THE ECONOMY

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Re: THE ECONOMY

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FOX NEWS

"State Farm ceasing new applications in California for property insurance, other policies"


Story by Louis Casiano

26 MAY 2023

The State Farm General Insurance Company will no longer accept new applications for property insurance and other policies in California, citing "historic" increases in construction costs and inflation," the company said Friday.

Beginning Saturday, the Illinois-based insurance group will cease to accept applications for business and personal lines property and casualty insurance.


The move doesn't impact personal vehicle insurance.

"State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market," the company said in a release.

"The Department of Insurance is focused on the safety of our homes and communities."

The insurance company said actions are necessary to improve its financial strength.

State Farm agents in California will continue to serve existing customers, it said.

A spokesperson for the California Department of Insurance told Fox Business it is committed to protecting customers.

"The factors driving State Farm’s decision are beyond our control, including climate change, reinsurance costs affecting the entire insurance industry, and global inflation," the spokesperson said.

California has some of the most expensive housing costs in the nation amid a shortage that many say has exacerbated the homeless crisis up and down the state.

The state plans to spend about $30 million to build 1,200 small homes.

In February, State Farm halted new coverage for some Kia, Hyundai drivers in several states because the vehicles were vulnerable to theft, it said.

https://www.msn.com/en-us/news/us/state ... 848a&ei=35
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Re: THE ECONOMY

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FOX NEWS

"AOC calls to 'eliminate the debt limit' at chaos-filled town hall"


Story by Adam Sabes

27 MAY 2023

Democratic socialist Rep. Alexandria Ocasio-Cortez, D-N.Y., said during a town hall on Friday night that the debt limit should be eliminated because of the Constitution.

Ocasio-Cortez made the comments during a town hall in Queens on Friday night.

"I still believe, first of all, that we should start to implement [the 14th Amendment] anyway because we should eliminate the debt limit in the United States because of the Constitutional reasons," Ocasio-Cortez said.

The Congresswoman was making the comments in response to a question asking if the 14th Amendment should be used by President Biden to raise the debt himself without Congress approving it.

While Ocasio-Cortez said during the town hall that Biden believes he "has this authority," people within his administration say that it won't be invoked.

"The 14th Amendment can’t solve our challenges now."

"Ultimately, the only thing that can do that is Congress doing what it’s done 78 other times — raising the debt limit," Deputy Treasury Secretary Wally Adeyemo said during a CNN interview on Thursday.

"We don’t have a plan B that allows us to meet the commitments that we’ve made to our creditors, to our seniors, to our veterans, to the American people."

"I think the president and secretary are clear that that will not solve our problems now."

"So, yes, that is a no," Adeyemo said when asked about the 14th Amendment.

Treasury Secretary Janet Yellen told Congress on Friday that the government is expected to run out of cash to pay its debts by June 5.

"Since January, I have highlighted to you the risk that Treasury would be unable to satisfy all of our obligations by early June if Congress did not raise or suspend the debt limit before that time."

"In my letters, I also noted that I would continue to update Congress as more information became available," Yellen wrote in a letter to House Speaker Kevin McCarthy, R-Calif.

FOX Business' Elizabeth Elkind contributed to this report.

https://www.msn.com/en-us/news/politics ... 48a&ei=113
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Re: THE ECONOMY

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THE CAPE CHARLES MIRROR MAY 27, 2023 AT 8:32 PM

Paul R. Plante says:

We common folks in America have become used to the fact that when Joe Biden says something, pretty much anything, for that matter, the actual meaning is the opposite of the words Joe is actually uttering, so that on July 19, 2021, when in his “Remarks by President Biden on the Economy,” Joe said “I’ve said it before, and it’s true: This is a blue-collar blueprint for building an American economy back,” what Joe was really saying was “this is a blueprint for building an American economy on the backs of the blue-collar workers of America,” which takes us to a Reuters article titled “Inflation has eroded US households’ financial security, Fed survey shows” on May 22, 2023, where we have what Joe is talking about in technicolor, to wit:

May 22 (Reuters) – The inflation wave that crested at a 40-year high last year and remains elevated has eroded U.S. households’ sense of financial security, the Federal Reserve reported Monday, with many saying they had reduced their savings to make ends meet, felt less secure about retirement, and had delayed purchases or swapped into cheaper products as they shopped.

end quote

Said the way it should be said, the MIRACLE BIDEN ECONOMY is looting their savings, leaving them poorer than they were before Joe came along to rob them, which takes us back to Reuters, as follows:

In an annual survey showing the corrosive effects of inflation on Americans’ economic confidence, the Fed said the percentage of respondents who said they were doing “at least okay financially” in 2022 tumbled by 5 percentage points – the most since the survey was launched a decade ago – to 73%.

