Tag Archives: Recession

28% surge in individual income taxes this year

Rev 6:5,6 NCV When the Lamb opened the third seal, I heard the third living creature say, “Come!” I looked, and there before me was a black horse, and its rider held a pair of scales in his hand. Then I heard something that sounded like a voice coming from the middle of the four living creatures. The voice said, “A quart of wheat for a day’s pay, and three quarts of barley for a day’s pay, and do not damage the olive oil and wine!”

Important Takeaways:

  • Americans paying most income taxes ever
  • 28% surge in individual income taxes this year
  • Another spurt in 2025 when the Trump tax cuts expire
  • The numbers were higher than the agency predicted last year, and as the economy recovers following the virus crisis, they are expected to go further

Read the original article by clicking here.

Everyday items, skyrocketing prices…could Recession be next?

Rev 6:6 NAS And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • Record gas prices are pushing up everyday costs, dampening economic recovery
  • Americans are facing sticker shock at gas stations across the country, but surging global energy costs are rippling through the economy in other ways, too:
    • Airlines are scaling back on flights. Truckers are adding fuel surcharges. And lawn care companies and mobile dog groomers are upping their service fees.
  • The average price for a gallon of gas jumped 13% this week, according to AAA. Overall gasoline prices are up 38% from a year ago, according to the Labor Department’s latest inflation figures.
  • Goldman Sachs this week lowered its forecast for annual U.S. economic growth, citing “higher oil prices,” and said there is a risk the United States will enter a recession in the next year.

Read the original article by clicking here.

Higher cost and lower standards of living a harbinger of a coming recession

Rev 6:6 NAS And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • Retail expert warns recession just ‘around the corner’
  • You’ve go to 16.6% this year versus the 10.6, the reference the cost of every return is $33 on a $50 item, the profit out of $50 items, only $1. So the retailers are losing a fortune. So that means higher prices and lower standards of living for consumers. And that with the McDonald’s news, today is a harbinger of the recession coming more quickly around the corner.

Read the original article by clicking here.

Brazil in recession as drought, inflation and interest rates bite

By Marcela Ayres and Camila Moreira

BRASILIA (Reuters) -Brazil’s economy contracted slightly in the three months to September, government data showed on Thursday, as surging inflation, steep interest rate hikes and a severe drought triggered a recession in Latin America’s largest economy.

The 0.1% decline in Brazil’s gross domestic product (GDP) in the third quarter, reported by official statistics agency IBGE, was below a median forecast for zero growth in a Reuters poll.

Brazil’s economic rebound from the worst of the COVID-19 pandemic has sputtered as inflation surged into double digits, forcing the central bank to raise borrowing costs aggressively despite the downturn.

Economists have said that the stubbornly high levels of inflation in Brazil have steadily eroded consumers’ purchasing power, proving a drag on the economy.

Some analysts said Thursday’s weak data may discourage the bank’s monetary policy committee, called Copom, from an even larger interest rate increase at its December meeting.

“Against this backdrop, we no longer see Copom upping the pace of monetary tightening next week,” William Jackson, chief emerging markets economist at Capital Economics, told clients in a note, forecasting another rate increase of 150 basis points.

Big rate hikes from the central bank, whose autonomy was written into Brazil’s constitution this year, are one more headwind for a weak economy, which is weighing on President Jair Bolsonaro’s popularity as he prepares to seek reelection in 2022.

Revised data showed a 0.4% drop in the second quarter, worse than the 0.1% decline reported previously. Two straight quarters of contraction meet the definition of a recession.

Unusually dry weather this year has also hurt key Brazilian crops such as corn and coffee. Vanishing reserves at hydropower dams drove up electricity costs, adding to price shocks.

Agricultural production fell 8.0% in the third quarter, while industrial output was flat and services advanced 1.1%.

Brazil’s auto industry has struggled to ramp up production amid a shortage of components such as microchips in global supply chains. Shortages have also hurt manufacturing in Mexico, whose economy contracted more than expected in the quarter.

WORSE TO COME

Some economists are warning of a deeper downturn next year.

The market outlook for 2022 economic growth has fallen from 2.3% in June to less than 0.6% in the latest central bank poll of economists, released on Monday.

Brazil’s Economy Ministry dismissed that consensus in a statement on Thursday, reaffirming its forecast of economic growth above 2% next year and pointing to recent job creation data as evidence of a resilient recovery.

Brazil’s unemployment rate fell to 12.6% in the third quarter from 14.2% in the prior quarter, data showed this week, hitting the lowest point since the beginning of the pandemic.

