- NFP used to be one of the only games in town when it came to market movement
- That's decreasingly true
- Even though it can still definitely have a big
short term impact, it won't necessarily set the tone like it used to - Here's why
I can remember putting together charts showing that entire months-worth of bond market movement oftentimes followed the suggestion laid out by NFP at the beginning of the month. Even on the occasions where the MBS Live community debated a particular NFP's relevance, there were still plenty of examples of it causing a surprising amount of market movement.
Times are
The Fed already knows job creation is strong. If that's all it took to hike, rates would be in the 3% range (Fed Funds). But there's just no inflation following from those jobs in the way it historically has. The Fed is puzzled by that from an academic standpoint. I think a lot of us are less puzzled by it based on our interactions with a broad swath of the loan-seeking American public.
Disposable income ain't what it used to be, except for the upper half of society. That's just not a recipe for inflation, and it's certainly a scary thing to be seeing 7 years into a recovery/expansion for rates to be where they are. So until something changes about the broader dynamic of this particularly frustrating post-crisis recovery--until real inflation actually shows up--rates are going to have a very hard time making super scary moves higher.