In his podcast addressing the markets today, Louis Navellier offered the following commentary.
Unemployment Claims Rise
The Labor Department on Thursday announced that weekly unemployment claims rose by 211,000 in the latest week, up from 190,000 in the previous week. Continuing unemployment claims rose to 1.718 million, up from a revised 1.649 million in the previous week.
The four-week moving averages of weekly and continuing unemployment claims are now rising. Although rising unemployment statistics are not yet high enough to influence Fed policy, if the weekly moving averages continue to rise, it may very well cause the Fed to pause its key interest rate hikes after the FOMC meeting on March 22nd.
Tomorrow, we will learn if the Federal government lied to us. I am not referring to Federal Reserve Chairman Jerome Powell’s recent testimony before the Senate on Tuesday or House on Wednesday. No instead, I am referring to Friday’s February payroll report.
Specifically, I want to see if the January payroll report is revised substantially lower after being artificially boosted by massive seasonal adjustments and gets closer to the ADP report. I have not been the only one questioning the shocking January payroll reports, since Bain Capital also questioned the seasonal adjustments in a recent economic report.
Speaking of ADP, they announced that private payrolls rose 242,000 in February, which was substantially higher than economists’ consensus estimate of 205,000. The January private payroll was revised 119,000, up from 106,000 previously reported.
Clearly, ADP cannot find the jobs that the Labor Department reported in January, which now more than ever looks grossly distorted by seasonal adjustments.
More Investor Anxiety
The other big economic report that may have also been exaggerated by January seasonal adjustments is the retail sales report next week on March 15th. The bottom line is that the stronger-than-anticipated January payroll and retail sales reports caused interest rates to soar, which is now causing more investor anxiety.
The fact that these two blowout economic reports may have been grossly distorted by January seasonal adjustments implies that interest rates might have surged to bogus economic reasons.
So far, the Fed has been remarkably quiet about surging Treasury yields and the fact that the yield curve is the most inverted in 41 years (since September 18, 1981). The 2-year Treasury yield surged to over 5% on Thursday for the first time since 2007, which is indicative that credit markets are expecting the Fed to raise the federal funds rate 0.5% on March 22nd.
Sticking to 2% Inflation Target
Interestingly, Fed Chairman Powell during his two-day Congressional testimony refused to go off script after being repeatedly insulted about inflation and higher interest rates by our elected leaders.
Right now, it appears that the Fed wants to continue raising key interest rates by 0.25% to 0.5% at its upcoming Federal Open Market Committee (FOMC) meeting on March 21st and 22nd. The big Fed news is that the “dot plot” will be updated, which is a survey of FOMC members federal funds rate forecast.
Chairman Powell in his prepared testimony said that the Fed is likely to hike key interest rates higher than expected, but again that will be ultimately re-confirmed by the dot plot on March 22nd.
Specifically, in front of the Senate Banking Committee, Powell said “The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.” Powell added, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.”
The Fed is sticking to its 2% inflation target. Ironically, China is the first major country to get inflation under control. Specifically, China’s National Bureau of Statistics (NBS) on Thursday announced that consumer price inflation in February decelerated to a 1% annual pace, down from a 2.1% annual pace in January.
An NBS senior statistician, Doug Lijuan, said “a pullback in demand after the holiday as well as ample market supply” caused consumer price inflation to slow. The whole world is waiting for China’s economic growth to perk up post Covid, but so far China’s economic recovery appears to be lagging behind the Western world.
According to OECD data, South Korea has the most work to do in order to close the gender wage gap. A male worker in South Korea outearned his female counterparts by 31.1 percent in 2021. Even though things are slightly better in North America, both the U.S. and Canada still have wage gaps of around 17 percent. Source: Statista. See the full story here.