Wage Growth During the December Equilibrium Collider Blast-Field Collision and the Postpandemic Phenomenon
Investors cheered the fact that wage growth, measured by average hourly earnings, rose only 4.7% over the previous 12 months in October. But year-over-year wage growth perked back up to 5.1% in November. Economists are predicting that wage increases cooled a bit, to 5% annually, in December.
wage growth will be looked at. An increase in worker compensation historically tends to lead to more inflation. If consumers have more money, they can afford to pay more for products and services.
When people have more money in their wallets (virtual or good old-fashioned leather ones), they tend to be more willing to spend it. That gives companies additional flexibility to raise prices.
The problem is that wage growth above 5% is still historically high. Before the pandemic, wages typically rose just 3% year-over-year. But labor shortages, due to Covid-19 and people dropping out of the workforce, shifted power from employers to employees when it came to worker pay.
The Fourth and Fifth Quarters of the Fed: A Bear Market for Wall Street and Wall Street Tuned by Consumer Shopping and Price Fluctuations
The PCE rose 6.2% in August from a year ago, according to the government. That was not as high as Julys reading.
The Fed’s latest economic projections that were released last week showed that board members were expecting inflation to remain slightly higher for longer than previously forecast. Fed board members now expect PCE inflation to end 2023 at 3.1% and core PCE to finish next year at 3.5%, above the central bank’s target rate of 2%.
“Shoppers are the firewall between an economy in recession and an economy that skirts a downturn,” Zandi wrote. “While the firewall is sure to come under pressure, particularly as financially hard-pressed low-income households struggle, it should continue to hold.”
The third quarter is over. It’s been another doozy for the market. September in particular was bleak. It was the worst month for the Dow since the start of the pandemic in March 2020.
But even though we’re seemingly in a bear market for everything as bonds, gold and bitcoin have all tumbled this year as well, there are some hopeful signs for the next few months.
The fourth quarter is typically a festive time on Wall Street. Investors tend to buy stocks in anticipation of robust consumer shopping during the holidays. Businesses spend more money to get their budgets under control. Some companies give rosy guidance in October about their earnings expectations.
The editor-in-chief of the Stock Trader’s Almanac said that October has been a “bear killer” if you will.
The Top 10 Reasons Why We Are Investing in the U.S., What Do We Want to Know About Inflation, Rates and the Global Economy?
If Republicans take control of the House in the fall, traders will be keeping a close eye on Washington. That could lead to more gridlock in DC, which investors tend to like.
The debate about whether or not Corporate America and investors are going to be bullish for October is up for debate due to the concerns about inflation, rates and the global economy. October is known for huge crashes, most recently in 2008 and in 1987 and 1929.
Christopher Wolfe is chief investment officer of First Republic Private Wealth Management. “A lot of quality companies are on sale. It’s a time to be patient and reposition.”
Thursday: US weekly jobless claims; earnings from ConAgra
(CAG), Constellation Brands
(STZ), McCormick
(MKC) and Levi Strauss
(LEVI)
According to the survey released Monday, a lot of respondents think America will experience a recession in the next year and a small number of people think the nation is already in one.
The tight labor market is making inflation more entrenched because of the rapid wage growth. The Consumer Price Index, which measures a basket of goods and services, was 8.3% year-over-year in August. That’s lower than the 40-year high of 9.1% in June, but still painfully high. The Federal Reserve is likely to cause the economy to go into a recession in just three years.
“But you know, having said that, I think we have a fighting chance of getting through the next year without an economic downturn.” He says businesses are reluctant to lay off workers because of their number one problem; finding and retaining workers.
The US economy has been flashing warning signs for months. Stocks and bonds are both in bear territory, and many analysts say the market could remain volatile until inflation gets under control. The economy contracted by 0.6% in the second quarter of the year, according to the Bureau of Economic Analysis.
That path to the Fed’s 2% inflation target is through the jobs market. “There will be some softening in labor market conditions,” Powell said. I hope there is a painless way to restore price stability. There isn’t. The best we can do is this.
Summers on Thursday specifically cited the OPEC+ decision to dramatically cut its oil output targets as a risk to the US economy. This isn’t good news that we’ve gotten from them. The risks with respect to inflation are increased. It increases the risks with respect to recession,” he said.
The group of major oil producers, which includes Saudi Arabia and Russia, said Wednesday that it will slash oil production by 2 million barrels per day, the biggest cut since the start of the pandemic, in a move that threatens to push gasoline prices higher just weeks before US midterm elections.
The Biden administration stated in a statement that the decision will hurt low and middle income countries because of the high energy prices.
The Statistical and Economic Dynamics of the US Economy in the Pre-Pandemic Era after the H1N1 Swine Flu Epidemic
Editor’s Note: Gad Levanon is the chief economist at the Burning Glass Institute. He’s the former head of The Conference Board’s Labor Market Institute. The opinions are of his own.
