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U.S. manufacturing activity slowed in December amid a cooling in demand for goods, but supply constraints are starting to ease and a measure of prices paid for inputs by factories fell by the most in a decade. 

The Institute for Supply Management (ISM) survey on Tuesday also suggested some improvement in labor supply, with a gauge of factory employment rising to an eight-month high. Still, Timothy Fiore, chair of the ISM manufacturing business survey committee, noted that “shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products continue to plague reliable consumption.” 

The survey does not fully capture the impact of the Omicron COVID-19 variant, which is rapidly spreading across the United States and abroad. Sky-rocketing infections could force workers to stay home and halt the tentative supply-chain progress. 

“There’s still a lot of ground to make up before supply chains fully normalize, but cooling prices and increased employment are positive signs,” said Will Compernolle, a senior economist at FHN Financial in New York. 

The ISM’s index of national factory activity fell to a reading of 58.7 last month, the lowest level since January 2021, from 61.1 in November. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. 

Economists polled by Reuters had forecast the index would fall to 60.1. 

All of the six biggest manufacturing industries — chemical products, fabricated metal products, computer and electronic products, food, transportation equipment, and petroleum and coal products — reported moderate-to-strong growth. 

Manufacturers of fabricated metal products expressed optimism that “we have reached the top of the hill to start down a gentle slope that lets us get back to something that resembles normal.” Their counterparts in the chemical products industry said the “gut feeling says it’s getting easier to source chemical raw materials.” 

Machinery makers reported that “costs for steel seem to be coming down some.” They also noted improvements in “performance by suppliers” and “on-time deliveries.” But transportation equipment manufacturers said capacity remained “limited due to the global chip shortage.” 

The ISM survey’s measure of supplier deliveries declined to a reading of 64.9 from 72.2 in November. A reading above 50% indicates slower deliveries to factories. 

The ISM’s Fiore said transportation networks, a harbinger of future supplier delivery performance, were still performing erratically, but there are signs of improvement. 

Raw materials have been in short supply as global economies rebounded from the coronavirus pandemic. Shortages have also been exacerbated by the shift in demand to goods from services early in the pandemic. Millions of workers needed to produce and move raw materials remain sidelined. 

U.S. stocks were trading mixed, with the Dow Jones Industrial Average and the S&P 500 index having hit fresh record highs earlier in the session. The dollar was flat against a basket of currencies. U.S. Treasury prices were mostly lower. 

Price gauge falls 

The nascent signs of improvement in supply chains suggest inflation at the factory gate could soon begin to subside. The survey’s measure of prices paid by manufacturers tumbled to 68.2 last month, the lowest level since November 2020, from 82.4 in November. The 14.2-point plunge was the biggest since October 2011. 

This supports the Federal Reserve’s long-held view that the current period of high inflation is transitory. Inflation is well above the U.S. central bank’s flexible 2% target. 

“The report is consistent with our expectation that inflation will hit an inflection point probably in the first quarter of this year,” said Tim Quinlan, a senior economist at Wells Fargo in Charlotte, North Carolina. 

The ISM survey’s forward-looking new orders sub-index fell to a still-high reading of 60.4 from 61.5 in November. With customer inventories remaining depressed, the slowdown in new order growth is likely to be temporary or limited. 

Factories hired more workers, but turnover rates remained high, a trend which manufacturers said started in August. 

Indeed, a separate report from the Labor Department on Tuesday showed a record 4.5 million Americans voluntarily quit their jobs in November, which will put pressure on businesses to raise wages to attract workers. 

“Replacing those workers is proving unusually challenging,” said Julia Pollak, chief economist at ZipRecruiter. “This is the tightest labor market ever.”

There were 10.6 million job openings at the end of November. The high number of vacancies meant there was a 0.65 unemployed person per job opening, an all-time low. Before the pandemic, there were normally about 2.3 unemployed people per job opening. 

The ISM’s measure of manufacturing employment rose to an eight-month high of 54.2 from 53.3 in November. This, together with very low first-time applications for unemployment benefits, supports the view that job growth accelerated in December. 

According to a preliminary Reuters survey of economists, nonfarm payrolls likely increased by 400,000 jobs in December after rising by 210,000 in November. The Labor Department is scheduled to publish December’s employment report on Friday. 

 
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China’s economy will increasingly rely on state investment, high-tech development and domestic consumption – with less input from its past staple of export manufacturing – as it stands to overtake the United States in the coming decade, analysts predict. 

China’s GDP should grow 5.7% per year through 2025 and then 4.7% annually until 2030, British consultancy Centre for Economics and Business Research (CEBR) forecasts. Its forecast says that China, now the world’s second-largest economy, would overtake the No. 1-ranked U.S. economy by 2030. Credit insurance firm Euler Hermes made a similar forecast. 

Chinese leaders have pushed over the past decade to rely more on value-added services over traditional factory exports, state media have said.  The Sino-U.S. trade dispute and early 2020 workplace closures due to COVID-19 have added pressure on manufacturing. 

Reducing factory output in China, foreign multinationals have been expanding outside China, targeting places such as Vietnam to avoid rising wages and environmental compliance costs. By offshoring in multiple countries they hope to head off any repeat of China’s early 2020 COVID-19 lockdowns that shut down factories.

China’s economy totaled $15.92 trillion in 2020, and market research firm IHS Markit estimates that it reached $18 trillion last year on export manufacturing growth and capital for new projects. The U.S. economy reached about $23 trillion last year, the market research firm said.

