Aurelia Butler

The pace of US jobs growth is set to have slowed further in December, as the Federal Reserve’s aggressive interest rate increases begin to weigh more heavily on economic activity.The world’s largest economy is expected to have added 200,000 jobs in the final month of 2022, according to a consensus forecast compiled by Bloomberg, a step down from the 261,000 increase registered in November and well below last year’s peak of 714,000 jobs recorded in February.The unemployment rate is expected to have steadied at 3.7 per cent, just above a historic low, the data set to be released by the Bureau of Labor Statistics at 8:30am ET will show, according to economists.The US central bank is actively trying to cool down the labour market and curb demand for new hires as it seeks to alleviate price pressures that have pushed inflation to multi-decade highs. Since March, the Fed has raised its benchmark policy rate from near-zero to just below 4.5 per cent in one of the most aggressive campaigns in its history.While the worst of the inflation shock appears to have passed, price pressures have taken hold in the services sector of the economy. In an interview with the Financial Times this week, Gita Gopinath, the first deputy managing director at the IMF, urged the Fed to “stay the course” in terms of tightening, arguing that inflation in the US has not “turned the corner yet”.Amid a worker shortage that Fed officials warn will not be easily reversed, wage growth is running at a pace far out of step with the Fed’s 2 per cent inflation target.In December, average hourly earnings are expected to have climbed another 0.4 per cent, slower than the previous period but still registering a 5 per cent annual pace. The labour force participation rate, which tracks the share of Americans either employed or looking for a job, remains stubbornly below its pre-pandemic level, at 62.2 per cent.

Policymakers at the Fed have acknowledged that stamping out inflation will require job losses and in turn a higher unemployment rate. According to the latest individual projections published by the Fed, most officials see the unemployment rate rising as high as 4.6 per cent this year and next as the benchmark policy rate surpasses 5 per cent and is held there for an extended period.“Holding [above 5 per cent] until we get evidence that inflation is actually coming down is really the message we’re trying to put out there,” Esther George, the outgoing president of the Kansas City Fed, said on Thursday.Striking a similar tone this week, Neel Kashkari of the Minneapolis Fed said he expects the central bank to raise the federal funds rate by another percentage point over the coming months. He will be a voting member on the policy-setting Federal Open Market Committee this year.Should the Fed follow through with this aggressive path, economists warn more material job losses could be on the horizon. Those polled last month in a joint survey by the FT and the Initiative on Global Markets at the University of Chicago Booth School of Business forecast the unemployment rate reaching at least 5.5 per cent next year as the economy tips into a recession. More

China scrapped its stringent COVID controls last month after protests against them, abandoning a policy that had shielded its 1.4 billion population from the virus for three years. Victor Wang, Head of Taiwan’s Central Epidemic Command Centre, told the official Central News Agency it sent an email to Chinese authorities this week and asked how Taiwan could help with the surge of cases in China.Rising cases in China has sparked concerns from the World Health Organisation that Beijing was under-reporting virus deaths.Wang said Taiwan has also sent an email to China in early December to “remind” authorities there about an community outbreak and severe cases among children.China, which claims the island as its own despite strong objections of the democratically-elected government, views Taiwan President Tsai Ing-wen as a separatist and has refused to talk to her administration since she took office in 2016.In a New Year address earlier this month, Tsai for the first time offered to provide China with “necessary assistance” to help it deal with a surge in COVID cases, but said Chinese military activities near the island were not beneficial to peace and stability. Health Minister Hsueh Jui-yuan said Taiwan could offer medication or vaccine to China but it’s not clear if Beijing would accept it, according the Central News Agency. Taiwan and China have repeatedly sparred over their respective measures to control the spread of COVID.China has been ramping up pressure on Taiwan to assert its sovereignty claims, including almost daily Chinese air force missions near the island over the past three years. Taiwan vows to defend itself, saying only its people can decide their own future and that Beijing’s claims are void as the People’s Republic of China has never governed the island. More

