Morning Report: Small business inflation concerns are the highest since 1981

Vital Statistics:

S&P futures4,472-8.2
Oil (WTI)90.07-1.23
10 year government bond yield 1.96%
30 year fixed rate mortgage 3.93%

Stocks are lower this morning as bonds continue to sell off. Bonds and MBS are down.

Part of the reason for the sell-off in stocks and bonds has been the consistently hawkish direction of the Fed Funds futures. The March Fed Funds futures are now predicting a 71% chance of a 25 basis point increase and a 29% chance of a 50 basis point hike. A month ago, it was a 6% probability and markets thought there was a 25% chance that the Fed would hold rates at zero.

The consensus for the December 2022 FOMC meeting is that the Fed Funds rate will be 150-175 basis points, which represents six 25 basis point increases. Bank of America is even more aggressive, forecasting that the Fed Funds rate will be between 1.75% and 2%.

Small business optimism slid in January, according to the NFIB. “More small business owners started the New Year raising prices in an attempt to pass on higher inventory, supplies, and labor costs,” said NFIB Chief Economist Bill Dunkelberg. “In addition to inflation issues, owners are also raising compensation at record high rates to attract qualified employees to their open positions.”

The number of businesses characterizing inflation as their biggest problem reached the highest level since 1981. In addition, the net number of firms raising prices hit 61% which was the highest reading since 1974. In addition, a net 50% of small businesses reported increasing raising compensation, a 48 year high.

The slowdown in the mortgage business has hit Spanish bank Santander. It will exit the US mortgage business. “We are simplifying our business to focus on those areas where we can be successful with clients and deliver solid returns,” Tim Wennes, president and CEO of Santander Bank and its U.S. holding company, said in an interview.

The mortgage industry was understaffed in general heading into the big 2020 refi wave, and is now overstaffed. Expect more layoffs going forward.

27 Responses

  1. Uh, they’re just now asking for this?


  2. FYI Brent, summary from the most recent NACTT Academy Board Meeting you may find of interest:

    “Hank Hildebrand and Alice Whitten (national counsel for Wells Fargo Mortgage) were remarking about what is happening in the world of foreclosure filings and the expectations for consumer bankruptcy filings.

    Alice said the non-judicial foreclosure states (like Virginia) should begin seeing increased foreclosures in significant numbers by the end of March. She said the mortgage industry has been waiting for foreclosure firms to staff back up but she thinks they are getting there quickly. Alice said the mortgage companies will start by focusing on clearing the loans that are in the worst shape – ones that were already in default when Covid first hit. These might not result in a lot of bankruptcy cases as many of these people are presumed to have enjoyed their couple of years of non-payment and the loans will be too far gone to cure. However, the industry is expecting continuous increases in foreclosures as time goes on.

    Likewise, Hank said the belief – based on foreclosure numbers and projections by the US Courts – is that bankruptcy filings will slowly but steadily rise between now and around June. Beginning around then, filings should begin to increase at a quicker pace through the end of the year. Hank’s statement was, “There won’t be a tsunami, but there will be an ever-growing wave.””

    Maybe all the laid off staff in the mortgage refi industry will just move over to foreclosures.


    • I don’t see a wave of foreclosures. Everyone has built up a crapton of home equity over the past two years. Anyone in trouble can just sell and buy a cheaper place.


  3. Here’s why the vote to censure Cheney was a mistake. Now you get “Republicans in disarray” stories:


    • I suspect it bothers the donor class but this is nectar for the base, there is a strong desire to really disrupt the Party, and to keep the white working class and Latinos, it needs to happen. That’s why I don’t see a downside, unless your in the Establishment.


      • Sure, but it’s easier to just vote them out and point to Democrats censuring Sinema without the comparison.

        Now you’ve got interviews with Romney, taking shots at the decision.

        If it’s more important to have the intramural fight between what’s left of the Establishment and the Trump supporters then so be it, but I think it distracts from taking shots at the Democrats.

        On the other hand, it’s probably not going to matter come November.


        • I understand your perspective but the constituency of white working class, latinos and black males don’t even read these sources nor do I suspect they watch the news, so it’s ultimately moot for them and not moving their votes one way or another. The base, on the other hand, needs Establishment scalps or else they won’t show up to vote or volunteer.

          Just my perspective.


        • I think that really depends how much passes into the general culture by osmosis . . . which is tough to predict and can only be semi measured by polls of general voter sentiment, generic ballot polls, etc.

          Ultimately I agree that it’s unlikely in and of itself to be relevant. Really it’s a question of how schizoid the party looks or how obsessed it is with internal conflicts, and right now I think the Democrats win that contest.