“The government has an obvious bias to overestimate (growth) as long as possible. But there comes a point when you can’t,” said José Francisco Gonçalves, chief economist at Banco Fator.

Compared to the third quarter of 2020, Brazil’s economy grew 4.0%, IBGE data showed, below a median forecast of 4.2% growth.

(Reporting by Marcela Ayres in Brasilia and Camila Moreira in Sao Paulo; Writing by Brad Haynes; Editing by Bernadette Baum, Daniel Flynn and Richard Chang)

 

Fed officials say high inflation weighing on consumers and needs to be controlled

By Jonnelle Marte

(Reuters) – Federal Reserve officials said on Tuesday they are vigilant of the ways that higher inflation can affect U.S. households and dampen consumer sentiment and want to get it under control.

While wages are rising for some workers, consumer sentiment is down to a “level that you might associate with a recession,” said Richmond Fed President Thomas Barkin, citing the consumer sentiment survey from the University of Michigan.

“I think that’s very much because of the impact that prices have on people,” including those who spend a significant part of their pay on food and gas, Barkin said during a virtual panel organized by the Fed.

Atlanta Fed President Raphael Bostic said the central bank aims for low inflation because it doesn’t want households to stress about rising prices. “That’s one of the reasons why, you know, I think you’ve heard from all of us concerns about the higher levels of inflation that we’ve seen recently and the need to get that back under control,” Bostic said.

The Fed this month began to reduce the pace of its monthly asset purchases, the first step in scaling back the support offered to the U.S. economy during the pandemic. Fed officials would like to wind down the bond purchases before they raise interest rates.

Some policymakers say the Fed should be prepared to act in case inflation lasts longer than expected. St. Louis Fed President James Bullard, speaking earlier in the day, said the Fed should “tack in a more hawkish direction” over its next couple of meetings to be prepared in case inflation does not ease.

“If inflation happens to go away we are in great shape for that. If inflation doesn’t go away as quickly as many are currently anticipating it is going to be up to the (Federal Open Market Committee) to keep inflation under control,” Bullard said on Bloomberg Television.

(Reporting by Jonnelle Marte and Howard Schneider; Editing by Chizu Nomiyama)

Debt ceiling impasse? Fed’s ‘loathsome’ game plan for the ‘unthinkable’

By Ann Saphir

(Reuters) – Treasury Secretary Janet Yellen says failure to raise the U.S. debt limit could lead to the unthinkable: a default on government payment obligations. That’s an outcome the White House on Friday warned could plunge the economy into recession.

If the impasse in Congress over the $28.5 trillion debt limit isn’t resolved before an October deadline, what would the Federal Reserve – the backstop for U.S. financial markets as the lender of last resort – be prepared to do?

As it turns out, Fed Chair Jerome Powell may already have something of a game plan. The country faced a similar crisis over the debt limit in 2011 and again two years later, and at an unscheduled October 2013 meeting, Fed policymakers – including Powell, who was then a Fed governor, and Yellen, who was the Fed’s vice chair – debated possible actions in response.

The plan included a process for managing government payments, given the Fed’s expectation that Treasury would prioritize principal and interest but would make day-by-day decisions on whether to cover other obligations.

Changes to the Fed’s supervision of banks were also planned. Banks would be allowed to count defaulted Treasuries toward risk-capital requirements, and supervisors would work directly with any bank experiencing a “temporary drop in its regulatory capital ratio.” The U.S. central bank would also direct lenders to give leeway to stressed borrowers.

Policymakers also mapped out an approach to managing market strains and financial stability risks stemming from a technical default.

They readily agreed to some measures, including expanding ongoing bond purchases to include defaulted Treasuries, lending against defaulted securities and through the Fed’s emergency lending window, and conducting repurchase operations to stabilize short-term financial markets.

Other actions sketched out in briefing notes and during the meeting were more controversial, including providing direct support to money markets by buying defaulted Treasury bills, or simultaneously selling Treasuries that are not in default and buying ones that are.

Powell described these approaches as “loathsome.”

“The economics of it are right, but you’d be stepping into this difficult political world and looking like you are making the problem go away,” he said at the time.

Powell added, however, that he wouldn’t rule it out in a catastrophic situation, a point also made by several of his colleagues, including Yellen and John Williams, who at the time was San Francisco Fed president and is now head of the New York Fed.

(Reporting by Ann Saphir; Editing by Paul Simao)

Recession ended in April 2020, making it shortest on record

WASHINGTON (Reuters) -The recession touched off by the coronavirus lasted only two months, ending with a “trough” reached in April 2020 just one month after the sharp drop in economic activity in March of that year, the U.S. Business Cycle Dating Committee announced Monday.

