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U.S. economy, plagued by worker shortages, added just 194,000 jobs in September – NBC News

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Following a disappointing August, the U.S. economy added a meager 194,000 jobs in September, as a critical shortage of workers hampers the nation’s economic growth.

The unemployment rate fell to 4.8 percent from 5.2 percent, the Bureau of Labor Statistics said Friday. Economists had been expecting an increase of 500,000 and an unemployment rate of 5.1 percent.

“This is quite a deflating report,” said Nick Bunker, economic research director at Indeed hiring service. “The hope was that August was an anomaly but the fact is, the delta variant was still with us in September. One optimistic interpretation is that Covid-19 case counts are receding, so future months should be stronger. But the reality is that we are still in a pandemic.”

One positive in the report was the upward tick in hourly wages, which rose by 0.6 percent, versus estimates of a 0.4 percent increase. Wage growth is a metric on which the market is keeping a sharp eye as it struggles to interpret the noise around skyrocketing prices, supply chain bottlenecks and what, exactly, it means for inflation to be “transitory.”

For most of the pandemic-recession recovery, metrics around earnings and wage growth have been volatile. The dramatic collapse of the leisure and hospitality sector skewed earnings data as millions of low-wage, service-sector workers lost their jobs due to Covid-triggered shutdowns — and some argued that the big miss in August could have been a function of flat leisure and hospitality jobs, which until that point had contributed an average of 350,000 new jobs per month over the past six months.

But even with those gains contributing to the overall recovery in the labor market, average hourly wages have continued to climb. Persistent weakness in the labor force participation rate is a major contributing factor, said Ross Mayfield, an investment strategy analyst at Baird. Since June 2020, labor force participation has remained nearly flat, oscillating from 61.4 percent to 61.7 percent.

“I think one of the main factors that could contribute to higher or elevated wage growth going forward is just tighter supply in the labor market,” he said. “If there are functionally fewer workers, those that remain are in a better position to negotiate wage hikes.”

“Inside manufacturing, companies are 100 percent seeing the need and reacting to the need to raise wages at all levels,” said Ethan Karp, president and CEO of the Manufacturing Advocacy and Growth Network. “They still can’t find people no matter what they do.”

And supply pressures are still unrelenting. This makes it difficult, economists say, to tease out exactly how much worker pay is contributing to the inflationary forces that are behind companies raising their prices. “It certainly is a contributing factor, but as far as the items we’re watching for inflation, it still pales in comparison to supply issues and Covid-19 issues,” Mayfield said.

“There definitely are some transitory factors in the inflation we’ve seen. I think a lot of it also has to do with supply chain disruptions,” said Megan Horneman, director of portfolio strategy at Verdence Capital Advisors.

“The supplies are there. It’s just a problem of getting them out into the economy,” she said — a function of the worker shortage that has port operators, trucking companies and delivery services all running short-handed.

The worker shortage means companies have been willing to pay more to entice people back into the labor market — and those higher labor costs could stick around.

Paying more to entice those workers back into the labor market — or steal them from competitors — will solve the problem in the short term, but higher labor costs are likelier to stick around than elevated prices for commodities or components, as economists agree that wage gains are “stickier” than price gains. The supply of computer chips or cardboard boxes or crude oil fluctuates with supply, but while employers can raise pay, they generally can’t unilaterally slash wages or salaries — especially not in the current tight labor market.

“The wage inflation is the sticky one — that’s the one that’s going to create longer-lasting inflation,” Horneman said.

For the moment, recent productivity gains have given employers a little breathing room, said Harry Holzer, professor of public policy at Georgetown University. “[There] could be some higher productivity that would make it easier for firms to pay these higher wages without inflation,” he said.

Many view this as a good thing, so long as the price pressures that are squeezing American shoppers do, in fact, recede in the coming months. “Some of us hope that inflation will start to moderate as these bottlenecks and supply shortages work their way through, and we’re hoping that these wage increases outlast the price increases,” Holzer said.

