The first domino: A bad U.S. economic outlook, reflected in Friday's jobs report, helped prompt major stock sell-offs globally over the weekend.

"Japanese stocks collapsed on Monday in their biggest single day rout since the 1987 Black Monday sell-offs," reports Reuters, with the Nikkei 225 index falling 12.4 percent and the Topix index falling 12.2 percent. The Kospi index in South Korea fell more than 10 percent. Equity markets felt the pain in Taiwan, Australia, Singapore, Hong Kong, and China, though to a lesser degree. "At one point, the plunge in Japanese and Korean stocks tripped a 'circuit breaker' mechanism that halts trading to allow markets to digest large fluctuations," reports The New York Times. "But even after those mandatory breathers, the sell-off in stocks seemed to accelerate. Jitters spread to the debt market, prompting a halt in trading in Japanese government bonds as well."

Wall Street's "fear gauge"—the VIX—jumped to its highest level since 2020, when the pandemic prompted a wild market fluctuation. "The market response is a reflection of the deteriorating U.S. economic outlook," Jesper Koll, a director at financial services firm Monex Group, told the Times. "It was a New York sneeze that forced Japanese pneumonia."

The U.S. jobs report, released Friday, found that hiring slowed significantly in July. Unemployment continued its slow creep upward—4.3 percent, the highest since October 2021—and wage growth eased a bit. The jobs report also revised the May and June numbers downward, by a combined 29,000 jobs, indicating that the July downshift did not come out of nowhere. It also "stoked fear of a coming recession" due to something known as the "Sahm Rule," named for economic Claudia Sahm, who identified in 2019 a useful recession indicator that our July jobs report has unfortunately met (more on that from Reason's Eric Boehm).

Inflation has showed plenty of signs of cooling a bit, responding to Federal Reserve rate hikes, but the jobs report means a rate cut "could be on the table" as soon as September, according to Fed Chair Jerome Powell.

In other words, the aspirational "soft landing"—a cooling down of inflation without triggering a recession—may not in fact be materializing. And these American warning signs are leading to global ripple effects.

Bloomberg's Joe Weisenthal has, I think, the smartest and most concise take on what's going on, for those who indulge:

10 THOUGHTS ON TODAY'S BIG MARKET SELOFF

In today's 5 Things newsletter, I jotted down a bunch of random stuff about this moment in stocks, crypto, FX, and macro.

Here they are

1) It was clear instantly on Wednesday that Powell was going to be offsides this market: pic.twitter.com/iJ6ipo7Grc

— Joe Weisenthal (@TheStalwart) August 5, 2024

Scenes from New York: Will Rudy Giuliani's real estate save him?

QUICK HITS

• The U.S. government believes Iran and Hezbollah will retaliate against Israel for the recent assassinations of Hamas leader Ismail Haniyeh in Tehran and Hezbollah leader Fuad Shukr in Beirut.
• Per tabloid reporting, which was partially confirmed by the campaign, Kamala Harris' husband, Doug Emhoff, had an affair during his first marriage (not to Harris). The woman he had an affair with allegedly became pregnant and did not keep the baby, though the campaign has not acknowledged or confirmed that part.
• "Belgium's Olympic committee announced Sunday that it would withdraw its team from the mixed relay triathlon at the Paris Olympics after one of its competitors who swam in the Seine River fell ill," reports the Associated Press. "After a spring with an abnormal amount of rainfall, tests of the river's water found that the levels of E. coli bacteria were more than 20 times higher than what World Triathlon considers acceptable," wrote Reason's Natalie Dowzicky last week. "But the mayor of Paris, Anne Hidalgo, still jumped into the Seine earlier this month in an effort to instill confidence that the waterway was just fine. But a small dip is very different from submerging yourself for hours of racing."

This is the most French possible thing that could have happened when Paris hosted the Olympics:

Running with a really stupid idea because it sounds cool, then somehow ending up fucking over the Belgians. https://t.co/K6Id4CUVV5

— Tom (@Lawmadillo) August 5, 2024

• Fun fact:

Nirvana's Nevermind was released 12,000 days ago. Its release date is closer chronologically to Fidel Castro taking control of Cuba than to today.

