Inflationary Outlook and the Prospects for the Post-Boomsday Employment Market: The Case for a White-Hot Labor Market
Tomorrow, when the Bureau of Labor Statistics releases its October jobs report, it will be the last major read of the economy before the midterm elections — and will cap a week of new data signaling that the white-hot labor market is showing only tentative signs of cooling off.
Inflation can be caused by a variety of factors including the price of oil, manufacturing and shipping costs, and so on. How much workers take home in their paychecks is also a big part of the inflation picture.
When people have more money in their wallets (virtual or good old-fashioned leather ones), they tend to be more willing to spend it. Companies are able to raise prices.
Wage growth above 5% is historically high. Before the pandemic, wages typically rose just 3% year-over-year. Due to Covid-19 and people dropping out of the workforce, power shifted to employees when it comes to worker pay.
The Fourth and Fourth Quarters of Wall Street: A Beating Month for Wall Street and Wall Street Stock Markets, and another Doozy in September
The PCE rose in August from a year ago, according to the government. That was lower than July’s reading.
The Fed won’t see much of a benefit from inflation being on the trajectory to 2% in the short-term, according to David Petrosinelli.
Despite inflation pressures, retail sales held up well, thoughNorton warns that can not last forever. American shoppers would reach their breaking point eventually and begin buying essentials. A slowdown in consumption will inevitably lead to lower prices…but also slower economic growth.
The third quarter is mercifully over. It’s been another doozy for the market. It was a sad month in September. It was the worst month since March 2020, when the World Wide Pandemic began.
But even though we’re seemingly in a bear market for everything as bonds, gold and bitcoin have all tumbled this year as well, there are some hopeful signs for the next few months.
The fourth quarter on Wall Street is usually a time of celebration. Investors tend to buy stocks in anticipation of robust consumer shopping during the holidays. Businesses typically spend more to get rid of their yearly budgets. And major companies also often give rosy guidance in October about earnings expectations for the coming year.
“October has been a turnaround month—a ‘bear killer’ if you will,” said Jeff Hirsch, editor-in-chief of the Stock Trader’s Almanac, in a recent blog post.
The Fed is Rolling over: The Case of the US Economy, Inflation, and the Employment and Employment Rate Puzzles in the Post-Inflationary Period
Traders will definitely be keeping close tabs on Washington this fall to see if Republicans gain control of the House. That could lead to more gridlock in DC, which investors tend to like.
Whether or not Corporate America and investors are going to be so bullish this October is up for debate given the concerns about inflation, interest rates and the global economy. In 1987 and 1929, October was famous for huge crashes, most recently in 2008, but also in 1987 and 1987.
“We’re nearer to a bottom,” said Christopher Wolfe, chief investment officer of First Republic Private Wealth Management. “A lot of quality companies are on sale. It’s a time to be patient and reposition.”
The US weekly unemployment claims, as well as earnings from ConAgra (CAG), and others, are on Thursday.
The Fed’s most aggressive monetary tightening in modern history — while driving up mortgage rates above 7% for the first time in 20 years, slowing business growth and crimping household spending — has barely made a dent in the labor market.
American employers added 263,000 jobs in September, down from 315,000 in August, the Labor Department said early Friday. The Fed had its efforts to cool the economy and reduce inflation taken into account, but there was still a slight decline in the unemployment rate to 3.5 percent, meaning that the labor market remains robust.
The effects of the interest rate hikes the Fed has made since early this year are just starting to be seen. Never mind what inflation and jobs data are saying right now; there’s a lot of reduction in inflationary pressures — and a lot of drag on output and employment — already in the pipeline. The economy, as some business analysts like to say, may well be “rolling over.”
Even though it sounds crummy, the Fed and others would like to see wage growth slow down. When we don’t spend as much money, prices go down, and this causes us to have less spending power. In theory, of course. That is just one part of a much larger inflation puzzle.
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 is difficult to overstate how delicate the situation is. The world was in a period of historic shocks after a torrent of economic shocks over the last two-and-a-half years, according to the Managing Director of the International Monetary Fund.
The Fed’s moves have spurred market volatility and fears about financial stability, making it harder for emerging-market borrowers to pay back their dollar-denominated debt.
Nightcap Jobs Report: Ford’s First Electric Pickup at $42 le$ 52,000? (News from Belarus) President Alexander Lukashenko
Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. 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. Any price increase is forbidden from today. Prohibited!” The president made an announcement.
