The Fed’s Folly Of Full Employment (Real Hourly Earnings Growth At -0.814% YoY, Labor Force Participation Remains Below Pre-Covid Levels)

If The Federal Reserve is actually looking to achieve full employment in the USA, then it is a fool’s errand.

Today’s jobs report is both good and bad. The good news? 531k jobs were added, more than expected. The U-3 unemployment rate fell to 4.6%, also better than expected.

The bad news? REAL average hourly earnings growth “rose” to -0.8141% meaning that inflation is outpacing wage growth (despite what Joe Biden said yesterday).

Look at labor force participation both in October and before Covid. After the large decline in LFP, it rose again then leveled-off to near where it is in October 61.6%.

Here is the rest of the story. Zero Hedge had the enticing headline of “October Payrolls Soar To 531K, Smashing Expectations As Prior Months Revised Sharply Higher”. Too bad inflation is eating away at the gains.

Biden: “We have increased labor force participation by inches.”

Employment in leisure and hospitality increased by 164,000 in October and has risen by 2.4 million thus far in 2021. Over the month, employment rose by 119,000 in food services and drinking places and by 23,000 in accommodation. Employment in leisure and hospitality is down by 1.4 million, or 8.2 percent, since February 2020.

Hey bartender!

Here is a video of The Federal Reserve being awakened by the banking crisis in 2008 and again due to COVID.

COVID And The CMBX Cliff (Retail and Office Sectors Still Limping Along Thanks To Shutdowns And Fearmongering)

Nothing has been the same since Covid struck in early 2020.

CMBX BBB-, the reference basket for CMBS 6, was climbing to around $95 prior to the Covid outbreak and resulting recession. The CMBX reference basket is now at $72.25.

CMBX 6 is largely composed of retail and office, both hit hard by Covid and the ensuing lockdowns and fearmongering by the Federal government and main street media.

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.

Invitation Homes Boosts Rents 11% As Housing Shortage (And Fed Stimulus) Persist

(Bloomberg) — The largest owner of U.S. rental houses isn’t seeing any let-up in demand, or in its ability to increase rents.

Invitation Homes Inc., which owns more than 80,000 single-family rentals, raised prices by nearly 11% in the third quarter, according to a statement. The company boosted rents by 8% on renewals and 18% when leasing homes to new tenants. Rates are rising fastest in the Southwest, where rents increased 30% on new leases in Las Vegas, and 29% in Phoenix.

“It’s a little bit crazy,” Chief Executive Officer Dallas Tanner said on a conference call with investors Thursday. “There just isn’t enough quality housing available right now.”

Rising rents have been a staple of the economy since early Covid lockdowns lifted in the middle of last year. Surging purchase prices have pushed homeownership out of reach for first-time buyers.

Invitation’s properties, which tend be more centrally located than those owned by other institutional landlords, have been especially popular. And tenants tended to stay put: The company had a record-low turnover rate in the quarter, which reduced the expenses associated with preparing a house for leasing.

Invitation’s shares rose slightly to $40.77 at 12:49 p.m. New York time after the company raised its expectations for full- year revenue and net operating income. The stock is up 37% for the year.

As Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” In this case, The Federal government and Federal Reserve were put in charge of the Covid epidemic and we have shortages of almost everything. Including housing.

I don’t have Invitations rent growth chart, but here is Zillow’s YoY rent chart against The Fed’s balance sheet.

The good news? The 11% increase is almost half of the 20% YoY Case-Shiller National home price index.

Here is Treasury Secretary Janet Yellen making housing supply disappear.

U.S. Employment Costs Rise at Record Pace as Wages Surge (Personal Income Declines -1.04%)

U.S. employment costs rose at the fastest pace on record in the third quarter as companies across a variety of sectors raised wages against a backdrop of labor shortages.

The employment cost index, a broad gauge of wages and benefits, rose 1.3% from the prior quarter, according to Labor Department data released Friday. The gauge increased 3.7% from a year earlier.

Although there was a record jump in wages and salaries, personal income was reported to have dropped -1.04% in September. On a YoY basis, personal income fell to a 4.15% growth rate. Even more disturbing, the Case-Shiller national home price index is still rising at a near 20% pace.

Median U.S. Home Price Just Passed $400,000 For First Time Ever! (Prices Could Rise Another 16% By End Of 2022)

In the third quarter the median home price hit $404,700, jumping nearly 13% since third quarter of 2020, when the median sales price was $358,700.

Though it’s an eye-catching number, the market has been hot of late, and a lack of inventory and high demand means foretold the rise in home prices.

According to a recent note from Goldman Sachs, home prices could rise another 16% by the end of next year. Goldman economist Jan Hatzius pointed out that of all the pandemic shortages, the housing shortage might last the longest and that a crash is very unlikely.

Sure Jan. That’s what economists were saying in 2007 too before housing prices crashed and burned. Although this time its different: The Federal Reserve hadn’t gone insane buying Treasuries and Agency MBS before the housing bubble burst in 2008/2009.

Freddie Mac 30-year Rate Rises To 3.14% (Nothing Has Been The Same Since Covid)

Freddie Mac’s 30-year mortgage rate rose today to 3.14%.

Notice how Freddie’s 30-year loan commitment rate tracked the 10-year Treasury yield … until Covid struck. Then there was a separation of the two rates.

U.S. Pending Home Sales Fell by More Than Expected in February (-7.19% YoY) With Sinking Real GDP Growth

US pending home sales declined -2.3% MoM and -7.19% YoY as US GDP sinks like a paralyzed falcon,

(Bloomberg) — The National Association of Realtors’ index of pending home sales decreased 2.3% in September from a month earlier to 116.7, largest drop since April, according to data released Thursday.

The median estimate in a Bloomberg survey of economists called for a 0.5% advance.

Compared with a year earlier, contract signings were down 7.2% on an unadjusted basis”

Forecast range from -4.6% to 4.5% from 30 economists surveyed

Signings declined in all four U.S. regions from the prior month, led by a 3.5% drop in the Midwest
Unlike existing-home sales, which are calculated when a contract closes, the index of pending home sales is based on contract signings

Treasury Secretary Janet Yellen: “What, me worry?”