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Always Look on the Bright Side
The Trump administration’s proposed budget projects federal deficits would be cut in half as a share of the economy by 2024, and in half again by 2029. While White House officials say they are serious about fulfilling President Trump’s promise to reduce swelling deficits, budget experts say the projections are built on questionable assumptions. The $4.8 trillion budget for fiscal 2021, released Monday, assumes that economic growth will be stronger than most forecasters project. To hit its targets, the budget excludes tax cuts the administration may propose later and includes spending cuts that are vague, unlikely to advance in Congress, or both, Richard Rubin and Kate Davidson report.
WHAT TO WATCH TODAY
The New Hampshire primary is today. Here’s our guide to the race.
Federal Reserve Chairman Jerome Powell testifies on monetary policy to the House Financial Services Committee. His remarks will be made public at 8:30 a.m. ET and the hearing begins at 10 a.m. ET.
European Central Bank President Christine Lagarde speaks at European Parliament at 9 a.m. ET.
The U.S. job openings and labor turnover survey for December is out at 10 a.m. ET.
Bank of England Gov. Mark Carney appears before the Lords Economic Affairs Committee at 10:35 a.m. ET.
Fed Vice Chairman Randal Quarles speaks on bank supervision at 12:15 p.m. ET, St. Louis Fed President James Bullard speaks on the economy and monetary policy at 1:30 p.m. ET, and Minneapolis Fed President Neel Kashkari speaks at 2:15 p.m. ET.
The Reserve Bank of New Zealand releases a policy statement and rate decision at 8 p.m. ET.
TOP STORIES
Ghost Towns
Business was slow to restart in China, even after some local governments stopped calling for people to stay away from the workplace during a coronavirus outbreak that has killed more than 1,000 people and dented economic growth. Workers remained stranded on Monday, unable to reach their factories. Office towers stayed dark as companies asked employees to work from home. The quarantine of nearly 60 million people in Wuhan and the surrounding Hubei province, the center of the epidemic, means that workers who visited family there over the recent Lunar New Year holiday can’t get back to their jobs. Even districts in cities hundreds of miles away have confined residents to their homes. On top of that, many companies continued to encourage people to continue working from home, even after Shanghai and Beijing officially ended their stay-away-from-the-workplace policy at midnight Sunday. These conditions have created a ghost-town ambience across China, where closed and short-staffed businesses have hammered the economy, Stu Woo and James T. Areddy report.
Bad for business: Diminished trade as a result of the coronavirus outbreak is costing container shipping lines $350 million a week in lost volumes, a new report says, as declining activity in China begins to take a deeper toll on maritime operations from shipyards to carriers of bulk commodities, Costas Paris reports.
Good for business: The outbreak has resulted in a boom in online orders across China after local governments allowed the country’s legion of scooter-driving couriers to stay on the streets.
Global stocks rose as the rate of new coronavirus cases in China slowed, bolstering investors’ hopes that authorities there and in the U.S. will take the necessary steps to contain the outbreak and shield the world economy.
Talk the Talk
Federal Reserve Chairman Jerome Powell heads to Capitol Hill for two days of testimony beginning Tuesday. Here are two topics to watch from Nick Timiraos.
Economic outlook: No sooner had the U.S. and China signed a deal that eased trade tensions last month than the coronavirus outbreak rekindled doubts about the global economy’s prospects. Mr. Powell is likely to say the Fed is monitoring how quarantines and limits on travel could spill over into the broader economy, but he may be unable to offer the kind of certainty that investors often crave about how the Fed will respond to the latest threats to growth.
Balance sheet: Lawmakers are expected to ask Mr. Powell pointed questions about money-market volatility last September that forced the Fed to quickly expand its asset portfolio to nearly $4.2 trillion from $3.8 trillion.
San Francisco Fed President Mary Daly said historically low unemployment doesn’t mean the labor market is historically tight: “Letting the economy run past what we thought was possible has tremendous benefits, especially for disadvantaged groups.” The upshot: No need to change interest rates. “Policy is in a good place, the economy is in a good place, and barring a material change in the outlook, I’m comfortable with policy where it’s at for the foreseeable future,” Ms. Daly said.
Fog in Channel, Continent Cut Off
The British economy picked up a little speed in 2019 despite registering no growth at all in the final quarter of the year. The U.K. economy grew 1.4%, according to a preliminary estimate by the Office for National Statistics, outpacing both France and Germany. The figures nevertheless add to a subdued picture for the global economy last year, as trade tensions between the U.S. and China weighed on activity worldwide. The U.K.’s fortunes in 2020 and the years ahead depend heavily on negotiations between London and Brussels to settle future economic ties following Britain’s formal departure from the European Union on Jan. 31. Prime Minister Boris Johnson is aiming to secure a free-trade accord with the bloc by Dec. 31, an ambitious deadline that raises the risk of a messy rupture at the end of the year, Jason Douglas reports.
WHAT ELSE WE’RE READING
The longest stretch of job creation on record and low unemployment are drawing more and more Americans off the sidelines and into the labor force. Where are they ending up? “In short, those who’ve been out of work for a while can find jobs, but the positions they take might not pay much,” Indeed Hiring Lab economist Nick Bunker writes in a blog post. That includes jobs like food service workers, and amusement and recreation attendants. Even so, “A stronger job market is presenting real opportunities for workers who are already collecting paychecks. It is a terrific time to look for a new job or bargain with a current employer for higher compensation,” Mr. Bunker writes.
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