Inflation, Housing and Business Jobs: Predictions for the Next Five to Five Years and the Problem of Cost-of-living in the Era of a Cool Down

Higher interest rates are starting to have an effect. Consumer spending has slowed in recent months. The central bank would like to see inflation stay under 15 percent, but it has fallen significantly.

It is difficult to determine how intense any slowing will be once the rates are back at normal levels, because so many countries have raised rates so quickly. Monetary policy takes months or years to kick in completely.

Many economists warn about a danger of overdoing it and the UN agency warns that the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.

Fed Chair Jerome Powell described the Feds approach to raising rates as being in a dark room with furniture and having to move carefully to avoid running into something. Well, however dark that room was in 2018, it is a lot darker now. Inflation is much higher, the forces driving that inflation are more opaque, and in light of the further rise in business debt since that time, the consequences of excessive monetary tightening are likely to be greater.

As part of its efforts to bring down inflation, the Fed has projected that the unemployment rate could rise to 4% next year. Businesses are in hiring mode, despite the Fed projections that would see 1.2 million more people lose their jobs. Job openings outpace job seekers on a 1.7 to 1 ratio, the BLS’ Job Openings and Labor Turnover Survey for August showed.

The economy will slow and inflation will moderate in the months ahead, according to economists. But they have been expecting an imminent cool-down for the past 18 months, and the data have repeatedly proved them wrong. The Federal Reserve has made it clear that they plan to raise rates to a point where they are controlling the economy in order to keep inflation under control. With an estimated 4.5 percent hike by the end of the year, borrowing costs will go up by nearly 500 dollars per person.

The US Labor Market is Tight after a Few Months of Inflationary Reopening and the First Five Years of School-Based Jobs

The reopening of schools was supposed to be a great opportunity for people who left the labor force during the Pandemic to get back to work, according to Pollak. “We may not see some of the people who left come back.”

The unemployment rate fell back to its half century low of 3.5% in September because there were less people looking for work.

As of Thursday afternoon, markets were pricing in a 50% chance of a rate increase in December. That would be a decrease after four consecutive hikes of three-quarters of a percentage point.

The Federal Reserve is expected to raise interest rates by half a point at the conclusion of its two-day policy meeting on Wednesday, an indication that the central bank is pulling back on its aggressive stance as signs begin to emerge that inflation may be easing.

“The market’s short-term reaction may be strong, but this is only one month’s data,” warned Yung-Yu Ma, chief investment strategist at BMO Wealth Management. The entire year has seen the market change from one narrative to the next. The October inflation data may help the Fed to modify its trajectory, but it will take more than that to make an actual dovish pivot.

The US labor market is historically tight, with the unemployment rate, as of November, at just 3.7% and about 1.7 available jobs for every job seeker. If job numbers come in the same way as expected, it will be the second best year on record for job growth.

Dean Baker, senior economist at the Center for Economic and Policy Research, said that the pace is unsustainable. If monthly job gains edge down to 200,000 or around 150,000, that would likely sit better with the Fed, he said.

The State of the Economy after the Pandemic: What have we learned in the last 12 months? How are the local economy and job market changing?

The Pandemic forced restaurants to incorporate online ordering and other services on a larger scale, and customers were more comfortable using those services. Hotels haven’t bounced back fully, but neither has business travel, he said, adding that the rise of Zoom and competitors like Airbnb could continue to result in more muted demand for hotel stays.

The labor market is beginning to feel the effect of the Fed’s rate hikes and the recovery is growing more complex, according to Pollak.

From August to September, local public education jobs fell by 22,000; day care services employment fell by 2,000 jobs; and truck transportation fell by 11,000 jobs, according to BLS data. The declines are moving in opposite directions at a critical time.

Weaver said that there are a lot of things going on in those sectors, including supply chain concerns, and the ability for people to have reliable education and child care so they can return to the workforce. “That can certainly impact [parents’] long-term and future economic and work prospects.”

Dionne Nelson, chief executive officer and founder ofLaurel Street, said they are not sure of the timing of a recession. “We’re still very busy. We are still looking for people. Our markets are active.

What Has the Consumer Price Index Rise in the last Three Months? Commentary on Mr. Biden, Fed Chair Powell, and the Fed

Mr. Biden said that the report showed that the costs went up less over the past three months compared to the previous three months. He acknowledged that inflation remained high.

