Tag Archives: Economy

Coronavirus pandemic advances the march of ‘cobots’

By Rajesh Kumar Singh

CHICAGO (Reuters) – While a resurgence in coronavirus cases in Texas has brought many businesses to a screeching halt, eight robots have kept All Axis Machining’s metal fabrication facility in Dallas humming.

The small, nimble robots perform multiple jobs, such as machine-tending, sanding, deburring, part inspection and laser marking, leaving owner Gary Kuzmin far less dependent on manual labor. When all the workers on one shift went into self-quarantine last month, it had no impact on the facility’s productivity.

All Kuzmin had to do was to move a couple of workers from other shifts to supervise the robots. “I have not lost any spindle time because of the pandemic,” he said.

Companies of all sizes are leaning on automation to keep factories running without compromising the health and safety of their workers. Half of the chief financial officers surveyed last month by PricewaterhouseCoopers said they were planning to accelerate automation.

With the U.S. economy grappling with a double-digit unemployment rate, however, industry’s rush to robots will fuel worries about semi-skilled or unskilled workers as low-paid, routine tasks become more likely to be automated.

“It is the most productive thing for us to have the robots,” said Kuzmin. “I don’t even look at a machine these days without thinking how I would automate it.”

Since August 2018, when All Axis Machining began using robots, its productivity has doubled with the same headcount. If not for the robots, the company would have needed to expand its staff of 30 by 50% to keep up with increase in demand.

“We are less dependent upon a semi-skilled employee,” said Kuzmin.

The pandemic has changed companies’ calculations about investments in automation, said Jeremie Capron, research chief at research and investment-advisory firm ROBO Global. “The cost of operating without a robot today in a factory is higher than it was pre-COVID,” he said.

Mark Muro, senior fellow and policy director at Washington-based the Brookings Institution, says the automation drive will result in a net reduction in the workforce as companies invest in technology not just for social distancing, but also to boost productivity and protect profits from the pandemic-induced recession.

“Technology has improved and gotten cheaper, and the financial pressure on companies is higher,” he said.

He noted, however, that since middle class and lower-paid workers tend to spend a larger share of their income than the higher-paid, it is important that productivity gains eventually result in more jobs.

“If there is… too little sharing of the gains of automation-supported growth, we will wind up with little economic activity,” Muro said.

LOWER COST, FASTER PAYBACK

The affordable cost of the so-called collaborative robots, or “cobots,” promises payback in months, making the changeover easier, even for small and medium-sized enterprises.

All Axis Machining, for example, spent $85,000 per robot and was able to recover the cost in five months. There are cheaper collaborative robots on the market, as well.

One of the most popular cobots sold by Denmark-based Universal Robots – a unit of Massachusetts-based Teradyne Inc. and a market leader in collaborative robotics technology – costs about $35,000, with a payback period of three to four months.

The robots are very easy to use, safe to be around and can easily be adapted to new tasks. It takes just hours to train employees to work with them, saving companies huge training expense.

Although they are not suited for heavy-duty jobs, they are designed to work alongside humans, making them the robots of choice in the age of social distancing.

California-based DCL Logistics, a third-party logistics company, decided to employ cobots to manage a 30% increase in orders in the immediate aftermath of the outbreak.

Normally, the company would have hired temporary workers to deal with the surge in orders. But bringing in new workers was fraught with safety risks, said Chief Revenue Officer Brian Tu. The robots have led to a 300% increase in productivity and a 60% jump in labor cost savings, Tu said.

DCL plans to deploy more cobots this year at its facilities in California and Kentucky.

At All Axis Machining, the cobots have allowed owner Kuzmin to stagger the shifts. The facility now runs three shifts seven days a week, with robots working the late night shift alone, without any roving inspector.

This has allowed workers in the facility to stay 30 feet apart from each other. Having seen the benefits, the company is automating its remaining machines as well.

Kuzmin, who also runs a robotics services company, says several Dallas-based manufacturers have approached him recently to install similar robots in their factories.

ECONOMIC UNCERTAINTY

Universal Robots is fielding inquiries from companies seeking social distancing solutions, as well as tools to re-shore production and make their operations more flexible.

“Some companies… are talking about dozens and dozens of robots,” said Joe Campbell, senior manager of applications development at Universal Robots.