State investment

The country that’s already known for fast economic growth over the past 20 years would see the state take more control over key sectors after intervening in several, including the internet, in 2021, economists expect.

“Beijing has the funds and the unfettered domestic political power to use China’s large public treasury to make strategic investments in the service of the leadership’s national and global objectives,” said Denny Roy, senior fellow at the East-West Center think tank in Honolulu.

China scored 2.98 in 2018, up from 2.45 eight years earlier and approaching about three times the world average, on the Organisation for Economic Co-operation Development policy forum’s Direct Control Over Enterprises index. 

That means the government’s direct control over enterprises “well exceeded the open economy average” and “reflects China’s increasing emphasis on the role of the state in the economy under Xi Jinping,” the think tank Atlantic Council says in its October report China Pathfinder: Annual Scorecard .

Growth in tech hardware

Chinese leaders will probably prioritize tech, especially hardware that does not require constant innovation, as a growth engine, economists say.

State intervention in the internet sector won’t hobble expansion in semiconductors and infrastructure software, said Zennon Kapron, founder and director of the Shanghai-based financial industry research firm Kapronasia.

“If the country does become self-sufficient in terms of technology and then is able to sell and export those products and services that are based on the technology, then that would be a huge bump to its economy, because [that] is a key driver certainly of the U.S. GDP now,” Kapron said.

The U.S. economy will keep growing but without spurts through 2030, Kapron predicts.

China has a “huge base of engineers,” albeit less creativity than it needs to foster the “zany ideas” that drive development of new technology, said Douglas McWilliams, founder and executive deputy chairman of CEBR.

Consumer spending

Domestic spending has driven most of China’s economic growth before 2021 as the country reduced its exposure to the world in view of the Sino-U.S. trade dispute, McKinsey & Co. says in its China consumer report 2021. Supply chains have “matured and localized, and its innovation capabilities were enhanced” in turn, McKinsey & Co says.

That trend is likely to continue despite hits to income under lockdowns during the first year of COVID-19, analysts say. China’s population exceeds that of the United States by 3.5 times, though American consumers are wealthier on average.

“In the past five years, domestic consumption has … become a more significant growth driver as China’s domestic consumer market has grown dramatically in size,” said Rajiv Biswas, Asia-Pacific chief economist with IHS Markit.

Beijing’s leadership “aims to create more than 11 million new urban jobs and expand domestic demand and effective investment,” the official Xinhua News Agency said in mid-2021. Those measures, it said, “are expected to put the economy firmly back to pre-pandemic vibrancy.”

What if China overtakes US economy?

Status as the world’s largest economy does not confer any automatic advantages over others, economists said, but countries dependent on the Chinese economy would take note.

“There is no gold medal or anything like that,” CEBR’s McWilliams told VOA. “But when you’ve got more money to spend, you do have the ability to influence things, and China will have that ability to influence things.”

China would be better placed, he said, to advance its Belt and Road Initiative, a 9-year-old effort aimed at building land and sea trade routes through Asia, Europe and Africa in the form of infrastructure projects and investments.

Officials in Beijing are already leveraging their economy in disputes with other countries, said Roy of the East-West Center. China vies with four Southeast Asian governments over maritime sovereignty, contests a group of islets with Japan and has gotten into territorial standoffs with India since 2017.

“The result of that expectation (China surpassing the United States economically) has been a bolder PRC (People’s Republic of China) foreign policy that seeks to settle regional disputes in China’s favor and to de-legitimize U.S. regional and global leadership under the assumption that China is destined to set the new rules of international relations,” Roy said. 
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Global stocks began 2022 in bullish fashion, with major bourses notching records and Apple’s valuation briefly hitting $3 trillion as investors monitor the COVID-19 pandemic and looming central bank rate decisions. 

The CAC 40 index in Paris kicked off the rally with new intraday and closing records while Frankfurt’s DAX rose 0.9 percent in thin holiday trading. London and Tokyo were among global markets that were shuttered for holidays. 

On Wall Street, both the Dow and S&P 500 ended at records as indices pushed higher. 

Apple briefly climbed to $3 trillion in value, becoming the first U.S. company to hit that benchmark. The tech giant’s valuation later retreated, though its share price was 2.5 percent higher at the close. 

“Welcome to 2022, which is looking like 2021 so far for the equity market,” market analyst Patrick O’Hare at Briefing.com said. 

The market “looks as if it will keep riding the rails with the help of new inflows that are typically seen on the first trading day of a new month,” he added. 

Monday’s landmarks come on the heels of a series of all-time highs in December as markets continue to bet the latest surge in COVID-19 cases won’t derail economic growth. 

Comments from health experts characterizing the omicron variant as less lethal than earlier COVID-19 strains have boosted markets. 

A bigger question mark is the shift in monetary policy, with investors now betting that the Federal Reserve will raise interest rates later this year.

The yield on the 10-year U.S. Treasury note vaulted above 1.6 percent Monday, the latest indication of this expectation.

A note from Briefing.com said the rise in yields may also reflect “an improving perspective on the economy.” 

Oil prices

Elsewhere, oil prices finished a volatile session higher as eyes turn to the meeting of OPEC and other major producers on Tuesday. 

So far OPEC+ has resisted pressure by top oil-consuming nations, such as the United States, to more aggressively boost production.

The 23 members of OPEC+ are expected to continue to stay the course and modestly boost output at their monthly meeting to be held via videoconference. 

