TIME Economy

Expect Talk of Oil, Terrorism and Sex Scandals at Davos

A logo sits on a glass panel inside the venue of the World Economic Forum (WEF) in Davos, Switzerland on Jan. 19, 2015.
A logo sits on a glass panel inside the venue of the World Economic Forum (WEF) in Davos, Switzerland on Jan. 19, 2015. Chris Ratcliffe/Bloomberg—Getty Images

Even the most powerful cannot completely control the agenda at the World Economic Forum in Davos. Here’s what you can expect from this year’s conclave of the elite

Even the powerful men of Davos can’t control their own agenda.

The CEOs, top academics, and world leaders—many of whom have traveled by private jet and then helicopter to Davos, a secluded Swiss ski town—for this year’s World Economic Forum have come officially to discuss how power in the global economy is shifting, from traditional leaders like the U.S. to the emerging markets.

Instead, on the eve of the conference, which officially kicks off on Tuesday night, there were signs that the economic order of the past few decades seems intact. The latest sign came on Monday, when Chinese stocks plunged 8%, their largest drop in six years. Meanwhile, Brazil’s economy is stagnant and the collapse in oil prices has pushed Russia into a crippling recession. At the same time, U.S. GDP rose 5% in the third quarter, once again making the nation the driver of the world’s economy. That’s likely to lead much of the talk in Davos this year.

And while the monied men—and they are, once again, mostly men—have come to talk economics and global policy, at least some of that high-minded fare will be overshadowed by more salacious talk. The U.K.’s Prince Andrew, who is attending the World Economic Forum this year, is likely to get hit with questions about a scandal with an American woman, who claims he used her as a sex slave when she was 17. It will be the first time Prince Andrew has been in public since the allegations were made.

The World Economic Forum’s official agenda often gets pushed aside by world events that unfold while the powerful are walled in by Davos’ peaks. But it has been six years since leaders in Davos were meeting in the midst of what looks to be growing economic turmoil. And it’s the first time in a while where at least a portion of that instability is coming from the conference’s home turf.

European leaders will be speaking on the eve, once again, of a vote in Greece that could break up the euro. That and the plunging price of oil threaten to hurl the world’s financial system back into tumult.

Officially, the title of this year’s World Economic Forum is “The New Global Context.” The economic context that has emerged in the past few months is one of cheaper oil and instability in economies in Russia, Europe, and, most recently, China. That’s likely to make oil the spotlight of any discussion at Davos. On Wednesday, the secretary-general of the Organization of Petroleum Exporting Countries (OPEC) Salem Adballa El Badri will speak on a panel with Arkady Dvorkovich, deputy prime minister of Russia. Also on the panel will be Khalid Al Falih, the CEO of Saudi Aramco, the Saudi Arabian oil company. The discussion will likely focus on whether the drop in oil prices is supply-driven, a gambit by Saudi Arabia and other nations to drive out other higher cost oil suppliers, or if it’s a sign that the world economy is slowing more dramatically than it may initially seem.

Central bankers around the world should expect some criticism, and that includes those in Switzerland, who last week surprised the world, causing currencies around the world to tumble compared to the Swiss franc. On Wednesday morning, New York University Professor Nouriel Roubini and hedge funder Paul Singer, both of whom have criticized the Federal Reserve for keeping interest rates near zero for so long, will talk. This summer, Singer said that the rise in the U.S. markets was based on fake money from the Fed and that it was not sustainable.

Davos is known for its high-powered panel discussions. The highest wattage finance conversation will come on Thursday and will likely focus on what could happen when the Fed begins to raise interest rates. That panel will include Goldman Sachs Chief Operating Officer Gary Cohn; Ray Dalio, who manages the largest hedge fund in the world; Harvard professor and former Treasury Secretary Larry Summers; and Christine Lagarde, who is head of the International Monetary Fund.