Still, the virus-induced recession is keeping many companies on the sidelines, wary of making new investments.

Tacoma, Washington-based Tool Gauge, which makes metal and plastic parts and assemblies for aerospace companies, including Boeing Co., planned to add two mobile industrial robots to its fleet of two cobots and 10 industrial robots before the novel coronavirus hammered the aviation industry.

But Tool Gauge put the robots on hold after a production shutdown at Boeing’s Washington state factories and an overall drop in orders, General Manager Jim Lee said.

(Reporting by Rajesh Kumar Singh; Editing by Joseph White and Dan Grebler)

U.S. public schools, focus of debate on reopening, are unsung economic force

By David Lawder

WASHINGTON (Reuters) – As the debate rages over how to safely reopen U.S. schools this autumn, one factor weighs heavily: the nation’s 98,000 public “K-12” schools are a cornerstone of the economy, and a massive jobs engine.

Nearly 51 million American kids attend public elementary, middle and high schools, compared to about six million in private schools. The educated workforce and childcare the system creates have been key drivers of economic growth.

With a total workforce of about eight million Americans before the pandemic, kindergarten through 12th grade public education is also one of the largest U.S. employment sectors, exceeding construction, hospitals, finance and insurance and transportation and warehousing.

Total expenditures for these schools were $721 billion during the 2018 fiscal year, according to U.S. Census Bureau data.

That is more than the U.S. Defense Department’s $671 billion budget that year, or the Pentagon’s $705 billion request for fiscal 2021.

The Trump administration, including U.S. Education Secretary Betsy DeVos, has been pushing for schools to physically reopen in the fall as U.S. coronavirus deaths near 140,000, the world’s highest. But it has not embraced any blueprint, including federal health guidelines, for how to do that safely.

Parents, teachers and local governments are expressing growing concern, after a string of coronavirus outbreaks at day care and summer school classrooms around the country.

On Monday, Los Angeles and San Diego said their 700,000-student public K-12 schools would start online-only education in August, citing “skyrocketing” coronavirus infection rates in California.

LOCAL DECISION

The White House has little real sway over whether public schools will reopen – just about 8% of U.S. K-12 public school funding comes from the federal government, with the remainder split fairly evenly between state and local governments, the Census Bureau data shows.

The Department of Education says public school spending is heavily skewed toward salaries and benefits, which made up 80% of the per-pupil total spending of $12,612 in 2018. About 11% goes to purchased services and 7% to supplies.

Maintaining these jobs is particularly important for local communities because of the economic multiplier effect, said Elise Gould, senior economist at the Economic Policy Institute in Washington. That $721 billion in public school spending in 2018 translated to about $1.08 trillion in direct GDP output, she calculates, not including the economic benefits of better-educated workers.

Although it rebounded somewhat in June, local government education employment is still down by 667,000 since March, when schools shifted largely to online instruction, Bureau of Labor Statistics data show.

That is nearly double the 351,000 jobs lost in local school districts after the 2008-2009 financial crisis, when tax revenues and budgets withered.

The losses could increase without federal aid to state and local governments, Gould said. “They’re faced with austerity and severe cuts and education is one of the places they look.”

Many of those laid off, including teaching assistants, counselors, and maintenance workers, are likely supported by enhanced unemployment benefits, scheduled to expire at the end of July.

It is difficult to say how much school shutdowns in the fall would affect the U.S. economy. Analysis from Washington-based think tanks has focused on the long-term cost to the U.S. economy of a less skilled workforce in years to come due to school closures. But there is little data to show how closures in the fall would impact U.S. jobs and the GDP immediately.

WHO’S WATCHING THE KIDS?

Online-only K-12 education or closed schools may pull parents, and especially women, out of the workforce, particularly those with very young children that need more supervision.

According to a recent McKinsey & Co report on reopening schools, about 26.8 million Americans, or about 16% of the workforce, are dependent on child care in order to work.

Physically opening schools a few days a week, as has been proposed in New York City, will not help much without more federal aid for child care, said Bruce Fuller, a professor of education and public policy at the University of California-Berkeley.

“This cost would be offset by the surge in labor supply and income, as parents flock back to work, helping to jump-start the economy,” Fuller said.

DeVos told CNN on Sunday that because children contract the virus at a far lower rate than adults, there is little danger for them to be back in schools.

