WASHINGTON — Inflation at the wholesale level rose 8.5% in September from a year earlier, the third straight decline though costs remain at painfully high levels.
Wednesday’s report from the Labor Department also showed that the producer price index — which measures price changes before they reach the consumer — rose 0.4% in September from August, after two months of declines.
The September monthly increase was larger than expected and was pushed higher by a big increase in hotel room costs and higher prices for other services. Food costs also rose in September from August, after a slight drop the previous month. The cost of fresh and dry vegetables soared nearly 16% in September from August.
The larger-than-expected monthly increase in overall wholesale prices suggests inflation pressures are still strong in the U.S. economy, with the Federal Reserve likely to continue its rapid pace of interest rate hikes at its next meeting in November.
Wholesale gas costs fell last month, but will likely reverse in the coming months now that oil prices are rising again in the wake of planned production cuts by many oil exporting nations. Grocery bills are rising at their fastest pace in decades, and prices at the gas pump are rising again, squeezing consumers’ budgets.
Excluding the volatile food and energy categories, core prices rose 0.3% in September from August for the third straight month, and 7.2% compared with a year earlier.
Overall wholesale inflation peaked at 11.7% in March.
Services prices — including health care, lodging, and shipping — rose 0.4% in September, the most in three months. Federal Reserve officials have recently cited rising services prices as a source of concern, because they can take longer to reverse since they mostly reflect the impact of rising wages.
Health care costs rose last month, driven higher by a 0.7% increase in nursing home prices.
Stubbornly-high inflation is draining Americans’ bank accounts, frustrating small businesses and raising alarm bells at the Federal Reserve. It is also causing political headaches for President Joe Biden and congressional Democrats, most of whom will face voters in mid-term elections in less than a month.
The Fed has boosted its benchmark short-term interest rate by three percentage points since March to combat rising prices. It’s the fastest pace of rate hikes since the early 1980s. Higher rates are intended to cool consumer and business borrowing and spending and bring down inflation..
Wednesday’s producer price data captures inflation at an earlier stage of production and can often signal where consumer prices are headed. It also feeds into the Fed’s preferred measure of inflation, which is called the personal consumption expenditures price index.
Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.
The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.
Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase.
Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.
The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.
A worker installs the instrument cluster for the Ford Motor Co. battery powered F-150 Lightning trucks under production at their Rouge Electric Vehicle Center in Dearborn, Michigan on September 20, 2022.
Jeff Kowalsky | AFP | Getty Images
However, Wednesday’s data shows the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester on Tuesday said “there has been no progress on inflation.” Following the PPI release, traders priced in an 81.3% chance of a three-quarter point hike, the same as a day ago.
Stock market futures trimmed gains following the news, while Treasury yields were little changed on the session.
The PPI release comes a day ahead of the more closely watched consumer price index. The two measures differ in that PPI measures the prices received at the wholesale level while CPI gauges the prices that consumers pay.
Some two-thirds of the increase in PPI was attributed to a 0.4% gain in services, the BLS said. A big contributor to that increase was a 6.4% jump in prices received for traveler accommodation services.
Final demand goods prices also rose 0.4% on the month, pushed by a 15.7% advance in the index for fresh and dry vegetables.
Home buyers nationwide are pulling back from the market due to high interest rates. Igor Popov, chief economist at Apartment Listing, joined Elaine Quijano to discuss where the housing market is heading.
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LONDON — Try as she might, Liz Truss just can’t calm the markets.
Despite reversing her plan to cut tax for the highest earners, bringing forward a more detailed budget statement by almost a month and halting the appointment of a controversial senior civil servant to oversee the Treasury, the Bank of England was again forced to step in to try to stabilize market turbulence.
Insiders pointed to the surprise appointment of James Bowler to the Treasury top job, passing over Antonia Romeo, who it was widely briefed had got the role, as a sign of No. 10’s anxiety.
“The PM is panicking and reaching for almost anything that she can do to calm the situation. She was so burnt by the fallout from mini-budget that anything that seemed bold, she now wants to massively trim back,” said a senior Whitehall official.
Treasury officials say that Chancellor Kwasi Kwarteng’s tone in the past week has become markedly more conciliatory as he tries to steady the buffs.
But in spite of these U-turns, the current market unease may be out of the government’s hands.
The so-called mini budget came at a particularly fragile time for the economy, caused by high inflation and the Bank of England’s attempts to end a policy that saw it buy up huge quantities of government debt, originally an attempt to stabilize the economy in the wake of the 2008 financial crisis.
Kwarteng’s tax cuts, presented without any detail about how they would be funded, spooked the markets, triggering a crisis at U.K. pension funds because the huge spike in yields forced them to bonds — but that then forced prices down further.
The Bank of England intervened with a £65 billion check book to give pension funds more time to raise cash and stop the so-called doom loop taking hold. Governor Andrew Bailey said Tuesday the Bank’s emergency support will definitely end Friday, prompting fears this may not be enough time.
The resulting crisis leaves Britain’s new prime minister with an intensifying political problem, as support ebbs away the longer it takes to tame the markets.
Jill Rutter, senior fellow at the Institute for Government and former Treasury official, said: “Paradoxically, having said they were the people to take on the Treasury orthodoxy, they are now walking on such thin ice that they are complete prisoners of the most orthodox orthodoxy.”
Staying alive
The race is now on for Kwarteng and his Treasury team to come up with a way to restore credibility by the end of October, when he is due to explain how the tax cuts will be paid for.
“It’s really difficult to see how you can have a vaguely deliverable plan to bring that back under control,” said the IfG’s Rutter, who pointed out that trying to find money from one-off events such as asset sales would not help the underlying fiscal position.
“If you’ve still got a pension fund problem with collateral issues, what [the government] give you on the 31st will probably not be that relevant, because you’ll still be dealing with a bigger problem,” said one markets strategist, speaking of condition of anonymity.
“If you as a government have somewhat stabilized [pension funds] … the currency is going to react based on how [the market] views the overall fiscal long-term sustainability.”
But the government’s dented reputation will be hard to rebuild. “If the root cause is fiscal policy, then the issue probably isn’t going to go away until the markets’ concerns over fiscal policy have eased,” said Paul Dales, chief UK economist at Capital Economics.
“That makes the chancellor’s medium-term fiscal plan on 31 October a very big event for the gilt market, the pound and the Bank of England. Our feeling is that the chancellor will have to work very hard indeed to convince the markets that his fiscal plans are sustainable.”
Ministers originally said their plan for £43 billion in tax cuts would be funded by borrowing and economic growth, but experts now warn it will require reductions in public spending.
The Institute for Fiscal Studies think tank predicted the chancellor would need to spend £60 billion less by 2026-2027, while the International Monetary Fund released a report calculating that high prices will last longer in the U.K. than many other major economies..
Ahead of the mini-budget, the Resolution Foundation’s Torsten Bell spelled out why this could have a lasting effect. “The big picture in a world where interest rates are rising and inflation is high, is that you don’t want to be seen as the one country that everyone decides is a bad bet.”
“Showing how serious you are is important,” he added. “If we are really arguing that our growth strategy is to borrow lots more and then that will pay for itself then they [the markets] don’t believe that.”
One government official speculated that in order to fill the hole in public finances and make the numbers add up Truss and Kwarteng would be forced to U-turn on further aspects of their mini-budget, such as the decision to cancel a planned corporation tax rise.
In the meantime, it’s not just the markets that remain unconvinced by Truss’ and Kwarteng’s approach.
At the chancellor’s debut session of Treasury questions in the Commons Tuesday, senior Tory MPs queued up to openly cast aspersion on his strategy.
Former Cabinet minister Julian Smith asked for reassurance that tax cuts “will not be balanced on the backs of the poorest people in the country” — normally an attack line reserved for opposition MPs.
Treasury committee Chairman Mel Stride warned that if Kwarteng did not seek buy-in from fellow MPs on the next fiscal statement it would upset the markets again.
The PM’s spokesman reiterated Tuesday that Truss is “committed to the growth measures set out by the chancellor” and “the fundamentals of the U.K. economy remain strong.”
While that statement continues to be tested, so will the position of the prime minister and her chancellor.
Annabelle Dickson contributed reporting.
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Aside from the global financial crisis and the peak of the Covid-19 pandemic, this is “the weakest growth profile since 2001,” the IMF said in its World Economic Outlook published Tuesday. Its GDP estimate for this year remained steady at 3.2%, which was down from the 6% seen in 2021.
More than a third of the global economy will see two consecutive quarters of negative growth, while the three largest economies — the United States, the European Union and China — will continue to slow, the report said.