On Thursday afternoon, Microsoft CEO Satya Nedella will debate the future of tech with Facebook’s Sheryl Sandberg and Google’s Eric Schmidt. Also talking will be Yahoo’s Marissa Mayer. But perhaps the hottest tech ticket at Davos, given the state of China’s economy, is to hear Alibaba’s CEO Jack Ma, who will be speaking Friday morning. In September, the Chinese online retail giant raised $26 billion on the New York Stock Exchange, in the biggest IPO in U.S. history.

Income inequality is a perennial topic at the World Economic Forum. But the discussion of inequality at Davos tends to be impersonal and focus on rich nations versus poor nations. But influential research group Oxfam has attempted to make the issue more personal this year. On Monday, the charity Oxfam released a report targeted at the World Economic Forum that said the world’s wealthiest 1% are close to owning as much wealth as the rest of the globe combined. Davos gets its share of that 1%. Also, President Obama’s State of the Union Address on Tuesday will likely focus on income inequality, which could make it a larger part of the discussion at Davos.

Also, given the recent attacks in Paris, terrorism is likely to be a topic of conversation in Davos. French President Francois Hollande will address the conference on Friday.

U.S. officials have been somewhat absent in recent years at Davos, but they are slated to return this year. Secretary of State John Kerry, who was criticized for not participating in demonstrations against terrorism in France, will address the conference on Friday. U.S. Treasury Secretary Jack Lew is also slated to be at Davos, but he is not scheduled to publicly address conference attendees. Other U.S. officials or politicians on the attendance list include Penny Pritzker, the Secretary of Commerce; and Darrell Issa, the congressman from California. Former U.S. House of Representatives Majority Leader Eric Cantor will also be at Davos, but this year as an investment banker, for boutique firm Moelis & Co.

For the first time, the World Economic Forum will hold a discussion of gay and lesbian rights on its official program. But likely to get as much buzz as the panel is the fact that it won’t take place until Saturday, when many of the conference’s rich and powerful have already decamped or have headed to the ski slopes.

So it goes in Davos.

This article originally appeared on Fortune.com.

TIME Economy

Americans Are Happier About the Economy Than They’ve Been in a Decade

The economic upswing is also boosting Obama

Steady growth is bolstering the American public’s confidence in the economy, according to a new poll that shows people are more optimistic than they have been in 11 years. It’s good news for President Barack Obama as he prepares to give his State of the Union address on Tuesday night.

About 45% Americans said they are satisfied with the state of the economy, a level unseen since January 2004, according to a Wall Street Journal/NBC poll. “For the first time, we have numbers that kind of bust out of the Great Recession Era,” said Bill McInturff, a Republican pollster who worked on the survey.

Only 49% of Americans said the country was in a state of decline, the lowest level since on the question since 1991. The poll of 800 adults found that the national mood is being bolstered by dropping fuel prices, increased employment, and economic growth.

Obama’s overall approval rating has also risen to 46%, and 49% of Americans now approve of his handling of the economy—the highest level since he won reelection in 2012. But Congress’ approval ratings remain at an abysmal 16%

“Throughout most of 2014, Barack Obama had a stiff wind in his face,” said Peter Hart, a Democratic pollster who worked on the survey. “He starts 2015 with a slight breeze at his back.”

[WSJ]

 

MONEY Economy

The Doom and Gloom of Deflation Hasn’t Reached Our Shores—Yet

Cars fill up at the pumps at a Shell station near downtown Detroit, where the sign shows the price at $1.899 a gallon on Thursday, Jan. 1, 2015
Cars fill up at the pumps at a Shell station near downtown Detroit, where the sign shows the price at $1.899 a gallon on Thursday, Jan. 1, 2015. AAA Michigan said that the average cost of self-serve unleaded gasoline in the state was $1.97 a gallon, the first time the price has fallen below $2 a gallon since March 2009 and down 9 cents since the beginning of the week. David N. Goodman—AP

A new government report shows that prices are clearly falling, mostly due to sinking energy prices. Even so, this could keep the Fed from hiking rates for months.

You might think that falling consumer prices would be met with cheers on Wall Street, especially in the all-important holiday shopping season.

