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Fed is reading today’s jobs report

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New York (CNN Business)The US has a jobs problem: There are too many of them.

There are currently around two jobs available for every unemployed person, and as a result, employers have had to raise wages to attract suitable candidates.
That sounds like a good thing — and it is for Americans who are facing higher prices on everything from groceries to rent. But the Federal Reserve isn’t very happy about it.
In order to fight inflation, it needs to cool the economy, and larger salaries do the opposite. Higher labor costs can also get passed on by companies to consumers, and that means higher prices.
Why it matters: This inflationary cycle — pay more and then charge more — is exactly what the Fed wants to squash. That’s why it’s paying particularly close attention to wage growth, which eased slightly to 0.3% in August.
If growth had continued to accelerate, the central bank would have more reason to aggressively hike interest rates at its meeting later this month. But we’re not out of the woods yet. Wage levels are still elevated for the year, up 5.2%.
There are a number of factors that add to higher prices — including supply chain and commodity pressures — but wages are the dominant driver of inflation moving forward, Aneta Markowska, chief financial economist at Jefferies, told me. “Rising wages are creating a significant amount of inflation. Supply chain issues are expected to ease in the next year, but we’re still left with this labor problem.”
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New York (CNN Business)The US has a jobs problem: There are too many of them.

There are currently around two jobs available for every unemployed person, and as a result, employers have had to raise wages to attract suitable candidates.
That sounds like a good thing — and it is for Americans who are facing higher prices on everything from groceries to rent. But the Federal Reserve isn’t very happy about it.
In order to fight inflation, it needs to cool the economy, and larger salaries do the opposite. Higher labor costs can also get passed on by companies to consumers, and that means higher prices.
Why it matters: This inflationary cycle — pay more and then charge more — is exactly what the Fed wants to squash. That’s why it’s paying particularly close attention to wage growth, which eased slightly to 0.3% in August.
If growth had continued to accelerate, the central bank would have more reason to aggressively hike interest rates at its meeting later this month. But we’re not out of the woods yet. Wage levels are still elevated for the year, up 5.2%.
There are a number of factors that add to higher prices — including supply chain and commodity pressures — but wages are the dominant driver of inflation moving forward, Aneta Markowska, chief financial economist at Jefferies, told me.
“Rising wages are creating a significant amount of inflation. Supply chain issues are expected to ease in the next year, but we’re still left with this labor problem.”
Today’s report: The US unemployment rate grew to 3.7% in August, coming in hotter-than-expected. The economy added 315,000 jobs for the month, topping analyst estimates of 300,000 but marking the lowest monthly gain since April 2021.
Wage growth also eased to 0.3% for the month. Wall Street had expected a 0.4% increase.
The Federal Reserve is looking for red-hot jobs growth to start cooling in its fight to ease inflation. The report lowered market expectations for a more aggressive interest rate hike at the Fed’s September meeting, sending stocks higher.
The numbers provided some relief from last month’s jobs report, which blew expectations out of the water. More than half a million jobs were created, the most in five months. Average hourly earnings grew by half a percent month-over-month.
In the weeks following the July jobs release, Fed officials took a more hawkish stance, saying that rate hikes would continue until inflation comes down and warning of upcoming economic “pain.”
Fed Chair Jerome Powell cited the strong labor market as a cause of inflationary concern at his Jackson Hole speech last week.
“The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers,” he said.
After the last Fed meeting in July, where the central bank raised rates by a whopping 75 basis points, Powell told me that he was closely monitoring wage growth. His ultimate goal, he said, was to bring inflation down and achieve “a landing that doesn’t require a really significant increase in unemployment.” That’s only achieved by slowing wage growth.
The takeaway: Wall Street is currently pricing in a 60% chance of a 75-basis point rate hike at September’s Fed meeting.
That’s down nearly 15 percentage points since Thursday, before the jobs report was released. But there’s still a lot of ambiguity around the Fed’s upcoming policy decision.
There’s a lot of economic data to digest in the first half of this month — in particular, inflation numbers for August — and this is just one piece of a larger puzzle.
“The Fed will require further proof of softening before adjusting policy materially,” said David Page, head of macro research at AXA Investment Managers. “But on balance these figures are consistent with a 50-basis point September Fed hike.”

