The jobs report is very important for investors because it gives clues about Fed rate hikes
The Rise of Wage Growth: An Inflationary Window for the Consumer and the Employer? Predictions for the Next Ten-Year
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.
The level of wage growth will also be under scrutiny. Worker compensation increases tend to cause more inflation. Consumers can afford to pay the higher prices that companies charge for their products and services if they have more disposable income.
People who have more money in their wallet are more likely to spend it. That gives companies additional flexibility to raise prices.
The problem is that wage growth above 5% is historically high. Before the Pandemic, wages rose just 3% a year. When it came to worker pay, power was shifted from the employer to the employee due to labor shortages.
The Market for Food and Energy: A Bullseye in the November/December 2008 Season of Growth and Constraints for the American Consumer
Core PCE, which excludes the volatile food and energy categories, was up 4.7% annually and 0.2% on a monthly basis, matching expectations of economists polled by Refinitiv.
David Petrosinelli, senior trader with InspireX said he doesn’t see anything in the near-term to comfort the Fed about inflation.
Retail sales have held up despite inflation, but that can not continue forever. American shoppers would eventually reach their breaking point and just start buying essentials. A slowdown in consumption will inevitably lead to lower prices…but also slower economic growth.
The third quarter has come to an end. For the market, it has been another doozy. It was gloomy in September. It was the worst month for the Dow since the start of the pandemic in March 2020.
Despite this year being a bear market for everything, there are some positive signs for the next few months.
The fourth quarter is an time when Wall Street is more fun to be around. Retailers do well during the holidays when investors tend to buy stocks. Businesses spend more money to get their budgets under control. And major companies also often give rosy guidance in October about earnings expectations for the coming year.
“October has been a turnaround month—a ‘bear killer’ if you will,” said Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac, in a recent blog post.
Do We Need a Big New Year? The Challenge of Deciding Wall Street Rates in the United States and Implications for Corporate America and the Economy
Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. It could lead to more chaos in the nation’s capital.
Despite the global economy and inflation concerns, Corporate America and investors might be so bullish this October. After all, October is also famous for huge crashes, most recently in 2008 but also in 1987 and, of course, 1929.
“We’re nearer to a bottom,” said Christopher Wolfe, 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.”
There were weekly unemployment claims from ConAgra and earnings from other companies.
The desired effect has begun to be achieved with higher interest rates. Consumer spending has been on the decline. Prices are still climbing more quickly than the central bank would like, but inflation has dropped significantly.
Higher borrowing costs have already put a big dent in the housing market. It’s beginning to slow other parts of the economy. But consumers, still flush with cash saved up early in the pandemic, continue to spend money. As a result, the Fed may have to tap the brakes harder, for longer, than it otherwise would.
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. The cost of living in developing countries has already been affected by high fuel and food prices and now the dollar is making imports more expensive.
Back in 2018, Fed Chair Jerome Powell described the Fed’s approach to raising rates similar to being in a dark room with furniture and having to move carefully to avoiding running into something. It’s a lot more dark than it was last year. The consequences of monetary tightening are likely to be greater due to the higher inflation, the fact that inflation is more opaque, and the rise in business debt since that time.
The Fed is Changing: Inflation, Growth, and the Predictions of the American Economy from an economist at the Burning Glass Institute
There is a chief economist at the Burning Glass Institute. He was the head of the Labor Market Institute at The Conference Board. The opinions are his own and have nothing to with this commentary.
“I was surprised by the willingness of some people to jump on that January numbers and proclaim they mark some sort of evidence the economy isn’t responding to the Fed’s interest rate increases,” says Shepherdson. I believe the trends are positive from the Fed’s perspective. The economic growth is slowing. Inflation is falling. These things don’t happen in a straight line.
The Federal Reserve has been right to raise interest rates aggressively because of the damage this surge in inflation has done to household budgets, savings and confidence. These rate hikes have been necessary to cool the economy, rein in inflation expectations, and thus alleviate the pressures pushing prices upward.
