| | | | |  | | By Zachary Warmbrodt | Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro.
| | Fed Chair Jerome Powell has all but taken a March interest rate cut off the table. Today’s initial snapshot of the 2024 labor market is the first big test of the trajectory he laid out this week. Let’s get into what’s at stake. What economists expect Per Bloomberg, economists are forecasting that today's employment report will show the economy added 185,000 jobs in January. A headline reading in that zone would indicate that U.S. employment growth continues to be solid even as it shows signs of decelerating. Why it matters Declining inflation has started to give the Fed reasons to tee up rate cuts this year, but Powell says he wants to see more data to be sure. That’s why he’s signaling that the central bank won’t be ready to act at its next meeting in March. The challenge for the Fed is to avoid letting elevated rates crimp growth while also being vigilant about a potential reacceleration in inflation. The fourth-quarter increase in productivity that was reported Thursday may give the Fed another reason to stand pat, as it shows companies and workers are doing more under current economic constraints. Separately, the Federal Reserve Bank of Atlanta said Thursday that its GDPNow model now has the U.S. economy growing by 4.2 percent this quarter. “We are currently seeing what I’ve called the holy grail of non-inflationary growth,” EY-Parthenon chief economist Gregory Daco told MM. “We have an environment where the economy’s still moving forward at a relatively decent clip, and we have inflation that’s falling back toward the Fed’s target. It’s the best of both worlds when it comes to policymakers.” Daco believes the January jobs number could surpass expectations – his firm’s forecast is 275,000 jobs – because of seasonal factors. He said it’s worth digging deeper than the top-line number, given how data-dependent the current Fed is. Powell said Wednesday that the labor market is “not totally back to normal.” “We have to factor in more than just the headline jobs print,” Daco said. “We have to look at where the unemployment rate’s headed, where wage growth is headed, how diffuse job growth is.” How voters see it Political polling still shows most voters disapprove of President Joe Biden’s handling of the economy. But there are other signs that Americans are starting to feel better about the way things are going. Consumer confidence in January, as measured by the Conference Board, hit its highest level since December 2021. The Conference Board said the increase was seen across all age groups and most income groups, reflecting slower inflation, anticipation of lower rates and favorable employment conditions. Happy Friday — Send tips to zwarmbrodt@politico.com.
| | | | CONGRESS OVERDRIVE: Since day one, POLITICO has been laser-focused on Capitol Hill, serving up the juiciest Congress coverage. Now, we’re upping our game to ensure you’re up to speed and in the know on every tasty morsel and newsy nugget from inside the Capitol Dome, around the clock. Wake up, read Playbook AM, get up to speed at midday with our Playbook PM halftime report, and fuel your nightly conversations with Inside Congress in the evening. Plus, never miss a beat with buzzy, real-time updates throughout the day via our Inside Congress Live feature. Learn more and subscribe here. | | | | | MM first look: Basel comments, by the numbers — Latham & Watkins is out with a stunning (if not surprising) stat on the pushback regulators are getting as they try to hike capital requirements for large banks. The law firm reviewed 356 comment letters that trade groups, lawmakers, academics and others submitted to banking agencies through Jan. 24. The analysis found that 97 percent of the comments on the capital proposal opposed it in full or raised substantial concerns with parts. Only nine letters were supportive. The tally illustrates the intense lobbying effort underway to pressure regulators to dial back their plans. Latham & Watkins has a breakdown of the big themes emerging from the comment letters in a report you can read here. IMF chief: A careful Fed is fine — IMF managing director Kristalina Georgieva said the Federal Reserve is “right to be cautious” about loosening monetary policy and should act on data, the Washington Post reports. “The timing of U.S. easing of monetary policy is indeed very important,” she said. “Not too early, but also not too late.” Taking Powell at his word — Goldman Sachs, Bank of America and Barclays pushed back their forecasts for rate cuts after the Fed chair signaled that March isn't happening, Bloomberg reports. Commercial property downturn hits banks — Per the WSJ, lenders in the U.S., Japan and Switzerland are flashing new warning signals about losses piling up in the commercial real estate market, reviving fears of banking turmoil less than a year out from the failure of SVB. New sanctions — The Biden administration is beginning to cut off U.S. financial system access to Israelis responsible for “extremist” violence against Palestinian civilians in the West Bank, the FT reports. Gensler’s legal ‘minefield’ — Declan Harty has a must-read on the mountain of lawsuits looming against Gary Gensler’s SEC. Trade associations are threatening to go after more than a half-dozen planned rules, in addition to cases that have already been pursued by the U.S. Chamber of Commerce, hedge funds and private equity firms. The stakes are high as conservative judges across the country show a growing interest in reviewing agency authority. Former Labor Secretary Eugene Scalia, one of the country’s premier litigators in this space, told POLITICO that the Supreme Court is “engaged in the most probing examination of the limits and powers of the administrative state that we’ve seen since the New Deal.
