Morning Report: Decent jobs report 8/3/18

Vital Statistics:

Last Change
S&P futures 2829.25 1.5
Eurostoxx index 386.66 -3.19
Oil (WTI) 37.32 -0.34
10 Year Government Bond Yield 2.97%
30 Year fixed rate mortgage 4.57%

Stocks are higher this morning on fears of an escalation in the trade war. Bonds and MBS are up small as markets continue to digest moves from the Bank of England and the Fed.

The Fed maintained current policy and didn’t reveal anything new in the statement. Bonds yawned at the decision. Trade was not mentioned in the statement. The Fed Fund futures are now sitting at a 94% chance of a Sep hike and a 70% chance of a Sep and Dec hike.

The jobs report was decent – payrolls disappointed but the revisions in May and June more than made up for it. Jobs report data dump:

  • Payrolls up 157,000 (Street was looking for 190,000)
  • Prior two month revision + 57,000
  • Labor force participation rate 62.9%
  • Unemployment rate 3.9%
  • Average hourly earnings up .3% MOM / 2.7% YOY (in line with expectations)

The employment population ratio ticked up to 60.4%. While this number has been steadily rising, the labor force participation ratio remains stuck just below the 70% level.

Initial Jobless Claims were flat last week at 218,000, while announced job cuts fell to 27,122.

Wells will pay a $2 billion penalty for misrepresentations on loans made during the bubble years. This is after they paid a $1 billion penalty for auto loan issues.

The Atlanta’s Fed’s GDP tracker is now looking for 5% growth in Q3. This model tends to give volatile results early in the quarter, but that is a pretty amazing number. Seems like every business in the US is firing on all cylinders except for mortgage banking.

The Trump Administration is looking into the idea of indexing capital gains to inflation. This idea has been around for decades, and it is based on the idea that asset prices will rise over time, some of which is due to simple inflation. If prices overall rise 5%, and your house value increases 5% as well, are you really better off? You probably aren’t, and yet you are paying taxes as if you are. It gets brutal in places like California, where if you move, the equity you built just gets rolled into buying an even more expensive home than the one you left. The tax bill makes that a difficult trade. The Admin is looking to see if they can make the change directly in the tax code, bypassing Congress. So far, it seems like the idea has little traction in Congress. Democrats will be uniformly opposed and Republicans don’t seem all that anxious to get whacked in the press for something that nobody seems to be asking for in the first place.

Speaking of politics, we are in opposite world, where the Koch brothers are cozying up with Democrats and Richard Trumka of the AFL-CIO is supporting Trump’s trade war. What does this mean? It means some investors are moving to cash ahead of midterm elections.

26 Responses

  1. …the Koch brothers are cozying up with Democrats and Richard Trumka of the AFL-CIO is supporting Trump’s trade war.

    I think it means that DJT is supporting AFL-CIO trade positions and I think it is a big reason he undercut the former D base, the labor vote. Sanders was the logical candidate for them, but DJT was more appealing than a free trade D – see Scranton and Wilkes-Barre PA.

    What surprises me is how many R politicians are suddenly not willing to be FOR free trade. I realize that some are giving DJT time to see where the dust settles – George pointed out that he suggested total free trade with EU. But DJT has long thought the USA is being played by everyone else. He is just wrong about that and most R pols know it.

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    • “What surprises me is how many R politicians are suddenly not willing to be FOR free trade.”

      I think this also reflects changes in the bases of both parties. The Democratic base now benefits more from free trade and the Republican one does not. The party elites both benefit from it, but they have less and less credibility.

      Liked by 1 person

    • I suspect Trumka is talking to Democrats, not Republicans with his statements.

      Like

  2. Hoping the goal is to renegotiate trade deals. They could certainly be better.

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    • Yes, good article. The bailey and motte strategy is used a lot. It reminds me of Jon Stewart’s schtick of trying to make serious political points with smug humor, and then whenever someone actually took his arguments seriously and tried to engage them, he’d put on his clown nose and retreat into “I’m just a comedian” mode to avoid defending them.

