Trump and the Fed may clash on inflation

The Federal Reserve could clash with President-elect Donald Trump on its core responsibility to keep prices stable.

To control inflation — the gauge of prices changes — the Fed regulates borrowing costs. Cheaper borrowing costs makes it easier to spend, raising demand and prices.

The Fed has kept borrowing costs near zero since the economy started to falter nine years ago, but is now normalizing interest rates, as inflation gradually rises and the labor market improves.

Trump’s massive infrastructure-spending plan could trigger a much faster jump in inflation. It’s not guaranteed, and there are questions about how much of the promised economic growth it would actually spur. But since the election, interest-rates traders have priced in a much steeper trajectory for inflation.

Read more at Business Insider: Trump and the Fed may clash on inflation – Business Insider

US economy adds 178,000 jobs in November; unemployment rate drops to 4.6%

The U.S. economy added 178,000 jobs in November, while the unemployment rate fell to 4.6 percent, a level not seen since August 2007, according to government data released Friday morning. The first employment report since voters went to the polls last month shows an economy in strong shape as President-elect Donald Trump prepares to take office.

“It looks like firms are pretty bullish about what they’re going to see in 2017 and are continuing their strong hiring of the past few years,” said Steve Rick, chief economist at insurance company CUNA Mutual Group. “This is a good tailwind for the new administration.”

Read more at The Washington Post: U.S. economy added 178,000 jobs in November; unemployment rate dropped to 4.6 percent – The Washington Post

What would economists do? Carrier incentives stir debate over ‘rewarding’ offshoring

The $7 million incentive package Carrier Corp. will receive as part of a deal the company reached with President-elect Donald Trump and Vice President-elect Mike Pencerepresents a departure from how tax credits are typically used in Indiana.

It’s also the kind of agreement Trump slammed on the campaign trail.

The furnace manufacturer will receive $5 million in tax credits over 10 years in exchange for keeping 1,069 jobs at its Indianapolis plant, with an average wage of $30.91 hour. The company also will receive $1 million in training grants and up to $1 million in additional tax credits based on Carrier’s planned $16 million investment in the west-side factory.

Read more at USA Today: Carrier incentives stir debate over ‘rewarding’ offshoring

But the deal differs from most other economic development agreements in Indiana, where incentives are usually aimed at luring jobs, not merely retaining them. In fact, about 400 workers at Carrier will still lose their jobs under the deal, as will 700 employees at a related company in Huntington.

Some experts say the deal sets a troubling precedent.

“It’s a potentially dangerous policy where you reward a company that threatens to leave. It’s a dangerous precedent. Why wouldn’t every other company make the exact same pitch?” said Steve Weitzner of Silverlode Consulting, a site-selection firm. “In this case, you’re rewarding a company that is actually cutting a lot of jobs in the state.”

But others say that economic development has to be handled on a case-by-case basis.

“It’s a judgment call,” said Mitch Roob, who led the state’s economic development agency under then-Gov. Mitch Daniels. “The IEDC has a fair amount of leeway, as they should, because there’s no way for the legislature to understand what the particular circumstances might be at a point in time.”

Read more at USA Today: Carrier incentives stir debate over ‘rewarding’ offshoring

Gallup: U.S. Economic Confidence Remains Positive After Election

Gallup’s U.S. Economic Confidence Index was +4 for the week ending Nov. 20, the first full week of interviewing after the Nov. 8 presidential election. This is the first positive weekly reading in more than a year and a half.

Gallup's U.S. Economic Confidence Index

 

Last week, Gallup reported an improvement in Americans’ views of the economy in the first few days after the presidential election. This moved the weekly average from -11 in the last full week before the election to 0 for the week of Nov. 7-13, which included both pre-election and post-election interviewing.

Twenty-nine percent of Americans rated the economy as “excellent” or “good” last week, while 23% said it was “poor,” resulting in a current conditions index of +6. That is up from a score of 0 the week before the election and one point shy of the high of +7 recorded in January 2008.

The economic outlook component experienced an even greater improvement. For the week ending Nov. 20, this component edged into positive territory at +1, compared with -5 one week earlier and -21 the week before the election. The latest score is the result of 47% of Americans saying economic conditions in the country are “getting better” and 46% saying they are “getting worse.”

