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. 

One Trump Victory: Companies Rethink China

The trade war between China and the U.S. is close to a resolution, but other countries are beginning to decrease their need for Chinese factory goods, due to tariffs and trade tensions, and in order to “diversify” their supply chains. Many see the dependence of the U.S. on Chinese products as something that could create vulnerability in the future, like the idea of decoupling. It mentioned that China may not oppose decoupling due to the inability to end “low-skilled, polluting manufacturing jobs and move higher up in the value chain.” The article also gave an overview of China’s rise in manufacturing development over the past two decades. China now seeks to focus on high-tech and innovative industries, but is aware that if their economy slows, it could lead to instability or job losses. A 2018 UBS survey of chief financial officers at export-oriented manufacturers in China found that about a third had at least shifted some production out of China and that this year another third has been predicted to do so again. Many companies outside of China are shifting their production to the United States. Even Hasbro, a large producer of toys, has a plan “to be 60 percent out of China” by next year and hopes to move much of its’ production to the U.S. Despite the U.S. and China on the verge of ending the trade war, these shifts have already begun, and it will be interesting to see the repercussions, if any, China will have to deal with.

https://www.nytimes.com/2019/04/05/business/china-trade-trump-jobs-decoupling.html

House Committee Passes Legislation to Improve Retirement Security

This week the House Ways and Means Committee UNANIMOUSLY passed the Secure Act which will make it easier for Small Employers to set-up 401(k)s for their employees.  The bill offers various incentives to firms to expand 401(k) access and to pay for part-time employee retirement benefits.  Congress is doing this to combat a retirement crisis in America.  "Americans currently face a retirement income crisis, with too many people in danger of not having enough in retirement to maintain their standard of living and avoid sliding into poverty" according to Richard Neal Democratic Representative from Massachusetts and Committee Chairman.  The bill would also repeal the maximum age that contributions could be made to IRAs.    The plan would also raise the age to mandatory withdrawals to 72 from its present 70 1/2.    The bill would also expand savings in 529 plans from just college related expenses to include home schooling expenses as well as to help pay for student loans.

https://www.cnbc.com/2019/04/02/house-committee-passes-secure-act-for-401k-plans-amid-retirement-income-crisis.html      

There are Plenty of Jobs, But No One to Fill Them

Throughout the start of 2019, many Economists were worried about a potential recession and predicted that a downturn was on the horizon. However as we have gotten farther into the year, the economy continues to push forward adding lots of jobs each month. In just March alone almost 200,000 nonfarming jobs were added to the market. The slow growth rates in the economy may not be from lower consumption but rather from firms not being able to get jobs filled as the labor market doesn't have the skill set yet to fill them.
Many Americans who are "qualified" to work somewhere have been struggling to find jobs in their field, as today it often requires additional education or training in order to stay relevant in a particular industry. The slow rate at which some new jobs are getting filled points to a skills gap in the labor force, particularly with the older generations. Now more than ever, firms are trying to incentivize workers to stay at their companies using things like wage increases, benefits packages, and more flexible work hours frequently rather than trying to search through the labor force with the hopes of finding someone who meets their very specific demands.
Moving forward, I am interested to see how the labor market looks throughout the rest of the year and what ties to has to the status of the economy.

SOURCE: https://www.cnbc.com/2019/04/05/americas-bustling-jobs-market-is-still-leaving-some-people-behind.html

Fed Officials Resist Rate-Cut Idea Pushed by Trump's Advisers

This Bloomberg article by Christopher Condon details the reactions of Federal Reserve officials to the president’s urging of cutting interest rates. While the Fed is currently holding the current rate given the global economic slowdown of the past few months, their patient approach has been under scrutiny by some. President Trump’s rationale of imposing an expansionary monetary policy is a response to the US’s recent slowing in growth and is meant to encourage consumer spending and business investments to prolong expansion for as long as possible. The Fed’s reasoning within this article is vague, but their overall intent for raising interest rates is related to our low inflation and trade deficit. By raising interest rates through open market operations, the Fed is looking to make US investments more appealing to foreign investors by offering better rates of return. Nevertheless, they intend to hold rates steady for the foreseeable future, as mentioned by several previous blog posts. Overall, Federal Reserve officials are content with what their current course of action is, despite presidential pushback.
    Personally, I think the Fed’s determination in keeping a patient approach is a somewhat comforting notion. Recent overall interest rates are historically still relatively low. In order for the Fed to maintain any effectiveness of monetary policy they implement, rates have to increase at some point in order to be decreased in the future for expansionary action. Further lowering of already modest interest rates appears to be a futile attempt at furthering US growth.

https://www.bloomberg.com/news/articles/2019-04-04/fed-s-mester-says-it-s-possible-rate-hiking-cycle-may-be-over?srnd=markets-vp

Brexit deadlocked again: British parliament fails to find an alternative

The Brexit deal has been rejected three times and there currently is no other deal agreed with the European Union. Parliament failed to find a majority against any separation deal. The direction of Brexit continues to be up in the air. In response to the rejection, the lawmakers tried to pass four last minute alternative Brexit options, all  of which were defeated. The only option that came close was keeping Britain in a Customs Union with the EU, however it was defeated by three votes.

Brexit minister Steven Barclay said that the default position was still that Britain would leave the EU on April 12^th without a deal. Barclay explained that Britain could try and put their deal up for a fourth vote and hope that it passes -- otherwise it will be a nightmare for many international businesses. Due to the stall in the Brexit the sterling fell almost 1 percent, which is already showing negative effects.

