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This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layo

This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc. Meanwhile most of the underlying indicators are actually positive. Growth is strong, employment is strong. Anecdotally we're still having trouble finding good candidates. It's almost like there is a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market.

bagels 4y ago
The fed said interest rates will keep being raised until unemployment rises.
- glial 4y ago
  Which is so strange and violates two of their three mandates - maximum employment and moderate interest rates.
  - dasil003 4y ago
    You don't want to fuck around with inflation because at a certain point it becomes a self-fulfilling prophecy (ie. merchants raise prices pre-emptively just because they internalize inflation at a high steady state).
  - CPLX 4y ago
    So strange. It’s almost as if they’ve picked a side in the conflict between supporting labor or capital.
    - roflyear 4y ago
      HN is capital not labor.
      - CPLX 4y ago
        Indeed. We are in fact conversing on a website that is a marketing forum for a multi-billion dollar private equity firm.
    - Aunche 4y ago
      So the low interest rates for the past decade that reduced unemployment must mean that they love labor right?
  - mpalczewski 4y ago
    the mandate is maximum employment and 0% inflation.
  - metapsj 4y ago
    maximum employment is a pandemic period objective. they aren't intending to crush the labor market. the fed has largely behind the curve in addressing inflation.
  - everybodyknows 4y ago
    The Fed has two mandates, not three: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-dual-mandate https://www.stlouisfed.org/in-plain-english/the-fed-and-the-... "... maximum employment and price stability"
- importantbrian 4y ago
  Did the fed actually say this? There were a bunch of investment bankers who did, and it seems like everyone else ran with the narrative. I haven't seen that the fed actually said it. I think all the fed cares about is bringing down inflation, but if the primary factors in inflation are supply related then unemployment doesn't have to go up for inflation to come down.
  - JumpCrisscross 4y ago
    > Did the fed actually say this? No [1]. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20220921a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
  - yieldcrv 4y ago
    Jerome Powell said this several times to Congress. You’ll be able to find it, I believe in you.
    - JumpCrisscross 4y ago
      > Jerome Powell said this several times to Congress No, he didn’t [1]. The Fed’s statements to Congress are tightly scripted, in part so professionals can pick the meat from such popular nonsense. [1] https://www.federalreserve.gov/newsevents/testimony/powell20220622a.htm https://www.federalreserve.gov/newsevents/testimony/powell20...
      - yieldcrv 4y ago
        tightly scripted to be vague https://www.bloomberg.com/news/articles/2022-09-21/powell-signals-recession-may-be-the-price-for-crushing-inflation https://www.bloomberg.com/news/articles/2022-09-21/powell-si... > Powell told reporters several times that a softer labor market may be necessary to sufficiently bring down demand.
  - mostly_harmless 4y ago
    Yes, but not directly. If you listen to the last FOMC meeting, Powell mentions there will likely be significant weakening of the labor market and a rise of unemployment. As well as his famous "there will be pain" remarks. I don't think he directly said "he won't stop until" though.
- bergenty 4y ago
  This seems like an easily accessible conspiracy theory but I think all the fed wants to do is bring down inflation.
  - ipaddr 4y ago
    Why not pull support for Ukraine let Russia win and ease those tensions
- datadata 4y ago
  I'm not sure why people continue to take what the fed says as being accurate predictions of the future. For example, they said in 2021 that they expected interest rates would be zero until 2024 [1]. They obviously have a lot of real power, but they must be understood to either be deceitful or incompetent given how wrong prior predictions have been. [1] https://www.ft.com/content/3d7704d3-a312-4294-95bc-90233f469ccd https://www.ft.com/content/3d7704d3-a312-4294-95bc-90233f469...
wollsmoth 4y ago
A lot are just focused on the next earnings call which makes sense I guess. If they work to deal with this "emergency" and it doesn't happen idk if there's a big price to pay.
atomicnumber3 4y ago
I too find that many mysteries become clearer when you look at them through the lens of the constant class warfare that is being waged. All too often in only one direction. I'll be honest - I didn't use to think the rich/powerful thought like this. I thought it was just the tragedies of capitalism and the invisible hand needing more protection from market failures. Then I worked for a billionaire's small company for five years right out of college. Now I recommend "Wage Labor and Capital" to anyone who I think will be able to manage it's low-two-digit number of pages.
- deleted 4y ago
  [deleted]
bushbaba 4y ago
Inflation means GDP can grow, with expenses growing faster.
- SantalBlush 4y ago
  This 2.6% figure is real GDP, meaning it's adjusted for inflation. [0] [0] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
  - Enginerrrd 4y ago
    Assuming inflation is being calculated accurately...
    - everybodyknows 4y ago
      There is no "accurately", because there are many measures of inflation, each with its own particular claim to verisimilitude. So any economic figure described as "adjusted for inflation" should taken with an extra measure of wariness.
    - fortuna86 4y ago
      You seem determined to find a way to discredit this figure.
      - Enginerrrd 4y ago
        Me with my one comment? Not at all, but there seems to be a lot of skepticism over official inflation figures, particularly for recent reporting. Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology, I'd expect a similar magnitude for inflation-adjusted GDP no?
        fortuna86 4y ago
        > Me with my one comment? You've made the same comment several times. > but there seems to be a lot of skepticism Why are you switching to the passive voice? Are you saying this or not. > Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology Not really. The price of a basket of goods, over time. Same as it's always been. As as already mentioned, GDP takes into account these numbers.
golergka 4y ago
We just had gone through an unprecedented global pandemic, there's a war in Europe that might become a world or nuclear war, and there's been unprecedented floods and draughts in many key regions of the world. I mean, it's good that they turned out to be wrong, but I won't blame them for expecting a recession in 2022.
cliftonk 4y ago
When I hear it from business leaders, there are three logical reasons 1) exposure to the housing market 2) poor performance by the company (its the economy's fault!) or 3) an excuse to trim fat from a high-margin company that's aware of how bloated it is.
