In farm-rich Argentina, hunger cries ring in leaders’ ears amid crisis

In farm-rich Argentina, hunger cries ring in leaders’ ears amid crisis
By Nicolás Misculin and Miguel Lobianco

CLAYPOLE, Argentina (Reuters) – In the hard-up neighborhood of Claypole on the outskirts of Argentine capital Buenos Aires, Elena Escobar makes her way to the local Caritas Felices soup kitchen to serve food to street children who scrape by from meal to meal.

Escobar, 53, says the volunteer-run kitchen has seen a surge of kids and families seeking help over the last few months, amid a biting recession and fast-rising prices that have pushed millions of people into poverty.

“There are many children in need, many malnourished, with kids that get to dinner time and don’t have any food,” said Escobar. The kitchen receives over 100 children each week, up from around 20-30 when it opened its doors in April.

The rise in hunger and poverty creates a complex backdrop for the leaders of Latin America’s no. 3 economy, who are in knife-edge talks with creditors to avoid default on billions of dollars of debt amid economic and political upheaval.

Ahead of a presidential election on Oct. 27, officials will head to Washington this month to meet with the International Monetary Fund (IMF), a major backer that struck a $57 billion funding deal with the country last year.

Those talks are likely to weigh on the current administration of President Mauricio Macri and the next one, likely led by left-leaning Peronist Alberto Fernandez, the front-runner to win the vote.

The Claypole kitchen is far from alone in witnessing rising hardship, with government data showing poverty rates jumped to 35% in the first half of 2019 amid recession and steep inflation, from 27.3% a year earlier.

‘A SCOURGE’

Around 13% of children and adolescents went hungry in 2018, according to data from the Pontificia Universidad Católica Argentina, and rising food prices have become a regular target of popular anger in street protests around the country.

Political leaders know something must be done, but face a complex juggling act: bolstering growth and spending to ease issues such as hunger, while cutting debt and averting a damaging default that would shut off access to global markets.

“We can’t live in peace with such a scourge,” left-leaning Fernandez said in a speech on Monday in reference to hunger, which he described as Argentina’s “greatest shame.”

Fernandez, who has been buoyed by support for populist running mate Cristina Fernandez de Kirchner, blames Macri and austerity measures agreed with the International Monetary Fund for the rise in poverty and hunger.

Macri’s running mate, Miguel Pichetto, meanwhile, said on Monday the way to eradicate hunger was to generate employment and attract “big global companies” to Argentina.

Both sides have said they would honor the country’s debts with creditors, including the IMF, though neither has laid out a clear plan for how to do so while boosting spending at home.

Most investors expect some sort of losses.

Indeed, Moody’s Investors Service anticipates holders of Argentina dollar bonds will need to write off  10% to 20% of their investments, while Fitch Ratings believes the government will write down local and dollar debt.

‘JUST NO WORK’

Hunger and poverty are not new in Argentina, but have risen abruptly over the past two years amid a series of economic shocks that have rattled the grain-exporting nation, famed for its rich arable land and cattle.

The issues have become a lightning rod for anti-government protests and marches, with the hardships of the poor brought into sharp focus as the government has been locked in talks with creditors about repayments on around $100 billion in debts.

Driving the problem is stubborn inflation, a tumbling peso and a slump in domestic production and consumption, which have hurt spending power, incomes and jobs.

“There is just no work,” said 46-year-old Isabel Britez, a volunteer at the Los Piletones dining room in Buenos Aires, who said that was the main message she heard from people eating at the kitchen, which serves around 2,000 meals a day.

Macri, looking to revive his election hopes, has rolled out plans to bolster jobs, including tax cuts for employers. He also announced a freeze on some food prices earlier this year.

Sergio Chouza, an economist at the University of Avellaneda in Buenos Aires, said food prices have rocketed nearly 60% over the past year, with basics such as dairy up as much as 90%.

“That results in a deterioration of diets and pushes many people below the poverty line,” he said.

MORE NOODLES, LESS MEAT

Poverty is a key reason for Macri’s fall from grace. His economic austerity, part of the $57 billion funding deal agreed with the IMF last year, reined in deficits but hit growth and voters’ wallets.

Macri was defeated heavily in a primary election in August. Since then, he has announced lower taxes for the middle class and higher subsidies for the poor along with food aid. The Senate approved an emergency food law last month.

“Perhaps we underestimated the impact of the economic situation on the elections. (The poverty issue) affected the vote for Mauricio,” Eduardo Amadeo, a Macri ally and member of Argentina’s house of deputies, told Reuters.

“The reforms we launched have stabilized the economy and we have tried to reduce the impact from the devaluation in August on people’s wallets,” Amadeo said.

A spokesman for the Ministry of Health and Social Development listed official measures to deal with the crisis, but declined to comment further on poverty rates.

In the meantime, even as soup kitchens flourish, some volunteers say meals are getting more meager amid tight funding conditions and as food donations dry up.

“Previously, people donated some meat and chicken; now we only get noodles and rice,” said Lorena Nievas, who works at the Abrazando Hogares soup kitchen in the southern Patagonian city of Puerto Madryn.

