The U.S. economy added a net 228,000 jobs in November, the Labor Department reported this morning. Economists surveyed by Bloomberg were looking for a gain of 195,000. That kept the unemployment rate at 4.1%, the lowest since 2000. Disappointingly, however, average hourly earnings increased by just 0.2%, less than the 0.3% gain expected by economists surveyed by Briefing.com That took the year over year gain in average hourly earnings to 2.5%
Goldman Sachs released its seven top trade themes for 2018 yesterday, November 17. Investors and traders always receive Goldman’s trading ideas with a high degree of skepticism, knowing that the bank’s traders are perfectly comfortable trading against the expectations that these themes generate. And there’s also the belief that what Goldman is really interested in is not tradable themes but volatility.But still, I think yesterday’s release is an important market event–because Goldman is now the first big voice willing to break with the current market consensus that the Federal Reserve will raise interest rates just twice in 2018.
The Labor Department reported today that headline inflation, the all items version of the Consumer Price Index, rose 0.1% in October to a year over year rate of 2.0%. The core Consumer Price Index, which excludes more volatile food and energy prices, rose 0.2% in the month and is now up 1.8% year over year. This is the first increase in the core index after five months where readings were stuck at an annual rate of 1.7%.
It’s not the actual inflation rate but for the Federal Reserve it’s perhaps even more important: In the latest survey of 1,200 households for October, the New York Fed Reserve Bank sees an increase in expectations for inflation in October 2018 to 2.61%. That’s up from the 2.54% expected increase in inflation over the next 12 months recorded in this survey in September.
In my daily trawling through the market I come upon lots of tidbits of knowledge that I think are important to investors but that don’t justify a full post. I’ve decided to start compiling these notes here each day in a kind of running mini blog that I’m calling Notes You Need. This mini-blog includes items like this from today: “11:40 a.m.: The PCE Price Index, the Federal Reserve’s preferred measure of inflation rise by 0.4% in September and is now up 1.6% year over year. In August the index was ahead 1.4% year over year. The core index, which excludes food and energy, was uo 1.3% year over year. Nothing here to change the odds on the Federal Reserve raising interest rates at its December 13 meeting.”
At its meeting today the European Central Bank decided to buy fewer bonds each month but for more months. Monthly purchases will be cut to 30 billion euros ($35 billion) from 60 billion euros beginning in January. But the bank will extend its bond purchases until September. Some observers had through the central bank would end purchases in January or March.
Despite’s what struck market analysts as “dovish” minutes released today, October 11, from the Federal Reserve’s September 19-20 meeting, the Fed Funds Futures market continues to point strongly toward an interest rate increase at the Federal Reserve’s December 13 meeting.
In my daily trawling through the market I come upon lots of tidbits of knowledge that I think are important to investors but that don’t justify a full post. I’ve decided to start compiling these notes here each day in a kind of running mini blog that I’m calling Notes You Need. I launched this new feature on JubakAM.com on December 1. For example, “10:20 a.m.: Oil was up on speculation that Tropical Storm Nate would rise to the status of a hurricane and then hit the Gulf Cost, disrupting refineries and oil export platforms again But now oil is down on speculation that the storm won’t hit the Gulf Coast has hard as previous speculation suggested.”
Friday’s job report for September will be an even bigger deal than usual. The report comes as the market is thinking and then re-thinking its belief that the Federal Reserve will raise interest rates at its December 13 meeting.
The tea leaves seem to say that President Donald Trump is leaning toward appointing Kevin Warsh to head the Federal Reserve when Janet Yellen’s term as chair of the U.S. central bank expires in February 2018. Trump has met with Warsh to discuss the position of chair of the Fed, the White House confirmed this week. Yellen, meanwhile, told reporters that she had not met with Trump since early in 2017.
For August the Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation measure, showed an increase in core inflation of just 0.1%. Economists had projected an increase of 0.2% for the month. Year over year the core PCE Index is up 1.3%, well short of the Fed’s target inflation rate of 2%.
