1 Fed chief sees slack staying in US jobs market
(BBC) US Federal Reserve chair Janet Yellen has said there is still
"remaining slack in the labour market". It was understated by the
unemployment rate, at 6%, she said. Ms Yellen said the "underutilisation
of labour resources" still "remained significant" to the US
economy.
If inflation went up more rapidly than expected, she
said, increases in the federal funds rate target could "come sooner"
than expected and "could be more rapid thereafter". But she added:
"Of course, if economic performance turns out to be disappointing and
progress toward our goals proceeds more slowly than we expect, then the future
path of interest rates likely would be more accommodative than we currently
anticipate."
Luke Bartholomew, manager at Aberdeen Asset
Management Investment, said Ms Yellen was being "deliberately vague"
by telling the market "nothing to see here". He said there was
"some hint" she was still concerned about the labour market. "Which
is good because one of the biggest questions about the US economy is just how
many of the long term unemployed will ever return to the labour market. "The
fear is that no one, least of all Janet Yellen, knows the answer," he
added.
2 Europe’s existential question (Khaleej Times) The
EU’s latest slip back into contraction is raising near-existential questions
among observers of the continent. At an immediate level, Europe’s woes — of
Germany and Italy contracting 0.2 per cent for the second quarter — are
disheartening, particularly since they are the consequences of failed policies.
The public’s response has been growing cynicism and
xenophobia, with radical parties gaining popularity and calling for the
dissolution of the union. Rectifying the mistakes requires overcoming
substantial political inertia. There is reason to be disillusioned; and yet, it
almost unthinkable that borders will once again be closed and currencies split
along national lines. It is also worth noting how strong the symbolism of
Europe remains to emerging states such as Romania and Ukraine, which have
demonstrated strong public enthusiasm for the EU project.
At a broader scale, the EU is currently still the
world’s largest economy, worth more than $17 trillion in GDP, more than the US;
or even China, Japan and South Korea combined. The continent also boasts the
world’s best economies by living standards and quality of life.
The standard cautionary tale is to warn that Europe
could become another Japan, stuck helplessly in “lost decades” of stagnation.
Since its bubble burst in the early 1990s, Japan’s economy has grown roughly
one per cent a year, with recurring periods of contraction. So if Europe were
to become Japan… is it only a matter of wounded pride and investors’ profits?
The difference between the EU’s brightest — such as
Norway and the Netherlands — and its most troubled is too multi-faceted to fit
a simple narrative of a failed idea. The best of Europe remains in many ways
the best in the world, and is likely to remain that way for some time.
3 The clout of online ratings (Carlo Ratti &
Matthew Claudel in Straits Times) Travel websites have been around since the
1990s, when Expedia, Travelocity and other holiday booking sites were launched,
allowing travellers to compare flight and hotel prices with the click of a
mouse. Today, the industry is in the throes of a new revolution - this time,
transforming service quality. Online rating platforms - specialising in hotels
(TripAdvisor), restaurants (Zagat), apartments (Airbnb), and taxis (Uber) -
allow travellers to exchange reviews and experiences for all to see.
Hospitality businesses are now ranked, analysed and
compared not by industry professionals, but by the very people for whom the
service is intended - the customer. This has forged a new relationship between
buyer and seller. Customers have always voted with their feet; they can now
explain their decision to anyone who is interested. As a result, businesses are
much more accountable, often in very specific ways, which creates powerful
incentives to improve service.
The impact cannot be overstated. Businesses that
attract top ratings can enjoy exponential growth, as new customers are
attracted by good overall reviews and subsequently provide yet more (positive)
feedback. So great is the influence of online ratings that many companies now
hire digital reputation managers to ensure a favourable online identity.
Fortunately, technology is also countering this
misuse of ratings. Algorithms can already detect fake reviews by identifying
consistently positive or negative opinions from the same reviewer. Geolocation
tracking can ensure that only customers who have actually used a service can
express an opinion, as is the case with Airbnb.
Not every service, however, has been touched by
online ratings. The impact of ratings depends on whether the typical consumer
actually reads online reviews before making a decision. While it is
increasingly common to do so when, say, booking a hotel room, it is much less
so when deciding among, say, bars on a busy street. Needless to say, many
developed economies lag behind, at least for now. But the writing is,
literally, on the wall - or at least on the screen. Indeed, if you are reading
this online and disagree with me, you can explain why in the comments section
accompanying this commentary.
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