Fed chair Jerome Powell hinted that a further slowdown in Fed tightening could be in the cards. The stock market recovered in the fourth quarter as investors hoped that inflation pressures would ease.

What’s happening: The Consumer Price Index rose 7.7% for the year ending in October, a much slower pace of increase than the 8% economists had expected and the lowest annual inflation reading since January.

The fed funds rate will continue to increase until it becomes apparent that the job market is cooling and wages are slowing, he said.

“Interest rates have risen at a whiplash-inducing speed, and we’re not done yet,” said Greg McBride, chief financial analyst at Bankrate. Even once we do start to see some improvement, it will take some time for inflation to come down from these lofty levels.

After hitting a four-decade high of 9% in June, the government’s scorecard shows that inflation slipped to 7.1% last month. That’s the smallest price increase this year.

Do we live in a recession? A message from the Fed to homebuilders, the home builder, and the Federal Reserve Bank of Kansas City

“We see today that there is a bit of a savings buffer still sitting for households, that may allow them to continue to spend in a way that keeps demand strong,” said Esther George, president of the Federal Reserve Bank of Kansas City. “That suggests we may have to keep at this for a while.”

In an interview that aired on CBS on Sunday, Treasury Secretary Janet Yellen — Powell’s predecessor at the Fed — said there is “a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

“I am in the camp of steadier and slower rates, to begin to see how those effects from a lag will unfold,” George said last month. There is a concern that a succession of very large rate hikes might cause you to oversteer and not be able to see the turning points.

“We are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families,” Sen. Elizabeth Warren, D-Mass., and colleagues wrote in a letter Monday to Fed chairman Jerome Powell.

Shawn Woods, president of the Kansas City home builder, said his company’s sales dropped off before the Fed started raising rates.

“Never in my wildest dreams would I have thought we’d go from 3% [mortgage rates] to 7% within six months,” said Woods, president of Ashlar Homes and the Home Builders Association of Kansas City.

“I think we’re in for a rough six or eight months,” Woods said. Housing leads us into downturns and it also leads us out of downturns. I think we’ve been in a housing recession since March or April.

If 2022 taught investors anything, it’s that you can’t beat the Fed. So expect more good-is-bad economic news, since a strong monthly jobs report will likely continue to correlate to a weak market.

The central bank has two different mandates: maximize employment and ensure price stability. The Fed would like everybody to keep their jobs, and they would like the price of food to go down in order to take the heat off consumer prices. Powell still considers it possible but most economists say the likelihood of that soft landing is remote.

The odds of a recession are high, according to analysts. The Fed is betting that the pain of a recession and job losses will be more beneficial than the pain of runaway prices.

Democrats are going to be in a tough spot next week because of the economic pain of inflation and their lack of positive sentiment about job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.

The Boom of the 2020 Housing Boom: How Boomers Returned Their First-TIMEs in the Upper-Middle Class, When the Fed and Housing Markets Started to Grow

The narrative got turned on it’s head in 2020. It wasn’t that Millennials didn’t want homes in the suburbs, they just couldn’t afford them. But when the pandemic hit and demand for property exploded, the furor was driven by people in their 30s — finally flush after years of slogging away at whatever jobs were left for them in the fallout of the Great Recession, and, for many, eager to flee to the wide-open spaces of suburban life.

The stock surge made Boomer parents who have large investment portfolios happy to pass on the gains to their kids.

The 2020 housing boom will make anyone who was able to close on a home in the crush of competition extremely lucky.

The share of first-timers has ranged between 30% and 40% over the past decade. In 2009, in the middle of the Great Recession, it was high as 50%.

“They have to save while paying more for rent, as well as student debt, child care and other expenses,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “And this year were facing increasing home prices while mortgage rates are also climbing.”

The Federal Reserve has raised its interest rates and mortgage rates have gone up as a result. The Fed raised interest rates by 75 basis points last week, marking the sixth increase this year and the fourth hike of that size.

“The policies that regulate land use and housing production make it extremely difficult to add more homes in desirable locations,” writes Jenny Schuetz, an urban economist at the Brookings Institution.

The housing supply has expanded through single-family subdivisions at the urban fringe rather than rebuilding in existing neighborhoods. The western region of the West is currently being put more people and homes into areas that are vulnerable to wildfire.

