Monday, February 29, 2016

Eurozone tumbles back into deflation; China factory output shrinks more than expected; Technology is eating into middle class jobs, too

1 Eurozone tumbles back into deflation (BBC) Consumer prices in the eurozone fell sharply in February to minus 0.2%, putting more pressure on the European Central Bank. The slide into deflation is a sharp reversal from the revised 0.3% increase recorded in January.

It is the first fall in inflation since September when it shrank by 0.1%, according to Eurostat. Energy drove the decline, with prices down 8% in February compared to a 5.4% slide in January.

The dismal figures have dashed hopes that ECB efforts to boost prices were working. That raises the chance of the bank announcing further stimulus measures next month. It has already announced a cut to its bank deposit rate, which remains in negative territory.

2 China factory output shrinks more than expected (Straits Times) Activity in China's manufacturing sector shrank more than expected in February, an official survey showed on March 1, adding pressure on policymakers to provide additional stimulus for the cooling economy.

The official Purchasing Managers' Index (PMI) stood at 49.0 in February, down from the previous month's reading of 49.4 and below the 50-point mark that separates growth from contraction on a monthly basis. Analysts had predicted a reading of 49.3.

Late on Monday, China's central bank reduced the amount of cash that banks must hold as reserves for the fifth time since Feb. 2015, as regulators move to get more cash into the system to cushion painful structural reforms.

3 Technology is eating middle class jobs, too (Michael White in The Guardian) “One million jobs to vanish in 10 years,” shout the Monday morning headlines just to get the week off to a good start. But it’s not another scary intervention in the referendum debate by a pro-European or a Brexiter. It’s more serious than that.

The culprit on this occasion is the British Retail Consortium (BRC), the people who speak for shops of many sizes and employ one in six of British workers, about 3 million people. They think that 900,000 of them (not quite the million of the FT’s headline) will disappear in the next decade, more in smaller businesses and poorer areas.

Why so? This is an upgrade of an old story, the impact of disruptive technologies on existing patterns of employment, bigger and smarter computers, more online sales. But since George Osborne decided to become the worker’s friend and raise the minimum wage to a “national living” variety (NLW), albeit slowly, it’s also a political story. Higher wages imposed by government will put low-paid shop workers’ jobs in danger, says the BRC.

Don’t be smug, Mr Lawyer, Ms Doctor, Sir Financial Adviser. Tech is starting to eat good middle-class jobs, much as automated production lines ate so many well-paid working-class jobs a generation ago. We know about this in journalism because our business was one of the first white-collar industries in the queue. Facebook and Google are busy eating our lunch; if we aren’t nimble enough, we’ll be pudding.

It was Keynes who first spoke of “technological unemployment”. But it’s getting faster, as it did for handloom weavers around 1800. The result for all such businesses, so the conventional scenario goes, is the pear-shaped labour market, which sees huge rewards for a tiny elite at the top and a lot (though not enough) insecure ones for millennials working in the gig economy.

So computers may beat us all at chess, but we still have the edge on human-to-human skills and much still needs to be done to tackle mental health problems in the ways we have done so many physical ailments with spectacular success. Is the future jobs path out of retail and into therapy?

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