Productive resources are limited.
Boosted by tax cuts and spending increases, these favorable conditions could continue for some time. The US Federal Reserve Fed has recently emphasized its upbeat assessment of US growth prospects, keeping it on course to continue slowly tightening monetary policy.
But investors should be aware of the growing risks to this scenario further out, in our view. Indeed, they may have already started to do so. US Dollar Strength and Trade Uncertainty Adding to Problems for Some Countries Though the threats to global trade have dominated headlines, many of the more liquid G7 1 markets have maintained an uneasy equilibrium since the end of May.
Judging to what extent and how quickly such trade-related concerns could affect the momentum of the global economy remains difficult for investors, but the topic seems certain to dominate agendas over the coming quarters and possibly well beyond. Some of the more extreme scenarios would be highly damaging, but we continue to believe a more rational economic approach is likely to prevail at some point, in order to prevent such outcomes.
However, until such views can gain greater political traction in the United States, further outbreaks of market volatility seem inevitable. For all the optimism expressed recently by the ECB on the outlook for growth, the flexibility built in to its planned cessation of bond purchases at the end of could yet prove useful.
The Fed has recently emphasized its upbeat assessment of US growth prospects, keeping it on course to continue slowly tightening monetary policy. There are already signs that market participants have started to price in the possibility of such a development, most noticeably in the US Treasury market.
In terms of the US economy, prolonged uncertainty about trade policy could see more companies put Economic perspective investment on hold, dampening the boost to corporate expenditure provided by the recent tax cuts. Although the current positive economic trajectory means corporate earnings are likely to remain strong for a while, the imposition of further tariffs may exacerbate existing shortages of labor and materials, reducing profitability.
Ultimately, given the current minimal growth in wages for US workers after allowing for inflation and with tariffs likely to increase the cost of many goods, the impact could eventually hinder consumer spending.
While such potential concerns lie ahead, the underlying strongly supportive backdrop for the economy has persisted. A monthly addition ofpositions beat consensus expectations and was accompanied by upward revisions totaling 37, for the two previous months.
The unrelenting pace of job gains did little for wages, however, with annual hourly earnings falling short of consensus forecasts, dipping slightly to 0. One restraining factor on wages may have been the expansion of the labor force, which grew by around , as the strong demand from employers encouraged more people to seek work.
This new supply of workers pushed the participation rate up by 0. Nevertheless, as Fed Chair Jay Powell pointed out in a speech at a symposium of central bankers in June, the participation rate remained well below the levels seen before the global financial crisis.
It also still lagged the rates of most other advanced economies.
The economy appeared close to full employment, he suggested, if judged by measures like the elevated ratio of job vacancies to the numbers of unemployed or the amount of workers leaving their jobs, a sign of confidence in their ability to find a new position.
But, in his view, the low growth in wages and productivity cast doubt on whether the labor market was excessively tight. This lack of precedent increased uncertainty about the consequences of an extended period of low unemployment, and raised the possibility of complacency about a tipping point in wage inflation.
But he also stressed the potential for further benefits, including the continued re-entry into the labor market of previously discouraged workers—for example, among minorities and the disabled—as well as wider gains to productivity and growth.
Broader measures of inflation generally rose modestly, boosted by higher gasoline prices. Much of the reason for the resilience of Treasuries appeared to be uncertainty among investors stemming from escalating global tensions on trade.
|The principal activity is the activity which contributes most to the value added of the unit. In the simple case where a unit performs only one economic activity, the principal activity of that unit is determined by the category of SIC which describes that activity.|
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|Markets Economists study trade, production and consumption decisions, such as those that occur in a traditional marketplace.|
With shorter-dated issues more sensitive to expectations of further interest-rate increases, the yield curve continued to flatten, narrowing the difference between two-year and year Treasury yields to its lowest level since US Dollar Strength and Trade Uncertainty Adding to Problems for Some Countries The US dollar strengthened for the third consecutive month in June, posting its best quarterly performance since over the second quarter as a whole, helped by a combination of tighter US monetary policy and increased risk aversion among investors.
In contrast, the Turkish lira remained under pressure.
Previously, official measures to rein in debt have mainly affected financial institutions, but the challenges for policymakers seemed likely to grow far greater if the effects were to spread to the other areas of the economy, like real estate. Among the G7 economies, Canada raised its interest rates for the fourth time in just over a year.
Though emerging-market assets have been hard hit, for all the threats to global trade have dominated headlines, many of the more liquid G7 markets have maintained an uneasy equilibrium since the end of May.
In the survey, the outlook of German companies on trade turned slightly pessimistic for the first time since the start of Trade tensions and higher energy prices were the main reasons given by the European Commission for a reduction of its growth forecast forfrom 2.
At its June meeting, the ECB announced a target date of the end of to cease its bond purchases, though it was widely expected to continue reinvesting the proceeds of the maturing bonds it holds beyond that date.Economic Perspective: State Regulatory Review Government regulation and deregulation is an ongoing matter in the political world.
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It is a mystery to me that this remarkable collection of essays is hard to find, almost out of print. Anyone interested in Russia, economic development, and economic history -- and especially any combination of these -- will find thought-provoking analysis and discussion in every chapter.