Is the Economy Open? Inflation, Pay, and Employment: The Fed’s Puzzle Embolded in the Last 12 Months

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.

The report is expected to show a modest downshift in hiring from the previous month. The unemployment rate is expected to stay the same.

So, while things are slowing down, they’re still pretty robust relative to those pre-pandemic normal times. Part of the reason for inflation being elevated is that.

Once again, and yes it sounds crummy, but the Fed and others would be happy to see wage growth slow down. The less money we have in our pocket, the less spending power we have. In theory, anyway. There are other parts of the large and complicated inflation puzzle.

In the last jobs report, wages were up 5.2% over the last 12 months. That’s historically high (woo!) It does not keep up with inflation, which is hovering around 8% year over year.

If it comes in well below 250K, you might see some renewed optimism that the Fed’s policies are starting to have their intended effect, and it may not need to keep inflicting pain on the economy.

The F-150 Lightning, the First Electric Pickup, and the Belarusian President Lukashenko: Pricing the Economy with Uncertainty

It’s hard to overstate just how delicate the situation is. The world is in a period of unprecedented economic stability after a series of shocks over the last two and a half years, according to Kristalina Georgieva, the managing director of the International Monetary Fund.

It’s still double the Fed’s customary quarter-point hike, and a sizable increase that will likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

The F-150 Lightning is Ford’s first electric pickup. Citing “ongoing supply chain constraints, rising material costs and other market factors” the company said the entry-level model will be priced at around $52,000 — up significantly from $40,000 when the truck went into production this spring.

(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. “From today, any price increase is prohibited. Prohibited! the president is quoted as saying.

Nightcap Jobs: Peloton is on a Transformation Journey – and it’s not going to work for the Musk White Paper, but it may be coming back

A source familiar with the negotiations told CNN that Musk’s deposition in the court fight over their $44 billion acquisition agreement will be delayed. Initially Musk was scheduled to give a deposition this morning, but changed his mind earlier in the week and offered to buy the company for nothing in exchange for dropping the litigation. The two sides are still haggling over various conditions.

Boston Dynamics is promising not to weaponize their products and encouraging other companies in the industry to do the same. The company believes that it is more important that customers believe 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!

The company is trying to shore up its bottom line with yet another round of layoffs. 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 it, but I would love to stop it.

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

Inflation, the First Mile in a Marathon: Work Stoppages, Job Openings, and Labor Market Behavior in the U.S. Amazon Building

(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. A fire broke out on Monday at the Staten Island facility, called JFK8, and workers reported that it was hard to breathe in parts of the building. 100 workers walked off the job.

The first mile in a marathon is important. A soft or softish landing, where inflation eases without a recession, is still possible because of the latest report. That’s also good for markets.

It’s hard to find a job this month, let them go, then three months from now. Tim Fiore, a research scientist for the Institute for Supply Management, said people are being a lot more cautious.

In late 2020 and early 2021, resignations and job openings rose roughly in tandem. But then the number of people quitting began to level off, even as openings kept rising. Americans are changing jobs a little more than in the past.

Manufacturing represents a small slice of the overall workforce, however. The ISM survey found that there was no change in the amount of people being hired.

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.

Pollak said that job gains are being made in health care, the arts, and food services, but those industries are more sensitive to interest rates and are showing declines.

Richardson said that more people returning to the labor market will cause the hiring situation to be loosened.

Nearly one million people joined or returned to the labor force in August. The trend of inflation in September will be watched by inflation watchdogs at the Fed.

It’s difficult for businesses to keep up with demand for their goods and services when there is a shortage of workers and critical supplies. Prices have gone up. The Fed thought they would be able to solve their problems on their own. Despite some encouraging signs, inflation remains high. In August the prices were up 8.3%.

Cook and her colleagues on the Fed’s governing board have made it clear to the public that interest rates will remain elevated until there is evidence that prices are leveling off.

Cook said in her speech Thursday that inflation was too high and must come down.

