Aurelia Butler

The US economy is expected to record another strong month of job gains for November as economists search for signs that the labour market recovery is regaining its momentum. Employers in the world’s largest economy are expected to have added 546,000 jobs for the month, according to a consensus forecast compiled by Bloomberg, a slight acceleration from the 531,000 positions created in October. Since the start of the year, monthly gains have averaged 582,000.Economists anticipate the unemployment rate will have fallen 0.1 percentage points to 4.5 per cent. Less than six months ago, it hovered closer to 6 per cent.But the data, which will be released by the Bureau of Labor Statistics at 8.30am US eastern time on Friday, are expected to show little improvement in the number of people employed or looking for a job. The so-called labour force participation rate, which has stagnated since June 2020, is pencilled in at 61.7 per cent for November, a marginal improvement from October’s 61.6 per cent, but about 1.5 percentage points lower than the pre-pandemic threshold. Childcare issues and Covid-related concerns are among the reasons most often cited for holding back people from returning to the workforce — a dynamic that could be exacerbated by the recent emergence of the new Omicron coronavirus variant.Jay Powell, chair of the Federal Reserve, alluded to this risk during two days of congressional testimony this week, noting another Covid-19 wave could impede progress in the labour market and worsen supply-chain disruptions. That could mean more muted employment gains, slower economic activity and even greater uncertainty about inflation, which is running at the fastest pace in 30 years, he said.Employers have already had to raise wages in order to attract workers amid what has become an acute labour shortage, and average hourly earnings are again expected to have increased in November. Another 0.4 per cent month-over-month increase is expected, which would bring the annual pace of wage growth to 5 per cent.

The latest jobs report comes just days after Powell made clear the central bank is assuming a more aggressive stance to combat inflation, which he acknowledged had broadened throughout the economy in recent months and raised the spectre of a much more persistent problem. Powell signalled this week that he may support speeding up the central bank’s withdrawal of its enormous stimulus programme — a process it began just a few weeks ago at a pace that would end bond-buying altogether in June.A faster exit, which many Fed officials now publicly support, is likely to mean earlier-than-expected interest rate increases, a possibility that jolted financial markets and prompted economists to ratchet up their bets for a rate rise next year. Some Wall Street analysts now expect three interest rate increases next year, with the first adjustment coming as early as May. More

A top Federal Reserve official has warned that the Omicron coronavirus variant threatens to fuel soaring inflation in the US by putting further pressure on supply chains and worsening worker shortages. “If it turns out to be a bad variant it could exacerbate the upward price pressures we’ve seen from the supply-chain problems,” Loretta Mester, president of the Cleveland Fed, told the Financial Times in an interview on Thursday. Mester added there was a risk that if Omicron were “more virulent than Delta” then people who lost or quit their jobs during the pandemic would continue to stay at home. “The fear of the virus is still one of the factors holding people back from re-entering the labour force,” she said.A global supply chain crunch and US worker shortages, which have compelled employers to raise wages to attract new hires, are two of the main factors that have sent inflation skyrocketing to a 30-year high. The comments from Mester are the latest sign that the Fed intends to press ahead with the withdrawal of the massive stimulus it put in place at the start of the pandemic, despite the potential risk to the US economy from the new variant. Earlier this week Jay Powell signalled that fighting inflation was the US central bank’s top priority during two days of testimony to Congress in which he only fleetingly acknowledged the damage that Omicron might do to the recovery. Mester, who will be a voting member of the policy-setting Federal Open Market Committee next year, also played down the risk that the variant could damp demand — especially if the current crop of vaccines prove to be effective. “The economy is better at dealing with these variants,” she said. “The demand side effects have been lessened, but we’ve seen these supply side effects, which are related to the virus.”

