Tag Archives: Economy

Coffee, ketchup and Nike Air Max: it’s the COVID consumer economy

By Nick Carey, Richa Naidu and Siddharth Cavale

(Reuters) – Instant coffee, ketchup, Lululemon yoga pants and Nike Air Max sneakers are all in. Bottled water, pricey diapers and Burberry luxury trench coats are out.

Welcome to America’s pandemic consumer economy. And it’s like nothing we’ve seen before.

“Everything we knew about supply and demand, we can essentially throw out the window because consumer behavior has changed completely,” said Piotr Dworczak, assistant professor of economics at Northwestern University.

A Reuters analysis of a varied basket of goods shows how the COVID-19 crisis has upturned a decades-old consumer model for everything from clothing to food. This has given some companies surprising power to raise prices or withdraw discounts.

Many of the new trends can be attributed to one factor, according to retail specialists: working from home.

Almost overnight, a consumer-driven economy with clearly delineated work and home spending, changed profoundly. Rising demand for certain items, as well as global supply-chain disruptions, has driven up prices.

Americans are now shelling out significantly more than a year before for coffee, eggs, sliced ham, ketchup and cheese, for example, according to the Reuters analysis of the latest pricing data from Nielsen Co, the Brewers Association and StyleSage Co.

Yet it’s a complex picture, and some of the changes in behavior seem counter-intuitive during a time of deep economic uncertainty.

Demand and prices have also increased for more expensive, or “splurge”, items like $106 men’s Nike Air Max sneakers, $105 Lululemon yoga pants and even a $1,500 Louis Vuitton handbag.

Economists put this apparent discrepancy in behavior down to the fact that many people, unable to spend outside, have more cash in hand. Even many workers on furlough are receiving jobless benefits that match their wages under a federal stimulus plan.

“If I were to consider the consumer situation right now, in a strange way, they may have more disposable income, if they kept their job,” said Nirupama Rao, an assistant professor of business economics and public policy at the University of Michigan. “Of course we’re facing mass layoffs, but the bulk of people have maintained their wages and earnings.”

‘UNPRECEDENTED PRESSURE’

Shoppers paid roughly 8% more on average for JM Smucker’s instant coffees, including Folger’s and Dunkin’, at bricks-and-mortar stores in the four weeks to Aug. 8 versus a year before, according to Nielsen data analyzed by Bernstein.

They shelled out nearly 10% more for Kraft Heinz sauces and about 5% extra for Tyson Foods’ sliced hams.

Such inflation might make commercial sense, given the bump in demand for home staples. But some consumer experts complain retailers and big brands are cutting back on promotions and using their power to shore up profits during a health crisis that has led to millions losing their livelihoods.

“Brand manufacturers have been fattening their pockets with profits while putting unprecedented pressure on the consumer who has to pay those higher prices,” said Burt Flickinger, retail consultant at Strategic Resource Group.

JM Smucker said it did not raise prices of its instant coffees in the four weeks to Aug. 8, but did cut back on some promotions for in-demand products. Kraft Heinz declined to comment, but said during earnings in July that second-quarter prices went up as it pulled some offers and discounts for scarce products. Tyson did not respond to a request for comment.

Other industry experts point out that companies have had to grapple with costly production shifts to adapt to the new landscape. They note that before the pandemic, when costs were lower and there were more promotions and discounts, prices of Heinz sauces were declining.

Pre-COVID-19, tens of millions of commuters grabbed a coffee to-go en route to work. Suddenly, instead of 20-pound (9.1 kg) bags of coffee for restaurants, or large containers of ketchup, producers have had to switch to smaller, home-use packaging.

As ketchup, mayonnaise and vinegar sales surged, Kraft Heinz diverted resources to running these production lines around the clock, while suspending others. It added extra shifts for factory workers to make grocery-sized bottles.

Egg suppliers, like market leader Cal-Maine Foods Inc., have had to overcome a shortage of cartons.

“If you look at eggs, before they’d be powdered to send to restaurants and now they have to be put in cardboard containers to go to supermarkets,” said Daniel Bachman, senior U.S. economist at Deloitte. “It took a high price to induce the change.”

Yet consumer companies cannot take demand for granted and can be burnt by raising prices.

