A version of this story first appeared in CNN Business’s Before the Bell newsletter. Not a subscriber?can sign up HereYou can listen to the audio version of the newsletter by clicking the same link.
New York
CNN
—
As the year draws to a close, the market’s focus on inflation appears to be shifting to a new area of concern: unemployment. The Federal Reserve has taken steps to combat inflation by curbing economic growth, but the full extent of the damage to the job market has yet to be seen.
what’s happening: Low unemployment and wage growth may look good for a near-recession economy, but they’re actually proving bad for markets.
Stocks plunged earlier this month after the closely monitored November jobs report showed a resilient labor market. They fell again on Thursday, when weekly figures showed a decline in the number of Americans applying for unemployment benefits, indicating the labor market is still tight.
This is because inflation and unemployment are diametrically opposed in this good-bad economy. Higher wages lead to higher inflation, as firms pass on higher costs by raising the prices of their goods. Investors fear the strong jobs data could prompt Fed officials to accelerate their rate hike campaign.
At the same time, if employment drops sharply, the economy could plunge into a deep recession. This is not a boon to the market either.
Investors want a Goldilocks situation where unemployment drops and rate hikes convince the Fed that the rate hike will cool the labor market and end rate hikes, but not enough to paralyze the economy. It’s a very narrow road to land on.
What the Federal Reserve Wants: Federal Reserve announced economic forecast On Wednesday, it expects the unemployment rate to rise to 4.6% by the end of next year from 3.7% today. The unemployment rate has never been this high outside of a recession. This figure means that about 2 million Americans will lose their jobs (or have to go into the workforce – which is highly unlikely).
Fed Chairman Jerome Powell didn’t chop words last week when he said a strong job market was a big driver of inflation and needed to weaken before rate hikes were over. “There is a demand-supply imbalance in the labor market,” he said, adding that it would take “a considerable period of time” to correct the imbalance.
“If prices aren’t stable, the economy doesn’t serve anyone,” Powell said.
The path to the Federal Reserve’s 2% inflation target is through the job market. “There will be some softening in labor market conditions,” Mr. Powell said. “And I wish there was a completely painless way to restore price stability.
What can happen: Former Daily Show host Jon Stewart tweeted after Wednesday’s meeting.
He may be right, but some economists believe there is hope that if employment softens in the first half of next year, the Fed will pivot soon and rebound with it.
“Employment hasn’t softened significantly yet, but I think it’s likely that the employment data will deteriorate meaningfully and quickly,” said Jeremy Siegel, a professor at the Wharton School of the University of Pennsylvania. weekly commentary Wisdom Tree last week.
Powell expressed optimism Wednesday that a soft landing is still possible and that the labor market is tight enough to withstand rising unemployment without falling into a snowball recession. Investors, on the other hand, are watching job openings very closely.
Former FTX CEO Sam Bankman-Fried plans to appear in court in the Bahamas on Monday to overturn his decision to contest extradition to the United States, a person familiar with the matter told CNN.
Bankman-Fried is expected to agree to extradition to the United States, the person said. Reuters first reported that Bankman-Fried would withdraw his extradition on Monday, his colleague Kara Scannell reports.
It remains unclear when Bankman-Fried will appear in court. If he waives his extradition, he will likely return to the United States soon. Once in state, he will appear before a U.S. judge for an arraignment and bail hearing.
CNN has reached out to Bankman-Fried’s attorneys and the Bahamas Attorney General.
Last Tuesday, federal prosecutors for the Southern District of New York indicted Bankman-Fried with eight counts of fraud and conspiracy. Bankman-Fried said he could face up to 115 years in prison if convicted on all eight counts of his charges against him, but he would not receive the maximum sentence. prize.
Additionally, U.S. market regulators have filed civil lawsuits against Bankman-Fried for defrauding investors and customers, stating that he is “one of the safest buildings in cryptocurrencies while telling investors that , built a house of cards based on deception.”
Bankman-Fried remained in the Bahamas, home of FTX, and was arrested last Monday night. He was arraigned on Tuesday and a Bahamas judge denied his bail request as a flight risk.
Stores have been drowning in a ton of merchandise this holiday season, and they’re continuing to slash discounts in the run-up to Christmas.
My colleague Parija Kavilanz reports that trading is becoming more and more active.
The Saturday before Christmas, also known as Super Saturday, is typically the busiest shopping day during the November-December gift-buying season. Christmas is Sunday, Christmas Eve is the Saturday before, and this year’s Super Saturday is December 17th. More than 158 million consumers are estimated to shop that day, according to the National Retail Federation.
The NRF estimates that shoppers are only halfway through their gift purchases so far. With Christmas less than a week away and shipping deadlines approaching, people are under pressure to buy even more.
It is also costly for retailers to remain in an oversupply of goods for too long. Retailers who store their products in their own warehouses and distribution centers have limited working space and room to accommodate excess inventory. But costs add up when more space is needed due to a lingering oversupply that can’t be quickly relieved.
Also, unsold items lose their value over time. This is especially true for fashion clothing, as savvy shoppers won’t buy last year’s styles if the trend has passed.
Well ahead of the last full weekend before Christmas, stores were already offering 50% to 60% off discounts and working on free shipping for online orders this year.
Ross Steinman, Professor of Consumer Behavior at Widener College in Chester, Pennsylvania, said:
“Retailers are very nervous,” he said. “They know the time is ticking and they must make the most of every opportunity to get consumers to buy.”
