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As far as economic expansions go, ours is pretty long in the tooth. Since World War II, the average length of time between recessions is about 58 months. With the current cycle clocking in at 81, its natural to wonder if the next downturn is imminent.
Meanwhile, a worrying level of data from abroad shows that the troubles in emerging markets are beginning to affect the developed world:
- In Germany, Europes strongest economy, exports fell 5.2% in August from the previous month, the Federal Statistics Office in Wiesbaden announced on Thursday.
- In the UK, where growth had been outstripping most of the rest of the developed world, recent data shows output in Britains construction sector plunged by 4.3% in August, the sharpest monthly drop since 2012.
- In Japan, things dont look much better. Serious declines in industrial output over the summer suggest to some that the worlds third largest economy has already fallen back into recession.
Former Treasury Secretary Larry Summers also sees global economic trouble up ahead. In an op-ed published on Thursday titled The global economy is in serious danger, he argues that rising economic inequality, slowing population growth, and the increased need for financial regulation, and the fact that the innovation that is taking place isnt very labor intensive all point to a slowdown.
Another analyst asking whether we are headed for, or already in, a global recession is Willem Buiter, Chief Economist at Citigroup.
Buiter relies on a different definition of global recession than what is used to define such an event in a single advanced economy like the United States. While he doesnt see global growth contracting, he does believe that growth has already fallen below its potential, and that the problem is only going to get worse. In a note to clients this week, Buiter writes:
Actual global output growth, although positive . . . is already below likely potential global output growth, which we estimate at 3%, meaning that the output gap is widening. Another year of sub- potential growth would therefore imply that the world economy would probably be back in recession according to both our criteria.
Summers thinks the worrying economic data we are seeing is just the beginning of troubling economic times, because none of the factors contributing to what he has called secular stagnation are set to dissipate anytime soon. He argues that the only thing propping up the global economy since 2008 has been the strength of emerging markets. But investment there is quickly reversing course, finding its way back into developed bond markets, pushing interest rates even lower than they already are. Summers writes:
This is no time for complacency. The idea that slow growth is only a temporary consequence of the 2008 financial crisis is absurd. The latest data suggest growth is slowing in the United States, and it is already slow in Europe and Japan. A global economy near stall speed is one where the primary danger is recession.
In his op-ed, Summers argues that the wealthy world needs to take the lead in preventing this outcome, first by keeping interest rates near zero until there is a clear sign of inflation. More important, however, is to implement expansionary fiscal policy, or borrow at the low rates the global economy is offering governments like the US, Germany and the UK to invest in infrastructure.
Unfortunately for those who agree with Summers, more government spending doesnt appear to be coming anytime soon. For years, Germany has resisted calls to spend more, while the conservative parties in the United States and the UK are doing their best to cut budgets, not expand them.
Further hurting Summers case is the fact that the United States is not seeing the same signs of slowing growth as the rest of the world. Sure, Septembers jobs report was disappointing, and the Samp;P 500 has been moving sideways all year. But job growth in 2015 still sits at just under 200,000 new positions per month, while home sales and housing starts figures have been on the upswing. And auto sales just hit a new 10-year high.
Most economists still see the US avoiding recession for at least another year. Last month, Bloomberg surveyed a group of 31 economists, and eight predicted that a recession would hit the United States before 2018. But as troubles in emerging markets bring economic woes to Japan and Europe, it makes sense to question the conventional wisdom.
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When the German football team lost 1-0 to the Republic of Ireland on Thursday night in a European championship qualifying match, it capped a grim week for national pride.
The shock defeat on the football field followed the ritual grilling of Michael Horn, the US boss of disgraced car-maker Volkswagen, by the US Congress; record losses at the country's biggest bank, Deutsche Bank; and a clutch of dire economic figures, including the sharpest drop in exports since 2009.
Suddenly, the health of Germany's economy, powerhouse of the 19-member eurozone, is under question, just as the slowdown in emerging markets, including China, starts to take its toll.
Volkswagen, for decades the ultimate symbol of lean, beautifully engineered German industry, is a byword for shoddy corporate practices since it admitted to deceiving regulators over emissions from its diesel cars. Horn apologised during the bruising congressional hearing, and was forced to concede that it was "very hard to believe" that the scandal was the work of a few rogue engineers.
Ben May of consultancy Oxford Economics says it is not yet clear how the Volkswagen scandal will affect the wider German economy, but it could have a considerable impact if it undermines confidence in diesel cars generally.
"Diesel cars are the speciality of European manufacturers," he says. "If you start to see buyers ditch diesel, or policymakers put in place regulations that mean it's harder to produce cheap, compliant diesel cars, you might see Japanese and American producers gaining a bigger share of the European market."