“Next year is going to feel painful,” Pierre-Olivier Gourinchas, the IMF’s chief economist told CNBC Tuesday on the back of the report. “There’s going to be a lot of slowdown and economic pain,” he said.
‘Volatile conditions’
In its report, the IMF laid out three major events currently hindering growth: Russia’s invasion of Ukraine, the cost-of-living crisis and China’s economic slowdown. Together, they create a “volatile” period economically, geopolitically and ecologically.
The war in Ukraine continues to “powerfully destabilize the global economy,” according to the report, with its impacts causing a “severe” energy crisis in Europe, along with destruction in Ukraine itself.
The IMF anticipates global inflation will peak in late 2022, increasing from 4.7% in 2021 to 8.8%, and that it will “remain elevated for longer than previously expected.”
Global inflation will likely decrease to 6.5% in 2023 and to 4.1% by 2024, according to the IMF forecast. The agency noted the tightening of monetary policy across the world to combat inflation and the “powerful appreciation” of the U.S. dollar against other currencies.
China’s “zero-Covid policy” — and its resulting lockdowns — continue to hamper its economy. Property makes up around one fifth of China’s economy, and as the market struggles the ramifications continue to be felt globally.
For emerging markets and developing economies, the shocks of 2022 will “re-open economic wounds that were only partially healed following the pandemic,” the report said.
The IMF also spoke of a “deteriorated” economic outlook in its Global Financial Stability Report, released Tuesday just after its World Economic Outlook. “The global environment is fragile with storm clouds on the horizon,” the report said.
Policymakers around the world are facing an “unusually challenging financial stability environment” where further shocks “may trigger market illiquidity, disorderly sell-offs, or distress,” the report added.
Speaking at the 2022 Annual Meetings of the International Monetary Fund and the World Bank Group, Axel Van Trotsenburg, the World Bank’s managing director of operations, echoed the sentiment in both reports.
“We see extreme poverty again increasing … The number of people living on $7 … That’s 47% of the world population [who are living] in poverty. So this is very clear, people are hurting,” van Trotsenburg told CNBC’s Geoff Cutmore Tuesday.
World economy is ‘historically fragile’
The IMF also highlighted that the risk of monetary, fiscal, or financial policy “miscalibration” had “risen sharply,” while the world economy “remains historically fragile” and financial markets are “showing signs of stress.”
The report Tuesday suggested “front-loaded and aggressive monetary tightening” is needed, but that a “large” downturn is not “inevitable,” citing tight labor markets in the U.S. and U.K.
The organization also highlighted that “fiscal policy should not work at cross purposes with monetary authorities’ efforts to quell inflation.” Those comments reflect the rare statement issued late last month by the IMF after U.K. Prime Minister Liz Truss laid out a series of tax cuts. The IMF suggested Truss should “re-evaluate” the fiscal package.
When asked if the U.K. was a “poster child for economic illiteracy,” Gourinchas said “certainly not.”
“We’ve welcomed the recent development, the fact that the government has announced a fiscal event at the end of the month and the OBR [Office for Budget Responsibility] is going to be involved in evaluating the proposals,” he said.
“I think all of this is going in the direction of ‘let’s have a three-sixty on fiscal plans and make sure we’re all pointing in the right direction’,” Gourinchas told CNBC.
Winter 2022 will be challenging, but 2023 ‘will likely be worse’
The energy crisis is also weighing heavily on the world’s economies, particularly in Europe, and it “is not a transitory shock,” according to the report.
“The geopolitical re-alignment of energy supplies in the wake of Russia’s war against Ukraine is broad and permanent,” the report added. “Winter 2022 will be challenging for Europe, but winter 2023 will likely be worse,” the IMF said.
Europe’s approach to the energy crisis has had a mixed response.
U.S. Sen. Chris Murphy criticized Europe’s overreliance on Russian energy, saying it was a mistake for Europe “to have been welded to Russia when it comes to energy” in an interview with CNBC’s Hadley Gamble at the Warsaw Security Forum in Poland on Oct. 4.
“America needs to play a real leadership role. America is the swing producer, not Saudi Arabia. We should have gotten that right starting in March,” he said, referring to Russia’s invasion of Ukraine on Feb. 24.
“Lack of gas, very expensive prices of gas and electricity all over Europe – this is the real price of the agreement between Germany and Russia,” Morawiecki told CNBC’s Charlotte Reed in an exclusive interview.
Cathie Wood, Founder, CEO, and CIO of ARK Invest, speaks at the 2022 Milken Institute Global Conference in Beverly Hills, California, May 2, 2022.
David Swanson | Reuters
The Federal Reserve likely is making a mistake in its hard-line stance against inflation Ark Investment Management’s Cathie Wood said Monday in an open letter to the central bank.
Instead of looking at employment and price indexes from previous months, Wood said the Fed should be taking lessons from commodity prices that indicate the biggest economic risk going forward is deflation, not inflation.
“The Fed seems focused on two variables that, in our view, are lagging indicators –– downstream inflation and employment ––both of which have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates,” Wood said in the letter posted on the firm’s website.
Specifically, the consumer price and personal consumption expenditures price indexes both showed inflation running high. Headline CPI rose 0.1% in August and was up 8.3% year over year, while headline PCE accelerated 0.3% and 6.2% respectively. Both readings were even higher excluding food and energy, which saw large price drops over the summer.
On employment, payroll growth has decelerated but remains strong, with job gains totaling 263,000 in September as the unemployment rate fell to 3.5%.
But Wood, whose firm manages some $14.4 billion in client money across a family of active ETFs, said falling prices for items such as lumber, copper and housing are telling a different story.
The Fed has approved three consecutive interest rate increases of 0.75 percentage point, mostly by unanimous vote, and is expected to OK a fourth when it meets again Nov. 1-2.
“Unanimous? Really?” Wood wrote. “Could it be that the unprecedented 13-fold increase in interest rates during the last six months––likely 16-fold come November 2––has shocked not just the US but the world and raised the risks of a deflationary bust?”
Inflation is bad for the economy because it raises the cost of living and depresses consumer spending; deflation is a converse risk that reflects tumbling demand and is associated with steep economic downturns.
To be sure, the Fed is hardly alone in raising rates.
Nearly 40 central banks around the world approved increases during September, and the markets have largely expected all the Fed’s moves.
However, criticism has emerged recently that the Fed could be going too far and is at risk of pulling the economy into an unnecessary recession.
“Without question, food and energy prices are important, but we do not believe that the Fed should be fighting and exacerbating the global pain associated with a supply shock to agriculture and energy commodities caused by Russia’s invasion of Ukraine,” Wood wrote.
The Fed is expected to follow the November hike with a 0.5 percentage point rise in December, then a 0.25 percentage point move early in 2023.
One area of the market known as overnight indexed swaps is pricing in two rate cuts by the end of 2023, according to Morgan Stanley.
A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
New York CNN Business
—
September’s hotly anticipated jobs data ended up cooling markets on Friday. Stocks fell sharply as investors evaluated the report, which showed more jobs than expected were added to the US economy and indicated that more pain-inflicting interest rate hikes from the Federal Reserve lie ahead.
But a breakdown of the numbers shows that the Fed’s plans to weaken the labor market to fight persistent inflation may already be working, just not for everybody.
White-collar office workers appear to be feeling the brunt of the Fed’s actions: The financial and business sector saw a large decline in employment last month. Legal and advertising services also experienced drops. Service and construction workers, meanwhile, are still thriving.
What’s happening: The US economy added 263,000 jobs in September, higher than analyst estimates of 250,000. The unemployment rate came in at 3.5%, down from 3.7% in August.
Leading the gain in jobs was the leisure and hospitality industry, which added 83,000 jobs in September — and employment in food services and drinking places made up 60,000 of those jobs alone. Manufacturing and construction also came in hot, adding 22,000 and 19,000 jobs, respectively.
The largest non-governmental losses in jobs came from the financial industry, which shed 8,000 between August and September. Large banks hire in cycles, extending offers to recent graduates in the early fall months. That makes this September’s drop particularly significant.
Business support services — such as telemarketing, accounting and administrative and clerical jobs — are also bleeding jobs. The sector lost 12,000 in September. Meanwhile, legal services lost 5,000 jobs, and advertising services also dropped 5,000 jobs.
What it means: The Federal Reserve’s hawkish policy appears to be cooling certain parts of the economy, but not others. Finance workers are likely beginning to worry as their industry depends on stock and lending markets which have been particularly hard hit by Fed actions.
Friday’s numbers indicate that we’re beginning to see that impact in the employment data.
What remains to be seen is whether the Fed can cool the economy just by loosening employment in white-collar industries or if these losses will trickle down to other industries, hurting lower-income workers.
