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Six questions that could shape the future of the U.S. labor market

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November 8, 2021

By Jonnelle Marte

(Reuters) – More than a year and a half after the COVID-19 pandemic ruptured the U.S. job market in historic fashion, huge gaps in employment and the labor force remain despite unprecedented demand for workers and a record number of vacant jobs.

Policymakers are struggling to understand just what is keeping so many people from returning to work – or even looking for a job. Friday’s monthly payrolls report showed strong hiring in October but the labor force participation rate tracking the share of people either working or searching for jobs didn’t budge.

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“There’s room for a whole lot of humility here as we try to think about what maximum employment would be,” Federal Reserve Chair Jerome Powell said last week after the central bank’s latest policy meeting.

Moments that were expected to mark turning points in the labor market recovery, such as the start of the school year or the expiration of enhanced unemployment benefits, did not lead to a massive return to the workplace.

Instead, economists are learning, workers may be stepping back because of family responsibilities, concerns about the virus or the desire to do something new.

Here’s a look at the questions experts say could help determine what the labor market could look like as the pandemic fades.

HOW MANY PEOPLE ARE NOT WORKING BECAUSE OF THE VIRUS?

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That remains hard to pin down, but Friday’s data did signal some improvement. About 3.8 million people were unable to work or reported reduced hours due to their business closing or reducing operations, down from roughly 5.0 million in September, resuming a downward trend that was interrupted by a rise in August.

Those saying they did not look for work because of the pandemic declined to 1.3 million last month from 1.6 million in September, the first notable drop since June.

WILL RETIREES COME BACK TO THE LABOR FORCE?

Retiree ranks increased by 3.6 million from February 2020 to June 2021, greater than the 1.5 million retirements that would have been expected under the pre-pandemic trend for retirements, according to the Kansas City Fed. That was driven by a big drop in those moving from retirement back to work, likely because of health concerns. More baby boomers also left the labor market.

(GRAPHIC: Spike in number of retirees – https://graphics.reuters.com/USA-ECONOMY/FULL-EMPLOYMENT/jnvwexemavw/chart.png)

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Fed Board Governor Michelle Bowman said last month surging retirements “may make it harder, or even impossible in the near term, to return to the high level of employment achieved before the pandemic.”

The tight prepandemic labor market brought some people out of retirement, and economists say that could happen again if infections keep dropping and wages keep rising.

HOW LONG UNTIL WOMEN’S EMPLOYMENT RECOVERS?

School reopenings were predicted to bring waves of women back to the work force, but that has yet to happen and may not, according to the Brookings Institution.

Tracking how long it takes those women, including Black and Hispanic women hardest hit by pandemic job losses, to get back to work is “going to be a very important focus of policymakers over the next six months,” said Joe Brusuelas, chief economist for RSM.

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(GRAPHIC: Women of color see slower labor recovery – https://graphics.reuters.com/USA-ECONOMY/FULL-EMPLOYMENT/lgvdwnkbjpo/chart.png)

If a large share find jobs in that time, that could lift the labor supply and ease wage pressures, he said. If not, then expectations for work force recovery may drop and wage pressures could persist.

ARE SAVINGS KEEPING PEOPLE HOME?

Savings accumulated during the pandemic as consumers reduced spending, received stimulus checks and benefited from a federal pause on student loan and mortgage payments. This perhaps gave job seekers room to hold out for the right position or to care fulltime for family longer. Those funds could soon run out now that enhanced unemployment benefits are gone and some forbearance programs are expiring, economists say.

(GRAPHIC: Pandemic cash cushion Pandemic cash cushion – https://graphics.reuters.com/USA-ECONOMY/gkplgxroevb/chart.png)

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As of September, households had saved about $2.5 trillion more than they would have if the pandemic had never happened, Mark Zandi, chief economist at Moody’s Analytics, estimates. Most of that was stashed away by higher-income households. Still, he estimates about $500 billion was saved by households in the 20%-60% range of the income distribution, leaving those households with about $10,000 per person, which he projects will get spent down by the end of this year or early 2022.

Lower-income households, by contrast, have only about $1,000 saved on average, according to the JPMorgan Chase Institute. “The financial pressure to go back to work will be overwhelming,” Zandi said.

HOW MANY PEOPLE PREFER TO WORK FOR THEMSELVES?

The pandemic sparked a surge in filings for new businesses as people tried to capitalize on new trends, make ends meet as freelancers or take more control over their work.

