THE ECONOMY

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Wealth of Geeks

"After $5 Trillion Stimulus A Significant Economic Downturn Is Inevitable in 2023"


Story by Max Marvelous

25 NOVEMBER 2022

An economic downturn is inevitable in 2023.

Thanks to rising inflation and very few pay raises to match it, as well as skyrocketing interest rates and other contributing factors, Americans need to be prepared for the worst in the coming year.


Stimulus Only Goes So Far

The United States government gave around $5 trillion in stimulus checks to help Americans in the thick of the pandemic.

And as a result of the pandemic, lending programs with low-interest rates were created to further assist Americans.

The economy was seemingly moving in a forward direction again.

The world began to open up, and it seemed like the economy was recovering fully.

It was obviously too soon for celebration, though, because soon after, things seemed to be settling, inflation rates began to skyrocket, and the economy started back into a downward spiral.

Americans have been left wondering how bad the economy will get in the future and how they will be affected by it long term.

Making Ends Meet

Many Americans are still struggling to pay for basic needs like rent and food, and with rising interest rates, anyone without a fixed mortgage is suffering from increasing monthly payments.

With inflation seeping into every industry, most notably food and gas, the future of the economy is looking bleak, and many are not sure they are prepared for what is ahead.

No More Pay Raises

Employers are also having to prepare for the potential consequences of an economic downturn.

Many companies are already slowing or have completely halted the hiring process.

The labor market did peak at one point, which benefited everyone, as people's incomes were able to counteract the effects of inflation.

With the inevitable economic downturn, companies have stopped increasing pay at such significant rates in order to prepare themselves for the coming crisis.

Bye Bye Savings

Many Americans were able to bolster their savings during the pandemic.

With no travel plans or any need to drive anywhere, money that may have been put towards vacation or gas was able to be redirected into savings.

Unfortunately, many of those savings accounts have dried up as people's incomes can no longer compete with rising inflation rates.

Despite the high rates, however, American spending has remained healthy, with many people living on their savings and giving up their safety nets.

These spending habits could put Americans in an even worse spot when the downturn inevitably hits.

An Underperforming Economy

The economy failed to meet the projections that economists set for 2022, making an economic downturn a sure thing.

Experts are projecting even higher interest rates going into the holidays and new year as well as an even more aggressive increase in inflation.

2023 will be a tough year for Americans, and everyone should begin preparing for this economic downturn because everyone will feel the effects when it hits.

This article was produced and syndicated by Wealth of Geeks.

https://www.msn.com/en-us/money/markets ... c8c6527c91
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Re: THE ECONOMY

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THE WASHINGTON EXAMINER

"Biden’s lawless bailout of credentialed elites continues"


Opinion by Washington Examiner

28 NOVEMBER 2022

Other than unmarried women, no demographic was a more reliable vote for President Joe Biden’s Democratic Party this Election Day than college-educated voters.

So it should come as no surprise that Biden once again showered this constituency with federal money this week when he announced that the Department of Education would, for the sixth time, delay all student loan payments.


To be fair, former President Donald Trump first delayed these payments before Biden did.

But that was at the height of the COVID shutdown.

No one could pay because no one was allowed to work.

Biden has since assured the nation that “the pandemic is over.”

Inflation is still rising faster than real wages, but the unemployment rate has fallen to near pre-pandemic levels.

Everyone, especially the most privileged and wealthiest among us who hold college degrees, should be able to pay their bills by now.

Biden’s new excuse for delaying student loan payments is that federal courts need time to decide whether or not Biden’s separate but related student debt amnesty plan is legal.

It is most certainly not legal.

The 2003 HEROES Act, the law Biden claims gives him the power to issue student debt amnesties, was passed by Congress after 9/11 so that National Guardsmen called to duty to fight a war wouldn’t have to pay their student loans while they were serving their country.

In no way whatsoever did Congress intend to give any president blanket authority to cancel all student debt at any time for any reason, which is what the Biden administration argues.


If a federal court ever recognizes a plaintiff's ability to establish standing, Biden will lose this lawsuit.

That would be a huge win for the American taxpayer since Biden’s student debt amnesty is terrible public policy.

First of all, at a time when the Federal Reserve is doing everything it can to reduce inflation, Biden’s debt amnesty pours $400 billion in federal spending on the existing inflation fire.

Worse, the vast majority of this cash will be going to the wealthiest.

