Good Friday Morning from your Hometown Lender,
… And this is why we don’t float loans into big news events.
The jobs report was released today and blew by all expectations. 254k new jobs were (supposedly) created on expectations of 150k. I am not a conspiracy theorist but the 10yr note jumped to 3.96% at 3:30am when the news was not released until 5:30. So markets were either tipped off or clairvoyant. I will let you decide which. That is the first question, but the second question is, do we believe the report is accurate? The Fed just spent months building up their case that the job market is softening. This report, now just 30 days before the election, is contrary to the previous 6 months of labor data and revises the last two months higher. This is all after a separate government report just two months ago showed that 600k fewer jobs were created than reported over the previous year.
Is it possible that today’s report is accurate, well sure, but it doesn’t sit well.
In any event, we are forced to accept it as the markets have. What does it mean? Well, if you were thinking the Fed would cut another 50bps in November, please revisit that. We should get 25bps in November. December is a bit of a question mark as I think the Fed despite saying it is nonpolitical, will include the outcome of the election in its evaluation of the economy. The next jobs report is supposed to be due on 11/1 but often when the first Friday is also the 1st of the month, the BLS pushes the report to the following Friday because they need time to collate the data so we will likely not see a report until 11/8, two days after the election. Effectively this is the last employment report the Fed will see before the election. The key to avoiding a recession lies in how the labor market unfolds.
The other main event the market is watching and waiting for is Israel’s response to Iran’s bombing.
Oil prices are jumping over concern Israel will attack Iran’s oil fields which if they do, will be inflationary and of course making it more difficult for the Fed to cut deeper.
The bottom line today despite it not being great news is that rates are not likely to drop from here for a bit. I would continue to expect rates to stay in a narrow range through the end of the year and with prices continuing to increase, the better time to transact is now.
Stay safe, enjoy the weekend and first, make today great!
