Economy

(Reuters) – The Bank of Canada will slash interest rates by a half percentage point at a second consecutive meeting on Dec. 11, according to a majority of economists polled by Reuters, many of whom changed their view on news of a sharp rise in unemployment.The BoC is already well in front of its peers for both size of rate cuts and speed. It has reduced rates by 125 bps, nearly double that of its southern neighbour, the U.S. Federal Reserve, which has hammered the Canadian dollar.News on Friday Canada’s jobless rate spiked to an 8-year high – outside the pandemic period – of 6.8% made several forecasters change their call to 50 bps from 25 bps. That rise came despite news over twice the number of jobs expected were added to Canadian payrolls in November.Nearly 80% of respondents, 21 of 27, predicted the Bank to cut the overnight rate by 50 bps on Dec. 11 to 3.25%. The rest forecast a quarter-point reduction. While interest rate futures traders had been pricing in the larger move, economists argue the decision is still nuanced. Some who switched to 50 said this did not mean they thought this was the correct policy choice. Derek Holt at Scotiabank (TSX:BNS) was one of several who changed to 50 bps on Friday. “I hate the call because I think it’s the wrong thing to do, but they are likely to take the easy way out relative to market pricing while arguing that the risk of doing too much is less than the risk of doing too little that could see inflation undershoot,” said Holt.  “I hope that (BoC Governor Tiff) Macklem will sound more circumspect and cautious if he does go big as multiple arguments lean toward being very cautious on inflation into 2025.”Inflation rose to the 2.0% central bank target in October, the first rise in the annual rate since May, but that was in line with the BoC’s recent predictions. Signs of improvement in parts of the economy suggest there is a risk it rises further.Among the big five Canadian banks, only TD expects 25 bps. James Orlando, senior economist at TD, noted that when the BoC stepped up its rate-cutting pace to 50 bps in October, there were concerns at the time that it was behind the curve with both growth and inflation undercutting expectations. “But since then, economic data have shown more resilience, with consumer spending, the real estate market, and price pressures rebounding,” Orlando wrote. “Even with the messiness of (the) employment report, the economy continues to add jobs, reinforcing our view that the labour market is on solid foundations. We think this should be enough to convince the central bank to revert to a 25 bp cut next week, but it will remain a close call,” he noted.The BoC will reduce rates by at least another 75 bps to 2.50% or lower by end-2025, according to over 80% of respondents. That was a stronger majority than just over half in an October poll.One potential serious threat to the economy in the coming months is much more difficult to forecast. Since the October policy meeting, U.S. President-elect Donald Trump has threatened to impose a 25% tariff on imports from Canada.All 11 economists who responded to an additional question said a recession was likely if Trump follows through on his tariff threat. Eight said the downturn would be shallow while three said severe. (Other stories from the Reuters global economic poll) (Reporting and polling by Mumal Rathore and Pranoy Krishna; Editing by Ross Finley and Diane Craft) More

(Reuters) -Donor countries have pledged a record $100 billion three-year replenishment of the World Bank’s fund for the poorest nations, providing a vital lifeline for their struggles against crushing debts, climate disasters, inflation and conflict.The World Bank made the announcement on Friday in Seoul at a pledging conference for the International Development Association, which provides grants and very low interest loans to 78 low-income countries. The total exceeds the previous $93 billion IDA replenishment announced in December 2021. Countries will contribute $23.7 billion directly to IDA, only marginally increased in dollar terms from the $23.5 billion pledged in 2021, but the fund will issue bonds and employ other financial leverage to stretch that to the targeted $100 billion in grants and loans through mid-2028.The two-day pledging conference fell short of the $120 billion goal African heads of state had called for, partly because the U.S. dollar’s strength – pushed up by Donald Trump’s U.S. presidential election victory – diminished the dollar value of significant increases in foreign currency contributions by several countries.At a G20 leaders’ summit in Brazil last month, Norway increased its pledge by 50% from 2021 to 5.024 billion krone. That’s $455 million at current exchange rates, but at the start of 2024, it would have been worth $496 million.South Korea boosted its pledge by 45% to 846 billion won, ($597 million), Britain by 40% to 1.8 billion pounds and Spain by 37% to 400 million euros. Spain’s pledge was worth $423 million on Friday, $10 million less than the day it was announced in October.U.S. President Joe Biden pledged a $4 billion U.S. contribution, up from $3.5 billion in the previous round.DOMESTIC RESISTANCEThe World Bank did not immediately reveal the amounts of other pledges, but said that 17 donor countries had committed to raising their contributions by more than 25%, with 10 offering increases of 40% or more.”While some donors made some very important increases, a lot of historically big IDA donors did not,” said Clemence Landers, senior policy fellow at the Center for Global Development, a Washington think tank. “This is a sign of the times: for a lot of governments, global poverty issues are often a tough sell domestically.”Still the pledges won some plaudits from non-profit groups, with ONE Campaign CEO Okonkwo Nwuneli calling it a “bold breakthrough” in leadership to aid some 40 African IDA recipients.”ONE will be holding all donors to account, ensuring that these pledges are delivered in full, and we will be working closely with African governments and our civil society partners to ensure that the resources are maximized for impact,” Nwuneli said.World Bank President Ajay Banga said in a statement that the IDA will be able to stretch the new pledges further because of work done to optimize the development lender’s balance sheet over the past two years, increasing its lending capacity by some $150 billion over 10 years.The bank’s ability to leverage contributions will transform “modest contributions into life-changing investments,” Banga said in an open letter to shareholders and client countries.About 35 countries have graduated from IDA to become donors, including China, South Korea, Chile, Jordan and Turkey.Banga said the resources will allow the bank to put job creation at the center of its work, even as it addresses climate change and other global crises.”In this context, IDA is not just a financial instrument; it is a catalyst for job creation,” Banga said. “It provides countries with the resources to build infrastructure, improve education and health systems and foster private sector growth.”($1 = 0.9455 euros) More

