April 20, 2024

As a Boom Slows, Peru Grows Uneasy

“This is Peru,” he said. “When you go to the shopping malls they’re full of people, they’re full. That’s a good indicator that people are really spending money.”

Peru’s economy grew an average of 6.4 percent a year from 2002-12 after adjusting for inflation, according to government figures, a remarkable period of sustained expansion that has made it one of the world’s star economies.

But suddenly growth has slowed here, and just beyond the view from Mr. Kristensen’s window, under Lima’s perpetually gray winter sky, the reason becomes clear.

At Dock 5B, ships are loaded with Peru’s mining riches, including copper ore, lead and zinc — the raw materials that fueled the Peruvian boom with their rising prices in recent years. But in the first six months of this year, mineral shipments through the port were down 12 percent by weight, according to APM Terminals, Mr. Kristensen’s company, which operates the facility for the Peruvian government.

The decrease resulted from a drop in demand in a struggling world economy and a slowdown in China, one of Peru’s top trading partners. Those factors have also caused mineral prices to plummet, sucking the wind from the sails of Peru’s economy.

This bust amid the boom has given vent to a national angst, with hand-wringing over the economy a mainstay of newspaper front pages and television news programs. Headlines bemoan soaring trade imbalances as the value of mining and other exports, including apparel and agricultural products, plunges at the same time imports are surging.

Miguel Castilla, the economy and finance minister, said he expected the economy to grow between 5.5 percent and 6 percent this year. While that was down from earlier predictions, it would maintain Peru’s place as one of the fastest-growing economies in Latin America. Even some of the most skeptical economists predict Peru’s economy will grow by nearly 5 percent this year, a rate that would be celebrated as a ripping success in many countries.

But in Peru, such predictions are being treated as something close to disaster.

“Growing for a decade at 6 percent, you get used to it,” said Gustavo Yamada, the dean of economics at the University of the Pacific in Lima. Mr. Yamada said he expected growth in Peru to settle into a range of about 4 percent to 5 percent in coming years.

“That creates a scenario,” he said, “of, ‘Hey, wait a minute, we were going to be the next Inca tiger, what a disappointment.’ ”

Polls show that consumer confidence has slipped this year, and a Peru Central Bank survey in June showed that investor confidence was at its lowest point in almost two years.

“We have become used to a sustained period of growth, and we have forgotten about cycles,” said Mr. Castilla, the economic minister.

Just as outside factors, like rising metals prices, fueled Peru’s boom, similar factors, like the slow recovery in the United States, Europe’s economic woes and China’s slowdown, are now causing it to cool down, he said.

“We’re at a crossroads,” Mr. Castilla said. “We have everything we need to cope with this less favorable world condition, but there’s an urgent need to implement the reforms that have been approved recently and to tackle other issues.”

Those changes include steps to clear away economic obstacles — like making government more efficient, making capital markets work better and improving infrastructure.

Mr. Castilla’s ministry has also chosen a list of 31 projects worth $22 billion, including mining and infrastructure, that it wants to fast-track by removing bureaucratic obstacles.

Peru’s economy is a mash-up of strengths and weaknesses. The country has robust international reserves, a large rainy day fund that can be used for economic stimulus in a crisis, and low public debt.

Poverty in Peru has been cut by more than half in recent years, falling from 59 percent of the population in 2004 to 26 percent last year, according to government figures. Millions have moved into the middle class, which the Inter-American Development Bank estimates has doubled in size from 2007-12 and now includes about half of all Peruvian families.

Article source: http://www.nytimes.com/2013/08/20/world/americas/as-a-boom-slows-peru-grows-uneasy.html?partner=rss&emc=rss

Growth Halted in 4th Quarter on U.S. Cuts

Disappointing data released Wednesday underscore how tighter fiscal policy may continue to weigh on growth in the future as government spending, which increased steadily in recent decades and expanded massively during the recession, plays a diminished role in the United States economy.

Significant federal spending cuts are scheduled to take effect March 1, and most Americans are also now paying higher payroll taxes with the expiration of a temporary cut in early January.

