USA

US labour market: A solid overall performance in the first half of the year, but little wage pressure

The latest Labor Market Report shows that job creation has not come to a halt in the USA. A surprisingly weak previous month had stoked some very bearish speculation about the US economy. In fact, however, the number of registered employed increased in June by 224,000. In industry, too, 17,000 new jobs were created although in the meantime the smouldering trade dispute is visibly souring the business climate. The fact that average monthly job creation was “only” 172 k in the first half of the year and thus visibly below its level in the year-earlier period should not be taken as a warning signal because, on the one hand, population growth requires an increase of only 100 k employed persons and, on the other, in 2018 the reduction of corporate tax had created an additional thrust for job creation. A further explanation for the fact that the jobs motor is…

Profiteers of the trade dispute

At the G20 summit, a further escalation in the US-Chinese trade dispute has been averted for the time being. However, the truce now agreed between Beijing and Washington stipulates that the special tariffs, which have been in place since the summer of last year and have just been significantly raised, will continue to apply for the time being. This means that the burdens particularly on the Chinese export trade will remain relatively high. The Asian neighbours are also affected by the bilateral trade barriers between the US and China as they are strongly integrated into the production chains of the Chinese export industry. Taiwan, Korea and Malaysia are particularly affected, and Vietnam, Thailand and Japan to a slightly lesser extent. Since the introduction of US tariffs, their exports of intermediate goods to China have plummeted as strongly as China’s exports to the US. Nevertheless, China’s neighbours are also able to…

The world after the G20

At the recent G20 summit, US President Trump and his colleagues once again spared us a catastrophe through their heroic conduct. Or such at least has been the press narrative built up very skilfully and effectively (particularly by the US) for the last few weeks. The problems that needed to be solved were actually created by the heads of government themselves beforehand – yet the G20 summit is viewed as a success. One undoubtedly positive aspect is that there was no major spat at the G20 meeting, while the countries involved also managed to come up with a final declaration – a little humility at least. The commitment to environmental targets is also a positive and necessary thing, but unfortunately the US was ultimately not willing to play ball here. The agreement between the US and China to resume negotiations on economic cooperation, and the announcements by President Trump that…

China selling its Treasuries: a warning to Trump?

There has long been speculation over whether China might use its huge portfolio of US Treasuries as a weapon in the (trade) war against the US. The latest data from the US Treasury Department is likely to add fuel to these speculations: Having already sold US Treasuries to the tune of USD 20 billion in March, China went on to sell further T bonds worth USD 10 billion in April. The volume of US Treasuries sold by China in the last twelve months thus amounts to an impressive USD 86 billion. As the chart below shows, this is not the first time China’s portfolio of Treasury bonds has fallen, and the current episode is also unlikely to break any new records. The Chinese had already disposed of US Treasuries in 2016, with the sales volume adding up to an even more impressive 150 billion US dollars. However, there is one…

US central bank faces a two-way dilemma

The US Federal Reserve will advise on further interest rate policy this week. It was still almost a foregone conclusion until recently that interest rates would continue to rise in the US. However, the trade conflict and the resultant growing concerns about growth have raised expectations that the Fed will lower the fed funds rate by up to three times in the course of the year. Some investors are not ruling out an interest rate cut even this week. The US central bank is now up against a dilemma once again. It is not in its interest to nip every key rate cut fantasy in the bud. This could lead to high levels of volatility on financial markets and conjure up far-reaching recessionary concerns. However, the Fed will not want to fuel market participants’ expectations of a quick and sharp reduction in key interest rates either. Consequently, it needs to…

The euro is not – and never will be – a lead currency

The US dollar is the world’s leading currency, a fact that serves to cement the economic dominance of the US. The US administration is increasingly exploiting this dominance. One reason why the US sanctions against Iran are so successful is the ability of the US to control international payments processing via Swift. This means that the sanctions policy adopted by the United States can also be imposed on companies from countries with no real interest in enacting this type of policy, such as Europe in the case of the Iran sanctions. For sovereignty over payment transactions entitles the US government not only to control access to the important US market but also to assert the US dollar as internationally recognized means of payment. There are of course good reasons for the dominance of the US dollar. The US is the world’s largest economy and the most important export market for…

1 2 3 31