A source familiar with the negotiations tells CNN that Musk and his lawyers have agreed to delay his deposition in the case. The deposition that Musk was going to give today was changed to an offer to buy the company and get rid of the litigation. The two sides are still talking.
Source: https://www.cnn.com/2022/10/06/business/nightcap-jobs-report/index.html
The Boston Dynamics Ex-Anglican Business Plan: Wall-to-wall, Not-So-Close to Wall Street, and Walls to Wallis & Walls
Boston Dynamics, the company behind the video of their four-legged robot, pledges to not weaponize their product and to encourage others in the industry to do the same. The company is worried that their customers might not believe them when they say they are not building an army that will destroy humans, according to a letter reviewed by Axios. Thankfully though, they’ve now said they’re not doing that. Phew!
As its new CEO attempts to shore up the company’s bottom line, it has announced another round of layoffs. The company said it was on a “transformation journey” in which it was “optimizing efficiency” to achieve break-even cash flow. I would love to stop this bloodless business-speak because I don’t know who writes it.
CNN Business. About 50 workers were suspended by Amazon after they went on strike in the wake of a fire at the warehouse. A fire broke out Monday at the Staten Island facility, known as JFK8, and workers reported that parts of the building still smelled of smoke and that it was difficult to breathe. 100 workers walked off the job.
The Impact of Hurricane Ian on Financial Markets and the Fed: Implications for Forecasting and Monetizing the Next Generation of Core-Collapse Hurricanes
Global warming has created new problems for forecasters, according to meteorology experts. Not only are hurricanes getting stronger, they’re also intensifying more rapidly than they used to, making it difficult to issue early warnings for communities in their path. It was too late for many people in Lee County, Fla., to be evacuated before definitive evidence showed that Hurricane Ian would hit hard.
What’s happening: Markets and the Federal Reserve have conflicting temperaments, said Blinder. Markets are capricious while the Fed remains calm. Markets and the central bank often have the same interpretation of incoming data, but markets exaggerate the data’s magnitude.
The way for more moderate price increases will be aided by higher rates slowing inflation and allowing supply to catch up. They slow down hiring, weaken wages, cause job losses, and spread uncertainty through financial markets.
It is not certain how intense any slowdown will be once rates go back to normal, due to the fact that many countries are raising rates so quickly. It can take a long time for monetary policy to kick in completely.
The United Nations agency warned that the damage could be particularly severe in poorer nations, because there is a pronounced danger or overdoing it. The cost of living has been increasing in the developing world because of high food and fuel prices, and now American imports are getting more expensive due to the dollar’s rise.
The Federal Reserve is Making Sense of the Boom and the Return of Work: The Case of the U.S. Manufacturing Workforce as Seen by an ISM Survey
“I think this is good news for the Federal Reserve,” said Nela Richardson, chief economist at the payroll processing firm ADP. “You are seeing some softening in early-stage demand [for workers] but still continuation in hiring.”
It’s very difficult to find a job the month of February and then four months later let them go. So people are being a lot more cautious,” said Tim Fiore, who conducts the survey for the Institute for Supply Management.
Second, despite the slowing of the economy and the growing fears of recession, layoffs are still historically low. The number of people who claimed unemployment insurance was higher than the previous week, but still one of the lowest readings in recent decades. After years of increasingly traumatic labor shortages, many employers are reluctant to significantly reduce the number of workers even as their businesses are slowing. That’s because companies are worried that they will have trouble recruiting new workers when they start expanding again.
Manufacturing represents a small slice of the overall workforce, however. And a similar ISM survey of service-sector businesses found no slowdown in hiring.
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.
The labor market has recovered quickly from the huge job wipe out of Covid-19 in recent years. US employers have created 562,000 jobs per month in the last year and 420,000 jobs per month this year.
“The more people who come back to the labor market, the more likely we’ll see some loosening in hiring conditions and a continuation of these steady gains,” said Richardson.
Almost half a million workers joined or returned to the labor force in August. The Fed is watching to see if the trend continued in September.
The survey shows that the high prices companies are forced to charge has led to some reductions in their prices. A total of 9% of respondents indicated prices were falling, the largest share reported since January 2021.
Cook and her colleagues on the Fed’s governing board made it very clear that interest rates will remain elevated until there’s convincing evidence of a leveling off in prices.
