Earlier this week, Fitch Ratings downgraded the U.S.’ credit rating. Stocks slipped a little on the news and bond yields ticked higher. The US 10-year treasury yield is now north of 4.10%. Fitch cited “expected fiscal deterioration over the next three years” and an erosion of governance. Hard to argue. Fiscal restraint is not one of the government’s strengths. But this isn’t entirely new news. For example, the credit agency placed the nation’s rating on watch in May following a near-default after members of Congress butted heads over raising the debt ceiling. However, this put the wheels in motion….
Some Things Just Take Time
This week we received the latest monthly payrolls data. US employers added 209K jobs – a little lower than expected. However, the job market appears robust. One metric that deserves closer inspection are weekly hours worked. That is trending lower and could be a precursor to what’s ahead. From my perspective, what we’re seeing is the “Fed lag” effect of higher rates slowly tighten its vice. But these things take time and we may not see the full effects on the labor market for another 6-12 months (at a guess).
For a full list of posts from 2017…