Unemployment Data Signals The U.S. May Be Entering Recession, New Military Aid Announced: $14.3B to Israel and $425M to Ukraine

Key events and numbers for the week ending November 3, 2023

• The Federal Reserve kept the federal funds rate unchanged at 5.25-5.50, leaving the door open for future rate hikes. Jerome Powell repeated that the Fed is committed to the 2% inflation rate.

  Getting inflation to drop from the official reading of 4% to 2% will be more difficult, if not completely impossible, than going from 9% to 4%. Specifically, high energy prices are the main obstacle.

• October unemployment numbers exceed expectations, while job growth numbers are slower than forecasted.

  Non-farm payrolls recorded a 150,000 increase vs. 179,000 expected vs. 297,000 new jobs added in September. Unemployment ticked higher to 3.9% compared with the 3.8% expected and 3.8% prior.

  The rise in U.S. unemployment and slower job growth combined typically indicate that a risk of a recession is very high. Historically, recessions start after the Federal Reserve finishes its tightening cycle, not during the process.

  Given the data, the Federal Reserve is expected to hold interest rates unchanged during its next meeting scheduled for December 13th.

• U.S. job cuts rise 9% in October compared to the same time last year. As of October 31, U.S. companies planned 641,350 cuts, a 164% increase from the cuts announced in the first 10 months of 2022.

• Credit card delinquencies are rising at the fastest pace since 1991. Compared to the same period last year, credit card delinquency rates increased almost 60%.

• Mortgage rates dropped for the first time in seven weeks, declining below 8% to the lowest level since September 2023. Rates were down by double-digit basis points for almost every other loan type.

  

• On Friday, the U.S. approved a new aid package to Ukraine in the amount of $425 million dollars. The U.S. will spend $300 million to purchase weapons systems from the defense industry. The remaining balance, $125 million, will be pulled from defense stock (ammunitions).

• On Thursday, the U.S. House of Representatives passed $14.3 billion aid bill for Israel, with the majority of Republicans voting in favor and Democrats objecting. According to Guardian, the House bill would provide billions for Israel’s military, including $4 billion for Israel’s Iron Dome and David’s Sling defense systems, as well as some transfers of equipment from US stocks.

• After $10 billion in customer funds were missing and fraud worse than Enron was uncovered, jury found the founder of FTX, Sam Bankman-Fried, guilty of all seven criminal counts. He’s facing 115 years in prison.

• Home broker commission structure is being scrutinized by the U.S. Justice Department. The NAR and several brokerages are being accused of colluding to keep commissions high. On Oct. 31, a Missouri jury sided with the plaintiffs in a verdict that could result in multibillion-dollar damages. If more litigation follows that path, it could change the way buyers and sellers compensate their agents.

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