Is The US At Full (Realistic) Employment? If So, Why Isn’t The Fed Raising Rates?

Is the US at full employment? That is, is the US at REALISTIC full employment? And if the US is at realistic full employment, why is The Federal Reserve keeping rates at 25 basis points??

Let’s start with the “quits” data. An estimated 3% of American workers quit their jobs in September, the Bureau of Labor Statistics reported last week.1That’s the highest percentage since the BLS started keeping track two decades ago.

Front-line and low-wage workers are leaving at rates higher than historical norms while higher-paid office workers aren’t. College-educated workers haven’t been quitting or dropping out of the workforce at higher rates than before the pandemic, but less-educated workers have.

The quits rate in professional and business services was just 0.4 percentage points higher in September than before the pandemic in February 2020. In financial activities it was unchanged. In the information sector, made up of telecommunications, publishing, broadcasting, motion pictures, software and most internet companies, the quits rate was down 0.3 percentage points.

The biggest increases in quit rates were in sectors such as leisure and hospitality where office workers are few, working remotely seldom an option and wages low. Within manufacturing, the quits-rate increase has been much bigger in lower-paying nondurable goods (of which food manufacturing is the biggest part) than in higher-paying durable goods.

In particular, fast food restaurants are offering above minimum wage salaries to attract workers. Burger King was even offering college tuition (not to University of Chicago, but to the local community college).

Labor force participation crashed with COVID and has struggled to recover, despite the staggering monetary stimulus. If this a sign that the US is at full employment (or very difficult to entice workers to enter and stay in the labor force)?

Speaking of colleges, business schools in particular, here are the top 85 business schools in the US according to Bloomberg/Business Week. I had the honor of teaching at University of Chicago in the 1990s which is currently ranked at #4.

I saw this headline this morning: “More Americans Than Expected File for Jobless Benefits.” Odd since so many jobs are available.

I guess Johnny Paycheck’s “Take This Job and Shove It” is the new national anthem under Biden.

Slipping Into Darkness? Inflation + Growing Recession Probability = Stagflation?

Is the US slipping into darkness?

The smoothed US recession probability just rose to 44.40%. Meanwhile, the CPI YoY rose to 6.24% YoY.

The Fed has been lowriding rates since late 2008.

Why can’t The Fed be friends with the middle class instead of just the top 1%?

Playing “Cisco Kid” to chill.

What’s Wrong With This Picture? M2 Money Growth “SLOWS” To 12.8% YoY As Real Earnings Growth Slows To -1.6% YoY (Will Omarova As Comptroller Make This Better??)

Highlights for Children has a popular segment called “What’s Wrong With This Picture?”

I give you my economics version of “What’s Wrong With This Picture?” It features The Federal Reserve’s M2 Money year–over-year compared with Real Average Weekly Earnings year-over-year.

Yes, M2 Money growth has “slowed” to 12.8% YoY while US Real Average Weekly Earnings YoY is now -1.6%. In other words, while M2 Money is still growing at a rapid pace, real weekly earnings growth is NEGATIVE.

The Fed continues to pump money into a bottle-necked economy while The Federal government pays people NOT to work.

The US Senate has a plan to fix the problem: Biden has nominated Saule Omarova, a dingbat law professor from Cornell (alma matter for The Office’s Andy Bernard), who proposes the following:

(1) Moving all bank deposits from commercial banks to so-called FedAccounts at the Federal Reserve;

(2) Allowing the Fed, in “extreme and rare circumstances, when the Fed is unable to control inflation by raising interest rates,” to confiscate deposits from these FedAccounts in order to tighten monetary policy;

And Ohio Senator Sherrod Brown (D-of course) thinks there is NO MORAL HAZARD PROBLEM with The Fed confiscating bank deposits for its own use?????

If I was attending Omarova’s confirmation hearing, my verdict would be ..

US Mortgage Rates Falls Below 3% (REAL Mortgage Rate Falls To -3.13%)

The Freddie Mac 30-year mortgage survey rate fell below 3% today to 2.98%.

And with today’s abysmal inflation report, the REAL 30-year mortgage rate fell to -3.13%.

Yes, President Biden is asking his economic council to do something about inflation. How about 1) telling The Fed to back off its outrageous and damaging stimulus and 2) stop shutting down pipelines.

Here is Joe Biden (aka, the Skipper) eyeing inflation from the White House.

The Inflation Tax Levied By The Federal Government Rose To 8.62% In October (Biden Interviews Brainard For Fed Chair Position)

Now that President Biden is interviewing Lael Brainard for Federal Reserve Chair, I am really getting a peaceless, uneasy feeling that The Fed will NEVER raise rates and inflation will be perpetual. To whit, …

Prices paid to U.S. producers accelerated in October, largely due to higher goods costs, fueling concerns about the persistence of inflationary pressures in the economy.

The producer price index for final demand increased 0.6% from the prior month and 8.6% from a year earlier, matching forecasts, Labor Department data showed Tuesday. The annual advance was the largest in figures back to 2010.

Excluding the volatile food and energy components, the so-called core PPI rose 0.4% and was up 6.8% from a year ago.

Prices paid to U.S. producers rose in October, reflecting in part higher energy costs

More than 60% of the headline increase was due to goods, which jumped 1.2%. Higher energy costs, including that for gasoline, drove the gain. The cost of services rose a more moderate 0.2% for a second month, reflecting a further pullback in the cost of securities brokerages and investment advice.