But when a new government report released on Friday showed that consumer prices in December had declined by the largest amount in six years, there was a bit of a gasp on Wall Street.

The Labor Department reported that the Consumer Price Index, perhaps the most widely followed measure of U.S. inflation, sank 0.4% in December, after dropping 0.3% in November.

This data clearly shows there is no inflation in this economy.

Yet it’s still too soon to say if there’s deflation — a quagmire that Europe is currently stuck in, where prices keep falling to the point where consumers postpone purchases, further weakening the economy.

Why?

For starters, over the past 12 months, prices in general have inched up 0.8%. While that’s the lowest yearly rate since 2009, it’s still positive.

More importantly, plummeting gasoline prices were the real culprit that drove CPI down in December and November, notes Michael Montgomery, U.S. economist for I.H.S. In fact, last month’s 9.4% decline in gas prices accounted for the entirety of the 0.4% decline in CPI, he said.

And keep in mind that several key categories of spending did rise in December, including food, electricity, and housing costs.

Overall, so-called core CPI — which strips out volatile energy and food costs — was flat last month and rose 0.1% in November.

This helps explains why Americans regard falling prices as a blessing so far — not a curse.

Consumer confidence, as measured by the University of Michigan’s consumer sentiment index, jumped to a reading of 98.2 this month, the highest point since January 2004.

But economists expect the deflation concerns to linger, as gas prices have sunk even faster this month than in December.

Already, there’s talk that the Federal Reserve might hold off raising interest rates this year because the global slowdown in general and Europe’s deflation specifically are keeping inflation at bay here at home.

This chatter—and concern—will grow if January’s CPI figures show even more falling prices.

MONEY Economy

Swiss Currency Has Shot Up 15% So Far Today. Here’s Why That Matters

A Swiss coin is seen beneath a euro banknote on Januay 15, 2015 in Lausanne. In a shock announcement on January 15, Switzerland's central bank said it was ending a three-year bid to artificially hold down the value of the Swiss franc against the euro, in a move that immediately sent the safe haven currency soaring. Fabrice Coffrini—AFP/Getty Images

Chaos in the currency market is a sign of deep problems for Europe—and the whole global economy.

The global economy got a lot more interesting today, and maybe a little more scary, when the Swiss National Bank ended its commitment to a fixed exchange rate between the Swiss Franc and the euro.

Currency markets went into a frenzy. The Swiss franc immediately rose 30% in value against the euro, mirrored by a spike in its U.S. dollar value. Some of those gains have pulled back, with the currency up about 15% at midday. That’s still a huge move.

Okay, so it’s been a big day for currency traders—and anyone planning on a ski trip to the Alps. But what’s this mean for me?

The wildness in the market underscores the big economic story of the moment: Europe’s slide toward a recession. In a globally connected economy, weak demand in Europe could weigh on the recovery in the U.S.

So what exactly happened?

Swiss francs rose because the Swiss central bank removed an artificial cap on the price of an asset people really, really want right now. The import of the story is less about the sudden price change today than about why people want to trade their euros for francs in the first place.

Switzerland isn’t a part of the eurozone, the group of countries that share the euro as a currency. Swiss assets denominated in Swiss francs have long been considered a safe haven—a parking spot for investors around the globe when they are feeling jittery.

The eurozone has given people a lot be jittery about. In the wake of the Greek debt crisis at the beginning of the decade, investors jumped into francs, strengthening the currency against others. The problem with that for the Swiss is that it makes the goods produced by Swiss companies more expensive to export. So the Swiss National Bank (that’s like their Federal Reserve) capped the value of a franc at 1.20 per euro.

It also decided to start charging negative interest rates, meaning investors in effect have to pay a fee to park their money in a Swiss bank. That’s another way of fighting currency overvaluation. Today, at the same time as it cut the currency peg, the Swiss bank lowered the short-term interest rate from -0.25% to -0.75%. That is, they raised the penalty for stashing money there. Even so, the rally in francs shows there remains a lot of demand for doing just that.

