REUTERS
"Weak US productivity could threaten Fed's 'soft landing' hopes"
By Howard Schneider
May 2, 2024
WASHINGTON, May 2 (Reuters) - Weaker U.S. productivity gains in the first quarter may challenge the Federal Reserve's efforts to finish its inflation fight without a painful rise in unemployment, potentially stalling progress on prices absent a further economic slowdown.
A jump last year in how much workers produce helped the economy grow fast and hiring remain strong while inflation fell nonetheless.
Data for the first three months of 2024, however, showed worker productivity rose at a 0.3% annual pace, compared to increases of more than 3% in the prior three quarters.
Unit labor costs, as a result, jumped 4.7%, the fastest in a year, as businesses spread higher wage and benefit payments across a comparatively small boost in what each person produced.
Analysts said the first-quarter results don't on their own disrupt what has been a core reason for optimism that the U.S. was heading for a "soft landing" in which inflation would return to the Fed's 2% target without the sort of sharp rise in joblessness associated with past battles against rising prices.
Productivity numbers are volatile, they noted, and even those reported for the first quarter leave a stronger yearly trend intact with reason to believe there will be further improvements.
But it also keeps alive the question of how much the Fed can count on additional improvement in the economy's ability to supply goods and services to help in the inflation fight, and how much will now rest on curbing demand - potentially dealing a blow to employment in the process.
Fed Chair Jerome Powell was sensitive to the issue during a press conference on Wednesday after the Fed held its benchmark interest rate steady in the current 5.25%-5.50% range while acknowledging that improvement in inflation had slowed and would require borrowing costs to remain high.
He said he still believes inflation can be returned to the Fed's target "without significant dislocations in the labor market or elsewhere."
Supply-side improvements, including higher productivity and faster immigration, "really helped inflation come down ... I'm not giving up on that."
"I think it is possible those forces will still work to help us," Powell said.
But, he added, there was no guarantee, and at the very least the process "will take longer than previously expected."
JOBS DATA
The U.S. Labor Department will release its employment report for April on Friday, providing the latest touchpoint for central bankers to assess whether the economy is moving towards a more sustainable pace of job and wage growth, as many feel it is.
Results for March from the Job Openings and Labor Turnover Survey, for example, showed balance continuing to emerge between the availability of workers and the demand for them.
Economists polled by Reuters expect firms hired an additional 243,000 workers in April, continuing a pandemic-era streak of job gains that a rising number of foreign-born workers has helped sustain even as wage growth moderates.
The unemployment rate has been below 4% for 26 months, a run not seen since the late 1960s.
The Fed doesn't want to wreck that streak, and the thinking under Powell has shifted away from what had been a working assumption that a low jobless rate stokes inflation to a more open-ended "show-me" attitude.
The approach served the Fed well last year.
Inflation fell sharply from the 40-year highs hit in 2022 even though the unemployment rate remained at levels that would, in some assessments of the U.S. economy, have kept price pressures elevated.
Even amid calls from top ranking economists that the unemployment rate had to rise for inflation to fall, the central bank unveiled its last rate hike in July.
But if "disinflation" loses steam it could make the Fed's endgame more difficult.
For now, Powell said the central bank is content to be patient and allow the current policy rate to do its work.
In the opening statement of his press conference on Wednesday, he excluded a phrase he had used in January and March that "it will likely be appropriate to begin dialing back policy restraint at some point this year," cementing a shift in expectations for steady and substantial rate cuts this year to doubt about whether rates will fall at all.
The change in Powell's language has touched off a mini-cycle of financial tightening across credit markets, with the average rate on a 30-year fixed-rate home mortgage jumping back above 7% and yields on the 2-year U.S. Treasury note, considered a proxy for Fed policy, rising from roughly 4.2% in January to around 5% now.
Powell said this week that these trends will all eventually show up in the form of inflation falling towards 2% from a level that, based on the Fed's preferred inflation measure, was running at 2.7% in March.
But how long that journey takes and what happens to workers in the meantime will depend on factors - productivity among them - well outside the central bank's control.
The Fed may not be willing to risk damaging the economy with further rate hikes to achieve the last bit of inflation control.
But neither, Powell said, will policymakers rush to cut rates over a modest rise in unemployment.
"It would have to be a meaningful thing and get our attention and lead us to think the labor market was really significantly weakening" he said on Wednesday.
"A couple of tenths (of a percentage point) in the unemployment rate would probably not do that."
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/us/weak ... 024-05-02/
THE ECONOMY
Re: THE ECONOMY
REUTERS
"US trade deficit narrows slightly in March"
By Reuters
May 2, 2024
WASHINGTON, May 2 (Reuters) - The U.S. trade deficit narrowed slightly in March as a decline in imports was tempered somewhat by a plunge in exports.
The trade deficit contracted 0.1% to $69.4 billion, the Commerce Department's Bureau of Economic Analysis said on Thursday.
Data for February was revised to show the trade gap widening to $69.5 billion instead of $68.9 billion as previously reported.
Economists polled by Reuters had forecast the deficit climbing to $69.1 billion in March.
Trade, through a surge in imports, was a large drag on gross domestic product in the first quarter.
The economy grew at a 1.6% annualized rate last quarter after expanding at a 3.4% pace in the October-December period.
Imports dropped 1.6% in March to $327.0 billion.
Goods imports fell 1.6% to $263.8 billion.
There were decreases in imports of motor vehicles and parts as well as industrial supplies and materials, which include crude oil.
But imports of consumer goods increased $3.0 billion, boosted by pharmaceutical preparations.
Capital goods imports were the highest on record.
Services imports fell $1.1 billion to $63.2 billion, pulled down by transport and travel.
Exports tumbled 2.0% to $257.6 billion.
Goods exports plummeted 2.9% to $171.3 billion.
There were decreases in exports of capital goods, industrial supplies and materials, and foods, feeds and beverages.
Exports of services fell $0.2 billion to $86.4 billion.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/markets/us/us-t ... 024-05-02/
"US trade deficit narrows slightly in March"
By Reuters
May 2, 2024
WASHINGTON, May 2 (Reuters) - The U.S. trade deficit narrowed slightly in March as a decline in imports was tempered somewhat by a plunge in exports.
The trade deficit contracted 0.1% to $69.4 billion, the Commerce Department's Bureau of Economic Analysis said on Thursday.
Data for February was revised to show the trade gap widening to $69.5 billion instead of $68.9 billion as previously reported.
Economists polled by Reuters had forecast the deficit climbing to $69.1 billion in March.
Trade, through a surge in imports, was a large drag on gross domestic product in the first quarter.
The economy grew at a 1.6% annualized rate last quarter after expanding at a 3.4% pace in the October-December period.
Imports dropped 1.6% in March to $327.0 billion.
Goods imports fell 1.6% to $263.8 billion.
There were decreases in imports of motor vehicles and parts as well as industrial supplies and materials, which include crude oil.
But imports of consumer goods increased $3.0 billion, boosted by pharmaceutical preparations.
Capital goods imports were the highest on record.
Services imports fell $1.1 billion to $63.2 billion, pulled down by transport and travel.
Exports tumbled 2.0% to $257.6 billion.
Goods exports plummeted 2.9% to $171.3 billion.
