CRIMINAL CAPITALI$M HO, HO, HO

Soros-Backed Fund’s Christmas Night Trading Frenzy Led to Arrest

Donal Griffin and Nishant Kumar
Sat, September 3, 2022 




As the clock crept toward midnight on Christmas 2017, many London traders headed to bed with bellies full, but in South Africa, Glen Point Capital co-founder Neil Phillips was wide awake.

Phillips, 52, a finance veteran backed by billionaire George Soros, wanted to drive the exchange rate between the US dollar and the South African rand below 12.50 so he could make a $20 million wager succeed, according to a US indictment against him unveiled this week. Over a high-stakes hour, he tapped out instructions to an employee at Nomura Holdings Inc. in Singapore, one of the few global hubs where the sun was rising and traders were at their desks.

“My aim is to trade thru 50,” Phillips said at 12:09 a.m. Seven minutes later, he repeated: “need to get it thru 50.”

Soon, the employee at Nomura -- called Bank-3 in the indictment, but identified by people with knowledge of the matter -- had arranged so many trades on Phillips’s behalf that prosecutors said the transactions nudged the rate where he wanted it, allegedly manipulating one of the world’s most-traded emerging-market currencies. London-based Glen Point made millions of dollars in profit and later boasted to investors that bets on South Africa had helped the hedge fund post a record year of returns.

But the frantic session that Christmas night sparked alarm elsewhere at Nomura, according to people familiar with the situation. It ultimately led to Phillips’s arrest in Spain this week at the request of US authorities. Federal prosecutors in New York accused the well-connected money manager of multiple counts of fraud, sending shock waves across Wall Street’s macro-trading scene.

In the industry, the incident resurrected memories of how Wall Street firms rigged the $6.6 trillion-a-day currency market for years and raised questions about how the alleged trades went ahead in the first place.

“This type of conduct unfortunately happens more often than we would like to see,” said Rosa Abrantes-Metz, an economist who co-heads the Brattle Group’s antitrust practice and taught for more than a decade at New York University’s Stern School of Business. Still, she said, Phillips may be able to offer defenses, potentially arguing he was making aggressive but not illegal trades. “Proving market manipulation is so hard,” she said.

Phillips has yet to formally respond to the charges, and he and his lawyer, William Stellmach, didn’t reply to requests for comment. Simon Danaher, a spokesperson for Nomura in London, declined to comment. Authorities haven’t accused the bank of any wrongdoing.

While Glen Point allegedly made $16 million on the trades, Soros’s investment firm -- Soros Fund Management -- got $4 million, according to legal filings and people familiar with the matter. Phillips helped oversee money for the billionaire investor through a so-called managed account, and there’s no suggestion of any wrongdoing on Soros’s part. A representative for Soros declined to comment.

Rival hedge funds with links to Phillips quickly cut ties. Kirkoswald Asset Management put on leave several employees who used to work at Glen Point while Balyasny Asset Management let go some former Glen Point staff who had joined the firm recently, people with knowledge of the matter have said.

“This turn of events for such a large and prominent hedge fund is remarkable,” Mark Williams, a professor at Boston University and a former Federal Reserve bank examiner, said of Glen Point. Many aspects of the case “make it stand out in terms of egregiousness.”

Volatile Currency

The charges could be catastrophic for Phillips, who has spent decades at some of Wall Street’s biggest firms. He worked at Morgan Stanley and Lehman Brothers Holdings Inc. in the early 2000s before joining BlueBay Asset Management. He focused on so-called macro trading, in which investors try to profit from global economic trends by betting on interest rates and currencies, and went on to manage a $1.4 billion standalone macro hedge fund at the London-based firm.

Macro traders frequently focus on South Africa, one of continent’s biggest economies and a place where volatile politics and scandals can send prices swinging. The rand is the fifth-most traded emerging-market currency in the world, with average daily turnover on global markets of $72 billion in 2019, the latest year for which full data are available, according to the Bank for International Settlements. That’s on par with Russia’s ruble and more active than Brazil’s real and Turkey’s lira.

An example of that volatility occurred in 2008, when the asset-management arm of Investec Ltd. said that the South African inflation rate was overstated. That fueled a rally in the country’s bond market and prompted Phillips to wade into the debate, accusing his rival of trying to unfairly boost returns on their own positions.

“It really is scandalous,” Phillips told Bloomberg in a phone interview. “It’s incredibly sinister and designed to hit the market at a time when it was very vulnerable. It’s an abuse of their market position.”

BlueBay closed Phillips’s fund in 2014 when he left to launch his own venture amid what he called “ridiculously successful circumstances.” He founded Glen Point the following year with colleague Jonathan Fayman and they raised nearly $2 billion from investors including Soros. But the new fund struggled in 2016 and lost money, according to documents obtained by Bloomberg.

Seeking Rebound

South Africa presented an opportunity for a rebound in 2017 as the ruling African National Congress party geared up to pick a new leader. Phillips predicted the rand would rally significantly against the dollar as a result of the December election, which cast investor-friendly Cyril Ramaphosa against Nkosazana Dlamini-Zuma, the ex-wife of the country’s embattled president at the time, Jacob Zuma.

To make his bet, Phillips purchased a so-called FX option, a complex derivative. If the dollar fell below 12.50 rand by Jan. 2, 2018, the contract would pay out $20 million.

Ramaphosa was announced as the new leader of the ANC about a week before Christmas, setting him on course to be the nation’s next president. The rand soared to a two-year high -- yet it didn’t cross the 12.50 threshold that Phillips needed. His option, the prosecutors noted, was about to expire.

Late Christmas night, prosecutors wrote in the indictment, Phillips sent a flurry of messages to the bank: Sell dollars in return for rand until the rate falls below 12.50. “Need it to trade thru 50,” he repeated again at 12:25 a.m.

