Economy

Layoffs are up only minimally, and employers may be averse to shedding workers after experiencing the challenges of rehiring.The past year has been a busy one for nearly every industry, as a reopening economy has ignited a war for talent. Unless, of course, your business is finding jobs for laid-off workers.“For outplacement, it’s been a very slow time,” said Andy Challenger, senior vice president of the career transition firm Challenger, Gray & Christmas. But lately, he has been getting more inquiries, in a sign that the market might be about to take a turn. “We’re starting to gear up for what we anticipate to be a normalization where companies start to let people go again.”Spurred by red-hot inflation fueled partly by competition for scarce labor, the Federal Reserve has begun raising interest rates in an effort to cool off the economy before it boils over. By design, that means slower job growth — ideally in the form of a steady moderation in the number of openings, but possibly in pink slips, too.It’s not yet clear what that adjustment will look like. But one thing does seem certain: Job losses would have to mount considerably before workers would have a hard time finding new positions, given the backlogged demand.So far, the labor market has revealed some clues about what might lie ahead.Challenger’s data, for example, shows that announced job cuts rose 6 percent in April over the same month in 2021. While still far below levels seen earlier in 2020, it was the first month in 2022 to have a year-over-year increase, and followed a 40 percent jump in March over the previous month. Some of those layoffs were idiosyncratic: More than half the layoffs in health care in the first third of this year resulted from workers’ refusal to obey vaccine mandates, with some of the rest stemming from the end of Covid-19-related programs.But other layoffs seem directly related to the Fed’s new direction. Nearly 8,700 people in the financial services sector lost jobs from January through April, Challenger found, mostly in mortgage banking. Rising rates for home loans have torpedoed demand for refinances, while prospective buyers are increasingly being priced out.Theoretically, a Fed-driven housing slowdown might in turn tamp down demand for construction workers. But builders bounced back strongly after a dip in 2020 and have only accelerated since. The National Association of Home Builders estimates that the industry needs to hire 740,000 people every year just to keep up with retirements and growth. Even if housing starts fell off, homeowners feeling flush as their equity has risen would snap up available workers to add third bedrooms or new cabinets.“A big national builder that’s concentrated in a high-cost market, and all they do is single-family exurban construction, yeah, they may have layoffs,” said the association’s chief economist, Robert Dietz. “But then remodelers would come along and say, ‘Oh, here’s some trained electricians and framers, let’s go get them.’”The National Association of Home Builders estimates that the industry needs to hire 740,000 people every year just to keep up with retirements and growth.Matt Rourke/Associated PressAnother sector that is typically sensitive to the cost of credit is commercial construction, which sustained deep losses as office development came to a screeching halt during the pandemic. Nevertheless, cash-rich clients have plowed ahead with industrial projects like power plants and factories, while federal investment in infrastructure has only begun to make its way into procurement processes.“I think that lending rates might be less important right now,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America. “An increase in either credit market or bank rates isn’t sufficient to choke off demand for many types of projects.”The tech sector, which feeds on venture capital that is more abundant in low-interest-rate environments, has drooped in recent months. Under pressure to burn less cash, some companies are looking to offshore jobs that before the pandemic they thought needed to be done on site, or at least in the country.“We’ve seen several of our clients in the high-growth technology space quickly shift their focus to reducing cost,” said Bryce Maddock, the chief executive of the outsourcing company TaskUs, discussing U.S. layoffs on an earnings call last week. “Across all verticals, the operating environment has led to an acceleration in our clients’ demand for growth in offshore work and a decrease in demand for onshore work.”In the broader economy, however, any near-term layoffs might occur on account of forces outside the Fed’s control: namely, the exhaustion of federal pandemic-relief spending, and a natural waning in demand for goods after a two-year national shopping spree. That could hit manufacturing and retail, as consumers contemplate their overfilled closets. Spending on long-lasting items has fallen for a couple months in a row, even before adjusting for inflation.If spending on durable goods declines sharply, “I could easily see that creating a recession, because suppliers would be stuck with a massive amount of inventory that they wish they didn’t have, and people employed that they wish they didn’t,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution. “Even there, it’s going to be hard to know how much was that the Fed raised interest rates, and how much was the extraordinary surge in demand for goods unwinding.”In general, if the Fed’s path of tightening does prompt firms to downsize, that’s likely to be bad news for Black, Hispanic and female workers with less education. Research shows that while a hot labor market tends to bring in people who have less experience or barriers to employment, those workers are also the first to be let go as conditions worsen — across all industries, not just in sectors that might be hit harder by a recession.So far, initial claims for unemployment benefits remain near prepandemic lows, at around 200,000 per week. But some economists worry that they might not be as good a signal of impending trouble in the labor market as they used to be.The share of workers who claim unemployment, known as the “recipiency rate,” has declined in recent decades to only about a third of those who lose jobs. These days, any laid-off workers might be finding new jobs quickly enough that they don’t bother to file. And the pandemic may have further scrambled people’s understanding of whether they’re eligible.“One possibility is that people are going to think that because they haven’t worked long enough, because they switched employers or stopped working for a period of time, that this would make them ineligible, and they’re going to assume that they can’t get it again,” said Kathryn Anne Edwards, a labor economist at the RAND Corporation. (The other possibility is that the temporary supplements to unemployment insurance during the pandemic might have introduced more people to the system, leading to more claims rather than fewer.)One good sign: Employers may have learned from previous recessions that letting people go at the first sign of a downturn can wind up having a cost when they need to staff up again. For that reason, managers are trying harder to redeploy people within the company instead.John Morgan, president of the outplacement firm LHH, said that while he was getting more inquiries from companies preparing to downsize, he did not expect as large a surge as in past cycles.“Even if they’re driving down on profits, a lot of our customers are trying to avoid the ‘fire and rehire’ playbook of the past,” Mr. Morgan said. “How can they invest in upskilling and reskilling and move talent they have inside the organization? Because it’s just really hard to acquire new talent right now, and incredibly expensive.” More

