Economy

The emergency funding request will also include $2 billion to address the impact of Russia’s war in Ukraine on U.S. energy supplies, Shalanda Young, director of the White House Office of Management and Budget (OMB), wrote in blog post. The $47.1 billion request comes ahead of the conclusion of the 2022 fiscal year on Sept 30. Congress has not yet passed a 2023 funding bill, and Young said lawmakers would likely need to pass a stopgap funding measure allowing them more time to negotiate a more comprehensive fiscal package. The White House’s requests for the stopgap measure, known as a continuing resolution (CR), will also include $3.9 billion in funding to fight against an outbreak of the monkeypox virus and $6.5 billion for natural disaster relief, Young wrote. Congress is expected to grapple with CR discussions to keep the government fully operating beyond Sept. 30 when lawmakers return from summer recess next week. The CR legislation could become an avenue for Congress to include Biden’s emergency requests, known as anomalies. It is also an opportunity for Congress to quickly approve such funds while Democrats and Republicans argue about spending priorities for the full fiscal year.The Biden administration has received bipartisan support in giving Ukraine more than $13.5 billion in security assistance since January 2021. Young said around three-quarters of Congress-approved aid for the country has been committed or disbursed. “We have rallied the world to support the people of Ukraine as they defend their democracy and we cannot allow that support to Ukraine to run dry,” Young said. More

BENGALURU (Reuters) – The German economy is on track to contract for three consecutive quarters starting from this one, according to a Reuters poll of economists, following a dramatic spike in gas prices after Russia slashed deliveries to Europe. Europe’s largest economy and manufacturing powerhouse is among the most vulnerable to any cut-off in energy supplies or rising costs as its industrial sector relies heavily on Russian gas.The Aug. 29-Sept. 1 Reuters poll showed Germany would see three consecutive quarters of negative growth, surpassing the definition of a technical recession which only requires two.As most of the euro zone grapples with the energy crisis, medians in the poll suggested the German economy would shrink 0.1% and 0.3% in the third and fourth quarters this year, and 0.2% in the first quarter of next year.That is a sharp turnaround from expectations of 0.2%, 0.3% and 0.4% quarterly growth as recently as July.”Gas prices are moving from one astronomic high to the other and will lead to unprecedentedly high energy bills over the winter,” noted Carsten Brzeski of ING.”Even without a complete stop to Russian gas, high energy and food prices will weigh heavily on consumers and industry, making a technical recession – at least – inevitable.” The economy was then forecast to grow 0.4% in the second quarter followed by 0.6% and 0.5% growth in the following quarters next year.On average, the German economy was expected to grow 1.5% this year and then slow to 0.1% next, median forecasts from 34 economists showed.The energy crisis has already triggered a 400% surge in wholesale gas prices over the last year, hurting energy intensive sectors from metal output to fertilizer production.With inflation rising to a near 50-year high of 8.8% in August and soaring energy bills eroding the purchasing power of households, pressure is building on the European Central Bank to go for bigger interest rate hikes.Indeed, the latest Reuters poll showed economists were split between a 50 basis point or a jumbo 75 basis hike from the ECB at the Sept. 8 policy meeting. However, expectations were now rapidly shifting towards a larger move. [ECILT/EU]Rising energy bills, devastating droughts and low water levels have worsened the cost of living crisis in the euro zone, signalling a painful recession during the winter. (For other stories from the Reuters global economic poll: More

The strongest areas within professional and business services include computer systems design, management and technical consulting, and architectural and engineering. The sector has now added 1.1 million jobs over the past 12 months, according to the U.S. Bureau of Labor Statistics.
Health care came in second for the month, with 48,200 jobs added. If health-care jobs were added to education and social services, as some economists do, that broad sector would have matched the 68,000 gain by professional and business services.
Retail trade was another bright spot, growing by 44,000 jobs. That was an acceleration from the 29,100 jobs added in July.
Even though job growth was positive across the board, it was significantly slower in some areas. Leisure and hospitality, for example, added 31,000 jobs in August after growing by 95,000 in July. The sector is still 1.2 million short of its pre-pandemic level.

