Tag Archives: economic recovery

WHO flags Omicron risk, countries tighten curbs, Biden urges vaccination

By Stephanie Nebehay, Alexander Winning and Wendell Roelf

GENEVA/JOHANNESBURG (Reuters) -The World Health Organization (WHO) said on Monday the Omicron coronavirus variant carried a very high risk of infection surges as more countries closed their borders, reviving fears over economic recovery from the two-year pandemic.

Airlines were scrambling to limit the impact of the variant on their networks, while delays in bookings threatened an already fragile recovery for global tourism.

But shares in airlines bounced back with the rest of the market on Monday after a sharp sell-off on Friday as hopes grew that the variant might prove to be milder than initially feared.

The WHO advised its 194 member nations that any surge in infections could have severe consequences, but said no deaths had yet been linked to the new variant.

“Omicron has an unprecedented number of spike mutations, some of which are concerning for their potential impact on the trajectory of the pandemic,” the WHO said.

“The overall global risk related to the new variant of concern Omicron is assessed as very high.”

Further research was needed to understand Omicron’s potential to escape protection against immunity induced by vaccines and previous infections, it said, adding that more data was expected in coming weeks.

U.S. President Joe Biden said the new variant was a cause for concern but not panic and that it would sooner or later arrive in the United States, urging people to get vaccinated. He said it would be weeks before the world knew how effective current vaccines would be against it.

“Obviously, we’re on high alert,” Dr. Anthony Fauci, the top U.S. infectious disease official and Biden’s chief medical adviser, told ABC News. “It’s inevitable that, sooner or later, it’s going to spread widely.”

An infectious disease expert from South Africa, where scientists first identified Omicron, said it was too early to say whether symptoms were more severe than previous variants, but it did appear to be more transmissible.

Professor Salim Abdool Karim also said existing vaccines were probably effective at stopping Omicron from causing severe illness. Scientists have said it could take weeks to understand the severity of Omicron.

South African cases were likely to exceed 10,000 a day this week, rocketing up from barely 300 a day two weeks ago, Karim added.

But South African President Cyril Ramaphosa denounced “unjustified and unscientific” travel bans that damage tourism-reliant economies. His country has said it is being punished for its scientific ability to detect new variants.

After a virtual meeting on Monday, health ministers from the Group of Seven bloc of wealthy nations praised South Africa for its “exemplary work” in detecting the variant and alerting others.

JITTERY MARKETS

Fears the new variant might be resistant to vaccines helped wipe roughly $2 trillion off global stock markets on Friday but markets settled down again on Monday, even after Japan said it would close its borders.

Other countries also imposed travel and other restrictions, worried that Omicron could spread fast even among people with immunity.

Travelers stranded at Johannesburg international airport said they felt helpless as flights from South Africa were cancelled.

“We don’t know what to do, we are just waiting here,” said Ntabiseng Kabeli, a stranded passenger from Lesotho.

Portugal found 13 cases of the variant at a Lisbon football club. Spain, Sweden, Scotland and Austria also reported their first cases.

Japan described its ban on arrivals by foreigners as precautionary.

Health Minister Shigeyuki Goto said tests would determine if a traveler from Namibia was Japan’s first Omicron case.

In Israel, a ban on arrivals by foreigners took effect overnight.

U.N. Secretary-General Antonio Guterres expressed concern that restrictions would leave southern African countries isolated.

“The people of Africa cannot be blamed for the immorally low level of vaccinations available in Africa – and they should not be penalized for identifying and sharing crucial science and health information with the world,” he said.

Guterres has long warned about the dangers of vaccine inequality around the world and that low immunization rates are “a breeding ground for variants.”

More than 261 million people in over 210 countries have been reported to be infected by the coronavirus since the first cases were identified in China in December 2019 and 5,456,515​ have died, according to a Reuters tally.

The new variant was discovered just as many parts of Europe were suffering a fourth wave of coronavirus infections as winter grips the continent in the runup to Christmas, with more people gathering indoors and increasing the risk of infection.

European Central Bank chief Christine Lagarde tried to reassure investors that the euro zone could cope with a resurgence of infections.

“We now know our enemy and what measures to take,” she told Italian broadcaster RAI late on Sunday. “We are all better equipped to respond to a risk of a fifth wave or the Omicron variant.”

