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China sees exports and imports slow
Beijing, China (AHN) – China saw growth in its exports slow to 4.9 percent in April, compared with 8.9 percent last year because of the slowing of economies around the world.
The slowdown in global demand has also hit Chinese consumers and businesses. Growth in imports to China also slowed, dropping to just 0.3 percent in April, down from 5.3 percent growth in March.
Chinese government officials were reportedly expecting an 11 percent growth in imports. The decrease in imports was nearly across the board affecting everything from consumer items to raw materials.
China is the world’s second-largest economy behind the United States.
Although both nations have a capitalistic business system, the model that the Communist government of China uses is vastly different from the model the U.S. uses.
In the U.S., the model is democratic, secular and free-market where businesses pay taxes to the federal government. In China, the model is state capitalism where the government owns a portion of most businesses and takes part of the profits to fund government operations.
 
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Payroll-processing company ADP says private sector job creation slowing
Washington, D.C., United States (AHN) – The latest report on private company hiring shows a disappointing 119,000 jobs created in April, according to payroll processor ADP. ADP’s report comes ahead of the official government numbers for April due out on Friday
Stock prices fell in midday trading on Wednesday as Wall Street reacted to the numbers that were lower than the 170,000 jobs many analysts expected the economy to create last month.
Dow Jones Industrial Average lost 41 points, or 0.3 percent, falling to 13,239, while the Nasdaq Composite slipped two points, or 0.1 percent, slumping to 3,048 and the Standard & Poor’s 500-stock index gave up six points, or 0.4 percent, plunging to 1,399.
ADP’s report comes ahead of the official government numbers for April due out on Friday.
The jobs that were created in April might not be the ones that many people might prefer.
That was because job creation differed between small companies, which traditionally offer fewer if any benefits, and large companies that usually have pay that is more generous and benefit packages.
Large companies with 500 or more employees added only 4,000 new employees, while small companies with fewer than 50 employees hired 58,000 people. In addition, medium-sized businesses created 57,000 jobs.
Job creation was better the previous two months with earlier ADP reports showing that companies added 228,000 jobs in February and 201,000 jobs in March.
The economy needs to create between 120,000 to 220,000 jobs monthly just to keep up with growth in the labor market.
In many months, the economy has not done that, which has meant that many of the millions of people who lost their jobs during the recession have not been able to find work. In addition, about 50 percent of recent college graduates have either been unable to find work or have had to take jobs below their skill level.
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Rare glimpse into Mideast middle class angst
Cairo, Egypt David Rosenberg (The Medi – In the Middle East, the middle class is grumpy.
And if the mass protests in Cairo’s Tahrir Square and Tunisia’s Habib Bourguiba Avenue over the past year haven’t made that clear, a survey of the people who make up the region’s soccer moms and middle managers articulates their angst in ways rallies often fail.
Less than a third of the people surveyed in the three Middle East and North African (MENA) countries of Egypt, Saudi Arabia and Morocco said they are “extremely satisfied” or “very satisfied” with their current economic situation, according to the poll conducted by consulting firm Booz & Co. Respondents who said they were “not at all satisfied” and only “slightly satisfied” reached 48 percent.
The survey comes at a time when the region’s leaders – both those who have come to power on the back of Arab Spring protests and those who are trying to head them off – are grappling with how to steer their countries to greater prosperity and freedom. So far, they are stumbling, with most of the region’s economies reeling from political upheaval and the transition to democracy proceeding slowly, if at all.
“There has never been a more critical time for policymakers in the Middle East to focus on empowering the region’s sizable—and politically significant—middle class,” Richard Shediac, Samer Bohsali and Hatem Samman, the authors of the report said. “There is a dire need for change, via a set of economic, social, and political policies aimed at developing a large, dynamic, and sustainable middle class.”
Compared to the West, MENA’s middle class is both undersized and understudied. Indeed, Booz had to develop its own parameters for defining its parameters, which it settled on as families with incomes between 75 percent and 150 percent of each country’s median. Turning that into dollar terms, that works out to an annual household income of as little as $23 a day in Morocco to $149 at the upper end for wealthy Saudi Arabia.
Middle class views on their economic situation vary widely from country to country, according to the poll.
