US Economic News

[BlueKelah]

https://www.washingtonpost.com/business/...story.html

While QT and QE are much talked about, one hidden aspect I just learnt as well is the reverse repos. Its a liquidity draining mechanism the Fed has to drain the QE and Biden's Fiscal stimulus effects. It currently stands at $2.4 trillion and will likely go back to $0 as QT starts its US$95 billion/month rate.

If the reverse repos are as what the article describes, the Fed can actually be gung ho in doing a massive QT to sell off its bond holdings. A US $200 billion QT per month should be possible.

After all, Biden just did another stimulus in student loan forgiveness which adds money into consumer's pockets as many US consumers now do not need to make loan repayments. So all the more the Fed can tighten its money supply strings

Fed can mess around all it wants, end game is the US economy has already gone into a technical recession and major indicators shows housing and other sectors all rolling over.

For QT, FED is effecting that by letting the bonds roll over and also gettign rid of MBS from balance sheet, but their holdings of MBS(mortgage backed securities (or the so called REPOS) hasn't really gone down much at all past couple months. I suspect they have to do that very very slowly otherwise the whole credit system in the housing market will crash and banks will get a shock similar to 2008 lehman situation.

The US economy has been on FED life-support since GFC times. Everytime rate rise or some form of QT happens, reponse in markets has been pretty bad , causing fed to pivot and reverse course. That why market has had this bear rally and many are expecting FED to pivot soon despite high inflation and the Jackson HOle speech. 

This time theres skyhigh inflation complicating policy making.

I am expecting a very hard landing probably in October-Novemer time as thats when the QT which supposed to  ramps to 95billlion this month will be felt abruptly.




rate rise +QT

[weijian]

First, it was the semiconductor companies reporting less ordering of inventories (less optimistic customers). Next the logistics providers are reporting slow-downs that is accelerating.

FedEx flags hit from economic slowdown, shares tumble 15%

FEDEX Corp said on Thursday its fiscal first-quarter results were hit by global volume softness that accelerated at the end of the period, and withdrew its financial forecast as it expects business conditions to worsen in the second quarter.

First-quarter revenue and profit missed Wall Street targets.

Altogether, a worldwide slowdown in economic activity caused shortfalls in FedEx Express revenues of US$500 million and FedEx Ground revenues of US$300 million in the quarter ended Aug. 31, FedEx said.

https://www.businesstimes.com.sg/compani...-tumble-15

[Behappyalways]

As what FedEx said.....slowing down pretty fast

The Atlanta Fed's GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is just 0.5 percent now, down from 1.4 percent on September 7, and down from 2.6 percent on September 1.

Atlanta Fed Slashes Q3 GDP Estimate Despite Surge In Government-Spending
https://www.zerohedge.com/economics/atla...n-weakness

[BlueKelah]

As what FedEx said.....slowing down pretty fast

The Atlanta Fed's GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2022 is just 0.5 percent now, down from 1.4 percent on September 7, and down from 2.6 percent on September 1.

Atlanta Fed Slashes Q3 GDP Estimate Despite Surge In Government-Spending
https://www.zerohedge.com/economics/atla...n-weakness

yeah 3rd Q negative GDP should be confirmed 3rd quarter due to be released end oct, i really want to see how fed try to deny 3quarters of negative gdp plus rising unemployment is not == recession.

[CY09]

Its not the Fed's call if a recession is announced, it is another think tank they need to classify it as recession before it is one.

Fed's agency task is to manage inflation and employment

[BlueKelah]

Its not the Fed's call if a recession is announced, it is another think tank they need to classify it as recession before it is one.

Fed's agency task is to manage inflation and employment

National Bureau of Economic Research is that think tank. and they can have a big lag before calling recession. 

For example fed rates went to 5.25% in july 2006 and held it there till September 2007. they had to start dropping it to 2% over the following year due to increasing unemployment and GDP going negative in 1q2008 and GFC hit in october. It was not until DEC 2008 that the NBER declared a recession. So you can see how useless it is to wait for them to define a recession. Obviously they knew a recession was there since the GDP went negative at the start of 2008 but didnt admit it till the GFC hit in october, and then they took another 2 months before announcing. 

So this round i expect maybe 3rd Q gdp negative then possibly another GFC hit and NBER will then have no choice but to say oh USA is in recession after the elections.

Also comapring to GFC, this round it only took a couple months for FED to scale down QE in November 2021 onwards and already the GDP went negative, of course made worse by the war and sanctions but those were after 1Q2022. Now with QT plus big rate rises, something will break eventually even with all the liquidity sloshing around.

[CY09]

Truth be told, I do agree with you that US is already in a recession with the massive job cuts at their end, Twilio was vicious in its restructuring, culling over 1,000 jobs

The feds actions of hiking interest rates faster than other countries is putting Japan into a currency crisis. There is going to be a trickle down effect where consumerism will be held back which will alleviate inflationary pressure. Will it be a shallow US recession, it is anyone's guess. But I loathe for Jerome Powell to embark on another round of QE, he was the policymaker who is not wise to hike interest rates without looking at liqudity.

My stance still remains that to solve the inflationary pressure, the first to be acted upon is QT. He made a serious mistake of hiking interest rates first before doing QT. IMO, he is not comptent at his job.

[weii]

ICE BofA US Corporate Index Option-Adjusted Spread is currently quite a distance from what it was during the Global Financial Crisis and Covid period in March 2020, suggesting that US economy is rather resilient at the moment.

Similarly, US Household Debt Service Payments as a Percent of Disposable Personal Income is far lower now (lowest at Q1 2021 since 1980) than just before the Global Financial Crisis and the Dot Com Crisis in 2001, suggesting that US household may be financially quite sound at the moment.

[CY09]

https://www.marketwatch.com/story/wharto...=home-page

It dosent rain but it pours. An academic has spoken out against the Fed.

It does seem Jerome Powell has blundered fairly badly, not acting fast enough and when he acted, it was all wrong. he has definitely overstayed his welcome and tenure.

[weijian]

These are really anecdotal evidence that inflation will persist in time to come.

Amazon to cover 100% of college tuition for U.S. hourly employees

Amazon is offering to pay the full cost of college tuition, including books and fees, for its 750,000 hourly U.S. employees.

Amazon is the latest large U.S. company to dangle perks such as education benefits or more pay in light of the competitive job market.

https://www.cnbc.com/2021/09/09/amazon-t...oyees.html

1 year ago, the starting wage was 17usd/hour. itself an increase of 50cents-3usd.

Fast forward to today, the starting wage is 19usd/hour. Granted this is not uniform across all functional groups but I thought this is further anecdotal evidence of wage inflation rising across the board.

Amazon raises hourly wages at cost of almost US$1b a year

AMAZON.COM announced a pay increase for hourly workers in the US that it says will take average starting wage for most front-line employees in warehousing and transportation to more than US$19 an hour.

https://www.businesstimes.com.sg/consume...s1b-a-year