The Economy

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? Scoop: Nobel winners see Trump inflation bomb

Photo illustration: Tiffany Herring/Axios

Sixteen Nobel prize-winning economists are jumping into the presidential campaign with a stark warning: Former President Trump's plans would reignite inflation and cause lasting harm to the global economy if he wins in November. Why it matters: The Nobel laureates are lending their academic prestige to a political argument the Biden administration has been making for weeks: Inflation would be worse under Trump, Axios' Hans Nichols scoops. "While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden's economic agenda is vastly superior to Donald Trump," the 16 economists write in a letter spearheaded by Joseph Stiglitz, who won the Nobel prize in 2001. ? Between the lines: The economists' claim is part of a broader attempt by Biden's campaign to turn the 2024 election into a choice between the two candidates' plans for the future — not a referendum on Biden's record.

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Inflation blame game

Illustration: Sarah Grillo/Axios

Republicans are twice as likely as Democrats to blame the government for inflation. Democrats are twice as likely as Republicans to blame corporate greed, according to a new Axios Vibes survey by The Harris Poll. Why it matters: Who's at fault for higher prices in post-COVID America will be a linchpin of tomorrow night's presidential debate in Atlanta. Between the lines: On the surface, the survey's findings offer some comfort to Biden. They suggest most Democrats and half of independents still give him the benefit of the doubt, Axios' Margaret Talev and Courtenay Brown write. But if 1 in 4 Democrats sees the current government as the biggest driver of high prices, that could be decisive in a close election. "Biden, having limited room to maneuver on inflation, will try to keep hammering corporations, especially credit cards and the airlines, for hidden fees — anything to deflect," said John Gerzema, CEO of The Harris Poll. ? By the numbers: Party ID is the biggest predictor of blame. 41% of overall respondents say government spending and policies are most to blame for higher prices. 39% say companies bolstering profits were more to blame. 20% put the finger on supply chain disruptions. 56% of Republicans — but just 41% of independents and 26% of Democrats — blame the government. 54% of Democrats — but just 41% of independents and 23% of Republicans — blame businesses. ? Go deeper ... Hillary Clinton writes in the N.Y. Times that she's the only person to have debated both Trump (in 2016) and Biden (in the '08 primary). Expectations for Trump are so low, she says,"that if he doesn't literally light himself on fire ... some will say he was downright presidential." Biden "starts from a disadvantage because there's no way he can spend as much time preparing as I did eight years ago. Being president isn't just a day job." Gift link (no paywall) ...

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? Biden's inflation bully pulpit

Photo illustration: Shoshana Gordon/Axios. Photo: Alex Wong/Getty Images

The Biden administration is making a not-so-subtle push to encourage companies to exercise pricing restraint, Axios Macro co-author Courtenay Brown reports. ?️ Companies that announce splashy price reductions can expect public praise from the highest levels of government — while attacks on sky-high profit margins, fees and other consumer inconveniences await companies that raise prices. In recent weeks, the administration has applauded Target, Walmart and other grocery chains for beginning to "answer the President's call to lower prices for household goods." ⏸️ Reality check: These price cuts alone are not enough to bring down monthly inflation figures. But the Biden camp hopes highlighting them will cause inflation-weary voters to take notice of day-to-day improvements.

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? Exclusive: U.S. Chamber's new agenda

Graphic: U.S. Chamber of Commerce

The U.S. Chamber of Commerce is launching a new agenda today, telling politicians that economic growth should be the top issue in the 2024 election and beyond, Axios' Courtenay Brown and Neil Irwin report. Why it matters: The influential business group is telling elected officials to prioritize economic policies that could return U.S. economic growth to the 3%+ rates that prevailed in the second half of the 20th century — not the sub-2% growth economists project for the decades ahead. ? The big picture: From the 1950s through 2010, demographic tailwinds supported rapid growth, as Baby Boomers entered the primes of their careers and more women joined the workforce. Now, Boomers are retiring. Women's labor force participation is already at an all-time high, so may not have further to rise. And the outlook for future immigration rates is uncertain. "When you have the type of tailwinds that we had from 1950 to 2010, you can sometimes get policy wrong and still have a pretty good, growing economy," Suzanne Clark, president and CEO of the Chamber, tells Axios. In an op-ed for USA Today, Clark writes that the U.S. has a mature economy — increasingly service driven — and demographics are not on our side." ? What's next: The Chamber will release a series of memos on issues they see as central to this goal — including AI, affordable childcare and tax policy — in the months leading up to the election. Keep reading ... Go deeper: Read the new agenda.

