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Real Time Economics | Market Forces vs. Government Fiat
Real Time Economics
Good morning. Jeff Sparshott here to
take you through key developments in the global economy. Send us your
questions, comments and suggestions by replying to this email.
It's a Trap!
U.S. semiconductor companies want no part of any trade deal that calls for stepped-up purchases from China. Washington has pressed Beijing to buy more than $1 trillion in U.S. goods and services as part of an agreement, and China has offered to buy $30 billion of U.S. chips over six years. But U.S. chip makers have told President Trump’s administration not to include them, Bob Davis reports.
Because U.S. production costs are so high, mandatory-purchase quotas
would essentially force U.S. chip makers to open new factories in China
give Beijing bureaucrats more sway over the U.S. firms. That would
benefit Chinese competitors and make the U.S. firms more dependent on
Beijing, executives at the U.S. companies fear. “The market should
determine commercial success, not government fiat,” said John Neuffer,
president of the Semiconductor Industry Association.
What to Watch Today
U.S. factory orders for January are expected to rise 0.4% from the prior month. (10 a.m. ET)
President Trump meets with Brazil President Jair Bolsonaro. The two hold a joint news conference at 1:45 p.m. ET.
The Federal Reserve begins a two-day policy meeting.
The Bank of Japan releases minutes from its Jan. 22-23 meeting at 6:50 p.m. ET.
Federal Reserve Chairman Jerome Powell appears ready to announce
Wednesday when the central bank will end the runoff of its $4 trillion
portfolio. But setting that date is just one challenge. Now, officials
are turning to the sensitive task of determining the portfolio's composition.
Specifically, they need to decide the right combination of
Treasurys—mostly short-term bills or a mix that includes more
longer-term notes and bonds, Nick Timiraos reports. The decision has
implications for markets, the economy and monetary policy.
composition “is more policy-relevant than many of the things people
have discussed about the balance sheet,” says Boston Fed President
The White House in a new report highlighted the strength of the labor-force participation rate and pushed for policies to encourage more people to work
as millions of baby boomers retire. From 2015 through 2018, the share
of Americans working or seeking work stabilized around 63%, defying
expectations for declines as the population ages, Sarah Chaney reports. The
Trump administration says government could encourage greater
labor-force participation if it advanced policies that help reduce
child-care costs, giving women greater incentive to work.
Female economists say they have been discriminated against and, in some cases, sexually assaulted
by their colleagues, according to a new survey by the American Economic
Association. The survey comes at a moment of soul-searching for the
economics profession over its treatment of women: recent research has
found ingrained bias and exclusion. Women make up 58% of the nation’s
undergraduate degrees but only 30% of economics majors, David Harrison
Brexit isn't happening any time soon. The speaker of the House of Commons unexpectedly blocked Prime Minister Theresa May's government
from putting its departure deal—already rejected twice—to lawmakers for
a third vote. The move undermines Mrs. May’s plan to crowbar lawmakers
into backing her Brexit deal by threatening a monthslong extension. Her
argument: The longer Brexit is delayed, the greater the chance it won’t
happen at all. The U.K. will now ask the EU at a summit this week to
substantially push back its departure, originally planned for March 29,
Max Colchester and Jason Douglas report.
Keep Calm and Carry On
The jobless rate in the U.K. fell in January to its lowest level in more
than four decades and the number of people in work hit a record high.
The figures show the labor market continues to perform well despite a
slowdown in growth caused by uncertainty over Brexit, Jason Douglas
Caviar prices are sinking as fish eggs cultivated in China are flooding the global market.
The tiny, salt-cured eggs from wild female sturgeon were once at risk
of extinction due to overfishing and poaching. As a result, all trade in
wild caviar has been tightly controlled under a global treaty since
1998. These days, most caviar is harvested from sturgeon farmed in
rivers, lakes and tanks. China has become one of the world’s largest
producers, and it is driving global prices down, Lucy Craymer reports.
Fake and pirated goods account for a growing share of global commerce. The OECD in a new report said seizures of imported fake goods reached $509 billion in 2016, or about 3.3% of world trade. The
main sources of fakes: China and Hong Kong. The countries most flooded
with knock-offs: the U.S., France, Italy, Switzerland and Germany.
Alan Krueger, a top economic adviser to
former President Barack Obama and one of the nation’s most influential
labor-market experts, died Saturday at the age of 58.
The cause of death was suicide, his family said in a statement released
by Princeton University, where he taught since 1987. Mr. Krueger, a
labor economist who wrote papers on topics including rock ’n’ roll
concerts and the roots of terrorism, was tapped by Mr. Obama in 2011 to
serve as chairman of the White House Council of Economic Advisers, Paul
Kiernan and Nick Timiraos report.
What Else We're Reading: Alan Krueger
Falling labor-force participation and the opioid crisis are intertwined. "Nearly half of prime age men who are not in the labor force take pain medication on any given day; and in nearly two-thirds of these cases, they take prescription pain medication."
There's a link between concentration of wealth and economic mobility. The Great Gatsby Curve
"shows that children from poor families are less likely to improve
their economic status as adults in countries where income inequality was
higher–meaning wealth was concentrated in fewer hands–around the time
those children were growing up."