I Just Hope the Fed Doesn’t See This Jobs Report

Wall Street’s fervent hopes and prayers for rate-cut ammo were not fulfilled.

Wall Street, clamoring for three to four rate cuts this year, was hoping and praying fervently for a lousy jobs report that would “force” the Fed to cut rates. Those hopes and prayers were not fulfilled when the Labor Department released its data trove for June this morning, the last jobs report before the next Fed meeting. Stocks instantly swooned. And the 10-year Treasury yield jumped by 10 basis points from 1.95% to 2.05%!

The number of nonfarm employees increased by 224,000 in June to 151.3 million. The May and April increases were revised lower to 72,000 and 216,000. The June increase was in the upper part of the multi-year range:

It is due to this jagged-teeth data in the chart above that the Fed doesn’t focus on the movements of one month. And it is why Fed Chair Jerome Powell said during the last FOMC press conference that the Fed is looking at the three-month moving average of the monthly employment report, when he countered the view, propagated by rate-cut mongers on Wall Street, that the job market had suddenly gone to heck, from a strong April to a dreary May. But the monthly ups and downs are not indicative of trends in the job market. He pointed out that the three-month moving average, which irons out the monthly ups and downs, had remained fairly strong.

When these surveys go out to employers – and I received one of them too – employers have some time to respond, and then it takes the BLS some time to put the data together. So that “June” employment data wasn’t even for June. But it was simply the latest reading. And the monthly ups and downs are laden with statistical noise. The vast US job market, unless a sudden catastrophe happens, doesn’t turn around on a dime.

So the Fed looks at the three-month moving average for trends. As Powell pointed out during the press conference, the three-month moving average of employment increases through May had been above 150,000 – fairly decent – though the increases in hiring had slowed somewhat. With the current reading in June, and the revisions for May and April, the three-month moving average ticked up to an increase of 171,000 employees per month:

Over the past 12 months through June, the number of nonfarm employees increased by 2.3 million persons. That 12-month increase was in the middle of the range since mid-2011, but down a little from the above-average increases in the second half last year.

This slower increase in hiring has been attributed to just how hard it is getting for employers to hire new people without jacking up wages. Employers are very reluctant to raise their labor costs by even small percentages, because for many of them, labor costs are over half of their total costs, and raising wages has an instant and big impact on profits.

Wages rose 3.1% over the 12-month period, according to the BLS data today. From the Great Recession through mid-2018, wage increases by this measure had been consistently below 3%. In July 2018, the 12-month increase hit 3% for the first time, and these increases have consistently exceeded 3% since then, a sign that employers are finally ceding some ground to the pressures in the labor market.

The narrowest definition of the unemployment rate, which is based on household surveys not employer surveys, “was little changed at 3.7 percent,” as the BLS put it, after ticking up from 3.6% in May and April, as 300,000 people entered the labor force looking for work and therefore counting as unemployed. The rate in May and April had been the lowest since the 1960s. And this measure is down from 4.0% in June last year.

The job market had been crappy for workers since about 2001, with big swings in crappiness including a dive into labor-market hell during the Great Recession. But as crappy as it still is for many workers and those looking for work in some areas, this is the tightest and least-crappy overall labor market since 2001, and it is not suddenly spiraling down, and it is not “forcing” the Fed to cut rates.

The inflation index the Fed anointed as its yardstick booked two big jumps in a row: May near the top of the range since 2010; April, third largest jump since 2010. Read…  Markets Might Hafta Grapple with “Patient”: Fed Rate Cut in July After This Inflation?

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  71 comments for “I Just Hope the Fed Doesn’t See This Jobs Report

  1. MoreCutsPlease
    Jul 5, 2019 at 11:37 am

    If the fed cuts even 0.25% at the end of July, it would look extremely political. That said, Yellen kept rates low during the last election cycle by delaying the tightening process, which seemed political. I would be funny if the fed cuts in July, as it could start the euphoria phase melt-up which could end this bull market early next year. Might be a smart move by the fed to crash the markets before the 2020 elections….

    • GP
      Jul 5, 2019 at 1:18 pm

      All presidents want rates to be low. Last president got that without asking for it publicly.

      End market manipulation by the Fed. Pare down its impossible mandates.

