Aurelia Butler

WASHINGTON (Reuters) – Almost all of the remaining shortfall in U.S. labor force participation is the result of demographic and other trends that predate the COVID-19 pandemic, according to new research that suggests little chance that growth in the number of workers will help ease a tight American job market.After accounting for factors such as population aging and changes in education that influence people’s willingness to work, the study showed that U.S. labor force participation was only about 0.3 percentage points short of where it would have been without the pandemic – equivalent to around 700,000 “missing” workers.”Much of the decline in labor force participation over the past three years should have been anticipated even absent the pandemic,” Katharine Abraham, a University of Maryland economics professor and former U.S. Bureau of Labor Statistics commissioner, and Lea Rendell, a University of Maryland doctoral candidate, wrote in a study released late on Wednesday in conjunction with a conference at the Brookings Institution think tank.They attribute the remaining gap largely to fear of COVID or the lingering impact of “long COVID” illness, though they say their numbers, far below what some other studies have found, were “very much in the nature of guesstimates” given the difficulties of pinning down a precise motivation for why people left the workforce.Still, the figures suggest a winnowing down of COVID-related impacts on the labor force, a significant conclusion for U.S. policymakers hoping labor force participation rates could rebound to pre-pandemic levels.As of February, about 62.5% of U.S. adults were either working or looking for work, 0.8 percentage points below where it was in February of 2020, according to government figures.It has been in a steady decline for nearly a quarter century after peaking at 67.3% in April 2000. After a dramatic drop of more than 3 percentage points at the start of the pandemic, Federal Reserve policymakers have hoped the participation rate would both recover to its early 2020 level and regain some of the same dynamics that had begun to drive it higher.It appears instead to have stalled at just above 62%.Even absent pandemic impacts that Abraham and Rendell said may be sidelining around 1.2 million workers, the number of open jobs, at 10.8 million, remains far above the nation’s supply of potential workers.Another drag: The average hours worked per week fell by about 36 minutes per person from January 2020 through the end of 2022, a decline they said equates to the loss of about 2.4 million people. They said they saw no clear explanation for that in the data, but suggested it might reflect “a broad-based re-evaluation regarding the balance people with to strike between their work and personal lives.” More

ZURICH (Reuters) – Switzerland’s authorities revealed the interest rates Credit Suisse and UBS will pay for the 250 billion Swiss franc ($273.31 billion) emergency lifeline the Swiss banks have been offered.Credit Suisse will pay an interest rate equal to the current Swiss National Bank’s policy rate of 1.5% plus 0.5% for access to the emergency liquidity assistance (ELA) scheme, the central bank said on Thursday.Credit Suisse said earlier in March it intended to borrow up to 50 billion francs under the facility, which requires loans to be covered by collateral in the form of mortgages and pledged securities.In measures announced alongside the emergency takeover of Credit Suisse by rival UBS engineered by the authorities, the two banks were also given access to 100 billion francs in additional liquidity assistance (ELA+).This central bank assistance is available to the banks at an interest of 3% plus its policy rate.To help it mitigate the impact of hefty outflows, Credit Suisse was also given access to an additional 100 billion franc public liquidity backstop, for which it has to pay a 3% risk premium evenly split between the national bank and the Swiss state.On top of this Credit Suisse owes Switzerland a 0.25% commitment premium for the public liquidity backstop. ($1 = 0.9147 Swiss francs) More