          I think a lot of it is about the internal conflicts–and not necessarily over ideology. I think Liz Cheney got her censure as much for grandstanding and being off-message, and essentially not doing her job when in the leadership, as anything. I can’t imagine that anyone who was party-focused thought her obsessive focus on Trump and the “insurrection” was helping. No matter what they thought of Trump.


        • Donors driving, 1/6 embarrasses them.


        • McConnell ripe to get primaried, I would think. But thinking of that sweet post-senate lobbying gig or a bunch of sweet, high-paying no-work board memberships.


        • Dude will die in office. His power is in his ability to fundraise to insure incumbent reelection.


        • I’m sure this is true, and I really don’t have my finger on the pulse of the Kentucky electorate. Just seems to me like this would be the time to play Switzerland for McConnell. But I’m sure he has data that suggests it’s all fine.


        • McConnell does get some benefit with the base because the Democrats hate him so much.


        • Yeah, I can see that.


      • I think the primary downside is that it’s internecine and it some people it’s going to seem like wasting time and effort and continue to hi-light their ability to navel gaze, and tendency to live in their own bubble (like everyone in the party apparatus, ultimately, of any side). So one might watch and wish they’d just ignore her but I don’t think it makes a big difference, either way.

        To appeal to much of the working class and certainly blacks and latinos, they shouldn’t be doing anything that doesn’t involve talking about inflation, jobs, connecting the gas price to Biden’s energy policy, and so on.


    • Several Republican senators took more direct action: Both Lindsey Graham (R-S.C.) and Mitt Romney (R-Utah) were in communication with RNC chair Ronna McDaniel about the censure, with Graham calling her and Romney texting his niece.

      “A very unfortunate decision by the RNC and a very unfortunate statement put out as well. Nothing could be further from the truth than to consider the attack on the seat of democracy as legitimate political discourse,” Romney said in an interview. Graham said the party is going in the “wrong direction” when it’s not talking about taking back control of Congress.

      One can just as easily, and correctly, blame Romney and Graham and the other senate Republicans making announcement and talking to the press for impression of Republicans in disarray stories. It takes two to tango and there’s a real argument between the elites in the RNC and the slightly-less-elite who remain aware that there are working class people who might vote for them.

      His comment about January 6th being an “attack on the seat of democracy” is not really substantively different, to me, than trying to downplay it as legitimate political discourse . . . and has that air of being “how dare the peasants show their faces amongst our class”. Which is, IMO, no more helpful.

      But can either side really spend any time seriously focusing on the voters? Not sure they can. I mean either side as in “either side of this particular Republican disagreement” but can apply to the different parties as well.


      • It’s hilarious how much these clowns fetishize the Capitol, etc.


        • The Capitol fetishizing feels like really fetishizing their own primacy in the world—-it ain’t no coincidence that they happen to work in those Hallowed Halls. One might be forgiven for thinking that they are so concerned over the attack on the Capitol (and revere it so much) because they see it as an avatar for themselves, the ruling class.


  4. Oh this is amusing watching the NYT try to argue that “incitement” doesn’t mean what it does.

    “Cohn also said she did not interpret language in the editorial about “incitement” as suggesting that there was a direct, causal link between political rhetoric and outbursts of violence.

    “I never thought of the word incite to mean it was giving orders or telling someone to do something,” she said. “Incitement is more just rhetoric you put out there. It’s very different than saying you instigated something.”

    Palin’s attorneys have argued that Bennet’s insertion of language about “incitement” into the editorial conveyed something closer to the legal meaning of the word, but Cohn said that wasn’t her impression of what the editorial was trying to say.”

    Trump should absolutely adopt this as a talking point vis-a-vis 1/6:

    “Incitement is more just rhetoric you put out there. It’s very different than saying you instigated something.”


  5. The full cave here is funny:

    “Virginia Senate Democrats join GOP on amendment to allow parents to opt out of school mask mandates

    By Laura Vozzella and Gregory S. Schneider
    Today at 3:48 p.m. EST|Updated today at 4:23 p.m. EST

    RICHMOND — Senate Democrats who have been howling over Gov. Glenn Youngkin’s executive order making masks optional in K-12 schools got on board with the idea Tuesday, voting to amend an education bill to give parents the right to decide if their children wear them.

    Ten of the Senate’s 21 Democrats voted for an amendment — proposed by Sen. Chap Petersen (D-Fairfax) — that would give parents a right that Youngkin (R) declared they had last month with an executive order signed on the day he took office.”


    • They didn’t want to go on record voting against it, knowing that it wouldn’t take much advertising to get the message out and unseat them next time around.

      Which means they aren’t ignorant of what the majority of their voters want from them, they just want to cater to a preferred class. At least 10 of them, in this case.


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