The number of Americans filing applications for new unemployment benefits plunged lower last week even as trade tensions between the U.S. and China escalated. New claims for state unemployment benefits declined by 16,000 to a seasonally adjusted 212,000 for the week ended May 11, the Labor Department said on Thursday. Initial jobless claims are a proxy for layoffs. The low number of claims suggests that rising tariffs and retaliation by China have not hurt American workers. Claims were expected to decline to 219,000 from the elevated levels seen in the prior three weeks. The four-week moving average of initial claims, which smoothes out week-to-week volatility and is looked at as a more reliable measure of the labor market, rose 4,750 to 225,000 last week. Continuing claims, which are announced with a week delay, fell 28,000 to 1.66 million for the week ended May 4. The four-week moving average of ticked up 1,500 to 1.67 million.
Federal Reserve officials unanimously voted to leave interest rates unchanged during their two-day meeting this week, with policymakers continuing to signal that they will be patient with monetary policy moving forward. “We do think our policy stance is appropriate right now,” Chairman Jerome Powell said during a press conference following the meeting’s conclusion. “We don’t see a strong case for moving in either direction.” Economists widely expected the U.S. central bank would keep the benchmark federal funds rate at 2.25 percent to 2.5 percent as it sought to strike a balance between overarching geopolitical concerns, muted inflation and otherwise “solid” economic growth. In the first quarter of 2019, GDP increased at a better-than-expected annualized rate of 3.2 percent. Unemployment, meanwhile, remains at 3.8 percent. But Fed officials mostly looked beyond the good rate of economic growth in the three-month period from January to March, instead favoring a wait-and-see approach as they watch how certain economic and financial developments – like a global trade war, and uncertainties surrounding Brexit – play out. “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the Fed said in a statement released after the meeting. The Fed’s decision, however, could provide additional fodder to President Trump, who’s frequently suggested that policymakers should cut interest rates Opens a New Window. by one percentage point and implement more quantitative easing because inflation is so low. “The Trump administration may point to this inflation data to accuse the Fed of having raised rates too quickly in 2018 and put even more pressure on the Fed to cut rates this year,” Cailin Birch, the global economist at the Economist Intelligence Unit, said. “We believe the Fed will successfully resist this pressure, but relations with the Trump administration will remain tense in 2019 to 2020.” At their last meeting, Fed policymakers signaled there would be no rate hikes for the remainder of 2019 in light of global economic and financial developments, as well as muted inflation. The move was a stark turn from the December meeting when Fed Chairman Jerome Powell suggested there could be as many as two hikes this year. Since then, inflation has considerably decelerated, running below the target range of 2 percent. Powell has previously emphasized the importance of the 2 percent inflation range, which he said is consistent with a healthy economy. In March, the core personal consumption expenditures index — the Fed’s favorite inflation gauge, which excludes food and energy prices — was up 1.6 percent, compared to a year earlier. That’s the lowest level of growth since January 2018. “We are strongly committed to the 2 percent inflation objective,” Powell said on Wednesday. And according to Luke Bartholomew, an investment strategist at Aberdeen Standard Investments, if inflation decreases further, the Fed will be hard-pressed to defend not cutting interest rates. ” Some policymakers have flagged core inflation of 1.5 percent as a crucial level which might justify easing policy, and we are already pretty close to these levels,” he said.