To Moroccans, economic conditions have not changed markedly over the past five years, while Egyptians are the most dissatisfied with the present situation. Saudis, whose economy is booming on the back of high oil prices, overwhelmingly rate their current economic status favorably.
MENA’s middle class is different than its peers in Europe and North America. Booz said it produces fewer entrepreneurs and therefore is less a source of economic growth. That is because the public sector is the main employer of the middle class rather than the private sector.
In Saudi Arabia and Egypt, for example, small and medium-sized businesses account for between 25 percent and 38 percent of employment, respectively, compared with 55 percent in the U.S., and 60 percent in Germany.
The survey gives some insight into why: 44 percent rated “having a secure job” as their most important factor in choosing an occupation while only 3 percent ranked “participating in new business venture” as so important.
Despite relying on it, employer trust in government is low. Less than a third of the middle class gives it a passing grade for disclosing adequate and accurate information, fighting corruption or having a fair and open court system. This figure is below 10 percent in Morocco. Less than a fifth of the MENA middle class trust their country’s court system
The poll also found that the middle class feels the educational system is performing poorly. More than half said it fails to provide opportunities for them or for their children, in terms of work. Nevertheless, more than 80 percent claim to save money for their children’s education, up to a 10th of their monthly income in some cases.
An average of 57 percent for all three countries said that their salary covers basic expenses, with a little for extras. Between 27 percent and 30 percent are barely able to make ends meet, while 3 percent said they could not even do that.
When they have free time, MENA’s middle class prefer shopping malls, restaurants, and amusement parks to nightclubs, pubs or museums. Saudis preferences are, of course, limited since movie theaters and nightclubs are banned in the country, but in Morocco where they are permitted, only 19 percent go to them. Egyptians are heavy cinema goers, with 60 percent saying they buy tickets. Nearly 100 percent of the middle class claims to watch television every day
“To many Westerners, these forms of entertainment may seem superficial and limiting. Yet surprisingly, middle class respondents report overall contentment with their entertainment options.” the report said.
Nevertheless, half of MENA’s middle class claims to be satisfied with their entertainment and cultural offerings, and in Saudi Arabia that number rises to 70 percent, with the highest rating among women. “One explanation for this disparity is that people cannot miss something they have never experienced,” the report suggests, noting that foreign travel among the region’s middle class is not that common.
In spite of the current pessimism, a surprising number of middle class people remain bullish about the future, Booz found. About 70 percent have a positive outlook for the economy over the next five years, especially in Saudi Arabia and Egypt. If only 5 percent said they are “extremely satisfied” with the economic conditions today, 29 percent said they expected it to be “much better” five years from now.
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Job growth weaker in March than prior three months
Washington, DC, United States (AHN) – The U.S. economy created 120,000 new jobs in March, causing the unemployment rate to drop slightly to 8.2 percent, down from 8.3 percent in February, the U.S. Bureau of Labor Statistics reported Friday.
Nonfarm employment rose in manufacturing, food services and drinking; however, it was down in retail trade.
Although the report was good news, it was not great news. The economy needs to create from 120,000 to 200,000 jobs monthly to keep up with growth in the labor force. Many economists had expected job growth closer to the top of that range.
March growth was less than that of the previous three months, and not sufficient to fuel a recovery in the jobs sector of the economy.
The official number of unemployed persons remained virtually unchanged at 12.7 million, compared to 12.8 in February. However, the percentage of working-age Americans who had a job also dropped slightly to 63.8 percent in March, compared to 63.9 percent in February. Before the recession, 89 percent or more of working-age Americans had a job.
The gap between the percentage of working-age people who have jobs and the official unemployment rate is because people are only counted as unemployed if they actively look for jobs. Many discouraged workers eventually stop looking for jobs.
Long-term unemployment is defined as individuals who are jobless for 27 weeks or more and who continue actively to look for work. That number was essentially unchanged in March at 5.3 million, with those people accounting for 42.5 percent of the unemployed. That number has fallen by 1.4 million since April 2010.
The number of people who were working part-time because their employers cut their hours or because they were unable to find full-time work also fell. That number dropped from 8.1 to 7.7 million people.
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U.S. stocks fall as GDP trails forecast
New York, NY, United States (AHN) – Wall Street opened lower Friday after a report showed that the U.S. economy expanded less than forecast..
