Weekly Industry Crib Sheet: Leaders Accelerate U.S.-E.U. Trade Pact Negotiations

Small Business Confidence Inches Up
Jobless Claims Plunge Due to Blizzard

In an effort to strengthen and expand economic ties between the world’s leading industrial economies, the governments of the U.S. and the European Union are moving to establish a new trade pact, with the goal of having a final agreement within the next two years.

“A U.S.-European working group spelled out the ambitions in a document…[that] called for standard trade-boosting measures like a virtual elimination of tariffs — already low, at an average 4 to 7 percent for goods traded between the United States and the European Union — and efforts to open areas that remain heavily regulated to outside investment, be it such services as power generation or agriculture markets in which both sides shelter local favorites,” the Washington Post notes.

Much of the negotiations will center on aligning the vast regulatory systems operating in the U.S. and E.U. to set trans-Atlantic standards for how products and parts are evaluated. These regulations cover a vast array of existing goods, as well as cross-border data flow that influences business activity. The complexity of the bureaucracies involved may impede the process.

“[T]he sheer ambition of the trade negotiations, which aim not only to eliminate import duties but also synchronize regulations governing products like cars, drugs, and medical devices, leaves plenty of room for the talks to bog down in the type of parochial concerns that have derailed past efforts at a trans-Atlantic trade pact,” the New York Times explains.

Despite these challenges, leaders on both sides of the table are determined to reach a comprehensive trade pact that would dramatically boost wealth and international commerce. An estimated $2.7 billion in goods and services moves between Europe and the U.S. each day, and entrepreneurs from either side of the Atlantic have made close to $3.7 trillion in investment in the two regions.

Small Business Confidence Inches Up

Confidence among small business owners in the U.S. edged up last month after policymakers arrived at a last-minute deal to avert widespread increases in income taxes. However, many entrepreneurs failed to recoup losses caused by the late-2012 scare regarding the fiscal cliff.

The optimism index from the National Federation of Independent Businesses (NFIB) rose to 88.9 in January, up from 88 in December. Although expectations for improved business conditions climbed 5 percentage points, they remained at negative 30 percent overall, the fourth-lowest reading in the index’s history.

“If small businesses were publicly traded companies, the stock market would be in shambles. While corporate profits are at record levels as a share of GDP, small businesses are still struggling to turn a profit,” Bill Dunkelberg, NFIB chief economist, said. “With the dismal news that our economy actually contracted in the fourth quarter of 2012, it isn’t any wonder that more small firms expect their real sales volumes to fall, few have plans to invest in new inventory, and hardly any owners are expanding or hiring. Owner pessimism is certainly not surprising in light of higher taxes, rising health insurance costs, increasing regulations and just plain uncertainty.”

On a more positive note, a net 3 percent of small business owners said they expect to add to headcount, compared with a net 1 percent in the previous survey, and 21 percent plan to make capital outlays in the short-term future.

“The agreement by President Barack Obama and Congress on Jan. 1 that also delayed government spending cuts helped stabilize the sentiment gauge, which dropped in November to the lowest level since March 2010,” Bloomberg News reports. “At the same time, Congress has until March 1 to reach a deal and avoid automatic budget reductions that are a risk to an economy that unexpectedly shrank at the end of 2012.”

Jobless Claims Plunge Due to Blizzard

New initial jobless claims fell sharply in the latest week reported, but the drop may have been due to effects from a blizzard that battered several states rather than actual improvements in the labor market. According to the U.S. Department of Labor, unemployment claims for the week ending February 9 decreased by 27,000 to a total of 341,000.

However, the four-week moving average, which smoothes out volatility and provides a clearer long-term picture of job market conditions, rose by 1,500 to 352,500, indicating that seasonal factors may have caused the unexpected swing in jobless claims.

“Jobless claims are seen as a key gauge of the job market, but last week’s data could have been distorted by weather. Illinois and Connecticut both submitted estimated data due to the blizzard that hit those areas over the weekend,” CNN Money explains. “Meanwhile, the blizzard may have also kept some people who are out of work from filing their claims…If that’s the case, next week’s data could show an increase in filings.”

Job creation has been relatively steady over the past two years, averaging approximately 175,000 new jobs per month. However, jobs have not grown at a sufficient pace to drive down the national unemployment rate, which stands at an elevated 7.9 percent.



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