TUESDAY, NOVEMBER 5 , 2019. THE WASHINGTON POST EZ RE A
may be a good sign. Unemploy-
ment typically rises for one of two
reasons: either more people are
losing jobs or more people have
been inspired, or compelled, to
come off the sidelines and look for
work. This doesn’t seem to be true
in Wisconsin, where the number
of people working or looking for
work remains below 2017 levels.
There are early signs that hir-
ing has cooled in Wisconsin and
neighboring Minnesota. Compa-
nies typically pull back on hiring
before they turn to layoffs. The
average rate of layoffs and firings
has risen more rapidly in North
Carolina than in any other state
over the past two years, according
to Labor Department data. In the
other states, data through June
did not yet show a sharp rise in
layoffs.
For now, Michigan’s economy
has slowed and the labor market
has stalled, but this turn is just
starting to take place. It can often
take a while before perceptions
change, and there is hope that
conditions could improve, espe-
cially if Trump de-escalates trade
tensions with China.
“I don’t think we’re in a psycho-
logical crisis zone in Michigan,”
Ehrlich said, “but I think the key
is to avoid letting it get much
worse.”
[email protected]
[email protected]with the most low-skill manufac-
turing jobs and in swing states.
“It’s fair to assume that Mr.
Trump’s prospects in Wisconsin, a
state with a high manufacturing
base with significant concentra-
tions of low-skilled workers, are
dimmed by this news,” Quinn
said.
There is intense debate about
how much influence the economy
is going to have on the 2020
election outcome or whether the
race will become a referendum on
Trump’s leadership style. Even on
the economy, views have become
more partisan over time, suggest-
ing some might not shift their
vote, despite what’s happening in
their region.
“I don’t think they will blame
Trump for it. They are more likely
to keep lashing out at immigrants
and others,” said John C. Austin,
director of the Michigan Econom-
ic Center.
Many places where unemploy-
ment is above the national level
have struggled for years.
“There is a bifurcated economy
here in the Midwest, especially in
Michigan,” Austin said. “There
are knowledge and talent hubs in
many metro areas that are grow-
ing. Whereas, small and midsized
manufacturing places just ha-
ven’t found their new way yet.”
Unemployment is rising across
the region, but in some places itespecially rising unemployment
or higher Democratic turnout, it’s
going to be a lot closer.”
Michigan and Wisconsin are
among the five most manufactur-
ing-reliant states in the country,
separate Labor Department data
shows. Manufacturing, especially
durable consumer goods such as
automobiles and recliners, is par-
ticularly sensitive to foreign trade
— and to recessions.
“There’s a real disconnect be-
tween the manufacturing econo-
my and the rest of the economy
right now, and our Michigan
economy is more manufacturing-
heavy than the nation as a whole,”
said Gabriel Ehrlich, associate di-
rector of the Research Seminar in
Quantitative Economics at the
University of Michigan.
In a 2017 analysis, Georgetown
University economists modeled
how swing-state county unem-
ployment affected the presiden-
tial vote, and found what George-
town’s Dennis Quinn said in an
email was “a significant penalty
from rising unemployment, espe-
cially in swing states like Wiscon-
sin.”
Why Wisconsin? As Quinn and
his collaborators wrote in the
journal International Organiza-
tion, “exposure to trade is strongly
associated with presidential vot-
ing.” The strongest effects, they
found, are concentrated in placeseconomy & business
DEFENSE
Navy to buy General
Dynamics submarines
The U.S. Navy has reached an
agreement with General
Dynamics on a multibillion-
dollar deal to buy the next batch
of Virginia-class attack
submarines, according to the
service.
After protracted negotiations,
the deal was cut from 11
submarines to nine, with options
to buy a 10th and 11th vessel by
2023, because funding was
running more than $1 billion
short, according to service
documents and congressional
correspondence. The value of the
resulting agreement wasn’t
immediately disclosed.