BOAO, China (Reuters) -Chinese Premier Li Qiang said on Thursday that he was committed to opening up and reforming the world’s second-largest economy, seeking to win over foreign investors even as trade and geopolitical tensions with the West loom large.His keynote speech, delivered at a business and political summit in the island province of Hainan, came in a week Beijing has mounted a charm offensive on overseas firms as it seeks to shore up an economy battered by years of pandemic restrictions. But the prospects for a speedy recovery are clouded by strained relations with the U.S. and its allies over issues including its cosy ties with Russia, muscular stance towards Taiwan and fears about its use of sensitive technologies.”No matter what changes take place in the world, we will always adhere to reform and opening up…We will introduce a series of new measures in expanding market access and optimising the business environment,” Li, who took office this month, told the panel at the annual Boao Forum.”A confident, open, and willing to share China must be a huge force for world prosperity and stability,” he said.Li, who spoke alongside the prime ministers of Malaysia, Singapore and Spain, earlier this week told a group of foreign executives, including Apple Inc (NASDAQ:AAPL)’s Tim Cook, at a summit in Beijing that China was “unswervingly” committed to opening up.In his maiden speech after he took office, Li pledged to ease a sweeping regulatory crackdown and support private enterprises. In a sign that stance may already be bearing fruit, Chinese e-commerce giant Alibaba (NYSE:BABA) Group announced this week it was planning to break up its empire and explore several fundraisings or listings.But three years of rigid border controls and a series of sweeping lockdowns during the pandemic have sapped business confidence in China, especially among foreign firms, according to sentiment surveys. Those COVID curbs were abruptly dropped in December, and Li said on Thursday there were signs a recovery was starting to take hold.”Judging from the situation in March, it’s better than in January and February. In particular, major economic indicators such as consumption and investment continue to improve, while employment and prices are generally stable,” Li said.China has set itself a modest target for gross domestic product growth of around 5% this year, after significantly missing its target for 2022. That is lower than what the International Monetary Fund and some private forecasters think it can achieve. For some at the conference, Li’s message to business did not go unnoticed.”I see a lot more determination in conveying the message that China is indeed back open for business,” said Denis Depoux, global managing director at consultancy Roland Berger.’CHAOS AND CONFLICTS’But there were also cautionary notes.In veiled comments aimed at the United States, which is working with its allies to stymie China’s access to advanced technologies such as microchips, Li said Beijing opposed trade protectionism and decoupling.Speaking on the same panel, Spanish Prime Minister Pedro Sanchez said protectionism would represent “a return to the past” and damage relations between China and Europe.But hours after his speech, the European Commission said it was examining measures to control outbound investment to prevent certain sensitive technologies going to rivals such as China.Li’s attempt to win over business also comes at a time of fierce rhetoric with the United States, its biggest export market.Taiwan, the democratically ruled island that China claims as its territory, has been a particular bone of contention.In the latest escalation, Taiwan President Tsai Ing-wen arrived in New York on Wednesday for the first of two U.S stopovers that Beijing has called provocative. In his speech, Li said “chaos and conflicts” must not happen in Asia and that China would act as an “anchor” for global peace. More

BUENOS AIRES (Reuters) – As Argentina’s over 100% inflation rate saps earning power and outstrips wages, Jorge Pedro Armoa, 67, has found a painful solution: juggling three jobs as a metal worker, soccer coach and part-time salesman of medical creams, flip flops and honey.Armoa, who lives in a small home in the outskirts of capital city Buenos Aires, gets up early every day for his seven-day working week to stave off poverty that affects almost four in 10 people in the South American country.”The situation is complex. Salaries are very low, things are very expensive. So sometimes it’s not enough,” said Armoa, a metal mold factory worker who is the technical director of a local soccer team and funds his own small business.Argentinians are battling through a painful economic crisis with annual inflation at 102.5% and expected to climb further, strict capital controls warping the peso’s value, and tumbling foreign currency reserves raising fears about future defaults.Poverty, which had edged down due to state support during the COVID-19 pandemic, is estimated to have shot back up to nearly 40% at the end of last year from 36.5% in the first half of 2022, as inflation has eroded the purchasing power of wages.”Our projection for the poverty rate … is around 40%,” said Martín González Rozada, an economist and professor of econometrics at the Universidad Di Tella, adding it was likely even higher in the early part of this year.”In terms of the increases in working people’s incomes, that income has increased less than the inflation of the total basic food basket,” he added, pointing out that around half of the country’s children lived in poor households.Government handouts and subsidies have kept down levels of extreme poverty, but that may come under pressure as the state tries to overturn a deep fiscal deficit and reduce spending as dollars are scarce and a drought has hit the key farming sector.Many of Argentina’s nearly 46 million people are unable to pay for the total basic basket of goods and services, which costs 177,000 pesos per month (some $849).Armoa, even with his three salaries and income from his wife, a teaching assistant, often struggles to get by.”With the issue of the price of things, it’s difficult to live. But hey, sometimes we get there and sometimes we have scrape by to get there,” said Armoa while chopping onions at his home to improvise a dinner.”You have to put a positive face on things, good energy and think that tomorrow things will be better.” More