Coming up:Earnings season begins in earnest this week with big banks like JPMorgan, Citigroup
(C), Morgan Stanley
(MS) and BlackRock
(BLK) reporting. Investors will be watching closely for any guidance on hiring and layoff plans.
Two key inflation indicators, PPI and CPI are also set to be released. Expect markets to react poorly if inflation comes in hot.
A panel of top US economists just released its economic outlook for the next year, and it’s not great.
The panel of 45 forecasters, led by the National Association for Business Economics (NABE), said they expected slower growth, higher inflation, higher interest rates, and weakening employment in both 2022 and 2023 than they previously expected.
Most of the worries come down to the Federal Reserve’s interest rate policy.
“More than three-quarters of respondents believe the odds are 50-50 or less that the economy will achieve a ‘soft landing’,” said NABE Vice President Julia Coronado. “More than half the panelists indicate that the greatest downside risk to the U.S. economic outlook is too much monetary tightness.”
NABE panelists downgraded their median forecast for real GDP for the fourth quarter of 2022 to a 0.1% increase, compared to a 1.8% increase in the May 2022 survey. The vast majority of respondents placed more than a 25% probability of a recession occurring in 2023, with the most likely start date in the first quarter.
The latest report comes as a growing number of economists are predicting that recession is imminent. Former US Treasury Secretary Larry Summers told CNN on Thursday that it’s “more likely than not” the US will enter a recession, calling it a consequence of the “excesses the economy has been through.”
Friday’s jobs report showed that the share of workers telecommuting or working from home because of the pandemic ticked lower — falling to just 5.2% in September from 6.5% in August.
Fully remote work in the United States, which many predicted would remain the norm long after the pandemic, appears to be edging away, especially as the job market loosens for white collar workers and employees have less leverage.
Last week, a KPMG survey of US-based CEOs found that two-thirds believed in-office work would be the norm within the next three years.
Still, it may not be enough to help an ailing commercial real estate market, where the outlook is dire. New York City office properties declined by nearly 45% in value in 2020 and are forecast to remain 39% below their pre-pandemic levels long-term as hybrid policies continue, according to a recent study from the National Bureau of Economic Research.
Looking forward: The Bureau of Labor Statistics has noted that while hybrid work may still be popular, Covid-19 is no longer fueling work from home trends. The October report will rephrase its telework questions to remove references to the pandemic.
Since May 2020, each jobs report has asked: “At any time in the last four weeks, did you telework or work at home for pay because of the Coronavirus pandemic?”
In May 2020, 35.4% answered yes.
Starting next month, the question will be revised. “At any time in the last week did you telework or work at home for pay?” it will ask, limiting the timeline and eliminating any reference to the pandemic.
The US bond market is closed for Columbus Day/Indigenous Peoples’ Day.
Coming later this week:
▸ Third quarter earnings season begins. Expect reports from big banks like JPMorgan Chase
(JPM), Wells Fargo
(WFC), Citigroup
(C), Morgan Stanley
(MS), PNC
(PNC) and US Bancorp
(USB) and consumer staples like Pepsi
(PEP), Walgreen
(WBA)s and Domino’s
(DMPZF).
▸ CPI and PPI, two closely watched measures of inflation in the US are also due to be released.
Ahead of the release of the latest consumer price index reading this week, Allianz Chief Economic Adviser Mohamed El-Erian told CBS’ “Face The Nation” Sunday that he predicts headline inflation “will probably come down to about 8%,” but that core inflation “is still going up.”
Core inflation is what measures the drivers of inflation and how broad they are, so El-Erian said an increase in core inflation means “we still have an inflation issue.”
Even if core inflation is still on the rise, however, El-Erian said it will eventually come down.
“The question is, does it come down with a slowdown in the economy or a major recession?” he said on “Face the Nation.”
The oil producer group OPEC+ announced its largest supply cut since 2020 on Wednesday, and El-Erian said this decision “does hurt the U.S.,” as it risks causing inflation to increase again. But he said the cut did not come as a surprise since the group is looking to protect oil prices in the face of declining demand.
“That’s what they do,” he said. “But it’s certainly not good news for the U.S. economy.”
Mohamed El-Erian, Allianz Chief Economic Adviser, said the ” main drivers of inflation and how broad they are is still going up.” He joins “Face the Nation” to discuss the “unsettling volatility” of the market right now.
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—
“Can you tell me where we’re headin’?” Bob Dylan asks in his 1978 song “Señor.”
Is it “Lincoln County Road or Armageddon? Seems like I been down this way before. Is there any truth in that, señor?”
Yes, we’ve been here before, at least if you take President Joe Biden at his word. At a fundraiser in New York City Thursday, Biden said, “First time since the Cuban missile crisis, we have a direct threat of the use (of a) nuclear weapon if in fact things continue down the path they are going.” Referring to Russian President Vladimir Putin’s threat to go nuclear in his war with Ukraine, the President observed, “I don’t think there’s any such thing as the ability to easily (use) a tactical nuclear weapon and not end up with Armageddon.”
As historian Julian Zelizer wrote, “Those were unsettling words for a nation to hear from the commander in chief.” Biden referred to “the Cuban missile crisis in October 1962, when the world seemed to teeter on the brink of nuclear war as the US and the Soviet Union faced off over missiles in Cuba.”
“Some planned escape routes from major cities while others stocked up on transistor radios, bottled water and radiation kits for their families. Although nobody knew it at the time, the danger was even greater than most thought as the leaders didn’t have full control of the situation. In the end, diplomacy won out, a deal was reached and disaster was averted.”
Nick Anderson/Tribune Content Agency
But the prospect of annihilating humanity in a nuclear exchange is so great that such brinksmanship should never be allowed to happen again. Surely Presidents Ronald Reagan and Mikhail Gorbachev were right when they agreed in 1985 that “a nuclear war cannot be won and must never be fought.”
US national security officials privately said there was no new intelligence to indicate that Putin is moving to carry out his threat and couldn’t explain why Biden made the extraordinary statement. But its implications were clear, Zelizer argued. “This historic moment in the war between Russia and Ukraine is an important reminder that the US has let nuclear arms control fall from the agenda, and the consequences are dangerous.”
Putin’s back is against the wall as Ukraine continues to retake territory from the Russians. Peter Bergen wrote that Putin is “facing growing criticism from Russians on both the left and the right, who are taking considerable risks given the draconian penalties they can face for speaking out against his ‘special military operation’ in Ukraine.”
“With even his allies expressing concern, and hundreds of thousands of citizens fleeing partial mobilization, an increasingly isolated Putin has once again taken to making rambling speeches offering his distorted view of history.”
One lesson of history is that military defeat endangers dictatorial leaders. “Putin’s gamble may lead to a third dissolution of the Russian empire, which happened first in 1917 as the First World War wound down, and again in 1991 after the fall of the Soviet Union,” Bergen noted. “It could unfold once more as Putin’s dream of seizing Ukraine seems to be coming to an inglorious end.”
It’s striking to recall, as Frida Ghitis did, that “seven months ago, some viewed Putin as something of a genius. That myth has turned to dust. The man who helped suppress uprisings, entered wars and tried to manipulate elections across the planet now looks cornered.”
In Ukraine, “Russia’s trajectory looks like a trail of war crimes, with hundreds of bombed hospitals, schools, civilian convoys, and mass graves filled with Ukrainians. And still Ukraine is pushing ahead, is doing very well in fact, and very possibly winning this war,” wrote Ghitis.
Lisa Benson/GoComics.com
Biden took heat this summer for deciding to meet Saudi Crown Prince Mohammed bin Salman and walking away with little commitment from the Saudis to expand oil production. And then last week, the Saudi regime was instrumental in OPEC+’s decision to actually cut oil production in a move that benefits it and other oil-producing states including Russia.
“So much for cozying up to the Saudis – President Joe Biden’s much-hyped fist bump with Mohammed bin Salman during a trip to the Middle East back in July has turned into something of a slap across the face from the crown prince,” wrote David A. Andelman.
In the US, gasoline prices have started rising after weeks of declines, adding to the burdens Democrats face in trying to hold onto control of Congress in the midterm elections a month from now.
Higher oil prices come on top of Europe’s emerging energy crisis, with Russia sharply reducing its export of natural gas to the continent. As a result, Germany is among the nations that have instituted tough new curbs on energy use, wrote Paul Hockenos.
“Step into my Berlin office today and you’ll find everybody is wearing sweaters – I wear two, with wool socks and occasionally a scarf. … At home, my little family has sworn off baths (swift showers please), and lights are on only in the rooms we’re occupying. We’ve invested in a wool curtain inside our apartment’s front door to keep out the draft.”
