Food crisis threatens India

Blue Shield proposes 59-percent rate hike — Blue Shield is proposing huge new rate hikes that could mean an increase of nearly 60 percent for policyholders. Now California’s new insurance commissioner is calling for a delay. The rate hikes could affect hundreds of thousands of Californians.He’s been on the job less than a week and already California Insurance Commissioner Dave Jones has had to play hardball with Blue Shield, which just told nearly 200,000 California customers with individual health policies their rates are going up as much as 59 percent as of March 1."I have asked that the company postpone its rate increase 60 days in order to afford me the opportunity to fully review the proposed rate increase," said Jones.

Food crisis threatens India – The specter of another food crisis has the whole world nervous. But in India, skyrocketing food prices threaten to send the entire economy into a tailspin, as the government struggles to balance growth and inflation — and create a safety net for the millions still mired in poverty. Government data revealed on Thursday that India’s food inflation topped 18 percent for the week ending Dec. 25, with vegetables prices up more than 50 percent from the same period last year. The steep increase came as a surprise to economists, who had predicted a moderation in prices due to last year’s good monsoon.For India, a spike in food prices means real suffering. But a prolonged and seemingly unstoppable rise in the cost of basic commodities like the one India has witnessed over the past two years could have farther reaching effects.

 World Bank Issues Its First-Ever Yuan Bonds – The World Bank said it is issuing its first-ever bond denominated in China’s currency, the yuan, in Hong Kong, as the country promotes international use of its currency, also known as the renminbi.

The World Bank said in a statement dated Monday that it is raising 500 million yuan ($76 million) by issuing the two-year bonds, which pay out 0.95 percent in interest semiannually. It said the money would be added to its normal pool of cash, rather than being raised for a specific purpose.

The bonds are issued by the Washington-based lender’s International Bank for Reconstruction and Development arm and get its "AAA" rating, the highest possible.

2011: Year of the Yellow Brick Road – Let’s enjoy the dream for a moment: the Federal Reserve (Fed) has sprinkled money on the economy, Congress has kept taxes low and we see signs of a recovery. A recovery driven by consumers with more disposable income. Where do they get it from? The reduced payroll tax? Maybe, but how about all the money consumers have at their disposal now that they have stopped paying their mortgage? What a wonderful life this must be! Because the Fed doesn’t quite believe in the recovery, we believe QE2 will run it’s course – Fed Chairman Bernanke has repeatedly stated that one of the grave policy mistakes during the Great Depression was that monetary policy was tightened too early. He appears committed to not letting history repeat itself; investors may want to trust him on that, as well as his commitment to push inflation higher. The challenge the Fed has, of course, is that while it can create asset inflation, the Fed has a difficult time influencing which assets inflate.

China helps take pressure off euro – Spain, Portugal and Greece — three of the eurozone’s most financially shaky members — in recent months have touted a lifeline thrown to them by China: a promise to buy these countries’ embattled bonds.The pledges from the government in Beijing temporarily took some pressure off European debt markets, but China has been quiet on how much money it will actually invest. What is clear is that China has an immense interest in helping the eurozone, its biggest trading partner, out of its current woes.On Wednesday, Spain signed more than a dozen business accords with China, two days after Vice Premier Li Keqiang wrote in daily El Pais that his country will keep on buying Spain’s public debt as a show of support. That follows similar deals and promises from China for already bailed-out Greece and Portugal, seen by many as the next weakest link in the 17-country eurozone.

Employment Summary and Part Time Workers, Unemployed over 26 Weeks – This graph shows the job losses from the start of the employment recession, in percentage terms – this time from the start of the recession.  In the previous post, the graph showed the job losses aligned at the bottom. The dotted line shows payroll employment excluding temporary Census workers.  This is by far the worst post WWII employment recession.The number of workers only able to find part time jobs (or have had their hours cut for economic reasons) declined slightly to 8.931 million in December. This has been around 9 million since early 2009 – a very high level. These workers are included in the alternate measure of labor underutilization (U-6) that declined to 16.7% in December. Still very grim.This graph shows the number of workers unemployed for 27 weeks or more.  According to the BLS, there are 6.441 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 6.328 million in November. It appeared the number of long term unemployed had peaked, however the increases over the last three months are very concerning.

Comparing Recoveries: Job Changes – The United States added 103,000 jobs on net in December, the Labor Department said today. While growth is better than shrinking, of course, the number was substantially lower than what economists had been expecting. The growth was primarily driven by jobs added in leisure and hospitality (in particular, the sub-sector of food services and drinking places) and in health care. Other industries’ payrolls remained largely flat. The chart above shows job changes in this recession compared with recent ones, with the black line representing the current downturn. The line has risen since last year, but still has a long way to go before the job market fully recovers to its pre-recession level. Since the downturn began in December 2007, the economy has shed, on net, about 5.2 percent of its nonfarm payroll jobs. And that doesn’t even account for the fact that the working-age population has continued to grow, meaning that if the economy were healthy we should have more jobs today than we had before the recession.


Europe sovereign-debt insurance costs rise further – The cost of insuring Western European sovereign debt against default continued to push into record-high territory on Friday. The spread on the five-year Markit iTraxx SovX Western Europe index, which is made up of debt from 15 Western European countries, rose six basis points to 218 basis points, according to data provider Markit. That means it would now cost $218,000 a year to insure $10 million of debt for five years. Worries about upcoming bond issuance by Portugal contributed to the rise, along with an ongoing political stalemate in Belgium, pushing up CDS spreads for both countries. Meanwhile, the spread on the Markit iTraxx Senior Financials index rose 4 basis points to 200, approaching a level last seen in March 2009, after the European Union late Thursday confirmed it was weighing new rules that could require senior debt holders to take writedowns in the event of future bank failures.


EMPLOYMENT SITUATION (9 charts) The December employment report showed a continuation of the past few months trend as payroll employment rose 103,000 and the household survey showed a gain of 297,000. The unemployment rate fell to 9.4%, but almost half of the drop was due to a 260,000 drop in the labor force. The gains in payroll employment reflected a 113,000 gain in private jobs and a 10,000 fall in government employment. Now that the census employment distortions have moved out of the data it is now showing the fundamental trends as both of the changes were near the averages of 2010.Although the employment gains were weak by historic standards, they are about the same as in the 1990s jobless recovery and moderately stronger than in the 2000s jobless recovery. Average weekly hours for nonsupervisory rebounded to 33.6 hours, the same as two months ago. As with the employment data, the hours worked data is strong compared to the last two jobless recoveries but weak by historic norms.


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