 
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The United States will issue new rules and $1 billion in funding this year to support independent meat processors and ranchers as part of a plan to address a lack of “meaningful competition” in the meat sector, President Joe Biden said on Monday. 

The initiative comes amid rising concerns that a handful of big beef, pork and poultry companies have too much control over the American meat market, allowing them to dictate wholesale and retail pricing to profit at the expense of their suppliers and customers. 

“Capitalism without competition isn’t capitalism. It’s exploitation,” Biden said. “That’s what we’re seeing in meat and poultry industries now.” 

A recent White House analysis found that the top four meatpacker companies – Cargill, Tyson Foods Inc., JBS SA and National Beef Packing Co. – control between 55% and 85% of the market in the hog, cattle and chicken sectors. 

The Department of Agriculture (USDA) will spend the $1 billion from the American Rescue Plan to expand the independent meat processing sector, including funds for financing grants, guaranteed loans and worker training, said Agriculture Secretary Tom Vilsack, who was speaking at an event with Biden. 

USDA will also propose rules this year to strengthen enforcement of the Packers and Stockyards Act and to clarify the meaning of “Product of USA” meat labels, which domestic ranchers have said unfairly advantage multinational companies that raise cattle abroad and only slaughter in the United States. 

Attorney General Merrick Garland, also speaking at the event, said “too many industries have become too consolidated over time,” and that the antitrust division of the Department of Justice has been chronically underfunded. 

The Biden administration issued an executive order last year that advocated a whole of government approach to antitrust issues. 

A central concern in agriculture has been meat prices, which have risen at a time when the White House is fighting inflation. An analysis in December by the White House economic council found a 120% jump in the gross profits of four top meatpackers since the pandemic began. 

Reaction to plan

The meat industry has said the White House analysis was inaccurate and criticized the new plan. 

National Chicken Council President Mike Brown called the plan “a solution in search of a problem.” 

North American Meat Institute spokesperson Sarah Little said staffing plants remains the biggest issue for meatpackers and that the White House plan would not address it. 

“Our members of all sizes cannot operate at capacity because they struggle to employ a long-term stable workforce,” she said. “New capacity and expanded capacity created by the government will have the same problem.” 

Eric Deeble, policy director at the National Sustainable Agriculture Coalition, cheered the plan, calling it a “very positive step to ensure farmers and ranchers receive fair prices.” 

The anticipated rulemaking under the Packers and Stockyards Act “could have a significant impact,” said Peter Carstensen, emeritus professor of law at University of Wisconsin-Madison and former antitrust attorney at the Department of Justice. But he noted that investment in independent processing itself would not address market concentration. 

Austin Frerick, deputy director of the Thurman Arnold Project at Yale University, an antitrust research center, said the plan does not go far enough to tackle the power of the top meatpackers. 

“I do not believe this (plan) will meaningfully change the concentration numbers,” he said. 

 
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U.S. premium electric vehicle maker Tesla said on Sunday it delivered nearly 1 million vehicles in 2021, almost twice as many as 2020, doing better than expected despite global supply challenges.

Tesla delivered more than 936,000 cars of all models in 2021, representing growth of 87.4% from the previous year. The manufacturer is thus doing much better than the objective announced last January, to increase its deliveries by 50% on average per year for several years.

The group, which chose to move its headquarters from Palo Alto (California) to Austin (Texas), sold 911,208 vehicles of its 3 and Y models, and 24,964 vehicles of its luxury S and X models.

In the fourth quarter alone, 308,600 cars were delivered, up 0.9% compared to the same quarter last year. Earlier in the year, in the second quarter, Tesla had crossed, for the first time, the threshold of 200,000 cars delivered (201,250).

Tesla has managed to sidestep the global logistics issues that have plagued the entire auto industry. Elon Musk previously said he was able to get around much of the semiconductor shortage by using new chip designs and rewriting software accordingly. 

In October, Tesla was boosted by a mega-order of 100,000 electric vehicles from the rental company Hertz, by the end of 2022. This announcement brought the automaker into the very select club of companies worth more than $1 trillion on the stock market.

The manufacturer is, however, in the crosshairs of the American road safety agency (NHTSA) for its controversial driver assistance system called “Autopilot.” 

The automaker has also agreed to update its software to prevent drivers from playing video games on the car’s system while the car is in motion, after an investigation was opened.
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Egypt’s Suez Canal Authority said the key waterway netted record revenues last year, despite the coronavirus pandemic and a six-day blockage by a giant cargo ship, the Ever Given.

Connecting the Red Sea and the Mediterranean, the canal accounts for roughly 10% of global maritime trade and is a source of much-needed foreign currency for Egypt.

In 2021, some 1.27 billion tons of cargo were shipped through the canal, earning $6.3 billion (5.5 billion euros) in transit fees, 13% more than the previous year and the highest figures ever recorded, Suez Canal Authority (SCA) chief Osama Rabie said.

The number of ships using the canal rose from 18,830 in 2020 to 20,694 in 2021, or more than 56 ships per day, the SCA said in a statement.

In March, the Ever Given super tanker — a behemoth with deadweight tonnage of 199,000 — got stuck diagonally across the canal during a sandstorm.

A round-the-clock salvage operation took six days to dislodge it and one employee of the SCA died during the rescue operation. Egypt lost some $12 million to $15 million each day during the canal closure, according to the SCA.

The Ever Given safely returned back through the canal without a hitch in August.

