Stalled out job growth, warning of slowdown, not recession

In February, the amount of payrolls added to the system was around 20,000, compared to 311,000 jobs in January. This slow job growth month was about 160,000 jobs less than economists forecast. According to many economists this is more the residual of a slow growth month, not a signal of a recession. Two main points were the government shutdown and a teacher strike which pulled some data down with it. After the jobs report, the futures market dipped but they were already lower because of the weak Chinese export data. The ironic part about all this, is the 18.6% growth in housing starts in February which happened to be the fastest pace in 8 months. The article speaks further on how the word recession is the wrong way to look at the first quarter of 2019. Inevitably the first quarter tends to be a bit slower growth than most, so this is not a large alarm.

I thought this article was interesting as it feels that so many people are referring to our economy moving toward a recession, but this article has a different view on it. Good read.


Link to the article:
https://www.cnbc.com/2019/03/08/stalled-job-growth-could-be-warning-of-slowdown-but-no-signal-of-recession.html

Elizabeth Warren pushed to break up big tech companies

In February, Elizabeth Warren, a presidential candidate for the 2020 election, made a public statement that she has a plan to break up some of the largest tech companies. Companies she mentioned were Amazon and Google, although she did not mention Apple, her campaign would still target the company. She states that these companies have too much power and influence over our economy, society, and democracy. She then goes on to mention how they have "used our private information for profit, and tilted the playing field against everyone else".

What are your thoughts? There's a price that consumers pay when they use free services like Facebook, and that's our data. There is a tradeoff for things that are free sometimes. In regards to her proposal on breaking up the tech companies, I believe that this is not necessary. It's one word. Competition. It's social Darwinism. Google was once a startup. Apple was once a startup. Amazon was once a startup. Every company has to start somewhere. We live in a society where consumers have the pleasure to chose what products and services they wish to use, and for a lot of people, they like Amazon and Google. Private companies are allowed to do what they would like, as long as it is within reason and under the law. For politicians to come in and disrupt the market is ignorant, in my opinion, and that is the inner capitalism in me speaking. I'm a big proponent for free markets and laissez-faire. However, what are your thoughts on her statements?



https://www.cnbc.com/2019/03/08/elizabeth-warren-pushes-to-break-up-companies-like-amazon-and-facebook.html

Asia's Travel Boom Is in Trouble as a Pilot Shortage Worsens

An unprecedented travel boom in Asia has spawned new budget carriers and millions of first-time fliers but a shortage of pilots is threatening to choke that demand. Global traffic is set to double in the next two decades with the biggest increase expected in the Asia- Pacific region. Boeing Co. forecasts that the region needs 16,930 new planes and about 261,000 pilots before 20137. This means that the current number of pilots needs to double during that period in order to keep up with demand.

This fits perfectly with what we discussed in class today about the history of Japans economic system. Japan had a massive labor force that was focused on agriculture and was entirely inefficient. Based on the Lewis two sector model there was a huge gap of inefficient workers that were weeded out and needed to find a new place to go. We mentioned in class today that China is going through something very similar. It is becoming harder and harder to attract people inland without increasing wages to be more competitive. China has had the luxury of an incredibly large supply of labor and the labor force is finally realizing they can demand higher wages. This is going to be interesting because wages will go up and China will fire more people in order to maintain efficiency. These workers and future generations should look to becoming proficiently trained in aviation. If there really is a drastic need for more pilots to support demand then it should be easy for workers to focus on more skilled positions like aviation because other easier opportunities wont be as readily available like it was in the past. 

https://www.bloomberg.com/news/articles/2019-02-26/asia-s-travel-boom-in-trouble-as-pilot-shortage-worsens

Trump's Other 'National Emergency': Sanctions That Kill Venezuelans

While people have felt comfortable voicing their complaints with almost every action done by President Trump, critiques of his sanctions against Venezuela have gone practically unnoticed. Just about every executive order he has made in regards to the country cite how it is a "national emergency" and that Venezuela poses an "extraordinary threat" to the United States.

The reason that these actions should receive more coverage in the media is because they are killing people. Venezuela is already in an incredibly vulnerable position and the mountain of economic sanctions keep them from being able to solve or address any of their internal issues, which leads to more problems, which leads to more sanctions, which leads to more of the same. Economic sanctions damage the economy and it's not sending a huge message to Venezuela's political elite -- instead it kills off vulnerable and marginalized populations. Effects include lower employment and income as well as decreased access to necessities. The sanctions also keep the government from being able to restructure Venezuela's debt or take steps to fix the hyperinflation.

