Friday Market Update: October 7th 2022

The UN thinks the Fed & Central Banks worldwide are hiking rates too quickly…

Happy Friday! Brian Manning here at the weekly Update. I can’t believe it. It’s jobs week already. That means another month is rolled by. My gosh, time goes so fast. It’s unbelievable. Let’s see. Monday this week was a relatively quiet news day. Not a lot to talk about there.

Tuesday this week, we had the United Nations calling out the Federal Reserve and other central banks around the world and asking them to stop hiking rates. They really feel like… if the Federal Reserve and central banks around the world continue to hike rates, it’s going to put us into a global recession.

I would say I kind of agree with them at this point in time. You know, the Federal Reserve has just gone high on hiking rates right now. They, certainly, have moved them up. They’re going to hike another probably three quarters of a percent here in the near future, on the November 2 meeting. The challenge is that when the Federal Reserve makes a move, it takes anywhere from three months to six months to see what the impact is.

And right now, you just have them hiking, hiking, hiking, and they’re not even taking a moment to see what happens. And they’re very much focused on the job market right now. The interesting thing about the job market is if you look at companies, big companies, Amazon, FedEx, etcetera, and they’re all looking at 2023, most of them have been very vocal in saying that they’re… gonna freeze hiring and then, reevaluate their budget.

So, if you look forward in the 2023, it looks like there’s going to be a softening in the job market. But the Federal Reserve and other central banks around the world are just not paying attention to this. Maybe the UN should be running the Federal Reserve because they, definitely, seem more dialed in than Jerome Powell and everyone else we’re dealing with right now.

Wednesday this week, we had OPEC saying that they’re going to cut oil by 2 million barrels. The challenge is this is going to be inflationary pressure. This is going to impact supply and demand. And, certainly, when the markets don’t need this and you start to see inflationary pressure from oil and gas going into the winter, it’s going to be a challenge. So… Not great news to hear there.

ADP report came on Wednesday. So, the first Wednesday of every month, we get ADP payroll report. ADP is the largest provider of private payrolls in the US. In the month of September, we had 208,000 new jobs that were created. A little bit better than expectations, but pretty much in line with expectations.

Also Wednesday this week, we had CoreLogic come out with a report for the month of August and the month of August, appreciation was down 7/10th of a percent on a month-over-month basis. On a year-over-year basis is still at 13.%. I’m not surprised to see this. We’ve talked about this in the past. 20% appreciation was not sustainable. It had to change. It had to calm down. So, certainly, seeing this calm down is perfectly fine.

Definitely, CoreLogic’s anticipation and prediction going forward is to see positive appreciation over the next twelve months. And I really like that because I think when you buy a home, historically, you buy a home to own it for 6, 7, 10 years. You’re not buying a home to own it for a year or less, typically. So, I think the report is right in line with what we’re anticipating as well.

Thursday this week, we got initial jobless claims. So, this is new people filing for unemployment for the first time. We’ve been watching this for a while and this is the first time we really saw a rise from the prior week. So, you know, the question is, is this a leading indicator? If we continue to see rising initial employment claims, does this mean the labor market is softening? Again, this is what the Federal Reserve is looking for. The calming of inflation and easing the labor market. So, we’ll have to keep an eye on that.

And then today, the first Friday of every month, we get the BLS report. That’s the Bureau of Labor Statistics. This is the government’s report for employment. For the month of September, we got 263,000 new jobs that were created. The expectation was to have 250,000 new jobs. So, a little better than expectations, but pretty close to being in line. The unemployment rate fell from 3.7% to 3.5%. But if you dig deeper into that report, the unemployment rate fell because 50,000 people left the workforce, whether it’s for couldn’t work anymore or retirement purposes, whatever it is, 50,000 people left. And then a really important component of this report is going to be annual earnings. So, annual earnings were down from 5.2% to 5.0%. So, this shows an easing in wage pressure inflation.

So again, Federal Reserve is going to be looking at these numbers. It’s not enough for them to stop hiking rates, but… as you start to see employment change, the more initial jobless claims, you see a softening in wage pressure inflation. This might be a turning point in the labor market pushing us into next year. We’ll have to wait and see what happens.

I’m available all weekend. If you have any questions, let me know. Also, if you have not RSVP for our Fall fiesta, please do. 8th Annual Fall fiesta taking place Thursday, November 10. It’s going to sell out. We are going to close down our RSVP at some point in time. So, if you do want to make it and we would love to have you there, please make sure you’re RSVP. Happy Friday. Have a great day.



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