As affordability reaches crisis levels, now is a good time for federal and local governments to rethink the way we frame the American Dream. If elected office is better represented, then those who stand to benefit will be able to. As Schuetz argues, the upper-middle class Boomers in power now are, understandably, reluctant to change the system that got them where they are.

After the Bank of England and the Central Bank: The First Five Years After the Wall Street Left (Sounds of Growth, But Not So Well)

The Bank of England hiked its key interest rate by the same amount, in line with the Federal Reserve’s fourth-straight rate hike on Thursday. The European Central Bank did the same thing last week.

Basis points are how central bankers talk about rate moves. One basis point = one-tenth of a percentage point.)

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? Right here, you can sign up. You can listen to an audio version of the newsletter by clicking the same link.

The key inflation indicator came in softer than expected, which helped the stock market surge on Thursday. Investors broke out their party hats as they interpreted the report to mean that peak inflation may finally be behind us. The Fed might be less aggressive with its rate hikes.

Investors will closely read the Fed’s economic outlook, the Summary of Economic Projections, which is also due out Wednesday. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.

Based on projections from Fed officials and other economists, the pathway has narrowed for the desired “soft landing” of reining in inflation while avoiding recession or significant layoffs.

The path for a soft landing looks like this, says a economist at an employment research institute. “Inflation has come down but there’s not a recession.”

“If the Fed doesn’t have to tighten as aggressively, the economy will weaken less, and headwinds for stocks will be smaller,” wrote Bill Adams, chief economist for Comerica Bank in a note.

Bitcoin, Wall Street, and Wall Street: An Inflationary Season in the Covid-Epoch of Growth and Perturbation

This isn’t the first time that there has been a winter like this. Bitcoin prices have been notoriously volatile over the past few years, but they have still done better than many major stock market indexes.

Unfortunately, those assets have gotten hit just like stocks and bonds, proving there really is no place to hide in a market where worries about rate hikes and recession reign supreme.

The Covid-era saw a big influx of investors from large-scale institutions and near-zero interest rates. In November it reached a record high of nearly $70,000.

While the dollar strengthened, central banks started raising their rates to fight inflation and make investors more cautious about their money. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves.

The CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, is in neutral after nearly a month in Greed mode, but it pales in comparison to what has happened with cryptocurrencies.

Sam Khater, Freddie Mac’s chief economist said mortgage application activity sank to a quarter century low this week as high mortgage rates weaken the housing market. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”

Inflation is Coming: Consumer Price Increases, the Producer Price Index, and Retail Sales – An Outlook for the Term-Planning and Decline of the Fed

They are trying to get a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. The rate was a bit higher than the expected 7 but it wasn’t as big as the 8% increase through October.

In November, consumer prices rose by a small amount. The past 40 years have seen that high a few times. But this marked the fifth-straight month of improvement and a significant cooldown from 9.1% in June. It is the lowest annual inflation rate in over a year.

A chief fixed income strategist for a financial research center said that inflation is probably peaked, but it may not come down as quickly as people want.

The latest projections from the Fed showed that board members anticipate inflation to remain slightly higher than before. The Fed board now thinks PCE inflation will end next year at 3.5%, above the central bank’s target rate of 2%.

The anticipated central bank meeting is next. On Wednesday there is a sandwich between retail sales and the Federal Reserve meeting.

“A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. The risk of a recession is still high.

The Consumer price index and retail sales reports come out on Tuesday and Thursday. Those numbers will give more clues about the health of American consumers. Are they still shopping despite rampant price increases?

Consumers may have just gotten a head start on holiday shopping. Retail sales have been impacted by inflation because of the fact people have to spend more money for stuff.

Everybody is talking about inflation this year. In the next few years, it will be more about disinflation.

What does price of services and wages tell us about companies and consumers? ACN, DRI and Winnebago: The case of Hermes and L’Oreal

What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

            (HESAF) and cosmetics giant L’Oreal

            (LRLCF).

Friday’s topics included: Eurozone PMI, retail sales in the UK, and earnings from ACN, DRI and Winnebago.

The price of services is heavily dependent on what happens to wages. That depends in turn on how many jobs the country adds each month, how many workers are available to fill those jobs, and how productive workers are when they’re employed.

