Inflationary Outlook and the Effect of the Central Bank on the Small-Scale Dynamics of the Minimal Retail Product Demand in the 21st Century

The Fed will have to cut jobs in order to get to its 2% inflation target, as unemployment is expected to rise to 4.6% this year, according to the central bank. The central bank will put pressure on the economy by hiking rates until there is an end to it.

Forecasters expect the report to show a modest downshift in hiring from August, when employers added 315,000 jobs. The unemployment rate is expected to hold steady, at a low 3.7%.

So, while things are slowing down, they’re still pretty robust relative to those pre-pandemic normal times. Part of the reason inflation is high is because of that.

It sounds crummy, but we would be happy to see wage growth slow down. When we stop buying things, prices go down because we don’t have as much money. In theory, of course. That’s just one part of the large and complicated inflation puzzle.

But that trend has begun to reverse, at least when measured on a monthly basis. Real wages have been growing faster than consumer prices, a significant shift that could give consumers firepower to keep spending next year.

If it comes in well below 250K, you might see some renewed optimism that the Fed’s policies are starting to have their intended effect, and it may not need to keep inflicting pain on the economy.

The End of the World: Predictions for the Chevrolet Boltzmann Equation from the First Anomalous Sales Decay

The situation is delicate and hard to overstate. Kristalina gyva, the managing director of the International Monetary Fund, just described the world to be in a period of historic shocks after a wave of economic shocks over the last two and a half years.

The market for housing is already soft because of higher borrowing costs. And other parts of the economy are beginning to slow. But consumers, still flush with cash saved up early in the pandemic, continue to spend money. The Fed may have to tap the brakes harder than it otherwise would, as a result.

Ford is raising prices on its first electric pickup. Citing “ongoing supply chain constraints, rising material costs and other market factors” the company said the entry-level model will be priced at around $52,000 — up significantly from $40,000 when the truck went into production this spring.

Nightcap jobs report: Do we really need to protect ourselves from the evils of our customers? (Reuters) Belarus’ president Alexander Lukashenko has not ruled out a price increase yet

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. “From today, any price increase is prohibited. Prohibited! The president is quoted as saying something.

A source tells CNN that lawyers for Musk and the company agreed to delay his deposition in the case. Musk was originally scheduled to give a deposition today, but he threw a curveball earlier in the week, offering to buy the company under the original terms of the deal in exchange for scrapping the litigation. There are still some disagreements between the two sides.

(Axios) Boston Dynamics, the company behind those viral videos of its creepily agile four-legged robots, is pledging not to weaponize their products and encouraging others in the industry to do the same. According to a letter Axios reviewed, the company suggests it’s worried that customers don’t, like, believe them when they say they’re not building an army that’ll destroy humanity. They have now stated that they are not doing that. Oh wow!

Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html

Amazon is on a transformation journey to shore up the U.S. economy after a two-decade layoff, according to an IBM employee survey

The new CEO of Peloton is trying to shore up the company’s bottom line as it announced yet another round of layoffs. The company’s website says it is on a “transformation journey” and that it is “optimizing efficiency” to achieve break-even cash flow. I would love to stop thisspeak, but I am not sure who it is.

(CNN Business) Amazon suspended roughly 50 workers at its only unionized warehouse Tuesday after they organized a work stoppage following a fire at the facility. A fire broke out Monday at the Staten Island facility, known as JFK8, and workers reported that parts of the building still smelled of smoke and that it was difficult to breathe. 100 workers walked off the job.

“I think this is good news for the Federal Reserve,” said Nela Richardson, chief economist at the payroll processing firm ADP. “You are seeing some changes in early stage demand but not a change in hiring.”

It’s difficult to find a job this month and it’s hard to find one in the next four months. So people are being a lot more cautious,” said Tim Fiore, who conducts the survey for the Institute for Supply Management.

“It’s not layoffs at all, mostly,” he said. “It’s [hiring] freezes. Replacing people that are quitting isn’t as fast as it should be. So that’s a clear change from where we’ve been over the last year-and-a-half, two years.”

Manufacturing represents a small slice of the overall workforce, however. The ISM survey found that there was no slowdown in hiring.

There were gains in restaurants, retail and professional services last month, according to ADP, which handles payroll for 25 million workers.

