Tour Operators say it's too soon to gauge Notre Dame Fire Impact

While an earlier post in the blog assessed how much it would cost to repair the Notre Dame Cathedral, I think it would be interesting to view its effect on the economy in other ways such as tourism. Notre Dame is the most popular destination for tourists in Paris with 30 thousand visitors each day and 13 million each year. While the cathedral is free to visit you can enter the crypt and tower for $6 and $9 respectfully. If 10% of visitors were to visit both this would yield around $16 million dollars in revenue. While it is unclear how long the cathedral will be closed it is easy to see the revenue that will be lost in the meantime.

In an article by Jeri Clausing takes a look at analyzing this impact on tourism. According to a tour director in the article it is too early to tell if the fire will affect the tourism of Paris at large. This is coming a year after Paris cultural attractions saw a 5.9% increase in visitors. The article mainly concluded that Paris has much to offer and it is unclear what effect the fire will have on tourism as a whole. Do you think Notre Dame will have a significant impact on tourism in the region or will Paris not see much of a change while the cathedral is being repaired?

https://www.travelweekly.com/Travel-News/Tour-Operators/Tour-operators-too-soon-to-gauge-Notre-Dame-fire-impact

US economy grows by 3.2% in the first quarter, topping expectations

The U.S economy grew at faster rate than expected. First quarter gap expanded by 3.2%. It was the first time since 2015 that first-quarter GDP topped 3%.

Exports rose 3.7% while import decreased by 3.7% in the first quarter. There was also a strong lift in investments in intellectual property products. Disposable personal income increased by 3%, while prices increased by 1.3% when excluding food and energy.

The data was being compared to how the economy was during the longest gov't shutdown. The report helped offset fears of slowing global growth said Alec Young.

https://www.cnbc.com/2019/04/26/gdp-q1-2019-first-read.html

Is Iraq's oil boom in Trouble?

Oil output has doubled over the past decade, putting Iraq to become the world's fourth-largest producer by 2030. They would trail only The US, Saudi Arabia and Russia. However, they are having a hard time finding water sources to produce their oil. This means that their production rates will struggle and continue to struggle if they can't find something to do about it. Iraq would need to produce an additional 3 million barrels a day of water in order to reach their goals.
They already use 5 million barrels of water a day to ensure there's enough pressure in the underground reservoirs to extract the oil and it needs as much as 1.5 barrels of water for every barrel of oil.
However, and more interestingly, they rely on imports from neighboring countries for 70% of the water it consumes and even more frightening, the River levels have fallen by up to 40% in the last 20 years.
What do you think Iraq should do and what can they do? Is there a solution? https://www.cnn.com/2019/04/25/business/iraq-oil-water-shortage/index.html

Trump's Washing Machine Tariff

This article depicts how Trump's tariffs on washing machines has raised the prices of both washers and dryers for US consumers. Even though the tariff has created more jobs for the US economy, the financial burden felt by consumers outweighs the benefits of the decision by increasing consumer prices by $1.5 billion dollars. It will be interesting to see what happens in this market in the near future and if the government will subsidize the cost of laundry equipment. Even though the tariff only affects washing machines, consumers typically purchase a washer and dryer as a bundle. therefore, manufactures raised the prices of dryers as a way to even out the cost of the two machines.

https://www.nytimes.com/2019/04/21/business/trump-tariffs-washing-machines.html

How Higher Minimum Wages Impact Employment

As the article points out at the very beginning, the debate about the effect that raising the minimum wage has on employment is currently not resolved, and research is still ongoing. Millsap does, however, review in this article a study (conducted by Paul Beaudry, David Green, and Ben Sand) that definitively concludes that minimum wage increases lead to lower employment in the long run. In numerical terms, the study found that a 1% increase in the wages leads to an employment decline of 0.3-1%; the range exists due to varying effects from wages being raised citywide or in only one industry.

The framework used by the authors is of three cities - Seattle, San Francisco, and Los Angeles - that recently raised their minimum wage to $15. San Francisco is a relatively higher-wage city so fewer workers and firms are affected in contrast to Los Angeles, which is a relatively lower-wage city. This makes sense since minimum wage workers in a higher-wage city would already be close to earning $15 per hour while someone in a lower-wage city earning a minimum wage of $10 will face a drastic change. Firms in the latter scenario will have much greater pressures applied to them and may even close down, a conclusion that another study mentioned in the article also reached. The last article I posted on this blog was about Target raising its minimum wage to $13 after increasing it to $12 the previous year, and now this article has me thinking about the long-term employment effects of doing that. Perhaps that might be the correct method going about it: gradual increases to the minimum wage to ensure that the long-term employment decline is not steep.

