Tag Archives: Economy

U.S. job growth seen accelerating; unemployment rate steady

FILE PHOTO: Leaflets lie on a table at a booth at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. employers likely stepped up hiring in June and boosted wages for workers, signs of labor market strength that could keep the Federal Reserve on course for a third interest rate increase this year.

According to a Reuters survey of economists, the Labor Department’s closely watched employment report on Friday will probably show that nonfarm payrolls increased by 179,000 jobs last month after gaining 138,000 in May.

The unemployment rate is forecast steady at a 16-year low of 4.3 percent. It has dropped five-tenths of a percentage point this year and matches the most recent Fed median forecast for 2017.

Economists say labor market buoyancy could also encourage the U.S. central bank to announce plans to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September.

“June’s employment report could provide sufficient evidence to Fed officials that they are still positioned to proceed with their monetary policy normalization plans in the second half of the year,” said Sam Bullard, a senior economist at Wells Fargo securities in Charlotte, North Carolina.

The Fed raised its benchmark overnight interest rate in June for the second time this year. But with inflation retreating further below the central bank’s 2 percent target in May, economists expect another rate hike only in December.

June’s anticipated employment gains would be close to the 186,000 monthly average for 2016 and reinforce views that the economy regained speed in the second quarter after a sluggish performance at the start of the year.

But the pace of job growth is expected to slow as the labor market hits full employment. There is growing anecdotal evidence of companies struggling to find qualified workers.

As a result, some companies are raising wages in an effort to attract and retain their workforces. Economists expect worker shortages to boost wage growth, which has remained stubbornly sluggish despite the tightening labor market.

EYES ON WAGES

Average hourly earnings are forecast increasing 0.3 percent in June after gaining 0.2 percent in May. That could lift the year-on-year increase in wages to 2.7 percent from 2.5 percent in May.

“The days of month after month of 200,000 jobs being created are likely behind us,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania.

“We will see trend job growth continue to moderate. That doesn’t necessarily signal that the expansion is running out of juice or that a recession is imminent, it is just a symptom of a full-employment economy.”

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Republican President Donald Trump, who inherited a strong job market from the Obama administration, has pledged to sharply boost economic growth and further strengthen the labor market by slashing taxes and cutting regulation.

But Republicans have struggled with healthcare legislation and there are also worries that political scandals could derail the Trump administration’s economic agenda.

Job gains were likely broad in June. Manufacturing payrolls likely rebounded after factories shed 1,000 jobs in May. But employment in the automobile sector probably declined further as slowing sales and bloated inventories force manufacturers to cut back on production.

Ford Motor Co has announced plans to slash 1,400 salaried jobs in North America and Asia through voluntary early retirement and other financial incentives. Others, like General Motors are embarking on extended summer assembly plant shutdowns, which will temporarily leave workers unemployed.

Further job gains are likely in construction.

The retail sector is expected to have purged jobs for a fifth straight month as department store operators like J.C. Penney Co Inc, Macy’s Inc and Abercrombie & Fitch struggle against stiff competition from online retailers led by Amazon.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. factory activity jumps, construction spending unchanged

A man walks his dog past a mural depicting factory workers in the historic Pullman neighborhood in Chicago

By Lindsay Dunsmuir

WASHINGTON (Reuters) – U.S. factory activity jumped in June suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May.

The Institute for Supply Management (ISM) said on Monday its index of national factory activity rose to a reading of 57.8 last month from 54.9 in May.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for roughly 12 percent of the overall U.S. economy.

The ISM survey’s new orders sub-index rose to 63.5 in June from 59.5 the prior month. A measure of factory employment increased to a reading of 57.2 from 53.5 in May.

According to ISM, comments from those surveyed generally reflected expanding conditions, “with new orders, production, employment, backlog and exports all growing in June compared to May and with supplier deliveries and inventories struggling to keep up with the production pace.” Fifteen of the 18 manufacturing industries reported growth in June.

The dollar rose to a session high against a basket of currencies after the data, while the yield on the 2-year U.S. Treasury note rose to a more than eight-year high. U.S. stocks extended gains.

 

CONSTRUCTION SPENDING MIXED

Meanwhile, U.S. construction spending unexpectedly remained flat in May but federal government outlays on construction projects were the highest in more than four years.