    • Just Some Random Guy
      Jul 5, 2019 at 3:20 pm

      “That said, Yellen kept rates low during the last election cycle by delaying the tightening process,”

      Yellen and Benny B kept rates low the entire 8 years of Obama. Then as soon as you know who got into office, all of a sudden it was oh gee maybe rates are too low.

      But you know, the Fed is super duper independent and stuff. And not at all political. And the Deep State is a myth.

      • Jul 5, 2019 at 6:33 pm

        Close but not quite. First rate hike was in Dec 2015, second rate hike in Dec 2016. Trump came into office in Jan 2017.

        • GP
          Jul 5, 2019 at 7:26 pm

          If we are into nitpicking, election was November 2016.

        • Just Some Random Guy
          Jul 5, 2019 at 7:42 pm

          Looking at this chart, If I didn’t know any better I’d swear The Fed did all it could to help Obama and has been doing all it can to hurt Trump. But that can’t be since there is no such thing as a Depp State and the Fed is totes apolitical. The nice people on CNBC keep telling me so.

          https://www.macrotrends.net/2015/fed-funds-rate-historical-chart

        • Jul 5, 2019 at 9:01 pm

          Just Some Random Guy,

          “The Fed did all it could to help Obama”: This whole theory is totally NUTS and leaves out the facts. Bush handed Obama the FINANCIAL CRISIS, when credit was freezing up, and banks were collapsing and others were at the brink of collapse. GM and Chrysler were going bankrupt. GE was threatening to. The housing market was collapsing. 11 million people would lose their jobs. The Fed reacted to that, and not to Obama.

        • Just Some Random Guy
          Jul 6, 2019 at 9:11 am

          Wolf,

          The Fed lowered rates to help out in 2009 and 2010. But then 2011-2015? Come on. And then since 2017? Just a coincidence?

    • Patrick
      Jul 5, 2019 at 5:41 pm

      “… euphoria phase melt-up which could end this bull market early next year.” Been hearing that one for a while, along with markets selling off due to the tanking economy.

      Saying markets will crash at the beginning of a brand new Fed easing cycle is like saying no one will show up to pick up all that free cash when they start airdropping it over Wall St. Powell all but stated…It won’t be allowed to fail. If needed, the Fed (with unanimous approval from Congress) will print to buy corporate bonds and stock indexes directly.

      What’s fair market value for a stock if it’s risen 3X because the currency supply has gone up 3X?

    • The REAL Donald Tweet
      Jul 5, 2019 at 8:21 pm

      The only event that will end this ridiculous bubble is a recession. All the scams, con artists, and Ponzi schemes (just like what happened withMadoff) will be out in full view. God knows the SEC isn’t going to do ANYTHING to prick this nonsense. HOWEVER, the FED is a different story. In fact, they are entirely political (this should be VERY OBVIOUS after refusing to raise rates for like a freakin’ decade) and aren’t to keen at receiving conscious colonoscopies on a regular basis from the Commander-in-Chief. If the Fed would like to have a more pleasant worklife, I would be looking for a rate increase.

      • alex in San Jose AKA Digital Detroit
        Jul 5, 2019 at 10:46 pm

        Most of us never recovered from the last one, so might as well bring it on.

  2. David H
    Jul 5, 2019 at 11:47 am

    I am still learning the ropes of the bond market but I am sitting on circa 85% bond etfs and gold at the moment.
    Can I test my understanding: if the fed cut wouldn’t the value of my bonds go up because the average date to maturity is like 8 years, so those higher yielding bonds would be worth more?
    What will happen to government bonds if the fed doesn’t cut and equities go to crap? Wouldn’t that also be good for bonds? But surely both situations can’t be good for bonds

    • Rcohn
      Jul 5, 2019 at 2:00 pm

      Lowering / raising the Fed funds rate directly affects short term rates and has no affect upon longer term rates , other than a psychological one.The problem with being long bonds is very simple; you are not being compensated sufficiently for the risk that you are taking. The 10 year and 30 year rates are not far from all time lows.Do you really want to tie up money for a real return of 31 bps and 76 bps for 10 and 30 years and an implied inflation rate of % 1.55 and %1.71 respectively.You are playing with fire by being long at these rates.

