Bad jobs reports won’t change tapering: Janet Yellen

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Recent weak employment reports haven’t been enough to sway the Federal Reserve from reducing the pace of its monthly stimulus program, Chair Janet Yellen said Tuesday.

In her first public remarks, delivered to the House Financial Services Committee, Yellen said the central bank does not look at economic reports in a vacuum when determining its policy course.

“We have to very careful not to jump to conclusions interpreting what those reports mean,” she said. “There were weather factors. We’ve had unseasonably cold temperatures that may be affecting economic activity in this job market and elsewhere.

“The (Open Market) Committee will meet in March. We will have a broad range of data on the economy to look at, including an additional job report,” Yellen added. “I think it’s important for us to take our time to assess what the significance of this is.”

(Read more: Yellen sees better economy, less money printing)

The economy has been hit with consecutive weak nonfarm payrolls numbers, with just 75,000 new positions added in December and 113,000 in January. Both reports came after the Fed announced in December that it would begin paring back its then-USD 85 billion a month in purchases of Treasurys and mortgage-backed securities. The Fed has reduced the purchases to USD 65 billion a month.

Still, Yellen said she believes the economy is in a sustainable economic recovery, though she noted she was “surprised” by the weak jobs data.

Yellen defended the central bank’s policy course, saying the central bank was trying to be as consistent as possible considering the difficulty of the task at hand.

Recent job market weakness, Yellen said, hasn’t been enough to sway the Fed from its course in reducing the pace of its monthly asset purchase program.

(Read more: ‘This isn’t your father’s Fed’: GOP congressman)

As the unemployment rate drifts toward the Fed-set threshold of 6.5 percent it had set in December 2012 for when it would consider raising interest rates, Open Market Committee officials have indicated that the target likely won’t hold.

In her first public comments since taking the Fed’s top position, Yellen told the House Financial Services Committee that the times have called for unusual policy moves.

“I have always been in favor of predictable monetary policy that responds in a systematic way to shifts in economic variables,” she said. Yellen called herself a “sensible central banker” but called the economic circumstances since the financial crisis “very unusual times.”

“We are attempting through our forward guidance to be a systematic and predictable as we can possibly be,” she said.

Yellen delivered her first public remarks to Congress on Tuesday, earlier pledging a steady course in which the central bank would continue unwinding its stimulus program so long as economic progress allowed.

Lawmakers tossed a variety of questions at Yellen, none particularly hostile though the central bank’s economic engineering has been the subject of considerable debate over the years since the financial crisis hit.

Questioned about high levels of minority jobless rates, Yellen said Congress needs to do its share of the heavy lifting to accelerate the recovery. The Fed is charged with a dual mandate: maximum employment and price stability.

“Monetary policy is not a panacea, and I think it’s absolutely appropriate for Congress to consider other measures you might take in order to foster the same goals,” she said.
In prepared remarks, Yellen tipped her hat to predecessor Ben Bernanke, whom she said “helped make our economy and financial system stronger.”

She also cited a “pickup in economic activity” but said more needs to be done before the Fed ends quantitative easing completely and begins raising interest rates.

—By CNBC’s Jeff Cox. Follow him on Twitter
@JeffCoxCNBCcom
.

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Janet Yellen sees better economy, less money-printing

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Federal Reserve Chair Janet Yellen promised a steady and consistent course forward, with less money-printing but continued low rates, in a speech that will be delivered to Congress Tuesday morning.

In her first public remarks since taking over for Ben Bernanke, the former head of the San Francisco Fed sounded optimistic about the economy, including projections about unemployment and inflation.

“The economic recovery gained greater traction in the second half of last year,” Yellen said, according to remarks for speeches she will present Tuesday to the House Financial Services Committee and then to the Senate Banking Committee on Thursday.

While she pointed out the various gains the economy has made in reducing unemployment, she said the current rate of 6.6 percent is “well above levels” that the Fed finds “consistent with maximum sustainable employment.”

Yellen also noted recent upset in the financial markets along with two straight months of weak jobs numbers.