Wage gains have dropped in recent months despite the tight job market. That helps to allay concerns that rapid wage gains might put more upward pressure on prices — as happened in the 1970s.

Fed policy could come to that location. If customers are willing to pay more, companies can only charge more. The Fed can stop that chain reaction by lifting interest rates to slow demand.

The Fed is Back: Predicting Growth and Earnings Decline with the 10-Year U.S. Treasury Yields and Interest Rates

Stocks rallied sharply in October and November due to hopes that the Fed would begin to scale back on the size of its rate hikes. They are still down sharply for the year, though, and stocks have been more volatile so far in December.

The yield on the 10-year US Treasury dropped back to about 3.5% after moving above 4.3% in late October. That was the highest the 10-year has been since 2008.

The concern is that the Fed and other central banks may not start to stop or even consider lower interest rates until it is too late.

Tom Essaye, a founder of the Sevens Report investing newsletter, said on Monday that the macroeconomic focus will be shifted away from Fed tightening to how badly growth slows and earnings fall before global central banks can hint at providing accommodation.

FTX founder Sam Bankman- Fried will testify in front of the House Financial Services Committee on Tuesday. The Senate Banking Committee is holding a FTX hearing but Bankman-Fried is not on their list of witnesses.

Maybe investors will be able to relax and take a deep breath before the Fed announcement and press conference later that day. Although there is no guarantee of that.

The hike is still double what the Fed usually does, and a lot of people will be hurt by the increase in borrowing costs for homes, cars and other loans.

But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.

The European Central Bank, the Bank of England and the Swiss National Bank are all expected to move by half a point on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

The hike, smaller than the previous four increases, comes after the latest government reading showed inflation is running at its slowest annual rate in nearly a year.

In his post-meeting press conference, Fed Chair Jerome Powell signaled that while there’s still a long way to go in the fight against inflation, he believes the trend is moving in the right direction.

The Consumer Price Crisis: Inflationary Patterns in the U.S. Turns Closer to the Second Lowest Last Minute, according to Experian

Many Americans, already contending with price increases in nearly every part of their lives, are feeling the effects as they pay more in interest on credit cards, mortgages and car loans. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.

The central bank said in a statement on Wednesday that inflation is elevated, due to supply and demand imbalances related to the swine flu.

The stock market fell after the announcement of another increase, mostly as Wall Street digested the Fed’s warning that there are more rate hikes to come. But stocks recovered and the major indices were mostly flat by mid-afternoon.

Fed officials believe the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.

The price of haircuts rose 6.8% in the last twelve months, while the price of dry cleaning jumped 7.9%. Services other than housing and energy account for nearly a quarter of all consumer spending.

The Fed is trying to find a sustainable recovery, but there’s “nothing new” for the economy in the next few years

“We see goods prices coming down,” Powell said. We know what will happen with housing services. But the big story will really be the the rest of it, and there’s not much progress there. And that’s going to take some time.”

Many older workers who retired in the last two years may not return to the job market. The Fed is trying to restore balance because of the shortage of workers.

The central bank has made it clear it will do whatever it takes to bring inflation back down, and on Wednesday it raised interest rates for the seventh time in nine months.

Gasoline prices have dropped sharply and are now lower than they were before Russia’s invasion of Ukraine. The prices of other goods like used cars and televisions have fallen, as pandemic kinks in the supply chain come untangled. And travel-related prices for things like airplane tickets and rental cars have dropped, as the pent-up demand that followed lockdowns has faded, and travelers become more price-conscious.

“I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way,” Fed Chairman Jerome Powell said on Wednesday.

The central bank has lowered its forecast for economic growth next year and raised its forecast for unemployment. But Powell says there’s considerable uncertainty.

“I do not think anyone knows if we’re going to have a recession or not, whether it’s going to be a deep one or not and that’s the reason I’m not really sure about that,” he said.

The case of Joseph Bankman-Fried, the FTX founder, and the Fed: a false start in Wall Street and Cryptocurrencies

The war in Ukraine could bring about big price swings at the gas station and grocery store. Faster or slower economic growth around the world could also cause gyrations in the price of crude oil and other commodities.

What might happen: “Boy the Fed is really committed to this put us in a high unemployment recession thing,” Jon Stewart, former host of The Daily Show, tweeted after Wednesday’s meeting.

