Study: US Middle-Class Families Are No Longer In The Majority

Study: US Middle-Class Families Are No Longer In The Majority

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — The nation’s middle class, long a pillar of the U.S. economy and foundation of the American dream, has shrunk to the point where it no longer constitutes the majority of the adult population, according to a new major study.

The Pew Research Center report released Wednesday put in sharp relief the nation’s increasing income divide, which is certain to be a central issue in the 2016 presidential race. It also highlights how various economic and demographic forces have eroded long-held ideals about maintaining a strong, majority middle class.

Many analysts and policymakers regard the shift as worrisome for economic and social stability. Middle-income households have been the bedrock of consumer spending, and many liberals in particular view the declining middle as part of a troubling trend of skewed income gains among the nation’s richest families.

Median-income voters, particularly non-college-educated men, are also at the core of billionaire Donald Trump’s surprising surge in the Republican presidential campaign. His supporters’ sense that their once-secure middle-class standing is in danger of slipping appears to be fueling much of the anger against the government and immigrant groups.

The tipping point for the middle class occurred over the past couple of years of the recovery from the Great Recession as the economy continued to reward highly educated workers, well-to-do investors and those with technical skills.

Rapid growth of upper-income households, coupled with an increase in less-educated, low earners, has driven the decline of the middle-income population to a hair below 50 percent of the total this year, Pew found. In 1971, the middle class accounted for 61 percent of the population, and it has been declining steadily since.

The Pew research found that the shares of upper-income and lower-income households grew in recent years as the middle shrank — with the higher-income tier growing more. In that sense, the nonpartisan group said, “the shift represents economic progress.”

Pew defined middle class as households earning between two-thirds and twice the overall median income, after adjusting for household size. A family of three, for example, would be considered middle income if its total annual income ranged from about $42,000 to $126,000. Pew analyzed data from the Census Bureau and the Labor Department, as well as the Federal Reserve.

Most Americans have traditionally identified themselves as middle class, even those at the top and bottom, reflecting a kind of cultural heritage tied to the American dream of self-reliance. But the Great Recession and subsequent slow recovery have shaken that image.

A Gallup survey this spring showed that just 51 percent of U.S. adults considered themselves middle or upper middle class, with 48 percent saying they are part of the lower or working class. As recently as 2008, 63 percent of those polled by Gallup said they were middle class.

This change in self-identification — and the reality of the shift documented by Pew — carries political ramifications as the state of the middle class continues to be a major focus of the economic debate in the presidential campaigns, with candidates, in time-honored fashion, invoking the middle class in their speeches and policy statements. President Barack Obama has dubbed his programs “middle-class economics.”

Although the median incomes of upper, lower and middle tiers have all lost ground since 2000, primarily because of the Great Recession in late 2007 to mid-2009, upper-income households saw the smallest decline through 2014, the Pew study found.

Seen over a longer period, from 1971 to 2014, the median income of all upper-income households increased 47 percent to $174,625. The median income for the middle tier rose 34 percent to $73,392, and for the lower income group, it was up 28 percent to $24,074. The median marks the halfway point.

Pew’s findings add to strong evidence that the middle class has been thinned partly by a decline in manufacturing due to competition from imports as well as a broader polarization of jobs that has favored the most educated and technically skilled workers.

The Pew study did not address economic mobility — an issue that many economists believe is more important than the change in income distribution. But research on income mobility across generations has found the U.S. as a whole lags other Western countries.

The declining middle also reflects demographic shifts, such as the arrival of more low-skilled immigrants, which can be seen in the overall slippage of Latinos in the income ladder since 1971. By race, black adults made the biggest strides in income status from 1971 to 2015, although they are significantly less likely to be middle income compared with adults overall.

At the same time, the increase of women in the workforce since the early 1970s has tended to boost household incomes, as has higher college education enrollment. And of course, strong gains from stocks and high-tech ventures have fueled incomes for some.

As of this year, 9 percent of Americans are in what Pew called the highest-income category — up from 4 percent in 1971 and 5 percent in 1991. A household with three people had to have an income of more than $188,000 last year to be in this highest bracket.

In contrast, the share of American adults in the very lowest income category — a three-person household making less than $31,000 — rose to 20 percent of the U.S. adult population this year, from 16 percent in 1971.

“The distribution of adults by income is thinning in the middle and bulking up at the edges,” Pew said.

(Times staff writer Samantha Masunaga in Los Angeles contributed to this story.)

©2015 Tribune Co. Distributed by Tribune Content Agency, LLC.

Photo: Republican presidential candidate Donald Trump takes the stage at a campaign rally in Waterville Valley, New Hampshire December 1, 2015. REUTERS/Brian Snyder


Jobless Rate Down; Wages Flat

Jobless Rate Down; Wages Flat

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — Despite another month of solid job growth and an economy closing in on full employment, the picture of America’s labor market looks decidedly mixed — and is likely to keep the Federal Reserve in a wait-and-see mode on raising interest rates.

Although employers added 223,000 jobs in June, in line with forecasters’ expectations, workers’ average wages flattened last month after a promising increase in May, the Labor Department said Thursday.

And while the jobless rate in June fell to a new post-recession low of 5.3 percent, from 5.5 percent in May, it dropped for the wrong reason: a large exodus of workers from the labor force.

The shrinking size of the workforce — the number of people working or looking for jobs — surprised analysts. Some experts have been looking for an uptick as the jobless rate has fallen steadily. Instead, the so-called labor force participation rate sank last month to the lowest level since October 1977.

“It is worrisome,” said Patrick O’Keefe, economic research director at CohnReznick, an accounting and consulting company. When combined with sluggish earnings, lower labor participation means less tax revenue and other costs to society for unused and underutilized human resources.

“We’re seven years into the recovery and labor participation is bottom-bouncing at a 38-year low — and it’s not showing signs of turning up,” he said.

Thursday’s report did provide a reassuring sign that the economy, which began its recovery from the Great Recession in mid-2009, still has some legs.

Hiring in the United States has bounced back from an awful winter quarter, and it looks strong amid rising global turmoil.

U.S. exports already have been hurt by weakness abroad, with risks increasing recently because of the chaos in Greece and slowing growth in China.

Job growth in June matched the average of the previous two months and was broadly based.

Business and professional services, retail, health care and finance industries all added a healthy batch of new jobs, while construction, manufacturing and government were essentially flat.

But that otherwise bright news was eclipsed by the disappointing wage and labor-force data.

Average hourly earnings in June remained flat at $24.95 for all private-sector workers. That was in part because average manufacturing pay fell by a nickel to $25.08, while hourly earnings of service workers rose by just a penny to $24.69.

For all workers, hourly wages were up just 2 percent in June from a year ago, about the same sluggish pace at which it has been growing over the last several years.

President Barack Obama, in a speech Thursday in Wisconsin, acknowledged that workers’ pay has been a disappointment.

While noting that the private sector has now added jobs for a record 64 straight months, he said, “We’ve got to get folks’ wages and incomes to keep going up. We’ve got to make sure their hard work is getting them somewhere.”

Economists said that the latest employment statistics suggest most employers aren’t in any hurry to bump up pay, despite reported pockets of shortages for technical workers in areas such as San Francisco.

Harry Holzer, a professor at Georgetown University, said companies are getting their needs met without feeling pressure to raise wages. “Employers simply aren’t desperate for bodies,” he said.

The lack of significant wage growth is one factor in the low labor participation rate and last month’s drop in the unemployment rate.

Most analysts had predicted that the June jobless figure would dip a notch to 5.4 percent, but it fell more sharply as the labor force declined by a whopping 432,000 last month after an increase of similar magnitude in May, the Labor Department said.