The Penn Wharton business school estimates that approximately 70% of Biden’s debt amnesty will benefit the top 60% of income earners.

This means that while those without college degrees continue to see their paychecks eaten away by higher inflation, their wealthier college-educated peers will be getting unearned cash from the government.

How is that fair?

Then there is the question of whether or not this will be a one-time amnesty or a new policy for financing college going forward.

Because if Biden wants to make this a new permanent policy, it creates terrible incentives for universities to jack up prices.

Since colleges will know that the federal government is picking up the tab, they’ll just raise tuition even higher.

Students will have no incentive to shop around for the most cost-effective degree.

And since many student loans are used not just for tuition but also for housing, taxpayers would be subsidizing lavish student lifestyles in the most expensive cities.

Rich graduate students studying at Columbia University would be getting twice as much money from taxpayers as low-income workers living in Section 8 housing.

Republicans will control the House of Representatives this January, so they are no longer dependent on the courts to stop Biden’s illegal debt amnesty.

House Republicans should not provide a single cent to the Department of Education until Biden rescinds his bailout to the elite credentialed class.

https://www.msn.com/en-us/news/politics ... b76deb2e44
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Re: THE ECONOMY

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REUTERS

"Fed has 'a ways to go' on interest rate hikes, Bullard says"


Reuters

November 28, 2022

Nov 28 (Reuters) - The Federal Reserve needs to raise interest rates quite a bit further and then hold them there throughout next year and into 2024 to gain control of inflation and bring it back down toward the U.S. central bank's 2% goal, St. Louis Fed President James Bullard said on Monday.

"We've got a ways to go to get restrictive," Bullard said in an interview with MarketWatch, as he restated his conviction that the Fed's target policy rate needs to rise to at least a range between 5.00% and 5.25% from the current level of 3.75%-4.00% to be "sufficiently restrictive" to reduce inflation.

Once at a high enough level, rates would then "have to stay there all during 2023 and into 2024" given the historical behavior of inflation, Bullard said.

The Fed has raised its policy rate by 375 basis points this year, the fastest pace of tightening since the early 1980s as it tries to quash stubbornly high inflation.

By the central bank's preferred measure, inflation is running at more than three times the Fed's target.

"We want to get this inflation under control much sooner than in the 1970s," Bullard said, noting that he prefers to get the policy rate up in short order to create the conditions for price pressures to ebb throughout next year.

However, Bullard also repeated comments made earlier this month that he would defer to Fed Chair Jerome Powell regarding how much higher to move rates at upcoming policy meetings.

Investors overwhelmingly anticipate the Fed to raise its policy rate by half a percentage point at its next policy meeting on Dec. 13-14.

Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama and Paul Simao

https://www.reuters.com/markets/us/fed- ... 022-11-28/
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REUTERS

"The yuan's the new dollar as Russia rides to the redback"


By Elena Fabrichnaya and Samuel Shen

November 28, 2022

Summary

* Russia turns to the Chinese currency amid sanctions

* Moscow becomes No.4 offshore trading centre for yuan

* Yuan's share of Russian FX market jumps from 1% to 45%

* Russian central bank supports trend but warns of risks


MOSCOW/SHANGHAI, Nov 29 (Reuters) - Chinese entrepreneur Wang Min is delighted about Russia's embrace of the yuan.

His LED lights company can price contracts to Russian customers in yuan rather than dollars or euros, and they can pay him in yuan.

It's "win-win", he says.


Wang's plans have been transformed by the conflict in Ukraine and the subsequent Western sanctions on Moscow that have shut Russia's banks and many of its companies out of the dollar and euro payment systems.

His contract manufacturing business with Russia has been small in the past, but now he's preparing to invest in warehousing there.

"We hope that next year sales in Russia can account for 10-15% of our total sales," said the businessman from China's southern coastal province of Guangdong, whose annual revenue of about $20 million mainly comes from Africa and South America.

Wang is seeking to capitalise on a rapid "yuanisation" of Russia's economy this year as the isolated country seeks financial security from Asian powerhouse China.

He sees a win-win situation in Chinese exporters reducing their currency risks and payment becoming more convenient for Russian buyers.

While the yuan, or renminbi, has been making gradual inroads into Russia for years, the crawl has turned into a sprint in the past nine months as the currency has swept into the country's markets and trade flows, according to a Reuters review of data and interviews with 10 business and finance players.

