Economy

NEW YORK (Reuters) – The biggest U.S. banks are expected to report weaker third-quarter profits as the economy slowed and volatile markets put the brakes on dealmaking. Four of the nation’s largest lenders – JPMorgan Chase & Co (NYSE:JPM), Wells Fargo (NYSE:WFC) & Co, Citigroup Inc (NYSE:C) and Morgan Stanley (NYSE:MS) – will report third-quarter earnings on Friday of next week. The results are expected to show a slide in net income after turbulent markets choked off investment-banking activity and lenders set aside more rainy-day funds to cover losses from borrowers who fall behind on their payments.Banks typically earn more when interest rates rise because they can charge customers more to borrow. But their fortunes are also tied to the health of the broader economy. The Federal Reserve has raised the benchmark rate from near zero in March to the current range of 3.00% to 3.25% and signalled more increases. While rising rates tend to buoy bank profits, the broader risk of an economic downturn sparked by high inflation, supply-chain bottlenecks and the war in Ukraine could weigh on future earnings. Higher rates are expected to boost net interest income at the two largest U.S. banks, JPMorgan and Bank of America Corp (NYSE:BAC), but the jump in borrowing costs has also hurt their mortgage and auto-lending businesses by cooling demand.”The concern is that rates will rise too much and slow the economy or push it into a recession,” said Matt O’Connor, an analyst at Deutsche Bank (ETR:DBKGn), wrote in a research note.Analysts expect profit at JPMorgan to drop 24%, while net income at Citigroup and Wells Fargo is forecast to decline 32% and 17%, respectively, according to Refinitiv I/B/E/S data.Investment-banking powerhouse Goldman Sachs Group Inc (NYSE:GS) is expected to report a 46% plunge in profit when it reports on Oct. 18, while earnings at rival Morgan Stanley are seen falling 28%. The drop comes as corporations’ interest in mergers, acquisitions and initial public offerings dried up. Analysts expect Bank of America’s third-quarter profit to fall nearly 14%, with robust growth at its consumer division estimated to partially offset the decline in advisory fees.The S&P 500 bank index is down almost 30% this year. Shares of Goldman Sachs and Morgan Stanley, which are not part of the index, are down 21.4% and 19.5% respectively during the same period.GRAPHIC: Investment banking revenue drop by region – https://graphics.reuters.com/USA-BANKS/akpezdxobvr/chart.pngSTEEP FALLJPMorgan President Daniel Pinto told investors last month that he expected the bank’s investment banking fees to fall between 45% and 50% in the third-quarter.For some investment-banking businesses, weakness was exacerbated by a decline in large private-equity buyouts. Dealmaking in that market dropped 54% to $716.62 billion in the third quarter from the same period last year, according to Dealogic data. U.S. banks wrote down $1 billion on leveraged and bridge loans as rising interest rates made it tougher for them to offload high-risk debt onto investors and other lenders.”We are expecting further losses on these deals,” said Richard Ramsden, an analyst at Goldman Sachs who oversees research on large banks. “It’s going to vary quite a bit,” depending on where the transactions were initially priced and how much exposure remains, he said.Wall Street banks took combined losses of $700 million on the sale of $8.55 billion in loans and bonds backing the leveraged buyout of business software company Citrix Systems Inc (NASDAQ:CTXS), Reuters reported last month, citing a person familiar with the matter. Analysts also said banks will set aside more reserves in anticipation of more soured loans.”We expect moderate, yet increasing, negative impact on banks’ asset quality and loan growth stemming from the higher rates, inflation and a mild recession in the U.S., negating some of the benefits of higher rates,” analysts at Fitch Ratings wrote in a report.The ratings agency expects overall bank loans to grow 10% to 11% this year, but that could peter out as interest rates climb and the economy slows.”Banks are going to be facing a much different 2023 than they did in 2022,” said Christopher Wolfe, who oversees Fitch’s ratings and analysis of U.S. and Canadian banks.GRAPHIC: Global investment banking revenues for top 10 banks – https://graphics.reuters.com/USA-BANKS/lgpdwrxeovo/chart.png More

