Economy

WASHINGTON (Reuters) – The Democratic chair of the U.S. Senate committee that sets spending policy on Wednesday said Republican House Speaker Mike Johnson was blocking his chamber’s team from negotiating budget details in hopes of holding spending to last year’s levels.Senate Appropriations Committee Chair Patty Murray said in an interview that she believed Johnson was standing in the way of his negotiators agreeing on spending levels for the 12 individual bills needed to fund many of the federal government’s operations.Democratic President Joe Biden and Johnson’s Republican predecessor, Kevin McCarthy, in June agreed on a $1.59 trillion overall level of discretionary spending for the fiscal year that began Oct. 1, leaving it to lawmakers to divvy that up across the government’s sprawling operations.”What he (Johnson) has not done is given direction to his Appropriations Committee to start negotiating the bills between the House and the Senate,” Murray said.The federal government is currently operating on a temporary “continuing resolution,” or CR, holding funding steady at last year’s levels. That money will begin to run out next month, and without further action by Congress, the federal government would enter a partial shutdown.”What the speaker has thrown out is some kind of solution of a date-change, full-year CR,” Murray said, meaning current funding would be extended through the full federal fiscal year ending Sept. 30, 2024.A spokesman for Johnson said: “The speaker’s preference is a fulsome process producing full-year bills, but we need to be done with FY24 one way or another.”The Republican-controlled House of Representatives so far has passed only seven of the 12 bills in partisan votes, failing to address some of the thorniest issues, such as annual food and agriculture funding and Justice Department funding, as well as money for transportation, scores of social programs and others.In the Democratic-majority Senate, Murray’s committee has passed all 12 bills with strong bipartisan support, while the full chamber has passed just three.FUNDS RUN OUT NEXT MONTHThe stopgap CR currently in place begins to run out on Jan. 19, including services for veterans, transportation and housing, with all other funding expiring by Feb. 2.If Johnson were to insist on a full-year CR instead of those 12 bills that make spending changes throughout the government, the Senate could balk, Murray said.”I am ready to go based on the number we all agreed to; voted into law … and now he is saying, ‘Wait, wait, I’m not going to let my House Appropriations Committee negotiate with you until we have a new, different agreement.’ We’re at the end of the (calendar) year, or three months into this (fiscal) year and now he’s trying to negotiate new numbers. That is nuts,” Murray said.Murray’s Republican counterpart, Senator Susan Collins, also said that holding funding steady for the year would harm the nation, including its military readiness.”A yearlong continuing resolution would simply fail to provide the resources needed to protect our nation,” Collins said in a Nov. 29 speech to the Senate.Two House Republican appropriators, Representatives Tom Cole and Michael Simpson, on Wednesday held out hope that a deal can be reached soon on a new top-line spending number, setting the stage for House-Senate negotiations over Congress’ winter break, which is scheduled to begin at the end of next week.Biden and McCarthy agreed on the $1.59 trillion top-line discretionary spending number as part of a June deal that narrowly averted a historic default on the nation’s debt, which would have destabilized financial markets. McCarthy in October was ousted by members of his own party after reaching a stopgap spending deal with Democrats that averted a partial government shutdown.The U.S. in the fiscal year ended Sept. 30 posted a $1.7 trillion deficit, its largest outside of the peak of the COVID-19 pandemic, driving its total debt past $33 trillion. That reflects both the effects of high spending and tax cuts.Moody’s (NYSE:MCO) ratings agency last month changed its outlook on the United States’ creditworthiness to “negative” from “stable,” citing political dysfunction. More

