REUTERS
"EXCLUSIVE Fed's Daly: March liftoff is 'quite reasonable'"
By Ann Saphir
January 13, 2022
Jan 13 (Reuters) - San Francisco Federal Reserve Bank President Mary Daly on Thursday said that with high inflation that's not abating and a labor market on a tear by nearly all measures, raising interest rates in March makes sense.
"I don't want to put a stake in the ground and say, definitely March," Daly told Reuters in an interview.
But, "lifting off in March when you have an unemployment rate of 3.9%, and an inflation rate that’s north of our price stability goal of average 2% inflation, to me seems a quite reasonable thing."
Consumer prices, which surged 7% in December from a year earlier, are rising across a broader range of goods and services than just the pandemic-related ones that saw price spikes early on.
Meanwhile unemployment has dropped to 3.9%, not far above where it was before the pandemic hit.
"Lifting off and withdrawing some of the emergency accommodation we've offered the economy is actually an appropriate thing to do," she said, and will help sustain the recovery longer so more workers will ultimately have a chance to return to the labor force.
In the past week or so a raft of Fed policymakers have said they could seeing raising interest rates at their March 15-16 meeting.
It's a possibility that was widely seen as remote as recently as November, when Daly was calling for patience on policy to allow more workers time to get jobs.
A lot has changed since then, she said on Thursday, to bring her around to the conviction that policy does need to adjust this year.
"Back then I was hopeful that more labor supply response would be coming, but it hasn’t; and then we had Omicron which tells me it’s probably not going to come," Daly said, because workers who were sidelined by childcare responsibilities or health concerns earlier in the pandemic continue to be so.
On top of that, she said, supply chain disruptions haven't gone away, and she's hearing hints of rising inflation expectations from business contacts who say workers are asking for higher wages to cover higher inflation.
"I now see that we are going to need to make some adjustment in the policy rate this year," she said, though unlike some of her colleagues, she declined to predict how many rate hikes will be needed this year, except to say she does not believe it will be more than three.
NOT ENOUGH TO BRIDLE
The Fed has kept its policy rate at near-zero since the pandemic hit in March 2020, and also bought trillions of dollars of Treasuries and housing-backed bonds, at first to stabilize financial markets and then to add extra lift to the economy as it emerged from the initial crisis.
Last fall, as inflation and employment continued to rise, the Fed decided to gradually reduce its asset purchases, easing off some of the stimulus it was delivering.
In December, with inflation still high, they decided to speed that process up, and end all bond-buying by March.
Even with rate hikes, she said, "we are not bridling the economy and starting to restrain it," noting that rates will still be well below the "neutral" level of 2.5% where they are likely neither stimulating nor braking the economy.
Inflation, she said, will remain high for much of the year, though it should moderate as supply chains get unclogged and once the latest surge in COVID-19 subsides.
Once the Fed has raised rates once or twice, she said, it should begin shrinking its $8-plus trillion balance sheet at a "predictable" rate that won't change meeting by meeting, but that's faster than the last time the Fed trimmed its balance sheet.
Reporting by Ann Saphir; editing by Diane Craft
https://www.reuters.com/business/exclus ... 022-01-13/
THE ECONOMY
Re: THE ECONOMY
REUTERS
"Omicron wave lifts U.S. weekly jobless claims; monthly producer inflation slows"
By Lucia Mutikani
January 13, 2022
Summary
* Weekly jobless claims increase 23,000 to 230,000
* Continuing claims fall 194,000 to 1.559 million
* Producer prices rise 0.2% in December; up 9.7% year-on-year
WASHINGTON, Jan 13 (Reuters) - The number of Americans filing new claims for unemployment benefits increased to an eight-week high in the first week of January amid raging COVID-19 infections, but remained at a level consistent with a rapidly tightening labor market.
The weekly jobless claims report from the Labor Department on Thursday also offered more evidence that the jobs market was at or near maximum employment.
State unemployment benefit rolls at the start of the year were the smallest since 1973.
There are signs the worst of high inflation is likely over, with producer prices posting their smallest gain in 13 months in December.
Shrinking labor market slack and strong price pressures have left economists anticipating that the Federal Reserve would increase interest rates in March.
"The rise in claims likely reflects an increase in layoffs due to the surge in COVID cases," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
"Claims may remain elevated in the near term, but we expect they will gravitate back to the 200,000 level once the Omicron wave passes."
Initial claims for state unemployment benefits increased 23,000 to a seasonally adjusted 230,000 for the week ended Jan. 8, the highest reading since mid-November.
Economists polled by Reuters had forecast 200,000 applications for the latest week.
A surge in coronavirus cases, driven by the Omicron variant, has disrupted activity from airlines to schools as workers call in sick.
Unadjusted claims jumped 103,693 to 419,446 last week.
They were driven by surges in New York, which has seen sky-rocketing cases.
There were also big increases in filings in California, Florida, Kentucky, Missouri, Tennessee, Texas, Utah and Indiana.
But applications fell significantly in Connecticut, Massachusetts and Michigan.
Omicron infections are starting to trend lower in New York and other metropolitan areas.
Claims have declined from a record high of 6.149 million in early April 2020 and remain close to their pre-pandemic levels.
Employers are hanging on to their workers, with 10.6 million job openings at the end of November.
The Fed's Beige Book report on Wednesday of anecdotal information on business activity, collected from contacts nationwide on or before Jan. 3, showed many were allowing part-time work or adjusting qualifications "to attract more applicants and retain existing workforces."
With more workers getting off unemployment benefits rolls, the labor pool could expand.
The claims report showed the number of people receiving benefits after an initial week of aid dropped 194,000 to 1.559 million in the week ended Jan. 1.
This was the lowest reading for these so-called continuing claims since the week ending June 2 in 1973.
The government reported last Friday that the unemployment rate fell to a 22-month low of 3.9% in December.
The workforce is about 2.2 million people smaller than before the pandemic.
Stocks on Wall Street were trading mostly higher.
The dollar fell against a basket of currencies.
U.S. Treasury prices rose.
RAYS OF HOPE
In another report on Thursday, the Labor Department said the producer price index for final demand increased 0.2% last month.
That was the smallest gain in the PPI since November 2020 and followed a 1.0% jump in November.
The PPI was restrained by a 0.4% drop in goods prices, the first decline since April 2020.
That reflected decreases in food and energy prices.
Goods prices advanced 1.1% in November.
Excluding food and energy, goods prices rose 0.5% after increasing 0.8% in November.
Services prices rose 0.5% after accelerating 0.9% in November.
In the 12 months through December, the PPI increased 9.7% after shooting up 9.8% in November.
Excluding the volatile food, energy and trade services components, producer prices rose 0.4% in December.
The so-called core PPI vaulted 0.8% in November.
In the 12 months through December, the core PPI rose 6.9%, matching November's increase.
"Monthly price increases are slowing but still high, and the Fed won't veer off its path to finish tapering in March and start hiking rates this year," said Will Compernolle, a senior economist at FHN Financial in New York.
The government reported on Wednesday that consumer prices soared 7% year-on-year in December, the largest gain since June 1982.
With the PPI and CPI data in hand, economists are forecasting that the core personal consumption expenditures (PCE) price index rose about 0.5% in December, which would lift the year-on-year increase to 4.9% from 4.7% in November.
The core PCE price index is one of the measures watched by the Fed for its 2% inflation target.
Inflation is surging as COVID-19 and the recovery from the pandemic have caused bottlenecks in the supply chain.
There are hopeful signs that the supply logjam could be breaking up.
An Institute for Supply Management survey last week showed manufacturers reporting improved supplier deliveries in December, though soaring Omicron infections pose a risk to supply chains.
Data on Tuesday showed China's factory-gate prices rose more slowly than expected in December.
"Some softening in China's PPI will have implications for U.S. inflation by taking some of the edge off core goods prices," said Bernard Yaros, an economist at Moody's Analytics in West Chester, Pennsylvania.
"Odds are the first place weaker growth in China's PPI will show up in the U.S. is in import prices, then producer prices, and finally consumer prices."
Reporting By Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-wee ... 022-01-13/
"Omicron wave lifts U.S. weekly jobless claims; monthly producer inflation slows"
By Lucia Mutikani
January 13, 2022
Summary
* Weekly jobless claims increase 23,000 to 230,000
* Continuing claims fall 194,000 to 1.559 million
* Producer prices rise 0.2% in December; up 9.7% year-on-year
WASHINGTON, Jan 13 (Reuters) - The number of Americans filing new claims for unemployment benefits increased to an eight-week high in the first week of January amid raging COVID-19 infections, but remained at a level consistent with a rapidly tightening labor market.
