WASHINGTON • Friday’s surprisingly strong January jobs report prompted hope that the economy’s recovery is finally kicking into high gear.
“It feels like businesses are finally looking to expand their operations, which means more hiring,” said Mark Zandi, chief economist for Moody’s Analytics, a forecasting and consulting firm. “The lack of hiring has been the missing link in this recovery. We may have found the missing link.”
Employers added a better than expected 243,000 nonfarm payroll jobs in January, and the unemployment rate fell to 8.3 percent, the Bureau of Labor Statistics reported Friday. Private sector employers actually added 257,000 jobs in January, but the national total was dragged down by 14,000 lost government jobs.
Most encouraging was the broad nature of job gains. Manufacturing added 50,000 posts, and professional and business services — many of them well-paid white-collar jobs — posted the largest gain, 70,000 new jobs.
Even the hard-hit construction sector improved, adding 21,000 jobs.
“It is a fantastic jobs report, not a single blemish,” said Zandi. “Jobs were up big, and unemployment was down big. All the leading indicators in the report suggest continued solid job growth at least into the spring.”
The unemployment rate fell another two-tenths of a percentage point to 8.3 percent — the fifth straight month that the unemployment rate dropped. It was at 9.1 percent as recently as August.
Wall Street investors sent stocks soaring. The Dow Jones industrial average rose 157 points, or 1.23 percent, to close at 12,862. The NASDAQ rose 46 points, or 1.61 percent, to close at 2,906. The Standard & Poors 500 rose 19 points, or 1.46 percent, to close at 1,345.
“The real stimulant to future economic growth is the ‘boost in confidence’ this report provides to the roughly 92 percent of the workforce (that) already has a job,” said James Paulsen, chief investment strategist for Wells Capital Management, in a research note.
Over the last three months, employers have averaged job creation above 200,000; this trend mirrors strong recent data on manufacturing, car sales and improving consumer sentiment.
Adding weight to that view, new data Friday showed that December factory orders were up modestly and a closely watched index of nonmanufacturing activity shot up 3.8 percentage points.
President Barack Obama welcomed the numbers during an appearance at a suburban Washington fire station in Arlington, Va.
“The numbers came down because more people found work. … These numbers will go up and down in coming months …”, but the economy is growing stronger, the recovery is speeding up,” he said.
The president pressed Republicans in Congress to support the economy by extending the payroll tax holiday that is set to expire at the end of this month.
“They’ve got to renew the payroll tax cut they’ve extended and do it without drama, without delay, without linking it to some ideological side issue,” Obama said. “Now is not the time for self-inflicted wounds for our economy. Don’t muck it up — keep it moving in the right direction.”
House Speaker John Boehner, R-Ohio, blamed Democrats for holding up the payroll tax extension, and in a statement, he gave a qualified thumbs-up for the January numbers.
“There’s welcome news in this latest jobs report as more Americans found work last month, but the fact is our unemployment rate is still far too high,” Boehner said. “Our economy still isn’t creating jobs the way it should be, and that’s why we need a new approach.”
The workforce shrank by about 1.2 million workers in January, which may have helped drive down the unemployment rate. The Labor Department began using new adjusted numbers to calculate workforce size, spurring some economists to question the falling jobless rate.
If the hiring numbers stay strong in coming months, it would confirm that Europe’s debt woes are having less of an impact on the U.S. economy than economists thought, and it may force revised projections of sluggish U.S. growth for the first half of 2012.
“We believe that consensus expectations for growth are understating the rising momentum in the economy,” economists for forecaster RDQ Economics in New York wrote in a note to investors.
Greece is gearing up for another tough week of negotiations on the country’s crucial second bailout as it tries to revive talks with private investors and has its economy scrutinized by a team of international debt inspectors.
“This is a critical time for the Greek economy … the negotiations are very difficult,” government spokesman Pantelis Kapsis said Monday.
“It is understood that there will be renewed pressure (from the debt inspectors) to speed up structural reforms.”
The mission heads of inspectors from the so-called “troika” _ the International Monetary Fund, European Central Bank and European Commission _ are expected to arrive in Athens on Friday, the Finance Ministry said. The technical teams, meanwhile, will begin work in Athens Tuesday, the same time Horst Reichenbach, the European Commission’s task force chief for Greece, is also due for a four-day visit.
Two top Greek negotiators, public debt management agency head Petros Christodoulou and chief economic adviser George Zanias, were heading to Washington Monday to attend the IMF board meeting on Wednesday, which would be dealing with Greece, the Finance Ministry said.
