Economy

Vice President Kamala Harris has been balancing the challenges of defending “Bidenomics” and charting her own course on the economy.As Vice President Kamala Harris unveiled her economic plans in recent weeks, former President Donald J. Trump has accused her of being a Marxist, a communist and a socialist.When they meet on Tuesday night for their only scheduled presidential debate, Ms. Harris will have the opportunity to rebut those claims and confront Mr. Trump about his record of managing the U.S. economy.She will also lay out her vision, which has been challenging as she tries to defend “Bidenomics” and demonstrate that she has a plan to chart a new course amid widespread economic discontent among many Americans who are struggling with high prices and other affordability issues.In a compressed presidential campaign, Ms. Harris indicated that she would continue many of President Biden’s policies, which aim to raise taxes on companies and punish them for price gouging, while also trying to strike a more business-friendly tone. In some cases, such as her embrace of ending taxation of tips, the vice president has even shown a willingness to adopt the policies put forward by Mr. Trump.How Ms. Harris would ultimately govern if elected will depend largely on the makeup of Congress, but her initial suite of proposals — from taxes to trade to child care — suggests that she would take the economy in a vastly different direction than her Republican opponent.Cost of LivingPerhaps Ms. Harris’s biggest political vulnerability is the run-up in prices that occurred during the Biden administration. Mr. Trump has repeatedly blamed the vice president for causing inflation to surge after the coronavirus pandemic, a phenomenon that stemmed from a mix of factors such as supply chain issues, Russia’s invasion of Ukraine and repeated bursts of fiscal stimulus to keep families and businesses afloat. The higher cost of goods initially hurt Mr. Biden when he was running against Mr. Trump, and Ms. Harris is now facing many of the same concerns from Americans who are feeling negative about a relatively strong economy.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

More faced hardship in the United States last year, the Census Bureau said, as inflation and the end of subsidies outweighed higher incomes.The nation’s poverty rate rose last year even as incomes improved, the government reported on Tuesday, reflecting higher prices and the expiration of the last pandemic relief programs.The share of Americans living in poverty as defined by the Census Bureau’s “supplemental” measure, which takes into account a broader range of benefits and expenses than the official poverty rate, rose to 12.9 percent in 2023, from 12.4 percent in 2022. The median household income, adjusted for inflation, rose to $80,610, finally regaining its prepandemic level.Poverty levels have risen anew in recent years after a wave of pandemic relief aid — and an exceptionally strong labor market that lifted the wages of many at the bottom of the pay spectrum — collided with the most rapid inflation in a generation.Stimulus checks, extra unemployment insurance and expanded tax credits for low-income families cut child poverty in half in 2021, to the lowest rate since record keeping began, in 1967. But the expiration of those supports, along with the jump in prices for food and other necessities, reversed the gains in 2022.“You need two kinds of strategies to keep poverty down: One is the economic strategy, and one is the investments in core programs and the safety net,” said Olivia Golden, interim executive director of the Center for Law and Social Policy, a progressive advocacy group. “To me, the idea that policies have high stakes in terms of the lives of families and their material hardship is very vivid as you look over the last few years.”The income gains were particularly pronounced for low-wage households, rural households and men, with the gap between male and female earnings rising for the first time since 2003. Census officials say that may have been because of an increase in the labor force participation of Hispanic women, who tend to earn less.Poverty Rebounded Sharply in 2022 and 2023As pandemic aid expired and prices rose, the share of Americans living below the poverty threshold went back up.

Data is the “supplemental” poverty rate, which accounts for taxes and subsidies. Gaps in data are due to changes in Census Bureau methodology.Source: Columbia Center on Poverty and Social Policy analysis of U.S. Census Bureau dataBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The Fed gets its last look this week before its policy meeting next week at inflation readings that will help determine the size of widely anticipated interest rate cuts.
Friday’s jobs report provided little clarity on the issue, so it will be left to the consumer and producer price index readings to help resolve the matter.
The focus for Fed officials has shifted, from a laser view on taming inflation to mushrooming fears over the state of the labor market.

People shop at a store in Brooklyn on August 14, 2024 in New York City. 
Spencer Platt | Getty Images

The Federal Reserve gets its last look this week at inflation readings before it will determine the size of a widely expected interest rate cut soon.
On Wednesday, the Labor Department’s Bureau of Labor Statistics will release its consumer price index report for August. A day later, the BLS issues its producer price index report, also for August, a measure used as a proxy for costs at the wholesale level.