Just after the opening bell, the Dow Jones Industrial Average was lower by 33 points, the Standard and Poor’s 500 Index was flat and the NASDAQ was up by about 6 points.
Weighing on stocks was a report that showed the U.S. economy expanded at 2.8 percent in the fourth quarter, less than the 3 percent that had been projected.
In Europe the Stoxx Europe 600 Index slipped 0.7 percent as investors await word on developments on the region’s sovereign debt crisis. European Union Economic and Monetary Affairs Commissioner Olli Rehn said authorities are “very close” to reaching an agreement on private-sector involvement in a Greek debt swap.
Despite those words of optimism, the dismal growth of GDP in the U.S. was keeping investors cautious. The health and growth of the U.S. economy is a very important and leading indicator of economic growth worldwide. As analysts like to say, “when the U.S. sneezes, the world catches a cold.”
In corporate news, Ford fell after reporting numbers that missed estimates. Starbucks shares slipped despite reporting better than expected numbers, and Juniper Networks plunged after the second biggest maker of computer networking equipment forecast sales and profits that missed estimates.
In commodities, oil was unchanged at $$99.60 a barrel, gold rose $4.70 to $1,725 a troy ounce and silver was up a few pennies at $33.63.
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Euro recession fears spike on hint of German GDP drop
Berlin, Germany (AHN) – Signs of an economic contraction in Germany’s economy raised fears of a recession in Europe.
The news escalated concern that demand for oil might fall, causing oil futures prices to drop by as much as 1.1 percent. In addition, the euro weakened against the dollar.
Germany has long served as the engine for economic growth for the entire European Union. Therefore, news that the German economy likely shrank by 0.25 percent during the last three months of 2011 caused alarm and has observers worrying the European Union might slide back into a recession.
Official figures from the Federal Statistics Office show that the German economy only grew by 3 percent during 2011 and that was only achieved because of strong growth during the first half of the year.
Moreover, the Statistics Office said that most of the growth during the first six months was driven by domestic demand. The Statistics Office based the annual figure on an estimate of fourth quarter growth. However, the government won’t post the official data for the last quarter until Feb. 15.
In the meantime, Norbert Raeth from the Statistics Office announced at a press conference Wednesday that the economy likely shrank by “around a quarter of a percentage point” in the fourth quarter.
Although the 3 percent growth rate was down from the 3.7 percent in 2010, Germany still had a stronger figure than the United States or the EU.
According to the Organization for Economic Co-operation and Development (OECD), among its member nations Germany showed better growth than the expected growth rate of the following nations:
- U.S. 1.7 percent
- France 1.6 percent
- United Kingdom 0.9 percent
- Italy and Spain 0.7 percent
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Mortgage payments show rise in delinquencies
New York, NY, United States (AHN) – More homeowners are having a hard time making their mortgage payments.
According to credit reporting agency TransUnion, the rate at which mortgage holders were late with their payments by 60 days or more rose in the June-to-September period for the first time since the last three months of 2009.
TransUnion said 5.88 percent of homeowners missed two or more payments, an early sign of a possible foreclosure. That was up from 5.82 percent in the second quarter of 2011.
The problems were widespread across the nation. All but 10 states and the District of Columbia saw delinquency rates rise.
Arizona had the best rate of improvement in the U.S. While still ranked fourth in the country for the number of delinquencies, the state now has a rate of 7.46 percent. That is a vast improvement from where the state was ranked in the fourth quarter of 2009, when the state’s delinquency rate hit 16 percent, the highest for any state since the foreclosure crisis began.
Experts say the delinquencies can no longer be blamed on bad loans. The bad economy is to blame.
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Turkey’s tremor strikes at poorest
Ankara, Turkey David Rosenberg / The Med – The 7.2-magnitude earthquake that struck eastern Turkey points up the great economic divide between the country’s thriving west and an east in long-term decline.
The Oct. 23 tremor and a series of aftershocks took an estimated 600 lives as of the latest count and left thousands more homeless, but the area at the epicenter – the city of Van with a population just over 1 million – is so bereft of industry and infrastructure that the cost of reconstruction will have little impact on the country’s economy.
Reconstruction efforts may give a boost to the economy but it might just as well deter development by serving as a reminder of how risky the area is, not only to natural disaster but to renewed conflict between militants and the Turkish army in the largely Kurdish region.