There were decreases in exports of capital goods, industrial supplies and materials, and foods, feeds and beverages.
Exports of services fell $0.2 billion to $86.4 billion.
Reporting by Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/markets/us/us-t ... 024-05-02/
Re: THE ECONOMY
CNBC
"U.S. job growth totaled 175,000 in April, much less than expected, while unemployment rose to 3.9%"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, MAY 3 2024
KEY POINTS
* Nonfarm payrolls increased by 175,000 on the month, below the 240,000 estimate from the Dow Jones consensus.
* The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%. A more encompassing jobless rate edged up, to 7.4%, its highest level since November 2021.
* Consistent with recent trends, health care led job creation, with a 56,000 rise. Other sectors showing significant increases included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000).
* Following the report, traders priced in a strong chance of two interest rate cuts by the end of 2024.
The U.S. economy added fewer jobs than expected in April while the unemployment rate rose, lifting hopes that the Federal Reserve will be able to cut interest rates in the coming months.
Nonfarm payrolls increased by 175,000 on the month, below the 240,000 estimate from the Dow Jones consensus, the Labor Department’s Bureau of Labor Statistics reported Friday.
The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%.
Average hourly earnings rose 0.2% from the previous month and 3.9% from a year ago, both below consensus estimates and an encouraging sign for inflation.
The jobless rate tied for the highest level since January 2022.
A more encompassing rate that includes discouraged workers and those holding part-time jobs for economic reasons also edged up, to 7.4%, its highest level since November 2021.
The labor force participation rate, or those actively looking for work, was unchanged at 62.7%.
Wall Street already had been poised for a higher open, and futures tied to major stock market averages added to gains following the report.
Treasury yields tumbled after being little changed before the release.
The report raised the prospect of a “Goldilocks” climate where growth continues but not at such a rapid pace to force the Fed to tighten policy further.
“With this report, the porridge was just about right,” said Dan North, senior economist at Allianz Trade.
“What would you like at this point the cycle?"
"We’ve had interest rates jacked up pretty high, so you would expect to see the labor market slow down a little."
"But we’re still at pretty high levels.”
Consistent with recent trends, health care led job creation, with a 56,000 increase.
Other sectors showing significant rises included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000).
Construction added 9,000 positions while government, which had shown solid gains in recent months, was up just 8,000 after averaging 55,000 over the previous 12 months.
Revisions to previous months took the March gain to 315,000, or 12,000 from the initial estimate, and February to 236,000, a decline of 34,000.
Household employment, which is used to calculate the unemployment rate, increased by just 25,000 on the month.
Workers holding full-time jobs soared by 949,000 on the month, while those hold part-time jobs slumped by 914,000.
The report comes two days after the Fed again voted to hold borrowing costs steady, keeping its benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%, the highest in more than 20 years.
Following the decision, Chair Jerome Powell characterized the jobs market as “strong” but noted that inflation is “too high” and this year’s economic data has indicated “a lack of further progress” in getting inflation back to the Fed’s 2% target.
But market action shifted after the jobs report indicated an easing labor market and softer wage increases.
Traders priced in a strong chance of two interest rate cuts by the end of 2024, with the first reduction expected to come in September, according to CME Group data.
“This is the jobs report the Fed would have scripted,” said Seema Shah, chief global strategist at Principal Asset Management.
“The first downside payrolls surprise in several months, as well as the dip in average hourly earnings growth, will bring the rate cutting dialogue back into the market and perhaps explains why Powell was able to be dovish on Wednesday.”
Though inflation has come well off its highs in mid-2022, it is still considerably above the central bank’s comfort zone.
Most reports this year have shown inflation around 3% annually; the Fed’s own preferred measure, the core personal consumption expenditures price index, most recently was at 2.8%.
Higher prices have been putting upward pressure on wages, part of an inflation picture that has kept the Fed on the sidelines despite widespread market expectations that the central bank would be cutting interest rates aggressively this year.
Most Fed officials in fact had been mentioning the likelihood of reductions in their public comments.
However, Powell at his post-meeting news conference Wednesday made no mention of the likelihood that rates would be lowered at some point this year, as he had in the past.
https://www.cnbc.com/2024/05/03/jobs-re ... april.html
"U.S. job growth totaled 175,000 in April, much less than expected, while unemployment rose to 3.9%"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, MAY 3 2024
KEY POINTS
* Nonfarm payrolls increased by 175,000 on the month, below the 240,000 estimate from the Dow Jones consensus.
* The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%. A more encompassing jobless rate edged up, to 7.4%, its highest level since November 2021.
* Consistent with recent trends, health care led job creation, with a 56,000 rise. Other sectors showing significant increases included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000).
* Following the report, traders priced in a strong chance of two interest rate cuts by the end of 2024.
The U.S. economy added fewer jobs than expected in April while the unemployment rate rose, lifting hopes that the Federal Reserve will be able to cut interest rates in the coming months.
Nonfarm payrolls increased by 175,000 on the month, below the 240,000 estimate from the Dow Jones consensus, the Labor Department’s Bureau of Labor Statistics reported Friday.
The unemployment rate ticked higher to 3.9% against expectations it would hold steady at 3.8%.
Average hourly earnings rose 0.2% from the previous month and 3.9% from a year ago, both below consensus estimates and an encouraging sign for inflation.
The jobless rate tied for the highest level since January 2022.
A more encompassing rate that includes discouraged workers and those holding part-time jobs for economic reasons also edged up, to 7.4%, its highest level since November 2021.
The labor force participation rate, or those actively looking for work, was unchanged at 62.7%.
Wall Street already had been poised for a higher open, and futures tied to major stock market averages added to gains following the report.
Treasury yields tumbled after being little changed before the release.
The report raised the prospect of a “Goldilocks” climate where growth continues but not at such a rapid pace to force the Fed to tighten policy further.
“With this report, the porridge was just about right,” said Dan North, senior economist at Allianz Trade.
“What would you like at this point the cycle?"
"We’ve had interest rates jacked up pretty high, so you would expect to see the labor market slow down a little."
"But we’re still at pretty high levels.”
Consistent with recent trends, health care led job creation, with a 56,000 increase.
Other sectors showing significant rises included social assistance (31,000), transportation and warehousing (22,000), and retail (20,000).
Construction added 9,000 positions while government, which had shown solid gains in recent months, was up just 8,000 after averaging 55,000 over the previous 12 months.
Revisions to previous months took the March gain to 315,000, or 12,000 from the initial estimate, and February to 236,000, a decline of 34,000.
Household employment, which is used to calculate the unemployment rate, increased by just 25,000 on the month.
Workers holding full-time jobs soared by 949,000 on the month, while those hold part-time jobs slumped by 914,000.
The report comes two days after the Fed again voted to hold borrowing costs steady, keeping its benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%, the highest in more than 20 years.
Following the decision, Chair Jerome Powell characterized the jobs market as “strong” but noted that inflation is “too high” and this year’s economic data has indicated “a lack of further progress” in getting inflation back to the Fed’s 2% target.
But market action shifted after the jobs report indicated an easing labor market and softer wage increases.
Traders priced in a strong chance of two interest rate cuts by the end of 2024, with the first reduction expected to come in September, according to CME Group data.