| | Fed, OCC speak out on SEC rule — Eleanor Mueller scoops that Fed Chair Jerome Powell and acting Comptroller of the Currency Michael Hsu voiced concern over the SEC's proposed changes to how investment advisers should handle crypto, real estate and other assets, according to letters sent to House lawmakers. "The proposed rule would, if adopted, require a significant change in custody practices at depository institutions," Powell wrote. Hsu said it "would be a departure from the usual manner in which bank custodians hold clients' cash," while its "liability and indemnification requirements would be another departure from current practice." French Hill and Nikki Haley — Jasper Goodman reports that a PAC aligned with Rep. French Hill, a potential contender to succeed Rep. Patrick McHenry as the top Republican on House Financial Services, donated $2,500 to Nikki Haley’s presidential campaign in September, according to recently released campaign finance filings. The donation, which hasn’t been previously reported, could become problematic for the Arkansas Republican. Former President Donald Trump, who is leading Haley in the GOP primary, has threatened that anyone who gives to her will be “permanently barred from the MAGA camp.” Hill hasn’t endorsed anyone in the presidential race. Haley has just one endorsement from a member of Congress. Lawmakers target SEC crypto policy — A bipartisan group of lawmakers is pushing for Congress to block SEC guidance on how certain companies, including banks, keep customers’ crypto assets on their balance sheets. As our Eleanor scooped Thursday, Sen. Cynthia Lummis and Reps. Wiley Nickel and Mike Flood introduced a resolution to nullify the policy under the Congressional Review Act. (The guidance at issue is known as Staff Accounting Bulletin 121.) Lummis in a statement said the SEC should have consulted bank regulators and the public before implementing the directive. “I look forward to getting this measure across the finish line to overturn it,” McHenry said on X.
| | | | YOUR GUIDE TO EMPIRE STATE POLITICS: From the newsroom that doesn’t sleep, POLITICO's New York Playbook is the ultimate guide for power players navigating the intricate landscape of Empire State politics. Stay ahead of the curve with the latest and most important stories from Albany, New York City and around the state, with in-depth, original reporting to stay ahead of policy trends and political developments. Subscribe now to keep up with the daily hustle and bustle of NY politics. | | | | | | | | MM first look: The college divide in the jobs market — Third Way is out with a new report looking at the disconnect between college educated and non-college educated in the professional classes. According to the think tank, the total number of full-time workers in managerial and professional occupations nearly doubled over a three-decade period, but workers without a college degree accounted for just 13 percent of the gain. Third Way’s Anthony Colavito writes, “there needs to be a rethinking of what credential is truly necessary to join the professional classes.”
| | People moves — Joanna Girardin Shapiro, previously of BNY Mellon, is the American Bankers Association’s new chief member engagement officer … Treasury has several new political appointees: spokesperson Haris Talwar, office of intelligence and analysis special adviser Milton Patch, scheduling and advance associate Emmanuel Brantley, office of the executive secretary special assistant Anna Brozycki and press assistant Tyla Evans (h/t Daniel Lippman). | | | | Follow us on Twitter | | | | Follow us | | | | |
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