The Fed Higher-Energy Wall Street Report: Implications for the Labor Market, and a New Window to Inflationary Recovery

Although the Fed has raised rates for the first time in over 20 years, the labor market has not been hurt by it.

The report was expected to show a slight decrease in hiring from August. The unemployment rate is expected to stay the same.

So, while things are slowing down, they’re still pretty robust relative to those pre-pandemic normal times. And that’s part of what is keeping inflation elevated.

Wages pose a particular conundrum for the Fed. We should shop just a little less but not so much. Unfortunately, there’s no magic formula for how much wages need to go down to make a dent.

“We had a labor market with 3.5% unemployment in 2018 and ’19, and we had inflation just barely getting to 2%, and wages moving up for most of the people at the lower end of the spectrum,” he said. We want to get back to that place.

If it is below 250K, you might see renewed optimism that the Fed’s policies aren’t necessary to keep hurting the economy.

The price of F-150 Lightning, the first electric pickup since 1999, is going to be priced at $52,000 – a time when Ford really started to ramp up

The situation is delicate and hard to overstate. Kristalina Georgieva, managing director of the International Monetary Fund, described the world as being in a period of historic shocks after the last few years.

America’s central bank became a target for criticism over the course of this year as Federal Reserve Chairman Powell used a number of tools to curb inflation.

Ford is once again raising prices on the F-150 Lightning, an 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.

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. Any price increase is not allowed today. It was forbidden! the president is quoted as saying.

Nightcap – What’s Going on? The CEO of Boston Dynamics, the company behind a video of its four-legged robots, hasn’t

According to a source familiar with the negotiations, lawyers for the two companies have agreed to hold off on Musk’s deposition in the case. In the week before he was to give a deposition, Musk offered to buy the company under the original terms of his deal in exchange for dropping the litigation. The two sides are still haggling over various conditions.

Boston Dynamics, the company behind those videos of its four-legged robots, has promised not to weaponize their product as well as encourage others to do the same. The company thinks that customers won’t believe them if they tell them they’re not constructing an army that will destroy humanity. Thankfully though, they’ve now said they’re not doing that. Phew!

In the latest round of layoffs, the new CEO of the company tried to shore up the bottom line as he tries to keep his job. In a statement, a company spokesman said that the company was on a transformation journey in which it was “optimizing efficiency” to achieve break-even cash flow. I would love to make it stop but I don’t know who is writing it.

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

Amazon Work Stoppage and The Cool-down of the Labor Market: Results from the ADP Payroll Processing Firm ADP (CNN Business)

(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. Workers at the JFK8 facility on Staten Island reported that parts of the building were smelling of smoke and it was difficult to breathe. An estimated 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. There’s some reduction in early-stage demand for workers, but it’s still continuing in hiring.

It’s hard to hire a person this month and three months from now. So people are being a lot more cautious,” said Tim Fiore, who conducts the survey for the Institute for Supply Management.

The labor market was always bound to cool off eventually. Almost no one thought that furious hiring pace was sustainable long-term. Now, the cool-down is clearly underway. There is a decrease in hiring. Job openings are dropping. Fewer people are jumping ship to other employers.

Manufacturing represents a small slice of the overall workforce, however. The ISM survey did not find a slowdown in hiring.

ADP, which handles payroll for more than 25 million workers across the country, reported solid job gains in restaurants, retail and professional services last month.

The Fed’s Progress Report: The State of the Labor Market During the September 18th and September 2001 Great Recession, a Preliminary Report

The current labor market reflects the effect the pandemic has had on the US economy and labor supply. The labor force participation rate has declined as the demand surpasses the supply by 5 million people.

“The more people who come back to the labor market, the more likely we’ll see some loosening in hiring conditions and a continuation of these steady gains,” said Richardson.