Russia's financial shift eastwards could boost cross-border commerce, present a growing economic counterweight to the dollar and limit Western efforts to pressure Moscow by economic means.


Total transactions in the yuan-rouble pair on the Moscow Exchange ballooned to an average of almost 9 billion yuan ($1.25 billion) a day last month, exchange data analysed by Reuters showed.

Previously, they rarely exceeded 1 billion yuan in an entire week.

"What happened was that it became suddenly very risky and expensive to keep traditional currencies - dollar, euro, British pounds," said Andrei Akopian, managing director of Moscow-based investment firm Caderus Capital, citing the potential danger of a bank that keeps foreign currency deposits being sanctioned.

"Everybody was motivated and even pushed towards the rouble or other currencies including, and first of all, the renminbi."


Indeed, yuan-rouble trading totalled 185 billion yuan in October, more than 80 times the level seen in February when Russia launched what it refers to as a "special military operation" in Ukraine near the end of the month, according to exchange data.

The surge of interest has seen the yuan's share of the currency market jump to 40-45% from less than 1% at the start of the year, said Dmitry Piskulov, international projects head at the Moscow Exchange's foreign-exchange market department.

By comparison, the dollar/rouble pair, which commanded more than 80% of trading volumes on the Russian market in January, has seen its share drop to about 40% as of October, according to exchange data and the central bank.

The U.S. Treasury declined to comment on the yuan's growing presence in Russia.


RUSSIAN GIANTS WANT YUAN

International money flows reflect a similar trend.

Until April, Russia didn't even make the top 15 list of countries using the yuan outside mainland China, in terms of the value of inbound and outbound flows, according to data from global financial networking system SWIFT.

It has since jumped to No. 4, lagging only Hong Kong, the city's former colonial ruler Britain and Singapore.

To put this in a global context, though, the dollar and euro are still by far the dominant currencies, representing more than 42% and 35% of flows respectively as of September this year.

The yuan has risen to almost 2.5% from below 2% two years earlier.

Wang's business optimism is echoed by Shen Muhui, who heads a trade group for small exporters to Russia in neighbouring Fujian province.

He said more and more Russian buyers were opening yuan accounts and settling transactions directly in the Chinese currency, which he said was a big advantage.

"The Russia-Ukraine conflict has brought opportunities for Chinese businessman," said Shen, adding that his association had received many inquiries from Chinese companies interested in doing business in Russia.

It's not only Chinese companies, or small companies, joining the yuan train.

Seven Russian corporate giants, including Rusal, Rosneft and Polyus, have raised a total of 42 billion yuan in bonds on the Russian market, according to Reuters calculations, and the list could grow with No.1 lender Sberbank and oil firm Gazpromneft saying they're also considering renminbi debt.


Aluminium producer Rusal, which buys raw materials from China and then sells a large chunk of its finished goods there, told Reuters it had stepped up the share of yuan used in those purchases and sales this year, and that the share would continue to rise, though it declined to provide a detailed breakdown.

XI AND PUTIN: 'NO LIMITS'

While President Vladimir Putin has long sought to reduce Russia's reliance on the dollar, geopolitics has turbo-charged this trend in 2022.

China, the world's No. 2 economy, is the biggest global power not to join economic sanctions against Russia.

Indeed, Putin and Chinese President Xi Jinping sealed a "no limits" partnership in February, weeks before Moscow launched what it describes as a "special military operation" in Ukraine.

The yuan comprised about 19% of Russia's trade settlements with China in 2021 versus the dollar's 49% share, Andrey Melnikov, deputy director at international cooperation department at the Russian central bank, said in September.

While 2022 figures haven't been published yet, the Chinese currency is gaining ground, according to Melnikov, who told a conference that demand for yuan liquidity had risen sharply due to reduced access to traditional payment methods and the freezing of its overseas gold and foreign exchange reserves.

The central bank declined to comment for this article.

Bank governor Elvira Nabiullina is tracking the growth, telling lawmakers this month that the influx of yuan illustrated a "transformation of the currency composition of our economy".

Regulators are also aware of potential perils, such as a disparity between a growing number of yuan-held current accounts and deposits of the currency, with yuan-denominated lending only starting to develop.

The central bank has said lenders should seek to reduce the growing risks of yuanisation of their balance sheets - or gaps between yuan assets and liabilities - by increasing payments in yuan for imports, investing in yuan-denominated securities or using yuan in trade transactions with other countries.

