Archives for November 2017

Yet there is also an uneasy feeling that the calm could be deceptive. While Germany does not have any serious economic problems that require wrenching policy changes, it faces rising longer-term challenges like an aging work force, the emergence of China as an industrial competitor and the need to invest in digital networks and a better power grid to stay relevant.

And Germany’s voice in important European matters that lie ahead could be diminished if Ms. Merkel oversees a weak, divided governing coalition.

“There are no pressing issues for the German government to address,” said Christian Kopf, head of fixed income at Union Investment, a fund manager in Frankfurt. “But we do need a capable government to deal with the severe challenges we face at the European level in the next two years.”

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Ms. Merkel, Germany’s leader for more than a decade, emerged as a major global figure in the wake of the 2008 global financial crisis. At home, she oversaw a plunge in joblessness and an economic expansion that contrasted with misery in much of the rest of Europe.

Her tenure is far from over. This week Germany’s Social Democrats were reconsidering their decision not to continue a coalition government with Ms. Merkel’s Christian Democrats. Five years of compromising with Ms. Merkel has hurt the Social Democrats among their blue-collar base. But the alliance of the two mainstream parties provided the kind of stability that business craves.

The economic outlook in Germany and Europe has not been this good in at least a decade, making the turmoil in Berlin seem like little more than background noise. The mood among European consumers is better than it has been since 2001. The eurozone economy has been expanding since 2013. In the most recent quarter, every country in the European Union grew except Denmark, where the economy shrank 0.3 percent compared with the previous quarter.

On the list of things keeping corporate executives up at night, business leaders and analysts say, the Berlin stalemate probably ranks well below other risks. More troubling for instance are North Korean nuclear arms, United States protectionism, a drift toward authoritarianism in Eastern Europe and Turkey, and Britain’s fraught attempt to work out a divorce from the European Union.

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But during her 12 years in office, Ms. Merkel has largely been coasting on reforms to the labor market and social welfare system undertaken by her Social Democratic predecessor, Gerhard Schröder, at great cost to his political career.

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To defend its long-term competitiveness, analysts say, Germany needs to be investing in infrastructure and its work force. With an unemployment rate of only 3.6 percent, the country will face labor shortages unless it can integrate immigrants into the work force. That will require more investment in education and training.

Corporations have a strong interest in political decisions that will be made in Brussels in coming years, such as common defense policy and the choice of a successor to Mario Draghi, the president of the European Central Bank, whose stimulus measures helped bolster the eurozone’s economy.

The twin pillars of German industry, precision machinery and automobiles, face unprecedented levels of technological change and new competition from places like China and Silicon Valley. European governments need to respond by, for example, building charging networks to encourage an electric car industry.

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“There is a deep structural adjustment process underway that requires assistance from the government,” said Ralph Wiechers, chief economist of VDMA, an organization that represents German engineering companies. “What are we producing in the future for what markets? What skills do we need to be competitive?”

Ms. Merkel has cordial if sometimes tense relations with German chief executives. She has led delegations of German business leaders to Beijing and other foreign destinations to promote their exports, and she beat back proposals that would have increased taxes.

She has been a zealous — perhaps too zealous — advocate of auto industry interests in Brussels. By fighting to dilute or delay stricter air quality standards, Ms. Merkel may have encouraged complacency among German carmakers. They did not invest enough in electric cars and risk being bypassed by Tesla in the United States or by Chinese automakers.

Other actions by Ms. Merkel have annoyed business. Her decision in the wake of the Fukushima disaster in 2011 to phase out nuclear power plants, without a clear plan to replace them with other sources of energy, has left German industry paying the highest electricity prices in Europe.

“She hasn’t done anything against business, on the other side she hasn’t done a lot for business,” Mr. Wiechers said. “There are no big programs where you can say, ‘She did this for the economy.’”

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On balance, Europe’s management class would probably be sorry to see Ms. Merkel go. Europe’s economy recovery is still young, and followed almost a decade of financial crisis and recession that nearly destroyed the eurozone. Right-wing populism has been contained in Western Europe but remains a threat.

Lorenzo Bini Smaghi, the chairman of the French bank Société Générale, credited Ms. Merkel with neutralizing reactionary elements in Germany and restraining those in her party who would have gladly let the eurozone collapse rather than support it with German tax revenue.

Despite the mixed feelings that business leaders have about the chancellor, her departure amid political disorder could shake their confidence. There are no potential successors with anywhere near her track record or international stature.