      The article also reminded me of an extended debate we had here once about labeling abortion a “women’s issue” as a means of delegitimizing anti-abortion opinions.

      Like

      • I think there’s a good argument to be made that abortion is a “women’s issue”. A good argument could probably be made that easy and safe access to legal prostitution is a man’s issue. Lots of potential overlap, but it doesn’t *not* make sense to frame abortion as a woman’s issue, and there’s arguments to be made. People may get heated and disagree, but there’s a rational debate to be had between rational people on such an assertion.

        Although at the end of the day I have trouble with the idea that there’s any good reason for someone not to talk or have opinions about a thing because it’s just So Very Important to some other person who feels (perhaps with great justification) that they have a greater stake in the issue. Distilled, that always sounds like an argument for thought control, to me.

        But I digress. Point being . . .

        There’s not a lot of good arguments to support the idea that white people have nothing to say about racism, can’t be victims of racism and can only be racist, based on the color of their skin *alone*, and that the very racism inherent in such an approach is a non-issue and in fact not even racism because the oppressed oppressors say so, and their word carries the legitimacy of papal authority because of their claims of victimhood. It’s a complete Orwellian inversion.

        In more ways than one. To assert something like that one PlumLine would probably get me flagged and banned in this day and age, but back in the day it would have been immediately labeled a straw man argument. Which is what folks on the left routinely do to largely accurate descriptions of the very arguments people on their side are actively making/

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        • KW:

          I think there’s a good argument to be made that abortion is a “women’s issue”.

          The point of the article, and why it reminded me of our old discussion about abortion being a “women’s issue”, is that sure, the characterization can be reasonable, but that reasonable use is what people retreat into only when forced to defend the characterization. In normal political usage, however, it is used in a totally different manner.

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    • Thanks…good article. It confirms everything we were saying about Thomas right here 6 years ago.

      BTW, if RBG keels over and Trump gets to replace her, what are the odds the left accuses Trump of taking her out?

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      • Give ’em Garland to shut them up.

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        • Brent:

          Give ’em Garland to shut them up.

          I wouldn’t give them anything, and not just because it won’t shut them up regardless. Any judge that is acceptable to the progressive left is, by dint of that very fact, not fit to serve on the court.

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        • I feel like Garland was probably Obama’s best choice. If only we could swap out Sotamayor for Garland.

          Still, I’ll definitely take Kavanaugh or Gorsuch over Garland, so I’m good.

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      • “BTW, if RBG keels over and Trump gets to replace her, what are the odds the left accuses Trump of taking her out?”

        Well, obviously, you will definitely hear about it from Twitter lefties and on Daily Kos. Just as on the fringe right there was plenty of speculation that Scalia was a hit.

        The real question is will it be treated as a serious question on CNN and MSNBC and ABC and in the New York Times? And given lots of ink and airtime? I think there is at least a 40% chance that it will be.

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    • To this day, he remains my favorite justice. Despite the frequent criticisms of him on the left as being “lazy” and “not thoughtful” and “not that smart”.

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    • This statement is frickin’ amazing to me. Shouldn’t be, I know, but it is.

      Taken as a whole, as the work of a single justice during a single Supreme Court term, they paint an extraordinary picture of a judge at war not only with modernity but with the entire project of constitutional law. . .

      The entire project of the constitutional law is to ignore the meaning and intent of the constitution as originally ratified? WTF?

      Like

  3. Being here illegally apparently gives you a cause of action for an employment discrimination claim now:

    https://www.vox.com/2018/8/6/17595088/daca-job-discrimination-lawsuits

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    • It does seem a little risky, legally speaking, to knowingly hire an illegal.

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    • jnc (from Vox):

      Juarez argued that the hiring practices violated his equal rights under the Civil Rights Act of 1866. In his 2015 class-action complaint, his lawyers zeroed in on the equal rights clause, known as section 1981, which says “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts … as is enjoyed by white citizens.”

      I feel like Alice in Wonderland. A law that says the state cannot prevent someone from entering and enforcing a contract is being “interpreted” to say that the state can compel someone to enter into a contract. This truly is lunacy.

      Like

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