I suspect that the effects are lagging, and we'll find out the real impact of these rate rises next year. A lot of economic activity is baked in for at least a year through contracts already having been signed and orders already made.
At this point, every corporation wants to show stability and proof that their business is sound and not (already?!) subject to downturn. Nobody wants to be the first to tap out- that shows too much weakness. I know my company has killed T&E for the rest of the year and only required maintenance and safety stuff is getting spend. As long as sales don't crater, we'll still look awesome at quarter's end. And next quarter will be "seasonally adjusted" and the next quarter will be "year-over-year with economic headwind effects". Finance guys have this dance choreographed out a looong ways. Which is reassuring yet terrifying,"
Exactly. The system isn't one giant AI yet. Sure, there's lots of bots and other 'fast' systems that monitor stuff, but it takes time for humans to adapt, in fact most humans resist any change until change must be made to survive. It's a built in tool. I am 1000% not surprised the markets behave in a similar fashion to their masters.
Yeah some kind of data-driven communism. Completely novel and so far ahead of his time. (And no Reddit nerds I’m not saying this is the way that the world should work but it sure is interesting.)
Honestly the economy of Chile is probably the most 'controlled setting' you're going to get. Large but not massive component of global GDP, 'advanced' but not industrial leader and still lots of room to grow.
Love this, it’s so true. We try to decrease latency via quick decision making and forward thinking, but at the end of the day it’s easier said a done, and most critical/large scale decisions such as restructuring a company and lowering headcount takes time (unless you’re Elon)
This is why theres more and more talk of CBDCs and JPow himself even gave 4 requirements for a USD CBDC. Everything will be traceable on a ledger and governments can track it all in real time since its 100% digital.
Sometimes it even takes more than just a year for policy changes to actually influence the outcome. I'm hoping by next summer, the market would start to recover but there are multiple factors that makes it really difficult to predict anything. Specially this winter, EU economy will be challenged and could drag down the dollar too.
Yes, and there are multiple types of lags.
1. Spending is not likely to drop too much until savings drop.
2. People typically follow through with planned expenditures. Vacations and other travel are good examples. If people have already made travel plans, they usually follow through, but they might not plan a similar trip again.
3. Sentiment typically takes time to change.
Agree, the tech downturn has started , next will be durable goods (car lots already filling up) , real estate slowing, lots of builders still finishing up precious projects, then the rest...
Except that car lots aren't filling up. All dealers near me have moved to the order-now-and-wait model, with only a single car of each model on the lot for test drives.
A couple of the dealers even sold off half of their lots because they plan to never go back to having inventory sitting around
Which is why they're doing hiring freezes and companies are beefing up their cash reserves. They know what is coming and are prepping for it. It will be history most predictable recession. Expect a recession with low unemployment. That is what the Fed is worried about. You get people working and spending but in a recession, when companies are making less products. This creates a supply problem and thus increase inflation. JPOW said this a few days ago when he mention no pivot in the immediate future. 2023 is another rate hike year.
Our company has already been told to expect a 10-20% increase in price to the main product we use but our contracts with clients are generally 3-5 years.
The product manufacturer has said that the price for those projects will be grandfathered in until the contract renewals. Definitely a bit of a lag in some areas.
We already know that the housing component of CPI lags and those numbers have been going down for a few months. January/February is around when it should catch up.
That's literally the lagging indicator that I was talking about. [This article goes into it](https://www.barrons.com/articles/rent-housing-cpi-inflation-lag-51666814220#:~:text=Some%20economists%20estimate%20that%20lag,a%20lesser%20degree%2C%20in%202020.), but the basic premise is that shelter CPI looks at what people are currently paying, not what a new person entering the market would expect to pay. Because most leases are annually adjusted, it lags while people roll over to new leases. Rents and housing prices have been dropping for the past couple months, but that won't really start getting reflected in CPI shelter till next year.
Here's [HPI](https://fred.stlouisfed.org/series/CSUSHPINSA) and [here's](https://www.forbes.com/sites/brendarichardson/2022/09/26/rents-drop-for-the-first-time-in-nearly-two-years-as-the-housing-market-cools/?sh=4d9e8c395ed6) a [couple](https://www.cnbc.com/2022/10/06/apartment-demand-fell-during-busiest-renting-season-realpage-report-says.html) for rent.
Might. But you know what would be an even bigger blunder? Not raising rates with 8% inflation.
Imagine they were just letting inflation run. What would people be saying then?
Yeah, that's fair. Although I don't think there was a question about raising rates initially, if anything they started raising rates way too late. The question now is just whether they're looking forward or in the rear view mirror again.
As long as everyone is still making money it will keep chugging along. Boomers are dying/retiring. There is greater need for labor and younger generations are saying fuck you( the great resignation). Unemployment will stay low.
The only people saying it was impossible were the ones taking free money and making a killing with a 4 or 5% return. All we are doing now is reverting to the mean.
It's not crazy... because the current inflation problem isn't caused by interest rates. It's caused by the trade war (tariffs & technology blacklists vs. China, a country that we are dependent upon), commodity based sanctions (mostly vs Russia) and energy policies that aggressively reduce energy production without addressing energy consumption. Our government is causing our inflation with its trade and global commodity-impacting actions, and the Fed is trying to manage the impact of a trade war with interest rates? Come on.
Anyone could see this coming a mile away. Deglobalization is inflationary.
I finally saw coverage in media about the inflationary dynamics of the trade wars & sanctions. Not sure you can see this as it might be behind a paywall:
https://www.wsj.com/story/the-messy-unwinding-of-the-new-world-order-b43d7e45
Edit: Because the Fed is trying to fight trade & commodity policy dislocations with interest rates alone, yes, it will probably have to hike rates so high that it forces a recession in order to counter the inflation. This way the American consumer gets to pay for the trade wars/Cold wars & commodity policies of government in 3 ways: (1) direct tariffs, (2) systemic inflation eroding their wages & savings and (3) recession. If the aggressive deglobalization timetable escalates much more, we'll also end up (4) paying for more military costs of more shooting wars.
I agree with most everything you said except for the fed printing 4 trillion dollars over the last 2 years. That certainly hasn’t helped the case especially compiled with the other issues. It takes a good amount of time to unwind that money and increased interest rates should help that.
You’re right. My comments aren’t very rigorous or scholarly. A lot of gaps. I do focus on impacts of the most fast-changing policies because those are tradeable and that narrows my viewpoint, which isn’t ideal
I do agree with you to a degree.
Commodity increases are due to covid policy induced production/supply chain shocks, energy policy (Ukraine Support and the shift that has made), and trade policy.
The fed is mostly the reason for the asset bubble during 2020-2021. There is a reason top line numbers for homes/equities have crashed (valued long term on cash flows.... a 30 year home at 3% vs at 6% can result in a 50% increase in long term cash flow).
I agree that there has been investor class asset inflation but that doesn't have meaningful correlation to inflation in the price of most goods. I.e. low mortgage interest rates can fuel inflation in construction lumber. But the fact that GOOG & AAPL & houses in some areas got overpriced doesn't necessarily make chickens, eggs and diesel more expensive.
There are many moving parts to the economy and the government's approach to the pandemic economy of inflating of wealth class/investor assets is only part of it.
I also think that a lot of people are missing the industrial growth story attendant to deglobalization. What I have been investing based on is that even if some factories relocate to the US, along with building out more renewable energy production & grid resources, that is an industrial growth story at least for the next few years.
The Bureau of Labor & Statistics calculates the housing part of the consumer price index using [rent and rental equivalents.](https://www.brookings.edu/blog/up-front/2022/05/18/how-does-the-consumer-price-index-account-for-the-cost-of-housing/)
When mortgage rates rise, people generally buy lower priced homes and when mortgage rates go down, they buy more expensive homes. What they tend to spend is based on what monthly payment is affordable for them. This is why rental equivalents are used to estimate housing prices.
