There are five reasons to be cautiously optimistic

The Ubiquitous Job Creation Rate in the First Two Years of the Great Recession: Is the World in a History of Histories?

The economists think that only 185,000 jobs were created in December and November, a decrease from the previous two months. The Fed would appreciate a further decline in the labor market since last year’s rate hikes were taking some air out of the economy.

The headline figure for the month of October is expected to show 255,000 jobs were created. That would be the smallest monthly gain in nearly two years, and well below the average of more than 510,000 for the past 12 months.

Measures of inflation expectations, derived from financial markets and household surveys, remain above those before the recession but have fallen since last year. Perhaps more importantly, since the beginning of the pandemic, wages have barely kept up with rising prices, whereas labor productivity has risen about 4%.

Stagflation, which happens when wages go down too much, is as unpleasant as it sounds. Stagflation – a portmanteau of stagnation and inflation – is when economic activity slows while prices continue rising.

The trend is beginning to reverse at least on a monthly basis. Real wages have been growing faster than consumer prices, a significant shift that could give consumers firepower to keep spending next year.

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’s hard to overstate just how delicate the situation is. Kristalina Georgieva, the managing Director of the International Monetary Fund, said that the world was in a period of “historic shocks”, after a string of economic shocks over the last two and a half years.

America’s central bank found itself in a glaring spotlight for much of this past year, as Federal Reserve Chairman Jerome Powell wielded blunt tools of interest rate hikes and quantitative tightening to curb surging inflation.

The problem of price increases in the economy: The case of the $34 billion acquisition agreement between Ford and the Russian president Alexander Lukashenko

Ford is once again raising the prices on its electric pickup. The entry-level truck will be priced at over $52,000, which is a steep increase from the $40,000 it cost when the truck went into production this spring.

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. Price increases are not allowed from today. Prohibited!” the president is quoted as saying.

A source close to the negotiations tells CNN that lawyers for Musk have agreed to delay his deposition in the court fight over the $44 billion acquisition agreement. Today was supposed to be a deposition for Musk, but he threw a curve ball earlier in the week, suggesting to buy the company in exchange for dropping the litigation. There are still disagreements over certain conditions.

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

Are Robots Enough? The Times are Coming: Peloton Announces New Layoffs and the JFK8 Facility Fire

(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 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. They said that they were 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. Peloton is on a transformation journey in which it’soptimizing efficiency to reach break-even cash flow, according to a statement from the company. (I don’t know who writes this bloodless business-speak but, man, I would love to make it stop).

(CNN Business) 50 workers at an Amazon warehouse were suspended on Tuesday, after they organized a work boycott following a fire in the facility. The JFK8 facility on Staten Island had a fire on Monday which the workers said was hard to breathe in, and parts of it still smelled of smoke. An estimated 100 workers walked off the job.

The First Mile Does Not Matter in a Marathon, but It’s Still Good for the Economy, and the Supply Sector Is Growing More Predictive

The first mile doesn’t always matter in a marathon. The latest report bodes well for the economy and could mean that a soft or soft-ish landing, where inflation eases without recession, is still achievable. That’s also good for markets.

It’s really hard to find a good job this month and the rest of the year. So people are being a lot more cautious,” said Tim Fiore, who conducts the survey for the Institute for Supply Management.

“It’s not layoffs, primarily,” Fiore said. “Hiring freezes.” People are not being replaced as quickly when they quit. A change from where we’ve been over the last year and a half.

Manufacturing represents a small slice of the overall workforce, however. A similar ISM survey found that hiring in the service sector had not slowed down.

There were gains in restaurants, retail, and professional services in last month, as reported by the payroll company, ADP.

The End of Inflation: Workforce Reentrance after COVID-19 and the Prospects for the Next Fed-Inflationary Cycle

Lisa Cook, governor of the Fed, said she was optimistic that more workers would reenter the labor force if the health impact of COVID-19 continued to diminish. There is a chance that labor supply remains below its pre-pandemic trend.

Richardson said that the more returnees to the labor market, the more likely we will see some easing of hiring conditions and a continuation of steady gains.

Almost one in seven people joined or rejoined the labor force in August. If that trend continued in September, the Fed will be keeping an eye on it.