BUFFALO, N.Y. (Reuters) -New York Federal Reserve President John Williams said on Friday the U.S. central bank has more work to do to lower inflation and rebalance economic activity in a more sustainable way, and he warned that the unemployment rate will most likely rise as part of that process.”We need to get interest rates up further and basically get interest rates above where inflation is,” and that could lead the central bank towards a target rate of around 4.5%, Williams said at a gathering held at SUNY Buffalo State in Buffalo, New York. Doing so will better balance supply with demand “in a way that brings down inflation quickly.” Williams, who also serves as vice chair of the rate-setting Federal Open Market Committee (FOMC), spoke in the wake of the release of employment data that showed the U.S. economy added 263,000 jobs last month versus 315,000 in August. The unemployment rate fell to 3.5% in September from 3.7% in August. The jobs report bolstered prospects for more aggressive interest rate rises and kept the central bank on track to raise its benchmark overnight interest rate – currently in the 3.00%-3.25% range – by three-quarters of a percentage point at its Nov. 1-2 policy meeting. The Fed has boosted the federal funds target rate, which it uses to influence the momentum of the economy, from near zero at the beginning of this year, and officials have penciled in increases that will take that rate to around 4.6% by next year. Williams said the U.S. economy has “a very strong labor market, which is a good thing except for very high inflation,” which is being countered by central bank rate rises. He added over time, “you are likely going to see the labor market, you know, maybe not be as strong in terms of the job growth we’ve been seeing.” He added that there was an economic slowdown underway, especially in the housing market. But he said he doesn’t expect the economy to tip over into a contraction, a fear that is common in financial markets. “I do see positive growth next year” and “I see the unemployment rate coming up somewhat, but most importantly, I see inflation coming down pretty significantly next year,” Williams said.BUSY WEEK Williams spoke at the end of a busy week for commentary by his fellow central bank policymakers. Williams kicked off the week when he said on Monday the Fed still had some ways to go with rate rises to get high levels of inflation under control. He noted then that while there are some signs overall inflation may be cooling as pandemic-related disruptions ease, overall price pressures remain problematic and will take years to bring back to the Fed’s 2% target. Meanwhile, other officials offered hawkish comments on monetary policy and some said that turbulence in financial markets would not deter them from taking action to lower inflation, which by the Fed’s preferred measure is running at more than three times its target. “I’ve read some speculation recently that financial stability concerns could possibly lead the FOMC to slow rate increases or halt them earlier than expected,” Fed Governor Christopher Waller said on Thursday, adding “let me be clear that this is not something I’m considering or believe to be a very likely development.”Minneapolis Fed President Neel Kashkari said separately on Thursday that he saw no evidence inflation was trending downward in a notable way, adding that he was “not comfortable” saying the central bank was going to pause its rate rises until that happened. More