The U.S. has now replaced all of the jobs that were lost in the early months of the pandemic. The number of workers available will play a part in continued job gains.

Richardson said that the more people that come back to the labor market, the more likely it will be for hiring conditions to be loosened.

August saw a big influx of new and returning workers, as nearly 800,000 people joined or rejoined the labor force. Inflation watchdogs at the Fed will be on the lookout to see if that trend continued in September.

“Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the central bank said in a statement on Wednesday.

Cook and the rest of the board made it clear that interest rates will remain elevated until there’s proof that prices have leveled off.

“Inflation is too high, it must come down, and we will keep at it until the job is done,” Cook said Thursday, in her first public speech as a central bank policymaker.

Mr. Biden said the report showed that costs have gone up over the past three months less than they had in the previous three months. He acknowledged that inflation remained high.

As of Thursday afternoon, markets were pricing in an 80% chance of a half-point rate increase at the Fed’s December policymaking meeting. That would represent a deceleration after a run of four consecutive hikes of three-quarters of a percentage point.

“Consumers clearly welcomed the recent easing of inflation,” Joanne Hsu, director of the Surveys of Consumers, said in a statement. “While sentiment appears to have turned a corner from its all-time low from June, consumers have reserved judgment about whether the trends will continue.”

The Fed’s Interest Rate Increase is Not Necessary for a Recession, and Consumer Prices will Boost Once More Rates Go Up

The Federal Reserve is expected to order another big boost in interest rates Wednesday, as questions bubble up about how much higher borrowing costs will have to go before stubborn inflation starts to come down.

“We’re not done yet because interest rates have gone up at a rapid pace, and we’re not done yet,” said the chief financial analyst at Bankrate. It will take a while for the cost of living to come down from these high levels, even once we begin to see some improvement.”

Annual inflation in September was 6.2%, according to the Fed’s preferred yardstick — unchanged from the month before. Consumer prices are rising at an annual rate of 8.2% according to the better known index.

“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 the Treasury Secretary said there is a risk of a recession. It is not something that is necessary to bring inflation down.

“I have been in the camp of steadier and slower [rate increases], to begin to see how those effects from a lag will unfold,” George said last month. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”

“We are concerned that hikes in the Fed’s interest rate could result in a slower economy and higher prices for everyone,” Sen. Warren, D-Mass., and her colleagues wrote on Monday.

What’s Happening in the U.S. Housing Market: Job Vacancies, Quits, and the Pain of Inflation

Shawn Woods, who builds houses in Kansas City, said his company has gone from selling a dozen houses a month to less than five.

“I never thought I’d see mortgage rates go from 3% to 7% within a year,” said Woods, the president of Ashlar Homes.

“I think it will be a rough six or eight months,” Woods said. Housing leads us out of downturns and leads us into downturns. And I think from a housing perspective, we’ve probably been in a housing recession since March or April.”

The latest monthly survey was on job vacancies and quits. The number of job openings in the United States were surprised on Tuesday, as economists had predicted that vacancies would fall because of the Fed slowing business growth. Instead of going down to 10 million, it went up to over 10 million.

What’s happening: Low unemployment rates and wage growth may appear to be good for an economy that’s close to recession, but has actually proven bad for markets.

“Reducing inflation is likely to require a sustained period of below-trend growth and softening of labor market conditions,” Powell said Wednesday. “Restoring that price stability is essential to set the stage for achieving stable employment and stable prices in the longer run.”

The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. It is unlikely that the central bank will prevent a recession by cutting interest rates until at least four years from now.

The pain of inflation seems to be more important than any positive sentiment for job security for Democrats trying to hold on to power next week. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.

Flipping the Baby Boomer Narrative on Its Head: Housing Prices and Homebuying Market Values in the 21st Century

The narrative was flipped on it’s head in 2020. It wasn’t that Millennials didn’t want homes in the suburbs, they just couldn’t afford them. The furor was driven by people in their 30s, who had been empty-handed due to the Great Recession and were finally desperate to find gainful employment.

(It also didn’t hurt that dizzying stock surges meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their darling Millennial kids.)

As that 2020 housing boom begins to go bust, those who managed to close on a home in the crush of competition fed by rock-bottom mortgage rates should count themselves extremely lucky.

Over the past 10 years, the share of first-timers has been between 30% and 40%. 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. This year, home prices have gone up, while mortgage rates are going up.

