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Saturday, March 17, 2012

Wells Fargo's Monthly Economic & Financial Commentary- March 2012

- Nonfarm payrolls have risen by an average of 244,000 per month over the past three months and the unemployment rate has fallen to 8.3%, while weekly first-time unemployment claims confirm the labor market has firmed a bit, particularly in the private sector.

. Even with the recent improvement in hiring, private sector average hourly earnings have risen just 1.6% over the past year, and inflation-adjusted disposable personal income is more or less flat over the same period on a per capita basis.

- Higher food and energy prices will make it tougher for the Fed to meet its 2% inflation objective.

. The extension of the temporary social security tax cut and the prospect of additional quantitative easing means that fiscal and monetary policy are offsetting some of the contractionary effects of higher food and energy costs, allowing them to rise even further.

- We suspect the Fed will toughen its rhetoric and adjust its timetable to begin to move away from its ultra-low interest rate policy over the course of this year as private demand proves more resilient.

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