CNBC
"Fed raises rates by another three-quarters of a percentage point, pledges more hikes to fight inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, SEP 21 2022
KEY POINTS
* The Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
* The central bank has been looking to bring down inflation, which is running near its highest levels since the early 1980s.
* Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate rise next year but no decreases.
The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Stocks seesawed following the announcement, with the Dow Jones Industrial Average most recently down slightly.
The market swung as Fed Chairman Jerome Powell discussed the outlook for interest rates and the economy.
Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated.
Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year.
‘Main message has not changed’
“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August in Wyoming.
“The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done.”
The increases that started in March — and from a point of near-zero — mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990.
The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year.
Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023.
That implies a quarter-point rate hike next year but no decreases.
The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024.
Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences.
The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing.
In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%.
Increases of that magnitude often are accompanied by recessions.
Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%.
The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession.
Powell conceded a recession is possible, particularly if the Fed has to keep tightening aggressively.
“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.
The hikes also come with the hopes that headline inflation will drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption expenditures price index, which showed inflation at 6.3% in July.
The summary of economic projections then sees inflation falling back to the Fed’s 2% goal by 2025.
Core inflation excluding food and energy is expected to decline to 4.5% this year, little changed from the current 4.6% level, before ultimately falling to 2.1% by 2025.
(The PCE reading has been running well below the consumer price index.)
The reduction in economic growth came even though the FOMC’s statement massaged language that in July had described spending and production as having “softened.”
This meeting’s statement noted: “Recent indicators point to modest growth in spending and production.”
Those were the only changes in a statement that received unanimous approval.
Otherwise, the statement continued to describe job gains as “robust” and noted that “inflation remains elevated.”
It also repeated that “ongoing increases in the target rate will be appropriate.”
’75 is the new 25′
The dot plot showed virtually all members on board with the higher rates in the near term, though there were some variations in subsequent years.
Six of the 19 “dots” were in favor of taking rates to a 4.75%-5% range next year, but the central tendency was to 4.6%, which would put rates in the 4.5%-4.75% area.
The Fed targets its fund rate in quarter-point ranges.
The chart indicated as many as three rate cuts in 2024 and four more in 2025, to take the longer-run funds rate down to a median outlook of 2.9%.
Markets have been bracing for a more aggressive Fed.
“I believe 75 is the new 25 until something breaks, and nothing has broken yet,” said Bill Zox, portfolio manager at Brandywine Global, in reference to the size of the rate hikes.
“The Fed is not anywhere close to a pause or a pivot."
"They are laser-focused on breaking inflation."
"A key question is what else might they break.“
Traders had fully priced in the 0.75 percentage point move and even had assigned an 18% chance of a full percentage point hike, according to CME Group data.
Futures contracts just before Wednesday’s meeting implied a 4.545% funds rate by April 2023.
The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory.”
Officials relented in March of this year, with a quarter-point rise that was the first increase since taking rates to zero in the early days of the Covid pandemic.
Along with the rate increases, the Fed has been reducing the amount of bond holdings it has accumulated over the years.
September marked the beginning of full-speed “quantitative tightening,” as it is known in markets, with up to $95 billion a month in proceeds from maturing bonds being allowed to roll off the Fed’s $8.9 trillion balance sheet.
Data also provided by Reuters
https://www.cnbc.com/2022/09/21/fed-rat ... 2022-.html
THE ECONOMY
Re: THE ECONOMY
REUTERS
"Auto suppliers raising prices for Ford - and beyond"
By Ben Klayman and Joseph White
September 21, 2022
DETROIT, Sept 21 (Reuters) - Automotive industry suppliers are raising prices to their customers across the board, not just with Ford Motor Co, which warned this week it was taking a $1 billion inflationary cost hit.
Several suppliers said Ford isn't suffering alone, as automakers across the board are being asked to shoulder more of the burden suppliers have faced from spiking energy, labor and raw material costs.
Suppliers contacted by Reuters said they have raised prices on parts in the range of 7% to 20%.
"During the course of this year, more and more suppliers have gone in to their customers," demanding higher pricing from automakers, said Andreas Weller, chief executive of aluminum parts maker Aludyne.
"They've been trying to hold everybody off, but eventually the dam breaks and then you've got to pay people," he said of the automakers.
Weller said in Europe alone, natural gas and electricity prices are almost 10 times what they were two years ago thanks to Russia's invasion of Ukraine, and even in the United States those prices are five times higher.
Throw in the tight labor market and the higher compensation required to attract workers, and "there's no improvement in sight."
That pressure was reflected in Ford's warning on Monday that inflation-driven supplier costs would run $1 billion higher than expected in the current quarter.
Fear of rising costs caused the Dearborn, Michigan automaker's shares on Tuesday to show their deepest one-day decline in over a decade.
Ford's warning also hit other stocks, not only of automakers like General Motors Co and Stellantis but also more broadly.
Bob Roth, co-owner of RoMan Manufacturing, a producer of transformers and glass-molding equipment in Grand Rapids, Michigan, said the only place where his company has seen cost relief recently was with declining copper prices.
"We're not giving it back until our arms are really twisted," he said of the company's price increases.
In fact, the rapidly-changing price environment led RoMan to change requirements so customers only have 15 days to lock in contract pricing compared with the 90 days it previously offered.
Vitesco Technologies CEO Andreas Wolf said last week during the Detroit auto show that the maker of engine control units and electric vehicle charging hardware has been passing on increases in its materials costs to automakers.
"It's clear the (automakers) have the chance to increase the prices of new cars, we have increased on the materials side, (and) in many cases were are able to give those increases to our customers," he said.
At the same time, Wolf said, Vitesco has teams assigned to keep watch for suppliers in its own network that could be having financial problems because of rising costs.
Many suppliers can't move fast enough, offering trailing contracts that leave them squeezing costs and accepting lower profit margins when prices spike.
"It's hard to get out in front of it," said Bill Berry, owner of Die-Tech & Engineering.
"Our cost of raw materials has skyrocketed from an historical perspective."
Berry has raised some prices, but is sensitive to competition from overseas.
Automakers have faced a series of supply chain issues over the past two years that have repeatedly delayed vehicle production, including semiconductor chip shortages.
"Ford's announcement shows that we are not yet out of the woods," Morgan Stanley analyst Adam Jonas said in a note.
"It was only a matter of time before supplier cost recoveries began to flow."
Suppliers say things won't likely change any time soon.
"It's the new economic reality and we'll continue to fight for (financial) relief," said Joe Perkins, CEO of Michigan engineering and machining firm Mobex Global.
Reporting by Ben Klayman and Joseph White in Detroit; Editing by Nick Zieminski
https://www.reuters.com/business/autos- ... 022-09-21/
"Auto suppliers raising prices for Ford - and beyond"
By Ben Klayman and Joseph White
September 21, 2022
DETROIT, Sept 21 (Reuters) - Automotive industry suppliers are raising prices to their customers across the board, not just with Ford Motor Co, which warned this week it was taking a $1 billion inflationary cost hit.
Several suppliers said Ford isn't suffering alone, as automakers across the board are being asked to shoulder more of the burden suppliers have faced from spiking energy, labor and raw material costs.
Suppliers contacted by Reuters said they have raised prices on parts in the range of 7% to 20%.
"During the course of this year, more and more suppliers have gone in to their customers," demanding higher pricing from automakers, said Andreas Weller, chief executive of aluminum parts maker Aludyne.
"They've been trying to hold everybody off, but eventually the dam breaks and then you've got to pay people," he said of the automakers.
Weller said in Europe alone, natural gas and electricity prices are almost 10 times what they were two years ago thanks to Russia's invasion of Ukraine, and even in the United States those prices are five times higher.
Throw in the tight labor market and the higher compensation required to attract workers, and "there's no improvement in sight."
That pressure was reflected in Ford's warning on Monday that inflation-driven supplier costs would run $1 billion higher than expected in the current quarter.
Fear of rising costs caused the Dearborn, Michigan automaker's shares on Tuesday to show their deepest one-day decline in over a decade.
