Category Archives: Business

How is The Rate of Jobs Report

teaJob and pay growth slowed in August, returning to a more modest pace that clouds the prospects for an interest rate hike by the Federal Reserve later this month.

Employers added 151,000 jobs last month, the government said Friday. That is still a healthy number but lower than the 180,000 that analysts were expecting on average and down sharply from revised gains of 271,000 jobs in June and 275,000 in July.

Job gains in those prior two months came after very sluggish hiring in the spring and were not expected to be sustained. Fed and other economists have said about 100,000 to 125,000 new jobs a month are needed to keep pace with the population and labor force growth, and hold the unemployment rate steady.

The nation’s jobless rate in August remained at 4.9% for the third straight month. Forecasters were looking for it to drop to 4.8%.

Fed Chairwoman Janet L. Yellen last week seemed to be preparing markets for the central bank’s first rate increase since December, citing the nation’s “continued solid performance” in the labor market. But some analysts said the Labor Department report was not strong enough to push Fed policymakers to raise the benchmark interest rate at the conclusion of their two-day meeting on Sept. 21.

“I don’t think it tips the balance toward a rate hike,” said Kevin Logan, chief U.S. economist at HSBC Bank in New York.

Most experts now don’t see a modest Fed rate increase until after election day Nov. 8, at its December meeting at the earliest, but others said the report was not so bad as to cause a rethink by Yellen or the Fed.

The latest job growth “is simply not slow enough to derail a rate hike,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York.

Nor was the jobs report weak enough to help Republican candidate Donald Trump, although that didn’t stop him from issuing a statement shortly after its release and highlighting the shortcomings.

“Over a third [of the August gains] are low-paying service jobs in sectors such as retail and restaurants that won’t support a family, pay for a home or put children through college,” said Trump senior economic advisor David Malpass.

About 44,000, or 29%, of the jobs added last month were in retail and the hotel and restaurant sectors, which pay on average $13 to $15 an hour. Most of the new jobs last month were in higher-wage professional services and financial businesses and other sectors where the pay is more mixed, such as health and education services. Manufacturing and construction industries shed jobs, however.

There was no immediate comment from Trump’s opponent, Hillary Clinton, but Donna Brazile, the Democratic National Committee’s interim chair, said: “Today’s strong jobs report is further proof that Democratic leadership in the White House is the right choice to keep our economy growing.”

The economy is now in its eighth year of growth since the Great Recession, but it has been slow by historical standards. And one clear disappointment has been on the pay front. August was another letdown.

Average hourly earnings of all private-sector workers rose just three cents last month from July, to $25.73. That was up 2.4 % from a year earlier, but the weakest showing since March and down from an annual pace of 2.7% in July.

Economists have been waiting for a bigger, sturdier pickup in earnings as the job market has tightened, but the smaller-than-expected gains suggest there are many more jobless workers than the 7.85 million people on the official unemployment rolls. A long-running trend of low productivity growth and more recently, weakening corporate profits are not helping, either.

Labor Secretary Thomas Perez acknowledged that the slow wage gains have been “a big part of the angst that people feel.” Saying that “we need to put more money into people’s pockets,” he argued for an increase in the federal minimum wage, which has been stuck at $7.25 since July 2009, and substantial increases in infrastructure spending that could support higher-paying jobs.

Including the August numbers, job growth this year has slowed to an average of 181,500 a month, from 229,000 last year and 251,000 in 2014. But in an interview Friday, Perez said that was to be expected after more than six years of solid job growth in which the private sector has added some 15 million jobs.

“This economy continues to be remarkably resilient,” he said.

Still, U.S. economic growth has been particularly lackluster in the prior three quarters, with gross domestic product expanding at an annual increase of around 1%. And with the economy nearing so-called full employment — which experts regard as an unemployment rate of 4.5% to 5% — job growth was bound to decelerate after several years of solid gains.

GDP growth in the current third quarter is expected to show a big pickup, to around 3% annualized, thanks mostly to hearty consumer spending, the biggest driver of the American economy. Low gas prices have helped.

Nationally, the average retail price for regular gas was $2.24 a gallon on Monday, the lowest price a week before Labor Day since 2004, according to the U.S. Energy Information Administration.

Nonetheless, growth has been restrained by soft business investment and declining exports, reflecting weak global trade, a strong dollar and a sluggish energy industry. That has hurt employment in manufacturing and supporting sectors such as the temporary-help sector.

