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September job gains affirm that the Fed has a long way to go in inflation fight

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The Go! Go! Curry restaurant has a sign in the window reading “We Are Hiring” in Cambridge, Massachusetts, July 8, 2022.

Brian Snyder | Reuters

September’s jobs report provided both assurance that the jobs market remains strong and that the Federal Reserve will have to do more to slow it down.

The 263,000 gain in nonfarm payrolls was just below analyst expectations and the slowest monthly gain in nearly a year and a half.

But a surprising drop in the unemployment late and another boost in worker wages sent a clear message to markets that more giant interest rate hikes are on the way.

“Low unemployment used to feel so good. Everybody who seems to want a job is getting a job,” said Ron Hetrick, senior economist at labor force data provider Lightcast. “But we’ve been getting into a situation where our low unemployment rate has absolutely been a significant driver of our inflation.”

Indeed, average hourly earnings rose 5% on a year-over-year basis in September, down slightly from the 5.2% pace in August but still indicative of an economy where the cost of living is surging. Hourly earnings rose 0.3% on a monthly basis, the same as in August.

No ‘green light’ for a Fed change

Fed officials have pointed to a historically tight labor market as a byproduct of economic conditions that have pushed inflation readings to near the highest point since the early 1980s. A series of central bank rate increases has been aimed at reducing demand and thus loosening up a labor market where there are still 1.7 open jobs for every available worker.

Friday’s nonfarm payrolls report only reinforced that the conditions behind inflation are persisting.

To financial markets, that meant the near certainty that the Fed will approve a fourth consecutive 0.75 percentage point interest rate hike when it meets again in early November. This will be the last jobs report policymakers will see before the Nov. 1-2 Federal Open Market Committee meeting.

Experts debate whether the Fed will continue with another 75-basis point rate hike

“Anyone looking for a reprieve that might give the Fed the green light to start to telegraph a pivot didn’t get it from this report,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Maybe the light got a little greener that they can step back from” two more 0.75 percentage point increases and only one more, Sonders said.

In a speech Thursday, Fed Governor Christopher Waller sent up a preemptive flare that Friday’s report would do little to dissuade his view on inflation.

“In my view, we haven’t yet made meaningful progress on inflation and until that progress is both meaningful and persistent, I support continued rate increases, along with ongoing reductions in the Fed’s balance sheet, to help restrain aggregate demand,” Waller said.

Markets do, however, expect that November probably will be the last three-quarter point rate hike.

Futures pricing Friday pointed to an 82% chance of a 0.75-point move in November, then a 0.5-point increase in December followed by another 0.25-point move in February that would take the fed funds rate to a range of 4.5%4.75%, according to CME Group data.

What concerns investors more than anything now is whether the Fed can do all that without dragging the economy into a deep, prolonged recession.

Pessimism on the Street

September’s payroll gains brought some hope that the labor market could be strong enough to withstand monetary tightening matched only when former Fed Chairman Paul Volcker slew inflation in the early 1980s with a fund rate that topped out just above 19% in early 1981.

“It could add to the story of that soft landing that for a while seemed fairly elusive,” said Jeffrey Roach, chief economist at LPL Financial. “That soft landing could still be in the cards if the Fed doesn’t break anything.”

Investors, though, were concerned enough over the prospects of a “break” that they sent the Dow Jones Industrial Average down more than 500 points by noon Friday.

Commentary around Wall Street centered on the uncertainty of the road ahead:

  • From KPMG senior economist Ken Kim: “Typically, in most other economic cycles, we’d be very happy with such a solid report, especially coming from the labor market side. But this just speaks volumes about the upside-down world that we’re in, because the strength of the unemployment report keeps the pressure on the Fed to continue with their rate increases going forward.”
  • Rick Rieder, BlackRock’s chief investment officer of global fixed income, joked about the Fed banning resume software in an effort to cool job hunters: “The Fed should throw another 75-bps rate hike into this mix at its next meeting … consequently pressing financial conditions tighter along the way … We wonder whether it will actually take banning resume software as a last-ditch effort to hit the target, but while that won’t happen, we wonder whether, and when, significant unemployment increases will happen as well.”
  • David Donabedian, CIO at CIBC Private Wealth: “We expect the pressure on the Fed to remain high, with continued monetary tightening well into 2023. The Fed is not done tightening the screws on the economy, creating persistent headwinds for the equity market.”
  • Ron Temple, head of U.S. equity at Lazard Asset Management: “While job growth is slowing, the US economy remains far too hot for the Fed to achieve its inflation target. The path to a soft landing keeps getting more challenging. If there are any doves left on the FOMC, today’s report might have further thinned their ranks.”

The employment data left the third-quarter economic picture looking stronger.

The Atlanta Fed’s GDPNow tracker put growth for the quarter at 2.9%, a reprieve after the economy saw consecutive negative readings in the first two quarters of the year, meeting the technical definition of recession.

