Economic and jobs news thread

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caltrek
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Wall Street Banks Huge Profits from Credit Card Debt
by Eric Gardner
January 25, 2023

Introduction:
(More Perfect Union) Major Wall Street banks are making billions from the Federal Reserve’s efforts to fight inflation, while American consumers are loading up on debt and falling behind to pay for necessities.

Bank of America, Citigroup, JP Morgan, and Wells Fargo reported stellar earnings last quarter due in large part to the Federal Reserve’s interest rate hikes and ballooning credit card debt.

Combined, the Wall Street titan’s net interest income – a financial metric that measures the difference between what they paid on deposits and what they earned through loan interest – topped $61 billion for the quarter. That means banks are extracting huge amounts from credit card interest while paying the bare minimum to those with savings accounts. Last quarter’s results amount to a 36% increase from the previous year.

With inflation soaring over the last year and government assistance drying up, consumers are resorting to credit cards to pay for basic expenses. Aggregate American credit card debt increased to $925 billion this month–the largest year-over-year increase in 20 years. 46% of credit card owners carry monthly credit card debt. Qualitatively, the most common answer to a US News and Report question about the cause of credit card debt was “increased cost coupled with insufficient income.”

Meanwhile, Big banks are profiting from the Federal Reserve’s interest rate hikes while saddling the consequences on consumers. Banks typically tie a credit card’s interest rate to actions by the Federal Reserve. The Fed’s actions have pushed the average credit card interest rate over 23%, a 30% increase compared to pre-pandemic levels. This helped J.P. Morgan, America’s largest bank, blow past its own internal profitability goals. Meanwhile, the dual mandate of inflation and rising interest rates has the industry preparing for an increase in consumer defaults.
Read more here: https://perfectunion.us/
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The Fed's favorite inflation gauge shows price hikes cooled last month

By Alicia Wallace, CNN
Published 8:33 AM EST, Fri January 27, 2023
Minneapolis (CNN) -- The Federal Reserve's preferred inflation gauge showed prices rose at a slower pace last month, indicating further progress in the central bank's battle with higher prices.

The Personal Consumption Expenditures price index, or PCE, rose by 5% in December, compared to a year earlier, the Commerce Department reported Thursday. ... In December alone, prices rose 0.1% from November.

Core PCE, which doesn't include the more volatile food and energy categories, increased by 4.4% annually, down from November's annual rate of 4.7%. On a monthly basis, it was up 0.3%.

Core PCE is the Fed's favored inflation gauge as it provides a more complete picture of consumer costs and spending.

This story is developing and will be updated.
Read more: https://www.cnn.com/2023/01/27/economy/ ... index.html
weatheriscool
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Re: Economic and jobs news thread

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US dairy policies drive small farms to 'get big or get out' as monopolies get rich
Source: Guardian/US
Exclusive: Misguided policies have hurt small-scale farms while enriching agribusinesses and corporate lobbyists, analysis shows.

Two decades of misguided US dairy policies centered around boosting milk production and export markets have hurt family-scale farms and the environment while enriching agribusinesses and corporate lobbyists, new research has found.

The average American dairy turned a profit only twice in the past two decades despite milk production rising by almost 40%, according to analysis by Food and Water Watch (FWW) shared exclusively with the Guardian.
[snip]
Nationally, the total number of US dairy farms fell by more than half between 1997 and 2017, while the average number of cows per farm increased by 139%, according to analysis of USDA data. More than 70% of US milk is produced on farms with at least 500 cows, with the largest dairies boasting herds of more than 25,000.

Read more: https://www.theguardian.com/environment ... s-get-rich
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US wage growth slowed in the final quarter of 2022
Source: ABC News

WASHINGTON -- Pay and benefits for America's workers grew at a healthy but more gradual pace in the final three months of 2022, a third straight slowdown, which could help reassure the Federal Reserve that wage gains won't fuel higher inflation. Wages and benefits, such as health insurance, grew 1% in the October-December quarter compared with the previous three months. That marked a solid gain, though it was slower than the 1.2% increase in the July-September quarter.

