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White House Warns Against Threats of Debt Default

September 15, 2013 by

WASHINGTON — Five years ago, the investment bank Lehman Brothers declared bankruptcy. The credit markets seized. The unemployment rate soared. Small and large financial institutions shook, and some fell, as the economy plunged into the deepest recession since the Great Depression.

On Sunday, the Obama administration celebrated its successes in combating the recession, while acknowledging the difficulties that remain: while the corporate economy has rebounded strongly, the middle class and its aspirants continue to feel the squeeze of high unemployment and sluggish wage growth.

The White House warned this weekend that Congressional recalcitrance on raising the federal debt ceiling might hurt the economy at a still-fragile time, with Gene B. Sperling, the director of the National Economic Council, warning in a call with reporters about the “unnecessary threatening of default” this fall.

“Thanks to the grit and resilience of the American people, we’ve cleared away the rubble from the financial crisis and begun to lay a new foundation for stronger, more durable economic growth,” a White House report said.

“The last thing we can afford right now is a decision from Congress to throw our economy back into crisis by refusing to pay our country’s bills or shutting down the government,” it said.

Mr. Sperling, the chief White House economic adviser, said that the negotiations over the debt ceiling in 2011 proved harmful to the economy — with some business leaders ranking them “with Pearl Harbor or 9/11” in terms of their hit to consumer confidence.

The economy remains weak as the Obama administration and Congressional Republicans prepare themselves for another round of bruising budget talks.

The unemployment rate has fallen to 7.3 percent. But a smaller proportion of Americans are working or looking for work than at any time in the last 35 years. And millions of wage-earning families have become poorer over the past decade, judging by wage growth and inflation.

The short-term measure financing the government will run out at the end of September, raising the risk of a government shutdown. The Obama administration anticipates running out of room under its statutory debt ceiling around mid-October, meaning that Congress might have to authorize the printing of new debt or deal with the unprecedented consequences of a default.

Article source: http://www.nytimes.com/2013/09/16/business/economy/white-house-warns-against-threats-of-debt-default.html?partner=rss&emc=rss

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Economy Is Showing New Signs of Strength

September 5, 2013 by

On Thursday, reports showed that services companies were increasing hiring and that fewer people were applying for unemployment benefits. That data followed reports of stronger auto sales and faster expansion by American factories. A report is due Friday on job growth in August. This year’s job growth, with a sharp drop in layoffs, has helped lower the unemployment rate to 7.4 percent in July from 7.9 percent in January. In anticipation of the report on Friday, analysts were predicting that employers added 180,000 jobs in August, with the jobless rate staying stable at 7.4 percent.

The improved jobs market is a major reason many economists expect the Fed to begin scaling back purchases of Treasury and mortgage-backed securities this month. The $85 billion in monthly bond buying has helped keep interest rates low to encourage consumers and businesses to borrow and spend more.

At its policy meeting on Sept. 17 and 18, the Fed will consider whether to taper its bond purchases and, if so, by how much.

Several reports released on Thursday and earlier this week have backed Fed officials who say the economy is healthy enough to stand the tapering.

Services businesses, which employ about 90 percent of the American work force, expanded last month at their fastest pace in nearly eight years, the Institute for Supply Management reported. Sales and new orders rose. Services companies hired at their fastest pace in six months. The institute’s index of service sector growth has jumped 5.8 points in the last two months, to 58.6 — the biggest two-month increase since it began in 1997.

The four-week average of first-time applications for unemployment benefits fell in the last month to its lowest point since October 2007, two months before the recession. In the latest reporting week, initial jobless claims dropped 9,000, to a seasonally adjusted 323,000.

The payroll provider ADP reported that American businesses added 176,000 jobs in August. Factory activity last month reached its strongest pace in more than two years. Americans bought new cars and trucks in August at the fastest annual pace since November 2007, with sales jumping 17 percent from a year earlier.