      • Anon1970
        Jul 5, 2019 at 4:23 pm

        Unfortunately, we do not live in normal times and in the past decade, the Fed very much affected long term rates by buying long term bonds and forcing down long term yields. It was printing money to pay for the bonds but called it quantitative easing to confuse the rubes.

        When Richard Nixon nominated Arthur Burns to head the Fed in 1969, it was with the understanding the Burns would run a loose monetary policy to help with Nixon’s re-election in 1972. Burns kept his word after he was sworn in in 1970. The Fed/Treasury’s failure to defend the value of the US$ via higher interest rates mean the end of the gold standard and, with a lag, higher inflation.

        With Trump’s erratic behavior, anything is possible.

      • Dale
        Jul 5, 2019 at 6:00 pm

        I agree with your sentiment.

        But look also at the way the investors in Europe look at it. If they buy a 20-year bond with a 2.34% coupon and the interest rate goes down to -1% (magically overnight), the value of that bond goes up 70%.

        European investors apparently believe that their rates will continue to go down. Otherwise, it would be insane for them to put $12T into negative interest-rate bonds.

        OTH, the whole negative rate scheme could be another approach to forcing investors to subsidize the rest of society, as opposed to the invest-in-worthless-investments approach used in the US (as explained so well by Wolf).

        • panatomic-x
          Jul 5, 2019 at 7:27 pm

          i wish i had the data but i believe that almost no one outside of european banks has been buying euro sovereign debt. the banks have to hold it as bank reserves. am i wrong?

        • Jul 5, 2019 at 8:55 pm

          Companies with cash that exceed the levels of deposit insurance have to buy government securities for their cash management needs because leaving their uninsured cash in a bank would be too risky. All corporations with “cash and cash equivalent” hold government securities for that reason.

        • lenert
          Jul 6, 2019 at 8:33 am

          The old headquarters of Pacific Car and Foundry had a walk-in vault.

    • Patrick
      Jul 5, 2019 at 5:53 pm

      Bond yields must fall because the Gov is running record deficits. Watch when the Fed starts actively suppressing the entire yield cure…they already are via Fed Funds rate and by selling MBS to buy long dated UST’s.

      As for Gold. it may even see $1500 but will fall big not long after the July 31 rate cut. What most aren’t anticipating is that this is a One-and-Done ‘insurance’ cut. Trump wants to get re-elected so will likely ease up on tariffs; letting the Fed take the year off on the stock pumping gambit. Beware of any Gold rally absent of a safehaven bid. The hangover is never pretty.

      • sunny129
        Jul 5, 2019 at 8:22 pm

        ‘will fall big not long after the July 31 rate cut’.

        On what basis?

        One cut of 25 or even 50 basis won’t do a thing, if the earnings recession holds up, along with global slow down!

        Fed is trapped just like the ECB and the BOJ, in holding the rates down to keep the interest paid on the National debt as low as possible, as long as they can!

        Otherwise all sovereign bonds including Treasury will crash, in the coming years, if the servicing the debt exceeds the flow of revenue!
        This is even before the recession hits!

        Wonder why there is 13 Trillions ( probably will go higher) with NIRP, today?

        • Rob D
          Jul 6, 2019 at 12:21 pm

          “if the servicing the debt exceeds the flow of revenue!”

          Me thinks we have already been in this boat for quite some time already.

        • sunny129
          Jul 6, 2019 at 4:21 pm

          @ Rob D
          “if the servicing the debt exceeds the flow of revenue!”

          Me thinks we have already been in this boat for quite some time already.”

          NO! Not yet!

          Within a year two, the interest on servicing the DEBT will exceed that budget for DOD! It will also compete with SS and Medicare funding!

    • Jul 7, 2019 at 7:57 pm

      I would beware of corporate bond ETF’s.
      Most corporate bonds are a notch above junk rating. A large number of corporate debt holders cannot legally hold much junk rated debt. If a few companies get downgraded forcing a selloff, it could create feedback which causes a much bigger selloff than expected.
      Holding the bond itself allows you to hold it to maturity, but holding an ETF exposes you to potential losses as the fund itself is caught in a series of forced sales and redemptions.
      If this happens it will be a great buying opportunity for much of this debt as most won’t go bad. It won’t work well with a typical ETF structure though.

  3. njbr
    Jul 5, 2019 at 12:10 pm

    A trillion plus in new deficit was not enough–we need to lower interest rates well below the rate of inflation–what a wonderful economy we will have!