However, the Atlanta Fed’s wage tracker shows worker pay growing at a 6.9% annual pace through August, even faster than the Bureau of Labor Statistics numbers. The Fed tracker uses Census rather than BLS data to inform its calculations and is generally more closely followed by central bank policymakers.

It all makes the inflation fight look ongoing, even with a slowdown in payroll growth.

“There is an interpretation of today’s data as supporting a soft landing – job openings are falling and the unemployment rate is staying low,” wrote Citigroup economist Andrew Hollenhorst, “but we continue to see the most likely outcome as persistently strong wage and price inflation that the Fed will drive the economy into at least a mild recession to bring down inflation.”

Job openings data suggest the economy and labor market are still growing, says Goldman's Hatzius



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George Clooney, Gladys Knight among Kennedy Center honorees

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Secretary of State Antony Blinken, second from left, and his wife, Evan Ryan, left, join 2022 Kennedy Center Honorees, front row from left, Amy Grant, Gladys Knight, George Clooney, Tania León, and Kennedy Center President Deborah Rutter, back row from left, Kennedy Center Chairman David Rubenstein, along with fellow 2022 Honorees Adam Clayton, Larry Mullen Jr., The Edge, and Bono for a group photo at the State Department following the Kennedy Center Honors gala dinner, Saturday, Dec. 3, 2022, in Washington.

Kevin Wolf | AP Photo

Performers such as Gladys Knight or the Irish band U2 usually would be headlining a concert for thousands but at Sunday’s Kennedy Center Honors the tables will be turned as they and other artists will be the ones feted for their lifetime of artistic contributions.

Actor, director, producer and human rights activist George Clooney, groundbreaking composer and conductor Tania León, and contemporary Christian singer Amy Grant will join Knight and the entire crew of U2 in being honored by the John F. Kennedy Center for the Performing Arts.

The organization honors a select group of people every year for their artistic influences on American culture. President Joe Biden, Vice President Kamala Harris and their respective spouses are slated to attend.

The 61-year-old Clooney — the actor among this year’s musically leaning group of honorees — has television credits going back into the late 1970s but became a household name with the role of Doug Ross on the television show “ER.” conductor Tania León, and

From there he starred in movies such as “Three Kings,” “Ocean’s Eleven” (and “Twelve” and “Thirteen”), “O Brother, Where Art Thou?” and his most recent film, “Ticket to Paradise.” He also has extensive directing and producing credits including “Good Night, and Good Luck.” He and his wife, humanitarian rights lawyer Amal Clooney, created the Clooney Foundation for Justice, and he’s produced telethons to raise money for various causes.

“To be mentioned in the same breath with the rest of these incredible artists is an honor. This is a genuinely exciting surprise for the whole Clooney family,” said Clooney in a statement on the Center’s website.

Knight, 78, said in a statement that she was “humbled beyond words” at receiving the Kennedy honor. The Georgia-born Knight began singing gospel music at the age of 4 and went on to a career that has spanned decades.

Knight and family members started a band that would later be known as Gladys Knight & The Pips and produced their first album in 1960 when Knight was just 16. Since then she’s recorded dozens of albums with such classic hits as “I Heard It Through the Grapevine” and “Midnight Train to Georgia.” Along the way she’s acted in television shows and movies. When Knight and the band were inducted into the Rock & Roll Hall of Fame, Mariah Carey described Knight as “a textbook you learn from.”

Sometimes the Kennedy Center honors not just individuals but groups; “Sesame Street” once got the nod.

This year it’s the band U2. The group’s strong connection to America goes back decades. They performed in Washington during their first trip to America in 1980. In a statement the band — made up of Bono, The Edge, Adam Clayton and Larry Mullen Jr. — said they originally came to America with big dreams “fueled in part by the commonly held belief at home that America smiles on Ireland.”

“And it turned out to be true, yet again,” read the statement. “It has been a four-decade love affair with the country and its people, its artists, and culture.”

U2 has sold 170 million albums and been honored with 22 Grammys. The band’s epic singles include “I Still Haven’t Found What I’m Looking For,” “Pride (In the Name of Love)” and “Sunday Bloody Sunday.” Lead singer Bono has also become known for his philanthropic work to eradicate poverty and to raise awareness about AIDS.

Christian music performed Amy Grant said in an interview with The Associated Press that she’d never even been to the Kennedy Center Honors even though her husband, country musician Vince Gill, has performed during previous ceremonies. Grammy winner Grant is well known for crossover pop hits like “Baby, Baby,” “Every Heartbeat” and “That’s What Love is For.” She’s sold more than 30 million albums, including her 1991 record “Heart in Motion,” which introduced her to a larger pop audience.