China needs Wall Street

The US and China have finally come to an agreement on one of the biggest problems in global business: How Chinese companies listed on American exchanges should be audited.
Regulators from both countries announced a deal last week that would allow US officials to inspect the audit papers of those firms.
The breakthrough means that for now, more than 160 Chinese companies may have dodged the immediate threat of being kicked off the world’s biggest stock market, reports my colleague Michelle Toh.
The US is wasting no time in getting started on those audits. Reuters reported Wednesday that officials picked Alibaba (BABA), Yum China (YUMC) and other companies for a first round of inspections beginning next month.
Some background: US regulations stipulate that all companies on American exchanges must comply with requests to fully open their books by 2024 or they will be barred from trading in the United States. That’s a problem for China. The country has been hesitant to let overseas regulators inspect its accounting firms, citing security concerns.
The tension has already led some Chinese companies to retreat from US markets.
Alibaba, whose shares have traded on the NYSE since 2014, outlined plans this summer to upgrade its Hong Kong listing to primary status, which it expects to take place by the end of this year.
Why it matters: The long list of companies at risk goes beyond Alibaba and includes some of China’s top tech giants like Baidu (BIDU), and JD.com (JD).
The impending audit deadline has already led to a slowdown in share issues. US IPOs by Chinese companies have slumped significantly, with eight so far this year compared to 37 in the same period last year.
The value of those deals has also shrunk. So far in 2022, companies have raised just $332 million through IPOs on US markets, down from nearly $13 billion a year ago.
The odds: This deal is just a first step in formalizing audit protocol between the US and China. It’s still unclear if China will actually comply.
Last week, SEC chief Gary Gensler warned that companies still faced ejection if their papers could not be accessed by US authorities. “The proof will be in the pudding,” he said in a statement.
Analysts at Goldman Sachs said this week that there’s still a 50% chance of Chinese shares getting delisted.
Either way, this isn’t likely to have a big impact on other contentious issues standing between the US and China. But it does mean that China needs Wall Street.
“The US-China relationship reminds me of conflict-ridden relationships where at the end of the day, they realize they can’t afford to get divorced,” said Drew Bernstein, co-chairman of Marcum Asia CPAs, an accounting firm for Asian companies looking to enter US markets.

Anyone want to buy Zoom?

I don’t need to tell you that the work-from-home boom is going bust. The dust collecting on your Peloton (PTON) already did.
Now, the return-to-work era is cornering its next victim: Zoom.
The pandemic darling’s weak earnings outlook and plunging stock price raise the question of whether or not the video conferencing company is a one-trick pony that needs to be part of a larger tech firm, reports my colleague Paul R. La Monica.
It may have trouble finding a suitor, though.
Zoom (ZM) has to contend with several larger tech giants that already have similar products. Microsoft (MSFT) operates Teams and Skype. Cisco (CSCO) has WebEx. Google (GOOG) owner Alphabet runs Meet and Chat. Apple (AAPL) has FaceTime.
That leaves four other possibilities.
Meta (FB) could incorporate Zoom into its messaging and social media apps. If Salesforce (CRM) combined Slack and Zoom they’d create a mega-productivity platform. Oracle (ORCL), the business software company, has a reputation as a serial acquirer and has been looking for a way to expand into video.
There’s also private equity. Zoom execs might enjoy being released from the quarterly earnings report whims of Wall Street.
For now, Zoom is remaining mum on any acquisition prospects, or maybe it’s just on mute.

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Six tonnes of cocaine found in banana shipment

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Sniffer dogs in Ecuador have found 6.23 tonnes of cocaine hidden in a banana shipment, police say.

The dogs alerted their handlers, who seized 5,630 parcels filled with a white substance that later tested positive for cocaine.

The shipment was destined for Germany, officials said, and would have been worth $224m (£173m) had it reached its destination.

Five people had been arrested following the discovery, according to the prosecutor-general’s office.

Police said they had found the massive cocaine haul during a routine inspection of container stored at Posorja deepwater port south-west of Ecuador’s largest city, Guayaquil.

The cocaine parcels had been hidden beneath crates of bananas destined for export.

One of those arrested in connection to the drug discovery was a representative of the export company responsible for the shipment, whom prosecutors said had been present at the inspection and gave officials the names of the four other suspects.

They include the managers of the banana plantation where the cocaine is suspected to have been added to the fruit shipment, as well as the driver who took the container to the port.

