As sanctions bite, North Korean workers leave Chinese border hub

: A North Korean waitress cleans the floor of a North Korean restaurant in Dandong, Liaoning province, China, September 12, 2016. REUTERS/Thomas Peter/File Photo

By Philip Wen

DANDONG, China (Reuters) – North Korean workers have begun to leave the Chinese border city of Dandong, following the latest round of sanctions seeking to restrict Pyongyang’s ability to earn foreign currency income, local businesses and traders say.

Almost 100,000 overseas workers, based predominantly in China and Russia, funnel some $500 million in wages a year to help finance the North Korean regime, the U.S. government says.

Dandong, a city of 800,000 along the Yalu river that defines the border with North Korea, is home to many restaurants and hotels that hire North Korean waitresses and musicians. Their colorful song and dance performances are a tourist attraction.

Thousands of predominantly female workers are also employed by Chinese-owned garment and electronics factories in Dandong, with a significant proportion of their wages going straight to the North Korean state.

The Wing Cafe used to advertise its “beautiful North Korean” waitresses on its shopfront by the Yalu. The sign is now gone, and cafe staff said the waitresses had returned home in recent weeks after their visas expired.

“There have been changes in government policy,” the manager of another restaurant said. “It’s not convenient to say more.”

Recent videos circulating on Chinese social media appear to show hundreds of North Korean women waiting in line to clear immigration at Dandong’s border gate. A Reuters reporter saw a group of around 50 North Korean women waiting to cross the border on Friday morning.

 

HARDER TO SMUGGLE, TOO

Four traders, who deal in goods ranging from iron ore and seafood to ginseng and alcohol, told Reuters the sanctions had all but crippled the usual trade.

More stringent customs checks and patrols by Chinese border police have also made it harder to smuggle goods across the border, according to the traders, who declined to be named due to the subject’s sensitivity.

“The impact has been huge. Dandong’s economy has always counted on border trade,” said one Chinese trader.

In response to Pyongyang’s sixth and largest nuclear test last month, the U.N. Security Council on Sept. 11 passed a resolution prohibiting the use of North Korean workers, strengthening an Aug. 5 resolution that put a cap on the number of workers allowed overseas.

Successive rounds of U.N. trade sanctions have now banned 90 percent of the North’s $2.7 billion of publicly reported exports.

The Sept. 11 sanctions also ordered the closure of all joint business ventures with North Korea and added textiles to a list of banned exports, which already included coal, iron ore and seafood.

In a statement on Thursday, China’s Ministry of Commerce ordered the implementation of the new sanctions across the country within 120 days.

 

FORCED TO LEAVE

The sanctions allow workers to serve out existing contracts. Business people in Dandong, through which most of trade between the two countries flows, said contracts could not be renewed and new visas were not being approved.

A Chinese supervisor at a factory making electronic wiring for automobiles said while most of its 300 North Korean workers were on multi-year contracts expiring at different times, those who arrived in Dandong after Aug. 5 had already been forced to leave. He did not say how many.

The sanctions have come as a rude jolt to Dandong businesses and traders who had long rolled with North Korea’s unpredictability but believed their neighbor’s economic reliance on China would keep its belligerence in check.

Dandong is one of the larger cities in Liaoning province, whose rustbelt economy has struggled under national campaigns to curb industrial overcapacity and ease pollution. Liaoning was China’s worst performer in the first half of 2017, registering GDP growth of 2.1 percent, compared with the national rate of 6.9 per cent, according to official statistics.

“The economy hasn’t been doing well here for the past two years,” said one trader. “This is making a bad situation worse.”

 

(Reporting by Philip Wen; Editing by Bill Tarrant)

 

Dollar set for best week of 2017, stocks near records

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

By Lewis Krauskopf

NEW YORK (Reuters) – The dollar was headed for its strongest week of the year on Friday, while world stock markets climbed back near record-high levels on the last trading day of the quarter.

Firming expectations for another U.S. interest rate increase by year-end, combined with U.S. President Donald Trump’s tax-cut plan, have dominated markets for most of the week.

Data on Friday showed U.S. consumer spending barely rose in August but the report did little to change expectations that the Federal Reserve would raise interest rates again in December. Another report showed the Chicago purchasing management index, which gauges factory activity, came in better-than-expected for September.

“The economic data we got was either on target or it was slightly better than expected so there wasn’t anything negative at all to put a pause on things,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“Generally, the overall economic backdrop is very solid. In a bull market when you don’t have bad news you tend to get up moves in the market,” Frederick said.

