It's been a while since I posted JOLTS data. Generally, the data continues to follow the pattern of an aging recovery. I continue to believe that we are at a place where monetary policy can be important. If the Fed pulls back too much, we will contract. If they accommodate rising wages, then recovery can continue for a long time.
I think the association of rising wages with inflation is a virus. Wages are rising because a healthy economy reduces the frictions that allow firms and workers to adjust and shift. If corporate profits are leveling off while wages rise, then monetary policy needs to accommodate enough nominal activity to prevent corporate profits from falling enough to disrupt these healthy economic trends. If that becomes inflationary, then we can moderate, but to pre-emptively pull back is going to trigger contraction by cutting into corporate profits.
The election has presented a bit of a surprise, though. I have been focusing on monetary policy because I assumed no relief was going to come to the mortgage market from GSE expansion or regulatory easing on the banks. After everyone took a deep breath last night, Trump didn't act like a monster when he gave his speech, and markets rebounded this morning. Banks are up in the 5% range as I type this.
Could it be that Trump will govern as a sane person, and that also some of the Dodd-Frank regulations that have cut low income households out of homeownership will be retracted? I don't have the feeling that Trump explicitly understands the connection between the banks and the condition of his rural voter base. But, he does seem to have a bias toward lighter banking regulations. Does this mean that we will meander our way into finally healing the housing market?
The yield curve has also steepened significantly today. Up by 25 basis points or so at the long end of the Eurodollar curve. This is exactly what I would expect to happen if mortgages were going to expand and the housing market was going to heal.
Wouldn't that be funny if Trump ended up being our rescuer?