Fed Chair Jerome Powell and economists consider the data released Tuesday, known as the employment cost index, to be the most comprehensive gauge of labor costs. Powell last year cited a sharp increase in the index as a key reason why the Fed accelerated its interest rate hikes.

Powell has said that he sees rapid wage gains, particularly in the labor-intensive service sector, as the biggest impediment to bringing inflation down to the Fed’s 2% target. When restaurants, hotels, veterinary clinics and other services companies raise pay, they often pass along those higher costs by charging their customers higher prices.

In last year’s first quarter, total worker compensation had jumped 1.4% — the most on records dating to 2001. Before then, quarterly compensation growth had rarely topped 1%.
Read more: https://abcnews.go.com/Business/wireSto ... 2-96787888
weatheriscool
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Private payroll growth slowed to 106,000 in January as weather hit hiring, ADP says
Source: CNBC
Private companies added just 106,000 new workers for January, down from an upwardly revised 253,000 the month before and well below the 190,000 Dow Jones estimate.
Most of the growth came in the hospitality industry, as bars, restaurants, hotels and the like added 95,000 positions.
ADP Chief Economist Nela Richardson said weather factors were at play and hiring was strong outside of the reference week the firm uses to compile the report.
Read more: https://www.cnbc.com/2023/02/01/adp-job ... 2022-.html
weatheriscool
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Fed raises rates a quarter point, expects 'ongoing' increases
Source: CNBC

The Federal Reserve on Wednesday raised its benchmark interest rate by a quarter percentage point and gave little indication that it is nearing the end of this hiking cycle. Aligning with market expectations, the rate-setting Federal Open Market Committee boosted the federal funds rate by 0.25 percentage point. That takes it to a target range of 4.5%-4.75%, the highest since October 2007.

The move marked the eighth increase in a process that began in March 2022. By itself, the funds rate sets what banks charge each other for overnight borrowing, but it also spills through to many consumer debt products. The Fed is targeting the hikes to bring down inflation that, despite recent signs of slowing, is still running near its highest level since the early 1980s.

The post-meeting statement noted that inflation “has eased somewhat but remains elevated,” a tweak on previous language. Markets, however, were looking to this week’s meeting for signs that the Fed would be ending the rate increases soon. But the statement provided no such signals. Stocks sold off in the wake of the announcement, with the Dow Jones Industrial Average tumbling more than 300 points.

The document included language noting that the FOMC still sees the need for “ongoing increases in the target range.” Market participants had been hoping for some softening of the phrase, but the statement, approved unanimously, kept it intact. The statement did alter one part when describing what will determine the future policy path.
Read more: https://www.cnbc.com/2023/02/01/fed-rat ... -hike.html
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caltrek
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Why the Fed Raised Interest Rates by the Smallest Amount Since It Began its Epic Inflation Fight
by William T. Chittenden
February 1 , 2023

Introduction:
(The Conversation) The Federal Reserve’s policy-setting committee lifted interest rates on Feb. 1, 2023, by a quarter of a percentage point to a range of 4.5% to 4.75%. The increase, the smallest since the Fed began an aggressive campaign of rate hikes in March 2022, came amid signs the fastest pace of inflation in decades is cooling. But the Fed also indicated more rate hikes are coming.

So why is the Fed slowing the size of rate increases now, and what does it mean for consumers? We asked finance scholar William Chittenden from Texas State University to explain what’s going on and what comes next.


Why did the Fed raise rates by only a quarter point?

The Fed is trying to figure out whether last year’s rate hikes have slowed the economy enough to get inflation near its target of about 2%.

By raising what’s known as the Fed funds rate, the U.S. central bank makes borrowing more expensive, which means buying large-ticket items, like cars and homes, is more costly. This should lead to fewer people buying cars, which will likely result in lower car prices.
Read more here: https://theconversation.com/why-the-fe ... ht-199057
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Payrolls increased by 517,000 in January, crushing estimates, as unemployment rate hit 53-year low

Source: CNBC
The employment picture started off 2023 on a stunningly strong note, with nonfarm payrolls posting their biggest gain since July 2022. Nonfarm payrolls increased by 517,000 for January, above the Dow Jones estimate of 187,000 and December’s gain of 260,000, according to a Labor Department report Friday.

