Aurelia Butler

As per analysts at BCA Research, despite the recent positive headlines around job creation, it’s too early to declare a decisive turning point in the labor market’s trajectory. “We assign a 60% chance that the US will enter a recession over the next 12 months, with the downturn likely to begin in the first half of 2025,” the analysts said.This cautious stance contrasts with the more optimistic projections held by many, reflecting a belief that the labor market’s apparent strength may not be as solid as it seems.Recent job reports, including a stronger-than-expected September payrolls figure, have spurred discussions of a soft landing—a scenario in which the U.S. economy slows down without tipping into recession. However, BCA cautions against reading too much into these gains.The note flags that while headline numbers suggest improvement, deeper scrutiny reveals anomalies, such as irregular seasonal adjustments and weak underlying trends like a declining workweek length and falling aggregate hours worked. These discrepancies suggest that the labor market could experience reversals in the months ahead.One of the critical distinctions BCA analysts make is between coincident and leading labor indicators. While payroll growth and unemployment rates—a focus of many reports—remain strong, these are coincident indicators, meaning they often hold steady even as the economy starts to contract. Leading indicators, however, paint a more concerning picture. BCA points to troubling signs, including weakening employment components of key purchasing manager indexes and a sharp decline in perceptions of job availability, suggesting labor market stress ahead​.Moreover, BCA flags that job openings—a crucial gauge of labor demand—remain an area of concern. Although official data from the Job Openings and Labor Turnover Survey showed a rise in August, the longer-term trend is one of softening. New job openings on platforms like Indeed have been on the decline, while hiring at large firms has cooled and temporary employment continues to shrink. These indicators suggest that while companies are not yet engaging in large-scale layoffs, they have become increasingly reluctant to hire, often a precursor to more severe labor market deterioration​.BCA underscores that the future of the labor market will largely hinge on consumer spending. Income growth, which has steadily decelerated, poses a risk. While disposable income increased by 3.1% year-on-year in August, wage growth has slowed, and the pool of available workers has almost fully reabsorbed those who left the workforce during the pandemic. Compounding this, high mortgage rates are likely to weaken the housing market further, curtailing residential investment—a reliable early indicator of economic downturns.In terms of broader economic implications, BCA is cautious about the prospect of a credit-driven spending boom. Despite recent increases in home equity loan activity, overall consumer credit growth has slowed, with delinquency rates rising across credit card and auto loans. Banks, in turn, have tightened lending standards, which is likely to suppress consumer spending further and amplify the slowdown in income growth. More

Mira Murati, former chief technology officer at OpenAI, is raising funds from venture capitalists for her new AI startup, according to sources familiar with the matter.The new company aims to build AI products based on proprietary models, said one of the sources who requested anonymity to discuss private matters. It is not clear if Murati will assume the CEO role at the new venture.A representative for Murati declined to comment.While the talks are in the early stages, Murati’s new venture could raise over $100 million given her reputation and the capital needed to train proprietary models, one of the sources said, cautioning that the figures have not been finalized.Barret Zoph, a prominent researcher who left OpenAI on the same day as Murati in late September, could also get involved in the new venture, the sources added. Zoph did not respond to requests for comment.The Information previously reported that Zoph is planning a new startup and that Murati has been recruiting OpenAI employees to join her new venture.Murati at OpenAI spent over six years spearheading transformative projects like ChatGPT and DALL-E. She was a key figure in OpenAI’s multibillion-dollar partnership with Microsoft (NASDAQ:MSFT), its largest financial backer.Murati’s meteoric rise at OpenAI has cemented her name as one of the most prominent executives in the fledgling field of artificial intelligence. Murati joined OpenAI in June 2018 and was promoted to CTO in May 2022, according to her LinkedIn profile. Prior to OpenAI, she worked at augmented reality startup Leap Motion and Tesla (NASDAQ:TSLA).She frequently appeared alongside OpenAI CEO Sam Altman as the public face of the ChatGPT maker. When OpenAI in May launched its GPT-4o model, which is capable of having realistic voice conversations, Murati led the presentation.Her abrupt resignation in late September marked the latest high-profile exit from the ChatGPT maker as the company undergoes major governance structure changes, including removing the control of the non-profit board. Murati, who briefly served as interim CEO last year when Altman was ousted by the non-profit board, cited a desire for personal exploration for her departure. Murati joins a growing list of former OpenAI executives launching startups, including rivals such as Anthropic and Safe Superintelligence. More

