Capital Ideas & Analysis

Considering these two charts you can see a few month delay in the non-Farm payroll jobs and unemployment, which means we should see unemployment creep up by around October in a significant way. This should give the Fed more incentive to cut rates again in October. Because of this I see a 50 basis point cut at both of the upcoming meetings and perhaps holding on the next meeting. Though I am less sure of the third as I am with the next two. If they don’t do 50 point cuts then I see an equal amount being cut just in a more “measured” way. Thus we would have four straight 25 basis point cuts.

How were they so off? Didn’t they see this coming? We saw plenty of corporations laying people off. But, only the nonfarm payrolls were drastically off (which is huge).

Unemployment is still very low, earnings are increasing, and the hours worked is at consensus levels. The created jobs are what is off, and that is possibly the most important number. Manufactuing was the troubled spot with a sharp loss of 46,000 in August, following a 1,000 decline in July. Construction declined 22,000 in the latest month, following a 14,000 drop in July. The thing about construction is, it looks as if the worst may be over as I wrote about earlier this week which is certainly a good thing. This does look as if we will get a rate cut from the Fed now. They finally have cover to not look as if to be bailing out Wall St. I see Monday having a high likilihood of moving lower and even into the open Tuesday. However, if this happens then we can make a bet (or gamble) that the Fed will cut rates which I consider being bullish.  Tuesday or early Wednesday could be good buy points if you agree with that.