“We have been watching closely the recent volatility in global financial markets,” she said. “Our sense is that at this stage these developments do not pose a substantial risk to the US economic outlook. We will, of course, continue to monitor the situation.”

(Read more: Wicked winter puts big chill on job creation)

Yellen’s speech comes as the US central bank is looking to chart a course past its historically easy monetary policy.

Faced with an economy in recession and a financial system at the verge of collapse, the Fed in late 2008 began buying bonds in order to inject liquidity and to assure markets that it stood at the ready to backstop weakness.

The program, known as quantitative easing, has morphed into a monetary backstop for markets, helping keep bond yields low and stock market prices high. The S&P 500 has rallied more than 160 percent since touching its March 2009 lows.

However, concerns have grown that the Fed is supporting yet another asset bubble after the dotcom craze in the 1990s and the real estate market to kick off the 21st century.

The Fed at its past two meetings has voted to scale back the program, cutting it in $10 billion increments to where it stands now at USD 65 billion a month. While the third leg of QE has taken root, the central bank’s balance sheet has soared past USD 4.1 trillion.

(Read more: ‘This isn’t your father’s Fed’: GOP congressman)

Yellen said the incremental cuts to QE likely would continue though she insisted the Fed Open Market Committee was “not on a preset course” regarding the purchases.

“The Committee’s decisions about their pace will remain contingent on its outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases,” she said.

Though the unemployment rate is just a tick above the 6.5 percent target the Fed said it would use to gauge when interest rates should rise, Yellen stuck to that benchmark. The Fed also has used a 2.5 percent inflation level as a guidepost for rate increases.

However, she said it’s likely that the Fed will have to keep rates near zero “well past the time” that unemployment crosses below the 6.5 percent threshold.

Ambiguity on the unemployment target could become a contentious point when Yellen engages in a question-and-answer session after delivering her remarks.

“Where’s the Fed going with this forward guidance? Is it a rule?” asked Rep. Jeb Hensarling said on CNBC Tuesday morning. “What good is forward guidance if when you reach a milepost you jettison it?” Hensarling, a Texas Republican, is a member of the Financial Services Committee.

Yellen also said the Fed will be an active participant in increased bank regulation, specifically focusing on avoiding the too-big-to-fail problems that accompanied the financial crisis and required a massive Wall Street bailout that the Bernanke Fed helped orchestrate.

“Since the financial crisis and the depths of the recession, substantial progress has been made in restoring the economy to health and in strengthening the financial system,” she said. “Still, there is more to do.”

(Click here for a full text of Yellen’s speech.)

Click here for market reaction.

—By CNBC’s Jeff Cox. Follow him on Twitter
@JeffCoxCNBCcom

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Rout overdone, emerging markets to ‘turn’ this year

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The recent phase of the emerging market rout is overdone, analysts told CNBC on Tuesday, arguing that it`s only a matter of time before investors wake up to the opportunities there.

Dramatic falls in the currencies of countries like Argentina and Turkey triggered widespread selling across the asset class earlier this year. The MSCI Emerging Market Index plunged nearly 9 percent from the start of the year to a hit a low of 913.65 on February 4, but has recovered 2.3 percent since.

Dave Zier, chief executive officer at Convergent Wealth Advisors, told CNBC this year would be the year emerging markets` fortunes would turn.

“Emerging markets are suffering from people`s view of a lack growth from a global standpoint and I think that will change fairly soon… I think this is the year emerging markets are going to turn,” Zier told CNBC Asia Squawk Box on Tuesday.

This year`s rout has been reminiscent of the brutal sell-off seen last year from mid-May to late June when US central bankers` first mention of tapering prompted widespread panic selling across risk assets, as investors panicked over how countries with larger current account deficits would cope. The MSCI Emerging market index lost 17.5 percent over that period.

However, many analysts have pointed out that the drivers of this year`s rout have been markedly different this time.

Nicholas Spiro, managing director of London-based consultancy Spiro Sovereign Strategy, pointed out that the more recent sell-off has occurred at a time when long-term U.S. Treasury yields have been falling, rather than rising, showing that a fear of a rise in U.S. interest rates was not the trigger for this phase of the sell-off.