In November, the SCA said it will hike transit tolls by six percent starting in 2022, but tourist vessels and liquefied natural gas carriers are to be exempted.
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More than 3,000 flights were canceled around the world on Sunday, more than half of them U.S. flights, adding to the toll of holiday week travel disruptions due to adverse weather and the surge in coronavirus cases caused by the omicron variant. 

Over 3,300 flights had been canceled by noon GMT on Sunday, including over 1,900 entering, departing from or within the United States, according to a running tally on the tracking website FlightAware.com. Including those delayed but not canceled, more than 4,800 flights were delayed in total. 

The Christmas and New Year holidays are typically a peak time for air travel, but the rapid spread of the highly transmissible omicron variant has led to a sharp increase in COVID-19 infections, forcing airlines to cancel flights as pilots and crew quarantine. 

Transportation agencies across the United States were also suspending or reducing services due to coronavirus-related staff shortages. 

Omicron has brought record case counts and dampened New Year festivities around much of the world. 

The rise in U.S. COVID-19 cases had caused some companies to change plans to increase the number of employees working from their offices Monday. 

Chevron Corp was to start a full return to office from Jan. 3 but told employees in late December it was postponing the move indefinitely. 

U.S. authorities registered at least 346,869 new coronavirus cases on Saturday, according to a Reuters tally. The U.S. death toll from COVID-19 rose by at least 377 to 828,562. 

U.S. airline cabin crew, pilots and support staff were reluctant to work overtime during the holiday travel season, despite offers of hefty financial incentives. Many workers feared contracting COVID-19 and did not welcome the prospect of dealing with unruly passengers, some airline unions said. 

In the months preceding the holidays, airlines were wooing employees to ensure solid staffing, after furloughing or laying off thousands over the last 18 months as the pandemic hobbled the industry. 
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The United States on Saturday cut Ethiopia, Mali and Guinea from access to a duty-free trade program, following through on President Joe Biden’s threat to do so over accusations of human rights violations and recent coups.

“The United States today terminated Ethiopia, Mali and Guinea from the AGOA trade preference program due to actions taken by each of their governments in violation of the AGOA Statute,” the U.S. Trade Representative’s office said in a statement.

Biden said in November that Ethiopia would be cut off from the duty-free trading regime provided under the U.S. African Growth and Opportunity Act (AGOA) because of alleged human rights violations in the Tigray region, while Mali and Guinea were targeted because of recent coups.

The suspension of benefits threatens Ethiopia’s textile industry, which supplies global fashion brands, and the country’s nascent hopes of becoming a light manufacturing hub. It also piles more pressure on an economy reeling from the conflict, the coronavirus pandemic, and high inflation.

“The Biden-Harris administration is deeply concerned by the unconstitutional change in governments in both Guinea and Mali, and by the gross violations of internationally recognized human rights being perpetrated by the government of Ethiopia and other parties amid the widening conflict in northern Ethiopia,” the trade office statement said.

The AGOA trade legislation provides sub-Saharan African nations with duty-free access to the United States if they meet certain eligibility requirements, such as eliminating barriers to U.S. trade and investment and making progress toward political pluralism.

“Each country has clear benchmarks for a pathway toward reinstatement and the administration will work with their governments to achieve that objective,” it added.

The Washington embassies of the three African countries did not immediately respond to requests for comment.

Ethiopia’s Trade Ministry said in November it was “extremely disappointed” by Washington’s announcement, saying the move would reverse economic gains and unfairly impact and harm women and children.
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Tesla has recalled 675,000 cars in the United States and China over issues with the trunk and front hood of two models, raising new questions about the safety of the popular electric vehicle. 

Chinese regulators announced the recall of almost 200,000 cars on Friday, hours after some 475,000 Tesla vehicles were flagged in the United States. 

The problems with the trunk and hood increase the risk of crashes, according to U.S. and Chinese regulators. 

Authorities said the repeated opening and closing of the trunk of the Model 3 can damage a cable for the rearview camera. 

An issue with the latch assembly for the front hood of the Model S could cause it to open without warning and obstruct the driver’s visibility, according to the U.S. National Highway Traffic Safety Administration (NHTSA). 

Tesla estimates that the problems affect 1% of Model 3 and 14% of Model S vehicles recalled in the United States, without causing any accidents so far. 

Mass recalls are not rare in the auto industry.

Volkswagen had to take 8.5 million cars out of circulation in 2015 due to the Dieselgate scandal, in which the German company admitted tampering with millions of diesel vehicles to dupe emissions tests. 

At least 100 million vehicles were recalled by car companies across the world in recent years due to a defect with airbags made by bankrupt Japanese group Takata. 

Tesla’s recall represents a quarter of the number of cars Elon Musk’s young company has produced so far. 

“It is a reality wake-up call for Tesla though, with a slap-in-the-face welcome to the automotive world that is perhaps more complex than the smartphone industry that many like to compare it to,” said German auto analyst Matthias Schmidt. 

“After all, a dysfunctional car on four wheels can do a lot more potential damage than a dysfunctional iPhone,” Schmidt said. 

Other incidents 

In June, Tesla recalled more than 285,000 cars in China over issues with its assisted driving software that could cause accidents. 

The company also recalled thousands of Model 3 and Model Y vehicles earlier that month to inspect brake calipers for loose bolts. 

In November, the NHTSA recalled nearly 12,000 Tesla cars due to errors with their communication software. 

