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Tag: Economic policy

  • The Fed will raise rates again. But it’s playing with fire | CNN Business

    The Fed will raise rates again. But it’s playing with fire | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

    Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

    The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

    The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

    But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

    The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

    As long as inflation remains a problem, the Fed is going to have to tread cautiously.

    “Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

    Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”

    The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Wages are growing, and consumers are still spending. That can’t last indefinitely.

    “The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit,” Jones said.

    So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

    In September, the Fed’s consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed’s preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

    The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

    “A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

    The US economy isn’t in a recession yet. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

    Economists are actually forecasting a small dip of 0.1% in retail sales from October. But it’s important to put that number in context. Retail sales surged 1.3% from September and 8.3% over the past 12 months.

    So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

    One market strategist also pointed out that as long as price increases continue to slow, consumers will feel more confident as well.

    “Everybody has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

    What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

    (HESAF)     and cosmetics giant L’Oreal

    (LRLCF)    .

    Monday: UK monthly GDP; earnings from Oracle

    (ORCL)

    Tuesday: US Consumer Price Index; Germany economic sentiment

    Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

    (LEN)     and Trip.com

    (TCOM)

    Thursday: US retail sales; US weekly jobless claims; ECB and Bank of England rate decisions; earnings from Jabil

    (JBL)

    Friday: Eurozone PMI; UK retail sales; earnings from Accenture

    (ACN)    , Darden Restaurants

    (DRI)     and Winnebago

    (WGO)

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  • Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

    Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

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    New York
    CNN
     — 

    Another key inflation measure shows price pressures cooled off but remained stubbornly high in November, despite the Federal Reserve’s monthslong efforts to fight inflation through higher interest rates.

    The Producer Price Index, which measures prices paid for goods and services by businesses before they reach consumers, rose 7.4% in November compared to a year earlier, the Bureau of Labor Statistics reported Friday. That’s down from the revised 8.1% gain reported for October.

    US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. The higher-than-expected inflation readings raised concerns about whether the Fed will be able to slow the pace of rate hikes.

    But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.

    “Overall inflation is moving in the right direction, though at a slow pace,” said Kurt Rankin, senior economist at PNC. “The Federal Reserve’s tightening plans will remain aggressive until clear, consistent signs of inflation’s demise have been demonstrated.”

    The PPI report generally gets less attention that the corresponding Consumer Price Index, which measures prices paid by US consumers for goods and services. But this is a rare month in which the PPI report came out before the CPI report, which is due out Tuesday.

    That and the Fed meeting scheduled for Tuesday and Wednesday next week is making this inflation report of particular importance to investors.

    “Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

    Overall prices rose a seasonally adjusted 0.3% compared to October — the same monthly increase as was reported in both September and October — but were slightly higher than the 0.2% rise forecast by economists.

    Stripping out volatile food and energy prices, core PPI rose 6.2% for the year ending in November, down from the revised 6.8% increase the previous month. Economists had forecast only a 5.9% increase.

    Core PPI posted a 0.4% increase from October, a far bigger rise than the revised 0.1% month-over-month rise in that previous month, and twice as big as the 0.2% rise forecast by economists.

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  • China’s Xi visiting Saudi Arabia amid bid to boost economy

    China’s Xi visiting Saudi Arabia amid bid to boost economy

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    BEIJING — Chinese leader Xi Jinping is attending a pair of regional summits in Saudi Arabia this week amid efforts to kick-start economic growth weighed down by strict anti-COVID-19 measures.

    The Foreign Ministry said Wednesday that Xi will attend the inaugural China-Arab States Summit and a meeting with leaders of the six nations that make up the Gulf Cooperation Council in the Saudi capital of Riyadh. His state visit to Saudi Arabia will end on Saturday.

    China is the world’s second largest economy and a major source of outward investment. To fuel massive demand, it imports half its oil, of which half of those imports come from Saudi Arabia, amounting to tens of billions of dollars annually.

    China’s economic growth had been on a steady decline for years and was dealt a major blow by rolling lockdowns imposed across the country as a response to the COVID-19 pandemic.

    Chinese economic growth rebounded to 3.9% over a year earlier in the three months ending in September, up from the first half of the year’s 2.2%, but still well short of the government target.

    China’s COVID-19 infection numbers are lower than those of the United States and other major countries. But the ruling party is sticking to “zero-COVID,” which calls for isolating every case, while other governments are relaxing travel and other controls and trying to live with the virus.

    China’s ruling Communist Party shares many of the authoritarian tendencies of Saudi Arabia and other Gulf states, shielding Beijing from criticism over its harsh policies toward Uyghurs and other Muslim minorities. More than a million have been sent to detention centers where they report being forced to denounce Islam and swear fealty to Xi and the party.

    Beijing denies the charges, saying they have been providing job training and ridding Muslims of extremist, separatist and terroristic tendencies.

    The trip to Saudi Arabia marks a further move by Xi to restore his global profile after spending most of the pandemic inside China. Xi was granted a third five-year term in October, but street protests against “zero-COVID” policies last month saw the most significant public challenge to his rule and may have prompted a relaxation of some measures.

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  • US stocks lose ground as markets ponder the Fed’s next moves

    US stocks lose ground as markets ponder the Fed’s next moves

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    NEW YORK — Stocks fell in morning trading on Wall Street Tuesday as markets ponder the Federal Reserve’s next moves on fighting inflation.

    The S&P 500 fell 0.9% as of 10:15 a.m. Eastern. The Dow Jones Industrial Average fell 139 points, or 0.4%, to 33,801 and the Nasdaq fell 1.4%.

    Technology stocks and retailers had some of the biggest losses. Apple fell 1.5% and AutoZone fell 5%,

    Bond yields mostly held steady. The yield on the 10-year Treasury fell slightly to 3.57% from 3.58% late Monday.

    European markets were mostly lower and Asian markets closed mixed.

    Several companies made big moves following financial updates and buyout announcements.

    Utility NRG Energy slumped 11.4% after announcing it is spending $2.8 billion in cash and assuming $2.4 billion in debt to buy Vivint Smart Home.

    Jewelry company Signet rose 18.6% after raising its profit and revenue forecasts for the year.

    The broader market’s dip comes a day after stocks pulled back as stronger-than-expected readings on the economy raised worries that the Fed has a ways to go in getting inflation under control. The Fed is doing that by intentionally slowing the economy with higher interest rates.

    Investors are closely watching economic data and company announcements to get a better sense of how the economy is handling stubbornly hot inflation. They are also trying to determine whether inflation is easing at a pace that will allow the Fed to ease up on interest rate increases. The Fed’s policy risks hitting the brakes on the economy too hard and sending it into a recession.

    Wall Street will get a weekly update on unemployment claims on Thursday. The job market has been one of the stronger pockets in the economy.

    Investors will get important updates on inflation and how consumers are dealing with high prices later in the week.

    On Friday, the government will release its November report on producer prices. That will give investors more insight into how inflation is impacting businesses.

    The University of Michigan will release its December survey on consumer sentiment on Friday.

    With growing concern about a recession, Fitch Ratings revised its forecasts for world economic growth downward to reflect the Fed’s and other central banks’ interest rate hikes.

    The ratings agency’s Global Economic Outlook report estimated global growth at 1.4% in 2023, revised down from 1.7% in its September forecast. It put U.S. growth in 2023 at 0.2%, down from 0.5%, as the pace of monetary policy tightening increases.

    ———

    Elaine Kurtenbach and Matt Ott contributed to this report.

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  • Asian shares lower as strong data hit hopes for dovish Fed

    Asian shares lower as strong data hit hopes for dovish Fed

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    BANGKOK — Stocks were mostly lower in Asia on Tuesday after Wall Street pulled back as surprisingly strong economic reports highlighted the difficulty of the Federal Reserve’s fight against inflation.

