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dow

Dow Tumbles More Than 1200 Points After Inflation Data

US stocks plummeted Tuesday after the latest Consumer Price Index report showed inflation rates are still at a 40-year high. The Dow fell more than 1200 points on its worst day since June 2020.

The report revealed that monthly consumer prices rose more than expected in August. History shows that low unemployment and rising inflation often precede a recession. High inflation rates erode consumer purchasing power. They also decrease companies’ profits due to rising material costs, causing stocks to fall and economic activity to slow down.

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Matt Peron, director of research at Janus Henderson Investors, agreed with most analysts that the Federal Reserve will likely increase the federal funds rate higher to cool off the market.

 “The CPI report was an unequivocal negative for equity markets. The hotter than expected report means we will get continued pressure from Fed policy via rate hikes.”

The Fed responds to rising inflation by increasing the federal funds rate. In the wake of the pandemic, the rate sat at near zero in an attempt to stimulate the economy. The Fed then hiked rates from a range of 0.25% to 0.50% in March 2022 to a range of 2.25% to 2.5% in July 2022. The rate of increase in borrowing costs was the fastest since the 1980s.

When the Fed raises the federal funds rate, the cost of credit throughout the economy increases and loans become more expensive for businesses and consumers, since interest payments are higher. At the same time, people with savings in banks earn more interest on their deposits. Together, this drops the amount of money in circulation, bringing down the inflation rate. However, if the Fed increases the federal funds rate too high, it may also trigger a recession by slowing economic activity too much.

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The Fed is expected to keep hiking the federal funds rate until a sustained drop in consumer price inflation. Investors hoped that the Fed would keep its interest rate increases at a slower speed, with analysts predicting a federal funds rate of 3.4% at the end of the year. Brian Jacobsen, a senior investment strategist at Allspring Global Investments, told Reuters his concerns.

“The big risk is that next week, the Fed tries to convince the markets that they’re not going to just try to go for 4% with the Fed funds rate, but that they could push it to something closer to four and a half percent.”

All three major US stock indexes — S&P 500, the Dow, and Nasdaq had their most significant one-day percentage drops in over two years. The CBOE volatility index, which measures the market’s expectations for volatility over the next 30 days, rose to 25.74 points.

The next Federal Reserve meeting is scheduled for Sept. 20.

 

UK

One Third Of Households In The United Kingdom Facing Poverty Due To Rising Energy Costs 

According to campaigners from the United Kingdom, nearly one third of households in the nation will face poverty by the winter due to increasing energy costs and paying bills that are expected to rise in price even further with the new year. 

According to estimates from the End Fuel Poverty Coalition (EFPC), about 10.5 million households will be in “fuel poverty” for the first three months of 2023. In other words, based on their incomes after they’re done paying their energy bills their household income will fall below the poverty line. 

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The definition of poverty in the UK is any household with an income of less than 60% of the UK median, which stands at £31,000 ($37,500), according to official statistics.

Cornwall Insight is the research firm that provided the data leading to the prediction that one third of households will be impoverished in the winter. The average energy bill is expected to hit £3,582 ($4,335) a year from October, and £4,266 ($5,163) from January; about £355 ($430) a month.

The forecast for 2023 represents a 116% increase in energy bills from their current levels. Fuel prices have been surging worldwide, and in the UK prices are projected to continue to rise by 83% in January. 

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Cornwall Insight, however, also is expecting energy bills will start decreasing in the second half of 2023. The average household bill in the UK has risen by 54% this year due to inflation rates regarding fuel and energy consumption.

The UK government announced a bill in May which introduced a  £15 billion ($18 billion) package of support — including a “£400 ($484) payment to 29 million households from October — to ease the burden of energy bills.”

But Simon Francis, coordinator for the EFPC, said “the latest price estimates meant the current level of government support amounted to a drop in the ocean.”

