Congress and the White House

The Senate continues to inch towards final passage of a continuing resolution (CR) to keep the government open past midnight Friday.  It now looks increasingly likely that the House of Representatives will vote on Friday on final passage of the legislation.  (That is welcome news to “downtown” as there are scores of fundraisers scheduled for this evening).  Congress is poised to leave town for the midterm election push.  Polls continue to show the economy and inflation as the top voter concern.  Events of the past few weeks have heightened concerns about the global and U.S. economy.  With the race for control of Congress tight, economic news in October will take on greater political significance.  Below are some key dates for economic news next month.  Some candidates will place this data in context, and some might exploit, and cherry pick the data to fit their particular narrative. 

October 3rd

  • ISM Manufacturing Index
  • Construction Spending
  • Factory Orders
  • MBA Mortgage Applications Index

October 6th

  • Initial and continuing unemployment claims

October 7th

  • Unemployment rate

October 13th

  • CPI – final inflation report before election

October 14th

  • Retail sales
  • Univ. of Michigan Consumer Sentiment – Prelim

October 19th

  • Housing Starts
  • Building Permits

October 20

  • Initial and continuing unemployment claims
  • Existing Home sales

October 25th

  • Consumer Confidence

October 27th

  • 3rd quarter GDP

October 28th

  • Univ. of Michigan Consumer Sentiment - Final
  • Pending Home Sales


Biden and DeSantis hit pause on rancor during hurricane

Weeks away from the midterm election, the political adversaries cooperate to help Floridians prepare for devastation.  For now, President Joe Biden and GOP Gov. Ron DeSantis have set politics aside to deal with Hurricane Ian as it bears down on Florida.  The two leaders, the politicians most on the line in responding to a natural disaster of this scale, talked for “some time” Tuesday night, Biden said Wednesday during the White House conference on Hunger, Nutrition and Health.  “I made it clear to the governor and the mayors that the federal government is ready to help in every single way possible,” Biden said. “We’ll be there every step of the way.”

McConnell Signals Support for Electoral Count Act Changes

GOP leader says he would back a bipartisan plan to overhaul how Congress ratifies votes.  Senate Minority Leader Mitch McConnell offered qualified support for a Senate bill that would overhaul a 19th-century law that governs the way Congress counts and ratifies presidential elector votes, giving the bipartisan effort a boost.  The House passed its own version last week, 229-203. Both measures are a response to efforts by then-President Donald Trump and his supporters to try to overturn the results of the 2020 election.  “I strongly support the modest changes that our colleagues in the working group have fleshed out after literally months of detailed discussions,” Mr. McConnell said on the Senate floor Tuesday, before the Senate Rules Committee voted to advance the bill. He said he would “proudly support the legislation, provided nothing more than technical changes are made to its current form.”

Progressive Democrats frustrated with 2022 primary losses

With less than two months until the midterm elections, progressive Democrats are facing a test of their power.  Their party is heading into the final stretch of the campaign with a robust set of legislative accomplishments that include long-term progressive priorities on issues ranging from prescription drug prices to climate change. But the left has also faced a series of disappointments as Democratic voters from Ohio to Illinois to Texas rejected high-profile progressive challengers to moderates or incumbent members of Congress during the primary season.  Those setbacks have raised fresh questions about the progressive movement’s standing among Democrats. Progressive leaders urge against reading too much into those losses, particularly in New York, where repeated elections this summer after a redistricting battle left some voters disoriented or disengaged.


The Economy

Kremlin announces Russia will annex four occupied regions in Ukraine; Nord Stream tensions rise

Russia is facing the prospect of another raft of sanctions on prominent individuals and sectors of the economy after it oversaw a series of sham referendums in four Russian-occupied parts of Ukraine, and is expected to annex those regions imminently.  Condemned by Ukraine and its Western allies, the votes showed a resounding majority voted to join Russia, although the elections were widely seen as rigged and many irregular voting practices were reported.  The EU proposed an eighth package of sanctions on Russia yesterday in response to the referendums, and the U.S. said it will announce more sanctions “in the coming days.” The U.K. has already announced 92 new sanctions as a result of the sham votes.

The Return of Inflation Makes Deficits More Dangerous

Britain’s proposed tax cut shows political leaders still stuck in prepandemic world of limitless borrowing.  It’s tempting to see the market backlash against the British government’s proposed income-tax cut as a uniquely British problem.  That would be a mistake. The markets are sending a deeper message: It’s a more dangerous world for deficits.  Before the pandemic, depressed private investment and demand kept inflation too low for central banks that targeted 2%. In that world, government deficits helped by putting upward pressure on inflation. This also tended to push up interest rates, not a bad thing when central banks worried more about rates being stuck at zero. The upshot was that, as far as markets were concerned, governments’ capacity to borrow was infinite.

Investors Fear Bond-Market Turmoil Is Entering a New Phase

Even in a year of outsize bond moves, the past week has stood out.  Mounting volatility in government bond markets is intensifying fears on Wall Street that this year’s wild swings in the world’s safest assets could further destabilize already rocky financial markets.  The worst bond rout in a generation carried the yield on the 10-year U.S. Treasury note above 4% for the first time in more than a decade on Wednesday, before emergency moves by the Bank of England prompted the biggest one-day rally in more than 13 years. The yield, a benchmark for borrowing costs on everything from mortgages to corporate loans, fell a quarter of a percentage point in a day.  The historic reversal marked the latest explosion of volatility in normally placid debt markets, raising investor worries that the yearlong selloff in bonds has entered a new and more dangerous phase.

Energy Crisis Pushes German Industry to the Brink

Rising costs are bringing the country’s energy-hungry manufacturers and small businesses close to breaking point.  German businesses are growing concerned that without an energy price cap, a wave of insolvencies could wash over the country in coming weeks and disrupt the supply chains serving Germany’s largest industrial sectors.  Starved of the abundant Russian energy that long fired the nation’s industrial engine, German businesses have already been curtailing production and halting investments. Business and consumer confidence is tumbling, approaching the lows reached during the 2008 global financial crisis. Germany’s government is now drawing up plans to cap the price of electricity and gas, officials said this week, acting in case a similar proposal by the European Union isn’t enacted swiftly.

China’s Offshore Currency Hits Record Low Against Dollar

The yuan weakened past 7.2 to the dollar, complicating Chinese policy makers’ efforts to boost the country’s economy with lower interest rates.  China’s central bank warned market participants against speculating on the yuan, after the currency slid to its weakest level against the dollar in more than 14 years and hit a record low in international trading.  On Wednesday, the offshore yuan depreciated to more than 7.2 to the dollar for the first time since a separate system for trading the currency outside mainland China was launched more than a decade ago.  The yuan also broke 7.2 against the dollar in China’s more tightly controlled onshore market, going beyond that mark for the first time since February 2008 and capping a 12% fall in the currency against the greenback in the year to date.

Yellen warns inaction on climate could cause economic crisis

Treasury Secretary Janet Yellen warned Tuesday of economic calamity if climate change is not addressed with immediate government intervention.  Joined by local business owners and prominent Democrats in North Carolina, Yellen said the increasing frequency and severity of natural disasters could create devastating short-term supply reductions of everyday goods that could cause prices to skyrocket.  Supply chain disruptions like those experienced on a global scale during the COVID-19 pandemic could soon become commonplace, she said during a visit to Cypress Creek Renewables’ solar farm in Chapel Hill.