Regulators do not plan to limit yuan usage now and may encourage banks to use more by relaxing provisioning requirements for the currency while tightening them for dollars and euros, Elizaveta Danilova, director at the central bank's financial stability department, told a conference this month.

'ABUNDANCE OF RENMINBI'

Akopian at Caderus Capital said some Russian brokerages reported that their clients were keeping an increasingly large part of their assets in yuan.

The inflows have led to a broad fall in interest rates on yuan deposits within Russia.

They range from 0.01% to 2.45% for one-year yuan deposits in Russia, compared with 1.6% for one-year deposits on the mainland, according to Russian banking aggregators and major Chinese banks.

"You can open a renminbi account in most Russian banks already."

"Interest rates are very low, because there is an abundance of renminbi in investors' pockets," Akopian added.

"That's why as soon as any renminbi product comes to the market, it becomes very popular."

"There's great demand."

Some small Russian savers are also getting onboard, seeking to hedge against rouble uncertainty.

Andrey, a communications specialist from Moscow who said he relocated to Dubai in September to avoid being called up to fight in Ukraine, bought both yuan and dirhams online through his Russian bank, as a safety play before he left.

"I see it as a way to save my funds from an unpredictable drop in the rouble value," said the 35-year-old, who asked for his surname to be withheld because he evaded the mobilisation.

"I can convert my roubles to these alternative currencies, but it's more like buying a share or a bond."

Editing by Vidya Ranganathan and Pravin Char

https://www.reuters.com/markets/currenc ... 022-11-28/
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Re: THE ECONOMY

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REUTERS

"IMF and WTO leaders warn don't 'pull the plug' on global trade"


By Andreas Rinke

November 29, 2022

Nov 29 (Reuters) - The leaders of the International Monetary Fund and the World Trade Organization on Tuesday warned against the negative impact of deglobalization for the global economy, arguing instead for smart moves to diversify supply chains.

IMF Managing Director Kristalina Georgieva, speaking after a meeting with German Chancellor Olaf Scholz, said globalization was facing its biggest challenge since World War Two in the wake of the COVID-19 pandemic and Russia's war in Ukraine.

"But don't throw the baby out with the bathwater," she said.

"Don't pull the plug on trade that makes us all better."

WTO Director-General Ngozi Okonjo-Iweala, speaking at the same news conference, echoed that view, noting a WTO estimate that breaking the global economy into two trading blocs would reduce global gross domestic product by 5% in the longer term.

"Retreating from trade, being protectionist will make it harder - not easier - to solve the problems we have now," Okonjo-Iweala said.

"Protectionism, decoupling, fragmentation is very disruptive and it will be very costly."

Both Okonjo-Iweala and Georgieva said the impact of deglobalization and fragmentation would hit developing countries and emerging markets hardest.

The impact to gross domestic product (GDP) in those countries would be in the double digits, the WTO chief said.

Okonjo-Iweala called for moves to de-concentrate manufacturing in a smart way and warned against counting too heavily on "friend-shoring".

"Who is a friend?"

"A friend today might become very unfriendly tomorrow," she said.

Georgieva said growth was slowing in the United States and China, the world's two largest economies.

She said data pointed to even lower global growth next year than the 2.7% rate the IMF had projected in mid-October.

"Business and consumer sentiment points to weakening of activities in the fourth quarter of this year and continuing in this same direction in 2023," she said.

About one-third of the world economy - and about half of the European Union - would slide in recession in 2023, she said, adding that inflation was now projected to persist longer, although it could gradually decline to around 6.5% next year.

Reporting by Andreas Rinke and Andrea Shalal; Editing by Chris Reese and Lisa Shumaker

https://www.reuters.com/business/imfs-g ... 022-11-29/
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Re: THE ECONOMY

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CNBC

"Fed Chair Powell says smaller interest rate hikes could start in December"


Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM

PUBLISHED WED, NOV 30 2022

KEY POINTS

* Federal Reserve Chairman Jerome Powell confirmed Wednesday that smaller interest rate increases are likely ahead and could start in December.

* But he cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.

* “We will stay the course until the job is done,” he said during a speech in Washington, D.C. at the Brookings Institution.


WASHINGTON – Federal Reserve Chairman Jerome Powell confirmed Wednesday that smaller interest rate increases are likely ahead even as he sees progress in the fight against inflation as largely inadequate.