Shortages of both workers and critical supplies have made it hard for businesses to keep pace with strong demand for goods and services. As a result, prices have soared. The Fed initially thought those bottlenecks would ease on their own. But despite some encouraging signs — like a drop in lumber and used car prices — inflation remains stubbornly high. Prices in August were up 8.3% from a year ago.

But Wall Street’s memory is short: Less than two weeks ago Fed Chair Jerome Powell unambiguously said rates would remain higher for longer. With continued price pressures in housing, wages and energy, the central bank still has a long way to go in its fight against inflation.

“Inflation must come down and we will keep at it until the job is done,” she said in her first speech as a central bank policymaker.

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. policymakers might want to give themselves some time to see the cumulative effects of the rate increases and monetary policy adjustments in other countries if inflation shows little sign of cracking by then.

A report by strategists at the BlackRock Investment Institute also noted that inflation for services companies (think retail, banking and tech, among others) is likely to remain “sticky due to worker shortages fueling wage growth.”

The Federal Reserve is expected to raise interest rates by half a point at the conclusion of its two-day policy meeting on Wednesday, an indication that the central bank is pulling back on its aggressive stance as signs begin to emerge that inflation may be easing.

Greg is the chief financial analyst at Bankrate and he said that interest rates are not done yet. “It’ll take a while for inflation to come down from these lofty levels, even once we see some improvement.”

The Fed’s preferred measure for inflation was PukiWikiPukiWikiPukiWiki, an annual inflation rate of PukiWiki. The better known consumer price index shows prices rising even faster, at an annual rate of 8.2%.

The latest Fed hike in four years: Job Vacancies, Shutdowns and Layoffs in the U.S. and the Implications for the Economy

“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 keep at this for a while.”

In an interview that aired on CBS on Sunday, Treasury Secretary Janet Yellen — Powell’s predecessor at the Fed — said there is “a risk of a recession. I don’t believe it 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 worried that your rate hikes could slow the economy to a crawl in addition to failing to slow rising prices that harm families,” the senators wrote.

Shawn Woods said his company stopped selling houses in a month because the Fed started raising rates.

In my wildest dreams I would not have thought that we would go from 3 percent to 7 percent in six months.

“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. From a housing perspective, I think we’ve been in a housing recession since March or April.

Take the latest monthly JOLTS survey on job vacancies, quits and layoffs. The report surprised economists, who had predicted that the number of job vacancies in the U.S. would fall if the Fed slowed business growth in order to tame inflation. But instead of dropping to 10 million, it surged to 10.7 million.

This is the kind of news that is worth celebrating in normal times. There is concern that it suggests the economy is overheating. The Fed hiked for the fourth time in a row, the latest in a series of aggressive moves that would have been unthinkable a few months ago.

The central bank is charged with a dual mandate: maximize employment (check) and ensure price stability (uncheck). Ideally, the Fed wants everyone to keep their jobs so as to reduce the heat on consumer prices who are hovering at 40-year-highs. Powell still thinks it’s possible, but most economists agree that the chance of that landing is now remote.

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 said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

Democrats are hoping to retain power next week, but inflation is outweighing any positive sentiment about job security. According to a new CNN poll, over a quarter of likely voters think the country is in a recession.

The Housing Crisis in 2022: Why Boomers Live in the Boom and Why they Are Reluctant to Change the System That Made Us Where We Are

The narrative got flipped on its head in 2020. It wasn’t that Millennials didn’t want homes in the suburbs, they just couldn’t afford them. The furore was created by people in the 30s who were finally freed from slogging away at whatever jobs were left for them when the demand for property exploded in the wake of 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.)

As that 2020 housing boom begins to go bust, those who managed to close on a home in the crush of competition fed by rock-bottom mortgage rates should count themselves extremely lucky.

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

Jessica Lautz, a vice president of demographics and behavioral insights of the National Retail Federation, mentioned that people need to save while paying for things like rent and student debt. Home prices are increasing and mortgage rates are rising.

Mortgage rates have risen throughout most of 2022, spurred by the Federal Reserve’s regime of interest rate hikes. Last week, the Fed announced it would raise interest rates by another 75 basis points, the sixth rate increase this year and the fourth-consecutive hike of that size.

The 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.

The way in which we frame the American Dream needs to be reconsidered as affordability gets worse. If people who are better suited to benefit are included in elected office, it will happen. As Schuetz argues, the upper-middle class Boomers in power now are, understandably, reluctant to change the system that got them where they are.

