“The backup of container ships off Southern California’s coast that was at the heart of U.S. supply chain congestion during the Covid-19 pandemic has effectively disappeared,” the Wall Street Journal reports.
Washington Weighs Options as Recession Fears Rise
Washington Post: “Amid intensifying forecasts of a U.S. recession, Washington policymakers are beginning to confront their limited options for easing the effects of a slowdown accompanied by high inflation – a confounding set of economic conditions that would present starkly different challenges from recent downturns.”
“Officials at the White House and the Federal Reserve say that they continue to believe a recession can be avoided and that they remain focused on fighting inflation, which is rising at rates not seen in four decades. But with Wall Street trembling, and many private forecasters warning that recession is likely, preliminary talks about policy options are underway around town.”
“On Capitol Hill, congressional officials have begun discussing the challenge of intervening to alleviate the pain of a recession in ways that do not exacerbate inflation. At the White House, aides have informally begun weighing hypothetical options, such as unemployment benefits and food stamp assistance. And at the Federal Reserve, staffers have discussed with outside analysts how monetary policy could simultaneously respond to an economic contraction and high prices — a dual challenge it has not faced in decades.”
Inflation Forces Over Half to Consider Second Jobs
“Over half of working Americans have considered holding multiple jobs to pay their living expenses as inflation remained stubbornly high in September and real wages fell,” Bloomberg reports.
“About 38% of workers have looked for a second job, while an additional 14% have plans to do so, according to a survey of more than 1,000 full-time US employees by Qualtrics International Inc., which makes software used by over 16,000 organizations. At the same time, 18% of working adults said they had moved to an area with a lower cost of living to cut expenses, and another 13% plan to do so.”
Pelosi Says Democrats Need Better Message on Inflation
Speaker Nancy Pelosi (D-CA) told Punchbowl News that Democrats need better messaging on inflation.
Said Pelosi: “Inflation’s an issue, but it’s global. It’s global… What’s the Republicans’ plan? They ain’t got nothing. When you bring down unemployment, inflation goes up.”
She added: “Inflation is there but it’s global and not as bad as it is in some countries. We’ll have to message it better in the next three weeks ahead. I think we’re in great shape. Other people don’t want to believe that.”
The GOP Agenda Includes a Global Financial Crisis
Catherine Rampell says Kevin McCarthy’s threat to hold the debt ceiling hostage if Republicans win control of the House could lead to a global financial crisis.
“If lawmakers dine-and-dash on behalf of Uncle Sam, they tarnish the creditworthiness of the United States and can make it more expensive for the federal government to borrow in the future because investors don’t trust us. Worse, they might accidentally blow up every other financial market on Earth, too.”
“That’s because U.S. debt is now viewed as the safest of safe assets. Virtually all other assets around the world are benchmarked against U.S. Treasury securities. If we default on our debt obligations — or even come close to default — that raises the question of the riskiness of everything else investors buy and can send shockwaves of panic through every other market.”
Inflation Surges in the U.K.
Inflation in the U.K. rose higher than expected to 10.1 percent in September from 9.9 percent in August, adding pressure to the Bank of England to continue raising interest rates to bring down prices, the Times of London reports.
The Fed Charts an Aggressive Path
“Federal Reserve officials have coalesced around a plan to raise interest rates by three quarters of a point next month as policymakers grow alarmed by the staying power of rapid price increases — and increasingly worried that inflation is now feeding on itself,” the New York Times reports.
“Such concerns could also prompt the Fed to raise rates at least slightly higher than previously forecast as officials face two huge choices at their coming meetings: when to slow rapid rate increases and when to stop them altogether.”
“Central bankers had expected to debate slowing down at their November meeting, but a rash of recent data suggesting that the labor market is still strong and that inflation is unrelenting has them poised to delay serious discussion of a smaller move for at least a month.”
