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Why the Fed is stressed about presidential elections
  + stars: | 2024-07-10 | by ( Nicole Goodkind | )   time to read: +9 min
New York CNN —Federal Reserve Chair Jerome Powell sent investors mixed messages on Tuesday during his semiannual testimony to Congress. Powell is stressed about the election: Powell was asked by multiple senators about White House politics, which he dodged. While the Fed head noted that policy decisions are data dependent, “elevated inflation is not the only risk we face,” he said. The September Fed meeting will be “live”: Powell noted multiple times that every Fed policy decision is made “live” using the latest available economic data – in other words, decisions aren’t made in advance. About 75% of investors think the Fed will cut rates, and about 25% think they’ll remain the same.
Persons: Jerome Powell, Powell, , Donald Trump, reappoint Powell, , Joseph Brusuelas, Trump, Gregory Daco, Chris Larkin, Morgan Stanley, Larkin, don’t, aren’t, David Rubenstein, he’ll, Airbnb, Isabelle Chapman, Majlie, Puy Kamp, Audrey Ash, Chris Isidore . Organizations: CNN Business, Bell, New York CNN — Federal, White, , Reserve, RSM, Federal Reserve, US Consumer, Treasury, Fed, Economics, Washington DC, Jackson, CNN, Boeing, Alaska Airlines Locations: New York, Powell, Washington, Alaska
Auto companies like BMW and Volkswagen will likely be hit hardest at first, he added, given their heavy reliance on the Baltimore port. Regional economyFor the city of Baltimore, though, the economic impacts of the bridge collapse will hit harder and last longer. The Baltimore port directly employs over 15,000 workers and indirectly supports nearly 140,000 jobs via other port activities, according to Maryland Gov. Baltimore port employees could be temporarily furloughed, or see disruption in their work hours amid the shutdown. "The bridge collapse is the latest challenge for Northeast U.S. supply chains," said S&P Global Head of Supply Chain Research Chris Rogers.
Persons: Francis Scott Key, Roberto Schmidt, Baltimore's Francis Scott Key, Joseph Brusuelas, DALI, Joe Biden, Brusuelas, Mark Zandi, Wes Moore, Zandi, Research Chris Rogers, It's, we've Organizations: AFP, Getty, RSM, Auto, BMW, Volkswagen, Depot, IKEA, shipper FedEx, CNBC, Maryland Gov, Afp, Northeast, Supply, Research, Others Locations: Baltimore , Maryland, Singapore, Baltimore, of Baltimore, Port, United States, of LA, Northeast U.S, Sea, Panama
Rising gasoline and housing prices led inflation to increase 0.4% in February, the Bureau of Labor Statistics reported on Tuesday. The food index was unchanged in February, as was the food at home index. Meanwhile, a recent report on consumer spending from Mastercard found that retail sales excluding autos were up in February, with online retail sales up more than 9.1%. The Census Bureau is scheduled to release retail sales for February on Thursday with analysts looking for a strong 0.8% increase after January's drop. “A dip in retail sales to start the calendar year is common, however, this year January retail sales marked the biggest decline since March of last year,” said Chip West, retail and consumer behavior expert at Vericast.
Persons: ” Joseph Brusuelas, , Chip Organizations: of Labor Statistics, Federal, “ Services, RSM, Mastercard, Apparel, Bureau, Federal Reserve Bank of, Blue Locations: Federal Reserve Bank of Atlanta
Americans continued to spend heavily as 2023 came to an end, driving retail sales higher by 0.6% in December, fueled by online purchases and spending at bars and restaurants, the Census Bureau reported on Wednesday. Excluding auto sales and gasoline that tend to be volatile month to month, sales rose by 0.6% as well compared to forecasts of a 0.2% increase. “Strong increase of 0.6% with the control group that feeds into the estimate of GDP up a robust 0.8%. Outstanding credit card spending debt surpassed $1 trillion in the third quarter, although debt-to-income levels were below 10% and modest compared to the early 2000s. Behind the shift is a belief that declining inflation and a cut in interest rates will help the economy grow modestly as the year unfolds.