rendang 4y ago
Another piece of the puzzle is the big drop in labor productivity lately - https://fred.stlouisfed.org/series/OPHNFB https://fred.stlouisfed.org/series/OPHNFB. Could the data you mention be explained by workers previously being in jobs where they were unproductive, being laid off but then quickly reabsorbed by the hot labor market into more efficient lines of work?
- importantbrian 4y ago
  Isn't that just because of the steep rise in labor costs? It's just another sign of how strong the labor market is right now.
  - colinmhayes 4y ago
    labor productivity is measured in output/hour, not output/dollar spent of wages.
- zeroonetwothree 4y ago
  It’s a pretty small drop and there is a lot of noise in that metric.
  - rendang 4y ago
    What do you think could be behind the noise in this case? It does look like the steepest drop in many decades, and more surprising when we read stories on HN about automation that would imply a baseline increase in productivity.
- ipaddr 4y ago
  That's people going back into the office and lowering production
- AntiRemoteWork 4y ago
- deleted 4y ago
  [deleted]
bergenty 4y ago
This is inspite of the fed raising the rates. I believe the fed may have missed the boat for a bit but they started raising rates just in time. This economy is resilient and honestly it’s a beautiful thing to see.
conductr 4y ago
There is a class of business leader that is definitely in a recession where that word just means downward financial performance trajectory. I’d be willing to bet the distinction is how much labor you employ and what kind (pay bands as proxy). Hospitals for example are in a world of hurt post Covid. Labor is their main cost. Rates are down but remain high. Employee satisfaction is low. Revenues do not keep pace with costs and largely uncontrollable.
hartator 4y ago
When you adjust for money supply inflation (peak at around 24%) instead of price inflation (peak at around 9%), every indicators become very red. I think money supply inflation reflects more the reality and explain the current bearish sentiment.
- JumpCrisscross 4y ago
  > adjust for money supply inflation (spiked at around 24%) instead of price inflation (spiked at around 9%) The former is a fake metric. Measuring changes in the monetary base [1] is a thing. But it’s seldom accurately reflected in a single figure. Also, the 2.6% is real GDP growth. Current-dollar growth was 6.7% annualised [1]. [1] https://en.wikipedia.org/wiki/Monetary_base https://en.wikipedia.org/wiki/Monetary_base [2] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
  - hartator 4y ago
    > the former is a fake metric. I am using M2 money supply. Basically trying to proxy how much money more we printed this past few years. Source: https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
    - nightski 4y ago
      That could be skewed because they changed how M2 was calculated during the pandemic.
      - giantg2 4y ago
        This makes me feel better. /s
        cko 4y ago
        It should. https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo... Also money printing isn't necessarily inflationary if the money stays as bank reserves. Unless... The Fed buys treasuries and the government dumps the money on the economy.
coldpie 4y ago
> It's almost like there is a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why You may find a clue in the results on Nov 8th.
nostrademons 4y ago
The stock market, interest rates, and advertising spending are leading indicators, while unemployment is a lagging indicator. Business leaders know the financial structure of their company, and many of them know that they can't survive at 2% rates, let alone 5 or 10% rates. The gloom from business leaders is forward-looking. They're fine for now, while consumer spending holds up and they can run on old debt. But as soon as they need to roll over their debt, everything collapses. They'd need to increase revenues by 2-5x, and they can't. My prediction is that we drive off a cliff. CEOs know their companies can't survive high rates, so they manage as if a Fed pivot is coming. If the expected Fed pivot happens, they bank windfall profits and get huge stock bonuses. If it doesn't, they go bankrupt, everybody is out of work, and it is not their problem anymore.
- importantbrian 4y ago
  This seems overly pessimistic. I'm sure a high rate environment isn't ideal for a lot of businesses, but we've had much higher rates in the past and most businesses survived it just fine.
  - tomtheelder 4y ago
    You're totally right that business can thrive in a high rate environment, but we have a LOT of them right now whose existence has been sustained due to the low rates, extending all the way down to proper zombie companies. A lot of those will be killed by rate hikes, but that's actually a good thing in the long run.
  - function_seven 4y ago
    Those businesses were the ones that were either created in that environment, or who survived it long enough. The last time rates were this high, they were this high for decades. I fear the cliff scenario because a lot of business models now were built on a foundation of crazy-cheap debt. The tide is about to go out. Eventually the business environment will re-adjust to the new cost of money, but the transition will be tough.
    - 4y ago
spaceman_2020 4y ago
The world is wacky right now. Normal patterns of behavior have been disrupted by 2 years of lockdowns. Some people are spending out of spite. Some people are not even leaving the house. There's a certain levity about work - no one seems to be taking it seriously. Strange times. Really hard to capture in data. Only increases possibilities of a major economic catastrophe because the tea leaves are just too hard to read right now.
- colordrops 4y ago
  > There's a certain levity about work Where do you work? For the two companies I've worked at during this period I would not use the term "levity".
supergeek133 4y ago
This is the broadest view of the economy growing. So there may be some business leaders who work in still growing industries who are trying to "wish the recession into existence" as you say.. But on the flipside you have things like housing taking a downturn (not just home prices, but actual housing construction) which negatively impacts all of their suppliers (HVAC equipment, lumber, contracting companies, etc etc). So there are some of those leaders who have a likely justified negative outlook.
- treeman79 4y ago
  Be real fun when the strategic oil reserve runs out / stop draining it after November Election. Nothing was done to increase domestic supply. And OPEC has decided to tighten the screws on us.
  - themitigating 4y ago
    When will it run out?
    - treeman79 4y ago
      https://www.forbes.com/sites/davidblackmon/2022/10/20/president-bidens-dangerous-abuse-of-the-strategic-petroleum-reserve/amp/ https://www.forbes.com/sites/davidblackmon/2022/10/20/presid... Oil reserve has a mix of different kinds of oils. We’ve been using up the better stuff. Not sure how much of that’s left. US has a 25 day supply of diesel.