The Recovery from the H1N1 Pandemic in the United States: Gad Levanon’s Perspective on the Economy and Labor Market

The chief economist at the Burning Glass Institute is, in fact, Gad Levanon. He’s the former head of The Conference Board’s Labor Market Institute. The opinions expressed in this commentary are his own.

To many economists and analysts, the US economy has represented a paradox this year. On the other hand, some argue that GDP growth even entered a recession because it has slowed significantly. On the other hand, overall employment growth has been much stronger than normal.

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. Demand for data processing and hosting services, semiconductor manufacturing, mental health services, testing laboratories, medical equipment and pharmaceutical manufacturing is higher than before the pandemic. And it’s likely that these represent structural changes to buying patterns that will keep demand high.

Next year will be very different. Many of the industries that are still recovering from the pandemic will have reached pre-pandemic employment levels. With demand saturated, those industries may revert to slower hiring. But this alone is unlikely to push job growth into negative territory. What will do that is monetary policy.

There are two ways to rein in the labor market: Either reduce demand for workers or increase the labor supply. It is difficult to increase labor supply. That requires the kind of legislative action needed to increase immigration, force people into the labor force, or invest in workforce training. This is likely to prove elusive in today’s polarized political environment.

The Fed has been hoping that companies would cut back on recruitment as interest rates go up. So far, we’ve seen only limited evidence of such a trend.

Many people who left the labor force during the H1N1 epidemic hoped that the reopening of schools would be a good time to return to work, according to Pollak. Some of the people who left could not come back.

Effects of the Fed Direct-Principles Rate Increases on the Labor Market and the Recovery of the Post-Pendulum Employment Rate

The number of people looking for work fell in September, which resulted in the unemployment rate going back to its half-century low.

Federal Reserve Chairman Jerome Powell confirmed last month that smaller rate hikes could be expected, saying: “The time for moderating the pace of rate increases may come as soon as the December meeting.”

The Fed’s recently revised script calls for the federal funds rate, the central bank’s benchmark borrowing rate, to move higher, but at a slower pace than in the past several months.

However, that pace is unsustainable, said Dean Baker, senior economist at the Center for Economic and Policy Research. He said that a monthly job gain of less than 200,000 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.

BLS data shows that public sector employment remains 2.5% below the levels of February 2020 as private sector employment has returned to pre-pandemic levels.

The recovery remains uneven, and it’s growing more complex as the labor market starts to feel the influence of the Fed’s series of supersized rate hikes, Pollak said.

Implications of Low-Scale Jobs in the Labor and Education Sectors for Long-Term Economic Growth and Work Perturbations

The number of local public education jobs fell from August to September, as well as day care and truck transportation jobs. At a critical time, the declines are in the opposite direction.

Weaver said that supply chain concerns and the ability for people to have reliable education and child care service so they can return to work have large ripple effects in those and a few other sectors. “That can certainly impact [parents’] long-term and future economic and work prospects.”

Dionne Nelson, the founder and chief executive officer ofLaurel Street said they are not anticipating a recession. “We’re still very busy. We’re still hiring. Our markets are still very active.”

Investors winced on Friday, as fresh data about the health of the labor market paved the way for the Federal Reserve to deliver another bumper increase to interest rates next month, raising costs for companies and weighing on stock prices.

Technology stocks were part of the reason why the S&P 500 fell 3% on Friday. Government bond yields, indicative of the future path of interest rates, rose and the dollar strengthened.

The Fed’s Big Picture: Inflation, Job Openings, Hiring Rates, and the Economic Case for the U.S.

It’s bad news for investors when the labor market is strong as it means the Fed needs to raise interest rates more than it has already done. Higher rates, in turn, raise costs for companies, weighing on stock prices.

Mr. Biden said the report showed “some progress” in combating the increases, noting that costs have climbed by less over the past three months than they had in the prior three months. He also acknowledged that inflation remained high.