Oh yeah, one other thing: In addition to mortgage rates going up, home prices also shot up, with the median peaking at $413,800 in June. Imagine your starter home being 400 grand.

“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.

Housing supply has grown through subdivisions at the urban fringe, rather than rebuilding within existing neighborhoods. That’s putting more people and homes in environmentally vulnerable areas, such as wildfire-prone regions of the West.

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

Why central bankers hike their interest rates? A case study of the central bank of the European Central Bank (and its publication in the Bell newsletter)

On the heels of the Fed raising rates for the fourth-straight time, the Bank of England followed suit, hiking its own key interest rate by the same amount. The European Central Bank did the same thing.

Basi points are what central bankers talk about when talking about rate moves. One basis point = one-tenth of a percentage point.)

A version of this story first appeared in CNN Business’ The Bell newsletter was published before. Not a subscriber? You just need to register right here. You can listen to an audio version of the newsletter by clicking the same link.

The Breakdown of Digital Cryptocurrencies: Inflation, Wall Street and Wall Street in a World Without Walls and Walls

Stocks surged on Thursday in their best day since 2020 after a key inflation indicator came in softer than expected. Investors broke out their party hats as they interpreted the report to mean that peak inflation may finally be behind us. That could mean the Fed is less aggressive with 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.

The Fed chair will repeat in the report that more needs to be done in order to bring inflation down to the Fed’s 2% target.

Bill Adams said in a note that the economy would weaken less if the Fed didn’t tighten as aggressively.

It’s been a terrible year for cryptocurrency. The value of Bitcoin has dropped nearly 75% since last November and the spectacular implosion of cryptocurrency exchange FTX, a so-called unicorn startup that was recently valued at $32 billion, is just the latest bit of bad news for investors in digital currencies.

The assets have gotten hit just like the stocks and bonds, proving that there is no place to hide in a market that is concerned about rates and the economy.

Why Bitcoin and Other Cryptocurrencies Have It Popularized? The Case of the Covid Era and the Rise and Fall of Wall Street

A crypto thaw: A lot of investors from large-scale institutions came out of the woodwork to invest in the digital currency during the Covid-era. In the month ofNovember it reached a new high of nearly $70,000.

Then, central banks started raising rates to fight inflation, and the dollar strengthened significantly, seducing investors as the ultimate safe haven. 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 volatility on Wall Street may be unnerving — the CNN Business Fear & Greed Index, which measures seven indicators of market sentiment, is now in Neutral territory after spending the past month in Greed mode — but it pales in comparison to what’s happening with bitcoin and other cryptocurrencies.

“Mortgage application activity sunk to a quarter-century low this week as high mortgage rates continue to weaken the housing market,” said Sam Khater, Freddie Mac’s chief economist. Inflationary pressures are easing, which should lead to lower mortgage rates in the years to come.

There are traders who think there is a half-point increase. The Chicago Mercantile Exchange has fed funds futures showing an 80% probability of a half-point hike.

If this trend continues, it could significantly lower the risk of a recession. If inflation remains above the Federal Reserve’s 2% target, that would be problematic.

Inflation? When will it come down, investors needn’t worry about the Fed’s announcement about rates, the economy and the jobs market

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 higher than expected, but not as high as the 8% increase through October.

The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

“This idea of peak inflation, which people have been talking about for most of the year, is starting to look like it’s valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. How soon does that come down?

Dallas Fed President Lorie Logan, who does have a vote on the FOMC this year, said in a speech later Tuesday that “we shouldn’t lock in on a peak interest rate or a precise path of rates.” But Logan did say the Fed will likely “need to continue gradually raising the fed funds rate until we see convincing evidence that inflation is on track to return to our 2% target.”

So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

“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 risks of a recession are still high.

The economists predict a small dip in retail sales from October. But it’s important to put that number in context. Retail sales have increased over the past year.

So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

Everybody is talking about inflation this year. It will be more about deflation in the years to come, according to the CEO of Comgest Global Investors.

What Does Cosserat’s Family Own: A Business Perspective for Investors and a Key Testimony of the Fed’s Rate of Adjustment

What does that mean for investors? Cosserat said quality companies that still have pricing power can maintain their profit margins. He said that two of the stocks his firm owns are luxurious goods maker, and cosmetics giant, L’Oreal.