“My friend Bill … hasn’t turned his heating on yet this year – no one I know has – and wears a sweater at home. He also has a new method of showering: one minute under warm water, turns it off, lathers up, and then rinses off.”
“Timing is everything,” said Garrett Hedlund in the 2011 song of that name.
“When the stars line up
And you catch a break
People think you’re lucky
But you know it’s grace…”
It works in reverse too. Just ask Linda Stewart, a New Mexico educator in her 60s who decided to retire one year into the pandemic lockdown. “Finances would be a little tight for a while, but some outside projects would supplement my income, so I felt confident I would be able to handle it,” she wrote in a new CNN Opinion series, “America’s Future Starts Now,” which explores the key issues in the midterm campaigns.
But, Stewart added, “by the end of the second year of lockdown, inflation started taking a toll and money was getting uncomfortably tight. Soon I was in the red each month, just trying to keep up. The usual suspects were groceries and gas, which meant cutting back on some of the more expensive food items and cooking meals at home.”
“I stopped driving for anything other than essentials. And with the continuing drought here in the Southwest, utility bills went through the ceiling. I cut back on watering my garden and turned the furnace down a few degrees in the winter and the air conditioning up a few in the summer. I switched to washing clothes mostly in cold water and only running the dishwasher once a week.”
The Federal Reserve Bank is raising interest rates at a rapid pace to conquer inflation. The “tight labor market – and the rapid wage growth it has spurred – is causing inflation to become more entrenched,” wrote economist Gad Levanon for CNN Business Perspectives. To curb the rise in prices, “the Federal Reserve is likely to drive the economy into a recession in 2023, crushing continued job growth.”
Dana Summers/Tribune Content Agency
At least 131 people have died due to Hurricane Ian. Why was it so deadly?
The storm’s course veered south as it approached Florida and rapidly intensified, Cara Cuite and Rebecca Morss noted. “Emergency managers typically need at least 48 hours to successfully evacuate areas of southwest Florida. However, voluntary evacuation orders for Lee County were issued less than 48 hours prior to landfall, and for some areas were made mandatory just 24 hours before the storm came ashore. This was less than the amount of time outlined in Lee County’s own emergency management plan.”
“While the lack of sufficient time to evacuate was cited by some as a reason why they stayed behind, there are other factors that may also have suppressed evacuations in some of the hardest hit areas.” Few people are aware of their evacuation zone, and some websites carrying that information crashed in the leadup to the storm’s arrival, Cuite and Morss wrote.
“People need time to decide what to do, pack belongings, find a place to go and arrange how to get there, often in the midst of heavy traffic and other complications and obstacles.” Other factors: “In addition to a false sense of security from prior near-misses among some residents, others who were in the areas of Florida hardest hit by Hurricane Ian may not have had any personal experience with such powerful storms. This is likely true for the millions of people who have moved to Florida over the past few decades…”
Geoff Duncan, a Republican and the current lieutenant governor of Georgia, is unsure about Herschel Walker’s prospects in the upcoming election. The Republican Senate candidate has denied reports alleging he paid for a girlfriend’s abortion in 2009.
“The October surprise,” Duncan wrote, “has upended the political landscape, throwing one of the nation’s closest midterm races into turmoil five weeks before Election Day, but it never had to be this way. Just as there should not be two Democrats representing a center-right state like Georgia in the US Senate, the Republican Party should not have found its chance of regaining a Senate majority hanging on an untested and unproven first-time candidate.”
“Walker won his Senate primary not because of his political chops or policy proposals. He trounced his opponents because of his performance on the football field 40 years ago and his friendship with former President Donald Trump – neither of which are guaranteed tickets to victory anymore.”
Organic chemistry is a famously difficult course and a traditional prerequisite for students who want to go on to medical school. Maitland Jones Jr., a master of the field and textbook author, taught the course at NYU – until 82 of the 350 students taking it “signed a petition because, they said, their low scores demonstrated that his class was too hard,” Jill Filipovic noted.
Then the university fired him.
An NYU spokesman “told the (New York) Times in defense of their decision to terminate Jones’s contract that the professor had been the target of complaints about ‘dismissiveness, unresponsiveness, condescension and opacity about grading.’ It’s worth noting that according to the Times, students expressed surprise that Jones was fired, which their petition did not call for.”
Some of the student complaints may have been valid, noted Filipovic, but she added that the case “raises important questions, chief among them how much power students, who universities seem to increasingly think of as consumers (and some of whom think of themselves that way), should have in the hiring, retention and firing of professors…”
“There are real consequences … to making higher education primarily palatable to those paying tuition bills – particularly when it comes to courses like organic chemistry, which are intended to be difficult. Future medical students do in fact need a rigorous science background in order to be successful doctors someday. Whether or not Jones was an effective teacher for aspiring medical students is up for debate, but in firing him, NYU is effectively dodging questions about the line between academic rigor and student well-being with potentially life-and-death matters at stake.”
Alessandro Garofalo/Reuters
The Securities and Exchange Commission fined Kim Kardashian nearly $1.3 million for failing to disclose she was paid to promote a crypto asset, EthereumMax, noted Emily Parker.
“This case reflects a much larger problem in the crypto industry: Celebrities are using their influence to promote cryptocurrencies, a notoriously complex and risky asset class, which can lead people to invest in coins or projects that they may not understand,” Parker observed.
“New coins and projects are constantly popping up, sometimes without sufficient warnings about the risks of investing … In such a fast-changing and confusing market, how do you distinguish winners from losers? It’s easy to imagine how a confident tweet by a celebrity could have a significant impact on a new investor.”
In agreeing to the fine, Kardashian “did a favor for the cryptocurrency industry. Such a high-profile example could cause other celebrities to think twice before shilling a token on social media.”
Until recently, the late-night television formula ruled, as Bill Carter noted. “On the air after 11 p.m. with a charismatic host, some comedy, a desk, a guest or two, maybe a band and then ‘Good night, everybody!’” Late-night shows seemed to be holding their own despite the rise of cord-cutting and the move to streaming.
But that’s changing, as Trevor Noah’s decision to give up hosting “The Daily Show” suggested. Carter wrote, “What many people watch now is not television: It’s whatever-vision, entertainment by any means on any device. What’s on late night is now often seen on subscriptions – and not late at night.”
Noah is leaving on a high note “after a seven-year run, marked by an impressive body of comedy work and growing acclaim,” Carter observed. In succeeding Jon Stewart as the show’s host, Noah “had a different beat in his head from the start. He wanted to refashion the show with a wider comedy vision, one looking more out at the world, instead of purely in at the United States, all informed by Noah’s South African-born global perspective.”
“It was a wise choice. Following Stewart was always going to be a potentially crippling challenge. Noah took it on and remade the show to his own specifications. One major sign of that was how strikingly diverse the show became.”
The oil cartel OPEC’s choice to pare back oil supply will harm the global economy and especially developing countries, U.S. Treasury Secretary Janet Yellen told the Financial Times in an interview published Sunday.
“I think OPEC’s decision is unhelpful and unwise — it’s uncertain what impact it will end up having, but certainly, it’s something that, to me, did not seem appropriate, under the circumstances we face,” Yellen said, adding that “we’re very worried about developing countries and the problems they face.”
The cartel of 13 oil-producing countries on Wednesday agreed to reduce production by 2 million barrels a day as of November, in the context of an already tight market and rising world inflation in part caused by high energy prices.
OPEC’s move marks a victory for Russia against the EU and the U.S. — Russia’s a major oil producer and an OPEC+ country that cooperates with the cartel. Ever since Moscow’s invasion of Ukraine, the West has been imposing economic sanctions against Russia, including on its oil sector, and encouraging other countries around the world to follow suit. Despite this effort, Moscow continues to sell its oil to countries like India, China and Turkey.
OPEC took the decision despite a flurry of trips by EU and U.S. leaders to Saudi Arabia in recent weeks to try to convince the country’s crown prince and new Prime Minister Mohammed bin Salman to ramp up oil production to fight inflation.
The world oil price already started to rise after the announcement on Wednesday, moving from around $86 to over $93 per barrel.
Meanwhile, Moscow congratulated “the truly balanced, thoughtful and planned work” of OPEC countries which served to “oppose the actions of the United States,” Kremlin spokesperson Dmitry Peskov said in a TV interview broadcasted on Sunday.
Mark Mobius, a veteran emerging-markets investor and co-founder of Mobius Capital Partners, has said that the world will have to live with high-interest rates and that this doesn’t mean the stocks will be affected. The legendary investor spoke to Udayan Mukherjee, global business editor, Business Today at a time when the global financial markets are in a state of turmoil, and the central banks across the world are trying to tame inflation by hiking rates.