Good morning. We have been pessimistic about China. But not pessimistic enough, as you will see below. We are taking tomorrow off as Rob flies to London and Ethan works on non-Unhedged projects. We’re back with you Thursday. Email us: [email protected] and [email protected] growth: worseThe last time we wrote about China, at the end of last month, the topic was the country’s “impossible trilemma”. Solving simultaneously for 5.5 per cent economic growth, a stable debt-to-GDP ratio, and zero Covid-19 is impossible. Given this, the short-term path of least political resistance for Beijing is supporting growth by pouring debt into low-productivity real estate/infrastructure projects. Recent noises from Xi Jinping make it clear that the country plans to take the easy path again.But it turns out that describing the situation as a trilemma is too generous. Horrific economic data from China in April suggests that the zero-Covid policy may be inconsistent with anything but meagre growth, even in the presence of government attempts at stimulus.Here is what April looked like in China:Retail sales down 11 per cent from a year earlier, against an expected decline of less than 7 per cent.Industrial production dropped 2.9 per cent.Manufacturing was particularly weak, with auto production falling 41 per cent.Export growth was 4 per cent, a screeching slowdown from 15 per cent growth in March.Real estate activity collapsed, with construction starts falling 44 (!) per cent The backdrop for all this is credit growth that stubbornly refuses to accelerate, despite policy tweaks (such as last months reduction of banks’ reserve requirements) and jawboning from the authorities. Here is a JPMorgan chart of total social financing (TSF) — a broad government measure of credit creation — through April:

JPMorgan’s Haibin Zhu breaks the sideways pattern into three pieces:(1) contraction in household loans, as industry data suggest further deceleration in property sales; (2) notable slowing in medium to long-term loans to the corporate sector, reflecting weak credit demand for corporate sector financing and investment; (3) moderation in government bond issuance.Number 1 speaks for itself. China’s real estate industry is undergoing a wholesale restructuring. Homebuyers are going to be treading carefully. As for number 2, the key word is “demand”. Why would a corporation want to risk a big new investment, even if bank financing were available, when the zero-Covid policy has an estimated 300mn city dwellers under some form of lockdown. How do we know it’s a demand issue? Zhu noted “the discrepancy between pick up in M2 [broad money] growth . . . and slowdown in loan growth . . . Accordingly, the ratio of new loans to new deposits fell to 86.2 per cent.” That’s the lowest ratio in five years.And so we turn to government bond issuance, the go-to when the government wants to create some growth. But there is a nasty problem there as well, as my colleagues Sun Yu and Tom Mitchell pointed out in an outstanding feature last week. Local government financing vehicles, a crucial funding conduit for infrastructure projects, are facing constricted access to bank credit:Bond issuance by LGFVs was just Rmb758bn ($112bn) over the first four months of this year, down almost 25 per cent from the same period in 2021. Many Chinese banks now prefer to lend to infrastructure projects led by large state-owned enterprises rather than LGFVs, which they see as too risky. The government will probably keep trying to jump-start things. Over the weekend, for example, the mortgage rate for first-time buyers was cut. But whereas a few months ago brokers and pundits held out hope for a fillip from government action, there is now increasing pessimism about how much in can help while the lockdowns are in place. Gavekal Dragonomics noted there is “a fundamental tension between maintaining the current Covid prevention strategy and lifting growth”, which renders fiscal stimulus increasingly impotent — as demonstrated by low infrastructure investment in April. This quote from the FT understates the point nicely:Zhiwei Zhang, chief economist at Pinpoint Asset Management, noted that the government was under pressure to launch new stimulus measures and that the mortgage rate cut was “one step in that direction”. But he added that “the effectiveness of these policies depends on how the government will ‘fine-tune’ the zero-tolerance policy against the Omicron crisis”.Fine-tune! People don’t buy new houses when they are locked in their old ones, and businesses don’t borrow when supply chains are shut down. Will the government relent on zero Covid? No one seems to think so. Here is the spectacularly depressing sign-off quote from Yu and Mitchell’s piece:Few expect Xi to relax his zero-Covid campaign before securing an unprecedented third term in power at a party congress later this year. The strategy “has become a political crusade — a political tool to test the loyalty of officials”, says Henry Gao, a China expert at Singapore Management University. “That’s far more important to Xi than a few more digits of GDP growth.”Both equity and credit markets in China capture this grim reality:

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Still, one way or another, sooner or later, the lockdowns will end. And there are some signs that the current wave of infections could be subsiding. Bloomberg reported on Sunday that total cases in Shanghai were falling, and that no new cases had been reported outside of the city’s quarantine areas in two days — nearing a key threshold from relaxing lockdown protocols. This sort of thing is enough to bring out the optimists. JPMorgan’s China equity strategy team has rolled out a list of stocks that will “benefit [from] the Shanghai reopening theme”. They include transport, semiconductor, auto parts, and building materials companies. Looking at the price chart above, it is pretty clear that whoever times the reopening trade just right is going to make some money in these sorts of names. We wish them well, but wouldn’t know how to time it ourselves.What kind of growth rate China’s economy returns to is a separate question. Julian Evans-Pritchard of Capital Economics argued the key variables will be global demand and the desire of the government to stimulate after the lockdowns are lifted. He foresees a recovery that begins quite soon, but wrote that:This recovery is likely to be more tepid than the rebound from the initial outbreak in 2020. Back then, Chinese exporters benefited from a surge in demand for electronics and consumer goods. In contrast, the pandemic-induced shift in spending patterns is now reversing, weighing on demand for Chinese exports. Meanwhile, officials are taking a more restrained approach to policy support this time . . . The upshot is that while the worst is hopefully over, we think China’s economy will struggle to return to its pre-pandemic trend.We agree with Evans-Pritchard about global demand but disagree about government restraint. Our guess — and that’s the only word for it, admittedly — is that the futility of stimulus under lockdown will only increase the political imperative for fiscal and monetary largesse after lockdowns end.One good readDepressing example of how capitalism works: the e-pimps of OnlyFans. More

