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Apr 12, 2019

Real Time Economics | High Times, Trade Truces and Fed Independence

The Wall Street Journal.
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Real Time Economics
American workers are smoking more marijuana, the European Union and Japan are trying to keep the peace with President Trump, and Fed officials at least sound like they're trying to ignore political pressure. 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.

Because I Got High

The share of American workers and job applicants who tested positive for marijuana climbed 10% last year, according to an analysis by Quest Diagnostics, one of the nation’s largest drug-testing laboratories. Quest found 2.3% of the analyzed samples contained traces of marijuana and 4.4% contained traces of both legal and illegal controlled substances including pot, prescription painkillers and other drugs—the highest such rate since 2004. Since then, the number of drug tests showing signs of cocaine, heroin, prescription sleep aids and certain opiates has fallen sharply. But marijuana use has steadily risen for the general U.S. workforce, including among employees in safety-sensitive jobs such as airplane pilots, nuclear power-plant operators and train conductors, Kelsey Gee reports.
Going up: Lawmakers in New Jersey and Illinois are pushing to join nearly a dozen more states where recreational use of the drug is now legal.

What to Watch Today

U.S. import prices for March are expected to rise 0.5% from a month earlier. (8:30 a.m. ET)
The University of Michigan consumer-sentiment index for April is expected to slip to 98.0 from 98.4 at the end of the prior month. (10 a.m. ET)
The Bank of England’s Mark Carney, Bank of Russia’s Elvira Nabiullina and Bank Negara Malaysia’s Nor Shamsiah Mohd Yunus speak on managing capital flows at World Bank/International Monetary Fund meetings at 12:30 p.m. ET.
The Baker-Hughes rig count is out at 1 p.m. ET.
President Trump delivers remarks on 5G deployment at 2:25 p.m. ET. The White House plans to ramp up the government’s role in speeding next-generation technologies, a key area of competition with China.
The Bank of Japan’s Haruhiko Kuroda speaks in Washington, D.C., at 4:00 p.m. ET.

Top Stories

Keeping the Peace

The European Union agreed to launch talks for a trade pact with the U.S., seeking to preserve a truce with President Trump despite competing demands over agriculture. EU governments directed the bloc’s executive arm to focus on slashing tariffs on industrial goods, explicitly excluding agriculture. Two days earlier, the U.S. envoy to the EU said agriculture must be included, Emre Peker reports.
U.S. Trade Representative Robert Lighthizer is set to meet his Japanese counterpart in Washington next week, nearly seven months after President Trump and Japanese Prime Minister Shinzo Abe agreed to start two-way trade talks.
The negotiations come at a critical time, with U.S. officials saying their patience is wearing thin and Mr. Trump considering tariffs on U.S. auto imports.

Laying Low

The number of Americans filing applications for new unemployment benefits fell last week to the lowest level in nearly half a century. On the one hand, the numbers reinforce other data suggesting the labor market regained its footing after a weak February.

On the other, jobless claims, which measure how many people file for unemployment benefits, are increasingly detached from actual layoffs.

That's likely a function of several factors: Fewer jobs qualify for benefits, it's harder to apply for benefits and a strong labor market means fewer people bother. So while claims are plumbing new depths, layoffs are not.

Republicans Trip Trump's Fed Pick

Four Republican senators have now said they would oppose the nomination of former restaurant executive Herman Cain to the Federal Reserve board, effectively dashing President Trump’s hopes of putting a political ally on the powerful body. With 53 seats in the Senate, the Republicans can afford no more than three defections to maintain the majority needed to win a confirmation vote, Paul Kiernan and Rebecca Ballhaus report.
No votes: Sens. Mitt Romney (R., Utah), Cory Gardner (R., Colo.), Lisa Murkowski (R., Alaska) and Kevin Cramer (R., N.D.).

What They're Saying

Mr. Trump picked Mr. Cain and his former campaign adviser Stephen Moore for Fed jobs after growing more and more frustrated with central bank policy. The Fed raised rates four times last year—the president wants them cut. Fed officials appear inclined to hold steady.
“Monetary policy is really well positioned right now in terms of the short-term interest rate.”New York Fed President John Williams
"We have indicated we can be patient as we assess what adjustments, if any, will be appropriate to the stance of monetary policy."Fed vice chairman Richard Clarida
“The FOMC may elect to adjust monetary policy going forward, but any such adjustments would be in response to incoming macroeconomic data."St. Louis Fed President James Bullard
"We need to make a judgment about whether we are stimulating or restricting the economy. It is hard to know for sure - we have to estimate it. I think we are close to neutral today."Minneapolis Fed President Neel Kashkari

WSJ Survey of Economists

Speaking of the Fed, economists expect the central bank to keep interest rates unchanged at least through the end of 2021, according to a Wall Street Journal survey. Just 1% of respondents predicted a rate cut this year, but about a third saw one or more reductions by the end of 2021.

China's Rebound

China’s exports rebounded strongly in March, the latest sign of stabilization in the world’s second-largest economy. China’s exports rose 14.2% from a year earlier, partially reversing a 20.7% drop in February. Imports fell 7.6% from a year earlier in March and 5.2% in February, Chao Deng reports. China's Lunar New Year holiday often distorts data during the opening months of the year, clouding the economy's trajectory.


Mexico’s lower house passed a landmark labor reform that empowers unions to bargain more effectively on behalf of workers and clears one of the last obstacles to ratifying the North American Free Trade Agreement's successor. The overhaul is meant to comply with labor requirements laid out in the U.S.-Mexico-Canada Agreement, or USMCA. The trade pact seeks to curb Mexico’s labor advantage by strengthening worker protections and bringing Mexican wages more in line with the rest of North America, Robbie Whelan and Juan Montes report.

Quote of the Day

Today I challenge our top retail competitors (you know who you are!) to match our employee benefits and our $15 minimum wage. Do it!
Amazon CEO Jeff Bezos, in a letter to shareholders

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