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Subsiding Delta wave seen boosting U.S. job growth; worker shortages still a constraint

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November 5, 2021

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth likely accelerated in October as the headwind from the surge in COVID-19 infections over the summer subsided, offering more evidence that economic activity was regaining momentum early in the fourth quarter.

But the Labor Department’s closely watched employment report on Friday is expected to show worker shortages persisting, even after federal government-funded unemployment benefits have expired and schools have reopened for in-person learning.

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Nonetheless, it will join rising consumer confidence and services sector activity in painting a more favorable picture of the economy, after the Delta variant of the coronavirus and economy-wide shortages of goods restrained growth in the third quarter to its slowest pace in more than a year.

“September was a bad dream, but since then vaccines have beaten back the Delta virus and the economy is marching forward and upward,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University in Los Angeles. “We could have seen employment gains probably approaching 800,000, the primary constraint is labor shortages.”

Nonfarm payrolls likely increased by 450,000 jobs last month, according to a Reuters survey of economists. The economy created 194,000 jobs in September, the fewest in nine months.

October’s anticipated job gains would bring employment about 4.5 million jobs below its peak in February 2020. Estimates ranged from as low as 125,000 jobs to as high as 755,000.

Education employment is a wild card after sharp drops in payrolls at state and local governments as well as private institutions contributed to curbing job growth in September.

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Pandemic-related staffing fluctuations in education have distorted normal seasonal patterns. Shortages of bus drivers and other support staff have been well documented. Education hiring in September was lower than usual, resulting in a decline after stripping seasonal fluctuations. Economists believe October was the same story.

“We think that seasonally adjusted education-related employment could fall by another 50,000 in October, as the increase in hiring that month anticipated by the seasonal factors does not fully materialize,” said Daniel Silver, an economist JPMorgan in New York.

Education payrolls dropped by 180,000 jobs in September.

The drop in COVID-19 cases has allowed Americans to travel, attend sporting events and frequent restaurants, boosting demand for workers.

IMPROVED OUTLOOK

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Indeed, labor market indicators were fairly strong in October, with the ADP National Employment Report on Wednesday showing an acceleration in private payrolls. The Conference Board’s labor market differential – derived from data on consumers’ views on whether jobs are plentiful or hard to get – hit a 21-year high.

The number of Americans filing new claims for unemployment benefits fell below 300,000 in October and has remained under that level for four straight weeks.

The unemployment rate is forecast falling to 4.7% from 4.8% in September. While companies desperately want to hire, millions remain unemployed and outside the labor force.

This labor market disconnect has been blamed on caregiving needs during the pandemic, fears of contracting the coronavirus, early retirements, massive savings and career changes as well as an aging population and the recently ended expanded unemployment benefits. There were 10.4 million unfilled jobs as of the end of August. About five million people have left the labor force since the pandemic started.

Federal Reserve Chair Jerome Powell told reporters on Wednesday that “these impediments to labor supply should diminish with further progress on containing the virus, supporting gains in employment and economic activity.”

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The Fed announced it would this month start scaling back the amount of money it is pumping into the economy through monthly bond purchases.

STRUCTURAL SHIFT

According to Beth Ann Bovino, chief economist at S&P Global Ratings, there was no evidence that generous pandemic jobless benefits discouraged the unemployed from seeking work. Bovino said the reason for people not taking up jobs appeared to stem more from the decision to drop out of the workforce entirely, signaling a structural shift rather than a temporary change.

She also noted that many people who moved out of cities during the pandemic have yet to return, which could create a mismatch between the open jobs and location.

“The labor market conditions since the pandemic began highlight a possible structural shift in the labor force, with 60% of the five million missing workers comprising people who have left the workforce entirely,” said Bovino.

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There are concerns that worker shortages could be exacerbated by the White House’s vaccine mandate, which comes into effect on Jan. 4 and applies to federal government contractors and businesses with 100 or more employees.

There has also been a rise in strikes as workers take advantage of the tight labor market to demand more pay and better conditions. The walk out by about 10,000 Deere & Co workers will have no impact on October’s payrolls as it started in the middle of the period during which the government surveyed households and businesses for the employment report.