While the labor force data are volatile from month to month, there has been persistent weakness in the participation rate of workers.

With more women joining the job market and the growth in the economy, the share of the working-age population in the U.S. labor force rose steadily from about 60 percent in the late 1960s to a peak of 67.3 percent in early 2000. But that share fell dramatically in recent years and is now down to 62.6 percent.

Gordon Breault of Columbus, Ohio, has been actively searching for work since he was laid off last August from his technology consulting job.

The 60-year-old father of two girls was in the office of Career Transition Institute on Thursday and said he was pressing on with his job hunt. But he said some of his acquaintances at the volunteer job-search office had taken early retirement.

“It’s not going to be the retirement they wanted,” he said, “but they don’t want to get back in the rat race.”

Photo: COD Newsroom via Flickr

Analysis: Why Everyone Is Fighting So Hard Over The Pacific Rim Trade Deal

Analysis: Why Everyone Is Fighting So Hard Over The Pacific Rim Trade Deal

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — The long, acrimonious legislative battle that gave President Barack Obama the power needed to complete trade agreements reflects both the steady march of globalization and also the nation’s deep ambivalence about the consequences of America’s widening economic engagement with the world.

With Wednesday’s 60-38 Senate vote to pass legislation on trade-promotion authority, or fast track, the Obama administration can turn to finishing negotiations on the Trans-Pacific Partnership, a legacy-making deal for the president that would join the markets of 12 Pacific Rim nations accounting for 40 percent of the global economy.

Tough issues involving sensitive farm and dairy products have to be resolved, and negotiators must also finalize rules and standards on intellectual property, labor, environment and other areas related to trade and investment. Organized labor and other groups that fought against fast track vowed not to let up in their campaign to block what they see as another trade deal that will destroy American jobs and depress wages.

And it will likely be year-end at the earliest before Congress has a final say on the accord. Lawmakers will not be allowed to amend the pact and it’s by no means certain they will approve it.

“I do not believe the vote on TPP will be easy,” said Susan Schwab, a former U.S. trade representative in the George W. Bush administration, of the Trans-Pacific Partnership. “That will be the next battle.”

History, though, is on Obama’s side: Every U.S. trade agreement presented to Congress by a president after winning fast track has eventually passed. In that sense, the Pacific deal, while the biggest yet attempted, is only the latest in a decades-long revolution set off by sweeping changes in technology, communications and transportation as well as economic policy all around the world _ changes that seem to go well beyond the power of any single government, political party or interest group to control.

“The reality is, in 2015, globalization is a fact of life,” said Sen. Ron Wyden, D-Ore., a pivotal figure in swaying enough Democrats to support fast track, a measure that limits Congress to a simple yes-or-no vote on completed trade agreements.

Certainly the benefits of globalization are clear: “We have $10 T-shirts, $12,000 basic cars and $500 computers,” noted Robert Shapiro, a top economic adviser to President Bill Clinton, who pushed through the North American Free Trade Agreement in 1993. “None of that would have been possible without globalization.”

But the costs are also clear: Hundreds of thousands of manufacturing and other jobs have moved overseas to countries where workers are paid less, have fewer benefits and enjoy a lower standard of living than the American workers who once held those jobs.

Nor have the costs been confined to industrial workers. Many white-collar jobs in law, medicine and accounting, to name a few, are also moving overseas as global education rates improve and the leveling influence of technology intensifies. So when free-traders claim everyone has benefited from globalization, a growing chorus of trade critics says, “Not so fast.”

There’s evidence, for example, that China’s rise in the world trading system over the last two decades has had a significant effect on American jobs. Researchers at the Massachusetts Institute of Technology and other institutions estimate that soaring import competition from China has resulted in a net loss of more than 2 million domestic jobs from 1999 to 2011. Other economists say offshoring, or the moving of U.S. factories and jobs to other countries, also has contributed to broader wage declines for American workers.

Lingering frustration from the Great Recession, which has left many U.S. workers struggling, has raised those stakes even higher, spurring Democratic lawmakers to challenge their party’s own president over the trade deal. Obama had just enough Senate Democrats in his corner to get to Wednesday’s vote, which came only after an initial rebuffing of the fast-track package by House Democrats earlier this month.

The intensity of the fight reflects an understanding that the Pacific trade deal, more than any other by virtue of its size and scope, will serve as a model for years to come. The Trans-Pacific Partnership includes Japan, Canada, Mexico and Vietnam, but officials see China, the Philippines and others potentially joining the U.S.-forged accord some day.

“Everybody sees the stakes being very high because the TPP is designed to be infinitely expandable,” said Thea Lee, the AFL-CIO’s deputy chief of staff. She acknowledged, however, that the odds are against those opposing the deal, noting that “once fast track is given, there’s no incentive to change course on TPP itself.”

Both Obama and his trade critics, including populist Sen. Elizabeth Warren, D-Mass., and presidential candidates Bernie Sanders, I-Vt., and to a lesser degree presidential front-runner Hillary Rodham Clinton, insist that protecting Americans workers is their top priority. To soften the hit for workers, many Democrats want Congress to extend federal retraining aid for those hurt by intensified foreign competition. Funding for that program, which economists consider inadequate, was initially tied to fast track but is now expected to face a separate vote later this week.

But beyond that, Democrats hold vastly different perspectives on the Pacific trade deal. Obama and many others argue that it was imperative for the U.S. to chart the path of global trade rather than follow China or anybody else.

“The rest of the world is still waiting for the U.S. to show global leadership on trade, and it won’t be able to lead globally unless it succeeds regionally” with the Pacific Rim deal, said James Bacchus, a former Democratic House member from Florida and onetime chairman of the World Trade Organization’s appellate body.

Yet many others have deep reservations about some of the proposed contents of the Trans-Pacific Partnership, which have been seen by lawmakers or leaked out from the secret talks.

As long ago as 1999 in Seattle, massive protests against globalization were mounted at a meeting of the World Trade Organization. The influence of the protests was marginal at best; the next year China joined the WTO.

Union leaders, consumer groups and others opposed to the Pacific deal are hoping for more lasting results this time. Once negotiations are completed, the fast-track legislation calls for the final trade package to be made public for 60 days before the president signs it and delivers it to Capitol Hill for a vote.

Whatever the outcome, “the United States is not withdrawing from globalization,” said Shapiro, the Clinton administration economist. “Globalization is simply becoming more universal, broader. You don’t really have an option to say no anymore. The option is, how do you get the largest number of your people to prosper through it?”

(c)2015 Tribune Co. Distributed by Tribune Content Agency, LLC.

Photo: AFGE via Flickr

U.S. Economy Creates A Strong 280,000 Jobs In May

U.S. Economy Creates A Strong 280,000 Jobs In May

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — Employers in the U.S. added a robust 280,000 jobs last month and average workers’ earnings ticked higher — reassurance that the six-year-old economic recovery remains on track despite faltering in the weather-marred first quarter.

The nation’s unemployment rate ticked higher, to 5.5 percent in May from 5.4 percent the previous month, but that was largely because more people entered the labor market.

The Labor Department’s report Friday also had some encouraging news on the wage front: The average hourly earnings of all private-sector workers rose eight cents to $24.96 in May, which was up 2.3 percent from a year ago. Though still moderate, it has risen steadily from an annual gain of two percent in February.

Job growth in May was broad-based and far exceeded analysts’ expectations. Forecasters were looking for a similar increase as April’s growth of 221,000. Adding to the bright news, Labor officials revised up the jobs added in March to 119,000 from the previously reported 85,000.