With the issue virtually settled over whether the Fed is going to cut rates when it wraps up the next policy meeting Sept. 18, the only question is by how much. Friday’s jobs report provided little clarity on the issue, so it will be left to the CPI and PPI readings hopefully to clear things up.
“Inflation data has taken a backseat to labor market data in terms of influence on Fed policy,” Citigroup economist Veronica Clark said in a note. “But with markets — and likely Fed officials themselves – split on the appropriate size of the first rate cut on September 18, August CPI data could remain an important factor in the upcoming decision.”
The Dow Jones consensus forecast is for a 0.2% increase in the CPI, both for the all-items measure and the core that excludes volatile food and energy items. On an annual basis, that is expected to translate into respective inflation rates of 2.6% and 3.2%. PPI also is projected to increase 0.2% on both headline and core. Fed officials generally put more emphasis on core as a better indicator of longer-run trends.

At least for CPI, the readings are not particularly close to the Fed 2% long-run target. But there are a few important caveats to remember.
First, while the Fed pays attention to the CPI, it is not its principal yardstick for inflation. That would be the Commerce Department’s personal consumption expenditures price index, which most recently pegged headline inflation at 2.5% in July.

Second, policymakers are as concerned about the direction of movement almost as much as the absolute value, and the trend for the past several months has been a decided moderation in inflation. On headline prices in particular, the August 12-month CPI forecast would represent a 0.3 percentage point decline from July.
Finally, the focus for Fed officials has shifted, from a laser view on taming inflation to mushrooming fears over the state of the labor market. Hiring has slowed considerably since April, with the average monthly gain in nonfarm payrolls down to 135,000 from 255,000 in the prior five months, and job openings have declined.

A baby step to start

As the focus on labor has intensified, so has the expectation for the Fed to start rolling back rates. The benchmark fed funds rate currently stands at 5.25% to 5.50%.
“The August CPI report should show more progress in getting the inflation rate back down to the Fed’s 2.0 percent target,” wrote Dean Baker, co-founder of the Center for Economic and Policy Research. “Barring some extraordinary surprises, there should be nothing in this report that would deter the Fed from making a rate cut and quite possibly a large one.”
Markets, however, seem to have made their peace with the Fed starting out slowly.

Futures market pricing on Tuesday indicated 71% odds that the rate-setting Federal Open Market Committee will kick off the easing campaign with a quarter percentage point reduction, and just a 29% chance of a more aggressive half-point cut, according to the CME Group’s FedWatch.
Some economists, though, think that could be a mistake.
Citing the general pullback in hiring coupled with substantial downward revisions of previous months’ jobs counts, Samuel Tombs, Pantheon Macroeconomics’ chief U.S. economist, thinks the “summer slowdown probably will look even sharper in a few months’ time,” and the downtrend in hiring “has much further to run.”
“We’re therefore disappointed — but not surprised — that FOMC members who spoke after the jobs report, but before the pre-meeting blackout, are still leaning towards a 25 [basis point] easing this month,” Tombs said in a note Monday. “But by the meeting in November, with two more employment reports in hand, the case for rapid rate cuts will be overwhelming.”
Indeed, market pricing, while indicating a tepid start to cuts in September, projects a half-point reduction in November and possibly another in December.

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Economists and analysts are dubious of Trump’s promises to slash gas prices or prod interest rates lower.As he seeks to return to the White House, former President Donald J. Trump has pledged to cut Americans’ energy costs in half in the span of a year, part of a plan to reduce inflation and drive mortgage rates back toward record lows.But economists and analysts — and Mr. Trump’s own record from his first term — suggest that it is unlikely that Mr. Trump can deliver on those promises.Mr. Trump’s vow to dramatically reduce Americans’ cost of living hinges in part on his plans to quickly expand oil and gas drilling and reduce government impediments to power plant construction, which he says would slash energy bills by “more than half.” As prices fall, he regularly states, interest rates will come down, along with mortgage rates.But Mr. Trump has not cited modeling or other economic analysis to support his assertions. Economic research and historical experience suggest that presidents have only a limited effect on locally regulated electric utilities or on the cost of oil, which is a globally traded commodity.“He doesn’t really have the tools to lower oil prices enough to cut gasoline prices in half,” said Steven Kamin, a senior fellow at the conservative American Enterprise Institute and former Federal Reserve economist.In all, experts and past evidence suggest that Mr. Trump is over-promising on key economic issues related to prices and interest rates. And that fits with a pattern he established during his earlier campaigns — one in which he emphasizes big, catchy outcomes with little attention to costs or how he might make good on his pledges.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

JPMorgan Chase CEO Jamie Dimon said Tuesday he wouldn’t rule out stagflation.
Dimon’s comments come at a time when investors are turning their attention to signs of slowing growth as inflation has shown signs of cooling.
He said he worries that a raft of inflationary forces on the horizon, such as higher deficits and increased infrastructure spending, will continue to add pressure to an economy still reeling from the impact of higher interest rates.