An integral part of the euro130 billion ($166 billion) second bailout is a bond swap deal with private creditors that is crucial to avoid a devastating default. But those talks appeared close to collapse Friday amid disagreements over the interest rates of the new bonds. The negotiations are expected to resume this week, probably Wednesday.
Known as the Private Sector Involvement, or PSI, the talks aim to reduce Greece’s debt by euro100 billion ($127.8 billion) by swapping private creditors’ bonds with new ones with a 50 percent lower face value. Without it, the country could suffer a catastrophic bankruptcy that would send shock waves through the global economy no teletrack payday loans.
“Despite the difficulties, there is optimism for the outcome” of the second bailout deal, Kapsis said.
Charles Dallara and Jean Lemierre of the Institute of International Finance, a global body representing the private bondholders, met in Athens last week with Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos, but the talks were suspended on Friday, with the IIF saying that despite Greek efforts, there had not been “a constructive consolidated response by all parties.”
People familiar with the talks said that while a deal appeared close last Thursday, a problem arose Thursday night over the interest rate the new bonds would have, with the International Monetary Fund and Germany seeking a coupon rate below 3 percent _ a very low rate for bonds that are paid off in 20 to 30 years’ time.
The people spoke on condition of anonymity to disclose details of the highly sensitive negotiations.
An interest rate that is that low is unlikely to be accepted by the banks and investment funds holding government bonds _ a crucial issue as the bond swap must be voluntary if the deal is not to be considered a “credit event” that could trigger the payment credit default swaps _ essentially insurance against a default.
Greece is running out of time to clinch a deal, as it faces a massive euro14.5 billion bond redemption on March 20 that it cannot afford to pay.
The second bailout comes on top of a first, euro110 billion rescue package that Greece has been relying on since May 2010, after years of overspending and waste left it facing an untenable public debt.
Friday’s stronger-than-expected December U.S. jobs growth figures drew a sharp contrast with European numbers, but staffing executives who track labor demand on both sides of the Atlantic caution Europe’s impact on jobs in the United States may yet prove deeper than it has so far.
Executives in the temporary staffing and employment services field say anxiety about a likely recession in Europe keeps cropping up in conversations with clients and, in some cases, is putting hiring plans on hold.
Faced with falling sales and profits in Europe, multinational clients may look for offsetting savings in other markets, including the United States.
Randstad Holding NV (RAND.AS: Quote, Profile, Research, Stock Buzz), the world’s second-largest temporary staffing provider by revenue, offers one anecdote to illustrate how Europe weighs on U.S. jobs.
Randstad’s recruitment outsourcing business, SourceRight Solutions, which handles large-scale hiring of as many as 500 people at a time, has a banking client that tentatively plans aggressive expansion in 2012. But the client’s plans are being held hostage by Europe.
“There’s still caution around Europe and how they could impact the U.S.,” said Joanie Ruge, Randstad senior vice president and chief employment analyst. “That is (clients’) biggest concern right now, though they seem optimistic about all the economic indicators in the U.S. moving in the right direction.”
Uncertainty persists even as the U.S. economy improves by many measures. U.S. manufacturing grew at its fastest pace in six months in December - in sharp contrast to the euro zone. Pending home sales are the highest since April 2010 and U.S. consumer confidence is at an eight-month high.
Friday’s employment report improved that picture. The U.S. economy added 200,000 non-farm jobs last month, 50,000 more than expected, and the jobless rate slipped to 8.5 percent, the lowest since February 2009.
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Non-farm payrolls graphic: link.reuters.com/qyn85s
Jobless rate graphic: link.reuters.com/vyn85s
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FEWER FINANCE JOBS
Recruitment in financial services has slowed and is likely to be “lighter” this year, said Scot Melland, Chief Executive of Dice Holdings Inc (DHX.N: Quote, Profile, Research, Stock Buzz), which runs specialized jobs websites focused on professional categories.
“We’ve seen job postings for the industry as a whole decline over the last six months,” Melland said. “It’s really caused by the uncertainty that the industry is facing (from) the European debt crisis and some regulatory uncertainty here in the United States cheapest personal loan rates.”
By contrast, technology workers remain in demand and energy markets are looking at record job growth in 2012, according to Dice.
Friday’s report showed an unexpected decline in temporary help payrolls, which are historically a strong predictor of wider labor trends. But staffing industry insiders said the dip does not square with their own business and could be an anomaly that reflects seasonal factors.
Demand for temps has been steady if unspectacular, said Joel Capperella, vice president of marketing for Yoh, a Philadelphia-area staffing company that focuses on professional categories such as finance and technology and whose clients include SAP AG (SAPG.DE: Quote, Profile, Research, Stock Buzz).
“We’re hopeful the pace will pick up a little bit,” Capperella said, adding that Europe was so far not affecting specific workforce decisions, but was a factor in overall client confidence.