Craig Lowrey, a principal consultant at Cornwall Insight, said in a Tuesday press release that “if £400 was not enough to make a dent in the impact of [the company’s] previous forecast, it most certainly is not enough now.”

Liz Truss, the UK’s foreign minister and as prime minister, has proposed “cutting taxes to help people struggling with their bills, rather than direct help.”

best places to live

The Best Places To Live In America This Year 

Real Estate company Niche has released their fifth annual report of the Best Places to Live in America, which includes a number of different categories including the most affordable places in the nation to live. 

“The pandemic triggered a new set of possibilities—suddenly, many individuals and families found themselves more mobile than ever before, and in the past two years they have continued to think hard about where they really want to live,” says Luke Skurman, CEO and founder of Niche.

Niche creates their reports using data from reliable sources such as the US Census and other government agencies, in addition to citizen reviews and reports. When it comes time to put there report together, they look at factors such as affordability, diversity, local housing economies, and other integral factors that buyers would look at when it comes time to buy a home. 

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For the second year in a row, Niche reported that The Woodlands is the top place in America to live. Ryan Bell, the principal strategist at Niche, discussed why it’s been able to top the list two years in a row. 

“When you look at all the factors we chose for our best cities ranking, The Woodlands is extremely well-rounded. It had high scores in each category, including weather, overall affordability and the quality of its public schools.”

Niche’s best cities rankings also incorporate real ratings from people who live there, so the residents’ love and appreciation for their home certainly helped The Woodlands hang on to the number one spot for two years running,” says Bell.

Gil Staley, CEO of The Woodlands Area Economic Development Project, also spoke to the perks that The Woodlands has to offer leading to its top ranking on the list. 

“Our county, as a whole, is one of the fastest growing counties in the nation and our community has turned into a regional center for jobs,” Bell explained, adding that the highly ranked school districts in the county also make the Woodlands a desirable place to live. 

Niche listed Fort Wayne, Indiana as the most affordable place to live in the US, a title which it also earned in 2018, 2019, and 2021. 

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“To take the number one spot, Fort Wayne had to have strong performance in several factors we take into account for the lowest cost of living rankings. In particular, housing and rental affordability in comparison to incomes in the area, are Fort Wayne’s strongest factors for affordability this year,” says Bell. 

Forbes Magazine reported on why citizens in Fort Wayne also believe it’s such an amazing place to live: “Fort Wayne is a lovely place to visit and live. I’ve lived here for six years now and still haven’t seen everything. It’s family friendly and just friendly in general. It’s a small city compared to most, but there’s much to do. It’s full of history and rivers.”

The Top 10 Best Places to live in America according to Niche are ranked as follows: 

  1. The Woodlands, Texas
  2. Cambridge, Massachusetts
  3. Naperville, Illinois
  4. Arlington, Virginia
  5. Overland Park, Kansas
  6. Ann Arbor, Michigan
  7. Columbia, Maryland
  8. Berkeley, California
  9. Plano, Texas
  10. Irvine, California

For the rest of the rankings from Niche, check out their full report here.

sale

Real Estate Experts Say US Housing Market Is On Its Way To Recovery

Real estate industry economists are stating that the nation’s housing market is on a correction course with housing prices slowly moderating, and even declining, in some areas.

labor

US Economy Adds 372,000 Jobs In June, Exceeding Expectations 

According to the monthly jobs report from the Bureau of Labor Statistics (BLS), the US economy added 372,000 new jobs in June, exceeding expectations and providing citizens with a surge in hiring. 

The unemployment rate remained around 3.6% as well. In May, 384,000 new jobs were added, so while June’s numbers were slightly lower, it still exceeded economist’s expectations. Economists initially were expecting around 272,700 jobs to be added in June. 

BLS data shows that the US job market is just 524,000 jobs away from pre-pandemic levels where unemployment rates were reaching record lows. 

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Professional business services, leisure/hospitality sectors, and the healthcare industry saw the biggest gains in jobs, with additional increases in food services and warehouse/storage positions. 