Article source: http://www.nytimes.com/2013/09/06/business/economy/economy-is-showing-new-signs-of-strength.html?partner=rss&emc=rss

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Set Back by Recession, and Shut Out of Rebound

August 26, 2013 by

He was also a guest that month at a White House forum on joblessness, in recognition of his work creating Neighbors-helping-Neighbors U.S.A., a volunteer networking organization with 28 chapters in New Jersey serving 1,200 unemployed, mainly white-collar, baby boomers. “John has one of the best volunteer organizations out there,” said Ben Seigel, a deputy director at the Labor Department. “He’s tireless and always upbeat.”

Lately Mr. Fugazzie has been feeling a little weary and beat down. One morning last October, just before his 57th birthday, he was laid off and, carrying a box of belongings from his office, driven home in a car service hired by the company. In the 10 months since, he has applied for more than 400 positions and had 10 interviews, but still has no job.

He and his family are living in his 88-year-old mother’s home, and last month he awoke at 4:30 a.m., sweating profusely, in the midst of a heart attack.

As happens to many Americans, when he lost his job, he lost his health insurance. He now owes $171,569.44 for the six nights he spent at the hospital.

And so on the evening of Aug. 15, at a meeting of the job club he himself started here two years ago, he told the others he was just like them. “I need a job,” he said. “I need to make money now.”

Most of the 15 men and women meeting at the library in this prosperous suburb were middle-aged or older, people who had worked all their lives, but lost jobs in the recession and its aftermath and have not been able to get back to where they were. Many of them worry that they never will, in part because of discrimination by employers against older workers.

On the statistical surface, boomers seem better off than other age groups. According to the Bureau of Labor Statistics, the unemployment rate for workers 55 to 64 (the category that best matches boomers, who range from 48 to 67) was 5.4 percent in July, compared with 7.4 percent for the general population.

But almost every other number from the bureau makes it clear that while the economy may be improving, a substantial number of older workers who lost jobs — even those lucky enough to be re-employed — are still suffering. Two-thirds in that age group who found work again are making less than they did in their previous job; their median salary loss is 18 percent compared with a 6.7 percent drop for 20- to 24-year-olds.

The re-employment rate for 55- to 64-year-olds is 47 percent and 24 percent for those over 65, compared with 62 percent for 20- to 54-year-olds. And finding another job takes far longer: 46 weeks for boomers, compared with 20 weeks for 16- to 24-year-olds.

Nor are those who believe age discrimination was a factor likely to have much luck in court. In 2009, just as the economy was hitting rock-bottom, the Supreme Court issued a ruling that toughened the standard for proving bias.

“It’s easier for younger workers to bounce back,” says Mr. Seigel of the Labor Department. “They don’t have many financial obligations. Older workers are supporting families; they may be supporting parents. They can’t afford to spend two years going back for a degree to retrain.”

At the Aug. 15 meeting, Barbara Braun, who worked as a marketing director for a pharmaceutical company, said she wasn’t able to relocate to California when the company moved. “I have a mother with Alzheimer’s, I think it would have killed her,” she said. “Our lives are full of complications we didn’t have at 35.”

They have no doubt that their age is held against them, yet work to keep hopeful. When a woman suggested shaving a decade off her résumé and not posting a photo on networking and job search sites to hide her age, Mr. Fugazzie advised against it. “When you go to the interview, you’re going to look like who you are,” he said. “To waste time hiding it when you’re only going to lose at the other end makes no sense. If they don’t want someone your age, you don’t want them.”

Article source: http://www.nytimes.com/2013/08/27/booming/for-laid-off-older-workers-age-bias-is-pervasive.html?partner=rss&emc=rss

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With Energy Costs Lower, Producer Prices Were Flat in July, Evidence of Little Inflation

August 14, 2013 by

The Labor Department reported on Wednesday that a drop in natural gas and gasoline costs left its seasonally adjusted producer price index unchanged for the month. Analysts polled by Reuters had expected a 0.3 percent increase.

But the very slight increase in the producer price index outside of the volatile energy and food sector components is likely to attract attention at the Federal Reserve, which has recently noted the risks to the economy from inflation that is too low.

The so-called core producer prices, which are seen as indicators of trends in inflation, rose just 0.1 percent during the month, below the 0.2 percent gain expected by analysts.

