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Tag: recession

  • Why recession fears are back: Americans are losing faith | CNN Business

    Why recession fears are back: Americans are losing faith | CNN Business

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    New York
    CNN
     — 

    From the executive suite to the grocery aisles to the halls of the Federal Reserve, the big question is: Can red-hot inflation be vanquished without tipping the economy into a recession?

    Ironically, all this talking about a recession can actually help cause one. How people feel is a huge driver of consumer behavior and business planning. The famous British economist John Maynard Keynes coined the phrase “animal spirits” to describe what drives investors, consumers and business leaders. Fear, hope, uncertainty, and confidence are all hard to measure — and hugely important to how the economy fares.

    Essentially, worrying about a recession and planning for one can be a self-fulfilling prophecy.

    “At the end of the day, a recession is a loss of faith,” said Mark Zandi, chief economist at Moody’s Analytics. Consumers worry about losing a job and so pull back on spending, and business leaders worry their sales will decline and start laying off workers.

    “You get into this kind of self-reinforcing negative cycle,” he told CNN’s Early Start. “So when sentiment is this bad and starting to feed on itself, we run the risk of talking ourselves into one.”

    The US economy grew at a 2.9% annual rate in the third quarter, and the unemployment rate is near a 50-year low. That’s not going to last. The Federal Reserve this week lowered its forecast for growth in the United States next year to just 0.5% and a jobless rate rising to 4.6% by the end of 2023.

    “Look, we’re planning as if there’s going to be a mild recession next year,” United Airlines CEO Scott Kirby told CNN This Morning. “And a lot of people in the business world are trying to talk ourselves into one is what it sometimes feels like to me.”

    But he added, “If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary because we just don’t see it in our data.”

    Federal Reserve Chairman Jerome Powell and plenty of economists — including Treasury Secretary Janet Yellen — still see a path to a so-called soft landing, where the economy slows enough to lower inflation but not cause a recession. Yellen explained this week that recession risks permanently exist.

    “There are always risks of a recession,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday. “The economy remains prone to shocks.”

    But Zandi said there can be a bright side to the dark worries.

    “It may just, in an odd kind of way, help things out because if everyone’s so nervous about recession, they are cautious,” he said. “They don’t take big risks. They don’t take on a lot of debt. They don’t go out and make big expansion moves (and) that may cool things off sufficiently to bring inflation down so that (the Fed) doesn’t have to raise rates as much and we actually — weirdly enough — avoid a recession.”

    JPMorgan Chase CEO Jamie Dimon has expressed concern for months about an impending recession, citing higher interest rates and consumers spending down their excess pandemic savings.

    “When you’re looking out forward, those things may very well derail the economy and cause this milder or hard recession that people are worried about,” he said earlier this month.

    With inflation still at the highest level in a generation and central banks around the world continuing to raise interest rates, the risks for 2023 are undoubtedly high.

    “I think it’s reasonable to be nervous and cautious about the economy next year,” Zandi acknowledged.

    “But you know, having said that, I think we have a fighting chance of getting through the next year without an economic downturn.” He cites inflation “coming in here pretty quickly, consumers still have cash and middle- and high-income consumers are spending and businesses are reluctant to lay off workers because their number one problem is finding and retaining workers.”

    He forecasts “just a moderate, steady slowing (in the job market) and economic activity as we move into next year. Hopefully we don’t lose faith and run for the bunker and go into recession.”

    — CNN’s Elizabeth Yang contributed to this report.

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  • Jobless claims drop to 11-week low of 211,000 in early December

    Jobless claims drop to 11-week low of 211,000 in early December

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    The numbers: The number of Americans who applied for unemployment benefits in early December fell to a nearly three-month low of 211,000, indicating layoffs around the holiday season remain low even as the economy softens.

    New unemployment filings declined by 20,000 from 231,000 in the prior week, the government said Thursday.

    Economists…

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  • Prioritize This Tool to Increase Customer Satisfaction in a Recession

    Prioritize This Tool to Increase Customer Satisfaction in a Recession

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    Opinions expressed by Entrepreneur contributors are their own.

    As economists continue to debate whether or not a recession is in fact going to happen, many companies are busy developing strategic plans should this come to fruition, taking the “hurry up and wait” mentality and focusing efforts on becoming more efficient with their dollars.

    The past few years have been transformative for many, and hopefully, your business has implemented some customer experience and digital transformation initiatives. Maybe you were already ahead of the curve or in more cases than not, the pandemic lit a fire under your organization as it did for many others. But if not, the good news is that it’s not too late to get started and with the economic uncertainty, now is a perfect time. The first step? Giving your customers what they really want with self-service options, which in turn will help you operate more efficiently from a digital perspective and more importantly, lead you through the potential recession.

    So how is this done? Let’s take a look at what your company can (and should) be doing:

    Help your customers help themselves — literally

    We are all familiar with how sales used to happen: Handshakes, order forms and catalogs over lunch. This method still worked before Covid-19, but changed drastically afterward — everything went remote and many companies had no choice but to go digital if they wanted to keep up. And now with another likely economic downturn, everyone’s minds are on their wallets, which means that one of the easiest ways to level up your business and lower the cost of sales is to ensure your customers have access to self-serve options so they can get the products they need without assistance. Convenience is key, as is ease of use — for every single interaction.

    It doesn’t really matter what your starting point is. Maybe you’re still employing dozens or even hundreds of field reps that are meeting face-to-face with customers, or maybe your customers use a call center where they’re helped by a rep with their product needs. The thing that matters most is where you need to go: A thoughtful digital experience tailored to your customer’s needs, accessible from anywhere to get what they need in real-time. Things that are easy should be easy. This means that if your customer wants to do something like order a product, track it or update payment information with you, they should be able to do all of those things themselves at a time and place that is most convenient for them. Therefore, creating the digital infrastructure for this is crucial. If something isn’t easy and cannot be done on its own, a customer may second guess their decision or withgo it all together — after all, budgets are tighter, so why waste time on something that isn’t convenient? Upgrading digital also means fewer sales responsibilities. However, with this lowered-cost-of-sale concept may come the logical thought, “are you suggesting we reduce the size of our sales team?”

