DA - Business Confidence - Michigan 7 2023 BFHGR

Economy DAs – BFHR
Notes
Great work by many students on this file and the second file that will be out later tonight/tomorrow. Mahi, Mike, Cy, Nicole, Surya, Lucy, Pairie, Aruthur, Ayush, Sanjith.
Many of the disad arguments in these files are interchangeable and you should read through all of the files to make sure you understand which cards can be used in multiple files. The 1NC in the biz con da is set up against the social security affs. If you want to read it vs. another aff you will need to change the shell. The same is true for the housing DA --- the 1NC is set up to be read against UBI affs and you will need to change the shell if you want to read it against a different affirmative. There will be an inflation DA and a Debt DA in the second file tonight or tomorrow.
Enjoy.
Forslund
General Ups
General Uniq
Uniq --- Econ Up
there is scope to escape a recession --- labor market is tight --- housing is recovering
Smart 6-21-23 (Tim, June 21, Tim Smart is the Contributing Editor for News at U.S. News & World Report "Powell to Congress: Taming Inflation Has a ‘Long Way to Go,’ More Rate Hikes Likely," US News & World Report, https://www.usnews.com/news/economy/articles/2023-06-21/powell-to-congress-taming-inflation-has-a-long-way-to-go-more-rate-hikes-likely// AP)
In particular, while there are signs the economy has slowed, the labor market still remains extremely tight by historical standards and the housing market seems to be showing new signs of life.
Some economists are now backing off their predictions of an imminent recession, the common result of a Fed tightening cycle and diminished economic growth. But there remain headwinds, notably less availability of credit and inflation that is eating into consumer pocketbooks.
“In this unique business cycle defined by unusual labor market characteristics, there is scope for hope that the US economy could escape a recession,” EY Parthenon Chief Economist Gregory Daco wrote Wednesday morning.
“Indeed, unlike in prior downturns, business executives have proven reticent to dispose of the pool of talent they struggled to hire, train, and retain post-pandemic,” he added. “This labor hoarding phenomenon has so far translated into a limited drag on household income and, as a result, a gradual consumer spending slowdown rather than a retrenchment.”
Uniq --- No Recession --- Labor/Consumer $
Growth is up—consumer spending and strong job markets are holding off recession.
Casselman 4-23 [Ben Casselman, writes about economics and other business topics for The New York Times, with a particular focus on stories involving data; 4/27/23, “U.S. Economy Continues to Grow, but More Slowly”, The New York Times, https://www.nytimes.com/2023/04/27/business/economy/gdp-q1-economy.html DOA 6/22/23] nmui
Higher interest rates took a toll on the U.S. economy in early 2023, but free-spending consumers are keeping a recession at bay, at least for now.
Gross domestic product, adjusted for inflation, rose at a 1.1 percent annual rate in the first quarter, the Commerce Department said on Thursday. That was down from a 2.6 percent rate in the last three months of 2022 but nonetheless represented a third straight quarter of growth after output contracted in the first half of last year.
The figures are preliminary and will be revised at least twice as more complete data becomes available.
Growth in the first quarter was dragged down by weakness in housing and business investment, both of which are heavily influenced by interest rates. The Federal Reserve has raised rates by nearly five percentage points since early last year in an effort to tamp down inflation.
Consumers, however, have proved resilient in the face of both rising prices and higher borrowing costs. Inflation-adjusted spending rose at a 3.7 percent annual rate in the first quarter, up from 1 percent in the prior period. Spending on services such as travel and restaurant meals continued to rebound from pandemic lows. But spending on goods also rose after four straight quarters of declines.
Consumers have been buoyed by a strong job market and rising wages, which have helped offset high prices. After-tax income rose at an 8 percent annual rate in the first quarter, adjusted for inflation, though that was partly because of a cost-of-living adjustment that led to a big increase in Social Security payments in January.
Uniq --- AT Recessions Inev
All recessions relate to confidence.