Jeremy Siegel of the Wharton School of the University of Pennsylvania said last week that the jobs data was likely to get worse quickly.

Powell expressed optimism on Wednesday that a soft landing was still possible and that the labor market was tight enough to withstand an increase in unemployment without snowballing into a recession. Investors, meanwhile, will be watching jobs numbers very closely.

Bankman-Fried remains in the Bahamas, where FTX was based, and was arrested last Monday night. He was arraigned Tuesday, and a Bahamian judge denied his request for bail, saying that he posed a flight risk. It could take weeks to extradite him to the US.

Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely wouldn’t get the maximum sentence.

The regulators of the US market accuse Bankman-Fried of building a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in Cryptocurrencies.

Super Saturday is the busiest shopping day of the year: Effects of inventory glut and deadlines on retailer profitability in a tight holiday season

The Saturday before Christmas is usually the busiest shopping day of the year. Christmas Day is a Sunday, and Christmas Eve is a Saturday, so this year Super Saturday falls on a Saturday. According to the National Retail Federation, 158 million consumers are predicted to shop that day.

Shoppers have only completed half their gift purchasing so far, the NRF estimates. With less than a week to go until Christmas Day, and drop-dead shipping deadlines approaching, people have a lot more buying to do.

Retailers have to sit on the oversupply of merchandise for a long time. Retailers who store merchandise in their own warehouse and distribution centers have a finite amount of space to work with, with some wiggle room to accommodate excess inventory. But costs add up if more space is needed for a protracted glut that they can’t quickly clear out.

Over time, unsold products lose value. It is more likely that savvy shoppers won’t purchase last year’s style if the trend has passed. Stores are then forced to heavily discount, which impacts profitability.

Stores were already offering discounts of 50% to 60% off on the final weekend before Christmas, as well as free shipping for online orders.

Ross Steinman, a professor of consumer behavior at Widener University, said he has studied the holiday season for over two decades and hasn’t seen anything like it.

“Retailers are very nervous,” he said. “The clock is ticking and they know they have to maximize every opportunity now to get consumers to make purchases.”

Implications of Inflation on the Consumer Spending in the U.S., Consumer Price Outlook, and the Services Sector (with an update)

inflation has moderated in the past months, mostly on items such as goods, because supply chain issues have lessened and consumers are spending more time in areas like leisure.

Core PCE, which excludes the volatile food and energy categories, was up 4.7% annually and 0.2% on a monthly basis, matching expectations of economists polled by Refinitiv.

Falling energy prices are the reason for much of the decline. But even the so-called “core” inflation rate, which excludes volatile energy and food prices and thus provides a more reliable reading on price trends, has also moved down a bit in recent months, to 5.7% year-over-year in December.

Spending continued to increase in November, but at a slower pace than in the previous months. Spending was up 0.1% in November as compared to 0.8% the month before. In October personal income was 0.7% and 0.4% in November.

The November PCE report, the last major inflation gauge released in 2022, provided a snapshot of an economy in transition. Tasked with reining in the highest inflation since the early 1980s, the Fed has undertaken a series of blockbuster interest rate hikes to squelch demand.

The economy is moving in the correct direction, but not quickly enough, according to Gus Faucher, chief economist for PNC Financial Services. “Higher interest rates are weighing on consumer spending, particularly for durable goods, and inflation is slowing.”

However, inflation within the services sector has been a little “sticky,” and not abating as quickly. Friday’s PCE report showed the services index posted a monthly increase of 0.4% – unchanged from October’s rate – and a year-over-year increase of more than 11%, Faucher noted.

While the services inflation is due to housing costs, which are quickly reversing, the Fed is concerned that strong wage growth can fuel persistent increases in services prices and overall inflation.

November Manufacturing Activity Decline in the Light of a Large, Rapidly-Scaling Wall and Impending Uncertainty About the Economy

A separate Commerce Department report released Friday showed that new orders for manufactured goods tumbled 2.1% in November, the biggest monthly drop since the onset of the pandemic.

The decline happened due to new orders for non-defense aircraft and parts. Excluding transportation, new orders increase 0.2%.