By 12:31 a.m., Phillips had sold $415 million and the rate was 12.505. “How much more u think to break 50,” he asked the Nomura employee, according to the indictment. “At least another 200,” came the response. At 12:44 a.m., with $725 million sold, the rate finally dropped below 12.50. Several minutes later, the rate was 12.4975.

“Perfect,” Phillips said.

The Glen Point Global Macro Fund gained 6% in December 2017, one of its strongest monthly performances, and contributed to a 22% return for the year, according to documents obtained by Bloomberg.

The hedge fund later touted its foresight to investors, the documents show.

“We had anticipated the potential for large swings in South African assets around the ANC electoral conference and, in particular, believed that the market had priced in too little risk of a Cyril Ramaphosa victory,” the fund wrote. “This judgment proved to be correct with the market subsequently coming to terms with the scope for a more positive policy dynamic than seen in South Africa for a long time.”

Back in London, the transactions were drawing attention inside Nomura. The size would be unusual even on a busy day and unheard of in the wee hours of Dec. 26, the people said. Traders there were surprised, and compliance officials began examining what happened, the people said.

Ultimately, the US brought a case, with officials vowing in a statement that they will track down manipulation of global financial markets no matter where it occurs.

“How utterly bizarre that US prosecutors are chasing a London-based hedge fund for currency manipulation in Singapore,” said Andrew Beer, founder of New York-based Dynamic Beta Investments. “The golden age of regulation may well be upon us.”

Glen Point would never repeat such a strong annual performance, the documents show. In December 2021, Phillips agreed to sell the hedge fund to Eisler Capital. Under the proposed transaction, Phillips would keep overseeing his old strategies and also manage money for Eisler. In a statement at the time, he said he was looking forward to “capitalizing on all the benefits of joining a larger business.”

But the deal fell apart in February. A spokesperson for Eisler Capital confirmed Phillips never joined the firm and declined further comment.

With the economy faltering, is it time to ditch your bank for a credit union? YES!

AKA PROUDHON'S PEOPLES BANK


Mitchell Glass
Sun, September 4, 2022 

With the economy faltering, is it time to ditch your bank for a credit union?

Deciding where to store your money is a big decision.

Oftentimes, we choose a bank or credit union as young adults based on family recommendations. But just because a certain financial institution worked well for your parents doesn't mean it's the best fit for you.

Credit unions and banks are very different creatures — each with a unique set of benefits and drawbacks.

Let’s explore the characteristics of each to help determine which is the better choice for your needs.

With two-thirds of Americans admitting to draining their savings to keep up with inflation, retirees have a secret key to boost their budgets in tough times.

What is a credit union?

A credit union is a not-for-profit financial institution owned by its members (like you). Since credit unions don't need to show a profit, their sole purpose is to offer their members the best rates possible.

Credit unions are smaller than banks and limit membership to certain groups of people. They might all be employees of the same company, followers of a specific religion, residents in a certain geographic location or members of a civic organization.

LIKE A UNION
As a member, you can vote on your credit union’s policies and influence how it is run.

Pros of credit unions

Favorable interest rates. Since credit unions aren’t designed to make a profit, they typically offer higher interest rates on deposits and lower rates on loans.

Lower or no fees. The nonprofit nature of credit unions allows them to keep fees as low as possible. For example, unlike banks, many credit union checking accounts have no minimum balance requirements or monthly maintenance fees.

Better customer service. Credit unions prioritize community and personal attention. Since policies are voted on by members, you’re more likely to receive services tailored to your needs. You can also develop a personal relationship with branch managers and loan decision-makers, which may help you secure a loan.

Security. Credit union accounts are insured up to $250,000 by the National Credit Union Administration. If you need higher coverage limits, you can often open multiple accounts.

Cons of credit unions

Outdated technology. Since the goal of credit unions is to charge you as little money as possible, they may have less of a budget to roll out new apps and technology. That said, if you find one that offers the basic online services you use the most, you may not need all the latest bells and whistles.

THIS DOES NOT APPLY IN CANADA WHERE CREDIT UNIONS WERE ONLINE BEFORE BANKS SUCH AS THE VANCOUVER CITY CREDIT UNION (VANCITY)

Limited locations. Credit unions are smaller and more focused on a tight-knit community. That means there are naturally fewer branches and ATM locations. To solve this problem, many credit unions have joined forces to create the CO-OP Shared Branch and ATM network that allows members to use branches and ATMs from all other credit unions in the co-op nationwide.

Limited membership. Each credit union has specific membership eligibility requirements called a “field of membership.” For example, the Navy Federal Credit Union accepts current and retired members of the armed forces, their families, household members and Department of Defense personnel. That said, nowadays larger national credit unions only require you to be part of certain easy-to-join organizations. For example, to join Alliant Credit Union, all you have to do is become a member of Foster Care for Success by donating $5, which can be reimbursed.

Limited financial products. Most credit unions offer checking accounts, savings accounts, CDs, basic credit cards and various loans. But they don’t typically offer the wide array of financial products you find at banks.

What is a bank?

Banks are for-profit organizations owned by investors. The main goal of a bank is to make money for the investors — and unlike with a credit union, you’re not a bank "member," which means you have no say in bank policies.

Banks don’t restrict eligibility to certain groups of people. Anyone who lives in a bank's serviceable area can open an account and become a customer.

Banks can be broken down into online-only operations and brick-and-mortar institutions. Online banks are completely virtual and have few or no physical locations. While they can’t offer face-to-face service like brick-and-mortar banks, their lower overhead typically allows them to offer better rates.

Pros of banks

More accessibility. Big banks offer more branches and ATMs than credit unions. For example, Chase has more than 4,700 branches and 16,000 ATMs — making it more convenient to access your money wherever you are. And while some small regional banks require you to live in the same state, most banks don’t have special eligibility requirements to join.

