Economy

(Reuters) – North American companies struggling to hire workers in the tightest labor market in decades brought on more robots last year than ever before, with many earmarked for new electric vehicle and battery factories under construction.Demand for robots appears to have slackened near the end of the year, though, raising questions about how strong 2023 will be in the face of shifting household consumption patterns and the rising interest rates engineered by central bankers to bring high inflation under control.Companies, overwhelmingly located in the United States but including some in Canada and Mexico, ordered just over 44,100 robots in 2022, an 11% increase over the previous year and a new record, according to data compiled by the Association for Advancing Automation, an industry group also known as A3. The value of those machines totaled $2.38 billion, an 18% increase over the prior year, according to the data.The “labor shortage doesn’t seem to be letting up,” said Jeff Burnstein, president of A3. Many companies, scrambling to find workers amid the lowest U.S. unemployment rate since 1969, see automation as a quick fix.Burnstein said there was a visible slowdown in orders at the end of the year, which raises a question about how 2023 will evolve. “The fourth quarter was really propped up by the strength in the auto industry,” he said. “We saw a falling-off in non-automotive” orders.A shift away from pandemic-era consumer behavior likely played a role in the orders drop-off in some segments, he added. “You saw companies like Amazon (NASDAQ:AMZN) put a pause on building new warehouses, which means they probably canceled or delayed purchases of new automation.”Supply chain problems may also have distorted last year’s results. Burnstein said robot makers saw some customers place extra orders during the COVID-19 health crisis – just to ensure they would get part of what they needed. (Graphic: North American robot orders: https://www.reuters.com/graphics/USA-ECONOMY/ROBOT/lbvggbzaqvq/chart.png)AUTO SECTOR DRIVES DEMANDMore than half of last year’s orders came from automakers and their suppliers – a group that has long led the way in automation of U.S. factories.New plants for electric vehicles, batteries and battery recycling have been announced since the beginning of 2021 at a cost of $160 billion, according to Atlas (NYSE:ATCO) Public Policy, a U.S.-based research group working with automakers and environmental groups.Most robots ordered last year will be used for material handling – an expansive category that includes all types of movement and handling of goods inside factories and warehouses. Closure Systems International Inc’s sprawling plant in Crawfordsville, Indiana, for instance, recently automated the job of packing and sealing boxes at the end of the assembly line. The company produces closures used for things like soda bottles and food packages.Next up are “auditor” jobs. Machines in the Crawfordsville plant spit out new caps faster than a machine gun, so workers called auditors currently sit in small booths along the line, constantly checking that specifications are met.Brad Bennett, the company’s senior vice president of global operations, said small robots will soon be installed in the booths to do the inspection work. “We won’t have to reduce people,” he said. Those workers will move to other tasks.The new machines will help avoid what happened during the pandemic, he said. “During COVID, we were literally running with 30% of the plant down because we couldn’t get a $15-an-hour guy to show up.” More

NEW YORK (Reuters) – Philadelphia Federal Reserve President Patrick Harker said on Friday the surprisingly strong jobs data reported last week did not alter his view that moving to smaller interest rate rises was a good strategy for the U.S. central bank, as he flagged the prospect of rate cuts in 2024 should inflation continue to ease.”What is driving our rate increases right now is inflation, and we are starting to see signs, early signs that inflation is starting to move down,” Harker said in a Reuters interview. “At this point, we can go at a pace of 25 (basis-point rate hikes) and get inflation under control without doing undue damage to the labor market,” he said, adding that moving to smaller rate increases is a “risk management” issue for the Fed.The U.S. central bank, which delivered a series of 75-basis-point and 50-basis-point rate hikes last year in an effort to bring inflation back down to its 2% target, announced a smaller quarter-percentage-point increase last week. The Fed’s benchmark overnight interest rate is now in the 4.50%-4.75% range.That increase in borrowing costs was followed just a couple of days later by an employment report showing a gain of 517,000 jobs in January, nearly three times the forecast of analysts polled by Reuters. The