Article link: https://www.forbes.com/sites/adammillsap/2018/09/28/how-higher-minimum-wages-impact-employment/#1db280401e7d

A Trump reelection should boost stocks and delay a recession, Nobel Prize winner Robert Shiller says

If President Trump wins a seconds term, it could prolong the bull market and delay a recession. Optimists believe that pro-business policies would resonate with Wall Street for another four years. Since Trump won the presidency the Dow and S&P 500 have rallied 44% and 35% respectively.

It is interesting to see how people can change their minds on a daily basis. Trump has had a great stock market run while he has been president but it is hardly from the policies he has enacted. The market thinks something one day and immediately changes the next day to something to total opposite. One day Trump has no idea what he is doing and the next, if he get reelected there will not be a recession in the United States. The market seems to like what Trump has been doing for stocks and recently there has been revitalized. It seems ridiculous to say that if he gets reelected the United States can skip a recession.



https://www.cnbc.com/2019/04/16/trump-reelection-would-boost-stocks-delay-recession-robert-shiller.html

US trade deals were designed to serve corporations at the expense of workers

Globalization sits at the center of America's economic crisis. Critic say that globalization is the cause of the Americas suffering middle class. Mostly from signing bad trade deals that led to the loss of American industrial jobs. The advocates claims that America has benefited from globalization. They shift the blame for deindustrialization due to the improvement in technology.

The trade agreements were unfair to the benefit of the U.S. and Europe and to the detriment of developing countries. We secured strong intellectual property protection. We've succeeded in forcing countries to open up their markets to our financial firms.

We could have ensured globalization benefitted all, but corporate greed was too great. American workers are at a disadvantaged, low-skilled workers in particular.

Overall, we need fairer international rules. America needs better management of the changes being brought about both globalization and technology.

https://www.cnbc.com/2019/04/22/joseph-stiglitz-us-trade-deals-helped-corporations-and-hurt-workers.html

Judge Delivers Major Setback to Trump Policy to Increase Coal Mining on Federal Land

A judge on Friday ruled that the Interior Department acted illegally when it tried to roll back Obama era regulation on coal mining. This is an important set back to the Trumps Administration's goal to help coal mining make a comeback.  The regulation was a freeze on opening new coal mine leases on public lands. The policy was put into place in an attempt to slow climate change. The Judge stated that the Interior Department's policy to overturn the freeze failed to include adequate studies to justify the policy change. It is also expected that in the upcoming months, he will make a decision regarding whether the Obama freeze should be reinstated.

I think this will be interesting to follow especially with the upcoming 2020 election. Will environmental concerns be a larger aspect of the debates?

https://www.nytimes.com/2019/04/19/climate/court-trump-coal-mining-setback.html





THANKS, OBAMA

Scholz rules out new debt to stimulate Germany's slowing economy

Olaf Scholz, Germany’s Finance Minister decided that taking more debt would not be the best method for helping Germany’s economy as it continues to slow. Scholz believes that Germany already has too much debt and he does not want to increase public debt, as well. He also believes that it is due to Brexit and other trade disagreements. Structural issues like weak investment were not stated as the problem, but Brexit, and the US trade discussions with the EU and China were viewed as potential factors. He believes that in order to be a globalized economy, it is expected to be affected by other countries in the world, and as the world economy slows, it is only natural Germany’s does as well. Mr. Scholz also thinks that despite the slow growth, Germany will not fall into recession, saying that they “just have softer growth, which is far away from a recession.” The article stated that in order to help the economy Scholz agreed to more investments in different sectors, increased spending on pensions and social welfare, and he approved tax relief for families totaling 11 billion dollars a year. This article shows the effects of living in a connected and globalized world. Brexit is still a huge decision from which many nations are feeling its rippling effects, along with issues from the US’s trade negotiations with China and the EU.

https://www.reuters.com/article/us-germany-economy-scholz/scholz-rules-out-new-debt-to-stimulate-germanys-slowing-economy-idUSKCN1RV0P1

How Do the Major Streaming Services Compare Against Each Other?

Consumers have slowly started to shift away from paying for cable and satellite bills, due to the rising prices and alternatives. More and more people have opted for streaming services such as Netflix, Hulu, HBO, Amazon Prime, etc. Disney recently announced that they will be debuting their own streaming services, Disney+. 

"Disney+ will debut Nov. 12 and is hoping to rapidly gain a significant audience, undercutting Netflix’s pricing, and offering a slew of exclusive shows alongside a formidable Disney library of catalog shows and films. And Apple has its own service set to launch this fall... Exclusive offerings: Disney’s leaning into its deep catalog of films and TV shows to support Disney+. If you want to watch any film in the Marvel superhero universe, any Pixar release, or any Disney classic, this will be the only place to do so. (Disney is pulling its films from Netflix, which will cut its operating income by about $150 million.)". 

