Aurelia Butler

JAKARTA (Reuters) -Indonesia’s President Joko Widodo signed an emergency regulation on Friday to replace a controversial job creation law that a court had ruled was flawed, arguing global economic uncertainty next year gives him a legal basis for such a move.Some legal experts criticised the regulation as a government ploy to bypass proper debate in parliament.The Constitutional Court last year ruled the passage of the president’s vaunted Jobs Creation Law was flawed due to inadequate public consultation and ordered lawmakers to restart the process within two years, or it would be deemed unconstitutional.”We know it looks like we’re normal now, but global uncertainty, risk is haunting us … Actually the world is not doing fine,” the president, widely known as Jokowi, told a news conference. He also argued Indonesia’s economy would rely on investment and exports in 2023 and that legal certainty about the law was important to maintain good investor perception.Passed in 2020, the so-called “omnibus” law revised more than 70 other laws and was lauded by foreign investors for streamlining business rules in Southeast Asia’s largest economy, which is notorious for its onerous bureaucracy. But it also sparked nationwide protests from workers, students and green groups, who said it eroded labour and environmental protections. Jokowi’s chief economic minister Airlangga Hartarto said the main considerations in issuing the emergency rules were a global recession risk in 2023, the conflict in Ukraine, the potential for global food, energy and monetary crises, as well as climate change. Chief security minister Mahfud MD said “strategic measures” were needed in this case as the regular process to comply with the ruling would take too long. Lawmakers had earlier this year told Reuters they planned to redo the deliberation of the legislation to comply.’FAIT ACCOMPLI’Bivitri Susanti, a constitutional law expert from the Indonesia Jentera School of Law, called the move “ridiculous” and “inappropriate” as it would cut debate time in parliament.”Everyone can see there is no emergency. It’s holiday time,” she said. “This emergency regulation is really a fait accompli from the president.”An emergency regulation is usually effective immediately, but must receive parliament’s endorsement by the end of its next session to become permanent legislation. Parliament is due to return from recess on Jan. 10 for what is typically a four-month session. Among the biggest issues with the law were relaxed rules on severance pay, changes to the minimum wage formula, contract labour and outsourcing, and a stipulation that environmental studies be required only for high-risk investments.The emergency regulation introduces some changes to that law to reflect trade unions’ demands, Airlangga said, including limiting outsourcing to certain sectors and adding a component for the formula used to set the minimum wage so that it would consider purchasing power. The contents of the decree have yet to be made public. Airlangga stressed the government had conducted more public consultations since the court ruling.Chairman of the Labour Party, Said Iqbal, said he backed the emergency regulation because with general elections in 2024, parliamentary debate could be held up and at risk of being influenced by corruption. He declined to comment on the content of the regulation but concurred that workers had been consulted by government officials and a business group over revisions in the law. The party, formed in 2021 by members of several unions, had previously pledged to revoke the Jobs Creation law if they won secured enough votes in the 2024 election. More