jobs data raised questions as to whether the 25-basis-point hike was the right move, and whether the labor market’s resiliency in the face of stiff monetary policy tightening might cause the Fed to be more aggressive over time. Fed officials hope their rate rises will better balance supply and what they see as overly strong levels of demand in the economy, and they expect unemployment to rise as part of this process from its current ultra-low level of 3.4%. Harker, a voting member of the rate-setting Federal Open Market Committee this year, said he would still have opted for a 25-basis-point hike last week even if he had seen the jobs report ahead of the policy decision.Other central bank officials have defended the size of the recent rate rise, but Fed Chair Jerome Powell noted in an appearance on Tuesday that if jobs and inflation data stay hot “it may well be the case we have to do more” with rate rises over time.Inflation by the Fed’s preferred measure was running at more than double the 2% target in December.DOOR OPENINGIn the interview, Harker said he sees the Fed’s policy rate going up to somewhere above 5% and holding there for a while. But after that, with inflation on track to ease and head back to 2% over the next couple of years, Harker said the door would open to the possibility of the Fed cutting rates at some point, simply to keep monetary policy from becoming more restrictive of economic activity. “I don’t think that’ll happen this year,” but in 2024 “we could start to see” movement downward in the federal funds rate that will likely be gradual in nature, Harker said. He reiterated that he doesn’t believe the economy is on track to fall into recession and he cautioned against using simple benchmarks, like the relationship of bond yields, or moves in unemployment, as tools to divine the economic future. Harker said he expects the jobless rate to move up to 4.5% from its current level due to the impact of Fed policy before ebbing. Such a gain would not “rise to the level of a recessionary rise,” he said. More

WASHINGTON (Reuters) -The U.S. government posted a $39 billion budget deficit for January after a $119 billion monthly surplus a year earlier, as revenues dipped and one-time costs, including the bailout of a union pension fund, pushed outlays sharply higher, the Treasury Department said on Friday.The report, which comes as Treasury employs extraordinary cash management measures to avoid breaching the federal debt limit, showed receipts at $447 billion last month, down $18 billion, or 4%, from January 2022.Outside of the one-time costs, the budget data did not show major shifts from recent trends of slightly slowing revenues and rising costs for Medicare, Social Security and interest on the public debt.The Treasury has said its ability to pay U.S. obligations may not last past early June unless Congress raises the $31.4 trillion statutory debt ceiling. Republicans want spending concessions from President Joe Biden, who has said he will not negotiate over raising the limit. U.S. federal outlays in January were $486 billion, up $140 billion, or 4%, from a year earlier due in part to Biden’s $36 billion bailout of the Central States Pension Fund to prevent cuts to the pensions of over 350,000 Teamsters union workers and retirees that it serves.The January outlays comparisons were also affected by the non-recurrence of a communications spectrum auction last year that had the effect of reducing outlays in January 2022 by some $70 billion.Social Security costs in January rose $12 billion or 12% compared to a year earlier, reaching $114 billion due to cost-of-living adjustments. Interest on the public debt rose $8 billion, or 18%, reaching $51 billion in January.Withheld individual income and payroll taxes in January rose $11 billion, or 4% from a year ago, reaching $279 billion. A drag effect from lower bonus payments in December and January is expected to fade in coming months amid continued high employment, a Treasury official said.January non-withheld receipts fell $9 billion, or 6%, to $141 billion, reflecting lower capital gains being realized. The Federal Reserve posted no earnings in January as higher interest paid on bank reserves offset any bond portfolio income. This compared to Fed earnings of $10 billion in January 2022 and the zero-earnings trend was expected to continue potentially for several years, the Treasury official said.For the first four months of the fiscal year, which started in October, U.S. receipts fell $44 billion, or 3%, to $1.473 trillion, while outlays grew $157 billion, or 9%, to $1.933 trillion, a record for the period. More

