Economy

MONTREAL/CHICAGO (Reuters) – Canada’s Mitchell Aerospace has a booming business – and a shop-floor shortfall that is reverberating from Boeing (NYSE:BA) to Airbus. The Montreal-based supplier of aircraft parts has an order backlog from clients such as Raytheon Technologies (NYSE:RTX), as aircraft makers push to ramp up output after a two-year slump. Like other companies that supply precision cast parts for everything from landing gear to engine components, Mitchell Aerospace is facing a labor shortage expected to hobble plane production through 2023.”It’s just a hurricane in the plant,” said company President Guillermo Alonso. “There’s just no time. It’s just produce, produce, produce and find ways to improve your productivity.”A slowing global economy has started to unwind some supply chain shortages that hit manufacturers and contributed to inflation. Demand for shipping and airfreight have softened, chip sales are slowing and used car prices in the United States are falling.But aircraft parts makers are still reeling from deep job cuts undertaken when planes were grounded during the pandemic, a sign of how uneven the supply chain crisis remains.In the United States, aerospace employment is 8.4% below its pre-pandemic level. In the province of Quebec, where Mitchell is located, the industry needs to fill 38,000 jobs in the next decade, according to industry trade group Aero Montreal. Major casting makers like Berkshire Hathaway (NYSE:BRKa) Inc’s Precision Castparts Corp and Pittsburgh-based Howmet Aerospace, which supply Boeing, Airbus and General Electric (NYSE:GE), are hiring after slashing staffing in 2020. But it takes time to train new hires. Boeing Chief Executive David Calhoun warned that labor will remain a bottleneck for the industry for years. “I don’t see this getting resolved any time soon,” Calhoun told a U.S. Chamber of Commerce conference this month. The problem is most acute in the highly labor intensive, hard to automate castings industry. In a recent Jefferies survey, nearly three-fourths of aerospace equipment makers cited castings as the largest source of shortages. Privately-held Mitchell Aerospace is encouraging staff to take overtime, raising wages by 4.75%, and offering workers referral bonuses. It is also trying to hire more women, immigrants and refugees from Ukraine. Some casting suppliers are taking as much as 72 weeks to fill in orders, said David Wireman, a managing director at AlixPartners. Rising interest rates and mounting economic uncertainty are making companies wary about ramping up capacity, given concerns that demand could collapse, he said. “It is going to be a rocky time for quite a while.” ‘IT’S ALL LABOR’ Meanwhile, the struggle to find workers is rippling through the supply chain, delaying jet engine and aircraft production at a time when much of the air travel market is booming. Leesta Industries, a Mitchell customer, is also wrestling with delays and quality problems from a different castings producer. When that producer delivers a month late, Montreal-based Leesta, which makes engine and landing gear components, must adjust to meet its own deadlines, said President Ernie Staub. “Your actual lead time of your product has been hurt by a month. You have to be ahead on the rest of your work,” he said. Raytheon (NYSE:RTN) recently said tight supplies of castings has left it operating “hand-to-mouth,” warning that delivery of some Pratt & Whitney large commercial engines might slip into the first quarter of 2023. The company did not specify the previous timeline for the deliveries. Rival GE said supply shortages have made it harder to deliver engines on time. Their customers are feeling the pinch. Airbus’ production target has declined, while Boeing warned supply chain pressures have capped its ability to ramp up output. Mitchell’s Montreal factory starts humming before sunrise with workers in protective gear filling mold sections with a mix of fine sand and a bonding agent. The whirring and grinding stops by mid-afternoon with no workers for a second shift.”It’s all labor,” said Alonso, who is looking for shop workers and metallurgists. “We have the demand.”Mitchell can only pass on about half of its higher costs to customers. Automating a part of Mitchell’s sand casting production by next year could address some labor issues, higher costs and allow for growth, Alonso said.     He sees robots replacing a job in which a worker must remove debris from castings. The work is repetitive and the part is at risk of damage in the process.”We haven’t pulled the trigger on the investment yet,” Alonso said, “but it’s a necessity.” More