  - matthewdgreen 4y ago
    "U.S. oil production is almost 12 million barrels per day. By the end of this year, it will be up by about one million barrels per day compared to when President Biden took office, and it is on track to reach a new annual high in 2023. However, a number of industry participants have suggested that, even with today’s high prices, they are concerned about investing in production when prices could fall in the future. The Administration is announcing its intent to use SPR repurchases to add to global crude oil demand at times when the price of West Texas Intermediate (WTI) crude oil is at or below about $67 to $72 per barrel. This will protect taxpayer interests because the SPR will be repurchasing at a lower price than recent sales, potentially allowing it to repurchase more oil than it released with sale proceeds. It will also help address producer concerns about uncertain demand in future years, encouraging immediate investment." https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/18/fact-sheet-president-biden-to-announce-new-actions-to-strengthen-u-s-energy-security-encourage-production-and-bring-down-costs/ https://www.whitehouse.gov/briefing-room/statements-releases...
tschellenbach 4y ago
Companies pay employees to increase the value of the company. The market is reasonably efficient and companies will increase pay to match the value created (somewhat correlated at least. startups often pay more with the hope it balances out in the future, established companies pay less since some of them print cash and they dont have to pay more to get candidates). Many tech companies are down 80-95%. So if you used to pay employees 100 to generate 100, now you are paying 100 to generate 20 or in some cases 5. This only works if you can massively increase productivity or reduce cost. There is no evil conspiracy, markets are just down
subsubzero 4y ago
It is weird, they say history does not repeat but it rhymes. What is troubling about this good news about GDP growth is the fed's course of raising interest rates will continue on and interest rates will keep getting higher and higher. This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs. In addition growth companies will be hit hard by rates being high as we have seen since early this year. Basically the fed will do anything in its power to stop inflation and I expect the only thing to get it back to the target of 2% is to have interest rates in the low teens. I know that sounds crazy but comparing this to the 70's it took Volker raising rates to 20% to tame the bad inflation of that period[1]. We are not seeing peaks of 11%-13%(like the 70's) but 8%+ is very high and is costing Americans dearly. [1] - https://www.npr.org/2022/09/29/1125462240/inflation-1970s-volcker-nixon-carter-interest-rates-fed https://www.npr.org/2022/09/29/1125462240/inflation-1970s-vo...
- ericmay 4y ago
  > This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs Yea and outside of just absolutely ultraviolet kind of hot markets this will mitigate downward pressure on prices now and in the future because home builders (though that's another problem) won't be building homes. Coupled with people who have locked in interest rates, the market seems to me to be poised to grind to a halt and prices to remain quite high.
- UncleOxidant 4y ago
  Mortgage rates at 7% is pretty much the average mortgage rate going back 70 years or so. We're basically at the average mortgage rate now. The Fed screwed up by keeping rates too low for too long which juiced home prices such that a huge chunk of people who would like to be able to buy a home are priced out of the market. The problem, though, is that home building needs to continue in order to improve the housing supply problem (caused at least in part by the dearth of home-building during the '08-'12 period) and thus help with affordability. I tend to think that the government needs to step in here and do something to either incentivize home-building and/or at the very least do something to streamline permitting/zoning. Building codes need to be examined to see if there might be innovations that could lead to lower building costs which are currently being precluded. But keeping mortgage rates artificially low isn't the answer, that led to prices getting out of hand.
Eumenes 4y ago
Sounds like a conspiracy theory on your end
Mikeb85 4y ago
The recession is real (but probably won't materialize until we see the 4th quarter of this year's numbers). Lots of sectors are seeing reduced consumer spending, layoffs and of course interest rates rising reduces capital spending.
- zeroonetwothree 4y ago
  Overall spending and employment are still increasing. There are always some sectors growing and some shrinking. It doesn’t mean the whole economy is in recession.
itsoktocry 4y ago
>This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc I think people's sense of timescale is off. Business leaders are talking about things that we likely won't see for months. This isn't rocket science; we have insane inflation, rising interest rates, a strong USD and tightening monetary policy around the globe. Where do you see the growth coming from? Have you considered that "things aren't that bad" might benefit one or the other party during the upcoming election?
- aschearer 4y ago
  Have you considered that "things are terrible" might benefit one or the other party during the upcoming election?
  - deleted 4y ago
    [deleted]
deleted 4y ago
[deleted]
UncleOxidant 4y ago
> a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why There's also a 'class' of political leaders (primarily the party out of power) that is trying to give the impression that we're in a recession in order to help their party in the mid-term elections.
lost_tourist 4y ago
LatteLazy 4y ago
It's a recession for NON workers. Normally recessions are managed to make sure they hit workers and everyone else is fine, this one is the other way. Hence the FED rushing to "correct" the problem.
bjornsing 4y ago
Stuff gets weird when you have a lot of inflation. It distorts everything.
dragonwriter 4y ago
> This is the weirdest "recession" I can remember. Its not a recession, which is why it is weird when looked at as a recession. OTOH, there is still substantial risk of inflation control measures creating a recession. (And there is a bigger risk of business actions anticipating and avoiding being overextended in case of a recession caused by inflation control measures themselves causing a recession.)
pclmulqdq 4y ago
Everyone forgot the denominator. In terms of GDP/kWh of energy or GDP/calorie of food, we are still seeing sharp decline. Instead, we are measuring in dollars. When inflation starts to hit salaries and debt needs to be rolled, we will start to see more business contraction. That is what business leaders are planning for.
vikingerik 4y ago