More financial products. Banks are more likely to offer money market accounts, investment accounts, wealth management services and a wider range of credit card options.

Better technology. Banks have more funds to invest in fancy websites, convenient apps and other tech to make your life easier. Just remember, the money to develop this technology comes out of your pocket via higher fees and less favorable rates.

Security. Bank accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). For higher coverage, you can split your funds between multiple accounts.
Cons of banks

Higher fees. Since a bank’s main objective is to make money for its investors, they charge higher fees. For example, checking accounts often charge fees if you do not maintain a minimum balance in your account. Overdraft and bounced check fees are also often harsher in banks than credit unions — especially with non-premium accounts.

Worse rates. A bank’s for-profit objectives naturally lead to less favorable rates than credit unions. That said, you may find better rates at an online bank compared to a brick-and-mortar bank.

Less flexible. Banks have strict rules and protocols set nationally by a board of directors. This makes them less flexible than credit unions, where you have a say in the rules. This rigidity — paired with corporate, profit-focused policies — is a recipe for customer service issues.
Is a bank right for you?

Banks make the most sense if you value convenience over price. You may pay more in fees and interest rates, but you have access to more financial products, better technology and more branches and ATMs.

If you take advantage and actually use all these extra features, depositing your money in a bank may be worth the price.

Choosing a credit union

Credit unions are designed to prioritize their members. If you want favorable interest rates, low fees, great customer service and an organization that has your best interests at heart, a credit union is the way to go.

This is especially true if you don’t need all the bells and whistles that banks offer.

Whether you decide to stay with your current financial institution or not, just be sure you’re regularly exploring your options to ensure you've landed on the best fit for your needs and financial goals.

Era of through-the-roof house prices in Australia set to end: Reuters poll


Residential properties line the Sydney suburb of Birchgrove in Australia

By Vivek Mishra

Sun, September 4, 2022 

BENGALURU (Reuters) - Australian house prices will fall sharply this year and next as rising mortgage rates and cost of living pressures drag on demand, a Reuters poll found, but for many people buying a home will still remain far out of reach.

Pandemic-related stimulus and cheap loans have nearly doubled house prices since the 2007-09 global financial crisis, increasing homeowners' wealth, but that has also kept millennials and first-time homebuyers off the property ladder.

After rising about one-third during the pandemic, home prices nationally sank 1.6% in July. It was the largest monthly drop since 1983 and dragged annual price growth down to 4.7%, from a peak above 21% late last year.

Average home prices were expected to decline 6.5% this year, according to an Aug 15-Sept. 2 Reuters survey of 10 property analysts, versus an expected 1.0% rise in a May poll.

A further 9.0% fall was expected next year.

"The property boom is well and truly over as the surge in mortgage rates is pulling the rug out from under it," said Shane Oliver, chief economist at AMP.

"There are three reasons why this downturn will likely be deeper and the recovery slower than in past cycles: high household debt levels, high home price to income levels and an end in the long-term downtrend in interest rates."

The Reserve Bank of Australia (RBA) has already lifted rates by 175 basis points since May and is expected to hike by another half-point on Tuesday in an effort to contain surging inflation. [AU/INT]

Markets are wagering the current 1.85% cash rate could be near 4.0% by the middle of next year. Banks have sharply raised borrowing costs on new fixed-rate mortgages and tightened lending standards.

"The path of interest rates will dominate the housing outlook. A steep increase in mortgage rates between May and the end of this year will weigh heavily on house prices," said Adelaide Timbrell, senior economist at ANZ.

"Still, a substantial correction is required to return housing affordability and housing prices to fair levels."

It will also be a greater challenge for some of the more heavily-indebted households in a country, which currently has a record A$2 trillion ($1.4 trillion) of mortgage debt outstanding.

ANZ, Bank of Queensland, Capital Economics and Knight Frank said average house prices would have to fall by between 10-35% - roughly the amount U.S. house prices tumbled during the global financial crisis - to make Australian housing affordable.

Property prices in Sydney, the world's second-most expensive housing market after Hong Kong, and Melbourne were forecast to fall 7.0-10.0% this year and 7.0% next.

(For other stories from the Reuters quarterly housing market polls:)

($1 = 1.4686 Australian dollars)

(Reporting by Vivek Mishra; Polling by Devayani Sathyan, Arsh Mogre and Anant Chandak; Editing by Hari Kishan, Ross Finley and Kim Coghill)

US mortgage lenders are starting to go bankrupt — how this one factor could be triggering the worst surge of failures since 2008


Chris Clark
Sun, September 4, 2022


The real estate market just can’t catch a break, with inventory of resale homes remaining low and rising interest rates making it harder for buyers to justify making the leap.

And now we can add mortgage lender bankruptcies — and the rise (and fall) of “non-qualified mortgages” — to the factors aggravating an already uncertain market.

But what does the trouble around these NQM mortgages really mean? And what does it mean for non-traditional buyers trying to get a foothold in the market?
Don’t miss

A “non-qualified” mess?

NQMs use non-traditional methods of income verification and are frequently used by those with unusual income scenarios, are self-employed or have credit issues that make it difficult to get a qualified mortgage loan

They’ve previously been touted as an option for creditworthy borrowers who can’t otherwise qualify for traditional mortgage loan programs.

But with First Guaranty Mortgage Corp. and Sprout Mortgage — a pair of firms that specialized in non-traditional loans not eligible for government backing — recently running aground, real estate experts are beginning to question their value.

First Guaranty filed for bankruptcy protection while Sprout Mortgage simply shut down early this summer.

In documents tied to its bankruptcy filing, First Guaranty leaders said once interest rates started to climb, lending volume dropped and left the company with more than $473 million owed to creditors.

Meanwhile, Sprout Mortgage, which leaned heavily on NQMs, abruptly shut down in July.