The job market in general has been a major force in keeping the US economy strong. The latest Job Openings and Labor Turnover Survey data released “showed there were 11.3 million available jobs in May, or 1.9 positions for every job seeker, along with historically low levels of layoffs.”

America is currently experiencing the highest inflation rates in 40 years, however, wages continue to rise. Average hourly wages were up by 5.1% within the past year, and the labor participation rate is at a steady 62.2%, just 1.2% less than pre-pandemic levels. 

“The job market is still plowing forward even in the face of increasing headwinds and recession fears. Even if the economy is slowing, the labor market remains a point of strength for the recovery. Strong employer demand is supporting solid but slowing job gains,”  Daniel Zhao, Glassdoor senior economist, said in a statement.

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“The employment report does nothing to dissuade Federal Reserve officials from sticking to their interest rate raising plans, looking to send inflation down, and closer to their 2% target. The next key reading for the Fed is the Consumer Price Index due in the days ahead,” ” said Mark Hamrick, senior economic analyst for Bankrate, in a statement. “

An increase in Covid cases in May prevented a lot of Americans from re-entering the job market last month, making the increase even more unexpected. 

Due to the increase in Covid cases in May, around 610,000 people were unable to look for work in June, up from 455,000 in the previous month. This is the first increase in this sector of data since January when the Omicron variant first appeared in the US.

The most recent Household Pulse Survey from the Census Bureau also showed that “the pandemic took more of a toll on Americans’ ability to work in June. Nearly 3.7 million people said they were not working because they were sick with Covid symptoms or were caring for someone who was sick, according to the survey, taken in the first two weeks of June.”

Climate Change

Climate Change Is One Of The Biggest Contributors To Inflation And Economic Failures

“Climatenomics” is a new book from Bob Keefe, a former White House reporter and director of Environmental Entrepreneurs. In the book, Keefe discusses how the climate crisis is changing international economies and driving prices up in almost all sectors of business.

Covid

China Slowly Recovering From Worst Surge Of Covid-19 Since Pandemic’s Start 

The capital city of Beijing, China took a step towards Covid-19 recovery by allowing restaurants to resume in-store dining this week, after a hiatus of nearly a month. Most other businesses are also able to restore in-person operations. 

Shanghai, which has been locked down for nearly two months, also announced reopening plans for their restaurants and in-person businesses, as well as outdoor activities like camping and local parks. 

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The traffic rates in both major metropolitan areas increased this week after weeks of nearly no congestion due to lockdown procedures. Virus testing in both cities has relaxed from every two days to every three days as well. 

Surges of Omicron cases have been spiking throughout China since March, prompting the nation to reinstate many of their “dynamic zero-Covid” policies. The nationwide daily Covid case cound has now fallen to well below 50, according to official data.

“The unsynchronized lockdowns and reopenings across major cities suggest that China’s ongoing post-lockdown growth recovery should be less steep than the V-shaped one in spring 2020.”

“Our high-frequency trackers suggest that barring another severe Covid resurgence and related lockdowns, mobility, construction and ports operation could recover to pre-lockdown levels in around one month,” said Goldman Sachs China Economist Lisheng Wang in a report.

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Local authorities have been enforcing strict travel bans and stay-home orders to control the spread of the virus, a method they’ve been using since the beginning of the pandemic in 2020. 

The report from Goldman Sachs also stated that “businesses in the service sector that involve close human contact would find it challenging to achieve a full recovery any time soon.”

The Dragon Boat Festival holiday weekend in China indicated to the government that overall economic recovery will likely be slow. Spending on domestic tourism during the holiday dropped 12.2% when compared to last year. 

The Purchasing Managers’ Index in China showed continuous declines in business plans for hiring new employees as well due to a lack of income overall. 

Even with Beijing and Shanghai reopening, many specific apartment complexes and neighborhoods could remain closed off due to contact with Covid cases. 

