Key Signs a Recession is Starting Soon... If It Hasn't Already Started

Economic

Summary:

Historical data suggests that significant Fed rate hikes and an inverted yield curve often precede major recessions and stock bear markets. Recent employment data, including declining job openings and full-time jobs, signals an imminent or ongoing recession. Proven recession indicators, such as rising unemployment and underperforming speculative assets, suggest a bear market is likely imminent.

Over the past century, after a significant Fed rate hiking cycle which resulted in an inverted yield curve — as we have seen over the past couple of years — there has been a major recession and stock bear market.

With investor sentiment towards stocks at historically high levels, most investors are either unaware of this phenomenon or believe this time is different for some reason.

I believe most investors are in for a major surprise… and not in a good way.

Declining employment is a key hallmark of recessions and leads to significant declines in spending and production, which leads to significantly lower corporate earnings, which leads to significantly lower stock prices.

In this article, I will show that the latest employment data suggests a recession is coming soon or is here already.

Jolting JOLTS Data

Every month, the US Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey, known on Wall Street as the JOLTS report. This report provides data on job openings, hires and separations, including quits and layoffs.

The latest JOLTS data shows that job openings, quits and hires are all declining at a rate that historically has only been observed during recessions. Of particular concern is job openings in the construction industry, since it is such a highly cyclical industry. Remarkably, construction job openings have collapsed by a whopping 46% over the past six months.

The chart below shows there has been a strong historical relationship between job openings (orange line) and S&P 500 stock prices (blue line). This relationship has been severed over the past couple of years, as AI-mania over mega-cap tech stocks like NVIDIA has driven the S&P 500 to all-time highs, while job openings continue to decline. Meanwhile, the median stock (as represented by the Value Line Geometric Index) is still 16% lower than it was nearly three years ago!

Key Signs a Recession is Starting Soon... If It Hasn't Already Started_1

OVOM Research

Latest Jobs Report Signals Recession

The August jobs report was disappointing. A total of 142,000 new jobs were added in the US during August, missing Wall Street expectations of 165,000. Also, the July and June jobs numbers were revised down by a combined total of 86,000 jobs. This is consistent with prior months, as six of the past seven monthly jobs numbers have been revised down.

Note that this disappointing report came out after the Bureau of Labor Statistics recently revised March 2024 nonfarm payrolls down by 818,000 jobs. That was the second-largest negative payrolls' revision after the revision in 2009. Clearly, jobs growth has been disappointing.

Manufacturing jobs declined by 24,000 in August, which is the second-largest decline in manufacturing jobs in three years. This is concerning, since manufacturing, along with construction, is one of the most cyclical industries in the economy.

Another concern shown in the jobs reports was a decline in full-time jobs, offset by an increase in part-time jobs. Full-time jobs fell by 438,000, while part-time jobs rose by 527,000. In fact, all the net jobs added over the past year have been part-time jobs, with full-time jobs declining by 1.02 million and part-time jobs increasing by 1.05 million. As the following chart shows, full-time jobs (blue line) are declining by 0.8% year-over-year, while part-time jobs (red line) are rising by 14.4%. Such a wide disparity between full-time and part-time jobs is typical in the early stages of a recession. Note that full-time jobs have declined for the past seven months. Historically, a recession has occurred when there has been three straight months of full-time job declines.

Key Signs a Recession is Starting Soon... If It Hasn't Already Started_2

FRED

Temporary job losses are another proven leading recession indicator, since it is easier for companies to lay off temporary workers. As with full-time jobs, a recession has historically occurred when there have been three straight months of temporary job declines. So far, temporary jobs have declined for the past twenty-two months.

Another key recession sign is a decline in the total number of workers. Historically, recessions have typically occurred when the number of people employed has declined. In August, employment fell by 66,000 from the prior year, which is the first decline since the covid panic.

Whenever the percentage of total payroll growth over the past year driven by private payrolls (excluding education and healthcare sectors) has fallen below 40%, that has signaled a recession. This measure dropped to 38% in July (as shown below) and 37% in August.

