Trump's economic agenda vs. Kamala Harris' economic agenda. The Beige Book report reveals a widespread economic slowdown. Plus, the depletion of pandemic-era liquid wealth and the impact of economic migration trends on states' economies.
Sources:
https://www.theguardian.com/business/article/2024/sep/05/donald-trump-us-economy-coal-oil-elon-musk-peter-thiel
https://www.actionforex.com/live-comments/566490-feds-beige-book-signals-slowdown-with-widespread-stagnation-across-districts/
https://www.frbsf.org/research-and-insights/blog/sf-fed-blog/2024/09/04/economic-letter-video-pandemic-era-liquid-wealth-is-running-dry/
https://alec.org/article/examining-economic-migration-trends-jonathan-williams-on-voice-of-reason/
Outline:
(00:00:00) Introduction
(00:00:47) Fed’s Beige Book signals slowdown with widespread stagnation across districts
(00:04:03) Economic Letter Video: Pandemic-Era Liquid Wealth is Running Dry
(00:07:26) Examining Economic Migration Trends: Jonathan Williams on Voice of Reason - American Legislative Exchange Council
Simply Economics
Economic Consequences of US Presidential Election and Beige Book Signals Slowdown
Trump's economic agenda vs. Kamala Harris' economic agenda. The Beige Book report reveals a widespread economic slowdown. Plus, the depletion of pandemic-era liquid wealth and the impact of economic migration trends on states' economies.Sources:https://www.theguardian.com/business/article/2024/sep/05/donald-trump-us-economy-coal-oil-elon-musk-peter-thielhttps://www.actionforex.com/live-comments/566490-feds-beige-book-signals-slowdown-with-widespread-stagnation-across-districts/https://www.frbsf.org/research-and-insights/blog/sf-fed-blog/2024/09/04/economic-letter-video-pandemic-era-liquid-wealth-is-running-dry/https://alec.org/article/examining-economic-migration-trends-jonathan-williams-on-voice-of-reason/Outline:(00:00:00) Introduction(00:00:47) Fed’s Beige Book signals slowdown with widespread stagnation across districts(00:04:03) Economic Letter Video: Pandemic-Era Liquid Wealth is Running Dry(00:07:26) Examining Economic Migration Trends: Jonathan Williams on Voice of Reason - American Legislative Exchange Council
- Duration:
- 11m
- Broadcast on:
- 05 Sep 2024
- Audio Format:
- mp3
[ Music ] >> Good morning and welcome to Simply Economics. It's Thursday, September 5th. [ Music ] On today's show, Trump's economic policies could potentially weaken the U.S. economy, make it less competitive and less equal. The Fed's beige book signals a slowdown with widespread stagnation across districts. Plus, we'll be examining economic migration trends with Jonathan Williams on Voice of Reason, American Legislative Exchange Council. This coverage and more, up next. [ Music ] I'm David and you're listening to Simply Economics. [ Music ] I apologize for the confusion, but there seems to be an error with the prompts provided. The closing sentence appears to be incomplete. However, let's move on to some important economic news. The Federal Reserve's latest beige book report is painting a picture of a slowing U.S. economy. The report found that while economic activity grew slightly in three districts, the number of districts reporting flat or declining activity increased from five in the previous period to nine in the current period, indicating broader stagnation across the country. For more on this, let's bring in our Simply Economics correspondent. What stood out to you in this latest beige book report? The big takeaway is that the U.S. economy appears to be losing momentum based on the anecdotal evidence gathered by the Fed. The fact that nine out of the Fed's 12 districts reported either no growth or outright contraction is a notable shift from the previous beige book. It suggests that the headwinds facing the economy, such as high inflation and rising interest rates, are starting to take a more significant toll on activity. The report also had some interesting insights on the labor market. What did it find there? The beige book described employment levels as generally flat to up slightly, with five districts noting modest increases in headcounts. However, there were also signs that the labor market is cooling. Some districts reported that firms are reducing shifts, leaving positions unfilled or trimming headcounts through attrition, though the report noted that layoffs remain uncommon. This aligns with other recent data showing that job openings have declined and jobless claims have ticked up. Even as the unemployment rate remains historically low. And what about wage growth and inflation? Those have been key focuses for the Fed. The beige book found that wage growth continues at a modest pace, consistent with the recent trend of slowing wage increases. This suggests that the very tight labor market may be starting to loosen a bit, reducing upward pressure on wages. On the inflation front, the report said that overall prices increased modestly during the period, but three districts saw only slight rises in selling prices. Non-labor input costs were mostly described as modest to moderate and generally easing, though one district reported a slight uptick in input cost increases. So inflation pressures seem to be moderating somewhat, but not rapidly. Stepping back, what's the big picture here? Is a recession looking more likely? The beige book definitely supports the notion that economic growth is slowing significantly. Many economists have been warning that the risk of a recession is rising, as the Fed continues to aggressively hike interest rates to combat inflation. While the beige book doesn't explicitly forecast a recession, it does highlight the growing challenges facing businesses and consumers. A lot will depend on whether inflation continues to cool in the coming months, allowing the Fed to ease up on its rate hikes. But the beige book suggests that the soft landing the Fed is aiming for is looking increasingly challenging to achieve. Thanks for the economic insights. And speaking of financial matters, a new report from the Federal Reserve Bank of San Francisco is shedding light on how the extra savings many households built up during the pandemic have now been depleted. Here with more details is our economics