All in all, the report affirms the view that the dismal economic numbers earlier in the year were largely the result of the harsh winter and work stoppages at West Coast ports. Economic output shrank in the first quarter, deflating hopes that this year would be a breakout year for growth.

Friday’s employment statistics, however, suggest there is still good steam left in the U.S. economy, which next month enters its seventh year of recovery from the Great Recession.

With the new May data, job growth has averaged 217,000 in the first five months of this year. That is down from an average of 260,000 a month in 2014, but still a solid pace that is about double what is needed to absorb the population growth and new entrants to the labor force.

Analysts also were heartened by the gain in wages, which have been slow to come despite an economy that is approaching full employment.

“While still weak, as the labor market continues to tighten, we expect to see further acceleration in wage growth in 2015,” said Gad Levanon, who follows the job market for the Conference Board, a New York-based employer-sponsored research group.

Photo: Unfinished Business via iStock

Bipartisan Agreement Gives Trade Pact A Boost

Bipartisan Agreement Gives Trade Pact A Boost

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — Congressional leaders reached agreement Thursday on a bipartisan bill that should ease passage of a sweeping Pacific Rim trade deal, giving a boost to one of President Barack Obama’s top foreign policy goals but putting him in an unusual alliance with Republicans against many in his own party.

The so-called fast-track legislation was seen as a necessary step for the White House to bring to a conclusion the long-delayed Trans-Pacific Partnership.

Proponents said the 12-nation trade deal would deliver significant benefits by opening markets and establishing rules on commerce and investment that will help American workers and an array of U.S. industries, including West Coast ports, entertainment companies and drug makers.

The Trans-Pacific Partnership is the economic centerpiece of Obama’s policy shift toward Asia. He has staked his legacy as the self-proclaimed “first Pacific president” on completing the deal, even at the expense of alienating many Democrats who remain deeply suspicious of claims that free-trade deals are good for American workers.

While Obama and many businesses lauded the agreement announced Thursday by key House and Senate leaders, Democratic lawmakers, trade unions and environmental groups responded with a flurry of statements and news conferences denouncing the legislation.

The AFL-CIO said it would launch a large-scale campaign to pressure more than 50 Democratic members of Congress who may be on the fence to vote against the bill.

Fast-track authority would let Obama strike a trade agreement with 11 other Pacific Rim countries, including Japan, Canada and Mexico, with the assurance that Congress must approve or reject it with no amendments. The Trans-Pacific Partnership negotiations are in the last stages, but Japan and some other countries have been reluctant to show all their cards, concerned that Congress might alter the final agreement.

The push to pass the bill will trigger a high-stakes political battle. Republican leaders generally favor speeding up the path to a trade agreement and have highlighted the Trans-Pacific Partnership as a rare issue of agreement with the Obama administration.

But the president will need to overcome resistance from many Democrats worried about the trade pact’s impact on U.S. jobs. Some tea party Republicans, particularly in the House, also complain the president has already exceeded his executive authority and should not be given new powers.

The issue also is likely to play a role in the 2016 presidential campaign, particularly for Democratic front-runner Hillary Rodham Clinton. She will face pressure from unions and progressive Democrats to oppose fast-track authority and the agreement, though it was her husband, former President Bill Clinton, who oversaw passage of the last big trade pact, the North American Free Trade Agreement.

Obama vowed to take congressional concerns into consideration, but stressed that the trade pact was critical to boosting U.S. exports and responding to the economic threat from China, which would not be part of the agreement. The pact, one of the largest in history, would join countries that make up 40 percent of the world’s gross domestic product.

“It’s no secret that past trade deals haven’t always lived up to their promise, and that’s why I will only sign my name to an agreement that helps ordinary Americans get ahead,” Obama said Thursday.

“At the same time, at a moment when 95 percent of our potential customers live outside our borders, we must make sure that we, and not countries like China, are writing the rules for the global economy,” he said.

Democratic lawmakers and opponents of fast-track authority complained that Trans-Pacific Partnership negotiations have been conducted in secrecy and said it would be a mistake for Congress to give up its ability to change elements of an agreement before voting on it. Liberal Democrats such as Sen. Elizabeth Warren, D-Mass., are expected to launch a fierce legislative push to block the bill.

Opponents also warn the pact will hurt the environment, kill U.S. jobs and benefit mostly large multinational corporations. Hollywood has been lobbying hard for the deal, which promises to bring tighter copyright protections for movie and music companies.

Among critics of the proposed agreement is the International Longshore and Warehouse Union.

“The ILWU handles containers that represent millions of outsourced and offshore industrial jobs,” said Craig Merrilees, an ILWU spokesman. The agreement is “a grab-bag of goodies for corporate America.”

Thursday’s compromise, aimed at getting enough Senate Democrats to break with their party to support the deal, would require White House trade officials to provide Congress with greater access to the terms of the deal and make updates and full details available to the public before it is signed.

The bill also includes a mechanism that would essentially revoke fast-track authority should U.S. trade negotiators fail to meet certain objectives, including promoting human rights, improving labor conditions and safeguarding the environment, said Sen. Ron Wyden, D-Ore., the ranking Democrat on the Senate Finance Committee.

Wyden, whose support for fast-track authority was seen as key to bringing along other Democrats, struck the deal with Sen. Orrin G. Hatch, R-Utah, the Senate panel’s chairman, and Rep. Paul D. Ryan, R-Wis., head of the House Ways and Means Committee.

In announcing the bill, the three lawmakers issued a joint statement saying that the legislation “establishes concrete rules for international trade negotiations to help the United States deliver strong, high-standard trade agreements that will boost American exports and create new economic opportunities and better jobs for American workers, manufacturers, farmers, ranchers, and entrepreneurs.”

Democratic lawmakers, however, said the measure — introduced in the Senate and to be followed in the House — did not include any language to prevent currency manipulation and was no better overall than the previous fast-track legislation that expired in 2007.

“It’s worse than the (previous) version,” said Rep. Brad Sherman, D-Calif., who called the legislation a “sellout.”

“Those are noble goals that won’t be enforced in any way,” he said of the provisions on human rights, which were not in the prior fast-track authority.

A separate but similar House version of the legislation could face a tougher test as the ranking member on the House Ways and Means Committee, Sander Levin, D-Mich., and other top Democratic lawmakers are opposed to fast-track. Sherman said he expected House Republicans to try to win a few more Democrats by tacking on sweeteners, such as aid for Africa.

(Times staff writer Stuart Pfeifer in Los Angeles contributed this report.)

(c)2015 Tribune Co., Distributed by Tribune Content Agency, LLC

Photo: Bridget Coila via Flickr

IMF Sees Modest, Uneven Growth In Global Economy

IMF Sees Modest, Uneven Growth In Global Economy

By Don Lee, Tribune Washington Bureau (TNS)

Global economic growth is likely to remain modest and highly uneven, and the longer-term prospects are even more sobering, according to the International Monetary Fund.

The IMF, in its latest outlook released Tuesday ahead of its spring meeting in Washington later this week, sees the U.S. economy expanding at a robust 3.1 percent this year, up from 2.4 percent last year.

That’s less optimistic than the IMF’s forecast in January, which predicted U.S. growth at 3.6 percent this year; the downgrade reflects the weak first quarter and strong dollar that is weighing on American exports.

The U.S. is still expected to be the main locomotive for the world economy, which is projected to grow 3.5 percent this year, up just a notch from 3.4 percent in each of the last two years. By global standards, these are moderate rates and well below pre-recession levels.

During the 2008 financial crisis and in its immediate aftermath, it was the sluggish performance of advanced economies like the U.S. that weighed on the world, while developing countries led by China pushed ahead. The tables have since turned.