The weekly jobless claims report from the Labor Department on Thursday also offered more evidence that the jobs market was at or near maximum employment.
State unemployment benefit rolls at the start of the year were the smallest since 1973.
There are signs the worst of high inflation is likely over, with producer prices posting their smallest gain in 13 months in December.
Shrinking labor market slack and strong price pressures have left economists anticipating that the Federal Reserve would increase interest rates in March.
"The rise in claims likely reflects an increase in layoffs due to the surge in COVID cases," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York.
"Claims may remain elevated in the near term, but we expect they will gravitate back to the 200,000 level once the Omicron wave passes."
Initial claims for state unemployment benefits increased 23,000 to a seasonally adjusted 230,000 for the week ended Jan. 8, the highest reading since mid-November.
Economists polled by Reuters had forecast 200,000 applications for the latest week.
A surge in coronavirus cases, driven by the Omicron variant, has disrupted activity from airlines to schools as workers call in sick.
Unadjusted claims jumped 103,693 to 419,446 last week.
They were driven by surges in New York, which has seen sky-rocketing cases.
There were also big increases in filings in California, Florida, Kentucky, Missouri, Tennessee, Texas, Utah and Indiana.
But applications fell significantly in Connecticut, Massachusetts and Michigan.
Omicron infections are starting to trend lower in New York and other metropolitan areas.
Claims have declined from a record high of 6.149 million in early April 2020 and remain close to their pre-pandemic levels.
Employers are hanging on to their workers, with 10.6 million job openings at the end of November.
The Fed's Beige Book report on Wednesday of anecdotal information on business activity, collected from contacts nationwide on or before Jan. 3, showed many were allowing part-time work or adjusting qualifications "to attract more applicants and retain existing workforces."
With more workers getting off unemployment benefits rolls, the labor pool could expand.
The claims report showed the number of people receiving benefits after an initial week of aid dropped 194,000 to 1.559 million in the week ended Jan. 1.
This was the lowest reading for these so-called continuing claims since the week ending June 2 in 1973.
The government reported last Friday that the unemployment rate fell to a 22-month low of 3.9% in December.
The workforce is about 2.2 million people smaller than before the pandemic.
Stocks on Wall Street were trading mostly higher.
The dollar fell against a basket of currencies.
U.S. Treasury prices rose.
RAYS OF HOPE
In another report on Thursday, the Labor Department said the producer price index for final demand increased 0.2% last month.
That was the smallest gain in the PPI since November 2020 and followed a 1.0% jump in November.
The PPI was restrained by a 0.4% drop in goods prices, the first decline since April 2020.
That reflected decreases in food and energy prices.
Goods prices advanced 1.1% in November.
Excluding food and energy, goods prices rose 0.5% after increasing 0.8% in November.
Services prices rose 0.5% after accelerating 0.9% in November.
In the 12 months through December, the PPI increased 9.7% after shooting up 9.8% in November.
Excluding the volatile food, energy and trade services components, producer prices rose 0.4% in December.
The so-called core PPI vaulted 0.8% in November.
In the 12 months through December, the core PPI rose 6.9%, matching November's increase.
"Monthly price increases are slowing but still high, and the Fed won't veer off its path to finish tapering in March and start hiking rates this year," said Will Compernolle, a senior economist at FHN Financial in New York.
The government reported on Wednesday that consumer prices soared 7% year-on-year in December, the largest gain since June 1982.
With the PPI and CPI data in hand, economists are forecasting that the core personal consumption expenditures (PCE) price index rose about 0.5% in December, which would lift the year-on-year increase to 4.9% from 4.7% in November.
The core PCE price index is one of the measures watched by the Fed for its 2% inflation target.
Inflation is surging as COVID-19 and the recovery from the pandemic have caused bottlenecks in the supply chain.
There are hopeful signs that the supply logjam could be breaking up.
An Institute for Supply Management survey last week showed manufacturers reporting improved supplier deliveries in December, though soaring Omicron infections pose a risk to supply chains.
Data on Tuesday showed China's factory-gate prices rose more slowly than expected in December.
"Some softening in China's PPI will have implications for U.S. inflation by taking some of the edge off core goods prices," said Bernard Yaros, an economist at Moody's Analytics in West Chester, Pennsylvania.
"Odds are the first place weaker growth in China's PPI will show up in the U.S. is in import prices, then producer prices, and finally consumer prices."
Reporting By Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-wee ... 022-01-13/
Re: THE ECONOMY
REUTERS
"Early holiday shopping hammers U.S. retail sales; Omicron drag anticipated in January"
By Lucia Mutikani
January 14, 2022
Summary
* Retail sales fall 1.9% in December
* Core retail sales tumble 3.1%; November revised down
* Manufacturing production slips 0.3%
WASHINGTON, Jan 14 (Reuters) - U.S. retail sales dropped by the most in 10 months in December, likely the result of Americans starting their holiday shopping in October to avoid empty shelves at stores.
Economists cautioned against reading the unexpected plunge in retail sales last month reported by the Commerce Department on Friday as a sign of weakness.
Consumer spending remains underpinned by huge savings, rising wages as companies scramble for scarce workers as well as soaring household wealth.
Still, the report and news of an unexpected decline in production at factories in December suggested the economy lost momentum at the end of 2021.
That trend likely persisted into January amid spiraling COVID-19 infections, driven by the Omicron variant, which have disrupted businesses and schooling.
"It is clear that most shoppers heeded the advice to get holiday shopping done early and that, combined with a massive surge in goods spending earlier in the year, conspired to pull sales sharply lower to end the year," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.
Retail sales fell 1.9% last month, the largest decline since February 2021, after rising 0.2% in November.
Economists polled by Reuters had forecast retail sales unchanged.
Estimates ranged from as low as a drop of 2.0% to as high as a 0.8% increase.
Retail sales, which are mostly goods, increased 16.9% year-on-year in December.
Unadjusted sales rose 10.0% last month.
Sales could weaken further in January as Omicron limits consumer traffic to places like restaurants and bars, though some economists expect goods spending to increase as people stay at home.
Retail sales are 19.2% above their pre-pandemic level.
Holiday sales surged 14.1% to a record $886.7 billion in 2021, according to the National Retail Federation.
Bottlenecks in the supply chains caused by the pandemic have led to shortages of goods.
The pulling forward of sales from December also likely impacted the so-called seasonal factor, the model that the government uses to strip out seasonal fluctuations from the data.
"We do not, therefore, believe that December was a weakening demand story or more cautious behavior by consumers," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The online sales category was hardest hit by the drag from the seasonal factor, plunging 8.7%.
Receipts at auto dealerships slipped 0.4%.
Automobiles remain scarce because of a global semiconductor shortage.
Motor vehicles could remain in short supply for a while.
A separate report from the Federal Reserve on Friday showed a 1.3% drop in production at motor vehicle plants helped to pull down manufacturing output 0.3% in December.
Production at factories increased 0.6% in November.
Economists had expected output to rise 0.5%.
The Fed is still expected to start raising interest rates in March, against the backdrop of high inflation.
"We do not think today's reading will have a significant impact on the Fed's decision to liftoff rates, likely in March, which will depend more heavily on inflation than activity data," said Andrew Hollenhorst, chief economist at Citigroup in New York.
"The seasonal adjustment factor turns highly positive in January suggesting that online sales and overall retail sales will bounce back strongly."
Stocks on Wall Street were lower.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
BROAD WEAKNESS
Sales at electronics and appliance stores dropped 2.9%.
Receipts at service stations fell 0.7% as gasoline prices retreated from higher levels seen in the prior months.
Sales at food and beverage stores fell 0.5%.
Sales at clothing stores declined 3.1%.
There were also decreases is sales at sporting goods, hobby, musical instrument and book stores.
Furniture store sales tumbled 5.5%, while receipts at electronics and appliance stores plunged 2.9%.
But sales at building material and garden equipment suppliers rose 0.9%.
Receipts at restaurants and bars decreased 0.8%.
Restaurants and bars are the only services category in the retail sales report.
These sales were up 41.3% from last December.
