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Homeowners are staying put, robots are—slowly—getting smarter, and Europe’s factories are mired in their worst slump in seven years. And we’ve got a lot more to start the week…
Are We in a Recession? Ask Claudia Sahm
Two of the biggest challenges of fighting a recession are knowing when you’re in one and deciding what to do next. Claudia Sahm has an answer for both, Kate Davidson reports.
- When economic data weaken, it’s impossible to know in real time whether it’s a blip or something more prolonged. The official declaration usually comes a year or more after a recession starts.
- Now, Ms. Sahm, a Federal Reserve economist, has come up with a simple rule based on movements in unemployment to rapidly determine when a recession is under way.
- The formula: If the average of unemployment rate over three months rises a half-percentage point or more above its low over the previous year, the economy is in a recession.
- The rule would have accurately called every recession since 1970 within two to four months of when it started.
- In conjunction with that rule, Ms. Sahm has also proposed policies to immediately soften the downturn without the political hurdles that usually slow stimulus efforts.
WHAT TO WATCH TODAY
U.S. factory orders for September are expected to fall 0.5% from the prior month. (10 a.m. ET)
European Central Bank President Christine Lagarde speaks in Berlin at 2:30 p.m. ET.
The San Francisco Fed’s Mary Daly speaks at New York University’s Stern School of Business at 5 p.m. ET.
TOP STORIES
There’s No Place Like Home
U.S. homeowners are staying in their residences much longer than before, keeping inventory off the market and helping explain why home sales have been sputtering. Homeowners nationwide are remaining in their homes typically 13 years, five years longer than they did in 2010, according to a new analysis by real-estate brokerage Redfin. When owners don’t trade up to a larger home for a growing family or downsize when children leave, it plugs up the market for buyers coming behind them, Laura Kusisto reports.
Speed Bump
The White House has until Nov. 13 to decide whether to impose tariffs on European and Asian auto imports. Business groups and some of President Trump’s fellow Republicans are warning that the levies—which are opposed by both foreign and domestic auto makers—couldn’t come at a worse time. The 25% tariffs would jack up the price of import cars by about $6,875, according to the Center for Automotive Research. Average prices overall would rise by $4,400 since even domestic manufacturers rely on global supply chains. Besides angering car-buyers, the higher prices could dent sales, further straining auto makers that are already cutting jobs, Josh Zumbrun and Natalie Andrews report.
That’s Gonna Leave a Mark
Sen. Elizabeth Warren’s new Medicare for All plan would leave a sizable imprint on the U.S. economy, altering consumer spending and business investment while upending the health-care sector. Nearly $20 trillion in new taxes over the next decade on corporations, investors and wealthy individuals would damp business profits. Households would see their costs reduced by $11 trillion, boosting their ability to spend on other goods and services. The plan also includes immigration-policy changes that would expand the labor force and consumer base. Ms. Warren detailed her Medicare for All plan on Friday. The WSJ’s Richard Rubin digs in here.
The Robots Are Getting Smarter, Slowly
Researchers at International Business Machines say they have uncovered evidence that artificial intelligence has begun to displace some workers, albeit quite slowly.
- Company researchers looked at some 170 million job postings provided by Burning Glass Technologies, a job placement and review site. They classified the tasks required by each job by ease of replacement by machine learning, a field of artificial intelligence that mimics human decision making.
- Between 2010 and 2017, among occupations where tasks are most suitable to machine learning, such as scheduling and credential verification, the number of tasks demanded fell 4.3, whereas in occupations less suited to machine learning such as teamwork, collaboration, presentation and design the number of tasks demanded fell only 2.9. (The average occupation involves 19 tasks.)
- The study attributes the faster drop in the first category to “early adoption of AI and machine learning.” But they also note the process thus far has been modest, likely because “AI, cloud infrastructure, natural language processing, and other related technologies [are] in early stages of deployment.”
—Greg Ip
Eurozone Factory Slump Worst in 7 Years
Europe’s factories slashed output and employment again in October. IHS Markit’s purchasing managers index for manufacturing showed another contraction in activity as the sector endures its steepest decline in seven years. “The focus of manufacturers remains on cost cutting, reducing inventories and investment spending while also lowering payroll numbers at an increased rate. The steeper pace of job losses is especially worrying, as it magnifies the risk of the downturn spilling over into the household sector,” IHS Markit economist Chris Williamson said.
Numbers out Friday showed factory activity in the U.S. declined in October for the third straight month, though at a slower pace than in September. The Institute for Supply Management’s manufacturing index suggested the slide in American manufacturing was nearing its end: The recently-ended strike at General Motors and the continued uncertainty around Boeing’s MAX passenger jet could have held down the numbers.
The Electric Co.
A little-known Chinese company has become the world’s biggest maker of electric vehicle batteries. Beijing engineered a scenario that didn’t give the world much choice. China is by far the biggest EV market, and to boost its standing in the fast-growing industry, China began pressuring foreign auto makers to use locally-made batteries in the country several years ago. One company—Contemporary Amperex Technology Ltd., known as CATL—was the only shop capable of producing them at scale. Auto makers weren’t pleased, but they fell in line. China’s dominance in EV batteries is a worrisome development for U.S. and European policy makers, who are increasingly wary of the Communist Party’s influence over new technologies and products, Trefor Moss reports.
WHAT ELSE WE’RE READING
Is Maine running out of people? “Scratch Baking Co. in South Portland announced Wednesday [Oct. 30] that it is closing its second location, a toast bar at 205 Broadway, because of the labor shortage. ‘Unfortunately with the current labor shortage we just can’t find the staff to provide the experience and service to our customers that is so important to us,’ the post said.” (Portland Press Herald)
California’s Paid Family Leave Act in 2004 provided up to six weeks partial pay for new parents. The result? “We find little evidence that PFLA increased women’s employment, wage earnings, or attachment to employers. For new mothers, taking up PFLA reduced employment by 7% and lowered annual wages by 8% six to ten years after giving birth. Overall, PFLA tended to reduce the number of children born and, by decreasing mothers’ time at work, increase time spent with children,” Martha Bailey, Tanya Byker, Elena Patel and Shanthi Ramnath write in a National Bureau of Economic Research paper.
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