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Apr 26, 2019

Real Time Economics on April 26, 2019.

The Wall Street Journal.
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Real Time Economics

Separate Commerce Department data shows that existing firms started cranking out jobs as soon as the last recession ended. The number of jobs created by new firms hit the lowest level on record in 2013 and has since been slow to recover.

More than ever, the oldest companies are helping drive employment gains.

What to Watch Today

U.S. gross domestic product for the first quarter is expected to advance at a 2.5% pace. Here’s what to watch in the report. (8:30 a.m. ET)
The University of Michigan's consumer sentiment index for April is expected to tick up to 97.0 from a preliminary reading of 96.9. (10 a.m. ET)
The Baker-Hughes rig count is out at 1 p.m. ET.
President Trump meets with Japanese Prime Minister Shinzo Abe at the White House. The gathering will focus on trade and North Korea. 

Top Stories

Built to Last

Orders for long-lasting factory goods rose in March at the fastest clip in seven months. The numbers are likely to further assuage concerns that the economy was heading toward a potentially sharp slowdown after market turmoil in late 2018 and a lengthy government shutdown, Paul Kiernan and Sarah Chaney report.
  • Taking flight: The increase was driven in part by demand for aircraft, a volatile segment of the report. But a closely watched proxy for business investment—new orders for nondefense capital goods excluding aircraft—was up 1.3% in March.
  • Takeaway: "The strong rise in underlying capital goods orders in March, together with stronger retail sales last month, suggests the economy is carrying a bit more momentum into the second quarter," says Capital Economics's Michael Pearce.

Ownership Society

The U.S. homeownership rate fell for the first time in more than two years in the first quarter, tapping the brakes on a recovery for the sector. After more than a decade of declines, the homeownership rate had been reliably on the upswing since the beginning of 2017 and was nearing its historic average of around 65%. But now first-time buyers “are hitting a bit of an affordability ceiling here,” said Zillow Director of Economic Research Skylar Olsen. Younger buyers, who had been driving the rise in homeownership, had some of the steepest falls in the first quarter, Laura Kusisto reports.

On the plus side, household formation—people moving into either rentals or their own homes—is still strong. That bodes well for the overall economy.

The Old College Try

The strongest labor market in decades has yet to entice young Americans away from pursuing more education. Nearly 69% of 2018 high-school graduates were enrolled in higher education in October, compared with 67% the year before, acording to the Labor Department. The rebound suggests that despite the lure of plentiful jobs, many fresh high-school graduates are choosing to attend postsecondary schools instead of jumping right into the labor pool, Sarah Chaney and Michelle Hackman report.
Why bother? In a knowledge-based economy, higher-paying jobs often require education beyond high school, whether a college diploma or trade certificate.

Chart of the Day: Cry for Me

Argentine President Mauricio Macri announced new price controls last week to try to get Argentina’s inflation under control. Consumer prices rose almost 55% from a year earlier in March.

Poll of the Day: Trump vs. Powell

President Trump has railed against the Federal Reserve and its chairman, Jerome Powell. The president blames the Fed for holding back the economy and stock market. A newly released Gallup poll, though, shows Americans have a bit more faith in Mr. Powell than Mr. Trump. Half of all Americans reported a "great deal" or "fair amount" of confidence that Mr. Powell would do the right thing for the economy; a touch higher than Mr. Trump's 47%. Ratings for both men ticked up five percentage points from a year earlier.

Quote of the Day

We would not charge negative interest if we did not regard this as being absolutely crucial for us in fulfilling our mandate.
Swiss National Bank Chairman Thomas Jordan, defending negative interest rates 

What Else We're Reading

A job at pays at least $15 an hour. If you can keep it. "In a signed letter last year, an attorney representing Amazon said the company fired 'hundreds' of employees at a single facility between August of 2017 and September 2018 for failing to meet productivity quotas. ... The number represents a substantial portion of the facility’s workers: a spokesperson said the named fulfillment center in Baltimore includes about 2,500 full-time employees today. Assuming a steady rate, that would mean Amazon was firing more than 10 percent of its staff annually, solely for productivity reasons," Colin Lecher writes in the Verge.
The process that brought Europe and Asia out of poverty is starting to work in Africa: industrialization. "African industrialization will complete the great transformation that began more than two centuries ago in Britain — the mass movement of humanity from indigence to material security. This is the last frontier of poverty reduction," Noah Smith writes at Bloomberg Opinion

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