10 Things You Need To Know: November 8, 2022
Key data releases this week include: consumer credit (Mon), NFIB Small Business Optimism (Tue), CPI (Thu), and consumer sentiment (Fri).
Haver
November 2, 2022
The Fed announced a widely expected 75 basis point increase in the target for the Federal funds rate to a range of 3.75% – 4.00%. It was the fourth consecutive increase of that magnitude in the last six months. The statement accompanying today’s action reads, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Haver
November 4, 2022
Nonfarm payrolls increased 261,000 (3.4% y/y) during October following gains of 315,000 and 292,000 in September & August. Payrolls rose 537,000 in July. Expectations had been for a 200,000 rise in the Action Economics Forecast Survey. On average, payrolls rose 289,000 during the last three months versus a three-month high of 602,000 in February of this year.
Haver
November 3, 2022
The Services PMI from the Institute for Supply Management fell to 54.4 during October from 56.7 in September. The figure remained below the peak of 68.4 in November 2021. The Action Economics Forecast Survey expected a reading of 55.5 for October.
Barron’s
November 7, 2022
Housing starts are already down 20% since the start of this year. This will have only a modest effect on current demand, but a big effect on the supply of housing in future years. Economics 101 should tell you that if efforts to reduce demand are also reducing supply, prices won’t come down much. They might even rise.
Barron’s
November 7, 2022
While odds favor the Federal Open Market Committee downshifting to a 50-basis-point hike at its next meeting, on Dec. 13-14, after four supersize 75-basis-point boosts, the fed-funds futures market sees an ultimate rate peak next year of 5.00-5.25%—about 25 basis points more than previously expected.
Barron’s
November 7, 2022
“The political cycle for the Fed is about to get a lot hotter—from all sides,” writes Steve Blitz, chief U.S. economist at TS Lombard. If the jobless rate rises next year, Blitz believes that “the Fed ultimately bails and raises the inflation target to 3%,” as Powell lacks the political backing that Paul Volcker had four decades ago when he wrung out inflation with painful back-to-back recessions.
Barron’s
November 7, 2022
Solomon Tadesse, head of quantitative equities strategies North America at Société Générale, says that if the Fed is to bring inflation back to its 2% target, then some $3.9 trillion in balance-sheet shrinkage must accompany a policy rate of at least 4.5%. That amount of QT, he says, is equivalent to an additional 4.5 percentage points of tightening. He doubts that the Fed will get anywhere near the $3.9 trillion necessary. The upshot: It might have to lift its inflation target to about 4%.
The Hill
November 3, 2022
Data from the Federal Reserve Bank of St. Louis shows less than 0.5% odds the US entered a recession in September. Jeffrey Frankel, a former member of the National Bureau of Economic Research committee, says the strength of economic indicators beyond a slight drop in GDP makes calling a recession difficult, noting, “You just can’t call it a recession when you have the ratio of vacancies to unemployed workers the highest it’s ever been.”
Financial Times
November 5, 2022
Companies whose sales and profits results fell short of analyst projections have suffered particularly acute market losses this earnings season. Shares of such firms underperformed the S&P 500 by an average of 6.7% the day following their reports, the sharpest decline on record, compared to an average drop of 2.4% in previous years.