That could help explain some of the worker shortage: More people are choosing to go it alone. It is too early to know how many new businesses will survive or how many jobs they might create.

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Analysis from the Atlanta Fed and University of Maryland economist John Haltiwanger found many of the new businesses are likely to remain “non-employer” firms – one-person businesses run by people who are now self-employed. But the number of firms with a “high propensity” to generate jobs also increased.

WILL IMMIGRATION REBOUND?

Immigration declined over the past several years under former President Donald Trump’s stricter policies and then restrictions imposed during the pandemic. Visas issued to work-eligible foreigners declined by 1.2 million during the pandemic, according to the Cato Institute.

(GRAPHIC: Fewer foreign workers – https://graphics.reuters.com/USA-ECONOMY/FULL-EMPLOYMENT/mopanlnxnva/chart.png)

That trend is reversing as infections drop and restrictions are loosened. The number of immigrant workers could rise by between 250,000 to 500,000 next year from current levels, Julia Coronado, president of MacroPolicy Perspectives and a former Fed economist, said during a recent webinar.

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The decline in immigration could allow labor market conditions to stay tight even without a full return to pre-pandemic employment levels, said Jesse Edgerton, a senior economist at J.P. Morgan. That means wages could continue to grow for some jobs, pulling more people off of the sidelines and boosting labor force participation.

(Reporting by Jonnelle Marte; Editing by Dan Burns and Chizu Nomiyama)

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Arnault-backed group launches second SPAC listing

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December 7, 2021

By Emma-Victoria Farr

LONDON (Reuters) – France’s richest man Bernard Arnault and former UniCredit head Jean Pierre Mustier will publicly list a second blank cheque vehicle in Amsterdam, raising 200 million euros ($226 million), the bookrunners on the deal said.

Earlier this year, the duo raised half a billion euros from their special purpose acquisition company (SPAC), Pegasus Acquisition Company Europe B.V., which is searching for takeover targets in the financial sector.

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On Tuesday, the same group of backers announced they would list a second vehicle with a similar focus, Pegasus Entrepreneurial Acquisition Company Europe, in Amsterdam.

SPACs are listed on a stock exchange by a group of entrepreneurs, who use the money raised to target a private company – allowing the target to get a stock market listing without the arduous process of launching a public listing.

Mustier is working with former Bank of America banker Diego De Giorgi and entrepreneur and investor Pierre Cuilleret in launching the 200 million euro listing.

Several SPACs have listed in Amsterdam, potentially boosting the Dutch financial capital’s credentials as a hub for fast-growing companies. London has only hosted one major SPAC in 2021, after updating its rules to make them easier.

Pegasus is backed by institutional sponsors Tikehau Capital and Financière Agache and by sponsors De Giorgi, Cuilleret and Mustier. Citi, Goldman Sachs and BNP Paribas are the bookrunners on the deal.

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($1 = 0.8860 euros)

(Reporting by Emma-Victoria Farr; editing by John O’Donnell and Louise Heavens)

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Bulls back in charge as Omicron worries wane

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December 7, 2021

By Marc Jones

LONDON (Reuters) – Waning Omicron COVID-19 variant worries and a timely booster shot of Chinese stimulus lifted world stock markets and oil on Tuesday and left traders offloading safe-haven currencies and bonds again.

The FTSEurofirst 300 index was on track for its first back-to-back run of plus 1% gains since February while Asia saw record bounces from some of China’s biggest firms such as Alibaba and Baidu. [.SS][.EU]

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The risk-on mood also helped the dollar climb against safe haven currencies such as the Japanese yen,, which had lost 0.6% overnight, as the confidence-sensitive Australian dollar also found buyers. [FRX/]

Safe-harbour government bonds went the other way with yields – which move inverse to bond prices – up 2.5% on Germany’s benchmark 10-year Bund after falling to a three-month low on Monday. [GVD/EUR]

Reports in South Africa said Omicron cases there had only shown mild symptoms and the top U.S. infectious disease official, Anthony Fauci, told CNN “it does not look like there’s a great degree of severity” so far.

“Good news relating to the severity of Omicron should be taken with a pinch of salt. Faster transmission could offset the benefits of milder symptoms,” researchers at ING said in a note. “More broadly, it is still early days, even if markets are starting to display Omicron fatigue.”

