Why a Slowdown in Manufacturing Matters to the US

The manufacturing sector has long been the lifeblood of the US economy.
In recent times, however, that's not the case as the US is not as dependent on manufacturing as it once was. This doesn't mean it's not important. If the sector sees drops it will affect the local towns and cities where these manufacturing industries are located.
The US now has the provision of services as it's the main driver. Economists make it known that as a country becomes richer, people spend less on goods and more on services.
Manufacturing, however, is still a very important part of the US economy as it contributes about 1/3 of total GDP. Even though manufacturing is not a huge share of the U.S. economy, it "punches higher than its weight in the economic cycle because there are so many other parts of the economy that are linked to it," Williamson, with IHS Markit, said.



https://www.google.com/amp/s/www.pbs.org/newshour/amp/economy/making-sense/why-a-slowdown-in-manufacturing-matters-for-the-u-s-economy

Xerox May Takeover HP For A Possible $27 Bn

WSJ Article

In a bold move for two fading tech companies, Xerox seeks to claim the computer and printer manufacturer HP for an estimated 27 billion dollars. Xerox is approximately one third the size of HP, at around $8 bn market value. They are set to discuss matters on Tuesday. This comes as both companies are in "cost-cutting mode," with HP recently announcing that it would be cutting around 9,000 jobs by 2022. These two companies used to be much more househod names, but have failed to keep up with the new digital pace set forth by new cloud storage companies, especially hurting Xerox. I'm not sure this is a very good move for them, as they show no real sign of technological breakthroughs, and this is what as already been hurting them. We shall see how they get on.

The US Collected $7 Billion in Tariffs in September

New data released by Trade Partnership, an economic consulting firm, tariff revenues reached a record of $7 billion in September, as new tariffs were introduced to apparel, electronics and other consumer good from China. This has been putting immense pressure on American businesses that import Chinese products - and their customers. While tariff collections have increased, so have trade-war related expenses. To help mitigate the losses to U.S. agricultural exporters, who have suffered from international tariff retaliation, the Agriculture Department has authorized $28 billion in payouts to farmers.

What do you think this tariff revenue will be used for? How big of an economic impact will removing tariffs have?

Iran to Inject Uranium gas into 1044 Centrifuges in Defiance of the 2015 Nuclear Deal

AP Article

 In a fortified mountain facility, Iran will begin injecting Uranium gas into its Fordo site, Iran's State Department also declared that it would renew a waiver to allow Rosatom, a Russian state-run nuclear company, to continue conversion work at this facility. This will increase pressure on European nations that remain in this accord to let Iran sell crude oil abroad. If not, President Hassan Rouhani announced that Iran will pull out of the deal further in early January 2020. This mostly comes in response to France's failure to make good on its proposed $15 billion line of credit trade mechanism, but Rouhani said that Iran's breaches of the agreement could be reversed if Europe allows Iran to avoid U.S. sanctions on crude oil sales abroad. Seems fair to me! What do you think?

US services companies growth rebounds in October

This past Tuesday, the Institute of Supply Management reported that its service index reached  54.7% over this past month,  higher then September's 52.6%.  They also reported that measure of sales, new orders and employment all rebounded from last month.  Being that service sector,  more then 2/3 of the U.S economy, grew this past month, it makes October the 117 month of straight growth. That being said, many employers are claiming that they are having difficulty finding workers due to the low unemployment rate of 3.6%. Im curious if we will  continue to see growth in the service sector  in the near future even though the trade war has created friction for both economies.

Apple Commits $2.5 Billion to Ease California Housing Crunch

Monday, Apple announced a $2.5 Billion plan to address the housing crisis in California. They are the latest big tech company to devote money to a problem the economist and lawmakers believe it helped to create. Apple plans to invest $1 Billion affordable housing and plans another $1 Billion to buy mortgages. Apple also intends to make a 40-acre, $300 million dollar property in San Jose available for new affordable housing. Apple's housing plan is a response to the increasing pressure Silicon Valley's tech giants are under to play a more active role in the region's housing crisis. Local tech companies big and small have boomed, they have flooded the region with hundreds of thousands of highly paid employees, but the supply of housing has failed to keep pace.