    Tokyo rose while other regional markets declined. U.S. futures gained and oil prices also advanced.

    Adding to worries over the potential for recession, Fitch Ratings revised its forecasts for world economic growth downward on Tuesday to reflect the Fed and other central banks’ interest rate hikes.

    Its Global Economic Outlook report estimated global growth at 1.4% in 2023, revised down from 1.7% in its September forecast. It put U.S. growth in 2023 at 0.2%, down from 0.5%, as the pace of monetary policy tightening increases.

    China’s growth forecast was cut to a 4.1% annual pace from 4.5%.

    Markets have been lifted by expectations China will press ahead with easing its stringent pandemic restrictions, relieving pressures on trade, manufacturing and consumer spending.

    But investors are also eyeing the Fed, hoping it might slow the pace of interest rate hikes aimed at curbing stubbornly high inflation.

    The services sector, which makes up the biggest part of the U.S. economy, showed surprising growth in November, the Institute for Supply Management reported Monday. Business orders at U.S. factories and orders for durable goods in October also rose more than expected, other reports said.

    That news is positive for the broader economy, but it complicates the Fed’s fight against inflation because it likely means the central bank will have to keep raising interest rates to bring down price pressures.

    “Inflation will likely prove to be stickier and with the service part of the economy refusing to weaken. The risks that the Fed might need to do more remain elevated,” Edward Moya of Oanda said in a statement.

    The Fed is meeting next week and is expected to raise interest rates by a half-percentage point, which would mark an easing of sorts from a steady stream of three-quarters of a percentage point rate increases. It has raised its benchmark rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. Wall Street expects the benchmark rate to reach a peak range of 5% to 5.25% by the middle of 2023.

    The aim is to cool growth without slamming on the brakes and causing a recession that would cascade through the global economy, slowing trade and consumer spending .

    Russia’s ongoing invasion of Ukraine continues agitating an already volatile global energy market. U.S. crude oil prices bounced around before settling 3.8% lower after a group of world leaders agreed to a boycott of most Russian oil. They also committed to a price cap of $60 per barrel on Russian exports.

    In Asian trading, Hong Kong’s Hang Seng fell 1.1% to 19,300.90 and the Kospi in South Korea fell 0.6% to 2,404.39. The Shanghai Composite index edged 0.1% lower to 3,209.27.

    Tokyo’s Nikkei 225 index picked up 0.3% to 27,909.65. Shares also fell in Bangkok and Thailand.

    The S&P 500 fell 1.8% Monday to 3,998.84. The Dow Jones Industrial Average lost 1.4% to 33,947.10 and the tech-heavy Nasdaq gave back 1.9%, closing at 11,239.94. Small-company stocks fell even more, sending the Russell 2000 index 2.8% lower to 1,840.22.

    Oil and gas company stocks fell amid a broad pullback in energy prices, including an 11.2% slump in natural gas. Exxon Mobil fell 2.7%.

    All told, roughly 95% of the stocks in the benchmark S&P 500 index were in the red, with technology companies, banks and retailers among the biggest weights on the market. Chipmaker Nvidia fell 1.6%, Bank of America slid 4.5% and Amazon dropped 3.3%.

    Bond yields mostly climbed. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.59% from 3.49% late Friday.

    Wall Street will get a weekly update on unemployment claims Thursday. November’s monthly report on producer prices is due Friday.

    In other trading Tuesday, U.S. benchmark crude oil gained 63 cents to $77.56 per barrel in electronic trading on the New York Mercantile Exchange. It lost $3.05 to $76.93 per barrel.

    Brent crude, the pricing basis for international trading, advanced 57 cents to $83.25 per barrel.

    The U.S. dollar rose to 136.88 Japanese yen from 136.71 yen late Monday. The euro climbed to $1.0497 from $1.0491.

    ———

    AP Business Writers Alex Veiga and Damian J. Troise contributed.

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  • DOJ antitrust regulators should look at Apple, Google’s handling of TikTok, says FCC commissioner | CNN Business

    DOJ antitrust regulators should look at Apple, Google’s handling of TikTok, says FCC commissioner | CNN Business

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    Washington
    CNN Business
     — 

    Apple and Google’s continued hosting of TikTok on their app stores, despite US national security concerns about the short-form video app, reflects the tech giants’ “gatekeeper” power and should be made part of any antitrust reviews the app stores may face, a member of the Federal Communications Commission wrote to the Justice Department last week.

    The previously unreported letter — sent on Dec. 2 to DOJ antitrust chief Jonathan Kanter and obtained by CNN — said that continuing to make TikTok available on the app stores risks harming consumers, whose personal information US officials have worried may be being fed to the Chinese government.

    Beyond possible consumer harm, TikTok’s continued presence on app stores also undercuts Apple and Google’s arguments that their dominance in app distribution leads to better user security and privacy, FCC Commissioner Brendan Carr wrote in the letter.

    It’s the latest attempt by Carr, a top Republican at the FCC, to pressure Apple and Google to remove TikTok. Last month, Carr called for the US government to ban TikTok over the bipartisan concerns that China could wield its influence over TikTok’s parent, ByteDance, to gain access to US user data or to disseminate propaganda and disinformation. Now, Carr is trying a new tack by framing the TikTok matter as an antitrust issue.

    “Apple and Google are not exercising their ironclad control over apps for the altruistic or procompetitive purposes that they put forward as defenses to existing antitrust or competition claims,” Carr wrote. “Instead, their conduct shows that those rationales are merely pretextual — talismanic references invoked to shield themselves from liability.”

    DOJ’s Antitrust Division should consider that “to the extent that it assesses the reasonableness of Apple’s and Google’s anticompetitive actions,” Carr added.

    Google declined to comment. Apple the Justice Department didn’t immediately respond to a request for comment.

    The FCC does not regulate app stores or social media, focusing instead on telecommunications and traditional media such as radio and television broadcasters and cable operators. But Carr has become the most vocal commissioner to speak out on TikTok, drawing what he’s said are lessons from the FCC’s own decisions to block Huawei, ZTE and other telecom companies with ties to China from the US market.

    His remarks also echo those by prominent lawmakers of both parties, including Virginia Democratic Sen. Mark Warner and Florida Republican Sen. Marco Rubio, who together lead the Senate Intelligence Committee.

    Carr’s call comes as Apple and Google’s critics have increasingly sought to apply the nation’s antitrust laws against the tech giants. Third-party software developers have long alleged that Apple and Google’s app store fees and rules are monopolistic and anticompetitive. A high-profile 2020 lawsuit along those lines brought by Epic Games, the maker of video game “Fortnite,” has so far proven largely unsuccessful, though an appeal is pending.

    More recently, Apple’s conservative critics have accused the company of abusing “monopoly” power by allegedly threatening to remove Twitter from its app store — a claim that Twitter’s new owner Elon Musk has made without evidence and that he says has since been resolved thanks to a conversation with Apple CEO Tim Cook. Apple has not commented on Musk’s allegation or purported exchange with Cook.

    For years, TikTok has been negotiating with the Committee on Foreign Investment in the United States, a multi-agency US government panel charged with reviewing the national security implications of foreign investment deals, to arrive at an agreement to allow TikTok to operate in the US market despite the security concerns.

    TikTok has said Project Texas, its plan to migrate US user data exclusively to cloud servers hosted by Oracle, is a core part of the solution. Last week, TikTok CEO Shou Zi Chew said at a conference hosted by the New York Times that “no foreign government has asked us for user data before, and if they did, we would say no.”

    In congressional testimony, TikTok has said it maintains robust data controls but has sought to sidestep questions about its parent company and declined to stop letting China-based employees access US users’ data.

