Government Workers Missed Another Paycheck… Both sides remain dug in over the border wall funding as 800,000 federal workers experienced another pay period without income. A three week continuing resolution just kicks this issue down the calendar without solving the impasse.
What it means – Travelers made it through another holiday weekend, braving longer security lines as TSA employees called in sick at higher than normal rates because they are working without pay. The shutdown is damaging ancillary businesses as those who service federal employees, from restaurants to dry cleaners, see their revenue plummet. When the government reopens, direct federal employees will receive back pay, but contractors and those who service federal workers will not.
At first there was a call for Congressmen to work without pay for the duration of the shutdown. Now it seems more appropriate that, in addition to lost pay, Congressmen pay a penalty through reduced future paychecks as punishment for failing to do their jobs.
Existing Home Sales Slide 6.4% in December, Down 10.3% Over Last Year… Sales fell to the lowest rate since 2015.
What it means – Was it higher rates, worries about the stock market or government shutdown, or simply price fatigue? Maybe it was a little bit of everything that kept buyers and sellers apart in the housing market. Mortgage rates fell as December came to a close, but it didn’t seem to help. The 2.9% price gain over 2018 looks a little out of place when compared with the double-digit drop in sales, but it can be explained by the lack of supply. At last month’s rate of sales, supply sits at a measly 3.7 months.
First-time home buyers are a missing piece of the puzzle. Purchase rates for this group remain 25% below the long-term average, a problem exacerbated by the lack of starter homes available as well as student debt on the books of would-be buyers.
Redbook Retail Index Up 7% Over Last Year, Down from 9% in December… The measure of comparable store sales at chain stores is a stand-in for retail sales, which won’t be released because of the government shutdown.
What it means – The numbers aren’t directly comparable to retail sales because they don’t include autos, fuel, and a few other sectors, but we can get a sense of consumer behavior.
The 7% rise over the same week last year shows decent strength, particularly in light of the fact that almost one million workers have missed paychecks. It appears that the underlying economy remains stable, if not robust.
Mexico Makes it Easier for Migrants to Cross on their Way to U.S. Border… In the face of a new migrant caravan that now numbers in the thousands, the new Mexican government eased its immigration and visa stance, giving them easier passage.
What it means – The Mexican government of Andrés Manuel López Obrador doesn’t want to confront the migrants seeking asylum in the U.S. He’d rather give them safe passage and let them take their chances at the Northern border than enforce Mexican immigration laws in the south. The new caravan gives President Trump more fodder in his fight for border wall funding.
ECB Holds Steady on Negative Interest Rates… The European Central Bank held deposit rates at negative 0.4% and reiterated that it would reinvest all proceeds from its bond portfolio.
What it means – The central bankers are nervous. They made a big show of ending their bond-buying program at year end, but then negative economic reports from Germany and France took them by surprise. This leaves the bankers trying to calm jittery markets without immediately reversing course and buying more bonds.
Without a catalyst for stronger growth, it’s likely that the ECB will have to capitulate sometime this year and take a more dovish stance. When that happens, expect the euro to drop.
Davos Economic Forum Attendees Have Trouble Finding Spots to Park Their Jets… Forum attendees traveled to Davos in a record 1,500 private jets, which strained the capacity of local air fields. The parking conundrum gave way to irony as the guests spent much of their time addressing climate change.
No word on whether or not the attendees would consider jet ride sharing in the future to avoid spewing more greenhouse gases into the atmosphere.
Data supplied by Dent Research/Delray Beach Publishing
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