Benefit Gains Exceed Wage Growth, Labor Data Show Value of benefits such as bonuses, health insurance and vacation has risen more quickly than pay
The cost of benefits for private-sector employers rose 3% in June from a year earlier, while the cost of wages and salaries advanced 2.7%, the Labor Department said Tuesday.
The benefit gain was driven by a nearly 12% increase in bonuses and other forms of supplemental pay. Paid leave, including vacation time, rose 4% in June from a year earlier. (…)
The increase in bonus compensation in part reflects lump-sum payments that many large companies, including AT&T Inc. and ComcastCorp. , gave employees after Congress approved a package of tax cuts late last year. After the tax cut, many employers, such as Southwest Airlines Co. and American Airlines Group Inc.,offered bonuses but not wage increases. Southwest said modifying wages would have required negotiating with its union. (…)
As of this month, 623 U.S. employers announced bonuses, pay increases or better benefits related to the tax law, the White House Council of Economic Advisers said Tuesday. The bulk of those, 408, offered a lump-sum payment.
About 100 firms raised wages for their lowest-paid workers, and 95 lifted wages for other employees. Some companies increased retirement contributions, and some took more than one of the actions. The council said more than 6 million U.S. workers in total have directly benefited from the tax overhaul. (…)
U.S. Home Builder Index Holds Steady
RSM US Middle Market Business Index
China Retaliates With Tariffs on $60 Billion of U.S. Goods The Chinese government said it plans to impose new tariffs on $60 billion in U.S. exports, prompting President Trump to reiterate a threat to punch back by hitting Chinese goods worth more than four times that much.
(…) While the threat of more tariffs might intensify the rhetorical pressure on Beijing, these people stressed, the actual administrative process—including holding public hearings, receiving written public comments, and conducting internal impact studies—would take weeks before any fresh measures would take effect. (…)
The next round would be far more politically and economically perilous, covering a range of consumer goods—from electronics to toys—that have largely been spared so far. (…)
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Holidays Gifts May Escape Tariffs, but Retailers Won’t Retailers worry about supply disruptions and price increases on spring merchandise
Big retailers are hustling to speed some shipments through ports and bracing for higher costs next year from the U.S. decision to impose tariffs on Chinese bicycles, handbags and thousands of other consumer goods, though the cost increase won’t hit most holiday items. (…)
Retailers probably will try to accelerate spring products through customs before the potential 25% tariff takes effect, he said. (…)
The latest action—a 10% tariff on $200 billion of goods—would increase costs by $20 billion. If that price increase happened in one quarter, it would cause a one-time bump in the inflation rate of about 0.5 percentage points, according to an estimate from PNC Bank senior economist Bill Adams. Mr. Adams said companies could import some goods from elsewhere, reduce profit margins or pursue other strategies that partially mitigate the price impact. (…)
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How will Trump’s China tariffs impact inflation?
Yesterday’s decision by the White House to escalate the U.S.-China trade war means that roughly half of U.S. imports from China (US$250 bn) will be subject to a 25% tariff next year. While that casts doubts about global growth in 2019 (via weaker world trade volumes), we’re less concerned about impacts on the U.S. economy. Retaliatory measures from China (if any) won’t affect growth significantly given that exports to that economy account for less than 1% of U.S. GDP.
But could the price-boosting impacts of tariffs prompt the Federal Reserve to tighten monetary policy faster and hence bring U.S. growth to a halt? That’s unlikely in our view. The Fed understands that any inflation impact of tariffs is temporary and will fade after a year ─ unless, of course, tariffs are raised every year after that. Also, given the relatively low content of imports from China in U.S. personal consumption expenditures (roughly 2% of PCE), the impact on prices is likely to be limited.
As today’s Hot Charts show, a 25% tariff on US$250 bn worth of imports from China would raise the annual U.S. inflation rate by less than 0.3%. The inflation impact would be even smaller if importers decided to preserve market share by not fully passing the higher costs to consumers or if say Beijing allows its yuan to depreciate versus the USD so as to reduce the “effective” tariff rate. (NBF)
SENTIMENT WATCH
Cash is Less Trashy
From Bespoke:
And also this:
America First Won’t Last Much Longer in Stocks, JPMorgan Warns They say cut holdings in U.S. equities and add money in emerging markets.
(…) “The large U.S. fiscal boost this year, as well as the delayed positive impact of weak USD and low rates from last year created a ‘sugar high’ for U.S. assets this year,” the strategists wrote in a note to clients. “We expect convergence of macro fundamentals between U.S. and international markets in the coming quarters; with equity markets tending to price forward fundamentals by six to 12 months, the time for the rotation may be now.” (…)
Last week, JPMorgan estimated that the combined per-share earnings for S&P 500 companies could drop by as much as $10 if bilateral tariffs of 25 percent are imposed. This year’s earnings forecast for the benchmark is $165 per share.