Last year, yields on the 10-year Treasury note spiked nearly 140 basis points from May to late December to over 3 percent, and have since moderated to 2.67 percent this year.

“Growth, or the lack of it, is of greater concern to investors this time round, particularly given the sharp economic slowdowns in many emerging markets, notably in Russia and Brazil,” added Spiro.

Convergent Wealth Advisors’ Zier told CNBC investors have been inaccurately blaming the US Federal Reserve’s tapering program for the emerging market selloff.

“You hear talk that the taper has been a drain on emerging markets, [but] when you look at the data, 92 percent of the money that`s come from the taper has ended up on banks` balance sheets. So what`s happening with the taper is, it`s not sucking the money out of emerging markets, it never went there in the first place,” he added.

Zier said investors’ perception of weaker growth in the region was overblown and economies in the region would likely recover along with the US and the rest of the global economy.

“I think we`re going to see growth across the bard, of between 3 to 4 percent in gross domestic product globally. The economy, particularly in the US, is stronger than people think. We`ll see 8 to 10 percent earnings growth in the US… which certainly would be supportive of emerging markets,” he added.

Zier recommended snapping up opportunities in the region now as EM valuations were offering a 50 percent discount on US stocks.

“In the US you can buy a dollar`s worth of earnings for $17 and in emerging markets you can buy that same dollar of earnings for about USD 9.50, so it`s really, really cheap over there,” said Zier.

“It`s just a matter of time before the market wakes up… this always happens – markets stay undervalued or overvalued longer than you expect,” he added, highlighting Brazil, India, China and Eastern Europe. He recommended avoiding Argentina, Thailand and Turkey.

– By CNBC`s Katie Holliday: Follow her on Twitter @hollidaykatie

Copyright 2011 cnbc.com

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Why the Fed is ‘delighted’ with bond markets: Analysts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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US government bond markets have stayed relatively benign in recent weeks, proving that fears of taper-induced volatility were unfounded and analysts told CNBC the Federal Reserve should be pleased with the recent moves.

All eyes are on Fed chair Janet Yellen’s first testimony before Congress on Tuesday, as investors attempt to predict whether the well-known dovish economist will continue tapering at USD 10 billion a month or pause following a string of weaker-than-expected data.

Read More: Markets wait on Fed Chair Janet Yellen

Simon Warner, head of fixed income at AMP Capital, told CNBC Asia’s Squawk Box on Monday the recent behavior of the US government bond market will give Yellen an extra spring in her step.

“The lack of inflationary pressure is keeping a lid on the long end of the bond market along with some of these concerns we have around the world. So I would have thought the Fed would be delighted about the way the bond market has traded since their move in December,” he said.

Read more: Good time to buy bonds? ‘Absolutely not’

 Yields on 10-year US Treasurys rose 138 basis points between May and late December, following the Fed’s first mention of tapering through to the central bank’s first stimulus reduction of USD 10 billion a month. The rapid nature of the spike prompted worries that the economic recovery could be derailed as long term US government bond yields – which determines mortgage rates – rose too quickly.

Ten-year Treasury yields have since settled back down to 2.67 percent, despite the announcement of a further USD 10 billion reduction in January.

Warner said it was now clear that all the hype about a rapid spike in bond yields was overblown.

Read more: Markets fear US chilled by more than weather

“The one thing that hasn’t really been talked about in the last six weeks or so is how benign the bond market has been,” he said. “All this talk about how rates were going to spike higher, and [how] emerging market concerns were due to higher rates in the long end, is clearly garbage. There’s no pressure in the long end of the curve at all.”

Viral Bhuta, portfolio manager, fixed income at UTI International Singapore, said the fact that bond markets have settled down demonstrates that investors are more relaxed about the tapering schedule.

“Uncertainty around the tapering schedule will reduce as the Fed continues to communicate with investors, allowing volatility in the bond market to cool off,” he said.

 Bhuta added that he expects yields on the 10-year Treasury to gradually tick up to 3 percent again as the US economy improves throughout the year.

