USA Outlook, October 31 to November 04, 2022

Weekly newsletter October 31 to November 04

October 31, 2022

November 01, 2022

Former Treasury Secretary Larry Summers urges Fed to keep hiking rates Former US Treasury Secretary Larry Summers said on Tuesday that the growing chorus of economists and politicians urging the Federal Reserve to pause its aggressive rate hikes to fight inflation are misguided. Those critics say that the Fed could throw the economy into recession, but Summers argued there’s a much greater risk to the economy that the Fed is not doing enough to bring down prices.

Photo: CNBC News

Euro zone inflation hits record high of 10.7% as growth slows sharply Euro zone inflation rose above the 10% level in the month of October, highlighting the severity of the cost-of-living crisis in the region and adding more pressure on the European Central Bank.

“I look at economic history and I see that there are many times when the Fed didn’t do enough and so inflation re-accelerated, but I can’t find any times in the last 60 years when the Fed did too much,” Summers told CNN’s Wolf Blitzer on “The Situation Room.”

Markets, meanwhile, have fallen significantly this year. Summers agrees that it’s substantially more likely than not there will be a recession within the next year and encouraged Americans to recognize that “there may be some more difficult times ahead.”

Preliminary data on Monday from Europe’s statistics office showed headline inflation came in at an annual 10.7% this month. This represents the highest ever monthly reading since the euro zone’s formation. The 19-member bloc has faced higher prices, particularly on energy and food, for the past 12 months. But the increases have been accentuated by Russia’s invasion of Ukraine in late February.

Salomon Fiedler, an economist at Berenberg, said the “continuing surge in consumer prices and stillresilient domestic demand in the summer indicate a risk that the European Central Bank may hike rates by 75 basis points in December, rather than the 50 basis points we currently expect.”

Photo: CNN News Source: https://www.cnbc.com/2022/10/31/euro-zone-inflation-hits-10point7percent-inoctober-.html

Source: https://edition.cnn.com/2022/11/01/economy/larry-summers-fed-rate-hikes-oilwindfall/index.html

November 02, 2022

November 03, 2022

High mortgage rates dampen home sales It's not a great time for home sellers, with the Federal Reserve raising interest rates to help combat inflation, driving up the cost of borrowing money. The average for a 30-year fixed mortgage rate briefly crossed the 7% mark before dipping to 6.95% this week, according to Freddie Mac, more than double what it was a year ago. That means monthly payments on a $400,000 loan would be more than $2,600 — nearly $950 more compared to the same loan last year.

Photo: CNN News

The Fed makes history with a fourth straight three-quarter-point rate hike

The Federal Reserve approved a fourth-straight rate hike of three-quarters of a percentage point on Wednesday as part of its aggressive battle to bring down the white-hot inflation that is plaguing the US economy. The supersized hike brings the central bank’s benchmark lending rate to a new target range of 3.75% to 4%. That’s the highest the fed funds rate has been since January 2008.

Home sales in Long Island's Nassau County are down more than 22%. It's a trend happening across the U.S. over the last eight months — the longest slump since the start of the housing crash in 2007. Wells Fargo economist Charlie Dougherty said it is all part of the Federal Reserve's efforts to lower inflation.

"The Federal Reserve is cognizant of what's happening in the housing market, but they're willing to let the housing market go under a correction if that means inflation is going to come down," Dougherty said.

Fed officials included a new section in their November statement — a rarity since the Fed typically repeats the same language in each release.

The Federal Open Market Committee, the central bank’s policymaking arm, “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.”

And through it all, the job market has remained tight. Job openings unexpectedly surged in September, indicating there are 1.9 job openings for every available worker. Friday’s upcoming jobs report is expected to show the economy added another 205,000 positions in October, down from last month but still historically high.

Source: https://edition.cnn.com/2022/11/02/economy/federal-reserve-meetinginflation/index.html

Photo: Forbes Source: https://www.cbsnews.com/news/mortgage-rates-homes-sales-long-island/

November 04, 2022

Photo: CBS News

Hiring stayed strong in October, with U.S. employers adding 261,000 jobs Hiring across the U.S. continued to surge in October, highlighting that the nation's job market remains tight just days before the midterm elections. Employers added 261,000 jobs last month, the Labor Department said on Friday, overshooting economists' expectations of about 200,000. The government also said 30,000 more jobs were created in August and September than earlier estimates.

The unemployment rate ticked up to 3.7%, from 3.5% in September, as more workers lost jobs. "The labor market is showing tentative signs of the effects of the Fed's tightening campaign. But the dynamism and competitive nature of the jobs market shows little change in the tightness of labor," Ben Emons of Medley Global Advisors wrote in a research note.

The government's monthly jobs report is derived from two separate surveys: A survey of employers that yields the payroll figure, and one of households that yields the unemployment rate. The two surveys often point to different trends, although the divergence in October was more pronounced than usual, with the household data showing a drop in employment of 328,000.

The strong job market is a rare bright spot in an economy otherwise beset by consumer worries. Polls show most Americans believe the country is in recession, while inflation remains near a 40-year high, outpacing wage growth and squeezing household budgets.

Source: https://www.cbsnews.com/news/job-growth-october-employment-report-labordepartment/