“We know that schools across the country look very different and that there’s not going to be a one-size-fits-all approach to everything,” DeVos told Fox News Sunday.

Despite the threat to their jobs, teachers are not pushing to reopen schools. A USA Today poll at the end of May revealed that one in five teachers said they were unlikely to return to their classrooms in the fall.

A Kaiser Family Foundation study found that nearly 1.5 million U.S. teachers, almost one in four, were at greater risk of serious illness if infected with the coronavirus due to age or existing health conditions.

(Reporting by David Lawder; Editing by Heather Timmons and Alistair Bell)

Pound slips below $1.25 on disappointing growth data

By Maiya Keidan

LONDON (Reuters) – Sterling fell below $1.25 on Tuesday for the first time in a week and reached a 14-day low against the euro after data showed Britain’s economy was recovering more slowly than forecast.

Gross domestic product rose by 1.8% in May after falling by a record 20.8% in April, the Office for National Statistics said, well below forecasts in a Reuters poll.

“You saw sterling moving lower almost immediately after the announcement and it was a big disappointment and I think that it’s also the realization that maybe the V-shaped recovery doesn’t apply to the UK to the same extent,” said Morten Lund, an analyst at Nordea.

Adding to fears was a warning from authorities that another, more deadly COVID-19 wave could kill up to 120,000 Britons over the winter.

The pound touched a low of $1.2485, down 0.5% on the day. It slipped 0.7% to the euro at 91.03 pence.

Broad dollar weakness has allowed sterling to gain around 0.7% versus the greenback this month but against the euro it has lost 0.5% since the start of July.

Consumer data also indicated a tentative recovery. The British Retail Consortium said retail sales values rose by 3.4% in annual terms in June, and Barclaycard said overall consumer spending fell 14.5% in annual terms in June, the smallest decline since lockdown began.

Money markets price in the Bank of England’s cutting rates below 0% only next March. But government two-year bond yields plumbed a record low around minus 0.16% and 10-year yields slipped 2.5 basis points to 0.14%.

FTSE mid-cap shares, which tend to be mostly domestically oriented, fell 1.6% versus a 0.6% decline for the exporter-laden FTSE100.

Investors are also waiting for more news on Britain’s negotiations with the European Union on concluding a trade deal for the post-Brexit period. Britain left the bloc on Jan. 31, with a one-year transition period to iron out a future relationship.

“My feeling is the market is not fully pricing in the likelihood of a hard Brexit,” said Colin Asher at Mizuho.

“There has been very little progress on negotiations and even if there is a deal, there’s not much time to put a lot in it.”

(Reporting by Maiya Keidan, editing by Larry King and Ed Osmond)

Climate change, COVID-19 stoke wildfire’s economic risk, Fed says

(Reuters) – Wildfires threaten the economy of the western United States to a greater extent than the rest of the country, and the coronavirus pandemic and climate change will only make that worse, according to research from the San Francisco Fed on Monday.

Some 52% of economic output in Arizona, California, Idaho, Nevada, Oregon, Utah, and Washington originates in counties with elevated wildfire hazard, putting the economies of the region in jeopardy as wildfires become more frequent and more destructive, the researchers found. By 2040 that proportion will have risen to 56%, they estimate. By comparison, about 25% to 30% of the Southeast’s economy faces elevated wildfire risk.

The states together account for a bit more than one-fifth of U.S. economic output.

“The portion of real output produced in (the counties of these states) with elevated exposure increases from $2.1 trillion in 2018 to $4.0 trillion in 2040 in the baseline scenario,” the researchers wrote in the regional Fed’s latest Economic Letter. The economic output under particular wildfire threat rises to $4.4 trillion under a more severe climate change scenario, they said.

Wildfire risk is a combination of the likelihood of a big fire happening – which climate scientists have shown has been rising as the planet warms – and the economic destruction, in terms of lives and livelihoods destroyed that it could cause.

The coronavirus pandemic is increasing the latter risk because the fiscal pinch to states and local governments from the drop in sales tax and other revenue means cuts to wildfire suppression and prevention spending, the researchers said.

(Reporting by Ann Saphir; Editing by Tom Brown)

More grim job losses as U.S. hits record high on new COVID cases

By Lisa Shumaker

(Reuters) – As the number of new coronavirus cases in the United States rose to a single-day record, fresh government data on Thursday showed another 1.3 million Americans filed for jobless benefits, highlighting the pandemic’s devastating impact on the economy.