For many residents, however, there is no choice.

“I have people from the street who come in for their lunch and snacks here. It’s all the food they get,” she said.

(Reporting by Nicolas Misculin and Miguel Lobianco; Editing by Adam Jourdan and Bernadette Baum)

Hong Kong children form chains of protest as economic worries grow

Secondary school students hold placards as they join a human chain protesting against what they say is police brutality against protesters, after clashes at Wan Chai district in Hong Kong, China September 9, 2019. REUTERS/Amr Abdallah Dalsh

By Jessie Pang

HONG KONG (Reuters) – Hundreds of uniformed school students, many wearing masks, formed human chains in districts across Hong Kong on Monday in support of anti-government protesters after another weekend of clashes in the Chinese-ruled city.

Metro stations reopened after some were closed on Sunday amid sometimes violent confrontations, although the mood in the Asian financial hub remained tense.

Early on Monday, before school started, rows of students and alumni joined hands chanting “Hong Kong people, add oil”, a phrase that has become a rallying cry for the protest movement.

“The school-based human chain is the strongest showcase of how this protest is deep-rooted in society, so deep-rooted that it enters through the school students,” said Alan Leong, an alumnus of Wah Yan College in the city’s Kowloon district.

Three months of protests over a now withdrawn extradition bill have evolved into a broader backlash against the government and greater calls for democracy.

Police said they had arrested 157 people over the previous three days, including 125 males and 32 females aged 14 to 63, bringing the total number of arrests to more than 1,300.

The former British colony is facing its first recession in a decade as the protests scare off tourists and bite into retail sales in one of the world’s most popular shopping destinations.

Tourist arrivals plunged 40% in August year on year, said Paul Chan, the city’s finance secretary, with sustained clashes blocking roads and paralyzing parts of the city. Disruptions at the city’s international had also hit the tourism industry.

“The most worrying thing is that the road ahead is not easily going to turn any better,” Chan said in his blog on Sunday, noting that some hotels had seen room rates plunge up to 70%.

Activists started fires in the street and vandalized a Mass Transit Railway (MTR) station in the main business district of Central on Sunday after thousands rallied peacefully at the U.S. consulate, calling for help in bringing democracy to the special administrative region.

The students, brandishing posters with the protesters’ five demands for the government, called on authorities to respond to the promises of freedom, human rights and rule of law, promised when Britain returned Hong Kong to Chinese rule in 1997. One of the five demands – to formally withdraw the extradition bill – was announced last week by embattled leader Carrie Lam, but protesters are angry about her failure to call an independent inquiry into accusations of police brutality against demonstrators.

U.N. human rights chief Michelle Bachelet urged people to protest peacefully and called on authorities to respond to any acts of violence with restraint.

The protesters’ other demands include the retraction of the word “riot” to describe demonstrations, the release of all those arrested and the right for Hong Kong people to choose their own leaders.

A journalist wearing a hard hat and protective goggles at a police briefing condemned the use by police of pepper spray against media over the weekend.

‘CRUSHED’

In a rare public appearance, Lam walked around the central business district with the city’s Transport and Housing Secretary Frank Chan and MTR officials to inspect the damaged station, where she chatted with staff and commuters.

Dressed in a black suit, she examined electronic ticketing machines and boarded up windows smashed the previous day, according to footage by public broadcaster RTHK.

Following the demonstration at the U.S. consulate on Sunday, Hong Kong’s government warned foreign lawmakers not to interfere in the city’s internal affairs after thousands of protesters called on U.S. President Donald Trump to “liberate” the city.

Hong Kong returned to China in 1997 under a “one country, two systems” formula that guarantees freedoms not enjoyed on the mainland. Many Hong Kong residents fear Beijing is eroding that autonomy.

China denies the accusation of meddling in the city and says Hong Kong is an internal affair. It has denounced the protests, accusing the United States and Britain of fomenting unrest, and warned of the damage to the economy.

Chinese state media on Monday said Hong Kong was an inseparable part of China and any form of secessionism “will be crushed”.

The China Daily newspaper said Sunday’s rally was proof foreign forces were behind the protests and warned demonstrators should “stop trying the patience of the central government”.

Pro-democracy activist Joshua Wong was released from police custody after breaching bail conditions following his arrest in August when he was charged along with a number of other prominent activists for inciting and participating in an unauthorized assembly.

A senior U.S. official, speaking on condition of anonymity, said the United States was monitoring events.

“The freedoms of expression and assembly are core values that we share with the people of Hong Kong, and those freedoms must be vigorously protected. As the president has said, ‘They’re looking for democracy and I think most people want democracy’,” the official said.