Transportation and warehousing added just 4,800 jobs after growing by more than 24,000 in July.
Roach also pointed to a rise in part-time workers by 225,000, with 69,000 saying they could not find full-time employment, as a potential area of concern going forward.

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Shares in UK housebuilders slumped to their lowest level in almost a decade on Friday after HSBC published analysis predicting house prices in London could fall by as much as 15 per cent.The research forecasts that demand for UK housing will fall 20 per cent from this autumn because of rising mortgage rates and inflation.HSBC expects average UK house prices will fall 7.5 per cent outside London, while prices in central London will drop by twice that. For new build homes, the research forecasts a 5 per cent drop.The HSBC note accelerated a drop in the shares of the country’s biggest developers, which have already suffered average declines of 40 per cent this year.Shares of Redrow, Barratt Developments and Berkeley Group were down between 4 per cent and 7 per cent in morning trading on Friday after the note.Expectations that UK house prices will begin to fall have been steadily growing in recent months, as the Bank of England has pushed up interest rates in an effort to tackle steeply rising inflation. Rising borrowing costs have made it harder for buyers to access the market and have added to a growing list of problems for listed developers, which have been hit by the withdrawal of key government support measures in recent months and the economic downturn.Since the last financial crisis, housebuilders have enjoyed near-uninterrupted profit growth and buoyant share prices. The sector even remained resilient during the pandemic, recovering strongly from a correction when the market was closed early in 2020. By later that year, demand had recovered to hit fresh highs.But after a long period of growth, underpinned by low interest rates and government support, the market is showing signs of cooling. HSBC analysts now expect earnings before interest and tax at the UK’s biggest listed builders to fall by between 32 per cent and 53 per cent — with an average of 43 per cent — by 2023-24 compared with 2022.Rob Perrins, chief executive of London-focused developer Berkeley, said there were “tough times to come”, but added that the bank was far too pessimistic about the market, particularly in the capital.“I think we’ll have some choppy times, but to say demand is going to fall off that amount is wrong,” he said. More

Federal Reserve officials are likely to see the August jobs numbers as a sign their policies are working — though not that their job is done.Policymakers are closely parsing labor market data as they try to figure out how much underlying momentum the economy has and how much they need to raise interest rates to restrain growth and lower inflation.Fed officials have raised rates to a range of 2.25 to 2.5 percent in July from near zero in March, but they are still waiting for signs that those higher borrowing costs are cooling consumer spending and business expansions, lowering demand and giving supply a chance to catch up. So far, the evidence of a major slowdown has been spotty.In that context, the data released on Friday was encouraging. Job growth slowed, but not by so much that it suggested a recession was imminent. The unemployment rate rose, but mostly because more people joined the labor force, which should make it easier for companies to fill open positions. Wage growth slowed.“Overall there’s a lot to like if you’re a Fed official right now,” said Sarah House, an economist at Wells Fargo. “Hiring remains robust but on a more sustainable basis. Yes, unemployment was up, but it was for all the right reasons. We saw a surge in job seekers.”Still, Ms. House said, one good report will not convince the Fed that it is time to back off its efforts to tame inflation.Central bankers have been clear that they are carefully watching data on both employment and inflation — which is showing hopeful, but not yet conclusive, signs of slowing — as they decide how quickly to raise interest rates. Fed officials are contemplating an increase of either a half percentage point or three-quarters of a point at their meeting on Sept. 20-21.Higher interest rates work to counter inflation partly by weighing on the labor market. As businesses face steeper borrowing costs, they grow less and cut back on hiring. As job opportunities dwindle, competition for workers eases and wage growth slows — reining in consumer spending. As demand wanes, companies become less able to raise prices, lowering inflation.That process can push unemployment up and prove painful as people lose or struggle to find jobs. But Fed officials have argued that getting inflation under control is critical — and that delaying the tough choices now would only make the situation worse down the road. More

