August 18, 2018

What to Watch as the Fed Meets

Will the Fed make its next move harder to guess?

Even when the Fed is not raising or cutting rates, it still sends signals to the market about where monetary policy is headed, through subtle, but crucial, changes in language. Some of those recent changes have sent a purposefully muddy signal, apparently meant to demonstrate flexibility to respond to events in the economy.

For example, in his testimony last month, Mr. Powell, the leader of the Federal Open Market Committee, said that “with a strong job market, inflation close to our objective, and the risks to the outlook roughly balanced, the FOMC believes that — for now — the best way forward is to keep gradually raising the federal funds rate.”

Analysts saw that phrase and honed in on “for now.”

“The inclusion of those words diluted the signal for continued gradual tightening, but not necessarily in a dovish or a hawkish way,” Jim O’Sullivan, chief United States economist for High Frequency Economics, wrote this week. “Rather, as we have been discussing, their inclusion continued the recent trend toward reduced forward guidance: The pace of tightening could be stepped up or slowed down, depending on the data.”

In other words, Wednesday’s statement might be more opaque, on purpose, to give officials move to change their plans if growth surprises anyone in the months to come.

Can the president influence the Fed?

Mr. Trump has made no secret of his disagreement with the Fed’s rate increases, tweeting twice last month that the central bank’s moves undercut the United States economy and “hurts all that we have done.”

The president, who had accused the Fed of keeping interest rates artificially low to help President Barack Obama, now appears ready to blame the central bank for trying to slow down a booming economy.

Mr. Powell has insisted the Fed is an independent body that moves in response to economic data, not political pressure. With Fed watchers expecting the third of four 2018 rate increases next month, all eyes will be on whether Fed officials give any indication their plans to raise rates have changed.

Article source: https://www.nytimes.com/2018/08/01/business/economy/federal-reserve-interest-rates.html?partner=rss&emc=rss

Times Reporters Answer Questions About Our G.D.P. Coverage

The Export Outlook

Q. To what extent did economists expect a slump in economic growth following the extended trade war of the last few months? Your article mentions a surge in soybean exports, but I was under the impression that many agricultural exports would suffer as a result of new tariffs both on our part and on the part of our trading partners. — Eli Parker, Chapel Hill, N.C.

A. Almost every economist expects a trade war to drag down economic growth around the world, although its impact will vary widely depending on the country and sector. Over all, the United States — because it has such a large and diversified economy — is probably in a better position to withstand the disruption than other industrialized nations.

As for soybeans, there may have been a temporary surge in exports as buyers rushed to get as many shipments of soybeans delivered before the tariffs went into effect. The result is that most economists expect that surge to reverse itself. Net exports were responsible for about a 1.1 percent increase in G.D.P. last quarter — although a lot of that was offset by declines in inventories. The U.S. Department of Agriculture, for example, reported that China canceled $140 million in soybean contracts at the end of June. PATRICIA COHEN


Reconciling Sources

Q. There seems to be a direct factual conflict between two generally reliable sources: The Times and The Wall Street Journal. The Times claims that business investment has not grown but The Journal gives numerical results claiming it has. While it is not surprising to me that The Times and The Journal are on opposing sides in interpreting numbers (since that is why I read both), it is rare that a measurable quantity is reported in opposite ways. Please explain. — Gardner Friedlander, Mequon, Wis.

A. Business investment has definitely grown. Where our story and The Journal’s might seem to disagree is on whether it is growing faster or slower this year than last. The Journal story noted, correctly, that “nonresidential fixed investment,” a measure of overall business investment, has risen more quickly this year. Our story noted, also correctly, that investment in equipment has grown more slowly this year. Our story focused on equipment because it’s the type of investment that the Republican tax law was designed to promote, and because it is less influenced by the volatile oil and gas sector. I stand by that choice of measure, but there is no factual disagreement between us and The Journal (where, I should add, I used to work). BEN CASSELMAN


Article source: https://www.nytimes.com/2018/07/31/reader-center/united-states-gross-domestic-product.html?partner=rss&emc=rss

Economy Hits a High Note, and Trump Takes a Bow

For policymakers at the Federal Reserve, the tax cuts and spending increases could pose a nearer-term challenge. The Fed has been trying to strike a delicate balance, raising interest rates gradually in an effort to keep inflation in check without snuffing out the recovery. If the second quarter’s growth rate continues, it could risk accelerating inflation and prompt the Fed to raise rates more quickly. That, in turn, could cause a recession.

There is little to suggest that will happen, however. Inflation slowed slightly in the second quarter, and Friday’s report is unlikely to persuade officials to deviate from their gradual and carefully devised march to higher interest rates. The central bank is on track to raise rates twice more this year, after two increases in the first half of the year.