“We have reached a multiyear”
agreement “and are working to
announce a contract” by Dec. 31,
Capt. Danny Hernandez, a Navy
spokesman, said in a statement.
Elizabeth Power, a
spokeswoman with General
Dynamics’ Electric Boat unit,
which makes the Virginia-class
sub with Huntington Ingalls
Industries, said: “We have been
working closely with the Navy
and stand ready to support their
needs. The contract being
contemplated allows us to
maintain a stable Virginia-class
build rate.”
Ellen Lord, the Pentagon’s
acquisitions chief, said in letters
to the four defense committees
that “while there are sufficientfunds” to execute the program
through 2024, “there are
shortfalls” in fiscal 2022 and
2023 that the Navy has
committed to address in its next
proposed budget.
— Bloomberg NewsINTERNATIONAL TRADEIndia pulls out of new
Asian trade agreementChina joined 14 countries on
Monday in agreeing on terms for
what could be the world’s biggest
trade pact, but India pulled out
at the last minute on the grounds
that the deal would hurt its
farmers, businesses, workers and
consumers.
The China-U.S. trade war andrising protectionism have given
new impetus to years of
negotiations on the Regional
Comprehensive Economic
Partnership (RCEP), which
brings together the 10-member
Association of Southeast Asian
Nations (ASEAN), China, Japan,
South Korea, Australia and New
Zealand.
Members said the deal would
be signed next year after the 15
countries without India reached
agreement in Bangkok on the
text and issues of market access.
But Indian Prime Minister
Narendra Modi said that he had
to take into account the interests
of Indian people.
“When I measure the RCEP
Agreement with respect to the
interests of all Indians, I do notget a positive answer,” Modi
said in a speech in Bangkok,
according to a government
note.
— ReutersALSO IN BUSINESS
U.S. regulators are investigating
whether Barclays violated
securities laws after a former
trader at the firm raised concerns
about its marketing practices for
certain bonds, according to legal
filings. From September 2018
until this June, Barclays provided
documents to the Securities and
Exchange Commission in
response to the agency’s probe,
according to legal paperwork
seen by Bloomberg News.
Barclays and the SEC both
declined to comment.New orders for U.S.-made goods
fell more than expected in
September and business
spending on equipment was
slightly weaker than initially
thought, suggesting that
manufacturing remains soft
amid the ongoing U.S.-China
trade war. Factory goods orders
declined 0.6 percent after
dipping by an unrevised
0.1 percent in August, the
Commerce Department said
Monday.COMING TODAY
8:30 a.m.: Commerce
Department releases
international trade data for
September— From news servicesDIGESTfired for a consensual relation-
ship with an employee that vio-
lated company policy. Chris
Kemp czinski, former president of
McDonald’s USA, will replace
Easterbrook as chief executive.
And sportswear giant Under
Armour closed 18 percent lower
after confirming Wall Street Jour-
nal reporting that it had been
under federal investigation for
more than two years for its ac-
counting practices. Despite post-
ing strong quarterly numbers
Monday, Under Armour cut its
2019 revenue forecast for the
second straight time.
News of the probe came just
two weeks after founder Kevin
Plank announced he would step
down as chief executive on Jan. 1,
after 23 years with the company.
He will be replaced by Patrik
Frisk, the chief operating officer.
[email protected]The trickle of rosy trade news
prompted Goldman Sachs to re-
vise its tariff outlook, saying it
expected tariffs to stay at the
same levels through 2020.
“While further tariff increases
are no longer our base case, we
believe the risks continue to lean
in that direction, as a US-China
deal that substantially reduces
US tariffs continues to look much
less likely than an eventual
breakdown in talks that leads to
renewed tariff escalation,” Alec
Phillips, the chief U.S. political
economist at Goldman Sachs,
wrote in a note to investors Mon-
day.
