Mattias Loov sought to cut costs for his clients at Stockholm-based H1 Communication AB after the global economic crisis hit the Nordic region. He found a solution 760 kilometers (475 miles) across the Baltic Sea.
H1 now has about 10 percent of its staff in Estonia, where the hourly labor cost is a fifth of Sweden
Budget Minister Cristobal Montoro said Spain would damage European and global growth if it misses budget-deficit targets and threatened to take over the accounts of regions that don
The cost of living in the U.S. probably rose in February as gasoline prices climbed, economists said before a report today.
The consumer-price index increased 0.4 percent, the most in 10 months, after advancing 0.2 percent in January, according to the median forecast of 79 economists surveyed by Bloomberg News. The so-called core, which excludes volatile food and energy expenses, may have climbed 0.2 percent for a second month. Industrial production probably rebounded in February, another report may show.
Filling up an automobile
Wait _ haven’t we seen this movie before?
Companies are generating waves of jobs, and unemployment is down.
The same thing happened last year around this time. Then everything faded to black starting with the earthquake in Japan, which struck a year ago Sunday.
Does a happier ending await the job market this time? Economists seem to think so.
For reasons ranging from progress on Europe’s debt crisis to a slowly improving housing market to slightly less gridlock in Congress, the economy and the job market appear better able to withstand setbacks than they were in 2011.
“The internal dynamics of the U.S. economy look pretty good right now,” says Bill Cheney, chief economist at John Hancock Asset Management.
U.S. employers added 227,000 jobs in February, the third straight month of 200,000-plus job growth. The unemployment rate remained 8.3 percent, but it was 9 percent as recently as September. By all measures, the job market is strengthening by the month.
Then again, the numbers can conjure an unsettling sense of deja vu. Last year, the job market had a similar three-month run. From February through April, the economy added an average 239,000 jobs each month.
Helping drive that growth was a new Social Security tax cut that put more money in paychecks for 160 million Americans. The tax cut gives $1,000 a year, or nearly $20 a week, to someone making $50,000. It gives up to $4,272 or roughly $82 a week, to a household with two high-paid workers.
The Social Security tax cut was supposed to expire at the end of 2011. But under election-year pressure, Congress has extended it through 2012.
On top of that, a bond-buying program by the Federal Reserve drove interest rates on mortgages and other consumer loans to historic lows.
Yet just as things were perking up, a freeze descended on the economy and job market.
The March 11 earthquake and tsunami cut off supplies from Japanese factories to U.S. and other manufacturers. The Arab Spring protests escalated oil prices. And gasoline prices followed them up, to a painful $3.98 a gallon by mid-May.
A clash in Washington over the federal debt limit brought the nation to the verge of default and sapped consumer and business confidence. Europe’s debt crisis panicked investors and further shook confidence.
From May through August last year, job growth averaged less than 80,000 a month before regaining strength in the fall.
Economists expect the 2012 sequel to improve on the 2011 original. Here are seven reasons the job market appears on surer footing this time:
_ COMPANIES CAN’T SQUEEZE MORE OUTPUT FROM WORKERS
During and right after the Great Recession, companies shrank their work forces because demand plunged and fewer workers were needed.
Once demand started growing again, companies were reluctant to hire immediately. They managed to produce more with the employees they had. But now many companies are finding they can’t continue to do more with less. As demand grows, they’re finding they have to hire.
_ CONSUMERS ARE STURDIER
Since the recession, households have cut their debts and rebuilt savings. One key measure of household debt burdens _ debt payments as a percentage of after-tax income _ is at its lowest point since 1994, according to the Federal Reserve.
“Consumer finances are fundamentally healthier than they were,” says Stuart Hoffman, chief economist at PNC Financial Services Group.
As the labor market has healed, Americans have worried less about losing their jobs. As a result, they’re less likely to curtail spending _ even in the face of shocks such as a 29-cent jump in gasoline prices in the past month to an average $3.78 a gallon.
_ TENSIONS EASE IN WASHINGTON
The debt-limit showdown waged last summer between the Obama administration and congressional Republicans rattled confidence in America’s leadership. It looked as if the United States might default on its debts for the first time in history because leaders couldn’t reach a deal.
Since then, thanks in part to election-year pressures, tensions have eased. Republicans dropped threats to let the payroll tax expire. And in an unusual show of cooperation, House lawmakers from both parties backed a bill last week to make it easier for small businesses to obtain financing they need to hire and expand.
_ HOUSING IS INCHING BACK
The collapse of real estate lies at the heart of America’s economic problems. House prices have plunged 30 percent since 2006. The drop has wiped out $7 trillion in homeowners’ equity. Millions of construction workers have lost jobs.
Now, there are tentative signs of recovery. Apartment construction is growing. Construction jobs are slowly returning. Home builders are seeing more foot traffic and gaining confidence that sales will pick up in the spring buying season.
