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Strong US jobs and wage growth expected in December by Reuters

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© Reuters. FILE PHOTO: A pedestrian passes a “help wanted” sign in the door of a hardware store in Cambridge, Massachusetts, US, July 8, 2022. REUTERS/Brian Snyder

Written by Lucia Mutecani

WASHINGTON (Reuters) – The U.S. economy likely maintained a solid pace of job and wage growth in December, but rising borrowing costs as the Federal Reserve battles inflation could slow labor market momentum significantly by the middle of the year.

The closely watched employment report released by the Labor Department on Friday is also expected to show that the unemployment rate was unchanged at 3.7% last month. The job market has remained strong since the Federal Reserve set out last March to raise interest rates at the fastest rate since the 1980s.

Price-sensitive industries such as housing and finance, as well as tech companies including Twitter, Amazon (NASDAQ:) and Facebook (NASDAQ:Meta) have cut jobs, yet airlines, hotels, restaurants and bars are desperate for workers as leisure and industries continue. Hospitality in the recovery from the epidemic.

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The resilience of the labor market has supported the economy by maintaining consumer spending, but it could prompt the Fed to raise its target interest rate above the peak of 5.1% that the US central bank projected last month and keep it there for a while.

“All indications are that the job market remains strong,” said Song Woon-soon, professor of finance and economics at the university.

Loyola Marymount University in Los Angeles. “Entertainment and hospitality employers are not able to get anyone even after the wages go up. This pattern has been going on and will continue for a while, so this is where the rubber hits the road.”

The business survey is likely to show that non-farm payrolls increased by 200,000 jobs last month after rising by 263,000 jobs in November, according to a Reuters poll of economists. That would be the smallest gain in two years.

However, job growth will far exceed the pace needed to keep pace with growth in the working-age population, comfortably in the 150,000-300,000 range that economists associate with narrow labor markets.

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Estimates ranged from the 130,000 to the 350,000 predicted by TD Securities.

Data from payroll-scheduling and tracking company Homebase showed employers retained workers in December, indicating a smaller-than-usual decline in non-seasonally adjusted (NSA) terms.

seasonal boost

“This means that the seasonal factor, which should be adjusted for more than 200,000 declines in the NSA, will add more than the expected number,” said Oscar Munoz, macro strategist at TD Securities. “Seasonally adjusted has added about 430,000 jobs on average over the past five years,” he added.

An ongoing strike by 36,000 teachers in California is seen as straining government salaries. The government will review the seasonally adjusted household survey data, from which the unemployment rate is derived, for the past five years.

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Household workers fell in October and November, leading some economists to speculate that overall job growth was overstated. Some Fed officials also focused on the difference between the two measures.

However, the household survey tends to be volatile and most economists expect household workers to adjust towards non-farm payrolls.

Veronica Clark, economist at Citigroup (NYSE:) in New York. “We wouldn’t be surprised to see a larger rebound in domestic workers in December or over the coming months.”

No significant effect on the unemployment rate was observed from the review of household data. Average hourly earnings are expected to rise 0.4% after rising 0.6% in November. This would reduce the annual increase in wages to 5.0% from 5.1% in November.

Strong wage growth is likely to continue in January, as several states raise minimum wages and most workers across the country receive cost-of-living adjustments. There were 10.458 million vacancies at the end of November, which translates to 1.74 jobs for every unemployed person.

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But the trend in employment growth could slow significantly by the middle of the year. The Fed raised its policy rate last year by 425 basis points from near zero to a range of 4.25%-4.50%, the highest since late 2007. Last month, it forecast at least an additional 75 basis points of increases in borrowing costs by the end of 2023. .

Trust among CEOs is at its lowest level since the Great Recession, according to a recent survey by the Conference Board.

“If they think demand is weakening and revenues will slow, they will likely feel pressure to cut costs to maintain profitability,” said James Knightley, chief international economist at ING in New York. “This suggests that the pace of employment growth is likely to slow very quickly this year, and we could, in fact, start to see some job losses in the middle of the year.”

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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

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International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

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The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

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However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

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Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

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David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

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BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

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Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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