Persons: Joseph Brusuelas, Carl Marks, , Howard Meitiner Organizations: Census, RSM, Carl, Carl Marks Advisors, “ Retailers, Mortgage Bankers Association Locations: U.S
"The market seems to have gotten excited that the Fed's going to have to do more than what the Fed thinks in terms of rate cuts now. watch nowThere is certainly a wide gap between what the Fed has indicated in terms of rate cuts and what the market is expecting. It probably means that right now, the market needs to give back some of the rate cuts that they priced in." Fed Governor Michelle Bowman said this week that while she expects rate hikes could be done, she doesn't see the case yet for cuts. Still, Brusuelas thinks the market is too aggressive in pricing in six rate cuts.
Persons: Frederic J, Brown, Dow Jones, Jack McIntyre, McIntyre, they've, Michelle Bowman, Lorie Logan, Logan, Joseph Brusuelas, Brusuelas, Richard Clarida, … There's, Clarida Organizations: AFP, Getty, Federal, Brandywine Global Investment Management, Traders, Dallas, RSM Locations: Rosemead , California
New York CNN —The Federal Reserve likely won’t raise interest rates again during its current tightening cycle, thanks to a cooldown in inflation. Interest rates are at a 22-year high after the Fed last March began its punishing pace of hikes in a bid to tame wayward inflation. Traders are now virtually certain that the Fed will hold rates steady at its December policy meeting and won’t hike again this cycle, according to the CME FedWatch Tool. Of course, one month’s data doth not a trend make. Traders are anticipating rate cuts won’t start before next March, and see May as more likely, according to the CME FedWatch Tool.
Persons: , Jeffrey Roach, Price, Sharp, Jerome Powell, Yung, Yu Ma, Joseph Brusuelas, Sephora, Parija Kavilanz, Read, Rishi Sunak, Hanna Ziady, , ” Sunak, ” Read Organizations: CNN Business, Bell, New York CNN, Federal Reserve, Fed, Dow Jones, Nasdaq, , LPL, Bureau of Labor Statistics, CPI, Research, BMO Wealth Management, Traders, Investors, RSM US, CNN, National Statistics Locations: New York
Consumer prices held stable in October, bringing the annual inflation rate down to 3.2% from 3.7% a month ago as energy prices receded, the Bureau of Labor Statistics said on Tuesday. “Further evidence of disinflation inside the October inflation report,” RSM US Chief Economist Joseph Brusuelas posted on social media, noting that month-over-month inflation was flat at 3.2% and core inflation was up 0.2 percent to 4% over the same period. Although prices for a wide variety of goods and services have cooled this year, the current inflation rate is well above the 2% target set by the central bank. “Inflation expectations over the next 5 years dipped to 2.7%, slightly above the Fed’s long-run target of 2%. “We don’t think the last mile of disinflation will be particularly hard,” Goldman Chief Economist Jan Hatzius wrote in the outlook.
Persons: Joseph Brusuelas, Stocks, Matt Bush, Patrick De Haan, , , Piyush Patel, Jeffrey Roach, Goldman Sachs, Jan Hatzius Organizations: of Labor Statistics, RSM, Federal, Treasury, Dow Industrial, Guggenheim Partners, CNBC, National Retail Foundation, NRF, Affinity Solutions, Wall Street, Travel, Gas, New York Federal Reserve Bank, University of Michigan’s, LPL, Investment, ” Goldman Locations: U.S
“So many more people have credit cards now.”Wise says the main thing to watch for is how strapped consumers are in their overall financial condition. There are signs the consumer may still have a little left in the tank. And speaking of tanks, gas prices have been coming down, a move that will free up a little more money for consumers to spend. And this occurred while consumers repeatedly tell surveys they are feeling gloomy and pessimistic about the state of the economy. The pace of increase in consumer prices has fallen from around 9% annually in the summer of 2022 to under 4% now.
Persons: , Donghoon Lee, , TransUnion, TrasnUnion, Charlie Wise, ” Wise, we’ve, ” Patrick De Haan, De Haan, Lisa Sturtevant, Goldman Sachs, Jan Hatzius, Joseph Brusuelas, Tuan Nyugen Organizations: Federal Reserve Bank of New York, New York Fed, TransUnion, , MLS, Federal, ” Goldman, Adobe Locations: U.S, California
Inflation Edges Down in September, in Line With Estimates
  + stars: | 2023-10-27 | by ( Tim Smart | Oct. | At A.M. | )   time to read: +3 min
Inflation, as measured by an index closely followed by the Federal Reserve, dipped slightly in line with estimates in September, the Bureau of Economic Analysis reported on Friday. The personal consumption price expenditures index rose 0.4% for the month, unchanged from August, while rising 3.4% on an annual basis, down from 3.5% a month earlier. The narrower core index, excluding food and energy costs, rose 0.3% for the month, in line with expectations but up from the 0.1% increase in August. For the year, the core index is running at 3.7%, an improvement from the 3.9% registered a month ago. The report showed that spending also increased, by 0.7%, while incomes rose by 0.3%,“Core Inflation: the three month annualized pace of core PCE slowed to 2.4% y/y.
