April report to show whether weak hiring persisted

(AP:WASHINGTON) A report Friday on April employment could show whether weak hiring in March marked a temporary lull or the fourth year in which a slumping economy has slowed job growth.

Economists predict that the job gains likely improved on March's 88,000 _ the fewest in nine months. But the hiring isn't expected to be much better. Most analysts think employers in April added more than 100,000 jobs but far fewer than the 196,000 that were added on average from September through February.

The unemployment rate is expected to remain unchanged at a still-high 7.6 percent.

The Labor Department will release the report at 8:30 a.m. EDT.

Economic figures in recent days have been mixed. The government said Thursday that the number of Americans applying for unemployment aid fell last week to a seasonally adjusted 324,000 _ the fewest since January 2008.

Unemployment applications reflect the pace of layoffs: A steady drop means companies are shedding fewer workers. Eventually, they'll need to hire to meet customer demand or to replace workers who quit.

At the same time, surveys have shown that hiring by private companies was weak and that manufacturing activity declined in April. And exports fell in March.

The economy grew in the January-March quarter at an annual pace of 2.5 percent, much better than in the previous quarter. Economists worry, though, that federal spending cuts and higher Social Security taxes could hurt the economy. And new requirements under the federal health care law may be causing some small and midsize companies to hold back on hiring.

Analysts forecast that growth will slow in the current quarter to 2 percent or less. That could mean that job growth will remain sluggish at least through summer.

Economists at Bank of America Merrill Lynch forecast that the spending cuts could reduce April's job gains by 25,000. That figure would include layoffs by government agencies and defense contractors.

The higher Social Security tax has cut take-home pay for nearly all working Americans. It's reduced pay for a typical household earning $50,000 by about $1,000 this year. A household with two highly paid workers has up to $4,500 less.

Consumers, so far, have shown resilience despite the tax increase. Americans boosted their spending from January through March at the fastest pace in more than two years.

But their spending slowed toward the end of the first quarter. And in March, consumers cut back their spending at retail stores by the most in nine months. Most economists think consumer spending is slowing further in the current quarter.

Still, some reports suggest that hiring could pick up later in the year. Applications for unemployment benefits fell to a five-year low last week, signaling fewer layoffs and potentially more job gains.

Americans are buying cars at a healthy pace, prompting some automakers to add jobs. Auto sales rose 8.5 percent in April compared with a year ago to nearly 1.3 million _ the best April total since before the recession began.

Home prices are rising, a trend that makes homeowners feel wealthier and more likely to spend. Higher home prices are also encouraging some people to buy homes before prices rise further.

Cheaper gas could also get people spending more. The national average for a gallon of regular on Wednesday was $3.52, 11 cents less than a month ago and 28 cents below the year-ago level.

Consumer confidence rose in April. The outlook improved mostly because Americans expect the economy to deliver more jobs and higher pay in the next six months.

Royal Dutch Shell CEO Peter Voser.

By Andrew Callus

LONDON, May 2 (Reuters) – Royal Dutch Shell’s 54-year old chief executive Peter Voser is to retire next year in a surprise early departure he said was driven by a desire for a change of lifestyle.

Over the past nine years the softly spoken and widely respected Swiss national has helped drive the group’s structural reorganisation and recovery from sector laggard to a leading position in the burgeoning industry of liquefied natural gas (LNG).

He took over as finance director of Europe’s top oil company in 2004 amid the board-level bloodshed that followed its shocking downgrade of reserves estimates and became CEO in 2009.

His departure comes as the company and the industry face huge new challenges.

Shell is the western world’s number two company by production behind Exxon Mobil. But, like its peers, it is struggling to replace reserves and boost production and faces a squeeze on earnings as costs rise while the price of oil threatens to fall decisively below the psychologically important $100 a barrel level.

Finance director Simon Henry said the company was well-placed for the recent fall in prices.

“We also think there are quite few players in the market, quite a few companies, who actually have bet the farm on $100-plus oil prices. We don’t,” he said.

“We’re structured around a lower oil price so it is not bad for us.”