Echoing recent statements from other central bank officials and comments at the November Fed meeting, Powell said he sees the central bank in position to reduce the size of rate hikes as soon as next month.

But he cautioned that monetary policy is likely to stay restrictive for some time until real signs of progress emerge on inflation.

“Despite some promising developments, we have a long way to go in restoring price stability,” Powell said in remarks delivered at the Brookings Institution.

The chairman noted that policy moves such as interest rate increases and the reduction of the Fed’s bond holdings generally take time to make their way through the system.

“Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” he added.

“The time for moderating the pace of rate increases may come as soon as the December meeting.”

Wall Street applauded the remarks.

The Dow Jones Industrial Average closed up 737 points, or 2.18%, to snap a three-session losing streak.

Tech stocks fared even better, with the Nasdaq Composite roaring 4.41% higher.

“The on-the-day equity market surge is in part a relief rally,” wrote Krishna Guha, head of global policy and central bank strategy at Evercore ISI.

“Many investors feared the Fed chair would take a max hawkish sledgehammer to the recent easing of financial conditions ..."

"That overhang has now gone.″

Markets already had been pricing in about a 65% chance that the Fed would step down its interest rate increases to half of a percentage point in December, following four successive 0.75-point moves, according to CME Group data.

That pace of rate hikes is the most aggressive since the early 1980s.

Following Powell’s speech, the probability for a half-point move rose to 77%.

What remains to be seen is where the Fed goes from there.

Markets took a more dovish tone from Powell’s speech, with the top rate put at just shy of 5% by May 2023 and bets that the Fed will cut half a point by the end of the year.

The pricing in the likelihood of rate reductions countered Powell’s warning that restrictive policy will stay in place until inflation shows more consistent signs of receding.

“Given our progress in tightening policy, the timing of that moderation is far less significant than the questions of how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level,” Powell said.

“It is likely that restoring price stability will require holding policy at a restrictive level for some time."

"History cautions strongly against prematurely loosening policy,” he added.

“We will stay the course until the job is done.”


Powell’s remarks come with some halting signs that inflation is ebbing and the ultra-tight labor market is loosening.

Earlier this month, the consumer price index indicated inflation rising but by less than what economists had estimated.

Separate reports Wednesday showed private payroll growth far lower than expected in November while job openings also declined.

However, Powell said short-term data can be deceptive and he needs to see more consistent evidence.

For instance, he said Fed economists expect that the central bank’s preferred core personal consumption expenditures price index in October, to be released Thursday, will show inflation running at a 5% annual pace.

That would be down from 5.1% in September but still well ahead of the Fed’s 2% long-run target.

“It will take substantially more evidence to give comfort that inflation is actually declining,” Powell said.

“By any standard, inflation remains much too high.”


“I will simply say that we have more ground to cover,” he added.

Powell added that he expects the ultimate peak for rates – the “terminal rate” – will be “somewhat higher than thought” when the rate-setting Federal Open Market Committee members made their last projections in September.

Committee members at the time said they expected the terminal rate to hit 4.6%; markets now see it in the 5%-5.25% range, according to CME Group data.

Supply chain issues at the core of the inflation burst have eased, Powell said, while growth broadly has slowed to below trend, even with a 2.9% annualized gain in third-quarter GDP.

He expects housing inflation to rise into next year but then likely fall.

However, he said the labor market has shown “only tentative signs of rebalancing” after job openings had outnumbered available workers by a 2 to 1 margin.

That gap has closed to 1.7 to 1 but remains well above historical norms.

The tight labor market has resulted in a big boost in worker wages that nonetheless have failed to keep up with inflation.

“To be clear, strong wage growth is a good thing."

"But for wage growth to be sustainable, it needs to be consistent with 2% inflation,” he said.

Powell spoke at length about the factors keeping labor force participation low, a key factor in addressing the imbalance between open jobs and available workers.

He said an important issue as been “excess retirements” during the Covid pandemic.

https://www.cnbc.com/2022/11/30/fed-cha ... ember.html
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Re: THE ECONOMY

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CNBC

"Private hiring increased by just 127,000 jobs in November, well below estimate, ADP reports"


Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM

PUBLISHED WED, NOV 30 2022

KEY POINTS

* Private companies added just 127,000 positions for the month, a steep reduction from the 239,000 in October and well below the 190,000 estimate.

* Leisure and hospitality saw an increase of 224,000, but that was offset by losses in manufacturing, professional and business services, financial activities, and information services.