Job openings, after falling significantly in August, rose again in September to 10.7 million. There were 1.9 job openings for every worker that was out of work. The number of people who quit their jobs decreased, but remained high, a sign that workers are confident they will find better jobs. Layoffs overall have stayed low.

Shortages of both workers and critical supplies have made it hard for businesses to keep pace with strong demand for goods and services. Prices have gone up. The Fed thought they would improve on their own. Despite some encouraging signs, inflation remains high despite a drop in lumber and used car prices. Prices in August were up 8.3% from a year ago.

Cook and her colleagues on the Fed’s governing board have made it clear that interest rates will remain elevated until there’s convincing evidence that prices are leveling off.

Cook said Thursday that inflation must come down and that they will keep at it until the job is done.

Why Has Employment Growth remained Strong? A Commentary on Gad Levanon, Director of the Labor Market Institute at the Burning Glass Institute

At the Burning Glass Institute, there is a chief economist named Gad Levanon. He was the head of the Labor Market Institute at The Conference Board. His own opinions are expressed in this commentary.

Why has employment growth remained so strong? The US economy is holding up better than expected. The Atlanta Fed thinks that the economy will grow 2.5% in the 3rd quarter of 2022, more than double last year’s growth but still not recession proof. When the demand for goods and services strengthens, so does the demand for workers producing these goods and services.

Fourth, just as some industries are growing because they are still catching up, others are experiencing high growth as they adjust to a new normal of higher demand. Demand for data processing and hosting services, semiconductor manufacturing, mental health services, testing laboratories, medical equipment and pharmaceutical manufacturing is higher than before the pandemic. And it’s likely that these represent structural changes to buying patterns that will keep demand high.

The hiring is surprisingly resilient. The unemployment rate is 3.7%, and the economy added 263,000 jobs in November, up from 18,000 in the previous month.

There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. It’s difficult to increase labor supply. That means legislative action that would increase immigration, drive people into the labor force or invest in workforce training. This is likely to prove elusive in today’s polarized political environment.

Julia Pollak, chief economist for ZipRecruiter, said that one area of concern for the Fed is labor force participation. Getting a larger share of people into the workforce can help bring down wage growth, one of several factors Fed officials fear could keep inflation high. The September report showed that labor force participation rate ticked down to 62.3% from 62.4% the month before.

The Swine Flu: How Do We Get Around the Second Pandemic? Reviving the Swine Flu: The Case of the Chicago Mercantile Exchange

Pollak told CNN Business that there was hope that people who left the labor force in the wake of the swine Flu epidemic would be given a chance at a restart. “We may not see some of the people who left come back.”

The unemployment rate fell in September due to a decline in the number of people searching for work.

That appears to be a certainty for the upcoming meeting in early November. The magnitude of future rate hikes will become clearer as we get closer to the final two [policymaking] meetings of the year,” he said.

Investors are now pricing in about a 70% chance of just a quarter-point rate increase at the Fed’s next meeting on February 1, according to Fed funds futures on the Chicago Mercantile Exchange.

Dean Baker is an economist at the Center for Economic and Policy Research. The Fed would likely be better off if the monthly job gain is less than 200,000.

Customers became more comfortable with online ordering, delivery and pick-up services because of the Pandemic. 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.

Staffing agencies and contract workers have become the main source of staff for businesses that recovered from the flu. The sector had a peak of 3.56 million employees in July 2022, but it plummeted to 1.9 million during the April 2020 trough and has yet to recover.

The economy is still going through a tough times: net job losses and the impact of Fed interest rate hikes on the S&P 500 and stock prices

As the labor market starts to feel the Fed’s large rate hikes, the recovery is getting more complex.

While declines in these sectors are anticipated during a period of high interest rates, what could be a troubling sign are net job losses in crucial support industries such as local education, child care and trucking, said Russell Weaver, an economic geographer with Cornell University’s ILR School.

Weaver noted that there are ongoing supply chain concerns as well as the ability for people to have reliable education and child care services so that they can return to the workforce. Long-term and future economic and work prospects can be impacted by that.