Good morning and welcome to Europe Express. EU’s environmental and energy independence plans, known as, RePowerEU will be published tomorrow — including plans on installing solar panels on all buildings. We will look at what the package has to say about independence from Russian gas and why some environmental groups claim it can be achieved faster than what the European Commission proposes. On the oil embargo, there was no breakthrough at the EU foreign ministers’ meeting yesterday, with Hungary demanding up to €18bn to cover their transition and adjustment from Russian oil to alternative energy sources.With payment deadlines for several large European gas importers fast approaching, the commission has clarified its guidance on sanctions-compliance vis-à-vis Gazprombank, saying that companies can open an account to make their payments, as long as their transaction is considered complete once they’ve wired over the amounts in euro or US dollars (rather than continuing to be on the hook until the sum gets converted into roubles).EU defence ministers are meeting Nato and European Defence Agency officials today in Brussels, with their Ukrainian counterpart tuning in remotely to ask for more weapons. But the commission’s own assessment on remaining defence spending gaps and plans on creating a dedicated task force to co-ordinate joint purchasing (including US weaponry) are only happening after the meeting, either tomorrow or Thursday. With Chinese industrial output having contracted last month for the first time since 2020, we will look at Europe’s economic headwinds and what IMF officials have to say about it. And after French president Emmanuel Macron finally nominated his new prime minister, we will explore a power struggle within the European Central Bank, where it briefly appeared as if Christine Lagarde was a possible option.Gas-free industryThe EU tomorrow will unveil a €195bn plan to wean itself off Russian oil and gas by 2027, but, according to a study discussed with commission officials, European industry could cut its reliance on natural gas much faster than that, writes Alice Hancock in London. Draft RePowerEU documents suggest that changes to behaviour could cut overall EU gas use by 5 per cent in the short-term and that actions taken by industry could save up to 35bn cubic metres of natural gas by 2030.But a report from Climact, the environmental NGO, estimates that industrial players could reduce near-term natural gas consumption by 26.6 bcm by 2027.To achieve this, companies must take “ambitious” short-term actions, the report says by rapidly installing heat pumps, recycling more plastic waste and, in the food industry for example, moving to electric ovens and microwaves.Gas makes up 28 per cent of the total energy use in European industry, roughly 1,030 TWh, according to Climact’s figures. The chemical and food industries are the two heaviest users of the fuel.The commission suggests hydrogen as the best way to replace gas in industrial production, but its draft proposals leave a blank where figures for how much transitioning to renewable hydrogen (as opposed to methane-generated hydrogen) would cost and does not give specifics on what industries should do to cut gas use.Climact goes heavy on recommending heat pumps and electrification as a quicker and more sustainable way to reduce gas use in the short term. The commission says in the RePower proposals that it will revise the current requirements for heat pumps in the first quarter of 2023.The big hurdles for industry to lower gas use are lack of infrastructure and the availability of renewable energy, executives say.Paul Skehan, senior director of EU affairs at PepsiCo, said “the cost of moving to electricity for our heat requirements is often double” and that made investment “prohibitive”.Chart du jour: China factor

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The shadow cast by the Ukraine war on the EU economy was underscored by a dreary set of economic projections from the commission yesterday. But the threats to growth also come from further afield, as Gita Gopinath, the IMF’s first deputy managing director, explained in an interview, writes Sam Fleming in Brussels.Figures from China yesterday showed its economic activity contracted sharply in April, driven by a wave of Covid-19-related lockdowns across the country.Speaking on a trip to Brussels, Gopinath noted that activity in China had fallen notably below expectations in April, and that this would increase the downside risks to the fund’s forecasts. The fund in April predicted 4.4 per cent growth for China this year, sharply down from 8.1 per cent in 2021.Other economies would also feel the impact, she explained. The slowdown would add a “significant headwind” to major manufacturing economies such as Germany which were important trading partners for China. The same applied to Asian economies which do a lot of business with China. “The supply chain frictions we were hoping would seriously alleviate this year: we are not seeing that yet,” she added.Addressing the situation in China, she said: “We certainly expected that this combination of more frequent outbreaks and more lockdowns would slow down activity significantly in China. Now the lockdowns have become much more broad-based than they were a few months ago, when it was much more targeted.”Lagarde rivalsWith labour minister Élisabeth Borne nominated as French prime minister yesterday, the rumour mill about the fate of Christine Lagarde as head of the European Central Bank has ground to a halt. Up until yesterday, no matter how slim Lagarde’s chances to move back to Paris may had been, they hadn’t stopped potential successors from jostling for position just in case she got the job, write Martin Arnold in Frankfurt and Leila Abboud in Paris.In the build-up to the prime ministerial announcement, it has not gone unnoticed that some ECB governing council seemed to have been behaving unusually.Krishna Guha, a former US Federal Reserve staffer who is vice-chair at investment bank Evercore ISI, said, “The balance of power has been unsettled by speculation that Lagarde could leave to become prime minister of France in June, creating a vacancy for the top job.”Dutch central bank head Klaas Knot, Finland’s central bank boss Olli Rehn, and Banque de France’s governor François Villeroy de Galhau were all considered potential replacements for Lagarde, in the event of her leaving halfway through her eight-year term.Knot, usually on the hawkish side of the monetary policy debate, was oddly quiet in recent weeks, even as other governing council members have been lining up to call for the ECB’s first rate rise in a decade to come by July.Meanwhile Rehn and Villeroy, normally considered to be more centrist on policy, have been loudly calling for an ECB rate rise in July — a more hawkish position aimed at appealing to northern countries. All this posturing seems to have been for a job vacancy that was never likely to exist. Although Lagarde had been rumoured to be a possible future prime minister earlier this year, she was seen by experts in Paris as an unlikely choice because her post at the ECB is arguably more prestigious and powerful, especially under Macron who centralises power in the Elysée palace.Her profile as a successful US lawyer, IMF president, and a centre-right politician who served as minister under former president Nicolas Sarkozy was also not the right political choice for Macron, who will be seeking to court leftwing voters in the run-up to next month’s parliamentary elections. Borne, a government official who served several centre-left administrations before being appointed labour minister in 2020, fits that bill. Plus, it is in France’s interest to have a friendly politician at the head of the ECB, especially with recession looming, inflation rearing its head and the central bank preparing to ditch a decade of ultra-loose monetary policy.What to watch today EU defence ministers meet in BrusselsUS Treasury secretary Janet Yellen speaks at the Brussels Economic Forum Notable, Quotable

