There’s a new term to describe this job market’s vibes
Despite a strong jobs report for November, the job market vibe is mixed. The number of Americans reporting they want a new job is at a 10-year high, but many feel they have nowhere to go.
Gallup is calling it the “Great Detachment,” years after the “Great Resignation” took hold. In workplaces around America, employees feel stuck.
“People are aware that it’s harder to find a job than it was a few years ago, and that if they have a job, their layoff risks are actually very low, so it’s worth holding tight, not worth jumping ship,” said Guy Berger, director of economic research at Burning Glass Institute. “Simultaneously with that, I think there’s some evidence people are much more frustrated in their current jobs.”
According to a recent Gallup poll, more than half of U.S. workers say they are watching for or actively seeking a new job, a 10-year high. Meanwhile, the share of people who report being “extremely satisfied” with their work is 18%, a 10-year low.
“I think until hiring starts picking up a little bit, which may happen next year, or at least stops falling, I think people are going to feel a little like, ‘I want to get out, I want to find something else, but I can’t,’” Berger said.
While employers may be relieved the age of high turnover is over, Gallup warns this period of detachment can come with productivity concerns and future talent loss. They say employees are more likely to resist or be indifferent to organizational changes.
An interesting thing happened when the “Great Resignation” kicked off. The connection employees felt to their workplace’s mission or purpose plunged, and there’s still no sign of recovery, Gallup data shows. Less than half of employees say they even know what’s expected of them at work. But still, employees are hanging on.
“There’s probably some chunk of people that are like, ‘You know what? My pay has gone up. I’m very happy at my job. I’m at low risk of layoffs … They might say this is a really good labor market,” Berger said. “And then you have people in the middle that have a job, they’re at low risk of being laid off, but might want something different. And there’s not a lot of stuff out there. And for them, this is a good, but not great, job market.”
“And that’s probably the biggest chunk of people out there. They’re not worried, but they would like something else, and there’s not something out there, and maybe they’re growing increasingly frustrated. As long as layoffs don’t pick up, they’re in a decent, cushy spot,” he continued.
And then there are people who are out of the labor force. The Labor Department says the unemployment rate is 4.2%. It’s historically on the lower side, though much higher than a year ago.
“The mix of unemployment has gotten a little worse,” Berger explained. “We have more people that are permanently laid off than we did before, and fewer people that are quitters.”
Berger said for those who can’t find a job, the market is more reminiscent of the early 2010s, when the Great Recession still had a grasp on the economy.
“And I think in some senses, maybe more isolating, because these people that are unfortunate enough to have been laid off and are having trouble getting hired, they keep hearing, ‘Oh, this is a good labor market, that employment rates are low, etc,’ and their experience is quite different,” Berger said.
Why November’s 227,000 jobs added is not as impressive as it seems
The U.S. jobs market beat expectations in November, adding 227,000 jobs after a bleak October report driven by hurricanes and strikes. At the same time, the unemployment rate ticked up to 4.2% from 4.1% in October, according to Labor Department data.
Payroll employment has averaged 186,000 jobs added per month over the last 12 months. While November’s numbers beat the 12-month average, Burning Glass Institute’s Director of Economic Research Guy Berger warns it may not be as impressive as it looks.
“I think this is a pretty ho-hum labor market,” Berger said. “We saw a big gain in jobs. It was expected because we had a bunch of striking workers at Boeing coming back to work, about 40,000 of them, and on top of that, we had a big hurricane last month.”
“You abstract from that noise of all those people coming back to work, and the monthly job gains are probably not very impressive right now,” he added. “The direction is definitely lukewarm.”
Employment in health care and hospitality drove much of the job gains, up 54,000 and 53,000 jobs for the month, respectively. Meanwhile, the retail trade lost 28,000 jobs in November.
The transportation equipment manufacturing sector added 32,000 jobs in November, reflecting workers returning from strike, the Bureau of Labor Statistics said.
BLS also revised up jobs data for the past two months. September was revised up by 32,000, from 223,000 jobs added to 255,000 jobs added. October was revised up by 24,000, from 12,000 jobs added to 36,000 jobs added.
