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Tech Is Splitting the U.S. Work Force in Two

PHOENIX — It’s hard to miss the dogged technological ambition pervading this sprawling desert metropolis.

There’s Intel’s $7 billion, seven-nanometer chip plant going up in Chandler. In Scottsdale, Axon, the maker of the Taser, is hungrily snatching talent from Silicon Valley as it embraces automation to keep up with growing demand. Start-ups in fields as varied as autonomous drones and blockchain are flocking to the area, drawn in large part by light regulation and tax incentives. Arizona State University is furiously churning out engineers.

And yet for all its success in drawing and nurturing firms on the technological frontier, Phoenix cannot escape the uncomfortable pattern taking shape across the American economy: Despite all its shiny new high-tech businesses, the vast majority of new jobs are in workaday service industries, like health care, hospitality, retail and building services, where pay is mediocre.

The forecast of an America where robots do all the work while humans live off some yet-to-be-invented welfare program may be a Silicon Valley pipe dream. But automation is changing the nature of work, flushing workers without a college degree out of productive industries, like manufacturing and high-tech services, and into tasks with meager wages and no prospect for advancement.

Automation is splitting the American labor force into two worlds. There is a small island of highly educated professionals making good wages at corporations like Intel or Boeing, which reap hundreds of thousands of dollars in profit per employee. That island sits in the middle of a sea of less educated workers who are stuck at businesses like hotels, restaurants and nursing homes that generate much smaller profits per employee and stay viable primarily by keeping wages low.

Image
A machine assembling a piece for a Taser. Axon hopes to reduce labor costs and improve productivity by increasing its use of machines to replace easy and monotonous actions.CreditDominic Valente for The New York Times

Even economists are reassessing their belief that technological progress lifts all boats, and are beginning to worry about the new configuration of work.

Recent research has concluded that robots are reducing the demand for workers and weighing down wages, which have been rising more slowly than the productivity of workers. Some economists have concluded that the use of robots explains the decline in the share of national income going into workers’ paychecks over the last three decades.

Because it pushes workers to the less productive parts of the economy, automation also helps explain one of the economy’s thorniest paradoxes: Despite the spread of information technology, robots and artificial intelligence breakthroughs, overall productivity growth remains sluggish.

“The view that we should not worry about any of these things and follow technology to wherever it will go is insane,” said Daron Acemoglu, an economist at the Massachusetts Institute of Technology.

Semiconductor companies like Intel or NXP are among the most successful in the Phoenix area. From 2010 to 2017, the productivity of workers in such firms — a measure of the dollar value of their production — grew by about 2.1 percent per year, according to an analysis by Mark Muro and Jacob Whiton of the Brookings Institution. Pay is great: $2,790 a week, on average, according to government statistics.

But the industry doesn’t generate that many jobs. In 2017, the semiconductor and related devices industry employed 16,600 people in the Phoenix area, about 10,000 fewer than three decades ago.

“We automate the pieces that can be automated,” said Paul Hart, a senior vice president running the radio-frequency power business at NXP’s plant in Chandler. “The work force grows but we need A.I. and automation to increase the throughput.”

Axon, which makes the Taser as well as body cameras used by police forces, is also automating whatever it can. Today, robots make four times as many Taser cartridges as 80 workers once did less than 10 years ago, said Bill Denzer, Axon’s vice president for manufacturing. Workers’ jobs were saved because the company brought other manufacturing work back from Mexico.

The same is true across the high-tech landscape. Aircraft manufacturing employed 4,234 people in 2017, compared to 4,028 in 2010. Computer systems design services employed 11,000 people in 2017, up from 7,000 in 2010.

The Fastest-Growing Jobs In Phoenix

Most of the growth in the Phoenix-area job market since 1990 has come in low-productivity industries, like health care. Productivity is the dollar value of the output per worker in each industry. The job sectors in the charts below represent about two-thirds of all Phoenix-area jobs.




Productivity and job growth in the Phoenix metropolitan area

SELECTED

LOW-PRODUCTIVITY

JOBS

SHARE OF

ALL JOBS

1990

2017

AVERAGE

WEEKLY

2017 WAGE

CHANGE

IN WAGES

1990-2017

0%

5%

10%

Accommodation and food services

$420

+28

%

Administrative and waste services

750

+44

Educational services

832

+24

Retail trade

647

+8

Health care and social assistance

1,024

+12

SELECTED

HIGH-PRODUCTIVITY

JOBS

0%

5%

10%

Manufacturing

$1,422

+34

%

Finance and insurance

1,432

+47

Wholesale trade

1,504

+52

Information

1,420

+44

Real estate and rental and leasing

1,043

+51

2017 PRODUCTIVITY

IN THOUSANDS

$0

$100

$200

$300

+10

PCT-POINT

CHANGE

IN SHARE

OF JOBS

1990 – 2017

Health care

and social

assistance

+5

Administrative

and waste services

Accommodation

and food

services

Finance and

insurance

Educational

services

INCREASED

SHARE

DECREASED

SHARE

Information

Real estate

and rental

and leasing

Retail trade

Wholesale

trade

–5

Manufacturing

–10

LESS PRODUCTIVE

MORE PRODUCTIVE

Productivity and job growth

in the Phoenix metropolitan area

SELECTED

LOW-

PRODUCTIVITY

JOBS

SHARE OF

ALL JOBS

AVG.