“It depends on how long the uncertainty lasts,” Mr. Bini Smaghi said. “In the European business world, the role she played in the crisis to push Germany forward rather than backward is very much appreciated.”

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Article source: https://www.nytimes.com/2017/11/28/business/germany-merkel-economy.html?partner=rss&emc=rss

Mr. Powell, 64, is a lawyer by training and an investment banker by trade, with deep roots in the financial industry and the Republican Party. Since joining the Fed, he has voted in favor of every policy decision — both monetary policy and regulatory policy — under the current Fed chairwoman, Janet L. Yellen, and her predecessor, Ben S. Bernanke.

President Trump nominated Mr. Powell in early November to succeed Ms. Yellen, whose four-year term as Fed chairwoman ends in early February. The position is subject to Senate confirmation, but after Tuesday’s hearing, that appears increasingly like a formality.

“Governor Powell has proved he is qualified to lead the Fed,” Senator Mike Crapo, the Idaho Republican who chairs the committee, declared in the opening moments of Tuesday’s hearing.

Some Democrats have indicated they might oppose the nomination. But, importantly, Mr. Powell drew little opposition from conservative Republicans who opposed both his nomination as a Fed governor in 2012 and his reappointment in 2014. Senator Dean Heller, a Nevada Republican who voted against Mr. Powell both times, said he was trying to get to yes.

Mr. Trump said he was replacing Ms. Yellen because he wanted to appoint his own chairman. Mr. Powell in his opening statement pledged to resist any political pressure.

He added that he had no reason to anticipate such pressure from the White House. “Nothing in my conversations with anyone in the administration has given me any concern on that front,” he said. His plan, he said, is to make policy decisions “with a view solely to right answers.”

The confirmation hearing was a relatively placid affair, with only a third of the seats in the hearing room occupied. Both Mr. Bernanke in 2010 and Ms. Yellen in 2014 were confirmed during periods of economic turmoil and sharp controversy about the conduct of monetary and regulatory policy. As economic growth has strengthened, public interest in those subjects has dissipated.

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Mr. Powell spent much of the hearing avoiding questions about fiscal policy, including tax legislation that currently commands most of the attention on Capitol Hill.

Asked whether Congress should pursue tax cuts that would increase the federal debt, he said that such questions should be left to Congress. He said the Fed had no position on the legislation.

“Do you have a personal position?” pressed Mr. Heller.

“No, Senator, I don’t,” Mr. Powell responded.

Asked by Democrats whether he accepted the analysis of the Congressional Budget Office, which found that the legislation backed by Republicans would sharply increase the federal debt, Mr. Powell responded that he had not looked at it.

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Janet L. Yellen, the current Fed chairwoman, and her predecessors have often warned that the growth of the federal debt is a problem for the economy.

Mr. Powell finally allowed that he shared concerns about borrowing too much, in the abstract.

“Without commenting on any particular bill, like all of us I am concerned about the sustainability of our fiscal path in the long run,” Mr. Powell said.

On regulation, Mr. Powell said that postcrisis changes have made the financial system stronger, but that those regulations were unnecessarily uniform.

He said he favored reduced regulation of smaller banks.

“Tailoring of regulation is one of our most fundamental principles,” he said. “We want it to decrease in intensity and stringency as we move down” to smaller banks.

He said the Fed was taking “a fresh look” at those rules.

Mr. Powell’s stance creates some distance from the Trump administration, which has described bank regulations as an ineffective impediment to growth.

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It also created some friction with Democrats, who see a continuing need for stronger regulations.

Senator Elizabeth Warren, Democrat of Massachusetts, asked Mr. Powell if there were rules that should be strengthened. Mr. Powell responded that he favored stronger enforcement in some areas, but that he did not see a need for stronger rules.

“I do think we’ve had eight years now of writing new rules and honestly I can’t think of a place now where we are lacking,” he said. “I think they’re tough enough.”

Senators asked few questions about monetary policy, a tacit endorsement of the Fed’s success under Ms. Yellen. Unemployment has fallen to 4.1 percent and inflation remains below 2 percent.

Some Republicans argue the Fed should have raised interest rates more quickly.

Mr. Powell said he does not agree. “We’ve been patient in removing accommodation and I think that patience has served us well,” he told the committee.

He emphasized that it was important to drive inflation back up to the 2 percent annual pace the Fed regards as optimal. Inflation is on pace to fall short of that target for the sixth straight year.