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  • Turkish inflation eases for 1st time in more than a year

    Turkish inflation eases for 1st time in more than a year

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    ANKARA, Turkey — Annual inflation in Turkey slightly eased in November for the first time in more than a year, according to official figures released on Monday, although it remains close to 24-year highs.

    Consumer prices for the year rose by 84.39% in November, down from 85.51% recorded in October, the Turkish Statistical Institute announced. The monthly inflation rate was 2.88% in November, compared with 3.51% in the previous month.

    It is the first time that annual inflation has eased since May 2021.

    “As we have previously stated through various media, we have left the peak in inflation behind us and entered a downward trend — unless there is an unexpected global development,” Treasury and Finance Minister Nureddin Nebati tweeted on Monday.

    While the pandemic and Russia’s invasion of Ukraine have stoked inflation around the world, economists believe that inflation in Turkey was additionally fueled by President Recep Tayyip Erdogan’s belief that high borrowing costs lead to higher prices. Traditional economic thinking says that raising rates helps rein in inflation.

    Turkey’s central bank has slashed interest rates by 5 percentage points since August, down to 9% despite high inflation that has deepened a cost-of-living crisis in the country. In contrast, central banks around the world have been raising rates to fight soaring inflation.

    Erdogan has said his model — which prioritizes growth, investments, employment and exports — is expected to yield results in the new year.

    The sharpest increases in annual prices were in the transportation sector, at 107%, followed by food and non-alcoholic drinks prices at 102.55%, according to official data.

    Some experts have questioned the state institutes’ figures and the Inflation Research Group, which is made up of independent economists, said on Monday that Turkey’s true inflation rate for November is 170.7%.

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  • Turkish inflation eases for 1st time in more than a year

    Turkish inflation eases for 1st time in more than a year

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    ANKARA, Turkey — Annual inflation in Turkey slightly eased in November for the first time in more than a year, according to official figures released on Monday, although it remains close to 24-year highs.

    Consumer prices for the year rose by 84.39% in November, down from 85.51% recorded in October, the Turkish Statistical Institute announced. The monthly inflation rate was 2.88% in November, compared with 3.51% in the previous month.

    It is the first time that annual inflation has eased since May 2021.

    “As we have previously stated through various media, we have left the peak in inflation behind us and entered a downward trend — unless there is an unexpected global development,” Treasury and Finance Minister Nureddin Nebati tweeted on Monday.

    While the pandemic and Russia’s invasion of Ukraine have stoked inflation around the world, economists believe that inflation in Turkey was additionally fueled by President Recep Tayyip Erdogan’s belief that high borrowing costs lead to higher prices. Traditional economic thinking says that raising rates helps rein in inflation.

    Turkey’s central bank has slashed interest rates by 5 percentage points since August, down to 9% despite high inflation that has deepened a cost-of-living crisis in the country. In contrast, central banks around the world have been raising rates to fight soaring inflation.

    Erdogan has said his model — which prioritizes growth, investments, employment and exports — is expected to yield results in the new year.

    The sharpest increases in annual prices were in the transportation sector, at 107%, followed by food and non-alcoholic drinks prices at 102.55%, according to official data.

    Some experts have questioned the state institutes’ figures and the Inflation Research Group, which is made up of independent economists, said on Monday that Turkey’s true inflation rate for November is 170.7%.

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  • Asian shares gain, oil prices up after Russia price cap deal

    Asian shares gain, oil prices up after Russia price cap deal

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    Asian shares were mostly higher and oil prices rose Monday after the European Union and the Group of Seven democracies agreed on a boycott of most Russian oil and a price cap of $60 per barrel on Russian exports.

    Hong Kong’s benchmark jumped 3.7% and the Shanghai Composite added 1.6%.

    Hopes for fewer disruptions to manufacturing and trade have risen as Chinese authorities begin lifting some of the most onerous restrictions imposed to contain outbreaks of the coronavirus, even as they say their “zero-COVID” strategy — which aims to isolate every infected person — is still in place. The curbs have included lockdowns of neighborhoods or buildings, frequent mandatory testing and shutdowns of factories and other businesses.

    China recently saw several days of protests across cities including Shanghai and Beijing as public frustration with the COVID-19 curbs boiled into unrest. Some demanded Chinese President Xi Jinping step down in an extraordinary show of public dissent in a society over which the ruling Communist Party exercises near total control.

    In other Asian trading, the Nikkei 225 was flat at 27,766.83 and the Kospi in Seoul shed 0.5% to 2,422.18. The Hang Seng in Hong Kong was up 648 points at 19,324.03 and the Shanghai Composite added 49 points to 3,205.38. In Sydney, the S&P/ASX 200 advanced 0.6% to 7,342.80.

    U.S. benchmark crude oil picked up 90 cents to $80.88 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.24 to $79.98 per barrel on Friday.

    Brent crude added 94 cents to $86.51 per barrel after the OPEC oil cartel and allied producers including Russia decided Sunday not to change their targets for shipping oil to the global economy after .

    On Monday, two measures aimed at hitting Russia’s oil earnings in response to its invasion of Ukraine take effect: a European Union boycott of most Russian oil and the price cap.

    It was unclear how much Russian oil the two sanctions measures could remove from the global market, tightening supply and driving up prices. The world’s No. 2 oil producer has been able to reroute much, but not all, of its former Europe shipments to customers in India, China and Turkey.

    Shares were mixed Friday on Wall Street, as investors fretted over inflation after a report showed U.S. wages were accelerating. That revived worries that the Federal Reserve may not be able to ease back as much as hoped on its big interest-rate hikes.

    The S&P 500 edged 0.1% lower to 4,071.70 and the Dow industrials gained 0.1% to 34,429.88. The Nasdaq fell 0.2% to 11,461.50.

    Stocks have been on the upswing for the last month on hopes inflation may have peaked, allowing the Federal Reserve to dial down rate hikes that aim to undercut inflation by slowing the economy and dragging down prices for stocks and other investments.

    But Friday’s labor market report showed that wages for workers rose 5.1% last month from a year earlier. That’s an acceleration from October’s 4.9% gain and easily topped economists’ expectations for a slowdown.

    Such jumps in pay are helpful to workers struggling to keep up with soaring prices for everyday necessities but they add to worries inflation may be becoming entrenched in the economy.

    U.S. employers added 263,000 jobs last month. That beat economists’ forecasts for 200,000, while the unemployment rate held steady at 3.7%. Many Americans also continue to stay entirely out of the job market, with a larger percentage of people either not working or looking for work than before the pandemic, which could increase the pressure on employers to raise wages.

    The strong labor market data follows up on several mixed reports on the economy, as a growing number of economists are forecasting the U.S. economy will dip into a recession next year mainly because of higher interest rates.

    The nation’s manufacturing activity shrank in November for the first time in 30 months, for example, while the housing industry is struggling from higher mortgage rates. Such data points had raised hopes the Fed’s rate hikes were taking effect and would ultimately pull down inflation.

    In currency dealings, the dollar fell to 134.29 Japanese yen from 134.39 yen late Friday. The euro rose to $1.0582 from $1.0540.

    .

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  • Asian shares gain, oil prices up after Russia price cap deal

    Asian shares gain, oil prices up after Russia price cap deal

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    Asian shares were mostly higher and oil prices rose Monday after the European Union and the Group of Seven democracies agreed on a boycott of most Russian oil and a price cap of $60 per barrel on Russian exports.

    Hong Kong’s benchmark jumped 3.7% and the Shanghai Composite added 1.6%.

    Hopes for fewer disruptions to manufacturing and trade have risen as Chinese authorities begin lifting some of the most onerous restrictions imposed to contain outbreaks of the coronavirus, even as they say their “zero-COVID” strategy — which aims to isolate every infected person — is still in place. The curbs have included lockdowns of neighborhoods or buildings, frequent mandatory testing and shutdowns of factories and other businesses.

