Money! About That June Jobs Report (The Fed’s Balance Sheet Still Out In Force!)

The Federal Reserve’s policies remind me of the Cabaret tune “Money.” There is still almost $9 trillion in monetary stimulus outstanding.

For all the economic cheerleaders out there like CNBC about the June job report, they generally ignore what is driving the jobs report: The Federal Reserve!

Take the US U-3 unemployment rate. The Biden Administration is proud of the unemployment rate of 3.6%. But if you look at the chart of unemployment relative to The Fed’s balance sheet expansion due to Covid lockdowns, there is still almost $9 trillion of Fed stimulus outstanding.

Of course, the lockdowns were pure economy killers, so opening the economies again led to the unemployment rate falling to 3.6% which is still higher than before the Covid outbreak. But The Federal Reserve has been painfully slow at shrinking its balance sheet, leaving almost $9 trillion in monetary stimulus outstanding.

Take average hourly earnings growth. The media is all smiles as US wage growth declined to 5.1%, much higher than pre-Covid.

Then we have inflation, at 40-years highs thanks to massive Fed stimulus (and Federal spending).

And if we deduct inflation from average hourly wage growth, we see REAL wage growth declining at a -3.25% YoY clip.

Lastly, we have the US Dollar. Nothing has been the same since the financial crisis of 2008 and the entrance of The Federal Reserve distorting the economy and prices. Not to mention the US Dollar.

The Fed leaving its monetary stimulus out in force for so long is a major policy error. So what happens when The Fed actually gets serious about withdrawing the monetary stimulus (likely after the midterm elections)?

US Mortgage Rates Fall To 5.30% As Q2 Real GDP Falls To -1.9% (The Economy Is Falling To Pieces)

Mortgage rates are falling … to pieces. Along with the US economy.

As the US approaches recession and the Atlanta Fed real-time GDP tracker falls to -1.9%, we are seeing mortgage rates falling to 5.30%.

Real Q2 GDP? Still in the doldrums at -1.9%.

Biden is likely walking after midnight trying to find someone to blame for his declining economic prospects ahead of the midterm elections.

Darkness, Darkness! Recession Fears Push Mortgage Rates Down And MBA Purchase/Refi Applications Up (Home Prices Up 20.9% YoY In May)

Biden’s new campaign theme for the midterms: economic darkness, darkness.

Well, this is one way to get inflation under control … crash the economy. And inflation fears growing, we are seeing mortgage rates declining and mortgage applications increasing.

Mortgage applications decreased 5.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 1, 2022. This week’s results include a holiday adjustment to account for early closings the Friday before Independence Day.

The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 17 percent lower than the same week one year ago.

The Refinance Index decreased 8 percent from the previous week and was 78 percent lower than the same week one year ago.

In May, CoreLogic’s national home price index was up 20.9% YoY. But home prices are expected to grow at a 5.6% clip over the coming year.

Today, we are seeing global sovereign debt yields declining which should help US mortgage rates decline further.

And the US Treasury yield curve (10Y-2Y) continues to invert, signaling recession.

Under Bidenflation, we will be forced to eat the daisies instead of meat.

Ted Day! Spread Between 3M Libor And 3M Treasury Yield Rising Fast (Recession Alert!)

Its Ted Day!

TED refers to the difference between the three-month Treasury bill and the three-month LIBOR based in U.S. dollars, a measure of fear in the market.

The 3-month TED spread is rising awfully fast. A sign of impending recession.

US bank credit default swaps (CDS) are rising fast as inflation gets ugly.

The US Treasury 10Y-3M curve is bumping against the zero barrier.

I am still shaking my head at President Biden chastising gasoline stations for not lowering prices at the pump when refiners are near full capacity and the Biden Administration is doing nothing to increase the supply of US-source non-green energy.

But what the heck. It’s Ted Day!

Heartaches On Heartaches! US Court Ruling May Take 70,000 Truckers Off Road, Spur Jams (Diesel Prices UP 118% Under Biden, Things Just Keep Getting Worse)

Hey, I thought Mayor Pete Buttigieg, the US Transportation Secretary, was supposed to unclog the supply-chain crisis! Instead, we get heartaches on heartaches as diesel prices rise 118% under Biden AND now the bottle-necks may get a lot worse.

A US Supreme Court decision that could force California’s 70,000 truck owner-operators to stop driving is set to create another choke point in already-stressed West Coast logistics networks, a truckers’ organization said.

“Gasoline has been poured on the fire that is our ongoing supply-chain crisis,” the California Trucking Association said in a statement following the Supreme Court’s decision to deny a judicial review of a decision of a lower court, a process known as certiorari.

“In addition to the direct impact on California’s 70,000 owner-operators who have seven days to cease long-standing independent businesses, the impact of taking tens of thousands of truck drivers off the road will have devastating repercussions on an already fragile supply chain, increasing costs and worsening runaway inflation,” the CTA said.

The association asked the Supreme Court for a review of a case challenging California’s Assembly Bill 5, a law that sets out three tests to determine whether a worker is an employee entitled to job benefits or an independent contractor who isn’t. The trucking industry relies on contractors, and has fought to be exempt from state regulations for years because of federal law.