Ford's warning also hit other stocks, not only of automakers like General Motors Co and Stellantis but also more broadly.
Bob Roth, co-owner of RoMan Manufacturing, a producer of transformers and glass-molding equipment in Grand Rapids, Michigan, said the only place where his company has seen cost relief recently was with declining copper prices.
"We're not giving it back until our arms are really twisted," he said of the company's price increases.
In fact, the rapidly-changing price environment led RoMan to change requirements so customers only have 15 days to lock in contract pricing compared with the 90 days it previously offered.
Vitesco Technologies CEO Andreas Wolf said last week during the Detroit auto show that the maker of engine control units and electric vehicle charging hardware has been passing on increases in its materials costs to automakers.
"It's clear the (automakers) have the chance to increase the prices of new cars, we have increased on the materials side, (and) in many cases were are able to give those increases to our customers," he said.
At the same time, Wolf said, Vitesco has teams assigned to keep watch for suppliers in its own network that could be having financial problems because of rising costs.
Many suppliers can't move fast enough, offering trailing contracts that leave them squeezing costs and accepting lower profit margins when prices spike.
"It's hard to get out in front of it," said Bill Berry, owner of Die-Tech & Engineering.
"Our cost of raw materials has skyrocketed from an historical perspective."
Berry has raised some prices, but is sensitive to competition from overseas.
Automakers have faced a series of supply chain issues over the past two years that have repeatedly delayed vehicle production, including semiconductor chip shortages.
"Ford's announcement shows that we are not yet out of the woods," Morgan Stanley analyst Adam Jonas said in a note.
"It was only a matter of time before supplier cost recoveries began to flow."
Suppliers say things won't likely change any time soon.
"It's the new economic reality and we'll continue to fight for (financial) relief," said Joe Perkins, CEO of Michigan engineering and machining firm Mobex Global.
Reporting by Ben Klayman and Joseph White in Detroit; Editing by Nick Zieminski
https://www.reuters.com/business/autos- ... 022-09-21/
Re: THE ECONOMY
REUTERS
"Fed delivers another big rate hike; Powell vows to 'keep at it'"
By Howard Schneider and Ann Saphir
September 21, 2022
Summary
* Fed lifts target interest rate to 3.00%-3.25% range
* Forecasts show another large hike likely by end of year
* Powell: No 'painless' way to bring down inflation
WASHINGTON, Sept 21 (Reuters) - Federal Reserve Chair Jerome Powell vowed on Wednesday that he and his fellow policymakers would "keep at" their battle to beat down inflation, as the U.S. central bank hiked interest rates by three-quarters of a percentage point for a third straight time and signaled that borrowing costs would keep rising this year.
In a sobering new set of projections, the Fed foresees its policy rate rising at a faster pace and to a higher level than expected, the economy slowing to a crawl, and unemployment rising to a degree historically associated with recessions.
Powell was blunt about the "pain" to come, citing rising joblessness and singling out the housing market, a persistent source of rising consumer inflation, as being likely in need of a "correction."
Earlier on Wednesday, the National Association of Realtors reported that U.S. existing home sales dropped for a seventh straight month in August.
The United States has had a "red hot housing market ..."
"There was a big imbalance," Powell said in a news conference after Fed policymakers unanimously agreed to raise the central bank's benchmark overnight interest rate to a range of 3.00%-3.25%.
"What we need is supply and demand to get better aligned ..."
"We probably in the housing market have to go through a correction to get back to that place."
That theme, of a continuing mismatch between U.S. demand for goods and services and the ability of the country to produce or import them, ran through a briefing in which Powell stuck with the hawkish tone set during his remarks last month at the Jackson Hole central banking conference in Wyoming.
Recent inflation data has shown little to no improvement despite the Fed's aggressive tightening - it also announced 75-basis-point rate hikes in June and July - and the labor market remains robust with wages increasing as well.
The federal funds rate projected for the end of this year signals another 1.25 percentage points in rate hikes to come in the Fed's two remaining policy meetings in 2022, a level that implies another 75-basis-point increase in the offing.
"The committee is strongly committed to returning inflation to its 2% objective," the central bank's rate-setting Federal Open Market Committee said in its policy statement after the end of a two-day policy meeting.
The Fed "anticipates that ongoing increases in the target range will be appropriate."
GROWTH SLOWDOWN
The Fed's target policy rate is now at its highest level since 2008 - and new projections show it rising to the 4.25%-4.50% range by the end of this year and ending 2023 at 4.50%-4.75%.
Powell said the indicated path of rates showed the Fed was "strongly resolved" to bring down inflation from the highest levels in four decades and that officials would "keep at it until the job is done" even at the risk of unemployment rising and growth slowing to a stall.
"We have got to get inflation behind us," Powell told reporters.
"I wish there were a painless way to do that."
"There isn't."
Inflation by the Fed's preferred measure has been running at more than three times the central bank's target.
The new projections put it on a slow path back to 2% in 2025, an extended Fed battle to quell the highest bout of inflation since the 1980s, and one that potentially pushes the economy to the borderline of a recession.
The Fed said that "recent indicators point to modest growth in spending and production," but the new projections put year-end economic growth for 2022 at 0.2%, rising to 1.2% in 2023, well below the economy's potential.
The unemployment rate, currently at 3.7%, is projected to rise to 3.8% this year and to 4.4% in 2023.
That would be above the half-percentage-point rise in unemployment that has been associated with past recessions.
"The Fed was late to recognize inflation, late to start raising interest rates, and late to start unwinding bond purchases."
"They've been playing catch-up ever since."
"And they're not done yet," said Greg McBride, chief financial analyst at Bankrate.
U.S. stocks, already mired in a bear market over concerns about the Fed's monetary policy tightening, ended the day sharply lower, with the S&P 500 index skidding 1.8%.
In the U.S. Treasury market, which plays a key role in the transmission of Fed policy decisions into the real economy, yields on the 2-year note vaulted over the 4% mark, their highest levels since 2007.
The dollar hit a fresh two-decade high against a basket of currencies, gaining more than 1%.
The U.S. currency's strength - it has appreciated by more than 16% on a year-to-date basis - has stoked concern at central banks around the world about potential exchange rate and other financial shocks.
Some are not even trying to match the Fed's blistering pace of tightening, with the Bank of Japan on Thursday expected to hold fast to its ultra-easy policy and keep its policy rate at minus 0.1%, likely leaving it as the last major monetary policy authority in the world with a negative policy rate.
Others are making an effort to stay somewhat abreast of the Fed.
The Bank of England, for example, is expected to lift its policy rate by at least half a percentage point on Thursday.
Reporting by Howard Schneider; Additional reporting by Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-21/
"Fed delivers another big rate hike; Powell vows to 'keep at it'"
By Howard Schneider and Ann Saphir
September 21, 2022
Summary
* Fed lifts target interest rate to 3.00%-3.25% range
* Forecasts show another large hike likely by end of year
* Powell: No 'painless' way to bring down inflation
WASHINGTON, Sept 21 (Reuters) - Federal Reserve Chair Jerome Powell vowed on Wednesday that he and his fellow policymakers would "keep at" their battle to beat down inflation, as the U.S. central bank hiked interest rates by three-quarters of a percentage point for a third straight time and signaled that borrowing costs would keep rising this year.
In a sobering new set of projections, the Fed foresees its policy rate rising at a faster pace and to a higher level than expected, the economy slowing to a crawl, and unemployment rising to a degree historically associated with recessions.
Powell was blunt about the "pain" to come, citing rising joblessness and singling out the housing market, a persistent source of rising consumer inflation, as being likely in need of a "correction."
Earlier on Wednesday, the National Association of Realtors reported that U.S. existing home sales dropped for a seventh straight month in August.
The United States has had a "red hot housing market ..."
"There was a big imbalance," Powell said in a news conference after Fed policymakers unanimously agreed to raise the central bank's benchmark overnight interest rate to a range of 3.00%-3.25%.
"What we need is supply and demand to get better aligned ..."
"We probably in the housing market have to go through a correction to get back to that place."
