What Matters Most about the September Jobs Report: The Problem of Wage Growth During the First Three-Year Afterglow Flux

Investors, economists and members of the Federal Reserve will be poring over the September jobs report on Friday morning for clues about the health of the economy. But one figure may matter more than most…and it’s not the number of jobs added or the unemployment rate. It’s wage growth.

Inflation is not just a function of the price of oil and other commodities and production costs like manufacturing and shipping. How much workers take home in their paychecks is also a big part of the inflation picture.

People tend to be more willing to spend their extra money when it’s in their wallet. That gives companies additional flexibility to raise prices.

The problem is that wage growth above 5% is still historically high. Wages increased just 3% year over year before the swine flu. 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 Last Three Months of the Decline of the U.S. Personal Consumption and the Emerging Wall Street Puzzle: Can Investors Survive Another Winter?

The government reported Friday that its preferred inflation metric, personal consumption expenditures (PCE), rose 6.2% from a year ago in August. That was lower than July’s reading.

The PCE number is seen as a sign of price stability by the Fed, and it usually has a 2% growth rate. That is not going to happen soon. According to the Fed, PCE is expected to increase 5.4% this year, up from their previous projection of 5.2%.

On the consumer front, two key economic reports — the Consumer Price Index read on inflation and retail sales — come out Tuesday and Thursday. Those numbers will give more clues about the health of American consumers. Are they still shopping despite price increases?

The third quarter was over quickly. It’s been another doozy for the market. It was a bleak month. It was the worst month for the Dow since the start of the pandemic in March 2020.

This is the first time in the past that there has been a winter of cryptocurrencies. Compared to major stock market benchmarks, the price of the digital currency has done better than many of them over the past few years.

The fourth quarter is typically a festive time on Wall Street. People tend to buy stocks in anticipation of consumer shopping during the holidays. Businesses spend more to make sure that the budget is in order. In October major companies often give positive guidance for the coming year.

There have been bear markets since World War II. The seven market bottoms happened during the election years.

Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. It’s likely that it will lead to more gridlock in DC, which investors like.

It is up for debate whether Corporate America and investors will be so bullish this October due to concerns about interest rates and the global economy. Huge crashes are what October is known for, most recently in 2008 but also in 1987 and 1929.

Christopher Wolfe is chief investment officer at First Republic Private Wealth Management. There are a lot of companies on sale. It’s a time to be patient and reposition.”

The U.S. Labor Market Has Changed During the Preheating Phase of the Depression and the Recession: Evidence from the Labor Market

The US weekly unemployment claims are being reported on Thursday.

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

More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans, and partly because the pool of available workers has grown as more people come off the economy’s sidelines. The labor force grew by over three-quarters of a million people in August, the largest increase since the start of the Pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.

Eric Hart, the chief financial officer at Express, told investors that the company could potentially ramp up hiring over the next few months.

Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months. That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.

Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.

Some economists are questioning the Feds focus on job openings. Other signals, like the unemployment rate, show the labor market is strong, but not nearly as strong as openings would imply.

That is below the revised number of 315,000, but it is higher than the 200,000 forecast by Refinitiv.

The Fed, Wall Street, and the Bargman-Hopf Problem: Why the Fed is Trying to Shut Down High-Pricing Wall Street

A months-long bout of high inflation weighing down on the US economy is what has happened despite a robust recovery from Covid-19. The Federal Reserve has stepped up its efforts to tamp down high prices via a series of blockbuster interest rate hikes.

The Fed has a dilemma with wages. It wants us to shop less, but not less. There is no formula for how much wages need to go down to make a difference.

BOTTOM LINE: If Friday’s headline number comes in above 250K, Wall Street may read that as a sign the Fed is going to have to keep raising interest rates, adding to already-significant strain across financial markets.

It is difficult 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.

That’s why the Fed’s decisions are being so closely scrutinized. The impact of Fed rate hikes on the value of the dollar, and on the rates of other central banks as well, create a domino effect around the globe. All of which could tip the world’s biggest economies into a recession, the UN has warned.

Nightcap jobs report: Negotiations between Ford and the Belarusian President Alexander Lukashenko are still on the verge of a deal

Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. The company pointed to rising material costs and other market factors in explaining why the entry-level model will cost around $52,000, up from $40,000 when it went into production.