There never was a real recession - it's an artifact of year-over-year numbers that were so skewed from pandemic effects. Pent-up consumer demand shifted much activity from 2020 into 2021. This is the source of all the apparent weirdness. Every yearly number in 2021 looked great thanks to comparing an artificially high number to an artificially low 2020 baseline. Then every yearly number from 2022 looks terrible, because it's comparing to 2021's number that was artificially high from time-shifted demand. Remember the "great resignation"? That was an illusion - it was just normal pent-up demand for job switching that didn't happen during the pandemic. The inflation of 2022 is also largely an illusion - it's really just that a few percentage points of what should have been normal inflation in 2020 and first-half 2021 was time-shifted into 2022. (The inflation is real, but the timing is an illusion - it's not really 8% per year, it's a fairly normal 12% over three years.) If you believe any year-over-year number from 2021 or 2022, you're falling for headline click-bait without considering the underlying irregularities.
- landoftheice 4y ago
- christkv 4y ago
  I really hope you are right but the massive debt taken on by all the western countries has me worried about their ability to actually respond to a hard recession if it hits this winter.
  - nequo 4y ago
    Public debt is a strange thing. The gross public debt of the US is 135% of its GDP[1] but Japan has it at 266%[2] and they've done okay so far, too. [1] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St... [2] https://en.wikipedia.org/wiki/National_debt_of_Japan https://en.wikipedia.org/wiki/National_debt_of_Japan
- com2kid 4y ago
  > The inflation of 2022 is also largely an illusion - it's really just that a few percentage points of what should have been normal inflation in 2020 and first-half 2021 was time-shifted into 2022. Food prices are up 48% at the nations second largest grocery chain. Rent prices are now through the roof, 20-30% year over year increases are common in major cities. Things are more expensive, full stop, and it isn't just "an extra year" more expensive.
adam_arthur 4y ago
Because a recession is all but obvious at this point. While it may not be here now, we probably have more foresight into the fact that there will be a recession than ever before. The Fed will intentionally create one to stop inflation, despite their talk of soft landing. The only hope otherwise is that inflation subsides on its own, which, given labor dynamics, is looking increasingly unlikely. So the Fed has to choose between spiking unemployment to contain inflation, or letting inflation run wild. Powell doesn’t intend to be remembered as an Arthur Burns, so it seems most likely he will keep pressing until the recession comes. Eventually stock prices will come down enough, and debt costs rise enough to actually cause the layoffs they need to pivot. Final note that, due to public sector debt levels, we cannot choose a path of allowing moderately high inflation for a long period of time. The government budget will become insolvent without a mechanism to fund it, either at the short or long end of the yield curve. Or in short, either we need a quick and sharp recession, or the Fed to give up on the inflation fight so they can drop short end rates and let govt debt inflate away. Otherwise the US govt will default within a few years.
blululu 4y ago
I’ve been thinking back to the 2008 recession where we had a jobless recovery for the next ~5 years. Part of me wonders if we will have an unemployment free downturn on the flip side. Personally I prefer the later to the former, but I understand people with more savings are less happy about that possibility.
nicholasjarnold 4y ago
This is just an opinion based on personal experience across multiple companies, but I think many of us can probably agree that companies (large, medium and small) seem to hire up a lot of people who provide tenuous value during the high times, like what's been occurring since post-2008 in the US. Those W2 employees are expensive recurring liabilities to the companies employing them. This expense can be offset in various ways (R&D credits, cheap money, endless VS cash, public statements about "always growing", other stuff I don't know about I'm sure). However, when the cracks in the system begin to show companies need to accomplish at least a couple of things: reduce recurring expenses and maintain an image of success (publicly traded or not!) despite the headwinds. Now, one way to accomplish those goals might be to join in with your fellow "biz leaders" and make statements about an upcoming recession and hard times, etc. This allows you to blend in with the crowd rather than be "that one company that is maybe failing". Once the blending in step is accomplished it leads into being able to start reducing headcount without freaking out too many people (it's not just Meta, it's everyone!). > ...I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market. Also, yeah, I've toyed with this idea too. After many years of pay band compression recent years have shown (for at least software engineers) that it's possible to individually negotiate up quite a bit. If you are qualified and can communicate that clearly, then you are in for a big raise or three. Until recently, even if you weren't particularly qualified you could still do this. This knowledge has spread pretty widely. Obviously capital doesn't like it when labor can say "Screw it, I'm out. 'Gonna go get a big raise instead of stick around and deal with X". This could indeed be the opportunity that capital was waiting for to readjust those dynamics again.
SkyPuncher 4y ago
IMO, business leaders knew they over-hired and that it was a wide spread industry trend. "The Recession" was a convenient reason for them to trim ineffective or unnecessary staff.
dfxm12 4y ago
I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market. It's exactly this and actions/comments from CEOs and the Fed pretty much confirm it. When Powell said "economic pain" was necessary, he meant that mostly for the working class. Look at all the layoffs going on... By driving up unemployment, the Fed expected “supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages https://www.wsws.org/en/articles/2022/09/23/izio-s23.html https://www.wsws.org/en/articles/2022/09/23/izio-s23.html
AtlasBarfed 4y ago
The Elite are drunk on PPP money printing, and don't want to downsize. Meanwhile inflation means all your employees expect a 10-15% raise to keep up with higher costs, and paying your employees is verboten in the religion of American Capitalism.
rufus_foreman 4y ago
>> Meanwhile most of the underlying indicators are actually positive That's not what I'm seeing. There's a good summary from earlier this week at https://seekingalpha.com/article/4548245-weekly-indicators-sinking-even-further https://seekingalpha.com/article/4548245-weekly-indicators-s... Employment is the only indicator that is still positive, everything else is either neutral or pointing to a recession.