Private hiring slowed sharply during November in a sign that the historically tight labor market could be losing some steam, according to a report Wednesday from payroll processing firm ADP.

Companies added just 127,000 positions for the month, a steep reduction from the 239,000 the firm reported for October and well below the Dow Jones estimate for 190,000.

It also was the lowest total since January 2021.

The relatively weak total comes amid Federal Reserve efforts to loosen up a jobs picture in which there are still nearly two open positions for every available worker.

The central bank has raised its benchmark borrowing rate six times this year, but the unemployment rate is still 3.7%, near the lowest since 1969.

“Turning points can be hard to capture in the labor market, but our data suggest that Federal Reserve tightening is having an impact on job creation and pay gains,” said ADP’s chief economist, Nela Richardson.

“In addition, companies are no longer in hyper-replacement mode."

"Fewer people are quitting and the post-pandemic recovery is stabilizing.”

The ADP report comes two days before the Labor Department releases its more closely watched nonfarm payrolls count.

Economists polled by Dow Jones expect that report to show a gain of 200,000 after an increase of 261,000 in October.

In the ADP report, the biggest sector gainer by far was leisure and hospitality, which saw an increase of 224,000.

However, that was offset by losses in manufacturing (-100,000), professional and business services (-77,000), financial activities (-34,000), and information services (-25,000).

Goods-producing industries overall saw a decline of 86,000 jobs, while services firms added 213,000 on net.

Even with the shaky jobs numbers, salaries continued to climb.

Pay increased 7.6% from a year ago, ADP said, though that was a slightly slower pace than the 7.7% reported for October.

From a size standpoint, all of the job creation came from companies that employ 50-499 workers, a sector that added 246,000 jobs.

Small companies lost 51,000 while big firms were off 68,000.

https://www.cnbc.com/2022/11/30/private ... ports.html
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REUTERS

"Fed's Powell: Rate hikes to slow, but adjustment just beginning"


By Howard Schneider and Ann Saphir

November 30, 2022

Nov 30 (Reuters) - Federal Reserve Chair Jerome Powell on Wednesday said it was time to slow the pace of coming interest rate hikes while also signaling a protracted economic adjustment to a world where borrowing costs will remain high, inflation comes down slowly and the United States remains chronically short of workers.

In an hour-long session of prepared remarks and questions at the Brookings Institution think tank - his last scheduled appearance before the central bank's next meeting in two weeks - Powell gave a short-term message that sent markets soaring: The Fed was "slowing down" from the breakneck pace of three-quarter percentage point rate hikes that have prevailed since June, and would feel the way towards the peak interest rate needed to slow inflation to the Fed's 2% target.

But he also outlined longer-term shifts that may be underway - in the supply of labor in particular - that could presage a long period of elevated interest rates and inflation that responds only slowly to the Fed's restrictive policy.

At the same time, he rejected the idea that the central bank was so intent on calming the highest inflation in 40 years that policymakers would "crash" the economy in that effort, insisting that a "soft or softish" landing remained possible, with inflation easing without a dramatic rise in unemployment.


"We wouldn't...try to crash the economy and then clean up afterward," Powell said, with policymakers hoping not to "overtighten...because we think that cutting rates is not something we want to do soon."

"That's why we're slowing down and going to try to find our way to what that right level is" that lowers inflation over time.

Combined the remarks showed the Fed grappling with some of the longer-term trends that were amplified by the pandemic, particularly the demographic drag that an aging population, COVID-era retirements, and weak immigration are having on the labor force.

Those won't reverse soon, Powell said, acknowledging that a tight labor market will have to be brought into balance mostly by Fed actions that lower the demand for workers - either through a drop in job vacancies or, as some fear, a rise in unemployment.

"I think for now we have to assume," that labor supply won't rebound, Powell said.

"We have to do what it takes to restore balance in the labor market to get back to 2% inflation...really just by slowing job growth rather than putting people out of work."

Those sorts of structural concerns have been in the background of Fed debate since the early days of the pandemic, but are moving to the fore.

Concerns about global supply chains, for example, were considered fleeting at first, likely to pass and help fix high inflation as they did.

But progress has been slower than expected, with China in particular now undergoing successive lockdowns that have made it a less secure source of goods, and U.S. labor force participation still depressed.

'LONG WAY TO GO'

Powell's remarks about a coming downshift in the pace of rate increases ignited a robust rally in equity and bond markets, which have taken a pounding this year on the back of the Fed's aggressive rate hikes.

