Economy News

Tuesday, June 13, 2017

Meet the Virginia Democrat who may set a blueprint for the party against Trump

Tom Perriello’s progressive campaign for governor could be a model for Democrats preparing to run against Trump in the midterm elections
The world’s largest manmade star overlooking Roanoke, Virginia from Mill Mountain.
 The world’s largest manmade star overlooking Roanoke, Virginia from Mill Mountain. Photograph: Mark Harris/Getty Images

Friday, June 9, 2017

UK economy now in the fog of election uncertainty

There are echoes of 1974 rather than 1983 as hung parliament points to possibility of second poll within months
Ted Heath
 Theresa May now resembles Ted Heath rather than Margaret Thatcher. Photograph: Frank Tewkesbury/Getty Images

The thing about Trump's infrastructure plan is: it doesn't really exist

The Republican leaders of Congress killed off that plan months before Trump ever reached the Oval Office. What we are left with is a farce
Donald Trump
 ‘What we see this week is a shallow farce, beginning with a plan to move air traffic control to a private, non-profit corporation run by the airlines.’ Photograph: Andrew Harnik/AP

Hopes of EU-US trade agreement put on ice, say Brussels sources

Uncertainty grows about trade deal with the EU that some in the US felt would be more important to its interests than a post-Brexit deal with Theresa May
The talks between the US and European council in Brussels last month.
 The talks between the US and European council in Brussels last month. Photograph: Stephanie Lecocq/AP

Monday, May 29, 2017

Food stamps: a lifeline for America's poor that Trump wants to cut

Residents of the Congress Heights section of Washington DC tell of the devastating impact the president’s plan to cut food stamps would have on their families
Kozette Green, center, and her twins Jerzey and Josh, nine. ‘My kids probably wouldn’t get as much as they do now. I think it’s horrible.’
 Kozette Green, center, and her twins Jerzey and Josh, nine. ‘My kids probably wouldn’t get as much as they do now. I think it’s horrible.’ Photograph: Jason Hornick for the Guardian
Wendell Britt does not know where he will sleep tonight. It might be a park bench, a pavement, a shelter – “You go to a shelter and they take your fucking phone” – or, if he’s lucky, a friend’s house. “Wherever I lay my head,” he says, wearing a Chicago Bulls cap.

Far from ‘strong and stable’, May’s economic plan is weak and unstable

Labour has won the battle of the manifestos with policies that can deliver better growth whereas the PM’s offering more of the same: cuts
Prime minister Theresa May has made rapid U-turns, and her election campaign has unravelled her weaknesses rather than strengths.
 Prime minister Theresa May has made rapid U-turns, and her election campaign has unravelled her weaknesses rather than strengths. Photograph: Jonathan Ernst/Reuters
Had Theresa May come back from her Easter walking holiday and decided against holding a general election, few would have blamed her. Going to the country on 8 June was always a gamble, as has become evident the longer the campaign has gone on.

