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Posts from the ‘General, Economic and Political’ Category

6
Mar

Can Productivity Keep Driving the U.S. Economy?

Productivity of U.S. workers increased by 2.7% in 2023 — well above the average annual rate of 2.1% since the end of World War II, and a dramatic change from 2022, when productivity dropped by 2.0%. It’s also a substantial improvement over the 0.9% growth rate in 2021.1

According to the nonpartisan Congressional Research Service,  “Productivity growth is a primary driver of long-term economic growth and improvements in living standards.”2 On  a more immediate level, the productivity surge in 2023 may help explain why the U.S. economy was able to grow at a strong pace while inflation dropped.

Doing more with less

Broadly, productivity is the ratio of output to inputs. A productivity increase means that output increases faster than input, essentially producing more with less.

The most cited productivity measure for the U.S. economy is labor productivity for the nonfarm business sector (the data cited in the first paragraph of this report). In simple terms, this is the value of goods and services produced per hour of labor. The nonfarm business sector comprises most U.S. business activity excluding farms, general government, and nonprofits.

Boosting GDP while fighting inflation

The 2.7% increase in 2023 means that, on average, 2.7% more value was created for each hour of labor. This helps boost gross domestic product (GDP), while also helping to control inflation by holding back the wage-price spiral, which can push inflation out of control.

In a tight employment market, as we have had for some time, a shortage of workers can force businesses to offer higher wages, which they pass on to consumers as higher prices. Because consumers are then earning more at their jobs, they demand more goods and services and are willing to pay higher prices, which pushes businesses to hire more workers at higher wages, continuing the cycle. Increased productivity allows business to keep prices lower even as they pay workers more. This seems to have occurred in 2023, with average hourly wages rising by 4.3%, while inflation dropped to 3.4% — the first time since the pandemic that wages increased faster than inflation.3

Compensating for demographics

Increasing productivity is especially important for the U.S. economy because of lower birth rates, the aging of the population, and more young people staying in school. The labor force participation rate, which measures the percentage of people age 16 and older who are working or looking for work, peaked in early 2000 and has trended downward since then.4  Higher productivity enables a smaller workforce to drive economic growth on a level that would require a larger workforce without productivity gains.

Why is productivity increasing and can it be sustained?

Increases in labor productivity are typically driven by  improved tools and technology, more efficient processes and organizations, and increased worker experience, education, and training. The proliferation of computers in the workplace spurred a productivity surge in the 1990s, and some analysts point to artificial intelligence (AI) as contributing to the 2023 increase. It’s possible that AI has already improved some businesses, but any large-scale impact may take years, as businesses integrate AI through worker training and new processes. As this unfolds, AI could help drive a long-term productivity surge.

A more immediate explanation for the current increase may be adjustment and experience with the hybrid work model. A recent survey found that 43% of remote workers felt working from home makes them more productive, while only 14% believed it makes them less productive. (Another 43% said it makes no difference.)5 The ideal situation would allow employees to work in the most productive environment. Three years after the pandemic, businesses may be improving that balance, and it’s possible that further developments in hybrid work could continue to drive productivity gains for some time.

New businesses can spur productivity through innovation, filling specialized niches, and producing specific goods or services more efficiently. New business applications surged during and after the pandemic, with more than 20 million from 2020 to 2023. Only about 10% of applications turn into businesses, but some new enterprises may already be making a difference, and the surge of entrepreneurship bodes well for future productivity.6

A less positive factor may be that some companies laid off employees and made other changes in 2023 in anticipation  of a recession that never materialized. Layoffs typically target the least productive employees, and remaining employees may increase their productivity to maintain production levels. While this “lean” model is not always sustainable, it can boost productivity in the short term, and technology and more efficient processes may enable some businesses to stay lean.

Volatile data

Measuring productivity is difficult, especially in service industries, which now comprise the largest sector of U.S. economic activity. For this reason, productivity data can be volatile and often changes with revision. (The 2.7% Q4 data  is preliminary.) Even so, the surge in 2023 seems solid, and enhancements such as artificial intelligence, hybrid work, and new business innovation could usher in a sustained period of productivity growth. The Bureau of Labor Statistics releases productivity data quarterly, with Q1 2024 data coming in May. You might keep an eye out for a continuing trend.

1, 3–4) U.S. Bureau of Labor Statistics, 2024

2) Congressional Research Service, January 3, 2023

5) Bloomberg, January 30, 2024

6) U.S. Chamber of Commerce, February 2, 2024

6
Dec

Are you optimistic about the 2024 Economic Outlook?

Despite high interest rates and unsettling geopolitical conflict, the U.S. economy outperformed the expectations of most economists in 2023.1 Inflation-adjusted gross domestic product (Real GDP) accelerated to an annualized rate of 5.2% in the third quarter, after growing 2.1% in Q2 and 2.2% in Q1. Inflation, as measured by the 12-month change in the price index for personal consumption expenditures (PCE), was 3.0% in October 2023, after beginning the year at 5.5%.2 The labor market stayed strong in 2023, though it has cooled off a bit. The unemployment rate edged up from 3.4% in January to 3.9% in October, but is still quite low by historical standards.3

That is all good news considering that a majority of economists polled in January 2023 believed the United States would enter a recession by the end of the year.4 Whether you are an investor, a business owner, or an employee thinking about your career prospects, you may be more interested in what lies ahead for the economy in 2024. Economic projections are essentially educated guesses. Economists in the public and private sectors are tasked with trying to predict the future based on a wide range of indicators, potential risks, and their overall impressions of market conditions. And so far, forecasts for 2024 seem to suggest the economy is kicking off the new year in a more stable position.5

Fed policies and official forecasts

Since March 2022, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve has raised the benchmark federal funds rate aggressively in an effort to control inflation, which had climbed to its highest levels in 40 years.6–7 Raising interest rates is meant to slow economic activity by making it more expensive for consumers and businesses to borrow money, which discourages spending.

