Inflationville! US Jobs Added Surprises At +467k, But REAL Hourly Wage Growth FALLS To -2.36% YoY Thanks To Inflation

Well, the COVID hysteria from the Biden Administration and the media preparing us for a horrible jobs report was … incorrect. In fact, the January jobs report was “exceptional”. 467,000 jobs were added and average hourly earnings growth ROSE to 5.7% YoY.

The bad news? Thanks to surging inflation, REAL average hourly earnings growth YoY FELL to -2.36%.

Unemployment ROSE to 4.0% from 3.9% as more people dropped out of the labor force in January. On the bright side, labor force participation rate rose to 62.2% from 61.9%.

Leisure and hospitality employment (one of the most vulnerable to inflation) expanded by 151,000 in January, reflecting job gains in food services and drinking places (+108,000) and in the accommodation industry (+23,000).

The reaction in the bond market? US 10-year yields are up 6.9 basis points as Eurozone is up across the board.

Energy prices are up (except natural gas futures).

Another day in inflationville.

Lagarde Pivots on ECB Rate Hikes as Switch in Guidance Seen Soon (US 10Y Yield Up 5BPS, Mortgage Rates To Follow)

Its the same all over the WESTERN world as sovereign yields are starting to rapidly rise.

(Bloomberg) — European Central Bank President Christine Lagarde is no longer ruling out an interest-rate hike this year, a pivot toward the tightening stance of global peers that officials privately see materializing with a shift in policy guidance as soon as next month.

Investors brought forward bets on ECB action as the monetary chief delivered surprisingly hawkish comments citing unexpected record inflation data, contrasting with an earlier statement on Thursday that kept intact its formal view that price increases will ease.

She spoke after policy makers agreed that it’s sensible no longer to exclude a rate move in 2022, and that bond buying could end in the third quarter, according to officials familiar with their thinking who asked not to be identified because such discussions are confidential. An ECB spokesman declined to comment.

The result of Lagarde’s jaw boning?

US mortgage rates are rising in anticipation of the US following Largarde’s lead. Powell and the Gang continue to lag.

US Debt-to-GDP Has Doubled Since 2008, But Hourly Workers Are Seeing Negative REAL Wage Growth (The Government Is Here To Help??)

Nothing has been the same since the financial crisis of 2008 (except we still have insider-trading superstar Nancy Pelosi as US House Speaker). What has changed is that US Public Debt to GDP (nominal dollars) has doubled.

Has doubling Federal debt helped the hourly worker? Initially we saw a surge in REAL hourly wage growth in 2009 as the US began to recover from the housing bubble burst and ensuing financial crisis. Another surge in REAL wage growth occurred when Federal debt exploded as the COVID crisis took hold. BUT more recently we see that REAL wage growth is negative.

The other aspect of pain for hourly workers is inflation which has reached 7%, the highest rate in 40 years.

Adding to the frustration of hourly workers is energy prices rising 80% under President Biden’s reign of error.

Most hourly wage earners can’t buy a Tesla or a $100,000 electric Chevy Silverado to take advantage of Biden’s green energy policies.

Will interest rates rise? Well, the Chicago Mercantile Exchange has Fed Watch tool. It is saying that there will likely be a 25 basis point increase at the March 2022 meeting.

As Ronald Reagan once said, “The most terrifying words in the English language are: I’m from the government and I’m here to help.”

The Grapes Of Wrath! Misery Index (Inflation + Unemployment) Remains Elevated Post COVID, Renter Misery Index Skyrockets (REAL Wage Growth Remains NEGATIVE)

The misery index is traditionally inflation rate plus U-3 unemployment rate. The RENTER misery index is the Zillow Rent Index YoY + U-3 unemployment rate to demonstrate the hardship of renters because of soaring home prices.

Notice that because of rising home prices, the Renter misery index has overwhelmed the improvement in unemployment.

As I typically do, I will now include The Fed’s balance sheet (as a proxy for Fed stimulus and supporting Federal government expenditures). Yes, you can see that The Fed and Federal government are responsible for our modern day “Grapes of Wrath.”

If we look at the TRADITIONAL misery index, we see that misery remains above 10 (it was below 6 prior to the COVID outbreak in early 2020).

Remember that the REAL average hourly earning growth of Americans is NEGATIVE. Gains in wage growth more than offset by inflation.

I won’t even mention how inflation is crushing retirees since Social Security and pension plans rarely adequately compensate retirees for inflation.

Now for the really bad news. 81-year old senior, House Speaker Nancy Pelosi, has announced that she is running for Congress yet again from leftist-stronghold San Francisco. Although she has an expensive home in Georgetown and a beautiful vineyard in Napa Valley. Pelosi’s vineyard only sells grapes to other wine makers. Not bad for a career civil servant!

I really wanted Pelosi to produce a wine called “The Grapes of Wrath” in honor of her insider trading and massive wasteful spending of taxpayer money that has helped generate inflation, rampant government debt growth and hurting retirees and hourly workers.

Reversal Of Fortune: Yield Curve Drooping As 2022 Forecast To Be Slower Market For Housing

No, not the Klaus von Bulow type of “reversal of fortune” (when he killed his wife). I am talking about a reversal in fortune for America.

Let’s look at the 10Y-2Y Treasury curve. It typically falls below 0 basis points before every recession. Except the mini-COVID recession of 2020. But notice that the Treasury curve did not recover from the COVID recession as it typically did. More along the lines of 1984-1985.

Speaking of Reversal of Fortune, everything changed once Fed Chair Powell started to speak after Tuesday’s FOMC meeting.

