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The euro has been losing ground against the dollar since the start of the year, when it hovered near $1.13, well off its peak of nearly $1.60 in 2008. Live currency data reported by MarketWatch shows the euro slipping just a few hundredths of a cent above the dollar, while Bloomberg and Reuters reported that the euro briefly slipped below a dollar in value.

Analysts say the sinking value of the euro reflects growing risk aversion on the part of investors, who are pouring into dollars ― considered a “safe haven” asset compared with other currencies ― amid concerns about inflation, the war in Ukraine, and recession fears in numerous countries.

Currency markets got a jolt Wednesday morning when the U.S. Bureau of Labor Statistics reported that U.S. prices soared by 9.1 percent in June compared with a year ago, a new peak with inflation running at 40-year highs.

The common currency in 19 European Union member countries has weakened during the months-long war in Ukraine, which has sent shock waves through global food and energy markets. The European Central Bank also lags behind peer institutions such as the Federal Reserve in tackling rising inflation, which swelled to 8.6 percent last month — the highest level since the euro was created in 1999.

The Fed has been aggressively raising interest rates to stem inflation woes, having announced three rounds of increases this year alone, and has signaled that four more scheduled rate hikes are in the works. Although the European Central Bank is also expected to raise rates to bring inflation back to a 2 percent target, it is likely to move at a slower pace: It has penciled in a 0.25 percentage point rate hike for July, while the Fed is widely expected go with a 0.75 percentage point increase, as it did in June.

The stronger dollar is good news for Americans considering a European vacation or buying goods abroad. Conversely, traveling and spending with U.S. dollars have now become pricier for those who earn wages in euros.

European businesses that sell their wares abroad might find that the weaker currency makes their exports more appealing, because the buyer’s currency will be more valuable by comparison. American companies, on the other hand, could face a tougher time exporting their goods abroad.

But more important, some experts argue that a less potent euro portends slower economic growth for Europe. “It’s becoming increasingly clear that the Euro zone is heading into recession, even as financial conditions have tightened more than in the US or Japan,” tweeted Robin Brooks, chief economist at the Institute of International Finance.

After the war in Ukraine began, the Economist Intelligence Unit revised its 2022 euro-zone growth forecast downward from 4 percent to 2 percent. It predicts a 1.6 percent growth rate for 2023. And the euro’s weakness “reflects fears from investors of an impending recession in the euro zone,” said EIU global forecasting director Agathe Demarais.

Stocks were choppy Wednesday after the inflation report. The Dow Jones industrial average plunged nearly 450 points after the data was released, then cut its losses. By late morning, the blue-chip index was down 115 points, or 0.4 percent. The broader S&P 500 index was off 0.1 percent, while the tech-heavy Nasdaq pushed 0.3 percent higher. France’s CAC 40 lost 1.2 percent, while Germany’s DAX index lost 1.7 percent and the pan-European Stoxx 50 lost 1.5 percent.

Source: WP
By: Aaron Gregg, Ellen Francis, Bryan Pietsch and Amy Cheng
Photo: (Dado Ruvic/Reuters)

Employers added 372,000 new positions last month, the Bureau of Labor Statistics reported, with gains across a range of industries and private-sector employment recovering all of its pandemic losses. The unemployment rate, meanwhile, remained steady at 3.6 percent for a fourth straight month.

“The U.S. labor market is defying gravity,” said Becky Frankiewicz, chief commercial officer for the staffing firm Manpower Group. “Fears of a possible recession stoked by inflation and an aggressive Fed are eclipsed by the simple reality that employers can’t hire fast enough to meet demand.”

The strong job growth keeps pressure on the Fed to continue raising interest rates when it meets later this month. After years of keeping interest rates at or near zero, the central bank has so far hiked rates three times this year, by a total of 1.5 percentage points, in the hope of slowing the economy just enough to curb inflation, which is at 40-year highs, without pushing it into a deep recession.

Fears of a more serious slowdown in the world’s largest economy are rising, despite the impressive job gains. Consumer confidence has plunged to record lows, in part because inflation is so high, and the stock market has lost trillions of dollars worth of value this year. (The stock market was mixed on Friday.)

Recession-spotters have pointed to technology industry layoffs, falling commodity prices and real-time measures of economic performance that showed output shrinking as proof that the United States was mired in its second downturn in three years.

The Federal Reserve Bank of Atlanta, for instance, estimated that the economy shrank by 1.2 percent in the second quarter, which would technically put the United States in a recession by one common definition, since the first quarter also saw a contraction.

But the National Bureau of Economic Research, the nonprofit organization that is the official arbiter of recessions, considers a number of other factors, such as the unemployment rate, before proclaiming a downturn is underway.

“The labor market continues to tighten,” said Eric Winograd, director of developed market economic research for Alliance Bernstein in New York. “Unless or until that changes, the economy will not be in recession, no matter what GDP prints say.”