Why did the Swiss cut the exchange rate peg?

The surprise move comes as Mario Draghi, president of the European Central Bank, is considering new measures to stimulate the eurozone economy. Many investors expect the ECB will take a page from the U.S. Federal Reserve and start buying long-term debt to push down long-term interest rates, a strategy known as quantitative easing.

A euro QE is broadly expected to bring down the value of the euro compared to the U.S. dollar. The Swiss, it seems, didn’t want to tie the value of its own currency so closely to the policy makers at the ECB.

“Recently, divergences between the monetary policies of the major currency areas have increased significantly – a trend that is likely to become even more pronounced,” the Swiss central bank said in a statement. “The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.”

Pity Swiss watchmakers, though. Their timepieces just became more expensive for foreigners to buy.

TIME Economy

Americans View Obama’s Economic Impact More Favorably

More Americans think the economy is improving

President Obama’s job approval rating is improving, a new survey reported .

The Pew Research Center survey, which polled 1,504 adults between Jan. 7-11, reports that Obama’s job approval rating is five points higher than it was in December, at 42%. Pew says his ratings are on the up and up thanks to views among Americans that the economy is improving (somewhat). Overall, Americans who believe the economy is doing well increased 11% since Obama’s 2014 State of the Union.

Among those surveyed, 27% say economic conditions are good or excellent–which at first glance might seem low but is actually 16% higher than last year. Thirty-one percent say they expect the economy to be better rather than worse in a year from now. A year ago, only 17% thought this to be true.

The survey shows that for the first time in five years 38% of those surveyed say Obama’s economic policies have made conditions better. Twenty-eight percent say he’s made them worse and 30% say there’s been no effect. Sixty-six percent of Americans say the economy is recovering, but not strongly. Only 16% say the economy is growing strongly, though the report’s authors note that this is a growing population.

TIME Economy

5 Global Risks You Should Care About Right Now

From Left: Ian Bremmer President and Founder of Eurasia Group, Nouriel Roubini, Chairman and Co-Founder of Roubini Global Economics and Rana Foroohar, Assistant Managing Editor at TIME speak on global politics and the economy at the Time & Life Building in New York City on Jan. 13, 2015. (Adam Glanzman for TIME)
From Left: Ian Bremmer President and Founder of Eurasia Group, Nouriel Roubini, Chairman and Co-Founder of Roubini Global Economics and Rana Foroohar, Assistant Managing Editor at TIME speak on global politics and the economy at the Time & Life Building in New York City on Jan. 13, 2015. Adam Glanzman for TIME

From Russia and China back to America

Ian Bremmer, the head of Eurasia Group, and Nouriel Roubini, the founder of Roubini Global Economics, are two of the world’s preeminent risk forecasters. They joined me Tuesday morning at the offices of Time Inc. for our yearly look ahead about what you should—and shouldn’t—worry about in the geopolitical and economic landscape for 2015.

Here are my top 5 takeaways from the conversation:

Russia is being underplayed as a major political risk, especially for Europe

Yes, we’ve all followed the conflict in the Ukraine. But according to Bremmer, there’s a good chance that petro-autocrat Vladimir Putin will become even more dangerous and unpredictable as oil prices plummet, stirring up more trouble abroad (possibly in other border states) in order to keep attention at home off the total collapse in the Russian economy. The European Union-United States divide over how best to handle Russia and Putin also underscores a transatlantic relationship that is becoming even more polarized.

America is becoming more unilateral, but not in the ways that you might think

Economically and politically, the U.S. is decoupling from the rest of the world. As Roubini pointed out, America is the one bright spot on the global economic map this year, with a solid recovery that could well have it growing faster than many emerging markets. On the other hand, there’s also a sense that the U.S. is withdrawing politically from the rest of the world, heightened by President Barack Obama’s absence this week from the Paris anti-terrorism rally (Bremmer believes this was a public relations blunder, not purposeful). That’s not the right way to think of it, says Bremmer. “The U.S. is projecting power through an arsenal of disparate mechanisms that allow is more easily to act alone,” including everything from drones to economic statecraft including more freezing of assets of problematic nations (think Russia or Iran), a strategy that Bremmer dubs “the weaponization of finance.”

