Finance

Fed Governor Christopher Waller told CNBC on Tuesday that “a hell of a good week of data” will buy the central bank some time on policy decisions.
While he was encouraged by the recent reports on where prices are trending, he said they also indicate that the Fed can afford to hold rates higher until it is sure inflation is on the run.

Federal Reserve Governor Christopher Waller said Tuesday that the recent round of strong economic data will buy the central bank some time as it decides whether additional interest rate hikes are needed to control inflation.
“That was a hell of a good week of data we got last week, and the key thing out if it is it’s going to allow us to proceed carefully,” Waller told CNBC’s Steve Liesman during a “Squawk Box” interview. “We can just sit there, wait for the data, see if things continue.”

Highlighting those data points was Friday’s nonfarm payrolls report, which showed better-than-expected growth of 187,000 jobs in August while average hourly earnings rose just 0.2% for the month, lower than forecast.
Earlier in the week, other reports showed that the Fed’s preferred inflation gauge rose just 0.2% in July, and that job openings, a key measure of labor market tightness, fell to their lowest level since March 2021.
“The biggest thing is just inflation,” Waller said. “We got two good reports in a row.” The key now is to “see whether this low inflation is a trend or if it was just an outlier or a fluke.”
Waller is generally considered one of the more hawkish members of the rate-setting Federal Open Market Committee, meaning he has favored tighter monetary policy and higher interest rates as the central bank battles inflation that in the summer of 2022 was running at its highest rate in more than 40 years.
While he was encouraged by the recent reports on where prices are trending, he said they also indicate that the Fed can afford to hold rates higher until it is sure inflation is on the run.

“That depends on the data,” Waller said when asked whether the rate increases can stop. “We have to wait and see if this inflation trend is continuing. We’ve been burned twice before. In 2021, we saw it coming down and then it shot up. The end of 2022, we saw it coming down, then it all got revised away.”
“So, I want to be very careful about saying we’ve kind of done the job on inflation until we see a couple of months continuing along this trajectory before I say we’re done doing anything,” he added.
Markets are assigning a near certainty to the chances that the Fed skips a rate rise at its Sept. 19-20 meeting. However, there’s a 43.5% probability of an increase at the Oct.31-Nov. 1 session, according to CME Group tracking of futures pricing, indicating some uncertainty. Goldman Sachs this week said it expects the Fed is done.
“I don’t think one more hike would necessarily throw the economy into recession if we did feel that we needed to do one,” Waller said. “It’s not obvious that we’re in real danger of doing a lot of damage to the job market, even if we raise rates one more time.”
Waller’s remarks come less than two weeks after Fed Chair Jerome Powell said inflation is still too high and could require more rate increases, though he noted policymakers will “proceed carefully” before moving. More

Supporters of Airbnb hold a rally on the steps of New York City Hall showing support for the company on October 30, 2015 in New York City.
Andrew Burton | Getty Images More

A sign is posted in front of a Broadcom office in San Jose, California, June 3, 2021.
Justin Sullivan | Getty Images

Check out the companies making headlines in midday trading:
VMware — The cloud services company slid 2.8%, a day after giving a mixed second-quarter report. While VMware surpassed expectations for earnings per share, it missed on revenue.

Lululemon Athletica — The stock popped 6% on Friday after the athletic apparel retailer reported an earnings beat following Thursday’s close. Fiscal second-quarter earnings per share came in at $2.68, versus the $2.54 expected from analysts polled by Refinitiv. Revenue was $2.21 billion, topping estimates of $2.17 billion. Lululemon also upped its guidance for the year.  
Broadcom — The chip stock lost 5.5% after the company issued fiscal fourth-quarter revenue guidance that was slightly below Wall Street estimates amid concerns about competition in the networking chip space. Broadcom did report better-than-expected earnings and revenue for the latest quarter, however.
Papa John’s — The pizza chain climbed 1.9% following a Wedbush upgrade to outperform from neutral. The firm said shares were too cheap.
PagerDuty — The stock declined 7.7% after PagerDuty issued third-quarter earnings guidance that missed analysts’ expectations. The company expects earnings per share between 13 cents and 14 cents for the quarter, below a StreetAccount consensus of 15 cents per share. Baird also downgraded PagerDuty to neutral from outperform, saying its shares are in the “penalty box.”
A-Mark Precious Metals — Shares of the precious metals trading company soared 10.9% during Friday’s trading session after the company posted its latest quarterly results and announced a $1 per share special dividend. Revenue totaled $3.16 billion, exceeding expectations of $2.31 billion. The company’s earnings per share came out at $1.71, however, which was lower than analysts’ expectations of $1.76, according to StreetAccount.

