Charting the Global Economy: US Job Growth Continues to Surprise – Financial Post
(Bloomberg) — The US labor market continued to muscle ahead, though the latest jobs report also showed some signs of atrophy.
Payrolls increased by more than expected for an 11th straight month in February and more people joined the workforce. Separate data showed that while job openings are still historically high, they retreated in January, and the level of layoffs rose to the highest since the end 2020.
After missing its goal in 2022 by a wide margin, China set more modest expectations for economic growth this year.
In South Korea and Mexico, inflation decelerated by more than forecast last month. Meantime, price growth in Switzerland unexpectedly sped up.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
US payrolls rose in February by more than expected while a broad measure of monthly wage growth slowed, offering a mixed picture as the Fed considers whether to step up the pace of interest-rate hikes.
Vacancies at employers retreated at the start of the year but remained historically elevated, highlighting persistent labor tightness that supports a higher level of interest rates from the Fed.
The Federal Reserve Bank of New York this week said stress on the world’s beleaguered supply chains had finally returned to normal — below normal, in fact. Not so fast, responded a professor at the top-ranked US university for supply-chain management.
Swiss inflation unexpectedly accelerated last month, suggesting the central bank will need to continue hiking borrowing costs. The jump was primarily due to rising prices for air transport, package holidays, rents and gasoline.
Sweden’s economy unexpectedly expanded in January, with gains in exports and household spending contrasting earlier evidence that the largest Nordic economy had likely entered a recession.
China set a modest economic growth target of around 5% for the year, with the nation’s top leaders avoiding any large stimulus to spur a consumer-driven recovery already underway, suggesting less of a growth boost to an ailing world economy.
South Korean inflation decelerated by more than expected in February, easing domestic concerns for a central bank that’s also closely monitoring offshore risks including sharper US policy tightening.
Mexico’s inflation decelerated more than expected in February, suggesting that the central bank may have some room for policy maneuver at this month’s interest-rate setting meeting.
South Africa posted a current-account deficit for the first time in three years in 2022 as imports increased and power shortages and logistics—network constraints curbed exports, heightening the nation’s vulnerability to external shocks.
Australia’s central bank signaled a pause ahead after raising rates to the highest since May 2012. The Bank of Canada kept interest rates unchanged for the first time in nine meetings, and Haruhiko Kuroda finished his last meeting at the helm of the Bank of Japan by standing pat. Poland, Malaysia and Peru extended their pauses while Serbia hiked.
—With assistance from Maya Averbuch, Bastian Benrath, Tom Hancock, Sam Kim, Yujing Liu, Brendan Murray, Prinesha Naidoo, Niclas Rolander, Reade Pickert, Augusta Saraiva, Zoe Schneeweiss, Ott Ummelas and Lin Zhu.
Euro-Area Economy Strengthens More on Service-Sector Surge – Financial Post
(Bloomberg) — Euro-zone economic growth continued to pick up in March, driven exclusively by the service sector as concerns over energy supplies recede.
The overall rate of expansion rose to the highest level in 10 months, according to business surveys by S&P Global. Manufacturing output broadly stagnated, however, only supported by a backlog of orders as demand continued to fall.
“Growth has been buoyed since the lows of late last year as recession fears and energy market worries fade, inflation pressures ease and the unprecedented supply chain delays seen during the pandemic are replaced with record improvements to supplier delivery times,” said Chris Williamson, an economist at S&P Global.
Sentiment in Europe has been improving as it became clear that the region would avoid worst-case scenarios for access to natural gas predicted after Russia cut off supplies to the bloc. Recent turmoil in the banking sector has cast some doubt on how the global economy will develop, though European officials have sounded confident that the sector can withstand any fallout.
While activity improved in both Germany and France, the strongest performance came in the rest of the 20-nation euro area.
What Bloomberg Economic Says…
“The euro-area composite PMI survey for March suggests the economy is beginning to emerge from a period of stagnation and holding up well under the weight of higher interest rates. While monetary policy works with long and variable lags and choppy waters may still lie ahead, the resilience of the economy should allow the hawks at the European Central Bank to succeed in pushing for more interest rate increases”
—David Powell, economist. For full analysis, click here
Inflation is still running far above the European Central Bank’s 2% target, however, with underlying data becoming the key focus for policymakers. While price gains continued to moderate in March, they remain elevated by historical standards, according to S&P Global.
“Such stubborn inflationary pressures, fueled primarily by the service sector and rising wage costs, will be a concern to policymakers and suggests that more work may be needed in terms of bringing inflation down to target,” Williamson said.
The jobs market also remained resilient. Employment growth reached a nine-month high, with acceleration seen especially in services in line with rising demand.
Firms’ confidence in the business outlook dipped, though it remained well above levels seen in late 2022. That could be linked to concerns over uncertainty caused by banking-sector stress and the impact of further increases in interest rates, S&P Global said.
The composite PMI reading for the UK edged lower to 52.2 in March from 53.1 the previous month, suggesting the economy has avoided a recession for now. British companies are the most confident they’ve been since the start of Russia’s invasion of Ukraine.
