Week of Nov 3rd, 2023 Weekly Recap & The Week Ahead
1. Fed Extends Pause on Interest-Rate Hikes but Keeps Door Open to Higher Rates — The Federal Reserve left interest rates unchanged at a 22-year high and signaled rates would remain elevated well into next year to keep inflation moving down. At the September meeting, most central-bank officials projected one more rate increase this year, but some have spoken in recent weeks as though they aren’t eager to hike again unless hotter-than-expected economic data force them to. That is a change from earlier this year, when they were more concerned about tightening too little. Officials have been trying to balance two risks. They don’t want to overdo rate rises to avoid causing an unnecessarily severe downturn. They also don’t want to allow inflation to reaccelerate or to settle at levels well above their 2% target. “We’re getting to a place where the risks are closer to being in balance,” Powell said.
2. US Productivity Grows by Most Since 2020, Labor Costs Decrease — US labor productivity advanced by the most in three years, helping to alleviate the inflationary impact of recent wage growth. Productivity, or nonfarm business employee output per hour, rose at a 4.7% annualized rate in the third quarter after climbing 3.6% in the prior period, data from the Bureau of Labor Statistics showed late last week.
Unit labor costs, or what a business pays employees to produce one unit of output, decreased at a 0.8% rate after climbing 3.2% in the second quarter. It marked the first decline since late 2022. Quarterly productivity figures are quite volatile, but overall, the back-to-back advances suggest companies are stepping up efforts to improve efficiency. Despite high borrowing costs, business investment has held firm, supporting long-term economic growth.
3. Sharp U.S. Hiring Slowdown Signals Cooling Economy Ahead — Employers added 150,000 jobs in October, half the prior month’s gain and the smallest monthly increase since June, the Labor Department said Friday. The unemployment rate rose to 3.9%, up a half-point since April, and wage growth slowed. The figures are likely to bring the Federal Reserve’s historic interest-rate increases to an end by providing stronger evidence that higher borrowing costs have slowed the economy. The report could also mollify concerns that brisk consumer spending this summer would lead hiring or wages to reaccelerate.
4. Tech Giants Spend Billions on AI Startups—And Get Just as Much Back — Amazon, Google and Microsoft have spent the past year investing billions of dollars in artificial-intelligence startups—while also charging those fledgling companies a similar amount to use their cloud platforms. The deals are making the big tech firms the largest backers and most direct beneficiaries of these startups, reflecting how some of the AI boom’s biggest rewards keep going to the most powerful players. The value of the tech giants’ stakes could shoot up if the startups take off. And if not, they still will have turned chunks of cash into revenue.
The week ahead — Economic data from Econoday.com:
