Yesterday I wrote about how the ADP Payrolls report for February may be a leading indicator of the US Non-Farm Payroll report that is due tomorrow at 8:30am EDT. You can review the blog here: highrockcapital.ca/pauls-blog/adp-payroll-data-a-leading-indicator
At the end of the blog, I said that if the non-farm payroll is as stout (or even half as stout) as the ADP, that I could only come up with one possible reason why the Fed wouldn't raise the Fed Funds target by .25% next Wed. I lied. I came up with two possible reasons, and I don't think either of them are even that strong in the Fed's eyes, but interesting observations nonetheless.
1) The first possible reason the Fed may not raise rates next week is that the Atlanta Fed's GDPNow model. I wrote on this model a week ago, here: highrockcapital.ca/pauls-blog/us-gdpnow. Interesting how the Fed is going to raise rates when one of their own regional board's model claims that 1Q GDP in the USA has been dropping each week from a high estimate in early February of 3.4% to a new low estimate as of March 8th at 1.2%. Maybe the picture will help, but it seems to me the Fed may be on the verge of a policy error (hiking rates when the economy is weakening).
2) And the second possible reason, one which no one seems to be talking about at all right now, is the US Debt Ceiling expires March 15th (the very same day as the Fed announcement). Remember how the Republicans in Congress and Obama squared up and Congress threatened to shut down the government back in 2011? At the 11th hour, they kicked the can down the road, and have done the same upon hitting each new deadline. Effectively, they suspend the limits and spend, spend, spend...until the deadline approaches. They may very well suspend the $20.1 trillion limit, yet again, but what if Trump, who has been arguing that they are $20 trillion in debt, says something about it (not likely as he wants to put forth a ton of fiscal stimulus) or Tea Party Republicans (who largely hate Trump) refuse to budge and force Trump's hand? This could actually be interesting. Will the Fed care? Probably not a ton, but we are always on the look-out for what could side-swipe the conventional thought. Regardless, here is the chart and history:
So for the news junkies out there (and you shouldn't be economic data news junkies...that is part of what you pay High Rock for), both Canada and the USA release their employment reports for the month of February. And then next Wed Mar 15th, the Fed will release what they are doing on Fed Funds at 2pm...and the US Debt Ceiling limit expires, presumably at midnight the very same day...