1 big thing: Super-slow job market cooldown

Illustration of bar chart columns forming a briefcase.

2. 🇪🇺 Europe's inflation relief

Welcome to your Wednesday Macro! Today's main event comes this afternoon, as Fed chair Jerome Powell will speak about the economic outlook at the Brookings Institution at 1:30 ET. Follow our coverage on Axios.com, and we'll be back tomorrow with a full analysis.

For now, we look at the snail-paced path of labor market cooling. Plus, an early sign of inflation easing in Europe.

📈 Situational awareness: The U.S. economy grew at a 2.9% annualized rate last quarter, modestly better than the initial estimate of 2.6%.

An alternate measure of growth, gross domestic income, says the economy expanded at a much slower 0.3% annual rate.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 592 words, a 2-minute read.

Macro

green

Stay ahead of the curve on the most important economic developments with reporting and analysis on how business, policy, and markets collide. With Neil Irwin and Courtenay Brown.

Axios Macro

1 big thing: The labor market isn't cooperating with the Fed

Illustration of briefcase full of 100 and 20 dollar bills

2. A not-so-Fed-like Chicago Fed president

Incoming Chicago Fed President Austan Goolsbee

A happy Big Jobs Friday to all. It was another stunner, in a way that is good for workers — but not so good for those hoping for a painless end to inflation.

That, plus a few thoughts on the appointment of Austan Goolsbee to run the Federal Reserve Bank of Chicago, below.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 656 words, a 2½-minute read.

1 big thing: Powell's dance with markets

Why Treasury Secretary has been practicing her signature

2. 💵 What Yellen has been practicing

There was another benign inflation reading for October, this time from the Federal Reserve's preferred Personal Consumption Expenditures Index. Stripping out food and energy costs, prices rose just 0.2% after two straight months of 0.5% increases. 

In today's edition of Macro, Fed chair Jerome Powell's increasingly complicated waltz with financial markets. Plus, some late-night comedy with Janet Yellen on getting her signature just right before it goes on the dollar. 💵 

🇨🇭 Next month, Axios will be at the 2023 World Economic Forum in Davos, Switzerland. Want to attend one of our events? Request an invite.

Today's newsletter, edited by Javier E. David and copy edited by Katie Lewis, is 669 words, a 2½-minute read.

1 big thing: What the bond market is telling us

2. What to watch: A global drag on growth

There appears to be a divergence between what the Federal Reserve says they they plan to do to wrangle inflation, and what markets think the Fed will do. We unpack it below.

Plus, a check on how a slowing global economy is affecting the U.S. trade deficit — and what it might portend for the next GDP report. 🇺🇸

Today's newsletter, edited by Javier E. David and copy edited by Elizabeth Black, is 618 words, a 2.5-minute read.

First look: CEO optimism is fading

1 big thing — First look: CEO optimism is fading

Oil crisis averted as Russian crude gets price-capped

2. The oil crisis averted

We begin the week with an exclusive look at a long-running survey of top CEOs and what the results signal about the economy and the odds of a recession.

🛢📉 Plus, a look at how the newly implemented cap on Russian oil prices has helped prevent forecasts of skyrocketing energy prices from materializing. 

Situational awareness: The Institute for Supply Management's survey of activity at service businesses showed unexpected strength in November, the group said this morning, surging to 56.5 from 54.4 (numbers above 50 indicated expansion).

Today's newsletter, edited by Javier E. David, is 605 words, a 2-minute read.

National

There is no denying it: The labor market is fantastic for workers. That continues to benefit America's workers, but it makes the Federal Reserve's campaign to bring down inflation that much harder.

Why it matters: The longer the labor market fails to cooperate with the Fed's engineered slowdown, the higher it will eventually need to push interest rates — and the more likely the central bank is to overdo things and cause an abrupt downturn.

Where it stands: Jobs are plentiful, and businesses have a robust appetite for new employees that are in short supply. The result is higher wages, which have actually risen faster than consumer prices in the last few months.