In November 2023, the Fed paused its rate hikes for the second meeting in a row, leaving the federal funds rate in a range of 5.25% to 5.5%, a 22-year high.8

Economic projections released at the FOMC’s September meeting indicated that slower GDP growth is expected, with a median projection of 1.5% in 2024. This was an improvement from 1.1% in the previous forecast. The committee expected PCE inflation to continue declining and end the year at 2.5%, which would still be higher than the Fed’s 2.0% target, and that the unemployment rate would tick up to 4.1% (based on median projections).9

Polling the pros

In October 2023, The Wall Street Journal’s Economic Forecasting Survey found that a recession is no longer the consensus view of 65 top business and academic economists polled by the publication on a quarterly basis. On average, the group expects real GDP growth will slow to 1.0%, the unemployment rate will rise slightly to around 4.0%, and inflation (measured by the consumer price index) will fall to 2.4% by the end of 2024.10

Nearly 60% of the economists believed the Fed was finished hiking interest rates, and roughly half thought that rate cuts would begin in the second quarter of 2024, in response to signs of weakening growth.11

At the same time, some economists were still not convinced that the U.S. economy is out of the woods. As recently as November 2023, the Conference Board predicted that a very short and shallow recession will begin early in 2024.12

Global growth trends

According to the Organisation for Economic Co-operation and Development’s September forecast, the global economy is expected to grow 3.0% in 2023 before slowing to 2.7% in 2024. In China, the growth rate is forecast to weaken from 5.1% in 2023 to 4.6%, due to its struggling property market and reduced domestic demand. Growth in the Euro area is expected to improve from 0.6% in 2023 to 1.1% in 2024. Inflation is expected to decline gradually, but to remain above central bank objectives in most economies.13

The problem with projections

Forecasts such as these may be helpful in making some kinds of financial decisions, but it’s also important to consider their limitations and remember that it’s not unusual for economists to change their minds. Recent years have shown how difficult it can be for forecasters to account for the impact of unforeseen economic disruption. Wild cards that could test economists in 2024 include losses from severe weather, fluctuations in oil prices, political conflict in the United States, and expansion of the war in Israel, which could harm an already fragile global economy.

In fact, Fed Chair Jerome Powell called on Fed forecasters to remain flexible in his November 2023 press conference. “Of course, even with state-of-the-art models and even in relatively calm times, the economy frequently surprises us.” He continued, “Our economy is flexible and dynamic, and subject at times to unpredictable shocks, such as a global financial crisis or a pandemic. At those times, forecasters have to think outside the models.”14

The financial markets could continue to react — and occasionally overreact — to economic news and policies announced by the Federal Reserve. But that doesn’t mean you should do the same. As always, it’s important to maintain a long-term perspective and invest strategically based on your financial goals, time horizon, and risk tolerance.

Forecasts are based on current conditions, are subject to change, and may not happen. All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost.

1, 4–5, 10–11) The Wall Street Journal Economic Forecasting Survey, 2022–2023

2, 7) U.S. Bureau of Economic Analysis, 2023

3) U.S. Bureau of Labor Statistics, 2023

6, 8–9) Federal Reserve, 2023

12) The Conference Board, 2023

13) Organisation for Economic Co-operation and Development, 2023

14) thehill.com, November 8, 2023

1
Nov

How long can Consumers Keep Carrying the Economy?

Consumer spending accounts for about two-thirds of U.S. gross domestic product (GDP), so it plays an outsized role in driving economic growth or slowing it down.1 For the last 18 months, U.S. consumers have kept the economy strong despite high inflation and rising interest rates. There is much discussion as to whether consumer spending will continue into 2024.

The Federal Reserve recently did not adjust interest rates. Raising interest rates has the same impact as increasing consumer spending. Both the level of consumer spending and increased interest rates help combat inflation. The Fed’s actions regarding interest rates try to balance numerous factors including consumer spending and employment. A reversal of spending and interest rates could lead to a recession

Measuring spending and inflation

The standard measure of consumer spending is personal consumption expenditures (PCE), released each month by the Bureau of Economic Analysis (BEA). Economists look at the monthly change in PCE  for the short-term trend and the year-over-year change for the longer-term trend.

September PCE increased 0.7% over August, a strong monthly growth rate and up from 0.4% in August over July. The September increase was 0.4% measured in “real” inflation-adjusted dollars, which indicates that consumers were spending more than the rate of inflation. The annual change in PCE was 5.9%, well above the 3.4% annual change in the PCE price index, which is the Fed’s preferred measure of inflation. (The Fed’s target for PCE inflation is 2%.)2–3

The pandemic effect

The current consumer spending story began with the pandemic recession, when a broad range of business activity stopped, and consumers received large government stimulus packages with little to spend it on. In April 2020, the personal saving rate — the percentage of personal income  that remains after taxes and spending — spiked to a record 32%, almost double the previous high. It declined as businesses reopened but remained above pre-pandemic levels until late 2021, when stimulus had ended, and high inflation made spending more expensive. The September 2023 saving rate was just 3.4%, well below the 6.5% average before the pandemic.4 While a low saving rate could be cause for concern in the long term, it indicates that consumers are willing to spend their income despite higher prices.

Why are consumers spending instead of saving?

Multiple explanations have been offered for this high-spending/low-saving pattern. Some lower-income consumers may be spending a larger percentage of their income because they must — they are spending more for basic needs due to high inflation. People with more disposable income might still be responding to pent-up demand for goods and services that were not available during the pandemic. And, after the tragedies and disruptions of the pandemic, some consumers may prefer to spend now and worry less about the future. The expensive housing market could be adding to this trend by making a typical saving goal seem unattainable to younger consumers.5

On a macro level, however, consumers may be spending instead of saving because they still have substantial savings. Although it was thought that pandemic-era savings were nearly exhausted, revised government data suggests there may be $1 trillion to $1.8 trillion in so-called “excess savings” still available. About half of this is likely held by households in the top 10% income bracket, but that still leaves a large savings buffer that could continue to drive middle-class spending for some time.6

The recently released Federal Reserve Survey of Consumer Finances revealed a similar story. The average inflation-adjusted median net worth of American families jumped by a record 37% from 2019 to 2022 — more than double the previous highest increase in the Fed survey, which is released every three years. Every demographic group saw substantial increases, but the largest by far was for consumers under age 35, whose net worth increased 143%. Because this survey only went through 2022, it does not capture the effects of continuing inflation in 2023.7

Wages and inflation

While pandemic-era savings may support consumer spending well into 2024, only wages can maintain strong spending for the long term. The question is whether wages will keep up with inflation without rising so quickly that they drive inflation even higher. For the 12-month period ending September 2023, average hourly earnings increased 4.2%. This was above the 3.4% PCE inflation rate over the same period, but down from the 5.1% pace of wage increases a year earlier.8 The fact that wage growth is keeping up with inflation while also slowing down bodes well for the goal of taming inflation with continued consumer spending.