The Bank of England and the European Central Bank Increase Interest Rates to a Minimum of 33.5 Threshold Midnight

The Bank of England hiked its key interest rate by the same amount as the Fed, making it the biggest hike in 33 years. The European Central Bank did the same thing as they did last week.

Basis points are the way central bankers talk about rate moves. One basis point = one-tenth of a percentage point.)

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 the audio version of the newsletter if you click the link.

The Bad Year for Cryptocurrencies: After FTX Implosion and the First Day of 2018 Inflationary Season for Digital Assets

The stock market’s best day since 2020 occurred on Thursday when a key inflation indicator came in softer than expected. The report made investors believe that the peak inflation may be behind us. That means the Federal Reserve could be less aggressive with its rate hikes.

Investors will closely read the Fed’s economic outlook, the Summary of Economic Projections, which is also due out Wednesday. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.

Based on projections from Fed officials and other economists, the pathway has narrowed for the desired “soft landing” of reining in inflation while avoiding recession or significant layoffs.

“If the Fed doesn’t have to tighten as aggressively, the economy will weaken less, and headwinds for stocks will be smaller,” wrote Bill Adams, chief economist for Comerica Bank in a note.

It has been a bad year for thecryptocurrencies. The implosion of FTX, a $32 billion startup that was recently valued at $32 billion, is just the latest piece of bad news for investors in digital currencies.

Unfortunately, those assets have gotten hit just like stocks and bonds, proving there really is no place to hide in a market where worries about rate hikes and recession reign supreme.

Bitcoin and the Rise of the Stock Market: From a Thaw to the Rise and Fall of the Wall Street: The Case for a Goldilocks Moment

A crypto thaw: In the late 1990s, interest rates were near zero, and a lot of investors were coming from large-scale institutions. It reached a record high in November.

Then, central banks started raising rates to fight inflation, and the dollar strengthened significantly, seducing investors as the ultimate safe haven. At the same time, the economy began to sour and those new investors who still viewed bitcoin as a risky asset exited in droves.

There has been a lot of gains from mid 2020 for bitcoin and ethereum. Digital assets are still performing better than tech stocks over the long term, according to an investment officer at a firm that specializes in altcoins.

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

Traders are betting on just a half-point increase. The federal funds futures show an 80% chance of a hike.

Investors are hoping for a Goldilocks situation where unemployment falls just enough to convince the Fed that its rate hikes have cooled the labor market enough to end hikes but not enough to cripple the economy. There is a very narrow path to land on.

Consumer and consumer prices: Do we anticipate a peak of inflation in the next few years? (The first 11 months of the year has already begun)

That may not be the case. 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. It was slightly higher than expected, but the 8% increase throughout October was a marked slowdown.

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.

“This idea of peak inflation, which people have been talking about for most of the year, is starting to look like it’s valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s just how quickly does that come down?”

According to the Feds latest economic projections, board members were expecting inflation to remain slightly higher for longer than before. Fed board members now expect PCE inflation to end 2023 at 3.1% and core PCE to finish next year at 3.5%, above the central bank’s target rate of 2%.

The Fed meeting, EU industrial production, and UK inflation are on Wednesday.

Truist Advisory Services co-chief investment officers said that pivot and pause is not a cure for the market. Rate cuts might be too late. The risks of a recession are high.

The US economy isn’t in a recession yet. Is American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers because it makes people spend more money on things.

Everybody has been worried about inflation this year. It will be more about disinflation in the 20th century, according to Arnaud Cosserat, CEO of Comgest Global Investors.

Stock Market Volatility, Growth, and Growth: Implications for Investors and Wall Street Correlations at the Fed Meeting and Other Central Bank-Bank Interactions

What does 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).

Wednesday: Fed meeting; US ADP private sector jobs; US JOLTS; China Caixin PMI; Europe inflation; earnings from AmerisourceBergen

            (ABC), Humana

            (HUM), T-Mobile

            (TMUS), Novartis

            (NVS), Altria

            (MO), Peloton

            (PTON), Meta Platforms, McKesson

            (MCK), MetLife

            (MET) and AllState

            (ALL)

The stock market rose in October and November due to hopes that the Fed would reduce the size of its rate hikes. They are still down sharply for the year, though, and stocks have been more volatile so far in December.

