U.S. Government Bonds Rise After Soft Inflation, Fed Rate Increase

U.S. Government Bonds Rise After Soft Inflation, Fed Rate Increase

U.S. government bond prices rose Wednesday after data showed inflation pressures remain muted and the Federal Reserve raised short-term interest rates as expected.
The consumer-price index, which measures what Americans pay for everything from coffee to prescription drugs, rose 0.4% in November, in line with what economists surveyed by The Wall Street Journal had expected.
But core prices, which exclude the more volatile categories of food and energy, rose just 0.1% in November, missing economists’ estimates for a 0.2% increase. “Any time you have core inflation come in softer than expected, it invites a little bit of uncertainty as to how aggressively the Fed can move,” said Joe Tanious, investment strategist at Bessemer Trust.
Investors and traders had widely expected the central bank to announce an interest-rate increase.
Something that did surprise some analysts: the fact that two Fed committee members voted against a December rate increase.
The move represented the first double dissent at a 2017 Fed meeting, and could foreshadow more disagreement in 2018 over the pace of rate increases given a streak of soft inflation data, some analysts said. “I’m not sure what else they needed to see for a December hike,” said JJ Kinahan, chief market strategist at TD Ameritrade.
With measures including household spending, business investment and the unemployment rate pointing to the U.S. economy continuing to strengthen, Mr. Kinahan expects wage growth — something that has been muted this year — to pick up in 2018.
Write to Akane Otani at akane.otani@wsj.com (END) Dow Jones Newswires December 13, 2017 15:58 ET (20:58 GMT)

Something doesn’t add up in Janet Yellen promise of higher wages

Something doesn’t add up in Janet Yellen promise of higher wages

Federal Reserve Chair Janet Yellen holds a press conference in Washington Thomson Reuters The Federal Reserve’s expectation for additional wage growth is based on hopes and prayers, not hard evidence.
Wage growth for non-supervisory workers have actually declined over the last year, confounding the Fed’s reasoning for additional rate hikes, an ex-Bank of England official tells Business Insider.
So why is the the Fed hiking interest rates while wages are still struggling to rise, and are in fact declining for many workers?
Yellen’s answer was deeply dissatisfying, seemingly based more on faith than evidence: “Generally in a strong labor market where many firms are having difficulty finding qualified workers, we would expect just through normal demand and supply channels to see some upward pressure on wage growth over time,” she said. “And as the labor market has tightened we’ve seen some very gradual drift upward in wage gains,” Yellen continued.
It suggests officials really “don’t care about the data” despite their assurances that the path of monetary policy is strictly dependent on the economic figures.
Some investors and Fed officials are worried that a flat yield curve, meaning a bond market where long-term interest rates are falling close to their short-term counterparts, could be pointing to darker economic times ahead.
In interviews with Business Insider, both St. Louis Fed President James Bullard and Philadelphia Fed President Patrick Parker cited the flat curve and a potential inversion as key concerns. “We should just [maintain] a slow removal of accommodation to minimize the risk that that would happen,” Harker said. “This hike feeds critics who say the Fed is not as data dependent as it claims,” Michael Madowitz, economist at the Center for American Progress, told Business Insider.

Applications for US jobless aid drop by 11,000 to 225,000

Applications for US jobless aid drop by 11,000 to 225,000

WASHINGTON – The number of Americans applying for unemployment benefits fell by 11,000 last week to 225,000, the lowest in nearly two months and another sign that U.S. workers are enjoying job security.
The Labor Department said Thursday that the less volatile four-week average also fell by 6,750 to 234,750.
Overall, 1.89 million Americans are collecting unemployment checks, down more than 7 percent from a year earlier and close to a four-decade low reached in November.
Unemployment claims are a proxy for layoffs.
They’ve been below 300,000 a week for nearly three years, the longest stretch in more than four decades.
The low levels reflect the strength of the job market and the overall economy.
The unemployment rate has fallen to a 17-year low of 4.1 percent.
Employers, who added 228,000 jobs last month, are holding onto workers and often struggling to find new ones.
The economy grew at a sprightly 3.3 percent annual pace from July through September, fastest in three years.

Greek unions strike as bailouts to end with austerity blitz

Greek unions strike as bailouts to end with austerity blitz

ATHENS, Greece – Greece’s workers walked off the job for a 24-hour general strike Thursday, as the country prepares to stop relying on European rescue loans but continues to pile more austerity measures on hard-hit taxpayers.
The strike halted ferry services to the islands, closed state schools, and left public hospitals accepting only emergency cases.
Airlines rescheduled and cancelled flights as some airport staff joined the labor action with a four-hour work stoppage, and public transport was operating only for certain hours during the day.
Thousands of people gathered in Athens for anti-government protests, while demonstrations were planned in more than 50 cities and towns across the country.
Greece has depended on international bailouts since 2010 but must return to bond markets next year when its third consecutive rescue program runs out in August.
The government’s borrowing rates have tumbled, and the country is on course to achieve modest economic growth in 2017.
But poverty rates continue to worsen after years of cuts.
Household incomes have fallen by about a third since the crisis started in 2009, according to World Bank data, and inequality has risen due to high long-term unemployment.
Prime Minister Alexis Tsipras’ left-led coalition government has also promised to help banks clear a mountain of bad loans, speeding up auctions of homes in mortgage default.
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Analysis: Morogoro conference – memorandums, wedge drivers and the saving of the ANC’s soul