(Reporting by Reuters bureaus; Writing by Himani Sarkar, Catherine Evans and Nick Macfie; Editing by Clarence Fernandez and Peter Graff)

U.S. home heating bills seen much higher this winter, EIA says

(Reuters) -U.S. consumers will spend more to heat their homes this winter (October-March) than last year due mostly to higher energy commodity prices, the U.S. Energy Information Administration (EIA) projected in its Winter Fuels Outlook on Wednesday.

Households that use propane and heating oil will likely spend much more than last year, EIA said.

EIA said it based its cost estimates on expectations of high retail energy prices — many are already at multiyear highs — and on forecasts for slightly colder weather this winter boosting household energy consumption over last year.

Last year, many energy prices reached multiyear lows due to coronavirus demand destruction. The wholesale price of natural gas, the most used heating fuel in the United States, averaged just $2.11 per thousand cubic feet (mcf) in 2020, their lowest in 25 years.

The main reason wholesale prices of natural gas, crude oil, and petroleum products have risen is that fuel demand has increased from recent lows faster than supply, in part because of economic recovery after the pandemic, EIA said.

Depending on where in the country people live, EIA said residential costs this winter – residents’ costs are higher than wholesale prices – will rise to about $11-$14 per mcf for natural gas, about $2.50-$3.50 per gallon for propane, and almost $3.50 per gallon for heating oil.

That compares with last winter’s residential costs of around $10-12 per thousand cubic feet for natural gas, $1.50-$2.50 per gallon for propane, and $2.50 per gallon for heating oil.

EIA said it will provide more details when it releases its Short-Term Energy Outlook later Wednesday.

(Reporting by Scott DiSavino; Editing by Andrew Heavens and Jonathan Oatis)

Ho Chi Minh City could lift lockdown, end ‘zero COVID-19’ policy

HANOI (Reuters) -Vietnam’s coronavirus epicenter Ho Chi Minh City, which has kept residents confined at home under lockdown, is considering reopening economic activity from Sept. 15, shifting from a “zero COVID-19” strategy to a policy of living with the virus.

The city of 9 million people is targeting a phased reopening and the full vaccination of its citizens by the end of this year, according to the draft seen by Reuters, which has yet to be endorsed.

Ho Chi Minh City last month deployed troops to enforce its lockdown and prohibited residents from leaving their homes to slow a spiraling rate of deaths. Just 3% of Vietnam’s 98 million population has been fully vaccinated.

Vietnam’s biggest city, a business hub flanked by industrialized provinces, aims to “promote economic recovery … and move towards living with COVID-19,” the draft proposal said.

The reopening would be gradual, and low-interest loans and tax cuts would be offered to affected firms, it said.

Ho Chi Minh City alone has recorded 241,110 coronavirus infections and 9,974 deaths, representing half of the country’s cases and 80% of its fatalities.

The vast majority of those have come in recent months, ending hopes that Vietnam could continue to achieve success it showed in 2020, when aggressive contact tracing and quarantining led to one of the world’s best COVID-19 containment records.

The ministry of health on Friday reported 14,922 coronavirus infections, a record daily increase, raising its caseload to 501,649 with 12,476 deaths.

Prime Minister Pham Minh Chinh on Wednesday warned Vietnam could be facing a lengthy coronavirus battle and cannot rely on lockdown and quarantines indefinitely.

During a visit to a smartphone factory of Samsung Electronics in the northern province of Thai Nguyen on Friday, Chinh urged the company to help Vietnam procure vaccines from South Korea and to maintain its long-term investment in Vietnam.

Foreign firms operating in the country, including Samsung “can put their trust in Vietnam’s efforts in tackling the pandemic,” Chinh said.

The health ministry on Friday called on recovered COVID-19 patients to help the city battle the epidemic.

In capital Hanoi, where dozens of new cases per day have been recorded in recent weeks, authorities will extend strict lockdown in most parts of the city beyond Sept. 6 and will conduct 1 million tests from now through the end of Sunday.

(Editing by Martin Petty and Peter Graff, Editing by Louise Heavens)

U.S. lets states use federal pandemic funds to extend jobless aid

WASHINGTON (Reuters) -U.S. states can use federal pandemic-related funds passed this year to extend unemployment aid, President Joe Biden’s administration said on Thursday, saying the Delta variant impact on some local economies may mean people need help for longer.

“There are some states where it may make sense for unemployed workers to continue receiving additional assistance for a longer period of time, allowing residents of those states more time to find a job in areas where unemployment remains high,” U.S. Treasury Secretary Janet Yellen and U.S. Labor Secretary Martin Walsh told congressional leaders in a letter.