Cook said in her first speech as a central bank policymaker that inflation is too high and will be brought down until the job is done.
The US Economy in the Light of a Great Depression and a Dynamic Implications for the Next Generation of Employers and Governments
At the Burning Glass Institute, Gad Levanon is the chief economist. He was the head of the Labor Market Institute at The Conference Board. His own opinions are being expressed in this commentary.
The US economy has been a bit odd this year, to economists and analysts. On the other hand, GDP growth has slowed considerably and you can argue that there was even a recession. 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. The demand for data processing and hosting services is higher than it was before the pandemic. It is likely that these changes are structural changes that will keep demand high.
Next year, however, will look 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. This alone is not likely to push job growth into negative territory. What will do that is monetary policy.
Reducing demand for workers is one way to increase the labor supply. It is difficult to increase labor supply. It takes legislative action to increase immigration, drive people into the labor force or invest in workforce training. This is likely to prove elusive in today’s polarized political environment.
Fed officials hope that companies will cut back on recruitment when the rates go up. So far, we’ve seen only limited evidence of such a trend.
Pollak said there was hope that the reopening of schools would be a great moment for people to rejoin the labor force. Some people who left may not come back.
The Effects of the Fed’s Interest Rate Increase on the Labor Market and the Construction Industry: A View from the Center for Economic and Policy Research
The unemployment rate was lower in September due to the decline in the number of people looking for work.
It’s possible that the rate hike on Wednesday will be the last very large one. Markets will be on the lookout for any signal that the Fed plans to scale back to a smaller increase in December. Borrowing costs will likely have to rise in order to curb inflation.
It is expected that the Fed will raise its benchmark interest rate for the fourth time in a row at the November 2 meeting.
Dean Baker is a senior economist at the Center for Economic and Policy Research. It would probably be better for the Fed if job gains average out to less than 200,000 a month.
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.
The private sector returned to pre-pandemic levels, while public sector employment remains below levels seen in the year of 2020.
The labor market is starting to feel the effect of the Fed’s rate hikes on the recovery, according to Pollak.
While declines in these sectors are anticipated during a period of high interest rates, what could be a troubling sign are net job losses in crucial support industries such as local education, child care and trucking, said Russell Weaver, an economic geographer with Cornell University’s ILR School.
Those and a few other sectors have large effects, such as supply chain concerns and the fact that people can return to the workforce with reliable child care. That can impact parents’ long term and future economic and work prospects.
Dionne Nelson, the chief executive officer and founder ofLaurel Street, said that they are not anticipating a recession. The people are still very busy. We’re still hiring. Our markets are still very active.”
The wake of Carl Tannenbaum: when the economy woke up from its nap in September, investors expected to be pleased with the Fed rate hike
The Federal Reserve was poised to give another hike to interest rates in a month, after fresh data about the labor market paved the way.
The S&P 500 fell on Friday due to interest rate sensitive sectors. Government bond yields, indicative of the future path of interest rates, rose and the dollar strengthened.
Typically a sign of economic strength, at the moment a resilient labor market is bad news for investors, as it points to the need for the Fed to raise interest rates even more than it already has. Higher rates, in turn, raise costs for companies, weighing on stock prices.
Despite higher interest rates, job growth in September was robust, showing that the economy was still growing. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.
When Carl Tannenbaum woke up from his nap, he thought that the job market was still strong.
CNN Business produced a version of the story. No, not a subscriber? You can sign up right here. Clicking on that link allows you to listen to an audio version of the newsletter.
Investor Memory is Very Short, Sen. Elizabeth Warren, D-Mass., and Timing the First Fed Fed Rate Annihilation
Markets on average, said Blinder, overreact to inflation-related data by a factor of three to 10 times more than they should. “That’s what’s going on now,” he said.
Expect the swings to continue until the Fed declares “mission accomplished” in its fight to lower inflation and pivots away from its current regime, likely some time in 2023, he told me.
“We are deeply concerned that your interest rate hikes risk slowing the economy to a crawl while failing to slow rising prices that continue to harm families,” Sen. Elizabeth Warren, D-Mass., and colleagues wrote in a letter Monday to Fed chairman Jerome Powell.
We’ve only just begun: Investor memory is very short, said Blinder. It used to be that policymakers were worried about inflation being too low. Inflation is very young, and we are a long way away from inflation expectations becoming deeply entrenched in economic activity as they were during the 1970s and 1980s. So while Wall Street may be shouting fire, there’s no reason yet for Main Street to worry about the economic meltdowns seen the last time inflation was this elevated.