Key Signs a Recession is Starting Soon... If It Hasn't Already Started_3

BofA Global Research

Another simple and proven recession indicator is the unemployment rate. The last nine recessions occurred when the unemployment rate rose by at least 0.5%. The unemployment rate in August was 4.2%, which is 0.8% higher than the lows reported in April 2023, 16 months ago. Historically, a recession has occurred 1 to 16 months after the unemployment rate troughs. If history is a guide, that suggests a recession is starting now or has already started.

Fed Rate Cuts Will Not Help

The Fed is widely expected to start cutting rates this month, even though “SuperCore” PCE inflation, Fed Chair Jay Powell’s favorite inflation metric, increased by 3.3% in July, the same increase seen in December 2023. That is more than 50% higher than the Fed’s arbitrary 2% target. In addition, wage growth was 3.8% in August, nearly double the Fed’s target.

Amazingly, most investors appear to believe that Fed rate cuts will prevent a recession and lead to a continuation of the stock market rally, even though rate cuts did not prevent the recessions and bear markets of the early 2000s and 2008-2009. They have forgotten that monetary policy is notorious for having long and variable lags, lasting a couple of years on average.

Indeed, as the following chart shows, whenever the Fed has cut rates after significant rate hikes, the unemployment rate has risen dramatically and there has been a recession.

Key Signs a Recession is Starting Soon... If It Hasn't Already Started_4

FRED

Conclusions

Many proven employment-related recession indicators are flashing red right now. So are many stock sectors and asset classes. With stock market valuations and investor stock allocations near all-time highs, many investors will likely suffer in the bear market to come. I recommend not being one of them.

Source: SEEKINGALPHA

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

UBS

Economic

Effective engagement has long been seen as a key component of any asset manager’s fiduciary duty, representing one of the two key pillars (along with voting) of stewardship or active ownership, as defined by the UN Principles for Responsible Investment (PRI) and consequently adopted by LPs and GPs alike. And while stewardship in ‘traditional’ asset classes, such as public equity markets, can often be relatively easily monitored and effectiveness quantified, an (until recently) under-publicized topic is engagement by Limited Partners (LPs) with General Partners (GPs) in private markets.

LPs can (and do) define engagement differently, but the term is widely understood to encompass some form of two-way dialogue with GPs, with the aim of exchanging information, improving understanding and driving specific actions or outcomes. The ultimate goal of this engagement is to enhance an investment’s financial and non-financial performance, clearly benefiting all parties involved.

Although engagement is a long-standing practice and was never restricted to sustainability issues (such as net-zero targets, exposure to physical climate risks or health and safety track record), it has recently come under the spotlight as to how effective it can be in enhancing sustainability performance and delivering tangible non-financial outcomes, at the same time as improving the financial risk-adjusted returns and maximizing long-term value.

Despite private market LPs often holding a reasonable amount of influence over their underlying GPs, engagement (on sustainability topics but also more broadly) in these alternative asset classes is made more challenging by a lack of direct control and (sometimes) visibility over underlying investments (portfolio companies, real estate assets, etc.).

Additionally, the nature of underlying investments can vary greatly across private market portfolios, ranging from multi-family housing to software companies, from bridges to ferry operators. Market practices on sustainability-related engagement can also differ by LP size (for example depending on number of employees or assets under management in that LP), location and geographic focus of investments, and very often the LP’s wider environment alongside other general market conditions. Engaging with a GP on setting a net-zero target when faced with the prospect of jeopardized investment returns is a far more challenging exercise than the same exercise in a less volatile and return-steady market.

Client expectations are also evolving, with growing demands for improved sustainability practices and results; this is driven by a number of factors such as pressure for greater investment returns (and the belief of many that sustainability is linked to risk-adjusted financial returns) and fast-evolving disclosure regulations (e.g. demanding evidence of discussions with investee companies, monitoring and following up on discussed action points, etc.). These factors and pressures all add to the complexity of delivering and carrying out an effective engagement program in alternative asset classes for LPs and their GPs, but have also accelerated progress and improvement across the market too.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Alex

Economic

The Japanese government is considering support measures to make it easier for companies to enter into long-term purchase contracts for liquefied natural gas to ensure a stable supply of the super-chilled fuel, the industry ministry said on last week.