What is Wells Fargo CEO Roasted Says

Wells Fargo CEO John Stumpf faced down a furious panel of lawmakers Thursday as the House Financial Services Committee grilled him on his bank’s shady practices.

Representative Maxine Waters, the committee’s ranking Democrat, told Stumpf that Wells Fargo’s abuse of the public’s trust was “some of the most egregious fraud we have seen since the foreclosure crisis,” and compared it to mass identity theft.

For his part, Stumpf offered up more apologies, and said the bank planned to halt the cross-selling practices as of October 1, instead of January 1, 2017, as originally announced.

“I want to apologize for violating the trust our customers have invested in Wells Fargo,” said Stumpf. “And I want to apologize for not doing more sooner to address the causes of this unacceptable activity.”

Congress was not appeased. Representative Mick Mulvaney told Stumpf, “The damage you have done to the market and your industry far exceeds the damage you have done to your business.”

At one point, Representative Brad Sherman told Stumpf, “I don’t think you should be alone in this joyous experience,” and suggested that the heads of other big banks should join Stumpf on the Hill to explain whether they employed the same aggressive sales tactics.

“The American people need an assurance that this cross-selling mania that has affected Wells Fargo is not to be found at the other behemoth banks,” said Sherman.

Representative Ed Perlmutter even took issue with the bank’s terminology. “You don’t sell grapefruit. Why are you calling these things stores? You’re a bank.”

The scandal has cost Wells Fargo dearly: More than $20 billion has been wiped off its market value, California announced on Wednesday that it was suspending all state business with the bank for 12 months, the Labor Department said it would initiate a “top-to-bottom” review to be sure the bank hadn’t violated wage laws by failing to pay overtime to sales reps forced to meet aggressive quotas, and the SEC is considering an investigation to determine if Wells Fargo misled investors.

In addition, a group of former employees have filed a $7.2 billion lawsuit against the bank, saying they were dismissed or demoted for whistle blowing.

Wells Fargo was hit with a record $185 million fine earlier this month for opening fee-generating accounts without customers’ authorization in order to meet the high sales goals.

Wells Fargo’s independent board of directors on Tuesday rescinded Stumpf’s $41 million in stock awards and froze his salary until the investigation is complete.

Why WA Government Sells Off $1.35b

Keystart is owned by the WA Housing Authority and provides loans to disadvantaged buyers who are unable to meet the deposit requirements of mainstream lenders.

The plan to divest up to 40 per cent of the loan book was set out in the May budget as part of the State Government’s asset sales and debt reduction strategy.

Bendigo and Adelaide Bank has today been named the successful bidder.

Managing director Mike Hirst said the bank had taken on 6,000 of Keystart’s 18,000 loans, but only those with a good repayment history.

“The customers in the portfolio we are acquiring have, on average, a track record of meeting their loan repayments for more than five years,” Mr Hirst said.

“We will not be acquiring any loans that are more than one month in arrears.”

Nevertheless, WA Treasurer Mike Nahan said the sale provided a significant boost to state coffers.

“When finalised, this will mark the second transaction in the State Government’s asset sales program and will achieve a reduction in gross debt,” he said.

“This also represents an important step in ensuring a sustainable future for the home loan program by reducing its reliance on Government borrowings.”

Keystart’s total loan book is worth about $4 billion and makes up 18 per cent of the first homebuyer market in Western Australia.

‘No impact on loan holders under deal’

Premier Colin Barnett said the agreement would both reduce state debt and allow Keystart to continue.

“There is a legislative cap on the amount of Keystart finance, I think it’s around about $4 billion to $5 billion, and we’re approaching that now,” Mr Barnett said.

“Unless we share some of that loan book with the banking sector, the Government won’t be able to provide that amount of Keystart finance.

“It frees up the cap, allows loans to continue to take place and therefore allows houses to be built and jobs in housing construction.”

That deal leaves the State Government responsible for less attractive loans that have not been adopted by the bank.

“Obviously newer loans, in a financial sense, carry a higher level risk and the state bears that risk to support home ownership and to support the building industry,” Mr Barnett said.

“As the years tick by [the loans] become safer.

“The level of default on Keystart is very low and it’s a very good system, a very well managed system and it’s unique to Western Australia.”

The Premier moved to ensure existing Keystart customers the deal would have no impact on their loans.

“The Government fully stands behind all the contracts and all the obligations,” he said.

“People who have Keystart loans will see no difference at all

What is The Function Robots Is 5 Tech Giants

Five major technology companies said Wednesday that they had created an organization to set the ground rules for protecting humans — and their jobs — in the face of rapid advances in artificial intelligence.

