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Tag: recession

  • Why ESG Companies Are Better Equipped to Weather a Recession

    Why ESG Companies Are Better Equipped to Weather a Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    I co-founded my company in 2009, at the tail end of a recession. My partner and I were selling products rooted in plant-based medicine, and as such, felt compelled to ensure our business gave back to the environment it was benefiting from. But it wasn’t just an external commitment.


    recep-bg | Getty Images

    When there’s an economic downturn, there’s also a downturn in mental and physical health. A lot suffers in the communities we live in, and we recognized early on the importance of creating a company where our team felt a sense of purpose and belonging.

    Like many startups, we had to work tirelessly amidst economic restraints, to find our market fit and navigate the logistics of a product-based business. What fed our energy and motivation during those early days of uncertainty was the affirmation we received from our team, customers and key stakeholders who understood our vision for having a positive social impact.

    As of 2020, 88% of publicly-traded companies and 67% of privately-owned companies had ESG initiatives in place. During an economic downturn, however, companies are forced to make hard financial decisions. Scaling back on ESG can be tempting in an effort to balance the books, but companies that do so may find the temporary savings are greatly outweighed by the loss in stakeholder alignment.

    I’ve learned from experience that ESG-focused companies are often better equipped to weather the storms of a downturn. Here’s why:

    Related: Why ESG Conscious Companies are Resilient Companies

    Operating with purpose strengthens stakeholder relations

    In those early days when we were just building important relationships with our customers, vendors and partners, it was our mission — to have a positive social impact — that distinguished us from our competitors.

    Not only did our ESG vision create brand loyalists and word-of-mouth marketing for us at a time when budgets were tight, it opened up doors to partnerships we might not have otherwise secured. For example, a global supermarket chain that’s historically difficult to get into approached us before we were even ready to fulfill the demand required to be on their shelves.

    Nearly 80% of consumers say they will stop buying from companies that treat the environment or people poorly, and 83% believe companies should be actively shaping ESG best practices.

    This major shift towards supporting values-aligned businesses also helped us during the pandemic when supply chain issues caused global shortages. Many of our suppliers chose to continue to source to us — even with the limited amounts of supply they had — because they aligned with our ESG standards.

    When there’s a downturn, your profit and growth might be temporarily stalled. Having motivation beyond profit can create a sense of stability and assurance in your company’s long-term vision that attracts more stakeholders to buy in.

    Related: 5 Big Mistakes Companies Make When Tackling ESG

    Creating sustainable conditions prevents employee burnout

    Before ESG, there was “triple bottom line” and “corporate social responsibility.” Just as the name has evolved, so has the definition. Increasingly, companies are recognizing ESG also encompasses the treatment of employees.

    Workplace burnout has been steadily on the rise since the onset of the pandemic, with nearly 50% of employees and 53% of managers reporting they’re burned out at work, according to a new study from Microsoft.

    As a wellness company, the health of our employees is critical. For us, investing in ESG also means creating processes to ensure work conditions are sustainable. This involves creating a culture where key questions are asked: Is this a sustainable workload? Is the timeliness of this project or task realistic? Is the remuneration for this position fair for what we’re asking in return?

    One way we’ve tried to ensure these policies are upheld is by investing in emotional-intelligence training for our employees. The experience employees have at work is greatly linked to their energy, motivation, productivity and performance. It also greatly affects their overall quality of life, which can be stretched thin during a recession.

    Lastly, by creating a sustainable environment for employees, you’re more likely to attract and retain top talent — a key advantage in any economy.

    Related: 3 Steps for Making a Positive Environmental, Social and Governance (ESG) Impact

    The days of corporate greenwashing are numbered

    In an effort to keep afloat during a recession, some companies may get louder about their ESG impact in ways that can mislead the public. This concept of greenwashing is prevalent — a 2022 Harris Poll found 58% of leaders globally and 68% of leaders in the United States admit their companies have overstated their sustainability or greenwashed at times. But the risk of damaging a brand’s reputation through exposed greenwashing, is quickly becoming greater than the reward.

    Not only are governments and policymakers starting to crack down on greenwashing, but consumers are also doing their own research — armed with social media, they’re calling out organizations that don’t measure up to the ESG values they espouse.

    One of the best ways for businesses to amplify their ESG impact in a fair and transparent way is to look for certifications that are representative of the values they’re embodying. In our business of wellness, for instance, it’s critical that a product be tested, researched and ethically sourced if we’re suggesting it’s therapeutic for someone.

    Regardless of your industry, there are certifications like B Corp or certified organic that offer third-party credibility and consumer assurance. Companies can also publish an annual impact report that offers a transparent look into their ESG efforts.

    Building a socially-responsible company is a long game — the return doesn’t always involve monetary gains upfront. While the need for profitability can be amplified during a recession, it shouldn’t come at the cost of a company’s social impact. When businesses invest in ESG value systems and policies, they create more scalable and successful organizations that better service all stakeholders for the long term.

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    Angela Willard

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  • U.S. adds robust 223,000 jobs in December, but wage growth slows in sign of ebbing inflation pressures

    U.S. adds robust 223,000 jobs in December, but wage growth slows in sign of ebbing inflation pressures

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    The numbers: The U.S. generated 223,000 new jobs in December to mark the smallest increase in two years, but the labor market still showed surprising vigor even as the economy faced rising headwinds.

    The unemployment rate, meanwhile, slipped to 3.5% from 3.6%, the government said Friday.

    The jobless rate has touched 3.5% several times since 2019. That matches the lowest rate since 1969.

    One good sign for Wall Street and the Federal Reserve. Hourly pay rose a modest 0.3% last month, suggesting wages are coming off a boil.

    The increase in wages over the past year also slowed to 4.6% from 4.8%, marking the smallest gain since the summer of 2021.

    U.S. stocks
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    SPX,
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    rose in premarket trades and bond yields edged higher after the report.

    Economists polled by The Wall Street Journal had forecast a smaller increase in new jobs of 200,000.

    The resilient labor market is a double-edged sword for the Federal Reserve.

    For one thing, a scarcity of workers has driven up wages and threatens to prolong a bout of high inflation. The Fed wants the labor market to cool off further to ease the upward pressure on prices.

    Yet the strong labor market also offers the best hope for the Fed to avert a recession as it jacks up interest rates to the highest level in years. Higher rates reduce inflation by slowing the economy.

    James Bullard, president of the St. Louis Federal Reserve, said on Thursday the odds of so-called soft landing have gone up in part because of the sturdy labor market. He was referring to a Goldilocks scenario in which the central bank vanquishes inflation without causing a recession.

    Senior Fed officials still want to see the jobs market slacken some more, however. They are likely to keep raising rates — and keep them high — until demand for labor, goods and services ease up.

    Big picture: The U.S. economy has shown more fragility, especially in segments like housing and manufacturing that are sensitive to high interest rates. Many economists predict a recession is likely this year due to the higher cost of borrowing.

    The Fed, for its part, is trying to thread the needle: Bring down high inflation and keep the economy out of recession.

    Whatever the outcome, one thing is virtually certain: The unemployment rate is expected to rise as U.S. growth wanes. Whether it’s enough to help the Fed achieve is far from clear. 

    Key details: Health care providers, hotels and restaurants accounted for most of the increase in employment last month. They added a combined 150,000-plus jobs.

    Hiring was weaker in most other sectors, suggesting that the labor market is likely to soften further.

    High-tech has been hit particularly hard and is experiencing a wave of layoffs.

    Employment in so-called professional businesses, which includes some tech, fell by 6,000, largely reflecting fewer temps being hired. It was the only major category to post a decline.

    The share of working-age people in the labor force — known as the participation rate — rose a tick to 62.3%.. A lack of people looking for work is a chief source of the labor shortage.

    Hiring in November and October was little changed after government revisions. The economy added 256,000 jobs in November and 263,000 in October.

     Market reaction:  The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Friday trades.