More than 60,000 new COVID-19 infections were reported on Wednesday and U.S. deaths rose by more than 900 for the second straight day, the highest since early June.

The grim numbers come on top of extraordinarily high jobless figures, although they came in lower than economists had forecast.

Initial unemployment claims hit a historic peak of nearly 6.9 million in late March. Although they have gradually fallen, claims remain roughly double their highest point during the 2007-09 Great Recession.

With coronavirus cases rising in 41 of the 50 U.S. states over the past two weeks, according to a Reuters analysis, many states have had to halt and roll back plans to reopen businesses and lift restrictions. From California to Florida, beaches and bars have been ordered to close. Restaurants in Texas have been told they can have fewer diners.

Earlier this week, President Donald Trump criticized his health agency’s recommendations for reopening schools in the fall as too expensive and impractical, insisting that all schools must open for classroom instruction. Vice President Mike Pence said on Wednesday the Centers for Disease Control and Prevention would issue a “new set of tools” next week.

Many Americans cannot return to work if schools do not open for in-person learning, as they are a major source of childcare in the country.

The CDC’s director, Robert Redfield, on Thursday defended the guidelines but gave no details on what the CDC was changing.

“It’s not a revision of the guidelines. It’s just to provide additional information to help the schools be able to use the guidance that we put forward,” he told ABC’s “Good Morning America” program. “Our guidelines are our guidelines.”

Officials in New Jersey and New York, the hardest-hit states at the outset of the U.S. outbreak, are trying to preserve the progress they made in curtailing the spread of the virus in the face of the resurgence elsewhere, especially the South and West.

New Jersey adopted a stringent coronavirus face-mask order on Wednesday, and New York City unveiled a plan to allow public school students back into classrooms for just two or three days a week.

(Reporting by Susan Heavey and Lucia Mutikani in Washington; Writing by Lisa Shumaker; Editing by Sonya Hepinstall)

COVID-19 pandemic plunges working world into crisis: ILO

GENEVA (Reuters) – Global leaders called for a comprehensive approach to counter the impact of the coronavirus pandemic, which International Labor Organization chief Guy Ryder said on Wednesday had plunged the world of work into “unprecedented crisis”.

“Let’s be clear: it’s not a choice between health or jobs and the economy. They are interlinked: we will either win on all fronts or fail on all fronts,” United Nations Secretary-General Antonio Guterres told an ILO summit that will be addressed by dozens of heads of state and government via recorded messages.

World Health Organization head Tedros Adhanom Ghebreyesus told the summit the world had a special duty to protect the millions of healthcare workers at the front line of the crisis and suffering increasing cases of infection and death.

“Together we have a duty to protect those who protect us,” he said.

The outlook for the global labor market in the second half of 2020 is “highly uncertain” and the forecast recovery will not be enough for employment to return to pre-pandemic levels this year, the ILO said last week.

The U.N. agency said the fall in global working hours was “significantly worse than previously estimated” in the first half of the year.

(Reporting by Emma Farge and Michael Shields; Editing by Andrew Heavens)

Fed’s Bostic: Business ‘getting nervous again’ as virus surges

(Reuters) – The surge in U.S. coronavirus cases has made business owners “nervous again,” Atlanta Federal Reserve Bank President Raphael Bostic said on Tuesday, and prompted him to focus on company decisions over the next three to six weeks.

“We are hearing it more and more as we get more data. People are getting nervous again. Business leaders are getting worried. Consumers are getting worried. And there is a real sense this might go on longer than we have planned for,” Bostic said in webcast remarks to the Tennessee Business Roundtable.

A Fed survey released on Tuesday morning showed Americans may be hunkering down for a longer than expected fight against the virus and the economic fallout from it.

The poll of 1,869 people took place between June 3 and June 12, as the first signs emerged of a newly growing coronavirus caseload, showed 46% of respondents now think it will take more than a year for conditions to return to normal. That is up from 35% in an April survey.

In conversations with managers in his Southern district, where several states are facing a renewed health crisis, Bostic said he is asking “what are their plans for the next three weeks, six weeks, how are they thinking about staffing decisions.”