Prices for bottled water and disposable diapers have gone up, while demand has fallen for most of the pandemic. People are unwilling to pay out extra when they can drink their own water at home, and can opt for reusable or cheaper generic diapers at a time when there’s a lack of child daycare, some economists say.

“You’re at home anyway so you’re not sending your child off somewhere in a diaper that fails,” said Rao.

A $2,245 COAT, ANYONE?

Lockdowns have meant many Americans do not travel, eat out, or go to movie theaters. As they have not been commuting or taking kids to school, many are using less gas in their cars.

So they can now splash out on other things, perhaps.

Michael Collins, a professor at the University of Wisconsin’s consumer science department, calls this a “substitution effect.”

“It’s pretty clear people behave as if they have different pots of money,” he said. “Now I don’t eat out at all, so I have a couple of hundred dollars of new income not allocated to anything. I can substitute that money away from eating out and treat myself to other things.”

This effect could help explain the rise in demand and prices for the Air Max. Nike sold about 63% of their online stocks of the shoes in July, compared with only 10% a year earlier, according to apparel data company StyleSage which collects sales information from brand websites.

Air Max prices surged 10.5% on average versus a year before.

Prices for Lululemon’s yoga pants rose 7.2%, and about 45% of stocks were sold in July versus 15% the year before.

Meanwhile, the price of Louis Vuitton’s Neverfull MM Monogram handbag has risen 5% on its website since the start of May. In July, Louis Vuitton owner LVMH said sales momentum had picked up since June, even as its star label raised prices for a third time during the pandemic.

There are some limits, though.

Demand for a Burberry woman’s trench coat has declined, with only 3% of online stocks sold in July versus 14% a year earlier.

It’s a snip at $2,245, down 3.5%.

Nike and Burberry did not respond to requests for comment, while LVMH declined to comment beyond its July remarks. Lululemon said it hadn’t raised prices on some of its core yoga pant styles, including Align and Wunder Under, but had seen a significant rise in demand for yoga products since April. The strong July sales reflected its “Warehouse Sale” offer that month, it added.

HOW LONG WILL IT LAST?

Much remains uncertain.

The U.S. epidemic and its economic consequences are moving targets, and it is unclear when – or even if – American life and consumer behavior will revert to “normal”.

The University of Michigan’s Rao said food producers had been reluctant to invest in permanent changes to retool factories. “They’re hindered by the fact there’s so much uncertainty as to how long this will last.”

Indeed, consumer demand, as well as brands’ pricing power, could change in the coming weeks and months as many Americans feel more financial pain.

The government’s first round of COVID-19-related benefits expired on July 31, leaving about 30 million unemployed Americans without the $600 weekly boost that sustained their households and promoted some discretionary spending.

With the money spigot turned off, analysts say recessionary spending behavior should take hold, with consumers cutting back.

The University of Wisconsin’s Collins said loan forbearance on mortgages, credit cards and student loans since the spring had also helped consumers.

“Eventually that will all end, and people could start to tighten up again.”

(Reporting By Nick Carey, Richa Naidu and Siddharth Cavale; Additional reporting by Silvia Aloisi; Editing by Vanessa O’Connell and Pravin Char)

Israel, UAE will cooperate on financial services, investment

JERUSALEM (Reuters) – Israel and the United Arab Emirates agreed on Tuesday to set up a joint committee to cooperate on financial services, aiming to promote investment between the two countries, an Israeli statement said.

An Israeli delegation is in Abu Dhabi on a historic trip to finalize a pact marking open relations between Israel and the Gulf state.

Representatives from both countries signed the understanding, Israeli Prime Minister Benjamin Netanyahu said in the statement.

One focus, Netanyahu said, would be on “cooperation in the field of financial services and removing financial barriers for making investments between the countries, as well as promoting joint investments in the capital markets”.

The countries will also collaborate in banking services and payment regulations, he said.

Separately, the state-run Abu Dhabi Investment Office (ADIO) and Invest in Israel, part of the economy ministry, agreed to set out a plan to establish formal cooperation between then, they said in a joint statement.

“The organizations will explore mutually beneficial areas of collaboration to unlock investment and partnership opportunities for companies in Israel and Abu Dhabi with a strong focus on innovation and technology,” they said.