“This is the jobs report the Fed would have scripted,” said Seema Shah, chief global strategist at Principal Asset Management.
“The first downside payrolls surprise in several months, as well as the dip in average hourly earnings growth, will bring the rate cutting dialogue back into the market and perhaps explains why Powell was able to be dovish on Wednesday.”
Though inflation has come well off its highs in mid-2022, it is still considerably above the central bank’s comfort zone.
Most reports this year have shown inflation around 3% annually; the Fed’s own preferred measure, the core personal consumption expenditures price index, most recently was at 2.8%.
Higher prices have been putting upward pressure on wages, part of an inflation picture that has kept the Fed on the sidelines despite widespread market expectations that the central bank would be cutting interest rates aggressively this year.
Most Fed officials in fact had been mentioning the likelihood of reductions in their public comments.
However, Powell at his post-meeting news conference Wednesday made no mention of the likelihood that rates would be lowered at some point this year, as he had in the past.
https://www.cnbc.com/2024/05/03/jobs-re ... april.html
Re: THE ECONOMY
REUTERS
"Fed's Bowman supports current policy stance but still sees inflation risks"
By Reuters
May 3, 2024
May 3 (Reuters) - Inflation should continue to decline even as the U.S. central bank holds its benchmark interest rate steady at current levels, Federal Reserve Governor Michelle Bowman said on Friday while also reiterating her willingness to raise the policy rate if progress peters out or reverses.
"My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook," Bowman said in prepared remarks for a speech to a banking conference in Key Biscayne, Florida.
"While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," Bowman added.
In her speech, Bowman made clear she expects inflation to remain elevated for some time, highlighting a number of factors that could keep it from falling back to the Fed's 2% goal.
Those include a lack of further supply-side improvements such as last year's healing of supply chains, lower energy prices and increased immigration, all of which helped put downward pressure on inflation.
Bowman also cited risks from spillovers from conflicts abroad as well as a recent loosening in financial conditions, which could cause inflation to re-accelerate
And at a time when Fed officials are keenly focused on the persistence of stronger-than-expected housing inflation, Bowman proposed a potential new wrinkle in the expectation that those pricing pressures will abate.
"Given the current low inventory of affordable housing, the inflow of new immigrants to some geographic areas could result in upward pressure on rents, as additional housing supply may take time to materialize," Bowman said.
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-05-03/
"Fed's Bowman supports current policy stance but still sees inflation risks"
By Reuters
May 3, 2024
May 3 (Reuters) - Inflation should continue to decline even as the U.S. central bank holds its benchmark interest rate steady at current levels, Federal Reserve Governor Michelle Bowman said on Friday while also reiterating her willingness to raise the policy rate if progress peters out or reverses.
"My baseline outlook continues to be that inflation will decline further with the policy rate held steady, but I still see a number of upside inflation risks that affect my outlook," Bowman said in prepared remarks for a speech to a banking conference in Key Biscayne, Florida.
"While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed," Bowman added.
In her speech, Bowman made clear she expects inflation to remain elevated for some time, highlighting a number of factors that could keep it from falling back to the Fed's 2% goal.
Those include a lack of further supply-side improvements such as last year's healing of supply chains, lower energy prices and increased immigration, all of which helped put downward pressure on inflation.
Bowman also cited risks from spillovers from conflicts abroad as well as a recent loosening in financial conditions, which could cause inflation to re-accelerate
And at a time when Fed officials are keenly focused on the persistence of stronger-than-expected housing inflation, Bowman proposed a potential new wrinkle in the expectation that those pricing pressures will abate.
"Given the current low inventory of affordable housing, the inflow of new immigrants to some geographic areas could result in upward pressure on rents, as additional housing supply may take time to materialize," Bowman said.
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/us/feds ... 024-05-03/
Re: THE ECONOMY
REUTERS
"US job gains fewest in six months as labor market cools"
By Lucia Mutikani
May 3, 2024
Summary
* Nonfarm payrolls increase 175,000 in April
* Unemployment rate rises to 3.9% from 3.8%
* Average hourly earnings gain 0.2%; up 3.9% year-on-year
WASHINGTON, May 3 (Reuters) - U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years, but it is probably too early to expect that the Federal Reserve will start cutting interest rates before September as the labor market remains fairly tight.
The Labor Department's closely watched employment report on Friday also showed the unemployment rate rising to 3.9% from 3.8% in March amid increasing labor supply.
Nonetheless, the jobless rate remained below 4% for the 27th straight month.
Data this week showed job openings declining in March.
Signs of labor market cooling raised optimism that the U.S. central bank could after all engineer a "soft-landing" for the economy and doused chatter of stagflation, which had been fanned by news of a sharp moderation in economic growth and a surge in inflation in the first quarter.
Financial markets boosted the odds of a September rate cut and saw the Fed reducing borrowing costs twice this year instead of only once before the data.
"A cooler pace of hiring to a more sustainable pace should be interpreted as beneficial with respect to the inflation outlook going forward and remove any lingering concerns of a wage price spiral and put to bed loose and undisciplined talk from the corners of the trading community about stagflation," said Joe Brusuelas, chief economist at RSM.
Nonfarm payrolls increased by 175,000 jobs last month, the fewest in six months, the Labor Department's Bureau of Labor Statistics said.
Revisions showed 22,000 fewer jobs created in February and March than previously reported.
Economists polled by Reuters had forecast payrolls advancing by 243,000.
Estimates ranged from 150,000 to 280,000.
April's employment gains were below the 242,000 monthly average for the past year.
Job growth last month was diverse.
The healthcare sector added 56,000 positions, spread across ambulatory healthcare services, hospitals, nursing and residential care facilities.
It continued to lead employment gains as companies seek to boost staffing levels after losing workers during the pandemic.
Social assistance payrolls increased by 31,000 jobs.
Employment in the transportation and warehousing industry rose by 22,000 jobs, driven by couriers and messengers as well as hiring at warehousing and storage facilities.
Retailers hired 20,100 more workers.
There were modest increases in construction and government as well as leisure and hospitality payrolls, which had been among the major drivers of employment in the past months.
Moderate job growth was also reported in manufacturing.
There were minor job losses in professional and business services, reflecting a continued decline in temporary help staffing.
This labor market segment, normally viewed as a harbinger for future hiring, has dropped in 24 of the last 25 months.
The information industry also posted small job losses as did mining and logging.
The share of industries reporting job growth edged up to 60.4% from 59.6% in March.
Financial markets raised their bets of a September rate cut to about 78% from 63% before the data.
The Fed on Wednesday left its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
Since March 2022 the Fed has raised its policy rate by 525 basis points.
"We're sticking with our call for a first ease in July," said Michael Feroli, chief U.S. economist at JPMorgan.
"The market is not there, but we believe that if the next two job reports show continued cooling in labor market activity, then the Fed will be comfortable taking back some of its policy restraint."
Stocks on Wall Street were trading higher.
The dollar fell against a basket of currencies.
U.S. Treasury prices rose, pushing yields to multi-week lows.
WAGE GROWTH SLOWS
Average hourly earnings rose 0.2% after climbing 0.3% in March.
Wages increased 3.9% in the 12 months through April.
That was the smallest gain in almost three years and first reading below 4.0% since June 2021.