— Dan Szymborski (@DSzymborski) August 1, 2024

The post Markets in Panic appeared first on Reason.com.

Released this morning: The jobs report, released at 8:30 this morning, shows that in May employers added 272,000 jobs, up from the monthly average of 242,000 that's persisted for the first half of the year and far more than most economists predicted.

In April, the unemployment rate was 3.9 percent—a bit higher than the 3.4 percent unemployment the year prior. In May, it slid up to 4 percent.

"The headline number is a source for celebration for President [Joe] Biden, who frequently points to the strong job market when making the case to voters that he has handled the economy well," summarizes The New York Times. But really, the picture is more complicated.

The economy is finally recovering from its recent high-inflation period, but the recovery has been slower than predicted and the Federal Reserve will probably not be inclined to lower rates anytime soon (which affects people's willingness to transact houses, for example). This new data probably won't change the Federal Reserve's behavior, so interest rates will remain high—a tough pill for Biden to swallow, as that may be one of the major factors leading to people's perception that the economy just isn't working for them.

Maybe Trump isn't so bad? Per The Washington Post, Donald Trump plans "to repeal parts of the 1974 law that restricts the president's authority to spend federal dollars without congressional approval" if he's elected to office a second time. He's claimed his Day 1 in office would include him telling every agency to find a "large chunk" of their budgets that can be cut, taking aim at international aid programs and environmental agencies in particular.

"What the Trump team is saying is alarming, unusual and really beyond the pale of anything we've seen," Eloise Pasachoff, a budget law expert at Georgetown, tells The Washington Post. But the national debt—which currently exceeds $34 trillion—is also alarming, unusual, and really beyond the pale of anything we've ever seen, so it's not clear what types of drastic measures ought to be taken to return spending to appropriate levels. For more on the national debt, check out this Just Asking Questions interview with Rep. Thomas Massie (R–Ky.), who wears a debt clock lapel pin.

But the specific mechanism Trump plans to use may throw the balance between the legislative and executive branches out of whack. "I will use the president's long-recognized Impoundment Power to squeeze the bloated federal bureaucracy for massive savings," writes Trump on his campaign website. Impounding funds, which was banned by lawmakers when President Richard Nixon abused the process, is when a president refuses to dispense funds even after Congress has already appropriated them.

Many quoted by The Washington Post seem to believe this would be a massive constitutional crisis, and there's plenty of reason to be skeptical that Trump would actually cut the amount of spending he says. But it's interesting that Trump gets dinged for proposals like this one, while plenty of Joe Biden's spendiest programs (like student loan forgiveness, which has repeatedly been thwarted by the courts) are deemed totally acceptable.

Scenes from New York: "An investigation from the City's Department of Investigation found that around 1,200 NYPD officers cheated while taking their promotional exam, yet the cheating was apparently for naught, because it didn't meaningfully improve their test scores," reports Hell Gate. 

QUICK HITS

• "SpaceX received the go-ahead from US air safety regulators to launch its massive Starship rocket on a fourth major test flight, as the Elon Musk-led company works to make the vehicle operational and ready for regular trips to space," reports Bloomberg. "The Federal Aviation Administration granted SpaceX a launch license to move forward with the next test flight, the agency said in a statement on Tuesday." (UPDATE: The launch happened yesterday and was successful.)
• Canada's new Online Harms Act would "curtail people's liberty in order to stop future crimes they haven't yet committed," writes The Atlantic's Conor Friedersdorf. Take it from the man himself: "We need the ability to stop an anticipated hate crime from occurring," says Canada's attorney general.
• Hunter Biden's gun trial—where he's charged with lying about drug use to obtain a gun—is ongoing but looking especially messy as his sister-in-law/ex-girlfriend Hallie Biden testifies against him, talking about how she disposed of his gun in a grocery store garbage can.
• "Congestion pricing, a good idea, died because our government doesn't deserve the money," writes Josh Barro at Very Serious.
• "A widely held belief is that the Nordic countries are great bastions of rehabilitation: by focusing on rehabilitation rather than punishment, they have managed to achieve remarkably low recidivism rates. Or so the story goes. This notion, however, is largely a myth," argues Patterns in Humanity.
• Briahna Joy Gray, who hosted Rising with Reason's own Robby Soave (and sometimes yours truly, when I would fill in for Soave), rolled her eyes at a source's account of her sister's October 7 rape and was promptly fired from the show.
• Joe Biden's executive order restricting asylum seekers is already having terrible consequences:

