Newsletter: A Crack in the Labor Market and a Pivotal Moment for the U.S. and China

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Demand for workers got a little softer this summer, U.S.-China trade talks start today—less than a week before tariffs are set to rise—and the economy looks to be slowing but not stalling. We’ll also take a spin through Fed deliberations, the budget and Elizabeth Warren’s plans to remake capitalism.

A Crack in the Labor Market?

Employer demand for workers softened this summer. The number of job openings declined 4% in August from a year earlier to 7.1 million, the third consecutive annual drop. Openings last logged three straight months of year-over-year declines in 2009. The takeaway: Weakening business demand, as opposed to a lack of available workers, could be the impetus behind a broader slowdown in hiring, Sarah Chaney reports.

  • Worker confidence may also be waning. A measure of employees who voluntarily quit their jobs ticked down in July. While the rate remained elevated compared with earlier in the expansion, the monthly decline hints at a cooling in employee bargaining power.
  • Even so, the labor market in 2019 looks to be on steady footing. Job postings exceeded the number of unemployed Americans by about 1 million in August. Employers are  hanging on to the workers they have: There were fewer layoffs in August than a year earlier. And unemployment reached a half-century low in September.

WHAT TO WATCH TODAY 

The European Central Bank releases minutes from its Sept. 11-12 meeting at 7:30 a.m. ET.

The U.S. consumer-price index for September is expected to rise 0.1% from a month earlier and 1.8% from a year earlier. Excluding food and energy, it’s expected to rise 0.2% from a month earlier and 2.4% from a year earlier. (8:30 a.m. ET)

U.S. jobless claims are expected to fall to 218,000 from 219,000 a week earlier. (8:30 a.m. ET)

U.S. federal budget figures for fiscal year 2019 are out at 2 p.m. ET.

The Minneapolis Fed’s Neel Kashkari speaks at a Yahoo Finance summit in New York at 12:15 p.m. ET, the San Francisco Fed’s Mary Daly speaks in La Jolla, Calif., at 12:30 p.m. ET and again in San Diego at 3:30 p.m. ET, and the Cleveland Fed’s Loretta Mester speaks at John Carroll University at 5:30 p.m. ET.

TOP STORIES

Big Deal, Mini Deal or No Deal

Senior U.S. and Chinese officials will square off for trade talks today at a pivotal moment in the countries’ relationship, with higher tariffs looming if negotiators fail to break a five-month stalemate, William Mauldin reports.

  • Few believe the U.S. and China will agree to a comprehensive trade accord this week. What started as a U.S. assault on Chinese trading practices has become muddied by other issues, from China’s repression of its Muslim minorities to the possible impeachment of President Trump.
  • China is looking to narrow the scope of its negotiations with the U.S. to trade matters only and put thornier issues on a separate track in a bid to break the deadlock.
  • U.S. business groups want Mr. Trump abandon plans to raise tariffs on Oct. 15 and impose new tariffs on smartphones, apparel and other consumer goods starting Dec. 15.
  • Asked Monday if the administration was heading toward a partial deal with China, Mr. Trump said, “I think it’s not what we prefer at all.” 

Expansion’s Gonna Expand

Thanks to consumer strength, the U.S. economy won’t tip into a recession next year but growth will slow, according to the Conference Board’s latest global economic outlook. Declining industrial production, a result of overcapacity in China, should bottom out in 2020, the private research group said. Although trade tariffs appear set to stay in place, the U.S.-China dispute is likely to stagnate rather than worsen. “Consumer performance is unusually strong,” says Bart van Ark, the Conference Board’s chief economist, driven by robust labor market expectations. What could potentially throw U.S. consumers off course? “A drumbeat of bad news” that could result in consumers worrying about their job prospects and reining in spending. —Harriet Torry

Hey, Wait a Minute Mr. Chairman

Federal Reserve officials grew more worried last month that slowing global growth, exacerbated by the U.S.-China trade war, could sap domestic hiring and economic activity, according to minutes from their Sept. 17-18 meeting. Officials in recent days haven’t dispelled market expectations that they would cut interest rates when they meet later this month, for their third reduction this year. The bigger debate could center on whether and how officials signal their future plans, including when they might finish cutting rates, Nick Timiraos reports.

As the Deficit Closes in on $1 Trillion…

President Trump is planning to sign an executive order as soon as this week requiring administrative action by a federal agency that boosts federal spending to be offset with spending cuts elsewhere. The order would effectively impose a “pay as you go” requirement on federal agencies, enforcing a 2005 memo from the Office of Management and Budget that required federal agency leaders to offset the cost of any administrative action that would increase mandatory spending, Andrew Restuccia and Kate Davidson report.

I Have a Plan for That

For the past generation, Democratic presidential candidates have mostly talked of redistributing the rewards of American capitalism while leaving its basic structure intact. Elizabeth Warren promises to break that mold. The Massachusetts senator talks of remaking capitalism from the ground up. Her policies would directly affect companies with sales of nearly $5 trillion and stock-market value of more than $8 trillion, a third of the S&P 500 stock index. Taxes on the wealthy and corporations would rise sharply. Businesses are meeting the rising prospect of a Warren presidency with a combination of concern, skepticism and, for a few, a sense of opportunity, Greg Ip writes.

WHAT ELSE WE’RE READING

We thought economic growth and technology would liberate China. “A darker truth is now dawning on the world: China’s economic miracle hasn’t just failed to liberate Chinese people. It is also now routinely corrupting the rest of us outside of China,” Farhad Manjoo writes in the New York Times.

The U.S. isn’t the world’s most competitive economy anymore. Singapore topped the World Economic Forum’s 2019 rankings. It’s not all bad: “The U.S. remains the most competitive large economy in the world, coming in at second place. It’s an innovation powerhouse, topping the rankings for business dynamism and coming second for innovation capability.”

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https://blogs.wsj.com/economics/2019/10/10/newsletter-a-crack-in-the-labor-market-and-a-pivotal-moment-for-the-u-s-and-china/?mod=_relatedInsights

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