The 10-year US Treasury’s yield fell back down to about 3.5% after it moved past 4.3% in October. That was the highest in a decade.

The concern is that the Fed and other central banks are unlikely to begin to pause, even if they were to consider reducing interest rates to try and jump start the economy.

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

Investors may get some answers this week when FTX founder Sam Bankman-Fried testifies in front of the House Financial Services Committee on Tuesday. The Senate Banking Committee will hold its own FTX hearing, but Bankman- Fried is not on the list of witnesses set to appear.

Fed Rate Increases Are Close to the End of the Wall Street Wall Wall Street Era: Implications For Credit, Mortgages, and Car Loans

Maybe investors will be able to relax and take a deep breath before the Fed announcement and press conference later that day. There is no guarantee of that.

But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.

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 latest government reading shows inflation is running at its lowest annual rate in nearly a year.

“It’s good to see progress, but let’s just understand we have a long ways to go to get back to price stability,” Fed Chairman Jerome Powell said at a press conference after the board announced its latest, smaller rate increase.

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.

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. The major indexes were mostly flat by mid-afternoon.

Fed Officials Expect the Worst of Shelter Inflation and the Economy is Still Getting More Ready for the Next High-Energy Economy

Fed officials think the worst of shelter inflation may be behind us. Increases in market rents have slowed since spring.

The price of haircuts and dry cleaning increased by 6.8% and 7.9% in the last twelve months. A quarter of the total consumer spending is spent on services other than housing and energy.

“We see goods prices coming 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.”

The job market is not favorable for older workers who have retired in the last two years. With the supply of workers constrained, the Fed is trying to restore balance by tamping down demand.

Higher borrowing costs make it more expensive to get a car loans, buy a house or carry a credit card. That has already curbed demand in the sensitive parts of the economy, like the housing market.

Jon Stewart, a former host of The Daily Show, said that the Fed might put us in a high unemployment recession if it is committed to this.

Still, Powell warned economy watchers that “the job is not fully done” and that the labor market remains too tight for his liking. He doesn’t expect to cut rates this year unless the economic trajectory changes drastically.

Even though job gains may be slowing, it’s not as if economists are starting to predict losses like they did in previous recessions.

Powell said on Wednesday that there was still hope for a soft landing and that the labor market was tight enough to weather an increase in unemployment. Investors, meanwhile, will be watching jobs numbers very closely.

Premarket Stocks Trading: An Analysis of New York Charges against Bankman-Fried on Decay Consequences of Wall-Centric Deception

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. He will appear before a US judge for an arraignment after arriving in the states.

Last Tuesday, federal prosecutors from the Southern District of New York charged Bankman-Fried with eight counts of fraud and conspiracy. If he is found guilty on all the counts, Bankman-Fried could receive up to 115 years in prison, though he might not receive the maximum sentence.

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

The Saturday before Christmas — also known as Super Saturday — is typically the busiest shopping day of the November-December gift-buying period. Super Saturday this year will occur on December 17th, with Christmas Day and Christmas Eve falling on a Sunday and Saturday, respectively. More than 158 million consumers are estimated to shop that day, according to the National Retail Federation.

Half of the gift purchases have been made, according to the NRF. With Christmas less than a week away, and shipping deadlines approaching, there is more buying to be done.

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

Inflation and the Growth of Personal Consumption Expenditures: The December Results from Widener University Consumer Behavior and Forecasts for November

Retailers can spend a lot of time sitting on an oversupply of merchandise. Some wiggle room can be found for excess inventory in retail warehouses which have a finite amount of space to work with. 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. Fashion clothing is a good example, as savvy shoppers won’t purchase last year’s style if the trend has passed. Stores are forced to discount which impacts their 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 retailers are very nervous. “The clock is ticking and they know they have to maximize every opportunity now to get consumers to make purchases.”

Inflation has moderated in recent months, especially on items like goods as supply chain bottlenecks have eased and consumers focused more spending in areas like leisure and hospitality.

The Personal Consumption Expenditures price index, or PCE, rose 5.5% in November from a year earlier, the Commerce Department reported Friday. In October, prices rose 5.6% annually.

The annual increases for the PCE inflation index dropped to their lowest level in over a year, as the inflation gauge continues to decline.