Analysis: Morogoro conference – memorandums, wedge drivers and the saving of the ANC’s soul

A thread that runs all the way back to the ANC’s watershed consultative conference held in April 1969 in Morogoro in Tanzania darts through the ANC in its current embodiment in the Zuma era.
Watch his poisonous tongue.’ – Oliver Tambo closing address, Morogoro Consultative Conference “No one in the movement can be content with the present situation; all must be aware of the deepening malaise such as we have never known before.” That was SACP member Ben Turok, stationed in Dar es Salaam, who on 5 April 1969, three weeks before the ANC’s third consultative conference that took place in Morogoro, Tanzania, wrote a memorandum in support of an earlier scathing critique penned by MK leader Chris Hani and six others.
The Morogoro conference was a critical one, prompted by deep crisis, accusations of an out-of-touch leadership, authoritarianism, careerism and corruption among senior MK leaders in charge of a moribund and ill-equipped military wing.
“There has been little elective democracy in our movement for well over a decade… democracy must be seen to operate – the power of recall is basic to discipline and mutual respect between leaders and the led,” Turok set out.
And then there was the uncompromising “Hani Memorandum” – thought to have been written in January 1969 – signed by Chris Hani and six other MK members following the disaster of the Wankie and Sipolilo campaigns.
The Acting President [Oliver Tambo] ordered the dungeons to be closed, and convened a meeting of militants to consider our case.” The Hani Memorandum was an uncompromising critique of the ANC’s leadership in exile, particularly secretary-general Duma Nokwe and and the effectiveness of MK, especially its commander-in-chief, Joe Modise.
That’s already 500 more than in 2012, when we had our conference in Mangaung, Free State,” noted the Stalwarts.
And, to us probably the worst manifestation of the misuse of power: greed.” And it is greed that is the “most potent contrarian force we have had to face in our 23 years of freedom.
However, it ought to be constantly borne in mind that these requirements ought not to be an excuse for the emergence of an elite.” In 2017, the Year of OR Tambo, the ANC limps into its 54th elective conference deeply divided and imperilled by a mountain of court judgments against its current leader and President of the Republic of South Africa, Jacob Zuma.
The vigilant or the wedge drivers?

Fed Predicts Modest Economic Growth From Tax Cut

Fed Predicts Modest Economic Growth From Tax Cut

WASHINGTON — The Federal Reserve, buoyed by a steadily strengthening economy, raised interest rates on Wednesday for a fifth time since the financial crisis and predicted that a proposed tax cut moving through Congress would modestly increase economic growth for the next few years without stoking inflation.
She said they expected the bill to provide “a modest lift.” Ms. Yellen spoke at a news conference after the Fed announced a widely expected decision to increase its benchmark interest rate by a quarter of a percentage point, to a range of 1.25 percent to 1.5 percent.
Wednesday’s increase is the third time this year that the Fed has raised rates, reflecting its confidence that the economy is in good health.
Some Fed officials, including Ms. Yellen, cautioned earlier this year that tax cuts could push the pace of growth to an unsustainable level, resulting in higher inflation, and that the Fed might respond by raising interest rates more quickly, to restrain growth and keep a lid on inflation.
A quarterly update of the Fed’s economic forecast showed that officials still expect to raise rates three times next year — unchanged from the last economic forecast.
Fed officials predicted that the economy would grow at a 2.5 percent pace next year; the previous forecast was 2.1 percent.
President Trump has predicted that the tax plan could deliver 4 percent growth or more.
They do not want the Fed to get in the way by raising rates.
It would be relatively easy for the Fed to respond if inflation does begin to climb.
Mr. Gonzalez noted that housing prices were rising, and he said that higher mortgage rates could worsen affordability problems in some markets.