The US economy added 2.3 million jobs in the last six months, more than any other six-month period in the 20 years prior to the H1N1 swine flu epidemic, as GDP declined at an annual rate of 1.1%.
Employment growth has remained strong. First, the US economy is holding on better than many expected. While the economy is growing at a slower pace than it did a year ago, we are not in a recession, according to the Atlanta Fed. When the demand for goods and services strengthens, so does the demand for workers producing these goods and services.
There is a worry by Rajan that companies are not laying people off because it’s hard to find the right workers.
Many industries are growing faster than usual because they are recovering from the Pandemic. Convention and trade show organizers, car rental companies, nursing homes and child day care services, among others, are all growing fast because they are still well below pre-pandemic employment levels.
“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.
There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. But it’s hard to engineer a boost in labor supply. That takes the kind of legislative action needed to increase immigration, drive people into the labor force or grow investment in workforce training. This is likely to be hard to find in the current political environment.
What Have We Learned From the Fed Over the Last 14 Years? Nomi Prins: A Primer on the State of the Economy and the Fed
Mr. Biden said the report showed “some progress” in combating the increases, noting that costs have climbed by less over the past three months than they had in the prior three months. He acknowledged that inflation was still very high.
The Fed’s recently revised script calls for the federal funds rate, the central bank’s benchmark borrowing rate, to move higher, but at a slower pace than in the past several months.
A report by strategists at the BlackRock Investment Institute also noted that inflation for services companies (think retail, banking and tech, among others) is likely to remain “sticky due to worker shortages fueling wage growth.”
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
What can we deduce from this? A decade of free-flowing money from the Federal Reserve to banks has caused two economies, according to Nomi Prins, a former managing director at Goldman Sachs. Wealthy Americans and corporations benefited directly from years of low rates, which kept money flowing into businesses and stocks high while Main Street suffered from decelerating wages and little support. There is a distortion where economic prosperity and market behavior have nothing to do with each other.
What is happening? The stock market has always been unpredictable. The reality is that analysts and economists tend to make very strong guesses, but still make guesses, when they attempt to predict or apply a rational explanation to market moves.
The Federal Reserve is mandated to keep prices in check, but also to boost markets, according to the Fed’s unofficial mandate. “We’ve seen that over the last 14 years,” she added. Beginning in 2008, interest rates for overnight bank borrowing in the United States were set low, near zero, and Fed officials pursued an aggressive monetary easing policy, where they infused money into the financial system by purchasing Treasury securities from the US Government. She explained that the idea of the stock market going up was pervasive in the finance world.
The bulk of this stimulus flowed upwards into markets and not outward into the economy at large and created a world where investors became dependent on the Fed while the larger economy suffered, said Prins.
When the Federal Reserve began raising rates earlier this year officials publicly said how important their credibility was in lowering inflation rates. Americans would need to believe that the central bank is steadfast in its fight to bring prices down if it succeeds, they said.
But investors don’t believe it, says Prins. That’s why they continuously appear to think a policy pivot is coming even when the Fed says it isn’t. They understand, says Prins, that eventually the Fed will return to its long-term policy of aiding markets.
She believes it is Main Street that has been hurt by the recent interest rate increases, as well as a slower jobs market.
Consumer prices went up in November. It wouldn’t be very low at any other time in the past 40 years. But this marked the fifth-straight month of improvement and a significant cooldown from 9.1% in June. It is the lowest annual inflation rate in a year.
The Yellen-Landau Survey of UK Small Business and Consumer Products: The Importance of Supply and Labor Shortages in the First Half of the Millennium
Shortages of raw materials and labor continue to hinder businesses’ operations, according to the survey. The share of respondents reporting shortages did not decline from previous records.
Britain has had at least three prime ministers in seven weeks and it will be a challenge for Sunak to project stability. But his other task — shepherding the country through a recession — is poised to be just as daunting, reports my colleague Julia Horowitz.
Sunak campaigned for the job over the summer with promises to help households tackle the rising cost of living, which is causing many to pull back spending. He promised to cut taxes but only if the price went down.
Yet the economic outlook has deteriorated sharply since then — not least because of the market turmoil unleashed by Truss’ now-abandoned plan to slash taxes as soon as possible and boost government borrowing.
▸ Coca-Cola
(KO), UPS
(UPS), Raytheon
(RTN), Twitter
(TWTR) and GE
(GE) report third-quarter earnings before the bell.
October Consumer Confidence is expected to be released by the Conference Board at 10 a.m.
The latest data showed a necessary slowdown in key areas of the economy that left open a pathway to a softer landing, and this is where the optimism comes from.
But Yellen agreed with the President’s assessment that the economy remains strong, standing out in comparison to how other economies around the world are fairing.
