Economic and jobs news thread

weatheriscool
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10-year Treasury yield drops below 3.5% after inflation reading comes in lighter than expected

Source: CNBC

Treasury yields slid on Tuesday after data showed inflation rose less than expected for November, fueling hope that the Federal Reserve will slow the pace of rate hikes. The yield on the benchmark 10-year Treasury dropped 15 basis points to 3.46%. The 2-year Treasury yield was last down by 20 basis points to 4.17% to hit its lowest level since Oct. 6. Yields and prices move in opposite directions and one basis point is equivalent to 0.01%.

The consumer price index, which measures a wide basket of goods and services, rose just 0.1% from the previous month, and increased 7.1% from a year ago, the Labor Department reported Tuesday. Economists surveyed by Dow Jones had been expecting a 0.3% monthly increase and a 7.3% 12-month rate.

The lighter-than-expected reading came just a day before the central bank wraps up the last policy-setting meeting of the year. Many believes that the data cemented a 50 basis point rate hike this week.

“Inflation is cooling for goods and services this month and the price increases that wreaked havoc on financial markets will likely cool even further in 2023,” Chris Rupkey, chief economist at FWDBonds. “For the first time we can say the Fed is winning its war on inflation.”
Read more: https://www.cnbc.com/2022/12/13/treasur ... gures.html
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caltrek
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The 1% Move Report for December 12, 2022


Introduction:

(Morgan Stanley)
What Happened in the Markets?

• The S&P 500 rose 1.4% Monday to close at 3,991. The index is now down 16.3% year-to-date.

• All 11 S&P 500 sectors increased Monday as Energy (+2.5%) and Utilities (+2.3%) outperformed while Communication Services (+0.7%) and Consumer Discretionary (+0.4%) lagged.

• US stocks climbed ahead of a busy week for economic data and central bank meetings. The Federal Reserve, European Central Bank (ECB), and Bank of England (BOE) will all hold meetings this week, with all three expected to hike their respective monetary policy rate by 50 basis points. The November CPI report will be released on Tuesday, with the consensus expecting headline CPI of 7.3% YoY, down from 7.7% YoY in October.

• By the 4 pm equity market close, WTI oil rose over 3% to above $73 per barrel. The 10-year US Treasury yield increased to 3.61%. Gold declined 1% to $1,780 per ounce while the US Dollar Index increased modestly.

What to Watch Going Forward

• Monetary Policy: The next FOMC meeting is December 13-14. Following the November FOMC meeting, Fed Chair Powell announced a fourth consecutive 75-basis-point (bp) hike and reiterated that "there is still a way to go to get to a sufficiently restrictive level of monetary policy" that will allow for inflation to return to 2% over time. Fed Chair Powell emphasized that the discussion on how long to keep policy restrictive is most important and that it is premature to think about a pause in rate hikes. With core services inflation still rising and goods inflation higher than the Fed anticipated at this point in time, the clarity on when inflation will moderate sustainably is not apparent. During the Q&A session, Fed Chair Powell noted that "a soft landing is still possible, although the window has narrowed."
Read more here: https://www.morganstanley.com/content/ ... -202212012
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The Fed lifts rates by half a point, acknowledging that inflation is easing
Source: CNN Business


Washington, DC CNN — 

The Federal Reserve approved a half-point interest rate hike on Wednesday, a smaller increase than in recent months and an acknowledgment that inflation is finally easing.

The increase marks a shift for the central bank after an unprecedented year that includes seven-straight rate hikes as part of an aggressive campaign to try and bring down the highest inflation since the early 1980s.

While lower than the four consecutive three-quarter-point hikes approved at the Fed’s previous meetings, Wednesday’s rate hike is still twice the size of the central bank’s customary quarter-point increase and will likely deepen the economic pain for millions of American businesses and households by pushing up the cost of borrowing even further.

This story is developing and will be updated.

Read more: https://www.cnn.com/2022/12/14/economy/ ... index.html
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U.S. retail sales post biggest drop in 11 months; labor market tight
Source: Reuters

Macro Matters
4 minute read * December 15, 2022 * 9:46 AM EST * Last Updated an hour ago
U.S. retail sales post biggest drop in 11 months; labor market tight
By Lucia Mutikani

Summary
-- Retail sales fall 0.6% in November
-- Core retail sales drop 0.2%; October sales revised lower
-- Weekly jobless claims decrease 20,000 to 211,000

WASHINGTON, Dec 15 (Reuters) - U.S. retail sales fell more than expected in November, but consumer spending remains supported by a tight labor market, with the number of Americans filing for unemployment benefits decreasing by the most in five months last week.

The biggest decrease in retail sales in 11 months reported by the Commerce Department on Thursday was likely payback after sales surged in October as Americans started their holiday shopping early to take advantage of discounts by businesses desperate to clear excess inventory.