Officials had suggested slowing down in November after three large rate increases. The inflation data could make it difficult for the Fed to slow its rate of monetary tightening, as policymakers had previously forecast, because it makes another big move more likely.

Inflation expectations improved by falling to 4.4% in December, according to the university, which showed the biggest improvement in sentiment about business conditions. This is a key data point for the Federal Reserve. If consumers think prices won’t go down, that will lead to more wage demands for businesses, which will in turn cause them to raise prices.

The logic behind Powell’s attention on job openings is simple. They are a direct measure of demand, since employers typically don’t try to hire when no one is buying their products. And they have a clear connection to wage growth — and therefore inflation — because when lots of companies are hiring, they have to pay more to compete for workers.

Changing jobs can be a risk but economists believe that quitting will be a sign of confidence in the economy. A job-switching contributes to wage growth due to people not jumping employers without a pay raise. 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.

Take the latest monthly JOLTS survey on job vacancies, quits and layoffs. The number of job vacancies in the United States was reported to have fallen on Tuesday, despite predictions by economists that it would fall because of the Federal Reserve slowing growth. It jumped to 10.8 million instead of dropping to 10 million.

The Fed has hiked rates, but the economy has withstood it. The job market is good, wages are growing, and GDP is strong. Positive earnings results and largely beating revenue expectations are evidence of business being good.

The central bank is charged with a dual mandate: maximize employment (check) and ensure price stability (uncheck). The Fed would like everyone to retain their jobs and keep consumer prices under control, especially since consumer prices are currently at 40 year-highs. Most economists say the likelihood of that so-called soft landing is now remote — although Powell still considers it possible.

There is a 35% chance of a US recession in the next year, according to Goldman. The Wall Street Journal’s recent forecaster survey has found the risk of a recession to be double the normal risk.

Democrats will have a hard time holding onto power next week due to the pain of inflation and the negative sentiment about job security. Three-quarters of likely voters believe that the country is in a recession, according to a new CNN poll.

The 2020 Housing Boom: How the Boom Has Derived the American Dream and How Boomers Will Get Their Hands: A Case Study of the First-Time Buyer’s Experience

The narrative got flipped on its head in 2020. It wasn’t that the young people didn’t want homes in the suburbs but that they couldn’t afford them. But when the pandemic hit and demand for property exploded, the furor was driven by people in their 30s — finally flush after years of slogging away at whatever jobs were left for them in the fallout of the Great Recession, and, for many, eager to flee to the wide-open spaces of suburban life.

(It also didn’t hurt that dizzying stock surges meant Baby Boomer parents with large investment portfolios were happy to pass on some of those gains to their darling Millennial kids.)

Those who were fortunate enough to close on a home in the current housing market are likely to be in good shape as the 2020 housing boom ends.

A report released Thursday showed that first-time buyers comprised just 26% of all buyers for the year ending in June, an all-time low according to the National Association of Realtors.

“They have to save while paying more for rent, as well as student debt, child care and other expenses,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. Home prices have increased while mortgage rates are climbing.

The Federal Reserve raised interest rates over the course of the year, which led to a rise in mortgage rates. The Fed raised interest rates last week by 75 basis points, the sixth rate increase this year and the fourth in a row.

“The policies that regulate land use and housing production make it extremely difficult to add more homes in desirable locations,” writes Jenny Schuetz, an urban economist at the Brookings Institution.

Rather than rebuilding within existing neighborhoods, housing supply has expanded through “sprawling single-family subdivisions at the urban fringe.” The West is prone to wildfire so that’s putting more people and homes in the area.

Now is the best time to rethink the way we frame the American Dream as affordability increases. But that will only happen if those who stand to benefit — Millennials and Gen Z — are better represented in elected office. 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 UK Central Bank (UK Central Bank) raises rates by a quarter of the Fed every three years: A note on rates, goldman Sachs, and inflation

The Bank of England followed the Fed in raising its key interest rate by the same amount, becoming the first national bank to do so in 33 years. The European Central Bank did the same thing last week.