LONDON (Reuters) – Liz Truss, on course to become Britain’s prime minister on Monday, looks set to walk straight into a financial market firestorm that she will have to act fast to extinguish.The pound had its worst month against the dollar in August since shortly after the Brexit referendum in 2016 and fell against the euro too. Some British government bonds suffered their biggest price losses in decades.     Much of the market turmoil is due to a surging inflation rate which is the highest among Group of Seven economies. Goldman Sachs (NYSE:GS) says it could hit 22% if the impact of Russia’s invasion of Ukraine on gas prices does not fade. Many investors are also alarmed that tax cuts promised by Truss could aggravate Britain’s inflation problem, speeding up the Bank of England’s interest rate hikes and worsening a recession that the BoE expects to start this year and end only in 2024.As well as tax cuts, Truss has recently promised “robust” direct cost-of-living help for households which would put more strain on the budget deficit.Then there are her plans to rethink the way the BoE does its job and to be ready to risk a post-Brexit trade war with the European Union.”I think the UK and the gilt market are in a degree of danger,” Mike Riddell, a senior fixed income portfolio manager at Allianz (ETR:ALVG) Global Investors in London, said.He pointed to sharp falls in recent weeks in the prices of British government bonds, or gilts, and the value of sterling, a rare occurrence.Normally, the prospect of higher BoE interest rates would hurt demand for bonds while pushing up the pound but the currency is down 15% against the U.S. dollar so far this year.Until August, there had never been a month when sterling fell by as much as 4.5% against the dollar and 10-year gilt yields rose by more than 90 basis points, according to Refinitiv and Bank of England data going back to 1971 when sterling floated.”The breakdown in the relationship between gilt yields and sterling is indicative of overseas investors losing confidence in the UK, and that is what is really worrying,” Riddell said.SMASH THE ORTHODOXYOpinion polls have given Truss – currently Britain’s foreign minister – a big lead over Rishi Sunak, who quit as finance minister in July to contest the Conservative Party leadership race which ends on Monday with an announcement of the winner.As a former chief secretary to the Treasury, Truss says she knows how to shake up economic orthodoxy by cutting Britain’s tax burden which is heading for a 70-year high.Sunak has dismissed her tax cut plans as “fairy tales” which will fuel inflation.Asset management firm Pictet said this week it was underweight on gilts due to the risk of a big stimulus push which could force the BoE to accelerate its rate hikes.Julian Jessop, an economist who backs Truss and is close to her advisers, said the idea of borrowing more now to speed up future economic growth made sense.”In these circumstances, you need to be bold and flexible on fiscal policy and if that means that in the short term the budget deficit has to take strain, then so be it,” he said.Britain’s public finances are weighed down by the government’s huge coronavirus spending spree. Public debt as a share of economic output is not far off 100%, up from about 80% before pandemic.But Jessop, a fellow at the Institute for Economic Affairs think-tank, said Truss was probably looking at extra borrowing in the tens of billions of pounds, far less than during the COVID-19 pandemic, something financial markets could swallow.”Once she actually gets the keys to Number 10 (Downing Street) then she can start reassuring markets about what she actually intends to do,” he said.KINDNESS OF STRANGERSFor some investors, that kind of clarification cannot come a moment too soon, with Riddell noting that a planned sale of a big slug of 30-year gilts in mid-September will be a test for Britain’s debt office.Oliver Blackbourn, U.K. portfolio manager at Janus Henderson Investors, said there were also political risks for Truss, who stands to become Britain’s fourth prime minister in six years.She trailed other candidates for much of the Conservative Party leadership race when it was in the hands of party lawmakers, climbing into second place at the last minute to contest the run-off, which is being decided by party members.”How easy is it going to be for her to control her party in the House of Commons when she wasn’t anywhere near the most popular choice among members of parliament?” Blackbourn said. “When you have hard decisions to make, you want to have a strong leader in place.”For Jessop, the Truss-supporting economist, the first item on her agenda if she is announced as prime minister on Monday should be a promise not to meddle with the BoE’s independence.Truss has said she wants to review the central bank’s mandate without compromising its independence but one of her supporters has questioned whether the BoE should have exclusive powers to set interest rates.”It’s very important that she hit the ground running with a clear statement of policy,” Jessop said. More

Nonfarm payrolls rose by 315,000 jobs in August, just below the Dow Jones estimate for 318,000.
The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations.
Wages also rose, with average hourly earnings up 5.2% from a year ago, slightly lower than the estimate.
The biggest sector gainers were professional and business services, health care and retail.

