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[Quick Facts]

1. UAW reportedly cuts wage raise demands to 36%.

2. McCarthy's stopgap funding proposal is opposed by hard-line members of his party, and the risk of a U.S. government shutdown remains high.

3. U.S. homebuilder sentiment falls to a five-month low.

4. Yellen doesn't see any signs that the U.S. economy is at risk of a downturn.

5. Timiraos says the soft landing goal faces four threats.

[News Details]

UAW reportedly cuts wage raise demands to 36%

The United Auto Workers (UAW) said that it was still waiting for new counter-proposals from Detroit's Big Three automakers on Monday. September 16, Stellantis updated the progress of the offer, which the media referred to as a "new offer." According to a person familiar with the contract negotiations, the latest offer on the table was made by the UAW. Stellantis said on Monday it had resumed talks. The company said it would offer a nearly 21% raise and was committed to finding a solution to problems at its Illinois plant. In addition, Ford and General Motors have both offered 20% raises. The UAW declined to give details of its latest offer, but the companies said the UAW had reduced the wage raise demand from 40% to 36%.

McCarthy's stopgap funding proposal is opposed by hard-line members of his party, and the risk of a U.S. government shutdown remains high

U.S. House of Representatives Speaker Kevin McCarthy's latest proposal to avert a U.S. government shutdown has faced stiff opposition from ultra-conservative Republicans whose support is indispensable to the passage of the proposal. McCarthy was struggling on Monday to salvage the plan he announced on Sunday night. Under the plan, the budgets of domestic government agencies would be cut by 8% and the construction of a wall on the southern border would resume. At least 10 hard-line lawmakers have already announced their opposition to the plan. Conservative critics have called for changes, including deeper spending cuts, stopping funding for investigations into former President Trump and blocking spending on previous Ukraine aid packages. Those changes are likely to draw opposition from moderate Republicans. Facing unanimous opposition from Democrats, McCarthy could lose by up to four Republican votes. "It's frustrating. I don't know what the problem is here," Moderate California Republican Mike Garcia said on Monday. "We need to give our leadership a package to negotiate with the Senate."

U.S. homebuilder sentiment falls to a five-month low

U.S. homebuilder sentiment fell to a five-month low in September as rising mortgage rates continued to deter many potential buyers. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) slipped 5 points to 45, the largest two-month decline in nearly a year, following a 6-point decline in August.

High mortgage rates are clearly hurting builder confidence and consumer demand as more buyers are choosing to put off purchasing a home until long-term interest rates fall. Many builders have been offering incentives to attract buyers. According to the NAHB, nearly one-third (the highest share since late 2022) of respondents said they cut prices to boost sales. The share of builders offering various types of incentives rose to a four-month high. All indices tracked by NAHB fell in September. Both current and expected sales measures fell to multi-month lows. A gauge of prospective buyer traffic dropped to the lowest since February.

Yellen doesn't see any signs that the U.S. economy is at risk of a downturn

I don't see any signs that the U.S. economy is at risk of a downturn, U.S. Treasury Secretary Janet Yellen said on Monday. It is still in a "healthy" state. Industrial output is rising, and inflation is falling.

Yellen thinks that the U.S. labor market is good and strong, and business demand for workers is high. At the same time, she acknowledged that the labor market has softened and is cooling. But she noted that the U.S. labor market has not seen large-scale layoffs and job openings remain high, suggesting that the job market is healthy, just not as hot as it has been.

When asked about the U.S. auto strike, Yellen said the Biden administration expects the two sides to be negotiating against the clock to get a settlement. It's too early to tell what impact the event might have on the economy, and it will depend much on how long the strike lasts and who exactly is affected.

Timiraos says the soft landing goal faces four threats

Although the possibility of achieving a soft landing has risen, but it is by no means easy, and the Federal Reserve is still skating on thin ice, written by Nick Timiraos, chief economics correspondent for The Wall Street Journal responsible for covering the Federal Reserve, on Monday.

On the eve of the 1990, 2001, and 2007 recessions, many Wall Street economists claimed that the U.S. was on the verge of a soft landing, where interest rates would be raised to curb inflation without triggering a recession.

Similarly, signs of slowing inflation and a cooling labor market this summer have made economists and Fed officials more optimistic that this tough goal could be achieved.

However, the goal faces four threats: the Fed holds rates too high for too long, economic growth accelerates, energy prices rise or a financial crisis erupts.

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