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U.S. private payrolls growth maintains brisk pace; labor costs rise in Q4

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WASHINGTON (Reuters) – U.S. private sector payrolls rose at a brisk pace in January as hiring increased across the board despite unseasonably cold weather, pointing to sustained labor market strength at the start of the year.

Other data on Wednesday showed a solid increase in labor costs in the fourth quarter. Growth in compensation is expected to accelerate as the tightening labor market forces employers to raise wages to retain and attract workers.

Federal Reserve officials were scheduled to resume a two-day meeting on Wednesday. The U.S. central bank is expected to leave interest rates unchanged at the end of the meeting. The Fed has forecast three rate hikes this year. It increased borrowing costs three times in 2017.

The ADP national employment report showed private sector employment rose by 234,000 jobs in January, beating economists’ expectations for an increase of only 185,000. December’s payrolls count was revised down to 242,000 from 250,000.

The ADP report, which is jointly produced with Moody’s Analytics, was published ahead of the release on Friday of the government’ comprehensive employment data for January.

According to a Reuters survey of economists, nonfarm payrolls probably rose by 180,000 jobs in January after increasing 148,000 in December. The unemployment rate is forecast unchanged at 4.1 percent.

“The job market juggernaut marches on,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester Pennsylvania. “Given the strong January job gain, 2018 is on track to be the eighth consecutive year in which the economy creates over 2 million jobs.”

U.S. financial markets were little moved by the data.

In a separate report the Labor Department said the Employment Cost Index, the broadest measure of labor costs, increased 0.6 percent in the fourth quarter after an unrevised 0.7 percent rise in the third quarter. That lifted the year-on-year rate of increase to 2.6 percent, the largest increase since the first quarter of 2015, from 2.5 percent in the third quarter.

STEADY WAGE GROWTH

Wages and salaries, which account for 70 percent of employment costs, rose 0.5 percent in the fourth quarter after advancing 0.7 percent in the prior period. Wages and salaries were up 2.5 percent in the 12 months through December. That followed a similar gain in the year to September.

Wage growth is expected to get a boost from a strong labor market, which is forecast to hit full employment this year. The unemployment rate is at a 17-year low of 4.1 percent and economists expect it to drop to 3.5 percent by the end of 2018.

A $1.5 trillion tax cut package pushed through by the Trump administration and the Republican-controlled U.S. Congress in December is also expected to bolster compensation growth. The tax cut has resulted in some companies either paying out one-time bonuses or raising wages for employees.

Companies like Starbucks Corp and FedEx Corp have announced they will use some of the savings from the tax cut to boost wages for workers.

The ECI is widely viewed by policymakers and economists as one of the better measures of labor market slack. It is also considered a better predictor of core inflation. Economists say labor costs need to rise by at least 3 percent to push inflation closer to the U.S. central bank’s 2 percent inflation target. Labor costs increased 2.5 percent in the year to September.

Private sector wages and salaries rose 0.6 percent in the fourth quarter. They were up 2.8 percent in the 12 months through December, the biggest increase since the first quarter of 2015. That followed a 2.6 percent gain in the year to September.

Benefits for all workers increased 0.5 percent in the October-December quarter after rising 0.8 percent in the third quarter. They were up 2.5 percent in the 12 months through December after rising 2.4 percent in the year to September.

Reporting By Lucia Mutikani; Editing by Andrea Ricci



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BUSINESS

Gambling Regulators in 2 States Reviewing Wynn Allegations

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  1. Gambling Regulators in 2 States Reviewing Wynn Allegations  U.S. News & World Report
  2. Media reports say Nevada regulators open misconduct inquiry into casino mogul Steve Wynn  Business Insider
  3. Will Wynn Boston Harbor drop the Wynn name as casino mogul faces sexual misconduct allegations?  MassLive.com
  4. wf-form4_151078065980722.xml – SEC.gov  SEC.gov
  5. Dozens of People Recount Pattern of Sexual Misconduct by Las Vegas Mogul Steve Wynn  Wall Street Journal
  6. Full coverage



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ASIAN (B)

As Yellen Hands Off at the Fed, Whither Her Go-Slow Approach?

