The Pros and Cons of the Migrant Influx; Goolsbee Confident Inflation on Path to Federal Reserve Target By James Christie
Good day. The millions of unauthorized migrants who entered the U.S. in recent years are expected to help fuel a bigger, faster-growing economy. But The Wall Street Journal reports that because recent migrants are more unskilled than their predecessors, the influx could drag on productivity and depress wages. Meanwhile, Federal Reserve Bank of Chicago President Austan Goolsbee said yesterday that inflation will be on track toward the Fed's 2% target even if some monthly inflation reports come in on the high side. Nevertheless, the inflation battle seems to be advancing only by inches, Bob Fernandez writes in a Pro Take.
Now on to today's news and analysis.
Top News Immigration Wave Delivers Economic Windfall. But There's a Catch.
The influx of millions of unauthorized migrants in recent years has sparked a political firestorm that threatens President Biden's re-election. But it is also likely to fuel a bigger, faster-growing economy .
The precise scale of that economic benefit was laid out in the Congressional Budget Office's latest long-term budget and economic outlook, released Feb. 7. It estimates the labor force will be larger by 1.7 million potential workers in 2024 and 5.2 million more-about 3%-in 2033 than the nonpartisan agency expected one year ago. Gross domestic product-the value of all goods and services produced in a year-should be 2.1% larger.
But a bigger economy doesn't necessarily equate to a better economy. The latest group of migrants differs from previous cohorts in ways that could put modest downward pressure on wages and productivity in the short term.
Goolsbee Says Some High Inflation Won't Knock His Confidence
Inflation in the U.S. has been so well behaved that some high readings for a few months won't change the picture, Federal Reserve Bank of Chicago President Austan Goolsbee said Wednesday, MarketWatch reported . Because inflation fell so far so fast last year, "even if inflation comes in a bit higher for a few months, as many forecasts suggest, it would still be consistent with our path back to [the Federal Reserve's 2%] target," Goolsbee said in a talk at the Council on Foreign Relations in New York. "There is nothing wrong" with some ups and downs, he added. (MarketWatch)
Barr Says U.S. Banking System Strong Despite NYCB's Woes
The recent troubles at New York Community Bancorp Inc. are not a sign of systemic problems in the U.S. banking system, Federal Reserve Vice Chair for Supervision Michael Barr said Wednesday, MarketWatch reported . "A single bank missing its revenue expectations and increasing its provisioning does not change the fact that the overall banking system is strong, and we see no signs of liquidity problems across the system," Barr said in a speech to a meeting of the National Association for Business Economics in Washington. Barr said there were "a few patches and pockets of risk" in the sector, including the value of office commercial real estate in certain central business districts. (MarketWatch)
Bank of Canada to Start Cash Reserve Auctions on Feb. 21
The Bank of Canada said morning auctions of Canadian government cash balances are scheduled to start on the morning of Feb. 21, with an initial auction size of C$5 billion. These auctions were suspended in 2020, during the pandemic, as securities buying, via quantitative easing, helped provide sufficient liquidity to markets. The auctions are returning as the central bank attempts to dampen upward pressure on the overnight collateral rate, which is presently at 5.04%, or above the BOC policy rate of 5%. The upward pressure reflects the impact of the BOC reducing assets on its balance sheet accumulated via bond buying during the pandemic. The overnight market is where participants with a temporary surplus or shortage of funds are able to lend or borrow until the next business day.
-Paul Vieira
Pro Take: No Big Consumer Price Declines Are in Sight By Bob Fernandez
Consumers are seeing some relief on rising prices as the Federal Reserve keeps interest rates at elevated levels and commodity prices weaken. But the inflation battle seems to be advancing only by inches. Core consumer prices rose a higher-than-expected 3.9% in January from a year ago, the government reported Tuesday. Read more .
U.S. Economy Why Wall Street Expects an Underwhelming Retail-Sales Report
Economists expect Thursday's retail-sales report to show that spending slipped a bit last month after surging in December. But some on Wall Street think there is a danger that the report will be much weaker than most expect.
Thanks to AI, Business Technology Is Finally Having Its Moment
The generative AI boom reflects a period of tech innovation ideally suited for revolutionizing the business world -unlike previous tech booms that favored the creation of big tech companies that served the consumer market.