    The velocity of money will slow even more as more money is pushed into the hands of the asset owning class who pile it into more assets. They haven’t quite figured out that the economy depends on volume spending–helicopter drops of cash–spending cash–that would be spent immediately by people who are just hanging on.

    • Cynic
      Jul 5, 2019 at 1:18 pm

      The rich, you know, feel awfully uncomfortable with the thought of poor people actually having money to spend.

      A friend of mine owned a (very successful) hedge fund: in 2008 I remember he got very emotional and said ‘This is what comes of letting poor people buy stuff!’

      Too funny for words, they just don’t get it.

      • gus
        Jul 5, 2019 at 3:50 pm

        The poor were sold homes they could not afford.
        The homes were defaulted on and the market crashed.
        Yeah I would blame the poor too.
        You lie on your application to finance a home.
        No one checks the lie because of fee’s.
        You keep selling to get more fee’s.
        So what if you sell 100 homes in one month and then the next month it jumps to 200.
        Collect a fee…. get rich.

        • panatomic-x
          Jul 5, 2019 at 7:31 pm

          so who’s fault is it the person who cheated on the application or the person who didn’t check the application in order to make the fee?

        • 91B20 1stCav (AUS)
          Jul 5, 2019 at 8:52 pm

          panatomic-x: the answer is ‘yes’.

          A better day to all.

        • Jul 7, 2019 at 8:05 pm

          I had some friends working in mortgage lending back in 2007. If someone didn’t qualify, it was standard practice to suggest an alt-a loan, ask what payments the guy thought he could make, and put the income accordingly. The individual buying the home wasn’t troubled with the details of the paperwork, just the info of what loan he got approved for at what rate and what the payments would be.

      • Dale
        Jul 5, 2019 at 6:25 pm

        Tyler Cowen’s response (or one of them) to Piketty’s work on income inequality was to suggest that, since the rich can reliably get better investment returns than poor people, *all wealth should flow to the rich*. And, I guess, the rich would then ‘take care’ of the poor as they see fit.

        Which is all very consistent with the trends we see.

  4. Nicko2
    Jul 5, 2019 at 12:17 pm

    Brexit deadline (the new one) is October 31….that could be the black swan to kick it all off.

  5. Stephen Romey
    Jul 5, 2019 at 12:52 pm

    Very sad to see our political system pandering to the crack whores on wall Street. We have historically low interest rates as it is. If companies cannot make headways in this interest rate environment and generally good consumption environment, then they certainly will not make money in an environment that pushes the value of the dollar lower and encourages more mal-investment. I am for higher interest rates and driving additional capital into America. In general, America for all its faults still attracts the lions share of global capital. Many Chinese investors would like to skirt the Chinese capital controls and send more investment to America. America can do very well without having to manipulate interest rates to ZIRP or NIRP. Just offer a transparent investment environment with solid ‘real’ returns on investment, and we can be the kings of the world.

  6. David Hall
    Jul 5, 2019 at 1:00 pm

    Some stocks have a higher dividend yield than the ten year bond.

    A large Chinese bank failed. The Chinese can’t sell non-performing loans to foreigners fast enough.

    Lower auto sales are affecting the European steel industry.

    • HR01
      Jul 5, 2019 at 1:53 pm

      The Chinese bank failure, Baoshin, wasn’t particularly large. Sure, it had stated assets of $83 billion but likely that number was fraudulently inflated since corruption was the rationale for the takeover.

      The Chinese government’s response was what spooked short-term credit markets though. Depositors were guaranteed but creditors were forced to take a haircut.

      The takeover of Anbang Insurance earlier this year was a much bigger deal. The company was sitting on $310 billion in assets.

      But thanks for bringing this up. The U.S. economy continues to outperform most everywhere else. Perhaps the Fed is more concerned with international financial conditions than domestic. Not just China either. Probably watching the European banking system closely as they struggle with NIRP. LIBOR inversion has to be causing some concern as well.

      • David Hall
        Jul 5, 2019 at 7:28 pm

        The Mongolian bank takeover caused other banks to tighten. It is in a CNBC article:
        “China’s banks face cash crunch fears after authorities seize lender”

        $80 billion is more than chicken feed.