Holiday spending

The winter holiday season, officially defined as November and December, accounts for about 20% of retail spending for the year, and is even more important for some retailers. An annual survey by the National Retail Federation found that consumers plan to spend an average of $875 this year on gifts, decorations, holiday meals, and other seasonal items. This is up from $833 in 2022 and slightly above the five-year average.9  Two broader surveys have found declines in consumer confidence in recent months, but it remains to be seen whether this leads to a decline in spending.10-11 While the winter holidays are not a “make or break” situation for the U.S. economy, this year’s holiday spending may provide clues to consumer behavior in the new year.

1–2, 4) U.S. Bureau of Economic Analysis, 2023

3, 7) Federal Reserve, 2023

5) The Wall Street Journal, October 1, 2023

6) Bloomberg, October 10, 2023

8) U.S. Bureau of Labor Statistics, 2023

9) National Retail Federation, 2023

10) The Conference Board, September 26, 2023

11) University of Michigan, October 27, 2023

4
Oct

Rising Oil Prices Could Be a Threat to the Economy

Oil prices have increased more than 30% since late June, driving up transportation costs for consumers and businesses and putting financial markets on edge. West Texas Intermediate crude, the U.S. benchmark for oil prices, was $93 per barre September 27, the highest level since August 2022. Brent crude (the global oil benchmark) rose above $96.1

Gasoline prices have followed suit. On September 27, the national average price for a gallon of unleaded gas was $3.83, up from $3.75 a year earlier. The price in California, the most expensive state for gasoline, averaged $5.89 per gallon.2

Market dynamics have impacted fuel prices in recent months. This adds concerns about broader inflation and the nation’s economic prospects.

Tight oil supplies

Oil prices are sensitive to shifts in the delicate balance between supply and demand in the global market. Much of the third quarter’s increase has been attributed to a combination of record-high global demand and coordinated supply cuts.3 On September 5, Saudi Arabia and Russia announced the extension of voluntary production cuts (1.3 million barrels per day combined) through the end of 2023. These cuts, which began in June, are on top of cuts that were previously put in place through 2024 by the Organization of the Petroleum Exporting Countries (OPEC), along with Russia and other allied oil producers (dubbed OPEC+). In total, supply cuts are expected to reduce global crude inventories by 3.3 million barrels per day in Q4 2023.4

OPEC is a coalition of 13 member countries, led by Saudi Arabia, which regulate their output to support oil prices. OPEC joined forces with the 10 OPEC+ countries in 2016 so they would have more power to influence prices. The two groups produced about 59% of the world’s supply of crude in 2022.5

Even so, OPEC does not have the iron grip on the oil market that it once wielded. Due to advances in shale drilling methods, U.S. oil production has more than doubled since 2011. The United States has been the top oil-producing nation since 2018 and was responsible for 20% of the world’s total in 2022. Saudi Arabia and Russia followed behind with 12% and 11%, respectively.6

Pain at the pump

Crude accounted for 57% of the nationwide cost of a gallon of gas in 2022, with the remainder reflecting refining costs, marketing and distribution, and taxes. Moreover, market conditions and gas prices vary widely by state and region.7

Gas prices also respond to seasonal demand shifts. For example, they tend to climb in the summer, when more drivers hit the road for vacations, then decline in the fall. In addition to the rising cost of crude, extreme heat in 2023 forced refineries in the Southeast to operate below capacity for safety reasons, pushing up prices even more than would be typical in the summer.8

On the bright side, the national average gas price is still below the record of $5.02 set in June 2022, when global oil costs spiked in the months following Russia’s invasion of Ukraine. And most states switch to a cheaper winter blend by October, which could deliver some price relief.9

Will U.S. drilling fill the gap?

Gasoline and heating oil (both derived from crude) are essential expenses for many households, which may leave them with less money to spend on other goods and services. A broad pullback in consumer spending — which accounts for about two-thirds of U.S. gross domestic product (GDP) — could take a significant toll on growth.10

Extended periods of high oil prices have been blamed for bringing on recessions in the past, and low prices have sometimes provided an economic boost. But this relationship has become more complex as the United States has expanded its presence in the global oil market. The United States has been called a swing producer because production levels often fluctuate in response to market prices. High oil prices tend to benefit producers by pumping up company profits, and they incentivize more hiring and drilling. A surge in drilling could have a positive impact on GDP that offsets some of the negative forces.

But more U.S. production is not guaranteed. With oil prices sitting above $100 per barrel for much of 2022, companies were reluctant to invest in drilling.11 In recent weeks, U.S. producers have reportedly added drilling rigs in the shale oil patch at the fastest rate since November of 2022, but it’s still unknown whether U.S. production will increase enough to lower prices.12

Inflation and the Fed

When fuel costs are high, businesses must decide whether to absorb them — lowering profit margins — or pass them on to consumers, which could reignite inflation across the economy.

Measured by the consumer price index (CPI), inflation increased 0.6% in August and was up 3.7% over the previous year. A 10.6% surge in gasoline prices was responsible for more than half of that monthly increase.13

The Federal Reserve has been raising interest rates aggressively to control inflation by slowing economic activity. Despite the rate hikes, the economy has remained surprisingly strong, so higher fuel costs may help the Fed’s efforts to slow the pace. Even so, the inflationary effects associated with rising oil prices appear to be another risk to the economic outlook that Fed policymakers must consider as they decide the future path of interest rates.

1) The Wall Street Journal, September 27, 2023

2, 9) American Automobile Association, 2023

3, 12) The Wall Street Journal, September 19, 2023

4) Bloomberg, September 12, 2023

5–7) U.S. Energy Information Administration, 2023

8) Associated Press, August 2, 2023

10) U.S. Bureau of Economic Analysis, 2023

11) The Wall Street Journal, February 24, 2022

13) U.S. Bureau of Labor Statistics, 2023

28
Sep

What Happens if There is a Government Shutdown?

There are only a few days till the U.S. government may shutdown. It is possible that a last-minute agreement could avoid a shutdown. Following is an abbreviated summary of the federal funding process, the current situation in Congress, and the potential consequences of a failure to fund government operations.