SEOUL (Reuters) -Samsung Electronics Co Ltd reported on Friday a likely 69% plunge in December-quarter operating profit to an eight-year low, as a global economic downturn saps demand for electronic devices and clouds the memory-chip industry outlook.The world’s largest memory chip, smartphone and TV maker estimated its profit slumped to 4.3 trillion won ($3.37 billion) in October-December from 13.87 trillion won a year earlier. It was Samsung (KS:005930)’s smallest quarterly profit since the third quarter of 2014 and fell short of a 5.9 trillion won Refinitiv SmartEstimate, which is weighted toward forecasts from analysts who are more consistently accurate. “For the memory business, the decline in fourth-quarter demand was greater than expected as customers adjusted inventories in their effort to further tighten finances, spurred by concerns over deteriorating consumer sentiment caused by continued high global interest rates and weak economic outlooks,” Samsung said in a statement.Revenue likely fell 9% from the same period a year earlier to 70 trillion won, Samsung said in the short preliminary earnings release. Samsung said memory chip prices also declined throughout the quarter due to increased inventory at memory suppliers, leading to a greater-than-expected drop in chip prices. Its mobile business profit declined in the fourth quarter as smartphone sales and revenue decreased due to weak demand resulting from prolonged macroeconomic issues, Samsung added. Asia’s fourth-biggest listed company by market value is due to release detailed earnings later this month. The current memory chip downcycle that began last year is expected to worsen in the current quarter, analysts said. “The biggest reason is memory prices falling… As of now, we expect first-quarter earnings to be worse because memory prices are expected to continue to fall.” said Greg Roh, head of research at Hyundai Motor Securities. Samsung shares rose 1.4% in morning trade, versus a 0.2% rise in the wider market. ($1 = 1,274.1900 won) More

BENGALURU (Reuters) – The dollar’s vice grip on FX markets will loosen a bit this year, according to analysts in a Reuters poll who expect most currencies to post marginal gains against the greenback over the coming 12 months.After enjoying complete domination over nearly every currency last year with the dollar index having its best annual performance since 2015, the run is over as the U.S. currency is expected to give back some of its gains this year.The Reuters Jan. 3-5 poll of 65 forex strategists showed most major and emerging currencies gaining against the dollar over the coming year.But with factors that helped the dollar’s outperformance expected to linger the predicted gains would be limited and not enough to offset heavy losses from the past couple of years.”There is a general perception the dollar has peaked, but I don’t think we’re going to have a straight-line movement of dollar losses,” said Jane Foley, head of FX strategy at Rabobank.”Even though the market is already beginning to debate when the Fed could potentially start to cut interest rates… hikes are still to come… there are also concerns about global growth and the combination of these two mean the dollar is likely to find bouts of strength.”Asked whether the dollar risked ending 2023 higher or lower than their predicted levels, a strong 60% majority of analysts – 30 of 50 who answered the additional question – said the risk was to the upside while the other 20 said there was downside risk to their forecast. Reuters Poll-U.S. dollar outlook: https://fingfx.thomsonreuters.com/gfx/polling/akpeqqdqbpr/Reuters%20Poll-U.S.%20dollar%20outlook-January%202023.PNG Despite being wrong-footed for years predicting dollar weakness, analysts still clung to that view in the latest poll.The euro, down nearly 13% over the last two years, was expected to only recoup around a third of those losses in a year.Median forecasts showed the euro will trade at $1.04, $1.06 in the next three and six months respectively. It is then forecast to change hands around $1.10 in a year, a near 4% gain from current levels.The Japanese yen took a beating last year, losing over a fifth of its value until late December when the Bank of Japan made a surprise tweak to its bond yield curve control. But it still ended the year 12% lower against the dollar.It is expected to gain nearly 4% to trade at 128.00/dollar by the end of 2023.With an expected slowdown in global economic growth and uncertainty over how long central banks will keep interest rates higher to temper inflation, analysts were split over which currencies would perform better against the dollar this year.A strong minority of analysts, 24 of 50, said emerging market currencies; 13 said developed market currencies; nine said safe-haven currencies; and four said commodity-linked currencies.”The emerging market currencies can probably outperform relative to the G10 and then also relative to the dollar over the longer term,” said Brendan McKenna, international economist and FX strategist at Wells Fargo (NYSE:WFC).”We’re still in an environment where yields associated with the emerging market currencies are still the highest and probably the most attractive.” (For other stories from the January Reuters foreign exchange poll:) More