Nod to Nato enlargement: Vladimir Putin has signalled that Russia will tolerate Finland and Sweden joining Nato, but warned that the Kremlin will respond if the alliance installs military bases or equipment in either country.Corporate exodus: US fast food giant McDonald’s will sell its Russian business, two months after temporarily closing its restaurants in the country, the latest corporate pullout in response to the invasion of Ukraine. France’s carmaker Renault, for its part, plans to sell its stake in Avtovaz, the manufacturer of Lada cars, for the symbolic sum of two roubles.Scholz curse: German chancellor Olaf Scholz suffered a major setback in regional elections on Sunday when his Social Democrats slumped to their worst electoral result in North Rhine-Westphalia, once an SPD stronghold. The two big winners were the opposition Christian Democrats and the Greens.Business of Luxury Summit | 18-20 MayLeaders from British Vogue, Valentino, Ermenegildo Zegna and YSL will debate the luxury sector’s most pressing questions at this year’s Business of Luxury summit, hosted at the Fairmont Windsor Park. Sign up at ft.com/luxurysummit More

The writer is president of Queens’ College, Cambridge, and an adviser to Allianz and GramercyWith so much going on in the global economy and financial markets, the dollar’s strong recent appreciation has attracted less attention than what would have been expected given the historical experience.On paper, the appreciation of the currency of the world’s most resilient economic performer should help adjustments in the global economy. It helps boost the exports of weaker countries while alleviating inflationary pressures in the US by lowering the cost of imports.But in current conditions, there are hazards in a rapid rise in the dollar for both the wellbeing of an already wobbly global economy and for unsettled financial markets.Since the start of the year, the dollar has appreciated by some 10 per cent as measured by DXY, a widely-followed index of the currency’s global value. In what has been a notably broad move encompassing the currencies of the vast majority of economies, the total 12-month appreciation of 16 per cent has taken the index to levels not seen for 20 years.Three factors are in play: expectations that the US Federal Reserve will raise interest rates more aggressively than other central banks in the advanced world; US economic outperformance that attracts capital from the rest of the world; and the relative haven appeal of its financial markets.So far there has been little political pushback to a development that erodes US competitiveness and contributes to its record trade deficit. In the past, such rises in the dollar have threatened trade wars. Now America’s strong labour market has countered potential tensions.Yet the lack of US political antagonism over the dollar’s ascent does not mean that it’s smooth sailing for global economic and financial stability. The risks are particularly acute for those developing countries already facing the clear and present dangers of crises over the economy, energy, food and debt.For most of them, dollar appreciation translates into higher import prices, more costly external debt servicing and greater risk of financial instability. It puts further pressure on countries that already stretched in resources and policy responses by the fight against the ravages of Covid.

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The concern is particularly acute for low-income countries hampered also by high food and energy inflation. A cost of living crisis here is also a threat of famine for the most vulnerable ones.If allowed to burn further, what I have called the “little fires everywhere syndrome” — that is, multiplying country cases of economic and financial instability — can merge into a bigger, more dangerous combination of damaged global growth, debt defaults, and social, political and geopolitical instability.The spillbacks to the advanced economies are potentially more problematic than any direct effect on them of dollar appreciation. In addition to weakening the external growth engines of such economies at a time of growing stagflation at home, a destabilised developing world can add volatility to financial markets that are already dealing with multiple risks.Financial markets already had to navigate a significant increase in interest rate risk owing to the persistently high inflation that has caught the Federal Reserve massively offside. In the process, the disruptions to government bonds spread to other market segments as the concerns over tightening financial conditions started to mount. Now markets have to worry more about slowing global economic growth.As unpleasant as the wealth destruction has been this year, its impact on economic activity has been muted and the risk of market functioning has yet to kick in. Having said that, for those with sharp noses, there is already some scent of this owing to the crypto carnage, together with repeated price gapping in the US Treasury market’s global benchmarks.Even if this were to develop into something bigger because of payments disruptions in the developing world, the Fed would find it tricky to revert to its usual policy of flooding the markets with liquidity given its bloated balance sheet and inflationary concerns.The way to reduce the risks associated with too rapid a dollar appreciation is for the rest of the world to progress faster with structural reforms that enhance growth and productivity, improve returns on capital and increase economic resilience.Without that, the theoretical promise of an orderly global adjustment, including external boosts for underperforming countries, would become a challenging source of economic and financial instability.  More