The Partnership on AI, unites Amazon, Facebook, Google, IBM and Microsoft in an effort to ease public fears of machines that are learning to think for themselves and perhaps ease corporate anxiety over the prospect of government regulation of this new technology.

The organization has been created at a time of significant public debate about artificial intelligence technologies that are built into a variety of robots and other intelligent systems, including self-driving cars and workplace automation.

The industry group introduced a set of basic ethical standards for engineering development and scientific research that its five members have agreed upon.

In a conference call on Wednesday, five artificial intelligence researchers representing the companies said they thought the technology would be a major force in the world for social and economic benefits, but they acknowledged the potential for misuse in a wide variety of ways.

They said their effort was not intended to be an enforcement organization to force technology companies into self-regulation. Rather, they want to foster “public understanding” and set “best practices” for work in artificial intelligence.

“We passionately believe in the potential for it to transform in a positive way our world,” said Mustafa Suleyman, head of applied A.I. for DeepMind, an artificial intelligence development company acquired by Google in 2014. “We believe it’s critical now to start to think about new models of engagement with the public, new models of collaboration across the industry and new models of transparency around the work that we do.”

The group released eight tenets that are evocative of Isaac Asimov’s original “Three Laws of Robotics,” which appeared in a science fiction story in 1942. The new principles include high-level ideals such as, “We will seek to ensure that A.I. technologies benefit and empower as many people as possible.”

Nevertheless, at least one of the tenets implies that the companies realize they could be drawn into sticky ethical situations, and it calls on engineers to oppose the use of artificial intelligence technology in weapons or other tools that could be used to violate human rights.

“With the hyperbole about A.I. over the last two to four years, there have been concerns in an echo chamber of anxiety that the government itself will be misinformed,” said Eric Horvitz, managing director for Microsoft Research.

The Scandal of Credit Card Bankruptcies

University of Canberra lecturer and former financial counsellor Gregory Mowle has interviewed 26 bankrupts as part of his PhD research into personal bankruptcy.

Most finger the plastic for their financial woes.

“They say credit cards are very dangerous, we don’t like credit cards,” Mr Mowle told ABC’s The Business.

“We’d actually prefer to go to a payday lender, because at least that’s over a fixed term, it’s going to be paid off over say six months.”

Mr Mowle’s research is backed up by the experience of Victoria’s Consumer Action Law Centre.

“Around half the people that contact us actually have credit card debt of over $10,000,” said the centre’s chief executive Gerard Brody.

“Many have many thousands more than that in credit card debt and, in fact, we’ve worked out that at least one person a week that contacts our centre has credit card debt of more than $100,000.”

Mr Mowle said many people were stuck on a credit card “merry-go-round”.

“They actually made that work for a long period of time, in some cases three or four years, but eventually it just takes one little thing for that house of cards, excuse the pun, to completely fall down.”

Pensioner pursued for card debts after already losing home

It is an experience that many people the ABC spoke to can identify with.

Mary* asked for her identity to be concealed because she only just reached a deal with her bank to clear her debts.

It was mainly investment property loans that got Mary into financial trouble, but her $14,000 credit card debt proved almost as difficult to resolve.

After being forced to liquidate her investment properties and sell her own home to repay her loans, Mary was still inundated with calls from her bank’s overseas call centres about the card debt.

“The 40 phone calls, that was during working hours while I was trying to work, four or five calls a day, and then on Saturdays and on Sundays,” she said.

“It wasn’t very pleasant at all.”

The experience was all the more galling because Mary did not even ask for the card in the first place.

“That came with the investment loan — it was a $25,000 limit and I didn’t want it,” she said.

It has become common practice for banks to push credit cards onto home loan customers.

After years of battling the bank, Mary said it took the eventual intervention of the financial ombudsman and repeated pleas to various bank officers, right up to the chief executive, to have her matter resolved.

“I had sold my own home — I would get nothing out of that because during the time that I had borrowed money from different people I’d paid all those monies back — there was nothing left,” she explained.

“That’s why I had to sell the car, ’cause I was only on the pension at that stage and I didn’t have any money for that.

“So the bank officer agreed to take the credit card and wipe that as well. What else were they going to do?”

Mary should not have been approved for the home loan in the first place, let alone the credit card on top of it.

The ABC has seen loan documents that put her income at $500,000 per annum.

While she had earned $24,000 in a single month, Mary was on commissions and did not earn anything many other months.

She said her annual income was closer to $50,000 — something the bank should have known, given that all her accounts were with them.