Twelve appropriations bills

The federal fiscal year begins on October 1, and under normal procedures 12 appropriations bills for various government sectors should be passed by that date to fund activities ranging from defense and national park operations to food safety and salaries for federal employees.

These appropriations are considered discretionary spending, meaning that Congress has flexibility in setting the amounts. Although discretionary spending is an ongoing source of conflict, it accounted for only 27% of federal spending in FY 2023, and almost half of that was for defense, which is typically less of a point of conflict. Mandatory spending (including Social Security and Medicare), which is required by law, accounted for about 63%, and interest on the federal debt accounted for 10%.1

It is obvious that it would be helpful for federal agencies to know their operating budgets in advance of the fiscal year, but all 12 appropriations bills have not been passed before October 1 since FY 1997. In 11 of the last 13 years, lawmakers have not passed a single spending bill in time.2 That is the situation as of September 27 this year. (One bill, to fund military construction and the Department of Veterans Affairs, has been passed by the House but not the Senate.)3

Continuing resolutions and omnibus spending bills

To delay further budget negotiations, Congress typically passes a continuing resolution, which extends federal spending to a specific date, generally at or based on the same level as the previous year. These bills are essentially placeholders that keep the government open until full-year spending legislation is enacted. Since 1998, it has taken an average of almost four months after the beginning of the fiscal year for that year’s final spending bill to become law.4

Even with the extension provided by continuing resolutions, Congress seldom passes the 12 appropriations bills. Instead, they are often combined into massive omnibus spending bills that may include other provisions that do not affect funding. For example, the SECURE 2.0 Act, which fundamentally changed the retirement savings rules, was included in the omnibus spending bill for FY 2023, passed in late December 2023, almost three months into the fiscal year.

Current Congressional situation

The U.S. Constitution gives the House of Representatives sole power to initiate revenue bills, so the House typically passes funding legislation and sends it to the Senate. There are often conflicts between the two bodies, especially when they are controlled by different parties, as they are now. These conflicts are typically settled through negotiations after a continuing resolution extends the budget process.

The Senate acted first this year, releasing bipartisan legislation on September 26 that would maintain current funding through November 17 and provide additional funding for disaster relief and the war in Ukraine. Although this is likely to pass the Senate later in the week, it was unclear how the House would react to the legislation.5

Late on September 26, the House cleared four appropriation bills for debate (Agriculture, Defense, Homeland Security, and State Department). It is unknown whether these bills will pass the House, and if they do, it will be too late to negotiate the provisions with the Senate. A proposed continuing resolution that would extend government funding and include new provisions for border security had not been cleared for debate as of the afternoon of September 27.6

Effects of a shutdown

The effects of a government shutdown depend on its length, and fortunately, most are short. There have been 20 shutdowns since the current budget process began in the mid-1970s, with an average length of eight days. The longest by far was the most recent shutdown, which lasted 35 days in December 2018 and January 2019, and demonstrates some potential consequences of an extended closure.7 However, in 2018-19, five of the 12 spending bills had already passed before the shutdown — including large agencies like Defense, Education, and Health & Human Services — which helped limit the damage. The current impasse, with no appropriations passed, could lead to an even more painful situation.8

Some things will not be affected: The mail will be delivered. Social Security checks will be mailed. Interest on U.S. Treasury bonds will be paid.9 However, some programs will stop immediately, including the Supplemental Nutrition Program for Women, Infants, and Children, which helps to provide food for about 7 million low-income mothers and children.10

Federal workers will not be paid. Workers considered “essential” will be required to work without pay, while others will be furloughed. Lost wages will be reimbursed after funding is approved, but this does not help lower-paid employees who may be living paycheck to paycheck.11 In an extended shutdown, the greatest hardship would fall on lower-paid essential workers, which would include many military families. Furloughed workers would struggle as well, but they might look for other jobs, and in many states would be able to apply for unemployment benefits.12 (Members of Congress, who are paid out of a permanent appropriation that does need renewal, would continue to be paid.)13

Air travel could be affected. In 2019, absenteeism more than tripled among Transportation Security Administration (TSA) workers, resulting in long lines, delays, and gate closures at some airports. According to the TSA,  many workers took time off for financial reasons.14 Air traffic controllers, who are better paid, remained on the job without pay and without normal support staff. However, on January 25, 2019, an increase in absences by controllers temporarily shut down New York’s La Guardia airport and led to substantial delays at airports in Newark, Philadelphia, and Atlanta. This may have been an impetus to reopen the government later that day.15

Unlike federal employees, workers for government contractors are not guaranteed to be paid, and contractors often work side-by-side with federal employees in government agencies. In 2019, it was estimated that 1.2 million contract employees faced lost or delayed revenue of more than $200 million per day.16 A more widespread shutdown would put even more workers at risk.

While essential workers will maintain some federal services, furloughed workers would leave significant gaps. At this time, it’s unknown exactly how each agency will respond to a shutdown. In 2019, some national parks used alternate funding to maintain limited access, which caused problems with trash and vandalism and was deemed illegal by the Government Accounting Office. This year, all parks might be closed during an extended shutdown.17 Many other federal services may be delayed or suspended, ranging from food inspections to small business loans and economic reports.18 Delays in economic statistics could make it more difficult for the Federal Reserve to judge appropriate policy.19

Although a shutdown would cause temporary hardship for workers and the citizens they serve, the long-term effect on the economy would be relatively benign, because lost payments are generally made up after spending is authorized. A shutdown might decrease gross domestic product (GDP) for the fourth quarter of 2023, but if the shutdown ends by the end of the year, GDP for the first quarter of 2024 would theoretically be increased. Even if delayed spending is recovered, however, lost productivity by furloughed workers will not be regained. And an extended shutdown could harm consumer and investor sentiment.20

Surprisingly, previous shutdowns generally have not hurt the broad stock market, other than short-term reactions. But the current market situation is delicate to begin with, and it is impossible to predict future market direction.21

For now, it’s wise to maintain a steady course in your own finances. In the event of a shutdown, be sure to check the status of federal agencies and services that may affect you directly.

All investments are subject to market fluctuation, risk, and loss of principal. When sold, investments may be worth more or less than their original cost. U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could be worth more or less than the original amount paid. Projections are based on current conditions, subject to change, and may not happen.