Still, the weakness in sales suggested higher borrowing costs and the threat of an imminent recession were starting to have an impact on household spending.

{snip}
Read more: https://www.reuters.com/markets/us/us-r ... 022-12-15/
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caltrek
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What Happened in the Markets on December 15, 2022?

Introduction:
(Morgan Stanley)

• The S&P 500 declined 2.5% Thursday to close at 3,896. The index is now down 18.3% year-to-date.

• All 11 S&P 500 sectors dipped Thursday as Energy (-0.6%) and Utilities (-1.3%) outperformed while IT (-3.8%) and Communication Services (-3.8%) lagged the index.

• Equity markets headed lower and the US Dollar Index rallied as investors considered US economic data releases and the potential effects of the Fed's and the ECB's decisions to slow their rate hikes to 50-basis-point increases.

• Today's US economic data reports showed labor market strength but weaker retail sales and industrial production. The retail sales report noted a cooling in spending in November (the most since last December) following a strong October amid the holiday shopping season. Spending grew in only four of the 13 categories, and motor vehicle sales declined the most (-2.3% MoM). This slowdown follows inflationary pressures and may reflect consumers' continued shift in spending from goods to services. Additionally, the industrial production report highlighted weaker goods manufacturing, with motor vehicles and parts declining 3.1% MoM.

• By the 4 pm equity market close, WTI oil declined 1.5% to $76 per barrel. The 10-year US Treasury yield decreased 3 basis points to 3.45% while the US Dollar Index rose 0.8%.
Read more here: https://www.morganstanley.com/content/ ... 20221215
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caltrek
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The Missing Workers Who are Never Coming Back
by Emily Peck
December 16, 2022

Introduction:
(Axios) Federal Reserve chair Jerome Powell struck a particularly somber note at his press conference earlier this week when he mentioned that one reason the labor market is so tight right now is that many workers died from COVID-19.

The big picture: Economists have theorized for a while about the impact of COVID deaths on the labor market. Now, research has started to emerge and key public figures like Powell are starting to talk about it explicitly.

• "Close to a half a million who would have been working ... died from COVID," Powell said while talking about the U.S. labor shortage.

• Go deeper: In a footnote to a speech he gave on Nov. 30, Powell estimates that 400,000 working-age Americans died in excess of what was anticipated pre-pandemic.
Read more of the Axios article here: https://www.axios.com/2022/12/16/the-mi ... ming-back

Here is an excerpt from Powell’s speech of November 30, 2022:
(Board of Governors of the Federal Reserve System) In the labor market, demand for workers far exceeds the supply of available workers, and nominal wages have been growing at a pace well above what would be consistent with 2 percent inflation over time. Thus, another condition we are looking for is the restoration of balance between supply and demand in the labor market.

Signs of elevated labor market tightness emerged suddenly in mid-2021. The unemployment rate at the time was much higher than the 3.5 percent that had prevailed without major signs of tightness before the pandemic. Employment was still millions below its level on the eve of the pandemic. Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon.

Comparing the current labor force with the Congressional Budget Office's pre-pandemic forecast of labor force growth reveals a current labor force shortfall of roughly 3-1/2 million people…(see left panel in figure at bottom of this post). This shortfall reflects both lower-than-expected population growth and a lower labor force participation rate (…see right panel in figure). Participation dropped sharply at the onset of the pandemic because of many factors, including sickness, caregiving, and fear of infection. Many forecasters expected that participation would move back up fairly quickly as the pandemic faded. And for workers in their prime working years, it mostly has. Overall participation, however, remains well below pre-pandemic trends.

Some of the participation gap reflects workers who are still out of the labor force because they are sick with COVID-19 or continue to suffer lingering symptoms from previous COVID infections ("long COVID"). But recent research by Fed economists finds that the participation gap is now mostly due to excess retirements—that is, retirements in excess of what would have been expected from population aging alone. These excess retirements might now account for more than 2 million of the 3 1/2 million shortfall in the labor force.

What explains these excess retirements? Health issues have surely played a role, as COVID has posed a particularly large threat to the lives and health of the elderly In addition, many older workers lost their jobs in the early stages of the pandemic, when layoffs were historically high. The cost of finding new employment may have appeared particularly large for these workers, given pandemic-related disruptions to the work environment and health concerns. Also, gains in the stock market and rising house prices in the first two years of the pandemic contributed to an increase in wealth that likely facilitated early retirement for some people.

The data so far do not suggest that excess retirements are likely to unwind because of retirees returning to the labor force. Older workers are still retiring at higher rates, and retirees do not appear to be returning to the labor force in sufficient numbers to meaningfully reduce the total number of excess retirees.

The second factor contributing to the labor supply shortfall is slower growth in the working-age population. The combination of a plunge in net immigration and a surge in deaths during the pandemic probably accounts for about 1-1/2 million missing workers.

