Job openings remained elevated in November, highlighting how a resilient labor market is likely to keep the Federal Reserve tilted toward more restrictive policy in the months ahead.

The number of available positions ticked down to 10.46 million from 10.51 million a month earlier according to the Labor Department’s JOLT survey.  The figure was higher than all estimates.

The ratio of opening to unemployed people remained elevated at 1.7, little changed from October.  The so-called quits rate, which measures voluntary job leavers as a share to total employment, rose for the first time since February to 2.7% or 4.2 million Americans.

Was this a reason Minneapolis Fed President Neel Kashkari’s comments that he favors raising the overnight rate to 5.4% and keep at this level for a “reasonable period of time?”  Kashkari is regarded as a hawk but also as a person that telegraph’s potential Fed deliberations.

The Federal Reserve has been very transparent a primary factor of monetary policy is jobs.  The Fed is adamant to increase unemployment by over 1 million workers to quell rising labor costs or cost push inflation.

Speaking of the Federal Reserve, the Minutes from December’s meeting only confirmed what the Committee has adamantly stated.

First and foremost, the step down to a 50 bps increase from 75 bps “is not an indication of any weakening of the Committee’s resolve to achieve its price stability goal nor hog that inflation was persistently slowing.”

The Minutes also warned the markets not to underestimate it resolve to bring down inflation stating, “An unwarranted easing in financial conditions, especially if driven by misperception by the public of Committee’s reaction function, would complicate the Committee’s effort to restore price stability.”  In other words, the proverbial Fed put is officially dead and gone.

Moreover, the risk of higher inflation is seen as a “key factor” shaping outlook for policy.

Finally the Minutes indicated policy makers are concerned that inflation “will remain entrenched if the labor market stays resilient,” reiterating its goal to increase unemployment to 4.6% by year end compared with 3.7% in November.

There was no change to is expected peak in the overnight rate of 5.1%.  The median estimate for the year end core inflation rate was boosted to 3.5%,  or about a percentage point lower than the 4.7% November reading of the core personal consumption expenditures index (PCE).

In other words the Minutes indicate the Fed has no intentions to pivot in 2023, is steadfast in its  resolve to drive inflation back to 2.0% and to date the proverbial light at the end of the inflation tunnel has yet to be seen.

Equity markets reversed moderate gains following the release of the Minutes and were volatile for the remaining of the day, closing nominally higher.  Treasuries traded in a similar fashion.

Today is the release of the private sector ADP Employment Survey which may offer some insight into the release of tomorrow’s BLS Labor report.

Last night the foreign markets were up.  London was up 0.44%, Paris up 0.02%  and Frankfurt down 0.2%.  China was up 1.01%, Japan up 0.40% and Hang Seng up 1.25%.

The Dow should open flat ahead of key labor reports.  The 10-year is off 3/32 to yield 3.69%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.