Persons: Joseph Brusuelas, Mark Vitner, Joe Davis, Andrew Patterson, Organizations: Federal Reserve, Economic, PCE, RSM, Fed, Crescent Capital, Vanguard, Global, Locations: Europe
The U.S. economy is on a roll, expanding at a 4.9% annual clip in the third quarter, the Bureau of Economic Analysis reported on Thursday. Analysts are looking for the overall index to show prices increased at a 3.4% annual rate and the core index at 3.7%, down from 3.5% and 3.9%, respectively. On Wednesday, Adobe Analytics issued its monthly measure of online prices showing they continue to fall, hitting a 41-month low in September. “Online prices fell for the majority of Adobe’s tracked categories (12 of 18) on an annual basis. On a month-over-month basis, online prices were down 0.6%.”
Persons: ” Joseph Brusuelas, , Steve Rick, Raymond James, Eugenio Aleman, Organizations: Economic, RSM US, Federal Reserve, TruStage, Labor Department, Adobe Analytics, Locations: U.S
watch nowThe auto workers' strike is the latest in a series of labor-management conflicts that economists say could start having significant growth impacts if they persist. So far, the United Auto Workers stoppage has impacted just a small portion of the workforce with limited implications for the broader economy. United Auto Workers (UAW) members on a picket line outside the Stellantis NV Toledo Assembly Complex in Toldeo, Ohio, on Monday, Sept. 18, 2023. August alone saw some 4.1 million labor hours lost this year, the most for a single month since August 2000, according to the Labor Department. Year to date, there have been 7.4 million hours lost, compared to just 636 hours total for the same period in 2022.
Persons: Ian Shepherdson, Emily Elconin, Shepherdson, Doris Dear, John Nacion, Joseph Brusuelas, Brusuelas, Biden, Janet Yellen, CNBC's Sara Eisen Organizations: United Auto Workers, Labor Department statistics, Pantheon, UAW, Stellantis NV, Bloomberg, Getty, Big Three, Ford, GM, Federal Reserve, Labor, Labor Department, HBO, National Union Solidarity, Writers Guild of America, Screen Actors Guild, University of Michigan, RSM, York Fed Locations: Stellantis NV Toledo, Toldeo , Ohio, U.S, New York City, John, Los Angeles, California , Oregon, Washington, York
Inflation showed its sticky nature in July, rising slightly as increases in services costs offset a decline in the price of goods, the Bureau of Economic Analysis reported on Thursday. The personal consumption expenditures price index, a metric closely followed by the Federal Reserve, rose 0.2% for the month and 3.3% for the 12-month period. The core index, stripping out energy and food costs, rose 0.2% and 4.2%, respectively. “The decline in house prices appears to have abated, which means that the contribution from shelter to core inflation next year may stabilize if not increase. Upside inflation risk is also present in healthcare services where insurance prices are expected to rise this October along with a continued upward pressure on labor demand in the sector, thus suggesting higher wage costs.”
Persons: Joseph Brusuelas, Jerome Powell, ” Powell, , Shana Orczyk Sissel, Joe Davis Organizations: Economic, Federal, RSM, Dow Jones, Banrion Capital Management, Vanguard Locations: , Wyoming
New York CNN —Fitch Ratings downgraded US long-term debt late on Tuesday from AAA to AA+, citing this spring’s debt ceiling standoff as a major reason. In the midst of the very tense debt ceiling standoff of 2011, Standard and Poor’s downgraded US debt for the first time in history. “My sense is that the Fitch downgrade of the US credit rating is an insignificant development and will not move financial markets or the economy,” said Joseph Brusuelas, chief economist at RSM US. “The majority of our clients’ investments in China are through index funds, and we are one of 16 asset managers currently offering US index funds investing in Chinese companies,” BlackRock said in a statement to CNN. “With all investments in China and markets around the world, BlackRock complies with all applicable US government laws.
