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US economy returned to growth last quarter, expanding 2.6%

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Re: US economy returned to growth last quarter, expanding 2.6%

#101

Post by dragonwriter »

importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

> This is the weirdest "recession" I can remember.

Its not a recession, which is why it is weird when looked at as a recession.

OTOH, there is still substantial risk of inflation control measures creating a recession. (And there is a bigger risk of business actions anticipating and avoiding being overextended in case of a recession caused by inflation control measures themselves causing a recession.)

Re: US economy returned to growth last quarter, expanding 2.6%

#102

Post by UncleOxidant »

subsubzero wrote: post #60
importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

It is weird, they say history does not repeat but it rhymes. What is troubling about this good news about GDP growth is the fed's course of raising interest rates will continue on and interest rates will keep getting higher and higher. This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs. In addition growth companies will be hit hard by rates being high as we…

Mortgage rates at 7% is pretty much the average mortgage rate going back 70 years or so. We're basically at the average mortgage rate now. The Fed screwed up by keeping rates too low for too long which juiced home prices such that a huge chunk of people who would like to be able to buy a home are priced out of the market.

The problem, though, is that home building needs to continue in order to improve the housing supply problem (caused at least in part by the dearth of home-building during the '08-'12 period) and thus help with affordability. I tend to think that the government needs to step in here and do something to either incentivize home-building and/or at the very least do something to streamline permitting/zoning. Building codes need to be examined to see if there might be innovations that could lead to lower building costs which are currently being precluded. But keeping mortgage rates artificially low isn't the answer, that led to prices getting out of hand.

Re: US economy returned to growth last quarter, expanding 2.6%

#104

Post by zeroonetwothree »

rendang wrote: post #24
importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

Another piece of the puzzle is the big drop in labor productivity lately - https://fred.stlouisfed.org/series/OPHNFB . Could the data you mention be explained by workers previously being in jobs where they were unproductive, being laid off but then quickly reabsorbed by the hot labor market into more efficient lines of work?

It’s a pretty small drop and there is a lot of noise in that metric.

Re: US economy returned to growth last quarter, expanding 2.6%

#105

Post by [deleted] »

atomicnumber3 wrote: post #13
importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

I too find that many mysteries become clearer when you look at them through the lens of the constant class warfare that is being waged. All too often in only one direction. I'll be honest - I didn't use to think the rich/powerful thought like this. I thought it was just the tragedies of capitalism and the invisible hand needing more protection from market failures. Then I worked for a billionaire's small company for…

[deleted]

Re: US economy returned to growth last quarter, expanding 2.6%

#106

Post by fallingknife »

nostrademons wrote: post #49
importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

The stock market, interest rates, and advertising spending are leading indicators, while unemployment is a lagging indicator. Business leaders know the financial structure of their company, and many of them know that they can't survive at 2% rates, let alone 5 or 10% rates. The gloom from business leaders is forward-looking. They're fine for now , while consumer spending holds up and they can run on old debt. But as…

You are thinking of nominal rates, but you should be looking at the real rate, which is the spread of the interest rate over inflation. They can survive 5-10% rates just fine if inflation is 8%. They don't need to raise revenue 2-5x to make coupon payments, because interest isn't their entire cost structure.

Re: US economy returned to growth last quarter, expanding 2.6%

#107

Post by Aunche »

mostly_harmless wrote: post #55
importantbrian wrote: post #28

Earlier quoted context omitted.

Did the fed actually say this? There were a bunch of investment bankers who did, and it seems like everyone else ran with the narrative. I haven't seen that the fed actually said it. I think all the fed cares about is bringing down inflation, but if the primary factors in inflation are supply related then unemployment doesn't have to go up for inflation to come down.

Yes, but not directly. If you listen to the last FOMC meeting, Powell mentions there will likely be significant weakening of the labor market and a rise of unemployment. As well as his famous "there will be pain" remarks. I don't think he directly said "he won't stop until" though.

Unlike smooth talking politicians, the Federal Reserve actually tries to be honest about the effects of their policies. This is something that should be applauded, not exploited as a means to get political capital.

Re: US economy returned to growth last quarter, expanding 2.6%

#108

Post by zeroonetwothree »

Mikeb85 wrote: post #77
importantbrian wrote: post #6

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wis…

The recession is real (but probably won't materialize until we see the 4th quarter of this year's numbers). Lots of sectors are seeing reduced consumer spending, layoffs and of course interest rates rising reduces capital spending.

Overall spending and employment are still increasing. There are always some sectors growing and some shrinking. It doesn’t mean the whole economy is in recession.

Re: US economy returned to growth last quarter, expanding 2.6%

#109

Post by altarius »

alexb_ wrote: post #2

>Housing investment, though, plunged at a 26% annual pace, hammered by surging mortgage rates as the Federal Reserve aggressively raises borrowing costs to combat chronic inflation. It was the sixth straight quarterly drop in residential investment. Thank christ. Please bring on a housing crash ASAP.

In my opinion, housing is mostly inelastic unless people have to sell due to external circumstances (like being unable to pay mortgage). I don't expect the housing market to decline more than 15-20%, as the more people are "underwater" from their purchase price, the more likely they're to just "wait out the slump". And with low interest rates locked in, many probably don't want to roll their mortgages now. Since we've had such a crazy runup [1] ([2]) in the past few years, a 20% decline still puts many sellers ahead, but I don't think they'd sell at a loss if prices dropped further. SF Case-Schiller is up 25-30% from 2020, and ~50% from 2017, for example.

My personal opinion is that once you've bought in you're locked in and along for the ride. If your house is down 20%, so is most likely the house you consider moving to. Unfortunately housing is often seen as an "investment".

[1] https://wolfstreet.com/wp-content/uploads/2022/10/US-Housing... [2]

Re: US economy returned to growth last quarter, expanding 2.6%

#110

Post by everybodyknows »

glial wrote: post #26
bagels wrote: post #9

Earlier quoted context omitted.

The fed said interest rates will keep being raised until unemployment rises.

Which is so strange and violates two of their three mandates - maximum employment and moderate interest rates.

The Fed has two mandates, not three:

https://www.stlouisfed.org/in-plain-english/the-fed-and-the-...

"... maximum employment and price stability"

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