    Investors worry a strong labor market will push the Fed to take sterner measures to slow the economy. The slowdown in hiring and wage growth is likely to be seen in a positive light.

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  • Chaos in Congress sends an ominous signal to Wall Street | CNN Business

    Chaos in Congress sends an ominous signal to Wall Street | CNN Business

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    New York
    CNN
     — 

    Many on Wall Street cheered last fall when the midterm elections ushered in a return of divided government in Washington.

    The old mantra is that gridlock is good because it means neither political party can mess things up.

    But the historic dysfunction playing out in Congress this week is a reminder that you should be careful what you wish for. While gridlock might be good for markets and the economy, complete paralysis is bad because, every so often, government needs to get stuff done.

    House Republicans’ inability to pick a speaker on the first ballot (or second or third) for the first time in a century raises an ominous question: If lawmakers can’t pick a speaker, how can they tackle truly thorny issues like raising the debt ceiling or responding to a potential recession?

    “We’re watching a slow-moving trainwreck collide with a dumpster fire,” Isaac Boltansky, director of policy research at BTIG, told CNN in a phone interview. “This is a clear indication we will have dysfunction for the entirety of this Congress, which heightens the risk around must-act deadlines such as the debt ceiling.”

    One New York Stock Exchange trader, a self-described conservative, told CNN on Tuesday the situation in the House is “disturbing” because it suggests lawmakers will struggle to get even more important things done.

    “This is a joke. The party can’t get its [stuff] together. It’s a disgrace,” said the trader, who requested anonymity to discuss the situation candidly.

    Even if Republicans eventually coalesce around Rep. Kevin McCarthy or a consensus candidate for speaker, the past few days have made plain to investors, economists and the public just how ungovernable the GOP majority in the House appears to be.

    “This is not gridlock so much as a rudderless ship without a captain,” Chris Krueger of Cowen Washington Research Group wrote in a note titled, “Burning down the House: Speaker vote opening act for 2 years of tail risk.”

    Krueger said the 4,000-page spending bill passed by Congress last month removed “a lot of the sharp objects” that could harm the economy.

    But lawmakers did not agree to tackle the debt ceiling, the borrowing limit that must be raised to avoid a calamitous US debt default.

    It’s not hard to imagine the ungovernable GOP majority clashing with Democrats and the White House this summer and fall over the debt ceiling — with the entire world economy hanging in the balance.

    Even before the House speaker stalemate, Goldman Sachs warned late last year that 2023 could bring the scariest debt ceiling fight since that infamous 2011 episode that cost America its perfect AAA credit score.

    In the past, brinksmanship over the debt ceiling eventually gave way to a compromise, though often not until significant pressure was applied by business leaders, financial markets — or both.

    It’s not clear how a debate over the debt ceiling will play out this time though, given the narrowly divided Congress and skepticism from Republicans about corporate America.

    “Our concern is that an increasingly populist GOP is less tied to big business influence, while a narrow majority amplifies their influence,” Benjamin Salisbury, director of research at Height Capital Markets, wrote in a note to clients on Wednesday.

    Of course, the “House of Cards”-style drama playing out in Congress is not the most pressing issue facing the economy and investors right now.

    The biggest questions concern whether the US economy is about to stumble into a recession (or a “slowcession,” if you ask Moody’s) and how long the Federal Reserve will keep up its fight against inflation.

    Later this week, on Friday, investors will be laser-focused not on McCarthy’s fate but on the monthly jobs report and what it says about efforts to cool down the labor market.

    Andrew Frankel, co-president of Stuart Frankel, dismissed the House speaker race as a “big, fat nothing-burger” for the market and said it was “just noise.”

    “It’s all about the Fed,” Frankel said.

    And yet the stalemate in the House underscores how hard it will be for lawmakers to aggressively respond to a potential recession or another crisis in the next two years.

    Although there are reasons to be cautiously optimistic about a soft landing, former Fed Chair Alan Greenspan warns a recession is still the most likely outcome.

    Greenspan, senior economic adviser at Advisors Capital Management, said in a discussion posted online that inflation will not cool enough to avoid “at least a mild recession” induced by the Fed.

    “We may have a brief period of calm on the inflation front, but I think it will be too little too late,” Greenspan said.

    If there is a recession, the chaos in Washington suggests the economy may not be able to count on a timely rescue from Congress this time around.

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  • No Fed official expects an interest-rate cut to be appropriate this year, meeting minutes show

    No Fed official expects an interest-rate cut to be appropriate this year, meeting minutes show

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    None of the 19 top Federal Reserve officials expect it will be appropriate to cut interest rates this year, according to the minutes of the central bank’s December policy meeting, which were released Wednesday.

    Fed officials welcomed recent inflation data that showed reductions in the monthly pace of price increases but wanted to see a lot more evidence of progress to be convinced inflation was on a sustained downward path, the minutes indicated.

    Investors who trade in the federal funds futures market expect the Fed to start reducing interest rates this summer.

    Fed officials said that if markets start to ease financial conditions, especially if driven by a misperception of how the Fed was responding to the data, that “would complicate” the Fed effort to restore price stability.

    Officials downshifted to a 50-basis-point rate increase at the Dec. 13-14 meeting, after four straight moves of 75 basis points. That puts their benchmark rate in a range between 4.25% to 4.5%. A number of Fed officials said it was important to stress that raising rates at a slower pace was not a sign of any “weakening” in the Fed’s resolve to bring inflation down to 2% or a judgement that inflation was already on a downward path.

    Seventeen of 19 Fed officials said they expected rates to rise above 5% this year. Officials penciled in the high end of the interest-rate range at 5.25%, with seven officials penciling in even higher rates.

    This is well above market-based measures of Fed policy-rate expectations.

    Earlier on Wednesday. Minneapolis Fed President Neel Kashkari said he would like to see the Fed hike interest rates to 5.4% before pausing.

    Read: Fed’s Kashkari backs more rate hikes at next few meetings

    Investors see the high end of the Fed’s interest-rate range hitting 5.25% this summer and then retreating.

    Fed officials said upside risks to inflation remained a “key factor” in shaping policy.

    The market expects the Fed to downshift to a 25-basis-point hike at their next meeting, slated for Jan. 31- Feb.1.

    Officials said they are trying to balance two risks — doing too little and adding fuel to inflation and raising rates too high and and lead to an “unnecessary reduction” in economic activity.

    Stocks
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    DJIA,
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    were higher on Wednesday. The yield on the 10-year Treasury note
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    slipped to 3.7%.

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  • Must Read: Billie Eilish Lands ‘Vogue’ Video Cover, Independent Designers Brace for Recession

    Must Read: Billie Eilish Lands ‘Vogue’ Video Cover, Independent Designers Brace for Recession

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    These are the stories making headlines in fashion on Wednesday. 

    Billie Eilish lands Vogue video cover, talks climate
    Vogue’s first-ever video cover star Billie Eilish spoke with eight climate activists, including Quannah Chasinghorse and Wawa Gatheru, on the future of the planet. The innovative video cover is a carousel of conversation, children signing and other aesthetic shots. Directed by Mike Mills, Eilish and the activists spoke about topics like climate anxiety, navigating academia and politics, leading grassroots campaigns and environmental racism. In the cover story, Eilish also reflected on her personal journey with her body, romance and current boyfriend Jesse Rutherford. {Vogue}

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    Andrea Bossi

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  • Get ready for a ‘slowcession’ in 2023, Moody’s says | CNN Business

    Get ready for a ‘slowcession’ in 2023, Moody’s says | CNN Business

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    New York
    CNN
     — 

    Many CEOs, investors and consumers are worried about a recession in 2023. But Moody’s Analytics says the more likely scenario is a “slowcession,” where growth grinds to a near halt but a full economic downturn is narrowly avoided.

    “Under almost any scenario, the economy is set to have a difficult 2023,” Moody’s Analytics chief economist Mark Zandi wrote in a report on Tuesday. “But inflation is quickly moderating, and the economy’s fundamentals are sound. With a bit of luck and some reasonably deft policymaking by the Fed, the economy should avoid an outright downturn.”