Persons: New York CNN — Fitch, Fitch, , Joseph Brusuelas, ” Fitch, Larry Summers, Janet Yellen, , Dow, BlackRock, Larry Fink, Henry Fernandez, MSCI, Mike Gallagher of, Raja Krishnamoorthi, ” BlackRock, ” MSCI Organizations: CNN Business, Bell, New York CNN, AAA, AA, RSM, Federal Reserve, Fitch, Treasury, US, Twitter, Dow Jones, Nasdaq, Tech, Nvidia, Apple, Microsoft, Congressional, Chinese Communist Party of, BlackRock, CNN, People’s Liberation Army, PLA, Republican, Locations: New York, America, United States, States, Mike Gallagher of Wisconsin, Illinois, MSCI, China
Government data released Tuesday showed that boom continued in June, with spending on manufacturing facilities up nearly 80 percent over the past year. The manufacturing sector as a whole has added nearly 800,000 jobs since Mr. Biden took office and now employs the most people since 2008. Measures by the University of Michigan and the Conference Board suggest consumers have grown happier with the current state of the economy and more hopeful about the year ahead. Hourly wages outpaced price gains in the spring for the first time in two years, giving consumers more purchasing power. National opinion polls still show a sour economic mood — but it appears to be improving slightly.
Persons: Biden, , Joseph Brusuelas Organizations: RSM, University of Michigan, Conference Board, New York Times, Siena College Locations: Siena
Nonfarm payrolls increased 209,000 in June and the unemployment rate was 3.6%, the Labor Department reported Friday. Employment growth eased in June, taking some steam out of what had been a stunningly strong labor market. A more encompassing unemployment rate that includes discouraged workers and those holding part-time jobs for economic reasons rose to 6.9%, the highest since August 2022. "This is a strong labor market where demand for higher paying jobs is clearly the trend," said Joseph Brusuelas, chief economist at RSM. The June report "suggests labor market conditions are finally beginning to ease more markedly," wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Persons: Nonfarm, Dow, downwardly, payrolls, Seema Shah, Joseph Brusuelas, Andrew Hunter Organizations: Labor Department, Dow Jones, Asset Management, ADP, Blacks, of Labor Statistics, RSM, Capital Economics
But what does the Fed mean when it talks about labor markets and their impact on inflation? What’s happening: At its most basic level, labor productivity is a measure of the value of the goods and services produced by a company compared with the amount of labor used to produce that output. Labor productivity decreased 2.1% in the first quarter of 2023, the US Bureau of Labor Statistics reported earlier this month. The silver lining: The good news is technological innovations typically drive upturns in productivity and AI could be such an innovation. Absolutely not,” Yellen said, echoing the joint statement leaders from the Group of Seven made at last month’s summit in Japan.
Persons: Lisa Shalett, , Lisa Cook, Joseph Brusuelas, Sundar Pichai, aren’t, Jeffrey Sonnenfeld, Richard Blumenthal, , Doug McMillon, Roger McNamee, Steven Spielberg, Vito Corleone, Janet Yellen, ” Yellen, Elisabeth Buchwald, Yellen, Biden Organizations: CNN Business, Bell, New York CNN — Federal Reserve, Morgan Stanley Wealth Management, Fed, Labor, US Bureau of Labor Statistics, BLS, McKinsey Global Institute, Federal, RSM US, of America, Google, Yale School, Management’s, Leadership Institute, Walmart, Technology, Financial, International Monetary Fund, Inter, American Development Bank group’s, African Development Fund, IMF Locations: New York, United States, Michigan, Connecticut, China, Japan
Survey respondents attributed the changes in lending standards to economic uncertainty, a reduced appetite for risk, deterioration in collateral values and broader concerns about banks’ funding costs and liquidity positions, according to the Fed report. At the time, banks expected that trend of tightening credit, waning demand and deteriorating loan quality would continue. Fed president: Central bank should weigh effectsFederal Reserve Bank of Chicago President Austan Goolsbee said in an interview with Yahoo! Fed officials, including Chair Powell, have previously noted that credit tightening could act similarly to a rate hike. A ‘salient risk’Separately on Monday, the Fed released its semi-annual Financial Stability Report, which assesses the resilience of the US financial system.