Edited excerpts by Shagun Walia.
Q. This is not just the first bear phase that you are witnessing in your career, you have seen so many of them. From 2008, the global financial crash to the tech bust in 2000. Where would you rank this period in the scheme of the great problem patches that you have to negotiate in the stock market over the last many decades?
Well, this is relatively mild, when you look at it from the perspective of history. You must remember we were dealing in the markets in Brazil when inflation was 2000 per cent and in Argentina and places like that. The history of India also was checkered in those areas and of course, you had the Asian financial crisis, which was very severe. So, I would say this downturn is relatively mild at least at this stage and we can pretty much handle them.
Q- The caveat in your answer is at least at this stage, the fear is that it might be looking mild now. The way central banks are acting, it might get out of control very easily, next year. What would you say is the probability of that?
I think the good probability of higher interest rates is still there. The Fed in America leads the world in terms of interest rate hikes, except China. But, if you look at the Fed, they desire to tame inflation, which is now running the CPI at about 8 per cent. Their playbook says if you want to tame inflation, interest rates have got to be higher than 8 per cent. That means they are going to 9 per cent. So, when you talk about 3-4 per cent. It is a big problem. Things will go much higher if, CPI stays at this level.
Q. So, do you think that the Fed is panicking about inflation at this point in time? It realises that it might have made mistakes in the last year, trying to compensate for it.
Yes, I think they realised it late. They should have moved much earlier. And, now they are trying to catch up. The problem they are facing, however, is that unlike in the past, they didn’t have cryptocurrencies running around. I had a recent trip to the US, visiting various states and people are spending like crazy and one of the reasons is of course that they still have money leftovers, from the handouts. They have taken place from the COVID crisis. The current administration releasing oil from the strategic oil reserves means that gasoline prices can come down. And, that makes people very happy and very rich in America because gasoline is very important. Don’t forget the cryptocurrency, it probably represents 2 per cent of the money supply and the velocity is very high and people are spending. Another interesting note in America is that the unemployment rate is so low that we have noticed a lot of companies and restaurants are looking for people. They are not just around. What does that mean? That means people don’t want to work. They have got enough money to spend and live without having to work. So, it is going to be very difficult for the Fed to tame inflation in my view.
Q. You have a long memory, Mark – and you have been around financial markets in the 1970s. At that point, inflation reigned for many years, and the Fed was unable to tame it. And, all of us have read how bad at that time the economic and financial markets were then. Do you think what you said about inflation, we are at risk of that kind of protracted inflation? Or would it be alarmist to think about it at this point?
I think it is not alarmist to think. We have to live with high-interest rates. And, by the way, high-interest rates did not necessarily mean a downturn in the stock markets. It can be temporary, of course, as the stock markets are now reacting negatively to the possibility of higher rates. But, if you look at history, the stock markets were able to do well even with high-interest rates. That means, you got to find companies with pricing power, they are able to raise prices, with higher inflation. But there is no question that Fed got much higher and that could have more pain ahead. Provided that the CPI stays at this level and even goes higher.
Q. Your point is not necessarily about a stock market downturn, but the way interest rates are going up this time, it seems most economies may go into a recession. And, that has ramifications for the stock markets at least for the foreseeable future. Do you see that as a real risk? Do you think recession might be averted in some of the major economies?
Yes, I mean. I think the possibility of recession is definitely there. In fact, if you take the official definition of recession, we are already in a recession in the US because you’ve had two-quarters of negative growth. So, we are in a recession but a recession does not necessarily mean that people feel poor. You’re going to find that these two things are quite different in many ways. And, yes, the recession is hitting companies.
Q- What does all this mean for currencies, Mark? I mean the stock market is one part of the equation but you know there is a huge flux going on in the currency, well. In London, the pound has collapsed over the last one month. We are seeing many such reactions even in the Euro versus the Dollar. How do you think this part of the equation will play out between the Dollar and the other major currencies?
That’s quite remarkable when you could think about not only the pound sterling but the euro, where the euro went, it’s quite remarkable. What does that mean? It means that imports for these countries in Europe and the UK have become a lot more expensive, and more difficult because usually these imports are denominated in dollars. It means that the US, of course, can import a lot more cheaply and, the rest of the world of course is under pressure because you see all these currencies are weak against the US dollar.
The Indian rupee has been holding up fairly well but, if you look at other countries it’s been pretty much of a disaster for many. You must remember that even in situations like this you have companies that can do quite well. For example, in Turkey companies that can export and receive dollars and their costs are in Turkish lira, which is evaluated massively against the U.S dollar. These companies can do quite well. So, it’s not a complete disaster for everyone but certainly, something that’s quite remarkable, when we see the major currencies decline against the US dollar to such an extent.
Q- The fear at such times is that one part is how the macro plays out and the other is what is going on in the world of interest rates, in the world of currencies that at some point part of the world there will be a financial accident. You know this kind of collateral damage. Do you see the fear of that? Some kind of accident, which dislocates the system and something like a 2008 situation pans out?
Definitely, when you see prices move in such a remarkable fashion, where interest rates and where currency rates move in such a fashion, then there’s a possibility of a big accident happening. I know, you’ve heard rumors about Credit Suisse being in trouble. Yes, it could happen where Credit Suisse has been gambling on farm reserves, on currency, interest rates in some ways, you know with all these derivatives. Banks can get into big trouble if they play with these instruments. So, yes there’s a possibility of an accident. I’m not saying that Credit Suisse is in trouble but I’m just saying that you could have a major bank like that having a real problem and then that would create a panic.
Q- What about geopolitics? The Ukraine war has been raging for some time now. The market might have priced in quite a bit of it. Where you sit, there is always the China-Taiwan thing that is simmering. Do you think something might explode on that front and bring geopolitics back into play, as one of the key risks for the market, sometime in the next few months?
Well, I think it’s a very important point you make and that is that these geopolitical issues are really at the top of the agenda. I mean, we can talk about interest rates; we can talk about the stock market etc. But, when you have a war going on in Europe and the possibility of Russia using nuclear weapons, then you really got a crisis that could wipe out everything that we’ve worked for the last 50 years. So, it’s a real problem and of course, the China-Taiwan situation has simmered down, and has quietened down a little bit, but there’s no question that continues to be an issue going forward.
I don’t see the Chinese taking military action against Taiwan in the foreseeable future. But, the threat is always there and particularly if Russia is successful in Ukraine then it might encourage other countries to try out the same thing.
Q- What are your thoughts on China, Mark because you know we’re talking about a global economic slowdown? The numbers coming out of China over the last quarter or so are not very comforting. Where do you stand on how China, the Chinese story will play out in the next year or so?
First of all, you can’t ignore China, it’s exactly equal to or a little more or less than the US economy. So, you just can’t ignore China and you can’t ignore Chinese companies, you continue to look at Chinese companies and see where the opportunities are.
But, as you mentioned some of the numbers don’t look very good. They should know that they’ve had a property or housing crisis recently and one of the reasons why Chinese investors are somewhat depressed is that most of their assets are usually in property, not in the stock market and, when property prices go down, they feel poorer. So, all of these issues including the COVID lockdown have hit China, foreign investors have been burnt badly. American investors had a lot in China as you know the Chinese market represented or still represents about 30 per cent of the major indices and over 50 per cent of investors in the emerging markets going into these index funds. So, when China goes down, they all get badly burnt and of course, Russia being eliminated from the index somewhat means that they’ve lost 7-8 per cent of their portfolio overnight. So, all of these factors make people very wary of China, but that does not mean that there are no opportunities.
Q- What do you think large global investors are thinking at this point in time? You’ve run billions of dollars as a global investor, you know would they be thinking that this is not the time to be adventurous and up allocation to emerging market equities? Maybe it’s better to be in the safety of home in the US dollar assets, where bond deals are inching higher. Would there be a propensity to take money back into the home ship at this point in time?
Yes, that’s already happened. If you know one of the reasons why these interest rates have been attracting people back to the US market is because, with US dollar deposits, they can get a lot more and equal to what they’ve been getting anywhere else. But, the other important factor is that people in other countries that were holding local currency, debt, or local currency assets want to get rid of those assets and move into US dollars. So, that’s the reason why you see this incredible strength of the US dollar.
The other factor that you must look at is that a lot of people have been burnt in the market and therefore don’t want to talk about investing more in the market. We haven’t really reached the end, however, I think there’s still considerable optimism in the market and I think it probably would take another leg down to really make people very despondent.