Excluding automobiles, gasoline, building materials and food services, retail sales plunged 3.1%.
That was also the biggest drop since last February.
Data for November was revised lower to show these so-called core retail sales falling 0.5% instead of dipping 0.1% as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product.
Economists lowered their fourth-quarter consumer spending forecasts after the data.
December's weakness puts consumer spending on a lower growth trajectory heading into the first quarter.
Concerns about inflation could also restrain spending.
Consumer sentiment fell to the second-lowest level in a decade in early January, a survey from the University of Michigan showed.
GDP growth estimates for the fourth quarter remained bullish, thanks to rising inventory accumulation.
A fourth report from the Commerce Department showed business inventories increased a strong 1.3% in November.
Goldman Sachs trimmed its growth estimate by half-a-percentage point to a 6.5% annualized rate.
The economy grew at a 2.3% pace in the third quarter.
Growth last year is expected to have been the strongest since 1984.
"Consumer spending will remain the cornerstone of economic growth this year but the near-term path will be choppy amid surging Omicron cases and elevated inflation," said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
"Overall, the combination of strong labor income growth, elevated excess savings and healthy balance sheets will support above-trend consumption growth this year of 4%."
Reporting by Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-ret ... 022-01-14/
"Early holiday shopping hammers U.S. retail sales; Omicron drag anticipated in January"
By Lucia Mutikani
January 14, 2022
Summary
* Retail sales fall 1.9% in December
* Core retail sales tumble 3.1%; November revised down
* Manufacturing production slips 0.3%
WASHINGTON, Jan 14 (Reuters) - U.S. retail sales dropped by the most in 10 months in December, likely the result of Americans starting their holiday shopping in October to avoid empty shelves at stores.
Economists cautioned against reading the unexpected plunge in retail sales last month reported by the Commerce Department on Friday as a sign of weakness.
Consumer spending remains underpinned by huge savings, rising wages as companies scramble for scarce workers as well as soaring household wealth.
Still, the report and news of an unexpected decline in production at factories in December suggested the economy lost momentum at the end of 2021.
That trend likely persisted into January amid spiraling COVID-19 infections, driven by the Omicron variant, which have disrupted businesses and schooling.
"It is clear that most shoppers heeded the advice to get holiday shopping done early and that, combined with a massive surge in goods spending earlier in the year, conspired to pull sales sharply lower to end the year," said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina.
Retail sales fell 1.9% last month, the largest decline since February 2021, after rising 0.2% in November.
Economists polled by Reuters had forecast retail sales unchanged.
Estimates ranged from as low as a drop of 2.0% to as high as a 0.8% increase.
Retail sales, which are mostly goods, increased 16.9% year-on-year in December.
Unadjusted sales rose 10.0% last month.
Sales could weaken further in January as Omicron limits consumer traffic to places like restaurants and bars, though some economists expect goods spending to increase as people stay at home.
Retail sales are 19.2% above their pre-pandemic level.
Holiday sales surged 14.1% to a record $886.7 billion in 2021, according to the National Retail Federation.
Bottlenecks in the supply chains caused by the pandemic have led to shortages of goods.
The pulling forward of sales from December also likely impacted the so-called seasonal factor, the model that the government uses to strip out seasonal fluctuations from the data.
"We do not, therefore, believe that December was a weakening demand story or more cautious behavior by consumers," said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
The online sales category was hardest hit by the drag from the seasonal factor, plunging 8.7%.
Receipts at auto dealerships slipped 0.4%.
Automobiles remain scarce because of a global semiconductor shortage.
Motor vehicles could remain in short supply for a while.
A separate report from the Federal Reserve on Friday showed a 1.3% drop in production at motor vehicle plants helped to pull down manufacturing output 0.3% in December.
Production at factories increased 0.6% in November.
Economists had expected output to rise 0.5%.
The Fed is still expected to start raising interest rates in March, against the backdrop of high inflation.
"We do not think today's reading will have a significant impact on the Fed's decision to liftoff rates, likely in March, which will depend more heavily on inflation than activity data," said Andrew Hollenhorst, chief economist at Citigroup in New York.
"The seasonal adjustment factor turns highly positive in January suggesting that online sales and overall retail sales will bounce back strongly."
Stocks on Wall Street were lower.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
BROAD WEAKNESS
Sales at electronics and appliance stores dropped 2.9%.
Receipts at service stations fell 0.7% as gasoline prices retreated from higher levels seen in the prior months.
Sales at food and beverage stores fell 0.5%.
Sales at clothing stores declined 3.1%.
There were also decreases is sales at sporting goods, hobby, musical instrument and book stores.
Furniture store sales tumbled 5.5%, while receipts at electronics and appliance stores plunged 2.9%.
But sales at building material and garden equipment suppliers rose 0.9%.
Receipts at restaurants and bars decreased 0.8%.
Restaurants and bars are the only services category in the retail sales report.
These sales were up 41.3% from last December.
Excluding automobiles, gasoline, building materials and food services, retail sales plunged 3.1%.
That was also the biggest drop since last February.
Data for November was revised lower to show these so-called core retail sales falling 0.5% instead of dipping 0.1% as previously reported.
Core retail sales correspond most closely with the consumer spending component of gross domestic product.
Economists lowered their fourth-quarter consumer spending forecasts after the data.
December's weakness puts consumer spending on a lower growth trajectory heading into the first quarter.
Concerns about inflation could also restrain spending.
Consumer sentiment fell to the second-lowest level in a decade in early January, a survey from the University of Michigan showed.
GDP growth estimates for the fourth quarter remained bullish, thanks to rising inventory accumulation.
A fourth report from the Commerce Department showed business inventories increased a strong 1.3% in November.
Goldman Sachs trimmed its growth estimate by half-a-percentage point to a 6.5% annualized rate.
The economy grew at a 2.3% pace in the third quarter.
Growth last year is expected to have been the strongest since 1984.
"Consumer spending will remain the cornerstone of economic growth this year but the near-term path will be choppy amid surging Omicron cases and elevated inflation," said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
"Overall, the combination of strong labor income growth, elevated excess savings and healthy balance sheets will support above-trend consumption growth this year of 4%."
Reporting by Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-ret ... 022-01-14/
Re: THE ECONOMY
REUTERS
"U.S. manufacturing output unexpectedly falls in December on autos"
Reuters
January 14, 2022
WASHINGTON, Jan 14 (Reuters) - Production at U.S. factories unexpectedly fell in December, pulled down by a decline in output at motor vehicle plants amid an ongoing global semiconductor shortage.
Manufacturing output dropped 0.3% last month after increasing 0.6% in November, the Federal Reserve said on Friday.
Economists polled by Reuters had forecast factory production rising 0.5%.
Output increased 3.5% compared to December 2020.
Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by lean inventories at businesses as demand for goods remains strong.
But COVID-19 and the recovery from the pandemic have overstretched supply chains, igniting inflation.
Manufacturing production increased at a 4.9% annualized rate in the fourth quarter after rising at a 4.0% rate in the July-September quarter.
Production at auto plants dropped 1.3% last month after rising 1.7% in November.
Motor vehicle output is about 6% below its year-earlier level.
Last month's decline in manufacturing output combined with a 1.5% decline in utilities to push industrial production down 0.1%.
That followed a 0.7% gain in November.
Utilities were undercut by unseasonably warm weather in December, which lessened demand for heating.
Mining production rose 2.0%.
Industrial production grew at a 4.0% rate in the fourth quarter.
That followed a 3.5% pace of increase in the third quarter.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, decreased 0.2 percentage point to 77.0% in December.
Overall capacity use for the industrial sector slipped 0.1 percentage point to 76.5% last month. It is 3.1 percentage points below its 1972-2020 average.
Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy — how far growth has room to run before it becomes inflationary.
Reporting By Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-man ... 022-01-14/
"U.S. manufacturing output unexpectedly falls in December on autos"
Reuters
January 14, 2022
WASHINGTON, Jan 14 (Reuters) - Production at U.S. factories unexpectedly fell in December, pulled down by a decline in output at motor vehicle plants amid an ongoing global semiconductor shortage.
Manufacturing output dropped 0.3% last month after increasing 0.6% in November, the Federal Reserve said on Friday.
Economists polled by Reuters had forecast factory production rising 0.5%.
Output increased 3.5% compared to December 2020.
Manufacturing, which accounts for 11.9% of the U.S. economy, remains supported by lean inventories at businesses as demand for goods remains strong.