“It was a phenomenal report,” said Michelle Meyer, chief U.S. economist at the Mastercard Economics Institute. “This brings into question how we’re able to see that level of job growth despite some of the other rumblings in the economy. The reality is it shows there’s still a lot of pent-up demand for workers were companies have really struggled to staff appropriately.”

The unemployment rate fell to 3.4% versus the estimate for 3.6%. That is the lowest jobless level since May 1969. The labor force participation rate edged higher to 62.4%. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons also edged higher to 6.6%. The household survey, which the Labor Department uses to compute the unemployment rate, showed an even bigger increase of 894,000.

“Today’s jobs report is almost too good to be true,” wrote Julia Pollak, chief economist at ZipRecruiter. “Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.” Markets, however, dropped following the report, with the Dow Jones Industrial Average down about 100 points in early trading.

Read more: https://www.cnbc.com/2023/02/03/jobs-re ... 2023-.html
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caltrek
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weatheriscool wrote: Fri Feb 03, 2023 5:15 pm Payrolls increased by 517,000 in January, crushing estimates, as unemployment rate hit 53-year low

Source: CNBC
The employment picture started off 2023 on a stunningly strong note, with nonfarm payrolls posting their biggest gain since July 2022. Nonfarm payrolls increased by 517,000 for January, above the Dow Jones estimate of 187,000 and December’s gain of 260,000, according to a Labor Department report Friday.

...
Read more: https://www.cnbc.com/2023/02/03/jobs-re ... 2023-.html
More on that:

MANHATTAN (Courthouse News) — An unbelievably strong jobs report caught Wall Street by surprise, bolstering investors’ fears that the Federal Reserve will keep its thumb pressed on the interest rate scale.

...

Most of the gains in the private sector were among the leisure and hospitality space, which saw 128,000 jobs gained; professional services, which picked up by about 82,000 jobs; and private education and health services, which saw a 105,000-job increase. Government jobs also increased by 74,000 last month.

Stock futures plummeted when the report came out before the opening bell Friday morning, and by the end of the week’s trading the Dow Jones Industrial Average had dropped 55 points. The S&P 500 and Nasdaq continued to gain, increasing 66 points and 385 points, respectively.

“The undeniably strong report is what markets hope for coming out of a recession, but not what you want to see when expectations for the end of the Fed rate hike campaign is suddenly challenged by significantly stronger labor market,” said Quincy Krosby, chief global strategist for LPL Financial.

...
The services sector gained all of the jobs, while manufacturers actually lost 3,000 jobs last month. Job gains were fairly consistent among U.S. regions except for the Midwest, which saw 40,000 jobs lost. Similarly, mid- and large-sized businesses gained 64,000 jobs and 128,000 jobs, respectively, while companies with fewer than 50 employees let go of 75,000 jobs.

ADP Chief Economist Nela Richardson blamed weather-related disruptions for the lukewarm hiring in certain sectors and areas —likely referencing heavy snow storms in mid-January — and said hiring during the remainder of the month was as strong as it was during January of last year.
Source: https://www.courthousenews.com/massive- ... fed-fears/
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Re: Economic and jobs news thread

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Inflation rose 0.5% in January, more than expected and up 6.4% from a year ago
Source: CNBC

Inflation turned higher to start 2023, as rising shelter, gas and fuel prices took their toll on consumers, the Labor Department reported Tuesday. The consumer price index, which measures a broad basket of common goods and services, rose 0.5% in January, which translated to an annual gain of 6.4%. Economists surveyed by Dow Jones had been looking for respective increases of 0.4% and 6.2%.

Excluding volatile food and energy, core CPI increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%. Markets were volatile following the release, with Dow Jones futures around flat.

Rising shelter costs accounted for about half the monthly increase, the Bureau of Labor Statistics said in the report. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. Energy also was a significant contributor, up 2% and 8.7% respectively, while food costs rose 0.5% and 10.1% respectively.

Rising prices meant a loss in real pay for workers. Average hourly earnings fell 0.2% for the month and were down 1.8% from a year ago, according to a separate BLS report.
Read more: https://www.cnbc.com/2023/02/14/consume ... 2023-.html
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