Economic and jobs news thread

weatheriscool
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Inflation gauge increased 0.4% in February, as expected and up 6% from a year ago

Source: CNBC
Inflation rose in February but was in line with expectations, likely keeping the Federal Reserve on track for another interest rate hike next week despite recent banking industry turmoil.

The consumer price index increased 0.4% for the month, putting the annual inflation rate at 6%, the Labor Department reported Tuesday. Both readings were exactly in line with Dow Jones estimates.

Excluding volatile food and energy prices, core CPI increased 0.5% in February and 5.5% on a 12-month basis. The monthly reading was slightly ahead of the 0.4% estimate, but the annual level was in line.



Stocks rose following the release, with the Dow Jones Industrial Average up more than 300 points in early trading. Treasury yields, which plummeted Monday amid fears over the banking industry’s health, rebounded solidly, pushing the policy-sensitive 2-year note up 30 basis points to 4.33%. Heading into the release, markets had widely expected the Fed to approve another 0.25 percentage point increase to its benchmark federal funds rate. That probability increased following the CPI report, with traders now pricing in about an 85% chance that the Fed will increase the rate by a quarter point, according to a CME Group estimate.
Read more: https://www.cnbc.com/2023/03/14/cpi-inf ... 2023-.html
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Moody's warns of more pain for US banks as downgrades sector

18 minutes ago

Ratings giant Moody's has warned of more pain ahead for the US banking system after a run on deposits led to the collapse of Silicon Valley Bank.

Moody's cut its outlook for the sector to "negative" from stable, warning of "a rapid deterioration in the operating environment".

https://www.bbc.com/news/business-64949786
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Swiss central bank ready for Credit Suisse support

1 hour ago

Swiss regulators have said they are ready to help troubled banking giant Credit Suisse "if necessary", as the collapse of Silicon Valley Bank in the US raises fears of a wider crisis.

The comments from the Swiss National Bank came after shares in Credit Suisse plunged 24% to a record low.

Investors are concerned about the state of the troubled firm and have already been spooked by US bank failures.

The worries spread across share markets with all major indexes falling sharply.

https://www.bbc.co.uk/news/business-64964881
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U.S. weekly jobless claims fall; housing finding bottom

Source: Reuters

WASHINGTON, March 16 (Reuters) - The number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to continued labor market strength, though financial market turmoil is casting a shadow over the economy.

Other data on Thursday also struck a fairly upbeat note on the economy, with homebuilding surging in February, driven by the rental housing market, and import prices posting their first year-on-year decline since December 2020. Regional factories, however, continued to struggle in March.

"The sky is not falling for the real economy as the labor market shows no fresh sign of layoffs, and builders are preparing the ground to start work on more multifamily housing," said Chris Rupkey, chief economist at FWDBONDS in New York. "More rentals means less inflation from rents some might think."

Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 192,000 for the week ended March 11, the Labor Department said. Economists polled by Reuters had forecast 205,000 claims for the latest week.
Read more: https://www.reuters.com/markets/us/us-w ... 023-03-16/
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Why Didn’t Regulators See Silicon Valley Bank’s Collapse Coming?
by Hannah Levitona and Ross Levine
March 16, 2023

Introduction:
(Mother Jones) Ross Levine, an economist at the University of California, Berkeley business school who specializes in banking and finance, believes SVB’s collapse is a manifestation of other problems within the banking system, and among federal banking regulators, that have been growing for years

What is your theory of how things got this bad at SVB?

SVB took lots of uninsured deposits from 100 or 200 really large depositors and invested a large portion of that money in long-term securities—very, very safe securities, so US Treasury securities and government-backed mortgage securities. This created an extremely fragile bank with respect to interest rates: Interest rates go up, bond prices go down, and that change is particularly big for long-term securities. So the value of the assets of SVB fell as interest rates rose.

The fact that it had a few large, uninsured depositors who were very well connected meant that any sign of vulnerability triggered a flow of information such that the uninsured depositors wanted to remove their deposits, and everything unraveled very quickly.

Now, the key thing in my view of all of this is that this interest rate risk—the vulnerability existed two years ago, three years ago, so I’m just stunned that financial supervisors and regulators didn’t induce the bank to hedge its interest rate risk. This is not rocket science. This is Banking 101. This is like my undergrads after a year of money in banking would look at this bank and say, “Wow! This bank is really vulnerable. It has a lot of uninsured depositors, and it’s exposed to interest rate risk, what are they doing to hedge that risk?”