Inflation has been trending lower for much of the last year despite signs of growing strength in the economy and the Fed warned last month that low inflation could hurt the economy.

The data on Wednesday showed that the core index was up 1.2 percent in the 12 months through July, the lowest reading since November 2010. Analysts had expected a 1.4 percent annualized increase, down from 1.7 percent in June.

The Fed is concerned about low inflation because it can encourage businesses and consumers to put off purchases in anticipation of lower prices. This undermines the Fed’s efforts to increase consumption by lowering borrowing costs.

Policy makers are also concerned about extremely low inflation because it raises the risk that a major shock to the economy could send prices and wages into a downward spiral known as deflation. Ben S. Bernanke, the Fed chairman, pointed out this risk in July.

But Mr. Bernanke has argued that temporary factors could be behind some of the low inflation and many private sector economists agree.

A steady decline in the unemployment rate appears to have the Fed nearly ready to begin winding down its economic stimulus program, which has kept interest rates historically low. The Fed has been buying $85 billion in Treasury and mortgage-backed securities each month.

A number of economists expect the Fed to begin reducing its monthly bond purchases in September. This has led to an increase in interest rates for home mortgages.

Article source: http://www.nytimes.com/2013/08/15/business/economy/with-energy-costs-lower-producer-prices-were-flat-in-july-evidence-of-little-inflation.html?partner=rss&emc=rss

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U.S. Adds 162,000 Jobs as Growth Remains Sluggish

August 2, 2013 by

The unemployment rate, which comes from a different survey, ticked down to 7.4 percent as people got jobs or dropped out of the labor force.

The job gains reported by the Labor Department on Friday were concentrated in retail, food services, financial activities and wholesale trade. The manufacturing sector gained 6,000 jobs; government employment stayed basically flat.

July represented the 34th-straight month of job creation, but the latest pace of employment gains is still not on track to absorb the backlog of unemployed workers anytime soon. At the average rate of job growth seen so far this year, it would take more than seven years to close the so-called jobs gap left by the recession, according to the Hamilton Project at the Brookings Institution.

Other indicators disappointed, too, with both average hourly wages and the length of the private-sector workweek shrinking modestly in July.

“I honestly didn’t think it would be this hard,” said Keith Aiken, 38, who moved into a homeless shelter in Greensboro, N.C., about a month ago. His employer of more than a decade, a group home for people with disabilities, shut down last August, and he has been looking for work ever since.

After state officials ended North Carolina’s eligibility for federal unemployment benefits last month, Mr. Aiken’s benefits stopped and he was no longer able to pay his rent.

“Hopefully something will come open pretty soon,” he said, noting that he is looking into contract labor in Iraq or Afghanistan. “I like to think I’m down but not quite out yet.”

The outlook for workers like Mr. Aiken is unclear.

Some economists are hopeful that the pace of hiring will pick up once Congress’s latest across-the-board budget cuts have worked their way through the system at the end of the fiscal year on Sept. 30. But battles in Washington over the debt ceiling and further austerity measures mean that the drag from a shrinking government could continue into next year and beyond.

“Whether there’s less fiscal drag, more fiscal drag, or a train wreck, we still really don’t know,” said Joshua Shapiro, chief United States economist at MFR.

Analysts are also questioning the disconnect between job growth and other measures of the country’s economic health. The current rate of job creation would typically coincide with faster-growing economic output.

But the country’s gross domestic product, a broad measure of the production of goods and services, grew at a relatively tepid annual rate of 1.7 percent in the second quarter of this year and 1.1 percent in the first quarter, much less than would be predicted from recent hiring trends.

Trends in output and job growth seem unlikely to stay decoupled for too long, some economists say, in which case output should start to pick up, or job growth should start to slow, or both.

“I think with the economy showing 1 percent growth on average over the last three quarters you’re locked into 150,000 jobs per month for the rest of this year,” said Steven Ricchiuto, chief United States economist at Mizuho Securities.

One other possible explanation for the seemingly incongruous trends in job and output growth has to do with the mix of jobs being created.