Do NQM’s signal another housing meltdown? Probably not

Most housing market watchers believe today’s conditions — led by stricter lending rules — mean the U.S. is likely to avoid a 2008-style housing market meltdown.

But failures among non-bank lenders could still have a significant impact. The NQM share of the total first mortgage market has begun to rise again: NQMs made up about 4% of the market during the first quarter of 2022, doubling from its 2% low in 2020, according to CoreLogic, a data analysis firm specializing in the housing market.

Part of what has contributed to the recent popularity of NQMs is the government’s tighter lending rules.

Today’s NQMs are largely considered safer bets than the ultra-risky loans that helped fuel the 2008 meltdown.

Still, many NQM lenders will be challenged when loan values start falling, as many are now with the Federal Reserve’s moves to raise interest rates. When values drop, non-bank lenders don’t always have access to emergency financing or diversified assets they can tap like larger banking lenders. Banks can also lean on safer qualified loans because they factor in traditional income verification, more stringent debt ratios and don’t carry features like interest-only payments.

It’s important to note that if you have a mortgage through a lender that’s now bankrupt or defunct, that doesn’t mean your mortgage goes away.

Typically, the Federal Deposit Insurance Corporation (FDIC) works with other lenders to pick up orphaned mortgages, and the process happens quickly enough to avoid interruptions in paying down the loan.

One number rules them all

While many factors drag on the real estate market, one data point carries the most significance: interest rates.

With the Fed’s laser focus on raising rates to cool inflation, there’s little reason to think the effect on lending and the broader housing market will ease anytime soon.

Higher mortgage rates — the average 30-year fixed rate was still above 5% as of Aug. 24 — will dictate how much home they can afford.

(This also affects sellers, many of whom will eventually become buyers and likely depend on loans.)

Between a potential shakeout among non-bank lenders, more stringent lending rules forced on banks and the Fed’s higher rates, there are many reasons for caution on all sides:

Buyers — especially those carrying traditional loans to the offer table — will need to be buttoned up. In addition to making sure their credit is in order to meet tightening bank lending standards, they may need to consider other tactics, such as offers that are higher than the seller’s asking price and other concessions, such as waiving repair costs for problems uncovered during inspection.

On the flip side, sellers may be more motivated by all-cash offers, which typically speed the closing process by removing traditional mortgages — and rising interest rates — from the picture.

As for would-be sellers, they may want to consider waiting to list their homes until the next upswing. Despite geographic pockets of rising values and high demand, a broader nationwide cooling trend may make staying put a prudent choice.

2008 all over again? BofA just launched a test of zero-down-payment, zero-closing cost mortgages for minority communities


Chris Clark
Sat, September 3, 2022


A major American bank has launched a new program to help first-time minority buyers finance a home purchase with no down payment or closing costs. It’s a boon to buyers at a time when rising interest rates and low home inventory have stacked the deck against them.

It’s also the latest response to longstanding criticism that banks favored white borrowers.

Bank of America’s test plan is rolling out in Los Angeles, Dallas, Detroit and Charlotte and aimed at predominantly minority neighborhoods in those cities. It offers loans to minority buyers without the need for a down payment, closing costs or private mortgage insurance (PMI), an extra cost that’s customary for buyers who put down less than 20% of the home’s purchase price.

Crucially, the program also requires no minimum credit score, with eligibility focused instead on a borrower’s solid track record of rent payments and regular monthly bills like utilities and phone. Before applying, buyers must finish a homebuyer certification course that counsels them on ownership responsibilities and other considerations.

But the move quickly drew mixed responses online, as Bank of America (and other large lenders) have been criticized in the past for predatory lending practices — especially when loaning to minority groups.

No money down loans — a timely boost

For buyers in Bank of America’s test cities, the loans come at a critical time.

Rising interest rates are making mortgages more expensive and creating downward pressure on lenders to ensure their loans are as risk-averse as possible. Bank of America’s program is meant to break from this by freeing qualified applicants from down payments, credit score standards and PMI costs.

That reduces many of the barriers to entry for homeownership for buyers in communities fighting against institutional lending that often favors white borrowers.

“Homeownership strengthens our communities and can help individuals and families to build wealth over time,” said AJ Barkley, Bank of America’s head of neighborhood and community lending.

Homeownership among white households was 72.1% in 2020, according to the National Association of Realtors — compared to 51.1% for Hispanic and 43.4% for Black households.

And Black borrowers are denied at twice the rate of the overall borrower pool, according to a recent report from LendingTree.

Bank of America’s plan adds to its $15 billion program that offers closing-cost and down payment assistance to lower income buyers and another initiative aimed at providing $15 billion in mortgages to low- to moderate-income buyers through mid-2027.

The equity risk

However, critics of the program were quick to point out that it could backfire and potentially harm the communities it’s designed to help.

The 2008 housing crisis — which was heavily driven by risky loans to unqualified buyers — taught tough lessons to lenders who were stuck with foreclosed homes after buyers stopped making payments on properties they were never able to afford.
The consequences were devastating: Lenders inherited foreclosed homes and buyers saw their credit scores sink.

It’s likely that at least some of the borrowers under Bank of America’s new program would be considered “subprime” under ordinary lending rules — recalling the ugliest days of the 2008 crisis and supplying critics with easy talking points. Credit agency Experian, for instance, considers borrowers with credit scores between 580 and 669 as subprime.

And while credit scores aren’t always an accurate barometer of a buyer’s purchase power or ability to make timely payments, advocates worry the interest rates required to make up for the low bar the lender is setting could set minority buyers up for failure.

Why businesses are still furiously hiring, even as a downturn looms



Sun, September 4, 2022 , THE ECONOMIST

Should companies be hiring or firing? Demand for workers has roared back over the past two years. But labour supply has not kept pace, and shortages are pervasive. That means many firms need to hire. On the other hand, fears of recession are widespread. Some bosses suspect they already have too many workers. Mark Zuckerberg has told Facebook employees that “there are probably a bunch of people who shouldn’t be here”. Tim Cook, the head of Apple, takes the middle course. Apple will continue to hire “in areas”, he said recently, but he was “clear-eyed” about the risks to the economy.

