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A tight labor market is pulling workers to the Midwest from Puerto Rico, tax cuts aren’t paying for themselves, and Europe’s economy is a mess. Happy Valentine’s Day! Jeff Sparshott here to take you through the day’s top economic news. Send us your questions, comments or suggestions by replying to this email.
FACTORS OF PRODUCTION
Tens of thousands of Puerto Ricans have fled the U.S. territory’s struggling economy in recent years. While they mostly concentrate in traditional landing spots like New York and Florida, a number are venturing to the Midwest, where jobs in many places are more plentiful than people. A number were drawn by employers that stepped up recruiting after finding it hard to secure workers locally or via the H-2B visa program that allows immigrants to work temporarily in the U.S., Erin Ailworth and Arian Campo-Flores write.
Case study: Sidney, Ohio, which like much of the Midwest needs workers, is welcoming, just often uninformed about Puerto Rico, the newcomers and some locals say. “They ask me if I have my immigrant card,” says Luis Vázquez Martínez. He explains he is a U.S. citizen. “They begin to get mad because I don’t know too much English.”
WHAT TO WATCH TODAY
The U.S. producer-price index for January is expected to rise 0.1% from the prior month. Excluding food and energy, it’s expected to climb 0.2%. (8:30 a.m. ET)
U.S. retail sales for December are expected to increase 0.1% from the prior month. (8:30 a.m. ET)
U.S. jobless claims are expected to fall to 225,000 from 234,000 a week earlier. (8:30 a.m. ET)
The Philadelphia’s Fed’s Patrick Harker speaks at a Lerner MBA Student Association Conference at 11 a.m. ET.
China’s consumer-price index for January is out at 8:30 p.m. ET.
TOP STORIES
BUDGET BUSTER
“Not only will this tax plan pay for itself, but it will pay down debt.” —Treasury Secretary Steven Mnuchin, Sept. 28, 2017
Federal tax revenue declined in 2018, the first full calendar year under the new tax law, despite robust economic growth and the lowest unemployment rate in nearly five decades. Federal spending increased 4.4%, pushing the U.S. budget gap up its highest level for a calendar year since 2012, Kate Davidson reports. A Treasury spokeswoman said the short-term drop in revenue was expected. “The tax cut is spurring increased economic growth which will ultimately generate trillions of dollars of economic activity and greatly contribute to higher government revenue over time,” she said. Estimates from nonpartisan government scorekeepers and other independent analyses did not project the tax cut would pay for itself.
GERMAN ENGINE SPUTTERS
The German economy came close to entering its first recession in six years in the final quarter of 2018, and seems set for another year of weak growth. Gross domestic product advanced at a 0.1% annual pace in the fourth quarter after contracting by 0.8% in the third. Germany’s slowdown is part of a wider European trend that has cast a cloud over the global economy’s prospects. Italy entered a technical recession at the end of last year and France’s economy has been impaired by protests against President Emmanuel Macron’s reform agenda, Nina Adam reports. For the entire eurozone, GDP advanced at a modest 0.8% pace in the fourth quarter.
JAPAN REVS UP
The Japanese economy rebounded in the final quarter of 2018 thanks to solid spending by households and companies. The world’s third-largest economy expanded at an annualized pace of 1.4% in the October-December period following a 2.6% contraction in the previous quarter, Megumi Fujikawa reports. But some economists said worries about China and weaker spending might limit growth this year: “It is possible that the economy would shrink again in the current quarter,” said Daiwa Securities economist Mari Iwashita.
CHINA EXPORTS REBOUND
China’s exports accelerated last month, suggesting a pickup in global demand for Chinese goods. Exports surged 9.1% from a year earlier in January, reversing December’s losses. Imports, however, dropped for a second consecutive month. One month’s data doesn’t make a trend: Exporters may have been hurrying out orders ahead of February’s Lunar New Year holiday and before the cease-fire in the U.S.-China trade war is set to expire on March 1, Liyan Qi and Grace Zhu report.
Trade spat: China’s exports to the U.S. fell 2.4% from a year earlier in January. Imports from the U.S. dropped a whopping 41.2%. Negotiations between the U.S. and China are under way in Beijing.
CONFIDENCE GAME
European Union leaders are losing confidence in Prime Minister Theresa May‘s capacity to deliver a Brexit deal. Privately, European officials say they may eventually accept some additions or attachments to the divorce agreement they sealed last November if Mrs. May convinces them Parliament would pass it. But those officials now worry that, even if they do make further concessions, Mrs. May still may not be able to drive the deal through her deeply divided legislature, Laurence Norman and Stephen Fidler report.
European officials are now working on the assumption that unless Britain exits on March 29 with no agreement, there will be a minimum three-month delay to Brexit.
NO SHUTDOWN SEQUEL
President Trump is likely to sign the border-security legislation finalized Wednesday that would keep the government from closing this weekend. The Senate and House were expected to vote Thursday on the spending package. It is expected to pass both chambers, though it will face opposition from lawmakers on both the left and right ends of the political spectrum, Rebecca Ballhaus, Kristina Peterson and Peter Nicholas report.
QUOTE OF THE DAY
I am a Democrat and not a socialist. I actually worked in the private sector for 14 years, and I believe in capitalism. —Presidential candidate and Minnesota Sen. Amy Klobuchar, speaking on Fox News
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Just selling more soybeans to China won’t cut it. “As American officials continue talks with their counterparts in Beijing to end the U.S.-China trade dispute, they should resist the temptation to cut a bad deal. At a minimum, they should strive to achieve the goals that President Trump outlined late last year: meaningful structural changes regarding forced technology transfers, intellectual-property theft, non-tariff barriers and cybersecurity,” Sen. Marco Rubio (R., Fla.) writes in the Washington Post.
President Trump and Rep. Alexandria Ocasio-Cortez have something in common. “On trade, Trump behaves more like a state-interventionist than a laissez-faire guy. And he has more in common with the New York congresswoman, who like many progressive Democrats argues for stronger trade rules to protect American jobs, than with the standard-bearers of his own Republican party,” Shawn Donnan writes at Bloomberg.
UP NEXT: FRIDAY
The New York Fed’s Empire State survey for February is expected to jump to 7.0 from 3.9 a month earlier. (8:30 a.m. ET)
U.S. import prices for January are expected to fall 0.3% from a month earlier. (8:30 a.m. ET)
U.S. industrial production for January is expected to rise 0.1% from a month earlier. (9:15 a.m. ET)
The Atlanta Fed’s Raphael Bostic speaks about workforce development at 9:55 a.m. ET.
The University of Michigan’s consumer-sentiment index for February is expected to rise to 93.0 from 91.2 earlier in the month. (10 a.m. ET)
from Real Time Economics https://on.wsj.com/2BBjSmO
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