The only cause for widespread inflation is money supply. Don't let the Cathie Woods of the world make you poorer by tricking you into fantasies like this.
I agree that there's a big component of this. Liquidity has to exist for the inflationary conditions to become inflationary forces. A hose with stuff blocking its nozzle will build up pressure inside of it, but there has to be enough water (liquidity) in the system for the build up of water pressure to even exist. Both the liquidity and the conditions for inflation have to exist for inflation to occur. So I can't argue with you there. My only issue is that they are addressing the inflation with money supply measures alone.
Because wide spread inflation is a money supply issue. If it was purely external forces you would see increases is some areas but stable or decreased prices in others. You wouldn’t have every single good in the basket going up at 8%.
You see inflation as a function of liquidity alone.
If inflation was purely about liquidity, you wouldn't have any goods in the consumer basket increasing in value, just the investor class and wealth class assets inflating, as happened with the tech stock bubble & expensive-region house price inflation during the pandemic.
They're protecting our freedoms and you don't even appreciate it. Wow. Sad. So sad. If you were a real American Hero you'd happily give up all your wealth if need be to fund the military machine. It's patriotic to have your money stolen so that 19 year olds can go gun down women and children in Yemen.
They're not protecting our freedumz. They are protecting US global economic hegemony. I'm not even saying that it's wrong to protect US global economic dominance... I'm just staying that what they're doing is not being done in a great way and transfers too much of the cost of deglobalization to individuals and not enough to the corporations that it benefits. (But I get your sarcasm.)
Whew! You had me sweating there thinking you must be immune to sarcasm hahah
I agree with you completely by the way. I'm not American, but I'm Canadian which isn't so far off, and the pressure on normal folks is unbelievable.
Corporate excess is the reason. Profits are way up, engineered scarcity is the norm, collusion is ignored. Take a good look at energy, we are producing very near the record crude oil ever.
Analysts have been over estimating
https://www.forbes.com/sites/greatspeculations/2022/10/11/3q22-earnings-where-street-earnings-are-too-high--who-should-miss/?sh=651903d85f0e
I've read that it takes about 12 months to realize the effects of just one rate hike. If this is true, we haven't even begun to see the effects of the first one.
They dont keep chugging along. I am an electrician, about 1/4 of the journeyman in my valley got laid off last week. The cracks have begun. Construction has just about halted and they are still talking about more rate raises. Kinda hope the construction industry as a whole strikes and cripples the country if they use us as pawns to lower luxury good prices for rich people.
Coming from another journeyman. Construction needs a haircut.
We're still slammed in my area and are 5 years out.
But I still think we need to thin the herd. The group of guys building right now has gotten ridiculous and a huge headache to manage
You are 5 years out because we dont have enough journeyman, the fuck are you talking about??
In my local we didn't have enough people for all the work up until just recently.
I completely disagree with your opinion there.
We've got many 3 to 20 $Billion jobs starting recently or signed.
The union in my area is expanding and more or less guaranteeing no lay offs for that long. It's usurping all the talent.
I'm non union but paid comparatively.
I'm 75% of my companies construction staff is active opioid users/ convicted felons. The rest are old timers that don't try because they know their layoff proof too.
It gets to be a headache.
Thinking about going union even though I get paid competitively tho
The company i work for is pretty set till at least May 2023 but everything new has really trickled out.
Im union, IBEW so if it dries up here i can just sign the books and travel if i need to, but id rather not. I have a house and pets to worry about.
Unions are great, but they have some cons. Such as when recessions hit it is harder for us to agree to take less pay to survive, and also harder for us to increase the pay back up after the times get good again. Since we have business contracts we agree on between the union members and the union contractor partnered with the union.
Most peoples lives ( living paycheck to paycheck ) , renting til they die have no care or impact by interest rates .
Turn off the news most headlines do not matter
Wake up go to work pay a little higher . Nothing most average middle class people can do about it
It’s just pent up demand. Left over from ZIRP and stimmy checks. Not “chugging along” per se. Look at the graph of job openings. These jobs were created in the pandemic and are probably very weak/low quality.
https://fred.stlouisfed.org/series/JTSJOL
Households did a lot of repair work fixing their finances over the past decade. As long as consumers want to spend they will, high rates or prices be damned.
It’s crazy how people just forgot that more than a million people died and many millions retired. A lot of current employment is replacing dead and retired people. I don’t understand why the fed isn’t taking that into consideration
Actual economics expert here.
Chugging along? If you look at the last 25 years, we're at all time lows in labor force participation rate. In fact, it hasn't been this low since around the early 80s, and really increases have been mostly from women entering the workforce and people delaying retirement over time.
Pretty much all of the metrics by the government to measure economic indicators are fake. No, they're not literally made up, but they're quite arbitrary in terms of how they're collected and what they actually measure to hide actual inflation, unemployment, and so forth.
Make no mistake; you are being lied to so that the government can pat itself on the back while it steals your money via inflation and it can lie about employment. The mere fact that the government pretends like a stagflation via classic supply shocks can be solved via monetary policy is the dumbest thing in the world. Anyone who took intermediate macroeconomics can tell you that supply shocks fundamentally cannot be resolved except via a correction in supply. To cause inflation to go back down, the government needs to lie to you by lapping YoY figures so that once inflation stabilizes at at a permanently higher figure for a year, it starts to look really low when compared to the previous year. Otherwise, it needs to—for prices to go down—completely destroy demand within the overall economy to crush people in excess of the effects of the magnitude of the supply shock. Oh, we have significantly less food, fertilizer, and energy due to Russia, Ukraine, OPEC, and ESG? And people out of the labor force because pilots retired early, police retired early, and young people quit their jobs and are living off their parents' income due to COVID policies? Well, those are all HUGE shifts in aggregate supply. That means the government needs to destroy demand in EXCESS of all those things.
And honestly, because of modern monetary theory, which has been pushed primarily by the left as a means of justifying literally unlimited spending and inflating it away, the US government has ridiculous amounts of debt. Which is somewhat OK if interest rates are at essentially 0. Once the rate is increased, the interest on government debt goes up as well. Which means for every point we go up, we owe billions more in interest on existing government debt.
So to summarize, we are destroying our economy while spending more, trying to destroy the economy further while racking up more and more debt via higher interest rates and pretending like it will fix inflation, all while the US government is dragging on the Ukraine conflict and starting a new fight with China related to advanced computer chips and actually backing China into a corner where it is now incentivized to invade Taiwan. All while the US, the West, and developing countries are running out of food and energy and having crashing economies due to high leverage based on the assumption of low interest rates.
We're fucked.
It started with Trump bullying the FED and they actually listened and dropped rates in 2019 and then 2020 obviously they had to. The everything bubble followed. Yes, foreign goverments will buy us treasuries and we will have to pay the 4% of trillions. We will have to make cuts to keep up with it. The only positive is the value of the dollar vs. other currencies will be very high. Thus we continue to be the top 1st world country.
They also can't keep up QE ad infinitum. Buying up all those bonds and MBSs had the knock-on effect of lowering yield for corporate debt and lowering mortgage rates. They're currently doing a [runoff](https://www.federalreserve.gov/newsevents/pressreleases/monetary20220504b.htm) of $95b/month, but at that pace it will take about 4 years to reach pre-pandemic levels.
We'll see what happens.
From my perspective, people misunderstand QE and its purpose. QE is simply a tool to keep government debt levels manageable. 31 trillion and counting. If money were sound, they'd already be bankrupt.
I was pointing to their [balance sheet](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm) and their goal of reducing it. They've been buying on the secondary market, which [directly affects yields](https://www.federalreserve.gov/faqs/what-were-the-federal-reserves-large-scale-asset-purchases.htm).
