No. of Recommendations: 9
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https://discussion.fool.com/t/control-panel-employ...Control Panel: Employment news & interest rates
Investment Analysis Clubs
Macro Economic Trends and Risks
Sep 7
3m
WendyBG
3m
Last month, President Trump fired the head of the Bureau of Labor Statistics because the employment news came in lower than expected. This month’s report was no better. Total nonfarm payroll employment changed little in August (+22,000) and has shown little change since April. The downward trend for blue-collar work has accelerated and manufacturing lost jobs. A job gain in health care was partially offset by losses in federal
government [thanks, DOGE!] and in mining, quarrying, and oil and gas extraction.
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bls.gov
empsit.pdf
546.77 KB
I wonder if Trump will fire the interim director of the BLS (highly experienced) before the new director (a Trump stooge) can be put in place.
Economic activity in the manufacturing sector contracted in August for the sixth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation’s supply executives in the latest ISM® Manufacturing PMI® Report. The August reading of the Production Index (47.8 percent) is 3.6 percentage points lower than July’s figure of 51.4 percent. The Prices Index remained in expansion (or ‘increasing’) territory, registering 63.7 percent… [end quote]
Decreasing production with increasing prices = stagflation.
Economic activity in the services sector grew in August for the third consecutive month, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. This index has not been in contraction territory since May 2020. The Prices Index registered 69.2 percent in August, a 0.7-percentage point decrease from July’s reading of 69.9 percent. The index has exceeded 60 percent for nine straight months, its longest such streak since 30 consecutive readings above 60 percent from October 2020 to March 2023….[end quote]
Since services provide 70% of GDP, growth in services are supporting growth in the economy. Respondents in the PMI report say that “We expect to see the full effect of tariffs in our cost of goods sold by October” and “Locally, prices have and are continuing to rise on goods and services that do not appear to be directly impacted by tariffs.”
The news from the both sectors is clearly inflationary. The last quarter of the year is critical to profits as the holiday season buying swings into full gear. Many companies built inventory before the tariffs went into effect. They will need to replace with tariffed goods.
Also, the fact that non-tariffed goods and services are rising in price shows that inflationary expectations are getting entrenched – the Federal Reserve’s worst fear.
The jobs report was disappointing but it was still in positive territory. U-6 has been gradually creeping up for months. (Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons, as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force.)
The options market is 89% sure that the FOMC will cut the fed funds rate at its next meeting in 10 days and high confidence that it will cut twice more in 2025 with a final fed funds rate of 3.50% - 3.75%.
The entire Treasury yield curve dropped suddenly. Junk bond values popped as their spreads relative to Treasuries have been in a downward trend. But Treasury prices are rising even faster than junk bond prices due to the expectation that cuts in the fed funds rate will also cause longer-dated Treasury yields to fall. (Bond prices rise when yields fall.)
The expectation that long bond yields will fall will not necessarily pan out over the long term. Bond traders (barring knee-jerk reactions) will realize that inflation is a real danger and won’t want to risk locking in a low fixed rate for the long term.
President Trump is actively trying to take over the Federal Reserve using any means possible, including accusing a Fed governor of unproven illegal actions. Trump has said that he wants to cut the fed funds rate by 3% in spite of the fact that inflation is already too high and getting worse.
atlantafed.org
Underlying Inflation Dashboard
The dashboard offers a broad characterization of retail price pressures and helps you understand longer-term inflation trends.
Treasury Secretary Scott Bessent wrote an opinion piece for the Wall Street Journal last week criticizing the Federal Reserve for — among other things — its aggressive quantitative easing actions over the last decade-plus, resulting in abuses of “cheap debt.”
Successive interventions during and after the financial crisis of 2008 created what amounted to a de facto backstop for asset owners. This harmful cycle concentrated national wealth among those who already owned assets. … Instead of accountability, presidents and Congress have expected intervention when their policies falter.[end quote]
If Trump transfers Bessent from Treasury to the Federal Reserve, Bessent will vote against future QE to suppress long-term interest rates when the growing government deficits eventually overwhelm the bond market’s willingness to lend more at low yields.
I agree with Bessent because the bond market should be setting real yields according to free market supply and demand. The Fed has suppressed this for far too long. However, rising Treasury interest payments will absorb more and more of the government’s income. The alternative is the Fed buying government debt indefinitely which would lead to Turkey-style inflation.
fred.stlouisfed.org
10-Year Real Interest Rate
10-Year Real Interest Rate
The stock market continues its upward trend with the usual noise. However, NASDAQ bullish percent is falling.