For now the hirers are trumping the firers. Figures released on September 2nd show that American employers, excluding farms, added 315,000 workers to payrolls in August. The Jobs Openings and Labour Turnover Survey (jolts), released a few days earlier, found 11.2m job openings in July. America’s unemployment rate ticked up from a 50-year low of 3.5% to 3.7%, but only because of a sudden influx of jobseekers to the labour market. Put another way, there were almost two job vacancies for every unemployed person in America (see chart 1). The situation in Britain is similar. The Bank of England forecasts a protracted recession. Even so, Britain has a near-record level of vacancies. Businesses in both countries are hiring as if a downturn might never come.

To understand these puzzling jobs trends, keep three important influences in mind. First, there is always a lot of churn in the labour market. The foundations of economic theory treat firms as if they are all the same, and the economy is just this “representative firm” writ large. In reality, companies differ from one another. Some expand, while others shrink—in booms and in busts. The firms that will be forced to fire workers in any recession are probably not the same as those that are furiously hiring now.

A second factor is what Steven Davis, of the University of Chicago’s Booth School of Business, calls the “great reshuffling”. This refers to a post-pandemic shakeup in employment in response to changes in the preferences of workers. It explains a lot of the frantic activity in the jobs market. The third issue is that organisations have limited bandwidth. In principle, a well-run business could recruit strategically across the business cycle. Some, like Apple, appear to do so. Ryanair hoarded staff during the pandemic hiatus and began hiring aggressively as the economy reopened. Its planes have kept flying this summer, while rivals have cancelled flights. But such firms are exceptions. Most businesses are not nearly as nimble.

Start with the perennial churn in the jobs market. The change in employment captured by indicators such as the monthly non-farm payrolls is a net figure. It is the difference between two flow measures—between job creation and job destruction by enterprises, and between joiners and leavers at the level of workers. These flows are large in comparison with the change in employment. In July payrolls rose by 0.5m, but around 6.5m workers took new jobs and 5.9m left their old jobs.

The jolts data captures the rate of worker flows in a single month (see chart 2). Over the course of a year, an even larger number of people move from job to job, or from not working to working (and back). A rule of thumb is that jobs flow at a slower rate than workers flow. (Imagine a hypothetical firm with two joiners and one leaver: workers move but the net change is one created job). In expansions, the rate of job creation trumps destruction. In recessions, job destruction is greater. But churn is remarkably high at all times. Some hiring firms are also firing firms. Walmart, the largest private employer in America, recently confirmed that around 200 jobs would go at its headquarters. But the retailer said it was also creating some new roles.

While jobs are being created in the aggregate, not every business is furiously hiring. For some firms a cyclical downturn is forcing a rethink on staffing. Planned layoffs at companies like Shopify, Netflix or Robinhood are a correction to previous bouts of rapid hiring. For other businesses, layoffs are a response to deeper structural challenges. In February Ford’s boss, Jim Farley, was blunt about his firm’s challenges: “We have too many people; we have too much investment; we have too much complexity”. In manufacturing, the need to cut jobs invariably means people get fired. But there are industries, notably retailing, where the normal rate of turnover is so high that jobs can be cut without any layoffs. Just stop hiring, and payrolls will shrink.

This leads to the second big issue on recruitment: the great reshuffling. A recent study by Eliza Forsythe, of the University of Illinois, and three co-authors portrays a jobs market in which the demand side was not changed much by the pandemic. Many of the 20m American workers laid off in April 2020 were quickly recalled by their employers. But the supply side was more radically altered. The number of adults in work as a share of all adults—the employment-to-population ratio—remains below its pre-pandemic peak. Much of this is down to older workers retiring from the workforce, say the authors. Another consequence of the pandemic has been a struggle to fill customer-facing jobs. The surge in vacancies is especially marked in the leisure, hospitality and personal-care industries.

It is much the same in Britain. On a boiling hot weekday in August, dozens of businesses have set out their stall on the campus of the University of Middlesex in Barnet, a London borough. These firms are looking to fill a backlog of vacancies. The target applicants are not graduates, but the local unemployed. Among the companies are JH Kenyon, a funeral directors; Metroline, a bus company; and Equita, a debt-collection agency. Many recruiters say applicants used to come to them—a “constant pipeline”, says one stallholder. But now firms need to go out and drum them up.

Employers in America are also stepping up the intensity of recruitment. Skills requirements in ads for customer-facing jobs have been relaxed. Pay has picked up more sharply than in other kinds of work. Ms Forsythe and her colleagues find an increased likelihood of unemployed and low-skilled workers moving into white-collar jobs. Opportunities on the higher rungs of the jobs ladder appear to have opened up, because of retirements.

The third big influence on recruitment trends is organisational capacity. The huge crosscurrents in the economy are taxing the capabilities of business. Apple sells discretionary goods. It has to keep an eye on the cycle, because in downturns people will delay upgrading their Mac or iPhone. But for a lot of firms even the certainty of a recession in 12 months’ time would not be enough knowledge to help them fine-tune their recruitment strategy. They would need to know the magnitude, duration and industry characteristics of any recession, and not only the fact and timing of it. Turning hiring on and off in response to subtle cyclical shifts is not feasible for a lot of firms. Bosses need to ensure the whole organisation is aligned on objectives. Firms, like people, have limited bandwidth.

