Wednesday, October 26, 2016

What Puts The Fed On Hold Again In December

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*Jobless claims showed weakness last week. We await another report on Thursday.
*Jobless claims changes month to month correlate to the all important NFP.
*If Thursday's number is weak, we may get a disappointment in NFP. That can put the Fed on hold once again.




The Fed has had several false starts this year in predicting a rate hike. Fed Funds Futures are at about a 70% chance for a hike in December. The Fed has needed the market aboard to hike. They have that. The other key is non-farm payrolls ("NFP"). Jobless claims though showed its weakest report in a month. If that continues that could predict a weaker NFP. That would stall a rate hike.
Let's first look at the recent jobless claims.
Above you see the 260 was a big jump from the last reports.
We've shown that jobless claims can predict NFP.
In the grid below, we show the relationship.
Jobless Claims4 wk avgChg From 1 Mo AgoNFPNFP Chg
5/7/2016294,000268,25024000
5/14/2016278,000275,75024000
5/21/2016268,000278,50024000
5/28/2016268,000277,0003.9%24000-83.3%
PredictedWeakNumber
6/4/2016264,000269,500271000
6/11/2016277,000269,250271000
6/23/2016258,000266,750271000
6/30/2016270,000267,250-3.5%2710001029.2%
PredictedStrongNumber
7/2/2016254,000264,750271000
7/9/2016254,000259,000252000
7/16/2016252,000257,500252000
7/23/2016266,000256,500252000
7/30/2016267,000259,750-1.9%252000-7.0%
PredictedStrongNumber
8/6/2016266,000262,750167000
8/13/2016262,000265,250167000
8/20/2016261,000264,000167000
8/27/2016263,000263,0001.3%167000-33.7%
PredictedWeakerNumber
9/3/2016259,000261,250156000
9/10/2016260,000260,750156000
9/17/2016251,000258,250156000
9/24/2016254,000256,000156000
10/1/2016246,000252,750-2.7%156000-6.6%
NFPDisappointedJobless Claims
10/8/2016247,000249,500
10/15/2016A260,000251,750-4.3%
10/22/2016E?260,000253,250
10/29/2016E?260,000256,7501.6%

Above you have weekly jobless claims on the left. The next column to the right is the four-week average.
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