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What a slowing job market could mean for interest rates

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Bonds have staged an impressive month-long rally, fueled by investors’ hopes that the Fed will start cutting rates next year. This bet could be tested as early as Friday with the release of new payroll data that Wall Street expects will show the labor market is cooling further.

The numbers to watch: Economists questioned by Reuters estimate that employers added about 150,000 jobs in November, in line with October. (The November figure is expected to include about 33,000 United Automobile Workers union workers returning after their strike.)

Wages will again be central. Data released Wednesday by payroll processing company ADP shows private sector wage growth has fallen lowest level in more than two years. The Fed would welcome similar results on Friday as it looks for data that could impact inflation.

The labor market is shifting. The number of The number of job openings fell significantly this year, according to Labor Department data released this week. “Employers have been looking for workers in recent years, but demand has cooled and headcount levels are higher across most of the economy,” Bill Adams, Comerica’s chief economist, wrote to investors on Wednesday.

The slower-growing but more stable labor market has led to higher worker productivity, he added, “which reduces wage price pressure on corporate cost structures and takes the edge off inflationary pressures across the economy.”

Inflation hawks have seen a lot of promising indicators lately. Both last month’s jobs and consumer price index reports came in below analysts’ expectations, a sign that the Fed’s aggressive increase in borrowing costs — from near zero to a range of 5.25 percent to 5.5 percent over time of 16 months – starts to decline. tame inflation.

Other good news for the economy is that gasoline prices in the US have fallen an 11-month low this weekamid further weakness in oil demand.

Inflation is expected to remain above the Fed’s 2 percent target for another yearmost economists predict, but there is near-unanimous consensus that the central bank will vote to keep interest rates steady at its policy meeting next week.

In addition, futures traders this morning are betting that the Fed will kick in interest rate cuts by March.

Nikki Haley is under fire for her growing support from elite donors. During last night’s Republican presidential debate, Florida Gov. Ron DeSantis and entrepreneur Vivek Ramaswamy criticized her for recent donations and endorsements from business moguls. Analysts said that while the four contestants took aim at each other, Donald Trump largely escaped criticism.

Kevin McCarthy, former Speaker of the House of Representatives, is leaving Congress. “I am leaving the House of Representatives, but not the fight,” the California Republican wrote in a speech Opinion essay from the Wall Street Journal, announcing his departure by the end of the year, before his term expires. McCarthy’s departure is another headache for his successor, Mike Johnson, whose slim majority in the House of Representatives will shrink.

Moody’s is reportedly telling some China-based employees to stay home. The rating agency advised some employees to avoid the office before lowering its outlook according to The Financial Times this week about China’s creditworthiness. The decision comes as Western companies in the country have taken greater precautions following a series of raids on their offices and growing sensitivity among Chinese officials over reporting on the economy.

Meta reopens a debate on communications privacy and security. The tech giant will update its Messenger app with end-to-end encryption – the same level of security as its sister service WhatsApp – which effectively protects messages from third-party access. Law enforcement authorities have argued that such encryption makes it more difficult to track child predators, terrorists and other criminals.

European Union leaders met on Thursday with China’s top leader Xi Jinping, launching talks to pressure Beijing over its 400 billion euro trade imbalance and support for Russia after Moscow’s invasion of Ukraine.

But a broader question looms over the discussions: How does Europe’s relationship with China fit into U.S. efforts to counter Beijing?

Xi urged Europe to maintain ‘momentum’ in their relationship, emphasizing that they were the champions of a multipolar world and must “eliminate all types of interference” – a dig at Washington.

The stakes for Europe are high. Germany, the continent’s largest economy, is closely linked to China, with around a third of companies importing essential materials from the country. And Emmanuel MacronThe French president has said that Europe should not blindly follow the United States and get drawn into a war over Taiwan.

Ursula Von der Leyen wants to ‘de-risk’ bloc’s relationship with China. The president of the European Commission has said this could include imposing trade restrictions on technologies with potential military applications and creating a mechanism to monitor foreign investments by European companies. In September, the EU also said it would launch an investigation into Chinese subsidies to its electric vehicle makers, amid fears European manufacturers would be undermined.