That theme, of a continuing mismatch between U.S. demand for goods and services and the ability of the country to produce or import them, ran through a briefing in which Powell stuck with the hawkish tone set during his remarks last month at the Jackson Hole central banking conference in Wyoming.
Recent inflation data has shown little to no improvement despite the Fed's aggressive tightening - it also announced 75-basis-point rate hikes in June and July - and the labor market remains robust with wages increasing as well.
The federal funds rate projected for the end of this year signals another 1.25 percentage points in rate hikes to come in the Fed's two remaining policy meetings in 2022, a level that implies another 75-basis-point increase in the offing.
"The committee is strongly committed to returning inflation to its 2% objective," the central bank's rate-setting Federal Open Market Committee said in its policy statement after the end of a two-day policy meeting.
The Fed "anticipates that ongoing increases in the target range will be appropriate."
GROWTH SLOWDOWN
The Fed's target policy rate is now at its highest level since 2008 - and new projections show it rising to the 4.25%-4.50% range by the end of this year and ending 2023 at 4.50%-4.75%.
Powell said the indicated path of rates showed the Fed was "strongly resolved" to bring down inflation from the highest levels in four decades and that officials would "keep at it until the job is done" even at the risk of unemployment rising and growth slowing to a stall.
"We have got to get inflation behind us," Powell told reporters.
"I wish there were a painless way to do that."
"There isn't."
Inflation by the Fed's preferred measure has been running at more than three times the central bank's target.
The new projections put it on a slow path back to 2% in 2025, an extended Fed battle to quell the highest bout of inflation since the 1980s, and one that potentially pushes the economy to the borderline of a recession.
The Fed said that "recent indicators point to modest growth in spending and production," but the new projections put year-end economic growth for 2022 at 0.2%, rising to 1.2% in 2023, well below the economy's potential.
The unemployment rate, currently at 3.7%, is projected to rise to 3.8% this year and to 4.4% in 2023.
That would be above the half-percentage-point rise in unemployment that has been associated with past recessions.
"The Fed was late to recognize inflation, late to start raising interest rates, and late to start unwinding bond purchases."
"They've been playing catch-up ever since."
"And they're not done yet," said Greg McBride, chief financial analyst at Bankrate.
U.S. stocks, already mired in a bear market over concerns about the Fed's monetary policy tightening, ended the day sharply lower, with the S&P 500 index skidding 1.8%.
In the U.S. Treasury market, which plays a key role in the transmission of Fed policy decisions into the real economy, yields on the 2-year note vaulted over the 4% mark, their highest levels since 2007.
The dollar hit a fresh two-decade high against a basket of currencies, gaining more than 1%.
The U.S. currency's strength - it has appreciated by more than 16% on a year-to-date basis - has stoked concern at central banks around the world about potential exchange rate and other financial shocks.
Some are not even trying to match the Fed's blistering pace of tightening, with the Bank of Japan on Thursday expected to hold fast to its ultra-easy policy and keep its policy rate at minus 0.1%, likely leaving it as the last major monetary policy authority in the world with a negative policy rate.
Others are making an effort to stay somewhat abreast of the Fed.
The Bank of England, for example, is expected to lift its policy rate by at least half a percentage point on Thursday.
Reporting by Howard Schneider; Additional reporting by Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-21/
Re: THE ECONOMY
REUTERS
"U.S. rents surge, leaving behind generation of younger workers"
By Rose Horowitch
September 21, 2022
Sept 21 (Reuters) - The cost of renting a home in the United States is surging and young workers have felt the sharpest pain, many of them taking on additional jobs or roommates to afford housing costs.
Household rents in 2021 jumped 10% from pre-pandemic levels, according to Census Bureau estimates released last week.
The figures came as rising healthcare and rental costs pushed U.S. consumer prices up unexpectedly last month.
The data from the bureau’s annual American Community Survey put median U.S. rent at $1,037 in 2021, up from $941 in 2019.
Year-over-year increases in the median household rent over the past decade were typically 2% or 3% - one exception was the 5% rise from 2018 to 2019.
Among those affected most are recent college graduates and other new entrants to the workforce, who have little in savings and cannot afford to buy a house.
Take Maeve Kozlark, a New York University doctoral student.
The 23-year-old spent a year in an apartment in New York City's Queens borough with a door that wouldn’t lock.
The landlord's refusal to fix the latch prompted Kozlark to make a TikTok video about it.
A year and 230,000 views later, the lock was still broken when the landlord announced a $1,000 hike on top of an existing rent of $2,500, Kozlark said.
"So began our crazy search to find something that was affordable and not a shoebox, which is pretty impossible,” said Kozlark, feeling lucky to have found a new place to rent for $3,300 in Queens.
Similar accounts of abrupt price hikes and rental struggles abound across the country.
In Austin, Texas, 22-year-old Skyler Lee signed a one-year lease for a two-bedroom apartment for which she and her boyfriend together pay $1950 a month in rent.
Within a month of moving in, comparable apartments in the building were being rented out at $2,400 per month - the price Lee expects to pay to renew her lease next year.
In Chicago, 23-year-old Kelvin Angelo Cupay decided to forego renting altogether and move in with family in Chicago because he expects to have to fork out close to $1000 in monthly rent, which he cannot afford while searching for a job.
On the West Coast, Celine Pun, 21, initially added a housemate to her Santa Barbara apartment to make costs affordable.
But she ended up moving out when the $600 in monthly rent for her share of the three-bedroom apartment rose by $50 and some of her five housemates left.
"It was a very frustrating process,” Pun said.
'TRULY UNPRECEDENTED'
Adding to renters' woes, rents in the professionally-managed sector - usually larger properties operated by management companies - have risen even more dramatically.
Annual rent growth there hit 11.6% at the end of 2021 and start of 2022, about three times what it was in the five years prior to the pandemic, according to the Harvard Joint Center for Housing Studies.
At the same time, vacancy rates fell to their lowest since 1984 as post-pandemic demand surged.
"It’s a truly unprecedented market in a lot of ways,” said Whitney Airgood-Obrycki, a senior research associate at the Harvard housing center.
A key factor in all this has been the COVID-19 pandemic.
As coronavirus infections spread in 2020, wealthier people went to summer homes or remote areas to avoid infection, leading to vacancies and steep rent reductions in many cities.
Now, landlords are making up for those losses while also trying to recoup higher maintenance and insurance costs, said Alexandra Alvarado, marketing director at the American Apartment Owners Association, which represents smaller landlords.
With low supply in large cities and rural areas where more people have moved for remote work, landlords can ask prospective tenants to show higher incomes than previously required, she said.
Adding to the demand, the millennial generation of mostly those in their thirties continues to live in apartments and is unable to purchase homes, said Michael Keane, adjunct professor of urban planning at New York University.
"They’re sort of stonewalling the new rental population that was behind them,” he said.
Some minority groups are also likely to feel the pinch more.
Black renters are less likely to have parents who own homes – a key source of wealth in the United States — and can help them financially, said Ingrid Gould Ellen, professor of urban policy and planning at New York University.
A recent survey by real estate company Zillow found that renters of color are asked to pay higher security deposits and more application fees than their white counterparts.
All of this has made for a market where just securing any apartment can be a big deal in some areas.
In New York - long known for its competitive and pricey rental market - apartment hunters have reported encountering landlords seeking tenants with an annual salary at least 40 times a month’s rent, or with guarantors who make more than 80 times a month’s rent.
Recent college graduate Caleb Seamon, 22, started delivering for Uber Eats alongside his full-time job at a think-tank to afford housing.
Even so, Seamon says he only found a New York apartment because one of his roommate's parents acted as guarantors.
“It’s a remarkably hard and privileged thing to be able to get even just the cheapest apartment on the market right now here,” Seamon said.
Reporting by Rose Horowitch in New Haven, Conn., Editing by Donna Bryson and Deepa Babington
https://www.reuters.com/markets/us/us-r ... 022-09-21/
"U.S. rents surge, leaving behind generation of younger workers"
By Rose Horowitch
September 21, 2022
Sept 21 (Reuters) - The cost of renting a home in the United States is surging and young workers have felt the sharpest pain, many of them taking on additional jobs or roommates to afford housing costs.