Recession in the Next Year Is Now a Near-Certainty
A U.S. recession is effectively certain in the next 12 months in new Bloomberg Economics model projections, a blow to President Joe Biden’s economic messaging ahead of the November midterms.
Families Still Struggle to Find Baby Formula
“Many U.S. households are still struggling to find baby formula, almost a year since supplies thinned on store shelves and eight months after a nationwide recall,” the Washington Post reports.
Most Economists Now Expect a Recession Next Year
Wall Street Journal: “The U.S. will enter a recession in the coming 12 months as the Federal Reserve battles to bring down persistently high inflation, the economy contracts and employers cut jobs in response, according to The Wall Street Journal’s latest survey of economists.”
“On average, economists put the probability of a recession in the next 12 months at 63%, up from 49% in July’s survey. It is the first time the survey pegged the probability above 50% since July 2020, in the wake of the last short but sharp recession.”
Fed Fearful of Doing Too Little to Fight Inflation
“Federal Reserve officials signaled they are more concerned about doing too little to rein in soaring US inflation than doing too much and doubled down on plans to tighten monetary policy so it constrains the economy,” the Financial Times reports.
Inflation Stays Higher Than Predicted
“Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy,” CNBC reports.
“The consumer price index for the month increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.”
Economic Situation Worsens Ahead of Midterms
AP-NORC poll: “More U.S. adults are now feeling financially vulnerable amid high inflation — a political risk for President Joe Biden and his fellow Democrats one month before the midterm elections.”
“Some 46% of people now call their personal financial situation poor, up from 37% in March… That’s a notable downturn at a particularly inopportune moment for Biden, given that the share of Americans who felt positive about their finances had stayed rock steady over the last few years — even during the economic turmoil of the COVID-19 pandemic.”
Social Security Cost-of-Living Hike Could Be 8.7%
“Retirees who are confronting higher prices due to record high inflation may get some welcome news this week when the Social Security Administration announces the cost-of-living adjustment for 2023,” CNBC reports.
“The Senior Citizens League, a nonpartisan senior group, estimated last month that the COLA could be 8.7% next year. That would make it the highest increase in decades, topping this year’s 5.9% annual cost-of-living adjustment, which was the largest in about 40 years.”
Proposal Could Lead to Employee Status for Gig Workers
“The Labor Department on Tuesday unveiled a proposal that would make it more likely for millions of janitors, home-care and construction workers and gig drivers to be classified as employees rather than independent contractors,” the New York Times reports.
“Companies are required to provide certain benefits and protections to employees but not to contractors, such as paying a minimum wage, overtime, a portion of a worker’s Social Security taxes and contributions to unemployment insurance.”
Economic Confidence Slumps Around the Globe
“A mood of mounting economic pessimism is taking hold across the world’s major economies, as soaring prices and geopolitical uncertainty damage the prospects of businesses and consumers,” the Financial Times reports.
U.S. Economists Win Nobel Prize in Economics
“U.S.-based economists Ben Bernanke, Douglas Diamond and Philip Dybvig were awarded the Nobel prize in economic sciences for 2022 for their research on banks and financial crises,” CNBC reports.
“Bernanke was chairman of the Federal Reserve from 2006 to 2014.”
Fed’s Inflation Fight Has Some Fearing Deep Downturn
“Some economists fear the Federal Reserve—humbled after waiting too long to withdraw its support of a booming economy last year—is risking another blunder by potentially raising interest rates too much to combat high inflation,” the Wall Street Journal reports.
“The Fed has lifted rates by 0.75 percentage point at each of its past three meetings, bringing its benchmark federal-funds rate to a range between 3% and 3.25% last month—the fastest pace of increases since the 1980s. Officials have indicated they could make a fourth increase of 0.75 point at their Nov. 1-2 meeting and raise the rate above 4.5% early next year.”
Bloomberg: “The Federal Reserve is closing ranks around a goal of quickly raising their benchmark interest rate to around 4.5% then holding it there, while being prepared to go higher if elevated inflation fails to show signs of easing.”
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