    Related: The 6 Essential In-Store Experiences That Your Customers Want to See

    Make sure your sales team is still providing exceptional customer service

    To be clear, we are not advocating for you to make drastic changes to your sales team. In fact, quite the opposite. While we’d argue that many clients, especially the big strategic ones, should have a dedicated human being they can go to when they need something, there are always going to be long-tail customers that are perfectly happy to get set up once and from then on, use self-service for all routine smaller orders or account status questions.

    Once your sales team is freed from checking inventory, providing shipping updates, and other administrative tasks, they have a lot more time to do what they’re best at: building relationships and serving your customers with an unparalleled experience that differentiates your company from others. After this is implemented, watch as your customer relationships thrive and flourish. The option of self-service options will be a huge support for your sales team and make them better at their jobs and happier at work, which means you’re far less likely to deal with retention problems – something many industries are still feeling the crunch of in a post-Covid world.

    When we start working with just about any client, one of the first things we want to know is how their selling gets done, and what we can do to make it better, because, at the end of the day, this is what ultimately helps the client’s bottom line. What are the nuts and bolts of how your products are ordered to end up in your customers’ hands? While it may seem that you have bigger things to worry about in the face of economic uncertainty than changing your selling model, I’d argue there’s never been a more important time. Self-service may be the very thing that helps you weather this storm and thrive well beyond it.

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    Andrew Walker

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  • Must Read: How Income Inequality Will Affect Fashion in 2023, Luxury’s Après-Ski Takeover

    Must Read: How Income Inequality Will Affect Fashion in 2023, Luxury’s Après-Ski Takeover

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    How income inequality will affect fashion in 2023
    Economic stress is impacting consumers differently depending on income levels when it comes to spending on fashion. Economists predict that lower-income households will feel the greater impact of economic turbulence and try to manage their finances accordingly. Many of these shoppers have been seeking discounts from their favorite stores or paying for products in installments. {Business of Fashion}

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    Brooke Frischer

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  • What to expect from this week’s Fed meeting | CNN Business

    What to expect from this week’s Fed meeting | CNN Business

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    New York
    CNN
     — 

    The Federal Reserve is expected to raise interest rates by half a point at the conclusion of its two-day policy meeting on Wednesday, an indication that the central bank is pulling back on its aggressive stance as signs begin to emerge that inflation may be easing.

    Although that increase would be smaller than the three-quarter-point hikes announced at the past four Fed meetings, it’s nothing to scoff at.

    It’s still double the Fed’s customary quarter-point hike, and a sizable increase that will likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

    The Fed’s anticipated action would increase the rate that banks charge each other for overnight borrowing to a range of between 4.25% and 4.5%, the highest since 2007.

    Federal Reserve Chairman Jerome Powell confirmed last month that smaller rate hikes could be expected, saying: “The time for moderating the pace of rate increases may come as soon as the December meeting.”

    But while inflation is unlikely to slow dramatically any time soon, partly due to continued pressure on wages amid a shortage of workers, Wall Street appears to believe the Fed will eventually be forced to pivot away from, or even reverse its regimen of rate hikes. Traders are largely pricing in rate cuts in the second half of 2023.

    The Fed will conclude its rate hike regimen by the second quarter of next year, predicted JPMorgan analysts in a recent note. “With inflation continuing to fade and fiscal policy likely on hold, the Fed is likely to end its tightening cycle early in the new year and inflation could begin to ease before the end of 2023,” they wrote. The analysts expect two quarter-point hikes in the first half of 2023.

    But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.

    Investors will closely read the Fed’s economic outlook, the Summary of Economic Projections, which is also due out Wednesday. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.

    ​”We expect Fed Chair Powell will insist on the need to hold policy at a restrictive level for some time to bring inflation down toward the 2% target,” wrote Gregory Daco, chief economist at EY-Parthenon, in a note to clients Monday. “This will serve to push back against current market pricing … Powell will stress that history cautions strongly against prematurely loosening policy.”

    The Fed has increased its benchmark lending rate six times this year in an attempt to discourage borrowing, cool the economy and bring down historically high inflation that peaked at 9.1% over the summer.

    Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

    In an interview that aired on CBS on Sunday, Treasury Secretary Janet Yellen — Powell’s predecessor at the Fed — said there is “a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

    And the economy has so far withstood the Fed’s aggressive rate hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Fed isn’t acting alone, it’s just one of nine central banks expected to make a rate announcement this week. Landing softly on the ever-narrowing path between high inflation and recession is a global concern as central banks across the world contend with similar economic problems.

    The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the United States with half-point moves of their own on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

    The Federal Reserve announces its rate hike decision Wednesday at 2 p.m., followed by a press conference with Chair Powell at 2:30 p.m.

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

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

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


    New York
    CNN
     — 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    (HESAF)     and cosmetics giant L’Oreal

    (LRLCF)    .

    Monday: UK monthly GDP; earnings from Oracle

    (ORCL)

    Tuesday: US Consumer Price Index; Germany economic sentiment

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

    (LEN)     and Trip.com

    (TCOM)

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

    (JBL)

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

    (ACN)    , Darden Restaurants

    (DRI)     and Winnebago

    (WGO)

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  • U.S. consumer sentiment improves in December as inflation worries ease

    U.S. consumer sentiment improves in December as inflation worries ease

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    The numbers: The University of Michigan’s gauge of consumer sentiment rose to a preliminary December reading of 59.1 from a November reading of 56.8.

    Economists polled by the Wall Street Journal had expected a December reading of 56.5.

    Inflation expectations over the next year fell to 4.6% from 4.9% last month. It is the lowest since September 2021. Five-year inflation expectations remained steady at 3%.

    Key details: A gauge of consumer’s views of current conditions rose to 60.2 in December from 58.8 in November, while an indicator of expectations for the next six months rose to 58.4 from 55.6 last month.

    Big picture: Economists think falling gasoline prices are behind the improvement in confidence.

    The national average retail price for a gallon of gas is now $3.33, down $1.69 from June, according to White House data.

    Still, high inflation has consumers remain in a relatively dour mood. The index is only marginally above the record low of 50 in June. By comparison, the consumer sentiment index was 101 in February of 2020.