Dionne Nelson, the chief executive officer and founder of the company said there was no sense that a recession was imminent. We are still busy. We are still looking for people. Our markets are active.

After fresh data about the labor market was released on Friday, investors knew the Fed would be raising interest rates next month and that’s bad for stock prices.

The S&P 500 fell nearly 3 percent on Friday, dragged down by interest rate-sensitive sectors like technology stocks. Government bond yields, indicative of the future path of interest rates, rose and the dollar strengthened.

The U.S. Labor Market Has Not Go Up in the Last 20 Years: A CNN/New Year’s View on the Context of Inflation

A labor market that is resilient is usually a good sign of economic strength, but at the moment it suggests the need for more interest rates to be raised by the Fed. Higher rates, in turn, raise costs for companies, weighing on stock prices.

Job growth remained stubbornly robust in October despite higher interest rates, defying policymakers’ efforts to dampen the labor market and curb the fastest inflation in generations.

But, for the most part, the labor market appears to have avoided the deep scarring that was the legacy of the last recession. It has not gone up in the last 20 years. Since 1960s, the unemployment rate hasn’t been lower. In September, 80% of Americans in their prime working years had a job, above the rate in the year before the swine flu epidemic.

A large percentage of the population are prevented from being able to work due to health effects related to Covid, according to John Leer of Morning Consult. There is ongoing child care challenges, we have a lot of people who retired early and limited immigration not where it was pre-pandemic.

Getting there has been bumpy. As vaccines became widely available and businesses came back to life last year, employers had more jobs to fill than they could get applicants to fill them. Workers were able to negotiate for higher wages thanks to that good news. It helped feed inflation by raising prices to cover labor costs.

There has been concern that the economy will suffer a recession in the coming year, but it was based on recent data that pointed to a soft landing.

The GDP data released Thursday highlighted the strength of the US economy as policy makers rushed to cool off inflation that has had a negative effect on American views, according to a one-on-one interview in Ohio that aired on CNN.

The Bureau of Economic Analysis released initial estimates for gross domestic product for the third quarter on Thursday. The decline in the first and second quarters was 1.6% and 0.6%, respectively.

The Case for American Recovery from Covid-19: A Conversation with Biden and the Kochi Administration on the Future of the Economic Processes in the United States

But Yellen’s view also underscored the complex balancing act President Joe Biden and his top economic officials have attempted over the course of this year, as they seek to highlight a rapid economic recovery and major legislative victories while also pledging to tackle soaring prices.

It is a fact that has made it difficult for the administration to take advantage of what they view as a robust record. Biden said the economy is strong as hell when asked about it last week.

Yellen also acknowledged frustration inside the administration that the efforts to pull the US economy out of crisis haven’t received the credit officials believe is merited.

There were problems that we could have had, and difficulties that many American families could have faced. The problem we don’t have are due to what the Biden administration has done. So, often one doesn’t get credit for problems that don’t exist.”

Yellen traveled to Cleveland as part of an administration push to highlight the major legislative wins – and the tens of billions of dollars in private sector investment those policies have driven toward manufacturing around the country.

It is an important piece of an economic strategy designed to address many of the vulnerabilities and deficiencies associated with Covid-19, with significant federal investments in infrastructure and creating from scratch key pieces of critical supply chains.

Listing off a series of major private sector investments, including the $20 billion Intel plant opened a few hours drive outside of Columbus, Yellen said they were “real tangible investments happening now,” even as she acknowledged they would take time to full take effect.

It is beginning to look like some of the bridges will be online soon. Many communities are going to see roads improved, bridges repaired that have been falling apart. Money flowing into research and development is an important source of long term strength for the American economy. She said that America’s strength will increase and that we will become a more competitive economy.