Brainard Says Soft Landing Helped by Public Spending Boost
Lael Brainard, director of the White House National Economic Council, played down concerns that the so-called last mile of reducing inflation would become more difficult than it has been so far.
Key Developments Around the World U.K. Falls Into Recession as World's Major Economies Lag U.S.
The U.K. followed Japan into recession at the end of last year, contrasting with a buoyant U.S. economy and leaving the Bank of England with a tough call as it decides when to start easing monetary policy.
Japan's Economy Shrank in Final Quarter of 2023
The Japanese economy shrank slightly in the final quarter of 2023 as growth in tourism spending failed to offset sluggishness in domestic private consumption and capital spending. Gross domestic product shrank 0.1% in the three months to December from the previous quarter, government data showed Thursday, weaker than economists' forecast for 0.2% growth. The economy contracted 0.8% in the July-September quarter.
On Ukraine's Front Line, Soldiers Forced to Tune In to Washington
Ukraine's struggles in battles at hot spots such as the besieged city of Avdiivka show why the loss of U.S. funds, almost half of all foreign military aid, would be a massive blow to troops running low on artillery and other ammunition.
Singapore's Economic Growth Slowed in 2023
Singapore's economy grew at a faster pace in the fourth quarter of 2023, but full-year growth slowed as the manufacturing sector contracted. Gross domestic product expanded 1.1% last year , according to revised data released by the Ministry of Trade and Industry on Thursday. That was a touch lower than the initial estimate of 1.2% growth and compared with a 3.8% increase in 2022. Barring a slump during the Covid-19 pandemic, 2023's growth was the country's softest since the global financial crisis of 2009.
Iran Gas Pipelines Explode in Act of Sabotage, Officials Say
Iranian officials said two explosions struck natural-gas pipelines in the country early Wednesday, calling the blasts a terrorist attack , which comes amid heightened tensions in the Middle East over the Israel-Hamas war in Gaza.
Australia's Unemployment Rate Accelerated in January
Australia's unemployment rate rose to its highest level since early 2022 in January, with only 500 jobs created over the month, signaling a further deterioration in the job market and a stoking of the case for interest rates to be cut later this year. The seasonally adjusted unemployment rate rose by 0.1 percentage point to 4.1% in January from 3.9% in December, according to the Australian Bureau of Statistics. Economists had been expecting the jobless rate to edge up to 4.0%. The number of unemployed people increased by 22,000 over the month, the ABS said.
Financial Regulation Roundup Morgan Stanley Laying Off Several Hundred in Wealth-Management
Morgan Stanley plans to cut several hundred jobs in its wealth-management division as new Chief Executive Ted Pick seeks to rein in costs in an area that is critical to the Wall Street firm's success but has shown signs of weakening lately.
The China Conundrum Facing Wall Street Banks
What's the definition of a Chinese company? The question is proving difficult to answer, creating headaches for Wall Street banks that are increasingly being forced to juggle competing demands of Chinese and U.S. regulators.
Forward Guidance Thursday (all times ET)
8:15 a.m.: Canada housing starts for January
8:30 a.m.: U.S. weekly jobless claims; U.S. retail sales advance report for January; U.S. import and export price index data for January; Philadelphia Fed Manufacturing Survey; New York Fed's Empire State Manufacturing Survey
9:15 a.m.: U.S. industrial production and capacity utilization for January
10 a.m.: U.S. business inventories for December
1:15 p.m.: Fed's Waller speaks at Global Interdependence Center and University of the Bahamas Conference: Climate, Currency, and Central Banking, Nassau, Bahamas
7 p.m.: Atlanta Fed's Bostic speaks to Money Marketeers of New York University
Friday
8 a.m.: Richmond Fed's Barkin speaks at Chamber RVA Annual Meeting Breakfast
8:30 a.m.: U.S. producer-price index for January; U.S. housing starts for January
9:10 a.m.: Fed's Barr speaks at Columbia Law School Banking Conference, New York City
10 a.m.: University of Michigan consumer survey, preliminary for February
12:10 p.m.: San Francisco Fed's Daly speaks at 40th Annual National Association for Business Economics Economic Policy Conference, Washington, D.C.
Research BOE Can Eye Inflation Victory in Spring
(MORE TO FOLLOW) Dow Jones Newswires
02-15-24 0718ET