The economy contracted at an annual rate of 0.1 percent in the last three months of 2012, the worst quarter since the economy crawled out of the last recession, hampered by the lower military spending, fewer exports and smaller business stockpiles, preliminary government figures indicated on Wednesday. The Fed, in a separate appraisal, said economic activity “paused in recent months.”

Still, economists said the seemingly bleak gross domestic product report was not a sign that another recession was looming. The preliminary data showed relatively strong spending by consumers and businesses, even as military spending posted its sharpest quarterly drop in 40 years.

Forecasters expect that growth this year will rebound to a still-anemic 1.5 percent, a little lower than the pace it has managed over the last three years.

“This is the tip of the iceberg on fiscal austerity from Washington,” said Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch. “It was exaggerated this quarter by the unusually large drop in defense spending, but that and higher taxes will start hurting” in the coming months.

The drop in American exports stemmed in part from a drop in economic growth in Europe, where governments have also been cutting spending in a bid to balance budgets. The parallel contractions are likely to provide fodder for economists who argue that austerity efforts have gone too far in many developed economies.

The surprisingly weak numbers could also force politicians to limit the cuts that are scheduled to take effect if Congress fails to produce a budget bargain in the coming weeks and strengthen the argument that deficit reduction is a lesser concern than job creation.

“Our economy is facing a major headwind, and that’s Republicans in Congress,” said the White House spokesman Jay Carney.

Republicans said the White House was not advancing concrete plans for creating new jobs and stimulating the economy.

“The bad GDP news makes it even more unbelievable that Obama has been ignoring job growth in his 2nd term agenda,” Reince Priebus, chairman of the Republican National Committee, posted on Twitter.

The Fed said Wednesday that it would continue its efforts to revive growth by holding short-term interest rates near zero and increasing its holdings of Treasury securities and mortgage-backed securities by $85 billion a month. Those policies aim to reduce borrowing costs for businesses and consumers.

“The committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline,” the Fed said in a statement.

Unemployment has not declined since the Fed started its latest round of purchases in September. The rate was 7.8 percent in December, the same as three months earlier. The government will report the rate for January on Friday.

Although economists expected output to decline substantially from the 3.1 percent annual growth rate recorded in the third quarter, the negative G.D.P. number still caught Wall Street off-guard. It was the weakest economic report since the second quarter of 2009, although revisions in February and March could alter the figure.

“I’m a little surprised,” said Michael Feroli, chief United States economist at JPMorgan.

Like some other observers, Mr. Feroli said there were hints the economy was performing slightly better than the headline number suggested.

Article source: http://www.nytimes.com/2013/01/31/business/economy/us-economy-unexpectedly-contracted-in-fourth-quarter.html?partner=rss&emc=rss

Economic Scene: Unionizing at the Low End of the Pay Scale

But their lives are connected. They both work in the fast-food industry — Mr. Carrillo at a McDonald’s in Midtown Manhattan and Mr. Williams at a Wendy’s in Brooklyn. They both earn a little more than $7 an hour. And they both need food stamps to survive. Last Thursday, both did something they had never done before: they went on strike.

Their activism, part of a flash strike of some 200 workers from fast-food restaurants around New York City, caps a string of unorthodox actions sponsored by organized labor, including worker protests outside Walmart stores, which, like most fast-food chains, are opposed to being unionized, and union drives at carwashes in New York and Los Angeles.

Labor unions are hoping that the unusual tactics, often in collaboration with social justice activists and other community groups, will offer them a new opportunity to get back on the offensive, helping to raise the floor for wages and working conditions in the harsh, ultracompetitive economy of the 21st century.

Mr. Carrillo’s and Mr. Williams’s meager salaries also underscore the straightforward choice we face as a nation: either we build an economy in which most workers can earn enough to adequately support their families or we build a government with the wherewithal to subsidize the existence of a lower class that can’t survive on its own. We are doing neither.

More than two million workers toil in food preparation jobs at limited-service restaurants like McDonald’s, according to government statistics. They are the lowest-paid workers in the country, government figures show, typically earning $8.69 an hour. A study by the Economic Policy Institute, a liberal-leaning research organization, concluded that almost three-quarters of them live in poverty. And they are unlikely to have ever contemplated joining a union.