The report underscores how transportation bottlenecks, materials shortages and increasing labor costs have sent prices soaring across the economy in recent months. Trucking freight costs jumped a record 2.5% from September.

Inflation is a tax created by printing too much money and stupid Federal economic policies (or follicies).

Lael Brainard? Discussing the chairmanship with Brainard could signify that the Biden team is weighing how a break with Powell might help advance their goals for the central bank. Brainard and Powell work closely together on multiple issues and are viewed as holding similar views on monetary policy, but she’s favored a tougher stance on big banks.

Remember, The Federal Reserve is a privately-owned entity independent of The Federal Government. A Brainard appointment would make The Fed the financing arm of the Democrat Party.

Stimulypto! 10-year REAL Treasury Yield Is -3.9364% And REAL 30-year Mortgage Rate Is -2.30%!

Yes, the US economy has been greatly overstimulated by the Federal government (fiscal stimulus) and The Federal Reserve (monetary stimulus). This has caused inflation that we haven’t seen in a long time.

How overstimulated in the economy? The REAL 10-year Treasury yield (nominal less CPI YoY) is now -3.9364% and the 30-year REAL mortgage rate is -2.30%.

When will Federal stimulypto end?

Ethereum Is A Runaway Train! $4,358 Versus $129 On April 1, 2020 When COVID And The Fed Struck

Cryptocurrencies are a runaway train. In particular, Ethereum has gone from $129 on April 1, 2020 to $4,358 today.

Yes. March 2020 is when Covid struck and The Federal Reserve counterattacked.

Has volatility increased for the cryptos? Of course. The skew to the upside is steep on Bitcoin.

What To Expect Today From The Fed Open Market Committee (No Rate Change, Slight Decrease In Asset Purchases As M2 Money Velocity Collapses And Real Hourly Earnings Growth Is Negative)

From The Land of 1,000 Excuses, The Federal Reserve Open Market Committee (FOMC) will announce … no rate increases and a slight reduction in their assets purchases (Treasuries and Agency MBS). The announcement will be at 2pm EST (not at The Midnight Hour).

The Federal Open Market Committee is all but certain to hold rates near zero after a two-day policy meeting and announce a $15 billion monthly reduction in bond buying from the current $120 billion pace, judging that the test for tapering has been met as the economy heals from Covid-19.

There are two rate increases baked into the Fed Funds futures data as of today.

But a troubling aspect of The Fed’s monetary policy is that M2 Money Velocity is near the lowest in history and The Fed has been binge printing. What this means is that money printing has had little impact on GDP growth.

When The Fed mentions the post-COVID recovery, I hope they mention that REAL hourly wage growth is NEGATIVE.

And REAL S&P 500 earnings yield is also negative.

The Fed will likely to blame TRANSITORY effects such as the backed-up port traffic in Long Beach for rising prices rather than their flooding the markets with too much money.

But The Fed will continue to print, even though they will blame bottlenecks for inflation rather than their haphazard drowning of the economy in money.

Given that The Fed is monetizing the reckless spending by The Federal government, particularly Pelosi’s latest budget, we will see coordination between Chairman Powell and Treasury Secretary Janet Yellen (aka, Mustang Sally).

Call Jerome at 634-5789 to tell him to raise rate to normal levels.

Escape From LA II? Corelogic Home Price Index UP 18% YoY, But Forecast To Slow To 1.9% YoY In 2022

Yes, home prices are still growing at a super-hot pace of 18%, according to Corelogic.

But the forecast for home price growth is for 1.9% YoY in 2022.

As home price growth crashes back to earth as wages don’t keep pace with home prices.

Home prices have been growing in most states out west where The Fed’s money pump has resulted in a boom in second homes and people escaping high tax California and Oregon for Nevada, Idaho, Arizona (again), Utah and Montana. The east coast is seeing the Carolinas booming along with Florida and Indiana. Escape from New York?

Escape from LA … to Arizona, Nevada, Idaho and Utah?

ECB’s Lagarde Sees Higher Inflation; Pushes Back On Rate-hike Bets (ECB Keeps Foot On Monetary Gas Pedal Despite Inflation)

Its the same all over the world … insane central bank policies and resulting inflation.

I have discussed the US Federal Reserve in depth, but its time to focus on Europe’s European Central Bank (ECB) and their President Christine Lagarde.

FRANKFURT, Oct 28 (Reuters) – European Central Bank President Christine Lagarde acknowledged on Thursday that inflation will be high for even longer but pushed back against market bets that price pressures would trigger an interest rate hike as soon as next year.

With central banks around the world signalling tighter policy amid rising prices, Lagarde said the ECB had done much “soul-searching” over its stance but concluded that inflation was still temporary, so a policy response would be premature.

Soul-searching? The ECB is just doing what Powell and the Fed (aka, Jerome Jett and the Blackhearts) are doing. Keeping the foot on the monetary gas pedal in the face of inflation.

Let’s start Eurozone inflation. It is now sitting a 4.10% YoY. And core inflation is sitting at 2.10% YoY. Inflation is now the highest since 2009 while core inflation is at the highest since 2001.

Like the Federal Reserve, the ECB still has its foot on the monetary accelerator pedal despite booming inflation.

So, Christine, 19 nations in “Europe” having negative 2-year sovereign yields isn’t low enough for you?

The ECB’s platform in Frankfurt reminds me of a bad TV quiz show where participants try to guess prices next year. Call it “The Price Is Wrong.”

Unless, of course, the ECB sees a massive depression ahead.