Source: https://www.cnbc.com/2019/04/01/alternatives-to-mays-brexit-deal-fail-to-find-majority-in-parliament.html

Trump says Fed should Cut Rates and Lift Economy

President Trump has called on the fed to cut interest rates to stimulate the economic growth and because there is not inflation. He has stated several times that this has slowed down the economy.He also stated that they should get rid of quantitative tightening. He has now put his efforts to try to build allies and at the Fed. Trump blames the Feds for economic growth falling short of the 4 percent annual rate last year. Despite that, the labor department reported employers adding 196,000 jobs last month. The trade war has begun to hurt some American Industries, and growth in China.

https://www.nytimes.com/2019/04/05/business/economy/trump-fed-interest-rates.html

World trade

World trade shrunk by 0.3% in the fourth quarter of 2018 , the forecast for 2019 is much lower than what was expected. World trade  has been weighed down by new tariffs and retaliatory measures, weaker economic growth, volatility in financial markets and tighter monetary conditions in developed countries. It will be interesting to see what effect the trade war between the united states and china will have on global trade as well if the UK decides to leave the EU could have significant impact on world trade. All in all it seems like the global economy is slowing down and i'm curious what impact this will have here at home.




https://www.cnbc.com/2019/04/02/wto-lowers-its-forecasts-after-global-trade-slowed-in-the-fourth-quarter.html

US weekly jobless claims drop to the lowest level since 1969

Article: https://www.cnbc.com/2019/04/04/weekly-jobless-claims.html

Despite predicted economic slowdowns for the US, as well as the rest of the world, the number of US citizens filing for unemployment benefits has dropped to an almost 50 year low. This seems to demonstrate a strong, sustained labor market. According to the Labor Department, state unemployment benefits "declined 10,000 to a seasonally adjusted 202,000 for the week ended March 30, the lowest level since early December 1969".

Possibly due to this drop in unemployment benefits, companies are experiencing a labor shortage which has attributed to a slow down in job growth. However, the pace that jobs are growing is sufficient to accommodate the increase in the working age population which has been able to keep the unemployment rate down.

It will be intriguing to see how unemployment benefits and job growth will be affected as the world continues toward an economic slowdown. And if, however, we have already reached, or even passed, the peak of our growth, how will we continue to grow without first going backward?

Gender pay gap in the UK, USA, and at OWU

Manufacturing Activity Rebounds in March

According to CNBC, the manufacturing activity, specifically through the ISM manufacturing index has rebounded more than expected in the month of March. In February, the index changed from 55.3 to 54.2. This was marked the lowest that the manufacturing index has seen since the low point of 2016. The readings that are indicated below 50 represent a contraction within the ISM index. This month in March, the index has ticked back up to 55.8, which has increases a lot more than a lot of analysts could have predicted.

In addition to the manufacturing index increasing through the month of March, the construction industry has also hit a 9-month high in spending. The strong gains even with the sluggish housing market and expensive building materials are a good sign for the economy. Hopefully, they can continue to find work within the construction industry and help the housing market get out of this drought that we are currently in. It will be interesting to see what happens in the next coming months to see if this continues.


Source: https://www.cnbc.com/2019/04/01/ism-.html

Trump Turns U.S. Policy in Central America on Its Head

President Trump announced recently that he plans to cut off aid to Guatemala, Honduras, and El Salvador. This will be 450 million in aid that these countries will no longer be receiving from the US. Trump’s reasoning behind this act was that these countries are not doing anything to stop the immigration flood into the United States. His reasoning is also backed by the theory that the best way to halt migration is to go to the root causes; however, many say that cutting off aid will actually make the issue worse. What should be happening in these countries are efforts to reduce violence, corruption, and help economic development. These positive changes will help stop immigration into the US and result in people wanting to stay in their home countries. But with these aid cuts, many US-backed programs that help fight against gangs and violence will be halted. Although legislation has a chance to fight this policy, there is a high chance that their aid will be cut completely for now and be reduced in the future. 

Personally, I don’t believe completely cutting aid is the right response to this situation. I think we do need to do our research and be sure that our aid is not funding a corrupt government, but to cut aid completely seems like an overreaction. It makes sense that helping to support more economic development and peace within these countries would lead to fewer people trying to leave and I think that is something we should strive for when looking to help these countries and reduce immigration. It will be interesting to see what the actual result of this policy is. 

Link: https://www.nytimes.com/2019/03/30/world/americas/trump-turns-us-policy-in-central-america-on-its-head.html

The new minimum wage is killing NYC’s once-thriving restaurant scene

According to the article, New York City restaurants are reducing jobs and raising prices due to the new hourly wage of $15 per hour. The executive director of the trade group also said there has been a loss of job of 1.6%. The restaurants said they have been reducing jobs and the hours of employees in 2018 and may make more adjustments in 2019 as well, which is naturally what they are assumed to do. This may get workers earn more money, but if the restaurants are raising the price, their cost of living would rise anyway. I think this will lead to reduced demands on restaurants and increase jobs and work hour loss more.

However the article seems to overstate the impact by using the word "killing", because it might not lead to major issues. But what I think of this $15 wage increase is it might not really benefit the people that work. Initially it might, but the reduced hours might negatively affect them. That depends on how the employer would adjust the times, but it will definitely reduce potential income.


https://nypost.com/2019/03/30/the-new-minimum-wage-is-killing-nycs-once-thriving-restaurant-scene/