So, they’re in the process of selling despondently. In other words, giving up completely on the market, we haven’t seen that yet but this could come. So, it’s a very interesting phenomenon that we have nowhere. As I mentioned, at least in America people feel quite wealthy, they’re traveling and so forth. Even in London, if you look at the hotel rates and prices in general, they have not come down, they’ve gone up. So, there is still a considerable flow of money. So, we haven’t reached that point where people are giving up completely and saying look, that’s it but there’s definitely a move or has been a move into US dollars.
Q- You’ve just said that sentiment indicators according to you are not indicating a bottom that you have not seen the kind of pessimism yet, which is consistent with markets having bottomed out.
We’re now in bear markets in most markets around the world. But, I don’t think, we’ve seen the end there, in other words, true bear markets, when people have really given up and I just dumping everything into the market and saying look never again – I don’t want anything to do with stocks and so forth we haven’t reached that yet.
Q- Are you talking about the S&P out here? Are you talking about the Nasdaq? Because the Nasdaq was the first to lead the fall and there the stock price collapse has been quite brutal. Has the Nasdaq made a bottom? Do you expect tech stocks to lead the slide, like last year?
No, I think techs already had it. They’ve already had a big downturn. You must remember that Nasdaq has outperformed the S&P for a number of years. So, even those that have seen this downturn are probably above what they would have been if they were just in the S&P 500. Let’s say, but, I would say Nasdaq has already had it.
We have already seen that decline and, the next leg will be with the S&P. By the way don’t forget Bitcoin and the cryptocurrencies. Bitcoin would have to go down quite a lot if pessimism continues and increase and that could be a very good leading indicator.
Let’s put it away for what’s happening in the stock market, so we watched the Bitcoin prices, very carefully because we just don’t know where they’re going to go. We’re now roughly at about 19-20,000, but it could go down to 10,000 and that would be really a very pessimistic scenario for many people.
Q- How would gold do in a scenario like this? The one that you’re painting, Bitcoin down to 10,000. Another, leg down for the S&P 500. How do you see gold fairing?
I think gold will do fairly well and that’d be fairly steady. I’m not saying go through the roof, but I’m saying that gold will probably hold its own and perform better in such an environment.
Q- Now, you know sitting in India, a lot of people are actually very enthused by the relative outperformance. Some see it as a risk that India has not fallen anywhere close to how much even the S&P 500 has fallen this year. But, some take comfort from the fact that India is actually standing out and being so resilient as a market. How do you see this cookie crumbling? Do you see the relative outperformance continuing or valuations actually acting against India in the next leg down, which you expect to come?
I think India will continue to outperform. Not that the market won’t go down, if there’s a global downturn then India will be affected. But, India definitely will outperform and part of the reason of course is the fundamentals of the Indian economy. The Reserve Bank (RBI) has done a fairly good job in managing the money supply and so forth. Most importantly, the government has moved to improve investment conditions. So, they’re attracting more and more high-tech manufacturing. That is now in China and elsewhere in India and this so-called Gati-Shakti programme to speed up approvals and speed up the government bureaucracy in India is going to be incredible. It’s going to have a big effect and a very positive effect on the Indian economy.
Q-Where would you be positioned, Mark, as an investor in India? I mean, if you were running emerging market money now and you said this is an outperforming market, I want to be here. What would you buy because traditionally large global investors like you have bought IT and banks, the two big sectors in India? But, IT has come under the clouds because of the global headwinds. What would be the right way to be positioned at this point?
Well, we still like Indian software. You know India is a leader, globally in the software market. I think they will continue to improve and there’ll be lots of opportunities in that area. The other is infrastructure-related stocks. Stocks that deal with pipes and tubes. Stocks in the supply of high-tech kinds of things for the construction industry. I think that would be a good area to be because a lot of the infrastructure projects in India will be accelerated as we’ve offered the new government policies. So, I would say those would be the two areas and possibly in healthcare. More and more Indians are taking advantage of better healthcare and they have the money to do so and that will be a growth area.
Q- When you say healthcare, do you mean hospital chains, diagnostic companies those names, or pharmaceutical companies?
Diagnostic in hospitals, most importantly, and a few selected pharmaceuticals.
Q- What is your base case assumption that this over the next 12 months? It still is a market where it’s difficult to make money for equity investors that this bear market actually extends through the next 12 months because the last 12 months have been flat for equity market investors. They have not made any money. Do you expect one more year of paying ahead?
I think perhaps a half year of pain is ahead, but you must remember even in this painful situation, there’s money to be made. As I mentioned, if you have companies that have good pricing power, strong balance sheets, and so forth. They’re going to take market share away from their competitors and they’re going to do very well. So, you know, if the index is going down, it doesn’t mean that all the stocks have to go down.
But, generally speaking, yes there’s probably more pain generally in the index ahead and, one of the reasons for that of course is the Ukrainian situation. You must remember that the Ukraine situation could get worse before it gets better and that can have a global impact in many different directions. There are winners and losers there as well because although Russia is going to be selling less gas and oil to Europe, other countries will be selling more. So, that probably is one of the reasons why the US dollar is strong because the dollar has become an important currency to buy oil and gas from the US.
Forget about Black Friday. Holiday shoppers are already hunting for the best deals, with many saying inflation will impact their purchases. Carter Evans reports.
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The US Postal Service on Friday proposed increased prices “to offset the rise in inflation,” according to a statement from the agency.
The price hikes, which have been approved by the Governors of the U.S. Postal Service, include a three-cent increase to purchase a stamp and a four-cent increase to mail a postcard. The changes amount to a 4.2% price increase for first class mail, according to USPS.
The proposal must now be reviewed by the Postal Regulatory Commission.
The announcement from the US Postal Service comes as consumers around the nation continue to grapple with rising prices for groceries, gas and other necessities. The US Postal Service has publicly struggled financially in recent years, and President Joe Biden signed a law earlier this year to overhaul the USPS’ finances and allow the agency to modernize its service.
“As operating expenses continue to rise, these price adjustments provide the Postal Service with much needed revenue to achieve the financial stability sought by its Delivering for America 10-year plan,” US Postal Service said on Friday. “The prices of the U.S. Postal Service remain among the most affordable in the world.”
Unlike other government agencies, the USPS generally does not receive taxpayer funding, and instead must rely on revenue from stamps and package deliveries to support itself.
The Postal Service is also looking to increase fees for P.O. Box rentals, money orders and the cost to purchase insurance when mailing an item.
If approved by the Postal Regulatory Commission the changes would take effect January 22, 2023, after midnight.
Opinions expressed by Entrepreneur contributors are their own.
The market we work in today is rapidly changing across all industries. We’re working against ultra-high inflation rates, an ongoing labor shortage and a nationwide supply chain crisis that backlogged operations for many companies. During turbulent times, strong and strategic leadership is a must to keep an organization afloat. To move in a forward-thinking direction during these moments of change, leaders must analyze their competitors, identify market disruptors and research industry trends to stay ahead of the curve.
Over the last 20 years as the Founder and CEO of a national multi-million-dollar franchise in the healthcare industry, I have witnessed periods of extensive change in the market landscape. More notably, because of Covid, we’re currently seeing a new wave of market shifts that companies must actively react and respond to. In this article, I will provide examples and a path forward to ensure your organization is set up for success amid a rapidly changing market.
As markets evolve, determining the trends influencing your specific industry is the first step you should take to ensure your company is positioned to win. Based on these trends, analyze where the industry is heading and what this will mean for your organization’s future. We’re seeing businesses embrace technology like never before, digitize their processes and align with strategic partners to expand reach. These shifts often issue a new season of growth for companies that comply with consumer demands and align with the direction of where their specific industry is heading. Whatever the reason, to get ahead, be aware of these trends and create an action plan.
Another factor to consider is the danger of the status quo. No matter how large and successful your organization may be, it’s not immune to a changing environment. Adapting and adjusting to industry changes is a key indicator of a company’s future success. A cautionary tale of a business that failed to keep up with a changing market is Netflix‘s displacement of the Blockbuster franchise. Entertainment moved away from in-store disc rentals to at-home streaming, yet Blockbuster did not promptly read and respond to those changes until it was too late.
Watch the competition and recognize disruptors
While monitoring industry changes, keep a keen eye on the competition. Analyze how your competitors respond to real-time market shifts and how your response differs. Another essential key is recognizing disruptors. Disruptors are new companies or technologies that innovate outside your industry and significantly impact the market.
An organization that is notorious for disrupting the market is Amazon. We may think of Amazon as the big disruptor of ecommerce. However, when you take a closer look, Amazon is a highly sophisticated technology platform that adapts across industries — including healthcare, which is my specific industry. CVS is another excellent example. While it may be a retail giant, CVS also offers an array of integrated healthcare services via acquisitions and major corporate partnerships. After key trends have been determined, and you have your pulse on the competition and the industry’s many disruptors, your organization will need to develop a road map to prepare for what’s next.