Dell Technologies — Dell Technologies surged 21.3% Friday after exceeding analysts’ second-quarter expectations. The computer company reported adjusted earnings per share of $1.74 and revenue of $22.93 billion. Analysts polled by Refinitiv anticipated earnings per share of $1.14 and $20.85 billion. Morgan Stanley also named Dell a top pick in IT hardware.
Walgreens Boots Alliance — The drugstore chain declined 7.4% after the company announced Roz Brewer had stepped down as the company’s chief executive and left the board.
Tesla — Shares of Tesla dropped nearly 5.1% after the electric vehicle maker cut prices for some Model S and Model X vehicles in China.
MongoDB — MongoDB gained just above 3% on Friday after topping Wall Street expectations in its latest quarter. The database software maker posted adjusted earnings of 93 cents per share on revenue totaling $423.8 million for the second quarter. Those results topped expectations of 46 cents in earnings per share and $393 million in revenue, according to a consensus estimate from Refinitiv.
— CNBC’s Yun Li, Alex Harring and Michelle Fox Theobald contributed reporting. More

The August 2023 jobs report issued Friday by the U.S. Bureau of Labor Statistics suggests a cooling but still-strong job market, economists said.
Other federal data on quits and job openings, for example, support the notion of a Goldilocks labor market.
Jobseekers still need to be on their best game when applying for roles, economists said.

Mario Tama | Getty Images

1. Job growth is slowing

The U.S. economy added 187,000 jobs in August, the Labor Department said Friday.

Job growth is clearly losing momentum: The three-month average in August was 150,000 jobs added, versus 201,000 in June, for example, Bunker said.

But August’s reading was “exactly in line” with the 2015-2019 average of 190,000 a month, said Julia Pollak, chief economist at ZipRecruiter. And job gains in August were broad-based across industries, she said.
Lat month’s tally was also reduced by tens of thousands due to one-off factors like ongoing strikes in Hollywood and trucking-sector layoffs largely driven by the bankruptcy of Yellow Corp., said Aaron Terrazas, chief economist at career site Glassdoor.

Further, monthly job growth still exceeds U.S. population growth, economists said. Estimates on this “neutral” pace vary. Bunker pegs it around 70,000 to 100,000 jobs a month; Terrazas puts it around 150,000.

2. Unemployment is up — but not for bad reasons

The unemployment rate jumped to 3.8% in August from 3.5% in July, the U.S. Labor Department said Friday.
However, that relatively big increase doesn’t seem to be for bad reasons like people losing jobs, economists said. In fact, employment rose in August.

Instead, the jump is largely attributable to an increase in the number of people looking for work, economists said. More people are therefore entering the labor force — which gives the appearance of rising unemployment.
“Although the unemployment rate jumped to an 18-month high of 3.8% … that arguably isn’t quite as alarming as it looks since it was driven by a 736,000 surge in the labour force,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, wrote in a research note Friday.

The rate of labor force participation in August reached its highest level since the start of the Covid-19 pandemic, according to Labor Department data.
That said, it would become worrisome if new entrants to the labor market don’t find jobs quickly and unemployment continues to rise, Pollak said.
Historically, an unemployment rate below 4% is “still consistent with improving labor market conditions for job seekers and workers, even those who have traditionally faced barriers to employment,” Pollak said.

3. The great resignation is over

The pandemic-era trend known as the great resignation is over.
Workers quit their jobs at a historically high rate in 2021 and 2022, attracted by ample job opportunity and higher pay elsewhere. Quits are a proxy of workers’ willingness or ability to leave jobs. Now, quits — as well as the number of new hires made by employers — have fallen back to their pre-pandemic levels.
It’s “exactly where you’d want” these rates to be, Zandi said.
That said, some sectors have seen the quits rate decline noticeably below pre-pandemic levels, suggesting workers feel less confident about their job prospects nowadays.

It’s a numbers game. Apply early and often. Speed really, really, really matters.

Julia Pollak
Chief economist at ZipRecruiter

For example, the quits rate for the leisure and hospitality as well as accommodation and food services sectors are each at 3.9%, “lower than 2019 levels of 4.6% and 4.9%, respectively,” Andrew Patterson, senior economist at Vanguard, wrote in an email.

4. Job openings ‘rapidly’ approaching normal

Job openings — a barometer of employer demand for workers — remain historically high but have been trending downward.  
There were about 8.8 million openings in July, the fewest since March 2021, according to Labor Department data. That’s more than at any point before the pandemic, though down from the Covid-era peak around 12 million in March 2022.