The Bureau of Economic Analysis released initial estimates on Thursday that show gross domestic product rose by an annualised rate of 2.6 percent in the third quarter. That’s a turnaround from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.
The Yellen-Biden Manifesto: Rebuilding the American Economy out of Covid-19 with Private Investment and Research and Development
The balancing act that 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 pledged to tackle soaring prices was underscored by Yellen’s view.
Efforts by the administration to take advantage of the record have been undermined by the reality. Biden was asked about the economy last week, and said it is strong as hell.
The administration is frustrated that the attempts to pull the US economy out of crisis haven’t received credit they think is merited.
Many families in the America could have faced difficulties due to the many problems we could have had. The problems that we don’t have are because of what the Biden administration has done. Sometimes one doesn’t get credit for problems that don’t exist.
As part of a government push, Yellen traveled to Cleveland to highlight the legislative wins and private sector investment that has driven manufacturing around the country.
It’s a critical piece of an economic strategy designed to address many of the vulnerabilities and failings laid bare as Covid-19 ravaged the world with federal investments in infrastructure and shoring up.
Even though she admitted that it would take time to fully implement the major private sector investments, she still described them as real tangible investments happening now.
“But you’re beginning to see repaired bridges come online – not in every community, but pretty soon. Many communities are going to see roads repaired or bridges repaired that have been falling apart We’re seeing money flow into research and development, which is really an important source of long term strength to the American economy. America will become a more competitive economy, and its strength will increase, she said.
Source: https://www.cnn.com/2022/10/27/politics/janet-yellen-gdp-recession-cnntv/index.html
The Fed Shutdown: What Do We Need to Know to End the Debt Limit? Yellen’s View of the U.S. Housing Market
The debt ceiling battle lines will be drawn again should the Republicans win the majority in Congress, which they are prepared to do if that is the case.
But Yellen, who has long highlighted the “destructive” nature of the showdowns, has also backed doing away with the debt limit altogether through legislation. A group of House Democrats wrote to Democratic leaders to request that action in the lame duck session of Congress, but Biden rejected the idea this week.
As the administration moves toward a time period that traditionally leads top officials to leave an administration, she made clear she did not plan to be one of them. Asked about reports she had informed the White House she wanted to stay into next year, Yellen said it was “an accurate read.”
“I feel very excited by the program that we talked about,” Yellen said. I believe it strengthens economic growth, addresses climate change, and strengthens American households. I want to be part of that.
There was a huge change in the US housing market last year. The longest month-to-month slump in recorded history was caused when mortgage rates doubled and sales plummeted. A lot of people looked on from the sidelines.
The stock surge was good for Baby Boomer parents who have large investment portfolios and were willing to pass on some of the gains to their kids.
The Real House Price Boom Into 2020: The Prospects for Generation Z and the First-Time Buyers in the U.S. Real Estate Market
As the housing boom that started in 2020 begins to go bust, those who closed on a home in the midst of competition should be very lucky.
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.
Student debt, child care and other expenses are the things that have to be saved for, according to Jessica Lautz, vice president of demographic and behavioral insights. Home prices have increased this year, while mortgage rates are climbing.
What will happen to the housing market this year? Between the spring of 2020 to the spring of 2022, home prices rose 40%, marking the 10th year in a row of price gains. Will what went up also come down?
The policies that regulate land use make it difficult to add more homes to desirable locations, according to Jenny Schuetz, an urban economist at the Brookings Institution.
The housing supply has been expanded through single- family subdivisions at the urban fringe. That is placing more people and homes in areas that are vulnerable to fire.
It’s a good time for federal and local governments to rethink the way they portray the American Dream. If Gen Z and Millennials are better represented in the government, 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.
How the Fed raised interest rates and inflation has shaped the U.S. economy, as it did in the first two years of the 21st century
In its seven meetings starting in March, the central bank’s policymaking arm raised its benchmark interest rate by a cumulative 4.25 percentage points. The sharp hike in rates has started to filter through the economy, its effects showing up first in areas such as real estate, where mortgage rates were 6.27% this week, more than double the rate seen last year at this time, according to Freddie Mac data.
TheBasis points are the way central bankers talk about rate moves. One basis point = one-tenth of a percentage point.)
The Fed can never be beat, that’s what 2022, taught investors. Since a strong jobs report is indicative of a weak market, expect more good economic news.
There are investors who hope for a Goldilocks situation where the unemployment falls enough to convince the Fed that it has cooled the labor market enough to end hikes and not cripple the economy. That is a very narrow path to travel.
In a good-is-bad economy, the higher the wages, the higher the inflation, as companies pass on higher costs by raising the price of goods. A strong jobs report could make the Fed faster in their rate increase campaign.
While investors, business leaders and some economic models continue to warn a recession is imminent, Wall Street’s most powerful investment bank remains cautiously optimistic.