The State of the Labor Market in the Precession and the Implications for the New Economy and the Future of Labor Market Structure and Product Development
Second, despite the slowing of the economy and the growing fears of recession, layoffs are still historically low. Initial claims for unemployment insurance, an indicator highly correlated with layoffs, were 219,000 for the week ended October 1 – higher than the week prior, but still one of the lowest readings in recent decades. Employers are hesitant to reduce their number of workers even as their business slows because of years of traumatic labor shortages. That’s because companies are worried that they will have trouble recruiting new workers when they start expanding again.
Fourth, just as some industries are growing because they are still catching up, others are experiencing high growth as they adjust to a new normal of higher demand. The demand for data processing and hosting services, mental health services, testing laboratories, medical equipment, and pharmaceutical manufacturing has increased. And it’s likely that these represent structural changes to buying patterns that will keep demand high.
Positive momentum will not evaporate overnight as a result of these factors. Employment growth is likely to slow down from its historically high rates, but it will still remain solid in the coming months. ManpowerGroup’s Employment Outlook Survey shows that the hiring intentions for the fourth quarter are still very high, despite dropping from the previous quarter.
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. It involves legislative action to increase immigration, drive people into the labor force or invest in workforce training. This is likely to be hard to find in today’s political environment.
Fed Rate Increases and Inflation: The Problem with the Fed and Its Role in the Fed’s Failure to Survive
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.
The Fed is not acting alone and it is one of nine central banks expected to make a rate announcement this week. Landing softly on the ever-narrowing path between high inflation and recession is a global concern as central banks across the world contend with similar economic problems.
The Federal Reserve will raise interest rates on Wednesday and some are asking if the hike will be enough to get inflation under control.
“Interest rates have risen at a whiplash-inducing speed, and we’re not done yet,” said Greg McBride, chief financial analyst at Bankrate. “It will take some time for inflation to come down from the high levels we are at, even once we see some improvement.”
The government’s latest scorecard shows that annual inflation dipped to 7 percent last month, after hitting a 40-year high of 9% in June. That’s the smallest annual price increase in 11 months.
Esther George, president of the Federal Reserve Bank of Kansas City, said “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.” It appears that we may have to keep this going for a while.
Treasury Secretary Janet Yellen told CBS that there is a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”
“I have been in the camp of steadier and slower [rate increases], to begin to see how those effects from a lag will unfold,” George said last month. “My concern being that a succession of very super-sized rate hikes might cause you to oversteer and not be able to see those turning points.”
“We are 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.
The Last Six Months of Mortgage Rate Rises: Why the Economy Is Growing Stronger than It Looked Last Minute, and Why the Fed’s Higher Rates Are Fading
Woods said his company dropped from selling a dozen houses in a single month to fewer than five a month after the Fed started raising rates.
“Never in my wildest dreams would I have thought we’d go from 3% [mortgage rates] to 7% within six months,” said Woods, president of Ashlar Homes and the Home Builders Association of Kansas City.
“I think we’re in for a rough six or eight months,” 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.”
Wall Street will get the last jobs figures for 2022 on Friday morning. The US government is expected to report that 200,000 jobs were added in December, according to forecasts of economists surveyed by Reuters. That would be a slowdown from the 263,000 jobs added in November.
The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. The job market remains strong, even though mortgage rates have spiked and that has hurt demand for housing. Consumers are spending and their wages are growing. That can’t last indefinitely.
Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell noted in November that the odds of an economy avoiding recession are very slim, and that the path to a soft landing could be shortened by keeping rates high.
The Fed funds futures on the Chicago Mercantile Exchange are pricing in a 70% chance that the Fed will not increase the federal funds rate at their next meeting on February 1.
The benchmark interest rate was raised by 4.5% in the seven meetings that it held in March. 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.
The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.
Why the Fed is Making it Up as They Go Along: The Producer Price Index, Consumer Price, and Energy Prices Rise in the Last 12 Months
But it may not be simple at all. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was higher than expected but slower than the 8% increase through October.
The consumer price data for November comes out on Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.