The Commerce Department said on Monday that construction spending in May remained unchanged at $1.23 trillion. Spending in April was revised to show it declining 0.7 percent after a previously reported 1.4 percent fall.

Economists polled by Reuters had forecast construction spending rising 0.3 percent in May. Construction spending increased 4.5 percent from a year ago.

Federal government construction spending jumped 6.4 percent in May to its highest monthly level since January 2013.

The May construction spending release included revisions to data back to January 2015, the Commerce Department said.

In May, private construction spending fell 0.6 percent, the biggest decline since October 2015, after declining 0.2 percent in April. Investment in private residential construction also declined 0.6 percent, the biggest fall since July 2014, after rising 0.5 percent the prior month.

Spending on private nonresidential structures fell 0.7 percent in May, the fifth straight monthly decline.

Investment in public construction projects rose 2.1 percent in May after dropping 2.7 percent in April.

Outlays on state and local government construction projects increased 1.7 percent in May after falling 2.7 percent in April.

 

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

 

Brazil cuts inflation target for first time in over a decade

Brazil's Central Bank President Ilan Goldfajn looks on during a news conference next to Brazil's Economy Minister Henrique Meirelles and Brazil's Planning Minister Dyogo Henrique de Oliveira in Brasilia, Brazil June 29, 2017. REUTERS/Ueslei Marcelino

By Silvio Cascione and Marcela Ayres

BRASILIA (Reuters) – Brazil’s government on Thursday lowered its annual inflation target for the first time in more than a decade, seeking to turn the page on recent double-digit jumps in consumer prices and bolster investors’ confidence about future economic stability.

The National Monetary Council, comprised of heads of the finance and planning ministries and the central bank, cut the inflation target to 4.25 percent in 2019 and 4.00 percent the following year, from 4.5 percent at present.

The tolerance range was maintained at 1.5 percentage point.

The reduction, predicted by a Reuters poll of economists in January, followed a plunge in annual inflation from nearly 11 percent in early 2016 to 3.6 percent in June.

A stronger commitment to low inflation could boost Brazil’s long-term growth by reducing investor uncertainty, without closing the door to further interest rate cuts by the central bank this year, economists said.

Economists forecast an inflation rate of 3.5 percent for 2017, breaking a sequence of seven straight years of Brazil overshooting its target. Under the administration of former President Dilma Rousseff, who was impeached last year, economists accused policymakers of pursuing the ceiling of the goal and not its midpoint in order to avoid rate hikes that could hurt growth.

“Economic policy has all the necessary conditions in terms of inflation, transparency and credibility to remain committed to these inflation targets,” central bank chief Ilan Goldfajn told journalists.

Yields <0#DIJ:> on longer-dated interest rate futures slipped in early trading, suggesting investors saw the new targets as consistent with forecasts of interest rate cuts. Global risk aversion pushed yields up again later in the day, traders said.

Growing investor optimism about Brazil’s economic prospects contrasts with an escalating political crisis that threatens to remove President Michel Temer from office.

Goldfajn said the targets took into account the political environment, and also responded affirmatively when asked if he expected to stay in his post even if Temer is suspended from office should the Supreme Court try him on corruption charges. Temer appointed Goldfajn to lead the central bank last year.

The central bank has been expected to cut its benchmark rate to 8.5 percent by December, from 10.25 percent currently, according to a central bank survey of economists released on Monday. The bank has already lowered the benchmark rate by 400 basis points since October.

Before the decision was announced, economists had been forecasting an annual inflation rate of 4.25 percent for the years of 2019, 2020 and 2021, according to the central bank.

“Expectations will probably start to converge toward the new target as soon as next week,” said Gustavo Arruda, an economist with BNP Paribas.

Brazil began targeting inflation in 1999, with the 4.5 percent target being first adopted for 2005.

Goldfajn had long said Brazil should aim for a target more in line with other emerging markets. Latin American countries such as Mexico and Chile target inflation at 3 percent.

(Reporting by Silvio Cascione and Marcela Ayres; Editing by W Simon and Daniel Flynn)

U.S. first quarter economic growth revised up on jump in consumer spending

FILE PHOTO: A customer exits after shopping at a Macy's store in the Brooklyn borough of New York, U.S., on May 11, 2017. REUTERS/Brendan McDermid/File Photo

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The U.S. economy slowed less than feared in the first quarter due largely to a jump in consumer spending, providing a slightly more encouraging outlook for growth this year.

