Unadorned Notes: October 24-27, 2024
Jobless Claims Drop, Continuing Claims Rise; U.S. Business Activity Rises; China Voices Concerns on U.S. Tariffs; Americans’ Views of China Plummet; Chinese Hackers Target Trump Campaign
Economics, Finance, and Business
Jobless Claims Drop, Continuing Claims Rise: The U.S. Labor Department reported a drop in new weekly unemployment claims to 227,000, with filings potentially affected by hurricane disruptions and the Boeing workers’ strike. Continuing claims rose by 28,000 to 1.897 million for the week ending October 12, 2024, marking the highest level since November 2021. This rise in continuing claims suggests increasing difficulty for job seekers, despite historically low layoffs. The Federal Reserve is expected to monitor these labor market dynamics but may disregard hurricane and strike-related distortions in its policy decisions next month. Lower interest rates have bolstered home sales, though a supply increase could temper future growth.1
U.S. New Home Sales Surge: U.S. new single-family home sales rose 4.1% in September 2024 to an annual rate of 738,000 units, the highest since May 2023, as lower mortgage rates attracted buyers. August 2024 sales were revised down to 709,000 units. Sales increased 6.3% from a year earlier, with gains in the Northeast and South but declines in the Midwest and stagnation in the West. The median home price remained steady at $426,300, while inventory rose slightly to 470,000 units. At the current sales pace, the market would take 7.6 months to absorb the available supply, down from 7.9 months in August 2024.2
Core Capital Goods Orders Rise: New orders for U.S. core capital goods, a key indicator of business investment, increased by 0.5% in September 2024, exceeding expectations. The rise suggests resilient business spending despite high borrowing costs, though shipments of these goods fell by 0.3%, indicating softer third-quarter investment momentum. The Fed’s recent rate cuts, with another expected soon, are anticipated to support capital expenditures in coming months. Consumer sentiment improved slightly in October 2024, aided by easing interest rates, despite pre-election concerns. Durable goods orders overall dropped 0.8%, led by a steep decline in aircraft orders due to Boeing’s production challenges.3
U.S. Business Activity Rises: U.S. business activity expanded in October 2024, with S&P Global’s Composite PMI rising to 54.3, driven by strong demand. Prices for goods and services increased at their slowest rate since May 2020, indicating easing inflation pressures. The measure of new orders jumped to 54.2, suggesting robust demand despite price sensitivity among consumers. The flash manufacturing PMI edged up slightly to 47.8, while the services PMI rose to 55.3. The Atlanta Fed estimates Q3 2024 GDP growth at 3.4%, with official data expected in the coming week.4
IMF Urges “Triple Pivot” Strategy: The IMF is promoting a “triple pivot” strategy to ensure global economic stability, involving monetary easing, fiscal tightening, and productivity-boosting investments. The first pivot calls for central banks to reduce interest rates as inflation moderates, while the second urges nations to tighten fiscal policies to address rising public debt. The third pivot focuses on structural reforms to counter aging populations, boost productivity, and adapt to climate change. IMF Managing Director Kristalina Georgieva warned of potential conflicts between these goals, especially as fiscal tightening may clash with the need for long-term investments. She cautioned that without coordinated action, the global economy risks falling into a “low-growth, high-debt” trap.5
G20 Calls for Streamlined Climate Funds: A G20 report highlighted inefficiencies in climate transition funds, urging greater focus and streamlined processes to improve disbursement rates. Key funds, including the Green Climate Fund and Climate Investment Funds, have a combined commitment capacity of $4-5 billion but disbursed only $1.4 billion in 2022. Recommendations include harmonizing accreditation procedures and shifting from project-based support to country-driven strategies. Brazil, under its G20 presidency, emphasized the need for increased financing to aid developing countries in climate adaptation. The report’s implementation will be monitored across future G20 presidencies.6
Money Market Inflows Surge Pre-Election: U.S. money market funds saw $29.98 billion in inflows in the week to October 23, 2024, as investors sought safer assets amid election uncertainty and shifting Fed rate expectations. Equity funds, by contrast, recorded $2.54 billion in outflows, breaking a three-week buying streak, with significant sales across large-cap, mid-cap, and small-cap categories. Sectoral equity funds attracted $1.03 billion, with notable interest in consumer discretionary, gold, and communication services sectors. Money market funds marked their 21st consecutive week of inflows, while investment-grade and fixed-income funds also gained.7
China Voices Concerns on U.S. Tariffs: During a Washington meeting of the U.S.-China Economic Working Group, China raised concerns over U.S. tariffs and sanctions linked to Russia, according to its finance ministry. Vice Minister of Finance Liao Min also outlined recent Chinese economic stimulus measures in discussions with U.S. Treasury Undersecretary Jay Shambaugh. The meeting marked the sixth engagement of its kind between the two nations. Liao additionally met briefly with Treasury Secretary Janet Yellen during his visit for IMF and World Bank annual meetings. China’s statements reflect ongoing tensions in U.S.-China economic relations.8
U.S. Politics and Geopolitics
Major Newspapers Halt Election Endorsements: The Washington Post and Los Angeles Times announced they will forgo endorsements in the upcoming presidential election. The WaPo’s publisher, William Lewis, cited a commitment to neutrality, though the editorial board had already prepared an endorsement for Kamala Harris. Newsroom staff expressed concern, claiming the decision was driven by owner Jeff Bezos and undermines editorial independence. The LA Times also blocked a Harris endorsement, prompting the resignation of its editorial board leader. This shift reflects a broader trend, as more newspapers, including the Star Tribune and Alden Global Capital-owned publications, retreat from candidate endorsements.9
Americans’ Views of China Plummet: A new Chicago Council poll shows American sentiment toward China has reached a record low, with an average rating of 26 out of 100, down from 32 in 2022. While 79% of Americans support limiting high-tech exports to China, 55% favor increased tariffs, down from 62% in 2021. Both parties view China negatively, but Democrats prefer engagement on shared issues, while Republicans are more concerned about national security risks. Economic links are increasingly viewed as a liability, with 56% of Americans seeing trade with China as a threat to U.S. security. Despite tensions, the public prioritizes managing competition to avoid military conflict.10
Chinese Hackers Target Trump Campaign: Chinese hackers reportedly targeted cellphones used by former President Donald Trump and his running mate, Sen. JD Vance, as well as individuals linked to the Harris-Walz campaign. The FBI and Cybersecurity and Infrastructure Security Agency (CISA) confirmed an investigation into unauthorized access to U.S. telecom infrastructure by actors tied to China. It remains unclear what data, if any, was accessed. The Trump campaign has blamed the Biden administration for allegedly emboldening foreign cyber threats. Officials indicate the cyberattack targeted members of both parties, with notifications to victims ongoing.11
Israeli Strike Cripples Iran’s Missiles: Israel conducted airstrikes on Iranian facilities, reportedly destroying 12 planetary mixers essential for solid-fuel ballistic missile production, severely impacting Iran’s missile capabilities. Israeli sources indicate the attack will hinder Iran’s ability to replenish its missile stockpile and supply proxies like Hezbollah and the Houthis. The strikes also targeted four S-300 air defense systems and a drone production site, with some attacks launched from Iraqi airspace. Iran acknowledged limited radar damage but downplayed other losses and vowed to respond. President Joe Biden confirmed only military targets were hit and called for restraint to prevent further escalation in the region.12