“My hope is that wage increases will once and for all outpace inflation, and manufacturing will just be more competitive,” Karp said. “Manufacturers raising wages is a very good thing. It’s good for the industry, it’s good for people. It’s what’s needed.”

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China economy slows; officials say recovery ‘unstable and uneven’ – Al Jazeera English

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Officials say GDP grew at its slowest place in a year in the third quarter, amid power cuts, property woes and COVID-19 concerns.

China’s economy grew at the slowest pace in a year in the three months that ended in September, buffeted by power shortages, supply bottlenecks and sporadic outbreaks of COVID-19, increasing pressure on policymakers amid rising concern about the health of the property sector.

Data released on Monday showed gross domestic product (GDP) grew 4.9 percent in the third quarter, compared with a year earlier, the slowest since the third quarter of 2020. The growth was also below economists’ expectations with a Reuters poll of analysts expecting GDP to rise 5.2 percent and a poll by the AFP news agency predicting growth at 5 percent.

“We must note that current international environment uncertainties are mounting and the domestic economic recovery is still unstable and uneven,” National Bureau of Statistics (NBS) spokesman Fu Linghui said on Monday.

China’s economy, the world’s second-largest, expanded 7.9 percent in the second quarter, and 18.3 percent in the first quarter, which benefitted from comparison with the COVID-19-induced slump of early 2020.

Meanwhile, industrial production growth slowed further to 3.1 percent on-year in September.

“Growth was dragged down by a slowdown in real estate, amplified recently by spillover from Evergrande’s travails,” Oxford Economics’ head of Asia economics Louis Kuijs told AFP.

There are increasing concerns about the property sector with industry giant Evergrande struggling with more than $300bn in debt [Thomas Peter/Reuters]

The struggles of property giant Evergrande – struggling with debts amounting to more than $300bn – have been made prospective buyers cautious.

Kuijs noted there was an “additional hit in September” from electricity shortages and production cuts due to the strict implementation of climate and safety targets by local governments.

He added that the damage was visible in the slowdown of industrial output.

Victor Gao, vice president of the Center for China and Globalization in Beijing, told Al Jazeera the latest data was on the “lower side” but added that China remained “confident” it could reach growth of about 8 percent for the year.

“That would make China one of, if not the, best performers among the larger economies in the world,” he said.

Chinese leaders, fearful that a persistent property bubble could undermine the country’s long-term ascent, are likely to maintain tough curbs on the sector even as the economy slows but could ease some measures if needed, policy sources and analysts said.

“In response to the ugly growth numbers we expect in coming months, we think policymakers will take more steps to shore up growth, including accelerating infrastructure development and relaxing some aspects of overall credit and real estate policies,” Kuijs told the Reuters news agency.

Premier Li Keqiang said on Thursday that China has ample tools to cope with economic challenges despite the slowing growth, and the government is confident of achieving full-year development goals.

Retail sales picked up to 4.4 percent – from 2.5 percent in August – with fewer virus containment measures in China, which has imposed swift local lockdowns over a handful of coronavirus cases.

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Stock Markets Today: EU economy, China GDP, Bitcoin, Squid Game – Bloomberg

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Good morning. Euro area economy vulnerable to shocks, China growth slows, Bitcoin rallies and Squid Game’s value. Here’s what’s moving markets.

Highly Vulnerable

European Central Bank President Christine Lagarde warned that the globalized nature of the euro area’s economy makes it highly vulnerable to systemic shocks from supply chain disruptions. Lagarde also said the current spike in inflation is unlikely to last, while vowing to continue aiding the euro-area economy as the fallout from the pandemic lingers. Supply bottlenecks, cost pressures, and a reopening letdown are already set to plague region’s third-quarter earnings season. 

Slowing Growth

China’s economy weakened in the third quarter, weighed by multiple headwinds from a property slump to an energy crisis. Gross domestic product expanded 4.9% from a year earlier, down from a previously reported 7.9% in the preceding quarter. People’s Bank of China Governor Yi Gang said authorities can contain risks posed to the Chinese economy and financial system from the struggles of China Evergrande Group.

