Real Time Economics: The Midterm Results Are In | Gridlock Likely To Limit Policy Shifts | Remember the Debt Ceiling?

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Democrats retook the House, Republicans added a seat in the Senate—and the short-term economic outlook is pretty much the same as before the midterms. Political gridlock is likely to temper major shifts in American economic and tax policy for the next couple years but could also leave Washington looking over the next fiscal cliff.

Good morning. Jeff Sparshott here to take you through the latest developments affecting the global economy.

HELP WANTED. SERIOUSLY.

Before we dive into the election, here’s some bright news for workers: Unfilled jobs in the U.S. exceeded the number of unemployed Americans by more than one million as the summer came to a close. Before March, job openings had never exceeded unemployed workers in more than 17 years of monthly records, Eric Morath reports. It’s a sign employers are increasingly struggling to staff up and could lead to stronger wage gains.

The average time to fill vacant job positions reached a record high of 32.3 working days in September, according to an analysis of underlying data by the University of Chicago’s Steven Davis.

Is a divided Congress good or bad for U.S. economic policy? 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. consumer credit for September is out at 3 p.m. ET.

The Federal Reserve begins its two-day policy meeting.

TOP STORIES

BUDGET BATTLES

A Democratic House and a Republican Senate make radical economic policy changes unlikely. That may assuage markets, but there could be real economic consequences. Take fiscal policy. Congress needs to raise the federal debt limit (see below) and pass a new budget next year. Here’s the thing: Congress has been overriding spending caps from the 2011 Budget Control Act to boost outlays. The caps return for FY 2020 unless there’s a bipartisan deal to overturn them. Government spending is a big reason economic growth has picked up since 2017. A hefty drop in discretionary spending from fiscal year 2019 to 2020 is one potential risk to an economy that’s already expected to slow.

Of course, if there’s one thing the sides can agree on it might be more spending: “Unless Wall Street demands changes…all of the things most likely to be enacted—think infrastructure—will increase rather than decrease the federal government’s red ink,” budget expert Stan Collender says in a blog post.

WELCOME TO CONGRESS! TIME TO VOTE ON THE DEBT LIMIT

The latest class of lawmakers will have a few months to settle in before they must turn to one of Washington’s thorniest tasks: raising the federal borrowing limit. Congress voted in February to suspend the limit until March 1, 2019, after which the U.S. Treasury Department will have to use so-called extraordinary measures to keep paying the government’s bills on time.

Those measures will last at least until mid-summer, according to a new estimate from the Bipartisan Policy Center. After that, Congress must suspend the limit again or risk defaulting on the government’s debt, Kate Davidson reports. The decision could be especially fraught in 2019 as deficits are projected to hit $1 trillion.

CLOSER TO HOME

Manufacturers are setting up shop closer to customers as they look to offset record-high trucking costs and find workers in a tight labor market. The number of U.S. factories where executives said material shortages and logistics problems were limiting output was the highest in a decade in the second quarter, Austen Hufford reports. Add in tariffs, and some companies are starting to think more locally, less globally. U.S. manufacturing construction spending hit a 16-month high in September.

Case study: Ferrellgas Partners added two plants in recent months to make and refill its Blue Rhino propane tanks closer to customers. The new factories in Alabama and California will allow the company to cut over a dozen delivery routes and lower costs by as much as $3 million annually.

UP…

The mining industry a wonderful study in microeconomics. When demand increases, prices goes up. Producers invest to expand capacity. Supply increases. Prices drop. Investment dries up. And now?

Global miners are spending a third of what they did five years ago on new projects. That’s got some investors expecting prices of copper, nickel and aluminum could soar past prior records—more than 40% above current levels—in the coming years, Amrith Ramkumar and David Hodari report. Of course, the trick for miners is to forecast supply and demand over long-term horizons as they weigh investing in assets that churn out ores for decades.

…AND DOWN

What happens when diggers and drillers get it wrong? Oil prices are on the cusp of a bear market one month after hitting four-year highs as a wave of supply has returned amid crumbling confidence in global growth. U.S. crude prices have fallen 19% since breaking above $76 a barrel in early October, on worries over slowing demand for fuel and record production from major oil exporters, Stephanie Yang and Amrith Ramkumar report. The sharp reversal marks another twist in an uncertain global market, as investors attempt to piece together the largest influences on supply and demand.

TWEET OF THE DAY

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WHAT ELSE WE’RE READING

Less-educated workers are less likely to pick up and move than their college-educated peers. Why? “Compared to college graduates, less educated workers find job search in more distant regions much more difficult. This limits their options to move for guaranteed employment, forcing them to move speculatively, and thereby reducing their overall mobility,” Oxford’s Maria Balgova writes in a job market paper.

The U.S. hasn’t seen much in the way of permanent changes to its output growth path since the late 18th century, according to a paper from the Swiss National Bank. Examining is mix of data on output, unemployment and survey forecasts, “the results indicate that there was no significant change in either yearly or quarterly average growth rates and, thus, no significant slope change in the output growth path,” the author wrote.

UP NEXT: THURSDAY

U.S. jobless claims, out at 8:30 a.m. ET, are expected to remain low.

The Federal Reserve releases a policy decision at 2 p.m. ET. The Fed is likely to leave rates unchanged.

China’s consumer-price index for October is out at 8:30 p.m. ET.

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