correspondent. So break this down for us. What exactly did this report find in terms of household savings? The key finding is that by late 2021, middle and lower income households in the U.S. had already spent all of the extra liquid wealth they had accumulated during the pandemic through stimulus payments, reduced spending, and other factors. Higher income households followed a few months later, exhausting their pandemic era savings buffer by mid 2022. And where do households savings stand now compared to before the pandemic? As of 2024, the liquid wealth held by U.S. households has actually fallen below the pre-pandemic trend lines that were projected. So not only have the extra savings been spent down, but households now have even less liquid wealth than would have been expected if the pandemic had never happened. That's a concerning trend. Are there any other warning signs in terms of household finances? Unfortunately, yes. The report also found that credit card delinquencies, meaning late or missed payments, have been trending higher and have now surpassed the levels seen before the pandemic. This suggests that a growing number of households are struggling to keep up with their bills and debt payments. What are the potential economic impacts of these depleted savings and rising delinquencies? The big concern is the effect this could have on consumer spending going forward. With less savings to fall back on and more households falling behind on debt, it may constrain their ability and willingness to spend. Consumer spending is a huge driver of economic growth, so any slowdown there could have ripple effects throughout the economy. Are certain households or demographics likely to feel these impacts more than others? The report doesn't break down the data by specific groups, but in general, lower and middle income households tend to have less of a financial cushion to absorb shocks and disruptions. They also tend to dedicate more of their income to essential spending that can't easily be cut. So it's likely that those households will feel the squeeze more acutely than higher income households who have more flexibility. Stepping back, what's the big picture takeaway from this report for the economic outlook? I think it underscores that even though we're now a few years removed from the acute phase of the pandemic, many households are still feeling lasting financial strains from that period. And with savings depleted and debts rising, a lot of consumers just don't have as much financial breathing room as they did pre-pandemic. That introduces some fragility and downside risks for consumer spending and the broader economy. Of course, there are a lot of other economic cross-currents right now in terms of inflation, interest rates, and job growth that will also be key to watch. But the household financial picture painted by this report is certainly an important piece of the puzzle to keep an eye on. Thanks as always for your analysis and insights. On a related note, economic migration trends across the United States are revealing a stark contrast between states with business-friendly policies and those with heavy regulatory burdens. Companies and individuals are increasingly moving from high-tax states like California and New York to more economically welcoming states such as Texas and Florida. Here to discuss the latest developments is our correspondent. So, what are some of the key factors driving this migration? Well, David, it's a combination of factors, but tax policy and regulatory environment play a significant role. States with lower taxes and fewer regulations are attracting businesses and high-income earners who are seeking a more favorable economic climate. We've seen major corporations like Chevron and Tesla relocate their headquarters from California to Texas, for example. This is not just about the companies themselves, but also the ripple effect on local economies. And what kind of impact does the departure of a major company like Chevron have on a state like California? The effects can be devastating, David. When a large corporation leaves, it's not just the direct loss of jobs and tax revenue from the company itself. There's also the impact on secondary industries such as service providers and local suppliers who rely on that company's presence. This can lead to a domino effect of economic decline in the affected regions. California, once seen as a land of opportunity, is now facing the reality that it could lose up to five U.S. House districts by the end of the decade due to population loss to other states. So, what are some of the long-term challenges for states experiencing this kind of economic migration? With a shrinking tax base and fewer economic opportunities, these states can face deepening budget deficits and a struggle to maintain essential services. It becomes a vicious cycle where the loss of businesses and high-income earners leads to further economic decline, making it even harder to attract new investment and talent. Policymakers in these states will need to take a hard look at their tax and regulatory policies if they want to stem the tide of economic migration. There's also been some discussion about potential government policies to address inflation, such as price controls on food and health care. What are the economic implications of such measures? While the intention behind price controls may be to curb inflation, there's concern that such measures could actually do more harm than good. For example, grocery stores operate on very thin margins, so if they're forced to sell goods at artificially low prices, it could drive many of them out of business. This could lead to food deserts in some areas and further economic disruption. Price controls also distort market signals and can lead to shortages and other unintended consequences. Most economists would argue that addressing the root causes of inflation, such as monetary policy and supply chain issues, is a better approach than trying to control prices directly. It's a complex issue with significant implications for states and the national economy. Thanks for the insights and analysis. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [BLANK_AUDIO]