The U.S. Economy Created 150,000 Jobs in October; Unemployment Ticked Up to 3.9%… The jobs count fell short of the 180,000 forecast.
What it means— The central bankers at the Fed and the investment community are thanking their lucky stars. The bankers look like they are walking the thin line between killing economic growth and letting inflation run. Investors are betting that this employment report, with coincidental easing economic growth, marks the beginning of the Fed’s pivot. That might be so, but a lot can happen during the holiday season. Striking workers will go back to work, and we’ll get a sense of retail sales. As for inflation, the employment report showed average hourly earnings up 4.1% for the last 12 months, which matches inflation. The Fed is still on the bubble as to its next move. Listen carefully when they tell you what they are thinking.
The Federal Reserve Holds Rates Steady at 5.50%… The central bankers voted unanimously to hold the overnight rate at 5.50%, noting that it looks like higher long rates are holding back economic activity.
What it means— This doesn’t mean anything in a vacuum, and the last Fed meeting is a long six weeks away. If inflation remains persistent or consumers burn up the plastic during the holiday season, we could see one more Fed hike this year. The Fed chair and his compatriots want to restrain economic activity to choke inflation, but not so much as to kill economic growth. The problem is that the inverted curve is screwing up financing.
Anyone who pays for leverage is getting killed while not earning extra yield when lending. Now, with mortgage rates just under 8%, the residential sector is all but frozen. We’ll see how festive consumers feel during the holidays. That said, the Atlanta Federal Reserve GDPNow model shows growth this quarter at just over 1%. It’s early in the quarter, but if economic growth falls near zero and the Fed remains on the sidelines, we could be looking at the top in short rates and the plateau before an all-out pivot. That forecast drove equities and bonds higher after the Fed meeting.
The Bank of Japan Announced 1% on 10-Year Bond as a Reference, not a Hard Cap… The Bank of Japan (BoJ) signaled that it will tolerate yields melting higher but reserves the right to intervene if yields move up too quickly.
What it means— This isn’t about yields, it’s about yen. When the Fed pinned overnight rates near zero and the U.S. Treasury 10-year bond traded around 2.5%, the BoJ could get away with targeting 0.00% (as in zero yield) on 10-year Japanese Government Bonds (JGBs). That world is gone, for now. The higher U.S. and European bond yields climbed, the more money drained out of the yen, pushing it from around 110 yen per U.S. dollar to 140 and then 150. The cheaper the yen, the more inflation Japan experienced. A little inflation makes people feel good; a lot of inflation makes people, especially retirees, cranky. The BoJ wants domestic consumers and foreign investors to know that they stand ready to defend the yen… sort of.
Ford Posted Earnings, Selling Just 20,962 EVs in the Third Quarter and Losing an Average $36,000 per EV… The legacy automaker noted weakness in the EV market.
What it means— Well, at least Ford sold more EVs than General Motors (GM) last quarter, but that is cold comfort for a company that thought it would be rolling models like the Mach-E and F150 Lightning out the door at a profit. Production costs and Tesla’s pricing war, along with fading customer interest, have played a part. After GM announced that its previous target of a 400,000-EV production rate by mid-2024 won’t happen, it will be interesting to see what tweaks Ford will make to its EV plans.
Georgia Restaurant Menu Lists Prices, Along With a Surcharge for Bad Parenting… The Toccoa Riverside Restaurant menu includes an adult surcharge for adults unable to parent. Some Google reviewers claimed that the restaurant charged them $50 for “bad parenting,” and one claimed his family was told to go to Burger King and Walmart. There’s no indication the patrons actually paid, and the restaurant owner claimed he has never enforced the charge on anyone. The owner also reiterated that the charge is for the parents who don’t know how to parent, not the kids.
Data supplied by HS Dent Research
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