Hmm. Midterm elections, possible Russian invasion of The Ukraine, further problems in China, etc. While The Fed Funds Future data implies that The Fed may raise their target rate 5 times over the coming year, we’ll see.

I happen to agree with Fannie Mae’s Doug Duncan who says that he is less bullish about the housing market in 2022.

If 2021 was a great year for the US housing market, 2022 faces “a new normal” marked by a slowing down of home price rises, job layoffs in the mortgage industry, and concerns over rising inflation and interest rate hikes, according to Douglas Duncan (pictured), Fannie Mae’s senior vice president and chief economist.

Duncan said “a shift” was underway in the market and the wider economy, which would result in far more moderate home price appreciation, expected to be between 7% and 7.5% this year due to the ending of fiscal and monetary stimulus.

“One of the elements of the shift is that you’re going to see house prices up, but not nearly as far as they were in the last two years because that was driven hugely by the fiscal and monetary stimulus (now) being removed,” he told MPA.

Ominously, he added that low interest rates “may never be seen again”. Or at least until Biden appoints more doves to The Federal Reserve Board of Governors.

The doves at The FOMC.

Bidenomics: Buying Conditions For Vehicles Falls To 46 As Vehicle Prices Soar (WTI Crude UP 87% Over Past Year, Buying Conditions For Housing Falls To 77)

Here is a lesson in Bidenomics. “Going Green” sounds great to some (like Al Gore, Leonardo DiCaprio and Greta Thunberg), but there are costs to not growing America’s energy supply.

Rising energy costs have helped create the rise in consumer prices and inflation. Not to mention chip shortages for car and trucks. The University of Michigan conditions for vehicles plummeted to 46 (100 baseline) as used vehicles prices sky rocket.

Under Biden’s reign of error, West Texas Crude futures prices have risen 87% (regular gas prices are up 49% even with Biden’s releasing two days of supply from the Strategic Petroleum Reserve.

On the housing front, the University of Michigan buying conditions for houses fell to 72 (baseline of 100) as home prices are roaring at a 18.81% YoY clip.

To paraphrase the comic strip “Gasoline Alley,” “Unca’ Joe, what have your done t’ US?”

Too Much Money! U.S. Consumer Spending Drops, Price Index Up Most Since 1982 (REAL Personal Spending Fell 1% In December)

This is a case of “Too much money” in the economy, courtesy of The Federal Reserve.

(Bloomberg) — U.S. inflation-adjusted consumer spending fell last month by the most since February, suggesting that Americans tempered their outlays amid the latest Covid-19 wave and the fastest inflation in nearly 40 years.

Purchases of goods and services, adjusted for changes in prices, decreased 1% from November, the Commerce Department said Friday.

The personal consumption expenditures price gauge, which the Federal Reserve uses for its inflation target, rose 0.4% from a month earlier and 5.8% from December 2020, the most since 1982. Unadjusted for inflation, spending fell 0.6%, while incomes rose 0.3%.

Yes, the PCE Deflator YoY rose to 5.8% as M2 Money Stock is growing at a 13.1% YoY clip.

REAL personal spending declined 1% in December as prices rose in part thanks to the 13.1% growth in M2 Money stock YoY.

Too much money! Time to slow down, Jay Powell! Stop sucking the life out people with inflation.

US Q4 GDP Price Soars To 6.9% QoQ As Commodity Prices Skyrocket (10Y-2Y Treasury Curve Tanks)

Yes, The Federal Reserve could have raised their target rate at their January meeting, but chose not to raise rates. Instead, Chairman Powell said that rate increases are a comin’!

I hope Powell wasn’t hoping for a slowdown in inflation, because today’s Q4 GDP report showed a surge in GDP to 6.9% QoQ. But with that GDP surge we also got a surge in prices paid by consumers to 6.9% as well. Thanks to the continuing massive Federal stimulus being poured into markets.

Despite the positive news on Q4 GDP, we are still seeing 7% inflation and a diving 10Y-2Y yield curve.

Along with that surprising GDP report, we are seeing the Bloomberg Commodity Index rising like a bat out of hell (RIP, Meatloaf).

Powell apparently found paradise by the dashboard light. So, why rock the boat? Oh yes. INFLATION.

Should Powell be renamed Meatloaf?

Fed Stands Still Despite 7% Inflation And 3.9% Unemployment (Taylor Rule Suggests Almost 18% For Target Rate, Fed Stays At 0.25%)

Despite inflation growing at 7% (versus The Fed’s target rate of 2%) and U-3 unemployment being only 3.9%, one would have thought that Jay and The Gang would have started increasing rates at the January meeting.

But nooooo. The Fed actually sat on their hands and did nothing.

What did The Fed say?

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent. With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate. The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March. Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month.“

According to The Fed Funds Futures data, the market is anticipating 1 rate increase at the March FOMC meeting. And another at the June FOMC meeting.

The Taylor Rule (not used by Jay and The Gang), suggests that The Fed should have their target rate at almost 18%! NOT 0.25%.

The Fed stands still.

US New Home Sales Crash -14% YoY In December As Median Price Slows To +3.4% YoY (Mortgage Applications Decline As Mortgage Rates Increase)

US new home sales spiked in December by 11.9% from November, but were down 14% year-over-year.

But the median price of new home sales (YoY) declined to 3.4%.

The Midwest saw a surge in new home sales (+56%).

The MBA’s mortgage applications index shows declining purchase applications (-1.83%) and declining refinancing applications (-12.60%) as mortgage rates increased from 3.64% to 3.72% for the week of 01/21.

Now, mortgage purchase applications rose for the week of 01/21 if we used non-seasonally adjusted data.