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. Any price increase is off the table. Prohibited! The president is quoted as saying something.

A source familiar with the negotiations told CNN that lawyers for Musk and retweet agreed to delay Musk’s deposition in the case. Musk was originally scheduled to give a deposition today, but he threw a curveball earlier in the week, offering to buy the company under the original terms of the deal in exchange for scrapping the litigation. The two sides are still trying to make a deal.

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

How Amazon walked off after a fire at the JFK8 facility on Staten Island in response to a worker’s work stoppage

(Axios) Boston Dynamics, the company behind those viral videos of its creepily agile four-legged robots, is pledging not to weaponize their products and encouraging others in the industry to do the same. According to the letter reviewed, the company is worried that customers won’t trust them when they say they are not building an army that will destroy humanity. Thankfully though, they’ve now said they’re not doing that. Phew!

(CNN Business) Peloton announced yet another round of layoffs — its fourth round of cuts this year — as its new CEO attempts to shore up the company’s bottom line. Or, as the company spokesperson put it in a statement: Peloton is on a “transformation journey” in which it is “optimizing efficiencies” to “achieve break-even cash flow.” (I don’t know who writes this bloodless business-speak but, man, I would love to make it stop).

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 said that it was difficult to breathe when a fire broke out at the JFK8 facility, which is on Staten Island. 100 workers walked off the job.

Why do we see so much stimulus and more job openings? An ISM survey of service sector companies in the September data released by the Center for Economic and Social Sciences

Higher rates slow inflation by cooling consumer demand, which in turn leads to a more moderate price increase. They disrupt the financial markets by slow down hiring, weaken wage growth, and cause job losses.

It is not clear how much pain today will cause because so many countries are raising rates so quickly. Monetary policy takes months or years to kick in completely.

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. As a result of the high cost of living in the developing world, American imports are becoming more expensive and so is the cost of living in the US.

“I think this is good news for the Federal Reserve,” said Nela Richardson, chief economist at the payroll processing firm ADP. “You are seeing some softening in early-stage demand [for workers] but still continuation in hiring.”

It is difficult to hire someone this month and then let them go three, four months from now. So people are being a lot more cautious,” said Tim Fiore, who conducts the survey for the Institute for Supply Management.

Manufacturing represents a small slice of the overall workforce, however. An ISM survey of service-sector businesses did not show a slow down 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.

“Obviously, 261,000 jobs is great,” he told CNN in an interview Friday morning after the jobs report. However, he noted that while total employment is now above where it was before the pandemic, there are still some sectors, such as leisure and hospitality and public schools, where employment is not yet back to pre-pandemic levels.

Richardson said more people coming back to the labor market will likely cause hiring conditions to loosen and a continuation of the steady gains.

There were more job openings in September than there were in August. That increase meant there were roughly 1.9 job openings for every unemployed worker. The number of people who quit their jobs — typically a sign that workers are confident they will find better ones — ticked down to 4.1 million but remained high. Layoffs overall have stayed low.

Half of the companies that responded to the survey said that their prices increased in the third quarter, but other respondents reported that some prices are starting to come back down. A total of 9% of respondents indicated prices were falling, the largest share reported since January 2021.

But Wall Street’s memory is short: Less than two weeks ago Fed Chair Jerome Powell unambiguously said rates would remain higher for longer. There are sustained price pressures in housing, wages and energy that make it very difficult for the central bank to keep up with inflation.

Cook said that inflation must come down and that she would keep working to do so until it was done.

Editor’s Note: The Growth of the Labor Market During the Yellen Era during the 2011-2012 Cosmic Microwave Background Flux

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. His opinions are his own in this commentary.

What we are seeing is good growth this quarter. When asked if the latest GDP data soothed recession concerns, Yellen said it had slowed after a rapid recovery from high unemployment. “We’re at a full employment economy. It was understandable that growth would slow. It has had over the first three quarters of the year. We have a very strong labor market. I don’t think there are signs of a recession at this point.

