US Jobs Data Have Potential to Push Fed Toward Third Jumbo Hike (Remember That ADP Jobs Added In August Was Only 132k)

When we look at tomorrow’s US jobs report, it is important to acknowledge that 1) The Federal Reserve has not yet removed the Covid stimulus (green line) and 2) the ADP payroll jobs added was only 132k in August while non-farm payrolls jobs added in July was 528k. That is quite a spread!

(Bloomberg) The hotly anticipated US jobs report has the potential to tip the scales toward a third jumbo-sized hike in interest rates later this month after a wave of data that point to a resilient consumer and high labor demand.

Friday’s report is one of the last marquee releases Fed officials will have in hand before the mid-September policy meeting to help them decipher a complex economic and inflationary puzzle.

Forecasts call for a healthy, yet more moderate 298,000 gain in August payrolls and for the unemployment rate to hold steady at 3.5%, matching the lowest in five decades. Solid wage growth is also expected amid a persistent mismatch between labor demand and supply.

Such figures, in conjunction with a blowout July employment print, improving consumer sentiment figures and a surprise pickup in job openings, could be enough to push the Fed to raise borrowing costs by 75 basis points, extending the steepest interest-rate hikes in a generation to curb an inflation surge.

As of this morning, Fed Funds futures data is still pointing to The Fed Funds Target rate rising from 2.50% to around 4% by the March FOMC meeting. That is still a large jump of another 150 basis points anticipated.

Inflation Is SO Bad That REAL Home Price Growth Has Slowed To 2.23% YoY While REAL Wage Growth Is -3.31% YoY (As Fed’s M2 Money Growth Slows)

When inflation is so bad that REAL wage growth is negative (-3.31% YoY), I would hardly call that a strong economy for the middle class and low-wage workers.

We also see that REAL home price growth (existing home sales median price YoY – CPI YoY) has slowed to only 2.23% YoY in July.

As The Fed tightens, it is only growing to get worse.

Perhaps Biden can enthrall us with yet another “Corn Pop was a bad dude” story.

Slowdown! ADP Jobs Added Only 132k Jobs In August As Fed M2 Money Growth Slows

Its a slowdown!

The ADP National Employment Report SA Private Nonfarm Level Change printed this morning confirming what most of us already knew … the US economy is slowing if not already in recession.

The ADP jobs added grew by only 132k in August as The Fed’s M2 Money growth slowed.

Since The Federal Reserve and Federal government overstimulated the economy when Covid surfaced in early 2020, The Fed’s balance sheet expanded to near $9 TRILLION which helped existing home sales median price YoY hit 25.2% in May 2021 but falling to 10.8% YoY in July 2022 as The Fed tightened rates.

It will be a monetary inferno if The Fed decides to actually unwind its $9 trillion balance sheet.

US Mortgage Applications Drop To Lowest Level Since 1997 (And The Fed Still Hasn’t Unwound Its Enormous Balance Sheet!)

Mortgage application volume dropped and remained at a multi-decade low last week (back to 1997), led by an 8 percent decline in refinance applications, which now make up only 30 percent of all applications. Purchase applications have declined in eight of the last nine weeks, as demand continues to shrink due to higher rates and a weaker economic outlook.

Mortgage applications decreased 3.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 26, 2022.

The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 23 percent lower than the same week one year ago.

The Refinance Index decreased 8 percent from the previous week and was 83 percent lower than the same week one year ago.

Just wait for The Federal Reserve to start unwinding its enormous balance sheet!

Unfortunately, Powell and Company don’t have a …

US Treasury Yields And Mortgage Rates Rise As Fed Vows To Extinguish Inflation Fire (Caused By Themselves And BAD Federal Policies) Check Out The Eurozone

As inflation burns the US middle class and low wage workers, The Federal Reserve reaffirmed at Jackson Hole that they are the NEW Smoky The Bear (only The Fed can fight inflation fire!) But of course, Federal spending and energy policies can drive up prices too.

Having said that, the 2-year Treasury yield and 30yr mortgage rate are rising rapidly.

The Fed is trying to cool demand by raising rates after lax monetary policy since late 2008.

While the US 2-year Treasury yield is up only slightly today, the Eurozone is seeing their 2-year sovereign yields spiking by 11-15+%.

Fed’s Temporary Repo Facility Looks More Permanent As Inflation Rages (All Is NOT Well In The Economy)

The Federal Reserve’s overnight repo facility where banks park their money is seemingly becoming permanent.

As inflation has soared near the highest in 40 years, banks are increasingly parking their money at The Federal Reserve.