It followed a 4.1% rise in March.
Slower wage growth is consistent with fewer people job-hopping in search of better compensation and working conditions.
Wage growth in a 3.0%-3.5% range is seen as consistent with the Fed's 2% inflation target.
Economists also believed a calendar quirk had biased wages lower.
"It's also possible that the low April print marks the return of a pre-Covid calendar quirk, in which wage gains are under-reported in months when the 15th - payday for people paid semi-monthly - falls on the Monday or Tuesday after the survey week," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"Either way, wage gains tend to track the quits rate, which is below its pre-Covid level and still falling."
The average workweek fell to 34.3 hours from 34.4 hours in March.
Details of the household survey from which the unemployment rate is derived showed labor supply continuing to increase, largely driven by a surge in immigration last year.
About 87,000 people entered the labor force in April, but there were not enough jobs for many, with household employment rising by only 25,000, accounting for the uptick in the jobless rate.
Economists attributed the divergence in employment to the household survey's difficulties measuring the recent immigrants.
Goldman Sachs estimated the underlying pace of job growth based on the payroll and household surveys at 189,000, but added "we estimate that counting immigration fully would boost this by roughly 20,000."
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged from March at 62.7%, the highest since November.
There were more people working part-time because they could not find full-time employment, with the number increasing 135,000.
But not many people were experiencing long periods of unemployment.
The employment-to-population ratio, viewed as a measure of an economy's ability to create employment, dipped to 60.2% from 60.3% in March.
"Despite missing expectations, signaling an economic cool down, the labor market has still maintained a pattern of growth and consumers can be cautiously optimistic that the Fed will be able to successfully lower inflation while also avoiding a recession," said Steve Rick, chief economist at TruStage.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-j ... 024-05-03/
"US job gains fewest in six months as labor market cools"
By Lucia Mutikani
May 3, 2024
Summary
* Nonfarm payrolls increase 175,000 in April
* Unemployment rate rises to 3.9% from 3.8%
* Average hourly earnings gain 0.2%; up 3.9% year-on-year
WASHINGTON, May 3 (Reuters) - U.S. job growth slowed more than expected in April and the increase in annual wages fell below 4.0% for the first time in nearly three years, but it is probably too early to expect that the Federal Reserve will start cutting interest rates before September as the labor market remains fairly tight.
The Labor Department's closely watched employment report on Friday also showed the unemployment rate rising to 3.9% from 3.8% in March amid increasing labor supply.
Nonetheless, the jobless rate remained below 4% for the 27th straight month.
Data this week showed job openings declining in March.
Signs of labor market cooling raised optimism that the U.S. central bank could after all engineer a "soft-landing" for the economy and doused chatter of stagflation, which had been fanned by news of a sharp moderation in economic growth and a surge in inflation in the first quarter.
Financial markets boosted the odds of a September rate cut and saw the Fed reducing borrowing costs twice this year instead of only once before the data.
"A cooler pace of hiring to a more sustainable pace should be interpreted as beneficial with respect to the inflation outlook going forward and remove any lingering concerns of a wage price spiral and put to bed loose and undisciplined talk from the corners of the trading community about stagflation," said Joe Brusuelas, chief economist at RSM.
Nonfarm payrolls increased by 175,000 jobs last month, the fewest in six months, the Labor Department's Bureau of Labor Statistics said.
Revisions showed 22,000 fewer jobs created in February and March than previously reported.
Economists polled by Reuters had forecast payrolls advancing by 243,000.
Estimates ranged from 150,000 to 280,000.
April's employment gains were below the 242,000 monthly average for the past year.
Job growth last month was diverse.
The healthcare sector added 56,000 positions, spread across ambulatory healthcare services, hospitals, nursing and residential care facilities.
It continued to lead employment gains as companies seek to boost staffing levels after losing workers during the pandemic.
Social assistance payrolls increased by 31,000 jobs.
Employment in the transportation and warehousing industry rose by 22,000 jobs, driven by couriers and messengers as well as hiring at warehousing and storage facilities.
Retailers hired 20,100 more workers.
There were modest increases in construction and government as well as leisure and hospitality payrolls, which had been among the major drivers of employment in the past months.
Moderate job growth was also reported in manufacturing.
There were minor job losses in professional and business services, reflecting a continued decline in temporary help staffing.
This labor market segment, normally viewed as a harbinger for future hiring, has dropped in 24 of the last 25 months.
The information industry also posted small job losses as did mining and logging.
The share of industries reporting job growth edged up to 60.4% from 59.6% in March.
Financial markets raised their bets of a September rate cut to about 78% from 63% before the data.
The Fed on Wednesday left its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
Since March 2022 the Fed has raised its policy rate by 525 basis points.
"We're sticking with our call for a first ease in July," said Michael Feroli, chief U.S. economist at JPMorgan.
"The market is not there, but we believe that if the next two job reports show continued cooling in labor market activity, then the Fed will be comfortable taking back some of its policy restraint."
Stocks on Wall Street were trading higher.
The dollar fell against a basket of currencies.
U.S. Treasury prices rose, pushing yields to multi-week lows.
WAGE GROWTH SLOWS
Average hourly earnings rose 0.2% after climbing 0.3% in March.
Wages increased 3.9% in the 12 months through April.
That was the smallest gain in almost three years and first reading below 4.0% since June 2021.
It followed a 4.1% rise in March.
Slower wage growth is consistent with fewer people job-hopping in search of better compensation and working conditions.
Wage growth in a 3.0%-3.5% range is seen as consistent with the Fed's 2% inflation target.
Economists also believed a calendar quirk had biased wages lower.
"It's also possible that the low April print marks the return of a pre-Covid calendar quirk, in which wage gains are under-reported in months when the 15th - payday for people paid semi-monthly - falls on the Monday or Tuesday after the survey week," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
"Either way, wage gains tend to track the quits rate, which is below its pre-Covid level and still falling."
The average workweek fell to 34.3 hours from 34.4 hours in March.
Details of the household survey from which the unemployment rate is derived showed labor supply continuing to increase, largely driven by a surge in immigration last year.
About 87,000 people entered the labor force in April, but there were not enough jobs for many, with household employment rising by only 25,000, accounting for the uptick in the jobless rate.
Economists attributed the divergence in employment to the household survey's difficulties measuring the recent immigrants.
Goldman Sachs estimated the underlying pace of job growth based on the payroll and household surveys at 189,000, but added "we estimate that counting immigration fully would boost this by roughly 20,000."
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged from March at 62.7%, the highest since November.
There were more people working part-time because they could not find full-time employment, with the number increasing 135,000.
But not many people were experiencing long periods of unemployment.
The employment-to-population ratio, viewed as a measure of an economy's ability to create employment, dipped to 60.2% from 60.3% in March.
"Despite missing expectations, signaling an economic cool down, the labor market has still maintained a pattern of growth and consumers can be cautiously optimistic that the Fed will be able to successfully lower inflation while also avoiding a recession," said Steve Rick, chief economist at TruStage.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-j ... 024-05-03/
Re: THE ECONOMY
REUTERS
"US service sector contracts in April; price pressures reaccelerate"
By Reuters
May 3, 2024
May 3 (Reuters) - The U.S. services sector contracted in March, while a measure of prices paid by businesses for inputs jumped, a worrisome sign for the outlook on inflation.