Extra spending to accommodate 800,000 migrants from Syria and elsewhere will boost German GDP by 3%, says Goldman Sachs
Meanwhile Frankfurt-based Deutsche Bank, which is being reshaped by its new boss, John Cryan, announced its largest-ever loss, more than EUR6bn, in the third quarter. Shareholders welcomed the announcement as a signal that Cryan was taking an aggressive approach to turning Deutsche Bank around, and would not be asking them to contribute more capital.
But news that another pillar of the German corporate establishment looked shaky added to the sense of uncertainty. Germany's economic model is heavily dependent on exports, including to fast-growing emerging economies, a specialism that has served it well in recent years.
But analysts say the sharp decline in exports - they fell by more than 5% in August - could be the first solid evidence that the downturn in emerging markets has started to hit home in Europe. Factory orders and industrial output also look weak.
Chinese economic growth has slowed, and there are growing fears that it could face a "hard landing", as Beijing battles to cope with a stock market crash and a troubled banking sector.
"Germany is more exposed," says Jonathan Loynes of consultancy Capital Economics. "It sends a bigger proportion of its exports to China than most European countries, so I would expect it to be affected first, and hardest."
Loynes believes the worst of the Chinese downturn is already over and doesn't expect a sharp downturn in German growth. But he thinks the hit to eurozone growth from slowing emerging economies may be enough to persuade the European Central Bank to extend its quantitative easing programme.
Under chairman Mario Draghi, the ECB has been creating EUR60bn each month and using it to buy government bonds, in a bid to prevent the eurozone economy from sliding into deflation.
The onset of QE helped weaken the euro and appeared to boost growth: eurozone GDP expanded by a relatively healthy 0.5% in the second quarter of the year. But the value of the single currency has since bounced back somewhat, just as demand from China is weakening.
"We could see a more substantial slowdown coming through, which would up the pressure on the ECB to provide more support," Loynes says.
The QE programme is meant to end next September, but Loynes expects it to be extended. Draghi could also speed it up, creating more than EUR60bn a month.
Economists point to one potential, short-term boon for the German economy: the extra it will have to spend to accommodate the influx of refugees from Syria and other troubled states in the coming months. Germany is expecting to accept up to 800,000 immigrants, as its contribution to the biggest refugee crisis in living memory. Economists at Goldman Sachs estimate that that could require EUR9bn of extra public spending, adding up to 3% to Germany's GDP.
"Refugees differ from economic migrants in that they have few, if any, resources on arrival in the destination country. Consequently, government financial support, which provides refugees with clothing, food and housing, will feed directly into the economy," Goldman said, in a note.
Once refugees are more established, and able to join Germany's workforce, they could help to offset the problem of its rapidly ageing population - if the country's policymakers can successfully navigate the considerable social and political challenges of absorbing such a large influx. Meanwhile, the symbols of their adopted country's world-beating prowess, from football to cars, look somewhat tarnished.
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Positive economic indicators, mixed with deep concerns over the steel industry, had local business leaders giving widely divergent evaluations of the economy and their industries at a recent meeting of The Times Board of Economists.
There are signs the economy is doing better, but there are also signs that we shouldnt be so hasty, said Micah Pollack, Indiana University Northwest economics professor.
Despite the woes of steel, the national economy continues to hum along, with US GDP increasing at an annualized rate of 3.9 percent in the second quarter and the United States notching 67 straight months of job creation through September.
The Board of Economists gave the national economy an average score of 7 on a 10-point scale, but a significantly lower average score for the regional economy of 6.6.
When the board met in January, it forecast the regional and national economy would be scoring a 6.9 on the 10-point scale within one year.
The steel industry and its troubles was a common theme among board members, and accounted for much of the disparity between their national and regional forecasts.
Berlin Metals owner Roy Berlin said overproduction in China and a strong dollar have led to an import level thats the highest penetration Ive ever seen.
Susan Zlajic, of Arcelor-Mittal, who gave the steel sector and economy overall relatively low marks, said her company is constantly evaluating our footprint and is engaged in planning for asset optimization.
While talk abounds of operational changes, she said Arcelor has no intention of reducing our blast furnace capacity in the United States.
Pollack studies the local economy and publishes the Northwest Indiana Economic Index, which has had kind of a rough year, he said.
It declined the first three months of the year, the first such stretch since the end of the recession. By the end of August the regional index had regained lost ground, Pollack said, but the forecast for growth over the next six months is not particularly optimistic -- perhaps 0.5 to 1 percent.
The US unemployment rate has been 5.1 percent for two months, causing analysts to worry that job growth has stalled. And, factory orders were down 1.7 percent in August, the biggest decline since early this year.
Pollack noted the complexities in unemployment statistics. Despite a relatively low state unemployment rate, average earnings in Indiana are down $2,000 from last year. Thats partly because the number of manufacturing jobs has decreased and service jobs, especially retail, have grown to take their place.
There are a number of bright spots in the local economy, even in some steel-related industries. Automobile manufacturers and its dealers are having a good run, and that increases demand for steel. Residential and commercial construction is relatively strong, and many retail and service sector business people are relatively bullish.