Source: https://www.cnn.com/2022/10/27/politics/janet-yellen-gdp-recession-cnntv/index.html

Wall Street Walls, Wall-Closure Rates, and Job Openings: When Do Americans Really Want to Leave the White House?

The battle lines that have been drawn over raising the debt ceiling, a now-perpetual Washington crisis of its own making, will be used by House Republicans once again, as they seek to take the majority.

“The President and I agree that America should not be held hostage by members of Congress who think it’s alright to compromise the credit rating of the United States and to threaten default on US Treasuries, which are the bedrock of global financial markets,” Yellen said.

She made clear she wouldn’t be a part of the time period that usually leads top officials to leave an administration. Reports that she told the White House she wanted to stay next year were false, and she said it was an accurate read.

The program that we talked about was very exciting to me, said Yellen. It strengthens economic growth and addressing climate change, and strengthens American households. And I want to be part of that.”

The logic behind Powell’s attention on job openings is simple. They are a direct measure of demand, since employers typically don’t try to hire when no one is buying their products. Companies must pay more to compete for workers when lots of companies are hiring, so they have a connection to wage growth.

If people are concerned about the economy, they won’t quit, so economists look at it as a sign of confidence. Job-switching contributes to wage growth because people usually don’t jump employers without a raise. The data released by the payroll processing giant shows that people who switched jobs in October saw their salaries double as quickly as people who stayed put.

Take a survey on job vacancies and quits. The number of job vacancies in the US was not predicted to fall by the economists as the Federal Reserve slows business growth to tame inflation. Instead of going down to 10 million it came up to over 10 million.

The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Consumers continue to spend and their wages are growing. That can not continue indefinitely.

“Reducing inflation is likely to require a sustained period of below-trend growth and softening of labor market conditions,” Powell said Wednesday. Restoring price stability is necessary to achieve stable prices and employment in the long run.

The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

The Democrats are going to have a hard time holding on to power next week because of inflation’s pain in comparison to job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.

A little over a decade ago, the dominant narrative about the housing market was that Millennials simply weren’t buying. They were either too cheap, lazy, or itinerant to commit to something as weighty as a mortgage.

It did not hurt that Baby Boomer parents with large investment portfolios were willing to give some of the gains to their kids.

A Realistic Real Estate Market, Mortgage Rates, and the American Dream: The Failure of First-Time Buyers in the Construction and Real Estate Era

Those who have successfully closed on a home because of rock-low mortgage rates should be very lucky as the housing market goes bust.

Here’s the deal: On Thursday, a new report showed that first-time buyers made up just 26% of all homebuyers in the year ending in June — an all-time low over the four decades that the National Association of Realtors has been conducting its survey.

“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. Mortgage rates are also climbing while home prices are increasing.

The Federal Reserve raised interest rates to tame inflation, and mortgage rates rose throughout most of the year. But mortgage rates dropped in November and December, following data that showed inflation may have finally reached its peak, reports my colleague Anna Bahney.

“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.

Rather than rebuilding within existing neighborhoods, housing supply has expanded through “sprawling single-family subdivisions at the urban fringe.” That’s putting more people and homes in environmentally vulnerable areas, such as wildfire-prone regions of the West.

With affordability getting worse, it’s a good time for government to reexamine the way we frame the American Dream. If they are better represented in the elected office, then that will happen. As Schuetz argues, the upper-middle class Boomers in power now are, understandably, reluctant to change the system that got them where they are.

The Bank of England and the European Central Bank hiked its key interest rate to 0.75 percentage points in the past three years, and their effects on the UK and the unemployment rate

Hot on the heels of the Fed’s fourth-straight 0.75 percentage point rate hike, the Bank of England followed suit Thursday, raising its own key interest rate by the same amount — its biggest hike in 33 years. The European Central Bank did the same thing last week.

(Side note: “Basis points” are how central bankers talk about rate moves, which usually happen in tiny increments. The percentage point is one basis point.

