US ECONOMY & POLITICS

U.S. Jobless Claims Hover Near Pandemic Low – Wall Street Journal, 9/23/2021

• Jobless claims climbed slightly last week, as demand for workers keeps a lid on layoffs and the economic recovery shows signs it is holding up during the latest Covid-19 surge.
• Initial unemployment claims, a proxy for layoffs, rose by 16,000 to a seasonally adjusted 351,000 last week from a revised 335,000 the prior week, the Labor Department said Thursday.
• Despite the recent decline in claims, weekly totals remain about 100,000 higher than they were before the pandemic.
• Claims averaged 218,000 in 2019.
• More broadly, the economy had roughly 5.3 million fewer jobs in August compared with February 2020, ahead of the pandemic.
• Continuing claims, a proxy for the number of workers receiving benefits, rose by 131,000 to 2.85 million in the week ended Sept. 11, up from the prior week’s pandemic low.

Growth at U.S. Services, Factories Stumbles to One-Year Low – Bloomberg, 9/23/2021

• A measure of activity at U.S. service providers and manufacturers in September grew at the slowest pace in a year, restrained by nagging supply-chain and labor challenges as well as the delta variant.
• The IHS Markit flash composite index of purchasing managers at service providers and manufacturers dropped to 54.5 from 55.4 a month earlier, the group reported Thursday.
• The group’s gauge of activity at U.S. services slid to its lowest level since July of last year.
• Employment in the sector shrank for the first time since June 2020 amid persistent hiring difficulties and more limited demand.
• At manufacturers, the PMI slipped to a five-month low. While still robust at 60.5, the gauge eased on the back of the weakest output reading since October and slower growth in orders.
• Order backlogs at manufacturers, however, shot up to the highest in data back to 2007. Production lines remain beset by materials shortages, shipping challenges and difficulty retaining and attracting skilled labor.
• The report showed the IHS Markit measure of factory output prices rose to a fresh series high. Manufacturing lead times remained close to the longest on record.

Fed Tees Up Taper and Signals Rate Rises Possible Next Year – Wall Street Journal, 9/23/2021

• The Federal Reserve signaled it was ready to start reversing its pandemic stimulus programs in November and could raise interest rates next year amid risks of a lengthier-than-anticipated jump in inflation.
• The Fed’s rate-setting committee, at the end of a two-day gathering, indicated in its postmeeting statement Wednesday that it could start to reduce, or taper, its $120 billion in monthly asset purchases as soon as its next scheduled meeting, Nov. 2-3.
• Mr. Powell said officials hadn’t made a formal decision on how quickly to reduce purchases, but most agreed that a gradual process “that concludes around the middle of next year is likely to be appropriate.”
• New projections released at the end of the Fed’s two-day policy meeting showed half of 18 officials expect to raise interest rates by the end of 2022. In June, just seven officials anticipated that, with most instead penciling in rate increases in 2023.
• The projections released Wednesday show that half of the officials expected interest rates would need to rise at least 1 percentage point from their current level by the end of 2023, and by another three-quarters of a percentage point in 2024.
• Officials expect slower growth, higher inflation and higher unemployment this year than they did in June, the projections showed, underscoring the effects of the Delta variant of the coronavirus.

Biden Pushes Democrats to Find Consensus on Budget Package – Wall Street Journal, 9/23/2021

• President Biden pressed lawmakers to reach a consensus on his sweeping $3.5 trillion spending proposal during a series of meetings at the White House on Wednesday, aiming to settle sharp intraparty differences that threaten to derail his legislative agenda.
• During his sit-down with moderate Democrats, lawmakers discussed reducing the size of the package, which would expand access to healthcare, offer universal prekindergarten and reduce carbon emissions, among other measures, to below $3 trillion, according to two people familiar with the meeting.
• Progressives, meanwhile, continued to threaten to block passage of a separate, roughly $1 trillion infrastructure bill next week if it comes to the House floor before the larger package.
• Top Democrats are hoping to reach a new agreement on the contours of the social-welfare legislation by Monday to reassure progressives about that efforts’ fate, while also clearing the way for the infrastructure legislation.
• But reaching even a rudimentary framework by Monday will be challenging, given the complexity and scope of the bill under discussion and the concerns voiced by a range of lawmakers.
• Mr. Manchin said Wednesday night that he thought a deal could be possible eventually.

Supply-Chain Crunch, Chip Shortage Focus of White House Meeting – Wall Street Journal, 9/23/2021

• The Biden administration is seeking more information from companies struggling with the global shortage of semiconductors, an effort designed to increase transparency in supply chains and ease bottlenecks.
• The request for information, which is voluntary for companies, will be made Thursday as the White House hosts a meeting of semiconductor producers and users. Administration officials said the objective is to get more information about supply and demand problems and identify ways the government can help.
• Companies expected to participate include Apple, Ford Motor, General Motors, Intel, Medtronic, Samsung Electronics, Stellantis and Taiwan Semiconductor Manufacturing Co.