WASHINGTON (Reuters) -The U.S. budget deficit grew to $1.833 trillion for fiscal 2024, the highest outside of the COVID era, as interest on the federal debt exceeded $1 trillion for the first time and spending grew for the Social Security retirement program, health care and the military, the Treasury Department said on Friday.The deficit for the year ended Sept. 30 was up 8%, or $138 billion, from the $1.695 trillion recorded in fiscal 2023. It was the third-largest federal deficit in U.S. history, after the pandemic relief-driven deficits of $3.132 trillion in fiscal 2020 and $2.772 trillion in fiscal 2021.The fiscal 2023 deficit had been reduced by the reversal of $330 billion of costs associated with President Joe Biden’s student loan program after it was struck down by the U.S. Supreme Court. It would have topped $2 trillion without this anomaly.The sizable fiscal 2024 budget gap of 6.4% of gross domestic product, up from 6.2% a year earlier, could pose problems for Vice President Kamala Harris’ arguments ahead of the Nov. 5 presidential election that she would be a better fiscal steward than Republican opponent Donald Trump.A fiscal think-tank, the Committee for a Responsible Federal Budget, has estimated that Trump’s plans would pile up $7.5 trillion in new debt, more than twice the $3.5 trillion envisaged from Harris’ proposals.White House budget director Shalanda Young emphasized the strong growth in the U.S. economy and the Biden administration’s investments in clean energy, infrastructure and advanced manufacturing.”This Administration has done this while maintaining a commitment to fiscal responsibility by ensuring the wealthiest among us and large corporations pay their fair share and cutting wasteful spending on special interests,” Young said in a statement, referring to plans by Biden and Harris to raise taxes on these groups.U.S. receipts for the 2024 fiscal year hit a record $4.919 trillion, up 11%, or $479 billion, from a year earlier, as individual non-withheld and corporate tax collections grew. Fiscal 2024 outlays rose 10%, or $617 billion, to $6.752 trillion.INTEREST COSTSThe biggest driver of the year’s deficit was a 29% increase in interest costs for Treasury debt to $1.133 trillion due to a combination of higher interest rates and more debt to finance. The total exceeded outlays for the Medicare healthcare program for seniors and for defense spending.But a senior Treasury official said the interest costs as a share of GDP reached 3.93%, below the 1991 record of 4.69% but the highest percentage since 4.01% in December 1998.The weighted average interest rate on federal debt was 3.32% in September, up 35 basis points from a year earlier, but down from 3.35% from August, marking the first monthly decline since January 2022.Other drivers of increased outlays for the fiscal year included Social Security, up 7% to $1.520 trillion, Medicare, up 4% to $1.050 trillion, and military programs, up 6% to $826 billion.For September, the government reported a $64 billion surplus, compared to a $171 billion deficit in September 2023, but the improvement was largely due to calendar adjustments for benefit payments. Without these, there would have been a $16 billion deficit in September 2024.Reported receipts were a record for September at $528 billion, up 13% from a year earlier, while outlays were $463 billion, down 27% largely due to the calendar adjustments. More

“We think the market wobbles over November and December Fed rate cuts are overdone. November looks rock solid to us at present, and December looks strongly odds-on though necessarily not watertight with more time to accumulate data,” Evercore ISI analysts said in a Friday note.The Federal Reserve will likely cut rates in both November and December, analysts at Evercore ISI said in a Friday note, bringing the federal funds rate down to a range of 4.25% to 4.5%.The call for a November and December rate cut comes even as recent strong economic data, including retail sales and unemployment claims,  led some market participants to question whether the Fed is likely to pause at upcoming meetings.But Evercore ISI believes that the Fed is unlikely to swayed by the recent data as the central bank’s primary focus is on moving rates back to a “more neutral setting to maintain a robust labor market as inflation returns to target.”The current level of rates, meanwhile, remain at levels that continue to curb growth and inflation. Real rates remain significantly elevated compared with “mainstream views of what a neutral setting might look like even in the short run,” the analysts said.”So we think there is a strong bias to move steadily to cut twice more at successive meetings down to 4.25 to 4.5 per cent after December before considering slowing down,” they added.Looking ahead to 2025, Evercore ISI revised its growth forecast upward amid expectations for a boost from the carryover effect of increased fiscal resources and an expected rebound in credit growth.While the first leg of rate cuts this year is seemingly on a more certain footing, the second leg of rate cuts will be executed with more caution. “[T]he more nuanced judgments will come in the second leg from 4-4.5 per cent to 3-3.5 per cent, when the Fed will learn more about neutral and will have to factor in how to remain dynamically well positioned including with respect to Trump policy shocks if Trump wins,” the analysts said. More

(Reuters) -Atlanta Federal Reserve Bank President Raphael Bostic on Friday made the case for patient reductions in the central bank’s policy rate to somewhere between 3% and 3.5% by the end of next year, a pace that would get inflation down to its 2% target by then and keep the U.S. economy out of recession.     “I’m not in a rush to get to neutral,” Bostic told the Mississippi Council on Economic Education Forum on American Enterprise in Jackson, Mississippi. “We must get inflation back to our 2% target; I don’t want us to get to a place where inflation stalls out because we haven’t been restrictive for long enough, so I’m going to be patient.” At the same time, he said, he envisions further cuts to the Fed’s target for short-term borrowing costs, now in the 4.75%-5.00% range. “If the economy continues to evolve as it does — if inflation continues to fall, labor markets remain robust, and we still see positive production — we will be able to continue on the path back to neutral,” he said.A neutral Fed policy rate — where borrowing costs neither stimulate nor restrict economic growth — is probably in the 3% to 3.5% range, he said. Inflation, currently at 2.2% by the Fed’s preferred measure, will likely get to the Fed’s 2% target toward the end of 2025, and “that should be sort of the timetable for when we should get to neutral,” he said.Financial markets are currently pricing in two quarter-point interest rate cuts before the end of the year and further reductions next year, likely bringing the policy rate to a 3.25%-3.5% range by September 2025.The Fed reduced its policy rate by a bigger-than-expected half-of-a-percentage point last month to keep borrowing costs from cooling the labor market too sharply. Since then, readings on the job market have come in stronger than expected, with monthly job growth accelerating and the unemployment rate ticking down to 4.1%.Bostic has said he expects only a single quarter-point cut over the last two Fed meetings of the year.”A recession has never been in my outlook,” Bostic said. “I’ve always felt that there was enough momentum in this economy to absorb the restrictiveness of our policy and drive inflation back down to its 2% target. I’m grateful that that’s been playing out so well. But the job is not done.”   More