With few exceptions, the relationship between independent truckers and their carriers, brokers and shippers will be governed by the tests.

As if US consumers aren’t getting crushed by rising prices already. In response to the Covid outbreak, The Fed slammed its foot on the money accelerator along with Federal government stimulus. Throw in Biden’s anti-drilling executive orders, and we have a nightmare.

Consumer confidence is already crumbling under inflation and rising energy prices.

Let’s get ready to stumble.

The End? Home Sellers Are Slashing Prices in Sudden Halt to Fed’s Stimulypto Boom (Dallas, Phoenix AZ And Las Vegas NV Seeing >20% Price Cuts)

As The Fed raises rates in their attempt to wrangle inflation, we are seeing an about-face in the US housing market.

The pandemic-related Fed monetary stimulypto begat a housing boom that is careening to a halt as the fastest-rising mortgage rates in at least half a century upend affordability for homebuyers, catching many sellers wrong-footed with prices that are too high. It’s an astonishing turnaround. Just a few months ago, house hunters felt pushed to make offers within days, waive inspections and bid way above asking. Now they can sleep on it and maybe even shop for a better deal.

It doesn’t mean real estate is heading for a crash on the order of 2008. But when a market reaches these heights, even a drop toward normalcy will feel steep. And of course, a recession could make everything worse.

Dallas, Phoenix AZ and Las Vegas NV are leading in the price-slashing derby.

Is this the end for the home price bubble?

Or is the music over with The Fed tightening monetary policy to fight inflation.

Slip, Slidin’ Away! US Q2 Real GDP Descends To -2.1% (Late In The Evening For The Midterm Elections!)

Slip slidin’ away
Slip slidin’ away
You know the nearer the midterm elections
The more you’re slip slidin’ away

As Bill Clinton once said about elections, “It’s the economy, stupid.”

Which is bad news for Biden and Democrats after Q1’s bad GDP report of -1.6% “growth”, we now see the Atlanta Fed’s real-time GDP report for Q2 at -2.1%.

Today’s miserable construction spending report helped tank Q2’s real GDP forecast.

Its getting late in the evening since the midterms are only a couple of months away and Biden’s approval rating is miserable.

Sing it, Joe!

Reversal Of Fortune! Fed Funds Futures Point To Feb ’23 Reversal Of Fed Rate Hikes (Recession Alert!) As Crippling Inflation Soars

No, not the Claus von Bülow kind of reversal of fortune where has was accused of killing his wife. But this murder is coming from The Federal Reserve hiking interest rates even when they know that doing so could lead to a recession. And Biden’s anti-fossil fuel energy policies.

“Fed Chair Powell Admits That Fighting Inflation Could Lead To Recession.”

And investors in the Fed Funds Futures market see The Fed changing its rate-hiking ways in February 2023.

Inflation is what is killing the US economy and millions of households. Financially speaking.

And Biden’s approval ratings are sinking faster than The Titanic. In other words, he’s just killing us.

And then we have turbulence in the housing market as Fed intentions are driving up mortgage rate which helped listings with price reductions at 98.2% YoY.

Biden’s energy policies plus The Fed’s war on inflation will result in an economic reversal of fortune.

S&P 500 Posts Worst First Half Rout Since 1970 As 10Y Treasury Yield Tanks 14 Basis Points (Biden Approval Drops To 38.3% On Rising Inflation, Gasoline Prices)

Run runaway! For safety to Treasuries.

A “recession shock” begins for markets following the worst first-half for the S&P 500 in more than 50 years.

And investors are running to Treasuries for safety as US Treasury 10-year yields tank 14 basis points.

Biden’s approval rating has collapse with inflation and rising gasoline prices. Note that Biden’s approval rating dropped below 50 in mid-August 2021, long before the Russian invasion of Ukraine in late February 2022. Gasoline prices had risen 49% since Biden’s inauguration as President, but before the Russian invasion of Ukraine.

Winter is coming!

Slowing! US Personal Consumption Expenditures Drop To 0.2% MoM In May As PCE Deflator Hits 6.3% YoY (US Mortgage Rates Slip to 5.7%, the First Decline in Four Weeks)

The US economy is slowing as inflation ravages consumers. US Regular Gasoline prices, for example, are up 104% under President Biden which helps to slow the economy.

US personal consumption expenditures fell to +0.2% MoM in May as “inflation” or real personal consumption expenditures PRICES rose +6.3% YoY as The Fed’s balance sheet (aka, Master Blaster!) remains.

As I mentioned above, US regular gasoline prices are UP 103% under President Biden, diesel prices (the cost of shipping goods to markets like … food is up 119% under Biden while CRB foodstuffs is up 55% under China Joe.

Now we have mortgage rates in the US falling for the first time in four weeks. The average for a 30-year loan was 5.7%, down from 5.81% last week, Freddie Mac said in a statement Thursday.

This year’s Fourth of July celebration is going to cost 18% more than last year’s celebration.

Lastly, the Atlanta Fed GDPNow real time tracker for Q2 is showing … -1% GDP “growth.”

So, yes, the US economy is slowing.