Scandals and shake-ups
dragged down some key players
in Monday’s trading. McDonald’s
shares fell nearly 3 percent after
the fast-food juggernaut an-
nounced Sunday that chief execu-
tive Steve Easterbrook had beennese trade officials said Friday
they had reached a consensus
with U.S. negotiators on the first
phase of a trade deal.
President Trump and Chinese
President Xi Jinping were expect-
ed to sign the first phase at the
Asia-Pacific Economic Coopera-
tion forum later this month, but
Chile canceled the forum because
of political unrest. Trump, how -
ever, has insisted a deal is still
coming, and he told reporters at
the White House on Friday that
he wants it signed on U.S. soil. He
suggested Iowa as a possible loca-
tion — a state he won in 2016 but
which has been among the hard-
est hit by the 16-month trade war.
“We’re thinking about Iowa.
You know why? Because it would
be the largest order in history for
farmers. So to me, Iowa makes
sense. I love Iowa. It’s a possibili-
ty,” Trump said.ed trade war would make a signif-
icant dent in corporate profits.
Wall Street is expecting a formi-
dable performance in November.
“The market has risen in price
nearly two out of every three
Novembers and has recorded the
greatest percentage of new all-
time highs since World War II,”
Sam Stovall of CFRA Research
wrote in a research note Monday.
“November typically kicks off a
stretch of improving average to-
tal returns and frequencies of
reporting positive performances
for large, small, and international
stocks, along with REITs and
bonds.”
Over the weekend, U.S. Com-
merce Secretary Wilbur Ross said
American companies would soon
be granted licenses to sell to
Chinese tech titan Huawei, lifting
a ban that has been a contentious
point in trade negotiations. Chi-tial trade deal is forthcoming.
The S&P 500 is up more than
20 percent for the year, headed
for its best performance since
2013.
“There is no recession out
there on the horizon,” Chris Rup-
key, chief financial economist at
MUFG Union Bank, wrote in a
research note Monday. “The
stock market can rejoice and
continue to climb to new record
highs.”
The upswing is a welcome shift
for investors after a rocky Octo-
ber, when ongoing trade uncer-
tainty collided with a raft of
recession warnings that cast
doubt on the life span of the
economic expansion, which is the
longest in U.S. history. About
75 percent of S&P 500 companies
that had reported earnings as of
Friday had beaten expectations,
assuaging fears that the protract-BY TAYLOR TELFORDU.S. stocks closed at fresh
highs Monday, extending last
week’s record-breaking run as
investors reveled in strong eco-
nomic data, blockbuster earnings
and trade optimism.
The Dow Jones industrial aver-
age closed up 115 points, or 0.
percent, surpassing the record
close of 27,398 set in July. The
Standard & Poor’s 500 and Nas-
daq indexes also rose from the
record levels they had set last
week.
Markets have rallied in part
because a better-than-expected
jobs report last week showed the
labor market was strong despite a
lengthy strike by General Motors
workers that stretched into Octo-
ber. Investors have also cheered
positive assurances from U.S. and
Chinese trade officials that a par-
U.S. stocks close at fresh highs, extending November’s record-setting start
○
DOW 27,462.
UP 114.75, 0.4% ○NASDAQ 8,433.
UP 46.80, 0.6% ○S&P 500 3,078.
UP 11.36, 0.4% ○GOLD $1,511.
DOWN $0.30, 0.02% ○CRUDE OIL $56.
UP $0.34, 0.6% ○10-YEAR TREASURY
DOWN $6.00 PER $1,000; 1.78% YIELDCURRENCIES
$1=108.57 YEN, 0.90 EUROSincumbent,” said Mark Zandi,
chief economist of Moody’s Ana-
lytics. Moody’s has several models
that it uses to predict the 2020
election outcome. “When unem-
ployment is rising, people sense
the implications of that: fewer
jobs, smaller pay increases, no
bonuses and maybe some layoffs.
It’s palpable. People feel things
are changing, and it makes them
nervous.”