    China recently saw several days of protests across cities including Shanghai and Beijing as public frustration with the COVID-19 curbs boiled into unrest. Some demanded Chinese President Xi Jinping step down in an extraordinary show of public dissent in a society over which the ruling Communist Party exercises near total control.

    In other Asian trading, the Nikkei 225 was flat at 27,766.83 and the Kospi in Seoul shed 0.5% to 2,422.18. The Hang Seng in Hong Kong was up 648 points at 19,324.03 and the Shanghai Composite added 49 points to 3,205.38. In Sydney, the S&P/ASX 200 advanced 0.6% to 7,342.80.

    U.S. benchmark crude oil picked up 90 cents to $80.88 per barrel in electronic trading on the New York Mercantile Exchange. It lost $1.24 to $79.98 per barrel on Friday.

    Brent crude added 94 cents to $86.51 per barrel after the OPEC oil cartel and allied producers including Russia decided Sunday not to change their targets for shipping oil to the global economy after .

    On Monday, two measures aimed at hitting Russia’s oil earnings in response to its invasion of Ukraine take effect: a European Union boycott of most Russian oil and the price cap.

    It was unclear how much Russian oil the two sanctions measures could remove from the global market, tightening supply and driving up prices. The world’s No. 2 oil producer has been able to reroute much, but not all, of its former Europe shipments to customers in India, China and Turkey.

    Shares were mixed Friday on Wall Street, as investors fretted over inflation after a report showed U.S. wages were accelerating. That revived worries that the Federal Reserve may not be able to ease back as much as hoped on its big interest-rate hikes.

    The S&P 500 edged 0.1% lower to 4,071.70 and the Dow industrials gained 0.1% to 34,429.88. The Nasdaq fell 0.2% to 11,461.50.

    Stocks have been on the upswing for the last month on hopes inflation may have peaked, allowing the Federal Reserve to dial down rate hikes that aim to undercut inflation by slowing the economy and dragging down prices for stocks and other investments.

    But Friday’s labor market report showed that wages for workers rose 5.1% last month from a year earlier. That’s an acceleration from October’s 4.9% gain and easily topped economists’ expectations for a slowdown.

    Such jumps in pay are helpful to workers struggling to keep up with soaring prices for everyday necessities but they add to worries inflation may be becoming entrenched in the economy.

    U.S. employers added 263,000 jobs last month. That beat economists’ forecasts for 200,000, while the unemployment rate held steady at 3.7%. Many Americans also continue to stay entirely out of the job market, with a larger percentage of people either not working or looking for work than before the pandemic, which could increase the pressure on employers to raise wages.

    The strong labor market data follows up on several mixed reports on the economy, as a growing number of economists are forecasting the U.S. economy will dip into a recession next year mainly because of higher interest rates.

    The nation’s manufacturing activity shrank in November for the first time in 30 months, for example, while the housing industry is struggling from higher mortgage rates. Such data points had raised hopes the Fed’s rate hikes were taking effect and would ultimately pull down inflation.

    In currency dealings, the dollar fell to 134.29 Japanese yen from 134.39 yen late Friday. The euro rose to $1.0582 from $1.0540.

    .

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  • EXPLAINER: 5 key takeaways from the November jobs report

    EXPLAINER: 5 key takeaways from the November jobs report

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    WASHINGTON — For nearly nine months, the Federal Reserve has relentlessly raised interest rates to try to slow the U.S. job market and bring inflation under control.

    And for just as long, the job market hasn’t seemed to get the message.

    The November employment report the government issued Friday was no exception. Employers added 263,000 jobs — a substantial gain that was far above economists’ expectations. Wages rose robustly, too, further intensifying the inflationary pressures the Fed has been struggling to contain.

    And the unemployment rate remained at 3.7%, barely above the half-century low of 3.5%.

    Friday’s hiring data left economists scratching their heads over the job market’s resilience and the continuing need of many employers for more workers.

    “The Fed is tightening monetary policy, but somebody forgot to tell the labor market,’’ said Brian Coulton, chief economist at Fitch Ratings.

    The Fed’s inflation challenge began after the economy roared back from the pandemic recession two years ago, causing vast shortages of goods and sending prices soaring. After assuming — falsely — for months that high inflation would prove short-lived, the Fed finally began raising its key short-term rate in March this year.

    Since then, its rate hikes have been recurrent and aggressive. The Fed has raised its benchmark rate six times, including four straight increases of three-quarters of a point — far larger than the usual quarter-point hikes. Later this month, it’s expected to raise its key rate by an additional half-point.

    Because the Fed’s rate affects borrowing rates across the economy, its hikes have had the effect of making loans much costlier for consumers and businesses. The idea is that individuals and companies would then cut back on borrowing and spending, and employers would slow their hiring.

    But the economy — and especially the job market — have proved surprisingly durable in the face of the Fed’s anti-inflation campaign, a fact underscored by Friday’s strong jobs numbers.

    The central bank’s goal is to achieve 2% annual inflation. It has a long way to go, to say the least: The most recent inflation report showed consumer prices up 7.7% from a year earlier.

    Here are five takeaways from the November jobs report:

    ———

    TOO HOT FOR THE FED

    Last year, the economy added a record 6.7 million jobs, and it tacked on an average of 457,000 a month more from January through July this year. Since then, hiring has cooled, to a monthly average of 277,000 from August through November. Yet it’s still running way too hot for the Fed’s inflation fighters and is consistently beating forecasters’ expectations.

    With nearly two job openings for every unemployed American, companies are struggling to find workers and retain the ones they have. A tight job market tends to keep upward pressure on wages and to feed into inflation.

    “This is another solid report that shows just how difficult it is going to be for the Fed to get inflation back to target,’’ economists Thomas Simons and Aneta Markowska of the investment banking firm Jefferies wrote in a research note Friday.

    ————

    RISING WAGES

    Average hourly earnings rose 0.6% from October to November — the strongest month-to-month gain since January. And measured over the past 12 months, average pay was up a more-than-expected 5.1%,

    “We had been hoping to see a clear softening,’’ said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

    Hourly pay gains were especially strong in November for workers in retail, transportation and warehousing and “information,’’ a category that includes some technology jobs.

    “Wage growth is likely to continue to remain elevated until we see a meaningful normalization in labor demand,’’ said Thomas Feltmate, senior economist at TD Economics.

    ————

    HELP WANTED: RESTAURANTS AND BARS

    Restaurants and bars added 62,000 jobs last month. The healthcare industry took on a net 45,000 new workers in November. That sector has been adding 47,000 jobs a month this year, up from an average of just 9,000 a month in 2021.

    Factories added 14,000 jobs in November. That gain occurred even though an index issued by the Institute for Supply Management showed that U.S. manufacturing activity fell last month for the first time since May 2020, when the economy was reeling from the COVID-10 outbreak.

    Last month, the economy also added 20,000 construction workers. But in a sign that higher interest rates are squeezing the housing market, the number of employees at homebuilding companies actually fell in November by 2,600.

    ————

    MISSING WORKERS

    The number of people who either have a job or are looking for one — the total labor force — declined by 186,000 in November. It was the third straight monthly drop.

    The figure remains slightly below where it stood in February 2020, just before COVID slammed into the U.S. economy. The proportion of the adult population in the labor force — the participation rate — amounted to 62.1% last month, well below the pre-pandemic 63.4%.

    The shortfall in available workers has been caused by a combination of early retirements, reduced immigration, COVID-19 deaths and a shortage of affordable child care. The shortage represents a setback in the fight against inflation: If employers had more workers to choose from, they would be under less pressure to bid up wages and thereby contribute to inflation pressures.

    ————

    TWO SURVEYS, TWO STORIES

    Friday’s report sent some mixed signals about the level of employment in the United States.