WEEKLY

2017

WAGE

PCT.

CHG.

1990-

2017

2017

1990

Accommodation

and food services

$420

+28

%

Administrative

and waste services

750

+44

Educational

services

832

+24

Retail trade

647

+8

Health care and

social assistance

1,024

+12

0%

5

10

SELECTED

HIGH-

PRODUCTIVITY

JOBS

SHARE OF

ALL JOBS

AVG.

WEEKLY

2017

WAGE

PCT.

CHG.

1990-

2017

2017

1990

Manufacturing

$1,422

+34

%

Finance and

insurance

1,432

+47

Wholesale trade

1,504

+52

Information

1,420

+44

Real estate and

rental and leasing

1,043

+51

0%

5

10

+10

PCT-

POINT

CHANGE

IN SHARE

OF JOBS

1990 –

2017

Health care

and social

assistance

+5

Administrative

and waste services

Accommodation

and food services

Educational

services

Finance and

insurance

INCREASED

SHARE

DECREASED

SHARE

Information

Real

estate

and rental

and leasing

Retail

trade

Wholesale

trade

–5

Manufacturing

–10

$0

$100

$200

$300

2017 PRODUCTIVITY

IN THOUSANDS


By The New York Times | Sources: Bureau of Labor Statistics; Brookings (productivity)

To find the bulk of jobs in Phoenix, you have to look on the other side of the economy: where productivity is low. Building services, like janitors and gardeners, employed nearly 35,000 people in the area in 2017, and health care and social services accounted for 254,000 workers. Restaurants and other eateries employed 136,000 workers, 24,000 more than at the trough of the recession in 2010. They made less than $450 a week.

The biggest single employer in town is Banner Health, which has about 50,000 workers throughout a vast network that includes hospitals, outpatient clinics and home health aides. Though it employs high-paid doctors, it relies on an army of lower paid orderlies and technicians. A nursing assistant in Phoenix makes $31,000 a year, on average. A home health aide makes $24,000. While Banner invests heavily in technology, the machines do not generally reduce demand for workers. “There are not huge opportunities to increase productivity, but technology has a significant impact on quality,” said Banner’s chief operating officer, Becky Kuhn.

The 58 most productive industries in Phoenix — where productivity ranges from $210,000 to $30 million per worker, according to Mr. Muro’s and Mr. Whiton’s analysis — employed only 162,000 people in 2017, 14,000 more than in 2010. Employment in the 58 industries with the lowest productivity, where it tops out at $65,000 per worker, grew 10 times as much over the period, to 673,000.

The same is true across the national economy. Jobs grow in health care, social assistance, accommodation, food services, building administration and waste services. Not only are some of the tasks tough to automate, employers have little financial incentive to replace low-wage workers with machines.

On the other end of the spectrum, the employment footprint of highly productive industries, like finance, manufacturing, information services and wholesale trade, has shrunk over the last 30 years.

Economists have a hard time getting their heads around this. Steeped in the belief that technology inevitably leads to better jobs and higher pay, they long resisted the notion that the Luddites of the 19th century, who famously thrashed the weaving machines that were taking their jobs, might have had a point.

“In the standard economic canon, the proposition that you can increase productivity and harm labor is bunkum,” Mr. Acemoglu said.

Image

Lourdes Sorreles, a registered nurse, with Pablo Lopaz Romero in the progressive care unit of the Banner University Medical Center Phoenix. While many jobs are being automated, there are still holdouts in the economy, especially in the health fields.CreditDominic Valente for The New York Times

By reducing prices and improving quality, technology was expected to raise demand, which would require more jobs. What’s more, economists thought, more productive workers would have higher incomes. This would create demand for new, unheard-of things that somebody would have to make.

To prove their case, economists pointed confidently to one of the greatest technological leaps of the last few hundred years, when the rural economy gave way to the industrial era.

In 1900, agriculture employed 12 million Americans. By 2014, tractors, combines and other equipment had flushed 10 million people out of the sector. But as farm labor declined, the industrial economy added jobs even faster. What happened? As the new farm machines boosted food production and made produce cheaper, demand for agricultural products grew. And farmers used their higher incomes to purchase newfangled industrial goods.

The new industries were highly productive and also subject to furious technological advancement. Weavers lost their jobs to automated looms; secretaries lost their jobs to Microsoft Windows. But each new spin of the technological wheel, from plastic toys to televisions to computers, yielded higher incomes for workers and more sophisticated products and services for them to buy.