The Institute for Supply Management (ISM) said on Friday that its non-manufacturing PMI fell to 49.4 last month from 51.4 in March, the lowest reading since December 2022.
A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.
The PMI adds to evidence that the economy is beginning to lose some steam after expanding at a solid pace.
Economists polled by Reuters had forecast the index edging up to 52.0 in April.
The slowdown in economic growth comes after 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 designed to quell elevated inflation.
The U.S. central bank had been expected to start cutting interest rates this year, but doubts now persist amid a stalling in progress on bringing inflation back down to its 2% goal.
A measure of new orders received by services businesses dipped to 52.2 last month from 54.4 in March, the lowest reading since last September.
Production also faltered, with a gauge of business activity dropping to 50.9 from 57.4 in the prior month, to levels last seen at the onset of the COVID-19 pandemic in May 2020.
Despite demand slowing, services inflation appears to have picked up again.
The survey's measure of prices paid for inputs by businesses jumped to 59.2 from 53.4 in March.
Data last week showed services inflation quickened in March.
The survey's measure of services sector employment fell to 45.9 from 48.5 in March.
Government data on Wednesday showed the labor market continues to gradually cool, with job openings falling to a three-year low in March and the number of people quitting their jobs declining.
There were 1.32 job openings for every unemployed person in March compared to 1.36 in February.
April's employment report on Friday showed that nonfarm payrolls increased by 175,000 jobs last month after rising by 315,000 in March.
The unemployment rate edged up to 3.9%, and annual wage growth ebbed to 3.9% from 4.1% in March.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-s ... 024-05-03/
"US service sector contracts in April; price pressures reaccelerate"
By Reuters
May 3, 2024
May 3 (Reuters) - The U.S. services sector contracted in March, while a measure of prices paid by businesses for inputs jumped, a worrisome sign for the outlook on inflation.
The Institute for Supply Management (ISM) said on Friday that its non-manufacturing PMI fell to 49.4 last month from 51.4 in March, the lowest reading since December 2022.
A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.
The PMI adds to evidence that the economy is beginning to lose some steam after expanding at a solid pace.
Economists polled by Reuters had forecast the index edging up to 52.0 in April.
The slowdown in economic growth comes after 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022 designed to quell elevated inflation.
The U.S. central bank had been expected to start cutting interest rates this year, but doubts now persist amid a stalling in progress on bringing inflation back down to its 2% goal.
A measure of new orders received by services businesses dipped to 52.2 last month from 54.4 in March, the lowest reading since last September.
Production also faltered, with a gauge of business activity dropping to 50.9 from 57.4 in the prior month, to levels last seen at the onset of the COVID-19 pandemic in May 2020.
Despite demand slowing, services inflation appears to have picked up again.
The survey's measure of prices paid for inputs by businesses jumped to 59.2 from 53.4 in March.
Data last week showed services inflation quickened in March.
The survey's measure of services sector employment fell to 45.9 from 48.5 in March.
Government data on Wednesday showed the labor market continues to gradually cool, with job openings falling to a three-year low in March and the number of people quitting their jobs declining.
There were 1.32 job openings for every unemployed person in March compared to 1.36 in February.
April's employment report on Friday showed that nonfarm payrolls increased by 175,000 jobs last month after rising by 315,000 in March.
The unemployment rate edged up to 3.9%, and annual wage growth ebbed to 3.9% from 4.1% in March.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-s ... 024-05-03/
Re: THE ECONOMY
REUTERS
"Rivian receives $827 mln in incentives to expand Illinois facility, shares jump"
By Reuters
May 2, 2024
May 2 (Reuters) - Rivian Automotive said on Thursday it has received $827 million in an incentive package from the State of Illinois to expand operations at its Normal facility.
The Irvine, California-based company's shares rose nearly 10% in afternoon trade after having lost more than 60% of their value this year, as of Wednesday's close.
The Illinois plant, where Rivian also makes its electric delivery vans for its largest investor, Amazon.com, can produce 150,000 vehicles a year, the company said.
Rivian will be producing its less-expensive midsize SUV R2 model, unveiled in March and will take on Tesla's Model Y, at the plant
With the addition of the R2, Rivian expects a total annual capacity of 215,000 vehicles.
The company said the funds from the state of Illinois would be spent on expanding the plant, improving public infrastructure and job training programs for its workforce.
The incentive package would add to Rivian's balance of cash and cash equivalents of $7.86 billion at end of last year.
Earlier this year, Rivian had said it expects to spend about $1.75 billion in capital expenditures in 2024, driven by additional investment in a second facility just outside of Atlanta, Georgia facility, but it has since paused construction of the plant.
Construction would resume later in Georgia as that site "remains an extremely important part of its long-term strategy," Rivian said.
Rivian, which is set to report first-quarter results next week, raised more than $3 billion with two bond issuances last year, but some analysts and investors say it will need additional capital by 2026.
Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar and Tasim Zahid
https://www.reuters.com/business/autos- ... 024-05-02/
"Rivian receives $827 mln in incentives to expand Illinois facility, shares jump"
By Reuters
May 2, 2024
May 2 (Reuters) - Rivian Automotive said on Thursday it has received $827 million in an incentive package from the State of Illinois to expand operations at its Normal facility.
The Irvine, California-based company's shares rose nearly 10% in afternoon trade after having lost more than 60% of their value this year, as of Wednesday's close.
The Illinois plant, where Rivian also makes its electric delivery vans for its largest investor, Amazon.com, can produce 150,000 vehicles a year, the company said.
Rivian will be producing its less-expensive midsize SUV R2 model, unveiled in March and will take on Tesla's Model Y, at the plant
With the addition of the R2, Rivian expects a total annual capacity of 215,000 vehicles.
The company said the funds from the state of Illinois would be spent on expanding the plant, improving public infrastructure and job training programs for its workforce.
The incentive package would add to Rivian's balance of cash and cash equivalents of $7.86 billion at end of last year.
Earlier this year, Rivian had said it expects to spend about $1.75 billion in capital expenditures in 2024, driven by additional investment in a second facility just outside of Atlanta, Georgia facility, but it has since paused construction of the plant.
Construction would resume later in Georgia as that site "remains an extremely important part of its long-term strategy," Rivian said.
Rivian, which is set to report first-quarter results next week, raised more than $3 billion with two bond issuances last year, but some analysts and investors say it will need additional capital by 2026.
Reporting by Akash Sriram in Bengaluru; Editing by Shilpi Majumdar and Tasim Zahid
https://www.reuters.com/business/autos- ... 024-05-02/
Re: THE ECONOMY
REUTERS
"Heavy oil shortage spells higher cost for shippers, road builders"
By Robert Harvey and Arathy Somasekhar
May 3, 2024
LONDON/HOUSTON, May 3 (Reuters) - Mexican export cuts and a rerouting of Canadian output are shrinking already limited supplies of heavy crude in the Atlantic basin, driving up refiners' costs with a likely knock-on effect to industries ranging from shipping and construction to Middle Eastern power plants.
Prolonged OPEC supply cuts and international sanctions on Venezuela, Iran and Russia had already led to shortages of heavier crude, with the complex refineries built to process it, such as those in the U.S. Gulf, struggling to find cheap supplies.