At a meeting with energy experts to discuss fossil fuel procurement, the Ministry of Economy, Trade and Industry (METI) outlined possible measures, including financial support for securing storage tanks in Japan and abroad, and a new scheme to assist LNG buyers committing to long-term contracts.

Details are still being finalised, a ministry official said.

Gas-fired power generation accounts for about 30% of Japan's power mix. Japan, the world's second-biggest LNG importer, faced heightened energy security risks after Russia's invasion of Ukraine, which led to soaring spot LNG prices and subsequently increased electricity costs.

To mitigate these risks, METI is exploring measures to support Japanese power and gas utilities in securing long-term LNG contracts, as LNG remains a crucial fuel source for Japan.

From an energy security perspective, the ministry is also considering forming an index to assess how much LNG Japan can stably procure and use relative to its needs.

Other measures include a government-led initiative to secure LNG in emergencies, potentially through a pre-arranged agreement between gas suppliers and the government, with a fee paid to ensure supply, the ministry official said.

At the meeting, METI emphasised the importance of diversifying sources for crude oil procurement as Japan relies on the Middle East for 95% of its oil.

The ministry also stressed the need to secure a stable supply of thermal coal, despite the global shift away from the dirty fuel.

The ministry said that the rapid divestment from upstream coal assets, especially in developed nations, could create a discrepancy between global supply and demand. METI underscored the benefits of coal, such as its low cost per heat unit, and Japan's need to maintain varied energy sources.

Source: The edge markets

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Owen Li

Economic

Blue-chip companies are spending more money on US dollar bond interest payments, and even Federal Reserve rate cuts this year won’t immediately reverse the trend.

High-grade issuers are poised to pay around $420 billion in coupons this year, up 18% from last year, according to a note by JPMorgan Chase & Co. That increase is three times the rate of revenue growth for companies in the S&P 500 Index during the second quarter — suggesting the trend is weighing on profit growth for many companies.

The difference between yields on new bonds and maturing bonds so far this year for companies in the US investment-grade market averages about 2.01 percentage points, or 201 basis points, data compiled by Bloomberg show. The higher costs are likely to persist for several more quarters, according to the JPMorgan report.

“Even with some Fed cuts, issuers will still on average be paying more for new debt versus maturing debt,” JPMorgan strategist Nathaniel Rosenbaum wrote in an email.

Fed policymakers are due to meet this week, and interest-rate traders broadly expect them to start cutting rates at that meeting. But for many high-grade companies, that won’t translate to lower bond expenses right away because their maturing debt often comes from the era of low interest rates, and the Fed tightening campaign that started in 2022 has lifted current borrowing costs so much from those levels.

Some companies have taken steps to keep costs manageable, with rate relief solutions including fine-tuning hedging strategies and shifting into debt that matures sooner.

“Now that rates are higher, we’ve tended to have more shorter-dated debt,” said Tim Arndt, chief financial officer at Prologis Inc., a real estate investment trust that focuses on warehouses.

Paying more interest can be punishing for companies, leaving them with less money for items like business investments and wages. For high-grade companies, the interest coverage ratio — which compares a measure of earnings with interest expenses — has come down since 2022, indicating a slight weakening in corporate credit quality, according to a report from S&P Global.

Rising interest costs also make acquisitions more expensive, which can limit companies’ ability to grow, move into adjacent business lines or cut operational expenses through efficiencies.

“You have to ask yourself the question, is it worth it for me to do those types of things given the fact that I have to pay interest, which is higher than it has been in the past?,” said Raj Shah, co-head of US investment grade bonds at PGIM Fixed Income.

ZIRP No More

Overall, though, the higher interest expenses appear to be frustrating rather than debilitating. Many companies were accustomed to rock-bottom interest rates — known as “ZIRP,” for Zero Interest Rate Policy — for such a long time.

Looking ahead, the extent and frequency of the Fed’s rate cuts are center stage for companies and investors. An inflation report on last Wednesday dampened odds of a cut beyond 25 basis points among traders.