Daniel Zhao, an economist at Glassdoor, said that the economy has transitioned from white hot to red hot. “It’s still a very hot labor market but it has cooled down.”

The report offered a final glimpse of the economy before the midterm elections next week, and it will almost certainly make its way into both parties’ closing pitches to voters.

Morgan Stanley Global Investment Office’s head of model portfolio construction said today’s stronger than expected report shows the difficult task still ahead for the Fed in wrestling a resilient labor market and sticky inflation. It was the lowest reading in nearly two years, so it wasn’t a huge deal for investors who were hoping for a dovish Fed.

The unemployment rate had been expected to rise to only 3.6%, as predicted by economists. The unemployment rate is calculated using a separate survey of households rather than the employer survey used to count workers on the job.

Wall Street Dynamics in the Pre-Big Bang Era: Are We Near the End of the High-Inflationary Phase? Goldman Sachs’ View on Inflation

Powell suggested a further slowdown in Fed tightening could be on the way. Hopes that inflation pressures are easing helped stocks recover a bit in the fourth quarter.

People are still feeling the struggles at the kitchen table, no matter how many jobs I am able to get in front of this camera, he said. The inflation reduction act of the Biden administration is being worked on to address rising prices.

The four step path from the high-inflation economy of today to a low-inflation economy of the future is still plausible, said Jan Hatzius, chief economist of Goldman.

But Goldman Sachs pointed out the transition to more sustainable — but still positive — economic growth “has already occurred, and it looks durable.” The bank expects gross domestic product growth of about 1% over the next year.

Goldman Sachs concedes that there has been “much less progress” on the price side. Inflation metrics have mostly stopped getting worse but they also haven’t really got any better either.

The Last Coincidence: Inflation, Recovery, and Predictions for the Stock Market, Consumer Prices, and Real Estate – The Story of Paul R. La Monica

CNN Business published a version of the story. Before the Bell newsletter came out. Not a subscriber? You can sign up right here. Clicking the same link will bring you an audio version of the newsletter.

The stock market had its best day since 2020 on Thursday after a key inflation indicator came in weaker than expected. The report meant that investors interpreted as suggesting that peak inflation may be behind us. That means the Federal Reserve could be less aggressive with its rate hikes.

The latest measure of inflation showed that the Consumer Price Index for November came in at 7.1%, down from the 40-year high of 9.1% hit in June; prices for used cars, lumber and gas — once poster children for the painfully steep price hikes — have come down; and housing prices and rents have also been on a downward trajectory.

If investors think about a central bank pivot, they’ll get their hopes up, but then another piece of negative data or a Fed official’s message will kill them.

The pathway to reining in inflation has narrowed due to projections from the Fed and other economists.

The economy will weaken less if the Fed is not as strict in tightening, according to a note from Bill Adams.

The advocates of cryptocurrencies hoped that rising inflation and interest rates would cause investors to shun the dollar and use alternative assets like gold and Bitcoins. Paul R. La Monica reports that they have been in for a rude awakening.

There’s no place to hide in the market where there are so many worries about rate hikes and recession.

The Crypto Thaw: What Happens When the Economy and Interest Rates Begin to Decay During a Crypto-Thaw?

A crypto thaw: Bitcoin soared through the Covid-era on the wings of near-zero interest rates, stimulus cash and a big influx of investors from large-scale institutions. It reached a new high of over $70,000 in November.

The dollar strengthened significantly, making investors want to use it as a safe haven. At the same time as the economy began to sour, those who still believed in the risk of the asset left in droves.

From mid 2020 onwards, there have been a lot of gains in the way ofBitcoin and ethereum. Digital Assets are still performing better than tech stocks over the longer time horizon, according to Jeff Dorman, Chief Investment Officer at Arca.

With the mortgage rates going up, the buying power of buyers has gone down. That has pushed many buyers out of the market and those who remain may need to look at a lower price point or make compromises on the location, size, or condition of a house in order to find one that is affordable.

