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Good morning. Jeff Sparshott here to take you through the latest developments on trade, the Fed, worker mobility and wages, Facebook, Japan’s recurring policy error, and mighty China’s mini yuan. You can send us any questions or comments by responding to this email.
I Will Wait
U.S. and Chinese trade negotiators are planning for a delay of December tariffs. In recent days, officials in Beijing and Washington have signaled that Dec. 15 isn’t the final date for reaching a so-called phase-one deal—even though that is the date President Trump has set for tariffs to increase on $165 billion of Chinese goods, Lingling Wei and Bob Davis report.
- Mr. Trump hasn’t made his decision, and he has overridden his trade advisers several times to add tariffs.
- The biggest holdup is Washington’s demand that China guarantee its pledge to buy more American soybeans, poultry and other agricultural products. The Chinese side wants to tie the size of the upfront commitment to how much tariff relief the U.S. would be willing to extend immediately.
WHAT TO WATCH TODAY
The U.S. consumer-price index for November is expected to rise 0.2% from a month earlier and 2% from a year earlier. Excluding food and energy, CPI is expected to climb 0.2% and 2.3%. (8:30 a.m. ET)
The U.S. quarterly services survey for the third quarter is out at 10 a.m. ET.
The Federal Reserve releases a policy statement and economic projections at 2 p.m. ET. Chairman Jerome Powell holds a press conference at 2:30 p.m. ET.
U.S. federal budget figures for November are out at 2 p.m. ET.
TOP STORIES
Steady as She Goes
Federal Reserve officials are likely to hold their benchmark interest rate steady today, a rather dull end to an eventful year for monetary policy. The Fed cut interest rates by a quarter percentage point at each of its past three meetings. Now, it’s in wait-and-see mode: Chairman Jerome Powell has said the economic outlook would need to weaken materially for the Fed to consider lowering rates further. His press conference today is the most likely venue for any clues on the policy outlook but recent data offer little reason for him to recast his message. Investors may pay more attention to officials’ interest-rate projections—the so-called “dot plot.” Will any officials project cuts in 2020? And look to see if estimates of the long-run interest rate fall further. This rate serves as a proxy for officials’ estimate of the so-called neutral rate that neither spurs nor slows growth, Nick Timiraos writes.
Noncompete Creep
A new study by the Economic Policy Institute finds a rising share of U.S. workers are subject to noncompete agreements—a factor that could be holding down wages and mobility. The study, which used data from a survey of private-sector American businesses with 50 or more employees, found roughly half of businesses, or 49.4%, use noncompete agreements for at least some employees. Nearly a third, 31.8% of respondents, indicated that all their employees had noncompetes, regardless of their pay or job duties. The findings suggest noncompetes are becoming more prevalent: earlier studies have found about one in five workers were subject to noncompetes, now it’s closer to one in three. —Harriet Torry
Noncompetes are likely bad news for wages—job hopping is a good way to get a raise. But the outlook on pay isn’t entirely bleak. The latest National Federation of Independent Business survey found small-business owners were struggling to find workers. One result: 26% plan to raise pay in the coming months, the highest level since December 1989.
New Nafta Poised for 2020 Ratification
A new U.S. trade deal with Mexico and Canada gained backing from House Democrats, setting the agreement on course for likely ratification by Congress in 2020 and marking a victory for President Trump after months of negotiations to modify it, Natalie Andrews, William Mauldin and Anthony Harrup report.
Oxford Economics economist Gregory Daco: “The net macroeconomic benefits of the deal will be negligible…. However, at a time when slower global growth, rising protectionism, lingering policy uncertainty and a strong dollar are constraining activity, the deal prevents a negative impact worth 0.5% of GDP from a dissolution of Nafta.”
Facebook and Free Lunch
She argued Facebook is a monopoly. People listened. Dina Srinivasan said that rather than raising prices like an old-school monopolist, Facebook harms consumers by taking ever-increasing amounts of personal data. The idea has had unexpected resonance.
Mistakes, I’ve Made a Few
For the third time, Japan has increased the country’s sales tax when a tightening of fiscal policy wasn’t merited. For the third time, the economic hit has been greater than expected. The Japan Center for Economic Research suggested Japanese GDP contracted 3.7% in October from its level a month earlier, as the government increased the sales tax to 10% from 8%. Given that tax increases in both 1997 and 2014 had similar effects, successive governments must one day stop acting surprised when raising the sales tax derails an economic recovery, Mike Bird writes.
Yuan for the Money
China’s yuan is on the rise: a future challenger to the global supremacy of the dollar, or at the very least, the herald of a new multipolar currency system—or so we’re told. A look at the data on the actual international use of the yuan is sobering. Relative to its size as the world’s largest trading nation, China’s currency punches far below its weight, Mike Bird reports.
WHAT ELSE WE’RE READING
Finland is a capitalist paradise. High taxes? Yes. “But the Nordic nations as a whole, including a majority of their business elites, have arrived at a simple formula: Capitalism works better if employees get paid decent wages and are supported by high-quality, democratically accountable public services that enable everyone to live healthy, dignified lives and to enjoy real equality of opportunity for themselves and their children. For us, that has meant an increase in our personal freedoms and our political rights—not the other way around,” Anu Partanen and Trevor Corson write in the New York Times.
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