Market Update | 10-07-22

• October 7, 2022
• realestate
• Announcements, Business & Markets, Interest Rates, Politics & Economy, Rates, Real Estate Finance, Recession, Updates, World News, Your Real Estate Life

Jobs, Jobs, Jobs: Its Big Jobs Friday! You can read the official BLS release here.

Here is the Tale of the Tape:

Jobs:
September Non Farm Payrolls (NFP) increased by 263K vs. est. of 250K August NFP remained at 315K
July NFP revised from 526K upward to 537K
The rolling 3 month moving average is now 372K

Wages:
The Average Hourly Earnings rate rose by 10 cents to $32.46
Average Hourly Earnings MOM increased by 0.3% which matched forecasts.
Average Hourly Earnings YOY increased by 5.0% which was lower than estimates of 5.1%

Employment:
The Headline Unemployment Rate dropped to 3.5% vs. est. of 3.7% but that was due primarily to a drop in the labor force participation rate.
The U6 Underemployment Rate dropped to 6.7% vs. est. of 6.8%.
The Labor Force Participation Rate dropped from 62.4% to 62.3%

The Talking Fed: We will hear from Williams, Kashkari and Bostic today.

Consumer Credit: The August data will hit at 3:00 and we will be paying very close attention to the revolving credit data set.

Sept unemployment rate reported at 3.5% down from 3.7% expected and down 0.2% from August. NFP jobs expected at 250K increased 263K, private jobs 288K against estimates of 280K. The labor participation rate fell to 62.3% from 62.4% in August. Average hourly earnings at +0.3% in line with forecasts and unchanged from August, yr./yr. earnings +5.0% slightly lower that 5.1% expected. Prior to the 8:30 am ET release the 10 yr. note yield was 3.84% +2 bps from yesterday, after the report at 9 am 3.90% +8 bps. MBS prices at 9 am -44 bps and unchanged from before the employment data. At 9 am the DJIA -227.

The better jobs and decline in unemployment rate to its historic lows keeps the Fed on track for a 75 bp increase in the FF rate when FOMC meets on Nov 3rd. Odds of a 75-basis point hike increased to a near certainty following the report. The job market continues to defy those outlooks that are expecting some easing in hiring after the JOLTS August job openings declined last week. Employers, many still short-staffed, continue to hire at a solid pace. That strength is not only underpinning consumer spending but also fueling wage growth as businesses compete for a limited pool of workers. The payrolls advance was the smallest since April 2021, the Fed is watching to see if their rate hikes spur an increase in the unemployment rate.

The wishful thinking that has spread recently that the Fed would soon moderate its increases met with a douse of cold water this morning. As we continue to note, while pundits hope the Fed will slow its rate increases, the reality is there are not any Fed officials that have recently commented that even hinted at any slowing, continuing to point out that the pain of reducing inflation won’t stop the Fed’s worries about a recession. No matter the chatter, Jerome Powell drove the point home back in August at Jackson Hole there will be no relenting until the data shows inflation is slipping.

The employment data today is the last the Fed will see prior to the November FOMC meeting but between now and then there will be inflation reports to digest. Next Wednesday Sept CPI and PPI will be released, a little unusual they will be released at the same time.

Next Wednesday both CPI and PPI will be released. Expecting the rest of the day to hold rates and prices steady but no relief of consequence until those reports are released. The technical correction we expected ended yesterday, it did what we expected, cleaning out the excesses. Now the likelihood of testing the 10 yr. high yield at 4.00% is back in play.