Wall Street digests the jobs report, credit downgrade and more earnings

A woman uses an iPhone mobile device at the Apple store at Grand Central Terminal in New York City, on April 14.

Apple’s market capitalization fell to about $2.86 trillion Friday, below the historic $3 trillion mark it reached earlier this year, on the heels of the company’s quarterly earnings report on Thursday.

Apple said in its earnings report that revenue slipped 1% during its June quarter, marking its third consecutive year-over-year drop in quarterly revenue. The company also reported quarterly dips in revenue for iPhone, Mac and iPad.

One bright spot in the report, however, was a new revenue high for Apple’s services business, which includes Apple Music and Apple TV+.

But Apple’s CFO Luca Maestri said during a call with analysts Thursday evening that the company expects revenue performance for its quarter ending in September “to be similar to the June quarter.” The stock slid at market’s open Friday morning, wiping out billions in market value for the tech giant.

Apple first closed with a valuation of $3 trillion on June 30, becoming the only company in the world to reach that milestone, as tech stocks rebounded this year from a bruising 2022.

People walk on the floor of the New York Stock Exchange on August 2.

Stocks ended Friday lower, closing out a volatile week of trading that saw investors grapple with a US credit downgrade, labor data and a slew of corporate earnings reports.

The Dow declined 149 points, or 0.4%. The S&P 500 slipped 0.5% and the Nasdaq Composite lost 0.4%.

All three major indexes fell for the week, with the S&P 500 and Nasdaq posting their biggest one-week declines since March.

Stocks sold off earlier this week when Fitch Ratings downgraded US debt from the highest AAA rating to AA+, with those losses continuing through the week.

Stocks initially rose on Friday, as investors parsed the July jobs report that indicated a softening but still strong labor market. The US economy gained just 187,000 jobs in July. That’s below economists’ expectations of a 200,000 net gain, according to Refinitiv.

Apple shares fell 4.8% after the iPhone maker on Thursday said sales slipped 1% during its June quarter.

Amazon shares gained 8.3% after the e-commerce giant said sales boomed on strong demand in the second quarter.

Zero-emissions truck maker Nikola saw its shares tank by 26% Friday after releasing its latest earnings and announcing that it will install its fourth CEO in as many months.

Tupperware shares gained 35.5% after the company said late Thursday that it had reached a deal with its creditors to reduce its interest payment obligations by $150 million.

Next week, Wall Street will be watching the July Consumer Price Index and Producer Price Index reports for signs that inflation is continuing to ease.

Tyson Foods, Under Armour, UPS, Lyft, Disney and Wendy’s are all slated to report earnings next week.

As stocks settle after the trading day, levels might change slightly.

A 'Now Hiring' sign is seen posted in the window of a restaurant looking to hire workers on May 5 in Miami, Florida.

While federal employment data is sometimes considered a lagging indicator, some parts of the July jobs report hint at potential weakening ahead, economists cautioned Friday.

The temporary help services industry shed jobs for the sixth consecutive month, dropping by nearly 22,000 positions in July, according to Bureau of Labor Statistics data. Through July, the industry has lost 205,000 jobs, a 6.5% hit, since its recent employment peak in March 2022, BLS data shows.

“This suggests that the overall labor market will continue to slow down in the coming months,” Selcuk Eren, senior economist at the Conference Board, said in commentary issued Friday.

Temporary employment activity is often viewed as a bellwether for future hiring activity: When times are good, businesses bring on more temps to take on extra work and potentially convert them into new hires; when times get lean, those positions are usually among the first to go.

Temporary employment declined in advance of the 2001 and 2008 recessions.

Separately, average workweek hours ticked down to 34.3 in July from 34.4 in June. During the past three months, average hours per worker fell at a 1.2% annualized rate, noted Preston Caldwell, Morningstar’s chief economist.

“That offset the bulk of the job gains, meaning that aggregate hours worked increased at a mere 0.5% annual rate in the past three months — which is indeed below normal,” he wrote. “Given that employers can only cut hours so much, this is a harbinger for increased layoffs and a slowed pace of total job gains.”