With Disney launching their own streaming platform, how do you think this will impact the current streaming industry? Netflix makes up ~75% of the current market share for streaming services. Will Disney be able to gain a portion of Netflix's current market share? Will people keep their Netflix account and open up an account with Netflix, or do you think people will have multiple accounts? 

http://fortune.com/2019/04/19/how-do-major-streaming-services-compare-against-each-other-netflix-hulu-disney/

The Fed is in worse shape than the economy as post-crisis expansion reaches a decade

Within the month the economy will have officially been in expansion for 10 years. The last time the economy hit the 10 year mark was in march 2001 and a rescission followed shortly after. The unemployment rate back then was very similar to where it is currently.

However, Currently the Fed has been under a lot of pressure. With the Fed rates hikes on pause if a recession does come it will not be able to combat it how it normally would. Typically the Fed drops rates by about 3% during a recession, with rates below 3% they will not be able to do that. Also, with the president heavily criticizing the Fed and markets dropping when rates are raised the Fed will have a hard time raising rates further.

The economy is doing well right now. We have had decent growth and Q1 looks to be better than expected. Inflation has also remained under control and unemployment has remained low. Furthermore, economic data from around the world appears to be improving. It appears the economy is in no pressing danger. however if something does happen the Fed may have trouble reacting to it.


https://www.cnbc.com/2019/04/18/fed-is-in-worse-shape-than-economy-as-economic-expansion-hits-a-decade.html

Trump’s Nafta Revisions Offer Modest Economic Benefits, Report Finds

A government report has concluded that the Trump administration’s revised North American trade agreement would offer modest benefits to the economy. The report found that the agreement would increase gross domestic product by 0.35 percent after inflation, or $68.2 billion, and create 175,700 jobs. Some of the largest economic benefits of the pact, according to the trade commission, would come from the parts of the deal that codify the free flow of data across borders — measures that have been  supported by technology companies. Since negotiations began in August 2017, the administration has secured some substantive changes to Nafta, including modernizing protections on digital trade, adding labor and environmental protections, opening up the Canadian dairy market and adding rules to restrict governments from manipulating their currency.

https://www.nytimes.com/2019/04/18/business/economy/trump-nafta-trade.html

China's growth to perk up

In a fantastically renewed effort, the Chinese government is turning once again towards capitalism in order to boost economic growth. According to the article, the Chinese government "cut taxes on personal incomes and corporate profits. Authorities ordered banks to lend more to small businesses. And planners cranked up the infrastructure machine again." While this would indicate strong government interference in the economy, a major stimulus package is apparently off the table while the fear of debt is still strong.
The article cites two particular reasons for all of this growth-oriented action. The first is the trade war with the States. After appearing "to be on the back foot last year as its stockmarket tumbled," China has seen the positive aspect of being in a strong negotiating position. The second is the 70th anniversary of Communist Party rule (October 1st). On a day which should be for reminding the Chinese people of how great communism is, the Chinese government does not want the day "marred by grumbles about the economy."

Article: https://www.economist.com/finance-and-economics/2019/04/17/chinas-growth-is-set-to-perk-up-after-a-decade-low

Notre Dame Costs

https://www.usatoday.com/story/news/world/2019/04/20/notre-dame-cathedral-fire-1-billion-rebuild-paris-france-church/3528844002/

The article lays out just how much it will cost to rebuild the Cathedral after the tragic fire.  Specifically how it may cost up to 3 Billion Euros to rebuild the Cathedral within President Macron's timeline of rebuilt within five years.

It will be interesting to see if the money can be raised in private contributions or if the French government will need to step in.

The world’s worst-performing currency could slip into ‘crisis’ mode later this year

Argentina after being hit with a recession is currently preparing for presidential elections towards the end of the year. The Argentine Peso settled around $43.68 this past Monday and it has received the title of the world’s worst-performing currency this year. They are super sensitive to any shift in the peso and they use it as a guide to their economy.

President Mauricio Macri’s  re-election is threatened due to the extensive inflation that run over 50%, and the rising of poverty rates by 32% during his presidency. The Argentina government is functioning within an IMF bailout package deal that requires an ease in its primary fiscal deficit. However, the economy shrank more than 6% during the last three months of 2018. The austerity measures taken by President Macri has led many people to be unhappy with Macri for cutting utility subsidies. Economists note there is no way Argentina will have a higher purchasing power than compared to last year. However, Macri needs to be able to change economic expectations in order to help the country and gain re-election. If Mauricio Macri is not re-elected all bets are off for the maintenance of the  IMF bailout terms. Former President Cristina Fernandez who is running against Macri, has been a free spender and is not likely to adhere to the IMF bailout terms.

