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Category: Economic News

Waiting For What We All Know is Coming

Markets–and in particular interest rates are quiet–the 10 year treasury yield is less than 1/2 basis point from the close yesterday.

I am pretty certain that we all know there is a 1/4% rate coming and then the Jay Powell presser will stress that GDP is decent and employment is strong and there may be a need to ‘pause’ further rate cuts. This would give the markets almost exactly what they are looking for right now. The CME Fed Watch tool is at 98% for a 1/4 point cut today, but only at 19% for January for a cut. Unless we see something drastic happen in the economy the FOMC will not cut in January with numbers like that. The Atlanta Fed GDPNow has 4th quarter GDP at 3.2% as of today–not exactly a soft growth picture. Let’s get this noise behind us so we can invest.

JOLTs Report is Soft

The most important number of the day was the JOLTs (job openings and labor turnover) employment report showed softness is almost undoubtably here in the labor market. The softness was modest and in my mind supportive of a FOMC Fed Funds rate cut of 1/4%.

Employment is the most important piece of economic news (at least that is my opinion) –with strong employment recessions are held at bay and demand for goods and services remain high–so any softening starts to show cracks in the economy.

The JOLTs report for July shows that separations were up 336,000 with the largest layoffs in accommodations and food service which may show travel and dining out are softening.

The number of job openings at 7.7 million was about a million fewer openings than a year ago–actually a nice drift lower–Goldilocks?

So tomorrow we have ADP jobs and then on Friday the official government numbers of employment.

The 10 year treasury fell 3-4 basis points on release of the JOLTs numbers–now around 3.79%. Let’s see where this goes by the end of the week.

All the detail on JOLTs is here.

New Home Sales are HOT!!

What is normally a ho hum report became more important this morning as the sales of new homes came in hot, hot, hot.

The forecast was for sales of 680,000 units but the actual came in at 759,000—way stronger than us that are looking for economic news that is friendly to interest rates.

The 10 year popped to 4.92% before setting back a basis point or two.

You have to tip your hat to the homebuilders as they find innovative ways to lure folks in to overpriced houses with short term interest rate buydowns etc.

Flash PMI Comes in Slightly Stronger than Expected

The flash Composite PMI came in slightly stronger than expected–although it notes that employment is softening somewhat. Does this bode well for a soft landing?

The report also made note that inflationary pressures are easing a bit.

Seems to me the report is near ‘Goldilocks’ – not too hot or too cold. The 10 year treasury moved slightly higher on the report – now up 4 basis points to now at near 4.88%.

The entire report is here.