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Jobs day: No shocks, please


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Welcome to jobs day — Every monthly jobs report is important to gauge the health of the U.S. economy. July’s figure, out at 8:30 a.m., is a bit more vital given widespread confusion over when we might hit a recession, how bad that recession might be and how hard the Fed will have to keep pushing to bring down soaring inflation.

Chances are the number will come in somewhere around the 250K consensus, which would be a significant but not massive drop from June’s 372K. Such a number would show, once again, that the economy is not yet in recession despite back-to-back quarters of GDP shrinkage. And it would let the Fed pretty much stay the course and continue to tilt body language toward an eventual end to its sharp rate-hiking campaign.

A goldilocks-ish number around 250K would also confirm other slightly worsening (though still fine) data on job openings and initial jobless claims. Those numbers indicate the Fed’s hikes are already slowing the economy which should theoretically start to bring down inflation.

If the number shocks to the downside (under 100K or thereabouts), big forecasters will push up their recession timetables to later this year or very early next year. Wall Street might not freak out though because it would likely mean a swifter end to Fed rate hikes.

A big beat to the upside — along with any signs that annual wage growth is accelerating again — might relieve some near-term recession fears. But it would also likely mean more and faster rate hikes. So good news could be bad news for the stock market.

Keep an eye on: Labor force participation. The big mystery of this economy is why more workers are not coming back into the labor market after Covid-19. The labor force participation figure ticked down to 62.2 percent last month and remains stubbornly low. Economists keep expecting rising personal debt and inflation to drive millions of absent workers back into the job market, relieving some of the current supply problems and easing pressure on wage growth. But it just hasn’t happened. At least not yet.

POWELL UNDER PRESSURE — Never mind if we’re in a recession. The more complicated question facing policymakers: Do we need one to get rid of inflation?

From our Kate Davidson: “Federal Reserve Chair Jerome Powell said last week the central bank isn’t trying to cause a recession by raising interest rates and doesn’t think it needs to as the Fed aggressively moves to get decades-high inflation under control.

“Some economists — including former Treasury Secretary Larry Summers — say Powell is being much too optimistic about the Fed’s ability to tame prices without pushing unemployment much higher. The implication: The Fed chief, who has sought to elevate the central bank’s focus on boosting the labor market, may be forced to accept millions of job losses and a significant recession to curb inflation.

“‘Unless we have a set of very surprising and positive developments,’ Summers told POLITICO, ‘we’re not likely to see the inflation rate come all the way down to [the Fed’s] target without there being some level of meaningful economic distress.’”

Underlying the Fed’s optimism: A belief that they can take some heat out of the labor market by reducing job vacancies. Not everyone is convinced.

HAPPY FRIDAY — You made it! Thanks to the esteemed Ben White, Morning Money author emeritus, for helping drive the MM bus today. Kate will be off next week — enjoying some lobster rolls and lighthouses — but Sam and the rest of the team will have you covered.

Have a tip, story idea or other feedback for any of us? Hit us up at [email protected], [email protected] or [email protected].

July jobs report released at 8:30 a.m. … Consumer credit data released at 3 p.m.

BREAKING: RECONCILED — Sen. Kyrsten Sinema signed off on the Inflation Reduction Act after securing changes that would preserve carried interest’s tax treatment and “protect advanced manufacturing, and boost our clean energy economy,” the Arizona Democrat announced in a statement Thursday night. “Subject to the Parliamentarian’s review, I’ll move forward.”

Sen. Joe Manchin (D-W.Va.) and Senate Majority Leader Chuck Schumer’s compromise legislation — hatched in a surprise announcement last week — would have generated an estimated $14 billion in revenue by raising taxes on private equity firms and hedge funds. Schumer on Thursday said that the new deal with Sinema “preserves the major components” of the bill.

JOBS DAY ON TWITTER — Join our Eleanor Mueller, Ben White and Katy O’Donnell as well as a trio of economist guests today at 3 p.m. ET on Twitter Spaces to discuss the July jobs report. As always, questions and anecdotes welcome! 

WARPED — From WSJ’s Ryan Dezember: “An exodus of hedge funds and other speculators from commodities markets has exacerbated the fall in prices for wheat, corn, soybeans and other staples, which some analysts say are now cheaper than supply and demand warrant … JPMorgan analysts say the collapse ‘is masking profound dislocations in global agricultural trade flows and in no way alleviates the risks of physical supply shortages through 2023.’”