An initial virtual meeting was held between Ziva Eger, Invest in Israel chief executive, and Monira Hisham al-Kuttab who leads ADIO’s international promotional activity. Further meetings are scheduled throughout September.

“Israel’s ecosystem has a lot to offer to the UAE’s economy in terms of innovation, specifically in the Life Sciences, CleanTech, Agtech and Energy sectors,” Eger said in the statement.

ADIO Director General Tariq Bin Hendi said ADIO’s investor care team would “facilitate connections throughout Abu Dhabi’s ecosystem” and explore opportunities over the coming months.

Israeli officials have been quick to play up the economic benefits of the accord, which once formalized would also include agreements on tourism, technology, energy, healthcare and security, among other areas.

A number of Israeli and Emirati businesses have already signed deals since the normalization deal was announced.

(Writing by Jeffrey Heller and Yousef Saba; editing by Ari Rabinovitch, Larry King, William Maclean)

Powell: Jobs recovery faces ‘long tail’ of a couple of years

(Reuters) – Despite “a lot of strength in the economy,” millions of U.S. workers displaced from restaurant, travel, and similar jobs will struggle to find new employment and need steady support from the government, Federal Reserve Chair Jerome Powell said on Thursday, warning a full jobs recovery could take years.

“There is a particular part of the economy which involves getting people together and feeding them, flying them around the country, having them sleep in hotels, entertaining them,” Powell said in online remarks to the Fed’s annual economic symposium. “That part of the economy will find it very difficult to recover…That is millions of people who are going to struggle to find work. We need to stay with those people….We are looking at long tail of probably a couple of years at least.”

(Reporting by Howard Schneider; Editing by Chizu Nomiyama)

Trump approves emergency aid for Iowa after storm

(Reuters) – U.S. President Donald Trump on Monday said he approved federal disaster aid for Iowa after a hurricane-force storm hit last week, causing widespread damage in towns and farms and leaving thousands without power.

Iowa Governor Kim Reynolds said on Sunday she requested about $4 billion in emergency funds following the Aug. 10 storm.

The destruction compounded troubles for a U.S. agricultural economy already battered by extreme weather, the U.S.-China trade war and disruptions to labor and food consumption from the COVID-19 pandemic.

“I just approved an emergency declaration for Iowa,” Trump told reporters at the White House before departing on a trip to the Midwest. “It really did a lot of damage,” he said of the storm.

Trump, who is scheduled to speak on Monday in Minnesota and Wisconsin, said he aimed to visit Iowa.

“I’ll be going very soon and maybe today,” he said.

Media reports said the storm caused at least three deaths in Iowa. Winds as high as 100 miles per hour (160 kph) hit eastern Nebraska, Iowa, Wisconsin and parts of Illinois.

The storm impacted 37.7 million acres of farmland across the Midwest, including 14 million in Iowa, the Iowa Soybean Association said on Friday, citing estimates from the U.S. Department of Agriculture.

“I’ve never seen the corn flattened as much as it has from this terrific windstorm,” U.S. Senator Charles Grassley of Iowa told reporters on Monday. “The number of grain bins flattened is humongous.”

The storm affected 58,000 holders of crop-insurance policies with a liability of around $6 billion in Iowa, according to the Iowa Soybean Association.

Grassley said crop insurance covers about 90% of Iowa farmland. It is too early to determine whether there will be enough storage space for the autumn harvest, he said.

(Reporting by Kanishka Singh in Bengaluru; Steve Holland; in Washington; and Tom Polansek in Chicago; Editing by Nick Macfie and Dan Grebler)

COVID-19 tanks U.S. economy in second quarter, outlook shaky

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy contracted at its steepest pace since the Great Depression in the second quarter as the COVID-19 pandemic shattered consumer and business spending, and a nascent recovery is under threat from a resurgence in new cases of coronavirus.

Gross domestic product collapsed at a 32.9% annualized rate last quarter, the deepest decline in output since the government started keeping records in 1947, the Commerce Department said on Thursday. The drop in GDP was more than triple the previous all-time decline of 10% in the second quarter of 1958. The economy contracted at a 5.0% pace in the first quarter.

Economists polled by Reuters had forecast GDP plunging at a 34.1% rate in the April-June quarter.

The bulk of the historic tumble in GDP occurred in April when activity almost ground to an abrupt halt after restaurants, bars and factories among others were shuttered in mid-March to slow the spread of the coronavirus.