“The composition of job growth has not been particularly great,” Mr. Shapiro said. “It’s a lot of temp services, retail, food services, health care. With low-end jobs contributing more than half the growth, the income generated would be not that great, and you wouldn’t be expecting it to drive strong consumer spending.”

Even so, the economy appears to be healing, at least from the perspective of the Federal Reserve.

Given the relatively strong headline numbers for job growth over the last few months, many Wall Street analysts are expecting the central bank to announce that it will start pulling back on its asset purchases in September. A statement the Fed released on Wednesday this week shed little light on the timing for this decision, but Chairman Ben S. Bernanke has said the Fed would most likely begin to taper its asset purchases later this year.

Article source: http://www.nytimes.com/2013/08/03/business/economy/us-adds-162000-jobs-less-than-expected.html?partner=rss&emc=rss

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Investors Parse Fed Report and a Four-Day Rally Fizzles

July 10, 2013 by Leave a Comment

The Dow slipped and the Standard Poor’s 500-stock index edged up less than a point on Wednesday, interrupting a four-day rally as investors tried to gauge when the Federal Reserve might scale back its economic stimulus.

Minutes from the Fed’s June policy meeting, which were released on Wednesday afternoon, showed that some members of the governing board wanted more reassurance that the labor market was improving before reining in stimulus measures. Even so, consensus built within the Fed that there probably was a need to begin pulling back soon on its monthly bond buying.

The three major stock indexes recovered some ground immediately after the release of the minutes. But those gains were short-lived as investors parsed the details of the minutes.

The Dow Jones industrial average dipped 8.68 points, or 0.06 percent, to end at 15,291.66. The S. P. 500 index inched up just 0.30 of a point, or 0.02 percent, to finish at 1,652.62. The Nasdaq composite index gained 16.50 points, or 0.47 percent, to close at 3,520.76.

Investors appeared to be more encouraged by a speech from the Fed chairman, Ben S. Bernanke, that was delivered after the market closed. Mr. Bernanke said highly accommodative monetary policy was needed for the foreseeable future and that the unemployment rate at 7.6 percent may be overstating the job market’s health.

His comments sent stock index futures higher. The central bank has said it will continue buying bonds until the labor market outlook improves substantially.

“That is calming market fears,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, N.Y., referring to Mr. Bernanke’s comments. “Speculation that the tapering could be from September is now turning into, ‘Maybe the Fed is going stay longer.’ ”

Mr. Bernanke spooked investors last month when he said the economy’s expansion was strong enough for the central bank to start slowing the pace this year of its monthly purchases of $85 billion in bonds, known as quantitative easing.

Some in the market have pegged September as time when the Fed could start pulling back, but the minutes suggested that was not a foregone conclusion.

The S. P. 500 has risen more than 2 percent over the last five sessions, nearing its high of 1,669.16, reached May 21.

Analysts expect earnings at S. P. 500 companies to grow 2.6 percent in the second quarter from a year ago, while revenue is forecast to increase 1.5 percent, Thomson Reuters data shows.

In government bonds, the benchmark 10-year Treasury note fell 9/32 to 92 2/32, sending the yield up to 2.67 percent, from 2.64 percent late Tuesday.

Article source: http://www.nytimes.com/2013/07/11/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Consumer Sentiment Ended June Near a Six-Year High

June 28, 2013 by Leave a Comment

Consumer sentiment improved, ending this month close to a six-year high set in May, as optimism among higher-income families rose to its strongest level in six years, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s final reading on the overall index on Americans’ consumer sentiment was 84.1 points, slightly below the 84.5 in May. The new figure was higher than the preliminary reading of 82.7.

Economists polled by Reuters had forecast the final June reading of 82.8.

“Consumers believe the recovery has achieved an upward momentum that will not be easily reversed,” Richard Curtin, survey director, said in a statement.

He added that the recent drop in stock prices and the jump in mortgage rates had not caused a deterioration in consumers’ view on the economy.

“To be sure, few high- or low-income consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead,” Mr. Curtin said.