Wednesday, May 24, 2017

The economy is stagnant because people fear for the future

Consumers are reluctant to spend because of new technologies that could eventually replace many or most of their jobs
People are increasingly limiting their spending because they fear they could suffer an economically catastrophic event.
 People are increasingly limiting their spending because they fear they could suffer an economically catastrophic event. Photograph: Mark Kauzlarich/Reuters
Since the “Great Recession” of 2007-09, the world’s major central banks have kept short-term interest rates at near-zero levels. In the United States, even after the Federal Reserve’s recent increases, short-term rates remain below 1%, and long-term interest rates on major government bonds are similarly low. Moreover, major central banks have supported markets at a record level by buying up huge amounts of debt and holding it.
Why is all this economic life support necessary, and why for so long?
It would be an oversimplification to say that the Great Recession caused this. Long-term real (inflation-adjusted) interest rates did not really reach low levels during the 2007-09 period. If one looks at a plot of the US 10-year Treasury yieldover the last 35 years, one sees a fairly steady downward trend, with nothing particularly unusual about the Great Recession. The yield rate was 3.5% in 2009, at the end of the recession. Now it is just over 2%.
Much the same is true of real interest rates. During the Great Recession, the 10-year Treasury Inflation-Protected Security yield reached almost 3% at one point, and was almost 2% at the recession’s end. Since then, the 10-year TIPS yield has mostly declined and stayed low, at 0.5% in May 2017.
The fact that people are willing to tie up their money for 10 years at such low rates suggests that there has been a long trend towards pessimism, reflected in the recent popularity of the term “secular stagnation” to describe a perpetually weak economy. After former US Treasury secretary Lawrence Summers used the term in a November 2013 speech at the International Monetary Fund, the New York Times columnist Paul Krugman picked it up, and it went viral from there.
Although secular stagnation became a meme five years after the 2008 financial crisis, the term itself is much older. It first appeared in Harvard University economist Alvin Hansen’s presidential address to the American Economic Association, in December 1938, and in his book published the same year.
Hansen described the “essence of secular stagnation” as “sick recoveries which die in their infancy and depressions which feed on themselves and leave a hard and seemingly immovable core of unemployment”. When Hansen delivered his speech, he expected the US economy’s economic stagnation to persist indefinitely. The depression that had started with the stock market crash of 1929 was approaching its 10th year, and the second world war had not yet arrived. Only after the war began, in 1939, did the stagnation end.
Hansen’s Great Depression-era theory of secular stagnation was based on an observation about the US birth rate, which was unusually low in the 1930s, after having already declined dramatically by the late 1920s. Fewer births perpetuated the stagnation, Hansen surmised, because people did not need to spend as much on children, and felt less need to invest in the future. Indeed, according to World Bank statistics, the global average birth rate has also fallen since the 2008 financial crisis. But low fertility had nothing to do with that crisis in particular, given that birth rates have been steadily declining for the better part of a century.
Another explanation is that the 2008 crisis is lingering in our minds, in the form of heightened fear that rare but consequential “black swan” events could be imminent, despite moderately strong consumer-confidence measures and relatively low financial-market volatility (with some exceptions). A recent paperby New York University’s Julian Kozlowski, Laura Veldkamp and Venky Venkateswaran argues that it is rational to harbour such fears, because once a formerly unthinkable event actually occurs, one is justified in not forgetting it.
My own theory about today’s stagnation focuses on growing angst about rapid advances in technologies that could eventually replace many or most of our jobs, possibly fueling massive economic inequality. People might be increasingly reluctant to spend today because they have vague fears about their long-term employability – fears that may not be uppermost in their minds when they answer consumer confidence surveys. If that is the case, they might increasingly need stimulus in the form of low interest rates to keep them spending.
A perennial swirl of good news after a crisis might instil a sort of bland optimism, without actually eliminating the fear of another crisis in the future. Politicians and the media then feed this optimism with rosy narratives that the general public is in no position to sort through or confirm.
Since around 2012, the equity and housing markets have been hitting new records. But the same sort of thing happened regularly in the Great Depression: the news media were constantly reporting record highs for one economic indicator or another. A Proquest News and Newspapers search for the 1930-39 period finds 10,315 articles with the words “record high”. Most of these stories are about economic variables. In 1933, at the very bottom of the depression, record highs were reported for oil production; wheat, gold and commodity-exchange-seat prices; cigarette consumption; postal deposits; sales or profits of individual companies; and so forth.
Such rosy reports may give people some hope that things are improving overall, without allaying the fear that they could still suffer an economically catastrophic event. Barring exceptionally strong stimulus measures, this sense of foreboding will limit their spending. Narrative psychology has taught us that there is no contradiction: people can maintain parallel and conflicting narratives at the same time. When people are imagining disaster scenarios, policymakers must respond accordingly.
 Robert Shiller is a 2013 Nobel laureate in economics, professor of economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance
https://www.theguardian.com/

UK car production falls at fastest rate in more than two​-​and​-​a​-​half years

SMMT says slowdown in manufacturing echoes 20% drop in new car sales, but overall outlook is positive

Employees work on the production line at Nissan's Sunderland factory
 Nissan’s Sunderland factory is one of the biggest carmakers in the UK. Photograph: Chris Ratcliffe/Bloomberg/Getty Images

Ford names Jim Hackett as new CEO in push to build self-driving cars

Carmaker confirms boss of its driverless cars division will take helm as Mark Fields exits after just under three years
Jim Hackett has been conformed as the new CEO of Ford, replacing Mark Fields.

 Jim Hackett has been conformed as the new CEO of Ford, replacing Mark Fields. Photograph: Paul Sancya/AP

Monday, May 15, 2017

Jobs market will suffer a Brexit slowdown, say experts

‘Significant proportion’ of UK workers face falling living standards, with lower pay rises and higher unemployment predicted
A woman passes notices for jobs in the window of a recruitment agency in London

 Employers are planning to give out rises of about 1%, although inflation is at 2.3%, says the EY Item Club. Photograph: Luke MacGregor/Reuters