1) Congressional Budget Office, May 2023

2, 4, 8) Pew Research Center, September 13, 2023

3)  Committee for a Responsible Federal Budget, September 27, 2023

5, 6, 9, 18, 19) The Wall Street Journal, September 26, 2023

7, 11)  CNN, September 21, 2023

10) MarketWatch, September 26, 2023

12) afge.org, September 25, 2023 (American Federation of Government Employees)

13) CBS News, September 25, 2023

14) Associated Press, January 21, 2019

15) The Washington Post, January 25, 2019

16) Bloomberg, January 17, 2019

17) Bloomberg Government, September 12, 2023

20) Congressional Research Service, September 22, 2023

21) USA Today, September 26, 2023

13
Jun

Congress Tells Treasury to Expect SECURE 2.0 Technical Fixes

Congress sent a letter to U.S. Treasury Secretary Janet Yellen and IRS Commissioner Daniel Werfel late in May,   that it will introduce legislation to correct several technical errors in the SECURE 2.0 Act. The letter, signed by Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), chair and ranking member of the Senate Finance Committee, respectively, and Representatives Jason Smith (R-MO) and Richard Neal (D-MA), chair and ranking member of the House Ways and Means Committee, respectively, describes four provisions in SECURE 2.0 with problematic language.

  1. Startup tax credit for small employers adopting new retirement plans.
  2. Change in the required minimum distribution (RMD) age from 73 to 75.
  3. SIMPLE IRA and SEP plan Roth Accounts
  4. Requirement that catch-up contributions be made on  a Roth basis for high earners.

Startup tax credits for small employers

Section 102 of SECURE 2.0 provides for two tax-credit enhancements for small businesses who adopt new retirement plans, beginning in 2023.

First, for employers with 50 employees or fewer, the pension plan startup tax credit increases from 50% of qualified startup costs to 100%, with a maximum allowable credit of $5,000 per year for the first three years the plan is in effect.

Second, the Act offers a new tax credit for employer contributions to employee accounts for the first five tax years of the plan’s existence. The amount of the credit is a maximum of $1,000 for each participant earning not more than $100,000 in income (adjusted for inflation). Each year, a specific percentage applies, decreasing from 100% to 25%. The credit is reduced for employers with 51 to 100 employees; no credit is available for those with more than 100 employees.

The letter notes, “The provision could be read to subject the additional credit for employer contributions to the dollar limit that otherwise applies to the startup credit. However, Congress intended the new credit for employer contributions to be in addition to the startup credit otherwise available to the employer.”

Change in RMD age.

Numerous comments noted that a technical correction is needed for Section 107 of the Act, which raised the RMD age from 72 to 73 beginning this year, and then again to 75 in 2033. The intention was to increase the age to 73 for those who reach age 72 after December 31, 2022, and to 75 for those who reach age 73 after December 31, 2032. However, the provision could be misinterpreted to mean the age-75 rule applies to those who reach age 74 after December 31, 2032.

SIMPLE IRA and SEP Roth accounts

Section 601 of the Act permits SIMPLE IRAs and Simplified Employee Pension plans to include a Roth IRA. The provision could have been interpreted that the provision was meant  that SEP and SIMPLE IRA contributions must be included when determining annual Roth IRA contribution limits. As the letter explains, “Congress intended that no contributions to a SIMPLE IRA or SEP plan (including Roth contributions) be taken into account for purposes of the otherwise applicable Roth IRA contribution limit.”

Roth catch-up contributions for high earners

Addressing what the American Retirement Association called a “significant technical error” in Section 603, the letter clarified a rule surrounding catch-up contributions for high earners. Specifically, the rule’s intent was to require catch-up contributions for those earning more than $145,000 to be made on an after-tax, Roth basis beginning in 2024; however, language in a “conforming change” detailed in the provision could be interpreted to effectively eliminate the ability for all participants to make any catch-up contributions.

The congresspeople’s letter clarified that, “Congress did not intend to disallow catch-up contributions nor to modify how the catch-up contribution rules apply to employees who participate in plans of unrelated employers. Rather, Congress’s intent was to require catch-up contributions for participants whose wages from the employer sponsoring the plan exceeded $145,000 for the preceding year to be made on a Roth basis and to permit other participants to make catch-up contributions on either a pre-tax or Roth basis.”

No time frame given.

Although the letter provided no specific period for introducing the corrective legislation, it did indicate that such legislation may also include additional items. Stay tuned.

24
May

Have You Been Following the Debt Ceiling Debate?

President Joe Biden and House Speaker Kevin McCarthy met on May 22 to discuss raising the statutory limit on U.S. government debt, generally called the debt ceiling. There was not resolution although both termed the discussion “productive,”, and their respective negotiating teams continued discussions.1 Here are some answers to questions you may have about the issues behind the current impasse.

What is the debt ceiling? The debt ceiling is a statutory limit on cumulative U.S. government debt, which is the sum of annual deficits since 1835 — the only time the U.S. government had no debt — plus interest owed to investors who purchased  Treasury securities issued to finance the debt.2 It limits the amount that the government can borrow to meet financial obligations already authorized by Congress. It does not authorize future spending. However, raising the debt ceiling has been used in recent years as leverage to negotiate on the federal budget.

Why do we have a debt ceiling? A debt ceiling was first introduced in 1917 to make it easier for the federal government to borrow during World War I. Before that time, all borrowing had to be authorized by Congress in extremely specific terms, which made it difficult to respond to changing needs. The modern debt ceiling, which aggregates almost all federal debt under one limit, was established in 1939 and has generally been used as a flexible structure to encourage fiscal responsibility.3 Since 1960, the ceiling has been raised, modified, or suspended 78 times, mostly with little fanfare until a political battle in 2011.4

How much is the debt ceiling? The current limit was set by Congress at about $31.4 trillion in December 2021.5 The debt was less than $6 trillion in 2001, when it began to rise due to tax cuts and increased military and national security spending in response to 9/11. It has tripled since 2008, driven by reduced tax revenues and stimulus spending during the Great Recession and the COVID-19 pandemic.6

When will we reach the debt ceiling? The government reached the $31.4 trillion limit on January 19, 2023. Since then, the Treasury has been using short-term accounting tactics (called “extraordinary measures”) to allow spending for a limited period without raising the ceiling.7 According to Treasury Secretary Janet Yellen, this extension is expected to expire on or shortly after June 1, 2023.8 The so-called “X-date” could vary because tax revenues are not fully predictable. It has come more quickly than anticipated, due to postponement of the tax-filing deadline for disaster-area taxpayers in certain states and lower capital gains tax receipts.9

What will happen if the ceiling is not increased? The U.S. government will not be able to pay all its financial obligations. This has never happened, so it is difficult to predict exactly how it would play out. The Treasury could still pay some of its obligations from incoming revenues, but there would have to be choices regarding what bills would not be paid. These are some of the possible results.

