adp employment figures show the smallest gain since the so called pandemic recovery, at 128K added jobs. The market is confused and the Fed is confusing the market even further whether they can reduce their 9 Trillion $ balance sheet and trigger rates over 2% in tackling the worst in inflation in over 40 years. Will they allow the U.S. Dollar to strengthen? Or markets to rally?
(Chart 2)
Automatic Data Processing (ADP Employment Change) May 2022 data showed a collapse in hiring across the U.S., which is a precursor to the Non-Farm Payrolls due shortly. This is due to the two years of Government economic stimulus drying up and inflation chewing into small to mid size businesses profit margins, thus creating uncertainly and budgets are downgraded, So, you don't hire employees in an inflationary environment. As noted with Chart 1. Showing the collapse in hiring, Chart 2 shows, after two years how government stimulus and the Federal Resaves, which has pumped trillions into the American economy did nothing to substantially lift employment, rather, it most likely stifled it with inflation.
Chart 3, shows the DOW, NASDAQ 100 and S&P 500 futures that have all rallied on expectations that .1 The Fed will not dramatically reduce its 9 Trillion balance sheet, 2. The Fed, will also not trigger a larger rate hike at their next meeting, note the U.S. dollar overlay as a baseline. Sine the start of June 2022 it has collapsed, whilst equities have risen across the board.
As noted with this post (link). For the Fed to remain credible it will need to lift rates over 2% to tackle the worst inflation America has seen in over 40 years.
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