Something different is going on in our current technological revolution. In a new study, David Autor of the Massachusetts Institute of Technology and Anna Salomons of Utrecht University found that over the last 40 years, jobs have fallen in every single industry that introduced technologies to enhance productivity.

The only reason employment didn’t fall across the entire economy is that other industries, with less productivity growth, picked up the slack. “The challenge is not the quantity of jobs,” they wrote. “The challenge is the quality of jobs available to low- and medium-skill workers.”

Adair Turner, a senior fellow at the Institute for New Economic Thinking in London, argues that the economy today resembles what would have happened if farmers had spent their extra income from the use of tractors and combines on domestic servants. Productivity in domestic work doesn’t grow quickly. As more and more workers were bumped out of agriculture into servitude, productivity growth across the economy would have stagnated.

“Until a few years ago, I didn’t think this was a very complicated subject; The Luddites were wrong and the believers in technology and technological progress were right,” Lawrence Summers, a former Treasury secretary and presidential economic adviser, said in a lecture at the National Bureau of Economic Research five years ago. “I’m not so completely certain now.”

The growing awareness of robots’ impact on the working class raises anew a very old question: Could automation go too far? Mr. Acemoglu and Pascual Restrepo of Boston University argue that businesses are not even reaping large rewards for the money they are spending to replace their workers with machines.

But the cost of automation to workers and society could be substantial. “It may well be that,” Mr. Summers said, “some categories of labor will not be able to earn a subsistence income.” And this could exacerbate social ills, from workers dropping out of jobs and getting hooked on painkillers, to mass incarceration and families falling apart.

Silicon Valley’s dream of an economy without workers may be implausible. But an economy where most people toil exclusively in the lowliest of jobs might be little better.

Source:

NYT > Economy


Author: EDUARDO PORTER

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Mexico ready to retaliate by hurting US farmers

Anti-Trump protests take place across Mexico

Anti-Trump protests take place across Mexico

Mexico is ready to hit the U.S. where it hurts: Corn.

Mexico is one of the top buyers of American corn in the world today. And Mexican senator Armando Rios Piter, who leads a congressional committee on foreign relations, says he will introduce a bill this week where Mexico will buy corn from Brazil and Argentina instead of the United States.

It’s one of the first signs of potential concrete action from Mexico in response to President Trump’s threats against the country.

“I’m going to send a bill for the corn that we are buying in the Midwest and…change to Brazil or Argentina,” Rios Piter, 43, told told CNN’s Leyla Santiago on Sunday at an anti-Trump protest in Mexico City.

He added: It’s a “good way to tell them that this hostile relationship has consequences, hope that it changes.”

American corn goes into a lot of the country’s food. In Mexico City, from fine dining restaurants to taco stands on the street, corn-based favorites like tacos can be found everywhere.

Related: Mexican farmer’s daughter: NAFTA destroyed us

America is also the world’s largest producer and exporter of corn. American corn shipments to Mexico have catapulted since NAFTA, a free trade deal signed between Mexico, America and Canada.

American farmers sent $2.4 billion of corn to Mexico in 2015, the most recent year of available data. In 1995, the year after NAFTA became law, corn exports to Mexico were a mere $391 million.

Experts say such a bill would be very costly to U.S. farmers.

“If we do indeed see a trade war where Mexico starts buying from Brazil…we’re going to see it affect the corn market and ripple out to the rest of the ag economy,” says Darin Newsom, senior analyst at DTN, an agricultural management firm.

Rios Piter’s bill is another sign of Mexico’s willingness to respond to Trump’s threats. Trump wants to make Mexico pay for a wall on the border, and he’s threatened taxes on Mexican imports ranging from 20% to 35%.

Trump also wants to renegotiate NAFTA. He blames it for a flood of manufacturing jobs to Mexico. A nonpartisan congressional research report found that not to be true.

Related: Mexico doubles down on Trump ‘contingency plan’

Still, Trump says he wants a better trade deal for the American worker — though he hasn’t said what a better deal looks like.

All sides signaled two weeks ago that negotiations would begin in May after a 90-day consultation period.

But Trump says if negotiations don’t bear the deal he wants, he threatens to withdraw from NAFTA.

Such tough talk isn’t received well by Mexican leaders like Rios Piter. He’s not alone. Mexico’s economy minister, Ildefonso Guajardo, said in January Mexico would respond “immediately” to any tariffs from Trump.

“It’s very clear that we have to be prepared to immediately be able to neutralize the impact of a measure of that nature,” Guajardo said Jan. 13 on a Mexican news show.

–Shasta Darlington contributed reporting to this story

Source: World business news – CNNMoney.com
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Will the next iPhone charge wirelessly?

Happy 10th birthday, iPhone

Happy 10th birthday, iPhone

You may never have to plug in your iPhone again.