Bitcoin Rallies

Bitcoin rallied early Monday after falling over the weekend, ahead of an anticipated U.S. exchange-traded fund approval. It fell both Saturday and Sunday to nearly $59,000 before climbing over $62,000 on Monday. Bitcoin is in focus as the first futures ETF tied to the token may debut Monday, according to a filing. Analysts expect profit-taking and volatility surrounding the decision.

Squid Game

Netflix estimates that its latest megahit, “Squid Game,” will create almost $900 million in value for the company, according to figures seen by Bloomberg, underscoring the windfall that one megahit can generate in the streaming era. The show stands out both for its popularity, and its relatively low cost, at just $21.4 million, less than Dave Chappelle’s new special “The Closer”. The viewership details are likely to cheer investors, who have regained enthusiasm for Netflix after several bumpy months, partly because “Squid Game” has been so popular.

Coming Up…

European futures are steady while contracts on U.S. stock benchmarks are pointing lower after last week’s strong performance. Oil advanced after an eighth weekly gain with the market facing a global energy crunch ahead of winter. Meanwhile, Koninklijke Philips will be among the European companies announcing results on Monday while State Street will report in the U.S. Also, Apple will finally unveil its redesigned MacBook Pro, the first revamp in five years.

What We’ve Been Reading

This is what’s caught our eye over the past 24 hours. 

And finally, here’s what Cormac Mullen is interested in this morning

Hedge funds have given up betting against short-term Treasuries, at least one gauge of positioning shows. Net leveraged-fund futures and options positions in two-year notes turned positive for the first time since April 2018, according to the latest Commodity Futures Trading Commission data. Two-year Treasury yields have surged some 25 basis points since early June as traders brought forward wagers on Federal Reserve rate hikes. The flip to net-long could suggest fast-money funds see a pause coming in the short-term yield spike, though some of the positioning is likely part of broader bets on the direction of the U.S. yield curve. In the interest-rate market, a full hike is now priced in for September next year, with traders about 50/50 in calling for one in June. That’s an aggressive move in a short space of time now given so much uncertainty over the path for inflation and growth until then.

#lazy-img-380107657:beforepadding-top:56.25%;Leveraged funds turn net long two-year Treasuries futures

Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.

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    Economy

    Oil prices climb to highest in years as COVID recovery, power generators stoke demand

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     Oil prices hit their highest in years on Monday as demand continues its recovery from the COVID-19 pandemic, boosted by more custom from power generators turning away from expensive gas and coal to fuel oil and diesel.

    Brent crude oil futures rose 87 cents, or 1%, to $85.73 a barrel by 0111 GMT, the highest price since October 2018.

    US West Texas Intermediate (WTI) crude futures climbed $1.12, or 1.4%, to $83.40 a barrel, highest since October 2014.

    Both contracts rose by at least 3% last week.

    “Easing restrictions around the world are likely to help the recovery in fuel consumption,” analysts from ANZ bank said in a note on Monday.

    “The jet fuel market was buoyed by news that the U.S. will open its borders to vaccinated foreign travellers next month. Similar moves in Australia and across Asia followed.”

    They added that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.

    Still, supply could also increase from the United States, where energy firms last week added oil and natural gas rigs for a sixth week in a row as soaring crude prices prompted drillers to return to the wellpad.

    The U.S. oil and gas rig count, an early indicator of future output, rose 10 to 543 in the week to Oct. 15, its highest since April 2020, energy services firm Baker Hughes Co said last week.

    China’s economy, meanwhile, likely grew at the slowest pace in a year in the third quarter, hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.

    The world’s second-largest oil consumer issued a new batch of oil import quotas for independent refiners for 2021 that show total annual allowances were lower than last year, a first reduction of import permits since these firms were allowed into the market in 2015.

     

    (Reporting by Jessica Jaganathan; Editing by Kenneth Maxwell)

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