(Reporting by Jessie Pang, Anne Marie Roantree, Donny Kwok and Twinnie Siu; Additional reporting by Joseph Campbell in Hong Kong, Roberta Rampton in Washington and Stephanie Nebehay in Geneva; Writing by Farah Master; Editing by Lincoln Feast, Robert Birsel)

U.S. consumer spending strong; manufacturing struggling

FILE PHOTO: People tour The Shops during the grand opening of The Hudson Yards development, a residential, commercial, and retail space on Manhattan's West side in New York City, New York, U.S., March 15, 2019. REUTERS/Brendan McDermid

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales surged in July as consumers bought a range of goods even as they cut back on motor vehicle purchases, which could help to assuage financial market fears that the economy was heading into recession.

The upbeat report from the Commerce Department on Thursday, however, will likely not change expectations that the Federal Reserve will cut interest rates again next month as news from the manufacturing sector remains dour, underscoring the darkening outlook for the economy against the backdrop of trade tensions and slowing growth overseas.

A key part of the U.S. Treasury yield curve inverted on Wednesday for the first time since June 2007, triggering a stock market sell-off. An inverted Treasury yield curve is historically a reliable predictor of looming recessions.

Financial markets have fully priced in a 25-basis-point rate cut at the U.S. central bank’s Sept. 17-18 policy meeting. The Fed lowered its short-term interest rate by a quarter of a percentage point last month, citing the acrimonious U.S.-China trade war and slowing global economies.

But the data could push markets to dial back expectations of a 50-basis-point rate cut next month.

“So yes, consumers are lifting economic growth and easing pressure on the Federal Reserve to cut more aggressively, but the trade war itself, and the rhetoric that accompanies it will push for more rate cuts,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Retail sales increased 0.7% last month after gaining 0.3% in June, the government said. Economists polled by Reuters had forecast retail sales would rise 0.3% in July. Compared to July last year, retail sales increased 3.4%.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

U.S. stock index futures extended gains after the release of the data. U.S. Treasury yields rose while the dollar <.DXY> was slightly weaker against a basket of currencies.

STRONG LABOR MARKET

July’s gain in core retail sales suggested strong consumer spending early in the third quarter, though the pace will likely slow from the April-June quarter’s robust 4.3% annualized rate. Consumer spending, which accounts for more than two-thirds of the economy, is being underpinned by the lowest unemployment rate in nearly half a century.

While a separate report from the Labor Department on Thursday showed an increase in the number of Americans filing applications for unemployment benefits last week, the trend in claims continued to point to a strong labor market.

Solid consumer spending is blunting some of the hit on the economy from the downturn in manufacturing, which is underscored by weak business investment. There are, however, red flags for the labor market coming from manufacturing.

The sector’s struggles were highlighted by a third report from the Fed on Thursday showing factory production dropped 0.4% in July. Output at factories has declined more than 1.5% since December 2018. Manufacturing, which makes up about 12% of the economy, is also being weighed down by an inventory overhang, especially in the automotive sector.

Manufacturing productivity tumbled at its fastest pace in nearly two years in the second quarter, with factories cutting hours for workers, another report from the Labor Department showed.

Manufacturing’s troubles appear to have persisted into the third quarter. Though a report from the Philadelphia Fed on Thursday showed factory activity in the mid-Atlantic region slowed less than expected in August amid an increase in new orders, manufacturers reported hiring fewer workers.

A measure of factory employment dropped to its lowest level since November 2016. The weakness in factory employment in the region that covers eastern Pennsylvania, southern New Jersey and Delaware was mirrored by another survey from the New York Fed. Activity in New York state was little changed this month, with employment measures deteriorating further.

“The health of factories is still an important driver of growth and the soft patch for production remains a factor that is keeping economic growth in the slow lane,” said Chris Rupkey, chief economist at MUFG in New York.

The economy grew at a 2.1% rate in the second quarter, decelerating from the first quarter’s 3.1% pace. Growth estimates for the third quarter are below a 2.0% rate.

In July, auto sales fell 0.6% after rising 0.3% in June. Receipts at service stations rebounded 1.8%, reflecting higher gasoline prices. Sales at building material stores gained 0.2%.

Receipts at clothing stores increased 0.8%. Online and mail-order retail sales jumped 2.8%, the most in six months, after rising 1.9% in June. They were likely boosted by Amazon.com Inc’s <AMZN.O> Prime Day.

Receipts at furniture stores rose 0.3%. Sales at restaurants and bars accelerated 1.1%. But spending at hobby, musical instrument and book stores dropped 1.1% last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Predicting the next U.S. recession, investors apprehensive

FILE PHOTO: Ships and shipping containers are pictured at the port of Long Beach in Long Beach, California, U.S., January 30, 2019. REUTERS/Mike Blake

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – A protracted trade war between China and the United States, the world’s largest economies, and a deteriorating global growth outlook has left investors apprehensive about the end to the longest expansion in American history.

The recent rise in U.S.-China trade war tensions has brought forward the next U.S. recession, according to a majority of economists polled by Reuters who now expect the Federal Reserve to cut rates again in September and once more next year.

Trade tensions have pulled corporate confidence and global growth to multi-year lows and U.S. President Donald Trump’s announcement of more tariffs have raised downside risks significantly, Morgan Stanley analysts said in a recent note.