It had stood at a record high the year before.

The share of those saying they were worse off shot up 15 points to 35%, the highest level by far since the Fed first started asking that question in 2014.

end quotes

They are worse off thanks to Joe Biden making them that way, which again takes us back to Reuters, to wit:

Those who considered their retirement savings “on track” fell to 31% among those not yet retired, compared to 40% in 2021.

With a 2024 presidential campaign already in its early stages, the survey also suggested Americans’ souring mood about their own finances carried over to their view of the national economy.

Even though the unemployment rate has been low, below 4%, since January of 2022, only 18% of respondents rated the national economy as “good” or “excellent,” down from 50% as of 2019.

Fifty-four percent of adults said that their budgets had been affected “a lot” by price increases, with parents of children under 18, Black and Latin American adults and those with disabilities ranking among the most likely to report an impact from inflation.

Indeed, overall one-third of households cited inflation as their main financial challenge, up more than fourfold from 2016.

A question meant to measure households’ wherewithal to overcome a modest financial emergency showed fewer thought they had the ability to meet an unexpected $400 expense using cash or the equivalent, such as a credit card expected to be repaid in full at the next statement.

end quotes

And from there, let’s go to a Fox News article titled “Inflation pummeled US household finances last year, Fed survey finds” by Breck Dumas on 22 May 2023, where we have more on Joe building his economy which benefits rich Democrats on the backs of blue-collar workers in America, to wit:

Historically high inflation took a notable toll on Americans’ finances last year, when rising prices outpaced wage gains and chewed into household budgets, according to newly released Federal Reserve data.

The central bank’s 2022 Survey of Household Economics and Decision Making (SHED) report released Monday, which was fielded from October 2021 through November 1, 2022, found the share of U.S. adults who reported they were worse off financially than a year earlier jumped from 20% to 35% – the highest level since the question was first asked nearly a decade ago.

The share of adults who reported spending less than their income in the month before the survey fell below pre-pandemic levels, while the share of Americans who reported their credit card debt increased rose.

The Fed said “inflation affected people’s spending and saving choices in several different ways,” pointing out that nearly two-thirds of adults stopped using a product or used less because of higher prices, 64% switched to a cheaper alternative, and more than half (51%) of Americans reduced their savings due to their budgets being squeezed.

Working adults also showed greater anxiety about being able to afford to retire.

Only 31% of non-retirees reported that their retirement savings plans were on track last fall, a nine-point drop from 2021.

The Fed has raised interest rates 10 consecutive times to the highest level in 16 years in its most aggressive tightening campaign since the 1980s as it battles to bring prices down, but another survey released Monday shows America’s top economists do not expect the central bank to reach its 2% goal any time soon.

The National Association for Business Economics (NABE) outlook survey found just 2% of business forecasters said they believe inflation will have slowed to 2% by the second half of 2023, while a 59% majority don’t believe inflation will decline to the Fed’s target level until 2025 or later.

end quotes

Bottom line, people, we are going to be paying Joe Biden’s INFLATION TAX for some time yet to come.

And that right now is the latest news about Joe Biden’s MIRACLE ECONOMY for the rich, but stay tuned because it does not end there!

http://www.capecharlesmirror.com/op-ed- ... ent-804474
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Re: THE ECONOMY

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REUTERS

"US consumer confidence dips to six-month low, labor market views soften"


By Lucia Mutikani

May 30, 2023

Summary

* Consumer confidence index falls to 102.3 in May

* Labor market differential drops to 31.0 from 36.9 in April

* Monthly house prices increase solidly in March


WASHINGTON, May 30 (Reuters) - U.S. consumer confidence slipped to a six-month low in May as Americans' assessment of the labor market softened, but more households planned to purchase motor vehicles and other big-ticket items over the next six months, which could support economic growth this quarter.