    Moody’s said in a slowcession — a phrase coined by Zandi’s colleague Cristian deRitis — economic growth “comes to a near standstill but never slips into reverse.” Unemployment would rise, but not spike.

    Given all the recent worries about the economy, such a slowcession would come as a relief to many.

    Recession fears helped make 2022 the worst year for US stocks since 2008. In fact, the S&P 500’s 19.4% drop last year was its fourth-largest drop since 1945, according to CFRA Research.

    With the Federal Reserve slamming the brakes on the US economy to snuff out inflation, business leaders and CEOs have grown increasingly confident about a 2023 recession.

    Bank of America CEO Brian Moynihan recently told CNN’s Poppy Harlow that a “mild” recession is likely. Economists surveyed by Bloomberg see a 70% chance of a recession in 2023.

    Moody’s, whose research is frequently cited by the White House, is not dismissing the risk of a downturn, warning that a recession remains a “serious threat” and saying the economy is “especially vulnerable” to a shock. The firm also expects unemployment will tick up to 4.2% by late 2023 from the current reading of 3.7%.

    There is also a real risk of a self-fulfilling prophecy, where nervous business owners and consumers hunker down so much that they cause the very recession they fear.

    Yet there are valid reasons to be cautiously optimistic about what lies ahead.

    The jobs market remains historically strong, inflation is cooling, real wages are heating up, gas prices have plunged and the Fed could be preparing to pause its rate-hiking campaign.

    Last week, Goldman Sachs said it still believes the US economy will avoid a recession and instead move towards a “soft landing” where inflation moderates but growth continues.

    In addition to cooling inflation, Moody’s expressed optimism about the ability of consumers to weather the storm in 2023.

    “Shoppers are the firewall between an economy in recession and an economy that skirts a downturn,” Zandi wrote. “While the firewall is sure to come under pressure, particularly as financially hard-pressed low-income households struggle, it should continue to hold.”

    Zandi also pointed to relatively strong fundamentals in the US economy, including profitable businesses, healthy consumer balance sheets and a banking system that is “on about as strong financial ground as it has ever been.”

    The Moody’s economist noted the economy is not plagued by troubling imbalances that were glaring before prior recessions, such as overbuilt real estate markets or massive asset bubbles.

    “It is important not to be Pollyannish, but it also important not to convince ourselves that a recession is inevitable,” Zandi wrote. “It is not.”

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  • ‘Recession is what everyone is betting on’: 2023’s first trading day begins

    ‘Recession is what everyone is betting on’: 2023’s first trading day begins

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    In the first trading day of the new year, U.S. financial markets were bogged down by the almost universal view that a recession is approaching.

    A stocks rally fizzled out within the first 30 minutes of opening gains. Gold, a traditional safe haven, touched its highest level in six months, rising alongside silver and platinum. And 10- to 30-year Treasury yields, nestled in what’s known as the long end of the bond market, fell as investors jumped into government bonds — driving those yields down respectively to around 3.8% and 3.9%.

    At the heart of the market moves was the strong sense that an economic downturn is all but inevitable at this point, following months of central bank interest rate hikes around the world — with the International Monetary Fund‘s chief Kristalina Georgieva warning that the economies of the U.S., European Union and China are all slowing simultaneously. Scion Asset Management founder Michael Burry said he expects another “inflation spike” after recession rocks the U.S., and former New York Fed President William Dudley said a U.S. economic downturn “is pretty likely.”

    Read: Stock-market investors face 3 recession scenarios in 2023

    “Recession is what everyone is betting on,” said Ben Emons, senior portfolio manager and head of fixed income/macro strategy at NewEdge Wealth in New York. “And, the thinking is, therefore inflation will decelerate faster than what people anticipate and the Federal Reserve could move quicker to a rate cut. But the whole narrative of a recession is something that’s bothering the stock market and other asset classes because it will mean shrinking margins and earnings.”

    Indeed, a much-hoped for rally in stocks around this time of the year, known as the “Santa Claus rally,” is failing to materialize, with just one more trading session left on Wednesday before the end of that seasonal period. The in-house research arm of BlackRock Inc., the world’s largest asset manager, described recession as “foretold” on Tuesday and said it is “tactically underweight” developed-market stocks, which are still “not pricing the recession we see ahead.” That’s the case even though global stocks ended 2022 down by 18% and bonds fell 16%, said Jean Boivin, head of the BlackRock Investment Institute, and others.


    Sources: BlackRock Investment Institute, Refinitiv, Bloomberg.

    “We see stock rallies built on hopes for rapid rate cuts fizzling. Why? Central banks are unlikely to come to the rescue in recessions they themselves caused to bring inflation down to policy targets. Earnings expectations are also still not fully reflecting recession, in our view. But markets are now pricing in more of the damage we see – and as this continues, it would pave the way for us to turn more positive on risk assets,” Boivin and others at BlackRock Investment Institute wrote in a note Tuesday.

    “Even with a recession coming, we think we are going to be living with inflation,” they said.

    Interestingly, the financial market’s focus on a 2023 recession is being accompanied by the view that such a downturn will help cure inflation, allowing central banks to end, slow, or even reverse their monetary policy-tightening campaigns. That view was buttressed by Tuesday’s release of inflation data out of Germany, which showed that the annual rate from the consumer price index fell by more than expected in December to a four-month low. Back in the U.S., fed funds futures traders priced in a greater likelihood of a smaller-than-usual, 25-basis point rate hike by the Federal Reserve in February.

    As of Tuesday afternoon, all three major U.S. stock indexes DJIA SPX were down, led by a 1.3% drop in the Nasdaq Composite.

    Meanwhile, a rally in Treasurys moderated relative to earlier in the day. The 10-year Treasury yield
    TMUBMUSD10Y,
    3.785%    ,
    a benchmark for borrowing costs, dropped back to levels last seen around Dec. 23-26, a period when conditions were “totally illiquid and no one was trading,” said Emons of NewEdge Wealth.

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  • One-third of world economy expected to be in recession in 2023, says IMF chief

    One-third of world economy expected to be in recession in 2023, says IMF chief

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    This year is going to be tougher on the global economy than 2022, the International Monetary Fund’s chief, Kristalina Georgieva, has warned.

    “Why? Because the three big economies, U.S., EU, China, are all slowing down simultaneously,” she said in an interview that on the CBS Sunday morning news program “Face the Nation.”

    “We expect one-third of the world economy to be in recession,” she said, adding that even for countries that are not in recession, it “would feel like recession for hundreds of millions of people.”

    The U.S. may end up avoiding a recession, but the situation looks more bleak in Europe, which has been hit hard by the war in Ukraine, she said. “Half of the European Union will be in recession,” Georgieva added.

    Purchasing manager index numbers for manufacturing published on Monday showed negative readings across Europe, Turkey and in South Korea. S&P Global data due Tuesday are expected to show similarly bad numbers for Malaysia, Taiwan, Vietnam, the U.K., Canada and the U.S.

    The IMF currently projects a global growth rate of 2.7% in 2023, slowing from 3.2% in 2022. Last October, the IMF cut its outlook for global economic growth for 2023, reflecting the ongoing drag from the war in Ukraine as well as inflation and the resulting high interest rates from central banks.

    The economic slowdown in China may have an impact around the world. The world’s second largest economy weakened in 2022 because of lockdowns and restrictions imposed on businesses and consumers under its zero-COVID policy which disrupted supply chains and damaged trade flows.

    Data published on Saturday showed that China’s reversal of its extraordinarily strict COVID policy meant economic activity in December fell to the slowest pace since February 2020 as the coronavirus overwhelmed the healthcare system, dampening consumption and production in the process.

    “For the first time in 40 years China’s growth in 2022 is likely to be at or below global growth,” Georgieva said. “Before COVID, China would deliver 34, 35, 40% of global growth. It is not doing it anymore,” she said, adding that it is “quite a stressful” period for Asian economies.

