U.S. Consumers Continue High Demand Despite Slowing Economy

     The U.S. economy slowed in the second quarter of 2019 with GDP increasing at only 2%. Despite this, consumer spending is at the strongest it's been in over 4 years. Among other things, the trade deficit has been narrowing, and businesses have been ramping up their inventories likely in anticipation that demand will stay strong. However, economists are worried that growth will continue to slow down amidst the U.S.-China trade war. Gross domestic output (the average of GDP and gross domestic income) fell to 2.1% from 3.2% in the first quarter. The Federal Reserve is confident that the economy is growing at a good rate, but Jerome Powell said that the Fed would act accordingly to keep expansion on track.
     One reason for such high consumer spending could be an anticipation that prices will rise as a result of tariffs being put in place. If consumers feel that prices will be rising in the near future, they'll spend more now in order to get more for their money. It's possible that we will see consumer confidence and spending start to slow down in the coming quarters, but for now consumers are happy to spend.



https://www.reuters.com/article/us-usa-economy-gdp/u-s-economy-slowing-but-consumers-limiting-downside-idUSKCN1VJ1J2

Port of Los Angeles slammed with cargo as companies rush to get imports in ahead of tariffs

Ahead of Black Friday, the Port of Los Angeles has been receiving an abnormal surge of shipments earlier than usual. This is most likely due to businesses and retailers front-loading orders in an attempt to avoid new planned tariffs. While Trump has stated that he has postponed issuing certain tariffs until after the holidays many of these shipments were likely put into place before that announcement. These rushed orders have caused the port's busy season to come nearly a month earlier than usual. Despite Trump's freeze on some tariffs until January other 15% tariffs will go into effect on September 1st. Since the beginning of the year, our trade with China has drastically decreased. Exports to China fell by 18% and imports fell by 12%. Despite the tariffs, the port does not expect business to slow significantly as other Asian countries have been picking up the slack such as Malaysia, South Korea, Singapore, Japan, and Vietnam.




Article: https://www.cnbc.com/2019/08/31/port-of-los-angeles-slammed-with-cargo-as-companies-rush-to-get-imports-in-ahead-of-tariffs.html

Interest Rates Are Not Enough To Handle Increasing deficits.

In the past couple of days, there has been a lot of talk about Interest rates in the news involving the rising debt in the U.S and the Fed cutting interests rates to slow down the accumulation of debt. In the Long Run, more government payments on programs like Medicaid and Social Security and the interest of debt will make the government spend more money more quickly and will overturn the revenue adding to the government's debt. One of the major issues occurring is that Interest Rates are used primarily for the long run and if we spend more in the Short Run, the Interest Rates start to rise and then we will begin to face higher levels of debt. Another issue is that policymakers have tried to implement policies for future spending on Government programs but if the Interest Rates remain low then any pre-funding for these programs will need higher taxes to be effective. If we continue spending more then we earn, then Interest Rates will no longer be effective and the government must find new ways and policies to stop the growing debt.

https://www.cnn.com/2019/08/28/perspectives/us-deficit-debt-economy-interest-rates/index.html

Sure, Unemployment Went Down - Because More People Left the Workforce

The talk of Unemployment levels has been a huge topic of discussion for as long as we have been studying Economics. As of recent, in specific, April we saw a increase of 164,000 new jobs in the workplace. While we saw this increase, there was also a huge drop in the number of employed individuals to the tune of 239,000. Our nations current unemployment rate is currently at 3.9% which is a nation low since the year 2000. Looking at the data that has been presented you would think that our unemployment rate should  have increased. the reason that it hasn't is because these individuals didn't get fired, they simply quit their job and left the workforce entirely leading to an decrease in the unemployment rate. There is now a ton of open jobs for anyone who is searching which may even cause the unemployment rate to decrease even more. My question that I have with all of this is why did all of these employees quit, and where did they go?