bagels 4y ago

The fed said interest rates will keep being raised until unemployment rises.

glial 4y ago
Which is so strange and violates two of their three mandates - maximum employment and moderate interest rates.
- dasil003 4y ago
  You don't want to fuck around with inflation because at a certain point it becomes a self-fulfilling prophecy (ie. merchants raise prices pre-emptively just because they internalize inflation at a high steady state).
- CPLX 4y ago
  So strange. It’s almost as if they’ve picked a side in the conflict between supporting labor or capital.
  - roflyear 4y ago
    HN is capital not labor.
    - CPLX 4y ago
      Indeed. We are in fact conversing on a website that is a marketing forum for a multi-billion dollar private equity firm.
  - Aunche 4y ago
    So the low interest rates for the past decade that reduced unemployment must mean that they love labor right?
- mpalczewski 4y ago
  the mandate is maximum employment and 0% inflation.
- metapsj 4y ago
  maximum employment is a pandemic period objective. they aren't intending to crush the labor market. the fed has largely behind the curve in addressing inflation.
- everybodyknows 4y ago
  The Fed has two mandates, not three: https://www.stlouisfed.org/in-plain-english/the-fed-and-the-dual-mandate https://www.stlouisfed.org/in-plain-english/the-fed-and-the-... "... maximum employment and price stability"
importantbrian 4y ago
Did the fed actually say this? There were a bunch of investment bankers who did, and it seems like everyone else ran with the narrative. I haven't seen that the fed actually said it. I think all the fed cares about is bringing down inflation, but if the primary factors in inflation are supply related then unemployment doesn't have to go up for inflation to come down.
- JumpCrisscross 4y ago
  > Did the fed actually say this? No [1]. [1] https://www.federalreserve.gov/newsevents/pressreleases/monetary20220921a.htm https://www.federalreserve.gov/newsevents/pressreleases/mone...
- yieldcrv 4y ago
  Jerome Powell said this several times to Congress. You’ll be able to find it, I believe in you.
  - JumpCrisscross 4y ago
    > Jerome Powell said this several times to Congress No, he didn’t [1]. The Fed’s statements to Congress are tightly scripted, in part so professionals can pick the meat from such popular nonsense. [1] https://www.federalreserve.gov/newsevents/testimony/powell20220622a.htm https://www.federalreserve.gov/newsevents/testimony/powell20...
    - yieldcrv 4y ago
      tightly scripted to be vague https://www.bloomberg.com/news/articles/2022-09-21/powell-signals-recession-may-be-the-price-for-crushing-inflation https://www.bloomberg.com/news/articles/2022-09-21/powell-si... > Powell told reporters several times that a softer labor market may be necessary to sufficiently bring down demand.
- mostly_harmless 4y ago
  Yes, but not directly. If you listen to the last FOMC meeting, Powell mentions there will likely be significant weakening of the labor market and a rise of unemployment. As well as his famous "there will be pain" remarks. I don't think he directly said "he won't stop until" though.
bergenty 4y ago
This seems like an easily accessible conspiracy theory but I think all the fed wants to do is bring down inflation.
- ipaddr 4y ago
  Why not pull support for Ukraine let Russia win and ease those tensions
datadata 4y ago
I'm not sure why people continue to take what the fed says as being accurate predictions of the future. For example, they said in 2021 that they expected interest rates would be zero until 2024 [1]. They obviously have a lot of real power, but they must be understood to either be deceitful or incompetent given how wrong prior predictions have been. [1] https://www.ft.com/content/3d7704d3-a312-4294-95bc-90233f469ccd https://www.ft.com/content/3d7704d3-a312-4294-95bc-90233f469...

wollsmoth 4y ago

A lot are just focused on the next earnings call which makes sense I guess. If they work to deal with this "emergency" and it doesn't happen idk if there's a big price to pay.

atomicnumber3 4y ago

I too find that many mysteries become clearer when you look at them through the lens of the constant class warfare that is being waged. All too often in only one direction. I'll be honest - I didn't use to think the rich/powerful thought like this. I thought it was just the tragedies of capitalism and the invisible hand needing more protection from market failures. Then I worked for a billionaire's small company for five years right out of college. Now I recommend "Wage Labor and Capital" to anyone who I think will be able to manage it's low-two-digit number of pages.

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bushbaba 4y ago

Inflation means GDP can grow, with expenses growing faster.

SantalBlush 4y ago
This 2.6% figure is real GDP, meaning it's adjusted for inflation. [0] [0] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
- Enginerrrd 4y ago
  Assuming inflation is being calculated accurately...
  - everybodyknows 4y ago
    There is no "accurately", because there are many measures of inflation, each with its own particular claim to verisimilitude. So any economic figure described as "adjusted for inflation" should taken with an extra measure of wariness.
  - fortuna86 4y ago
    You seem determined to find a way to discredit this figure.
    - Enginerrrd 4y ago
      Me with my one comment? Not at all, but there seems to be a lot of skepticism over official inflation figures, particularly for recent reporting. Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology, I'd expect a similar magnitude for inflation-adjusted GDP no?
      - fortuna86 4y ago
        > Me with my one comment? You've made the same comment several times. > but there seems to be a lot of skepticism Why are you switching to the passive voice? Are you saying this or not. > Given there's usually a fairly significant magnitude of the variation on inflation figures depending on the exact methodology Not really. The price of a basket of goods, over time. Same as it's always been. As as already mentioned, GDP takes into account these numbers.

golergka 4y ago

We just had gone through an unprecedented global pandemic, there's a war in Europe that might become a world or nuclear war, and there's been unprecedented floods and draughts in many key regions of the world. I mean, it's good that they turned out to be wrong, but I won't blame them for expecting a recession in 2022.

cliftonk 4y ago

When I hear it from business leaders, there are three logical reasons 1) exposure to the housing market 2) poor performance by the company (its the economy's fault!) or 3) an excuse to trim fat from a high-margin company that's aware of how bloated it is.

rendang 4y ago

Another piece of the puzzle is the big drop in labor productivity lately - https://fred.stlouisfed.org/series/OPHNFB https://fred.stlouisfed.org/series/OPHNFB. Could the data you mention be explained by workers previously being in jobs where they were unproductive, being laid off but then quickly reabsorbed by the hot labor market into more efficient lines of work?