    Looking ahead: “High prices coupled with ongoing aggressive rate hikes will be a headwind for consumers and sentiment going forward,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

    Market reaction: Stocks
    DJIA,
    -0.90%
     
    SPX,
    -0.73%
    were higher on Friday on the back of hotter-than-expected wholesale inflation in November. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.583%
    rose to 3.54%.

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  • U.S. wholesale price inflation picks up in November, but is lower for year

    U.S. wholesale price inflation picks up in November, but is lower for year

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    The number: U.S. wholesale prices rose 0.3% in November, the Labor Department said Friday.

    Economists polled by The Wall Street Journal has forecast a 0.2% gain.

    This is the third straight 0.3% monthly gain in the PPI index. Inflation in October and September was also revised up from the prior estimate of a 0.2% gain.

    The core producer price index, which excludes volatile food, energy and trade prices, also rose 0.3% in November, up from a 0.2% gain in the prior month.

    The increase in producer prices over the past 12 months slowed to 7.4% gain from 8.1% in the prior month. This is down from the peak of 11.7% in March.

    Over the past year, core prices rose 4.9%, down from 5.4% in October.

    Key details: The cost of energy fell 3.3% in November after a 2.3% gain in the prior month.

    Food prices jumped 3.3% after a 0.8% increase in the prior month.

    The cost of trade services jumped 0.7% in November after two straight monthly declines.

    Big picture: Although hotter than expected in November, inflation at the wholesale level is showing steady deceleration from the peak in March.

    The market is more focused on consumer price inflation report, which will be released next Tuesday, one day before the Fed’s decision on interest rates.

    Market reaction: Stock futures
    DJIA,
    -0.25%
    turned lower on the upside surprise to the monthly gain. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.533%
    jumped to 3.5%.

     

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  • U.S. jobless claims climb to 230,000 in sign labor market is slowly cooling off

    U.S. jobless claims climb to 230,000 in sign labor market is slowly cooling off

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    The numbers: The number of Americans who applied for unemployment benefits in early December rose slightly to 230,000, pointing to a slow but steady increase in layoffs as the U.S. economy slows.

    Economists polled by the Wall Street Journal had forecast new claims to total 230,000 in the seven days ended Dec 3. The figures are seasonally adjusted.

    The number of people applying for jobless benefits is one of the best barometers of whether the economy is getting better or worse. New unemployment filings have gradually risen from a 54-year low of 166,000 last spring , but they are still extremely low.

    Economists predict layoffs will rise, however, as rising interest rates orchestrated by the Federal Reserve choke off U.S. growth. The tech sector has already suffered a wave of layoffs and manufacturers are also scaling back.

    Big picture: The strongest U.S labor market in decades has now become a double-edged sword.

    Rising wages and low unemployment have allowed Americans to meet their needs and spend enough to keep the economy growing.

    Yet the fastest wage growth in four decades is now adding to high U.S. inflation and putting more pressure on the Fed to get prices back under control.

    The Fed could tip the economy into recession if it raises rates high enough to cool off a hot labor market.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.00%
    and S&P 500
    SPX,
    -0.19%
    were set to rise in Thursday trades.

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  • Why we think we’re in a recession when the data says otherwise | CNN Business

    Why we think we’re in a recession when the data says otherwise | 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 Business
     — 

    It seems like you can’t go anywhere these days without colliding headfirst into another ominous prediction of imminent recession. CEOs, portfolio managers, politicians, news pundits, second cousins and even Cardi B are sounding the alarm: Hear ye! Hear ye! Economic downturn awaits all who dare enter 2023!

    But those predictions contradict the slew of positive economic data we’ve seen: The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Federal Reserve’s regimen of painful interest rate hikes meant to tame persistent inflation could certainly cool the economy — as could events in Eastern Europe and China — but the economy has been able to successfully endure nearly a year of hikes and war in Ukraine with barely a dent.

    It’s possible that recession chatter is just that. Chatter.

    What’s happening: No one would ever accuse investors of shying away from their emotions: Passions run high on trading floors where feelings are often as valid as facts and fear and greed can sometimes run the show. Economists, on the other hand, are a data-dependent, stoic bunch. The US economy is not Wall Street, and market downturns are not recessions — but sometimes they get jumbled together in the public eye and their borders become hazy.

    That appears to be the case: The Fed’s attempts to tamp down sky-high inflation are having an outsized impact on markets — the S&P 500 is down about 18% so far this year — but there has so far been little impact on the US economy as a whole.

    This week, a number of top executives warned of an economic slowdown in 2023. CEOs from Goldman Sachs, JPMorgan, General Motors, Walmart, United and Union Pacific all said they were making plans for less-profitable times ahead. But hidden behind those “CEO PREDICTS RECESSION” headlines lies a lot of uncertainty.

    Rising interest rates and geopolitical chaos are pointing towards storm clouds on the horizon, JPMorgan CEO Jamie Dimon told CNBC on Tuesday: “When you look out forward, those things may well derail the economy and cause this mild-to-hard recession that people are worried about.” When pressed to predict what was coming, he deflected. “It could be a hurricane. We simply don’t know,” he said. What was left unsaid was that sunny days are also a possibility.

    Feedback loop: United Airlines CEO Scott Kirby also told CNBC on Tuesday that “we’re probably going to have a mild recession induced by the Fed.” He then went on to say that demand in his industry is higher than ever and United entered the fourth quarter with profit margins near all-time highs. He doesn’t see any indication of a slowdown on the horizon, either.

    So why does he think a recession is coming? “If I didn’t watch CNBC in the morning, the word ‘recession’ wouldn’t be in my vocabulary,” he said. “You just can’t see it in our data.”

    It’s almost as though Kirby predicted recession was imminent because other prominent voices predicted that recession was imminent. And it’s possible that we’re all stuck in a feedback loop that amplifies unjustified fear.

    Prophecies are often self-fulfilling. If CEOs believe recession is coming, they preemptively batten down the hatches — and that means less spending and more layoffs, which in turn can trigger an economic downturn.

    Goldman CEO David Solomon said Tuesday that the bank may soon terminate staff and exercise caution with its financial resources due to the mounting economic uncertainty. Morgan Stanley will reportedly slash its workforce by about 1,600 people, roughly 2% of the total.