President Biden on Friday took credit for the rapid labor market turnaround, saying it was the result of widespread stimulus efforts to revive the economy. The recovery from the brief pandemic recession in early 2020 has been much faster than the recovery from the Great Recession after the 2008 financial crisis.

“Today, we learned that our private sector has recovered all of the jobs lost during the pandemic, and added jobs on top of that,” Biden said in a statement on Friday. “This has been the fastest and strongest jobs recovery in American history.”

U.S. employers are still eager to bring on new workers. Businesses continued to hire briskly in June, with some of the biggest jumps in professional and business services, which added 74,000 jobs, leisure and hospitality at 67,000 jobs and health care at 57,000 jobs.

Employers added 29,000 new factory jobs in June, bringing the total to 12.8 million, which means all of the nearly 1.4 million manufacturing jobs lost in the early months of the pandemic have been recovered. There were also notable gains in jobs producing durable goods, such as computers and motor vehicles, and in food manufacturing.

Overall, the economy is still down about 500,000 jobs from before the pandemic. Although private-sector employers have more than made up for pandemic losses, the government is still down 664,000 employees from early 2020.

“These are big, broadly distributed gains,” said Julia Pollak, a labor economist at Zip Recruiter. “There was continued strength in even the most capital-intensive and interest rate-sensitive sectors like manufacturing and construction, which suggests that the labor market is still vibrant and dynamic. It is not reacting too negatively to the return to more normal interest rates.”

What is a recession? We answered all your economy questions here.

Employment also rose across retail, transportation and warehousing, and education. Day-care centers added 11,000 workers, while nursing and residential care facilities hired 8,000 workers, promising developments that could help get more parents and caregivers back into the labor force.

“We saw strong gains in child care, which has an immediate impact on getting people back to work,” Labor Secretary Marty Walsh said in an interview. “If you have people who can’t go to work because they don’t have strong child care, and all of a sudden, centers start calling parents saying, ‘We have an opening, our wait list is moving,’ that’ll have an impact on getting people, especially more women, back to work because frankly, the jobs are available.”

In Ohio, spirits manufacturer Cleveland Whiskey recently hired two new employees, bringing its head count to 18. Despite rising costs and other economic challenges, chief executive Tom Lix says sales have largely held up so far this year.

“There has been a little bit of a flattening from last year, but consumer demand remains pretty strong,” he said. “There are a lot of factors we’re dealing with, inflation, supply shortages in terms of getting bottles and grains and everything else, but nothing obvious that says, ‘Oh my God, demand is down.’ It is still too early to tell which way things are going, but we’re keeping a very close eye on it.”

The share of people with jobs or actively looking for one fell slightly in June, to 62.2 percent of the labor force, from 62.3 percent the month before. But workers continue to reap the benefits of a tight labor market where there are nearly two open positions for every person seeking a job.

Around 4.3 million Americans quit or changed jobs in May, a sign that workers had the upper hand. Some are switching careers altogether, from hospitality to office work, for instance, in search of more consistent hours, higher wages and better working conditions.

Wages continued to rise in just about every sector, except for manufacturing and professional and business services, where they remained steady from the month before. Average hourly earnings rose 10 cents to $32.08 in June, though there are signs that growth is cooling. Overall wages are up 5.1 percent over the past year, though they have not kept pace with prices, which have increased 8.6 percent in the same period.

“Wage growth has been fairly strong, and the good news is that gains have been largest for lower-income workers,” said Liz Ann Sonders, managing director and chief investment strategist at Charles Schwab.

After nearly a decade working in restaurants, Annabel Sanderson, 29, recently took a job as a teller for a bank in New Hampshire. She went through three interviews and got an offer within a week of applying. The bank is paying her more she had asked for, amounting to a 50 percent raise, along with a hefty benefits package that includes pet insurance. She said she had grown tired of working in short-staffed restaurants.

“I didn’t expect to get a job within a week, especially since I don’t have any experience in banking,” she said. “I was shocked as heck. But it just shows you that there is still a real need for employees.”

Congress reacts to jobs report along partisan lines

House Majority Leader Steny H. Hoyer (D-Md.) said the June statistics showed a continuing trend of growth. He cited the American Rescue Plan, which aimed to help small businesses during the pandemic, and a bipartisan infrastructure spending bill, which invested over $100 billion in infrastructure, as key laws that helped to “reinvigorate our economy and help Americans get back to work.”

“It is imperative that the House and Senate agree on a final version of a bipartisan, bicameral innovation bill similar to the America COMPETES Act that the House passed in February,” Hoyer added. The bill proposed training programs for workers in the innovation, research and manufacturing sectors. He also said the Senate could soon pass a reconciliation bill that would lower costs.

Republicans, though, raised concerns over the continuing labor shortage. “Red flags abound in the June jobs report with the worker shortage persisting, layoffs rising, and employment shrinking two of last three months, fueling inflation, empty shelves, and hurting the economy,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, in a statement.

He added that rising inflation created extra burden on small businesses and families, because they “have been wiping out their savings just to keep up with rising prices in President Biden’s cruel economy punctuated by slow growth.”

Source: WP