This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
An Asia-Pacific economic summit ended poorly this weekend as U.S.-China trade tension overshadowed…pretty much everything else. “President Trump believes that a [trade] deal is possible but we also believe we’re in a very strong position,” Vice President Mike Pence said before departing the gathering.
Good morning. Jeff Sparshott here to take you through the day’s top economic news. We also look at upcoming housing data, preparations for the next recession, the gender pay gap, and mutton prices. Let us know what you think by replying to this email.
DEAL WITH IT
Prospects for a U.S.-China trade truce aren’t looking good. The latest: an Asia-Pacific Economic Cooperation summit ended in acrimony on Sunday with a fight over Chinese trade practices. For the first time in APEC’s history, officials ended meetings without issuing a communiqué, Rob Taylor, Peter Nicholas and Rachel Pannett report.
The tensions and lack of resolution at APEC herald the difficulty the two sides will have in reaching any trade deal. President Trump and Chinese President Xi Jinping are scheduled to meet in Buenos Aires in less than two weeks. The two sides are aiming for at least a cease-fire in the trade fight that would involve a new set of negotiations tied to a U.S. pledge to hold off on additional tariffs.
UNDER PRESSURE
China’s yuan, meanwhile, is coming under pressure as the Federal Reserve tightens and China’s central bank eases monetary policy. China’s short-term government debt now yields less than its U.S. equivalent, Mike Bird reports. Investors often flock to higher-yielding currencies, driving up their value. Trade tensions and other economic factors have also helped push the Chinese currency near a 10-year low against the dollar.
The Trump administration has been unhappy with a weaker yuan, because it makes Chinese goods less expensive in the U.S. But Beijing has defended the yuan to keep it from falling below a symbolic seven to the dollar in an effort to prevent capital flight.
WHAT TO WATCH TODAY
The National Association of Home Builders housing market index for November, out at 10 a.m. ET, is expected to tick down to 67 from 68 a month earlier.
The New York Fed’s John Williams participates in a moderated Q&A at 10:45 a.m. ET.
The NAHB index kicks off a busy week for housing data, with new-home construction due out Tuesday and existing-home sales Wednesday. Housing is one of the economy’s soft spots, as higher mortgage rates combined with already high prices and limited inventories hold back sales. The weakness has the Fed’s eye: “There are a lot of factors weighing on home building right now. It’s material costs, It’s labor scarcity, it’s difficulty finding lots, it’s rates as well,” Fed Chairman Jerome Powell said last week.
TOP STORIES
THE RECESSION TOOLKIT
The U.S. expansion is the second-longest on record. The economy is strong and there’s no sign of a looming downturn. But there’s always a next recession. What has the U.S. done to prepare? Here’s a look at the traditional tool kit when a recession hits.
1.) MONETARY POLICY
As the Great Recession unfolded, the Fed cut interest rates from 5.25% to nearly zero. That’s not an option again—short-term rates are a little over 2% and officials estimate they’ll ultimately settle around 3%. “While the Fed has other monetary policy tools, such as buying large quantities of government securities, these tools have proved to be politically sensitive, making their deployment in future recessions complicated. Hence, the ability to counter economic downturns with monetary policy alone may be impaired, shifting more of the stabilization burden to fiscal and regulatory policy tools,” Boston Fed President Eric Rosengren wrote in the Boston Globe.
2.) FISCAL POLICY
Ah, but the federal government might not be in great shape to help. Before the Great Recession, federal debt amounted to about 35% of the country’s economic output. It more than doubled to about 77% of GDP by 2016 as the country suffered through a massive downturn and then endured one of the slowest expansions on record. The economy is humming along now but after a big round of tax cuts and spending increases, debt is again climbing—to 78% of GDP in fiscal 2018 and likely more than 80% by 2020. That doesn’t mean more fiscal stimulus is out of the question. In a global recession, U.S. debt could easily remain the least ugly investment available.