Jobs rebounded in November, with nonfarm payrolls increasing more than expected.
Employment growth came from many different areas of the economy, with health care and social assistance leading the way.
The gains come after October’s employment performance across industries showed a mixed bag for the U.S. economy.

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The jobs report for November came in better than expected, and that growth came from several different areas of the U.S. economy, according to the data.
Health care and social assistance led the way yet again last month, seeing 72,300 new positions added in that area, per the Bureau of Labor Statistics. This comes after the group had the biggest contribution in October.

When including private education with the health-care category, as some economists do, the group’s growth would have increased even more to 79,000.

Leisure and hospitality had the second-biggest contribution last month, with 53,000 positions added. That also marks significant growth compared to its performance in October. The November gains were supported by employment in food services and drinking places, which trended up by 29,000.
Meanwhile, government, a category that had the second-biggest contribution two months ago, came in just behind leisure and hospitality last month. In November, the group grew by 33,000 jobs.
More notably, there was a stark rebound in manufacturing and professional and business services, two areas that suffered major losses in October as a result of the seven-week Boeing machinist strike and the effects of Hurricanes Helene and Milton. Last month, those categories saw gains of 22,000 jobs and 26,000 jobs, respectively.
“After a prior month of hurricanes and worker strikes, we did get a bounce back in the headline payroll numbers plus positive revisions,” Byron Anderson, head of fixed income at Laffer Tengler Investments, said in a statement. “Jobs creation may not be as robust as in the past years, but we are not seeing a disaster in the job market.”

While there were some gains in other areas as well such as construction, Julia Pollak of ZipRecruiter noted that the gains are “very narrowly” concentrated and told CNBC that the growth in manufacturing is actually smaller than she expected to see.
Retail trade, which lost 28,000 jobs, was also a key weak spot of the report. Unless there is a turnaround in other sectors soon, Pollak believes the pace of overall job growth will “slow further.”
“Some people are calling this a bounceback, [but] I think one should not be misled by the seemingly healthy payroll gain,” the firm’s chief economist said in an interview. “We always knew going in that this report would overstate the underlying strength of the labor market [and] be inflated by the return of workers following strikes and storms.”
On the other hand, Pollak pointed to financial activities as one bright spot. That group experienced a gain of 17,000 jobs in November.
“Banks are getting … sort of bullish and excited about a Trump administration, which is seen as likely to relax financial regulations and take a more favorable approach towards mergers and acquisitions,” she added. “So, that is definitely one sector where we’re seeing more optimism and a bit more hiring in some places.”

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Nonfarm payrolls rose by 227,000 for the month, compared with an upwardly revised 36,000 in October and the Dow Jones consensus estimate for 214,000.
The unemployment rate edged higher to 4.2%, as expected.
Traders accelerated their bets on an interest rate cut this month following the payrolls release.
Job gains were focused in health care (54,000), leisure and hospitality (53,000), and government (33,000).

Job creation in November rebounded from a near-standstill the prior month as the effects of a significant labor strike and violent storms in the Southeast receded, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls increased by 227,000 for the month, compared with an upwardly revised 36,000 in October and the Dow Jones consensus estimate for 214,000. September’s payroll count also was revised upward, to 255,000, up 32,000 from the prior estimate. October’s number was held back by impacts from Hurricane Milton and the Boeing strike.

The unemployment rate edged higher to 4.2%, as expected. The jobless figure rose as the labor force participation rate nudged lower and the labor force itself declined. A broader measure that includes discouraged workers and those holding part-time jobs for economic reasons moved slightly higher to 7.8%.
The data likely gives the Federal Reserve a green light to lower interest rates later this month.
“The economy continues to produce a healthy amount of job and income gains, but a further increase in the unemployment rate tempers some of the shine in the labor market and gives the Fed what it needs to cut rates in December,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
Job gains were focused in health care (54,000), leisure and hospitality (53,000), and government (33,000), sectors that have consistently led payroll growth for the past few years. Social assistance added 19,000 to the total.

