The Fed Just Hiked Into a Stall
The Fed just hiked into a stall. 👀
29K jobs in September. 3 month average ~51K. Unemployment up to 4.2 and they cut 60K out of the prior months. Wages are growing 3%, slowest since 2021.
And all 19 of them backed the hike. Most want another one. 🤯
Meanwhile the 10-year hit 5.36. Haven't seen that since 2002 (highest in 24 years). 30-year over 5.70.
People read that as the market pricing in more Fed. It isn't. The 2-year does that. The long end is pricing $40T of debt and $2T deficits. It's a Treasury problem, not a Fed problem.
Is this stagflation? Not like the 70s. There's no wage spiral, wages are slowing down. This is an oil shock plus a deficit the market finally decided to charge for. And the Fed is squeezing the one thing it can actually touch, which is private credit. That doesn't fix oil and it doesn't fix the deficit.
What breaks first? Jobs already did. The Fed moves when the 2-year moves, and the 2-year moves on data. ECI at the end of the month is the one to watch.
The other side says rates just belong higher now and the Fed is still loose. If that's true, wages should be picking up. They're at 3% and falling. I'll change my mind when that changes.
Nonetheless, you don't fix a funding problem by raising the cost of money for the people who had nothing to do with it.
