Wall Street and the Economy: Implications for the Future of the U.S. Wage System and for the First Five Years of the Great Recession
Wall Street will also need to dive even deeper into Friday’s jobs report to get a better sense of what’s happening in the economy. The unemployment rate is expected to stay at 4.3%, close to a half century low.
Wall Street will get the last jobs figures for 2022 on Friday morning. According to forecasts of economists surveyed, the US government is expected to report 200,000 new jobs in December. The 263,000 new jobs added in November would be a decrease.
Things are still very strong compared to those pre-pandemic normal times. And that’s part of what is keeping inflation elevated.
There is a particular dilemma for the Fed. It wants us to shop just a little less – but not a lot less. Unfortunately, there’s no magic formula for how much wages need to go down to make a dent.
Wages were up by 5.2% in the last jobs report. That is historically high. It does not keep up with inflation, which is around 8% year over year.
It might be worthwhile to look at the situation from a different angle if it comes in well below 250K, because you might see a renewed optimism that the Fed’s policies are starting to have their intended effect.
Phenomenology of the Emerging Market and Implications for Prime Minister Alexander Lukashenko’s Decelerating Economy
It’s hard to overstate just how delicate the situation is. In fact, just today the IMF’s managing director, Kristalina Georgieva, described the world as being in a period of “historic fragility” after a torrent of economic shocks over the last two-and-a-half years, from the pandemic to the war in Ukraine.
The Fed’s actions have made it more difficult for emerging-market borrowers to pay back dollar denominated debt, making them more nervous about the stability of their finances.
Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. The entry-level model will be more expensive than when it was first offered, due to ongoing supply chain constraints, rising material costs and other market factors.
(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. “From today, any price increase is prohibited. Prohibited!” The president is quoted as saying something.
Axios is not going to destroy humanity: Musk and Twitter postpone their deposition in the court fight over the $44 billion acquisition agreement
(CNN Business) Lawyers for Elon Musk and Twitter have agreed to postpone Musk’s deposition in the court fight over their $44 billion acquisition agreement, a source familiar with the negotiations told CNN. Musk was originally scheduled to give a deposition today, but he threw a curveball earlier in the week, offering to buy the company under the original terms of the deal in exchange for scrapping the litigation. The two sides are still haggling over various conditions.
Boston Dynamics, the company behind the video of its slobbering four-legged robot, is promising not to weaponize their products and will encourage other companies to do the same. According to a letter Axios reviewed, the company suggests it’s worried that customers don’t, like, believe them when they say they’re not building an army that’ll destroy humanity. Thankfully, they said they were not doing that. Phew!
At its peak, the company had over 4,000 employees, but it will leave with around 3,800 after letting go of 500 more. The company said the latest cut marks the last of CEO Barry McCarthy’s \major changes to restore the brand. And if it fails, McCarthy told The Wall Street Journal, Peloton likely isn’t viable as a stand-alone company. He will give it another six months.
Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html
Amazon Firefights: Why the Fed is Fading? The Case for Recovering from the Pandemic and the Economic Recovery After the Wall Street Left
(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 reported that the building smelled of smoke and it was difficult to breathe after the fire broke out. The workers walked off the job.
Higher borrowing costs make it costly to obtain a car loan, buy a house, or carry a credit card. That’s already curbing demand in some of the more sensitive parts of the economy, like the housing market.
It is not clear how much pain this will cause because so many countries are raising rates quickly and so in sync that it is hard to say how much will go down. It takes a long time for monetary policy to kick in.
But many economists and several international bodies have warned that there’s a pronounced danger or overdoing it, including a United Nations agency that warned the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.
The chief economist at the Burning Glass Institute is Gad Levanon. He was the former head of The Conference Board’s Labor Market Institute. The opinions he expresses are his own.
Low unemployment rates and wage growth may appear to be good for an economy that is close to a recession, but they have actually proven bad for markets.