Traders are betting on just a half-point increase. The Chicago Mercantile Exchange show 80% of a half-point hike in federal funds futures.

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

Inflationary Resummation in the New Economy: Why It May Not Be That Simple, But It May Slow Down Over the Past 12 Months

But it may not be that simple. The Producer Price Index rose 7.4% over the past 12 months, according to the government. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

“There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case,” Powell said. “It will take some time.”

The Fed released its latest economic projections last week and it shows that board members think inflation will stay higher than previously thought. Fed board members expect the PCE inflation to end in 2023 at 3.0% and the core PCE to finish next year at 3.5%, above the central bank’s target rate.

Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

            (LEN) and Trip.com

            (TCOM)

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

The US economy isn’t in a recession yet. Is the American shopper tapped out? The retail sales figures for November will be released on Thursday.

So it’s possible consumers were simply getting a head start on holiday shopping. Retail sales have been affected by inflation since people have to spend more money for stuff.

Everyone has been talking about inflation this year. Cosserat said that disinflation will be more important in the years to come.

What can investors learn from the November jobs report? An investor-friendly view of the Fed, Hermes and L’Oreal in a tight labor market

What is it that means 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: Eurozone PMI; UK retail sales; earnings from Accenture

            (ACN), Darden Restaurants

            (DRI) and Winnebago

            (WGO)

The closely watched November jobs report showed a resilient labor market, which caused the stock market to plunge. The number of Americans who were looking for unemployment benefits fell in the week that ended Thursday, suggesting a tight labor market.

Jon Stewart, host of The Daily Show, said after the meeting that the Fed was committed to putting us in a high unemployment recession.

I don’t think the Fed can navigate that without hitting a recession, and I think it is a really narrow path. It is a tough task if a soft landing is avoiding a recession. If it’s a milder recession than recent history, I think that’s still in the cards.”

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. The investors will be watching the jobs numbers very closely.

Bankman-Fried is a House of Cards on a Foundation of Deception, and Will he Return to the United States soon?

It remains unclear what time Bankman-Fried will appear in court. He would probably return to the United States quickly if he doesn’t bother to fight his deportation. He will appear before a judge in the US for a bail hearing.

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.

According to the lawsuits filed by US market regulators, Bankman- Fried built a house of cards on a foundation of deception and lied to investors and customers about the safety of it.

Super Saturday is the busiest shopping day of the year before Christmas. Super Saturday is on December 17th, because Christmas Day falls on a Sunday and Christmas Eve falls on a Saturday. According to the National Retail Federation, 158 million people are expected to shop that day.

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

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

Inflation, Consumer Spending and Profitability: An Overview from a Consumer Focused Approach to the November 12th Annual PCE Report

Retailers sit on an oversupply of goods for too long, so it costs them. Retailers who store their merchandise in their own distribution centers can have a lot of space to work with, with some wiggle room for excess inventory. But costs add up if more space is needed for a protracted glut that they can’t quickly clear out.

Also, unsold products lose value over time. That’s especially true with fashion clothing as savvy shoppers won’t buy last year’s style if the trend has passed. Stores are then forced to heavily discount, which impacts profitability.

Well ahead of the final full weekend before Christmas, stores this year were already offering discounts of 50% to 60% off, and tacking on free shipping for online orders.

“I’ve studied the holiday season for 20 years and haven’t seen discounting so dramatic,” said Ross Steinman, professor of consumer behavior at Widener University in Chester, Pennsylvania.

Retailers are anxious, he said. “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 Core PCE, which excludes food and energy, was up 4.7% on a year-on-year basis and only marginally down on a monthly basis.

The consumer price index and producer price index have been decreasing in recent months, and the annual increases for the PCE inflation index hit their lowest level in over a year.

Friday showed that spending rose in November at a slower pace than in previous months. Spending was up in November by a small margin over the previous month. Personal income was up by 0.7% in October but fell by 0.4% in November.