importantbrian 4y ago
Isn't that just because of the steep rise in labor costs? It's just another sign of how strong the labor market is right now.
- colinmhayes 4y ago
  labor productivity is measured in output/hour, not output/dollar spent of wages.
zeroonetwothree 4y ago
It’s a pretty small drop and there is a lot of noise in that metric.
- rendang 4y ago
  What do you think could be behind the noise in this case? It does look like the steepest drop in many decades, and more surprising when we read stories on HN about automation that would imply a baseline increase in productivity.
ipaddr 4y ago
That's people going back into the office and lowering production
AntiRemoteWork 4y ago
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bergenty 4y ago

This is inspite of the fed raising the rates. I believe the fed may have missed the boat for a bit but they started raising rates just in time. This economy is resilient and honestly it’s a beautiful thing to see.

conductr 4y ago

There is a class of business leader that is definitely in a recession where that word just means downward financial performance trajectory. I’d be willing to bet the distinction is how much labor you employ and what kind (pay bands as proxy). Hospitals for example are in a world of hurt post Covid. Labor is their main cost. Rates are down but remain high. Employee satisfaction is low. Revenues do not keep pace with costs and largely uncontrollable.

hartator 4y ago

When you adjust for money supply inflation (peak at around 24%) instead of price inflation (peak at around 9%), every indicators become very red. I think money supply inflation reflects more the reality and explain the current bearish sentiment.

JumpCrisscross 4y ago
> adjust for money supply inflation (spiked at around 24%) instead of price inflation (spiked at around 9%) The former is a fake metric. Measuring changes in the monetary base [1] is a thing. But it’s seldom accurately reflected in a single figure. Also, the 2.6% is real GDP growth. Current-dollar growth was 6.7% annualised [1]. [1] https://en.wikipedia.org/wiki/Monetary_base https://en.wikipedia.org/wiki/Monetary_base [2] https://www.bea.gov/news/2022/gross-domestic-product-third-quarter-2022-advance-estimate https://www.bea.gov/news/2022/gross-domestic-product-third-q...
- hartator 4y ago
  > the former is a fake metric. I am using M2 money supply. Basically trying to proxy how much money more we printed this past few years. Source: https://www.longtermtrends.net/m2-money-supply-vs-inflation/ https://www.longtermtrends.net/m2-money-supply-vs-inflation/
  - nightski 4y ago
    That could be skewed because they changed how M2 was calculated during the pandemic.
    - giantg2 4y ago
      This makes me feel better. /s
      - cko 4y ago
        It should. https://collabfund.com/blog/the-fed-isnt-printing-as-much-money-as-you-think/ https://collabfund.com/blog/the-fed-isnt-printing-as-much-mo... Also money printing isn't necessarily inflationary if the money stays as bank reserves. Unless... The Fed buys treasuries and the government dumps the money on the economy.

coldpie 4y ago

> It's almost like there is a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why You may find a clue in the results on Nov 8th.

nostrademons 4y ago

The stock market, interest rates, and advertising spending are leading indicators, while unemployment is a lagging indicator. Business leaders know the financial structure of their company, and many of them know that they can't survive at 2% rates, let alone 5 or 10% rates. The gloom from business leaders is forward-looking. They're fine for now, while consumer spending holds up and they can run on old debt. But as soon as they need to roll over their debt, everything collapses. They'd need to increase revenues by 2-5x, and they can't. My prediction is that we drive off a cliff. CEOs know their companies can't survive high rates, so they manage as if a Fed pivot is coming. If the expected Fed pivot happens, they bank windfall profits and get huge stock bonuses. If it doesn't, they go bankrupt, everybody is out of work, and it is not their problem anymore.

importantbrian 4y ago
This seems overly pessimistic. I'm sure a high rate environment isn't ideal for a lot of businesses, but we've had much higher rates in the past and most businesses survived it just fine.
- tomtheelder 4y ago
  You're totally right that business can thrive in a high rate environment, but we have a LOT of them right now whose existence has been sustained due to the low rates, extending all the way down to proper zombie companies. A lot of those will be killed by rate hikes, but that's actually a good thing in the long run.
- function_seven 4y ago
  Those businesses were the ones that were either created in that environment, or who survived it long enough. The last time rates were this high, they were this high for decades. I fear the cliff scenario because a lot of business models now were built on a foundation of crazy-cheap debt. The tide is about to go out. Eventually the business environment will re-adjust to the new cost of money, but the transition will be tough.
  - 4y ago

spaceman_2020 4y ago

The world is wacky right now. Normal patterns of behavior have been disrupted by 2 years of lockdowns. Some people are spending out of spite. Some people are not even leaving the house. There's a certain levity about work - no one seems to be taking it seriously. Strange times. Really hard to capture in data. Only increases possibilities of a major economic catastrophe because the tea leaves are just too hard to read right now.

colordrops 4y ago
> There's a certain levity about work Where do you work? For the two companies I've worked at during this period I would not use the term "levity".

supergeek133 4y ago

This is the broadest view of the economy growing. So there may be some business leaders who work in still growing industries who are trying to "wish the recession into existence" as you say.. But on the flipside you have things like housing taking a downturn (not just home prices, but actual housing construction) which negatively impacts all of their suppliers (HVAC equipment, lumber, contracting companies, etc etc). So there are some of those leaders who have a likely justified negative outlook.