    The Labor Department’s survey of businesses delivered the headline number of 263,000 added jobs. But the department also surveyed households, and they told a different story: The number of people who said they had a job fell by 138,000 in November after having dropped by 328,000 in October.

    The survey of businesses, called the “establishment survey,” tracks how many jobs are added across the economy. The separate survey of households is used to calculate the unemployment rate.

    The two surveys sometimes tell different tales, as they did in October and November, though the disparities tend to even out over time.

    For its establishment survey, the department asks mostly large companies and government agencies how many people they had on their payrolls.

    For its household survey, it asks households whether the adults living there have a job. Those who don’t have a job but are looking for one are counted as unemployed. Those who aren’t working but aren’t seeking work are not counted as unemployed.

    Unlike the establishment survey, the household survey counts farm workers, the self-employed and people who work for new companies. It also does a better job of capturing small-business hiring.

    But the results of the household survey are likely less precise. The government surveys just 60,000 households. By contrast, it surveys 131,000 businesses and government agencies for the establishment survey.

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  • Asian shares sink on revived worries over recession, China

    Asian shares sink on revived worries over recession, China

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    BANGKOK — Shares retreated in Europe and Asia on Friday ahead of the release of U.S. jobs data.

    Optimism over moves by China to ease strict pandemic controls appeared to have faded, replaced by worries over indications recession may be looming.

    Oil prices fell as the European Union was edging closer to a $60-per-barrel price cap on Russian oil in a maneuver designed to keep Russian oil flowing into global markets while clamping down on President Vladimir Putin’s ability to fund his war in Ukraine.

    U.S. benchmark crude oil lost 16 cents to $81.06 per barrel in electronic trading on the New York Mercantile Exchange. It gained 67 cents to $81.22 per barrel on Thursday.

    Brent crude oil, the standard for pricing oil for international trading, shed 6 cents to $86.82 a barrel.

    Germany’s DAX was flat at 14,489.59 and the CAC 40 in Paris lost 0.5% to 6,723.62. Britain’s FTSE 100 gave up 0.5% to 7,522.46.

    The futures for the S&P 500 and the Dow Jones Industrial Average were 0.1% lower.

    Action was muted as traders awaited a closely watched monthly report on jobs due out Friday that will show how the labor market is holding up, which may influence what the Fed does next in its bid to cool inflation.

    A moderate reading might improve buying sentiment, said Ipek Ozkardeskaya of Live.com, given that “investors are dying to price in the goldilocks scenario, which is the sweet combination of slowing inflation, but a mild economic slowdown, which means mild deterioration in the U.S. jobs data.”

    Shares fell in New York on Thursday after a U.S. measure of inflation that’s closely watched by the Federal Reserve eased in October, raising questions over the central bank’s determination to keep raising interest rates to tame price increases.

    A report by the Institute for Supply Management also showed that prices are falling and that American manufacturing contracted in November for the first time since May 2020.

    Slower growth due to tighter monetary policies has slowed new orders and order backlogs, “which saw manufacturing conditions contracting for the first time since June 2020,” Jun Rong Yeap of IG said in a report. That may suggest that with “inflation risks behind us now, ‘bad news’ in economic data may not be ‘good news’ for markets as recession fears could be brewing,” he said.

    Signs of weakening trade, especially for export dependent economies in Asia, have deepened worries over slowing growth in China and its implications for the global economy.

    Tokyo’s Nikkei 225 index lost 1.6% to 27,777.90 and the Hang Seng in Hong Kong fell 0.3% to 18,675.35. The Kospi in Seoul shed 1.8% to 2,434.33.

    The Shanghai Composite index gave up 0.3% to 3,156.14 and Australia’s S&P/ASX 200 slipped 0.7% to 7,301.50.

    Bangkok’s SET index lost 0.5% and the Sensex in Mumbai was down 0.7%.

    The declines followed a 0.1% retreat Thursday in the benchmark S&P 500. The Dow industrials fell 0.6%, while the Nasdaq edged 0.1% higher. The Russell 2000 index of small companies fell 0.3%.

    Markets rallied Wednesday after Fed Chair Jerome Powell the central bank could begin moderating its pace of rate hikes at its next meeting in mid-December. The Fed, though, has been very clear about its intent to continue raising interest rates until it is sure that inflation is cooling.

    A big concern for Wall Street has been whether the Fed can tame rates without sending the economy into a recession as it hits the brakes on growth. Businesses are seeing demand fall for a wide range of goods as inflation squeezes wallets. Analysts generally expect the U.S. to dip into a recession, even if it is mild and short, at some point in 2023.

    In currency dealings, the U.S. dollar slipped to 133.90 Japanese yen from 135.31 yen late Thursday. The euro rose to $1.0540 from $1.0522.

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  • EU edges closer to $60-per-barrel Russian oil price cap

    EU edges closer to $60-per-barrel Russian oil price cap

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    BRUSSELS — The European Union was edging closer to setting a $60-per-barrel price cap on Russian oil — a highly anticipated and complex political and economic maneuver designed to keep Russia’s supplies flowing into global markets while clamping down on President Vladimir Putin’s ability to fund his war in Ukraine.

    EU nations sought to push the cap across the finish line after Poland held out to get as low a figure as possible, diplomats said Thursday. “Still waiting for white smoke from Warsaw,” said an EU diplomat, who spoke on condition of anonymity because the talks were still ongoing.

    The latest offer, confirmed by 3 EU diplomats, comes ahead of a deadline to set the price for discounted oil by Monday, when a European embargo on seaborne Russian crude and a ban on shipping insurance for those supplies take effect. The diplomats also spoke on condition of anonymity because the legal process was still not completed.

    The $60 figure would mean a cap near the current price of Russia’s crude, which fell this week below $60 per barrel, and is meant to prevent a sudden loss of Russian oil to the world following the new Western sanctions. It is a big discount to international benchmark Brent, which traded at about $88 per barrel Thursday, but could be high enough for Moscow to keep selling even while rejecting the idea of a cap.

    When the final number is in place, a new buyer’s cartel — which is expected to be made up of formal and informal members — will be born. Western allies in the Group of Seven industrial powers led the price cap effort and still need to approve the figure.

    Oil is the Kremlin’s main pillar of financial revenue and has kept the Russian economy afloat so far despite export bans, sanctions and the freezing of central bank assets that began with the February invasion. Russia exports roughly 5 million barrels of oil per day.

    The risks of the price cap’s failure are immense to the global oil supply. If it fails or Russia retaliates by stopping the export of oil, energy prices worldwide could skyrocket. Putin has said he would not sell oil under a price cap and would retaliate against nations that implement the measure.

    U.S. and European consumers could feel the ramifications in more spikes to gasoline prices, and people in developing countries could face greater levels of food insecurity.

    With the EU and U.K. banning insurance for Russian oil shipments, the price ceiling allows companies to keep insuring tankers headed for non-EU countries as long as the oil is priced at or under the cap. That would avoid a price spike from the loss of supplies from the world’s No. 2 oil producer and put a ceiling on Russia’s oil income near current levels.

    The Treasury Department has released guidance meant to help firms and maritime insurers understand how to abide by the price ceiling, saying the price cap could fluctuate depending on market conditions.

    Robin Brooks, chief economist at the Institute of International Finance in Washington, said the cap should have been implemented earlier this year, when oil was hovering around $120 per barrel.

    “Since then, obviously oil prices have fallen and global recession is a real thing,” he said. “The reality is that it is unlikely to be binding given where oil prices are now.”

    Critics of the price cap measure, including former Treasury Secretary Steve Mnuchin, have called the plan “ridiculous.”

    Mnuchin told CNBC during a panel in November at the Milken Institute’s Middle East and Africa Summit that the price cap was “not only not feasible, I think it’s the most ridiculous idea I’ve ever heard.”