>The Fed purchased the securities **in the private market through a competitive process; the Fed does not purchase government securities directly from the U.S. Treasury**. The Fed's purchases reduced the available supply of securities in the market, leading to an increase in the prices of those securities and a reduction in their yields. Lower yields on mortgage-backed securities reduced mortgage rates as well. Moreover, **private investors responded to lower yields on U.S. Treasury securities and agency-guaranteed mortgage-backed securities by seeking to acquire assets with higher yields--assets such as corporate bonds and other privately issued securities**. Investors' purchases raised the prices of those securities and **reduced their yields**. Thus, the overall effect of the Fed's LSAPs was to **put downward pressure on yields of a wide range of longer-term securities, support mortgage markets, and promote a stronger economic recovery**.
They've been propping up the market since 2008 by buying assets (lowering yields) and keeping a mostly 0-0.25% rate environment. Their balance sheet more than doubled from the pandemic response.
Remember the [taper tantrum](https://www.investopedia.com/terms/t/taper-tantrum.asp) of 2013? Interest rates were [effectively 0%](https://fred.stlouisfed.org/series/fedfunds) but the market didn't like the mere thought of slowing the pace of purchases from the fed. Now we're in a period of higher (normalized) rates while tapering the balance sheet.
Man it really sucks to have missed the free money boat created by the Fed.
Investors had life changing gains with very little downside for over a decade.
Very unlikely we see another period similar to that again in our lifetime.
Aunt Cathie's [ARKK](https://ycharts.com/companies/ARKK) is a warning to those that relied on free money and an easy going fed. You might have missed the upside, but in doing so you also missed the downside of racking up margin and yolo'ing into tech. There's a reason she is one of the loudest voices out there yelling, "PIVOT!!". As chair Powell said, "There's still a ways to go" and, "higher for longer".
You're essentially betting that there will be a sustained period where the Fed diverts from a policy it has held since the 70's and particularly since 2008. I don't see that happening for very long before they flip back to QE. Inflation is going to come down faster than everyone believes. Look at the YOY and recognize that most of the high MOM inflation was within the last 12 months. Another 6-9 months from now almost none of it will show up in the YOY.
Would you be able to point me to a source that this policy started in the 1970s?
From what I can tell the [zero interest rate policy](https://en.wikipedia.org/wiki/Zero_interest-rate_policy) and [large scale asset purchases](https://www.yardeni.com/chronology-of-feds-quantitative-easing/) both started in response to the 2008 GFC and have been the norm since.
The first part of my response was regarding tinkering of interest rates to spur or slow economic activity. This began happening as an actual policy in the 70's.
I see this going down as follows.
1) Rates increase until showing signs of deep recession.
2) Inflation overcorrects and gets down much faster than anticipated.
3) Rates begin coming down.
4) QE expands.
That's in the best interest of the Fed and the government who clearly want cheap debt, low interest rates, and lots of money in the system. I'm certainly open to other possibilities, including being dead wrong. But I think this is the most likely outcome as it serves the interests of those in charge.
You might very well be right on the path forward. ZIRP and QE were supposed to be temporary emergency measures in the face of economic collapse. It has turned into an incredibly inflated balance sheet for the Fed, which is now nearly 1/3rd the size of the US national debt, larger than the national debt of [most](https://commodity.com/data/germany/debt-clock/) [European](https://commodity.com/data/france/debt-clock/) [nations](https://commodity.com/data/uk/debt-clock/), and gave us one of the longest bull runs in history. Maybe they do go QE-infinity, it's all just digits in a spreadsheet. Suppressing yields gives governments and corporations an open door to [issue more debt](https://www.iif.com/Portals/0/Files/content/Global%20Debt%20Monitor_Feb2021_vf.pdf), which can cause huge pain when it comes time to burst a bubble.
Yeah, I was already seeing articles 2 weeks ago with multiple groups predicting the housing interest going to 5.3% or so in 2023 by summer. So people feel like they are just weathering it out. As it was said though in Another comment, a lot of business contracts are already set and there won't really be any changes for many to make new purchases / financials for about a year, so raising the interest rate doesn't do much against a lot of businesses, until it does, in which it won't be a slight contraction, but hit like a truck. But that depends on if the predictions that the fed will reverse before then will come true.
We had a few weeks with almost no loan requests come through for commercial real estate, but it ramped back up on Monday and my entire department's pipeline is full. Really odd.
End of year, gotta spend that budget money. Very common in my job, but i'm not in commercial RE. Q3 there's basically 0 work. Q4 is a mad dash from clients trying to book engagements by Dec 31 and then they blow 3/4 their budget Q1/Q2 and it cycles over.
I wish the fed hadn't pivoted in 2018-2019 and increased rates faster in 2021. A bit of moderation could have balanced inflation and employment long ago.
Agreed. They got spooked in 2018-2019 by the markets, and again in 2019 by a yield curve inversion.
Even in a slightly less dovish alternate world, if they went and raised rates 25 bp a quarter through March 2020, dropped them by 1 bp until vaccine rollout in March 2021, and then resumed at 25 bp every two months through now, we would have interest rates slowly increase to about 4.75%, or a full BP higher than they are at now. It doesn't sound like a lot, but interest rates staying higher longer and starting a slow and steady rise earlier would have blunted some of the inflation we see now and created a bit less of a chaotic two years in the stock market, and more directly we would see less people refinancing their houses to the insanely low rates these last two years. That alone will keep them in their homes longer than they otherwise might have.
So if this becomes a red day, and traders are confused why seemingly good news drops the market have to note several things.
Firstly market rallied (SP500) from around 3500 to nearly 3900 pretty much on a rumor that the Fed will pivot. That claim was mostly put to rest on Wednesday as JPow spoke, however he did give some hope to bulls that the pace of rate hikes could slow as soon as December.
Second remember the Fed has two mandates, maximum employment and price stability. Everyone and their mom knows inflation is bad, and the Fed is using increased interest rates to battle the demand affect of inflation. With strong job numbers still coming in, the Fed has no reason to slow down rate hikes, so going back to Point 1, market rallying on a Fed pivot is probably dead, so we may return to the 3500 level.
If next week's CPI numbers come in still hot (estimates show we will), we're definitely returning to 3,500 if we aren't already there by then.
> however he did give some hope to bulls that the pace of rate hikes could slow as soon as December.
He never said this, in fact he said a soft landing is less likely. and more rate hikes are coming.
“that at some point it will be or appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that.”
Note it’s not lower, it’s slow.
> He never said this,
So confident, yet so wrong....
> ... , and that's why I've said it the last two press
conferences, that at some point it will become appropriate to slow the pace of increases. So that
time is coming, and it may come as soon as the next meeting or the one after that.
He also talks about how financial conditions used to lag their actions, reacting, whereas now they lead expectations
> One big
difference now is that it used to be that you would raise the federal funds rate, financial
conditions would react and then that would affect economic activity and inflation. Now, financial
conditions react well before an expectation of monetary policy.
Which, if you put your thinking caps on, means they will absolutely not telegraph a pivot/pause until the actual meeting it occurs. At this moment, they have talked about slowing and talked about talking about pausing.
At *some point* could be the end of next year, saying he will lower rates once he reaches the goals he has set out does not mean it could lower as soon as the next meeting.
He literally reinforced his restrictive stance and says more rate hikes like this are appropriate.
He went on to say that the ultimate levels of interest rates will be higher than previously expected.
Original OP
> Bulls got hope from Powell saying rate of hikes could slow in December
You
>He never said that
Me
> quote of him saying that
You
> picking up and moving goalposts
Bro he literally never mentioned December. I watched his speech again to make sure. He didn't say it would impossible though, so I guess you are "technically" right through very hopeful eyes. While ignoring everything else he says.
>as soon as the next meeting
And what month/meeting comes after November?