Esther George on Inverted Yield Curves and FED's Balance

The Yield curve has often been used by investors to aid them in seeing when prices for securities are abnormally large or small. A normal yield curve tells that bonds with a longer maturity period should have a larger yield than those with shorter terms. In recent United States history, an inversion of this curve often suggested that an upcoming recession is approaching. With the country on the midst of another yield curve inversion, the Kansas City Fed President Esther George believes that the Fed may be partially responsible. With the yield of the 10-year Treasury note not reaching its expected yield twice, the Fed decided to keep increasing the balance sheet to counter this offset. Though the situation is not ideal, George believes that the United States should not be worried about a potential recession as conditions are not as bad as they could be.

https://www.cnbc.com/2019/08/22/esther-george-says-the-feds-large-balance-sheet-may-have-helped-cause-the-yield-curve-inversion.html

Esther George says the Fed’s ‘large balance sheet’ may have helped cause the yield curve inversion

Esther George, the Kansas City Fed President, stated that she believes the Federal Reserve is partly responsible for the recent inverted yield curve.  An inverted yield curve happens when the interest rate for short-term bonds are higher than the interest rates for long-term bonds, and George suggest that the Federal Reserve could be influencing the long end of things. Inverted yield curves often signal to a possible recession, however George says that she does not see the signal of a possible downturn.

Comparing Stock Market Growth Under Modern US Presidents

Stock market growth has always been a key indicator of the economy in the United States, as a result, it is looked at when judging a president's "success" in office. What I've come to realize is that yes presidential policies and actions do affect the stock market, but there are many others determinants, and sometimes its out of their control. Presidents Trump and Clinton both inherited favorable conditions in office. Clinton was fortunate to be in office during the dot com boom, during this time the S&P grew 210%. Trump also received a post-recession growing economy when he was inaugurated, and his infamous tax cuts fueled the market even further. Recently, however, his trade war with China has slowed stock market growth, and has made it a choppy ride. Reagan and Obama experienced different situations when they came into office. Reagan had to deal with the recession of 1981, while Obama came into office during the worst economic crisis since the Great Depression. They both managed to stimulate the economy but with different ways. Reagan cut taxes on the rich, which was called the trickle down affect. Obama on the other hand increased taxes on the rich, but pumped a ton of federal money into the system, leaving office with the S&P tripled from the time he took office in 2008.

https://www.cnn.com/interactive/2019/business/stock-market-by-president/index.html

Adidas, Nike, Crocsjoin more than 200 footwear companies warning Trump over tariffs

Consumers have been powering the U.S. economy. But it’s clear that after this latest round of tariffs, retailers will have no choice but to raise prices on some goods. The question now is what happens when an unstoppable economic force meets an immovable tariff object?

https://www.cnn.com/2019/08/28/politics/adidas-nike-crocs-china-tariff-letter/index.html?utm_source=morning_brew

Millenial and Gen Z Workers Increasingly Happy with Pay

For the first time in the past decade US workers under 35 are more satisfied with their current wages than those over the age of 55, according to a report from the Conference Board poll on workplace satisfaction. This is clearly a result of the current labor market conditions in the United States with unemployment at historical lows and the general increase in wage rates. As a result, the demand for labor in the US is currently so high that firms are willing to pay higher wages to retain their young talent, where as other employers are trying to attract talent with higher salaries. Americans are feeling a sense of job security now, and are overall probably producing more because of it, and also improving the consumer confidence index in America. 46% of millennials and Generation Z workers  are now reporting to be satisfied with their compensation, a jump from 36% in the previous year. Overall, this increase in satisfaction can only lead to positive impacts on the economy as these workers, whom will make up much of the future labor force, are now more likely to produce more as well as spend and reinvest in the nation's economy.

https://www.whitehouse.gov/briefings-statements/wall-street-journal-younger-workers-report-biggest-gains-happiness-pay/