No one expects another boom. But real estate is no longer subtracting from U.S. employment. And there’s hope among economists that higher sales could stop prices from falling further by spring.
Once home prices stabilize, more people will likely decide it’s time to buy. And consumers who worry less about a loss of home equity _ the main source of wealth for most people _ are more likely to keep spending.
_ STATE AND LOCAL GOVERNMENT CUTS SLOWING
The Great Recession and the housing collapse dried up tax revenue for state and local governments. Many were forced to lay off teachers and other public workers. Since December 2008, state and local governments have slashed 613,000 jobs, offsetting some of the hiring by private companies.
But the cuts appear to be easing. State governments have added 10,000 jobs so far this year. Local governments last month added 2,000 _ a modest total but only the third increase in two years.
“There’s only so many teachers you can cut, so many police officers, so many firemen,” says Mark Vitner, senior economist at Wells Fargo Economics.
_ EUROPE’S THREAT HAS SUBSIDED
Investors panicked last year over the prospect that Greece and some other European countries would default on their debts, stick banks with huge losses and trigger a global credit crunch. Such fears sent stocks tumbling and helped diminish U.S. consumer confidence in the second half of 2012.
But confidence is rebounding. Greece has received a $172 billion bailout, pushing back the threat of a destructive default. And the European Central Bank has made more than $1.3 trillion in low-rate three-year loans to banks since December, making clear it won’t let the European banking system fail.
_ U.S. BANKS LENDING MORE TO BUSINESSES
After the September 2008 collapse of Lehman Brothers shook the financial system, U.S. banks cut loans to businesses in 2009 and 2010. The credit crunch fed the economy’s misery by starving many companies of financing needed to grow and hire.
But banks are healthier now. So are the prospects for their business customers. Bank lending to businesses rose nearly 14 percent last year to $1.35 trillion, according to the Federal Deposit Insurance Corp. Loans to small businesses grew at the end of last year for the first time since the FDIC started tracking them nearly two years ago.
William Dunkelberg, chief economist of the National Federal of Independent Business, says the outlook for hiring by small businesses offers “a better picture than we have seen for years.”
Economists are still cautious. A shock like the Japanese quake or further Middle East turmoil could always reverse the gains. Ever-higher oil prices would hurt. And even with the improvements, the recovery from the 2007-2009 remains weaker than past recoveries.
But economists say the job market has likely gained enough momentum to avoid a repeat of mid-2011’s gut-churning drop.
“This year will not be the same,” PNC’s Hoffman says. “We won’t be sitting here in six months saying, `Uh-oh, it was another false dawn.’”
The year has barely begun, but it’s already a major disappointment for the cruise industry.
It was supposed to be the year that prices stabilized following widespread discounting after the recession. But just two weeks into the year, 32 people died when the Costa Concordia sank off the coast of Italy. Then late last month, another Costa ship _ the Allegra _ caught fire and lost power, leaving passengers without working toilets, running water or air conditioning for three days.
Costa’s parent company, Carnival Corp., said Friday those incidents led it to slash its 2012 earnings expectations by 82 percent. Still, it’s holding prices firm, warning that “consumers holding out for deeper than normal discounts may be disappointed.”
Since the Concordia capsized in mid-January, Carnival said that its booking trends, excluding Costa, are still running behind last year, despite lowering prices immediately after the accident. Booking volumes for the Costa line during the same period are running “significantly behind.”
Costa nixed essentially all its marketing after the wreck, Carnival said, and has not made a serious public attempt to win back potential travelers in most markets.
Carnival Corp. posted a loss of $139 million, or 18 cents per share, for the first quarter on Friday. A year ago, it earned $152 million, or 19 cents per share.
Revenue rose 5 percent to $3.58 billion. Analysts expected a loss of 7 cents per share with revenue of $3.56 billion.
The first three months of the year are a critical period for the cruise industry payday loan lenders in states. Referred to as “wave season,” it’s a time when a large number of travelers book cruises for the year. The Costa Concordia disaster happened as the season was starting, and it affected bookings across the industry.
Last month Royal Caribbean Cruises Ltd. said it’s hard to determine what impact the tragedy will have on its 2012 revenue, but it said the accident has already hit bookings significantly.
Unlike plane tickets or hotel rooms which are mostly booked directly by customers on the internet, most cruises are sold by travel agents, which makes it harder to gauge the impact of an accident like the Concordia wreck.
But no cruise line has felt the impact like Carnival.
The Miami company predicted net income of between $1.40 and $1.70 per share. It previously forecast $2.55 to $2.85 per share. Revenue for the year after expenses could fall as much as 4 percent. If the potential business from the sunken Italian ship is excluded, Carnival says the number would likely be flat.
Carnival operates 101 ships under several brands including Costa, Carnival, Cunard, Holland America, Princess and Seabourn.
