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Good morning. Today we look at presidential pledges, the unintended consequences of a higher minimum wage, the world’s longest sea bridge and the state of American infrastructure spending, Hurricane Maria, how shipowners could affect airfares, and Germany’s concession to U.S. gas exporters.
MORE TAX CUTS?
“We’re giving a middle-income tax reduction of about 10%. We’re doing it now for middle-income people.”—President Trump, speaking to reporters Monday
Well, don’t hold your breath. Congress is out of Washington until after the Nov. 6 election. It isn’t even clear whether the administration will put out any plan by then. There likely aren’t enough votes or time in the post-election Congress for a major tax cut, and a switch in control of the House or Senate would reshape the tax agenda for 2019, Richard Rubin writes.
Last year’s tax law goosed the economy but Republicans on the campaign trail have struggled at times to gain traction by selling its benefits. That law cut taxes, on average, for individuals at all income levels and for businesses. The biggest gains, as a share of income, went to high-income households.
For more news from the campaign trail, check out the WSJ’s Campaign Wire.
UP OR OUT
With Amazon raising its minimum wage to $15 an hour, the debate over local, state and federal minimum wages might seem a bit dated. But politicians in several states are working to boost hourly pay and there are already several laws on the books that phase in higher minimum compensation.
Research shows the results can be a mixed bag. “Seattle’s minimum wage ordinance appears to have delivered higher pay to experienced workers at the cost of reduced opportunity for the inexperienced,” Ekaterina Jardim, Mark Long, Robert Plotnick, Emma van Inwegen, Jacob Vigdor and Hilary Wething write in a National Bureau of Economic Research working paper. Basically, more-experienced workers got a boost in pay but less-experienced workers got locked out of the local market.
Of course, if the labor market continues to tighten, employers may have no choice but to snap up the least experienced workers at higher pay rates.
The federal minimum wage is $7.25 an hour. Should it be higher? 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
The Richmond Fed manufacturing survey for October is out at 10 a.m. ET.
The Minneapolis Fed’s Neel Kashkari speaks at an education conference at 9:30 a.m. ET, and the Dallas Fed’s Robert Kaplan speaks in Galveston, Texas, at 2:15 p.m. ET.
The Bank of England’s Mark Carney speaks at a University of Toronto conference at 11:20 a.m. ET.
The Mega Millions lottery draws its latest set of numbers at 11 a.m. ET. The jackpot is up to a record $1.6 billion. The odds of winning are 1 in 302,575,350.
TOP STORIES
NOW THAT’S INFRASTRUCTURE…
The world’s longest sea bridge opened on Tuesday, snaking 34 miles across China’s Pearl River estuary to form a pillar of Beijing’s plan to merge 11 cities in its southern region into one megalopolis. At 20 times the length of California’s Golden Gate Bridge, the six-lane crossing will link a regional economic zone of 70 million people, with a combined annual GDP of $1.51 trillion—almost twice that of the San Francisco Bay Area, and larger than the national economies of Australia, Spain or Mexico, Natasha Khan reports.
The bridge will put Hong Kong, Macau and the Chinese city of Zhuhai within an hour of each other. To be sure, President Xi Jinping‘s plan to build out China’s Silicon Valley will need more than infrastructure to succeed. Hong Kong and Macau are both former Western colonies promised a high-degree of autonomy until the middle of this century. But in Hong Kong especially, concerns are rising that those rights are being eroded and that Beijing’s ultimate aim is to swallow up the city into the mainland.
…AND THAT’S NOT
U.S. spending on infrastructure, meanwhile, hit its high-water mark in 2003. Yes, the Trump administration and congressional Democrats bemoan America’s decrepit roads, bridges and airports, and have promised to spend money aggressively to fix them. But they haven’t opened the taps.
Even high-priority areas haven’t gotten much of an overall spending boost. The WSJ’s David Harrison this spring noted that water bills started rising significantly faster than inflation way back in the mid-2000s as communities stepped up their repairs of aging water and sewer infrastructure. The job isn’t done, but inflation-adjusted spending on water projects peaked in 2010.