Heavy-sour crudes yield more residual fuel oils that are either upgraded into higher-value road fuels, or converted into marine fuels and bitumen.
"The combination of tighter heavy crude and fuel oil supplies, as well as the seasonal rise in power generation demand is expected to push up fuel oil cracks in the weeks ahead," said Vortexa analyst Xavier Tang, referring to the spread between the price of crude and the refined product.
More marine fuel oil is needed by ships making longer voyages around Africa to avoid the Red Sea area, while in summer Saudi Arabia burns more fuel oil for air conditioning and demand also increases from higher construction and road-laying activity.
Mexico cut crude exports in April to facilitate higher domestic processing as it seeks to end a costly dependency on fuel imports.
That further threatened sour supply in the Atlantic basin where refiners have been preparing for the opening of the Trans Mountain pipeline expansion which will divert more heavy Canadian crude to the Pacific.
Heavy crude prices in the U.S. Gulf soared as refiners sought replacement supply, with the Mars grade hitting a near four-year high against WTI on April 1 according to LSEG data.
"U.S. Gulf refiners have a much more expensive Canadian base feedstock via pipelines, they have less Mexican available, and as a consequence other heavy-sour options are significantly more expensive," said Viktor Katona, lead crude analyst at Kpler.
In Europe, the Argus Brent Sour index - which includes Norway's flagship Johan Sverdrup grade - hit a 14-month high in mid-April and is still trading roughly in line with light-sweet benchmark dated Brent, according to price agency Argus Media.
Although prices cooled slightly as Mexican domestic crude demand rose by less than expected, freeing up more for export, the sour market remains structurally tight.
"The global crude slate is getting increasingly lighter and sweeter as a direct result of constrained OPEC production, meanwhile non-OPEC+ countries are supplying growing volumes of lighter, sweet crude," said Jay Maroo, head of market intelligence at Vortexa, referring to the Organization of the Petroleum Exporting Countries and its allies such as Russia.
"Unless there is any major change in course by OPEC, it's hard to see that trend reversing."
Light and medium-sweets have accounted for more than 50% of Europe's crude imports since 2019 according to Kpler data.
Medium and heavy-sours made up just 26% of the continent's imports in the first four months of 2024, the lowest since at least 2012.
BALANCING ACT
High-density, higher-sulphur crudes are harder to refine and therefore usually cheaper than lighter oil.
The higher prices are a particular headache for refiners who invested in the costly upgrading units that allow them to process the heaviest grades.
"The lack of heavy sour crudes goes directly against refinery profitability and it is a waste of capex for complex refineries," said Rystad Energy's vice president of oil market analysis Patricio Valdivieso.
Refiners will have to adapt to a lack of heavy crude like Mexican Maya by blending any other similar grades they can find that would suit their configuration, according to Hillary Stevenson, director at IIR Energy.
Taking advantage of the relative abundance of light crudes could prove financially and operationally difficult for U.S. refiners.
"If they try to go lighter, the end impact would be lower profitability," said Rommel Oates, founder of Refinery Calculator, adding that a lighter crude diet can impact the stability of a refinery's downstream units.
Refiners can balance a lighter crude diet by feeding residual fuels into secondary units.
U.S. Gulf refiners could process up to 50,000 bpd extra of Mexican fuel oil to substitute heavy crude, according to FGE analyst Francisco Goncalves.
That may not be possible for Europe's refineries however, which would struggle to process such heavy-sour fuel oil into road fuels, Kpler's Katona added.
Prior to 2022, Europe's main source of heavy fuel was Russia, but the G7 embargo over its invasion of Ukraine has cut off access to refinery feedstocks such as vacuum gasoil and straight-run fuel oil.
In Northwest Europe, high-sulphur fuel oil barge crack spreads against Brent futures hit their highest since Jan. 4 at around an $11 discount on Wednesday, according to Argus Media price data.
"A tighter fuel oil market is surely also at play," said Sparta Commodities analyst Neil Crosby.
Reporting by Robert Harvey, Natalie Grover and Ron Bousso in London, Arathy Somasekhar in Houston, and Stefanie Eschenbacher in Mexico City; Editing by Dmitry Zhdannikov and Simon Webb, Kirsten Donovan
https://www.reuters.com/markets/commodi ... 024-05-03/
"Heavy oil shortage spells higher cost for shippers, road builders"
By Robert Harvey and Arathy Somasekhar
May 3, 2024
LONDON/HOUSTON, May 3 (Reuters) - Mexican export cuts and a rerouting of Canadian output are shrinking already limited supplies of heavy crude in the Atlantic basin, driving up refiners' costs with a likely knock-on effect to industries ranging from shipping and construction to Middle Eastern power plants.
Prolonged OPEC supply cuts and international sanctions on Venezuela, Iran and Russia had already led to shortages of heavier crude, with the complex refineries built to process it, such as those in the U.S. Gulf, struggling to find cheap supplies.
Heavy-sour crudes yield more residual fuel oils that are either upgraded into higher-value road fuels, or converted into marine fuels and bitumen.
"The combination of tighter heavy crude and fuel oil supplies, as well as the seasonal rise in power generation demand is expected to push up fuel oil cracks in the weeks ahead," said Vortexa analyst Xavier Tang, referring to the spread between the price of crude and the refined product.
More marine fuel oil is needed by ships making longer voyages around Africa to avoid the Red Sea area, while in summer Saudi Arabia burns more fuel oil for air conditioning and demand also increases from higher construction and road-laying activity.
Mexico cut crude exports in April to facilitate higher domestic processing as it seeks to end a costly dependency on fuel imports.
That further threatened sour supply in the Atlantic basin where refiners have been preparing for the opening of the Trans Mountain pipeline expansion which will divert more heavy Canadian crude to the Pacific.
Heavy crude prices in the U.S. Gulf soared as refiners sought replacement supply, with the Mars grade hitting a near four-year high against WTI on April 1 according to LSEG data.
"U.S. Gulf refiners have a much more expensive Canadian base feedstock via pipelines, they have less Mexican available, and as a consequence other heavy-sour options are significantly more expensive," said Viktor Katona, lead crude analyst at Kpler.
In Europe, the Argus Brent Sour index - which includes Norway's flagship Johan Sverdrup grade - hit a 14-month high in mid-April and is still trading roughly in line with light-sweet benchmark dated Brent, according to price agency Argus Media.
Although prices cooled slightly as Mexican domestic crude demand rose by less than expected, freeing up more for export, the sour market remains structurally tight.
"The global crude slate is getting increasingly lighter and sweeter as a direct result of constrained OPEC production, meanwhile non-OPEC+ countries are supplying growing volumes of lighter, sweet crude," said Jay Maroo, head of market intelligence at Vortexa, referring to the Organization of the Petroleum Exporting Countries and its allies such as Russia.
"Unless there is any major change in course by OPEC, it's hard to see that trend reversing."
Light and medium-sweets have accounted for more than 50% of Europe's crude imports since 2019 according to Kpler data.
Medium and heavy-sours made up just 26% of the continent's imports in the first four months of 2024, the lowest since at least 2012.
BALANCING ACT
High-density, higher-sulphur crudes are harder to refine and therefore usually cheaper than lighter oil.