  • The government could default on its bond payments. U.S. Treasury securities are generally considered among the safest investments in the world because they are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. These securities are widely held by individual and institutional investors as well as local, state, and foreign governments. Even the possibility of defaulting on interest payments could disrupt global markets, and an extended default could have serious economic repercussions around the world. An estimate by Moody’s Analytics suggests that a one-week default could send the U.S. economy into a mild recession with the loss of 1.5 million jobs and real GDP contraction of 0.7 percentage point. A default through the end of July (which seems highly unlikely) could cause a deep recession with 7.8 million lost jobs and a real GDP decline of 4.6%. Any default, or even near-default, could result in downgrading the U.S. credit rating, as occurred in 2011. This would make borrowing more expensive, adding to the ongoing problem.10
  • Government payments could be delayed. Social Security and Veterans benefit payments could be delayed, causing hardship to those who depend on them for immediate needs. The same is true for wages of U.S. government workers, and overdue payments to government contractors could mean they may not be able to pay their employees. Late reimbursements to Medicare providers could strain smaller hospitals and medical practices. Any past due payments would be made once the debt ceiling is raised, but the short-term consequences could be painful.

What are the issues in the negotiations? Public statements from negotiators indicate the key issues include caps on future spending, use of unspent COVID-relief funds, work requirements for certain social programs, and expediting rules for energy projects. Both sides have agreed to spending caps in general terms, but they differ on how caps should be structured. The 2011 debt ceiling impasse resulted in spending caps, which had mixed results over the long term.11 Any caps would only affect discretionary spending, accounts for just 28% of federal spending. Defense spending is almost half of that amount. The rest is mandatory spending, including Social Security and Medicare (which will account for nearly 35% of federal spending in 2023) and interest on the national debt.12

Will there be a resolution? It is impossible to know for sure, but both sides have clearly stated that they will not allow the U.S. government to default on its obligations. However, time is growing short, and any agreement must pass in both the House and the Senate, requiring at least some bipartisan support. Speaker McCarthy has said that an agreement must be reached early enough to give House lawmakers a required 72-hour period to review the legislation before the June 1 deadline.13 If an agreement is not reached by that time, a temporary measure could suspend or raise the ceiling for a limited period to provide more time for negotiations.

Should investors worry? Although a default could have serious market repercussions, the most likely scenario is that the ceiling will be suspended or raised close to the deadline. If so, any related market volatility is likely to be temporary.14 While the U.S. debt is a significant issue, your investment strategy should be based on your long-term goals and risk tolerance, and it’s generally wise to stay the course through political conflicts.

The  principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could be worth more or less than the original amount paid. Forecasts are based on current conditions, are subject to change, and may not happen.

1, 11, 13) The New York Times, May 22, 2023

2, 4, 6, 8) U.S. Treasury, 2023

3) Bipartisan Policy Center, 2023

5, 7, 12) Congressional Budget Office, February 2023

9-10, 14) Moody’s Analytics, May 2023

1
Mar

Ceiling and Deficit Spending

The U.S. government reached its statutory limit, commonly called the debt ceiling, January 19,2023. The current limit was set by Congress at about  $31.4 trillion in December 2021.1

Janet Yellen, Treasury Secretary, started well-established “extraordinary measures” to allow necessary borrowing for a limited period the same day. While Yellen projects the extension will last until early June, the Congressional Budget Office (CBO) estimates it may last until sometime between July and September. However, the CBO cautions that if April tax revenues fall short of its projections, the Treasury could run out of funds earlier.2–3

Flexibility vs. Fiscal Fights

A debt ceiling was first established in 1917 to give the federal government more flexibility to borrow during World War I. Previously, all borrowing had to be authorized by Congress in very specific terms, which made it difficult for the government to respond to changing needs.4

The modern debt ceiling, which aggregates almost all government debt under one limit, was established in 1939. Since 1960, it has been raised, modified, or suspended 78 times, mostly with little fanfare. That changed in 2011, when a political battle over the ceiling pushed the Treasury so close to the edge that Standard & Poor’s downgraded the credit rating of the U.S. government.5–6

The debt ceiling limits the amount that the U.S. Treasury can borrow to meet financial obligations already authorized by Congress. It does not authorize future spending. However, beginning with the bitter battle of 2011, it has been used as leverage for partisan negotiations over government spending. With the White House and the House of Representatives — which must authorize spending — held by different parties, this year’s negotiations could be particularly difficult.

Potential Consequences

If the debt ceiling is not raised in a timely manner, the U.S. government could default on its financial obligations, resulting in unpaid bills, higher interest rates, and a loss of faith in U.S. government securities that would reverberate throughout the global economy. While it’s unlikely that the current situation will lead to a default,  pushing negotiations close to the edge can be damaging in itself. It was estimated that the 2011 impasse cost U.S. taxpayers $1.3 billion in increased borrowing costs in FY 2011 with additional costs in the following years.7

The Deficit and the Debt

The federal government runs at a deficit when tax revenues are not sufficient to meet spending obligations. Federal spending has outpaced revenue for the last 50 years, except from 1998 to 2001.8 Annual budget deficits add to the national debt.

The current debt of $31.4 trillion is the highest in U.S. history.9 Measuring the debt as a percentage of gross domestic product (GDP) is a better comparison over time.  Economists look at debt held by the public — funds the government has borrowed to meet operational expenses and liabilities, primarily through issuing Treasury securities. Interagency debt — funds borrowed from government accounts such as the Social Security trust funds — is also subject to the limit but does not directly affect the economy or federal budget.