BLS said the monthly revisions are a result of additional reports received from business and government agencies since the last published estimates, along with recalculating seasonal factors.
The Federal Reserve will use this latest jobs report to guide the committee’s next interest rate decision in mid-December. Right now, markets are heavily favoring a 25-basis-point cut.
Berger said the Fed is in an uncomfortable spot right now because the data from its two mandates, price stability and maximum employment, are both a little less clear as to what direction they’re heading.
Economy may reel from hurricanes for 6+ months, Fed president says
Recovery efforts for Hurricane Helene are just getting started in the southeastern U.S., as Hurricane Milton makes landfall in Florida. The back-to-back disasters less than two weeks apart will have a lasting impact on the economy, Atlanta Federal Reserve Bank President Raphael Bostic warned during the week of Oct. 6.
Bostic said hurricane season impacts could evolve over the next six months or more and is something the Fed will closely track. As Milton’s path becomes more clear, damage estimates range from tens to more than $100 billion in losses. Private insured losses from Helene are around $8 billion to $14 billion, Moody’s estimates.
“Hurricane Helene is by far the most impactful event of the current 2024 hurricane season thus far, though this may quickly change with Major Hurricane Milton due to impact Florida in the coming days,” Moody’s Chief Risk Modeling Officer Mohsen Rahnama said.
“The hurricane is going to have a substantial effect on numbers coming out of the entire Southeast. We’re going to see a very large number of people who are temporarily laid off,” Harris said. “It’s hard to know exactly how long that’s going to last…The swath of the hurricane [Helene] was quite broad, and it hit a lot of population centers. So I think that is going to have a meaningful effect.”
Supply chain shocks are also expected post-hurricanes, especially with food, medicine and gas, as people rush for supplies. The storms hinder transportation routes which bottleneck delivering goods. In addition, Milton has the potential to damage major port infrastructure in Tampa and hinder trade routes nationally and internationally.
“When we think about a huge, horrific natural disaster with a huge human toll, we tend to focus solely on the negative sides of the economic impact – and for obvious reasons,” RiverFront Investment Group Chief Investment Strategist Chris Konstantinos told Straight Arrow News. “The cold, hard economic fact is [there are] gives and takes of what happens after a catastrophe like this. There are often two sides of it.”
“There’s going to be a huge amount of infrastructure spend,” Konstantinos added. “And so for companies, industry sectors that are construction related, sometimes these things can actually be a huge stimulus of sorts in those areas. And that may, at least regionally, actually increase some of the manufacturing data that we’re seeing.”
Konstantinos also said despite massive insured losses in the short term, insurance companies can benefit from major storms in the long run because they can lock in rate hikes. In Florida, home insurance rates are already the highest in the nation, with homeowners paying an average of about $1,000 per month for coverage that does not include flood insurance.
Markets convinced Fed will cut by 25bps after ‘very, very good’ jobs report
The next Federal Reserve rate decision may still be one month away, but traders are increasingly confident the Fed will cut by 25 basis points in November after seeing September’s jobs report. In new data out Friday, Oct. 4, the Bureau of Labor Statistics reported the U.S. economy added a surprise 254,000 jobs in September, 104,000 jobs more than economists anticipated, while the unemployment rate lowered to 4.1%.
The Fed cut its benchmark interest rate for the first time in four years in September. After seeing inflation slow closer to its 2% target and unemployment on the rise, Fed Chair Jerome Powell declared, “The time has come for policy to adjust.”
The declaration followed a weak July jobs report, showing unemployment rising to 4.3% and employers adding 114,000 jobs, much lower than the 12-month average.
In the latest data, the BLS revised up July’s data to 144,000 jobs added. The Bureau also revised August’s numbers up to 159,000 from 142,000.
“We were all sort of wringing our hands, and we thought the labor market was a lot weaker than we had expected,” former Acting and Deputy Labor Secretary Seth Harris told Straight Arrow News of July’s jobs report. “And of course, after this survey was taken, the Federal Reserve cut interest rates by 50 basis points, which is intended to strengthen the labor market.