Apple has joined an industry group devoted to wireless charging, strengthening existing rumors that the next iPhone will charge without a cord. The Wireless Power Consortium, which is made up of some 200 organizations that promote a single wireless charging standard, confirmed to CNNTech that Apple joined the group last week.

IPhone rumors swirl months before each new version is announced, and hype around the so-called ‘iPhone 8″ is particularly high: Apple (AAPL) is expected to unveil a major redesign of the this fall to mark the 10-year anniversary of the smartphone.

The company has already shown interest in doing away with cumbersome cords. The Apple Watch charges wirelessly, provided consumers spend $79 on a magnetic charging dock. And the latest MacBook now comes with only one USB port.

Related: Apple stock nears a record high

Apple would also create another iPhone revenue stream by selling a wireless charging station separately. The feature would simplify charging for smartphone owners. Rather than plugging in one’s phone, a user would only need to place it on the charging dock.

Apple said in a statement Monday it was joining the Wireless Power Consortium to contribute its ideas as wireless charging standards are developed.

As for the speculated possible features of the next iPhone, other rumors include an edge-to-edge display, a glass body and the removal of the home button.

Source: World business news – CNNMoney.com
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How ‘America First’ could turn into to ‘India First’

What is an H-1B visa?

What is an H-1B visa?

America is great because of its willingness to accept talented immigrants.

That’s what Nandan Nilekani, the billionaire co-founder of Infosys Technologies, would tell President Trump if he had the opportunity.

“If you really want to keep the U.S. … globally competitive, you should be open to overseas talent,” Nilekani said on the sidelines of CNN’s Asia Business Forum in Bangalore.

Infosys (INFY) is India’s second-largest outsourcing firm, and a major recipient of U.S. H-1B visas. The documents allow the tech firm to employ a huge number of Indians in U.S. jobs.

The Trump administration is now considering significant changes to the visa program. Press Secretary Sean Spicer said in January that Trump will continue to talk about reforming the H-1B program, among others, as part of a larger push for immigration reform.

Curbs on the visas could hit Indian workers hardest.

India is the top source of high-skilled labor for the U.S. tech industry. According to U.S. government data, 70% of the hugely popular H-1B visas go to Indians.

Shares in several Indian tech companies — including Infosys — plunged spectacularly two weeks ago amid reports of an impending work visa crackdown.

Related: Tech industry braces for Trump’s visa reform

Nilekani said it would be a mistake for the administration to follow through.

“Indian companies have done a great deal to help U.S. companies become more competitive, and I think that should continue,” Nilekani said. “If you look at the Silicon Valley … most of the companies have an immigrant founder.”

India’s contribution to the industry — especially at top levels — has been outsized. The current CEOs of Google (GOOG) and Microsoft (MSFT), for example, were both born in India.

Related: India freaks out over U.S. plans to change high-skilled visas

But Nilekani, who is also the architect of India’s ambitious biometric ID program, suggested that India would ultimately benefit from any new restrictions put in place under Trump’s “America First” plan. If talented engineers can’t go to the U.S., they will stay in India.

“This issue of visas has always come up in the U.S. every few years, especially during election season,” he said. “It’s actually accelerated the development work [in India], because … people are investing more to do the work here.”

Nilekani cited his own projects for the Indian government as an example.

The Bangalore-born entrepreneur left Infosys in 2009 to run India’s massive social security program, which is known as Aadhaar. As a result of the initiative, the vast majority of India’s 1.3 billion citizens now have a biometric ID number that allows them to receive government services, execute bank transactions and even make biometric payments.

“It was built by extremely talented and committed Indians,” Nilekani said. “Many of them had global experience, but they brought that talent and experience to solve India’s problems.”

Nilekani said the country’s massive youth population is increasingly choosing to stay home and pitch in.

“It’s India first,” he said.

Source: World business news – CNNMoney.com
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Swiss voters reject corporate tax overhaul

Why Trump's tax plan could raise taxes for 8.7 million households

Why Trump’s tax plan could raise taxes for 8.7 million households

Voters in Switzerland have shocked the political establishment by rejecting a reform plan that would have brought the country’s corporate tax system in line with international norms.

The tax reforms, which were widely supported by the business community, would have removed a set of special low-tax privileges that had encouraged many multinational companies to set up shop in Switzerland.

Experts say the future of Switzerland’s tax system is now unclear. The vote result could create headaches for firms that had been banking on their implementation, and deter companies who had been considering a move to the country.

“They do not know what [tax] measures will be available… That is not a very solid basis for making investment decisions,” Peter Uebelhart, head of tax at KPMG in Switzerland, said in a video statement.

Switzerland has come under intense pressure from G20 and OECD nations in recent years to clean up its tax system. The country runs the risk of being “blacklisted” by other nations if it doesn’t change its tax system by 2019.

Many voters rejected the tax reform package over fears it might reduce the amount of revenue collected by the government, according to Stefan Kuhn, head of corporate tax at KPMG in Switzerland. That might have lead to tax hikes on the middle class.