The Dow Jones Industrial Average <.DJI> fell 18.29 points, or 0.08 percent, to 22,362.91, the S&P 500 <.SPX> gained 4.93 points, or 0.20 percent, to 2,514.99 and the Nasdaq Composite <.IXIC> added 31.99 points, or 0.5 percent, to 6,485.44.

The S&P technology sector <.SPLRCT> led the way, rising 0.6 percent.

The S&P 500 had set a record closing high on Thursday.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.34 percent and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 0.34 percent.

The MSCI global index was within 0.5 percent of an all-time high and on pace for its 11th consecutive positive month.

The dollar index <.DXY> was flat. The greenback was up about 1 percent for the week, on track for its best week since December.

“What you have seen is a general closing out of some short dollar positions but for that to be sustained we need greater detail on Trump’s fiscal plans and see it going through,” said James Binny, head of currency portfolio management for EMEA at State Street Global Advisors.

The euro <EUR=> was up 0.29 percent to $1.1818.

Benchmark 10-year notes <US10YT=RR> last fell 4/32 in price to yield 2.3193 percent, from 2.307 percent late on Thursday.

U.S. crude <CLcv1> fell 0.23 percent to $51.44 per barrel and Brent <LCOcv1> was last at $56.88, down 0.49 percent on the day.

Spot gold <XAU=> dropped 0.2 percent to $1,284.52 an ounce.

(Additional reporting by Abhinav Ramnarayan and Saikat Chatterjee in London; Editing by Andrew Bolton and Nick Zieminski)

U.S. consumer spending barely rises; core inflation moderates

FILE PHOTO: New cars are shown for sale at a Chevrolet dealership in National City, California, U.S., June 30, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON (Reuters) – U.S. consumer spending barely rose in August likely as Hurricane Harvey weighed on auto sales and annual inflation increased at its slowest pace since late 2015, pointing to moderation in economic growth in the third quarter.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month also as unseasonably mild temperatures reduced demand for utilities. That followed an unrevised 0.3 percent increase in July.

Last month’s gain in consumer spending was in line with economists’ expectations. When adjusted for inflation, consumer spending slipped 0.1 percent in August, the first drop since January.

The government said the data reflected the effects of Hurricane Harvey. However, it could not separately quantify the total impact of Harvey on the data. It said it made adjustments to estimates where source data were not yet available or did not fully reflect the effects of the storm.

The report was the latest suggestion that Harvey, together with Hurricane Irma, would dent economic growth in the third quarter. The economy grew at a brisk 3.1 percent annualized rate in the second quarter, with consumers doing the heavy lifting.

Harvey, which tore through Texas in late August, has undercut industrial production, homebuilding and home sales. Further declines are expected after Irma slammed Florida in early September.

Economists estimate the storms could slice off as much as six-tenths of a percentage point from third-quarter GDP growth. However, a pick-up in output is expected in the fourth quarter as communities ravaged by the hurricanes rebuild.

Inflation remained benign last month. The personal consumption expenditures (PCE) price index excluding food and energy rose 0.1 percent. The so-called core PCE has increased by the same margin for four straight months.

As a result, the annual increase in the core PCE price index slowed to 1.3 percent after advancing 1.4 percent in July. That was the smallest year-on-year increase since November 2015. The core PCE is the Federal Reserve’s preferred inflation measure and has a 2 percent target.

The U.S. central bank signaled last week it anticipated one more interest rate increase by the end of the year. On Tuesday, Chair Janet Yellen said the Fed needed to continue gradual rate hikes despite uncertainty about the path of inflation. It has increased borrowing costs twice this year.

Harvey also probably impacted on income in August.

Personal income rose 0.2 percent last month after increasing 0.3 percent in July. Savings fell to $522.9 billion in August from $524.8 billion in the prior month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. second-quarter economic growth revised higher; jobless claims rise

FILE PHOTO: Customers shop at a Whole Foods store in New York City, U.S., August 28, 2017. REUTERS/Brendan McDermid/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. economy grew a bit faster than previously estimated in the second quarter, recording its quickest pace in more than two years, but the momentum probably slowed in the third quarter as Hurricanes Harvey and Irma temporarily curbed activity.

Gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday. The upward revision from the 3.0 percent rate of growth reported last month reflected a slightly faster pace of inventory investment.

Growth last quarter was the quickest since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that the second-quarter GDP growth rate would be unrevised at 3.0 percent.