Additionally, the teenage jobless rate rose for the third consecutive month, increasing to 11.3% from 11% the month before.

That’s “another sign of the cooling employment picture,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University and chief economist of SS Economics.

People walk near Nasdaq MarketSite at Times Square on July 12 in New York City. 

Stocks fell Friday mid-afternoon, pivoting from a rally earlier in the day as investors continued to parse the July jobs report and corporate earnings.

The Dow fell 112 points, or 0.3%. The S&P 500 slipped 0.4% and the Nasdaq Composite declined 0.2%.

All three major indexes are on track to end the week down. The S&P 500 and Nasdaq are both on pace to post their biggest weekly loss since March.

Shares of Apple deepened their losses, falling 4.6% after the iPhone maker on Thursday said sales slipped 1% during its June quarter.

The VIX, known as Wall Street’s fear gauge, climbed to 17, above where it closed on Wednesday when Fitch Ratings’ downgrade of US credit helped drive a selloff.

The top US economist at JPMorgan Chase is the latest to join growing calls that the United States will likely avoid a recession this year.

Noting that projections for third-quarter data suggest the economy is “expanding at a healthy pace,” the banking giant is revising its position, said Michael Feroli, chief US economist at JPMorgan Chase, in a note on Friday.

“Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected,” he said.

Economists at JPMorgan Chase previously forecasted that the economy would tip into a recession starting in the fourth quarter of this year.

Still, the risk of an economic downturn is “very elevated,” and could materialize if the Federal Reserve hikes interest rates for longer than expected or if the lagged effects of the hikes it’s already taken put substantial pressure on the economy, wrote Feroli.

Tightening lending conditions, the restart of student loan payments in October and the loss of pent-up demand for workers could also slow down the economy’s growth, according to the note.

“We believe recession risks were, and continue to be, elevated, but timing the exact quarter of the onset of a downturn may be inherently an exercise in dart-throwing,” wrote Feroli.

An attendee signs into a career fair hosted by the New Hanover NCWorks and the Cape Fear Workforce Development Board in Wilmington, North Carolina, in June. 

The unemployment rate among Black workers fell in July to 5.8%, trailing downward after suddenly spiking from a record low.

For much of the past year, the Black unemployment rate had fallen, hitting a record low of 4.7% in April, according to Bureau of Labor Statistics data. But in May the rate shot up to 5.6%; and then by another 0.4 percentage points in June, to 6%.

Despite the slight retreat, the Black unemployment rate remains nearly double that of White workers, who had a jobless rate of 3.1% in July.

While the monthly unemployment data is often volatile and frequently revised, some of the recent trends are concerning for vulnerable workers, said William M. Rodgers III, vice president and director of the St. Louis Fed’s Institute for Economic Equity.

“A contraction in employment still appears to be emerging,” he wrote Friday. “The unemployment rates among young workers, Black men and Black women over the past five months have ticked upward. At the same time, their labor force participation rates have trended downward.”

He added: “In short, vulnerable workers are having an increasingly difficult time finding a job rather than sidelined workers entering the workforce.”

The vulnerable workers typically are more sensitive to macroeconomic shifts, he said, noting they are usually the “first fired” and “last hired” in economic downturns and expansions, respectively.

Based on the experience of these groups, the broader labor market may experience a decline in the coming months.

The monthly job gains may be moderating, but higher-than-expected wage growth should fuel concerns about a potential acceleration of inflation, former Treasury Secretary Larry Summers said Friday.

“If you look at wage inflation, it was faster for the month than the quarter, faster for the quarter than the year and running [at an annualized rate] for the quarter at about 4.9%,” Summers said during an interview on Bloomberg Television’s Wall Street Week. “That’s not consistent with 2% underlying inflation.”

Economists were expecting to see a slight moderation in wage gains; however, those held steady for the second consecutive month.

