Economy · August 6, 2022

US jobs data scald expectations for fuel rate hikes

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A positive streak of US employment data has allayed some of the concerns of a recession in the world’s largest economy.

More than expected 528,000 jobs were created in July, up from 398,000 the previous month, with the unemployment rate dropping from 3.6% to 3.5%, the lowest level since the pandemic began.

Today’s figures follow last week’s GDP data, which shows the economy shrank for the second consecutive quarter, prompting concerns that the US is entering a recession – an as yet unconfirmed state – although the government says it is. is still in good shape. Federal Reserve Chairman Jay Powell warned against putting too much emphasis on the GDP reading, arguing that interest rates could rise further without triggering a slump.

Separate data yesterday showed that the number of people applying for unemployment benefits last week reached 260,000, the highest in more than six months, suggesting the labor market was starting to cool.

Several large companies recently announced they are losing jobs, including retail giant Walmart, brokerage Robinhood, media companies Netflix and Twitter, and electric car maker Tesla. Tech groups Meta and Alphabet, Google’s parent company, have announced a slowdown in hiring.

US government bonds and stock futures were sold after today’s more positive news as traders are betting the Fed will continue its aggressive streak of interest rate hikes.

“The unexpected acceleration of non-farm wage growth in July, coupled with the further decline in the unemployment rate and the renewed resumption of wage pressure, make fun of claims that the economy is on the verge of recession,” he said. said Michael Pearce, senior US economist at Capital Economics. “All the details [of the report] they seem to support the Fed’s continuing aggressive rate hikes ”.

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Good to know: the economy

Europe and Asia are fighting for security gas suppliesrisking a further hike in prices that could intensify the compression of the cost of living on consumers.

Bank of England Governor Andrew Bailey defended his strategy after the central bank yesterday raised interest rates by 0.5 percentage points to 1.75%, the highest level since the global financial crisis. The BoE said the country will enter a prolonged recession by the end of the year, with inflation reaching 13% by the end of the year. He was criticized by promising Prime Minister Liz Truss and the FT editorial board, who said he needed to be more energetic.

Bank of England benchmark rate (%) line chart showing UK interest rates rise by half a point for the first time in 27 years

Latest for the UK and Europe

Energy poverty in the UK Activists opposed the move by the regulator Ofgem to change the energy price cap every three months instead of twice a year. Meanwhile, data on the earnings of low-income families highlighted the low level of social mobility in the country. scammers who exploited victims’ fears of the coronavirus are now preying on those affected by the cost of living crisis.

The number of British companies in “critical financial distress” it has increased by more than a third in the last year. Construction in the UK activity has declined for the first time since the beginning of last year due to rising inflation and interest rates.

Ukraine he demanded that the Russian bloc’s loosening of its grain exports be extended to other products such as metals.

This was shown by a survey by the European Central Bank consumers in the euro area turning gloomier, with expectations that inflation would remain above 2 percent for the next three years and that the economy will shrink by 1.3 percent over the next 12 months.

The latest world

Tensions rising throughout the Strait of Taiwan highlighted the risks to global supply chains as merchant ships and airlines are disrupted by Chinese military exercises. The Strait is the main shipping route between China and Japan, the second and third largest economies in the world, as well as transporting goods from Asian factories to world markets.

Taiwan map showing Chinese military exercises in March 1996 and August 2022

India it raised its benchmark interest rate by half a percentage point to 5.4% to try to curb the rise in inflation, currently at 7%.

Sergio Massa, the third person to take charge of the Argentine economy in just a month, has pledged to restore fiscal order and regain market confidence through a new “super ministry”. Her first measures include ending the printing of money to finance the budget, the creation of dollar reserves and the “reworking” of state subsidies.

The recent Japanese invention of heatstroke insuranceWhile captivating as a piece of commercial innovation, it tells a disturbing story about the state of the country’s “retirees”, writes Leo Lewis, editor of Asia business.

A review in the Reserve Bank of AustraliaThe management of rising inflation is closely followed by central bankers around the world who have been blamed for political and communication failures.

Need to know: business

Recent shaking financial markets it was reflected in declining profits and slowing new business at the UK investment platform Hargreaves Lansdown and outflows from Pimco, the world’s largest credit focused fund manager.

Lufthansa he said demand from affluent passengers would bring “substantially higher” profits in subsequent quarters, despite the current state of industry chaos.

profits a Glencore, one of the biggest winners of the commodity market turmoil, more than doubled in the first half of the year. Coal accounted for nearly half of its record $ 18.9 billion in adjusted earnings.

BayerGermany’s drug and chemicals group doubled its growth forecast for 2022 after rising food prices spurred demand for seeds and herbicides.

profits a Toyota, the world’s largest carmaker, nearly halved to 579 billion yen ($ 4.3 billion) in the second quarter thanks to rising costs and a halt to the pandemic in China. Meanwhile, Rolls Royce warned of the effect of rising inflation and supply chain problems.

Bellwether retail in the UK Next increased its full-year profit forecasts after hot weather boosted store sales in the first half of the year. There is hope on the horizon for online retail as well. Innovation editor John Thornhill examines an Indian e-commerce network enabling millions of small merchants to connect with suppliers, customers and delivery companies to address the likes of Amazon.

US media companies they have been hit by a “perfect storm” of problems, which have lost nearly $ 400 billion in market value this year. Discovery of Warner Bros said the era of “spend, spend, spend” streaming had come to an end as it posted a quarterly loss of $ 3.4 billion. Demand for advertising remains strong, according to WPPthe largest advertising group in the world, even if its investors weren’t convinced.

Barcelona FC he had previously been declared “clinically dead” by his president after years of high player spending coupled with the forced closure of his stadium during the pandemic. Sports publisher Josh Noble considers whether a new spending spree will help him reclaim past glories or simply rack up more financial woes for the future.

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Science rounds out

covid in the UK, although still high, they fell for the second consecutive week, filling hopes that the latest wave, led by the BA.5 variant, has peaked.

The United States is shifting focus on monkeypox after yesterday declared the outbreak a public health emergency and appointed a new team to improve access to tests, vaccines and treatments. The country accounts for about a quarter of the 22,100 global infections of the virus, which is spread through skin-to-skin contact and is usually found in West and Central Africa.

Two reports question the UK’s goal of becoming a “superpower of scienceWithout a greater focus on results and greater spending on research and development. Lack of space for labs is also threatening the life sciences boom in Oxford and Cambridge.

president of the United States Joe Bidenthe positive test for Covid just three days after announcing it was negative highlighted cases of “rebound” patients who were prescribed Paxlovid, which was hailed for preventing some of the worst effects of Covid in older patients or in patients with existing pre – conditions.

Japan is struggling with its largest coronavirus outbreak since the start of the pandemic, fueled by children and teens who haven’t been fully vaccinated.

Covid cases and vaccinations

Total global cases: 575.8 million

Total doses administered: 12.4 billion

Get the latest world photo with ours vaccine tracker

Some good news

The tram is back! Dozens of cities across Europe are reintroducing trams, relieving congestion and pollution, as well as claiming urban centers in a new golden age of transit. (Reasons to be cheerful)

Tram in Birmingham city center
A tram passes through Birmingham, UK, host city of the Commonwealth Games © Kirsty Wigglesworth / AP

Have you spotted some good news you would like to share with FT readers? Comment below or email us at disruptedtimes@ft.com.

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