Economic Outlook and Trends 2023
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Questions and Answers

What was the personal savings rate in July, as noted in the analysis?

  • 4.1%
  • 5.4%
  • 2.9% (correct)
  • 3.6%

    • What is the significance of the ISM manufacturing PMI of 47.2?

  • It signifies a recovering market.
  • It shows contraction in the manufacturing sector. (correct)
  • It indicates strong economic growth.
  • It reflects stable manufacturing conditions.

    • How much has bank lending for home construction decreased year over year?

  • 10% (correct)
  • 15%
  • 5%
  • 20%

    • What trend is seen in commercial real estate according to the analysis?

    <p>Rising default rates.</p> Signup and view all the answers

    What is the expected change for the Fed funds rate over the next 12 months?

    <p>Decrease by more than 2%</p> Signup and view all the answers

    What has been the trend in wage growth recently?

    <p>Wage growth has accelerated to 3.8%.</p> Signup and view all the answers

    What level did homebuilder confidence fall to in August?

    <p>The lowest level this year.</p> Signup and view all the answers

    What percentage decline was noted in the annual pace of multifamily-building starts in July?

    <p>22%</p> Signup and view all the answers

    What is indicated by low job openings in July according to the JOLTS survey?

    <p>Job openings for July were below expectations at 7.7MM.</p> Signup and view all the answers

    How has consumer spending been characterized recently?

    <p>Consumer spending has accelerated in various sectors.</p> Signup and view all the answers

    What has been the trend for new orders in the ISM manufacturing index in August?

    <p>Fell to the lowest level since May 2023.</p> Signup and view all the answers

    What notable change occurred in the unemployment rate recently?

    <p>Unemployment dropped from 4.26% to 4.22%.</p> Signup and view all the answers

    What is the significance of the quits rate remaining at 0.5?

    <p>It suggests fewer workers are willing to change jobs compared to 2022.</p> Signup and view all the answers

    What does the narrowing gap between high labor demand and low labor supply suggest?

    <p>The labor market is becoming more balanced.</p> Signup and view all the answers

    Which factor is causing fear about the future of consumer spending?

    <p>Weakness among lower-income households.</p> Signup and view all the answers

    What implication does the rebound in staffing firms' stock prices have?

    <p>It implies a potential rebound in job openings.</p> Signup and view all the answers

    What can the dis-inversion of the yield curve indicate about economic conditions?

    <p>It is a signal of an impending recession or soft-landing.</p> Signup and view all the answers

    What significant trend was noted in the breakeven inflation rate?

    <p>It has fallen below 2%, the lowest since 2020.</p> Signup and view all the answers

    What does the Beveridge curve illustrate?

    <p>The relationship between the unemployment rate and job vacancies.</p> Signup and view all the answers

    What does the Phillips curve represent?

    <p>The inverse relationship between inflation and unemployment.</p> Signup and view all the answers

    Which factor contributed to the drop in oil prices reported?

    <p>Weaker global growth and China’s economic slowdown.</p> Signup and view all the answers

    What was the state of China's manufacturing activity in August?

    <p>It fell to a six-month low.</p> Signup and view all the answers

    What has OPEC+ been reconsidering regarding their production plans?

    <p>To implement a gradual increase in oil production.</p> Signup and view all the answers

    What has been a notable trend regarding copper prices?

    <p>Copper prices are nearing $9K a ton due to slower growth.</p> Signup and view all the answers

    What is one reason most countries maintain lower capital gains tax rates compared to ordinary income tax?

    <p>To encourage individuals to take investment risks.</p> Signup and view all the answers

    What unintended consequence might occur if capital gains taxes are raised too high?

    <p>A potential outflow of investors to lower tax regions.</p> Signup and view all the answers

    What percentage of recent immigrants are participating in the labor force compared to US-born Americans?

    <p>68% for immigrants versus 62% for US-born Americans.</p> Signup and view all the answers

    What is the estimated percentage of immigrants who report being unable to work due to various reasons?

    <p>1%</p> Signup and view all the answers

    What is a common misconception about data revisions from the Bureau of Labor Statistics (BLS)?

    <p>Revisions are a normal part of ensuring accurate economic data.</p> Signup and view all the answers

    How does the employer response rate to the payroll survey change over time?

    <p>It increases from 60% for the first estimate to 88% by the third month.</p> Signup and view all the answers

    What percentage of working-age Americans are reported as unable to work due to chronic illness or other reasons?

    <p>5%</p> Signup and view all the answers

    What was the net migration number to the US since the end of 2020?