Wednesday: Fed meeting; US ADP private sector jobs; US JOLTS; China Caixin PMI; Europe inflation; earnings from AmerisourceBergen

            (ABC), Humana

            (HUM), T-Mobile

            (TMUS), Novartis

            (NVS), Altria

            (MO), Peloton

            (PTON), Meta Platforms, McKesson

            (MCK), MetLife

            (MET) and AllState

            (ALL)

Hopes that the Fed would scale back on the size of its rate hikes helped push the stocks higher in October and November. They are down a lot for the year and the stocks have fluctuated more in December.

The 10-year US Treasury yield 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.

Many central banks will probably raise rates by 50 basis points, but investors are concerned that policy makers will not be able to prevent an economic downturn in a few years.

“The macroeconomic focus will shift from fears of Fed tightening to how badly growth slows and earnings fall before global central banks can hint at providing accommodation,” said Tom Essaye, founder and editor of the Sevens Report investing newsletter, on Monday.

The House Financial Services Committee will hear testimony from FTX founder Sam Bankman-Fried on Tuesday. Bankman- Fried is not on the list of witnesses for the Senate Banking Committee’s FTX hearing.

Fed Fed Chairman Jerome Powell discusses the Fed’s decision to hike interest rates in advance of the next-generation large-scale financial crisis

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.

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 expected to follow the United States with half-point moves of their own 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.

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. Used car buyers are paying the highest monthly payments on record due to the lower interest rates they are being charged.

Wall Street accepted the Fed’s warning that there are more rate hikes to come as the stock market fell. by the end of the afternoon, the major indices were mostly flat.

Tension on the Future: How the Fed is Fighting a High-Horizon Recession in Support of Consumer Demand and Housing Markets

Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.

The last twelve months saw the price of haircuts rise by 6.8% while the price of drycleaning jump by 7.9%. Services other than housing and energy make up 25% of consumer spending.

“We see a decline in the prices of goods,” Powell said. “We understand 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.”

Older workers who retired in the last couple of years may not find gainful employment. With the supply of workers constrained, the Fed is trying to restore balance by tamping down demand.

It’s more difficult to get a car loan, buy a house or carry a balance on a credit card with higher borrowing costs. Demand in sensitive parts of the economy, like the housing market, is already being curbed.

Jon Stewart, the former host of The Daily Show, said that the Fed is very committed to this and it could lead to a high unemployment recession.

“I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. I think it would be difficult to avoid a recession if there was a soft landing. If it’s a milder recession than recent history, I think that’s still in the cards.”

“Employment has yet to soften notably, but I think the jobs data is likely to deteriorate meaningfully and quickly,” said finance professor Jeremy Siegel of The Wharton School of the University of Pennsylvania in his weekly commentary for WisdomTree last week.

Powell was optimistic that the labor market was tight enough to deal with a rise in unemployment and that a soft landing was still possible. Job numbers will be watched very closely by investors.

Super Saturday is Super Saturday: An investigation of bankman-fried’s bank fraud and his case against a false foundation of deception

It’s not known what time Bankman-Fried will show up in court. If he waives his extradition, he would likely return to the United States quickly. Once in the states, he will appear before a US judge for an arraignment and bail hearing.

The Southern District of New York charged Bankman- Fried with eight counts of fraud. 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.

On top of that, US market regulators filed civil lawsuits accusing Bankman-Fried of defrauding investors and customers, saying he “built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto.”

The busiest shopping day of the holiday season is called Super Saturday and it occurs on the Saturday before Christmas. With Christmas Day falling on a Sunday, and Christmas Eve falling on the preceding Saturday, Super Saturday this year is on Dec. 17th. More than 158 million people are estimated to shop on that day.

The NRF estimates shoppers have only completed half their purchases. With less than a week to go until Christmas Day and drop-dead shipping deadlines approaching, people have more buying to do.

Source: https://www.cnn.com/2022/12/19/investing/premarket-stocks-trading/index.html

The Rise and Fall of the PCE Inflation Indexes: Implications for Retailers and Consumers in the 21st Century

It’s also costly for retailers to sit on an oversupply of merchandise for too long. 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. Costs add up if more space is required for a long period of time that they cannot quickly clear out.