treeman79 4y ago
Be real fun when the strategic oil reserve runs out / stop draining it after November Election. Nothing was done to increase domestic supply. And OPEC has decided to tighten the screws on us.
- themitigating 4y ago
  When will it run out?
  - treeman79 4y ago
    https://www.forbes.com/sites/davidblackmon/2022/10/20/president-bidens-dangerous-abuse-of-the-strategic-petroleum-reserve/amp/ https://www.forbes.com/sites/davidblackmon/2022/10/20/presid... Oil reserve has a mix of different kinds of oils. We’ve been using up the better stuff. Not sure how much of that’s left. US has a 25 day supply of diesel.
- matthewdgreen 4y ago
  "U.S. oil production is almost 12 million barrels per day. By the end of this year, it will be up by about one million barrels per day compared to when President Biden took office, and it is on track to reach a new annual high in 2023. However, a number of industry participants have suggested that, even with today’s high prices, they are concerned about investing in production when prices could fall in the future. The Administration is announcing its intent to use SPR repurchases to add to global crude oil demand at times when the price of West Texas Intermediate (WTI) crude oil is at or below about $67 to $72 per barrel. This will protect taxpayer interests because the SPR will be repurchasing at a lower price than recent sales, potentially allowing it to repurchase more oil than it released with sale proceeds. It will also help address producer concerns about uncertain demand in future years, encouraging immediate investment." https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/18/fact-sheet-president-biden-to-announce-new-actions-to-strengthen-u-s-energy-security-encourage-production-and-bring-down-costs/ https://www.whitehouse.gov/briefing-room/statements-releases...

tschellenbach 4y ago

Companies pay employees to increase the value of the company. The market is reasonably efficient and companies will increase pay to match the value created (somewhat correlated at least. startups often pay more with the hope it balances out in the future, established companies pay less since some of them print cash and they dont have to pay more to get candidates). Many tech companies are down 80-95%. So if you used to pay employees 100 to generate 100, now you are paying 100 to generate 20 or in some cases 5. This only works if you can massively increase productivity or reduce cost. There is no evil conspiracy, markets are just down

subsubzero 4y ago

It is weird, they say history does not repeat but it rhymes. What is troubling about this good news about GDP growth is the fed's course of raising interest rates will continue on and interest rates will keep getting higher and higher. This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs. In addition growth companies will be hit hard by rates being high as we have seen since early this year. Basically the fed will do anything in its power to stop inflation and I expect the only thing to get it back to the target of 2% is to have interest rates in the low teens. I know that sounds crazy but comparing this to the 70's it took Volker raising rates to 20% to tame the bad inflation of that period[1]. We are not seeing peaks of 11%-13%(like the 70's) but 8%+ is very high and is costing Americans dearly. [1] - https://www.npr.org/2022/09/29/1125462240/inflation-1970s-volcker-nixon-carter-interest-rates-fed https://www.npr.org/2022/09/29/1125462240/inflation-1970s-vo...

ericmay 4y ago
> This will lead to a housing market that will grind to a halt and expect that whole sector will hemorrhage jobs Yea and outside of just absolutely ultraviolet kind of hot markets this will mitigate downward pressure on prices now and in the future because home builders (though that's another problem) won't be building homes. Coupled with people who have locked in interest rates, the market seems to me to be poised to grind to a halt and prices to remain quite high.
UncleOxidant 4y ago
Mortgage rates at 7% is pretty much the average mortgage rate going back 70 years or so. We're basically at the average mortgage rate now. The Fed screwed up by keeping rates too low for too long which juiced home prices such that a huge chunk of people who would like to be able to buy a home are priced out of the market. The problem, though, is that home building needs to continue in order to improve the housing supply problem (caused at least in part by the dearth of home-building during the '08-'12 period) and thus help with affordability. I tend to think that the government needs to step in here and do something to either incentivize home-building and/or at the very least do something to streamline permitting/zoning. Building codes need to be examined to see if there might be innovations that could lead to lower building costs which are currently being precluded. But keeping mortgage rates artificially low isn't the answer, that led to prices getting out of hand.

Eumenes 4y ago

Sounds like a conspiracy theory on your end

Mikeb85 4y ago

The recession is real (but probably won't materialize until we see the 4th quarter of this year's numbers). Lots of sectors are seeing reduced consumer spending, layoffs and of course interest rates rising reduces capital spending.

zeroonetwothree 4y ago
Overall spending and employment are still increasing. There are always some sectors growing and some shrinking. It doesn’t mean the whole economy is in recession.

itsoktocry 4y ago

>This is the weirdest "recession" I can remember. Business leaders are constantly talking about how challenging the economic environment is and the need for layoffs etc I think people's sense of timescale is off. Business leaders are talking about things that we likely won't see for months. This isn't rocket science; we have insane inflation, rising interest rates, a strong USD and tightening monetary policy around the globe. Where do you see the growth coming from? Have you considered that "things aren't that bad" might benefit one or the other party during the upcoming election?

aschearer 4y ago
Have you considered that "things are terrible" might benefit one or the other party during the upcoming election?
- deleted 4y ago
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deleted 4y ago

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UncleOxidant 4y ago

> a class of business leaders who are just trying to wish a recession into existence, and I can't figure out why There's also a 'class' of political leaders (primarily the party out of power) that is trying to give the impression that we're in a recession in order to help their party in the mid-term elections.

lost_tourist 4y ago

LatteLazy 4y ago

It's a recession for NON workers. Normally recessions are managed to make sure they hit workers and everyone else is fine, this one is the other way. Hence the FED rushing to "correct" the problem.

bjornsing 4y ago

Stuff gets weird when you have a lot of inflation. It distorts everything.

dragonwriter 4y ago

> This is the weirdest "recession" I can remember. Its not a recession, which is why it is weird when looked at as a recession. OTOH, there is still substantial risk of inflation control measures creating a recession. (And there is a bigger risk of business actions anticipating and avoiding being overextended in case of a recession caused by inflation control measures themselves causing a recession.)

pclmulqdq 4y ago

Everyone forgot the denominator. In terms of GDP/kWh of energy or GDP/calorie of food, we are still seeing sharp decline. Instead, we are measuring in dollars. When inflation starts to hit salaries and debt needs to be rolled, we will start to see more business contraction. That is what business leaders are planning for.

