Why the market is obsessed with unemployment | CNN Business

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As the year draws to a close, the market’s focus on inflation rates appears to be shifting to a new area of ​​concern: unemployment. While the Federal Reserve has taken steps to fight inflation by curbing economic growth, the full extent of the damage to the labor market is not yet clear.

what happens: Low unemployment and wage growth may seem good for an economy close to recession, but it’s actually proven bad for the markets.

Stocks fell earlier this month after the closely watched November jobs report showed a resilient labor market. They fell again on Thursday when weekly figures showed that the number of Americans filing for unemployment benefits fell, indicating that the job market remains tight.

This is because in this good and bad economy, inflation and unemployment have an opposite relationship – higher wages mean higher inflation as companies pass on higher costs by raising the prices of goods. Investors are worried that the strong payrolls report could prompt Fed officials to speed up the rate hike campaign.

At the same time, if jobs decline precipitously, the economy could sink into a deep recession – which isn’t a boon for the markets either.

Investors are hoping for a Goldilocks situation where unemployment drops enough to convince the Fed that the rate hikes have cooled the labor market enough to end the increases but not enough to cripple the economy. This is a very narrow road to land on.

What does the Fed want: The Federal Reserve (the US central bank) released its economic outlook on Wednesday, forecasting the unemployment rate to rise to 4.6% by the end of next year, up from 3.7% today. The unemployment rate hasn’t risen much outside of a recession, and those numbers mean that about two million Americans will have to lose their jobs (or join the labor force – which is highly unlikely).

Federal Reserve Chairman Jerome Powell did not mince words last week when he said that a strong labor market is largely responsible for inflation and will have to weaken before the rate hike ends. “There is an imbalance in the labor market between supply and demand,” he said, adding that it will take a “large period” to fix this imbalance.

“Without price stability, the economy doesn’t work for anyone,” Powell said Wednesday.

That path to the Fed’s 2% inflation target runs through the labor market. “There will be some softening in labor market conditions,” Powell said. I wish there was a completely painless way to restore price stability. none. This is the best we can do.”

What might happen: Jon Stewart, former host of The Daily Show, tweeted after Wednesday’s meeting, “Boy the Fed is really committed to this one that puts us in a high unemployment recession.”

He’s probably right – but some economists still think there’s hope that if employment eases in the first half of next year, the Fed’s pivot could come quickly and with it recovery.

“Employment hasn’t declined significantly yet, but I think the jobs data is likely to deteriorate appreciably and rapidly,” finance professor Jeremy Siegel of the University of Pennsylvania’s Wharton School said in his weekly commentary on WisdomTree last week.

Powell expressed optimism on Wednesday that a soft landing is still possible and that the job market was tight enough to handle an increase in unemployment without spiraling into recession. In the meantime, investors will be watching the jobs numbers closely.

Former FTX CEO Sam Bankman-Fried is expected to appear in a Bahamas court on Monday to overturn his decision to challenge his extradition to the United States, a person familiar with the matter told CNN.

The person said Bankman Fried was expected to agree to extradite him to the United States. Reuters first reported that Fred Bankman will withdraw his extradition fight on Monday, my colleague Cara Scannell reports.

It remains unclear when Fred Bankman will appear in court. If he waives his extradition, he will likely return to the United States quickly. Once in the states, he will appear before a US judge for a trial and be granted bail.

CNN has reached out to Bankman-Fried’s attorney and Attorney General for the Bahamas.

Last Tuesday, federal prosecutors for the Southern District of New York charged Bankman Fried with eight counts of fraud and conspiracy. Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him, though he likely won’t get the maximum sentence.

Furthermore, market regulators in the US have filed civil lawsuits accusing Bankman-Fried of defrauding investors and customers, saying that it “built a house of cards on a foundation of deception while telling investors it was one of the safest buildings in cryptocurrency.”

Bankman-Fried remains in the Bahamas, where FTX is headquartered, and was arrested last Monday night. He was arraigned on Tuesday, and a Bahamian judge denied his bail request, saying he posed a flight risk. It could take weeks for it to be delivered to the United States.

Stores are flooded with an abundance of merchandise this holiday season, keeping discounts fast and furious in the run-up to Christmas.

And the deals are getting juicier, says my colleague Pareja Cavillans.

The Saturday before Christmas – also known as Super Saturday – is usually the busiest shopping day of the November-December gift-buying period. With Christmas Day falling on a Sunday, and Christmas Eve falling on the previous Saturday, Super Saturday this year falls on December 17. It is estimated that more than 158 million consumers shop that day, according to the National Retail Federation.

Shoppers have only completed half of their gift purchases so far, NRF estimates. With less than a week left until Christmas Day, and with shipping deadlines approaching, people have a lot to do.

It’s also expensive for retailers to sit on surplus merchandise for so long. Retailers who stock merchandise in their warehouses and distribution centers have limited space to work with, with some space to accommodate excess inventory. But the costs add up if more room is needed for an extended fermentation that they can’t get rid of quickly.

Also, unsold products lose value over time. This is especially true with fashion clothes because savvy shoppers wouldn’t buy last year’s fashion if the trend passed. Stores are then forced to discount significantly, which affects profitability.

Long before the final full weekend before Christmas, this year stores were already offering discounts of 50% to 60%, and dealing with free shipping for online orders.

“I’ve studied the holiday season for 20 years and I’ve never seen sales so exciting,” said Ross Steinman, a professor of consumer behavior at Widener University in Chester, Pennsylvania.

“Retailers are very worried,” he said. “Time is ticking, and they know they have to maximize every opportunity now to get consumers to buy.”

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