Fifth, during the pandemic, corporate investments in software and R&D reached unprecedented levels, which drove a rapid increase in new STEM jobs. Because these workers are very well paid, they have a lot of disposable income to spend on goods and services which has supported job growth throughout the economy.

It will look very different next year. Many industries that are still coming back from the pandemic will hit pre-pandemic employment levels. Some industries may be forced to slow down hiring due to saturation of demand. But this alone is unlikely to push job growth into negative territory. Monetary policy will do that.

There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. It is hard to get 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.

Wage growth is a key metric for the Fed because it can cause inflation if wages go up, since higher wages can put money in the hands of consumers and drive up demand for goods and services.

What Happened After the Jobs Reopening? Evidence from CNN Business on the Recovery from the Post-Post-Pendemic Landscape

“There was hope that the reopening of schools would have been a great moment for a restart” for many of the people who left the labor force during the pandemic, Pollak told CNN Business. “We may not see some of the people who left come back.”

The unemployment rate fell back to its half-century low of 3.5% in September due to the declining number of people looking for work.

What’s next: This is just one report in a crowded landscape of economic data. But if inflation continues to moderate in November, that could be enough to convince the Fed to ease its rate of hiking.

The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point, the fourth time in a row, at its meeting in November.

However, that pace is unsustainable, said Dean Baker, senior economist at the Center for Economic and Policy Research. He said if monthly job gains were to decline to around 200,000 or so, that would be better for the Fed.

The pandemic forced restaurants to incorporate online ordering, pick-up and delivery on a greater scale, and customers became more comfortable in using those services, he said. 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.

In addition, while private sector employment returned to pre-pandemic levels earlier this year, public sector employment remains nearly 600,000 jobs, or 2.6%, below levels seen in February 2020, BLS data shows.

The labor market is starting to feel the impact of the rate hikes, and the recovery is becoming more complex, according to Pollak.

The Laurel Street Baby Boom: Jobs and Markets in the Light of BLS Measures and the Fed’s Inverse Rate Cuts

BLS data shows local public education jobs fell by 22,000 and day care jobs fell by 2000 in the month of September. While those declines are small, they are moving in the opposite direction at a critical time.

“Those and a few other sectors have large ripple effects,” Weaver said, noting ongoing supply chain concerns and the ability for people to have reliable education and child care services so that they can return to the workforce. It could impact parents long-term and future economic and work prospects.

“We’re not sensing that a recession is imminent,” said Dionne Nelson, Laurel Street’s chief executive officer and founder. We are still busy. We are still hiring. Our markets are still very active.”

On Friday investors were reassured by fresh data about the health of the labor market, indicating that the Federal Reserve could raise interest rates next month and put a lid on 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.

A Survey of Job Vacancies, Quasi-Filloffs, and Layoffs in the U.S. Economy after the September September 11 Poilt-Out

Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. The strong showing left many investors unhappy, because they saw signs that the fight against inflation may become tougher.

Carl Tannenbaum, chief economist at Northern Trust, said if he had woken up after a long sleep and seen the numbers, he would say that we still have one of the strongest job markets in history.

The pandemic left a lasting mark on the U.S. economy. The number of people working in warehouses is higher than it was in February 2020. Some parents with a disproportionate share of women are being forced to work part-time or not at all because of the lack of child care. “Long Covid” is also clearly keeping some people out of work, although researchers have come up with different estimates of how many.

Getting there has been bumpy. Businesses reopened last year and employers had more jobs to fill than applicants available to fill them. That was good news for workers, who were able to jump between jobs and negotiate for higher pay. But it almost certainly helped feed into inflation, as businesses raised prices to cover higher labor costs.

The latest monthly survey is on job vacancies, quits and layoffs. Tuesday’s report surprised economists, who had predicted that the number of job vacancies in the United States would fall amid measures by the Federal Reserve to slow business growth in order to tame inflation. It grew to over 10 million, instead of dropping to 10 million.

The Biden Effect of Rate Increases on the Fed’s First Three-Year Budget Measures and the Implications for the Economy

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 also acknowledged that inflation remained painfully high.

It is too early to know how the Fed’s thinking will evolve by its final meeting of the year on Dec. 13 and 14. Even if there is little sign of inflation cracking by that time, policymakers may want to consider the cumulative effect of rate increases and monetary policy adjustments around the world.