Economic output in rich countries is expected to accelerate to 2.4 percent this year and next, up from 1.8 percent this year. By comparison, the IMF said growth in the developing world will weaken to 4.3 percent this year from 4.6 percent last year and 5 percent in 2013.

One big factor in the divergent trends is energy and other commodities. The steep fall in prices of oil and metals such as copper is generally a plus for the U.S. and Europe, but are taking a toll on big exporting nations such as Russia, Brazil, and Nigeria.

Meanwhile, growth in China, the world’s largest developing nation, is likely to keep sliding as authorities move to tamp down excessive investments in real estate. The IMF reckons China will expand 6.8 percent this year, down from 7.4 percent last year, and then slide further to 6.3 percent next year.

The IMF’s projections for the U.S. are more bullish than other forecasts, including that of the Federal Reserve. Besides the strong dollar, risks to the American economy include geopolitical instability and the uncertainty of monetary policy as the Fed prepares to hike interest rates for the first time in nearly a decade.

Longer term, the IMF’s latest World Economic Outlook paints a picture of lowered expectations.

The lender of last resort warned that the world’s potential growth, or the maximum speed of economic activity before inflation heats up, will be lower than in the past. That’s partly because of the lingering effects from the financial crisis, but has more to do with longer-term trends such as slowing productivity and population growth.

“More subdued growth prospects lead, in turn, to lower spending and lower growth today,” Olivier Blanchard, the IMF’s chief economist, said Tuesday.

The IMF’s managing director, Christine Lagarde, said this “new mediocre” threat could be the “new reality” for the global economy, unless nations act with structural reforms and policies that boost infrastructure spending.

But, Lagarde said in a speech last week, “frankly, in too many countries, these reforms have been lagging.”

(c)2015 Tribune Co., Distributed by Tribune Content Agency, LLC

Photo: Sebastian Alvarez via Flickr

China Is Obama’s Trump Card In Push For Pacific Rim Trade Agreement

China Is Obama’s Trump Card In Push For Pacific Rim Trade Agreement

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — As the White House looks to wrap up years of negotiations on a highly contested Pacific Rim trade agreement, administration officials are increasingly casting the agreement as vital to helping the U.S. face its most daunting economic rival: China.

The proposed Trans-Pacific Partnership, or TPP, would be the largest trade deal in U.S. history, involving the U.S., Japan, and 10 other countries that combined make up 40 percent of the world economy. China isn’t among them.

In recent weeks, one Obama official after another has hammered away at the same line of argument: It’s crucial that Congress supports the TPP — including passing a related trade-promotion bill that would strengthen the president’s negotiating hand — because the alternative is that China, not the U.S., will write the rules of global trade.

They note that China is trying to assemble a competing 16-nation trade pact without the United States.

“We want to make sure we don’t cede ground to China,” Agriculture Secretary Tom Vilsack said last month. Deputy Commerce Secretary Bruce Andrews said: “It’s a choice between us writing it and, frankly, China writing it.”

The administration’s focus on China comes at an important juncture for what has become a priority for President Barack Obama this year.

Though he didn’t start the decade-old TPP talks, Obama has made the proposed trade deal the centerpiece of his foreign policy in East Asia, where China’s rising economic and military power is challenging America’s long-held dominant influence in the region. And in that sense, Obama’s legacy as the self-proclaimed Pacific president hinges on nailing down the TPP.

Yet with less than two years left in his presidency and much less time on the political calendar for passing a trade bill, the administration has been stepping up its campaign for trade-promotion legislation that many see as a necessary first step to conclude the TPP negotiations.

Trade-promotion authority would allow the White House to iron out an agreement with other nations with the assurance that Congress would not make changes to a final deal, only voting it up or down.

Obama stands a better chance today of winning so-called fast-track authority than a few months ago, thanks to a stronger domestic economy and a midterm election that put the Senate in the hands of the Republican Party, which is historically more favorable toward trade agreements.

Even so, the president needs enough Democratic backing to secure passage, and with strident opposition from corners of his own party, the White House has unleashed a full-court press on trade — with China as a major talking point.

“They’re trying to reframe the debate and say this is not simply a matter of trade flows … [that] this is about a long-term geopolitical competition between the U.S. and China,” said Robert J. Shapiro, a Washington consultant and top Clinton administration economic strategist.

Opponents of the TPP say that pulling out the China card at this stage represents an act of desperation in the face of persistent congressional uneasiness about Obama’s trade agenda.

“They think China is the biggest, scariest story they can tell,” said Lori Wallach, trade director at Public Citizen, a consumer-rights advocacy group that has been a sharp critic of the TPP. “It’s the best boogeyman for the moment.”

U.S. Trade Representative Michael Froman, commenting on the shift in strategy, noted that China was trying to forge its own regionwide trade alliance.

“We have different approaches to how we pursue trade agreements,” he said at a recent briefing with reporters. “And as we look ahead, we want to make sure that we’re using our trade agreements to shape globalization … in a way that supports American workers and American jobs.”

With the TPP, the U.S. wants to reduce tariffs and other barriers to open markets, and establish standards on a range of issues affecting trade and commerce, such as intellectual property rights, government procurement and state-owned enterprises.

Besides the U.S. and Japan, the TPP parties are Canada, Australia, Mexico, Malaysia, Singapore, Chile, Peru, New Zealand, Vietnam and Brunei.

The White House has estimated that the trade deal would boost American exports by $123.5 billion a year by 2025. That’s about 6 percent of the total $2.3 trillion in exports last year.

Administration officials, including Vilsack and Secretary of State John F. Kerry, also have said the trade agreement would “support” an additional 650,000 jobs in the U.S.

Various labor, environmental and health groups, meanwhile, fear the deal would benefit corporations at the expense of workers and families. Fair minimum wages and access to generic medicines are among areas of concern.

Big-business groups are squarely behind the TPP and have stepped up their lobbying for fast-track authority too, also appealing in part to the threat of a rival, 16-country trade deal that China is spearheading.

Whether the China argument will influence lawmakers or the public is hard to tell.

Surveys show that a strengthening recovery in the U.S. along with China’s slowing economic growth has made the giant Asian country less of a threat today in the eyes of the American public.

On the other hand, a Gallup poll last month found that more Americans than ever, a solid 50 percent viewed it as “important” for the U.S. to be No. 1 in the world economically.

The emphasis on China may appeal to moderate Democrats, said Derek Scissors, a China specialist at the conservative American Enterprise Institute.

“To this point, trade has pressed wages of the industrial middle class while it’s paid off for people in technology,” he said.

Given Democratic skepticism, the Obama administration may be reluctant to focus the argument on the merits of trade, Scissors said. “So you turn it into ‘It’s a way to beat China.’ Politically it makes a lot of sense.”

Rep. Janice Hahn (D-CA), whose district includes the Port of Los Angeles, isn’t buying it.

“I believe that in concept,” she said of the need for the U.S. to set the rules of global trade. “I’m pro-trade. I understand the economic value of trade. … But I think there are so many questions we have about the actual deal. I’m not comfortable about just having an up-or-down vote on it.”

Photo: President Barack Obama signs the Department of Homeland Security funding bill in the Oval Office of the White House on Wednesday, March 4, 2015, in Washington, D.C. (Olivier Douliery/Abaca Press/TNS)

Consumers Have Enjoyed Lower Gas Prices, But Will They Last? A Question And Answer

Consumers Have Enjoyed Lower Gas Prices, But Will They Last? A Question And Answer

By Don Lee, Tribune Washington Bureau (TNS)

Filling up at the gas station has been a much more pleasant experience for Americans since last fall. Regular gas is now less than $2 a gallon in many states, down from around $3.30 just a year ago.

