Evelyn Reynolds

The Conference Board’s consumer confidence index slid to 98.7, down from 105.6 in August, the biggest one-month decline since August 2021.
Respondents’ concerns focused mostly on jobs and inflation.

Consumers’ view on the economy tumbled in September, falling by the largest level in more than three years as fears grew about jobs and business conditions, the Conference Board reported Tuesday.
The board’s consumer confidence index slid to 98.7, down from 105.6 in August, the biggest one-month decline since August 2021. The Dow Jones consensus forecast was for a reading of 104. By contrast, the index had a reading of 132.6 in February 2020, a month before the Covid pandemic hit.

Each of the five components the organization samples fared worse on the month, with the biggest fall coming among those aged 35-54 and earning less than $50,000.
“Consumers’ assessments of current business conditions turned negative while views of the current labor market situation softened further. Consumers were also more pessimistic about future labor market conditions and less positive about future business conditions and future income,” said Dana Peterson, chief economist at The Conference Board.
The last time the confidence index dropped more came as inflation was just beginning a climb to what ultimately was the highest level in more than 40 years.
Stocks saw some brief losses following the release, while Treasury yields moved lower.
In addition to the steep drop in the confidence index, the present situation measure worsened by 10.3 points to 124.3 and the expectations index was off 4.6 points to 81.7. On the expectations measure, a reading below 80 is consistent with a recession.

Respondents’ concerns focused mostly on jobs and inflation.
Those saying jobs are plentiful continued to decline, falling to 30.9% from 32.7% in August, while the jobs “hard to get” measure rose to 18.3%, up from 16.8%.
On inflation, the 12-month outlook rose to 5.2%, with concerns over price increases topping the list of economic concerns.
“The proportion of consumers anticipating a recession over the next 12 months remained low but there was a slight uptick in the percentage of consumers believing the economy was already in recession,” Peterson said.
The survey comes less than a week after the Federal Reserve voted to lower benchmark interest rates by a half percentage point, citing a more favorable outlook for inflation and worries over a potentially softening labor market. It was the first rate cut in four years and double the traditional quarter-point reduction.
The survey, though, was conducted through Sept. 17, the day before the Fed approved the rate cut.

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The ruling Labour government has faced criticism for generating an atmosphere of doom over the state of the public finances.
Prime Minister Keir Starmer has warned of “painful” decisions after the party rallied to victory in the July general election.

Britain’s Chancellor of the Exchequer Rachel Reeves speaks on the second day of the annual Labour Party conference in Liverpool, north-west England, on September 23, 2024. 
Paul Ellis | Afp | Getty Images

Liverpool, ENGLAND — U.K. Finance Minister Rachel Reeves vowed on Monday that Britain will not return to austerity, but said she would make hard choices as she lays out budget proposals next month.
“It will be a budget with real ambition … a budget to deliver the change we promised. A budget to rebuild Britain,” she told a crowd of Labour party delegates Monday. “There will be no return to austerity.”

Her keynote speech, briefly interrupted by heckles from a pro-Palestinian protester in the crowd, came as Labour kicked off its annual party conference on Monday — its first in power for 15 years.
The ruling Labour government has faced criticism for generating an atmosphere of doom over the state of the public finances, with Prime Minister Keir Starmer warning of “painful” decisions after the party rallied to victory in the July general election.
Reeves has suggested that taxes are likely to rise at her upcoming Oct. 30 Autumn budget after discovering a £22 billion ($29 billion) “black hole” in the public finances. Her predecessor Jeremy Hunt, from the rival Conservative Party, has denied the claims as “fictitious.”
“I know that you are impatient for change. But because of that legacy inherited by the Conservatives, the road ahead is steeper and harder than we expected,” she told the audience Monday.

Reeves defended a divisive move earlier this month to cut winter fuel allowances for millions of pensioners as the “right decision in the circumstances we inherited.”

However, she reiterated that the government would not raise income tax, the National Insurance social security payments, value-added tax (a sales levy) and corporation tax
Instead, she vowed to raise additional revenues by eradicating the U.K.’s non-dom tax concession and clamping down on forms of tax avoidance and tax evasion.
“This government will not sit back and indulge those who do not pay the taxes they owe,” she said.
Reeves also restated the government’s position as “proudly pro-business,” referencing plans next month to host a business summit and announce proposals for a new national industrial strategy. That, she said, would include measures for Britain to reach its net zero and clean energy goals by 2030.
Additionally, she said that the government would continue to pursue trade deals to “open up new markets,” as negotiations currently remain underway with major partners such as India.