But COVID-19 and the recovery from the pandemic have overstretched supply chains, igniting inflation.
Manufacturing production increased at a 4.9% annualized rate in the fourth quarter after rising at a 4.0% rate in the July-September quarter.
Production at auto plants dropped 1.3% last month after rising 1.7% in November.
Motor vehicle output is about 6% below its year-earlier level.
Last month's decline in manufacturing output combined with a 1.5% decline in utilities to push industrial production down 0.1%.
That followed a 0.7% gain in November.
Utilities were undercut by unseasonably warm weather in December, which lessened demand for heating.
Mining production rose 2.0%.
Industrial production grew at a 4.0% rate in the fourth quarter.
That followed a 3.5% pace of increase in the third quarter.
Capacity utilization for the manufacturing sector, a measure of how fully firms are using their resources, decreased 0.2 percentage point to 77.0% in December.
Overall capacity use for the industrial sector slipped 0.1 percentage point to 76.5% last month. It is 3.1 percentage points below its 1972-2020 average.
Officials at the Fed tend to look at capacity use measures for signals of how much "slack" remains in the economy — how far growth has room to run before it becomes inflationary.
Reporting By Lucia Mutikani; Editing by Andrea Ricci
https://www.reuters.com/world/us/us-man ... 022-01-14/
Re: THE ECONOMY
REUTERS
"U.S. consumer sentiment sours in early January to second lowest level in decade"
By Lindsay Dunsmuir
January 14, 2022
Jan 14 (Reuters) - U.S. consumer sentiment soured in early January, falling to the second lowest level in a decade as Americans fretted about soaring inflation and doubted the ability of government economic policies to fix it, a survey showed on Friday.
The University of Michigan said its preliminary consumer sentiment index fell to 68.8 in the first half of this month from a final reading of 70.6 in December.
Lower income households held a more negative outlook than wealthier ones, with sentiment dropping by 9.4% among households with total incomes below $100,000, but rising by 5.7% among households above that threshold.
Economists polled by Reuters had forecast the index would decline but only to 70.0.
The sharper-than-expected drop in sentiment comes as Americans face various headwinds despite an overall strong economy, with inflation topping the list of concerns amid a record level of COVID-19 cases due to the Omicron variant that could in turn prolong high prices.
"While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate," Richard Curtin, the survey director, said in a statement.
"Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation," he added.
At a current annual rate of 7.0%, inflation is near a 40-year-high, outstripping wage gains.
Consumer price increases have broadened from a handful of pandemic-sensitive categories while supply chain disruptions have continued.
The current inflation readings have bolstered expectations that the Federal Reserve will start raising interest rates in March as it seeks to bring down the rate of price increases closer to its 2% flexible target.
The Biden administration has said it is also prioritizing ways to help curb inflation.
The survey showed confidence in government economic policies is at its lowest level since 2014.
Elsewhere in the survey, consumers raised their expectations for medium term inflation, another measure the central bank is closely monitoring to ensure that inflation expectations remain anchored.
The survey's one-year inflation expectation ticked higher to 4.9%, from 4.8%, and its five-year inflation outlook edged up to 3.1% from 2.9% in December.
The last few weeks have also seen a surge in COVID-19 cases due to the highly transmissible Omicron variant, which has exacerbated labor shortages as the United States nears maximum employment.
Despite the inflation woes, economic growth is still expected to have grown last year at its fastest pace in almost four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/world/us/us-con ... 022-01-14/
"U.S. consumer sentiment sours in early January to second lowest level in decade"
By Lindsay Dunsmuir
January 14, 2022
Jan 14 (Reuters) - U.S. consumer sentiment soured in early January, falling to the second lowest level in a decade as Americans fretted about soaring inflation and doubted the ability of government economic policies to fix it, a survey showed on Friday.
The University of Michigan said its preliminary consumer sentiment index fell to 68.8 in the first half of this month from a final reading of 70.6 in December.
Lower income households held a more negative outlook than wealthier ones, with sentiment dropping by 9.4% among households with total incomes below $100,000, but rising by 5.7% among households above that threshold.
Economists polled by Reuters had forecast the index would decline but only to 70.0.
The sharper-than-expected drop in sentiment comes as Americans face various headwinds despite an overall strong economy, with inflation topping the list of concerns amid a record level of COVID-19 cases due to the Omicron variant that could in turn prolong high prices.
"While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate," Richard Curtin, the survey director, said in a statement.
"Three-quarters of consumers in early January ranked inflation, compared with unemployment, as the more serious problem facing the nation," he added.
At a current annual rate of 7.0%, inflation is near a 40-year-high, outstripping wage gains.
Consumer price increases have broadened from a handful of pandemic-sensitive categories while supply chain disruptions have continued.
The current inflation readings have bolstered expectations that the Federal Reserve will start raising interest rates in March as it seeks to bring down the rate of price increases closer to its 2% flexible target.
The Biden administration has said it is also prioritizing ways to help curb inflation.
The survey showed confidence in government economic policies is at its lowest level since 2014.
Elsewhere in the survey, consumers raised their expectations for medium term inflation, another measure the central bank is closely monitoring to ensure that inflation expectations remain anchored.
The survey's one-year inflation expectation ticked higher to 4.9%, from 4.8%, and its five-year inflation outlook edged up to 3.1% from 2.9% in December.
The last few weeks have also seen a surge in COVID-19 cases due to the highly transmissible Omicron variant, which has exacerbated labor shortages as the United States nears maximum employment.
Despite the inflation woes, economic growth is still expected to have grown last year at its fastest pace in almost four decades after falling into a brief recession in 2020 caused by the coronavirus pandemic.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/world/us/us-con ... 022-01-14/
Re: THE ECONOMY
REUTERS
"U.S. home builder sentiment dips; New York state factory activity plummets"
By Lucia Mutikani
January 18, 2022
Summary
* Homebuilder sentiment slips in January
* New York state factory activity slumps
WASHINGTON, Jan 18 (Reuters) - Confidence among U.S. single-family homebuilders slipped in January after four straight monthly increases, and builders called for a new softwood lumber agreement with Canada to ease shortages and lower prices, a survey showed on Tuesday.
Other data showed factory activity in New York state slumped this month amid surging COVID-19 infections, but manufacturers remained upbeat about business conditions over the next six months.
The reports supported views that the economy started the year on a soft note because of high inflation, shortages and raging coronavirus cases, driven by the Omicron variant.
"This is a reminder that COVID still holds sway over the recovery," said Oren Klachkin, lead U.S. economist at Oxford Economics in New York.
"U.S. supply chain dynamics didn't improve at the end of 2021, and early data suggest they've only worsened in 2022."
The National Association of Home Builders/Wells Fargo Housing Market index dipped one point to 83 this month.
A reading above 50 indicates that more builders view conditions as good than poor.
"NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021," NAHB Chairman Chuck Fowke said in a statement.
"Policymakers need to take action to fix supply chains."
"Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start."
According to the NAHB, higher material costs and shortages were adding weeks to typical single-family home construction times.
The economy is struggling with high inflation, mostly the result of the pandemic, which has snarled supply chains.
The United States last November nearly doubled the duties on imported Canadian softwood lumber to 17.9% after a review of its anti-dumping and countervailing duty orders.
The Trump administration initially imposed 20% duties on Canadian softwood lumber in 2018 after the collapse of talks on a new quota arrangement, but reduced the level in December 2020 to 9%.
President Joe Biden's administration had stuck to those duties until the Commerce Department's November review.
The NAHB survey was conducted during the first two weeks of January and does not fully reflect the recent jump in mortgage interest rates.
The 30-year fixed-rate mortgage averaged 3.45% during the week ending Jan. 13, up from 3.22% in the prior week, according to data from mortgage finance agency Freddie Mac.
More expensive building materials and higher mortgage rates could make housing less affordable, especially for lower-income groups and first-time home buyers.
The dollar was trading higher against a basket of currencies.
U.S. Treasury yields rose, weighing on Wall Street stocks.
THE OMICRON EFFECT
The NAHB survey's measure of current sales conditions was steady at 90, but its gauge of sales expectations over the next six months dropped two points to 83.
The component measuring traffic of prospective buyers also fell two points to 69.
A separate report from the New York Federal Reserve on Tuesday showed its "Empire State" index of current business conditions plunged 32.6 points to a reading of -0.7 this month.