U.S. data will no doubt be scoured for signs of a long-hoped Federal Reserve “pivot”, while central bank and finance chiefs gather in Washington for the IMF and World Bank annual meeting.Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Ira Iosebashvili in New York, John O’Donnell in Frankfurt, and Dhara Ranasinghe and Karin Strohecker in London. Graphics by Vincent Flasseur and Kripa Jayaram. 1/ LEADER FOR LIFE Chinese President Xi Jinping is set to be appointed to an unprecedented third five-year term as supreme leader in the week to come. But the days leading up to the twice-a-decade Communist party congress will be strewn with reminders of how damaging some of his policies have been for the economy and markets.    Loan data could show how a system awash with cash still can’t find borrowers, as a property crisis and crippling pandemic sap confidence. Exports have fallen victim to factory shutdowns as part of those pandemic counter-measures.     Investors hope for a roadmap out of the draconian zero-COVID policies, and wonder if “common prosperity” efforts will crush more than just the real-estate, hi-tech and tutoring industries. And part of Xi’s vision is a China that includes Taiwan. Graphic: China’s trade growth loses steam https://graphics.reuters.com/GLOBAL-MARKETS/egpbkzqoyvq/chart.png 2/ ELUSIVE PIVOTU.S. inflation numbers, retail sales data, consumer sentiment gauges and minutes from the Federal Reserve’s latest meeting will give market watchers plenty to chew over. Signs that inflation is finally starting to slip from multi-decade highs would be well received by investors, who have repeatedly had hopes dashed for that elusive pivot away from the Fed’s market-punishing rate hikes. But another robust number on Thursday could bolster the case for even more hawkishness.Wednesday’s Fed minutes could lend insight on Fed thinking on the tenacity of inflation and how durable the U.S. economy is likely to be given rising borrowing costs. Friday’s retail sales and consumer sentiment data should show how U.S. consumers are faring after months of tighter monetary policy. Graphic: Glimmer of hope https://graphics.reuters.com/GLOBAL-MARKETS/zjvqkxonyvx/chart.png 3/(NOT) OUT OF THE WOODSBank of England (BoE) intervention to stem a bond market rout and a government U-turn on part of its unfunded tax-cutting plan have bought some calm to UK markets.But the coming days will put the modest recovery in sterling and gilts to the test. It’s a data heavy week, with UK August jobs figures out on Tuesday and the August GDP estimate, industrial output data and trade balance numbers out Wednesday.The economy is flirting with recession and weak data could pile pressure on the government to deliver longer-term growth plans. Markets price in a 100 basis point November rate hike, meaning sharply higher borrowing costs will likely add to economic pain. Emergency BoE bond purchases expire on Oct. 14. That could reveal just how much market nerves have been calmed. Graphic: UK government bond yield spreads https://graphics.reuters.com/GLOBAL-MARKETS/gdpzyzbmgvw/chart.png 4/ A MOUNTAIN TO CLIMB After an online storm of rumours over Credit Suisse’s future sent its stock tumbling and default insurance cost soaring, the embattled lender will be keeping its fingers crossed the coming days stay calm. In a bid to reassure investors, Credit Suisse ended the week by announcing a bond buyback of up to 3 billion Swiss francs ($3 billion).The bank, beset by a series of scandals and losses, wants time to work out the final details of an overhaul to claw back the trust of sceptical investors and is set reveal its revamp plan on Oct. 27.The only difficulty: this vision requires another throw of the dice and potentially further billions of francs in fresh capital. And the bank’s woes cast a pall over Europe’s financial sector, already in the spotlight over how lenders will cope with the latest market fallout. Germany’s Deutsche Bank (ETR:DBKGn) is among those feeling the heat. Graphic: Cost of insuring Credit Suisse debt https://graphics.reuters.com/GLOBAL-MARKETS/dwvkroljepm/chart.png 5/WORLD OF WOE The who’s who of finance and central banking descend on Washington for the Oct. 10-16 International Monetary Fund and World Bank annual meeting – the first full in person meeting since October 2019.There is plenty to discuss. A number of developing economies are buckling under the toxic mix of high inflation, food and energy shocks, elevated borrowing costs and the fallout from climate change. Many – like Ghana, Egypt and Sri Lanka – need financial help, knocking on the door of multilateral banks, the lenders of last resort. Ukraine is pushing for a bespoke programme to secure billions of funding.But the stress is truly global, with central banks outside the United States trying to shore up their currencies against a surging dollar and the fallout from policy mistakes such as Britain’s mini-budget sending tremors through markets. Graphic: Emerging markets face pressure amid war https://graphics.reuters.com/GLOBAL-MARKETS/zdvxolkqgpx/chart.png ($1 = 0.9910 Swiss francs) More

SAO PAULO (Reuters) – Economic advisers to Brazilian presidential candidate Luiz Inacio Lula da Silva are looking at two main ideas to replace a constitutional spending cap, including a flexible primary surplus target, two senior aides told Reuters on Friday.Lula has resisted pressure to lay out what fiscal rules his government would follow if he is elected in an Oct. 30 runoff vote against President Jair Bolsonaro.But he has stressed he will not maintain the spending cap, which only allows spending by the federal government to grow as much as the previous year’s inflation. Bolsonaro has also said he is looking at changes to that fiscal anchor. Lula and advisers in his Workers Party (PT) are looking for ways to raise public spending to jumpstart economic growth, though Lula will only take his decision after the election, two party sources said on condition of anonymity.One of the proposals involves the establishment of a primary budget surplus target with bands so the government can spend more in the event of an economic downturn. Currently, the primary budget target is fixed, which, according to the sources, prevents the government from adopting counter-cyclical actions.”If (the economy) slows down, you don’t have the means for the government to act,” said one of the sources.According to the sources, this proposal is Lula’s preferred option. In public statements, he often repeats that Brazil posted budget surpluses every year of his 2003-2010 presidency but admits that the design of a new rule can be improved.The sources said that a second proposal would limit spending growth to inflation plus some other unspecified indicator to allow a real increase in federal investment. More