Nevertheless, analysts say that among the world’s top oil companies, Shell spends more on exploration per barrel produced than any of its competitors. Its most high-profile exploration failure has been in Alaska, where it has spent $5 billion since 2006, and has yet to drill a single complete hole.

Meanwhile thefts, strikes and other issues dog activity in Nigeria where it is the principle international oil company operator. “We were concerned by the level of oil theft in Nigeria at the end the fourth quarter and we are even more concerned now,” Henry said.

LIFESTYLE CHANGE

Voser joined Shell in 1982. He left in 2002 to join Swiss group ABB, but was back within two years as finance director as part of an effort to stabilise the company after the reserves crisis.

He said his decision to go in the first half of 2014 was a personal one. Shell employees, investors and analysts all said they were surprised to see him go.

“After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to having more time available for my family and private life in the years to come,” Voser said in a statement.

Shell said it would look outside and inside the company for his replacement. A spokeswoman said Shell had looked outside for CEOs in the past. However, as with most big oil companies, new chief executives traditionally come up through the ranks.

Henry refused to be drawn on his own prospects for becoming CEO of Shell, Europe’s second-largest investor-owned company by value behind food company Nestle.

Voser has been named in media reports as a possible chairman of Roche Holding, the drug firm based in his native Switzerland and where he is already non-executive director.

A Shell insider said Voser had indicated he had no plans to take on new non-executive directorships or chairmanships.

STRONG TRADING, LIKE BP

The last of the western world’s four biggest oil companies to report results, Shell joined its peers on Thursday in delivering a first-quarter profit that topped market expectations.

Adjusted net profit on a current cost of supply basis rose to $7.5 billion from $7.3 billion a year ago, compared with expectations of around $6.5 billion.

As was the case with BP’s results on Tuesday, Shell exceeded expectations by a big margin thanks in large part to its trading activities, which were not split out from the rest of its operations.

Shell’s shares climbed 1.4 percent to 2,223 pence, making it the third-best performer among European oil stocks on Thursday.

Royal Dutch Shell CEO Peter Voser.

By Andrew Callus

LONDON, May 2 (Reuters) – Royal Dutch Shell’s 54-year old chief executive Peter Voser is to retire next year in a surprise early departure he said was driven by a desire for a change of lifestyle.

Over the past nine years the softly spoken and widely respected Swiss national has helped drive the group’s structural reorganisation and recovery from sector laggard to a leading position in the burgeoning industry of liquefied natural gas (LNG).

He took over as finance director of Europe’s top oil company in 2004 amid the board-level bloodshed that followed its shocking downgrade of reserves estimates and became CEO in 2009.

His departure comes as the company and the industry face huge new challenges.

Shell is the western world’s number two company by production behind Exxon Mobil. But, like its peers, it is struggling to replace reserves and boost production and faces a squeeze on earnings as costs rise while the price of oil threatens to fall decisively below the psychologically important $100 a barrel level.

Finance director Simon Henry said the company was well-placed for the recent fall in prices.

“We also think there are quite few players in the market, quite a few companies, who actually have bet the farm on $100-plus oil prices. We don’t,” he said.

“We’re structured around a lower oil price so it is not bad for us.”

Nevertheless, analysts say that among the world’s top oil companies, Shell spends more on exploration per barrel produced than any of its competitors. Its most high-profile exploration failure has been in Alaska, where it has spent $5 billion since 2006, and has yet to drill a single complete hole.

Meanwhile thefts, strikes and other issues dog activity in Nigeria where it is the principle international oil company operator. “We were concerned by the level of oil theft in Nigeria at the end the fourth quarter and we are even more concerned now,” Henry said.

LIFESTYLE CHANGE

Voser joined Shell in 1982. He left in 2002 to join Swiss group ABB, but was back within two years as finance director as part of an effort to stabilise the company after the reserves crisis.

He said his decision to go in the first half of 2014 was a personal one. Shell employees, investors and analysts all said they were surprised to see him go.

“After such an exciting executive career I feel it is time for a change in my lifestyle and I am looking forward to having more time available for my family and private life in the years to come,” Voser said in a statement.