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Who Broke The Economy?

Inflation and a broken supply chain created chaos across the world. Corporate consolidation is the reason it all happened.

During the COVID-19 pandemic, it felt like we ran out of everything: toilet paper, hand sanitizer, microchips, exercise bikes, and more. High demand and supply shortages rocked the economy. Now we know that it was the corporations that did it to themselves.

In his new book How the World Ran out of Everything: Inside the Global Supply Chain, veteran New York Times reporter Peter Goodman who covers the global economy unspools the long and sordid history of how the supply chain went global, then consolidated, and ultimately ended up in the hands of just three companies — creating a complicated and surprising crisis that has unfolded around the world.

Then, as inflation began to set into the economy, corporations saw a huge opportunity to raise prices as consumers grew desperate — and they took it, giving us “greedflation.” In this episode of Lever Time, Goodman and Lindsay Owens, the executive director of The Groundwork Collaborative, sit down with senior podcast producer Arjun Singh to unpack how that gave us inflation.

To read an un-edited transcript of the episode, click here.

https://www.levernews.com/who-broke-the-economy/

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? Labor market losing steam

Illustration: Sarah Grillo/Axios

The labor market is showing signs of weakness, Axios Macro co-authors Courtenay Brown and Neil Irwin write. Employers are easing hiring, and the share of jobless Americans is rising. ? By the numbers: There were 206,000 jobs added to U.S. payrolls last month, according to today's jobs report — a decent gain. But downward revisions to prior months' data show a more rapid slowdown than previously thought. ? Why it matters: The Fed might not be able to continue its inflation fight without risking further weakness in a labor market that is the bedrock of the economy. Today's jobs numbers in isolation probably aren't enough to trip alarm bells, but paired with softer readings on inflation and consumer spending, a September interest rate cut now looks more likely than not. Go deeper.

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? Used cars get cheaper

Data: Cox Automotive; Chart: Axios Visuals Used vehicle prices are plummeting, Axios Closer co-author Nathan Bomey reports — good news if you're in the market for a ride, bad news if you've got a trade-in. Why it matters: Used car prices were a major driver of post-pandemic inflation. ? By the numbers: Average wholesale prices declined 8.9% in June to $17,934, compared with a year earlier, according to Cox Automotive's Manheim Used Vehicle Value Index. ? The price declines are hitting EVs the hardest, as choices proliferate and some consumers balk at the chance to go electric. Used EV prices are down 16.6% over the last year, and the average price of a 2023 Tesla Model 3 with two-wheel-drive has plunged 40% in a year, according to Manheim.

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? America's wage boost

Data: Oxfam. Chart: Rahul Mukherjee/Axios Just 13% of workers in the U.S. are now earning less than $15 an hour. Two years ago, that number was 31.9%, Axios' Felix Salmon writes from new data by Oxfam. Why it matters: Even accounting for inflation — $15 an hour in 2024 has the same buying power as about $14 in 2022 — this is remarkable progress. The boost is meaningful for the millions of Americans who need (and typically spend) every additional dollar they earn.

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Confidence is building that inflation is receding

The latest Consumer Price Index report, out Thursday morning, revives confidence that America's inflation problem is truly receding.

https://www.axios.com/2024/07/11/inflation-receding-cpi-report-prices?