Harvey, which struck Texas, has been blamed for much of the decline in retail sales, industrial production, homebuilding and home sales in August. Further weakness is anticipated in September after Irma slammed into Florida early this month.

Rebuilding is, however, expected to boost GDP growth in the fourth quarter and in early 2018. Estimates for the growth rate in the July-September period are just above 2.2 percent.

However, they could be raised after another report from the Commerce Department on Thursday showed a decline in the goods trade deficit in August as well as large increases in both retail and wholesale inventories.

Harvey and Irma continue to impact the labor market and are expected to cut into job growth this month. In a third report, the Labor Department said initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 272,000 for the week ended Sept. 23.

Still, the labor market remains strong. Claims have now been below the 300,000 threshold, which is associated with a robust labor market, for 134 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller.

Prices for U.S. Treasuries held losses after the data and the dollar <.DXY> fell to a session low against a basket of currencies. U.S. stock index futures were trading lower.

ROBUST CONSUMER SPENDING

With GDP accelerating in the second quarter, the economy grew 2.1 percent in the first half of 2017. Still, economists believe growth this year will not breach President Donald Trump’s ambitious 3.0 percent target.

Trump on Wednesday proposed the biggest U.S. tax overhaul in three decades, including lowering the corporate income tax rate to 20 percent and implementing a new 25 percent tax rate for pass-through businesses such as partnerships to boost the economy.

But the plan gave few details on how the tax cuts would be paid for without increasing the budget deficit and national debt, setting up what is expected to be a bruising battle in the U.S. Congress.

Growth in consumer spending, which makes up more than two-thirds of the U.S. economy, was unrevised at a 3.3 percent rate in the second quarter as an increase in spending on services was offset by a downward revision to durable goods outlays. Consumer spending in the second quarter was the fastest in a year.

Amid robust consumer spending, businesses accumulated a bit more inventory than previously reported to meet the strong demand. Inventory investment added just over one-tenth of a percentage point to GDP growth in the second quarter. It was previously reported to have been neutral.

Growth in business spending on equipment was unchanged at a rate of 8.8 percent, the fastest pace in nearly two years.

Investment on nonresidential structures was revised to show it increasing at a 7.0 percent pace, up from the previously reported 6.2 percent rate.

Both export and import growth were revised slightly lower. Trade contributed two-tenths of a percentage point to GDP growth last quarter. Housing was a slightly bigger drag on growth in the last quarter than previously reported, subtracting 0.3 percentage point from output.

The government also sharply revised down growth in corporate profits for the second quarter. Profits after tax with inventory valuation and capital consumption adjustments increased at a 0.1 percent rate instead of the previously reported 0.8 percent pace.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

U.S. hopes for ‘good deliverables’ during Trump’s China visit

U.S. Secretary of Commerce Wilbur Ross meets Chinese Premier Li Keqiang at the Zhongnanhai state guesthouse in Beijing, China, September 25, 2017.

By Christian Shepherd

BEIJING (Reuters) – The United States hopes there will be some “very good deliverables” when President Donald Trump visits China, U.S. Commerce Secretary Wilbur Ross said on Monday, striking an upbeat tone amid trade tensions between the two countries.

Trump will likely visit China in November as part of a trip that will take him to an Association of Southeast Asian Nations (ASEAN) summit in the Philippines and an Asia-Pacific Economic Cooperation (APEC) summit in Vietnam.

China’s relationship with the United States has been strained by the Trump administration’s criticism of China’s trade practices and by demands that Beijing do more to pressure North Korea to halt its nuclear weapons and missiles programs.

Meeting in Beijing, Ross told Chinese Premier Li Keqiang he and his delegation had been greeted very warmly which augurs well for Trump’s forthcoming trip to meet Chinese President Xi Jinping.

“We are looking forward to a very good session including a lot of American CEOs and we hope there will be some very good deliverables,” Ross said, in comments in front of reporters.

Li told Ross that the two countries’ common interests far outweighed their differences and their economic and trade relationship had enormously benefited both countries and the world.

“China is the world’s largest developing country while the United States is the world’s biggest developed country,” Li said.

“In addition to that, China and the United States are the largest trading partners with each other, so I think it is fair to say that our common interests far outweigh our differences and divergences,” he added.

“Over the years, economic and trade relations between our two countries have always served as a ballast for our overall bilateral relationship and also these important trade and economic relations have benefited enormously our two peoples as well as the whole world.”

State media quoted Li as further saying that China hopes the United States will give fair treatment to Chinese companies’ investments there, as well as ease restrictions on high-tech exports.