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. The inflation metrics haven’t got any better but they’ve mostly stopped getting worse.
The United Kingdom is the only G7 economy to have contracted in the third quarter and is now 0.4% smaller than it was at the end of 2019, before the coronavirus pandemic began, according to the ONS.
The fall was mainly driven by manufacturing, which saw a lot of declines. The services sector was flat overall, but consumer-facing industries did badly, with a notable fall in retail.
The extra bank holiday for Queen Elizabeth II’s funeral on September 19 also played a role, as some businesses closed or adjusted their operations that day, the ONS said. The GDP fell in September.
“Lower consumer spending appetite is likely to help push GDP into a second-straight contraction during the fourth quarter,” James Smith, developed markets economist at ING, said in a note on Friday.
The UK’s longest recession since the 1940s may be on the horizon according to the Bank of England. And the third quarter contraction contrasts with expansion of 0.2% in France and Germany, and growth of 0.5% in Italy.
The European Commission warned Friday that high inflation and rising interest rates are likely to tip the euro zone into recession in the fourth quarter. It now thinks inflation will peak at 8.5% by the end of the year.
In the first quarter of next year, the Commission said that economic activity will continue to contract due to inflation.
“Under almost any scenario, the economy is set to have a difficult 2023,” Moody’s Analytics chief economist Mark Zandi wrote in a report on Tuesday. The economy’s fundamentals are sound and inflation is quickly moderating. It’s plausible that the economy will avoid an outright downturn with a bit of luck and deft Fed policy.
The GDP figures show that the economy is moving towards a recession, according to the British Chambers of Commerce.
Weak economic growth in the UK causes pressure on the government as it tries to reestablish credibility with investors following a run over the pound and a bond market crash in September.
Finance Minister Jeremy Hunt reversed most of her plans in his first few days on the job, and is expected to announce hefty tax rises and spending cuts next week in a bid to reduce debt in the medium term.
Responding to the latest GDP figures, Hunt said: “I am under no illusion that there is a tough road ahead — one which will require extremely difficult decisions to restore confidence and economic stability. To obtain sustainable growth we need to control inflation, balance the books and get rid of debt. There is only one way to go.
Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”
Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.
But it may not be that simple. A key measure of wholesale prices has risen over the past year, 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.
The November Consumer Price index data is coming out on Tuesday just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.
The Fed meet, EU industrial production, and UK inflation are all on the agenda.
The concern is that the Fed and other central banks may not be able to lower interest rates on their own until it is too late.
“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. Recession risks are still relatively high.”
Implications of Inflation for US Stock Markets and Financial Performance: The Case for a Great Recovery in 2023, according to Arnaud Cosserat
Consumers may have just gotten 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 has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.
What does that mean for investors? Consumers should be looking for quality consumer companies with good pricing power and profit margins, Cosserat said. 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 worst year for US stocks was in 2022, due to recession fears. CFRA Research says that last year was the fourth-biggest drop in the history of the S&P 500.
Market analysts are not alone. According to the International Monetary Fund, the failure to predict a recession is almost indecipherable.
Truist’s base case is for a US recession in 2023 “even though economic growth in the US is expected to remain stronger relative to global peers.” Wells Fargo calls for a “moderate recession in 2023,” based on “a resilient labor market, slowing inflation, and lower interest rates.”
The market will be bumpy due to that. Analysts at JP Morgan wrote that US equity returns will be driven by earnings against a backdrop of elevated market volatility.
Markets will make a modest recovery and this will result in a more stable and prosperous second half of the year, according to analysts.
In spite of the stock market crash, many Americans still have a healthy financial cushion, as reported by my colleague Tami Luhby.
The net worth of households and nonprofit organizations fell $400 billion in the third quarter. The value of households’ stocks declined by $1.9 trillion, while their real estate holdings increased in value by $700 billion, according to data from the Federal Reserve released Friday.
The Edinburgh Reforms: Achieving the UK’s financial health by Relaxing Financial Regulation and Improving the UK Competitiveness in a Global Financial Hub
House prices, meanwhile, inched up by just 0.1% in the third quarter, compared to the prior quarter, according to the Federal Housing Finance Agency House Price Index.
The growth in household debt was slower in the third quarter than in the prior quarter. Home mortgage debt increased, while non-mortgage consumer credit increased but at a slower pace than the second quarter.
This “I’m OK, you aren’t” syndrome was especially clear in a Federal Reserve survey carried out in late 2021; we won’t have the 2022 results until later this year, but I expect them to look similar. 78 percent of households said that they were doing alright financially, a record high, while only 24 percent thought the national economy was good or excellent. Assessments of local economies, for which people have some personal knowledge, were in between.