Sluggish wage recovery remains a pressing issue for Japan to tackle as surging living costs hurt households and weigh on consumer spending in the world’s third largest economy. Japanese Prime Minister Fumio Kishida this week urged firms to accelerate wage hikes that exceed the rate of inflation to prevent stagflation. Inflation-adjusted real wages, a key indicator of consumer purchasing power, dropped 3.8% in November from a year earlier, according to the labour ministry.It was the fastest pace of decline since a 4.1% drop in May 2014 and followed a revised 2.9% fall in October. Moreover, real wages were in negative territory for the eighth month in a row due to higher inflation.The consumer price index the ministry uses to calculate real wages, which includes fresh foods but not owners’ equivalent rent, rose 4.5% in November from a year earlier, the quickest pace of increase since June 1981.Nominal total cash earnings were up 0.5% in November but the pace of growth slowed from a revised 1.4% gain in October, led by falls in special payments such as bonuses. Special payments declined 19.2% in November, the biggest drop since January 2021, after a revised 2.9% rise in October. Industries such as transportation and wholesales showed double-digit falls in special payments, the data showed. Japanese firms typically pay bonuses in the summer and winter, which tend to be volatile as they reflect changes in profits and the status of the economy.Meanwhile, overtime pay, a gauge of business activity strength, advanced 5.2% year-on-year in November after a revised 7.7% gain in October. The following table shows preliminary data for monthly incomes and number of workers in November:—————————————————————-Payments (amount) (yr/yr % change)Total cash earnings 283,895 yen ($2,140.50) +0.5-Monthly wage 269,116 yen +1.8-Regular pay 249,550 yen +1.5-Overtime pay 19,566 yen +5.2-Special payments 14,779 yen -19.2—————————————————————-Number of workers (million) (yr/yr % change)Overall 51.721 +1.1-General employees 35.290 +1.0-Part-time employees 16.431 +0.9—————————————————————-The ministry defines “workers” as 1) those who were employed for more than one month at a company that employed more than five people, or 2) those who were employed on a daily basis or had less than a one-month contract but had worked more than 18 days during the two months before the survey was conducted, at a company that employs more than five people.To view the full tables, see the labour ministry’s website at: ($1 = 132.6300 yen) More

WASHINGTON (Reuters) – President Joe Biden said on Thursday the U.S. economy was seeing “really bright spots” after a rough few years, and was headed to a “new plateau,” a new term for the stable, slower growth White House officials see ahead. While investors, many economists and some CEOs have warned recently that a U.S. recession is due in 2023, the Biden administration considers it unlikely, in part because of federal spending. Biden told members of his Cabinet ahead of a private meeting that he sees public and private investments of $3.5 trillion in manufacturing and technology over the next decade strengthening the U.S. economy and boosting prospects for American companies and workers.”This is not about getting to a level spot. This is about going to a whole new plateau,” the Democratic president said. “We’re the only country in the world who’s come out of the crisis stronger than we went in.”Biden cited recent data showing easing inflation, solid growth and a resilient labor market, but said it would be critical to implement hundreds of billions of dollars in federal spending contained in three key signature laws passed last year.The U.S. economy is forecast to grow 3.8% in the fourth quarter of 2022, according to an Atlanta Fed model, while the Consumer Price Index rose 0.1% in November.”That doesn’t mean it’s all over. It means that we’re off to a pretty darned good start,” he said. “I just don’t want to get us suckered into thinking that we can sort of let up on the gas pedal.”Biden is not alone in his optimism.The United States may avoid the outright contraction that could hit a third of the world’s economies, Kristalina Georgieva, head of the International Monetary Fund, said on Sunday.St. Louis Federal Reserve leader James Bullard said Thursday that the risk of a U.S. recession has fallen in recent weeks.Still, if the U.S. avoids recession, it will likely be by a narrow margin. The Federal Reserve predicts 0.5% growth in 2023, for example. Speaking to Cabinet members, Biden also lauded plans by the U.S. Federal Trade Commission, which enforces antitrust law, to ban companies from requiring workers to sign noncompete and some training repayment agreements that keep workers from leaving for better jobs.”The bottom line is, I believe our economic vision is working, and we’re in the process of implementing the first pieces we’ve gotten done and we’re going to move on,” he said.Biden’s upbeat comments came as Wall Street’s main indexes closed more than 1% lower, with evidence of a tight labor market eating away at any hopes investors had that the Federal Reserve could soon pause its rate hike cycle. More