Low oil prices won’t last forever

Both Roubini and Bremmer feel that the conventional wisdom about the Saudis keeping the pumps going and depressing prices in order to stick it to rivals Iran and Russia is wrong. “This is about economics,” says Roubini, who believes that the Saudis are simply trying to push competitors (including U.S/ shale producers) out of the market and that they’ll start pumping more oil once the marketplace is clear. While the impact for American homegrown shale could be bad in the short term, it will be outweighed by the consumer effect of lower prices (witness gas falling below two bucks a gallon in some parts of the country).

China is still a big mystery

It’s slowing economically, that’s for sure. But is President Xi Jinping’s massive consolidation of power a sign that the country is about to undergo pro-market reforms of the type that it hasn’t seen since the days of Deng (something that China watchers hope will vault the country into the middle-income bracket and help it create more jobs)? Or is it rather a sign that China is going back to the scary days of Mao, when dissent of any kind could land you in jail or worse? Bremmer is hopeful that China can make the middle market leap and maintain social stability. Roubini (like me) is less bullish, and feels that the country’s economic model is still based on cheap labor and cheap capital (it’s worth noting it takes four dollars of debt to create every dollar of growth in China these days, which is not good). Both agree that 2015 will be a crucial pivot year for China.

Bifurcation, polarization, inequality and volatility are the buzzwords for 2015

Politically and economically, old alliances are fracturing and new ones are being formed. Sectarian conflict in the Middle East and North Africa region will get worse before it gets better, Europe is headed toward a scary deflationary debt spiral that’s galvanizing far-right politics (witness Marine Le Pen’s rise in France), and China’s slowdown and the fall in oil prices is rejiggering the geopolitical landscape. Markets will be skittish this year—so fasten your seatbelts.

TIME energy

Oil Surplus Grows Even as Prices Plummet

Getty Images

All the major oil producers may increase output this year

When the world gives you too much oil, drill for more.

That seems to be the motto of some of the most prolific oil producers today. Iraq, Russia, Latin America, West Africa, the United States, Canada – all may increase production this year, and by more than just balancing out the reduced production in war-torn Libya. On top of this, expect even more oil on the market if Iran comes to terms with the West over its nuclear program and is freed of the constraints of sanctions.

That’s the conclusion of Adam Longson, an oil analyst at Morgan Stanley writing in an e-mailed report on Jan. 5.

All this new oil is flooding a market already awash because OPEC has refused to cut its production cap below 30 million barrels a day – and is even exceeding that level – and the United States is pumping oil, mostly from shale, faster than it has in 30 years. This has caused the average price of oil to plunge more than 50 percent, from about $115 in June 2014 to just over $50 today.

This is creating an unmitigated bear market for oil, according to Morgan Stanley. “With the global oil market just passing peak runs and Libyan supply already at low levels, it’s hard to see much improvement in oil fundamentals near term,” its report said. “A number of worrying signs have already emerged, lifting the probability of our ‘bear’ case.”

One more sign is that Iraq’s production is at its highest level in more than three decades, now that Baghdad has finally reached agreement with Kurdistan to allow it to export oil through Turkey. And just before the New Year there were reports that Russian oil output has hit post-Soviet records without any sign of abating.

“We already have an ample supply of oil, and on top of that we see this increase from Iraq and Russia,” Michael Hewson, analyst at CMC Markets, a British financial derivatives dealer, told The Wall Street Journal. “The momentum clearly continues to be bearish for oil.”

But wait, there’s more, according to the Morgan Stanley analysis. It says to expect increased production at several oil fields in Brazil, Canada, the United States and in West Africa. And, according to Hewson, there’s no sign of increased demand, according to reports of anemic economies in China and Europe.