Consumer sentiment is considered by some economists as a predictor on consumer spending, which accounts for 70 percent of the United States economy.

Also on Friday, the Institute for Supply Management-Chicago said its index on Midwest business activity posted a steeper-than-expected drop in June to 51.6. A reading below 50 points suggests business contraction.

“It’s not firmly in expansion territory where businesses are ready to hire and invest,” said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, N.C.

In the Thomson Reuters/University of Michigan’s data, there was a divergence in outlook between higher-income families and lower-income ones.

Higher-income households showed increased optimism about their incomes and wealth, while lower-income ones reported less optimism. Families in the top third of incomes were the most optimistic since the June 2007 survey.

Article source: http://www.nytimes.com/2013/06/29/business/economy/consumer-sentiment-ended-june-near-a-six-year-high.html?partner=rss&emc=rss

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As Lenders Return to Greece, Athens Seeks Relief

June 10, 2013 by Leave a Comment

ATHENS — The international lenders overseeing Greece’s bailout were back in Athens on Monday for their latest audit, as Greek officials hope dissent in the lending group might allow them new negotiating room.

It was the first time high-ranking representatives of the troika — the International Monetary Fund, the European Commission and the European Central Bank — have assembled here since an I.M.F. report last week conceded that it had made mistakes in Greece’s first foreign bailout. The report prompted angry reactions from the European Commission, not to mention Greek citizens weary of years of recession and austerity measures imposed by the lenders.

Finance Minister Yannis Stournaras met with the foreign envoys Monday for the first in a series of talks expected to focus on Greek pledges for layoffs in the civil service, an overhaul of the dysfunctional tax collection system and the status of a slow-moving effort to raise money by selling off state assets. Athens is obliged to show progress on those and other commitments to secure a tranche of 3.3 billion euros, or $4.4 billion, in rescue loans that are scheduled to be dispensed this month.

A ministry official described the first meeting as “a discussion and an exchange of views about where we are and how we see things.”

“We didn’t decide on anything,’’ he said. “All issues remain open.”

Having arranged two bailouts for Greece worth a combined 240 billion euros over the last three years, the troika has been handing out the aid in installments in exchange for the country’s adopting economic changes and hitting austerity targets. Many Greeks have protested those measures, which have helped slash living standards as the country enters its sixth year of recession and have played a part in an unemployment rate that has reached 27 percent.

Greek government officials hope that the string of errors highlighted in the I.M.F.’s internal report might prompt the troika to ease demands for more painful reforms. The report concluded that the fund made serious miscalculations and failed to anticipate the severity of Greece’s economic downturn. The I.M.F.’s admission has given Greece some “negotiating power,” Mr. Stournaras said in an interview with the center-left To Vima newspaper on Sunday.

Among the concessions he is expected to seek is the lowering of the value-added tax on restaurants and taverns – to 13 percent, from 23 percent — as a way to lighten the burden on small businesses and help the crucial tourism sector, which is forecasting a record year of 17 million foreign visitors.

Government officials are also expected to ask for a reprieve in the approximately 2,000 layoffs in the civil service that the troika wants to see over the summer; Athens fears that possible labor protests and transport strikes would hamper tourism. Greece had committed to dismissing 4,000 public sector workers this year and an additional 11,000 in 2014. Even after those cuts, the number of Greek civil servants would be above 600,000, compared with around three million working in the private sector.

Other issues likely to be discussed are an expected funding gap of 4.6 billion euros for financing the bailout program in 2014 and measures that will be taken to cover the shortfall. Also on the table might be discussion of how likely it is that Greece’s international creditors might be forced to take some losses on their holdings of Greek debt next year to ease the country’s financial burden.

Another big topic on the agenda is Greece’s huge untapped potential for privatizing government-owned assets. But Athens received an unpleasant surprise when the Russian energy giant Gazprom failed to submit an offer for the Greece’s public gas corporation, Depa, by Monday’s deadline. Athens had hoped to close a deal with Gazprom after meetings in recent months between the Russian company’s chief executive, Alexey Miller, and the Greek prime minister, Antonis Samaras. Gazprom made a preliminary bid last year of 900 million euros, and a final bid of around 800 million euros had been expected.