    Rachel Ziemba, an adjunct senior fellow at the Center for a New American Security, said that while a worst-case scenario envisions Russia cutting off the global supply of its oil, “the Saudis and Emiratis would boost production.”

    “Russia has made is clear the countries that abide by the cap won’t receive their oil and that could result in cuts to natural gas exports as well,” she said. “This will be an interesting few weeks and few months.”

    ———

    Hussein reported from Washington. AP Business Writer David McHugh contributed from Frankfurt, Germany.

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  • Applications for jobless benefits decline last week

    Applications for jobless benefits decline last week

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    WASHINGTON — The number of Americans applying for unemployment benefits came back down last week, hovering near levels suggesting the U.S. labor market has been largely unaffected by the Federal Reserve’s aggressive interest rate hikes.

    Applications for jobless aid fell to 225,000 for the week ending Nov. 26, a decline of 16,000 from the previous week’s 241,000, the Labor Department reported Thursday. The four-week moving average of claims, which evens out week-to-week swings, inched up by 1,750 to 227,000.

    Applications for unemployment benefits are a proxy for layoffs, and viewed with other employment data, shows that American workers are enjoying extraordinary job security at the moment, despite an economy with some glaring weaknesses.

    To combat inflation that hit four-decade highs earlier this year, the Federal Reserve has raised its benchmark interest rate six times since March. The housing market has buckled under the strain of mortgage rates that have more than doubled from a year ago. Many economists expect the United States to slip into a recession next year with more Fed rate hikes expected to increase borrowing costs and slow economic activity.

    Early this month, the Fed raised its short-term lending rate by another 0.75 percentage points, three times its usual margin, for a fourth time this year. Its key rate now stands in a range of 3.75% to 4%, the highest in 15 years.

    On Wednesday, Fed Chair Jerome Powell said the central bank would push interest rates higher than previously expected and keep them there for an extended period until inflation was under control. Powell did add that the size and pace of those increases could be scaled back from the jumbo three-quarters of a point increases the Fed made at its last four meetings.

    In spite of persistent inflation and rapidly rising interest rates, U.S. employers added 261,000 jobs last month and are creating an average of nearly 407,000 a month this year. That pace would make 2022 the second-best year for hiring — after 2021 — in government records going back to 1940. There are nearly two job openings for every unemployed American. The unemployment rate is 3.7%, a couple of ticks above a half-century low.

    The government issues its November jobs report on Friday.

    New weekly applications for unemployment benefits have been extremely low early this year — staying below 200,000 for much of February, March and April. They began to tick up in late spring and hit 261,000 in mid-July before trending lower again.

    The Labor Department said Thursday that 1.61 million people were receiving jobless aid the week that ended Nov. 19, up 57,000 from the week before.

    The tech and real estate sectors have been outliers in an otherwise robust employment market, with Facebook, Twitter, Amazon, DoorDash, Redfin and Compass all announcing significant layoffs in recent months.

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  • Asian shares gain after Fed chair signals slower rate hikes

    Asian shares gain after Fed chair signals slower rate hikes

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    BANGKOK — Shares advanced in Europe and Asia on Thursday after a rally on Wall Street spurred by the Federal Reserve chair’s comments on easing the pace of interest rate hikes to tame inflation.

    Signs that China may be shifting its approach to containing COVID-19 outbreaks to focus more on vaccinations, while some cities have lifted pandemic lockdowns, also helped lift sentiment.

    In Europe, Germany’s DAX gained 0.5% to 14,472.99 while the CAC 40 in Paris edged 0.1% higher to 6,750.81. Britain’s FTSE 100 also was 0.1% higher, at 7,580.56. The future for the S&P 500 was down 0.1% while that for the Dow industrials fell 0.2%.

    Stocks on Wall Street roared higher Wednesday after Fed Chair Jerome Powell, said in comments at the Brookings Institution that the central bank could begin moderating its pace of rate hikes as soon as December, when its policymaking committee will hold its next meeting.

    “We have a risk management balance to strike,” Powell said. “And we think that slowing down (on rate hikes) at this point is a good way to balance the risks.”

    The benchmark S&P 500 rose 3.1%, snapping a three-day losing streak. The Dow Jones Industrial Average gained 2.2% and the Nasdaq composite climbed 4.4%. The Russell 2000 index rose 2.7%.

    “The optimism in the market is that perhaps the worse is over for the U.S. in terms of inflation reading, and the Fed isn’t going to increase the interest aggressively,” Naeem Aslam of Avatrade said in a commentary.

    In Asia on Thursday, Tokyo’s Nikkei 225 index added 0.9% to 28,226.08 while the Hang Seng in Hong Kong advanced 0.8% to 18,736.44. The Shanghai Composite index climbed 0.5% to 3,165.47. In Seoul, the Kospi picked up 0.3% to 2,479.84. Australia’s S&P/ASX 200 gained 1% to 7,354.40.

    Bangkok’s SET rose 0.8% a day after the central bank raised its key interest rate by a quarter point to 1.25%, aiming to curb inflation.

    The stronger gains seen early in Asian trading had faded by the day’s end.

    Markets have wobbled all year as the Fed has fought high inflation with aggressive interest rate increases.

    “While it could be argued that Jerome Powell’s comments on Wednesday were relatively balanced — slower tightening now but rates high for longer — the last year has proven that anticipating the path of inflation even a short period ahead is incredibly difficult,” Craig Erlam of Oanda said in a commentary.

    Powell stressed that the Fed will push rates higher than previously expected and keep them there for an extended period to ensure inflation comes down sufficiently.

    “History cautions strongly against prematurely loosening policy,” he said. “We will stay the course until the job is done.”

    Wall Street has been hoping that the Fed will slow the scale and pace of its interest rate hikes. It has raised its benchmark interest rate six times since March, driving it to a range of 3.75% to 4%, the highest in 15 years. The goal is to make borrowing more costly and generally slow the economy in order to tame inflation.

    Higher mortgage rates have caused home sales to plunge and higher interest rates also have raised costs for most other consumer and business loans.

    The economy has been slowing, and many economists expect the U.S. to slip into a recession next year. But there are strong pockets of growth. The government said Wednesday that the economy expanded at a 2.9% annual rate from July through September, an upgrade from its initial estimate.

    Consumers have continued spending, despite inflation squeezing wallets. Overall, employment remains strong, though job openings dropped in October more than economists had anticipated and human resources company ADP reported an easing in private sector hiring in November.

    Investors will get more data Thursday on the employment sector with a report on weekly unemployment claims. The closely watched monthly report on the job market will be released on Friday.

    In other trading, U.S. benchmark crude oil lost 12 cents to $80.43 a barrel in electronic trading on the New York Mercantile Exchange. It climbed 3% on Wednesday.

    Brent crude, the pricing basis for international trading, shed 14 cents to $86.83 a barrel.

    The U.S. dollar fell to 136.31 Japanese yen from 138.09 yen. The euro rose to $1.0435 from $1.0409.

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  • Powell: Fed to keep rates higher for longer to cut inflation

    Powell: Fed to keep rates higher for longer to cut inflation

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    WASHINGTON — The Federal Reserve will push rates higher than previously expected and keep them there for an extended period, Chair Jerome Powell said Wednesday, in remarks likely intended to underscore the Fed’s single-minded focus on combating stubborn inflation.

    Powell also signaled in a written speech to be delivered to the Brookings Institution that the Fed may increase its key interest rate by a smaller increment at its December meeting, only a half-point, after four straight three-quarter point hikes. But Powell also stressed that the smaller hike shouldn’t be taken as a sign the Fed will let up on its inflation fight anytime soon.

    “It is likely that restoring price stability will require holding (interest rates) at a restrictive level for some time,” Powell said. “History cautions strongly against prematurely loosening policy.”