If the Fed does cut rates more aggressively, it will probably be because economic growth is slowing fast, said Daniel Sorid, head of U.S. investment grade credit strategy at Citigroup. That would suggest layoffs, lower demand and weaker corporate profits ahead — all of which would hit credit, he said.

In the meantime, investors have been reinvesting interest payments back into the market, driving demand and keeping risk premiums relatively tight. They are getting more money back than they can invest: Bank of America in June forecast total high-grade corporate coupon payments of $220 billion in the second half of 2024, while net issuance will probably be around $89 billion. In that way, any growth in coupon payments could help support corporate bond valuations.

“That eliminates one more thing for investors to worry about,” said Travis King, head of US investment grade corporates at Voya Investment Management.

Source: The edge markets

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

ING

Economic

Since Vice President Kamala Harris replaced Joe Biden as the Democrat Party presidential candidate, she has been strategically silent about her energy and climate policy platform. Her campaign for the 2020 presidential election indeed outlined an aggressive vision, where she proposed to spend $10 trillion to decarbonise the US economy, establish a carbon tax, and ban fracking. But this time around, her ambiguity on climate policy so far is signalling a departure from her 2020 stance and a move toward the centre.

Harris may face mounting pressure to lay out a more detailed energy and climate policy platform as we head to the elections, but either way, we would expect Harris to preserve the Biden administration’s most important climate legacy – the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA).

Based on these two laws, she may propose to expand clean energy spending and put a stronger emphasis on certain aspects, such as environmental justice and affordable energy. She is also likely to toughen environmental regulations, such as on vehicles and oil and gas. But those regulations run a high risk of being struck down now that the Supreme Court has overturned the Chevron Doctrine and shifted much of government agencies’ power to the judiciary branch.

Oil and gas

Harris would need to carefully handle the delicate balancing act among energy transition, energy security, and market stability. This will remain difficult given the exacerbated political polarisation, increased cost of living, as well as the US’s role as the world’s largest oil and gas exporter. Thus, as discussed before, we would not expect Harris to take an extreme approach toward the oil and gas industry – in fact, she has already indicated that she no longer supports a fracking ban.

US oil output would likely continue to hit record highs regardless of who is in the White House as we have seen over the last few presidencies. We would also likely see caution from Harris on new LNG export licensing bans, as the January ban has already been overturned by a federal judge and would similarly be struck down by the Supreme Court.

Instead, a Harris administration might try to implement policies asking oil and gas companies to pay more royalties for drilling on federal lands or toughening the rule of fee collection over methane emissions. Harris might even try to reduce current subsidies to oil and gas companies – as newly indicated on the Democrat Party’s policy website. However, this latter policy may prove to be difficult to implement because of the stubborn existing system and the strong lobbying power of the oil and gas industry, especially if the Democrat Party does not control Congress.

IRA

The IRA will not go away, because even if Congress somehow succeeded in voting to repeal the act, the decision would be vetoed by Harris. Nevertheless, the Democrats may need to make compromises on certain IRA provisions. The compromises may be done by cutting certain clean incentives such as for electric vehicles (EVs), making more clean fossil fuel power plants eligible for clean power tax credits, and favouring blue hydrogen over green hydrogen, among others. Additionally, more compromises might be necessary if the deficit issue in the US becomes more severe.

In any case, we expect the Harris administration to work on an even better implementation of the IRA. Harris’ Vice President pick of Governor of Minnesota Tim Walz has signed into law various legislation to help the state tap into the clean energy funding of the IRA and reduce emissions. While not easy to replicate at the national level, the Harris administration can leverage Walz’s experience to work with federal agencies and ensure more efficient flows of funding to states.

EVs

If Democrats do not control Congress, the US EV policy would remain vulnerable, even with Harris winning the White House. Harris would want to support the EV industry even more, but any EV provisions under the IRA – tax credits, charging network funding – would be first in line to be sacrificed for a compromise. Nevertheless, we can still expect the Harris administration to push for educational programmes and work with car manufacturers to upskill the industry’s workforce and promote the adoption of EVs.