Shares of Carnival Corp. fell 54 cents to $30.41 in midday trading. The stock lost about 16 percent in the days following the Concordia wreck, and has not recovered much from a January low of $29.36.
Gasoline prices have finally dropped after 27 days.
The nationwide average for regular unleaded slipped less than a penny to $3.764 per gallon on Tuesday. That ended a streak of price hikes that began on Feb. 8. Pump prices rose by more than 28 cents per gallon in that period, making gasoline the most expensive ever for this time of year.
Gasoline already tops $4 per gallon in California, Alaska and Hawaii. It’s near the $4 mark in several other states, including Connecticut, Illinois, Michigan, New York, Oregon and Washington.
Despite the one-day drop, experts predict that gasoline will continue to rise over the next several weeks. The Oil Price Information Service predicts the nationwide average could peak at $4.25 per gallon in late April.
Debt-crippled Greece’s budget deficit is expected to hit 9.6 percent of economic output in 2011, about half a percentage point above target, the development minister said Wednesday.
Michalis Chryssochoidis said that an increase in the use of European Union structural development funds had contributed to lowering government overspending from 10.6 percent of gross domestic product in 2010.
“The good news is that absorption of European Union funds has exceeded all expectations,” Chryssochoidis said at an economic forum where the government hopes to attract investment from the United Arab Emirates.
But Greece, which is relying on billions in rescue loans from its European partners and the International Monetary Fund to keep afloat, had pledged to cut the 2011 deficit to 9 percent of GDP.
Greece ran up high budget deficits for years, building a suffocating debt load set to exceed 160 percent of GDP in 2011. In exchange for a vital euro110 billion ($140 billion) international bailout in May 2010, the country implemented a harsh austerity program, slashing pensions and salaries while repeatedly hiking taxes and raising retirement ages.
The country’s interim coalition government is rushing to pass a new batch of reforms and cutbacks, to secure a second, euro130 billion bailout package approved in October but not yet finalized instant personal loans guaranteed.
Fitch Ratings warned on Wednesday that Greece’s financial troubles could still worsen the eurozone crisis if it can’t work out a debt reduction deal with creditors, part of the second bailout package.
Fitch’s head of sovereign ratings David Riley said Greece “still has lots of potential to plunge Europe into crisis” and that “time is running out.”
Greece is in talks with private investors about a voluntary 50 percent reduction in their Greek bond holdings.
It needs to agree the deal before it can get another installment in its rescue loans, which it will need to repay euro14 billion in bonds that come due in March.
Riley said one complicating factor in the private creditors’ deal was the European Central Bank’s refusal to write down its estimated euro45 billion in Greek bonds. That means private bondholders have to be asked to take on more losses to reach a given reduction in Greece’s debt load.
India’s central bank held key interest rates steady Friday as it struggles to foster growth amid high inflation, disappointing businesses who were looking for more drastic action.
The Reserve Bank of India kept the short-term lending rate, or repo rate, at 8.5 percent and the reverse repo rate _ the rate it pays to banks for deposits, at 7.5 percent. The bank also kept the cash reserve ratio for commercial lenders unchanged.
“Downside risks to growth have clearly increased,” the bank said in a statement. “However, it must be emphasized that inflation risks remain high.”
The bank’s 13 rate hikes since March 2010 are starting to choke growth in Asia’s third largest economy. Growth slipped to a two year low of 6.9 percent in the September quarter and industrial production fell 5.1 percent in October, its first contraction since June 2009. But inflation remains above 9 percent.
“I would like to see RBI do a major rate cut now,” B. Muthuraman, president of the Confederation of Indian Industry and vice chairman of Tata Steel, told CNBC-TV18 before the policy decision.
He said he would have liked the bank to cut rates by half a percentage point and reduce the cash reserve ratio to boost lending. That would help small and medium sized businesses _ which are crucial to jobs and output in India’s manufacturing sector _ get more affordable financing to grow.
“Government inaction is a big cause of concern for industry,” Muthuraman said, citing coal shortages, land acquisition difficulties and slow decision making. “We can have a growth rate in excess of 8 percent, if only we’d had reforms. It’s a very sad story.”
The rupee, which has been trading at record lows, strengthened Friday, after the central bank took to steps to curb speculation.
A Yemeni military official says al-Qaida-linked militants have attacked a military barracks in an embattled southern town, leaving two soldiers and 11 militants dead.
The official said Saturday that another 36 soldiers were injured in the base in Zinjibar, the capital of Abyan province.
He says that the fighting began Friday night and continued into the morning. He spoke on condition of anonymity because he was not authorized to speak to the media payday loans.
Militants and the army have fought for control of Zinjibar since May. A 10-month-old uprising against authoritarian President Ali Abdullah Saleh has caused a breakdown of authority throughout the country.
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