ReportWire

Tag: recession

  • Three investors on how to protect your portfolio | CNN Business

    Three investors on how to protect your portfolio | 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. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Wall Street has been hit with a barrage of complex signals about the economy’s health over the past month. From banking turmoil to weakening jobs data to slowing inflation, and now the start of earnings season, investors have remained largely resilient.

    But the Federal Reserve’s March meeting minutes revealed last week that officials believe the economy will enter a recession later this year. While that’s not new news to investors who have worried that a recession is on the horizon for the past year, it does mean that markets could take a turn for the worse.

    So, how should investors protect their portfolios? Investors say there isn’t one asset that Wall Street should pile all their bets on, but there are fundamentals that should underlie their investment strategies.

    Jimmy Chang, chief investment officer at Rockefeller Global Family Office, says he advises clients to be patient, defensive and selective when navigating the market.

    In other words, investors should make decisions based on logic, not a fear of missing out.

    “You chase these rallies and then it fizzles out — you’re left holding the bag,” he said.

    Chang also recommends that investors stay defensive by investing in high-quality blue chip stocks with solid balance sheets and keep dry powder.

    Doug Fincher, portfolio manager at Ionic Capital Management, says investors should brace their portfolios against inflation.

    The Personal Consumption Expenditures price index rose 5% for the 12 months ended in February, showing that inflation remains much higher than the Fed’s 2% target.

    Coupled with the fact that the central bank has signaled that it plans to pause interest rate hikes sometime this year, it’s possible inflation could prove stickier than Wall Street expects.

    “It is the boogeyman of traditional investments,” Fincher said.

    He manages the Ionic Inflation Protection exchange-traded fund, which seeks to specifically perform well during periods of high inflation. The portfolio’s core exposure is inflation swaps, which are transactions in which one investor agrees to swap fixed payments for floating payments tied to the inflation rate. The fund also invests in short-duration Treasury Inflation Protected Securities.

    Megan Horneman, chief investment officer at Verdence Capital Advisors, says that her firm has hedged its portfolio in cash. A well-known haven, cash is a better alternative to other perceived safe spots like gold, which tends to be volatile and run up too fast, she said.

    Investors have rushed into money market funds in recent weeks after the banking turmoil both shook their confidence in the banking system and sent ripples through the market.

    “Cash is actually earning you something at this point,” Horneman said. “You have to look long term.”

    Earnings season kicked off Friday with a bonanza of earnings from the nation’s largest banks.

    Perhaps most noteworthy out of the bunch was JPMorgan Chase, which reported record revenue and an earnings beat for its latest quarter.

    The bank has $3.67 trillion in assets, making it the largest bank in the country and a bellwether for the economy. Strong earnings reports from the New York-based bank and its peers including Wells Fargo, Citigroup and PNC Financial Services have shown a promising start to the earnings season.

    Charles Schwab, Goldman Sachs, Bank of America and Morgan Stanley report next week.

    Here are some key takeaways from JPMorgan Chase’s first-quarter earnings:

    • The company guided net interest income to be about $81 billion in 2023, up $7 billion from its previous estimate. That’s especially important because this earnings season is all about guidance, as investors try to gauge whether the economy is headed for a recession and which companies will be able to weather a potential downturn.
    • CEO Jamie Dimon said in the post-earnings conference call that while financial conditions are a bit tighter after the collapse of Silicon Valley Bank and Signature Bank, he doesn’t see a credit crunch. But chances of a recession are now higher, he said.
    • The company said that its portfolio’s exposure to the office sector is less than 10%, addressing concerns that the $20 trillion commercial real estate industry could be the next space to see turmoil.

    Read more here.

    Monday: Empire State manufacturing index and homebuilder confidence index. Earnings report from Charles Schwab (SCHW).

    Tuesday: Earnings reports from Bank of America (BAC), Goldman Sachs (GS), Johnson & Johnson (JNJ), Netflix (NFLX), United Airlines (UAL) and Western Alliance Bancorp (WAL).

    Wednesday: Earnings reports from Citizens Financial Group (CFG), Morgan Stanley (MS), Tesla (TSLA) and International Business Machines (IBM). Speech from NY Federal Reserve President John Williams.

    Thursday: Philadelphia Fed manufacturing index, jobless claims, mortgage rates, US leading economic indicators and existing home sales. Earnings reports from AutoNation (AN) and American Express (AXP).

    Friday: Manufacturing PMI and services PMI. Earnings report from Procter & Gamble (PG).

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  • How Creators Can Thrive as Advertisers Are Cutting Back | Entrepreneur

    How Creators Can Thrive as Advertisers Are Cutting Back | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    If you’re a creator, you’ve probably heard about the importance of diversifying your revenue streams. Chances are, you may have already done this successfully and if not, you might be curious about where to start.

    Like any industry, the creator economy isn’t immune to the pressures of inflation. As declining brand sponsorship offers and ad revenue payouts squeeze revenues, creators increasingly seek additional ways to extract value from their businesses. But for many, the question then becomes how and when?

    Not only do I believe diversification is one of the major trends that will define the creator economy in 2023, but a recent survey we conducted also revealed that 70% of respondents were considering additional income streams because of this economy. And with good reason: Diversifying can help complement and cross-sell existing offerings, leading to greater engagement, retention and customer lifetime value.

    But while it can be tempting to dive right in, creators need to approach diversification strategically to ensure it yields increased revenue and career stability by complementing and strengthening existing content rather than becoming a distraction.

    I don’t just work with creators; I am one, which has given me a front-row view of diversification’s overlooked pitfalls and powerful potential. There are no easy answers to getting this right, but here are some rules of thumb for any creator hoping to diversify their offerings to remain competitive, meet evolving audience needs and survive in this economy.

    Related: Why Creators Can Weather a Recession Better Than Big Business

    Don’t diversify without a purpose

    Let’s get this out of the way. Yes, diversification can be a powerful strategy for business growth, but you don’t have to diversify just because everyone is talking about it. And you certainly don’t need to be on every platform, trying to tap into every possible revenue stream. Generally speaking, there are two main scenarios in which diversification might be a good option for your business: When things are working and when they’re not.

    Diversification can be an effective strategy for creators who are already successful and want to take their business to the next level. If you have a large audience, generate significant revenue, and have the bandwidth to take on more work, it’s a good time to consider expanding and reaching a wider customer base.

    By diversifying, you can tap into new revenue drivers and lead sources and engage with your audience innovatively. Twenty-five percent of full-time creators earn between $50,000 to $150,000 per year, according to a recent survey from ConvertKit. Most do this by combining several revenue sources, from online courses to paid newsletters, appearances, coaching, merchandise or other streams. Our research shows that full-time creators rely on an average of 2.7 income streams, and the number of creators relying on multiple streams has risen nearly 50% over the past five years.

    On the other hand, if your current strategy is losing steam and you’re finding it difficult to generate audience engagement and revenue, it may be time to look for content and revenue streams that click. Used this way, diversification is more of a slow pivot than a true expansion, but exploring new kinds of content, products and services may help you energize your community or find new audiences that are more receptive to your content, bringing long-term stability to your business. Simply put, if your content is not resonating with your audience or you find it difficult to generate revenue, it may be time to consider a new approach.

    Related: A Recession Creates Opportunity for Creatives

    When to wait

    Despite the great potential diversification offers, sometimes it’s better to wait and focus all your energies on what you’ve got. If you’re new to the creator economy, still seeing growth and achieving your milestones, it may be best to focus on your existing content and channels rather than adding extra distractions. Diversifying can easily become overwhelming, especially if you’re still on a learning curve.

    Even experienced creators should recognize that diversification will require additional focus and effort. I’ve seen plenty of cases where creators with Shiny Object Syndrome neglect successful and profitable business channels and lose at both. If your current approach works well, staying focused on growing existing channels and hiring a team to increase your capacity in those successful ventures may be better than splitting your attention.

    I’d always suggest you do a quick ROI check on if your efforts on this new opportunity are likely to create greater returns than just leaning into your existing business and doubling down on what’s working.

    It’s not a one-size-fits-all approach

    If diversification is your move, the next logical question for many creators will be: How? And the truth is, there is no golden ticket. The right moves for diversification depend heavily on your unique audience and business.