"They aren't all asylum seekers" totally misses the point. We don't want to send one person back to persecution or torture. If that requires letting in 10 or 100 who want to work, so what? My tax dollars shouldn't go to help any persecutors or torturers. https://t.co/hoh2MOyyz4

— David J. Bier (@David_J_Bier) June 6, 2024

• New Just Asking Questions with Mike Solana (an absolute must-follow):

The post The Economy Biden Wants appeared first on Reason.com.

This week's featured article is "In the AI Economy, There Will Be Zero Percent Unemployment" by Andrew Mayne.

This audio was generated using AI trained on the voice of Katherine Mangu-Ward.

Music credits: "Deep in Thought" by CTRL and "Sunsettling" by Man with Roses

The post <I>The Best of Reason</I>: In the AI Economy, There Will Be Zero Percent Unemployment appeared first on Reason.com.

In recent months, many politicians and media outlets have focused on the "migrant crisis" in various cities, supposedly caused by the arrival of large numbers of asylum seekers. Many of these migrants cannot support themselves, and end up taking up shelter space or living on the streets. In a recent Atlantic article (unfortunately, paywalled), Jerusalem Demsas explains why the supposed crisis is in reality a product of flawed government policies, rather than migration, as such:

When the mayor of New York, of all places, warned that a recent influx of asylum seekers would destroy his city, something didn't add up.

"I said it last year when we had 15,000, and I'm telling you now at 110,000. The city we knew, we're about to lose," Eric Adams urged in September. By the end of the year, more than 150,000 migrants had arrived. Still, the mayor's apocalyptic prediction didn't square with New York's past experience. How could a city with more than 8 million residents, more than 3 million of whom are foreign-born, find itself overwhelmed by a much smaller number of newcomers?

In another legendary haven for immigrants, similar dynamics were playing out. Chicago has more than 500,000 foreign-born residents, about 20 percent of its population, but it has been straining to handle the arrival of just 35,000 asylum seekers in the past year and a half. Some people have even ended up on the floors of police stations or in public parks. Mayor Brandon Johnson joined Adams and a handful of other big-city mayors in signing a letter seeking help with the "large numbers of additional asylum seekers being brought to our cities."

Sometimes the best way to understand why something is going wrong is to look at what's going right. The asylum seekers from the border aren't the only outsiders in town. Russia's 2022 invasion of Ukraine brought a separate influx of displaced people into U.S. cities that quietly assimilated most of them. "We have at least 30,000 Ukrainian refugees in the city of Chicago, and no one has even noticed," Johnson told me in a recent interview.

According to New York officials, of about 30,000 Ukrainians who resettled there, very few ended up in shelters. By contrast, the city has scrambled to open nearly 200 emergency shelters to house asylees from the Southwest border.

What ensured the quiet assimilation of displaced Ukrainians? Why has the arrival of asylum seekers from Latin America been so different? And why have some cities managed to weather the so-called crisis without any outcry or political backlash? In interviews with mayors, other municipal officials, nonprofit leaders, and immigration lawyers in several states, I pieced together an answer stemming from two major differences in federal policy. First, the Biden administration admitted the Ukrainians under terms that allowed them to work right away. Second, the feds had a plan for where to place these newcomers. It included coordination with local governments, individual sponsors, and civil-society groups. The Biden administration did not leave Ukrainian newcomers vulnerable to the whims of Texas Governor Greg Abbott, who since April 2022 has transported 37,800 migrants to New York City, 31,400 to Chicago, and thousands more to other blue cities—in a successful bid to push the immigration debate rightward and advance the idea that immigrants are a burden on native-born people.