The committee, a group of macroeconomists who assign the start and end dates of U.S. business cycles, said that while the country had by no means gotten back to normal operating capacity at that point, indicators of both jobs and production “point clearly to April 2020 as the month of the trough,” with a rebound beginning in May.

Indeed, the resumption of growth was so rapid the committee said it was only “the unprecedented magnitude of the decline” that led members to consider what happened to be a recession in the first place, with a downturn typically requiring “depth, duration and diffusion” to qualify for the label.

Around 22 million jobs disappeared from company payrolls in March and April of that year, an event that sparked concern about a new Depression and led Congress and the White House to approve the first of several massive relief packages to keep firms and households afloat.

Amid what became a divisive national conversation over masks and lockdowns, during May 2020 2.8 million people were brought back to work, and over the next year about 15 million jobs were recovered.

Jobs “reached a clear trough in April before rebounding strongly the next few months and then settling into a more gradual rise,” with incomes rising as well, the committee said in a statement released through the National Bureau of Economic Research.

The announcement makes the pandemic recession by far the shortest on record, at two months only a third as long as the six-month downturn at the start of 1980. There have been several 8 month recessions, including the one that followed the collapse of the bubble in technology stocks in 2001.

But the hole it created in the U.S. job market remains substantial, and filling it a focus of the Biden administration and the U.S. Federal Reserve.

Nor is the battle over. Coronavirus infections are again increasing as the Delta variant takes hold and a national immunization drive stalls with only about 57% of those eligible having been fully vaccinated.

This year may still see the fastest expansion of economic activity in 40 years, but rekindled fears about the pandemic on Monday hit markets hard. The S&P 500 and the Dow Jones Industrial Average were both down more than 2% by midday, and U.S. 10 year Treasury yields fell to a 5-month low.

(Reporting by Howard Schneider; Editing by Nick Zieminski)

U.S. job growth slows sharply; long-term unemployment rises

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy added the fewest workers in six months in November, hindered by a resurgence in new COVID-19 cases that, together with a lack of more government relief money, threatens to reverse the recovery from the pandemic recession.

The closely watched employment report also showed a surge in people experiencing long periods of joblessness, putting pressure on Congress to come up with another rescue package.

The report only covered the first two weeks of November, when the current wave of coronavirus infections started. Infections, hospitalizations and death rates have sky-rocketed, leading some economists to anticipate a drop in employment in December or January as more jurisdictions impose restrictions on businesses and consumers shun crowded places like restaurants.

“This is a disappointing report, and one that shows the third wave of the pandemic is having a bigger effect on hiring than had been thought,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “Prospects for a continued strong recovery in consumer spending may be at risk. This is a wake-up call for the Congress and should support more Federal stimulus.”

Nonfarm payrolls increased by 245,000 jobs last month after rising by 610,000 in October, the Labor Department said on Friday. That was the smallest gain since the jobs recovery started in May. The fifth straight monthly slowdown in job gains left employment 9.8 million below its February peak.

Job growth last month was held back by further departures of temporary workers hired for the 2020 Census. States and local governments are also expected to have shed more workers, leaving overall government payrolls to drop by 99,000 jobs, the second straight monthly decline. The private sector added 344,000 jobs.

Economists polled by Reuters had forecast payrolls would increase by 469,000 jobs in November. Hiring peaked at 4.781 million jobs in June. Reports on consumer spending, manufacturing and services industries have suggested a slowdown in the recovery from the worst recession since the Great Depression.

The United States is in the midst of a fresh wave of COVID-19 infections. Nearly 200,000 new cases were reported on Wednesday and hospitalizations approached a record 100,000 patients, according to a Reuters tally of official data.

A bipartisan, $908 billion coronavirus aid plan gained momentum in Congress on Thursday as conservative lawmakers expressed their support and leaders in the U.S. Senate and House of Representatives huddled together.

More than $3 trillion in government COVID-19 relief helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls, leading to record economic growth in the third quarter. The uncontrolled pandemic and lack of additional fiscal stimulus could result in the economy contracting in the first quarter of 2021.

U.S. stock index futures sharply pared gains on the jobs report. The dollar was trading lower against a basket of currencies. U.S. Treasury prices were lower.

LONG-TERM UNEMPLOYED

The unemployment rate fell to 6.7% from 6.9% in October. It, however, has been biased down by people misclassifying themselves as being “employed but absent from work.” Without this error, the government estimated the jobless rate would have been about 7.1% in November.

