Morning Report: The US economy stagnates

Posted on September 22, 2023 by Brent Nyitray

Vital Statistics:

Stocks are higher as markets digest the Fed’s hawkish language from Wednesday. Bonds and MBS are flat.

The 10 year briefly touched 4.5% in the overnight session, which is the highest level since 2007. A combination of rising oil prices, economic resilience in the US and massive government supply is pushing yields higher.

The Fed Funds futures are still predicting a roughly 40% chance of one more rate hike in 2023, taking to heart Jerome Powell’s language of “proceeding carefully” on rate hikes going forward. The December 2024 Fed Funds futures moved up their forecast by about 25 basis points after the Fed meeting.

December 2024 futures:

The average interest rate on US credit cards is over 22%, according to recent data. About 37% of credit card cap out their interest rate at 29.99%. At those sort of levels, it is easy to get trapped in credit card debt. At some point even with mortgage rates where they are, a cash-out debt consolidation refi could make sense for people.

The US economy experienced stagnation in output at the end of the third quarter according to the S&P Flash PMI. The US economy put up the worst performance since February as demand fell. Pricing pressures remain, largely driven by rising energy prices, while backlog gets worked off. We still aren’t seeing layoffs yet, but as demand flags, that should begin to happen.

“PMI data for September added to concerns regarding the trajectory of demand conditions in the US economy following interest rate hikes and elevated inflation. Although the overall Output Index remained above the 50.0 mark, it was only fractionally so, with a broad stagnation in total activity signalled for the second month running. The service sector lost further momentum, with the contraction in new orders gaining speed.


“Subdued demand did not translate into overall job losses in September as a greater ability to find and retain employees led to a quicker rise in employment growth. That said, the boost to hiring from rising candidate availability may not be sustained amid evidence of burgeoning spare capacity and dwindling backlogs which have previously supported workloads.


“Inflationary pressures remained marked, as costs rose at a faster pace again. Higher fuel costs following recent increases in oil prices, alongside greater wage bills, pushed operating expenses up. Weak demand nonetheless placed a barrier to firms’ ability to pass on
greater costs to clients, with prices charged inflation unchanged on the month.”

Filed under: Economy |

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19 Responses

  1. jnc4p's avatar
    jnc4p, on September 22, 2023 at 10:40 am said:

    Good read:

    “Review: Chasing the Intact Mind, by Amy Lutz
    a brilliant, tragic book

    Freddie deBoer
    Sep 22, 2023”

    I like the term “gentrification of disability”. And this is spot on:

    “Her new book is both resolutely academic and crackling with a frustration that builds inside me day after day: the sense that the disability studies/disability rights movement is making things worse for people with disabilities, and doing so armed with overwhelming self-righteousness that chokes the debate. By surveying the world of autism memoirs, the politically-motivated decline in services and programs specifically for the autistic, and the troubling return of a discredited practice, she demonstrates that the cultural conversation about her son’s developmental disorder has been hijacked by activists who care more about their doctrine than the vulnerable people they ostensibly speak for.”

    https://freddiedeboer.substack.com/p/review-chasing-the-intact-mind-by

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  2. jnc4p's avatar
    jnc4p, on September 22, 2023 at 11:17 am said:

    Interesting breakdown of Marxism as an analytical framework vs communism as a political structure.

    “You might be a Marxist if…
    Random thoughts on the meaning of Marxism

    David Josef Volodzko
    Sep 22, 2023”

    https://volodzko.substack.com/p/you-might-be-a-marxist-if

    I think this sort of view explains why a greater percentage of Millennials and Gen Z are identifying as Marxists.

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    • Brent Nyitray's avatar
      Brent Nyitray, on September 22, 2023 at 1:29 pm said:

      Until the Marxists can explain how to keep the productive from leaving without having to impose a police state, it is a bankrupt ideology.