EV and hybrid vehicle sales as a percentage of total light-duty vehicles

Hybrid electric vehicle without plug: HEV, battery electric vehicle: BEV, plug-in hybrid electric vehicle: PHEV

Source: Argonne National Laboratory, ING Research

Renewable power

Supportive policies on renewable power would stay largely intact with possible additional efforts to reform the transmission lines and shorten permitting timelines. The renewable industry in the US would continue to develop steadily, further driving down the cost of production.

Hydrogen and CCS

The hydrogen and CCS tax credits have the highest chances of staying among all incentives provided under the IRA. However, without Democratic control of Congress, we would still see pressure to make the tax credit eligibility requirements looser for both hydrogen and CCS. And since the Department of Energy's LPO’s funding does not differentiate among technologies, it is likely to be cut in this scenario, too. Efforts from corporates to develop pipelines will continue, though support from the government will not be high.

Critical minerals

Onshoring key technologies (such as batteries) and securing the critical mineral supply chain would also be a priority for Harris. But as opposed to Trump’s comprehensive tariff proposal, Harris might target tariff hikes on strategic goods, including batteries, graphite, and permanent magnets, among others, with existing/further exemptions or delays in implementation.

Regulation

Harris may put a strong emphasis on strengthening environmental regulation to push the US to a cleaner economy faster. But there is a strong resistance force – the Supreme Court.

In recent years, the conservative Supreme Court has made several decisions limiting the EPA’s regulatory power. In 2022, it ruled that the EPA does not have the authority to limit emissions from power plants by taking a broad view of the Clean Air Act (CAA) and forcing them to switch from one source of generation to another. Power plants must instead be regulated based on the best system of emissions reduction (BSER) method authorised under the CAA.

In June this year, the Supreme Court overturned the 40-year-old “Chevron doctrine” under which lower courts needed to defer to federal agencies to implement legislation that was ambiguous in interpretation. Moreover, the Supreme Court recently temporarily blocked the EPA’s “Good Neighbour” rule to regulate power plant nitrogen oxide emissions from upwind states.

These decisions have shifted more power of interpreting federal law from the executive branch to the judiciary branch. This means that despite Harris’ will, the EPA’s newly finalised vehicle tailpipe emissions rule, its new regulations on coal and gas power plants (following the 2022 Supreme Court guidance on using BSER), and any new regulations could all be at risk. Consequently, the US may need to rely even more on carrots than sticks to drive the energy transition.

Climate leadership

A Harris administration would advance climate leadership through continued engagement in the United Nations Conference of the Parties on climate change. But the US’s climate credibility may be hard to enhance given its lack of a comprehensive climate policy ecosystem, its lagging progress in mandating sustainability disclosure, as well as potential clean energy funding pullbacks.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Goldman Sachs

Economic

Our analysts increased their forecast for US home price appreciation to 4.5% this year and 4.4% in 2025, up from previous estimates of 4.2% and 3.2% respectively in April.

We spoke with Goldman Sachs Research analyst Vinay Viswanathan about the revised outlook and why homes might become more affordable even as prices continue to climb.

Your team recently upped its forecast for US home prices, noting that “bad news is likely good news” for home prices. What did you mean by that?

It’s a reflection of the fact that labor markets appear to be loosening, which gives the Fed more room to cut. Our economists now forecast the Fed will deliver three consecutive 25 basis point rate cuts at the remaining meetings this year.

Now, if we thought the ability of homebuyers to purchase houses would diminish because of a worsening economy, in which people lose jobs and income and are therefore unable to afford a mortgage, rising prices would be bad news.

But we’re not seeing higher permanent layoffs — at least not yet. The reason we think right now that bad news is good news is that rates are falling because of concerns around employment, and we don’t think those concerns will really affect the housing market without income loss. All you’re really seeing is that the cost of buying, of taking on a mortgage, is coming down. To that end, we’ve already seen substantial improvement in funding costs. Just to frame this, the peak in the cycle saw mortgage rates of about 7.8% in Oct. 2023. Mortgage rates have since fallen all the way back down below 6.5%. We believe we’re well past the peak in mortgage rates, and we think it's going to be a slow but steady grind lower over the coming years.