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When Federal Reserve Chairwoman

Janet Yellen

concludes her last policy meeting Wednesday, she will leave her successor the challenge of deciding whether to pick up the pace of rate increases to prevent the economy from overheating.

Fed governor

Jerome Powell,

who is likely to be sworn in as chairman Monday, will have to weigh how closely to stick with Ms. Yellen’s approach of very gradually raising interest rates from still-low levels.

Mr. Powell’s choices could shape how history remembers Ms. Yellen’s four-year term as chief.

If he moves too slowly, low borrowing costs risk fueling an asset bubble like those that triggered recessions in 2001 and 2007.

Alternately, her record could be tarnished if inflation continues to limp below the central bank’s 2% target, confounding the Fed’s forecasts and damaging officials’ credibility.

The Fed is likely to leave its benchmark short-term rate unchanged Wednesday in a range between 1.25% and 1.5%. Officials are sure to discuss at the meeting how much the recent tax cuts are apt to spur economic growth and inflation, given that unemployment is at a 17-year low.

They also will consider the economic boost likely to come from the recent decline in the U.S. dollar, rise in stock prices and solid global growth.

Fed officials want inflation to rise to 2%, a level they view as healthy for an expanding economy, but they don’t want it to surge out of control. Policy makers have penciled in three quarter-percentage-point rate increases this year. But if they expect the tax cut to raise domestic demand without expanding the labor force or lifting workers’ productivity, which could fuel a burst of inflation, they might want to raise interest rates more.

The Fed held short-term rates near zero from late 2008 until late 2015. Under Ms. Yellen, who became chairwoman in February 2014, officials raised the benchmark federal-funds rate five times, most recently in December. In October, the Fed started shrinking its more than $4 trillion portfolio of bonds purchased to stimulate the economy by lowering long-term rates.

“She guided us through an exit strategy that wasn’t straightforward,” said Boston Fed President

Eric Rosengren

in an interview. “We are the only central bank in the world that has successfully started the reduction” in the bond portfolio.

When Ms. Yellen became chairwoman, Fed officials were anxious to avoid a repeat of the so-called taper tantrum, the market turbulence triggered by then-Fed Chairman Ben Bernanke’s comments in May 2013 suggesting the Fed might soon slow its asset purchases.

The episode hung over many of Ms. Yellen policy moves as an example of the costs of imprecise communications during an unprecedented policy shift.

In each of her first three years as chairwoman, critics warned Ms. Yellen was risking excessive inflation by moving so slowly to raise borrowing costs. The Fed lifted rates just once in 2015 and once in 2016. Once she did start raising rates, other critics said the moves risked smothering the fitful economic recovery.

So far, neither outcome has materialized, which Ms. Yellen’s allies say vindicates her approach. “She held off when moving would have been a mistake, but she also correctly perceived when gradual liftoff could begin without great threat to the economy,” said

Daniel Tarullo,

who served as a Fed governor from 2009 until last April.

The portfolio unwinding involved more than a year of discussions, focusing as much on how to communicate the plan as on what it would entail. When it was announced and launched last year, markets shrugged.

Fed officials view the reaction as a major success because it could make those programs less controversial if they are needed in the next downturn.

Officials appear unlikely to change the process of reducing the holdings now.

After the taper tantrum, many expected the rest of the process of withdrawing economic stimulus “would be an utter nightmare,” said

Andrew Levin,

a Dartmouth College economist and former Fed adviser. “I’m not sure even the most optimistic person four or five years ago would have expected it would have gone this smoothly.”

President

Donald Trump

opted not to nominate Ms. Yellen for a second term as Fed chief, breaking with a 35-year precedent in which new presidents have offered a second term to the sitting Fed chairman regardless of party.