A side note:Basis points is how central bankers talk about rate moves. One basis point is one tenth of a percentage point.

A four-step path from high inflation to a low inflation economy is still possible, according to a report.

But Goldman Sachs pointed out the transition to more sustainable — but still positive — economic growth “has already occurred, and it looks durable.” The bank expects gross domestic product growth of about 1% over the next year.

Goldman Sachs concedes that there has been “much less progress” on the price side. Inflation metrics have stopped getting worse but they don’t really have any better.

Inflationary Mixing in the Crowd: What Are We Expect to Learn from the Collapse of Cryptocurrencies and Wall-Closure

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up here. The audio version of the newsletter can be downloaded by Clicking on the link.

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 be behind us. The Federal Reserve may 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. They will watch Powell’s press conferences for clues about what is to come.

The pathway has narrowed as a result of projections from the Fed and other economists, so that reining in inflation can be achieved in a soft landing.

“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.

In November, the price of virtual currency fell by more than 15%. The remarkable collapse of crypto brokerage and exchange firm FTX, which was once valued as high as $32 billion, has investors in digital currencies wondering what the future will bring.

The assets have gotten hit just as much as stocks and bonds, proving that there’s no place in the market to hide from worries about rate hikes and recession.

Crypto Thaw: From Bitcoin to Cryptocurrencies in the Covid Era to the Next Generation of Wall-Centrics and Wall Street Walls

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 new high of over $70,000 in November.

The dollar strengthened as central banks started raising rates to fight inflation, making it attractive to investors as a safe haven. At the same time, the economy started to sour and those new investors who still viewed bitcoins as risky exited in droves.

“Bitcoin and ethereum went straight up and down but they have still gained a lot from mid-2020. Over that longer time horizon, digital assets are still outperforming tech stocks,” said Jeff Dorman, chief investment officer at Arca, a firm that specializes in crypto.

The cost to finance a home has gone up so much that sales have dropped for the last eight months. Only 16% of people think the time is right to buy a home, the lowest number in Fannie Mae’s history.

The traders are only putting in a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

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.

The Consumer Price Index and Producer Price Rise in November, and a Sign of Inflation in the First Three Months of the New Year

But it may not be that simple. The Producer Price index rose 7.4% in the last year, according to the government. The rate was a bit higher than expected but still slower than in October.

The Consumer Price index for November was 7.1%, a decrease from the 40-year high of 9.1% in June, as prices for used cars, lumber and gas have come down.

“This idea of peakinflation, which people have been talking about for the entire year, is finally starting to look like it is valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. How quickly does it come down?

Jones still thinks the Fed will raise rates by half a point this week and may hike them by a quarter point in early 2023. She conceded that the Fed is making it up as they go along.

What else: Wednesday will also bring the Fed’s latest forecasts for the unemployment rate and gross domestic product (GDP) growth. Those numbers will highlight whether Fed officials think recession is likely and how high their tolerance for pain is as they continue the fight to bring down persistent inflation.

The co-chief investment officer at Truist Advisory Services said that a pause is not a cure-all for the market. “Rate cuts may be too late. The risks of a recession are still high.

The US economy isn’t in a recession yet. But are 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 too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

Everyone has been talking about inflation. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

What the Fed is saying about the stock market, how the US Treasury and other central banks will react to Fed tightening and the economic slowdown

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).

Friday: Eurozone PMI; UK retail sales; earnings from Accenture

            (ACN), Darden Restaurants

            (DRI) and Winnebago

            (WGO)

The stock market rallied in October and November due to the hopes that the Fed would start to scale back the size of its rate hikes. The stock market is volatile in the month of December and is still down for the year.

The 10-year US Treasury yield is about 4%, down from 4.3% in late October. That was the highest it has been since 2008.

The major concern is that the Fed and other central banks may not begin to pause, let alone consider lowering interest rates to try and stimulate the economy, until it’s too late.