This article is part of a guide to London from FT GlobetrotterThe pausa pranzo — the “lunch pause” — is an almost sacred tradition in Italian working life. When the clock strikes uno, office workers head home or into a nearby osteria and relax for an hour (or several) with good food and company. The dreary desk lunch has yet to truly penetrate the business world in Rome or Milan, and one hopes it never will. It is the image of an alternative Italian life that, at least once during the week, reminds me to treat myself to a leisurely lunch break, a proper pausa pranzo. “Pause” feels more ponderous than “break”, and so I fill the allotted hour with activities of this nature. Sometimes this is as simple as a long walk along the river; at other times, I wander the backstreets of an area to discover new cafés or I seek little rushes of culture in galleries or museums. The following recommendations are a small selection of the many rejuvenating ways to fill a lunch hour around three of London’s main office hubs. I guarantee that on these days you will return to work reset and ready to plough on through the afternoon. King’s Cross and BloomsburyGood for: Canals, museums and picnicking squares Not so good for: The constant thrum of construction drillingFYI: Museum Mile can feel like overload for those seeking a quick culture or curiosity fix. Instead, narrow it down to the small Petrie Museum of Egyptian Archaeology or the Brunei Gallery at SOAS — they have collections from the Middle East, Africa and Asia

A 645-635BC Assyrian relief of a lion hunt on display at the British Museum © Lanmas/Alamy

Bloomsbury and King’s Cross are frothing with creativity, as tech giants, start-ups, marketing agencies and small publishing houses rub shoulders with academia and museums. Your lunch break could take you anywhere from the British Museum to view the magnificent Assyrian lion reliefs, to the Regent’s canal at King’s Cross watch the boats. To narrow things down a bit, I focus on green space — especially at King’s Cross, where new buildings are almost always going up. The tree-lined St Pancras Old Church Gardens, for instance, provides a tranquil picnic spot. The church is tiny and medieval, with remnants of paint peeping from beneath the plaster. Also, the writer and women’s rights activist Mary Wollstonecraft is buried in the graveyard.

The gardens around St Pancras Old Church make for a peaceful lunchtime picnic spot © Peter Cripps/Alamy

Nearby is Camley Street Natural Park — an urban wildlife sanctuary on Regent’s Canal where blossom-embowered walkways weave between ponds and rushes. You can sit and read at the outdoor café, watch boats drift along the water and delight in the illusion that a little nature adds to a city.Just over the bridge is Coal Drops Yard, where Thomas Heatherwick’s sublime architecture flows over the stolid geometry of industrial warehouses that were once used for hauling coal up from barges on the canal. The Yard is now a shopping arcade with more than a dozen eateries, but if you’re there at the end of the week, the best lunch is to be found at the stalls beneath West Handyside Canopy, a former fish market, which is open Friday through Sunday. Here they offer the usual London array of eclectic deliciousness — everything from bibimbap to oysters.

The Canopy Market in West Handyside Canopy, a former fish market © Bradley Taylor/Alamy

Stroll along Regent’s Canal to the floating bookshop Word on the Water, and see what takes your fancy from its august selection. In winter, they light the stove and the reading space gets cosy. For another true emporium of delight, peruse the Relic Antique Warehouse, which describes itself as selling “exquisite antiques at fine prices”. Be warned, your purchases will be impulsive and eccentric.If you are more Bloomsbury inclined, your lunch break may well involve some glorified slacking in one of its leafy squares — Gordon Square is particularly good for this. On the corner is a little kiosk called Momo’s Garden Café, from which the smell of baking wafts across the green.

Momo’s Garden Café in Bloomsbury’s Gordon Square © Paul Carstairs/Alamy

If all that is too much, simply visit the Waterstones café inside a turreted red-brick fortress surrounded by Gower Street, Torrington Place and Malet Street. This Hogwarts-like branch of the national bookshop chain is just the place to find a nook and pass an hour reading.

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Canary WharfGood for: Getting to grips with London’s maritime heritageNot so good for: Sunlight — most of it is blocked by skyscrapersFYI: Canary Wharf was first conceived as a sort of “back office” for banks’ support operations. Construction began in 1988, with the first buildings completed in 1991. This included the iconic One Canada Square, whose principal architect was César Pelli — he based his design on a combination of Three World Financial Center in New York and the Houses of Parliament’s Elizabeth Tower

The Yurt Café in Limehouse, east London © Cat Morley/Avalon

Before you start exploring this steel and glass Mount Parnassus, stop off at a spot that stands in direct contrast with it: the Yurt Café, a couple of minutes from Limehouse station. Though it sounds gimmicky, this tranquil garden and tent set-up is very appealing, especially if you want to spend time reading the paper. They also do good Moroccan-inspired dishes and cake. From here, stroll along to Limehouse Marina, where boats’ masts tinkling in the breeze provides the most sonorous of joys. The Marina was once used to unload coal and timber from cargo ships — as well as, unusually, circus animals and ice. German submarines were scrapped here after the first world war; now it’s a mix of narrowboats and luxury yachts.

Cargo ships once docked at the Limehouse Marina, which today is home to narrowboats and yachts © I-Wei Huang/Alamy

After just two stops on the DLR to Canary Wharf (or a 20-minute walk along Narrow Street), you are dwarfed by New York-style skyscrapers. Green relief awaits at Jubilee Park, where benches sit alongside sculptures and fountains. Crane your neck up beyond the trees to admire César Pelli’s God-bothering glass finger. If it’s a chilly day, the Crossrail Place Roof Garden offers the same effect but you will be sitting snug beneath a greenhouse covering.

