BW Businessworld

Globescan: Just A Blip

US employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but rising wages and an unemployment rate at an eight-year low suggested the labour market recovery remains firm.

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US employment gains slowed more than expected in January as the boost to hiring from unseasonably mild weather faded, but rising wages and an unemployment rate at an eight-year low suggested the labour market recovery remains firm. Non-farm payrolls increased by 151,000 jobs and the unemployment rate slipped one-tenth of a percentage point to 4.9 per cent, the lowest since February 2008, the Labour Department said. The payrolls gain was a sharp step-down from the average 231,000 jobs per month during the fourth quarter. “The fact that payroll gains fell back to earth is not necessarily a bad sign. Most indications are that the job market in the US is on solid footing and improving,” said Nariman Behravesh, chief economist. Economists had forecast employment increasing by 190,000 in January and the jobless rate steady at 5 per cent.

Car Trouble
Honda Motor’s order that its US dealers stop selling some 2.2 million of the automakers’ most popular models is compounding financial and regulatory headaches for car dealers stuck with millions of vehicles that have potentially hazardous air bags or other safety defects. With the recalls affecting Honda vehicles dating back several years, used-car dealers are facing increased pressure. It is legal under federal law to sell used cars with unrepaired safety defects that are subject to recall, but dealers that operate under franchises with manufacturers could be violating those agreements. It is illegal to sell new cars that are subject to a recall under federal law. Because some used-car dealers operate independently of any manufacturer, the growing number of used cars that need safety repairs is creating divisions among dealers.

Crude Drive
US President Barack Obama will launch a long-shot bid next week to impose a $10-a-barrel tax on crude oil that would fund the overhaul of the nation’s aging transportation infrastructure, the White House said. The proposed fee, which would be paid by oil companies and phased in over five years, was quickly met with scorn by lawmakers in the Republican-controlled Congress. In the last year of his presidency, Obama has said the country must stop subsidising the “dirty” fossil fuels of the past and focus on clean, renewable fuels that do not exacerbate climate change. “By placing a fee on oil, the President’s plan creates a clear incentive for private sector innovation to reduce our reliance on oil and at the same time invests in clean energy technologies that will power our future,” the White House said.

Damage Control
Volkswagen will offer generous compensation packages to the roughly 600,000 US owners of diesel vehicles whose emissions are over the legal limit, the head of its claims fund told a German paper. The German car maker has still not decided whether vehicle owners will be offered cash, car buy-backs, repairs or replacement cars, Kenneth Feinberg said. He previously headed the compensation funds for the 11 September 2001 attacks, BP’s Deepwater Horizon oil spill and General Motors’ ignition switch crashes. Volkswagen postponed the publication of its 2015 results and delayed its annual shareholders’ meeting as it struggles to put an exact price on its emissions scandal.

Debt Row
Argentina offered a $6.5-billion cash payment to creditors suing the country over defaulted bonds, seeking to end a festering 14-year legal battle that transformed the country into a financial markets pariah. Two out of six leading bondholders have already accepted the offer, the US court-appointed mediator said, hailing the proposal by Argentina’s new, business-friendly government as an “historic breakthrough”. The offer, if accepted by all litigating bondholders, would represent a roughly 25 per cent discount or so-called haircut for creditors who filed claims of about $9 billion.

Dumping Debate
China’s Ministry of Commerce has said that claims it was dumping steel in Europe should be put to WTO. Reports said that the European Commission was preparing to impose duties on imported Chinese steel. WTO members should fulfil their treaty obligations and stop using “surrogate countries” to pursue anti-dumping claims. The EC is set to impose provisional duties later in February up to 16 per cent on China, and of up to 26 per cent on Russia, following its investigation into alleged dumping by the two countries.

China Woes
ArcelorMittal, the world’s largest steelmaker, launched plans for a $3-billion share issue to help reduce debt and cut costs, having been hit by a plunge in steel prices which it blamed on a surge in cheap exports from China. The company, twice the size of its nearest rival, reported that its core profit dropped by 32 per cent last year to $5.2 billion and warned the result this year would only be “in excess of” $4.5 billion as it sees little improvement in overall global demand for steel this year.

Battle Of Brands
Yum Brands, the home of KFC and Pizza Hut, is falling behind rival McDonald’s as the pair battle to revive flagging sales in China — a headache for Yum as it looks to spin off operations in its biggest market. A Reuters analysis of same-store sales data suggests McDonald’s is recovering faster in China than larger rival Yum as both seek to bounce back from a slew of food safety scandals dating back
to 2012.

Tough Talk
The International Monetary Fund (IMF) has asked Sri Lanka to urgently bolster its economic funds, narrow the fiscal deficit and put the country’s public finances on a sustainable path. While the country’s recent economic performance has been positive and a GDP growth of 5.2 per cent was achieved in the first three quarters of 2015, the IMF expressed concern that the fiscal deficit for 2015 is estimated to have exceeded the original budget target.

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