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Strong jobs report shows economy back on track for further growth – CNBC

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Workers at Stellantis’ Detroit Assembly plant which produces the new 2021 Grand Cherokee L, a new three-row SUV.
Michael Wayland | CNBC

Broad-based strength in hiring in October signals the economy is shaking off the Covid-related slump of the third quarter and could grow faster than expected in the fourth quarter.

Employment increased by 531,000 in the month, with gains in many categories, including manufacturing, hospitality, professional and business services. The unemployment rate fell to 4.6%. Revisions to prior months’ data also added a total of 235,000 more payrolls in August and September.

“We’re reaccelerating as the delta wave abates and given the revisions, we’ve weathered the storm,” said Diane Swonk, chief economist at Grant Thornton. “It suppressed spending as people were afraid of the contagion during the delta wave, but it didn’t derail underlying employment, and now we’re picking up again.”

The economy slowed in the third quarter, as supply chain disruptions and Covid hampered activity. Gross domestic product grew by just 2%. Swonk had expected growth of 5% in the fourth quarter, but now she says it could be higher.

“It could be a little stronger with these numbers. There’s no question we’re going to end on a high note,” she said.

Economists had expected 450,000 jobs were created in October, up from September’s revised 312,000. There were some disappointments, including a decline in local and state government education jobs of nearly 65,000. Labor force participation also did not make expected gains and was unchanged at 61.6%.

But overall, economists saw the report as positive. “These numbers were great. The private sector is picking up the baton from the public sector,” said Swonk.

“The education losses really reflect the inability of schools to lure back staff workers and deal with the tsunami of retirements,” she added. “Public sector wages are just not going up at the pace of private sector. There’s no way they can compete. They really need to raise wages. These are low-paid jobs that are now competing with Amazon and Walmart.”

Michael Gapen, chief U.S. economist at Barclays, said the employment report shows the economy is back on track after the dip in third-quarter growth. “We’re not going to see what we saw in the first half of the year, but we’re not a 2% economy,” he said.

Wages continued to rise sharply, the latest sign that inflationary pressures are not abating. Gains in average hourly wages were again elevated, rising by 0.4% from the prior month, or 4.9% over the past 12 months.

While the wage component was hot and job growth strong, economists say the report does not change the dynamic yet for the Federal Reserve. However, a few more months of strong jobs growth could cause the central bank to reassess its timetable on winding down its bond program.

The Fed announced Wednesday that it would begin paring its bond purchases, ending the $120 billion monthly program by the middle of next year. Swonk expects the Fed will begin raising interest rates once it ends the program. She said the central bank could re-evaluate its timetable when it meets in December, if job growth remains strong.

Inflation is also a concern of the Fed. A worsening outlook for inflation could also lead policymakers to act faster to end the bond purchases, and begin battling high prices with higher interest rates, economists said.

Stephen Stanley, chief economist at Amherst Pierpont, notes the Fed could be forced to adjust its timing. “A few more reports like this one will bring the economy within hailing distance of full employment. This report is a significant step toward the [Federal Open Market Committee] needing to accelerate the pace of tapering early next year and ultimately having to raise rates earlier than policy makers currently anticipate,” he wrote, adding he expects the Fed to begin hiking interest rates in June.

Economists say the fact that job growth was broad-based was a positive for the economic reopening.

Professional and business services added 100,000 jobs, while manufacturing was also strong with a 60,000 gain. Transportation and warehousing workers increased by 54,400 and retail employment grew by 35,300. Construction jobs increased by 44,000.

Employment in leisure and hospitality increased by 164,000 and is now up 2.4 million in 2021. But the sector is still down 1.4 million jobs, or 8.2%, compared to February 2020.

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Nobody seems to know what's going on with the economy – CNN

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A version of this story appeared in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.

(CNN)If you’re confused by the US economy, which simultaneously shows signs of strength and cause for concern, you’re not alone.