Data earlier revealed activity in Japan’s services sector edged up to the strongest in almost a decade as the return of Chinese tourists boosted demand. The US number due later on Friday is expected to be below 50.
—With assistance from Mark Evans, Joel Rinneby, Tom Rees and Zoe Schneeweiss.
(Updates with UK PMI data in 10th paragraph.)
Economy headed into a ‘Bermuda Triangle’ financial crisis: Nouriel Roubini
- The economy is headed into a “Bermuda Triangle” of risk, economist Nouriel Roubini warned.
- Roubini pointed to three stressors facing the US economy.
- He sounded the alarm for a stagflationary debt crisis and a severe recession to hit the US.
In a recent interview on the McKinsey Global Institute’s “Forward Thinking” podcast, the top economist warned that the economy was risking another financial crisis as central bankers continue to tighten monetary policy.
Federal Reserve officials raised interest rates another 25 basis-points this week, and have hiked rates 475 basis-points over the last year to control inflation. That marks one of the most aggressive Fed tightening cycles in history, and could place the economy under three different kinds of stress, Roubini warned.
First, high interest rates could easily overtighten the economy into a recession, experts say, which reduces income for households and corporations.
Second, high interest rates means firms are battling higher costs of borrowing and waning liquidity, which weighs on asset prices. Last year, US stocks plunged 20% amid the Fed’s rate hikes, with warnings from other market commentators of an even steeper crash in equities this year.
Finally, high interest rates are pressuring the mountain of debt, both private and public, that was amassed during the years of low rates, Roubini said. He pointed to bankrupt “zombies”, which include households, corporations, and governments.
“It’s got like, a Bermuda Triangle. You have a hit to your income, to your asset values, and then to the burden of financing your liabilities. And then you end up in a situation of distress if you’re a highly leveraged household or business firm. And when many of them are having these problems, then you have a systemic household debt crisis like ,” he warned.
Roubini, one of the experts who called the 2008 subprime mortgage crisis, has repeatedly sounded the alarm for another crisis to strike the US economy. The scenario he envisions combines the worst aspects of 70s-style stagflation with something like the 2008 crisis, with a severe recession, stubborn inflation, and mounting debt levels bludgeoning economic growth.
He and other top economists have criticized the Fed’s aggressive rate hiking regime over the last year, and some experts have called central bankers to stop raising interest rates entirely out of fear of “breaking” something in the financial system.
Signs of stress are mounting, the most recent being the failure of Silicon Valley Bank. But pausing interest rates could panic investors and lead to a resurgence of inflation, meaning central bankers are powerless no matter what they do with rates, Roubini has said previously.
Cuba’s new parliament will face a familiar economic hangover
For Jose Guerra Ferrer, a Havana-based industrial engineer, “the economic situation in Cuba is bad”. “I hope it can be addressed by the new parliament,” he says, with reference to national assembly elections this weekend.
In recent years, Cuba’s parliament has implemented gradual policy adjustments to try and ease economic constraints and that is Guerra Ferrer’s hope with the country’s upcoming elections.
The country’s highest political body is assembled through committees such as trade unions and student organisations. Once candidates, most of whom are members of the Communist Party of Cuba, or PCC, are nominated, they can confirm their choice for president.
That is certain to be the incumbent, Manuel Diaz-Canel, who took over from Raul Castro in 2018. The following year, in 2019, Diaz-Canel, a PCC stalwart, adopted a new constitution. Amid growing political dissatisfaction, it was designed to modernise Cuba’s entrenched state apparatus.
Voter absenteeism has become a feature of recent elections in Cuba. Turnout for the November 2022 municipal elections, for instance, fell below 70 percent for the first time, indicating disengagement in a political system that depends on public support.
Decades of sanctions
After US-backed leader Fugencio Batista was toppled in 1959, Cuba became a one-party-state led by Fidel Castro and his successors. Since then, the PCC has defied expectations by surviving decades of economic isolation and the disintegration of the Soviet Union, a key ally.
Since the early 1960s, the cornerstone of US foreign policy towards Cuba has been a controversial trade embargo, among other restrictions. Then, in 2015, the Obama administration began normalising relations with Cuba, including a shift away from sanctions.
By contrast, Donald Trump reintroduced old measures and added new ones as well. He barred US tourism and limited the amount of money Cuban Americans could send to their relatives (some remittance restrictions have been eased under President Joe Biden).
“The truth about sanctions is that repercussions are multilayered,” says Guillaume Long, Ecuador’s former minister of foreign affairs. “Governments are prevented from following standard protocols, which undermines state-building capacity.”
He stressed that “there is no doubt that Cuba’s economy has suffered under US sanctions”. The country also experienced a painful adjustment after the collapse of the Soviet Union in 1991. Up to that point, the USSR supplied 90 percent of Cuba’s petroleum needs and 70 percent of all other imports, including food and medicine, mostly at subsidised prices.