Morgan Stanley forecast that if the U.S. lifts tariffs on all imports from China to 25 percent for 4-6 months and China takes countermeasures, the U.S. would be in recession in three quarters.

Goldman Sachs Group Inc <GS.N> said on Sunday that fears of the U.S.-China trade war leading to a recession are increasing and that Goldman no longer expects a trade deal between the world’s two largest economies before the 2020 U.S. presidential election.

Global markets remain on edge with trade-related headlines spurring big moves in either direction. On Tuesday, U.S. stocks jumped sharply higher and safe-havens like the Japanese yen and Gold retreated after the U.S. Trade Representative said additional tariffs on some Chinese goods, including cell phones and laptops, will be delayed to Dec. 15.

Besides watching developments on the trade front economists and investors are watching for signs they hope can alert them to a coming recession.

1. THE YIELD CURVE

The U.S. yield curve plots Treasury securities with maturities ranging from 4 weeks to 30 years. When the spread between the yield on the 3-month Treasury bill and that of the 10-year Treasury note slips below zero, as it did earlier this year, it points to investors accepting a lower yield for locking money up for a longer period of time.

As recession signals go, this so-called inversion in the yield curve has a solid track record as a predictor of recessions. But it can take as long as two years for a recession to follow a yield curve inversion.

The closely-followed yield spread between U.S. 2-year and 10-year notes has also narrowed – marking the smallest difference since at 2007 – according to Refinitiv data.

GRAPHIC – Yield curve as a predictor of recessions🙂

2. UNEMPLOYMENT

The unemployment rate and initial jobless claims ticked higher just ahead or in the early days of the last two recessions before rising sharply. Currently the U.S. unemployment rate is near a 50-year low.

“Although job gains have slowed this year, they continue to signal an above-trend economy,” economists at BofA Merrill Lynch Global Research said in a recent note.

Claims will be watched over the coming weeks for signs that deteriorating trade relations between the United States and China, which have dimmed the economy’s outlook and roiled financial markets, were spilling over to the labor market.

(GRAPHIC – Unemployment rate: )

3. GDP OUTPUT GAP

The output gap is the difference between actual and potential economic output and is used to gauge the health of the economy.

A positive output gap, like the one now, indicates that the economy is operating above its potential. Typically the economy operates furthest below its potential at the end of recessions and peaks above its potential towards the end of expansions.

However, the output gap can linger in positive territory for years before a recession hits.

(GRAPHIC – The GDP output gap peaks before recessions🙂

4. CONSUMER CONFIDENCE

Consumer demand is a critical driver of the U.S. economy and historically consumer confidence wanes during downturns. Currently consumer confidence is near cyclical highs.

(GRAPHIC – Consumer confidence is at cyclical highs: )

5. STOCK MARKETS

Falling equity markets can signal a recession is looming or has already started to take hold. Markets turned down before the 2001 recession and tumbled at the start of the 2008 recession.

The recent pullback in U.S. stocks has done its share to raise concerns about whether the economy is heading into a recession. On a 12-month rolling basis, the market has turned down ahead of the last two recessions. The 12-month rolling average percent move is now below the recent highs of January 2018 but still above higher than the lows hit in December.

(GRAPHIC – The S&P 500 has fallen during recessions🙂

6. BOOM-BUST BAROMETER

The Boom-Bust Barometer devised by Ed Yardeni at Yardeni Research measures spot prices of industrials inputs like copper, steel and lead scrap, and divides that by initial unemployment claims. The measure fell before or during the last two recessions and has retreated from a peak hit in April.

(GRAPHIC – The Boom-Bust Barometer🙂

7. HOUSING MARKET

Housing starts and building permits have fallen ahead of some recent recessions. U.S. homebuilding fell for a second straight month in June and permits dropped to a two-year low, suggesting the housing market continued to struggle despite lower mortgage rates.

(GRAPHIC – Housing starts have fallen before prior recessions: )

8. MANUFACTURING

Given the manufacturing sector’s diminished role in the U.S. economy, the clout of the Institute for Supply Management’s (ISM) manufacturing index as a predictor of U.S. GDP growth has slipped in recent years. However, it is still worth watching, especially if it shows a tendency to drop well below the 50 level for an extended period of time.

ISM said its index of national factory activity slipped to 51.2 last month, the lowest reading since August 2016, as U.S. manufacturing activity slowed to a near three-year low in July and hiring at factories shifted into lower gear, suggesting a further loss of momentum in economic growth early in the third quarter.

“The slowdown in manufacturing activity likely reflects, in part, the tariffs that went into effect over the course of last year,” economists at BofA Merrill Lynch Global Research said in a note on Friday.

(GRAPHIC – ISM Manufacturing Index: )

9. EARNINGS

S&P 500 earnings growth dipped ahead of the last recession. Earnings estimates for S&P 500 companies have been coming down but companies are still expected to post growth for most quarters this year.

(GRAPHIC – Earnings fell during the last recession: )

10. HIGH-YIELD SPREADS

The gap between high-yield and U.S. government bond yields rose ahead of the 2007-2009 recession and then widened dramatically.

