By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job growth likely slowed further in August, but the pace of gains probably remains sufficient to keep the economy expanding moderately amid rising threats from trade tensions and weakness overseas that have left financial markets fearing a recession.
The Labor Department’s closely watched monthly employment report on Friday will come in the wake of a survey on Tuesday that showed manufacturing contracting for the first time in three years in August. The economy’s waning fortunes, underscored by an inversion of the U.S. Treasury yield curve, have been largely blamed on the White House’s year-long trade war with China.
Washington and Beijing slapped fresh tariffs on each other on Sunday. While the two economic giants on Thursday agreed to hold high-level talks in early October in Washington, the uncertainty, which has eroded business confidence, lingers.
The economy is also facing headwinds from Britain’s potentially disorderly exit from the European Union, and softening growth in China and the rest of the world.
The Federal Reserve is expected to cut interest rates again this month to keep the longest economic expansion in history, now in its 11th year, on track. The U.S. central bank lowered borrowing costs in July for the first time since 2008.
“The general message from the labor market is that businesses are cutting back on hiring, but they are not laying off workers and that is important,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Consumers are what’s keeping the economy moving at this point.”
Nonfarm payrolls probably increased by 158,000 jobs last month after advancing 164,000 in July, according to a Reuters survey of economists. The anticipated job gains would be below the monthly average of 165,000 over the last seven months, but still above the roughly 100,000 per month needed to keep up with growth in the working age population.
The unemployment rate is forecast unchanged at 3.7% for a third straight month.
August job growth could, however, fall short of expectations because of a seasonal quirk related to students leaving their summer jobs and returning to school. Over the past several years, the initial August job count has tended to exhibit a weak bias, with revisions subsequently showing strength.
Other factors favoring slower job growth include declines in both the Institute for Supply Management’s manufacturing and services industries employment measures in August. In addition, global outplacement firm Challenger, Gray & Christmas reported a 37.7% jump in planned job cuts by U.S-based employers in August.
But first-time applications for unemployment benefits, a more timely indicator of labor market health, have been hovering near historically low levels. Consumers were very bullish about the labor market in August and the government likely started recruiting for the 2020 Census last month.
Though the trade impasse does not appear to be spilling over to the labor market, job growth has been slowing since mid-2018.
The government last month estimated that the economy created 501,000 fewer jobs in the 12 months through March 2019 than previously reported, the biggest downward revision in the level of employment in a decade. That suggests job growth over that period averaged around 170,000 per month instead of 210,000. The revised payrolls data will be published next February.
The government has also trimmed economic growth for the second quarter. The employment report is expected to show average hourly earnings gaining 0.3% last month, matching July’s rise. But the annual increase in wages is seen dipping to 3.1% from 3.2% in July as last year’s surge falls out of the calculation.
“Recent downward revisions to estimates of economic growth, corporate profits, and employment growth all suggest that the economy is displaying classic late-cycle symptoms,” said Michael Feroli, an economist at JPMorgan in New York. “Moreover, these symptoms are unlikely to go away entirely even if a truce is reached in the current trade tensions.”
The length of the workweek will also be watched for clues on how soon companies might start laying off workers. The average workweek fell to its lowest level in nearly two years in July as manufacturers and other industries cut hours for workers. It is forecast rising to 34.4 hours in August from 34.3 hours in July.
“While one month does not make a trend, hours worked is a leading indicator worth noting,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings in New York. “A prolonged drop in hours worked signals that businesses may reduce hiring, with layoffs and cutbacks in private spending to likely follow.”
Manufacturing employment is expected to have risen by 8,000 jobs last month after increasing 16,000 in July. But factory payrolls could surprise on the downside after the ISM reported on Tuesday that its gauge of factory employment dropped in August to its lowest level since March 2016.
Manufacturing has ironically borne the brunt of the Trump administration’s trade war, which the White House has argued is intended to boost the sector. Factories cut overtime for workers in July.
Government employment could get a lift from hiring for the 2020 decennial census, which could create roughly 40,000 temporary jobs.
EU incoming economy chief calls for less restrictive budget policies
By Gavin Jones
ROME (Reuters) – The European Union needs looser budgetary policies and an overhaul of its fiscal rulebook, the bloc’s designated economics commissioner said in an article published on Sunday.
Writing in Italian financial daily Il Sole 24 Ore, Paolo Gentiloni said that while the EU’s deficit and debt rules must not be ignored, they needed to be “reviewed and updated”.
“It’s time for countries which have fiscal space to use it, in an overall context of less restrictive budgetary policies,” Gentiloni, due to replace Pierre Moscovici as economic and financial affairs commissioner on Nov. 1, said.
The former Italian prime minister warned that with the EU economy slowing, “the risks of a prolonged period of low growth must not be overlooked” and the task of stimulating the economy “cannot be left to monetary policy alone”.
Gentiloni will have an important role in scrutinizing Italy’s draft 2020 budget which was submitted to the Commission last week.
The budget plan raises next year’s structural deficit — which excludes the effect of GDP growth fluctuations — by 0.1% of gross domestic product, reversing a previous commitment by Rome to lower it by 0.6%.
EU Commission Vice President Valdis Dombrovskis told Reuters on Friday that Brussels would ask Italy for “clarifications” over its budget intentions.
However, even though the budget seems to flout EU rules, many analysts expect the Commission to take a lenient approach and avoid a prolonged dispute with Rome like the one that broke out last year when Italy had a less EU-friendly government.
