MANILA, Philippines — Philippine officials say that the country’s economy expanded by 6.4 percent in the second quarter and tied with Malaysia as the second fastest growing in Asia during the period.
The government statistics agency reports Thursday that growth was higher than 5.6 percent posted in the first quarter, driven by industry, which grew by 7.8 percent, followed by services, which posted 6.0 percent growth.
Socio-Economic Planning Secretary Arsenio Balisacan says the economy is “back on the higher trajectory” and on track to hit its 2014 target of 6.5-7.5 percent growth in gross domestic product.
The first quarter growth was dampened by a major earthquake and Typhoon Haiyan that wreaked havoc in the central Philippines late last year.
As top central bankers gather this weekend for their annual powwow in Jackson Hole, Wyo., their main focus this year will be on the labor market — a topic at the heart of the Federal Reserve’s increasingly intense debate on when to start raising interest rates.
Fed Chairwoman Janet L. Yellen, who will be speaking Friday at the conference, has indicated for months that things aren’t as strong as the rapid drop in the jobless rate might suggest.
The unemployment figure has fallen to 6.2% in July from 7.3% a year earlier, but Yellen sees a lot of labor slack in the economy, which as she has put it, means there are “significantly more people willing and capable of filling a job than there are jobs for them to fill.”
But some of her colleagues on the Fed policy committee believe the labor market is much closer to full employment than Yellen and others think. With recent improvements in job growth and unemployment, they argue, the Fed should start to raise interest rates earlier than the expected target of next June to avoid the risk of a surge in inflation.
The intensifying debate was evident in the Fed’s last meeting three weeks ago.
Although officials made no policy changes, the minutes of that two-day meeting, released Wednesday, indicate that pressure is building inside the central bank as inflation, while still below the Fed’s 2% target, has ticked a little higher, and economic activity has rebounded after a winter stall.
"These minutes suggest that the committee as a whole has started to shift its stance and is pondering more seriously whether rates need to rise early next year rather than later," said Paul Dales, an economist at Capital Economics, who is now forecasting the first rate hike in March.
For now, Yellen and most Fed policymakers want to wait for further data on the economy, labor market and inflation before issuing any change in their forecast for when people might expect the first rate increase.
The minutes show that Fed officials, at the last meeting, were concerned about the weak housing market as well as potential spillover effects from the fighting in Ukraine and the Middle East.
The Fed’s employment and inflation outlooks hinge in large part on policymakers’ assessment of labor slack in the economy. Fed officials agree that as job growth has accelerated and more long-term unemployed workers have been hired, the number of willing and capable workers on the sidelines has declined. But the question is, by how much?
The unemployment rate of nearly 6% suggests the labor market is fairly tight — many economists said full employment may be about 5.5% — and employers are increasingly complaining about having trouble finding workers. All of which should give rise to bigger wage increases and, in turn, higher inflation.
But Yellen and other economists note that worker pay raises have changed little in this recovery; average hourly earnings are still growing about 2% annually — just a little bit above inflation.
In the past, lower unemployment led to higher wages. Based on historical data, given the drop in the unemployment rate from its peak of 10% in October 2009, inflation-adjusted earnings should have been 3.6 percentage points higher than they are now, according to a study by the Federal Reserve Bank of Chicago.
Daniel Aaronson, an economist at the Chicago Fed and author of the study, said that the biggest factor in the breakdown of this historical relationship between wages and joblessness appears to be the large number of part-time workers who have had their hours cut because of soft business or who otherwise could not find full-time work.
These part-timers numbered 7.5 million in July — down from a high of more than 9 million in 2009 and 2010 but still well above the 4.3 million before the recession.
"The involuntary part-time is quite elevated, and that has a big effect," Aaronson said.
By his estimates, the slack stands at about 1% of the current labor force. That translates to about 1.5 million people waiting in the wings on top of the regular flow of new entrants to the job market.
A large number of part-timers means companies, instead of raising pay to attract new hires, can just dip into the deep part-time pool.
But Fed officials and economists who don’t think there is that much slack noted that many people who dropped out of the labor force during the recession and slow recovery will never return. They are retired, on disability or no longer employable because of an erosion of skills and the stigma of being long-term unemployed.
With baby boomers aging and birth rates declining over the years, the unemployment rate is capturing an ever-tightening labor market, the experts said.
Employer reports also indicate that they are having increasing problems finding workers. In July, 42% of small business owners reported few or no qualified applicants for openings in the last three months, according to the National Federation of Independent Business.