At the end of fiscal year 2022 (September 30, 2022), debt held by the public was equivalent to 97% of GDP. In 2019, before the pandemic, it was 79% of GDP, and  in 2007, before the Great Recession, it  was 35%. Both crises caused a significant increase of the deficit and debt due to lower tax revenues and high spending on government stimulus programs. The last time the debt exceeded current levels was at the end of World War II.10-11

A February 2023 analysis, the CBO projected that the debt will rise steadily over the next decade to 118% of GDP in 2033, which would be the highest percentage  in U.S. history. The driving forces behind this increase would be higher spending on Social Security and Medicare, and rising interest costs (due to increasing debt  and higher rates). If current laws remain unchanged, the debt is projected  to rise even more quickly in the next two decades, reaching 195% of GDP in 2053.12

No Easy Answer

The only way to change this trajectory is to increase revenue, reduce spending, or both. The best scenario would be decades of high GDP growth that increases revenue at current tax rates, but this seems unlikely. The CBO projects real (inflation-adjusted) GDP growth to average a tepid 1.7% annually over the next decade.13 Raising tax rates may be necessary, but that is always a difficult political option.

There is little room to maneuver on the spending side. Only 28% of federal spending is “discretionary,” meaning Congress can set amounts through annual appropriations bills, and almost half of that spending goes to national defense, which few leaders would want to cut in the current global climate. The rest is mandatory spending, including Social Security and Medicare (which will account for nearly 36% of federal spending in  2023) and interest on the national debt.14 While both parties have indicated that Social Security and Medicare are off the table, other mandatory spending could be reduced through Congressional action.

The White House is expected to release  its budget proposal for FY 2024 this month, followed by a counterproposal from House Republicans in April, setting up what is sure to be an intense period of budget negotiations. President Biden and House Speaker Kevin McCarthy have already begun to discuss the debt ceiling issue, and it remains to be seen whether the ceiling can be addressed outside of the budget process or whether it will be caught in the crosshairs. In either case, the ceiling will have to be raised or suspended in order to maintain U.S. government operations.

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could be worth more or less than the original amount paid. Forecasts are based on current conditions, are subject to change, and may not come to pass.

1, 3, 10, 12–14) Congressional Budget Office, 2023

2, 6, 9) U.S. Treasury, 2023

4–5) Bipartisan Policy Center, 2023

7) U.S. Government Accountability Office, July 23, 2012

8, 11) U.S. Office of Management and Budget, 2023

12
Jan

Is the Yield Curve Signaling a Recession?

Long-term bonds generally provide higher yields than short-term bonds because investors demand higher returns to compensate for the risk of lending money over a longer period. Occasionally, however, this relationship flips, and investors are willing to accept lower yields in return for the relative safety of longer-term bonds. This is called a yield curve inversion because a graph showing bond yields in relation to maturity is essentially turned upside down (see chart).

A yield curve could apply to any bonds that carry similar risk, but the most studied curve is for U.S. Treasury securities, and the most common focal point is the relationship between the two-year and 10-year Treasury notes. The two-year yield has been higher than the 10-year yield since July 2022, and beginning in late November, the difference has been at levels not seen since 1981. The biggest separation in 2022 came on December 7, when the two-year was 4.26% and the 10-year was 3.42%, a difference of 0.84%. Other short-term Treasuries have also offered higher yields;  the highest yields in early 2023 were for the six-month and one-year Treasury bills.1  (Although Treasuries are often referred to as bonds, maturities up to one year are bills, while maturities of two to 10 years are notes. Only  20- and 30-year Treasuries are officially called bonds.)

Predicting Recessions

An inversion of the two-year and 10-year Treasury notes has preceded each recession over the past 50 years, reliably predicting a recession within the next one to two years.2  A 2018 Federal Reserve study suggested that an inversion of the three-month and 10-year Treasuries may be an even more reliable indicator, predicting a recession within about 12 months.3 The three-month and 10-year Treasuries have been inverted since late October, and in December and early January the difference was often greater than the inversion of the two- and 10-year notes.4

Weakness or Inflation Control?

Yield curve inversions do not cause a recession; rather they indicate a shift  in investor sentiment that may reflect underlying economic weakness. A normal yield curve suggests that investors believe the economy will continue to grow, and that interest rates are likely to rise with the growth. In this scenario, an investor typically would want a premium to tie up capital in long-term bonds and potentially miss out on other opportunities in the future.

Conversely, an inversion suggests that investors see economic challenges that are likely to push interest rates down and typically would rather invest in longer-term bonds at today’s yields. This increases demand for long-term bonds, driving prices up and yields down. (Bond prices and yields move in opposite directions; the more you pay for a bond that pays a given coupon interest rate, the lower the yield will be.)

The current situation is not so simple. The Federal Reserve has rapidly raised the benchmark federal funds rate to combat inflation, increasing it from near 0% in March 2022 to 4.25%–4.50% in December. As the rate for overnight loans within the Federal Reserve System, the funds rate directly affects other short-term rates, which is why yields on short-term Treasuries have increased so rapidly. The fact that 10-year Treasuries have lagged the increase in the funds rate may indeed mean that investors believe a recession is coming. But it could also reflect confidence that the Fed is winning the battle against inflation and will lower rates over the next few years. This is in line with the Fed’s projections, which see the funds rate peaking at 5.0%–5.25% by the end of 2023, and then dropping to 4.0%–4.25% in 2024 and 3.0%–3.25% in 2025.5

Inflation slowed somewhat in October and November, but there is a long way to go  to reach the Fed’s target of 2% inflation  for a healthy economy.6  The fundamental question remains the same as it has been since the Fed launched its aggressive rate increases: Will it require a recession to control inflation, or can it be controlled without shifting the economy into reverse?

Other Indicators and Forecasts

The yield curve is one of many indicators that economists consider when making economic projections. Among the most closely watched are the 10 leading economic indicators published by the Conference Board, with data on employment, interest rates, manufacturing, stock prices, housing, and consumer sentiment. The Leading Economic Index, which includes all 10 indicators, fell for nine consecutive months through November 2022, and Conference Board economists predict a recession beginning around the end of 2022 and lasting until mid-2023.7 Recessions are not officially declared by the National Bureau of Economic Research until they are underway, and the Conference Board view would suggest the United States may already be in a recession.