Household rents in 2021 jumped 10% from pre-pandemic levels, according to Census Bureau estimates released last week.
The figures came as rising healthcare and rental costs pushed U.S. consumer prices up unexpectedly last month.
The data from the bureau’s annual American Community Survey put median U.S. rent at $1,037 in 2021, up from $941 in 2019.
Year-over-year increases in the median household rent over the past decade were typically 2% or 3% - one exception was the 5% rise from 2018 to 2019.
Among those affected most are recent college graduates and other new entrants to the workforce, who have little in savings and cannot afford to buy a house.
Take Maeve Kozlark, a New York University doctoral student.
The 23-year-old spent a year in an apartment in New York City's Queens borough with a door that wouldn’t lock.
The landlord's refusal to fix the latch prompted Kozlark to make a TikTok video about it.
A year and 230,000 views later, the lock was still broken when the landlord announced a $1,000 hike on top of an existing rent of $2,500, Kozlark said.
"So began our crazy search to find something that was affordable and not a shoebox, which is pretty impossible,” said Kozlark, feeling lucky to have found a new place to rent for $3,300 in Queens.
Similar accounts of abrupt price hikes and rental struggles abound across the country.
In Austin, Texas, 22-year-old Skyler Lee signed a one-year lease for a two-bedroom apartment for which she and her boyfriend together pay $1950 a month in rent.
Within a month of moving in, comparable apartments in the building were being rented out at $2,400 per month - the price Lee expects to pay to renew her lease next year.
In Chicago, 23-year-old Kelvin Angelo Cupay decided to forego renting altogether and move in with family in Chicago because he expects to have to fork out close to $1000 in monthly rent, which he cannot afford while searching for a job.
On the West Coast, Celine Pun, 21, initially added a housemate to her Santa Barbara apartment to make costs affordable.
But she ended up moving out when the $600 in monthly rent for her share of the three-bedroom apartment rose by $50 and some of her five housemates left.
"It was a very frustrating process,” Pun said.
'TRULY UNPRECEDENTED'
Adding to renters' woes, rents in the professionally-managed sector - usually larger properties operated by management companies - have risen even more dramatically.
Annual rent growth there hit 11.6% at the end of 2021 and start of 2022, about three times what it was in the five years prior to the pandemic, according to the Harvard Joint Center for Housing Studies.
At the same time, vacancy rates fell to their lowest since 1984 as post-pandemic demand surged.
"It’s a truly unprecedented market in a lot of ways,” said Whitney Airgood-Obrycki, a senior research associate at the Harvard housing center.
A key factor in all this has been the COVID-19 pandemic.
As coronavirus infections spread in 2020, wealthier people went to summer homes or remote areas to avoid infection, leading to vacancies and steep rent reductions in many cities.
Now, landlords are making up for those losses while also trying to recoup higher maintenance and insurance costs, said Alexandra Alvarado, marketing director at the American Apartment Owners Association, which represents smaller landlords.
With low supply in large cities and rural areas where more people have moved for remote work, landlords can ask prospective tenants to show higher incomes than previously required, she said.
Adding to the demand, the millennial generation of mostly those in their thirties continues to live in apartments and is unable to purchase homes, said Michael Keane, adjunct professor of urban planning at New York University.
"They’re sort of stonewalling the new rental population that was behind them,” he said.
Some minority groups are also likely to feel the pinch more.
Black renters are less likely to have parents who own homes – a key source of wealth in the United States — and can help them financially, said Ingrid Gould Ellen, professor of urban policy and planning at New York University.
A recent survey by real estate company Zillow found that renters of color are asked to pay higher security deposits and more application fees than their white counterparts.
All of this has made for a market where just securing any apartment can be a big deal in some areas.
In New York - long known for its competitive and pricey rental market - apartment hunters have reported encountering landlords seeking tenants with an annual salary at least 40 times a month’s rent, or with guarantors who make more than 80 times a month’s rent.
Recent college graduate Caleb Seamon, 22, started delivering for Uber Eats alongside his full-time job at a think-tank to afford housing.
Even so, Seamon says he only found a New York apartment because one of his roommate's parents acted as guarantors.
“It’s a remarkably hard and privileged thing to be able to get even just the cheapest apartment on the market right now here,” Seamon said.
Reporting by Rose Horowitch in New Haven, Conn., Editing by Donna Bryson and Deepa Babington
https://www.reuters.com/markets/us/us-r ... 022-09-21/
Re: THE ECONOMY
REUTERS
"U.S. labor market resilient as recession signals grow stronger"
By Lucia Mutikani
September 22, 2022
Summary
* Weekly jobless claims increase 5,000 to 213,000
* Continuing claims drop 22,000 to 1.379 million
WASHINGTON, Sept 22 (Reuters) - The number of Americans filing new claims for unemployment benefits increased moderately last week, indicating the labor market remains tight despite the Federal Reserve's attempt to cool demand with aggressive interest rate increases.
The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy's health, suggested that job growth remained solid this month.
The U.S. central bank delivered a 75-basis-point rate hike on Wednesday, its third straight increase of that magnitude.
It signaled more large increases to come this year.
"Fed officials are hitting the brakes hard, but so far employers are just giving this policy a great, big yawn and holding on tight to their workers," said Christopher Rupkey, chief economist at FWDBONDS.
"It's either that or there is some sort of stealth job losses where those made redundant are not getting unemployment benefits."
Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 17, the Labor Department said on Thursday.
Data for the prior week was revised to show 5,000 fewer applications filed than previously reported.
Economists polled by Reuters had forecast 218,000 applications for the latest week.
Fed Chair Jerome Powell told reporters on Wednesday that "there's only modest evidence that the labor market is cooling off," describing it as continuing "to be out of balance."
Since March, the Fed has raised its policy rate by three percentage points to the current range of 3.00% to 3.25%.
Unadjusted claims rose 19,385 to a still-low 171,562 last week.
There was a surge in applications in Michigan and notable increases in California, Georgia, Massachusetts and New York.
Only Indiana reported a significant decrease in filings.
Economists say companies are hoarding workers after experiencing difficulties hiring in the past year as the COVID-19 pandemic forced some people out of the workforce, in part because of prolonged illness caused by the virus.
There were 11.2 million job openings at the end of July, with two jobs for every unemployed person.
Stocks on Wall Street were trading lower.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
NO MATERIAL CHANGE
The claims report covered the period during which the government surveyed businesses for the nonfarm payrolls portion of September's employment report.
Applications fell 32,000 between the August and September survey periods, suggesting job growth maintained its brisk pace this month.
Payrolls increased by 315,000 jobs in August.
Employment is now 240,000 jobs above its pre-pandemic level.
Expectations for solid job gains in September were supported by data on Thursday from time management firm UKG showing its monthly workforce recovery index was unchanged from August.
"With slight declines in workforce activity in six of the last seven months, we are not seeing any indication of widespread layoffs, at least among industries reliant on hourly workers," said UKG Vice President Dave Gilbertson.
The claims report showed the number of people receiving benefits after an initial week of aid decreased 22,000 to 1.379 million in the week ending Sept. 10.
Data next week on the so-called continuing claims, a proxy for hiring, will shed more light on September's employment picture.
The Fed on Wednesday raised its median forecast for the unemployment rate this year to 3.8% from its previous forecast of 3.7% in June.
It boosted its estimate for 2023 to 4.4% from the 3.9% projected in June, a move that economists viewed as recessionary.
The jobless rate rose to 3.7% in August from 3.5% in July.
"Historically, an increase in the unemployment rate of this magnitude over a year has been followed by a recession," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"The jury is still out on whether the Fed can pull off a soft landing."
Recession risks are rising, with a third report from the Conference Board showing its Leading Economic Index fell 0.3% last month after decreasing 0.5% in July.
The index, a gauge of future U.S. economic activity, dropped 2.7% between February and August, reversing a 1.7% increase over the prior six months.
That pushed the six-month average change in the index below -0.4%, a threshold historically associated with a recession.