The NewsThe European Union plans to postpone strict local-content rules that would have led to costly tariffs imposed on cars traded between the bloc and Britain beginning Jan. 1.“This removes the threat of tariffs on export of E.U. electric vehicles to the U.K. and vice versa,” Maros Sefcovic, the European Union’s executive vice president, told journalists in Brussels Wednesday.The tariffs would have forced consumers in Britain and the European Union to pay more for many electric vehicles. Andrew Testa for The New York TimesWhy It Matters: Relief for carmakers that were facing tariffs.The proposal provides for a three-year delay in the trade rule, and represents a huge reprieve for many carmakers, especially those with plants in Britain. Eighty percent of cars made in Britain are exported, with 60 percent of them going to the European Union. The delay means that British electric vehicles with batteries made outside Europe will no longer face tariffs of up to 10 percent starting in three weeks.European carmakers would have faced similar hits in their sales of cars to Britain, a major market. The delay will probably be seen as a win for Prime Minister Rishi Sunak’s British government, which lobbied for the change along with the European car industry.Background: Europe and Britain do not make enough batteries.The rule would have made it virtually impossible for cars made in Britain with batteries from Asia to be imported tariff-free into the European Union. Neither Britain nor the Europe Union is manufacturing enough batteries for the rising number of electric vehicles expected to be produced in coming years. Batteries are the most expensive components of electric vehicles.Local origin rules are designed to discourage automakers from importing expensive parts, and to encourage local production. But this rule would have been counterproductive, the auto industry argued, by forcing consumers to pay more for many electric vehicles. Those higher prices could have opened the door for electric vehicles from outside Europe, especially China, whose makers are churning out low-cost models that have gained traction in Britain.What Happens Next: Time for the battery industry “to catch up.”The proposal still needs the support of European Union governments. Early indications are that it will be welcomed by auto industry. An extension would give “the European battery industry time to catch up,” the Society of Motor Manufacturers and Traders, a British trade group, said Wednesday in a statement.Mr. Sefcovic also said the European Union planned to provide 3 billion euros ($3.25 billion) to encourage local manufacturing of batteries. More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.Leading economists are expecting the Federal Reserve to maintain the 22-year high in US interest rates until at least July 2024, according to the latest poll by the Financial Times. While most of those surveyed, between December 1 and December 4, thought the rate-raising phase was now over, almost two-thirds of the respondents said the central bank would begin to cut its benchmark rate only by the third quarter of next year.Three-quarters of those polled also expect that when the cuts come, the federal funds rate will be cut by only half a percentage point or less in 2024 from its current position of 5.25 per cent to 5.5 per cent.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.Meanwhile, US job openings data has provided more evidence that the central bank’s efforts to damp demand are working as openings fell to their lowest level in more than two years in October.Businesses advertised 8.7mn job vacancies in October, down from 9.6mn in September, according to the labour department’s Job Openings and Labor Turnover Survey released yesterday. It is the lowest level of openings since March 2021.Advocacy groups are raising concerns that many lower-income consumers will struggle to pay their bills in the new year as the number of Americans choosing “buy now, pay later” (BNPL) payment methods for their holiday shopping surges.Usage of the system, in which payments are typically made in interest-free instalments, have hit an all-time high this holiday season. BNPL accounted for $10.1bn of online spending since the start of November, up 17 per cent from the same period of 2022, according to Adobe Analytics. Meanwhile, US household savings have fallen to below levels recorded before they were boosted by the government stimulus during the Covid-19 pandemic and consumer sentiment has sunk to a six-month low.US cigarette sales have also taken a hit with British American Tobacco announcing a £25bn one-off impairment charge on the value of its acquired cigarette brands. BAT, which makes Dunhill and Lucky Strike cigarettes, said competition from illicitly sold disposable vapes and smokers switching to cheaper cigarette brands or quitting altogether had dragged down US combustible sales. Shares in the London-listed group dropped 7.5 per cent in early morning trading after the announcement was made, slashing BAT’s market capitalisation to £51.2bn.Need to know: UK and Europe economyThe Bank of England’s financial stability watchdog said today that private credit and leveraged lending markets remained vulnerable to “sharp revaluations” as the war in the Middle East adds to geopolitical risks.G7 nations will ban imports of Russian diamonds from January 1 under an agreement aimed at restricting one of the few leading Russian exports still untouched by western sanctions imposed in response to the Ukraine war.Tui, Europe’s largest tour operator, which has a dual listing in London and Frankfurt, is considering delisting from the London Stock Exchange. More than three-quarters of Tui’s shares are now held in Germany, according to Tui’s chief financial officer Mathias Kiep.UK investors have returned to equities for the first time in six months as asset managers look to reorientate their portfolios to account for brighter sentiment on inflation and interest rates.British shoppers appear to be cutting their purchases in the run-up to Christmas as growth in UK retail sales was lower than inflation last month, according to the British Retail Consortium. The value of retail sales rose by an annual rate of 2.7 per cent in November, well below the 12-month average of 4.1 per cent.Germany’s hopes of playing a significant role in the global semiconductor industry are under threat as the country’s budget crisis could affect plans to hand out billions