    See: China announces U-turn on strict zero-COVID measures

    Also: China is racing to vaccinate the elderly as infections explode with lifting of zero-COVID restrictions

    From the archives (November 2022): Protests expand over zero-COVID policies in China

    “When I talk to Asian leaders, all of them start with this question, ‘What is going to happen with China? Is China going to return to a higher level of growth?’ ” she said.

    The next couple of months will “be tough for China, and the impact on Chinese growth would be negative,” Georgieva said, adding that she expects the country to move gradually to a “higher level of economic performance, and finish the year better off than it is going to start the year.”

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  • Fed watch 2023: When will rate hikes slow down | CNN Business

    Fed watch 2023: When will rate hikes slow down | CNN Business

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    Minneapolis
    CNN
     — 

    America’s central bank found itself in a glaring spotlight for much of this past year, as Federal Reserve Chairman Jerome Powell wielded blunt tools of interest rate hikes and quantitative tightening to curb surging inflation.

    As 2022 draws to a close, inflation metrics show some of that may have worked: Consumer prices are cooling, home sales have ground to a halt, and some of America’s best-known companies have made plans to slow their roll and pull back on capital investment.

    The latest measure of inflation showed that the Consumer Price Index for November came in at 7.1%, down from the 40-year high of 9.1% hit in June; prices for used cars, lumber and gas — once poster children for the painfully steep price hikes — have come down; and housing prices and rents have also been on a downward trajectory.

    “This idea of peak inflation, which people have been talking about for most of the year, is starting to look like it’s valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s just how quickly does that come down?”

    In a matter of weeks, the Fed’s Act II gets underway.

    The Fed’s recently revised script calls for the federal funds rate, the central bank’s benchmark borrowing rate, to move higher, but at a slower pace than in the past several months.

    While the Fed has — finally — eked out some small victories in slowing the economy, after seven bumper rate hikes, the robust and historically tight labor market has remained a thorn in the central bank’s side. When the number of available jobs far outpaces those looking for work, wages can rise, which in turn could keep prices higher for longer.

    That means the Fed, with its “laser focus on the job market,” could be “continually hawkish” at the start of 2023, said Ross Mayfield, investment strategy analyst at Baird.

    There are already signs that the labor market is softening: Quits and hires have edged downward, while layoffs have moved higher; continuing claims have grown to their highest level since February; and the number of jobs added each month has started to nudge slowly lower.

    However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

    As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

    “This latent strength in the job market could be the reason that the Fed over-tightens,” he told CNN. “The rest of the economy, to us, is very clearly signaling slowdown, imminent recession. And when you see the Fed revising their unemployment projections up, revising their GDP growth number down, it seems that they agree.”

    He added: “So, I would hope that they would take their own advice and pause fairly soon.”

    The December projections showed a more aggressive monetary policy tightening path, with the median forecast rising to a new interest rate peak of 5%-5.25%, up from 4.5%-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the Fed’s economic predictions were last released.

    Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, during a break at the Jackson Hole economic symposium in Moran, Wyoming, on Aug. 26, 2022.

    Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain far above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. That’s 0.2 percentage points higher than the 4.4% rate they were expecting in September and significantly higher than the current 3.7% rate.

    Based on projections from Fed officials and other economists, the pathway has narrowed for the desired “soft landing” of reining in inflation while avoiding recession or significant layoffs.

    “It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.

    “I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. … If a soft landing is avoiding a recession altogether, then I think that’s a pretty tough task. If it’s a milder recession than recent history, I think that’s still in the cards.”

    The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.

    Below are the meetings tentatively scheduled for 2023. Those with asterisks indicate the meeting with a Summary of Economic Projections, which includes the chart colloquially known as the “dot plot” that shows where each Fed member expects interest rates to land in the future.

    • January 31-February 1
    • March 21-22*
    • May 2-3
    • June 13-14*
    • July 25-26
    • September 19-20*
    • October 31-November 1
    • December 12-13*

    — CNN’s Nicole Goodkind contributed to this report.

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  • How to Prepare Your Portfolio for a Market Downturn With Real Assets

    How to Prepare Your Portfolio for a Market Downturn With Real Assets

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    Opinions expressed by Entrepreneur contributors are their own.

    Forecasters are growing increasingly confident that a large-scale economic downturn is imminent. In a recent Bankrate survey, economists placed a 65% chance of a recession in 2023. Meanwhile, a mid-November American Association of Individual Investors survey showed nearly twice as many investors predict that the stock market will go down in the next six months than those who think it will rebound.

    One of the latest economic watchers to sound the alarm is Bloomberg, whose forecast models show a 100% chance of a recession. All this is to say that it’s nearly impossible to know exactly when a global recession will begin — or how long it will last.

    But while past performance does not guarantee future results, historical data can help investors predict how certain assets might hold up in times of turmoil. As we head into the New Year, here’s why you might want to consider real assets to help safeguard your portfolio from the uncertainty ahead.

    Related: 7 Investment Strategies to Follow During a Crisis

    Portfolio diversification

    Historically speaking, stocks and bonds tend to have a negative correlation with each other, meaning if stocks take a turn, bonds should still hold their value and vice versa. Typically, the two act as a hedge against one another. That’s not necessarily the case in today’s environment.

    Following the Fed’s decision to begin raising interest rates, coupled with growing fears of a potential recession, both stocks and bonds have experienced massive sell-offs this year. As a result, the values of both assets have dropped in tandem; year-to-date, the S&P 500 is down nearly 18% while the Bloomberg U.S. Aggregate Bond Index has surrendered about 13%.

    As two of the most common asset classes gear up to finish the year with net losses — which would be the first time since 1969 — traditional portfolios may be in for a painful drawdown.

    Across the board, investors are increasingly looking for non-correlated assets to help cushion their portfolios in times of volatility.

    Real assets, such as real estate, infrastructure and farmland, have historically low or negative correlations to traditional stocks and bonds, as well as to each other, meaning they are not often exposed to speculative trading in public markets. In the last three decades, farmland, for example, has had a -0.06 correlation to stocks and -0.24 to bonds, according to research from my own firm, FarmTogether.

    As a result, these assets can offer welcome diversification for investors looking to create distance between their portfolios and the markets.

    Capital preservation

    For nearly 30 years, real assets have provided similar or higher average annual returns than stocks, and with much lower volatility, resulting in historically higher risk-adjusted returns. From 1991 to 2021, average annual real estate returns had a standard deviation of 7.73%, while S&P 500’s was over 16%. Meanwhile, farmland’s standard deviation was just 6.75%.

    This stability is largely driven by a host of factors, including real assets’ intrinsic value, comparatively lower level of uncertainty around future cash flows and long-term structural trends driving values upward. The demand for necessities, like shelter, food and energy, for example, is inelastic, meaning it tends to remain consistent throughout the year. In turn, the value of these assets is not likely to experience swings like those seen with the markets.

    During the 2008 Global Financial Crisis, the Dow Jones dropped 54%. By comparison, gold values actually increased in value by 4%. Today, despite stocks and bonds both showing negative returns this year, the NCREIF Real Estate and Farmland indices have returned around 9% and 6% year to date, respectively.

    In addition to their physical value, many real assets have the potential to deliver passive income through operating or rental income. Global real estate has historically generated an annual cash yield of 3.8%, while infrastructure investments have yielded 3.3%. Farmland cash receipts from the sale of agricultural commodities are forecast to be up $91.7 billion in 2022, to $525 billion, a 21.2% increase from last year.

    Related: How Entrepreneur Millionaires Prepare for a Recession

    Hedge against inflation

    While inflation cooled to 7.7% in October, the inflation rate is not projected to return to the Fed’s 2% target until the end of 2025, with some econometric models still showing 3%+ inflation through 2024. With many signs pointing to continued inflation, investors may find refuge in real assets.

    The value of real assets is ultimately derived from their physical characteristics, meaning they’re more likely to retain long-term value than other, more traditional investments.

