NEWS,04.01.2013

US jobs ease on fiscal cliff angst

The pace of hiring by US employers eased slightly in December, pointing to a lackluster pace of economic growth that was unable to make further inroads in the country's still high unemployment rate.Payrolls outside the farming sector grew 155 000 last month, the labour department said on Friday. That was in line with analysts' expectations and slightly below the level for November.Gains in employment were distributed broadly throughout the economy, from manufacturing and construction to health care.That should reinforce expectations that the economy will grow about 2% this year, unlikely to quickly bring down the unemployment rate or make the US Federal Reserve rethink its easy-money policies, which have been propping up the recovery."It's not a booming economy, but it is growing," Jim O'Sullivan, an economist at High Frequency Economics in Valhalla, New York, said before the data was released.The jobless rate held steady at 7.8% in December, down nearly a percentage point from a year earlier but still well above the average rate over the last 60 years of about 6%. The labour department raised its estimate for the unemployment rate in November by a tenth of a point to 7.8%, citing a slight change in the labour market's seasonal swings.Most economists expect the US economy will be held back by tax hikes this year as well as by weak spending by households and businesses, which are still trying to reduce their debt burdens.Friday's data nonetheless gave signals of growing momentum in the labour market's recovery from the 2007/9 recession. Many economists had expected December's payroll gains to be padded by one-time factors like the recovery from a mammoth storm that hit the East Coast in late October.The government had said last month the storm had no substantial impact on the November data, and many economists expected the government to recant by revising downward in Friday's report its estimate for payroll gains in November. Instead, the government revised its estimate for November payrolls upward by 15 000. "There is some evidence that underlying jobs growth has improved," Paul Dales, an economist at Capital Economics in London, said before the report was released. Austerity's biteDespite the signs of some momentum in hiring, a wave of government spending cuts due to begin around March loom over the economy. Many economic forecasts assume the cuts which would hit the military, education and other areas will ultimately be pushed into next year as part of a deal sought by lawmakers to reduce gradually the government's debt burden.Initially, the cuts were planned to have begun this month as part of a $600bn austerity package that also included tax hikes. Hiring in December may have been slowed by uncertainty over the timing of the austerity, economists say. Congress this week passed legislation to avoid most of the tax hikes and postpone the spending cuts.Even with the last-minute deal to avoid much of the fiscal cliff, most workers will see their take-home pay reduced this month as a two-year cut in payroll taxes expires. That leaves the Fed's efforts to lower borrowing costs as the main program for stimulating the economy.The Fed has kept interest rates near zero since 2008, and in September promised open-ended bond purchases to support lending further. On Thursday, however, minutes from the Fed's December policy review pointed to rising concerns over how the asset purchases will affect financial markets.Analysts ahead of the report expected some of the strength in job creation in December would be due to the Fed's policies."Despite the end-of-year angst over the fiscal cliff, financial conditions remained supportive of job growth in December," economists at Nomura said in a note to clients earlier in the week.

