QUICK QUILL — The Fed’s hawkish cut, with two dissents for no change (compared to one in October), was overturned by Powell’s dovish job comments in the presser. Our cyclical unemployment guide suggests the rate is closer to 5%, and that wage pressures will ease through 2026’s first half. Sluggish labor demand and a less encouraging mortgage application picture yearn for the Fed to keep cutting. With low January rate cut odds, a tactical opportunity is manifest for Treasury bulls in the 2s to 5s space.
TAKEAWAYS
- JOLTS Quits fell to a cycle low 2.941 million in October while Layoffs rose to 1.854 million, just 50,000 south of their January 2023 cycle lag; a 2-quarter lag of the Quits-Layoffs spread reliably guides wage inflation and flags further easing in the ECI for Wages & Salaries
- The 4-week average of Lightcast job postings was down 4.7% vs. January 2020 levels as of the end of November, the first negative read in ten weeks; only recession-proof Education and Healthcare saw positive growth, remaining up 7.5% vs. pre-COVID levels
- Adjusting the MBA’s Purchase Index with the rejection rate from the NY Fed’s Credit Access Survey reveals a decline in activity since September; the perceived improvement in the MBA’s Purchase Index also contrasts with capitulating UMich Selling Conditions