Job openings are “rapidly approaching” their pre-pandemic peak, suggesting “labour market conditions have mostly normalized,” Hunter wrote in a note this week.

5. Wage growth is slowing, but outpaces cost of living

Wage growth has cooled from a pace unseen in decades.
Average three-month growth was 4.5% in August, on an annualized basis, according to a White House Council of Economic Advisers analysis of earnings data in Friday’s jobs report. While still elevated, that’s down from 4.9% last month and a peak of 6.4% in January 2022, CEA said.

There’s good news for workers, though: “Real” wages have finally flipped positive after a long stretch of declines for the average worker.
Real wages are net earnings after accounting for increases in the cost of living. On average, inflation had outstripped the growth in average hourly wages for two years, from April 2021 to April 2023, according to Labor Department data. That meant the average worker saw their living standard erode.

But a combination of falling inflation and relatively strong wage growth has meant a reversal of that trend since May — meaning living standards have begun rising again.  
In July, real average hourly earnings rose 1.1% from a year earlier, following increases of 1.3% and 0.2% in June and May, respectively, according to the Labor Department.

6. Jobseekers need to be ‘on their best game’

While the labor market remains strong, jobseekers “need to be on their best game” since they no longer have “unprecedented” leverage when seeking work, Pollak said.
Workers face more competition for open roles, she said. There are opportunities but they’ll be a bit harder to find, she added.
“It’s a numbers game,” Pollak said. “Apply early and often. Speed really, really, really matters.” More

U.S. inflation started to gain pace in early 2021 as the economy emerged from the Covid-19 pandemic, rising from an annual 1.2% in December 2020 to a 40-year high of 9.1% in June 2022.
“The Fed thought the source of the inflation that began in the post-pandemic era was excess demand, and you could understand why they may have thought that if they didn’t do their homework,” Stiglitz told CNBC’s Steve Sedgwick at the Ambrosetti Forum.
Instead, the economist said that the price rises were often driven by other factors, such as a shortage of key components like semiconductor chips.

Mike Green | CNBC

The Federal Reserve “didn’t do their homework” and mischaracterized the spike in inflation that has plagued the U.S. economy over the last two years, according to Nobel Prize-winning economist Joseph Stiglitz.
U.S. inflation started to gain pace in early 2021 as the economy emerged from the Covid-19 pandemic, rising from an annual 1.2% in December 2020 to a 40-year high of 9.1% in June 2022.

The Fed didn’t start hiking rates until March 2022 and Chair Jerome Powell repeatedly insisted that inflation was “transitory,” indicating that it could be easily tamed.
“The Fed thought the source of the inflation that began in the post-pandemic era was excess demand, and you could understand why they may have thought that if they didn’t do their homework,” Stiglitz told CNBC’s Steve Sedgwick on the sidelines of the Ambrosetti Forum on Thursday night.

Instead, Stiglitz said that the price rises were often driven by other factors, such as a shortage of key components like semiconductor chips.
In an effort to drag inflation back down towards its 2% target, the Fed has now hiked interest rates 11 times in total to a target range of 5.25%-5.5%, the highest level for more than 22 years.
Considerable progress has been made, with the 12-month headline consumer price index reading falling to just 3.2% on the year in July, and multiple data points suggesting that inflationary pressures have eased considerably.

‘Bad economics’

Although he does not see the aggressive monetary policy tightening of the last 18 months tipping the U.S. economy into recession, Stiglitz suggested there are lessons to be learned from the Fed’s assessment of inflationary dynamics.
“It’s really bad economics, because [the Fed] saw that the government had passed this enormous recovery program, and if all that money had been spent, it would have been inflationary, but you have to remember back just a few years ago, there was an enormous amount of uncertainty.”
This uncertainty meant that firms were not investing as they ordinarily would have, while consumers did not feel comfortable deploying the pent-up savings accrued during the pandemic — meaning total, or aggregate, demand was still below pre-pandemic forecasts, Stiglitz said.
“Why was there inflation? We all know the reason,” he added. “Car prices in the beginning went way up — why? Was it because we didn’t know how to make cars? No, we knew how to make cars. American auto companies forgot to put in orders for chips, and for want of a chip, you can’t make a car.”

A lucky policy mistake?