Aid for Sandy victims falls short

US lawmakers finally approved emergency disaster aid for victims of Hurricane Sandy on Friday, but only after a delay that sparked East Coast Republican outrage against their own party leadership Lawmakers voted 354-67 to provide the Federal Emergency Management Agency with $9.7bn to pay the flood insurance claims of thousands of victims of the killer October storm that devastated coastal communities.The bill now goes to the US Senate, where it could pass as early as Friday before the two chambers go into recess, but the sum falls short of what was originally promised and bitter debate is likely top continue.The Senate had approved a comprehensive $60.4bn Sandy aid package last week, but House Speaker John Boehner, stung by fractious negotiations over the deal to avert the fiscal cliff crisis, refused to bring it to the floor."It's been 70 days and many have been living in misery and heartache," Republican congressman Rodney Frelinghuysen of New Jersey told the House, describing the vote as "the first step of what we need to do to rebuild lives."Democrats again attacked the Republican leadership for what congressman Rob Andrews of New Jersey called the "inexcusable and unjust" delay in getting a bill to the House floor.And, while Boehner has pledged to bring the remaining $51bn in aid to a vote on January 15 as a two-part package, Andrews said it would be "meaningless" unless the Senate turned around and quickly approved the aid.Boehner had scrambled to tamp down fury over the delay on aid to victims of the storm, which killed 120 people and destroyed tens of thousands of homes and businesses in New York, New Jersey and neighbouring northeastern states.President Barack Obama, instrumental in cobbling together the $60bn package, joined New Jersey's outspoken Republican Governor Chris Christie in leading the charge against Boehner's delay.Christie offered a blistering critique of his own party's congressional leadership, calling Boehner's delay "absolutely disgraceful."Fuming Republican congressman Peter King of New York also tore into his own leadership, saying the delay was "a knife in the back of New Yorkers and New Jerseyans."The outrage quickly gained the national spotlight, and Boehner wasted little time announcing the two-part vote."This is not a handout, this is not something we're looking for as a favor," King told the House. "What we're asking for is to be treated the same as victims (from) other natural disaster victims have been treated."Some Republicans including Senator Marco Rubio from Florida, a hurricane-prone state which has received billions in federal disaster aid, voted against the Sandy bill in the Senate, claiming it was stuffed with "pork" funding for projects or elements unrelated to Sandy relief.Darrell Issa, the powerful Republican chairman of the House Oversight Committee, continued in that vein Friday, saying "we need to get the pork out" and pointing to funding in the Senate bill that went to programs in Alaska, more than 3 000 miles (4 800 kilometers) from the Sandy disaster zone.He said he was hopeful the re-written legislation due for a vote January 15 would be a "clean bill" focused exclusively on Sandy relief."I believe today we are buying a little bit of time, but for the people on the Eastern Seaboard who are suffering, time is running out," he said.FEMA has announced it will soon run out of flood insurance funding without the $9.7bn increase.

Signs of hope for eurozone

Tentative signs the eurozone may have passed the worst of its downturn emerged in December but business surveys also suggested Britain's economy tipped back into contraction in the final months of 2012.Friday's purchasing managers indexes, which measure the activity of thousands of companies worldwide, brought mixed news from Europe.Activity in Britain's dominant services sector fell for the first time in two years and at a faster pace than predicted by any analyst polled by Reuters, while the speed of decline among French, Italian and Spanish firms slowed.Data from the United States due later on Friday are expected to show continued but modest jobs growth and a steady expansion of its services sector.With Chinese growth showing evidence of revival, that leaves Europe as the world's economic slowcoach going into 2013.In particular, economists were surprised by news the UK services PMI slipped to 48.9 in December from 50.2 last month, sagging below the 50 mark that divides from contraction for the first time in two years."The PMIs point to an economy that is contracting modestly," said Rob Wood, chief UK economist at Berenberg Bank. "The broader picture is that for some time the economy has been bouncing around the bottom ... and I think this is likely to stay with us for the next couple of quarters."Survey compiler Markit said the figures suggest Britain's economy shrank 0.2% in the final quarter of 2012, a slightly bigger drop than most other private-sector forecasts.The eurozone composite PMI hit its highest levels since last March, rising to 47.2 in December from 46.5 in November, although it remained rooted below the 50 mark for an 11th month."I think (the eurozone PMIs) are showing a decisive bottoming-out of activity," said James Nixon, chief European economist at Societe Generale."Now, the actual levels of the surveys are still consistent with GDP declining, but at least things aren't getting worse any faster."  Worst over?The decline eased among the services firms that make up the bulk of the eurozone's economy, ranging from banks to restaurants, but manufacturers endured an awful end to 2012.Survey compiler Markit warned that Friday's figures would probably fail to prevent the eurozone's recession deepening in the fourth quarter of last year, thanks to dismal figures in October and November."The surveys at least bring some substance to the belief that the worst is over and that a return to growth is in sight for the region in 2013," said Chris Williamson, chief economist at Markit.As with last year, the eurozone economy's fate hinges on the resolution of the sovereign debt crisis, which still smoulders despite the creation of financial firewalls by the European Central Bank and European Union.German Finance Minister Wolfgang Schaeuble said last week he thought the worst had passed for the debt crisis, although similar sentiments have been expressed by various European policymakers and politicians since mid-2010.Friday's European data followed news that China's services sector saw its slowest rate of expansion in nearly a year and a half in December, although the HSBC services PMI still pointed to a modest revival in economic growth.And economists expect the US ISM non-manufacturing survey, another PMI, to fall slightly to 54.2 in December from November's 54.7. While showing slowing growth, that would still signal a far brighter economic outlook for the US compared with its European peers.Analysts also predict the US economy added around 150 000 non-farm jobs in December, compared with 146 000 the previous month.