Mester echoed Powell by saying she would support a quicker withdrawal of the Fed’s massive bond-buying programme as a form of “insurance” that would give the central bank more flexibility to raise interest rates next year. “We have to entertain the risk that those persistently high numbers of inflation could become more embedded,” she said on Thursday. “It’s really about giving us the optionality . . . to make moves on the interest rate path.”Mester said she would support at least one rate increase next year, and that two might be “appropriate”. Powell this week told Congress this week he believed the Fed should “consider wrapping up the taper of our asset purchases . . . perhaps a few months sooner”. Mary Daly, president of the Federal Reserve Bank of San Francisco, also expressed her support for an earlier taper on Thursday. “If we didn’t have higher inflation readings, you might let the economy go a little bit more to see if we can get through Covid and have those [unemployed] individuals come back,” she said at an event hosted by the Peterson Institute for International Economics.Raphael Bostic of the Atlanta Fed has indicated his backing for a quicker taper as well, while Fed vice chair Richard Clarida said last month he supported the FOMC discussing the issue at its next policy meeting scheduled for December 14 and 15. More

The pandemic surge in property prices has reached around the globe. From Turkey to New Zealand, from Russia to Australia, house prices have soared in the past year.Overall, prices rose 9.2 per cent across 55 countries in the 12 months to the end of June, according to research from Knight Frank, a property agent. The developed world led the way with a 12 per cent gain, well ahead of the 4.7 per cent increase in developing countries.The price surge is a result of the gush of cheap money that central banks released into the markets as their co-ordinated contribution to helping the global economy avoid disaster during the Covid-19 outbreak. The funds helped to reassure investors that asset prices would be stabilised in the face of the pandemic’s economic shocks.However, as the charts show, the advances largely bypassed London and New York, and other leading global cities, such as Tokyo, Hong Kong and Paris, where prices marked time, albeit at historically high levels. Instead, the increases were posted in centres where investors saw catch-up opportunities: San Francisco, Los Angeles and Toronto, for example, and Shanghai, Seoul and Moscow.In some cases, expatriates have been buying property in their home countries, often out of concern that, in a post-pandemic world, it might be harder to move around the globe. Alongside them are domestic and international investors, including many wealthy families, who have been encouraged by ultra-low interest rates to add to their property portfolios.How much more can prices surge? There are signs that the extended price appreciation in property and financial assets could now be accompanied by more general price inflation, triggered by the post-pandemic economic recovery and the re-emergence of shortages of everything from microchips to lorry drivers.Central bankers initially insisted that the price surges were transitory. Now, though, they seem to be less sure about that. The spike in energy prices has uncomfortable echoes of the 1970s, when an oil supply shock helped trigger years of persistent inflation. Meanwhile, labour shortages are fuelling wage hikes, which tend to spiral as companies compete with each other for staff.

All this generates pressure on central banks to raise rates from the ultra-low levels of much of the past decade. Other things being equal — which admittedly they rarely are — that will weaken the property price surge. As Knight Frank says: “Despite strong price growth, there are signs of softening demand in some markets.”What happens next depends on what kind of interest rate hikes come. Financial traders are betting on step-by-step increases, which are least likely to upset confidence. And that is what central banks are likely to aim for. Having spent years assiduously bolstering economic growth with near-zero rates, they are not likely to change gear suddenly, if they can avoid it.But the risk exists that central banks might be forced to take unexpectedly drastic action, especially if they are shown to have delayed too long in their response.Still, it seems clear that, whatever the gyrations of the markets, most of us seem to have an innate fondness for real assets, starting with owning a place we can call home.For the rich, the attraction of property is particularly compelling. The wealthy put about a third of their assets into property, a figure that rises to nearly half in Asia, wealth managers say. They like to have homes in the leading cities, seaside resorts and ski villages. They buy apartments close to prestigious private hospitals and top-class schools and universities.Shifts in interest rates may influence the timing of such purchases and the prices paid, but the basic allure remains undimmed.Stefan Wagstyl is the editor of FT Wealth and FT Money. Follow Stefan on Twitter @stefanwagstylThis article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment More