“To a great extent, the US bond market will be data driven, especially by growth and unemployment numbers. The Fed won’t be watching yields, they’ll be totally focused on employment and inflation data,” he added.

Manpreet Gill, senior investment strategist at Standard Chartered, also said he expects long-term rates to gradually drift above 3 percent in the first half of this year, but said the Fed could run into problems in the second half of the year.

Read more: Fed volatility is emerging markets’ ‘poison’: Analyst

“In the second half of this year, however, the market is likely to begin questioning when the Fed is likely to commence raising rates, even if the actual event is some time away. This may lead to the Treasury curve creeping higher across the board. For the 10-year we are looking for yields to reach approximately 3.5-3.75 percent by the end of 2014,” he said.

Recent US economic data have raised a few eyebrows, however, although much of the weakness has been blamed on an exceptionally cold winter.

On Friday, January’s non-farm payrolls report showed 113,000 jobs were created last month, well below estimates of 185,000, while the jobless rate fell to 6.6 percent versus expectations of 6.7 percent.

The data did prompt a small reaction from bond investors with yields initially falling, before reversing course, to settle at 2.68 percent.

— By CNBC’s Katie Holliday: Follow her on Twitter @hollidaykatie

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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China data, central banks in play for Asia this week

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Economic data from China, central bank meetings in Indonesia and South Korea and latest inflation numbers from India: there`s a lot going on in Asia this week.

In addition to that, there`s focus on the US where data on Friday showed 113,000 new jobs were created in January versus market expectations for a gain of 185,000.

(Read more: Next up for markets-Yellen )

That forms the backdrop to a testimony by new Federal Reserve chief Janet Yellen Tuesday.

“There will be a lot of interest in Janet Yellen`s first Congressional testimony as Fed Chairman on Tuesday,” said Shane Oliver, head of investment strategy and chief economist at AMP Capital, in a note.

“Our expectation is that she will likely signal a continuation of the message [former Fed head] Ben Bernanke has been communicating, i.e. that growth is gradually improving and that as long as this remains the case tapering will continue,” he added.

Concerns about weakness in China`s economy meanwhile puts the spotlight on January trade data due out on Wednesday and inflation numbers expected later in the week.

China`s service sector grew at its slowest pace in almost 2-1/2 years in January, a survey from HSBC showed on Friday.

(Read more: China`s services sector activity slows to over 2-year low )

“China data drips in next week, so that will be something to watch and to see what that means for the outlook,” said Vishnu Varathan, market economist at Mizuho Corporate Bank in Singapore. “We`re also looking at how the Thai political situation evolves.”

Thailand has been marred by political unrest for months now, with elections just over a week ago failing to restore stability to the Southeast Asian country.

Central bank time

On Thursday, central banks in both Indonesia and South Korea meet.

Robert Prior-Wandesforde, director for non-Japan Asia economics at Credit Suisse, said he expected no change in monetary policy from either central bank.

(Read more: India and Indonesia: Not so bad after all? )

Still, Bank Indonesia`s meeting could attract some attention given recent rate hikes from Indonesia as well as other emerging markets, grappling with an outflow of foreign cash as U.S. monetary stimulus is unwound.

“The latest fall in emerging markets hasn`t had much impact on India or Indonesia because quite rightly they are perceived to have made progress in key areas of macro-financial vulnerability such as current account deficits,” said Prior-Wandesforde, explaining why he expected Indonesia to keep rates steady this week.

“There is a widespread expectation that inflation in Indonesia has peaked and our view is that inflation will drift lower,” he added.

Bank Indonesia has raised rates 175 basis points since last June, taking its key rate to 7.50 percent.

India watch

In the context of emerging market jitters, inflation and trade data from India is also likely to be watched closely.

(Read more: How these two big emerging markets escaped selloff )

India trade data for January is expected early in the week, while the January consumer price index (CPI) is due out Wednesday and the wholesale price index (WPI) is expected on Friday.

The CPI stood at an annual 9.87 percent last month, while the WPI stood at 6.16 percent from a year earlier.

“We expect India`s CPI to come in around 9.5 percent,” said Prior-Wandesforde. “The India trade data is also very important amid still jittery emerging markets.”

