The level of activity in the service sector in the United States has reached a 10-year high. Layoffs across the U.S. approached a four-year high in July. The Chinese government has spent billions of dollars to contain the meltdown of the stock markets. Donald Trump weighed in on the Federal Reserve. And Facebook believes "LOL" has come to an end in favor of "haha." These are the 5 global business headlines from last week.
1. U.S. Service Sector Activity Hits 10-Year High
Although the U.S. economy’s recovery has been lackluster since the financial crisis, there has been one lone bright spark: the service sector. In July, the U.S. service sector was in the best shape it has been for 10 years. This has been led by significant gains in employment, new orders and overall business activity.
The Institute for Supply Management released an industry report on Wednesday that found the services sector index had soared to 60.3, which is the highest level since Aug. 2005. Experts say this report suggests renewed confidence in a sector that represents more than two-thirds of the U.S. economy.
Any number above 50 in this index shows expansion in the sector.
A Reuters poll from earlier the month predicted a reading of 56.2 in July.
Pundits argue that this will provide the Federal Reserve with another metric as the central bank debates the pros and cons of raising interest rates at its next Federal Open Market Committee (FOMC) meeting in September.
Economic data over the past couple of months have been mixed, and this is why the Fed has been apprehensive over hiking rates. This has been the case of the last couple of years: when manufacturing numbers improve, the housing market takes a dive. When inflation is supposedly tame, job numbers are disappointing.
2. Layoffs Approach Four-Year High in July
Despite the official unemployment rate dipping below six percent this year, the U.S. labor market is still in a quagmire. This one report shows exactly why there isn’t too much confidence in the job market.
According to Challenger, Gray & Christmas, an outplacement consultancy firm, the number of U.S. job cuts skyrocketed to a near four-year high last month. In July, U.S. employers announced 105,696, job cuts which is the first time that monthly reductions have hit 100,000 since Sept. 2011. The same time year ago, the number of job cuts was 46,887.
So far this year, there have been 393,368 job cuts, which represents a 34 percent increase from the same time a year ago.
One reason for the substantial increase is because the U.S. military outlined plans to cut back on soldier and civilian workforce payrolls. The military job cuts accounted for about half with 57,000 layoffs over the next two years.
"When the military makes cuts, they tend to be deep," said Challenger CEO John A. Challenger in a statement. "With wars in Afghanistan and Iraq winding down and pressure to cut government spending, the military has been vulnerable to reductions."
Another contributing factor to the immense number of layoffs is the tech sector surprisingly laying off workers. Computer and electronic firms said in July they would slash 18,891 positions, with Microsoft, Qualcomm and Intel making up a bulk of the losses.
3. Chinese Government Spends Billions to Prop up Market
Since June, the Chinese stock market has shed about $3.25 trillion as the bubble finally burst. Over the past several weeks, the Shanghai Composite Index has been extremely volatile. For every four percent gained one day, there’s an eight percent loss the next day. And this has been the pattern since June.
U.S. investment banking firm Goldman Sachs released a report last week that found the Chinese government has attempted to contain the situation by pumping billions of dollars into the system.
According to the data, China spent up to 900 billion yuan, or $147 billion, to help stock prices stay afloat and prevent any additional collapses in stock markets. Following a tremendous 30 percent downfall in the stock market, the government stepped in with a massive rescue package, which included acquiring the state-backed China Securities Finance Corp.
The Wall Street titan asserts that the government could be doling out up to two trillion yuan, or about $400 billion, in addition to the large amount of money already pumped into the market. China has reportedly already begun investing heavily in various blue-chip stocks in the banking, healthcare, finance and insurance industries.
Investors have been fearing that the government could eventually sit back on the sidelines and permit the market to correct itself. Chinese officials dispelled these rumors, and Goldman Sachs argues these concerns are overblown because there has been very little sign of stability and sitting on the sidelines could further hinder stabilization.
"The probability of a rash exit is low as the market has not yet stabilized and the government has no pressing need for the funds,” the report said.
4. Donald Trump Mulls Over Bubble Territory
Billionaire real estate mogul and 2016 presidential candidate Donald Trump is leading the polls among the Republican faithful, and he has been delving into a wide variety of issues since he began his campaign. One of them has been the Federal Reserve and the central bank’s monetary policy.
Speaking in an interview with Bloomberg Television last week, he discussed the several-year policy of artificially low interest rates. Trump admitted he has been speaking with two hats in recent weeks. He said as a businessman he likes low rates, but it’s a terrible policy for the country.
Since his career consists of developing real estate, he would certainly benefit from low rates because he could borrow cheap money while his debt payments would be very low.
With that being said, Trump does think this zero-rate policy is creating a bubble for the U.S.
“Right now, we have the low rates,” Trump told the news outlet. “In terms of real estate, if I want to develop... from that standpoint I like low interest rates. From the country’s standpoint, I’m just not sure it’s a very good thing, because I really do believe we’re creating a bubble.”
He added that Fed Chair Janet Yellen is just "more of the same," and if president he would tap Paul Volcker, who served as Fed Chair in the early-1980s to fight inflation. He boosted rates while containing the growth of the money supply.
“I thought he was a terrific guy in so many different ways, and he had a good pulse and he had a good – to me he had – he was doing what had to be done,” Trump said.
In several state polls, including the important states like New Hampshire and Florida, Trump is leading Bush by a percent or two. In the general, however, Trump is trailing the likely Democratic nominee Hillary Clinton by double-digits.
5. Facebook Says 'LOL' Has Been Replaced by 'Haha'
Is this the end of the "LOL"? After decades of this being the go-to, overused acronym to respond to a joke on the Internet, LOL may finally enter the dustbins of history. What will it be replaced by? It’s very simple: "Haha."
Facebook released a report last week that found users take advantage of numerous types of the "written laughter." Everything from "haha" to "hehe." But the LOL is something that is being used less and less. The social media juggernaut analyzed data after the New Yorker’s Sarah Larson opined on the growth of the written laughter in the online world.
The website looked at data from the final week of May that consist of “at least one string of characters matching laughter.” The data look like this:
- Haha: 51.4 percent
- Emoji: 33.7 percent
- Hehe: 13.1 percent
- Lol: 1.9 percent
Facebook wrote in its report:
"As denizens of the Internet will know, laughter is quite common: 15% of people included laughter in a post or comment that week. The most common laugh is haha, followed by various emoji and hehe. Age, gender and geographic location play a role in laughter type and length: young people and women prefer emoji, whereas men prefer longer hehes. People in Chicago and New York prefer emoji, while Seattle and San Francisco prefer hahas. Let’s dive in."
There we have it. The U.S. service sector is booming. The jobs market is stagnant. The Chinese government is in panic mode. Donald Trump mused on monetary policy. Facebook says "haha" is replacing "lol."