U.S. Consumer Confidence Slips In May Among Inflation

On Tuesday, The Conference Board reported that its consumer confidence index decreased slightly in May to 106.4, a score that — while still a strong number — is down from 108.6 in April (which saw a small increase itself from March).

Meanwhile, the group’s present situation index, which is based on consumers’ assessments of current business and labor market conditions, declined from 152.9 to 149.6. The expectations index, based on consumers short-term outlooks for income, business, and labor, decreased from 79.0 to 77.5.

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“The decline in the present situation index was driven solely by a perceived softening in labor market conditions,” Lynn Franco, The Conference Board’s senior director of economic indicators, said. “By contrast, views of current business conditions — which tend to move ahead of trends in jobs — improved. Overall, the present situation index remains at strong levels, suggesting growth did not contract further in Q2.”

“That said, with the expectations index weakening further, consumers also do not foresee the economy picking up steam in the months ahead. They do expect labor market conditions to remain relatively strong, which should continue to support confidence in the short run.”

The dip in confidence comes after April saw an 8.3% year-over-year rise, which was down from March’s 8.5% year-over-year hike. Also not helping is the producer price index, which saw a jump of 6.9% in April. That’s down from March’s 7.1%, but up from February’s 6.7%.

Even with the Federal Reserve’s attempts to fight inflation by raising interests rates by 0.5% to 1.00%, the soaring prices will likely continue to be a burden to Americans over the coming summer months. One area consumers are being tortured in are rising gas prices, which now sit at a national average of $4.6 per gallon.

The labor market continues to remain a question mark for consumers even after employers added 428,000 jobs in April, keeping the unemployment rate at a pandemic-low 3.6%. Those numbers helped the country keep a 12-month streak of 400,000 or more jobs added.

However, that steady improvement may be misleading. Politico noted that data released by the Ludwig Institute suggests the “true rate of unemployment” (or TRU) is higher than national or local figures show and accounted for 23.1% of the labor force in April.

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“We think it misleads the American people to say, ‘Oh, we’ve got 3.6 percent of America that is unemployed, ergo, a huge percent of the population is employed,’ when in fact they can’t make above a poverty wage,” Ludwig told Politico.

Additionally, Federal Reserve chair Jerome Powell has previously called the labor market “unsustainably hot,” and — in an interview with Marketplace — explained that the demand of labor is inconsistent with low inflation. “What we need to do is we need to get demand down, give supply a chance to recover and get those to align,” he said.

President Joe Biden met with Powell Tuesday, saying afterwards that inflation has become his top domestic priority. “My plan to address inflation starts with the simple proposition: Respect the Fed, respect the Fed’s independence, which I have done and will continue to do,” Biden said.

How Biden deals with inflation could significantly impact his odds of possessing a second term in two years. According to FiveThirtyEight, the President currently sits at a 54.0% disapproval rating (up from 52.4% May 1), with just 40.8% approving of his work. Biden has pointed to the Ukraine invasion and supply chain issues as culprits of inflation woes.

Ukraine Could Lose Half Of Its Economy Due To War, According To World Bank 

The World Bank released a report this weekend that stated Ukraine could lose almost half of its economy this year as a result of Russia’s invasion and the ongoing war between the two nations. 

The bank estimated that the “country’s GDP could decline by 45.1% this year, although the magnitude of the contraction will depend on the duration and intensity of the war.”

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Since Russia invaded, Ukraine’s infrastructure has endured excessive amounts of damage and destruction. Bridges, neighborhoods, and ports have been hit with multiple blockades, and farmland throughout the nation has become the setting for multiple battles. 

Before this conflict, Ukraine was a major exporter of wheat and sunflower oil, however, the growth of both has been interrupted by fighting. Farmers are also finding it difficult to access machinery and other essential products needed for farming that would typically arrive through Black Sea ports. 

