Let’s discuss how rate rate hike odds changed following the jobs report on Friday. 
Economists surveyed by Bloomberg Econoday forecast nonfarm payrolls would rise by 187,000 with private payrolls up 179,000.
Yesterday, ADP said private payrolls rose by only 89,000. Today, the BLS said nonfarm payrolls rose by 336,000.
The upside surprise sent bond yields and rate hike odds up across the board. I selected May of 2024 for detailed analysis of CME Fedwatch data.
May 1, 2024 FOMC Rate Hike Odds
- The odds of at least one rate cut by the May 2024 meeting fell by 13.3 percentage points.
- The odds of at least one rate hike rose by 9.0 percentage points.
- The single most likely thing is no change, up 4.4 percentage points to 44.9 percent.
What about this year?
December 13, 2023 FOMC Rate Hike Odds
Looking ahead to the December 13, 2023 meeting, market participants think the single most likely thing is for the Fed to hold pat.
For December, the odds of at least one hike rose from 33.1 percent to 42.6 percent, an overall increase of 9.5 percentage points.
Curiously, that’s nearly the same increase as the 9.0 percentage point jump for May of 2024.
Across all time frames, the odds of hikes increased, yet never jumped above 50 percent.
Higher For Still Longer But No Hikes
The market perception is higher for longer but still no more hikes.
This will change quickly if the Fed starts yapping about the need for more hikes.
Jobs Unexpectedly Surge by 336,000 But Employment Only Rises by 86,000
For discussion of the jobs report that impacted the above odd, please see Jobs Unexpectedly Surge by 336,000 But Employment Only Rises by 86,000
Also see Government Jobs Rose by Nearly 1 Million Unadjusted in Sept, What Going On?
The 6th seasonal inflection point came early.
The trend line for bond yields is 3.5 years long, and yields continue to make new highs since the 2020 low. This forces the Fed to raise rates.
Exogenous events might surprise the markets.
Endogenous events too!!!
what I’ve said in my first comment (one last hike in Jan/24 and interest cutting ccle into q4/2025) means: after a top in $ / dxy in January 2024 , we will see a falling $ for years like the leaves fall from the trees in autumn (target 87 dxy or below – and when I say or below I mean the 64-60 dxy range).
p.s. search the reasons in the chinese approach to long term US debt (in the markets) 😉
Vali
Once again … there are plenty of job openings because:
Published Another Op-Ed Trying To Call Attention To The Exploding Rates Of Death Amongst Young, Working-Age Americans – PIERRE KORY, MD, MPA
With the investigative journalist Mary Beth Pfeiffer, we are again trying to get the public and government’s attention to focus on the “inexplicable” (yeah right) rates of death still being recorded.
I really don’t know how much worse it can get yet still be ignored by health and governmental authorities the world over. But it is bad, like really bad, and it ain’t just the U.S.
John Campbell and Ed Dowd and MP Andrew Bridgen are trying to do the same with the insane excess mortality rates being measured in the U.K. In a rare “win,” Andrew told me that he has successfully scheduled a hearing on UK’s excess mortality in the House of Commons (a hearing that they scheduled for the aptly named “graveyard shift” (i.e. last spot of the day on a Friday when all the MP’s try to get out of dodge).
Life insurance data show a massive spike in excess deaths among younger, working-age people that began in 2021, even as COVID-19 deaths decreased, and continues today. So far, good explanations are elusive. A concerted, bipartisan investigation should explore this threat to America’s economic future and recommend a course of action.
A report by the nonprofit Society of Actuaries found that 34% more 35- to 44-year-olds died than expected in the last three months of 2022. More deaths occurred among white-collar vs. blue-collar workers.
https://pierrekorymedicalmusings.com/p/published-another-op-ed-trying-to
This is what Gates and the WEF were aiming for.
This isn’t being talked about in the MSM. This drastically affects our economy. (jobs, healthcare costs, # of people on disability)
i have been saying here for a year, in spite of calls for slowdown long long ago, i do NOT know a single person who is out of work, that wants a job. NOT a one. coast to coast. all ages, all spectrums of family and friends. it’s raging inflation, as inflation is cumulative. with full employment. so only half the misery index indicating bad times. i’m gonna go out on a limb and say r/e prices will be drastically lower in 3 to 5 years from now. it’s the slowest sector to move. which makes it so lucrative for patient investors……..r/e cap rates need to keep up with inflation. to make sense.
i have been saying here for a year, in spite of mish call for slowdown long long ago, i do NOT know a single person who is out of work, that wants a job. NOT a one. coast to coast. all ages, all spectrums of family and friends. it’s raging inflation, as inflation is cumulative. with full employment. so only half the misery index indicating bad times. i’m gonna go out on a limb and say r/e prices will be drastically lower in 3 to 5 years from now. it’s the slowest sector to move. which makes it so lucrative for patient investors……..r/e cap rates need to keep up with inflation. to make sense.