Craig Frendling, a real estate agent with Century 21 Executive Realty, said housing sales are up 8 percent through August this year over last. He also said the average sale price has risen to about $156,000 from a low, at the depth of the recession, of less than $100,000.
Challenges across sectors include growing personnel costs.
Zlajic noted that labor costs, including health care and retirement plans, were $2.1 billion for ArcelorMittal in 2014, and have become a larger portion of the companys expenses than theyve traditionally been.
Berlin said the cost of health insurance was up 9.3 percent when he recently negotiated his companys annual plan.
Every year for the last several years its been about 9 percent, he said. Its insane to think that this could continue.
As increases compound year-to-year, I think its a system waiting for a crash, Berlin said.
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Live. Climb. Repeat. Its a phrase often recited here at Black Diamond, where we work every day to create innovative products that help get people and families, young and old, outside to enjoy wild places like Utahs Mighty Five national parks.
The bedrock of our commitment to outdoors recreation and its benefits to people and the economy is protecting wild places for everyones enjoyment. Utahs parks are national treasures for adventure and recreation, with stunning landscapes that attract people locally, nationally, and from around the world. On any given day I may meet a veteran climber venturing into one of our wilderness areas, a local outdoor retailer or guide whose livelihood depends on the sanctity of our public lands, or a family preparing for its first trip to Bryce, Canyonlands or Arches.
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Barack Obama wants the home stretch of his presidency to be defined by a push to change the balance of economic power in America before runaway corporate influence destroys the country. But hes not plotting any grand legislative push, and hes running low on ways to exercise executive power to act without Congress.
So now, he wants you.
At the White House on Wednesday, the administration convened a daylong Summit on Worker Voice that focused on how collective action and pro-active communication among workers, consumers, and employers alike can help steer the country off a dangerous course.
In an age where union power is at a low ebb and corporate power is at high tide, hundreds of millions of Americans are at risk of drowning economically. Ever the optimist, President Obama said he thinks all of that can change.
In a town hall forum in the East Room at the end of the summit, he sat with the co-founder of online worker organizing platform Co-Worker.org and talked at length about the mix of legal, cultural, and technological changes that could help shift power back to working people.Time to change how businesses define success
The central issue of the day was how to alleviate the pressures that lead business leaders to make decisions that undermine their employees economic security.
The overall share of business income that goes to workers has been dropping for years, while executive compensation, profit-hoarding, and spending on goodies for shareholders have all soared. This level of inequality in the workplace breeds political tension, the president observed.
"Part of the reason issues of CEO compensation are sensitive to folks is not because workers are jealous and they want lifestyles of the rich and famous," Obama said. "Its the sense that if, in fact, there are greater competitive pressures out there, how much is everybody willing to give up to meet those competitive pressures as opposed to putting it all on the backs of workers?"
Changing the way businesses think about how their profits get allocated would be a radical shift. Employers have long been incentivized to think of the wages and benefits they dole out to their workers as a burden that is best minimized.How much is everybody willing to give up to meet those competitive pressures as opposed to putting it all on the backs of workers?
The president said that mindset needs to change. He blamed the ongoing devaluation of workers on a "quarterly report mentality" where "bonuses, incentives, whether a CEO keeps his job, so much of it is just based on short-term profits."
There are a variety of proposals out there to shift corporate incentives away from that kind of short-term myopia. It's become something of a theme for Hillary Clinton who so far has called for tax incentives to reward companies that set up profit-sharing schemes for their workers, changes to how corporate stock buybacks work, and new capital gains tax rules to encourage companies to take a long view.
Such structural changes would come atop existing rules that are supposed to protect working people from bosses so fixated on minimizing their labor costs that they are willing to bend or break the law. In recent years, low-wage worker activism has illustrated just how commonly those rules fail to protect people. Fast food workers, for example, have gone on mass strikes for years to protest not just their low base wages, but also their companies' habit of cheating them on payday like forcing them to submit inaccurate timesheets.Where I grew up, it was called cheatin.
Wage theft doesn't always take that kind of brute-force approach, though. Many companies have found a simple way to avoid paying overtime or the minimum wage, reimbursing workers for expenses, helping them with tax withholding, and paying payroll taxes to fund systems like unemployment insurance and worker's compensation. Those costs and protections only kick in legally for workers defined as employees, so a company that deems its workforce "independent contractors" can sidestep it all.
"It's called 'misclassification' here in Washington. I don't like that word, because it sounds like you put it in the wrong file," Labor Secretary Tom Perez said Wednesday. "Where I grew up, it was called 'cheatin''."
Estimates about the extent of this cheatin' vary, but misclassification is especially common in the transportation industry. Legal battles over the contractor/employee distinction are still raging in many cases, with courts handing FedEx a major defeat in a class-action suit by workers who say they were cheated out of huge sums of money through misclassification. Uber is being sued in multiple venues by drivers who say they should be employees not contractors.