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North American Edition
6th May 2024
 
THE HOT STORY
IT unemployment rate drops as hiring focuses on AI skills
The unemployment rate for U.S. IT workers decreased slightly to 2.8% in April from 3% in March, reflecting targeted hiring by companies to bolster their artificial intelligence initiatives. According to CompTIA, technology firms like Microsoft and Salesforce hired approximately 4,280 workers in April, primarily in technology services and software development roles, as well as in cloud infrastructure and data processing. This hiring trend is partly in preparation for future growth, particularly in areas that support generative AI technologies. Despite this, the broader U.S. job market saw a slowdown, with only 175,000 jobs added in April compared to over 300,000 in March, and the overall unemployment rate increased slightly to 3.9%. Tech companies are also contemplating AI as a cost-effective alternative to hiring, which could impact entry-level IT roles traditionally filled by humans.
WORKFORCE
U.S. job growth slows, wage gains cool in April
U.S. job growth slowed more than expected in April, with nonfarm payrolls increasing by 175,000 jobs. The unemployment rate rose to 3.9% from 3.8%, and wages increased 3.9% in the 12 months through April. The data indicates a looser labor market, which is good news for markets and the Federal Reserve. However, economists suggest that more signals are needed before the Fed changes its policy. Experts note that the report is not too hot or too cold, and it aligns with what the Fed wants to see. The market reacted positively to the report, as it hopes for rate cuts this year. The report also suggests a cooling in the labor market, which is seen as market-friendly.
Luminar Technologies to cut workforce by 20%
Lidar sensor maker Luminar Technologies plans to cut its workforce by 20% as part of a restructuring plan. The company, which currently employs nearly 800 people across multiple countries, will also sub-lease some of its facilities to reduce its global footprint. The restructuring is expected to result in annual operating cost reductions of $50m to $65m. Luminar recently launched its latest lidar sensor, Halo, in partnership with Applied Intuition. Lidar sensors are crucial for self-driving cars and driver-assistance systems to create three-dimensional road maps.
Boeing announces potential layoffs in Huntsville
Boeing has notified some team members in Huntsville of potential layoffs due to external decisions. The company plans to explore alternative placement opportunities within Boeing for impacted employees. Boeing is a contractor for NASA's Space Launch System and the layoffs are a result of delays for the SLS Artemis mission. Federal law requires employers to notify the state of planned layoffs or closures. NASA did not provide a comment regarding the layoffs. Elsewhere, Southwest Airlines plans to offer its pilots reduced hours and, in effect, monthly pay, two people familiar with the matter said, as it grapples with higher costs and overstaffing due to delays in aircraft deliveries from Boeing.
ECONOMY
Economic cooling signals potential for rate cuts as services sector slows
The U.S. economy is showing signs of a slowdown, particularly in the services sector, which may lead to a decrease in interest rates. Recent job additions in April fell significantly from March, with notable declines in leisure and hospitality. Major companies like Starbucks and McDonald’s have observed a downturn in consumer spending, attributing it to heightened price sensitivity due to persistent inflation. The contraction in the services sector was further evidenced by a decline in the Institute for Supply Management’s services-sector activity index, marking its first drop into contraction territory in 15 months. Despite the slowdown, the overall activity levels remain robust, and the softening may reduce wage growth pressures, potentially alleviating inflation concerns. This economic cooling has renewed investor speculation about possible Federal Reserve rate cuts, with market expectations for a rate cut by September increasing.
REMUNERATION
Record raises for unionized workers in the U.S.
Unionized workers in the U.S. have seen record raises, with wages of private sector union workers rising by 6.3% in the past year, the largest increase since 2001. In contrast, nonunion workers in the private sector only experienced a 4.1% increase in their salaries, barely beating inflation. Union leaders have been leading strikes to demand higher cost-of-living increases, resulting in wage agreements with companies like Daimler Truck Holding AG. The recent victory of workers at Volkswagen AG in Tennessee joining the United Auto Workers union further highlights the success of union organizing in the traditionally anti-union South. These wage gains may impact the Federal Reserve's decision on interest rates, as they suggest a stronger economy. Goldman Sachs analysts believe the wage data is even better than it appears, as union workers tend to have longer-term contracts that delay their wage adjustments to past inflation spikes.
LEGAL
President Biden vetoes Republican measure on labor board rule
President Joe Biden has vetoed a Republican-backed measure that aimed to repeal a U.S. labor board rule. The rule treats companies as employers of their contract and franchise workers, requiring them to bargain with workers' unions. Biden stated that the rule would prevent employers from evading their legal obligations. The veto is unlikely to be overridden by Republicans. The rule has been blocked from taking effect by a federal judge, but the decision is expected to be appealed. Critics argue that the rule would force companies to the bargaining table even when they have little control over working conditions. Franchise businesses believe the rule could disrupt the franchise model. Matthew Haller, president and CEO of the International Franchise Association, expressed concern about the impact on underrepresented groups. The rule was set to take effect in February but was delayed and blocked by a judge. The labor board has until the end of the month to appeal the ruling.