In Japan, current account data for December is expected on Monday, while Australia releases January jobs data on Thursday.

– By CNBC.Com`s Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Will emerging markets become a euro zone-style risk?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Emerging markets have been a key source of volatility for global financial markets in recent weeks, raising the question of whether they will become a “euro zone” for investors this year.

“We expect that woes in emerging markets may continue to provide occasional worries for global markets similar to what was experienced during periods of the euro zone crisis in 2011 and 2012,” William Stone, chief investment strategist at PNC Wealth Management wrote in a report titled “Emerging Markets are the New Eurozone” last week.

(Read more: Will China be the `savior` of emerging markets? )

“Our expectation is that emerging markets will also fail to drag the global economy into crisis. (But) investors should position themselves to be able to withstand any volatility from the concerns, since investors forced out of stocks during the euro zone crisis paid a heavy price in terms of missed market returns as the worries passed,” he said.

Mitul Kotecha, head of global currency research, Credit Agricole says while there are vast differences in the nature of the euro zone debt debacle and current emerging market troubles, the underlying similarity is the potential of contagion – from emerging markets to developed markets in this case.

“There`s certainly potential for contagion. While there`s differentiation, there are so many different issues for emerging markets that cumulatively, they are adding to negative sentiment when we have Fed (Federal Reserve) tapering,” he told CNBC.

There has been some evidence of this contagion reflected in the performance of emerging market and US equities this year. The benchmark SandP 500 (INDEX: .SPX) has fallen about 3 percent since January 1, while the MSCI Emerging Markets index is down 6.5 percent.

(Read more: How fragile are emerging markets? )

The selloff in emerging markets has been triggered by a combination of factors from the US Federal Reserve`s pullback in its bond buying program – which has provided global markets with ample liquidity in recent years – to concerns over the growth outlook for China. The “Fragile Five” – India, Indonesia, Brazil, Turkey and South Africa – markets have been among the worst hit given their vulnerabilities including twin fiscal and current-account deficits, falling growth rates and above-target inflation.

According to Kotecha, the emerging market turmoil is unlikely to transpire into a multi-year episode given they are in a better position to weather the storm.

“Fundamentals are better than in past crises. For example, when you look at FX reserves they are a lot more solid than in the past,” he said.

(Read more: Why Fed volatility is emerging markets` `poison` )

Rajiv Biswas, chief economist, Asia-Pacific at IHS Global Insight agrees contagion from the emerging market troubles will be on a far lesser scale than the euro zone debt crisis.

“Euro zone contagion was driven by the toxic assets on US and European bank balance sheets related to subprime securities, which translated into a systemic EU banking system crisis and deep contraction in bank credit,” Biswas said.

“At present, the macroeconomic problems of different emerging markets do vary considerably. The most fragile emerging markets are more vulnerable to capital flight and currency depreciation, while other emerging markets which have sound macroeconomic policies, low levels of government debt, and well capitalized banking systems are less vulnerable,” he added.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Friend or foe: How does US view China?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A “pivot” or emphasis on Asia in US foreign policy is not about containing China, although more could be done to spell out what the strategy means, speakers at an Asia-Pacific Security Conference in Singapore said on Monday.

Diplomatic relations in Asia are at a delicate point: China is asserting its claims in the South China Sea, alarming regional neighbors who hope that the US, the world`s remaining superpower, will provide some balance in the region.

(Read more: Singapore Airshow 2014: A CNBC Special Report )

“Last year, [US Secretary of Defense] Chuck Hagel said the pivot is misread, that it`s not all about China and I agree with that,” Ruan Zongze, vice president at the China Institute of International Studies (CIIS) said during a panel discussion on Sino-American strategies, part of the events for this week`s Singapore Airshow.

“But when I talk to people about this they say it [the pivot] is all about the rise of China,” he added.

According to Andrew Shapiro, a former US assistant secretary of state for political-military affairs, US policy in Asia is not about `containing` China`s power.

“Every announcement [on the pivot] is not about China, this is not a new Cold War,” Shapiro, the managing director of Beacon Global Strategies, said. “The US acknowledges that China is growing and that it has interests in the region.”