    But this unique quality of real assets is even more attractive when you combine the limited supply of natural resources with the rising demand from a growing population, which just topped 8 billion people last month. With stable supply-demand dynamics, real assets are well-positioned to increase in value year after year.

    Also, because real asset returns are inherently tied to commodity prices, which tend to move in lockstep with inflation, these investments have had a historically positive relationship to inflation indices like the Consumer Price Index (CPI). Simply put, when the CPI rises, so too should the value of your investment; over the last 20 years, real assets have historically outperformed traditional investments in inflationary environments.

    Preparing for a potential recession

    In an increasingly uncertain market, real assets can present an attractive opportunity for investors in 2023 and beyond. By expanding into real assets, investors have the potential to help spread overall investment risk, generate historically attractive returns and help hedge against persistent inflation.

    And thanks to the rise of real asset investment managers in recent years, investors now have access to a wide variety of investment channels and diverse opportunities.

    Related: What to Expect from the Markets in a Recession

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    Artem Milinchuk

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  • The 16 Biggest Fashion News Stories of 2022

    The 16 Biggest Fashion News Stories of 2022

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    In fashion, the top headlines of 2022 were brimming with excitement and chaos.

    Scandals swept Balenciaga and any brand associated with the artist formerly known as Kanye West. Legislation offered a new pathway for sustainability in fashion. A new guard of creatives took the helm at some of the world’s most stories houses, while a recession loomed over the whole industry.

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    Andrea Bossi

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  • U.S. home prices fall for fourth month in October as high mortgage rates bite

    U.S. home prices fall for fourth month in October as high mortgage rates bite

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    The numbers: The S&P CoreLogic Case-Shiller 20-city house price index fell 0.5% in October, its fourth monthly decline. 

    Year-over-year prices rose rose 8.6%, slowing from 10.4% in the previous month.

    A broader measure of home prices, the national index, fell a seasonally adjusted 0.3% in October from September.

    A separate report from the Federal Housing Finance Agency showed home prices remaining flat in October, down from a 0.1% gain the prior month. 

    And over the last year, the FHFA index was up 9.8%.

    Key details: Miami, Tampa, and Charlotte reported the highest year-over-year gains among the 20 cities in October. All 20 cities reported lower price increases.

    San Francisco and Seattle reported the lowest year-over-year gains, which have seen prices fall by more than 10% from a peak in May.

    Big picture: Housing is in a slowdown, but affordability hasn’t returned. Homes are still expensive, as mortgage rates remain above 6%, and inventory of homes available for sale remains low.

    What S&P said: “As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be a headwind for home prices,” Craig J. Lazzara, managing director at S&P DJI, said.

    “Given the continuing prospects for a challenging macroeconomic environment, prices may well continue to weaken,” he added.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -0.22%
    and the S&P 500
    SPX,
    -0.63%
    were up in early trading on Tuesday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.807%
    rose above 3.81%.

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  • What Is a Recession and How Do You Prepare for One?

    What Is a Recession and How Do You Prepare for One?

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    The news is abuzz with rumors of the next recession coming in 2023 or 2024. But for most Americans, all of that triggers a sudden panic and a desperate need to look at one’s bank account.

    What is a recession, what does it mean, and how can you prepare yourself and your family’s finances for one? This article will answer each of these questions and more. By the end, you’ll know what to expect and how to prepare for a recession.

    What is a recession?

    According to economists working for the National Bureau of Economic Research, a recession is a prolonged period of economic downturn or declining economic activity.

    It affects a nation’s or the world’s entire economy and lasts for a few months or more. In some ways, the best way to understand the recession is to compare it to “regular” or positive economic activity and GDP.

    GDP (gross domestic product) is essentially the combined value of the goods and services made by an economy, like the American economy. The country’s GDP grows a bit each day/week/month in a standard economy.

    When a recession kicks in, there is no economic expansion. Instead, the GDP is negative — the value of goods and services in the economy decreases — for more than two quarters or approximately six months. People stop spending as much money when this happens because the dollar’s value decreases.

    Related: Are We in a Recession? Here’s What Economists Say

    This decrease in consumer demand triggers a decline in industrial production, exacerbating the spiral effect and making a recession last longer. A significant decline in the business cycle, characterized by many consecutive quarters of lower consumer spending, may lead to job losses or a high unemployment rate.

    Several past recessions have stalled economic growth and led to the depletion of the Federal Reserve or the “Fed.”

    These include the recession leading into World War II, the Great Recession financial crisis, which occurred in 2008 from speculation on real estate, and the most recent recession brought on by the Covid-19 pandemic and the necessary cutback/slowdown on retail sales in the U.S. economy.

    Signs of a recession

    Aside from this recession indicator, some typical economic indicators also have other signs and symptoms to pay attention to.

    These signs include:

    • More layoffs than average, a tighter labor market.
    • A general, widespread decline in stock market stock prices.
    • More businesses are going bankrupt than usual.
    • Fewer raises or promotions for workers.

    Related: Are We Headed for a Recession? It’s Complicated.

    As for GDP? According to some sources, the American GDP was -1.6% in the first quarter of 2022 and -0.9% in the second quarter of 2022. Technically, this means there is currently a recession, regardless of what people say.

    Note that a recession differs from a depression, which is much more severe. In a depression, the economy tanks significantly, and many more people may lose their jobs and money.

    In contrast, a recession is usually relatively short-lived. Some people may not feel a recession’s impact, depending on how much money they have saved up and their financial situation before the recession occurs.

    In any case, a recession is never good news, which could signify that you must prepare accordingly.

    How to prepare for a recession

    Fortunately, there are multiple ways in which you can prepare for a recession. Good recession prep can keep your finances secure until the recession recedes, allowing you to maintain your investments, keep your savings account intact and provide your family with peace of mind.

    Knock out as much debt as possible (and avoid new debt)

    Your priority should be to get rid of as much debt in your name as possible. You should already be trying to clear debt aggressively. The longer you leave it hanging around, the worse your credit will be and the more interest fees you’ll pay over time — it’s lost funds.

    As you put more of your money toward knocking out your debt, prioritize high-interest debt, such as credit cards and loans with high-interest rates. When you get rid of as much debt as possible, you set yourself up for financial success during the potentially turbulent economic times ahead.

    Avoid taking out any unnecessary loans or opening up new credit accounts during this timeframe. If you avoid further debt, you’ll have more money to spend on savings or necessities, which may be necessary soon.

    Related: How to Recession-Proof Your Business

    Keep saving aggressively

    Speaking of saving, you should continue to save aggressively or even save more money than you were previously.

    You might not get an unexpected promotion or pay raise during the recession. Even worse, your job could be at risk if you recently joined a company or are at the beginning of your professional career.

    In these cases and others, your income streams could dry up unexpectedly. If you save aggressively before that happens, you’ll be well-positioned to get back on your feet and weather this economic storm until clear skies return.

    Try to save as aggressively as possible and put that money into a secure savings account. That way, you’ll earn interest on those savings and avoid accidentally spending the money.

    Diversify investments

    Plunging numbers and red lines on charts are not reasons to withdraw all of your investments or blow up your portfolio if you’re invested in the stock market. You should keep your money in the market; after all, the stock market will eventually rebound just like it always does.

    Instead of panicking, diversify your investments by distributing your money into different stocks, funds, and other securities and assets. When you diversify your portfolio further, you protect it from economic damage, even from recessions.

    Plus, if you diversify your investments instead of withdrawing from the market, you’ll prevent yourself from losing money in the short term.

    Every time a recession occurs, some Americans invested in the market sell all of their securities, which only lowers prices for those securities. Then they regret this panicked decision as the market inevitably rebounds, with many stocks achieving higher prices than they reached previously.

    Bottom line: keep your investments in the market and keep your eye on the prize, particularly for long-term gains. A recession will eventually pass. Your current positions may be unattainable the next time you have money to invest in the market.

    Related: Worried About a Recession? Do This to Prepare Your Company.

