Every week we bring you the world’s biggest business stories. This week: US jobs report disappoints, the Fed waits on rates, Volkswagen emissions scandal fallout continues, ThyssenKrupp Elevator Americas cuts Toronto jobs, $99 flights to Iceland, and Air France KLM plans layoffs.
US Jobs Slowdown
The US economy added 142 000 jobs in September, falling well short of the 205 000 jobs economists had forecasted. The numbers, released by the Labor Department also revised the number of jobs created in July and August down by a total of 59 000. Both the Dow Jones and S&P 500 dropped 1.3% while markets in London and in Europe also reacted negatively. Despite the disappointing figures, the unemployment rate still stands at a very healthy 5.1%. Experts believe that China’s slowdown is the culprit behind the weaker than expected jobs report.
The recent jobs report could convince the Fed to delay raising rates yet again. There is no official timeline for the rate hike, but many commentators had expected to see some movement in September. Economic uncertainty in Europe and more seriously in China caused enough concern for the Fed to hold rates to below 0.25%. Now it seems increasingly likely that the Fed could wait until next year to raise rates. In response to the Department of Labor’s figures, the US dollar fell slightly along with government bond yields. Gold, meanwhile, jumped 2% higher but oil prices followed the USD’s slight stumble with a 2% decline.
Volkswagen is facing increasing pressure as the recent emissions scandal continues to unfold. The German car manufacturer admitted that software designed to trick emissions tests is installed on up to 11 million of its vehicles. Now executives will have to testify before Congress and likely reveal in detail their plan to refit their vehicles. Some fear that a recall could be necessary and would likely hit the company coffers hard. Thus far the scandal has already wiped out a third of the company’s share price and forced the CEO to resign. Volkswagen has vowed to hold those involved in the deceptive measures responsible. The story is far from over and the coming weeks could hold more upheavals, fines and losses for the German automaker.
ThyssenKrupp Elevator Americas will be closing its Northern Elevator plant in Toronto by next summer. The company will instead focus on preserving its manufacturing operation in Middleton, Tennessee. A remaining 1 600 employees involved in customer service and maintenance will retain their positions. The plant closure comes on the back of announcements of similar plant closures by GM and others.
WOW, an Icelandic discount airline, has unveiled plans to offer flights from Montreal or Toronto to Iceland for just $99 flights one way, and flights to other European destinations for just $149. The exact number of flights available at these prices is still unclear. To keep prices low the no-frills airline could levy additional charges for luggage and snacks. Skuli Mogensen, founder of WOW, made his fortune in Montreal at Oz Communications. He hopes to apply the same high-tech approach to his latest venture. WOW will be run entirely online from Iceland, avoiding many of the large overhead costs associated with the major airlines. Flights are due to begin next May. Travelers will be eager to see if the company will be able to stand by its $99 flights promise.
Air France KLM Cutbacks
Air France KLM will cut as many as 2 900 jobs. The airline has faced stiff competition from cheap domestic competitors as well as Middle Eastern airlines like Etihad and Qatar. Profits have been hit by striking pilots and falling revenue. The company will be implementing wide ranging cost cutting measures including the potential sale of nine long-haul planes by 2017.
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