of euros in government subsidies to chip companies.Need to know: Global economyApple wants batteries for its latest generation of iPhones to be made in India as part of the US company’s efforts to diversify its global supply chain and move manufacturing out of China.EU leaders will stress their rising concerns about Chinese industrial overcapacity when they meet President Xi Jinping for a summit in Beijing on Thursday amid signs China is pumping more funding into manufacturing.Last night, Venezuela’s President Nicolás Maduro ordered state companies to exploit oil deposits and mines in the sparsely populated Essequibo region run by Guyana. In response, Guyana’s President Irfaan Ali said today that he would report the matter to the UN Security Council and the International Court of Justice.Shipowners have demanded more military protection on maritime routes in the Middle East after attacks by Iran-backed rebels in the Red Sea sparked fears of disruptions to global trade.Need to know: BusinessDanish drugmaker Novo Nordisk’s breakthrough weight-loss and diabetes drugs have helped it become Europe’s largest drugmaker. Now, it wants to go a step further and stop people gaining weight in the first place.The return of wealthy tourists, especially from China, and a weak yen has helped Japan escape the luxury downturn. For LVMH, the world’s largest luxury group, Japan is the fastest-growing region among its 75 brands, recording 31 per cent growth in the first nine months of the year.Airbus chief executive Guillaume Faury has said that the group “might need some support” from European governments for a new, multibillion-dollar commercial aircraft programme to replace its A320 family of jets.Denmark’s largest union 3F announced yesterday that it had joined Scandinavia in the latest escalation in tensions over workers’ rights against US electric-car maker Tesla.The World of WorkThis week on Working IT, the FT’s Isabel Berwick speaks to some of this year’s most prominent business-book authors, including Amy Edmondson, Ed Conway and Mustafa Suleyman. Right Kind of Wrong by Harvard Business School professor Edmondson becomes the first management book to win the Financial Times and Schroders Business Book of the Year in the prize’s 19-year history.Should you switch non-profit work for the corporate world? Jonathan Black answers a reader’s question on how to make the move towards higher pay in the private sector when your professional contacts are all in the charity sector.Some good newsNew research from the Wellcome Sanger Institute and others reveals that human fingers and toes do not grow outward but rather they form from within a larger foundational bud. This could help explain, diagnose and treat congenital limb syndromes.Recommended newslettersWorking it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up hereThe Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up hereThanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at [email protected]. Thank you More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.G7 nations will ban imports of Russian diamonds from January 1 and implement staged embargoes on trading the stones throughout 2024, under an agreement aimed at restricting one of the few leading Russian exports still untouched by western sanctions.The deal, set to be announced on Wednesday by the group of wealthy nations, follows months of wrangling between western capitals over how such a ban would work, and widespread concern from big African diamond producers that the measures could hurt their trade in the precious stones.The diamond ban is a welcome sign of support from western allies as Ukraine has recently become increasingly anguished by the failure of the EU and the US to commit to long-term financial and military support and as its counteroffensive against Russian troops has largely failed to make significant gains on the ground. Russia’s economy and its military-industrial complex have proven more resilient than expected since President Vladimir Putin’s full-scale invasion of Ukraine in February last year, despite western sanctions that have been gradually imposed in response. The west is increasingly alarmed at the failure of existing restrictions to curb rising Russian defence spending and the country’s production of weapons and military equipment.The G7, whose leaders were set to meet virtually on Wednesday, will agree to ban imports of non-industrial diamonds from Russia starting on January 1 2024. A ban on the stones processed in third countries will also be introduced from March 1 and a full traceability system for rough diamonds traded in G7 nations from September 1, according to people briefed on the contents of a draft joint statement.The G7 “will continue consultations . . . with other partners including [diamond] producing countries as well as manufacturing countries” to implement the traceability measures, according to the people.Diamonds are one of the few remaining major Russian exports that have not been targeted by co-ordinated western sanctions, such as crude oil and precious metals.The US unilaterally banned the import of Russian rough diamonds in April 2022, but stones that were polished elsewhere were still allowed into the country. The EU has long toyed with banning Russian diamonds, but the introduction of such measures has been delayed by Belgian concerns that it would harm Antwerp and benefit rival diamond trading hubs such as Dubai and Mumbai. Four proposals for the G7 diamond traceability system have been on the table from Belgium, France, India and the World Diamond Council, an industry group. The Belgian proposal, under which Antwerp would serve as a gatekeeper for all diamonds entering the G7, has sparked outrage among the diamond industry and African diamond-producing nations.Russia is home to Alrosa, the world’s second-largest diamond producer by revenue after industry leader De Beers and a third of which is owned by Moscow. The company made $1.9bn of revenue in the first half of 2022.The invasion of Ukraine has already drastically overhauled the global diamond industry with Russian stones flowing largely to the Chinese market after big western jewellery companies boycotted its gems.G7 nations have grown increasingly frustrated that the UN-authorised certification scheme to identify “conflict diamonds” could not label Russian diamonds as such since the nomenclature only applies to conflict waged by rebel groups and not by governments. More