Some Greek media reports Monday said the deal went sour following a dispute over the price at which Gazprom would supply gas to Greek households. Others reported that objections by the European Union’s competition authorities, which have been investigating Gazprom since last fall, led the Russians to withdraw their interest. Greece’s privatization agency, Taiped, was expected to issue a statement later in the day.

Addressing supporters of his conservative New Democracy Party, which leads Greece’s ruling coalition, in the northern port of Thessaloniki on Sunday, Mr. Samaras said the government was “doing everything in our power to attract investments.” He accused the main leftist opposition party, Syriza, which opposes the terms of Greece’s foreign bailouts and has pledged to reverse all privatizations if it comes to power, of “doing all it can to chase investments away.”

Article source: http://www.nytimes.com/2013/06/11/business/global/as-lenders-return-to-greece-athens-seeks-relief.html?partner=rss&emc=rss

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Middling Jobs Gain Signals a Long Path to Healthy Payrolls

June 7, 2013 by Leave a Comment

Economists were relieved that the numbers weren’t worse, given a string of other disappointing data in recent weeks, but noted that recent job trends are nowhere close to bringing the country back to full employment. At the current pace of job and population growth, it would take nearly five years to get the economy back to the low unemployment rate it enjoyed when the recession officially began in December 2007.

“I feel hopeless, and that just makes it hard,” said Sherry Lockhart, 53, of Enumclaw, Wash. She was laid off by the state’s liquor control board a year ago, when voters privatized liquor sales, and her jobless benefits are about to be slashed as a result of federal spending cuts. “I just feel I’ve done my best over the years, and I feel like I haven’t failed the system. The system has failed me, and millions more.”

Still, the cause behind the uptick in the unemployment rate, at least, was mildly encouraging: more people joined the labor force, perhaps indicating that Americans who have been sitting on the sidelines feel that they finally have a chance at finding a job.

“It’s a decent report, but it’s not by any means robust,” said Conrad DeQuadros, senior economist at RDQ Economics, a research firm. “It’s certainly not strong enough to get the Fed to make any significant changes at its meeting in June,” he said, referring to speculation that the Federal Reserve might consider tapering its stimulus measures if the jobs numbers came in strong.

The major stock market indexes — the Dow Jones industrial average and the broader Standard Poor’s 500 — were up in midday trading by about 1 percent.

Consumers have also been relatively upbeat recently. A New York Times/CBS News poll conducted May 31 to June 4 found that 39 percent of respondents believe the condition of the economy is very or fairly good, the highest share saying this both since President Obama took office and even since the recession began.

Despite signs of optimism from consumers and investors, other indicators of the health of the economy and the job market have been mixed. Average weekly hours and average hourly earnings, for example, have shown little improvement in recent months, according to the Labor Department. Wages are up just 2 percent from a year earlier, which bodes poorly for consumer spending.

“The wage gains are very disconcerting, and particularly strange when you see these surveys of employers who say they have positions they can’t fill,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “That means they should be bidding up wages.”

Wage growth may be held back by the composition of new jobs being created, he said, as there are a lot of jobs being added in low-paying sectors like retail. Restaurants and bars, for example, have added 337,000 jobs over the last year, and that category now makes up about 7.6 percent of all payroll jobs, its largest share on record.

The other big industry to add jobs in May was professional and business services, particularly temporary help services. Temp services employment has been growing for six straight months now, and as of May, about 2 percent of all American jobs were in the sector.

The federal government, on the other hand, lost 14,000 jobs in May, presumably a result of the across-the-board federal spending cuts, known as the sequester, implemented by Congress in March.

“With the recovery gaining traction, now is not the time for Washington to impose self-inflicted wounds on the economy,” said Alan B. Krueger, President Obama’s chairman of the Council of Economic Advisers, in a statement. “The administration continues to urge Congress to replace the sequester with balanced deficit reduction, while working to put in place measures to create middle-class jobs, such as by rebuilding our roads and bridges and promoting American manufacturing.”