Still, in picking Mr. Powell, an ally of Mr. Bernanke and then Ms. Yellen during his 5½ years on the Fed’s board, Mr. Trump signaled his preference for an evolution rather than a revolution in monetary policy.

“There is strong consensus in the committee for the gradual approach that we’ve been pursuing, and governor Powell has been part of that consensus,” Ms. Yellen said at a December press conference.

History’s view of Ms. Yellen’s record will be shaped by how Mr. Powell manages two puzzles the Fed has wrestled with over the past year.

The first concerns inflation, which has confounded the central bank’s expectations by running below 2% despite low unemployment and solid economic growth. If price pressures never materialize, “people will say, ‘Why did she raise rates at all?’” said

Lewis Alexander,

chief U.S. economist at Nomura Securities.

The second centers on lofty prices for stocks, real estate and other assets. It remains to be seen whether the Fed’s recent efforts to beef up bank regulation will be enough to contain wider damage to the economy if new financial bubbles crop up.

Former Fed Chairman

Alan Greenspan

left office in 2006 on a cloud of praise, only to have his performance reassessed after the housing bust set off the 2008 financial crisis.

The history of monetary policy includes so many unforced errors that not making one is itself an accomplishment, wrote

John Cochrane,

an economist at Stanford University’s Hoover Institution, reflecting on Ms. Yellen’s record last November. “Not screwing up doesn’t earn you as big a place in history,” he said, “but perhaps it should.”

Write to Nick Timiraos at nick.timiraos@wsj.com



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INDIAN (B)

Centre sanctions Rs 1,500 crore for organic farming in U'khand

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Dehradun, Jan 31 (PTI) The Centre has sanctioned Rs 1,500 crore for three years to promote organic farming in Uttarakhand.

The amount was sanctioned by Union Agriculture Minister Radha Mohan Singh when Chief Minister Trivendra Singh Rawat met him in New Delhi yesterday, an official release here said.

This is in keeping with Prime Minister Narendra Modi‘s vision of developing Uttarakhand as an organic state which he spelt out during his visit to Kedarnath last year, it said.

The Union minister also cleared a proposal worth Rs 2,600 crore for the co-operative sector in the state. Of which, Rs 200 crore is meant for the reorganisation of sugar mills.

The co-operation extended by the Centre would strengthen the co-operative sector in the state in a major way, the chief minister said. PTI ALM MKJ

Disclaimer: This story has not been edited by BW staff and is auto-generated from a syndicated feed.


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BUSINESS

Boeing Surges as Fast 737 Max Start, US Tax Cut Bolster Profit

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Boeing Co. jumped as earnings rose on surging deliveries of the 737, the planemaker’s largest source of profit, and an unexpectedly large one-time gain from U.S. tax cuts.

The company pocketed a tax boost of $1.74 a share in the fourth quarter and expects more benefits to come this year. Corporate levies are falling just as the Chicago-based manufacturer starts to see large cash gains from its 787 Dreamliner after a decade of losses.

Money Machine

Boeing expects that cash flow will continue to climb this year

Source: Boeing data compiled by Bloomberg


Lower taxes are combining with record jetliner deliveries to fuel the cash gush at Boeing, the biggest gainer on the Dow Jones Industrial Average in 2017 and so far this year. In an earnings report, the company predicted the first annual sales growth since 2015 and said operating cash flow, a focus for investors, would climb to $15 billion.

“The buyback and cash flow have been the whole story on the stock for the last year,” Ken Herbert, an analyst at Canaccord Genuity, said in an interview before the earnings were released.

Shares increased 5.5 percent to $356.32 before the start of regular trading in New York. Boeing had advanced 15 percent this year through Tuesday, the largest gain among the 30 members of the Dow Jones Industrial Average. The stock has more than doubled since the start of 2017 as Boeing surpassed General Electric Co. to become the largest U.S. industrial company by market value.