Composer and conductor León said during an interview when the honorees were announced that she wasn’t expecting “anything spectacular” when the Kennedy Center initially reached out to her. After all, she’s worked with the Kennedy Center numerous times over the years going back to 1980, when she was commissioned to compose music for a play.

But the 79-year-old Pulitzer Prize winner said she was stunned to learn that this time the ceremony was going to be for her.

León left Cuba as a refugee in 1967 and eventually settled in New York City. She’s a founding member of the Dance Theatre of Harlem and instituted the Brooklyn Philharmonic Community Concert Series.



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Michigan couple teaches people how to start lucrative side hustles

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In 2020, Jamie and Sarah McCauley filmed themselves ripping, repainting and restoring thrifted furniture. They resold the items, made more than $1,000 in profit and posted the results on YouTube.

Within a week, the video received 20,000 views. The McCauleys, who live off a variety of concurrently running side hustles, sensed opportunity. They started posting more videos about their other streams of income, which include rental properties, house flipping projects and reselling return pallets from Amazon and Target.

Teaching people how to build those types of hustles has proved lucrative: In the last year, the McCauleys made $102,000 from their YouTube and other social media channels, according to documents reviewed by CNBC Make It.

That averages out to $8,500 per month. During their best month of the year, they brought in $9,000.

The McCauleys say some of their furniture flips are as simple as staging and taking fresh photos of the product.

Jamie and Sarah McCauley

“We started to realize: This is a great way for people to make extra money if they have bills, or they just aren’t able to pay their rent, or they want to go on a nice vacation with their family,” Sarah says. “Anyone can do it.”

But of all their income streams, Jamie says their YouTube and social media presence is the most stressful to manage.

Here’s how they built it, and what goes into maintaining it.

How to build a social media career

Jamie and Sarah knew the ins and outs of social media from years of running a successful wedding photography business, which at its height made $150,000 per year, Jamie says.

But after having two children, the couple realized they didn’t want to spend weekends away from their family. So they started buying, renovating and renting out properties around west Michigan, hoping for a more passive income stream that would encourage schedule flexibility.

It worked, and the extra time allowed them to embrace a variety of side hustles. They got the idea to post their furniture and property-flipping adventures on YouTube in 2019, and immediately found it challenging.

Initially, Jamie worked 30 hours per week on the YouTube project alone, with Sarah working an additional 10 — on top of their efforts to sell two flipped houses and manage their photography business.

It took them a full year to hit 1,000 subscribers and 4,000 hours of watch time, making them eligible for Google AdSense, a feature that allows creators to monetize their YouTube videos with advertisements.

“We weren’t really sure where home design or flipping or photography or YouTube would lead us,” Sarah says. “But we knew if we put ourselves out there, it would open more opportunities.”

Flipping pros and cons

There are a couple of clear-cut benefits to flipping and reselling furniture and home décor online, especially during times of economic uncertainty, Sarah says.

For instance, more people are willing to hunt for deals on eBay and Facebook Marketplace when times are tough, instead of frequenting their usual retail stores.

“When a recession hits, people don’t want to pay full price for things,” she says. “Thrift stores thrive during recessions, and I think resellers do, too, because people are trying to save money in any way they can.”

Unlike real estate, the gambles of buying and reselling furniture are minimal in both price and risk, the McCauleys say. There’s less of a financial investment, and Sarah says she’s broken even on every flip.

The McCauleys say they staged and resold this $50 Facebook Marketplace dresser for $300.

Jamie and Sarah McCauley

The couple says one of their best flips was a mid-century dresser they bought for $50 on Facebook Marketplace. All they had to do was stage and take a nice photo of the dresser before reselling it for $300.

Sometimes, after buying furniture, the couple realizes the items have more flaws than they expected. Usually, this means investing more time and money into fixing up the piece, which can affect the item’s eventual sale value, they say.

In those cases, “we just get our money back instead of gaining a huge profit, but we’ve never really lost money from it,” Sarah says.

Costs and effect

Going a full year without making any money from YouTube was difficult, the McCauleys say. And simply qualifying for AdSense didn’t guarantee the big bucks.

“The slower growth and the inconsistency of it, it’s been more of a mental struggle to keep pushing and believing the process,” Jamie says. “Now, we’re in a better spot, but throughout that two-year period, it was a question of, ‘Is this what we should be doing? Is this going to work out?'”

In 2020, the couple felt a shift, they say. Their videos started going viral more regularly, and brands like Skillshare, Beyond Paint and HelloFresh reached out to them with partnership opportunities.

The sudden attention was overwhelming, and they didn’t immediately know which brands to trust. These days, the McCauleys work with an agency that vets the brands and sets up contracts for them, claiming an 18% from a number of those partnerships, they say.

Sarah says she often notices undervalued items at Goodwill, which she resells for a profit on sites like eBay.

Jamie and Sarah McCauley

Inside a renovated $155,000 old mansion in North Carolina



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