Kathy Jones is a chief fixed income strategist for the Schwab Center for Financial Research.
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.”
The Summary of Economic Projections and the Fed’s economic outlook will be read by investors. They might be disappointed, but they will watch Powell’s press conferences for clues.
A pivot or pause isn’t a cure-all for this market, said a co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”
Inflationary results from luxury goods companies and cosmetics giant L’Oreal, Hermes, Accenture, DRI, and WGO
So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.
“Everybody has been talking about inflation this year. Cosserat said that it will be about disinflation in the years to come.
What is that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes
(HESAF) and cosmetics giant L’Oreal
(LRLCF).
Earnings from Accenture, DRI, and WGO were reported on Friday.
It’s still double the Fed’s typically quarter-point hike and a big increase that will likely cause economic pain for millions of American businesses and households.
The average period between the peak interest rates and the first reductions by the Fed is 11 months, and this could mean that even if the central bank stops hiking rates they could stay elevated into 2024.
And the economy has so far withstood the Fed’s aggressive rate hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Revenue expectations have been beaten and companies reporting positive results.
The European Central Bank of Central Bank and the Swiss National Bank are Expecting Strong Rate Increases next-to-leading Order on Wall Street and Wall Street Charges
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. The borrowing costs ofNorway, Mexico, Taiwan, Colombia and the Philippines are likely to increase this week.
The hike is smaller than the previous four increases after the latest government reading showed inflation is at its lowest rate in almost a year.
The board’s latest, smaller rate increase was good to see, but the Fed Chairman said we have a long way to go to return to price stability.
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, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the central bank said in a statement on Wednesday.
Friday’s report showed that spending is still robust and some think the Fed will be aggressive in raising interest rates. That prospect is weighing on the stock market. Last week, the blue chip index fell nearly 3%.
The Fed believes the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.
The price of haircuts and drycleaning went up in the last twelve months. Services other than housing and energy are the main source of consumer spending.
Energy and Transportation as a Function of the Consumer’s Needs: Inflation and the Implications for the U.S. Economy
“We can see goods prices coming down,” Powell said. We understand what will happen to housing services. The rest of it won’t have much progress, and the big story will really be the rest. It’s going to take some time.
Powell says the job market is out of balance with more job openings than available workers. Although the U.S. economy has been able to replace all the jobs lost in the swine flu, the percentage of people who are working or looking for work hasn’t fully recovered.
Older workers who retired in the last two years might not return to the job market. With the supply of workers constrained, the Fed is trying to restore balance by tamping down demand.
The 12-month increase in the price of goods was slightly lower, but prices rose sharply in December and January, suggesting inflation is not under control.
The central bank raised interest rates for the seventh time this year on Wednesday as it continued to do everything in its power to bring inflation down.
Gasoline prices have dropped sharply and are now lower than they were before Russia’s invasion of Ukraine. The prices of other goods have fallen due to the problems in the supply chain. And travel-related prices for things like airplane tickets and rental cars have dropped, as the pent-up demand that followed lockdowns has faded, and travelers become more price-conscious.
Fed Chairman Jerome Powell insisted that economic growth is not going to end late in the year 2000-2003 cycle ‘because inflation is not on the way’
“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.
The central bank has lowered its forecast for economic growth next year and raised its forecast for unemployment. But Powell says there’s considerable uncertainty.
“I don’t think anyone knows whether we’re going to have a recession or not and if we do, whether it’s going to be a deep one or not,” he said on Wednesday.
Changes in the weather or the war in Ukraine could cause big swings in prices at the gas station and the grocery store. Faster or slower economic growth around the world could also cause gyrations in the price of crude oil and other commodities.
The Fed is keeping an eye on the price of services like haircuts and restaurant meals. The labor costs are what drive those prices and are less likely to be brought down than goods prices.
The Bell Newsletter. Declining Retail Sales and the Ruling Down the U.S. Consumer Credit Card Charges During the November Holiday Season
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Weaker-than-expected retail sales in November pummeled market sentiment on Thursday and raised the odds that the Federal Reserve’s inflation-fighting interest rate hikes would push the economy into recession.