Minneapolis CNN —High prices, rising interest rates and banking uncertainty be damned: The US labor market is still chugging right along. “The American labor market right now is simply unstoppable,” RSM economist Joseph Brusuelas wrote in a note Friday. “This is what a soft landing would look like, with job growth gradually slowing to a more sustainable pace,” Faucher added. The milestone comes just three years after the Covid-19 pandemic caused mass layoffs that pushed the Black unemployment rate as high as 16.8%. “Make no mistake, the Black [unemployment] rate is still too high,” Shierholz tweeted.
However, job openings that month tumbled to their lowest level since May 2021, according to data released Tuesday. The shifting landscape paved the way for the collapse of Silicon Valley Bank in March and First Republic Bank this week. By blessing JPMorgan’s takeover of First Republic Bank, the Democratic US senator fears federal regulators just made the “too big to fail” problem even worse. To the relief of investors and bank customers, the JPMorgan deal protects all of First Republic’s depositors. The decision to invest in food and grocery delivery during the pandemic has become a big advantage for Uber.
New York CNN —The collapse of First Republic Bank is unlikely to worsen the US economic outlook, JPMorgan CEO Jamie Dimon said Monday. Dimon told CNN’s Poppy Harlow early last month that the stress in the banking system had increased the odds of a US recession. The bank had $100 billion in those deposits withdrawn from the bank during the first quarter, it reported last week. “The American banking system is extraordinarily sound,” he said. But he agreed with Dimon that the seizure of First Republic, however, does not shift those forecasts, he told CNN Monday.
In fact, excluding the drag from inventories, GDP growth actually would have been closer to 3.4%, well above trend. However, most economists and strategists on Wall Street think the U.S. economy is still on the path to recession. We continue to expect the drag from higher interest rates and tightening credit conditions to push the economy into a mild recession soon." Jim Baird, chief investment officer, Plante Moran Financial Advisors "For all the discussion of recession risk – which is very real – consumers remain willing and able to spend. Recession risks remain elevated; the first estimate of Q1 GDP confirms that the economy continues to slow.
While inflation has come down and other economic data point to a cooling economy, the labor market has remained remarkably resilient. The labor market is cooling but not rapidly or significantly, and further rate hikes can’t be ruled out. More trouble for commercial real estateA few weeks ago, Before the Bell wrote about big problems brewing in the $20 trillion commercial real estate industry. In a worst-case scenario, anxiety about bank lending to commercial real estate could spiral, prompting customers to yank their deposits. The proportion of commercial office mortgages where borrowers are behind with payments is rising, according to Trepp, which provides data on commercial real estate.
Despite peaks and valleys, stocks closed the first quarter on an up note, with the S & P 500 rallying more than 7% and the tech-fueled Nasdaq soaring about 16%. .SPX .DJI YTD line S & P 500 gains so far in 2023 Indeed, the market has lived through a lifetime of scary headlines in the first three months of 2023. Despite repeated protestations from Fed officials that they are taking the higher-for-longer approach on interest rates, markets still expect cuts. AAPL .SPX YTD mountain Apple compared to the S & P 500 Only five of the 11 S & P 500 sectors are positive for the year, despite the substantial rally for the index. The net profit margin for the S & P 500 also is expected to edge lower to 11.2%.
Federal Reserve Chair Jerome H. Powell testifies before a House Financial Services hearing on "The Federal Reserve's Semi-Annual Monetary Policy Report" on Capitol Hill in Washington, U.S., March 8, 2023. That changed after Powell's appearance, during which he cautioned that if inflation data remains strong, he expects rates to go "higher than previously anticipated" and possibly at a faster pace than a quarter point at a time. Basically, it was the January inflation data plus signs that the labor market remains remarkably strong despite the Fed's efforts to slow it down. Brusuelas is among those who think the Fed should accelerate its inflation battle with a half-point rate hike. However, he said policymakers could be swayed by a potentially softer jobs report and inflation data next week that reverses course and shows price increases abating.
Here's how the U.S. economy could escape a recession in 2023
  + stars: | 2022-12-30 | by ( Jeff Cox | )   time to read: +12 min
The U.S. economy heads into 2023 facing what might be the most anticipated recession in history. That basically means some parts of the economy will feel like they're in a recession while others won't. "Some areas of the economy may not feel like they actually are in recession. "For certain parts of the economy, it will feel like a very deep recession. For other parts, it will feel like a healthy growth economy, particularly in the parts of the economy where we see strong demand," she said.
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