And recession fears are probably not the main influence on recruitment strategy just now. For many employers, says Mr Davis, the key decision is whether and how to accommodate the desire of employees to work from home. There is a spectrum of responses. At one extreme is Elon Musk, who has gruffly demanded that Tesla employees turn up in the office for at least 40 hours a week or “pretend to work somewhere else.” At the other end is Yelp, a popular review website, which favours a “remote-first” strategy, and Spotify, which has a “work from anywhere” policy. This approach has advantages in a tight jobs market. A firm can cast its recruitment net over a wider area. And there is evidence that remote workers will trade greater flexibility for lower pay. But there are obvious downsides, too. It is tough to sustain corporate culture or unity of purpose when colleagues barely meet.

For some kinds of firms, the cycle will eventually bite. A lot of the historical cyclicality in hiring is down to high-growth startups and newish businesses, says John Haltiwanger of the University of Maryland. In booms, providers of capital—whether venture-capital funds, banks or public-market investors—are willing to fund all kinds of enterprises. But in downturns investors become averse to risk. And young firms without a long track record find it harder to finance their growth. Hiring across the economy then suffers.

It is natural to believe that your firm is recession-proof, and that your rivals will suffer. The archetypal “man in a van”, who specialises in renovations, will struggle next year, says a recruiter at the Barnet jobs fair. Bigger building firms that are part of large infrastructure projects, such as his, have a pipeline of projects. But with workers so scarce, he is as clear-eyed as Mr Cook about what is possible. “You just need to be able to turn up on time and show some willingness and commitment,” he says of his target applicant. “No previous experience is required.”

© 2022 The Economist Newspaper Limited. All rights reserved.

Can anything stop blockbuster US job growth? Why it keeps rolling despite slowing economy, recession worries


Paul Davidson, USA TODAY
Sun, September 4, 2022 

FrescoData has seen sales flatline this year, but that isn’t stopping the San Diego-based email marketing company from adding seven workers in coming months.

Last year, amid dire labor shortages, the 26-employee firm struggled to attract job candidates as it battled larger competitors offering higher pay.

“I’m preparing for the holidays,” says CEO Tony Raval, citing “the hardship that we faced last year not having enough people.”

Now, with recession fears mounting, some of those bigger rivals are laying off staffers, and Raval aims to scoop them up. “We’re looking to take advantage of that,” he says.

Quiet quitting: What is quiet quitting?: Employees suffering pandemic burnout say they've just stopped working as hard

A new gender gap: Men recovered all jobs lost during the pandemic. Women have not.

Millions of businesses are taking a similar approach, helping the labor market defy expectations of a sharp slowdown and remain a pillar of strength in an otherwise wobbly economy. Consumer spending is moderating because of rampant inflation. The economy contracted the first half of the year (though top economists say we’re not in a recession). The Federal Reserve is aggressively raising interest rates to fight soaring prices. And the Fed’s campaign, along with the recession chatter, has hammered the stock market.

Yet somehow the job market has remained surprisingly strong, an achievement worth noting as the nation celebrates Labor Day on Monday. Job growth did slow to 315,000 in August following a blockbuster 526,000 in July, the Labor Department said last week, but that's still historically robust and it pushes the U.S. over the finish line in the recovery of all 22 million jobs lost in the early days of the pandemic. That translates to an average 438,000 monthly advances this year.

Several factors are driving the remarkable showing. Worker shortages have discouraged many businesses from laying off workers and prodded others to stick to their hiring plans despite the economy’s warning signals, economists and staffing officials say.

Also, many industries are still catching up after shedding employees during the COVID-19 recession. Americans have shifted their purchases from goods to more labor-intensive services, like dining out and traveling. And weak labor productivity – or output per hour of work – is forcing many employers to add staffers to meet demand.

“The labor market remains incredibly strong and is likely to remain so,“ says Traci Fiatte, CEO of professional and commercial staffing for Ranstad, an employment agency.

Economists do expect job growth to pull back as the Fed continues to raise interest rates to slow inflation and the economy, but at a slower pace than had been forecast.

Mark Zandi, chief economist of Moody’s Analytics, now expects payroll gains to average slightly more than 100,000 a month by the end of the year, compared with his estimate of about 50,000 several months ago.

A slowdown "is going to happen,” Zandi says.

In the short term, the robust job gains are providing Americans more income that they can spend, propping up the economy and staving off a recession, says Matthew Luzzetti, chief U.S. economist of Deutsche Bank. But the booming payroll additions and rapid wage growth mean the Fed probably will raise interest rates more aggressively to tame inflation, increasing the risk of a downturn by mid-2023, Luzzetti says.

Some employers are already hunkering down. Outlaw, which sells colognes, soaps and other fragrances online, has scrapped its plan to add three employees to its staff of 16 ahead of the holidays, says Danielle Vincent, CEO of the Sparks, Nevada-based company.

Danielle Vincent

“We’re concerned about the uncertainty,” Vincent says. She points to the recession worries and notes the company sells a discretionary product that could be hit hard if consumers tighten their belts.

Many companies, though, are forging ahead with hiring plans or at least avoiding layoffs.

Here’s why:

Worker shortages

Labor crunches have improved since schools have reopened, and enhanced unemployment benefits expired a year ago. But shortages are still severe. In July, job openings neared a record 11.2 million, or two for every unemployed American, Labor Department data shows.

So while lots of businesses are posting smaller sales gains or even declines, many have had such a tough time finding employees that they’re reluctant to lay people off. That haskept elevated net monthly job gains, which include all cuts and hiring.

Even if the economy continues to sputter or slips into recession, “they’re thinking, ‘Sales will rebound and I’ll have a hell of a time" filling the vacancies, Zandi says.

To be sure, some companies have announced significant job cuts in recent months, including Oracle, Amazon, Netflix and Ford. And initial jobless claims, a gauge of layoffs, have trended higher since spring. But they dipped recently and remain historically low. The share of all those employed who were laid off or fired was near a record low at 0.9% in July.