        • HR01
          Jul 5, 2019 at 11:47 pm

          DH,

          Yes the takeover and haircut caused a credit crunch in China that still persists. Overnight SHIBOR continues to hover around the 1% level. Eurodollar market not accepting Chinese corporate debt as collateral.

          Precisely my point. The Fed likely watching events in China, Europe and elsewhere….nervously.

  7. Jul 5, 2019 at 1:22 pm

    Both red lines are wrong, raw data too high, 3MA too low. The raw data is a dome and the 3ma is skewed. Either way the zero line is about 200. Fed can cherry pick the 3MA and say the labor market is not too hot. Some of the other data suggests economic weakness, even if labor is tight. Fed started rate hikes and QT post 2014 and labor continues to tighten but is still well below the mean.

    • Jul 5, 2019 at 6:19 pm

      The zero line is about 100K. That’s what is required on average per month to absorb the new entrants into the labor force. Anything significantly above 100K tightens the labor market.

      • sunny129
        Jul 5, 2019 at 8:30 pm

        What about the claim that these job numbers are related to multiple part time jobs plus double counting??

        ZH
        To summarize: June saw a surge in full-time jobs, as total US employment hit a record high of 157 million workers, however virtually all of this increase was due to workers being forced to get a second (or third, or fourth) job, double- (and triple-)counting those who can no longer make ends meet on one job alone

        • Jul 5, 2019 at 9:07 pm

          sunny129,

          As I said below: There is ALWAYS weak data in EVERY employment report, ever since Adam and Eve. ALWAYS. One month, it’s this. The other month, it’s that. And you can always pick it out too. But that doesn’t change the trend.

  8. otherbrother
    Jul 5, 2019 at 2:00 pm

    A lot of people are working to make ends meet and a larger percent are not making it:

    A full-time worker earning the federal minimum wage of $7.25 per hour cannot rent an affordable two-bedroom apartment anywhere in the country, where affordable is defined as comprising up to 30% of a renter’s budget.

    https://www.cnbc.com/2019/06/26/minimum-wage-workers-cannot-afford-2-bedroom-rental-anywhere-in-the-us.html

    • Jul 5, 2019 at 6:27 pm

      otherbrother,

      Forget federal minimum wage. It has largely been obviated by states and cities taking fate into their own hands (which is how this is supposed to work): 18 states have “living wages,” including the largest states except Texas. Many cities have even higher living wages, such as $15/hr.

      • lisa
        Jul 5, 2019 at 6:43 pm

        going hourly rate in Ashtabula County, Ohio is $8-10.00USD- in most local businesses- primarily low budget dineries etc… Although Aldi’s does advertise $12.10 per hour to start- that’s the premium rate. Gas station attendants at the biggie car-wash over the state-line in Erie have told me they get $4.00 per hour sometimes less, because they are considered tipped employees. IF the tip split makes their earnings less than the minimum Federal hourly rate, then the small corporation makes up the difference. Reality check for Ohio and a part of low income western area of PA.

  9. Memento mori
    Jul 5, 2019 at 2:51 pm

    The Fed will cut rates in July, no matter what.
    The Fed looking at the data means nothing, all the Fed does is look at the stock market, nothing else matters.
    If truly the Fed was looking at the data how do you explain their U-turn in a December from three rate hikes in 2019 to rate cuts, there is no way data could have changed so much in such short period of time.
    Read Bernankes book, the guy had a Bloomberg Terminal in his office.

    • J.M.Keynes
      Jul 5, 2019 at 3:09 pm

      – Indeed. Bernanke wanted to know what the 3 month T-bill was doing.

  10. Stuart
    Jul 5, 2019 at 2:58 pm

    The common complaint has always been noisy data, so we must flatten it out to the 3M??… It might be too late with confirmation then. To see the slow degradation of the economy WolfSt and Rosie are picking out the weak data points.
    “David Rosenberg
    ‏ @EconguyRosie

    Half the payroll gain came from the ‘Birth-Death’ BLS guesstimate; and prime-adult male employment actually sagged 97k in June, collapsing 338k over the past three months, which hasn’t happened since September 2009. Lift open the shiny hood and check out the sputtering engine.
    8:12 AM – 5 Jul 2019 ”

    George VBRA has a good recession indicator but within 10wk+-2w notice would need to see more weakness in other sectors but I fear it would be too late by then.