Take the latest monthly JOLTS survey on job vacancies, quits and layoffs. The report surprised economists who had predicted a fall in job vacancies because of the Fed slowing business growth. But instead of dropping to 10 million, it surged to 10.7 million.
Third, many industries are growing faster than normal because they are still recovering from the pandemic. Convention and trade show organizers, car rental companies, nurses, child day care services, and others are all growing rapidly because they are still below pre-pandemic employment levels.
Next year, however, will look very different. Many of the industries that are still recovering from the pandemic will have reached pre-pandemic employment levels. The industries might return to slower hiring if demand doesn’t increase. But this is not likely to push job growth into negative territory. Monetary policy is what will do that.
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 prove elusive in today’s polarized political environment.
Despite higher interest rates, the job growth remained robust despite a slight easing in September. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.
“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.
The Fed is Getting Closer to Normal: Do We Need to Bring Inflation Down? Mr. Biden’s Comments on Fed Board Measurements and Rate Increases
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. But he acknowledged that inflation was still very high.
Last week the Fed released its latest economic projections and it showed the board was expecting inflation to remain higher for longer than had previously been forecast. Fed board members expect PCE inflation to end at 3% in two years, and core PCE to hit 3.5% next year, above the 1% central bank’s target rate.
The Fed is expected to increase the interest rates on overnight borrowing by banks to between 4% and 4.5%, which would be the highest in seven years.
“Interest rates have risen at a whiplash-inducing speed, and we’re not done yet,” said Greg McBride, chief financial analyst at Bankrate. “It’s going to take some time for inflation to come down from these lofty levels, even once we do start to see some improvement.”
Last month, the government’s latest scorecard says that annual inflation dropped to 7.1%, after hitting a high of 9% in June. That’s the smallest annual price increase in 11 months.
“We see today that there is a bit of a savings buffer still sitting for households, that may allow them to continue to spend in a way that keeps demand strong,” said Esther George, president of the Federal Reserve Bank of Kansas City. That suggests that we may need to keep going for a while.
In an interview on CBS on Sunday, Janet Yellen, the Treasury Secretary, said that there is a risk of a recession. I think it doesn’t need to bring inflation down.
“I have been in the camp of steadier and slower [rate increases], to begin to see how those effects from a lag will unfold,” George said last month. My concern is that the rate hikes may cause you to overstep and not be able to see the turning points.
“We are concerned that your interest rate hikes could slow the economy and make it harder for families to make ends meet,” Sen. Elizabeth Warren and her colleagues wrote in a letter to Powell.
What the Great Resignation Means for the Real Economy and the Deflationary Economy: Evidence from the United States, England, and UK
Shawn Woods said that his company stopped selling houses a month before the Fed started raising rates.
“I wouldn’t think we would go from 3% to 7% within six months”, said Woods, the president of Ashlar homes.
“I think we’re in for a long period of time,” Woods said. “Typically, housing leads us into downturns and it leads us out of downturns. And I think from a housing perspective, we’ve probably been in a housing recession since March or April.”
There are currently 1.9 jobs for every one person looking for work, a margin that the Fed worries is keeping inflation uncomfortably high. With plenty of options, workers are demanding higher wages; and with few applicants, managers are forking out higher pay, which bolsters demand for goods and services (and therefore drives up prices).
Fed officials have been hoping that as interest rates rise, companies would respond by cutting back on recruitment. We have only limited proof of such a trend.
You probably read about the “great resignation,” the surge in people leaving their jobs as the economy re-emerged from Covid-induced lockdowns. The narrative missed a key part of the phenomenon: Most weren’t quitting to sit on the couch. They were taking other jobs.
The risks of deflation were high across the US, England and UK in a survey byDeutsche Bank. Reid added that “there’s a strong consensus that the next US recession will start in 2023.”
Democrats hoping to retain power next week will have to contend with inflation being more of a problem than a concern about job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.