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? Goldilocks economy

Data: Department of Labor. Chart: Axios Visuals There's lots to like about America's economy, Axios' Courtenay Brown writes: The Consumer Price Index yesterday was as good as an economic report can get. In June, CPI fell (yes, deflation!) for the first time since 2020. The unemployment rate is edging up, but still at an historically low level. Those looking at their 401(k)s can be pleased: Stocks are near a record high. Why it matters: This is the economic sweet spot that Fed officials have been hoping for. From the standpoint of the Biden administration, the economy is performing just as they would have hoped. ? The big picture: The economy is no longer in the rip-roaring state that helped stoke inflation. Instead economic activity is slowing — so far — in a way that's not too sudden. The gentle cooling gives the Fed room to cut interest rates possibly as soon as September.

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Economy

 

Consumer prices in the US fell in June for the first time since the start of the Covid-19 pandemic. The Consumer Price Index dropped 0.1% from May, which helped to slow the annual rate of inflation to 3% from 3.3% in May, according to a new report from the Bureau of Labor Statistics. Falling gas prices as well as a drop in new and used car prices helped to usher in the first month-on-month decline since May 2020, the data showed. The better-than-expected inflation report further bolstered hopes that the Federal Reserve will begin cutting interest rates sooner than later and help make borrowing money less expensive for many Americans.

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Economic red flags

Illustration: Annelise Capossela/Axios

Today's jobs numbers confirm that something is going wrong in the American economy — and may suggest that a recession is imminent. The new data is a sign that the Fed should have started cutting interest rates months ago, Axios Macro co-author Neil Irwin writes. "Yellow flags had started to pop up in the labor market data over the past few months, but now the flags are turning red," Nick Bunker, of Indeed Hiring Lab, wrote in a note. ? The big picture: The July employment numbers showed weak job creation and the highest unemployment rate since October 2021. The jobless rate is still low, but in a healthy economy, the kind of increase we've seen this year — a gain of 0.6 percentage points since January — simply doesn't happen. When it does, it's usually a warning sign that a recession is imminent. ? What we're watching: Ten-year U.S. Treasury yields have plunged to 3.82% — down from 4.5% a month ago — because markets now anticipate significant rate cuts to combat incipient economic weakness. The big question now is how aggressively the Fed will react. Go deeper.

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Unemployment rise spurs fears of slowdown, yet recession signals have been wrong — so far

WASHINGTON (AP) — A surprising rise in the U.S. unemployment rate last month has rattled financial markets and set off new worries about the threat of a recession — but it could also prove to be a false alarm.

https://apnews.com/article/economy-recession-jobs-unemployment-c7f1985b1ab3a7b781920c2693cd0438?

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? Boy who cried recession

Illustration: Annelise Capossela/Axios

This time two years ago, seemingly every economist worth their salt was predicting a recession was imminent. They were wrong then. But that doesn't mean we're out of the woods now, Axios' Neil Irwin writes. ? Between the lines: There's a bit of a "boy who cried recession" phenomenon now. The fact that many forecasters made incorrect recession predictions two years ago is fueling complacency about the possibility that a serious downturn will arrive soon. ? Reality check: Subtle but worrying signs in economic data over the past several weeks have shown cracks in what has been a robust post-pandemic expansion. The July jobs numbers, out yesterday, were the least subtle and most worrisome of them all. What we're watching: Whether interest-rate cuts that the Fed is nearly certain to commence at its mid-September policy meeting will be enough to arrest the emerging economic weakening before it goes too far.   ? Global market plunge     Headlines from The New York Times, Financial Times   Fears of a U.S. recession tanked global markets today, with Japanese stocks suffering their biggest single-day rout since 1987's Black Monday. Wall Street's fear gauge, the VIX, is trading at levels not seen since COVID times, in June 2020. Why it matters: Friday's dismal U.S. jobs report capped a series of worrying signs over the past few weeks, with clear cracks in what had been a robust post-pandemic expansion, Axios Neil Irwin writes. In Japan, the Nikkei average shed a staggering 12.4% — the index's worst showing in percentage terms since the October 1987 crash, Reuters reports. The Nikkei's 4,451-point loss was the biggest ever — eclipsing the 3,836 points it lost on Oct. 20, 1987, when the Black Monday crash hit Japan. Get the latest.