The British economy is not ready for Brexit

The suspension of the British Parliament last week creates a scenario where a hard (no-deal) Brexit is likely to occur, and the British economy is not prepared for this possibility.  British economic figures have already shown the initial impact of a no-deal Brexit, but these figures are expected decrease drastically when the U.K. officially leaves the European Union. These economic figures have shown that British businesses have been hit especially hard since the Brexit vote. Businesses, within the United Kingdom, have recently failed to invest significant resources into economic capital, out of fear of an economic recession, and this has led to a significant drop in economic productivity and output. Economic output has already “contracted 0.2 percent in the second quarter” with the expectation of further contractions. The Bank of England (BoE) recently estimated that that the U.K. has “forfeited 3% of its national income in the three years since voting to leave the EU” and has started to make preparations to combat the looming economic recession. Overall, a hard Brexit will cause fundamental changes to the British economy and will cause a recession on the size of the 2008 financial crisis.

   https://www.ft.com/content/bc44eff8-c9a7-11e9-af46-b09e8bfe60c0

China and US Trade War

For the past twelve months and counting, the USA AND China, the two biggest economies in the world
have gone head to head, locking horns in a never seeming to end the trade war. 

The USA has imposed several tariffs on Chinese goods and the Chinese have in turn retaliated with
similar tariffs. These tariffs are put in place to increase the final price of goods to the consumer in
a bid to stop them from buying goods from these two economies. 

US President has accused the China government of unfair trade practices on numerous occasions
being his reason for imposing the tariffs on Chinese goods. He has also sought to pressure other
European countries to place similar tariffs on Chinese goods so as to stifle the Chinese economy.  

As a result of this, Chinese manufacturing and technology giant Huawei has been caught in the
crossfire with the American Government accusing them of using their technology to spy and steal
data from people who use products made by Huawei.

https://www.google.com/amp/s/www.bbc.co.uk/news/amp/business-45899310

US company dividends now outstrip Treasury yields

Even though we just a saw an inverted yield curve a few days ago, income-hungry investors are being driven into stocks. As yields on US Treasury bonds decline investors are now getting more income from dividends on S&P 500 shares, this has resulted in driving more savers towards the stock market. As we look at the possibility of a recession on our horizons, investors must look back to the 2008 financial crisis to discover the last time dividends brought in more cash than all other available treasuries . As companies aim to increase their dividends each year even in times of stress, I'm curious to see what will happen if the theory of inverted yield curves holds true, and rumors of a recession become real.

Americans’ View of the Current Economy Is the Highest in 19 Years

U.S. consumer confidence declined in August by less than forecast as Americans’ assessment of current conditions climbed to the highest level in almost 19 years, helped by a job market that remains robust. The graph in the article shows that the view of the present situation index jumped to 177.2, the highest since November 2000. The reading shows hiring and income gains are keeping consumers upbeat and slowing concerns about the economy’s prospects in light of slowing global growth, volatile financial markets and escalating U.S.-China trade tensions. The level of confidence could allow for sustained household spending that remains a mainstay of the economy. Some parts of the economy are showing some weakening but consumers are confident and willing to spend. As college students, what are your thoughts on the current conditions of the economy? Are you confident in spending as a consumer? 


https://www.bloomberg.com/news/articles/2019-08-27/u-s-consumer-confidence-declined-less-than-forecast-in-august

China is willing to negotiate trade resolution. Won't retaliate for now.

It is clear that Trump has poked the bear and at least received a piece of what he was after, and that is to be paid fairly for the business we are doing with China or move our business operations. Industries have already begun finding new homes for manufacturing, such as Taiwan. It is probably in our best interest to end this trade war and create a fair and equal treaty with China. Trump can chalk it up as a win because he got the last jab and both sides can stop punishing innocent industries with the burden of finding alternatives from this trade war. If you were Trump, what is your next step?

https://www.cnbc.com/2019/08/29/china-says-its-willing-to-resolve-trade-war-with-a-calm-attitude.html

