US economy likely to pick up, though pain may linger for some

US President Donald Trump agreed to reopen the government for three weeks after having forced a shutdown over funding for a wall on the Mexico border. (AP)
Updated 27 January 2019
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US economy likely to pick up, though pain may linger for some

BALTIMORE: The US economy will likely resume its steady growth now that the government has reopened, though economists say some scars — for the nation and for federal workers — will take time to heal.
Most analysts estimate that the 35-day partial shutdown shaved a few tenths of a percentage point from annual economic growth in the first three month of 2019. They say growth should pick up in the coming months, though some of the money federal workers and contractors didn’t spend in the past five weeks — on such items as movie tickets, restaurants and travel — will never be made up. Having gone without two paychecks, many federal workers were forced to visit food banks or to borrow money. Federal workers will now receive backpay, though some contractors might not.
President Donald Trump agreed to reopen the government for three weeks after having forced the shutdown in hopes of compelling Democrats to approve billions for a wall on the Mexico border. Trump failed to secure any such money.
During the shutdown, a shortage of airport security and air traffic controllers disrupted travel at such major hubs as LaGuardia Airport in New York and Newark Liberty International Airport in New Jersey. The pressure on Trump to reopen the government intensified Friday after a delay of about 3,000 flights by mid-afternoon because six of 13 air traffic controllers didn’t show up to work at a critical center in Virginia.
S&P Global Ratings estimates that the economy lost $6 billion because of the government closure — a sizable but relatively negligible sum in a $19 trillion-plus US economy.
“If the shutdown had lasted much longer, the economic impacts would have snowballed — travel problems, tax refunds, etc.,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.
Still, the damage isn’t likely to lift immediately. And some federal employees had expressed anxiety during the shutdown about the stability and security of their jobs. The most skilled or talented among them may be likelier to leave government service, a potential problem for an economy already facing worker shortages in some areas.
Job searches by employees at multiple federal agencies jumped during the shutdown, according to clicks tracked by the jobs site Indeed. Employees who had gone unpaid at the Department of Homeland Security, Census Bureau, the IRS and the Transportation Safety Administration were much more likely to be hunting for a new job compared with the past two years of searches.
One lingering risk is if Trump chooses to shutter the government again after the three-week agreement lapses on Feb. 15. Should that occur, it would sabotage consumer confidence and hurt the economy, predicted Mark Zandi, chief economist at Moody’s Analytics.
“It would wipe out confidence,” Zandi said.


British Steel collapses, threatening thousands of jobs

Updated 22 May 2019
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British Steel collapses, threatening thousands of jobs

LONDON: British Steel Ltd. has been ordered into liquidation as it struggles with industry-wide troubles and Brexit, threatening 5,000 workers and another 20,000 jobs in the supply chain.
The company had asked for a package of support to tackle issues related to Britain’s pending departure from the European Union. Talks with the government failed to secure a bailout, and the Insolvency Service announced the liquidation on Wednesday.
“The immediate priority following my appointment as liquidator of British Steel is to continue safe operation of the site,” said David Chapman, the official receiver, referring to the Scunthorpe plant in northeast England.
The company will continue to trade and supply its customers while Chapman considers options for the business. A team from financial firm EY will work with the receiver and all parties to “secure a solution.”
“To this end they have commenced a sale process to identify a purchaser for the businesses,” EY said in a statement.
The government said it had done all it could for the company, including providing a 120 million pound ($152 million) bridging facility to help meet emission trading compliance costs. Going further would not be lawful as it could be considered illegal state aid, Business Secretary Greg Clark said.
“I have been advised that it would be unlawful to provide a guarantee or loan on the terms of any proposals that the company or any other party has made,” he said.
Unions had called for the government to nationalize the business, but the government demurred.
The opposition Labour Party’s deputy leader, Tom Watson described the news as “devastating.”
“It is testament to the government’s industrial policy vacuum, and the farce of its failed Brexit,” he said in a tweet.
The crisis underscores the anxieties of British manufacturers, who have been demanding clarity around plans for Britain’s departure from the EU. Longstanding issues such as uncompetitive electricity prices also continue to deter investment in UK manufacturing, said Gareth Stace, the director-general of UK Steel, the trade association of the industry.
“Many of our challenges are far from unique to steel — the whole manufacturing sector is crying out for certainty over Brexit,” Stace said. “Unable to decipher the trading relationship the UK will have with its biggest market in just five months’ time, planning and decision making has become nightmarish in its complexity.”
Greybull Capital, which bought British Steel in 2016 for a nominal sum, said turning around the company was always going to be a challenge. It praised the trade union and management team, but said Brexit-related issues proved to be insurmountable.
“We are grateful to all those who supported British Steel on the attempted journey to resurrect this vital part of British industry,” it said in a statement.