In the Fed's ideal scenario, more workers re-enter the workforce and demand for employees slows, helping to heal labor's supply-demand mismatch. Wage growth would slow, with prices coming down more.

But the opposite is happening. The labor force shrank in November for a third straight month; employers keep adding to their payrolls en masse; and wage growth accelerated.

By the numbers: Employers added 263,000 jobs last month, well above the minimum of roughly 100,000 jobs needed to keep pace with population growth.

Missing in the aggregate data were any signs of a severe hiring slowdown in sectors like technology that are grabbing all the headlines. In fact, the information sector has added an average of 14,000 jobs each month this year — in line with the 16,000 added in 2021.

Any workers who are getting laid off are finding new jobs quickly. The median duration of unemployment is 8.4 weeks, shorter than the 9.7 weeks before the pandemic.

Perhaps the most surprising news of the November jobs report: Average hourly earnings for private-sector workers rose 0.6%, and wage gains for September and October were revised upward.

Over that three-month span, average hourly earnings rose at a 5.8% annual rate — well above what the Fed would consider consistent with price stability.

What's next: The Fed's next policy action is pretty clear. It will likely raise its target rate by 0.5 percentage point at a meeting concluding Dec. 14.

But the hot labor market makes it more likely that official projections of how high they will eventually push interest rates will be markedly higher, likely above 5% (in September, they envisioned topping out around 4.6%).

What they're saying: Joe Brusuelas, chief economist at RSM, thinks the data will prompt the Fed "to lift the policy rate above 5% — perhaps as high as 5.5% — before entertaining any idea of a strategic pause in its efforts to restore price stability."

"This implies the probability of the central bank creating economic conditions for a soft landing has narrowed and supports our call of a mild recession next year," he adds.

The booming labor market isn't cooperating with the Fed

The labor market is fantastic for workers. But that may eventually spell trouble for the economy.

Jobs

Economy & Business

A few months ago, it was a glimmer in the eyes of some U.S. economic diplomacy wonks. Now, a price cap on Russian oil — imposed by U.S. and European allies to try to throttle revenues to Russia — is a reality.

Driving the news: The cap, agreed at $60 per barrel on Friday, is meant to be enough to give Russia incentive to keep pumping oil, contributing to global supply, but prevent windfall profits amid its war in Ukraine.

The policy allows those importing Russian oil to take advantage of Western shipping, financing and insurance, only if they pay at or below the $60 price.

Right now the debate is over whether the price is too high or too low. Ukraine and some of its closest allies like Poland wanted the number set lower to punish Russian President Vladimir Putin more. Shipping nations like Greece wanted it higher.

Flashback: But amid arguments over the details of the policy design, it's easy to miss what the strategy has achieved relative to expectations that prevailed among energy analysts this past spring, in the early days of the Ukraine war.

The conventional wisdom was that, given Europe's commitment to applying maximum pressure on Putin, the result would be sharply fewer global oil supplies, resulting in price spikes and risking economic crisis.

In an April note, JPMorgan analysts estimated oil would reach $185 a barrel in the event of a full embargo of Russian oil, as Europe had threatened. In March, Goldman Sachs analysts were forecasting $135 per barrel of oil for year-end.

Numbers like those would have meant both higher inflation and high odds of a global recession.

By the numbers: Brent crude now stands at around $86 a barrel, down from $123 in June.

A price cap on Russian oil — imposed by U.S. and European allies to try to throttle revenues to Russia — is a reality.