The current tax system gives preferential treatment to some companies with large foreign operations. International tax authorities say the rules amount to unfair corporate subsidies.

Martin Naville, head of the Swiss-American Chamber of Commerce, said it’s possible that voters didn’t understand the complexities of the reforms. The measures were rejected by 59% of voters.

“I think it’s a very bad day for Switzerland,” Naville said. “Clearly, the uncertainty and the credibility in the Swiss [system] has taken a massive hit.”

Related: How Europe’s elections could be hacked

Swiss authorities say they will move quickly to create a modified tax reform proposal. Naville said he hopes new rules are devised within the next few months.

“All stakeholders now have to take responsibility to develop an acceptable competitive tax system, and to regain credibility regarding the famed political stability which gave Switzerland such an advantageous position,” he said in a statement.

Naville hinted that potential tax reforms in the U.S. and U.K. could tempt Swiss-based companies to relocate, putting more pressure on Switzerland’s tax base.

Source: World business news – CNNMoney.com
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Stocks hit record again. Is Trump the reason?

What does a Trump presidency mean for the Fed?

What does a Trump presidency mean for the Fed?

The Dow, S&P 500, Nasdaq and Russell 2000 each hit new all-time highs Monday.

Investors are giddy with excitement and they clearly believe that both big blue chip multinationals and smaller companies that do most of their business in the U.S. will continue to thrive.

So is this the Donald Trump rally? Or the Janet Yellen rally?

Some strategists believe Trump’s stimulus plans and talk of killing many burdensome regulations are the reasons stocks are soaring.

Or perhaps this is better characterized as a continuation of the Barack Obama rally instead?

You could argue that POTUS 44 has dealt POTUS 45 a pretty good hand.

The solid job market and overall economy that Trump inherited may be the reason consumers and businesses are so confident.

But investors (and financial journalists) are often quick to give the president more credit — and blame — than they probably deserve for the performance of the stock market.

RBC strategist Jonathan Golub pointed this out in a report on Monday, one that was aptly titled “Message to Market: It’s Not All About Donald.”

Related: Trump isn’t killing the bull market

Golub noted that the S&P 500 rose nearly 7% from late June through Election Day — a time when most polls were predicting that Hillary Clinton would be the next president.

But stocks have continued to rally since then, rising another 8% since Trump pulled off the upset (at least to the mainstream media and Wall Street) victory.

You can’t have it both ways. It makes no logical sense to suggest that stocks rallied because investors believed Trump would lose and that they continued to rally because Trump didn’t lose.

Bond yields have also been rising since Trump won, a phenomenon that many investors have attributed to the likelihood of stimulus from the president and Republican Congress.

Yet Golub points out that the yield on the 10-year U.S. Treasury was going up during the late summer as well.

Of course, many investors were expecting stimulus from Clinton too.

Yet once again, many investors are claiming that Trump is the catalyst for something that not only was going on before he was elected, but was happening because many thought he would lose.

Related: Stocks have avoided a 1% dive for an unusually long period of time

So it’s odd that Trump is being cited as the main reason for a market rally that began months before anyone felt he could win.

What’s really going on? The one constant during the past few months is the Federal Reserve.

Yes. the markets are reacting to Washington. But they are paying closer attention to Janet Yellen, not the White House.

The Fed made it crystal clear before the election that it would probably raise interest rates in December and do so a few more times in 2017 regardless of who won the race for president.

The good news for investors is that the U.S. economy seems to be growing steadily, but does not appear to be at risk of overheating.

Related: Here’s why the world’s largest money manager is worried

The most recent jobs report showed that wages grew at a decent rate of 2.5% annually. But that’s not nearly high enough to spark fears of runaway inflation and lead the Fed to aggressively raise rates.

Even if Yellen and the Fed hike rates three times this year, they are likely to do so by just a quarter point every time. That would push the Fed’s key short-term rate to a range of 1.25% to 1.5%.

That’s still extremely low. At those levels, stocks would still be more attractive than bonds. Corporate earnings should be able to keep rising at a healthy clip. And consumers would probably keep spending.

So investors would be wise to keep a close eye on Yellen and not just have a myopic focus on the president,

With that in mind, Yellen is set to testify in front of Congress on Tuesday and Wednesday. And what she says about the timing and magnitude of future rate hikes could wind up keeping the rally going full steam ahead — or stopping it dead in its tracks.

Source: World business news – CNNMoney.com
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Apple stock nears record high

Apple looks to manufacture in India

Apple looks to manufacture in India

Apple has found its groove again.

The iPhone maker’s stock hit $133.82 in early trading Monday, putting Apple less than $1 away from its intraday trading high of $134.54, reached in April 2015. Apple’s stock ended the day at $133.29, beating its previous record closing price of $133, set in February 2015.

