US unemployment rate falls to 50-year low of 3.5%

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The US unemployment rate has fallen to a 50-year low, possibly easing recession worries after recent weak economic data.

The Labor Department figures showed that the rate fell to 3.5% in September from 3.7%, with the economy adding 136,000 jobs last month.

In addition, August data was revised up to 168,000 jobs created instead of the previously reported 130,000.

However, wage growth was unchanged and manufacturing jobs fell in September.

The report came on the heels of a string of weak economic reports, including a plunge in manufacturing activity to more than a 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016.

There are fears that the Trump administration’s 15-month trade war with China is spilling over to the rest of the US economy, which has been one of the few bright spots in a world where many other countries are experiencing marked slowdown.

The US-China trade dispute has eroded business confidence, hitting investment and manufacturing.

Despite the continued moderate employment growth and sharp drop in the jobless rate, many economists still expect the Federal Reserve to cut interest rates at least one more time this year.

The US central bank cut rates in July for the first time since 2008 and cut them again last month. It is trying to keep the longest economic expansion in US history, now in its 11th year, on track.

September’s job gains were below the monthly average of 161,000 this year, but still above the roughly 100,000 needed each month to keep up with growth in the working-age population, according to economists.

Manufacturing shed 2,000 jobs last month, the first decline since March, after hiring 2,000 workers in August. The sector is seen as having borne the brunt of the trade wars.

This week, Washington announced tariffs on aircraft , other industrial products and agricultural products from the European Union as part of a dispute over aircraft subsidies given to Boeing’s rival Airbus.

What’s been worrying the markets?

Shares were hit earlier this week by some disappointing economic surveys.

While the manufacturing sector has been the weak point of the US economy, the services sector had been performing more strongly.

“You’ve had this dichotomy, manufacturing extremely weak, service sector holding up and looking fairly resilient,” said Neil Shearing, group chief economist at Capital Economics.

However, he said that on Wednesday, the non-manufacturing purchasing managers’ index – which tests the mood of businesses – showed its slowest rate of growth for three years.

“The key question has been, OK, manufacturing’s weak but so long as the service sector holds up and continues to be resilient, the US economy can avoid recession,” Mr Shearing said.

Jim Reid, a strategist at Deutsche Bank in London, said that the US has been the “bright spot in a pretty moribund” western world, growing at about 2% to 2.5% a year, while Europe slips towards 0.5% or even 0% growth.

It is just a US problem?

Mr Shearing said that the manufacturing sector is weak globally.

“The essence of the issue is that since May this year, the manufacturing data both in the US and globally has been pretty horrific,” he said.

But economies are less reliant on manufacturing than in the past. In the US, for instance, it makes up about 12% of the economy.

“We tend to think of the economy being about making things, but actually in the modern era it’s more about services – health, retail, leisure,” he said.

Why does the American economy matter?

The US is still the world’s biggest economy – despite the growth of China – and if it slows down the rest of the world can be expected to do so too. It is almost impossible to have a US recession without the rest of world suffering too.

Mr Shearing said it is not just about its size. “It’s the consumer of last resort,” he said, describing the US trade deficit which President Donald Trump has complained about.

“What the trade deficit is telling you is that the US consumes more than it produces,” he said. “If it slows, there’s repercussions”.

What does it mean for US interest rates?

Federal Reserve chairman Jay Powell has been under pressure from President Trump to cut rates.

British Airways planes
Image copyrightPA MEDIA

British Airways pilots have begun a two-day strike in an ongoing dispute over pay and conditions.

Tens of thousands of passengers have been told not to go to airports, with the airline cancelling some 1,700 flights due to the disruption.

The pilots’ union Balpa said BA management’s cost-cuts and “dumbing down” of the brand had eroded confidence in the airline.

But BA chief Alex Cruz said investment in the operator had never been so big.

IAG net profit

Both sides say they are willing to hold further talks, but no date has been set. The pilots are currently scheduled to stage another strike on 27 September.

Balpa’s general secretary, Brian Strutton, said: “It is time to get back to the negotiating table and put together a serious offer that will end this dispute.”

But he told the BBC that while BA says publicly it is willing to talk, “in private they say they are not going to negotiate”. And although the headline dispute is about pay, he said there was also deep resentment about the airline’s direction.

“BA has lost the trust and confidence of pilots because of cost-cutting and the dumbing down of the brand… management want to squeeze every last penny out of customers and staff,” Mr Strutton said.


At the scene

Simon Jones, BBC News, Heathrow

Terminal 5
BA’s Terminal 5 was deserted on Monday morning

On a Monday morning, Terminal 5 would normally be bustling with people, jetting off on holiday or business trips. Today, it seems more like a ghost town. The staff far outnumber the handful of passengers. Those affected had been warned not to come to the airport.

The departure board shows only 10 flights leaving for the entire day. The cafes are pretty much deserted too, and the taxi rank has been growing in size, with no passengers to pick up. The strike here is clearly having a big effect.


Mr Cruz defended the airline against Mr Strutton’s claim, saying it had never in its history embarked on such a big investment programme in services and training. He said the airline was “ready and willing” to return to talks with Balpa.

It is the first time BA pilots have walked out and the action could cost the airline up to £40m a day. Some 4,000 pilots are involved in the strike.

In a statement, BA said: “We understand the frustration and disruption Balpa’s strike action has caused our customers. After many months of trying to resolve the pay dispute, we are extremely sorry that it has come to this.

“Unfortunately, with no detail from Balpa on which pilots would strike, we had no way of predicting how many would come to work or which aircraft they are qualified to fly, so we had no option but to cancel nearly 100% of our flights.”