    Powell acknowledged there has been some good news on the inflation front, with the cost of goods such as cars, furniture, and appliances in retreat. He also said that rents and other housing costs — which make up about a third of the consumer price index — were likely to decline next year.

    But the cost of services, which includes dining out, traveling, and health care, are still rising at a fast clip and will likely be much harder to rein in, he said.

    “Despite some promising developments, we have a long way to go in restoring price stability,” Powell said.

    Services costs are mostly pushed higher by rising wages, he added, which have been rising at the fastest pace in four decades, before adjusting for inflation. Powell said the robust wage gains are largely being driven by a labor shortage that began during the pandemic and that is unlikely to unwind anytime soon.

    The lack of workers reflects a jump in early retirements, the death of several hundred thousand working-age people from COVID-19, and a sharp decline in immigration and slower population growth, he said.

    “Wage growth remains well above levels that would be consistent with 2% inflation over time,” Powell said.

    Last month’s inflation report showed that prices rose 7.7% in October from a year earlier, straining many families’ budgets. That is down, however, from a 9.1% peak in June.

    The Fed has lifted its key rate six times this year, to a range of 3.75% to 4%, the highest in 15 years. Those increases have sharply boosted mortgage rates, causing home sales to plunge, and it has raised costs for most other consumer and business loans.

    Fed officials forecast in September that they would ultimately push their short-term rate to a range of 4.5% to 4.75% by next year. Powell suggested that rates will likely go higher than that. Many economists forecast the Fed’s key rate will instead rise to at least 5% to 5.25%.

    Fed officials hope that by tightening credit they can slow consumer and business spending, reduce hiring and wage growth, and cool inflation. Powell said the Fed’s efforts have slowed demand, and will have to keep it slow “for an extended period.”

    At the Fed’s last meeting in November, it hiked rates by a hefty three-quarters of a point for the fourth straight time. But Powell signaled at the time that its next increase would likely be only a half-point, still a significant step up. Typically the central bank moves interest rates in quarter-point increments.

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  • US job openings fell in October to still-high level

    US job openings fell in October to still-high level

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    WASHINGTON — U.S. job openings dropped in October but remained high, a sign that businesses became slightly less needy for workers as the Federal Reserve ramps up interest rates in an effort to cool the economy.

    Employers posted 10.3 million job vacancies in October, down from 10.7 million in September, the Labor Department said Wednesday. Even with the drop, openings were slightly lower in August, when they dipped below 10.3 million before rebounding the following month.

    The number of people quitting their jobs also slipped in October, to 4 million from 4.1 million.

    The Federal Reserve is closely monitoring the figures on job openings and quits for signals about the strength of the job market. The Fed is seeking to pull off a delicate task by slowing hiring and the broader economy to cool inflation, but not so much as to cause a recession.

    While more job openings are a benefit for those seeking work, Fed officials would like to see the number of openings fall. That’s because fewer openings would indicate less competition between businesses to find and keep workers, reducing pressure on them to raise wages.

    The number of open jobs dropped last month in construction, manufacturing, professional services such as architecture and engineering, and health care. They rose in financial services and remained high for restaurants, bars, and hotels.

    “The labor market is cooling (what the Fed wants) but it is far from cold,” Jennifer Lee, an economist at BMO Capital Markets, said in an email.

    Fed officials would also like to see the number of people quitting decline. When workers quit, they typically do so for a new, higher-paying job. Since the pandemic, people who have left one job for a new one have been getting historically large wage increases.

    Many businesses then pass on the higher labor costs to customers through price increases, fueling inflation.

    The Fed would like to slow — though not eliminate — wage gains, so it is hoping that its rate hikes will bring down the number of jobs that companies advertise.

    Fed Chair Jerome Powell is scheduled to speak about inflation and the labor market in a highly-anticipated speech Wednesday afternoon. Wall Street traders in particular will watch his speech closely for any signs he may give of how much further the Fed will raise interest rates.

    Powell’s appearance comes two days before the U.S. releases critical employment data for November.

    The Fed has hiked its benchmark interest rate six times this year to a range of 3.75% to 4%, the highest in about 15 years, in a bid to quell rampant inflation. Prices have soared 7.7% in the past year, near the highest in four decades. The Fed typically seeks to slow price increases by weakening the economy and pushing up unemployment, which reduces spending and often brings down inflation.

    However, with job openings so high — they hit a two-decade record of 11.9 million in March — many Fed officials hope they can bring down wage increases and inflation by sharply reducing openings, without causing layoffs to rise significantly. Many economists are skeptical that such an approach can succeed, because historically layoffs have also risen when job openings have gone down.

    Wednesday’s report — known as the Job Openings and Labor Turnover Survey — provides greater detail about the labor market, while the monthly jobs report on Friday includes the unemployment rate and the number of jobs added or lost each month.

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  • AP Interview: IMF chief urges targeted COVID policy in China

    AP Interview: IMF chief urges targeted COVID policy in China

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    BERLIN — It is time for China to move away from massive lockdowns and toward a more targeted approach to COVID-19, the head of the International Monetary Fund said days after widespread protests broke out, a change that would ease the impact to a world economy already struggling with high inflation, an energy crisis and disrupted food supply.

    IMF Managing Director Kristalina Georgieva urged a “recalibration” of China’s tough “zero-COVID” approach aimed at isolating every case “exactly because of the impact it has on both people and on the economy.”

    Georgieva made the comments in a wide-ranging interview Tuesday with The Associated Press in which she also cautioned it is too early for the U.S. Federal Reserve to back off on its interest rate increases and held out hope that an energy crisis driven by Russia’s war in Ukraine will speed the push into renewables in Europe. She also called increasing hunger in developing countries “the world’s most significant solvable problem.”

    In China, protests erupted over the weekend in several cities and Hong Kong in the biggest show of public dissent in decades. Authorities have eased some controls but have showed no sign of backing off their larger strategy that has confined millions of people to their homes for months at a time.

    “We see the importance of moving away from massive lockdowns, being very targeted in restrictions,” Georgieva said Tuesday in Berlin. “So that targeting allows to contain the spread of COVID without significant economic costs.”

    Georgieva also urged China to look at vaccination policies and focus on vaccinating the “most vulnerable people.”

    A low rate of vaccinations among the elderly is a major reason Beijing has resorted to lockdowns, while the emergence of more-contagious variants has put increasing stress on the effort to prevent any spread.

    Lockdowns have slowed everything from travel to retail traffic to car sales in the world’s second-largest economy. Georgieva urged it “to adjust the overall approach to how China assesses supply chain functioning with an eye on the spillover impact it has on the rest of the world.”

    The Washington-based IMF expected the Chinese economy to grow only 3.2% this year, below the global average for the year, a rare occurrence.

    The Communist Party has taken steps in the direction Georgieva recommends, switching to isolating buildings or neighborhoods with infections instead of whole cities and made other changes it says are aimed at reducing the human and economic cost. But a spike in infections since October has prompted local authorities facing pressure from above to impose quarantines and other restrictions that residents say are too extreme.

    Asked about criticism of the crackdown on protests, a Chinese Foreign Ministry spokesman has defended Beijing’s anti-virus strategy and said the public’s legal rights were protected by law.

    The government is trying to “provide maximum protection to people’s lives and health while minimizing the COVID impact on social and economic development,” Zhao Lijian said.

    While China’s policy ripples out worldwide, Georgieva said the greatest risk facing the global economy is high inflation that requires central banks to raise interest rates, making credit more expensive for consumers and businesses. Coupled with that is the need for governments to take care of the most vulnerable people without undermining central bank efforts with excess spending.

    “Policymakers are faced with the very difficult time in the year ahead,” she said. “They have to be disciplined in the fight against inflation. Why? Because inflation undermines the foundation for growth, and it hurts the poor people the most.”