But how long will that last? It’s just one of many questions stemming from the extraordinary drop in crude oil prices — a development that has boosted consumer confidence, hurt once-booming energy states and presented new opportunities — and challenges — for the U.S. and global economy.

Q: Why did oil prices fall so much, so fast?

A: A confluence of factors has contributed to the more than 50 percent slide in oil prices since September. The biggest is the steady rise in world petroleum supplies, mainly because of the shale-oil revolution in the U.S. Thanks to hydraulic fracturing, or fracking, and other drilling techniques, the U.S. has accounted for more than 80 percent of global crude production growth in the last five years. More recently, an increase in oil output in Iraq and Libya has further boosted capacity.

At the same time, there are signs of softening demand. Economies in Europe and Japan have been stagnant, and the Chinese economy, the biggest driver of global oil demand, is slowing down. The strong dollar also has helped pushed down oil prices.

Q: How long will it last?

A: Low prices at the pump may be short-lived because the cost of crude is likely to start rebounding in the second half of this year. That’s based on predictions of future supply and demand, including that low prices will stimulate greater use and therefore lead to an increase in demand. Oil futures lately have been trading at about $45 per barrel, compared with an average $100 in the first half of last year. By this time next year, Moody’s Analytics estimates that oil will bounce back up to $80 a barrel.

But there are other factors that could come into play. The fall in crude prices has started to slow drilling and exploration projects, which no longer look as profitable amid the falling cost of oil. And while theoretically that should lower supply and nudge prices back up, it won’t happen right away. In some cases, oil producers may be reluctant to turn off the spigot, even if their profits are falling, because there are hefty costs to restarting operations. Some may tough it out, betting that prices will soon rise again to a level where they can at least break even.

All of which is to say that global supplies could keep growing and outpacing any pick-up in demand, prolonging an oil glut and keeping prices depressed.

Q: Who benefits the most from lower energy costs?

A: The U.S. will be one of the biggest winners. Car-related businesses, for example, will see more sales as people drive more, buy bigger vehicles and require more services. On average, an American household is projected to save $750 on gasoline costs this year compared with 2014, according to the Energy Department. States in the Southeast will benefit comparatively more as households in that region tend to spend a bigger share of their after-tax income on fuel.

Countries that import a lot of oil also stand to save hundreds of billions of dollars, including European nations, Japan, South Korea and China. But there are caveats. Heavy taxes in Europe and government subsidies in China will limit the benefits to consumers in those countries. Meanwhile, the savings to Japan will be partially offset by its weak currency. Like other commodities, oil is denominated in dollars, so Japan will have to pay that much more yen for every $1 of crude that it buys in international markets.

Q: Whom will it hurt the most?

A: Oil-producing countries such as Russia, Iran, Venezuela and Nigeria are already straining because they rely heavily on oil for government revenues. Other OPEC-member countries will feel a pinch too, but at $45 a barrel or even lower, Saudi Arabia, the Organization of the Petroleum Exporting Countries’ dominant and lowest-cost producer, can still make a solid profit.

While big oil companies will be cushioned somewhat by gains in their petroleum-refining business, smaller, less-efficient energy firms will face a revenue and credit squeeze that could drive some out of business. Significantly, a protracted oil price slump would take a toll on the U.S. shale industry, concentrated in Texas and North Dakota.

Q: How will it affect economic and job growth in the U.S?

A: On net, the U.S. economy could get as much as a big 0.5 percentage point lift from the steep oil price decline, primarily from billions of dollars freed up for spending by consumers. Many companies, too, will enjoy a bump in profits– more than 50 percent of in-house company economists said the drop in oil prices already had a positive effect on their firms, according to a January survey by the National Association for Business Economics.

Job growth also will get a boost, although it won’t be evenly distributed. If oil prices remain low for an extended period, it could even drag some energy-dependent states into recession. While an oil-related boom-turned-bust in North Dakota won’t mean much for the U.S. economy, a downturn in Texas is another matter. The Lone Star state has added some 1.3 million new jobs since the Great Recession, or about 14 percent of the total gains in the nation, and many undoubtedly were linked to the oil boom.

Q: Which country will call the shots in determining oil prices?

A: Much has been said about the diminished power of OPEC, the oil cartel dominated by Saudi Arabia, the longtime energy kingpin. Now there’s another big kid on the block: The U.S. has once again become a “swing producer,” as energy expert Daniel Yergin calls the impact from America’s tremendous output of shale oil.

Even so, the U.S. today can’t match the low-cost production of Saudi oil. And the kingdom’s decision to keep pumping out large supplies — ostensibly to protect market share and put pressure on neighbors as well as rivals in America — is certain to test the financial mettle of U.S. producers as well as their ability to harness their drilling technologies more efficiently and effectively.

AFP Photo/Philippe Huguen

Wealth Gap In America Widens To Record Level, Report Says

Wealth Gap In America Widens To Record Level, Report Says

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — The wealth gap between middle- and upper-income households has widened to the highest level on record, says a new report.

Using the latest Federal Reserve data, the Pew Research Center said Wednesday that the median wealth for high-income families was $639,400 last year — up 7 percent from three years earlier on an inflation-adjusted basis.

For middle-income families, the median wealth — that is, assets minus debts — stood at $96,500 last year, unchanged from 2010.

The result is that the typical wealth of the nation’s upper-income households last year was nearly seven times that of middle-class ones. By Pew’s calculations, that is the biggest gap in the 30 years that the Fed has been collecting statistics from its Survey of Consumer Finances.

“The latest data reinforces the larger story of America’s middle-class household wealth stagnation over the past three decades,” Pew said. “The Great Recession destroyed a significant amount of middle-income and lower-income families’ wealth, and the economic ‘recovery’ has yet to be felt for them.”

In Pew’s definition, middle-income households are those earning between two-thirds and twice the median income, after adjusting for household size. The median marks the halfway point.

For example, a one-person household was categorized as middle income if its earnings last year were at least $22,000 but less than $66,000. For a four-person family to qualify as middle income, earnings would have to be at least $44,000 but less than $132,000.

Based on these thresholds, 46 percent of American households were classified as middle income last year. One-third were considered lower income, and 21 percent upper income.

Incomes represent wages and other earnings such as interest and profits, whereas wealth is the value of stocks and other assets such as homes and cars, minus debts.

The Pew data shows that lower-, middle- and upper-income households all have yet to recover the wealth lost in the Great Recession. But higher-earning families had the smallest percentage loss of wealth from 2007 to 2010. And these same households, thanks in good part to their disproportionately large stock holdings, recovered a substantial part of the lost wealth since then, while lower-income families made no pickup at all.

Seen over a longer period, the typical wealth of upper-income households in 2013 was about double what it was in 1983, after adjusting for inflation.

For middle-income households, there was practically no change in wealth over the 30-year period. The median wealth for the middle class was $94,300 in 1983. That peaked at $158,400 in 2007 and has since retreated to $96,500.

For lower-income households, wealth rose to a high of $19,100 in 2001, but has since fallen to $9,300 last year. Their median wealth was $11,400 in 1983.

Photo: 401(K) 2012 via Flickr

Obama Calls For Patience In Fight Against Racism

Obama Calls For Patience In Fight Against Racism

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — President Barack Obama, responding to the recent protests and racial tensions across the country, appealed for patience and persistence in solving what he described as an issue “that is deeply rooted in our society … our history.”

