[ad_1]
This article was originally published by Joe Consorti & Nik Bhatia at TheBitcoinLayer.Substack.com
Yes, that just happened.
The week we’ve long expected has finally passed, with labor market data that has been dismal for some time finally emerging after a several-month lull in headline unemployment figures surging higher.
On Tuesday, job vacancies in the US fell to 8.827 million, the lowest level since September 2021. What’s worse, last month’s data was overstated. The figure was revised down by 417,000 jobs, biggest downward revision in a job posting… ever. Data that does not meet expectations often coincides with the start of a recession. But when it happened This bad? All bets are off. Here he is:
Later on Wednesday, new data showed US job growth slowed significantly in August. ADP employment gain fell from 371,000 in July to 177,000, missed expectations by 17,000—added to Tuesday’s dismal job openings data. Cracks spread in the labor market, the impact of the interest rate hike finally occurs after 19 months:
Although the labor market as illustrated by the data above has been slowing for several months, the general unemployment rate still lags far behind, typically around a year and a half. However, on Friday, finally showing signs of life when it rose to 3.8% versus expectations remaining flat at 3.5%, highest in 38 months. Given that the labor market has experienced a secular downturn and lending standards are at their highest level in years according to projected unemployment rates, one thing is certain—this is only the beginning:
The U6 unemployment rate that counts discouraged workers and those working part-time for economic reasons jumped to 7.1%, the highest since May 2022. More fuel is driving consumers to do all they can to make ends meet and prevent company closures. poor.
Related reading: Without Bitcoin you can work longer and with less money
Consumers are on the edge. Personal income data in July rose just 0.2% while personal spending rose 0.8%—a worrying trend given the acceleration in consumer spending driven by savings and credit, not rising wages:
To play the classic “oh crap” scene from The Big Short:
Downward revisions have become the norm across all prominent and relevant economic data, as is common at the start of a recession. In Friday’s data, August marked the seventh straight month of downward revisions in nonfarm wages, and new home sales for 13 of the past 16 months have been revised downwards. This decline has already occurred faster And harder than economists expected, or they deliberately ignore economic weaknesses in favor of other interests they may serve. We’ll let you be the judge on that:
The Fed has finished making increases.
At least, we are closer than ever that sentence came true in this cycle. Why? They always make the climb when the unemployment rate begins or will begin to rise. Given its rise to 3.8% from 3.5% on Friday, a break has arrived. The Fed’s mission to “loosen” the labor market (Fed-speak for putting people out of work) is starting to take shape. The operative question is runway length before starting to cut interest rates:
There is currently only a 32.6% chance that the Fed will raise interest rates again in November, down from 38% last week, and then make a cut in early 2024:
So, despite weak employment, GDP being revised down on Wednesday, slowing employment growth, and an unemployment rate rising to a 3-year high, most of the relevant economic data is ugly. So why are stocks slumping?
Bad news is good news nowadays.
The poor data eased investors’ concerns about the Fed’s hawkish policy—fueling hopes of monetary policy easing to support asset prices. We don’t make the rules. This relationship has had its ups and downs, but now stocks are starting to turn dovish:
Emergency lending in the Fed’s BTFP has hit a new high of $107.52 billion, usage has essentially not increased for 12 weeks. Why? Regional banks are dumping consumer loans to shore up losses rather than using BTFP, packaging the loans into ABS and selling them—which are now providing the highest yields since 2008 at an average of over 5.75%. These are the steps banks take to survive compared to the Fed:
This is not profitable for regional banks.
As we have long said, BTFP is simply a panacea for the real problems lurking beneath the surface—unless the Fed intends to cover all bank losses and perpetuate moral hazard, then these problems must be confronted immediately.
And yeah, it seems like the powers that be are aware of this too and are avoiding dodging while the results are still good. San Francisco Fed Head of Bank Supervision Azher Abbasi will retire on October 1. He is responsible for overseeing lenders including… SVB and First Republic Bank, two important regional bank failures to date in 2023.
The Fed did not give a reason for his sudden departure. If there are anyone who knows how bad things are really going on behind the scenes, that’s the guy. Leaving the country without warning in the halcyon days when the Fed’s strictest rate hike regime in decades has hurt regional countries to the point where they are throwing all their assets away like water from a sinking ship to survive? This does not provide confidence regarding the risks faced by regional banks.
In the midst of the chaos, the Fed increased its supervision of small US banks. Citizens, Fifth Third, and M&T have been privately warned by the Fed to shore up capital and liquidity planning—it seems odd to warn undercapitalized banks to raise provisions if the economy is supposedly headed for a “soft landing,” doesn’t it? ? Regional areas are still in trouble, and the Fed knows it:
Now for a quick update on bitcoin. Grayscale won its lawsuit against the SEC’s rejection of its application to convert GBTC into a spot bitcoin ETF. On the news, GBTC rallied from a -32% discount to a -20% discount to NAV in less than a minute, although GBTC has given up some of those gains and slid along with bitcoin itself in the days following the win:
Excitement in Binance and Tether Land as CZ calls Tether a black box, and Bitfinex continues to launch BNB perpetual futures with a 20x leverage limit.
Let’s say: If Binance must shore up liquidity to meet margin calls on a nothing BNB-backed loans now that there is unlimited short-term pressure on BNB, bitcoin will experience a huge level of selling pressure. Exciting!
[ad_2]
Source link
