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Fed close to pulling off the elusive economic soft landing in 2024 after great September jobs report

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4 months ago

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A hiring sign is posted on the exterior of Urban Outfitters at the Tysons Corner Center mall on August 22, 2024 in Tysons, Virginia. 

Anna Rose Layden | Getty Images

September’s outsized payrolls boost takes the U.S. economy out of the shadows of recession and gives the Federal Reserve a fairly open glide path to a soft landing.

If that sounds like a Goldilocks scenario, it’s probably not far from it, even with the lingering inflation concerns that are straining consumers’ wallets.

A gravity-defying jobs market, at least a slowing pace of price increases and declining interest rates puts the macro picture in a pretty good place right now — a critical time from a policy and political standpoint.

“We’ve been expecting a soft landing. This just gives us more confidence that it seems to remain in place,” Beth Ann Bovino, chief economist at U.S. Bank, said after Friday’s nonfarm payrolls report. “It also increases the possibility of a no-landing as well, meaning even stronger economic data for 2025 than we currently expect.”

The jobs count certainly was better than virtually anyone figured, with companies and the government combining to boost payrolls by 254,000, blowing away the Dow Jones consensus for 150,000. It was a big step up even from August’s upwardly revised numbers and reversed a trend that started in April of decelerating job numbers and rising concern for a broader slowdown — or worse.

Economy's still very solid if you look at a broad range of indicators, says Goldman's Jan Hatzius

Beyond that, it virtually eliminated any chance that the Federal Reserve would be repeating its half percentage point interest rate cut from September anytime soon.

In fact, futures markets reversed positioning after the report, pricing in a near-certain probability of just a quarter-point move at the November Fed meeting, followed by another quarter point in December, according to the CME Group’s FedWatch gauge. Prior, markets had been looking for a half-point in December followed by the equivalent of quarter-point cuts at each of the eight Federal Open Market Committee meetings in 2025.

Not a perfect picture

No more, though, as the Fed, barring any more disappointments from the labor market, can stake a moderate pace through its easing cycle.

“If we continue to see a stronger than expected economy that may give the Fed reasons to slow the pace of rate cuts through 2025 with that exit rate being a little bit higher than they currently expect, all with the economy still maintaining its strength,” Bovino said. “That would be good news for both the Fed and the economy.”

To be sure, there remain some blemishes in the jobs picture.

More than 60% of the growth for September came from the usual suspects — food and drinking establishments, health care and government — that have all been the beneficiaries of fiscal largesse that has pushed the 2024 budget deficit to the brink of $2 trillion.

There also were a few technical factors with the report, such as a low response rate from survey participants, that could cast some clouds over Friday’s sunny report and lead to downward revisions in subsequent months.

But broadly speaking, the news was very good and raised questions over just how aggressive the Fed will need to be.

Questions for the Fed

Bank of America economists, for instance, asked “Did the Fed panic?” in a client note referencing the half percentage point, or 50 basis point, cut in September, while others wondered about the wild vacillations and miscalculations among Wall Street experts. David Royal, chief financial and investment officer at financial services firm Thrivent, speculated that “it is doubtful” the Fed would have cut by so much “if it had known this report would be so strong.”

“The question becomes, how does everybody keep getting it wrong?” said Kathy Jones, chief fixed income strategist at Charles Schwab. “How is it we can’t get this number right with all the information we get?”

Jones said the Fed will have a dilemma on its hand as it figures out the proper policy response. The FOMC next meets Nov. 6-7, right after the U.S. presidential election and following a five-week span during which it will get plenty more to digest.

Some commentary after the meeting suggested the Fed may have to raise its estimate of the “neutral” rate of interest that neither boosts nor restricts growth, an indication that benchmark interest rates will settle at a higher place than they have in the recent past.

“What does the Fed do with this? Certainly, 50 basis points is off the table for the next meeting. I don’t think there’s any case to be made there,” Jones said. “Do they pause? Do they do another 25 [basis points] because they’re still far from neutral? Do they just weigh this against other data that might not be as strong? I think they have a lot of figuring out to do.”

In the meantime, though, officials are likely to be content knowing that the economy is stable, the labor market isn’t in nearly as much trouble as had been suspected, and they have time to weigh their next move.

“We’ve witnessed a pretty remarkable economy over the past few years, despite some naysayers and lackluster consumer sentiment,” said Elizabeth Renter, senior economist at NerdWallet. “In an election year, passions run high and every economic report or event can garner intense reaction. But the economic aggregates tell us the U.S. economy has been and is strong.”

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Accounting

Business Transaction Recording For Financial Success

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56 minutes ago

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January 18, 2025

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Business Transaction Recording For Financial Success

In the world of financial management, accurate transaction recording is much more than a routine task—it is the foundation of fiscal integrity, operational transparency, and informed decision-making. By maintaining meticulous records, businesses ensure their financial ecosystem remains robust and reliable. This article explores the essential practices for precise transaction recording and its critical role in driving business success.

The Importance of Detailed Transaction Recording
At the heart of accurate financial management is detailed transaction recording. Each transaction must include not only the monetary amount but also its nature, the parties involved, and the exact date and time. This level of detail creates a comprehensive audit trail that supports financial analysis, regulatory compliance, and future decision-making. Proper documentation also ensures that stakeholders have a clear and trustworthy view of an organization’s financial health.