I have to put on my space cadet headgear to believe jobs are booming. Glad to see this piece today at Zerohedge. Their conclusion – that full time jobs actually collapsed by 885 m, while part time and multiple jobholders were up 1127m and 368m respectively. You may have already responded, but I’d be interested to see your take on it.
Worth noting that Good Producing sectors only accounted for 29K jobs – less than 1/10th of the overall figure.
The “Real Economy” isn’t in such great shape actually.
That really is a major assumption on your part at least as it relates to the labor market. At 3.5-3.8% unemployment, we’re at peak employment. The dominate types of jobs created over the last 18 months have been in lower paying industries & part-time work. You don’t have tons of great paying jobs created, when you’re at 3.8% unemployment. It’s just not possible. Now then, I firmly believe the bottom 50% are really starting to get hit hard by inflation, but that doesn’t mean the economy is teetering on the edge of a recession.
It is the “bottom 95%” getting hit by Inflation.
JUST SAYIN’.
Let’s see what happens next week with CPI.
My question is how long does it take for +/- in fuel costs to start affecting the cost of goods sold? Once that happens, +/- in inflation become baked into core PCE.
Would love to see a surprise upside to CPI next week, but I won’t be surprised to see the Fed pause again on 11/1. This will give them two more data points before making what they feel is a data dependent decision about another 25 increase.
Personally, I think this is the wrong stance to take and a more hawkish stance needs to prevail. Slow & steady wins the race, though.
Corporate net margins are still historically high for what generally was a mean reverting series. There may be some room for some of this input inflation to be eaten by companies especially if they start to see pushback from pinched consumers.
You would think…but it’s never quite that simple.
When demand softens, there is a temptation to actually *increase* prices to try to maintain the top-line and increase margins. This temptation is greatest in sectors that are not subject to high competition or consist of good/services for which there is no easy substitution.
A very recent example would be Disney – which until the last week was continuing to hike admission prices at its theme parks despite persistently dropping attendance.
This sort of behavior seems like the silliest form of hopium – until one realizes the beating that investors subject you to when you finally face the music.
“Buyer Strikes” work – but after so many quarters of earnings blowouts they will take some time.
Oil prices will be a key determinant. They’ve sold off a bit over the past few days (excepting today) due to a spooky-looking reading on gasoline demand that might portend a slowdown.
The latest trade deficit data also suggests a slowdown courtesy of lower consumer goods and capital goods imports.
We probably will see an uptick in next week’s CPI data – but if oil stays in check – the Fed could stay on the sidelines.
BTW: Even if the Fed raises rates – don’t expect the increases to filter through to higher Savings account and CD rates. Banks in my area suddenly cut Special CD yields about 100-125 BP for the 6-18 month duration. Clearly they do not want more deposits. I expect that’s because they are becoming more reluctant to make loans due to the prospect of increased loan non-performance.
You need to move your money to Fidelity.
You can get 5.65% brokered CDs for 1 year.
You can get 5.1% 3 year Morgan Stanley CDs with call protection.
I JUST this week moved Money from Schwab/TD (too much cash there) to Fidelity.
Fidelity is paying a $100 bonus on new balances coming into their firm. Nice little bonus to buy one Steak and a Glass of Wine.
Charles Schwab CD rates for 3 mos to 3 yrs are ALL over 5.5%
one last rate hike in January 2024 and after that (q1/q2/2024) sudden big (0.5-1%) rate cuts AND LOWER INTERESTS FOR LONGER (end of lowering rates cycle ending q1/2026 or q4/2025).
Almost no chance of a new secular low in interest rates.
Too many inflationary forces globally.
While we are consumed by our CPI numbers etc, it looks like China is a dead carp floating. Bad real estate, poor internal labor market & demographics, global image collapsing etc. US markets are frankly much more alluring and offer a transparent rule of law based governance. Peak totalitarianism has been reached and investment $ is going to flow this way.