October 23, 2019
Trump Move Could Spark Another Exodus of U.S. Jobs Researchers
“Donald Trump has called its work “phony.” His Acting Chief of Staff Mick Mulvaney warned that President Obama was “manipulating” its numbers. Economic adviser Larry Kudlow termed one of its reports “very fluky.” Is it a House oversight committee? A Democratic think tank? No, it’s the gold standard of research and impartiality on U.S. inflation, employment and productivity: The U.S. Bureau of Labor Statistics. Now 70% of the bureau’s staff of 1,800 is likely to leave by 2022, according to a survey by the union that represents most of its workers. The reason: The administration plans to move the bureau’s current headquarters from Washington, near the Union Station transit hub, to an office complex in Suitland, Maryland. Current and former government employees said they’re concerned the administration is seeking to drive out civil servants whose work could undermine the president’s agenda. These researchers are in a position to document, for example, a slowdown in manufacturing employment in part because of Trump’s tariffs. Ninety percent of the bureau’s employees oppose the move because traffic and lack of transit options would add on average an hour to their daily commutes — in some cases, as much as two hours — even though the new office is only seven miles away and near a subway station. They also worry it will isolate them from Capitol Hill policy makers and that the new digs are too small to fit the staff. The White House has said it is promoting efficiency by consolidating three agencies. The Bureau of Labor Statistics, or BLS, now part of the Labor Department, will join the Census Bureau and the Bureau of Economic Analysis in a single, lower-cost location. The Obama administration had also indicated an interest in consolidating these agencies, though it never happened. Trump’s “phony” comment and the critical words of Mulvaney and Kudlow all referred to BLS jobs reports. During the Obama administration, Trump said they overstated the health of hiring. “So far, the BLS has avoided politicization from the Trump Administration,” said Michael Havlin, an economist at the agency and union member. “But the economic data has been pretty positive the last three or four years — that might not be the case in a year or so.”
Brexit May Be Delayed. But Markets Have a Bigger Problem
“If there’s one thing that is relatively clear from last night, it’s that the risk of no-deal Brexit has dropped. While we await to see if the EU will agree to another delay and if there will be a general election, any negative reaction on European equities and U.K. domestic stocks in particular should be contained, judging by the limited retreat in futures this morning. But there might be a bigger problem for investors: the macro landscape is still deteriorating. The market had a pop last week when odds of a no-deal Brexit significantly receded. It has been consolidating within a strong resistance area since then, and the number of Stoxx 600 stocks trading above their 50-day moving average, a bullish momentum signal, has now stalled. At these levels, an improvement in PMIs — due tomorrow — are much needed especially after the IMF cut its global growth forecast to a decade low of 3% while Germany slashed its economic outlook for 2020. Yesterday, S&P Global Ratings also lowered its euro-area growth forecasts to 1.1% for 2020. Looking at economic surprises for Europe, they remain at a very low level, while the Euro Stoxx 50 has been rising toward 2018 highs. Deutsche Bank strategists are among those keeping a cautious view on equities in the near term. They say the market has been rising despite dismal macro data and there are some risks given current valuation levels. They recommend defensive sectors over cyclicals. In fact, just this year, cyclicals experienced four major episodes of outperformance against defensives. Every time, further deterioration of manufacturing data put an end to the trend. Numbers tomorrow could help determine what comes next for cyclical shares.”
China’s New Investment Law a Positive Step, Foreign Firms Say
“China’s new law governing foreign investment that will take effect next year addresses some of the core concerns of companies operating in the country, though questions remain on how it will be implemented, according to organizations representing U.S. and European firms. A draft of regulations related to the law takes a positive step toward dealing with issues around unequal access to China’s market and intellectual property protection, the U.S.-China Business Council said. The implementation guidelines have added clarity in a number of areas, though some could be clarified further, the EU Chamber of Commerce added. The document that was circulated to some organizations for comment pledges greater recourse when intellectual property rights are violated and allows foreign firms to interact with local governments and also participate in the drafting of standards and government procurement, U.S.-China Business Council Vice President Jake Parker said in an e-mail. It also emphasizes that government officials can’t compel the transfer of technology from foreign companies, he said. “However, the draft falls short of specifying the types of disclosures of trade secrets that will be prohibited and clarifying the types of administrative organs to which the provisions on technology transfer apply,” Parker said. The new law aims to level the playing field by treating both foreign and domestic firms equally, and promises to do more to protect overseas companies’ technology and know-how. The law was passed in March and the government is now circulating draft regulations on how it will be implemented to foreign firms and chambers of commerce, looking for feedback. The draft was sent around by the State Council, the National Development and Reform Commission, and the Ministry of Justice, with a deadline for feedback at the end of the month, according to Adam Dunnett, secretary-General of the EU Chamber of Commerce. “The law is intended to address many of the long-standing issues that we’re constantly talking about,” Dunnett said in an interview on Tuesday. “It’s going to come down to how it’s implemented in practice, and that’s how people will determine their overall view on this in the longer run.“ As part of the process, the Commerce Ministry and other agencies also consulted with foreign businesses on the law at a summit for multinational companies in Qingdao over the weekend, according to state-run newspaper China Daily.”
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