Yellen’s optimism comes amid growing concern from economists and finance officials that a recession is likely at some point in the next year, but was based in part on elements of the latest data that showed signs a necessary slowdown in key areas of the economy leaves open a pathway to a “soft landing” as the Federal Reserve prepares to continue its rapid pace of rate increases.
The central bank provided additional support to the UK markets on Monday, according to Julia, who is with me. The bank said it planned to buy up to $10 billion of government bonds each day this week, more than the daily limit it set last month.
It said it would give more support to the banks after Friday, but that the program would be coming to an end.
The Bank of England and World Banks in the Presence of Inflation: A Preliminary Nobel Committee Report on Fed-Financial-Century Stress Tests
The UK government sold index-linked gilts for 1.55% of their face value. According to the news agency, that is the highest yield in over a year.
The yields on long-dated government bonds, which are used to move opposite prices, went down after the Bank of England announced it was getting into the business of buying bonds.
The central bank said it had to act after the market experienced historic selling following the budget plans being made public.
The Bank of England stressed on Monday that funds have made “substantial progress” over the past week, but that it would continue to work with them to ensure the “industry operates on a more resilient basis in future.”
Former Federal Reserve Chair Ben Bernanke was awarded the Nobel Memorial Prize in Economic Sciences on Monday for reshaping the way the world thinks about the relationship between big banks and financial crises.
The collapse of Lehman Brothers, as well as Goldman Sachs, Bank of America and Morgan Stanley, were caused by the Fed taking other large banks to the brink of failure during the 2008 financial crisis. The banks were saved by the government.
The Federal Reserve implemented a policy of “stress tests” for major US banks in 2009 to test their ability to weather a severe recession and upheaval in financial markets. The tests determine if a bank can increase dividends or buy back shares.
It’s pertinent today because markets have been in turmoil due to rapid interest rate hikes to combat inflation.
The research papers, said the Nobel Committee, “offer important insights into the beneficial role that banks play in the economy, but also into how their vulnerabilities can lead to devastating financial crises.”
The Fed’s Big Bang: What Will It Tell Us About the Next Three Months? Consumer Prices and Bank Rates are Going Up, but the Economy Hasn’t
▸ Third quarter earnings season begins. Expect reports from big banks like JPMorgan Chase
(JPM), Wells Fargo
(WFC), Citigroup
(C), Morgan Stanley
(MS), PNC
(PNC) and US Bancorp
(USB) and consumer staples like Pepsi
(PEP), Walgreens
(WBA) and Domino’s
(DMPZF).
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.
The Fed policy takes time to work and economists don’t think this year’s adjustments will be as consequential as they would have you believe. Because rate moves work by slowing consumer demand, one would expect their effects to show up in everyday consumer goods and services first. That hasn’t happened yet. Consumers are willing to pay up if prices keep climbing, suggesting restaurant meals, cigarettes, and stationery are in fact free.
The global economy is in a bad place and the vast majority of economists think we are in the verge of a recession. US markets do not seem to mind. The stockmarket had its best week in several months last Friday and into Monday.
So what gives? A decade of easy money from the Federal Reserve to banks has created two economies, argues a former Goldman Sachs managing director and author. Wealthy Americans and corporations benefited directly from years of low rates, which kept money flowing into businesses and stocks high while Main Street suffered from decelerating wages and little support. The distortion we are dealing with is where economic prosperity and market behavior have no connection at all.
But markets, which have taken quite a beating this year, are at multi-month highs again. It’s become pointless to try to apply economic rationale to stock markets, Prins told me in a recent interview.
The central bank is tasked with two different tasks – maximize employment and ensure price stability. Ideally, the Fed would like everybody to keep their jobs and keep consumer prices low so that the economy will continue to grow. Powell still considers it possible but most economists say the likelihood of a soft landing is remote.
The Fed created a world where investors became dependent on it while the larger economy suffered, because the bulk of thisStimulus flowed upwards into markets.
The credibility problem: When the Federal Reserve began raising rates earlier this year, officials publicly explained how important their credibility is to successfully lowering inflation rates. If the Fed is to succeed, they said, Americans would need to believe that the central bank is steadfast in its fight to bring down prices.
