US Jobs: Private Payrolls Rise By 233k In October After Rising 319k In September (-27% MoM), Unemployment Rate Edges Up To 3.7% As Wage Growth Cools To 4.7% (Too Bad Inflation Is At 8.2%)

President Biden just lost one of his midterm election talking points. “The U-3 unemployment rate the lowest since (garbled) at 3.5%!” Because it now has risen in October to 3.7%.

Private payrolls added 233k jobs in October, which is a -27% decline from September’s revised private payroll figures.

The good news? Average hourly earnings growth is still positive, but fell to 3.7% YoY. But with inflation raging at 8.2% YoY, workers are getting clobbered by inflation.

Here is the rest of the story.

The Fed is now green-lighted to raise rates even higher.

Biden’s campaign promise was to unite rather than divide. But Biden has morphed into Gustaf Holst’s, Mars – Bringer of War! Both domestically and in the Ukraine.

US REAL 30yr Mortgage Rates Finally Turn Positive (0.32%) While REAL 10yr Treasury Yields Remain Negative (-2.50%)

It has been a wild and mostly negative ride under Biden’s Reign of Error. 40-year highs in inflation (caused by Biden’s fossil fuel mandates and Federal spending) have left the US mortgage market FINALLY seeing positive REAL mortgage rates (now 0.32%), even though the REAL 10yr Treasury yield is still negative (-2.50%).

US 30Y Mortgage Rate Rises To 7.22% As Fed Combats Near 40-year High Bidenflation, BUT 10Y Treasury Yield DOWN -12 BPS This AM (US Treasury 10yr-3mo Curve Falling Further Into Inversion)

US 30-year mortgage rates are above 7% as The Federal Reserve slowly withdraws its Covid-related monetary stimulus and attempt to combat near 40-year highs in inflation under Biden (aka, Bidenflation).

However, the US Treasury 10-year yield is down -12 basis points this morning.

And we have an important predictor of recession, the Treasury 10yr-3mo yield curve.

And if the Republicans win The House (and maybe the Senate) at the midterms, Biden can blame Republicans for the recession.

Joe Biden, Hunter and Biden’s brother James must be singing “Damn, it feels good to be a Biden!“

MBS Returns Extend Negative Streak During Worst Year On Record (MBS Prices Dropping With Fed Tightening And M2 Money Growth Decline)

The housing and mortgage markets are suffering with impending recession and Fed monetary tightening.

MBS returns extended their negative run during their worst year on record as 10-year Treasury yields topped 4% and the trend in MBS spreads widened.

The MBS sector has had only two positive months in both total and excess returns this year — May and July.

Take a look at the 4.5% coupon agency MBS price and risk (duration) with Fed tightening (orange line) and crashing M2 Money growth (green line).

Time for something new in the MBS market?

The Fed’s BIG Green Bag (Of Money)! Goldman Sees Fed Rate Peaking In March At 5%, Core Inflation Rate UP > 400% Under Biden (US Yield Curve Inverted Prior To Nov 2nd FOMC Meeting)

The next Federal Reserve Open Market Committee (FOMC) meeting in on Wednesday, November 2nd. Let’s see what The Fed does with its BIG GREEN BAG … OF MONEY.

As I set here on Sunday morning waiting to see how the Cleveland Browns will lose to cross-state rival Cincinnati Bengals, I see that both the US Treasury 10yr-2yr and 10yr-3mo yield curves are inverted (below zero).

Core inflation (CPI less food and energy) YoY (blue line) was only 1.3% in February 2021 shortly after Biden was sworn-in as President and is now 6.6% in September 2022. That is over a 400% increase in core inflation!

We have this tantalizing headline on Bloomberg:

Goldman Sachs Now Sees Fed Rates Peaking at 5% in March By Simon Kennedy(Bloomberg) —

Goldman Sachs Group Inc. economists said they now expect the US Federal Reserve to raise interest rates to 5%, higher than previously predicted.

The central bank will lift its benchmark rate to a range of 4.75% to 5% in March, 25 basis points more than earlier expected, economists led by Jan Hatzius wrote in an Oct. 29 research report.

The route to the new peak includes increases of 75 basis points this week, 50 basis points in December and 25 basis points in February and March, they said.

