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The partial government shutdown, now entering its 26th day, is hitting more workers and more corners of the economy.
Good morning. Jeff Sparshott here to take you through the day’s economic news, including more missed paychecks, worker recalls, an increasingly dovish Fed, Brexit follies, Ivanka’s World Bank picks and the biggest risks to global growth. Let us know what you think by replying to this email.
PAYCHECK TO PAYCHECK
Federal employees who have been furloughed or are working without pay will be reimbursed for lost wages. Federal contractors can’t count on receiving any compensation for lost labor. With nine of the 15 major federal agencies unfunded, some federal contractors and their employees are taking drastic measures to try to stay afloat. Low- and middle-wage workers are looking for new jobs, small- and medium-size firms have stopped paying employees and may have to fire some people, and the financial institutions that support those companies are assuming greater risk, Andrew Duehren reports.
“How long can it go on? We’re counting the days until we’re out of business.” —Gary Shumaker, president and CEO of C2 Solutions Group.
THE SIDE-HUSTLE SHUTDOWN
President Trump’s top economic adviser said the broader impact of the shutdown remains fairly limited, but members of his staff are feeling the pinch. Kevin Hassett, chairman of the Council of Economic Advisers, said one long-time employee in his division is is now driving for Uber. “Nobody thinks that government workers are better off because of the furlough,” Mr. Hassett said. “It breaks my heart that that is going on.” Mr. Hassett is working, but not receiving a paycheck. The statement is an apparent change in tone from a PBS interview posted on Jan. 10, in which he said the shutdown allowed government workers to vacation without using their leave. —Eric Morath
WHAT TO WATCH TODAY
U.S. retail sales for December won’t be published due the shutdown. Economists had expected a 0.1% increase from the prior month.
U.S. import prices for December are expected to fall 1.5% from the prior month. (8:30 a.m. ET)
The National Association of Home Builders index for January is expected to hold steady at 56. (10 a.m. ET)
President Trump invited the Problem Solvers Caucus, a bipartisan group of House lawmakers, to the White House to discuss the shutdown. (11:30 a.m. ET)
The Fed’s beige book is due out at 2 p.m. ET.
The Minneapolis Fed’s Neel Kashkari speaks on the global financial system at 6:30 p.m. ET.
Bank of Japan Governor Haruhiko Kuroda speaks at a G-20 symposium at 7 p.m. ET.
For live analysis of the partial government shutdown, follow the WSJ’s coverage here.
TOP STORIES
DEATH, TAXES STILL INEVITABLE
More than half of Internal Revenue Service employees will work during the coming tax-filing season as the government tries to implement the 2017 tax law. Few of those 46,052 workers will be paid assuming the shutdown continues. Since the shutdown started in December, the agency has been operating with fewer than 10,000 of its 80,265 employees, Richard Rubin reports.
All together, the Trump administration is recalling tens of thousands of workers. The Federal Aviation Administration, for example, has ordered nearly 3,000 inspectors and other employees in safety-critical jobs back to work without pay.
OPPORTUNITY COST
The government shutdown is putting the brakes on scores of real-estate investors and developers hoping to take advantage of the lucrative opportunity-zone provisions of the 2017 tax overhaul. The groups have have been raising hundreds of millions of dollars toward what could be one of the most attractive tax breaks in years. But they first need the Treasury Department to finalize guidance on exactly how the tax breaks will work. That’s not likely as long as most of the government stays shut, Peter Grant reports.
HIGH AND DRY
“Today you will not be receiving your regularly scheduled mid-month paycheck. To the best of my knowledge, this marks the first time in our Nation’s history that servicemembers in a U.S. Armed Force have not been paid during a lapse in government appropriations.” —Admiral Karl Schultz, commandant of the Coast Guard, in a letter to service men and women.
ENDANGERED SPECIES: FED HAWK
One of the Federal Reserve’s most consistent supporters of raising interest rates is ready for a pause. Kansas City Fed President Esther George said she backs such a break even though higher rates may still be needed to keep growth on an even keel, Nick Timiraos reports. “A pause in the normalization process would give us time to assess if the economy is responding as expected with a slowing of growth to a pace that is sustainable over the longer run,” Ms. George said.
MAYDAY, MAYDAY, MAYDAY
The British Parliament overwhelmingly rejected a proposed Brexit deal, prompting a no-confidence vote against U.K. Prime Minister Theresa May and further stoking extreme uncertainty around Britain’s exit from the European Union. British lawmakers repudiated the deal by a vote of 432 to 202, Max Colchester and Jason Douglas report.
Mrs. May appears likely to survive the no-confidence vote. The next steps for Brexit are less certain. “It is clear that the House does not support this deal. But tonight’s vote tells us nothing about what it does support,” Mrs. May said.
IVANKA’S CHOICE
Indra Nooyi, David Malpass and Ray Washburne are among the candidates the Trump administration is considering to head the World Bank. Ms. Nooyi is an Indian-American business executive who stepped down as PepsiCo CEO in August, Mr. Malpass a top official at the Treasury Department and Mr. Washburne the president of the Overseas Private Investment Corporation. President Trump’s daughter Ivanka Trump has been charged with selecting a candidate to succeed outgoing World Bank President Jim Yong Kim, Vivian Salama reports.
BIG RISKS
The threat of a global trade war and rising political tensions are the dominant global risks, according to a World Economic Forum report. Cyberattacks and climate change also feature high on the list drawn up from a survey of around 1,000 lawmakers, academics and business leaders ahead of the WEF’s annual gathering in Davos, Switzerland, Joanna Sugden reports.
The report, which analyzed global risks and trends over a 10-year horizon, said that the rate of global growth appeared to have peaked and the slowdown in China’s economy was of particular concern.
CHART OF THE DAY
Almost three quarters of U.S. workers face some kind of caregiving responsibility. Of those, 32% say they have left a job because they couldn’t balance work and family duties, Harvard’s Joseph Fuller and Sheila Marcelo find in a new study.
QUOTE OF THE DAY
Someone estimated that if it goes on for the whole quarter, it can reduce growth to zero. We just have to deal with that. —J.P. Morgan Chase CEO Jamie Dimon, speaking about the government shutdown
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
What if Ivanka Trump ended up the new head of the World Bank? “The sad reality is this: If Ivanka took over the reins of the bank, she probably would be an improvement,” Tyler Cowen writes at Bloomberg Opinion.
Immigrants are so 20th century. “The entry of an additional robot reduces employment and wages by more than the entry of an additional immigrant, suggesting that one industrial robot is comparable to 2 to 3 human workers and upwards of 3 to 4 in particular groups,” George Borjas and Richard Freeman write in a National Bureau of Economic Research working paper.
UP NEXT: THURSDAY
Bank of England credit conditions survey is out at 4:30 a.m. ET.
U.S. jobless claims are expected to rise to 220,000 from 216,000 a week earlier. (8:30 a.m. ET)
The Philadelphia Fed manufacturing survey for January is expected to slip to 8.0 from 9.4 a month earlier. (8:30 a.m. ET)
U.S. housing starts for December won’t be published due to the shutdown.
Fed Vice Chairman Randal Quarles speaks on insurance regulation and supervision at 10:45 a.m. ET.
Japan’s consumer-price index for December is out at 6:30 p.m. ET.
from Real Time Economics https://on.wsj.com/2FvmkyU
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