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? World's 10 biggest companies

Cover: Fortune

For the first time since 2018, the U.S. has more companies than China on Fortune's Global 500 list, which ranks the world's largest corporations by revenue, Axios Markets co-author Emily Peck writes. The top 10: ?? Walmart ?? Amazon ?? State Grid ?? Saudi Aramco ?? Sinopec ?? China National Petroleum ?? Apple ?? UnitedHealth Group ?? Berkshire Hathaway ?? CVS Health ? Between the lines: China's economy, the world's second-largest, has faltered lately, dragged down by a yearslong housing crisis and lackluster consumer demand. Full list.

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Japan’s share benchmark soars nearly 11% a day after massive sell-offs that shook Wall Street

NEW YORK (AP) — Japan’s benchmark Nikkei 225 index soared nearly 11% early Tuesday, a day after it set markets tumbling in Europe and on Wall Street.

https://apnews.com/article/stocks-markets-nikkei-economy-c6240977e9482bf7207abc53b2a11e58?

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Global stock panic

Data: Yahoo Finance; Chart: Axios Visuals Today's plunge in global markets seems to have been driven by complex international trades — not by a loss of confidence in the U.S. economy, Axios Macro co-author Neil Irwin writes. There's no reason that a 0.2 percentage point rise in the U.S. unemployment rate should trigger a 12% collapse in the price of Japanese stocks — the selloff that touched off a day of chaos worldwide. ? The S&P 500 ended the day down more than 2%, its biggest one-day drop in nearly two years. But there's more going on than fallout from Friday's jobs report. Several of the biggest tech stocks were down because Wall Street is worried those companies are spending too much money on AI, for example. ? The bottom line: There are moments when markets just have a wild and woolly feel to them — when the scale of the moves is unmoored to the changes happening on the ground. It often happens when players with big, leveraged positions are forced to unwind them all at once. This looks like one of those times. Go deeper.

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Calm returns to Wall Street, and stocks bounce back after their worst drop in nearly 2 years

NEW YORK (AP) — A rising tide swept stocks higher, and calm returned to Wall Street after Japan’s market soared earlier Tuesday to claw back much of the losses from its worst day since 1987.

https://apnews.com/article/stocks-markets-rates-nikkei-79deff7e82224b37c77ee8867c10a953?

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? Wall Street's wild day

The VIX — Wall Street's "fear gauge" — hit its highest level since the COVID selloff yesterday morning. Data: Yahoo Finance. Chart: Axios Visuals ? New this morning: Japan's main stock index — the catalyst for yesterday's selloff — closed 10% higher today, 24 hours after it plunged a near-record 12.4%. (Today was the Nikkei's biggest daily percentage gain since October 2008, and highest ever in points.) Futures tied to the S&P 500 — which fell 3% yesterday — indicate the index will rebound after its worst day in almost two years. The U.S. economic outlook has dimmed. But the sharp stock selloff of recent days appears to have its roots in more obscure forces, Axios' Neil Irwin writes. Why it matters: The stock adjustment doesn't, in and of itself, mean a recession is looming. ? Stat for the books: Bloomberg calculates that in the past three weeks, some $6.4 trillion has been erased from global stock markets. Yesterday's global debacle looks to be driven significantly by technical factors — including trades on the Japanese yen, big-company tech stocks, and low volatility reaching the end of their runs. None of that means the economy is in the clear. The alarm bells from the latest round of data are still loud. ? How it works: For years, hedge funds have been able to exploit a big gap between U.S. and Japanese interest rates to profit off the "carry trade." That no longer works, with the Bank of Japan raising rates and the Fed set to cut them. ? Plus: The U.S. stock market rally has been built on a handful of mega-cap tech stocks that are poised to profit from the AI boom. Prices of those shares have looked frothy for months, and now the froth looks to be blowing off. On June 18, chipmaker Nvidia's shares were up 181% for the year. They have declined sharply since then — but are still up 107% for the year. Keep reading ...