vikingerik 4y ago

There never was a real recession - it's an artifact of year-over-year numbers that were so skewed from pandemic effects. Pent-up consumer demand shifted much activity from 2020 into 2021. This is the source of all the apparent weirdness. Every yearly number in 2021 looked great thanks to comparing an artificially high number to an artificially low 2020 baseline. Then every yearly number from 2022 looks terrible, because it's comparing to 2021's number that was artificially high from time-shifted demand. Remember the "great resignation"? That was an illusion - it was just normal pent-up demand for job switching that didn't happen during the pandemic. The inflation of 2022 is also largely an illusion - it's really just that a few percentage points of what should have been normal inflation in 2020 and first-half 2021 was time-shifted into 2022. (The inflation is real, but the timing is an illusion - it's not really 8% per year, it's a fairly normal 12% over three years.) If you believe any year-over-year number from 2021 or 2022, you're falling for headline click-bait without considering the underlying irregularities.

landoftheice 4y ago
christkv 4y ago
I really hope you are right but the massive debt taken on by all the western countries has me worried about their ability to actually respond to a hard recession if it hits this winter.
- nequo 4y ago
  Public debt is a strange thing. The gross public debt of the US is 135% of its GDP[1] but Japan has it at 266%[2] and they've done okay so far, too. [1] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St... [2] https://en.wikipedia.org/wiki/National_debt_of_Japan https://en.wikipedia.org/wiki/National_debt_of_Japan
com2kid 4y ago
> The inflation of 2022 is also largely an illusion - it's really just that a few percentage points of what should have been normal inflation in 2020 and first-half 2021 was time-shifted into 2022. Food prices are up 48% at the nations second largest grocery chain. Rent prices are now through the roof, 20-30% year over year increases are common in major cities. Things are more expensive, full stop, and it isn't just "an extra year" more expensive.

adam_arthur 4y ago

Because a recession is all but obvious at this point. While it may not be here now, we probably have more foresight into the fact that there will be a recession than ever before. The Fed will intentionally create one to stop inflation, despite their talk of soft landing. The only hope otherwise is that inflation subsides on its own, which, given labor dynamics, is looking increasingly unlikely. So the Fed has to choose between spiking unemployment to contain inflation, or letting inflation run wild. Powell doesn’t intend to be remembered as an Arthur Burns, so it seems most likely he will keep pressing until the recession comes. Eventually stock prices will come down enough, and debt costs rise enough to actually cause the layoffs they need to pivot. Final note that, due to public sector debt levels, we cannot choose a path of allowing moderately high inflation for a long period of time. The government budget will become insolvent without a mechanism to fund it, either at the short or long end of the yield curve. Or in short, either we need a quick and sharp recession, or the Fed to give up on the inflation fight so they can drop short end rates and let govt debt inflate away. Otherwise the US govt will default within a few years.

blululu 4y ago

I’ve been thinking back to the 2008 recession where we had a jobless recovery for the next ~5 years. Part of me wonders if we will have an unemployment free downturn on the flip side. Personally I prefer the later to the former, but I understand people with more savings are less happy about that possibility.

nicholasjarnold 4y ago

This is just an opinion based on personal experience across multiple companies, but I think many of us can probably agree that companies (large, medium and small) seem to hire up a lot of people who provide tenuous value during the high times, like what's been occurring since post-2008 in the US. Those W2 employees are expensive recurring liabilities to the companies employing them. This expense can be offset in various ways (R&D credits, cheap money, endless VS cash, public statements about "always growing", other stuff I don't know about I'm sure). However, when the cracks in the system begin to show companies need to accomplish at least a couple of things: reduce recurring expenses and maintain an image of success (publicly traded or not!) despite the headwinds. Now, one way to accomplish those goals might be to join in with your fellow "biz leaders" and make statements about an upcoming recession and hard times, etc. This allows you to blend in with the crowd rather than be "that one company that is maybe failing". Once the blending in step is accomplished it leads into being able to start reducing headcount without freaking out too many people (it's not just Meta, it's everyone!). > ...I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market. Also, yeah, I've toyed with this idea too. After many years of pay band compression recent years have shown (for at least software engineers) that it's possible to individually negotiate up quite a bit. If you are qualified and can communicate that clearly, then you are in for a big raise or three. Until recently, even if you weren't particularly qualified you could still do this. This knowledge has spread pretty widely. Obviously capital doesn't like it when labor can say "Screw it, I'm out. 'Gonna go get a big raise instead of stick around and deal with X". This could indeed be the opportunity that capital was waiting for to readjust those dynamics again.

SkyPuncher 4y ago

IMO, business leaders knew they over-hired and that it was a wide spread industry trend. "The Recession" was a convenient reason for them to trim ineffective or unnecessary staff.

dfxm12 4y ago

I can't figure out why other than maybe they think it would allow them to reestablish power in the labor market. It's exactly this and actions/comments from CEOs and the Fed pretty much confirm it. When Powell said "economic pain" was necessary, he meant that mostly for the working class. Look at all the layoffs going on... By driving up unemployment, the Fed expected “supply and demand conditions in the labor market to come into better balance over time, easing the upward pressure on wages https://www.wsws.org/en/articles/2022/09/23/izio-s23.html https://www.wsws.org/en/articles/2022/09/23/izio-s23.html

AtlasBarfed 4y ago

The Elite are drunk on PPP money printing, and don't want to downsize. Meanwhile inflation means all your employees expect a 10-15% raise to keep up with higher costs, and paying your employees is verboten in the religion of American Capitalism.

rufus_foreman 4y ago

>> Meanwhile most of the underlying indicators are actually positive That's not what I'm seeing. There's a good summary from earlier this week at https://seekingalpha.com/article/4548245-weekly-indicators-sinking-even-further https://seekingalpha.com/article/4548245-weekly-indicators-s... Employment is the only indicator that is still positive, everything else is either neutral or pointing to a recession.