Adjusted fourth-quarter earnings were $4.80 a share, the Chicago-based company said, or $3.06 a share excluding the tax gain. Analysts had predicted $2.90 a share, according to the average of estimates compiled by Bloomberg. Revenue rose 8.9 percent to $25.4 billion, compared with the $24.7 billion analysts expected.

Steady Gains

As GE has stumbled, Boeing’s steady performance and willingness to hand shareholders bucketfuls of cash attracted investors, Herbert said. The aerospace manufacturer has pledged to return the equivalent of its free cash flow to investors through an $18 billion share buyback program and 20 percent dividend increase approved by directors in December.

Revenue has declined since 2015 as Boeing slowed deliveries of its highly profitable 777 jetliners amid waning sales and a shift to a new model. But earnings per share have continued to rise as buybacks contributed to a 15 percent drop in the company’s average share count.

Under Chief Executive Officer Dennis Muilenburg, Boeing has rolled out new planes such as the 737 Max and 787-10 with few glitches while rival Airbus SE battled engine delays for its A320neo and A330neo. Muilenburg’s campaign to make Boeing leaner has lowered the cost of goods and services.

The planemaker is forecasting sales growth in 2018 as Boeing lifts 737 output by 11 percent and pockets additional tax savings. Revenue will range from $96 billion to $98 billion, the company predicted, compared with the $93.6 billion expected by analysts.

Driving those increases will be another record-setting year of aircraft deliveries. Boeing expects to ship 810 to 815 airliners, up from 763 last year.

Tax Winner

For the manufacturer of the carbon-fiber 787 Dreamliner — a source of Boeing’s cash riches — the timing of new corporate tax cuts “could not have been much better,” said Douglas Harned, aerospace analyst with Sanford C. Bernstein & Co.

Boeing was able to claim deductions at the old 35 percent rate over the years it recorded cash losses on the Dreamliner. The aircraft wracked up almost $30 billion in production and inventory costs as Boeing worked out supplier snarls and compensated airlines for tardy deliveries. The company said it expects to be taxed at a 16 percent rate in 2018.

The balance of inventory and factory costs for the Dreamliner fell $590 million to $25.4 billion during the fourth quarter from the previous three-month period. Deferred production costs for the 787, Boeing’s most advanced plane, have declined 11 percent since peaking at $28.7 billion at the start of 2016.

Margin Goals



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ASIAN (B)

Japan's Fujifilm to Take Majority Control of Xerox

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TOKYO—The American icon Xerox is getting a new Japanese owner.

Fujifilm Holdings Corp. said Wednesday that it would take a majority stake in Xerox Corp., marking the end of independence for a stalwart of 20th-century American industry.

The new entity, to be called Fuji Xerox, will be 50.1% owned by Fujifilm and will keep Xerox’s listing on…



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INDIAN (B)

ICICI Bank posts smallest profit in seven quarters

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(Reuters) – ICICI Bank, India’s third-largest lender by assets, reported its smallest profit in seven quarters on lower treasury income and as provisions rose from a year earlier but said bad loan additions were slowing.

Net profit for the three months to Dec. 31 fell 32 percent year on year to 16.5 billion rupees ($259.4 million), the bank said on Wednesday. That compared with a 19.54 billion rupees average forecast from 24 analysts, Thomson Reuters data shows.

Soured loans have nearly doubled at Indian banks over the past four years as a prolonged economic slowdown took its toll on the ability of companies to repay debt. The rise in non-performing loans has also been blamed on profligate lending in some cases.

While 21 state-run lenders account for bulk of the 9.46 trillion rupees of stressed loans at Sept. 30, private sector banks including ICICI also had more than a trillion rupees of non-performing and rolled-over debt.

ICICI’s gross bad loans as a percentage of total loans was 7.82 percent at the end of December, compared with 7.87 percent at Sept. 30 and 7.2 percent a year earlier.