Source: https://www.cnbc.com/2019/04/09/argentinas-peso-could-slip-into-crisis-mode-ahead-of-elections.html

Treasury Issues Rules on Tax Breaks for Opportunity Zones

Some of the areas were selected as opportunity zones, which is a tax break zone for low-income communities. It could help start-up businesses to invest in the areas. There would be the regional development in economy and infrastructure as well.
The benefits of the investors in the opportunity zone will be largely 3:
1. Investors are temporarily deferred of inclusion in taxable income for capital gains reinvested in the fund.
2. Step-up in basis for capital gains via opportunity funds. The basis is increased by 10% if the fund is held by the taxpayer for at least 5 years, and adds up 5% more if held for at least 7 years.
3. A permanent exclusion from taxable income of capital gains if the funds are held for at least 10 years.

However what the article brings up is that this regulation may just benefit real estate developments rather than start-up businesses. If that happens, the outcome may bring economic development, but the wealth gap may increase. Values of the opportunity zones will increase if real estates and businesses are invested in them, but if real estate grows more rapidly than the business sectors, the lease or property price may become more burdensome to the inhabitants of the zones. Hopefully it does not result in a bigger income inequality, but an overall improvement of certain rural (or poor) areas of the States.



https://www.nytimes.com/2019/04/17/business/economy/opportunity-zones-treasury-regulations.html

Irish Brexit border issue could endanger EU-U.S. trade deal

    In the midst of Brexit negotiations, the European Union announced it was willing to begin the process of solidifying trade agreements before the end of the year. U.S. House Speaker Nancy Pelosi asserted that the US would not accept any trade agreements with Britain if any Brexit-related outcome tampered with the Good Friday Agreement. These accords currently hold the peace between the North of Ireland and the Republic of Ireland after literal centuries of sectarian violence exacerbated by British colonialism and Irish nationalist movements. A crucial component of this tenuous peace is the lack of a hard border between the two areas, allowing for relatively free movement on both sides. Reportedly, the European Union has also refused to accept any British withdrawal agreements that would require elements of a hard border, as that would almost definitely incite unnecessary violence. Opponents of these requirements from the British Parliament are concerned about the lack of a “clean break” that may threaten future trade agreements with other nations.

    Overall, I find this article and its general subject to be thought-provoking. During this time of overall economic precariousness, the US’s and EU’s dedication to keeping a seemingly minute detail that is crucial for the peace in Ireland is admirable. Despite the uncertainty surrounding the existence of any possible benefits to Brexit, I also thought it was interesting to see these entities potentially forfeit economic gains and trade deals for the sake of the peace accords they helped broker. In a broader macroeconomic sense, consumer confidence in Ireland would undoubtedly nosedive from a variety of factors if the Good Friday Agreement were in any way hindered by Brexit negotiations. https://www.reuters.com/article/us-britain-eu-usa/irish-brexit-border-issue-could-endanger-eu-u-s-trade-deal-congressman-idUSKCN1RV0JO

Trump Says Fed Should Cut Rates and Lift Economy

On Friday, April 5^th, President Trump called for the Federal Reserve to cut interest rates in an effort to continue unprecedented economic growth since his election. Historically, the central bank has remained independent of the Presidential administration. As of recent, President Trump has been highly critical of the actions taken by the Fed. He believes that interest rate hikes imposed by the Fed have really slowed the economy. In response, he has called for the Fed to resume quantitative easing as opposed to continuing their current policy of quantitative tightening. As he begins his reelection campaign, Trump aims to focus on his accomplishments regarding the health of the economy. Economic growth is forecasted to slow within the fiscal year, however, unemployment remains historically low along with inflation, resulting in a strong economy. Recently, the Fed announced their plans to halt interest rates which have jumped four times within the last year. President Trump announced plans to nominate Herman Cain, and Stephen Moore, to the Feds seven-member board. Initially, President Trump hoped to achieve consistency within the Fed after electing Jerome Powell, however these recent nominations show a transition from the Presidents previous selections. Many remain highly critical of President Trumps involvement with the Fed and worry that his influence on the Fed is interfering with the long-term stability of the economy.

Japan Exports Hit by Weak China Demand, Raising Risk of Economic Contraction

Japan’s economy relies heavily on trade and the amount of goods that the country exports. With China’s economy going through a contraction period and the demand for Japanese exports decreasing, there is fear that Japan’s economy is now going through a contractionary period. This past March, exports fell 2.4% following a 1.2% drop in February. As companies’ profits are being hindered, businesses will not be able to invest in themselves as much, workers’ wages will drop, and consumer spending will slow. With the Japanese economy contracting, Prime Minister Shinzo Abe will have to delay a planned sales tax hike that is needed in order to fix Japan’s public debt burden. This plan will have to be pushed off as it is considered a contractionary policy and would hurt the economy even further. The Bank of Japan Governor Kuroda believes that the economy would quickly recover as global growth grows although there are remaining risks. The United States and China trade war as well as Brexit still need to be resolved and could potentially have a negative effect on Japan’s exports once again.  