Spending in November continued to grow but at a slower pace than in previous months. Spending was up 0.1% in November as compared to 0.8% the month before. Personal income increased in November but not as much as in October.

The November PCE report, the last major inflation gauge released in 2022, provided a snapshot of an economy in transition. The Federal Reserve has undertaken a series of interest rate hikes to stifle demand as it attempts to rein in inflation.

Their outlook for the economy is not as strong as it may have been. The sustainability of robust consumer spending is contingent on continued strength in incomes and labor markets in the quarters ahead.”

However, inflation within the services sector has been a little “sticky,” and not abating as quickly. The services index posted a monthly increase of 0.4% and year-over-year increases of more than 11%, Faucher noted in the Friday PCE report.

The risk of a wage-price spiral where rising wages lead to rising prices is low despite the fact that the Fed has said repeatedly it’s worried that tight labor markets are boosting wage growth above level with its 2% inflation target.

Retail Sales Suppressed by the Pandemic, a Preliminary Measurement of Manufacturing Orders in the Context of An Expanding Economy

In November, the Commerce Department said that new orders for manufactured goods fell by -21.0%, the biggest decline since the start of the Pandemic.

The decline was driven by new orders for non-defense aircraft and parts. Excluding transportation, new orders increase 0.2%.

Diane Swonk, the chief economist forKPPM, said after the report that core durable goods orders slowed but did not contract reflecting growing unease about the economy. The prelim reading for December suggests manufacturing will contract further in the year end. The manufacturing sector is bracing for a cold winter.

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.

Powell noted in December that a structural labor shortage remains a major headwind because of the lack of workers to early retirements, caregiving needs and Covid illnesses and deaths.

As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

The consumer has held up very well over the past 18 months, and not keeping the rug out from under them is how you get to the soft landing.

The 2008-2009 Central Bank Policy Working Group: Analysis of Market Conditions and Monetary Policy Actions for the US and Forecast for the Next 10 Years

The central bank’s policymaking arm holds eight regularly scheduled meetings per year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.

The meetings are scheduled for later in the decade. Thedot plot is a chart commonly known as the “Summary of Economic Projections” that shows where each Fed member thinks interest rates will go.

It was a brutal period for the stock market, with roughly one-fifth of the value of the S&P 500 vanishing and the Nasdaq dropping by more than one-third. The US markets have suffered their worst years since 2008.

New numbers published last week show first-time applications for unemployment benefits edged up to 225,000. It is still low historically and the same place as it was a year ago before the recession fears emerged.

The economy could avoid a recession, according to Mark Zandi, chief economist at Moody’s. “Without mass layoffs, it’s unlikely consumers will stop spending and the economy suffer a downturn.”

Inflation, Job Growth, and Wage Growth in the U.S., and Implications for Wall Street, Wall Street and Gas Prices

After spiking above $5 a gallon for the first time ever in June, gas prices have plunged. 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.

The fear is that the Fed will eventually overdo it, raising rates so high and keeping them there for so long that it causes a recession — if the Fed hasn’t already done that.

There is a bet by traders that a further moderation of jobs growth will force the Fed to reduce interest rate hikes.

In the last month or so traders have been watching economic reports more and stock markets have been choppy due to what the latest figures indicate about inflation.

Wednesday’s weaker than expected report on the health of the manufacturing sector, along 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, as well as a report from payroll processing company Automatic Data Processing, will be looked over by investors. It’s possible that further strength will alarm us about inflation and Fed rate hikes.

Wage growth will be looked at. An increase in worker compensation historically tends to lead to more inflation. Consumers can afford to pay the higher prices that companies charge for their products and services if they have more disposable income.

“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.

Workers are likely to be more focused on their paychecks on Friday than the number of jobs added. Wall Street may do the same thing.

Salesforce, Amazon, and IMF: How European Consumers Feel the Pressure of the Inflationary Universe after the December 12th Aldi Event

As my colleague Catherine Thorbecke reported, Salesforce joins a growing list of major tech firms that have recently announced job cuts, including Amazon

            (AMZN) and Facebook owner Meta Platforms. Amazon

            (AMZN) confirmed late Wednesday that it was laying off more than 18,000 employees.

The hope was that the economy would continue to grow and that consumers and businesses would keep spending on tech products and services.