“The Delta variant may also pose short-term challenges to local economies and labor markets,” they added.

Extra federal unemployment benefits will expire as planned on Sept. 6, they said. But states can tap funds from a law enacted in March called the American Rescue Plan, they told the heads of the Senate Finance Committee and the House of Representatives Ways and Means Committee.

COVID-19 deaths in the United States reached a five-month high this week, with cases most prevalent in the U.S. South as the highly contagious Delta variant continued to spread, according to a Reuters tally.

Surging infections have threatened to upend the nation’s battle with the pandemic as well as its economic recovery.

Still, data released on Thursday showed U.S. weekly jobless claims hit a 17-month low as the ranks of the unemployed continued to shrink despite threats from rising COVID-19 cases.

(Reporting by Susan HeaveyEditing by Will Dunham and Chizu Nomiyama)

Canada looks to women to bolster trades amid post-pandemic labor shortage

By Julie Gordon

OTTAWA (Reuters) -A shortage of skilled workers is intensifying in Canada, potentially threatening the pace of the economic recovery from the COVID-19 pandemic, and that has policymakers looking at a largely untapped market for new construction workers: Women.

But attracting and retaining women in the skilled trades has long proven difficult, with tradeswomen and advocates citing challenges balancing childcare and on-site work, the stubborn sexism still ingrained in some workplaces, and a lack of opportunities for women to get a foot in the door.

Vanessa Miller was a young single mom when she decided to scrap university for welding. She got her journeyperson ticket and became a rarity in Canada: a woman with her own welding rig, a truck kitted out with all the equipment needed to do big jobs.

“Every time you go to a different job and nobody knows who you are, you have to prove yourself,” she said, speaking from her home in Regina, Saskatchewan. “It’s still difficult to break into the industry, it’s still very male dominated.”

Canada, like other developed nations, is facing a shortage of skilled trade workers just as a pandemic stimulus-backed building boom gets underway. At the same, more women than men remain unemployed because of the pandemic, and about 54,000 women have left the labor force since February 2020.

The gap between women’s labor force participation and men’s costs the Canadian economy C$100 billion ($79.3 billion) each year, said Carrie Freestone, an economist at RBC.

“Obviously skilled trades are a good opportunity,” Freestone said.

In its latest budget, Canada’s Liberal government pledged C$470 million ($373.2 million) to support the hiring of new apprentices for the most in-demand trades. Companies that hire women, Indigenous people and other minority groups get double the funding.

But women working in the trades and union leaders say it will take more than just money to get more women in the trades, they need work opportunities.

“We’re doing the work to mentor tradeswomen, to build our supply of under-represented groups,” said Lindsay Amundsen, director of workforce development at Canada’s Building Trades Unions. “Now we need these things legislated in large infrastructure projects. We need to put these people to work.”

Canada has suggested employment thresholds, or quotas, for certain groups – like women and Indigenous people – on major projects that get federal support, but it is up to the provinces to set them, a spokesperson at the infrastructure ministry said.

On Thursday, Canada set out C$2.4 million over five years to help diversify apprentices working in the carpentry trades.

RETENTION WOES

More than a decade ago, the province of Newfoundland and Labrador realized that efforts to get women more interested in the trades were working, but few were sticking with it.

The province funded the Office to Advance Women Apprentices (OAWA) to connect tradeswomen with employers and also mandated the hiring of women and other under-represented groups, like Indigenous people, on major projects.

By 2017, about 14% of construction tradespeople working in Newfoundland and Labrador were women, far above the national average of 3-4%, though some barriers remain.

When journeyperson millwright Cassandra Whalen landed in remote Voisey’s Bay, Labrador for a recent job, she discovered there was no safety equipment in her size on site.

“I needed a respirator, I needed gloves and I needed a harness, none of which they had in size small,” she said. “They had to be flown in.”

But Whalen loves her work, and says union advocacy has made the industry more inclusive.

One of the unions leading the charge is UA Canada, which pays up to 24 weeks salary to pregnant members unable to work due to safety risks. They also pay a top-up for both men and women who take parental leave after a baby is born.

“I really think it does help with the retention for sure,” said Alanna Marklund, a national manager at UAC who is also a journeyperson welder.

But childcare continues to be an issue for many tradeswomen. Several tradeswomen interviewed by Reuters said they depended on family members or spouses to help care for young children.

Maggie Budden, a journeyperson ironworker, ended up taking a job in a bank after her children were born. “Unfortunately with construction you need to travel and I could not do that with my daughters,” she said. She now runs the newest branch of OAWA, in Cape Breton.