Establishing a Robust Chart of Accounts
A well-organized chart of accounts is fundamental to accurate transaction recording. This structured framework categorizes financial activities into meaningful groups, enabling businesses to track income, expenses, assets, and liabilities consistently. Regularly reviewing and updating the chart of accounts ensures it stays relevant as the business evolves, allowing for meaningful comparisons and trend analysis over time.

Leveraging Modern Accounting Software
Advanced accounting software has revolutionized how businesses handle transaction recording. These tools automate repetitive tasks like data entry, synchronize transactions in real-time with bank feeds, and perform validation checks to minimize errors. Features such as cloud integration and customizable reports make these platforms invaluable for maintaining accurate, accessible, and up-to-date financial records.

The Power of Double-Entry Bookkeeping
Double-entry bookkeeping remains a cornerstone of precise transaction management. By ensuring every transaction affects at least two accounts, this system inherently checks for errors and maintains balance within the financial records. For example, recording both a debit and a credit ensures that discrepancies are caught early, providing a reliable framework for accurate reporting.

The Role of Timely Documentation
Prompt transaction recording is another critical factor in financial accuracy. Delays in documentation can lead to missing or incorrect entries, which may skew financial reports and complicate decision-making. A culture that prioritizes timely and accurate record-keeping ensures that a company always has real-time insights into its financial position, helping it adapt to changing conditions quickly.

Regular Reconciliation for Financial Integrity
Periodic reconciliations act as a vital checkpoint in transaction recording. Whether conducted daily, weekly, or monthly, these reviews compare recorded transactions with external records, such as bank statements, to identify discrepancies. Early detection of errors ensures that records remain accurate and that the company’s financial statements are trustworthy.

Conclusion
Mastering the art of accurate transaction recording is far more than a compliance requirement—it is a strategic necessity. By implementing detailed recording practices, leveraging advanced technology, and adhering to time-tested principles like double-entry bookkeeping, businesses can ensure financial transparency and operational efficiency. For finance professionals and business leaders, precise transaction recording is the bedrock of informed decision-making, stakeholder confidence, and long-term success.

With these strategies, businesses can build a reliable financial foundation that supports growth, resilience, and the ability to navigate an ever-changing economic landscape.

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Economics

A protest against America’s TikTok ban is mired in contradiction

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7 hours ago

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January 17, 2025

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AS A SHUTDOWN looms, TikTok in America has the air of the last day of school. The Brits are saying goodbye to the Americans. Australians are waiting in the wings to replace banished American influencers. And American users are bidding farewell to their fictional Chinese spies—a joke referencing the American government’s accusation that China is using the app (which is owned by ByteDance, a Chinese tech giant) to surveil American citizens.

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Economics

Home insurance costs soar as climate events surge, Treasury Dept. says

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1 day ago

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January 16, 2025

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Firefighters battle flames during the Eaton Fire in Pasadena, California, U.S., Jan. 7, 2025.

Mario Anzuoni | Reuters

Climate-related natural disasters are driving up insurance costs for homeowners in the most-affected regions, according to a Treasury Department report released Thursday.

In a voluminous study covering 2018-22 and including some data beyond that, the department found that there were 84 disasters costing $1 billion or more, excluding floods, and that they caused a combined $609 billion in damages. Floods are not covered under homeowner policies.

During the period, costs for policies across all categories rose 8.7% faster than the rate of inflation. However, the burden went largely to those living in areas most hit by climate-related events.

For consumers living in the 20% of zip codes with the highest expected annual losses, premiums averaged $2,321, or 82% more than those living in the 20% of lowest-risk zip codes.

“Homeowners insurance is becoming more costly and less accessible for consumers as the costs of climate-related events pose growing challenges to both homeowners and insurers alike,” said Nellie Liang, undersecretary of the Treasury for domestic finance.

The report comes as rescue workers continue to battle raging wildfires in the Los Angeles area. At least 25 people have been killed and 180,000 homeowners have been displaced.

Treasury Secretary Janet Yellen said the costs from the fires are still unknown, but noted that the report reflected an ongoing serious problem. During the period studied, there was nearly double the annual total of disasters declared for climate-related events as in the period of 1960-2010 combined.

“Moreover, this [wildfire disaster] does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage – from severe storms in the Great Plans to hurricanes in the Southeast,” Yellen said in a statement. “This report identifies alarming trends of rising costs of insurance, all of which threaten the long-term prosperity of American families.”

Both homeowners and insurers in the most-affected areas were paying in other ways as well.

Nonrenewal rates in the highest-risk areas were about 80% higher than those in less-risky areas, while insurers paid average claims of $24,000 in higher-risk areas compared to $19,000 in lowest-risk regions.

In the Southeast, which includes states such as Florida and Louisiana that frequently are slammed by hurricanes, the claim frequency was 20% higher than the national average.

In the Southwest, which includes California, wildfires tore through 3.3 million acres during the time period, with five events causing more than $100 million in damages. The average loss claim was nearly $27,000, or nearly 50% higher than the national average. Nonrenewal rates for insurance were 23.5% higher than the national average.

The Treasury Department released its findings with just three days left in the current administration. Treasury officials said they hope the administration under President-elect Donald Trump uses the report as a springboard for action.

“We certainly are hopeful that our successors stay focused on this issue and continue to produce important research on this issue and think about important and creative ways to address it,” an official said.

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