This was the first negative reading since June 2020.
A reading below zero signals a contraction in the New York manufacturing sector.
New York has been slammed by a vicious winter wave of coronavirus infections which has severely disrupted business activity.
The survey offered an early read of Omicron's impact on the economy.
There are signs that infections have peaked in some regions, including New York.
"It is possible that the recent weakening is related to the surge in virus spread over the past several weeks and/or persisting supply issues and price pressures," said Daniel Silver, an economist at JPMorgan in New York.
"We will see if other January manufacturing surveys released this week and beyond reinforce the downbeat message from the Empire State survey."
Manufacturers reported a sharp decline in orders.
The survey's new orders index tumbled 32 points to a reading of -5.0.
There were also decreases in shipments and unfilled orders measures, though not of the same magnitude as the plunge in new orders.
Factories continued to wait long periods for supplies to be delivered, keeping prices elevated.
But manufacturers were generally optimistic about the outlook for the next six months.
The index for future business conditions dipped 1.3 points to a reading of 35.1 this month.
The capital expenditures index climbed two points to 39.7, a multi-year high, suggesting that firms plan significant increases in capital spending in the months ahead.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/business/us-hom ... 022-01-18/
"U.S. home builder sentiment dips; New York state factory activity plummets"
By Lucia Mutikani
January 18, 2022
Summary
* Homebuilder sentiment slips in January
* New York state factory activity slumps
WASHINGTON, Jan 18 (Reuters) - Confidence among U.S. single-family homebuilders slipped in January after four straight monthly increases, and builders called for a new softwood lumber agreement with Canada to ease shortages and lower prices, a survey showed on Tuesday.
Other data showed factory activity in New York state slumped this month amid surging COVID-19 infections, but manufacturers remained upbeat about business conditions over the next six months.
The reports supported views that the economy started the year on a soft note because of high inflation, shortages and raging coronavirus cases, driven by the Omicron variant.
"This is a reminder that COVID still holds sway over the recovery," said Oren Klachkin, lead U.S. economist at Oxford Economics in New York.
"U.S. supply chain dynamics didn't improve at the end of 2021, and early data suggest they've only worsened in 2022."
The National Association of Home Builders/Wells Fargo Housing Market index dipped one point to 83 this month.
A reading above 50 indicates that more builders view conditions as good than poor.
"NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021," NAHB Chairman Chuck Fowke said in a statement.
"Policymakers need to take action to fix supply chains."
"Obtaining a new softwood lumber agreement with Canada and reducing tariffs is an excellent place to start."
According to the NAHB, higher material costs and shortages were adding weeks to typical single-family home construction times.
The economy is struggling with high inflation, mostly the result of the pandemic, which has snarled supply chains.
The United States last November nearly doubled the duties on imported Canadian softwood lumber to 17.9% after a review of its anti-dumping and countervailing duty orders.
The Trump administration initially imposed 20% duties on Canadian softwood lumber in 2018 after the collapse of talks on a new quota arrangement, but reduced the level in December 2020 to 9%.
President Joe Biden's administration had stuck to those duties until the Commerce Department's November review.
The NAHB survey was conducted during the first two weeks of January and does not fully reflect the recent jump in mortgage interest rates.
The 30-year fixed-rate mortgage averaged 3.45% during the week ending Jan. 13, up from 3.22% in the prior week, according to data from mortgage finance agency Freddie Mac.
More expensive building materials and higher mortgage rates could make housing less affordable, especially for lower-income groups and first-time home buyers.
The dollar was trading higher against a basket of currencies.
U.S. Treasury yields rose, weighing on Wall Street stocks.
THE OMICRON EFFECT
The NAHB survey's measure of current sales conditions was steady at 90, but its gauge of sales expectations over the next six months dropped two points to 83.
The component measuring traffic of prospective buyers also fell two points to 69.
A separate report from the New York Federal Reserve on Tuesday showed its "Empire State" index of current business conditions plunged 32.6 points to a reading of -0.7 this month.
This was the first negative reading since June 2020.
A reading below zero signals a contraction in the New York manufacturing sector.
New York has been slammed by a vicious winter wave of coronavirus infections which has severely disrupted business activity.
The survey offered an early read of Omicron's impact on the economy.
There are signs that infections have peaked in some regions, including New York.
"It is possible that the recent weakening is related to the surge in virus spread over the past several weeks and/or persisting supply issues and price pressures," said Daniel Silver, an economist at JPMorgan in New York.
"We will see if other January manufacturing surveys released this week and beyond reinforce the downbeat message from the Empire State survey."
Manufacturers reported a sharp decline in orders.
The survey's new orders index tumbled 32 points to a reading of -5.0.
There were also decreases in shipments and unfilled orders measures, though not of the same magnitude as the plunge in new orders.
Factories continued to wait long periods for supplies to be delivered, keeping prices elevated.
But manufacturers were generally optimistic about the outlook for the next six months.
The index for future business conditions dipped 1.3 points to a reading of 35.1 this month.
The capital expenditures index climbed two points to 39.7, a multi-year high, suggesting that firms plan significant increases in capital spending in the months ahead.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/business/us-hom ... 022-01-18/
Re: THE ECONOMY
REUTERS
"Biden says Fed should 'recalibrate' policy as prices rise"
Reuters
January 19, 2022
WASHINGTON, Jan 19 (Reuters) - U.S. President Joe Biden on Wednesday said it was appropriate for the Federal Reserve to recalibrate the support it provides to the U.S. economy, in light of fast-rising prices and the strength of recovery.
"Given the strength of our economy and recent price increases, it's appropriate, as ... Fed Chairman (Jerome) Powell has indicated, to recalibrate the support that is now necessary," Biden told a news conference.
"The critical job of making sure that the elevated prices don't become entrenched rests with the Federal Reserve, which has a dual mandate: full employment and stable prices," the president said.
At the same time, he said, the White House and Congress could help contain inflation by moving to fix supply chain failures, encourage competition, and pass his Build Back Better spending bill that he says would cut childcare and other costs for families.
Fed policymakers have signaled they will raise interest rates several times this year, likely starting in March, to try to rein in inflation that's rising at its fastest pace in nearly 40 years.
A reduction in the Fed's $8 trillion balance sheet could soon follow.
At his renomination hearing earlier this month, Powell told lawmakers that he would not allow inflation to become "entrenched," and said a tighter policy stance was necessary to keep the economy growing.
Biden also called on the U.S. Senate to confirm his recent nominations for key roles on the Federal Reserve Board "without any further delay."
Biden earlier this month nominated former Fed Governor Sarah Bloom Raskin for the Fed's top regulatory post and two Black economists, Lisa Cook and Philip Jefferson, to round out the Fed's seven-member Board.
Late last year Biden renominated Powell to lead the Fed for another four years, and nominated Fed Governor Lael Brainard to serve as Fed Vice Chair.
The picks would remake the Fed Board to be the most diverse in the central bank's 108-year history.
Reporting by Alexandra Alper; writing by Andrea Shalal; editing by Cynthia Osterman and Richard Pullin
https://www.reuters.com/business/biden- ... 022-01-19/
"Biden says Fed should 'recalibrate' policy as prices rise"
Reuters
January 19, 2022
WASHINGTON, Jan 19 (Reuters) - U.S. President Joe Biden on Wednesday said it was appropriate for the Federal Reserve to recalibrate the support it provides to the U.S. economy, in light of fast-rising prices and the strength of recovery.
"Given the strength of our economy and recent price increases, it's appropriate, as ... Fed Chairman (Jerome) Powell has indicated, to recalibrate the support that is now necessary," Biden told a news conference.
"The critical job of making sure that the elevated prices don't become entrenched rests with the Federal Reserve, which has a dual mandate: full employment and stable prices," the president said.
At the same time, he said, the White House and Congress could help contain inflation by moving to fix supply chain failures, encourage competition, and pass his Build Back Better spending bill that he says would cut childcare and other costs for families.
Fed policymakers have signaled they will raise interest rates several times this year, likely starting in March, to try to rein in inflation that's rising at its fastest pace in nearly 40 years.
A reduction in the Fed's $8 trillion balance sheet could soon follow.
At his renomination hearing earlier this month, Powell told lawmakers that he would not allow inflation to become "entrenched," and said a tighter policy stance was necessary to keep the economy growing.
