Fed official warning, inflation ‘gaslight’ tax, jobs and more: the 5 things to know from Monday

Here are five key things that could affect Monday’s trading.

DIRE FED WARNING: Federal Reserve Bank of Minneapolis CEO and President Neel Kashkari said on Sunday that the current state of inflation is “deeply concerning” and “spreading more widely across the economy.”

“It’s very worrying. We keep getting inflation readings, new data coming in over the past week, and we keep getting surprised. It’s higher than we expect,” Kashkari said during an appearance on CBS’ “Face The Nation.” “And it’s not just a few categories. It’s spreading more widely across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back.”

Kashkari stressed that while wages are rising for many Americans, so are the costs of goods and services, meaning workers are experiencing a “real wage cut” because inflation is growing so fast. He said wage-driven inflation is not happening and the cost of goods is partly due to supply chain disruptions caused by the pandemic and now the war in Ukraine.

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Federal Reserve Bank of Minneapolis CEO and President Neel Kashkari speak during an interview

Minneapolis Federal Reserve president Neel Kashkari warned that the current state of inflation is “deeply concerning” and will continue to “spread more widely across the economy” during an appearance on CBS’ “Face The Nation” on Sunday, July 31, 2022. . (John Lamparski/Getty Images/Getty Images)

“For most Americans, their wages are rising, but they’re not rising as fast as inflation, so most Americans’ real wages and real incomes are falling,” he said. “They’re getting a real pay cut because inflation is growing so fast. I mean, typically, we’re thinking of wage-driven inflation where wages are growing fast and that leads to higher prices in a self-fulfilling spiral – that’s not happening yet. The wages are trying to get those high prices now. Those high prices are now being driven by supply chains and the war in Ukraine, among other things, so we need to get the economy back in balance before this really becomes a very pay-drive inflation story.”

He pointed to the recent results of the economic cost index and emphasized that it is a good thing that Americans are earning more, but the Federal Reserve can’t wait for the supply chain to adjust to lower prices.

“Only at the basic level is inflation when demand exceeds supply. We know that supply is low because of supply chains, because of the war in Ukraine, because of COVID. We hoped supply would come online faster. That has not happened.” Kashkari said. “So we need to balance demand. Now I hope we get some help on the supply side, but that doesn’t change the fact that the Federal Reserve has its job to do, and we are committed to doing this.” the.”

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“We can’t wait for the supply to heal completely. We have to do our part in monetary policy,” he added.

Kashkari argued that the new bill introduced by Sens. Chuck Schumer, DN.Y., and Joe Manchin, DW. Va., dubbed the Inflation Reduction Act, will “not have much of an impact on inflation in the coming years,” and it will be the job of the Federal Reserve to adjust monetary policy to bring it down.

GAS LIGHTING AMERICAN AUDIENCE: Conservative groups blame President Biden and his administration for attempting to “gaslight” Americans into believing the country is not in a recession.

The country entered a technical recession as the US economy shrank by 0.9%, meaning the country has seen negative gross domestic product for the second consecutive quarter.

Ahead of the preliminary estimate of the country’s GDP on July 28, the White House Council of Economic Advisers said that even if the figure is negative, it is still “unlikely” to be an indicator that the country is in a recession. recession is going on.

“Based on this data, the decline in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — is unlikely to indicate a recession,” a statement read. the White House website.

President Biden speaks on a podium with two microphones

Conservative groups claim that President Joe Biden is “gaslighting” the American public about the country not in recession, with the group telling Americans that “the GDP numbers don’t lie.”

After the GDP figure was released, Biden was quick to say the United States is “not in a recession”, adding that it is “not an uprising that is slowing the economy.”

Will Hild, executive director of Consumers’ Research, told Fox News Digital that the country is in the midst of a recession, despite what Biden and his administration are suggesting.