Though activity picked up starting in May, momentum has slowed amid a resurgence in new cases of the illness, especially in the densely populated South and West regions where authorities in hard-hit areas are closing businesses again or pausing reopenings. That has tempered hopes of a sharp rebound in growth in the third quarter.

Federal Reserve Chair Jerome Powell on Wednesday acknowledged the slowdown in activity. The U.S. central bank kept interest rates near zero and pledged to continue pumping money into the economy.

“The bottom fell out of the economy in the second quarter,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University in Los Angeles. “The outlook is not very good. Americans are not behaving well in terms of social distancing, the infection rate is unacceptably high and that means economic growth cannot gain any traction.”

The plunge in GDP and faltering recovery could put pressure on the White House and Congress to agree on a second stimulus package. President Donald Trump, whose opinion poll numbers have tanked as he struggles to manage the pandemic, economic crisis and protests over racial injustice three months before the Nov. 3 election, said on Wednesday he was in no hurry.

Economists say without the historic fiscal package of nearly $3 trillion, the economic contraction would have been deeper. The package offered companies help paying wages and gave millions of unemployed Americans a weekly $600 supplement, which expires on Saturday. Many companies have exhausted their loans.

This, together with the sky-rocketing coronavirus infections is keeping layoffs elevated. In a separate report on Thursday, the Labor Department said initial claims for unemployment benefits totaled 1.434 million in the week ending July 25.

(Reporting by Lucia Mutikani; Editing by Chris Reese)

China orders U.S. to shut Chengdu consulate, retaliating for Houston

By Yew Lun Tian, Tony Munroe and Doina Chiacu

BEIJING/WASHINGTON (Reuters) – China ordered the United States on Friday to close its consulate in the city of Chengdu, responding to a U.S. demand for China to close its Houston consulate, as relations between the world’s two largest economies deteriorate.

The order to close the consulate in Chengdu, in southwestern China’s Sichuan province, continued Beijing’s recent practice of like-for-like responses to U.S. actions.

China had warned it would retaliate after it was this week given 72 hours – until Friday – to vacate its consulate in the Texas city, and had urged the United States to reconsider.

Relations between Washington and Beijing have deteriorated sharply this year over issues ranging from trade and technology to the novel coronavirus, China’s territorial claims in the South China Sea and its clampdown on Hong Kong.

“The Ministry of Foreign Affairs of China informed the U.S. Embassy in China of its decision to withdraw its consent for the establishment and operation of the U.S. Consulate General in Chengdu,” China’s foreign ministry said in a statement.

Foreign ministry spokesman Wang Wenbin said some Chengdu consulate personnel were “conducting activities not in line with their identities” and had interfered in China’s affairs and harmed China’s security interests, but he did not say how.

Senior Chinese diplomat Wang Yi, who is also foreign minister, blamed Washington for the deterioration in ties.

“The current difficult situation in Sino-U.S. relations is entirely caused by the United States, and its goal is trying to interrupt China’s development,” Wang said in a video conversation with his German counterpart.

U.S. President Donald Trump’s administration said the closing of the consulate was aimed at protecting American intellectual property and personal information.

“We urge the CCP (Chinese Communist Party) to cease these malign actions rather than engage in tit-for-tat retaliation,” John Ullyot, a spokesman for the White House National Security Council, said in a statement.

The consulate in Chengdu was given 72 hours to close, or until 10 a.m. on Monday, the editor of the Global Times newspaper said on Twitter.

The consulate opened in 1985 and has almost 200 employees, including about 150 locally hired staff, according to its website. It was not immediately clear how many are there now after U.S. diplomats were evacuated from China during the novel coronavirus outbreak.

Global share markets fell after the announcement, led by a heavy drop in Chinese blue chips, which fell 4.4%, while the yuan hit a two-week low. [MKTS/GLOB]

The U.S. State Department warned Americans in China of a greater risk of arbitrary law enforcement including detention, repeating a similar warning two weeks ago.

TROUBLED TIES

Secretary of State Mike Pompeo said in a speech on Thursday Washington and its allies must use “more creative and assertive ways” to press the Chinese Communist Party to change its ways.

A source had told Reuters China was considering shutting the U.S. consulate in Wuhan, where Washington withdrew staff as the coronavirus outbreak raged.