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  3. jnc4p's avatar
    jnc4p, on September 22, 2023 at 1:21 pm said:

    Taibbi is looking for suggestions to do a town hall

    “Note to Readers, on a Town Hall Proposal: “What Happened to American Liberalism?”

    If you live in a progressive east coast town, I’d like to come to hold a free discussion

    Matt Taibbi
    Sep 22, 2023″

    https://www.racket.news/p/note-to-readers-on-a-town-hall-proposal

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  4. Let the mutherfuker burn!'s avatar
    Let the mutherfuker burn!, on September 22, 2023 at 6:27 pm said:

    I certainly have my doubts about what the feds say about Menendez, but this did make me laugh.

    https://x.com/housegop/status/1705257824169664577?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

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  5. jnc4p's avatar
    jnc4p, on September 24, 2023 at 11:28 am said:

    Even the Marxists get it:

    “I don’t think opposition to humor is an essential part of the definition of “fascism,” but it is a very common element. I have previously written about how to best define fascism in an essay titled “What is fascism?,” in which I disagree with the political commentator Robert Reich for calling Donald Trump a fascist. I also disagree with his definition of “fascism,” and in the essay, I outline what I think are the fundamental aspects of the movement as well as the fact that it evolved from socialism.

    I think Reich’s rhetoric is dangerous for the same reason I shake my head when climate change scientists are caught fudging the numbers. They do this to raise alarm, but what they fail to realize is that if and when they are caught, people will not merely think to themselves, “those numbers were wrong.” They will think,” I better not trust climate scientists anymore.” This is precisely why scientists should be as accurate as possible at all times, especially if their field is a highly politicized one. This is also why we shouldn’t throw the word “fascist” around simply to describe our political rivals.”

    https://volodzko.substack.com/p/on-fascism-and-censorship-letter

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  6. jnc4p's avatar
    jnc4p, on September 24, 2023 at 11:38 am said:

    The headline perfectly encapsulates Vox:

    “Everything you need to know about the UAW strike to look cool at parties

    Why are auto workers striking? What’s their special strategy? And wait, what’s the UAW?

    By Emily Stewart and Ellen Ioanes
    Updated Sep 22, 2023, 5:15pm EDT”

    https://www.vox.com/2023/9/15/23875044/uaw-strike-news-contract-demands-wentzville-toledo-wayne

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    • Brent Nyitray's avatar
      Brent Nyitray, on September 25, 2023 at 10:12 am said:

      doesn’t include taxes either

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    • jnc4p's avatar
      jnc4p, on September 25, 2023 at 11:01 am said:

      Worse than even I thought.

      An observation from a piece I posted a few days ago:

      “The government has been measuring prices using some variant of the Consumer Price Index (CPI) since 1913. When there’s a change to inflation, what that usually means is that the CPI is going up or down. And a change to inflation isn’t a change in absolute price levels. If inflation is, say, down, it doesn’t mean prices are down, only that the rate prices are increasing is less rapid than it was before.

      Since 2021, prices have spiked fairly dramatically, with a CPI reaching up to 9% at certain points in 2022 before settling back to 3.7% last month. Once again, that doesn’t mean prices are down, just that the rate of increase is down. The crazy expensive fourteen dollar sandwich is still a crazy expensive fourteen dollars, it’s just not going up to seventeen dollars. One of the bigger contributors to the CPI last month was housing, jumping by 7.3% over the past year.

      But does the CPI really show how people experience price increases? After all, one of the most significant changes in what we pay is higher interest rates, which the Federal Reserve has hiked dramatically over the past few years. The Fed’s actions have increased credit card rates, mortgage rates, auto financing, and corporate and government borrowing costs. Surprisingly, none of this is directly included in our inflation metrics. “The CPI’s scope,” writes the Bureau of Labor Statistics, “excludes changes in interest rates or interest costs.” The price of money, which is an input into everything, isn’t included in how we see inflation today.”

      https://www.thebignewsletter.com/p/strikes-and-bidenomics

      The graph in the piece on car prices shows the same thing as the link from Twittter/X.

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