White House officials have begun preparing options to help bolster the American economy and prevent it from falling into a recession, including mulling a potential payroll tax cut and a possible reversal of some of President Trump’s tariffs, according to people familiar with the discussions.

Mr. Trump continues to insist the economy is “doing tremendously well,” and he and his advisers publicly dismiss any notion of an impending recession. But behind the scenes, Mr. Trump’s economic team is pulling together contingency plans in the event the economy weakens further.

Officials inside the administration have drafted a white paper exploring a payroll tax reduction, which would seek to boost the economy by immediately injecting more money into workers’ paychecks. In 2011 and 2012, the Obama administration employed a two-year payroll tax cut in an effort to stimulate what was a sluggish recovery from the recession that ended in 2009. (…)

A White House official said more tax cuts were on the table, “but cutting payroll taxes is not something that is under consideration at this time.” Another senior administration official cautioned that a payroll tax cut was not under serious consideration. And a third official said that discussions of what tools could be deployed to offset a recession, based on examining what had been done in previous slowdowns, were hypothetical and not being explored with urgency. (…)

Calling for the cuts could give more political ammunition to Mr. Trump, who has already begun to blame Democrats for fanning the flames of a potential recession and could help the president put the onus on his opponents for failing to push through a tax cut if the economy weakens further. (…)

Researchers at JPMorgan Chase said on Monday that tariffs Mr. Trump has already imposed on $250 billion worth of Chinese imports amount to a tax of about $600 annually on an average American household. When the next wave of tariffs is fully in place, in December, the researchers said, that cost will rise to $1,000 per household. (…)

“Tax cuts 2.0, we are looking at all that,” Mr. Kudlow said. “By the way, Senator Rick Scott of Florida, very smart guy, made an interesting idea — a proposal on another network last week. He said, ‘Look, why don’t we take the tariffs from the China trade and turn those back to the taxpayers in the form of tax cuts?’ That’s an idea.” (…)

Recycling the same dollars, back and forth. That’s an idea!

Interestingly, the Washington Post was first on this on Monday. The NYT carried it today but not the WSJ, BB or Reuters.

But the WSJ’s Daily Shot had these great charts this a.m.:

This last chart is intriguing given that the aggregate national claims data have remained very low and manufacturing employment is still rising albeit more slowly. But weekly hours in manufacturing have declined 2.1% YoY to their lowest level since 2011:

Employment in agriculture and related industries is down 3.3% YoY in July. On a seasonally adjusted basis, ag employment peaked in April 2017 and is down 10.4% since.

China’s economy slows to 4.6% in June

Fathom’s China Momentum Indicator 2.0, our preferred measure of the pace of economic activity in China, slowed to 4.6% in June, the weakest reading since August 2016. Gary Cohn, former chief economic advisor to Donald Trump, argues that this slowdown reflects a strategic decision by China to rebalance the economy at a time when any negative impact on growth can be blamed on US trade sanctions. However, we believe that China was slowing regardless. With the consumer share of total import demand on a downward trend since 2016, we also find little evidence to suggest that China is successfully rebalancing. Instead, policymakers are resorting to their tried and tested playbook, including currency depreciation. Indeed, since the first threat of tariffs in March 2018 the renminbi has weakened by 11% against the US dollar, neutralising what we estimate to be an increase of around 10 percentage points, over the same period, in the average effective tariff imposed by the US on imports from China. This undermines any hopes of rebalancing, while further frustrating trade relations, as evidenced by the US administration branding China a currency manipulator. It also acts as a fiscal transfer from China to the US.

Germany Readying Stimulus Plan as Contingency for Deep Recession

(…) Similar to bonuses granted in the 2009 crisis to prod Germans to buy new cars, the government is studying incentives to improve energy efficiency of homes, promote short-term hiring and boost income through social welfare, the people said. (…)

Signs are mounting that Germany’s rigid adherence to its balanced-budget policy is softening. On Sunday, Finance Minister Olaf Scholz suggested the government would aim to muster 50 billion euros ($55 billion) of extra spending in case of an economic crisis. Last week, Chancellor Angela Merkel said the economy is “heading into a difficult phase” and that her government will react “depending on the situation.” (…)

The hurdles for a stimulus program remain high. The government requires the lower house of parliament to declare a crisis so it can issue debt beyond the normal guidelines allowed during a recession. Without a sense of wide-spread malaise that approval could be difficult to justify, and Germany is still officially predicting an economic recovery before the end of the year. (…)

(Note to Miles: This is dated August 19, 2019 )

Japan manufacturers turn pessimistic for first time since 2013: Reuters Tankan

(…) The monthly poll, which tracks the Bank of Japan’s (BOJ) closely-watched tankan quarterly survey, found manufacturers’ mood slid for a third straight month to minus 4 in August from the prior month’s plus 3.

It was the weakest sentiment reading since April 2013, when it was minus 4, dragged down by electric machinery, metals, food processors and transport equipment.