“The GDP numbers don’t lie – under the Biden administration, we’re building a backup broker,” Hild said. “No matter how the White House tries to twist it, the Biden recession is here to last as ordinary Americans face higher prices from the grocery store to the gas pump.”

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He said in an interview that the White House’s current calculation of whether the country is in a recession rests on the fact that there is not yet a high unemployment rate.

“My understanding is the [White House] relies heavily on the fact that we haven’t seen massive unemployment numbers yet, but the layoffs are on the rise, and it could just be a delayed indicator,” Hild said.

PRODUCTION REPORT: An important report on US manufacturing activity will kick off the new month Monday morning.

The report, the ISM’s July Purchasing Managers Index, will be released at 10 a.m. ET. It is expected to drop a point to 52.0, the lowest level since May 2020, and would also mark the fifth month in the last six of declining manufacturing activity.

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In context, the March 2021 reading of 63.7 marked the fastest rate of growth in more than 37 years. Also for reference, a score of 50 is the dividing line between a growing and shrinking manufacturing sector. Inflation watchers will pay close attention to the price component paid.

It is expected to fall for a fourth month to 74.3, the lowest level since December and support peak inflation. For perspective, the June 2021 reading of 92.1 was a record high.

A man working in a factory

An important production report is scheduled for Monday morning. The ISM manufacturing purchasing managers’ index for July is expected to fall one point to 52.0, its lowest level since May 2020, and would also mark its fifth month in the past six years. (Jill Connelly/Bloomberg via Getty Images/Getty Images)

At the same time, note that construction spending will rise 0.2% month-on-month in June, after a surprising 0.1% decline in the previous month.

NEW WEEK OF REVENUE: The second quarter earnings season continues this week with 153 companies in the S&P 500, or about 30% of the benchmark index, expected to report.

That number includes two Dow members: Caterpillar on Tuesday and Amgen on Thursday.

ticker Safety Last Change Change %
CAT CATERPILLAR INC. 198.36 +10.60 +5.65%
AMGN AMGEN INC. 247.47 -2.28 -0.91%
ATVIA ACTIVISION BLIZZARD INC. 79.96 +0.45 +0.57%
UBER UBER TECHNOLOGIES INC. 23.45 +0.14 +0.60%
SEX STARBUCKS CORP. 84.78 +0.11 +0.13%
CVS CVS HEALTH COMPANY 95.82 +0.36 +0.38%
CI CIGNA CORP. 275.25 +2.16 +0.79%

Other names to keep an eye out for include video game maker Activision Blizzard on Monday afternoon, Uber and Starbucks on Tuesday, managed health support centers CVS Health on Wednesday and Cigna on Thursday.

About 280 companies, or just over half of the S&P 500, have reported results from April through June, and the numbers exceed expectations.

JOBS REPORT FROM THE TAP: A major economic report of the week will be released Friday morning when the Department of Labor is expected to say the US economy added 250,000 new nonfarm jobs in July. That is less than a stronger-than-expected gain of 372,000 in June and would be the weakest job growth since December 2020.

This news is consistent with other data showing signs of a cooling labor market (eg, unemployment claims hover around an 8-month high).

The unemployment rate is expected to remain stable for the fifth straight month at 3.6%, just above the pre-pandemic level of 3.5% in January and February 2020, the lowest level since May 1969.

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In perspective, the unemployment rate of 14.7% in April 2020 surpassed the record of 10.8% after World War II in November 1982 and was the highest since record keeping in 1948.

The manufacturing sector is likely to add 15,000 jobs in July, about half of the more-than-expected increase of 29,000 in the previous month and the lowest since April 2021.

Private sector payrolls are expected to rise by 230,000, well below the higher-than-expected figure of 381,000 in June and the lowest since April 2021.

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In addition, look for hourly wages to rise 0.3% month-over-month and up 4.9% from a year ago. That would be down 5.1% in June, marking the fourth straight month with annual wage growth slowing from a 2-year high of 5.6% in March, and a sign that wage inflation has peaked .

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