The Finance 202: GOP convention will tout an economic recovery so far leaving millions behind

Some of the indicators now flashing red:

  • More Americans are going hungry. “For the week that ended July 21, the most recent numbers available, roughly 29 million U.S. adults — about 12.1 percent — said their household sometimes or often didn’t have enough to eat the preceding seven days, according to the Center on Budget and Policy Priorities,” Hannah Denham and Taylor Telford write, citing Census Bureau data.
  • Renters face evictions. “Nearly 15 million renters said they were behind on rent during the same period,” they report.
  • Small businesses are struggling. “Small-business data from the time management firm Homebase shows no improvement since the middle of the summer in employment or hours worked in crucial parts of the economy,” the New York Times’s Jeanna Smialek and Jim Tankersley write. “Job postings from the online recruiting site Indeed slipped backward this week for the first time since May.”
  • A staggering number of Americans continue to lose their jobs. “The number of people applying for the first time for unemployment insurance ticked up last week to 1.1 million, from 970,000 the week before, a sign that job losses continue to plague the labor market five months into the coronavirus pandemic,” Eli Rosenberg reported Thursday. “The weekly jobless claims had sunk slowly in recent months but have remained well above historical highs, averaging about 1.18 million a week for the last four weeks.”
  • The jobless are losing confidence in their prospects. “More than half of those who are still out of work say they never expect to go back to their old jobs, according to polling from the online research firm SurveyMonkey for The New York Times,” per Smialek and Tankersley.
  • There’s good reason for their skepticism. The Internal Revenue Service projects there will be 37.2 million fewer jobs next year than it anticipated before the pandemic, and it could be 2027 before the economy replaces them.

Trump’s executive actions to extend expired benefits are offering limited help.

The president is likely to tout the moves he has made end-running Congress to continue emergency aid. But they’ve so far proven a paltry substitute for a new legislative package.

“Just two weeks after [Trump] approved executive actions aimed at bypassing stalled stimulus negotiations with Congress, only one state has said it is paying new jobless benefits, few evictions have been paused, and leading employers have made clear that workers will not benefit from the president’s new payroll tax deferral,” Jeff Stein and Tony Romm report.

The end of $600 weekly enhanced unemployment benefits alone will drain $70 billion this month from personal income, Goldman Sachs economists estimate. The $300 replacement Trump has tried to push through executive action at best would cover half the decline “if implemented in full,” the Goldman team wrote in a Sunday note. “But given delays in implementing the program and disbursing funds, the new program is unlikely to meaningfully support incomes until September.”

Biden got heat for not highlighting his economic plans during the convention. Trump so far doesn’t have any. 

Ronald Brownstein, writing in The Atlantic last week, argued Biden’s acceptance speech at the Democratic National Convention “had a conspicuous blind spot: The event did not deliver a concise critique of Trump’s economic record or offer a tight explanation of Biden’s plans to improve the economic circumstances of middle-class families.

“Though Biden ran through an extended list of policy goals on issues including job creation and climate change during his address, he offered vanishingly little detail about how he would achieve them—though, in fact, he’s delivered a series of detailed speeches laying out his agenda.”

Republicans this week will “defend some in-person activities as essential to keeping the economy humming,” the Wall Street Journal’s Joshua Jamerson writes. 

But the GOP announced Sunday it will forgo releasing a policy platform, opting instead to “continue to enthusiastically support the President’s America-first agenda.” And where Democratic nominee Joe Biden has put forward detailed policy proposals, Trump so far has not. 

His campaign on Sunday night released what it billed as a second-term agenda. The section labeled “Jobs” is 48 words long. It includes specifics-free pledges to create 10 million jobs and one million small businesses while cutting taxes and regulations.

With the convention starting, the president and his team have rushed to answer the question of what he would do with a second term — and he will tout the goals laid out in the campaign release in his Thursday night address, Politico’s Nancy Cook and Meredith McGraw report.

Yet “senior administration officials concede the second-term agenda will lean more toward pledges to continue Trump hallmarks than it will toward presenting entirely new ideas, creating a high-wire act for a president trying to both appeal to his base’s long-favored themes while also responding to criticism from within his own party,” they write.

Market movers

Powell to headline Jackson Hole conference on Thursday. 

He will discuss the Fed’s update of its monetary policy framework. “Prompted by worryingly low inflation and interest rates that eroded the central bank’s ability to fight recessions, the Fed spent all of 2019 and much of this year conducting its first comprehensive framework review,” Bloomberg’s Steve Matthews reports. “Policy makers have discussed a more relaxed approach to inflation, one that would call for inflation to sometimes exceed the 2% target in order to achieve average outcomes closer to that objective.”

Coronavirus fallout

Government debt is skyrocketing. It won’t be easy to trim. 

Advanced economies are seeing a tide of red ink unrivaled since World War II. “Among advanced economies, debt rose to 128% of global gross domestic product as of July, according to the International Monetary Fund. In 1946, it came to 124%,” WSJ’s Josh Zumbrun writes. 

“After World War II, advanced economies brought down debt quickly, thanks in large part to rapid economic growth. The ratio of debt to GDP fell by more than half, to less than 50%, by 1959. It is likely to be harder this time, for reasons involving demographics, technology and slower growth… Though vanquishing the virus could bring a surge of optimism, the post-World War II boom would be difficult to re-create. Population growth has slowed in advanced economies, the workforce is shrinking as societies age and productivity is slowing.”