Radical tax-cutting measures in the mini-budget have caused a maxi reaction in markets, with the pound falling to an all-time low against the dollar this week. New chancellor Kwasi Kwarteng and prime minister Liz Truss are gambling that borrowing tens of billions to fund large tax cuts and cap soaring energy bills will boost economic growth, but there are already fears that inflation and interest rates could be pushed up even further. Presenter Claer Barrett discusses what the new era of “Trussonomics” could mean for our personal finances with George Parker, the FT’s political editor, and Mary McDougall, the FT’s acting tax correspondent.To listen, click on the player link above, or search for Money Clinic wherever you get your podcasts. Money Clinic is keen to hear from listeners and readers. If you would like to get in touch, please email us at [email protected] or DM Claer on social media. She is @ClaerB on Twitter, Instagram and TikTok.

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The sudden sell-off in the pound and U.K. bond markets led economists to anticipate more aggressive interest rate hikes from the Bank of England.
In a series of tweets Tuesday morning, Harvard professor Summers said that although he was “very pessimistic” about the potential fallout from the “utterly irresponsible” policy announcements, he did not expect markets to capitulate so quickly.
The likening of the U.K. to an emerging market economy has become more prevalent among market commentators in recent days.

Larry Summers
Cameron Costa | CNBC

LONDON — Former U.S. Treasury Secretary Larry Summers on Tuesday warned that the U.K. has lost sovereign credibility after the new government’s fiscal policy sent markets into a tailspin.
The British pound hit an all-time low against the dollar in the early hours of Monday morning, before recovering slightly on Tuesday, while the U.K. 10-year gilt yield rose to its highest level since 2008 as markets recoiled at Finance Minister Kwasi Kwarteng’s so-called “mini-budget” on Friday.

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In a series of tweets Tuesday morning, Harvard professor Summers said that although he was “very pessimistic” about the potential fallout from the “utterly irresponsible” policy announcements, he did not expect markets to capitulate so quickly.
“A strong tendency for long rates to go up as the currency goes down is a hallmark of situations where credibility has been lost,” Summers said.
“This happens most frequently in developing countries but happened with early (Former French President) Mitterrand before a U turn, in the late Carter Administration before Volcker and with Lafontaine in Germany.”
The policy announcement from Prime Minister Liz Truss’s administration last week included a volume of tax cuts not seen in Britain since 1972, funded by borrowing, and an unabashed return to the “trickle-down economics” promoted by the likes of Ronald Reagan and Margaret Thatcher. Truss and Kwarteng maintain that the policies are focused on driving economic growth.
The sudden sell-off in the pound and U.K. bond markets led economists to anticipate more aggressive interest rate hikes from the Bank of England. The central bank said Monday night that it would not hesitate to act in order to return inflation toward its 2% target over the medium term, but would appraise the impact of the new economic policy at its November meeting.