Tech companies realize that inflation and rate hikes are taking a toll on their budget as recession alarm bells ring once more.

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

“Companies that last a long time go through different phases. In a memo shared with employees, Amazon CEO Andy Jassy said they are not in heavy people expansion mode every year.

The global economy is still not out of danger. The head of the International Monetary Fund is worried that a downturn could hit China and emerging markets particularly hard.

According to CNN, investors in Europe are starting to be hopeful that the pace of consumer prices increases is slowing in France and Germany. The drop in energy prices is leading the retreat.

Consumers still 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. The company claims that Brits bought more than 48 million pies.

Wages, Salads, and the Rest of the Year: Implications for the US Economy and the First Month of the New Year

In the salad days of the New Year, many feel renewed and rejuvenated as they look ahead to the coming year. During January there is a certain amount of clarity.

Jobs has been the word of the week as investors eye a slew of data highlighting a strong labor market that is confoundingly resistant to the Fed’s attempts to cool the economy.

Several other job market indicators continue to show that the US economy is in no serious danger of a recession just yet. The number of people filing for weekly jobless claims dipped last week to 186,000, a nine-month low. Investors will get the latest weekly initial claims numbers on Thursday.

According to an interview with the Financial Times this week, Gopinath urged the Fed to continue with its rate increases this year because of the labor market’s resilience.

So will wages moderate this year? Analysts at Goldman Sachs predict that they will. They think the unemployment rate will rise and wage growth will slow by the end of the year.

Bank of America CEO Brian Moynihan told CNN around the holidays that the continued strength of the US consumer is nearly single-handedly staving off recession.

US retail sales fell 0.6% in November, the weakest performance in nearly a year. If the sales are weak, the earnings of retailers are going to suffer.

The Implications of Inflation for the Stock Market and the Recovery of the 30-Year Fixed-Rate Mortgage Rates: Comment to Wall Street Journal and Associated Press

The answer to this is important for investors and for the economy, as it will help determine what happens to markets this year, and if the economy will fall into recession.

And while officials welcomed softer inflation reports in recent months, they stressed that “substantially more evidence of progress” was required and said that inflation was still “unacceptably high.”

The 30-year fixed-rate mortgage averaged 6.48% in the week ending January 5, up from 6.42% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.22%.

The current market is causing would-be buyers to leave because Americans aren’t interested in selling or giving up their mortgage rates.

The home goods company said in the filing that it has significant doubt about the company’s ability to continue.

But the Wall Street Journal reported that Bed Bath & Beyond is preparing to file for bankruptcy within weeks, citing sources familiar with the matter. Bed Bath & Beyond did not immediately respond to a request for comment from CNN.

Wall Street and Wall Street: How Computers and Investors Meteorized and Simplified the Labor Market and Consumer Spending: A Commentary from Steven Kamin

There are people that don’t agree with that assessment. Organized labor has been winning bigger pay increases lately in the transportation industry. And more workers at tech and retail giants have been unionizing as of late.

Workers will be reluctant to give up the bargaining power they have gained over the past year, according to a report.

“Combine a strong labor market with a still substantial reserve of excess savings, and you have all the components in place to keep the Fed up at night,” Vaillancourt said.

Some argue that more tech layoffs won’t be a problem. The view of investors is that companies cutting costs is a good thing for profits since consumers are still spending and that revenue may not be affected in a negative way.

How well Facebook and other tech companies do when they report their fourth quarter earnings next week is one of the factors that could help the Nasdaq continue to climb.

A set of weaker-than- expected reports from these firms could cause the market to weaken in the near term, according to a report.

Tesla

            (TSLA) reported strong results last week, which could be a sign of good things to come from other more dynamic tech companies.

The International Monetary Fund releases a world outlook on Monday.

Editor’s Note: Steven Kamin is a senior fellow at the American Enterprise Institute (AEI), where he studies international macroeconomic and financial issues. He was the director of the international finance division of the Federal Reserve. The opinions expressed in this commentary are his own. View more opinion on CNN.

The First Fed Open Market Conference: Fed Rate Increases and the Rise of the Economy, with Implications for the Core Services Exclusion Housing Metric

labor markets tighten as the economy slows in response to the rise in interest rates, but price pressures will continue to ease due to remaining supply-side bottlenecks.

