1 big thing: Synchronized global slump
It was 20 months ago that we told you about the highly unusual dynamic of synchronized global growth — the world’s 10 biggest economies growing at once.
- Bad news: We seem headed for the Synchronized Slump.
- Why it matters: We had the rise of inward-looking, finger-pointing nationalism in relatively good times. Imagine the world as things go south.
- Japan and three of Europe's four largest economies — Germany, Italy and the U.K. — are heading toward recession by year-end, with China growing at its slowest pace in 27 years.
- The IMF cut its global growth forecast again last month after warning in April that this was a "delicate moment" for the world.
- Today's N.Y. Times lead: "Markets Shudder as Signs Point to Global Slowdown ... Trade War Dims Outlook in Germany, China and U.S."
Signs of a looming U.S. recession abound, Dion tells me:
- The 3-month/10-year Treasury yield curve has inverted, which the San Francisco Fed calls a "reliable predictor of recessions."
- Yesterday, another recession indicator — the 2-year/10-year yield curve — also inverted, sending the S&P 500 down 3% and tanking the Dow by 800 points (3%), its biggest drop of the year.
- The New York Fed's recession probability indicator hit its warning level last month.
👀 These inversions have preceded every U.S. recession of the last 70 years.
Other warning signs:
- U.S. manufacturing is in recession, as is transportation across all sectors — air, rail, freight and passenger.
- Airlines are expecting their worst year since 2014, and the auto industry has laid off more people than it has in a decade.
- A growing number of businesses are citing "greater risk aversion," largely because of tariffs, as a reason for not making more purchases or investments.
- Economists say Trump's policies have introduced a real risk of stoking inflation — absent for more than a decade — as retailers large and small say the tariffs will force them to raise prices.
Why things could get worse: The levers that have saved the economy in previous times of crisis look exhausted.
- Central bankers around the world are cutting interest rates at a level not seen since the financial crisis — but studies show that monetary policy is not as powerful as it once was.
- The world is already deeply in debt — and democratic institutions are extremely polarized — making government spending more difficult as well.
Reality check: The U.S. economy is still like a "choose-your-own-adventure" game, with plenty of other data points saying the economy is in fine shape.
- Consumer spending — responsible for two-thirds of economic growth — is still strong, and consumers haven't expressed the same dip in confidence that businesses have.
- The economy has added jobs for 106 consecutive months.
- Unemployment is near a 50-year low.
The bottom line: A recession is always coming — it's just that no one knows when.
- And the mere fear of recession is just as likely to push the economy into a recession as anything else.
2. Trump "running out of tools"
With #TrumpRecession trending on Twitter, a source close to President Trump told Axios' Jonathan Swan: "I’m very worried about the latest economic data. A lot of us are concerned. Without the narrative on the economy, he can't win."
- A senior administration official said the administration was getting a lot of blowback from retailers who were worried about the China tariffs coming in September. The delay until Dec. 15, announced this week, was to stave off these concerns, the source said.
- When Commerce Secretary Wilbur Ross said on CNBC it was to help consumers for Christmas, he let the cat out of the bag: Tariffs hurt consumers.
- If Trump were correct that China pays the entirety of his tariffs, as he has repeatedly claimed, why would the commerce secretary say the decision to delay tariffs was made to protect U.S. consumers for holiday shopping?
The backdrop to all of this is that Trump knows he needs a strong economic run into November 2020.
- His team is worried about polling data from Michigan, Pennsylvania and Wisconsin, amid the economic signals.
- That's why Trump is getting even more agitated about the Federal Reserve. As one former senior White House official put it: "He’s running out of tools" to juice the economy.
- Tax reform is in the rear view mirror. Infrastructure isn’t happening. What else has he got besides a possible China trade deal?
The bottom line ... A former senior White House official told Swan: "Continued economic expansion is not a given. Most of the benefits from Trump’s tax cuts and regulatory relief have already taken effect."
- "Rather than attack the global system that has produced so much prosperity for America, Trump would do well to harness its potential for economic growth."
- "The consequences of further isolating ourselves from the world may turn out to be quite severe."