Summers noted that British credit default swaps — contracts in which one party acquires insurance against the default of a borrower from another party — still suggest “negligible default probabilities,” but have risen sharply.
“I cannot remember a G10 country with so much debt sustainability risk in its own currency. The first step in regaining credibility is not saying incredible things. I was surprised when the new chancellor spoke over the weekend of the need for even more tax cuts,” Summers said on Twitter.
“I cannot see how the BOE, knowing the government’s plans, decided to move so timidly. The suggestions that seem to have emanated from the Bank of England that there is something anti- inflationary about unbounded energy subsidies are bizarre. Subsidies affect whether energy is paid for directly or through taxes now and in the future, not its ultimate cost.”
‘Global consequences’
Summers, who served as U.S. Treasury Secretary from 1999 to 2001 under President Bill Clinton and as director of the National Economic Council from 2009 to 2010 under the Obama administration, added that the scale of Britain’s trade deficit emphasized the challenges the economy faces. The U.K. current account deficit sat at more than 8% of GDP, as of the first quarter of 2022 — well before the government’s announcement.
Summers predicted that the pound will fall below parity with both the dollar and the euro.
“I would not be amazed if British short rates more than triple in the next two years and reach levels above 7 percent. I say this because U.S. rates are now projected to approach 5 percent and Britain has much more serious inflation, is pursuing more aggressive fiscal expansion and has larger financing challenges,” he said.
U.K. inflation unexpectedly fell to 9.9% in August, and analysts recalibrated their eye-watering expectations after the government stepped in to cap annual household energy bills. However, many see the new fiscal policies driving higher inflation over the medium term.
“Financial crisis in Britain will affect London’s viability as a global financial center so there is the risk of a vicious cycle where volatility hurts the fundamentals, which in turn raises volatility,” Summers added.
“A currency crisis in a reserve currency could well have global consequences. I am surprised that we have heard nothing from the IMF.”
His warnings of global contagion echo those of U.S. Federal Reserve official Raphael Bostic, president of the Atlanta Fed, who told The Washington Post on Monday that Kwarteng’s £45 billion in tax cuts had increased economic uncertainty and raised the probability of a global recession.
Chicago Fed President Charles Evans told CNBC on Tuesday that the situation was “very challenging,” given an aging population and slowing growth, adding that the global economy would need to increase growth of labor input and technological infrastructure in order to secure long-term stability.
‘Emerging market currency crisis’
Sterling has fallen by roughly 7-8% on a trade-weighted basis in less than two months, and strategists at Dutch bank ING noted Tuesday that traded volatility levels for the pound are “those you would expect during an emerging market currency crisis.”
ING Developed Markets Economist James Smith suggested that mounting pressure, potentially coupled with comments from ratings agencies in the coming weeks, may lead investors to look for signs of a policy U-turn from the government.
“Ministers may emphasize that tax measures will be coupled with spending cuts, and there are hints at that in today’s papers,” Smith noted.
“We also wouldn’t rule out the government looking more closely at a wider windfall tax on energy producers, something which the prime minister has signaled she is against. Such a policy would materially reduce the amount of gilt issuance required over the coming year.”
The likening of the U.K. to an emerging market economy has become more prevalent among market commentators in recent days.

Timothy Ash, senior sovereign strategist at BlueBay Asset Management, said in a Politico editorial on Tuesday that rising inflation, falling living standards and a potential wage price spiral, combated by tax cuts that will exacerbate “already bloated” budget and current account deficits and increase public debt, mean the U.K. is now resembling an emerging market.
“Predictably, the market has been unconvinced by the new government’s dash-for-growth economic policy. Borrowing costs for the government have risen, making its macro forecasts now appear unsustainable. Everything is unraveling, and talk of crisis is in the air,” Ash said.
“All of the above sounds like a classic emerging market (EM) crisis country. And as an EM economist for 35 years, if you presented me with the above fundamentals, the last thing I would now recommend is a program of unfunded tax cuts.”

However, not all strategists are sold on the emerging market narrative. Julian Howard, investment director at GAM Investments, told CNBC on Tuesday that the bond sell-off was a global phenomenon and that lower taxes and deregulation could be “very helpful” over the medium term, but that the market had “chosen to completely ignore it.”
“I think really what’s happened is that sterling and gilts have been swept up in a wider global phenomenon … In the meantime, I think the U.K. might quietly get some growth going over the next six to nine months, and that has been studiously ignored,” he said.
“There is a more general inflation panic going on around the world, and I think if that eases off then we may see some more stabilization in the U.K.”
Howard said talk of an “emerging market” economy was premature and “too harsh,” and suggested the Bank of England should hold off on raising rates any further.