Federal Budget Deficit Climbing at a Record Rate

The Federal Budget Deficit Is Getting Bigger As Spending Grows: https://www.npr.org/2019/08/21/753112635/the-federal-budget-deficit-is-getting-bigger-as-spending-grows

For as long as we can remember, the United States has been in debt. However the CBO believes that we will hit $960 billion for this fiscal year, followed by an average of $1.2 trillion for the next 10 years. Of course this is all just forecasting and the numbers could change, but the fact that they are projecting for the United States to exceed $29 trillion by the year 2029 is a scary thought. Especially when that would be 95% of the GDP which according to the CBO will be the highest ratio since the end of World War II. Is there anything the government is spending money on that they should not be or is it all justified? I wonder when the debt will become irreversible if it isn't already. It seems the new budget deals have not been as efficient as they were promised to be.

Bond Market Signals Fed May Be Too Slow Cutting Rates

The Federal Open Market committee cut interest rates by a quarter of a percent during their July meeting. This is the first time since the financial crisis in 2008 that the Federal Reserve voted to lower interest rates. Jerome Powell, chairman of the Federal Reserve, was persistent that the rate cut was a recalibration to fit the economy, rather than a response to the 2-year and 10-year bonds inverting. The inversion of these bonds often is a signal of a recession coming. The bond market inverting is feared to be in response to the Federal Reserve not taking an aggressive approach to preventing a recession.

https://www.cnbc.com/2019/08/21/bond-market-signaling-that-fed-may-be-too-slow-to-cut-rates.html

US weekly jobless claims fall more than expected: 

https://www.cnbc.com/2019/08/22/weekly-jobless-claims.html

In mid August, markets dropped substantially and remained unsteady the following day according to a journalist for The Washington Post. People are beginning to have concerns that a recession is looming due to increased layoffs and lower productivity. The article that I attached to this post is clearly showing that employers and businesses are continuing to hire. Despite the manufacturing slowdown and concerns about a recession, the data shown in the article suggests that the labor market is holding strong.

The article states that the number of Americans filing applications for unemployment benefits has fallen the week of the 12th. The Labor Department said on August 15th the claims for state unemployment benefits dropped 12,000 to approximately 209,000 by August 17th. They were not expecting such a substantial drop in claims. It was projected to drop to only 216,000. This suggests that the labor market is holding steady against the concerns about a possible recession and the manufacturing slowdown.

The Labor Department's four-week average for new unemployment benefits claims was lower than the corresponding weeks in July, which is a positive sign for employment during the month of August.

The graph in the article shows the initial jobless claims from 2008 to 2018. After the 2008 recession, we see a spike in initial jobless claims to almost 700,000 from about 350,000. It overall shows the decrease in jobless claims since 2008- going from 350,000 to just above 200,000. 

Trump on US-China Trade War

Over recent years, President Trump has engaged in somewhat of a trade war with China. He feels that China has taken advantage of the U.S. economy for decades, taking what he claims to be, "a total loss of almost a trillion dollars a year for many years." To counter, Trump has began to raise tariff rates on Chinese goods in attempt to, as he claims, straighten out the biggest of multiple horrible trade deals set between the U.S. and their foreign counterparts. 

What kind of effect can these tariffs have on the U.S. economy? And more specifically how could it affect growth of real and nominal GDP?


https://www.cnbc.com/2019/08/25/trump-on-us-china-trade-war-i-could-declare-a-national-emergency.html

Interest Rate Cuts

In theory, lowering interest rates will increase consumption by the typical consumer and add an additional stimulus to the economy. This has typically been a monetary practice during times of economic hardship, but right now, the economy seems to be stable on the surface with low inflation, low unemployment, and overall growth. Do you think the Federal Reserve is gearing up for a recession in the near future?

Macroeconomic performance

This is an interesting article which looks at all the main macroeconomic indicators that we are currently discussing in class. Notice that GDP growth, unemployment and inflation are discussed, but that there are also other important indicators included in the article.

Which indicator do you find the most relevant/interesting/intriguing and why?