Gross domestic product increased at a 1.4 percent annual rate instead of the 1.2 percent reported last month, the Commerce Department said in its final assessment for the period on Thursday.

The reading was the worst since the second quarter of 2016 but above analysts’ expectations, easing fears the economy had been hobbled at the start of this year. The government had pegged first-quarter growth at a paltry 0.7 percent in its first estimate in April.

“The upward revision occurred even with a downward revision to the inventory data, which has favorable implications for the adding up of second-quarter growth,” said Daniel Silver, an economist at J.P. Morgan.

Economists polled by Reuters had expected GDP growth to be unrevised at 1.2 percent in the first quarter. The economy tends to underperform in that period relative to the rest of the year due to perennial issues with the calculation of the data. The government has said it is working to resolve those issues.

The U.S. dollar <.DXY> briefly edged up after the release of the data before retracing earlier losses against a basket of currencies. Prices of U.S. Treasuries were trading lower and stocks on Wall Street were down sharply.

First-quarter economic growth was boosted by an upward revision to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Consumer spending rose at a 1.1 percent pace, the weakest reading since the second quarter of 2013 but almost double the 0.6 percent reported last month.

Despite the upward revision to GDP, the Trump administration’s stated target of swiftly boosting annual U.S. economic growth to 3 percent remains a challenge.

A sustained average growth rate of 3 percent has not been achieved in the United States since the 1990s. The U.S. economy has grown an average 2 percent since 2000 and it expanded only 1.6 percent in 2016, which was the weakest growth in five years.

President Donald Trump’s economic program of tax cuts, regulatory rollbacks and infrastructure spending has yet to get off the ground five months into his presidency.

Details of the White House’s tax plan remain sparse as Trump advisers attempt to win over fiscally conservative Republicans in Congress who want any changes to ultimately be revenue-neutral.

Initial signs that economic growth re-accelerated sharply in the second quarter have also faltered in the face of recent disappointing data on retail sales, manufacturing production and inflation. Housing data has also been mixed.

The Atlanta Federal Reserve is currently forecasting annualized growth of 2.9 percent in the second quarter.

LABOR MARKET STILL STRONG

Other data on Thursday showed the job market was still flashing a green light.

The Labor Department reported that the number of Americans filing for unemployment benefits last week rose slightly, but the underlying trend remained consistent with a tight labor market. The unemployment rate fell to a 16-year low in May.

U.S. exporters also flexed more muscle in the first quarter. Exports for the period were revised to show a 7.0 percent rate of growth from the previously reported 5.8 percent. Exports in the fourth quarter fell at a rate of 4.5 percent.

Business spending on equipment was revised to show it increasing at a rate of 7.8 percent in the January-March period rather than the 7.2 percent previously estimated.

Businesses accumulated inventories at a rate of $2.6 billion in the first quarter, rather than the $4.3 billion reported last month. Inventory investment rose at a rate of $49.6 billion in the fourth quarter of last year.

Inventories subtracted 1.11 percentage point from GDP growth in the first quarter instead of the 1.07 percentage point previously reported.

The government also reported that corporate profits after tax with inventory valuation and capital consumption adjustments fell at an annual rate of 2.7 percent in the first quarter after rising at a 2.3 percent pace in the prior three months.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

Seattle employers cut hours after latest minimum wage rise, study finds

FILE PHOTO: Protest signs are pictured in SeaTac, Washington just before a march from SeaTac to Seattle aimed at the fast food industry and raising the federal minimum wage and Seattle's minimum wage to $15 an hour December 5, 2013. REUTERS/David Ryder/File Photo

By Alex Dobuzinskis

(Reuters) – A Seattle law that requires many businesses to pay a minimum wage of at least $13 an hour has left low-wage workers with less money in their pockets because some employers cut working hours, a study released on Monday said.

Low-wage workers on average now clock 9 percent fewer hours and earn $125 less each month than before the Pacific Northwest city set one of the highest minimum wages in the nation, the University of Washington research paper said.

Even so, overall employment at city restaurants, where a large percentage of low-wage earners work, held steady.

