Economy

Last Friday, Elon Musk said he has a “super bad feeling” about the economy and plans to cut Tesla (NASDAQ:TSLA)’s workforce by about 10%, according to an internal email seen by Reuters.Musk backtracked on Saturday and said the electric-vehicle maker’s total headcount will increase over the next 12 months, but the number of salaried staff should be little changed.Following is a list of some other companies that have announced layoffs or frozen hiring to rein in costs:COMPANIES COMMENTS Alibaba (NYSE:BABA) Group China’s Alibaba might cut more than 15% of its total workforce, or about 39,000 employees, due to a sweeping regulatory crackdown in China, as well as slowing sales growth and rising prices. European online car retailer Cazoo said it would cut its workforce Cazoo Group by about 15% as it looks to conserve cash. Ltd Carvana Co (NYSE:CVNA) Carvana said it will lay off about 2,500 employees, or 12% of its workforce. Coinbase (NASDAQ:COIN) Coinbase will extend its hiring freeze for the foreseeable future and rescind Global Inc a number of accepted offers to deal with current macroeconomic conditions. Getir Turkey’s Getir is planning to cut 14% of its staff globally due to rising global inflation and costs, a source with knowledge of the matter told Reuters on May 25. German grocery app Gorillas will lay off 300 people, cutting its Gorillas administrative staff in half, Chief Executive Kagan Sumer said on May 24. Henkel AG (OTC:HENKY) & Germany’s Henkel, the company behind Schwarzkopf, said on May 5 it would cut Co KGaA about 2,000 positions due to low demand of its shampoos and hair spray, as well as rising costs and global supply chain issues. Klarna Swedish company Klarna said on May 23 it was slashing 10% of its 7,000 strong workforce as a consequence of a recent steep increase in inflation, fear of a recession and the war in Ukraine worsening business sentiment.  Lyft Inc (NASDAQ:LYFT) The company said in May it will slow down hiring and assess budget cuts in some departments. Meta Facebook (NASDAQ:FB) parent Meta said in May it will slow the growth of its workforce. Platforms Inc Move About Sweden’s Move About Group said on May 20 it would cut 17 out of 40 positions Group AB due to indirect effects of the war in Ukraine and an excessive cost base. Netflix (NASDAQ:NFLX) Netflix in May said it has laid off about 150 people, mostly in the U.S., as the streaming service company faces slowing growth. Peloton (NASDAQ:PTON) Peloton in February said it will cut about 2,800 corporate jobs as it looks to Interactive revitalize sagging sales. Inc Robinhood (NASDAQ:HOOD) The retail trading platform said in April it is laying off about 9% of its Markets Inc full-time employees. Snap Inc (NYSE:SNAP) CEO Evan Spiegel in May told employees the company will slow hiring for this year. Tencent Chinese company Tencent is struggling to cope with the slowing economy, and Holdings might cut between 10-15% of its total workforce this year. Twitter Inc (NYSE:TWTR) CEO Parag Agrawal said in a memo that the social media company will pause hiring and review existing job offers to determine whether any “should be pulled back”. Uber (NYSE:UBER) Uber will scale back hiring and reduce expenditure on its marketing and Technologies incentive activities, Reuters reported in May, citing a letter from the CEO. Inc Valmet Oyj Valmet said on May 23 it was in negotiations for temporary layoffs of up to three months, with about 340 employees part of the talks at its valve factory in Helsinki due to reduced orders caused by the war in Ukraine and COVID-19 restrictions in China. Source: Regulatory filings, Reuters stories, company websites More

Biden will attend the G7 summit at Schloss Elmau in southern Germany on June 25, where leaders will discuss the war in Ukraine and the food and energy crisis it has precipitated, Jean-Pierre said in a statement. At the NATO gathering in Madrid on June 28, allies are expected to focus on NATO’s “transformation over the next decade”, the statement said. (This story refiles to make headline read ‘summits’) More