    The upside: Some parts of Wall Street seem to be avoiding the recession fervor. ​​A recent study by Goldman Sachs found that smart money is betting on a soft landing. Money managers have been favoring industrial and commodity stocks that are sensitive to economic downturns. Stocks that act as a buffer during economic downturns like consumer staples and utilities have fallen out of favor at investment funds with assets totaling almost $5 trillion, Goldman strategists found.

    “Current sector tilts are consistent with positioning for a soft landing,” they wrote.

    Oil prices have tumbled to their lowest level since Christmas as worries about the health of the economy weigh on crude, overshadowing concerns about new restrictions imposed on Russian energy, reports my colleague Matt Egan.

    Brent crude, the world benchmark, lost nearly 3% on Thursday to around $77.45 a barrel.

    The oil selloff comes after the West hit Russia with new restrictions that, so far at least, do not appear to be derailing global energy markets.

    The European Union on Monday imposed a ban on seaborne oil imports from Russia, while the West placed a $60 cap on Russian oil. Both moves are designed to hurt Russia’s ability to finance its war in Ukraine, without hurting consumers by causing Moscow to slash oil production.

    “Russia oil is still on the market. As of now, it appears Russia is willing to play ball,” said Robert Yawger, vice president of oil futures at Mizuho Securities.

    The tame reaction from energy markets is a welcome gift for Americans heading on long drives this holiday season, as prices at the gas pump are expected to continue their recent plunge.

    US oil this week hit its lowest level since December 23, 2021, before recovering a little on Thursday to trade up 2% at $73.60 a barrel. That leaves oil down by 43% since briefly topping $130 a barrel in March amid fears about Russia’s invasion of Ukraine.

    The national average price for regular gasoline dipped by three cents to $3.33 a gallon on Thursday, according to AAA. Gas prices have dropped 14 cents in the past week and 47 cents in a month. The national average is a cent lower than a year ago when they averaged $3.34 a gallon.

    Britain is bracing for further disruption from strikes heading into the Christmas period, as ambulance drivers and nurses join rail operators and postal workers in the worst wave of walkouts the country has endured for at least a decade, reports my colleague Hanna Ziady.

    More than 20,000 ambulance workers, including paramedics and call handlers, are expected to strike on December 21 in a dispute over pay, according to statements from labor unions GMB, Unison and Unite.

    The strike will involve just under half of all ambulance drivers in England, Wales and Northern Ireland, although unions have said they will cover life-threatening emergencies during the walkouts. More than 10,000 ambulance workers represented by the GMB Union will strike again on December 28.

    Strikes have swept the United Kingdom this year, as workers grapple with a cost-of-living crisis and stagnating wages. Consumer prices rose by 11.1% in the year to October, a 41-year high. Once inflation is taken into account, average wages fell by the biggest drop on record earlier this year, and were still declining in the June-September period.

    According to The Times newspaper, one million UK workers are set to strike in December and January. Data from the Office for National Statistics shows Britain has already lost at least 741,000 days to strike action this year, putting it on track for its worst year of labor disputes in at least a decade.

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  • 3 Strategies to Reach Customers in an Economic Downturn

    3 Strategies to Reach Customers in an Economic Downturn

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    Opinions expressed by Entrepreneur contributors are their own.

    A recessionary environment can be a make-or-break time for businesses. Some of today’s most successful companies were founded during recessions, such as Google during the dot-com bust of the early 2000s or Uber during the Great Recession of 2008. But for every company that thrives during a recession, there are many more that fail.

    One of the key reasons that some companies succeed while others falter is how they handle their marketing and advertising spend during these difficult times. When a recession hits, businesses are quick to cut marketing budgets as they seek to reduce costs. But this can be a mistake.

    Recessions provide opportunities for businesses to reach customers who may be more price-sensitive and receptive to new offers. Instead of cutting marketing spend, businesses should focus on reallocating their ad budgets to more efficient channels and developing interactive content that will capture the attention of customers who may be spending more time at home. Here are three ways businesses can reach and engage customers despite a market slowdown:

    Related: 6 Recession-Proof Business Marketing Strategies

    1. Develop interactive content

    Customers are spending more time than ever online, so it’s important to develop content that is interactive and engaging. In a recession, ROI becomes even more important, so businesses should focus on creating content that will drive leads and sales.

    Traditional paid advertising can be expensive and is subject to banner blindness, which is when users tune out online ads. Interactive content, such as quizzes, polls and surveys, can be a more effective and cost-efficient way to reach and engage customers.

    Instead of non-consensually slapping users in the face with a commercial message, interactive content allows businesses to provide valuable information or entertainment while also gathering data that can be used to improve marketing campaigns.

    For example, a fashion company might run a style quiz that helps users find the right clothing for their body type. Not only is this quiz interactive and fun, but it also provides the company with valuable data about its customers’ preferences.

    2. Target recession-proof industries

    A recession doesn’t impact all sectors equally. In fact, some industries have seen tremendous growth. The energy industry, for instance, has seen a resurgence as renewed consumer demand and limited oil supply have led to higher prices. Year-to-date, as the S&P500 has fallen by around 15%, the United States Oil ETF is up over 30%.

    Healthcare is another industry that is relatively resilient to economic downturns. As people age, they require more medical care, and government spending on healthcare tends to increase during periods of economic hardship.

    Other so-called “defensive” industries, such as food and beverage, household staples and personal care, also tend to do well during recessions.

    Businesses that target these recession-proof industries can still find success even when the economy is struggling. That isn’t to say that your business needs to be in one of these industries to survive a recession, but it may be worth researching how your product or service can be positioned to appeal to these industries.

    Related: Why You Should Never Skimp on Brand Marketing in a Recession

    3. Focus on ROI-positive marketing channels

    When businesses are cutting costs, they often reduce their marketing spend across the board. But not all marketing channels are created equal. Some, such as paid search and social media advertising, can be very effective in driving leads and sales but can also be expensive.

    Other marketing channels, such as email marketing and content marketing, can be less expensive and just as effective in reaching and engaging customers. In a recession, businesses should focus on allocating their marketing budgets to the channels that will provide the most ROI.