    • Jul 5, 2019 at 6:30 pm

      There is ALWAYS weak data in EVERY employment report since Adam and Eve. ALWAYS. One month, it’s this. The other month, it’s that. And you can always pick it out too. But that doesn’t change the trend.

    • Dan
      Jul 5, 2019 at 7:32 pm

      That and the small business employment numbers were FUUUGLY. Those are a leading indicator too.

  11. J.M.Keynes
    Jul 5, 2019 at 3:08 pm

    – My money is still on a rate cut from the FED. Although a rate cut has become a little less likely in the last 3 days. (think: 3 month T-bill rate).

    • Jul 6, 2019 at 10:49 am

      Any rate cut would be the first in a long time and would provide the market with proof that more rate cuts are on the way. 1/4 of 1/4 point would send stocks soaring. It might be Fed will think of a way for a stealth rate cut, mere verbiage would be lost. They could shut down the balance sheet operation, which they conveniently left open. They are really afraid of goosing this market, and the economy at the wrong time and appearing to be political hacks of the president. In the cause of market stability they might want to throw some cold water on speculators. BB once did that with a surprise one off rate hike, which killed the rally in gold. They could get away with that, if it didn’t alter the basic policy of accommodation.

  12. Willy2
    Jul 5, 2019 at 3:29 pm

    – What worries me the most is that both the stockmarket and the T-bond futures have run higher in a (very) dramatic way in the last say 6 months. Either the bond market or the stock market is wrong. They can’t be both right.
    – I fear something else: I more and more think that this week we have seen the very ultimate end of the 38 year bull market (= falling interest rates) in government bonds. That bull market started (NOT only for the US !!!!) in 1981 and seems to have ended this week. If so then we prepare ourselves for the Deflation of the decade (if not century).

  13. AV8R
    Jul 5, 2019 at 3:43 pm

    Dear Fed,

    Leave Interest Rates alone. Please accelerate retirement of the MBS debt.

    Pronto

    AV8R

  14. van_down_by_river
    Jul 5, 2019 at 4:43 pm

    The Fed is going to continue with their (permanent) rate cut cycle regardless of an overheating economy. The jobs report could have added 1,000,000 new jobs and Powell would still cut rates. Not matter if there are no longer viable investments to fund with the easy money – there are always endless mal-investments to vacuum up the endless supply of free money. There are holes that need digging and holes that need filling – always room to pump more liquidity as far as the Fed is concerned.

    This is it boys. This is the big one. This is the start of the crack-up boom. With the economy overheating, with companies running out of employable people and inflation taking off the Fed is embarking on massive rate cuts and money printing. Why the easy money policy you ask? The answer: it’s popular, everyone is loving it and Powell wants to play the part of the hero. Powell wants to write books proclaiming his courage. Powell wants to be the man of the year. Powell wants to be rewarded with the big pay-off (it’s never enough is it Jerome).

    The crack-up boom has started. Some smart people have begun to panic – you can see it in the price of gold and bitcoin. This small panic will grow to a large panic and the enormous supply of M1 money will fuel a massive inflation when the dollar becomes a hot potato and money velocity goes super sonic. Anyone who has lived this before knows what is happening.

    • Paulo
      Jul 5, 2019 at 4:59 pm

      I agree with your analysis, Van. Speaking of vans, I have an old van engine I have started taking apart. 3 cylinders look okay, but #1 has a melted piston. It also melted and burned out a bunch of wiring. Some previous owner put too much pedal to the metal until it wouldn’t go, anymore.

      Now, we have an overheated economy van threatening to fly apart. With these super low interest rates in the supposed good times, there are no more tools in the box to fix what breaks. And it will break. It always does.

      Preps? We don’t know what will happen, or how this will play out, but I am assuming just about anything can set it off that we’ll only recognize in the rear view mirror.

      Enough car analogies, already!! Hey, maybe it’ll be tariffs on German autos? Now, that would be ironic. :-)

    • Steve Graves
      Jul 5, 2019 at 7:25 pm

      Permanent rate cut cycle? I was under the impression that rates had been rising during Powell’s tenure. It’s true that the Fed has listened to some of the data and hit the pause button in 2019, but Powell has given no indication that he intends to cut rates this month, or any time soon for that matter. Perhaps the financial media has been clamoring for cuts so consistently that everyone simply believes they’re inevitable.