Jamie Dimon, Chairman and Chief Executive officer (CEO) of JPMorgan Chase & Co. (JPM) speaks to the Economic Club of New York in Manhattan in New York City, U.S., April 23, 2024. 
Mike Segar | Reuters

JPMorgan Chase CEO Jamie Dimon said Tuesday he wouldn’t rule out stagflation, even with greater confidence recently that inflation is coming off its highs.
“I would say the worst outcome is stagflation — recession, higher inflation,” Dimon said at a fall conference from the Council of Institutional Investors in Brooklyn, New York. “And by the way, I wouldn’t take it off the table.”

The chief executive of the largest U.S. bank makes his comments at a time when investors are turning their attention to signs of slowing growth. Recent readings showed pricing pressures increasingly on their way to the Federal Reserve’s 2% inflation target, but reports on employment and manufacturing have revealed some signs of softening.
Investors will get some additional key data this week, with the consumer price index and producer price index coming Wednesday and Thursday, respectively.
But Dimon worries that a raft of inflationary forces on the horizon, such as higher deficits and increased infrastructure spending, will continue to add pressure to an economy still reeling from the impact of higher interest rates.
“They’re all inflationary, basically in the short run, the next couple of years,” Dimon said. “So, it’s hard to look at [it] and say, ‘Well, no, we’re out of the woods.’ I don’t think so.”
The bank leader has previously warned of an economic slowdown. In August, he said the odds of a “soft landing” were around 35% to 40%, implying a recession is the more likely outcome.

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NEW YORK (Reuters) -Wall Street is anticipating a hit to corporate earnings and the stock market if Democratic presidential candidate Kamala Harris wins in November and enacts promised tax increases. Tax policy has emerged as a key focus for investors ahead of the Nov. 5 election. Republican candidate and former President Donald Trump and Harris, who debate on Tuesday night, are in a statistical dead heat. Wealth advisers say they have been fielding questions from investors about how to prepare for potential changes. “Tax policy is a huge, huge concern for investors,” said chief investment officer Yung-Yu Ma of BMO U.S. Wealth Management, which is hearing questions from clients across the country about potential tax hikes. “Tax policy is something that is front and center in this election.” For Wall Street, the greatest attention is on corporate earnings and capital gains taxes. Trump cut the corporate tax rate to 21% from 35% during his presidency and last week said he favors cutting it to 15% for companies that make their products in the U.S. Harris, meanwhile, last month outlined plans to raise the corporate tax rate to 28% from 21%, to ensure “big corporations pay their fair share,” as they are “often paying a lower tax rate than our teachers and our nurses and our firefighters.” Goldman Sachs analysts said in a note last week that at Harris’ 28% rate, earnings of S&P 500 companies would take a 5% hit while Trump’s proposed cut would boost them about 4%.Ma said that higher taxes would mean lower corporate profits and lower stock valuations. “Essentially, what you have is the likelihood of a significant pullback in the stock market due to higher taxes,” said Ma.The winner will still need congressional approval for tax law changes. Trump’s campaign said Harris’ tax plan includes a large tax hike and would add to the national debt. It did not comment on how Trump’s plan would impact the deficit. The Harris campaign did not immediately respond to requests for comment. In a memo reviewed by Reuters, Brian Nelson, the Harris campaign’s senior policy advisor, said Trump’s proposal would give “massive tax windfalls” to “billionaires and big corporations.” CAPITAL GAINSAnother investor concern is that Harris’ higher capital gains tax, which is levied on profits from selling an asset held for more than a year, will eat into clients’ net gains.The Democrat last week proposed raising the capital gains rate for people earning above $1 million to 28%, lower than President Joe Biden’s plan of 39.6%. Trump has not announced any plans to change it from a maximum 20%.“In terms of revenue for the government, capital gains tax hikes have typically under-delivered,” said Brian Gardner, chief Washington policy strategist at investment bank Stifel. “But it would be a broad negative for the market. How much is tough to say.”Morgan Stanley said in a note last week that the correlation between capital gains taxes and stock market performance is statistically insignificant, but the tax debate could drive volatility in equity markets in the near term. If capital gains taxes go up a lot, investors are likely to more aggressively use tax-minimizing trading strategies, said a wealth management executive at a large bank who declined to be named.OVERALL ECONOMIC IMPACTA Trump presidency is seen by the market as stoking inflation and raising the U.S. federal budget deficit, which would spur more Treasury debt issuance.“All the models seem to believe that Trump would increase deficits by more than Harris,” said Bruce Mehlman, partner at bipartisan government relations firm Mehlman Consulting.“Businesses and corporations prefer lower than higher taxes. But there is just general recognition that sooner or later, we’re going to have a debt crisis.”Goldman Sachs has said the broader economy would get the biggest boost in the next two years if Democrats win the White House and Congress. New federal government spending and expanded middle-income tax credits would more than offset by a slight margin lower investment caused by higher corporate tax rates, it said.Economic output would take a hit next year under a Republican administration, mostly as a result of Trump’s proposals for higher import tariffs and tighter immigration policies, Goldman has said. INDIVIDUAL TAXESNext year, parts of the Tax Cuts and Jobs Act, signed by Trump in 2018, expire. It cut taxes for both corporations and individuals but the wealthiest households and big businesses benefited disproportionately.Trump intends to extend those cuts, and he has floated the idea of replacing personal income taxes with tariffs. Harris has said she would leave the tax cuts in place only for people earning less than $400,000 a year.”That current tax law sunsetting at the end of next year is at the center of so many questions we’re fielding from clients,” said Nicole Webb, senior vice president at financial planning firm Wealth Enhancement. “It’s on the forefront of a lot of people’s minds.” More

