“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.”
Biden Warns Inflation Will Worsen if GOP Retakes Congress
President Biden laced into Republicans on Friday for trying to enact policies that would make “every kitchen table cost” go up while lavishing tax cuts on big corporations, shedding his usual tone of bipartisanship a month ahead of the midterm elections, the New York Times reports.
Job Growth Slows Slightly
“Job growth fell short of expectations in September as efforts by the Federal Reserve to slow inflation appeared to take their toll on hiring,” CNBC reports.
“The unemployment rate was 3.5%, down 0.2 percentage points as the labor force participation rate edged lower.”
U.S. Job Openings Fell in August
“U.S. employers pulled back sharply on job openings, and layoffs rose in August, adding to signs the labor market cooled at the end of the summer,” the Wall Street Journal reports.
“The 1.1 million drop in openings is the largest decline since the early months of the Covid-19 pandemic, and job openings are at their lowest level in a year.”
Inflation Hits Double-Digits in Europe
Consumer prices in the 19-country eurozone rose a record 10% in September from a year earlier, up from an annual 9.1% in August, the AP reports.
Only a year ago, inflation was as low as 3.4%.
The World Economy Is Reeling
The Economist: “The world’s financial markets are going through their most painful adjustment since the global financial crisis. Adapting to the prospect of higher American interest rates, the ten-year Treasury yield briefly hit 4% this week, its highest level since 2010. Global stock markets have sold off sharply, and bond portfolios have lost an astonishing 21% this year.”
“The dollar is crushing all comers. The greenback is up by 5.5% since mid-August on a trade-weighted basis, partly because the Fed is raising rates but also because investors are backing away from risk. Across Asia, governments are intervening to resist the depreciation of their currencies. In Europe Britain has poured the fuel of reckless fiscal policy on the fire, causing it to lose the confidence of investors. And as bond yields surge, the euro zone’s indebted economies are looking their most fragile since the sovereign-debt crisis a decade ago.”
Meanwhile, in a Bloomberg interview, former Treasury Secretary Lawrence Summers likened the array of risks confronting the global economy to the pre-crisis summer of 2007.
Jay Powell Takes on the World
“Federal Reserve Chair Jerome Powell is waging a relentless battle against inflation that threatens to leave a path of destruction on the global economy in its wake,” Politico reports.
“The Fed — carrying out its steepest interest rate hikes in three decades — has fueled market turmoil by boosting the value of the dollar and feeding higher borrowing costs from the U.K. to Japan to Latin America. But Powell’s No. 1 enemy is inflation at home, and he has signaled that the Fed will do what’s best for the U.S., no matter what.”
Why Are Companies Still Hiring When GDP Is Shrinking?
“A persistent economic puzzle is why labor is still so tight amid slowing growth, high inflation and growing fears of recession,” the Wall Street Journal reports.
“Gross domestic product growth slipped into negative territory in the first half of the year. Borrowing costs have risen steeply as the Federal Reserve boosts interest rates in an attempt to reduce inflation. Even so, monthly payrolls have grown an average of 438,000 from January through August, nearly three times their 2019 prepandemic pace.”
“Many employers say they continue to struggle with large staffing shortages that built up during the pandemic and are reluctant to cut head count. In many cases, they are still hiring.”
Jobless Claims Fall to Six-Month Low
“Applications for US unemployment insurance dropped unexpectedly to a five-month low, led by a sizable decline in Michigan, suggesting robust demand for workers amid economic uncertainty,” Bloomberg reports.
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