Decade since recession: Thriving cities leave others behind

Decade since recession: Thriving cities leave others behind

With fewer people able to move to places with more jobs and higher pay, the national economy tends to suffer, economists say.
Among the nation’s 100 largest metro areas, San Francisco experienced the biggest gain in median household income in the decade after the recession began.
And the income gap between the 10 richest and 10 poorest metro areas has widened in the past decade, Moody’s data shows.
Data compiled by Brookings shows that 65 percent of Americans who live in urban areas — defined as cities with populations above 65,000 — live in places where the typical household income is still below its 1999 level.
Boston enjoyed the 11th-best income gain in the past decade, Moody’s data shows.
Versace launched Neurala in 2013, and it now has 36 employees, including eight with PhDs.
Jed Kolko, chief economist at Indeed, the job listings website, calculates that one quarter of tech job openings in the first half of this year were located in just eight tech hubs: Baltimore, Washington, Boston, San Jose, San Francisco, Seattle, Austin and Raleigh, North Carolina.
In the 10 cities with the fastest income growth, housing prices have soared by an average of 31.1 percent in the past decade, Trulia found.
A resident of San Francisco who bought a typical home, paying nearly $816,000 in the spring of 2007 — just as the housing market nationwide was collapsing — has gained $365,000 in the past decade.
About 61 percent of blue state residents have jobs, compared with roughly 59 percent in red states, Brooks found.

GOP says it’s got a deal on taxes; cuts coming for next year

GOP says it’s got a deal on taxes; cuts coming for next year

Middle- and low-income families would get smaller tax cuts, though Trump and GOP leaders have billed the package as a huge benefit for the middle class.
The legislation, which is still being finalized, would cut the top tax rate for the wealthy from 39.6 percent to 37 percent, slash the corporate income tax rate from 35 percent to 21 percent and allow homeowners to deduct interest only on the first $750,000 of a new mortgage.
Details of the agreement were described by Republican senators and congressional aides.
Negotiators have removed several controversial provisions from the tax bill, including one that would have eliminated the deduction for interest on student loans and another deduction for medical expenses, said two congressional aides.
The tax bill would scale back the deduction for state and local taxes, allowing families to deduct only up to a total of $10,000 in property and income taxes.
Business owners who report business income on their personal tax returns would be able to deduct 20 percent of that income.
Scrapping the individual mandate would provide them with more than $300 billion for deeper tax cuts while undermining the law.
Senate leaders plan to vote on the package Tuesday.
The committee is charged with blending the tax bills passed by the House and Senate, though Republicans have done all of their negotiations behind closed doors.
Once the plan is signed into law, workers could start seeing changes in the amount of taxes withheld from their paychecks early next year, lawmakers said — though taxpayers won’t file their 2018 returns until the following year.

Australian employment surges again

Australian employment surges again

The ABS said the largest increase was in Victoria where employment increased by 32,900, outpacing gains of 28,500 and 8,500 in New South Wales and Western Australia.
Reflective of the strong lift in employment, the total number of hours worked by all Australians increased by 9.8 million hours, or 0.6%, to 1.7409 billion hours in seasonally adjusted terms.
Indeed, over the year, full-time employment increased by 304,600, far outpacing a 78,700 increase in part-time employment.
Despite the surge in employment in November, the unemployment rate held steady at 5.4% courtesy of a massive lift in labour force participation which jumped 0.3 percentage points to 65.5%, leaving it at the highest level since September 2011.
With more Australians entering the labour market, an outcome likely reflecting improved job opportunities, the total number of unemployed Australians increased despite strong employment growth, rising by 4,100 to 707,700.
By state, unemployment fell in Victoria and Tasmania but rose in South Australia and Western Australia.
Adding to the stellar report card, the quarterly underemployment rate fell 0.2 percentage points to 8.3% in seasonally adjusted terms, an outcome that suggests the labour market is tightening.
The labour force underutilisation rate — combining both underemployment and unemployed Australians — also fell, dropping to 13.7% in seasonally adjusted terms, a decrease of 0.3 percentage points.
While an encouraging sign for workers, Kate Hickie, Australia and New Zealand Economist at Capital Economics, said that more progress in lowering labour market underutilisation will be required in order to deliver a meaningful lift in wage pressures.
“That would be well below the pre-crisis average of 3.5%, and is a key reason we expect inflation to remain low for longer than the RBA currently expects.” However, while Hickie isn’t expecting a strong lift in wages in the near-term, she says that the overall jobs report “leaves little doubt about the current health of the labour market”.

Europe: is a fiscal and political union needed?

Europe: is a fiscal and political union needed?

Monetary union required political union.
Of course, Schäuble and Varoufakis had different ideas regarding the ends that political union would serve.
Schäuble saw political union as a means to impose strong fiscal discipline on member states from the centre, tying their hands and preventing “irresponsible” economic policies.
What needs to be done instead is to delink private finance from public finance, insulating each from the malfeasance of the other.With this separation, private finance can be fully integrated at the European level, while public finance is left to individual member states.
This way, countries can reap the full benefit of financial integration while national political authorities are left free to manage their own economies.
“With banking union, there is no need for fiscal union,” he argues.
Advocates of cutting the Gordian knot between private and public finance recognize that governments’ approach to banks must change radically if this separation is to work.
Sovereign states can always change the rules ex post, which means full financial integration is impossible.
Because they retain sovereignty, they cannot make similarly credible commitments not to interfere with financial markets.
So the risk remains that a severe enough financial shock in the EU will affect all other borrowers in the same country in a self-fulfilling manner.