The more immediate risk may be the possibility of a trade war. Mr. Trump has placed tariffs on billions of dollars of imports from China, the European Union and other countries. Trading partners have responded by imposing retaliatory tariffs, and both sides have threatened more.

Tensions with Europe appeared to ease this week when Mr. Trump and Jean-Claude Juncker, the president of the European Commission, agreed to work toward a trade deal. But the durability of that truce is unclear, and relations with China remain fraught.

Trade friction has yet to dampen business leaders’ confidence, however, let alone caused them to change their behavior. In conference calls in recent weeks, executives said they were watching tariff announcements closely, and companies including General Electric, Whirlpool and United Technologies have said tariffs are raising costs or cutting into profits. Few, however, said they were slowing hiring or canceling projects.

“You’re hearing some notes of caution, but nothing specific regarding pullbacks,” said Bill Warlick, an analyst for Fitch, the ratings agency. Big companies, he said, make big investment decisions years in advance and will be slow to change course.

Article source: https://www.nytimes.com/2018/07/27/business/economy/economy-gdp.html?partner=rss&emc=rss

FACT CHECK: Trump’s Numbers on ‘Amazing’ Economy Sometimes Don’t Add Up

When President Trump announced Friday that the American economy had grown at an annual rate of 4.1 percent in the second quarter — an achievement he called “amazing” — he included a long list of statements about how well the economy has performed on his watch.

He declared that the United States was “the economic envy of the entire world,” and indeed, the American economy is in a relatively strong position: Growth is accelerating, its size and diversity make it more resilient over all, and it is less reliant than the economies of other major countries on exports, which could help it weather a trade war more easily. Growth in Japan, China and Europe has been slowing.

But several trends for which Mr. Trump took credit were underway — and in some cases more pronounced — before he took office. Other claims lacked context or foundation.

Here are some of the president’s remarks during the White House session, fact-checked:

“We’ve accomplished an economic turnaround of historic proportions.”

This requires context.

It does look as if the growth rate has picked up meaningfully this year and may be on track for the best year of the decade-long recovery. But the economy is continuing the essentially upward trajectory established before Mr. Trump took office, with some quarters growing a little faster and some more slowly. In a given quarter, the economy exceeded 4 percent annual growth four times during the Obama administration, with the highest level — 5.3 percent — occurring in the third quarter of 2014. The jobless rate was 7.8 percent when President Barack Obama took office in January 2009, and was 4.8 percent when he turned over the reins to Mr. Trump. In Mr. Trump’s 18 months in office, the jobless rate has fallen further, and was 4 percent last month. Gross domestic product has risen every year for the past nine years.

Article source: https://www.nytimes.com/2018/07/27/business/economy/trump-gdp-fact-check.html?partner=rss&emc=rss

4 Takeaways From a Long-Term G.D.P. Revision

[The economy grew at a 4.1 percent annual rate in the last quarter, the government said Friday.]

The statisticians concluded America’s imported cellphones were improving more rapidly than previously calculated — that consumers had actually gotten more for their money than we thought. That change had a ripple effect, all the way up to annual economic growth figures, which emerged from the revisions ever so slightly changed from previous estimates.

Here are four takeaways from the total package of revisions:

The economy under President Obama was better than advertised

Revisions added $82.7 billion to the size of the United States economy at the end of 2016, which means it grew a tenth of a percentage point faster in President Barack Obama’s second term than previously thought. Growth in President Trump’s first year in office, 2017, was actually smaller by the same amount.

That’s not an economic earthquake, but the headline change does mask some bigger swings in individual components of gross domestic product. For example, companies appear to have invested $110 billion more in 2012 than previously thought, largely because the statisticians more or less missed some huge corporate spending on cloud computing technology. The revisions employed improved measures of I.T. investments, and voilà.

Winter’s not as cold as it seemed

For a while now, experts at the Bureau of Economic Analysis have struggled with something called seasonal adjustment, which is their way to rebalance raw economic data to allow for an apples-to-apples comparison of growth at different times of the year. Even after two rounds of fixes, growth in the first quarter, which includes most of the winter, has consistently run lower than subsequent quarters. This revision brought what the bureau said were the final batch of fixes, and it has changed past winter numbers to look much better — and made some quarters from later in the year look worse.

Growth in the first quarter of 2016 has been revised up to 1.5 percent, from 0.6 percent. Growth in the fourth quarter of 2017 was revised down to 2.3 percent, from 2.9 percent. (That revision complicates Republican claims that growth was surging with companies’ expectation that President Trump would sign a big tax cut package into law, by the way, but the revision for the first quarter of 2018 that is announced Friday could help their case that the enactment of the law sped up growth.)

Article source: https://www.nytimes.com/2018/07/27/business/economy/revised-gdp-report.html?partner=rss&emc=rss

Why Friday’s G.D.P. Number May Be a Size Too Big

How much did government spending contribute?

