Euro zone wage growth pulls back from two-year high

Hourly labor costs rose by 1.6 percent year-on-year in the July-September quarter. (REUTERS)
Updated 20 December 2017

Euro zone wage growth pulls back from two-year high

BRUSSELS: Euro zone wage growth slowed in the third quarter from a two-year high hit in the April-June period, data released on Tuesday showed, offering little comfort for the European Central Bank in its search for a pick-up in inflation.
Hourly labor costs rose by 1.6 percent year-on-year in the July-September quarter, compared with 1.8 percent in the second quarter, which had been the highest level since the first quarter of 2016.
Wages were also 1.6 percent higher year-on-year in the third quarter from a 2.1 percent increase in the second, which had been the highest rate since the first quarter of 2015.
Weak consumer price inflation is a particular problem for the ECB as it has undershot its nearly 2 percent inflation target for over four years despite unprecedented stimulus and will not reach its goal before the end of the decade.
Inflation was 1.5 percent in November.
The ECB increased its forecasts for euro zone growth and nudged up its expectations for inflation next year to 1.4 percent from 1.2 percent and now sees the level at 1.7 percent in 2020.
However, despite increased growth and inflation forecasts, the ECB kept interest rates at rock bottom and stuck to its pledge to keep money pouring into the euro zone economy.
The ECB is keeping a close eye on wages, hoping that robust economic growth and rapid job creation will finally push earnings higher and give inflation a badly needed boost.
Although employment has increased by nearly seven million since its trough in 2013, wage growth has been limited for years, a puzzling development for policymakers that suggests sizable hidden unemployment.
It may also signal that globalization has diminished central banks’ control over inflation as supply, demand and labor markets become international.

Economists fear a US recession in 2021

Updated 19 August 2019

Economists fear a US recession in 2021

  • Trump’s higher budget deficits ‘might dampen the economy’

WASHINGTON: A number of US business economists appear sufficiently concerned about the risks of some of President Donald Trump’s economic policies that they expect a recession in the US by the end of 2021.

Thirty-four percent of economists surveyed by the National Association for Business Economics, in a report being released Monday, said they believe a slowing economy will tip into recession in 2021. 

That’s up from 25 percent in a survey taken in February. Only 2 percent of those polled expect a recession to begin this year, while 38 percent predict that it will occur in 2020.

Trump, however, has dismissed concerns about a recession, offering an optimistic outlook for the economy after last week’s steep drop in the financial markets and saying on Sunday, “I don’t think we’re having a recession.” A strong economy is key to the Republican president’s 2020 reelection prospects.

The economists have previously expressed concern that Trump’s tariffs and higher budget deficits could eventually dampen the economy.

The Trump administration has imposed tariffs on goods from many key US trading partners, from China and Europe to Mexico and Canada. 

Officials maintain that the tariffs, which are taxes on imports, will help the administration gain more favorable terms of trade. But US trading partners have simply retaliated with tariffs of their own.

Trade between the US and China, the two biggest global economies, has plunged. Trump decided last Wednesday to postpone until Dec. 15 tariffs on about 60 percent of an additional $300 billion of Chinese imports, granting a reprieve from a planned move that would have extended duties to nearly everything the US buys from China.

The financial markets last week signaled the possibility of a US recession, adding to concerns over the ongoing trade tensions and word from Britain and Germany that their economies are shrinking.

The economists surveyed by the NABE were skeptical about prospects for success of the latest round of US-China trade negotiations. Only 5 percent predicted that a comprehensive trade deal would result, 64 percent suggested a superficial agreement was possible and nearly 25 percent expected nothing to be agreed upon by the two countries.

The 226 respondents, who work mainly for corporations and trade associations, were surveyed between July 14 and Aug. 1. That was before the White House announced 10 percent tariffs on the additional $300 billion of Chinese imports, the Chinese currency dipped below the seven-yuan-to-$1 level for the first time in 11 years and the Trump administration formally labeled China a currency manipulator.

As a whole, the business economists’ recent responses have represented a rebuke of the Trump administration’s overall approach to the economy.

Still, for now, most economic signs appear solid. Employers are adding jobs at a steady pace, the unemployment rate remains near a 50-year low and consumers are optimistic. US retail sales figures out last Thursday showed that they jumped in July by the most in four months.