Boutique advisory firm Centerview Partners has rocketed up the closely scrutinised league tables ranking deal activity on Wall Street and in Europe after advising on some of the biggest takeovers of the quarter.Centerview, which has advised on 18 deals totalling nearly $94bn so far this year, rose to third place from 14th place in the same quarter last year.The bank, which was launched in 2006 by investment bankers Blair Effron and Robert Pruzan, has expertise in bank restructuring. US regulators turned to Centerview following the run on deposits at Silicon Valley Bank to manage the sale of assets, including the investment bank. It also played a key role advising on the $3.25bn sale of Credit Suisse to UBS.Many large Wall Street banks were conflicted in the recent bank deals, creating an opening for independent advisers like Centerview. Here’s what else I’m watching today:Economic data: The US releases gross domestic product figures for the fourth quarter of 2022. Monetary policy: Susan Collins, president of the Boston branch of the Federal Reserve, Richmond Fed president Tom Barkin and Minneapolis Fed president Neel Kashkari are all scheduled to speak at public events today. Janet Yellen: The US Treasury secretary will also speak today at the National Association of Business Economics’ annual conference in Washington.Nato enlargement: Turkey’s parliament will vote to approve Finland’s membership of the Atlantic military alliance.What did you think of today’s FirstFT? Let us know at [email protected]. Thanks for reading.Five more top stories 1. EXCLUSIVE: Meta executives are discussing a company-wide ban on political advertising in Europe, according to people briefed on the talks. The owner of Facebook, Instagram and WhatsApp is concerned that new EU laws coming into force next year that will make online political campaigning more transparent are too broad. Read more about the EU’s proposals.More technology news: Elon Musk and more than a 1,000 tech researchers and executives have called for a “pause” to developments in AI. 2. Russia’s security service said it detained a Wall Street Journal reporter in the city of Ekaterinburg on suspicion of spying. Evan Gershkovich was reportedly looking into the Wagner mercenary group and was planning to meet contacts in Ekaterinburg, the largest city in Russia’s central Urals region.3. Binance hid substantial links to China for several years, according to internal company documents seen by the Financial Times, including an office it used in the country until at least the end of 2019 and a bank that was used to pay some employees.4. Bernie Sanders accused Starbucks founder and billionaire Howard Schultz of leading an unprecedented crusade of “illegal union-busting” at the coffee chain in a two-hour Senate face-off. Read more on the tense showdown.5. Ecuador’s constitutional court last night gave the go-ahead for impeachment proceedings to begin against President Guillermo Lasso. The decision leaves one of Latin America’s few market-friendly presidents facing trial before a hostile congress. Read more on the charges against Lasso.News in-depth

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The end of historically low interest rates was billed as good news for banks, but recent crises on both sides of the Atlantic show the reality is more complex, upending conventional wisdom. We break down the new threats and challenges at banks as interest rates rise.We’re also reading . . . China’s regulatory shake-up: China has some of the same vulnerabilities in its globally important financial system as the US and Europe, writes George Magnus. ‘Total distrust’: In wartime Russia, teachers, neighbours and even family members are informing on each other in Soviet-style denunciations.Opinion: ‘Succession’ is a triumph that may bookend the ‘peak TV’ era, argues Anna Nicolaou.Chart of the dayShares in European property groups are on track for their worst month since the start of the pandemic, as investors bet that weeks of banking turmoil will tighten access to credit and send property valuations plummeting.Take a break from the newsA giant of 20th-century art, Pablo Picasso has influenced generations of artists and his work still commands huge prices — but things have changed. Described by the New York Times as “the greatest single force in 70 years” when he died, what has happened to the Spanish artist’s reputation 50 years on?

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Additional contributions by Tee Zhuo and Emily Goldberg More