    Bump up your credit

    Your credit score is also essential during a recession. You should improve your credit score before and during a recession whenever possible, primarily by eliminating high-interest debt such as credit card debt.

    If necessary, move any high-interest debt to a new credit card with an introductory 0% APR offer for any balance transfer funds. This can be an excellent way to quickly pay down any other debt in your name (in keeping with the tip above) without paying extra interest.

    In any case, try to improve your credit so you can take out emergency loans if necessary, and so any other fees or financial strain you face over the next few months, reduce your credit by as little as possible. Many people feel the aftereffects of recessions for years to come, primarily because it damages their savings accounts or credit scores.

    Don’t panic

    Do not panic if and when a recession occurs or when the news anchors start talking about it. Contrary to what some may believe, recessions are standard parts of the economic cycles inherent in capitalism.

    Simply put, recessions are inevitable declines in economic activity that eventually fade away. Once people stop panicking about the effects of a recession, economic activity should return to normal, and businesses will start to boom again.

    Just thinking of a recession in this light — a regular element of the economy and not something to necessarily be feared — will help you keep your head straight as you plan.

    Not panicking is crucial, so you keep spending and saving money, which are essential actions to do your part to prevent the economy from spiraling downward even further.

    Summary

    Recessions might be financially uncomfortable, but they are far from devastating if you take the right steps beforehand. The proper prep and patience will go a long way toward shoring up your bank accounts and protecting your finances throughout the upcoming recession until the market upswings again.

    Looking to expand your financial knowledge with more articles like this one? Explore more of Entrepreneur’s Money & Finance articles here.

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    Entrepreneur Staff

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  • Consumer sentiment creeps up at year end as worries about inflation ease

    Consumer sentiment creeps up at year end as worries about inflation ease

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    The numbers: A survey of consumer sentiment rose to 59.7 in December, buoyed by falling gas prices and a rebound in stocks earlier in the month. Yet Americans are generally pessimistic about the economy.

    The final reading in the sentiment poll marked a small increase from the initial 59.1 result earlier in the month, the University of Michigan reported.

    The index increased from 56.8 in November.

    Consumer sentiment is still extremely weak, however. The index fell to a record low of 50 in June, just half as much as the 101 reading in the last month before the pandemic in 2020.

    Key details: A gauge that measures what consumers think about their financial situation — and the current health of the economy — rose slightly to 59.4 last month. One year ago, the index stood much higher at 74.2.

    Another measure that asks about expectations for the next six months registered 59.9, up from 55.6 in November. It was also well below year-ago levels, though.

    Americans view inflation as somewhat less of a threat. They expect the inflation rate in the next year to average about 4.4%, compared to 4.9% in the prior month.

    In the longer run, consumers see inflation falling toward 2.9%.

    Top Federal Reserve officials pay close attention to inflation expectations because it could be a harbinger of future price trends.

    The current 12-month rate of inflation is 7.1%, based on the consumer-price index. It’s fallen from a peak of 9.1% last summer.

    Big picture: Falling gas prices and a slowdown in inflation have given consumers something to cheer about during the holidays. But they consumers are worried about what the future will bring.

    The Federal Reserve is rapidly raising interest rates to slow inflation even further, but higher borrowing costs are weakening the economy. That’s likely to result in rising unemployment in 2023 — and perhaps even a recession.

    Looking ahead: “While the sizable decline in short-run inflation expectations may be welcome news, consumers continued to exhibit substantial uncertainty over the future path of prices,” said survey director Joanne Hsu.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.53%
    and S&P 500
    SPX,
    +0.59%
    XXX in Friday trades.

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  • High U.S. inflation is on the wane, PCE price gauge shows

    High U.S. inflation is on the wane, PCE price gauge shows

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    The numbers: A key gauge of U.S. prices rose just 0.1% in November, marking the fifth month in a row in which inflation eased after peaking at a 40-year high over the summer.

    The yearly rate of inflation, meanwhile, slowed to 5.5% in November from 6.1% in the prior month, based on the personal consumption expenditures index. That’s the smallest increase since October 2021.

    Key details: The PCE index is viewed by the Federal Reserve as the best measure of inflation, especially the core gauge that strips out volatile food and energy costs.

    The core index rose 0.2% last month, matching Wall Street’s forecast.

    The increase in the core rate of inflation in the past 12 months relaxed to 4.7% from 5%. That’s also the lowest level since October 2021..

    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 ground beef for more expensive ones like ribeye to keep costs down. Or buy no-name denims instead of more fashionable jeans.

    The CPI showed inflation rising at a 7.1% yearly rate in November.

    Big picture: The rate of inflation is coming down, but not fast enough for the Fed.

    The central bank is worried a prolonged bout of high inflation could spur workers to keep asking for higher and higher wages, making it harder to get prices back under control. The cost of labor is the biggest expense for most companies.

    The Fed plans to raise interest rates even higher to slow the economy enough to alleviate upward wage pressures, a strategy that’s bound to raise unemployment and potentially trigger a recession.

    Looking ahead: “The economy is moving in the right direction from the Federal Reserve’s perspective at the end of 2022, but not quickly enough,” said chief economist Gus Faucher of PNC Financial Services. “The Fed is concerned that strong wage growth will lead to persistent increases in services prices and high overall inflation.”

    Read: Inflation appears to be slowing, but the Fed isn’t turning down the heat

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.53%
    and S&P 500
    SPX,
    +0.59%
    were set to open higher in Friday trades.

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  • U.S. durable-goods orders drop 2.1% in another sign of slowing economy

    U.S. durable-goods orders drop 2.1% in another sign of slowing economy

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    The numbers: Orders for manufactured goods sank 2.1% in November in another sign of slackening demand in the U.S. economy as the year winds down.

    Fewer contracts for commercial jets explained most of the weakness last month. But orders minus transportation and a key measure of business investment posted just very small increases.

    Orders rise in an expanding economy and shrink when growth weakens. A variety of measures point to waning demand for goods due to a more fragile economy and a shift in consumer spending toward services such as travel and recreation.

    Economists polled by the Wall Street Journal had forecast a 1.1% decline in orders for durable goods — or products meant to last at least three years.

    Key details: Orders for aircraft nosedived 36% last month, reflecting typical seasonal swings in contract signings. Demand for new cars and trucks also fell slightly.

    The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production.

    Outside of transportation, new orders rose a meager 0.2%. Bookings increased in every major category except primary metals.

    Business investment, meanwhile, also rose 0.2% last month, but the annual rate of growth has slowed sharply in recent months to 5.7% from more than last spring.

    These orders exclude military spending and the auto and aerospace industries.

    Big picture: American manufacturers are likely to tread water for a while.

    Higher interest rates have sapped demand for houses, new cars and other big-ticket items because of the added costs and a fading global economy has curbed exports.

    The Federal Reserve plans to keep raising interest rates to tame high inflation, so the slowdown in manufacturing could intensify.

    The one side-benefit? Congested supply chains are clearing up and reducing a primary driver of inflation over the past few years.

    Looking ahead: “Underlying investment demand is weakening,” said senior U.S. economist Andrew Hunter in a note to clients. “We expect it to weaken more markedly next year as the full impact of the Fed’s aggressive tightening this year feeds through.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.53%
    and S&P 500
    SPX,
    +0.59%
    were set to open higher in Friday trades.

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  • White House cautiously optimistic over economy in 2023: ‘Absolutely no sign’ job growth will tumble or unemployment will spike | CNN Politics

    White House cautiously optimistic over economy in 2023: ‘Absolutely no sign’ job growth will tumble or unemployment will spike | CNN Politics

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    CNN
     — 

    As Wall Street and Main Street fret about a potential recession, White House officials are projecting confidence about the economy’s ability to weather the storm in 2023.

    “We’re feeling cautiously optimistic because we are starting to see some real concrete measurable signs of progress,” Aviva Aron-Dine, deputy director of the White House National Economic Council, told CNN in a Zoom interview.

    The Biden administration economist pointed to a range of metrics showing inflation has cooled off, real wages have heated up and the job market has defied doomsday predictions.

