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What We Read Today 07 March 2016

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • What Surpising Thing Was Found at the Bottom of a Deep Ocean Trench?

  • Would Improved Labor Force Participation Rate Give Faster Economic Growth?

  • What Do Analysts Think the Fed will do the Rest of 2016?

  • How is Donald Trump Increasing Civic Participation?

  • The Roots of Trump's Strength

  • Japan to Cut Growth Outlook Again

  • China is Thinking about a New Interest Rate Mechanism

  • Bloomberg Won't Run

  • Americans Don't Like Immigration

  • And More

Articles about events, conflicts and disease around the world

U.S.

  • US labor market conditions still strong but wage growth weak, Fed likely to resume hiking rates in June (EconTimes)  The US Fed is expected to resume raising interest rates in June as employment is increasing at a rapid pace and slack in labor market is contracting. There is absence of a noticeable rise in wage growth; however, it will not bother the central bank when there are clear indications of acceleration in core price inflation.  Econintersect:  There are a wide variety of opinions on this, with some expecting another rate hike this month, some others arguing for only one hike in 2016 and others thinking there will be no hike.  There are even a few who suggest the Fed might cut in 2016, canceling the December 2015 hike.

  • The Risk I Will Not Take (Bloomberg)  Former New York City mayor Michael Bloomberg will not run for president.

  • More Latinos Seek Citizenship to Vote Against Trump (The New York Times)  Donald Trump is evoking a sense of civil participation.  We all know about the larger primary and caucus turnouts.  Now there's another way he is helping increase citizen activity:  Latino immigrants are accelerating their applications for naturalization so they will be able to vote in November.

  • The Roots of Trump’s Strength (Mauldin Economics)   Donald Trump's supporters tend to be less educated, less well-off, and white. This has become a central, disaffected class in the United States, and while focus has been on other groups, Trump has spoken to this one. He has addressed their economic and cultural interests, and no candidate has done that in a long time.  This strategy is what has made him effective. Yet it also poses a challenge, as this class by itself isn’t large enough to give him the presidency. And it generates an almost unanswerable question: Did Trump plan this strategy or did it just happen? But let’s begin with why poorer, less educated white voters have flocked to him:

Today, people in the lower-middle class are bringing home, at best, $2,000 a month, and they will not own a house but instead pay $1,200 a month to rent an apartment, with the rest going to food and other basics. The lower-middle class can no longer afford what used to be a lower-middle class life.

The Democrats have made a huge case about inequality, assuming that the problem is that the rich own too much. American political culture has rarely been triggered by inequality, but by the inability to acquire the basics of American life. The problem with the Republicans is that they have not noticed that the defining issue of this generation is the collapse in the standard of living of the middle and lower-middle classes. This is part of what brought Trump to where he is today, but only part.

The deeper problem was the perception of the white segment of the lower-middle class that their problems were invisible. They heard talk about African-Americans or Hispanics and the need to integrate them into society. However, from the white lower-middle class perspective, there appeared to be little interest in the challenges facing their demographic. Indeed, there was a perception that the upper strata and the media not only didn’t care about them, but had contempt for their beliefs.

  • Americans Really Don't Like Immigration, New Survey Finds (Bloomberg)  Sixty-one percent of Americans agree that "continued immigration into the country jeopardizes the United States," according to a new poll commissioned by management consulting firm A.T. Kearney that revealed pessimism across a wide range of issues.  The degree of concern is remarkable considering that the question was about all immigration, including the legal kind. Even Republican presidential candidate Donald Trump has said he supports legal immigration into the U.S.  Econintersect:  This result should not be surprising.  From the very beginning of the country there has been substantial resentment against immigrants.

Japan

  • Japan central bank to cut next fiscal year's growth, price estimates (Reuters)  The Bank of Japan (BOJ) is expected to cut next fiscal year's economic and price forecasts at a quarterly review in April, sources say, reflecting growing gloom in the bank after its most recent stimulus measures fell on stony ground.  Downgrading its forecasts could heighten pressure for additional easing measures, though there is waning confidence that monetary policy is providing an effective boost to the economy.

China

  • China mulls creating new interest-rate mechanism (China Daily)   China is exploring the creation of a mechanism that would use a band to guide the country'sinterest rates, an approach aimed at giving the market a greater say in the financial system, according to Yi Gang, vice-governor of the People's Bank of China.  The mechanism being looked at is an interest rate corridor that would be formed through the central bank's deposit and lending facilities to commercial banks.

Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea

  • Unexpected noise discovered at deepest part of world's ocean (AccuWeather)  After sending equipment more than 36,000 feet below the ocean's surface, scientists heard something they didn't expect: noise.  The equipment picked up on sounds from earthquakes, whales, ship propellers and "the clamor" of a typhoon that barreled overhead during the three-week project.  Scientists sent a hydrophone down Challenger Deep trough in the Mariana Trench, near Micronesia, which is deep enough to fit Mt. Everest.

  • If we want more economic growth, we need more workers (James Pethokoukas, American Enterprise Institute)  Here's a good set of policy recommendations (see excerpt below).  But labor force participation is not both a necessary and sufficient condition:  The U.S. economy has outperformed all those in the graph below.

What policies might boost labor force participation and supply (other than the obvious one of immigration)? Here are a few possibilities: a) work-friendly reforms to the Social Security Disability Insurance program so it’s not a permanent exit from the labor force; b) expanded work subsidies to make work more attractive; c) reduced payrolls taxes; d) reduced commute times through better public transit option; and d) relocation assistance for the unemployed.

labor.force.participation.g7.2016


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