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A pedestrian passes a "Help Wanted" sign in the door of a hardware store in Cambridge, Massachusetts.
US jobs soar despite Fed’s high interest rates
A stunning US jobs report on Friday showed that the US economy added a whopping 517,000 jobs in January, far more than the expected 187,000 – taking unemployment down to 3.4%, the lowest it's beensince May 1969. This, coupled with the 11 million US employment openings at the end of 2022, reflects a hopping job market. Experts attribute the surprise figures to there being so much pent-up labor demand that companies continue to hire, though the tech sector has seen a recent slew of layoffs. Job creation has increased in areas like housing and finance, which would normally be more sensitive to high interest rates.
Sounds pretty great, right? Not exactly. The Federal Reserve has been desperately trying to slow the economy and tamp down inflation by raising interest rates, with eight hikes since March 2022. More jobs, however, mean more money being heaped into the economy, so markets tumbled Friday morning as investors anticipated more interest rate hikes in response. That said, the hiring surge may give economists a reason to soften their predictions about a looming recession, or at least about its severity.
GameStop stock rally gives policymakers opportunity for legislation
Jon Lieber, who leads Eurasia Group's coverage of political and policy developments in Washington, offers insights on US politics:
First question. Stonks! Will the GameStop stock rally result in new regulation on Wall Street?
The answer is probably, but the interesting thing is, we have no idea what form that regulation might take. The interesting thing about this storyline around GameStop is that the run-up in prices, driven by social media chatter on Reddit, against hedge funds who had shorted the stock, opens up a whole can of worms for how you want to solve the issue, and is most likely going to be an outlet for members of Congress preexisting biases. If you want to regulate hedge funds, well, here's an excuse to do so. If you want to implement a financial transaction tax, this is your opportunity. If you're concerned about consumer protection, data privacy, this could be a hook to get into those issues as well. So, this is a headline grabbing event that's probably going to fade out of the news in a week or so, but it's going to stay relevant to policymakers for several more months, could potentially result in new legislation, or new regulation from the SEC based around investor protection and market structure. So, stay tuned. We're going to be hearing about GameStop for a long time.
Second question. What is the future for the legislative filibuster?
Well, as part of the Senate's organizing resolutions, two Democratic senators made public commitments that they were not going to vote to change the legislative filibuster. This is the 60-vote threshold in the Senate to pass legislation. With 50 Democratic members in the Senate, you need all 50 to agree to change the rules. They only have 48 votes right now at the most. This means it's probably not going to happen. Now, these two senators could change their mind down the road, Kyrsten Sinema from Arizona, Joe Manchin, from West Virginia. There's probably a handful of other senators who also oppose changing the rules but haven't done so publicly. The other thing they could do is pass legislation using the reconciliation process, which has guard rails around it that limited to only budget and tax legislation, but change the rules of the reconciliation process, to supercharge their ability to pass legislation with only 50 votes without changing the legislative filibuster. Something to keep an eye on, we expect at least two big pieces of legislation this year to pass through the reconciliation process, giving multiple opportunities to try to change those rules and erode the norms around reconciliation.
What to expect for second-quarter earnings season; H2 2020 outlook
Betty Liu, Executive Vice Chairman for NYSE Group, provides her perspective:
What are analysts expecting, going to the second quarter earnings season?
So, this earnings season has just started this past week, you saw banks kick off their reports. And as you can well imagine, analyst estimates are pretty much all over the place. And part of that is because a good number of companies did not provide guidance. Now, according to some estimates, some analysts estimates, we could see an earnings season decline or earnings decline as much as 44% this time around. That would be one of the biggest declines since 2008, the prior crisis.
What is the outlook for the second half of 2020?
Well, that's the million-dollar question. What is going to happen the rest of the year? So, nobody knows, right? But there's a few factors that we're going to be watching to see how companies perform. One is going to be watching the number of coronavirus cases across the country. And the second, of course, is watching the results of the November presidential elections.
US Politics in 60 Seconds: 2020 Field Heats Up
Former Starbucks CEO Howard Schultz's independent campaign in 2020 would only help reelect one person: President Trump
It's your US Politics in 60 Seconds with Ben White!
And go deeper on topics like cybersecurity and artificial intelligence at Microsoft on The Issues.
US-China Trade War: What's At Stake?
A US-China Trade War is Looming. Trump is doubling down on tariffs, XI refuses to yield. Can a temporary truce last? On this week's GZERO World, we look at the ramifications of the US-China conflict and the future of international trade.