That’s a bad sign for the economy. Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is nearly single-handedly staving off recession. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.
The weak report means that the holiday season is a crucial time for retailers to start ramping up profits and get rid of excess inventory. Investors weren’t too happy about that.
Shares of Costco
(COST) closed Thursday 4.1% lower, Target
(CBDY) fell by 3.2%, Macy’s
(M) dropped 3.5% and Abercrombie & Fitch
(ANF) was down 6.2%.
The entire sector’s top three holdings, Home Depot, Walmart and Amazon, were all lower by 2%. The SPDR S&P Retail ETF, which follows all S&P retail stocks, was down 2.9%.
Morgan Stanley economist Ellen Zentner warned that consumers will be more conservative in their holiday shopping this winter due to the headwinds of the past year.
“Households are increasingly relying on their savings to sustain their spending, and many families are resorting to credit to offset the burden of high prices. These trends are unsustainable, and the current credit splurge is a true risk, especially for families at the lower end of the income spectrum,” said Gregory Daco and Lydia Boussour, economists at EY Parthenon.
American bank accounts are still strong, but they are starting to decline. In the third quarter of 2022, credit card balances jumped 15% year over year. That’s the largest annual jump since the New York Fed began keeping track of the data in 2004.
“Against this backdrop, we expect consumers will rein in their spending further in coming months,” said Daco and Boussour. Consumer spending is expected to grow modestly in the last quarter of the year but will barely rise over the course of the next five years.
How Chinese companies listed on the US stock market will end their delisting after a decade of deliberation: Ann McLaughlin’s Freddie Mac
Freddie Mac says the 30-year fixed-rate mortgage had an average of 6.31% in the week ended December 15. Anna says the 30-year fixed rate was 3.12% a year ago.
Freddie Mac’s chief economist said mortgage rates continued their downward trajectory this week as softer inflation data and a modest shift in Federal Reserve policy reverberated through the economy.
“The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” he added. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”
The American regulators had access to the audited accounts of Chinese companies, which was why they threatened to dump tech giants from US stock exchanges if they did not get the data.
A years long stalemate over how Chinese companies listed on Wall Street should be regulated has come to an end. Laura He reports it will be a huge relief for the investors who have invested billions of dollars in them.
“For the first time in history, we are able to perform full and thorough inspections and investigations to root out potential problems and hold firms accountable to fix them,” Erica Williams, chair of the Public Company Accounting Oversight Board, said in a statement Thursday, adding that such access was “historic and unprecedented.”
More than 100 Chinese companies had been identified by the US securities regulator as facing delisting in 2024 if they did not hand over the audits of their financial statements.
There are more than 260 Chinese companies listed on US stock exchanges, with a combined market cap of over $700 billion, according to the US-China Economic and Security Review Commission.
Inflation in the Core Sector: Consumer Sentiment and Manufacturing Activity in the Second Half of the November 13th through the Fourth Quarter of the Big Bang
Inflation has moderated in recent months, especially on items like goods as supply chain bottlenecks have eased and consumers focused more spending in areas like leisure and hospitality.
Many of the decline is due to falling energy prices. But even the so-called “core” inflation rate, which excludes volatile energy and food prices and thus provides a more reliable reading on price trends, has also moved down a bit in recent months, to 5.7% year-over-year in December.
Spending rose in November but was at a slower rate compared to previous months. Spending increased by a small amount in the month of November. Personal income increased by 0.4% in November, down from 0.7% in October.
inflation in the services sector has been a little bit of a stick. The services index showed a month-on-month increase of 0.4%, but a year-over-year increase of more than 11% in the Friday PCE report.
Wage growth is important to the Fed because it could fuel continued increases in service prices and overall inflation because of the rapidly reversing housing costs.
New orders for manufactured goods dropped in November, the biggest monthly drop since the beginning of the Pandemic.
Transportation equipment, specifically new orders for non-defense aircraft and parts, drove the decline, according to the report. New orders increased 0.2% without transportation.