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In 1900 the world’s population numbered 1.65bn. A century later that figure had quadrupled to more than 6bn. At the same time, despite this unprecedented crowding of humanity, gross domestic product per capita rose in real terms by more than four times. That huge increase in productive potential redefined the lives of billions of people. It also enabled more destructive wars than ever before and, beyond wars, something even more terrifying: the real possibility of the total annihilation of human life on the planet. This duality of production and destruction gives the 20th century a claim to be the most radical in the history of our species.With Slouching Towards Utopia, J Bradford DeLong, Berkeley economics professor, former Clinton-era Treasury official and pioneering economics blogger, tries his hand at a grand narrative of the last century. With disarming frankness, he starts with the basic question of any such enterprise: which model, which narrative frame to pick?In The Age of Extremes, Eric Hobsbawm, the great Marxist historian, organised his account of the “short” 20th century around the rise and fall of the Soviet project — 1917-1991. The economist Branko Milanovic in his pioneering work on global inequality has sketched a narrative dominated by globalisation, deglobalisation and reglobalisation from the 1970s onwards. DeLong’s version of the 20th century is more parochial than either of those. It is centred on the political battles that raged around the growth regime of modern American capitalism and continue to shape policy debate in governments and central banks today. This is, you might say, the in-house, post-Clintonian history of the 20th century.The story opens in sweeping style in the late 19th century, when the second industrial revolution shifted global growth into a new gear. By that point the first British-centred industrial revolution was a century old. It had changed the face of a small part of northern Europe, but by modern standards it proceeded at a snail’s pace. The American-led growth phase that began towards the end of the 19th century was different. For the first time an important fraction of humanity experienced truly rapid economic growth and that growth was sustained and accelerated into the 20th century. The drivers of this development, according to DeLong, were three forces: the laboratory, the corporation and globalisation. Migration enabled tens of millions to raise their standard of living. Global investment put them to work. From the laboratory poured forth the magic of modern technology. Surprisingly, DeLong makes no mention of the immense mobilisation of raw materials all this enabled. As the economies of Europe and Japan developed their own growth models, as they collectively bound in large parts of the rest of the world through trade, migration and capital flows, the ensemble acquired such momentum that it promised to give history a deterministic logic dominated by economic growth.As the 20th century began, it seemed that economic development would realise utopia in the sense of freedom from want. But, as DeLong recognises, the liberal development engine was fragile. Indeed, it was smashed by the cataclysm of the first world war. On the question of whether that war was itself the result of combined and uneven economic development, or nationalist passion and happenstance, DeLong prevaricates. In any case, the war ended the first wave of globalisation, not only slowing growth but opening the door to contingency and politics. Rather than marching on the high road towards material abundance, humanity slouched towards utopia.As DeLong sees it, Friedrich von Hayek and his followers were right when they preached that the market would deliver dynamism and innovation, but they ignored the problems of inequality and capitalist instability. As the economist Karl Polanyi diagnosed, increasingly enfranchised populations were not passive victims of history. They pushed back against market forces, demanding protectionism and welfare. The result was a dysfunctional muddle, which John Maynard Keynes tried to sort out. Around the triptych of Hayek, Polanyi and Keynes, DeLong spans the familiar stations of north Atlantic political economy from 1914 down to the 2010s.

This is a surprisingly political economic history. Of course, individual policymakers, ideologies and institutions do matter. But in the process of narrating the twists and turns of economic policy, the corporations and research labs that DeLong celebrated in the opening chapters disappear almost entirely from view, until they roar back abruptly in his triumphalist account of microelectronics. The author likes European history and writes knowledgeably about the second world war, but the US is clearly the centre of his world. The Great Depression, postwar social democracy, the race question, the history of technology, are all addressed from an American point of view.An American-centric world history has an obvious beginning — the years following the US civil war. The more tricky question is how such a history should end. For DeLong the long era of American dominance was concluded in the decade after 2008, a period characterised by secular stagnation and the ascent of Donald Trump. One can see why this combination was traumatic for veterans of the 1990s-era Clinton administration. But, as a world historic caesura, it is something of an anticlimax. Does the shock of Hillary Clinton’s 2016 defeat really rank alongside the fall of the Soviet Union or the rise of China? Or is the relative banality of that moment, the confirmation of the bigger point, that for all its monumental self-obsession the American narrative is losing its ability to organise our understanding of the world?Furthermore, are we convinced that this is how the American century ends — with a whimper, not a bang? The last few years hardly suggest as much. For better and for worse, the US Federal Reserve remains the hub of the global financial system. American military power and technology span the globe and are girding themselves for a clash with China. The US is a major energy producer and the supplier of last resort for liquefied natural gas. Which brings us to what is surely the most puzzling aspect of DeLong’s book: his failure to address the vast mobilisation of non-renewable resources that from its beginning defined and powered the American-led growth model.