    Email marketing, for example, can be very effective in reaching potential customers who may be interested in your product or service but may not be actively searching for it. And because email is a permission-based channel, you’re more likely to reach people who are receptive to your message.

    Content marketing can also be an effective way to reach and engage customers. By creating high-quality, informative content, businesses can attract customers who are looking for answers to their questions or solutions to their problems.

    In a recessionary environment, it’s more important than ever to focus on ROI-positive marketing channels. By allocating your marketing budget wisely, you can still reach and engage customers despite a slowdown in the economy.

    With the right approach, a recession can be an opportunity for businesses to thrive. By focusing on interactive content, targeting recession-proof industries and allocating your marketing budget to ROI-positive channels, you can weather the economic storm and come out ahead.

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    Vlad Gozman

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  • U.S. stocks waver in choppy trade, S&P 500 on pace for 5-day losing streak as economic growth worries linger

    U.S. stocks waver in choppy trade, S&P 500 on pace for 5-day losing streak as economic growth worries linger

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    U.S. stock indexes are wavering between small gains and losses on Wall Street Wednesday, struggling to gain ground after a four-day losing streak amid worries about the chances of an economic downturn in coming months.

    How are stock-index futures trading
    • S&P 500
      SPX,
      -0.16%
      dropped 14 points, or 0.3%, to 3,927

    • Dow Jones Industrial Average
      DJIA,
      +0.08%
      shed 70 points, or 0.2%, to 33,528, after rallying over 145 points earlier in the session

    • Nasdaq Composite
      COMP,
      -0.50%
      fell 83 points, or 0.8% to 10,931

    On Tuesday, the Dow Jones Industrial Average fell 351 points, or 1.03%, to 33596, the S&P 500 declined 58 points, or 1.44%, to 3,941, and the Nasdaq Composite dropped 225 points, or 2%, to 11,015.

    What’s driving markets

    A four-day losing streak, during which the S&P 500 index has lost 3.4%, showed little sign of being snapped Wednesday as investors continued to assess the potential economic damage inflicted by high inflation and the Federal Reserve’s campaign to damp it by raising interest rates. U.S. stock indexes extended losses in midday trade despite regaining some ground in the morning session.

    MarketWatch Live: S&P 500 on pace for 5-day losing streak as stocks turn negative heading into midday

    “The recent run of macro data points in the U.S. continues to underscore relatively solid economic trends. And combined with the recent easing in financial conditions, it may trigger a need for the Fed to push back in December. Put another way, the dove camp is feeling some pain,” said Stephen Innes, managing partner at SPI Asset Management.

    Jim Reid, strategist at Deutsche Bank , noted that the S&P 500 had now lost ground in the last seven out of eight sessions. “In fact, the latest moves for the S&P mean it’s now unwound the entirety of the rally following Fed Chair Powell’s [supposedly dovish] speech last week, which makes sense on one level given he didn’t actually say anything particularly new.”

    The S&P 500 has fallen 17.2% in 2022 as the Federal Reserve has driven borrowing costs sharply higher in an effort to tame inflation that has been running at the fastest pace in 40 years.

    See: BNP Paribas studied 100 years of market crashes — here’s what it says is coming next

    The Fed’s monetary tightening alongside stubborn inflation may deliver a marked economic slowdown, senior bankers such as JPMorgan’s Jamie Dimon and Goldman Sachs’s David Solomon warned this week.

    “Fears are growing that economies are in for a rough time ahead as feverish inflation and the bitter interest rate medicine being used to bring it down take effect,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

    “Worries deepened amid warnings from U.S. banking and media sectors that navigating through the storm would not be easy, while the latest data has shown China’s trade has been sideswiped by a drop in global demand and zero-COVID policies. Despite today’s easing of restrictions it’s clear China’s COVID nightmare is not at an end,” Streeter added.

    China on Wednesday announced a series of measures rolling back some of its most draconian anti-COVID-19 restrictions. People who test positive for the virus will be able to isolate at home rather than in overcrowded and unsanitary field hospitals, and schools where there have been no outbreaks must return to in-class teaching, according to the National Health Commission.

    The Hang Seng index
    HSI,
    -3.22%
    in Hong Kong fell 3.2%, while the CSI 300
    000300,
    -0.25%
    dropped 0.2%, suggesting investors had already discounted Beijing’s more relaxed COVID stance.

    See: A speedy reversal of China COVID-19 restrictions could cause 1 million winter deaths: report

    However, long time bull Tom Lee, head of research at Fundstrat, reckons equities will benefit in coming weeks as investors start to get greater clarity on when the Fed may stop tightening policy.

    “We don’t think the end of the inflation war in 2022 is the Fed cutting rates. It is when Fed and markets see sufficient progress in inflation to remove the upside risks to higher rates. We think this could happen as early as the November CPI report. This will be released on 12/13,” Lee wrote in a note.

    “And if November CPI is soft, we think this will support a strong year-end rally. Admittedly, a 10% move between now and [year end] seems a stretch given the S&P 500 is around 4,000 but… the broader point is we see stocks having positive skew given the cautious positioning of investors and the possibility of very favorable incoming inflation reports,” Lee added.

    On the U.S. economic front, nonfarm productivity, which measures hourly output change per worker, rose at a 0.8% annualized rate last quarter, the Labor Department said on Wednesday. Unit labor costs, the price of labor per single unit of output, climbed by a smaller 2.4% annual pace in the third quarter, compared to the preliminary 3.5% increase.

    What companies are in focus

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  • This little-known but spot-on economic indicator says recession and lower stock prices are all but certain

    This little-known but spot-on economic indicator says recession and lower stock prices are all but certain

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    An obscure and arcane economic indicator suggests that Federal Reserve Chairman Jerome Powell was wrong when he said at his Nov. 30 news conference that “There is a path to a soft, a softish landing” for the U.S. economy.

    This indicator traces to the large divergence between consumers’ views about the economy in general and their immediate personal financial circumstances in particular. A recession has occurred each time over the past four decades in which this divergence even approached its current level.