U.S. safety officials are also investigating Tesla’s Autopilot after identifying 11 crashes involving the driver assistance system. 

The previous month, U.S. highway safety regulators demanded details from Tesla on issues with its new autonomous system, building on a previously announced probe. 

Tesla executives have downplayed the regulatory inquiries, saying they were to be expected with “cutting edge” technology and that they were cooperating “as much as possible.” 

Banner year 

The issues have been blights to an otherwise banner year for Tesla, as it joined the exclusive club of companies with a market capitalization of $1 trillion. 

The company delivered a record 240,000 vehicles in the third quarter, and Tesla’s billionaire chief Elon Musk was named Time magazine’s person of the year. 

Tesla’s good fortune contrasted with other, traditional automakers that were heavily affected by the coronavirus pandemic and a shortage of semiconductors that are key components in cars. 

Trip Chowdhry, analyst at Global Equities Research consultancy, said the latest Tesla recall is a “non-event” as the company still holds a big advantage over its competitors. 

 
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More canceled flights frustrated air travelers on the final day of 2021 and appeared all but certain to inconvenience hundreds of thousands more over the New Year’s holiday weekend. 

Airlines blamed many of the cancellations on crew shortages related to the spike in COVID-19 infections, along with wintry weather in parts of the United States. 

United Airlines, which suffered the most cancellations among the biggest U.S. carriers, agreed to pay pilot bonuses to fix a staffing shortage.

By early evening Friday on the East Coast, airlines had scrubbed more than 1,550 U.S. flights — about 6% of all scheduled flights — and roughly 3,500 worldwide, according to tracking service FlightAware.

That pushed the total U.S. cancellations since Christmas Eve to more than 10,000 and topped the previous single-day peak this holiday season, which was 1,520 on December 26. 

The disruptions come just as travel numbers climb higher going into the New Year’s holiday weekend. Since December 16, more than 2 million travelers a day on average have passed through U.S. airport security checkpoints, an increase of nearly 100,000 a day since November and nearly double last December. 

Led by Southwest and United, airlines have already canceled 1,500 U.S. flights on Saturday — about 700 at Chicago’s O’Hare Airport, where the forecast called for a winter storm — and 700 more on Sunday. 

Canceled flights began rising from a couple hundred a day shortly before Christmas, most notably for United Airlines, Delta Air Lines and JetBlue Airways. 

On Friday, United canceled more than 200 flights, or 11% of its schedule — and that did not include cancellations on the United Express regional affiliate. CommutAir, which operates many United Express flights, scrubbed one-third of its schedule, according to FlightAware. 

United decided to spend more money to fill empty cockpits. The airline reached a deal with the pilots’ union to pay 3.5 times normal wages to pilots who pick up extra trips through Monday and triple pay for flights between Tuesday and January 29, according to a memo from Bryan Quigley, United’s senior vice president for flight operations. 

JetBlue canceled more than 140 flights, or 14% of its schedule, and Delta grounded more than 100, or 5% of its flights by midday Friday. Allegiant, Alaska, Spirit and regional carriers SkyWest and Mesa all scrubbed at least 9% of their flights. 

FlightAware reported fewer cancellations at Southwest, 3%, and American, 2%. 

The virus is also hitting more federal air traffic controllers. The Federal Aviation Administration said that more of its employees have tested positive – it didn’t provide numbers Friday – which could lead controllers to reduce flight volumes and “might result in delays during busy periods.” 

While leisure travel within the U.S. has returned to roughly pre-pandemic levels, international travel remains depressed, and the government is giving travelers new cause to reconsider trips abroad. On Thursday, the State Department warned Americans that if they test positive for coronavirus while in a foreign country it could mean a costly quarantine until they test negative.

Since March 2020, U.S. airlines have received $54 billion in federal relief to keep employees on the payroll through the pandemic. Congress barred the airlines from furloughing workers but allowed them to offer incentives to quit or take long leaves of absence – and many did. The airlines have about 9% fewer workers than they had two years ago. 

Kurt Ebenhoch, a former airline spokesman and later a travel-consumer advocate, said airlines added flights aggressively, cut staff too thinly, and overestimated the number of employees who would return to work after leaves of absence. It was all done, he said, “in the pursuit of profit … and their customers paid for it, big time.” 

Many airlines are now rushing to hire pilots, flight attendants and other workers. In the meantime, some are trimming schedules that they can no longer operate. Southwest did that before the holidays, JetBlue is cutting flights until mid-January, and Hong Kong’s Cathay Pacific is suspending cargo flights and reducing passenger flights because it doesn’t have enough pilots. 

Other forms of transportation are also being hammered by the surge in virus cases. The U.S. Centers for Disease Control and Prevention said Thursday that it is monitoring more than 90 cruise ships because of COVID-19 outbreaks. The health agency warned people not to go on cruises, even if they are fully vaccinated against the virus. 

The remnants of the delta variant and the rise of the new omicron variant pushed the seven-day rolling average of new daily COVID-19 cases in the U.S. above 350,000, nearly triple the rate of just two weeks ago, according to figures from Johns Hopkins University. 

 
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Applications for state unemployment benefits fell by 8,000 from 206,000 applications last report to 198,000 for the week ending December 25, the U.S. Labor Department reported Thursday.

Economists had predicted 205,000 applications.

The number of applications was near a 50-year low, but concerns over COVID-19, low labor market participation rates and rising inflation continue to add to economic uncertainty.