WASHINGTON (Reuters) -U.S. stocks tumbled on Friday after a stronger-than-expected jobs report locked in expectations that the Federal Reserve is sticking with a steady diet of rate hikes, while supply cuts continued to boost oil prices.The Dow Jones Industrial Average closed down more than 600 points, sliding 2.11%, while the S&P 500 fell 2.8% and the Nasdaq Composite lopped off 3.8% in value as investors bet that the Fed’s inflation fight will continue apace. The MSCI world equity index, which tracks shares in 45 nations, was down 2.45%.The U.S. Labor Department reported that nonfarm payrolls increased by 263,000 in September – slightly above expectations – with the jobless rate dipping to 3.5%, below forecasts.The data solidified the view that the Fed and other global central banks have a way to go before easing up on their tightening cycles, after stocks surged earlier in the week on hopes that such a pivot may be on the way.”Today’s employment data did little to change the narrative for a Fed committee that has been intensely focused on bringing down inflation,” said Charlie Ripley, senior investment strategist for Allianz (ETR:ALVG) Investment Management. “Timing the Fed’s pivot away from an aggressive policy stance is proving to be difficult, and the current conditions in the labor market are certainly not helping the situation.”The likelihood of ongoing interest rate increases helped drive up the dollar and Treasury yields yet again. The dollar index, which tracks the greenback versus a basket of six currencies, was up 0.47%, and the yield on benchmark 10-year Treasury notes climbed 5.9 basis points to 3.881%.Markets are currently pricing in a 92% chance of a 75-basis-point increase for next month’s Federal Open Market Committee meeting.Investors will now turn to quarterly corporate earnings kicking off next week, as well as Thursday’s latest monthly figures on U.S. inflation. “The market’s negative reaction may be a sign that investors are processing the likelihood that there will be no change in the Fed’s aggressive playbook in the near term,” said Mike Loewengart, head of model portfolio construction at Morgan Stanley (NYSE:MS)’s global investment office. “Keep in mind the next Fed decision isn’t until early November, so much more data will need to be digested, not least of which is next week’s inflation gauge.”Crude oil continued to ride the announced supply cuts from OPEC+ to a five-week high, shaking off concerns of an economic slowdown.Brent crude closed up 3.7% to $97.91 a barrel and U.S. crude prices were up 4.73% at $92.63 a barrel. [O/R] Elsewhere, gold took a hit against the surging dollar, with spot prices falling 0.9% to $1,695.52 an ounce. More