Daniella Francis was living in Ontario when she started considering the trades, but she couldn’t find any programs for women in her province. She ended up moving her entire family to Alberta and is now an apprentice plumber.

“There needs to be more options,” she said, adding however: “I would say, as a woman, don’t be afraid to go into the trades. Things are changing.”

($1 = 1.2594 Canadian dollars)

(Reporting by Julie Gordon in Ottawa; Additional reporting by Allison Lampert in Montreal; Editing by Andrea Ricci)

Fed’s Powell keeps to script on jobs recovery, feels heat on inflation front

By Howard Schneider

WASHINGTON (Reuters) – Federal Reserve Chair Jerome Powell on Wednesday pledged “powerful support” to complete the U.S. economic recovery from the coronavirus pandemic, but faced sharp questions from Republican lawmakers concerned about recent spikes in inflation.

In testimony to the U.S. House of Representatives Financial Services Committee, Powell said he is confident recent price hikes are associated with the country’s post-pandemic reopening and will fade, and that the Fed should stay focused on getting as many people back to work as possible.

Any move to reduce support for the economy, by first slowing the U.S. central bank’s $120 billion in monthly bond purchases, is “still a ways off,” Powell said, with millions of people who were working before the crisis still to be pulled back into the labor force.

“The high inflation readings are for a small group of goods and services directly tied to the reopening,” Powell testified, language that indicated he saw no need to rush the shift towards post-pandemic policy.

Representative Ann Wagner, a Republican from Missouri, challenged that conclusion, relaying what’s likely to be a refrain from lawmakers as long as inflation continues to rise: their constituents are getting worried.

At a prior hearing in February “you reiterated that price spikes were temporary. I can tell you that the families and businesses I represent are not feeling that these price spikes are temporary,” Wagner said.

“The incoming data have been higher than expected and hoped for but are still consistent” with a temporary bout of higher prices, Powell responded.

“It is housing, appliances, food prices, gas,” Wagner retorted, a sign of what could become growing political pressure on the Fed to get tougher on inflation if the spikes in prices continue.

Representative Anthony Gonzalez, a Republican from Ohio, took aim at a new Fed framework that aims to encourage higher employment by letting inflation run “moderately” above the central bank’s 2% target “for some time”

“How long is ‘some time’?” Gonzalez asked, arguing that the Fed’s current policies may be doing little to encourage employment at a time when employers are already posting record numbers of jobs.

“It depends,” Powell said, demonstrating the dilemma he faces if prices continue rising. “Right now inflation is well above 2%. … The question for the (Federal Open Market) Committee will be where does this leave us in six months.”

U.S. Treasury yields fell after the release of Powell’s prepared testimony earlier on Wednesday and remained lower even though prices of factory inputs rose at a higher-than-expected pace in June, an indication markets construed his comments as a sign the monetary taps will stay open.

Powell’s remarks were notable as well for excluding any mention of risks to the recovery from the coronavirus Delta variant, with the Fed chief saying the central bank expects strong upcoming job gains “as public health conditions continue to improve.”

The Fed’s June meeting saw officials begin a move towards post-pandemic policy, with some of them poised to tighten financial conditions sooner to ensure inflation remains contained. Renewed coronavirus-related risks, if they materialize, could push the Fed in the other direction of keeping support for the recovery in place longer in case household and business spending wane amid a rise in new infections.

Falling Treasury bond yields have indicated concern among investors about slowing U.S. economic growth, even as new data on prices this week showed consumers paying appreciably more for an array of goods and services, including appliances, fabric, beef and rent.

In a report to Congress last week, the Fed said that as the “extraordinary circumstances” of the reopening subside, “supply and demand should become better aligned, and inflation is widely expected to move down.”

RISING DELTA

While each month of high inflation makes it harder to stick to that conviction, Powell for now is keeping to the Fed’s core narrative of a job market that still needs massive help from the central bank to restore it to its pre-pandemic health and minimize the long-term damage from a historic, virus-driven calamity.

The Fed has said it will not reduce its bond-buying program absent “substantial further progress” in regaining the roughly 7.5 million jobs still missing since the onset of the pandemic in March 2020, a threshold policymakers feel will likely be met later this year.

That hinges, however, on continued reopening of the economy, recovery in the travel, leisure and other “social” industries devastated by the health crisis, and the willingness of currently unemployed or homebound individuals to fill the record number of jobs on offer.