Growth in bad loans slowed to 43.8 billion rupees in the past quarter, from 46.74 billion rupees in the September quarter. That compared with 70.37 billion rupees a year ago.

Chief Executive Chanda Kochhar told reporters on a conference call that bad-loan additions were at their slowest in nine quarters but forecast provisions for such loans to remain at an “elevated” level as banks set aside more money for defaults by companies being pursued in bankruptcy court.

Provisions including for bad loans rose by 31.6 percent from a year earlier to 35.7 billion rupees in the quarter, the bank said.

Kochhar also said the bank did not need to disclose any additional bad loans for the last financial year to March 2017 after a central bank audit of its books. She did not give details of the audit but said it was below the threshold set by the Reserve Bank of India for banks to report so-called divergence in bad loans.

State-run IDBI Bank, which also reported third-quarter results on Wednesday, posted a fifth straight quarterly loss on higher provisions for bad loans, though the loss narrowed from last year.

($1 = 63.6000 Indian rupees)

Reporting by Krishna V Kurup and Devidutta Tripathy; Editing by David Goodman



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BUSINESS

Euro-Area Inflation Slowdown Highlights Uphill Battle for ECB

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Inflation in the euro area slowed at the start of the year, highlighting the hurdles faced by the European Central Bank as it attempts to foster price growth in a region still beleaguered in places by high unemployment.

Consumer prices rose 1.3 percent in January, the European Union’s statistics office said on Wednesday. The reading exceeds the median forecast of 1.2 percent in a Bloomberg survey but is below December’s rate of 1.4 percent.

Just minutes before the report, Executive Board member Benoit Coeure said inflation would “only very gradually” converge to the ECB’s goal of close to but below 2 percent, justifying continued stimulus.

While economic growth in the 19-country region is at its strongest in a decade and joblessness has declined, price pressures have failed to pick up to a similar extent despite unprecedented efforts by the ECB. President Mario Draghi said last week that developments were still heavily reliant on monetary support, arguing that it’s too soon to discuss winding down asset purchases later this year.

In the euro area, the “labor-market recovery is still a few years behind other advanced economies like the U.S. and the U.K.,” said Jack Allen, an economist at Capital Economics in London. That means “domestic price pressures are going to build only very slowly, core inflation will rise only very slowly, so the ECB is going to be very cautious about normalizing monetary policy.”

Core inflation, which strips out volatile elements such as food and fuel, nudged up to 1 percent in January from 0.9 percent. That rate hasn’t been near 2 percent since 2008.

National inflation data  Actual Prior Estimate
Germany 1.4% 1.6% 1.6%
France 1.5% 1.2% 1.1%
Spain 0.7% 1.2% 0.8%
Italy (due Feb. 2) 1.0% 0.8%

Slack in the economy is one reason why price pressures have been slow to build. With unemployment still high in much of southern Europe, wages haven’t risen sufficiently yet.

The euro area’s unemployment rate stayed at 8.7 percent in December, a separate Eurostat release showed. Joblessness remains well above 10 percent in Spain and Greece.

Read more: Coeure Says Inflation to Converge Only Gradually Toward ECB Goal

Speaking in Dublin on Wednesday, Coeure confirmed Draghi’s assessment, saying that “an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up” and that interest rates would remain at their present levels for an “extended” period, well past the end of the central bank’s net asset purchases.

What Our Economists Say…

“The decline in euro-area inflation largely reflected volatile energy prices. The rise in the core figure may also relate to forces beyond the ECB’s control. Service prices, the best measure of underlying price increases in the release, showed no change. As ECB President Mario Draghi said last week — given the lack of movement, patience and persistence with monetary stimulus will be required.”

— David Powell, Jamie Murray, Maxime Sbaihi, Bloomberg Economics

For more, see our Euro-Area React

Complicating matters for the ECB, the euro has risen to a three-year high against the dollar. Draghi has termed the development a “source of uncertainty,” while company executives were more blunt in expressing their concerns. 

