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• Pandemic-era stimulus is gone, and rates are much higher. It’ll make the 2023 recession hurt much more.
• Households are already feeling pressure from high inflation, slowing wage growth, and dwindling savings.
• Americans aren’t likely to get more aid in a 2023 downturn, and as their financial cushions fade, the pain will worsen.

The US economy’s post-pandemic party is over. Strap in for a pretty nasty comedown.

Roughly $5 trillion in government stimulus, historically low interest rates, and a salvo of emergency lending programs helped the US economy rocket out of its slump and stage one of the fastest recoveries in modern history.

But that fast recovery came at a price. Inflation started to heat up in the spring of 2021, first powered by used car prices but soon spreading to gas, food, and housing costs.

The monetary-policy cops showed up at the party soon after, but by then it was too late. The Federal Reserve started raising interest rates this March, making all forms of borrowing more expensive and hitting the brakes on economic growth. Mortgages, car loans, and credit card debt got pricier over a matter of weeks. Yet inflation charged even higher in the following months, and data published last week showed one key inflation gauge hitting a four-decade high in September.

Not only has the economy fallen short of its projections this year, forecasts of next year’s performance are even more worrying. Experts see 2023 featuring even higher interest rates, still-elevated inflation, rising unemployment, and a tougher job market for workers.

The removal of huge stimulus and the shift to slower growth will be a “painful process akin to waking up the next morning with a hangover after a long, hard bender,” Lauren Sanfilippo, director of Bank of America’s Chief Investment Office, said.

The bastions of the post-lockdown rebound are already deteriorating, and as a new recession looms, Americans are looking less prepared by the week.

Americans are burning through their pandemic-era cash savings cushions

For starters, households aren’t as flush with cash as they were one year ago. Americans built up a $2.1 trillion savings cushion through the early stages of the pandemic as spending plunged and stimulus hit households. But they’ve spent $630 billion — roughly one-third — of that buffer already, according to the Bureau of Economic Analysis.

Total savings are still well above pre-crisis levels, but the cushion is fading fast. The rate of decline has accelerated in recent months, and as inflation continues to bite households’ finances, Americans will face the difficult choice between cutting their spending on essentials and dipping into savings they held before the pandemic.

Their day-to-day cash flow is also down. Real disposable personal income per capita — what the average American can spend after taxes and inflation — held flat at $45,300 in August, according to government data. Though that’s up from the June low, it lands in line with the trend seen since March and below the pre-pandemic high of $46,000.

Put simply, the average household is past its financial peak. Americans are saving less and dipping into their financial cushions more just to get by. Once that buffer wears out, weaker saving can worsen the likely coming recession. Revenues will fall, companies will cut costs by laying off workers, and aggregate spending will fall all over again.

The historically-great jobs market is probably on its last legs

The unusually tight labor market was another boon to Americans throughout the recovery, but that’s reversed course too. American companies are trimming their hiring plans amid soaring interest rates and fears of a near-term recession. Job gains in September remained historically strong, but continued a longer trend of increasingly slower growth. Job openings, meanwhile, fell in August by the most since the first months of the pandemic.

And as employers’ demand for labor cools, so does worker pay. Monthly wage gains have slowed from the rapid pace seen earlier this year and now match the pre-crisis average. After accounting for inflation, the median worker’s weekly pay is below what they brought home before the lockdowns of early 2020.

The Fed’s crackdown on inflation will cause more economic pain

The historically low interest rates that aided households through the crisis are also nowhere to be found as the Fed has been ramping up its fight against inflation. The Fed’s benchmark rate now sits between 3% and 3.25%, well above the threshold at which rates constrain, not boost, economic growth. That’s helped push mortgage rates to highs not seen since the mid-2000s housing bubble and the average credit card rate is already two percentage points higher than it was in March.

The central bank still frames its rate hikes as its best tool for cooling the price surge, but until headline inflation falls back to earth, Americans are stuck between rising costs and pricier borrowing.