(Read more: Why investors should watch out for Japan-China relations )

China has grown rapidly over the past three decades to become the world`s number two economy after the US While this makes it a key trading partner for many countries in Asia, the rise of China has also fueled concerns about the balance of power in Asia.

China declared an air defense zone in the East China Sea last November covering territory claimed by China, Japan, Taiwan and South Korea. It has also implemented new fishing restrictions in the South China Sea since the start of the year, upsetting its neighbors.

The country is also a big spender when it comes to defense and according to IHS, China is projected to outspend the UK, France and Germany combined by 2015.

“There are concerns about China`s territorial claims in the South China Seas. The US has made clear that we are not taking sides. What we need is a rules-based system for disputes,” Shapiro added.

The Asia pivot has been presented as a rebalancing of US priorities as the US withdraws from Afghanistan and Iraq, analysts say.

“The US could do better to explain what the pivot means,” said Richard Bitzinger, a senior fellow at the S Rajaratnam School of International Studies.

Japan`s role

Japan`s relations with the US add another dimension to how Sino-US relations develop going forward, the panelists said.

(Read more: Timeline of latest flare-up in China-Japan relations )

Relations between China and Japan, Asia`s two biggest economies, are at a low point amid a territorial dispute in the East China Sea and following a visit by Japan`s Prime Minister Shinzo Abe in December to the Yasukuni war shrine in Tokyo that honors Japan`s war dead, including some convicted war criminals.

“Japan`s revisionist moves a pose a challenge to peace and stability in the region,” said Zongze at the CIIS.

According to Shapiro, “The US-Japan relationship is a cornerstone of US security interests in Asia and will continue to be so.”

But he added: “From the US, we would urge Japan to be a good partner and to take into account how their actions might be interpreted by their neighbors.”

– By CNBC.Com`s Dhara Ranasinghe; Follow her on Twitter @DharaCNBC

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s new visa rules a ‘game changer’ for tourism

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The loosening of India`s stringent visa rules is expected to unleash the huge potential of the country`s vibrant tourism industry, which currently welcomes far fewer visitors than many of its Asian neighbors.

India`s government last week decided to extend its visa-on-arrival scheme to 180 countries worldwide from just 11 countries previously in a bid to boost tourist arrivals in the country.

“The new visa-on-arrival rules have the potential to be a significant game changer for India`s tourism industry by sharply reducing regulatory barriers to visits by foreign nationals from almost all countries worldwide,” said Rajiv Biswas, chief economist, Asia-Pacific at IHS Global Insight wrote in a note on Thursday.

(Read more: `Full-fledged war` awaits India`s airline sector )

“One of the most significant advantages India can reap from these regulatory changes is to tap the large pool of Indian diaspora who are foreign nationals and were subject to cumbersome visa procedures prior to the new regulations,” he added.

The Indian diaspora comprises around 25 million people, according to the Indian Ministry of Overseas Indian Affairs, many of whom do not have an Indian nationality, particularly in OECD countries. This provides a large pool of potential tourists who have ties to India and also the financial means to travel frequently, Biswas said.

In the US, for example, there were 1.15 million Indian-Americans holding US citizenship in the 2010 Census, with a median annual household income of $88,000, according to IHS.

At the moment, domestic tourists are a key driver of the industry, accounting for 82 percent of the country`s overall tourism revenue.

Safety-related concerns have been a key setback for the country`s tourism sector, with cases of sexual harassment gaining significant coverage in international media over the past two years.

(Read more: China tourism set for boom like Japan in the `80s )

International tourist arrivals were estimated at just 6.65 million in the 2012-2013 fiscal year – around four times less than the 26 million foreign visitors traveling to both Thailand and Malaysia in 2013.

With India`s tourism industry contributing approximately 3.7 percent to the country`s gross domestic product (GDP) and accounting for 4.4 percent of employment, according to IHS, a surge in tourist arrivals would provide a much needed boost for the struggling economy.