    The White House is hoping for a soft landing, in which the Federal Reserve tames inflation without crashing the economy.

    “We remain optimistic about a transition to stable, steady growth with lower inflation – without giving up labor market gains, without a recession,” Aron-Dine said.

    So far, so good – at least from the administration’s perspective.

    For the moment, metrics suggest the economy has remained resilient and consumers are more optimistic as inflation has eased. The Conference Board’s latest consumer confidence index this month, for example, showed a significant jump from November. And after spiking to record highs in June, gas prices have plunged to 17-month lows, delivering a major boost to consumers.

    And some broader trends appear to be working in the administration’s favor, like hiring, which has slowed but has not collapsed.

    There is “absolutely no sign” that job growth will fall on a “sustained basis” below a pace of roughly 150,000 jobs a month, Aron-Dine said.

    Last month, the US economy added a surprisingly strong 263,000 jobs. That’s down sharply from 647,000 in the same period last year – but still a very healthy pace.

    Despite a series of mass layoffs in the tech and media industries, Aron-Dine added that there is “no sign of a big increase in unemployment.”

    Indeed, initial jobless claims remain very low. The Labor Department said Thursday that first-time claims for unemployment benefits rose just slightly in the latest week and remain near two-month lows. However, some economists – including ones at the Fed – warn this trend could be about to change due in large part to continued pressure from higher borrowing costs.

    After raising interest rates for a seventh meeting in a row, the Fed last week projected the unemployment rate will rise from a historically low level of 3.7% today to 4.6% by the end of next year. That implies an increase of approximately 1.6 million unemployed people.

    Some, though certainly not all, business leaders and major banks expect the US economy will slip into a downturn next year. For instance, PNC is now projecting a “mild recession” that is similar to the downturns of 1990-1991 and 2001.

    “The risk of a recession is elevated right now – certainly higher than six months or a year ago,” Gus Faucher, chief economist at PNC, told CNN. “We need to be prepared for a recession sometime in the spring or summer of 2023.”

    Other economists including Mark Zandi, the chief economist at Moody’s Analytics, are growing more confident a recession may be avoided.

    Although Fed officials say a soft landing is still possible, some of the Fed’s own metrics are flashing red.

    A New York Fed model that uses shifts in the bond market to forecast recession risks finds there is a 38% chance of a recession in the next 12 months. That narrowly surpasses the peak in 2019 and is the highest level since just before the Great Recession.

    There are signs that cracks are forming in consumer spending – the main engine of the US economy – due to high inflation that has forced some Americans to dip into savings and turn to credit cards. Retail sales declined in November by the most in nearly a year as shoppers pulled back on everything from furniture and cars to even e-commerce.

    Asked about the surprise retail sales slump, Aron-Dine noted this metric can experience significant volatility.

    “If you look at the data over a more extended period, you’re just not seeing any signs that would make us think that is a significant concern,” she said.

    In that effort to transition away from high inflation, Aron-Dine said, the White House continues to evaluate ongoing risks, calling the war in Ukraine “one of the most significant risks that we monitor.”

    “I think all year, we’ve seen that there are signs of real strength and opportunities for a successful transition, and that there are significant risks. And so our work, our strategy has been about trying to take advantage of the strengths and mitigates the risk,” she said, later adding, “I think we have reason for optimism, reasons to believe the US economy is well positioned, but there are global challenges and high on that list is potential downstream consequences of the war in Ukraine for food and energy as we saw this year and more generally.”

    Another hurdle Biden’s economic team will face in the new year will be achieving consensus among a newly divided Congress.

    Biden’s first two years in office were marked by the passage the administration’s proposed major spending bills aimed at bolstering the country’s recovery from the coronavirus pandemic, rebuilding the nation’s infrastructure, overhauling major social safety net programs, enhancing domestic supply chains and making climate investments.

    But some major provisions the Biden White House has pushed for, including the revival of the enhanced child credit have failed to move forward in Congress. The previous expansion of the child tax credit lifted 2.1 million children out of poverty in 2021, according to the Census Bureau.

    A last-ditch effort this month to pass the credit into law as part of the $1.7 trillion government spending bill failed. And with Republicans taking over the House of Representatives next year, its passage is even less likely.

    “It is a disappointment that Republicans blocked inclusion of Child Tax Credit improvements during the lame duck,” Aron-Dine said, adding, “I won’t get ahead of agenda setting our strategy for next year, but of course, this will remain a priority for us.”

    Along with broader efforts to tackle inflation and avoid a recession, the implementation of the Inflation Reduction Act will also be top of mind for Biden economic officials in the coming year.

    A slate of provisions in the IRA are scheduled to roll out in January, including home energy efficiency tax credits and a $35 cap on the cost of insulin for seniors on Medicare.

    And CNN previously reported that along with deploying a messaging strategy aimed at highlighting existing accomplishments, as Biden heads into the new year, the White House is looking to highlight ways the Inflation Reduction Act will lower everyday costs.

    Aron-Dine told CNN that the enactment of the IRA “is just going to have a huge effect in shaping our work in the year ahead, with one of our biggest priorities really being just making sure that we fully realize the potential of that law.”

    And as the administration prepares to frame Biden’s agenda ahead of the State of the Union address next year, National Economic Council Director Brian Deese told the Wall Street Journal this week that officials are considering a push for policies aimed at getting Americans back to work, including childcare and eldercare benefits.

    It’s not clear whether the White House is considering using executive authority or proposals to Congress to move forward on the initiative. Aron-Dine declined to offer specifics.

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  • Leading indicators point to slowing U.S. economy and recession in 2023

    Leading indicators point to slowing U.S. economy and recession in 2023

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    The numbers: The U.S. leading index fell a sharp 1% in November, extending a downturn that began last spring and points to a weakening economy.

    Economists polled by The Wall Street Journal had forecast a 0.5% decline.

    The LEI is a gauge of 10 indicators designed to show whether the economy is getting better or worse. The report is published by the nonprofit Conference Board.

    The index also fell 0.9% in October.

    Big picture: The economy is still expanding as the year winds down, but rising interest rates orchestrated by the Federal Reserve to tame high inflation could choke off growth in 2023. Many economists even predict a recession.

    Key details: The leading economic index fell last month largely because of higher jobless claims, a sagging housing market and a slowdown in manufacturing.

    A measure of current economic condition rose 0.1% in November.

    The so-called lagging index — a look of sorts in the rearview mirror — increased by 0.2%.

    Looking ahead: “The U.S. LEI suggests the Federal Reserve’s monetary tightening cycle is curtailing aspects of economic activity, especially housing,” said Ataman Ozyildirim, senior director of economic research at the board.

    “As a result, we project a U.S. recession is likely to start around the beginning of 2023 and last through mid-year.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    -1.40%
    and S&P 500
    SPX,
    -1.83%
    fell in Thursday trades.

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  • 2023 Is The Year and a Fear of Uncertainty. Here’s How to Navigate It.

    2023 Is The Year and a Fear of Uncertainty. Here’s How to Navigate It.

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    Opinions expressed by Entrepreneur contributors are their own.

    As we approach 2023, there is a ringing sound of uncertainty, amplified by foreboding headlines that warn us of a looming recession, or, as it’s described in one article, “a big reset,” — a term used to describe widespread layoffs across the technology sector. The latest report by the U.S. Bureau of Labor Statistics just adds to the collective discourse that we’re, well, doomed, stating that 263,000 new jobs have been added to the workforce — more than what was expected — yet the hiring economy remains extremely tight.

    The reality is that uncertainty hasn’t actually risen — it’s always been there. What is rising, in fact, is our fear of uncertainty. And we, as company leaders, try to do everything in our power to mitigate it, analyze it and wish it away. But the truth is, uncertainty will always be there. We may shore up our supply chain, reduce inflation and vaccinate ourselves against Covid-19, but a new health scare may hit, a war might break out or a natural disaster strike.