Meeting earlier in the day, Chinese Commerce Minister Zhong Shan told Ross that there was huge potential for cooperation and China was willing to “manage and control” disputes, the ministry said in a statement.

China was willing to create good conditions for Trump’s visit and ensure his trip was fruitful, Zhong added.

Xi and Trump met for the first time in person at Trump’s Mar-A-Lago estate in Florida in April. Trump has since played up his personal relationship with Xi, even when criticizing China over North Korea and trade.

The two sides launched a 100-day economic plan at that meeting, including some industry-specific announcements such as the resumption of American beef sales in China.

There has since been limited progress on trade relations.

Ross’s visit comes at a time of heightened trade tensions between the United States and China following Trump’s decision earlier this month to block a Chinese-backed private equity firm from buying a U.S.-based chipmaker.

In August, Trump authorized an inquiry into China’s alleged theft of intellectual property – the first direct trade measure by his administration against Beijing.

During his campaign, Trump vowed repeatedly to declare China a currency manipulator once in office but in April backed off from that threat.

Trump’s administration has also repeatedly called on China to do more to rein in North Korea and has threatened new sanctions on Chinese banks and other firms doing business with Pyongyang.

China says it is already doing all it can to pressure North Korea and that those countries directly involved in the stand-off on the peninsula should take responsibility for resolving tensions.

There was no mention of North Korea in the comments Li and Ross made in front of reporters.

 

(Reporting by Christian Shepherd; Writing by Ben Blanchard; Editing by Nick Macfie)

 

Dudley sees Fed rate hikes; inflation weakness ‘fading’

William Dudley, President of the New York Federal Reserve Bank, answers a question, after addressing the Indian businessmen at the Bombay Stock Exchange (BSE) in Mumbai, India May 11, 2017.

By Jonathan Spicer

SYRACUSE, N.Y. (Reuters) – The Federal Reserve is on track to gradually raise interest rates given the recent inflation weakness is fading and the U.S. economy’s fundamentals are sound, an influential Fed policymaker said on Monday, reinforcing the central bank’s confident tone.

New York Fed President William Dudley, among the first U.S. central bankers to speak publicly since a decision last week to hold rates steady for now, cited the soft dollar and strong overseas growth among the reasons he expects slightly above-average U.S. economic activity and a long-sought rise in wages.

“With a firmer import price trend and the fading of effects from a number of temporary, idiosyncratic factors, I expect inflation will rise and stabilize around the (Fed’s) 2 percent objective over the medium term,” he told students and professors at Onondaga Community College.

“In response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually,” added Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on monetary policy.

Dudley’s comments were similar to his speech earlier this month, and reinforced the growing expectation that the Fed is set to raise rates for a third time this year in December. That notion was driven home by Fed forecasts published last week, when the central bank held rates but announced the beginning of a long process of shedding bonds it accumulated to boost the economy.

Still, others at the Fed are less anxious to tighten policy in the face of price readings that have sagged since February, despite strong jobs growth. Futures traders give a December rate hike about a 55-percent probability, according to Reuters data.

Dudley nodded to the three devastating hurricanes that have struck parts of the U.S. south and the Caribbean, noting their effects will likely make it more difficult to interpret economic data in coming months. He said, though, that the effects would likely be short-lived and noted that such events tend to boost economic activity as rebuilding gets underway.

In a speech focused on workforce development, he said the Fed, which is tasked with achieving maximum sustainable employment, “cannot declare success if we have people who want to work but lack the skills to fill available jobs.” Yet he noted that the Fed’s tool kit is limited and best works to provide incentives for firms to invest and grow.

“There are greater incentives for businesses to invest in labor-saving technologies” and the labor market improves, he said. “Investment spending should also benefit from a better international outlook and improvement in U.S. trade competitiveness caused by the dollar’s recent weakness.”

 

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

 

Hurricane-ravaged U.S. cities hit by rising cleanup costs

FILE PHOTO: Flood-damaged contents from people's homes line the street following the aftermath of tropical storm Harvey in Wharton, Texas, U.S., September 6, 2017. REUTERS/Mike Blake/File Photo

By Rod Nickel

HOUSTON (Reuters) – Communities in Texas and Florida, each swamped by a hurricane within two weeks of one another, are rewriting debris removal contracts and paying millions of dollars more to lure trucks, as subcontractors say costs have jumped.