"The fact that the six-month change has breached the historical recession threshold does not guarantee that a recession is imminent, but it does signal economic weakness is broadening," said Shannon Seery, an economist at Wells Fargo in New York.
"That combined with a continued tightening in financial conditions due to aggressive Fed tightening suggests a recession may be harder to avoid."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-w ... 022-09-22/
"U.S. labor market resilient as recession signals grow stronger"
By Lucia Mutikani
September 22, 2022
Summary
* Weekly jobless claims increase 5,000 to 213,000
* Continuing claims drop 22,000 to 1.379 million
WASHINGTON, Sept 22 (Reuters) - The number of Americans filing new claims for unemployment benefits increased moderately last week, indicating the labor market remains tight despite the Federal Reserve's attempt to cool demand with aggressive interest rate increases.
The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy's health, suggested that job growth remained solid this month.
The U.S. central bank delivered a 75-basis-point rate hike on Wednesday, its third straight increase of that magnitude.
It signaled more large increases to come this year.
"Fed officials are hitting the brakes hard, but so far employers are just giving this policy a great, big yawn and holding on tight to their workers," said Christopher Rupkey, chief economist at FWDBONDS.
"It's either that or there is some sort of stealth job losses where those made redundant are not getting unemployment benefits."
Initial claims for state unemployment benefits rose 5,000 to a seasonally adjusted 213,000 for the week ended Sept. 17, the Labor Department said on Thursday.
Data for the prior week was revised to show 5,000 fewer applications filed than previously reported.
Economists polled by Reuters had forecast 218,000 applications for the latest week.
Fed Chair Jerome Powell told reporters on Wednesday that "there's only modest evidence that the labor market is cooling off," describing it as continuing "to be out of balance."
Since March, the Fed has raised its policy rate by three percentage points to the current range of 3.00% to 3.25%.
Unadjusted claims rose 19,385 to a still-low 171,562 last week.
There was a surge in applications in Michigan and notable increases in California, Georgia, Massachusetts and New York.
Only Indiana reported a significant decrease in filings.
Economists say companies are hoarding workers after experiencing difficulties hiring in the past year as the COVID-19 pandemic forced some people out of the workforce, in part because of prolonged illness caused by the virus.
There were 11.2 million job openings at the end of July, with two jobs for every unemployed person.
Stocks on Wall Street were trading lower.
The dollar rose against a basket of currencies.
U.S. Treasury prices fell.
NO MATERIAL CHANGE
The claims report covered the period during which the government surveyed businesses for the nonfarm payrolls portion of September's employment report.
Applications fell 32,000 between the August and September survey periods, suggesting job growth maintained its brisk pace this month.
Payrolls increased by 315,000 jobs in August.
Employment is now 240,000 jobs above its pre-pandemic level.
Expectations for solid job gains in September were supported by data on Thursday from time management firm UKG showing its monthly workforce recovery index was unchanged from August.
"With slight declines in workforce activity in six of the last seven months, we are not seeing any indication of widespread layoffs, at least among industries reliant on hourly workers," said UKG Vice President Dave Gilbertson.
The claims report showed the number of people receiving benefits after an initial week of aid decreased 22,000 to 1.379 million in the week ending Sept. 10.
Data next week on the so-called continuing claims, a proxy for hiring, will shed more light on September's employment picture.
The Fed on Wednesday raised its median forecast for the unemployment rate this year to 3.8% from its previous forecast of 3.7% in June.
It boosted its estimate for 2023 to 4.4% from the 3.9% projected in June, a move that economists viewed as recessionary.
The jobless rate rose to 3.7% in August from 3.5% in July.
"Historically, an increase in the unemployment rate of this magnitude over a year has been followed by a recession," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania.
"The jury is still out on whether the Fed can pull off a soft landing."
Recession risks are rising, with a third report from the Conference Board showing its Leading Economic Index fell 0.3% last month after decreasing 0.5% in July.
The index, a gauge of future U.S. economic activity, dropped 2.7% between February and August, reversing a 1.7% increase over the prior six months.
That pushed the six-month average change in the index below -0.4%, a threshold historically associated with a recession.
"The fact that the six-month change has breached the historical recession threshold does not guarantee that a recession is imminent, but it does signal economic weakness is broadening," said Shannon Seery, an economist at Wells Fargo in New York.
"That combined with a continued tightening in financial conditions due to aggressive Fed tightening suggests a recession may be harder to avoid."
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/us-w ... 022-09-22/
Re: THE ECONOMY
THE HILL
"The government is not only spending trillions — it’s losing trillions"
Opinion by Paul Kupiec and Alex J. Pollock, opinion contributors
23 SEPTEMBER 2022
Lately, no matter if the federal government is spending taxpayer dollars or losing them, it doesn’t mess around with small change.
The government allocated $4.6 trillion just in COVID relief spending, tens of billions of which have been siphoned off by fraud.
And when it comes to losing taxpayers’ hard-earned dollars, we’ve calculated that losses tallied at the Federal Reserve and Department of Education together will top $2 trillion.
No telling how much it will cost when the government losses accumulate on the $370 billion green energy loan and loan guarantee programs included in the Inflation Reduction Act, but if Obama-era green energy loan guarantee costs are any guide, they will be large.
Let’s start with Fed.
By the end of May of this year, we estimated that the Fed’s mark-to-market loss on its huge portfolio of Treasury bonds and mortgage securities had grown to the staggering sum of $540 billion.
The Fed’s losses have continued to build and today are, we now estimate, quickly approaching $1 trillion.
Thus the Fed’s investing losses match the estimated loss the Department of Education is about to foist on U.S. taxpayers should President Biden’s student loan forgiveness plan survive legal challenges.
The government spends trillions of taxpayer dollars here and loses trillions more there, but it hardly seems to make the news.
Congress has passed so many new giant spending bills in the past three years, much of it financed on the Fed’s balance sheet, that the public has become desensitized to the magnitude of the taxpayer dollars involved.
Consider this: One million seconds is about 11.5 days; a billion seconds is about 32 years; a trillion seconds is 32,000 years!
In the footnotes of the Fed’s recently released financial statement of the combined Federal Reserve Banks for the second quarter of 2022, you can find this startling disclosure: The mark-to-market loss on the Fed’s system open market account portfolio on June 30 reached $720 billion, $180 billion more than our end-of-May estimate.
Since June 30, interest rates have continued rising and the market value of the Fed’s massive investment portfolio has shrunk even more.
Using the interest rate sensitivity that the market value of the Fed’s portfolio displayed over the first six months of 2022, we estimate that the market value loss since June 30 has increased by $275 billion, bringing the Fed’s total investment portfolio mark-to-market loss to about $995 billion, which is 17 times the Federal Reserve System total capital.
If interest rates continue to rise, as we expect they will, Fed market value losses will easily exceed $1 trillion.
The irony, of course, is that the Fed was buying heavily to build its $8.8 trillion portfolio at top-of-the-market prices the Fed itself created with its extended near zero-interest rate monetary policy.
In addition, the Fed is moving toward generating large operating losses, even if it never sells any of its underwater bonds and mortgage securities, because it must finance its long-term fixed rate assets with floating rate liabilities at ever-higher interest rates.
The federal budget deficit will be bigger still, and possibly for a very long time because it will be short the billions of dollars of revenue the Treasury has been receiving from the Federal Reserve System’s remitted profits.
In the very same eventful quarter that Fed losses reached almost $1 trillion, President Biden issued an executive order (of dubious legality) that ordered the government to fully forgive, at taxpayer expense, hundreds of billions of dollars of defaulted student loans it had made, and to partially forgive over time billions more in unpaid student loan balances at taxpayer expense.
Estimates of the cost to the taxpayer of writing off these loans run up to $1 trillion.
Considered as a lending program, as it was enacted to be, the federal student loan program is nothing if not an utter and egregious failure.
The loss is especially ironic since a decade ago it was claimed that student loans would be a big source of profits for the government and help to offset the cost of Obamacare subsidies.
According to a Congressional Budget Office report in March 2010, the federal government takeover of the student loan program would save $68 billion.
These savings, it was claimed, would provide funding for an additional $39 billion of grants and make available the remainder to theoretically pay for Obamacare subsidies.