    As we kick off 2023, entrepreneurs have the opportunity to develop a relationship with uncertainty and get more comfortable with its existence. In fact, according to the Kauffman Foundation, a staggering 57% of Fortune 500 companies were started during a recession, so despite the fear of what’s to come, there can be a path to success. Here are seven ways to harness the unknown and find opportunity within that uncertainty:

    1. Identify what is in and out of your control

    No matter how much we plan, research and analyze, there will always be forces that are out of our control. Instead of obsessing about ridding ourselves of these circumstances, we must analyze our challenges and categorize them according to what we can and cannot control. For those we cannot control, we should be aware of them but also not dwell on trying to predict their outcomes. No one could foresee the effect a pandemic would have on their individual business. However, we can now think about the lessons learned, appreciate the innovation that occurred and reflect on how we can operate more nimbly in the future.

    2. Reframe your uncertainty

    Our tendency, as entrepreneurs, is to correlate uncertainty with a negative outcome. We don’t know whether we’ll raise the amount of capital we need, we don’t know whether our product will find market fit once launched, we don’t know whether our company will survive. The truth is, we also don’t know whether we’ll scale beyond our wildest dreams, an out-of-scope event will come our way that opens a new door, or an unidentified need for our product or service will emerge. As Steve Jobs once said, “You can’t connect the dots looking forward; you can only connect them looking backward. So you have to trust that the dots will somehow connect in your future.” Uncertainty can be your biggest advantage.

    Related: How to Protect and Retain Control Over Your Business

    3. Listen to what your sense of uncertainty is telling you

    Many times, we as entrepreneurs feel a strong sense of uncertainty or fear about areas that affect us personally — meaning we are particularly sensitive to those topics that elicit a sense of fear-based bias resulting from our own life experiences. If you once had a poor experience living in a different city, state or country, for example, and are years later offered an opportunity to expand there, chances are your uncertainty bias will impact you. Perhaps you had raised money from a venture capital firm at one point in your career and that situation didn’t turn out well. You may be skeptical the second time around, potentially hindering an opportunity for a constructive investment relationship.

    4. Detach from your desired outcome

    There’s an old Yiddish proverb: “We plan. God laughs.” Many entrepreneurs kick off their ventures with their own definition of success in mind, and they become married to it. Any deviation is a failure. However, to properly navigate the reality of our futures being uncertain, we must detach from our own definitions of success — removing the ego from the outcome — and be open to what may unveil itself along the way. The uncertainty of such is also the joy.

    5. Understand the bigger life picture

    There is a bigger world out there, and it is important that we have perspective. Take a walk in nature and realize those things we obsess about are things in our own small universe. Uncertainty is inevitable, and it is foolish for us to believe that we have the power to control so much that goes on. Your life will not depend on the success of your venture. Today is a moment in time and we are but specks in a massive universe. Perspective is imperative.

    7. Recognize your survival instinct

    The human brain was formed over millions of years. We have an innate survival instinct that comes from the early days of being cavemen/women. For example, scientists have postulated that our need to be accepted by others stems from the previous reality that if the group were to kick us out, we’d be away from the fire and prone to attack by predators. This level of uncertainty held an entirely different scope at that time. Yet today our brains are still wired with the same survival-based fight-or-flight framework.

    Related: Many People Are Burdened by Fear. Here’s How I Embrace It.

    8. Approach with a beginner’s mind

    Our lives are all made of unique experiences that are individual to us. These experiences make up the lens through which we view the world. A toddler will not be afraid of the stock market crashing. However, s/he may be fearful of being alone or not having food. As entrepreneurs, we need to remove our biases and retrain our minds to approach our ventures with the wisdom of past experiences but also a sense of youthful naivety.

    As we kick off 2023, we, as entrepreneurs, have an opportunity to redefine our relationship with uncertainty. There is an opportunity to partner with the feeling of uncertainty by acknowledging its existence, asking what it is trying to tell us and being comfortable setting our own boundaries with its partner: fear. Uncertainty can serve as the pavement for our future path to success. We just have to become friends first.

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    Kalon Gutierrez

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  • 3 Ways to Save on Car Insurance During a Recession

    3 Ways to Save on Car Insurance During a Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    In the face of a recession, it can be hard to keep up with the rising costs of vehicle ownership. The average American is spending 17% more on car insurance coverage in 2022 than they were in 2020, and that expense is driving Americans to extreme extents in order to save money. It may be tempting to save money by cutting coverage with your current insurance company. However, I recommend keeping adequate coverage and using alternative methods to save money so you don’t make your problems worse in the event of an accident.

    While 16% of drivers are considering moving to a location with better public transportation and walkability, you do not have to relocate or surrender your car to save during a recession. By implementing these simple tips, you can significantly cut down on your monthly payments without sacrificing much convenience or comfort.

    Related: 8 Tricks for Solopreneurs to Cut the Cost of Auto Insurance

    1. Shop for car insurance every 6 months

    While some insurers would suggest drivers shop for car insurance on an annual basis, a recession can cause your finances to change on a whim. Shopping for car insurance every six months ensures that you’re getting the best deal for your financial situation. Car insurance comparison platforms will automatically shop for you every six months and before your policy renewal, so you can stay updated on the best policy options.

    If you prefer to conduct your own shopping research, you should start by assessing your own coverage. As you shop, you should compare the rates of other policies that offer coverage that mirrors yours. Make sure you include any applicable discounts (e.g., homeownership, education, safety devices, etc.) in your comparison shopping.

    2. Consider usage-based insurance

    Usage-based insurance (UBI) lets insurers charge lower premiums for people who drive less often or in safer ways. There are two main types of UBI: driving-based programs and mileage-based programs.

    Driving-based programs involve a device being installed in your car that monitors how and when you drive, with the goal of lowering your rates according to how safe you are behind the wheel. Your rates will be determined by factors like how hard you brake, how quickly you accelerate and the time of day that you drive. If your insurer offers a driving-based program, you should avoid driving after midnight, drive less often, and don’t multitask while driving — otherwise, you risk your rates increasing.

    Alternatively, there are mileage-based programs that consider the total miles driven each year. Your insurer will calculate your premium based only on how many miles you drive. Even though not all insurers offer this type of plan, if you work remotely or are retired, it might be a good option for you.

    Related: Save Time and Energy With AI-Powered Car Insurance

    3. Opt for a higher deductible

    Your insurance deductible is the amount you have to cover out of pocket before your insurance company will chip in. This can mean that if you get into an accident and need repairs, you would be responsible for paying them out of pocket — unless the damage falls below your deductible level.

    Many people avoid having a high deductible because they worry that they would not be able to cover it if something happened. They fear they will end up being stuck with the bill and unable to afford their car repairs or medical treatment without going into debt or taking out a loan.

    But here’s the thing: There are many benefits to having a higher deductible. Generally, you will see lower premiums for higher deductibles; and having more money in your pocket each month could help offset any unexpected costs from accidents or emergencies. Keep in mind, savings vary by company, so before you choose an insurance provider, compare quotes with different deductibles to maximize savings.

    4. Take a defensive driving course

    Taking a defensive driving course can result in a discount of 5-10%. This can also help you remove DMV points from your record, which will further reduce your insurance costs. If you have taken a defensive driving course due to a court mandate, you won’t be eligible for the discount. Taking an approved course voluntarily is worthwhile, however.

    Not all insurance companies honor this discount, so you should check with your provider beforehand. Allstate, GEICO and State Farm are among the national auto insurance agencies that do offer this discount for drivers, so long as you take an approved program.

    Related: Find the Best Car Insurance Rates in Your Area with ‘The Zebra’

    These simple tips will prove useful both now and in the years to come, allowing you to make smart, informed decisions about insurance coverage regardless of your financial situation. It is hard to know for certain what economic conditions will look like in 2023 and beyond, but it is important to be prepared nonetheless. By implementing these four, easy practices, you can save money and reduce your risk of being overcharged by an insurance company that doesn’t understand your personal finances.

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    Paul Moss

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