The willingness of communities to renegotiate such contracts in the aftermath of hurricanes Harvey in Texas and Irma in Florida shows the limits of pre-planning for events as unpredictable as back-to-back hurricanes.

Higher fees, however, may not be covered by the Federal Emergency Management Agency (FEMA), even after these huge storms brought intense public pressure to clear millions of cubic yards of rubbish from streets and damaged furnishings from flooded homes and businesses.

In Texas, Houston is considering a 50-percent increase in pay for haulers and Harris County, which encompasses the city, is also offering incentives to recruit more trucks. In Florida, the City of Miami hiked its rates for debris removal by as much as double to DRC Emergency Services, CrowderGulf LLC and Ceres Environmental Services Inc, city documents show.

Local officials are rewriting contracts to attract subcontractors from other regions and businesses such as logging and dirt-hauling, citing a shortage of trucks to cart debris away because fleets are stretched across two devastated states. The removal business relies on networks of subcontracted trucks when disasters strike.

DRC’s subcontracting costs have jumped by at least 30 percent, said John Sullivan, president of the Galveston, Texas-based disaster specialist, shrinking margins to “almost nothing” as the company has to pay more to attract truck owners.

“It’s not a renegotiation, it’s a necessity,” Sullivan said. “The increase that we’re getting is all going to (pay) costs.”

Subcontractors often include out-of-state operators lured by the opportunity for a financial windfall.

Johnny Helaire, owner of Crossroads Trucking Service, said the Houston cleanup offers steady work at a time when his dirt and gravel business is slumping.

Each of Helaire’s 12 trucks earns on average $800 gross per day more in Houston than they would loading dirt, not counting hotel and food expenses, he said, while directing workers through a headset like a football coach.

Across the Texas Gulf Coast, Harvey left as much as 200 million cubic yards (153 million cubic meters) of trash that must be removed, the state has estimated.

Much of that still lines local streets. Houston’s director of solid waste management, Harry Hayes estimated that just 5 percent of the city’s debris had been cleared by Sept. 20.

“Houston ended up being ground zero. A thousand-year rain event is going to generate a wider field of debris, considering our population,” than in smaller Texan cities, Hayes said.

The city wants to increase its debris-hauling rate to $11.84 per cubic yard from $7.86, an amount that would help it get 200 more trucks from contractors, he said. Houston now has about 330 in service.

DRC expects to handle 2.5 million cubic yards in the Houston area alone. On that basis, Houston’s pay increase would amount to $10 million more.

Officials delayed a vote on the rate increase on Wednesday as they sought more information.

Harris County, one of the most populous U.S. counties, is offering incentives worth an additional $3 to $5 per cubic yard because small trucks cannot profit at the rate for trucks with bigger capacity, said county engineer John Blount.

Paying more for trucks is critical to recruiting more away from their normal businesses, said Glen Nelson, owner of DNR Group, which specializes in disaster clean-up. Even so, he said he is earning half of what he did for Hurricane Katrina cleanup in 2005.

RAISING FEES “SMELLS”

Bruce Hotze, treasurer of Houston watchdog group Let the People Vote, said offering to increase payments to disposal companies “smells.”

“If they needed prices to go up it should have happened before the hurricane,” he said.

Texan cities Rockport and Corpus Christi, both near where Harvey made first landfall, said they will not pay more.

“You hold those contractors accountable to provide what they said they would provide for you,” said Mike Donoho, Rockport’s public works director.

Alabama-based CrowderGulf has not asked communities for higher pay because of the risk that those fees will not be reimbursed by FEMA, said Chief Operating Officer Ashley Ramsay-Naile. Some of its contracts state that CrowderGulf will not get paid for amounts that FEMA does not cover, she said.

FEMA reimburses 90 percent of debris expenses, and covers pay above contracted rates only if municipalities show it is justified, said FEMA spokeswoman Barb Sturner.

(Reporting by Rod Nickel in Houston; editing by Gary McWilliams and Marcy Nicholson)

Unbudgeted: How the opioid crisis is blowing a hole in small-town America’s finances

Unbudgeted: How the opioid crisis is blowing a hole in small-town America's finances

By Paula Seligson and Tim Reid

INDIANA, Pa./CHILLICOTHE, Ohio (Reuters) – As deaths mount in America’s opioid crisis, communities on the front lines face a hidden toll: the financial cost.

Ross County, a largely rural region of 77,000 people an hour south of Columbus, Ohio, is wrestling with an explosion in opioid-related deaths – 44 last year compared to 19 in 2009. The drug addiction epidemic is shattering not just lives but also stressing the county budget.