HAGERSTOWN, Md. — President Biden laced into Republicans on Friday for trying to enact policies that would make “every kitchen table cost” go up while lavishing tax cuts on big corporations, shedding his usual tone of bipartisanship a month ahead of the midterm elections.In a speech before factory workers at a Volvo manufacturing facility, Mr. Biden defended his economic record and accused Republicans of political hypocrisy for seeking to reap the benefit of federal funds made available by legislation that they had opposed. He also laid out the stakes of the upcoming elections, bluntly warning that Republicans will try to scale back Medicare and Social Security benefits if they win control of Congress. And he accused Republicans of rooting against America’s economic success.“This is a choice between two very different ways of looking at the economy,” Mr. Biden said.Mr. Biden’s comments came as Labor Department figures showed that the United States economy added 263,000 jobs in September and that the unemployment rate fell to 3.5 percent, from 3.7 percent a month earlier. The report suggests that the labor market is cooling as the Federal Reserve raises interest rates but that the central bank will likely have to take further steps to slow the economy in order to tame inflation.Mr. Biden said that the numbers were a sign that the economy was transitioning to stable growth.“Our job market continues to show resilience as we navigate through this economic transition,” he said. “The pace of job growth is cooling while still powering our recovery forward.”Despite concerns about an economic slowdown, Mr. Biden’s remarks were the latest attempt by the White House to highlight examples of America’s manufacturing resurgence with a focus on the automobile sector in the run-up to the November midterm elections.The State of the 2022 Midterm ElectionsWith the primaries over, both parties are shifting their focus to the general election on Nov. 8.Standing by Herschel Walker: After a report that the G.O.P. Senate candidate in Georgia paid for a girlfriend’s abortion in 2009, Republicans rallied behind him, fearing that a break with the former football star could hurt the party’s chances to take the Senate.Wisconsin Senate Race: Mandela Barnes, the Democratic candidate, is wobbling in his contest against Senator Ron Johnson, the Republican incumbent, as an onslaught of G.O.P. attack ads takes a toll.G.O.P. Senate Gains: After signs emerged that Republicans were making gains in the race for the Senate, the polling shift is now clear, writes Nate Cohn, The Times’s chief political analyst.Democrats’ Closing Argument: Buoyed by polls that show the end of Roe v. Wade has moved independent voters their way, vulnerable House Democrats have reoriented their campaigns around abortion rights in the final weeks before the election.The Volvo facility in Hagerstown employs more than 1,700 workers and makes parts for Mack Trucks.The visit also came with political calculations, as Representative David Trone, a Maryland Democrat, was locked in a tight re-election race with his Republican challenger, Neil Parrott. Hagerstown is also close to the border with Pennsylvania, where the senate and governor’s races are two of the most consequential political contests in the country.Mr. Biden maintained a more pointed tone with Republicans as he made claims about the benefits of the so-called Inflation Reduction Act that Congress passed in August. He called out Republicans such as Representative Paul Gosar of Arizona and Representative Andy Barr of Kentucky for seeking federal funds for local projects while criticizing his agenda, calling it “socialism.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“I didn’t know there were that many socialist Republicans,” Mr. Biden joked.Mr. Biden, who on Thursday evening attended a fund-raiser at the Manhattan home of the Democratic donor James Murdoch, said that Republicans have a “Park Avenue” view of the world that stands in stark contrast to his policies that are born out of concern for people in places like Scranton, Pa., where Mr. Biden was born, and Hagerstown.Republicans seized on signs of a cooling job market to assail Mr. Biden for economic mismanagement on Friday.“The economy is shrinking, inflation is raging, and job growth is slowing,” said Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee.While the White House has so far sounded very in line with the Fed’s push to fight the quickest inflation in four decades, that tone could shift somewhat as the economy begins to show cracks.The Biden administration has made it clear that it respects the Fed’s independence to set policy free of partisan interference, but it might be challenging for administration officials to embrace the central bank’s actions too loudly when the Fed’s policies are hurting the economy and inflicting pain on workers.Mr. Biden acknowledged that economic headwinds continued to persist, noting that gasoline prices are inching back up “because of what the Russians and the Saudis just did.”“I’m not finished with that just yet,” he added.Despite his sharper tone, Mr. Biden said that he remained hopeful that bipartisan cooperation could be possible after the election.“That’s my hope, that after this election, there will be a little return to sanity,” Mr. Biden said. “That we’ll stop this bitterness that exists between the parties and have people working together.” More

September’s nonfarm payrolls report provided both assurance that the jobs market is strong and that the Fed will have to do more to slow it down.
Worker pay rose 5% on a year-over-year basis in September, down slightly from the 5.2% pace in August but still indicative of an economy where the cost of living is surging.
Futures pricing Friday pointed to an 82% chance of a 0.75-point move in November, then a 0.5-point increase in December followed by another 0.25-point move in February.

The Go! Go! Curry restaurant has a sign in the window reading “We Are Hiring” in Cambridge, Massachusetts, July 8, 2022.
Brian Snyder | Reuters

September’s jobs report provided both assurance that the jobs market remains strong and that the Federal Reserve will have to do more to slow it down.
The 263,000 gain in nonfarm payrolls was just below analyst expectations and the slowest monthly gain in nearly a year and a half.

But a surprising drop in the unemployment rate and another boost in worker wages sent a clear message to markets that more giant interest rate hikes are on the way.
“Low unemployment used to feel so good. Everybody who seems to want a job is getting a job,” said Ron Hetrick, senior economist at labor force data provider Lightcast. “But we’ve been getting into a situation where our low unemployment rate has absolutely been a significant driver of our inflation.”
Indeed, average hourly earnings rose 5% on a year-over-year basis in September, down slightly from the 5.2% pace in August but still indicative of an economy where the cost of living is surging. Hourly earnings rose 0.3% on a monthly basis, the same as in August.