And then there’s the environment. The governments of many countries – including the world’s two hungriest fossil fuel consumers, China and the United States – are striving to meet various targets for lower greenhouse gas emissions. This new green approach is responsible for “anemic global growth” in demand for oil and an “upsurge in competing supply,” said David Hufton, the CEO of the broker PVM.

“[It] is very plain for all to see that oil supply growth exceeds oil demand growth and from a producer point of view, this imbalance has to be rectified,” Hufton told the Financial Times.

Carsten Fritsch, a senior oil and commodities analyst at Commerzbank in Frankfurt, agreed. “The easiest path for oil is down,” he told Reuters. “Almost all market news and the fundamental backdrop are negative, and it is difficult to see much upside at the moment.”

This post originally appeared on OilPrice.com.

Read more from Oilprice.com:

TIME energy

Here’s How Much Money Oil Companies Have Lost Due to Falling Prices

Exxon Mobil Corp. Gas Stations Ahead Of Earnings Figures
A Mobil gas station in Peoria, Illinois, on Oct. 29, 2014. Bloomberg—Getty Images

Together, Exxon Mobil and Chevron has shaved more than $95 billion from their combined market value since last summer

It has been a pretty rough six-month stretch for the energy industry. Crude oil prices have fallen about 55% since the middle of last summer, resulting in some of the world’s largest energy companies losing hundreds of billions of dollars in market value.

The price of crude oil has been relatively flat over the past two days, but it still sits below $50 per barrel — the lowest point in about 5 and 1/2 years — thanks to a global supply glut exacerbated by the ongoing U.S. shale boom as well as decreased oil consumption in Asia and Europe.

As oil prices have steadily declined, so too have the share prices of many large energy companies. Out of 24 oil, gas and coal producers in the Fortune 500, 22 saw their stock price decline between the beginning of July 2014 and Wednesday’s close. In total, the 24 companies lost more than $263 billion in market value combined, according to data from FactSet Research Systems. (A company’s market value is found by multiplying its share price by the number of its shares outstanding.)

Exxon Mobil and Chevron, the two largest U.S. energy companies, accounted for more than $95 billion of that figure as the two have seen their respective market values decrease by 11.7% and 17.9% in just over six months.

In terms of total lost market value, ConocoPhillips and Occidental Petroleum finished behind Exxon and Chevron, with more than $20 billion shaved off each of their respective market caps during the period — a 26% decline.

Only two of the qualifying companies on the Fortune 500 list actually improved over the past six months: Marathon Petroleum and Tesoro, both of which are oil refiners who benefit from lower crude prices.

Meanwhile, even coal producers have not been immune to the energy sell-off, as both Peabody Energy and Cliffs Natural Resources have seen their market values drop by more than half since July. And, Halliburton’s 44% stock dip since last summer is one example of how ancillary companies in the energy industry have been hit hard as well.

What’s more, the energy industry’s woes are likely far from over. While the broader stock market has rebounded sharply over the past two days, oil prices have yet to show significant improvement. In fact, some analysts see prices hitting $40 per barrel at some point in 2015 as oversupply in the global oil market shows little sign of abating.

This article originally appeared on Fortune.com.

TIME Economy

Unemployment Rate Drops to 5.6% as Employers Add 252,000 Jobs

Pedestrians walk by a now hiring sign posted in the window of a business on Nov. 7, 2014 in San Rafael, Calif.
Pedestrians walk by a now hiring sign posted in the window of a business on Nov. 7, 2014 in San Rafael, Calif. Justin Sullivan—Getty Images

December marked the 11th straight month of payroll increases above 200,000

U.S. job growth remained brisk in December, with employers adding 252,000 jobs to their payrolls after November’s outsized increase. The nation’s unemployment rate fell to 5.6% from November’s 5.8%.

December marked the 11th straight month of payroll increases above 200,000, the longest stretch since 1994. With a revised 353,000 jump in November, and October’s count also revised higher, the economy created 50,000 more jobs than previously reported in the prior two months.

“The U.S. is sort of an island of relative strength in a pretty choppy global sea. People are worried the problems abroad could afflict the U.S., but our domestic fundamentals are pretty sound and should outweigh that,” said Josh Feinman, chief global economist at Deutsche Asset & Wealth Management in New York.