About 75 percent of the 200 children placed into state care in the county have parents with opioid addictions, up from about 40 percent five years ago, local officials say. Their care is more expensive because they need specialist counseling, longer stays and therapy.

That has caused a near doubling in the county’s child services budget to almost $2.4 million from $1.3 million, said Doug Corcoran, a county commissioner.

For a county with a general fund of just $23 million, that is a big financial burden, Corcoran said. He and his colleagues are now exploring what they might cut to pay for the growing costs of the epidemic, such as youth programs and economic development schemes.

“There’s very little discretionary spending in our budget to cut. It’s really tough,” Corcoran said.

Cities, towns and counties across the United States are struggling to deal with the financial costs of a drug addiction epidemic that killed 33,000 people in 2015 alone, data and interviews with more than two dozen local officials and county budget professionals shows. (For graphics on the opioid crisis click here: http://tmsnrt.rs/2hO4YC7)

The interviews and data provide one of the first glimpses into the financial impact on local governments but it is far from complete because there is no central database collating information from counties and states. So, the true scale is still mostly hidden from view.

Opioids, primarily prescription painkillers, heroin and fentanyl – a drug 50 to 100 times more powerful than morphine – are fueling the drug overdoses.

President Donald Trump last month called the epidemic a “national emergency” but has not yet made an official national emergency declaration. Such a move would give states access to federal funds to fight it.

BUILDING A PICTURE

Counties grappling with rising overdoses face higher costs in emergency call volumes, medical examiner and coroner bills, and overcrowded jails and courtrooms, said Matt Chase, executive director of the National Association of Counties, which represents 3,069 county and local governments.

At his group’s July annual meeting, a presentation where county officials shared tips on tackling the opioid crisis, and the budget problems the crisis is triggering, played to a packed room, Chase said.

The organization is in the early stage of collecting information to build a more complete picture of the financial impact of the crisis on county budgets, Chase said.

Indiana County, Pennsylvania, a mountainous, predominantly rural region, provides a snapshot of how the crisis is stressing local services and budgets.

Its county seat, the borough of Indiana, is home to a modern college campus and a main street lined by restaurants and American flags. Yet beneath its outward tranquility, the opioid epidemic is everywhere, said David Rostis, an undercover detective and head of the county’s drug task force.

On a recent ride-along in Rostis’ car, he points to a building where a doctor used to sell opioid prescriptions for sex; a large, affluent home where a teenager died of an overdose; a trail where a drug-related killing recently occurred; and the local gas station where a woman recently overdosed and died in her car while people passed by.

In 2016, the county’s drug overdose death rate was 50.6 deaths per 100,000, compared to the state average of 36.5.

Autopsy and toxicology costs there have nearly doubled in six years, from about $89,000 in 2010 to $165,000 in 2016, county data shows.

Court costs are soaring, mainly because of the expense of prosecuting opioid-related crimes and providing accused with a public defender, local officials say.

The county is using contingency funds to pay for the added coroner costs, said Mike Baker, the county’s top government official. Last year, the county drew $63,000 from those funds, up from $19,000 in 2014, he said. In 2014, the county saw 10 drug-related deaths. In 2016, the number had grown to 53.

In Mercer County, West Virginia, 300 miles (483 km) to the south of Indiana County, opioid-related jail costs are carving into the small annual budget of $12 million for the community of 62,000 people.

The county’s jail expenses are on course to increase by $100,000 this year, compared to 2015. The county pays $48.50 per inmate per day to the jail, and this year the jail is on course to have over 2,000 more “inmate days” compared to 2015, according to county data.

“At least 90 percent of those extra jail costs are opioid-related,” said Greg Puckett, a county commissioner who sits on a national county opioid task force. “We spend more in one month on our jail bill than we spend per month on economic development, our health department and our emergency services combined.”

West Virginia has been on the front line of the opioid crisis. In 2015, the state led the nation in drug overdose death rates for the third consecutive year. Preliminary numbers for 2016 recorded 883 drug overdose deaths, with 755 involving at least one opioid, up from 629 total deaths in 2014.

AUTOPSIES INC.

Few know the opioid crisis like the father-son duo Sidney and Curtis Goldblatt. The pair run two companies, ForensicDx for autopsies and MolecularDx for drug testing, out of Windber, Pennsylvania. Together they conduct autopsies for 10 Pennsylvania counties, including Indiana, charging between $2,000 and $3,000 per body.