    Asked if the U.S. Federal Reserve should pause interest rate increases that are strengthening the dollar and putting pressure on poorer countries, Georgieva said that “the Fed has no option but to stay the course until credible decline in inflation.”

    “They owe it to the U.S. economy, they owe it to the world economy, because what happens in the United States if inflation does not get under control, can have also spillover impacts for the rest of the world,” the Bulgarian IMF chief said.

    Inflation data are still too high in the U.S. and Europe and “the data at this point says: too early to step back,” Georgieva said.

    She warned that international tensions between the China and the West and between Russia and the West threatened to restrict trade and its beneficial effect on economic growth and prosperity. She added that while there are concerns about supply chains disrupted by the pandemic, “we have to work harder on finding a way to counter these protectionist instincts” while being honest about supply concerns.

    Georgieva said the world was already seeing signs of increased hunger before Russia’s invasion of Ukraine disrupted grain supplies to Africa and the Middle East. More investment in resilient agriculture and support for small farmers as well as efforts to reduce food waste would be part of the solution, she said.

    “We have to admit in the wealthiest societies, in the wealthier families, that we waste food on a daily basis, even in quantities that are sufficient to feed the rest of the world,” she said. “Look, hunger is the world’s most significant solvable problem. It is solvable. And yet not only we haven’t solved it, but in the last years, hunger has been going up and up.”

    The world needs “a focus on food security in a comprehensive way that reduces waste, increases productivity, and most importantly, focuses more attention on small-scale farming, where a great deal of livelihoods of people, especially in developing countries like that, would go a long way to bring this solvable problem finally to an end,” she said.

    Russia’s war also created an energy crisis after Moscow cut off most natural gas supplies to Europe as Western allies supported war-torn Ukraine. The resulting high energy prices have created an opportunity to “accelerate the transition to low-carbon energy supplies” through incentives for green investments.

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  • Asian shares fall as China protests, lockdowns cloud outlook

    Asian shares fall as China protests, lockdowns cloud outlook

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    BANGKOK — Shares skidded in Asia on Monday, with Hong Kong briefly dipping more than 4% following weekend protests in various cities over China’s strict zero-COVID lockdowns.

    U.S. futures were lower after a mixed, shortened session Friday on Wall Street. Oil prices fell more than $2 a barrel.

    The unrest in China is the boldest show of public dissent against the ruling Communist Party in years. It followed complaints that policies aimed at eradicating the coronavirus by isolating every case might have worsened the death toll in an apartment fire in Urumqi in the northwestern Xinjiang region.

    China’s infection rate has been lower than in the United States and other countries, but the authorities are facing rising resentment over the economic and human costs of the approach known as “zero-COVID” as businesses close and families are isolated for weeks with limited access to food and medicine.

    “For investors, when it comes to China, trying to predict with any degree the reopening certainty that has no certainty, basis, or track record to go by is looking like a dangerous game in the context of the disquietening protests and the colossal challenge China’s leaders now have on their hands,” Stephen Innes of SPI Asset Management said in a commentary.

    By midday Monday, Hong Kong’s Hang Seng was 2% lower at 17,225.41 and the Shanghai Composite index had declined 1% to 3,069.66.

    On Friday, China’s central bank sought to boost the economy by easing its reserve requirement ratio, the proportion of assets banks must hold in reserve, by a quarter percentage point to 7.8%.

    “The cuts are a bid to support weakening economic growth dragged down not only by COVID restrictions but also a deeper property market rout,” Mizuho Bank noted in a report. However, it said, that news was overshadowed by rising numbers of virus cases and the protests.

    Tokyo’s Nikkei 225 index shed 0.5% to 28,131.00 and the Kospi in Seoul lost 1.1% to 2,411.34. In Sydney, the S&P/ASX 200 shed 0.4% to 7,230.30 following the release of weaker than expected retail sales data.

    Bangkok’s SET was 0.1% lower while the Sensex in Mumbai added 0.2%.

    On Friday, when markets closed at 1 p.m. Eastern following the Thanksgiving day holiday on Thursday, the S&P 500 fell less than 0.1% to close at 4,026.12.

    Nearly 70% of stocks in the benchmark index gained ground, but the broader market was dragged lower by technology companies, whose high valuations give them more heft in pushing the market higher or lower.

    The Dow Jones Industrial Average rose 0.5% to 34,347.03. The Nasdaq fell 0.5% to 11,226.36.

    Long-term bond yields were relatively stable but still hovered around multi-decade highs. The yield on the 10-year Treasury, which influences mortgage rates, rose to 3.70% from 3.69% late Wednesday.

    Investors remain concerned about whether the Federal Reserve can tame the hottest inflation in decades by raising interest rates without going too far and causing a recession.

    The central bank’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. It has warned it may have to ultimately raise rates to previously unanticipated levels to rein in high prices on everything from food to clothing.

    Wall Street gets several big economic updates this week. The Conference Board business group will release its November report on consumer confidence and the U.S. government will release its closely watched monthly employment report.

    In other trading Monday, U.S. benchmark crude oil lost $2.24 to $74.04 per barrel in electronic trading on the New York Mercantile Exchange. It gave up $1.66 on Friday to $76.28 per barrel.

    Brent crude, which is used to price oil for international trading, sank $2.37 to $81.34 per barrel.

    The dollar fell to 138.57 Japanese yen from 139.28 yen. The euro slipped to $1.0358 from $1.0379.

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  • EU, US edging toward trade spat when both want unity instead

    EU, US edging toward trade spat when both want unity instead

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    BRUSSELS — The European Union and the United States are treading precariously close to a major trans-Atlantic trade dispute at a time when the two Western giants want to show unity in the face of challenges from Russia and China.

    EU trade ministers on Friday insisted they would be forced to respond if Washington stuck to all the terms of its Inflation Reduction Act, which is favorable to local companies through subsidies and, according to the EU, will unfairly discriminate against its firms that want to compete for contracts.

    “Nobody wants to get into a tit-for-tat or subsidy race. But what the U.S. has done really isn’t consistent with the principles of free trade and fair competition,” Irish Trade Minister Leo Varadkar said.

    Even though the allies have stood shoulder to shoulder by imposing strict sanctions against Russia since the Feb. 24 invasion of Ukraine, they cannot gloss over the trade differences.

    “What we are asking for is fairness. We want and expect European companies and exports to be treated in the same way in the U.S. as American companies and exports are treated in Europe,” EU Commission Vice President Valdis Dombrovskis said.

    And beyond the European Commission, which negotiates on behalf of the 27 member nations on trade issues, the concerns are largely shared in EU national capitals, too.

    “All the member states are concerned,” said Czech Trade Minister Jozef Sikela, who chaired the emergency meeting.

    The Czech minister said the EU still hopes divergences can be solved during a Dec. 5 meeting of the task force that the U.S. and EU have set up, with the possibility that the bloc would be treated like Canada and Mexico and be exempted from the subsidy conditions.

    Trade disputes have been a red line for decades in trans-Atlantic relations, highlighted by fights over aircraft subsidies and steel exports and affecting everything from hormone-treated beef to liquor exports.

    Planned subsidies under the Inflation Reduction Act passed by the U.S. Congress in August, are especially grating for the EU. For example, electric car buyers are eligible for a tax credit of up to $7,500 as long as the vehicle runs on a battery built in North America with minerals mined or recycled on the continent.

    The EU believes that the measure is a potential trans-Atlantic trade barrier discriminating against foreign producers. Potential actions the EU can take are complaints before the World Trade Organization, trade sanctions or upping subsidies for their own companies.

    Those considerations have to weighed against the need to cooperate on the geopolitical stage and the essence of showing a united front.

    “We see that the parts from the East actually are trying to divide us,” Estonian Trade Minister Kristjan Jarvan said. “And of course economy plays a huge role in that.”

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