            I was surprised to see that a decline in China’s economy and imports had this negative of an effect on Japan’s economy. I think given the tensions with the US and China trade talks, Japan’s economy will remain a little rocky, especially when including the impending Brexit decision. It will be interesting to hear more about how Japan handles this export issue and what they decide to do about their planned sales tax hike. Hopefully, this contractionary period does not last too long. 

Article: https://www.reuters.com/article/us-japan-economy-trade/japan-exports-hit-by-weak-china-demand-raising-risk-of-economic-contraction-idUSKCN1RT01Q

The Death of Retail?

As we are about a third of the way through the year, more retail stores are planning to shut their doors than did throughout all of 2018. In the past, when stores would close their doors, liquidating companies would come in and buy bulk amounts of clothes and store them in a warehouse; their strategy is to wait until interest picked back up and someone wanted to re-open the store with the merchandise. However, nowadays that isn't the case. With the rise of e-commerce, more and more stores find themselves shutting their doors for good and filing for bankruptcy as the number of options that now exist because of online retail has forced them out of the market. Not only does this hurt people within the companies, but it hurts the brand of them as well too which is bad in the long run. Often during these liquidation sales, stores become chaotic and they are unable to get the staff to manage it as no one wants to take a job for a store that won't exist in a month. When this image is seen by the public, it further supports the drive for e-commerce; why get trampled in a store when you can buy something from the comfort of your own home?

But, the closing of these stores is nothing to fear. Rather it's a signal that preferences in shopping are changing. Specifically, it's starting to look like the brick-and-mortar experience could exist to complement the online shopping experience in the future, as companies like Amazon are experimenting with small physical locations.

Moving forward, I am interested to see where the excess of retail employees may go, as there appears to be a strong demand for labor in other sectors. Now it appears to be a question of what sector they will move to. I am also looking forward to how physical retail locations change and adapt to complement e-commerce rather than being a substitute.

SOURCE: https://www.nytimes.com/2019/04/12/business/retail-store-closings.html

China first quarter GDP growth set to slow to 6.3 percent, more policy support needed

Article: https://www.reuters.com/article/us-china-economy-gdp/china-first-quarter-gdp-growth-set-to-slow-to-6-3-percent-more-policy-support-needed-idUSKCN1RS2F1

This Wednesday, China is expected to report the slowest economy growth they have had in the past 27 years - 6.3%. However, investors and trading partners alike are confident recent data will demonstrate economic recovery. Though these hopes are still left with questions regarding the length and prominence of said rebound.

To support recovery, China has cut taxes by billions of dollars and have also increased infrastructure spending to jump-start growth. Their banks have also lent out a first quarter record of $864.8 billion dollars which is larger than Switzerland's GDP. However, many experts are still saying more needs to be done in order to get China back on its feet.

China should be watched with a close eye as it is the second largest economy in the world. Even though China has grown considerably faster than other economies, the U.S. for example, they are still playing a catch-up game. Even though China has been in a position to grow so quickly, it is worrisome to see their growth cool down.

Risk Rally Causes Pivot Away from Gold

The WSJ article "Gold Falls Out of Favor as Risk Rally Continues into Spring" by Amrith Ramkumar details the fall in gold's popularity among investors by 4% since highs in February. Gold is often times considered a "haven" for investors since it is believed that the precious metal has a negative beta and moves in opposition to markets - making it a safe bet in risky times. Currently, however, the current market optimism and the drop in gold popularity is a signal that "rising confidence in the world economy" is pushing investors away. More specifically, this market optimism stems from a hopeful outlook that the US and China will reach an agreement and end the tariff debacle and also confidence from the Federal Reserve, claiming that they will not be raising interest rates any higher in 2019. As gold has taken a hit, nearly wiping out all of its returns from the beginning of the year, the flipside is that there has been a rally in the stock market, and other materials like copper and oil. Peter Hug, director of sales at Kitco Metals claims that people are "getting bored" with gold since it is like "watching paint dry." Although investors who had confidence that gold would finally rally above $1,350 troy oz. have lost this bet, I think this signal to the market it rather important in terms of the confidence and optimism that investors have right now. Earlier this semester, there was so much literature about a slowing economy and the stock market took quite the hit in December of 2018, yet "mounting confidence in US growth" which has lifted the dollar and T yields, paints a much rosier hue of the current economic outlook and seems to be impacting the way that investors are handling the risk/return trade off.

Link: https://www.wsj.com/articles/gold-falls-out-of-favor-as-risk-rally-continues-into-spring-11555416000

Signs of Global Economic Recovery Emerging

According to CNBC, the worries about the Global economic failures are starting to fade away. A senior international economist, Alejandra Grindal, says that because many of the manufacturing purchasing managers indexes are finally starting to stabilize for the first time in 10 straight months which may indicate the worst has passed us. Not only this, but the expansion in the manufacturing sector rose for the first time in six months. This is a good sign for the international economy moving forward, as this might indicate that the economy will finally start to get back to a stable state.