Amazon is responsible for most Big Tech job growth since 2000

https://www.cnbc.com/2019/11/04/how-many-jobs-have-amazon-google-and-apple-created-since-2000.html


The five largest tech firms, Apple, Microsoft, Amazon, Alphabet, and Facebook have given jobs to over 1 million people since 2000. Alphabet, who is Google's parent company has grown the most out of the five firms,  with an employee number in 2018 that was 347 times what it was in 2001. Out of the firms, Amazon has created the most jobs but they are also the only company that counts its part time employees into their head count. Although these companies have created over a million jobs they have also displaced entire industries and contributed to job losses as well. With the growing tech industry I'm interested to see how these companies will continue to affect job growth in the U.S.

Here's What the Federal Reserve Really Thinks About the Economy

https://www.politico.com/news/2019/10/30/federal-reserve-powell-economy-062539

The Fed recently ct interest rates again and say they have no intentions of doing it again. Trump has called for interest rates to go to zero so that the economy will experience a boost going into reelection. Powell claimed that a new trade deal with China will certainly help the economy speed back up, which would be good for Trump. But for the moment it appears as if the rates will be in a pause until some more information comes out on future expectations.  Do you think we should push interest rates to zero? I think that it would be a wildly aggressive move and it would only force a recession sooner rather than later.

HSBC faces challenges, Europe stocks slump

As Europe's largest lender, HSBC plays a crucial role in financial markets. Recently, their profits fell by 12%, key targets were missed, and stocks plummeted. A fair share of the turmoil and revenue problems come from the Asian markets, especially in light of the political protests in Hong Kong. Most of their money is made in the Greater China region and they are exposed to the problems in the region, which are currently centered around the protests. Hong Kong in particular is a key driver in revenue. Their shares were down by 2.1%. Some of the measures being considered are exit stock trading in some of the Western markets, selling their french retail bank. The political situation is projected to worsen in Hong Kong and HSBC needs to take steps to to protect their profits and credit having such deep ties economically to the financial markets there.

In the United States there has been a lot of push to raise minimum wage within the country. The latest case is the airport and hotel industry as they have pushed to increase their minimum wage to $20. With all of these industries pushing for an increase in wage, will we get to the point where prices for goods will just raise and we will be back in the same place we are now?

https://www.nytimes.com/2019/11/03/business/economy/minimum-wage.html

The Fed Cutting The Interest Rates

 With a potential recession on it's way the Federal Reserve decided to cut interest rates, in an effort to sustain a record-long economic expansion. This would not the first time the Fed have cut interest rates this year. In fact the Fed have lowered interest rates three times this year, which is absurd and frighting. This can cause inflation to increase, and decrease the interest rate of CD's. The economy might be continue to thrive after this decision, but for how long and at what cost?

https://www.reuters.com/article/us-usa-fed/fed-cuts-interest-rates-signals-holding-pattern-for-now-idUSKBN1W32H7
 

U.S. Economy Third Quarter Growth

During the third quarter of 2019, the U.S. economy grew at its lowest rate this year. This is likely attributed to the major trade uncertainty with China and lack of global growth. Consumer growth stayed relatively stable, and there was also arise in residential investment. Still, there has been a major decline in business investment, which is the most volatile part of GDP. Further, spending on factories and offices decreased by 15.3 percent. There was a strike at General Motor  for six weeks during the third quarter which halted production. Even so, the Fed expects the now lower interest rates to help encourage business investment in the fourth quarter.

https://www.nytimes.com/2019/10/30/business/economy/us-gdp-growth.html

Student Loan a small boost to the economy

Student debt has ballooned to about $1.5 trillion when it stood at $363 billion in 2005. This has lead to a number of politicians looking at ways to reduce this debt and if possible, cancel all the debt. But it's not an easy solution. It won't be fair to everyone since someone might have studied a different program if they knew their debt would be waived off. There are questions to be answered like who deserves to have their debt waived? What percentage of debt should be waived for people from high-income homes? Should the debts be waived?

If these debts are waived, it is estimated to bring in about $86 billion -$108 billion over a 10 year period. 

The benefits of the waiver could help families spend these monies elsewhere in things they would most need. It could also be capital to start a new business which would employ people in future, further growing the GDP

https://www.cnbc.com/2019/11/01/wiping-out-student-debt-would-be-small-boost-to-economy-moodys-says.html

Once Again the Fed is Cutting Rates

Late last week Jerome Powell and his colleagues on the FOMC Board of Governors decided to continue down the path of cutting interest rates as external factors continue to threaten the strength of the US economy. The ongoing trade war with China, as well as the overall weakening of the global economy are at the forefront again as the Fed decided to lower the benchmark FFR rate from 1.75% to 1.5%. This decision also follows the latest data that shows US economic growth slowed to an annual rate of 1.9%. Powell stated that, pending any sharp downturn in the economy, he doesn't expect to cut rates any lower.

