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Real Time Economics |
Good morning. Jeff Sparshott here to take you through key developments in the global economy. You can send questions, comments and suggestions by replying to this email. |
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The number of workers applying for jobless benefits likely held at historically high levels last week as the labor market continues to slowly recover from the impact of the coronavirus pandemic. Economists expect applications for jobless benefits ticked down to 850,000 from 860,000 a week earlier. Jobless claims are down significantly from a peak of near 7 million in March but have stagnated at just over 800,000 in recent weeks. The high number of claims is a sign that layoffs have continued at a high rate, though many workers are also returning to their previous jobs or finding new ones. Re-employment has contributed to a decline in the number of people collecting unemployment benefits through regular state programs, Sarah Chaney reports. |
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U.S. jobless claims for the week ended Sept. 19 are expected to fall to 850,000 from 860,000 a week earlier. (8:30 a.m. ET) U.S. new-home sales for August are expected to fall to an annual pace of 898,000 from 901,000 a month earlier. (10 a.m. ET) Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell testify to the Senate Banking Committee at 10 a.m. ET. Bank of England Gov. Andrew Bailey speaks at a business leaders webinar at 10 a.m. ET. More Fed officials: Dallas’s Robert Kaplan speaks to Texas Christian University at 8:50 a.m. ET, Chicago’s Charles Evans speaks to the Illinois Chamber of Commerce at 1 p.m. ET, Richmond’s Thomas Barkin speaks at a Money Marketeers of New York University virtual event at 1 p.m. ET, Atlanta’s Raphael Bostic speaks to a forum for minorities in banking at 2 p.m. ET, New York’s John Williams speaks at a New York Fed webinar at 2 p.m. ET, and Mr. Barkin speaks to the Baltimore City Chamber of Commerce at 2 p.m. ET. The Bank of Mexico releases a policy statement at 2 p.m. ET. |
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The U.S. economy in September continued its steady recovery from the sharp declines in the second quarter as demand and output strengthened, according to new business surveys. Purchasing managers at U.S. service-sector and manufacturing companies reported solid growth, a positive signal for the broader economy—if it can be sustained, David Harrison and Paul Hannon report. |
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While U.S. growth continued, the pace faltered in Europe and Asia, where new Covid-19 infections have led to new restrictions on activity. Manufacturing broadly improved—eurozone factory output increased at the fastest pace since February 2018—but activity in consumer-facing service industries either decelerated or contracted, weighing heavily on overall growth. |
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One reason manufacturers are in a sweet spot: Businesses that ran down inventories when Covid-19 arrived are now trying to build them back up. When inventories get run down, gross domestic product gets depressed. But when businesses stop drawing down inventories, more production is needed to meet demand. If inventory levels are flat in the third quarter from the second, for example, GDP growth will be boosted by around 6 percentage points. Such inventory effects are ultimately temporary and shouldn’t be confused with changes in underlying demand. The boosts to production are still real, though, and they can last longer than just one quarter, Justin Lahart writes. |
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One reason Europe's service sector is struggling: rising Covid-19 caseloads. But Europe is shunning new lockdowns. Instead, Spain, France, the U.K. and other countries at the forefront of a second wave of infections are relying on targeted local restrictions to stem contagion. European governments and citizens want to avoid returning to the full-blown lockdowns of early 2020, which broke the pandemic’s first wave but also froze European economies. But the cities and regions that have become Europe’s new coronavirus hot spots are so far struggling to configure local, lighter-touch restrictions that let economic recoveries continue but are also effective against the virus, Xavier Fontdegloria, Noemie Bisserbe and Max Colchester report. |
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Federal Reserve officials stepped up calls for additional government spending to avoid an uneven and protracted economic recovery from the coronavirus pandemic, Nick Timiraos reports. Chairman Jerome Powell: “The power of fiscal policy is really unequaled by anything else.” Chicago Fed President Charles Evans said his projection for sub-6% unemployment by the end of next year had been premised on around $1 trillion in additional fiscal relief. “If that doesn’t happen, then I think it’s going to be a lot harder, and much more unlikely that we make that much progress.” Boston Fed President Eric Rosengren: “This is a time where a delay in fiscal policy, I think, is much more economically impactful than what we do ." Cleveland President Loretta Mester said the recovery would need continued support from Fed policy makers and broader government actions. “It’s not a sustainable recovery, it’s still fragile.” |
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Sen. Mark Warner (D., Va.) says China has shown that cutting-edge technology and economic expansion are possible within authoritarian-state capitalism. So how do you stop the country from dominating the global tech industry? Mr. Warner, a former governor of Virginia, has laid out an alternative strategy: set standards on where interacting with China poses unacceptable risks to national security, get allies on board, and then pour the necessary resources into building up Western alternatives to Chinese companies, Greg Ip writes. |
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Sweden, Sweden, Sweden. "Finland has had 90% fewer coronavirus deaths per capita than Sweden and its economy contracted by less in the first half of 2020 as well. Even now as the rest of Europe frets about a big surge in cases, Finland has one of the lowest infection rates on the continent, although it has ticked up in the past two weeks. Experts said Finland’s approach—and the similar one of Denmark and Norway—of shutting down rapidly but not totally to get the pandemic under control, and then reopening after a couple of months has been one of the most successful in Europe in this early stage of coronavirus," Richard Milne reports in the Financial Times. |
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Real Time Economics has launched a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here. |
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