Seattle, which has a booming economy and a strong technology sector, is midway through an initiative to increase its minimum wage for all employers to $15 an hour. The city is at the forefront of a nationwide push by Democratic elected officials and organized labor in targeting $15 for all workers.

“Most people will tell you there is a level of minimum wage that is too high,” Jacob Vigdor, a professor of public policy at the University of Washington and director of the team studying the increase, said in a phone interview. “There is a sense that as you raise it too high, then you get to a point where employers will really start cutting back.”

Many companies reached that point after Seattle, a city of nearly 700,000 residents, raised the minimum to $13 an hour for large employers beginning Jan. 1, 2016, according to the study.

Seattle’s labor market held steady when the minimum rose to $11 from $9.47 on April 1, 2015, the university found in a study released last year.

“Raising the minimum wage helps ensure more people who live and work in Seattle can share in our city’s success, and helps fight income inequality,” Seattle Mayor Ed Murray said in a statement in response to the study, which the city commissioned.

The federal minimum wage has stayed at $7.25 an hour since 2009, and the Republican-controlled U.S. Congress has opposed an increase.

Critics of minimum wage increases say they lead to layoffs and force some companies out of business.

The latest research from the University of Washington found no major reduction in hours or jobs at Seattle restaurants, in keeping with a finding in a study conducted by University of California, Berkeley, that was released last week.

Lawmakers in California, the nation’s most populous state, voted last year to increase the minimum wage to $15 an hour by 2022. Elected officials in several states, including New York and Oregon, and large cities such as Chicago have in the last two years approved their own minimum pay hikes.

(Reporting by Alex Dobuzinskis in Los Angeles; Editing by Leslie Adler)

U.S. new home sales jump, median price surges to record high

A view of single family homes for sale in San Marcos, California October 25, 2013. REUTERS/Mike Blake

By Lindsay Dunsmuir

WASHINGTON (Reuters) – New U.S. single-family home sales rose in May and the median sales price surged to an all-time high, suggesting the housing market had regained momentum.

The Commerce Department said on Friday new home sales increased 2.9 percent to a seasonally adjusted rate of 610,000 units last month. April’s sales pace was also revised sharply higher to 593,000 units from 569,000 units.

Economists polled by Reuters had forecast new home sales, which make up about 10 percent of all home sales, rising 5.4 percent to a pace of 597,000 units last month. Sales were up 8.9 percent on a year-on-year basis in May.

“While the data quality of the new home sales report is notoriously poor, the general picture from this report and the existing home sales report is one of solid housing demand in the important spring selling season,” said Michael Feroli, an economist with J.P. Morgan.

The housing market has been bolstered by continued strong job growth. The unemployment rate fell to a 16-year low of 4.3 percent in May and mortgage rates are still favorable by historical standards.

However, an increase in the cost of building materials and shortages of lots and labor have crimped homebuilding. With demand outstripping supply, house prices remain elevated.

The median house price rose to a record high of $345,800 in May, from $310,200 in the prior month. The average sales price last month was $406,400, also a record high.

The U.S. dollar pared losses against the yen after the data. U.S. stocks were trading modestly higher while prices of U.S. Treasuries edged up.

Across the nation’s four regions, new home sales were mixed. They fell 25.7 percent in the Midwest and 10.8 percent in the Northeast, but rose 13.3 percent in the West and 6.2 percent in the South, which accounts for a large share of the housing market.

The inventory of new homes on the market increased 1.5 percent to 268,000 units last month.

At May’s sales rate, it would take 5.3 months to clear inventory, unchanged from April. A six-month supply is seen as a healthy balance between supply and demand.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

Qatar rift risks raising cost for Gulf debt issuers and slowing Saudi reforms

FILE PHOTO: Cars drive past the King Abdullah Financial District, north of Riyadh, Saudi Arabia, March 1, 2017. REUTERS/Faisal Al Nasser/File Photo

By Saeed Azhar, Davide Barbuscia and Katie Paul

DUBAI/RIYADH (Reuters) – Qatar’s rift with its Arab neighbors is threatening to puncture investor appetite for the Gulf region as a whole, translating into potentially higher debt costs for governments and possibly slowing the pace of Saudi Arabia’s economic reforms.

