Morning Report: Strong jobs report knocks stocks

Vital Statistics:

 

Last Change
S&P futures 2982.25 -8.4
Oil (WTI) 57.45 0.2
10 year government bond yield 2.02%
30 year fixed rate mortgage 4.00%

 

Stocks are lower this morning after Friday’s strong jobs report stoked fears the Fed might not cut rates as much as the market expects. Bonds and MBS are up.

 

Jobs report data dump:

 

  • Payrolls up 224,000
  • Unemployment rate 3.7%
  • Labor force participation rate 62.9%
  • Employment-population rate 60.6%
  • Average hourly earnings up 3.1%

 

Overall, a strong report which should in theory argue against easing rates at the upcoming July meeting. That said, the deceleration in the labor market is being taken as a sign that the Fed needs to act, especially since inflation remains stubbornly below the Fed’s 2% target. The July Fed funds futures are pricing in a 100% chance for a cut, with a 92% chance for 25 basis points, and an 8% chance of 50 basis points.

 

We don’t have much in the way of economic data this week, however we do have Jerome Powell’s Humphrey-Hawkins testimony on Wednesday and Thursday. Humphrey-Hawkins testimony is usually more about posturing politicians than it is about useful insights, but with the markets on edge about a potential rate cut, we could see some volatility. Expect a lot of questions about Fed independence.

 

Want to get involved in the property rental business without having to actually buy a house and rent it out? Roofstock could be your answer. It allows individuals to buy into occupied rental properties and allows them to trade out of them after a 6 month lock up period. If you can’t get a bid on Roofstock’s online exchange, they will buy it back at a 7.5% discount.

 

Deutsche Bank is retreating back to Europe, as it cuts 18,000 jobs and exits a lot of overseas businesses. DB has been underperforming for years, and it looks like its decades-old attempt to become a player on Wall Street and in London are over. It would be cool to see them spin off Bankers Trust, Alex Brown and Sons and Morgan Grenfell, but it doesn’t look like that will happen.

14 Responses

  1. It’s telling about the zeitgeist that this is even being debated.

    https://www.washingtonpost.com/nation/2019/07/08/detroit-music-festival-charged-white-people-double-then-backlash-started/

    Although, I do have to admire this guy’s understanding of white progressives:

    ““If I created the framework where I outline a problem that is indisputable, and I position you as an antagonist, and I give you a way to solve the problem tidily and be the hero — in the moment, anything other than the $30 choice becomes antisocial behavior,” he explained.”

    Like

    • so you are anti-social unless you buy in 100% to stunts like this…

      the language ministry is at it again…

      Like

      • Actually that’s not what he’s saying. He’s saying that he’s used psychological/social manipulation to make it that way.

        I appreciate the con/grift/marketing here.

        Like

    • “Also note: publicly harming a black woman’s business because you imagine that her efforts at helping the black community would make your white grandma uncomfortable is what internalized white supremacy looks like.”

      Interesting that there always seems to be an intersection between a group wanting to have their cake and eat it, too, and claims of internalized white supremacy on the part of critics. I’ve noticed that a common defense of hypocritical or It’s-Okay-If-Your-Progressive is that critics are exhibiting internalized racism or sexism or it’s evidence of institutional racism.

      There’s never any: hmmm, maybe we are taking this pendulum swing a bit too far.

      Like

  2. NoVA – For you. Ezra Klein has a revelation.

    “3) Why should Americans trust the government to decide what is and isn’t covered by health insurance?

    Both the Medicare-for-all and Medicare-for-more plans envision the government structuring the country’s main health insurance plan. But what happens when Republicans are in charge of that plan, and they decide that abortion and Plan B contraceptive pills shouldn’t be covered? Or that there should be a work requirement for able-bodied adults who want health insurance? The Trump administration recently approved Wisconsin’s request to add a work requirement to Medicaid, for instance.

    There are other concerns as well. The late, great health economist Uwe Reinhardt supported single-payer, but he once told me he thought America’s system of government was “too corrupt” to make it work. “When you go to Taiwan or Canada,” Reinhardt said, “the kind of lobbying we have here is illegal there. You can’t pay money to influence the party the same way. Therefore, the bureaucrats who run these systems are pretty much insulated from these pressures. Here you have basically a board of directors in the House Ways and Means Committee that gets money from lobbyists both at the regulatory writing stage and during normal operations.”

    If the government runs the country’s main health insurer, the entirety of the health care industry’s might will be turned on lobbying the federal government. And the health care industry is mighty. It’s not just rich — it’s also spread out, between hospitals and doctors and nurses and drug and device manufacturers, across every congressional district. How do you stop the system from collapsing into corruption?”

    https://www.vox.com/policy-and-politics/2019/7/8/20683368/democrats-2020-medicare-private-insurance-single-payer-debate

    Like

    • oh man, the secret is out.

      oh, and if you’re going to lie, at least make it plausible.
      ” The first — which led to some confusion on Sen. Kamala Harris’s part — is that it’s unclear: Was Holt asking about the candidates’ own health care plans, or their plans for the country?”
      uh huh.

      Like

    • “During the first debate, John Delaney took direct aim at this part of Sanders’s plan. “If you go to every hospital in this country and you ask them one question, which is how would it have been for you last year if every one of your bills were paid at the Medicare rate, every single hospital administrator [would] say they would close. And the Medicare-for-all bill requires payments to stay at current Medicare rates. So to some extent, we’re basically supporting a bill that will have every hospital close.”

      I think Delaney is wrong about this. Much of the health care system could adjust to a Medicare rate, in part because the volume of health services would rise if everyone was covered and everything was free at point of service”

      make it up on volume? ugh.

      Liked by 1 person

      • That response is meaningless. “I don’t think this will happen” just glosses over what a huge disruptive an abrupt transition to Medicare-for-all would be. Even if it became merely awful over time, at first it would be a disaster. And lots of hospitals would close, left with no time to adapt to the changes. But I’m sure lots of other unintended consequences would make a wreck of things for at least the first several years.

        Like

    • Love the sign of the brit telling trump to keep his hands off nhs…

      i don’t think you have anything to worry about dear

      Liked by 1 person

  3. $15 / hour MW would cost 1.3 million jobs – CBO

    https://www.cbo.gov/system/files/2019-07/CBO-55410-MinimumWage2019.pdf

    Like

    • That strikes me as low.

      Like

    • I feel like, real-world, that’s probably high—at least until there’s a serious recession. In part because there’d be some loopholes—although a lot of work might transition to contract work. Or benefits would get cut.

      I think we’d be all right. Generally. But I also think we should abolish the minimum wage entirely.

      When our district established a $15 minimum wage, it was interesting the amount of resentment it generated amongst the people doing higher-value work that got a 3 cent raise versus the lower-value work where the employees ended up with a seven dollar raise. Because when you are underpaid at $14.97 and are still underpaid at $15 and the people around you are suddenly being seriously overpaid at $15 … it is not a morale booster.

      I understand why various parties embrace minimum wages but there’s always a downside.

      Like

      • Even if one believes the notion that it is proper for the government to dictate what businesses must pay low-skill workers, a national minimum wage in a nation that has such wide variances in cost-of-living as between, say, San Fransisco and Syracuse (to pick two places almost at random) still makes no sense whatsoever.

        Liked by 1 person

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