Europe, Middle East and Africa
With the chance for a no-deal Brexit still looming, the stakes are getting increasingly higher for British employment and economic prospects. For example, the United Kingdom’s Office for Budget Responsibility recently put out a report stating that should a no-deal Brexit occur, the country’s economy could plunge by 2% by the end of 2020, according to a recent article by The Guardian. This in turn could cause Great Britain to enter a recession.
At a press conference, the OBR chairman, Robert Chote, discussed the potential impact for such a political move. “The big picture is that heightened uncertainty and declining confidence deter investment, higher trade barriers with the EU weigh on domestic and foreign demand,” he said, “while the pound and other asset prices fall sharply.”
Notably, the OBR had assumed that a smooth Brexit would occur for the country. However, Theresa May’s departure as Prime Minister leaves Jeremy Hunt and Boris Johnson in the lead vying for the title, and both have said they’re willing to “contemplate a no-deal departure,” according to the news service, meaning the OBR has had to test what could happen and produce economic forecasts for other scenario.
Beyond the United Kingdom, France has passed a 3% tax on digital revenue of tech companies, which could kickstart a “country-by-country approach toward taxation of tech companies in Europe. Hours after the French vote, the U.K. released its own draft proposal for a 2% digital services tax,” according to CNBC. As the news service noted, the tax is aimed at approximately 30 companies that generate over $845 million in annual digital services revenue.
Aimed at companies that are mostly based in the U.S., the tax is seen as having the potential to heighten tensions between the U.S. and France as the tax implementation defied “a warning from the President Donald Trump administration that it “unfairly targets American companies,” according to a recent CNBC article.
In Asia, the effects of a recent series of protests in Hong Kong against the government’s highly unpopular extradition bill have prompted economic issues for the region, according to a Bloomberg report. The article states that the political unrest has led to driving away local shoppers from buying goods and tourists from mainland China to stay away from Hong Kong as well, driving down tourism dollars.
According to the Hong Kong Retail Management Association, “‘most members’ reported a single-to-double-digit drop in average sales revenue between June and the first week of July, when multiple demonstrations converging on major office and retail districts took place,” as stated in a recent Bloomberg news report.
Hong Kong Financial Secretary Paul Chan said in a July 15 statement that the second quarter economic output will be “slow,” according to Bloomberg. Elsewhere in Asia, China saw a record low growth rate for the second quarter despite an improving job market. According to the South China Morning Post, “After dropping to a five-year low of 1.68 in the first quarter, the number of jobs available for every applicant increased to 1.89 in the following three months due to faster growth of seasonal hiring.” Notably, the publication reported that the trade war with the United States could put pressure on employment in the coming months. However, economists stated that the labor market would be minimally impacted by the trade war overall.
Interestingly, another impact to the country’s employment rate would be the record-high 8.3 million university graduates who will “begin to look for jobs this summer,” according to the news service. Mao Shengyong, a spokesman for China’s National Bureau of Statistics, said the following in a statement: “There are still some structural pressures. Some traditional industries, while going through transformation and overcapacity cuts, may also add to employment pressure.”
Notably, however, a lot rests on the decision the U.S. reaches on the amount of tariffs placed on the country, according to the report and economist Jiang Chao. He explained to the South China Morning Post that the “worst-case scenario, where the U.S. imposes 25% tariffs on all goods shipped from China, would cost China 5.5 million jobs, which would only amount to 0.8% of total employment.”
For the United States, the Employment Situation report for June showed an increase in nonfarm payroll employment to the tune of 224,000, according to the Bureau of Labor Statistics. This comes off the heels of a growth reduction for May’s figures which saw just 75,000 jobs added, which was the only month in 2019 (since February) to fall short of six-figure growth. U.S. hiring rebounded and topped all estimated of economists, “a sign of labor-market strength that may ease calls for a Federal Reserve interest-rate cut,” according to Bloomberg.
Reuters, however, reported that while job growth rebounded from a weak May, “moderate wage gains and mounting evidence that the economy was slowing sharply could still encourage the Federal Reserve to cut interest rates.”
Additionally, the jobless rate ticked up slightly to 3.7%, which is slightly above the half-century low of 3.6%. Earnings increased 3.1% from a year earlier, which is slightly less than Bloomberg projected. The average wages paid to U.S. workers also saw an increase of 6 cents to $27.90.
In Mexico, June saw the biggest job loss total since 2010 in a bad month for the country’s employment gains. As a net loss of 14,000 jobs took hold of the country, job growth also slowed to the lowest since 2009, according to the Mexican Social Security Institute.
“The [June] employment data is the continuation of a poor trend for formal employment ... [It] confirms that the Mexican economy is going through an economic slowdown,” according to David Kaplan, a senior labor market specialist at the Inter-American Development Bank, in a news report by Mexico News Daily. In terms of a breakdown of the job loss, there were added roles in agriculture and communications for the month. However, the construction and mining sectors saw declines of 2.1% and 3.3% respectively to lead to the net loss in new jobs for the country.