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Financial markets around the world stabilize after recent rout. Here’s what to know

Markets on Wall Street and in Asia are stabilizing Tuesday following a mini-panic caused by an assortment of factors that stretched from late last week through Monday.

https://apnews.com/article/financial-markets-wall-street-interest-rates-recession-cc9f4f487f14915b8720d74ffd698516?

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Stock markets

 

US stocks closed lower Wednesday as Wall Street struggles to stage a comeback from the week's bruising losses. The Dow fell 234 points, or 0.6%, after gaining more than 400 points earlier in the day. The S&P 500 declined 0.8% and the Nasdaq Composite lost 1.1%. While there are no immediate signs of a recession, the highly volatile market has many investors on edge about a potential US economic slowdown. Meanwhile, Asian markets made solid gains on Wednesday then quickly lost steam. Japan's benchmark Nikkei 225 ended down 0.7% today, snapping a two-day winning streak.

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? Stocks' best day in two years

Data: Yahoo Finance. Chart: Axios Visuals A week after the S&P 500's worst day in nearly two years, the index had its best day since 2022 yesterday after jobless claims came in lower than expected. In normal times, financial markets don't react very much to the weekly unemployment claims data. These aren't normal times: Markets are looking for any hint, however small, about the state of the economy, Axios Macro's Neil Irwin writes. Go deeper.

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Mortgage rates

 

Mortgage rates have plunged to their lowest level in more than a year on expectations that the Federal Reserve may cut interest rates next month. This is welcome news to prospective homebuyers in America's notoriously unaffordable housing market. The standard 30-year fixed-rate mortgage averaged 6.47% this week, down substantially from last week's average of 6.73%. This marks the lowest level since May 2023 but home prices are still a major obstacle for many Americans — especially in large metropolitan areas. Chicago, Phoenix, Washington and Anaheim, California, have joined New York, Los Angeles, Atlanta and Boston as cities where total home values top $1 trillion, according to a report released Thursday from Redfin.

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Americans’ refusal to keep paying higher prices may be dealing a final blow to US inflation spike The great inflation spike of the past three years is nearly spent — and economists credit American consumers for helping slay it. Read more.

Key points: On Monday, the Federal Reserve Bank of New York reported that Americans’ expectations of how much they’ll spend in the next 12 months has declined — and so has their outlook for inflation. Consumers expect their spending to grow 4.9% in the coming year, according to their  survey. That is the lowest such reading since April 2021, when inflation was beginning to surge.   The reluctance of consumers to keep paying more has forced companies to slow their price increases — or even to cut them. The result is a cooling of inflation pressures. In that way, consumer expectations for inflation can be self-fulfilling.   Still, a key question now is whether shoppers will pull back so much as to put the economy at risk. Consumer spending makes up more than two-thirds of economic activity. With evidence emerging that the job market is cooling, a drop in spending could potentially derail the economy. Such fears caused stock prices to plummet a week ago, though markets have since rebounded.

RELATED COVERAGE ➤ How to get relief from unexpectedly high medical bills   Homeowners race to refinance as mortgage rates retreat from 23-year highs   Want to speed up a road or transit project? Just host a political convention

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? ➡️ ☕ Starbucks nabs "hall of fame CEO"

Data: Yahoo Finance. Chart: Axios Visuals Starbucks shares soared today on news that the company poached Chipotle's extremely popular boss, Brian Niccol, as its new chair and CEO. Niccol is "a hall of fame restaurant CEO" who will use his savvy marketing lessons from Chipotle to "create brand buzz" at Starbucks, TD Cowen analyst Andrew Charles said in a research note. ? Context: Niccol took the reins at Chipotle in 2018, when it was still reeling from an outbreak of foodborne illness. Sales more than doubled in the next five years, Axios Closer' co-author Nathan Bomey reports. Long wait times and supply chain issues have been dogging Starbucks, fueling a sales slowdown. Two hedge funds have also been pushing the chain to make a leadership change. Go deeper.