Even with the frankly rather silly speculation of a 50 basis-point rate cut finally over, the trend toward a dramatic easing in financial conditions remains intact. That actually seems reasonable because the guts of the employment data, which will be of great interest to the Fed, suggest reasons for concern that the labor market is no longer in danger of overheating. The official unemployment rate actually went up very slightly. And most importantly, the signs of growing wage inflation that appeared a few months ago may be at an end. The following chart is from Deutsche Bank strategist Torsten Slok:
Sentiment surveys have been suggesting a turn like this for a while. It is also noticeable that overtime is going down and that weekly earnings growth is falling more than hourly earnings growth. When preparing for tougher times, businesses generally start by asking people to ask fewer hours, so this makes sense:
These latest data may have convinced traders that talk of a 50 basis-point cut was a bit silly, but they provided stronger evidence that the case for a Fed rate cut is a decent one. And if there is a reason for lower rates (which as said earlier is good for stocks), it follows there is also reason to fear an economic slowdown or recession (which would be bad for stocks).
No comments:
Post a Comment