The stock surge, pushing Apple (AAPL) to a $700 billion market cap, comes amid renewed optimism for the iPhone.

Goldman Sachs raised its price target for the stock on Monday, citing the likelihood of “major new features” like “3D sensing” being added to the next iPhone model, according to an investor note provided to CNNMoney.

Apple’s previous high was set six months after it released the redesigned iPhone 6 and 6 Plus, kicking off what CEO Tim Cook described as the “mother of all upgrades.”

Since then, however, Apple has bucked its tradition of overhauling the iPhone every other year. The newest models on the market today look nearly identical to the iPhones available in late 2014.

The long wait, combined with this year marking the iPhone’s tenth anniversary, has only raised expectations that Apple is about to significantly overhaul its smartphone and reignite demand.

Related: Tim Cook: ‘Apple would not exist without immigration’

Apple’s annual sales fell in the 2016 fiscal year for the first time since 2001 as iPhone sales, still the majority of its business, declined in three consecutive quarters.

Apple even cut its CEO’s pay by 15% due to the company’s failure to meet its performance goals for both sales and profits.

But that losing streak just ended.

Apple sales started growing again in the December quarter, driven by stronger demand for the iPhone — particularly for the larger and more expensive iPhone 7 Plus.

The company sold 78.3 million iPhones for the quarter, setting a new record. At least some of that may be due to the Samsung’s smartphone recall woes.

Mark Moskowitz, an analyst with William Blair, wrote in an investor note this month, “Samsung’s Note 7 struggles likely helped.”

The iPhone isn’t the only reason Wall Street is excited about Apple. There’s also President Trump.

Despite Trump clashing with Apple during the campaign, investors are now optimistic Apple will benefit from at least one Trump proposal: cutting taxes on cash that U.S. businesses bring back from their overseas accounts.

Apple currently has $230 billion in cash held in foreign accounts. If Trump and Congress make it cheaper for Apple to bring that money back, it could be used for acquisitions and buybacks.

Source: World business news – CNNMoney.com
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America’s NAFTA nemesis: Canada, not Mexico

NAFTA explained

NAFTA explained

America and Canada have one of the world’s biggest trade relationships.

President Donald Trump met for the first time Monday with Canada’s Prime Minister Justin Trudeau.

“We have a very outstanding trade relationship with Canada,” Trump said at the news conference.

But the U.S.-Canada trade relationship over the years has not been as smooth as you might think. There have been trade wars, acts of retaliation, allegations of dumping and jobs lost.

“Our trading relationship obviously is strong…but the relationship has been rocky, despite the agreements we have in place,” says Stuart Trew, an editor at the Canadian Centre for Policy Alternatives, a research group in Ottawa, Canada’s capital.

Trump has often slammed Mexico and NAFTA, the trade agreement between the U.S., Mexico and Canada. But Canada is rarely mentioned.

Yet, there have been more NAFTA dispute claims against Canada — almost all by U.S. companies — than against Mexico. Even today, Canada has stiff tariffs against the United States and the two sides only recently resolved a bitter dispute over meat.

Most leaders and experts stress that trade ties between the two nations are strong and mostly positive. But Canada and America have had plenty of battles along the way.

Now Trump wants to renegotiate NAFTA, which will be on the top of the agenda for his meeting with Trudeau.

1. Canada gets in more NAFTA trouble than Mexico

Listening to Trump, you might think Mexico is the bad actor of NAFTA. But since NAFTA’s inception in 1994, there have been 39 complaints brought against Canada, almost all by U.S. companies. Known in the industry as the investor state dispute settlements, it allows companies to resolve cases under a special panel of NAFTA judges instead of local courts in Mexico, Canada, or the U.S.

There’s only been 23 complaints against Mexico. (By comparison, companies from both Mexico and Canada have filed a total of 21 complaints against the U.S.)

And increasingly, Canada is the target of American complaints. Since 2005, Canada has been hit with 70% of the NAFTA dispute claims, according to CCPA, a Canadian research firm.

2. The U.S. – Canada lumber battle

NAFTA isn’t the only sore area. In 2002, the U.S. slapped a roughly 30% tariff on Canadian lumber, alleging that Canada was “dumping” its wood on the U.S. market. Canada rejected the claim and argued the tariff cost its lumber companies 30,000 jobs.

“It was a very sour point in Canadian – American relations for quite a while,” says Tom Velk, an economics professor at McGill University in Montreal.

The dispute had its origins in the 1980s, when American lumber companies said their Canadian counterparts weren’t playing fair.

Whether Canada actually broke the rules is a matter of dispute.

Canadian officials deny that the government is subsidizing softwood lumber companies in Canada. American lumber companies still allege that it does, and a U.S. Commerce Department report found that Canada was providing subsidies to lumber companies in 2004. It didn’t say whether the subsidies were ongoing.