“And then it turns out that, from this report, the labor market actually was a little bit stronger than we thought it was,” Harris continued. “Now, that’s not to say the Federal Reserve got it wrong. I don’t think they got it wrong. I have been calling for rate cuts for about six months now…But what this tells us is the labor market is very resilient. It is still quite strong. It is doing well.”
Harris, who is now a distinguished professor of practice at Northeastern University and a senior fellow at the Burnes Center, said he still believes the Fed should move forward with a 25-basis-point cut at their next meeting in November.
The market agrees.
In the 15 minutes following the release of September’s jobs data, the probability of a 25-basis-point cut in November went from 68% to 87%, according to CME FedWatch. Within two hours of the data release, that skyrocketed to 97%.
“I just think 25 basis points makes a lot of sense,” Harris said on Straight Arrow News’ live broadcast following the jobs report. “There’s some volatility in the labor market. That is the big story here, is we thought things weren’t going so well [when] they were actually going moderately, not great. This is, I would say, a very, very good number.”
“At the end of the day, they’re also trying to set a tone for the economy. Twenty-five basis points is a gentle nudge that we’re moving towards growth: Everybody loosen up a little bit. Start spending, start hiring, start moving a little bit more, not too fast, but a little bit more,” he said of the Fed’s desired rate-cut messaging.
Powell says Federal Reserve is in no ‘hurry to cut rates quickly’
Experts say the greatest threat to the economy in the next year isn’t the upcoming election or even conflict in the Middle East or Ukraine. More professional forecasters say a monetary policy mistake by the Federal Reserve poses the greatest downside risk.
This month, the Federal Reserve adjusted its policy rate for the first time in 14 months. The Fed cut its benchmark interest rate by 50 basis points in a supersized kickoff to the rate-cutting cycle. But in a speech Monday, Sept. 30 in Nashville, Fed Chair Jerome Powell essentially said not to read too much into the size of that first cut.
“This is not a committee that feels like it’s in a hurry to cut rates quickly. It’s a committee that wants to be guided,” Powell said. “Ultimately, we will be guided by the incoming data, and if the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower. And that’s really what’s going to decide it.”
We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.
Federal Reserve Chair Jerome Powell
The Fed’s goal is a soft landing, where they raise rates high enough to bring down inflation without triggering a recession. So far, they’ve reached the rate-cut part of the equation without a recorded recession.
“Our design overall is to achieve disinflation down to 2% without the kind of painful increase in unemployment that has often come with these inflation processes,” Powell said during the National Association for Business Economics annual meeting. “That’s been our goal all along. We’ve made progress toward it. We haven’t completed that task.”
The Fed’s preferred inflation gauge is down to 2.2%, a hair above its 2% target, while core inflation is higher at 2.7%. Meanwhile, the unemployment rate climbed to 4.2% from the 3.4% low hit in January and April 2023.
Federal Reserve board members and bank presidents project unemployment will rise to 4.4% by the end of this year and next, while core inflation won’t hit the 2% target until 2026.
While unemployment is higher than the modern-era lows experienced not too long ago, Powell rebuffed worries about the weakening labor market.
“Just take the current situation,” he said. “What you see is solid growth in the economy and what you see is a solid labor market. So in a way, the measures we’re taking now are really due to the fact that our stance is due to be recalibrated, but at a time when the economy is in solid condition, that’s what we’re doing. We’re recalibrating policy to maintain the strength in the economy, not because of weakness in the economy.”
The Fed will meet two more times this year, with its next 2-day meeting right after the election.
Right now, markets are leaning more toward a 25-basis-point cut rather than a 50-basis-point cut in November, according to CME’s FedWatch. Assuming those in the 25-basis-point camp are correct, that would bring the target range down to 4.5% to 4.75%.
Traders are then projecting the rate will drop down to between 4% and 4.25% following the December meeting, which would equate to a 50-basis-point cut. That’s higher than the 4.4% the Fed itself is projecting.