Do you think this was a wise decision by the Federal Reserve?

CEO of biggest US mall owner says retail industry is ‘reaching the bottom’ of bankruptcies

CEO of Simon Property Group says they are nearing the bottom of a wave of bankruptcies. They were in a similar situation in 2017 so they feel confident they know what they need to do to get back on track. Shares were down 3.5% as of Wednesday falling about 12% this year. So far in 2019 U.S. retailers have announced 8,993 store closings and only 3,780 store openings and are estimating a record of about 12,000 closings by the end of the year. The CEO also announced recent investment in online shopping site Rue La La which will help Simon run a website for its outlet centers. Simon also reported that sales per square foot were up 4.5% from a year ago and total occupancy 94.7% was down from 95.5% a year ago.

https://www.cnbc.com/2019/10/30/simon-property-ceo-says-reaching-the-bottom-of-retail-bankruptcies.html

Consumption Continues to Rise

Consumers have continued to help prop up economic growth as US household spending increased going into the 4th quarter. This is helping to offset the decline in manufacturing and business investment, however, they are spending at a lesser pace than what they were a year ago. It is thought that consumption, muted inflation, and modest labor costs are the reasons that point to a slowing but still expanding economy.

Saudia Arabia Announces IPO of World's Most Profitable Company.

As of today, Saudi Aramco, the largest oil producer in Saudi Arabia, announced that they plan on releasing an IPO by early December. Due to their profitability and sheer size, this is a very impactful event for investing. Analysts have the value of Aramco between 1.5 and 2 trillion dollars. For a little perspective, selling even 1% of Aramco stock could be worth up to 15 billion dollars. The main issue they are having, however, is that they are finding it hard to get listed in New York or London because of heavy environmental concern. Do you think Aramco should be publicly traded, or no because we should be investing our money in cleaner energy?

https://www.cnn.com/2019/11/03/investing/saudi-aramco-ipo/index.html

U.S. Consumer Confidence Dips in October, Misses Expectations

    In October U.S. consumer confidence saw a slight dip compared to months previous. This caught a lot of people off guard because the Dow Jones expected approximately a 2% increase in consumer confidence but saw a half percent decrease to 125.9. This is the lowest that consumer confidence has been since June when it was 124.3. It was said that the consumers are worried about the future job prospects and future business conditions but weren't necessarily worried about the current state of business conditions. This decrease hasn't seemed to cause any distress because consumer confidence is still at a very high level. What do you think that this shows for the future levels of consumer confidence?


https://www.cnbc.com/2019/10/29/us-consumer-confidence-for-october-comes-in-at-125point9-vs-128-expected.html

It’s getting to be the best time of year for stocks, and the Dow could soon set a new high

The S&P 500 & Nasdaq both traded at record highs this past week because of better economic news, a better-than-expected earnings season, and hopes that trade talks will soon resolve the trade war with China. Many analysts are saying that stocks could keep setting record highs because of these trade talks with China. November is usually a good month for stocks, but December is the number one month. 76% of companies also beat expected earnings, which was definitely a main catalyst for the performance of the stock market. What is your take on this? Do you think these analysts are correct?https://www.cnbc.com/2019/11/01/the-dow-could-soon-join-other-benchmarks-at-a-record-as-strong-november-seasonality-kicks-in.html

Protest's effect on Honk Kong GDP

The protests in Hong Kong have have now cause 2 consecutive quarters of GDP growth with the 3rd quarter dropping 3.2% alone.  This is a dramatic shift for the Hong Kong economy and the local government has described the recessions effect on the city as devastating.  The slow down in growth has mainly been attributed to the on going protests for democratic freedoms that has been raging in the city for months.  City leaders fear that the recession will only worsen as protests continue. Vacancy rates in hotels in the city are above 60% and the tourist industry, a huge economic driver for the city, has been crushed.




https://www.bbc.com/news/business-50204696

The Push to Raise Minimum Wage

The fight for increased wage rates has been brought to employers by labor unions and community groups. After a successful effort, the minimum wage for affected workers have seen change. In Oakland, the minimum payment for hotel workers has been increased to $20, an effect from the strategies of these groups. The fight for increased wages was to keep up with rising prices in housing costs, in an effort to prevent workers from being evicted from their homes. Though union participation in the workforce has been decreasing, their impact is still significant in the job market. Will this rise in wage for this particular group cause relayed effects in other departments? Will we see a significant rise in participation within labor unions?