Ecuador has become a major transit country for cocaine produced in neighbouring Peru and Colombia, with transnational criminal gangs using Ecuador’s ports to ship the drug to Europe and the US.

Last year, Ecuadorean security forces seized more than 200 tonnes of drugs, most of it cocaine. Only the US and Colombia seized more drugs in 2023.

Gangs have caused a wave of violent crime in Ecuador, leading President Daniel Noboa to declare a state of emergency and deploy tens of thousands of police officers and soldiers in an effort to combat them.

These security forces have stopped large amounts of cocaine from being shipped to Europe.

In January, officers found the largest stash ever to be seized in Ecuador – 22 tonnes of cocaine – buried in a pig farm.

However, extortion, kidnappings and murders remain high in the Andean country.

Reports /Trainviral/

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Thailand expands v-free entry to 93 countries

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Thailand has expanded its visa-free entry scheme to 93 countries and territories as it seeks to revitalize its tourism industry.

Visitors can stay in the South-East Asian nation for up to 60 days under the new scheme that took effect on Monday,

Previously, passport holders from 57 countries were allowed to enter without a visa.

Tourism is a key pillar of the Thai economy, but it has not fully recovered from the pandemic.

Thailand recorded 17.5 million foreign tourists arrivals in the first six months of 2024, up 35% from the same period last year, according to official data. However, the numbers pale in comparison to pre-pandemic levels.

Most of the visitors were from China, Malaysia and India.

Tourism revenue during the same period came in at 858 billion baht ($23.6bn; £18.3bn), less than a quarter of the government’s target.

Millions of tourists flock to Thailand every year for its golden temples, white sand beaches, picturesque mountains and vibrant night life.

The revised visa-free rules are part of a broader plan to boost tourism.

Also on Monday, Thailand introduced a new five-year visa for remote workers, that allows holders to stay for up to 180 days each year.

The country will also allow visiting students, who earn a bachelor’s degree or higher in Thailand, to stay for one year after graduation to find a job or travel.

In June, authorities announced an extension of a waiver on hoteliers’ operating fees for two more years. They also scrapped a proposed tourism fee for visitors flying into the country.

However some stakeholders are concerned that the country’s infrastructure may not be able to keep up with travellers’ demands.

“If more people are coming, it means the country as a whole… has to prepare our resources to welcome them,” said Kantapong Thananuangroj, president of the Thai Tourism Promotion Association.

“If not, [the tourists] may not be impressed with the experience they have in Thailand and we may not get a second chance,” he said.

Chamnan Srisawat, president of the Tourism Council of Thailand, said he foresees a “bottleneck in air traffic as the incoming flights may not increase in time to catch up with the demands of the travellers”.

Some people have also raised safety concerns after rumours that tourists have been kidnapped and sent across the border to work in scam centres in Myanmar or Cambodia.

fatal shooting in Bangkok’s most famous shopping mall last year has also caused concern among visitors.

Reports /Trainviral/

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Royal Mail will deliver letters forever

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The prospective new owner of Royal Mail has said he will not walk away from the requirement to deliver letters throughout the UK six days a week, as long as he is running the service.

“As long as I’m alive, I completely exclude this,” Czech billionaire Daniel Kretinsky told the BBC.

Mr Kretinsky has had a £3.6bn offer for Royal Mail accepted by its board.

Shareholders are expected to approve the deal in the coming months, but the government also has a say over whether it goes ahead.

Currently the Universal Service Obligation (USO) requires Royal Mail to deliver letters six days a week throughout the country for the same price. But questions have been raised over whether the service could be reduced in the future.

In an exclusive interview with the BBC, Mr Kretinsky also said he would be willing to share profits with employees, if given the go-ahead to buy the group.

However, he appeared to reject the idea of employees having a stake in Royal Mail, which unions have called for in exchange for their support.

The Royal Mail board agreed a £3.6bn takeover offer from Mr Kretinsky in May for the 500-year-old organisation, which employs more than 150,000 people. Including assumed debts, the offer is worth £5bn.

But because Royal Mail is a nationally important company, the government has the power to scrutinise and potentially block the deal.

As well as keeping the new government on side, Mr Kretinsky also faces the task of convincing postal unions that the proposed deal will benefit employees.

