While an unemployment rate of 4.9% has met the Fed’s target, it was above the markets expectation of 4.8%. The areas highlighted in bold should cause the Fed to have some concerns. The shrinking manufacturing index (below 50 is shrinking and above 50 is expanding), the lack of wage growth and slow job growth are troubled areas. Some of this weak economic data on the backdrop of global issues and an uncertain election ahead should cause the Fed to pause. However that being said many at the Fed grow bolder every day in making the case for higher rates regardless. There is always a chance of a surprise but the Fed hasn’t surprised in nearly a decade, so hard to take them serious at this point. Even though September is very unlikely, it’s important to keep the corner of one eye open to that chance, albeit 20% or less, because the chatter is there.
In the interim I wouldn’t expect the 10yr to break the 1.45 to 1.65 range that has persisted for almost 2 months. Today it trades at 1.53%.
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