Diane Swonk, chief economist for KAPM said after the report that core durable goods orders slowed but did not contract as they reflect growing unease about the economy. “Manufacturing activity has begun to contract and prelim reading for December suggests it will contract further at year end. A cold winter expected for the manufacturing sector.

The final December reading for the index of consumer sentiment came in at 59.7 in December, up slightly from a preliminary measurement of 59.1 and November’s final reading of 56.8, according to data from the university’s Surveys of Consumers.

The Conference Board’s consumer confidence index, which is a measure of how consumers feel about the economy, landed at it’s highest measurement since April 2022, earlier this week.

As the Federal Reserve Chairman took aggressive actions to curb inflation, America’s central bank was in the news a lot over the past year.

However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

“It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.

A brutal period for the US stock market and low unemployment rates: A brief summary of economic projections before the 2023 meeting of the Fed Open Market Committee

The Federal Open Market Committee holds eight regularly scheduled meetings each year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.

Below are the meetings tentatively scheduled for 2023. The meeting is indicated by a Summary of Economic Projections, also known as thedot plot, which shows where the Fed member thinks interest rates will go.

It was a brutal period for the stock market, with roughly one-fifth of the value of the S&P 500 vanishing and the Nasdaq dropping by more than one-third. The major US markets have had their worst years in a long time.

The number of first-time applications for unemployment benefits went up last week. That’s still low historically and almost exactly where jobless claims were a year ago, long before recession fears emerged.

“This is one reason to the be optimistic the economy could skirt a recession,” Moody’s Analytics chief economist Mark Zandi told CNN on Thursday. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”

Wall Street and Silicon Valley Need to Respond to Growing Demand and Supply Mismatch in the Construction and Real Estate Markets with Higher Interest Rates and Energy Rates

Gas prices went above $5 a gallon for the first time in June but have since dropped. The national average for regular gasoline has dropped to $3.10 in recent weeks, an 18-month low, though it has risen recently to about $3.22 a gallon.

The fear is that the Fed will eventually overdo it, raising rates so high and keeping them there for so long that it causes a recession — if the Fed hasn’t already done that.

Wall Street will get its last jobs data on Friday. The US government is expected to say that 200,000 jobs were created in December, according to forecasts by economists. That would be a slowdown from the 263,000 jobs added in November.

Even with the economic reports being more abundant, traders have been more interested in the stock market’s performance because of recent figures about inflation.

Wednesday’s weaker than expected report on the health of the manufacturing sector, coupled with more signs of strength in the jobs market given the solid report about labor turnover, led to more market volatility.

That’s why investors will also be poring over the weekly jobless claims numbers that come out Thursday morning as well as a report from payroll processing company ADP

            (ADP) about the private sector job market. Increasing strength could increase the alarm bells about inflation and Fed rate hikes.

Wall Street will also need to dive even deeper into Friday’s jobs report to get a better sense of what’s happening in the economy. The unemployment rate is projected to hold at 3.7%.

So will wages moderate this year? Analysts at Goldman Sachs predict that they will. They believe that unemployment will grow and wage growth will slow from above 5% in 2022 to about 4% by the end of this year.

“The persistent mismatch between labor supply and demand continues to put upward pressure on wages,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a report.

The jobs market is in good shape. But you wouldn’t know that from what’s going on in Silicon Valley. It’s the software giant and component of the index. The company said Wednesday that it would be laying off 10% of its workforce.

The hope was that consumers and businesses would continue to spend heavily on tech products and services, a notion that seemed valid as the economy quickly rebounded from a brief recession in 2020.

Tech companies are starting to realize that inflation and rate hikes can affect their budgeting plans, as the recession alarm bells are sounding again.

According to a recent note to employees, the chair and co-CEO of the company said that they hired too many people in the past and are currently facing an economic downturn.

Companies that have been around for a long time go through different phases. They’re not in heavy people expansion mode every year,” Amazon CEO Andy Jassy said in a memo shared with employees.

The Global Economy Is Not Out Of the Woods: Investors Are Feeling the Impact of Price Increases and Energy Cosmic Recession

The global economy is clearly not out of the woods. The head of the International Monetary Fund is worried about a downturn that could hit China and emerging markets especially hard.

But CNN’s Anna Cooban notes that investors in Europe appear to be growing more hopeful that the pace of consumer price increases is starting to slow in France and Germany. A drop in the price of energy is leading to a retreat.