“After years of instability and uncertainty, Britain is open for business once again,” she said.
Half of Britons, including a quarter of Labour voters (26%), are disappointed with the government’s achievements so far, Ipsos opinion polling showed Friday. Gideon Skinner, Ipsos’ senior director of U.K. politics, said the findings were an indication that the government’s “honeymoon period” was over.
“There’s a seeping back of pessimism and concern following a few months of hope after the election,” Skinner said earlier Monday at the Labour party conference. More

Fed Chair Jerome Powell has unveiled his latest buzzword to describe monetary policy, with a “recalibration” of policy at a pivotal moment for the central bank.
Asset prices soared Thursday as investors took Powell at his word that the unusually outsized move wasn’t in response to a substantial weakening of the economy but rather an effort to shore up the labor market.
“It really allows him to push this narrative that this easing cycle is not about us being in recession, it is about extending the economic expansion,” PGIM economist Tom Porcelli said. “I think it’s a really powerful idea.”

Federal Reserve Chair Jerome Powell has unveiled his latest buzzword to describe monetary policy, with a “recalibration” of policy at a pivotal moment for the central bank.
At his news conference following Wednesday’s open market committee meeting, Powell used variations of the word no fewer than eight times as he sought to explain why the Fed took the unusual step of a half percentage point rate cut absent an obvious economic weakening.

“This recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we begin the process of moving forward a more neutral stance,” Powell said.
Financial markets weren’t quite sure what to make of the chair’s messaging in the meeting’s immediate aftermath.
However, asset prices soared Thursday as investors took Powell at his word that the unusually outsized move wasn’t in response to a substantial slowing of the economy. Rather, it was an opportunity to “recalibrate” Fed policy away from a rigid focus on inflation to a broader effort to make sure a recent weakening of the labor market didn’t get out of hand.
The Dow Jones Industrial Average and S&P 500 jumped to new highs in trading Thursday after swinging violently Wednesday.
“Policy had been calibrated for meaningfully higher inflation. With the inflation rate now drifting close to target, the Fed can remove some of that aggressive tightening that they put into place,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.

“It really allows him to push this narrative that this easing cycle is not about us being in recession, it is about extending the economic expansion,” he added. “I think it’s a really powerful idea. It’s something we had been hoping that he would do.”

Powell’s buzzwords

Several of Powell’s previous efforts to provide buzzy descriptions of Fed policy or its views on the economy haven’t worked out so well.
In 2018, his characterizations of the efforts to reduce its bond holdings as being on “autopilot,” as well as his assessment that a string of rate hikes the same year had brought the Fed “a long way” from a neutral interest rate spurred blowback from markets.
More famously, his insistence that an inflation surge in 2021 would prove “transitory” ended up causing the Fed to be slow-footed on policy to the point where it had to enact a series of three-quarter percentage point rate increases to pull down inflation.
But markets expressed confidence in Powell’s latest assessment, despite this track record and some signs of cracks in the economy.

“In other contexts, a larger move may convey greater concern about growth, but Powell repeatedly stressed this was basically a joyous cut as ebbing inflation allows the Fed to act to preserve a strong labor market,” Michael Feroli, chief U.S. economist at JPMorgan Chase, said in a client note. “Moreover, if policy is set optimally, it should return the economy to a favorable place over time.”
Still Feroli expects the Fed will have to follow up Wednesday’s action with a similar-sized move at the Nov. 6-7 meeting unless the labor market reverses a slowing pattern that began in April.
There was some good news on the jobs front Thursday, as the Labor Department reported that weekly claims for unemployment benefits slid to 219,000, the lowest since May.

An unusual move lower

The half percentage point — or 50 basis point — cut was remarkable in that it’s the first time the Fed has gone beyond its traditional quarter-point moves absent a looming recession or crisis.
Though Powell did not give credence to the notion that the move was a makeup call for not cutting at the July meeting, speculation on Wall Street was that the central bank indeed was playing catch-up to some degree.
“This is a matter of maybe he felt like they were getting a little bit behind,” said Dan North, senior economist for North America at Allianz Trade. “A 50 basis point cut is pretty unusual. It’s been a long time, and I think it was maybe the last labor market report that gave him pause.”
Indeed, Powell has made no secret of his concerns about the labor market, and stated Wednesday that getting in front of a potential weakening was an important motivator behind the recalibration.
“The Fed still sees the economy as healthy and the labor market as solid, but Powell noted that it is time to recalibrate policy,” wrote Seth Carpenter, chief global economist at Morgan Stanley. “Powell has stressed and proven with this rate cut that the FOMC is willing to move gradually or make bigger moves depending on the incoming data and evolution of risks.”

Carpenter is among the group that expects the Fed now can dial down its accommodation back to quarter-point increments through the rest of this year and into the first half of 2025.
Futures markets traders, though, are pricing in a more aggressive pace that would entail a quarter-point cut in November but back to a half-point move in December, according to the CME Group’s FedWatch gauge.
Bank of America economist Aditya Bhave noted a change in the Fed’s post-meeting statement that included a reference to seeking “maximum employment,” a mention he took to indicate that the central bank is ready to stay aggressive if the jobs picture continues to deteriorate.
That also means the recalibration could get tricky.
“We think the Fed will end up front-loading rate cuts more than it has indicated,” Bhave said in a note. “The labor market is likely to remain tepid, and we think markets will push to do another super-sized cut in 4Q.”

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