Indeed, Mr. Powell sounded less impressed by the health of the economy than some of his colleagues. A number of Fed officials have said that the economy is back at full employment, meaning that further reductions in unemployment will tend to drive up wages and inflation.

But Mr. Powell suggested that there might still be room for growth.

“There is no indication in wages that the labor market is overheating or even hot,” he said.

Mr. Powell, who would become the first non-economist in several decades to lead the central bank, also sounded confident in his own abilities to steer policy.

“You’re about to become the most important economic policymaker in the world,” Mr. Heller asked. “How do you feel about that?”

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Responded Mr. Powell, “I feel fine.”

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Article source: https://www.nytimes.com/2017/11/28/us/politics/jerome-powell-federal-reserve-nominee-testimony.html?partner=rss&emc=rss

Mr. Powell, 64, is a lawyer by training and an investment banker by trade, with deep roots in the financial industry and the Republican Party. Since joining the Fed, he has voted in favor of every policy decision — both monetary policy and regulatory policy — under the current Fed chairwoman, Janet L. Yellen, and her predecessor, Ben S. Bernanke.

President Trump nominated Mr. Powell in early November to succeed Ms. Yellen, whose four-year term as Fed chairwoman ends in early February. The position is subject to Senate confirmation.

Mr. Trump said he was replacing Ms. Yellen because he wanted to appoint his own chairman. Mr. Powell in his opening statement pledged to resist any political pressure.

He added that he had no reason to anticipate such pressure from the White House. “Nothing in my conversations with anyone in the administration has given me any concern on that front,” he said. His plan, he said, is to make policy decisions “with a view solely to right answers.”

The confirmation hearing was a relatively placid affair, with only a third of the seats in the hearing room occupied. Both Mr. Bernanke in 2010 and Ms. Yellen in 2014 were confirmed during periods of economic turmoil and sharp controversy about the conduct of monetary and regulatory policy. As economic growth has strengthened, public interest in those subjects has dissipated.

Mr. Powell spent much of the hearing avoiding questions about fiscal policy, including tax legislation that currently commands most of the attention on Capitol Hill.

Asked whether Congress should pursue tax cuts that would increase the federal debt, he said that such questions should be left to Congress. He said the Fed had no position on the legislation.

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“Do you have a personal position?” asked Senator Dean Heller, Republican of Nevada.

“No, senator, I don’t,” Mr. Powell responded.

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Asked by Democrats whether he accepted the analysis of the Congressional Budget Office, which found that the legislation backed by Republicans would sharply increase the federal debt, Mr. Powell responded that he had not looked at it.

Janet L. Yellen, the current Fed chairwoman, and her predecessors have often warned that the growth of the federal debt is a problem for the economy.

Mr. Powell finally allowed that he shared those concerns, in the abstract.

“Without commenting on any particular bill, like all of us I am concerned about the sustainability of our fiscal path in the long run,” Mr. Powell said.

On regulation, Mr. Powell said that post-crisis changes have made the financial system stronger, but that those regulations were unnecessarily uniform.

He said he favored reduced regulation of smaller banks.

“Tailoring of regulation is one of our most fundamental principles,” he said. “We want it to decrease in intensity and stringency as we move down” to smaller banks.

He said the Fed was taking “a fresh look” at those rules.

Mr. Powell’s stance creates some distance from the Trump administration, which has described bank regulations as an ineffective impediment to growth.

It also created some friction with Democrats, who see a continuing need for stronger regulations.

Senator Elizabeth Warren, Democrat of Massachusetts, asked Mr. Powell if there were rules that should be strengthened. Mr. Powell responded that he favored stronger enforcement in some areas, but that he did not see a need for stronger rules.

“I do think we’ve had eight years now of writing new rules and honestly I can’t think of a place now where we are lacking,” he said. “I think they’re tough enough.”

Advertisement

Continue reading the main story

Senators asked few questions about monetary policy, a tacit endorsement of the Fed’s success under Ms. Yellen. Unemployment has fallen to 4.1 percent and inflation remains below 2 percent.

Some Republicans argue the Fed should have raised interest rates more quickly. Mr. Powell said he does not agree with those critics.

“We’ve been patient in removing accommodation and I think that patience has served us well,” he said.