EUROPE & WORLD

Delta Variant, Supply Chain Bottlenecks Slow European Economy – Wall Street Journal, 9/23/2021

• Europe’s economy slowed in September as supply chain bottlenecks and worries over the Delta variant weighed on businesses across the continent, adding to signs the global economy is experiencing a soft patch amid an uneven recovery.
• A gauge of business activity in the 19-nation eurozone recorded sharply slower growth in September in both manufacturing and services, extending a slowdown that began in August after activity in July hit a 21-year high, when widening vaccination campaigns allowed public health restrictions to be rolled back and economies to rev up.
• Forecasting firm IHS Markit said its index of eurozone activity, drawn from surveys of purchasing managers, fell to a five-month low of 56.1 in September from 59 in August. The fall was steeper than predicted.
• Thursday’s surveys show manufacturing activity slowed in Europe as supply chain disruptions and rising prices for raw materials hurt factory output and lengthened order backlogs.
• Activity in the European services sector also slowed, IHS Markit said, as consumer nerves over Delta dented spending after a summer rebound. The slowdown was less marked than in manufacturing, however.
• Activity in Germany slowed to a seven-month low and growth in France slowed to its weakest pace in five months, IHS Markit said.
• Activity in the U.K., which isn’t in the eurozone and left the European Union Jan. 31 last year, also slowed in September.

China Makes Preparations for Evergrande’s Demise – Wall Street Journal, 9/23/2021

• Chinese authorities are asking local governments to prepare for the potential downfall of China Evergrande Group, EGRNF -12.13% according to officials familiar with the discussions, signaling a reluctance to bail out the debt-saddled property developer while bracing for any economic and social fallout from the company’s travails.
• The officials characterized the actions being ordered as “getting ready for the possible storm,” saying that local-level government agencies and state-owned enterprises have been instructed to step in to handle the aftermath only at the last minute should Evergrande fail to manage its affairs in an orderly fashion.
• They said that local governments have been tasked with preventing unrest and mitigating the ripple effect on home buyers and the broader economy, for example by limiting job losses—scenarios that have grown in likelihood as Evergrande’s situation has worsened.
• Real estate directly accounts for 7.3% of national gross domestic product, according to official figures, though analysts say that real estate and real-estate-linked industries collectively drive nearly one-third of economic output.

Foreign Businesses Say They Feel Effects From China’s Turn Inward – Wall Street Journal, 9/23/2021

• U.S. and European companies operating in China are feeling the effects as the country increasingly turns inward by keeping its borders closed and showing growing favoritism toward domestic companies, two business lobbies said in separate reports.
• An annual survey, released Thursday by the American Chamber of Commerce in Shanghai, showed that 45% of 338 members surveyed said China’s strict rules related to entering the country had a negative impact on their operations, while more than a quarter said they had hit profitability in the country.
• Half of the companies that took part in the AmCham Shanghai survey conducted in June and July felt strong or some favoritism toward local companies, up from 47% a year ago, particularly in areas such as technology hardware and software, pharmaceuticals and medical devices and life sciences.
• Still, the AmCham Shanghai survey indicated that among its member companies, optimism about the business outlook in China over the next five years rose this year after declining in the past two years.
• Seventy percent of the AmCham Shanghai members surveyed expect revenue growth in China over the next three to five years to outpace their global operations.

Turkey Delivers Surprise Rate Cut, Lira Sinks to Record Low – Bloomberg, 9/23/2021

• Turkey’s lira fell to a record low after the central bank cut its benchmark interest rate on Thursday, unleashing a new bout of market turbulence and reflecting the long shadow cast by President Recep Tayyip Erdogan over monetary policy.
• The Monetary Policy Committee reduced its key one-week repo rate by 100 basis points to 18%.
• All but one of the 23 economists surveyed by Bloomberg predicted the central bank would keep rates unchanged at 19%.
• Turkish inflation unexpectedly climbed to 19.25% last month, pushing the nation’s real interest rate below zero for the first time since October.
• The central bank said the recent increase in inflation was due to transitory factors and removed a pledge to keep its benchmark rate above inflation and maintain tight monetary policy.

BoE sees growing case for rate rise as inflation to stay higher for longer – Reuters, 9/23/2021

• The Bank of England said the case for higher interest rates “appeared to have strengthened” on Thursday after it nudged up its forecast for inflation at the end of the year to over 4%, more than twice its target rate.
• The BoE said it expected the overshoot to be temporary, but two policymakers called for an immediate halt to the British central bank’s 895 billion pound ($1.23 trillion) bond purchase program, which is due to run until year-end.
• After the BoE statement, sterling interest rate futures priced in a 90% chance that the BoE would raise rates by February, up from just over 60% before – though some economists say this is premature given the challenges to growth.
• The BoE said it had revised down its expectations for the level of gross domestic product in the third quarter by around 1% from the August report, reflecting supply constraints.
• But it said inflation – which hit a nine-year peak of 3.2% last month – would “temporarily” rise above 4% in the final quarter of the year.

Factmonster – TODAY in HISTORY

• After a three-year journey to the Pacific Northwest, the Lewis and Clark expedition returned to St. Louis. (1806)
• Sigmund Freud, the founder of psychoanalysis, died in London. (1939)
• Vice presidential candidate Richard Nixon delivered his “Checkers speech” rebutting charges of improper campaign financing. (1952)
• Palestinian president Mahmoud Abbas officially requests a bid for statehood at the UN Security Council. (2011)