No ‘green light’ for a Fed change

Fed officials have pointed to a historically tight labor market as a byproduct of economic conditions that have pushed inflation readings to near the highest point since the early 1980s. A series of central bank rate increases has been aimed at reducing demand and thus loosening up a labor market where there are still 1.7 open jobs for every available worker.
Friday’s nonfarm payrolls report only reinforced that the conditions behind inflation are persisting.

To financial markets, that meant the near certainty that the Fed will approve a fourth consecutive 0.75 percentage point interest rate hike when it meets again in early November. This will be the last jobs report policymakers will see before the Nov. 1-2 Federal Open Market Committee meeting.

“Anyone looking for a reprieve that might give the Fed the green light to start to telegraph a pivot didn’t get it from this report,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Maybe the light got a little greener that they can step back from” two more 0.75 percentage point increases and only one more, Sonders said.
In a speech Thursday, Fed Governor Christopher Waller sent up a preemptive flare that Friday’s report would do little to dissuade his view on inflation.
“In my view, we haven’t yet made meaningful progress on inflation and until that progress is both meaningful and persistent, I support continued rate increases, along with ongoing reductions in the Fed’s balance sheet, to help restrain aggregate demand,” Waller said.
Markets do, however, expect that November probably will be the last three-quarter point rate hike.
Futures pricing Friday pointed to an 82% chance of a 0.75-point move in November, then a 0.5-point increase in December followed by another 0.25-point move in February that would take the fed funds rate to a range of 4.5%4.75%, according to CME Group data.
What concerns investors more than anything now is whether the Fed can do all that without dragging the economy into a deep, prolonged recession.

Pessimism on the Street

September’s payroll gains brought some hope that the labor market could be strong enough to withstand monetary tightening matched only when former Fed Chairman Paul Volcker slew inflation in the early 1980s with a fund rate that topped out just above 19% in early 1981.
“It could add to the story of that soft landing that for a while seemed fairly elusive,” said Jeffrey Roach, chief economist at LPL Financial. “That soft landing could still be in the cards if the Fed doesn’t break anything.”
Investors, though, were concerned enough over the prospects of a “break” that they sent the Dow Jones Industrial Average down more than 500 points by noon Friday.
Commentary around Wall Street centered on the uncertainty of the road ahead:

From KPMG senior economist Ken Kim: “Typically, in most other economic cycles, we’d be very happy with such a solid report, especially coming from the labor market side. But this just speaks volumes about the upside-down world that we’re in, because the strength of the unemployment report keeps the pressure on the Fed to continue with their rate increases going forward.”
Rick Rieder, BlackRock’s chief investment officer of global fixed income, joked about the Fed banning resume software in an effort to cool job hunters: “The Fed should throw another 75-bps rate hike into this mix at its next meeting … consequently pressing financial conditions tighter along the way … We wonder whether it will actually take banning resume software as a last-ditch effort to hit the target, but while that won’t happen, we wonder whether, and when, significant unemployment increases will happen as well.”
David Donabedian, CIO at CIBC Private Wealth: “We expect the pressure on the Fed to remain high, with continued monetary tightening well into 2023. The Fed is not done tightening the screws on the economy, creating persistent headwinds for the equity market.”
Ron Temple, head of U.S. equity at Lazard Asset Management: “While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target. The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”

The employment data left the third-quarter economic picture looking stronger.
The Atlanta Fed’s GDPNow tracker put growth for the quarter at 2.9%, a reprieve after the economy saw consecutive negative readings in the first two quarters of the year, meeting the technical definition of recession.
However, the Atlanta Fed’s wage tracker shows worker pay growing at a 6.9% annual pace through August, even faster than the Bureau of Labor Statistics numbers. The Fed tracker uses Census rather than BLS data to inform its calculations and is generally more closely followed by central bank policymakers.
It all makes the inflation fight look ongoing, even with a slowdown in payroll growth.
“There is an interpretation of today’s data as supporting a soft landing – job openings are falling and the unemployment rate is staying low,” wrote Citigroup economist Andrew Hollenhorst, “but we continue to see the most likely outcome as persistently strong wage and price inflation that the Fed will drive the economy into at least a mild recession to bring down inflation.”