Just two months after UK markets suffered their worst meltdown since the global financial crisis, the British government is promising a major relaxation of financial regulation in a bid to shore up the country’s banking and insurance industries against growing competition from cities such as Amsterdam and Paris, reports my colleague Julia Horowitz.
The measures were dubbed the Edinburgh Reforms by the UK Treasury. These include an effort to make it easier for companies to list shares in London, a rethink of short-selling regulations and a mandate for regulators to take account of growth and UK competitiveness when setting rules.
“We are committed to securing the UK’s status as one of the most open, dynamic and competitive financial services hubs in the world,” Jeremy Hunt, the UK finance minister, said in a statement.
The effort was originally dubbed a “Big Bang 2.0,” a nod to the rapid deregulation of UK financial markets under Margaret Thatcher in 1986. The reforms are expected to be more gradual so the ministers have moved away from that language.
Changes are being made to keep London as a global financial hub after Britain leaves the EU.
Wall Street Volatility, Digital Currency Prices and the Implications for Wall Street and Wall Street Wall Street: A Brief Note from Mr. Essaye
Long-term bond yields have eased as well, with the yield on the 10-year US Treasury edging back down to about 3.5% after moving above 4.3% in late October. That was the highest the 10-year has been since 2008.
“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 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.
The price of virtual currency fell more than 15% in November and has plummeted more than 65 percent this year. The remarkable collapse of crypto brokerage and exchange firm FTX, which was once valued as high as $32 billion, has investors in digital currencies wondering what the future will bring.
Sam Bankman-Fried will testify on Tuesday before the House Financial Services Committee. Bankman-Fried is not on the list of witnesses that the Senate Banking Committee will be holding on Wednesday.
The Fed announcement and press conference could be a distraction for investors. Although there is no guarantee of that.
The biggest question is if red-hot inflation can be mitigated without tipping the economy into a recession.
There is also a real risk of a self-fulfilling prophecy, where nervous business owners and consumers hunker down so much that they cause the very recession they fear.
“You get into this kind of self-reinforcing negative cycle,” he told CNN’s Early Start. We can’t risk talking ourselves into one if sentiment is this bad.
The CEO of the airline said that they were planning for a mild recession next year. People in the business world are trying to talk themselves into one and sometimes it feels like I do as well.
But he added, “If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary because we just don’t see it in our data.”
JPMorgan Chase CEO Jamie Dimon has expressed concern for months about an impending recession, citing higher interest rates and consumers spending down their excess pandemic savings.
With inflation still at the highest level in a generation and central banks around the world continuing to raise interest rates, the risks for 2023 are undoubtedly high.
Fed Chairman Jerome Powell is out of a recession, but the labor market is weaker than supply and demand: A lawyer’s perspective on Bankman-Fried’s case
He forecasts “just a moderate, steady slowing (in the job market) and economic activity as we move into next year. Hopefully we don’t lose faith and run for the bunker and go into recession.”
The closely watched November jobs report showed a resilience in the labor market, which caused the stock market to plunge. They fell again on Thursday when weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.
Fed Chair Jerome Powell did not mince words last week when he said that the strong job market is exceedingly responsible for inflation and will have to weaken before rate hikes end. “There’s an imbalance in the labor market between supply and demand,” he said, adding that it will take a “substantial period” to fix that imbalance.
What might happen: “Boy the Fed is really committed to this put us in a high unemployment recession thing,” Jon Stewart, former host of The Daily Show, tweeted after Wednesday’s meeting.
Powell was positive that the labor market was tight enough to weather an increase in unemployment without triggering a recession. The jobs numbers will be watched very closely by investors.
Bankman-Fried is expected to agree to extradition to the US, the person said. Kara Scannell reported that Bankman- Fried would withdraw his fight on Monday.
The Southern District of New York has 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.
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.”
Super Saturday: A Season of Christmas Discounting, as Revealed by a Consumer Behavior Professor at Widener University (NYS)
The Saturday before Christmas is known as Super Saturday, and is the busiest day of the year for shopping. 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 consumers are estimated to shop that day, according to the National Retail Federation.
Half of the gift buying has been completed, according to the NRF. With less than a week to go until Christmas Day, and drop-dead shipping deadlines approaching, people have a lot more buying to do.
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. If they have to hold on for too long, the costs will rise and 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 forced to heavily discount and this impacts their profitability.
This year, stores were already offering discounts of 50% to 60% off and tacked on free shipping for online orders in advance of the final full weekend before Christmas.
Ross Steinman, a professor of consumer behavior at Widener University, said that he has studied holiday season discounting for the past two decades.
He said retailers were very nervous. The clock is running so they have to maximize every chance to get consumers to make purchases.
Inflation Continues to Recover, and the Federal Reserve is Taking a Wrinkle in the Dust: PCE Results from November
The Fed’s preferred inflation indicator showed a moderation in price increases in November, giving another indication that the high prices of recent months are over.