The economists cited three reasons for expecting the Fed to hike beyond February: “uncomfortably high” inflation, the need to cool the economy as fiscal tightening ends and price-adjusted incomes climb, and to avoid a premature easing of financial conditions.

Well, not exactly earth-shattering. Fed Funds Futures data point to a peak of near 5% (4.905%) for the May 2023 FOMC meeting, so Goldman Sachs is calling for an earliest peak at the March 2023 FOMC meeting,

Regardless of what Goldman Sachs thinks, Fed officials are expecting a peak in 2023 followed by a decline to 2.5%.

Brainard and Bostic are the only “doves.” Which is silly because Chicago’s Evans is a perma-dove. Let’s see how the Dots Plot changes at the November 2nd meeting.

America’s distressed debt pile is biggest since September 2020.

US Pending Home Sales Collapse -30.4% YoY In September (10th Negative Month In A Row) As Fed Plans MORE Rate Hikes (Personal Saving Rate DOWN -59.3% YoY)

I was in an MRI tube getting a scan of the brain tumor that is causing me problems. So, I missed this morning’s new dump. And what a dump it was!

First, pending home sales have collapsed (down -30.4% YoY) for September. Look at pending home sales against M2 Money growth.

Then we have the employment cost index, up 5%. This will encourage The Fed to tighten further, even if it causes a recession.

How about the US Personal Saving Rate YoY?? It is down -59.3%.

But were living on Washington DC time!

US Mortgage Applications Decline -1.71% WoW, Lowest Level Since 1997 As Fed Continues Its Counterattack (Refi Apps DOWN 86% YoY, Purchase Apps DOWN 42% YoY)

As The Federal Reserve continues to withdraw its massive Covid-related monetary stimulus, US mortgage applications continue to fall to the lowest level since 1997.

Mortgage applications decreased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 21, 2022.

The Refinance Index increased 0.1 percent from the previous week and was 86 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 42 percent lower than the same week one year ago.

Under Biden, we have seen (orange line) a significant decline in mortgage purchase applications (peak 2021 to this week). Mortgage rates are the highest since 2001 (wait for it!)

Here is Jerome Powell of The Federal Reserve Board of Governors trying to figure out what to do after so many policy errors with increasing likelihood of recession while trying to withdraw monetary stimulus.

US New Home Buyer Traffic DOWN -64% YoY (Bank Deposits DOWN The Most Since 1973)

Everything is NOT beautiful with the US economy.

Another crack in the dam (US economy) is buyer traffic for new homes. They are now down -64% since last year (YoY).

Of course, The Federal Reserve is removing its massive monetary stimulus. BUT commercial bank deposits have declined the most since 1973.

My Kuroda! Dow UP 774 Points And 10Y Treasury Yield Down -2.2 BPS As Japan’s Central Bank Intervenes To Prop Up Currency (Options Expiration Likely Explanation For Stock Surge)

My Kuroda!

Wall Street saw another day of stunning reversals, with stocks rallying after a Treasury selloff sputtered. The yen jumped as Japan intervened again to prop up the currency.

After many twists and turns, the S&P 500 pushed solidly into the green and headed for its best week since June as 10-year yields fell from the highest since 2007.

Probably because The Fed is likely to pivot with impending recession. The Dow is up 774 points this Friday. And today was a huge option expiration day!!

And the 10-year Treasury yield fell -2.2 basis points.

Here is the result of Japan’s intervention.

But today’s numbers were largely monthly stock index option expiration.

Why did it fall upon Powell to be the wielder of the Fed tightening scimitar? Why didn’t Yellen? Because “Good Girls Don’t.” But Powell did.

Have a nice weekend. I will be rooting for Ohio State to annihilate the Iowa Hawkeyes at noon on Saturday.

US 1-Unit Housing Starts Plunge -18.5% In September As Liquidity Grinds To A Halt (Multifamily Starts DOWN -13.11%)

Liquidity is a big deal for the housing and mortgage markets.

Unfortunately, M2 Money YoY (liquidity) is shrinking fast and 1-unit (single family detached) starts dropped -18.5% in September.

This is not surprising given the decline yesterday in the NAHB market index.

Even multifamily (5+ unit starts) were down -13.11% in September.