The Fed's JUST Warned Us - It's Getting WORSE.

the Federal Reserve just released a

document that I believe the Federal

Reserve is going to use to justify an

increase in the dots that is fewer Cuts

more pain for the markets but then I was

slightly thrown off because I was

randomly scrolling and I came across a

tweet like this here's this Caleb

individual who says I know that

disinflation feels questionable with the

recent CPI and PPI data oh he's trying

to relate to us that is how we feel do

feel that way and then says but

forward-looking indicators in the labor

market continue to indicate disinflation

will persist H okay so he has

forward-looking data he says that

indicates that disinflation will persist

and therefore he will stick with the

weight of the

evidence and he quote tweets this Nick

bunker guy who proceeds to post multiple

year over-year wage growth charts

indicating that wage growth is falling

but wait a minute year over-year

measures are not leading indicators they

are lagging indicators H wait a minute

but the person just said he is going to

stand with the weight of the evidence

and look at leading indicators but then

he gave me a lagging

indicator okay that's not very useful so

what did the Federal Reserve just

release and how does it relate to this

well let me give you a hint the Federal

Reserve just released a paper that

actually might be a leading indicator

and it says the exact opposite of what

this Twitter poster is suggesting now

our first clue that we got over the last

few months that uh-oh something is

changing was actually here in the ADP

report remember the ADP report all of a

sudden showed that we went from

7.2% wage growth in January to 7 .6%

wage growth in February for job

Changers that was our first red flag

that wait a minute that Trend that

plummeting trend of wages might be

starting to turn again and then the

Federal Reserve releases this on the

same day that JP is testifying in the

Senate note that he probably hadn't read

this yet given that it came out probably

after he was done in the Senate take a

look at this will the moderation in wage

growth continue Nick T actually tweeted

a chart from this but he didn't go into

as much detail in my opinion as he

should have given that he just kind of

took the chart out of context but let's

actually read what this is first of all

wage growth has moderated notably

following the post-pandemic search great

that's exactly what Mr Twitter poster

says but it remains strong compared to

wage growth prevailing during the years

prior so what will happen now will wage

growth moderate or will it stall well

this is a really important question if

wage growth keeps moderating then we can

get rate Cuts we're not so worried about

inflation we usually want this to be

around 3% to be consistent with 2%

inflation consumers make up about 70% of

the economy so you got a rough kind of

translation there anyway take a look at

this in this post we use our own measure

of wage growth

persistence and it's called Trend wage

inflation and what they're trying to do

is find out what's happening in the near

term that could be indicative of the

future so what they do is they look at

the last 3 months and they look at the

wage changes in the last 3 months and

then they annualize those out to say

okay well if we continue at the speed

that we've had the last 3 months what's

the future going to look like that's

very different from going back a year

and going oh well well wages are lower

today than they were a year ago very

very different so what do they include

and this is the scary part ready for

this let's scroll down over here the

Shaded area shows a 68% confidence band

whatever but it's uh but but there's

this chart here and they're going to

give us some takeaways here in a moment

you should already be able to tell them

I added this box on the left I added

this box here and I added this box on

the right and what you'll notice is

we're kind of getting a little stuck in

this box on the right the Box on the

left was around 3 to 3 and 1/2% the Box

on the right is is around 5 to 6% not

great okay what are the conclusions of

the FED though that was just me looking

at the chart what are their conclusions

I want you to keep in mind this is from

the New York fed this is their their

these are their researchers providing

this sort of um

Insight a large chunk of wage growth we

saw over the course of 2021 appears to

have been persistent it is worth

stressing once more that the trend

distracted by the model is expressed in

annualized monthly wage growth which

explains why it leads the actual

year-over-year growth Series in the

chart notice how it's almost like the

FED literally responds to Mr leading

indicator over here on Twitter anyway

and and they're basically like you wrong

anyway and this is concerning to me

because keep in mind I used to be in

Camp it's all going to be fine the trend

is down it's going to keep going you

know I'd look at these charts be like

great we're getting close to rate Cuts

this is going to be glorious well then

the data started changing I'm like oh no

no no this is how the second wave starts

now I don't know if the second wave will

keep going I I don't know that uh I do

know that I'm looking for my next short

and I'm going to send an alert to all my

course members in the stocks and

psychology and money group as soon as I

place my next short and I got some juicy

targets I'm looking at here no

guarantees they're going to kill it but