Another crucial piece of the puzzle is ensuring all your key stakeholders are on board with your strategic plan for the company’s future. The goal should be to adapt to market changes while staying true to your brand values and mission. This means having tough but necessary conversations with your network to establish alignment.
My organization is currently implementing our strategic plan to adapt to advancements in the healthcare industry. Our brand’s purpose is to enrich the lives of our clients and families, and our brand vision is to expand our reach and the accessibility of home care. As a national franchise brand, we must work with our network of franchisees to ensure we share the same vision for the future. When we initially presented the plan, it was met with hesitation from some franchisees. We continue to hold one-on-one meetings and host network-wide town hall meetings to ensure our franchisees’ voices and ideas are heard.
Despite the adversity and opposition from some players, I have remained steadfast in our vision to uphold the best interests of our network with whatever means necessary to ensure consistency in delivery and quality, expand the addressable market so more seniors can access quality care and deliver on the opportunities ahead. I have received feedback from franchisees that change takes time to process and operationalize. Ultimately, many recognized the value in refocusing efforts to align with the external forces impacting our industry. Many also recognized the opportunity this change presents. Our strategic plan will inevitably drive revenue growth and profitability for the entire network.
A natural reaction to change is opposition. However, the saying goes, “there is strength in numbers,” which stands true as you think about your company’s future. There is the strength behind a network coming together to create change. But a clear path must be put in place so all partners and all parties involved can launch that shared vision to fruition.
The state of the market and knowing exactly where your industry is heading will often be volatile. However, keeping a close eye on market trends, disruptors and competitors and positioning your brand to remain in front of these changes will set your brand apart. Adhere to your organization’s brand mission during moments of change, and focus on areas of improvement to meet current and future industry demands. Be willing to be the leader who will take your organization where it needs to go, even if it may not be where stakeholders desire to go in the short term.
More U.S. companies are cutting jobs and freezing hiring as the economy cools, a sign that efforts by the Federal Reserve to tamp down inflation are hitting the labor market.
Layoff announcements spiked in September, according to outplacement firm Challenger, Gray & Christmas. Job cuts last month rose to nearly 30,000, an increase of 46% from August, while the number of companies announcing hiring plans last month fell to the lowest level in more than a decade, the firm said.
“Some cracks are beginning to appear in the labor market. Hiring is slowing and downsizing events are beginning to occur,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement.
Government figures also point to a slowing job market. Jobless claims for the week ending October 1 rose by 29,000, to 219,000, the Labor Department said on Thursday. The total number of Americans collecting unemployment aid rose by 15,000 to nearly 1.4 million for the week ending September 24.
“We won’t read too much into one week’s claims data, but if an upward trend persists, it would be consistent with other recent indicators pointing to some loosening of labor market conditions,” economists at Oxford Economics said in a research note.
Applications for jobless aid generally reflect layoffs, which have remained historically low since the initial purge of more than 20 million jobs at the start of the coronavirus pandemic in the spring of 2020. However, the technology sector has seen a hiring slowdown, with dozens of companies announcing layoffs or hiring freezes. Last week, Meta said it planned to reduce headcount for the first time in the company’s history.
Netflix, Peloton, Snap, Twilio, Taboola and Twitter have all announced layoffs. Google parent Alphabet has shut its video-game streaming service, Stadia, and Amazon has reportedly frozen corporate hiring in its retail division.
The number of available jobs in the U.S. plummeted in August compared with July, the government said earlier this week. The drop of more than 1 million open jobs signals that employers are pulling back on hiring as they contemplate economic uncertainty ahead.
The Federal Reserve is closely watching job-openings data for signs that demand for workers is cooling off. Fed Chair Jerome Powell has repeatedly cited the high number of open jobs as one driver of historically high inflation and has signaled that the unemployment rate will likely rise as part of the Fed’s push to curb inflation.
The U.S. central bank has raised its key interest rate to a range of 3% to 3.25%, up from near zero at the start of this year. The sharp rate hikes have pushed mortgage rates up to 15-year highs and made other borrowing costlier. The Fed hopes the higher interest rate will slow borrowing and spending and push inflation closer to its target of 2%.
As part of that at effort, the Fed expects the unemployment rate to increase to about 4.4% by next year, which is equivalent to 1.2 million people losing jobs.
On Friday, the government is expected to report hiring data for September. Wall Street analysts estimate that 250,000 jobs were added last month. If the figures turn out substantially higher, it could spur the Fed to hike rates even faster, according to Wall Street analysts.
Last week, the government reported the U.S. economy shrank for the second straight quarter, but so far that has done little to cool the job market.
Inflation could dash some of the holiday cheer for many Americans who plan on traveling to see family and friends this season.
Surging gas, airfare and hotel costs are making travelers especially budget-conscious, according to a survey from Bankrate. Americans said they plan to travel shorter distances, spend fewer days out of town and engage in fewer activities that cost money. More people are also planning to drive to their destination instead of flying, while others are planning to use credit card points to book trips, the personal finance site found.
Travel costs are up sharply compared to last year. Lodging away from home, which includes hotel stays, was up 4% in August from a year ago, according to the Consumer Price Index. Gasoline rose 26% during that same period, and airline fares jumped 28%, inflation data shows.
The days between November 24 and January 1 are the busiest times for domestic travel. The price of plane tickets and hotel stays during the holidays are expected to continue growing, with airfares reaching some of their highest points in the past five years, according to travel booking app Hopper.
Domestic flights on Christmas Day are roughly $435 on average for a round-trip fare, up 55% from last year, while Thanksgiving airfare prices are about $281 round-trip, a 25% increase from last year, Hopper’s data shows.
“Those prices are going up 4% every week between now and the time you want to go,” CBS News senior travel adviser Peter Greenberg said. “So anybody who wants to procrastinate now, you do so at your own peril in terms of the price you’re going to be paying.”
To avoid higher prices, don’t travel on the Wednesday before Thanksgiving and opt instead to board a flight on that Thursday, Greenberg said. It’s going to be cheaper to travel back home on Black Friday, he added.
The average hotel stay over the Thanksgiving holiday will be $189 per night, up 13% from last year, and $218 a night during Christmas, up 32% from last year.
Holiday travel also proved a challenge earlier this year, particularly around Memorial Day, when passengers experienced thousands of canceled or delayed flights. The cancellations stemmed from a combination of bad weather, staffing shortages and TSA and airlines over-scheduling some flights.
“Hopefully this holiday season won’t be as messy, but I suspect there will be more travel disruptions due to weather, high demand, lingering staff and equipment shortages,” Bankrate senior industry analyst Ted Rossman said.
Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.
The Go! Go! Curry restaurant has a sign in the window reading “We Are Hiring” in Cambridge, Massachusetts, July 8, 2022.
Brian Snyder | Reuters
September’s jobs report provided both assurance that the jobs market remains strong and that the Federal Reserve will have to do more to slow it down.
The 263,000 gain in nonfarm payrolls was just below analyst expectations and the slowest monthly gain in nearly a year and a half.
But a surprising drop in the unemployment rate and another boost in worker wages sent a clear message to markets that more giant interest rate hikes are on the way.
“Low unemployment used to feel so good. Everybody who seems to want a job is getting a job,” said Ron Hetrick, senior economist at labor force data provider Lightcast. “But we’ve been getting into a situation where our low unemployment rate has absolutely been a significant driver of our inflation.”
Indeed, average hourly earnings rose 5% on a year-over-year basis in September, down slightly from the 5.2% pace in August but still indicative of an economy where the cost of living is surging. Hourly earnings rose 0.3% on a monthly basis, the same as in August.
Fed officials have pointed to a historically tight labor market as a byproduct of economic conditions that have pushed inflation readings to near the highest point since the early 1980s. A series of central bank rate increases has been aimed at reducing demand and thus loosening up a labor market where there are still 1.7 open jobs for every available worker.
Friday’s nonfarm payrolls report only reinforced that the conditions behind inflation are persisting.
To financial markets, that meant the near certainty that the Fed will approve a fourth consecutive 0.75 percentage point interest rate hike when it meets again in early November. This will be the last jobs report policymakers will see before the Nov. 1-2 Federal Open Market Committee meeting.
“Anyone looking for a reprieve that might give the Fed the green light to start to telegraph a pivot didn’t get it from this report,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Maybe the light got a little greener that they can step back from” two more 0.75 percentage point increases and only one more, Sonders said.