According to the allegations, Canada subsidized lumber companies because the government owns many of the lands where the wood comes from. That subsidy — on top of Canada’s huge lumber supply — allowed Canada to price its lumber below what U.S. companies can charge.

The World Trade Organization ultimately sided with Canada, denying America’s claim and the two sides came to an agreement in 2006 to end the tariff.

However, that agreement and its ensuing grace period expired in October, and the two sides are back at it again. The Obama and Trudeau administrations couldn’t reach a compromise before Obama left office and it remains a contentious trade issue with U.S. lumber companies calling once again for tariffs.

Related: ‘Without NAFTA’ we’d be out of business

3. Smoot-Hawley triggers U.S. – Canada trade war

Things got even worse during the Great Depression. In 1930, Congress wanted to protect U.S. jobs from global trade. So the U.S. slapped tariffs on all countries that shipped goods to America in an effort to shield workers.

It was called the Smoot-Hawley Act. Today, it is widely accepted that this law made the Great Depression worse than it was.

Canada was furious, and retaliated more than any other country against the U.S., sparking a trade war.

“Canada was so incensed that…they raised their own tariff on certain products to match the new U.S. tariff,” according to Doug Irwin, a Dartmouth Professor and author of “Peddling Protectionism: Smoot-Hawley and the Great Depression.”

For example, the U.S. increased a tariff on eggs from 8 cents to 10 cents (these are 1930s prices, after all). Canada retaliated by also increasing its tariff from 3 cents to 10 cents — a threefold increase.

Exports dwindled sharply: in 1929, the U.S. exported nearly 920,000 eggs to Canada. Three years later, it only shipped about 14,000 eggs, according to Irwin.

Related: Remember Smoot-Hawley: America’s last major trade war

4. Canada’s sky high tariffs on U.S. eggs, poultry, milk

Fast forward to today. Smoot-Hawley is long gone, but Canada continues to charge steep tariffs on U.S. imports of eggs, chicken and milk.

For instance, some tariffs on eggs are as high as 238% per dozen, according to Canada’s Agriculture Department. Some milk imports, depending on the fat content, are as high as 292%.

“They’re so onerous that you can’t bring it across. There’s no American eggs in Quebec,” says Velk.

According to Canada’s Embassy in the U.S., reality is much different. Its officials say that despite some stiff tariffs, Canada is one of the top export markets for American milk, poultry and eggs.

The U.S. does have tariffs on some goods coming from all countries, but they are not nearly as high as Canada’s.

Experts say these tariffs continue to irk some U.S. dairy and poultry farmers, some of whom are challenged to sell into the Canadian market. But they doubt much will change since the tariffs have been in place for decades now.

Related: Those Reagan tariffs Trump loves to talk about

5. COOLer heads and the future of NAFTA

Despite all these disputes, experts stress this trade relationship is still one of the best in the world.

In fact, the two countries are so interconnected now, when trade disputes erupt sometimes American companies will side with Canadian companies and against U.S. lawmakers.

For example, Canadian meat producers disputed a U.S. law that required them to label where the cattle was born, raised and slaughtered. Canadians said the law discriminated against its meat from being sold in the U.S. and took the case to the WTO.

The WTO sided with Canada, and last December, Congress repealed the country-of-origin-labeling law. American meat producers — whose business is intertwined with Canada — actually supported their counterparts in Canada, arguing the regulation was too burdensome.

As for Trump’s proposal of tearing up NAFTA, many American and Canadian experts say that it’s not worth it to renegotiate or end the agreement. The three countries that are part of the agreement are so enmeshed with each other that untangling all that integration would be detrimental to trade and economic growth.

–Editor’s note: This story was originally published on August 11, 2016. We have since updated it.

Source: World business news – CNNMoney.com
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Verizon’s plan: Consumers win, investors lose

Inside Verizon's device testing lab

Inside Verizon’s device testing lab

Verizon has brought back its unlimited data plan. That’s great if you’re a Verizon customer. But it is terrible news for its investors.

Verizon (VZ) stock fell nearly 1.5% in early trading Monday. It’s now down about 10% so far this year, making it the Dow’s worst performer of 2017.

Verizon’s move is a clear sign the company has to pull out all the stops to remain competitive with wireless rivals AT&T (T), Sprint (S) and T-Mobile (TMUS).

“In recent months, both T-Mobile and Sprint had some success taking additional share from Verizon by virtue of their unlimited offerings,” wrote Morgan Stanley analysts in a report Monday morning.

That may explain why shares of T-Mobile and Sprint, which is now controlled by Japanese tech conglomerate SoftBank, are both up this year while Verizon is down. T-Mobile and Sprint have also been perennially linked as possible merger partners.

But the new telecom price war isn’t the only problem for Verizon.

AT&T recently acquired satellite broadcast provider DirecTV, a move that makes Ma Bell more competitive against Verizon in the battle to control people’s living rooms. Verizon offers its own FiOS broadband TV service.