Manpower Inc., the big temporary-help agency, said the hardest jobs to fill this year were in skilled trades, followed by restaurant and hotel staff.
But even with pockets of labor shortages in certain regions and industries — oil and gas, for example — experts said that on the whole, it didn’t appear to be so much a labor shortage as much as employers unwilling to pay more to fill openings.
"With all due respect to restaurants and hotels, I don’t think it’s a hugely coveted skill that very few people possess," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "It’s got to be a matter of what they’re willing to pay."
At the same time, there are signs that wages are likely to grow faster in the coming months. The National Assn. for Business Economics said in July that 43% of its respondents’ firms raised wages in the last three months, more than double the percentage a year earlier.
If such increases are borne out in government statistics, that will give policymakers more reason to act sooner than later. Until then, or unless there are signs that inflation is heating up, Yellen and the Fed are likely to wait.
(Reuters) - Bank of America Corp is expected to pay more than $16.5 billion to end investigations into mortgage securities that the bank and its units sold in the run-up to the financial crisis, in a deal that could be announced as early as Thursday, a person familiar with the matter said.
The bank has been hammering out the final details of the record-breaking accord with the U.S. Department of Justice and is expected to pay around $9 billion in cash and the rest in assistance to struggling homeowners.
A $16.5 billion payout would be the largest in a series of soaring penalties against banks for a range of misconduct, including violating U.S. sanctions and inappropriately marketingmortgage securities.
An agreement in principle was reached earlier this month after a phone call between the bank’s chief executive, Brian Moynihan, and Attorney General Eric Holder.
The negotiations have been driven by an investigation into securities sold by Merrill Lynch, which the bank agreed to acquire in 2008 at the height of the financial crisis, people familiar with the matter have said.
Representatives of the Justice Department and Bank of America declined comment.
Dollar General Corp. trumped a rival’s bid for Family Dollar Stores Inc., offering $8.9 billion in cash for the discount retailer as industry leaders scramble to gain an edge in attracting customers who are still struggling financially.
The offer Monday of $78.50 a share from the Goodlettsville, Tenn., company could spark a bidding war as Wall Street pushed Family Dollar’s shares to $79.81. The new bid beat a deal reached last month with Dollar Tree Inc. of Chesapeake, Va.
Many analysts expect Dollar Tree to sweeten its $8.5-billion deal for Family Dollar, possibly matching its competitor’s price.
"Let the games begin," said Joan Storms, retail analyst at Wedbush Securities. "Both companies could clearly go higher."
The battle over Family Dollar comes as the discount industry grapples with a customer base that has not benefited from the economic recovery. Wal-Mart Stores Inc., which caters to a similar lower-income shopper, dropped its full-year profit forecast just last week after reporting another quarter of disappointing sales.
"The outlook for the sector is perhaps not as robust as it has been in the past," said Peter Keith, senior research analyst at Piper Jaffray. "A sizable acquisition would be a nice way to drive margins and earnings higher."
As it was, Dollar General, the nation’s largest deep discounter, was looking at the prospect of No. 2 Family Dollar and No. 3 Dollar Tree combining to overtake its share of the market.
Family Dollar has struggled against rival chains. The Matthews, N.C., company said in April that it was closing 370 underperforming stores after its profit plummeted 35% in its fiscal second quarter, ended March 1. Its profit fell an additional 33% for its fiscal third quarter, ended May 31.
Activist shareholder Carl Icahn, who controls nearly 10% of Family Dollar, has pressured the company for months to put itself up for sale. Icahn said he was “extremely pleased” with the Dollar Tree offer, but said there were other potential buyers that could emerge to woo the company.
A deal with Dollar General would create a business with sales of more than $28 billion, nearly 20,000 stores and more than 160,000 employees across the country. The company said it would be the biggest small-box discount retailer in the U.S.
In a letter to Family Dollar’s board, Dollar General Chief Executive Rick Dreiling said he was “surprised and disappointed” about the deal announced last month with Dollar Tree.
"Our proposal is financially superior to the current transaction agreement with Dollar Tree and would provide Family Dollar shareholders with a substantial premium," Dreiling wrote.
Dollar General has indicated it is serious about elbowing aside Dollar Tree to win Family Dollar. Dreiling, who was expected to retire next year, vowed to remain at the helm through May 2016 to oversee the combination of the two businesses.