3. Israel may block Squad members
A trip to Israel this weekend by Reps. Ilhan Omar (D-Minn.) and Rashida Tlaib (D-Mich.) will most likely be denied in its current proposed format, a senior government official told the Washington Post today.
- Axios' Jonathan Swan and contributor Barak Ravid scooped this weekend that President Trump had told advisers that he thought Israeli Prime Minister Benjamin Netanyahu should use Israel's anti-boycott law to bar the two lawmakers.
"Omar and Tlaib, who have both been outspoken critics of Israel and support a boycott movement against the country, are slated to arrive Sunday," the Post reports.
- "Their trip is being planned by Miftah, a nonprofit organization headed by Palestinian lawmaker and longtime peace negotiator Hanan Ashrawi."
- The government official told the Post "that if Tlaib, an American of Palestinian heritage, made a special humanitarian request to visit her family in the occupied West Bank, then 'it would be considered favorably.'"
4. America mourns
Leaders from both sides of the U.S.-Mexico border told thousands of people gathered in a baseball stadium in downtown El Paso last night that love will triumph over hatred, AP reports.
- People lined up hours before the memorial and packed the stadium.
- Nine circles and 22 stars formed by luminarias — traditional lanterns made from paper bags, sand, and LED lights — adorned the field in honor of the nine people killed in Dayton and 22 in El Paso.
5. "Clear warning": China masses near Hong Kong
Hundreds of China's People's Armed Police conducted exercises today at a sports complex in Shenzhen, just across the border from Hong Kong, Reuters reports:
- The State Department expressed concern that the forces could be deployed to break up protests wracking the city.
Satellite photos show what appear to be 500 or more armored personnel carriers and other Chinese military vehicles parked in the soccer stadium, per AP.
President Trump tweeted last evening:
6. Trump: "The Russian 'Skyfall' explosion"
A deadly explosion at a naval weapons testing range in northwestern Russia resulted in a brief spike in radiation levels, an evacuation order that was rescinded — and speculation about the weapon involved. A quick catch-up:
7. 2020 candidate who's winning at day job
While Sen. Elizabeth Warren is the 2020 candidate best-known for robust policy plans, Sen. Amy Klobuchar has been the most prolific at her day job, introducing the most bills of any senator or House member running for president, Axios' Neal Rothschild writes from Quorum data.
- The Minnesotan has also introduced more bills than any senator, whether they're running for president or not.
- But that hasn't changed the game for Klobuchar in a primary that has incentivized maximum resistance and bold ideas that likely wouldn't become law in a divided government. She's polling at 1%.
8. Screen du jour
9. Tiffany launching men's jewelry collection
Tiffany & Co. is launching its first comprehensive jewelry collection for men in October as the upscale chain taps into a trend popularized by the likes of Jay-Z and John Mayer, AP reports.
- Why it matters: Tiffany's wants to attract millennials. Sales have been dampened by a decline in spending by international tourists.
10. 1 🎵 thing
The rise of Lil Nas X represents a larger moment in our culture, TIME’s Andrew Chow writes:
The fact that Lil Nas has risen so far and so fast testifies not only to his skill, but also to the erosion of the systems that for generations kept artists like him on the sidelines. As streaming and social media have democratized pathways to success, hip-hop — once an outlet for disenfranchised people of color — has become the dominant sound of popular music. ... Lil Nas X represents a more unified vision of the future, one in which a young queer black man can dominate popular culture by being unapologetically himself.
A TIME interview with Lil Nas X:
- On the initial response to "Old Town Road": "
- On his fear of losing fans when he came out as gay: "I know the people who listen to this the most, and they’re not accepting of homosexuality."
- On coming out during Pride Month: "I never would have done that if I wasn't in a way pushed by the universe. In June, I'm seeing Pride flags everywhere and seeing couples holding hands — little stuff like that."
Correction: This quote was attributed to Lil Nas X in a TIME news release and therefore in Axios AM, but is attributed in the TIME article to Darius Rucker, front man of the hit rock band Hootie & the Blowfish:
- "I was doing radio tours, and one guy looked me in the eye and said, 'I love the song, but I don’t think I’ll play it' ... The perception was that the audience wouldn’t accept an African-American singer."