The Cut to 2020 Narrative: Implications for Boomers, Millennials, and the Governments that Own the Dream of Living in the Wild
Cut to 2020 and that narrative got flipped on its head. People in the suburbs don’t have the money to afford homes for young people. As demand for property increased, so did the furor, driven by people in their 30s who had been working hard for years, and had finally quit their jobs after the Great Recession.
(It also didn’t hurt that dizzying stock surges meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their darling Millennial kids.)
Those able to close on a home in the crush of competition due to rock-low mortgage rates should be very lucky.
The National Association of Realtors reported Thursday that the number of first-time buyers was 26% in the year ending in June, which is the lowest number in the four decades that the survey has been done.
Jessica Lautz, a vice president of Demographics and Behavioral Insights at the National Research Council said that people have to save while paying for things like rent, student loans and child care. Home prices have been increasing and mortgage rates are going up.
The Federal Reserve has raised interest rates andmortgage rates have gone up. The Fed raised interest rates for the fifth time this year and the fourth time, by 75 basis points, last week.
The policies that regulate land use make it difficult to add more homes in desirable areas, according to Jenny Schuetz, an urban economist.
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.
Now is a good time for federal and local governments to rethinking the way they frame the American Dream. But that will only happen if those who stand to benefit — Millennials and Gen Z — are better represented in elected office. Schuetz says the upper-middle class Boomer in power are reluctant to change the system that got them where they are.
The First Mile in a Marathon: The Fed’s Short-Term Interest Rate Rises by a Half a Point after the December Fed Rate Increase
After four straight increases of three-quarters of a percentage point, the central bank lifted rates by half a point in December. The Fed’s key short-term interest rate is now in a range of 4.25% to 4.5%.
(Side note: “Basis points” are how central bankers talk about rate moves, which usually happen in tiny increments. One basis point = one-tenth of a percentage point.)
It’s not all bad news: The first mile in a marathon matters. The report indicates that there is good news for the economy, and that it is possible for inflation to ease without a recession. That’s also good for markets.
Based on projections from Fed officials and other economists, the pathway has narrowed for reining in inflation while avoiding recession or significant layoffs.
The Rise of the Crypto-Coinsurers: An Overview of What Comes After Inflation, and How to Avoid the Misfortune
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a monthly or yearly subscriber? You can sign up here. You can listen to an audio version of the newsletter by clicking the same link.
Stocks surged on Thursday in their best day since 2020 after a key inflation indicator came in softer than expected. The report suggested that peak inflation may have been behind us, as investors broke out their party hats. The Fed could be less aggressive in its rate hikes.
The Summary of Economic Projections is due out on Wednesday and will be read closely by investors. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.
The advocates for cryptocurrencies hoped that rising interest and inflation rates would make people abandon the dollar and invest in alternative assets like gold and Bitcoins. They have been in for a rude awakening this year according to Paul R. La Monica.
The assets have gotten hit just like stocks and bonds, making it clear that there is no place to hide in a market worried about rate hikes and recession.
A Cryptothaw: The Case for Fundamental Issues in the Bitcoin and Cryptocurrencies Markets During the Covid Era
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 record high of more than $70,000 in November.
The dollar strengthened significantly as central banks started raising rates to fight inflation, spurring investors to become more risk averse. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves.
“Bitcoin and ethereum went straight up and down but they have still gained a lot from mid-2020. Over that longer time horizon, digital assets are still outperforming tech stocks,” said Jeff Dorman, chief investment officer at Arca, a firm that specializes in crypto.
“The housing market is the most interest-rate sensitive segment of the economy, and the impact rates have on homebuyers continues to evolve,” said Sam Khater, Freddie Mac’s chief economist. “Home sales have declined significantly and, as we approach year-end, they are not expected to improve.”
The traders think that there will be a half-point increase. On the Chicago Mercantile Exchange there is an 80% probability of a half point hike in federal funds futures.
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 more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.
“Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.