    One way to diversify is by expanding your topics using your existing channels. For example, if you have an online school for yoga instruction, your student community might also be interested in meditation and healthy eating. By expanding into related niches, you can diversify the topics within that niche to keep your audience engaged and attract new followers. This approach allows you to grow your brand while maintaining focus on the platforms that serve you best.

    Another approach is diversifying your revenue sources to complement and cross-sell successful content. A physical product can drive revenue, while a course and community can be an engagement engine that keeps people returning. The synergies create a virtuous cycle – hot topics of conversation in a community can be the basis for a new minicourse or ebook; courses can be gateways to paywalled communities where everyone has a common baseline of interests and skills.

    Creators can build robust and sustainable businesses by combining channels in unique ways. Take John Lee Dumas, host of the podcast Entrepreneur on Fire, who has combined his daily podcast, short courses, and even regular reports about his own entrepreneurial journey as part of his diversified offerings.

    Related: For Savvy Entrepreneurs, an Economic Downturn Creates Opportunity

    A well-executed diversification strategy can turn your community into an engagement engine that builds customer loyalty while yielding rich customer insights. The key is always to be strategic. When considering diversification, map out a workflow for your content production, syndicating it across channels and reassess the impact on your bandwidth before making additional changes.

    Diversification can be a gamechanger for creators looking to build thriving, sustainable businesses, but there’s no single way to go about it or one right answer that will meet every creator’s needs.

    Random expansion, or feeling the need to be everywhere all the time, is not a successful strategy — it’s a recipe for burnout. But by strategically identifying and tackling new content and revenue streams, creators can stay on top of the game.

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    Greg Smith

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  • Retail spending fell in March as consumers pull back | CNN Business

    Retail spending fell in March as consumers pull back | CNN Business

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    Washington, DC
    CNN
     — 

    Spending at US retailers fell in March as consumers pulled back after the banking crisis fueled recession fears.

    Retail sales, which are adjusted for seasonality but not for inflation, fell by 1% in March from the prior month, the Commerce Department reported on Friday. That was steeper than an expected 0.4% decline, according to Refinitiv, and above the revised 0.2% decline in the prior month.

    Investors chalk up some of the weakness to a lack of tax returns and concerns about a slowing labor market. The IRS issued $84 billion in tax refunds this March, about $25 billion less than they issued in March of 2022, according to BofA analysts.

    That led consumers to pull back in spending at department stores and on durable goods, such as appliances and furniture. Spending at general merchandise stores fell 3% in March from the prior month and spending at gas stations declined 5.5% during the same period. Excluding gas station sales, retail spending retreated 0.6% in March from February.

    However, retail spending rose 2.9% year-over-year.

    Smaller tax returns likely played a role in last month’s decline in retail sales, along with the expiration of enhanced food assistance benefits, economists say.

    “March is a really important month for refunds. Some folks might have been expecting something similar to last year,” Aditya Bhave, senior US economist at BofA Global Research, told CNN.

    Credit and debit card spending per household tracked by Bank of America researchers moderated in March to its slowest pace in more than two years, which was likely the result of smaller returns and expired benefits, coupled with slowing wage growth.

    Enhanced pandemic-era benefits provided through the Supplemental Nutrition Assistance Program expired in February, which might have also held back spending in March, according to a Bank of America Institute report.

    Average hourly earnings grew 4.2% in March from a year earlier, down from the prior month’s annualized 4.6% increase and the smallest annual rise since June 2021, according to figures from the Bureau of Labor Statistics. The Employment Cost Index, a more comprehensive measure of wages, has also shown that worker pay gains have moderated this past year. ECI data for the first quarter of this year will be released later this month.

    Still, the US labor market remains solid, even though it has lost momentum recently. That could hold up consumer spending in the coming months, said Michelle Meyer, North America chief economist at Mastercard Economics Institute.

    “The big picture is still favorable for the consumer when you think about their income growth, their balance sheet and the health of the labor market,” Meyer said.

    Employers added 236,000 jobs in March, a robust gain by historical standards but smaller than the average monthly pace of job growth in the prior six months, according to the Bureau of Labor Statistics. The latest monthly Job Openings and Labor Turnover Survey, or JOLTS report, showed that the number of available jobs remained elevated in February — but was down more than 17% from its peak of 12 million in March 2022, and revised data showed that weekly claims for US unemployment benefits were higher than previously reported.

    The job market could cool further in the coming months. Economists at the Federal Reserve expect the US economy to head into a recession later in the year as the lagged effects of higher interest rates take a deeper hold. Fed economists had forecast subdued growth, with risks of a recession, prior to the collapses of Silicon Valley Bank and Signature Bank.

    For consumers, the effects of last month’s turbulence in the banking industry have been limited so far. Consumer sentiment tracked by the University of Michigan worsened slightly in March during the bank failures, but it had already shown signs of deteriorating before then.

    The latest consumer sentiment reading, released Friday morning, showed that sentiment held steady in April despite the banking crisis, but that higher gas prices helped push up year-ahead inflation expectations by a full percentage point, rising from 3.6% in March to 4.6% in April.

    “On net, consumers did not perceive material changes in the economic environment in April,” Joanne Hsu, director of the surveys of consumers at the University of Michigan, said in a news release.

    “Consumers are expecting a downturn, they’re not feeling as dismal as they were last summer, but they’re waiting for the other shoe to drop,” Hsu told Bloomberg TV in an interview Friday morning.

    This story has been updated with context and more details.

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  • Fed’s Goolsbee says a mild recession is definitely a possibility

    Fed’s Goolsbee says a mild recession is definitely a possibility

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    The U.S. economy could slip into recession given the fast pace of interest rate rates over the past year, said Chicago Fed President Austan Goolsbee on Friday.

    “There is no way you can look at current conditions around the U.S. and not think that some mild recession is on the table as a possibility,” Goolsbee said, in an interview on CNBC.  

    At the same time, while inflation is coming down, there is “clear stickiness” in some categories of prices, he said. 

    Goolsbee said he is focused on whether there is a credit crunch in the wake of the collapse of Silicon Valley Bank in March.

    The Chicago Fed president, who is a voting member of the Fed’s interest rate committee, said he wanted to see more data before deciding what to do at the Fed’s next meeting on May 2-3 .

    “What I am looking at quite clearly coming into the next FOMC meeting is what’s happening on credit…how much of a credit crunch is there,” he said.

    “Let’s be mindful that we’ve raised a lot. It takes time for that to work its way through the system,” Goolsbee said. 

    The March retail sales report, released earlier this morning, might be  a sign of further slowing in the economy, he said. The government reported a 1% drop in retail sales, the biggest decline since November.

    “If you add financial stress on top of that, let’s not be too aggressive,” he said.

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  • Retail sales tumble in another sign of a softening U.S. economy

    Retail sales tumble in another sign of a softening U.S. economy

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    The numbers: Sales at retailers dropped 1% in March and declined for the fourth time in the past five months, reflecting a slowdown in the U.S. economy and a shift in consumer-spending habits.

    Retail sales are a big part of consumer spending and offer clues about the strength of the economy. Sales had been forecast to drop 0.4%, based on a Wall Street Journal poll of economists.

    Receipts shrank a smaller 0.3% if auto dealers and gas stations are excluded. Car and gasoline purchases exaggerate overall retail spending.

    Key details: Sales in March posted the biggest decline in four months, largely because of lower auto and gasoline sales.

    A late Easter holiday might have also shifted some sales into April that normally would have taken place in March, economists say.

    Sales of new vehicles and parts, an up-and-down category, fell a sharp 1.6% last month.

    Receipts at gas stations declined 5.5% largely because of lower oil prices. It’s a good thing when Americans spend less on gas, however.

    Americans are likely to pay more for gas in April, though, after the oil cartel OPEC cut production and prices surged.

    Even after setting aside car dealers and gas stations, retail sales were weak. Sales fell in most major categories, including home centers, electronics stores and department stores.

    The only segment to stand out: Internet retailers. Sales jumped 1.9%.

    One category economists watch closely is bars and restaurants, the only service sector in the retail report. Restaurant receipts rose a tepid 0.1% last month after a 1.6% decline in February.

    Restaurant sales tend to rise when the economy is healthy and Americans feel secure in their jobs. Sales slack off during times of economic distress.

