May 23, 2017

Euro Zone Business Activity Rises in Quarter

Business activity in the 17 European Union member states that share the euro rose this month to a 27-month high, according to a survey of euro zone purchasing managers by Markit Economics, a data and analysis firm based in London.

Germany, which has the largest European economy, led the euro zone with strong new business and employment gains, according to the Markit survey. French purchasing managers also reported modestly improving business.

The report came on the heels of the election victory of Chancellor Angela Merkel in Germany. European stock markets and the euro currency were essentially unchanged, as investors took in stride the widely expected election outcome; only the large margin of Ms. Merkel’s victory had been unexpected.

Ms. Merkel’s triumph and the fact that the anti-euro party Alternative for Germany fell short of the total needed to enter Parliament may allow her more freedom to address looming problems, including the likelihood that Greece, Portugal and Slovenia will need additional bailouts. Germany also holds trump cards in crucial European discussions on banking oversight. But Germany’s own banks remain fragile.

Markit’s composite index of euro zone purchasing managers, which tracks sales, employment, inventory and prices, rose to 52.1 in September from 51.5 in August, the sixth straight monthly gain. Markit said new orders received by businesses drove the gain, rising at their fastest pace since June 2011.

James Howat, an economist with Capital Economics in London, wrote in a note that the data suggested a rise in quarterly growth of about 0.4 percent, after the second quarter’s gain of 0.3 percent, or 1.1 percent annualized.

While even a modest increase in growth would be welcome news for the battered European economy, a much more significant rebound will be necessary to address the unemployment crisis. More than 19 million people are without jobs in the euro zone, according to Eurostat, the European Union statistical agency.

The zone’s economy had contracted for the six quarters before the April-June period, and Mr. Howat warned that some recent data have been disappointing. The recovery remains “fragile,” he said.

While Germany’s economy is improving, the country’s central bank warned Monday that German banks are still shaky.

As a group, German banks reported higher operating profit in 2012, the German Bundesbank said in its monthly report. But much of the improvement was the result of trading profits, which are subject to large fluctuations, the Bundesbank said.

The better overall result “should not obscure the fact that the German banking industry remains in a complex state of conflict,” the Bundesbank said. Banks must find a balance between the need for profitability and the need to build more sustainable businesses, it said.

While there is no shortage of credit in Germany, banks such as HSH Nordbank in Hamburg and Commerzbank in Frankfurt remain burdened by exposure to loans to the troubled shipping industry and other problems. As a group, German banks are among the most highly leveraged in the world, which could make them vulnerable to financial shocks.

Jack Ewing contributed reporting from Berlin.

Article source: http://www.nytimes.com/2013/09/24/business/global/euro-zone-business-activity-rises-in-quarter.html?partner=rss&emc=rss

Unemployment at 4-Year Low as U.S. Hiring Gains Steam

Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.

“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.”

The Labor Department reported that the economy added 236,000 jobs in February as the unemployment rate sank to 7.7 percent, down from 7.9 percent in January and the lowest level since December 2008.

Wall Street expected no more than 165,000 additional jobs in February, and the surprise helped lift the Dow Jones industrial average to another new nominal record, its fourth for the week. It closed at 14,397.07.

But many experts said if it weren’t for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead.

“It does suggest a bit more cushion heading into the spring, when we will see the bulk of the impact from the sequester and fiscal pullback,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “This was a good report. It’s hard to poke holes in it. But we think we’ll see some slowdown in April and May because of the sequester.”

Mr. Gault estimated that the economy would achieve a 1.5 percent growth rate in the first half of 2013. Without the spending cuts and a rise in Social Security taxes that went into effect in January, he said, the economy would probably advance at double that pace.

As a result, he and other economists expected that the pace of job creation would slow, leaving the unemployment rate not much lower than where it is now. If jobs were added at February’s pace for the rest of 2013, the unemployment rate would crack the closely watched 7 percent level by the end of the year. Instead, Ms. Meyer predicted that unemployment would remain near 7.5 percent.

Macroeconomic Advisers, an independent forecasting firm, predicted that the federal spending cuts would cost about 700,000 jobs this year, with most of the damage occurring in the second and third quarters.

While the economy is expected to continue to add enough jobs to keep the jobless rate from rising significantly, estimates like these suggest that without the drag from Washington the labor market might have added, on average, a robust 300,000 jobs a month or so.

The data for February, adjusted for normal seasonal variations, don’t reflect the federal cuts, which are expected to affect not just government jobs but also industries that rely on public spending.

Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.

On Friday, the White House was quick to point to the new data as a sign that the economy is strengthening even as it warned of the impact from the squeeze on spending.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

In some respects, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

Private hiring last month was broad-based, with healthy job gains in several areas, including business services and manufacturing.

Article source: http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?partner=rss&emc=rss