Fed in Crisis: Terrible Jobs Report WORSENS Economic Outlook.

hey everyone me Kevin here oh man we had

a jobs report come out this morning that

at first looked like it kind of matched

what Economist surveys were but the more

we looked at the details the more we

realized

buckle up because the FED is about to

whack us back into the hole they are not

going to be happy with this report in

fact markets are now pricing in a

terminal fed funds rate that's slightly

higher than yesterday at about 4.66

percent but those on Wall Street say the

market still hasn't priced it enough and

that's why the Market's probably turning

red because now we're getting folks on

Wall Street saying this report could

potentially be what finally pushes the

fed from a terminal that is a high fed

funds rate of 4.6 percent to five

percent that means the next fomc meeting

in November is almost certainly going to

have a 75 basis point hike and

unfortunately it is unlikely that we're

actually going to see a substantial

softening in the consumer price index

report next week as we still have hot

labor data which unfortunately is driven

most by Leisure and hospitality and I

hate to say it but I'm in a hotel

because I'm about to go on a weekend

trip with my family and I'll tell you

the biggest increases were in

entertainment food and dining and

drinking establishments and uh

let's just say I'm contributing to that

inflation so up front I'm sorry but now

in the long term JP Morgan believes that

in order for us to actually get

inflation to go down to two percent we

are going to have to see the

unemployment level or I should say the

jobs level of inflation sit around an

annual three percent rate presently that

rate and in this last report it is at

five percent so we still have a while to

go before we actually see wage inflation

start declining month over month we're

sitting at point three percent which is

right along expectations but still at

3.6 percent annualized which is also

still above that three percent that JP

Morgan believes we need to be at to be

able to get to two percent inflation and

unfortunately the FED is backing

themselves into a corner the FED is

saying we will not stop until we get to

two percent inflation this is very

different from what they did in the 80s

when they used the phrase opportunistic

disinflations say that look inflation's

at four or five percent let's now wait

and we'll just wait until inflation gets

to two percent it ended up taking 15

more years to go from high inflation to

four and a half to five percent

inflation but then 15 years to go from

that four and a half level to two

percent 15 years today the FED is

telling us no we are not going to

resolve inflation that quickly or we're

not going to U-turn that quickly we're

not going to pause like that we're going

to go ahead and keep hiking until we

actually get to two percent inflation

and this is now being priced into the

market and so if you're seeing red in

the markets today which you are crypto's

falling about two percent that's even

following the binance hack yesterday of

about 100 million dollars that was

terrible you've got uh Treasurer yields

skyrocketing again the 10-year sitting

knocking on the door of 3.9 which is

absolutely terrible for Real Estate uh

it'll create great opportunities for

those investing in house hack I believe

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read the solicitation of over at

househack.com but let's actually talk

about some of the numbers that came in

here we were expecting 255 000 jobs to

be created we actually got 263 000

that's above long-term Trend and it's

hotter than expected it's not hotter

than expected by much I mean it's 8 000

more jobs but still it's not better than

expected right so we got we didn't get

good news on that if anything we got

slightly bad news on that we got

slightly bad news in the fact that the

labor force participation rate also fell

the labor force participation rate fell

to

62.3 percent down from the prior read of

62.4 percent uh this has now helped

contribute the headline unemployment

rate to actually fall the headline

unemployment rate fell from 3.7 percent

to 3.5 percent and this is the last

thing that we want to see right now is

the Wall Street Journal and the New York

Times or whatever putting on their

headlines oh look the unemployment

rate's going down economy still strong

the economy is still really really hot

again the law largest job gains actually

came from Leisure and Hospitality here

and as as much as it is true that I've

been traveling and uh and and spending

more on entertainment and food with

family uh I will say I I mentioned this

in our live stream that we did earlier I

think for the last like six weeks I've

probably had the equivalent of four

drinks we've Lauren and I we just

haven't been drinking at all she also

had a surgery that she had to go through

so couldn't but anyway it's been very

interesting uh it's really good for

weight loss hint like big five six

hundred calorie Mai ties are not very

good for weight loss but anyway uh we

had 5.2 percent of people teleworking we

had the labor force participation rate

again at 62.3 percent the biggest gains

in workers again coming from Leisure and

Hospitality at 63 000 with food and

service food service and drinking places

Rising sixty thousand Healthcare Rising

by sixty thousand and professional

business services Rising by forty six

thousand manufacturing 22 000

construction 19 000 wholesale trade

eleven thousand and financial activities

and services down eight thousand I was

mentioning that we'll probably see a lot

lot more layoffs in the neighborhood of

financial services which could help

bring down some of the these strong jobs

reports once you start getting companies

like credit Swiss laying people off and

the other large Banks which are way too

bloated with staff it makes no sense

that their earnings and revenue went

down to the neighborhood in the

neighborhood of 30 to 40 percent but

their staff and payroll bloated by

another 10 to 15 percent it's absolutely

maddening so unfortunately this was not

the best report and it was certainly a

hot report which is now leading to

expectations that the inflation report

next week is also going to come in hot

I'll go ahead and give you the preview

for inflation right now this is before

the jobs that data came out the

expectation for year-over-year inflation

is 8.1 percent and the month over month

inflation is expected to come in at 0.2

percent for the next meeting or the next

CPI report but unfortunately with this

jobs report those numbers could come in

worse than expected you also had a

revision up of the last jobs report

which was revised up 11

000 jobs that's not great so not only

did you have a slightly hotter report

but you also had a revision up of the

last report again less labor force

participation lower headline inflate uh

jobs report or unemployment report

and then again we have Wall Street now

suggesting that we need to price in

probably closer to a five percent

terminal fed funds rate and so that's

why we're seeing pain in the markets

today including the NASDAQ down nearly

two percent S P 500 and DOW all turning

red treasury yields again sitting about

3.9 percent and the five-year Break Even

actually taking up as well even though

the five-year Break Even is at the

lowest point it's been in the last year

it's actually still at a high relative

to 2018

it's basically at the highest point of

2018 and if you remember 2018 you

remember that Jerome Powell was raising

rates back then and Donald Trump was

threatening to fire Jerome Powell

something that hasn't really been done

before and led a lot of questions like

can the president do that but anyway

Jerome Powell was hiking rates back then

when inflation break evens were where

they are now so worth knowing we

definitely have some work to do and

that's why we're seeing red in the

markets right now so it's quite painful

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Link down below I'm going to be heading

over to a course member live stream uh

probably in about the next 15 minutes so

I'd love to see you there uh but uh yeah

we'll do some fundamental analysis

together but otherwise this unemployment

and jobs report not so great is a bad

signal unfortunately for CPI going

forward and it's just not the best news

that we were hoping for anyway thanks so

much for watching

good luck out there as usual thank you

so much thanks for subscribing and we'll

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insurance remember Met kevin.com Life

thanks so much bye