ZAGREB (Reuters) – The European Central Bank needs to keep raising rates beyond March and must hold them at high levels for a while even as inflation falls and this “sacrifice” becomes more difficult to explain to the public, the ECB’s newest policymaker said. Having raised rates by 3 percentage points since July, policymakers have started to ponder when and where the fastest tightening cycle in ECB history will end, especially since inflation is now retreating quickly from record highs. But Croatian central bank Governor Boris Vujcic, whose nation joined the euro on Jan. 1, says stubborn underlying inflation means it is premature to predict the end of rate hikes and the cut priced in by markets for the turn of the year is not even worth discussing. “We are likely to see more rate action beyond March and I would leave the issue of the terminal rate for later,” Vujcic, a career economist, university professor and Croatia’s central bank chief for the past decade told Reuters.”Then typically you would keep the rate there for some time until you are confident that the inflation is back to where you want it to be,” he said in an interview.Seen as a policy hawk like most governors from Europe’s former communist east, 58-year-old Vujcic has already attended ECB meetings through much of 2022 and has another year and a half left in his term. With energy prices sharply down compared to 2022 highs and supply chains constraints easing, the ECB could cut its own inflation projections next month, Vujcic said.And there is a possibility that price growth falls back to , one the ECB’s 2% target more quickly than now expected, he added. GRAPHIC: Euro zone inflation expectations – https://fingfx.thomsonreuters.com/gfx/mkt/byprlknxqpe/Pasted%20image%201676018837733.png Still, that is not a signal that the ECB’s job is done, the Croatian argued.”There is a possibility that headline inflation will fall to 2% much sooner than expected due to various factors … (that) bring the headline figure down sharply, below core inflation,” Vujcic said.But the ECB needs to see a sustained decline in underlying inflation, which strips out volatile food and energy prices, as this figure is a more reliable indicator of underlying price pressures and the effectiveness of monetary policy.Dutch central bank chief Klaas Knot has also warned that headline inflation could fall below underlying prices.This is because lower gas prices are set to drag down the overall rate quite quickly while core inflation is proving unexpectedly stubborn due to a host of factors from wages to the second-round impacts of past inflation on prices. GRAPHIC: The race to raise rates – https://www.reuters.com/graphics/CANADA-CENBANK/zjpqjwaolvx/chart.png The problem is that while public tends to look at headline inflation, the ECB will have to watch underlying prices as well, taking into account that the final phase of cutting inflation may be the most difficult.”In this case, monetary policy has to be restrictive enough to push the core inflation downwards, which is not an easy task as it could imply relatively high sacrifice ratio,” Vujcic said.Economists call sacrifice ratio the loss suffered in order to achieve a reduction in the long-run inflation rate.It tends to be lower when inflation is coming down from high levels and usually increases in the “last mile” of disinflation, as price growth is approaching the target.”We would have to explain to public why we are keeping restrictive monetary policy stance if headline inflation already fell,” Vujcic said. A possible good news for the ECB is that the economy has appeared to avoid the worst of the economic downturn and prospects for a soft landing have improved.Click here for excerpts of this interview. More

Scotland’s deputy first minister has warned that the country faces “four very difficult years” because weak economic growth could force the government of first minister Nicola Sturgeon to cut to public-sector jobs and spending, and put it on a collision course with unions demanding above inflation pay rises. John Swinney, who is acting finance cabinet secretary, had to revise parts of the Scottish government’s spending plans twice last year, to accommodate higher than expected wage settlements with public sector workers. While most accepted Holyrood’s revised pay offers, teaching unions rejected a proposal of 5 per cent and went out on strike, while members of the Royal College of Nursing union have voted to reject the 7.5 per cent in 2022/2023 that was agreed by the rest of the health service. “We need to resolve these issues but there are limits [because] I can’t spend money I don’t have,” he said in an interview at the Scottish parliament. He added that while the government sympathised with workers who wanted to be compensated for the high cost of living: “We have to live within our means because we are required to balance the budget.”In December, the Scottish Fiscal Commission, Scotland’s spending watchdog, forecast that growth will be weak for the coming five years, predicting that it would be just 