Crypto News: A head scratcher

Hello. Today we look at one paradox which may help deliver a soft landing in the US economy, signs of a rebound in China's economy and the outlook for US inflation.

Inside the White House, economist Jared Bernstein calls it a "legitimate head scratcher."

Why is wage growth slowing if the job market is so tight?

As Rich Miller writes today, the answer will help determine whether the Federal Reserve can restrain inflation without overly hurting the economy and employment.

If pressure on pay keeps easing even as firms keep hiring, policymakers may feel less compelled to push interest rates ever deeper into restrictive territory in their drive to return inflation to their 2% goal.

Many economists say it will take serious damage to the job market to hit the goal.

But there's another scenario starting to gain attention: call it a reverse wage-price spiral.

Moody's Analytics chief economist Mark Zandi posits the wage deceleration is due to a downshift in inflation expectations held by workers, as well as their bosses.

Reduced expectations for living costs — reflecting lower gasoline prices and the anticipated impact of aggressive Fed rate increases — lead to tempered wage demands. That, in turn, means less pressure on companies to raise prices.

Will Fed Manage a 'Soft' or 'Hard' or 'No' Landing?: QuickTake

For the Fed, the bottom line is it may not have to force such a big downturn in the job market.

"A slowdown in wage growth without a significant increase in the unemployment rate puts us one step closer to a soft landing," said Sinem Buber, lead economist at ZipRecruiter, an online job-matching site.

—Simon Kennedy

Got tips or feedback? Email us at ecodaily@bloomberg.net

China's economy is bouncing out of Covid Zero.

A wave of data released on Wednesday showed:

An index of manufacturing at its highest in more than a decade
A gauge of services and construction improved more than forecast
Home sales rose for the first time since June 2021

The reports add to other signs of a rebound in the economy and will cheer policymakers as they prepare for next week's National People's Congress, where a new growth target will be disclosed.

"It will be hard to keep up this brisk pace, with global growth slowing and pent-up demand after Covid reopening likely to fade," said Chang Shu and Eric Zhu of Bloomberg Economics. "Still, with policy swinging toward growth support, the recovery should sustain momentum into the second quarter."

Elsewhere, Asia's factories are improving gradually and Bloomberg reports how President Xi Jinping is moving to consolidate the Communist Party's hold over the world's second-biggest economy.

Raimondo's rise | Washington is full of self-professed China hawks, both the Republicans and Democrats. But Gina Raimondo hasn't embraced the label, which is notable: As US Commerce secretary she plays a leading role in the Biden administration's China containment strategy.
Bulging deficits | Italy's budget deficits for the past three years were revised drastically higher after a reassessment of tax breaks including the so-called "superbonus" showed a bigger immediate hit to the public finances.
Leaving China | For the first time in about 25 years, China is not a top three investment priority for a majority of US firms, with geopolitical tensions and domestic economic issues driving businesses to increasingly focus elsewhere, according to a new report.
Russia's consumer | For all of President Vladimir Putin's upbeat talk of expecting "some growth" across the board this year, retail sales remain in a contraction that's deeper than that of the pandemic.
An RBA pause | Australia's surprisingly slower economic growth and monthly inflation data may prompt the Reserve Bank to reconsider how aggressive it needs to be with future interest-rate increases.
Nigeria's challenge | Bola Tinubu won't have much time to celebrate his victory in Nigeria's presidential election given he must address rising debt that consumes 80% of revenues.
Housing bet | Wealthy investors were the most active buyers of commercial property in 2022, a new report finds.

Nomura Holdings economists have run a statistical exercise to help assess whether the pick-up in US price gauges in January will continue.

They divvied the consumer price index up into five baskets, looked at the longer-term trend levels, and made some basic assumptions going forward.

All of the 32 possible outcomes show CPI disinflation continuing in 2023.
The average of the 32 outcomes was for fourth-quarter inflation at 3.8%.
The average outcome for the fourth quarter of 2024 was 3.4%

"Our analysis suggests that, in all likelihood, the disinflation process has hit a mere speed bump — rather than a full-on
roadblock," Nomura economists led by Robert Subbaraman wrote in a note Tuesday. However, "we see that the higher hurdle to the disinflation process could be in 2024."