Credit spreads typically widen when perceived risk of default rises. Spreads have fallen from their January highs.

(GRAPHIC – Junk bond yields jumped in the 2008 recession🙂

11. FREIGHT SHIPMENTS

The Cass Freight Index, a barometer of the health of the shipping industry produced by data company Cass Information Systems Inc, logged a 5.3% year-over-year decline in June. That marked the index’s seventh straight month with a negative reading on a year-over-year basis.

“Whether it is a result of contagion or trade disputes, there is growing evidence from freight flows that the economy is beginning to contract,” Broughton Capital analyst Donald Broughton wrote in the June Cass Freight Index report.

(GRAPHIC – Cass Freight Index – shipments🙂

12. MISERY INDEX

The so-called Misery Index adds together the unemployment rate and the inflation rate. It typically rises during recessions and sometimes prior to downturns. It has slipped lower in 2019 and does not look very miserable.

(GRAPHIC – The Misery Index: )

(Reporting by Saqib Iqbal Ahmed; Editing by Chizu Nomiyama)

Graphic: America’s economy and wages are cooling but not its female workforce

A female construction worker stands outside a construction site in Manhattan, New York, U.S., October 3, 2018. REUTERS/Shannon Stapleton

By Jason Lange

WASHINGTON (Reuters) – Data released on Friday showed a return to strong job growth in the United States, allaying some fears the U.S. economy is on a short path to recession. But the data also reinforced the view that economic growth is slowing.

Here are five take-aways from a report by the U.S. Labor Department on U.S. employment during June.

SLOWING GROWTH

Every month the Labor Department surveys payrolls in the private sector to calculate how many hours employees across the nation worked. Seen as a proxy for economic growth, this index of the national work effort grew 0.2% in June, a rate near the muted gains clocked in recent months. That suggests the U.S. economy, which grew at a 3.1% annual rate in the first quarter of this year, could be cooling.

COOLER WAGE GROWTH?

Growth in private sector average hourly earnings accelerated throughout 2018 and through February of this year, when year-over-year growth hit the strongest rate since 2009 at 3.4%. June’s growth rate, however, was a more modest 3.1%. It is probably too early to tell if there has been a break in the upward trend.

Average earnings graphic

WAGE LAGGARDS

The manufacturing sector added 17,000 jobs in June after several months of weak growth or outright decline. Wage growth in the factory sector, however, has underperformed the national average. Wage growth has also been lower in the education and health jobs category tracked by the Labor Department.

leaders_laggards: https://tmsnrt.rs/2FUH8hw

LABOR FORCE INCREASE

A bright spot for the U.S. economy over the last few years has been the increase in the share of the population that either has a job or is looking for one. This so-called labor force participation rate ticked slightly higher in June, both for a key demographic of people of prime working age and for the general population. But the rate for prime-age workers has been mostly falling since January. This suggests the economy might be running lower on its supply of people available to work, which could depress future job growth.

participation rate graphic

WOMEN LEAD

In June, the participation rate fell for men of prime working age, while it rose for women. This is in line with the trend over the last few years. Indeed, the share of men who have jobs or are looking for one was slightly lower in June than it was in January 2017.

Women lead graphic 

(Reporting by Jason Lange; Editing by Dan Grebler)

Venezuela grinds to a halt as blackout drags into a second day

A general view of a street during a blackout in Caracas, Venezuela March 8, 2019. REUTERS/Manaure Quintero

By Vivian Sequera and Brian Ellsworth

CARACAS (Reuters) – Venezuela shut schools and suspended the workday on Friday as the worst blackout in decades paralyzed most of the troubled nation for a second day, spurring outrage among citizens already suffering from hyperinflation and a crippling recession.

Power went out late on Thursday afternoon due to a problem at Venezuela’s main hydroelectric plant, the government said, calling the event an act of “sabotage” by ideological adversaries.

“We will once again defeat this electrical sabotage. We are going to recover this important service for the population,” Vice President Delcy Rodriguez said in comments broadcast over state television.

While blackouts are routine in many Venezuelan provinces, particularly along the western border with Colombia, nationwide power outages under the ruling Socialist Party have never extended for more than a day.

“This is a severe problem. It is not just any blackout,” said Luis Martinez, a 53-year-old construction worker walking to work in eastern Caracas.

Reuters witnesses could only confirm that lights were on in the southern city of Puerto Ordaz. It was not immediately clear if the power shortages affected oil operations in the OPEC nation.

State oil company PDVSA did not immediately respond to a request for comment.

In Caracas, scores of people walked through the streets early in the morning due to the closure of the metro, while others took the few buses that were circulating. Many did not realize the workday was suspended because they could not watch television or listen to the news.

SABOTAGE

President Nicolas Maduro always attributes major power outages to sabotage by opposition adversaries.

Maduro, who was re-elected last year in a vote widely viewed as fraudulent, blames the crisis on a U.S.-backed sabotage campaign.

His critics say his government has mismanaged the power sector since late socialist leader Hugo Chavez nationalized it in 2007 while setting aside billions of dollars for power projects that were swallowed by corruption.