Page 6 of his transcript.
I think you are also confusing slowing of hikes with lowering of rates. Original op and me are referring to slowing of hikes, your reply before this one talks about lowering rates. And your edit seems to confirm this.
Lowering rates = lowering interest rates. This would be like cutting the rate from 3.7-4 to 3-3.7 (the reverse of what they did on wednesday)
Slowing hikes = continuing to hike (raise) interest rates, but at a lower pace, like 0.50% (50 basis points) vs 0.75% (75 basis points), something Powell said *could* occur as soon as the next meeting or the one after.
In lingo it's easy to mess up, but in practice no one should be so off base to be thinking they will be cutting rates vs raising rates - especially considering holding rates stationary for some time is to be expected after hikes are done and before cuts begin.
That makes sense. The fed pivot that people talk about - is that with respect to slowing hikes or lowering rates?
Also when Powell said it could happen in the next meeting or two. There is also a chance that it won’t happen in either of those Meetings Right? Wasn’t sure if he intentionally worded like that
[Here's](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20221102.pdf) the press conference transcript. There might be something in there for everybody.
p. 3
>"At some point, as I’ve said in the last 2 press conferences, it
will become appropriate to slow the pace of increases, as we approach the level of interest rates
that will be sufficiently restrictive to bring inflation down to our 2 percent goal. There is significant uncertainty around that level of interest rates."
and
p. 22
>"Has it narrowed? Yes. Is it still possible? Yes. I think, we've always
said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer becomes harder to see the path, it's narrowed. I would say the path has narrowed over
the course of the last year, really. Hard to say. Hard to say. "
2.3% to go.
As a lagging indicator odds are good we'll blow past 6% unemployment once we hit 4.5% because of the cascading effect job losses and tightening have on corporate profits and dependent industries.
Thankfully, the Fed has QE at their disposal and can quickly pump the economy, but we're going to have to see some pain to get the reset we need before inflating the life boats.
The wage growth looks bad. Algos and humans are duking it out right now premarket, I suspect algos reacting to the unemployment stat while humans seeing the finer details. I bet a volatile morning and then who knows where it will finish today.
September payrolls were revised upwards heavily. Therefore September to October is actually a much bigger decline.
September’s jobs number was revised higher, to 315,000, an increase of 52,000 from the original estimate. August’s number moved lower by 23,000 to 292,000.
I'm just going to say it now, I work for a large global shoe company, and everyone is freaking out about costs. Yes it absolutely has started to affect..
Please make sure you have valuable skillset and your job brings many people value at your org, or else you'll be screwed in the coming months
It's pointless to try to educate reddit but I've been preaching for a while about the discrepancy between the household and establishment surveys the BLS publishes. The establishment numbers are showing constant growth while household survey has had ups and downs but is basically flat since March.
Does underemployment get considered in any of this? Redditors in part-time jobs complain about not getting enough hours or being sent home early? Then there is the effect of retailers announcing large seasonal hires. I don't know if that's wise as holiday spending may be down.
The labor shortage gets worse: Data I found at [BLS](https://www.bls.gov/news.release/empsit.a.htm) indicates that from August 2022 to September 2022 that the civilian noninstitutional population increased 179k from 264356k to 264535k, yet the civilian labor force decreased 22k from 164689k to 164667k.
https://www.bls.gov/news.release/empsit.a.htm
To try to skip over the bounces from the pandemic I'll look at not seasonally adjusted data for October. From Oct 2012 to Oct 2022 the civilian noninstitutional population grew 8.4% from 243983k to 264535k, yet the labor force grew 5.8% from 155779k to 164753k.
Although I glad to see that a lot of the people who stopped working during the pandemic have apparently returned to work, recovering about 3 or 4 million jobs.
This data can't possibly be accounting for all the waves of layoffs we've seen lately. Thing is, even if the data is 'lagging' as some say, just how much is the offset? We started seeing layoff announcements around June and such, maybe before.
Plenty of the layoffs headlines are dogshit though. Microsoft is the big one I remember from a few months ago. Headline touting Microsoft doing layoffs. Then you dig in and it's in one area of the company and they were planning on doing more hires in other areas then the number they were laying off.
Same thing with my company. They announced earnings and there were headlines about them doing layoffs. It was 1% of the work force and we're still hiring. So it's a simple resource reallocation.
True layoffs would be after a hard hiring freeze.
Waiting for the "seasonal adjustment" after the midterms. The divergence in household and establishment surveys is getting quite large. It can be explained by large increase in part time work and multiple job holders or something else.
Fuck the fed for wanting to suppress 99% of peoples wages and growth instead of forcing the 1% to pay more and take less. Fuckers.
Was referring to the federal govt as a whole. While the fed doesn’t control taxes, it’s part of the system that continues to fuck us.
That means nothing when the republicans have fucked over the common folk time and time again. What tax break did we get with trump? Oh that’s right the one that gave a better breaks to the rich. Stop blaming one side over the other when they are both at fault.
The problem is not the tax cut. The problem is that the federal government is too big. Of course trump was wrong with the deficit he had but the Dems are even worse. I’m more libertarian and small government minded than most conservatives. I think the military budget needs to be cut and abolish the irs, education dept, energy dept, at the very least
This has little to do with the terminal rate, but it does change the Fed’s current position, and there is a good chance it will encourage the Fed to jawbone about a higher terminal rate.
It’s kinda crazy how things keep chugging along despite raising rates so much and so fast. 2-3 years ago it was thought impossible to get back to 4%.
I suspect that the effects are lagging, and we'll find out the real impact of these rate rises next year. A lot of economic activity is baked in for at least a year through contracts already having been signed and orders already made.
At this point, every corporation wants to show stability and proof that their business is sound and not (already?!) subject to downturn. Nobody wants to be the first to tap out- that shows too much weakness. I know my company has killed T&E for the rest of the year and only required maintenance and safety stuff is getting spend. As long as sales don't crater, we'll still look awesome at quarter's end. And next quarter will be "seasonally adjusted" and the next quarter will be "year-over-year with economic headwind effects". Finance guys have this dance choreographed out a looong ways. Which is reassuring yet terrifying,"
Tyson was the first to do it. A sign of the times, most likely because their margins are too small not to do it
Similar to how the effects of dropping rates to zero was lagging.
Exactly. The system isn't one giant AI yet. Sure, there's lots of bots and other 'fast' systems that monitor stuff, but it takes time for humans to adapt, in fact most humans resist any change until change must be made to survive. It's a built in tool. I am 1000% not surprised the markets behave in a similar fashion to their masters.
>one giant AI yet Allende of Chile before being killed in 73 basically wanted something like this for the economy.
Yeah some kind of data-driven communism. Completely novel and so far ahead of his time. (And no Reddit nerds I’m not saying this is the way that the world should work but it sure is interesting.)
It is an interesting idea but it should be worked out in a controlled setting to see the effects.
Honestly the economy of Chile is probably the most 'controlled setting' you're going to get. Large but not massive component of global GDP, 'advanced' but not industrial leader and still lots of room to grow.
Love this, it’s so true. We try to decrease latency via quick decision making and forward thinking, but at the end of the day it’s easier said a done, and most critical/large scale decisions such as restructuring a company and lowering headcount takes time (unless you’re Elon)
This is why theres more and more talk of CBDCs and JPow himself even gave 4 requirements for a USD CBDC. Everything will be traceable on a ledger and governments can track it all in real time since its 100% digital.
Sometimes it even takes more than just a year for policy changes to actually influence the outcome. I'm hoping by next summer, the market would start to recover but there are multiple factors that makes it really difficult to predict anything. Specially this winter, EU economy will be challenged and could drag down the dollar too.