A dozen years after the CBO produced this wildly overoptimistic estimate, the federal government student loan program is costing taxpayers $1 trillion, not generating $68 billion in additional revenues.
Considering the federal government’s propensity for producing unreliable forecasts, simultaneously authorizing trillions in new spending, and losing trillions of taxpayer dollars in off-budget government loans and investments, it certainly makes one doubt the acumen of the federal government as a financial manager.
Paul H. Kupiec is a senior fellow at the American Enterprise Institute. Alex J. Pollock is a senior fellow at the Mises Institute.
https://www.msn.com/en-us/news/politics ... ac3150e2d9
"The government is not only spending trillions — it’s losing trillions"
Opinion by Paul Kupiec and Alex J. Pollock, opinion contributors
23 SEPTEMBER 2022
Lately, no matter if the federal government is spending taxpayer dollars or losing them, it doesn’t mess around with small change.
The government allocated $4.6 trillion just in COVID relief spending, tens of billions of which have been siphoned off by fraud.
And when it comes to losing taxpayers’ hard-earned dollars, we’ve calculated that losses tallied at the Federal Reserve and Department of Education together will top $2 trillion.
No telling how much it will cost when the government losses accumulate on the $370 billion green energy loan and loan guarantee programs included in the Inflation Reduction Act, but if Obama-era green energy loan guarantee costs are any guide, they will be large.
Let’s start with Fed.
By the end of May of this year, we estimated that the Fed’s mark-to-market loss on its huge portfolio of Treasury bonds and mortgage securities had grown to the staggering sum of $540 billion.
The Fed’s losses have continued to build and today are, we now estimate, quickly approaching $1 trillion.
Thus the Fed’s investing losses match the estimated loss the Department of Education is about to foist on U.S. taxpayers should President Biden’s student loan forgiveness plan survive legal challenges.
The government spends trillions of taxpayer dollars here and loses trillions more there, but it hardly seems to make the news.
Congress has passed so many new giant spending bills in the past three years, much of it financed on the Fed’s balance sheet, that the public has become desensitized to the magnitude of the taxpayer dollars involved.
Consider this: One million seconds is about 11.5 days; a billion seconds is about 32 years; a trillion seconds is 32,000 years!
In the footnotes of the Fed’s recently released financial statement of the combined Federal Reserve Banks for the second quarter of 2022, you can find this startling disclosure: The mark-to-market loss on the Fed’s system open market account portfolio on June 30 reached $720 billion, $180 billion more than our end-of-May estimate.
Since June 30, interest rates have continued rising and the market value of the Fed’s massive investment portfolio has shrunk even more.
Using the interest rate sensitivity that the market value of the Fed’s portfolio displayed over the first six months of 2022, we estimate that the market value loss since June 30 has increased by $275 billion, bringing the Fed’s total investment portfolio mark-to-market loss to about $995 billion, which is 17 times the Federal Reserve System total capital.
If interest rates continue to rise, as we expect they will, Fed market value losses will easily exceed $1 trillion.
The irony, of course, is that the Fed was buying heavily to build its $8.8 trillion portfolio at top-of-the-market prices the Fed itself created with its extended near zero-interest rate monetary policy.
In addition, the Fed is moving toward generating large operating losses, even if it never sells any of its underwater bonds and mortgage securities, because it must finance its long-term fixed rate assets with floating rate liabilities at ever-higher interest rates.
The federal budget deficit will be bigger still, and possibly for a very long time because it will be short the billions of dollars of revenue the Treasury has been receiving from the Federal Reserve System’s remitted profits.
In the very same eventful quarter that Fed losses reached almost $1 trillion, President Biden issued an executive order (of dubious legality) that ordered the government to fully forgive, at taxpayer expense, hundreds of billions of dollars of defaulted student loans it had made, and to partially forgive over time billions more in unpaid student loan balances at taxpayer expense.
Estimates of the cost to the taxpayer of writing off these loans run up to $1 trillion.
Considered as a lending program, as it was enacted to be, the federal student loan program is nothing if not an utter and egregious failure.
The loss is especially ironic since a decade ago it was claimed that student loans would be a big source of profits for the government and help to offset the cost of Obamacare subsidies.
According to a Congressional Budget Office report in March 2010, the federal government takeover of the student loan program would save $68 billion.
These savings, it was claimed, would provide funding for an additional $39 billion of grants and make available the remainder to theoretically pay for Obamacare subsidies.
A dozen years after the CBO produced this wildly overoptimistic estimate, the federal government student loan program is costing taxpayers $1 trillion, not generating $68 billion in additional revenues.
Considering the federal government’s propensity for producing unreliable forecasts, simultaneously authorizing trillions in new spending, and losing trillions of taxpayer dollars in off-budget government loans and investments, it certainly makes one doubt the acumen of the federal government as a financial manager.
Paul H. Kupiec is a senior fellow at the American Enterprise Institute. Alex J. Pollock is a senior fellow at the Mises Institute.
https://www.msn.com/en-us/news/politics ... ac3150e2d9
Re: THE ECONOMY
THE WASHINGTON EXAMINER
"Biden tries happy talk about the 'transitory' economy as elections loom"
Opinion by W. James Antle III
24 SEPTEMBER 2022
As rising interest rates join the highest inflation in decades as a pinch on the public’s wallets, President Joe Biden and his team are rolling out a novel response: telling voters less than two months before the midterm elections that everything is pretty good.
“Inflation rate month to month was just an inch, hardly at all,” Biden said when asked about the 8.3% annual inflation rate and what he could “do better and faster” to bring grocery bills down.
“This is one of the strongest job markets that we have seen on record,” White House press secretary Karine Jean-Pierre told reporters on Friday when asked about falling stock markets.
“So, given the encouraging initial signs that we have seen on inflation and the continued strength of growth in the job market — so we believe in — the transition remains possible,” she said when asked about Federal Reserve projections that the economy will grow “just 0.2% for the entirety of this year and then 1.2% for next year.”
First, inflation was supposed to be transitory.
Now the whole economy is in transition.
Given the low unemployment rates seen under Biden since the COVID business closures wound down and under former President Donald Trump before they started in the first place, there is probably some truth to the argument that the natural state of the economy in general and the jobs market in particular is strong when there is neither a virus nor bad government policies mucking it up.
But we do keep ending up with those two factors interrupting economic growth, which is why the RealClearPolitics polling average shows just 38.7% approving of Biden’s stewardship in this area compared to 57.9% who disapprove.
Biden’s economic approval rating is worse than his approval overall.
Inflation is the economic problem that most vexes Biden and his party in the run-up to November.
Its persistence, despite repeated White House assurances the spike in consumer prices would soon run its course, has forced the Federal Reserve into particularly aggressive interest rate hikes.
These moves will surely slow the economy, which has already experienced two quarters of negative growth, and may lead to a recession.
The White House is publicly as confident that a recession will not happen as they were that inflation would be transitory.
Whether that instills much confidence in anyone else remains to be seen.
The markets, majorities in most economic polling, and even larger majorities when polled about the direction of the country do not seem persuaded.
Inflation is much higher than when Biden took office, the stock market somewhat lower, and real wages have barely budged at all.
That’s why polls showed the public souring on the economy long before a recession seemed likely.
Biden and his deputies have understandably concentrated on the low unemployment as gasoline and food prices soared.
But a recession would touch jobs — unemployment ballooned to 10.8% when inflation was last brought to heel in 1982 — and risk reintroducing voters to terms like stagflation and the misery index.
While some of the worst of that post-inflation hangover occurred under Ronald Reagan, who partnered with Federal Reserve Chairman Paul Volcker in stabilizing monetary growth and eradicating stagflation, the next time Biden goes down to Georgia — perhaps to campaign for Democratic gubernatorial nominee Stacey Abrams — he should stop in to ask Jimmy Carter for a refresher course on what those economic phenomena did to Democrats’ electoral prospects.
All presidents talk up positive economic numbers and downplay negative ones.
Trump certainly did.
But when a president tries to paint a picture of the economy that ordinary voters and consumers do not recognize, it can quickly become untenable.