Push to Raise Minimum Wage Goes Local, at Airports and Hotels

The economy is in good shape, but two big clouds hang over it.

The U.S. economy is in good shape. Is this in favor of the middle, working classes and the poor? According to this article, the two big clouds hanging over the U.S. economic future are wealth and income inequality and raising the economy’s potential for growth through accelerating productivity.  Even though the unemployment rate is very low, but many of those counted as "employed" are "employed" in jobs that pay relatively little with few or no benefits,  little or no job security for fewer than the customary number of weekly hours.

5 million children to get face masks as New Delhi battles heavy pollution

New Delhi is suffering from such severe smog that the government is considering extreme measures such as shutting down schools, stopping construction work, banning trucks from the city, and imposing a rule whereby cars with odd and even number plates can only drive on alternate days. Anything above a 100 on the Air Quality Index is considered unhealthy, New Delhi's AQI is a sky rocketing high of 336. With Delhi as the capital of India, this has huge economic repercussions. A 2006 study reported that cars contributed to 72% of New Delhi's air pollution, so the government's plan to limit car usage may be effective, the question is if its practical? It could decrease output of businesses, and may cause a burden on a public transport system that is already stretched out thin. Moreover, just today, 37 flights were cancelled due to low visibility which causes further inefficiencies. This problem is not unique to New Delhi, Lahore, a city in Pakistan faces the same issue. Are the solutions posed by the government practical? 

https://edition.cnn.com/2019/11/01/asia/delhi-pollution-schools-intl-hnk/

US-CHINA TRADE WAR SEEMS TO HAVE NO END

Over the past couple of months, China and the U.S have been involved in an ongoing trade war between the two countries, Politics and Culture between these two countries have made negotiating even more difficult. "As far as substantial trade breakthroughs, on thorny issues like intellectual property and opening up the Chinese financial system to US banks - I don't think that will happen, in what's left of Trump's first term or in a second term if he wins one.,” “Without an election to win in 2024, I doubt that the president would even care to make it a priority of his administration.” 
This may never happen as it requires the intellectual property to be a public good and therefore tradable and exchangeable in banking systems. Opening banks in the U.S would solve this issue of trade but would put China at risk of a banking crisis similar to What their East Asian neighbor Japan experienced in the 1990s. Overall discussion may lead to a final conclusion if both markets have serious problems making the this possible in times of desperate impossibility of balancing the markets and recovering massive crashes in stocks and increases in trade deficits, only then in times of desperation will they settle on a deal to end the trade war.

https://www.forbes.com/sites/panosmourdoukoutas/2019/11/03/us-china-trade-war-will-never-end/#448c63ee6f58

The Fed is still cutting rates

It seems like we have become a broken record on this blog now as this is the third time the Fed has decided to cut rates since we started this class. So I am still a strong believer that we are using our safety net WAY before we actually need it and Trump is at fault for part of this. The reason the Fed is not associated with the government is that there shouldn't be any political pressure for decisions. Trump has done nothing but tells Powell and companions what a terrible job they are doing for not cutting rates harder and not cutting them earlier when realistically, cutting rates this early is using up one of our safety nets before we actually need it. This could all blow up right before the election next year or it is going to become a massive problem for Trump after he uses the strong economy to get re-elected (implying that he does get re-elected). If Trump and his staff are able to continue such growth then this will truly go down as the best economic presidency in the history of this country.

https://www.cnbc.com/2019/10/31/trump-rails-against-powell-day-after-fed-cuts-rates-for-a-third-time-this-year.html

Third-quarter economic growth is expected to be a tepid 1.6%, but markets could look past it

The article states that third quarter growth is expected to slow down to 1.6%. One of the biggest hits is coming from a slow down in business investment. We have discussed in class how a slight dip in investment can drive the economy into a recession. I have voiced my belief that economists who are insistent that there is a recession coming are a large problem. If the people who we see as experts are insisting that there is a recession coming, then consumers and investors are not going to invest. This will cause a huge decrease in the investment section of GDP, which could also be a large reason as to why our growth rate is expected to decrease.
Even thought the growth rate is decreasing, this does not mean that the US is in a recession currently or there is going to be a recession. The growth rate can slow down and then stay constant as well. I hope the markets are able to "look past the weak report" as the article says.