Biden also called on the U.S. Senate to confirm his recent nominations for key roles on the Federal Reserve Board "without any further delay."
Biden earlier this month nominated former Fed Governor Sarah Bloom Raskin for the Fed's top regulatory post and two Black economists, Lisa Cook and Philip Jefferson, to round out the Fed's seven-member Board.
Late last year Biden renominated Powell to lead the Fed for another four years, and nominated Fed Governor Lael Brainard to serve as Fed Vice Chair.
The picks would remake the Fed Board to be the most diverse in the central bank's 108-year history.
Reporting by Alexandra Alper; writing by Andrea Shalal; editing by Cynthia Osterman and Richard Pullin
https://www.reuters.com/business/biden- ... 022-01-19/
Re: THE ECONOMY
CNBC
"Jobless claims jump to 286,000, the highest level since October"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, JAN 20 2022
KEY POINTS
* Initial jobless claims totaled 286,000 for the week ended Jan. 15, well above the 225,000 estimate.
* Continuing claims also rose, jumping to 1.64 million.
* The Philadelphia Fed manufacturing index was higher than expected, though the future prices paid index, an inflation gauge, hit its highest level since August 1988.
Jobless claims took an unexpected turn higher last week in a potential sign that the wintertime omicron surge was hitting the employment picture.
Initial filings for the week ended Jan. 15 totaled 286,000, well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000.
The total was the highest since the week of Oct. 16, 2021, and marks a reversal after claims just a few weeks ago hit their lowest level in more than 50 years.
“Omicron has put a wrench in where we stand on the labor market front, but with hiring challenges, employers are likely trying to hold onto their workforce,” said Mike Loewengart, managing director of investment strategy at E-Trade.
“So this could be a short-term surge in jobless claims.”
Continuing claims, which run a week behind the headline data, also shot up, rising 84,000 to 1.64 million.
One bright spot in the data showed that the four-week moving average for continuing claims, which irons out weekly volatility, declined by 55,250 to 1.664 million, the lowest since the week ended April 27, 2019.
California showed a sharp 6,075 jump in claims, while New York reported a slide of 14,011, according to unadjusted data.
Total recipients of all unemployment compensation programs rose by 180,114 to 2.13 million, according to data through Jan. 1.
Jobless claims are seen as a leading real-time gauge of the employment picture, which has brightened in some respects but is still beset by multiple trouble spots.
The unemployment rate has fallen to 3.9% after a record year of nonfarm payrolls growth.
Still, the total employment level remains 2.9 million below where it was in February 2020, just before the pandemic declaration.
Labor force participation remains well below pre-pandemic levels, with the current 61.9% rate 1.5 percentage points below the pre-Covid level.
The labor force has contracted by nearly 2.3 million during the period.
A separate economic report Thursday morning showed that manufacturing activity expanded faster than expected in the Philadelphia area.
The Philadelphia Federal Reserve’s outlook survey registered a reading of 23.2, a measure of the percentage point difference between companies reporting expansion versus contraction.
The estimate had been for 18.5.
Just 16% of the companies surveyed said they expect decreases in activity, with gains coming in new orders and future shipments.
The future employment index stumbled 19 points to 38.4, but that still reflects expectations of employment growth.
Inflation, however, remains an issue.
The future prices paid index surged 23 points to 76.4, its highest level since August 1988.
https://www.cnbc.com/2022/01/20/jobless ... tober.html
"Jobless claims jump to 286,000, the highest level since October"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, JAN 20 2022
KEY POINTS
* Initial jobless claims totaled 286,000 for the week ended Jan. 15, well above the 225,000 estimate.
* Continuing claims also rose, jumping to 1.64 million.
* The Philadelphia Fed manufacturing index was higher than expected, though the future prices paid index, an inflation gauge, hit its highest level since August 1988.
Jobless claims took an unexpected turn higher last week in a potential sign that the wintertime omicron surge was hitting the employment picture.
Initial filings for the week ended Jan. 15 totaled 286,000, well above the Dow Jones estimate of 225,000 and a substantial gain from the previous week’s 231,000.
The total was the highest since the week of Oct. 16, 2021, and marks a reversal after claims just a few weeks ago hit their lowest level in more than 50 years.
“Omicron has put a wrench in where we stand on the labor market front, but with hiring challenges, employers are likely trying to hold onto their workforce,” said Mike Loewengart, managing director of investment strategy at E-Trade.
“So this could be a short-term surge in jobless claims.”
Continuing claims, which run a week behind the headline data, also shot up, rising 84,000 to 1.64 million.
One bright spot in the data showed that the four-week moving average for continuing claims, which irons out weekly volatility, declined by 55,250 to 1.664 million, the lowest since the week ended April 27, 2019.
California showed a sharp 6,075 jump in claims, while New York reported a slide of 14,011, according to unadjusted data.
Total recipients of all unemployment compensation programs rose by 180,114 to 2.13 million, according to data through Jan. 1.
Jobless claims are seen as a leading real-time gauge of the employment picture, which has brightened in some respects but is still beset by multiple trouble spots.
The unemployment rate has fallen to 3.9% after a record year of nonfarm payrolls growth.
Still, the total employment level remains 2.9 million below where it was in February 2020, just before the pandemic declaration.
Labor force participation remains well below pre-pandemic levels, with the current 61.9% rate 1.5 percentage points below the pre-Covid level.
The labor force has contracted by nearly 2.3 million during the period.
A separate economic report Thursday morning showed that manufacturing activity expanded faster than expected in the Philadelphia area.
The Philadelphia Federal Reserve’s outlook survey registered a reading of 23.2, a measure of the percentage point difference between companies reporting expansion versus contraction.
The estimate had been for 18.5.
Just 16% of the companies surveyed said they expect decreases in activity, with gains coming in new orders and future shipments.
The future employment index stumbled 19 points to 38.4, but that still reflects expectations of employment growth.
Inflation, however, remains an issue.
The future prices paid index surged 23 points to 76.4, its highest level since August 1988.
https://www.cnbc.com/2022/01/20/jobless ... tober.html
Re: THE ECONOMY
REUTERS
"U.S. weekly jobless claims at three-month high amid Omicron wave"
By Lucia Mutikani
January 20, 2022
Summary
* Weekly jobless claims increase 55,000 to 286,000
* Continuing claims jump 84,000 to 1.635 million
* Mid-Atlantic factory activity picks up in January
* Existing home sales drop 4.6% in December
WASHINGTON, Jan 20 (Reuters) - The number of Americans filing new claims for unemployment benefits jumped to a three-month high last week, likely as a winter wave of COVID-19 infections disrupted business activity, which could weigh on job growth in January.
The third straight weekly increase in jobless claims reported by the Labor Department on Thursday was also influenced by unfavorable seasonal factors after the holidays.
But coronavirus cases, driven by the Omicron variant, are subsiding and the seasonal factors, the model used by the government to iron out seasonal fluctuations in the data, are seen normalizing soon, suggesting the recent surge in applications is a blip.
"The Omicron variant of COVID-19 is hurting the U.S. labor market, but the good news is that this will be temporary," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Initial claims for state unemployment benefits surged 55,000 to a seasonally adjusted 286,000 for the week ended Jan. 15, the highest level since mid-October.
The increase was the largest since last July.
Economists polled by Reuters had forecast 220,000 applications for the latest week.
Unadjusted claims fell 83,418 to 337,417 last week.
The decline was, however, less than the 138,773 decrease that had been anticipated by the seasonal factors.
Claims rose 6,075 in California, but plunged 14,011 in New York.
The United States is reporting an average of 752,698 new coronavirus infections a day, according to a Reuters analysis of official data.
The Census Bureau's Household Pulse Survey on Wednesday showed 8.8 million people reported not being at work because of coronavirus-related reasons between Dec. 29 and Jan. 10.
That was up from the 3 million from Dec. 1 to Dec. 13.
The bureau's Small Business Pulse Survey released on Thursday also showed an increase in establishments reporting large negative impacts from the pandemic.
It was led by accommodation and food services businesses, with big rises also in education as well as arts entertainment and recreation.
The labor market setback is unlikely to stop the Federal Reserve from raising interest rates in March to tackle high inflation.
Claims have plunged from a record high of 6.149 million in early April 2020.
Employers are desperate for workers, with 10.6 million job openings at the end of November.
The unemployment rate is at a 22-month low of 3.9%, a sign the labor market is at or close to maximum employment.
