Dec 13, 2019

Axios Markets

By Dion Rabouin
Dion Rabouin

👋 Morning! I’m your Axios Markets host for the next few days, while Dion enjoys some time off.

  • Reply to this email with any tips, questions or suggestions. Today’s newsletter is 1,020 words, or a 4-minute read.

In keeping with Dion's tradition, here's a quote — see who said it and why it matters at the bottom: "The sun don't shine forever, but as long as it's here, then we might as well shine together."

1 big thing: Pressure on corporations to boost paid parental leave

Illustration: Aïda Amer/Axios

As legislation moves forward to give 12 weeks of paid parental leave to civilian federal workers, corporate America is feeling pressure to follow suit — or at least offer sweeter policies.

Why it matters: The U.S. is the only industrialized country that doesn't mandate paid leave for new parents. While there are federal rules about unpaid leave, most companies set their own rules, with an eye toward their bottom lines.

Driving the news: After the House approved the bill on Wednesday, the Business Roundtable, a group of CEOs whose companies employ more than 15 million, wrote letters urging Congress and President Trump to make paid family leave — a broader category than parental leave — available to "as many working Americans as possible."

  • IBM CEO Ginni Rometty signed the letter, saying that "while most Business Roundtable companies provide very generous paid leave, there is a need for economy-wide action."
  • Rometty notes federal legislation would "help businesses challenged by the growing patchwork of competing and inconsistent state plans."

By the numbers: Just 16% of private employees in 2018 had access to paid family leave, which includes maternity and paternity leave, according to the latest data from the Bureau of Labor Statistics. That's up from 10% in 2010.

  • This year, the Business Roundtable said its member companies' sole purpose was no longer profits, and that part of their mission shift is to prioritize investing in their employees.

Between the lines: One reason corporations might push for federal legislation rather than act on their own "could be that it saves them from having to bear the costs of the policy," Aparna Mathur, director of the AEI-Brookings Project on Paid Family and Medical Leave, tells Axios.

  • "The government programs under consideration in this White House do not raise taxes on businesses, but instead allow employees to pull forward from either the child tax credit that they are eligible for or social security — so there are no additional costs on business."

The big picture: The tight labor market — with the unemployment rate at a 50-year low — puts workers in a bargaining position.

  • Private employers "now have to compete with the [government] and up their own games to attract and retain the best talent," Meredith Bodgas, editor-in-chief of Working Mother magazine, tells Axios.
  • "It's the larger employers who tend to start offering new benefits in order to attract and retain employees," Mathur says.
  • Small businesses face steeper challenges, she said. "It's a tight labor market for them, but the costs of providing the benefit are much higher."

Where it stands: Only a handful of companies — primarily corporate giants — offer anything nearly as rich as what the government is poised to pass.

Keep reading

Bonus: The impact on would-be workers
Expand chart
Source: Bureau of Labor Statistics; Note: Chart shows women who want a job; Chart: Axios Visuals

Fewer women who want a job, but have given up looking for work, are citing "family responsibilities" as the reason.

  • In fact, the number is at a low for this economic cycle, according to quarterly data by the BLS — though it's still more than double that of men, who are more likely to cite other reasons for dropping out of the labor force.

What's going on: Women in general are hopping back into the labor market at a faster rate than before. Part of the reason behind the drop in those would-be workers citing "family responsibilities" could be employers are forced to be open to more flexible work arrangements in the tight labor market.

  • Yes, but: Julia Pollak, a labor economist at employment marketplace ZipRecruiter, points out that the "share of job postings on ZipRecruiter offering parental leave has risen tenfold since 2016, but from a very low base ... from 0.03% of jobs in 2016 to 0.3% of jobs now."
  • That's still way below 1%, she adds.

Of note: "When a firm is offering [a parental leave] benefit, not all their employees are getting it," Liz Peters, a fellow at the Urban Institute, tells Axios.

  • "There's a big socio-economic gradient. It's more likely to be offered at firms that have more high-wage or high-skill workers than those in firms that have a larger proportion of low-wage workers."
2. Brexit and the trade war are still sources of uncertainty

"Celebrate Boris!" President Trump tweeted this morning, touting the potential for a post-Brexit U.S.-U.K. trade deal. Photo: Steve Parsons-WPA Pool/Getty Images

Central bankers, economists and market watchers say the U.S.-China trade war and Brexit are the biggest headwinds to the global economy — and are uncertainties that largely remain despite developments on Thursday.

Driving the news on China: President Trump has reportedly signed off on an agreement that would tamper down — but not end — the trade war.

  • But, there’s no guarantee tensions between the two nations won’t flare back up, as in the past.
  • Plus, China officials haven't confirmed the deal.

Driving the news on Brexit: British Prime Minister Boris Johnson won the U.K. election comfortably and he’s “now set to steer the U.K. through what should be a crucial five years for the country,” Axios’ world editor Dave Lawler reports.

  • According to CNBC, Citi analysts said that Johnson’s Brexit deal, which he promises to deliver on Jan. 31, would leave “lingering uncertainty in key areas such as financial services.”
  • How it’s playing: The British pound jumped over 2% versus the U.S. dollar — its biggest one-day gain in about three years, per Reuters.

The big picture: Deadlines have come and gone for the trade war and Brexit without moving closer to a solution. Corporations are fleeing the chaos — making moves like shifting supply chains — instead of waiting around for Brexit and the trade war to clear up.

3. Catch up quick

Regulators won’t clear Boeing’s 737 MAX to fly until at least February — meaning the plane will be grounded even longer than the company planned. (Reuters)

The FTC is reportedly weighing a preliminary injunction that could prevent Facebook from integrating its family of apps. (Axios)

The Federal Reserve consistently underestimated the labor market’s potential. (New York Times)

Deutsche Bank is considering a 20% cut to employee bonuses as the bank looks to rein in costs. (Bloomberg)

4. Debt binge milestone
Expand chart
Data: Federal Reserve; Chart: Axios Visuals

U.S. businesses now have more debt than American households, according to data released by the Fed on Thursday.

Why it matters: It’s the first time corporate borrowing levels has clipped that of households in 28 years and “a potential warning sign for the economy as corporate investment softens,” Bloomberg reports.

  • Lower-for-longer interest rates have fueled a borrowing frenzy, and Fed officials have warned about potential risks high corporate debt levels could pose to the record-long economic expansion.

Between the lines: Businesses investment “has historically climbed when borrowing rose.”

  • But companies have pulled back on investing in things like new buildings and factories — which fuel economic growth — with CEOs citing trade war uncertainty and worries about a global growth slowdown as the reason.
  • Bloomberg notes companies in some cases used borrowed cash to finance buybacks and dividends.
5. 1 🦉thing

Photo: Daniel Roland/AFP via Getty Images

Christine Lagarde is officially a central banker. But don't label her a dove or a hawk:

"My ambition is to be this owl ... [which is] associated with a little bit of wisdom."
— ECB President Christine Lagarde speaking to reporters on Thursday
Dion Rabouin

If you guessed Sean Combs aka Diddy — the world's 3rd wealthiest hip hop artist — you're right.

  • Read my story about what hedge fund manager Ray Dalio said when Axios asked what he could learn from the entrepreneur and rapper.