To many seasoned observers of monetary policy, the following two statements are contradictory. The eurozone faces a considerable threat of recession later this year. Even so, the European Central Bank should withdraw monetary support from the eurozone economy and raise interest rates.For years it has been the correct response for European central bankers to support spending in difficult times with looser monetary policy and to do everything possible to avoid a recession. After all, the ECB won acceptance as a powerful and respected institution only when the central bank, led by then president Mario Draghi, pledged to do “whatever it takes” to boost the continent’s economy almost exactly a decade ago. The promise of unlimited monetary firepower quickly ended the eurozone crisis.In 2022, the circumstances are not remotely similar to 2012 and policy needs to adapt accordingly. Ten years ago, Europe was engaged in an austerity drive to improve public finances, unemployment across the bloc was over 10 per cent and rising, inflation was only a little over 2 per cent and falling. That was an economy that needed stimulus. Today, unemployment across the eurozone fell to 6.8 per cent in March and April, its lowest level since the creation of the single currency in 1999, while inflation rose to 8.1 per cent in May. In place of austerity, European nations are planning their spending under the €800bn recovery fund.Although the similarities with a decade ago are few, this is still not enough to make the case for tighter monetary policy that the ECB is likely to advance at its meeting on Thursday. For that we need to look more closely at the forces affecting supply and demand in the eurozone economy and the risks surrounding different policy actions. Growth has slowed considerably since the strong recovery from coronavirus last summer. Gross domestic product across the eurozone rose only 0.3 per cent in the final quarter of 2021 and 0.2 per cent in the first quarter of 2022, which coincided with Russia’s invasion of Ukraine. In the quarters ahead, demand will be boosted by the removal of most Covid-19 restrictions this summer, especially for the providers of consumer-facing services, but it will be held back by the cost-of-living squeeze of higher energy prices on consumer incomes. But whether growth rates remain anaemic or turn negative, the brutal truth is that Europe needs to spend less on other things because, as a net energy importer, the surge in the cost of oil and gas has made everyone poorer. If there is no recognition of this, demand will continue to exceed supply and turn a temporary rise, predominantly in energy prices, into more problematic and persistent general inflation. This would happen with weak growth rates, similar to those of recent quarters, or even in a shallow recession. The ECB estimates the effective tax on consumers of higher gas, electricity and petrol prices amounts to 1.3 per cent of national income. That, at a minimum, is the hit everyone has to take. While in 2011, the central bank erred because it expected energy and food price inflation to persist at a time of economic depression, the more relevant policy error for today’s circumstances occurred in the 1970s. Then, the countries that rapidly killed inflationary impulses with tight policy, led by the West German Bundesbank, took the pain and suffered a short and shallow downturn. Price rises were temporary and did not become ingrained into daily life. Those that followed a more accommodating path — Italy and France — ended up with persistently higher inflation rates that required much deeper recessions in the early 1980s to stamp out inflation.This is therefore the moment to take early action to prevent the foothills of an inflation problem turning into a mountain. There are signs that price rises are becoming broader across goods and services in Europe. In April, three-quarters of all individual goods and services saw prices more than 2 per cent higher than a year earlier, showing companies are increasingly willing to raise prices rather than take a squeeze in their margins. Long-term inflation expectations have risen sharply in financial markets and are no longer languishing below the ECB’s 2 per cent target. With inflation at 8 per cent and the ECB’s policy interest rate still negative at minus 0.5 per cent, the real rate of interest is extraordinarily low even with the tighter policy flagged by the central bank. The ECB is right to signal it will raise interest rates in July and then take them out of negative territory by September. The economic situation is ugly. But the risks would be greater if the central bank did nothing. A faltering eurozone economy can be boosted again by looser policy if the downturn proves deeper than required to keep inflation in check. In contrast, the costs of dealing with a loss of confidence in the authorities’ ability to control prices would be considerable.The months ahead will be miserable for European economies. Incomes will be squeezed, a recession is quite likely and interest rates need to rise, adding to pressures on households and families. It will be difficult. But that is the adjustment that every European economy needs to make as we wean ourselves off cheap, but ultimately dangerous, Russian energy. [email protected] More

The cabinet reiterated that China will strive to achieve reasonable economic growth in the second quarter, state media said after a regular meeting.The cabinet added that most localities have moved to stabilise growth in line with its policy measures, which it said have increased the number of positive factors in the economy and enhanced market confidence.The cabinet said it had sent inspection teams to 12 provinces to ensure its recently unveiled policy measures were being implemented. More

