Thursday, December 10, 2015

Raising Rates As The Economy Contracts

Economists tell us that the unexpected jump is nothing to worry about. The message of the market, however, disagrees. Initial claims' downside surprise pushes down a Economic Activity Composite (EAC) that's been trending lower since February 2015.

The market assigns a 85.3% probability that the Fed will raise rates at next week's FOMC meeting. The Fed, citing a solid economy that can support higher rates, is either clueless, or more likely, doing so for reasons other than economic trends. If those reasons force economists that think today's claims jump is nothing to worry about to ask questions that could challenge confidence in the global financial system, then expect the Fed to play the 'solid economy' card until even economist don't believe them.

This is consistent with a Fed that pronounced that the era of transparency has ended.

Headline: Jobless claims spike to highest level in five months

The number of Americans getting laid off from their jobs rose to the highest level in five months, suggesting, at least on the surface, that the labor market could be slowing down.

Initial claims jumped by 13,000 to 282,000 in the period ended Dec. 5, the Labor Department said Thursday. This was the highest level since the week of July 4.



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.