On a full-time schedule, they could make a little over $18,000 a year, just about enough to keep a family of two parents and one child at the threshold of poverty. But full-time work is hard to come by. With fast-food restaurants increasingly using scheduling software to adjust staffing levels, workers can no longer count on a steady stream of work. Their hours can be cut sharply from one week to the next based on the business outlook or even the weather.

Orley Ashenfelter, a labor economist at Princeton, published a study earlier this year that captured the plight of workers under the Golden Arches in a novel way: measuring pay by the burgers a worker could buy for an hour of work, he calculated that the real wages of McDonald’s workers in the United States hit about 2.2 Big Macs an hour last year. That’s 15 percent less than in 2000.

Many economists will argue that concern about the lowly McJob is misplaced. These jobs offer a wage to people with no training or education. Mr. Carrillo, for instance, doesn’t speak English. “To get a better job at my age, you need a profession,” he says. To improve the lives of American workers, most economists argue, we might do better by focusing on education to equip them with the skills to perform more productive, better-paid jobs.

But this argument overlooks the fact that the McJob is hardly a niche of the labor market reserved for the uneducated few. Rather, it might be the biggest job of our future.

The American labor market has been hollowing out for decades — losing many of the middle-skilled, relatively well-paid jobs in manufacturing that can be performed more cheaply by machines or workers overseas. It has split between a high end of well-educated workers, and a low end of less-educated workers performing jobs, mostly in the service sector, that cannot be outsourced or mechanized.

This process is not expected to reverse any time soon. According to government statistics, personal care aides will make up the fastest-growing occupation this decade. The Economic Policy Institute study found that some 57 percent of them live in poverty.

This poses an existential question for labor unions, which are struggling because of the loss of union jobs to automation and stiff competition, both from cheaper labor in the mostly union-free South and developing nations around the world: can they do something to improve workers’ lot?

They have in the past. A recent study by the International Labor Organization concluded that low-wage work was rare where unionization rates were high. In countries where more than half of workers belong to a union, only 12 percent of jobs pay less than two-thirds of the middle wage, on average.

Still, there is little reason to believe that American labor unions can do much to lift the floor on wages in the future. Fewer than 7 percent of workers in the private sector are in a union. We have the largest share of low-paid jobs in the industrial world, amounting to almost one in four full-time workers, according to the International Labor Organization. And our rates of unionization continue to fall.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

Article source: http://www.nytimes.com/2012/12/05/business/unionizing-at-the-low-end-of-the-pay-scale.html?partner=rss&emc=rss

Economix Blog: Betting on Job Growth

The latest government figures detailing job growth in August — or lack thereof — won’t be out until Friday morning, but some economists are already speculating that the figures may be stronger than expected.

Making predictions is notoriously tricky, but better-than-expected data on Thursday from Automatic Data Processing, a private payroll firm, showed a private sector job gain for August of 201,000, much higher than the 145,000 private sector forecast from economists.

As a result, the chief United States economist at Morgan Stanley, Vincent Reinhart, raised his prediction for Friday’s government report to 125,000 total nonfarm payroll jobs from an earlier estimate of 100,000.

Other economists cautioned against reading too much into Thursday’s figures from A.D.P., which tracks private sector employment. Friday’s figures include both public and private jobs.

“The A.D.P. number is unexpectedly strong today, but it hasn’t been a terrific predictor of where the Bureau of Labor Statistics figures will be,” said Peter Cappelli, a professor of management at the Wharton School and director of the school’s Center for Human Resources. A.D.P. figures have trended higher than government data in the past.

Another forecasting tool is the weekly report on first-time unemployment claims. Last week, they fell 12,000, to 365,000. The prediction had been for 370,000 new claims.

Ahead of Friday’s release, the consensus estimate among economists stood at 125,000 for the total number of new nonfarm jobs created in August.

Maury Harris, chief United States economist at UBS, said that if the number came in at 100,000 or lower and the unemployment rate stayed at 8.3 percent, that would be a big disappointment for traders. But he said that anything higher than 150,000 would be a positive surprise.

Article source: http://economix.blogs.nytimes.com/2012/09/06/betting-on-job-growth/?partner=rss&emc=rss