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More Guns, Less Butter

President Trump is expected to release a $4.8 trillion budget Monday proposing steep reductions in social-safety-net programs and foreign aid, and higher outlays for defense and veterans. The budget reflects the administration’s priorities and also reveals Mr. Trump’s fiscal policy objectives should he win re-election. The proposal is unlikely to become law, however, as Democrats control the House and spending bills in the GOP-led Senate need bipartisan support, Kate Davidson and Andrew Restuccia report.

Winners: The plan would increase military spending 0.3%, NASA would get a 12% bump, some $2 billion in new funding would be allocated for construction of the wall on the southern U.S. border, Department of Veterans Affairs spending would rise 13%, Department of Homeland Security 3% and the National Nuclear Security Administration’s budget 19%.

Losers: Medicare, food stamps and disability benefits are targeted for savings, Environmental Protection Agency spending would be slashed by 26%, the Department of Housing and Urban Development’s budget by 15%, the Commerce Department’s by 37%, foreign aid by 21% and the Centers for Disease Control and Prevention 9%.


Federal Reserve governor Michelle Bowman speaks at a community bankers conference at 8:15 a.m. ET, San Francisco Fed President Mary Daly speaks in Dublin at 1:45 p.m. ET and Philadelphia Fed President Patrick Harker speaks on the economic outlook at 3:15 p.m. ET.

White House Office of Management and Budget Acting Director Russ Vought holds an off-camera briefing to discuss the Trump administration’s latest budget proposal at 1 p.m. ET.



The death toll from the new coronavirus outbreak has now surpassed that of the severe acute respiratory syndrome, or SARS, epidemic nearly two decades ago, as the number of fatalities topped 900.

China’s factories are struggling to resume operations after their extended Lunar New Year holidays. Many factories are scheduled to reopen Monday, although it is unclear how many can. The coronavirus lockdown has choked supplies, restricted travel and limited the ability of employees to report to work. Factories that do open might have to operate with lower productivity because of labor shortages, new screening requirements and lack of parts. The virus is the latest blow to businesses in the world’s largest manufacturing economy, which also has been hurt by a bruising trade war with the U.S., Chuin-Wei Yap reports.

China’s consumer inflation rose to its highest level in more than eight years in January. China’s consumer-price index climbed 5.4% from a year earlier, the National Bureau of Statistics said Monday. January’s pickup was driven by the Lunar New Year, which normally boosts demand for consumer goods, and by the coronavirus, said Dong Lijuan, an analyst with the statistics bureau. In Hubei province, which has been hit hardest by the illness, local residents have been feeling more sticker shock than even official data suggest: Panic buying began in Wuhan, the epicenter of the outbreak, following authorities’ decision to lock down the city of 11 million people on Jan. 23, Liyan Qi and Jonathan Cheng report.

Redrawing the Map

The two-year trade war between the U.S. and China upended commerce world-wide, slamming the brakes on global trade growth—but also delivering modest benefits to a handful of industries and countries. Growth in global trade sank to a meager 1% last year, the worst showing outside a period of recession on record, according to International Monetary Fund data. Behind the slump were falling U.S. sales to China of agriculture products, aircraft and machinery, while China’s sales of electronics and industrial supplies to the U.S. dropped. But the declines would have been much larger had trade not been diverted to many other countries. China’s loss, for example, was Vietnam’s gain, accelerating a long-term trend of Chinese factories moving to Vietnam and other Southeast Asian countries where labor costs are lower, Josh Zumbrun, Feliz Solomon and Jeffrey Lewis report.

Put Me In Coach, I’m Ready to Play Today

A tight U.S. labor market is drawing Americans off the sidelines at a record rate. Nearly three of four Americans who were newly employed in recent months came from outside the labor force—meaning they weren’t actively looking for work prior to the month they accepted a job. That is the highest ratio in three decades of records and helps explain how employers have consistently added jobs without stoking stronger wage growth.

What’s happening? Millions of Americans are on the edge of the labor market—interested in working, but not searching. Last month, 4.8 million of them took jobs, more than offsetting the number of Americans who had dropped out of the labor force, Eric Morath reports.

What’s not happening? The number of people working at small companies hardly budged last year. The sluggishness in small-business hiring is particularly striking because it is the first time small companies haven’t added to their payrolls since 2010, when businesses of all sizes were recovering from the financial crisis. More than 5.3 million businesses have fewer than 20 employees. They are often the first to feel the pinch from a tight labor market: Smaller companies sometimes struggle to match the pay and perks offered by larger employers, Ruth Simon reports.

Tax Cuts

The 2017 corporate tax cut is turning out to be somewhat larger than expected. The Congressional Budget Office recently lowered its projections of corporate income tax receipts by $127 billion over the next decade. What happened? The Treasury Department finished regulations and companies learned how to operate in the new system. “Overall, the downward revision to our projections of corporate income tax revenues owing to the international provisions reflects an improved understanding of taxpayers’ behavior that has been gained this year,” CBO Director Phillip Swagel wrote in a blog post. “More broadly, the effects of the tax act generally appear to have been what we expected.” —Richard Rubin


Investors expect the coronavirus to lead to a sharp deceleration for world economic growth this quarter followed by a strong rebound, something that would look like a “V” on most charts. “I sure hope this is right. The global economy—and, in particular, those countries with more fragile growth dynamics—can ill afford a big shock that has adverse geopolitical and institutional spillovers. Unfortunately, it is still early to declare with confidence the much-hoped-for V-shaped evolution. Indeed, given what I have called the cascading sudden-stop dynamics of the coronavirus for China and beyond, the risk of either a U- or L-shaped pattern for 2020 is still too high to dismiss,” Mohamed El-Erian, chief economic adviser at Allianz, writes at Bloomberg Opinion.


Real Time Economics has launched a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here.

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