And the company also would pay the $305-million breakup fee to Dollar Tree to terminate the existing agreement and assume $700 million in debt. To alleviate potential antitrust issues, Dollar General said it would to unload as many as 700 stores.
A marriage with Dollar General makes more strategic sense for Family Dollar than joining forces with Dollar Tree, analysts said.
Both chains target shoppers in urban and rural markets with food and daily necessities at a variety of price points. Dollar Tree, on the other hand, is located primarily in suburban neighborhoods with goods all priced at $1 or less.
Dollar General said buying Family Dollar could eventually save the company up to $600 million a year after streamlining such operations as distribution and purchasing. Dollar Tree had forecasted $300 million in annual savings.
Industry watchers said that the winning offer could come in at $80 a share or more.
Dollar Tree is “in the mix,” Storms said. “They want to do this. There is the potential they would up the bid in order to keep it.”
But several observers predicted that Dollar General will ultimately come out the victor because it could save more in expenses with Family Dollar.
"The smartest thing would be for Dollar Tree to take the breakup fee and go on its way," analyst Keith said. "But the way the market seems to be behaving, it’s speculating that Dollar Tree is going to come back with a counter bid."
The two suitors are likely to have different plans for Family Dollar.
Dollar Tree said it would keep the Family Dollar brand and maintain many jobs at the Matthews headquarters. Howard Levine, Family Dollar’s chief executive and son of company founder Leon Levine, also would remain on the job for at least two years.
Dollar General made no such promises.
Levine has “an emotional attachment to the name, and he would like to keep all his employees employed,” Keith said. “But the bottom line is, this will be a board decision.”
(Reuters) - Global stocks rose and core bonds barely moved on renewed investor appetite for risk on Tuesday, driven by a lack of escalation of the Ukraine crisis and upbeat U.S. housing data that buoyed Asian and European markets.
"The situation in Ukraine is still very tense, but slowly investors are getting used to it and turning their focus back on the macro and micro data, and earnings have been quite good,” said Arnaud Scarpaci, fund manager at Montaigne Capital
Equities are still trading broadly near multi-year highs despite the past month’s jitters over geopolitical risk, with investors keeping a close eye on economic data and central-banker comments for indications of interest-rate moves after years of crisis-era rock-bottom benchmark borrowing rates.
Closely watched inflation data for July from the UK and U.S. were due later on Tuesday.
The MSCI World Index .MIWO00000PUS, which tracks stocks from developed economies, was up 0.17 percent at 1,730.33 points at 0437 EST, compared with its all-time high of 1,765.77 points reached in July.
The FTSEurofirst 300 .FTEU3 index of top European shares was up 0.43 percent, led by gains in Germany, where the blue-chip DAX index was up 1.0 percent. The index, which is traded as a proxy for the Ukraine crisis given Germany’s strong trade ties with Russia, is down some 7 percent from its June highs.
Ukrainian government forces have been fighting separatists for four months in the Russian-speaking east of Ukraine. A reported attack on a Russian convoy on Friday had sparked fears of Russian retaliation but the Kiev military has since reported new successes after raising the national flag in Luhansk, previously a stronghold of the rebels.
European trading followed on from gains in Asia and Wall Street, where U.S. equities rose to their highest level since late July and the U.S. dollar index .DXY edged back toward an 11-month high after upbeat housing data.
Emerging markets also benefited, with the MSCI Emerging Market index .MSCIEF up 0.5 percent.
German 10-year bund yields DE10YT=TWEB were unchanged at 1.01 percent, just above record lows hit at the end of last week, while yields on lower rated bonds dipped.
Spanish and Italian equivalents dipped 2 basis points to 2.33 and 2.62 percent, respectively, while Portugal’s dropped 4 bps to 3.47 percent. Greek equivalents were unchanged at 5.92 percent.
Later in the week, investors will be keeping a close eye on Wednesday’s release of minutes from the Federal Reserve’s July policy meeting as well as comments from the Fed’s summit in Jackson Hole, Wyoming, which starts on Thursday.
A rally in July spurred hopes the dollar was ready for a push higher, long predicted by many of the biggest investment houses, but on which it has consistently failed to deliver over the past year. That casts the steadying of the euro and other currencies so far this month as just a hiccup, but opinion in the market is divided.
"We’re back in this zone really where it could go either way," said a dealer with one London bank. "The data over the next couple of days, and (Fed Chair Janet) Yellen’s appearance, could be the key to breaking us out of this range, but we have been here before. This year’s model is range-trading."