Jubilee Park is the green heart of Canary Wharf © Greg Balfour Evans/Alamy

If you’re curious about the area, the Museum of London Docklands provides a fascinating insight into the story of the Thames and the Port of London, as well as its fraught colonial history. Much of Docklands was devastated during the Blitz in the second world war, but this museum reimagines the thriving port, with its pubs populated by sailors; the creak of keels and gaskets, the shouts of aft and stern as ropes were thrown when boats came into harbour. Buoyed by this spirit, you may wish to pick up supper at Billingsgate Fish Market, where porters used to wear special leather hats on which they carried crates.

One of the residents of Mudchute Farm on the Isle of Dogs © Alamy

If you’re on a longer lunch break, stroll down to Millwall Park and Mudchute Farm and café, on the Isle of Dogs. Again, there’s a New-York feeling to leaving the skyscrapers and hitting the river, although the city farm with its lambs is idiosyncratically British. Continue walking to the river and look across to Greenwich’s magnificent Old Royal Naval College. Jump on one of the Thames Clippers boats from Masthouse Terrace Pier and leave Canary Wharf behind you. You’ll want to commandeer the boat, head for the high seas, feel the wind in your hair and not look back. But oh no . . . there goes the lunch bell.

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The CityGood for: 15th-century architecture, exquisite churches, serendipitous squares and gardensNot so good for: Queues for food at lunchtimeFYI: For lunchtime concerts, check the schedules here

Postman’s Park in the City of London. Its Memorial to Heroic Self-Sacrifice honours people who died while rescuing others © John Bracegirdle/Alamy

Step out of the office and take in the domed view of St Paul’s and the spires of Baroque churches competing to be seen amid the ever-expanding mass of steel and glass.Though the City is closely packed, there are gardens aplenty. From the top of the Monument, built to commemorate the Great Fire of 1666, you can spot dozens of these little handkerchiefs of green. Particularly pleasant is Postman’s Park, laid out in a circle of benches and a small pond, with plaques dedicated to everyday heroes who died while saving others’ lives.

Climb to the top of the Monument, which commemorates the Great Fire of 1666, for a bird’s-eye view of the City © Nathaniel Noir/Alamy

More gardens would have been added if Christopher Wren’s plans for rebuilding after the fire had been realised. He designed the new city around piazzas and canals, but his vision was rejected and the area was developed on an ad hoc basis, which goes some way to explain its higgledy-piggledy nature. Still, Wren built 51 wonderful churches in the Square Mile, of which a personal favourite is St Mary-le-Bow — famous for the Bow Bells that have rung out for centuries. Inside is a lovely café, but equally you can sit in the pews and just think for an hour. Indeed, a church is one of the few places in corporate London where you don’t have to queue, pay or make a reservation.

The interior of St Michael Cornhill, one of the many City churches to offer lunchtime concerts © Steve Vidler/Alamy

Like most historic churches, these have fabulous acoustics, which you’ll discover if you slip inside for one of their daytime concerts, of which there are many throughout the week, from organ recitals in St Michael Cornhill to soothing classical guitar or jazz in St Stephen Walbrook. The latter’s altar was carved by Henry Moore, and the church was the founding place of the Samaritans mental-health charity. The old St Stephen Walbrook used to sit above the ruins of the Temple of Mithras, or the London Mithraeum, which now lies concealed beneath the Bloomberg building (its remains were discovered in 1954). Visiting is somewhat psychedelic — as you descend underground to the temple, a sound and light medley attempts to conjure the experience of Roman worship and ritual. The adjoining museum of Roman artefacts found by archaeologists during excavations from 2012-14 is fascinating.

‘The Garden of Eden’ by Hugh Goldwin Riviere at the Guildhall Art Gallery evokes the London of 120 years ago © Nick Harrison/Alamy

For a quick art fix, the two-roomed Guildhall gallery is a gem. Here you can gaze at a Rossetti redhead, Constable’s sylvan landscapes and a peculiar 1901 painting of a grey London day by Hugh Goldwin Riviere called “The Garden of Eden”. In it a couple walk together, their hats dripping with rain. Mist rises from railings and resolves around them; in the background are cabs and solitary figures in suits. Somehow this dreich depiction of urban life was Riviere’s version of paradise. Towards Bank and Liverpool Street, two public spaces are notable for being friendly and accessible. The first is Devonshire Square: a hidden gem found by ducking down Devonshire Row (or the back way via Cutler Street) and emerging into this cavernous warehouse complex, with trees reaching up to a glass roof. There are plenty of benches to perch on with a sandwich, otherwise Cinnamon Kitchen does a grand lunch.

A late-Victorian masterpiece: the Leadenhall Market © Maremagnum/Getty Images

The second is the ornate Leadenhall Market, a former poultry, game and meat market dating back to the 14th century. Its current wrought iron and glass structure was built in 1881, and today its arcades are filled with shops and pubs. A century later, Richard Rogers designed the nearby Lloyd’s Building with all its innards (vents, cables, ducts) on the outside to leave more space inside for employees. As a result, the trading halls are lofty and uncluttered, and the facade is as bizarre as the Centre Pompidou’s (co-designed by Rogers) but rendered in the smooth beauty of monochrome steel. To my mind, it’s one of the most beguiling pieces of modern architecture in the City, and certainly more considered than the cheesegraters, nozzles and apple-corers that have sprung up since. Rogers died last year but his people-centric architectural ideas, like Wren’s, will resonate for centuries.