"The underlying strength in the labor market suggests this is a temporary blip due to Omicron," said John Lynch, chief investment officer at Comerica Wealth Management in Charlotte, North Carolina.
"We look for job growth to continue to firm as global cyclical recovery persists."
Stocks on Wall Street were higher.
The dollar rose against a basket of currencies.
U.S. Treasury yields fell.
BAD OMEN?
But some economists worried that the jump in claims, which followed a plunge in retail sales in December as well as manufacturing production, could be signaling a faster slowdown in economic activity than currently anticipated.
"The higher layoffs are a cautionary tale for the economy where despite inflation pressures, the Fed will have to proceed with their interest rate hikes at a measured pace," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"The economy may be slowing down more than previously believed."
Manufacturing, however, appears to be picking up, though shortages and higher prices remain a headache.
The Philadelphia Fed said on Thursday its business activity index rose to a reading of 23.2 in January from 15.4 in December.
Any reading above zero indicates expansion in the region's manufacturing sector, which covers eastern Pennsylvania, southern New Jersey and Delaware.
News on the housing market was discouraging.
A fourth report from the National Association of Realtors showed existing home sales dropped 4.6% to a seasonally adjusted annual rate of 6.18 million units in December as higher prices amid record low inventory continued to shut out some first-time buyers.
Economists expect demand for housing to remain strong even as mortgage rates increase.
"Unless job and income growth slow sharply, owner-occupied housing demand is likely to remain solid, keeping upward pressure on house prices," said David Berson, chief economist at Nationwide in Columbus, Ohio.
Worker shortages are boosting wages, and households are sitting on savings accumulated during the pandemic.
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of January's employment report.
Last week's jump in claims together with the rise in businesses negatively impacted by COVID-19 and persistent labor shortages raise the risk of a drop in payrolls this month.
The economy added 199,000 jobs in December, the fewest in a year.
The workforce is about 2.2 million smaller than before the pandemic.
The recent softening in the labor market trend was also highlighted by the claims report, which showed the number of people receiving benefits after an initial week of aid increased by 84,000 to 1.635 million in the week ended Jan. 8.
"The pandemic continues to displace workers from the labor force," said Van Hesser, chief strategist at Kroll Bond Rating Agency in New York.
"We need the labor force to grow to sustain healthy economic growth."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea Ricci and Leslie Adler
https://www.reuters.com/world/us/us-wee ... 022-01-20/
"U.S. weekly jobless claims at three-month high amid Omicron wave"
By Lucia Mutikani
January 20, 2022
Summary
* Weekly jobless claims increase 55,000 to 286,000
* Continuing claims jump 84,000 to 1.635 million
* Mid-Atlantic factory activity picks up in January
* Existing home sales drop 4.6% in December
WASHINGTON, Jan 20 (Reuters) - The number of Americans filing new claims for unemployment benefits jumped to a three-month high last week, likely as a winter wave of COVID-19 infections disrupted business activity, which could weigh on job growth in January.
The third straight weekly increase in jobless claims reported by the Labor Department on Thursday was also influenced by unfavorable seasonal factors after the holidays.
But coronavirus cases, driven by the Omicron variant, are subsiding and the seasonal factors, the model used by the government to iron out seasonal fluctuations in the data, are seen normalizing soon, suggesting the recent surge in applications is a blip.
"The Omicron variant of COVID-19 is hurting the U.S. labor market, but the good news is that this will be temporary," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
Initial claims for state unemployment benefits surged 55,000 to a seasonally adjusted 286,000 for the week ended Jan. 15, the highest level since mid-October.
The increase was the largest since last July.
Economists polled by Reuters had forecast 220,000 applications for the latest week.
Unadjusted claims fell 83,418 to 337,417 last week.
The decline was, however, less than the 138,773 decrease that had been anticipated by the seasonal factors.
Claims rose 6,075 in California, but plunged 14,011 in New York.
The United States is reporting an average of 752,698 new coronavirus infections a day, according to a Reuters analysis of official data.
The Census Bureau's Household Pulse Survey on Wednesday showed 8.8 million people reported not being at work because of coronavirus-related reasons between Dec. 29 and Jan. 10.
That was up from the 3 million from Dec. 1 to Dec. 13.
The bureau's Small Business Pulse Survey released on Thursday also showed an increase in establishments reporting large negative impacts from the pandemic.
It was led by accommodation and food services businesses, with big rises also in education as well as arts entertainment and recreation.
The labor market setback is unlikely to stop the Federal Reserve from raising interest rates in March to tackle high inflation.
Claims have plunged from a record high of 6.149 million in early April 2020.
Employers are desperate for workers, with 10.6 million job openings at the end of November.
The unemployment rate is at a 22-month low of 3.9%, a sign the labor market is at or close to maximum employment.
"The underlying strength in the labor market suggests this is a temporary blip due to Omicron," said John Lynch, chief investment officer at Comerica Wealth Management in Charlotte, North Carolina.
"We look for job growth to continue to firm as global cyclical recovery persists."
Stocks on Wall Street were higher.
The dollar rose against a basket of currencies.
U.S. Treasury yields fell.
BAD OMEN?
But some economists worried that the jump in claims, which followed a plunge in retail sales in December as well as manufacturing production, could be signaling a faster slowdown in economic activity than currently anticipated.
"The higher layoffs are a cautionary tale for the economy where despite inflation pressures, the Fed will have to proceed with their interest rate hikes at a measured pace," said Christopher Rupkey, chief economist at FWDBONDS in New York.
"The economy may be slowing down more than previously believed."
Manufacturing, however, appears to be picking up, though shortages and higher prices remain a headache.
The Philadelphia Fed said on Thursday its business activity index rose to a reading of 23.2 in January from 15.4 in December.
Any reading above zero indicates expansion in the region's manufacturing sector, which covers eastern Pennsylvania, southern New Jersey and Delaware.
News on the housing market was discouraging.
A fourth report from the National Association of Realtors showed existing home sales dropped 4.6% to a seasonally adjusted annual rate of 6.18 million units in December as higher prices amid record low inventory continued to shut out some first-time buyers.
Economists expect demand for housing to remain strong even as mortgage rates increase.
"Unless job and income growth slow sharply, owner-occupied housing demand is likely to remain solid, keeping upward pressure on house prices," said David Berson, chief economist at Nationwide in Columbus, Ohio.
Worker shortages are boosting wages, and households are sitting on savings accumulated during the pandemic.
The claims data covered the period during which the government surveyed businesses for the nonfarm payrolls component of January's employment report.
Last week's jump in claims together with the rise in businesses negatively impacted by COVID-19 and persistent labor shortages raise the risk of a drop in payrolls this month.
The economy added 199,000 jobs in December, the fewest in a year.
The workforce is about 2.2 million smaller than before the pandemic.
The recent softening in the labor market trend was also highlighted by the claims report, which showed the number of people receiving benefits after an initial week of aid increased by 84,000 to 1.635 million in the week ended Jan. 8.
"The pandemic continues to displace workers from the labor force," said Van Hesser, chief strategist at Kroll Bond Rating Agency in New York.
"We need the labor force to grow to sustain healthy economic growth."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea Ricci and Leslie Adler
https://www.reuters.com/world/us/us-wee ... 022-01-20/
Re: THE ECONOMY
REUTERS
"Fed likely to hike rates in March as Powell vows sustained inflation fight"
By Howard Schneider, Ann Saphir
JANUARY 26, 2022
WASHINGTON (Reuters) - The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.
“The committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so,” Powell said in a news conference, pinning down a policy statement from the central bank’s Federal Open Market Committee that only said rates would rise “soon.”
Subsequent interest rate increases and an eventual reduction in the Fed’s asset holdings would follow as needed, Powell said, while officials monitor how quickly inflation falls from current multi-decade highs back to the central bank’s 2% target.
Much was left undecided, he told reporters after the end of the Fed’s latest two-day policy meeting, including the pace of subsequent rate hikes or how quickly officials will let its massive balance sheet decline.
But Powell was explicit on one key point: that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic.
Since the Fed’s last policy meeting in December, Powell said, inflation “has not gotten better. It has probably gotten a bit worse ..."
"To the extent that situation deteriorates further, our policy will have to reflect that.”
“This is going to be a year in which we move steadily away from the very highly accommodative monetary policy we put in place to deal with the economic effects of the pandemic,” he added.