So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The latest forecasts for growth, unemployment, and consumer prices will be released Wednesday by the Fed.
The co-chief investment officer at Truist Advisory Services believes that a pause is not a cure-all for the market. It may be too late for the rate cuts. Recession risks are still relatively high.”
The US economy is not currently in a recession. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.
It is possible that consumers were getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.
Everyone 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 It Mean for Investors? The Stock Market, Wall Street, and Wall Street Volatility over the Last Ten-Year
What does that mean for investors? Quality consumer companies that can maintain profit margins and keep their pricing power should be looked for by people. He said that his firm owns two of the biggest beauty companies in the world: Luxury goods maker Hermes and cosmetics giant L’Oréal.
Earnings from Accenture, DRI, and WGO were reported on Friday.
In October andNovember, stocks surged due to the hope that the Fed would scale back on its rate hikes. The year has been a bad one for the stock market, and stocks have been volatile so far in December.
Long-term bond yields have dropped, with the 10-year USTreasury’s yield edging back down to around 3.5% after moving above 4% in late October. That was the highest the 10-year has been since 2008.
Tom Essaye, the editor of the Sevens Report investing newsletter, said Monday that the macroeconomic focus would shift to how badly growth slows and earnings fall before global central banks can hint at providing accommodation.
Sam Bankman-Fried is expected to testify in front of the House Financial Services Committee on Tuesday. The Senate Banking Committee will hold its own FTX hearing Wednesday, but Bankman-Fried is not currently on the list of witnesses set to appear.
The Fed is Booming: The Economic Economy and the Fed’s Latest Rate Cuts – an Outlook for Inflationary Outlook –
The Fed announcement and press conference that day may cause some investors to take a deep breath. Although there is no guarantee of that.
“I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way,” Fed Chairman Jerome Powell said on Wednesday.
And the economy has so far withstood the Fed’s aggressive rate hikes. Wages are increasing, Americans are spending and the GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.
The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the United States with half-point moves of their own on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.
The hike, smaller than the previous four increases, comes after the latest government reading showed inflation is running at its slowest annual rate in nearly a year.
The Fed chairman commented on the progress, but said that there was still a long way to go to get back to price stability.
The Importance of Inflationary Housing, Food and Energy Prices for the U.S. Consumer and Industrial Economy: a Preliminary Report by Experian
Many Americans, already contending with price increases in nearly every part of their lives, are feeling the effects as they pay more in interest on credit cards, mortgages and car loans. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.
“Inflation remains elevated due to supply and demand balance related to the swine flu and higher food and energy prices,” the central bank said in a statement.
Stocks plunged earlier this month after the closely watched November jobs report showed a resilient labor market. They fell again on Thursday when weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.
In the recent months, inflation has moderated mainly on goods as supply chain issues have been alleviated and consumers are focused more on leisure and tourism.
The Fed thinks the worst of shelter inflation may be behind us. Since the beginning of the year, rents have been increasing more slowly.
The overall cost of living is still increasing more quickly than it used to, even after some prices came down. At 7.1%, the November inflation rate is well above the Federal Reserve’s 2% target. It’s also more than three times the rate of inflation in February 2020 – before COVID-19 led to the economy shutting down. Since labor costs are usually more stable than food and energy prices, the rising cost of services such as haircuts and restaurant meals is worrisome.
“We expect goods prices to come down,” Powell said. “We understand what will happen with housing services. But the big story will really be the the rest of it, and there’s not much progress there. And that’s going to take some time.”
Powell stated that the job market is out of balance and more job openings than available workers are needed. Even though the U.S. economy has replaced all of the jobs that were lost in the H1N1, the share of adults looking for work still isn’t back to pre-pandemic levels.
Inflationary Constraints from the U.S. Central Bank: A Warning from the Cold War and Implications for Poverty Control
The Federal Reserve’s actions to slow down inflation may finally be working, as prices are still climbing faster than before, even though there are signs that the steps may finally be working.