In addition to this, the trade tension between the US and China are finally starting to cool off. Which means that there might not be anymore hikes in rates throughout the next quarter. Although this idea is not 100%, it is a good sign for the economy moving forward, and our trade deals that rates will not hike and tension is starting to cool off. It will be interesting to see what happens in the near future if this continues or if the economy will start to fall off again.


Source: https://www.cnbc.com/2019/04/11/signs-of-a-global-economic-recovery-in-the-second-half-are-emerging.html

CPI Increase

U.S. consumer prices increased by the most in more than a year in March.  boosted by increases in the costs of food, gasoline and rents. That was the biggest advance since January 2018 and followed a 0.2% gain in February. but underlying inflation remained gentle against the backdrop of slowing domestic and global economic growth. this supports the FEDS decision to suspend its rate hikes in 2019. If you remove the volatile energy and food prices then Prices only increased 0.1%. Im curious if this trend of increasing prices, although small continues, will make the FED revisit its decision to suspend hikes and start slowly increasing rates.  

















https://www.cnbc.com/2019/04/10/consumer-price-index-march-2019.html

Job Changes in March (by industry)

The sector with the most absolute job growth was by far Education and Health Care. There were about 70,000 jobs added in the Education and Health Care sector in March, the second was professionalism and business services.

It is pretty interesting that there were only two sectors to experience a loss of jobs in March, as the economy seems to be on a slow down. Although, after reading about the different industries and reading the rest of the article it makes more sense. The 2 industries were wholesale trade and manufacturing. We are in a political area where global trade captures much of the attention of news outlets, with recent trade tariffs with China and the global economic slowdown. The United States manufacturing sector has been getting smaller and smaller over the years so this is not much of a surprise. Although, this was a priority of President Trumps administration and saw its first decline since 2017, which could be just the beginning of the downfall.

As an economy, it is good to see that the jobs created in March clearly out weigh the ones lost. I hope that in the future these industries have varying growth rates and can even out the job growth over time.



https://www.cnbc.com/2019/04/05/heres-where-the-jobs-are-in-one-chart.html

Blamed for Climate Change, Oil Companies Invest in Carbon Removal

Major oil companies including Chevron, Occidental Petroleum, and BHP have all invested into a small Canadian company called Carbon Engineering. This comes after years of oil companies taking the main blame for carbon emissions, negatively affecting the environment. Carbon Engineering claims that they are on the verge of developing a fan that will remove already existing carbon out of the atmosphere. This could keep bringing oil companies profits for years as we've seen a rise in affordable alternatives such as electric cars.

Carbon Engineering is also researching ways to process carbon to create synthetic fuel. This fuel would be more costly to consumers, but would be a lot less harsh on the environment. However, the rise in price in this fuel could make it difficult for a new market to develop. There are negative externalities affecting the environment with regards to driving motor vehicles.
However, the additional cost of environmentally friendly fuel would not be worth it to many consumers.

It will be interesting to see the development and implementation of environmentally friendly alternatives by these oil companies. Addressing carbon emissions could be a turning point for the oil industry as a whole. Climate change has been a global concern for decades and it is interesting to see oil companies finally take action against it.

https://www.nytimes.com/2019/04/07/business/energy-environment/climate-change-carbon-engineering.html

Target raises hourly minimum wage to $13

An interesting development this week has been America's eighth largest retailer (by sales), Target Corp, announcing that they will increase their minimum wage to $13 per hour. This is especially important considering that the US unemployment rate has been at its lowest in half a century and retailers are having difficulty in attracting workers. There has been increased political pressure in the nation to raise the minimum wage to at least $15 per hour, and massive companies such as Amazon Inc and Costco Wholesale Corp have followed that exact route in the past year. In the midst of all this, Target has decided to go from an hourly minimum wage of $12 to $13, after just raising it from $11 to $12 early last year.

In contrast, the world's largest retailer, Walmart, has stuck to paying entry-level workers an hourly wage of $11. While their spokespeople have said that workers end up making over $15 when their wages and benefits are combined, this announcement from Target will undoubtedly have at least a minor effect on Walmart's labor activity. A possible issue that has been raised about this news is whether the Target workers already earning $13/hour will see an equal rise in their wages or not. This could be problematic since $13/hour earning experienced workers would be motivated to earn more than new hires and not receiving an increase would lower their motivation. Moreover, there have been reports in the past about similar companies raising minimum wages but then cutting the hours of their workers to keep the average payroll cost the same relatively. However Target decides to proceed, this could be a crucial moment for America's labor market in realizing their values and possibly standing up to corporations such as Walmart.