It’s no wonder, then, that economists are nearly certain a recession will materialize in the next 12 months. A forecast from Bloomberg economists pegs the odds of a downturn by October 2023 at 100%. A survey of economists conducted by The Wall Street Journal saw those odds climb to 63% in October from the 49% chance in July.

Fed officials haven’t explicitly forecasted a recession, but their latest projections show growth slowing significantly next year while unemployment leaps to 4.4%.

Congress probably won’t ride to the rescue in the next recession

Americans shouldn’t expect much aid by the time the next recession comes around. Inflation is still running at a 8.2% year-over-year pace, leaving lawmakers incredibly wary of pumping more cash into the economy. Republicans are also poised to take control of the House after the November midterm elections, further dooming the chances of a bipartisan stimulus bill should a downturn materialize. 

Taken together, the aforementioned trends make for a bleak outlook. The Fed has promised to keep raising rates until “the job is done,” all but guaranteeing borrowing costs will climb higher and the economy will slow further. Bringing inflation to heel is critical to ushering in a healthy economic expansion. Until then, the next recession will be made even worse by the come-down from the last downturn.

• Actor Ezra Miller has pleaded not guilty to accusations that they burglarized a Vermont home.
• Miller appeared in court on Monday morning to face a burglary charge and a petit larceny charge.
• Miller’s charges carry a possible jail term of up to 26 years if they are convicted, per Variety.

Ezra Miller pleaded not guilty on Monday to accusations that they burglarized a home in Vermont. 

Miller appeared in the Bennington Superior Court with their lawyer via video link on Monday morning, per Variety. The actor pleaded not guilty to felony burglary and petit larceny, two charges that carry a sentence of up to 26 years in prison if they are convicted, per the media outlet. 

Miller was granted approval by Vermont judge Kerry McDonald-Cady to remain out of jail on the condition that they do not go near the home that prosecutors allege they burgled, per the VT Digger, an independent Vermont news outlet.

The actor’s charges are related to a May 1 incident in the town of Stamford, Vermont. The authorities accused Miller of breaking into a home on County Road and taking “several bottles of alcohol” from the residence, per a police press release.

Miller — known for their roles in “Fantastic Beasts” and “Perks of Being a Wallflower” — became a lightning rod for controversy this year.

They were accused in June of grooming a teen, 18-year-old Tokata Iron Eyes. The teenager’s parents, Chase Iron Eyes and Sara Jumping Eagle, filed a domestic-violence protection order against the actor at the Standing Rock Sioux tribal court, accusing Miller of physical and emotional abuse. Both Miller and Tokata Iron Eyes have denied the allegations.

In late March, Miller was charged with disorderly conduct and harassment in Hawaii after they became “agitated” with people at a karaoke bar and began “yelling obscenities,” the local police said.

Miller’s attorney Lisa Shelkrot did not immediately respond to Insider’s request for comment.

• Former DOJ official Neal Katyal commented on Donald Trump’s 14-page response to the DOJ.
• Katyal said he did not think the response would help Trump unless he was trying to plead insanity.
• He said Trump’s response was “evidence” of an insanity plea.

Neal Katyal, a former Justice Department official, thinks former President Donald Trump’s written response to the House panel’s intention to subpoena him looks like an insanity defense. 

Katyal — a law professor and an Obama-era acting solicitor general — made an appearance on NBC on Sunday, three days after the House panel investigating the Capitol riot unanimously voted to subpoena Trump. The subpoena will compel the former president to cooperate with the committee or be held in contempt of Congress and referred to the DOJ for prosecution — much like Trump allies Steve Bannon and Peter Navarro. 

In response to the decision, Trump sent a document to the panel that started off with the sentence, “THE PRESIDENTIAL ELECTION OF 2020 WAS RIGGED AND STOLEN!” and contained multiple baseless claims of election fraud. It also included four photos of the crowd near the Washington Monument on January 6, 2021.