Between 1989 and 1994, Cuban trade with the former Soviet Union plummeted by 89 percent. While domestic production was squeezed, the government consolidated its control over the economy. Large public enterprises have survived through privileged access to credit and foreign currency.
Today, Cuba’s economy remains undiversified and commodity-dependent. Tobacco and sugar account for roughly 30 percent of foreign exchange earnings. Cuba also exports healthcare services by sending physicians and nurses to Brazil and Venezuela. Tourism, meanwhile, represents an important source of revenue.
Elsewhere, the PCC has succeeded in establishing reputable education and healthcare systems. Not only is Cuba’s life expectancy higher than the United States’, it is also the smallest country in the world to have successfully developed a vaccine against COVID-19.
Due to the outsized role of tourism in Cuba’s economy, COVID-19 dealt the island a body blow. Tourist arrivals fell dramatically during the pandemic, from four million in 2019 to just 356,000 in 2021, Bloomberg News reported. Foreign currency inflows slowed significantly.
To cope with falling international reserves, the PCC was forced to unify Cuba’s dual exchange rate system in January 2021. This involved devaluing the Cuban peso (CUP), which had been set at parity with the US dollar for decades, to the then unofficial rate of 24 pesos per greenback.
However, the new rate was “overvalued” according to Alberto Gabrielle, a senior researcher at Sbilanciamoci, a Rome-based political think tank. “The devaluation did not achieve an equilibrium in Cuba’s import-export mix, causing a scarcity of goods and nudging up inflation,” he added.
Though difficult to measure, Cuba’s official consumer price index rose by 70 percent during 2021. Unofficial estimates showed that inflation increased between 100 percent to 500 percent over the same period. “Queues at supermarkets and pharmacies went from long to longer,” said Gabrielle.
Together with a surge in coronavirus cases at the start of 2021, the hit to purchasing power led to a groundswell of social unrest. In July of that year, Cuba witnessed the largest anti-government demonstrations in years.
Though public dissent is forbidden, thousands of protesters took to Cuba’s streets, voicing concerns over food supplies and the handling of the pandemic by the authorities. The protests were quickly stamped out, but they did succeed in rattling the regime.
“The government got scared, especially when inflation persisted into 2022,” noted Gabrielle. To counter these trends, authorities introduced a second exchange rate for personal transactions in August 2022 at CUP120:$1. This cooled the demand for dollars and eased import price pressures.
At roughly the same time, Cuba was struck by two concurrent shocks. On August 6, the island’s main fuel import facility – the Matanzas supertanker – was struck by lightning. Three of its tanks caught fire, triggering electricity blackouts nationwide.
A month later, in September, a powerful storm surge rolled across western Cuba. Hurricane Ian knocked out the national power grid. It also prompted thousands of evacuations and caused extensive physical infrastructure damage, including to tobacco and sugarcane fields.
Gradual opening up
Even before the events of last year, the PCC agreed to expand private sector activity in an effort to boost output and relieve goods shortages. In February 2021, the government agreed to grant private company status for 2,000 listed professions (up from 127 previously), facilitating partnerships with foreign investors and limiting state control over commercial activities.
While a new law granting equal commercial rights for private companies and state firms has yet to be agreed upon, the government is hoping that piecemeal reforms will stimulate growth.
“Heterodox policies will be maintained, but a gradual opening will probably be the direction of travel for the new parliament,” said Guillaume Long.
Until then, large numbers of Cubans are expected to try and leave the country. A record 220,000 Cubans were caught at the US-Mexico border in the fiscal year 2022, which ended on September 30, Reuters news agency reported. In December 2022 and January 2023, US Customs and Border Protection reported nearly 50,000 encounters with Cuban migrants.
The experience of Guerra Ferrer, the engineer, is not uncommon, “I have many friends who’ve emigrated. My son may also leave to help my wife and I once we retire.”
New York Fed board member warns of commercial real-estate risks – Reuters
Large asteroid to zoom between Earth and Moon – Al Jazeera English
China's Mysteriously Resilient Real Estate Prices: New Economy Saturday – Bloomberg – Bloomberg
Silver investment demand jumped 12% in 2019
Iran anticipates renewed protests amid social media shutdown
Search for life on Mars accelerates as new bodies of water found below planet’s surface
Art16 hours ago
Gagosian’s DALL-E–Enabled Art Exhibition Throws Us Headfirst into the Uncanny Valley
Business23 hours ago
Stock market today: Stocks open lower as further bank-related fears percolate
Investment16 hours ago
Here’s how much money you’d have if you invested $1,000 in Nike 10 years ago
Economy22 hours ago
Economy headed into a ‘Bermuda Triangle’ financial crisis: Nouriel Roubini
Media22 hours ago
4 ways to use social media to advance your career
Health11 hours ago
Nearby regions report spike in whopping cough – BlackburnNews.com
News20 hours ago
What can I give on Mother’s Day?
Business24 hours ago
Banking crisis lingers as contagion fears take aim at Deutsche Bank