STOCKS FALL AGAIN
U.S. stocks, pummeled to start the year on worries about how fast the Fed may move to contain inflation, slid as Powell repeatedly emphasized the economy’s underlying strength and inflation’s persistence, and refused to rule out more aggressive tightening as needed.
The S&P 500 index, at one point in the day up by more than 2%, sold off sharply through the course of Powell’s news conference to close 0.15% lower.
The Nasdaq Composite, which had taken a hard blow in this month’s sell-off, ended the day little changed.
Yields on longer-dated Treasury securities, sensitive to the Fed’s balance sheet policy, rose as Powell signaled that a decision would be made soon on when to start shrinking the central bank’s more than $8 trillion portfolio of U.S. government bonds and mortgage-backed securities (MBS).
The dollar surged 0.5% to its highest level in a month against a basket of key trading partners’ currencies.
Powell was “trying to balance the fear factor but at the same time he’s talking about inflation might get worse, he’s talking about the Fed might have to use more tools, he’s talking about the balance sheet reduction,” said Peter Cardillo, chief market economist with Spartan Capital Securities in New York.
“The bottom line is his response is causing the market to fear the uncertainty.”
The extent of the Fed’s policy pivot away from battling the economic fallout from the pandemic and towards an inflation fight will take more shape in coming weeks.
It will be contingent on how inflation itself behaves, and Powell said officials still hope much of the improvement will come as the aftershocks of the pandemic ease, perhaps allowing them to do less of the work through tighter monetary policy.
A myriad of risks remain, from a pandemic that is still underway to a potential Russia-Ukraine military conflict.
But Powell said policymakers at this point feel they have “quite a bit of room to raise interest rates” without threatening progress on jobs or slowing an economic recovery they want to keep underway.
In a refrain that has become common, he noted “the economy is quite different” than when the Fed last began raising interest rates in 2015, with higher inflation, lower unemployment, and what Powell regards as enough momentum to make its way without the Fed’s help.
In that shift to tighter policy the Fed moved at an initially glacial pace, with one quarter-percentage-point rate increase in 2015 and only an additional one in 2016.
Investors are expecting much more this time, with pricing in federal funds future contracts anticipating four rate increases this year.
The Fed’s benchmark overnight interest rate is currently set at the near-zero level.
FOMC members also agreed at this week’s meeting on a set of principles for “significantly reducing” the size of the Fed’s asset holdings.
Officials said they will shrink holdings “primarily” by limiting how much of the principal from maturing bonds the Fed would reinvest each month.
That plan would start after the liftoff in interest rates, the central bank said, without yet setting a specific date, pace or final size.
Over time the Fed’s balance sheet would not only be pared down, but shifted away from MBS and weighted towards U.S. Treasuries, “thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across sectors of the economy,” the central bank said.
The Fed’s statement, in moving ahead with a plan to tighten monetary policy, cited “solid” recent job gains that continued even as the outbreak of the Omicron variant of the coronavirus pushed daily case numbers to record levels.
While the Fed has stopped trying to assess when inflation might ease, the statement said officials continue to expect improvements in global supply chains will ease the pace of price increases.
“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the Fed said, with consumer prices increasing at a 7% annual rate, the highest level since the 1980s.
Policymakers did not release new economic and interest rate projections on Wednesday.
Reporting by Howard Schneider and Jonnelle Marte; Editing by Paul Simao
https://www.reuters.com/article/usa-fed ... SL1N2U51RB
"Fed likely to hike rates in March as Powell vows sustained inflation fight"
By Howard Schneider, Ann Saphir
JANUARY 26, 2022
WASHINGTON (Reuters) - The Federal Reserve on Wednesday said it is likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month in what U.S. central bank chief Jerome Powell pledged will be a sustained battle to tame inflation.
“The committee is of a mind to raise the federal funds rate at the March meeting assuming that the conditions are appropriate for doing so,” Powell said in a news conference, pinning down a policy statement from the central bank’s Federal Open Market Committee that only said rates would rise “soon.”
Subsequent interest rate increases and an eventual reduction in the Fed’s asset holdings would follow as needed, Powell said, while officials monitor how quickly inflation falls from current multi-decade highs back to the central bank’s 2% target.
Much was left undecided, he told reporters after the end of the Fed’s latest two-day policy meeting, including the pace of subsequent rate hikes or how quickly officials will let its massive balance sheet decline.
But Powell was explicit on one key point: that with inflation high and for now apparently getting worse, the Fed this year plans to steadily clamp down on credit and end the extraordinary support it has provided to the U.S. economy during the coronavirus pandemic.
Since the Fed’s last policy meeting in December, Powell said, inflation “has not gotten better. It has probably gotten a bit worse ..."
"To the extent that situation deteriorates further, our policy will have to reflect that.”
“This is going to be a year in which we move steadily away from the very highly accommodative monetary policy we put in place to deal with the economic effects of the pandemic,” he added.
STOCKS FALL AGAIN
U.S. stocks, pummeled to start the year on worries about how fast the Fed may move to contain inflation, slid as Powell repeatedly emphasized the economy’s underlying strength and inflation’s persistence, and refused to rule out more aggressive tightening as needed.
The S&P 500 index, at one point in the day up by more than 2%, sold off sharply through the course of Powell’s news conference to close 0.15% lower.
The Nasdaq Composite, which had taken a hard blow in this month’s sell-off, ended the day little changed.
Yields on longer-dated Treasury securities, sensitive to the Fed’s balance sheet policy, rose as Powell signaled that a decision would be made soon on when to start shrinking the central bank’s more than $8 trillion portfolio of U.S. government bonds and mortgage-backed securities (MBS).
The dollar surged 0.5% to its highest level in a month against a basket of key trading partners’ currencies.
Powell was “trying to balance the fear factor but at the same time he’s talking about inflation might get worse, he’s talking about the Fed might have to use more tools, he’s talking about the balance sheet reduction,” said Peter Cardillo, chief market economist with Spartan Capital Securities in New York.
“The bottom line is his response is causing the market to fear the uncertainty.”
The extent of the Fed’s policy pivot away from battling the economic fallout from the pandemic and towards an inflation fight will take more shape in coming weeks.
It will be contingent on how inflation itself behaves, and Powell said officials still hope much of the improvement will come as the aftershocks of the pandemic ease, perhaps allowing them to do less of the work through tighter monetary policy.
A myriad of risks remain, from a pandemic that is still underway to a potential Russia-Ukraine military conflict.
But Powell said policymakers at this point feel they have “quite a bit of room to raise interest rates” without threatening progress on jobs or slowing an economic recovery they want to keep underway.
In a refrain that has become common, he noted “the economy is quite different” than when the Fed last began raising interest rates in 2015, with higher inflation, lower unemployment, and what Powell regards as enough momentum to make its way without the Fed’s help.
In that shift to tighter policy the Fed moved at an initially glacial pace, with one quarter-percentage-point rate increase in 2015 and only an additional one in 2016.
Investors are expecting much more this time, with pricing in federal funds future contracts anticipating four rate increases this year.
The Fed’s benchmark overnight interest rate is currently set at the near-zero level.
FOMC members also agreed at this week’s meeting on a set of principles for “significantly reducing” the size of the Fed’s asset holdings.
Officials said they will shrink holdings “primarily” by limiting how much of the principal from maturing bonds the Fed would reinvest each month.
That plan would start after the liftoff in interest rates, the central bank said, without yet setting a specific date, pace or final size.
Over time the Fed’s balance sheet would not only be pared down, but shifted away from MBS and weighted towards U.S. Treasuries, “thereby minimizing the effect of Federal Reserve holdings on the allocation of credit across sectors of the economy,” the central bank said.
The Fed’s statement, in moving ahead with a plan to tighten monetary policy, cited “solid” recent job gains that continued even as the outbreak of the Omicron variant of the coronavirus pushed daily case numbers to record levels.
While the Fed has stopped trying to assess when inflation might ease, the statement said officials continue to expect improvements in global supply chains will ease the pace of price increases.
“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation,” the Fed said, with consumer prices increasing at a 7% annual rate, the highest level since the 1980s.
Policymakers did not release new economic and interest rate projections on Wednesday.
Reporting by Howard Schneider and Jonnelle Marte; Editing by Paul Simao
https://www.reuters.com/article/usa-fed ... SL1N2U51RB