Tom Essaye, founder and editor of the Sevens Report investing newsletter, said in a Monday statement that the macroeconomic focus will shift from fears of Fed tighteng to how badly growth slows and earnings fall before global central banks can hint at providing accommodation.

Sam Bankman-Fried will testify in front of the House Financial Services Committee this week. The Senate Banking Committee will hold its own FTX hearing Wednesday, but Bankman-Fried is not currently on the list of witnesses set to appear.

The Fed is Getting Closer to Expect: Predictions for the Second Half of the 2023 Rate of Interest Rates and Unemployment Rates

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

The Fed’s anticipated action would increase the rate that banks charge each other for overnight borrowing to a range of between 4.25% and 4.5%, the highest since 2007.

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 Fed has increased its benchmark lending rate a record 6 times this year in an attempt to keep inflation from going as high as it did this summer.

The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the US with moves of their own on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

The question is how big of a jump will there be in the dots. Back in December 2021, the Fed was only expecting rates to finish this year at about 0.9%.

Economists at EY-Parthenon believe that projections for real GDP growth will likely be revised down from 1.2% in the fourth quarter of 2023 to around 0%. Projections for unemployment rate will likely approach 5% from 4.4% in September.

The First Time the RCN Has Goed on Strike: The 1995-98 Season of the Renaissance of the Reproductive Nurses’ Union

It is the first time in the 106-year history of the RCN that it has gone on strike. The cost-of-living crisis slashed nurses’ spending power nearly three years after the start of a Pandemic that pushed many to their limits.

For the majority of the RCN’s history, it had a no strike policy. In 1995, the union changed its rules, allowing strikes as long as they did not compromise patient care.

The country went through a “Winter of Discontent” in the late 1970s, when huge numbers of workers went on strike.

The lawsuit cited numerous times when Musk and others at Tesla had stated that, within a year or two, the cars would be fully self-driving thanks to software updates. The suit states that in 2016 Musk stated that his vehicle would be able to drive across the US by next year.

According to lawyers for the company, the alleged fraud in the class-action lawsuit doesn’t mean that the company failed to live up to lofty goals.

The lawsuit, filed by the California firm of Cotchett, Pitre & McCarthy, also cited numerous cases of crashes involving the use of Tesla’s driver assist technology.

The hike, smaller than the previous four increases, comes after the latest government reading showed inflation is running at its slowest annual rate in nearly a year.

” It’s good to see improvement but we have a long way to go before we get back to price stability,” Powell said after the board decided to raise the rate by 0.25 of a point.

The Decreasing Wall Wall Revealed in the Economy: Consumer Prices and Optimal Mortgage Payments in the Last Twelve Months

Many Americans are feeling the effects of higher interest on their credit cards, cars, and mortgages as a result of the price increases in almost every part of their lives. The average interest rate on used cars is 9.34%, compared to 8.12% last year and they are making the largest monthly payments on record.

November’s jobs report showed a resilient labor market, which caused the stock market to plunge. They fell again on Thursday when weekly numbers showed the number of Americans filing for unemployment benefits fell, indicating a still-tight labor market.

Fed officials think that shelter inflation may be behind us. Increases in market rents have slowed.

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 Fed is Back: Why is the US economy going to a high unemployment crisis? In response to Powell’s comments on the economy and the housing market

Powell said that goods prices were going to come down. What happens with housing services is something we understand. 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.

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

It is more expensive to get a car loan, buy a house or carry a balance on a credit card due to higher borrowing costs. That’s already curbing demand in some of the more sensitive parts of the economy, like the housing market.

Jon Stewart, former host of The Daily Show, believes that the Fed will put the US in a high unemployment recession.

It is possible that he is right, but some economists still think there is hope that a Fed pivot could happen in the first half of next year.

Powell said on Wednesday that a soft landing was possible, and that the labor market could not sustain an increase in unemployment without triggering a recession. Investors, meanwhile, will be watching jobs numbers very closely.

