The National  Memo Logo

Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

Tag: us economy

U.S. Economy Returns To Pre-Pandemic Level As Labor Market Improves

By Lucia Mutikani WASHINGTON (Reuters) - The U.S. economy grew solidly in the second quarter, pulling the level of gross domestic product above its pre-pandemic peak, as massive government aid and vaccinations against COVID-19 fueled spending on goods and travel-related services. The pace of GDP growth reported by the Commerce Department on Thursday was, however, slower than economists had expected. That was because businesses had to again draw down on meager inventories to meet the robust demand. Supply constraints, which have resulted in shortages of motor vehicles and some household applian...

Biden Kicks Off Effort To Reshape Economy With Infrastructure Plan

By Jarrett Renshaw (Reuters) - President Joe Biden on Wednesday will call for a dramatic and more permanent shift in the direction of the U.S. economy with a roughly $2 trillion package to invest in traditional projects like roads and bridges alongside tackling climate change and boosting human services like elder care. He also aims to put corporate America on the hook for the tab, which is expected to grow to a combined $4 trillion once he rolls out the second part of his economic plan in April. Coupled with his recently enacted $1.9 trillion coronavirus relief package, Biden's infrastructure...

Republican Rejection Of State Aid Risks ‘Extended Depression’

Reprinted with permission from Alternet

Senate Majority Leader Mitch McConnell has been slammed by everyone from New York Times liberal Paul Krugman to Washington Post conservative Jennifer Rubin over his recent assertion that he has no desire to "bail out blue states" and that individual states that are struggling should apply for bankruptcy. Journalist Robert McCartney, in an article for the Post, reports that according to "officials and analysts," McConnell's proposal is "a recipe for turning a potentially short recession into a prolonged depression."

"Governors, mayors and county leaders of both parties are clamoring for help in the next federal rescue package after McConnell and President Trump blocked such assistance in the $484 billion bill approved last week," McCartney reports. "House Speaker Nancy Pelosi (D) says the next bill must include state and local aid, but Trump has sent mixed signals about whether he will support it. McConnell and many other Senate Republicans are resisting."

Read Now Show less

Economy Won’t Reopen With A Bang

From the first moment Donald Trump recognized the serious nature of the new coronavirus pandemic, his impatience has been palpable. Over and over, he stressed how quickly we would get past it. And even after extending the guidelines that restrict activity until the end of April, he continues to predict that life will soon be back to normal.

"It would be nice to be able to open with a big bang and open up our country or certainly most of our country," he said Wednesday. "And I think we're going to do that soon." Treasury Secretary Steven Mnuchin was similarly optimistic, predicting that "we could be open for business in the month of May." Attorney General William Barr insisted that by then, it will be time "to allow people to adapt more than we have and not just tell people to go home and hide under their bed."

Read Now Show less

US Economy’s Second-Quarter Growth Slower Than Estimated

Reprinted with permission from Alternet

President Donald Trump and his sycophants continue to insist that reports of a weakening U.S. economy are “fake news” and that the state of the economy has never been stronger in the United States. But an inverted yield curve (meaning that short-term interest rates for financial products are higher than long-term interest rates for such products) is, according to many economists, a sign of an economic slowdown — and data released by the Commerce Department on Thursday shows that growth for the U.S. during 2019’s second quarter was 0.1 percent less than originally thought.

For the April-June period, the Commerce Department’s Bureau of Economic Analysis (BEA) revised U.S. gross domestic product (GDP) growth to 2 percent —which is 0.1 percent less than the previous estimate of 2.1 percent released in July.

Obviously, 0.1 percent isn’t a huge change, but growth in the quarter was already disappointing to begin with. A significant revision upward would have been a sign that the economy was doing somewhat better than we thought; instead, it’s doing slightly worse.

The Federal Reserve signaled it’s taking these signs of weakness seriously with its recent decision to lower interest rates for the first time since 2015. Gradually, interest rates had been increasing since 2015, but that trend ended this summer with the Fed’s rate cut.

Although Trump insists that the U.S. is not going into a recession, his desire for more interest rate cuts indicates that he is worried about the economy slowing down. On Thursday, Trump tweeted, “The Economy is doing GREAT, with tremendous upside potential! If the Fed would do what they should, we are a Rocket upward!”

But some economists, including Robert Reich, have been warning that there is a strong possibility the U.S. will head into a recession when the “sugar high” of the GOP’s 2017 corporate tax cut wears off.

Major Banks Warn Against Trump Recession

Big banks are raising red flags about a looming recession in the United States, citing Trump’s trade war with China as the major factor.

