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Good morning. Today we look at college grads stuck working in jobs that don’t require a degree, U.S.-China trade talks, trade policy fallout, early signs that the economy may cool in the final months of the year, and the rising supply and strong demand for marijuana that won’t get you high.
FRIES WITH THAT BACHELOR’S DEGREE?
It’s a tight job market, but some college majors aren’t much help in landing a job that requires a college degree. No, we’re not talking about English literature. Some more vocationally geared majors—like fitness studies, criminal justice and business—can be worse choices than English or gender studies, according to a new report by labor analytics firm Burning Glass Technologies. College graduates who studied homeland security and law enforcement had a 65% probability of being underemployed in their first job out of school. Engineers, by contrast, had the best outcome for any major, Melissa Korn reports.
Students weighing their college options are increasingly focused on the return from that hefty investment. But on average, 43% of college graduates are underemployed in their first job. Of those, roughly two-thirds remain in jobs that don’t require college degrees five years later. That adds up: While the average starting salary for a bachelor’s degree holder employed in a job that actually requires such a degree is $46,000, underemployed graduates make an average $36,000.
Comments or suggestions? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest news. (Responses may be quoted in this newsletter.)
WHAT TO WATCH TODAY
U.S. gross domestic product for the third quarter, out at 8:30 a.m. ET, is expected to rise at a 3.4% annual pace.
The University of Michigan’s consumer sentiment survey for October, out at 10 a.m. ET, is expected to hold steady at 99.
The European Central Bank’s Mario Draghi speaks in Brussels at 10 a.m. ET.
TOP STORIES
U.S.-CHINA STANDSTILL
The U.S. is refusing to resume trade negotiations with China until Beijing comes up with a concrete proposal to address Washington’s complaints about forced technology transfers and other economic issues. The impasse threatens to undermine a meeting between President Trump and President Xi Jinping that is scheduled for the end of November at the Group of 20 leaders summit in Buenos Aires, Bob Davis and Lingling Wei report.
Both sides had hoped the gathering would ease the trade tensions. U.S. businesses have been counting on sufficient progress at the meeting for the Trump administration to suspend its plan to increase tariffs on $200 billion of Chinese imports to 25% on Jan. 1, from the current 10%.
TRADE POLICY, PART I
The Trump administration’s get-tough trade policies may be having noticeable impact in some areas, though the short-term results aren’t necessarily what the White House wants. For starters, the U.S. trade deficit in goods hit a record in September. (There are a lot of caveats with that number: The data isn’t inflation adjusted, doesn’t include services and the “record” is within the bounds of statistical error. But the trade balance clearly isn’t moving in the right direction.)
TRADE POLICY, PART II
U.S. policy may be driving Japan and China closer together. The countries agreed Friday to cooperate in developing cities and other infrastructure in Asia, part of a rapprochement during the first formal visit by a Japanese leader to China in seven years. Ties have warmed recently between Asia’s two largest economies, impelled in part, analysts say, by China’s need for friends in the region while it battles President Trump over trade issues. Japan also is looking for better relations because China is its biggest export market and a source of tourists.
TRADE POLICY, PART III
U.S. policy may also be adding to China’s economic slowdown, which is squeezing its currency. The yuan hit its weakest point in nearly two years in offshore trading Friday and is at the brink of hitting 7 per dollar—a symbolic threshold that could spark further selling, Ben Eisen and Saumya Vaishampayan report. A weakening yuan makes Chinese exports cheaper in the U.S. and U.S. exports more expensive in China. That may add to tensions—President Donald Trump has repeatedly asserted that China is artificially holding down its currency.
The yuan’s decline is also a reminder of the diverging directions of the U.S. and Chinese economies. While America’s economic growth picked up this year, China’s slowed. That’s led to higher interest rates in the U.S. and lower rates in China, forces that will move currencies in opposite directions.
TRADE POLICY, PART IV
It looks like foreign aluminum producers have generally been able to pass the cost of U.S. tariffs through to U.S. customers. The reason: Many U.S. companies used the tariffs to raise prices, and non-U.S. companies have followed suit, sometimes more than offsetting the 10% duty set by the U.S. government.
“[Mr.] Trump has managed to increase the price level in the U.S. locally, and that amid increasing demand. We have managed to increase prices beyond the 10% [levy] for some special products,” said Philip Grothe, chief executive of Alimex, a Germany-based maker of cast-aluminum products.
COOL IT
The U.S. is expecting another solid economic report Friday, with economists forecasting that gross domestic product advanced at a 3.4% annual pace in the third quarter. That’s robust, but not as robust as the second quarter. And the fourth quarter may continue that cooling trend as the U.S. faces headwinds from international trade and an easing of private-sector demand for manufactured products.
A widening trade deficit is typically a drag on headline GDP. Separately, the Commerce Department reported that a measure of underlying business investment edged down for the second straight month. New orders for nondefense capital goods excluding aircraft posted its smallest year-over-year increase since January of last year.
BECAUSE I DIDN’T GET HIGH
Not all cannabinoids—the active chemical compounds in marijuana and hemp—get you stoned. Enter CBD, a nonintoxicating compound found in cannabis. As of October, 46 states have passed some kind of CBD legalization, in June the Food and Drug Administration approved a version for the treatment of seizures, and now, with support from Senate Majority Leader Mitch McConnell, the 2018 farm bill might legalize every cannabinoid except the psychoactive compound THC, Amanda Chicago Lewis reports.
“Everyone knows that this is about to explode and is developing their own products and processes,” says Rod Kight, a cannabis business lawyer in Asheville, N.C. Companies hope to have CBD products on shelves at mainstream, big-box retailers within a year, which has triggered breeding, production and research into other cannabinoids.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Australia didn’t get to be the world’s most successful economy because it’s the land of Oz. “Rising incomes, low public debt, an affordable welfare state, popular support for mass immigration and a broad consensus on the policies underpinning these things—that is a distant dream in most rich countries. Many Western politicians could scarcely imagine a place that combined them all. Happily, they do not have to, because such a country already exists: Australia,” The Economist writes in its latest edition.
There’s a big, hidden benefit to smartphones. “Finally, consider dematerialization—the process of declining consumption of goods and energy per unit of gross domestic product. The smartphone combines functions that previously required a myriad of separate devices, including a telephone, camera, radio, television set, alarm clock, newspaper, photo album, voice recorder, maps, compass, etc. The emergence of the smartphone does not mean that all the other devices will disappear. But we are using them less and less,” By Marian Tupy writes at Human Progress. That should be welcome news to those worried about growing populations and availability of resources.
from Real Time Economics https://ift.tt/2qdMmNk
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