The annual increases for both PCE inflation indexes hit their lowest levels in more than a year and follow a continued decline in other inflation metrics.
Friday’s report also showed that spending continued to rise in November, but at a much slower pace than in 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.
According to Faucher the economy is moving in the right direction from the Federal Reserve perspective, but not quickly enough. Consumer spending is being weighed down by higher interest rates and inflation is slowing.
However, inflation within the services sector has been a little “sticky,” and not abating as quickly. Friday’s PCE report showed the services index posted a monthly increase of 0.4% – unchanged from October’s rate – and a year-over-year increase of more than 11%, Faucher noted.
While housing costs are rapidly reversing, the Fed’s concern is that strong wage growth could lead to more inflation by driving up service prices.
December New Manufacturing Activity Declines in the Light of a High-Precision Commerce Department Measurement of the Economic Inflationary Year
The Commerce Department report showed that new orders for manufactured goods plunged in November, the biggest monthly drop since the start of the Pandemic.
Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. New orders increased Excluding transportation they increased.
Diane Swonk, chief economist for kpmg, saidcore durable goods orders slowed but did not contract after the release of the report. “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 consumer sentiment was 59.7, up slightly from a preliminary reading of 59.1, but still below the final reading in November of 56.8.
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.
Federal Reserve Chairman Powell used a number of tools to curb surging inflation during the past year, which made for a glaring spotlight on America’s central bank.
The Fed could be “continually hawkish” when it takes place in the beginning of the new century, according to an investment strategy analyst.
Powell said that a “structural labor shortage” remained a big headwind, attributing thelack of workers to early retirements, caregiving needs, Covid illnesses and deaths and a plunge in net immigration.
The First Two Days of the Federal Open Market Committee: An Overview of the Last Five Years and the First Results from Unemployment Benefits in the US
“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 Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.
Below are the meetings tentatively scheduled for 2023. A Summary of Economic Projections is included with the meeting with a dot plot that shows where interest rates will go in the future.
The stock market lost more than a third of its value in the period and one-fifth of the S&P 500 lost 20% of their value. In the last five years, the major US markets have had their worst years.
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.
The Recovery from a Slow Secession: The US Economy Is On The Way To Become Strong, Faster Than It Has Ever Been
After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. The average for regular gasoline in the US was at its lowest level in 18 months, falling to $3.10 a gallon, and has risen a bit in the last few days.
If the Fed hadn’t already done that, it would cause a recession, because they will raise rates so high and keep them there for so long.
Moody’s said in a slowcession — a phrase coined by Zandi’s colleague Cristian deRitis — economic growth “comes to a near standstill but never slips into reverse.” There would be an increase in unemployment, but not a spike.
The jobs market remains historically strong, inflation is cooling, real wages are heating up, gas prices have plunged and the Fed could be preparing to pause its rate-hiking campaign.
Zandi also pointed to relatively strong fundamentals in the US economy, including profitable businesses, healthy consumer balance sheets and a banking system that is “on about as strong financial ground as it has ever been.”
After prior recessions, the economy was plagued by troubling imbalances, such as overbuilt real estate markets or massive asset bubbles.
The last jobs figures for next year will be released on Friday. According to forecasts by economists, 200,000 jobs were added in the US in December. That would be a slowdown from the 263,000 jobs added in November.
The Federal Reserve could reduce the size of interest rate hikes if jobs growth slows down.
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.
The market volatility was caused by the weak report on the health of the manufacturing sector, as well as signs of strength in the jobs market given the solid report about labor turnover.
The weekly jobless claims numbers are due on Thursday morning as well as a report from payroll processing company ADP about jobs in the private sector. More alarm bells about inflation and rate hikes could come from further strength.
It is essential that Wall Street understand what is happening in the economy on Friday with the jobs report. The unemployment rate is expected to remain at 3.7%, close to a half-century low.
According to a report from New York Life Investments, the mismatch between labor supply and demand continues to put upward pressure on wages.
In other words, the Fed is likely to focus more on worker paychecks in Friday’s jobs report than the number of jobs added. Wall Street may do the same.
Overall, the jobs market is still in good shape. You would not know from what is happening in Silicon Valley. Software giant and component of the stock market. The company announced on Wednesday that it was laying off 10% of its workforce.
The hope was that consumers and businesses would continue to spend heavily on tech products and services, a notion that seemed valid as the economy quickly rebounded from a brief recession in 2020.
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. In a memo shared with employees, Amazon CEO Andy Jassy said they aren’t in heavy people expansion mode every year.
The Global Economy is Not Out of the Woods: Mortgage Applications in the UK and Europe are Decreasing due to a Declining Mortgage Rate
The global economy is 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.
Anna Cooban says investors in Europe appear to be growing more hopeful that consumer prices in Germany and France are starting to slow. A drop in energy prices is leading the pullback.