The central bank has made it clear it will do whatever it takes to bring inflation back down, and on Wednesday it raised interest rates for the seventh time in nine months.
Before the invasion of Ukraine, the average price of gasoline was higher than it is now. The prices of other goods like used cars and televisions have fallen, as pandemic kinks in the supply chain come untangled. The price of travel related things has dropped, as travelers are more price-conscious and the demand for travel has faded due to the lockdowns.
He said that he didn’t know whether we’re going to have a recession or not, or if it’s going to be a deep one.
The war in Ukraine could cause big swings in the prices of things like gas and groceries. Faster or slower economic growth around the world could also cause gyrations in the price of crude oil and other commodities.
The price of services is heavily dependent on what happens to wages. That depends in turn on how many jobs the country adds each month, how many workers are available to fill those jobs, and how productive workers are when they’re employed.
In Search of a Soft Landing for Jobs: The Case of Jonathan Bankman-Fried in the U.S. Sentiments to New York Counties
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.
If employment continues to fall in the first half of next year, there is hope that a Fed pivot could take place in the second half of the year.
Powell said on Wednesday that a soft landing was possible and that the labor market was tight enough to absorb an increase in joblessness without causing a recession. Investors, meanwhile, will be watching jobs numbers very closely.
It remains unclear what time Bankman-Fried will appear in court. If he waives his extradition, he would likely return to the United States quickly. Once in the states, he will appear before a US judge for an arraignment and bail hearing.
Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely wouldn’t get the maximum sentence.
The US market regulators have filed civil lawsuits against Bankman-Fried accusing him of swindling investors and customers while telling them that the building was one of the safest.
Super Saturday: The Night before Christmas evelops of a New-York Super-Safari Experience, and why retailers need to act fast
The busiest shopping day before Christmas is called Super Saturday. 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 gift buying has been completed, according to the NRF. With less than a week until Christmas, people have lots of shopping to do.
It’s also costly for retailers to sit on an oversupply of merchandise for too long. Retailers that store their own merchandise in their warehouses have a limited amount of space to work with, but they have some wiggle room to accommodate excess inventory. But costs add up if more space is needed for a protracted glut that they can’t quickly clear out.
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.
He said that theRetailers are very nervous. They know they have to get consumers to make purchases, the clock is running.
The November Personal Consumption Expenditure Price Index, a Signal from an Inflationary Phase of the Industrial Revolution?
The Federal Reserve’s preferred measurement of inflation showed price increases continued to moderate in November, providing yet another welcome indication that the period of painfully high prices has peaked.
The Personal Consumption Expenditures price index, or PCE, rose 5.5% in November from a year earlier, the Commerce Department reported Friday. In October, prices went up 6.1% annually.
The annual increases for the PCE inflation indexes hit their lowest levels since October of 2021, as other inflation indicators continued to fall.
Spending continued to rise in November but at a slower pace than in the previous months. Spending was up in November as compared to the previous month. In October personal income was up by 0.7%.
The PCE report provides a snapshot of an economy in transition. The Fed has undertaken a series of interest rate hikes to stop inflation from rising.
The report stated that inflation for services companies is likely to remain stuck, due to worker shortages fueling wage growth.
The Fed is worried that wage growth could fuel service prices and overall inflation because of the reversal of service inflation caused by housing costs.
Decline of New Orders for Manufacturing Activity and Consumer Sentiment in the U.S. through the November 11 Pandemic
A separate Commerce Department report released Friday showed that new orders for manufactured goods tumbled 2.1% in November, the biggest monthly drop since the onset of the pandemic.
Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. Excluding transportation is the factor that increases new orders.
“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. “Manufacturing activity has begun to contract and prelim reading for December suggests it will contract further at year end. A cold winter expected for the manufacturing sector.
The final consumer sentiment reading was 59.7 in December, up from the preliminary measurement of 59.1 and the final reading of 56.8 in November.