Shell said it would look outside and inside the company for his replacement. A spokeswoman said Shell had looked outside for CEOs in the past. However, as with most big oil companies, new chief executives traditionally come up through the ranks.

Henry refused to be drawn on his own prospects for becoming CEO of Shell, Europe’s second-largest investor-owned company by value behind food company Nestle.

Voser has been named in media reports as a possible chairman of Roche Holding, the drug firm based in his native Switzerland and where he is already non-executive director.

A Shell insider said Voser had indicated he had no plans to take on new non-executive directorships or chairmanships.

STRONG TRADING, LIKE BP

The last of the western world’s four biggest oil companies to report results, Shell joined its peers on Thursday in delivering a first-quarter profit that topped market expectations.

Adjusted net profit on a current cost of supply basis rose to $7.5 billion from $7.3 billion a year ago, compared with expectations of around $6.5 billion.

As was the case with BP’s results on Tuesday, Shell exceeded expectations by a big margin thanks in large part to its trading activities, which were not split out from the rest of its operations.

Shell’s shares climbed 1.4 percent to 2,223 pence, making it the third-best performer among European oil stocks on Thursday.

There are a number of factors potentially influencing non-farm payrolls this month. First, the sequester likely reduced government jobs and weighed on private sector expansion. Although the government did most of its cost cutting through furloughs, we suspect there were also some outright job cuts. We are penciling in a decline of 25,000, but the risk is that this is too conservative.

Moreover, the private sector will likely be impacted. At a minimum, it likely reduced hiring in those industries most closely exposed to the government, such as defense contracting. We think it will ultimately result in outright job cuts, but this may occur with a lag, as suggested by the continued drop in initial jobless claims.

Second, there has been greater-than-normal seasonality in the past two months. March was particularly cold with snowfall in parts of the country, likely curbing economic activity. This would show up in retail and construction jobs in particular, which we think were both held back in March due to the weather.

There is another reason to expect a weak nonfarm payrolls number tomorrow: the April survey only covers four weeks of data, as opposed to the typical five-week window used to conduct the survey.

UBS economists are looking for a below-consensus print of 130,000 nonfarm payrolls, but they attribute it to the shortened time period covered by the April survey.

" The softness in headline  payrolls that we forecast reflects technical oddities rather than fundamental  weakening," says UBS economist Sam Coffin. " The relatively short interval between March and April payroll surveys,  with a four-week rather than five-week gap between them, has historically been  associated with April payrolls about 60,000 below the surrounding trend."

Société Générale economist Brian Jones acknowledges this effect in his preview of the Friday jobs report as well, but is decidedly more optimistic: he projects 175,000 new nonfarm payrolls in April and expects the unemployment rate to tick  down to 7.5%.

In his preview, Jones writes:

Capping a week of decidedly spotty data, we expect the Bureau of Labor Statistics (BLS) to report that the employment situation in the United States improved further in April. Although once again falling shy of the psychologically important 200,000 mark, nonfarm establishments probably added 175,000 net new workers last month, marginally eclipsing the 168,000 first-quarter average.

Estimated insured unemployment statistics, meanwhile, suggest that the civilian jobless rate remained on a downtrend during the month just passed, moving one tick lower to 71⁄ 2% –the lowest reading since the end of 2008. The remaining key establishment survey metrics are projected to be mixed in Friday’s report. Average hourly earnings likely quickened, rising by 0.2% following no change in the preceding month. The mean work span of private employees probably shortened to 34.5 hours.

HERE IT IS: Wall Street's Most Bearish Prediction For Tomorrow's Jobs Report

According to the consensus estimate, the U.S. added 140,000 nonfarm payrolls in April.

 

This number is derived from a survey of Wall Street economists conducted by Bloomberg.

The range of estimates goes as low as 100,000 and as high as 200,000.