Ask Dan Quayle how invoking the National Bureau of Economic Research’s conclusion that the 1990-91 recession had ended by the time of the 1992 worked out for the Republican ticket.
Then again, why ask Carter and Quayle?
Biden lived through all this history.
Yet he seems doomed to repeat it.
While the general public experiences some of the highest prices they have endured in 40 years, Biden is talking about inches and “zero” inflation.
An unfamiliar grocery store scanner, or an odd fixation with crudites, is not the only way to appear out of touch.
Biden could luck out, as he once thought he might do on inflation as gas prices began to drop steadily.
A recession isn’t inevitable.
Trust the transition.
Unfortunately, when the White House is talking about soft landings while the Federal Reserve chairman is using the word “pain,” that’s not always the way to bet.
https://www.msn.com/en-us/news/politics ... 81a2f265e5
"Biden tries happy talk about the 'transitory' economy as elections loom"
Opinion by W. James Antle III
24 SEPTEMBER 2022
As rising interest rates join the highest inflation in decades as a pinch on the public’s wallets, President Joe Biden and his team are rolling out a novel response: telling voters less than two months before the midterm elections that everything is pretty good.
“Inflation rate month to month was just an inch, hardly at all,” Biden said when asked about the 8.3% annual inflation rate and what he could “do better and faster” to bring grocery bills down.
“This is one of the strongest job markets that we have seen on record,” White House press secretary Karine Jean-Pierre told reporters on Friday when asked about falling stock markets.
“So, given the encouraging initial signs that we have seen on inflation and the continued strength of growth in the job market — so we believe in — the transition remains possible,” she said when asked about Federal Reserve projections that the economy will grow “just 0.2% for the entirety of this year and then 1.2% for next year.”
First, inflation was supposed to be transitory.
Now the whole economy is in transition.
Given the low unemployment rates seen under Biden since the COVID business closures wound down and under former President Donald Trump before they started in the first place, there is probably some truth to the argument that the natural state of the economy in general and the jobs market in particular is strong when there is neither a virus nor bad government policies mucking it up.
But we do keep ending up with those two factors interrupting economic growth, which is why the RealClearPolitics polling average shows just 38.7% approving of Biden’s stewardship in this area compared to 57.9% who disapprove.
Biden’s economic approval rating is worse than his approval overall.
Inflation is the economic problem that most vexes Biden and his party in the run-up to November.
Its persistence, despite repeated White House assurances the spike in consumer prices would soon run its course, has forced the Federal Reserve into particularly aggressive interest rate hikes.
These moves will surely slow the economy, which has already experienced two quarters of negative growth, and may lead to a recession.
The White House is publicly as confident that a recession will not happen as they were that inflation would be transitory.
Whether that instills much confidence in anyone else remains to be seen.
The markets, majorities in most economic polling, and even larger majorities when polled about the direction of the country do not seem persuaded.
Inflation is much higher than when Biden took office, the stock market somewhat lower, and real wages have barely budged at all.
That’s why polls showed the public souring on the economy long before a recession seemed likely.
Biden and his deputies have understandably concentrated on the low unemployment as gasoline and food prices soared.
But a recession would touch jobs — unemployment ballooned to 10.8% when inflation was last brought to heel in 1982 — and risk reintroducing voters to terms like stagflation and the misery index.
While some of the worst of that post-inflation hangover occurred under Ronald Reagan, who partnered with Federal Reserve Chairman Paul Volcker in stabilizing monetary growth and eradicating stagflation, the next time Biden goes down to Georgia — perhaps to campaign for Democratic gubernatorial nominee Stacey Abrams — he should stop in to ask Jimmy Carter for a refresher course on what those economic phenomena did to Democrats’ electoral prospects.
All presidents talk up positive economic numbers and downplay negative ones.
Trump certainly did.
But when a president tries to paint a picture of the economy that ordinary voters and consumers do not recognize, it can quickly become untenable.
Ask Dan Quayle how invoking the National Bureau of Economic Research’s conclusion that the 1990-91 recession had ended by the time of the 1992 worked out for the Republican ticket.
Then again, why ask Carter and Quayle?
Biden lived through all this history.
Yet he seems doomed to repeat it.
While the general public experiences some of the highest prices they have endured in 40 years, Biden is talking about inches and “zero” inflation.
An unfamiliar grocery store scanner, or an odd fixation with crudites, is not the only way to appear out of touch.
Biden could luck out, as he once thought he might do on inflation as gas prices began to drop steadily.
A recession isn’t inevitable.
Trust the transition.
Unfortunately, when the White House is talking about soft landings while the Federal Reserve chairman is using the word “pain,” that’s not always the way to bet.
https://www.msn.com/en-us/news/politics ... 81a2f265e5
Re: THE ECONOMY
REUTERS
"U.S. Congress negotiators set nearly $12 bln in new Ukraine aid -sources"
Reuters
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Negotiators of a stop-gap spending bill in the U.S. Congress have agreed to include nearly $12 billion in new military and economic aid to Ukraine in response to a request from the Biden administration, sources familiar with the talks said on Monday.
The sources, who asked not to be identified ahead of the announcement, said the funding would include $4.5 billion to provide defense capabilities and equipment for Ukraine, as well as $2.7 billion to continue military, intelligence and other defense support.
It also will include $4.5 billion to continue to provide direct budget support to the Kyiv government through the next quarter.
That way President Volodymyr Zelenskiy's administration can pay salaries to essential staff, support Ukrainians fleeing conflict and cover other critical expenses to help civilians, a government official said.
U.S. President Joe Biden asked Congress earlier this month to provide $11.7 billion in new emergency military and economic aid for Ukraine in the stopgap spending bill.
There is widespread support in Congress from both Biden's fellow Democrats and Republicans for helping Ukraine to defend itself following Russia's invasion.
Congress is facing a midnight Friday deadline to pass the spending bill, which also would temporarily fund a wide range of U.S. government programs.
In addition to the previously listed funding, the package - which could be announced as soon as later on Monday - includes $2 billion for the U.S. energy industry, to address the impact of the war and reduce future energy costs.
One of the sources familiar with the package said the funding request - known as a continuing resolution - would also include resettlement funding for Afghan refugees.
In a separate, but related authorization request, a U.S. official said the Biden administration also planned to ask Congress for an additional $3.5 billion in Presidential Drawdown Authority, which allows the president to authorize the transfer of excess weapons from U.S. stocks.
Washington and its allies have sent billions of dollars in security and economic assistance to Ukraine during the seven-month-long war.
Reporting by Richard Cowan, Steve Holland, Mike Stone and Patricia Zengerle; editing by Grant McCool
https://www.reuters.com/world/us/us-con ... 022-09-26/
"U.S. Congress negotiators set nearly $12 bln in new Ukraine aid -sources"
Reuters
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - Negotiators of a stop-gap spending bill in the U.S. Congress have agreed to include nearly $12 billion in new military and economic aid to Ukraine in response to a request from the Biden administration, sources familiar with the talks said on Monday.
The sources, who asked not to be identified ahead of the announcement, said the funding would include $4.5 billion to provide defense capabilities and equipment for Ukraine, as well as $2.7 billion to continue military, intelligence and other defense support.
It also will include $4.5 billion to continue to provide direct budget support to the Kyiv government through the next quarter.
That way President Volodymyr Zelenskiy's administration can pay salaries to essential staff, support Ukrainians fleeing conflict and cover other critical expenses to help civilians, a government official said.
U.S. President Joe Biden asked Congress earlier this month to provide $11.7 billion in new emergency military and economic aid for Ukraine in the stopgap spending bill.
There is widespread support in Congress from both Biden's fellow Democrats and Republicans for helping Ukraine to defend itself following Russia's invasion.
Congress is facing a midnight Friday deadline to pass the spending bill, which also would temporarily fund a wide range of U.S. government programs.
In addition to the previously listed funding, the package - which could be announced as soon as later on Monday - includes $2 billion for the U.S. energy industry, to address the impact of the war and reduce future energy costs.