Confidence in the service sector also plunged, to plus 13 from plus 25 in July, due to big drops at wholesalers and retailers. That will raise questions over how much longer domestic demand can remain resilient enough to offset rising external pressures, with a rise in the domestic sales tax set for October.

Private consumption constitutes about 60% of the economy. (…)

A full year into the trade war, we read more of these stories: higher costs passed on or absorbed and more complex logistics.

Apparel Industry Works to Blunt Impact of Tariffs Apparel companies in the U.S. are bracing for squeezed profits and potential store closures as a result of the Trump administration’s pledge to extend tariffs on Chinese imports.

(…) About 40% of all clothing and 70% of shoes sold in the U.S. are made in China, according to the American Apparel and Footwear Association. (…) In all, about $33 billion in apparel, shoes and hats are among the items subject to a 10% tariff on Chinese imports beginning Sept. 1, according to a Wall Street Journal analysis of data from the Office of the U.S. Trade Representative and the Census Bureau. (…)

Jay Sole, a retail and department store analyst at UBS, estimated that if the administration raised tariffs on China to 25%, it could lead to as many as 12,000 stores closing, about 10% of the stores among the 524 retailers UBS tracks. Even the proposed 10% tariff would pressure hundreds of stores throughout the U.S., he added. (…)

Macy’s Inc., which raised prices on some luggage, housewares and furniture when tariffs on such items rose to 25% in May, said it was unlikely to repeat that approach for apparel subject to new tariffs.

“We learned from that experience that the customer had very little appetite for those cost increases,” CEO Jeffrey Gennette said during the company’s earnings call last week. Instead, he said, Macy’s would work with its Chinese partners to absorb the extra costs.

Many apparel companies would find it painful to do the same. Fifteen publicly traded clothing, footwear and accessories retailers tracked by UBS have margins of less than 3%. These companies represent $42 billion in sales, and they operate more than 12,000 stores, UBS said. (…)

At least a few retailers already facing tariffs have been able to raise prices without much consumer backlash. In May, Home Depot said it managed to pass the tariff costs on imported washing machines to its customers. Sales initially sagged, then recovered.

Steven Madden Ltd. , a shoe and fashion-accessory company, said it has already moved some production out of China. If any competitors feel compelled to raise prices after the China tariffs, the company would view that as an opportunity to gain market share.

“We’re making a good chunk of the Steve Madden-branded products in Mexico for fall,” CEO Edward Rosenfeld said on a recent earnings call. He added that some production was moved to Cambodia “and a number of other countries.”

But shifting suppliers isn’t an easy option for most apparel companies. It takes years to build relationships and establish new supply chains. Retailers have built quality-control systems in Chinese factories that can’t be dismantled and reassembled in another country overnight. (…)

• Home Depot Cuts Sales Forecast, Posts Slightly Lower Profit Home Depot lowered its sales forecast, warning that rising material costs and the potential effects of tariffs on U.S. consumers could weigh on growth.

WeWork Analyst Warns IPO Filing a ‘Masterpiece of Obfuscation’

WeWork’s IPO prospectus lacks the information needed to create a financial model of the company, according to an analyst who specializes in new listings. (…) “The prospectus is a masterpiece of obfuscation,” he said in an interview. “If the underlying facts were positive, why would a company go to so much trouble to prevent you from understanding them?” (…)

States to Move Forward With Antitrust Probe of Big Tech Firms Investigation would put additional scrutiny on an industry already under a federal spotlight

(…) The effort involving state attorneys general is expected to be formally launched as soon as next month, the people said. It is likely to focus on whether a handful of dominant technology platforms use their marketplace powers to stifle competition.

As part of the probe, the states are likely to issue civil investigative demands, similar to subpoenas, to tech companies and other businesses, the people said.

The new investigation could dovetail with plans by the Justice Department, which last month announced its own antitrust review that will focus on tech companies includingAlphabet Inc. ’s Google unit and Facebook Inc., the people familiar with the plans said.

The specific number of states that might join the investigation couldn’t be learned, though one person familiar with the effort said up to 20 or more may participate. (…)

“The attorneys general involved have concerns over the control of personal data by large tech companies and will hold them accountable for anticompetitive practices that endanger privacy and consumer data,” said a spokesman for New York Attorney General Letitia James, a Democrat. (…)

The expected state investigation would add a third major layer of scrutiny for the tech sector. In addition to the Justice Department probe, the Federal Trade Commission is investigating antitrust concerns at Facebook, including the company’s acquisition of nascent tech companies, as well as competitive issues elsewhere in the tech industry.

The involvement of state attorneys general could add to complexity and cost for the companies. These officials were a driving force in the landmark joint state-federal antitrust case against Microsoft Corp. two decades ago. Microsoft agreed to an array of conditions, including making the Windows platform more accessible to third-party software developers.

But the states eventually splintered over whether to accept a settlement. Some experts say their involvement expanded and extended the legal battle, at times significantly. (…)

In case you missed this link a few weeks back. Really worth the 16 min.: https://www.youtube.com/watch?v=WQMuxNiYoz4