    To measure this divergence, this indicator focuses on the Conference Board’s Consumer Confidence Index (CCI) and the University of Michigan’s Consumer Sentiment Survey (UMI). While there is some overlap between what these two indices measure, there is a significant difference in emphasis, according to James Stack of InvesTech Research, from whom I first heard about this indicator. The CCI more heavily reflects consumers’ attitudes towards the overall economy, according to Stack, while the UMI is more heavily weighted towards their immediate personal circumstances.

    Perhaps not surprisingly, the CCI currently is higher than the UMI. Even as American consumers’ attitudes towards their immediate financial situations continue to sour, due to everything from inflation to higher mortgage rates to a softening housing market, the overall economy has proven to be remarkably resilient. Yet more evidence of this resilience was the Dec. 2 jobs report, in which the Labor Department reported the creation of a much-higher-than-expected number of new jobs.

    What is more surprising is the magnitude of the current divergence. According to the latest data releases from the Conference Board and the University of Michigan in late November, the CCI is 43.4 percentage points higher than the UMI. That’s close to a record; the latest reading stands at the 98th percentile of all monthly readings of the past four decades.

    Furthermore, as you can see from the chart above, a recession was in the economy’s not-too-distant future (shadowed bars) the past four times this difference rose to even 25 percentage points. 

    Consumer sentiment and the stock market

    Stark as this chart’s correlations are, it’s difficult for a sample with just four observations to be statistically significant. To test this indicator’s potential, I next measured its ability to predict the S&P 500’s
    SPX,
    -1.96%
    inflation-adjusted total return over the subsequent one- and five-year periods. The table below reflects data since 1979, which is when monthly data for both of these consumer indices first began to be reported.

    When divergence between CCI and UMI was…

    		 S&P 500’s average total real return over subsequent 12 months

    		 S&P 500’s average total real return over subsequent 5 years (annualized)
    In the highest 10% of monthly readings since 1979

    		 -0.4%

    		 -3.1%
    In the lowest 10% of monthly readings since 1979

    		 +14.3%

    		 +14.8%

    The differences shown in this table are statistically significant at the 95% confidence level that statisticians often use when determining if a pattern is genuine.

    The bottom line? It’s not good news, for the economy in general or the U.S. stock market in particular, that consumers are so much more upbeat about the overall economy than they are about their immediate financial circumstances.

    Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

    More: The U.S. job market is strong, but layoffs are on the rise. Is this a good — or bad — time to ask for a raise?

    Also read: Bigger paychecks are good news for America’s working families. Why does it freak out the Fed?

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  • Inflation and credit-card debt are on the rise, despite a strong job market. Tell us how the economy is affecting you.

    Inflation and credit-card debt are on the rise, despite a strong job market. Tell us how the economy is affecting you.

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    We want to hear from readers who have stories to share about the effects of increasing costs and a changing economy. If you’d like to share your experience, write to readerstories@marketwatch.com. Please include your name and the best way to reach you. A reporter may be in touch.

    For many people living in the U.S., these are tough — and confusing — times.

    On Friday, the Labor Department reported 263,000 new jobs in November, while the unemployment rate held steady at 3.7%. Layoffs remain low, despite mass job cuts in the tech sector. Average hourly wages have also risen 5.1% in the past year, but still lag behind inflation for many workers. And there were 10.3 million job openings in October — slightly down from the previous month’s 10.7 million. 

    Some people might see the latest economic data as both challenging and confusing.

    After all, the cost of living rose 7.7% on the year in October. The once red-hot housing market is finally cooling, thanks to mortgage rates that have more than doubled over the last year amid the Federal Reserve’s attempts to rein in inflation, and rents, while moderating, have surged from pre-pandemic levels. Borrowing money to cover increased precarity is becoming more expensive too, with the average credit-card APR at 19.2% as of Nov. 30, according to Bankrate.

    “‘It’s just mind-boggling, the disconnect that we’ve seen.’”

    Given all the conflicting signals, economists say it can be difficult for consumers to know exactly how to feel about the economy right now. “It’s not new, this disparity between the actual facts on the ground about what’s going on in the economy and the sentiment,” said Heidi Shierholz, president of the Economic Policy Institute, a left-leaning think tank. 

    “I remember this summer it was just unambiguously the strongest jobs recovery we’ve had in decades,” she added. “There’s just absolutely zero chance that we were in a recession — not only were we not in a recession, we were in just an extraordinarily fast recovery — and the polling, a huge share of people actually thought we were in a recession. It’s just mind-boggling, the disconnect that we’ve seen.”

    Still, the fact that inflation is eating into people’s savings — and that essential goods like food, energy and housing have spiked in cost — is bound to make many people unhappy. 

    Struggling to pay for rent and food

    “Going into the pandemic, more than seven out of every 10 extremely low-income renters were already spending more than half of their income on rent. And then the pandemic hits; we saw a lot of low-wage workers lose their jobs and see an income decline,” said Andrew Aurand, vice president for research at the National Low Income Housing Coalition. “Then in 2021, we see this huge spike in prices. For a variety of reasons, they’ve struggled for a long time, and since the pandemic, it’s gotten even worse.”

    Moderate-income Americans are struggling too. Maybe you can’t afford your favorite family meals, as the price of grocery store and supermarket purchases has jumped by 12.4% from last year. Or maybe you’re putting off a trip to see family this holiday season thanks to the higher cost of airfare, or you’re worried about losing your job as some business leaders warn of a recession. Perhaps you’re forced to rely on credit cards and personal loans, as credit-card debt is up 15% from a year ago.

    MarketWatch has chronicled many of these changes, detailing renters’ frustrations, families’ tough choices at the grocery store, and the reality faced by would-be home buyers sidelined by higher rates and dwindling affordability. 

    But we would like your help telling an ongoing story about the American economy, centering the experiences of everyday people. Our readers know better than anyone about how today’s economic conditions have impacted their daily lives.

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  • November jobs report is most important data for inflation this year- and not in a good way

    November jobs report is most important data for inflation this year- and not in a good way

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    The November U.S. jobs report on Friday showed the U.S. economy gained 261,000 jobs last month, with the unemployment rate holding steady at 3.7%.

    Economists polled by the Wall Street Journal had expected an addition of 200,000 jobs.

    Wages jumped 0.6% in November, double the expected pace.