Friday’s report showed that average hourly earnings growth was unchanged at 0.4% from the month before and also unchanged at 4.4% year over year. Economists had projected a monthly gain of 0.3% and a 4.2% annual increase, according to Refinitiv.

“We’re trying to land the plane on the runway, where we’re worried the plane would crash short of the runway,” Summers said during the interview, referencing the central bank’s goal to rein in inflation while not causing a recession and massive unemployment.

“That certainly does not look like it’s going to happen — we’ve got a very strong economy,” he said. “We’re worried that the plane will overshoot the runway.”

A shopper carries retail bags in Miami, Florida, on June 14.

Two Federal Reserve officials expressed optimistic views Friday about the job market’s cooldown, despite wages growing at a stronger clip last month.

The latest jobs report from the Labor Department showed that average hourly earnings rose 4.4% in July from a year earlier, an annual rate stronger than anything seen in the years leading up to the pandemic. Some analysts said in notes that the persistently strong wage figures reflected in the monthly employment reports might be a concern for the Fed, which is still trying to bring inflation down to its 2% target.

Federal Reserve Bank of Chicago President Austan Goolsbee isn’t completely buying that.

“Wages are not a leading indicator of price inflation,” Goolsbee said in an interview with Bloomberg Friday morning. He added that “we are getting the job market into balance” and doubled down on his optimism that the Fed can pull off a soft landing, or a scenario in which inflation falls to 2% without a recession.

Atlanta Fed President Raphael Bostic also played down concerns about wage growth complicating the Fed’s inflation fight.

“It doesn’t surprise me that wages are still strong,” he told Bloomberg in a separate interview Friday. “During this whole high inflation period, worker wages have trailed inflation for quite some time and so we’re still in that catch-up period and I expect that we will still see strong wages.”

Bostic also expressed some comfort with the labor market’s ongoing evolution.

“I expected the economy to slow down in a fairly orderly way, and this number — 187,000 — comes in continuing that pace,” he said. “I’m comfortable. I’m not expecting this to be over in a short period of time.”

Wages have been playing a role in pushing up consumer prices, but the extent of that is debated by economists. The Fed also puts more weight on the quarterly Employment Cost Index, which showed that pay gains cooled in the second quarter.

A U.S. Flag hangs in the background at the corner of Wall and Broad Streets in the heart of the Financial District in New York City, Tuesday, Aug. 1.

Friday’s market rally picked up speed Friday mid-morning as investors continued reviewing cooler-than-expected July jobs data.

The Dow rose 221 points, or 0.6%. The S&P 500 gained 0.6%. The Nasdaq Composite added 0.9%.

Still, all three major indexes are on track to lose for the week after Fitch Ratings’ downgrade of US debt sparked a broad selloff.

Apple shares continued to fall, slipping 3.2% after the iPhone maker said sales fell during its quarter ending July 1, marking the third consecutive year-over-year drop in quarterly revenue.

Amazon shares rose 11.3% after the e-commerce giant said sales boomed on strong demand in the second quarter.

The VIX, known as Wall Street’s fear gauge, fell to 14.7. A value of 30 reflects extreme volatility in markets, while a value below 20 generally indicates stability.

Taking a deeper look behind the headline 187,000 jobs added last month paints a mixed picture.

Most of those gains came primarily from private education and health service jobs, which added 100,000 jobs last month. Within that sector, 87,000 of those jobs came from health care and social assistance, signifying this wasn’t just a back-to-school hiring push.

Behind education and health service, the biggest gains came from construction and financial services, which added 19,000 jobs each.

The biggest losses came from the information sector, which shed 12,000 jobs last month. These losses, along with softness across sectors such as transportation and warehousing, leisure and hospitality and temporary help, “could signal some slowing in consumption and service spending is underway,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

Pamphlets at a career fair at a community college in Bolivia, North Carolina, on April 20.

Jobs openings are plentiful (there were 9.6 million of them in June), people are getting hired (187,000 new jobs were added in July), and even though there are fewer people looking for a job, they’re staying longer on the unemployment rolls.