The British Retail Consortium said in a report that food prices increased in December. Meanwhile, data analytics firm Kantar noted in another report that UK grocery sales hit a record during the four weeks ending on December 25, even though the number of items that consumers bought fell 1% during the same period.
According to John Burns Real Estate Consultants, economists predict a 5% rise in prices this year and a 22% decline from the peak in 2022 to the trough.
“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. “While mortgage market activity has significantly shrunk over the last year, inflationary pressures are easing and should lead to lower mortgage rates in 2023.”
The current market driving away would-be buyers is because Americans don’t want to sell their house and pay too much for the mortgage.
But he said the tight inventory picture and strong unmet demand to buy a home suggests to him that, should mortgage rates drop a bit, there will be more movement in the market.
“Half of the country may experience small price gains, while the other half may see slight price declines,” said Lawrence Yun, NAR chief economist. “However, markets in California may be the exception, with San Francisco, for example, likely to register price drops of 10%-15%.”
As a result, the search for affordability is leading many would-be homebuyers toward lower-priced metro areas where the cost of a house can fit within more families’ budgets, said George Ratiu, manager of economic research at Realtor.com.
In some markets like Manchester, New Hampshire and Columbus, Ohio, for example, homes are still being sold as buyers from more expensive locations are lured by the solid local economies and median prices.
The 30-year fixed-rate mortgage averaged a higher rate in the week ending January 5, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.22%.
In November, as mortgage rates started a six-week tumble, the median monthly mortgage payment fell by 1.8% to $1,977 from $2,012 in October, according to the Mortgage Bankers Association.
The 30-year fixed mortgage rate is expected to fall to 5.6% as the Fed slows the pace of rate hikes.
The Season of the Mirror Image: Buyers and Developers in a Growing, Dynamic Real Estate Market. Steinberg, Gopinath, and Goldman Sachs
In 2023, we may see a mirror image of 2022 — a somewhat trying first half that gives way to a surprisingly strong back half of the year for buyers, said Leonard Steinberg, corporate broker at Compass in New York.
“The would-be buyers that stepped back from the market in late 2022 can’t and won’t stay away forever, especially given the competing demands from first-time buyers looking to get into the market and retirees looking to move or downsize,” Steinberg said.
Chronic under-building of new homes is also likely to remain a challenge across all market segments as builders grapple with the challenge of balancing a short-term decline in demand with the long-term need for more new housing, he added.
“The spring market will be busier and more competitive, for buyers, while the next two months will be the calm before a more hectic time,” said Tucker.
Tucker said that people might be surprised by how boring the market is. “It would be a great change of pace. It would be a wonderful surprise to see a boring, boring year in the housing market.
We are in the salad days of the new year, where many feel refreshed and motivated and possibly even optimistic about the coming year. During this time in January, there is a certain amount of clarity.
Jobs has been the word of the week as investors eye a slew of data highlighting a strong labor market that is confoundingly resistant to the Fed’s attempts to cool the economy.
In an interview with the Financial Times this week, Gita Gopinath, second in command at the International Monetary Fund, urged the Fed to continue with rate increases this year, citing the labor market’s resilience.
Will wages moderate this year? Analysts at Goldman Sachs predict that they will. They believe that wages will grow by 4% by the end of this year, rather than the current 5%.
Inflationary Perspectives on the Continuum Growth and the Implications for the U.S. Economy and Consumers in the 21st Century
Moynihan told CNN at the holidays that the strength of the US consumer is keeping the recession from happening.
The retail sales miss in November eroded market sentiment and was seen as a sign that the Fed could push the economy into recession.
The answer to this is crucial to determine what happens to markets this year and if the economy will fall into recession.
The softer inflation reports in recent months are welcomed by officials but they warned that more evidence of progress was required and inflation was still high.
There is “substantial doubt about the company’s ability to continue” because of its worsening financial situation, the home goods chain said in a regulatory filing.
The Wall Street Journal said that Bed Bath & Beyond is preparing to file for Chapter 11 in a few weeks. Bed Bath & Beyond did not immediately respond to a request for comment from CNN.
Now, this isn’t the first time I’ve written about the disconnect between economic perceptions and reality. In the past, however, I got a lot of pushback from people insisting that the public was in deep shock over the resurgence of inflation after years of more or less stable prices.
That position is becoming a harder one to sustain. Egg prices have gone up since last summer, but the prices of other goods have gone down. As I said, the overall inflation rate in the second half of 2022 was around 2 percent, which has been normal for the past few decades, while the unemployment rate in December, at 3.5 percent, was at a 50-year low. Inflation-adjusted wages, which were falling in the face of supply-chain problems, are rising again.
