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The U.S. economy is growing but household incomes aren’t, more Americans are quitting their jobs, and China may be trying to ease trade tensions ahead of another round of talks. Here are the key economic developments for your Wednesday.
Party Like It’s 1999
American incomes remained essentially flat in 2018. Median household income was $63,179 last year, a statistically insignificant uptick of 0.9% from 2017, according to new Census Bureau figures. That leaves inflation-adjusted median household income about the same as it was during previous peaks in 1999 and 2007, Janet Adamy and Paul Overberg report.
- Income growth hasn’t been as strong as some economists would have expected given the tightness of the U.S. labor market. That may be partly because employers have become more adept at holding down wages by using technology, industries have consolidated and unions declined.
- The good news: The poverty rate in 2018 was 11.8%, the fourth consecutive annual decline. It was the first time the official poverty rate fell significantly below its level at the start of the recession in 2007.
WHAT TO WATCH
The U.S. producer price index for August is expected to be unchanged from the prior month. (8:30 a.m. ET)
U.S. wholesale inventories for July are expected to rise 0.2% from the prior month. (10 a.m. ET)
TOP STORIES
Effect and Cause
The U.S. economy grew by an inflation-adjusted 48% from 1999 to 2018. The median household income was basically flat. That’s striking, and likely reflects shifts in the economy by which upper-income tiers are capturing more of the gains from income and wealth. While there is a heated debate over the causes, the effects are just as important, Heard on the Street’s Justin Lahart writes.
- Political: The populism that President Trump tapped into in the 2016 election was driven in part by a feeling among Americans that the economy was passing them by. Leading Democratic presidential candidates have embraced a smorgasbord of positions aimed at combating inequality.
- Economic: Inequality may also change the way the economy works. Rich people are less likely than others to spend additional income, for example, leading to reduced growth and inflation. And because the rich tend to invest that extra money instead, it can lead to increased asset prices.
Strong Dollar
Currencies around the world are tumbling to multiyear lows, bruising investors’ portfolios and fanning the flames of a global trade war. The Chinese yuan recently hit its lowest level in more than a decade against the dollar, the euro dropped to a fresh two-year low last week and the British pound is at depths it hasn’t consistently plumbed since the 1980s. The declines highlight how fears of a global slowdown and a burgeoning trade dispute between the U.S. and China have converged to ripple through markets in recent months. Central banks began cutting interest rates earlier this year. As falling rates and slowing growth drove bond yields lower, investors headed to the U.S., where the economy is relatively strong and the payout on Treasurys stands far above that offered by many other government bonds, Ira Iosebashvili reports.
Now Hiring…a Little Less
The number of job openings decreased in July from a year earlier for the second consecutive month, underscoring slowing demand for new workers. Before June, job openings hadn’t decreased year over year since early 2017. Still, the number of available jobs remains high. Openings exceeded the number of unemployed Americans for the 17th straight month. And one particularly positive sign: The rate at which workers quit their jobs ticked up in July to the highest level since 2001, a sign of confidence in the job market, Sarah Chaney reports.
China Tries to Ease Tensions
China said it would exempt a variety of U.S. imports from higher tariffs and that it would continue to review more goods for possible exclusion. The move appears aimed at helping de-escalate tensions ahead of trade talks planned in Washington in early October, Grace Zhu reports.
Any breakthrough would be welcome news for American companies in China. An American Chamber of Commerce in Shanghai survey found U.S. companies are downshifting in China as the country’s economy slows and trade tensions with the U.S. persist, James T. Areddy reports.
Saving for a Rainy Day
How much did you spend last year—all told—on housing, food, clothes, transport, healthcare and movie tickets? If the answer is $61,224, you’re bang in line with the average American. New data from the Labor Department found that average expenditures per consumer for 2018 were up 1.9% from the prior year, a slower pace than the 4.8% increase in 2017. The data show a big jump in the amount people paid into pensions and Social Security, likely a reflection of the strong labor market as more Americans had jobs and the saving rate ticked up. Personal insurance and pensions spending increased 7.8% on the year in 2018, the biggest jump in any category. —Harriet Torry
WHAT ELSE WE’RE READING
Three political science professors from the University of North Texas and Texas A&M wrote a paper saying President Trump’s rallies are associated with a 226% increase in “hate-motivated incidents.” Two Harvard Ph.D. students studying economics say a closer look at the data shows that’s not a sensible conclusion: “Adding a simple statistical control for county population to the original analysis causes the estimated effect of Trump rallies on reported hate incidents to become statistically indistinguishable from zero. The study is wrong, and yet journalists ran with it anyway,” Matthew Lilley and Brian Wheaton write in Reason.
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