COMMUNITY REINVESTMENT ACT — Progressive groups are pushing for the revised Community Reinvestment Act to make a priority of climate resilience. A new letter to federal banking regulators from the Americans for Financial Reform Education Fund, The Greenlining Institute, Public Citizen and more than 80 other housing, climate and advocacy organizations called for an expansion of the list of climate-related activities that can be financed under the CRA to “help communities understand what kinds of climate- related investments they can seek financing support for, and help banks understand which activities can receive CRA credit,” according to the letter.

UH-OH Our Katy O’Donnell: “The Consumer Financial Protection Bureau is investigating Goldman Sachs’ credit card unit, the bank said Thursday in a regulatory filing.”

RASKIN — Bloomberg’s Steven Dennis: “Senator Pat Toomey is again demanding transparency by the Federal Reserve after learning the central bank withheld documents he and other Republicans sought related to former Fed nominee Sarah Bloom Raskin during her confirmation fight.”

BLACKROCK’S BITCOIN BET — Bloomberg’s Silla Brush: “BlackRock Inc. is partnering with Coinbase Global Inc. to make it easier for institutional investors to manage and trade Bitcoin, marking a major push into cryptocurrencies for the world’s largest asset manager. Top clients will be able to use BlackRock’s Aladdin investment-management system to oversee their exposure to Bitcoin along with other portfolio assets such as stocks and bonds, and to facilitate financing and trading on Coinbase’s exchange.”

OCC — American Banker’s Brendan Pedersen: “In an undated draft letter that circulated among lawmakers on Wednesday, Sen. Elizabeth Warren, D-Mass., asked acting Comptroller Michael Hsu to formally rescind a series of interpretive letters issued by former acting Comptroller Brian Brooks in late 2020 and early 2021 that gave banks regulatory cover to explore decentralized finance, including digital asset custody and processing stablecoin payments.”

ICYMI — POLITICO’s Elena Schneider on FTX CEO and Founder Sam Bankman-Fried: “Bankman-Fried seemingly wandered into the middle of the Democratic Party and pulled out his wallet at the exact moment when many Democratic megadonors are pulling back, all ahead of a blistering midterm environment. Some Democrats see Bankman-Fried’s investments and engagement as the thing that could help them hold back a red midterm wave … But it’s not clear if that’s what Bankman-Fried wants.”

FILE AWAY — WSJ’s Bryan Mena: “Worker filings for unemployment benefits rose last week, holding close to the highest level of the year as the U.S. labor market showed several signs of cooling. Initial jobless claims, a proxy for layoffs, increased slightly to a seasonally adjusted 260,000 last week from a downwardly revised 254,000 the prior week, the Labor Department said Thursday.”

ACCORDING TO EXPERTS — AP’s Josh Boak: “Democrats call it the ‘Inflation Reduction Act.’ Republicans say it’s a ‘tax and spending spree.’ And everyone has a study they say proves it. Recent bipartisan action in Congress on matters ranging from producing computer chips to expanding NATO isn’t extending to the latest economic package from Democrats, which is generating a battle of dueling statistics and projections over whether it would help or hurt the economy.”

STRESSED IN CRE — Bloomberg’s Carmen Arroyo and Alex Nguyen: “A key US banking regulator said it will be taking a closer look at growing bank-held commercial real estate loans, citing macroeconomic volatility. The Federal Deposit Insurance Corp. announced in a report on Wednesday that its next test cycle will focus on ‘newer CRE credits, credits within stressed sub-categories and geographies, and credits with payments vulnerable to rising rates and rising costs.’”

Chris Hayward has joined Citi’s Global Public Affairs team, where he will continue in his role as the bank’s head of change management. Jennifer Lowney is now in an expanded role as Citi’s global head of communications. Separately, Gawain Patterson was elevated to the title of director of strategic initiatives and Lloyd Brown, II is the bank’s new Community Reinvestment Act officer.

Tiffany Haas has been named head of government affairs at the Financial Services Forum. Haas has served as the Forum’s co-head of government affairs since 2018. She worked previously at the Consumer Bankers Association and was a Democratic aide on the Hill.

Kemi Giwa has been promoted to be communications director for the House Financial Services Committee.

The Bank of Englandunleashed its biggest interest-rate hike in 27 years as it warned the UK is heading for more than a year of recession under the weight of soaring inflation. — Bloomberg’s David Goodman and Libby Cherry

Credit Suisse Group AG executives are discussing reducing thousands of roles globally as the struggling European lender seeks to slash its overall cost base by an additional $1 billion. — Bloomberg’s Ambereen Choudhury, Cathy Chan, and Myriam Balezou





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