Zandi’s models currently pre-
dict an easy Trump victory in
2020, but if the stock market de-
clines significantly or unemploy-
ment rises back above 4 percent,
that could change things.
“The key swing states are the
ones that feel the most fragile
right now. A lot of that is due to
the trade war,” Zandi said. “If
anything moves against Trump,rising joblessness depend on
manufacturing and agriculture.
Those sectors have been hit hard
by President Trump’s trade war
with China.
The global economic slow-
down and dramatic shifts in re-
tailing are also playing a role in
some job losses. Beleaguered re-
tailers fear that the tariffs Trump
wants to put in place at the end of
the year would raise prices on
popular items such as laptops and
phones, driving away still more
customers.
Models forecasting the 2020
presidential election often incor-
porate unemployment. But it’s
not the rate itself that matters,
many economists say. It’s how it
changes.
“Unemployment can be low,
but if it’s rising, that will hurt theBY ANDREW VAN DAM
AND HEATHER LONGThere’s been a steady increase
in people coming to the St. Vin-
cent de Paul Society’s food pantry
in Marinette, Wis., a small city of
about 10,000 just across the bor-
der from Michigan’s Upper Penin-
sula.
In the past year or so, a slew of
major employers — Shopko,
Kmart, Younkers — have closed.
J.C. Penney left the year before.
After each business shuttered, vis-
its to the food pantry ticked up.
The number of people served
there has risen by 600 in just the
past six months.
“We are a lifeline for folks fac-
ing a financial crisis, which hap-
pens more often than not when
they are living paycheck to pay-
check,” said Kalyani Grasso, exec-
utive director of the St. Vincent de
Paul Society of Marinette, which
runs a food bank, thrift store and
other services. “We’ve had a spate
of business closures.”
Nationally, the economy looks
healthy, with solid growth, stocks
at record highs and an unemploy-
ment rate of 3.6 percent, near
historic lows. But unemployment
isn’t falling for everybody. New
data released last week by the
Labor Department reveals just
how many places are struggling.
In more than 1,000 counties, or
about one in three, the unemploy-
ment rate is higher than it was a
year ago. That includes all 72
counties in Wisconsin and all 10
in New Hampshire, as well as
most in Michigan, Minnesota and
North Carolina. The numbers can
be volatile from month to month,
but this trend remains even if you
look at entire quarters or years.
Marinette County is a good ex-
ample. At about 4 percent, its
unemployment rate remains low
by historical standards. But it has
risen a full percentage point in the
past year, and Grasso and her
team have seen the fallout first-
hand.
Unemployment is rising in
parts of the country, particularly
in a few states that are likely to be
critical to the 2020 presidential
election. Of the 10 closest states in
the past election, four — Wiscon-
sin, Michigan, Minnesota and
North Carolina — have seen sub-
stantial rises in unemployment
over the past year, according to
the latest Labor Department data.
Others have seen smaller rises,
but it’s too early to read much into
the often-revised numbers.
Economists say it’s telling that
many of the places experiencing
Unemployment is climbing in four key 2020 swing states
LIANNE MILTON FOR THE WASHINGTON POST
Pro-Trump signs are on display in Manitowoc, Wis. Despite trade-war fears in the manufacturing
sector, particularly Michigan and Wisconsin, some experts predict voters won’t blame the president.Change from a year earlier in unemployment rate0 to 0.
pct. pts.Falling unemployment 0.25 to 0.
as of Q3 20190.5 to 1 Up 1
or moreTHE WASHINGTON POSTNew Hampshire FloridaPennsylvaniaNevada MaineMinnesota North Carolina Michigan WisconsinArizona’17’18 ’’17’18 ’0246%0246%Unemployment rates in swing statesSources: Labor Department (unemployment); Dave Leip’s Atlas of U.S. Presidential Elections (margins)Note: State rates are seasonally adjusted; swing states are those with the narrowest margins in 2016.