An oil refinery in France. Photo: Benjamin Girette/Bloomberg via Getty Images

Energy

A few months ago, it was a glimmer in the eyes of some U.S. economic diplomacy wonks. Now, a price cap on Russian oil — imposed by U.S. and European allies to try to throttle revenues to Russia — is a reality.Driving the news: The cap, agreed at $60 per barrel on Friday, is meant to be enough to give Russia incentive to keep pumping oil, contributing to global supply, but prevent windfall profits amid its war in Ukraine.<ul><li>The policy allows those importing Russian oil to take advantage of Western shipping, financing and insurance, only if they pay at or below the $60 price.</li></ul>Right now the debate is over whether the price is too high or too low. Ukraine and some of its closest allies like Poland wanted the number set lower to punish Russian President Vladimir Putin more. Shipping nations like Greece wanted it higher.Flashback: But amid arguments over the details of the policy design, it&#x27;s easy to miss what the strategy has achieved relative to expectations that prevailed among energy analysts this past spring, in the early days of the Ukraine war.<ul><li>The conventional wisdom was that, given Europe&#x27;s commitment to applying maximum pressure on Putin, the result would be sharply fewer global oil supplies, resulting in price spikes and risking economic crisis.</li><li>In an April note, JPMorgan analysts estimated oil would reach $185 a barrel in the event of a full embargo of Russian oil, as Europe had threatened. In March, Goldman Sachs analysts were forecasting $135 per barrel of oil for year-end.</li><li>Numbers like those would have meant both higher inflation and high odds of a global recession.</li></ul>By the numbers: Brent crude now stands at around $86 a barrel, down from $123 in June.

Data: Business Roundtable; Chart: Axios Visuals

The chief executives of America's biggest companies have downgraded their view of the economy — though not to the levels of gloom normally seen in recessions.

Why it matters: Economic jitters have not sent CEO confidence diving off a cliff. Their plans for hiring and capital spending are more consistent with a slowdown in growth than outright economic contraction.

By the numbers: The latest Business Roundtable CEO Economic Outlook index, first shared with Axios, declined 11 points — continuing the steady slide that's happened every single quarter this year.

It's the first time since 2020 that the index has fallen below its long-run average. 

When 142 CEOs of major U.S. companies were surveyed in late November, they reported relatively healthy plans for sales growth, hiring and capital spending.

But those expectations had notably cooled from last year's nosebleed levels. 40% of CEOs expect to increase employment at their firms within the next six months. This time last year, 77% planned to do so. 

What they're saying: "With continued supply chain challenges and inflation uncertainty, many CEOs remain cautious about domestic plans and expectations for the next six months," General Motors CEO Mary Barra, who chairs the Business Roundtable, said.

Look for more on what business leaders' assessment says about the economic outlook later today in Axios Macro.

First look: CEO optimism fading as economy teeters

It's the first time since 2020 that the index has fallen below its long-run average.

CEOs

A chart showing Business Roundtable CEO Economic Outlook Index.

The chief executives of America&#x27;s biggest companies have downgraded their view of the economy — though not to the levels of gloom normally seen in recessions.Why it matters: Economic jitters have not sent CEO confidence diving off a cliff. Their plans for hiring and capital spending are more consistent with a slowdown in growth than outright economic contraction.

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The jobs market stayed strong last month: Employers added 263,000 jobs, while the unemployment rate held at 3.7%, near the lowest level in a half-century, the Labor Department said on Friday.

Why it matters: The figures are the latest signal of a roaring labor market that continues to defy fears of a recession.

November's payroll gains are above the addition of 200,000 jobs that economists had expected.

By the numbers: Job growth last month was slightly slower than the 284,000, added in October, which was revised up by 23,000. In September, the economy added 269,000 jobs, 46,000 fewer than initially estimated.

Average hourly earnings, a measure of wage growth, rose by 0.6% in November — faster than the prior month, when earnings rose by 0.5%. Over the past year ending in November, average hourly earnings increased by 5.1%.

The share of people working or looking for work, known as the labor force participation rate, ticked down to 62.1%, compared to 62.2% in October.

The backdrop: Economists have been bracing for cracks in the labor market that have yet to appear.

It has been an ugly stretch for layoffs in a handful of sectors like technology, with large-scale job cuts announced at Meta, Amazon and Twitter.

But overall, the booming job market has continued for workers, even in the face of ultra-aggressive efforts by the Federal Reserve to try to cool demand for labor to help put a lid on inflation.

Last month, Fed chair Jerome Powell said that employers bidding up wages to attract workers is not "the principal story of why prices are going up."

Still, the labor market may point to clues about how inflation will evolve in certain categories, including industries within the services sector where wages make up the biggest costs for businesses, Powell said on Wednesday.