Super Saturday – the Busiest shopping day of the year: An analysis by Scannell’s colleague Kara Bankman-Fried

A person said that Bankman-Fried is expected to agree to be extradited to the US. Reuters first reported thank Bankman-Fried would withdraw his extradition fight Monday, reports my colleague Kara Scannell.

Federal prosecutors in New York charged Bankman-Fried with conspiracy and eight counts of fraud. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely wouldn’t get the maximum sentence.

US market regulators sued Bankman-Fried because they claimed he built a house of cards on a foundation of deception and lied to investors.

The busiest shopping day of the year is on Saturday before Christmas, 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. More than 158 million consumers are estimated to shop that day, according to the National Retail Federation.

Half of gift purchase has been done, the NRF estimates. With less than a week to go before Christmas, people have a lot more shopping to do.

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

The Federal Reserve’s December Inflationary Measurements: A State of Emergency for the Consumer Consumers’ Choice in the Consumer Goods Sector

Retailers spend money to sit on oversupply for too long. Retailers who keep items in their own warehouses and distribution centers have limited space to work with, but they have some wiggle room to deal with excess inventory. If more space is required for a long period of time it adds up.

Also, unsold products lose value over time. If the trend has passed, savvy shoppers wont buy last year’s style if they haven’t already purchased it. Stores are forced to discount in order to be profitable.

Stores were already offering discounts of 50% to 60% off during the final full weekend before Christmas, as well as free shipping for online orders.

Ross Steinman, professor of consumer behavior at Widener University in Chester, Pennsylvania, said he has studied the holiday season for two decades and has never seen it so dramatic.

“Retailers are very nervous,” he said. They know that there is a lot of time left to get consumers to make purchases.

The Federal Reserve’s preferred measurement of inflation showed price increases continued to moderate in November, providing yet another welcome indication that the period of painfully high prices has peaked.

The Personal Consumption Expenditures price index increased in November from a year earlier. In October, prices rose 5.6% annually.

The annual increases for both PCE inflation indexes hit their lowest levels since October 2021, following a decline in other inflation indicators.

Spending continued to rise in November, 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 by 0.4% in November, down from 0.7% in October.

The PCE report provided a snapshot of an economy in transition, the last major inflation gauge to be released. Tasked with reining in the highest inflation since the early 1980s, the Fed has undertaken a series of blockbuster interest rate hikes to squelch demand.

While the economy is moving in the right direction, it is not fast enough according to a statement by the chief economist of the P.C. Financial Services. Decreases in consumer spending for durable goods are a result of higher interest rates.

Inflation hasn’t abate as quickly in the services sector. Friday’s PCE report showed the services index had a 0.4% monthly increase, unchanged from October, and a year over year increase of more than 10%.

While much of the services inflation is due to housing costs, which are rapidly reversing, the Fed is concerned that strong wage growth could fuel persistent increases in services prices and overall inflation, he added.

December New Orders for Manufacturing and the Economic Uncertainty in the U.S. After the Decline of the November 11 Pandemic

A separate Commerce Department report released Friday showed that new orders for manufactured goods tumbled 2.1% in November, the biggest monthly drop since the onset of the pandemic.

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

“Core durable goods orders slowed but did not contract, reflecting growing unease about the economy,” Diane Swonk, chief economist for KPMG, tweeted Friday after the report’s release. “Manufacturing activity has begun to contract and prelim reading for December suggests it will contract further at year end. The manufacturing sector is expecting 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.

The consumer confidence index from the Conference Board was the highest measurement in over two years this week.

In December, Powell stated that the labor shortage was caused by early retirements, caregiving needs, Covid illnesses and deaths and a plunge in net immigration.

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 last 18 months and that is pretty much what gets to the soft landing.

The Federal Open Market Committee: Observational Results and Report on a Press Conference by Chair Powell (invited press conference in July, 2011)

The Federal Open Market Committee has eight regular meetings a year. The group looks through economic data and assesses financial conditions over the course of two days before it decides on monetary policy after a press conference by Chair Powell.