“But it’s very clear that we have less fiscal space than we had before,” says Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget. “Whether or not we have enough fiscal space we won’t know until we are in the moment.”
3.) STATE AND LOCAL
At least states have had plenty of time to repair their budgets, right? Moody’s looked at finances across the U.S. and found 23 are prepared for a moderate recession and another 10 are within striking distance. But 17 states are “significantly unprepared for even a small downturn.” Separate Labor Department data out early this year showed more than half of U.S. states lack enough unemployment funding to be prepared for another recession.
Fiscal stress at the state and local level can be particularly severe—local governments can’t start racking up more debt, so they either have to raise taxes or cut spending. Local government payrolls still haven’t fully rebounded from the Great Recession.
MORE FROM CHINA
Two Chinese initiatives worth noting:
China’s private sector has become a weak link in a slowing economy. Now, authorities are rolling out tax breaks, bank loans and other financing options to bolster private businesses. The threat is that a declining private sector—which accounts for more than half of China’s economic output—will rob the economy of vitality, with growth having slipped to 6.5% last quarter and projected to slow further, Chao Deng reports.
The trade dispute with the U.S. is giving Beijing fresh motivation to make the country’s farms more efficient and lessen dependence on foreign growers. The trade-off: Chinese officials have long called for modernizing agriculture and consolidating farms, but Beijing also wants to maintain social stability. Large-scale mechanized farming would likely eliminate many jobs in rural areas, where resistance to change has been strong, Dominique Fong reports.
LIBERTé, ÉGALITé, FRATERNITé
France is preparing to fine companies that underpay women, a novel attempt to narrow the gender pay gap. Starting on Jan. 1, firms will be required under a new law to report how much they pay women compared with men, using a range of government-approved metrics. Companies with pay gaps will have three years to fix them or face a fine of up to 1% of their total payroll. The idea of policing pay equity is an unusually strict approach, even among countries that have turned up pressure on firms to bridge the divide, Noemie Bisserbe reports.
THANKS FOR MUTTON
Prices of mutton and other sheep meat are hovering near record highs as more people around the world gain a taste for the strong-flavored red meat. Rising U.S. consumption in recent years coincides with rising demand in China, the Middle East and sub-Saharan Africa. Sheep populations in Australia and New Zealand—the world’s largest producers and exporters of the meat—on the other hand, have fallen to near their lowest levels in a century, Lucy Craymer reports.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
There aren’t enough women in corporate leadership roles because there aren’t enough women in corporate leadership roles. “We find that women randomly assigned to male majority teams are less willing to become team leaders than women assigned to female majority teams. Analyses of potential mechanisms show that women in male majority teams are less confident in their relative performance, less influential, and more swayed by others in team discussions. They also (accurately) believe that they will receive less support from team members in a leadership election. Taken together, our results indicate that the absence of women in male dominated contexts may be a self-reinforcing process,” Stockholm School of Economics’ Andreas Born, University of Gothenburg’s Eva Ranehill and Stockholm University’s Anna Sandberg write.
Oregon in 2008 gave a group of uninsured low-income adults a chance to apply for Medicaid. “We find that Medicaid increased voter turnout in the November 2008 Presidential election by about 7% overall, with the effects concentrated in men (18% increase) and in residents of democratic counties (10% increase); there is suggestive evidence that the increase in voting reflected new voter registrations, rather than increased turnout among pre-existing registrants,” Katherine Baicker and Amy Finkelstein write in a National Bureau of Economic Research working paper.
UP NEXT: TUESDAY
Bank of England Governor Mark Carney appears before parliament at 5 a.m. ET.
U.S. housing starts for October, out at 8:30 a.m. ET, are expected to rise to an annual pace of 1.22 million from 1.201 million a month earlier. Permits are expected to rise to 1.27 million from 1.241 million.
from Real Time Economics https://ift.tt/2qRT7Vc
No comments:
Post a Comment