Goldman Sachs, JPMorgan CEOs tip U.S. economy for recession as labor tightness keeps Fed aggressive
Labor #Labor
Goldman Sachs CEO David Solomon and JPMorgan CEO Jamie Dimon both expect a U.S. recession as a tight labor market keeps the Federal Reserve on an aggressive monetary policy tightening trajectory.
Speaking on a panel at the Future Initiative Investment conference in Riyadh, Saudi Arabia on Tuesday, Solomon said he expects economic conditions to “tighten meaningfully from here,” and predicted that the Fed would continue raising interest rates until they reached 4.5%-4.75% before pausing.
“But if they don’t see real changes — labor is still very, very tight, they are obviously just playing with the demand side by tightening — but if they don’t see real changes in behavior, my guess is they will go further,” he said.
“And I think generally when you find yourself in an economic scenario like this where inflation is embedded, it is very hard to get out of it without a real economic slowdown.”
The Fed funds rate is currently targeted between 3%-3.25%, but Federal Open Market Committee policymakers have signaled that further hikes will be needed, with U.S. inflation still running at an annual 8.2% in September.
Philadelphia Fed President Patrick Harker said last week that the central bank’s policy tightening to date had resulted in a “frankly disappointing lack of progress on curtailing inflation,” projecting that rates would need to rise “well above 4%” by the end of the year.
Goldman Sachs CEO says outlook looks uncertain
SHARE
SHARE
TWEET
SHARE
Click to expand
New gig economy rules look like ‘gut punch’ for Uber and Lyft, says Dan Ives Dan Ives, Wedbush Securities managing director and senior equity analyst, joins ‘The Exchange’ to discuss Ives’ take on the reclassification proposal for gig economy workers, what happens if rides from Uber, Lyft and DoorDash become more expensive and more. 
CNBC
How airlines park thousands of grounded planes The coronavirus pandemic has devastated the airline industry. U.S. air travel dropped 95% compared to last year and the number of flights scheduled globally is down by 63%. More than 16,000 of the world’s commercial aircraft are grounded. These planes can’t just sit idle, they need routine maintenance and a place to be stored. And when you suddenly have thousands of planes with nowhere to go it becomes a logistical nightmare. Watch the video to see how airlines are parking all of these planes. CNBC
Why you should stop overthinking and start taking risks, according to this CEO It’s easy to overthink the decisions in your career, but the CEO of creative agency Imagination, Patrick Reid, says that taking risks when you’re young can be more rewarding than trying to follow a perfect path. And he has the experience to prove it. CNBCUP NEXT
Meanwhile, the U.S. Department of Labor reported 10.1 million job openings in August, signaling that employers’ demand for workers, though falling sharply, remains historically high.
Central bank policymakers hope that a cooling labor market will translate to lower wage growth, which has been running at its highest rate in decades and signals that inflation has become embedded in the economy.
“So I too am in the camp that we likely have a recession in the U.S. … I think most likely we might be in a recession in Europe, and so until you get to that point where you see a change — whether it’s in labor, the demand side — you are going to see central banks continue to move on that trajectory,” Solomon added.
U.S. GDP contracted by 0.9% in the second quarter of 2022, its second consecutive quarterly decline and a strong signal that the economy is in recession.
Fellow Wall Street titan Dimon agreed that the Fed would likely continue hiking rates aggressively before pausing to allow the data to begin reflecting its efforts to rein in inflation, but struck a similarly pessimistic tone on the outlook for economic growth.
“But American consumers, eventually the excess money they have is running out. That will probably happen sometime mid-year next year, and then we will know more about what is going on with oil and gas prices and that kind of thing, so we will find out,” Dimon said.