The ebb in confidence reported by the Conference Board on Tuesday was concentrated among consumers aged 55 years and older, as well as among households with annual incomes in the $50,000-$99,000 range.

Consumers expected inflation to stabilize at higher levels over the next year.

"Consumer confidence levels are in a holding pattern even if they are saying it isn't quite as easy as it was to get a new job," said Christopher Rupkey, chief economist at FWDBONDS in New York.

"Older Americans were less confident in the future perhaps with talk of budget cuts and the eventual need to rein in entitlement programs like Social Security and Medicare."

The Conference Board's consumer confidence index slipped to 102.3 this month, the lowest level since last November, from an upwardly revised 103.7 in April.

Economists polled by Reuters had expected the index to fall to 99 from the previously reported reading of 101.3.

The cutoff date for the survey, which places more emphasis on the labor market, was May 22.

A fight to raise the government's borrowing cap weighed on the University of Michigan's consumer sentiment measure this month.

President Joe Biden and Republican U.S. House of Representatives Speaker Kevin McCarthy on Sunday signed off on an agreement to temporarily suspend the debt ceiling and cap some federal spending in order to prevent a U.S. debt default.

Consumers were less optimistic on the labor market, with the share viewing jobs as "plentiful" falling to the lowest level since April 2021 and the proportion of those saying jobs were "hard to get" rising to a six-month high.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, fell to 31.0, the lowest since April 2021, from 36.9 in April, suggesting the labor market was loosening up.

This measure correlates to the unemployment rate from the U.S. Labor Department.

The jobless rate fell back to a 53-year low of 3.4% in April.

The government is scheduled to publish its closely watched employment report for May on Friday.

More timely data like first-time applications for state unemployment benefits suggests the labor market remains tight, but is gradually easing.

"Job growth is slowing," said Jeffrey Roach, chief economist at LPL Financial in North Carolina.

"Investors should expect Friday's job report to reveal emerging cracks in the labor market."

Stocks on Wall Street were mixed.

The dollar fell against a basket of currencies.

U.S. Treasury prices rose.

HOUSE PRICES RISE

Consumers expected inflation over the next 12 months to average 6.1%, the lowest level since January 2021 and down from 6.2% last month.

Inflation readings have been persistently high, increasing the probability that the Federal Reserve will raise interest rates again next month.

Financial markets saw more than a 60% chance of the U.S. central bank raising its policy rate by another 25 basis points at its June 13-14 meeting, according to CME Group's FedWatch Tool.

Minutes of the Fed's May 2-3 policy meeting, which were published last week, showed policymakers "generally agreed" the need for further rate hikes "had become less certain."

Consumers are not showing signs of drastically pulling back on spending, thanks to strong wage gains.

The share of consumers planning to buy motor vehicles over the next six months increased compared to April.

The proportion intending to buy major appliances including refrigerators, washing machines and television sets rose to a seven-month high.

That suggests consumer spending could support growth this quarter after it accelerated at its fastest pace in nearly two years in the first quarter.

There was a slight increase in the share of consumers planning to buy a house over the next six months.

But the rise in demand could be undercut by a perennial shortage of houses on the market, and potentially drive home prices higher.

Single-family home prices increased solidly on a monthly basis in March, surveys showed on Tuesday.

The S&P CoreLogic Case-Shiller national home price index, covering all nine U.S. census divisions, climbed 0.4% in March after adjusting for seasonal fluctuations.

That followed a 0.3% rise in February.

The inventory of existing homes remains 44% below pre-pandemic levels, according to data from the National Association of Realtors, which also this month reported price rises in roughly half of the country, multiple offers and many homes being sold above list price.

A separate report from the Federal Housing Finance Agency showed monthly house prices rose 0.6% in March after an increase of 0.7% in February.

Prices increased 3.6% in the 12 months through March after an advance of 4.2% in February.

"As inventory remains a challenge in this market, so too will affordability, rocked by stubbornly high prices that aren't looking to move drastically any time soon," said Nicole Bachaud, senior economist at Zillow in Seattle.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama, Andrea Ricci and Paul Simao

https://www.reuters.com/markets/us/us-c ... 023-05-30/
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Re: THE ECONOMY

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REUTERS

"HP misses revenue estimates as inflation saps PC demand"


Reuters

May 30, 2023

May 30 (Reuters) - HP Inc missed Wall Street targets for second-quarter revenue on Tuesday as inflation-hit customers spent less on the company's personal computers, sending its shares down nearly 3% in extended trading.

