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Today in Real Time Economics, the Senate meets to avoid a government shutdown, Amazon names 20 finalists for a new headquarters, the White House considers John Williams for Fed vice chairman, less-educated Americans see wage gains and Japan’s central bank weighs its message as inflation firms.
MIDNIGHT DEADLINE TO AVOID SHUTDOWN
The Senate will try to avoid a partial government shutdown today. The House passed a stopgap spending measure yesterday but the risk of a standoff has intensified amid partisan fighting and disagreement over immigration, defense spending and other policies.
Senate Democrats indicated they had the votes to block a measure to keep the government funded through Feb. 16. It needs 60 votes. Party leaders say the bill leaves key issues unresolved, including the fate of young illegal immigrants brought to the U.S. by their parents.
WHAT HAPPENS NEXT?
If lawmakers can’t get the job done by 12:01 a.m. Eastern Time on Saturday, hundreds of thousands of workers would be furloughed, many federal contracts with businesses would be suspended and government services that support private firms would be halted. That means, for example, mortgage applications would be delayed and drilling permits languish.
While it’s difficult to separate effects of the 16-day shutdown in 2013 from debt limit brinkmanship during the same period, a report from the Obama administration budget office estimates the last partial closure knocked 0.2-0.6 percentage point off of GDP for the quarter.
Of course, the economy rebounded. And many crucial services would continue, including law enforcement, air-travel security and Social Security payments.
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WHAT TO WATCH TODAY
The University of Michigan’s preliminary January consumer sentiment index is out at 10 a.m. Eastern. Economists expect a reading of 97.0, up from end-December’s 95.9. The index hit its highest level in more than 13 years in October and has remained elevated, reflecting a broadly upbeat outlook amid strong job growth, steady economic gains and new highs for stocks.
The Federal Reserve’s Randal Quarles speaks on banking regulation at an American Bar Association banking law committee meeting at 1 p.m.
The San Francisco Fed’s John Williams speaks at Bay Area forecast conference at 1:30 p.m.
TOP STORIES
TOP 20 ON AMAZON
Amazon announced 20 finalists for its planned second headquarters, including New York, Boston and Chicago, as well as some surprise candidates like Columbus, Ohio, Indianapolis and Miami.
Amazon expects to create as many as 50,000 jobs paying an average of $100,000, a boon but also challenge for a local economy.
For example, Zillow estimates that Seattle home values doubled and rents increased by half since November 2010, when Amazon moved to its current location in the city. By comparison, nationwide home values increased 30% and rents 14.7% in the same span.
WHITE HOUSE LEANS TOWARD WILLIAMS
The White House is considering John Williams, the president of the Federal Reserve Bank of San Francisco, as a candidate to serve as the vice chairman of Federal Reserve Board in Washington, Nick Timiraos reports.
Mr. Williams would be following in Fed Chairwoman Janet Yellen’s footsteps. He took over as the San Francisco Fed leader in 2011, after Ms. Yellen was tapped to serve as the Fed’s vice chairwoman in 2010.
Mr. Williams would fit the Trump administration’s interest in filling the vice chairman post with someone who is a widely respected expert in monetary economics.
WAGES RISE FOR HIGH-SCHOOL DEGREE HOLDERS
Americans with only a high-school diploma are seeing faster earnings growth than their college-educated counterparts, as employers in low-wage industries scour the market for workers.
In the fourth quarter of 2017, median weekly earnings for workers 25 years and older with only a high-school diploma rose 2.3% from the same period a year earlier, new Labor Department data show. Meanwhile, pay for Americans carrying a bachelor’s degree edged up just 0.8% from the fourth quarter of 2016.
The trend has been ongoing, with year-over-year wage growth for high-school graduates outpacing wage growth for college graduates in each quarter of 2017.
45-YEAR LOW ON CLAIMS
Need more evidence the labor market is tightening?
The number of Americans filing applications for new unemployment benefits fell last week to the lowest level in nearly 45 years. Claims numbers have remained below 300,000 a week for almost three years—the longest such streak since 1970, when the U.S. population and workforce were far smaller than they are today.
