Some are interpreting the FOMC Minutes as hawkish. The Minutes unexpectedly stated the Committee is closer to agreement on an exit strategy from aggressive stimulus, raising the possibility that it might increase rates sooner than anticipated.
As widely known, FRB Chair Yellen has committed monetary policy to stronger labor markets, which measures as vast array of indicators. Yellen has stated as long as inflation remains in check and the labor utilizations remains “below normal levels” monetary policy will remain unchanged.
However the Minutes stated “the characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated.”
Yellen speaks tomorrow in Jackson Hole and she has already telegraphed her planned topic…labor markets.
Equity markets initially sold off nominally when the Minutes were released only to then advance partially predicated by the word if. Many market participants believe this is a really big if as it regards to labor utilization.
Yes 200,000 jobs were created for the last six months, the longest such period since 1997, however it must be noted it was only four months ago the economy finally created all the jobs lost from the recession even as the economy today is $2 trillion or 13.3% larger than the economic apex in December.
In other words, it took 58 months to recover all lost jobs in the recession according to the BLS. Historically all lost jobs are recovered within 15 months after the recovery commenced.
Treasuries pared losses on the Minutes.
Today’s weekly reading of jobless claims might be of greater importance given the Minutes. Also released today is the Philadelphia Fed, the LEI and existing home sales.
Last night the foreign markets were up. London was up 0.23%, Paris up 0.64% and Frankfurt up 0.45%. Japan was up 0.85% and Hang Seng down 0.66%.
The Dow should open nominally higher as the markets now await Yellen’s Jackson Hole speech, a speech that may offer some insight once QE ends. The 10-year is off 2/32 to yield 2.44%.
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