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Inflation indexing is a mighty boring topic of conversation. But here’s something interesting: Congress and the IRS are using it to get you to pay more taxes.
Good morning. Jeff Sparshott here to take you through the day’s top economic news. We also look at who’s winning the U.S.-China trade fight, how to phone in a job interview, Theresa May’s Brexit mess, and the link between marijuana and more babies. Let us know what you think by replying to this email.
‘CAUSE I’M THE TAXMAN
Last year’s big tax cut is about to start shrinking. The Internal Revenue Service is implementing a new method for making inflation adjustments that will cost Americans $133.5 billion over a decade. The tax law enacted last year lowered tax rates and reduced tax burdens for most households. It also required the IRS to switch to a different, slower-moving measure of inflation to adjust a variety of tax-code features, Richard Rubin reports. The standard deduction, tax brackets and other items will still increase most years, but now they will usually climb more slowly than they would have under the old formula.
The result: More income gets taxed, or taxed at higher rates. In 2019, for example, the standard deduction for a married couple will be $24,400. The deduction would have been $24,550 under the old inflation-adjustment method. The discrepancy will likely expand over time.
WHAT TO WATCH TODAY
U.S. industrial production for October, out at 9:15 a.m. ET, is expected to rise 0.2% from a month earlier.
The U.S. quarterly services survey for the third quarter is out at 10 a.m. ET.
The Kansas City Fed’s manufacturing survey for November is out at 11 a.m. ET.
The Chicago Fed’s Charles Evans speaks on the economy and monetary policy at 11:30 a.m. ET.
TOP STORIES
IMPORT SURGE
Imports into U.S. seaports are surging over usual seasonal patterns in an apparent push by retailers and manufacturers to pull orders forward ahead of a new round of tariffs set to hit U.S.-China trade in January. Ports in Southern California, Georgia and Virginia reported double-digit growth in import volume from September to October, setting monthly records as furniture, apparel, auto parts and other goods streamed in, Erica E. Phillips reports.
Distortions caused by tariffs and other trade tensions could make it harder to get a true read on underlying economic trends. Separate data show China’s exports to the U.S. jumped last month and the U.S.-China the trade gap is on track to be the widest on record this year. It’s not entirely clear if that’s because of stockpiling, a weaker yuan, strong demand or a mix of factors.
WE ARE THE CHAMPIONS
So who’s winning the U.S.-China trade spat? By President Trump’s preferred measure, the trade deficit, China has the upper hand.
Financial markets are leaning toward the United States.
Which is right? “It is very likely that Chinese exporters (and US importers of Chinese goods) will have front-loaded deliveries to the US in the months leading up to the US imposing the latest round of tariffs, thus flattering the figures. Once this process has finished, trade flows are likely to slow sharply,” Oxford Economics’s Adam Slater writes.
One possible leading indicator: China’s official purchasing managers index, a gauge of activity in the critical manufacturing sector, dropped in October to its lowest level in more than two years. New orders for export are contracting.
YOU’RE HIRED
Want a job? Just pick up the phone. Eager employers trying to lure workers in the tightest job market in decades are hiring some candidates sight unseen, at times after one phone interview. The practice has become most common in seasonal work, particularly retail, although it is spreading among certain in-demand white-collar roles, such as engineers, IT professionals and teachers, Chip Cutter reports.
Case study: Ashley Jurak, a 19-year-old student at Baylor University in Waco, Texas, offered to drive 90 minutes to her hometown of Dallas for an in-store interview with Bath & Body Works as she tried to nail down a position for the holiday break. The hiring manager told her she had clinched it over the phone.
BREXODUS
U.K. Prime Minister Theresa May appealed to her cabinet to stick together, a day after a wave of resignations thrust her terms for a departure from the European Union into jeopardy. Six members of the government, including Brexit Secretary Dominic Raab, quit Thursday.
“A slew of ministerial resignations and the probability that enough of her MPs will look to trigger a no-confidence vote leave PM Theresa May’s Brexit plan in tatters. The biggest loser is the UK economy,” says ING Chief International Economist James Knightley.
YOUNG, WILD AND FREE
The tide of medical-marijuana legalization making its way through American states is leading to a notable uptick in births, according to new research. When more people smoke marijuana, they get friskier and, apparently, more careless. After legalization, there’s “increased frequency of sexual intercourse, decreased purchase of condoms and suggestive evidence on decreased condom use during sex,” Michele Baggio and David Simon of the University of Connecticut, and Alberto Chong of Georgia State University write.
The authors found that enactment of any medical marijuana law increases the birth rate by 0.40, or approximately 4 births per quarter for every 10,000 women of childbearing age, Michael S. Derby reports.
QUOTE OF THE DAY
I respect economists. But they’re usually wrong.—President Trump, in an interview with the WSJ
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Maybe Columbus, Raleigh, Dallas and other Amazon HQ2 also-rans should have focused less on wooing the retail giant and more on homegrown companies. “Migration of establishments and their respective jobs constitutes a small portion of overall job gain or loss in our six metropolitan areas of study, suggesting that public resources may be better spent on activities that are larger contributors to employment gains, such as establishment births and expansions,” Brett Theodos, Aravind Boddupalli and Megan Randall write in a research report from the Tax Policy Center and Urban Institute.
What happens to U.S. manufacturers if current economic and demographic trends continue? “By 2028, in the base case, additional manufacturing value added of US$454 billion could be at risk if qualified workers cannot be found to fill the open jobs, which could account for about 17% of the total US forecasted manufacturing GDP of US$2.67 trillion,” Deloitte and The Manufacturing Institute write in a new study.
from Real Time Economics https://ift.tt/2Q3eYYe
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