Companies such as HP, Lenovo and Dell Technologies Inc have seen demand ease from peaks hit during the pandemic, when work-from-home trends had driven up sales of laptops and other electronic devices.

Global PC shipments declined nearly 30% in the January-March period to levels lower than before the pandemic, according to data from research firm IDC.

Sales for HP's Personal Systems segment - home to its desktop and notebook PCs - dropped 29% in the reported quarter, while the company's printing segment recorded a 5% fall.

HP said it expects second-half revenue to be higher than the first half, even though the year-on-year comparison will still be negative.

"From a demand perspective, especially on the consumer side, the second half is stronger," said CEO Enrique Lores in an interview with Reuters.

The PC maker now expects annual adjusted profit between $3.30 per share and $3.50 per share, compared with $3.20 to $3.60 forecast earlier.

California-based HP's second-quarter revenue was $12.91 billion.

Analysts were expecting $13.07 billion, according to Refinitiv data.

On an adjusted basis, HP earned 80 cents per share, compared with expectations of 76 cents.

Reporting by Tiyashi Datta in Bengaluru and Jeffery Dastin in Palo Alto; Editing by Devika Syamnath

https://www.reuters.com/technology/hp-m ... 023-05-30/
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Re: THE ECONOMY

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REUTERS

"U.S. banks sink on concerns about office real estate loans"


By Sinéad Carew

MAY 31, 2023

(Reuters) - Shares of U.S. banks, both major and mid-sized, sharply underperformed the broader market on Wednesday with the S&P 500 Banks Index down 2.0% while the benchmark S&P 500’s fell 0.5% with worries about commercial real estate loans in focus among bank investors.

Investors worried about potential losses among banks from office real estate loans after comments from executives, including Wells Fargo & Co’s Chief Executive Officer Charlie Scharf and Blackstone President Jonathan Gray at a Sanford C Bernstein investor conference.

Wells Fargo’s Scharf said on Wednesday that there will be losses in the office loan space and that the bank was proactively managing its portfolio while he looked to reassure investors that the company is not “overly concentrated” in that space.

Meanwhile, Blackstone’s Gray talked about “unprecedented weakness” in older office buildings while noting that this segment currently makes up less than 2% of company’s equity portfolio in real estate.

“Vacancy is 20-plus percent, rents are declining, companies now are obviously thinking about their space needs in light of remote work and the economic climate that’s ahead."

"Lenders are reluctant to have exposure to office buildings."

"Buyers are reluctant."

"Valuations are going down,” Gray said, according to a transcript from the Bernstein conference.


Rick Meckler, partner, Cherry Lane Investments, a family investment office in New Vernon, New Jersey said “continued concern over loans made to the office market,” was hurting bank stocks broadly on Wednesday, citing the Wells Fargo comments.

“The implication is that there are those that will suffer even if Wells Fargo is diversified enough,” Meckler said.

Citigroup, JPMorgan Chase & Co, Morgan Stanley, Goldman Sachs down more than 1% while Bank of America was down more than 2% and Wells Fargo dropped more than 3%.

Regional lenders Citizens Financial, Western Alliance Bancorp, PacWest Bancorp, Comerica, KeyCorp, PNC Financial Services, Fifth Third Bancorp and Zions were falling more than bigger lenders.

KeyCorp, down 5.5%, was the biggest decliner in the S&P bank index, and Zions was next, down 4.9%.

Also on Wednesday, the Federal Deposit Insurance Corporation announced that U.S. banks saw total deposits decline by a record 2.5% in the first quarter of 2023.

Sending the broader market down also was an upcoming vote by lawmakers on a deal to raise the nation’s debt ceiling.

Also unexpectedly strong labor market data reinforced bets for more Federal Reserve interest rate hikes.