“Supercore inflation was a strong 6.4% on a year-over-year basis through December 2022, but it is moderating,” said Mark Zandi, Moody’s chief economist. For the three months through December, supercore inflation is up only 2.4% annualized, and just 0.9% annualized in the month of December.
Core services that don’t include housing are important for understanding the evolution of core inflation, Powell said recently.
The worst inflation in 40 years has caused American families to become household names thanks to an alphabet soup of economic data: PCE, ECI, and the Consumer Price Index.
The reports have shown that the price of food, fuel, and housing have risen more quickly than wages because of huge consumer demand, supply chain troubles, and the war in Ukraine.
“The Fed focuses on supercore because it includes those prices that are more likely to be driven by the cost of labor, which the Fed can more directly impact through changes in interest rates,” he said.
While helpful for economists to drill down on inflation’s drivers, there is a practical drawback to stripping out volatile categories like housing, food and energy: These are non-negotiable expenses for most households.
There is a chance that the January inflation will be worse than expected. Some of December’s rosy headlines came from falling gas prices, which have since reversed.
Why is there so many recessions? An economist at the University of Michigan professor says it’s unbelievable how fast our economy is going through a 50 year recession
A recession is when the economy gets smaller, i.e. produces less stuff: fewer laptops, trucks, lattes, and haircuts. Normally, when people are laid off and businesses shut down, everything goes on a super sale.
Wolfers says the most important and telling data in an economy is jobs data. After all, when the unemployment rate is low, people feel confident they can find a job if they need to: they spend, they invest, they ask for raises.
“We don’t quite know what’s going on,” says Raguhram Rajan, an economist and professor of finance at the University of Chicago’s Booth School of Business. This situation is not common.
At the root of this confusion: inflation. Last year, as inflation rose, the Federal Reserve took action to bring prices down by raising interest rates.
Raising interest rates is intended to slow spending. Higher interest rates make it more expensive for people and businesses to borrow money, so they borrow less, spend less and ultimately buy less.
In addition, she’s looking at housing permits, consumer confidence, manufacturing data, factory orders and consumer spending. A lot of the indicators are showing signs of a recession.
The number of layoffs we’ve seen this year, the rising price of basics such as food and electricity and the fact that consumers spent less than projected during the all important holiday shopping season are some of the things that come to mind.
What is the reason? Companies aren’t planning to lay off workers because it was so difficult to find people with the right skills. So this recession might not look like other recessions.
There might be no recession at all. The University of Michigan’s Justin Wolfers says all of the recession talk he’s heard is ridiculous.
Wolfers thinks a soft landing is in our country’s future, but not enough to cause companies to lose money and start going bankrupt.
“We’re celebrating unemployment at a 50 year low of 4%) right now,” he says. “These are levels that earlier generations of economists had said was impossible.”
Wolfers says that this kind of job growth is almost miraculous after what the economy went through three years ago at the start of the Pandemic.
If I had been told that in three short years, we’re going to have an unemployment rate that is never seen before, I wouldn’t have believed it.
If layoffs happen companies might begin to relax about finding people to fill jobs, and things might change really fast.
“If firms look around and say it’s not as hard to hire now.” and we’re holding onto these people… Everybody gets the idea at the same time, as if we should clear the deck as well. He said that a lot of people would lose their jobs at the same time.
This risk is similar to the Wile E. Coyote cartoons. “He runs off the edge of the cliff and doesn’t realize he’s over the cliff until after he looks down and falls.”
Source: https://www.npr.org/2023/02/17/1157456149/is-the-economy-headed-for-recession-or-a-soft-landing
Predictions for the Future of the US Economy: An Analysis of the National Association for Business Economics (NABE) Paper 2/17, 2000-2019
Dana says economics in school is clean. It doesn’t assume that labor shortages and shocks are associated with each other. Economic models can’t always handle those types of things.
In a time when the economic data has delivered mixed messages or flat out busted expectations, economists’ predictions for the year ahead are growing increasingly opaque.
The National Association for Business Economics’ latest survey, released Monday, shows a “significant divergence” among respondents about where they think the US economy is heading in 2023, the organization’s president said.
Estimates of inflation-adjusted GDP, inflation, labor market indicators, and interest rates are all vastly different in their opinions about the fate of the economy, according to Julia Coronado, President of the National Association for Business Economics.
The views of Panelists are mixed on how high the Federal Reserve may raise interest rates, how long rates might stay at the peak, and what the central bank will do in regards to each of these fronts. The consequences of China reopening on global inflation and the upcoming debt ceiling are both of concern to respondents, but they disagree on how they should affect the US economy.
They do not expect the downturn to swing into bust territory. 2% of respondents thought the greatest downside risk to the US economy was a housing market bust.
Instead 51% of respondents said the biggest downside risk was too much monetary tightening. Trailing far behind in second was the broadening of war in Ukraine, with 12%.