To me, there was a really kind of grossly incompetent supervision and regulation at the FDIC and the Fed that I just don’t understand at this point.

Another point made in the article is that uninsured deposits are also going to be protected by the FDIC and the Federal Reserve. Why?
Because of the fear that many other banks are almost as exposed as SVB. So, protecting uninsured deposits is needed for stability in the over all system. So much for “moral hazard”.

Read more here: https://www.motherjones.com/politics/2 ... -reserve/

caltrek’s comment: High rates of return are supposed to be justified by high risk. If the government acts to mitigate that risk, then we see yet another mechanism by which the rich get richer, and inequality of income and wealth grows.
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Biden Demands Stricter Penalties for Executives in Bank Failures
by Nolan Stout
March 17, 2023

Introduction:
WASHINGTON (Courthouse News) — President Joe Biden called Friday for stiffer laws to hold bank executives accountable after the second-largest banking collapse in U.S. history, but some economists say regulations won’t stop a similar situation.

Saying Congress needs to strengthen the government's ability to respond when crises hit the financial sector, Biden lamented limitations on the executive branch’s ability to take action.

“When banks fail due to mismanagement and excessive risk taking, it should be easier for regulators to claw back compensation from executives, to impose civil penalties, and to ban executives from working in the banking industry again,” Biden said in a statement. “Congress must act to impose tougher penalties for senior bank executives whose mismanagement contributed to their institutions failing.”
Read more here: https://www.courthousenews.com/biden-d ... failures/
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Disney considers layoffs, nearly 4,000 employees at risk of job loss in April, says Report
Entertainment conglomerate Disney after eliminating 7,000 jobs in February, is now again considering to lay off at least 4,000 current employees in April, reported Business Insider

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However, it is still unclear that the layoff will be done in batches or will be done in a single shot. The planned job cuts were announced ahead of Disney's annual meeting on 3 April.

Apart from this, Disney has also announced that a reduction will be done in general entertainment aimed at adults and considering options for what to do with the streaming service Hulu. The the streaming service specialises in entertainment shows and owned two-thirds by Disney and one-third by Comcast Corp.

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Earlier in February, Disney CEO Bob Iger had announced to lay off 7,000 employees with the firm looking to save billions of dollars by restructuring it, cutting content, and trimming payroll.

Excluding sports, the firm is expecting deliver approximately $3 billion in savings over the next few years.
https://www.livemint.com/companies/news ... 69561.html
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Amazon to lay off 9,000 more workers after earlier cuts
Source: CNBC

Amazon will lay off 9,000 more employees, CEO Andy Jassy said in a memo to staff on Monday.

Read more: https://www.cnbc.com/2023/03/20/amazon- ... rkers.html
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Home sales spike 14.5% in February as the median price drops for the first time in over a decade
Source: CNBC
Sales of previously owned homes rose 14.5% in February compared with January, according to a seasonally adjusted count by the National Association of Realtors. That put sales at an annualized rate of 4.58 million units. It was the first monthly gain in 12 months and the largest increase since July 2020, just after the start of the Covid-19 pandemic. Sales were, however, 22.6% lower than they were in February of last year.

These sales counts are based on closings, so the contracts were likely signed at the end of December and throughout January, when mortgage rates had fallen sharply. The average rate on the popular 30-year fixed loan hovered in the low 6% range throughout January after reaching a high of 7% last fall.

The relative drop caused a jump in sales of newly built homes, before rates jumped back toward 7% in February. They not stand at 6.67%, according to Mortgage News Daily. “Conscious of changing mortgage rates, home buyers are taking advantage of any rate declines,” said Lawrence Yun, chief economist for the Realtors, in a release. “Moreover, we’re seeing stronger sales gains in areas where home prices are decreasing and the local economies are adding jobs.”

Higher mortgage rates have been cooling home prices since last summer, and for the first time in a record 131 consecutive months — nearly 11 years — prices were lower on a year-over-year comparison. The median price of an existing home sold in February was $363,000, a 0.2% decline from February 2022.
Read more: https://www.cnbc.com/2023/03/21/februar ... spike.html
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