EYE OF THE STORM
Puerto Rico lost 35,000 jobs in the month after Hurricane Maria struck. One year later, employment in the storm-battered island still hasn’t recovered to pre-Maria levels, Sarah Chaney reports.
Employment in Puerto Rico has been on a steady descent since 2006. The hurricane that pounded the territory September of last year accelerated the jobs decline. Maria—the worst storm to hit Puerto Rico in nearly a century—knocked out electricity across the island and ravaged roads and infrastructure. Thousands of small businesses closed down, resulting in a huge blow to the island’s already-suffering economy.
BOOK NOW
Airline fuel budgets are about to get squeezed by unlikely competitors. Next year, shipowners are expected to start switching to cleaner-burning diesel fuel, part of new emissions controls taking effect globally in 2020. Airline executives are warning that the shift could boost the price of fuel for the world’s fleet of commercial jets, Robert Wall and Sarah McFarlane report.
Refineries produce three main categories of fuel: gasoline for cars; “distillates,” including both diesel and jet fuel; and heavier fuels used for a variety of industrial purposes, including to power many ships. By a marketing convention, jet-fuel prices are usually pegged to diesel prices. Airline and refining industry officials are bracing for a surge in diesel demand as shipowners switch from heavier bunker fuels. Should diesel prices rise, jet fuel could follow.
WIN FOR U.S. EXPORTERS
Chancellor Angela Merkel has offered government support to efforts to open up Germany to U.S. gas, a key concession to President Trump as he tries to loosen Russia’s grip on Europe’s largest energy market. Over breakfast this month, the chancellor told a small group of lawmakers her government had decided to co-finance the construction of a €500 million ($576 million) liquefied natural gas shipping terminal in northern Germany, Bojan Pancevski reports. That gives a crucial nudge to a project that had failed to get off the ground for years in a country that gets most of its gas cheaply from Russia.
QUOTE OF THE DAY
There is a disconnect in corporate America. Year after year, companies report that they are highly committed to gender diversity. But the proportion of women in their organizations barely budges. For this to change, companies need to treat gender diversity like the business imperative it is.—Facebook COO Sheryl Sandberg and LeanIn.org President Rachel Thomas, writing in the WSJ
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
The labor market looks a lot like the economic heyday of 2000 and 2001—except for wage growth. Evercore ISI economist Ernie Tedeschi runs through several hypotheses and tries to unravel the mystery in The New York Times, but it’s complicated. “Slack labor markets, for example, may be feeding into weak productivity growth, and rising employer concentration may be widening the gap between wage gains and productivity growth,” he writes.
The U.S. would probably have more PhDs working on science and tech if not for delays granting permanent residency. “We find that newly-binding limits on permanent visas for those from China and India with advanced degrees are significantly associated with declines in stay rates,” Shulamit Kahn and Megan MacGarvie write in a National Bureau of Economic Research working paper. “We conclude that per-country limits play a significant role in constraining the supply of highly skilled STEM workers in the US economy.”
UP NEXT: WEDNESDAY
Markit’s flash manufacturing and services purchasing managers indexes for October are out at 9:45 a.m. ET.
U.S. new home sales for September, out at 10 a.m. ET, are expected to drop to an annual pace of 620,000 from 629,000 the prior month.
The Bank of Canada releases a policy statement at 10 a.m. ET. A press conference follows at 11:15 a.m. ET.
The Federal Reserve’s beige book is out at 2 p.m. ET.
We get a cacophony of Fed chatter Wednesday: St. Louis’s James Bullard speaks in Edinburgh, Scotland, at 11:30 a.m. ET, Atlanta’s Raphael Bostic speaks at Louisiana State University, Baton Rouge, at 1 p.m. ET, Cleveland’s Loretta Mester speaks at the Cornell Club in New York City at 1:10 p.m. ET, governor Lael Brainard speaks at a Council for Economic Education event at 7 p.m. ET, and Kansas City’s Esther George speaks in Sydney, Australia, at 8 p.m. ET.
from Real Time Economics https://ift.tt/2PgeQ73
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