The director of the surveys of consumers said that consumers welcomed the recent easing of inflation. “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.”
She added: “Their outlook for the economy may have improved, but it remains relatively weak. If incomes and labor markets continue to rise, consumer spending can continue to grow.
The consumer confidence index from the Conference Board landed at its highest level in over a year, reflecting how consumers are feeling about the economy.
That implies the Fed could be more active in the job market at the start of 2023 according to Ross Mayfield, investment strategy analyst.
There is a labor shortage at the moment, Powell stated in December, and he attributed it to early retirements, chronic illnesses and deaths and a plunge in net immigration.
The Open Market Committee: A Summary of Economic Projections for 2023, Including a Drop in Interest Rates and the Lowering of the Stock Market
The consumer has held up very well over the past year or so, and not pulling the rug out from under the consumer is very important in getting to the soft landing.
The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. The 12-member group looks through economic data, assesses financial conditions, and appraise monetary policy actions that are released to the public following the conclusion of its meeting on the second day, with a press conference led by Chair Powell.
Below are the meetings tentatively scheduled for 2023. The meeting has a Summary of Economic Projections that includes a chart called the “dot plot” which shows where interest rates will go in the future.
The stock market lost onefifth of its value during that time, and it dropped by more than one-third. Since 2008, the major US markets have had their worst years.
The number of first-timers applying for unemployment benefits went up to 225,000. The unemployment rate is still low but it is close to it a year ago, before recession fears emerged.
Mark said that it was one reason to be optimistic that the economy could avoid a recession. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”
Are We Live in the Silicon Valley? Traders are worried about the prospects of a recession driven by inflation, rate hikes, and wage growth
In June, gas prices shot above $5 a gallon for the first time. The national average for regular gasoline recently dropped to $3.10 a gallon, an 18-month low, though it has crept higher in recent days to about $3.22 a gallon.
If the Fed doesn’t already do that, then the fear is that it will eventually raise rates too high and cause a recession.
Traders are betting on a further deceleration in jobs growth because that could lead to a reduction in the size of interest rate hikes by the Federal Reserve.
As of late, traders have been looking at economic reports much more often than in the past and stocks have been choppy based on the latest inflation figures.
Wednesday’s weaker than expected report on the health of the manufacturing sector, coupled with more signs of strength in the jobs market given the solid report about labor turnover, led to more market volatility.
That is why investors are interested in the weekly jobless claims numbers that come out Thursday morning as well as a report from payroll processing companyADP about the private sector job market. There’s a chance of more alarm bells about inflation and rate hikes if there’s further strength.
The wage growth level will be watched. An increase in worker compensation historically tends to lead to more inflation. If a person has more disposable income, they will be able to afford higher prices for products and services.
“The persistent mismatch between labor supply and demand continues to put upward pressure on wages,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a report.
In other words, the Fed is likely to focus more on worker paychecks in Friday’s jobs report than the number of jobs added. The same could happen on Wall Street.
The jobs market is still doing well. But you wouldn’t know that from what’s going on in Silicon Valley. The software giant has a component. It was announcing that it would lay 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.
In a recent message to employees, the chair and co-CEO of the company said that they had hired too many people before the economic downturn.
“Companies that last a long time go through different phases. Amazon doesn’t have a heavy people expansion mode every year, according to CEO Andy Jassy in a memo.
The global economy isn’t out of the woods: Consumer price growth is slowing down in Europe and Britain, with a view from the UK
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.
But CNN’s Anna Cooban notes that investors in Europe appear to be growing more hopeful that the pace of consumer price increases is starting to slow in France and Germany. A drop in energy prices is leading the pullback.
Still, consumers continue to bear the brunt of higher prices. British shoppers, feeling the pinch of inflation, flocked to the German discount grocery chain, spurring December to be the best in the company’s history. Aldi said Brits bought more than 48 million mince pies, for example.