    Big picture: Retail sales haven’t fallen off a cliff, but they also aren’t rising rapidly like they did in 2021 and early 2022.

    How come? High inflation has eaten away at household incomes. Government pandemic stimulus has dried up. And rising interest rates have made purchases of big-ticket items such as cars more expensive.

    Americans are still spending plenty to get out and about, however.

    Americans have been spending more on services such as travel, hospitality and recreation and less on goods such as consumer electronics and home-office supplies. That’s a big reversal of what happened during the pandemic.

    That’s helping to keep the economy afloat. If the economy continues to slow, however, spending on services could also go slack.

    Looking ahead: “U.S. retail sales fell sharply in March as consumers became more cautious, adding to other recent data releases that have signaled a deterioration [in the economy],” said economist Katherine Judge of CIBC Economics.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.42%
    and S&P 500
    SPX,
    -0.21%
    fell in Friday trades after Federal Reserve Gov. Chris Waller said interest rates need to keep rising to squelch high U.S. inflation.

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  • IMF’s Georgieva warns against another Cold War

    IMF’s Georgieva warns against another Cold War

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    IMF Managing Director Kristalina Georgieva on Thursday said it was important that the tensions between the U.S. and China not devolve into a second Cold War.

    At a press briefing at the start of the IMF/World Bank meetings of finance ministers and central bankers. Georgieva called for “cool-headedness” and rational policies to lower tension.

    Tension…

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  • Fed officials at March meeting were keenly worried about impact of bank stress on economy

    Fed officials at March meeting were keenly worried about impact of bank stress on economy

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    Federal Reserve officials, meeting days after the collapse of Silicon Valley Bank, agreed that the stress in the banking sector would slow U.S. economic growth, but were uncertain about how much, according to minutes of the meeting released Wednesday.

    The twelve voting members on the Fed’s interest-rate committee “agree that recent developments were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring and inflation, but that the extend of these effects were…

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  • How to Keep Pace and Grow Your Company During a Recession | Entrepreneur

    How to Keep Pace and Grow Your Company During a Recession | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Market cycles often present opportunities for leaders from all fields of work — whether it’s real estate, tech, finance, healthcare or a number of other industries — to scale and pivot their businesses, prioritize talent and retake market share. In times of a market downturn, entrepreneurs may need to adjust their approach to see their teams and clients to the other side. Surviving a recession is a challenge for businesses at any stage, but it is achievable.

    Throughout my career, I’ve navigated economic uncertainty while working in real estate and have weathered storms and come out more competitive than ever. Here are a few tips to help you keep pace and grow your business even during times of uncertainty:

    Related: 3 Ways to Adapt and Grow During a Recession

    Take calculated risks

    An important trend to consider as part of your business plan is understanding how your industry reacts during a down market and anticipating that. For example, with real estate starting to soften across the country, capitalization rates, or expected rate of return on an investment property, start to grow. Our current strategy is to gather as much real estate nationwide as possible — including in Georgia, Oklahoma, Texas and Utah — and take advantage of the softening market and recession, in which other investors are more hesitant and less into taking risks.

    But we believe we can safeguard our risks by being prudent and doing our research into these burgeoning markets. What areas of weakness can you take advantage of in your industry? Is decreased demand causing lower prices for parts? Does increased demand allow you to raise prices for your goods or services? Audit the landscape, and see where you can find those calculated risks.

    Pivot if needed

    I have been in the real estate business for more than two decades and witnessed the 2008 Great Recession. At the time, my previous firm was invested in industrial real estate, which quickly dropped in value as the market collapsed. Instead of closing up shop after selling at a loss, we decided we could stay in business by pivoting into senior housing, assisted living and memory-care facilities.

    We learned that these were more stable investments, so my team and I took a leap of faith and successfully changed course. Evolving as a business is critical to keep momentum; if you’re not growing, you’re dying. Thinking ahead, innovating and staying a step ahead of the game are important to keeping momentum during turbulent times.

    Related: 5 Ways to Sustain Company Growth During a Recession

    Lead with vision

    As a business owner, regardless of your industry, understanding how to lead during a time of chaos, such as a recession, is critical to the survival of your company. Although the path forward isn’t always crystal-clear, staying connected with your guiding principles can help you navigate any uncertainty you might face as a business owner.

    If you’re unsure of what those principles are, tune into your “inner voice,” and make sure that the decisions you make align with your values, as well as the values of your business. Make sure your team members are clear on your company’s mission statement and vision as well, to maximize alignment companywide.

    Grow your team

    Something to consider is continuing to grow and invest in your team so you’re ready for when the market cycle swings back up and business returns. Your people are the engine of your business. With continued layoffs across industries, there may be a growing pool of talent to choose from. During this cooldown period, as you’re innovating your business and expanding your company’s capabilities, make sure you have the right talent in place. I offer tips on how to attract the right team members in a previous Entrepreneur article.

    Keep in mind, fortifying your business from a talent standpoint doesn’t have to mean hiring. It can instead mean reminding current employees of your company’s values, as well as sharing with them your business model and vision for the future.

    Related: Don’t Let a Recession Ruin You. Here’s How Your Business Can Thrive During Hard Times

    Remember, market cycles are temporary

    A recession doesn’t necessarily have to be viewed as a bad thing; to me, it’s an opportunity for entrepreneurs to build and adjust, carrying themselves and their teams to the other side and to a better, future market cycle. All market cycles are temporary, so this, too, shall pass. Issues like softening real estate, higher interest rates, economic uncertainty and market volatility are cyclical.

    Regardless of which industry you’re in, you can learn and grow from something negative like a recession by growing your business, pivoting it as needed, investing in the right people and quite simply weathering the storm in hopes of a clearer, brighter future.

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    Edward Fernandez

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  • IMF: Banking crisis boosts risks and dims outlook for world economy | CNN Business

    IMF: Banking crisis boosts risks and dims outlook for world economy | CNN Business

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    London
    CNN
     — 

    At the start of the year, economists and corporate leaders expressed optimism that global economic growth might not slow down as much as they had feared. Positive developments included China’s reopening, signs of resilience in Europe and falling energy prices.

    But a crisis in the banking sector that emerged last month has changed the calculus. The International Monetary Fund downgraded its forecasts for the global economy Tuesday, noting “the recent increase in financial market volatility.”

    The IMF now expects economic growth to slow from 3.4% in 2022 to 2.8% in 2023. Its estimate in January had been for 2.9% growth this year.

    “Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled,” the organization said in its latest report.

    Fears about the economic outlook have increased following the failures in March of Silicon Valley Bank and Signature Bank, two regional US lenders, and the loss of confidence in the much-larger Credit Suisse

    (CS)    , which was sold to rival UBS in a government-backed rescue deal.

    Already, the global economy was grappling with the consequences of high and persistent inflation, the rapid rise in interest rates to fight it, elevated debt levels and Russia’s war in Ukraine.

    Now, concerns about the health of the banking industry join the list.

    “These forces are now overlaid by, and interacting with, new financial stability concerns,” the IMF said, noting that policymakers trying to tame inflation while averting a “hard landing,” or a painful recession, “may face difficult trade-offs.”

    Global inflation, which the IMF said was proving “much stickier than anticipated,” is expected to fall from 8.7% in 2022 to 7% this year and to 4.9% in 2024.

    Investors are looking for additional pockets of vulnerability in the financial sector. Meanwhile, lenders may turn more conservative to preserve cash they may need to deal with an unpredictable environment.

    That would make it harder for businesses and households to access loans, weighing on economic output over time.

    “Financial conditions have tightened, which is likely to entail lower lending and activity if they persist,” said the IMF, which hosts its spring meeting alongside the World Bank this week.

    If another shock to the world’s financial system results in a “sharp” deterioration in financial conditions, global growth could slow to 1% this year, the IMF warned. That would mean “near-stagnant income per capita.” The group put the probably of this happening at about 15%.

    The IMF acknowledged forecasting was difficult in this climate. The “fog around the world economic outlook has thickened,” it said.

    And it warned that weak growth would likely persist for years. Looking ahead to 2028, global growth is estimated at 3%, the lowest medium-term forecast since 1990.

