Slatestone Wealth Market Strategist Kenny Polcari discusses the release of the October jobs report and how it confirms the Federal Reserve’s deflationary plan on ‘Varney & Co.’
An often-overlooked economic analysis showed Friday that the U.S. economy is headed for a recession — or already in one — as the Federal Reserve tries to tackle rising inflation and higher interest rates.
The Conference Board’s Leading Economic Indicators index showed that conditions worsened in October, with the gauge down 0.8% from last month. This follows a 0.5% decline in September.
“The US LEI fell for the eighth month in a row, indicating that the economy is beginning to collapse,” said Ataman Ozyildirim, chief economist at The Conference Board.
The decline reflects a worsening mood among consumers, who are increasingly worried about high interest rates and rising property prices, as well as a prolonged downturn in the housing market.
DEMOCRATS SAY FED RATE ‘CUT’, WARN OF JOBS END
Shoppers are seen inside a Kroger store in Atlanta, Georgia, on Oct. 14, 2022. (Elijah Nouvelage/AFP/Getty Images)
There is growing optimism on Wall Street that The Fed will cause a recession as it raises interest rates at the fastest rate in three decades to meet inflation.
Officials this month approved a fourth consecutive 75-basis-point rate hike, raising the federal funds rate to 3.75% to 4% – close to the regulatory limit – and have shown no signs of increasing rates.
In a troubling development, the Fed’s rate hikes have so far not ended inflation: The government said this month that consumer prices rose 7.7% in October from last year, the highest in nearly 40 years.
FED HIKES RATE TO 75 POINTS FOR FOURTH STRAIGHT MONTH.
This suggests that the Fed should continue to pursue its aggressive policies, raising the stakes that will hurt consumer demand and cause unemployment to rise.
“Let me say this,” Fed Chairman Jerome Powell told reporters earlier this month. “It’s never too early to think about a pause. When people hear about a delay, they think about a pause. It’s premature, in my opinion, to talk about stopping our inflation. We have a way to go.”
Job seekers attend a camp during the Spring Job Fair at the Las Vegas Convention Center in Las Vegas, Nevada, on April 15, 2022. (Analysis by KM Cannon/Las Vegas-Journal/Getty Images)
Higher interest rates lead to higher rates on consumer and business loans, which reduces wealth by forcing employers to reduce spending.
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Economic growth has already taken place in the first two quarters of the year, with gross domestic product – the total amount of goods and services produced in the country – contracting by 1.6% in the winter and 0.6% in the spring.
However, it grew again in the summer, with GDP growing by 2.6% annually in the three months from July to September.