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The White House issued sweeping restrictions on selling semiconductors and chip-making equipment to China, an attempt to curb the country’s access to critical technologies.WASHINGTON — The Biden administration on Friday announced sweeping new limits on the sale of semiconductor technology to China, a step aimed at crippling Beijing’s access to critical technologies that are needed for everything from supercomputing to guiding weapons.The moves are the clearest sign yet that a dangerous standoff between the world’s two major superpowers is increasingly playing out in the technological sphere, with the United States trying to establish a stranglehold on advanced computing and semiconductor technology that is essential to China’s military and economic ambitions.The package of restrictions, which was released by the Commerce Department, is designed in large part to slow the progress of Chinese military programs, which use supercomputing to model nuclear blasts, guide hypersonic weapons and establish advanced networks for surveilling dissidents and minorities, among other activities.Alan Estevez, the under secretary of commerce for industry and security, said his bureau was working to prevent China’s military, intelligence and security services from acquiring sensitive technologies with military applications.“The threat environment is always changing, and we are updating our policies today to make sure we’re addressing the challenges posed by the P.R.C. while we continue our outreach and coordination with allies and partners,” he said, referring to the People’s Republic of China.Technology experts said the rules appeared to impose the broadest export controls issued in a decade. While similar to the Trump administration’s crackdown on the telecom giant Huawei, the new rules are far wider in scope, affecting dozens of Chinese firms. And unlike the Trump administration’s approach — which was viewed as aggressive but scattershot — the rules appear to establish a more comprehensive policy that will stop cutting-edge exports to a range of Chinese technology companies and cut off China’s nascent ability to produce advanced chips itself.“It is an aggressive approach by the U.S. government to start to really impair the capability of China to indigenously develop certain of these critical technologies,” said Emily Kilcrease, a senior fellow at Center for a New American Security, a think tank.Companies will no longer be allowed to supply advanced computing chips, chip-making equipment and other products to China unless they receive a special license. Most of those licenses will be denied, though certain shipments to facilities operated by U.S. companies or allied countries will be evaluated case by case, a senior administration official said in a briefing Thursday.It remains to be seen whether the Chinese government will take action in response. Samm Sacks, a senior fellow at Yale Law School who studies technology policy in China, said the new rules could push Beijing to impose restrictions on American companies or firms from other countries that comply with U.S. rules but still want to maintain operations in China.“The question is: Would this new package cross a red line to trigger a response that we haven’t seen before?” she said. “A lot of people are anticipating it will. I think we’ll have to wait and see.”More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.The measures come at a particularly sensitive moment for Beijing. Chinese leaders will hold a major political meeting beginning Oct. 16, where leader Xi Jinping is expected to secure a third leadership term, becoming the country’s longest-ruling leader since Mao Zedong.Liu Pengyu, a spokesman for the Chinese Embassy in Washington, said the United States was trying “to use its technological prowess as an advantage to hobble and suppress the development of emerging markets and developing countries.”“The U.S. probably hopes that China and the rest of the developing world will forever stay at the lower end of the industrial chain,” he added.The Chinese government has invested heavily in building up its semiconductor industry, but it still lags behind the United States, Taiwan and South Korea in its ability to produce the most advanced chips. In other fields, like artificial intelligence, China is no longer significantly behind the United States, but those technologies mostly rely on advanced chips that are designed or fabricated by non-Chinese firms.Jack Dongarra, a computer scientist at the University of Tennessee, said some of China’s most advanced supercomputers depended on chips made by California-based Intel or Taiwan Semiconductor Manufacturing Company, which uses U.S. technology in its production process and so would be subject to the new rules.The restrictions limit U.S. exports of high-tech chips called graphic processing units, which are used to power artificial intelligence applications, and place broad limits on chips destined for supercomputers in China. The rules also bar U.S.