ECONOMY

US jobs figures knock recovery hopes

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Good evening from London,

The US added just 194,000 jobs in September, falling short of expectations of around 500,000 by economists and raising questions about the strength of the country’s recovery as well as when the Federal Reserve might begin “tapering” its pandemic stimulus programme.

Today’s non-farm payrolls data follow a disappointing update last month after the spread of the Delta variant of coronavirus knocked back hiring rates. Even with the reopening of schools freeing up workers from childcare duties, labour shortages remain.

The unemployment rate has fallen for the third month in a row, from 5.2 per cent to 4.8 per cent, partly because workers have left the labour force or are not yet ready to return. Meanwhile, wage growth has inched up as rising demand puts workers in a stronger bargaining position.

The Fed has been awaiting “substantial further progress” on its twin goals of inflation averaging 2 per cent and maximum employment before it begins winding down its $120bn asset-buying scheme. Fed chair Jay Powell had indicated that a “decent” report would mean the employment target had been met.

Stocks and bond markets were largely unmoved as the report eased concerns that stronger job gains would fuel inflation and prompt the Fed to hasten the end of its crisis measures.

As one analyst put it, slowing growth combined with labour shortages driving up wages “looks set to leave Fed officials in an uncomfortable position over the coming months”.

Latest news

  • UK prime minister Boris Johnson appointed Dave Lewis, the former head of retailer Tesco, to advise on the supply chain crisis

  • Annual inflation in Brazil hit 10.25 per cent thanks to rising commodities prices, drought and a weak currency

  • The Canadian economy created more jobs than expected in September, sending employment back to pre-pandemic levels

For the latest coronavirus and other news, visit our live blog

Need to know: the economy

The world has inched closer to the first major change in cross-border corporate taxation in a century. The OECD is targeting a minimum 15 per cent global rate and an obligation for companies to pay tax bills where they actually conduct their business. Ireland signed up yesterday, abandoning its 12.5 per cent rate and costing it about €2bn in lost revenues.

The global energy crisis continues to unnerve policymakers. In China, coal miners have been ordered to increase production urgently to ease shortages at factories, jeopardising moves towards more climate friendly polices. Other unwelcome news for renewable energy includes European electricity generation being blown off course by a lack of wind. In the UK, regulators are reviewing the price cap on energy bills as customers face stinging increases following the rise in wholesale gas prices.

As bad news piles up, from rows over the US debt ceiling to the threat of global contagion from troubled Chinese property company Evergrande, as well as the threat of stagflation and the mounting energy crisis, recovery from the pandemic may be more complicated than it looks, writes the FT’s senior editorial columnist John Plender.

Latest for the UK and Europe

Huw Pill, in his first public remarks as the new Bank of England chief economist, has said heightened UK inflation would last longer than originally expected. Minutes from the latest policy-setting meeting of the European Central Bank recorded similar worries over the eurozone.

Economics correspondent Delphine Strauss examines whether the UK government’s policies of cutting immigration and newfound enthusiasm for higher wages can help solve the country’s productivity puzzle.

Line chart of GDP per hour worked (2009 = 100) showing reliance on a 'low wage' model may partly explain the UK's poor productivity performance

One part of the UK economy that is steaming ahead is the housing market. Prices shot up in September with the biggest monthly rise since 2007, while those in the eurozone rose at the fastest pace in 15 years in the second quarter. As pandemic restrictions ease, the rental market across Europe and the US has also sprung back to life.

Global latest

China’s service sector bounced back in September, after shrinking the month before, as pandemic restrictions lessened following recent scares over the advance of the Delta variant.

The rise of the Delta strain is forcing countries across the Asia-Pacific to abandon isolation and “zero Covid” strategies after initially avoiding the major death tolls in western countries such as the UK. Singapore has become the test case to learn whether vaccine coverage is enough to ease restrictions on internal and external movement.

Chart showing UK Covid-19 pandemic death toll towers over Asia-Pacific, cumulative deaths per 100,000 residents

Tens of thousands of migrant workers have left Ho Chi Minh City in Vietnam since it eased pandemic restrictions, sparking fears of a labour shortage in one of Asia’s biggest manufacturing hubs which supplies many multinational companies.

Need to know: business

The global semiconductor shortage may be hitting manufacturing worldwide, but for South Korean chipmaker Samsung it has led to record sales. Third-quarter operating profit for the world’s biggest producer of memory chips, smartphones and electronic displays leapt 28 per cent to Won15.8tn ($13.2bn). Local correspondent Song Jung-a examines the supply chain risks from the country’s dominance of the world’s rechargeable battery market industry.

The Bank of England has warned of a likely rise in company collapses by the end of year. A third of UK small businesses are now classed as highly-indebted — more than double the amount before the pandemic.

The FT revealed British Airways plans to rehire about 3,000 of the 10,000 staff laid off last year when the crisis grounded most of its aircraft, spurred by the reopening of UK-US routes. The airline’s pilots have backed a deal to open a new low-cost subsidiary at Gatwick airport. BA, together with Ryanair, has been spared action from regulators over Covid-19 refunds for passengers.

Amazon has won a record amount of US tax breaks this year as local authorities rebuild their economies, despite the company’s profits soaring during lockdown.

Science round up

The battle against coronavirus may have sucked up resources from other scientific endeavours, but the unprecedented speed at which vaccines were delivered shows us the importance of science and what can be done when funding is found for bold ideas, writes US editor-at-large Gillian Tett.

Moderna’s announcement that it is planning a vaccines factory for Africa follows criticism that the pharma industry has resisted efforts to expand access in poorer countries by refusing to waive intellectual property rights. The industry has argued that this would not result in the faster production of more doses.

Other vaccine news this week includes Pfizer asking the US Food and Drug Administration for approval to use its jab developed with BioNTech in children aged 5-12, while Johnson & Johnson submitted its booster shot for approval from US regulators.

Meanwhile, demand for antibodies has surged among the unvaccinated in the US, leaving many states with few supplies. AstraZeneca submitted its long-acting antibody combination to US regulators for approval after trials showed the treatment led to a 77 per cent reduction in Covid-19 risk.

Away from coronavirus, we reported on two stunning medical developments this week.

The World Health Organization has approved the world’s first malaria vaccine for children: GSK’s RTS,S, or Mosquirix. The disease is one of the biggest causes of childhood illness and death in sub-Saharan Africa, killing more than 260,000 under-fives each year.

Science editor Clive Cookson meanwhile covered how US researchers have been able to successfully relieve a patient’s severe, long-term depression using an electronic implant that acts like a neural pacemaker and resets the brain circuits associated with negative feelings.

An illustrative graphic showing how the electronic implant works
The device is placed under the skull. When the electrode marked in blue senses the onset of depressive feelings, it sends tiny electric pulses down the electrode marked in red to alleviate symptoms © Ken Probst/UCSF

Covid cases and vaccinations

Total global cases: 236.7m

Get the latest worldwide picture with our vaccine tracker

And finally…

The COP26 conference in Glasgow this November is going to be the most important climate summit in years. But what actually is a COP? And why does this one matter so much? Environment correspondent Leslie Hook explains what you need to know in our new video.

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