It is unlikely Trump is especially concerned with peaceful resolutions in the region, especially after the decision to recognize Juan Guaido over Maduro as president back in January. It will be interesting to see how the issues in Venezuela finally come to a head and how the world will choose to react. It's going to be a very long and difficult path to recovery for the country no matter what, so we can only hope they are shown some compassion.

https://www.thenation.com/article/venezuela-sanctions-emergency/

Fed's Powell says 'no rush' to hike rates in 'solid' but slowing economy

The Federal Reserve is in “no rush to make a judgment” about further changes to interest rates, Fed Chairman Jerome Powell told U.S. lawmakers on Tuesday as he spelled out the central bank’s approach to an economy that is likely slowing.In two hours of testimony to the Senate Banking Committee, Powell elaborated on the “conflicting signals” the Fed has tried to decipher in recent weeks, including disappointing data on retail sales and other aspects of the economy that contrast with steady hiring, wage growth, and ongoing low unemployment.If anything, Powell’s comments solidified a Fed policy shift last month in which it indicated it would pause a three-year cycle of rate hikes, which had been projected to run well into 2020, until the inflation or growth dynamics change.The flow of new workers into the labor force, for example, has surprised the central bank and means “there is more room to grow,” Powell said.

https://www.reuters.com/article/us-usa-fed-powell/feds-powell-says-no-rush-to-hike-rates-in-solid-but-slowing-economy-idUSKCN1QF1UB

Mexican economic plan aims to cut migration to the US

The president of Mexico, Andrés Manuel López Obrador, has introduced a new initiative with the goal of incentivizing Mexican citizens to remain in the country and not feel the need to go to the United States. He calls it the "zona libre" which runs along the entire US-Mexico border with a width of 25 kilometers. The free zones will have their sales tax reduced from 16% to 8%, their income tax cut from 30% to 20%, minimum wage doubled to 176.20 pesos, and fuel prices equivalent to the US. The goal of all these measures is to spur economic growth so that Mexicans as well as other foreign nationals from countries such as  Honduras and Venezuela do not feel as compelled to cross the border. The president also hopes that with this economic boost, US companies may look to Mexican firms as an investment option. Some see this project as a great step to reducing imports and keep talent on the Mexican side of the border. Business owners and policy experts have expressed their concern about businesses being able to sustain such a raise wage hike. Ultimately, this could be seen as a benefit to the US as well since it will reduce migration. I personally think that this has a lot of potential and hope that it brings economic prosperity to regions that have needed it for a long time.

Source:
https://www.bbc.com/news/business-47119459

Wages Fall For The First Time In Three Years

In January 2019, the United States saw a drop in personal income for the first time since November 2015. Following 1 percent of growth in December, consumers have cut back on purchases such as cars and recreational goods. This decline in income and spending further supports some analysts' claims that the economy will continue to slow down in the first quarter of 2019.

Moving forward, I am interested to see what happens with wages for the rest of the year. Even though the decline was less than one percent, when added into the mix with already slow growth and low consumption it looks as if the US economy might finally be slowing down. Also, as the fed looks to slowly continue to raise interest rates, the slow growth or decline in wages could help them as it will further lower consumption.

https://www.cnbc.com/2019/03/01/personal-income-consumer-spending-december-2018.html

Amazon’s Hard Bargain Extends Far Beyond New York

Since 2010 Amazon has leveraged its huge impact on local economies to influence regional politics.  When Texas tried to make Amazon pay $270 million  in back taxes they left the state for 2 years till all the tax charges were waived.  Amazon has used similar tactics in Seattle, South Carolina, and New York to avoid local and state taxation.  Through the sheer size of its financial impact Amazon can leverage its position for greater tax credits and benefits.  When New York tried to work with Amazon to create new jobs and locations in the state the company didn't hire any local employees or lobbyists but instead brought outsiders to create the deal.  So far Amazon has leveraged its position for more than $2.4 billion in taxpayer subsidies.  Amazon employees a huge number of lobbyists to fight against any attempts by localities to impose sales taxes or remove the tax breaks the company receives and has been effective so far in imposing its will on regulators. 


https://www.nytimes.com/2019/03/03/technology/amazon-new-york-politics-jobs.html

Shell May Face Charges in Netherlands Tied to Nigerian Oil Deal

The Dutch Government is preparing to prosecute Royal Dutch Shell over corruption charges. This case comes from a $1.3 billion oil exploration deal off the Nigerian coast in 2011. Shell is already on trial for corruption regarding this deal in Italy, but now the Netherlands are also investigating the company. The Dutch prosecutor's office declared that "we concluded there are prosecutable offenses" but have not made it clear what actions will be taken.