    The IMF said this sluggishness was attributable in part to scarring from the pandemic, aging workforces and geopolitical fragmentation, pointing to Britain’s decision to leave the European Union, economic tensions between the United States and China and Russia’s invasion of Ukraine.

    Interest rates in advanced economies are likely to revert to their pre-pandemic levels once the current spell of high inflation has passed, the IMF also said.

    The body’s forecast for global growth this year is now closer to that of the World Bank. David Malpass, the outgoing World Bank president, told reporters Monday that the group now saw a 2% expansion in output in 2023, up from 1.7% predicted in January, Reuters has reported.

    In a separate report published Tuesday, the IMF said that while the rapid increase in interest rates was straining banks and other financial firms, there were fundamental differences from the 2008 global financial crisis.

    Banks now have much more capital to be able to withstand shocks. They also have curbed risky lending due to stricter regulations.

    Instead, the IMF pointed to similarities between the latest banking turmoil and the US savings and loan crisis in the 1980s, when trouble at smaller institutions hurt confidence in the broader financial system.

    So far, investors are “pricing a fairly optimistic scenario,” the IMF noted in a blog based on the report, adding that access to credit was actually greater now than it had been in October.

    “While market participants see recession probabilities as high, they also expect the depth of the recession to be modest,” the IMF said.

    Yet those expectations could be quickly upended. If inflation rises further, for example, investors could judge that interest rates will stay higher for longer, the group wrote in the blog.

    “Stresses could then reemerge in the financial system,” it noted.

    That bolsters the need for decisive action by policymakers, the IMF said. It called for gaps in supervision and regulation to “be addressed at once,” citing the need in many countries for stronger plans to wind down failed banks and for improvements to deposit insurance programs.

    — Olesya Dmitracova contributed to this report.

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  • High inflation and interest rates to hobble U.S. and global economies for several years, IMF says

    High inflation and interest rates to hobble U.S. and global economies for several years, IMF says

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    The U.S. and global economies are likely to struggle to grow over the next few years as countries fight to reduce high inflation and cope with rising interest rates, the IMF said Tuesday.

    The latest projections paint a gloomy picture of the challenges facing the world. Chief among them is high inflation, a problem the IMF said has proven stickier than expected compared to “even a few months ago.”

    Price increases in goods and services other than food and gasoline are still high, the IMF said, and a tight labor market could keep upward pressure on wages.

    Inflation globally is likely to average about 7% in 2023, up almost 1/2 point from the IMF estimate just three months ago.

    The fund said inflation probably won’t return to the low levels that prevailed around the world until “2025 in most cases.” In the U.S., for example, inflation rose less than 2% a year in the decade before the pandemic.

    Stubbornly high inflation, in turn, is likely to force the U.S. and other countries to keep interest rates high for some time.

    “This may call for monetary policy to tighten further or to stay tighter
    for longer than currently anticipated,” IMF director of research Pierre-Olivier Gourinchas said.

    Yet rising interest rates and higher borrowing costs also risk destabilizing financial institutions as witnessed by the failure of Silicon Valley Bank in the U.S. and the emergency rescue of Switzerland-based Credit Suisse.

    Recent banking instability reminds us,” Gourinchas said, “that the situation remains fragile.”

    “Once again, the financial system may well be tested even more,” he added. “Nervous investors often look for the next weakest link, as they did with Crédit Suisse.”


    IMF

    Threats to banks could add to the stress on the economy by spurring them to lend less to businesses and consumers. Lending is critical for economic growth.

    “We are therefore entering a tricky phase during which economic growth remains
    lackluster by historical standards, financial risks have risen, yet inflation has not yet
    decisively turned the corner,” Gourinchas said.

    The U.S. economy is forecast to slow from 2.1% growth in 2022 to 1.6% in 2023 and 1.1% in 2024. Notably, the IMF does not predict a U.S. recession.

    By contrast, the Federal Reserve predicts U.S. growth will slow to just 0.4% in 2023 and then rebound to a 1.2% annual pace in 2024.

    Most countries in Europe are also expected to keep growing aside from the U.K. and Germany, whose economies have been harder hit by high energy prices.

    The world economy is forecast to expand 2.8% in 2023 and 3% in 2024, a shade lower compared to the IMF’s forecast in at the start of the year.

    Looking out to 2028, global growth is forecast at 3%, the weakest five-year outlook since the IMF began publishing them 33 years ago.

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  • What markets are watching after digesting the US jobs data | CNN Business

    What markets are watching after digesting the US jobs data | 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. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    In an unusual coincidence, the US jobs report was released on a holiday Friday — meaning stock markets were closed when the closely-watched economic data came out.

    It was the first monthly payroll report since Silicon Valley Bank and Signature Bank collapsed. It also marked a full year of jobs data since the Federal Reserve began hiking interest rates in March 2022.

    While inflation has come down and other economic data point to a cooling economy, the labor market has remained remarkably resilient.

    Investors have had a long weekend to chew over the details of the report and will likely skip the typical gut-reaction to headline numbers.

    What happened: The US economy added 236,000 jobs in March, showing that hiring remained robust though the pace was slower than in previous months. The unemployment rate currently stands at 3.5%.

    Wages increased by 0.3% on the month and 4.2% from a year ago. The three-month wage growth average has dropped to 3.8%. That’s moving closer to what Fed policymakers “believe to be in line with stable wage and inflation expectations,” wrote Joseph Brusuelas, chief economist at RSM in a note.

    “That wage data tends to suggest that the risk of a wage price spiral is easing and that will create space in the near term for the Federal Reserve to engage in a strategic pause in its efforts to restore price stability,” he added.

    The March jobs report was the last before the Fed’s next policy meeting and announcement in early May. The labor market is cooling but not rapidly or significantly, and further rate hikes can’t be ruled out.

    At the same time Wall Street is beginning to see bad news as bad news. A slowing economy could mean a recession is forthcoming.

    Markets are still largely expecting the Fed to raise rates by another quarter point. So how will they react to Friday’s report?

    Before the Bell spoke with Michael Arone, State Street Global Advisors chief investment strategist, to find out.

    This interview has been edited for length and clarity.

    Before the Bell: How do you expect markets to react to this report on Monday?

    Michael Arone: I think that this has been a nice counterbalance to the weaker labor data earlier last week and all the recession fears. This data suggests that the economy is still in pretty good shape, 10-year Treasury yields increased on Friday indicating there’s less fear about an imminent recession.

    There’s this delicate balance between slower job growth and a weaker labor market without economic devastation. I think this report helps that.

    As it relates to the stock market, I would expect the cyclical sectors to do well — your industrials, your materials, your energy companies. If interest rates are rising, that’s going to weigh on growth stocks — technology and communication services sectors, for example. Less recession fears will mean investors won’t be as defensively positioned in classic staples like healthcare and utilities.

    Could this lead to a reverse in the current trend where tech companies are bolstering markets?

    Yes, exactly. It’s difficult to make too much out of any singular data point, but I think this report will hopefully lead to broader participation in the stock market. If those recession fears begin to abate somewhat, and investors recognize that recession isn’t imminent, there will be more investment.

    What else are investors looking at in this report?

    We’ve seen weakness in the interest rate sensitive parts of the market — areas that are typically the first to weaken as the economy slows down. So things like manufacturing, things like construction. That’s where the weakness in this jobs report is. And the services areas continue to remain strong. That’s where the shortage of qualified skilled workers remains. I think that you’re seeing continued job strength in those areas.

    What does this mean for this week’s inflation reports? It seems like the jobs report just pushed the tension forward.

    it did. I expect that inflation figures will continue to decelerate — or grow at a slower rate. But I do think that the sticky part of inflation continues to be on the wage front. And so I think, if anything, this helps alleviate some of those inflation pressures, but we’ll see how it flows through into the CPI report next week. And also the PPI report.

    Is the Federal Reserve addressing real structural changes to the labor market?

    The Fed was confused in February 2020 when we were in full employment and there was no inflation. They’re equally confused today, after raising rates from zero to 5%, that we haven’t had more job losses.

    I’m not sure why, but from my perspective, the Fed hasn’t taken into consideration the structural changes in the labor force, and they’re still confused by it. I think the risk here is that they’ll continue to focus on raising rates to stabilize prices, perhaps underestimating the kind of structural changes in the labor economy that haven’t resulted in the type of weakness that they’ve been anticipating. I think that’s a risk for the economy and markets.