Opposition leader Juan Guaido slammed the government for bungling the country’s energy supply and dismissed sabotage accusations.

“Sabotage is stealing money from Venezuelans. Sabotage is burning food and medicine. Sabotage is stealing elections,” he wrote via Twitter, referring to humanitarian aid trucks that went up in flames last month when opposition leaders attempted to bring relief supplies across the Colombian border.

More than 3 million people are believed to have fled Venezuela amid a deep economic crisis marked by shortages of food and medicine and hyperinflation.

Venezuela suffered major blackouts in 2008 and 2013 that affected significant parts of the country, but both were resolved in less than six hours.

Maduro’s televised speeches have on several occasions been interrupted by power outages, spurring chuckles from opposition critics.

Local power outages continue to be chronic, particularly in the sweltering western state of Zulia where residents complain of days without power or with limited electricity and voltage fluctuations that damage appliances.

Venezuela is mired in a major political crisis, with more than 40 foreign governments disavowing Maduro in favor of Guaido. The United States in January levied crippling oil industry sanctions meant to starve Maduro’s government of revenue.

Maduro says Guaido is a “puppet” of Washington and dismisses his claim to the presidency as an effort by the Trump administration to control Venezuela’s oil wealth.

(Reporting by Vivian Sequera and Brian Ellsworth,; Editing by Daniel Flynn, Chizu Nomiyama and Jeffrey Benkoe)

A decade after recession, a jump in U.S. states with wage gains for American workers

Newly hired employees take a break from training to pose for a group photo at the chain’s soon-to-open 54th outlet in Oakland, California ,U.S., January 24, 2018.

By Ann Saphir, Jonathan Spicer and Howard Schneider

OAKLAND, Calif./CANTON, N.Y./WASHINGTON (Reuters) – The kind of pay raises for which American workers have waited years are now here for a broadening swath of the country, according to a Reuters analysis of state-by-state data that suggests falling unemployment has finally begun boosting wages.

Average pay rose by more than 3 percent in at least half of U.S. states last year, up sharply from previous years. The data also shows a jump in 2017 in the number of states where the jobless rate zeroed in on record lows, 10 years after the financial crisis knocked the economy into a historic recession.

The state-level data could signal an inflection point muffled by national statistics.

Over the past four years, the U.S. economy added 10 million jobs and the overall unemployment rate fell to its lowest level since 2000. Yet wages have disappointed.

The disconnect has puzzled economists at the Federal Reserve, frustrated politicians concerned about rising inequality, and held regular Americans back, even as businesses have benefited and stock markets have surged, particularly in the first year of U.S. President Donald Trump’s presidency.

Trump says his tax cuts and regulation rollbacks are lifting business sentiment, and in an upbeat address to Congress on Tuesday, he said Americans “are finally seeing rising wages” after “years and years” of stagnation.

Indeed, average hourly earnings were up 2.9 percent in January year-on-year, the biggest rise in more than 8-1/2 years but still less than the 3.5 percent to 4 percent economists say would be a sign of a healthy economy.

The Reuters analysis and interviews with businesses across the country do show wage increases in industries ranging from manufacturing to technology and retail. Executives are mixed, however, on how much to credit Trump after several years of job growth that has chopped nearly six percentage points from the unemployment rate since its peak of 10 percent at the height of the 2007-2009 recession.

“Everyone in the building knows that they can leave and make more money,” said Michael Frazer, president of Frazer Computing, which provides software to U.S. used-car dealers from its offices in northern New York state. In response he raised wages by 6.1 percent at the end of 2017, up from 3.7 percent the previous year.

In Portland, Oregon, software provider Zapproved now hires coding school graduates and spends up to three months training them because the experienced software developers it used to hire have become too expensive. And still, CEO Monica Enand says she gives her developers twice-yearly raises “to make sure we are in the market for pay.”

JOBLESS RATES AT RECORD LOWS

The Reuters analysis of the most recent data available found that in half of the 50 states, average hourly pay rose by more than 3 percent last year. That’s up from 17 states in 2016, 12 in 2015, and 3 in 2014. Average weekly pay rose in 30 states, also up sharply from prior years, the analysis showed.

Unemployment rates are near or at record lows in 17 states, including New York, up from just five in 2016, the Reuters analysis shows.

“Wage growth tends to accelerate when the unemployment rate gets really strong,” said Bart Hobijn, an economics professor at Arizona State University.

California, Arkansas, and Oregon were among those both notching 3-percent-plus wage gains and plumbing record-low unemployment rates. This broadening of benefits to U.S. workers comes as robust global growth pushes up wages from Germany to Japan.

New York Fed President William Dudley said last month that firmer wage gains in states with lower unemployment rates gave him confidence that U.S. inflation, long stubbornly low, would soon rise.

In California, home of Noah’s New York Bagels, more than half of its 53 stores now pay their new hires more than the legal minimum wage, twice as many as in mid-2017.

“It’s very challenging to find enough people” in low-unemployment areas like the San Francisco Bay Area, said Noah’s president Tyler Ricks, who expects to hike pay further this year even as he opens five new stores.