Analysis

By Katie Prescott, Business reporter

It’s unlikely that passengers will see that much disruption at airports. Most of the real problems have happened over the past few weeks as people have rushed to make other travel arrangements, re-book their flights or apply for refunds.

In terms of the negotiations, both sides say that they are open to talks but neither has responded to the other, underlining just how acrimonious their relationship has become.

Ostensibly this is about pay, but there’s also underlying discontent among pilots with the company’s strategy. Some say they don’t like British Airways’ cost-cutting drive and they want to see more of the benefits of their bumper profits.

But industry insiders say BA has made those profits because they have cut costs. They also say airlines are expensive and unpredictable beasts to run and are in thrall to a fluctuating oil price (jet fuel accounts for a quarter of their operating costs) and random acts such as drones in the air.

If they don’t come to an agreement in the next few weeks, another strike is scheduled for 27 September. The result of the pilots’ union ballot allows strike action until the start of next year, but Balpa says it hopes to resolve the situation well before then.


How did we get here?

Pilots previously rejected a pay increase worth 11.5% over three years, which was proposed by the airline in July.

Balpa says its members have taken lower pay rises and made sacrifices during more stringent times for the airline in recent years. The union insists that now BA’s financial performance has improved – its parent company IAG reported a 9% rise in profits last year – they should see a greater share of the profits.

BA says its pilots already receive “world-class” salaries. The airline believes the pay offer is “fair and generous”, and that if it is good enough for BA cabin crew, ground staff and engineers – whose unions, Unite and the GMB, have both accepted it – it should be good enough for pilots, too.

The airline says once the 11.5% pay deal has fully taken effect in three years’ time, some BA captains could be taking home more than £200,000 a year, allowances included.

British Airways planeImage copyrightGETTY IMAGES

Two weeks ago, BA informed some customers they would have to re-book their flights next week due to the planned industrial action.

Unfortunately, due to “human error” the airline mistakenly sent emails to some customers whose flights were not actually affected, throwing BA’s customer service operations into a tailspin over the bank holiday weekend.

On Friday, BA said the “vast majority” of affected customers had now either accepted a refund or rebooked, either on alternative dates or with other airlines.

What rights do passengers have if their flight is affected?

BA advice says you can request a full refund, rebook your flight for another time in the next 355 days, or use the value of your fare to fly to a different destination.

If your flight has been cancelled due to a strike, the Civil Aviation Authority sayspassengers also have a legal right to a replacement flight at BA’s expense to get you to your destination, even if this means travelling with a different airline.

Most affected passengers would already have been in contact with BA, but they may not have considered additional costs, such as airport parking. They are advised to keep receipts for these extra costs, and BA said it would look at refunding them on a case-by-case basis.

Facebook, Google and Twitter need to do more to tackle fake news, E.U. says

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“The tactics used by internal and external actors… are evolving as quickly as the measures adopted by states and online platforms,” E.U. officials said.

Facebook, Google and Twitter ramped up their efforts to fight fake news ahead of elections last month but “more needs to be done” in the face of ongoing threats from Russia, E.U. officials said Friday.

In a joint statement and report, the E.U. reported evidence of “coordinated inauthentic behavior” such as bots and fake accounts trying spread divisive content on online platforms ahead of the European Parliament elections at the end of May. The E.U. added it found “continued and sustained disinformation activity” by Russian sources aiming to influence voter preferences and suppress turnout.

“The tactics used by internal and external actors, in particular linked to Russian sources, are evolving as quickly as the measures adopted by states and online platforms,” the statement said.

The E.U. report found it was too early to identify whether there was a “distinct cross-border disinformation campaign” targeting the European elections.

Social media platforms like Facebook, YouTube and Twitter have faced backlash from lawmakers around the world for failing to contain the spread of fake information in election campaigns. The E.U. said the companies have made progress

Facebook has been stepping up its fight against fake accounts in recent months. In May, the company reported it removed 2.2 billion fake accounts in the first quarter of 2019, nearly double the amount from the prior quarter. Facebook also toughened its requirements around political advertising on the platform ahead of E.U. elections.

“Although Facebook extended its transparency to issue-based ads and Google and Twitter did not, questions remain about the effectiveness of the transparency measures taken by all signatories,” the E.U. report said. “Furthermore, the platforms did not make sufficient progress in increasing the transparency of websites hosting ads, partly due to the lack of engagement from the advertising industry.”

Facebook, Google and Twitter agreed to an E.U. “Code of Practice on Disinformation ” in 2018, making commitments to submit monthly reports on their efforts to remove fake news ahead of the election.

“People want accurate information online and the work undertaken under the Code shows how Governments, tech companies and trade bodies can work together to tackle online misinformation. But the fight against false news will never be over. That is why we are making significant investments to remove fake accounts and clickbait and to promote high-quality journalism and news literacy,” a Facebook spokesperson said in a statement Friday.

Meanwhile, a spokesperson from Twitter said in a statement that it is “deeply committed to protecting and supporting the public conversation. During the E.U. Elections, Twitter took proactive steps to encourage healthy democratic debate and ensure E.U. citizens could access credible, quality information on the service.”

It further added: “We established a high-level cross-functional elections team, introduced a political campaign ads policy, and launched a new tool which enables users to report deliberately misleading election-related content. As with every election around the world, we’ll continue to enforce our policies in line with our singular priority: to improve the health of the public conversation.”

The European parliamentary election is the second-largest democratic election in the world, following India. The E.U. reported 51% of voters turned out for elections this year, the highest level in two decades. Top E.U. jobs – including that of the head of the European Union – are still up for grabs with a decision expected on June 18.

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