Inverted Yield Curve Despite Strong Job Growth

Check out the shape of the Yield Curve. While longer-term rates were up more than shorter-term rates this past week, the Yield Curve continues to be inverted despite last Friday’s strong Net New Jobs growth which was TWICE the monthly totals that had occurred during 2010-2020. 

Granted Weekly New Unemployment filings are trending up, the Net New Jobs MONTHLY totals continue to be very solid, indicating an economy that is strong despite the Fed’s efforts to slow it down with higher interest rates.  The next Fed meeting is on Sept 21st.

10 Year US Treasury

With the strong Net New Monthly Jobs report, 8.5.22 longer-term rates increased more than shorter-term rates. The Yield Curve for short terms remains steep while the longer term (5+ years) remains INVERTED. It will take at least 12 months for the Energy Prices to “fall” out of the CPI 12-month rolling calc. In the meantime, we can have a slowing economy with higher interest rates while the Fed fights inflation. This is what an inverted yield curve is pointing to. While CPI was down on 8.10.22 CORE components are likely to be higher even though energy prices are declining.

2022 Recent Yield Curve Changes

Bill Knudson, Research Analyst Landco ARESC

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