Read more at Gallup: U.S. Economic Confidence Remains Positive After Election | Gallup

WSJ: Economic Resilience Bolsters Prospects for December Rate Rise

The U.S. economy is showing strength in key sectors, offering the Federal Reserve the comfort it has sought to raise short-term interest rates in December.

Minutes from the Fed’s November meeting, released Wednesday following the usual three-week lag, indicated officials were looking for signs of an improving economy before increasing rates. Since then, the U.S. has seen a steady stream of robust economic news and a brighter consumer outlook in the wake of Donald Trump’s election.

With the outcome of the presidential election settled and employment and inflation on the rise, economists and market participants almost overwhelmingly expect the Fed to raise rates in three weeks’ time.

Read more at The Wall Street Journal: Economic Resilience Bolsters Prospects for December Rate Rise – WSJ

Clinton dodges economic shock: Unemployment rate falls to 4.9% heading into Election 2016

The latest job report showed strong wage growth, undercutting Trump’s message of economic disaster.

Hillary Clinton’s campaign can breathe a little easier Friday following a solid October jobs report issued just four days before the election. In the best news for Clinton and the Democrats, wages for American workers are now rising at the fastest pace in seven years.

The October report was no blockbuster. It showed a gain of just 161,000 jobs, slightly below expectations. Unemployment declined to 4.9 percent but 195,000 people left the labor force, reversing some of the big gains in September.

Read more: http://www.politico.com/story/2016/11/us-economy-clinton-2016-230732#ixzz4P6qFpqdN

Source: Clinton dodges economic shock

Consumer Spending in U.S. Climbs by Most in Three Months – Bloomberg

Consumer purchases climbed in September by the most in three months as incomes grew, signaling momentum in the biggest part of the U.S. economy.

The 0.5 percent advance in spending, which accounts for about 70 percent of the economy, followed a 0.1 percent decline the prior month that was revised lower, a Commerce Department report showed Monday. The median forecast in a Bloomberg survey called for a 0.4 percent gain.

While the results indicate a solid handoff into the final quarter of 2016, disposable income, or the inflation-adjusted money left over after taxes, was little changed for a second month, indicating wages will need to pick up to boost spending even more. Such support is needed to drive faster economic growth, which picked up last quarter despite softer household purchases.

Source: Consumer Spending in U.S. Climbs by Most in Three Months – Bloomberg

Twitter to Cut 9% of Workforce as Revenue Growth Slows – WSJ

Twitter Inc. posted another quarter of slowing revenue growth Thursday and said it would slash 9% of its global workforce, in its first report since recent takeover interest from potential suitors including Salesforce.com Inc. dissipated.

The social-media company’s revenue rose 8.2% to $615.9 million, its smallest gain and ninth straight period of slowing growth. Analysts expected revenue of $606 million.

Twitter recorded a loss of $102.9 million, or 15 cents per share. Excluding certain expenses such as stock-based compensation costs, Twitter posted a profit of 13 cents a share, compared with the average analyst estimate of 9 cents per share

Source: Twitter to Cut 9% of Workforce as Revenue Growth Slows – WSJ

Orders for U.S. Capital Goods Decline by Most Since February – Bloomberg

Orders for U.S. business equipment fell in September by the most in seven months, indicating corporate investment is having trouble gaining traction.

Bookings for non-military capital goods excluding aircraft dropped 1.2 percent, erasing a 1.2 percent August gain that was stronger than previously reported, Commerce Department data showed Thursday. The median forecast of economists surveyed by Bloomberg called for a 0.1 percent drop. Demand for all durable goods eased 0.1 percent.

Source: Orders for U.S. Capital Goods Decline by Most Since February – Bloomberg

Why the good economy could be a problem for the next president – The Washington Post

The U.S. economy is delivering some of the best employment and income gains of the past 40 years, boosting workers in a way that recalls the boom years of the 1980s and 1990s.

But while the gains may help Hillary Clinton rebuff Donald Trump’s frequent attacks on the state of the nation and the Obama administration’s record, she would face a series of minefields if she wins the White House. As would Trump, if he pulls off a victory.

Economists say there is a one in five chance of recession next year. The Federal Reserve is on a march toward raising interest rates. And threats continue to flow from abroad, including the United Kingdom’s exit from the European Union and other signs of turbulence in the global economy.

A recession — or even a decline in economic momentum — could rapidly expose the new president to criticism and change the ability of the new administration to accomplish its goals.

Source: Why the good economy could be a problem for the next president – The Washington Post