Well, the COVID hysteria from the Biden Administration and the media preparing us for a horrible jobs report was … incorrect. In fact, the January jobs report was “exceptional”. 467,000 jobs were added and average hourly earnings growth ROSE to 5.7% YoY.
The bad news? Thanks to surging inflation, REAL average hourly earnings growth YoY FELL to -2.36%.
Unemployment ROSE to 4.0% from 3.9% as more people dropped out of the labor force in January. On the bright side, labor force participation rate rose to 62.2% from 61.9%.
Leisure and hospitality employment (one of the most vulnerable to inflation) expanded by 151,000 in January, reflecting job gains in food services and drinking places (+108,000) and in the accommodation industry (+23,000).
The reaction in the bond market? US 10-year yields are up 6.9 basis points as Eurozone is up across the board.
Energy prices are up (except natural gas futures).
(Bloomberg) — European Central Bank President Christine Lagarde is no longer ruling out an interest-rate hike this year, a pivot toward the tightening stance of global peers that officials privately see materializing with a shift in policy guidance as soon as next month.
Investors brought forward bets on ECB action as the monetary chief delivered surprisingly hawkish comments citing unexpected record inflation data, contrasting with an earlier statement on Thursday that kept intact its formal view that price increases will ease.
She spoke after policy makers agreed that it’s sensible no longer to exclude a rate move in 2022, and that bond buying could end in the third quarter, according to officials familiar with their thinking who asked not to be identified because such discussions are confidential. An ECB spokesman declined to comment.
The result of Lagarde’s jaw boning?
US mortgage rates are rising in anticipation of the US following Largarde’s lead. Powell and the Gang continue to lag.
Between the Biden Administration, Anthony Fauci and the media constantly screaming about the devastating effects of Omicron, I would have expected massive job cuts and a large spike in jobless claims. But alas, the numbers and charts tell a different story.
Today, we saw that the Challenger job cuts for January fell further to 76%. Initial jobless claims fell to 236k. And The Federal Reserve is still hyper-stimulating the economy.
After listening to Biden spokesperson Jen Psaki preparing us for an end-of-times job report, I was expecting today’s news dump to be terrible. But alas, it just looks like another day in Stimulyoptoville.
Hey Jen, where’s the beef? Now that I think of it, Jen Psaki looks like Wendy from the burger franchise. Except that the burger Wendy doesn’t terrify people.
But the housing market is still blistering hot in January 2022. Mortgage Bankers Association (MBA) mortgage purchase applications for the week of 1/21-1/28 were UP 11.63% week-over-week (WoW).
Refinancing applications were up 18.4% WoW as fear of Fed monetary tightening grips the mortgage market.
Now, The Fed is expected to raise their target rate 5 times or so over the next year AND slow down asset purchases. Mortgage rates are rising in anticipation of the Fed’s withdrawal of COVID related stimulus.
So, the housing market is expected to slowdown in 2022 as The Fed withdraws its ample monetary stimulus.
Yes, its a cold one out there. But the Biden Administration is engaging in reducing fossil fuel supply and pushing towards “green” energy such as inefficient solar panels, eagle-killing wind turbines, and ocean turbines.
As a consequence, natural gas futures are up 93% from January 1, 2021 while coal futures are up 133% and WTI Crude spot price is up 82%.
Any wonder why food prices are up 40%?
Stay warm. It’s a cold one out there today. And The Federal government doesn’t care.
Raphael Bostic and Goldman Sachs are both calling for dramatic rate increases to fight inflation … that they helped cause with their monetary stimulypto. I call this The Fed’s March of the Toreadors as The Fed now attempts to kill the bull market.
(Bloomberg) — The Treasury yield curve flattened to the lowest level in over a year on Monday as the prospect of a super-sized Federal Reserve rate increase in March gained traction, weighing disproportionately on shorter-dated tenors.
Two-year U.S. yields climbed as much as 4 basis points after Raphael Bostic, the president of the Fed’s Atlanta branch, said the U.S. central bank could raise its benchmark rate by 50 basis points if a more aggressive approach to taming inflation is needed.
That narrowed the gap with ten-year counterparts — which rose about half as much — to the least since October 2020. The last time the Fed delivered a half-point increase to borrowing costs was at the height of the dot-com bubble in 2000.
The repricing extended a move spurred last week, after Fed Chair Jerome Powell underscored the policy maker’s determination to put a lid on inflation. The market positioning may have been exacerbated by hedge funds that had been leaning the wrong way before Powell’s address.
Traders are currently betting the Fed will deliver 32 basis points of tightening in March, more than fully pricing an increase of a quarter-point. That puts the implied probability of a 50-basis-point increase at almost 30%. The odds of such a move in December were zero.
Consumer prices rose an annual 7% in December, the fastest pace in almost four decades. Powell left the door open to increasing rates at every meeting, and didn’t rule out the possibility of a 50-basis-point hike.
In an interview with the Financial Times, Bostic stuck to his call for three quarter-point interest rate increases in 2022, while saying that a more aggressive approach was possible if warranted by the economic data. Bostic is a non-voting member of the FOMC this year.