Continue reading the main story

Article source: https://www.nytimes.com/2017/11/28/us/politics/jerome-powell-federal-reserve-nominee-testimony.html?partner=rss&emc=rss

A survey of 1,100 retail workers published this month by the Center for Popular Democracy, a liberal-leaning advocacy group, found that only one in about 12 front-line retail workers were in jobs considered of high quality — meaning that they were employed full time, were paid at least $15 an hour and were offered health insurance and at least one form of paid leave. One in three had not gotten a raise in the last two years. Almost half had received some form of government assistance in the previous year.

Perhaps policymakers believe that undesirable sales jobs are inevitable features of the economic landscape; that the lot of poorly paid cashiers results from powerful market forces like automation and globalization over which they have little control. The truth is that retail work doesn’t have to be so unpleasant. A quick look around Europe underscores that retailers can profit, even thrive, and still provide their workers a better deal.

This is the proposition of “Where Bad Jobs Are Better,” a study published last month by the Russell Sage Foundation. The authors — the labor experts Françoise Carré of the University of Massachusetts, Boston, and Chris Tilly of the University of California, Los Angeles — explored the wages and working conditions of retail workers in Germany, Britain and other industrialized nations.

They concluded that for all the power of market forces, from automation taking over routine tasks to globalization squeezing retailers’ margins, there is nothing inevitable about low-quality retail jobs. Social norms and political institutions can make them better, or worse.

In the United States, 42 percent of retail workers earn a low hourly wage — defined as less than two-thirds of the median wage across the economy. In Denmark, only 23 percent of retail workers earn so little; in France, only 18 percent. And labor turnover in the American retail industry is twice as high as it is in Britain and the Netherlands.

European retailers employ part-time workers more often. But full-time workers in the United States sometimes fare no better: Retailers will cut their hours to avoid paying overtime. What’s more, American retailers face few barriers to altering schedules to fit consumer demand, forcing employees to be available at any time even if they work few hours.

What accounts for these differences? The high minimum wage in France — set at 68 percent of the median wage — is a critical tool preventing low pay among retail workers. Cashiers, near the bottom rung on the wage ladder, made more than $2 more per hour at big food retailers in France like Carrefour than at similar American retailers like Walmart.

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Unions, of course, play a major role. Fewer than 5 percent of retail workers in the United States are represented by a union. In Denmark, France, the Netherlands and Germany, by contrast, multi-employer union agreements determine wages and working conditions across regions in the entire sector. Notably, retailers in Germany, Denmark and the Netherlands s have to negotiate scheduling with unions and often must post schedules weeks in advance.

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Other institutions matter. In the United States, part-time retail workers earn two-thirds of the hourly wage of full-timers. In the European Union, they must be paid the same. Premium pay for late-night and weekend shifts in Europe also improve pay. Universal child care — common in countries like France — also affects the labor supply, freeing mothers to seek full-time work. Germany’s apprenticeship system provides retailers with workers who have more skills and can take on a greater variety of tasks.

These things tend to come together. When I asked what change would most improve the lives of retail workers in the United States, Professor Carré said the minimum wage, mandated or subsidized health care and mandated sick days made a big difference. Still, she argued, “you don’t get those things without a strong labor movement.”

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This is not to say that retail jobs are great in France or the Netherlands. Indeed, Professors Carré and Tilly find that these jobs are gradually getting worse everywhere, as European retailers seek workarounds to avoid labor regulations. But while wages and working conditions have steadily deteriorated in the United States, the decline in Europe hasn’t been as general.

“New regulatory initiatives, such as high minimum wages, have partially reversed trends toward falling compensation,” the researchers wrote.

And what is critical is that European retailers can afford this: the researchers found that large food stores in France sell about twice as much per hour as American stores. Value added per employee is about 12 percent higher. And French stores sell about three times as much per square foot, not least because of tight zoning regulations that limit their size.

This is not to say that European culture is somehow more labor-friendly. Professors Carré and Tilly observe that when European retailers come to the United States, they tend to adopt American norms.

Europe’s choices do entail costs. Notably, American consumers benefit from the more intense competition among retailers in the United States. In areas with weak zoning regulations, where Walmart can easily enter and undercut other retailers’ prices, this is particularly true. In France, where barriers to entry are high, competition is weaker and retailers are more profitable. They can afford to give workers a better deal.

Still, it is important to understand that this is a choice. There is nothing inevitable about dead-end jobs. As the United States struggles with stagnating wages and widening inequality, giving bottom-end workers a better deal might not be a bad choice — and $13 an hour is one place to start.

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Article source: https://www.nytimes.com/2017/11/28/business/economy/retail-work.html?partner=rss&emc=rss