June 12 ,2018
United States:
U.S. Small-Business Optimism Hits Second-Highest on Record
A gauge of optimism among U.S. small-business owners rose to a 34-year high amid increasingly sunny expectations for sales and profits, a National Federation of Independent Business survey showed Tuesday. Small-business sentiment has remained elevated since Donald Trump was elected president in late 2016, with tax cuts, reduced regulations and solid economic growth supporting the optimistic outlook. At the same time, owners continued to cite difficulty finding workers with the necessary skills and qualifications and have raised compensation accordingly amid the lowest unemployment rate in 18 years. The report suggests that Trump administration tariffs, along with freight bottlenecks that have pushed up costs for some businesses, have had little effect so far on small-company sentiment.
Powell’s Fed Could Clear Up a Few Mysteries Puzzling Investors
Jerome Powell might have some explaining to do. The Federal Reserve meets Tuesday and Wednesday in Washington and the gathering will be followed by fresh economic projections and a press conference with Chairman Powell. While the news will likely be an expected interest-rate increase, the Fed has plenty of topics to dissect — from a falling unemployment rate to emerging-market pain. Powell and his colleagues could shed light on these five longer-run policy themes. The labor market is running hot, so a job market discussion is sure to be on the Fed’s agenda. The committee’s 2018 unemployment projection is probably destined for a revision, since it places joblessness at 3.8 percent by the end of the year and the data hit that level in May. But more interesting is whether officials will cut their longer-run unemployment estimate — now at 4.5 percent — and how they explain any change. The Fed says unemployment is already running below the level that can be sustained in the longer run, but wages are crawling higher rather than taking off. What’s more, job growth hasn’t slowed down as much as you might expect in an economy with a big worker shortage. Those developments could push the Fed to revise down that longer-run jobless rate, signaling the labour market is not as hot as expected with unemployment this low. More people working means the economy has more capacity to grow. If the effect is big enough, it could even mean interest rates can rise higher before choking off growth.
Europe:
German Investor Confidence Extends Slide as Political Risks Gain
German investor confidence tumbled to its lowest level since 2012 as U.S. trade tariffs and Italy’s political turmoil added to concerns that the economy is weakening. The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor expectations fell to minus 16.1 in June from minus 8.2 in May, marking the fourth monthly decline this year. Economists in a Bloomberg survey predicted a drop to minus 14. The negative reading means that more of those investors surveyed saw a worsening of the outlook than forecast an improvement. German investor confidence tumbled to its lowest level since 2012 as U.S. trade tariffs and Italy’s political turmoil added to concerns that the economy is weakening. The ZEW Center for European Economic Research in Mannheim said on Tuesday that its index of investor expectations fell to minus 16.1 in June from minus 8.2 in May, marking the fourth monthly decline this year. Economists in a Bloomberg survey predicted a drop to minus 14. The negative reading means that more of those investors surveyed saw a worsening of the outlook than forecast an improvement. The downbeat assessment comes after Italy, Germany’s fifth largest trading partner, triggered doubts over its commitment to euro-area membership when its new populist government promised to implement spending plans that would break European Union rules. Italian bonds and stocks recovered on Monday after Finance Minister Giovanni Tria made assurances that Italy had no plans to leave the single currency. The turmoil added to mounting concerns over global trade after the U.S. imposed import tariffs on European steel and aluminum. While economists have downplayed how damaging the measures will be for the region’s expansion, Germany’s export-driven economy already appears to be coming off its peak, a trend which could worsen if further risks materialize. “The recent escalation in the trade dispute with the U.S. as well as fears over the new Italian government pursuing a policy which potentially destabilizes the financial markets have left their mark on the economic outlook for Germany,” ZEW President Achim Wambach said in a statement.
Asia:
World’s Fastest Growth Yet to Make a Mark on India’s Job Market
Hiring in India’s formal job market remained stagnant even as growth accelerated at the fastest pace among the world’s biggest economies. A survey of 5,110 employers conducted by Manpower Group found 16 percent planned to increase their workforce in the quarter ending September. It includes companies in the formal sector, who employ 10 or more workers. Data on India’s informal labor market, which employs the majority of its workers, is limited. “Major trends that will drive recruitment in 2018 in India are diversity, automated recruitment, virtual reality, remote working options,” AG Rao, group managing director of Manpower Group India said in a statement Tuesday. The service sector and wholesale and retail trade are expected to have the strongest outlook, with 20 percent of respondents saying they planned to hire in the September quarter. Prime Minister Narendra Modi’s government is counting on high levels of economic growth to deliver jobs before the country heads for elections in 2019. Gross domestic product growth has accelerated in each of the last four quarters, hitting 7.7 percent for the quarter ending March. Before sweeping to power in 2014, Modi appealed to young job-seekers with a promise to create 10 million jobs. Four years later it remains unclear how many positions have been created. More than 12 million Indians enter the workforce every year, government data show. Though the rate of hiring isn’t increasing dramatically, neither are large numbers of jobs being lost, data indicates.