‘Recession pop’: Can great music signal an economic downturn?
It’s tough to identify if the economy is in a recession. Economists toil over economic data to try to find the most accurate indicators. Gross domestic product and unemployment numbers are great data points, but what does the state of pop music tell us about economic conditions?
Traditionally, two consecutive quarters of negative growth is the preferred method to tell a recession took place. When it comes to unemployment, the Sahm Rule is triggered when the three-month moving average of the unemployment rate is half a percentage point above the 12-month low. The McKelvey Rule is essentially the same but is triggered when the unemployment rate is 0.3 percentage points above the 12-month low. The inverted yield curve, when short-term Treasury yields exceed long-term yields, is also a recession indicator.
Exploring Recession Pop: A Journey Through Music and Hardship * Recession Pop, characterized by its upbeat and escapist dance music, emerges during times of economic turmoil as a form of distraction and catharsis. * This phenomenon is not new, with historical examples dating back to the Great Depression and recurring during subsequent periods of hardship. Pre-Recession Examples: * Dance music as a form of escapism can be traced back to the Great Depression era, where swing and jazz provided solace amidst economic struggles. * In the UK, the Winter of Discontent in 1978/1979 saw the rise of ABBA’s albums, offering a similar escape during a period of social and economic unrest. The Great Recession (2000s): * The late 2000s Great Recession saw a surge in dance-pop music, offering a distraction from economic woes. * Artists like Black Eyed Peas, Rihanna, Katy Perry, and Lady Gaga dominated the charts with infectious hits. * Songs like Flo Rida’s “Club Can’t Handle Me” provided a sense of camaraderie and hope amid uncertainty, embodying the spirit of Recession Pop. * Dance music acts as a survival mechanism, providing a temporary reprieve from the harsh realities of the world. Post-Pandemic (2020s): * The COVID-19 pandemic brought about a resurgence of dance-pop and disco music, echoing the Recession Pop trend. * Artists like Dua Lipa, Doja Cat, and Beyoncé spearheaded this revival, offering upbeat and nostalgic tunes during difficult times. * Sample-heavy tracks and uplifting beats became prevalent, serving as a source of comfort and nostalgia for listeners. * Despite the challenging circumstances, the music industry continued to thrive, providing a beacon of light in dark times. * Recession Pop reflects the resilience of music as a form of escapism and catharsis during times of hardship. * Despite economic downturns and global crises, dance-pop music remains a source of joy and unity for listeners worldwide. * As we navigate through uncertain times, the enduring popularity of Recession Pop serves as a reminder of the power of music to uplift and inspire in the face of adversity. #JoesAlternativeHistory#RecessionPop#MusicHistory#GreatRecession#LadyGaga#2000sPop#BlackEyedPeas#BoomBoomPow#WinterOfDiscontent#GreatDepression#DuaLipa#Beyonce#DojaCat#ABBA#PopCulture#PopCultureHistory#recession
But then there is the notion that “pop music is brilliant” when the economy is about to face serious problems. That is where the idea of “recession pop” comes into play.
What is recession pop?
In short, recession pop is seen as the Top 40 hits that are released during an economic downturn. The most clear example was during the Great Recession.
“I would define recession pop from the years just leading up to the recession, so the end of 2007 probably at least through 2012,” Charlie Harding, an NYU Professor and co-host of the podcast “Switched on Pop,” said.
Meanwhile, Joe Bennett, a musicologist and professor at Berklee College of Music, said it’s a label that applies “to a particular body of work, which I would broadly describe as super cheerful dance floor bangers that came out sometime between 2008 and 2011.”
Super cheerful dance floor bangers that came out sometime between 2008 and 2011.
Musicologist Joe Bennett describing recession pop
Since it is not a particularly scientific indicator, Harding said the recession pop label could even go all the way into 2014 because “lots of people were still really feeling that recession well into the early 2010s.”
Is recession pop a real thing?
It’s hard to officially quantify whether pop music really reflects the economic times, but both Harding and Bennett said the interpretation is often up to the listener.
