Fed official's warning, inflation 'gaslight' charge, jobs and more: Monday's 5 things to know

Here are five key things that could impact Monday's trading.

DIRE FED WARNING: The Federal Reserve Bank of Minneapolis CEO and President Neel Kashkari said Sunday that the current state of inflation is "very concerning" and "spreading out more broadly across the economy." 

"It’s very concerning. We keep getting inflation readings, new data that comes in as recently as this past week, and we keep getting surprised. It’s higher than we expect," Kashkari said during an appearance on CBS’ "Face The Nation." "And it’s not just a few categories. It’s spreading out more broadly across the economy and that’s why the Federal Reserve is acting with such urgency to get it under control and bring it back down."

Kashkari stressed that although wages are increasing for many Americans, so are the costs of goods and services, which means workers experience a "real wage cut" because inflation is growing so quickly. He said wage-driven inflation is not happening, and the cost of goods is partially due to disruptions in the supply chain, namely caused by the pandemic and now the war in Ukraine. 

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"For most Americans, their wages are going up, but they’re not going up as fast as inflation, so most Americans’ real wages, real incomes are going down," he said. "They’re getting a real wage cut because inflation is growing so quickly. I mean typically, we think about wage-driven inflation where wages grow quickly and that leads to higher prices in a self-fulfilling spiral – that is not yet happening. Wages are now trying to catch up to those high prices. Those high prices are now being driven by supply chains and the war in Ukraine among other factors. And so we need to get the economy back into balance before this really does become a very wage-drive inflation story."

Noting the recent results of the economic cost index, he stressed that it’s a good thing Americans are earning more, but the Federal Reserve cannot wait for the supply chain to adjust to get prices down. 

"Just at its basic level, inflation is when demand is outstripping supply. We know supply is low because of supply chains, because of the war in Ukraine, because of COVID. We hoped that supply would come online more quickly. That hasn't happened," Kashkari said. "So, we have to get demand down in the balance. Now, I hope we get some help on the supply side, but that doesn't change the fact that the Federal Reserve has its job to do, and we are committed to doing it."

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"We cannot wait till supply fully heals. We have to do our part with monetary policy," he added.

Kashkari argued that the new bill introduced by Sens. Chuck Schumer, D-N.Y., and Joe Manchin, D-W. Va., dubbed the Inflation Reduction Act is "not going to have much of an impact on inflation" over the next several years, and it will be the Federal Reserve’s job to adjust monetary policies to get it down.

GASLIGHTING AMERICAN PUBLIC: Conservative groups are slamming President Biden and his administration for attempting to "gaslight" Americans into believing that the country isn't in a recession.

The country entered a technical recession as the U.S. economy shrank by 0.9%, meaning that the country has seen a negative gross domestic product figure for a second straight quarter.

Prior to the advance estimate of the country's GDP on July 28, the White House Council of Economic Advisors said that even if the figure is negative, it's still "unlikely" to be an indicator that the country is in a recession.

"Based on these data, it is unlikely that the decline in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — indicates a recession," a post on the White House website states.

After the GDP figure was released, Biden was quick to say that the United States "is not in a recession," adding that it is "no uprise that the economy is slowing down."

Will Hild, executive director of Consumers’ Research told Fox News Digital that the country is in the middle of a recession despite what Biden and his administration suggest.

"The GDP numbers don’t lie— under the Biden Administration, we are building back broker," Hild said. "Regardless of how the White House tries to spin it, the Biden recession is here to stay as everyday Americans are facing higher prices from the grocery store to the gas pump."

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He said in an interview that the White House's current calculation on whether the country is in a recession is relying on the fact that there isn't high unemployment yet.

"My understanding is the [White House] is leaning heavily on the fact that we haven't seen huge numbers of unemployment yet, but layoffs are picking up, and it may just be a delayed indicator," Hild said.

MANUFACTURING REPORT: A key report on U.S. manufacturing activity will kick off the new month Monday morning.

The report, the ISM’s manufacturing purchasing managers index for July, will be released at 10 a.m. ET. It’s expected to slip a point to 52.0, the lowest level since May 2020, and would also mark the fifth month in the last six of declining manufacturing activity. 

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For context, the March 2021 reading of 63.7 marked the fastest pace of expansion in more than 37 years. Also for reference, a score of 50 is the dividing line between an expanding and contracting manufacturing sector. Inflation watchers will pay close attention to the prices paid component. 

It’s expected to fall for a fourth month to 74.3, the lowest since December and supporting the peak inflation view. For perspective, the June 2021 reading of 92.1 was a record high.

At the same time, watch for construction spending to rise 0.2% month-over-month in June, following a surprise decline of 0.1% the prior month.

NEW WEEK OF EARNINGS: Second-quarter earnings season continues this week with 153 companies in the S&P 500, or about 30% of the benchmark index, set to report. 

That number includes two Dow members: Caterpillar on Tuesday and Amgen on Thursday. 

Ticker	Security	Last	Change	Change %
CAT	CATERPILLAR INC.	338.24	-25.10	-6.91%
AMGN	AMGEN INC.	269.38	-3.63	-1.33%
ATVI	n.a.	n.a.	n.a.	n.a.
UBER	UBER TECHNOLOGIES INC.	69.31	-0.05	-0.07%
SBUX	STARBUCKS CORP.	87.84	-0.91	-1.03%
CVS	CVS HEALTH CORP.	67.33	-0.43	-0.63%
CI	THE CIGNA GROUP	354.56	+2.29	+0.65%

Other names to watch include video game maker Activision Blizzard Monday afternoon, Uber and Starbucks on Tuesday, managed health care mainstays CVS Health on Wednesday and Cigna on Thursday. 

Some 280 companies, or a little more than half the S&P 500, have reported April-through-June results, and the numbers are topping expectations.

JOBS REPORT ON TAP: Friday morning, a key economic report of the week will be released when the Labor Department is expected to say the U.S. economy added 250,000 new nonfarm jobs in July. That’s down from a stronger-than-expected gain of 372,000 in June and would mark the weakest job growth since December 2020.

This news is consistent with other data showing signs of a cooling labor market (e.g., jobless claims are hovering near an 8-month high). 

The unemployment rate is anticipated to hold steady at 3.6% for the fifth month in a row, just slightly above the pre-pandemic level of 3.5% in January and February 2020, which was the lowest since May 1969. 

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For perspective, April 2020’s 14.7% jobless rate exceeded the post-World War 2 record of 10.8% in November 1982 and was the highest since record-keeping began in 1948. 

The manufacturing sector likely added 15,000 jobs in July, about half the larger-than-expected increase of 29,000 the prior month and the lowest since April 2021. 

Private sector payrolls are anticipated to rise by 230,000, well below June’s higher than expected tally of 381,000 and the lowest since April 2021. 

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In addition, look for hourly earnings to increase 0.3% month-over-month and to jump 4.9% from a year ago. That would be down from 5.1% in June, marking the fourth straight month of slowing annual wage growth from a 2-year high of 5.6% in March, and a sign that wage inflation has peaked.