Early this year, Congress approved a budget deal that will increase federal spending by hundreds of billions of dollars over the next two years. Many economists question the wisdom of passing what amounts to a debt-funded stimulus package when unemployment is low and the economy is strong. But whether or not they like the policy, they agree it will give the economy a temporary jolt.

Unlike the trade effects, the lift from government spending won’t disappear overnight. Most economists expect the budget deal to keep adding to growth for the rest of the year and into 2019. After that, though, the effects will fade.

As a result, some economists are focused on a measure of growth that strips out government spending, as well as trade and inventory effects. Research from President Barack Obama’s Council of Economic Advisers found that measure, known as “final sales to private domestic purchasers,” to be a better predictor of long-run growth trends.

What about the tax cuts?

The Republican tax cuts, which took effect in January, didn’t have much effect on economic growth in the first quarter. Consumer spending growth actually slowed, and business investment in equipment, which the tax law was meant to encourage, had its weakest showing in a year.

The second quarter could be a different story. Retail sales and other data suggest that consumer spending rebounded, and capital spending has been picking up as well. The tax cuts probably contributed to both trends, although it will be hard to discern exactly how much.

Economists will be watching business investment particularly closely. The Trump administration and its supporters argue that the tax cuts will stimulate investment, which could make the American economy more productive in the long term. Critics argue that companies will mostly return their tax windfalls to shareholders in stock buybacks and dividends, giving the economy the equivalent of a short-term sugar high but doing little for the longer run.

“We have yet to see any meaningful evidence of an increase” in investment, said Joe Brusuelas, chief economist at the accounting firm RSM U.S. “That’s something that you can’t make a judgment on in one or two quarters. That’s something that you make a judgment on in two or three years.”

Article source: https://www.nytimes.com/2018/07/26/business/economy/economy-gdp-trump.html?partner=rss&emc=rss

U.S. Businesses Are Bullish Amid Worldwide Instability

Midterm elections have tended to result in a loss of seats for the party in the White House, with the president’s popularity working to amplify or blunt the impact. The economy generally plays a supporting role.

Among Republicans, Mr. Trump’s overall approval rating is near 90 percent, although across the public as a whole, it has lingered around the 40 percent mark. The question is whether a roaring economy can soothe voters unsettled by the president’s policies or temperament, and offset any inclination to check his power.

Mr. Trump has argued that the United States has long been taken advantage of by its trading partners and that punishing tariffs will force them to adjust their practices. Those comforted by the buoyant economy may be more likely to give Mr. Trump’s negotiating style the benefit of the doubt.

Although the second quarter’s heady growth pace — estimated at more than 4 percent — is expected to slow markedly in the second half of the year, a drop-off that showed up after the election would have less impact.

At the same time, for many smaller businesses, sensitive political topics can often seem removed from day-to-day business life. “They’re not worried about China tariffs and trade fights with Germany,” said Mark Hemmeter, the founder of Office Evolution in Broomfield, Colo., which franchises office space for small businesses to rent. “Our clients are focused on developing business in their communities.”

What does attract notice is the perception of a pro-business mind-set in Washington.

“I think, psychologically, it’s fantastic when you have a business cheerleader in the White House; small businesses feel more comfortable with the direction,” said Mr. Hemmeter, who said he expected to double the number of franchises to 60 by the end of the year, and then double again by the end of 2019.

Whatever the political winds, Bonnie Micheli and Tracy Roemer, founders of the boutique fitness studios Shred 415 in Chicago, are enjoying the open wallets. “We feel the economy is really strong right now, especially in health and wellness,” Ms. Micheli said. “Politics are just irrelevant to our business.”

Article source: https://www.nytimes.com/2018/07/24/business/economy/business-confidence-economy-private-sector.html?partner=rss&emc=rss

Upheaval All Around, but U.S. Businesses See Smooth Sailing

Midterm elections have tended to result in a loss of seats for the party in the White House, with the president’s popularity working to amplify or blunt the impact. The economy generally plays a supporting role.

Among Republicans, Mr. Trump’s overall approval rating is near 90 percent, although across the public as a whole, it has lingered around the 40 percent mark. The question is whether a roaring economy can soothe voters unsettled by the president’s policies or temperament, and offset any inclination to check his power.

Mr. Trump has argued that the United States has long been taken advantage of by its trading partners and that punishing tariffs will force them to adjust their practices. Those comforted by the buoyant economy may be more likely to give Mr. Trump’s negotiating style the benefit of the doubt.

Although the second quarter’s heady growth pace — estimated at more than 4 percent — is expected to slow markedly in the second half of the year, a drop-off that showed up after the election would have less impact.