NEW YORK (Reuters) – Just over half of the 50 U.S. states are exhibiting signs of slowing economic activity, breaching a key threshold that often signals a recession is in the offing, new research from the St. Louis Federal Reserve Bank report said. That report, released Wednesday, followed another report from the San Francisco Fed from earlier in the week that also delved into the rising prospect that the U.S. economy may fall into recession at some point in coming months.The St. Louis Fed said in its report that if 26 states have falling activity within their borders, that offers “reasonable confidence” that the nation as a whole will fall into a recession. Right now, the bank said that as measured by Philadelphia Fed data tracking the performance of individual states, 27 had declining activity in October. That’s enough to point to a looming downturn while standing short of the numbers that have been seen ahead of some other recessions. The authors noted that 35 states suffered declines ahead of the short and sharp recession seen in the spring of 2020, for example.Meanwhile, a San Francisco Fed report, released Tuesday, observed that changes in the unemployment rate can also signal a downturn is on the way, in a signal that offers more near-term predictive value than the closely-watched bond market yield curve. The paper’s authors said that the unemployment rate bottoms out and begins to move higher ahead of recession in a highly reliable pattern. When this shift occurs the unemployment rate is signaling the onset of recession in about eight months, the paper said.The paper acknowledged its findings are akin to those of the Sahm Rule, named for former Fed economist Claudia Sahm, who pioneered work linking a rise in the jobless rate to economic downturns. The San Francisco Fed research, written by bank economist Thomas Mertens, said its innovation is to make the jobless rate change a forward-looking indicator. Unlike the St. Louis Fed state data that is tipping toward a recession projection, the U.S. jobless rate has thus far remained fairly stable, and after bottoming at 3.5% in September, it held at 3.7% in both October and November. The San Francisco Fed paper noted that the Fed, as of its December forecasts, sees the unemployment rate rising next year amid its campaign of aggressive rate hikes aimed at cooling high levels of inflation. In 2023, the Fed sees the jobless rate jumping up to 4.6% in a year where it sees only modest levels of overall growth.If the Fed’s forecast comes to pass, “such an increase would trigger a recession prediction based on the unemployment rate,” the paper said. “Under this view, low unemployment can lead to a heightened probability of recession when the unemployment rate is expected to rise.”Tim Duy, chief economist with SGH Macro Advisors, said he believes that to achieve what the Fed wants on the inflation front, the economy would likely “lose roughly two million jobs, which would be a recession like 1991 or 2001.” Anxiety over the prospect of the economy falling into recession has been driven by the Fed’s forceful actions on inflation. Many critics contend that the central bank is focusing too much on inflation and not enough on keeping Americans employed. Central bank officials have countered that without a return to price stability, the economy will struggle to meet its full potential. What’s more, in the press conference following the most recent Federal Open Market Committee meeting earlier this month, central bank leader Jerome Powell said that he didn’t view the current Fed outlook as a recession prediction given the expectation growth will remain positive. But he added much remains uncertain. “I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just, it’s not knowable,” Powell said. More

