• 2 days The Gold Rally Has Finally Run Out Of Steam
  • 2 days Citibank Analyst Predicts $300k Bitcoin By End Of 2021
  • 5 days Bitcoin Lives Up To Its Safe Haven Status In A Big Way
  • 5 days 14 Million People Will Lose Unemployment Benefits On December 31st
  • 7 days Why 12 Million American Millionaires Isn’t Good News
  • 8 days Big Oil Is Paying The Price For Investing In Renewables
  • 9 days The Banking Industry’s $35 Billion Gravy Train Could Disappear
  • 10 days Did Amazon Just Democratize Prescription Drugs?
  • 11 days The Private Space Race Just Got Very Real
  • 13 days Short Sellers Are Willing Big In This Turbulent Market
  • 14 days SpaceX Gets Go-Ahead To Send Humans Into Space
  • 15 days Saudi Arabia Lost $27 Billion In Oil Crash
  • 16 days China’s Big Tech Takes A Hit As Regulators Crack Down
  • 17 days Black Friday Could Be Retailers’ Only Hope
  • 18 days Why You Should Not Dump Your Stay At Home Stocks Just Yet
  • 19 days The Real Reason Why Uber And Lyft Stocks Have Soared Nearly 50%
  • 21 days Bitcoin Heads Towards $16,000 And No One’s Cashing In
  • 22 days Elon Musk’s $250 Tesla Tequila Is Already Sold Out
  • 23 days Will The San Francisco Wealth Tax Spark An Exodus Of The Rich?
  • 24 days The Fin-Tech IPO Of The Century Just Got Crushed
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Convincing the Market Rate Hikes Coming is Damn Tough: Why?

I frequently check CME Fedwatch for a look at market expectations of rate hikes.

When expectations rise, I typically laugh.

Given all the analysis on stunning job growth, inventory builds, Fed pontifications, and other drivel, interest rates ought to be at least 1% by now.

But here we are. Rate hike expectations are sinking fast ... again.

This evening, just for grins, I decided to check what market participants thought of rates hikes.


September 2016

September 2016 Hike DOA

The much touted "September rate hike on the table" message is now dead on arrival.

OK, but when?


May 2017

May 2017 Hike?

The market now believes the next rate hike will be in June of 2017, pushed back from May yesterday and March following the last jobs report.


Why?

That's easy, but Fed presidents, mainstream media, and economists in general still haven't figured it out.

Here's the answer in a nutshell: Every good economic report is invariably followed up with an equally bad if not worse economic report.

Excuses have been endless: China, Brexit, Jobs, GDP have all come into play.

Given two allegedly excellent jobs reports back-to-back, the September hike thesis was "surely" in play.

That notion lasted from the jobs report on August 5 until the August 9 BLS admission Productivity Declines 0.5%, Down 3rd Consecutive Quarter, Longest Losing Streak Since 1979.


Real Wages Decline

Buried deep in that productivity admission was this little tidbit from the BLS.

"Due to a 4.7-percentage point downward revision to first-quarter hourly compensation, unit labor costs decreased 0.2 percent in the first quarter of 2016, rather than increasing 4.5 percent as reported June 7. Real hourly compensation decreased 0.4 percent after revision, rather than the previously-published increase of 4.2 percent."

Fancy that. Despite huge minimum wage hikes, wage earners are still losing ground.

One day ahead of the productivity report, the Wall Street Journal posted an article entitled "Voter Discord Isn't Over Wages".

I commented on that notion ahead of the productivity report in Is Voter Discord Over Jobs and Wages? If Not, What?

My conclusion was "People may cite race relations, police attacks, security, etc., but those concerns have their roots in something else: a feeling of slipping economically behind over a decade or longer, as the rich get richer and richer."

One day later I offered this recap: Pocketbook Theory – Mish vs. Wall Street Journal.

Please take a look.


Rate Hike in September?

For the Fed to hike in September, the data between now and then better be uniformly positive. Even then, it's not a slam dunk given that horrendous productivity report.

To put it mildly, don't count on it.

 

Back to homepage

Leave a comment

Leave a comment