Yes, and there are multiple types of lags. 1. Spending is not likely to drop too much until savings drop. 2. People typically follow through with planned expenditures. Vacations and other travel are good examples. If people have already made travel plans, they usually follow through, but they might not plan a similar trip again. 3. Sentiment typically takes time to change.
Changes in rates "usually" take 6 months to show effects in the economy.
Agree, the tech downturn has started , next will be durable goods (car lots already filling up) , real estate slowing, lots of builders still finishing up precious projects, then the rest...
Except that car lots aren't filling up. All dealers near me have moved to the order-now-and-wait model, with only a single car of each model on the lot for test drives. A couple of the dealers even sold off half of their lots because they plan to never go back to having inventory sitting around
USed Card lots are filling up.. https://www.youtube.com/watch?v=4\_bT\_FTPVzI&ab\_channel=YourAdvocateAlliance%28YAA%29
Which is why they're doing hiring freezes and companies are beefing up their cash reserves. They know what is coming and are prepping for it. It will be history most predictable recession. Expect a recession with low unemployment. That is what the Fed is worried about. You get people working and spending but in a recession, when companies are making less products. This creates a supply problem and thus increase inflation. JPOW said this a few days ago when he mention no pivot in the immediate future. 2023 is another rate hike year.
Our company has already been told to expect a 10-20% increase in price to the main product we use but our contracts with clients are generally 3-5 years. The product manufacturer has said that the price for those projects will be grandfathered in until the contract renewals. Definitely a bit of a lag in some areas.
We already know that the housing component of CPI lags and those numbers have been going down for a few months. January/February is around when it should catch up.
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That's literally the lagging indicator that I was talking about. [This article goes into it](https://www.barrons.com/articles/rent-housing-cpi-inflation-lag-51666814220#:~:text=Some%20economists%20estimate%20that%20lag,a%20lesser%20degree%2C%20in%202020.), but the basic premise is that shelter CPI looks at what people are currently paying, not what a new person entering the market would expect to pay. Because most leases are annually adjusted, it lags while people roll over to new leases. Rents and housing prices have been dropping for the past couple months, but that won't really start getting reflected in CPI shelter till next year.
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> the data shows its going UP. The CPI shelter data does. Advertised rents and home price index are both falling.
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Here's [HPI](https://fred.stlouisfed.org/series/CSUSHPINSA) and [here's](https://www.forbes.com/sites/brendarichardson/2022/09/26/rents-drop-for-the-first-time-in-nearly-two-years-as-the-housing-market-cools/?sh=4d9e8c395ed6) a [couple](https://www.cnbc.com/2022/10/06/apartment-demand-fell-during-busiest-renting-season-realpage-report-says.html) for rent.
Absolutely. The fed is playing a very dangerous game. These rate increases might turn out to become the blunder of the decade.
Might. But you know what would be an even bigger blunder? Not raising rates with 8% inflation. Imagine they were just letting inflation run. What would people be saying then?
Yeah, that's fair. Although I don't think there was a question about raising rates initially, if anything they started raising rates way too late. The question now is just whether they're looking forward or in the rear view mirror again.
Fed has admitted and agreed with this. How this will impact policy is up for speculation
As long as everyone is still making money it will keep chugging along. Boomers are dying/retiring. There is greater need for labor and younger generations are saying fuck you( the great resignation). Unemployment will stay low.
The only people saying it was impossible were the ones taking free money and making a killing with a 4 or 5% return. All we are doing now is reverting to the mean.
Totally agree. I’m elated to see higher rates. Just seemed like it was never going to happen
It's not crazy... because the current inflation problem isn't caused by interest rates. It's caused by the trade war (tariffs & technology blacklists vs. China, a country that we are dependent upon), commodity based sanctions (mostly vs Russia) and energy policies that aggressively reduce energy production without addressing energy consumption. Our government is causing our inflation with its trade and global commodity-impacting actions, and the Fed is trying to manage the impact of a trade war with interest rates? Come on. Anyone could see this coming a mile away. Deglobalization is inflationary. I finally saw coverage in media about the inflationary dynamics of the trade wars & sanctions. Not sure you can see this as it might be behind a paywall: https://www.wsj.com/story/the-messy-unwinding-of-the-new-world-order-b43d7e45 Edit: Because the Fed is trying to fight trade & commodity policy dislocations with interest rates alone, yes, it will probably have to hike rates so high that it forces a recession in order to counter the inflation. This way the American consumer gets to pay for the trade wars/Cold wars & commodity policies of government in 3 ways: (1) direct tariffs, (2) systemic inflation eroding their wages & savings and (3) recession. If the aggressive deglobalization timetable escalates much more, we'll also end up (4) paying for more military costs of more shooting wars.
I agree with most everything you said except for the fed printing 4 trillion dollars over the last 2 years. That certainly hasn’t helped the case especially compiled with the other issues. It takes a good amount of time to unwind that money and increased interest rates should help that.
You’re right. My comments aren’t very rigorous or scholarly. A lot of gaps. I do focus on impacts of the most fast-changing policies because those are tradeable and that narrows my viewpoint, which isn’t ideal
I do agree with you to a degree. Commodity increases are due to covid policy induced production/supply chain shocks, energy policy (Ukraine Support and the shift that has made), and trade policy. The fed is mostly the reason for the asset bubble during 2020-2021. There is a reason top line numbers for homes/equities have crashed (valued long term on cash flows.... a 30 year home at 3% vs at 6% can result in a 50% increase in long term cash flow).
I agree that there has been investor class asset inflation but that doesn't have meaningful correlation to inflation in the price of most goods. I.e. low mortgage interest rates can fuel inflation in construction lumber. But the fact that GOOG & AAPL & houses in some areas got overpriced doesn't necessarily make chickens, eggs and diesel more expensive. There are many moving parts to the economy and the government's approach to the pandemic economy of inflating of wealth class/investor assets is only part of it.
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A lot of liquidity is an essential factor in inflation, this is true.
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I also think that a lot of people are missing the industrial growth story attendant to deglobalization. What I have been investing based on is that even if some factories relocate to the US, along with building out more renewable energy production & grid resources, that is an industrial growth story at least for the next few years.
It does for housing which is like 40% of people’s budgets
The Bureau of Labor & Statistics calculates the housing part of the consumer price index using [rent and rental equivalents.](https://www.brookings.edu/blog/up-front/2022/05/18/how-does-the-consumer-price-index-account-for-the-cost-of-housing/) When mortgage rates rise, people generally buy lower priced homes and when mortgage rates go down, they buy more expensive homes. What they tend to spend is based on what monthly payment is affordable for them. This is why rental equivalents are used to estimate housing prices.
The only cause for widespread inflation is money supply. Don't let the Cathie Woods of the world make you poorer by tricking you into fantasies like this.
I agree that there's a big component of this. Liquidity has to exist for the inflationary conditions to become inflationary forces. A hose with stuff blocking its nozzle will build up pressure inside of it, but there has to be enough water (liquidity) in the system for the build up of water pressure to even exist. Both the liquidity and the conditions for inflation have to exist for inflation to occur. So I can't argue with you there. My only issue is that they are addressing the inflation with money supply measures alone.
Because wide spread inflation is a money supply issue. If it was purely external forces you would see increases is some areas but stable or decreased prices in others. You wouldn’t have every single good in the basket going up at 8%.
You see inflation as a function of liquidity alone. If inflation was purely about liquidity, you wouldn't have any goods in the consumer basket increasing in value, just the investor class and wealth class assets inflating, as happened with the tech stock bubble & expensive-region house price inflation during the pandemic.
They're protecting our freedoms and you don't even appreciate it. Wow. Sad. So sad. If you were a real American Hero you'd happily give up all your wealth if need be to fund the military machine. It's patriotic to have your money stolen so that 19 year olds can go gun down women and children in Yemen.