Good morning. China is increasing monitoring Covid-19 variants as countries including the US, Italy and Japan impose restrictions on travellers from the country amid concern that the unprecedented surge in cases could produce new variants.In recent days, Chinese researchers and officials have begun uploading genome sequence data from hundreds of coronavirus samples to Gisaid, a global online database that allows scientists to track mutations of the virus. So far, the samples show that the primary Omicron sub-variants spreading in China are similar to those that have already been identified in Europe and North America. But researchers say more data are needed to get the full picture. On Wednesday, Washington announced that from January 5, air passengers arriving from China must show a negative Covid-19 test or proof of recovery from a previous infection. Dig Deeper: Covid and crackdowns muffle China’s live music sceneThanks for reading FirstFT Americas. Please note that the newsletter will take a break on Monday, returning to normal on Tuesday January 3. Have a wonderful weekend and happy new year! — GeorginaFive more stories in the news1. Republicans set to take House majority amid division and scandal The new Republican majority in the US House of Representatives is set to take office next week as leader Kevin McCarthy rushes to overcome internal opposition to his Speakership and an incoming New York congressman, George Santos, admits he “embellished” his CV. Find out how Santos misled voters. 2. US green subsidies may drive European companies closer to China America’s huge green subsidies plan risks backfiring by making “overtures and propositions” from Beijing more interesting and driving European companies closer to China, Valdis Dombrovskis, the European trade commissioner, warned yesterday. 3. Global stocks set to post worst year since 2008 financial crisis The broad MSCI All-World index of developed and emerging market equities has shed nearly a fifth of its value in 2022, with bourses from Wall Street to Shanghai and Frankfurt all notching up significant losses.4. Mergers and acquisitions down by a third in second half of 2022 Global dealmaking suffered a record fall during the six months to December, as rising interest rates and economic uncertainty brought a period of frenzied activity to an abrupt close. Read the full story. 5. Ukraine rocked by massive Russian missile barrage Scores of Russian missiles were fired at Kyiv and other Ukrainian cities yesterday in what officials described as one of the largest daily barrages of a months-long campaign targeting the country’s energy infrastructure.Weekend essay: Ukrainian writer Oleksandr Mykhed tells the story of two scientists caught up in the conflict and reflects on its agonising impact on his homeland.How well did you keep up with the news this year? Take our FirstFT 2022 quiz to find out.What else we’re reading Fashion designer Vivienne Westwood dies aged 81 Westwood died “peacefully and surrounded by her family” at home in London last night, her representatives said. The designer made her name on London’s fashion scene in the 1970s and was widely credited with bringing punk style into the mainstream.Millennials shatter oldest rule in politics People have tended to become more conservative as they grow older. From the “silent generation” born between 1928 and 1945 to “Gen X”, who came along between 1965 and 1980, this pattern has held firm — until now. While millennials, born between 1981 and 1996, started on the same trajectory, something has changed, with striking implications for UK Conservatives and US Republicans.War, inflation and tumbling markets: the year in 11 charts It has been a year dominated by unforeseeable events with stark consequences and few precedents in recent history. Over a tumultuous 12 months, the FT’s visual and data journalism has brought readers a deeper understanding of the news stories that dominated 2022. Here are the highlights.Pelé dead at 82 after stellar football career for Brazil Football fans around the world are mourning Pelé, the man celebrated as the greatest player in the history of the sport, who has died at the age of 82. Our obituary remembers the life of one of the most popular and recognisable athletes of the 20th century.Most popular FT Weekend story: Inside Putin’s circle — the real Russian eliteAs the year reaches its close, we are sharing some of our most-read stories across different sections of the FT. As the west focuses on oligarchs, a far smaller group has its grip on true power in Moscow. These men are known in Russia as the “siloviki” — “men of force”. Who are the siloviki, and what motivates them?Most popular FT obituary: Anshu Jain, banker, 1963— 2022Jain, who died in August aged 59, spearheaded Deutsche Bank’s conquest of Wall Street and was known for his hard-charging trading floor style.

