Good morning 🌅, and welcome to this week's edition of Kalshi Kit. We're diving into home prices and the state of the job market in this one, the two topics that are arguably most top-of-mind for Americans today.
The U.S. Labor Department is slated to release its July jobs report on Friday, an announcement that will provide valuable insight into how the labor market has responded to recent rate hikes by the Fed.
The Job Openings and Labor Turnover Survey (JOLTS) released today, showing that U.S. job openings fell to 10.7 million in June, the lowest since September of 2021.
Despite hawkish activity from the Fed, stocks finished July with their strongest performance since 2020, with the Nasdaq surging 12.3%.
Let's see what the Kalshi markets are saying in anticipation of this big week for the labor market:
Market Watch 👀
New Total Non-Farm Payrolls 💼
>300,000 Yes: 46¢ No: 54¢
Kalshi members are predicting a 46% chance that the U.S. added more than 300,000 non-farm payrolls in July. On the flip side, Kalshi members are predicting a 54% chance that the U.S. added less than 300,000 non-farm payrolls in July.
Even in the face of significant rate hikes, the job market showed robustness in June, adding 372,000 non-farm payrolls. This number outperformed estimates by over 120,000 non-farm payrolls. In a paper released Friday, Fed governor Christopher Waller outlined that he expects the labor market to remain strong, even if rate hikes drive job openings down.
A paper released last week by ex-treasury secretary Larry Summers and economist Olivier Blanchard stated that recent actions by the central bank will inflict a "painful spike in unemployment", and pushed back against the "misleading conclusions" of the paper released by Waller. Summers has also repeatedly referenced the "sacrifice ratio" to underscore that to push inflation down, unemployment will have to rise significantly.
>400,000? Yes: 18¢ No: 82¢
Kalshi members are predicting a 18% chance that the U.S. added more than 400,000 non-farm payrolls in the month of July. On the contrary, Kalshi members are predicting a 82% chance that the U.S. added less than 400,000 non-farm payrolls in July.
In his July press conference, Jerome Powell outlined that much of the financial tightening from the Fed may "still be in the pipeline", and has yet to be felt by the U.S. economy. This signals that the July job market may have been insulated from the impact of June's large hike in interest rates.
JOLTS data for the month of June showed that the number of job openings dropped ~600,000 in June, the largest month over month decline since April of 2020. This suggests that the labor market has already been begun to feel the impact of the Fed's rate hikes.
Reconciliation Bill Passed By Election Day? 🖋️
Yes: 86¢ No: 14¢
Kalshi members are predicting a 86% chance that the Senate will pass the reconciliation bill by Election Day and a 14% chance that it will not pass by Election Day.
With West Virginia Senator Joe Manchin, a key roadblock to past spending legislation posed by Democrats, reaching an agreement with Senate Majority Leader Chuck Schumer on the reconciliation bill last week, Democrats only need to vote along party lines to push the legislation through by Election Day.
Hedge Against Your Rent 🏡
2022 has been a record year for home prices. In June, the median price for a single-family home in the United States was $450,000, up 17% from June of 2021. This rise comes after the median price for single-family homes already surged 20% between April of 2020 and April of 2021.
In addition to an increased demand for homes coming out of the COVID-19 pandemic, rising lumber costs is also a culprit for these record high home prices.
These skyrocketing prices have started to cool, following a series of aggressive rate hikes by the Fed. Mortgage rates have ticked up from 3.22% in January of 2022 to 5.81% in June of 2022, pricing out many buyers and thus dampening demand for new homes as a whole.
This slowdown was much sharper than expected, with the annual rate of price appreciation dropping 2% from June to July. For context, the highest single-month drop in price appreciation during the 2007-2009 housing crash was 1.19%.
This relief in housing prices has not been felt in the Big Apple, where the average monthly rent for an apartment in Manhattan exceeded $5,000 in June, an all-time high.
This has been driven by a boom of young professionals flocking back to the city following the COVID-19 pandemic, an event that spurred a mass exodus out of cities like NYC and into the suburbs.
Kalshi has launched two markets to allow members to hedge against these volatile housing markets. Kalshi members can now trade directly on the month over month increase in U.S. single family home prices and NYC rent prices.
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