Now we bring in Dr Ward McCarthy, chief financial economist at Jeffrey's. Ward welcome. I know you've been busy explaining to the guys on your trading desk what this means. What do you take away from Janet yellen speech today?
What's this? What's the message? Well, the messages she wants still wants to try to gradually move interest rates away from zero, but Friday's employment number was sufficiently scary in her mind, um that she became much less specific in terms of the timing of when the next rate hike might be, and uh effectively backed away from some of her comments recently when she said that the FED would
be raising rates in coming months. So I think the messages that the Fed wants to go through another round to two of data just to make sure that uh, the economy, which has been you know, resilient for almost uh seven years now continues on that track before the nutget rates by another basis points, you know, we could go Friday Ward, when she was speaking with Greg Manq
at Radcliffe, I was quite struck. To me, she sounded very devilish and she did not say rate hikes in coming months, whether it was just an unconscious slip or not. She said, a rate hike, that's like one right hike in coming months. Now months is that that could be three months, that could be four months. To me, she left the door wide open to to a rate hike maybe sometime this summer, maybe not, maybe not to the fall. Well, I think you also have to put her comments in
the context of what other FETE officials were saying. Uh, and some of them um uh talked about a rate hike specifically in either June or July. So you know you're right and that she was not being specific as to what exact meaning, but she was sending a message that she thought of what happened soon today. She just sent the message that yes, we're going to continue to raise rates, but there was no hint at all that
she thought it was going to happen soon. Very interesting, of course that based on what were McCarthy just told us, and he is going to continue this conversation, We've got a lot more questions to ask him. That the U. S. Treasury market actually has traded lower today, stocks are in rally mode. We're gonna ask Ward to decipher what the message from the bond market is as taking stock continues. I'm Kathleen Hayes and this is Bloomberg Radio fed cher.
Jannet Yellen spoke in Philadelphia this afternoon and eagerly anticipated speech, which seems to have fallen short of the kind of fireworks a lot of people thought might have occurred had she signaled very definitely that she was ready to pull the trigger on interest rates. Maybe not next week, but certainly by the middle of the summer. Instead, Jenny Ellen did not give us a sense of timing, only what repeating something she has said for a while that wants
to normalize rates, rates will move higher. There's certainly no sense though of when in the urgency she may or not have their Dr Wid McCarthy is joining us. He's chief financially economist at Jeffreys so Ward. What about the job support the labor market? Are you concerned? Uh didn't get much attention with all the focus on yelling, But the labor market Conditions Index for May weakened even more
than it had weekend in April. Well, that was pretty much a given after UH the employment data that we saw on Friday, Because the labor market Conditions indexes is based on the BLS report so it is no surprise that it was extremely weak. It just really confirmed what we had already seen on Friday, and that is that the labor market data for the month of May was absolutely abysmal. So what's going on? Well, that's the million good question, Kathleen. Um, I'm we are in one of
those periods right now. We're echono data points in very different directions. So, for example, within the last few weeks, we have seen new home sales that were the strongest since Q one two thousand and eight. Then we saw the largest month over month increasing consumer spending since Q three two thousand and nine, and then we followed that up with the weakest payroll data since Q one two tho and ten. So the economic data has not been
telling a coherent story. Um, And you know when this happens, it creates confusion. My inclination is to look at the employment data is being uh some kind of a statistical quirk. And here's why I say that, on three prior occasions we have had UH payroll increases that we're well in excess of three hundred thousand. None of them persisted, nor did this signal any significant improvement in the underlying tone
of the economy. But prior to Friday, we also had two increases in payrolls since the beginning of this cycle that were less than fifty thou and they also did not persist, uh and nor did it signal a deterioration and economic activity that was significant. So in each of these probate cases, when we got a head scratch and number, payrolls migrated back towards the underlying trend, which is a
little bit under two hundred thousand. And I think that's what's going to happen this time around over the next couple of months as well. Uh. Okay, fair enough, because you know, people left the labor force usually a sign that maybe things aren't as good as they had been. But the household survey is probably even more volatile than the payrolls. Why is the bond market falling in price
and rising in yield today? Well, I think that Uh, Jenny Ellen, I think walked kind of a fine line here and she did not want to pre commit to to anything, but she also did not want to uh back way from the normalization process. And I think that, uh, there were some expectations today that Janet Yellen would express a greater tone of concern as far as the employment data, um, how it might affect monetary policy. But she didn't, you know,
she did not hit the panic button. She just pointed out, Yeah, this data is um, something that we really don't like to see, but against the backdrop of the cumulative improvement we've seen in the labor market um over the last number of years. Um, it's the reason to pause and think about things, but not a reason to hit the
panic button. It's interesting to be worried that the two year notes sold off a little, but still it was what point seven eight on Friday, just you know, the yield plunge, surprise sword after the jobs apart came in so weak. It's sold off a little, but it's still just at zero point seven nine. And even with a little bit of a sell off in the ten year note one point seven three, I mean, yields are remaining very low. Perhaps uh kind of corroborating with the Fed.
Chairs Yes, yeah, the Fed's going to raise rates eventually, but it's gonna be well. And there's just there's just not too much sign and people turning from turning to a real bearish view in the bond market. No, not at all and and part of that is because the markets just become so skeptical um of two things. First of all, there is a pervasive pessimism about whether or not, you know, the US economy is capable of generating any
growth UM. And they're also is a skepticism about UM the FITS commitment to raising rates as it has projected so UM, you know, the FIT has been projected in it would raise rates since two thousand and twelve, and it took till December two thousand and fifteen before they got one off. And now they had been preparing us for a rate hike in a relatively short period of time, and Jennet Yellen um by not addressing it specifically, appeared to back away from it. Any chance to FED was
still September. Final questions, Well, that's when I think they will do at this point is way until Tember. Let some more data come in, let the dust settle, and uh and then finally pulled the plug. Man, all right, it's gonna be a long FED watch in summer, and of course he's gonna be helping us throughout ward. McCarthy, chief financial economist at Jeffries. He says, Uh, Janet Yellen is in no hurried raise rates. He once thought June would be likely, September seems more like the time for
the Fed Rais Dreys a key rate again. Now, next, we're gonna go to the marijuana business. The co founder and CEO of med men right here on Bloomberg Radio