The number of people unemployed for 27 weeks or more jumped 385,000 in November to 3.9 million. These long-term unemployed accounted for 36.9% of the 10.7 million unemployed last month. The number of people working part-time for economic reasons was steady at 6.7 million.

Despite the ample slack in the labor market, average hourly earnings rose 0.3% after nudging up 0.1% in October. That left the year-on-year increase in wages at 4.4%. The average workweek was steady at 34.8 hours.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

Boeing cuts jet demand forecast on pandemic crisis

By Eric M. Johnson and Tim Hepher

SEATTLE/PARIS (Reuters) – Boeing cut its rolling 20-year forecast for airplane demand on Tuesday, sending its shares lower as the COVID-19 pandemic lays waste to deliveries over the next few years.

The U.S. plane maker, which dominates jet sales together with Europe’s Airbus, forecast 43,110 commercial aircraft deliveries over the next 20 years, down 2% from 44,040 projected a year ago and worth an unchanged $6.8 trillion at list prices.

While fleets are still expected to almost double, it is the first time since the 2009 financial crisis that Boeing has cut the 20-year demand forecast in terms of the number of deliveries.

Boeing, also for the first time, lifted the lid on the first half of the 20-year period, showing steep declines for the coming decade on the heels of the COVID-19 crisis. It predicted 18,350 deliveries for 2020-2029, down 10.7% from an unpublished forecast of 20,550 embedded in the last report.

“The industry clearly has been dramatically impacted … by the pandemic,” Commercial Marketing Vice-President Darren Hulst said.

Boeing shares fell as much as 3.3% after the report.

A key forecast for passenger traffic growth – once a reliable 5% a year – has been edging lower since 2015 as a record aviation boom peaked. But it took a sharp knock lower in the latest report, falling to 4% from 4.6% a year ago.

Boeing, America’s largest exporter, lowered its assumption for average global economic growth over 20 years to 2.5% from 2.7% after the pandemic plunged key markets into recession.

Even so, Boeing expressed confidence that demand would return towards previous trends in the 2030’s, just as it did after earlier economic shocks. Environmentalist critics say the crisis is an opportunity for the industry to get smaller.

WEAK DEMAND FOR BIG JETS

“It will take longer from this crisis but … the industry will prove resilient again; the fundamentals aren’t changing,” Hulst said.

Demand will be buoyed in part by a rise in the number of replacements as airlines accelerate the retirement of older jets to save running costs and meet environmental goals.

Thousands of jets have been parked during the crisis, especially long-haul twin-aisle models, owing to the widespread border restrictions choking international air travel.

Boeing cut its 20-year forecast for twin-aisle models such as its 787 Dreamliner and the Airbus A350 by more than 10%. At 7,480 jets, down from 8,340 a year ago, that part of the 20-year forecast is now lower than 8,000 for the first time since 2010.

Twin-aisle demand will be especially slow in the next 10 years with deliveries of only 3,060 aircraft, Boeing said.

The 20-year forecast for smaller single-aisle jets, such as the grounded 737 MAX, dipped 0.5% from the last survey. Previously Boeing had been revising it up by about 3.5-4% year in, year out.

Boeing now sees 32,270 deliveries in the medium-haul single-aisle category, traditionally the cash cow of large plane makers. That includes 13,570 deliveries between now and 2029.

Although medium-haul travel is showing signs of revival, particularly in the booming China market, airlines there continue to sit on the sidelines amid U.S. trade tensions.

While global passenger demand has been mauled by COVID-19, demand for freighters has gone up as shippers seek alternatives to the cargo space being left empty in unused passenger jets.

Despite that near-term bump, Boeing cut its 20-year forecast for freighters by 10.6% to 930 jets on weaker trade and a move by carriers to group shipments into bigger jets to reduce costs.

(Reporting by Eric M. Johnson in Seattle; Editing by Mark Potter and David Goodman)

Kudlow sees single-digit unemployment in August, ‘V’ recovery

(Reuters) – White House economic adviser Larry Kudlow on Thursday said he expects the U.S. unemployment rate to return to single-digit levels as early as this month and growth in the third quarter should be 20% or more as the economy recovers from the recession triggered by the coronavirus pandemic.

“The key point that I would make is the economy is rebounding, it looks like a V-shaped recovery and the recent news now is even better than it was a month ago,” Kudlow said in a virtual appearance at a conference hosted by the Council of the Americas.

(Reporting By Jonnelle Marte and Dan Burns; Editing by Chizu Nomiyama)