“You can find what we might say are reflective songs, where the dark times people are experiencing are indeed dealt with within the song lyric,” Bennett said. “And we might also find what you might call escapist songs. ‘What the heck, let’s party.’”
“So songwriters are not necessarily social commenters, but like all of us, everyone who creates popular culture, they are living in that culture at the time they are making the object and the market that is the pop music fans who are buying or streaming the single are also in that social context and liking what they like in the context that they’re in,” he continued.
“As much intention as a songwriter might have, whatever they might intend, the listener is going to take it and do what they want with it,” Harding added. “A great example of listeners completely misusing a song would be ‘Hey Ya’ by OutKast, which is one of the most requested songs at weddings, and yet the song is about relationships that never last.”
“The recession affected different people very differently,” Harding said. “If you lost your home, you’re gonna remember what that song is on the radio when you had to pack up and leave. It’s really different than maybe someone for whom their family got through it okay, and they’re just like, ‘I just love my recession pop bops.’”
The history of popular music is littered with songs known as “party anthems.” But the recession pop era may have had less economic-based reasons for those hits.
“I think there’s ways in which the music was great, and I think there’s other ways in which it feels a little bit reductive,” Harding told Straight Arrow News. “We’re talking about a period in which the digitization of music was fully taking over.”
Despite the idea that recession pop is specific to the Great Recession, Bennett points to music that came out amid the Great Depression to illustrate how music reflects the times.
“Bing Crosby’s ‘Brother Can You Spare a Dime?’: it was a big hit in the early ’30s, and that’s a song about a returning war veteran who’s homeless and looking for money,” he said. “In 1933, Ginger Rogers has a hit with ‘We’re in the Money.’ Is that sort of an ironic title? It’s certainly a very cheerful lyric. Maybe it’s a fantasy about having money, because a lot of people wouldn’t have in the U.S. in the early 30s.”
Nostalgia effect
With all the evidence to support the idea of recession pop, it’s hard to say one era’s music is better than another, which can make it a particularly difficult economic indicator to nail down.
“If recession pop is a nostalgic way of looking back and trying to make sense of this period of total dislocation and fragmentation, all the power to listeners to call this stuff recession pop, even if it just happened to be the upbeat, fun thing that was occurring at that time,” Harding said. “People are trying to make this connection to music that happened 10 to 15 years ago.”
There is good reason for music dubbed recession pop to be resonating with people in their 30s that may have nothing to do with the quality of the tunes or state of the economy.
“It fits with the general cycle of popular music nostalgia,” Bennett said.
Bennet added most people believe the best music was released when they were 17 years old.
“A lot of the psychology research into nostalgia suggests that it works on something like a 15-year cycle,” Bennet continued.
“It’s more of an after-the-fact analysis, which is a fun and useful way of creating playlists: being nostalgic, digging into our memory, perhaps making sense of an era that was really dark and challenging for people and making light of it after the fact,” Harding said.
Pop music today
While recession pop is likely just a label put on music after the fact, it gives us an opportunity to look at what makes a hit song and how that has changed in the last 15 years.
“I think what makes a great pop song is accessibility,” Bennett said. “Particularly if you’re releasing a single, you want it to appeal to millions of people.”
“It has to have an amazing concept,” Harding added. “[It] has to have a memorable hook, and it has to capture the zeitgeist.”
Harding likens making a great pop song to winning the lottery. Many wonder how some artists have been able to hit the jackpot over and over again. But what makes a great pop song has changed over time. Today, more and more records are being discovered on short-form video apps like TikTok and Instagram.
“TikTok is a much faster-moving medium so people need to grab their audience’s attention to stop them from vertically scrolling onto the next thing,” Bennett said of the app that broke artists like Lil’ Nas X. “As we know from TikTok, that sort of meme community will often seize on a particular part of the song, a particular audio excerpt, and use that to make its meme, its dance routine, whatever it is.”
But even though artists need to get to the hook quicker than ever before, Harding said they have more to say than ever before.