The USO is a potential sticking point for both the government and unions.

Royal Mail is required by law to deliver letters six days a week and parcels five days a week to every address in the UK for a fixed price.

How well this has actually been working in practice is a different matter. Ten years ago, 92% of first class post arrived on time. By the end of last year it was down to 74%, according to the regulator Ofcom.

Last year the regulator fined Royal Mail £5.6m for failing to meet its delivery targets.

Royal Mail has been pushing for this obligation to be watered down. It wants to cut second class letter deliveries to every other weekday, saying this will save £300m, and lead to “fewer than 1,000” voluntary redundancies.

‘Unconditional commitment’

Mr Kretinsky has committed in writing to honouring the USO, but only for five years.

And after that, in theory, the new owners could just walk away from it.

However, Mr Kretinsky told the BBC: “As long as I’m alive, I completely exclude this, and I’m sure that anybody that would be my successor would absolutely understand this.

“I say this as an absolutely clear, unconditional commitment: Royal Mail is going to be the provider of Universal Service Obligation in the UK, I would say forever, as long as the service is going to be needed, and as long as we are going to be around.”

Mr Kretinsky added that the written five-year commitment was “the longest commitment that has ever been offered in a situation like this”.

Woman's hand posting a letter into a red post box

Another potential stumbling block for the deal, however, is how the company will be structured.

Unions would like to see the company renationalised, but Dave Ward, general secretary of the Communication Workers Union (CWU), told the BBC that would be “difficult in the current political and economic environment”.

Instead, what the CWU is pushing for is “a different model of ownership” – that is, where the employees part-own the business.

To get its support for the takeover, the union wants employees to share ownership of the company, along with other concessions including board representation for workers.

It says profit sharing is “not going to be enough to deliver our support and the support of the workforce”.

If the union doesn’t get what it wants, it won’t rule out industrial action, Mr Ward said. Its members went on strike in 2022 and 2023.

Although Mr Kretinsky said he is “very open” to profit sharing, he is not in favour of shared ownership.

“I don’t think the ownership stake is the right model,” he said. “The logic is: share of profit, yes, [but an] ownership structure creates a lot of complexity.

“For instance, what happens if the employee leaves? He has shares, he is leaving, he is not working for the company, he [still] needs remunerating.”

Mr Kretinsky said he didn’t want to create “some anonymous structure” but instead “remunerate the people who are working for the company, and creating value for the company”.

The union is also concerned about job losses and changes to the terms and conditions of postal workers’ contracts.

Mr Kretinsky has guaranteed no compulsory redundancies or changes in terms and conditions but only until 2025.

“If we are more successful, and we have more parcels to be delivered, we need not less people, but we need more people,” he said. “So really, job cuts are not part of our plan at all.”

He said if the management, union and employees work together, “we will be successful”.

Another concern is the potential break-up of the business.

The profit for Royal Mail’s parent company last year was entirely generated by its German and Canadian logistics and parcels business, GLS. Royal Mail itself made a loss.

Mr Kretinsky has promised not to split off GLS or load the parent company with excessive debt, although borrowings will rise if the deal goes through.

But he has a way to go to convince the CWU.

“I can’t think of any other country in the world that would just just hand over its entire postal service to an overseas equity investor,” Mr Ward of the CWU said.

However, Mr Kretinsky said that the postal unions “do understand that we are on the same ship, and that we need this ship to be successful, and that if we are there, we don’t have any real problems to deal with, because the sky is blue, and it’s blue for everybody.”

The union cannot stop this deal but the government can block it under the National Security and Investment Act.

Business Secretary Jonathan Reynolds has said he will scrutinise the assurances and guarantees given and called on Mr Kretinsky to work constructively with the unions.

Mr Kretinsky may say that he and the unions are ultimately on the same ship but, as things stand, they are not on the same page.

Who is Daniel Kretinsky?

Daniel Kretinsky started his career as a lawyer in his hometown of Brno, before moving to Prague.

He then made serious money in Central and Eastern European energy interests.

This includes Eustream, which transports Russian gas via pipelines that run through Ukraine, the Czech Republic and Slovakia.

He then diversified into other investments, including an almost 10% stake in UK supermarket chain Sainsbury’s and a 27% share in Premier League club West Ham United.

The Czech businessman is worth about £6bn, according to reports.

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