Despite the Fed’s rapid raising of interest rates, the U.S. economy has held up surprisingly well, though economists are still divided over whether the tightening of financial conditions will bring about a recession.
Stiglitz suggested that the economic soft landing the Fed has tried to engineer may well come to fruition, but as the result of another lucky policy “mistake,” this time from the government in the form of the Inflation Reduction Act.
The IRA, the Biden administration’s landmark legislation targeting manufacturing, infrastructure and climate change, was launched just over a year ago and has spurred more than $500 billion in new investment, according to the Treasury.
“When they passed that Act, they thought there’d be some companies taking advantage of it and it would cost over 10 years $271 billion. Now the estimates by many sources is well over a trillion dollars,” Stiglitz noted.
“That’s a big stimulus to the economy that’s going to be offsetting the contractionary effects of monetary policy, so we may manage our way through this by luck. The Fed had no idea of the effect of the IRA.” More

A Dell Technologies flag outside the company headquarters in Round Rock, Texas, US, on Monday, Feb. 6, 2023.
Jordan Vonderhaar | Bloomberg | Getty Images

Check out the companies making headlines before the bell:
Dell Technologies — Dell Technologies surged 10.5% after exceeding analysts’ second-quarter expectations. The computer company reported adjusted per-share earnings of $1.74 and revenue of $22.93 billion. Analysts polled by Refinitiv anticipated per-share earnings of $1.14 and $20.85 billion. Morgan Stanley named Dell a top pick in IT hardware.

MongoDB — MongoDB advanced 5% after topping Wall Street expectations in its latest quarter. The database software maker posted adjusted earnings of 93 cents per share on revenue totaling $423.8 million for the second quarter. Those results topped expectations of 46 cents earnings per share and $393 million in revenue, according to a consensus estimate from Refinitiv.
Lululemon Athletica — Shares added 2.3% in premarket trading after the athletic apparel retailer reported an earnings beat. Earnings per share for its second fiscal quarter came in at $2.68, topping the Refinitiv consensus estimate of $2.54. Revenue was $2.21 billion, versus the $2.17 expected. Lululemon also upped its guidance for the year.
Walgreens Boots Alliance — The drugstore chain rose by 0.4% in early trading. Walgreens said Friday that Roz Brewer had stepped down as the company’s chief executive and left the board. 
Vale — The metals and mining stock rose nearly 2% after JPMorgan upgraded Vale to overweight from neutral, saying that shares look too cheap too ignore after recent pullback, valuation reset.
VMware — The cloud services company slid 1.9% before the bell. VMware gave a mixed second-quarter report on Thursday, beating expectations for earnings per share while missing on revenue. The company also said it entered a definitive agreement to be acquired by Broadcom.

Broadcom — Shares of the chipmaker fell 4% despite Broadcom’s fiscal third-quarter results beating expectations. The semiconductor company generated $10.54 in adjusted earnings per share on $8.88 billion of revenue. Analysts surveyed by Refinitiv were expecting $10.42 per share on $8.86 billion of revenue. Fourth-quarter revenue guidance of $9.27 billion was roughly in line with estimates.
— CNBC’s Michelle Fox, Alex Harring, Jesse Pound and Samantha Subin contributed reporting More

“China is not really developing as we hoped in the beginning of the year,” said ABB’s Bjorn Rosengren, citing softness in China’s real estate sector as driving factor.
The Chinese real estate industry has been in a state of turmoil for the last three years, most notably marked by the financial woes of heavily indebted property developer Evergrande.
China, a powerhouse of manufacturing often referred as “the world’s factory” due to its influence on global trade, is ABB’s second-biggest market.

The CEO of Swedish-Swiss multinational robotics firm ABB said he has been “disappointed” by the state of the Chinese market, adding he expects conditions will prove challenging for the rest of the year.
“China is not really developing as we hoped in the beginning of the year,” said Bjorn Rosengren, CEO and chairman of ABB, speaking with CNBC’s Joumanna Bercetche on Wednesday, adding ABB has been impacted by a “softening” in China’s property sector.

Rosengren said that a decline in Chinese real estate development and hefty debts faced by the sector have meant pain for its residential construction segment, which is more cyclical and therefore prone to changes in the economy.
“We are pretty pessimistic at the moment” on China, said Rosengren. “We thought in the beginning of the year that we should see some recovery from the Covid period, but I think everybody has been pretty disappointed.”
“China continues to be pretty soft. It’s a big market though, so it’s not dead. It’s still living there, but not really developing as we’d hoped. I think it will be challenging for the rest of the year.”
ABB is one of the largest companies globally operating in the realm of industrial manufacturing. With its machines embedded in so many major global companies’ factories, the company’s performance serves as something of a barometer for the health of the manufacturing sector — and the broader economy.
Notably, China, a powerhouse of manufacturing often referred to as “the world’s factory” due to the country’s influence on global trade, is the company’s second-biggest market.