Editor's note: This story was updated with additional details throughout.

U.S. economy adds 263,000 jobs in November

The figures are the latest signal of a roaring labor market that continues to defy fears of a recession.

Jobs report

Stock market

The <a class="gtmContentClick" data-vars-link-text="jobs market" data-vars-click-url="https://www.axios.com/2022/12/01/jay-powell-explains-americas-worker-shortage" data-vars-item="in_content_link" href="https://www.axios.com/2022/12/01/jay-powell-explains-americas-worker-shortage" target="_self">jobs market</a> stayed strong last month: Employers added 263,000 jobs, while the unemployment rate held at 3.7%, near the lowest level in a half-century, the <a class="gtmContentClick" data-vars-link-text="Labor Department" data-vars-click-url="https://www.bls.gov/news.release/empsit.nr0.htm" data-vars-item="in_content_link" href="https://www.bls.gov/news.release/empsit.nr0.htm" target="_blank">Labor Department</a> said on Friday.Why it matters: The figures are the latest signal of a roaring labor market that continues to defy fears of a recession.

Austan Goolsbee, who served as the chair of former President Obama's Council of Economic Advisors, will be the next president of the Federal Reserve Bank of Chicago, the bank said on Thursday.

Why it matters: Goolsbee is set to become a member of the Federal Open Market Committee that makes crucial decisions about monetary policy and interest rates, as the Fed battles decades-high inflation.

Goolsbee, a professor at the University of Chicago, has been a frequent commentator on economic policy, displaying a quick wit on television and Twitter. He was an ardent supporter of the Biden administration's pandemic rescue plan.

He will start at the Chicago Fed on Jan. 9.

Zoom out: Goolsbee is part of a wave of turnover in leadership of the 12 Fed banks. 

Susan M. Collins took the helm of the Boston Fed and Lorie Logan the Dallas Fed earlier this year. The Kansas City Fed is searching for its next president as well.

Catch up quick: Charles Evans, the current president of the Chicago Fed, announced earlier this year that he would retire from the position at the beginning of 2023 as he faces a mandatory retirement age.

Former Obama economic adviser will lead the Chicago Federal Reserve

He will replace Charles Evans, who has led the bank since 2007.

Austan Goolsbee, a former top economic adviser to President Obama, testifies before Congress in 2013. Photo: Chip Somodevilla/Getty Images

Federal Reserve

Austan Goolsbee, who served as the chair of former President Obama&#x27;s Council of Economic Advisors, will be the next president of the Federal Reserve Bank of Chicago, the bank <a class="gtmContentClick" data-vars-link-text="said" data-vars-click-url="https://twitter.com/ChicagoFed/status/1598401573725536258" data-vars-content-id="ce88e0fc-1efd-4db5-9796-cdaa6e21edc9" data-vars-headline="Former Obama economic adviser will lead the Chicago Federal Reserve" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://twitter.com/ChicagoFed/status/1598401573725536258" target="_blank">said</a> on Thursday.Why it matters: Goolsbee is set to become a member of the Federal Open Market Committee that makes crucial decisions about monetary policy and interest rates, as the Fed battles <a class="gtmContentClick" data-vars-link-text="decades-high inflation" data-vars-click-url="https://www.axios.com/2022/12/01/inflation-october-fed-reserve-powell" data-vars-content-id="ce88e0fc-1efd-4db5-9796-cdaa6e21edc9" data-vars-headline="Former Obama economic adviser will lead the Chicago Federal Reserve" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/2022/12/01/inflation-october-fed-reserve-powell" target="_self">decades-high inflation</a>.

Courtenay Brown

Stories

Oil crisis averted as Russian crude gets price-capped

First look: CEO optimism fading as economy teeters

The booming labor market isn't cooperating with the Fed

U.S. economy adds 263,000 jobs in November

Former Obama economic adviser will lead the Chicago Federal Reserve

Newsletter editions

📉 Bond market's message

📉 Softer, but not off a cliff

🤯 Jobs keep booming

💃 Powell's waltz

🐢 Slow cooldown