Unemployed products lose value over time. The trend in clothing will not be seen by shoppers if it has passed. Stores are then forced to heavily discount, which impacts profitability.

Stores are already offering up to 70% off in the final weekend before Christmas, as well as free shipping for online orders.

The professor of consumer behavior at Widener University has been studying the holiday season for 20 years.

He said that retailers were very nervous. “The clock is ticking and they know they have to maximize every opportunity now to get consumers to make purchases.”

Inflation has moderated in recent months, especially on items like goods as supply chain bottlenecks have eased and consumers focused more spending in areas like leisure and hospitality.

The PCE increased in November from a year earlier. That’s lower than in October, when prices rose 6.1% annually.

The annual increases for both PCE inflation indexes hit their lowest levels since October 2021 and follows continued declines in other inflation gauges, such as the Consumer Price Index and Producer Price Index.

Spending rose in November, but at a much slower pace than in the previous months. Spending was up 0.1% in November as compared to 0.8% the month before. Personal income increased by 0.4% in November, down from 0.7% in October.

The last major inflation gauge to be released, the PCE report, 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 right direction from the Federal Reserve’s perspective at the end of 2022, but not quickly enough,” Gus Faucher, chief economist for PNC Financial Services, said in a statement. “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. The services index was unchanged in October, and posted a year-over-year increase of more than 9%, Faucher noted.

Finally, though the Fed has repeatedly signaled its concern that tight labor markets are boosting wage growth above levels consistent with its 2% inflation target, the risk of a wage-price spiral, where rising wages lead to rising prices, which in turn spur further wage demands, seems low.

November Manufacturing Activity and the U.S. Consumer Confidence Index Rises Strongly in the Light of the December December Data Release from the Commerce Department

On Friday, a report from the Commerce Department showed that new orders for manufactured goods fell in November, the biggest monthly decline since the begining of thepandemic.

Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. Excluding transportation, new orders increase 0.2%.

“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. “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 consumer confidence index from the Conference Board reached a two-year high earlier this week.

Powell noted in December that the labor shortage was caused by early retirements, Covid illnesses and deaths, and a plunge in net immigration.

Hiring remains surprisingly resilient. The economy added a robust 263,000 jobs in November, and the unemployment rate is just 3.7% — down dramatically from nearly 15% in the spring of 2020.

“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.

The Fed Open Market Committee meets in Budapest, Hungary, on September 22-27, 2023: Preliminary Meeting and Summary of Economic Projections

The central bank has the Federal Open Market Committee as its policymaking arm. 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. Those with asterisks indicate the meeting with a Summary of Economic Projections, which includes the chart colloquially known as the “dot plot” that shows where each Fed member expects interest rates to land in the future.

The stock market had a rough time in the period, with one-fifth of the S&P 500’s value vanishing and theNasdaq dropping by more than one third. Since 2008, the major US markets have had their worst years.

There were 225000 first-time applications for unemployment benefits in new numbers published last week. That is close to where it was a year ago, before the worries of a recession emerged.

Mark Zandi, chief economist of Moody’s Analytics, told CNN on Thursday that he was optimistic the economy could avoid a recession. Without mass layoffs, it is unlikely that consumers will stop spending.

Wall Street Sensitivity to Inflation and Rate Rises: Why the Silicon Valley Incentive Market is Bounced in June

After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. The national average for regular gasoline recently dropped to $3.10 a gallon, an 18-month low, though it has crept higher in recent days to about $3.22 a gallon.

If the Fed hasn’t already done so, the fear is that they will eventually raise rates so high, and keep them there for so long, that it will cause a recession.

Traders are betting on a further deceleration in jobs growth because that could lead to a reduction in the size of interest rate hikes by the Federal Reserve.

Still, traders have been glued to economic reports even more than usual as of late, and stocks have been incredibly choppy based on what the latest figures indicate about inflation.

There were weaker than expected reports on manufacturing and labor turnover on Wednesday and this led to more market volatility.

That is why investors are interested in the weekly unemployment claims that come out Thursday morning as well as a report from payroll processing companyADP about private sector job market. Further strength could set off more alarm bells about inflation and Fed rate hikes.

Wage growth will be closely watched. An increase in worker compensation can lead to inflation. Consumers can afford to pay the higher prices that companies charge for their products and services if they have more disposable income.

