US adds 236K jobs; unemployment fallsto four-year low

Updated 09 March 2013
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US adds 236K jobs; unemployment fallsto four-year low

WASHINGTON: A burst of hiring in February added 236,000 US jobs and slashed the unemployment rate to 7.7 percent — a four-year low. The strong job growth showed that American employers are confident about the economy despite the fiscal austerity triggered by higher taxes and government spending cuts.
The jobs report issued yesterday provided encouraging details: Job growth has averaged more than 200,000 a month since November, wages rose, and the job gains were broad-based, led by the most construction hiring in six years.
The report was good news for the Obama administration: The jobless rate dropped to the lowest level since President Barack Obama has been in office.
And the upbeat jobless report fits with other big economic news of recent days: Surging stock prices and steady home-price increases that have finally allowed Americans to regain the $ 16 trillion in wealth they lost to the Great Recession. The gains are helping support the economy and could lead to further spending and growth.
Stock futures rose on the report, putting the Dow Jones Industrial Average on track for a fourth straight record close.
Still, White House economist Alan Krueger noted in a statement yesterday that the new unemployment rate was measured before $ 85 billion in automatic budget cuts started taking effect. The administration has warned that the cuts could have a negative impact on employment and economic growth.
The jobless rate had been stuck at 7.8 percent or above since September. The rate declined last month because the number of unemployed fell 300,000 to just over 12 million, the fewest since December 2008. More than half the decline occurred because 170,000 of the unemployed found jobs. Another 130,000 gave up on their job searches. People who aren't looking for jobs aren't counted as unemployed.
The unemployment is calculated from a survey of households, while the job gains come from a survey of employers.
Employers added slightly fewer jobs in January than the government had first estimated. Job gains were lowered to 119,000 from an initially estimated 157,000. Still, December hiring was a little better than first thought, with 219,000 jobs added instead of 196,000.
Robust auto sales and a steady housing recovery are spurring more hiring, which could trigger more consumer spending and stronger economic growth. The construction industry added 48,000 in February and has added 151,000 since September. Manufacturing has gained 14,000 last month and 39,000 since November.
Retailers added 24,000 jobs, a sign that they expect healthy consumer spending in the coming months. Education and health services gained 24,000. And the information industry, which includes publishing, telecommunications and film, added 20,000, mostly in the movie industry.
The economy is also benefiting from the Federal Reserve's efforts to keep interest rates low. Lower rates have made it easier for Americans to afford new homes and cars. The Fed has said it will keep the benchmark rate that it controls near zero until unemployment has fallen to 6.5 percent, as long as inflation remains in check.
"This may not yet be the substantial improvement in the labor market outlook that the Fed is looking for, but it's moving in the right direction," Paul Ashworth, an economist at Capital Economics, said in a note to clients.
So far, higher gas prices and a Jan. 1 increase in Social Security taxes haven't caused Americans to sharply cut back on spending.
Across-the-board government spending cuts also kicked in March 1 after the White House and Congress failed to reach a deal to avoid them. Those cuts will likely lead to furloughs and layoffs in coming weeks.
The impact of the tax hikes is partly being offset by higher pay: Hourly wages rose 4 cents to $23.82 last month. Wages have risen 2.1 percent in the past year, slightly ahead of inflation.
A big source of strength has also been home sales and residential construction: New-home sales jumped 16 percent in January to the highest level since July 2008. And builders started work on the most homes last year since 2008.
Home prices rose by the most in more than six years in the 12 months that ended in January. Higher prices tend to make homeowners feel wealthier and more likely to spend.
SOURCE: THE ASSOCIATED PRESS


All-American banker heads back to the Kingdom

Updated 40 min 9 sec ago
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All-American banker heads back to the Kingdom

  • "The implementation and execution of Vision 2030 will produce global companies for Saudi Arabia, and we can help in that process," said Citigroup CEO
  • "The government has a lot on its plate and privatization takes a long time to set up. Privatization is one of those things that you only want to do once,”

If anybody deserves the description “all-American”, it is surely Mike Corbat, chief executive officer of Citigroup.

New England origins, a Harvard education, Ivy League American footballer and a Wall Street career are all evidence of the fact he was very definitely “born in the USA”, as is the in-bank nickname of “Clark Kent” — the alter-ego of Superman — due to his athletic physique and spectacles.

But last week Corbat was turning his mind away from the USA and toward Saudi Arabia, as the bank formally ended a 14-year self-imposed exile from the Kingdom with a ceremony at its new offices in Riyadh, symbolizing its return to the lucrative markets it first entered in the 1950s, among the first American banks to do business in the region.

Corbat took some time out of the day’s celebrations — a formal ribbon-cutting alongside Ibrahim Al Omar, governor of the Saudi Arabian General Investment Authority, and an elite dinner in the ballroom of the Four Seasons Hotel in Kingdom Tower — to talk exclusively to Arab News about Citi’s plans for the Saudi business at a time of rapid transformation in the Kingdom and the region.

“I am absolutely positive about the economic prospects for this region. We are in 13 countries here, with 2,500 employees, focusing on trade and business, with some consumer presence. The implementation and execution of Vision 2030 will produce global companies for Saudi Arabia, and we can help in that process. Citi can service some of their needs as they expand globally,” he said.

Citi withdrew from Saudi Arabia in 2004 in the aftermath of the 9/11 terrorist attacks in the USA, in a decision later described by executives as “a mistake.” Even before the enormous opportunities of Vision 2030 persuaded the bank it had to have a formal presence again in the Kingdom, and a license from the Capital Markets Authority (CMA) to pursue investment banking and other business there, the bank was back on the scene.