To be sure, some states like Idaho with very low unemployment continue to have slow wage growth, while some like Delaware with very strong wage growth still have jobless rates well above their record lows.

And the share of gross domestic product that feeds back to labor as compensation has only edged slightly higher this decade, after generally declining since the 1970s, suggesting workers have a long way to make up ground.

Yet the state-level data hints at a first step.

Galley Support, a Sherwood, Arkansas-based manufacturer of latches for airplane kitchens and toilets, gave unskilled workers as much as a 20 percent pay hike last year. CEO Gina Radke said it will sap profit but with the Trump administration’s business-friendly policies set to benefit aircraft companies like Boeing, she added, “We feel confident that we will see an increase in sales to cover the increase in wages.”

Work-site managers at Gray, a company that oversees the building of factories and other projects from its headquarters in Lexington, Kentucky, also got a 20 percent raise since 2016. Yet a paycheck of up to $200,000 a year, plus bonuses, often isn’t enough to fill all the jobs on offer.

“There is just so much work around for people that it’s just hard to lure them away,” said Susan Brewer, Gray’s vice president of human resources.

(Reporting by Ann Saphir in Oakland, Calif., Jonathan Spicer in Canton, New York and Howard Schneider in Washington; Editing by Andrea Ricci)

Brazil exits recession with fastest growth rate since 2013

FILE PHOTO: Cranes are seen in the distance during a workers' strike at Latin America's biggest container port in Santos, Sao Paulo state, Brazil, September 14, 2016. REUTERS/Fernando Donasci/File Photo

By Silvio Cascione

BRASILIA (Reuters) – Brazil’s economy emerged from its worst recession on record with its fastest growth rate in nearly four years, data showed on Thursday, boosting President Michel Temer’s case for staying in office as he battles a corruption scandal.

Brazil’s gross domestic product (GDP) grew 1.0 percent in the first quarter from the preceding one, matching economists’ forecasts for the biggest rise since the second quarter of 2013.

Growth is unlikely to stay as strong in the second quarter, economists said, as the first-quarter performance was driven up by extraordinary harvests of corn and soy and by a strong buildup in inventories across the economy.

Yet Temer, who has resisted protests for his resignation after being placed under investigation by the Supreme Court, tweeted minutes after the release: “The recession is over!”

“It’s the result of the measures we are taking. Brazil is growing again and will grow even more with the reforms,” he went on. He was referring to a legislative agenda seen as crucial for balancing the budget but which got stuck in Congress as his allies debated whether to break ranks with the government.

Fourteen million workers remain unemployed in Brazil, a country with one of the biggest gaps between the wealthy and poor. Many analysts expect Latin America’s largest economy, operating now at 2010 levels and forecast to grow just 0.5 percent in 2017, will continue running below potential throughout next year at least.

Subpar growth, in turn, should give policymakers room to continue cutting interest rates in coming months. The central bank slashed its benchmark Selic rate by 100 basis points on Wednesday to 10.25 percent and flagged further cuts to come, although probably at a slower pace because of the political uncertainty. <BRCBMP=ECI>

“HISTORICAL DAY”

Brazil’s economy shrank more than 3 percent in each of the past two years, the deepest and longest downturn since records began in 1901. As the recession deepened last year, Temer’s predecessor, Dilma Rousseff, was impeached for breaking budget rules amid record-low approval ratings.

Temer’s hold on power seemed in danger two weeks ago when the billionaire owners of meatpacker JBS SA <JBSS3.SA> accused him of condoning bribes to silence a key witness in a corruption probe. But lack of a clear replacement and signs of economic growth have given the scandal-plagued president some breathing room, allies have said.

“There is still some way to go before a full recovery but we’re in the right direction,” Finance Minister Henrique Meirelles said in a statement praising what he called a “historical day” for Brazil.

IBGE also revised up fourth-quarter data to show that Latin America’s largest economy contracted 0.5 percent in that period, and not 0.9 percent as originally reported.

Agricultural output rose in the first quarter at the fastest pace since 1996. Services remained stagnant and manufacturing grew only slightly in the first quarter, driven up by stronger exports, IBGE said. Government data later on Thursday showed a record trade balance in May. <BRTBAL=ECI>

Brazil’s economy shrank 0.4 percent in the first quarter from the year-earlier period, following a 2.5 percent drop in the previous quarter. <BRGDP=ECI>

(Reporting by Silvio Cascione; Editing by W Simon and Chizu Nomiyama)

Hush money scandal jeopardizes Brazil’s feeble recovery

Demonstrators shout slogans during a protest against Brazil's President Michel Temer in Sao Paulo, Brazil, May 18, 2017. The sign reads "Out Temer and Elections now!." REUTERS/Nacho Doce

By Alonso Soto

BRASILIA (Reuters) – Hopes Latin America’s largest economy could emerge from its worst-ever recession this year were plunged into doubt on Thursday after President Michel Temer was shaken by allegations he condoned bribing a potential witness.