JOHANNESBURG/BENGALURU/BUENOS AIRES (Reuters) – Emerging market currencies will struggle to make modest gains next year as the U.S. Federal Reserve turns more hawkish, squeezing interest rate differentials, amid likely unimpressive growth from world No. 2 economy China, a Reuters poll found.Beaten-down currencies like the South African rand, Turkish lira and Thai baht are expected to climb by a fraction of what they fell over the past year in the next 12 months, 2.1% to 15.50/$, 15.0% to 11.71/$ and 3.3% to 32.75/$, respectively. The Russian rouble is expected to fare better, rising 3.6% to 71.10/$ according to the Nov. 29-Dec. 2 survey, after a shallow dip so far this year of 0.2%. But there is little optimism generally around emerging FX.The new Omicron coronavirus variant is also likely to weigh on emerging market sentiment as further studies are conducted on whether it can evade vaccine protection and how severe the symptoms are.Dirk Willer at Citi notes “our forecasts assume that the new variant will not cause a replay of the 2020 outcomes. But we are already relatively negative on EM, and the recent news flow skews the risks to increased negativity.”But the main challenge for emerging FX in 2022 is likely to be interest rate differentials, driven by the world’s most influential central bank as it gears up for tighter policy.U.S. central bankers will discuss in December whether to end their bond purchases a few months earlier than had been anticipated, Federal Reserve Chair Jerome Powell said on Tuesday, leading to a sharp move higher in shorter-dated Treasury yields.Citi noted that “capital flows to emerging markets are ‘driven by U.S. monetary conditions’, while growth in EM is ‘driven by China’ and next year looks bad on both counts.” Growth in emerging market economies recovered for most countries this year after initial pandemic lockdowns, but it is expected to slow into next year on lower consumption from China compared with previous stronger years.The Chinese yuan, tightly managed by Chinese authorities, was predicted to lose 1.5% against the greenback over the coming year after gaining 2.5% so far this year as the economy is widely expected to grow at a much weaker pace next year, compared to 2021.”The bottom line and our main message is that more sustained and sustainable EM growth will be required to bring back portfolio inflows to support local assets across the board,” noted Alvaro Vivanco, head of ESG macro and EM strategy at Natwest.”Against this backdrop, we argue for a defensive stance for EM currencies through a few directional trades, while being extremely selective on our longs and “all the boxes need to ticked” for local duration.”In Latin America, Mexico’s peso is entering the new year surrounded by doubts over its decreasing carry-trade appeal, while Brazil’s real is set for some respite after taking a hit in the second-half of 2021.”Political and fiscal uncertainties on the domestic front, coupled with the start of the normalization of the monetary policy in the U.S. should prevent the BRL from strengthening substantially in the coming months,” wrote analysts at Banco Santander (MC:SAN) Brasil. Meanwhile, some strategists are questioning President Andres Manuel Lopez Obrador’s decisions for a new leadership in Mexico’s central bank as domestic inflation continues to outstrip expectations, affecting Mexican peso’s outlook. More

The world’s third-largest economy has lagged other advanced nations in its recovery from the pandemic’s hit with coronavirus curbs crimping activity for parts of the year.The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 53.0 from the prior month’s 50.7 and a 52.1 flash reading.That marked the fastest pace of expansion since August 2019.”New orders rose for the first time since January 2020 as panel members cited the lifting of state of emergency measures had boosted confidence and sales,” said Usamah Bhatti, economist at IHS Markit, which compiles the survey.”Despite increasing demand and evidence of pressure on capacity, Japanese service providers decreased staffing levels for the first time since July.”Stronger spending on dining out, overnight stays and other services would likely support Japan’s economy as a persistent global chip shortage and soaring raw material prices pressure manufacturers.”Both manufacturers and services firms pointed to prominent rises in cost pressures in November,” Bhatti said.The composite PMI, which is estimated using both manufacturing and services, expanded at the fastest rate in more than four years, rising to 53.3 from October’s final of 50.7. More