Over the last three months, the federal government has shed 45,000 jobs, not including the furloughs that many federal employees are being placed on. The Pentagon, for example, has said that it would furlough 680,000 civilian workers starting in early July, with most workers losing about one paid day a week.

Though difficult to measure, the sequester has probably been dragging on the private sector, both because government contractors are laying off workers and because laid off or furloughed public workers have had less money to spend at their local businesses.

“There’s surely some sequester effects in there, but that’s something that will be disentangled in years to come,” said Mr. Shepherdson.

Article source: http://www.nytimes.com/2013/06/08/business/economy/us-added-175000-jobs-in-may-jobless-rate-rises-to-7-6.html?partner=rss&emc=rss

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British Companies See Value in Continentwide Labor Pool

June 7, 2013 by Leave a Comment

LONDON — With several big construction projects under way in Britain, the multinational company CH2M Hill searched in vain for six months for a qualified tunneling engineer.

Only a few weeks ago did the company find a candidate, in Portugal. CH2M Hill quickly made plans to bring him north — no visa or work permits were required, thanks to a European Union policy that allows the free flow of labor across the borders of the 27-country bloc.

With signs that Britain might seek an exit from the European Union, businesses like CH2M Hill are starting to focus on what they might lose in the labor force if the country does leave.

For non-Europeans, securing a work permit can take three months, so the European Union’s labor law is a huge help, said Michael I. Glenn, CH2M Hill’s director of international operations.

“It’s incredibly important; we struggle with that constantly,” he said. “These programs and projects that we do are of a scale that we have to move our expertise around.”

Continental Europe provides a nearby pool of potential employees with the experience, skills and engineering qualifications needed to work in Britain, added Andrea Laws, the company’s director of international recruitment.

Britain, with 61.9 million people, has an estimated 40.6 million people of working age. But together, the 27 countries in the European Union, population 494.9 million, represent a much vaster labor pool, about 329.7 million strong. (Only citizens of Romania and Bulgaria are restricted from working freely in Britain, and they will gain that right in January when temporary restrictions imposed by Britain must lapse.)

Despite Britain’s unemployment rate of 7.8 percent, many businesses say that without access to the European Union’s labor pool, they would have trouble filling all sorts of jobs, whether because they cannot find enough people with the right skills in Britain or because there are some jobs that Britons are reluctant to do.

A report this month from the London Chamber of Commerce and Industry, a business lobbying group, concluded that Britain’s leaving the European Union would “have a direct impact on firms’ ability to do business,” on “their access to skills” and, therefore, on the British government’s tax revenue.

The report also said the 2.2 million European Union immigrants were “much more likely” to be employed and less likely to be reliant on public welfare benefits than either British citizens or immigrants from outside the European Union.

But as in the United States, where immigration legislation has been hotly debated for months, migrant labor remains a contentious issue in Britain. A growing populist force, the U.K. Independence Party, blames the European Union for allowing hundreds of thousands of workers outside the country to settle here.

“The business perspective, broadly speaking, clashes with the No. 1 concern about the European Union from the public,” said Mats Persson, director of Open Europe, a research institute that favors a looser relationship between Britain and the European Union. His solution would be to restrict welfare benefits for migrants rather than their right to work in Britain.

British opponents of open borders point to the large influx of workers from the former Communist states of Eastern Europe in the last decade. When Poland and seven other ex-Communist countries joined the European Union in 2004, the British government underestimated the scale of likely migration and chose not to impose temporary work restrictions.

Yet in one of the interviews conducted for the chamber of commerce report, an unnamed director of a promotional merchandise company said “a number of our suppliers use Polish or Baltic workers to do quite menial tasks because they cannot get local people to do them.”

Big British employers of foreign labor include service businesses like hotels because, the report said, “part of the problem with sectors like retail, leisure and hospitality is their poor image and the belief that they do not offer career progression opportunities.”

Article source: http://www.nytimes.com/2013/06/08/business/global/british-firms-see-value-in-continent-wide-labor-pool.html?partner=rss&emc=rss

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