“When you’re dealing with something as deeply rooted as racism or bias in any society, you got to have vigilance, but you have to recognize that it’s going to take some time,” Obama said in an interview to be aired Monday on BET Networks. “You just have to be steady so you don’t give up when we don’t get all the way there,” he said in a short video clip of the interview released Sunday.

Obama has come under increasing pressure to speak out after last week’s decision by a New York grand jury not to prosecute a police officer, Daniel Pantoleo, in the death of Eric Garner, an unarmed black man, when he was being arrested for allegedly selling loose cigarettes. That decision came barely a week after a Ferguson, Mo, police officer, Darren Wilson, was not indicted for fatally shooting Michael Brown, an unarmed 18-year-old African-American whose death prompted protest in the town of Ferguson, Mo.

As the first African-American president, Obama has in the past addressed America’s racial tensions in a personal way, saying for instance after the 2012 shooting death of black teenager Trayvon Martin that it could have been Obama’s son or even himself 35 years ago.

Obama has expressed empathy for those angered by unfair policing practices, while condemning the looting in the streets. But the president has refrained from visiting Ferguson and has generally sought to frame the problem as part of a national debate on law enforcement and its tactics and relations with minority communities.

In the BET interview, Obama acknowledges the lingering grip of racism in America but also urges against despairing over the recent events.

“It’s important to recognize, as painful as these incidents are, we can’t equate what’s happening now with what was happening 50 years ago,” he said. “Things are better. Not good in some cases, but better,” Obama said. “And the reason it’s important for us to understand progress has been made is that, that then gives us hope we can make even more progress.”

AFP Photo/Mladen Antonov

Economy Adds Robust 321,000 Jobs In November, Most In Nearly Three Years

Economy Adds Robust 321,000 Jobs In November, Most In Nearly Three Years

By Don Lee, Tribune Washington Bureau (TNS)

WASHINGTON — Hiring in the U.S. surged last month as employers added a robust 321,000 jobs across a broad spectrum of high- and low-paying industries, the government said Friday.

The nation’s unemployment rate held steady at 5.8 percent in November as more people entered or returned to the job market.

Though the labor-participation rate and the number of long-term unemployed were little changed, the Labor Department report overall indicated that the jobs market picked up momentum despite concerns that weaker global performance could hammer the American economy. The net job gain last month was the biggest in nearly three years.

Moreover, payroll employment numbers for September and October were revised higher by a total of 44,000. With that, job growth has averaged 278,000 a month in the last three months.

The hiring in November far exceeded expectations for job growth of about 225,000. There were strong gains at retailers ahead of the holiday season, but also a burst of new hires in the better-paying business services category that includes computer programmers and engineers. Manufacturing, construction, healthcare and even financial services all added a solid batch of jobs last month.

The latest jobs data, combined with other indicators such as low unemployment benefit claims and increased confidence among workers to change jobs, adds to the likelihood that the Federal Reserve will start to raise its benchmark interest rate by the middle of next year.

As yet, however, the pay of the typical worker has not budged from its paltry annual rate of growth. In November, the average hourly earnings for all private-sector employees saw a solid increase of 9 cents from October, to $24.66. Still, that was 2.1 percent higher than a year ago, just a notch above the rate of inflation and within the narrow 2 percent-2.1 percent band in which it has stayed all year long.

AFP Photo/Scott Olson

U.S. Moves To Cash In On African Economic Promise

U.S. Moves To Cash In On African Economic Promise

By Don Lee, Tribune Washington Bureau

WASHINGTON — When Kevin Smith and his partners started a solar energy firm in Santa Monica, California, in 2008, they expected to sell their technology to advanced economies in Europe and the United States.

But much of the action has been in a part of the world Smith initially wrote off: Africa.

Not only are some of SolarReserve’s biggest projects in South Africa, but by year’s end the continent is also likely to generate the bulk of the company’s sales. “We’re now spending a whole lot more time” in Africa, he said, mentioning Ghana, Nigeria and Mozambique, among others.

Sub-Saharan Africa still struggles with political unrest, poverty and disease, including the current Ebola outbreak in West Africa. But the last decade has brought a sea change in its economic performance and perceptions of its future promise. In 2000, Economist magazine dubbed Africa “the hopeless continent.” Today, scholars talk about the “African growth miracle.”

On Tuesday, President Barack Obama acknowledged the transformation, kicking off the first U.S.-Africa leaders summit in Washington by announcing $14 billion in American private investment in Africa for construction, clean energy, banking and information technology. Federal and industry commitments now total about $33 billion.

“I don’t want to just sustain this momentum. I want to up our game,” Obama told a crowd of U.S. and African business leaders, praising the virtues of vibrant markets that offer opportunities “not just for aid, but for trade.”

In many ways, Washington and corporate America are playing catch-up to the Chinese, who for years have held summits with African leaders and have sent armies of workers to cut deals for oil and resources, construct roads and buildings and, more recently, establish shoe and other manufacturing operations.

“It’s clear from being there that we’re significantly behind China, Korea, Germany,” said Robert Blackwell Jr., chief executive of Electronic Knowledge Interchange in Chicago.

At the summit Tuesday, he said his firm recently partnered with an electric company in Nigeria, Africa’s largest economy, to provide software and technical systems to better distribute electricity and manage Nigeria’s grid.

“It reminds me of China when I first went there in 2001,” Blackwell said, conceding that it’s far from risk-free. “But I think it’s a huge opportunity.”

China’s footprint in Africa is huge.

“Its presence can be seen and felt almost everywhere one goes in Africa these days,” said Howard French, author of China’s Second Continent: How a Million Migrants Are Building a New Empire in Africa.

SolarReserve’s push in Africa is now focused on staying a beat ahead of the Chinese, who are moving to expand into technology opportunities there.

“We are at risk of having the Chinese capturing market share away from American companies,” Smith said.

China designated Africa as a priority region for expansion in the mid-1990s, French said. Chinese construction companies have been undertaking large state-financed infrastructure projects, sending 200 to 2,000 workers at a time, often on two-year contracts.

Many of those workers are staying on in Africa, he said, “to seek their own fortunes in a new land that they have discovered seems to be wide open for business and full of opportunity.”

To be sure, American commodity firms and corporations such as General Electric and Ford Motor have been in Africa for years, as have U.S. missionaries, relief workers and humanitarian agencies.

But many U.S. companies have been queasy about entering Africa, given its less-developed markets, poor infrastructure, unskilled workforces and especially its violence and war.

Some of Africa’s economic ascendance may be part hype. Obama noted Tuesday that six of the world’s fastest-growing economies are now in Africa, but such growth rates are easier to achieve because the countries are coming from very low baselines.

Nevertheless, there have been clear improvements in areas of governance, health and farming, experts said. As a whole, sub-Saharan Africa’s economy is expected to grow at nearly 6 percent a year on average over the next decade, the fastest of any region in the world.

Companies such as Wal-Mart, Marriott and IBM are expanding in the continent, especially in the biggest and fastest-growing economies — Nigeria, South Africa, Angola and Ethiopia.

Africa’s middle class is budding, and it is entering a so-called demographic sweet spot in which better health and declining fertility rates — which allows more women to have jobs — are boosting Africa’s working-age population, said Margaret McMillan, a Tufts University economics professor who specializes in Africa.

An extensive traveler in the sub-Saharan region, McMillan noted that there’s a Four Seasons in the middle of Serengeti in Tanzania. Africa has the largest penetration of cellphones in the world.

“It’s just amazing,” she said of the capital of Rwanda, a nation once torn by ethnic conflict. “The city is clean. They don’t allow plastic bags.”

So dramatic has been the turnaround that some experts have likened Africa’s growth to the remarkable rise of China and other Asian nations that harnessed manufacturing capabilities to become global export powerhouses.