Private payrolls rose by 103,000 jobs last month, the ADP National Employment Report showed on Wednesday. Data for October was revised lower to show 106,000 jobs added instead of 113,000 as previously reported. Economists polled by Reuters had forecast private payrolls rising 130,000.The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the release on Friday of the Labor Department’s more comprehensive and closely watched employment report for November.The ADP report has been a poor gauge for predicting the private payrolls count in the employment report.The labor market is steadily slowing in the aftermath of 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022. The government reported on Tuesday that job openings fell to more than a 2-1/2-year low of 8.733 million in October. There were 1.34 vacancies for every unemployed person, the lowest since August 2021. According to a Reuters survey of economists, the Labor Department’s Bureau of Labor Statistics is expected to report that private payrolls increased by 153,000 jobs in November as about 33,000 striking United Auto Workers union members returned to work. Private payrolls rose 99,000 in October. Total nonfarm payrolls are estimated to have increased by 180,000 in November after rising 150,000 in the prior month. Easing labor market conditions together with ebbing inflation have led financial markets to believe that the Fed’s monetary policy tightening campaign was over and that the U.S. central bank could cut rates as soon as next March. The Fed is expected to leave rates unchanged next Wednesday. More

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The Bank of England hiked interest rates by more than 500 basis points between December 2021 and August 2023 in a bid to combat soaring inflation.
“The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments,” the Financial Policy Committee said.

A member of the public walks through heavy rain near the Bank of England in May 2023.
Dan Kitwood | Getty Images News | Getty Images

LONDON — The Bank of England on Wednesday warned that although household finances are faring better than expected, higher borrowing costs have yet to fully feed through to the economy.
In its half-yearly Financial Stability Report, the central bank noted that “the overall risk environment remains challenging” amid a sluggish domestic economy, further risks to global growth and inflation and heightened geopolitical tensions.