If the Netherlands decides to prosecute Shell its operations in Nigeria will be threatened and under serious scrutiny. The case underway in Milan, Italy is concerning bribery charges Shell paid to the Nigerian government for exploration and drilling rights. The Dutch prosecution team will likely be investigating the same matter.

Shell denies any wrongdoing and claims that all payments were made legally and that the company is not responsible for what the government did with the funds afterward.













https://www.nytimes.com/2019/03/01/business/shell-netherlands-nigeria-charges.html

The 10 Year Anniversary of the Bull Market is Coming

In March of 2009, the US economy was in the midst of the great recession. At this time the government had just reported that over 650,000 jobs were lost in the prior month. The Dow and S&P 500 were also each down more than 50% from their peaks in October 2007.

For the last ten years investors have fared quite well due in part to steady economic growth and a surge in corporate profits. In fact the two previously mentioned indexes are up 300% since March 2009. Now that this bull market is approaching its ten year anniversary some are wondering how much longer the surge could last. According to the article earnings are expected to slow partly due to the fading effect of corporate tax cuts. Cause for concern can also be derived from economic weakness in Italy and Germany, along with the worries that come from Brexit and the slowing growth of China. These factors could certainly harm the earnings of huge multinational corporations.The article also notes that even though the Fed has already signaled it will probably not raise interest rates this year, the US economy may start to slow due to the lag of prior rate hikes. Randy Swan, the CEO of Swan Global Investments believes that the Fed's previous rate hikes may have already been enough to cause a slow in the economy and markets.

It will be interesting to see if these signs are signaling that the economy will slow or even contract in growth soon. Do you think signals the article mentions are indicators of a slowing economy, or are their even other metrics that you prefer to keep an eye on?

Source: https://www.cnn.com/2019/03/03/investing/stocks-week-ahead-bull-market/index.html

70% Stock Market Crash to strike March 1st

Economists and investors are warning about a disastrous stock market crash. David Stockman, former budget director for the Reagan White House, claims that an economic collapse is right around the corner. Scott Minerd, who is the Chairman of Investments and Global Chief Investment Officer of Guggenheim Partners, states and warns individuals that: "The markets are potentially on a collision course for disaster..... once we reach a peak we'll probably see a 40% retracement in equities."

Other Statements were made regarding the stock market. Saying that our economy is the strongest it has been in 40 years and its "unsustainable" and bound to crash, "we can predict a market loss on the order of 60%" (Hussman), and Ted Bauman claiming that a 70% collpase isn't just moving, but it's already here. Bauman has correctly predicted the financial crashes of 1999 and 2007 and he is already preparing for an upcoming financial crash.

What do you think? Is Bauman right? Should we sell tomorrow? What should we do to prepare?

https://banyanhill.com/exclusives/70-stock-market-crash-to-strike-august-1-economist-warns/?z=1000790

Modi's economic repercussions

Narendra Modi, India's new prime minister, has, since coming into office, made some interesting economic decisions. The article below describes them well, but only in its last paragraph does it elucidate the most interesting decision: Modi's intention to "discontinue, revise or delay some official data that does not flatter [the economy]."
It is understood that a full information economy is most helpful for a market's successful operation, and Modi's decision has made it more difficult for people to gather that information. Without said information, it will be difficult in the future for individuals and firms to make educated decisions about how to act.
Additionally, on the world stage, only limited information will be available to other states, leading to a skewed understanding of India's economic situation.
The other interesting part of the article is that despite Modi's promises of radical change, he seems to be following the preceding UPA policies at least for the most part.

Article: https://www.economist.com/finance-and-economics/2019/02/28/narendra-modis-most-distinctive-economic-policies-were-his-worst

Will Meng Wanzhou chief executive of Huawei be extradited to the US?

Huawei is a Chinese multinational company that manufactures telecommunication equipment and consumer electronics. Currently, the US is accusing Huawei of 23 different charges, including sanction-breaking business with Iran and Syria of Huawei's American subsidiaries, stealing technology from T-mobile to test smartphone durability, obstructing justice, and committing wire fraud. In response Meng Wanzhou was arrested in Canada on December 1st 2018 after a US request. And Canada decided on Friday that the extradition case will continue in court, where she will appear on March 6th. Although, no commitment on extradition has been made yet, the whole case is already causing tensions in US-China-Canada relations. After her arrest China responded by detaining two Canadians, and giving a third Canadian the death penalty after overturning his old sentence. China has also been demanding the US to withdraw the arrest warrant and extradition request, and Huawei announced it will no longer be using US components to make its smartphones. Wether Mang Wanzou will actually be extradited to the US on Wednesday is questionable, because even if the judge rules for it, there will be many ways to appeal and extradition cases can drag on for over a decade.

https://www.bbc.com/news/world-us-canada-47423398