The decision, at the conclusion of the Federal Open Market Committee’s first meeting of 2023, comes after months of jumbo-sized rate increases intended to cool the economy, and marks the return to a more traditional interest-rate policy.

Powell believes it is very difficult to manage the risk of doing too little and not getting the job done.

US markets jumped following the press conference, indicating the investors expect a more dovish Fed going forward. The S&P 500 finished the first day of February 1.1% higher, marking its best January in four years.

The jobs report for January showed the US economy added 517,000 jobs. It shows you why we think this will take a long time.

“The disinflationary process has begun,” Powell said, noting progress especially in goods prices. The price gains within the services sector remain high, according to him.

Powell keeps a close eye on the Core ServicesExcludingHousing metric in the report, as he expects housing inflation to come down by the middle of the year.

The major stock indexes rose in the first part of the day but then fell in the next part of the trading, with the S&P lower by 0.6%, the DOW down by 2% and the tech- heavy Nasdaq down by 2%.

The Richmond Fed President and the Problem of Forecasting the Future: A Remark on Inflation, the Labor Market, and the Jobs Report

He said that a strong labor market or higher inflation reports may well lead to rates being raised more.

If your heart goes aflutter when central bankers talk about inflation, this may be the most romantic day of the year. Four members of the Federal Reserve spoke about the economy today.

First up was Richmond Fed President Thomas Barkin, who is not a voting member on the interest-rate setting Federal Open Market Committee this year. Barkin said in an interview that inflation is “normalizing, but it is coming down slowly.”

The problem is trying to predict future economic data. “When inflation repeatedly comes in higher than the forecasts…or when the jobs report comes in with hundreds of thousands more jobs than anyone expected…it is hard to have confidence in any outlook,” she said.

Source: https://www.cnn.com/business/live-news/stock-market-news-inflation/index.html

Predictions for Market Swings: Pennsylvania Fed President Patrick Harker and the New York Fed VP John Williams (Nambda Brainard)

Philadelphia Fed President Patrick Harker sounded less dovish than Atlanta Fed President Dennis Blair about inflation. He is an FCC voting member this year. Harker said in a speech Tuesday that “we are not done yet” with rate hikes but added that “we are likely close.” At some point this year, Harker thinks the policy rate will be restrictive enough that we will hold rates in place.

Last up was New York Fed President John Williams, another FOMC member and also someone whose name has been mentioned as a possible successor to Lael Brainard as Fed vice chair now that President Biden is expected to name Brainard as his new top economic adviser.

Along those lines, Williams said that there will likely be “a period of subdued growth and some softening of labor market conditions.” He said the unemployment rate would go up to between 4% and 4.5% over the next year, because he expected the GDP growth to be 1%. The unemployment rate is 3.4%.

The upcoming data could lead to volatile market swings, as Wall Street investors are preparing for their version of Hell Week.

What to expect: ADP’s private payroll report for February and the JOLTS job openings, hires and quits report for January are expected Wednesday. On Thursday, Challenger, Gray & Christmas will release their job cuts numbers for February, while the Labor Department will release its monthly employment report on Friday.

Wall Street Reactions of the Biden-Billionaire Budget in the Early 2000s and Beyond: Commentary on Hirt’s Analysis of the State of the Economy

“We’re stuck in the messy middle.” said Josh Hirt, senior US economist at Vanguard. “Activity has weakened in the most interest rate-sensitive sectors of the economy, but core areas are still showing resilience. The impact of rates has not fully worked through the economy in this period.

The unemployment rate is currently at a 54- year low, but could climb to 5% in the next year or so, according to Hirt.

Wednesday: European Central Bank President Christine Lagarde is to speak, February ADP Nonfarm Employment Change, Federal Reserve Chair Jerome Powell is expected to testify on economic outlook and monetary policy before the Joint Economic Committee, February JOLTs Job Openings; earnings from Brown Forman, Campbell Soup and MongoDB.

Congress often uses the president’s budget to help shape spending priorities for the year ahead. Wall Street investors will likely look at the document in order to understand what may be coming down the pike.

Biden has said his budget will help offset increasing costs for Medicare, Social Security and health care by increasing taxes on the ultra-wealthy. The president also proposed a “billionaire” tax last year. Biden’s proposals, including increased tax on capital gains and on corporate stock buybacks, have roiled Wall Street.