Nonfarm payrolls rose solidly in August amid an otherwise slowing economy, while the unemployment rate ticked higher as more workers rejoined the labor force, the Bureau of Labor Statistics reported Friday.
The economy added 315,000 jobs for the month, just below the Dow Jones estimate for 318,000 and well off the 526,000 in July ad the lowest monthly gain since April 2021.

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The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations largely due to a rising labor force participation rate. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons rose to 7% from 6.7%.
Wages continued to rise, though slightly less than expectations. Average hourly earnings increased 0.3% for the month and 5.2% from a year ago, both 0.1 percentage point below estimates.
Professional and business services led payroll gains with 68,000, followed by health care with 48,000 and retail with 44,000. Leisure and hospitality, which had been a leading sector in the pandemic-era jobs recovery, rose by just 31,000 for the month after averaging 90,000 in the previous seven months of 2022.
Manufacturing rose 22,000, financial activities gained 17,000 and wholesale trade increased by 15,000.
Markets reacted positive to the numbers, with Wall Street indicating a positive open for stocks while Treasury yields moved lower.

“There’s something for everybody in this report,” said Michael Arone, chief investment strategist at State Street Global Advisors. “This report supports the Fed’s ability to engineer a soft landing. Markets like it.”
The jobs numbers pose a quandary for a Federal Reserve trying to get inflation under control.
Inflation is running near its fastest pace in more than 40 years as a combination of a supply-demand imbalance, massive stimulus from the Fed and Congress, and the war in Ukraine has sent the cost of living soaring.
However, the labor market has held strong even as other aspects of the economy have weakened. Housing in particular is likely in a recession.
“This is a unique period of time, where we have still a relatively tight labor market, where there is still job growth, but companies have started to announce hiring freezes, some companies have announced layoffs,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “This could very likely be a recession were you don’t see the kind of carnage in the labor market that you see in most recessions.”
Those payroll and wage gains came amid soaring inflation and concerns over a slowing economy that posted negative GDP numbers in the first two quarters of the year, generally considered a telltale sign of recession.
The Fed has been battling the inflation problem with a series of interest rate hikes totaling 2.25 percentage points that are expected to continue into next year. In recent days, leading central bank figures have warned that they have no intention on backing off their policy tightening measures and expect that even when they stop hiking, rates will stay elevated “for some time.”
One key channel the Fed is looking for policy impact is the jobs market. In addition to robust hiring, job openings are outnumbering available workers by a nearly 2-to1 margin, pressuring wages and creating a feedback loop that is sending prices higher for not only gas and groceries but also shelter costs and a variety of other expenses.
The jobs report is “not strong enough to get them to be more aggressive in terms of rate hikes, and not weak enough to have them slow down,” Arone said. “I don’t think today’s jobs report changes anything about the path the Fed was on.”
August’s payroll numbers are generally more volatile than other months. In 2021, the initial estimate of 235,000 eventually was revised up to 483,000. Over the past decade, the average revision for August has been 82,700 higher.
The BLS lowered the June payrolls count to 293,000 from 398,000 and July’s to 526,000 from 528,000, a combined net drop of 107,000 from previous estimates.