George-Marios Angeletos 15, Economics Professor at MIT; Fabrice Collard, Professor at the Toulouse School of Economics; Dr. Harris Dellas, Monetary Economics, Macroeconomics, and International Economics Professor at the University of Burn, 3/16/2015, “Confidence, aggregate demand, and the business cycle: A new framework,” https://voxeu.org/article/confidence-aggregate-demand-and-business-cycle-new-framework, Stras
Macroeconomic activity and economic confidence seem closely linked. Figure 1 shows the relationship between the cyclical component of GDP and a popular measure of economic confidence, the University of Michigan Consumer Sentiment Index. There has not been a single instance of a recession during this period that has not been preceded-accompanied by a significant deterioration in confidence.
The popular press and economic commentators often invoke this relationship when reporting on macroeconomic developments. For example, they attribute recessions to declines in aggregate demand that are triggered by sagging confidence. They link reductions in hiring and investment by firms to their pessimism about the demand for their products; and reduced spending by consumers to their pessimism about their job and income prospects. Consumers' and business' confidence indexes move together, indicating that the pessimism of one class of agents often appears to justify, if not feed, that of other.
Previous attempts to introduce coordination failures and market psychology
A literature in macroeconomics that blossomed in the late 80s and the 90s sought to rationalise this close link between market psychology and macroeconomic activity within a class of models that featured multiple equilibria and self-fulfilling fluctuations (e.g., Cooper and John 1988, Benhabib and Farmer 1999). The appealing feature of these models was that they could accommodate coordination failures and movements in economic confidence without any commensurate movements in ‘hard’ fundamentals, such as peoples’ abilities and tastes or the economy’s know-how, or expectations of such fundamentals. Yet, these models are not part of the core chute of quantitative macroeconomic models used nowadays to study the data and guide macroeconomic policy. This probably reflects the fact that, although equilibrium multiplicity is an interesting theoretical concept that highlights the perils of coordination failure, it also poses serious difficulties when evaluating a model’s empirical performance or when seeking to guide policymaking.
Mainstream macroeconomic models have little use ‘for confidence’
Mainstream dynamic stochastic general equilibrium (DSGE) models, on the other hand, simply opt to ignore the possibility of either coordination failure or extrinsic shifts in market sentiment. By imposing that economic agents share a single, common belief about the current state and the future prospects of the economy (e.g., agents never disagree with one another on how deep a recession might be, how long the recovery may take, or when the next boom is coming), these models are built on the convenient but unrealistic assumption that the millions of firms and consumers, whose joint behaviour determines macroeconomic activity, can coordinate their actions in a perfectly orchestrated manner. In so doing, these models also take a narrow view of the notions of confidence and market psychology; those are linked exclusively to uncertainty about fundamentals such as technology and policy, with uncertainty about the actions of others and the possibility of coordination failures being ruled out. We find this both limiting and counterproductive.
Waves of optimism and pessimism as a driver of the business cycle
In Angeletos et al. (2015), we thus seek to liberate the formation of expectations in mainstream DSGE models. We accomplish this by introducing a certain type of higher-order uncertainty (what I believe, that you believe, that I believe, that you...) which relates directly to the firms’ and the consumers’ expectations about the short-term economic outlook.
The paper contains contributions on both the methodological and applied front.
The methodological contribution lies in devising a method that bypasses the technical difficulties associated with incomplete information and higher-order uncertainty.
The applied contribution derives from accommodating certain waves of optimism and pessimism about the short-term economic outlook, quantifying their importance within real business cycle and New Keynesian models, and establishing that these waves help capture multiple salient features of the data in a manner that is not easily rivalled by existing structural mechanisms.
The key mechanism of our model is encapsulated by the following narrative. Consider a negative confidence shock represented by the belief that other agents have developed a pessimistic outlook about the short-term prospects of the economy (with the medium- to long-term prospects remaining invariant). As firms expect the demand for their products to be low for the next few quarters, they too find it optimal to lower their own demand for labour and capital. Households, on their part, experience a transitory fall in wages and total income. They react by working less and by cutting down both consumption and saving. Variation in confidence, therefore, leads to a strong co-movement between employment, output, consumption, and investment at the business-cycle frequencies, without commensurate movements in labour productivity, TFP, or the relative price of investment at any frequency. It is precisely these co-movement patterns that represent the key properties of observed business cycles and that existing structural mechanisms have difficulty accounting for.