(Read more: Record tourism fuels hotel boom in land of the rising sun )

“Taking into account the large output and employment multiplier effects from tourism industry value added, the sector has the potential to become a significant source of new output, employment and foreign exchange earnings growth,” he said.

A rise in foreign exchange earnings is important because it could aid in the narrowing of the country`s large current account deficit, which stood at $88 billion in the fiscal year ended March 2013.

However, with the liberalizing visa procedures, Biswas notes that it`s vital the government steps up its focus on enhancing the county`s infrastructure.

“The Indian government will also need to give a high priority to developing tourism infrastructure, using both domestic and foreign private investment flows to boost tourism infrastructure capacity with new developments such as airports, hotels and tourist attractions,” he said.

-By CNBC`s Ansuya Harjani. Follow her on Twitter: @Ansuya_H

 Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Wicked winter puts big chill on job creation

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Job growth saw another weak month in January, with employers adding just 113,000 positions as frigid weather and a deluge of storms, along with a continued economic slowdown, helped dampen hiring.

The Bureau of Labor Statistics also reported Friday that the unemployment rate fell to 6.6 percent. The labor force participation rate remained mired around 36-year lows, though it edged higher to 63 percent, and some economists said that for a change the drop in the rate came for good reasons.

Economists expected 185,000 new positions were created in January, from a slightly upwardly revised 75,000 in December, with the unemployment rate holding steady at 6.7 percent.

An alternate measure of unemployment that includes discouraged and underemployed workers slid from 13.1 percent to 12.7 percent, its lowest level since November 2008.

(Read more: This is what Greenspan is really worried about …)

Markets shrugged off the number after turning negative momentarily. Futures indicated a sharply higher open on Wall Street.

“On an absolute kind of real-economy basis, this does confirm that there’s probably some degree of slowness out there, but I don’t think it’s catastrophic,” Brad McMillan, chief investment officer for Commonwealth Financial, which manages USD 81.6 billion for clients, said in a phone interview. “You had the same kind of differential last time where the unemployment rate is going down at the same time as we get a very disappointing number. Clearly, there’s some kind of discrepancy between the establishment survey and the household survey. The best explanation for that is weather.”

The household survey showed that 262,000 people said they couldn’t work because of the weather, though that number was below the norm for January and indicative to economists that that weakness went beyond the turbulent climate.

The report, then, could fuel fears that the job-creation engine is sputtering, after December’s anemic number, originally reported as 74,000. That in turn could play into decision-making at the Federal Reserve, which has reduced its monthly asset purchase program by USD 20 billion a month to USD 65 billion. Dallas Fed President Richard Fisher, who has backed a faster unwinding of the easing program, told CNBC that a single data point is unlikely to sway policy.

“They would need some pretty darn compelling evidence to (risk) creating the impression that the Fed is flip-flopping,” McMillan said.

(Read more: Fed’s Fisher: We’re on right QE3 taper course)

January’s performance was well off the 2013 pace, during which the new positions averaged 194,000 per month. Construction led the way, with 48,000 new positions, while professional and businesses services grew by 36,000, manufacturing added 21,000 and wholesale trade created 14,000 new positions. Leisure and hospitality grew by 24,000, below the 38,000 per month in 2013.

“It’s two strikes in the economy and it’s down in the count. I don’t think it’s going to strike out,” said Stuart Hoffman, chief economist at PNC, which manages USD 127 billion. “After two weak payroll reports, the stock market is saying that’s good news (in terms of the Fed reversing its tapering) or they’re looking underneath this and seeing a few silver linings.”

Looking at the internals, long-term unemployment—the most pernicious part of the struggling U.S. jobs picture—moved lower by 232,000 to 3.6 million. The average duration of joblessness fell to 35.4 weeks, its lowest in a year but still well above pre-recession levels.

Construction growth led to doubts that weather was the sole factor in the jobs slowdown.

“Using weather as an excuse is wrong, because construction actually had an increase in the month,” said Todd Schoenberger, managing partner at LandColt Capital. “The labor market is in a dangerous position right now as it seems to be deteriorating at a rapid pace, with little evidence to support a turnaround anytime soon.”

On Wall Street, job growth was stagnant, though there’s some optimism that could be changing soon.