If the escape from Malthusian constraint defined what was radical about the 20th century, that century also brought us, from the 1970s onwards, a dawning certainty that environmental limits will indeed constrain our future. Not by accident, modern environmentalism was born in the 1960s and 1970s above all in the US. In the 1990s, under Clinton and his vice-president Al Gore, the US was the pivot of world climate policy. But America’s political class abandoned that leadership role and the climate problem has since become the most unambiguous indicator by which to gauge the end of the era of US economic preponderance. In the early 2000s, in the wake of massive industrialisation and urbanisation, China overtook the US as the largest emitter of greenhouse gases. Today China emits more CO₂ than the entire OECD club of rich nations put together. In environmental terms, the American-led west no longer controls its own destiny.Of all of this there is no mention in DeLong’s history. The title itself is telling. Slouching towards utopia? If utopia were on the cards, would slouching really be our problem? The big worry right now is the fear that the 20th century has set us hurtling towards collective disaster. Believers in technology insist that such pessimism is overdone. But nowadays they do at least feel the need to make the case, to demonstrate that to avoid disaster DeLong’s 20th-century formula — labs, corporations, markets and wise government — will suffice. Serenely untroubled by such concerns, Slouching Towards Utopia reads less like a history than a richly decked out time capsule, a nostalgic throwback to the 20th century as we imagined it before the great anxiety began.Slouching Towards Utopia: An Economic History of the Twentieth Century by J Bradford DeLong, Basic Books £30/$35, 624 pagesAdam Tooze teaches history at Columbia University. He is the author of ‘Shutdown: How Covid Shook the World’s Economy’ (2021)Join our online book group on Facebook at FT Books Café More

“We must get Britain working again,” the UK’s new chancellor Kwasi Kwarteng said last week. He is right. It would help the country’s inflation problem and its growth problem if more people joined the labour market. Yet inactivity — the term economists give to people who are neither working nor looking for work — is on the rise. It’s worth dwelling for a moment on how new this is for Britain’s labour market. In the decade after the financial crisis of 2009, the UK became a more industrious place. The proportion of 16 to 64-year-olds who were inactive fell from about 23 per cent in 2009 to 20 per cent by 2019, the lowest since records began in 1971. Older people retired later and more women joined the workforce. The employment rate for mothers in couples rose over 5 percentage points between 2008 and 2019. It also became more common for single parents to work when their children were young, partly because of changes to welfare rules. This growth in the size of the labour force was partly about benefit rules and changing social norms. But it was also about money. The UK was going through a lost decade for real wage growth that left people poorer than they had expected to be. As the Resolution Foundation think-tank put it in a report on these trends in 2019: “feel poor, work more.”Now inactivity has climbed back up to 21.7 per cent. Of the 640,000 or so working-age people who have become inactive since the start of the pandemic, 55 per cent of them say they are long-term sick (the other big group are students, which is less of a worry). But having identified the right problem, Kwarteng announced two policies last week that do not even attempt to tackle it. The first is to require people who receive universal credit while working up to 15 hours a week on minimum wage to “take active steps” to increase their earnings or face having their benefits cut. This is an expansion from the current threshold of 12 hours and will affect an extra 120,000 workers.The idea that you can chivvy people into switching jobs or asking their employers for more hours or more money isn’t completely without evidence, but it’s a lot of effort for not much impact. The government’s trials of the policy found that people subject to this intervention earned about £5 more per week after a year than those people who were given minimal support.More fundamentally, you don’t address a problem with worklessness by telling 0.4 per cent of the people who are working to work slightly longer hours. The share of workers who are part-time is lower than it was pre-pandemic already, while the share who are full-time is higher.Kwarteng’s other policy was to give more job-hunting support to people on unemployment benefit who are over 50. Again, this is strangely off-target. The unemployment rate for 50 to 64-year-olds is just 2.6 per cent, the lowest on record. The inactivity rate for this age group is 27.7 per cent — and it’s the people in this latter group we need to worry about. They aren’t looking for jobs and many of them are not claiming any benefits at all. The government is applying its policy lever to a group that is small and shrinking, rather than to the group that is large and growing.So what would work? The underlying problem, it seems to me, is that Britain is worn out after a tough decade. Public infrastructure is worn out; social infrastructure is worn out; people are worn out. Compared with the over-60s, those leaving the labour market in their 50s since the pandemic were less likely to leave work for retirement reasons and more likely to cite stress or mental health, according to the Office for National Statistics.