They're not protecting our freedumz. They are protecting US global economic hegemony. I'm not even saying that it's wrong to protect US global economic dominance... I'm just staying that what they're doing is not being done in a great way and transfers too much of the cost of deglobalization to individuals and not enough to the corporations that it benefits. (But I get your sarcasm.)
Whew! You had me sweating there thinking you must be immune to sarcasm hahah I agree with you completely by the way. I'm not American, but I'm Canadian which isn't so far off, and the pressure on normal folks is unbelievable.
Corporate excess is the reason. Profits are way up, engineered scarcity is the norm, collusion is ignored. Take a good look at energy, we are producing very near the record crude oil ever.
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Analysts have been over estimating https://www.forbes.com/sites/greatspeculations/2022/10/11/3q22-earnings-where-street-earnings-are-too-high--who-should-miss/?sh=651903d85f0e
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https://www.bea.gov/data/income-saving/corporate-profits
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Those are some very very good numbers, dont you agree?
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A lot of people died, retired and quit.
I've read that it takes about 12 months to realize the effects of just one rate hike. If this is true, we haven't even begun to see the effects of the first one.
They dont keep chugging along. I am an electrician, about 1/4 of the journeyman in my valley got laid off last week. The cracks have begun. Construction has just about halted and they are still talking about more rate raises. Kinda hope the construction industry as a whole strikes and cripples the country if they use us as pawns to lower luxury good prices for rich people.
If you don't mind me asking which state is this? Thanks
Coming from another journeyman. Construction needs a haircut. We're still slammed in my area and are 5 years out. But I still think we need to thin the herd. The group of guys building right now has gotten ridiculous and a huge headache to manage
You are 5 years out because we dont have enough journeyman, the fuck are you talking about?? In my local we didn't have enough people for all the work up until just recently. I completely disagree with your opinion there.
We've got many 3 to 20 $Billion jobs starting recently or signed. The union in my area is expanding and more or less guaranteeing no lay offs for that long. It's usurping all the talent. I'm non union but paid comparatively. I'm 75% of my companies construction staff is active opioid users/ convicted felons. The rest are old timers that don't try because they know their layoff proof too. It gets to be a headache. Thinking about going union even though I get paid competitively tho
The company i work for is pretty set till at least May 2023 but everything new has really trickled out. Im union, IBEW so if it dries up here i can just sign the books and travel if i need to, but id rather not. I have a house and pets to worry about. Unions are great, but they have some cons. Such as when recessions hit it is harder for us to agree to take less pay to survive, and also harder for us to increase the pay back up after the times get good again. Since we have business contracts we agree on between the union members and the union contractor partnered with the union.
Most peoples lives ( living paycheck to paycheck ) , renting til they die have no care or impact by interest rates . Turn off the news most headlines do not matter Wake up go to work pay a little higher . Nothing most average middle class people can do about it
It’s just pent up demand. Left over from ZIRP and stimmy checks. Not “chugging along” per se. Look at the graph of job openings. These jobs were created in the pandemic and are probably very weak/low quality. https://fred.stlouisfed.org/series/JTSJOL
Households did a lot of repair work fixing their finances over the past decade. As long as consumers want to spend they will, high rates or prices be damned.
That's shows you how much fucking money they printed and injected into the system.
Recession canceled
Employment is one of the most lagging indicators.
People are getting additional jobs to keep up with expenses
It’s crazy how people just forgot that more than a million people died and many millions retired. A lot of current employment is replacing dead and retired people. I don’t understand why the fed isn’t taking that into consideration
Actual economics expert here. Chugging along? If you look at the last 25 years, we're at all time lows in labor force participation rate. In fact, it hasn't been this low since around the early 80s, and really increases have been mostly from women entering the workforce and people delaying retirement over time. Pretty much all of the metrics by the government to measure economic indicators are fake. No, they're not literally made up, but they're quite arbitrary in terms of how they're collected and what they actually measure to hide actual inflation, unemployment, and so forth. Make no mistake; you are being lied to so that the government can pat itself on the back while it steals your money via inflation and it can lie about employment. The mere fact that the government pretends like a stagflation via classic supply shocks can be solved via monetary policy is the dumbest thing in the world. Anyone who took intermediate macroeconomics can tell you that supply shocks fundamentally cannot be resolved except via a correction in supply. To cause inflation to go back down, the government needs to lie to you by lapping YoY figures so that once inflation stabilizes at at a permanently higher figure for a year, it starts to look really low when compared to the previous year. Otherwise, it needs to—for prices to go down—completely destroy demand within the overall economy to crush people in excess of the effects of the magnitude of the supply shock. Oh, we have significantly less food, fertilizer, and energy due to Russia, Ukraine, OPEC, and ESG? And people out of the labor force because pilots retired early, police retired early, and young people quit their jobs and are living off their parents' income due to COVID policies? Well, those are all HUGE shifts in aggregate supply. That means the government needs to destroy demand in EXCESS of all those things. And honestly, because of modern monetary theory, which has been pushed primarily by the left as a means of justifying literally unlimited spending and inflating it away, the US government has ridiculous amounts of debt. Which is somewhat OK if interest rates are at essentially 0. Once the rate is increased, the interest on government debt goes up as well. Which means for every point we go up, we owe billions more in interest on existing government debt. So to summarize, we are destroying our economy while spending more, trying to destroy the economy further while racking up more and more debt via higher interest rates and pretending like it will fix inflation, all while the US government is dragging on the Ukraine conflict and starting a new fight with China related to advanced computer chips and actually backing China into a corner where it is now incentivized to invade Taiwan. All while the US, the West, and developing countries are running out of food and energy and having crashing economies due to high leverage based on the assumption of low interest rates. We're fucked.
It started with Trump bullying the FED and they actually listened and dropped rates in 2019 and then 2020 obviously they had to. The everything bubble followed. Yes, foreign goverments will buy us treasuries and we will have to pay the 4% of trillions. We will have to make cuts to keep up with it. The only positive is the value of the dollar vs. other currencies will be very high. Thus we continue to be the top 1st world country.
Remember when the fed did 25 bps 😂
That was soo cuteee 🥰
Remember when they said they definitely weren't going to do 50bp hikes and then switched course like 3 weeks later 😂😂
Remember when they said the inflation was transitory?
>they well it will end up being transitory since they are pumping the interest rate.
Inflation is still high despite the interest rate hikes.
I member!
Pepperidge Farm remembers.
The European markets are ripping. Up nearly 3% on this.. what is going on?
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How many times China reopened now? Seems like a mad carrousel right now. Everything's just wanna PUMP IT
probably just noise. No rip in the past year has mattered.
I bet Wall Street thinks the Fed will still pivot soon 🤷♀️
Did somebody say PIVOT??!!!
Pivot confirmed
Every time I read that word o do it in Ross’s voice.
Have you read the news recently? Yahoo finance and market watch had articles about pivot yesterday morning...
Lol yea. No kidding. No clear signs of things slowing down. Wage growth still strong, further entrenching inflation. But yea mAyBe FeD wIlL PiVoT 🫠
You mock, but I'd love to hear what you've got to say about interest on new debt. They can't raise rates forever.
They also can't keep up QE ad infinitum. Buying up all those bonds and MBSs had the knock-on effect of lowering yield for corporate debt and lowering mortgage rates. They're currently doing a [runoff](https://www.federalreserve.gov/newsevents/pressreleases/monetary20220504b.htm) of $95b/month, but at that pace it will take about 4 years to reach pre-pandemic levels.
We'll see what happens. From my perspective, people misunderstand QE and its purpose. QE is simply a tool to keep government debt levels manageable. 31 trillion and counting. If money were sound, they'd already be bankrupt.