In the last week, Bank of America, Morgan Stanley, Goldman Sachs, and UBS have all warned that Trump’s actions with China are hurting the U.S. economy and pushing the country, and even the entire globe, into a recession.

Morgan Stanley on Aug. 5 predicted that a recession will start in just nine months if Trump follows through on his pledge to add a 25 percent tariff (tax) on all goods from China.

“Trade tensions have pushed corporate confidence and global growth to multi-year lows,” Chetan Ahya, Morgan Stanley’s chief economist, said.

In an analysis published Friday, Aug. 9, Bank of America raised their odds of a recession in the next year from a 1-in-5 chance to a 1-in-3, and stated their model “likely does not fully capture the threat of US-China trade tensions spiraling into a more severe trade war, which we view as the biggest downside risk for the US economy.”

“Fears that the trade war will trigger a recession are growing,” Jan Hatzius, Goldman Sachs’ chief economist, announced on Sunday. He also predicted that Trump’s economic battle with China will cause America’s economic growth to falter at the end of 2019.

On Tuesday morning, UBS said it anticipates both a slowdown in job growth as well as an increase in unemployment. In June, UBS warned that if trade tensions between the U.S. and China did not cool, “the contours would resemble a mild ‘global recession.'”

The warnings come days after Trump announced a 10 percent tariff on Chinese goods starting September 1. The White House has since changed course, announcing that the U.S. will delay the start of tariffs on Chinese goods until mid-December.

Before the White House announced a delay in the new tariffs, economists questioned if and when the trade war could end.

“I’m very skeptical that the two sides will come to a deal before the 2020 election,” said Meredith Crowley, a Cambridge University economist, told NBC News on Monday.

Trump’s trade war with China has already had devastating effects for American farmers. In retaliation for Trump’s tariffs, China first reduced and then completely eliminated purchases of U.S. agricultural products.

Mark Zandi, chief economist at Moody’s Analytics, estimated Trump’s trade war has already cost the U.S. economy 300,000 jobs.

There’s no telling how much more damage he will do before it all ends.

Published with permission of The American Independent.

‘Ominous Signs’ Loom Over US Economy — And Workers Still Struggle

Reprinted with permission from Alternet.

President Donald Trump hasn’t been shy about citing economic data, pointing out how much unemployment has decreased in the U.S. and insisting that he is responsible — never mind the fact that unemployment was already down to 4.7 percent in December 2016, President Barack Obama’s last full month in office. Trump inherited an economic recovery; he didn’t create one singlehandedly.

But while the 3.7 percent unemployment rate the Bureau of Labor Statistics (BLS) gave for June is certainly an improvement over the financial misery and devastation that Obama coped with in 2009 and 2010 during the worst of the Great Recession, there are some troubling signs in current economic data — and those signs are examined in recent articles published by the Washington Post, the New York Times, and Bloomberg News.

Sen. Elizabeth Warren and Sen. Bernie Sanders have both been complaining that most of the economic gains of the Trump era have gone to Americans at the top — and Heather Long, in the Washington Post, notes that 40 percent of Americans still say they are struggling to pay their bills. Long notes that although the “stock market is at record levels” and the current “economic expansion” is the longest in U.S. history, this is a “two-tier recovery.”

And the lower tier, according to Long, is seeing “paltry or volatile wage growth, rising expenses for housing, health care and education, and increased levels of personal debt.”

Long observes that according to Matthew Mish (head of credit strategy for the investment bank UBS) the 40 percent of Americans Mish considers the “lower tier” is struggling to make ends meet.

Neil Irwin, in the New York Times, cites some good news: “Employers added a robust 224,000 jobs, the Labor Department said, up from a revised 72,000 in May.” But Irwin goes on to cite some bad news as well — for example, Irwin writes, “average hourly earnings have risen only 3.1 percent over the last year.”

Irwin reports, “Even as low as the unemployment rate is, employers don’t seem to be bidding up the wages to get workers.” The Times reporter stresses that although “the American job market is steady and solid,” wages aren’t increasing enough for “the average American worker.”

He also noted the financial markets are sending “ominous signs about the global economy.”

The Great Recession was the worst economic downturn since the Great Depression of the 1930s. When Obama was sworn in as president in January 2009, he inherited the worst economy of any president since Democrat Franklin Delano Roosevelt (who took office in 1933 after his landslide victory over Republican incumbent President Herbert Hoover in 1932).

The Great Recession left millions of Americans financially scarred. And Karl W. Smith (a former economics professor at the University of North Carolina) explains in Bloomberg News that although “the job market is still going strong,” the U.S. economy still isn’t “fully healed” in 2019.

