Slow Down! ADP Jobs Added Slows To 106k In January, Lowest Since August 2021

The US economy is slowing down. In fact, ADP jobs added just printed at 106k in January, the lowest reading since August 2021. ADP jobs added follows the slow down of M2 Money growth YoY as The Fed tightens its monetary policy.

Do I detect a trend (orange line)?

Speaking of trends, check out ISM Manufacturing New Orders. Lowest since Great Recession of 2008 (if I exclude the government economic shutdown Covid recession).

I doubt that January’s ADP report or the ISM Manufacturing report will be mentioned in Biden’s State of the Union address.

Debt-Limit Fight Risks Early End to Fed Quantitative Tightening (Fed Had Penciled In Shrinking Its Bond Portfolio Into 2024)

While the children in Congress and the Administration argue about cutting the Fedcral budget (as if there isn’t trillions of dollars of wasteful spending in the budget), we saw an even dumber suggestion from Pramila Jayapal (WA-D), Adam (Shifty) Schiff (CA-D) and Sheila Jackson Lee (TX-D): a bill to eliminate the debt ceiling altogether to allow unlimited Federal spending. That reminds me of the Tom Arnold/Julie Ford film “The Stupids.” Yet these clowns keep getting re-elected.

In any case, The Federal Reserve’s quantitative-tightening program risks being propelled toward an early end as US politicians bicker in Washington over raising the national debt limit, according to some economists and bond-market participants. As of this morning, the US credit default swap (1-year CDS) remains elevated signaling a positive probability of a US debt default. (CDS represents the price of insuring against a default).

But notice that The Fed still has $8.5 TRILLION in assets (largely Treasuries and Agency MBS) on their balance sheet. But The Fed’s plans to continue shrinking their balance sheet will be put on hold (and if fact will be reversed) if Democrats and President (10% for the big guy) Biden don’t budget on cutting some of the enormous fat from the Federal budget.

United States Yield Curve 3M10Y Most Inverted In 30+ Years! (But Other Assets Signaling Cooling Odds Of Recession)

The first headline I saw when I turned on Bloomberg.com was “DOJ Officials Find More Classified Documents at President Biden’s Home.” This is an improvement! So far, the task has been handled by Biden’s private attorneys who don’t have proper security clearance; at least the Justice Department is finally getting involved!

But back to the US yield curve. It is now the most inverted in 30+ years as M2 Money growth stalls. Inverted yield curves have preceded recessions in the past.

But as China reopens and Europe is experiencing a warmer winter than expected (meaning that Europe has sufficient natural gas reserves) and US inflation cooling,

we are seeing market-implied odds of a recession falling in January.

I am still betting on a recession in the second half of 2023.

Markets Are Strange! Mortgage Applications Rise 27.9% Since Previous Week, But Purchase Applications Remain 35% Lower Than Last Year (Refi Apps 81% Lower Than Last Year)

Markets are strange.

Mortgage applications increased 27.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 13, 2023. But mortgage applications are 60% lower than the same week last year.

The Refinance Index increased 34 percent from the previous week and was 81 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 25 percent from one week earlier. The unadjusted Purchase Index increased 32 percent compared with the previous week and was 35 percent lower than the same week one year ago.

Here are the stats.

One lender in particular, Wells Fargo, smells blood in the economic waters, and has cut back mortgage originations.

Just remember, mortgage applications generally rise in the first part of the year until May, then start slowing until the last week of the year. This is called seasonality. But despite the fast growth this year, purchase applications are still down -35% compared to last year at this time.