At the same time, retail trade saw a decline of 28,000 heading into the holiday season. With Thanksgiving coming later than usual this year, some stores may have held off hiring.

Worker pay continued to rise, with average hourly earnings up 0.4% from a month ago and 4% on a 12-month basis. Both numbers were 0.1 percentage point above expectations.

Stock market futures edged higher after the report while Treasury yields were lower.
The report comes with questions over the state of the labor market and how that will impact Federal Reserve decisions on interest rates.
Traders accelerated their bets on a rate cut following the payrolls release, with market-implied odds rising above 88% for a quarter percentage point reduction. when central bank policymakers make their next decision on Dec. 18.
“Data this morning was a Thanksgiving buffet with payrolls spot on, revisions positive, but unemployment ticking higher despite the participation rate falling,” said Lindsay Rosner, head of multi-service investing at Goldman Sachs Asset Management. “This print doesn’t kill the holiday spirit and the Fed remains on track to deliver a cut in December.”
Earlier this week, Fed Chair Jerome Powell said the generally strong state of the economy affords him and his colleagues the ability to be patient when making interest rate decisions. Other officials have said they see additional interest rate cuts as being likely but subject to changes in the economic data.
While inflation is well off the boil from its 40-year high in mid-2022, recent months have shown prices drifting up. At the same time, the October jobs report and various other reports have pointed to a labor market that is still growing but slowing.
The survey of households, which is used to calculate the unemployment rate, painted a different picture as the establishment survey that provides the headline payrolls count.
According to the BLS, household employment fell by 355,000 on the month even as the labor force contracted by 193,000. The labor force participation rate, which measures the share of the working-age population either at work or looking for a job, declined to 62.5%, a decrease of 0.1 percentage point.
Full-time job holders decreased by 111,000 while part-time workers were off by 268,000.
The unemployment rate for Black workers jumped to 6.4%, an increase of 0.7 percentage point.

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MOSCOW (Reuters) – The Russian rouble rebounded past 100 to the U.S. dollar, trading at 99.50 on Friday, after a decree by President Vladimir Putin which opened new payment options for European buyers of Russian gas, allowing foreign currency flows to resume.The rouble strengthened by 1.5% against the dollar, according to over-the-counter data from banks. It was also up by 2.4% at 13.57, rebounding past 14, against China’s yuan in trade on the Moscow stock exchange. Putin’s decree meant that European buyers of Russian gas, including Hungary and Slovakia, who previously used Gazprombank for their transactions, could now convert their currency into roubles in other banks that are not under sanctions. U.S. sanctions imposed on Gazprombank on Nov. 22 disrupted Russia’s foreign currency market, leading to a 15% fall in the rouble exchange rate against the dollar. The Russian currency now is on track for its best week in four months, suggesting the market has adjusted to the sanctions. The rouble has been weakening since Aug. 6, the first day of Ukraine’s incursion into Russia’s Kursk region. Russia’s Finance Minister Anton Siluanov directly linked problems with energy payments and U.S. sanctions against Gazprombank to the rouble’s weakness, saying the volatility will disappear as soon as a solution for payments is found. “Our foreign trade participants are finding ways to settle accounts with their counterparts abroad, so I think that one more week and everything will be fine,” Siluanov was quoted by the Russian media as saying on Dec. 5. Analysts and traders shared this view, saying that Putin’s decree has unlocked energy payments, giving a boost to the Russian currency. “Previously stalled large export revenues, which were stuck due to new banking sanctions, may have been ‘unblocked’ and have now hit the market, which is already very thin,” a forex trader in a large Russian bank, who declined to be identified, told Reuters, explaining the reasons for the rouble’s rise. Putin said this week that up to 90% of Russia’s foreign trade was now in roubles and currencies of ‘friendly’ nations such as China’s yuan. However, some importers still needed dollars and euros, creating domestic demand for both currencies. Russia’s sanctioned largest lenders, including state-controlled Sberbank, can no longer hold and trade dollars in euros since they cannot have correspondent accounts in the U.S. and Europe and are cut off from the international SWIFT system. Many Russian banks have been importing large volumes of dollar and euro cash from third countries at least throughout 2023 in order to service their clients in case they want to buy foreign currency.However, many Russian banks, including local subsidiaries of Austria’s Raiffeisen, Hungary’s OTP and Italy’s UniCredit, were not under sanctions and could use SWIFT. Such banks formed the core of the Russian market in dollars and euros, which became entirely over-the-counter following sanctions against Moscow Stock Exchange in June, which made yuan the most traded foreign currency in Russia. Sberbank’s CEO German Gref said the fair value of the rouble is in a range of 100-105 to the U.S. dollar, adding that he did not expect more surprise exchange rate fluctuations for now. “Today we do not expect any surprises with this. It will fluctuate depending on the situation. And currently, we do not see any room for a significant weakening of the rouble,” Gref said at the bank’s investor day. More

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