That period could prove critical in the pace of an economic recovery Bostic suggested may plateau sooner and at a lower pace than expected.

At the end of July, some of the programs approved to support businesses and families during the pandemic will expire, most notably the $600-a-week addition to unemployment benefits.

With the caseload growing again, Bostic said it may become apparent that a longer bridge to the post-pandemic world is needed.

“It is pretty clear this is going to go on beyond the expiration of relief efforts,” Bostic said, adding that as the fact becomes clear, elected officials might “strongly consider doing more.”

(Reporting by Howard Schneider; Editing by Chizu Nomiyama and Jonathan Oatis)

U.S. tops 130,000 deaths from COVID-19 after record surge in cases

By Lisa Shumaker and Doina Chiacu

(Reuters) – The number of U.S. coronavirus deaths exceeded 130,000 on Monday, following a surge of new cases that has put President Donald Trump’s handling of the crisis under the microscope and derailed efforts to restart the economy.

The overall rate of increase in U.S. deaths has been on a downward trend despite case numbers surging to record levels in recent days, but health experts warn fatalities are a lagging indicator, showing up weeks or even months after cases rise.

Nationally, cases are approaching 3 million, the highest tally in the world and double the infections reported in the second most-affected country Brazil. Case numbers are rising in 39 U.S. states, according to a Reuters analysis.

Sixteen states have posted new record daily case counts this month. Florida confirmed a record high 11,000 in a single day, more than any European country reported in a single day at the height of the crisis there.

As health experts cautioned the public not to gather in crowds to celebrate Independence Day over the weekend, U.S. President Donald Trump asserted without providing evidence that 99% of U.S. coronavirus cases were “totally harmless.”

At least five states have already bucked the downward trend in the national death rate, a Reuters analysis showed. Arizona had 449 deaths in the last two weeks of June, up from 259 deaths in the first two weeks of the month. The state posted a 300% rise in cases over the full month, the most in the country.

Steve Adler, the Democratic mayor of Austin, Texas, on Monday criticized the Republican Trump’s comment over the weekend that the virus was mostly harmless.

“It’s incredibly disruptive and the messaging coming from the president of the United States is dangerous,” Adler told CNN. “One of the biggest challenges we have is the messaging coming out of Washington that would suggest that masks don’t work or it’s not necessary, or that the virus is going away on its own.”

Soaring case numbers and packed hospitals in Texas have prompted some mayors and other local leaders to consider launching a new round of stay-at-home orders. Cities are getting together and lobbying the state’s governor to restore the authority to impose local anti-coronavirus measures, Adler said.

White House Chief of Staff Mark Meadows on Monday defended Trump’s comment over the weekend, saying the president was not trying to play down the deaths.

“But it’s really to look statistically to know that whatever risks that you may have or I may have, or my children or my grandchildren may have, let’s look at that appropriately and I think that’s what he’s trying to do,” he told reporters outside the White House.

The U.S. Centers for Disease Control and Prevention has forecast between 140,000 to 160,000 coronavirus deaths by July 25 in projections that are based on 24 independent forecasts.

(Reporting by Lisa Shumaker, Doina Chiacu and Gabriella Borter; Editing by Howard Goller)

Microsoft to close physical stores, take $450 million hit

(Reuters) – Microsoft Corp said on Friday it would close its retail stores and take a related pretax asset impairment charge of $450 million in the current quarter.

The Redmond, Washington-based software giant said it would continue to serve customers online, with team members working remotely from corporate facilities.

A Microsoft spokeswoman told Reuters all current retail employees would be given an opportunity to remain with the company in different roles.

“Speaking over 120 languages, their diversity reflects the many communities we serve,” Microsoft Corporate Vice President David Porter said of the company’s retail employees in a statement. “Our commitment to growing and developing careers from this talent pool is stronger than ever.”The company also said it will rethink other spaces that serve all customers, including operating Microsoft Experience Centers in London, New York, Sydney, and Redmond campus locations.

“This is a tough but smart strategic decision for (CEO) Nadella & Co. to make at this point. The physical stores generated negligible retail revenue for Microsoft and ultimately everything was moving more and more towards the digital channels over the last few years,” Wedbush analyst Dan Ives said in a note. Retailers, whose stores shuttered in mid-March due to coronavirus-prompted lockdowns, have seen a huge surge in online demand amid stay-at-home orders.

