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Thursday, December 15, 2022

Today’s bulletin by: Miles WoodlandSenior Markets Editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on and on LinkedIn:. Read this and more market news as you go Yahoo Finance app.Yahoo Finance app.

The Federal Reserve expects an economic recession next year.

But don’t just call it a recession.

In the latest summary of economic projections released Wednesday, Fed officials said they expect GDP growth to come in at just 0.5% at the end of next year, while the unemployment rate will rise from the current level of 3.7% to 4.6%.

These forecasts were released alongside the Fed’s latest 2022 monetary policy decision, which saw the central bank raise its benchmark interest rate target range by 0.5%, as expected.

Asked at a press conference following the announcement whether these projections — flat growth, rising unemployment — suggest a recession will hit the economy next year, Powell countered.

“I don’t think it qualifies as a recession because you’ve had positive growth,” Powell said.

Federal Reserve Board Chairman Jerome Powell holds a press conference following the announcement that the Federal Reserve raised interest rates by half a percentage point at the Federal Reserve Building in Washington, U.S., December 14, 2022. REUTERS/Evelyn Hochstein

Although, as NBC’s Brian Cheung pointed out in his question to Powell, the DFO’s unemployment projections suggest that about 1.6 million Americans will lose their jobs over the next year.

“There will be some easing in labor market conditions,” Powell said. “And I wish there was a completely painless way to restore price stability. There is none. And this is the best we can do.”

Of course, Wall Street is already one step ahead of Powell.

“The expected increase in the unemployment rate between this year and next has never happened without a recession,” Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a note on Wednesday.

As we’ve seen in many predictions for the markets and the economy for the coming year, the consensus among most strategists has hardened around the idea of ​​a recession hitting the economy in the second or third quarter of 2023, sending the stock market down. And with expectations that the Fed will respond to the downturn by easing policy, most strategists are betting that stocks will return unchanged by the end of the 23rd.

But with Tuesday’s inflation data showing that the Fed’s aggressive rate hikes this year, which have totaled 4.25%, have started to have some effect on slowing prices, economists look increasingly skeptical that the Fed misjudged the effectiveness of his own program. aimed at bringing inflation under control and returning to the 2% target.

“Despite increasingly compelling evidence that core inflation will fall sharply next year, the Fed doubled down on its hawkishness today,” Paul Ashworth, chief North American economist at Capital Economics, wrote in a note to clients on Wednesday.

“It’s hard to know whether Fed officials really believe their own economic and interest rate forecasts, or whether they’re aiming to try to reverse some of the easing in financial conditions over the past month,” Ashworth added, referring to the sharp decline. Treasury yields and stocks rally after the Fed’s November policy decision.

Still, whether Fed officials want to call the economic outlook for next year bearish or not, the central bank’s own projections are responding to just that scenario. Interest rates are expected to reach 5 percent in 2023 before falling to 4.1 percent in 2024.

“The Fed is willing to risk a recession in the labor market to reduce inflation, and December projections show that risk has increased, not decreased,” wrote Michael Gapen and Bank of America Global Research’s economics team. : .

“We agree and continue to look for a recession in the first half of 2023 and a sharper increase in the unemployment rate than the average FOMC members project,” they added.

Rising unemployment, below-potential growth and a 100 basis point cut in interest rates.

If it walks like a recession and talks like a recession, call it what you will.

What to watch today?

Economy

  • 8:30 a.m. ET Empire ProductionDecember (expected -0.9, last month’s 4.5)

  • 8:30 a.m. ET Advance retail salesmonthly, November (-0.2% expected, 1.3% last month)

  • 8:30 a.m. ET Retail sales, except for automobilesMonth-on-month, November (0.2% expected, 1.3% last month)

  • 8:30 a.m. ET Retail sales excluding cars and gasmonthly, November (0.1% expected, 0.9% last month)

  • 8:30 a.m. ET Retail Sales Control GroupNovember (0.1% expected, 0.7% last month); )

  • 8:30 a.m. ET Initial unemployment claimsweek ended Dec. 10 (232,000 expected, 220,000 last week)

  • 8:30 a.m. ET Continuous requirementsWeek ended Dec. 3 (1.668 million expected, 1.671 last week)

  • 8:30 a.m. ET Philadelphia Fed Business Outlook IndexDecember (expected -10.0, during the previous month -19.4)

  • 9:15 a.m. ET Industrial productionMonth-on-month, November (0.1% expected, 0.1% last month)

  • 9:15 a.m. ET Capacity utilizationNovember (79.8% expected, 79.9% last month)

  • 9:15 a.m. ET Manufacturing (SIC) ManufacturingNovember (-0.1% expected, 0.1% last month)

  • 10:00 a.m. ET. Business inventoriesOctober (0.4% expected, 0.4% last month)

  • 10:00 a.m. ET. Net long-term TIC flowsOctober ($118.0 billion in the previous month)

  • 10:00 a.m. ET. Total net TIC flowsOctober ($30.9 billion in the previous month)

Profit

  • Adobe: (ADBE), Jabil (JBL), Live Ventures: (LIVE), Trinity Biotech (TRIB), Immunospecific antibodies (IPA)

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