Labor participation, the number of people working or actively seeking a job, continues to hover at rates not seen since the early 1970s

“The claims data may be more volatile in the upcoming weeks due to the seasonal adjustment process, but looking past that noise, we expect claims to remain around 200,000 as layoffs remain low amid tight labor market conditions,” said Nancy Vanden Houten, lead economist at Oxford Economics, according to CBS News.

Continuing claims reportedly were 1.72 million for the week ending December 18, which is the lowest since March of 2020, when the pandemic began to peak.

n October, the U.S. had nearly 11 million job openings, a near record.

The news sent the stock market slightly higher on low, pre-holiday volume.
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The U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record ahead of the second straight COVID-19-distorted holiday shopping season along with industrial supplies, while exports slipped after a historic gain a month earlier.

The goods trade gap reported Wednesday by the Commerce Department is likely to remain historically high as long as the coronavirus pandemic continues, economists said. The emergence of the fast-spreading omicron variant of COVID-19 that has driven U.S. and global caseloads to a record this week may exacerbate it further in the near term if it limits American consumers’ spending on services and restokes demand for imported goods.

Omicron also stands as a downside risk in the housing market. A reading of pending home sales also out Wednesday showed an unexpected drop in November, and while that data largely predated omicron’s ascendance in the United States, the highly contagious new variant could further limit home sales in the near term, the National Association of Realtors (NAR) said.

The goods trade deficit widened last month by 17.5% to $97.8 billion from $83.2 billion in October, Census Bureau data showed. That exceeds the previous record deficit set in September of $97 billion and may damp optimism that trade might finally add to U.S. economic growth this quarter for the first time in more than a year.

Imports rose by 4.7% with industrial supplies leading the way with an increase of $5.7 billion to $63.2 billion, followed by consumer goods rising by $2.9 billion to just shy of $67 billion as retailers rushed to fill store shelves ahead of Christmas. Both were record highs.

“The emergence of the omicron variant may further ignite demand for imported goods if services activity is restricted” in the first quarter of 2022, Nancy Vanden Houten, lead economist at Oxford Economics, wrote after Wednesday’s report.

Goods exports, meanwhile, declined 2.1%, with weakness across the board outside of a 4.3% increase in food exports. The drop was led by declines of $1.4 billion in industrial supplies and $1.3 billion in capital goods.

The worldwide surge of coronoavirus cases to a record in recent days – including a record U.S. caseload – may weigh on global demand in the months ahead, risking an even wider trade gap, Vanden Houten said.

The so-called Advance Indicators report also showed wholesale inventories climbed 1.2% last month, while retail inventories increased 2.0%. Retail inventories, excluding autos, which go into the calculation of gross domestic product, edged up by 1.3% to $465.2 billion, the latest in a string of record-high readings.

The economy grew at a 2.3% annualized rate in the third quarter, a step-down from earlier in the year, but activity has rebounded in the fourth quarter with a consensus among economists building around a growth rate of 6% to 7% in the final three months of 2021.

Trade has been a drag on gross domestic product growth for five straight quarters, while inventories added to output in the third quarter.

Earlier this month, the Commerce Department reported a sharp reduction in the overall trade deficit – including services – for October, which had generated some optimism that trade may contribute to the improvement in output in the final quarter of the year. The big reversal to a record goods trade gap in November may prompt a rethinking of that.

Economists at Action Economics have dialed back their fourth-quarter GDP growth estimate to 6.5% from 7.0%, with exports now seen subtracting from growth rather than adding to it as had been previously expected. Economists at JPMorgan and Goldman Sachs, meanwhile, left their estimates intact at 7%.

Meanwhile, contracts to buy U.S. previously owned homes fell unexpectedly in November as limited housing stock and lofty prices crimped activity, and the explosion of new coronavirus cases poses a risk to the housing market headed into 2022.

NAR said its Pending Home Sales Index, based on signed contracts, fell 2.2% last month to 122.4. Pending home sales were lower in all four regions.

Economists polled by Reuters had forecast contracts, which typically become final sales after a month or two, would rise 0.5% in November.

“There was less pending home sales action this time around, which I would ascribe to low housing supply, but also to buyers being hesitant about home prices,” said Lawrence Yun, NAR’s chief economist.

Looking ahead, Yun said Omicron poses a risk to the housing market’s performance, as buyers and sellers are sidelined, and home construction is delayed.
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The Dow and S&P 500 closed at all-time highs on Wednesday on a boost from retailers including Walgreens and Nike as investors shrugged off concerns on the spreading omicron variant. 

The Dow has now risen six straight trading days, marking the longest streak of gains since a seven-session run from March 5-15 this year. 

Walgreens Boots Alliance and Nike rose 1.59% and 1.42% respectively against the backdrop of recent reports suggesting holiday sales were strong for U.S. retailers. 

Data on Wednesday showed the U.S. trade deficit in goods mushroomed to the widest ever in November as imports of consumer goods shot to a record and the coronavirus pandemic has limited spending by Americans on services. 

Some early studies pointing to a reduced risk of hospitalization in omicron cases have eased some investors’ concerns over the travel disruptions and powered the S&P 500 to record highs this week. 

Meanwhile, the S&P 1500 airlines index dipped. Delta Air Lines and Alaska Air Group canceled hundreds of flights again on Tuesday as the daily tally of infections in the United States surged. 