(Reporting by Akanksha Rana in Bengaluru and Stephen Nellis in San Francisco)

Take Five: World stocks’ 2020 rollercoaster ride rumbles on

HALF TIME

World stocks have been on a roller-coaster ride in the first half of 2020. Having slumped 35% from Feb. 20 to March 23, they are now within 10% of February’s record highs thanks to lashings of fiscal stimulus, interest rates slashed to 0% or below in most major economies, and massive amounts of QE. Borrowing costs for high-grade U.S. companies have in fact fallen below January levels.

So what happens over the rest of the year? Much depends on whether another coronavirus wave comes crashing down, further testing policymakers. And if an effective treatment or a vaccine is found, the severest global recession in living memory could also turn out to be the shortest.

Nevertheless, the crisis has exposed weaknesses such as companies’ high debt levels and their over-reliance on share buybacks.

LINES OF CONTROL

Asian market anxiety levels look set to rise another notch in coming days due to geopolitical tensions.

Hong Kong will be in the Chinese parliament’s sights when it meets on June 28-30 to finalize a security law aimed at tackling separatism, subversion, terrorism and collusion with foreign forces.

After a year of sometimes violent anti-government and anti-Beijing protests, the focus is on how far-reaching the law is, what activities constitute such crimes and what the punishment would be. Investors also want to know whether the laws will be retroactive or create new avenues for asset seizures.

China and much of Asia will also publish manufacturing surveys. But as North Korea’s military threats ebb and flow and troops amass on both sides of a disputed part of the Indo-Chinese border, geopolitics will likely trump other factors.

PLEASANT SURPRISE

After the dire numbers of April and May, recent U.S. economic data flow has delivered good news for the most part, helping keep stock markets within 10% of their pre-coronavirus levels.

On the heels of comebacks in employment and retail sales, Citi’s U.S. Economic Surprise Index, which tracks economic data relative to economists’ expectations, is at a record high.

Now the focus is on whether the rebound remains in force. Consumer confidence on Tuesday, manufacturing data on Wednesday and U.S. employment figures on Thursday – both weekly and monthly – are among reports due.

Non-farm jobs actually rose 2.5 million in May, versus April’s record 20 million-plus plunge. Another improvement could allow markets to push higher – bar further coronavirus-linked lock downs.

INFLATION WATCH

Economies are bouncing back from the COVID-19 shock, so will inflation follow? Preliminary June euro area data may offer clues.

Already, inflation expectations are reacting to data showing the worst of the economic gloom has lifted; a long-term gauge of where markets see euro zone inflation headed is just above 1% — near its highest since early-March and almost 40 bps above record lows hit that month.

Some investors are already buying gold and other inflation hedging assets. But others say that if you dig deeper into activity indicators, they suggest little evidence of inflationary pressures picking up. And until that happens, expect the ECB to keep its foot on the stimulus pedal.

EUROPE’S TURNING TIDE

Is the U.S. share juggernaut slowing? Seems like it. In the past month, U.S. equities have under-performed world stocks by 2.5%; Europe outperformed by a similar margin. European stocks enjoyed investment inflows in three of the past four weeks, BofA says.

Behind the shift perhaps are the growing odds of a presidential election victory for Democrat Joe Biden, worsening U.S./China ties and the continued rise in U.S. coronavirus infections that prevent economic activity from fully resuming.

Europe, meanwhile, has largely controlled the virus spread, economies are turning the corner quicker than expected and a proposed EU recovery fund is speeding up euro zone integration.

BlackRock and Goldman Sachs are among those recommending clients shift focus towards European stocks, which lagged U.S. peers throughout the previous economic cycle due to a paucity of “growth” stocks.

European out-performance looks likely until at least November’s U.S. election. Longer-term though, U.S. firms, such as tech names, may face headwinds from higher taxes especially from a Democrat administration. And in a world where investors attach increasing importance to environmental, social and governance (ESG) credentials, Europe’s higher ESG scores will be a plus.

 

(Reporting by Marc Jones, Dhara Ranasinghe and Thyagaraju Adinarayan in London; Vidya Ranganathan in Singapore and Saqib Iqbal Ahmed in New York; compiled by Sujata Rao; Editing by Hugh Lawson)