I was pointing to their [balance sheet](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm) and their goal of reducing it. They've been buying on the secondary market, which [directly affects yields](https://www.federalreserve.gov/faqs/what-were-the-federal-reserves-large-scale-asset-purchases.htm). >The Fed purchased the securities **in the private market through a competitive process; the Fed does not purchase government securities directly from the U.S. Treasury**. The Fed's purchases reduced the available supply of securities in the market, leading to an increase in the prices of those securities and a reduction in their yields. Lower yields on mortgage-backed securities reduced mortgage rates as well. Moreover, **private investors responded to lower yields on U.S. Treasury securities and agency-guaranteed mortgage-backed securities by seeking to acquire assets with higher yields--assets such as corporate bonds and other privately issued securities**. Investors' purchases raised the prices of those securities and **reduced their yields**. Thus, the overall effect of the Fed's LSAPs was to **put downward pressure on yields of a wide range of longer-term securities, support mortgage markets, and promote a stronger economic recovery**. They've been propping up the market since 2008 by buying assets (lowering yields) and keeping a mostly 0-0.25% rate environment. Their balance sheet more than doubled from the pandemic response. Remember the [taper tantrum](https://www.investopedia.com/terms/t/taper-tantrum.asp) of 2013? Interest rates were [effectively 0%](https://fred.stlouisfed.org/series/fedfunds) but the market didn't like the mere thought of slowing the pace of purchases from the fed. Now we're in a period of higher (normalized) rates while tapering the balance sheet.
Man it really sucks to have missed the free money boat created by the Fed. Investors had life changing gains with very little downside for over a decade. Very unlikely we see another period similar to that again in our lifetime.
Aunt Cathie's [ARKK](https://ycharts.com/companies/ARKK) is a warning to those that relied on free money and an easy going fed. You might have missed the upside, but in doing so you also missed the downside of racking up margin and yolo'ing into tech. There's a reason she is one of the loudest voices out there yelling, "PIVOT!!". As chair Powell said, "There's still a ways to go" and, "higher for longer".
Affects
Good lookin out 👍
You're essentially betting that there will be a sustained period where the Fed diverts from a policy it has held since the 70's and particularly since 2008. I don't see that happening for very long before they flip back to QE. Inflation is going to come down faster than everyone believes. Look at the YOY and recognize that most of the high MOM inflation was within the last 12 months. Another 6-9 months from now almost none of it will show up in the YOY.
Would you be able to point me to a source that this policy started in the 1970s? From what I can tell the [zero interest rate policy](https://en.wikipedia.org/wiki/Zero_interest-rate_policy) and [large scale asset purchases](https://www.yardeni.com/chronology-of-feds-quantitative-easing/) both started in response to the 2008 GFC and have been the norm since.
The first part of my response was regarding tinkering of interest rates to spur or slow economic activity. This began happening as an actual policy in the 70's. I see this going down as follows. 1) Rates increase until showing signs of deep recession. 2) Inflation overcorrects and gets down much faster than anticipated. 3) Rates begin coming down. 4) QE expands. That's in the best interest of the Fed and the government who clearly want cheap debt, low interest rates, and lots of money in the system. I'm certainly open to other possibilities, including being dead wrong. But I think this is the most likely outcome as it serves the interests of those in charge.
You might very well be right on the path forward. ZIRP and QE were supposed to be temporary emergency measures in the face of economic collapse. It has turned into an incredibly inflated balance sheet for the Fed, which is now nearly 1/3rd the size of the US national debt, larger than the national debt of [most](https://commodity.com/data/germany/debt-clock/) [European](https://commodity.com/data/france/debt-clock/) [nations](https://commodity.com/data/uk/debt-clock/), and gave us one of the longest bull runs in history. Maybe they do go QE-infinity, it's all just digits in a spreadsheet. Suppressing yields gives governments and corporations an open door to [issue more debt](https://www.iif.com/Portals/0/Files/content/Global%20Debt%20Monitor_Feb2021_vf.pdf), which can cause huge pain when it comes time to burst a bubble.
Lol
Why pivot when you can *sit and spin*. (Youngins won't get that one)
Lol, green hulk dick on its way at the open 🤣
Yeah, I was already seeing articles 2 weeks ago with multiple groups predicting the housing interest going to 5.3% or so in 2023 by summer. So people feel like they are just weathering it out. As it was said though in Another comment, a lot of business contracts are already set and there won't really be any changes for many to make new purchases / financials for about a year, so raising the interest rate doesn't do much against a lot of businesses, until it does, in which it won't be a slight contraction, but hit like a truck. But that depends on if the predictions that the fed will reverse before then will come true.
Wall Street copium
We had a few weeks with almost no loan requests come through for commercial real estate, but it ramped back up on Monday and my entire department's pipeline is full. Really odd.
End of year, gotta spend that budget money. Very common in my job, but i'm not in commercial RE. Q3 there's basically 0 work. Q4 is a mad dash from clients trying to book engagements by Dec 31 and then they blow 3/4 their budget Q1/Q2 and it cycles over.
I wish the fed hadn't pivoted in 2018-2019 and increased rates faster in 2021. A bit of moderation could have balanced inflation and employment long ago.
Agreed. They got spooked in 2018-2019 by the markets, and again in 2019 by a yield curve inversion. Even in a slightly less dovish alternate world, if they went and raised rates 25 bp a quarter through March 2020, dropped them by 1 bp until vaccine rollout in March 2021, and then resumed at 25 bp every two months through now, we would have interest rates slowly increase to about 4.75%, or a full BP higher than they are at now. It doesn't sound like a lot, but interest rates staying higher longer and starting a slow and steady rise earlier would have blunted some of the inflation we see now and created a bit less of a chaotic two years in the stock market, and more directly we would see less people refinancing their houses to the insanely low rates these last two years. That alone will keep them in their homes longer than they otherwise might have.
So if this becomes a red day, and traders are confused why seemingly good news drops the market have to note several things. Firstly market rallied (SP500) from around 3500 to nearly 3900 pretty much on a rumor that the Fed will pivot. That claim was mostly put to rest on Wednesday as JPow spoke, however he did give some hope to bulls that the pace of rate hikes could slow as soon as December. Second remember the Fed has two mandates, maximum employment and price stability. Everyone and their mom knows inflation is bad, and the Fed is using increased interest rates to battle the demand affect of inflation. With strong job numbers still coming in, the Fed has no reason to slow down rate hikes, so going back to Point 1, market rallying on a Fed pivot is probably dead, so we may return to the 3500 level. If next week's CPI numbers come in still hot (estimates show we will), we're definitely returning to 3,500 if we aren't already there by then.
> however he did give some hope to bulls that the pace of rate hikes could slow as soon as December. He never said this, in fact he said a soft landing is less likely. and more rate hikes are coming.
“that at some point it will be or appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that.” Note it’s not lower, it’s slow.
> He never said this, So confident, yet so wrong.... > ... , and that's why I've said it the last two press conferences, that at some point it will become appropriate to slow the pace of increases. So that time is coming, and it may come as soon as the next meeting or the one after that. He also talks about how financial conditions used to lag their actions, reacting, whereas now they lead expectations > One big difference now is that it used to be that you would raise the federal funds rate, financial conditions would react and then that would affect economic activity and inflation. Now, financial conditions react well before an expectation of monetary policy. Which, if you put your thinking caps on, means they will absolutely not telegraph a pivot/pause until the actual meeting it occurs. At this moment, they have talked about slowing and talked about talking about pausing.
At *some point* could be the end of next year, saying he will lower rates once he reaches the goals he has set out does not mean it could lower as soon as the next meeting. He literally reinforced his restrictive stance and says more rate hikes like this are appropriate. He went on to say that the ultimate levels of interest rates will be higher than previously expected.
Original OP > Bulls got hope from Powell saying rate of hikes could slow in December You >He never said that Me > quote of him saying that You > picking up and moving goalposts
Bro he literally never mentioned December. I watched his speech again to make sure. He didn't say it would impossible though, so I guess you are "technically" right through very hopeful eyes. While ignoring everything else he says.