Reporting by Sinéad Carew in New York, Mehnaz Yasmin in Bengaluru; Editing by Nick Zieminski

https://www.reuters.com/article/usa-sto ... SL1N37S2SI
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Re: THE ECONOMY

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REUTERS

"U.S. economy little changed, outlook 'deteriorated': Fed survey"


By Ann Saphir and Howard Schneider

May 31, 2023

May 31 (Reuters) - U.S. economic activity appeared to stall in recent weeks, a Federal Reserve report published on Wednesday showed, with job growth and inflation both slowing, and near-term business prospects looking slightly worse than previously.

"Expectations for future growth deteriorated a little, though contacts still largely expected a further expansion in activity," the U.S. central bank said in its latest "Beige Book" compendium of surveys and interviews, conducted across its 12 districts through May 22.

Contacts across districts noted that while labor markets remained strong, they had "cooled some," the report said, with businesses in some regions reporting a pause in hiring or reductions in staffing due to weaker demand or greater uncertainty.

Meanwhile districts reported that the pace of inflation had slowed, with prices rising "moderately" and contacts in most parts of the country expecting a similar pace of price increases in the coming months.

Fed policymakers early this month increased the benchmark short-term interest rate a 10th straight time, taking it to a range of 5.00%-5.25%, and signaled they were near or possibly at the end of a rate-hike campaign that began last March.

Since that early-May meeting, economic data has generally come in stronger than expected, with the unemployment rate at a decades-low 3.4% and inflation by the Fed's preferred gauge at 4.4%, more than twice the Fed's target.

But many Fed policymakers since then have signaled they may rather wait before undertaking any further policy tightening.

While inflation is still too high, they say, the full impact of the Fed's rate hikes so far is still making its way through the economy, and the degree of credit tightening from bank failures in March remains difficult to gauge.

The Fed's snapshot of business, bank and worker conditions published Wednesday also said financial conditions "were stable or somewhat tighter" in most of the country.

Fed policymakers have said credit conditions are a key input to their calculations for monetary policy-setting.

Overall, bank sector stress appears to have receded in the months since the March collapse of Silicon Valley Bank and Signature Bank, despite the failure of an additional regional bank - First Republic - on May 1.

U.S. lawmakers look on course to approve a deal struck over the weekend that raises the debt ceiling and averts a catastrophic default on U.S. Treasuries.

'SCARE' FROM HIGHER RATES

Fed policymakers next meet June 13-14, before which they will get several more key pieces of economic data, including the monthly government labor market report for the month of May, and a fresh read on the consumer price index.

The Beige Book may also help shape their views of where the economy is heading, and overall did not signal the economy is either experiencing a hard stop or, conversely, a resurgence that would suggest the Fed's rate hikes to date are not doing their job to slow the economy.

About half of districts reported no change in economic activity in recent weeks, the report showed, while four reported small increases and two reported "slight to moderate declines."

And there were plenty of pockets of weakness.

"One department store contact reported a sharp sales decline in his stores that he said had 'worsened throughout March and April,'" the Cleveland Fed said.

The Minneapolis Fed, like some other districts, noted growth in consumer spending overall, but a decrease in activity at minority and women-owned businesses, with one contact who provides technical assistance to women entrepreneurs noting that higher interest rates "scare new entrepreneurs."

At the St. Louis Fed, banking contacts said loan demand had softened and they expected further weakening ahead.

"Contacts reported that clients have been taking distributions from their portfolios to pay off loans and avoid new borrowing," it said.

Reporting by Ann Saphir; Editing by Andrea Ricci and Chizu Nomiyama

https://www.reuters.com/markets/us/us-e ... 023-05-31/
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Re: THE ECONOMY

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REUTERS

"US labor market remains resilient as job openings climb, layoffs drop"


By Lucia Mutikani

May 31, 2023

Summary

* Job openings increase 358,000 to 10.1 million in April

* Layoffs drop 264,000; voluntary quits decrease 49,000


WASHINGTON, May 31 (Reuters) - U.S. job openings unexpectedly rose in April and data for the prior month was revised higher, pointing to persistent strength in the labor market that could compel the Federal Reserve to raise interest rates again in June.

The Job Openings and Labor Turnover Survey, or JOLTS report, from the Labor Department on Wednesday also showed layoffs declined significantly last month.

There were 1.8 job openings for every unemployed person in April, up from 1.7 in March, and well above the 1.0-1.2 range that is considered consistent with a jobs market that is not generating too much inflation.