      • van_down_by_river
        Jul 5, 2019 at 7:56 pm

        Never mind what anyone thinks is inevitable. Rates will be zero or lower this time next year.

        Fact: the Fed chairman has no spine, he completely reversed policy after a garden variety market correction.

        Fact: if the Fed does not drop rates the Federal Government cannot service the debt. The government has made clear the intention to increase government deficits and the Fed has provided tacit approval and implied they will fund the spending.

        Fact: pension funds are heavily invested in the U.S. stock market and are underfunded. The Fed needs to keep assets inflated to prevent complete pension meltdown.

        Fact: The housing market is inflated way past any previous bubble in history (based on percentage of earned income) and the Fed is determined to keep rates low to prevent a correction to fair market values.

        Fact: your country’s government and population spend well beyond their means and productive capacity. The Fed is now funding this rampant spending. They were only able to raise rates to 2.375% – they have hit a dangerous feedback loop and have begun the process of rampant excess. The more they print, the less it’s worth so the more they will print – wash, rinse, repeat…

        For so long Brazil printed money. Economists said inflation would remain under control because the economy was growing strong. A few years later anyone who saved Brazilian Cruzeiros was wiped out. The dollar, the Euro, the Yen, the Pound… they are all garbage, confetti. Governments around the world are printing money to pay the bills. This time is not different, no one gets to print wealth, that is magical thinking.

        • Jul 5, 2019 at 8:25 pm

          van, i wish you were wrong but you probably are correct. my only quibble is the effect of lowering rates on pensions. the pensions that are invested in bonds are being killed by lower rates. social security has been destroyed by zirp.

        • sunny129
          Jul 5, 2019 at 8:43 pm

          Public debt can be ‘monetized’ by Fed.

          What about the Private debt ( corporate,Shadow banking, CC, auto loans, Non-mortgage house hold debt plus Student loans)?

          Lowering of Fed rates DOESN’T automatically translate into lower rates for the private sector. Does it?

          There are at least 15% + zombie Companies out there!

          Will they all get ZRP plus 1,2 or 3% added, right? CC debt is running 18-22%. Student debt – over 5% or even 8%!

          First there will ve DELEVERAGING Deflation and then, may be hyper inflation!

        • Steve Graves
          Jul 5, 2019 at 8:49 pm

          Yet there are other “facts” which suggest rate cuts won’t be coming any time soon. Only time will tell which “opinion” is correct!

        • Prairies
          Jul 6, 2019 at 1:35 am

          Wrong

  15. GrassRanger
    Jul 5, 2019 at 6:20 pm

    So why does the wage rate continue to have this ball and chain on its ankle? I still think the hidden competition of 11(+/-) million undocumented aliens has something to do with it.

    • 91B20 1stCav (AUS)
      Jul 5, 2019 at 9:19 pm

      Grass Ranger-Bullseye. We’re two generations past the time the nation should have implemented a strong, mandatory and verifiable card-check at&by EVERY U.S. employer-THAT would be the most effective ‘wall’. Wolf’s comment on employers hating labor’s impact on profits is a long-term truth. “Work Americans won’t do” is work Americans WOULD do if it were properly compensated. If those jobs were filled by Americans, there’d be much less attraction/opportunity for those living in the lands of our second/third world neighbors, whom one can’t really blame for just trying to improve their lot. As long as business is complicit in hiring illegals, then business will be at at fault.

      A better day to all.

      • Paulo
        Jul 6, 2019 at 8:35 am

        regarding the use of illegal immigrant labour:

        You guys are right. I read some insane stats a few years ago about how certain industries rely heavily on exploiting illegal immigrants, particulary meat processing and poultry operations. Then a crackdown appeared. It is interesting to see how many states with almost open immigration protection and supports relies heavily on undocumented labour, which I cynically assume helps keep costs down and profits high.

        “Georgia has had unparalleled success in getting employers to use E-Verify by requiring it for a business license.

        In California, where 23 percent of new hires are screened, E-Verify is discouraged, and local ordinances mandating its use are prohibited.

        Some of the states with high screening rates are red states with strong anti-immigrant sentiment. Not Texas and Florida, where employers screen fewer than a third of new hires — fewer than blue states Minnesota and Washington.”