From the U.S.:

  • At least 5,673,000 cases have been reported; at least 173,000 have died. 
  • Hotspots are moving to the Midwest and West, according to former FDA commissioner Scott Gottleib:  
  • But cases are falling overall. “The number of new coronavirus infections in the U.S. declined from a day before, reaching its lowest level in more than two months and notching a ninth straight day with fewer than 50,000 new cases,” WSJ’s Adam Martin reports. “The nation reported 34,567 new cases on Sunday, according to data compiled by Johns Hopkins University. That is down from 44,572 on Saturday and the lowest since June 22, when the U.S. reported 30,536 new cases.”
  • Scientists raise doubts about breakthrough Trump hails. The president announced Sunday he helped cut red tape to allow emergency authorization of convalescent plasma to treat covid-19, “despite the fact that his own scientists are calling for more studies to definitively show it works,” Carolyn Y. Johnson and team report. The announcement “drew criticism from physicians and scientists, who said [Trump and his top health officials’] statements misled the public by overstating the evidence behind a therapy that shows promise but still needs to be rigorously tested.”
  • Extreme weather threatens to compound the health crisis in hard-hit states. Two tropical storms are on track to hit the Gulf Coast this week. “The most recent forecast by the National Hurricane Center showed the storms, Marco and Laura, headed for coastal Louisiana and eastern Texas and expected to make landfall on Monday and Wednesday, respectively,” Derek Hawkins and Marisa Iati report. “Louisiana could face an unprecedented one-two punch, with both storms potentially hitting the state as hurricanes in a three-day span.”

From the corporate front:

  • Companies are rethinking plans to reopen after Labor Day. “Many employers had hoped to bring white-collar workers back to the office next month,” WSJ’s Lauren Weber and Chip Cutter report. “But as cases rose in dozens of states throughout the summer, major school districts settled on remote or hybrid instruction, complicating the picture for working parents. Some employers have already scuttled plans to force office workers back so soon.”
  • Unused vacation days vex employers. “With vacation balances building among employees who either feel they can’t take time off amid the uncertainty or won’t because travel plans were quashed due to the coronavirus, companies are split on what to do,” WSJ’s Anne Steele and Chip Cutter report. “While some are introducing more relaxed policies and allowing days to carry over into next year, others are requiring employees to take their vacation sooner rather than later to fend off burnout—and a potential liability on their books.”

Campaign 2020

Biden pledges no new taxes on those making less than $400,000 a year. 

The Democratic nominee tells ABC News that everybody should pay “their fair share.” Biden, in his first joint interview with running mate Sen. Kamala Harris (D-Calif.), defended his proposal to raise taxes on businesses during an economic recovery. “It’s smart to tax businesses that are in fact making excessive amounts of money and paying no taxes,” he told the network’s David Muir. ”It’s how we did it last time… with the largest, the most consecutive number of months of growth in jobs of any time in history. We did it the right way.”

  • Biden said he wouldn’t target small businesses. He pledged not to raise taxes on the  “90% of the businesses out there are mom and pop businesses, that employ less than 50 people.”

When superpowers collide

TikTok to sue to challenge Trump’s order. 

The video sharing app aims to block the president from forcing it to divest its U.S. operations. “TikTok said on Saturday it plans to file a lawsuit on Monday against [Trump’s] executive order prohibiting transactions with the popular short video app and its Chinese parent ByteDance,” Reuters reports. “TikTok said it had tried to engage with the U.S administration for nearly a year, but faced ‘a lack of due process’ and that the government paid no attention to the facts.”

China approves BlackRock joint venture with Temasek and China Construction Bank. The deal for a wealth management joint venture “comes as China’s government looks to open up its financial market to foreign firms, offering potentially rich rewards for international fund managers and others in the broader financial sector,” Reuters reports. “But the Chinese industry remains dominated by domestic state firms and China has yet to open up some more sensitive areas of its financial industry.”

Trade fly-around

U.S. farmers are suffering even with a strong crop.

The economic picture remains fragile: “Following a growing season last year filled with battering rainfall and bitter trade wars, U.S. farmers hoped 2020 would provide them an opportunity to make up some ground. Instead, the situation has grown worse for many as prices remain depressed,” the Wall Street Journal’s Kirk Maltais reports.

“Despite a wind storm tearing through Midwestern farms last week and drought conditions in isolated areas, a bumper crop of both corn and soybeans is still expected this year … For many U.S. farmers, the prospect of grain prices staying low is untenable. ‘It’s almost a day-to-day struggle to decide what to do next year,’ said Doug Sombke, president of the South Dakota Farmers Union and a farmer of 3,000 acres of corn and soybeans in Brown County, S.D.”

Pocket change

Microsoft wades into fight between Apple and Epic Games.

The tech giant said Apple blocking Epic would hurt the video game industry: “In a declaration filed on Sunday, a senior Microsoft engineer said that allowing Apple to block Epic Games’ developer account would deal a significant blow to game makers including Microsoft by making them unable to use Epic’s Unreal Engine,” CNBC’s Tucker Higgins reports.

“The Unreal Engine, a type of gaming engine, is a widely used set of technologies that provides a framework for the creation of three dimensional graphics. Epic licenses the engine to companies that use the technology for a fee … While there are alternative gaming engines, Kevin Gammill, Microsoft’s general manager for Gaming Developer Experiences, said that ‘very few’ are available with as many features and the same functionality.”

Daybook

  • The Republican National Convention begins
  • The Census Bureau releases new home sales for July
  • Nordstrom, Best Buy, Hormel Foods, J.M. Smucker and Intuit are among the notable companies reporting their earnings, per Kiplinger.
  • Fed Chair Jerome Powell headlines the Kansas City Fed’s annual Jackson Hole Economic Policy Symposium
  • The Labor Department releases the latest weekly jobless claims
  • Dollar General, HP, Abercrombie & Fitch, Ulta Beauty and Dollar Tree are among the notable companies reporting their earnings

The funnies

Bull session

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