Diane Swonk, the Chief Economist for KPMG commented that core durable goods orders slowed, but did not contract, a reflection of growing unease about the economy. The prelim reading for December suggests that manufacturing activity will contract further at the end of the year. It is predicted that the manufacturing sector will experience a cold winter.
“Consumers clearly welcomed the recent easing of inflation,” Joanne Hsu, director of the Surveys of Consumers, said in a statement. Consumers have a lot to say about whether the trends will continue or not, since sentiment appears to have turned a corner from its all-time low.
The final December reading for the index of consumer sentiment came in at 59.7 in December, up slightly from a preliminary measurement of 59.1 and November’s final reading of 56.8, according to data from the university’s Surveys of Consumers.
Earlier this week, the Conference Board’s consumer confidence index – another measure of how consumers are feeling about the economy – landed at its highest measurement since April 2022.
What’s Happening in Silicon Valley? Inflation and Rates: Implications for the Stock Market, Wall Street, and Wall Street
It was a rough period for the stock market, with the S&P 500 losing 20% of its value and the Nasdaq dropping over 30%. Since 2008, the major US markets have suffered their worst years.
New numbers published last week show first-time applications for unemployment benefits edged up to 225,000. It is still close to where it was before the recession began, and is still historically low.
Gas prices have dropped during the first two weeks of February, but AAA warns that drivers can’t count on falling prices at the pump to keep inflation in check.
When measured on a monthly basis, the trend has begun to reverse. Consumers could keep spending next year if real wages keep growing as fast as consumer prices.
If the Fed hasn’t already done that, the fear is that the Fed will end up raising rates more and more in order to cause a recession.
Despite the economic reports being more important than always, stocks have been very 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.
The weekly jobless claims numbers will be released on Thursday morning, as well as a report from payroll processing company Automatic Data Processing about the private sector job market. More alarm bells about inflation can be set off by further strength.
“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. Wall Street may do the same thing.
Overall, the jobs market is still in good shape. You would not know that from what is happening in Silicon Valley. Software giant (and Dow component) The company said Wednesday 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.
The co-CEO ofSalesforce wrote to employees that they hired too many people in the lead-up to the economic downturn.
“Companies that last a long time go through different phases. Andy Jassy wrote in a memo shared with employees that they weren’t in expansion mode every year.
CNN’s Hanna Ziady Report on the European Consumer Prices: Aldi’s Best Decay in the UK, with an apology from Steven Kamin
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.
Anna reports that investors in Europe are increasingly hopeful that the pace of consumer price increases is starting to slow in France and Germany. A drop in energy prices is leading to a retreat.
Still, consumers continue to bear the brunt of higher prices. CNN’s Hanna Ziady reports that European supermarket giant Aldi just had its best December ever in the United Kingdom as British shoppers, feeling the pinch of inflation, flocked to the German discount grocer. Brits bought a lot of pies, for example.
Steven Kamin is a senior fellow at the American enterprise Institute and he studies international macroeconomic and financial issues. He served as director of the international finance division of the Federal Reserve. The opinions expressed in this commentary are his own. View more opinion on CNN.
Inflationary Outlook in the Near-Predominant Era of the Second Wall Street Volatility: Implications for Labor and Corporate Profits
As the remaining supply-side shortages are resolved, price pressures are likely to ease and the economy will slow due to a rise in interest rates.
Workers did not receive compensation for increased productivity. The consequence, as acknowledged by Fed Vice Chair Lael Brainard, is that “the labor share of income has declined over the past two years and appears to be at or below pre-pandemic levels, while corporate profits as a share of GDP remain near postwar highs.” This suggests that, going forward, wages may rise faster than prices as workers regain their share of corporate income. But that should not force firms into additional price increases, and therefore shouldn’t impede the Fed’s ability to reduce inflation, since firms should be able to absorb those wage hikes by reducing profit margins rather than increasing prices.
“core” prices in December were 4% higher than a year ago, according to the Fed’s preferred inflation yardstick. That is lower than a 5.2% rate in September.