The gains also came after China’s central bank on Monday injected its second shot of stimulus since July by cutting the amount of cash that banks must hold in reserve.

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There was still uncertainty about its property sector as Evergrande teetered on the brink of default again but data showing much stronger import growth was “a positive sign on the strength of domestic demand”, RBC analyst Adam Cole said.

Elsewhere, Australia’s S&P/ASX200 rose 0.95%, while Japan’s Nikkei advanced 2.1% as risk-on sentiment pushed markets higher.

MSCI’s main Asia ex-Japan benchmark has lost about 5% so far this year, with Hong Kong markets figuring among the big losers, while Indian and Taiwan stocks outperformed.

Shares in embattled developer Evergrande edged up 1.7% after hitting a record low on Monday as markets waited to see if the real estate giant has paid $82.5 million with a 30-day grace period coming to an end.

Elsewhere, markets were supported by gains on Wall Street, where economically sensitive stocks outperformed.

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“While epidemiologists have rightly warned against premature conclusions on Omicron, markets arguably surmised that last week’s brutal sell-off ought to have been milder,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said in a note.

“After all, early assessments of Omicron cases have been declared mild, spurring half-full relief.”

Also supporting the dollar in FX markets was the expectation the Federal Reserve will accelerate the tapering of its bond-buying programme when it meets next week in response to a tightening labour market.

Oil prices jumped another 2% to $74.60 a barrel, adding to a near 5% rebound the day before as concerns about the impact of Omicron on global fuel demand eased. [O/R]

Copper prices also ticked higher while gold was steady at $1,778.5 per ounce on expectations U.S. consumer price data due later this week will show inflation quickening.

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(Additional reporting by Anshuman Daga in Singapore; Editing by Nick Macfie)

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Exclusive: EU antitrust regulator seeks input on Microsoft’s $16 billion Nuance deal

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December 7, 2021

By Paresh Dave

(Reuters) – EU’s antitrust regulator is taking a deeper look into Microsoft Corp’s $16 billion deal for transcription technology company Nuance Communications Inc, asking customers and competitors to draw up a list of concerns, according to a questionnaire from last month seen by Reuters.

The previously unreported outreach is the most extensive by an antitrust authority since the companies announced the acquisition in April, according to a person familiar with the matter.

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Microsoft declined to comment, and Nuance did not respond to a request for comment.

After minimal review, the U.S. Department of Justice in June and the Australian Competition Commission in October said they would not contest the deal. The companies filed for approval from the European Commission’s competition bureau last month, and the regulator has until Dec. 21 to clear the deal or open a bigger investigation.

The companies had expected to close the deal by the end of this year, but said last month the timeline could slip to early next year.

The questionnaire asks whether Microsoft and Nuance are competitors and whether a tie-up could affect clients and rivals, including whether Microsoft could favor Nuance over competing services.

Nuance primarily sells transcription technology that is popular among doctors and call centers that want to automate note-talking. Analysts view the deal as bolstering Microsoft’s presence in the healthcare market, and bringing it new voice and medical data to train artificial intelligence offerings in health, speech and biometric security.

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Like other big tech companies, Microsoft for years has grown its business through acquisitions, such as in advertising and video gaming. But in the last decade, Microsoft has avoided the target that recently has dogged its competitors Alphabet Inc’s Google, Facebook Inc, Apple Inc and Amazon.com Inc, all of which are facing antitrust lawsuits and investigations on numerous issues.

Steven Weber, a University of California Berkeley professor studying the intersection of technology and health care, said possible concerns about the pending deal could include Microsoft forcing its Office suite on Nuance customers by bundling them together.

Nuance has said it serves 77% of U.S. hospitals.

A key to its success has been has ensuring in deals with customers that it could use their data to advance its voice recognition systems, according to former chief executive Paul Ricci and another former employee.

For instance, a Nuance contract with Augusta University Medical Center, obtained by Reuters this year through a public records request, reads, “Customer shall provide Nuance access to voice and text data…and grants Nuance a perpetual, royalty-free license to copy, use and analyze such data for speech recognition research.”

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Big cloud vendors such as Amazon and Microsoft typically do not have unfettered access to customers’ data for research and development. But the opportunity to acquire those relationships and data explains Microsoft’s interest in Nuance, the former employees said.

Other providers of health transcription technologies include 3M Co and Philips.

(Reporting by Paresh Dave; Editing by Kenneth Li and David Gregorio)

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