“For most workers,” Smith warns, “wages are rising only modestly. That implies there has been an ample supply of people outside the job market who can be pulled back in not because they are being offered more money, but because now, employers are giving them the opportunity.”

In other words, those workers are being underpaid, but being underpaid is a step up from the extended unemployment of the Great Recession.

“The job market is still going strong,” Smith reports. “But until we see labor’s share of income rising and increasing numbers of people choosing work over school and retirement, the job market won’t be fully healed.”

IMAGE: Fast-food workers and their supporters join a nationwide protest for higher wages and union rights outside McDonald’s in Los Angeles, California. REUTERS/Lucy Nicholson

 

 

 

How Trump’s Tariffs May Wreck The Good Economy He Inherited

When it comes to the economy, Donald Trump was born on third base and claims he hit a triple. But now, he seems determined to be thrown out before reaching home.

His latest move is threatening to impose tariffs on all goods coming from Mexico, starting at five percent and rising to 25 percent in October. He made the announcement Thursday, even as he is asking Congress to approve a new trade deal to keep virtually all tariffs on goods from Mexico at … zero.

It’s a contradiction on the order of pressing one foot on the accelerator while using the other to stomp on the brakes. “Why even have a trade agreement if it means nothing?” former Mexican diplomat Jorge Guajardo asked a reporter for The Washington Post.

That’s just one of the questions that will occur to people on Capitol Hill. Others include: Why did the president go to the trouble of negotiating a new free trade deal to replace NAFTA if he has no intention of actually practicing free trade? Why would members of Congress bother voting on an accord that he would feel entitled to override?

This step comes on top of the 25 percent tariffs the president has already imposed on Chinese goods, which, contrary to his habitual lies, will be paid by Americans. A new report from the Federal Reserve Bank of New York estimates that Trump’s tax on Chinese imports will cost the average U.S. household $831 a year.

That’s not counting the consequences of his taxes on imported steel and aluminum, washing machines and solar panels. It’s also not counting the burden on American exporters from retaliatory tariffs imposed by Beijing. Pork producers and soybean growers saw their sales to China plummet last year, and the effect is likely to be even more painful this year.

The administration has admitted as much, promising to compensate farmers with $16 billion in federal aid, on top of the $12 billion it handed out in 2018. The help, farmers say, will fall short of making them whole. It will, however, add to the loss borne by taxpayers, who will suffer twice — once in financing the government payments and again when they go shopping.

The U.S. auto industry stands to suffer because the new tariffs on Mexico will tie knots in their internal supply chains, which involve making and assembling components in both countries. “This would cripple the auto industry,” Torsten Slok, chief economist for Deutsche Bank Securities, told Yahoo Finance. “It would bring car production to a halt pretty quickly.”

All these measures could hardly be better engineered to squander the good times that Trump inherited and has so far maintained. Presidents typically have far less impact on the real economy, for good or ill, than the public assumes. But Trump has been doing his best to prove otherwise.

Having arrived in the White House during an expansion that was nearly eight years old, Trump has been happy to take credit for something that began under Barack Obama. In the first quarter of 2019, real GDP grew at a strong 3.1 percent clip, which Trump and his allies in Congress celebrated as proof of his business savvy.

It wasn’t. In fact, the economy exceeded that pace as recently as the second quarter of 2015 — when Republicans were accusing Obama of stifling growth. The Dow Jones Industrial Average is up some 5,000 points under Trump, on top of the 12,000 it gained under his predecessor.

Unemployment fell from 10 percent to 4.7 percent during the Obama years, and it has dropped to 3.6 percent under Trump.

The administration and its allies in Congress argue that the recent solid growth is a direct result of the mammoth tax cut enacted in 2017. But a new report by the nonpartisan Congressional Research Service concluded it had “a relatively small (if any) first-year effect on the economy” and that growth has been “in line with the trend in growth” since 2013. Oh, and the tax cut didn’t come close to paying for itself.

On economic matters, Trump is an impetuous meddler who brings to mind what Theodore Roosevelt’s daughter Alice Roosevelt Longworth said: “My father always wanted to be the corpse at every funeral, the bride at every wedding and the baby at every christening.” But Trump’s policies are likely to confirm that, often, the best policy is to leave well enough alone.

Steve Chapman blogs at http://www.chicagotribune.com/news/opinion/chapman. Follow him on Twitter @SteveChapman13 or at https://www.facebook.com/stevechapman13. To find out more about Steve Chapman and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

IMAGE: Construction on the area around the port of entry from Mexico to the United States continues next to the border wall in San Ysidro, California, January 25, 2017. REUTERS/Mike Blake