Editor’s Note: I am traveling today to attend the funeral of the Mother of my long-time friend and former business partner, John Mauldin. As a result, I have reprinted a very good article from John Crudele in the New York Post yesterday.

Booming Jobs Report Gives Federal Reserve a Big Headache

What will it be like on the day when the Federal Reserve becomes irrelevant?

Like when Janet Yellen — or the next Fed chairman or the one after that — makes an announcement and it gets as much attention as a proclamation from a vice president — of a shoe manufacturer.

Whether you like the Fed or not, the last thing anyone should want is a central bank that’s powerless to control inflation, boost the economy, keep banks in line and use its verbal persuasion on the financial markets.

But that’s where we are headed.

The Fed has a big problem and it manifested itself last Friday, when the Labor Department declared that the job market boomed in February — a result that contradicts just about every other bit of economic data that has come out of late.

For instance, the Federal Reserve Bank of Atlanta recently announced that its GDPNow gauge — a new, real-time measure of the nation’s gross domestic product — was showing as of March 6 annualized growth for the first quarter of just 1.2 percent. [Emphasis mine.]

The Atlanta Fed explained that it came up with this new measurement because GDP — as compiled by the Commerce Department — ‘is released with delay.’

The other problem with Commerce’s measure of the economy — an issue not touched by Atlanta — is that the official GDP is also inaccurate because of bogus inflation data used in its calculations, among other things.

The 1.2 percent annualized first-quarter growth being measured by the Atlanta Fed compares with an already paltry 2.2 percent expansion in the fourth quarter of 2014, which was downgraded from the 2.6 percent growth that was originally reported.

The consensus among economists who are tracked by the Blue Chip Economic Indicators is that first-quarter GDP growth will clock in at close to 3 percent. So Atlanta’s conclusion — if on target — is going to be a shock to the experts.

But wait, there’s more. Like:

• The US is reaching another debt limit that’ll be fought out in Congress.

• Construction spending remains weak.

• Income growth has stalled.

• Interest income has disappeared.

• Car sales have weakened (maybe because of the weather, maybe not).

• Recent industrial production and housing starts have been weak.

• International trade is being upended by all the bad stuff going on in the rest of the world.

But then there’s the employment situation — WHICH HAS BOOMED! I’m capitalizing that because the Friday job report was great…

Right after Labor reported that 295,000 jobs were created in February and that the unemployment rate had fallen from 5.7 percent to 5.5 percent, the stock and bond markets dropped sharply.

Why? Well, stocks have been propped up by the Fed’s ultra-low interest rates, which have forced people out of fixed-income investments like bonds and, in a push for higher returns, into riskier equities.

If a booming jobs report forces the Fed to raise interest rates — which will be the prevailing view until the economic data sours again — then a good jobs report is bad news for stocks.

But the quake in the bond market last Friday is much more important. As you know, bond prices automatically move in the opposite direction of interest rates. In fact, the rate on 10-year Treasurys rose 0.26 of a percentage point before settling 0.20 percentage point higher.

Why the jump in rates? Because the bond market was signaling that borrowing costs need to rise because the job market is getting tight and inflation is on the way. The bond market wasn’t politely asking the Fed to raise the rates it controls — basically only very short-term ones — it was telling Yellen to get moving.

And if the Fed ignores the bond market’s exhortations? Then, like it did on Friday, the bond market will move rates higher on its own. And the Fed will gradually become irrelevant.

This is the way it’s supposed to work. It’s a check and balance built into the system. The market needs to be responsive to the Fed’s wishes. But the Fed also needs to be responsible to the needs of the bond market — after all, that’s where the customers are for all the debt that Washington must sell to paper over its deficits.

But here’s where it gets wacky. What if last Friday’s employment report wasn’t nearly as strong as it seemed on the surface? What if the report was actually pretty weak?

What if the bond market was fooled? What if the Fed is now in a position where it will be forced to go along with higher interest rates even though at least one of its regional banks knows the truth about the weak economy?

I’ve already proven that the nation’s unemployment rate — compiled by the Census Bureau — is a worthless gauge of economic activity.

And I’ve already shown why the monthly measurement of job growth — called the Establishment Survey by Labor — is greatly affected by things like seasonal adjustments and guesstimates about jobs created by small companies that may not exist.

Yet both the unemployment rate’s decline and the alleged sharp rise in new jobs will play a large part in the Fed’s discussion next week about interest rates. Wall Street is worried that the Fed will no longer say it can be ‘patient’ before making a move.

If the Fed does change the language of its post-meeting communiqué, then it will have buckled to the reaction to last Friday’s misleading employment report. And then the Fed is truly in a quandary.