BEIJING (Reuters) -China’s exports grew at their fastest pace in nearly 1-1/2 years in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners, while imports disappointed amid weak domestic demand.The mixed trade data highlights the challenge facing Beijing as policymakers try to bolster overall growth without becoming too reliant on exports, especially given the tightening of consumers’ purse strings.China’s economy has failed to fire over the past year amid a prolonged property sector downturn, and a survey last week showed exports in the doldrums and factory gate prices at their worst in 14 months, pointing to producers slashing prices to find buyers.Outbound shipments from the world’s second-largest economy grew 8.7% year-on-year in value last month, the quickest since March 2023, customs data showed on Tuesday, beating a forecast 6.5% increase in a Reuters poll of economists and a 7% rise in July.But imports increased by just 0.5%, missing expectations for a 2% boost and down from the 7.2% growth a month prior.”The strong export performance and trade surplus are favourable to economic growth in the third quarter and whole year,” said Zhou Maohua, a macroeconomic researcher at China Everbright (OTC:CHFFF) Bank.”However, the global economic and geopolitical environment is complicated and China’s exports face a lot of headwinds.”Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports, following a series of lacklustre data, raising pressure on policymakers for more stimulus to revive China’s economy.”The continued strong run of exports may actually delay near-term policy support, and we continue to expect bolder measures to be released in Q4,” Nomura analysts said in a note.Outbound shipments to the European Union grew 13.4% in August year-on-year, which represented the biggest increase out of China’s major export markets, followed by an 8.8% lift in sales to the Southeast Asian economies. Chinese exports to the U.S. rose by just an annual 4.9% last month but imports grew 12.2% over the same period, the most of any major import market.TRADE BARRIERSMounting trade barriers are emerging as another significant obstacle, threatening China’s price-driven export momentum.China’s trade surplus with the United States widened to $33.81 billion in August from $30.84 billion in July. Washington has repeatedly highlighted the surplus as evidence of the one-sided trade favouring the Chinese economy.Brussels’ trade policy has turned more protective too, and Beijing’s efforts to negotiate with the EU to ease tariffs on Chinese electric vehicles (EVs) have made little headway.Last month Canada announced a 100% tariff on Chinese EVs, along with a 25% tariff on Chinese steel and aluminium.As China attempts to direct more exports towards Southeast Asia and South Asia, it is also facing pushback there. India is planning to raise tariffs on Chinese steel, Indonesia is eyeing heavy duties on textile imports, and Malaysia opened anti-dumping investigations into plastic imports from China and Indonesia.Still, some analysts expect outbound shipments to ride out the storm, given the relative inexpensiveness of China’s yuan and the relative ease with which exporters can re-route their wares to avoid tariffs.”Outbound shipments are likely to remain strong in the coming months. Admittedly, more barriers are being erected,” said Zichun Huang, China Economist at Capital Economics.”We doubt the tariffs announced so far will prevent real effective exchange rate declines from fuelling further gains in China’s global export market share,” she added. SLOW IMPORTS The lower-than-expected imports might not bode well for exports in the coming months, as just under a third of China’s purchases are parts for re-export, particularly in the electronics sector.China’s commodities purchases also pointed to a bleak domestic picture, with iron ore imports down 4.73% last month from a year earlier, as weak demand in the country’s construction sector pinched steelmakers.Furthermore, while China bought in a record 12.14 million metric tons of soybeans in August, there were ominous signs for the production powerhouse’s future export performance.Analysts say the buying spree was motivated by traders taking advantage of lower prices to stock up amid concerns that trade tensions with the U.S. could intensify if Donald Trump returns to the White House next year.On the whole, while August exports were positive for growth, “it is still uncertain if this momentum can last,” said Lynn Song, ING’s chief economist for China.”Aside from incoming tariffs and the sluggish export orders data of the last few months, if global growth momentum begins to slow too, this could also drag export momentum.”  More