Fears the scandal could force Temer to step down or derail his ambitious reform agenda drove the biggest daily drop in the Brazilian real since 1999, while the benchmark Bovespa stock index closed 9 percent lower.

Government officials, lawmakers and economists told Reuters the crisis surrounding Temer, 76, could slow the pace of interest rate cuts and diminish consumer and business confidence enough to extend the recession into a third year.

Central Bank data this week suggested Brazil’s economy finally grew in the first three months of the year after eight consecutive quarters of contraction. A second month of job growth in April also fueled hopes of a recovery.

“The government went from its best moment to its worst moment in a matter of seconds,” said a Temer aide, who asked for anonymity to speak freely. “Even the opposition was betting on the approval of the reforms. Now we need to reestablish normalcy.”

Since he took office following the impeachment of leftist President Dilma Rousseff a year ago, Temer has regained investors’ confidence with measures to stop hemorrhaging in public finances. The government recorded a budget deficit of more than 10 percent of gross domestic product last year.

In a defiant address to the nation, Temer insisted that he would not resign and his ministers tried to ease market alarm by promising to push ahead with reforms.

Still, the specter of renewed political uncertainty raised doubts about the recovery and senior politicians said they could not press on with reforms in the midst of calls for Temer to step down.

Senator Ricardo Ferraço, a Temer ally in charge of drafting the government’s labor reform, said he had halted his work until the political crisis was resolved.

The lawmaker sponsoring the government’s flagship pension reform, Arthur Maia, also said there was no room to advance on the legislation in the midst of the turmoil created by the allegations against Temer.

“This certainly makes approval of the reforms more difficult,” Senator Valdir Raupp, a close ally to Temer, told Reuters. “Halting legislative work is the worst path to take. We have to see how things evolve in coming days.”

CAUTIOUS CENTRAL BANK

Government officials also said they worry the crisis could hamper investors’ interest in multi-million dollars auctions of oil rights, hydroelectric plants and infrastructure projects later this year. Temer was betting on those investments to add momentum to the recovery

Risks that labor and pension reforms could stall will likely prompt the central bank to slow the pace of interest rate cuts, limiting a source of relief for businesses battered by the recession, economists said.

The sharp depreciation of Brazil’s real could raise inflation expectations and cut short the easing cycle, economists said. The real closed down nearly 8 percent at 3.38 per US dollar.

“Although there is still room to cut rates, the central bank will be more cautious on the pace of easing,” said Alessandra Ribeiro, partner with consultancy Tendencias.

“The scandal compromises the recovery, which could be much weaker than originally expected or even fizzle away.”

Earlier this week, many market economists expected a more aggressive 125-basis-point rate cut at the bank’s next meeting on May 31. Investment banks expected the bank’s benchmark Selic rate to drop below 8 percent this year.

A surge in Brazilian interest rate futures shows traders are scaling back their bets for steeper rate cuts.

For Jose Carlos Martins, head of construction industry group CBIC, political paralysis would further undermine an economy struggling with more than 14 million unemployed.

“The chaos in the markets should serve as a warning for Congress to continue with the reforms,” Martins said. “Paralysis will send a terrible message to everyone.”

(Reporting by Alonso Soto; Editing by Andrew Hay)

Brazil’s worst-ever recession likely extended into fourth quarter

Shoppers walk in a mall in Refice, northeast Brazil, May 5, 2010. REUTERS/Bruno Domingos

BRASILIA (Reuters) – Brazil’s economy probably contracted for an eighth straight quarter at the end of 2016, offering further proof that Latin America’s largest economy has been in its worst recession ever, a Reuters poll showed on Friday.

Gross domestic product probably shrank 0.4 percent in the fourth quarter from the third after seasonal adjustments, according to the median forecast of 16 economists. Brazil’s GDP contracted 0.8 percent in the third quarter.

Brazil’s economy is expected to have contracted 3.5 percent in 2016, after a decline of 3.8 percent in 2015. Brazil has never experienced such a long and deep period of recession, at least since records began more than a century ago.

The recession has left nearly 13 million people unemployed and caused a record number of bankruptcy filings. It also contributed to the ousting of former President Dilma Rousseff last year and to the low approval ratings of her successor, President Michel Temer.

The fourth-quarter GDP numbers will be released on March 7.

Leading indicators have suggested the economy is finally emerging out of recession in the first quarter of 2017, Finance Minister Henrique Meirelles told Reuters earlier this week. The central bank has been cutting interest rates at a rapid pace as inflation falls, which is expected to help boost growth.

The recovery, however, is expected to be very slow. The median expectation of economists in a weekly central bank survey projected a GDP expansion of 0.5 percent in 2017.

Although this recession has been the deepest in Brazil’s history, it has not been as dramatic as other crises in the country’s turbulent economic past. Previous downturns were often marked by debt crises, capital flights, hyperinflation and mass migration, none of which happened during the current recession.

Brazil’s economy probably shrank 2.2 percent in the fourth quarter from a year before, according to the poll.

(Reporting by Silvio Cascione; Editing by Matthew Lewis)