She says that Main street is feeling the effects of interest rate hikes through increased mortgage and borrowing rates and a slowing jobs market.
The State of the Economy in the Three-Year Post-Recession Era: An Empirical Analysis of the US GDP and Gross Domestic Product
The survey found that the shortage of labor and raw materials is a problem for businesses. The number of respondents who reported shortages was close to record levels.
The third prime minister in a row will have a huge challenge projecting stability after a period of historic political and financial market chaos. But his other task — shepherding the country through a recession — is poised to be just as daunting, reports my colleague Julia Horowitz.
Sunak campaigned for the job over the summer with promises to help households tackle the rising cost of living, which is causing many to pull back spending. He promised to reduce taxes, but only once prices fell.
The economic outlook has worsened since then, and this is due to the market turmoil caused by the now-abandoned plan to slash taxes.
October consumer confidence is expected to come out from the Conference Board at 10 a.m.
Treasury Secretary Janet Yellen said Thursday in an exclusive interview with CNN that she did not see signs of a recession in the near term as the US economy rebounded from six months of contraction.
During a one-on-one interview in Ohio that aired on CNN’s “Erin Burnett OutFront,” Yellen said the third quarter GDP data released Thursday underscored the strength of the US economy as policy makers urgently move to cool off pervasive and soaring inflation that has had a sharp effect on American views of the economy – and endangered the Democratic majorities on Capitol Hill less than two weeks from the midterm elections.
Gross domestic product — the broadest measure of economic activity — rose by an annualized rate of 2.6% during the third quarter, according to initial estimates released Thursday by the Bureau of Economic Analysis. That’s a turnaround from a decline of 1.6% in the first quarter of the year and negative 0.6% in the second.
The American Economy is Strong as Hell, but What Do We Really Need to Do About It? Jayden Yellen’s Perspective on Biden, the Economy, and the State of the Economy
But Yellen’s view also underscored the complex balancing act President Joe Biden and his top economic officials have attempted over the course of this year, as they seek to highlight a rapid economic recovery and major legislative victories while also pledging to tackle soaring prices.
It’s a reality that has undercut efforts by the administrationto take advantage of what officials view as a robust record. Republicans took exception to Biden telling reporters that the economy is strong as hell.
Yellen also acknowledged frustration inside the administration that the efforts to pull the US economy out of crisis haven’t received the credit officials believe is merited.
“There were several problems that we could have had, and difficulties many families American families could have faced,” Yellen said. The problems we don’t have are the result of what the administration has done. So, often one doesn’t get credit for problems that don’t exist.”
The policy victories of the administration have led to tens of billion of dollars in private sector investment, which has helped drive manufacturing around the country.
It’s a critical piece of an economic strategy designed to address many of the vulnerabilities and failings laid bare as Covid-19 ravaged the world, with significant federal investments in infrastructure and shoring up – or creating from scratch – key pieces of critical supply chains.
She said they would take time to full effect, but listed a series of major private sector investments including the $20 billion Intel plant which opened a few hours drive outside of Columbus.
Not in every community, but fairly soon, bridges are being repaired. Many of the bridges that have been falling apart will be repaired. Money flow into research and development is an important source of long term strength to the American economy. And America’s strength is going to increase and we’re going to become a more competitive economy,” she said.
Source: https://www.cnn.com/2022/10/27/politics/janet-yellen-gdp-recession-cnntv/index.html
The House Finance Causal Debt Challenge: Implications for Inflation and for the Recovery of the U.S. General Relativity
House Republicans have pledged to use for leverage once more if they take the majority, because of a now-perpetual Washington crisis of its own, which prompted them to draw on the battle lines over raising the debt ceiling.
The debt limit has been removed from the legislation because of the damaging nature of the showdowns. The group of House Democrats wrote to Biden asking for the action, but he turned it down this week.
She made it clear that she did not plan on being part of the time period when top officials usually leave the administration. Asked about reports she had informed the White House she wanted to stay into next year, Yellen said it was “an accurate read.”
After we talked about the program, I feel very excited. I see that it strengthens economic growth, address climate change, and strengthen American households. I want to be a part of that.
The Federal Reserve is expected to increase interest rates by another big amount on Wednesday as questions arise about how much higher borrowing costs will have to go before inflation comes down.