Many employers believe any downturn will be short-lived, and so they figure “'l’ll ride it out because (finding workers) is so expensive,’” says Jim McCoy, senior vice president of staffing firm Manpower. Some companies that need to trim staff are instead retraining employees and shifting them to other departments, McCoy says.

Employers generally aren’t hiring workers who aren’t needed now, McCoy and Zandi say. But Julia Pollak, chief economist at job site ZipRecruiter, says some hoarding is happening.

Raval, head of FrescoData, the email marketing company, says his hiring plans are on track even though sales are flat in part because “it will take three or four months for employees to get trained” so they’re in place for the holidays.

Tony Raval

Of recession jitters, he says, “What if there is no recession?”

Even some firms in the industry hit hardest by rising interest rates – housing – are hiring.

St. Louis-area home sales fell 23.6% in July from the year-earlier period, according to St. Louis Realtors, a trade group. But the Hermann London Group, a real estate brokerage in Maplewood, Missouri, is looking to add two administrative staffers and five to 10 brokers, says owner Adam Kruse.

“I think of it as an opportunity,” Kruse says. “Many realtors are getting scared” and cutting staffers. “I want to be one of those gaining market share.”
Catching up from COVID job cuts

Although the nation has recovered all the jobs wiped out in the pandemic, it’s a few million short of where it would be if the pandemic hadn’t happened. Leisure and hospitality – which includes restaurants, bars and hotels, sectors decimated by COVID-19 – is still 1.2 million jobs shy of its pre-pandemic level.

“If you look at spending at restaurants, it’s fully recovered, but there’s a huge jobs hole,” says Pollak, the chief economist at ZipRecruiter.

Many consumers, meanwhile, are still flush with more than $2 trillion in savings they socked away during the crisis and are resuming activities as COVID-19 eases, she says. Employers also are still struggling to fill longstanding openings created by the labor shortage.

Neema Hospitality, which owns a dozen hotel franchises in the mid-Atlantic region, finally crept close to its normal summer occupancy of about 80% the past few months as Americans hit the road despite record gas prices, president Sandeep Thakrar says. The company has hired 30 permanent staffers and about 20 temporary workers this year, but it still has about 25 openings.

“We’re always understaffed,” he says.

Other businesses say worker deficits are improving.

Forever Floral, which sells handcrafted artificial bouquets online, is adding 25 employees this year, says interim CEO Alex Ledoux. Sales at the 110-employee company have doubled in 2022 as couples hold weddings that were deferred earlier in the pandemic.

Forever Floral interim CEO Alex Ledoux

Despite the labor shortage, Ledoux says, the Ogden, Utah-based company is receiving about 100 applications per opening, versus about 10 earlier in the crisis.

The pivot from goods to services

As the pandemic has waned, Americans have shifted their purchases from TVs, furniture and other goods to services like dining out and moviegoing, says economist Bob Schwartz of Oxford Economics.

But such services require more workers than factories, which rely heavily on labor-saving technology. In July, services accounted for 402,000 of the 528,000 job gains, Schwartz says.

Weak productivity growth

Because the economy is adding workers while gross domestic product has declined, productivity, or output per labor hour, has fallen this year.

THIS DECLINE IN PRODUCTIVITY HAS ANOTHER NAME

One reason for the trend is that many employees who burned out after making up for absent colleagues earlier in the pandemic are resolving not to do more than the minimum. The trend, called "quiet quitting," is forcing employers to hire more workers to churn out products and services.

Whatever is behind this Teflon labor market, workers are reaping the benefits. Last November, Dominick Gula, a call center manager, decided to look for a warehouse supervisor job and got responses from 90% of the 25 or so companies he contacted.

Dominick Gula now works for Forever Floral.

Gula, 33, who lives in Sunset, Utah, got offers from two companies and accepted one from Forever Floral after Ledoux interviewed him personally and raised his proposed wage by 15%. Just months after starting, Gula is poised to get another 20% raise.

He didn’t respond to several prospective employers because they pushed him to start immediately.

“A few seemed desperate,” he says.

This article originally appeared on USA TODAY: U.S. job growth keeps surging despite slowing economy, recession fears

'There is no more retirement': Runaway prices are pushing seniors back to work


Serah Louis
Sat, September 3, 2022 


“Unretirement,” or the act of going back to work after retiring, isn’t just for young Buccs like Tom Brady.

Recent data shows about 3.2% of workers who were retired a year ago have rejoined the workforce — about 1.7 million people.

That means the number of retirees heading back into the labor force is returning to pre-pandemic levels, says a spring report from the Indeed Hiring Lab.

Yet John Tarnoff, a reinvention career coach based in L.A., says unretirement has been an underreported phenomenon for years.

“The costs of living were going up even before the current inflationary cycle that we're in now — costs were rising, fixed incomes were no longer good for people, Social Security as an institution is under threat,” says Tarnoff.

What is driving retired workers back to the labor force?

Spencer Betts — a certified financial planner and chief compliance officer with Bickling Financial Services in Lexington, Massachusetts — says some retirees could be heading back to work due to high job vacancies and wage increases.

Older workers may also feel safer now than they did during the peak of the pandemic, especially if they’re fully vaccinated.

St. Louis Federal Reserve economist Miguel Faria-e-Castro reported over 2.5 million excess retirements due to COVID-19 as of August 2021. Many of these individuals could be heading back to work now that opportunities are available and money is tight.

“Retirement is a misnomer — there is no more retirement,” says Tarnoff. “I think that older workers are going to be caught in a tight squeeze, because they don't have the income overall to keep up with inflation.”

He adds that plenty of older workers may have been pushed out of the workforce during pandemic-related layoffs but didn’t voluntarily choose to retire.

The mean income for households where at least one person is 65 years old or older was at just over $44,000 in 2017, according to the most recent data available from the U.S. Census Bureau. Social Security typically makes up the highest proportion of that income, at $16,560, and then earnings at $13,950.