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STOCKHOLM (Reuters) – With its robust welfare provisions and green energy mix, wealthy Sweden should be better placed than most countries in Europe to withstand the energy-driven cost of living crisis battering the continent. But consumer worries over soaring electricity bills, rising interest rates and stalling economic growth mean the campaign for the general election on Sept. 11 has turned into something of a bidding war between the centre-left and right-wing blocs over which can do more to ease the short-term pain. That could entail long-term costs for the economy.”There is a risk that there will be a compensation economy rather than a focus on long-term structural reform,” said Sven-Olov Daunfeldt, chief economist at the Confederation of Swedish Enterprise.Swedes are among Europe’s most well-off. The welfare system – though much less generous than it used to be – means poverty rates are well below the European average. But in recent decades, the gap between rich and poor has been growing, leaving many vulnerable to inflation that is currently at around 8%.Eva Lindman Marko, a 59-year-old educational psychologist, said she got a monthly electricity bill for over 19,000 Swedish crowns ($1,765) in January – two or three times what she pays in a normal winter.Prices could be even higher this coming season – not least because of problems at the Ringhals nuclear plant.Sweden’s electricity comes mainly from hydro-power, nuclear and wind, with only a tiny fraction from gas. But with prices set on international markets, it has not escaped the continent-wide effects of the war in Ukraine on energy prices.”A rise of over 100% feels brutal in itself. But the cost may be three or four times as high,” Lindman Marko said, adding that this winter she plans to lower the thermostat at home, wear thermal clothes and go to the sauna at a local swimming pool to warm up. “Clearly the more worried you are over, for example electricity prices, the more it will affect how you vote,” she said. Petrol and food prices have also soared. The cost of butter is up by around 25%, meat 24% and cheese around 22% this year, according to consumer price comparison site Matpriskollen.Stockholm’s Stadsmission, a non-profit organization, said it had seen its membership of its Matmissionen subsidized foodshops nearly double in the first half of the year.”It’s a broad group – maybe you are a pensioner, maybe you are unemployed or perhaps have not lived for a long time in Sweden,” said Johan Rindevall, who heads up the Matmissionen shops.”Forty percent of our new members this year have been families with children.”Matmissionen sells food donated by major chains to members with monthly incomes below 11,200 crowns at around 30% of the prices seen in high-street shops. PROMISES, PROMISESThe two major political blocs are rushing out promises to help consumers fight the effects of inflation.Prime Minister Magdalena Andersson’s Social Democrat government has promised up to 90 billion Swedish crowns ($8.36 billion) in subsidies to ease the pain of rising electricity bills for households and businesses, on top of billions in subsidies paid last winter.The Moderates, the leading centre-right opposition party, have promised income tax cuts and lower fuel prices, which they say would mean 24,000 crowns extra for working families each year.They intend to pay for measures by cutting back on overseas aid and benefits like unemployment and sickness insurance.As a longer term solution to the energy crisis, the centre-right plans loan guarantees of up to 400 billion crowns to support building new nuclear power stations. Like Germany, Sweden has been shutting reactors in recent years.The Left Party, loosely part of the centre-left bloc, wants to halt electricity exports.Opinion polls don’t give a clear answer as to which policy promises have caught voters’ eyes, but the ruling Social Democrats have at least avoided blame for the gloomy economic outlook.The two main blocs are running neck-and-neck though the Social Democrats are easily the largest party.TOUGH CHOICESWhoever wins may find it hard to live up to all their promises.The NIER, a government think-tank, reckons the next administration will have around 120 billion crowns to play with in terms of extra spending. A chunk of that is already earmarked for defence spending as Sweden raises its allocation to 2% of GDP from the current 1% to support its bid to join NATO, and for other measures like boosting healthcare and employing more police to deal with gang crime.At the same time, GDP growth is expected to slow to around 0.4% next year, according to a government forecast, and even grind to a halt completely if inflation worsens and rates rise more than currently expected.Increasing public debt would “add fuel to inflation and further raise interest rates and could also threaten public finances, threaten welfare and pensions,” Finance Minister Mikael Damberg warned last month.Diverting cash to support households will leave less for structural reforms needed to support the shift to a “green” economy, to rebuild the welfare state and to meet a skills shortage in the labour market.The Social Democrats’ plan to subsidize energy bills will be paid from a fund that is supposed to be used, in part, for expanding transmission capacity – one of the major causes of record domestic electricity prices in Sweden.Plans by the right to decrease the amount of biofuel in petrol and diesel, making them cheaper, will also make it harder to reach the country’s target of zero net emissions by 2045.It is also uncertain which policies will get approval from the next parliament, given that even within the centre-left and right blocs there is much disagreement about what to do and how to pay for it. “No responsible politician can say that they will compensate for every price rise,” Andersson said last month.($1 = 10.7646 Swedish crowns) More