Friday, August 9, 2019

Real Time Economics: College Gets Riskier, Recession Odds Climb

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

A college degree is becoming a riskier proposition, the U.S.-China dispute is more than a spat, and Japan’s economy is up while the U.K.’s is down. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.

College Pays, but Not for Everyone

Investing in a college degree still pays off for most students with higher salaries and greater wealth, but in recent years it has become riskier, splitting graduates more widely into haves and have-nots, Josh Mitchell reports.

  • College graduates still earn far more than those who never got an education beyond high school.
  • But there are three related shifts causing economists to re-examine the returns: Inflation-adjusted wages of graduates have remained mostly flat this century, the cost of attending college has soared, and significant numbers of graduates are failing to build the kind of wealth that previous generations did.
  • One reason: Since the early-2000s tech bust, college grads have been taking up jobs previously held by those who only went to high school. Roughly four in 10 recent graduates are in jobs that typically don’t require a degree. 
  • The result: Many students ended up paying far more for higher education than previous generations but may not have gotten the type of income boost they expected.

WHAT TO WATCH TODAY

The U.S. producer-price index for July is expected to rise 0.2% from a month earlier. (8:30 a.m. ET)

Canada’s jobs report for July is out at 8:30 a.m. ET.

The Baker Hughes rig count is out at 1 p.m. ET.

TOP STORIES

WSJ Survey: Fed Cuts and Recession Odds

Economists’ expectations for a September Federal Reserve rate cut rose sharply this month, along with their expectations for a recession in the next year. Private-sector economic forecasters surveyed by The Wall Street Journal on average saw a 63.9% probability for a rate cut at the Fed’s Sept. 17-18 meeting, up from 49.8% in the prior month’s survey. They saw a 33.6% probability of a recession in the 12 months, up from 30.1% in July and the highest level in The Wall Street Journal survey going back to 2011. The average probability was just 18.3% a year ago, Harriet Torry reports.

Totally Saw It Coming

In recent days, President Trump’s morning routine has included expressing his unhappiness on Twitter with Federal Reserve policy. He said Thursday, for example, he thinks the dollar is too strong, and the Fed should be cutting rates aggressively to support stock markets and weaken the dollar.

  • Compared to Trump administration economic projections, however, interest rates don’t look high. In the administration’s May 2017 budget submission, officials assumed they would achieve 3% growth this year and next and that average three-month Treasury bill rates would reach 2.1% and 2.6%, respectively.
  • In economic projections released last month, the administration projected short-term rates would average 2.4% this year and next.
  • After the Fed cut its benchmark rate last week, the three-month bill declined. It stood at 2.02% on Thursday afternoon.
  • The upshot is the administration’s economic forecast assumes that current interest rates will not be a barrier to delivering growth above 3% this year or next.

—Nick Timiraos

Bringing Home the Bacon

Trend watch: The growing clout of women as drivers of the U.S. economy will radically alter the business and investing landscape in years to come.

When Two Tribes Go to War

The economic consensus is in: The U.S. and China are in a trade war. A year ago, economists in a monthly Wall Street Journal survey were evenly split over whether to describe the situation in those terms: Half said they preferred terms such as “trade skirmish,” “trade tensions,” “trade battle” or “trade dispute.” But in the latest survey, 87% of respondents were good to go with “trade war,” Josh Zumbrun reports.

Land of the Rising Economy

The Japanese economy grew at a faster pace than expected in the second quarter, but a tax increase and global uncertainty could dim the outlook. The world’s third-largest economy expanded at an annualized rate of 1.8%. The April-June results were led by solid private consumption: Consumers rushed to buy big-ticket items such as cars and air conditioners before a national consumption tax is raised in October to 10% from 8%, Megumi Fujikawa reports.

Little Britain

The U.K. economy shrank in the second quarter as Brexit uncertainty soared. Gross domestic product fell an annualized 0.8%, the first time the economy has contracted since 2012. Business surveys indicate that the U.K. economy steadied at the start of the third quarter, but its fate over the rest of this and coming years will hinge on the outcome of a standoff between new U.K. Prime Minister Boris Johnson and the European Union, Paul Hannon reports.

Go Gentle Into That Good Night

Reserve Bank of Australia Governor Philip Lowe said he’s ready to cut interest rates to support the economy. But things may be looking up: “There are signs the economy may have reached a gentle turning point. Consistent with this, we are expecting the quarterly GDP growth outcomes to strengthen gradually after a run of disappointing numbers.”

WHAT ELSE WE’RE READING

The number of Americans 65 or older declaring bankruptcy has increased almost fivefold over the past 25 years. “The culprits are vanishing pensions, soaring healthcare costs and tens of thousands of dollars in unpaid student loans for themselves, their children and even their grandchildren,” Patti Waldmeir writes in the Financial Times.

President Trump has complained that the Federal Reserve has been hurting the economy. “In fact, the central bank has kept interest rates lower than under any other president since Jimmy Carter, when adjusted for the economy’s output and inflation. At the same time, Congress has provided an unusual level of fiscal support. Only one president in the past 25 years got a bigger lift from tax cuts and federal spending increases than Mr. Trump has since he signed the 2017 tax overhaul,” Jim Tankersley, Jeanna Smialek and Ben Casselman write in the New York Times.

Sign Up for Our Calendar

Real Time Economics has launched a downloadable Google calendar with concise previews, forecasts and analysis of major U.S. data releases.

  • To add to your Google Calendar on desktop, click here.  
  • To add to your Google calendar app on mobile, click here.
  • If you prefer to view the calendar using a web browser, with the option of adding select Real Time Economics entries to your calendar, click here.
  • And here’s our how-to.

 

Let us know what you think. This is a pilot project, so we’d appreciate your feedback.

 



from Real Time Economics https://ift.tt/31pQ07i

No comments:

Post a Comment