“Interest rates have risen at a whiplash-inducing speed, and we’re not done yet,” said Greg McBride, chief financial analyst at Bankrate. “It’s going to take some time for inflation to come down from these lofty levels, even once we do start to see some improvement.”
The Fed’s preferred measure of inflation in September remained at PukiWikirs of 6.2%. The better known consumer price index shows prices rising even faster, at an annual rate of 8.2%.
Why is the Federal Reserve Bank of Kansas City in a Housing Phase? A Case Study of a Mortgage Rate Crisis in the First Five Years
Esther George, president of the Federal Reserve Bank of Kansas City, said that there may be a savings buffer still sitting for households that may allow them to continue to spend. That suggests we might have to do this for a while.
Like her colleagues on the Fed’s rate-setting committee, George has expressed a determination to control inflation. She is cautioned against raising rates too quickly at a time of economic uncertainty.
“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.”
Kansas City homebuilder Shawn Woods said his company has gone from selling a dozen houses a month before the Fed started raising rates to fewer than five.
“Never in my wildest dreams would I have thought we’d go from 3% [mortgage rates] to 7% within six months,” said Woods, president of Ashlar Homes and the Home Builders Association of Kansas City.
“I think we will be in a lot of trouble for six or eight months,” Woods said. “Typically, housing leads us into downturns and it leads us out of downturns. I think that we’ve been in a housing recession since March or April.
What do job vacancies tell us about the economy, how many jobs do they need? The evidence from a JOLTS study of the U.S. economy
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.
You may read about the surge in people leaving their jobs as the economy came back from the Covid shutdowns. The phenomenon was real, but the narrative often missed a crucial element: Most weren’t quitting to sit on the couch. They were taking other, usually better-paying, jobs.
Take the latest monthly JOLTS survey on job vacancies, quits and layoffs. The number of job vacancies in the United States was not expected to fall as a result of Fed measures to slow business growth. Instead of dropping to 10 million, it went up to more than 10 million.
Powell said Wednesday that inflation is likely to need a sustained period of below-trend growth and softened labor market conditions. Restoring price stability is needed to achieve stable employment and stable prices in the long run.
Unfortunately for Democrats trying to hold on to power next week, the pain of inflation appears to be outweighing any positive sentiment about job security. According to a new CNN poll, three-quarters of likely voters already feel like the country is in a recession.
Over the past decade, the story about the housing market has been that there wasn’t much buying by young people. They were either too cheap, lazy, or itinerant to commit to something as weighty as a mortgage.
Baby Boomer parents with large investment portfolios were willing to pass on the gains from the stock surge to their kids.
Nightcap Housing Crisis: The Case for a Realistic Future of the 21st Century, As We Know They Will Never Come to an End
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.
First-time buyers made up just 26% of all housing purchases last year, an all-time low, according to a new report from the National Association of Realtors.
Jessica Lautz, the vice president of Demographics and Behavioral Insights at NAR, said that people need to save while paying more for rent, student debt, as well as child care. “And this year were facing increasing home prices while mortgage rates are also climbing.”
The median home price shot up to $413,800 in June from a low of $213,400 in February, as mortgage rates went up. imagine your starter home at 400 grand.
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.
Housing supply has expanded through single- family subdivisions at the urban fringe, rather than rebuilding within existing neighborhoods. There will be more people and homes in areas that have a high risk of wildfire.
Federal and local governments need to rethink how they frame the American dream as affordability reaches crisis levels. It’s only possible if the people who are going to benefit are well represented in office. The upper-middle class Boomers in power are unwilling to change the system that got them where they are, as Schuetz argues.
Source: https://www.cnn.com/2022/11/03/business/nightcap-housing-crisis/index.html
Why the Central Bank of England and the European Central Bank Shouldn’t Worry about the UK Central Bank’s QED Rate Cuts
The Bank of England raised its key interest rate by the same amount, its biggest hike in 33 years, following on the heels of the Fed’s fourth-consecutive rate hike. The European Central Bank did the same thing a week ago.
Basis points are what central bankers talk about when they talk about rate moves. A percentage point is one-tenth of a basis point.
It is the kind of news worth celebrating in normal times. But in the up-is-down economics of 2022, it’s cause for concern, as it suggests the economy is overheating. The Fed announced its fourth-consecutive three-quarter point hike, the latest in a string of aggressive moves that would have been unthinkable a few months ago.
The Fed would love for everyone to keep their jobs in order to see a softening of the labor market.