Saudi, United Arab Emirates, Bahrain and Egypt broke relations and transport ties with Qatar on June 5, alleging it finances terrorism, something Doha vehemently denies.

The move has thrown the region — which has been relatively stable, if troubled by Sunni and Shi’ite Muslim rivalry — into diplomatic turmoil that is now putting off investors.

“We were used to a relatively peaceful region and now the landscape has changed,” said Brigitte Le Bris, head of emerging debt and currencies at Paris-based Natixis Asset Management, which manages about 350 billion euros ($392 billion) in assets.

“We are not yet ready to increase our exposure to the region. We need to know whether this crisis is isolated to Qatar or it can spread and affect other countries or the crisis can worsen.”

One obvious area is sovereign debt, where the crisis has the potential of raising borrowing costs.

Following the sanctions, rating agency Standard & Poor’s downgraded Qatar while Fitch put it on its watchlist for a potential downgrade.

To date, foreign investors still appear to be comfortable holding Qatar paper due to the size of the country’s reserves and assets held by its sovereign wealth fund, Qatar Investment Authority.

Yields on Qatar’s sovereign dollar bonds maturing in 2026 spiked over 40 basis points after the sanctions were announced on June 5 but have now recovered nearly 20 bps.

Other Gulf Cooperation Council countries’ sovereign bonds saw some weakness in the immediate aftermath of the diplomatic crisis, but again have largely gone back to their pre-crisis levels.

How long this lasts, however, may depend on how long the crisis goes on, which may be “for years” according to one UAE minister..

The market’s take, however, is that the diplomatic crisis will be resolved via political mediation, said Max Wolman, senior portfolio manager at Aberdeen Asset Management in London.

“But if the likes of Bahrain, Oman or even Saudi Arabia were to issue these days, I think there would be a slight risk premium of 10 to 15 basis points in the primary to the secondary market because of current political uncertainty,” he said.

SAUDI REFORMS

Another risk could be to Saudi Arabia’s economic reforms, many of which depend on investor cash flowing in.

“Investors may become concerned about Saudi over-extending itself, as the war in Yemen continues and domestically reforms have adversely impacted consumer sentiment,” Asha Mehta, portfolio manager at Acadian Asset Management.

A senior banker, who has done extensive investment banking work in the Middle East, pointed to the high-profile listing of oil company Aramco as a potential issue.

“If the situation continues like this and they planned their IPO, they would be bombarded with questions on this (political upheaval),” he told Reuters, asking not to be named.

Even though the Aramco IPO is not expected until 2018, Saudi Arabia was preparing the sale of government stakes in airports, healthcare and educational firms, aiming to raise $200 billion.

The privatization is part of the reforms to reduce Saudi Arabia’s dependence on oil, after its price plunge hurt the kingdom’s economy and stretched its finances.

Bank of America Merrill Lynch in a recent note said geopolitics may delay the reforms, although not derail them.

Saudi’s reform process could get some impetus, however, from the announcement on Wednesday that Mohammed bin Salman will become the crown prince, replacing his cousin in a sudden announcement that confirms Saudi Arabia King Salman’s 31-year-old son as next ruler of the kingdom.

MBS, as he is known, was behind the sweeping economic reforms aimed at ending the kingdom’s “addiction” to oil, part of his campaign.

Brent was unchanged at $46.02 barrel at 0651 GMT on Wednesday at multi-month lows after falling nearly 2 percent in the previous session to its lowest settlement since November as investors discounted evidence of strong compliance to a deal to cut a global output.

(additional reporting by Marc Jones in London, and Tom Arnold in Dubai Editing by Jeremy Gaunt)

Fed’s Fischer says more to be done to prevent future crises

FILE PHOTO: U.S. Federal Reserve Vice Chair Stanley Fischer addresses The Economic Club of New York in New York, U.S. on March 23, 2015. REUTERS/Brendan McDermid/File Photo

(Reuters) – Federal Reserve Board Vice Chair Stanley Fischer on Tuesday warned that while the U.S. and other countries have taken steps to make their housing finance systems stronger, more needs to be done to prevent a future crisis.

Fischer did not address the outlook for U.S. monetary policy or the economy in remarks prepared for delivery to the DNB-Riksbank Macroprudential Conference Series in Amsterdam.