Anshu Jain, a father of two, never adopted the flamboyant lifestyle that was the norm in the brash, male-dominated world of investment banking © Simon Dawson/Bloomberg

Take a break from the news Did you know that Bundt cakes hark back to the German bundkuchen — a “gathering” or “together” cake? The “t” was added in the 1950s by a Minneapolis aluminium pan manufacturer who couldn’t trademark the word bund. Honey & Co’s chocolate, orange and coffee take on the classic Bundt cake is a perfect dinner party treat. Save the recipe.

Orange bundt cakes, drizzled with a mix of icing sugar and coffee liqueur © Patricia Niven More

The era of ultra-low interest rates and quantitative easing died in 2022, with the arrival of high inflation. This transformation has, for now, upended prior assumptions about markets and the economy. Central banks will no longer come to the rescue of damaged markets. As Sam Bankman-Fried of FTX has learnt, hawking speculative assets is no longer a sure road to riches. This is a new world. The question, as we go into 2023, is how long it will last.The proximate cause of this upheaval is the unexpected surge in inflation. All important central banks, with the notable exception of the Bank of Japan, have rapidly tightened monetary policy over the past 12 months: the Federal Reserve has raised the federal funds rate by 4.25 percentage points, to a level last seen in early December 2007; the Bank of England has raised rates by 3.25 percentage points to a level last exceeded in November 2008; and the European Central Bank has raised rates by 2.5 percentage points to a level last seen in December 2008.Bond yields have also risen. Since the end of December 2021, yields on 10-year gilts have jumped more than 2.6 percentage points, on German Bunds 2.2 percentage points and on US Treasuries 2.3 percentage points. Rates are low by longer-term standards. But US yields have not been this high since early 2011. Real rates have jumped too. Over the past year, the yield on inflation-protected 10-year US Treasuries has gone from minus 1 to more than plus 1.5 per cent.Inevitably, higher rates have destabilised asset prices. Stock markets were notably volatile, ending the year well below peaks, though hardly cheap. Bitcoin fell from $65,000 in late 2021 to about $16,600 now. Crashes reveal what the economist JK Galbraith called the “bezzle”. This one has already revealed the ills of FTX.The new year will be one of uncertainty. Beyond those of geopolitics and energy, the biggest doubts concern the future of inflation and monetary policy. If inflation quickly subsides, monetary policy is likely to ease in the important jurisdictions before the end of the year. If it does not, it will not. So long as this uncertainty remains, so must that over the outlook for monetary policy.Higher interest rates will bring casualties, as debt becomes costlier. Given the uncertainty, market turmoil is also likely to continue. The combination is likely to shake out overbought assets and increase defaults. If rates rise further, defaults will become more likely. That will not just be in developing and emerging economies, where distress is already visible. Highly leveraged ventures will be under pressure in high-income countries, too. The Austrian economist Joseph Schumpeter argued that recessions caused “creative destruction”. Expensive money will at least do the needed job of reminding everybody that leverage is never a one-way bet.A longer-term uncertainty is over whether the era of free money is going through a temporary interruption or if it is ending for good. Some, notably Charles Goodhart and Manoj Pradhan, in The Great Demographic Reversal, argue that demographic forces will mean higher inflation and higher interest rates over the long term. Against this, Olivier Blanchard, former chief economist of the IMF, insists the forces that have generated low real interest rates on safe assets go will continue to dominate, once the current inflationary shock is over.We do not yet know who will prove right. The speed with which inflation subsides and how high real interest rates will then shape how different the future will be from the pre-inflationary past. Today, however, is a time of dearer money and risk repricing. That offers peril and opportunity. More

Huawei has declared it is “business as usual” years after Washington imposed punishing restrictions that created a template for wider export controls on technology shared with Chinese companies. The Shenzhen-based technology group said it was forecasting for three successive quarters of growth and a flat total revenue for 2022. Overall sales were expected to reach Rmb636.9bn ($91.8bn) this year, up 0.02 per cent annually.“In 2022, we successfully pulled ourselves out of crisis mode. US restrictions are now our new normal,” said Eric Xu, Huawei’s rotating chair, in an annual new year message to employees. Xu added that 2023 would be “the first year” for returning to “business as usual”, though Washington’s export controls on high-end technology are still in place.Huawei has attempted to explore new markets and businesses since it was hit by the curbs. The tightened controls forced companies supplying US technology to the Chinese group to seek an additional licence from regulators, limiting Huawei’s ability to produce cutting-edge smartphones.After being added to Washington’s trade blacklist in 2019, Huawei rapidly lost both its global and domestic market share of consumer electronics. This year, it ran out of advanced in-house designed chips, according to research company Counterpoint.The US in October introduced new technology export curbs that more broadly restrict Chinese access to its technology, part of a wider geopolitical confrontation between the world’s superpowers. To work around the measures, Huawei launched updated smartphone models using stockpiled chips and licensed components. It expanded the consumer business into wearables such as smart watches, which require less advanced semiconductors than smartphones. The pivot to wearables makes it easier for Huawei to source parts domestically. Huawei has been on a quest to find alternatives to American technology, partnering with domestic companies and collaborating with local governments as Beijing works to become technologically self-sufficient. Without mentioning the details of overcoming the advanced chip shortage, Xu said the freefall in the consumer devices business had diminished, and the company would concentrate resources on developing products next year.Income gathered from expanding cloud services and its steady telecoms business also offset the plummeting devices sales, he added.

Another profitable source for Huawei is to levy royalties, especially in 5G-related services, to some of the world’s largest brands, including Apple and Samsung.The company also signed more than 20 patent licences this year, covering smartphones and networking, said Alan Fan, the company’s global head of intellectual property.Xu admitted business would still be difficult in 2023, saying that “the macro environment may be rife with uncertainty” and the company is “faced with external volatility”.“We need to be proactive about improving the business environment and more effectively managing risks. This is the only way we can reach our business goals for 2023 and lay a solid foundation for Huawei’s continued survival and development,” said Xu. More