The higher prices are a particular headache for refiners who invested in the costly upgrading units that allow them to process the heaviest grades.
"The lack of heavy sour crudes goes directly against refinery profitability and it is a waste of capex for complex refineries," said Rystad Energy's vice president of oil market analysis Patricio Valdivieso.
Refiners will have to adapt to a lack of heavy crude like Mexican Maya by blending any other similar grades they can find that would suit their configuration, according to Hillary Stevenson, director at IIR Energy.
Taking advantage of the relative abundance of light crudes could prove financially and operationally difficult for U.S. refiners.
"If they try to go lighter, the end impact would be lower profitability," said Rommel Oates, founder of Refinery Calculator, adding that a lighter crude diet can impact the stability of a refinery's downstream units.
Refiners can balance a lighter crude diet by feeding residual fuels into secondary units.
U.S. Gulf refiners could process up to 50,000 bpd extra of Mexican fuel oil to substitute heavy crude, according to FGE analyst Francisco Goncalves.
That may not be possible for Europe's refineries however, which would struggle to process such heavy-sour fuel oil into road fuels, Kpler's Katona added.
Prior to 2022, Europe's main source of heavy fuel was Russia, but the G7 embargo over its invasion of Ukraine has cut off access to refinery feedstocks such as vacuum gasoil and straight-run fuel oil.
In Northwest Europe, high-sulphur fuel oil barge crack spreads against Brent futures hit their highest since Jan. 4 at around an $11 discount on Wednesday, according to Argus Media price data.
"A tighter fuel oil market is surely also at play," said Sparta Commodities analyst Neil Crosby.
Reporting by Robert Harvey, Natalie Grover and Ron Bousso in London, Arathy Somasekhar in Houston, and Stefanie Eschenbacher in Mexico City; Editing by Dmitry Zhdannikov and Simon Webb, Kirsten Donovan
https://www.reuters.com/markets/commodi ... 024-05-03/
Re: THE ECONOMY
Fox Business
"White House economic adviser struggles with question on monetary policy"
Story by Eric Revell
MAY 5, 2024
A viral video of President Joe Biden's chief economic adviser, Jared Bernstein, appearing to struggle to explain how monetary policy works has raised new questions about the administration's handling of the economy.
Bernstein, who chairs the White House Council of Economic Advisers, was interviewed for a new film called, "Finding the Money," a documentary made by advocates of Modern Monetary Theory (MMT) – a controversial line of economic thought.
One of MMT's central tenets is that government budget deficits don't matter for countries like the U.S. that borrow money in their own currencies.
Proponents argue this means the government should use tax and spending policies to manage the economy and address inflation instead of the central bank's monetary policies.
"The U.S. government can't go bankrupt, because we can print our own money," Bernstein says in the video.
He was then asked by the interviewer, "Like you said, they print the dollar, so why does the government even borrow?"
Bernstein's reply seems to indicate uncertainty – at best – about monetary policy.
"Again, some of this stuff gets – some of the language and concepts are just confusing."
"The government definitely prints money, and it definitely lends that money by selling bonds."
"Is that what they do?"
"They sell bonds, yeah, they sell bonds."
"Right?"
"Since they sell bonds, and people buy the bonds, and lend them the money," Bernstein replied.
"A lot of times, at least to my ear with MMT, the language and the concepts can be kind of unnecessarily confusing but there is no question that the government prints money and then it uses that money to um, uh … I guess I'm just, I can't really, I don't get it, I don't know what they're talking about. . . ."
"It's like, the government clearly prints money, it does it all the time, and it clearly borrows, otherwise you wouldn't be having this debt and deficit conversation."
"So I don't think there's anything confusing there."
Bernstein's jumbled response about monetary policy sparked criticism of the Biden administration's economic policies on social media.
FOX Business spoke to federal budget and economic specialists who weighed in on the exchange.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), told FOX Business, "What you have there is a serious, credible, economist – Jared Bernstein – trying to be polite about a nonsensical economic fairytale that can't even be called a theory."
"MMT is forever being reinvented by its defenders who use made-up excuses for why you don't have to pay for anything."
"First, both Jared and the MMT crowd are great reminders of why limited government is so important," Norbert Michel, VP and director of the Cato Institute's Center for Monetary and Financial Alternatives, told FOX Business.
"Fortunately, the people in the administration (and Congress) do not actually 'run the economy,' they only enact policies that affect people, and the people have a chance to elect new politicians every couple of years."
"Second, the MMT crowd, no matter what they say, pretends that the government can just print and distribute money without consequence, but history has already proven that kind of policy leads to inflation, and, depending on how the money is distributed, massive cronyism," Michel added.
"In the real world, there are always rent seekers and resource constraints."
The White House Council of Economic Advisers did not immediately respond to a request for comment.
]Bernstein is a longtime economic aide to President Biden, although he lacks an academic background in economics.
He earned a bachelor's degree in music from the Manhattan School of Music, as well as a master of social work from Hunter College and a doctorate of social work from Columbia University.
He has taught at several colleges, including Columbia and New York University, and worked as an economist for the Department of Labor during the Clinton administration.
Bernstein has also worked at liberal think tanks, including the Economic Policy Institute and the Center on Budget and Policy Priorities.
Bernstein worked as the chief economist and economic adviser to then-Vice President Biden from 2009 to 2011 during the Obama administration.
He was an advisor to the Biden-Harris Transition Team, and after President Biden's inauguration, Bernstein was appointed to the CEA.
He was confirmed as the chair of the CEA on a 50-49 vote by the Senate in June 2023.
The confirmation vote was largely along party lines, with all Democrats voting in favor except for Sen. Joe Manchin, D-W.V., who joined Republican senators in opposing Bernstein's confirmation to the role.
https://www.msn.com/en-us/money/markets ... 3da7&ei=12
"White House economic adviser struggles with question on monetary policy"
Story by Eric Revell
MAY 5, 2024
A viral video of President Joe Biden's chief economic adviser, Jared Bernstein, appearing to struggle to explain how monetary policy works has raised new questions about the administration's handling of the economy.
Bernstein, who chairs the White House Council of Economic Advisers, was interviewed for a new film called, "Finding the Money," a documentary made by advocates of Modern Monetary Theory (MMT) – a controversial line of economic thought.
One of MMT's central tenets is that government budget deficits don't matter for countries like the U.S. that borrow money in their own currencies.
Proponents argue this means the government should use tax and spending policies to manage the economy and address inflation instead of the central bank's monetary policies.
"The U.S. government can't go bankrupt, because we can print our own money," Bernstein says in the video.
He was then asked by the interviewer, "Like you said, they print the dollar, so why does the government even borrow?"
Bernstein's reply seems to indicate uncertainty – at best – about monetary policy.
"Again, some of this stuff gets – some of the language and concepts are just confusing."
"The government definitely prints money, and it definitely lends that money by selling bonds."
"Is that what they do?"
"They sell bonds, yeah, they sell bonds."
"Right?"
"Since they sell bonds, and people buy the bonds, and lend them the money," Bernstein replied.
"A lot of times, at least to my ear with MMT, the language and the concepts can be kind of unnecessarily confusing but there is no question that the government prints money and then it uses that money to um, uh … I guess I'm just, I can't really, I don't get it, I don't know what they're talking about. . . ."