To quote Joe Biden, “All is well in the garden.” But apparently, not is all well in the banking industry or with the mortgage industry.

The Comeback Kid? US Personal Savings Rate Is -51.5% YoY To Cope With Bidenflation Raging At 8.5% YoY (Meanwhile The Fed Is “Slothing” Its Balance Sheet Reduction)

It is amazing that Biden is rising in the polls, simply because he got several inflation-generating, crony pay-off bills passed through a Democrat-controlled Congress. Even more amazing is that Americans aren’t more furious with Biden given that inflation is still raging at 8.5% YoY and the US Personal Savings Rate to cope with raging prices is at -51.5% YoY.

It looks like one quick fix to the inflation problem is for The Federal Reserve to shrink its balance sheet. But they are taking their own sweet time doing it.

And then we have the S&P 500 index which has done poorly since Powell and The Fed have undertaken their “fight inflation” mantra caused by their own folly and Biden’s green, anti-fossil fuel policies. Not to mention Congress spending like drunken sailors in port.

But the same is going on in Europe where inflation is even higher than in the USA and the EUR/USD is plunging like a paralyzed falcon.

And then we have Biden shrinking the Strategic Petroleum Reserve (orange line).

And in Europe, we have Germany suffering through a horrible energy price spike.

Finally, here is a baseball card of former Dodger pitcher Billy Loes. He almost reminds me of Biden trying to think through a complex problem like student loan debt forgiveness that may cost taxpayers an average of $2,000 yet buy votes for Democrats at the midyear elections.

Powell Channels Mr T As Dow Drops 1,000 Points, Home Builder Index Plummets (UMich Buying Conditions For Houses Remains Near 1982 Levels)

‘‘We will keep at it until we are confident the job (i.e. killing inflation) is done.’’

Jerome Powell, Jackson Hole speech

Interviewer : What’s your prediction for the market?

Clubber Lang (Mr T) : My prediction?

Interviewer : Yes, your prediction.

[Clubber looks into camera]

Clubber Lang : Pain!

Of course, Friday was one of those “Black Fridays” for investors. And pension funds.

The Dow Jone Industrial Average fell -1008.38 points after Powell’s “Mr T” remarks on pain. That was a whopping -3%. The NASDAQ composite index fell almost -4%.

Equity markets struggled in Europe as well, particularly the German DAX index.

The UMich Buying conditions for houses rose slightly, but remains near the lowest level since 1982.

Clubber Powell, Federal Reserve Chairman.

The Case-Shiller house price numbers are due out Tuesday for June and it is expected that they will show a significant slowing in home prices. Biden and Clubber Powell could then take “credit” for slowing “inflation.”

Q2 US GDP 2nd Reading Improves … To Just Plain Bad (GDP Price Worsens To 8.9% QoQ As Consumption Growth Dwindles To 1.5% QoQ)

The elite class “economists” (aka, cheerleaders) are meeting at Jackson Hole, Wyoming this week. But while they are planning our future, the revision to the miserable Q2 Real GDP report came out this morning.

Real gross domestic product (GDP) decreased at an annual rate of 0.6 percent in the second quarter of 2022, according to the “second” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP decreased 1.6 percent.

So, the second pass at measuring Real GDP produced a slightly better number (-0.6% vs -0.9%).

But the GDP PRICE index revision worsened from 8.7% to 8.9%. Look at REAL personal consumption (yellow line) as M2 Money growth slows.

Let’s see how things go at The Fed party at Jackson Hole, Wyoming. It is appropriate for The Fed to hold their party/meeting at Jackson Hole (Teton County) since it has the highest concentration of wealth per household than any other county in the nation.

Yee-haw!

Biden’d? US Mortgage Applications Hit Lowest Level In 22 Years (Purchase Apps DOWN -21% YoY, Refi Apps DOWN -83% YoY As Fed Tightens To Combat Bidenflation)

US mortgage applications just hit the lowest levels in 22 years, January 2000 as The Federal Reserve continues monetary tightening to combat Bidenflation.

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 19, 2022.

The Refinance Index decreased 3 percent from the previous week and was 83 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 21 percent lower than the same week one year ago.

Notice that The Federal Reserve is slower than the Geico Sloth is removing balance sheet stimulus.

MBA mortgage applications just declined to their lowest level in 22 years (January 2000) as The Fed has begun raising rates to fight inflation caused by 1) excessive monetary stimulus since late 2008, 2) Biden’s green energy policies driving up transportation costs, 3) distortionary Federal spending (e.g., Covid relief, infrastructure bills and now green energy/IRS spending by Biden/Pelosi/Schumer).