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Daniel Davies is a managing director at Frontline Analysts, and the author of ‘Lying for Money: How Legendary Frauds Reveal the Workings of Our World’.Anyone who follows central banks knows that there are some subjects they love talking about endlessly (inflation forecasts), some they’re less happy being open about (quantitative easing) and some where they’re hardly prepared to talk at all. The key function of “lender of last resort” is very much in the third category. In the language of memes:

Which makes it surprising that the Bank for International Settlements published a short four-page document last Wednesday which seems to set out an entire policy framework for the extension of that role to emergencies in all kinds of financial markets, potentially going well beyond the banking system. Only true central bank trainspotters will have seen it, given the lack of a press release and the unassuming title of “Market dysfunction and central bank tools: Insights from a Markets Committee Working Group”, but it’s actually quite radical.Here’s why it mattersBeing cagey about the circumstances in which central bank support might be offered is an old tradition. If you ever want to learn about last-resort lending to the banking system, arguably your best reference is still “Lombard Street”, by Walter Bagehot. Despite being written in 1873 by the then editor of The Economist, over time central bankers have tacitly and grudgingly admitted that the book has things about right. Ever since the Great Financial Crisis, economists like Perry Mehrling have been arguing that we need a “New Lombard Street”, because the Federal Reserve, Bank of England, European Central Bank and the rest have steadily taken on a role as “dealer of last resort” when securities markets threaten to blow up. However, hardly anyone has been optimistic for the prospects of getting any clear policy statement. And by and large the central bankers themselves have taken the Fight Club approach to their most politically sensitive and economically risky activity.

But now we have the equivalent of a TED Talk on the subject. The “Markets Committee” of the BIS is an obscure cousin of the Basel Committee on Banking Supervision, formerly known as the Committee on Gold And Foreign Exchange. They’re central bank operations and markets people, most famous for rewriting the FX Code. And they’ve made a straightforward statement, in reasonably clearly written English, of what they call the “Backstop Principle”.. . . In situations where it appears likely that market dysfunction will have a material adverse impact on the real economy, central banks should consider using their ability to expand their balance sheets and provide liquidity in order to mitigate this impact.This looks like it could form the basis for a quite activist policy; it would suggest that central banks did the right thing in March 2020, when they flooded the market with liquidity to prevent bond markets locking up at the start of the COVID pandemic. The Markets Committee is still a little bit worried about moral hazard in the long term. But the caveat they make looks more like a definition of what constitutes a “backstop” than anything which might justify ever letting an economically-significant market freeze up.. . . Central banks should aim under normal market conditions not to (i) interfere with price discovery or market determination of the allocation of resources; or (ii) substitute for the primary obligation of market participants to manage their own risks . ..The document identifies a number of “open issues” which also touch on previously neuralgic policy issues. It suggests that in many cases, outright asset purchases can be a more powerful tool of intervention than just providing liquidity through the banking system, as QE purchases can directly attack mispricings and balance sheet overhangs (at the cost of probably creating worse moral hazard and exposing the central bank balance sheet to more risk, but swings and roundabouts etc). It also holds out the possibility that the lender of last resort function shouldn’t necessarily be restricted to banks — any institution that’s subject to “appropriate regulation and supervision” might reasonably be given emergency liquidity in a crisis.So the interesting question arises — what is the status of this document? If it were to be a general statement of global central bank policy, it’s one of the most important such statements since the days of Bagehot. Although the authors recognise that different countries and situations will interpret it differently, the backstop principle itself gives a lot more clarity about the circumstances in which central banks will and won’t ride to the rescue.It isn’t such a statement, of course. It’s an ad hoc publication by a working group of a committee, with only two members of that working group named (Andy Hauser of the Bank of England, and Lorie Logan, now off to lead the Dallas Fed but at the New York Fed’s markets desk when it was written). The backstop principle isn’t binding on anyone, either for action or inaction. But it’s not just a thrown-off thinkpiece either. It’s something that a committee of the BIS — a famously consensus-driven club of central banks — has decided is worth putting in the public domain. In terms of a new Lombard Street, this is likely to be as much as we’re going to get, and more than we were expecting. More

When US Treasury secretary Janet Yellen meets her counterparts in Brussels on Tuesday, one big topic for discussion will be how to fund a country battered by war. While the immediate concern is covering Ukraine’s short-term financing needs, officials are also increasingly worried about a reconstruction bill that is heading above half a trillion euros. Some are now tempted to use the roughly $300bn of Russian foreign exchange reserves frozen when the EU, the US and their allies imposed sanctions on the country’s central bank. Josep Borrell, the EU’s top diplomat, this month called for the assets of the Russian state to be directly targeted, saying such a move would be “full of logic” given the enormous cost. But confiscating foreign governments’ assets would be fraught with risk and legally questionable, according to some scholars. As the US Treasury secretary put it last month, using Moscow’s reserves to fund rebuilding is not something to consider “lightly”. Why would such a move be seen as incendiary?Governments around the world hold the bulk of their wealth in dollars and euros. Beijing, for instance, is one of the biggest holders of US Treasuries in the world.

The decision to freeze Russia’s assets has already raised concern in states with tense relations with the US and Europe. An outright seizure of Moscow’s wealth would be viewed as crossing a political Rubicon. “It would essentially be an action that does away with the international political economy system we have set up over [recent] decades,” said Simon Hinrichsen, a visiting fellow at the London School of Economics.In a blog post published by the Bruegel think-tank on Monday, Nicolas Véron and Joshua Kirschenbaum argued that while the idea of seizing the assets was “seductive”, it was also “unnecessary and unwise”. “Credibly standing for a rules-based order is worth more than the billions that would be gained from appropriating Russia’s money,” they said. “Countries place their reserves in other countries trusting they will not be expropriated in situations short of being at war with each other.” The possibility of leaving the reserves frozen and later returning them to Moscow was also “a powerful bargaining chip” for Kyiv, the two authors said. What is the US’s stance? Yellen has said making Russia pay for rebuilding is something that the authorities “ought to be pursuing”, though the Treasury secretary has cautioned that doing so would require changes in US law and require the support of US allies. In the new $40bn aid package for Ukraine that is making its way through Congress, the Biden administration has proposed measures that would make it easier and faster for the government to seize assets linked to Russian “kleptocrats”. The Biden administration has form in seizing governments’ assets: earlier this year the president ordered some of the Afghan central bank’s wealth that was parked in accounts in the US to be used for humanitarian assistance. Still, doing the same in the case of Russia would involve surmounting significant legal obstacles. What do lawyers think? International law recognises that the assets of convicted war criminals can be seized in reparations to their victims. In 2017 Hissène Habré, the former president of Chad, was ordered by a special war crimes tribunal to pay more than $145mn to victims of abuses under his rule. However, Habré died last year without his victims seeing compensation.There was more success in the case of Iraq, where the country’s government has paid $52bn to victims of Saddam Hussein’s invasion of Kuwait. The last payment, funded by oil sales and backed by the UN, was made earlier this year.