1.7 per cent in 2022/23 and just 1.5 per cent in 2027/28, which would further constrain the government’s ability to generate revenue. Graeme Roy, chair of the commission, said long-term structural issues, such as an ageing population, would hold back’s Scotland economic prospects relative to the rest of the UK. Under a combination of the Barnett formula — which is used by the UK Treasury to determine the annual block grants given to the devolved nations for spending on public services such as health and social security — and the taxation regime, the Scottish government was due to receive an extra £1.7bn for day-to-day spending in 2023-24. But this is set to be eroded by inflation to just £279mn in real terms, leaving the government with no option but to cut essential services if it wanted to fund bigger pay increases.The devolved administration may have managed to avoid winter stoppages in the NHS, but members of the Royal College of Nursing are holding out for a higher pay offer — although they agreed to hold off strikes while talks are continuing. Members of the Educational Institute of Scotland (EIS) union, meanwhile, are demanding a 10 per cent pay settlement. The union said it would “never” accept the government’s 5 per cent offer, which it said amounts to a 9 per cent reduction once inflation is taken into account and education has been disrupted by walkouts since late last year and are due to go on strike again on February 28. Instead of spending more on wages, Swinney said the Scottish government needed to accelerate reforms to “redesign” its public services.“There are constraints in public spending and there are reductions having to be made,” he said. “If I pay a 10 per cent pay increase, I just add to the scale of that problem.” More

TOKYO (Reuters) – Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya, who is seen as a top contender to become next central bank chief, said on Friday he saw no imminent need to make further tweaks to its yield control policy.Speaking in parliament, Amamiya said he was mindful of the demerits of yield curve control (YCC), such as distortions in the yield curve caused by the BOJ’s huge bond buying to defend its 0.5% cap set for the 10-year bond yield.”YCC is an extraordinary policy, so we must carefully balance the benefits and costs,” Amamiya said.”For now, I don’t see the need to make further steps to enhance the flexibility of YCC,” he added.When asked by an opposition lawmaker whether tweaks to YCC could become a future option, Amamiya said: “In general, our basic approach is to guide monetary policy flexibly by weighing the benefits and costs of each step.”Markets are rife with speculation the BOJ will phase out YCC and raise interest rates under a successor to incumbent governor Haruhiko Kuroda, whose second, five-year term ends in April.Amamiya is considered by markets as among top contenders to succeed Kuroda, though a government spokesperson denied a report by the Nikkei newspaper on Monday that Prime Minister Fumio Kishida’s administration has sounded him out for the job.The government will present its nominees for the new BOJ governor and two deputies to parliament on Feb. 14, a ruling party lawmaker told reporters on Friday.Analysts see Amamiya as being more dovish on monetary policy than other contenders like former deputy governors Hiroshi Nakaso and Hirohide Yamaguchi.In the parliament session, Amamiya defended the central bank’s ultra-loose policy as having successfully reflated growth, and said it was “premature to debate any specific ideas of an exit policy”. He stressed the need to maintain current stimulus to ensure inflation hits the BOJ’s 2% target in a sustainable manner.The BOJ’s leadership transition comes at a time Kuroda’s radical stimulus programme is being put to test by creeping inflation – which hit 4% in December – and rising global interest rates.In a policy proposal last month, the International Monetary Fund (IMF) urged the BOJ to let government bond yields move more flexibly. Under YCC, the BOJ guides short-term rates at -0.1% and the 10-year yield around 0%. It allows the 10-year yield to move 0.5 basis point up and down each around the 0% target, and also buys risky assets like ETFs as part of its stimulus programme. More