“This is what the path for a soft landing looks like,” says Aaron Sojourner, an economist at the Upjohn Institute for Employment Research. There is not a recession because inflation has come down.
Chris was quoted two weeks ago as saying that the Fed does not want to be head-faked. “Back in 2021, we saw three consecutive months of relatively low readings of core inflation before it exploded in our face.”
Financial markets don’t agree with that forecast. Despite warnings to the contrary from Fed officials, many investors are currently betting on the central bank cutting interest rates. The expectation of lower borrowing costs is one reason the stock and bond markets have rallied in recent weeks.
“We’re pulling off something really nice right now, and I worked in both the Obama and Trump administrations,” says Sojourner, who was an economist for the Council of Economic Advisers. If the Fed messes up, jobs will be destroyed. Hopefully we can avoid that.”
Powell said that he didn’t think it would go away painlessly, and that there was an expectation that it would go away quickly. We will have to do more rate increases, we will have to look around again and see if we’ve done enough, and that is the base case for me.
Consumer Spending During the Prevalence of the First Five-Year Low-Carbon-Federal Supermarkets and the Implications for Inflation
“We are entering the higher-priced spring and summer driving season, and so drivers should brace for that,” said Devin Gladden of AAA. The year will likely be volatile because of the uncertainty around the economy.
Used car prices have also acted as a brake on inflation, falling 8.8% last year and another 1.9% in January. But signals from the wholesale market suggest used car prices could jump again in the coming months.
All that spending threatens to put more upward pressure on inflation at a time when the Fed is raising interest rates to keep prices in check.
If consumer spending goes down it will help to cool inflation and it will also raise concerns about a recession. On the other hand, if spending continues to grow at this pace, it could force the Fed to raise interest rates even more aggressively to bring prices under control.
Consumer spending rose in January, as they spent more on things like food and drinks, according to the Commerce Department.
Thanks to strong job growth and rising wages, many people have money in their pockets to spend. Retirees also got a raise this year. Social Security benefits rose by 8.7% in January, the largest cost-of-living increase in four decades.
Jonathan Silver, who tracks credit card use by about 100 million people nationwide, says that additional income will help to support consumer spending in the months to come.
In addition, many people socked away extra savings during the early months of the pandemic, when spending opportunities were limited and the government was distributing multiple rounds of relief payments. While bank balances have come down, Americans are still sitting on a lot of additional cash.
“We estimate households to still have about ten months of spending power if they continue to deplete excess savings at the pace they have over the past six months,” Wells Fargo economists wrote in a research note Friday.
Back to Las Vegas During the Covid Pandemic: What’s Happening for Las Vegas? The Consumers’ Choices in the Presence of Price Increases
People who put off traveling during the worst of the pandemic are making up for lost time. There were more vacation visits to Las Vegas last year.
“People realized what they were missing during Covid,” says Steve Hill, CEO of the Las Vegas Convention and Visitors Authority. I think it has spurred a lot of activity to get back to experiences. And we see, and I’m sure you do as well in the numbers, a shift from buying stuff to buying experiences.”
Of course, not everybody is flush with cash. Some households are not making ends meet. And businesses are not confident that consumers’ free-spending habits will continue.
Walmart expects to have modest sales growth this year. Doug McMillon said shoppers are more limited in their spending on more discretionary items than they used to be.
“Customers are spending money even though it’s been a few weeks,” McMillon told analysts. It’s not clear to us what the back half of the year looks like.
The owner of the restaurant is cautiously optimistic. His food costs have begun to go down. Staffing shortages at his restaurants have been alleviated. And he’s planning to open about half-a-dozen new locations this year.
“My gut is telling me that as an operator,” Mitchell says. “A year ago [people] knew we had to raise our prices. It was obvious and they were accepting of that. But the consumer is not the same as before. I think people want inflation to come down and they are not as tolerant any more of price increases.”
Ian Shepherdson thinks the Fed’s efforts are working. He believes the surprisingly strong spending last month was a fluke, resulting from unusually warm weather.