When Powell last spoke about the economy at a news briefing after the end of the June 15-16 policy meeting, new daily coronavirus infections were falling toward recent lows, and the Fed dropped language from its policy statement that the pandemic “continues to weigh on the economy.”

Since then the Delta variant has pushed the seven-day moving average of cases from 11,000 to above 21,000, and health officials are concerned about the spread of the variant in parts of the country where vaccination rates are low. The numbers are more ominous globally.

Powell is scheduled to appear before the U.S. Senate Banking Committee at 9:30 a.m. (1330 GMT) on Thursday.

(Reporting by Howard Schneider; Editing by Dan Burns, Andrea Ricci and Paul Simao)

Fed officials say important they be ‘well positioned’ to act, minutes show

By Howard Schneider, Jonnelle Marte and Lindsay Dunsmuir

WASHINGTON (Reuters) – Federal Reserve officials last month felt that substantial further progress on the economic recovery “was generally seen as not having yet been met,” but agreed they needed to be poised to act if inflation or other risks materialized, according to the minutes of the U.S. central bank’s June policy meeting.

In minutes that reflected a divided Fed wrestling with the onset of inflation and financial stability concerns, “various participants” at the June 15-16 meeting felt conditions for reducing the central bank’s asset purchases would be “met somewhat earlier than they had anticipated.”

Others saw a less clear signal from incoming data and cautioned that reopening the economy after a pandemic left an unusual level of uncertainty and required a “patient” approach to any policy change, stated the minutes, which were released on Wednesday.

Still “a substantial majority” of officials saw inflation risks “tilted to the upside,” and the Fed as a whole felt it needed to be prepared to act if those risks materialize.

“Participants generally judged that, as a matter of prudent planning, it was important to be well positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments, including faster-than anticipated progress toward the Committee’s goals or the emergence of risks that could impede the attainment of the Committee’s goals,” the minutes stated.

The Federal Open Market Committee at its meeting last month shifted towards a post-pandemic view of the world, dropping a longstanding reference to the coronavirus as a constraint on the economy and, in the words of Fed Chair Jerome Powell, “talking about talking about” when to shift monetary policy as well.

The start of that discussion, along with interest-rate projections showing higher borrowing costs as soon as 2023, caused investors to anticipate the Fed will move faster than expected to end its support for an economy still afflicted by high levels of unemployment and, now, rising inflation.

Long-term Treasury yields are near five-month lows, and the gap between those and shorter-term yields has been narrowing, a development often associated with skepticism about the outlook for longer-term economic growth.

In this case, Cornerstone Macro analyst Roberto Perli wrote recently, “the market views the perceived Fed shift as harmful to the long-term prospects for the U.S. economy,” with the Fed’s stated commitment to getting back to full employment seen as weakening in the face of higher-than-anticipated inflation.

Powell, speaking to reporters after the end of last month’s policy meeting, said any increase in the Fed’s benchmark overnight interest rate from the current near-zero level remained far off. He said, however, that the Fed would begin a “meeting-by-meeting” assessment of when to start reducing its $120 billion in monthly purchases of Treasury bonds and mortgage-backed securities, and of how to announce its plans for doing so.

The U.S. economy, he said at that point, was still “a ways away” from the progress on job creation the Fed wants to see before reducing its asset-purchase program, which supports the recovery by making the purchase of homes, cars and similar items more affordable by holding down borrowing costs for households and companies.

But “we’re making progress,” Powell said in the briefing, and to such an extent that he and his colleagues now needed to “clarify … thinking around the process of deciding whether and how to adjust the pace and composition of asset purchases.”

TAPERING TIMELINE

What investors are wondering is how fast the discussion will spool out and when the actual “taper” may begin.

Several regional Fed policymakers have since said they felt the economy was near the point where the central bank should pull back. However, even some of them have indicated it will take several meetings to develop and announce a plan for reducing the bond purchases.

The Fed’s policy-setting committee meets eight times a year, with the next two meetings scheduled for July 27-28 and Sept. 21-22. In the interim, the central bank will hold its annual research conference in Jackson Hole, Wyoming, a setting that Fed chiefs have often used to signal policy changes.

The U.S. economy added 850,000 jobs in June. If that pace of hiring continues over the summer, it “could prompt the Committee to accelerate the tapering timeline” from an expected start in January to as soon as October, analysts from Nomura wrote last week.

Economists polled by Reuters expect the Fed to announce a strategy for tapering its asset purchases in August or September, with the first cut to its bond-buying program beginning early next year.

(Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao)

From lapsing job benefits to full stadiums, June could be U.S. recovery’s pivot

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Fourteen months after the pandemic triggered a national emergency, the final chapter of the U.S. economic recovery may begin this month, with rapid changes starting with the end of enhanced unemployment benefits in half the states and ending in the fall’s expected reopening of schools and universities.

Along the way, Major League Baseball stadiums are slated to return to full capacity, and the largest state economy, California, on June 15 will shed its final COVID-era restrictions and give bars, restaurants and other businesses a green light on the road to normal.

That same day in Washington, the U.S. Federal Reserve is expected to open debate about when and how to cut the economy loose from its crisis-fighting monetary policy and shift to managing what is hoped to be a long economic expansion.

The questions about just what the post-pandemic economy will look like are myriad: How many people will return to jobs? How many businesses will have survived or failed? How resilient will the country be when pandemic supports are withdrawn? The answers should start to come soon.

“The timing really is awesome,” Porchlight Brewing Co. general manager Tyson Herzog said of the just-in-time-for-summer end of California’s restrictions, which closed many restaurants for parts of last year and kept them under strict limits during the fight against the virus.

An $800 billion small business assistance program helped many firms survive, including Herzog’s. After a year of home-delivering beer in his 1999 Dodge Caravan he plans to hire more onsite staff and expand production amid already record sales.

Since coronavirus vaccines rolled out in December, forecasts have pointed to record-breaking numbers this year, including the fastest annual gross domestic product growth in nearly 40 years.

More than 60% of people 12 years and older are at least partially vaccinated. The rate of new infections and deaths has plummeted, while confidence, travel, and human socializing – and the commerce that accompanies all that – have risen steadily.

Still, the pieces have not yet clicked in unison.

Companies in May added 559,000 jobs, but the total number remains 7.6 million short of early 2020. About 3.6 million more people are unemployed, and the labor force is 3.5 million smaller.

Shortages of supplies, workers and raw materials have crimped the recovery with businesses curtailing hours, turning away customers, or delaying filling orders. The Fed’s most recent national economic snapshot referenced shortages 44 times, compared with 17 in January and three a year ago.

Economists expect that to ease. The pandemic put the economy into what some likened to an induced coma. Shaking off the stupor takes time, and is complicated by some of the programs used to cushion the economy’s sharp drop last spring.

Stimulus payments and low interest rates, for example, fueled a boom in home sales that spilled into home construction and lumber prices. Yet the costs for wood and some other commodities already have begun easing: lumber futures are down 24% from their peak, with copper and aluminum falling around 5%. Likewise, the splurge on automobiles, appliances and other goods will likely prove a one-time affair; even if demand remains strong, supply will likely catch up.

Workers sidelined by a variety of issues, from health concerns to lack of childcare, have been given latitude on when to return to work through expanded unemployment benefits that pay some more than their former jobs. That starts to wind down on June 12 when the first four states end the extra benefits launched last spring as one plank in a financial “bridge” to the other side of the pandemic.

In all, $5.2 trillion deployed across an array of programs helped make the coronavirus recession unique: Personal incomes actually rose even as unemployment hit 14.8% in April 2020.

With the money now largely spent, the programs one-by-one are being shuttered.

By July 10 half the states will have ended the extra unemployment benefits, and the program lapses nationwide on Sept. 4. The Payroll Protection Program of small business loans closed May 31.

There’s dispute over what role those and other programs play in decisions to work or not. But to the degree prices, wages and other factors have been distorted by the pandemic, the next few weeks should wring those distortions out.

June will inaugurate a “summer-boom with demand still strong and supply issues – on labor and capital – being resolved,” said Gregory Daco, chief U.S. economist for Oxford Economics. “There is evidence of supply bottlenecks slowly easing…On the labor front, reduced virus fear, reduced benefits, better childcare, will draw people back.”

And people seem primed to respond.

After a year of lockdown, public parks are again hosting crowds, sports stadiums are filling, and restaurants are booked to the limit.

California had among the first cases of COVID-19, imposed some of the stiffest restrictions, and will be among the last states to let it all go.

Damian Fagan, owner of the Almanac Taproom in Alameda, is getting ready. While he is adding up to six new employees to his current 12-person staff ahead of the June 15 reopening, he expects such a rush of business he plans to limit his hours for another few weeks “so we don’t have this tsunami of changes.”

“I don’t know how long this party will last,” he said. Eventually, “this massive excitement period dies down,” and business can get back to normal.