uh I think we're going to have some

juicy short shorts going into that fed

meeting next week because I'm a little

nervous about it and a lot of people

still think we're going to get three or

four rate Cuts this year not if these

numbers persist the FED is literally

telling you this but nobody's paying

attention to it except that's why I'm

making this video I always think my job

on this channel is to point things out

that other people aren't pointing out or

to try to dispel people's

misunderstandings that doesn't mean

everything I say is perfect but we're

going to at least try so what do we have

here the model suggests that the trend

may have peaked in the early months of

2022 then started declining the

moderation then flattened out in mid

2023 that's bad and remained stagnant

since okay that's a really bad phrase

right here flattened out in mid 23 and

remained stagnant since however the

shaded areas IND indicate considerable

uncertainty the recent slowdown

estimated by our models indicates it

cannot be ruled out that wage growth

will be markedly higher in the near term

than it was before the pandemic notice

how they didn't say oh it might be

marbly lower they said hey um it's

flattened progress has flattened it's

remaining more persistent and it may go

way higher uhoh now obviously we're

getting some mixed signals since they do

mention over here that the employment

cost index which is the ECI right here

is trending down it's that red line

right there yes it's trending down but

Trend inflation it's not so much that

it's Skyrocket it's that it's stagnating

it's that we're getting stuck right

there that's bad that means the FED has

to wait more to actually finish the job

so what else do we have from the fed

well listen to this I wrote rip right

here many labor market indicators such

as job vacancies or the rate at which

unemployed workers find jobs are still

at or above pre-pandemic levels in

addition persistently elevated nominal

wage growth may have repercussions for

Price inflation oops although it may be

the result of wages in nominal terms

catching up with previously High

inflation that's true it's entirely

possible that the reason we're seeing

wage growth is

because you have high prices so prices

went up and now wages are catching up so

that wage growth falling progress is

stalling because people are still

catching up but the the question is when

does that become the spiral right okay

so wage growth catches up well our

prices is then going to go up right

that's where you get the lading of the

Spiral that's really bad I think that's

going to keep the FED extremely cautious

they do not want to repeat the 1970s

where they cut too early and then they

end up realizing they weren't tight

enough and they're going to have to

raise rates again that's when you create

a real

disaster now our approach offers a way

to look under the hood out through the

noise and while cons uncertainty remains

our estimates point to persistent wage

growth that is still above pre-pandemic

levels dang it that's exactly the

opposite of what Mr Twitter dude over

here said now In fairness let's be real

we did just have a CNBC article over

here no thanks CNBC we did just have a

CNBC piece here what did we have layoffs

rise to the highest for uh uh for any uh

group basically any February since 2009

okay that sucks so Tech layoffs led the

way with warnings of 28,000

now what's interesting is that number

has fallen 55% from the same period a

year ago so I have a little trouble

reading this data because they're

telling us it's the highest since

2009 but actual uh layoff numbers have

fallen 55% from the same period a year

ago so there's something weird going on

here with layoff announcements in

February given that uh uh Tech you know

Tech the number of tech layoffs have

fallen to half I think it's because all

categories together we might be the

highest level since

2009 and that's because of this total

84,000 planned job Cuts showing an

increase of 3% from January 9% from the

same period next month the thing though

is job Cuts don't necessarily mean the

FED is done because what happens when

companies cut jobs as part of a

rebalancing and then you get a bunch

bunch of people taking new jobs

in other words other companies hiring

the government Healthcare education

retail whatever so yes you can have more

layoffs and more turnover but as long as

you still have more job openings which

we do well what difference does it make

I mean let's consider for a moment the

job uh let's try it St Louis Fred jobs

I'll just do jolts it should come up

under jolts job openings labor turnover

here we go and let's go ahead and pop

the chart can I get job openings nonfarm

yeah I mean come on look at how many

jobs we have available 8.86 million

compare that to pre pandemic 7 7.5

million so we have at least another

million and a half jobs to go before the

number of job openings we have actually

starts leading to a higher unemployment

rate potentially now I know there could

be a mismatch and there are a lot of

things here but listen all all I'm

trying to do in this video is tell you

the Federal Reserve themselves this is

the New York fed okay they themselves

are saying hey um the moderation wage

growth is stalling we need to pay

attention to this because we're trying

to use forward-looking data as much as

you can for labor because we know that's

a lagging indicator and it makes us

nervous anyway let me know what you

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