text: Good morning. Here’s your Early Warning for Thursday, 08 September 2022.TODAY’S BRIEFING:READ TIME: 12 mins 30 secondsInFocus: Weekly Economic OutlookInside the BeltwayDomestic INTSUMGeostrategic INTSUMLow-Intensity Conflict Activity Rollup & OutlookInFocus: Weekly Economic OutlookJason Furman had an interesting take on inflation this week. He was chairman of the White House Council on Economic Advisers under Obama, but is hardly a Biden cheerleader. His take is that the Fed is going to need to run a 6.5% unemployment rate for two years to get the rate of inflation back to 2%. In other words, the Fed is going to have to put more people out of work, which likely means running a recession.As always, the standard caveat to the “unemployment rate” stands: it’s poorly calculated, isn’t reflective of actual unemployment, and doesn’t account for those underemployed and taking jobs below their potential. In a speech this week, Cleveland Federal Reserve Bank Chairwoman Loretta Mester said she wasn’t convinced that inflation has peaked, adding that the Fed’s goal remains to engineer a soft landing. And we continue to see softening economic data.In the latest Beige Book, the Fed points out that consumer spending is shifting towards essential items and away from discretionary goods. Sales for autos have fallen and continue to remain below peak sales levels since July, while manufacturing activity has declined as well. Demand for residential real estate loans has decreased alongside demand for commercial real estate loans. The Beige Book’s outlook for the economy was “generally weak,” with expectations for softening demand to continue over the “next six to twelve months.”To recap: Fed officials have played down the recession risks for two straight quarters of negative economic growth, and now expect weakening economic conditions through the middle of 2023. By denying the recession, the Fed continues to strain what’s left of its credibility, especially when they’ll likely be forced to reverse course on recession talk next year.In a note to clients this week, BlackRock ($8 trillion assets under management) said they expect a “large drop” in U.S. gross domestic product (GDP) by mid-2023, signaling the start of a recession by early next year at the latest. They follow a slew of other investment, corporate, and financial firms warning of an imminent recession. Officially or technically, it’s here or will be soon.One last note: Bank of America issued a stark warning to clients yesterday about worsening conditions in U.S. Treasuries. “In our view, declining liquidity and resiliency of the Treasury market arguably poses one of the greatest threats to global financial stability today, potentially worse than the housing bubble of 2004-2007,” analysts write. I expect to have this full report today and will be digging into it. – M.S.INSIDE THE BELTWAYWHITE HOUSE: President Biden is speaking with European leaders this morning about the next steps in the Ukraine-Russia war, following the approval of another $2 billion in Ukraine military aid.CONGRESS: Nothing Significant to Report (NSTR)NEW LEGISLATION TO HURT SMALL FAMILY FARMS: The House is scheduled to vote on a bill intended to reduce the number of injuries that children experience working on farms each year. The bill would enlist working restrictions for 14 and15-year-olds that prevent them from working during certain hours outside of school. Additionally, the bill would enable 12 and 13-year-olds to work outside school with parental consent. Critics of children working on farms are excited about the bill, as it includes provisions for safety standards that, if ignored, could result in jail time or fines for farmers. (AC: Farmers and farm associations across the country complain of a labor shortage which is driving up prices. Restrictions on teenage labor will impact small family farms where farm work is a part of life. If passed by the House and Senate, this bill will exacerbate the farm labor shortage. – M.S.)DOMESTIC INTSUM