The Fear & Greed Index is neutral. The market is risk-neutral as SPX and the 10 year Treasury are rising at the same rate. USD is stable. Gold continues to rise. Copper fell like a stone in early August and stays low.
The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, is very loose.
A couple of days ago, @eldemonio started a discussion about systemic liquidity. Systemic liquidity is cash which can be deployed immediately. The Fed keeps track of how much overnight money is available using its Overnight Reverse Repurchase Agreement (ON RRP) Facility which includes bank excess reserves and also money markets and the Shadow Banking system. Even though there’s a huge amount of money in money markets they choose to buy higher-yielding assets (short-term commercial and/or government debt) which yields higher than the Federal Reserve. Money markets have never “broken the buck” even in 2008 when the Fed bailed out a small MM fund.
Yesterday, @eldemonio wrote, “With the Treasury issuing gobs of short-term treasuries, money markets are chasing the higher yield and pulling liquidity out of the ON RRP. With the ON RRP buffer at practically zero, further QT and the rebuilding of the Treasury General Account (TGA) will suck liquidity out of the financial markets….This move away from the Fed’s facility will force new or renewed treasuries to be absorbed by private investors….With the bazillions of dollars of treasuries that are …
As we all know, politics isn’t allowed on METAR. But when an event happens over the weekend that could sway the markets next week it should be part of the Control Panel.
https://www.nytimes.com/2025/09/06/us/trump-chicag...Tensions Mount as Trump Administration Threatens Federal Crackdown in Chicago
In a social media post, President Trump said Chicago was “about to find out why it’s called the Department of WAR.” Illinois officials condemned the message.
By Hamed Aleaziz and Julie Bosman, The New York Times, 9/7/2025
Tensions between President Trump and Illinois leaders escalated on Saturday when the White House posted an image on social media depicting Mr. Trump with helicopters, billowing flames and the Chicago skyline.
“Chicago about to find out why it’s called the Department of WAR,” read the post, titled “Chipocalypse Now,” a reference to the 1979 war movie “Apocalypse Now.” [end quote]
The President changed the name of the Department of Defense to the Department of War last week. He didn’t say that his first target of attack would be an American city.
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Illinois governor J.B. Pritzker called attention to the gravity of Trump’s post: “The President of the United States is threatening to go to war with an American city. This is not a joke. This is not normal. Donald Trump isn’t a strongman, he’s a scared man. Illinois won’t be intimidated by a wannabe dictator.” Under the words “Know your rights, Illinois,” and “Stay safe and stay informed,” the governor’s social media account posted information about Americans’ rights in both English and Spanish.
This is very scary stuff, straight out of the totalitarian play book.
It’s hard to say how the markets would react if Trump actually did invade Chicago with the Army, a clear violation of the Constitution. There may be flight-to-safety buying of USD, Treasuries and gold.
The METAR for next week is cloudy.
Wendy
https://www.ismworld.org/supply-management-news-an...https://www.ismworld.org/supply-management-news-an...fred.stlouisfed.org
Total Unemployed, Plus All Persons Marginally Attached to the Labor Force,...
Total Unemployed, Plus All Persons Marginally Attached to the Labor Force, Plus Total Employed Part Time for Economic Reasons, as a Percent of the Civilian Labor Force Plus All Persons Marginally Attached to the Labor Force (U-6)
fred.stlouisfed.org
ICE BofA CCC & Lower US High Yield Index Option-Adjusted Spread
ICE BofA CCC & Lower US High Yield Index Option-Adjusted Spread
stockcharts.com
Dynamic Yield Curve | Free Charts | StockCharts.com
Visualize the relationship between interest rates and stocks over time using our draggable, interactive yield curve charting tool.
CNN
Fear and Greed Index - Investor Sentiment | CNN
CNN’s Fear & Greed Index is a way to gauge stock market movements and whether stocks are fairly priced. The index uses seven market indicators to help answer the question: What emotion is driving the market now?
stockcharts.com
CandleGlance | Free Charts | StockCharts.com
Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
stockcharts.com
CandleGlance | Free Charts | StockCharts.com
Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
stockcharts.com
CandleGlance | Free Charts | StockCharts.com
Quickly and easily view and analyze mini-charts of up to 12 different symbols simultaneously, all displayed side-by-side on a single page
chicagofed.org
National Financial Conditions Index: Current Data - Federal Reserve Bank of...