Africa’s income has long been derived mainly from two sources: commodities and foreign aid. Africa ships all kinds of things farmed or extracted from the land — oil, copper, cotton, coffee. Ethiopia is the largest source of top-notch sheepskin, a key reason the Chinese firm Huajian opened a shoe factory near Addis Ababa.

But over the last decade, much of the economic growth has come from outside the commodity industries, mostly in construction and services such as retail and transportation.

With many countries still lacking adequate roads, rail and electric power, it remains to be seen whether Africa will replicate Asia’s growth model through manufacturing and exports.

For the American economy, Africa represents just a speck of business at the moment.

American exports of goods to Africa totaled about $35 billion last year, largely machinery, vehicles and wheat. That was up from $28 billion in 2010. But it was still a fraction of total U.S. shipments of $1.6 trillion worldwide.

Meanwhile, American imports from Africa have fallen sharply, to $51 billion last year from $87.5 billion in 2010, mainly because of the plunge in U.S. demand for African oil.

Still, for individual American companies, the potential is huge, particularly for those in the energy business. About 70 percent of sub-Saharan Africans live without access to electricity, and more African nations, including Nigeria, recently have moved to open up opportunities to the private sector.

“As soon as they get their hands around the power issue, it’s really going to unlock the economy,” said Blackwell, noting that he is eyeing Tanzania for future business.

SolarReserve, the sun-power storage company, started out gingerly in South Africa by opening a small office in 2011 with one local employee when the Johannesburg government announced a $30 billion renewable energy plan.

Smith, who made his first visit to Africa that year, said he was a little skeptical at first, but the company took the plunge anyway. Launched with seed money from a Los Angeles private equity fund called U.S. Renewables Group, SolarReserve spent several million dollars to buy land and secure permits to be ready to bid for contracts.

So far, it’s been awarded three projects to build and operate conventional solar panel technology valued at $820 million. Its products are based on technology from Rocketdyne in Los Angeles.

Last month, SolarReserve sent one of its two senior vice presidents — and his family — to live and work in Johannesburg. The company has 15 employees there, compared with about 50 in Santa Monica.

The company is awaiting a decision this summer on a bid for a $1 billion project in South Africa to build a thermal energy plant using molten salt technology, similar to a solar power facility that the company is developing in Crescent Dunes, Nev.

“We feel pretty good about it,” he said of the company’s bid, which is competing against Spanish and French companies. The Chinese, he said, are supplying a lot of the equipment and supplies for the renewable energy market, but not the cutting-edge technology — at least not yet.

AFP Photo/Saul Loeb

Job Growth Is Robust In June; Unemployment Rate Falls To 6.1 Percent

Job Growth Is Robust In June; Unemployment Rate Falls To 6.1 Percent

By Don Lee, Tribune Washington Bureau

WASHINGTON — U.S. employers added a robust 288,000 jobs last month and the unemployment rate fell to a six-year low of 6.1 percent, the government reported Thursday.

The net job growth in June exceeded analysts’ expectations and signaled a strengthening labor market as the economy moves past a weak first quarter.

Adding to the bright news, the Labor Department revised up the payroll gains for the prior two months by a total of 29,000 jobs — to 304,000 for April and to 224,000 for May.

With those changes, job growth in the second quarter averaged 272,000 a month — compared with about 190,000 in the first quarter and for all of last year.

The jobless rate has fallen sharply in recent months. As recently as November, it was 7 percent. The 6.1 percent figure for June, down from 6.3 percent in May, was the lowest since September 2008 during the middle of the Great Recession and before unemployment surged to 10 percent about a year later.

The latest drop in the unemployment rate was not because workers dropped out of the job market. The number of unemployed workers fell by 325,000 to 9.5 million, and in a particularly encouraging sign, most of them were long-term jobless who had been out of work for more than six months.

Other indicators of the labor market were less sanguine. The number of part-time workers who want full-time hours increased by 275,000 to 7.5 million people. The labor participation rate, or the share of working-age people with jobs or looking for jobs, remained at a low 62.8 percent.

And the average hourly earnings for all private-sector workers rose 6 cents for the second straight month, to $24.45 in June. That is up 2 percent from a year earlier, indicating no real gain as consumer prices rose by about that much over that same period.

Still, the latest jobs report provided more evidence that the big contraction in economic output in the first quarter was mostly a weather-related anomaly. Many analysts expect a sharp rebound in growth for the second quarter and the rest of this year. And the latest jobs report will add to expectations that the Federal Reserve could begin raising its benchmark short-term interest rate earlier than the middle of next year.

Although the housing market remains slow and business investment has yet to fire up, car sales surged in June and measures of consumer confidence have risen lately — and they could strengthen further if wages start to grow at a faster pace as the job market tightens up.

The jobs report, which usually comes out on the first Friday of every month, was released a day earlier because of the Fourth of July holiday.

AFP Photo / Scott Olson

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Fischer Is Confirmed To Fed Board

Fischer Is Confirmed To Fed Board

By Don Lee, Tribune Washington Bureau

WASHINGTON — Stanley Fischer, the former Bank of Israel head picked by President Barack Obama for the No. 2 job at the Federal Reserve, won Senate confirmation Wednesday to become a member of the Fed’s board of governors.

The 68-27 vote in favor of Fischer means he will have little trouble being installed as the central bank’s vice chair when a separate Senate vote on that appointment is taken later.

Fischer, 70, would succeed Janet L. Yellen, who moved up to become the Fed chairwoman earlier this year. An internationally respected economist with a dual U.S. and Israeli citizenship, Fischer joins the Fed at a challenging time.

Yellen and her colleagues have been gradually reducing their bond-buying stimulus program aimed at lowering long-term interest rates, and the Fed is looking ahead to the day when it will need to raise its key short-term interest rate, which has been pinned near zero since late 2008.

In fact, in their policy meeting last month, Fed officials had a broad discussion about how they might hike rates and manage an “eventual normalization” of monetary policy, according to an account of the meeting, released Wednesday with the usual three-week lag.

Many analysts don’t expect the Fed’s so-called federal funds rate to rise until about the middle of next year, but that will depend on the economic conditions, in particular employment and inflation trends. After a winter stall, the American economy and job growth are showing signs of gaining momentum again, but the housing market has slowed and the global outlook remains hazy.

In its last meeting three weeks ago, the Fed generally viewed the economy as having “returned to a trajectory of moderate growth,” the minutes indicated. But some officials thought it was too early to say the pickup would be sustained, expressing concerns about a “persistent slowdown in the housing sector” or a “further slowing of growth in China or an increase in geopolitical tensions regarding Russia and Ukraine.”

The Fed’s next monetary policy meeting is set for June 17-18, likely to be Fischer’s first as vice chair of the board.

In recent weeks the Fed has been operating short-handed as a series of departures and the slow confirmation process had left three vacancies in the seven-member board, with another governor, Jeremy C. Stein, set to step down May 28.

A second Obama nomination to the board, Lael Brainard, a former Treasury official, is also expected to win confirmation, but it isn’t clear when that vote will be taken.

As second-in-command to Yellen, Fischer is expected to be a loyal supporter of the chairwoman and will bring many years of experience in finance and economics. He was the top deputy at the International Monetary Fund in the 1990s and a vice chair at Citigroup from 2002 to 2005. Previously Fischer taught at the University of Chicago and Massachusetts Institute of Technology, where his students included former Fed Chairman Ben S. Bernanke and former Treasury Secretary Lawrence Summers.