The other problem: 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 are spending and wages are growing. That can’t last for very long.

Why the Fed is Here: Why the Stock Markets and Main Street are in a Perturbative Distortion. A CNN Business Before the Bell Newsletter

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.

The global economy is in a bad spot right now, and most of the economists think we are on the verge of a recession. But US markets don’t seem to mind. Stocks closed out their best week since mid-June last Friday and continued that rally into Monday.

So what does that mean? The financial markets abandoned the real economy forever as a result of the 10 years of free-flowing money from the Federal Reserve to banks. 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. Prins says we are now dealing with a “permanent distortion,” where market behavior and economic prosperity have nothing to do with each other.

Markets, which have taken a beating this year, are at multi-month highs again. In a recent interview, Prins said that it was pointless to apply economic rationale to stock markets.

The central bank is charged with a dual mandate: maximize employment (check) and ensure price stability (uncheck). The Fed wants everyone to keep their jobs so that demand isn’t too much of a problem and consumer prices won’t go through the roof. Powell still considers it possible but most economists don’t think so.

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.

The credibility problem stems from the fact that the Fed raised rates earlier this year in order to lower inflation. If the Fed is to succeed, they said, Americans would need to believe that the central bank is steadfast in its fight to bring down prices.

With a tendency for investors to get their hopes up about central bank changes only to be crushed by negative data or messaging from a Fed official, there is always a chance for a central bank pivot.

Meanwhile, she says, it’s Main Street, not Wall Street, that’s feeling the brunt of these interest rate hikes, through increased mortgage and borrowing rates and a slowing jobs market.

The Status of the UK Economy in the Context of a Recjuncture Crisis and the Emerging Market: An Analysis of U.S. Manufacturing and Industrial Statistics

Recession predictions are a dime a dozen these days, but some are more serious than others. Like this one: Almost two-thirds of corporate economists believe the United States is already in a recession or will be within the next 12 months, according to the latest survey from the National Association for Business Economics.

Shortages of raw materials and labor continue to hinder businesses’ operations, according to the survey. The percentage of respondents reporting shortages remained near record highs.

Britain’s third prime minister in seven weeks will have to project stability after a period of political and financial market chaos. 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 said he would cut taxes if price pressures were to go 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.

▸ Microsoft

            (MSFT), Alphabet

            (GOOG), Visa

            (V), Spotify

            (SPOT) and Chipotle

            (CMG) report third-quarter earnings after market close.

October Consumer Confidence is expected to be released by The Conference Board at 10 a.m.

Yellen’s optimism comes amid growing concern from economists and finance officials that a recession is likely at some point in the next year, but was based in part on elements of the latest data that showed signs a necessary slowdown in key areas of the economy leaves open a pathway to a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate increases.

The economy is strong and stand out compared to how other economies around the world are doing.

Gross domestic product — the broadest measure of economic activity — rose by an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a turnaround from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.

Is the American economy strong as hell? Joe Yellen’s message to the rest of the world on the heels of Covid-19: How private sector invest in research and development

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’s a reality that has undercut efforts by the administrationto take advantage of what officials view as a robust record. Biden, asked about the economy last week, told reporters it’s “strong as hell,” drawing criticism from Republicans.

Yellen pledged that those efforts would be felt as they course through the economy in the months and years ahead. Asked if the administration’s general message to Americans was one of patience, Yellen said: “Yes.”

“There were several problems that we could have had, and difficulties many families American families could have faced,” Yellen said. These are problems we do not have because of what the Biden administration has done. Sometimes one doesn’t get credit for problems that aren’t there.

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 a piece of an economic strategy designed to address many of the weaknesses and failures laid bare as Covid-19 ravaged the world, with significant federal investments in infrastructure and shoring up.

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.

You are starting to see repaired bridges being online, not in every community but very 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 to the American economy. And America’s strength is going to increase and we’re going to become a more competitive economy,” she said.

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

Yellen in the White House: The State of the Debt and the Washington Crisis of its Own with the U.S. Treasury Rates

The battle lines drawn over raising the debt ceiling and the Washington crisis of its own have been drawn, and House Republicans have again pledged to utilize for leverage should they take the majority.