In 2014, overdoses represented about 40 percent of the deaths they handled, the Goldblatts said. Last year, that shot up to 62 percent. Goldblatt senior has been performing autopsies for 50 years and says he has never seen anything on the scale of the current epidemic. When he started, a drug overdose was rare.

The pair opened ForensicDx in 2014 with a staff of three, serving only three counties. That’s grown to seven staff and 10 counties, mainly to meet demand from drug-related deaths, the Goldblatts said.

Indiana County’s ambulance service is also under financial stress because of the opioid crisis. The county’s primary ambulance provider, Citizens’ Ambulance Service, has lost more than $100,000 since 2016 alone on opioid calls, said Randy Thomas, director of operations.

The non-profit is reimbursed only if an opioid overdose patient is transported to the hospital. It doesn’t get paid for successfully treating people who have overdosed but then refuse to go to the hospital, Thomas said.

People brought back from the brink of death after a dose of the life-saving drug naloxone, also known as Narcan, often awake angry and combative and refuse hospitalization, Thomas said.

As costs related to the opioid epidemic increase, Indiana County commissioner Baker isn’t sure what will happen next. Unless the state or federal government intervene, the county will have to either cut services or increase taxes, Baker said.

“This has introduced an entirely different metric, an entirely different level of unpredictability in budgeting,” he said.

For all the budget problems Baker faces because of the crisis, the human toll is what distresses him most. Last fall, Baker’s nephew died of a fentanyl overdose. He was 23. Talking about his nephew’s death, Baker pauses to collect his thoughts.

“It is a most painful and difficult experience and I wouldn’t wish it on anyone in the world,” he said.

(Editing by Jason Szep and Ross Colvin)

U.S. housing starts fall for second straight month; outlook murky

U.S. housing starts fall for second straight month; outlook murky

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. homebuilding fell for a second straight month in August as a rebound in the construction of single-family houses was offset by persistent weakness in the volatile multifamily home segment.

The report from the Commerce Department on Tuesday also showed building permits racing to a seven-month high in August. However, permits for single-family homebuilding, which accounts for the largest share of the housing market, dropped.

The mixed report suggested housing could remain a drag on economic growth in the third quarter. Homebuilding has been treading water for much of this year amid shortages of land and skilled labor as well as rising costs of building materials.

Housing starts slipped 0.8 percent to a seasonally adjusted annual rate of 1.18 million units, the Commerce Department said.

Building permits surged 5.7 percent to a rate of 1.30 million units in August, the highest level since January.

The data suggested limited impact on permits from Hurricane Harvey, which lashed Texas in late August and caused unprecedented flooding in Houston. The Commerce Department said the response rate from areas affected by the storm “was not significantly lower.”

But homebuilding could slump further in September in the aftermath of Harvey and Hurricane Irma, which struck Florida. According to Census Bureau data, the areas in Texas and Florida that were devastated by the storms accounted for about 13 percent of permits issued in the nation last year.

Though activity could pick up as the hurricane-ravaged communities rebuild, the dearth of labor could curb the pace of increase in homebuilding. A survey Monday showed confidence among homebuilders fell in September amid concerns that the hurricanes could worsen the labor shortages and make building materials more expensive.

Economists had forecast housing starts rising to a 1.18 million-unit pace last month. Investment in homebuilding contracted in the second quarter at its steepest pace in nearly seven years. As a result, housing subtracted 0.26 percentage point from second-quarter gross domestic product.

Homebuilding rose 1.4 percent in August on a year-on-year basis. Despite the recent weakness, housing continues to be supported by a labor market that is near full employment. In addition, mortgage rates remain close to historic lows.

Single-family homebuilding jumped 1.6 percent to a rate of851,000 units in August. Single-family permits, however, fell 1.5 percent to a 800,000-unit pace. With permits lagging starts, single-family homebuilding could decline in the months ahead. Groundbreaking on single-family housing projects has slowed since vaulting to near a 9-1/2-year high in February.

MIXED DATA

Last month, single-family starts rose in the South and West, but fell in the Midwest and Northeast. Starts for the volatile multi-family housing segment tumbled 6.5 percent to a rate of 329,000 units. Multi-family permits vaulted 19.6 percent to a 500,000-unit pace in August.

The mixed data is unlikely to change expectations that the Federal Reserve will announce on Wednesday a plan to start unwinding its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities. Fed officials were scheduled to start a two-day meeting later on Tuesday.

The dollar was trading lower against basket of currencies, while prices for U.S. Treasuries rose. U.S. stock futures were slightly higher.