Source for speech: https://www.federalreserve.gov/newseven ... 1130a.htm

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Consumer confidence jumps to eight-month high as recession worries fade

Published: Dec. 21, 2022 at 10:12 a.m. ET
By Jeffry Bartash

Consumer confidence index climbs to 108.3 from 101.4
The numbers: A survey of consumer confidence jumped to a eight-month high of 108.3 in December, reflecting fewer worries about inflation and more optimism about jobs and the economy. ... The closely followed index rose 6.9 points from 101.4 in the prior month, the nonprofit Conference Board said Wednesday. It was the first increase in three months. ... Economists polled by The Wall Street Journal had forecast the index to rise to 101.2.

Key details: A measure of how consumers feel about the economy right now leaped to 147.2 in December from 138.3 in the prior month. That's the highest level since early summer. ... Falling gas prices have helped to bolster the confidence of consumers and ease their worries about inflation. ... Inflation expectations fell to the lowest level in a year, indicating consumers believe price pressures will continue to dissipate.

The decline in inflation expectations is sure to hearten senior officials at the Federal Reserve, who worry high inflation could become entrenched in the economy. ... A similar confidence gauge that looks ahead six months advanced to 82.4 from 76.7 and hit an 11-month high.

{snip}
Read more: https://www.marketwatch.com/story/consu ... 1671635548
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Dow tumbles after the US economy grew much faster than previously thought in the third quarter

By Chris Isidore and Alicia Wallace, CNN
Updated 1:38 PM EST, Thu December 22, 2022
New York (CNN) -- The Dow sank sharply as America's economy grew much faster than previously thought in the third quarter, a sign that the Federal Reserve's battle to cool the economy to fight inflation is having only a limited impact.

The Commerce Department's final reading Thursday morning showed gross domestic product, the broadest measure of the US economy, grew at an annual pace of 3.2% between July and September. That was above the 2.9% estimate from a month ago. Economists surveyed by Refinitiv had expected GDP to stay unchanged from its previous reading. ... The report said the stronger-than-expected reading was due to increases in exports and consumer spending that were partly offset by a decrease in spending on new housing. Consumer spending is responsible for more than two-thirds of the nation's economic activity.

US stocks tumbled Thursday on fears that the stronger-than-expected GDP could prompt the Fed to continue to raise rates more than expected in 2023. The Dow lost nearly 800 points, or 2.3%, while the S&P 500 fell 2.9% and the Nasdaq was 3.9% lower.

"The data was stronger across the board, and if there's anything the Fed does not want to see these days, it's better than expected data," said Paul Hickey of Bespoke Investment Group. ... The Fed has been raising interest rates throughout the year to cool demand for goods and services and reduce inflation. Economists have been worried for quite some time that the Fed's actions could tip the US economy into recession next year.
{snip}

Read more: https://www.cnn.com/2022/12/22/economy/ ... index.html
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U.S. consumer spending, inflation slow in November
Source: Reuters
WASHINGTON, Dec 23 (Reuters) - U.S. consumer spending barely rose in November, while inflation cooled further, but not enough to discourage the Federal Reserve from driving interest rates to higher levels next year.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1%, the Commerce Department said on Friday. Data for October was revised up to show spending surging 0.9% instead of 0.8% as previously reported.

Economists polled by Reuters had forecast consumer spending rising 0.2%. Some of the moderation in spending last month reflected a shift demand from goods to services. Slowing price increases for some goods also lowered the dollar amount of consumer spending.

Nevertheless, consumer spending is on track to provide another lift to economic growth this quarter, after teaming up with exports to boost gross domestic product in the third quarter. The economy grew at a 3.2% annualized rate last quarter after contracting in the first half of the year.
Read more: https://www.reuters.com/markets/us/us-c ... 022-12-23/
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U.S. weekly jobless claims tick higher as the job market remains tight
Source: NBC News
The number of Americans filing new claims for unemployment benefits edged higher last week but remain in a range indicating the U.S. job market remains tight, even as the Federal Reserve works to cool demand for labor as part of its bid to lower inflation.

Initial claims for state unemployment benefits rose 9,000 to a seasonally adjusted 225,000 for the week ended Dec. 24, the Labor Department said on Thursday. Economists polled by Reuters had forecast 225,000 claims for the latest week.

The claims figures have been choppy in recent weeks but have held well below the 270,000 threshold that economists see as a red flag for the labor market. A raft of layoffs in the technology sector and interest-rate sensitive industries like housing have yet to leave a notable imprint on claims as laid-off workers appear to cycle into new jobs with relative ease.

Federal Reserve Chair Jerome Powell — the chief architect of the central bank’s aggressive interest rate hikes aimed at bringing too-high inflation to heel — earlier this month said “it feels like we have a structural labor shortage out there.”
Read more: https://www.nbcnews.com/business/market ... -rcna63600
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