One of the sources familiar with the package said the funding request - known as a continuing resolution - would also include resettlement funding for Afghan refugees.
In a separate, but related authorization request, a U.S. official said the Biden administration also planned to ask Congress for an additional $3.5 billion in Presidential Drawdown Authority, which allows the president to authorize the transfer of excess weapons from U.S. stocks.
Washington and its allies have sent billions of dollars in security and economic assistance to Ukraine during the seven-month-long war.
Reporting by Richard Cowan, Steve Holland, Mike Stone and Patricia Zengerle; editing by Grant McCool
https://www.reuters.com/world/us/us-con ... 022-09-26/
Re: THE ECONOMY
REUTERS
"Biden plan to cancel some U.S. student loan debt will cost $400 bln -CBO"
By David Shepardson and Eric Beech
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - U.S. President Joe Biden's executive actions cancelling some student loan debt will cost about $400 billion, about a quarter of funds owed, the Congressional Budget Office (CBO) said on Monday.
As of June 30, 43 million borrowers held $1.6 trillion in federal student loans.
About $430 billion of that debt will be canceled, CBO estimated.
CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.
Of 37 million borrowers with direct loans from the federal government, CBO estimated 95% of borrowers meet the income criteria for eligibility and 45% of income-eligible borrowers will have their entire outstanding debt canceled.
In August, the White House released a "cash flow" estimate of foregone loan repayments of $24 billion a year, or about $240 billion over a decade - assuming that 75% of eligible borrowers apply.
White House Chief of Staff Ron Klain said on Twitter the CBO estimate is a 30-year score rather than a more common 10-year estimate.
He said the CBO is consistent with the White House estimate and CBO "puts the first year cost at $21B."
Reuters reported in August that non-government budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.
The U.S. government in March 2020 temporarily suspended interest and payments on federal student loans at the start of the COVID-19 pandemic.
The extension of that pause from September through Dec. 31 will increase outstanding student loan costs by a further $20 billion, CBO said.
The CBO said its $400 billion "present-value" cost estimates do not include any effects of the actions impacting income-driven repayment plans, which the Committee for a Responsible Federal Budget estimates will cost a further $120 billion.
Bharat Ramamurti, deputy director of the White House's National Economic Council, told reporters last month the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared to the prior year.
CBO acknowledged its estimates include big unknowns, especially the uncertain projection "of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action."
Reporting by Eric Beech and David Shepardson; Additional reporting by Caitlin Webber
https://www.reuters.com/world/us/biden- ... 022-09-26/
"Biden plan to cancel some U.S. student loan debt will cost $400 bln -CBO"
By David Shepardson and Eric Beech
September 26, 2022
WASHINGTON, Sept 26 (Reuters) - U.S. President Joe Biden's executive actions cancelling some student loan debt will cost about $400 billion, about a quarter of funds owed, the Congressional Budget Office (CBO) said on Monday.
As of June 30, 43 million borrowers held $1.6 trillion in federal student loans.
About $430 billion of that debt will be canceled, CBO estimated.
CBO previously projected that some of the funds canceled by Biden's action would eventually have been forgiven anyway.
Of 37 million borrowers with direct loans from the federal government, CBO estimated 95% of borrowers meet the income criteria for eligibility and 45% of income-eligible borrowers will have their entire outstanding debt canceled.
In August, the White House released a "cash flow" estimate of foregone loan repayments of $24 billion a year, or about $240 billion over a decade - assuming that 75% of eligible borrowers apply.
White House Chief of Staff Ron Klain said on Twitter the CBO estimate is a 30-year score rather than a more common 10-year estimate.
He said the CBO is consistent with the White House estimate and CBO "puts the first year cost at $21B."
Reuters reported in August that non-government budget analysts projected the program's total 10-year cost at $500 billion to $600 billion, including extending a repayment pause on all federal student loans through Dec. 31 and reducing future payments based on income.
The U.S. government in March 2020 temporarily suspended interest and payments on federal student loans at the start of the COVID-19 pandemic.
The extension of that pause from September through Dec. 31 will increase outstanding student loan costs by a further $20 billion, CBO said.
The CBO said its $400 billion "present-value" cost estimates do not include any effects of the actions impacting income-driven repayment plans, which the Committee for a Responsible Federal Budget estimates will cost a further $120 billion.
Bharat Ramamurti, deputy director of the White House's National Economic Council, told reporters last month the plan was fiscally justified because the federal deficit was on track for a $1.7 trillion reduction for fiscal 2022 compared to the prior year.
CBO acknowledged its estimates include big unknowns, especially the uncertain projection "of how much borrowers would repay if the executive action canceling debt had not been undertaken and how much they will repay under that executive action."
Reporting by Eric Beech and David Shepardson; Additional reporting by Caitlin Webber
https://www.reuters.com/world/us/biden- ... 022-09-26/
Re: THE ECONOMY
REUTERS
"Fed's Mester: with inflation high, better to act 'aggressively'"
By Ann Saphir
SEPTEMBER 26, 2022
(Reuters) - With inflation “unacceptably high,” the Federal Reserve should lift rates higher and keep policy restrictive for some time, Cleveland Fed President Loretta Mester said on Monday -- and if there is an error to be made, better that the Fed do too much than to do too little.
“When there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about,” Mester said in remarks prepared for delivery to the Massachusetts Institute of Technology.
Mester said she would be “very cautious” about assessing inflation, and would need to see several months of declines in month-to-month readings to be convinced it had peaked.
Similarly, she said she will “guard against being complacent” on long-term inflation expectations that have recently dropped a bit but may not, she said, be as well-anchored as hoped and could rise again.
Policymakers faced with uncertainty over inflation expectations should risk setting policy too tight rather than too loose, she said.
“Research indicates that erroneously assuming that longer-term inflation expectations are well anchored at the level consistent with price stability when, in fact, they are not is a more costly error for the economy than assuming they are not well-anchored when they actually are,” Mester said.
The Fed last week increased its policy rate to 3%-3.25% in its third 75 basis point hike in so many meetings.
Policymakers signaled another similar sized hike is likely at their next meeting in November, with more increases on tap in subsequent months, as the U.S. central bank seeks to get borrowing costs high enough to bite into growth and bring down inflation running at three times its target, even at the cost of a rise in unemployment.
“Further increases in our policy rate will be needed,” Mester said.
“In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30X1ZJ
"Fed's Mester: with inflation high, better to act 'aggressively'"
By Ann Saphir
SEPTEMBER 26, 2022
(Reuters) - With inflation “unacceptably high,” the Federal Reserve should lift rates higher and keep policy restrictive for some time, Cleveland Fed President Loretta Mester said on Monday -- and if there is an error to be made, better that the Fed do too much than to do too little.
“When there is uncertainty, it can be better for policymakers to act more aggressively because aggressive and pre-emptive action can prevent the worst-case outcomes from actually coming about,” Mester said in remarks prepared for delivery to the Massachusetts Institute of Technology.
Mester said she would be “very cautious” about assessing inflation, and would need to see several months of declines in month-to-month readings to be convinced it had peaked.
Similarly, she said she will “guard against being complacent” on long-term inflation expectations that have recently dropped a bit but may not, she said, be as well-anchored as hoped and could rise again.
Policymakers faced with uncertainty over inflation expectations should risk setting policy too tight rather than too loose, she said.
“Research indicates that erroneously assuming that longer-term inflation expectations are well anchored at the level consistent with price stability when, in fact, they are not is a more costly error for the economy than assuming they are not well-anchored when they actually are,” Mester said.
The Fed last week increased its policy rate to 3%-3.25% in its third 75 basis point hike in so many meetings.
Policymakers signaled another similar sized hike is likely at their next meeting in November, with more increases on tap in subsequent months, as the U.S. central bank seeks to get borrowing costs high enough to bite into growth and bring down inflation running at three times its target, even at the cost of a rise in unemployment.
“Further increases in our policy rate will be needed,” Mester said.
“In order to put inflation on a sustained downward trajectory to 2%, monetary policy will need to be in a restrictive stance, with real interest rates moving into positive territory and remaining there for some time.”
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30X1ZJ