The first three months of the year saw wages for manufacturing workers rise at the most in over a decade. The employment cost index, a measure of wages and benefits paid by businesses, for manufacturing workers rose by 0.9 percent in the first quarter, Labor Department data released Tuesday showed. The salary and wage component rose even more–by a full percentage point. The last time manufacturing saw quarterly wage gains that high was in 2008, when wages also rose 1.0 percent in the January through March period. Compared with a year ago, manufacturing wages were up 2.9 percent in March. That’s the biggest 12-month gain since March of 2003, when wages rose 3.2 percent. By Barack Obama’s final year in office, manufacturing wages were rising an average of just 0.625 a quarter. Very low inflation means that unlike past gains in worker pay, these have not been eaten away by higher prices. Prices in March were up just 1.5 percent compared with year-earlier levels, which makes the real wage gain 1.4 percent. Back in March 2003, prices were up 2.5 percent. So most of the paycheck growth went to higher prices. In March of 2008, the situation was even worse: 3.1 percent inflation meant workers were actually losing ground despite growing paychecks. There’s another reason to think that the first quarter of 2019 may have been better than either 2003 or 2008. In both those periods, unemployment in the manufacturing industry was quite high, 6.8 percent in 2003 and 5 percent in 2008. When unemployment is high or rising, lower paid workers with less tenure are often laid off before more experienced, higher paid workers, as a result average wages in the employment cost index can climb even when workers are losing their jobs. In fact, it usually does. But unemployment is now very low. In the manufacturing sector, it is just 2.9 percent. So there is no upward pressure being created by layoffs. In fact, it is quite the opposite. Manufacturing sector employment is expanding, and it is likely that manufacturing businesses are hiring less experienced workers who can be paid less than incumbents. So the very good numbers for the first quarter may be even better than they appear. The revival of American manufacturing was a key campaign promise of Donald Trump in the 2016 campaign. Tuesday’s data suggests that Trump is making good on that promise. When analyzing the employment cost index to see how economic conditions are affecting workers, it makes sense to focus on the wages and salaries component. The cost of benefits, which include employer-subsidized health insurance, can rise without workers seeing any actual improvement to their lives or financial situation. It is not just manufacturing employees seeing rising wages. Wages for all workers rose 1.1 percent in the first three months of 2019. Compared with a year ago, wages are up 3.0 percent. Wages in transportation, which includes truckers, rose 1.6 percent in the quarter and are up 4.6 percent for the year. The overall employment cost index climbed 0.7 percent in the first quarter, matching the fourth quarter’s growth. Both the wage and benefits component also rose 0.7 percent. Compared with a year ago, the index was up 2.8 percent. While that is slightly less than the fourth quarter’s 2.9 percent, it is an improvement in real terms because inflation was running a quarter of a percentage point higher at the end of 2018.
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The S&P 500 and Nasdaq Composite rallied on Tuesday to notch record closing highs as Wall Street cheered stronger-than-expected quarterly profits from some of the largest publicly traded U.S. companies. The broad index closed 0.9% higher at 2,933.68, topping its previous record close of 2,930.75. The S&P 500 also ended the day just below its intraday record of 2,940.91. The Nasdaq closed up 1.3% at 8,120.82. The Dow Jones Industrial Average, meanwhile, gained 145.34 points to close at 26,656.39 and was 1.1% from an all-time high. Tuesday’s move toward an all-time closing high comes less than six months after a sharp decline in late December, which led the S&P 500 to its worst annual performance since 2008. But stocks quickly turned around as the Federal Reserve reversed course on monetary policy while the tone around U.S.-China trade talks improved. “These market levels are justified,” said Kevin Barry, chief investment officer at Captrust Advisors. “The fourth-quarter sell-off actually prevented a recession because policymakers responded extremely quickly. Both President Xi and President Trump cooled off the rhetoric and Fed Chairman Jerome Powell came out and reversed course.” Dow members Coca-Cola and United Technologies reported better-than-expected quarterly earnings on Tuesday. Their shares rose 1.7% and 2.3%, respectively. Twitter shares jumped 15.6% on its stronger-than-expected results. The social media company said its monthly active users totaled 330 million, more than a FactSet estimate of 318 million. Defense giant Lockheed Martin also rallied more than 5% after its earnings easily topped expectations. The company reported strong operating margins across all its major businesses, which include aeronautics and missiles. Procter & Gamble also posted stronger-than-forecast earnings…
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The real estate market in some of the richest pockets of the Northeast is flooded with sellers, as homeowners try to unload gorgeous properties — and their high tax rates. There also is evidence that Americans are not just moving to smaller homes in town but fleeing high-tax states altogether as they search for more frugal digs. “Tax the rich. Tax the rich. Tax the rich. The rich leave,” New York Gov. Andrew M. Cuomo, a Democrat, lamented in February as he announced an anticipated revenue plunge in the Empire State. “And now what do you do?” The population of New York and other high-tax states has posted a demonstrable decline in recent years, sparking a debate on whether there are limits to how much the taxman can squeeze from residents. The issue is particularly acute as the April 15 income tax filing deadline approaches — the first since the Republicans’ tax overhaul capped the amount of state and local taxes that can be deducted on federal returns. The $10,000 limit has left governors in high-tax states steaming and has sent Democratic politicians scrambling to try to offer breaks to the same wealthy Americans they usually demand pay their fair share. “It is having a big impact,” said Chris Edwards, tax policy director at the Cato Institute. “There was migration before, but there has always been disputes about the causes with the data. Now I suspect a lot of people are just getting fed up.” Mr. Edwards’ data shows a net outflow in 2016 of almost 600,000 people from the 25 highest-tax states to the 25 lowest, and they took with them roughly $33 billion in income. For the 2018 tax year, the combined state and local tax bill that won’t be deductible comes to $323 billion, according to the Treasury Department’s estimate, and that whopping total will be borne by fewer than 11 million taxpayers. Most of the affected taxpayers are higher earners who already pay most of the nation’s income taxes. The cap on state and local tax deductions affects only those who itemize their returns, which in the past accounted for 27% of filers, according to the IRS. When Republicans pushed through the tax changes in late 2017, they suggested that high-tax states could cut their own taxes, thus saving residents the pain. Maryland Gov. Larry Hogan, a Republican, tried. He proposed a bill to try to reduce taxes for retirees because many have been leaving over high tax bills. Democrat-led states, meanwhile, attempted quirky workarounds, such as giving wealthy taxpayers an option of paying some of their taxes as charitable contributions, thus offering a break to offset the cap on state and local tax deductions. The IRS said it would reject those maneuvers. Migration is one sure way to dodge the hit. The median home price now in Summit, New Jersey, is $868,200 but tops $1.3 million in Darien, Connecticut. Just how many people avail themselves of that option, however, is not clear.