    Below are some initial reactions from economists and other analysts as U.S. stocks
    DJIA,
    -0.20%

    SPX,
    -0.37%
    traded lower and the yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.569%
    jumped following the data on nonfarm payrolls.

    • “You probably want to revise your view on inflation and it’s overall dynamic more based on today’s job report than any other data report this entire year. And not in a favorable direction,” The report dashes hopes wage growth was cooling, said Jason Furman, economics professor at Harvard and former Obama White House economist, in a tweet.

    • “A stronger than expected 263,000 monthly payroll print plus the spike in wages…will reinforce the Fed’s assessment that the labor market remains very overheated, and rates will need to go higher for longer in order to bring it back into balance,” said Krishna Guha, vice chairman of Evercore ISI.

    • “The Fed will not like the renewed strength in wages,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

    • “The U.S. labor market has lost some momentum this year, but it’s still speeding ahead as we approach the new year. Continue to underestimate the momentum in the U.S. labor market at your own peril. Job gains continue to be added at a pace that would have drawn cheers in 2019. The labor market might encounter some bumps in the road next year, but it’s heading into 2023 cruising,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.

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  • Bank of America: Recession Will Ravish Markets in Early 2023

    Bank of America: Recession Will Ravish Markets in Early 2023

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    • Bank of America economists expect the US to slip into a recession in the first quarter of 2023.
    • That will become the dominant story for markets next year, the bank said.
    • The S&P 500 could plunge 24% from its current level by the end of the year, strategists warned.

    This story originally appeared on Business Insider.


    Spencer Platt/Getty Images via Business Insider

    A recession next year will trigger a 24% sell-off in the S&P 500, Bank of America warned Wednesday.

    Markets will be ravaged by a recession next year, with the benchmark US stock index potentially falling 24% from its current level, Bank of America has said.

    The bank’s base case is that the US enters a severe and sustained downturn in the first quarter of the year, when its economists expect growth to fall by 0.4%.

    That would weigh on stocks, as companies would be forced to cut their earnings targets, they said in their 2023 outlook published recently.

    “We think the market could drop as low as 3,000 based on a panoply of indicators, given a host of risks we face as payback continues and a recession unfolds,” Savita Subramanian, the bank’s head of US equity strategy, said.

    Hitting that 3,000 level would represent a 24% plunge from the S&P 500‘s Tuesday close of 3,958.

    This year, there’s been a process of payback for the boost markets have had from decades of low interest rates and stimulus, both fiscal and corporate, Subramanian said.

    “The bad news is, in 2023, the process of unwinding easy money could start to impact the economy,” she said.

    And it’s not just a recession that will rattle markets next year, according to Bank of America. Rising interest rates, red-hot inflation, war in Ukraine and the environmental crisis will also carry on spooking investors.

    “The biggest rate shock in history, the most aggressive hiking cycle, the biggest inflationary pressure in 40+ years, rising recession fears, wartime and ongoing geopolitical risks, urgency building around carbon emission reduction suggest macro will loom large in 2023,” the team led by Subramanian said.

    All these factors played a key role in the stock selloff that has seen the S&P 500 plunge 17% in 2022, they noted.

    Bank of America’s most likely investment outlook sees the S&P 500 creep up just 1% by the end of 2023, for a target of 4,000 points, with significant volatility coming before that point as the downturn rattles investors’ confidence.

    Subramanian’s team expects the S&P 500 to bottom out at some point in the first half of next year, because stocks tend to trough six months before the end of a recession – which means there could be buying opportunities soon.

    “The market typically bottoms six months before the end of a recession, so buy in the first half based on our economists forecast of the recession ending by the third quarter of 2023,” they said.

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    George Glover

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  • Fed eyes slower rate hikes as recession threat grows

    Fed eyes slower rate hikes as recession threat grows

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    Senior officials at the Federal Reserve expect smaller increases in interest rates will “soon be appropriate” as the threat of recession grows.

    Although the Fed still expects rates to rise higher than previously forecast, senior officials are unsure just how much further they will go. Slower rate hikes, they say, would give them more time to evaluate the “lagging” effects on the economy amid the rising threat of a recession.

    “Short of some wild inflation report before the next meeting, 50 basis points sounds very reasonable in December. But the Fed is clearly not finished yet.”

    The Fed’s economic staff for the first time said a recession was possible in the next year, according to a detailed summary of the bank’s last strategy session in early November.

    The bank’s previous minutes have not mentioned the possibility of a recession.

    The main U.S. stock gauges
    SPX,
    +0.59%

    DJIA,
    +0.50%
    extended gains after the release of the Fed minutes.

    The Fed has quickly raised a key U.S. interest rate to a top range of 4% from near zero last spring in an effort to tame high inflation. Rising rates tend to reduce inflation by slowing the economy and depressing demand for goods and labor.

    Yet some economists and senior officials at the Fed also worry the central bank could spark a recession or a period of prolonged economic weakness if rates go too high.

    Some members said there was an increasing risk that the Fed’s actions “would exceed what was required” to bring inflation down to acceptable levels.

    In recent speeches, a few have suggested a “pause” in rate hikes might be warranted by early next year to see how they affect the economy. A rapid easing of inflationary pressures could strengthen their case.

    The rate of inflation exploded earlier this year to a 40-year high of 9.1% from almost zero during the early stages of the pandemic. It has since slowed to 7.7%.

    Earlier this month, the bank lifted the so-called fed funds rate by three-quarters of a point to a range of 3.75% to 4% — the third big rate increase in a row. Most U..S. loans such as mortgages and car loans are tied to the fed fund rate.

    In December, the Fed is likely to raise rates again, but markets are betting on a smaller 1/2-point increase. The minutes also suggest a smaller rate hike is likely.

    “Short of some wild inflation report before the next meeting, 50 bps sounds very reasonable in December,” senior economist Jennifer Lee of BMO Capital Markets said. “But the Fed is clearly not finished yet.”

    Senior Fed officials have repeatedly said they plan is to further raise rates in 2023 and then keep them high for an unspecified period of time to make sure inflation declines.

    Officials are less unified on just how high rates will go. Some want to stop at around 5% while others suggest they might need to go higher.

    Wall Street expects the Fed to raise its benchmark rate to 5% by next year.

