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Good morning. Today we look at fallout from U.S. trade policy, another milestone for workers, how opioid addiction is affecting the labor market, and where midterm elections could affect economic policy.
THE LONG ARM OF HIGHER TARIFFS
U.S. companies said they are tempering the effects of escalating tariffs with China through price increases or changes to their supply chains, but they warn investors that the picture could worsen next year. Tariffs have slowed U.S. timber and grain exports, raised the cost of imported clothes hangers and heavy-equipment materials, and compressed profit margins for computer chip and tool makers, among other effects, according to an analysis of results and comments from third-quarter earnings. While the negative impact is widespread, it’s so far mostly modest, Theo Francis reports.
The tariff concerns come as the recent run of robust profit and sales growth shows signs of slowing. Analysts and economists warn of still-slower earnings growth next year.
HERE TO STAY
U.S. tariffs appear entrenched and likely to escalate—or at least markets seem to think so. Asian stocks rallied Friday as President Trump said he had a “very good conversation” with President Xi Jinping of China, signaling progress in the nations’ trade dispute. But White House economic adviser Larry Kudlow later said the two countries weren’t on the cusp of a deal and by Monday, Asian shares sank again. They’re languishing near their lowest levels of the year, Saumya Vaishampayan reports.
Do you think Tuesday’s midterm elections will have much impact on the economy? 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 Bank of Canada’s Stephen Poloz speaks to the Canada-U.K. Chamber of Commerce in London at 8:25 a.m. ET.
Markit’s October purchasing managers index for services is out at 9:45 a.m. ET.
The Institute for Supply Management’s nonmanufacturing PMI, out at 10 a.m. ET, is expected to slip to 59.5 from 61.6 a month earlier.
The Reserve Bank of Australia releases a policy statement at 10:30 p.m. ET.
Don’t miss any Election Day coverage. Subscribe to Capital Journal (for two special editions on Nov. 6) and politics alerts (for key updates).
TOP STORIES
PAINKILLERS VS. THE LABOR MARKET
More Americans are piling back into the labor force. The share of Americans in their prime working years, between 25 and 54, who are working or looking for work rose to the highest level since 2010 last month. That’s largely due to a strong jobs market.
But there could be another factor at play. The American opioid crisis may have plateaued. Preliminary data from the Centers for Disease Control and Prevention suggest that overdose deaths—including from opioids—are inching down.
Andrew Kolodny, co-director of the Opioid Policy Research Collaborative at Brandeis University, cautions the figures are early and incomplete but other indicators, such as the number of infants born opioid dependent, tend to confirm the shifting trajectory. Policies started a few years ago, like greater caution with painkiller prescriptions and better access to treatments, may be bearing fruit.
Why does it matter? Princeton University economist Alan Krueger found that a national increase in opioid painkiller prescriptions between 1999 and 2015 may have accounted for about 20% of the decline in workforce participation among men ages 25 to 54, and roughly 25% of the drop in prime-age female workforce participation.
Still, it’s only small progress. “The epidemic may not be continuing to get worse, and maybe there have been some very slight improvements. But we are still dealing with a devastating public health crisis that will have an impact on the country and economy for decades,” Dr. Kolodny said. —Jeffrey Sparshott
ICYMI
U.S. employers added 250,000 jobs in October, the unemployment rate held at a 49-year low and wages grew at the strongest pace in nearly a decade in October. The WSJ’s Greg Ip writes that Federal Reserve Chairman Jerome Powell doesn’t expect the good times to end any time soon. “So as long as financial imbalances don’t return, and some shock like a war doesn’t come along, Mr. Powell is confident unemployment can stay much lower than in the past without forcing the Fed to kill off the expansion with higher interest rates,” Greg writes.
Of course, that doesn’t mean the Fed is sitting idly by. The latest job figures leave the central bank all but certain to raise interest rates in December, Paul Kiernan reports.
ELECTION DAY
Tuesday is Election Day in the U.S. Depending on the outcome, the midterms may impact key economic policies including taxes, trade, regulations, infrastructure and defense spending, farm and food-stamp payments, and health care.
Some quick thoughts from economists and analysts:
“If the base case of a split Congress materializes, prospects of legislative gridlock would increase. In turn, a divided Congress would likely leave the direction of fiscal policy largely unchanged, with no major changes to spending, taxes, or trade policies.”—Wells Fargo
“Don’t get overconfident about any outcome. While the base case is holding strong, there is still approximately a 30% chance of an outcome other than the base case.”—Morgan Stanley
“Markets will probably be influenced to some extent this week by election results, but the main policy-related uncertainty continues to be in an area where Congress has delegated much of the responsibility to the White House—foreign trade.”—High Frequency Economics
“The betting odds suggest that there are few uncertainties surrounding the broad outcomes of Tuesday’s midterm elections, with the Democrats likely to win control of the House while the Republicans maintain a majority in the Senate. That is most likely to lead to legislative gridlock, but wouldn’t necessarily weigh on the markets or real economic growth.”—Capital Economics
I VOTED
Corporate America wants to get out the vote. Ahead of the midterm elections, many companies are urging employees to cast their votes, banning meetings or giving people paid time off to do so. Employers say they have a duty to encourage greater participation in democracy in a time of deep political division, especially because voter turnout is typically so much lower in midterms than presidential elections, Chip Cutter reports. At least 325 companies, from jeans brand Levi Strauss to spirits maker Diageo, are giving employees paid time off to cast their ballots on Election Day or in early voting.
QUOTE OF THE DAY
Most important for the future of the world trading system is the fact that the United States has stepped back from its seven-decade long role of being the prime mover and the guarantor of the world economic order. Atlas has shrugged. —Alan Wolff, deputy director-general of the World Trade Organization
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
One of the great side-effects of online grocery shopping: people are less likely to toss junk food into their shopping cart. “I find that the nutritional content of grocery purchases is improved in the months in which households shop online. Estimated declines in the average amount of calories purchased imply that the average adult would lose roughly five pounds over the course of a year simply from engaging in online grocery shopping,” Michigan State University’s Katherine Harris writes in a job market paper.
Pollution is bad for the economy and inequality. “Our findings indicate early life exposure to air pollution may reduce the prospects children from low-income families will achieve upward economic mobility and suggest variation in environmental quality may help explain observed variation in mobility outcomes,” Rourke O’Brien, Tiffany Neman, Kara Rudolph, Joan Casey and Atheendar Venkataramani write in Social Science & Medicine.
UP NEXT: TUESDAY
It’s Election Day in the U.S. Follow the WSJ’s coverage here.
The job openings and labor turnover survey for September is out at 10 a.m. ET.
from Real Time Economics https://ift.tt/2qtEt6o
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