EOW May 2007

welcome the news from China. He said: “Our government has been demanding that the Chinese take steps to boost their currency, which is too cheap and is creating inflation.” Mr Hummer predicted that diversification of Chinese assets around the globe will do little harm in the US. If the dollar weakens a bit against the Chinese yuan, so much the better, he said. Why? It might slow the torrent of goods coming into the country, making American factories more competitive. If China does go ahead with its plan to place hundreds of billions of dollars in ‘strategic assets’ around the globe, it is considered likely to move at a measured pace to avoid disruption of its sizeable investments in the US. In the opinion of Chicago investment manager Marshall Front, any rapid or concerted selling could diminish the value of those holdings in China’s top market. In the 21 months up to March, the Chinese allowed their currency to decline by about 7% against the dollar, partly to satisfy US demands. But any projected shift in Chinese reserves is bound to be regarded warily, if not with alarm, in Washington. Less than two weeks before China floated the diversification idea, a steep sell-off in Chinese stocks triggered a global sell-off in equities, including a brief 540-point drop in the Dow Jones industrial average. Global markets had not yet recovered from that setback when the diversification plan was announced. ❈ Although some recent statistics point to a definitely weakening American economy, the trend has not yet affected the job market. The Labour Department’s latest monthly report on employment, released 9 th March, showed that employers added 97,000 workers in February, and the jobless rate edged down a notch to 4.5% from 4.6%. While the economy may remain relatively sluggish, the new employment report suggests that a slower but still robust job market and rising wages should help keep Americans in spending money. It is the solid pace of their so-called discretionary spending that has bolstered the US economy for so long. But, as much encouragement as the Labour Department report offered, it also raised some worry points. 40% of the new jobs tallied in February were created by localities, states, and the federal government. Businesses added only 58,000 of the private- sector jobs that economists consider fundamental to a hardy labour market. This was the lowest monthly total of these new jobs since November 2004. As usual with employment statistics, they showed an uneven distribution of the good and bad luck. Workers in factories and on construction sites lost a combined 76,000 jobs – 62,000 in construction, reflecting both cold weather and a slowdown in new housing. The unemployment rate for construction workers jumped to 10.5% from 8.6% a year earlier. On a demographic basis, the unemployment rate for Hispanics dropped to 5.2% from 5.7% in January. Job growth resists downward tug of the US economy

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EuroWire – May 2007