“The Chengdu consulate is more important than the Wuhan consulate because that is where the U.S. gathers information about Tibet and China’s development of strategic weapons in neighboring regions,” said Wu Xinbo, a professor and American studies expert at Fudan University in Shanghai.

He said the Chengdu consulate was less important for economic activity than U.S. consulates in Shanghai, Guangzhou and Hong Kong.

Chinese social media users, who had denounced the order to close the Houston mission, lauded the response.

The comment, “let’s renovate it into a hotpot restaurant!”, a reference to a popular dish in Chengdu, got 100,000 likes on the Weibo account of state broadcaster CCTV.

(Reporting by Tony Munroe and Yew Lun Tian; additional reporting by Huizhong Wu and Judy Hua in Beijing, Rama Venkat in Bengaluru, Tom Westbrook in Singapore and Doina Chiacu in Washington; Editing by Michael Perry, Timothy Heritage and Jonathan Oatis)

When the U.S. sneezes, the world catches a cold. What happens when it has severe COVID-19?

By Howard Schneider

WASHINGTON (Reuters) – During a blue-sky moment in 2018 near the end of a decade-long economic expansion, it was the United States that helped pull the world along as the extra cash from tax cuts and government spending flowed through domestic and global markets.

But if it was U.S. policy that pushed the world higher then, it is U.S. policy that threatens to pull the world under now as the country’s troubled response to the coronavirus pandemic emerges as a chief risk to any sustained global recovery.

Officials from Mexico to Japan are already on edge. Exports have taken a hit in Germany, and Canada looks south warily knowing that any further hit to U.S. growth will undoubtedly spill over.

“Globally there will be difficult months and years ahead and it is of particular concern that the number of COVID-19 cases is still rising,” the International Monetary Fund said in a review of the U.S. economy that cited “social unrest” due to rising poverty as one of the risks to economic growth.

“The risk ahead is that a large share of the U.S. population will have to contend with an important deterioration of living standards and significant economic hardship for several years. This, in turn, can further weaken demand and exacerbate longer-term headwinds to growth.”

It was a clinical description of a grim set of facts: After the U.S. government committed roughly $3 trillion to support the economy through a round of restrictions on activity imposed to curb the virus in April and May, the disease is surging in the United States to record levels just as those support programs are due to expire. More than 3.6 million people have been infected and 140,000 killed. Daily growth in cases has tripled to more than 70,000 since mid-May, and the 7-day moving average of deaths, after falling steadily from April to July, has turned higher.

Meanwhile the country has fractured over issues like mask-wearing that in other parts of the world were adopted readily as a matter of common courtesy. With some key states like Texas and California now reimposing restrictions, analysts have already noted a possible plateau to the U.S. recovery with the country still 13.3 million jobs shy of the number in February.

A GLOBAL DISAPPOINTMENT

For other major economic powers, that is a weight added to their own struggles with the virus and the economic fallout.

The U.S. economy accounts for about a quarter of world gross domestic product. Though much of that is service-related, and much of the direct impact of the virus is tied up in industries like restaurants with weak links to the global economy, the connections are still there. A lost job leads to lower consumer spending leads to fewer imports; weak business conditions lead to less investment in the equipment or supplies that are often produced elsewhere.

Year-to-date U.S. imports through May are down more than 13%, or roughly $176 billion.

In Germany, whose measures to contain the pandemic are considered to have been among the most effective, exports to the United States plunged 36% year-over-year in May. Analysts see little prospect for improvement, with year-to-date U.S. auto sales through June down nearly 24% from a year earlier.

“That is really a disappointment,” said Gabriel Felbermayr, president of the Kiel Institute for the World Economy, in a recent interview with radio network Deutschlandfunk. The spike in U.S. infections, he said, could not have been expected.

In Japan, the speed of the recovery is seen tied directly to U.S. success in stemming the virus.

“Japan’s recovery will be really delayed if the spreading of the coronavirus in the United States isn’t stopped and U.S.-bound exports from various Asian countries don’t grow,” said Hideo Kumano, a former Bank of Japan official who is now chief economist at Dai-ichi Life Research Institute.

PESSIMISM AT BOTH BORDERS

The IMF projected U.S. GDP will shrink this year by 6.6%, in line with many analysts’ projections.