    The Fed’s aggressive posture stems from the biggest surge in prices since the early 1980s.

    The Fed is aiming to bring down inflation to pre-pandemic levels of 2% or so, but they acknowledge it could take a while.

    Several Fed members also expressed worries that non-traditional financial institutions could amplify the problems for the U.S. economy if higher rates exposed them to greater instability.

    The troubles at the crypto-currency firm FTX were emerging just as the Fed meeting took place.

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  • The U.S. economy is losing speed, S&P surveys show

    The U.S. economy is losing speed, S&P surveys show

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    The numbers: Business conditions at U.S. companies deteriorated again in November and pointed to a slowing economy.

    The “flash” U.S. services sector index drop to a three-month low of 46.1 this month from 47.8 in October, keeping it near the lowest level of the pandemic era. The service side of the economy employs most Americans.

    The S&P Global U.S. manufacturing sector index, meanwhile, slid to a 2 1/2-year low of 47.6 from 50.4.

    Any number below 50 reflects a contracting economy.

    Key details: New orders, a sign of future sales, fell in November at the fastest pace since early in the pandemic in 2020, S&P Global found. Exports also declined.

    The cost of supplies, a measure of inflation, eased again in a sign that intense inflationary pressures are on the wane. Companies also raised prices at the slowest rate in more than two years.

    Shortages of supplies, a big problem during the pandemic, also continued to diminish.

    These shortages were one of the biggest contributors to the U.S. and global surge in inflation. While they are fading, they remain a big problem.

    Big picture: Businesses are still expanding by some measures, but they are also preparing for slower economic growth.

    Rising interest rates orchestrated by the Federal Reserve have dampened sales in the U.S. while a strong dollar has hurt exports by making American products more expensive.

    Looking ahead: “Inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.28%
    and S&P 500
    SPX,
    +0.59%
    rose in Wednesday trades.

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  • Durable-goods orders jump 1%, but momentum unlikely to last as U.S. economy slows

    Durable-goods orders jump 1%, but momentum unlikely to last as U.S. economy slows

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    The numbers: Orders at American factories for long-lasting goods such as autos and computers jumped 1% in October, marking a strong showing that probably isn’t sustainable because of a slowing U.S. economy.

    Economists polled by the Wall Street Journal had forecast a 0.5% increase. Durable goods are items such as autos, appliances and computers meant to last at least three years.

    A key measure of business spending, meanwhile, also rose a solid 0.7% last month.

    Orders tend to rise steadily in an expanding economy and shrink when it weakens. Yet the results in October don’t look quite as strong after inflation is taken into account. The consumer price index rose 0.4% last month.

    Big picture: Manufacturers are able to produce more of what their customers want after two years of chronic shortages, but mostly because demand has softened. Rising U.S. interest rates have curbed sales at home while a strong dollar has dented exports.

    The situation could get worse. The Federal Reserve is jacking up interest rates to bring down high inflation, but higher borrowing costs are expected to slow the economy even further.

    Key details: Orders for new cars climbed 0.6% in October. Orders for aircraft rose a sharper 7.4%. The transportation segment is a large and volatile category that often exaggerates the swings in industrial production.

    Outside of transportation, new orders rose a still-decent 0.5%. Bookings increased in every major category except for primary metals.

    The rate of growth in business investment, or core orders, has slowed considerably. however. The figure excludes military spending and the auto and aerospace industries.

    Looking ahead: “Business equipment investment continues to hold up reasonably well in the face of higher borrowing costs,” said senior U.S. economist Andrew Hunter of Capital Economics, but “we doubt that resilience will continue indefinitely.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.50%
    and S&P 500
    SPX,
    +0.59%
    were set to open slightly higher in Wednesday trades.

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  • American workers can expect bigger raises next year, despite a looming recession

    American workers can expect bigger raises next year, despite a looming recession

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    It’s the most wonderful time of the year: corporate budget season. Or in some cases, budget re-adjustment season. 

    It’s the time when companies start to get realistic about what’s ahead for the coming year, particularly during the first quarter. And while that’s already playing out for some companies in the form of layoffs and hiring freezes, there is some good news for some employees heading into 2023. 

    Next year’s raises should be even higher than 2022 payouts, according to WTW’s annual salary budget planning report, based on survey responses from 1,550 U.S. organizations fielded in October. Despite the threat of an impending economic downturn, companies estimate they’ll be increasing their average workers’ salary 4.6% next year, up from the 4.2% the average worker received in 2022. 

    “As inflation continues to rise and the threat of an economic downturn looms, companies are using a range of measures to support their staff during this time,” Hatti Johansson, research director of reward data intelligence at WTW, said in a statement. 

    Boosting salary budgets is proving especially critical as companies continue to struggle to attract and retain employees. Three-quarters of organizations admitted to hiring and staffing issues—a number that’s nearly tripled since 2020. The continued tight labor market is the primary reason about 68% of companies opted to increase salary budgets. 

    But that pressure to pay well is a balancing act. About seven in 10 companies said they spent more than they’d planned to on salary increases and compensation adjustments over the last year. In order to fund pay increases, one in five are planning to raise prices on their products while 12% expect they will need to restructure and reduce staff headcounts. 

    And yet, despite the historic pay increases that organizations have doled out in recent years, compensation has not kept pace with inflation. National wage growth during the third quarter of 2022 increased 4.7% year over year, according to the PayScale Index. Yet, as of the end of September, real wages—which factor in the effect of inflation—are actually down 3% year over year. 

    For organizations struggling to make the math work if workers keep playing musical chairs with jobs and employers, WTW’s Lesli Jennings recommends focusing on the overall employee experience, not just providing pay increases. Two-thirds of companies surveyed have already provided workers with more flexibility and 61% have sharpened their focus on diversity, equity, and inclusion policies and programs. 

    “By focusing on health and wellness benefits, workplace flexibility, careers and DEI, organizations can position themselves as the employer of choice for their current and prospective employees,” Jennings says.

    Our new weekly Impact Report newsletter will examine how ESG news and trends are shaping the roles and responsibilities of today’s executives—and how they can best navigate those challenges. Subscribe here.

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    Megan Leonhardt

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