US economy returned to growth last quarter, expanding 2.6% • Hacker News Board

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

#141

Post by georgeecollins » Thu, Oct 27, 2022, 5:14 PM UTC

bumby wrote: post #88

nostrademons wrote: post #49

Earlier quoted context omitted.

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…

> many of them know that they can't survive at 2% rates, let alone 5 or 10% rates. From your perspective, what is the underlying reason they cannot survive without excessively low rates? Your last statement feels like it's primed to hold the Fed hostage, which is worrisome.

I'm not the OP, but there is an idea in bushiness that a company has to have a percentage return on the equity invested. That rate goes up when interest rates go up. Otherwise you could just sell the equity and buy corporate debt instead.

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

#142

Post by rendang » Thu, Oct 27, 2022, 5:15 PM UTC

zeroonetwothree wrote: post #104

rendang wrote: post #24

Earlier quoted context omitted.

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.

What do you think could be behind the noise in this case? It does look like the steepest drop in many decades, and more surprising when we read stories on HN about automation that would imply a baseline increase in productivity.

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

#143

Post by georgeecollins » Thu, Oct 27, 2022, 5:15 PM UTC

eloff wrote: post #134

This is terrible news. Without a recession to curb inflation, the fed will have to get far more extreme with interest rates to get inflation back down. I thought that rates might top out around the end of the year, but now the fed may have to keep raising aggressively well into next year. Mortgages and the housing market are going to get slammed. This is going to get much worse than I previously expected.

But inflation is already lower in this report. I am not forecasting the future-- I have no idea-- but its not clear that inflation is getting worse.

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

#144

Post by justin66 » Thu, Oct 27, 2022, 5:15 PM UTC

nobody9999 wrote: post #58

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.

>Federal Reserve aggressively raises borrowing costs to combat chronic inflation. [emphasis added] Not sure why you used that word. I don't think it applies in this circumstance. Not trying to be pedantic/snarky, I just wonder why you characterize only 18 months or so of higher than has been seen in quite some time inflation as "chronic." Chronic (adj.):[0] 1a : continuing or occurring again and again for a long time…

There is (was, really) an argument in the public sphere as to whether the inflation we're experiencing is merely "transitory," and this plays into the larger debate about how it ought to be dealt with by the Fed and the US government. Use of the word "chronic" is merely someone noting their position on the question of whether our inflation is "transitory."

edit: looking at it in context, it's someone noting the Fed's decision on the matter (of course it's not transitory), which also makes sense

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

#145

Post by theGnuMe » Thu, Oct 27, 2022, 5:16 PM UTC

Auracle wrote: post #133

UncleOxidant wrote: post #102

Earlier quoted context omitted.

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 sup…

[flagged]

What is your hypothesis exactly? Are you saying those 5m folks took the 3m houses?

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

#146

Post by adam_arthur » Thu, Oct 27, 2022, 5:17 PM UTC

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…

Because a recession is all but obvious at this point.

While it may not be here now, we probably have more foresight into the fact that there will be a recession than ever before.

The Fed will intentionally create one to stop inflation, despite their talk of soft landing. The only hope otherwise is that inflation subsides on its own, which, given labor dynamics, is looking increasingly unlikely.

So the Fed has to choose between spiking unemployment to contain inflation, or letting inflation run wild. Powell doesn’t intend to be remembered as an Arthur Burns, so it seems most likely he will keep pressing until the recession comes.

Eventually stock prices will come down enough, and debt costs rise enough to actually cause the layoffs they need to pivot.

Final note that, due to public sector debt levels, we cannot choose a path of allowing moderately high inflation for a long period of time. The government budget will become insolvent without a mechanism to fund it, either at the short or long end of the yield curve. Or in short, either we need a quick and sharp recession, or the Fed to give up on the inflation fight so they can drop short end rates and let govt debt inflate away.

Otherwise the US govt will default within a few years.

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

#147

Post by wwweston » Thu, Oct 27, 2022, 5:18 PM UTC

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…

> This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs.

Construction should be an industry that people care about and policymakers watch out for. But making housing purchases dependent on cheap credit may have been a poor decision, and it's possible that as a result large swathes of real estate as a sector are based on problematic incentives. The housing market needs several resets, and much as it pains me to say it as someone who'd like my own mortgages to be cheap as much as anyone else, it might need years of high interest rates to start getting things back in line -- on top of aggressive vacancy taxes, property taxes scaling on single-family rental volume + inventory scarcity, and anything else that nudges capital towards construction vs operation on existing inventory.

> Basically the fed will do anything in its power to stop inflation

I'm not sure what the limits of the fed's will here are, but what worries me is that monetary policy is not the sole or even primary cause of inflation: big supply shocks and demand shifts in the last 2-3 years are the bigger issue. Monetary policy can only go so far in addressing it.

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

#148

Post by ancientworldnow » Thu, Oct 27, 2022, 5:18 PM UTC

onlyrealcuzzo wrote: post #138

nostrademons wrote: post #49

Earlier quoted context omitted.

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…

Is there any indication that ad spending LEADS consumer spending? I can't imagine why anyone would turn down ads while ROAS is blazing. Marketers / ad people - is this common? If so, why?

When companies start trimming their budgets ads are first on the block. I've been in an advertising adjacent field for over a decade and ad spends always decreased prior and at the start of economic downturns and recovered earlier than other macros. My personal experience currently is that budgets and projects are down quite a bit at the moment (a small uptick currently but some of that is seasonal).

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

#149

Post by jfengel » Thu, Oct 27, 2022, 5:18 PM UTC

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…

The reversals in the housing market will be unpleasant, but they go hand in hand with all of the overpriced housing we've had for the last decade.

The Fed failed to follow its own policy, of taking the punch bowl away when the party gets going. It allowed the economy to heat up for too long, and thus the inevitable reversals. Averaged over a few decades it will be the same 3-4% GDP growth that we would have gotten if they'd taken a stronger hand in taming the business cycle.

Their goal is to contain the booms so that the busts aren't so bad. Having let the boom go on, there is no choice but for a bad bust to happen. It would be nice if they'd learn their own lesson for next time, a decade or so away... but unfortunately, everybody loves low interest rates and a roaring economy.

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

#150

Post by landoftheice » Thu, Oct 27, 2022, 5:20 PM UTC

vikingerik wrote: post #136

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…

There never was a real recession - it's an artifact of year-over-year numbers that were so skewed from pandemic effects. Pent-up consumer demand shifted much activity from 2020 into 2021. This is the source of all the apparent weirdness. Every yearly number in 2021 looked great thanks to comparing an artificially high number to an artificially low 2020 baseline. Then every yearly number from 2022 looks terrible, beca…

No post body was provided.