    A few weeks ago, Before the Bell wrote about big problems brewing in the $20 trillion commercial real estate industry.

    After decades of thriving growth bolstered by low interest rates and easy credit, commercial real estate has hit a wall. Office and retail property valuations have been falling since the pandemic brought about lower occupancy rates and changes in where people work and how they shop. The Fed’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry.

    Recent banking stress will likely add to those woes. Lending to commercial real estate developers and managers largely comes from small and mid-sized banks, where the pressure on liquidity has been most severe. About 80% of all bank loans for commercial properties come from regional banks, according to Goldman Sachs economists.

    Since then, things have gotten worse, CNN’s Julia Horowitz reports.

    In a worst-case scenario, anxiety about bank lending to commercial real estate could spiral, prompting customers to yank their deposits. A bank run is what toppled Silicon Valley Bank last month, roiling financial markets and raising fears of a recession.

    “We’re watching it pretty closely,” said Michael Reynolds, vice president of investment strategy at Glenmede, a wealth manager. While he doesn’t expect office loans to become a problem for all banks, “one or two” institutions could find themselves “caught offside.”

    Signs of strain are increasing. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, which provides data on commercial real estate.

    High-profile defaults are making headlines. Earlier this year, a landlord owned by asset manager PIMCO defaulted on nearly $2 billion in debt for seven office buildings in San Francisco, New York City, Boston and Jersey City.

    Dig into Julia’s story here.

    Tech stocks led market losses in 2022, but seemed to rebound quickly at the start of this year. So as we enter earnings season, what should we expect from Big Tech?

    Daniel Ives, an analyst at Wedbush Securities, says that he has high hopes.

    “Tech stocks have held up very well so far in 2023 and comfortably outpaced the overall market as we believe the tech sector has become the new ‘safety trade’ in this overall uncertain market,” he wrote in a note on Sunday evening.

    Even the recent spate of layoffs in Big Tech has upside, he wrote.

    “Significant cost cutting underway in the Valley led by Meta, Microsoft, Amazon, Google and others, conservative guidance already given in the January earnings season ‘rip the band- aid off moment’, and tech fundamentals that are holding up in a shaky macro [environment] are setting up for a green light for tech stocks.”

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  • U.S. economy forecast to create 238,000 jobs in March. The Fed wouldn’t be happy.

    U.S. economy forecast to create 238,000 jobs in March. The Fed wouldn’t be happy.

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    Normally a big increase in new U.S. jobs is cause for celebration. Not right now.

    The Federal Reserve sees a tight labor market as a big obstacle in getting high inflation under control and wants hiring to slow as soon as possible, but it might not get its wish in March.

    …

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  • Fed’s Bullard doesn’t see a looming credit crunch that would push economy into a recession

    Fed’s Bullard doesn’t see a looming credit crunch that would push economy into a recession

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    In the wake of the collapse of Silicon Valley Bank, conventional wisdom has been that banks will cut lending, known as a credit crunch, that will damage the economy.

    On Thursday, St. Louis Federal Reserve President James Bullard said he was “less enamored’ with this forecast.

    “Only about 20% of lending is going through the banking system…

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  • How Tech-Based Market Research Helps Businesses Stay Ahead | Entrepreneur

    How Tech-Based Market Research Helps Businesses Stay Ahead | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Consumer priorities are quickly changing with the possibility of a recession. Businesses will find it difficult to get away with sub-optimal segmentation, placement, pricing or branding as people become more frugal with their money.

    With rising uncertainty in both the business and consumer markets, market research is critical for brands to stay on top of shifting consumer preferences. However, marketers are expected to trim their research budgets while under increased pressure to obtain high-quality data and insights.

    But here’s the good news — companies can speed up their market research at a notably lower cost with the help of technology-driven market research.

    Tech-driven market research leverages technologies like AI, ML and Big Data to assist you in overcoming the significant limitations of traditional market research, like the reliance on self-reported data, lack of optimization recommendations and long turnaround times.

    Let’s look at how market research techniques can be particularly useful during these uncertain times.

    Related: The Impact of Technology on Market Research

    Identify market trends

    Spotting changes in customer preferences, shopping habits and spending patterns is essential for businesses to adapt and survive.

    For instance, the fast fashion giant H&M realized the trend of sustainable clothing early on. Incentivizing customers with vouchers for recycling clothes, H&M collected nearly 19,000 tons of unwanted clothes and textiles in 2020 through their Garment Collecting program, garnering much love from their customers.

    Like H&M, businesses can adjust their marketing strategies, develop new products and tailor their offerings to meet the evolving needs of their customers by keeping up with current trends. This is where tech-driven market research gives you an edge, effectively identifying changing consumer sentiments by capturing not just stated responses but also subconscious feelings that consumers have not explicitly conveyed.

    Conduct competitive analysis

    Competitive market research is especially critical during a recession, with many businesses struggling to survive and beat the fierce competition. By analyzing the competition, businesses can identify areas where they can improve, such as pricing, product features or customer service. They can also identify areas where they have an advantage and leverage it to gain market share.

    Market research technology can help you delve deeper into understanding, for instance, why you might be losing customers to competitors. Even if you’ve lost the deal, following up with open-ended questions like what services attracted the customer to the competitor, did they have any issues with the pricing and such will help you find out why they made the switch.

    Advanced research technologies help you quantify the emotions hidden in voice tonalities and facial expressions, enabling you to capture more profound insights. They can also help you accurately test the UX of your application and the competitors’ with features like eye tracking.

    You can also test your media (adverts) against the competitors; robust market research tech stacks can generate heatmaps and benchmarking scores, so you know how your marketing strategies fare against the industry standard.

    Related: 4 Key Questions to Ask When Analyzing Competition

    Test new products and services

    While businesses need to be more cautious with their investments during an economic downturn, keeping branding, products and services relevant to the current dynamics can be worthwhile.

    For instance, Procter & Gamble utilized market research to successfully introduce the Swiffer WetJet in 2001 [during the recession], creating a new product that made it easier to mop floors, weaning customers away from less expensive alternatives.

    This is where the right market research technology can enable you to flawlessly conduct innovation testing, product concept testing and more before investing in a product or service development and launch. Businesses can avoid costly mistakes and make informed choices by gathering feedback from prospective customers ahead of time to evaluate the viability of their new offering.

    Currently, Coca-Cola is riding the sustainability trend and is testing paper bottles for all its products. An important aspect of this testing is how it will impact customer experience. The company is focusing on consumer research to understand how customers will react to the paper bottle and to find sustainable packaging solutions that people can enjoy.

    Such intensive research activities become easy to conduct with the help of market research platforms where surveys and focus group discussions can be conducted entirely online. Moreover, research tools also come equipped with massive online panels, enabling you to practically reach any corner of the world for your research activities.

    Related: How Businesses Can Utilize Market Research to Create Reactive, Recession-proof Strategies for Survival

    Optimize marketing spend

    Market research technology can help businesses optimize their marketing efforts by identifying the most effective channels and messages. By analyzing customer data, businesses can determine which marketing campaigns deliver the best return on investment (ROI) and adjust their strategies accordingly.

    Fortunately, there are several tech-driven market research tools available in the market today. An integrated research platform allows you to gather both quantitative and qualitative data in one platform, giving you a single view of all data. Since data visualization is easy, these tools enable quick decision-making as well.

    Today, companies can move forward during a recession rather than being bogged down; implementing the right market research platform can be a game-changer in helping companies innovate and thrive even during uncertain times.

    According to HBR, only 9% of companies flourished during the Great Recession. This small group of companies was research-oriented and had concerted plans for handling a recession and where they would invest. The result? They outperformed competitors by more than 10% in sales growth.

    These companies understood the consumer sentiment that people didn’t necessarily stop spending but were willing to spend elsewhere. However, it’s impossible to come to this understanding without investing in research.

    Without effective market research, you can only speculate about what your consumers want and, as a result, what might benefit your company in difficult times.

