Overnight Finance

On The Money — Americans keep spending despite recession fears

Shoppers line up to pay for their merchandise at a checkout counter in a Target store November 30, 2004 in Chicago, Illinois. (Scott Olson/Getty Images)

We dig into huge retail sales that appear to contradict warnings of a looming recession. We’ll also look at the wave of tech industry layoffs and the explosive congressional hearing into the collapse of top crypto exchange FTX.  

🏳️‍🌈 But first, see which Senate Republicans joined Democrats in advancing a bill to codify same-sex marriage protections.  

Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter?

Retail sales spike casts doubt on likely recession

An October surge in retail sales is raising doubts about how close the U.S. economy actually is to a recession. 

Americans spent far more money on consumer goods and services in October than economists had expected, according to Census Bureau data released Wednesday. While high interest rates and stubborn inflation have taken a chunk out of retailers’ profits, it’s done little to keep down sales as a whole. 

  • U.S. retailers made $694.5 billion in sales last month, according to the Census Bureau, an increase of 1.3 percent from September.  
  • Sales beat expectations of a smaller 1 percent increase, according to projections from experts, and rose broadly across the economy. 

The background: Experts attributed some of the increase to the beginning of holiday shopping, kicked off in part by an Amazon Prime sales event held last month. 

“Retail sales data surged in October as holiday shopping started early for the second year in a row. The strong month, which followed a flat month in September, suggested that, at least for now, a recession was not at hand,” Tuan Nguyen, economist at audit and tax firm RSM, wrote in a Wednesday analysis. 

Sylvan breaks it down here

LEADING THE DAY 

Big Tech bleeds tens of thousands of jobs after pandemic heyday 

Major technology companies that saw an explosion of growth during the early part of the coronavirus pandemic are bleeding thousands of jobs as high interest rates and a slowing economy turn against the industry.  

Amazon, Meta, Twitter, Stripe and a slew of other Big Tech firms have announced layoffs over the past month, all citing a decline in revenue and a deteriorating outlook for the global economy.   

How we got here: Silicon Valley powerhouses saw their stock prices and payrolls soar throughout most of the past two years.  

  • Propelled by low interest rates set by the Federal Reserve and a glut of pandemic stimulus, tech companies rode a steady wave of consumer spending in online retail, streaming services and other products to major stock gains.  
  • But the heyday for Big Tech has come crashing down, along with the values of some its high-flying stocks. The tech-heavy Nasdaq composite is down
    28 percent on the year after reaching record highs before the Fed began hiking rates in March.  

Sylvan has more here

LET THE GRILLING BEGIN

House committee announces hearing into FTX collapse featuring Bankman-Fried 

The House Financial Services Committee will hold a hearing next month to investigate the collapse of top crypto exchange FTX, lawmakers announced Wednesday. 

  • Reps. Maxine Waters (D-Calif.) and Patrick McHenry (R-N.C.), the top lawmakers on the committee, said that they expect disgraced FTX founder Sam Bankman-Fried to appear before Congress.  
  • Bankman-Fried, a major political donor, cultivated close connections with lawmakers on key committees and even helped write the first major crypto bill.   

“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds,” Waters said in a statement.  

Karl has the story here

INFRASTRUCTURE WEAK

Homebuilder confidence falls for 11th consecutive month 

Homebuilders’ confidence in the housing market continued its decline this month amid rising interest rates, high material costs and deteriorating housing affordability, according to data released Wednesday by the National Association of Home Builders.  

The NAHB/Wells Fargo Housing Market Index found that homebuilder confidence in the market for newly built single-family homes fell for the 11th straight month in November, reaching its lowest level in a decade.  

“Higher interest rates have significantly weakened demand for new homes as buyer traffic is becoming increasingly scarce,” NAHB Chairman Jerry Konter said in a media release.  

“With the housing sector in a recession, the Biden administration and new Congress must turn their focus to policies that lower the cost of building and allow the nation’s home builders to expand housing production.”  

The Hill’s Adam Barnes explains here. 

Good to Know

Elon Musk gave remaining Twitter employees a Thursday deadline to respond to an ultimatum: staff can commit to working with a “hardcore” company or leave with three months of severance pay, multiple outlets are reporting. 

Musk gave his employees until 5 p.m. Eastern on Thursday to make the call and accept an online form, signing a pledge of allegiance to the revamped version of the social media platform, according to The Washington Post. 

Other items we’re keeping an eye on: 

  • The IRS is tasked with collecting hundreds of billions of dollars in unpaid taxes over the next decade, and tax experts say individuals’ business income is an untapped source of revenue.   
  • U.S. climate envoy John Kerry said Wednesday that the U.S. will back proposals to phase out the use of “unabated” fossil fuels at the ongoing COP27 climate summit. 

That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow. 

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