The Gang That Couldn't Shoot Straight

George Yacik - Contributor - Fed & Interest Rates

Is a July rate increase back on now because of the strong June jobs report? If not July, then September?

June’s unexpectedly strong 287,000 gain in nonfarm payrolls – more than 100,000 above Street forecasts – has some people believing that the Federal Reserve will now once again change its mind and increase interest rates sometime this summer, either later this month or at its September conclave.

But the bond market isn’t buying it, and neither am I. The yield on the benchmark 10-year Treasury note ended last Friday at a new record low of 1.36%, down eight basis points for the week. That doesn’t sound like bond investors believe that a rate increase is imminent. And it’s hard to believe that the Fed, which won’t make a move unless the sun, moon and stars are in perfect alignment, will suddenly take the big rebound in nonfarm payrolls as the green light to raise rates. It will take a lot more than that. Continue reading "The Gang That Couldn't Shoot Straight"

Lousy May Jobs Report Makes Fed Increase Unlikely This Year

George Yacik - Contributor - Fed & Interest Rates

Is the Federal Reserve, which has been signaling a rate increase in the “coming months,” really going to do so after last week’s lousy May jobs number?

And if the jobs economy, which has been one of the few bright spots in the economy lately – that is, of course, if you ignore the 94 million or so adults not working – is as soft as the report indicates, will the Fed be able to raise rates at all this year?

To my way of thinking, the Fed has only until September if it’s going to raise rates this year. After that, we’ll be in the final two months of the presidential election campaign, and there is no way the Fed is going to make any moves then, especially if such a move were to jeopardize the chances of Janet Yellen’s party’s nominee.

Following the awful May jobs report, I think we can pretty much dismiss the idea of a rate increase at the June meeting, now less than two weeks away. July remains a possibility, but there will have to be an awful lot of improvement in the economy by then, and there’s not a lot of time between now and then. There is no meeting in August, so that leaves the September 20-21 meeting as the only real possibility, and even then the odds in favor of a move less than two months before the election are pretty small.

Just how bad was the May report? Continue reading "Lousy May Jobs Report Makes Fed Increase Unlikely This Year"