Lauren Goodwin, an economist and portfolio strategist at New York Life Investments said in a report that the persistent mismatch between labor supply and demand continued to put upward pressure on wages.

The Fed is likely to focus more on the paychecks of workers than the jobs created in the report. Wall Street may do the same.

The jobs market is doing well. But you wouldn’t know that from what’s going on in Silicon Valley. The software giant is also the component of the stock market. According to the company, it was laying off 10% of its workforce.

The hope was that consumers and businesses would still spend a lot on tech products and services, as the economy quickly rebounded from a brief recession in 2020.

Now, though, recession alarm bells are sounding once more as inflation and rate hikes take their toll…and tech companies realize that they may have not factored that in to their budgeting plans.

In a recent note to employees, the chair and co-CEO said that they had hired too many people before the economic downturn took hold.

Companies that last 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 Confused About the Decline of the European Union and the Future of the IMF

The global economy is clearly not out of the woods. Many, including the head of the International Monetary Fund, are still concerned about a looming downturn that could hit China and emerging markets particularly hard.

According to CNN, investors in Europe seem to be growing more optimistic that consumer price increases in France and Germany will slow down. The decline in energy prices is leading the retreat.

The British Retail Consortium said in a report Wednesday that food prices surged 13.3% in December. The number of items that consumers purchased fell 1%, but the UK grocery sales hit a record in the four weeks ending on December 25.

The salad days of the New Year are when many feel motivated and hopeful about the year to come. During January, there is a certain clarity that comes.

Jobs have been the word of the week as investors watch a slew of data that shows a strong labor market that is resistant to the Feds attempts to cool the economy.

The US economy is in no danger of a recession at the moment according to other indicators. The number of people filing for unemployment compensation dropped to 186,000, a nine-month low. The weekly initial claims numbers will be available on Thursday.

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.

So will wages moderate this year? Analysts at Goldman estimate that they will do so. Wage growth will be slow and the unemployment rate will grow in the next four years, according to them.

The Inflationary Crisis : Why the US Consumer is Staggered Off the Recession? An Analysis by Moynihan

Bank of America CEO Brian Moynihan told CNN around the holidays that the continued strength of the US consumer is nearly single-handedly staving off recession.

Market sentiment was hit by weaker-than- expected retail sales in November and caused by the Fed’s punishing interest rate hikes.

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 30-year fixed-rate mortgage averaged 6.48% in the week concluding January 5, compared to 6.42% the week before. The 30-year fixed rate stood at 3.31% a year ago.

The current market is not suited for would-be buyers due to lack of available inventory as Americans are unwilling to sell due to low mortgage rates.

The home goods chain stated in a regulatory filing that it is uncertain about the ability to continue because of its worsening financial situation.

An analyst at Global Data Retail stated in a note to clients that “Bed Bath & Beyond is too far gone to be saved in its present form.” The most likely outcome according to all of this is a bankruptcy.

Tech layoffs are not a problem for investors: Why tech stocks shouldn’t be part of the old tech guard? Comments on the report by Steven Kamin

There are not all of them who agree with that assessment. Workers have been getting bigger pay increases in the transportation industry. And more workers at tech and retail giants have been unionizing as of late.

Over the course of the last year, workers have gained more power in bargaining, but they will not give it up, according to a report.

“Combine a strong labor market with a still substantial reserve of excess savings, and you have all the components in place to keep the Fed up at night,” Vaillancourt said.

Some people think that more tech layoffs are not a problem. Investors seem to be (somewhat perversely) taking the view that companies cutting costs is a good thing for profits and that revenue likely won’t be impacted in a negative way because consumers are still spending.

It isn’t a good start to tech earnings season, with Microsoft, Intel, and IBM all reporting weak results. But it’s important to note that that trio is part of the “old tech” guard while Apple, Amazon, Alphabet and Meta all have more rapidly growing businesses.

The market is expected to have a strong start to the next year but a set of weak reports from these companies could hurt it, stated Daniel Berkowitz, senior investment officer for Prudent Management.

It could be thatTesla’s strong results are a sign of better things to come from other more dynamic tech companies.

The International Monetary Fund is releasing world outlook, as well as earnings from GE healthcare, Franklin Resources and Principal Financial.