The preference for temporary increases may be frustrating for workers struggling with a cost-of-living crisis but it will be welcomed by European Central Bank policymakers fearing a self-reinforcing spiral between wages and inflation.At 8%, inflation is so high that families are quickly losing their purchasing power, so it is only a matter of time before they ask for more pay, emboldened by record-low unemployment and labour scarcity that is increasingly painful for businesses. Spending their extra cash would in turn fuel even more inflation, just as the ECB tries to bring it back down to 2%.Employers are meanwhile trying to resist big pay rises as they see the war in Ukraine curb economic growth and cling on to hopes that the current, energy-fuelled spike in inflation will prove temporary. On the surface, data seems to indicate that employers and the ECB are slowly but surely losing that battle: negotiated wages rose by 2.8% in the first quarter. This was their fastest pace since early 2009, driven by a 4% rise in Germany, the biggest of the 19 economies that make up the euro zone. But once one-off payments are excluded, the German increase was only around 2%, suggesting firms paid up to ease the pain of inflation and the pandemic for their employees, but in a limited way that should not perpetuate inflation. There is evidence that firms from Italy to France and the Netherlands are taking similar steps, mitigating what is still likely to become a difficult-to-contain surge in wages. Around 15,000 workers at Amsterdam’s Schiphol airport are getting an extra 5.25 euros per hour over the summer to alleviate crippling staff shortages that forced airlines to cancel hundreds of flights this spring.In France, President Emmanuel Macron’s government is actively encouraging firms to give employees inflation relief with a variety of tax-free bonuses, such as extra cash to help pay for transport to work.  And in Italy, where wage growth is still muted, some firms are paying sizeable one-off bonuses as a way of compensating for inflation and heading off demands for salary increases.Eyeware maker Luxottica recently offered workers a hefty pre-tax bonus of 3,800 euros, and its smaller peer De Rigo gave employees earning below 40,000 per year a bonus of 1,000 euros.     Other prominent Italian companies adopting the same strategy include footwear company Geox and brake-maker Brembo.”Employers have dug in and don’t want to reopen negotiations,” Boris Plazzi, a wage negotiator at French union CGT said. “Workers have therefore stood down and become resigned.”German union IG Metall made headlines last month by demanding an 8.2% pay increase for steel workers but employers rejected the demand, instead offering a one-off payment and possibly triggering a strike.The Ukraine war is another factor holding back wage growth, as a murky outlook and growing talk of a possible recession makes people fear for their jobs.”In the upcoming wage negotiations, uncertainty about economic development and concerns about possible job losses could dampen wage increases,” the German central bank said. MATTER OF TIMEBut barring a sharp deceleration of the economy, a pick up in euro wage growth is only a matter of time, with planned new European Union minimum wage rules likely to speed it up.Unemployment has never been lower while employment is near record highs – Germany alone has a shortage of 558,000 workers, according to the German Economic Institute. Staff shortages are most acute in the services sector, particularly tourism, where workers were laid off during the pandemic and firms are now struggling to replace labour.”In the hotel and catering sector, higher wages are going to be offered due to the lack of workers,” Ignacio Conde-Ruiz, economics professor at Complutense University in Madrid said about the Spanish economy.”However a more structural solution, such as hiring foreign workers, is needed.”The ECB has long argued that wage growth of 2% to 3% is consistent with a 2% inflation rate, its medium term target.Few are predicting that wages will accelerate far beyond this range, especially since the bloc’s sluggish southern economies will offset quicker growth in countries like the Netherlands, Belgium and Germany. But there is also a growing risk that persistent inflation will eventually empower unions to start demanding bigger payouts. “We expect further increases in the coming quarters, but not enough to compensate for inflation, leading to sharply negative real wage growth,” Morgan Stanley (NYSE:MS) said. “Accelerating nominal wage growth should nonetheless support core-driven inflation further out, and make services the key driver of our 2023 forecast.” More