The Bank of Canada is more pessimistic, forecasting U.S. GDP to fall 8.1% on the year. That has already been lowered once as the health situation decayed.

A further leg down would hit Canada directly, with perhaps three-fourths of the country’s exports headed over the U.S. border.

“We did take down our U.S. projection … I would underline that there’s a lot of uncertainty, and the principle source of the uncertainty is the evolution of the coronavirus itself,” said BOC governor Tiff Macklem.

At the southern border, Mexico is also posting record daily numbers of new cases, but President Andres Manuel Lopez Obrador has at times deflected criticism of his government’s efforts by pointing to the U.S. numbers.

Lopez Obrador undertook a risky visit with President Donald Trump earlier in July, couching his journey to Washington as a matter of economic necessity as Mexico attempts to revive an economy that could shrink by 10% or more this year, according to forecasts.

The Mexican president hopes the new United States-Mexico-Canada Agreement (USMCA) trade deal, which took effect on July 1, will spur business and investment, but pessimism about the outlook has been growing.

“To the point that people in the U.S. are losing jobs or incomes it is a downward weight … and it will have ramifications on the ability to consume globally,” said Elizabeth Crofoot, senior economist at the Conference Board, which documented a record drop in global consumer confidence in a recent survey.

“We take one step forward and two steps back.”

(Reporting by Howard Schneider in Washington; Additional reporting by Reinhard Becker and Christian Kraemer in Berlin, Leika Kihara in Tokyo, Steve Scherer in Ottawa and Dave Graham in Mexico City; Editing by Dan Burns and Matthew Lewis)

Coronavirus pandemic advances the march of ‘cobots’

By Rajesh Kumar Singh

CHICAGO (Reuters) – While a resurgence in coronavirus cases in Texas has brought many businesses to a screeching halt, eight robots have kept All Axis Machining’s metal fabrication facility in Dallas humming.

The small, nimble robots perform multiple jobs, such as machine-tending, sanding, deburring, part inspection and laser marking, leaving owner Gary Kuzmin far less dependent on manual labor. When all the workers on one shift went into self-quarantine last month, it had no impact on the facility’s productivity.

All Kuzmin had to do was to move a couple of workers from other shifts to supervise the robots. “I have not lost any spindle time because of the pandemic,” he said.

Companies of all sizes are leaning on automation to keep factories running without compromising the health and safety of their workers. Half of the chief financial officers surveyed last month by PricewaterhouseCoopers said they were planning to accelerate automation.

With the U.S. economy grappling with a double-digit unemployment rate, however, industry’s rush to robots will fuel worries about semi-skilled or unskilled workers as low-paid, routine tasks become more likely to be automated.

“It is the most productive thing for us to have the robots,” said Kuzmin. “I don’t even look at a machine these days without thinking how I would automate it.”

Since August 2018, when All Axis Machining began using robots, its productivity has doubled with the same headcount. If not for the robots, the company would have needed to expand its staff of 30 by 50% to keep up with increase in demand.

“We are less dependent upon a semi-skilled employee,” said Kuzmin.

The pandemic has changed companies’ calculations about investments in automation, said Jeremie Capron, research chief at research and investment-advisory firm ROBO Global. “The cost of operating without a robot today in a factory is higher than it was pre-COVID,” he said.

Mark Muro, senior fellow and policy director at Washington-based the Brookings Institution, says the automation drive will result in a net reduction in the workforce as companies invest in technology not just for social distancing, but also to boost productivity and protect profits from the pandemic-induced recession.

“Technology has improved and gotten cheaper, and the financial pressure on companies is higher,” he said.

He noted, however, that since middle class and lower-paid workers tend to spend a larger share of their income than the higher-paid, it is important that productivity gains eventually result in more jobs.

“If there is… too little sharing of the gains of automation-supported growth, we will wind up with little economic activity,” Muro said.

LOWER COST, FASTER PAYBACK

The affordable cost of the so-called collaborative robots, or “cobots,” promises payback in months, making the changeover easier, even for small and medium-sized enterprises.

All Axis Machining, for example, spent $85,000 per robot and was able to recover the cost in five months. There are cheaper collaborative robots on the market, as well.