AFP Photo/Timothy A. Clary

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IMF Urges Congress To Back Reforms Giving Fund More Clout

IMF Urges Congress To Back Reforms Giving Fund More Clout

By Don Lee, Tribune Washington Bureau

WASHINGTON — The U.S. made clear this past week that it wants the International Monetary Fund to be the emergency lender for countries like Ukraine, but American lawmakers have persistently refused to give the IMF the additional financial firepower that it has sought.

That tension was evident in meetings concluding this weekend of the IMF, the World Bank and representatives of the Group of 20 major economies: Washington’s long delay in ratifying changes to the IMF’s so-called quota system came under fire from finance ministers and other officials of many countries.

Analysts say congressional failure to act on the 2010 IMF reforms has hurt American credibility and weakened its hand in international settings, such as the G-20, the main global forum for cooperation on economic policies.

On Saturday, even as the IMF noted that a stronger U.S. economy was helping drive better global growth, it said in a statement that it was “deeply disappointed” by the lack of progress on the IMF reforms. And the fund threatened to take other options if Congress failed to sign off on the overhaul by the end of the year. The G-20 issued a similar message in its communique Friday.

The reforms would strengthen the IMF’s resources and shift some of the fund’s voting power to large developing countries such as China and India. The changes wouldn’t erase U.S. veto power in the IMF or require new money from Washington, but lawmakers’ concerns about budget deficits and domestic politics have stymied passage of the package.

The inaction won’t have a direct bearing on the IMF’s plan to help the Ukraine government with loans of as much as $18 billion. The support is critical for Ukraine’s economy, which was struggling even before the political turmoil from Russia’s annexation of Crimea and pro-Russia protests in eastern Ukraine.

Christine Lagarde, the IMF’s managing director, said Saturday that she hoped the fund’s loan deal with Ukraine authorities would be approved by the IMF executive board by the end of this month.

The agreement, reached in late March, would entail some painful structural adjustments by the Ukraine government, such as cuts in its energy subsidies.

The total international package for Ukraine is expected to total about $27 billion, and the U.S., which is contributing $1 billion in loans, and other countries wholeheartedly endorsed the IMF as the primary and lead player in the bailout plan.

“The situation in Ukraine has highlighted the IMF’s unique role as first responder in a crisis of this kind,” Treasury Secretary Jacob J. Lew told the International Monetary Financial Committee in Washington on Friday. “It is critical that the international community . . . take immediate steps to also support the IMF program by providing financing support, given the sizable financing needs.”

At the same time, Lew seemed to acknowledge the implicit inconsistency in such a call with the protracted delay in implementing the IMF’s reforms.

“We are working to fulfill our pivotal responsibility,” he said, adding that despite this “major setback,” the Obama administration remained committed to the overhaul and will work with Congress to ratify it this year.

Lagarde and other IMF officials said they were hopeful, and declined to talk about what options the fund would consider should Congress fail to act in time. But given the midterm election in November and other partisan political considerations, analysts doubted that lawmakers would meet the IMF’s deadline.

“It goes beyond the IMF itself,” said Domenico Lombardi, a global economic expert at the Center for International Governance Innovation in Canada.

“International relations is about give and take,” he said, adding that it could undermine America’s ability to secure its own economic goals. “How can the U.S. ask China to revise its exchange rate policy or contribute to global rebalancing?”

Photo: Jewel Samad via AFP

Economy Adds 192,000 Jobs; Unemployment Rate Holds Steady At 6.7 Percent

Economy Adds 192,000 Jobs; Unemployment Rate Holds Steady At 6.7 Percent

By Don Lee, Tribune Washington Bureau

WASHINGTON — The U.S. economy added a fairly solid number of new jobs in March as employers reverted to their average pace of hiring after the unusually harsh winter weather.

The Labor Department said Friday that the economy created a net 192,000 new jobs last month, just about as many as in February and the average for all of last year. Economists had forecast job growth of about 200,000 for last month.

The nation’s jobless rate held steady at 6.7 percent in March, but the broader measure of unemployment and underemployment, including part-time workers who want full-time jobs, edged up to 12.7 percent.

Labor Department officials revised up the job-growth numbers for the prior two months — to 197,000 for February, from 175,000 previously estimated; and to 144,000 for January, from an initial tally of 129,000.

With those changes, the economy added an average of 178,000 jobs in the first quarter. That is down from the 194,000 average for last year, but analysts expect job growth to pick up some as employers step up hiring after delays caused by the cold weather across the much of the nation.

Job growth last month was led by business services, which boosted payrolls by 57,000. Half of those gains were at temporary-help firms, another sign that stronger hiring may be in store this spring.

The construction industry added 19,000 jobs, about the same as in February, but hiring in manufacturing was lackluster.

Retail trade rebounded by adding 21,300 jobs, and restaurants continued to hire aggressively last month. Government payrolls were flat.

The length of the average workweek, meanwhile, rose to 34.5 last month from 34.3 in February, the likely result of workers’ hours being restored after being cut by the cold weather.

Average hourly earnings for private-sector employees fell by a penny, to $24.30. Compared with a year ago, earnings were up 2.1 percent, a little more than the rate of inflation.

(For The Record, 6:17 a.m. PDT April 4: An earlier version of this post stated government figures for March showed that average hourly earnings for private-sector employees rose by a penny, to $24.30. They fell by a penny to $24.30.)

AFP Photo/Joe Raedle

Malaysia Jet: New Objects Sighted, Raising Hope Of Finding Wreckage

Malaysia Jet: New Objects Sighted, Raising Hope Of Finding Wreckage

By Don Lee, Los Angeles Times

KUALA LUMPUR, Malaysia — The hunt for the missing Malaysia Airlines flight intensified Monday as search crews reported more sightings of possible debris in the south Indian Ocean, including two objects that could be retrieved soon by an Australian vessel.

Malaysia’s prime minister, Najib Razak, also announced an unscheduled news conference for 10 p.m. local time (7 a.m. PDT). He is believed to be planning to announce a major development, possibly confirmation of Flight 370 debris. Razak has given only one press conference on the matter in the last two weeks when Malaysia said it believed the plane had been deliberately diverted off course.

Malaysian Defense Minister Hishammuddin Hussein said earlier Monday evening that a search aircraft had located two objects and that an Australian vessel, HMAS Success, was in the vicinity.

“It is possible that the objects could be received within the next few hours, or by tomorrow morning at the latest,” he said at a news conference. Hishammuddin said Australia’s prime minister had informed the prime minister of Malaysia about the development just minutes prior to the daily briefing to reporters.

If retrieved, the two objects — one described as circular and possibly gray or green, and the other rectangular and orange — would be the first to be found in the remote section of the southern Indian Ocean about 1,500 miles off the coast of southwest Australia since searchers began focusing there Thursday. And they could provide the first physical evidence of the fate of the plane that vanished March 8 with 239 passengers and crew on board.

In recent days, there has been a growing number of satellite and aircraft sightings of objects in remote ocean area that authorities described as having potential to be wreckage from the missing jetliner.

On Monday, with China and Japan joining an Australian-led team of American and New Zealand aircraft, 10 military and commercial planes combed an area of about 20,000 square nautical miles in the southern Indian Ocean looking for traces of Flight 370.

Earlier in the day, one of the two Chinese Ilyushin IL-76 aircraft involved in the search reported seeing “two big floating objects with many white smaller ones scattered within a radius of several kilometers,” according to the official New China News Agency.

After the sighting was reported, the U.S. Navy P-8 Poseidon plane sought to relocate the objects but was unable to do so, according to the Australian Maritime Safety Authority. A Chinese vessel was steaming toward the area to investigate and was expected to arrive in the area by Tuesday morning, the news agency said.

Photo: Shyb via Flickr