Typically, the final five trading days of the year and the first two of the subsequent year are seasonally strong for U.S. stocks, in a phenomenon known as the “Santa Claus Rally.” Market participants, however, warned against reading too much into daily moves as the holiday season tends to record some of the lowest volume turnovers, which can cause exaggerated price action. 

The Dow Jones Industrial Average rose 90.42 points, or 0.25%, to 36,488.63, the S&P 500 gained 6.71 points, or 0.14%, to 4,793.06 and the Nasdaq Composite dropped 15.51 points, or 0.1%, to 15,766.22. 

As 2021 draws to a close, the main U.S. stock indexes are on pace for their third straight year of stunning annual returns, boosted by historic fiscal and monetary stimulus. The S&P 500 is looking at its strongest three-year performance since 1999. 

The focus next year will shift to the U.S. Federal Reserve’s path of interest rate hikes amid a surge in prices caused by supply chain bottlenecks and a strong economic rebound. 

Volume on U.S. exchanges was 7.89 billion shares, compared with the 11.15 billion average for the full session over the past 20 trading days. 

 
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Rights groups in Kenya are pushing authorities to resettle tens of thousands of squatters evicted just ahead of the holidays to make way for a Chinese-backed expressway.  

Kenyan Lucy Wangare, in her forties, cleans a makeshift tent that has provided her family flimsy shelter since October, when Nairobi city authorities evicted them from their home of almost two decades.

She, her husband, and her sister spent the holiday season living in the tent, enduring cold and wet nights. 

City authorities evicted more than 40,000 squatters like Wangare from the Mukuru Kwa Njenga slum and razed their homes to make way for construction of the Nairobi Expressway.  

What is left of the Mukuru slum looks like a wasteland, with scores of makeshift tents forming a small island.  

Authorities gave them just days’ notice to vacate their homes, says Wangare.

“If you look at where I sleep, you’d think I wasn’t a Kenyan citizen, you’d think I was a refugee, said Wangare. 

They used to have property and houses but, right now, they’ve been left destitute. She blames Kenya’s government.

The half a billion dollars elevated expressway aims to ease Nairobi’s notorious traffic by connecting the main international airport to the city center and wealthy suburbs.      

The Chinese state-owned China Road and Bridge Corporation is building and financing the expressway, which should be working in 2022, and will collect the tolls for nearly three decades.    

Despite critics calling it a road for the rich, Kenya’s President Uhuru Kenyatta defended the project while taking a tour of it the day before Christmas.  

“The difference that is being occasioned by the road building, the drainage being build, by the sewage being put in — I do believe that within another two years, Nairobi will be a truly 21st century city, catering for its population in a positive manner and in a manner befitting our people,” said Kenyatta.    

But Kenyan rights activists fault the government for not striking a balance between the need for infrastructure and human dignity for those evicted.  

Anami Daudi, 25, is with the Mukuru Community Justice Center.

“It’s so traumatizing, people are having mental issues here, we have other special challenges, they should get like special attention.  But you find out that even the facilities we have around they can’t even accommodate to create maybe that space to provide such services,” he said. 

The single squatters left homeless, like 38-year-old Pauline Gathoni, struggle with security fears.      

“It’s very dangerous to spend the night here, especially for us, women,” she said. The men can defend themselves if attacked,  but she can’t fight anybody. ”If someone attacks me and steals my property, tells me to leave, I will have no choice but to obey them,” she said.

City authorities’ promises to compensate and help resettle the evicted families have yet to come true.    
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With the arrival of winter in Europe and energy prices soaring, tensions are running high over the provision of gas from Russia — especially through the Yamal-Europe pipeline that runs through Poland and Belarus. 

But the Yamal pipeline is just one part of a complex gas infrastructure network shaped not only by energy needs but also wider economic interests and politics, including strife between Russia and Ukraine. 

The pipeline, opened in 1994, runs over 2,000 kilometers (1,242 miles) to Germany from the city of Torjok in central Russia, transiting through Belarus and Poland. 

It delivers 30 billion cubic meters of gas to Europe each year, making it one of the most important vehicles for the provision of Russian gas to the continent. 

Russia sells Germany gas at a cheaper rate than it does to Poland, in part to make up for the higher transit fees through the longer delivery distance. 

But this means that it is more cost efficient for Poland to buy Russian gas from Germany. 

Some of the gas sold by German traders to Poland flows directly into Polish territory, or if that is not sufficient, the pipeline can also operate in reverse to send more to Germany’s eastern neighbor. 

Since December 21, the pipeline has been operating in reverse, with gas flowing east back into Poland from the German border, according to data from management company Gascade seen by AFP. 

This means that over the last days, Germany itself has not been receiving gas via Yamal. 

Meanwhile, Russian gas continues to flow to Europe through other major pipelines such as Nord Stream I and TurkStream. 

It is not unusual for the Yamal pipeline to operate in reverse for short periods, but this latest about-turn comes against a backdrop of political tension over fears that Russia may invade Ukraine. 

Political pressure 

In Germany, the government has said that in the event of any “escalation”, it will put the brakes on another gas pipeline, Nord Stream 2, which is still awaiting the green light from the authorities. 

Some European states, such as Poland and Ukraine, have accused Moscow and Russian energy company Gazprom of cutting gas supplies to Europe to exert political pressure over these tensions. 

Russian President Vladimir Putin has said the change in gas flow through the Yamal pipeline is purely down to fluctuating orders and denied any political motive. 

Gazprom, for its part, has called accusations that it is failing to deliver enough gas to Europe “absolutely groundless and unacceptable” and blamed Germany for dipping into its reserves to supply neighboring Poland. 