(Reporting by Howard Schneider and Ann Saphir; Editing by Dan Burns and Andrea Ricci)

U.S. job growth improves; desperate employers raise wages to attract workers

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers increased hiring in May and raised wages as they competed for workers, with millions of unemployed Americans still at home because of childcare issues, generous unemployment checks and lingering fears over COVID-19.

Though the pickup in job growth shown in the Labor Department’s closely watched employment report on Friday missed economists’ forecasts, it offered some assurance that the recovery from the pandemic recession remained on track.

Growth is being supported by vaccinations against COVID-19, massive fiscal stimulus and the Federal Reserve’s ultra-easy monetary policy stance. April’s nonfarm payrolls count, which delivered about a quarter of the new jobs economists had forecast, caused handwringing among some analysts and investors that growth was stagnating at a time when inflation was rising.

“There are still a lot of people unemployed, but there does not seem to be a lot of eagerness to work,” said Chris Low, chief economist at FHN Financial in New York. “There would have been many more hires if employers could find more people.”

Nonfarm payrolls increased by 559,000 jobs last month. Data for April was revised higher to show payrolls rising by 278,000 jobs instead of 266,000 as previously reported.

That left employment about 7.6 million jobs below its peak in February 2020. Economists polled by Reuters had forecast 650,000 jobs created in May. About 9.3 million people were classified as officially unemployed last month. There are a record 8.1 million unfilled jobs.

At least half of the American population has been fully vaccinated against the virus, according to data from the U.S. Centers for Disease Control and Prevention.

That has allowed authorities across the country to lift virus-related restrictions on businesses, which nearly paralyzed the economy early in the pandemic. But the reopening of the economy is straining the supply chain.

Millions of workers, mostly women, remain at home as most school districts have not moved to full-time in-person learning. Despite vaccines being widely accessible, some segments of the population are reluctant to get inoculated, which labor market experts say is discouraging some people from returning to work.

Government-funded benefits, including a $300 weekly unemployment subsidy, are also constraining hiring. Republican governors in 25 states are terminating this benefit and other unemployment programs funded by the federal government starting next Saturday.

These states account for more than 40% of the workforce. The expanded benefits end in early September across the country. That, together with more people vaccinated and schools fully reopening in the fall, is expected to ease the worker crunch.

Labor Secretary Marty Walsh said the argument that enhanced benefits were discouraging job seeking was not supported by what workers were telling him.

“Working people across America are eager to work,” said Walsh in a statement. “But workers also told me about the challenges they and their families face, finding affordable childcare, caring for elderly parents and grandparents”

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. U.S. Treasury prices rose.

WILLING WORKERS IN SHORT SUPPLY

Average hourly earnings rose a solid 0.5% after shooting up 0.7% in April. That raised the year-on-year increase in wages to 2.0% from 0.4% in April. Wages in the leisure and hospitality sector jumped 1.3%, the third straight month of gains above 1%.

Postings on Poachedjobs.com, a national job board for the restaurant/hospitality industry, are showing restaurants offering as much as $30-$35 per hour for lead line cooks.

Sustained wage growth could strengthen the argument among some economists that higher inflation could last longer rather than being transitory as currently envisioned by Fed Chair Jerome Powell. A measure of underlying inflation tracked by the Fed for its 2% target accelerated 3.1% on a year-on-year basis in April, the largest increase since July 1992.

Still, most economists do not expect the U.S. central bank to start withdrawing its massive economic support anytime soon.

“The data will likely reinforce the view of most Fed officials that progress has not been ‘substantial’ enough for them to start signaling tapering,” said Jim O’Sullivan, chief U.S. macro strategist at TD Securities in New York.

The average workweek held steady at 34.9 hours. That together with strong wage gains lifted an income proxy 0.9%, matching April’s gain. This bodes well for consumer spending, which could also get a powerful tailwind from the more than $2.3 trillion in excess savings amassed during the pandemic.

Economists are sticking to their forecasts for double-digit growth this quarter.

Last month’s increase in hiring was led by the leisure and hospitality industry, which added 292,000 jobs, with restaurants and bars accounting for 186,000 of those positions. Local government education employment rose by 53,000 jobs as the resumption of in-person learning and other school-related activities in some parts of the country continued.

Manufacturing payrolls increased by 23,000 jobs. But construction employment decreased by 20,000 jobs.