With Ukraine, the scale of the asset freezes already targeting Russia is a clear advantage. But the assets remain the property of Moscow under US law. Lee Buchheit, a veteran lawyer of international finance, said the US president was likely to need an act of Congress to change that. “The issue is whether they can take the next step and actually confiscate [the assets],” said Buchheit. “It is highly likely to happen, because the political pressure on western leaders is building to take this step.”However, Véron and Kirschenbaum argue that, even if Congress passes new legislation, it could be found to be unconstitutional in future court cases. “Such an aggressive expansion of executive powers might even cause the US judiciary to revisit the deference it has historically granted the government when exercising blocking or other sanctions authorities,” they said.What other ways are there to make Russia pay? Confiscating assets of wealthy individuals is one route. The Biden plan has bipartisan support, with both Republican Lindsey Graham and Democrat Richard Blumenthal championing it in the Senate. The EU has set up a so-called freeze-and-seize task force which is examining whether to take a similar approach to the US — as are officials in the European Commission’s justice directorate. One stumbling block is that asset confiscation is subject to strict legal limits in member states, and in many (although not all) cases it can only happen following a criminal conviction of the owner of the relevant property. To overcome this, the commission is working on measures to clarify that evasion of sanctions — for example, by moving assets to another jurisdiction — is itself a criminal offence, facilitating the confiscation of the assets by the authorities. But, compared with the vast wealth of the Russian central bank, the assets of the oligarchs are relatively small and would leave the allies with a massive gap to plug in the reconstruction bill. More

High energy and food prices are particularly bad news for people who live from one payday to the next. In the UK, about 22 per cent of adults have less than £100 in savings, according to a government-backed survey. In the US, about 20 per cent of households say they could only cover their expenses for two weeks or less if they lost their income, according to the consumer protection regulator.In this context, many employers are keen to do something to help their staff become more “financially resilient”. One increasingly popular idea is to partner with companies which provide “earned wage access” or “early salary advance scheme” products. These companies connect with an employer’s payroll to let employees draw down some of their forthcoming pay packet in advance. The companies usually charge a fee per transaction (generally between £1 and £2 in the UK) which is paid by the employee or the employer. The products are largely unregulated because they are not seen as loans. They are proliferating in the UK, the US and a number of countries in Asia such as Singapore and Indonesia. Revolut, the UK-based banking app, has also entered the market, telling employers it is a way to “empower employee financial wellbeing, at no cost to you”. Data is scarce, but research company Aite-Novarica estimates that $9.5bn in wages were accessed early in the US in 2020, up from $3.2bn in 2018.In a world where many employers don’t offer ad hoc advances to employees any more, these products can help staff cope with unexpected financial emergencies without having to resort to expensive payday loans. Some of the apps like UK-based Wagestream, whose financial backers include some charities, combine it with a suite of other services like financial coaching and savings. There is also value in the clear information some of these apps supply to workers about how much they are earning, especially for shift workers.But for companies which don’t offer these wider services, there is a question about whether payday advances really promote financial resilience. If you take from the next pay cheque, there is a risk you will come up short again the following month. Data from the Financial Conduct Authority, a UK regulator, suggests users take advances between one and three times per month on average. While data shared by Wagestream shows 62 per cent of its users don’t make use of the salary advance option at all, 20 per cent tap it one to two times per month, 9 per cent tap it four to six times and 9 per cent tap it seven or more times.As well as the risk of becoming trapped in a cycle, if you are paying a flat fee per transaction the cost can soon add up. The FCA has warned there is a “risk that employees might not appreciate the true cost” compared to credit products with interest rates. Against that, Wagestream told me frequent users weren’t necessarily in financial distress. Some users are part-time shift workers who simply want to be paid after every shift, for example. Others seem to want to create a weekly pay cycle for themselves. Wagestream users on average transfer lower amounts less often after a year. The company’s “end goal” is that all fees are covered by employers rather than workers. Some employers do this already; others are planning to as the cost of living rises.Regulators have noticed the market but haven’t got involved yet. In the UK, the FCA’s Woolard review last year “identified a number of risks of harm associated with use of these products”, but didn’t find evidence of “crystallisation or widespread consumer detriment”. In the US, the Consumer Financial Protection Bureau is expected to look again at the question of whether any of these products should be treated as loans. A good place to start for regulators would be to gather better data on the scale of the market and the ways in which people are using it.Employers, meanwhile, should be wary of the idea they can deliver “financial wellbeing” on the cheap. Companies that believe in the value of these products should cover the fees and keep an eye on the way staff are using them. They could also offer payroll savings schemes to help people develop a financial cushion for the future. Nest, the UK state-backed pension fund, has just concluded an encouraging trial of an “opt out” approach to employee savings funds.If employers don’t want to go down that road, there is a perfectly good alternative: pay staff a decent living wage and leave them to it. [email protected] More