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

Fed Rate Resummation and the Fed Open Market Commission: Powell’s Implications for the US Economy and the Economy, and the Sensitivity to the Future

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

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 echoed that sentiment Wednesday, saying: “I continue to think that it is very difficult to manage the risk of doing too little, and finding out in six or 12 months that we actually were close but didn’t get the job done.”

The investors expect the Fed to be dovish going forward and US markets jumped after the press conference. The S&P 500 closed the first day of February higher by over 1 percent after having its best January in four years.

“We didn’t expect it to be this strong,” Powell said of the January jobs report, which showed the US economy added 517,000 jobs. “It kind of shows you why we think that this will be a process that takes a significant period of time.”

“The disinflationary process has begun,” Powell said, noting progress especially in goods prices. He said that price gains in the services sector remain high.

Powell expects housing inflation to come down by the middle of this year but is keeping the closest watch on a metric within the Personal Consumption Expenditures report: Core services excluding housing.

The major US stock indexes rallied during Powell’s discussion but then fell in early afternoon trading, with the Dow down by around 200 points or 0.6%, the S&P lower by 0.3% and the tech-heavy Nasdaq down by 0.2%.

Do Central Bankers Really Need Rate Increases? — Richmond Fed President Thomas Barkin at a Valentine’s Day Inflationary Conference

If the reports of strong labor market reports and better inflation reports continue, it could be a case that we need to raise rates more.

If your heart goes pitter patter when central bankers discuss inflation (you know who you are on Twitter!), then this may be the best Valentine’s Day ever. Four members of the Federal Reserve (although not Fed Chair Jerome Powell) spoke on the economy today.

First up was Richmond Fed President Thomas Barkin, who is not a voting member on the interest-rate setting Federal Open Market Committee this year. According to Barkin, inflation is comfortable, but it is coming down slowly.

The problem is trying to predict future economic data. She said it’s hard to have confidence in any outlook when inflation increases or the jobs report more than anyone expected.

Source: https://www.cnn.com/business/live-news/stock-market-news-inflation/index.html

Fed Policy, Wall Street Markets and the Labor Department: Are We Nearly Here? Philadelphia Fed President Patrick Harker, Robert F. Biden, and John W. Williams

Philadelphia Fed President Patrick Harker sounded a little more dovish (i.e. less concerned about inflation) than Logan. He is a voting member this year in the governing body of monetary affairs. Harker said in a speech Tuesday that “we are not done yet” with rate hikes but added that “we are likely close.” Harker noted that “at some point this year, I expect that the policy rate will be restrictive enough that we will hold rates in place.”

Last up was New York Fed President John Williams, another FOMC member and also someone whose name has been mentioned as a possible successor to Lael Brainard as Fed vice chair now that President Biden is expected to name Brainard as his new top economic adviser.

Williams said that there would likely be some soft labor market conditions, and a period of subdued growth. He said that he expected the unemployment rate to rise to between 4% and 4.5% next year because of the small real GDP growth. The rate of unemployment is 3.4%.

Wall Street investors are gearing up for their version of Hell Week — a torrent of jobs data coming over the next few days could easily lead to volatile market swings.

The payroll report for February is expected on Wednesday along with the job openings report for January. On Thursday, Challenger, Gray & Christmas are set to release their job cuts numbers for February, and Friday brings the main show — the Labor Department’s monthly employment report.

Wall Street is Back in Business: Hirt, Powell and the Biden-Budget Bounds in the Prescription Rate and Social Security

“We’re stuck in the messy middle.” said Josh Hirt, senior US economist at Vanguard. “Activity has weakened in the most interest rate-sensitive sectors of the economy, but core areas are still showing resilience. The impact of rates on the economy isn’t fully worked on.

The unemployment rate is currently at a 54-year low, and will likely go up to around 4.5% by the end of the year, according to Mr. Hirt.

What’s happening: Federal Reserve Chairman Jerome Powell will testify in front of the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

Congress often looks to the president’s budget for help in shaping spending priorities for the year ahead. Wall Street investors are going to pour over the document to find out what market- shifting debates will be.

Biden has said his budget will help offset increasing costs for Medicare, Social Security and health care by increasing taxes on the ultra-wealthy. The president wanted a tax on billionaires last year. Increased tax on capital gains and on corporate stock buy backs are just two of the Biden proposals that have roiled Wall Street.