“There is this expectation that we are more giving of ourselves in our lyrics today,” Harding said. “And so I think of an artist like Charlie XCX, who, on ‘Brat,’ talked about how she wanted to write lyrics that were as if she was just texting a friend. And this is the album that has broken through for her, because some of these lyrics, they don’t have these perfect rhymes. They have the perfect imperfections.”
And there’s no bigger artist giving themselves to their music than Taylor Swift.
“I think on a lot of metrics, Taylor Swift is the biggest artist to have ever lived, in terms of the longevity of her career; the fact that she is what should be a late-stage career artist, and yet she is at her peak,” Harding said. “She has had multiple peaks that just keep getting bigger and bigger and bigger.”
Meanwhile, Bennett pointed out that Swift herself was not immune to the recession pop movement.
“Her two significant albums at that time would have been ‘Fearless,’ which came out in 2008 and then ‘Speak Now,’ which originally came out in 2010,” Bennett said. “And of course, both of those contain a whole bunch of songs in that vein: ‘Love Story,’ ‘You Belong with Me,’ ‘White Horse,’ ‘The Story of Us.’”
In the end, while there may not be a deliberate intention to make music that makes listeners feel good or sad during tough economic times, it’s clear music resonates with people and reminds them of those snapshots in time.
Target, other retailers hiring tens of thousands of seasonal workers
Target and other retailers are hiring tens of thousands of seasonal workers for the holiday season as sales are likely to grow at a slower rate this year. With the unemployment rate at 4.2%, jobseekers hope these opportunities will make it the most wonderful time of the year.
Burlington Stores, which has over 1,000 locations across the U.S., is looking to hire 1,500 full-time seasonal warehouse associates and 23,000 part-time seasonal employees, including cashier and retail associates.
Bath & Body Works is recruiting more than 30,000 new seasonal workers for its 1,800 retail stores and 2,700 distribution centers.
Target is planning to hire 100,000 seasonal employees for its nearly 2,000 stores and over 50 supply chain facilities.
According to consultancy firm Bain and Company, retailers are planning to do similar levels of seasonal hiring as last year. Target said more than half of its seasonal team members in 2023 were offered permanent positions. But what is different than last year is how much shoppers will be spending on the holidays.
Holiday sales are predicted to rise between 2.3 and 3.3%, for a total of $1.59 trillion between November 2024 and January 2025. This is down from last year’s 4.3% growth, which totaled $1.54 trillion.
As shoppers turn to online deals, Deloitte reports e-commerce will be a key driver in overall retail sales growth this season. Online sales are expected to bring in between $289 billion and $294 billion.
Reuters reports the holiday shopping season typically accounts for more than half of U.S. retailers’ annual revenue.
August jobs report misses with 142,000 jobs added, unemployment at 4.2%
The U.S. economy added fewer jobs than anticipated in August, but the unemployment rate did come off July’s surprise 4.3%. According to the latest data from the Bureau of Labor Statistics (BLS), the U.S. added 142,000 jobs in August when economists expected around 165,000. The month’s unemployment rate of 4.2% came in as expected.
In July, preliminary data showed 114,000 jobs added and 4.3% unemployment, triggering a recession indicator known as the Sahm Rule.
In Friday’s release, the BLS revised down July’s numbers to just 89,000 jobs added for the month. It also revised down June’s numbers by 61,000 jobs, from 179,000 to 118,000 jobs added. In total, jobs added in June and July are 86,000 lower than previously reported by the Labor Department.
This is in addition to a massive downward revision for the 12 months ending in March. According to Labor Department revisions, the U.S. economy added 818,000 fewer jobs than previously reported over that time. Therefore, while the labor market remained strong over those 12 months, it did not perform as well as the initial data indicated. The Labor Department will not finalize these estimates until February 2025.
“It is an indication that the Fed really has to step in at this point,” Business Insider Deputy Editor Bartie Scott told Straight Arrow News. “It’s under some pressure that maybe it has waited too long, and I think those numbers potentially back that up.”
“The interest rate hikes and keeping them steady for a year has really slowed down the labor market,” Scott continued. “And those numbers are showing us that maybe it started before we knew and it’s slower than we knew.”