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The Federal Reserve left interest rates unchanged Wednesday and predicted that it will not raise them again for the entirety of the coming year due to a recent slowdown in economic growth. In a widely anticipated move, the central bank’s policy-making Federal Open Market Committee abandoned its previous prediction, made just three-months ago, of continued strong economic growth that would necessitate two rate hikes this year. After predicting in December that the economy would continue to grow at 2.3 percent on the year, officials revised their assessment to 2.1 percent. As a result, the benchmark-funds rate will remain between 2.25 percent and 2.5 percent. The Fed has generally kept rates low since the 2008 financial crisis, but began raising them incrementally under Janet Yellen. The new economic-growth forecast further widens the chasm between the central bank and the White House, which has consistently provided the rosier prediction of 3.2 percent growth this year. The decision to halt rate hikes will likely please President Trump, who, following the Fed’s December announcement, lambasted Chairman Jerome Powell for threatening the bull market he’s enjoyed since taking office. Powell, for his part, has resisted criticizing the president and has repeatedly asserted the Fed’s independence from the Trump administration.
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President Trump’s crackdown on illegal immigration in the United States is producing higher wages and better working conditions on American dairy farms, the New York Times admits. Though 1.5 million legal immigrants continue to be admitted to the country every year, and illegal immigration at the U.S.-Mexico border soars to historic levels, the Immigration and Customs Enforcement (ICE) agency efforts to go after employers who hire illegal aliens are proving to be an economic surplus for lower-wage workers. The latest New York Times report on immigration details complaints from dairy farmers who argue that they needed illegal aliens to survive as a viable business. Recent ICE raids of dairy farms, they claim, have made dairy farming more difficult as they can no longer readily rely on cheaper, foreign workers. Dairy farm workers, on the other hand, are seeing the benefits of Trump’s “Hire American” tight labor market through increased wages and better working conditions: Without a legal alternative to informal migrant labor, the competition between dairy farms to retain migrant workers is so fierce that farm owners, once notorious for underpaying and mistreating workers, are now improving working conditions and wages to entice employees to stay on their farms, workers said. Victor Cortez is an immigrant who has worked on a dairy farm in western New York for 18 years. A few years ago, farm owners “wouldn’t let us leave the farm,” he said, adding, “They wouldn’t pay us as much as they promised they would.” “But the good thing about it now,” he said, “is that we get paid more and this farmer is good to me.” For decades, a flooded labor market for America’s working and middle class due to mass legal and illegal immigration has produced generations of low-wage workers, stagnant salaries, and a cheaper labor economy — a benefit to employers at the expense of American workers. Center for Immigration Studies Director Mark Krikorian said that rather than U.S. dairy farms relying on an endless flow of cheaper, foreign workers, the federal government ought to provide subsidized loans for smaller dairy farmers to invest in robots and machines that can do the work more efficiently and without Americans having to subsidize the cost of illegal alien labor. A Bloomberg report from 2015 highlighted the effectiveness of dairy farmers mechanizing: A recent analysis by Goldman Sachs revealed how Trump’s tightened labor market for America’s working and middle class helped grow wages by four percent in 12 months. ICE has played a crucial role in carrying out Trump’s “Hire American” economic nationalist agenda by indirectly reducing the foreign competition, which U.S. workers have been subjected to. Last fiscal year, for example, ICE agents deported more than a quarter of a million illegal aliens, including more than 95,000 deportations of illegal aliens who were living in the interior of the country. Currently, the nation’s Washington, DC-imposed policy on mass legal immigration — where about 1.5 million unskilled legal immigrants are admitted to the U.S. every year — is a boon to corporate executives, Wall Street, big business, and multinational conglomerates, as working and middle-class Americans have their wealth redistributed to the country’s top earners through wage stagnation. Research by the National Academies of Sciences, Engineering, and Medicine has discovered that immigration to the country shifts about $500 billion in wages away from working and middle-class Americans to new arrivals and economic elites.