JAPAN CENTRAL BANK MASSAGES MESSAGE
The Bank of Japan is optimistic about hitting its 2% inflation target within two years and is considering how best to communicate any possible policy changes, Megumi Fujikawa reports.
As the central bank prepares for its first policy meeting of 2018 on Monday and Tuesday, insiders see more signs that inflation is on the right track. Core inflation—all prices excluding fresh food—rose 0.9% in November, and corporate leaders have expressed openness toward larger wage increases this spring, when annual talks with labor unions take place.
That has led to speculation that the Bank of Japan may dial back its easing program, following in the footsteps of the Federal Reserve and the European Central Bank.
VENEZUELA OIL OUTPUT COLLAPSES
Economic growth hasn’t spread to all corners of the globe. Venezuela’s oil output is collapsing at an accelerating pace, deepening an economic and humanitarian crisis and increasing the chances the country will default on its debts.
Crude production fell 11% in December from the month before. Over all of 2017, output was down 29%, driven by mismanagement and under investment at the state oil company, say industry observers and oilmen.
The drop is deeper than that experienced by Iraq after the 2003 war there.
U.S. TO PASS SAUDI CRUDE OUTPUT
U.S. energy producers are moving in the opposite direction of Venezuela. Surging U.S. crude oil production this year is expected to surpass output in Saudi Arabia and rival that of Russia, the world’s two largest oil producers, the International Energy Agency said.
Boosted by a resurgent shale industry, U.S. crude production will likely climb above 10 million barrels a day in 2018, a level not seen since 1970.
SPLIT BETWEEN OLD EU, NEW EU
The European Union is locked in increasingly bitter battles with its newer members over their adherence to democratic standards of law, a clash of cultures that EU officials say poses a long-term threat to the union.
Hungary has drawn EU ire for legislation targeting universities and nongovernmental organizations. Slovenia and Croatia can’t settle their border. Poland and Romania have moved ahead with efforts to curtail the independence of their judiciaries.
The EU’s eastward expansion during the previous decade was meant to lift Europe’s less-developed countries out of economic and political stagnation after decades under communism. While these nations have raised their standards, EU officials worry about their commitment to core principles such as the separation of powers and rule of law.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
The Financial Times warns China’s declining birth rate could threaten the country’s economic development. The annual number of births in China fell for the first time since Beijing relaxed its one-child policy—there were 17.23m in China in 2017, down from 17.86m the previous year. “Economists have warned that falling birth rates in China are leading to a rapid ageing of the population and creating a shortage of workers. That is placing a greater burden on social services even while per capita incomes in the country lag behind developed nations, which have struggled with declining fertility rates for decades.”
Want a better bead on the U.S. economy? Federal Reserve economists get into the weeds with microdata from payroll processor ADP. What they derive is a set of weekly aggregate employment indexes that allows them to measure employment at a higher frequency than with official government measures. “Indeed, the timeliness and frequency of the ADP payroll microdata substantially improves forecast accuracy for both current-month employment and revisions to the [Labor Department] data.”
The New York Times asks if China’s economic data is fake news. While official numbers say China’s economy accelerated last year for the first time in seven years, the actual pace of growth is anybody’s guess. “Its official figures have become implausibly smooth and steady, even as other countries post results with plenty of peaks and valleys. Officials in far-flung regions are admitting their numbers are wrong. And outside experts crunching the data have come up with different — and usually weaker — results.”
UP NEXT
If the U.S. government shuts down this weekend, regularly scheduled data releases from the Commerce and Labor Departments, such as jobless claims and housing starts, will not be published until the government is fully-funded again. Once all government agencies are open again, all of the reports that were not published during the shut down will be released.
The Bank of Japan releases a policy statement on Tuesday and the European Central Bank releases a policy statement on Thursday.
For the U.S., the latest measure of economic growth highlights next week’s economic calendar. The Commerce Department is scheduled to release its advance reading of fourth-quarter gross domestic product on Friday.
The U.S. economy has posted two consecutive quarters of above-3% growth and appears to be in one of its strongest stretches of growth in a decade.
from Real Time Economics http://ift.tt/2DOiNHZ
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