In July, the share of workers who have been out of a job for more than three and a half months jumped 3 percentage points to 36.9%, the highest level in more than a year, according to Bureau of Labor Statistics data released Friday.

Within that group, the share of unemployed people who have been looking for work for between 15 weeks and six months increased to its largest share since November 2020.

The labor market remains tight by historical standards; however, finding workers and filling jobs could be heavily influenced by factors such as skills, geography, and inflation, Giacomo Santangelo, an economist with employment website Monster and a senior lecturer of economics at Fordham University, told CNN earlier this week.

Even though certain industries (like health care) need employees, that’s not a simple transition for workers such as longtime truck drivers. And even though there may be jobs available in one’s field in another state, that relocation isn’t simple.

Inflation also plays a role, Santangelo said.

“Just because there’s a job opening doesn’t necessarily mean that job opening is going to be taken by an unemployed person,” he said. “We could, in fact, find a fully employed person taking on additional work in order to meet the labor demands as well as catch up with inflation.”

Carl Icahn in 2016.

Legendary corporate raider Carl Icahn remains under siege. 

The billionaire’s investment firm, Icahn Enterprises, slashed its dividend by 50% on Friday in the wake of investment losses and a relentless attack from a short-seller. 

The dividend cut – the first for Icahn Enterprises in a dozen years – drove its shares down 30%.

Hindenburg Research launched an aggressive campaign against Icahn this spring, predicting his firm would have to cut its dividend because it funds the payouts using a “Ponzi-like” scheme. Hindenburg says it continues to bet against the stock. 

Icahn once again slammed Hindenburg’s campaign, describing it as “misleading and self-serving.”

President Joe Biden on July 6 during a stop at a solar manufacturing company that's part of his "Bidenomics" rollout in West Columbia, S.C.

President Joe Biden touted the July jobs report as “Bidenomics” after data from the Bureau of Labor Statistics showed Friday that the economy added 187,000 jobs last month. 

“Unemployment near a record low and the share of working-age Americans who have jobs at a 20-year high: that’s Bidenomics. Our economy added 187,000 jobs last month, and we’ve added 13.4 million jobs since I took office — more jobs added in two and a half years than during any president’s four-year term,” Biden said in a statement released Friday morning after the jobs report.

Still, a new CNN poll indicates the American public remains negative about the state of the economy, with 51% saying they think the economy is still in a downturn and getting worse. The Biden administration is making an effort to take credit for an improving economy, including data like this and effects of its legislative accomplishments, with officials fanning across the country to highlight tangible benefits. 

The Marriner S. Eccles Federal Reserve Board Building is seen on September 19, 2022 in Washington, DC.

Wall Street turned green across the board after the latest jobs data was released, but while the headline jobs number is mostly positive news for markets and the Federal Reserve, the higher-than-expected wage growth will likely remain a sticking point for central bank officials.

“Unless productivity gains continue to gain, the higher-than-desired hourly wages will remain a concern as it’s been a key source of the ‘sticky’ inflation the Fed is focused on,” said Quincy Krosby, chief global strategist for LPL Financial.

With the next Fed meeting still 47 days away, “wage-related data will remain at the top of the market’s focus as the Fed makes a decision as to whether the economy needs another rate hike to cool demand,” she said in a note released Friday.

Traders work on the floor of the New York Stock Exchange on August 02.

Stocks rose on Friday as investors reviewed the July jobs report and earnings reports from tech behemoths.

The Dow rose 129 points, or 0.4%. The S&P 500 gained 0.4%. The Nasdaq Composite added 0.7%. All three major indexes are on pace to fall for the week.

The US economy gained just 187,000 jobs in July. That’s below economists’ expectations of a 200,000 net gain, according to Refinitiv. June’s job growth was revised down to 185,000 jobs from 209,000.

The July unemployment rate ticked down to 3.5%, from 3.6% — still at a level not seen in more than 50 years.