-based companies that make the equipment used to manufacture advanced logic and memory chips from selling that machinery to China without a license.Perhaps most significant, the Biden administration also imposed broad international restrictions that will prohibit companies anywhere in the world from selling chips used in artificial intelligence and supercomputing in China if they are made with U.S. technology, software or machinery. The restrictions used what is known as the foreign direct product rule, which was last deployed by former President Donald J. Trump to cripple Huawei.Another foreign direct product rule bans a broader range of products made outside the United States with American technology from being sent to 28 Chinese companies that have been placed on an “entity list” over national security concerns.Those companies include Beijing Sensetime Technology Development, a unit of a major Chinese artificial intelligence company, SenseTime. Also included are Dahua Technology, Higon, iFLYTEK, Megvii Technology, Sugon, Tianjian Phytium Information Technology, Sunway Microelectronics and Yitu Technologies, as well as a variety of labs and research institutions linked to universities and the Chinese government.In a briefing with reporters, senior administration officials said the measures would be limited to the most advanced chips and not have a broad commercial impact on private Chinese businesses. But they conceded that the limits could become more restrictive over time, given that technology will begin to outpace the advanced technological standards spelled out in the rules.Industry executives say many Chinese industries that rely on artificial intelligence and advanced algorithms power those abilities with American graphic processing units, which will now be restricted. Those include companies working with technologies like autonomous driving and gene sequencing, as well as the artificial intelligence company SenseTime and ByteDance, the Chinese internet company that owns TikTok.New limits on sales of chip-making equipment are also expected to clamp down on the operations of China’s homegrown chip makers, including Semiconductor Manufacturing International, Yangtze Memory Technologies and ChangXin Memory Technologies.The actual impact of the restrictions will hinge on how the policy is carried out. For most of the measures, the Commerce Department has the discretion to grant companies special licenses to continue selling the restricted products to China, though it said most would be denied.Some Republican lawmakers and China hawks have criticized the department for being too willing to issue such licenses, allowing U.S. companies to continue selling sensitive technology to China even when national security may be at stake.“If you want to stop it, you can just stop it,” said Derek Scissors, a senior fellow at the American Enterprise Institute. “When you create a licensing requirement, you are announcing to the world: We don’t want to stop it. We are just pretending.”With its vast ecosystem of factories, China continues to be a huge and lucrative market for U.S. chip exports. The tiny technologies are crucial to the smartphones, laptops, coffee makers, cars and other goods that Chinese factories pump out for domestic consumption and export to the world.Many American companies have long argued that their sales to China are an important source of revenue that allows them to reinvest in research and development and retain a competitive edge.But doing business with China has become much more fraught in the last few years, as the tensions between the United States and China have morphed into a cold war competition. The Chinese government has sought to blur the line between its defense sector and private industry, drawing on Chinese firms that specialize in fields including artificial intelligence, big data, aerospace technologies and quantum computing to fuel the country’s military modernization.Chinese military drills aimed at intimidating Taiwan, and China’s alignment with Moscow after the Russian invasion of Ukraine, have strengthened the case for technology regulation.Still, industry executives and some analysts argue that cutting China off from foreign chips will accelerate Beijing’s push to develop them itself and cause U.S. companies to lose out to foreign competitors, unless other countries also impose similar restrictions.The Semiconductor Industry Association said Friday that it was assessing the impact of the export controls on the industry and working with companies to ensure compliance.“We understand the goal of ensuring national security and urge the U.S. government to implement the rules in a targeted way — and in collaboration with international partners — to help level the playing field and mitigate unintended harm to U.S. innovation,” it said in a statement.In remarks last month, the Biden administration signaled that it would get tougher on technology regulation. Jake Sullivan, the national security adviser, said the U.S. government’s previous approach, of trying to stay a few generations ahead of competitors, was no longer sufficient.“Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible,” he said.Kevin Wolf, a partner at Akin Gump who led export control efforts during the Obama administration, said the move was “a fundamental shift in the use of export controls” to address broader national security objectives. Since the Cold War, most countries had used export controls more narrowly, focusing on regulating specific items that were necessary to produce or deploy weapons.Mr. Wolf said the new measures were likely to be highly effective in the short and medium term. “How effective they will be over the long term will be a function of whether allies ultimately agree to impose similar controls,” he added.Edward Wong More