"It's like, the government clearly prints money, it does it all the time, and it clearly borrows, otherwise you wouldn't be having this debt and deficit conversation."
"So I don't think there's anything confusing there."
Bernstein's jumbled response about monetary policy sparked criticism of the Biden administration's economic policies on social media.
FOX Business spoke to federal budget and economic specialists who weighed in on the exchange.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), told FOX Business, "What you have there is a serious, credible, economist – Jared Bernstein – trying to be polite about a nonsensical economic fairytale that can't even be called a theory."
"MMT is forever being reinvented by its defenders who use made-up excuses for why you don't have to pay for anything."
"First, both Jared and the MMT crowd are great reminders of why limited government is so important," Norbert Michel, VP and director of the Cato Institute's Center for Monetary and Financial Alternatives, told FOX Business.
"Fortunately, the people in the administration (and Congress) do not actually 'run the economy,' they only enact policies that affect people, and the people have a chance to elect new politicians every couple of years."
"Second, the MMT crowd, no matter what they say, pretends that the government can just print and distribute money without consequence, but history has already proven that kind of policy leads to inflation, and, depending on how the money is distributed, massive cronyism," Michel added.
"In the real world, there are always rent seekers and resource constraints."
The White House Council of Economic Advisers did not immediately respond to a request for comment.
]Bernstein is a longtime economic aide to President Biden, although he lacks an academic background in economics.
He earned a bachelor's degree in music from the Manhattan School of Music, as well as a master of social work from Hunter College and a doctorate of social work from Columbia University.
He has taught at several colleges, including Columbia and New York University, and worked as an economist for the Department of Labor during the Clinton administration.
Bernstein has also worked at liberal think tanks, including the Economic Policy Institute and the Center on Budget and Policy Priorities.
Bernstein worked as the chief economist and economic adviser to then-Vice President Biden from 2009 to 2011 during the Obama administration.
He was an advisor to the Biden-Harris Transition Team, and after President Biden's inauguration, Bernstein was appointed to the CEA.
He was confirmed as the chair of the CEA on a 50-49 vote by the Senate in June 2023.
The confirmation vote was largely along party lines, with all Democrats voting in favor except for Sen. Joe Manchin, D-W.V., who joined Republican senators in opposing Bernstein's confirmation to the role.
https://www.msn.com/en-us/money/markets ... 3da7&ei=12
Re: THE ECONOMY
CNBC
"Renters’ hopes of being able to buy a home have fallen to a record low, New York Fed survey shows"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED MON, MAY 6 2024
KEY POINTS
* The share of renters who believe that they one day will be able to afford a home, fell to a record low 13.4%, according to a New York Federal Reserve survey released Monday.
* There’s not a lot of good news on the renting front, either. Respondents expect rental costs to increase by 9.7% over the next year.
The dream of home ownership has gotten even further away for renters, with higher housing costs and elevated interest rates standing in the way of the American housing dream, according to a New York Federal Reserve survey released Monday.
The share of renters as of February who possess hopes of “residential mobility,” or the belief from renters that they one day will be able to afford a home, fell to a record low 13.4% in the central bank’s annual housing survey for 2024.
That’s down from 15% in 2023 and well off the 20.8% series high back in 2014.
Pessimism about future prospects comes amid a confluence of factors conspiring against the likelihood of renters being able to transition to home ownership.
For one, some 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, which the New York Fed said has “deteriorated substantially” from the 66.5% level in 2023 and 63.1% in 2022.
Moreover, mortgage rates have remained high by historical standards.
A 30-year fixed-rate mortgage now carries an average 7.22% borrowing rate, the highest since late November 2023, according to Freddie Mac.
Housing affordability has improved little, with the median price in February at $388,700, the highest since November, according to the National Association of Realtors.
The NAR’s housing affordability index was at 103 in February, down slightly from January but still at elevated levels with average monthly housing payments at $2,040.
Survey respondents expect housing prices to increase 5.1% over the next year, nearly double the 2.6% expected rate in February 2023 and above the pre-pandemic mean of 4.2%.
Despite prospects for the Fed to cut interest rates before the end of 2024, respondents think mortgage rates are only going to go higher.
The outlook for a year from now is that borrowing costs will be 8.7%, and 9.7% in three years, both survey records.
There’s not a lot of good news on the renting front, either.
Respondents expect rental costs to increase by 9.7% over the next year, up 1.5 percentage points from last year’s survey and the second highest in series history.
The results come a week after the Federal Open Market Committee voted to hold benchmark interest rates steady while indicating that there has been “a lack of further progress” in its efforts to bring the annual inflation rate back down to 2%.
Futures market pricing is indicating that the Fed will begin lowering rates in September, with a another cut likely to come in December.
https://www.cnbc.com/2024/05/06/renters ... shows.html
"Renters’ hopes of being able to buy a home have fallen to a record low, New York Fed survey shows"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED MON, MAY 6 2024
KEY POINTS
* The share of renters who believe that they one day will be able to afford a home, fell to a record low 13.4%, according to a New York Federal Reserve survey released Monday.
* There’s not a lot of good news on the renting front, either. Respondents expect rental costs to increase by 9.7% over the next year.
The dream of home ownership has gotten even further away for renters, with higher housing costs and elevated interest rates standing in the way of the American housing dream, according to a New York Federal Reserve survey released Monday.
The share of renters as of February who possess hopes of “residential mobility,” or the belief from renters that they one day will be able to afford a home, fell to a record low 13.4% in the central bank’s annual housing survey for 2024.
That’s down from 15% in 2023 and well off the 20.8% series high back in 2014.
Pessimism about future prospects comes amid a confluence of factors conspiring against the likelihood of renters being able to transition to home ownership.
For one, some 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, which the New York Fed said has “deteriorated substantially” from the 66.5% level in 2023 and 63.1% in 2022.
Moreover, mortgage rates have remained high by historical standards.
A 30-year fixed-rate mortgage now carries an average 7.22% borrowing rate, the highest since late November 2023, according to Freddie Mac.
Housing affordability has improved little, with the median price in February at $388,700, the highest since November, according to the National Association of Realtors.
The NAR’s housing affordability index was at 103 in February, down slightly from January but still at elevated levels with average monthly housing payments at $2,040.
Survey respondents expect housing prices to increase 5.1% over the next year, nearly double the 2.6% expected rate in February 2023 and above the pre-pandemic mean of 4.2%.
Despite prospects for the Fed to cut interest rates before the end of 2024, respondents think mortgage rates are only going to go higher.
The outlook for a year from now is that borrowing costs will be 8.7%, and 9.7% in three years, both survey records.
There’s not a lot of good news on the renting front, either.
Respondents expect rental costs to increase by 9.7% over the next year, up 1.5 percentage points from last year’s survey and the second highest in series history.
The results come a week after the Federal Open Market Committee voted to hold benchmark interest rates steady while indicating that there has been “a lack of further progress” in its efforts to bring the annual inflation rate back down to 2%.
Futures market pricing is indicating that the Fed will begin lowering rates in September, with a another cut likely to come in December.
https://www.cnbc.com/2024/05/06/renters ... shows.html