“Yeah, so, this is a 14-page screed, Jonathan, that’s very hard to follow. But it does seem to dig the hole in deeper for Donald Trump,” Katyal told MSNBC host Jonathan Capehart. 

“I can’t see it in any legal way helping him unless he is trying to go for the insanity defense, of which this paper seems, you know, to be some evidence of,” Katyal added.

Katyal added that he thought it was a “pretty fanciful” idea that Trump would just give in and testify to the panel because of the congressional subpoena.

“I mean, this is a man who took the Fifth Amendment more than 400 times the last time he was questioned under oath. And I doubt he’s suddenly become eager to testify,” Katyal said.

Katyal was referencing Trump’s deposition in New York in August during New York Attorney General Leticia James’ probe of the Trump Organization’s business practices, during which he pleaded the Fifth more than 440 times and only answered a question about what his name was.

Katyal also added that he thinks Attorney General Merrick Garland will indict Trump, seeing as there is overwhelming evidence to do so and “no contrition whatsoever” on Trump’s part.

A representative at Trump’s post-presidential press office did not immediately respond to Insider’s request for comment.

• An AirTag led police to a dumpster filled with more than 100 stolen campaign signs in Philadelphia.
• The Tredyffrin Township Police Department received numerous reports of stolen political signs.
• The signs were in support of Democratic candidates or causes such as reproductive health issues.

An AirTag led police to a dumpster filled with more than 100 stolen Democratic campaign signs in Philadelphia, according to the Tredyffrin Township Police Department. 

In a press release, the police department said it received numerous reports of stolen political signs from community members between Oct. 10 to Oct. 13. 

Police said a person whose signs were stolen told them that one of their signs had an AirTag attached to it which led officers to a commercial dumpster behind the Valley Fair Shopping Center where they discovered more than 100 signs. The department did not disclose the name of the resident who attached the AirTag to the campaign sign or why they did so. 

AirTags are a tracking accessory that helps users find whatever the AirTag is attached to by integrating with Apple’s “Find My” app.

Law enforcement told BuzzFeed News that the political signs were in support of Democratic candidates or causes such as reproductive health issues and Black Lives Matter. The news outlet spoke with Sandy Gilson, a resident of Tredyffrin Township who noticed four political signs, including one for Democratic Senate candidate John Fetterman were missing. 

Arlene Talley, Gilson’s friend and a member of the Chester County Democratic Committee, told BuzzFeed News she showed up at the dumpster after Gilson told her where they were located and found 118 signs. 

“I just started taking them out and putting them in my car,” Talley told BuzzFeed.

Pennsylvania State Rep. Melissa Shusterman tweeted her signs had been removed and blamed “local Republicans” for stealing them.

Raffi Terzian, the chairman of the Republican Party of Chester Country issued a statement in response to Shusterman’s allegations, saying it was unfortunate that the representative “decided to try to score political points with this issue by using highly charged and divisive rhetoric and pointing blame at local Republicans.”

Terzian’s statement condemned the thefts and stated that the Republican party had also received reports of signs that had gone missing or were vandalized. 

The police department said they have no suspects at this time.

—Melissa Shusterman (@MelissaForPA) October 12, 2022

The Apple AirTag has been used to track campaign signs before: In April, a candidate in Florida used an AirTag to track a stolen campaign sign located in a Jeep parked outside the home of his political rival.

The Tredyffrin Township Police Department and representatives for Shusterman did not respond to Insider’s request for comment. 

• The Chairwoman of the Republican National Committee made a number of predictions about the midterms.
• Ronna McDaniel said she expects Republicans to retake the majority in the House.
• She also said that the GOP will “retire” House Speaker Nancy Pelosi.

The Chairwoman of the Republican National Committee made a number of predictions about November’s midterms, including that the Senate will be narrowly split and that if the GOP wins, it will “retire” Nancy Pelosi as the House Speaker.

In an interview with Jon Decker, a White House correspondent for Gray Television, Ronna McDaniel was referring to the fact that if Republicans take the house, they will be in charge of electing a new Speaker.