Since the rapid growth in inflation was caused by a combination of too much Fed stimulus, too much fiscal stimulus and “green” energy policies, it is unclear whether an increase of 50 basis points will do much, particularly if Bostic’s own Atlanta Fed GDPNow forecast of 0.051% is accurate. Raising ratesif the economy is slowing??
To be clear, Bostic and others are trying to signal The Fed’s intent well in advance to avoid a surprise knock-down of the stock market. Or a killing of the bull market.
Nothing has been the same since the financial crisis of 2008 (except we still have insider-trading superstar Nancy Pelosi as US House Speaker). What has changed is that US Public Debt to GDP (nominal dollars) has doubled.
Has doubling Federal debt helped the hourly worker? Initially we saw a surge in REAL hourly wage growth in 2009 as the US began to recover from the housing bubble burst and ensuing financial crisis. Another surge in REAL wage growth occurred when Federal debt exploded as the COVID crisis took hold. BUT more recently we see that REAL wage growth is negative.
The other aspect of pain for hourly workers is inflation which has reached 7%, the highest rate in 40 years.
Adding to the frustration of hourly workers is energy prices rising 80% under President Biden’s reign of error.
Most hourly wage earners can’t buy a Tesla or a $100,000 electric Chevy Silverado to take advantage of Biden’s green energy policies.
The misery index is traditionally inflation rate plus U-3 unemployment rate. The RENTER misery index is the Zillow Rent Index YoY + U-3 unemployment rate to demonstrate the hardship of renters because of soaring home prices.
Notice that because of rising home prices, the Renter misery index has overwhelmed the improvement in unemployment.
As I typically do, I will now include The Fed’s balance sheet (as a proxy for Fed stimulus and supporting Federal government expenditures). Yes, you can see that The Fed and Federal government are responsible for our modern day “Grapes of Wrath.”
If we look at the TRADITIONAL misery index, we see that misery remains above 10 (it was below 6 prior to the COVID outbreak in early 2020).
Remember that the REAL average hourly earning growth of Americans is NEGATIVE. Gains in wage growth more than offset by inflation.
I won’t even mention how inflation is crushing retirees since Social Security and pension plans rarely adequately compensate retirees for inflation.
Now for the really bad news. 81-year old senior, House Speaker Nancy Pelosi, has announced that she is running for Congress yet again from leftist-stronghold San Francisco. Although she has an expensive home in Georgetown and a beautiful vineyard in Napa Valley. Pelosi’s vineyard only sells grapes to other wine makers. Not bad for a career civil servant!
I really wanted Pelosi to produce a wine called “The Grapes of Wrath” in honor of her insider trading and massive wasteful spending of taxpayer money that has helped generate inflation, rampant government debt growth and hurting retirees and hourly workers.
No, not the Klaus von Bulow type of “reversal of fortune” (when he killed his wife). I am talking about a reversal in fortune for America.
Let’s look at the 10Y-2Y Treasury curve. It typically falls below 0 basis points before every recession. Except the mini-COVID recession of 2020. But notice that the Treasury curve did not recover from the COVID recession as it typically did. More along the lines of 1984-1985.
Speaking of Reversal of Fortune, everything changed once Fed Chair Powell started to speak after Tuesday’s FOMC meeting.
Hmm. Midterm elections, possible Russian invasion of The Ukraine, further problems in China, etc. While The Fed Funds Future data implies that The Fed may raise their target rate 5 times over the coming year, we’ll see.
If 2021 was a great year for the US housing market, 2022 faces “a new normal” marked by a slowing down of home price rises, job layoffs in the mortgage industry, and concerns over rising inflation and interest rate hikes, according to Douglas Duncan (pictured), Fannie Mae’s senior vice president and chief economist.
Duncan said “a shift” was underway in the market and the wider economy, which would result in far more moderate home price appreciation, expected to be between 7% and 7.5% this year due to the ending of fiscal and monetary stimulus.
“One of the elements of the shift is that you’re going to see house prices up, but not nearly as far as they were in the last two years because that was driven hugely by the fiscal and monetary stimulus (now) being removed,” he told MPA.
Ominously, he added that low interest rates “may never be seen again”. Or at least until Biden appoints more doves to The Federal Reserve Board of Governors.
Here is a lesson in Bidenomics. “Going Green” sounds great to some (like Al Gore, Leonardo DiCaprio and Greta Thunberg), but there are costs to not growing America’s energy supply.
Rising energy costs have helped create the rise in consumer prices and inflation. Not to mention chip shortages for car and trucks. The University of Michigan conditions for vehicles plummeted to 46 (100 baseline) as used vehicles prices sky rocket.
Under Biden’s reign of error, West Texas Crude futures prices have risen 87% (regular gas prices are up 49% even with Biden’s releasing two days of supply from the Strategic Petroleum Reserve.
On the housing front, the University of Michigan buying conditions for houses fell to 72 (baseline of 100) as home prices are roaring at a 18.81% YoY clip.
To paraphrase the comic strip “Gasoline Alley,” “Unca’ Joe, what have your done t’ US?”
Confounded Interest - Anthony B. Sanders 
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