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SENATE TRIES AGAIN ON SHUTDOWN
The Senate is expected to vote at noon ET Monday on a measure to keep the government funded through Feb. 8. It’s not clear if it will have enough support to pass.
A federal government shutdown could sideline federal employees and leave government contractors out in the cold, but in a $19.5 trillion economy with 147 million workers, even a long one isn’t expected to leave much imprint on the economy, Harriet Torry writes.
The last government shutdown in October 2013 sent 818,000 workers, or 30% of all federal government employees, home without pay for more than two weeks. Nonetheless, in the final quarter of 2013, the economy had its strongest performance in two years despite the 0.3 percentage point hit to gross domestic product from the federal impasse.
The labor market held up well during the shutdown period, too: U.S. employers created 212,000 jobs that October, up from 190,000 the prior month.
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WHAT TO WATCH TODAY
Monday is quiet on the economic data front.
Later this week, Federal government releases may be delayed because of the shutdown. The next notable indicators are Thursday’s new-home sales, followed on Friday by durable-good orders and the closely watched fourth-quarter gross domestic product estimate.
“Never mind the delay,” economists at Morgan Stanley say of GDP. “Tracking estimates are based on hard data inputs and every indication points to a strong finish to the year.”
Economists surveyed by The Wall Street Journal expect 2.9% GDP growth for the fourth quarter.
The World Economic Forum in Davos is this week. Thousands of the world’s richest and most powerful people will descend on the Swiss village to network, party and discuss the meeting’s official theme: “Creating a Shared Future in a Fractured World.” The topic is belated recognition that many people are deeply unhappy with trade, immigration and other policies championed by the business and political elite.
Some populist-nationalist flag bearers will take a turn in the spotlight, including Narendra Modi and Mateusz Morawiecki, prime ministers of India and Poland. But the marquee event is President Trump’s address Friday, assuming the shutdown doesn’t get in the way. His main message will be to link upbeat American economic news to his policies, in particular his tax cut. The Davos crowd probably hopes he will also use the forum to reconcile his America First agenda with the global rules and institutions they hold dear.
TOP STORIES
SHORT-TERM GAIN, LONG-TERM PAIN?
Washington could be trading more growth now for the risk of more pain down the road, Nick Timiraos writes.
The GOP tax overhaul is projected to raise annual federal-budget deficits to nearly $1 trillion in the coming years. That could leave lawmakers less fiscal firepower and put more pressure on the Federal Reserve if the economy contracts. The U.S. government has traditionally reduced interest rates, boosted spending or cut taxes to counter a downturn.
The good news is that very few economists think a recession is anywhere near. Forecasters surveyed by The Wall Street Journal in December put a low 13% probability of recession in the next 12 months.
KEEP ON TRUCKIN’
With the economy humming, retailers and manufacturers are looking to hire thousands more trucks to haul clothing, construction equipment and other goods.
There is just one hitch: Trucking companies can’t add capacity fast enough to take advantage of the flood of new business. Many expect to raise pay later this year. Even then, “unseated trucks”—big rigs that could be hired out but have nobody to drive them—are becoming more common.
The U.S. unemployment rate held at 4.1% in the final three months of the year, its lowest level since 2000, and employment in the truck transportation industry has leveled off, signs of a tight labor market. Over all of 2017, truck transportation industry payrolls grew less than 1%.
NO CHECKOUT LINES
Will cashierless shops follow driverless cars? Amazon.com’s cashierless convenience store is slated to open to the public today.
The new Amazon Go store in Seattle uses computer vision and machine-learning algorithms to track shoppers and charge them for what they select, thereby eliminating checkout counters.
RETAILERS STILL NEED WORKERS
Despite a supposed retail apocalypse, demand for workers is high. As of November 2017, there were 711,000 retail job openings—the highest number since the data was first collected in 2000.
Last week, Walmart announced plans to increase its minimum wage to $11 and provide a one-time cash bonus of $1,000 to eligible employees. Target last fall announced it was raising its minimum wage to $11, with plans to establish a $15 minimum by 2020.
If wage pressures lead to fatter paychecks for retail workers, that could end up a net positive for stores that cater to middle-class shoppers.
MAKE-OR-BREAK NAFTA TALKS
Canadian and Mexican trade officials are working to convince their U.S. counterparts not to put an end to the North American Free Trade Agreement.
In Montreal this week, Canada and Mexico will present an array of responses to some of the Trump administration’s most hard-line demands for changing the trade pact. Negotiators’ initial focus will be on Washington’s demands for increased U.S. content for cars made in North America.
The goal in the Montreal talks is to make enough progress that President Trump won’t be tempted to pull the plug on negotiations.
TRUMP PRIORITIZES CHINA
Nafta is one of the Trump administration’s concern, but perhaps not its biggest. The president’s “America First” trade policy will be more focused in the coming year on countering China, after a first year tangling with allies ranging from North America to Europe and Asia.
“There’s a lot of consensus around the viewpoint that China does need to be the focal point, because China’s behaviors are causing significant problems for the U.S. economy and for the global trading system,” a White House official said.
WHAT ELSE WE’RE READING
The Center for Economic Policy Research adds evidence to the assumption that people become less willing to take risks as they get older, an outcome with a potentially significant impact on countries in Europe, Asia and elsewhere with aging populations. The size of this effect is substantial. For example, an increase of 10 years in the median age of a society translates into the equivalent of 2.5% less investment in stocks or about 6% less self-employment.
The Economist highlights research showing that women aren’t only underrepresented in the field of economics. They’re also underrepresented in its textbooks. “For example, in America women owned 36% of businesses in 2012, and since 2008 they have comprised about a quarter of chief executives. In the books, however, just 6% of the real-world business leaders were female.” The trend continues when textbooks use real-life policy makers and fictitious characters to illustrate analysis and decision making. That may be one factor perpetuating the wider gender imbalance among economics graduates.
The New York Times asks how New Hampshire, a prosperous state with the highest median household income in the country, low unemployment and crime, and frequently at or near the top of lists of the best states in which to live, could also lead the nation in overdose deaths per capita from fentanyl, a powerful synthetic opioid. Research suggests it’s a mix of several factors, including proximity to an abundant drug supply in Massachusetts, low spending on drug treatment services, pockets of economic degradation, and high prescription rates for painkillers.
UP NEXT
The Bank of Japan releases its rate decision on Tuesday.
The Federal Reserve Bank of Richmond’s manufacturing index is due out at 10 a.m. Eastern on Tuesday.
The Senate Banking Committee holds a confirmation hearing on Marvin Goodfriend’s nomination to the Federal Reserve Tuesday morning.
The European Commission releases January eurozone consumer confidence on Tuesday at 11 a.m. Eastern.
The Chicago Fed’s Charles Evans gives introductory remarks at a monetary policy conference in Chicago at 6:30 p.m. Eastern.
from Real Time Economics http://ift.tt/2rwRaRc
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