Massachusetts battle over Uber and Lyft drivers' employment status
Massachusetts is the latest battleground in the ongoing debate over whether Uber and Lyft drivers should be classified as independent contractors or employees. The state's top court is set to hear arguments on dueling ballot measures that would redefine the relationship between app-based drivers and ride-share companies. One proposal would treat drivers as independent contractors with new benefits, while the other would allow drivers to unionize. Uber and Lyft are also facing a trial over allegations of unlawfully classifying drivers as contractors. The outcome in Massachusetts could have implications for the gig economy and potentially embolden the companies in other states.
Israeli private investigator arrested in London for cyberespionage allegations
An Israeli private investigator wanted by the United States has been arrested in London for allegedly carrying out a cyberespionage campaign on behalf of an unidentified American PR firm. The extradition attempt was initially thrown out due to a legal technicality. The investigator, Amit Forlit, is accused of engaging in a "hack for hire" scheme, with allegations including being paid £16m ($20m) to gather intelligence on the Argentinian debt crisis. Forlit was arrested at London's Heathrow Airport while attempting to board a flight to Israel. He is wanted in the U.S. on charges of conspiracy to commit computer hacking and wire fraud. The extradition attempt was ruled invalid due to a failure to produce Forlit in court within the required timeframe. Forlit has also been accused of computer hacking by aviation executive Farhad Azima. Forlit denies the hacking allegations.
TECHNOLOGY
Why a recession is the best time to launch companies
New research has suggested that a recession could be the best time to launch a tech start-up. The researchers - Daniel Bias, an assistant professor of finance at Vanderbilt University’s Owen Graduate School of Management, and Alexander Ljungqvist, Stefan Persson Family Chair in Entrepreneurial Finance at the Stockholm School of Economics - found that tech startups that began operations during the 2007-09 recession, and received their first patent in that time, tended to last longer than tech start-ups founded a few years before or after. Drawing on data from the U.S. Patent and Trademark Office, the authors examined a sample of 6,946 tech startups that launched and received their first patent approval between 2002 and 2012. One group - about 5,734 companies - launched and received their patent outside of the 2007-09 recession. Of those, approximately 70% made it to their seventh year. In contrast, the start-ups that launched and got their first patent during the recession - about 1,212 companies - were 12% more likely to be in business in their seventh year. For startups started during the 2007-09 recession, founding inventors were 25 percentage points less likely to leave their company within the first three years. 
Warren Buffett fears AI has "enormous potential for harm"
Warren Buffett, the chairman and chief executive of Berkshire Hathaway, has raised concerns about the dangers of AI, saying it could have devastating consequences on society, much like the atomic bomb, if used incorrectly. Buffett acknowledged that he knew little about how the underlying technology works, but said he had reason to worry. He recently saw his own image and voice so convincingly replicated by an AI tool that he said even his wife and children would have struggled to determine they were fake. Greg Abel, Buffett's designated successor as CEO of Berkshire, noted that the company has begun using AI inside some of its businesses to help make its employees more efficient. Abel said the company was looking to deploy the technology to make certain tasks more effective or safer. Buffett, for his part, said he struggled to predict the ultimate effects of AI on the world. “It has enormous potential for good and enormous potential for harm,” Buffett said. “And I just don’t know how that plays out.” 
HEALTH & SAFETY
U.S. health officials warn dairy workers of bird flu risk
U.S. health officials have issued a warning to dairy workers about the risk of bird flu infection. They are urging workers to wear protective gear when in contact with sick birds, livestock, feces, raw milk, or contaminated surfaces. This warning comes after a dairy worker in the United States was infected with the H5N1 bird flu virus and developed conjunctivitis. While human infection with the bird flu virus is rare, there is concern that widespread exposure could lead to a global pandemic. The case of the infected dairy worker is only the second known infection in the United States. Health officials are emphasizing the importance of taking precautions to prevent further spread of the virus. "Infection of the bird virus is rare in humans, and the dairy worker's case represents only the second known infection in the United States," said Julie Steenhuysen, a reporter for Reuters.
HIRING
Army's psychological operations seeks more soldiers
The Army's psychological warfare soldiers, known as psychological operations (Psyop), have released a provocative recruitment video called "Ghost in the Machine 2." The video aims to attract new soldiers to join the Army's Special Operations Command. Psyop units are responsible for various missions, including propaganda and messaging to deceive the enemy or shape opinion on foreign soil. The video, created by a member of the 8th Psychological Operations Group, showcases the creative mindset the Army is looking for in recruits. Army Special Operations Command hopes that the video will generate interest and help fill the challenging positions within the Psyop units.
INTERNATIONAL
Strike looms in German construction industry
A strike is looming in Germany's construction industry after employers on Friday rejected an arbitrator's decision for some 930,000 affected workers. The IG BAU union had previously said that it would take industrial action if employers rejected the arbitrated decision, which it had accepted in late April. That decision would have provided for an increase in income of 250 euros per month from May 1, 2024, with a further increase on April 1, 2025, of 4.15% in western Germany and 4.95% in eastern Germany. It would run for 24 months until the end of March 2026.
 


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