This story is part of CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.
When the government releases its latest monthly jobs report on Friday, all eyes will be searching for signs that the labor market is loosening up — a key factor weighing on the Federal Reserve as it figures out its next steps to fight inflation.
Economists expect the headline figure to show 250,000 jobs were added in last month. That would be the smallest monthly gain in nearly two years, and well below the average of more than 510,000 for the past 12 months.
Seems counter-intuitive, but the Fed (and much of Wall Street) is actually rooting for that number to go down.
Here’s the thing: Before the pandemic and its whiplash-inducing economic rebound, the US economy averaged about 200,000 new jobs each month.
So, while things are slowing down, they’re still pretty robust relative to those pre-pandemic normal times. And that’s part of what is keeping inflation elevated.
Beyond the headline figure, investors and economists will also be hyper-focused on wages, my colleague Paul R. La Monica writes.
Once again, and yes it sounds crummy, but the Fed and others would be happy to see wage growth slow down. Less money in our wallets leaves us with less spending power, and when we stop buying things, prices go down. In theory, anyway. That’s just one part of the large and complicated inflation puzzle.
In the last jobs report, wages were up 5.2% over the last 12 months. That’s historically high (woo!) but it doesn’t keep up with inflation, which is hovering around 8% year over year (boo!).
Wages pose a particular conundrum for the Fed. It wants us to shop just a little less – but not a lot less. Unfortunately, there’s no magic formula for how much wages need to go down to make a dent.
The risk of wages going down too much, too quickly raises the risk of falling into stagflation, which is as unpleasant as it sounds. Stagflation – a portmanteau of stagnation and inflation – is when economic activity slows while prices continue rising.
BOTTOM LINE: If Friday’s headline number comes in above 250K, Wall Street may read that as a sign the Fed is going to have to keep raising interest rates, adding to already-significant strain across financial markets.
If it comes in well below 250K, you might see some renewed optimism that the Fed’s policies are starting to have their intended effect, and it may not need to keep inflicting pain on the economy.
It’s hard to overstate just how delicate the situation is. In fact, just today the IMF’s managing director, Kristalina Georgieva, described the world as being in a period of “historic fragility” after a torrent of economic shocks over the last two-and-a-half years, from the pandemic to the war in Ukraine.
That’s why the Fed’s decisions are being so closely scrutinized. When the Fed raises rates as aggressively as it has in the past several months, it creates painful ripple effects around the globe, pushing the US dollar’s value up and forcing other central banks to raise their own rates as well. All of which could tip the world’s biggest economies into a recession, the UN has warned.
Ford is, once again, raising prices on its first electric pickup, the F-150 Lightning. Citing “ongoing supply chain constraints, rising material costs and other market factors” the company said the entry-level model will be priced at around $52,000 — up significantly from $40,000 when the truck went into production this spring.
(Reuters) Belarus’ President Alexander Lukashenko banned consumer price increases across the economy, according to state media. “From today, any price increase is prohibited. Prohibited!” the president is quoted as saying.
(Geez, why didn’t Jay Powell just try that strategy?)
(CNN Business) Lawyers for Elon Musk and Twitter have agreed to postpone Musk’s deposition in the court fight over their $44 billion acquisition agreement, a source familiar with the negotiations told CNN. Musk was originally scheduled to give a deposition today, but he threw a curveball earlier in the week, offering to buy the company under the original terms of the deal in exchange for scrapping the litigation. The two sides are still haggling over various conditions.
(Axios) Boston Dynamics, the company behind those viral videos of its creepily agile four-legged robots, is pledging not to weaponize their products and encouraging others in the industry to do the same. According to a letter Axios reviewed, the company suggests it’s worried that customers don’t, like, believe them when they say they’re not building an army that’ll destroy humanity. Thankfully though, they’ve now said they’re not doing that. Phew!
(CNN Business) Peloton announced yet another round of layoffs — its fourth round of cuts this year — as its new CEO attempts to shore up the company’s bottom line. Or, as the company spokesperson put it in a statement: Peloton is on a “transformation journey” in which it is “optimizing efficiencies” to “achieve break-even cash flow.” (I don’t know who writes this bloodless business-speak but, man, I would love to make it stop).
After letting go of another 500 people, Peloton will be left with around 3,800 employees — less than half the number of employees it had at its 2021 peak. The company said the latest cut marks the last of CEO Barry McCarthy’s \major changes to restore the brand. And if it fails, McCarthy told The Wall Street Journal, Peloton likely isn’t viable as a stand-alone company. He’s giving it another six months.
AMAZON CRACKS DOWN
(CNN Business) Amazon suspended roughly 50 workers at its only unionized warehouse Tuesday after they organized a work stoppage following a fire at the facility. A fire broke out Monday at the Staten Island facility, known as JFK8, and workers reported that parts of the building still smelled of smoke and that it was difficult to breathe. An estimated 100 workers walked off the job.