In a separate report on Tuesday, the Labor Department said import prices jumped 0.6 percent in August, the biggest gain since January, after dipping 0.1 percent in July.

In the 12 months through August, import prices surged 2.1 percent after rising 1.2 percent in July.

Last month, prices for imported petroleum raced 4.8 percent after slipping 0.4 percent in July. Import prices excluding petroleum rose 0.3 percent after dipping 0.1 percent the prior month. Import prices excluding petroleum increased 1.0 percent in the 12 months through August.

Import prices outside petroleum are rising as the dollar’s rally fades. The dollar has weakened 8.3 percent against the currencies of the United States’ main trading partners this year.

The report also showed export prices rose 0.6 percent in August after gaining 0.5 percent in July. They increased 2.3 percent year-on-year after rising 0.9 percent in August.

A third report from the Commerce Department showed the current account deficit, which measures the flow of goods, services and investments into and out of the country, increased to $123.1 billion in the second quarter from $113.5 billion in the first quarter.

That was the highest level since the fourth quarter of 2008.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. job openings at record high; qualified workers scarce

FILE PHOTO: Men walk in the hall outside a Hire Our Heroes job fair targeting unemployed military veterans and sponsored by the Cable Show, a cable television industry trade show in Washington, June 11, 2013. REUTERS/Jonathan Ernst/File Photo

WASHINGTON (Reuters) – U.S. job openings rose to a record high in July, suggesting a slowdown in job growth in August was an aberration and that the labor market was strong before the recent disruptive hurricanes.

The monthly Job Openings and Labor Turnover Survey, or JOLTS, released by the Labor Department on Tuesday showed the labor market continued to tighten amid a scarcity of workers.

The strong labor market fundamentals could encourage the Federal Reserve to continue tightening monetary policy this year despite inflation persistently running below the U.S. central bank’s 2 percent target.

“Employers need skilled labor and experienced workers are in short supply, which continues to suggest the economy has returned to a relatively normal labor market that does not need exceptional support from the Fed,” said John Ryding, chief economist at RDQ Economics in New York.

Job openings, a measure of labor demand, increased by 54,000 to a seasonally adjusted 6.2 million. That was the highest level since the data series started in December 2000. Job openings have now been above 6 million for two straight months.

Hiring increased 69,000 to 5.5 million in July, lifting the hiring rate to a near 1-1/2-year high of 3.8 percent from 3.7 percent in June.

Labor market tightness was also underscored by another report from the National Federation of Independent Business.

The NFIB survey showed a record share of small businesses in August ranked difficulties finding qualified workers as “their top business problem.” The rise in job vacancies in July bolsters views that August’ s moderation in job gains was largely because of a seasonal quirk.

SOLID SHAPE

Nonfarm payrolls increased by 156,000 jobs last month, with the private services sector hiring the smallest number of workers in five months. Job growth in September could, however, be held back by hurricanes Harvey and Irma, which struck Texas and Florida, respectively.

The two states account for about 14 percent of U.S. employment. Temporary unemployment as a result of flooding from Harvey has already caused a surge in first-time applications for jobless benefits.

“The JOLTS data signal that the labor market was in solid shape in July and support our view that we should not be very concerned about the modest disappointment in the August payroll report,” said Daniel Silver, an economist at JPMorgan in New York.

JOLTS is one of the job market metrics on Fed Chair Janet Yellen’s dashboard. Economists expect the U.S. central bank will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities at its Sept. 19-20 policy meeting.

Benign inflation amid sluggish wage growth, however, suggests the Fed will delay raising interest rates again until December. It has increased borrowing costs twice this year.

Job openings in transportation, warehousing and utilities increased 70,000 in July and educational services had an additional 26,000 vacancies. There were 20,000 more job openings in construction.

Manufacturing, however, saw a 29,000 drop in vacancies in July. Health care and social assistance job openings decreased 72,000 and federal government vacancies declined 21,000.

About 3.2 million Americans voluntarily quit their jobs in July, up from 3.1 million in June. The quits rate, which the Fed looks at as a measure of job market confidence, rose to 2.2 percent from 2.1 percent in June.

“One of the problems facing firms is that workers are still pretty much locked into their current positions,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “With companies unwilling to bid for workers from other firms, there is little reason to leave and that is limiting the availability of qualified workers.”

Layoffs fell 23,000 to 1.78 million in July.

(Reporting by Lucia Mutikani; Editing by Phil Berlowitz)