The Bank of England hiked interest rates by more than 500 basis points between December 2021 and August 2023, taking its main rate to a 15-year high in a bid to combat soaring inflation. Its Financial Policy Committee highlighted in the report that long-term interest rates in both the U.K. and the U.S. are now around their pre-2008 levels.
“The full effect of higher interest rates has yet to come through, posing ongoing challenges to households, businesses and governments, which could be amplified by vulnerabilities in the system of market-based finance,” the FPC said.
“So far, and while the FPC continues to monitor developments, U.K. borrowers and the financial system have been broadly resilient to the impact of higher and more volatile interest rates.”

Since its last FSR in July, household income growth has been greater than expected, the FPC noted, which has reduced the share of households experiencing high cost-of-living adjusted debt-servicing ratios. Meanwhile, a lower expected path for the Bank of England’s main interest rate has reduced the extent to which that share is likely to rise.
“Nevertheless, household finances remain stretched by increased living costs and higher interest rates, some of which has yet to be reflected in higher mortgage repayments,” the FPC said.

“Arrears for secured and unsecured credit remain low but are rising as the impact of higher repayments is felt by borrowers.”
Companies’ ability to service their debt has improved on the back of robust earnings growth, and the FPC expects the corporate sector to remain largely resilient to the impact of higher rates and weaker economic activity.
“But the full impact of higher financing costs has not yet passed through to all corporate borrowers, and will be felt unevenly, with some smaller or highly leveraged UK firms likely to remain under pressure,” the FPC added.
“Corporate insolvency rates have risen further but remain low.” More

Private payrolls grew by 103,000 workers in November, below the downwardly revised 106,000 in October and the 128,000 Dow Jones estimate.
After leading job creation for most of the period since Covid hit in early 2020, leisure and hospitality recorded a loss of 7,000 jobs.
Services-related industries provided all the job gains for the month, as goods-producers saw a net loss of 14,000.

A postal worker wearing a Santa hat, sorts through mail and packages during a media tour hosted by the US Postal Service at the Los Angeles Processing and Distribution Center, the largest in the country, equivalent to 29 football fields, on November 30, 2023. 
Frederic J. Brown | AFP | Getty Images

Private sector job creation slowed further in November and wages showed their smallest growth in more than two years, payrolls processing firm ADP reported Wednesday.
Companies added just 103,000 workers for the month, slightly below the downwardly revised 106,000 in October and missing the 128,000 Dow Jones estimate.

Along with the modest job growth came a 5.6% increase in annual pay, which ADP said was the smallest gain since June 2021. Job-changers saw wage increases of 8.3%, making the premium for switching positions the lowest since ADP began tracking the data three years ago.
After leading job creation for most of the period since Covid hit in early 2020, leisure and hospitality recorded a loss of 7,000 jobs for the month. Trade, transportation and utilities saw an increase of 55,000 positions, while education and health services added 44,000 and other services contributed 15,000.
Services-related industries provided all the job gains for the month, as goods-producers saw a net loss of 14,000 due to declines of 15,000 in manufacturing, despite the settlement in the United Auto Workers strikes, and 4,000 in construction. Recent layoffs in Silicon Valley and on Wall Street also did not show up in the data, as both sectors posted gains on the month.
“Restaurants and hotels were the biggest job creators during the post-pandemic recovery,” said ADP chief economist Nela Richardson. “But that boost is behind us, and the return to trend in leisure and hospitality suggests the economy as a whole will see more moderate hiring and wage growth in 2024.”
Companies with between 50 and 499 employees led job creation, with an addition of 68,000. Small businesses contributed just 6,000.

The ADP report comes two days before the more widely watched nonfarm payrolls count from the Labor Department. The two reports can differ widely, though the numbers for private payrolls were close in October as the Labor Department reported growth of 99,000, just 4,000 below the revised ADP tally.
Including government jobs, nonfarm payrolls increased 150,000 in October and are expected to show growth of 190,000 in November, according to Dow Jones.
Another sign that the labor market is loosening came Tuesday, when the Labor Department reported that job openings declined to 8.73 million in October, the lowest level since March 2021. More