Article link: https://www.reuters.com/article/us-target-wages/target-raises-minimum-wage-to-13-an-hour-in-tight-labor-market-idUSKCN1RG1F9

Hundreds of millions of Facebook user records exposed on Amazon cloud servers

Hundreds of millions of Facebook user records exposed on Amazon cloud servers

Researchers at UpGaurd, a cyber security firm, found massive amounts of user data hiding in plain sight. This data was inadvertently posted publicly to Amazon's cloud computing servers. The discovery shows that a year after the Cambridge Analytica scandal exposed how unsecure and widely disseminated Facebook users’ information is online, companies that control that information at every step still haven’t done enough to seal up private data. In one instance, Mexico City-based digital platform Cultura Colectiva, openly stored 540 million records on Facebook users, including identification numbers, comments, reactions and account names. The records were accessible and downloadable for anyone who could find them online. That database was closed Wednesday after Bloomberg alerted Facebook to the problem and Facebook contacted Amazon. As a result of these findings Facebook shares fell on the news and they closed down 0.4% at $173.54.

I think of this from two sides. First it is interesting to hear people complain that Facebook is using user data by pretty much selling it to big firms like Amazon through advertisements. Facebook tracks peoples preferences and through technology both Amazon and Facebook can pick up on these preferences and send targeted advertisements to individuals. Facebook is a for profit company so when people complain that their privacy is being violated its a little silly. People post about their entire lives for the whole world to see but get uptight when they get a few extra advertisements thrown their way. If people have a problem with the way Facebook does things then they shouldn't use the sight. It is interesting to note how sloppy Facebook has become at hiding what they are doing. There is obviously a microscope on their user data policies and it seems that they just do not care about either fixing the problem or becoming better at hiding it. I am all for companies doing whatever it takes to make money. But in this day and age if a company is blatantly irresponsible people will take notice and boycott.


https://www.latimes.com/business/la-fi-tn-facebook-user-data-amazon-web-services-privacy-20190403-story.html

Mixed data offer glimmers of hope for slowing U.S. economy

U.S. retail sales unexpectedly fell in February, but a rebound in factory activity in March and strong increase in construction spending offered hope the economy was not slowing as sharply as previously feared. Retail sales dropped 0.2 percent as households cut back on purchases of furniture, clothing, food and electronics and appliances, as well as building materials and gardening equipment. Cold and snowy weather could also have hurt sales. The dollar was little changed against a basket of currencies, while U.S. Treasury prices fell. Stocks on Wall Street were trading higher.While demand is softening, the supply side of the economy is stabilizing.16 industries, including machinery, computer and electronic products, furniture, and electrical equipment, appliances and components, reported growth last month. Apparel and paper products industries reported a contraction.A measure of export orders fell, likely reflecting softening global economic growth. Factories reported hiring more workers last month.

https://www.reuters.com/article/us-usa-economy/mixed-data-offer-glimmers-of-hope-for-slowing-us-economy-idUSKCN1RD2CK

The price of Brexit has been £66 billion so far, plus an impending recession — and it hasn't even started yet

Estimates put the price of Brexit up to this point at $86 billion.  Analysis found that the depreation of the pound, increased inflation, and weak exports has led to a reduction of GDP by 3%, which translates into about $86 billion.

The model consist of creating a basket of counties that when combined with proper weightings matched the UK's growth up till the 2016 referendum.  For Example the US makes up 28.4% of the model, Hungary 24.1%, and Canada is 21.3%. This model creates a statistical doppelganger for the UK. After the referendum the UK slowed down while the doppelganger continued on trend.

The £66 billion implies that the country is £1,000 poorer per person. The decline can be seen in in the recent PMI data as well, with a PMI of 50 that implies no to very little growth.

The economic weakness is caused by firms delaying investment spending. Firms are delaying spending due to the high amount of uncertainty around Brexit. Even as deadlines have came and passed the economy is not sure what Brexit will mean for the UK.

It is clear that the cost of Brexit has been high up to this point and it hasn't even happened yet. It is possible that the UK will enter a recession due to the low investment spending created by the uncertainty. Maybe with some clarity around what Brexit means firms will feel comfortable to begin investment spending again and the UK's economy will strengthen regardless of the terms of Brexit. 


https://www.businessinsider.com/price-of-brexit-66-billion-recession-2019-4

Blamed for Climate Change, Oil Companies Invest in Carbon Removal

As fear of climate change continues to grow, large oil companies are receiving more and more flak for their role in the runaway problem. In the wake of the growing issue, some of these companies have actually begun investing in carbon removal technology. Chevron, Occidental Petroleum, and BHP have all invested in a start-up Candian firm "Carbon Engineering". This firm is in the process of developing technology to remove carbon currently in our atmosphere. The firm is testing enormous fans that suck air into scrubbing vessels that remove carbon dioxide. The CO2 would then either be buried or converted into synthetic fuel.