Properly funding the NHS and social care would lift barriers to growth, by allowing people to get the care they need so they can work. The same goes for addressing the UK’s expensive and inflexible childcare provision. People in their 50s and 60s, as well as increasingly suffering from ill health themselves, are often now called upon to help care for grandchildren and ageing parents as well. Britain would also benefit from a modern public employment service which is open to people who aren’t on benefits, something which is common in other countries in Europe.Kwarteng is right to focus on the labour market if he wants to boost growth. But last week’s policies were small solutions to problems that don’t exist, rather than big solutions to the problems that do. [email protected] More

Caps on electricity bills, fuel rebates, and cheap public transport tickets are just some of the ways European governments are trying to cushion the impact of surging energy prices. While these policies will lower prices in the short-term, the region’s central bankers worry they risk boosting demand and forcing interest rates to go even higher in the longer term.Tensions between governments and central banks are flaring up. There is, as Dario Perkins, an economist at research group TS Lombard, put it, “a tug of war between fiscal and monetary policy.” “Central banks want to squeeze demand, but governments want to support incomes,” he said. Since Russia’s invasion of Ukraine, energy prices in the region have soared. The European Central Bank has raised interest rates at an unprecedented pace in response, aiming to suppress demand to bring eurozone inflation down from its all-time highs of more than quadruple its 2 per cent target, even if it means exacerbating a potential recession this winter.At the same time, euro area governments are promising extra fiscal support — which Allianz economists estimate has already cost taxpayers almost €500bn. If these fiscal measures are too generous or broad-based, they will boost consumers’ spending power and undo the cooling effect on demand from higher rates — keeping inflation higher for longer in the medium term.The EU’s plan to raise €140bn from a levy on excess profits in the energy sector to spend on measures cushioning the blow of high prices is likely to further accentuate this trend.“The continuous fiscal efforts will make the ECB’s job much more tricky, as they will keep inflation stronger for longer, hence not getting inflation down as soon as anticipated,” said Piet Haines Christiansen, chief strategist at Danske Bank. In the UK, tensions have reached boiling point. Chancellor Kwasi Kwarteng’s new economic strategy, which includes a £150bn energy price cap and £45bn of tax cuts funded by extra borrowing, caused a sell-off in bond markets after investors judged it would lead to more inflation and require bigger rate rises by the Bank of England.The BoE said on Monday it would assess the plan’s impact on demand, while reminding everyone of its aim “to ensure that demand does not get ahead of supply in a way that leads to more inflation over the medium term”.Economists have also said US president Joe Biden’s $700bn climate, health and tax bill is as likely to add to price pressure as reduce it, despite being called the Inflation Reduction Act, while his decision to forgive billions of dollars of student loans is expected to fuel more inflation.The ECB, where fiscal policy is handled by 19 different governments, has an extra worry. Higher government debt levels may raise the spectre of a debt crisis and deter it from raising rates as high as needed to tackle inflation.ECB president Christine Lagarde encapsulated these concerns on Monday, saying any government support should be “temporary and targeted”, which “limits the risk of fuelling inflationary pressure . . . [while] contributing to preserving debt sustainability”.This is a new situation for Lagarde, who repeatedly praised the “strong and co-ordinated” approach of fiscal and monetary policy during the Covid-19 pandemic when both sides worked together to counter the sharp economic downturn. Some economists doubt governments will boost demand enough to avert a sharp economic downturn, which will ease inflation. Silvia Ardagna, chief European economist at Barclays, said: “The extent of the current fiscal easing does not spare the euro area a recession and a cut in gas demand.”The question is whether fiscal support is spread too wide and therefore boosts the spending power of people who do not really need it. “It is all about distribution,” said Jens Eisenschmidt, chief European economist at Morgan Stanley, who used to work at the ECB. “If you are a taxi driver you probably don’t have much extra savings, but someone like me does,” said Eisenschmidt. “Yet some of these fiscal policies like fuel duty cuts help everyone and that means they can stimulate demand too much.” More