“Recent strike activity and vaccine mandates have been challenging factors on the supply front and suggest that labor market improvement will be gradual in coming months,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

The scramble for workers is boosting wage growth, which together with record savings should help to underpin consumer spending over the holiday session, though salaries are lagging inflation and shortages of goods abound.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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U.S. stock futures, oil regain some ground after Omicron battering

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November 29, 2021

By Wayne Cole

SYDNEY (Reuters) – Asian markets regained a little composure on Monday as investors settled in for a few weeks of uncertainty on whether the Omicron variant would really derail economic recoveries and the tightening plans of some central banks.

Oil prices also bounced $3 a barrel to recoup some of Friday’s shellacking, while the safe haven yen took a breather after its run higher.

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The new variant of concern was found as far afield as Canada and Australia as more countries imposed travel restriction to try to seal themselves off.

Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, although a South African doctor who had treated cases said symptoms of Omicron were so far mild.

“There is a lot we don’t know about Omicron, but markets have been forced to reassess the global growth outlook until we know more,” said Rodrigo Catril, a market strategist at NAB.

“Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery.”

Trading was erratic early on Monday but there were signs of stabilisation as S&P 500 futures added 0.8% and Nasdaq futures 0.9%.

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Both indices suffered their sharpest fall in months on Friday with travel and airline stocks hit particularly hard.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1% but was off early lows. Likewise, Japan’s Nikkei pared early losses to be down 0.9%.

Bonds gave back some of their gains, with Treasury futures down 11 ticks. The market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks.

Two-year Treasury yields edged up to 0.55%, after falling 14 basis points on Friday in the biggest drop since March last year. Fed fund futures had pushed the first rate rise out by a month or so.

The shift in expectations undermined the U.S. dollar, to the benefit of the safe haven Japanese yen and Swiss franc.

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Early Monday the dollar had steadied somewhat at 113.81 yen, after sliding 1.7% on Friday. The dollar index held at 96.190, after Friday’s 0.7% drop.

The euro paused at $1.1294, following its rally from $1.1203 late last week.

European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant.

The economic diary is also busy this week with China’s manufacturing PMIs on Tuesday to offer another update on the health of the Asian giant. The U.S. ISM survey of factories is out on Wednesday, ahead of payrolls on Friday.

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday.

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In commodity markets, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday.

“The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December,” wrote analyst at ANZ in a note.

“Such headwinds are the reason it’s been only gradually raising output in recent months, despite demand rebounding strongly.”

Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24.

Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce.

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(Reporting by Wayne Cole; Editing by Richard Pullin & Shri Navaratnam)

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Nissan Motor to spend $17.6 billion to accelerate electrification

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November 29, 2021

TOKYO (Reuters) – Nissan Motor Co said on Monday it will spend 2 trillion yen ($17.59 billion) over the next five years to accelerate vehicle electrification as it bets tighter carbon emission restrictions will spur demand for electric cars and hybrids.

Japan’s No. 3 car maker will introduce 23 electrified vehicles by 2030, including 15 electric vehicles (EV), and plans to introduce all solid-state batteries by March 2029, it said in a statement.

Nissan’s deeper push into battery-powered cars comes as consumer demand for such vehicles grows in key auto markets such as China and the United States and as its competitors release new electric vehicles.

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Although still only a small portion of vehicles on the road, global electric car registrations in 2020 grew 41% even as the overall car market contracted by almost a sixth, according to the International Energy Agency (IEA).

Nissan, like other Japanese car makers, however, has yet to commit to completely abandoning fossil-fuel vehicles.

At the U.N. climate summit in Glasgow this month, major car makers, including General Motors and Ford Motor Co, signed on to a declaration that committed them to phase out fossil fuel vehicles by 2040.

($1 = 113.7000 yen)

(Reporting by Tim Kelly; Editing by Christopher Cushing and Muralikumar Anantharaman)

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Shares of Macau casino operator Suncity suspended -HKEX

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November 29, 2021

HONG KONG (Reuters) – Shares of Suncity Group Holdings Ltd were suspended on Monday after its chief executive was believed to be among 11 people arrested by Macau authorities on Sunday over alleged links to cross-border gambling and money laundering.

The South China Morning Post reported that Macau police said on Sunday a 47-year-old businessman surnamed Chau was among those arrested. Alvin Chau is head of Suncity.

Suncity could not be reached for comment. Shares of the company last closed at HK$0.255.

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(Reporting By Anne Marie Roantree; Editing by Kim Coghill)

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