“Capital is still held close to the vest, but we do see it flowing a little bit more freely,” he said.
CURTAILED SPENDING
Tig Gilliam, who heads North American operations for Adecco SA (ADEN.VX: Quote, Profile, Research, Stock Buzz), the world’s leading staffing company, said Adecco is expecting “significant pressure” in Western Europe, which may already be in recession. Even strong markets, such as Germany, are expected to slow, although developing markets in Eastern Europe are likely to grow this year.
Gilliam sees a risk in underestimating the effect of Europe’s slowdown on the U.S. economy. Large employers, instead of investing to accelerate growth, may curtail spending to boost profits in markets that are holding up relatively well, he said.
“If you go to a U.S. multinational company and they look at what they’re facing in Western Europe in the next year, it automatically translates into that much more pressure on the markets that are performing,” he said. “They’ve got to find how much more they can save because they have a hole in Europe to dig out of from a profitability perspective.”
Staffing company shares were mixed on Friday. Among the largest U.S.-listed shares, ManpowerGroup (MAN.N: Quote, Profile, Research, Stock Buzz) and Robert Half International Inc (RHI.N: Quote, Profile, Research, Stock Buzz), were both modestly lower in midday trading, while Kelly Services Inc (KELYA.O: Quote, Profile, Research, Stock Buzz) rose.
In European trading, Adecco, Randstad and London-listed Michael Page International Plc (MPI.L: Quote, Profile, Research, Stock Buzz) were up slightly.
Prime Minister Manmohan Singh failed to win passage of his anti-corruption bill as an uproar broke out in India
Taiwan President Ma Ying-jeou said his rapprochement with China will encourage other nations to strengthen trade with the island and make it less dependent on the mainland, rebutting opposition criticism that he
Peruvian Cabinet chief Salomon Lerner resigned Saturday after less than five months in the post and was replaced by the interior minister, who inherits an unresolved dispute over the country’s biggest mining investment.
The reason for Lerner’s resignation was not explained, but he was recently involved in failed attempts to negotiate an end to protests that stalled the $4.8 billion Conga gold mining project, which has been plagued by increasingly violent protests.
His resignation letter, posted online by the newspaper La Republica, does not make direct reference to the conflict but hints Lerner was unhappy with the government’s handling of it.
As Cabinet chief, Lerner wrote in the 1 1/2-page resignation letter, “our direct mandate has been dialogue and the seeking of consensus to avoid confrontation between Peruvians.”
After just one day of talks that Lerner led with local officials who fear the Conga project could taint and diminish water supplies affecting thousands, President Ollanta Humala on Dec. 5 called a state of emergency in four affected northern provinces for 60 days.
Lerner’s replacement, Interior Minister Oscar Valdes, is a 62-year-old former army officer who quit the military as a lieutenant in 1991 and became a successful executive at various businesses in the southern coastal city of Tacna, most recently a trucking company and pasta producer.
Humala, 49, was a student of Valdes in the 1980s at Peru’s military academy.
Humala, who canceled a trip to Argentina for the Saturday inauguration of President Cristina Fernandez, had no immediate comment on the change.
A successful businessman of Jewish descent, Lerner was twice campaign manager for the center-left Humala, a former army officer who lost the 2006 race and then won election last June.
The fate of the Conga project, whose principal owner is U.S.-based Newmont Mining Corp., is considered key to prospects for other mining investments in Peru, which gets 61 percent of export income from the sector.
A windfall tax that the industry agreed to, and that Lerner played a key role in brokering, is helping to underwrite social welfare programs that Humala promised during the election campaign.
ST. LOUIS
Italy’s benchmark 10-year borrowing rate has jumped above the 7 percent level widely considered unsustainable over the longer term, a day after Italian Premier Silvio Berlusconi announced he would resign after Parliament passes new austerity measures.
The announcement failed to calm markets, with stocks and bonds sliding.
The 7 percent threshold is psychologically important for traders because Greece, Ireland and Portugal asked for bailouts when it became clear the rate wasn’t coming back down from that level.
Berlusconi agreed to leave office after a routine vote confirmed he’d lost his majority in Parliament. What comes next remains unclear.
Berlusconi wants new elections with his hand-picked successor as a candidate. Before that can happen, Italy’s president must decide an interim government and if it will be led by politicians or technocrats.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
ROME (AP) _ Italian Premier Silvio Berlusconi confirmed he won’t run again for office and said Wednesday his hand-picked successor Angelino Alfano will be his party’s candidate when Italy holds new elections.