How does your anticipated home price appreciation compare to recent history?

The growth in home prices has been really resilient. At the start of the pandemic, there was a lot of concern that home prices might actually decline, because of the loss of income. The opposite happened. There ended up being a massive surge in household formation, which created an organic need for housing. On top of that, it was also a time when there wasn’t a ton of supply, both in terms of existing inventory and new builds. Those factors in the supply and demand sides led to the strongest home price growth we’ve seen in the country’s history: around 20% on an annualized basis.

Over the last year, home prices have grown by about 5.5 %, which is a little above the historical trend of about 5%. Clearly, there’s still not enough supply. But it also goes back to the household formation story. Peak homeowner age is between 30 and 39, when people start having children. And we have a lot of people in America in that cohort who need housing just based on where they are in their lives.

But isn’t the unaffordability of housing impacting their buying decisions?

It’s true that, by almost any estimate, affordability is the worst right now than it’s been for as long as we have data on record — so since the early 1980s. A lot of folks were thinking we would have home price declines again because of this. We had maybe a couple of months of home price declines, but then very quickly they reversed back up.

US House Prices are Forecast to Rise More Than 4% Next Year_1

I do think we’re bucking some of the historical norms that have governed the housing sector. A lot of that just comes down to what’s happening under the hood. First, consumer balance sheets remain in really good shape overall, despite the fact that there’s weakness in the bottom income quintile, where we are seeing cracks. And second, unemployment has been attributed mostly to temporary layoffs or new entrants into the economy. Permanent layoff rates are still quite low.

If home prices keep rising, though, how does that impact the affordability problem?

There are two ways to get out of this affordability trap that we’re in. One way would be if home prices fall in one fell swoop, and you immediately see, say, a 20% drop in home prices over the course of a year, which brings affordability back to normal.

The other way, which we think is going to happen this time around, is you have a slow grind in affordability back down to normal levels. We think three factors will drive that. First, we’ll have a gradual lowering of interest rates. Mortgage rates have already fallen in anticipation of the Fed rate cuts, so they’ll probably remain unchanged from current levels through the rest of the year. But we think they’ll fall by another 40 basis points next year. Second, we think income growth will remain positive — we’re forecasting real disposable income growth of 2.4% this year and 2.1% next year, which are both pretty healthy levels relative to history. And lastly, we think home price growth will be positive but below trend — just enough that we will see affordability stabilize.

Based on these views, we think we will get back near a healthy level of affordability by the end of the decade, so it will be a five-year odyssey of slow normalization.

US House Prices are Forecast to Rise More Than 4% Next Year_2

Why haven’t we seen mortgage applications respond yet to the decline in borrowing rates?

It’s a good question, and one that we’ve been a little puzzled by. The main factor, in my opinion, is that the timing of the drop-in rates was not ideal. You typically see a seasonal spike in mortgage applications at the end of spring, around April or May. But mortgage rates really didn’t start to drop until June. If that had happened earlier, I think you would have seen a bigger effect. Right now, we’re entering the seasonal slowdown in the market when kids are going back to school and families generally don’t want to move. So I think it’s really just residual seasonality that’s the big driver here.

US House Prices are Forecast to Rise More Than 4% Next Year_3

What are some of the big differences you’re seeing among US regions?

Year to date, we’ve seen the strongest home price growth in three main areas. First is the Midwest, which by most estimates is the cheapest and most affordable part of the country. Cities like Cleveland and Chicago have done really well. Second is the Northeast. New York and Boston have had a really strong year. The third is California, especially San Diego. People assumed California would be the worst-performing state because the baseline level of affordability was so low. But California also has pretty onerous land-use regulations that limit supply, and there’s been a lot less financial distress than people were expecting, with one of the lowest loan-to-value ratios on outstanding mortgages in the country.

We have a model-driven forecast for home price appreciation in the top 381 metros in the country, and we have two very out-of-consensus views as a result. First, we think California home price appreciation will do very well over the next two years. Certain metros like San Jose could see up to 10% appreciation over the next 12 months.