Along with capturing these important features of the data, our mechanism offers a novel formalisation of the notion of fluctuations in ‘aggregate demand’. In spite of its popularity and widespread use, aggregate demand is a fuzzy concept that is difficult to nail down in general equilibrium models. Our model links aggregate demand and its variation to the level and variation of confidence (a barometer of the beliefs held by economic actors about other actors' outlook on the economy) and, unlike the New Keynesian model, it does not require either nominal rigidities or frictions in the conduct of monetary policy for demand to matter for business cycles.
In addition, our model-based confidence concept looks remarkably similar to its empirical counterpart. We illustrate this in Figure 2, by comparing the University of Michigan Consumer Sentiment Index to the confidence shock in our model, which is itself estimated on the basis of standard macroeconomic series alone, without any information about that index. We view this coincidence as additional validation of our mechanism and of its interpretation.
Recessions under the lenses of the new theory
Our approach helps revisit the interpretation of actual recessions. To account for them, New Keynesian models rely on a level of nominal rigidity which seems hard to reconcile with menu-cost models and micro evidence on price-setting behaviour. They also require certain kinds of adjustment costs that have dubious micro-foundations. By contrast, our approach offers a structural interpretation of the business cycle that is not unduly sensitive to either the degree of nominal rigidity or the aforementioned modelling features. In particular, it attributes economic downturns and the possibility of sluggish recoveries to, at least in part, coordination failures and to a non-monetary form of ‘deficient demand’. It can thus account for the fact that the Great Recession was not accompanied by a ‘great deflation’, as one would have expected on the basis of the New Keynesian model; it can accommodate the view that depressed consumer spending is at the core of this recession by linking the former to the observed large and persistent drop in confidence; and it provides a formal foundation for the argument that the recovery hinges on ‘restoring confidence in the economy’.
Uniq --- Labor Markets = Growth Up
Resilient labor markets are keeping economic growth afloat.
Mutikani 5-23 [Lucia Mutikani, Correspondent for Reuters; 5/25/23, “US weekly jobless claims rise moderately; first-quarter GDP growth revised up”, Reuters, https://www.reuters.com/markets/us/us-weekly-jobless-claims-rise-moderately-first-quarter-gdp-growth-revised-up-2023-05-25/ DOA 6/24/23 ] nmui
WASHINGTON, May 25 (Reuters) - The number of Americans filing new claims for unemployment benefits rose moderately last week and the prior week's data was revised sharply lower, suggesting persistent labor market strength.
Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 229,000 for the week ended May 20, the Labor Department said on Thursday. Data for the prior week was revised to show 17,000 fewer applications received than previously reported. Economists polled by Reuters had forecast 245,000 claims for the latest week.
Though claims surged recently, boosted by fraudulent applications in Massachusetts, they remain at levels consistent with a still-tight labor market.
The low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.
The labor market has been resilient, despite 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.
There were 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.
Employers have been hoarding workers after experiencing difficulties finding labor in the wake of the COVID-19 pandemic.
Economists expected layoffs to increase as the effects of the punitive rate hikes spread through the economy and tightening financial conditions make it harder for small businesses to access credit. Most expect a mild recession by the second half of the year.
Minutes of the Fed's May 2-3 policy meeting published on Wednesday showed that while "participants noted that the labor market remained very tight," they "anticipated that employment growth would likely slow further, reflecting a moderation in aggregate demand coming partly from tighter credit conditions."
The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 5,000 to 1.794 million during the week ending May 13, the claims report showed.
The so-called continuing claims covered the period during which the government surveyed households for May's unemployment rate. Continuing claims dropped between the April and May survey weeks. The unemployment rate fell back to a 53-year low of 3.4% in April.