The President and I agree that America should not be held hostage by members of Congress who will compromise the credit rating of the U.S., which is the basis of global financial markets, and threaten default on US Treasuries, which are of paramount importance to the global financial markets.

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. It was “an accurate read” about the reports that she had told the White House she wanted to stay.

“I feel very excited by the program that we talked about,” Yellen said. “And I see in it great strengthening of economic growth and addressing climate change and strengthening American households. And I want to be part of that.”

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

“Interest rates have risen at a fast pace and we’re not done yet”, said Greg McBride, chief financial analyst. It’s going to take some time for inflation to come down, even once we start to see some improvement.”

The government’s latest scorecard shows that the annual inflation rate dipped to 7.1% last month after hitting 9% in June. That’s the smallest annual price increase in 11 months.

FRB Chairman Esther George: “The Fed is a better place to invest” than raising rates in a time of economic uncertainty. And when will interest rates go up too fast?

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

George is on the Fed’s rate-setting committee, and she has expressed her determination to control inflation. But she’s also cautioned against raising rates too rapidly at a time of economic uncertainty.

George spoke last month of his desire to see how the effects of a lag will play out. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”

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

Shawn Woods, a homebuilder in Kansas City, stated that his company went from selling a dozen houses a month before the Fed began raising rates to fewer than five.

Woods, president of Ashlar Home and the Home Builders Association of Kansas City, said that he wouldn’t have thought that mortgage rates would go from 3% to 7% within six months.

The Pain of Inflation: How Job Openings Can Disturb The Electrified Economy and Boomer-Generation Confidence

It is simple that Powell pays attention to job openings. They are a direct way to measure demand since employers don’t always try to hire when no one is buying their products. It’s clear that the link between wage growth and inflation lies in the fact that companies have to pay more to try and fill open jobs.

Economists see quitting as a sign of confidence among workers: Changing jobs is a risk, so people avoid doing so if they’re worried about the economy. Since people don’t jump employers without a boost in pay, job-switching contributes to wage growth. Data released yesterday from ADP, the payroll-processing giant, showed that people who switched jobs in October saw their pay rise roughly twice as quickly as people who stayed put.

The central bank may have to reduce the pace of economic growth as part of a battle to combat high prices, Federal Reserve Chairman Powell has warned. The labor market’s strength could allow the Fed to raise its rates at its upcoming meetings.

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

More bad news for the younger Millennial and Gen Zers hoping to buy their first home: The typical age of a first-time homebuyer is now a record 36 years old, up from 33 last year.

(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.)

The Real Estate Market is Not Making Sense: Real Estate Booms Are Coming to an End. How Housing Markets are Facing the Great Recession

Those who were lucky enough to close on a home in the crunch of competition should take solace in the fact that there will be no more housing boom.

The share of first time buyers over the last 10 years has ranged between 30% and 40%. In 2009, in the middle of the Great Recession, it was high as 50%.

Jessica Lautz, a vice president of Demographics and Behavioral insights at the National Association of Real Estate Professionals, said that they have to save while paying for rent, student debt and other expenses. “And this year were facing increasing home prices while mortgage rates are also climbing.”

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

Housing is broken. I don’t purport to have a silver bullet, but it’s clear that inventory constraints and outdated zoning restrictions are a big part of the problem.

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.

As affordability reaches crisis levels, now is a good time for federal and local governments to rethink the way we frame the American Dream. Those who will benefit the most from this are those that are better represented in elected office. Schuetz states that the upper-middle class Boomers in power want the system that got them there to remain the same.

The fourth consecutive central bank hike in three decades: a critical test for the Fed, which is likely to rise by three quarters, and the unemployment rate by 36%

The Bank of England raised its main interest rate for the fourth time in a row on Thursday, making it the biggest hike in over three decades. Last week the European Central Bank also did the same thing.

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

In normal times, that’s the kind of news worth celebrating. But in the up-is-down economics of 2022, it’s cause for concern, as it suggests the economy is overheating. That’s partly why the Fed announced its fourth-straight three-quarter-point hike, the latest in a series of aggressive moves that would have been unthinkable just a few months ago.