She told Decker she thinks the Senate will be very tight. “I think it will be one seat either way,” she said. 

The RNC chair added she’s optimistic about Pennsylvania Senate candidate Dr. Mehmet Oz, despite him trailing  Democratic candidate John Fetterman in recent polling. 

“Everything is trending towards Oz and we feel really confident in this race,” McDaniel said.

When asked about the allegations surrounding Herschel Walker, the Georgia Republican nominee for Senate, McDaniel told Decker he’s been “very forthcoming” about his struggles with mental health.

Those allegations include Walker paying for a former girlfriend to get an abortion despite being a staunch opponent of abortion rights. Walker has denied paying for an abortion, calling the story a “flat out lie.” Walker’s son and ex-wife have also accused him of being “physically abusive.”

According to FiveThirtyEight, Republicans are favored to win the House while Democrats are slightly favored to win the Senate.

Representatives for McDaniel did not respond to Insider’s request for comment. 

• Inflation surged more than expected in September, raising new questions around the economy’s future.
• The Fed’s anti-inflation efforts haven’t worked, fueling speculation on rising interest rates.
• The White House could suffer ahead of midterms while Fed tightening could continue to affect stocks.

Some economic-data releases are hugely complicated, leaving experts and everyday Americans more confused about the country’s economic health.

But the September inflation report was crystal-clear in showing trouble ahead. Nearly every detail within painted a bleak picture of the country’s near-term future and made a self-induced recession even more likely.

The Consumer Price Index rose 0.4% in September and showed a year-over-year pace of 8.2%, both measures surpassing economists’ forecasts. Core inflation, which excludes volatile food-and-energy prices, jumped 0.6% last month, with a year-over-year gain of 6.6%. That marked the fastest core-price growth since 1982.

The details of the report were just as dire. Shelter inflation replaced food and gas prices as the biggest driver of headline inflation, accelerating to the fastest one-year pace since 1982 as well. Inflation for medical care and transportation services like airlines and mass transit also worsened throughout the month.

For the Federal Reserve, the new data makes its battle against inflation — which has included multiple historically large rate hikes — look futile. For the stock market, the prospect of further Fed tightening is a major headwind with indexes already near 2022 lows. And the White House now has to grapple with a fresh batch of negative inflation headlines mere weeks before the hugely consequential midterm elections.

Investors stare down a market reckoning

The stock market’s path through 2022 has been a simple one: If it looks as if the Fed will slow its hiking cycle, investors cheer and stocks rally. Conversely, signs that the central bank will keep tightening typically lead to sudden declines and fears of an economic downturn.

The first hours of Thursday’s trading session met that precedent. The S&P 500 plummeted as much as 2.4% soon after markets opened as investors read the report as a clear sign that the Fed will continue its hiking plans, though those losses reversed themselves by midday and stocks rebounded into the afternoon.

Options traders are now pricing in 0.75-point rate hikes for both the Fed’s November and December meetings. Such moves would firmly press the brakes on economic growth.

That leaves stock investors with a steep uphill climb through the rest of this year and 2023. Higher rates make borrowing more expensive for companies, which typically slows firms’ profit growth, and traders will set an even higher bar for companies to clear when they start announcing their quarterly earnings.

“These inflation numbers will be a major pain point for the markets. The coming earnings season would have to be doubly strong to offset the strong headwinds of will be an ever-aggressive Fed,” Yung-Yu Ma, a chief investment strategist at BMO Wealth Management, said. “Earnings season might not be bad, but being strong enough to reverse this tide will be a tough go.”

With several large rate hikes surely on the way, trading is likely to get more volatile before cooling down.

Strong inflation leaves the door wide open for the Fed to keep up its fast hiking pace

The September CPI read might’ve made investing a whole lot more complicated, but it makes the Fed’s decision process much easier.

Projections central-bank officials made in September already signaled the Fed would raise rates by another three-quarters of a percentage point in November before easing to a half-point hike at its December meeting. Market positioning heading into Thursday morning echoed that projection.