The PCE report provided a snapshot of an economy in transition. The Fed has been tasked with reining in the highest inflation since the early ’80s and has undertaken a series of big interest rate hikes.

She added: “Their outlook for the economy may have improved, but it remains relatively weak. The health of robust consumer spending depends on continued strength in incomes and labor markets.

Inflation within the services sector is still going up, and it isn’t abating soon. The services index registered a monthly increase of 0.4%, and an annual increase of more than 9%, Faucher noted.

The Fed is worried that wage growth might cause service prices to go up even more than inflation because of reversing housing costs, he said.

December Commerce and Transportation Orders Drop During the First Month of the Pandemic, and Consumer Confidence in the U.S. Economy

The Commerce Department’s report showed that new orders for manufactured goods fell in November, the biggest monthly drop since the beginning of the Pandemic.

There were new orders for transportation equipment, specifically non-defense aircraft and parts. Excluding transportation, new orders increase 0.2%.

DianeSwonk, chief economist for kpmg, said after the release of the report that core durable goods orders slowed but did not contract, indicating 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.

“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 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.

Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.

The Fed Open Market Committee Meeting Summary: Preliminary Results of the Decline and Rise of the U.S. Economic Inflationary Rates

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.

Employers are hesitant to lay off people because of the strength of the economy and other areas of it, while those who are unemployed can get rehired quickly.

” 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 him is pretty much how you get to the soft landing.”

The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. A press conference led by chair Powell on the second day of the meeting will be the last thing the group will do over the course of two days.

Below are the meetings tentatively scheduled for 2023. Thedot plot, a chart of where the Fed member expects interest rates to go in the future, can be found in the Summary of Economic Projections.

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. All three major US markets suffered their worst years — by far — since 2008.

The American Economy in the Light of Recent Labor Market Data and Inflationary Results from the Sloan Digital Asset Management (Daily Tech News)

New numbers published last week show first-time applications for unemployment benefits edged up to 225,000. That’s still low historically and almost exactly where jobless claims were a year ago, long before recession fears emerged.

There is a big question weighing on everyone’s mind at this time, whether the US will enter a recession this year. The health of the economy will be determined by three things: the strength of the labor market, the American consumer and the Federal Reserve.

Gas prices went above $5 a gallon for the first time in June. The national average for regular gasoline recently dropped to a low of $3.10 a gallon, and it has crept higher in recent days to around $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.

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.

Despite the fact that the economic reports are more frequent as of late, the stock market has been choppy on the latest figures about inflation.

The weaker than expected report on health of the manufacturing sector and more signs of strength in the jobs market caused more market volatility.

That is why investors will be looking at the weekly jobless claims numbers, as well as the report from Automatic Data Processing about the private sector job market. More alarm bells could be set off regarding inflation and Fed rate hikes.

Wage growth is going to be scrutinized. Worker compensation increases tend to 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.

According to a report by New York Life Investments, the mismatch between labor supply and demand continues to put upward pressure on wages.

The number of jobs added is likely to be less than the number of worker paychecks in the Friday jobs report from the Fed. Wall Street may do the same.

The jobs market is in good shape. But you wouldn’t know that from what’s going on in Silicon Valley. The software giant has a component. 10% of its workforce was laid off on Wednesday.

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.

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.

“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing,” said Salesforce chair and co-CEO Marc Benioff in a recent note to employees.

“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 Dynamics of the Global Economy: December is Salad Days of the New Year, and Investors are Rejoind in Their Predictions

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 Anna Cooban of CNN, the investors in Europe are growing more hopeful that the pace of price increases in Germany and France is starting to slow. A drop in energy prices is leading the pullback.

The British Retail Consortium said in a report Wednesday that food prices surged 13.3% in December. The number of items purchased by consumers fell 1% during the four week period ending on December 25 but sales hit a record, according to another report.