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    Sriya Srinivasan

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  • How to Jump the Curve and Get Ahead of the Game During a Recession | Entrepreneur

    How to Jump the Curve and Get Ahead of the Game During a Recession | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Why should you think differently about a recession? When everybody is being cautious and using the down market cycle to consolidate their business, why should you be the person being bold and investing in new products and services? The answer is surprisingly simple. Consider that some of the most significant companies were born amid a depression or a recession.

    Ford was founded during the 1902-1904 recession, while GM started in the aftermath of the panic of 1907, the first global financial crisis of the 20th century. American Airlines was formed during the Great Depression. The 1973-75 recession saw the birth of HBO and Microsoft. Mailchimp sprung into life during this time and is still thriving today. The second Great Recession (2007-2009) saw Airbnb flourish in the market.

    What does “jump the curve” mean?

    Think of a sine wave — starting at the top of the curve, moving down to the lowest point, and then rising back to the highest point. Imagine if you could jump from peak to peak and skip the low point. To do this means having a completely different mindset.

    In general, when the market is bold and optimistic, this is usually the time to be cautious and use it as an opportunity to consolidate your business. When the market is fearful and cautious, this is the time for you to be bold with your new initiatives. This concept is jumping the curve. It is this concept of trying to move your business to the next level and to expand the operations at a time everybody else is downsizing and shrinking to a smaller operation.

    Preserving cash is critical at a time like this; no question of the wisdom of that strategy. But a smart team can find ways to preserve cash and expand the business simultaneously. This means being exceptionally innovative.

    Related: How to Unlock Your Team’s True Potential by Creating a Team of Leaders

    Abundance vs. Scarcity Mindset

    Often in a down market, a company can find its very best opportunities. When other companies are shrinking operations, laying off key people, and even canceling certain products and services, this creates opportunities to gain new customers that are no longer served. New customers become available during down markets.

    There may even be opportunities to acquire other businesses where evaluations of companies are at a lower level, often providing good value. During market upswings, most company valuations are inflated.

    Down markets also offer opportunities to find great talent and expand the business by employing new people.

    Related: This Is How Thinking About Abundance Has Helped Me Build a Success Mindset

    Developing a powerful culture to help jump the curve

    We mentioned earlier the exceptional innovation that a team has to display when trying to jump the curve during a down cycle. This means being innovative with capital and developing new products and services that require very little cash.

    Here, the Pareto principle can be beneficial. Perhaps you can get 90% of the benefit with 10% of the cost? What if there is a way for your team to expand your services and offerings while at the same time preserving most of your capital? This is a different mindset.

    When we flip the switch and become bold and innovative to expand our operations, we can access new customers, markets and increase market share. When the world is shrinking operations and scaling down, you can take the opportunity to jump your business to a whole new level.

    This requires a unique culture. That is why Peter Drucker said, “Culture will eat strategy for breakfast.” For this to work, key elements need to be built into your culture. When the business is on an upcycle, you consolidate your culture and empower every team member to act as a leader.

    This is how you create a team of leaders, not just a team with a leader. Allowing team members to experiment and innovate and even take calculated risks during good times teaches them how to think like owners and to act and function at a different level.

    The challenge is to move people from a “worker” mindset into a “leader” mindset. A worker is someone who manages their outputs. They do what they are told and try to do a good job by following procedures and meeting the required standards. The leadership approach is to teach people to manage their inputs and outputs.

    Related: The Mindset That Sets Apart Great Leaders

    This means people never use excuses like “nobody sent me the email” or “I’ve called twice, and they didn’t answer me.” You are teaching your team to function as a group of leaders in which they lead their own contribution to the organization by managing their inputs (what they need to do their job) and their outputs. You teach people to act like owners in their areas of responsibility.

    When you create a culture in which people are celebrated as heroes when they do something unique, you are investing in a powerful culture that will empower those same heroes to come up with extraordinary innovation and ideas during a down cycle.

    You take on a new mindset in which it is not your job to be the hero for the team but rather to create heroes in your team. This means taking a risk with people. It means giving people an opportunity to innovate and take risks. It also means that you give people a profile who normally would be overlooked or remain unseen in your organization.

    When everyone on the team knows they have an opportunity to have their moment in the spotlight and be celebrated, a new era of innovation and experimentation beings. It is really about you, as the leader, permitting to act like owners and bring innovation to every level of the organization.

    When we create a culture in which ideas have no rank, then every idea stands on its own merit regardless of who proposed it. Once a team learns how to innovate and believes that a certain amount of risk-taking is not just permitted but encouraged, heroes, are born. When heroes are created during the peaks of the market, the same heroes will be the ones who will deliver Innovation and great ideas during a down cycle and help the organization jump from peak to peak.

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    Dionne Van Zyl

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  • The Fed could easily drive Black unemployment much higher than the overall jobless rate | CNN Business

    The Fed could easily drive Black unemployment much higher than the overall jobless rate | CNN Business

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    New York
    CNN
     — 

    Millions of jobs could be on the chopping block this year, as the Federal Reserve continues its rate-hiking campaign to tame inflation. But the effects of that action likely won’t reverberate evenly across the economy.

    The Fed has seen some success: Inflation has cooled for eighth consecutive months, according to the February Consumer Price Index. The Producer Price Index shows a dramatic drop in wholesale prices in February. And the Fed’s favored inflation gauge, the Personal Consumption Expenditures price index, has also started to moderate.

    But the job market has proved to be a formidable force, humming steadily in the face of climbing rates meant to slow its growth. After adding more than half a million jobs in January, the US economy then added 311,000 jobs in February, with an unemployment rate of 3.6% — just above a half-century low — according to the Bureau of Labor Statistics.

    However, the jobless rate isn’t expected to be that low for long.

    At its most recent policy-making meeting, the Fed released projections for the year ahead that showed unemployment could jump to 4.5%, representing another 1.5 million job losses, by the end of the year.

    While that’s a small improvement from the central bank’s previous 4.6% jobless rate estimate, economists say it’s possible the unemployment rate could rise above the Fed’s expectations. Moreover, they say that historically disadvantaged groups could be disproportionately affected by the central bank’s stringent monetary policy.

    While some groups often sidelined in the job market have seen benefits from this hot job market — women have seen a faster pace of job gains than men in recent months, for example — others, including Black women and Latino men, have seen slower recoveries in jobless rates since the onset of the Covid pandemic.

    Recession fears gained traction last month when the collapse of Silicon Valley Bank sent markets wobbling, raising concerns about the economy’s ability to handle more stress. Goldman Sachs revised its estimate of the United States entering a recession over the next 12 months to a 35% chance, up from its estimate of a 25% chance before the banking sector turmoil.

    That’s of particular concern to certain demographic groups: Jobless rates for Black and Hispanic Americans often increase by more than those of their White counterparts during recessions, said Rakesh Kochhar, a senior researcher focusing on demographics and social trends at the Pew Research Center.

    History makes that discrepancy clear.

    A Pew Research Center report comparing two recessions in recent decades shows how Black and Hispanic Americans experience disproportionate effects on their jobless rates during periods of economic downturn. From the second quarter of 2007 to the second quarter of 2009, during the Great Recession, the unemployment rate rose 6.5 percentage points for Black Americans. The Hispanic unemployment rate climbed 6.3 percentage points. For White workers, it increased 4 percentage points.

    And from the first quarter of 1990 to the first quarter of 1991, the unemployment rate climbed 1.4 percentage points for Black Americans and 2.1 percentage points for Hispanic Americans. The White unemployment rate rose 1.3 percentage points.

    Economists say it’s hard to guess the trajectory of the unemployment rate this year, noting it could very well exceed the Fed’s estimate.

    “There’s just tons of momentum, and once you slow the economy enough to get the unemployment rate moving up, it’s very hard to sort of turn that cruise ship back around,” said Josh Bivens, research director and chief economist at the Economic Policy Institute.

    As such, the Fed’s tightening efforts could easily drive the Black unemployment rate much higher than the overall jobless rate, said William Spriggs, an economics professor at Howard University and chief economist to the AFL-CIO.

    “If the Fed continues to use unemployment as its measure of labor force slack, and thinks they want a 4.5% unemployment rate — to make that happen, the Fed would have to induce net job loss in the labor market,” Spriggs told CNN in an email. “If we go through two months of negative job growth, all bets are off. The Black unemployment rate will easily get to 9% in that scenario.”