The latest data from the Bureau of Labor Statistics suggests that the labor market is continuing to cool, in line with the Federal Reserve’s desire to bring prices down without sending unemployment levels soaring.

Traders see an 84% chance that the Fed will pause interest rates at its next policy meeting, in September, according to the CME FedWatch Tool.

Meanwhile, Apple shares lost 3.1% after the iPhone maker said sales fell during its quarter ending July 1, marking the third consecutive year-over-year drop in quarterly revenue.

Amazon shares jumped 10.1% after the e-commerce giant said sales boomed on strong demand in the second quarter, helping lift profit substantially from a year prior.

Airbnb shares gained 0.8% after sliding initially in after-hours trading on Thursday, after the company’s bookings number for nights and experiences fell short of expectations.

A representative hands a flyer to an attendee at a healthcare career fair at Cape Fear Community College in Wilmington, North Carolina, on Feb. 28.

“The once-hot labor market has dropped a few degrees to warm, and it could stay this way for months, given the ongoing lack of jobs in key industries that continue to lead in jobs-added, including health care and government,” said Robert Frick, corporate economist with Navy Federal Credit Union.

But that’s partly because there is still a labor shortage, said Chris Rupkey, chief economist at FwdBonds.

“No one claims to be unemployed and in need of a job, and this will act as a brake on future hiring. This could be the first time in economic history that payroll employment drops, which normally indicates a recession, but the reason will be there is no one in the county left to hire,” he said Friday.

The latest jobs report raises questions about whether the slowdown in job creation is “due to a lack of labor demand or labor supply,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.

“The continued wage growth suggests it is more due to a lack of available workers — which suggests that, even with slower job growth, the Federal Reserve might still feel compelled to keep raising rates.”

Although the headline jobs number is undoubtedly a step in the right direction for the Federal Reserve, the central bank still needs to see wage growth cool down more to ensure inflation doesn’t heat up again, Moody’s Analytics chief economist Mark Zandi told CNN’s Zain Asher in an interview Friday morning.

The July jobs report showed that average hourly earnings for all private, non-farm workers rose by 14 cents, or 0.4%, to $33.74. Over the past year, average hourly earnings increased by 4.4%.

These wage gains are primarily going to traditionally lower-paid jobs where employers have struggled to rehire workers after the economy began to recover from the Covid-induced recession.

Still, the wage gains are worrisome to the Fed because they contribute to higher inflation levels. That’s because when workers earn more money, businesses have more flexibility to raise prices.

“We need wage growth to moderate a bit more to be consistent with underlying productivity growth [and] to be consistent with the Fed’s 2% [inflation] target,” Zandi said.

Commuters wait for a train in Boston, MA, on July 5.

“The Federal Reserve will take note of this report, including that average hourly earnings continued to rise at annual rate of 4.4%,” said Mark Hamrick, senior economic analyst at Bankrate, in commentary released Friday morning.

“Before the September policy-setting meeting, Federal Reserve officials will have another employment report to process as well as much more data on inflation,” he said. The latest Consumer Price Index and Producer Price Index are set to be released on Thursday and Friday next week, respectively.

But despite Friday’s headline jobs number coming in lower than expected, Fed Chair Jerome Powell will likely still describe the job market as very tight, Hamrick said.

“A steady job market is good for workers — but continues to be a concern for employers and central bankers.”

Earlier this week, Fitch Ratings downgraded US debt from AAA to AA+, citing “a steady deterioration in standards of governance.”

The move faced steep criticism from many economists who argued that it was inappropriate at a time when the US economy appears on track to avoid a recession. That’s because inflation has steadily been moving closer to the Federal Reserve’s 2% target and job growth remains stronger than many economists thought it would be now at this time last year.

CNN previously reported that Fitch indicated to Biden administration officials that government instability stemming from the January 6 insurrection was a potential reason for its future downgrade that came on Tuesday. However, the credit agency did not mention the insurrection in its full report on the downgrade.