Betts notes that plenty of older workers may still opt for part-time work once they hit retirement age.

“I think the biggest trend — and it's been happening for many years — is … sliding into retirement, where it’s like, ‘I'm not going to work 40 hours, I'm going to work 30, 20, 10…’”

Higher income means higher taxes

A retiree heading back into the workforce isn’t necessarily going to obtain the same job and salary range that they had before they retired. If you’re looking to come out of retirement, you need to watch out for the potential tax implications that a higher income brings in.

Betts provides an example of a retiree with a consulting gig, which often means filing a 1099 form — a tax form for individuals earning money from a person or entity who is not their employer.

“You might get the same amount of salary. But you're now responsible for both sides of the Social Security tax. So that's naturally like a 9% reduction in your pay.”

Workers who have tapped into their Social Security benefits pay 6.2% on their earnings up to $147,000 — while those who are self-employed face a 12.4% cut that can be offset by income tax provisions.

Your age and at what point you start receiving your benefits can also affect how much Social Security you’re receiving. The full retirement age for those born in 1943 through 1954 is 66, and then gradually increases each year until you hit 67 for those born in 1960 or later.

If you’re below full retirement age, you can make up to $19,560 and receive all your benefits. “If you make more than that, then for every $2 over that number, you gotta give $1 of your Social Security back,” says Betts.

In the year you reach your retirement age, you can make up to $51,960 to receive your full benefits. For every $3 over the limit, $1 will be withheld.

Depending on where you live and how high your state income tax rate is, almost half of your earnings can go to the tax man, adds Betts. “So make sure you don't price yourself too low.”

What else should you know when applying to jobs?

Betts says that if you have the ability to bring in more income, it’s usually going to be a net positive in the long-term.

“They're probably taking less out of their investments, they're able to save more,” he explains. “Maybe they can put a lot of that towards future retirements, towards an IRA or investment account, or paying down debt more quickly.”

When applying for a job, Tarnoff says the most important thing is to focus on your value as an employee — and consider adding new skills to your repertoire as well.

“It's vital that older workers dive in and roll up their sleeves along with everybody else. There is no reason why an older worker can't learn the same remote work skills and technology skills as a younger worker.”

Cleaning up your LinkedIn page and networking is crucial. Tarnoff also recommends zeroing in on the opportunities that best suit your skills and experience, instead of applying haphazardly to hundreds of job postings.

Census Bureau: 3.8 million  U$ renters will likely be evicted in the next two months — why the rental crisis keeps getting worse

PROFITEERING & GOUGING

Brian J. O’Connor
Sat, September 3, 2022

Census Bureau: 3.8 million renters will likely be evicted in the next two months — why the rental crisis keeps getting worse

For the first time ever, the median rent in the U.S. topped $2,000 a month in June — and the increases show no sign of stopping.

Those rising rents mean that households representing a total of 8.5 million people were behind on their rent at the end of August, according to Census Bureau figures. And 3.8 million of those renters say they’re somewhat or very likely to be evicted in the next two months.

The combination of soaring inflation, the end of most eviction moratoriums and rental assistance payments and an extremely low vacancy rate has pushed rents up — and many renters out.

Rents up nearly 25% since before the pandemic

Since 2006, rents have risen faster than home prices, but at the same time, the shortage of available rental units has been steadily increasing since the Great Recession.

In the year before the pandemic, the country recorded a shortage of seven million affordable housing units for low-income renters, according to the Center for American Progress, creating a crisis that left just 37 affordable rental homes for every 100 low-income households looking to rent.

And the homes that are available are often still out of reach. Rent rates are up nearly 25% since before the pandemic, with an increase of 15% in just the past 12 months, according to the real estate tracking service Zillow.

Evictions are up, too, according to the Eviction Lab at Princeton University. In August, evictions were 52% above average in Tampa, 90% above average in Houston and 94% above average in Minneapolis-St. Paul.

While the federal government has distributed the bulk of pandemic-related rental assistance grants, some states and cities have been slow to make the money available to landlords on behalf of tenants who can’t pay their rent.

As of May, the National Low Income Housing Coalition reported that 12 states and the District of Columbia had distributed half of their last assistance allocation, while Idaho, Iowa and Ohio hadn’t spent any of that money. Two states — Nebraska and Arkansas — refused to accept the federal rent assistance money.

Nearly half of renters have seen rent hikes

The annual median household income for all renters in the U.S. is about $42,500, according to Zillow, 37% lower than the national median income of $67,500.

As of early August, the Census Bureau reported that while 56% of renters had household incomes of less than $50,000, 24% of renters surveyed were paying more than $2,000 a month in rent.

Nearly half of all renters — more than 30 million people — had been hit with rent hikes in the past 12 months, with 19% paying a monthly increase of $100 to $250, 7% paying $250 to $500 more and 4% needing to find another $500 a month to stay in their apartments.

To meet higher rents, 57% of renters said they relied on credit cards, loans, savings or selling off some assets, including raiding their retirement accounts.

Despite that, 14% of renters told the survey that they weren’t completely caught up on back rent.

Rising rents hurting some more than others

Rising rents are hitting minorities harder than others, according to a Pew Research Center analysis of census data.

Among households headed by Black adults, 58% are renters, while 52% of those headed by Latino adults rented. That compares to a rental rate of slightly less than 40% of Asian-led households and 25% for households led by non-Hispanic white adults.

While inflation gets the blame for much of the problem with high rents, the cure for high inflation also may be contributing to the tight rental market, as renters who wanted to become homeowners are increasingly being priced out of the housing market.

As the Federal Reserve has increased interest rates to cool off the economy and bring down inflation, that move has pushed U.S. mortgage rates up from less than 3% a year ago to 5.13% by mid-August.

The combination of higher home loan rates and already high home prices has resulted in an 18% drop in mortgage applications from August 2021 to a 22-year low.