In The Wall Street Journal’s October 2022 Economic Forecasting Survey, most economists believed the United States would enter a recession within the next  12 months, with an average expectation  of a relatively mild 8-month downturn.8 More recent surveys of economists for the Securities Industry and Financial Markets Association and Wolters Kluwer Blue Chip Economic Indicators also found a consensus for a mild recession in 2023.9–10

For now, the economy appears fairly strong despite high inflation, with a low November unemployment rate of 3.7% and an estimated 3.8% Q4 growth rate for real gross domestic product.11–12 Unfortunately, the indicators and surveys discussed above suggest an economic downturn in the next year or so. This would probably cause some job losses and other temporary financial hardship, but a brief recession may be the necessary price to tame inflation and put the U.S. economy on a more stable track for future growth.

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could be worth more or less than the original amount paid. Forecasts are based on current conditions, are subject to change, and may not happen.

1, 4) U.S. Treasury, 2023

2)  Financial Times, December 7, 2022

3) Federal Reserve Bank of San Francisco, August 27, 2018

5) Federal Reserve, 2022

6, 11) U.S. Bureau of Labor Statistics, 2022

7)  The Conference Board, December 22, 2022

8)The Wall Street Journal, October 16, 2022

9)  SIFMA, December 2022

10) USA Today, December 15, 2022

12) Federal Reserve Bank of Atlanta, January 5, 2023

3
Nov

What Does a Strong Dollar Mean for the U.S. Economy?

In late September 2022, the U.S. dollar hit  a 20-year high in an index that measures  its value against six major currencies: the euro, the Japanese yen, the British pound, the Canadian dollar, the Swedish krona, and the Swiss franc. At the same time, a broader inflation-adjusted index that captures a basket of 26 foreign currencies reached its highest level since 1985. Both indexes eased slightly but remained near their highs in October.1–2

Intuitively, it might seem that a strong dollar is good for the U.S. economy, but the effects are mixed in the context of other domestic and global pressures.

World Standard

The U.S. dollar is the world’s reserve currency. About 40% of global financial transactions are executed in dollars, with or without U.S. involvement.3As such, foreign governments, global financial institutions, and multinational companies all hold dollars, providing a level of demand regardless of other forces.

Demand for the dollar tends to increase during difficult times as investors seek stability and security.  Despite high inflation and recession predictions, the U.S. economy remains the strongest in the world.4 Other countries are battling inflation, too, and the strong dollar is making their battles more difficult. The United States recovered more quickly from the pandemic recession, putting it in a better position to weather inflationary pressures.

The Federal Reserve’s aggressive policy to combat inflation by raising interest rates has driven demand for the dollar even higher because of the appealing rates on dollar-denominated assets such as U.S. Treasury securities. Some other central banks have begun to raise rates as well — to fight inflation and offer better yields on their own securities. But the strength of the U.S. economy allows the Fed to push rates higher and faster,  which is likely to maintain the dollar’s advantage for some time.

Exports and Imports

The strong dollar makes imported goods cheaper and exported goods more expensive. Cheaper imports are generally good for consumers and for companies that use foreign-manufactured supplies, but they can undercut domestic sales by U.S. producers.

At the same time, the strong dollar effectively raises prices for goods that U.S. companies sell in foreign markets, making it more difficult to compete and reducing the value of foreign purchases. For example, a U.S. company that sells 10,000 euros worth of goods to  a foreign buyer would receive less revenue when a euro buys fewer dollars. Some experts are concerned that the strong dollar will dampen the post-pandemic rebound in U.S. manufacturing.5 More broadly, the ballooning trade deficit cuts into U.S. gross domestic product (GDP), which includes imports as a negative input and exports as a positive input.

Overseas Exposure

Generally, large multinational companies have the most exposure to risk from currency imbalances, and the stock market has shown signs of a shift from large companies — which have dominated the market since before the pandemic — to smaller companies that may be more nimble and less dependent on overseas sales. The S&P SmallCap 600 index has outperformed the S&P 500 index through late October; if the trend continues through the end of the year, it would be the first time since 2016 that small caps have eclipsed large caps.6 The S&P MidCap 400 index has done even better. In the current bear market, however, better performance means lower losses; all three indexes have had double-digit losses through October 2022.7

Global Pain

A weak currency can be a boon for a country by making its exports more competitive. But with the world economy weakening, other countries are not reaping those benefits, while paying more on debt and imported essentials such as food and fuel that are traded in dollars. The Fed is focused on domestic concerns, but it is effectively exporting inflation while trying to control it at home, and global economic pain could ultimately spread to the U.S. economy.8

Slowing the Dollar

In the near term, the Fed’s aggressive rate hikes may reduce domestic demand for foreign goods, reducing the trade deficit and weakening the dollar. The advance Q3 2022 GDP estimate showed the trade gap closing, but it’s unclear if the trend will last.9

In the longer term, as inflation eases in the United States, the Fed will likely take its foot off the gas pedal and ultimately bring rates down. This would allow other central banks to catch up if they choose to do so and would make foreign currencies and securities more appealing. Lower oil prices (denominated  in dollars) and/or any reduction in world tensions — such as a slowdown in the Russia-Ukraine war — might also help reduce demand for dollars.

The dynamics of these factors are complex, and it may take time for any of them to unfold. In the meantime, the strong dollar is a sign of U.S. economic strength, and it would not be wise to place too much emphasis on it for long-term investment decisions. However, this could be a great time for an overseas vacation.

U.S. Treasury securities are guaranteed by the federal government as to the timely payment of principal and interest. The principal value of Treasury securities fluctuates with market conditions. If not held to maturity, they could  be worth more or less than the original  amount paid.

All investments are subject to market volatility and loss of principal. Investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, and economic and political risk unique to the specific country. This may result in greater share price volatility. Shares, when sold, may be worth more or less than their original cost. The value of a foreign investment, measured in U.S. dollars, could decrease because of unfavorable changes in currency exchange rates.

The S&P 500 index is an unmanaged group of securities that is considered to be representative of the U.S. stock market in general. The performance of an unmanaged index is not indicative of the performance of any specific investment. Individuals cannot invest directly in an index. Past performance is not a guarantee of future results. Actual results will vary.

1) MarketWatch, October 19, 2022 (U.S. Dollar index)

2) Federal Reserve, 2022 (Real Broad Dollar index)

3, 8) The New York Times, September 26, 2022

4, 6) The Wall Street Journal, October 17, 2022

5) The Wall Street Journal, October 9, 2022

7) S&P Dow Jones Indices, 2022

9) U.S. Bureau of Economic Analysis, 2022