ABB says it’s the leading robotics player in the Chinese market, accounting for more than 90% of sales from locally-made products, solutions and services there.
But it has been showing signs of weakness.
In the second quarter of 2023, ABB reported a 2% increase in orders on a comparable basis, to $8.7 billion. Comparable revenues were up 17%, to $8.2 billion. Income from operations, meanwhile, climbed 15.9%, to $1.3 billion. However, in China, the firm saw its order intake decline 9% on a comparable basis in the period.

More than 50 Chinese property developers have defaulted or failed to make payments in the last three years, according to credit ratings agency Standard and Poor’s.
In July, Fitch Ratings pulled its credit ratings for Central China Real Estate Limited, a Hong Kong-based investment holding company primarily engaged in property businesses.
More recently, economists have flagged concerns with structural issues in China’s economy, such as debt, an aging population and young people unable to find work, and a growing fear of a “decoupling” from the rest of the world as tensions with the United States reach boiling point.
The Chinese real estate sector has been in a state of turmoil over the last two years, most notably marked by the financial woes of heavily indebted property developer Evergrande, which earlier this month filed for U.S. bankruptcy protection.
On Monday, Evergrande’s shares lost as much as 87% of their value after the company resumed trading for the first time since March 21, 2022. The shares have struggled to recover since.

A silver lining?

Rosengren said that, despite the weakness it is seeing in China, electric mobility is proving a fast-growing area for the company globally — especially in China.
“One of the positive things is EV vehicles, which also are getting a position globally as you’ve seen also in Europe today, Chinese cars from that perspective,” said Rosengren.
“I think that’s one of the sectors which has been good, which had some positive for the robotics market. But I think actually the real estate construction part which is low and has been low for quite some time.”
ABB is currently planning an initial public offering for the e-mobility business, which in raised 325 million Swiss francs ($370.6 million) from investors in a pre-IPO placement.
Rosengren said that most businesses and governments are “aligned” on the need to push toward a green energy future, so the ceiling for growth remains high.
In Europe, especially, greater impetus has been placed on the need to accelerate the energy transition due to Russia’s invasion of Ukraine and resulting restrictions of natural gas supplies to the continent.
“Energy generation is of course one of the sectors that needs to go green,” Rosengren said.
“You also need to build up infrastructure, electrification infrastructure globally. And I think that is what we are feeling today and that’s what we are seeing and that’s why we see still very strong market in electrification and that’s why that is important.”
ABB has an e-mobility division responsible for developing electric charging solutions, which are the backbone of the EV industry.
Still, this part of the business has proven challenging as macroeconomic conditions have deteriorated.
In the second quarter, ABB’s e-mobility unit lost $67 million, which the company attributed to “inventory related provisions as well as technology investments triggered by a shift back to a more focused product strategy to secure a continued leading market position.” More

Ralph Orlowski | Getty Images

Check out the companies making headlines after hours.
MongoDB — Shares of the database software maker gained 5% in extended trading. MongoDB reported earnings of 93 cents per share, excluding items, on revenue totaling $423.8 million in the second quarter. That came in ahead of the earnings per share of 46 cents and $393 million in revenue expected by analysts polled by Refinitiv. 

Dell Technologies — Dell popped 7.7% after reporting second-quarter earnings that surpassed Wall Street’s expectations. The technology company reported earnings per share of $1.74, excluding items, and $22.93 billion in revenue, while analysts polled by Refinitiv expected earnings per share of $1.14 and $20.85 billion.
Broadcom — Shares of the semiconductor manufacturing company fell 4% after the company posted soft fiscal fourth-quarter guidance. The semiconductor company called for fourth-quarter revenue of $9.27 billion, while analysts polled by Refinitiv anticipated $9.275 billion.
VMware — The cloud services stock edged down 1.7%. VMware posted mixed earnings, coming out at earnings of $1.83 per share, excluding items, on revenue of $3.41 billion. Meanwhile, analysts polled by Refinitiv expected $1.71 in earnings per share and $3.46 billion in revenue.
Lululemon Athletica — Shares of the athletic apparel retailer gained nearly 2% Thursday after it reported sales and profits that beat Wall Street’s estimates. The company reported earnings per share of $2.68 and $2.21 billion in revenue for its fiscal second quarter, while analysts polled by Refinitiv expected $2.54 in earnings per share and $2.17 billion in revenue. Lululemon also said it now expects sales of $9.51 billion to $9.57 billion for the fiscal year. More