This Week In The Economy: The U.S.’ Tightening Jobs Market, China Economic Growth Slows, Sluggish Housing Demand

Welcome to a regular snapshot-review of U.S. and international economic news that aims to 1) provide a window into the challenges and decisions facing businesses today, 2) determine the direction of economic policy — such as the speed at which central banks decide to raise interest rates, and 3) assess what the impact will be for consumers.

The job openings rate of 4.6%, compared to the hires rate of 3.9% also underlines the difficulty many employers face in filling vacant positions.

The National Federation of Independent Business’ September jobs report showed a number of small business owners reported raising overall compensation in order to hire and retain employees in the tight labor market.

“The competition for qualified workers is pushing up compensation as there are more job openings than job seekers,” the NFIB said, with the reports of job openings the most frequent in construction, manufacturing, transportation, wholesale trades, and retail.

China President Xi Jinping and U.S. President Donald Trump will meet on the sidelines of next month’s G20 meeting, according to news reports this week. There has been no official announcement from either side confirming the supposed meeting date — November 29th — but this appears to be the most convenient time for both leaders to meet since the trade war went into hyperdrive earlier this month.

While it remains to be seen what China hopes to get out of the meeting (aside from having the punitive tariffs lifted of course), there will be no surprises in the U.S. demands as evidence by a U.S. Treasury report released this week.

In its semi-annual report to Congress on the foreign exchange policies of major trading partners, the Treasury said:

“(S)tructural reforms that durably open China’s economy to U.S. goods and services, alongside efforts to reduce state intervention, allow a greater role for market forces, and strengthen household consumption growth would provide more opportunities for American firms and workers to compete in Chinese markets and facilitate a more balanced economic relationship between the United States and China.”

The Treasury also warned about the yuan’s depreciation and, while it didn’t accuse China of currency manipulation, vowed to “carefully monitor and review this determination over the following 6-month period.”

China’s economy grew at a slower pace in the third quarter of this year, with government officials acknowledging the impact of trade tensions with the U.S. on the world’s second largest economy.

China’s National Bureau of Statistics reported Friday that economic activity expanded by 6.5% in Q3, down from 6.8% and 6.7% in Q1 and Q2, respectively. The agency noted the “extremely complex environment abroad and daunting task of reform and development at home” in its release.

As reported last week, the People’s Bank of China cut reserve requirements for banks to release more credit into the economy and counteract the impact of the tariffs.

The data released Wednesday showed Chinese banks extended 1.38 trillion yuan (~$199.25 billion) in net new loans in September, an increase from August.

Total new bank loans for the first nine months of the year jumped 17.7% from a year earlier to 13.14 trillion yuan, and are on track to outpace last year’s total amount of 13.53 trillion yuan.

Is China’s rapidly growing pile of debt a ticking time bomb? Watch this space.

The U.S. government recorded a $779 billion deficit for fiscal year 2018, its largest in six year and a 17% jump from FY2017.

Government spending totaled $4.1 trillion — fueled by outlays on Defense, Medicare and Social Security — compared to $3.3 trillion in receipts. The 2017 tax law contributed to the shortfall in government revenue, as income from corporate taxes fell by $76 billion to $205 billion.

The strong growth and robust activity witnessed in the broader U.S. economy has yet to be reflected in one key sector — the housing market. And data released this week underlined the long road ahead before demand recovers from the damage of the crisis ten years ago.

Data from the Census Bureau earlier this week showed the construction of new homes in September declined by 5.3% compared to August, the completion of new homes was down 4.1%, while the issuance of building permits fell 0.6%.

And just in, the National Association of Realtors announced that total U.S. existing-home sales — including single-family homes, townhomes, condominiums and co-ops — fell 3.4% from August to a rate of 5.15 million in September, the lowest level in three years. Sales are now down 4.1% from a year ago.

“A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.” — NAR

The report said the median home price was $258,100, a 4.2% increase compared to September 2017 ($247,600). Total housing inventory at the end of September fell from 1.91 million in August to 1.88 million homes available for sale, but is up from 1.86 million a year ago. That is 4.4-months’ worth of supply at the current sales pace.

Your TWITE author will spare you the boring details about the lack of progress (again!) at this week’s gathering of European leaders to hash out a deal over the UK’s exit from the European Union in 2019. Suffice it to say the Irish border issue remains the major sticking point, and all indications post to the EU having the stronger bargaining position and UK Prime Minister Theresa May will have to make some unpopular compromises to avoid an exit with no deal in place.

Founder — SW4 Insights. Public policy junkie and Central Bank Watcher. Recovering journalist and former Senior Director at Hamilton Place Strategies

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