Italian borrowing costs jumped higher a day after Berlusconi promised to resign after Parliament passes new austerity and reform measures. While Berlusconi’s majority was hampered in pushing through reforms, the makeup of Italy’s next government remains a looming question.
Berlusconi said he would leave office after a routine vote in Parliament revealed he no longer had the majority he needs to push through policy. He said he would step aside once Parliament passes economic reforms demanded by the European Union to prevent Italy from being swept up further into Europe’s debt crisis.
No date has been set, but earlier indications suggested it would happen next week.
Despite the move, Italy’s financial markets deteriorated on Wednesday. The yield on Italy’s 10-year bonds jumped another 0.37 of a percentage point Tuesday to 6.95 percent. The main Milan stock index was trading 3.6 percent lower at 15,097. Shares in Berlusconi’s Mediaset empire were battered, trading down 9.8 percent at euro2.262.
Once Berlusconi resigns, President Giorgio Napolitano must begin consultations to form a new government _ possibly with the conservative leader from Berlusconi’s party, or if consensus can’t be reached, a technical government may be sought.
Berlusconi is pressing for new elections in early 2012.
“I won’t run, actually I feel liberated,” Berlusconi was quoted as telling the La Stampa daily. “It’s Alfano’s turn.”
Berlusconi tapped Alfano, his former justice minister, to head his People of Liberties Party a few months ago. At 41, Alfano represents a new generation of politicians after 17 years of Berlusconi leadership.
Mario Monti, a former EU competition commissioner who now heads Milan’s prestigious Bocconi University, has been widely tipped as a candidate to head a technical government.
Berlusconi conceded it was up to Napolitano to decide how to proceed once he steps down.
It’s not clear that Napolitano would want to subject Italy to elections any time soon given the need to calm markets. He may try to sound out politicians about the possibility of forming either a government of technocrats or a broad-based government that could hold a majority in parliament.
International Monetary Fund officials urged the Cyprus government to move fast with its austerity program to get a grip on its debts, after projecting that the island’s economy will contract next year.
IMF officials Wes McGrew and J. Erik Jan de Vrijer said Wednesday that the Cypriot economy will stagnate this year but shrink by one percent next year, while the fiscal deficit will grow to 7 percent of national income in 2011 before moderating to 4 percent in 2012.
Cypriot Finance Minister Kikis Kazamias disputed the IMF figures, telling told state TV late Wednesday that his ministry’s revised projections put growth next year at just above zero percent and the deficit at around 2.9 percent.
Kazamias last month forecast 1 to 1.5 percent growth next year and a deficit of around 6 to 6.5 percent in 2011 and 2.3 percent in 2012.
“A doom scenario is a lot worse than what you see here, and one of the things that we’re saying is the time to take action is now in order to avoid getting into a doom scenario,” Jan de Vrijer told a news conference at the end of a weeklong review of the island’s economy.
Buffeted by the ongoing eurozone crisis, Cyprus is finding it more expensive to borrow from international markets because of a string of credit rating agency downgrades due to the exposure of the country’s large banking sector to Greece.
That has stoked fears that the small island with a population of around 1 million and a euro17 billion ($23 billion) economy may be forced to seek a bailout from its partners in the eurozone, as Greece, Ireland and Portugal already have.
“We think that the situation at the moment is very serious. The fact that the government cannot access the capital markets is very, very serious and the risks to the banking sector compound that very much,” Jan de Vrijer said Online payday loans.
To finance its debt and stimulate growth, the Cypriot government is looking to finalize a 4 1/2 year, euro2.5 billion ($3.4 billion) loan agreement with Russia at a 4.5 percent annual interest rate. That’s much lower than markets are currently offering.
McGrew said it’s crucial that any such loan deal doesn’t weaken the resolve of the government to roll back spending and push through fiscal reforms.
Cyprus’ 2012 draft budget that Kazamias will submit to parliament late this week incorporates a euro840 million ($1.14 billion) package of spending cuts and tax increases, aimed at reducing the deficit.
Measures include slashing 1,100 public sector positions, rolling back social handouts by euro220 million ($299 million) and raising the sales tax from 15 to 17 percent for at least three years _ a move that is meeting resistance from opposition parties.
Jan de Vrijer said there is no wriggle room to discount the measures which need to be implemented fully.
“The first priority is for Cyprus to do all it can to avoid that these problems get out of hand,” he said.
“I think there is time and there is opportunity for the government to take really decisive and large action to avert the possibility of these problems getting worse and worse.”
Kazamias said there would be no hesitation to take additional austerity measures if necessary.
On Tuesday, the finance minister told lawmakers that the government is looking into opening tightly-regulated casinos to tap their revenue-generating potential, reversing it’s long-held opposition to any such move.
JEFFERSON CITY
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