At the same time, for many smaller businesses, sensitive political topics can often seem removed from day-to-day business life. “They’re not worried about China tariffs and trade fights with Germany,” said Mark Hemmeter, the founder of Office Evolution in Broomfield, Colo., which franchises office space for small businesses to rent. “Our clients are focused on developing business in their communities.”

What does attract notice is the perception of a pro-business mind-set in Washington.

“I think, psychologically, it’s fantastic when you have a business cheerleader in the White House; small businesses feel more comfortable with the direction,” said Mr. Hemmeter, who said he expected to double the number of franchises to 60 by the end of the year, and then double again by the end of 2019.

Whatever the political winds, Bonnie Micheli and Tracy Roemer, founders of the boutique fitness studios Shred 415 in Chicago, are enjoying the open wallets. “We feel the economy is really strong right now, especially in health and wellness,” Ms. Micheli said. “Politics are just irrelevant to our business.”

Article source: https://www.nytimes.com/2018/07/24/business/economy/business-confidence-economy-private-sector.html?partner=rss&emc=rss

Trump Nominee Is Mastermind of Anti-Union Legal Campaign

While presidents nominate members of their own parties as agency chiefs, the conference tends to be studiously bipartisan in its approach. Prominent former government officials serve on the agency’s board, like Ronald Klain, a chief of staff to Vice Presidents Al Gore and Joseph R. Biden Jr., and Theodore B. Olson, who was solicitor general under Mr. Bush. A young Antonin Scalia once ran the agency.

But portions of Mr. Mitchell’s background, at least as reflected in legal arguments he has advanced, are notably conservative on culture-war issues. In a case he argued after the Supreme Court recognized same-sex marriage, Mr. Mitchell represented two Houston taxpayers who had sued the city to deny benefits to same-sex spouses of city employees.

Senate Democrats have expressed concern that the nomination of Mr. Mitchell, who represented a coalition of states in a Supreme Court case against the Environmental Protection Agency as Texas solicitor general, is part of Mr. Trump’s broader strategy to curb rule making by federal agencies.

(In written responses to senators’ questions, Mr. Mitchell said that he did not believe that the Supreme Court’s gay-marriage decision allowed governments to deny same-sex spouses benefits that opposite-sex spouses received, and that he was not out to destroy the “administrative state,” a goal some Trump advisers have espoused.)

And then there are the union cases, which Mr. Mitchell filed after his nomination to head the conference, and which could also suggest a free-market worldview hostile to regulation.

Senator Sheldon Whitehouse, a Rhode Island Democrat who opposed the nomination in the Judiciary Committee, said Mr. Mitchell’s role in the cases raised questions about his suitability for the federal position.

“Mr. Mitchell has given us no information about how he got involved in these cases and who is backing them financially,” he said. “If he is a clandestine operative of the same powerful ultraconservative special interests out to cripple unions, he is not fit to serve in this post.”

Article source: https://www.nytimes.com/2018/07/18/business/economy/union-fees-lawyer.html?partner=rss&emc=rss

Corner Office: Stacy Brown-Philpot of TaskRabbit on Being a Black Woman in Silicon Valley

Once you got to Google, you started managing larger and larger teams.

Sheryl saw the potential for leadership, so pulled me into her group to run a 200-person team. I went from managing 14 to 200 people overnight. That was a big step up in not just how I led but how I talked to people, how I communicated. I went from managing direct reports to managing managers, and becoming more responsible as a leader. And then I went to India, and went from managing 200 people to 1,000 people.

Was going to India a difficult decision?

It threw a monkey wrench in my plan. My husband and I were thinking about starting a family at the time, and India would have delayed that decision. So I go home, and I tell my husband: “They asked me to go to India, but I’m not going to go. We’re thinking about starting a family.”

But I’d always wanted to live abroad. India was a really important market for Google at the time, and I knew they were going to take care of me. So we decided together, as a couple, to delay the decision to start a family so I could take this career opportunity.

So I went back to work and said, “Here are all the things I need to make this work for me.” And they were like, “Yes.” Then I went back and asked for some more, because they said yes too fast.

How was managing in India different than in the United States?

I had to adapt my style. Google, at least in the U.S., was very consensus driven. In India, it was a lot more directive. My style is to naturally be consensus-driven, so I had to immediately adapt.

After about a month in India, my assistant came to me and said: “Stacy, you’re going to be great here. Everyone loves you. But you have to start to tell people what to do.” And I was like, “I’m already telling people what to do. We’re having these meetings. We’re agreeing.” She’s like, “No. You have to actually tell people what to do.”

My Detroit upbringing taught me how to be directive. I had to defend myself from bullies. So I knew how to speak up. So I just had to go back to my roots.

Article source: https://www.nytimes.com/2018/07/13/business/stacy-brown-philpot-taskrabbit-corner-office.html?partner=rss&emc=rss