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. This time in January, there is a certain clarity.

The week has been about jobs and investors are watching a bunch of data to see how the economy is doing with a strong labor market.

The labor force participation rate rose in December to 62.3%, a two-tenths of a percentage point. The percentage of people working or actively looking for work remained constant throughout the year, even after three months of declines.

In an interview with the Financial Times this week, Gita Gopinath urged the Fed to continue with rate increases in order to maintain labor market resilience.

Will wages moderate this year? Goldman analysts think that they will. Wage growth will slow from 5% in a year to 4% by the end of the year as unemployment grows, they believe.

Do US Retail Sales and the Inflationary Rates will Fail in 2020? An Update on Fed and Mortgage Rate Sensitivity

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.

US retail sales fell 0.6% in November, the weakest performance in nearly a year. 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.

In the minutes from the December Fed meeting, central bank officials spelled it out for interested parties: No policy makers anticipated that rate cuts would be appropriate in 2023. The Committee would have trouble restoring price stability if there was an unwarranted easing in financial conditions.

Officials welcomed softer inflation reports in recent months, but stressed that more evidence of progress was needed and that inflation was still high.

The 30-year fixed-rate mortgage averaged over 6 percent in the week beginning January 5, up from 6.42 percent the week before 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 Americans are too lazy to sell and not interested in keeping down their mortgage rates.

Source: https://www.cnn.com/2023/01/06/investing/premarket-stocks-trading/index.html

The Fed’s First Money-Measurement Making Meeting: Predictions for the Decline of the Labor Market in the First Five Years of QCD Inflation

The home goods chain said in a regulatory filing that it has a significant doubt about its ability to continue.

Sources said Bed Bath & Beyond is about to file for bankruptcy in a few weeks. Bed Bath & Beyond did not immediately respond to a request for comment from CNN.

And yet, while the Federal Reserve’s aggressive rate hikes have helped make a dent in inflation and resulted in slower economic activity without stark rises in unemployment, the full effects have yet to come, Fed Chair Jerome Powell warned Wednesday.

“I would say it is a good thing the disinflation we have seen so far has not come at the expense of a weaker labor market,” Powell said in a news conference following the Fed’s first monetary policymaking meeting of the year. The inflationary process you are currently viewing is at an early stage.

Julia Pollak, senior economist at ZipRecruiter, said that could mean we’re headed for a better labor market or a worse one.

Pollak and other economists are going to look beyond the headline indicators of payroll gains, unemployment and average earnings when the January jobs report is released Friday morning.

That’s down from the January 2021 high of 35 hours when the average workweek ballooned as workers were scarce and other employees were forced to pick up the slack and the extra shifts, Pollak said.

“The recent decline in temp staffing is mostly the result of a healthy recovery in full-time, in-house hiring,” Pollak said. If it falls below 3 million, that would be a warning sign.

Temporary and contract hiring can show where businesses expand and reduce their workforce at the margins, said Sarah House, senior economist at Wells Fargo.

The fact that they are paring down suggests that they don’t see the point in expanding as much as they did before.

The gap grew in December based on Wednesday’s labor turnover data. There were 11.01 million job openings, or 1.9 available jobs for every unemployed person that month.

Information Asymmetry in the Labor Market: Why the US Economy is Going Through a Phase of Boomer Ageing and Demographic Shifts

He said that there might be some information asymmetry that is happening because of demographic shifts and the aging of Baby Boomers.

He said that there are people out there who don’t know how many jobs are out there in the labor market. “And I think that’s a function of being a little removed. The world has changed pretty dramatically over the last two to three years, and it’s going to be difficult to show people that the skills they possess are needed right now.”

“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.”

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 did not fall completely during Powell’s discussion, but fell in early afternoon trading, with the Dow down by around 200 points or 0.6% and the S&P lower by 3.0%.

We may have to raise rates more if we get stronger labor market reports and higher inflation reports, he said.