    One other likely consequence of growing unemployment is slowing wage growth, Bivens said.

    Like rising unemployment, stunted wage growth tends to hit marginalized groups harder. A 2021 Economic Policy Institute report shows that a 1 percentage point increase in overall unemployment correlates with about 0.5% slower wage growth for White median hourly wages. Wage growth falls by roughly 0.8% for Black median hourly wages.

    “A lot of people have this idea that in a recession, if unemployment rises by a couple of percentage points, as long as you’re not one of those unlucky people to lose the job, you’ve dodged the bullet,” Bivens said. “And that’s not true at all.”

    Still, a robust labor market isn’t a permanent solution to bridging employment disparities, even if the Fed does keep rates lower, says Wendy Edelberg, director of the Hamilton Project and a senior fellow in economic studies at the Brookings Institution.

    The job market’s recent strength is unsustainable, she said. The US economy needs about 75,000 net job gains a month to keep stable and is currently adding about 350,000 net job gains a month on average, according to Edelberg.

    “[The Fed is] right to be confident that one of the things that’s going to have to happen to get inflation back down to a normal, stable level is to get job growth to a normal, sustainable level,” Edelberg said. “But if the Fed’s actions resulted in a slower labor market, then inflation stayed high — that would be a disaster.”

    The March jobs report from the Department of Labor, due to be released Friday at 8:30 a.m., is expected to show the US economy gained 240,000 positions last month. ADP’s private-sector payroll report, generally seen by investors as a proxy for the trajectory of Friday’s number, fell short of expectations, with just 145,000 jobs added. Economists had expected private hiring would rise by 200,000 positions last month.

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  • Manufacturing shrinks for 5th month in a row, ISM finds, with one gauge signaling recession

    Manufacturing shrinks for 5th month in a row, ISM finds, with one gauge signaling recession

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    The numbers: A key barometer of U.S. factories was negative in March for the fifth month in a row, reflecting an ongoing struggle by a key part of the economy to resume growth.

    The Institute for Supply Management’s manufacturing survey dropped to 46.3% from 47.7% in the prior month. That’s the lowest level since May 2020, when the pandemic show down much of the U.S. economy.

    Numbers below 50% signal that the manufacturing sector is contracting. The last time the index fell five months in a row was in 2019, during a trade fight with China.

    The ISM report is viewed as a window into the health of the economy, and it shows growing strains. New orders shrank to a level historically associated with recession, for example.

    Economists polled by the Wall Street Journal had forecast the index at 47.3%.

    Key details:

    • The index of new orders dropped 2.7 points to 44.3%. “Sales a down a bit, and budgets being cut with a greater emphasis on savings,” an executive at a chemical company told ISM.

    • The production barometer edged up 0.5 points to 47.8%.

    • The employment gauge fell 2.2 points to 46.9%, marking the lowest level since early in the pandemic.

    • The price index, a measure of inflation, declined 2.1 points to 49.2%. Inflation is still a big worry, but price increases have slowed sharply since last summer.

    Big picture: Manufacturers have battled supply shortages, high inflation and rising interest rates over the past year.

    While the shortages are clearing up and inflation is slowing, interest rates are still rising, boosting the odds of recession both in the U.S. and abroad.

    The result: The near-term outlook for manufacturers is still quite cloudy. More companies are tackling the problem with hiring freezes or even layoffs.

    “Now companies are facing the reality that demand is not going to come back to support the current level of employment,” said Timothy Fiore, chair of the ISM survey.

    Looking ahead: “The new orders index is very much in recessionary territory, with only one previous occasion over the past 60 years where the index has fallen to that level without an economic contraction following,” noted deputy chief U.S. economist Andrew Hunter of Capital Economics.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.61%
    and S&P 500
    SPX,
    -0.05%
    rose in Monday trades.

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  • 6 Ways to Outpace Your Competitors During a Recession | Entrepreneur

    6 Ways to Outpace Your Competitors During a Recession | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    There’s been a lot of debate about whether the U.S. is in a recession or not. The economic signals have been confusing at best — interest rates are rising, two banks have failed, and there have been many well-publicized layoffs at major tech companies.

    However, the jobs report has been largely positive, and signs indicate that inflation is slowing. In short, whether or not we’re headed for a recession is anyone’s best guess.

    But as a business owner, you can take steps to prepare ahead of time. By planning and acting strategically, you can use economic uncertainty as an opportunity to grow your business and stand out among your competitors.

    Related: 4 Ways Entrepreneurs Can Achieve Massive Growth in a Recession

    Build up your cash reserves

    A cash reserve is always important because it improves the financial stability of your business. But it’s even more critical during a recession when your revenue and profits can suddenly drop, putting a strain on your cash flow.

    Poor cash flow can make it difficult for your company to pay its bills, resulting in late fees and strained relationships. If the situation gets bad enough, you could even be forced to close your business altogether.

    One of the best ways to improve your cash flow is by watching your spending. Look at your budget, and identify any areas that can be reduced or eliminated. You can negotiate your contracts with suppliers and reduce any discretionary spending.

    From there, focus on building up your cash reserves, especially your emergency savings. You can also consider taking out a line of credit as an additional cash reserve. With a line of credit, you can draw from it on an as-needed basis but only have to repay what you actually borrowed.

    Invest in technology

    Next, look for ways to increase your operational efficiency by investing in technology. The right technology can help you improve your internal processes and better serve your customers.

    For example, self-service chatbots allow you to keep in constant contact with your customers, even when your sales team isn’t available. Investing in analytics can help you identify what’s working and what isn’t, so you can make data-driven decisions about your business.

    Investing in technology ensures that your business can continue to thrive during the recession. That way, when the economy does rebound, you’re not starting over from zero.

    You might think that making an investment of this caliber isn’t worthwhile in poor economic times, but the savings you yield after you’ve implemented new technology could offset the cost of your financing and drive further revenue. With the right lender, you can use financing to cover the purchase and preserve cash flow.

    Related: 5 Ways to Protect Your Business From a Recession

    Focus on customer retention

    During a recession, you should double down on your customer retention efforts. Keeping a customer is always less expensive than acquiring a new one, so the majority of your efforts should be focused on keeping your current customers happy.

    Make sure your customers are happy with the service you’re currently providing them. Focus on quality above quantity — during an economic downturn, the worst thing you can do is sacrifice the quality of your products or services in the name of productivity.

    Come up with a marketing strategy focused on customer retention. This might include offering discounts or implementing a loyalty program to reward repeat business.

    Expand into new markets

    Many people don’t realize that recessions can be a great opportunity to expand your current business model. That’s partly because there’s less competition during a recession. Instead of looking to expand, most businesses will retreat and focus on survival above all else.

    Layoffs are common during a recession, and businesses that are hiring will often lowball potential employees out of fear of spending money. That means you’ll have more access to talented employees who can help move your business forward.

    Unfortunately, some businesses will be forced to close their doors, which will create an opening in the market. Customers will be looking for new solutions to meet their needs, which allows you to step in.

    Before you can successfully expand into a new market, you’ll need to take some time to pay attention to shifting consumer demands. Over time, you’ll find opportunities to offer additional products and services and expand your current customer base.

    Related: For Savvy Entrepreneurs, an Economic Downturn Creates Opportunity

    Focus on company culture

    During a recession, most employees will start to feel worried about their jobs and financial security. That’s why it’s important to continue focusing on company culture. Your employees are your most important asset, and when they succeed, your business will succeed.

    Look for ways to continue engaging your team and offer good pay and benefits. Not only will this create more loyalty among your current employees, but it will make your company more attractive to future job candidates.

    Consider taking out a line of credit

    Finally, it’s a good idea to consider taking out a line of credit before you need it. During a recession, banks and credit unions tend to tighten their lending standards, so it’s a good idea to secure the funds you need before your credit line is reduced.

    A line of credit is a good option for businesses with fluctuating cash flow needs. It can help you fund new investment opportunities as they arise. For instance, if you plan to invest in new technology or additional inventory, a line of credit gives you access to the funds you need.

    Even if you don’t have any immediate plans to invest in your company, a line of credit can be used as an additional cash reserve for your business.