The unemployment rate fell to 5.8% from 6.1% in April. The drop was in part due to more jobs created and 53,000 people dropping out of the labor force. The jobless rate has been understated by people misclassifying themselves as being “employed but absent from work.” Without this problem, the unemployment rate would have been 6.1%.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 61.6% from 61.7% in April.

“It appears like employers may need to offer up more incentives to entice workers to fill the record number of job openings that are out there,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Amid hiring troubles, rising prices, U.S. growth gains speed -Fed

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) -The U.S. economic recovery accelerated in recent weeks even as a long list of supply chain troubles, hiring difficulties, and rising prices cascaded through the country, Federal Reserve officials said in their latest review of economic conditions.

The economy grew at a “somewhat faster rate” from early to late May, the Fed reported in its Beige Book summary of anecdotal reports about the economy on Wednesday, with officials noting “the positive effects…of increased vaccination rates and relaxed social distancing measures.”

But getting a $20 trillion economy back to speed posed challenges of its own, Fed officials reported based on contacts in their 12 regions.

Homebuilders could not keep up with demand, manufacturers faced delivery delays of the material needed to finish goods, and “it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople.”

Prices were rising, and for now were likely to continue to do so, the Fed reported.

“Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months,” the Fed said.

The Beige Book will help frame the Fed’s upcoming June meeting as officials edge towards a debate about how and when to pull back on the $120 billion in monthly bond purchases and raise the near-zero interest rates put in place to battle the economic fallout from the pandemic.

Fed officials say they will likely struggle for several months to get a clear read on an economy snapping back to life but hitting some speed bumps along the way.

The United States this year is expected to register the strongest annual growth in gross domestic product since the early 1980s, yet hiring in April was tepid, a May jobs report to be released on Friday may not be much better, and there are concerns inflation may be on the horizon.

Businesses on the whole seemed stretched thin by surging demand for their goods and services, while consumers appeared ready to splurge.

“Grocery store sales remained healthy and there were again reports of consumers trading up for more expensive items, such as premium meat cuts, finer wines, and seafood,” the Chicago Fed reported.

The Boston Fed’s summary of activity in its New England district captured the dynamic playing out across the country.

“Labor demand strengthened, but hiring was held back by widespread labor shortages. Amidst intensified recruiting efforts, wage increases varied across sectors. Prices held mostly steady despite growing cost pressures at some businesses, although restaurant prices rose sharply,” it said. “Contacts generally maintained a cautiously optimistic outlook.”

WIDESPREAD SHORTAGES

Evidence of shortages — whether of workers or goods — was widespread, cited as a main source of the rising prices that Fed and other officials are watching carefully.

The Richmond Fed reported restaurants and hospitality services were unable to reopen fully because they couldn’t find workers, and retailers were limiting inventories because of shipping and production delays.

Builders in the Midwest reported “significant project delays and some outright cancellations” because of “inflated material costs,” the Minneapolis Fed reported. Wood product manufacturers in the Pacific Northwest were operating at full capacity and still unable to meet demand.

The improving economic picture has yet to translate into booming demand for credit from consumers and businesses, if the Beige Book is any indication. Most districts reported loan volumes had increased “slightly” or “moderately,” although the Dallas Fed said loan volumes had grown “robustly.” In the Cleveland Fed district, bankers were somewhat fretful that supply chain disruptions might hurt clients’ sales and soften demand for loans.

Fed officials in general expect the current labor and product shortages to ease as the pandemic fades into the past and the economy reopens. Worker shortages in particular are felt to be a sort of holdover from the depths of the pandemic, with workers weighing practical considerations about child care and the availability of unemployment benefits against the eventual need to return to work.

The Beige Book also said: “high-income earners were actively seeking jobs to replace lost income, while low-income earners were more likely to stay on the sidelines if they were receiving government benefits.”

Indeed, there is unresolved friction between the demand for labor and the supply. The Minneapolis Fed, for instance, said labor groups reported that “while hiring demand was robust, job service contacts reported low wages as a moderate or significant barrier keeping job seekers from taking available jobs.”

Still, compared to the risks and economic devastation of a year ago as the pandemic surged, the mood was positive.

Retailers in the New York Fed district “expressed increasing optimism about the near-term outlook,” while contacts in “most sectors” in the Kansas City Fed region “anticipated additional gains in the months ahead.”

​ To the extent there were concerns, it was about too much of a good thing.

“Outlooks improved, though there was widespread apprehension about the sustainability of current demand growth in light of supply constraints, difficulty hiring, and rising costs,” the Dallas Fed said.

(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)