        NOT click bait: https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2018/04/27/job-screening-for-illegal-immigration-varies-by-state

        I know in Canada, if illegals are used people turn the business in to the Govt. I have never even heard of companies using illegal immigrants, although there is a trend in certain farm sectors to use permitted foreign workers during busy crop seasons. Good housing and working conditions are mandated, with inspections. Some individuals do exploit foreign workers, usually nannies. These people are caught, turned in, and prosecuted. Every industry, including home care child care, is expected to adhere to labour standards with minimum pay, time off, etc. Large Fraser Valley market farms had a nasty habit of treating foreign workers poorly which was highlighted after a series of fatal crashes of their transport vans. Now, there are surprise inspections by RCMP for seatbelt checks, etc.

        • alex in San Jose AKA Digital Detroit
          Jul 6, 2019 at 9:07 pm

          Where I am it’s a lot of cabinetry, kitchen remodel, flooring etc shops and they hire illegals like crazy.

  16. Michael Engel
    Jul 5, 2019 at 7:10 pm

    Today Job report : a huge 4th of July positive surprise.
    The 3M & 3Y jumped, flattening the hump and gold lost its shine.
    USD in a big upthrust, so what is right and who is drunk.
    US celebrated its military might, but Germany lost its PMI.
    Xilandia cannot escape the Thucydides trap.
    Their Maritime Silk Road lost some HP & Dell to the ASEAN block.
    The Scots “Liberal Imperialism” vs China “social Imperialism” schools of colonialism.
    When USD/RMB popup above 7, the “Barter Trade King” will
    suffer a sroke.
    Oppressed nations on the Maritime Silk Road will be the most oppressed in China growing collection.
    Oil extractors, with little else, under a rising USD, will become the most enslaved nations in the world.
    They will risk a rebellion , seek a 4th of July from “Social Imperialism”, for themselves.

  17. Mike Are
    Jul 5, 2019 at 7:29 pm

    The Fed will not lower interest rates. The Fed is in charge of getting Trump defeated for the next election, now that the whole Mueller thing flopped.
    Jobs numbers and other stats will be manipulated to support their position.

  18. Michael Engel
    Jul 5, 2019 at 8:21 pm

    Change in Nonfarm Employees, 3M, MA, chart : 1) The 2012 peak & and the low of the sharp decline in 2012 are the chart trading range.
    2) 2014 high is an upthrust. Since then, only lower highs.
    3) 2014 low is the chart half line.Since 2014 to 2018 peak, results
    were mostly in the upper half.
    4) The 2018 sharp correction was followed by a thud.
    This correction is about 38% of the previous decline from 2018 peak.
    5) It failed to reach the half line. If things will not get better :
    6) The next move will be a sharp decline, to a min of 125 (250 – 125)
    from 175, to about 50, below the 2012 low.

  19. NotMe
    Jul 7, 2019 at 6:36 pm

    The Fed should be under the department of the treasury. The Fed is supposedly independent, but what that means is that it is unaccountable. The president and treasury secretary not the Fed should set rates.

    Yes, this makes the Fed political, but it makes it accountable. The supreme court just ruled on this issue viz a viz gerrymandering. Gerrymandering while not pretty, should fall under the purview of elected representatives, not some independent agency or judiciary.

    Sorry. Disagree with any idea that the Fed is or should be independent.

    • fajensen
      Jul 9, 2019 at 8:14 am

      They tried that plan a lot in Central America! Argentina is the poster child for having the president nationalising the central bank and then meddle in the cost of money to favour his policies.

      “Accountable” means *nothing* to a career politician.

      Their “punishment” for failure in a democracy is to be de-selected, but, even then there is always a cushier job to fail into or a Swiss numbered account to fall back on.

      Argentina info:
      https://ideas.repec.org/p/zbw/eabhps/1503.html

  20. KiwiinCanada
    Jul 8, 2019 at 7:01 am

    The Fed should not care if politicians get re-elected or not, if pension plans are solvent or not, if governments can be funded or not, if yield curves are inverting or not. This is not their mandate. It risks floundering in a swamp if they stray from their basic goals. These I believe are low inflation and near full employment. If they stick to their mandate they will be on much safer ground.

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