The Fed has been raising rates in an effort to cool the labor market and convince the public that the rate hikes did not cripple the economy. That’s a very narrow path to land on.

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

“Today’s stronger than expected report illustrates the difficult task that still lies ahead for the Fed wrestling a resilient labor market and sticky inflation,” said Mike Loewengart, head of model portfolio construction for Morgan Stanley Global Investment Office. It was the lowest reading in nearly two years, which is disappointing for investors hoping for a dovish Fed sooner rather than later.

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

The Digital Cryptocurrency Thaw: A Bad Year for Investors, Market Sentiment, and Mortgage Rates: How the Coin Market Has Bounced

Stocks surged on Thursday in their best day since 2020 after a key inflation indicator came in softer than expected. The investors interpreted the report to mean that the peak inflation may have been behind us. That means the Federal Reserve could be less aggressive with its rate hikes.

It’s been a terrible year for cryptocurrency. The spectacular implosion of FTX, a so-called unicorn startup that was recently valued at $32billion, is just the latest sign of bad news for investors in digital currencies.

Those assets have been hit just like stocks and bonds, showing that there is no place to hide in a market that is worried about rate hikes and the economy.

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 nearly $70,000 in November.

The dollar strengthened after central banks started raising their rates to fight inflation, making it more attractive to investors as a safe haven. At the same time, the economy started to sour, and many new investors who still thought of it as a risky asset left in large numbers.

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 is happening with other Cryptocurrencies.

Because of this drastic change in the cost to finance a home, sales have dropped for eight months running, according to the National Association of Realtors. A survey from Fannie Mae showed that only 16% of people think this is a good time to buy a home, a record low.

The Big Picture: The Real Reason Why the Fed is Higgsing and the Consumer Price Index is Soaring During the Decline and Decline

The traders don’t think there will be a half-point increase. There is an 80% probability of a half point hike on the Chicago Mercantile Exchange.

It may not be that simple. The producer price index, which is a key measure of wholesale prices, has risen over the past 12 months according to the government. That was higher than anticipated, but it wasn’t as fast as the 8% increase through October.

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

From the executive suite to the grocery aisles to the halls of the Federal Reserve, the big question is: Can red-hot inflation be vanquished without tipping the economy into a recession?

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. She acknowledged that the Fed is making it up as they go along.

Wednesday evening: Fed meeting, EU industrial production, and UK inflation.

The co-chief investment officer of Truist Advisory Services said that pivots or pauses aren’t a cure-all for the market. “Rate cuts may be too late. Recession risks are still relatively high.”

What Do Investors Want to Know About Inflation and Predictions for the Next 25 Years? An Investment Report from Comgest Global Investors

It is possible that consumers were just getting started on holiday shopping. Retail sales have been negatively impacted by inflation since more people have to spend more money on stuff.

This year everybody has been talking about inflation. 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? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. He said that his firm owned two of them, and they were luxury goods company Hermes and cosmetics giant L’Ouverture.

On Friday, there are: Eurozone PMI; retail sales in the United Kingdom; and earnings from various companies.

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. It was the highest it has been in a long time.

With inflation at a 25-year high and central banks around the globe continuing to raise interest rates, the risks for 2023 are high.

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

Consumer and Financial Issues After the First Fed-Inflaton Measurement: Sam Bankman-Fried and the U.S. Small Business Monitor

FTX founder Sam Bankman-Fried is expected to testify in front of the House Financial Services Committee on Tuesday. Bankman-Fried is not on the list of witnesses that the Senate Banking Committee is going to have on Wednesday.

After the Fed announcement, investors might be able to relax and take a deep breath. Although there is no guarantee of that.

The hike, smaller than the previous four increases, comes after the government reading showed inflation is running at it’s lowest annual rate in nearly a year.

Many Americans are feeling the effects of higher interest on credit cards, mortgage and car loans because of price increases. Currently, used car buyers are charged an average interest rate of 9.34%, compared to 8.12% last year, and they’re making the largest monthly payments on record, according to credit reporting firm Experian.

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

Rents continue to climb, but Fed officials believe the worst of shelter inflation may be behind us. Since spring, market rents have increased more slowly.