Gentiloni, who comes from the pro-Europe Democratic Party which now governs with the anti-establishment 5-Star Movement, said it was crucial that the budget plan comes from a government that has a constructive approach toward the EU.
Among what he termed new instruments needed help growth and stability, Gentiloni cited an EU-wide unemployment insurance scheme, without going into details.
(Reporting by Gavin Jones; Editing by Canada News Media)
Lebanese continue protests, demand government to fix economy
Demonstrators, who have been on the streets since Thursday, have pledged to continue marching despite the resignations late on Saturday of four government members from the key political party, Lebanese Forces.
Labour Minister Camille Abousleiman, one of the four to quit the government, told Al Jazeera shortly after the decision that they had “lost faith in the government’s ability to effect change and address the problem”.
Lebanese citizens have been suffering from tax hikes and dire economic conditions in the heavily indebted country.
Lebanon’s public debt stands at around $86bn – more than 150 percent of gross domestic product, according to the finance ministry.
The grievances and anger at the government’s lack of solutions erupted into protests on Thursday, sparked by hikes in taxes including a proposed $0.2 tax on calls via messaging apps such as WhatsApp.
Such calls are the main method of communication for many Lebanese and, despite the government’s swift abandonment of the tax, the demonstrations quickly swelled into the largest in years.
“It is day four and protesters are back on the street. It’s not just in the capital Beirut, but across the country. The message they [protesters] are giving is of defiance and that they will continue to demand the resignation of the government,” said Al Jazeera’s Zeina Khodr, reporting from Beirut.
“While there are tens of thousands on the street protesting, there are still people who are backing the political parties, so it is not going to be easy to bring a change. These people out there want a nationalist leader whose loyalty is to Lebanon and not a political party.”
In an attempt to appease demonstrators, Lebanon’s finance minister, following a meeting with Prime Minister Saad Hariri, announced that they had agreed on a final budget that did not include any additional taxes or fees.
“We want everybody to join us on Sunday and also Monday to topple the government,” one protester said.
On Friday, Hariri gave a 72-hour deadline to his partners in government to agree on a solution to the country’s economic woes without imposing new taxes.
Hezbollah chief Hassan Nasrallah, whose movement is part of the government, warned on Saturday that a change in government would only worsen the situation.
The army on Saturday called on protesters to “express themselves peacefully without harming public and private property”.
|What is the solution to Lebanon’s economic and political crisis?|
On Saturday evening, thousands were packed for a third straight night into the Riyadh al-Solh square in central Beirut, despite security forces having used tear gas and water cannon to disperse similar crowds a day before.
Amnesty International said the security forces’ reaction was excessive, pointing out that the vast majority of protesters were peaceful.
“The intention was clearly to prevent protesters gathering – in a clear violation of the right to peaceful assembly,” it said.
Small groups of protesters have also damaged shop fronts and blocked roads by burning tyres and other obstacles.
The Internal Security Forces said 70 arrests were made on Friday on accusations of theft and arson.
But all of those held at the main police barracks were released on Saturday, the National News Agency (NNA) said.
Al Jazeera and news agencies
Finance Officials Focus on Economy
The IMF managing director, Kristalina Georgieva, said the threat from trade wars was a chief point of discussion for finance officials.
She said the IMF has estimated that the tariffs already imposed or threatened could shave 0.8% off global growth by the end of next year. Much of that stems from the fallout on business confidence.
In trade wars, “everybody loses,” she said. “Policymakers ought to take very seriously their obligations to international cooperation in trade.”
The World Bank’s president, David Malpass, said this week’s finance discussions had focused on how to address multiple challenges.
“Growth is slowing, investment is sluggish, manufacturing activity is soft and trade is weakening,” he said. “Climate change and fragility are making poor countries more vulnerable.”
He said the World Bank was committed to helping to address these challenges to provide a better life for the 700 million people in the world living in extreme poverty.
The IMF, in an updated economic outlook, projected the global economy would expand by 3% this year, the weakest in a decade, and said 90 percent of the world was experiencing a downshift in growth. But the IMF forecast growth will accelerate slightly to 3.4% in 2020, still below the 3.6% rate in 2018.
Jubilee USA, a religious organization fighting global poverty, said in a statement that while the IMF outlined a number of serious threats, the recommendations for dealing with them fell short.
“Risky investing, trade tensions and developing countries borrowing too much are serious concerns for financial stability,” said Eric LeCompte, the group’s executive director.
While Trump’s trade policies were a prime topic of discussion at the meetings, finance officials for the most part avoided direct criticism of the American president.
Christine Lagarde, who dealt with the Trump administration during her last three years as head of the IMF, was a bit more direct in an interview to be broadcast Sunday on CBS’s “60 Minutes.”
Asked about Trump’s trade war with China, she said it would give the world’s economy “a big haircut” and should be resolved by having all parties “sit down like big men, many men in those rooms and put everything on the table, and try to deal bit by bit, piece by piece, so that we have certainty.”
On Trump’s frequent Twitter attacks on Federal Reserve Chairman Jerome Powell, Lagarde said central bankers need to be independent to do their jobs well.
“Market stability should not be the subject of a tweet here or a tweet there. It requires consideration, thinking, quiet and measured and rational decisions,” she said.
Lagarde is scheduled to take over on Nov. 1 as the head of the European Central Bank, which manages monetary policy for the 19 countries who use the euro currency.
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