One of the most popular cobots sold by Denmark-based Universal Robots – a unit of Massachusetts-based Teradyne Inc. and a market leader in collaborative robotics technology – costs about $35,000, with a payback period of three to four months.

The robots are very easy to use, safe to be around and can easily be adapted to new tasks. It takes just hours to train employees to work with them, saving companies huge training expense.

Although they are not suited for heavy-duty jobs, they are designed to work alongside humans, making them the robots of choice in the age of social distancing.

California-based DCL Logistics, a third-party logistics company, decided to employ cobots to manage a 30% increase in orders in the immediate aftermath of the outbreak.

Normally, the company would have hired temporary workers to deal with the surge in orders. But bringing in new workers was fraught with safety risks, said Chief Revenue Officer Brian Tu. The robots have led to a 300% increase in productivity and a 60% jump in labor cost savings, Tu said.

DCL plans to deploy more cobots this year at its facilities in California and Kentucky.

At All Axis Machining, the cobots have allowed owner Kuzmin to stagger the shifts. The facility now runs three shifts seven days a week, with robots working the late night shift alone, without any roving inspector.

This has allowed workers in the facility to stay 30 feet apart from each other. Having seen the benefits, the company is automating its remaining machines as well.

Kuzmin, who also runs a robotics services company, says several Dallas-based manufacturers have approached him recently to install similar robots in their factories.

ECONOMIC UNCERTAINTY

Universal Robots is fielding inquiries from companies seeking social distancing solutions, as well as tools to re-shore production and make their operations more flexible.

“Some companies… are talking about dozens and dozens of robots,” said Joe Campbell, senior manager of applications development at Universal Robots.

Still, the virus-induced recession is keeping many companies on the sidelines, wary of making new investments.

Tacoma, Washington-based Tool Gauge, which makes metal and plastic parts and assemblies for aerospace companies, including Boeing Co., planned to add two mobile industrial robots to its fleet of two cobots and 10 industrial robots before the novel coronavirus hammered the aviation industry.

But Tool Gauge put the robots on hold after a production shutdown at Boeing’s Washington state factories and an overall drop in orders, General Manager Jim Lee said.

(Reporting by Rajesh Kumar Singh; Editing by Joseph White and Dan Grebler)

U.S. public schools, focus of debate on reopening, are unsung economic force

By David Lawder

WASHINGTON (Reuters) – As the debate rages over how to safely reopen U.S. schools this autumn, one factor weighs heavily: the nation’s 98,000 public “K-12” schools are a cornerstone of the economy, and a massive jobs engine.

Nearly 51 million American kids attend public elementary, middle and high schools, compared to about six million in private schools. The educated workforce and childcare the system creates have been key drivers of economic growth.

With a total workforce of about eight million Americans before the pandemic, kindergarten through 12th grade public education is also one of the largest U.S. employment sectors, exceeding construction, hospitals, finance and insurance and transportation and warehousing.

Total expenditures for these schools were $721 billion during the 2018 fiscal year, according to U.S. Census Bureau data.

That is more than the U.S. Defense Department’s $671 billion budget that year, or the Pentagon’s $705 billion request for fiscal 2021.

The Trump administration, including U.S. Education Secretary Betsy DeVos, has been pushing for schools to physically reopen in the fall as U.S. coronavirus deaths near 140,000, the world’s highest. But it has not embraced any blueprint, including federal health guidelines, for how to do that safely.

Parents, teachers and local governments are expressing growing concern, after a string of coronavirus outbreaks at day care and summer school classrooms around the country.

On Monday, Los Angeles and San Diego said their 700,000-student public K-12 schools would start online-only education in August, citing “skyrocketing” coronavirus infection rates in California.

LOCAL DECISION

The White House has little real sway over whether public schools will reopen – just about 8% of U.S. K-12 public school funding comes from the federal government, with the remainder split fairly evenly between state and local governments, the Census Bureau data shows.

The Department of Education says public school spending is heavily skewed toward salaries and benefits, which made up 80% of the per-pupil total spending of $12,612 in 2018. About 11% goes to purchased services and 7% to supplies.

Maintaining these jobs is particularly important for local communities because of the economic multiplier effect, said Elise Gould, senior economist at the Economic Policy Institute in Washington. That $721 billion in public school spending in 2018 translated to about $1.08 trillion in direct GDP output, she calculates, not including the economic benefits of better-educated workers.

