QUICK QUILL — Unless it’s all different this time, the yield curve steepening is broadcasting that inflation has been defeated and that a rising unemployment rate is inevitable. At 82%, the breadth of states with rising unemployment rates does little to dispute this conclusion and ratifies that the bottom for volatility for this market cycle has been put in.
TAKEAWAYS
- As student loan payments resume and next month marks an end to COVID-era forbearance for eligible homeowners, California has conveniently been given another one-month tax extension; the level of initial claims may still be flashing green, but the path of the 2s10s towards un-inverting says otherwise
- Unemployment troughed at 3.8% in April 2000, a month after the 2s10s inversion peaked, and reached its high of 6.3% in June 2003, 31 months after the 2s10s un-inverted; if the current cycle mimics this least harmful of recessions, unemployment will peak at 5.9% in roughly three years
- Data from the BLS indicates that 80% of states have rising MoM nonfarm payrolls at the same time that more than 80% of states have rising MoM unemployment rates; with payrolls late to reflect the reality of bankruptcies and WARN notices, the current dislocation is already underway