“The magnitude of the humanitarian crisis unleashed by the war is staggering. The Russian invasion is delivering a massive blow to Ukraine’s economy and it has inflicted enormous damage to infrastructure,” Anna Bjerde, the World Bank’s vice president for the Europe and Central Asia region, said in a statement.

“Ukraine needs massive financial support immediately as it struggles to keep its economy going and the government running to support Ukrainian citizens who are suffering and coping with an extreme situation.”

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Ukraine Finance Minister Serhii Marchenko has stated that “the government is still functioning, despite the war.”

“About a third of the country’s economy is no longer functioning as the atrocities continue and millions of people flee as refugees into neighboring countries,” he explained. 

Marchenko added that as of late March, nearly 3 million Ukranians have lost their jobs; preliminary reports show the nation’s economy has already lost approximately $565 billion. 

To keep the economy afloat, the government has “leaned on war bonds, as well as less traditional avenues, such as fundraising in cryptocurrencies and the sale of non-fungible tokens (NFTs),” according to Marchenko.

“I think that the true figures of total economic loss would be clear only after the war,” he said.

“The [best] scenario is to end the war as quickly as possible.”

Russia And Ukraine Conflict Update: Ukraine Rejects Moscow’s Offer Of Safe Housing For Citizens

Moscow announced this week that they would provide corridors for residents of Ukraine’s two main cities if they decided to flee to Russia or Belarus; a move that Ukraine called an “immoral stunt to exploit the suffering under Russian bombardment.” 

Russian and Ukrainian delegations assembled for a third round of talks when the announcement was made. The two previous rounds of delegation didn’t offer many solutions for citizens besides a pledge to open up routes for humanitarian access. 

“In a few minutes, we will start talking to representatives of a country that seriously believes large-scale violence against civilians is an argument. Prove that this is not the case,” Ukrainian negotiator Mykhailo Podolyak said.

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A spokesperson for Ukrainian President Volodymyr Zelenskiy called the move “completely immoral, Russia is trying to use people’s suffering to create a television picture. They are citizens of Ukraine, they should have the right to evacuate to the territory of Ukraine.”

The United Nations refugee agency stated that more than 1.7 million Ukrainians have now fled their home country to seek safe housing in Central Europe. A multitude of international sanctions has also isolated Russia from global commerce. 

Russia is the world’s biggest exporter of oil and gas. Prices of oil spiked above $139 a barrel this Monday, the closest the nation has come in nearly 14 years to reaching the all-time high of $147. Investment banks say that the prices could even approach $200 this year is Russian supply continues to dwindle. 

The general staff of Ukraine’s armed forces say that Russian forces “were beginning to accumulate resources for the storming of Kyiv,” which is a city of more than 3 million people. So far 2,000 citizens have been evacuated from Irpin, a suburb in Kyiv that has been enduring heavy attacks. 

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In a speech to the nation late on Sunday, Zelenskiy described one family “cut down as they tried to escape Irpin on Sunday, Russians responsible for such atrocities will never be forgiven. For you there will be no peaceful place on this earth, except for the grave.”

Ukraine also said on Monday its forces had “retaken control of the town of Chuhuiv in the northeast, a site of heavy fighting for days, and of the strategic Mykolayiv airport in the south.”

The United Nations has called for safe passage for all people who are cut off from lifesaving aid across Ukraine. One psychiatric hospital near Kyiv has been running out of water and medicine with 670 patients trapped inside. The WHO said at least 6 people have been confirmed killed within nine attacks on health care facilities since the start of the conflict. 

Moscow has acknowledged that nearly 500 of their soldiers have been killed, but Western countries and Ukraine said that number is actually likely to be in the thousands. Russian authorities, however, have imposed a near total media blackout on non-official information, making it nearly impossible to verify the actual amount of deaths. 

Evacuation efforts have been stalled in multiple areas around Ukraine due to safety concerns, but ideally leaders will be able to continue to provide aid and refuge through the UN.