In 2015 it helped Saudi Aramco to raise multi-billion dollar loans, and advised the oil giant on Asian deals. The following year, which saw the formal unveiling of Vision 2030, Citi was involved in the groundbreaking $17.5 billion bond issue that marked the Kingdom’s debut on global capital markets.

Citi was back, but needed a CMA license to win more lucrative business in the big domestic economic transformation under way. That was finally granted in April of last year, and Carmen Haddad, a long serving Citi executive with extensive experience of the Middle East, was made head of the new Saudi operation.

“We’ve been at the front and center of the sovereign bonds drive Saudi has been doing for the past couple of years, and also with syndicated loans. But with the CMA license we can really show our worth. We can help with all future debt and equity transactions,” Corbat said.

Vision 2030 aims to reduce the Kingdom’s dependence on oil, but also to increase the contribution of the private sector to the national economy, and this is one area where Citi feels it can use its global experience. The bank has advised governments around the world on privatization strategies, and Saudi has a privatization schedule that ranks among the largest in history.

The timing and scale of the program is still unclear. Last year minsters put a value of $200bn on the program, but officials in Riyadh last week were talking more in the $60bn to $70bn range. And investors are still waiting for the first big sell-off of a state company. But Corbat insisted Citi would be ready to get involved when the time is right.

“Privatization is obviously a top priority of the Vision 2030 strategy, and we can bring our expertise to bear in this. I think it is right to take your time over something as significant as the privatization program. The government has a lot on its plate and privatization takes a long time to set up. Privatization is one of those things that you only want to do once,” he said.

By far the biggest element of the drive toward a more private sector-focused economy is the plan to sell shares in the Kingdom’s “jewel in the crown”, Saudi Aramco. Citi is among a small group of top global banks vying for business in the Aramco sell-off.

Originally planned as a big international initial public offering (IPO) by the end of this year, valuing the company at $2 trillion, doubts have begin to creep in over the valuation figure, and over the venue for what promises to be the biggest IPO in history. One suggestion is that Aramco will go only for a listing on the Tadawul exchange in Riyadh.

“I don’t know the timing of the IPO. Maybe they [the Saudi authorities] will want to start locally, in which case they have to be sure the capacity and liquidity are there,” Corbat said.

He believes that recent improvements to the market infrastructure in Saudi Arabia — which look set to see the country included in index provider MSCI’s widely-tracked Emerging Markets index from as early as next year — could make an “exclusive” IPO on Tadawul more attractive.

“The MSCI upgrade to emerging markets status will create more liquidity, and foreign investors will have to play their role,” he said.

“All the big reforms that have taken place on the Riyadh market recently have certainly made it a friendlier place for foreign investors. The CMA has been through more change than ever, and it’s a better place for that. The CMA over the past two years has proven to be progressive and consultative,” he added.

Citi found itself indirectly involved in the big anti-corruption campaign of last year, when their long-term partner and shareholder, Price Alwaleed Bin Talal, was among the businessmen detained in the Ritz Carlton hotel in Riyadh.

Corbat is reluctant to comment on the Kingdom’s internal affairs, though he did say that foreign direct investment would not be hit by the anti-graft drive. “I don’t think FDI has been or will be affected negatively by the anti-corruption campaign. Saudi Arabia is already the biggest economy in the region with only limited foreign investment. Imagine how far it could go with more,” he said.

On Alwaleed, he said: “He has been a shareholder since the early 1990s, and he has been a great shareholder, a loyal voice of support and reassurance. We’ve been fortunate to be able to count him as one of our shareholders. In all our dealings with him I’ve found him to be straightforward and transparent.”

Corbat was one of the top American executives who met with Saudi officials on the recent royal visit to the USA, intended in part to counter any adverse investor sentiment from the anti-corruption arrests, and was impressed by what he saw.

“The visit to the USA by the Crown Prince was extremely well received. The whole Saudi delegation impressed us with their drive and commitment to the transformation process. It was a very successful exercise for Saudi Arabia,” he said.

With 35 years at Citi under his belt, including responsibly for unwinding Citi’s “toxic” assets after the financial crisis, and wide ranging experience of the bank’s international operations, he is well placed to gauge global geo-politcal risk.

He sees some threat to the world financial system from the end of quantitative easing, which he called a “renormalization of the global economy”, and a more limited challenge to world economies from possible “trade wars” between the USA and China.

“I think it’s fair to say that if we did have a serious trade war, it would have an effect. But it would not be the end of trade. I think it’s more likely to redraw the trade lines of the world. Trade flows would move away from the big blocks and go through other areas, like Africa and other places for example,” he said.

On regional risks, always a factor in business and financial decisions in the Middle East, he said: “I think they are within acceptable limits and I don’t think they will go beyond that. The region is the leading center for oil and gas so what happens here has global implications,” he said, though with the caveat that the effects of a prolonged trade was on the “bookend” economies of the USA and China could have a negative impact on global commodity prices.

All-American Corbat may be, but Citi’s return to the Kingdom will just not be an exercise in stuffing US executives into the top jobs in Riyadh. The firm is committed to achieving 85 percent Saudi employment levels at its new office, and is already well on the way to achieving that.

“The market for talent in Saudi Arabia is extremely competitive, but we think we have a very strong appeal for candidates. We are very proud of our ability to invest in and train, and to improve home grown talent,” Corbat said.