Berlin on Monday denied any intervention on its part. “It is not the government that decides on gas flows, but the market, the traders,” the Economy and Climate Ministry said. 

According to George Zachmann, a specialist in energy issues for the Brussels-based Bruegel think tank, Gazprom may also be “favoring its own pipelines” over those it does not 100% control, such as the Yamal pipeline. 

Low reserves

A spokeswoman for the German Economy and Climate Ministry told AFP that “security of supply is still guaranteed.” 

But Berlin, which has “relatively low” gas reserves with its tanks just 53 percent full, could soon have “difficulties”, according to Christophe Bonnery, president of the Association of Energy Economists. 

“If contracts are adhered to there will be no problems until at least March,” said Zachmann. But “if Russia cannot or will not deliver gas for technical or other reasons, then supplies could fall short.” 

The wrangling comes amid an explosion in gas prices, which are up to seven times higher than at the beginning of the year.

The surge is thought to be partly down to a particularly cold winter and an increase in activity linked to the post-coronavirus economic recovery. 

With 40% of gas consumed in Europe coming from Russia, Moscow is suspected of taking advantage of the tensions on the world market to reduce supply and drive up prices. 

The International Energy Agency (IEA) in September called on Russia to be a “reliable supplier” and send more gas to Europe. 
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As Europe rang in the New Year 20 years ago, 12 of its nations said goodbye to their deutschmarks, French francs, liras and pesetas as they welcomed the euro single currency. 

On January 1, 2002, euro notes and coins became a reality for some 300 million people from Athens to Dublin, three years after the currency was formally launched in “virtual” form. 

Here is a recap of the event, drawn from AFP reporting at the time: 

In a far cry from the austere New Year’s celebrations imposed by the COVID-19 pandemic 20 years later, fireworks, music and lights blazed at midnight into the early morning of January 1, 2002, to mark the biggest monetary switch in history. 

AFP reported that many people passed on their traditional New Year’s Eve parties, choosing instead to queue up at cash dispensers in their enthusiasm to get hold of the first pristine euro notes. 

In Berlin, Germans said hello to the euro and goodbye to their beloved mark at a special ceremony at the Brandenburg Gate, as up to 1 million people thronged the streets for the traditional giant New Year’s Eve street party there. 

The euro cash was also a hit in the coffee shops and red-light district of Amsterdam. 

Irish revelers were, however, less in a hurry to welcome the euro, continuing to pay for Guinness, Ireland’s favorite tipple, in the national currency, leaving the headache of the changeover until the next day. 

As many feared, the euro switch provoked sporadic price hikes across Europe. 

From Spanish bus tickets, which jumped by 33%, to a Finnish bazaar, where “everything for 10 markka (1.68 euros)” was now “everything for two euros,” many price tags were a bit heftier since the single currency became legal tender. 

The European Central Bank president at the time, Wim Duisenberg, who warned merchants not to take advantage of the euro launch to increase prices, said he had not seen signs of widespread abuse. 

“When I bought a Big Mac and a strawberry milkshake this week it cost 4.45 euros, which is exactly the same amount as I paid for the same meal last week,” Duisenberg told reporters. 

Europe surprised itself with the almost glitch-free transition to the single currency, AFP reported. 

The Germans — reputedly skeptical about the single currency and nostalgic for their mark — turned out to be among the most enthusiastic. 

An editorial in the popular German tabloid Bild proclaimed: “Our new money is moving full speed ahead. No problems whatsoever in saying adieu to the mark, no tears to be shed.” 

Initial “europhoria” was, however, tempered as a few hiccups appeared, such as cash shortages and long lines in banks, post offices and at toll booths. 

France urged citizens to not rush all at once to the banks with their savings, often hoarded under mattresses and in jam jars, since they had until June 30 to get rid of their francs at commercial banks and until 2012 at the Bank of France. 

And the European Commission reported minor problems in getting small euro bills and coins distributed in most countries. 

Duisenberg said, however, he was sure that January 1, 2002, would be written into history books as the start of a new European era. 

 
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Holiday travelers continued to experience widespread flight cancellations as the omicron variant causes airline staff to call in sick.

According to FlightAware, which tracks delays and cancellations, there have been 2,395 total flight cancellations around the world Monday with 869 of those impacting flights “within, into, or out of the United States.” 

Some 6,342 flights have been delayed around the world with 1,602 delays impacting U.S flights. 

Over the Christmas weekend, thousands more flights were canceled, leaving travelers stranded. 

“We apologize to our customers for the delay in their holiday travel plans,” Delta said in a statement. “Delta people are working hard to get them to where they need to be as quickly and as safely as possible on the next available flight.” 

The holiday season is the busiest time of year for air travel. The U.S. Transportation Security Administration said 2.19 million passengers were screened on Dec. 23, and the previous day saw more travelers than the same day in 2019. 

When things might return to normal is unclear. 

Delta and JetBlue have reportedly asked the U.S. Centers for Disease Control and Prevention to reduce quarantine times for their vaccinated employees. Some airlines are also reportedly offering bonuses to work more to cover for sick employees. 

Amid the scramble, some are expressing concern. 

“We’ve got to make sure employees don’t feel pressured to come to work when they’ve been exposed to COVID or they think they may have the symptoms,” Captain Dennis Tajer, a spokesperson for the Allied Pilots Association, told ABC News. 
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