President Biden has pushed European allies to help with America’s China strategy, unlike the Trump administration. But some of Biden’s other policies have irked EU members, among others billions in subsidies to accelerate the green transition and domestic semiconductor production. European officials say the U.S. approach discriminates against their own companies.

China sees a gap that can be exploited Betting that Europe’s economic ties will force the country to act as a counterweight to Washington. “Beijing hopes that Europe will not go in the same direction as the US,” Yu Jie, a China expert at the research organization Chatham House, told DealBook.

Next year’s presidential elections also weigh on European thinking. “There are legitimate concerns about the direction of American politics and how long Biden will be in office,” Noah Barkin, a senior adviser in the China practice at research firm Rhodium Group, told DealBook. “Could we see a return of a more confrontational US approach towards Europe?”

OpenAI’s release of ChatGPT last year put Google in the background, beating the tech giant to market with an artificial intelligence product that took the public by storm. The search titan was forced to change course and quickly launch new services, even if they were flawed.

After releasing a series of AI-infused offerings this year, Google has announced perhaps its biggest yet: a new version of Bard, its ChatGPT rival. The question is whether that is enough to remain competitive with OpenAI and its partner Microsoft. (Investors seemed unimpressed: Shares of Alphabet, Google’s parent company, fell on Wednesday.)

The new Bard is powered by Gemini, Google’s most advanced AI model. The company said Gemini could generate more accurate responses and come closer to mimicking human reasoning in some situations. The technology was able to beat GPT-4, OpenAI’s latest offering, in several benchmarks, including the task of summarizing news articles, according to Google.

And a version of Gemini, called Nano, is optimized for runs on mobile devices. That means chatbot services can run offline, promising greater speed and versatility – and enabling more secure processing of personal information because it doesn’t have to flow over the internet.

Executives didn’t hesitate to praise the new model: “This is the beginning of the Gemini era,” Google CEO Sundar Pichai told The Times.

Except … The most powerful Gemini technology will not be made available immediately. The top version, Ultra, will debut next year. The updated edition of Bard released on Wednesday is roughly comparable to the version of ChatGPT that has been available for free since last year; A more powerful version of ChatGPT has been available since the beginning of this year.

And, like all chatbots, the updated Bard still “hallucinates”, or makes things up.

— Jenny Lefcourt, an investor at Freestyle Capital, on the wave of startups being forced to close as investors close their wallets. About 3,200 privately backed U.S. companies have filed for bankruptcy this year, according to data collected for The Times by the analytics firm PitchBook; the companies had raised $27.2 billion in venture capital.

An inside joke about the apocalyptic potential of artificial intelligence is becoming mainstream: meet p(doom), a way to describe where one stands on the utopia-to-dystopia spectrum of AI outcomes.

Dario Amodeithe CEO of the AI ​​company Anthropic, estimates his p(doom) between 10 and 25 percent – ​​higher means you’re more likely to believe the technology can wipe out humanity – while Lina Khan, the chairman of the FTC, says hers is about 15 percent. As part of a special section on the DealBook Summit, The Times’ technology columnist Kevin Roose explains the sickening statistic and its place in AI culture:

It’s become a common icebreaker among techies in San Francisco — and an inescapable part of AI culture. I’ve been to two tech events this year where a stranger asked for my p(doom) as casually as if they were asking for directions to the bathroom. “It comes up in almost every dinner conversation,” Aaron Levie, the CEO of cloud data platform Box, told me.

Offers

  • SpaceX is said to have begun discussions about selling employee stock at a price Valuation of $175 billion, an increase from the $150 billion level reached during the summer. (Bloomberg)

  • McKinsey reportedly mentioned about 250 new partners on Wednesday; That is a sharp decrease compared to last year, because customers pay less for expensive consultancy work. (WSJ)

  • Sportsology and Ares Management are reportedly in talks to buy a company 10 percent stake in the Texas Rangers, the MLB team that won the World Series last month. (Bloomberg)

Policy

  • Jamie Dimon of JPMorgan Chase, a longtime critic of the cryptocurrency industry, told senators that he “shut it offif he could. (Bloomberg)

  • New Mexico sued Meta, blaming its Facebook and Instagram platforms dispatching sexual predators to underage users. (WSJ)

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