The report added to data this month, including consumer spending, in suggesting that the economy regained speed at the start of the second quarter.

Demand has remained resilient despite 500 basis points worth of interest rate increases from the Fed since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.

The flow of strong data has diminished expectations that the Fed could pause further rate increases next month.

"This is not what the Fed was hoping to see," said Priscilla Thiagamoorthy, a senior economist at BMO Capital Markets in Toronto.

Job openings, a measure of labor demand, increased by 358,000 to 10.1 million on the last day of April.

Data for March was revised higher to show 9.75 million job openings instead of the previously reported 9.59 million.

The April data ended three straight monthly decreases in job vacancies.

Economists polled by Reuters had forecast 9.375 million job openings.

The increase in job vacancies was led by retail trade, where there were an additional 209,000 openings.

There were 185,000 more job openings in healthcare and social assistance, while vacancies jumped by 154,000 in the transportation, warehousing, and utilities sector.

Notable increases were also reported in construction as well as finance and insurance industries.

But job openings declined in durable goods manufacturing, which has seen demand for goods slowing as higher interest rates increase the cost of credit.

Spending is also shifting back to services.

Job openings surged in the West and Midwest.

They rose moderately in the South, but fell in the Northeast.

Businesses with one to nine employees and those with 250 to 999 workers accounted for last month's rise in job vacancies.

Companies with 10 to 49 workers reported a sharp drop.

The job openings rate rose to 6.1% from 5.9% in March.

The Fed's "Beige Book" report on Wednesday described the labor market as having "continued to be strong" in May, "with contacts reporting difficulty finding workers across a wide range of skill levels and industries."

But it also noted that contacts across districts reported that "the labor market had cooled some, highlighting easier hiring in construction, transportation and finance."

Stocks on Wall Street were trading lower.

The dollar rose against a basket of currencies. U.S. Treasury prices rose.

JOLTS

FEWER RESIGNATIONS


Minutes of the Fed's May 2-3 policy meeting, which were published last week, showed policymakers "generally agreed" the need for further rate hikes "had become less certain."

Some economists are, however, skeptical that the JOLTS report is offering a clear read of the labor market.

According to Goldman Sachs economist Ronnie Walker, a low response rate to the survey, which has reduced the sample size, could be boosting the JOLTS data, noting that some alternative measures of job openings from LinkUp and ZipRecruiter, have declined sharply in the past year.

But Walker also acknowledged that some of the alternative measures of job openings could be downwardly biased, as their samples could be skewed toward companies which are more likely to have an online presence and have cut job openings sharply.

"As a result, we suspect that the 'true' level of job openings lies somewhere in the middle of the range implied by JOLTS and alternative measures of job openings," Walker said.

The JOLTS report showed layoffs fell 264,000 to 1.6 million, consistent with the very low levels of weekly unemployment claims data.

Layoffs decreased by 113,000 in construction, another sector hard hit by the Fed's rate hikes.

There were also notable declines in information, leisure and hospitality as well as healthcare and social assistance.

Despite the strong demand for labor, workers are growing less confident, leading to fewer resignations.

The quits rate, viewed as a measure of labor market confidence, fell to 2.4% from 2.5% in March.

That aligns with a Conference Board survey on Tuesday that showed the share of people viewing jobs as "plentiful" dropped in May to the lowest level since April 2021.

Resignations declined in the professional and business services, healthcare and social assistance categories as well as in durable goods manufacturing.

They dropped in the Northeast and South.

There were modest increases in the West and Midwest.

"This suggests that the labor market is slackening, despite the reported increase in job openings, and that workers are increasingly sheltering in place in their jobs as better alternatives become less available," said Julia Pollak, chief economist at ZipRecruiter.

Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao

https://www.reuters.com/markets/us/us-j ... 023-05-31/
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Re: THE ECONOMY

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REUTERS

"A June skip jumps to the fore following latest Fed comments"


By Howard Schneider and Ann Saphir

May 31, 2023

WASHINGTON, May 31 (Reuters) - Federal Reserve officials including the vice chair-designate pointed towards a rate hike "skip" in June, prompting a quick reversal of market expectations for another hike as the U.S. central bank weighed the value of caution against still strong inflation data.

In what some viewed as a message from the Fed's leadership, Fed Governor and vice chair nominee Philip Jefferson said any decision to hold rates steady should not be viewed as the end of the tightening cycle.

"Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming," Jefferson said at a financial stability conference in Washington.

Leaning toward what some have called a "hawkish pause," with rates held steady for now but the door left open for further increases, Jefferson said that "a decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle."

Though Jefferson's nomination as vice chair is still pending in the U.S. Senate, his remarks were taken as a cue, just two days before the start of a blackout period that prohibits further public comment about the June 13-14 policy meeting.

"We are as certain as we can be that this message would have been agreed with chair (Jerome) Powell beforehand and represents the collective Fed leadership view," said Evercore ISI vice chairman Krishna Guha, who called it "an authoritative signal that the Fed leadership is not intending to raise rates in June."

Since the Fed's last meeting and with inflation showing little recent improvement towards the Fed's 2% target, markets have been on a seesaw trying to determine if the Fed is going to raise its policy rate in June or not.

After Jefferson spoke investors reset expectations yet again, with prices of futures tied to the Fed's policy rate reflecting a less than one in three chance of a June rate hike compared with about a two-in-three probability before his remarks.

Philadelphia Fed President Patrick Harker added to the case.

"I am in the camp increasingly coming into this meeting thinking that we really should skip," Harker said, though data due on Friday about the U.S. job market "may change my mind."

The rate hike "skip" has now become jargon for an emerging compromise between concerns inflation is not yet controlled with fears the economy may slow sharply as banks pull back on credit.

The Fed's main measure of inflation did accelerate in April and remains more than twice the central bank's target, data that has prompted some officials to say rates need to continue higher.

"I don't really see a compelling reason to pause," Cleveland Fed president Loretta Mester said in an interview published Wednesday in the Financial Times.

Fed Governor Michelle Bowman, meanwhile, said that some of the factors the Fed has hoped would lower inflation, such as a weakened housing market, may have provided less help than expected given what may be the beginnings of a housing rebound.

Jefferson acknowledged inflation remains "too high" and that "by some measures progress has been decelerating recently."

But he also said he expected the economy would remain sluggish for the rest of the year as households spend down savings built up during the COVID-19 pandemic, and credit gets scarcer and more expensive.

"I expect spending and economic growth to remain quite slow over the rest of 2023," he said.

While Jefferson does not expect a recession, he noted that there are reasons to be careful after 15 months in which the policy rate was raised by 5 percentage points.

"History shows that monetary policy works with long and variable lags, and that a year is not a long enough period for demand to feel the full effect," he said.

Reporting by Howard Schneider; Editing by Paul Simao, Nick Zieminski and Daniel Wallis

https://www.reuters.com/markets/us/feds ... 023-05-31/
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REUTERS

"Fed's Harker: Inclined to 'skip' a rate hike in June"


Reuters

May 31, 2023

May 31 (Reuters) - Federal Reserve Bank of Philadelphia President Patrick Harker said on Wednesday that for the moment he is inclined to support a "skip" in interest rate hikes at the central bank's next meeting in June, although economic data due soon could change his mind.

"I am in the camp increasingly coming into this meeting thinking that we really should skip," Harker said at an event on financial stability.

That said, data due on Friday about the U.S. job market "may change my mind."

Harker was the latest Fed official to lend his support to the notion that the central bank could "skip" a rate hike for a single meeting as opposed to "pause" increases for perhaps a longer stretch.

The Fed has raised rates for 10 meetings in a row, lifting the benchmark federal funds policy rate by 5 percentage points in that run to the current level of between 5.0% and 5.25%.

At their meeting earlier his month, policymakers opened the door to taking a break at the coming June 13-14 meeting.

Several of them since have emphasized that even if they forego a hike then, it does not preclude more increases later on.

Harker echoed that sentiment, adding that he does not like the word "pause."

"A pause says that you are going to hold there for a while," he said.

While at some point, Harker said, officials may hold rates steady for a longer period, he didn't know whether that moment was now at hand.

Fed policymakers need to be prepared to do more increases if inflation is not sufficiently responsive to the hikes already delivered, he said, and he is "willing to do that, but I want to give it a little bit of time."

Reporting By Dan Burns; Editing by Chizu Nomiyama

https://www.reuters.com/markets/us/feds ... 023-05-31/
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