This is a light week. The big number will be Wednesday with PPI. However, I’m going to also watch for the announced foreign bond purchases. It’s not normally a pivotal number, but I’m seeing the dollar strengthen against other currencies, and it looks like it’s sitting in cash or near cash.

Oh, and …

Wednesday – FOMC interest rate announcement.

We’re expected to see rates stay stable. A surprise cut might initially drive asset prices up but it would be happening because of weakness in the labor market. As I’ve said before, the labor market looks good and bad, at the same time. However, there are two trends I think help explain the weirdness. The first is the role of the gig economy in absorbing workers that would normally have gone into unemployment insurance. If you make more than unemployment, driving for Uber, you can’t apply for an unemployment check. The second is the lack of population growth. That’s US population growth did not come from making new Americans, but by importing working age adults. If no new working age adults are showing up, then no new jobs need to be created.

As I’m not a working economist, trying to research these issues, along with a plucky team of graduate students, I’m largely guessing. But I do know that the gig economy is under-researched among economists, because the numbers are opaque and without a standard process to collect. Therefore it’s unresearchable. (Is that a word?)

But getting back to what a surprise rate cut would mean: that the FOMC has data or models that indicate the labor market is worsening. And if you point to Meta announcing a 20% staff cut, I’ll caution you that they are a very small part of the job market. And they over-hired during the pandemic. And they’re spending all their money on AI build-out, meaning they need to cut costs as much as possible, even though they are making money. Also, remember that this is the company that changed its name to reflect its future, the metaverse. Something that does not exist, and I thought was a stupid idea at the time. No one wants to sit around being a legless icon, while wearing a headset that makes like 1/3 of people motion sick. They are devoid of new revenue ideas but can’t bring themselves to focus on operational efficiency and becoming a dividend stock.

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