Bill McDermott, chief executive officer of Walldorf, Germany-based SAP, said in an interview with Bloomberg Television’s Guy Johnson and Matt Miller earlier this week that the single currency’s gain is a headwind and “I would prefer it wasn’t as strong, for sure.”



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ASIAN (B)

Rival Employers Dread Possible Arrival of Amazon HQ2 in Their Town

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Amazon.com Inc. plans to hire thousands of people in the area it picks as a second home from a shortlist of 20 locations. That’s worrying other companies because it could become more difficult to attract talent if the behemoth moves into their backyard.

Amazon has said it expects to create as many as 50,000 jobs paying an average of $100,000 at its new site. Supplying that many employees is a feat for any area, and is likely to result in greater competition for workers and wage increases at a time when unemployment already…



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INDIAN (B)

Inclusiveness Is Needed, Not Charity

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If you have attended his talks or watched his  YouTube videos, you will know that Sadhguru Jaggi Vasudev (60), has the ability to respond to any question — be it current affairs, spirituality, well-being or environment — with an enviable ease and calm. He speaks to Suman K. Jha on the rich and wealth management; economy, CSR, and judicious use of natural resources.

Excerpts:

How much wealth should one earn during one’s lifetime? 
Wealth is just one of the tools towards human well-being, not the whole of it. Wealth means making our surrounding pleasant for ourselves. But today, in pursuit of wealth creation, we are destroying the very planet upon which we live. Whether you make a safety pin or build a computer, you are digging it out of the planet. Individual human beings and humanity as a whole must decide how much to dig and how much the planet can take. We have to look at how much is sensibly manageable. Instead of thinking of wealth creation, we need to think of creating human well-being!

Do those (who have enough wealth) have a responsibility towards the less well-off? 

If you have, you can give and that is wonderful, but you should not talk about making others give. If someone has made money, paid taxes, and comply with the nation’s laws, whether they want to build a cancer hospital or paint themselves gold is their choice.

Charity is neither sustainable nor is it a solution. Nobody  wants to feel his well-being depends on charity. He wants to feel worthy, and that he is part of the process of economic prosperity. So, what is needed is investment. Charity means you only give what you think you can spare. Charity will always be a drop, investment is a chunk. So, investing in healthcare and education for the disadvantaged is not charity. It is investment that creates quality human resources and expands markets, furthering the scope of the economic engine.

Why does Hindu philosophy not encourage wealth creation? Critics say this discourages entrepreneurship.
This is not a culture that has been shy of the economic process. Till 250 years ago, India was the planet’s largest economy. Just about anybody who could build a ship in Europe wanted to come here. At the same time, there was not a single Indian without a spiritual practice, because at that time, spiritual process was not necessarily transmitted by a guru or an organisation. In every home, there was a spiritual process.

India became a vibrant economy, without a sense of conquest. Our success was not to the detriment of someone else. This culture has always stressed upon equal measure of attention for both internal and external well-being.

India will soon become the fifth top economy of the world. How does one minimise the divide between the haves and have-nots?
The haves and have-nots have happened not because of someone being born poor or born rich. It is just that socially we did not collectively take the responsibility of making sure everyone has something. What is needed is a more inclusive economy. If we want a gentler and more compassionate economic process, it is not charity but inclusiveness that is needed. If there is no sense of inclusiveness in individual human beings, there is no way that the systems they create or actions they perform will lead to inclusiveness.

Today for the first time in the history of humanity, we have the necessary technology, resource and capability to address every issue — of nourishment, health or education — on the planet. The only thing that is missing is inclusive consciousness. Tell me, how do you bring same parity between people when only 1.53 per cent have been paying taxes till recently. No wonder there is resistance to GST, as there is no escape.

How can Indian corporates become more socially responsible?

The days of CSR are over. Both the corporation and the individual come armed with certain capabilities. It is important to see how human potential and corporate capability can be combined to create a productive enterprise.




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