The economy is on the road to recovery from the coronavirus pandemic, reeling from inflation or a source of disappointment on jobs creation, depending on who you’re talking to.
It’s probably all three, and what happens from month to month seems to be something of a surprise. That element of unpredictability might be the most normal possible thing given the shock of the pandemic — the extraordinary government intervention to save the economy is unlike anything anybody alive today has ever seen.
It’s hard to decide how important any single thing is.
Let’s look today at jobs.
Government data released Friday showed the US economy gained 210,000 jobs in November and the unemployment rate fell to 4.2%. A low rate traditionally signals full employment, meaning that nearly everyone who wants a job has one.
And yet!
Most stories about the November jobs report described it as “disappointing” in the first sentence, but also proof that the pandemic recovery is moving along.
Why the disappointment? Tappe wrote: “Economists had expected more than double the number of jobs created in November, forecasting a continuation of the buoyant economic recovery over the past two months. Instead, the November jobs gain was more reminiscent of the pre-pandemic economy, when employers added a smaller but steady number of positions, at least on the face of it.”
At the same time, there’s the good news. The jobs report suggests the pandemic recovery is progressing. The country has created more than 6 million jobs this year, and labor force participation increased to 61.8%, the highest level since the pandemic hit.
Much of the disappointment stems from expectations. The jobs report is based on two surveys — one of businesses with payrolls and one of households about their economic situation — that are conducted by the government mid-month and released by the Bureau of Labor Statistics in tandem on the first Friday of each month.
“Weird jobs numbers,” tweeted Jason Furman, who led the Council of Economic Advisors during the Obama administration.
“Very strong household survey: unemployment down to 4.2% & labor force participation up as employment up 1.1 million,” he tweeted. “But the normally more reliable payroll survey shows only 210K jobs added.”
He’s not sure what’s going on: “Some explanations may emerge but it may just be measurement error.”
Where do expectations come from? Leading up to the monthly release, economists and banks publish their own expectations for what the surveys will find. If the government data doesn’t hit those expectations, disappointment follows.
I talked to Elise Gould, a senior economist at the Economic Policy Institute, about what we do and do not learn from these reports.
She said they need to be viewed as pieces of information, not the full picture, in part because the surveys can overstate things and miss the changing composition of the workforce.
Revisions to jobs reports from recent months have confirmed stronger job growth than what was shown by the surveys.
Still, it’s best to know the latest information, even if we know it’s likely to change, she said.
Also, the pandemic. There is also the pandemic element to confound economic expectations, just like it has confounded people’s lives.
“Everyone in this economy today and the people that are making these predictions have never lived through a pandemic that hit the labor market so strong,” said Gould. “And so their models are not necessarily capturing the ebbs and flows of the pandemic.”
I asked David Goldman, managing editor of CNN Business, for his thoughts on why these reports seem to confound expectations each month. He came back with three points:
  • This is a particularly unusual environment. It is making predictions really difficult for economists. The labor shortage, supply chain crisis, energy crunch, inflation and Covid-19 situations all wrapped into one make for a delicate balancing act. We should cut economists a break.
  • Right in the long run. Economists actually have been proven correct over the past several months when they initially were thought to be wrong. That’s because the reports keep getting revised higher in subsequent months as Labor Department economists get more data. It’s not only hard for economists at Goldman Sachs and JPMorgan to figure out — it’s hard for the government, too.
  • Don’t focus on expectations. The forecasts aren’t the important thing here — it’s the actual data. And one month doesn’t a trend make. We’ve had some shockingly good jobs data in recent months, and November wasn’t all that bad — just not quite as good as we had expected.
There’s uncertainty elsewhere. Leaders at the Federal Reserve, like Chairman Jerome Powell, had been preaching that inflation was temporary — calling it “transitory,” meaning it wouldn’t permanently affect the economy.
But in a signal that inflation may last a little longer than expected, Powell told lawmakers this week the Fed may end some of its pandemic stimulus efforts — they call it “tapering” — earlier than expected.
“At this point the economy is very strong and inflationary pressures are high and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” Powell said.
One wrench thrown into the economy has been the resilience of the coronavirus. We may not quite understand how the surge of the Delta variant over the summer and fall arrested progress.
CNN’s Tappe and Nathaniel Meyersohn wrote about the Delta effect back in August.
Now that the Omicron variant is emerging, it, too, could send things in a new direction.

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Omicron Variant May Be Good For Economy – Forbes

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The omicron variant of Covid-19 has sparked great fear. With time, we may find the fear to have been justified, but we may find the opposite: that this is good news for the economy.

It’s still early days for our knowledge of omicron. Waiting to learn more seems to make sense, but consider this: Business decisions are being made every day. Any person who waits for perfect certainty—about the economy, technology or Covid-19—will never make a single decision. In many areas decisions have to be made this week. So it’s worthwhile to consider how omicron may be good for the economy.

Omicron seems to be displacing the delta variant in South Africa. Ted Wenseleers showed that delta’s share of total Covid-19 cases in South Africa has plummeted while omicron has surged. Because the early indications show that omicron was highly transmissible, it could well displace the delta variant around the world.

So far omicron has triggered a surge in infections in South Africa, but not a comparable increase in deaths. There’s good reason for the virus to mutate to be less dangerous. Bugs that kill their hosts don’t replicate as much as bugs that allow their hosts to remain alive. Many viruses in the past have evolved to be milder. We cannot take this idea too far, however.

The omicron virus may have mutated so that it has greater ability to infect those who already had been exposed to earlier variants. That’s no surprise to South African scientists, who have observed a very high past infection rate in their population. The virus could not get ahead by finding people never exposed to any version of Covid-19, so it found a way to infect the previously ill, this theory goes.

BioNTech CEO Ugur Sahin said recently that current vaccines probably help protect against severe illness from the omicron variant, and that new vaccines are under development that would be more targeted against omicron. Given the speed with which our vaccines were developed, we may have new versions being tested in the lab right now. The question will be how long we have to wait for regulatory approval.

From an economic forecasting viewpoint, business leaders should consider the upside potential of omicron. Although it is way too early to be sure, we may find that the disease becomes dominated by a less dangerous mutation. Illness would continue if this happens, but with fewer deaths and hospitalizations. People would come to feel more comfortable dining out, traveling and seeking routine non-Covid healthcare tests and procedures. The rosy view is far from certain, but current evidence is not more pessimistic.

Companies that that are especially sensitive to the Covid pandemic should try to delay big decisions. We’ll have better information in the coming weeks. But decisions that cannot be delayed should probably consider the possibility of a stronger economy rather than greater Covid problems.

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Can the global economy battle through another COVID-19 setback? – Aljazeera.com

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Video Duration 26 minutes 00 seconds

From: Counting the Cost

A new coronavirus variant has forced governments to impose travel bans just as economies were starting to recover.

Last week, after scientists in South Africa identified a new coronavirus variant, borders were suddenly closed off to passenger travel from Southern African countries, oil prices fell more than 10 percent, and stock markets took a hit.

Markets and economies are expected to face weeks of uncertainty as investors closely watch for updates on Omicron. What comes next largely depends on what scientists discover and how quickly they do so.

Also, green hydrogen has been hailed as the energy of the future; can it help decarbonise economies?

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