In 2022, median annual pay was $52,000 for Americans with a bachelor’s degree, according to data released by the New York Federal Reserve Friday. That’s a 7.4% decline in inflation-adjusted terms — the steepest plunge since 2004, erasing nearly all of the pandemic-era gains. It was sharpest for those earning the most.Meanwhile, wages accelerated 6% in real terms to $34,320 for those with only a high-school diploma — the biggest gain in more than two decades. While secondary-degree holders are still paid more, those who didn’t attend college are catching up. Americans with only a high school diploma made 93% of what recent graduates with a bachelor’s degree in the bottom quarter of wages made. The ratio is up from 79% in 2021, and it’s back at the levels seen in 2019 when tight labor markets were boosting pay at the the lower end of the spectrum.The data underscore the demand for service-sector workers and those in segments of the economy where technical skills are more important than a college degree, such as plumbing and electrical work. It also shows the eroding value of an expensive bachelor’s degree as more Americans get one, increasing competition in that part of the labor market. More TakeawaysSince December 2020, wages have grown more rapidly for high school-only workers, according to the data that tracks median wages for those aged 22 to 27 who are working full-time. That’s a flip from the dynamics over the past 20 years, according to the Atlanta Fed Wage Tracker.Recent graduates are still able to find work pretty quickly, with an unemployment rate of 4.1% in December. That compares with 3.9% in March 2020. Not surprisingly, unemployment rates vary by college major. Nursing and education graduates experienced an unemployment rate below 2% as the industry desperately seeks to restaff after the pandemic exodus of workers. In fields such as philosophy, the rate exceeds 9%.©2023 Bloomberg L.P. More

Today’s top storiesGovernments and international organisations are stepping up financial support for Turkey and Syria as the death toll from this week’s earthquake surpassed 22,000 people, with millions expected to be displaced.Japan is expected to appoint Kazuo Ueda, a respected monetary policy expert, as its new central bank chief, ending speculation among global investors over the successor to Haruhiko Kuroda, who oversaw a decade of policies designed to keep interest rates at ultra-low levels by buying vast quantities of government bonds. The yen climbed in anticipation.Moldova’s prime minister Natalia Gavrilita quit, blaming a lack of support for her government as it struggles with the consequences of war in neighbouring Ukraine and efforts by Moscow to destabilise the country. For up-to-the-minute news updates, visit our live blogGood evening.It is perhaps a sign of the times that news this morning of UK growth flatlining in the fourth quarter of last year was hailed by chancellor Jeremy Hunt as evidence that the economy was “more resilient than many feared”.Output shrank more than expected in December, according to the Office for National Statistics, but GDP for the three-month period was unchanged, meaning the UK had, for now, dodged recession, defined as two consecutive quarters of negative growth. It remains the only G7 member not to have recovered fully from the pandemic, in contrast with the US, which was up 5.1 per cent in the fourth quarter compared with 2019, and the eurozone, which was up 2.4 per cent.One bright spot is London, where new data yesterday showed the capital powering ahead of other regions in England, thanks to growth in professional services, underlining the challenges ahead for the government in delivering on its promise of “levelling up” left-behind areas.On the positive side, the outlook for inflation has improved since gas prices began to fall. Bank of England chief Andrew Bailey told a parliamentary committee yesterday that public sector workers needed to take this into account when asking for pay rises. The BoE predicts inflation will drop from 10.5 per cent to 4 per cent by the end of 2023. House prices meanwhile are showing their most widespread falls since 2009 as soaring mortgage rates hit buyer demand. The average rate for new loans reached 3.67 per cent in December, the highest in a decade, according to BoE data last week.All of which will be on Hunt’s mind as he prepares for his Budget on March 15. Business lobby groups are calling on the chancellor to use his speech to pave the way for growth through tax breaks for investment and policies to tackle worker shortages. They have also voiced concerns that the forthcoming increase in corporation tax from 19 to 25 per cent will hit companies’ capital spending.Brexit costs for business meanwhile continue to mount, especially in areas such as chemicals where companies now have to adhere to UK-badged regulations as well as existing EU rules, for no tangible gain. Not to mention the question marks still hanging over the broader regulatory landscape thanks to the government’s intention to “review or revoke” all leftover EU laws by the end of this year.As UK chief political commentator Robert Shrimsley notes, the attempt by Hunt and his boss Rishi Sunak to emphasise fiscal prudence is not made any easier by noises off from Tory colleagues — especially those grouped around Sunak’s predecessor Liz Truss — pining for another dose of unfunded tax cuts, despite the last attempt ending in