Labor market tightness is supporting wage growth, helping to drive consumer spending and keep the overall economy afloat.
In a separate report on Thursday, the Commerce Department confirmed economic growth slowed in the first quarter, restrained by businesses liquidating inventories. The inventory drawdown likely reflected strong consumer spending as well as businesses reducing stock in anticipation of a recession.
Gross domestic product increased at a 1.3% annualized rate last quarter, the government said in its second estimate of first-quarter GDP growth. That was revised up from the 1.1% pace reported last month. The economy grew at a 2.6% pace in the fourth quarter. Economists had expected first-quarter GDP growth would be unrevised.
Uniq --- Growth Up
Consensus proves—growth will expand in 2023.
Federal Reserve Bank 5-23 [Federal Reserve Bank of Philadelphia, 12 regional Reserve Banks that, together with the Board of Governors in Washington, D.C., make up the Federal Reserve System, work to ensure the strength and integrity of the U.S. economy and financial system; 5/12/23, “Second Quarter 2023 Survey of Professional Forecasters”, Federal Reserve Bank of Philadelphia, https://www.philadelphiafed.org/surveys-and-data/real-time-data-research/spf-q2-2023 DOA 6/24/23] nm
Forecasters Maintain Their Expectations for Growth in 2023
The forecasters see the U.S. economy in 2023 expanding at the same pace as they predicted three months ago, according to 38 panelists surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict annual-average over annual-average growth in real GDP of 1.3 percent in 2023, unrevised from their estimate of three months ago. The panelists are also maintaining their forecast for growth in the second quarter at an annual rate of 1.0 percent, unchanged compared with their previous projection. However, while their predictions for the second quarter and for 2023 remain the same, the forecasters revised upward their predictions for the third quarter of 2023. They also revised downward their fourth-quarter estimates.
A downward revision of 0.1 percentage point in the quarterly projections for the unemployment rate over the next four quarters accompanies the outlook for growth. On an annual-average over annual-average basis, the forecasters have lowered their 2023 unemployment rate forecast from 3.8 percent in the previous survey to 3.7 percent in the current survey.
The forecasters see stronger payroll employment growth in 2023 than they did three months ago. The current estimate calls for job gains at a monthly rate of 257,500 in 2023, marking an increase from 217,800 in the previous survey.
Uniq --- Growth Fragile/Shocks = Recession
Consumer spending has stabilized growth, but its fragile—shocks to the labor market cause recession.
Pound 6-23 [Jesse Pound, covers markets for CNBC Pro, with a focus on the ETF industry, has degrees in journalism and economics from the University of Oklahoma and a master’s degree in finance from Villanova University; 6/8/23, “Consumers are keeping the U.S. out of a recession. It’s getting harder”, CNBC, https://www.cnbc.com/2023/06/08/the-us-economy-keeps-skirting-recession-but-consumer-sector-might-slowly-be-splitting-apart.html DOA 6/24/23] nmui
The widely predicted U.S. recession remains out of sight as the first half of 2023 winds down, but the consumer sector that has fueled a remarkable recovery from the pandemic shutdowns may finally be showing signs of fraying.
The signals that economists lean on to gauge the odds of a recession are contradictory at the moment. The yield curve remains deeply inverted, and manufacturing surveys have been flashing recession signals for months. But layoffs concentrated in the tech sector have not spread widely so far, and there are pockets of consumer strength, such as travel, that look like a downright boom.
With the Federal Reserve expected to skip a rate hike at its next meeting, hopes of a so-called “soft landing” for the economy have begun to sprout again. On Tuesday, Goldman Sachs lowered its odds of a U.S. recession in the next 12 months to just 25%.
But can the strong consumer sector continue to hold up as the pandemic-era savings fade away and interest rates remain elevated? Not everyone is convinced, with some Wall Street strategists and economists arguing that a recession is just a matter of time as the central bank tries to bring down inflation — and there is plenty of evidence for that pessimistic case.
“The US and global expansions stand on solid ground, and fears of an imminent recession look overblown. This is th

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