The new inflation data changed outlooks in a matter of minutes. Markets are now bracing for back-to-back 0.75-point hikes through the end of the year as well as continued hiking through early 2023.

“After today’s inflation report, there can’t be anyone left in the market who believes the Fed can raise rates by anything less than 75bps at the November meeting,” Seema Shah, the chief global strategist at Principal Asset Management, said. “Slowing growth yet rising inflation — the combination none of us, and least of all the Fed, want to see.”

With Fed officials consistently hinting that their tightening plans are far from complete, significantly higher interest rates are practically a given for at least the next year.

Worse-than-expected inflation endangers Democrats’ already-shaky election hopes

The Thursday report was the last opportunity for Democrats to win a surprise inflation cooldown they could campaign on through Election Day.

What they got was a worst-case scenario. Republicans already favored to wrest control of the House now have a new talking point that’s relevant to all Americans, and as campaigns enter their final sprints, surging inflation could even dent Democrats’ hopes to keep the Senate.

That likely dooms the Biden administration to a dull two years before the 2024 elections. Democrats’ fragile control of Congress allowed President Joe Biden to pass much of his legislative agenda, albeit with many packages slimmed down. Yet much of the blowback — from Republicans and moderate Democrats alike — centered around the policies putting more cash into the economy when inflation was on the rise.

With core inflation higher than it was at any point during the pandemic, Republicans are poised to push spending cuts and deficit reduction should they take the House. Chances at bipartisan policymaking will be few and far between, and until inflation shows clear signs of easing, the GOP will likely aim to reverse many of the White House’s recent victories.

• Walt Nauta, a longtime Trump aide, was seen moving boxes out from a storage room the FBI searched.
• The incidents were caught on security footage, The New York Times reported.
• Nauta was seen moving boxes before and after the DOJ demanded top-secret files be returned in May.

A Trump aide was caught on security camera moving boxes out of a storage room in Mar-a-Lago, per a report from The New York Times. The Times did not view the security footage and Insider was not independently able to verify its contents.

The Times spoke to three people familiar with the matter, who said longtime Trump staffer Walt Nauta was seen on Mar-a-Lago’s security footage moving boxes out of a storage room that was later searched by the FBI. This took place both before and after the Department of Justice issued a subpoena in May ordering Trump to hand over classified documents, per the NYT’s sources.

Intrigue has swirled around what was kept in the storage room, and whether anything was removed from it before the DOJ searched Trump’s property. The Times’ piece dropped hours after The Washington Post reported that Trump himself explicitly directed employees to move boxes of White House documents from the storage room. These boxes were taken from the storage area to the former president’s private residence after Trump advisers received the DOJ’s subpoena in May, per The Post.

The FBI also interviewed Nauta several times before it raided Mar-a-Lago on August 8, according to one of The Times’ sources.

After the raid, the FBI carted off 11,000 documents from Mar-a-Lago, including some that were marked “CLASSIFIED.” Investigators found documents inside a closet in Trump’s office and a storage area in the property’s basement. Some of the documents the FBI found were so sensitive that investigators needed further clearance to view them. Among the documents retrieved was classified information on a foreign country’s nuclear defenses, The Washington Post reported.

The DOJ is currently investigating whether Trump broke three federal laws — including the Espionage Act — by keeping the files at his Florida residence. In an August court filing, the Justice Department said it had evidence “that government records were likely concealed and removed” from the storage room at Mar-a-Lago, and that “efforts were likely taken to obstruct the government’s investigation.”

Nauta’s lawyer, Stanley Woodward Jr., declined to comment on The Times’ reporting. Taylor Budowich, Trump’s spokesman at his post-presidential press office, told The Times the Biden administration was “colluding with the media through targeted leaks in an overt and illegal act of intimidation and tampering.”

Budowich and Woodward Jr. did not immediately respond to Insider’s requests for comment.