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The Trump administration is trying to ease the pain from a government shutdown entering its 18th day, though the task is getting more complicated.
Good morning. Jeff Sparshott here to take you through the latest economic news, including U.S.-China trade talks, signs of slowing growth in Asia and Europe, a wait-and-see Fed, and Saudi Arabia’s plan to pump up oil prices. Let us know what you think by replying to this email.
SHUTDOWN RUNDOWN
The Trump administration now says it will pay tax refunds during a shutdown. Future challenges: ensuring Transportation Security Administration staff show up to work, and paying for food stamps and federal housing.
Taxes: The Trump administration and its predecessors had said refunds couldn’t be paid while the IRS was shut because those payments weren’t necessary to protect life or government property. Switching that position makes it easier for the shutdown to continue without tens of millions of Americans clamoring for their money, Richard Rubin and Peter Nicholas report.
TSA: About 51,000 airport screeners are required to show up to work but aren’t getting paid. Some have already been calling in sick at higher-than-normal rates. So far TSA says that hasn’t led to much longer waits or less security. But if the shutdown drags on, many workers may not be able to hold out for a check and could opt to search for new jobs, Alison Sider reports.
Payday: Hundreds of thousands of federal workers are planning to miss their first paycheck on Friday. About 420,000 employees are working without pay while 380,000 federal employees have been placed on unpaid leave. Real estate website Zillow estimates that unpaid federal workers owe $438 million in mortgage and rent payments alone this month.
Way out? President Trump will deliver a prime-time address and travel to the U.S. border with Mexico this week to make his case for a border wall—while also working privately with advisers to find a way out of the shutdown without losing face, Rebecca Ballhaus, Michael C. Bender and Peter Nicholas report.
Impact: Barclays economists Michael Gapen and Jonathan Millar estimate the shutdown knocks 0.1 percentage point off of GDP every two weeks.
WHAT TO WATCH TODAY
The Commerce Department’s Bureau of Economic Analysis and Census Bureau are closed during the partial government shutdown, so international trade data for November won’t be out Tuesday. Economists had expected the deficit to narrow to $54.2 billion from $55.49 billion a month earlier.
The Labor Department is funded, so we’ll get November’s job openings and labor turnover survey at 10 a.m. ET.
The Fed’s consumer credit report for November is out at 3 p.m. ET.
President Trump delivers a speech on border security at 9 p.m. ET.
TOP STORIES
LET’S MAKE A DEAL
The U.S. and China opened talks Monday to resolve a trade fight that is threatening the global economy. U.S. negotiators are focused on guarantees that Beijing will follow through on its offers, Lingling Wei reports. Key issues include more Chinese purchases of U.S. goods and services; increased U.S. access to China’s markets; better protection of U.S. intellectual property and reductions in Beijing’s subsidies to Chinese companies.
HELP FOR U.S. NEGOTIATORS?
Chinese bond yields fell to a two-year low, coinciding with growing evidence of a slowing economy. The latest slew of data showed Chinese industrial production slowed in November to its slackest since early 2016, while growth in retail sales dropped to the lowest in more than 15 years, Shen Hong reports.
BAD SIGN FOR GERMAN ECONOMY
German industrial production unexpectedly slumped in November, adding to recent evidence that a nine-year recovery in Europe’s largest economy is foundering. The data underscore how trade tensions and weaknesses in emerging markets are putting a brake on Germany’s long-running economic upswing, and could delay any move by the European Central Bank to lift short-term interest rates, Tom Fairless reports.
FEDSPEAK
Atlanta Fed President Raphael Bostic said the central bank should raise interest rates just once this year: “The clouds, the nervousness has gotten me to a place where I want to make sure that we don’t move too aggressively and then contract the economy.”
Cleveland Fed President Loretta Mester said the central bank has more flexibility in how it paces future rate increases because inflation appears to be restrained, economic growth is decelerating, and interest rates have moved closer to neutral: “I think we’re in this mode where we have time to evaluate policy going forward.”
Fed Chairman Jerome Powell speaks at the Economic Club of Washington on Thursday.
SCORE ONE FOR THE BANKERS
Former Fed economist Nellie Liang, whom the Trump administration had nominated to serve on the central bank’s board of governors, withdrew from consideration amid opposition from the banking industry, which feared she would stymie efforts to loosen financial regulation.
WORLD BANK PRESIDENT RESIGNS
World Bank President Jim Yong Kim unexpectedly announced his resignation, setting up a potential dispute between the U.S. and other member countries over selecting the next leader. In the bank’s seven-decade history, its president has always been picked by the U.S., but many countries and advocacy groups have sought an end to Washington’s control. The prospect of President Trump making the selection could galvanize countries to fight for a change in this status quo, Josh Zumbrun reports.
PAIN AT THE PUMP
Saudi Arabia is planning to cut crude exports to around 7.1 million barrels a day by the end of January in hopes of lifting oil prices above $80 a barrel, Benoit Faucon and Summer Said report.
SMALL-BUSINESS CONFIDENCE SOFTENS
Small-business owners’ confidence in the U.S. economy fell for the fourth consecutive month and their outlook on business conditions fell to the lowest level since late 2016, according to the National Federation of Independent Business.
QUOTE OF THE DAY
I am in a state of being unsure, I am in a state of anguish, I don’t know what I should do, I don’t know if I should go and apply for unemployment, I don’t know if I should apply for another job.—Suhailah Stevenson, a worker at the Homeland Security Department affected by the shutdown
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Banks, insurers and money managers are planning to move about 800 billion pounds ($1 trillion) of assets from the U.K. to the rest of Europe as Brexit uncertainty takes its toll, Bloomberg’s Silla Brush reports.
The National Weather Service is open during the shutdown but forecasters and managers are not getting paid, and the quality of forecasts is deteriorating, The Washington Post’s Angela Fritz reports.
UP NEXT: WEDNESDAY
The Atlanta Fed’s Raphael Bostic speaks at the Chattanooga Chamber of Commerce’s 2019 Economic Outlook Breakfast at 8:20 a.m. ET, the Chicago Fed’s Charles Evans speaks on monetary policy and the economy at 9 a.m. ET, and the Boston Fed’s Eric Rosengren speaks on the economic outlook at 11:30 a.m. ET.
The Bank of Canada releases a policy statement at 10 a.m. ET.
Bank of England Governor Mark Carney participates on an online Q&A at 10:30 a.m. ET.
Federal Reserve minutes from the Dec. 18-19 meeting are out at 2 p.m. ET.
China’s consumer-price index for December is out at 8:30 p.m. ET.
from Real Time Economics https://on.wsj.com/2LW3P6U
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