The benchmark S&P 500 index shot into positive territory and closed 3.09% higher, and bond yields, which move in the opposite direction to their prices, all tumbled.

The yield on the 2-year Treasury note , the maturity most sensitive to Fed rate expectations, dropped to about 4.37% from 4.52%.

The dollar weakened against a basket of major trading partners' currencies.

In rate futures markets, traders added to the prevailing bets that the Fed would slow its pace of rate hikes at its meeting in two weeks.

"You can't keep raising rates as quickly as they were doing it," said Rick Meckler at Cherry Lane Investments in New Vernon, New Jersey.

"That said, investors always like the comfort of hearing it directly from the (Fed) chair."

Still, and despite the coming slowdown in the pace of rate increases, Powell said it remained an open question "how much further we will need to raise rates to control inflation, and the length of time it will be necessary to hold policy at a restrictive level."

While the Fed chief did not indicate his estimated "terminal rate," Powell said it is likely to be "somewhat higher" than the 4.6% indicated by policymakers in their September projections.

He said curing inflation "will require holding policy at a restrictive level for some time," a comment that leaned against market expectations the U.S. central bank could begin cutting rates next year as the economy slows.

The central bank meets again on Dec. 13-14.

Along with approving an expected half-point rate increase policymakers will issue new projections for rates, economic growth, inflation and unemployment in coming years.

With the coming half-percentage-point increase the central bank will have lifted its overnight policy rate from near zero as of March to the 4.25%-4.50% range, the swiftest change in rates since former Fed Chair Paul Volcker was battling an even worse rise in prices.

That has not, however, had a convincing impact yet on inflation.

Powell said Fed estimates of inflation in October showed its preferred measure still rising at about triple the central bank's 2% target.

He noted that while goods inflation has been easing, the cost of housing is likely to continue to rise into next year, while key price measures for services remain high and the labor market tight.

Data released earlier on Wednesday showed there were still about 1.7 job openings for each unemployed person.

"Despite some promising developments, we have a long way to go in restoring price stability," Powell said.

"We will stay the course until the job is done."

Reporting by Howard Schneider; Additional reporting by Caroline Valetkevitch; Editing by Paul Simao and Andrea Ricci

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Re: THE ECONOMY

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REUTERS

"U.S. job openings fall in October; labor market still tight"


By Lucia Mutikani

November 30, 2022

Summary

* Job openings fall 353,000 to 10.3 million in October

* Third-quarter GDP growth revised up to 2.9% from 2.6%

* Consumer, business spending, exports account for upgrade

* Goods trade deficit widens 7.7% in October


WASHINGTON, Nov 30 (Reuters) - U.S. job openings decreased in October, but remained significantly high, pointing to continued labor market resilience despite the Federal Reserve's efforts to cool demand by aggressively raising interest rates.

The tight labor market keeps the Fed on course to continue tightening monetary policy, heightening the risks of a recession next year.

Most economists, however, believe any downturn will likely be short and mild because of the unprecedented jobs market strength.

Fed Chair Jerome Powell said on Wednesday the U.S. central bank could scale back the pace of its rate increases "as soon as December," but cautioned that the fight against inflation was far from over.

"Elevated job openings during a time of an economic slowdown implies that the labor market may remain tight for quite some time," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina.

"Firms could hoard workers even though the economy may go through a recessionary period."

Job openings, a measure of labor demand, decreased 353,000 to 10.3 million on the last day of October, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS report.

It was the 16th straight month that job openings remained above 10 million.

October's job openings were in line with economists' expectations.

There were 1.7 job openings for every unemployed person in October, down from 1.9 in September.

Last month's decrease in job openings was led by state and local government, excluding education, where vacancies dropped by 101,000.

There were 95,000 fewer job openings in nondurable goods manufacturing, while federal government vacancies fell by 61,000.

But there were 76,000 additional job openings in other services and unfilled positions increased by 70,000 in the finance and insurance industry.

The job openings rate fell to 6.3% from 6.5% in September.

Hiring slipped to 6.0 million from 6.1 million in September.

The Fed's Beige Book on Wednesday found that while difficulties hiring and retaining workers continued to ease, "labor markets were still described as tight."

Mounting recession fears appear to have taken some of the steam out of the great resignation movement.

About 4.0 million people quit their jobs, down from 4.1 million in September.