Even if the motivation for the downgrade was tied more to politics than the actual state of the economy, it had immediate ramifications for stocks, US Treasuries and mortgage rates.

“After months of hand wringing about recession risks, today’s report shows a job market that continues to slow in an orderly fashion,” said Daniel Zhao, lead economist at Glassdoor.

“The job market is still on a slow but steady path towards a soft landing” — where the economy slows and inflation falls without triggering a recession — he said Friday in a note.

“Wage growth remained stagnant at 4.4%, still showing a positive indicator of a healthy labor market in the future. It suggests with inflation under control, employers can focus on improving job security rather than competing for talent.” 

A "Now Hiring" sign shown at a business in San Francisco, California, on June 26.

The US economy gained just 187,000 jobs in July, according to new data released Friday by the Bureau of Labor Statistics.

It’s another indication that the labor market is slowly cooling off, in line with the Federal Reserve’s goal.

Economists were expecting a net gain of 200,000 jobs last month. June’s job growth was revised down to 185,000 jobs from 209,000.

The July unemployment rate ticked down to 3.5%, from 3.6%.

Investors, Federal Reserve officials and even the White House are once again rooting for a “Goldilocks” jobs report — not too hot so as to inflame inflation, nor so cold that it revives recession fears.

Economists are penciling in monthly job growth of 200,000 positions for July, down slightly from 209,000 in June and the weakest pace since late 2020.

But make no mistake: 200,000 is healthy growth, especially given the historic job gains already in the books. The unemployment rate is expected to stay at 3.6%, not far from the half-century low of 3.4% hit several times this cycle.

People walk past the New York Stock Exchange on Wall Street on August 1.

US stocks bounced back ahead of a key employment report from the Bureau of Labor Statistics and after two days of losses following America’s credit downgrade.

Dow futures were up 85 points, or 0.2%. S&P 500 futures rose 0.5%. Nasdaq futures were 0.7% higher.

Stocks began to sell off Wednesday after Fitch Ratings downgraded US credit. But momentum slowed late Thursday, as investors began to turn their attention to the latest batch of second-quarter earnings data.

Some Big Tech earnings came in after the bell Thursday, with Apple’s revenue slipping 1% to $81.8 billion for its quarter ending July 1, marking the third consecutive year-over-year drop in quarterly revenue for the world’s most valuable company.

Amazon said sales boomed on strong demand in the second quarter, fueling a massive jump in profit from a year ago.

Sales grew 11% to $134.4 billion, an increase from $121.2 billion in the second quarter of 2022. The stock surged 7% in after-hours trading.

A hiring sign is displayed at a retail store in Downers Grove, Ill., on May 1.

One year ago, the July jobs report showed that the US economy added 568,000 jobs — more than double the 250,000 that economists had expected. 

Come Friday, the government’s jobs report for this July might not end up being quite so shocking. In fact, it could be relatively humdrum: A slight cooling in job growth, and unemployment holding steady.

“To some extent, our predictions are a little bit boring, which is a good thing,” said Daniel Zhao, lead economist at Glassdoor. “There are always the risks of unexpected shocks, but right now, we’re on a good glide.”

Zhao’s predictions echo those of economists polled by Refinitiv, who are projecting US employers added 200,000 jobs last month and that the unemployment rate didn’t budge from the 3.6% registered in June. 

Flyers at a career fair hosted by the New Hanover NCWorks and the Cape Fear Workforce Development Board in Wilmington, North Carolina, on June 20.

Claims for unemployment insurance have remained below pre-pandemic levels.

On Thursday, the Labor Department reported that Americans made 227,000 first-time filings for jobless benefits during the week ended July 29, an increase of 6,000 claims from the week before. Continuing claims, which are filed by people who have received unemployment benefits for more than one week, were 1.7 million for the week ended July 22. 

Weekly jobless claims, which are volatile and frequently revised, remain below recent levels. In the decade before the pandemic, initial claims averaged 311,000, Labor Department data shows. 

Next week’s filings, however, could climb closer to those levels. On July 30, the 99-year-old trucking company Yellow ceased operations and laid off its 30,000-person workforce.