BHP's VP for sustainability and climate change states “This is about recognizing that climate change poses significant risks to all economic sectors. Climate change is no longer seen as a fringe issue. It’s a business risk that requires a business response.” While these large companies are confirming the threat of climate change they are not necessarily accepting responsibility for their involvement and contribution towards the problem. These same companies continue to extract fossil fuels and lobby for deregulation and further exploration rights. While it is a good sign that more investments are being made into clean environmental technology it is interesting to think about the oil firms' motives. Are they making the investments to save face and satisfy public pressure or are they actually interested in the developing and incorporating the technology into their own business to prepare for a changing world? Most likely it is somewhere in between.

https://www.nytimes.com/2019/04/07/business/energy-environment/climate-change-carbon-engineering.html

US Companies Raised $30B in Q1 2019

Nationally, startups pulled in $30.8 billion in the first quarter of 2019, up 22 percent year-on-year, according to Crunchbase’s latest deal round-up. These investments represented a large chunk (29%) of all US dollars invested in US startups in Q1. 

I'm curious as to how the behavior of a sophisticated investor varies based on the time of the business cycle. So for example, a lot of people have money in traditional equity markets and the stock market is doing quite well. As we reach the top of the business cycle, the performance of the S&P may fall, and this is when we see investors put money into other asset classes, like fixed income or gold. Do these sophisticated investors (VCs, Family Offices, Ultra High Net Worth Individuals, Institutional Firms, etc) allocate money more into private companies and private equity when the stock market has a correction?

To invest in private companies, you usually have to be an "accredited investor", so you either make at least $200,000/year or have $1M in assets. So obviously the average retail investor is not participating in these private deals, but I'm curious as to how the investment deals and deal sizes vary during a recession. Is there more money allocated into startups in such, or do you think there are much smaller deal sizes?
Let me know what your thoughts on how you think these investors act during times of corrections and recessions and how they behave with their money. 






https://techcrunch.com/2019/04/06/startups-weekly-us-companies-raised-30-1b-in-q1-2019/

Ohio Lawmakes Attempt to Rescue Nuclear Plants

Currently in the Ohio statehouse legislators are preparing a bill that would raise electric bills to rescue nuclear power plants. The highly controversial bill is an attempt to essentially bail out the Davis-Bessie nuclear plant just east of Toledo and the Perry plant northeast of Cleveland. If the bill is passed, a large amount of the revenue created would go to subsidize the plants through Ohio's newly created "Ohio Clean Air Program". Supporters of the legislation say, "they [subsidies] are needed because nuclear plants can’t generate power as cheaply as power plants that run on cheap natural gas. They argue that it’s worth keeping the plants going because they’re reliable sources of power and don’t generate a lot of carbon emissions." Opponents including consumer and business groups say, "that the state shouldn't force Ohioans to pay higher electric bill to bail out a utility company." What do you think about this government involvement which may protect a less efficient firm under the argument that it will help clean Ohio's air?

 https://www.cleveland.com/politics/2019/04/tim-ryan-tells-mahoning-valley-crowd-he-is-running-for-president-to-bring-this-country-back-together.html

Cautious Earnings Could Threaten Stock Market Confidence

In the WSJ article "Corporate Profit Squeeze Looms, Threatening Stocks' Climb," author Michael Wursthorn details how less than stunning corporate earning could lead to a shaky stock market. The stock market run this year has had its best returns since '98 and is up 15% from January. The article notes that the Federal Reserve's decision to pause the rate hikes for the rest of 2019 has fueled a lot of the bounce back. Alternatively, however, many large corporations like Walgreens, Apple, FedEx, and 3M have "slashed their profit forecasts for this quarter" which is not a positive signal to markets and could threaten performance. The article mentions that this is the first pullback in earnings in nearly 3 years, with "margin degradation" or the inability to produce meaningful margins as the center of the problem. A Morgan Stanley equity strategist cites that the margins have succumb to the rising costs that companies face from a "strong dollar" and hiring workers. This bit reminded me that business investment is a main driver in the economy, and without it, usually an economic slowdown is on the horizon. If workers are becoming too costly, and companies cannot afford to keep investing in human capital and paying competitive wages, then this could be a signal to the market and an upset to this year's positive returns. Moreover, this also reminded me of the market socialist ideas we have discussed in class. In our flexible labor market, where workers are laid off in downturns or less workers are hired if they are too costly, this allows companies to cut their losses and try to move forward. Alternatively, in the Yugoslavian example that we discussed in class where downsizing was not a real option, these margin concerns and expensive workers would threaten the health of the company and cause many more issues.

I am definitely curious about how the market will react to these earnings pullbacks from such large and successful corporations as well as the ways in which these companies will try to bounce back this next quarter.