The quits rate, viewed by policymakers and economists as a measure of job market confidence, fell to 2.6% from 2.7% in the prior month.

Layoffs increased to a still-low 1.4 million from 1.3 million, leaving the layoffs rate unchanged at 0.9%.

"The data suggest only very little loosening in the labor market so far," said Isfar Munir, an economist at Citigroup in New York.

"It will be difficult for the Fed to be anything but hawkish at the moment."

The U.S. central bank has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in what has become the fastest rate-hiking cycle since the 1980s.

Economists expect half-a-percentage point increase at the Dec. 13-14 meeting.

U.S. stocks rallied on Powell's comments.

The dollar fell against a basket of currencies.

U.S. Treasury prices rose.

GROWTH REVISED UP

The elevated level of job openings also suggests worker shortages persist, which economists said were contributing to the slowdown in job growth.

Private employment increased by 127,000 jobs in November, the smallest gain since January 2021, the ADP National Employment report showed on Wednesday.

Labor market strength is helping to drive consumer spending, supporting the overall economy.

A fourth report from the Commerce Department showed the economy rebounded more strongly than initially thought in the third quarter.

Gross domestic product increased at a 2.9% annualized rate, the government said in its second estimate of third-quarter GDP.

That was revised up from the 2.6% pace reported last month.

The economy had contracted at a 0.6% rate in the second quarter.

The upward revision reflected upgrades to growth in consumer and business spending as well as exports, which offset the drag from a slower pace of inventory accumulation.

But residential investment contracted for the sixth straight quarter, the longest such stretch since the housing market collapse in 2006.

When measured from the income side, the economy grew at a 0.3% rate.

Gross domestic income (GDI) had contracted at a 0.8% pace in the second quarter.

In principle, GDP and GDI should be equal, but in practice diverge as they are estimated using different and largely independent source data.

The income side of the growth ledger was driven by wages.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, increased at a 1.6% rate in the July-September period after shrinking at a 0.7% pace in the second quarter.

Profits from current production decreased $31.6 billion in the third quarter after rising $131.6 billion in the second quarter.

Profits were, however, impacted by penalties and fines imposed on some businesses by federal and state agencies.

A fifth report from the Commerce Department showed the goods trade deficit surged 7.7% to $99.0 billion last month as exports declined.

October's sharp widening in the deficit suggested trade could be a drag on GDP in the fourth quarter.


The Commerce Department also reported that wholesale inventories increased 0.8% in October after rising 0.6% in September.

Retail inventories fell 0.2% after dipping 0.1% in September.

Motor vehicle stocks increased 0.4%.

Excluding motor vehicles, retail inventories slipped 0.4% after dropping 0.9% in September.

This component goes into the calculation of GDP.

Inventories subtracted from GDP growth in the third quarter.

Reporting by Lucia Mutikani; Editing by Nick Zieminski and Andrea Ricci

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Re: THE ECONOMY

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REUTERS

"U.S. private payrolls growth slows in November-ADP"


Reuters

November 30, 2022

WASHINGTON, Nov 30 (Reuters) - U.S. private payrolls increased far less than expected in November, suggesting demand for labor was cooling amid high interest rates, a survey showed on Wednesday.

Private employment increased by 127,000 jobs in November, the ADP National Employment report showed.

Data for October was unrevised to show 239,000 jobs created.

Economists polled by Reuters had forecast private jobs increasing 200,000.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the Labor Department's Bureau of Labor Statistics' more comprehensive and closely watched employment report for November on Friday.

The jury is still out on the ADP's reliability in predicting the private payrolls component in the BLS employment report.

According to a Reuters survey of economists, private payrolls likely increased by 200,000 jobs in November after rising by 233,000 in October.

With no job gains expected in the government sector, overall nonfarm payrolls are also forecast to have advanced by 200,000 jobs.

The economy created 261,000 jobs in October.

Job growth is gradually slowing as the Federal Reserve's aggressive interest rate hikes slow demand in the economy.

Still, demand for labor continues to run strong.

Data on Wednesday is expected to show job openings remained elevated in October, according to a Reuters survey.

There were 1.9 job openings for every unemployed worker in September.

The Fed has raised its policy rate by 375 basis points this year from near zero to a 3.75%-4.00% range in what has become the fastest rate-hiking cycle since the 1980s.

Reporting by Lucia Mutikani; Editing by Nick Zieminski and Andrea Ricci

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