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

The Central Bank of Japan raises the price of goods – and what will it take to get rid of the Russian invasion of Ukraine?

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

On Wednesday, the central bank raised its rates for the seventh time in nine months, as it continues to try and bring inflation down.

The price of gasoline has fallen as a result of Russia’s invasion of Ukraine. The prices of other goods like used cars and televisions have fallen, as pandemic kinks in the supply chain come untangled. The prices for things like flights and rentals have come down as demand has waned and travelers are more price-conscious.

Powell said that he wouldn’t see the committee cutting rates until they were certain inflation would fall in a sustained way.

The central bank expects economic growth to be less than it previously expected and its forecast for unemployment is higher. There’s a lot of uncertainty says Powell.

Changes in the weather or the war in Ukraine could cause big swings in prices at the gas station and the grocery store. The price of crude oil and other commodities might go up or down if the world’s economic growth goes slower.

The price of service depends on what happens to wages. It depends on how many jobs the country adds each month, how many workers are available, and how productive workers are when they’re employed.

The Real Estate and Energy Markets Shutdown by Moody’s Analytics: Wall Street Sensitivities to the Fed and 2023 GDP

The sell-off has been broad, only 12 companies in the S&P 500 are trading in the green. The energy and real estate sectors have been the hardest hit.

The retail sales report sent the stock market plunging as investors worried about the Fed’s forecasts. Thursday was the worst day of the year for the index as it lost 765 points. The S&P 500 and Nasdaq lost 2.5% and 3.2%, their worst day of the year.

Now, economists at Moody’s Analytics predict America’s economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports spooked Moody’s analysts, who also lowered their 2023 GDP forecast to just 0.9%, much lower than 2022’s 1.9% estimate.

Adobe and Facebook parent company Meta are the markets largest gainers today, up 3.6% and 3.4%, respectively. Adobe shares soared after the company reported better-than-expected quarterly earnings and guidance. Meta, which is still down nearly 65% for the year, saw a tick after JPMorgan upgraded shares of the company to neutral from overweight.

When the Economy Gets Itories, It’s Going to Get Closer. John Maynard Keynes Reveals How We Are in a Recession

Ironically, all this talking about a recession can actually help cause one. A huge driver of consumer behavior and business plans is how people feel. John Maynard Keynes used the phrase ” animal spirits” to describe what drives people. Fear, hope, uncertainty, and confidence are hard to measure, and are important to how the economy fares.

He told CNN that he got into a kind of self-destructive negative cycle. “So when sentiment is this bad and starting to feed on itself, we run the risk of talking ourselves into one.”

If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary.

He said that it might help things out if everyone is so worried about the recession. “They don’t take big risks. They don’t pay a lot of debt. The Fed doesn’t need to raise rates as much because they don’t make big expansion moves that may cool things off enough to bring inflation down.

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.

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.”

Jon Stewart, former host of The Daily Show, thinks the Fed will cause us to be in a high unemployment recession.

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

Powell said that the labor market was adequate to handle an increase in unemployment, which could lead to a soft landing. The jobs numbers will be watched very closely by investors.

The Bahamas Jailbreak of Bankman-Fried: Banking on a Base of Deception and a House of Cards for a Funded Foundation in Cryptography

Bankman-Fried was arrested last Monday in the Bahamas and remains in that country. He was arraigned Tuesday, and a Bahamian judge denied his request for bail, saying that he posed a flight risk. It could be weeks before he is extradited to the United States.

Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. If he was found guilty on all the counts, Bankman- Fried could face up to 115 years in prison.

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

The busiest day of the year for shopping is Saturday before Christmas, also known as 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. The National Retail Federation estimates 158 million consumers will shop that day.

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

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

The Reality of Holiday Discounts: The Effects of Space and Space Needed on Fashion Retailer Profitability in the Presence of Inventory Oversupply

Retailers have to spend money on sitting on an oversupply of merchandise. 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 more space is needed it will cost more and they can not clear out quickly.

Over time, unsold products lose value. 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.

The last full weekend before Christmas this year has already seen stores offer discounts of 50% to 60% off and 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 retailers were very nervous. The clock is on and they know they need to maximize every opportunity to get consumers to make purchases.