As US business leaders work to lure employees back into offices this autumn, they have hit an unexpected roadblock: inflation. The costs of transport, food and childcare have risen faster than salaries, and some employees are saying it is not just more convenient but also cheaper to continue working from home. When the Covid-19 crisis sparked a widespread shift to remote work in early 2020, many companies provided stipends to employees who complained of the cost of setting up home offices and bigger electric bills. But now some workers say remote is the more economical option as US consumer prices continue to escalate. “I lose money every single time I leave my house,” said Lina Tumanyan, a real estate broker whose office is in Manhattan. Even with a job that requires time showing properties outside the office, Tumanyan said she was expected to go in a couple times a week for tasks such as email and posting listings. “It’s really frustrating that a lot of places are now actually requiring people to be in office, because we all saw that everybody can pretty much function at home and all is fine,” she said. US consumer prices rose 8.3 per cent in the 12 months leading up to August, with the index for food away from home gaining 8 per cent. The price for petrol used by commuters who drive remains 17 per cent higher than a year ago at about $3.70 a gallon, even after a recent decline, according to AAA. Large employers from Apple to NBCUniversal to Goldman Sachs have pushed staff to return to the office, with mixed success. Office occupancy rates in 10 major cities across the US last week reached their highest levels since the pandemic began, according to data from security company Kastle Systems. Daily subway ridership reached 3.9mn passengers in New York City last week, also the most since March 2020.Yet Kastle data released on Monday showed the average office occupancy rate was still only 47.3 per cent, down slightly from last week. The New York subway is running at less than two-thirds of traffic on a typical day before the pandemic, with travel notably weak on Mondays. About 60 per cent of employees surveyed by jobs site ZipRecruiter say they prefer to work remotely.“Employees still express some quite serious reluctance to return to the office and a strong preference for remote work,” said Julia Pollak, ZipRecruiter chief economist. “The motivations for wanting remote work have changed over time. So while health concerns were the number one concern initially, now commuting costs are the major concern.”US full-time workers say they spend twice as much money on average in a month when they are working in an office, or about $863, compared with $432 when they are working at home, according to a survey by Owl Labs, a video conferencing equipment maker that benefits from hybrid working. Office workers said their biggest daily expenses were an average of $15.11 on the commute, $14.25 on lunch and $8.46 on breakfast and coffee. Those with pets also reported spending an additional $16.39 on services such as dog walkers.That is why Megan Zuckerman limits her trips into the office to once a quarter. Zuckerman, a 28-year-old public relations manager, left Manhattan to move in with her parents in New Jersey in June 2020. At the time her employer still planned to operate remotely “indefinitely”.Her bosses later announced a two days per week office schedule. In the meantime, New York apartment rental prices had risen so much that Zuckerman could not afford to move back. Median monthly rent on new leases in Manhattan reached record highs for six straight months before dipping to $4,100 in August, according to appraiser Miller Samuel and brokerage Douglas Elliman.Zuckerman estimated her commute from New Jersey — which involves both a ferry and a bus and takes nearly two hours — cost $45 round-trip. In the end she found a new job that let her work primarily from home.“I’m really happy that I was able to get some flexibility, because two days a week in the office would have been really expensive,” Zuckerman said.

An empty storefront in New York, where mayor Eric Adams has urged a return to the office © Bloomberg

Some employers have expanded benefits in an attempt to compensate for rising costs. Healthy snacks maker That’s It, which mandated a return to the office last year, gave each employee three separate $100 petrol gift cards when prices topped $5 a gallon.California-based biopharmaceutical firm Urovant expanded the approved uses for a $500 health and wellness allowance given to employees, from fitness expenses to transport costs, lunch and childcare.“We’re offering that to our employees to recognise them, but also to help provide additional incentives and compensation since we do understand that the cost of living continues to go up,” said Betzy Estrada, Urovant’s chief human resources officer.