On the other hand, we are pessimistic about the Southeast, and Florida in particular. You’ve seen lower income growth on a real basis in Florida versus the rest of the country, and it has also experienced a massive shock in affordability. Florida actually entered the pandemic being relatively affordable, and now it’s one of the least affordable parts of the country. Not only that, insurance costs have ballooned in Florida, which has to be factored into the outlook.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

FastBull Featured

Daily News

Central Bank

Economic

[Quick Facts]

1. No progress in Gaza ceasefire talks in recent weeks, sources say.

2. Eurozone labor costs have risen too much, inflation may fall going forward.

3. NY Fed reports improved manufacturing but weak employment in Sept.

4. European gas prices fall on warmer weather and improved supply outlook.

5. Oil prices surge on Monday.

[New Details]

No progress in Gaza ceasefire talks in recent weeks, sources say

Palestinian sources familiar with the negotiations stated that there has been no progress in Gaza ceasefire talks in recent weeks. These sources indicated that recent mediation efforts aimed at pressuring Israeli Prime Minister Netanyahu to return to the negotiating table to end the war and release the detainees have failed. Netanyahu's new demands, such as maintaining Israeli military control over Gaza's "Philadelphi Corridor," have disrupted the negotiation process.

The sources noted a "real gap" between Hamas's demands and Netanyahu's, which has hindered the agreement. They also mentioned that Qatar and Egypt are seeking to pressure the U.S. to compel Netanyahu to meet the requirements for a Gaza ceasefire.

Eurozone labor costs have risen too much, inflation may fall going forward

Pantheon Macroeconomics economist Claus Vistesen stated that hourly labor costs in the Eurozone grew by 4.7% from a year earlier, which is still too high for the European Central Bank's (ECB) 2% inflation target. In a report, he wrote: "With the rapid slowdown in the growth of corporate profits and profit margins, core inflation and headline inflation may continue to decline even if unit labor cost increases at a high rate in the next 6 to 12 months."

Vistesen noted that based on earlier data and the ECB's own wage tracker, while wage growth is expected to rebound in the third quarter after a significant slowdown in the second quarter, this is unlikely to alarm the ECB given the overall downward trend.

NY Fed reports improved manufacturing but weak employment in Sept

Business activity in New York State grew for the first time in nearly a year, according to business responses to the September 2024 manufacturing survey. The NY Fed manufacturing index recorded 11.5 in September. The survey showed an increase in new orders, a significant rise in shipments, stable delivery times and supply, and steady inventory levels.

However, labor market conditions remain weak, with modest employment contractions and stable average weekly hours. Input and sales prices have remained virtually unchanged. Despite the capital spending index falling below zero for the first time since 2020, businesses have become more optimistic about conditions improving in the coming months.

European gas prices fall on warmer weather and improved supply outlook

European gas prices fell due to warmer weather and improved supply outlook. The benchmark Dutch TTF gas futures contracts fell 3.9% to €34.26 per MWh on Monday. Florence Schmit, energy strategist at Rabobank noted: "Some short-term bearish indicators are pushing TTF gas prices lower." The main drivers include a warmer weather outlook, a slight decrease in Asian demand for Liquefied Natural Gas, and an expected end to planned power outages in Norway next week.

Meanwhile, EU gas reserves have reached 93.30%, according to industry data. However, Schmit warned: "Volatility has not disappeared. Weather changes in Europe and Asia this winter, as well as gas flows from Russia through Ukraine to Europe, still pose risks for price increases."

Oil prices surge on Monday

Due to Hurricane Francine's impact on oil production in the U.S. Gulf of Mexico, Brent crude oil prices rose by 1.11% on Monday; WTI crude prices rose by 1.82%. The oil market remains cautious ahead of this week's Fed meeting.

Traders are likely to remain cautious before the upcoming Fed interest rate decision. With some production capacity in the Gulf of Mexico still offline, supply concerns are supporting oil prices. Lower interest rates typically reduce borrowing costs and boost oil demand; however, a 50 basis point rate cut by the Fed could raise concerns about oil demand.