    <p>9 million.</p> Signup and view all the answers

    What recent trend has been observed regarding average hourly earnings?

    <p>They have reaccelerated to 0.4%.</p> Signup and view all the answers

    Which economic indicator suggests a potential return to 2% inflation?

    <p>Core PCE annualized rate of 1.7%.</p> Signup and view all the answers

    What indicates a shift in market focus from inflation to economic growth?

    <p>Stock performance shifting towards previously unloved stocks.</p> Signup and view all the answers

    What is the significance of the labor market trends mentioned?

    <p>Neither survey indicates a decline in job creation.</p> Signup and view all the answers

    What does the Atlanta Fed's GDPNow forecast for Q3 indicate?

    <p>An expected GDP growth of 2.4%.</p> Signup and view all the answers

    What trend is being observed regarding shelter prices?

    <p>A slowdown in shelter prices is starting to appear.</p> Signup and view all the answers

    What can be inferred about default rates and bankruptcy filings?

    <p>They are declining.</p> Signup and view all the answers

    Which of the following reflects a change in the relationship between good news and stock performance?

    <p>Good economic news is good for stocks.</p> Signup and view all the answers

    Study Notes

    Economic Outlook

    • Fed Governor Waller indicated that the labor market is softening but not deteriorating.
    • Average hourly earnings reaccelerated to 0.4% (0.3% expected).
    • Atlanta Fed President Bostic highlighted 3 signs of deflation: narrowing price increase breadth, core PCE for three months through July at an annualized rate of 1.7%, and slowing shelter price growth.
    • The market is now focused on economic growth rather than inflation.

    Soft-Landing Narrative

    • The overall economy is performing well, according to the Fed’s weekly GDP model and Atlanta Fed’s GDPNow.
    • Default rates and weekly bankruptcy filings are decreasing.
    • The labor market remains strong with declining unemployment, increasing wage growth, low layoffs, decreasing jobless claims, increasing labor supply, and robust consumer spending.
    • Market data is promising with near all-time high profit margins for S&P 500 companies and rebounding staffing firm stock prices.

    Recession Narrative

    • The labor market shows signs of weakening with lower-than-expected job openings, declining quits rate, and a slight increase in layoffs.
    • The employment report shows a lower-than-expected increase in payroll jobs and a decrease in manufacturing jobs.
    • The gap between high labor demand and low labor supply has narrowed significantly.
    • Fears about consumer spending are growing due to rising consumer loan delinquency rates and a falling personal savings rate.
    • Manufacturing sector weakens with falling new orders and production levels.
    • The real estate market shows weakness with declining homebuilder confidence, weak home sales, and a drop in home construction bank lending.
    • Commercial real estate faces difficulties with increasing default rates and declining multifamily building starts.

    Financial Market Signals

    • Continued rotation into defensive stocks.
    • Financial firms are outperforming the broader market.
    • The market is expecting the Fed to cut the Fed funds rate by more than 2% over the next 12 months.
    • Treasury yields declined.
    • The yield curve dis-inverted, indicating potential for economic slowdown or soft-landing.
    • Bets on Fed rate cuts are growing.
    • Five-year breakeven inflation rate is below 2%, the lowest since 2020.

    Commodity Prices

    • Oil prices dropped 8% in the past week, driven by weak global growth and OPEC+ rethinking their output targets, despite heightened geopolitical risks.
    • Copper prices are falling due to slower growth and a lagging green transition.

    Beveridge Curve and Phillips Curve

    • The Beveridge curve portrays the relationship between unemployment and job vacancies.
    • The Phillips curve represents the relationship between unemployment and inflation.
    • Lower unemployment can lead to increased job openings and inflation.

    Immigration Impact

    • Immigration to the US has increased significantly since the end of 2020, boosting population growth and labor force participation.
    • Recent immigrants have a higher labor force participation rate compared to US-born Americans.
    • Immigrants are more likely to have a college degree but less likely to have a high school diploma.

    Revising Economic Data

    • Revisions to economic data are a normal part of obtaining an accurate picture of the economy, especially when analyzing a complex dataset like the US labor market.
    • Employer response rates to the payroll survey improve over time, leading to revisions in the data.
    • Revisions reflect a commitment to high-quality statistics.

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    Explore the latest insights on the U.S. economy, including indicators of labor market strength and inflation trends. This quiz delves into the narratives of economic growth, soft-landing scenarios, and recession concerns as discussed by key Federal Reserve officials. Test your knowledge of current economic conditions and forecasts.

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