LONDON (Reuters) – Turbulence in Europe’s banks following the implosion of 167-year-old Credit Suisse and runs on regional banks in the U.S. has focused attention on the role played by credit default swaps in all the turmoil.Investors, worried about which bank might be next, have hammered the shares and bonds of some of Europe’s best known banking names, including Deutsche Bank (ETR:DBKGn), Germany’s biggest lender.The moves followed a surge in the cost of insuring Deutsche Bank’s debt against default via credit default swaps (CDS) to a more than four-year high last week.Andrea Enria, the banking supervisory chief at the European Central Bank, highlighted the volatility in Deutsche Bank’s securities – including CDS – as a worrying sign of how easily investors could be spooked.”There are markets like the single-name CDS market which are very opaque, very shallow and very illiquid, and with a few million (euros) the fear spreads to the trillion-euro-assets banks and contaminates stock prices and also deposit outflows.” Graphic: European banks see default risk costs soar – https://www.reuters.com/graphics/BANKS-CDS/jnvwyjrobvw/chart.png WHAT IS A CDS ANYWAY?Credit default swaps are derivatives that offer insurance against the risk of a bond issuer – such as a company, a bank or a sovereign government – not paying their creditors.Bond investors hope to receive interest on their bonds and their money back when the bond matures. But they have no guarantee either of these things will happen and so have to bear the risk of holding that debt.CDS help to mitigate the risk by providing a form of insurance. The CDS market is worth around $3.8 trillion, according to the International Swaps and Derivatives Association (ISDA). But the market is well below the $33 trillion of its heyday in 2008, based on ISDA data.The CDS market is small relative to equities, foreign exchange or the global bond markets, where there are more than $120 trillion bonds outstanding. Average daily volume in foreign exchange is close to $8 trillion, based on Bank for International Settlements data.Trading in these derivatives can be thin. The number of average daily CDS trades, even for large companies, can sometimes be in single digits, based on data from the Depositary Trust & Clearing Corporation (DTCC).This makes the market tricky to navigate and creates a situation where even a small CDS trade can have an outsized price impact.ISDA said on Thursday the market was much more transparent these days, as rules require that trades be reported to regulators via trade repositories, alongside increased clearing of standardised derivatives.ISDA said that 83.4% of the total notional amount of CDS traded that were subject to regulatory reporting rules were cleared in 2022. Graphic: The rise and fall of credit default swaps – https://www.reuters.com/graphics/MARKETS-CDS/dwpkdkynovm/chart.png WHO BUYS CDS?Investors in bonds issued by companies, banks or governments can buy CDS insurance via an intermediary, often an investment bank, which finds a financial firm to issue an insurance policy on the bonds. These are “over-the-counter” deals which do not go through a central clearing house.The buyer of the CDS will pay a fee on a regular basis to their counterparty, which then takes on the risk. In return, the seller of the CDS pays out a certain amount if something goes wrong, just like an insurance payout.CDS are quoted as a credit spread, which is the number of basis points that the seller of the derivative charges the buyer for providing protection. The greater the perceived risk of a credit event, the wider that spread becomes.The owner of a CDS quoted at 100 basis points would have to pay $1 to insure every $100 of bonds that they hold. Graphic: Biggest CDS markets for corporate issuers – https://www.reuters.com/graphics/GLOBAL-CDS/lbvggjyyavq/chart.png WHAT COULD TRIGGER CDS? A CDS payout is triggered by a so-called credit event – which can include a bankruptcy of a debt issuer, or a failure to make a payment on bonds.In 2014, a new category of credit event was introduced, so-called “Governmental Intervention”, to address investor concerns that CDS would not cover measures taken by governments to support struggling entities, especially banks. Like any financial asset, CDS are actively traded. If the perception of risk increases around a debt issuer, demand for its CDS rises, widening the spread. The biggest CDS market is for governments. Brazil tops the charts, with an daily notional average of $350 million trades each day, based on DTCC data. Credit Suisse’s CDS were the most actively traded on the corporate front in the last quarter of 2022, with $100 million traded each day, DTCC data shows.LEADING ROLE IN 2008 CRISISCDS were one of the financial instruments at the centre of the 2008 financial crisis.Bear Stearns and Lehman Brothers were among the many banks that issued CDS to investors on mortgage-backed securities (MBS) – mortgages bundled together into one package – among other types of derivative.When U.S. interest rates rose sharply throughout 2007 this caused a wave of mortgage defaults, rendering billions of dollars in MBS and other bundled securities worthless. This triggered hefty CDS payouts for banks such as Lehman and Bear Stearns. A REPEAT OF 2008?No. A lot has changed since then. Many derivatives, including CDS, were far more widely used at that time and covered a broader range of assets, many of which went sour. The current turmoil does not reflect a steep drop in the value of the securities that underlie the CDS. It is more the perception of risk, rather than actual risk.In Deutsche Bank’s case, CDS on its five-year debt rose above 200 bps last week from 85 bps just two weeks ago, as investors fretted about the stability of the broader European banking system.The ECB’s Enria argued that central clearing for CDS would improve transparency, reducing the risk of volatility.”Having these type of markets centrally cleared rather than having OTC, opaque transactions … would already be a big progress,” he said. More