The Federal Reserve is expected to cut its benchmark interest rate in its September meeting, the first such cut since March 2020. The Federal Open Market Committee has been holding the target range at a two-decade high of 5.25%-5.5% for more than a year in an attempt to bring down inflation.
At a speech in Jackson Hole, Wyoming, in August, Fed Chair Jerome Powell said it was time for policy to adjust after “unmistakable” cooling in the labor market. The Fed makes its next rate decision on Sept. 18.
Americans surprise with confidence in economy though job concerns grow
Americans are more confident in the economy than analysts expected and that confidence has been growing throughout the summer. The Conference Board released its consumer confidence survey for August, with a 103.3 rating, beating the 100.7 expected and exceeding July’s 101.9 surprise.
It’s the highest confidence rating in months, but there’s more behind the headline number.
Conference Board Chief Economist Dana Peterson said that while consumers are more positive about business conditions now and in the future, they’re also more concerned about the labor market.
In July, unemployment rose to 4.3%. In August, fewer people told the Conference Board jobs were “plentiful” while slightly more said jobs were “hard to get.” Fewer people also expected their incomes to increase this year, while more expected their incomes to decrease.
That said, Americans’ inflation expectations dropped to their lowest level since March 2020. That comes as the Federal Reserve’s own inflation expectations are getting more rosy, as Fed Chair Jerome Powell addressed in his Jackson Hole speech last week.
“Inflation is now much closer to our objective, with prices having risen 2.5% over the past 12 months,” Powell said. “After a pause earlier this year, progress toward our 2% objective has resumed. My confidence has grown that inflation is on a sustainable path back to 2%.”
“He is confident now, not just waiting for more confidence, but confident that inflation is moving lower,” Central Bank Central Editor-in-Chief Kathleen Hays emphasized in an interview with Straight Arrow News. “It’s heading for that 2% target. And the concern is unemployment.”
Powell’s speech signaled a likely rate cut coming in September, and Americans are expecting interest rates to decline. That expectation, however, hasn’t made Americans rethink buying homes. Average responses over the past six months show plans to purchase homes are at a new 12-year low. But Americans are planning more smaller purchases. Buying plans for cars, refrigerators, TVs, washing machines, smartphones and laptops all increased.
Overall, Americans are feeling better about their family’s financial situation moving forward. They don’t see the results of the election causing much volatility in the economy and recession expectations are unchanged in August and well below 2023’s peak.
But confidence can be drawn along income lines. Those making less than $25,000 are feeling less confident overall, while those making more than $100,000 are the most optimistic.
Businesses, investors and the Federal Reserve all pay close attention to measures of consumer confidence. It’s a window into how much buying power Americans are comfortable yielding, and household spending accounts for more than two-thirds of the U.S. economy.
‘The time has come for policy to adjust’: Powell says rate cuts imminent
For the first time in definitive terms, Federal Reserve Chair Jerome Powell said it is time to cut rates after witnessing “unmistakable” cooling in the labor market. Powell made the remarks Friday, Aug. 23, at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming.
“The time has come for policy to adjust,” Powell said. “The direction of travel is clear and the timing and pace of rate cuts will depend on incoming data, the evolving outlook and the balance of risks.”
“We will do everything we can to support a strong labor market as we make further progress toward price stability with an appropriate dialing back of policy restraint,” Powell added. “There is good reason to think that the economy will get back to 2% inflation while maintaining a strong labor market.”
Despite the optimism, the labor market is undoubtedly slowing. In July, the unemployment rate spiked up to 4.3%, triggering a recession indicator. And the latest Labor Department revisions showed the Bureau of Labor Statistics overestimated job growth by 818,000 for jobs added throughout the year ending in March.
“The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labor market conditions,” Powell said.
Given the remarks, markets are practically using permanent ink to mark a September rate cut. The Federal Open Market Committee, which sets the overnight lending rate, will meet three more times this year. Powell left the size and pace of rate cuts open to interpretation.