“In the current job market, I think it should be fairly easy for workers who lose their jobs to find employment,” Gus Faucher, chief economist of the PNC Financial Services Group, told CNN. “That being said, if we do start to see these jobs losses start to accumulate, then that could be a signal of something more worrisome in the economy.” 

While the number of job openings has fallen to its lowest level in two years, they’re still nearly 37% higher than they were in February 2020, the latest Bureau of Labor Statistics turnover data shows. Earlier this week, the BLS reported that there were 9.582 million available jobs in the US, amounting to 1.6 open jobs for every person looking for one. 

The number of job cuts announced in July was the lowest in 11 months, according to data released Thursday morning by Challenger, Gray & Christmas. 

US-based employers announced 23,697 job cuts last month, a 42% drop from the 40,709 announced in June, according to the outplacement and coaching firm’s latest monthly report. It’s the first time this year that the monthly downsizing activity decreased from the same period in 2022, according to the report. 

“The job market is remaining resilient in the face of rising interest rates, as consumers continue to spend and inflation falls,” Andy Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement. “Companies, weary of letting go of needed workers, are finding other ways to cut costs. Many have slowed hiring, but wages continue to rise, particularly for the lowest-wage earners, for the moment.” 

The technology sector, which has been shedding workers after bulking up during the pandemic, continued to lead all industries in layoffs in July, followed by health care product manufacturers. Artificial intelligence was cited as the reason for 60 of the 23,697 cuts, Challenger noted. 

People shop at a neighborhood grocery store in Brooklyn, New York, on June 12.

The US economy is currently enjoying a 30-month streak of monthly job gains, consumer confidence remains high, the economy is growing, and inflation and inflationary pressures (including supply chain challenges, energy costs and wages) have eased. 

That’s prompted some to pull their long-held recession forecasts off the table, including Bank of America economists, who on Wednesday said In a note to clients that they now expect growth to stay positive over the coming quarters. 

“Our revisions imply we no longer expect a mild recession and, instead, think the economy may be able to skirt one,” Bank of America economists led by Michael Gapen wrote in the report.

Business leaders remain wary of a downturn, but confidence is improving among chief executives, according to new survey data published Thursday by the Conference Board.

The business group’s Measure of CEO Confidence rose to a reading of 48 in the third quarter of this year, up from 42 the quarter before. About 84% of the CEOs surveyed between July 10-24 said they were preparing for a recession in the next 12 to 18 months. That’s down from 93% in the second quarter. 

The number of CEOs expecting no recession jumped to 17% from 2%, the Conference Board noted.

The US Capitol building is seen past flags surrounding the base of the Washington Monument as the sun rises in Washington, DC, on May 28.

For only the second time in history, America lost its perfect rating on its long-term debt — the exact thing everyone said would happen when lawmakers decided to play chicken with the full faith and credit of the United States. 

Whether Fitch Ratings’ downgrade was warranted — the Biden administration and many economists argue it was not — it is nonetheless a direct result of incessant dysfunction in Washington, especially (though not exclusively) the Republican-manufactured debt-ceiling debacle that played out this spring. And it illustrates the real-world consequences that lawmakers’ brinkmanship has on regular Americans, who could see their investments lose value and already-high borrowing rates go up. 

See here: Fitch cites “a steady deterioration in standards of governance” in its report, which, perhaps appropriately, came out moments after a grand jury handed up a third round of criminal indictments against former President Donald Trump.  

“The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” Fitch said in its report. “In addition, the government lacks a medium-term fiscal framework … and has a complex budgeting process.”

In other words: Republicans can’t stop cutting taxes and then holding the economy hostage with its debt-ceiling antics, and both parties refuse to make politically sensitive cuts to spending that is adding to America’s debt burden. 

The message from Fitch this week, and S&P more than a decade earlier, is that the constant brinkmanship in DC is eroding trust. And eventually, that has to take a toll. 

Read more here.