disaster. Need to know: UK and Europe economySpurred by the decline in cash transactions, the UK government and the Bank of England have started work on the design of a “digital pound”. Read our explainer on how it might work and FT consumer editor Claer Barrett’s piece on whether it would be good for consumers.European Commission chief Ursula von der Leyen said the EU would fight back against “massive” hidden handouts from China to its industries, as well as responding to the US threat of green energy subsidies. The finance chief of ArcelorMittal, Europe’s largest steelmaker, told the FT that Brussels needed to simplify the approvals process for investments.German inflation hit a five-month low of 9.2 per cent, but the delayed data could lead to an upward revision to last week’s eurozone-wide figure of 8.5 per cent.Russia said it would cut its oil output by 5 per cent or 500,000 barrels a day in response to the price cap imposed by the west. Top energy trader Pierre Andurand said Vladimir Putin had “lost the energy war”. Putin will deliver a state-of-the-union address on February 21, three days before the first anniversary of his invasion of Ukraine. Join FT correspondents and guests at our subscriber webinar on February 23 from 1300-1400 GMT to mark the anniversary and what might happen next. Register for your free ticket at ft.com/ukraine-event.Need to know: Global economyChina has pulled back from its participation in a subsea cable project linking Asia with Europe as tensions grow with the US over who builds and owns the infrastructure underpinning the global internet.Hong Kong is pulling out all the stops to lure business back after three years of lockdowns in what it called “probably the world’s biggest welcome ever”. Attractions include set-up funds for international companies, visas for foreign graduates and 500,000 free airline tickets to encourage tourism.Dancers perform at the Hello Hong Kong campaign launch event. © Lam Yik/BloombergNeed to know: businessAdidas is facing €700mn in operating losses thanks to its pile of unsold Kanye West “Yeezy” sneakers. The group issued its fourth profit warning since July, laying out a worst-case scenario in which it would have to write off all the remaining inventory.Disney is to cut 7,000 jobs, about 3 per cent of its workforce, as part of a cost-saving restructuring. The changes led to activist investor Nelson Peltz calling off his proxy fight against the company which was set to be one of the biggest corporate battles in recent years.Credit Suisse reported its biggest annual loss since the 2008 financial crisis as investment banking slumped and clients pulled money from its wealth management business. Here’s our Big Read on a make-or-break moment for the bank.The FT Magazine dives into the bizarre final hours of FTX and how Sam Bankman-Fried and his crew of millennial millionaires lost a $40bn crypto empire.Global investors are betting big on China’s reopening, snapping up a record $21bn of Chinese equities since the start of the year. The trend has been fuelled by positive economic data published after the lunar new year holiday. Science round upThe spread of antibiotic resistance has revived interest in the bacteria-killing viruses known as phages, first discovered and used to fight infection a century ago. Read more in our special report: Future of Antibiotics.The inventor of the silicon technology behind solar power told the FT that combining other materials with the silicon could boost the efficiency of photovoltaic cells that convert sunlight into electricity from 25 per cent to more than 40 per cent.The fusion energy industry called for more political support to build on last year’s breakthrough by US scientists that demonstrated the possibility of producing more energy from a fusion reaction than it consumed, dubbed “one of the most impressive scientific feats in the 21st century”.New technology that uses fibre optics to find the causes of heart disease has begun testing at London’s St Bartholomew’s Hospital. The iKOr device measures blood flow around the heart and could eventually help many patients suffering from problems such as chest pains, whose cause cannot be identified with current techniques.And finally, the European Space Agency is preparing for one of the most ambitious space projects ever, a 12-year mission to the outer solar system to investigate whether three of Jupiter’s moons might support life. Some good newsUniversity of California researchers have identified tiny organisms that not only survive but thrive during the first year after a wildfire. The findings could help bring land back to life after fires that are increasing in both size and severity.Something for the weekendThe FT Weekend interactive crossword will be published here on Saturday, but in the meantime why not try today’s cryptic crossword? More