“It happened in a place there almost no industrial manufacturing, no major economic activity, mainly in rural areas so it won’t be significant in such a big economy,” Yarkin Cebeci, economist at JP Morgan Chase in Istanbul, told The Media Line. “It could facilitate some investments into the region. The capacity in the region has been to a large extent limited. Rebuilding will be done with new technology.”
The earthquake brought economic activity to a halt in the eastern province due to the destruction and closure of banks. Many lenders, both state-owned and private, have said they will postpone repayments owed by farmers and small business owners in the province.
A week later in Ercis, the town hit hardest by the quake, the Reuters news agency reported that some shops had finally reopened, electricity was back on line in some parts of town and one bank’s ATM was put into service. But concerned about aftershocks, barely any of the city’s nearly 100,000 residents have returned to their damaged homes.
EQECAT, a California-based catastrophe modeler, estimates that total damage caused by the quake is likely to be in the “low single-digit billions” of dollars, compared with Turkey’s nearly $1 trillion economy. That’s about one-tenth of the damage that was caused by the 7.6-magnitude 1999 Izmit earthquake in Turkey’s west that left nearly 20,000 dead.
In the intervening years, the gap between east and west has only grown as the economic boom Turley has enjoyed since 2002 has mainly benefited the metropolitan areas along the country’s Mediterranean coast. In spite of programs to develop the southeast, the region suffers net migration as people seek industrial jobs in the west, according to a report by Euromonitor International, a London-based market research firm.
Between 2005 and 2010, greater Istanbul’s population expanded by almost 38 percent to 12.1 million and is projected to reach 17.8 million by 2020, or more than a quarter of the country’s total, Euromonitor said. The value of goods and service produced by Istanbul and environs amounted to 28 percent of the country’s total, it said.
By comparison, the southeast is mired in poverty and unemployment. Nearly a third of the country’s poor – defined at 50 percent of median household disposable income – lived in the southeast, Euromonitor said. Its unemployment rate in 2010 was 12.4 percent, 0.5 percentage points higher than the national average. But that understates the extent of the problem because the proportion of economically active people in the southeast was low.
Households in Istanbul spent an average of $43,670 on consumer goods in 2010, versus $19,294 in southeast Anatolia. A nationwide minimum wage level has probably had the effect of lifting incomes, but may also be discouraging investment in the region, which can’t make up for its deficiencies by competing for lower-wage jobs.
“With poor infrastructure, less affluent consumers and yet an equally high minimum wage, the east in unable to compete with the west,” the report said.
Southeast Anatolia’s woes are likely to be compounded by a sharp slowdown in Turkey’s economy that was already on its way even before the earthquake struck. The International Monetary Fund is projecting gross domestic product growth will decelerate to 2.2 percent next year from 6.6 percent in 2011.
Last week, Turkey’s central bank struck another blow to economic growth by effectively ending its low-interest rate policy by reducing the availability of loans at the benchmark weekly rate of 5.75 percent and making banks more reliant on shorter-term rates of up to 12.5 percent.
“The latest moves by the central bank certainly trigger a slowdown in monetary lending and credit extension, which will have a negative impact on the country’s growth prospects,” said Sinan Ulgen, an expert on Turkish politics at the Carnegie Endowment for International Peace in Brussels, told The Media Line.
Lying at the intersection between the Arabian and Eurasian tectonic plates, Turkey is prone to earthquakes. Besides the 1999 shaker in the west, eastern Anatolia was struck in 1976 by a magnitude-7.3 earthquake that destroyed several villages and killed 3,000 to 5,000 people. In 1939, a magnitude-7.8 earthquake near Erzincan killed some 33,000 people. On a smaller scale, a magnitude-6.0 earthquake in March 2010 in the east took 51 lives.
Chris Rowan, a geologist specializing in tectonics at the University of Chicago, said in a comment for Scientific American that while all of Turkey faces a high risk of earthquakes, the Van region where last week’s tremor was felt has a more complicated geology than in the west. The “mish-mash of lots of smaller faults” makes it hard for scientists to say where the next will occur.
“The stress changes in the region due to this earthquake may interact in complicated and hard-to-predict ways with other faults in the area, and may lead to a heightened chance of further large earthquakes in the months and years ahead,” he said.
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