Demsas is largely right here. Ukrainians admitted under the Uniting for Ukraine (U4U)  program have not caused any controversy in cities largely because they are allowed to immediately start working, and thereby can support themselves and contribute to our economy. By contrast, asylum seekers aren't eligible to apply for work permits for six months, and even then it often takes the federal immigration bureaucracy a long time to actually issue them.

What is true for Ukrainians is also true of Cubans, Nicaraguans, Venezuelans, and Haitians admitted under the "CNVH" program—an extension of the U4U model to a combine total 30,000 migrants per month fleeing oppression and violence in those four countries. Several hundred thousand people have entered the US under the CNVH program. But, like the Ukrainians, they have immediate work authorization, and therefore turn out to be a asset to cities, not a burden.

As Demsas explains, the federal government should abolish the six-month rule and let asylum-seekers work legally from day one. The Biden Administration has taken this step for many Venezuelans already in the US. But it needs to expand work authorization to other asylum seekers.

I do think Demsas gets one point wrong here. For the most part, it is not true that "the feds had a plan for where to place" U4U participants.  The program requires each migrant to have a US sponsor. But, beyond that, the federal government makes little or no effort to control where and how they live.

I myself am a sponsor in the U4U program, and have advised other sponsors and migrants.  Generally speaking, the migrants decide for themselves where they are going to settle in the US. Sponsors advise, but do not dictate. I now have eight Ukrainian sponsorees. To my knowledge, never once has a federal official attempted to plan where they live and work, or even offered advice on that subject.

Instead of planning and controlling, U4U mostly lets the market and civil society work. That, I think, is the real key to its success. While I don't myself have CNVH sponsorees, I know people who do; that program seems much the same.

Demsas also notes that, even when it comes to asylum seekers, the  dfficulties encountered in New York and Chicago have largely been avoided in cities like Houston and Miami, even though the latter also have experienced recent influxes. What's the difference between these cases? I don't know for sure. But a major factor is likely that the cities with serious problems also tend to have highly restrictive zoning rules, which make it difficult or impossible to build housing in response to demand. I have previously noted this issue in the case of New York.

By contrast, Houston is famous for not having zoning at all (thereby making housing construction easy, and housing itself very affordable). And Miami is at least less restrictive than cities like New York and Chicago.

In New York, housing issues have been exacerbated by the city's ill-advised free shelter guarantee, which incentivizes both migrants and poor natives to seek out free housing at public expense. New York would be well-advised to end the guarantee, while simultaneously ending exclusionary zoning rules that block new housing construction.

It is also true, as Demsas notes, that Texas Gov. Greg Abbott's migrant busing program—which has heavily targeted New York and Chicago—has caused disruption in those cities:

When immigrants make their way to a city in an organic fashion, they usually are drawn to a place where they have family ties, job leads, or other connections and resources available….

That's very different from the haphazard Texas busing program. When Abbott's buses arrive at their destinations, many of them are filled with people who had specific plans to go somewhere else. Cities then re-ticket many of the passengers. The mayor of Denver told me that roughly 40 percent of asylees who are bused into his city have no intention of staying there.

Abbott should stop the busing program, and instead let migrants choose their own destinations and pay their own way. In addition to increasing the migrants' economic productivity (thereby boosting the US economy) and reducing disruption in New York and Chicago, it would also save Texas taxpayers money. The state has spent some $148 million busing migrants to other parts of the country.

In sum, the "migrant crisis" is largely caused by a combination of perverse federal, state, and local policies that bar asylum seekers from working legally, artificially restrict housing construction, and bus migrants to places other than where they actually want to go. Migrants who enter by programs that avoid these obstacles don't cause any crises. Indeed, they are actually assets to the economy. If governments want to end the "crisis," for the most part they need only get out of the way.

The post The "Migrant Crisis" is Caused by Flawed Work and Housing Policies, not Migrants appeared first on Reason.com.