Still, consumers continue to bear the brunt of higher prices. CNN’s Hanna Ziady reports that European supermarket giant Aldi just had its best December ever in the United Kingdom as British shoppers, feeling the pinch of inflation, flocked to the German discount grocer. Aldi said Brits bought more than 48 million mince pies, for example.

We’re in the salad days of the New Year — that period where many feel refreshed and motivated and perhaps even optimistic about the year to come. There’s a certain clarity that comes during this time in January.

Jobs has been the word of the week as investors eye a slew of data highlighting a strong labor market that is confoundingly resistant to the Fed’s attempts to cool the economy.

In an interview with the Financial Times this week, Gita Gopinath, second in command at the International Monetary Fund, urged the Fed to continue with rate increases this year, citing the labor market’s resilience.

Even though the temperature is still too hot, a large drop in labor market activity could give the Fed a proof of concept that gradual labor market healing can slow wage and price pressures during a recession.

How Will Consumers Take the U.S. Out of a Recession? A Critic Analysis of Bank of America’s Home Goods Chain

Brian Moynihan, Bank of America’s chief executive, told CNN that the strength of the US consumer is keeping the country out of a recession.

There was a 0.6% fall in retail sales in November. Weak sales are likely to continue, say analysts, and if they do, retailers’ earnings will suffer.

This is the main question on every investor’s mind — and the answer will not only help determine what happens to markets this year, but also whether the economy will fall into recession.

And while officials welcomed softer inflation reports in recent months, they stressed that “substantially more evidence of progress” was required and said that inflation was still “unacceptably high.”

The average of the 30-year mortgage was 6.48% for the week ending January 5, up from 6.42% the previous week according to Freddie Mac. A year ago, the 30-year fixed rate was 3.22%.

The current market is driving away would be buyers because there is not much inventory in the US and Americans are not interested in selling or exchanging their mortgage rates.

There is “substantial doubt about the company’s ability to continue” because of its worsening financial situation, the home goods chain said in a regulatory filing.

The analyst said thatBed Bath & Beyond is too far gone to be saved in its present form. “All of this points to bankruptcy as being the most likely outcome.”

Kamin’s View on the Fed’s Inflationary Pressure: The Case for a Pedestrian’s Dream of a Better Future

Steven Kamin is a senior fellow at the American Enterprise Institute, where he studies macroeconomic and financial issues. He served as director of the international finance division of the Federal Reserve from 2011 to 2020. His own opinions are expressed in this commentary. CNN has more opinion on it.

As labor markets tighten and the economy slows due to the rise in interest rates, the price pressures are likely to continue to ease.

Measures of inflation expectations derived from financial markets and based on household surveys have moved down since the beginning of last year. Wages have not kept up with rising prices and labor productivity has not risen.

In other words, workers have received no compensation for increases in productivity. The consequence, as acknowledged by Fed Vice Chair Lael Brainard, is that “the labor share of income has declined over the past two years and appears to be at or below pre-pandemic levels, while corporate profits as a share of GDP remain near postwar highs.” This suggests that, going forward, wages may rise faster than prices as workers regain their share of corporate income. But that should not force firms into additional price increases, and therefore shouldn’t impede the Fed’s ability to reduce inflation, since firms should be able to absorb those wage hikes by reducing profit margins rather than increasing prices.

The decision, at the conclusion of the Federal Open Market Committee’s first meeting of 2023, comes after months of jumbo-sized rate increases intended to cool the economy, and marks the return to a more traditional interest-rate policy.

Powell said it was difficult to manage the risk of doing too little, and that it was not easy to find out after a year or two that the job had not been done.

The New Year: Fed and Core Prices in the U.S. After a Top-Critical Phase of Growth and Decoherence

The US markets jumped after the Fed’s press conference indicated investors expect the Fed to be more dovish. The S&P 500 was up on the first day of February after having its best January in four years.

Excluding volatile food and energy costs, “core” prices in December were 4.4% higher than a year ago, according to the Fed’s preferred inflation yardstick. That’s down from a 5.2% annual rate in September.

“We do not want to be head-faked like we were in 2021,” Fed governor Chris Waller said two weeks ago. “Back in 2021, we saw three consecutive months of relatively low readings of core inflation before it exploded in our face.”