Initial fillings for unemployment claims fell last week to their lowest level in 5 months despite pressure by the FED to slow down the labor market. Jobless claims for the week totaled 193,000, a decrease of 16,000 from the previous week’s downwardly revised total. This is the first time since May that claims fell below 200,000. With inflation being the highest since the 1980s, the FED's policies have definitely put the economy in a slow down, everything seems to be affected apart from the labor market.
Furthermore, the CPI index showed a 7.3% year over price gain in Q2. This gain was above 7.1% in the prior Q2 estimates. Excluding food and energy, the core PCE inflation for 4.7%, 0.3% higher than the previous estimates but below the 5.6% increase in Q1. The FED has raised interest rates 5 times in 2022 which totals 3% points, this increase is starting to show as inflation is slowly going down in September and it goes along with a decrease in gas prices. The Cleveland FED's inflation gauge showed a 8.2% increase in the CPI and 6.6 increase in the core prices compared to 8.3% and 6.3% in August.
The Bureau of Economic Analysis estimated for Q2 GDP remained at negative 0.6, which was unchanged from the previous estimate. This was the second straight quarter of negative GDP which is a indicator of a possible recession in the near future.
Source: cnbc.com
With this being the second straight quarter with a negative GDP, I believe a recession is inevitable at this point and it seems like most of the nation is preparing for it, hoping for a soft landing. The Fed seems to be taking a route where they would rather over-tighten and cause a recession now than under-tighten and see inflation re-remerge down the line.
ReplyDeleteIt seems like the Fed would rather deal with the pain of recession all at once right now rather than face a much worse recession down the road. It's much easier to justify the hard times now by saying it's for the future than to say that the hard times were because they weren't on top of things in the past.
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