Instead he focused on preventing financial instability, arguing that since the 2007-2009 financial crisis in the United States, “the core of the financial system is much stronger, the worst lending practices have been curtailed, much progress has been made in processes to reduce unnecessary foreclosures,” and a 2008 law helped clarify the status of government support for housing agencies Fannie Mae and Freddie Mac.

But to prevent a new crisis, he said, governments ought to do more, including stress tests for banks on their resilience should house prices decline dramatically, and making it easier to avoid foreclosures, which hurt both lenders and borrowers.

“(T)here is more to be done, and much improvement to be preserved and built on, for the world as we know it cannot afford another pair of crises of the magnitude of the Great Recession and the Global Financial Crisis,” he said.

(Reporting by Ann Saphir; editing by Diane Craft)

U.S. retail sales post biggest drop in 16 months

A shopper passes a window display at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew

WASHINGTON, June 14 (Reuters) – U.S. retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the second quarter.

The Commerce Department said on Wednesday retail sales fell 0.3 percent last month after an unrevised 0.4 percent increase in April. May’s decline was the largest since January 2016 and confounded economists’ expectation for a 0.1 percent gain.

Retail sales rose 3.8 percent in May on a year-on-year basis. Some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.6 percent rise in April.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have increased 0.2 percent in April.

Growth is expected to pick up this quarter after being held back by a near stall in consumer spending and a slower pace of inventory investment at the start of the year.

The economy grew at a 1.2 percent annualized rate in the first quarter after notching a 2.1 percent pace in the October-December period.

The Atlanta Fed is forecasting the economy growing at a 3.0 percent annualized rate in the second quarter, but this estimate could be trimmed following the weak core retail sales.

May’s surprise sluggishness in consumer spending, which accounts for more than two-thirds of the U.S. economy, could worry Federal Reserve officials who have previously attributed the slowdown in domestic demand to transitory factors.

Still, the U.S. central bank is expected to raise interest rates by 25 basis points later on Wednesday, the second increase this year. Further rate hikes are likely to depend on the outlook for inflation and economic growth.

Auto sales fell 0.2 percent after rising 0.5 percent in April. Receipts at service stations dropped 2.4 percent, the largest decline since February 2016. Sales at building material stores were unchanged, while receipts at clothing stores rose 0.3 percent.

Department store sales tumbled 1.0 percent, the largest drop since July 2016. Department store sales are being undercut by online retailers, led by Amazon.com <AMZN.O>. That has led some retailers, including Macy’s <M.N>, Sears <SHLD.O> and Abercrombie & Fitch <ANF.N> to announce shop closures.

Sales at online retailers increased 0.8 percent last month after rising 0.9 percent in April. Sales at electronics and appliance stores plunged 2.8 percent, the largest drop since March 2010.

Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby stores fell 0.6 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

California governor, legislature agree on final budget

FILE PHOTO - California Governor Jerry Brown attends the International Forum on Electric Vehicle Pilot Cities and Industrial Development in Beijing, China June 6, 2017. REUTERS/Thomas Peter

By Robin Respaut

(Reuters) – California Governor Jerry Brown announced on Tuesday that state lawmakers had reached an agreement about the state’s 2017-2018 budget.

Both houses of the state legislature will likely vote on the new budget on Thursday, the constitutional deadline for lawmakers to adopt a budget bill.

California’s Department of Finance had not totaled the final budget numbers as of Tuesday morning, according to department spokesperson H.D. Palmer.

The budget adds $1.8 billion to the state’s rainy day fund, expands access to California’s Earned Income Tax Credit and boosts funding for schools and infrastructure repairs, according to the governor’s office. It also sends more money to the nation’s largest public pension fund, California Public Employees’ Retirement System (CalPERS), to help reduce the fund’s unfunded liability.

“This budget keeps California on a sound fiscal path and continues to support struggling families and make investments in our schools,” Brown said in a statement on Tuesday.

“This budget makes historic investments in healthcare, education, and childcare, and lays down a multi-billion dollar investment to start fixing our roads and infrastructure,” said Senate President pro tem Kevin de León.

Brown proposed a state budget in January for the new fiscal year and revised his budget up 2.2 percent to $183.4 billion in May.

(Reporting by Robin Respaut; Editing by Chizu Nomiyama)