December’s gains capped a strong year for hiring. With another job creation number over 200,000, employment gains for 2014 at around 3 million — the largest since 1999.

A five cent drop in average hourly earnings after rising six cents in November, took some shine off the report.

Wage growth has been frustratingly tepid and economists believe the Federal Reserve will be hesitant to pull the trigger on raising interest rates without a significant increase in labor costs.

The U.S. central bank has kept its short-term interest rate near zero since December 2008. It has not raised interest rates since 2006, but recently signaled it was moving closer to hiking, even if inflation remains below the Fed’s 2.0 percent target. Most economists expect the first rate increase in June.

But an acceleration in wage gains is in the cards as the labor market continues to tighten.

That, together with lower gasoline prices are expected to provide a tail wind to consumer spending this year.

“As the labor market moves closer to full employment … we are likely to see firms increase wages. We have already started to see some of that,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

Most of the measures tracked by Fed Chair Janet Yellen to gauge the amount of slack in the labor market have pointed to tightening conditions and would be again under scrutiny.

A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment is at six-year lows, the labor force appears to have stabilized, while the ranks of the long-term unemployed are also shrinking.

—Reuters contributed to this report

This article originally appeared on Fortune.com

TIME Economy

U.S. Employers Laid Off the Fewest People in 17 Years in 2014

Getty Images

Data are the latest indicator that the U.S. labor market is performing well

Job cuts announced by U.S.-based employers last year were 5% fewer than in 2013 and the lowest annual total since 1997, the latest indicator that the U.S. labor market is performing well.

Overall, employers announced job cuts totaling 483,171 in 2014, down from 509,051 cuts announced the prior year, according to a report by global outplacement firm Challenger, Gray & Christmas.

“Layoffs aren’t simply at pre-recession levels; they are at pre-2001-recession levels,” said John A. Challenger, CEO of the firm. “This bodes well for job seekers, who will not only find more employment opportunities in 2015, but will enjoy increased job security once they are in those new positions.”

Challenger’s report pointed out that while the economy and employment has grown in 2014, no job is ever truly secure as the nation still averaged about 40,000 planned job cuts per month. That’s because companies restructure their operations, announce cost-cutting moves or cut jobs when mergers and acquisitions are completed.

Notably, the tech sector, a relatively strong performer in the economy, saw the heaviest downsizing last year. That sector announced 59,528 planned layoffs. Challenger said that was a 69% increase from a year ago. Much of that downsizing was due to plans announced by Hewlett-Packard and Microsoft to each cut thousands of jobs. With both of their traditional businesses heavily tied to the PC world, the companies are pivoting to compete as the tech market moves to mobile devices where other rivals are stronger.

Job cuts in the retail sector declined by 11% in 2014 but the industry still ranked second. The third-ranked health care sector also posted fewer layoffs in 2014, Challenger said. Meanwhile, the largest increases in job cuts occurred among employers in the entertainment industry and electronics, where job cuts in 2014 more than doubled for both.

“We expect downsizing to remain subdued in 2015, as a growing number of employers turn their attention toward job creation,” Challenger said.

The biggest potential threat? Falling oil prices, which could result in higher job cuts in one of 2014’s star performers: the energy sector. Energy related layoffs only totaled 14,262 last year. In a nod to that possible soft spot, Challenger pointed to an announcement earlier this week that U.S. Steel would be laying off 756 employees due to soft demand related to weak oil prices.

“Lower prices mean less money for research, exploration and new drilling operations,” Challenger said. “However, the slowdown in oil-related industries may be more than offset by the extra dollars in consumers’ pockets as they shell out less money for gas and heating oil. The money not spent at the pump can be used for consumer goods, travel, home improvement, and dining out. Furthermore, continued low gas prices could spur an increase in SUV sales. All of these are going to have an immediate and positive impact on the job market and hiring.”

This article originally appeared on Fortune.com

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