At the bearish end is Nomura economist Ellen Zentner.  From her jobs preview note:

When the Bureau of Labor Statistics (BLS) releases the National Employment Report on Friday we expect it to reveal that the US economy added a net new 100k jobs in April... Our below consensus forecast for total nonfarm payrolls reflects our judgment that most incoming labor market indicators failed to improve in April following a surprisingly softer labor market in March (when the BLS reported that just 88k net new jobs were created).
...
Not all labor market indicators have weakened, but on net incoming data since the March employment report have continued to soften (Figure 2).

Nomura

 


The regional surveys, consumer spending data, consumer confidence readings, and Nomura's proprietary indicators on net point to weakness.

Zentner's forecast is even lower than the bearish " whisper number."

It's worth noting that in December, Zentner had an unusually bullish forecast for the jobs report and she basically nailed it.

By PAMELA SAMPSON
AP Business Writer

(AP:BANGKOK) Asian stock markets rose Friday, finding renewed strength from a fall in U.S. jobless benefit claims and an interest rate cut by the European Central Bank intended to boost the region's ebbing economy.

Investors jittery over the state of the U.S. economy took heart from a U.S. Labor Department report that said applications for unemployment benefits fell last week to the lowest level in more than four years. That calmed fears that intensified Wednesday following the release of reports showing lackluster hiring and factory output.

Hong Kong's Hang Seng rose 0.8 percent to 22,853.89. Australia's S& P/ASX 200 added 0.1 percent to 5,134.50. South Korea's Kospi rose 0.1 percent to 1,958.41. Benchmarks in mainland China and the Philippines also rose. New Zealand and Singapore fell.

Markets in Japan were closed for a public holiday.

An interest rate cut by the European Central Bank gave markets in Europe a small lift Thursday. The central bank, which sets interest rates for the 17 European Union countries that use the euro, cut the rate by a quarter of a percentage point to a new record low of 0.5 percent.

The decision was widely anticipated following a grim run of economic data for the eurozone, which is expected to stay in recession when first-quarter figures are released later this month.

" Importantly, core countries have been increasingly affected by weakening growth prospects and it remains to be seen whether the German economy can rebound strongly any time soon," said analysts at Credit Agricole CIB in a market commentary.

The Labor Department report and higher profits from CBS, Facebook and other companies sent Wall Street higher Thursday. The Dow Jones industrial average rose 0.9 percent to 14,831.58. The Standard & Poor's 500 index rose 0.9 percent to 1,597.59. The Nasdaq composite index climbed 1.3 percent to 3,340.62.

On Friday, the U.S. government's closely watched monthly employment report will be released.

Benchmark oil for June delivery was down 19 cents to $93.80 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.96, or 3.3 percent, to finish at $93.99 a barrel on the Nymex on Thursday, the biggest one-day gain for crude since November.

In currencies, the euro rose to $1.3076 from $1.3058 late Thursday in New York. The dollar rose slightly to 98 yen from 97.96 yen.

___

Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson

 
   By Chris Dieterich 
 

Falling oil prices weigh on Shell's Q1 profit

(AP:AMSTERDAM) Royal Dutch Shell PLC has reported lower profits for the first quarter, as a decline in oil prices offset improved earnings from its refining arm.

The company reported net profit Thursday of $8.18 billion, down from $8.74 billion in the first quarter of 2012. Revenues fell 5.1 percent to $112 billion.

Stripping out the impact of oil price fluctuations and asset sales, underlying earnings grew 2 percent.

Shell produced 3.56 million barrels of oil per day, fractionally higher than 3.55 million a year ago. Shell said core production is growing, but some of its capacity in Nigeria is closed due to security threats.

Production earnings fell 10 percent to $5.65 billion due to lower oil prices. The company's refining arm profits rose 28 percent to $1.69 billion amid better margins.

Warren Buffett's company has sold more than 1.7 million Moody's shares this week, but Berkshire Hathaway Inc. still owns nearly 12 percent of the credit ratings agency.

Berkshire still held 26.7 million Moody's shares after the sales it reported to the Securities and Exchange Commission on Wednesday.

But in March 2009, Berkshire held 48 million Moody's shares before it started selling.

Berkshire said it sold the Moody's shares this week at prices around $60 a share, so the stock sales would have generated more than $100 million for Buffett's Omaha-based firm.