Managers are not the only ones desperate for white-collar workers to return to offices. Municipal leaders such as New York City mayor Eric Adams have urged companies to bring them back to support local economies. Industries that rely on regular visits from office workers, such as cafés, dry cleaners, nail salons, and parking garages, still employ 347,000 fewer people nationwide than before the pandemic, according to an analysis by ZipRecruiter. Those are the kinds of expenses that deter workers such as Tumanyan, the real estate broker. Between her subway fare, coffee, a lunchtime salad and things she is tempted to buy while in Manhattan, she said she can spend $75 on days she goes to the office. “Unless you want to pay for our lunches and our transportation, no, I will not be coming into the office every single day,” she said. More

Mining group Glencore faces disruption at its largest partner for selling refined copper in the Chinese market as Maike Metals International, a powerful trading house, grapples with a liquidity crisis.The slowdown in the Chinese economy and the downturn in the real estate market have caught out several domestic trading houses, leading to a string of recent scandals including missing copper at warehouses. Glencore was selling about 600,000 tonnes a year of high purity copper into China through Maike, before the Xi’an-based trading group ran into liquidity constraints, according to people familiar with the matter. That level is equivalent to a fifth of Glencore’s sales of copper metal and concentrates last year, according to its annual report.Glencore’s sales volumes through Maike had more recently been reduced, one of the people added.Maike was Glencore’s biggest local intermediary to market refined copper used in everything from electric wiring and cabling, accounting for 80 per cent of its copper sale volumes in the country. But Maike ran into trouble earlier this year, and its founder He Jinbi admitted last month that it was facing liquidity issues. Last week, He told the Financial Times that Maike is selling assets and studying a broader restructuring to survive the crisis. It is also working with creditors who have agreed to extend existing loans.Maike, founded by He in 1993, grew into one of the most important bridges between big international trading houses and Chinese consumers with revenues of Rmb160bn ($22.6bn) in 2021. The trading house used imported metal to raise financing from banks with usually 90 days to repay, which He then ploughed into China’s property sector, according to traders. The company had property investments of Rmb6.65bn, or around 60 per cent of its illiquid assets, at the end of 2020 according to a report by China Lianhe Credit Rating, a Beijing-based rating agency.Now that China’s real estate sector has slowed, Maike is laden with bad debts that it is struggling to repay to creditors. The largest were the Xi’an branches of the Bank of Beijing and Industrial and Commercial Bank of China, according to company filings for mid-2021. At the end of June 2021, lenders had extended credit lines of about Rmb10.6bn to Maike, of which it had used Rmb9.6bn, according to the company’s filings. It also had three bonds with an outstanding value of Rmb3.3bn, according to data provider Wind Information. He said in the latest interview that the firm still has an outstanding bank debt of about Rmb7bn. London-based ICBC Standard Bank has been moving some copper stocks that were collateral for its lending to Maike outside China, according to two people familiar with the matter. JPMorgan, another of its financiers, has been liquidating stocks in bonded warehouses at the ports within China they added.Foreign lenders have become increasingly nervous about financing commodity trading in China after a string of problems at trading houses. The credit squeeze has made it more difficult to get physical copper inside China, and copper stocks in Shanghai are close to their lowest level in a decade. Other large copper miners including the world’s largest mining group BHP and Chile’s Codelco have also paused sales to Maike as it works to resolve its liquidity issues, according to commodity trading executives. Foreign groups including Glencore, Mitsui, Trafigura, Codelco and Aurubis supplied 30 per cent of Maike’s annual imports in 2020, according to China Lianhe Credit Rating. A person familiar with the matter said Trafigura had not done any business with Maike this year. Glencore, BHP and JPMorgan declined to comment. ICBC Standard and Codelco did not respond to requests for comment. Maike’s He said the group is actively selling fixed assets and equities to replenish its liquidity and reduce debt, using the expression “breaking arms to survive” — meaning sacrificing parts of the business in order to save it.Commodity traders expect state-owned firms to provide financing lines to steer the company through the liquidity crisis. Maike’s He told the FT that the group is discussing an investment with state-owned groups in the central city of Xi’an, but did not reveal details.In August, Maike established a joint venture with a local government financing vehicle backed by the city of Xianyang in Shaanxi province.A copper trader at a state-owned futures firm said that a firm affiliated to Shaanxi province is mulling a stake purchase and cash injection into the company since it is so vital to the local economy.When asked about Maike’s heavy reliance on short-term financing using metals as the pledge, He said: “The entire private sector has encountered a lot of liquidity difficulties this year, and we are no exception.” One senior copper trader said: “It coincides with whether they are politically too big to fail for the province. I hope they can’t come back. These guys are the last of a dying breed of Chinese traders who use the import of copper to raise funding.” More