    An economic downturn brings a lot of uncertainty, but there are opportunities to be found as well. Focus on staying visible in the marketplace and continually look for new opportunities to expand. This will put your company in a good position once the economy begins to recover.

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    Joseph Camberato

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  • Inflation softens in February, PCE finds, and takes some pressure off Fed

    Inflation softens in February, PCE finds, and takes some pressure off Fed

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    The numbers: The cost of U.S. goods and services rose by a milder 0.3% in February, perhaps a sign the Federal Reserve’s fight against high inflation is showing grudging progress.

    Prices had risen by a sharp 0.6% in January, based on the so-called PCE index.

    The yearly increase in prices declined to 5% from 5.3% in the prior month, the government said Friday, marking the lowest level in more than a year and a half.

    That’s still about three times the rate of inflation before the pandemic, however.

    Senior Federal Reserve officials have signaled they plan to raise interest rates just once more before pausing to determine how much a sharp increase in borrowing costs brings down inflation. The Fed has jacked up its key short-term U.S. rate to a top end of 5%, a remarkably fast acceleration from nearly zero one year ago.

    Higher interest rates temper inflation by slowing the economy, but the effects can sometimes take up to a year or more to be fully felt. The Fed wants to avoid going too far or cause any more stress on the U.S. financial system after the failure of Silicon Valley Bank.

    After the PCE report, Boston Federal Reserve President Susan Collins said the central bank “has more work to do” to get inflation lower in an interview with Bloomberg.

    Key details: The more closely followed core index also increased 0.3% last month, matching Wall Street’s forecast.

    The core rate of inflation in the past 12 months slipped to 4.6% from 4.7%.

    The PCE is viewed by the Fed as the best predictor of future inflation trends. It is formally known as the personal consumption expenditures price index.

    The central bank pays especially close attention to the core gauge that strips out volatile food and energy costs.

    Unlike it’s better-known cousin, the consumer price index, the PCE gauge takes into account how consumers change their buying habits due to rising prices.

    They might substitute cheaper goods such as chicken thighs for more expensive ones like boneless breasts to keep costs down. Or buy generic medicines instead of brand names.

    The CPI showed inflation rising at a 6% yearly rate in February.

    Big picture: The Fed is trying to straddle a fine line: Bring inflation back down to its 2% target, but without causing a severe economic reaction.

    Whether the Fed will be able to hold the line on just one more rate hike is far from certain.

    If inflation stays high, the central bank would have to end its pause on rate hikes and risk a recession. A slim majority of economists, in fact, already believe a downturn is imminent.

    Steadily falling inflation, on the other hand, could allow the Fed to pull a rabbit out of the proverbial hat.

    Looking ahead: “For an economy looking to avoid recession, this was a good report,” said Robert Frick, corporate economist at Navy Federal Credit Union.

    “For the Fed, it could be one and done in May,” said senior economist Sal Guatieri of BMO Capital Markets.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.50%
    and S&P 500
    SPX,
    +0.57%
    rose in Friday trades. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.535%
    declined several basis points to 3.53%.

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  • JPMorgan Charts Show the Tech Recession May Already Be Over | Entrepreneur

    JPMorgan Charts Show the Tech Recession May Already Be Over | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    This story originally appeared on Business Insider.

    With the recent collapses of Silicon Valley Bank and Signature Bank drawing comparisons to the Global Financial Crisis, the stakes have never been higher for the Federal Reserve than they were during this week’s FOMC meeting.

    After embarking on a rapid rate-hiking cycle starting last March, the US central bank now has to walk a delicate tightrope between mitigating the banking crisis while simultaneously reigning in runaway inflation. In a year almost certainly fated to end in recession, the turbulence currently roiling the financial industry might seem, at least on the surface, catastrophic for markets.

    But while it’s certainly understandable that any parallels to the 2008 recession may shake investors, it’s also important to keep in mind that short-term market fluctuations can oftentimes be due to noise rather than any long-term fundamental trends, wrote JPMorgan’s Jacob Manoukian.

    “In an average year, the stock market sees a close to 15% peak-to-trough decline. Currently, the year-to-date drawdown is 8%. While drawdowns are never comfortable, what we are seeing in markets is, at the surface, normal,” Manoukian, the US head of investment strategy at JPMorgan Private Bank, wrote in a note on Thursday. “So while we look at the dynamics currently in play and consider what they might mean for you, keep that long-term perspective in mind.”

    Takeaway #1: SVB and Signature Bank were special cases

    For instance, Manoukian wrote that any investors worried about potential contagion from the Silicon Valley Bank, or SVB, and Signature Bank collapses should keep in mind that both banks were fundamentally different from others due to their capital concentration.

    Both SVB and Signature Bank had an unusually high concentration of large deposits above the $250,000 threshold insured by the Federal Deposit Insurance Corporation. In addition, most of SVB depositors were made up of venture funds and their investments, with less than 10% of the bank’s deposits made up of retail capital.

    JPMorgan Private Bank

    Although both banks have already been bailed out by the federal government, Manoukian noted that banks will most likely practice more conservative lending practices going forward. While diminishing the amount of available credit could slow down economic growth, more conservative lending practices could also tighten monetary policy, ultimately helping to bring down sticky inflation.

    Takeaway #2: Say goodbye to the tech recession

    Besides their deposit makeup separating them from regional banks, both SVB and Signature Bank were also highly concentrated in specific sectors. SVB’s focus was on technology, healthcare, and life sciences, with over one-third of its deposit base from early-stage companies in these industries, while Signature Bank was highly concentrated in cryptocurrencies.

    “Such companies are often (as yet) unprofitable, speculative and digitally enabled,” Manoukian wrote. “They soared during lockdowns, when lives moved online and interest rates were extremely low. But now, under the opposite conditions (public life reopening, the quickest rate hikes in a generation), investors are far less enthusiastic, capital markets have largely been closed to them, and fundraising has become difficult,” he wrote. Manoukian added that the collapse of SVB was just another hallmark of the recession the technology sector currently faces.

    Although 481 tech companies have already announced layoffs this year, Manoukian noted that these headcount reductions seem to have peaked in January — a tentative sign that the tech recession may already well be on the road towards recovery.

    The tech layoff wave may have crested

    JPMorgan Private Bank

    “It has been a rough stretch for the technology complex in general, but it may be time for investors to start to sort through the wreckage. We expect to see opportunities in businesses with leaner cost structures and sustainable business models that may be valued at a discount,” he wrote.

    Takeaway #3: A “goldilocks” labor market

    The same day SVB collapsed, the February jobs report revealed that the labor market was neither too hot nor too cold, but chugging along without unconstrained wage growth, Manoukian said.

    “It has been a rough stretch for the technology complex in general, but it may be time for investors to start to sort through the wreckage. We expect to see opportunities in businesses with leaner cost structures and sustainable business models that may be valued at a discount,” he wrote.

    “It has been a rough stretch for the technology complex in general, but it may be time for investors to start to sort through the wreckage. We expect to see opportunities in businesses with leaner cost structures and sustainable business models that may be valued at a discount,” he wrote.

    Wage growth easing from highs

    JPMorgan Private Bank

    “The turmoil in the banking sector will likely curtail new lending, and thus economic growth and inflation. The Fed may not have to raise rates quite as far as we had thought just a few weeks ago,” he added. “The bad news: it probably also raises recession risks.”

    Takeaway #4: Don’t let the noise distract you from your long-term goals

    Although markets remain highly volatile and uncertain in the short term, Manoukian emphasized that investors are best served by sticking to their long-term plan, since equity returns in the long run are much less volatile, and in fact have always been positive over a 20-year horizon.

    Long term returns have been less volatile

    JPMorgan Private Bank

    Additionally, Manoukian noted that market volatility tends to cluster. “Our research shows that seven of the 10 best days for the equity market over the past 20 years have occurred within 15 days of the 10 worst days. If you missed just the 10 best days, it would have reduced your total return by 4% per year, relative to staying invested,” he wrote.

    Even with daunting odds ahead, investors should keep their long-term goals and investment plans in mind to prevent making any rash decisions during any short-term selloffs. “While there could be more strain ahead, policymakers have the tools to mitigate a great deal of risk and point to a clearer path forward. Coming back to that long-term mindset can do the same for you,” Manoukian concluded.

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    Lisa Kailai Han

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