In a speech Thursday, Fed Governor Christopher Waller sent up a preemptive flare that Friday’s report would do little to dissuade his view on inflation.
“In my view, we haven’t yet made meaningful progress on inflation and until that progress is both meaningful and persistent, I support continued rate increases, along with ongoing reductions in the Fed’s balance sheet, to help restrain aggregate demand,” Waller said.
Markets do, however, expect that November probably will be the last three-quarter point rate hike.
Futures pricing Friday pointed to an 82% chance of a 0.75-point move in November, then a 0.5-point increase in December followed by another 0.25-point move in February that would take the fed funds rate to a range of 4.5%4.75%, according to CME Group data.
What concerns investors more than anything now is whether the Fed can do all that without dragging the economy into a deep, prolonged recession.
September’s payroll gains brought some hope that the labor market could be strong enough to withstand monetary tightening matched only when former Fed Chairman Paul Volcker slew inflation in the early 1980s with a fund rate that topped out just above 19% in early 1981.
“It could add to the story of that soft landing that for a while seemed fairly elusive,” said Jeffrey Roach, chief economist at LPL Financial. “That soft landing could still be in the cards if the Fed doesn’t break anything.”
Investors, though, were concerned enough over the prospects of a “break” that they sent the Dow Jones Industrial Average down more than 500 points by noon Friday.
Commentary around Wall Street centered on the uncertainty of the road ahead:
From KPMG senior economist Ken Kim: “Typically, in most other economic cycles, we’d be very happy with such a solid report, especially coming from the labor market side. But this just speaks volumes about the upside-down world that we’re in, because the strength of the unemployment report keeps the pressure on the Fed to continue with their rate increases going forward.”
Rick Rieder, BlackRock’s chief investment officer of global fixed income, joked about the Fed banning resume software in an effort to cool job hunters: “The Fed should throw another 75-bps rate hike into this mix at its next meeting … consequently pressing financial conditions tighter along the way … We wonder whether it will actually take banning resume software as a last-ditch effort to hit the target, but while that won’t happen, we wonder whether, and when, significant unemployment increases will happen as well.”
David Donabedian, CIO at CIBC Private Wealth: “We expect the pressure on the Fed to remain high, with continued monetary tightening well into 2023. The Fed is not done tightening the screws on the economy, creating persistent headwinds for the equity market.”
Ron Temple, head of U.S. equity at Lazard Asset Management: “While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target. The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”
The employment data left the third-quarter economic picture looking stronger.
The Atlanta Fed’s GDPNow tracker put growth for the quarter at 2.9%, a reprieve after the economy saw consecutive negative readings in the first two quarters of the year, meeting the technical definition of recession.
However, the Atlanta Fed’s wage tracker shows worker pay growing at a 6.9% annual pace through August, even faster than the Bureau of Labor Statistics numbers. The Fed tracker uses Census rather than BLS data to inform its calculations and is generally more closely followed by central bank policymakers.
It all makes the inflation fight look ongoing, even with a slowdown in payroll growth.
“There is an interpretation of today’s data as supporting a soft landing – job openings are falling and the unemployment rate is staying low,” wrote Citigroup economist Andrew Hollenhorst, “but we continue to see the most likely outcome as persistently strong wage and price inflation that the Fed will drive the economy into at least a mild recession to bring down inflation.”
FRANKFURT, Germany — Major oil-producing countries led by Saudi Arabia and Russia have decided to slash the amount of oil they deliver to the global economy.
And the law of supply and demand suggests that can only mean one thing: higher prices are on the way for crude, and for the diesel fuel, gasoline and heating oil that are produced from oil.
The decision by the OPEC+ alliance to cut 2 million barrels a day starting next month comes as the Western allies are trying to cap the oil money flowing into Moscow’s war chest after it invaded Ukraine.
Here is what to know about the OPEC+ decision and what it could mean for the economy and the oil price cap:
WHY IS OPEC+ CUTTING PRODUCTION?
Saudi Arabia’s Energy Minister Abdulaziz bin Salman says that the alliance is being proactive in adjusting supply ahead of a possible downturn in demand because a slowing global economy needs less fuel for travel and industry.
“We are going through a period of diverse uncertainties which could come our way, it’s a brewing cloud,” he said, and OPEC+ sought to remain “ahead of the curve.” He described the group’s role as “a moderating force, to bring about stability.”
Oil prices had fallen after a summer of highs. Now, after the OPEC+ decision, they are heading for their biggest weekly gain since March. Benchmark U.S. crude rose 3.2% on Friday, to $91.31 per barrel. Brent crude, the international standard, rose 2.8% to $97.09, though it’s still down 20% from mid-June, when it traded at over $123 per barrel.
One big reason for the slide is fears that large parts of the global economy are slipping into recession as high energy prices — for oil, natural gas and electricity — drive inflation and rob consumers of spending power.
Another reason: The summer highs came about because of fears that much of Russia’s oil production would be lost to the market over the war in Ukraine.
As Western traders shunned Russian oil even without sanctions, customers in India and China bought those barrels at a steep discount, so the hit to supply wasn’t as bad as expected.
Oil producers are wary of a sudden collapse in prices if the global economy goes downhill faster than expected. That’s what happened during the COVID-19 pandemic in 2020 and during the global financial crisis in 2008-2009.
HOW IS THE WEST TARGETING RUSSIAN OIL?
The U.S. and Britain imposed bans that were mostly symbolic because neither country imported much Russia oil. The White House held off pressing the European Union for an import ban because EU countries got a quarter of their oil from Russia.
In the end, the 27-nation bloc decided to cut off Russian oil that comes by ship on Dec. 5, while keeping a small amount of pipeline supplies that some Eastern European countries rely on.
Beyond that, the U.S. and other Group of Seven major democracies are working out the details on a price cap on Russian oil. It would target insurers and other service providers that facilitate oil shipments from Russia to other countries. The EU approved a measure along those lines this week.
Many of those providers are based in Europe and would be barred from dealing with Russian oil if the price is above the cap.
HOW WILL OIL CUTS, PRICE CAPS AND EMBARGOES CLASH?
The idea behind the price cap is to keep Russian oil flowing to the global market, just at lower prices. Russia, however, has threatened to simply stop deliveries to a country or companies that observe the cap. That could take more Russian oil off the market and push prices higher.
That could push costs at the pump higher, too.
U.S. gasoline prices that soared to record highs of $5.02 a gallon in mid-June had been falling recently, but they have been on the rise again, posing political problems for President Joe Biden a month before midterm elections.
Biden, facing inflation at near 40-year highs, had touted the falling pump prices. Over the past week, the national average price for a gallon rose 9 cents, to $3.87. That’s 65 cents more than Americans were paying a year ago.
“It’s a disappointment, and we’re looking at what alternatives we may have,” he told reporters about the OPEC+ decision.
WILL THE OPEC PRODUCTION CUT MAKE INFLATION WORSE?
Likely yes. Brent crude should reach $100 per barrel by December, says Jorge Leon, senior vice president at Rystad Energy. That is up from an earlier prediction of $89.
Part of the 2 million-barrel-per-day cut is only on paper as some OPEC+ countries aren’t able to produce their quota. So the group can deliver only about 1.2 million barrels a day in actual cuts.
That’s still going to have a “significant” effect on prices, Leon said.
“Higher oil prices will inevitably add to the inflation headache that global central banks are fighting, and higher oil prices will factor into the calculus of further increasing interest rates to cool down the economy,” he wrote in a note.
That would exacerbate an energy crisis in Europe largely tied to Russian cutbacks of natural gas supplies used for heating, electricity and in factories and would send gasoline prices up worldwide. As that fuels inflation, people have less money to spend on other things like food and rent.
Other factors also could affect oil prices, including the depth of any possible recession in the U.S. or Europe and the duration of China’s COVID-19 restrictions, which have sapped demand for fuel.
WHAT WILL THIS MEAN FOR RUSSIA?
Analysts say that Russia, the biggest producer among the non-OPEC members in the alliance, would benefit from higher oil prices ahead of a price cap. If Russia has to sell oil at a discount, at least the reduction starts at a higher price level.
High oil prices earlier this year offset much of Russia’s sales lost from Western buyers avoiding its supply. The country also has managed to reroute some two-thirds of its typical Western sales to customers in places like India.
But then Moscow saw its take from oil slip from $21 billion in June to $19 billion in July to $17.7 billion in August as prices and sales volumes fell, according to the International Energy Agency. A third of Russia’s state budget comes from oil and gas revenue, so the price caps would further erode a key source of revenue.
Meanwhile, the rest of Russia’s economy is shrinking due to sanctions and the withdrawal of foreign businesses and investors.