Although it rebounded somewhat in June, local government education employment is still down by 667,000 since March, when schools shifted largely to online instruction, Bureau of Labor Statistics data show.

That is nearly double the 351,000 jobs lost in local school districts after the 2008-2009 financial crisis, when tax revenues and budgets withered.

The losses could increase without federal aid to state and local governments, Gould said. “They’re faced with austerity and severe cuts and education is one of the places they look.”

Many of those laid off, including teaching assistants, counselors, and maintenance workers, are likely supported by enhanced unemployment benefits, scheduled to expire at the end of July.

It is difficult to say how much school shutdowns in the fall would affect the U.S. economy. Analysis from Washington-based think tanks has focused on the long-term cost to the U.S. economy of a less skilled workforce in years to come due to school closures. But there is little data to show how closures in the fall would impact U.S. jobs and the GDP immediately.

WHO’S WATCHING THE KIDS?

Online-only K-12 education or closed schools may pull parents, and especially women, out of the workforce, particularly those with very young children that need more supervision.

According to a recent McKinsey & Co report on reopening schools, about 26.8 million Americans, or about 16% of the workforce, are dependent on child care in order to work.

Physically opening schools a few days a week, as has been proposed in New York City, will not help much without more federal aid for child care, said Bruce Fuller, a professor of education and public policy at the University of California-Berkeley.

“This cost would be offset by the surge in labor supply and income, as parents flock back to work, helping to jump-start the economy,” Fuller said.

DeVos told CNN on Sunday that because children contract the virus at a far lower rate than adults, there is little danger for them to be back in schools.

“We know that schools across the country look very different and that there’s not going to be a one-size-fits-all approach to everything,” DeVos told Fox News Sunday.

Despite the threat to their jobs, teachers are not pushing to reopen schools. A USA Today poll at the end of May revealed that one in five teachers said they were unlikely to return to their classrooms in the fall.

A Kaiser Family Foundation study found that nearly 1.5 million U.S. teachers, almost one in four, were at greater risk of serious illness if infected with the coronavirus due to age or existing health conditions.

(Reporting by David Lawder; Editing by Heather Timmons and Alistair Bell)

Pound slips below $1.25 on disappointing growth data

By Maiya Keidan

LONDON (Reuters) – Sterling fell below $1.25 on Tuesday for the first time in a week and reached a 14-day low against the euro after data showed Britain’s economy was recovering more slowly than forecast.

Gross domestic product rose by 1.8% in May after falling by a record 20.8% in April, the Office for National Statistics said, well below forecasts in a Reuters poll.

“You saw sterling moving lower almost immediately after the announcement and it was a big disappointment and I think that it’s also the realization that maybe the V-shaped recovery doesn’t apply to the UK to the same extent,” said Morten Lund, an analyst at Nordea.

Adding to fears was a warning from authorities that another, more deadly COVID-19 wave could kill up to 120,000 Britons over the winter.

The pound touched a low of $1.2485, down 0.5% on the day. It slipped 0.7% to the euro at 91.03 pence.

Broad dollar weakness has allowed sterling to gain around 0.7% versus the greenback this month but against the euro it has lost 0.5% since the start of July.

Consumer data also indicated a tentative recovery. The British Retail Consortium said retail sales values rose by 3.4% in annual terms in June, and Barclaycard said overall consumer spending fell 14.5% in annual terms in June, the smallest decline since lockdown began.

Money markets price in the Bank of England’s cutting rates below 0% only next March. But government two-year bond yields plumbed a record low around minus 0.16% and 10-year yields slipped 2.5 basis points to 0.14%.

FTSE mid-cap shares, which tend to be mostly domestically oriented, fell 1.6% versus a 0.6% decline for the exporter-laden FTSE100.

Investors are also waiting for more news on Britain’s negotiations with the European Union on concluding a trade deal for the post-Brexit period. Britain left the bloc on Jan. 31, with a one-year transition period to iron out a future relationship.

“My feeling is the market is not fully pricing in the likelihood of a hard Brexit,” said Colin Asher at Mizuho.

“There has been very little progress on negotiations and even if there is a deal, there’s not much time to put a lot in it.”

(Reporting by Maiya Keidan, editing by Larry King and Ed Osmond)