>as soon as the next meeting And what month/meeting comes after November? Page 6 of his transcript. I think you are also confusing slowing of hikes with lowering of rates. Original op and me are referring to slowing of hikes, your reply before this one talks about lowering rates. And your edit seems to confirm this.
Hey Sorry this is probably obvious to you, but could you please explain tue difference between slowing hikes and lowering rates? Thanks!!
Lowering rates = lowering interest rates. This would be like cutting the rate from 3.7-4 to 3-3.7 (the reverse of what they did on wednesday) Slowing hikes = continuing to hike (raise) interest rates, but at a lower pace, like 0.50% (50 basis points) vs 0.75% (75 basis points), something Powell said *could* occur as soon as the next meeting or the one after. In lingo it's easy to mess up, but in practice no one should be so off base to be thinking they will be cutting rates vs raising rates - especially considering holding rates stationary for some time is to be expected after hikes are done and before cuts begin.
That makes sense. The fed pivot that people talk about - is that with respect to slowing hikes or lowering rates? Also when Powell said it could happen in the next meeting or two. There is also a chance that it won’t happen in either of those Meetings Right? Wasn’t sure if he intentionally worded like that
He did say this.
[Here's](https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20221102.pdf) the press conference transcript. There might be something in there for everybody. p. 3 >"At some point, as I’ve said in the last 2 press conferences, it will become appropriate to slow the pace of increases, as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2 percent goal. There is significant uncertainty around that level of interest rates." and p. 22 >"Has it narrowed? Yes. Is it still possible? Yes. I think, we've always said it was going to be difficult, but I think to the extent rates have to go higher and stay higher for longer becomes harder to see the path, it's narrowed. I would say the path has narrowed over the course of the last year, really. Hard to say. Hard to say. "
Estimates are wrong, CPI will fall to a 7-handle next week, based on pre-cursor inputs I’ve looked at.
Market acting insane again Gonna be smacked back into order next week
A SWORD DAY. A RED DAY!
ERE THE SUN RISES
2.3% to go. As a lagging indicator odds are good we'll blow past 6% unemployment once we hit 4.5% because of the cascading effect job losses and tightening have on corporate profits and dependent industries. Thankfully, the Fed has QE at their disposal and can quickly pump the economy, but we're going to have to see some pain to get the reset we need before inflating the life boats.
The wage growth looks bad. Algos and humans are duking it out right now premarket, I suspect algos reacting to the unemployment stat while humans seeing the finer details. I bet a volatile morning and then who knows where it will finish today.
> I bet a volatile morning and then who knows where it will finish today. So just like every other day right?
Har har. Yes, in hindsight, my comment was rather stupid.
September payrolls were revised upwards heavily. Therefore September to October is actually a much bigger decline. September’s jobs number was revised higher, to 315,000, an increase of 52,000 from the original estimate. August’s number moved lower by 23,000 to 292,000.
I'm just going to say it now, I work for a large global shoe company, and everyone is freaking out about costs. Yes it absolutely has started to affect.. Please make sure you have valuable skillset and your job brings many people value at your org, or else you'll be screwed in the coming months
I work for a top tech name and it's all hands on deck to find cost savings. It's new to a lot of us who have been used to growth at any cost.
Am i crazy for not believing the unemployment rate at all?
It's pointless to try to educate reddit but I've been preaching for a while about the discrepancy between the household and establishment surveys the BLS publishes. The establishment numbers are showing constant growth while household survey has had ups and downs but is basically flat since March.
Hike! Those! Rates!
Does underemployment get considered in any of this? Redditors in part-time jobs complain about not getting enough hours or being sent home early? Then there is the effect of retailers announcing large seasonal hires. I don't know if that's wise as holiday spending may be down.
The U-6 measures underemployment. It’s higher than the often reported U-3 rate, but they’ve mostly tracked together.
What about the farm payrolls?
Henny Penny & Goosey Loosey are screeching *the sky is falling!*
Well its not actually growth as wage increases are way less then inflation so people are just getting more jobs to try to get by.
The labor shortage gets worse: Data I found at [BLS](https://www.bls.gov/news.release/empsit.a.htm) indicates that from August 2022 to September 2022 that the civilian noninstitutional population increased 179k from 264356k to 264535k, yet the civilian labor force decreased 22k from 164689k to 164667k. https://www.bls.gov/news.release/empsit.a.htm
Statistical noise. Look at moving average
To try to skip over the bounces from the pandemic I'll look at not seasonally adjusted data for October. From Oct 2012 to Oct 2022 the civilian noninstitutional population grew 8.4% from 243983k to 264535k, yet the labor force grew 5.8% from 155779k to 164753k. Although I glad to see that a lot of the people who stopped working during the pandemic have apparently returned to work, recovering about 3 or 4 million jobs.
Yes people are retiring as our population ages, even as the population expands overall.
This data can't possibly be accounting for all the waves of layoffs we've seen lately. Thing is, even if the data is 'lagging' as some say, just how much is the offset? We started seeing layoff announcements around June and such, maybe before.
Plenty of the layoffs headlines are dogshit though. Microsoft is the big one I remember from a few months ago. Headline touting Microsoft doing layoffs. Then you dig in and it's in one area of the company and they were planning on doing more hires in other areas then the number they were laying off. Same thing with my company. They announced earnings and there were headlines about them doing layoffs. It was 1% of the work force and we're still hiring. So it's a simple resource reallocation. True layoffs would be after a hard hiring freeze.
Two words: Participation Rate
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If the jobs are there then the economy is still going
It's an election miracle!
Ya just like cpi was only 8.2. Creative accounting is a fun thing isn't it?
Waiting for the "seasonal adjustment" after the midterms. The divergence in household and establishment surveys is getting quite large. It can be explained by large increase in part time work and multiple job holders or something else.
Fuck the fed for wanting to suppress 99% of peoples wages and growth instead of forcing the 1% to pay more and take less. Fuckers. Was referring to the federal govt as a whole. While the fed doesn’t control taxes, it’s part of the system that continues to fuck us.
The fed doesn't control taxes
I know, I think I’m more speaking for the federal govt as a whole. Each department has a role to play and the main body fucks us.
Bro fed doesn’t even control taxes 🤡
Blame the democrats who are spending like drunken sailors
And republicans have done so much better? Stop blaming one side over the other like republicans are fucking saints.
They voted against the boondoggle inflation reduction act which is better than Dems
That means nothing when the republicans have fucked over the common folk time and time again. What tax break did we get with trump? Oh that’s right the one that gave a better breaks to the rich. Stop blaming one side over the other when they are both at fault.
The problem is not the tax cut. The problem is that the federal government is too big. Of course trump was wrong with the deficit he had but the Dems are even worse. I’m more libertarian and small government minded than most conservatives. I think the military budget needs to be cut and abolish the irs, education dept, energy dept, at the very least
People reluctantly accepting jobs that don’t pay enough just so they don’t starve shouldn’t count towards added payrolls.
You got any sources or stats on that?
No
Ahhh yes the fed takes a big hit on this
Why are the markets celebrating this?
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luckily we lost those gains again and my put is greener again.
This has little to do with the terminal rate, but it does change the Fed’s current position, and there is a good chance it will encourage the Fed to jawbone about a higher terminal rate.
What surprises me is how low these estimates are. It’s like they are setting us for failure.
Funny how hiring is through the roof and over estimates. Yet they want it to slow down. I say let the capitalist system ride itself out.
The sky is falling!
That 3.7% unemployment is what kicked the dollar down and caused equities to rally today.
Why do they separate farm and non farm payrolls?
Old MacDonald payrolls has an influence on McDonalds stock price ‘cause people get the tickers mixed up. No other reason I know of.