Related: Verizon brings back unlimited data plans

And AT&T is also making a much bigger bet on content, with plans to purchase CNN’s parent company Time Warner (TWX). Verizon already owns AOL and is looking to buy the core assets of Yahoo to bolster its own digital content offerings.

But the Yahoo (YHOO) deal could fall apart in the wake of revelations of massive data breaches at Yahoo over the past few years.

Yahoo recently said it hopes that the deal with Verizon will close in the second quarter of this year. It was originally supposed to be finalized by the first quarter.

However, in its latest earnings release, Verizon simply said that it “continues to work with Yahoo to assess the impact of data breaches” — not that it expected the deal to close anytime soon.

Verizon has a lot on its plate, which could be making investors nervous. In addition to the Yahoo deal, the company is also in the process of buying the fiber optic network of XO Communications. And it’s selling its data center business to Equinix (EQIX).

There also have been rumors in the past few weeks that Verizon might even consider buying cable provider Charter Communications (CHTR).

That may be more than Verizon can realistically handle right now. But nothing may be off the table for Verizon given how competitive the wireless world is these days.

Anything that could give Verizon a leg up on AT&T, Sprint and T-Mobile might be possible.

Related: Charter shares popped on report of possible Verizon takeover

Still, it’s worth noting that shares of AT&T are lower this year too, down about 5%. And Verizon and A&T have something in common that Sprint and T-Mobile lack — Verizon and AT&T pay gigantic dividends.

Companies that have big dividend yields haven’t fared as well since Donald Trump was elected. Investors are betting on a sizable stimulus package from him and the Republican Congress, which may be fueled in part by debt.

That’s caused bond yields to rise — and that makes shares of big dividend payers like Verizon a lot less attractive.

The Federal Reserve is expected to raise interest rates a few times this year too. That could push bond yields even higher.

So Verizon faces many big challenges that could hurt its stock this year.

That’s why Verizon, nicknamed Big Red because of its logo’s crimson hue, may see its stock in the red for the foreseeable future.

Source: World business news – CNNMoney.com
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Oil prices have doubled in a year. Here’s why

Trump signs oil pipeline executive actions

Trump signs oil pipeline executive actions

It’s a good day for OPEC.

Data published Monday by the oil cartel show its members have largely complied with an agreement to slash production.

The confirmation caps a remarkable year for OPEC, which was forced to devise a plan to boost prices after they fell to $26 per barrel in February 2016.

The price collapse — to levels not seen since 2003 — was caused by months of growing oversupply, slowing demand from China and a decision by Western powers to lift Iran’s nuclear sanctions.

Since then, the market has mounted a stunning turnaround, with crude prices doubling to trade at $53.50 per barrel.

Here’s how major oil producers worked together to push prices higher:

OPEC deal

OPEC agreed major production cuts in November, hoping to tame the global oil oversupply and support prices.

The news of the deal immediately boosted prices by 9%.

Investors cheered even more after several non-OPEC producers, including Russia, Mexico and Kazakhstan, joined the effort to restrain supply.

Crucially, the deal has stuck. The OPEC report published Monday showed that its members have — for the most part — fulfilled their pledges to slash production. The International Energy Agency agrees: It estimated OPEC compliance for January at 90%.

UAE energy minister Suhail Al Mazrouei told CNNMoney on Monday that the results were even better than he had expected.

The production cuts total 1.8 million barrels per day and are scheduled to run for six months.

Related: OPEC has pulled off one of its ‘deepest’ production cuts

election2016 markets oil up

Investors upbeat

The OPEC deal took months to negotiate, and investors really, really like it. The number of hedge funds and other institutional investors that are betting on higher prices hit a record in January, according to OPEC.

The widespread optimism is helping to fuel price increases.

Higher demand

The latest data from OPEC and the IEA show that global demand for oil was higher than expected in 2016, thanks to stronger economic growth, higher vehicle sales and colder than expected weather in the final quarter of the year.

Demand is set to grow further in 2017 to an average of 95.8 million barrels a day, compared 94.6 million barrels per day in 2016.

The IEA said that if OPEC sticks to its agreement, the global oil glut that has plagued markets for three years will finally disappear in 2017.

Saudi oil minister: I don’t lose sleep over shale

What’s next?

Despite the stunning growth, analysts caution that prices may not go much higher.

That’s because higher oil prices are likely to lure American shale producers back into the market. The total number of active oil rigs in the U.S. stood at 591 last week, according to data from Baker Hughes. That’s 152 more than a year ago.

U.S. crude stockpiles swelled in January to nearly 200 million barrels above their five-year average, according to the OPEC report.

“This vast increase in inventories is a result of a strong supply response from the U.S. shale producers, who were not involved in the OPEC agreement and who have instead been using the resultant price rally to increase output,” said Fiona Cincotta, an analyst at City Index.

More supply could once again put OPEC under pressure.

Source: World business news – CNNMoney.com
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