“There’s a lot more demand to hire this year than there was a year ago,” said Paul Sorbera, president of Alliance Consulting, a Wall Street executive search firm. “Wall Street kind of bottomed out somewhere last year in compensation, and Ithink the year has been a bottoming out on the layoffs. They’ve cut back so far really that they’ve cut down to the bone.”

Government saw a contraction of 12,000 positions, primarily due to Postal Service cutbacks.

The report contrasted strongly with Wednesday’s reading from ADP and Moody’s Analytics, which indicated the private sector added 175,000 new positions.

The average workweek was unchanged at 34.4 hours while average hourly earnings rose 5 cents to USD 24.21.

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Does Sony’s shakeup signal sea change for Japan Inc?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

The major restructuring of Sony`s consumer electronics units may signal that a long-awaited shakeup to break Japan Inc. out of its doldrums has finally begun.

“Zombie” companies resisting change and offering little in the way of growth had long plagued Japan`s moribund economy. In the wake of Abenomics – a series of policy measures unveiled under Prime Minister Shinzo Abe to jump start the economy – that may be changing, with more companies beginning to shake up their business models, especially in the face of increasing competition from abroad.

“There`s a real feeling in corporate Japan that we have got to change. Evidence of that happening is most welcome,” Mark Matthews, head of research for Asia at private bank Julius Baer, told CNBC.

At its quarterly earnings announcement Thursday, Sony said it would hack off its long-ailing computer and television businesses, stepping up its restructuring efforts. The turnaround efforts include plans to cut around 5,000 jobs, a once-taboo step in corporate Japan.

Sony isn`t alone. Panasonic has emerged from a period of heavy losses after it sold off some units and shifted its focus toward industrial, rather than consumer, clients; its efforts also included reducing its workforce by more than 30,000 workers.

“It`s indicative of the wake-up call that Prime Minister Abe is having. It`s really causing positive reverberations throughout corporate Japan,” Matthews said.

“Japan has rightly realized that if they don`t do something, they`re going to slowly sink into the Pacific Ocean and become vulnerable and irrelevant,” he said. “In a way, Sony is a microcosm of that.”

Others also see the crossing of former taboos could indicate Japan`s corporate world is heading into a period of major changes.

“Japan has been the last bastion of jobs for life,” said Shane Oliver, head of investment strategy at AMP Capital. “Maybe it does indicate a shift of structure in Japan.”

Oliver noted that Abe likely isn`t a fan of the layoffs, as they will complicate his efforts to push companies for much-need wage increases.

“One thing Japan needs is higher wages growth, but if other companies follow Sony`s lead, it may not get that,” Oliver said.

But he added, “If Prime Minister Abe wants a new Japan, then some people will have to lose their jobs,” noting “ultimately, a stronger Japan will lead to more jobs.”

To be sure, not everyone is convinced Japan Inc.`s moves indicate a drive for growth so much as a painful necessity.

“It`s a painful adjustment to slower growth,” said Tim Condon, head of research for Asia at ING Financial.

“North Asia is a big loser from slower growth in China,” Condon said. “The really beneficial effects of rapid growth in the early part of the century are running in reverse,” he said, noting that Japan was a major beneficiary of China`s rapid growth before the Global Financial Crisis.

“(Sony) didn`t want to do this. They`re doing this to save the company,” he said. “Other companies are going to be facing the same kind of pressures as Sony. There`s a limited amount the (weaker) yen can do to help out there,” he said.

Sony itself may see its moves as only a retrenchment in the face of tough competition, rather than a springboard for growth.

“I hope that this will be the last time I will need to restructure on this scale,” Kazuo Hirai, Sony`s CEO said at a press conference. “It may not be to this magnitude in the future, but we will always need to review and realign our business portfolio as a time like this when competition is intense.”

Indeed, it`s likely noteworthy that Sony`s moves leave the company`s basic structure intact. Last year, Sony rejected calls from billionaire investor Daniel for a breakup of the company, with spinoffs of the entertainment and insurance divisions.

-By CNBC.Com`s Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

Copyright 2011 cnbc.com

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