The governor of the Bank of Japan has been forced to retract his claim that consumers had become more “tolerant” of price rises after a public backlash overy soaring food and energy costs.The rare apology issued by Haruhiko Kuroda underscored the political sensitivity of price increases ahead of July elections to the upper house of Japan’s parliament that are likely to be largely fought over the rising cost of living. “My expression that households are becoming more tolerant of price rises was utterly inappropriate, so I will retract it,” Kuroda said in parliament on Wednesday.The retraction came on the same day the yen slid against the dollar to below ¥134, a fresh 20-year low that will drive up the cost of imported goods for the resource poor Japanese economy. Speaking at the Financial Times Global Boardroom conference on Wednesday, Kuroda suggested price rises would not be sustained and that downward pressures on the yen from increasing interest rate differentials with the US were likely to ease. The BoJ governor had said in a speech on Monday that Japanese households might have become more accepting of price rises due to “forced savings” accumulated as a result of Covid-19 restrictions. “The point to consider for the time being is how Japan . . . can maintain a favourable macroeconomic environment and make this lead to a full-fledged rise in wages, including base pay, from fiscal 2023 onward,” he said. Kuroda’s comments drew immediate criticism on social media and from members of opposition parties as being “insensitive to household pain”. The timing was also unfortunate, with prime minister Fumio Kishida having just compiled emergency measures to combat rising commodity prices that include subsidies for lower income households. “What the governor had tried to say was that there will be opportunities to raise wages if company profits increase by transferring the cost to consumers through price increases,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. “But the flip side of that is households will suffer the pain of price rises, and the governor was insensitive to that part.”Greater tolerance of price increases among Japanese consumers would be a sea change for a country that has struggled with a deflationary mindset for decades. There has been almost no pass-through from rising prices to higher wages, despite the fact that Japan is heavily exposed to the increasing cost of imported commodities. Companies in Japan are hesitant to transfer those costs to consumers because they fear a public backlash if they raise prices, while workers — beaten down by decades of stagnant pay — do not demand the higher wages that would let them afford higher prices in the shops.While the US Federal Reserve and the Bank of England are raising interest rates, the BoJ has repeatedly said it will maintain its monetary easing, exacerbating a global divergence in yields that has pushed the yen to historic lows. At the Global Boardroom conference Kuroda repeated that the rise in prices was driven by energy costs and would not be sustained. “At this moment, Bank of Japan must continue its support for economic activity by continuing with the current monetary easing,” he told Financial Times chief economics commentator Martin Wolf.Asked about the sliding yen, Kuroda said market players had largely priced in how much the US Fed would like to increase interest rates. “Unless the Fed raises interest rates much faster than, or more than, what their forward guidance shows, the dollar rate may not be so much affected by [US-Japanese] interest rate differentials,” he added. More

(Reuters) -Money markets ramped up their bets on European Central Bank (ECB) interest rate rises on Wednesday to price in 75 basis points (bps) of hikes by September. With the bank largely expected to start rises in July and move in 25-bp increments, the pricing implies traders now expect its hikes to include a rare 50-bp move at a single meeting by September, brought forward from the October timing anticipated on Friday.The ECB’s next policy-setting meeting will be held on Thursday.Traders have steadily ramped up their bets on ECB hikes following a higher-than-expected euro area inflation report last week, which boosted the case for larger moves from the central bank. Several policymakers have said they are open to a 50-bp move.”It seemed inevitable to me that 50-basis-point hike bets would become more popular given that the ECB is widely perceived as being behind the curve and other central banks have started to move in 50-basis-point increments as well,” said Antoine Bouvet, senior rates strategist at ING, referring to the Reserve Bank of Australia. The Australian central bank raised interest rates by 50 bps on Tuesday in a hawkish surprise. “The key question ahead of tomorrow is whether the ECB can deliver on hawkish expectations. Clearly the April meeting was a puzzling one for markets with rhetoric failing to match market expectations and I suspect the same might be true at this meeting,” Bouvet said. Bond yields had dropped sharply following the ECB’s April meeting, when it refrained from making firm pledges regarding stimulus removal beyond what it had outlined in March.In the broader market, bond yields continued to rise on Wednesday.Germany’s 10-year yield, the benchmark for the euro area, rose to a new high since 2014 at 1.351% and was up 5 bps on the day by 1043 GMT.It extended its rise after data showed the euro zone economy grew much faster in the first quarter of the year than in the previous three months despite the impact of the war in Ukraine, with an earlier estimate revised sharply higher.Italy’s 10-year yield was up 5 bps at 3.45%, but below the highest since 2018 at 3.55% on Tuesday. The closely watched risk premium on 10-year Italian debt over Germany’s was at 210 bps, down from over 220 bps earlier this week. In the primary market, Germany raised 3.266 billion euros and Portugal 750 million euros from 10-year bond auctions. More

The five-member study group, as it is called, consists of outside experts, including the head of fixed income group at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley (NYSE:MS) Securities and professors at prominent universities.”While receiving opinions and advice from highly knowledgeable persons, we will begin discussions including technical aspects,” the ministry said in a statement on Wednesday, without elaborating.Japan’s public debt is twice the size of its economy after years of fiscal stimulus, including recent efforts to battle the COVID-19 pandemic, have strained public finances, making fiscal reform an urgent task. More