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Economic Indicators

California’s minimum wage projected to rise to $15.50 under inflation trigger

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© Reuters. A store advertises for workers in downtown Los Angeles, California, U.S. November, 16, 2021. REUTERS/Mike Blake/Files

By Steve Gorman

LOS ANGELES (Reuters) – California’s minimum wage will rise to $15.50 an hour for workers at all businesses, large and small, on Jan. 1, 2023, under an automatic inflation trigger built into state law and never previously activated, the governor’s office projected on Thursday.

The announcement came a day before Governor Gavin Newsom, a first-term Democrat, was slated to present his revised budget plan to the state legislature controlled by his party, including a proposed $11.8 billion inflation-relief spending package.

The economic stimulus proposal, similar to one enacted last year to help California recover from the COVID-19 pandemic, includes a plan Newsom previewed in recent weeks offering $400 tax rebates to vehicle owners to help offset escalating gasoline costs.

Newsom said his package taps into a “historic” state budget surplus to help individuals and families cope with rising costs of living, which the state Finance Department projects will grow 7.6% between fiscal year 2021 and fiscal 2022.

Regardless of whether Newsom’s package becomes law, the Finance Department estimates that some 3 million workers stand to benefit from the first inflation-based minimum wage hike expected to take effect under a labor statute enacted in 2016.

That law requires an automatic 50-cent-per-hour increase above California’s prevailing minimum wage levels – already the highest any state requires for larger companies – whenever the U.S. consumer price index rises more than 7% from year to year.

That means the statewide minimum wage for companies employing 26 or more workers, and those with 25 or fewer workers, will both go to $15.50 in the new year. Without an inflation trigger, the minimum wage for smaller companies was due to have topped out at $15 in January, catching up with the level now required at larger firms.

Only two states – Massachusetts and Washington state – exceed California’s existing $14 minimum wage for smaller companies. They require at least $14.25 and $14.49 per hour, respectively, at businesses of all sizes, U.S. Labor Department figures show.

The District of Columbia is higher still, at $15.20 an hour. The U.S. federal minimum hourly wage is currently set at $7.25.

Other highlights of Newsom’s inflation package include $2.7 billion in emergency rental assistance for low-income tenants and $1.4 billion to help utility customers pay overdue bills.

The California Republican Party issued a statement urging the legislature to suspend state gasoline taxes as “the most effective way to relieve pain at the pump.”

Economic Indicators

JPMorgan cuts U.S. GDP estimates for 2022 and 2023

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© Reuters. FILE PHOTO: Stacked containers are shown as ships unload their cargo at the Port of Los Angeles in Los Angeles, California, U.S. November 22, 2021. REUTERS/Mike Blake

(Reuters) – JPMorgan (NYSE:JPM) on Wednesday cut its expectation for U.S. real gross domestic product for the second half of 2022 and for 2023.

The firm’s economic and policy research department cut its second half view to 2.4% from 3% and cut its first half 2023 target to 1.5% from 2.1% and for the second half of 2023 it cut its view to 1% from 1.4%.

It said there may be enough of a growth slowdown to lead to a gradual increase in the unemployment rate later next year, helping to relieve some wage pressures that have been building.

“In short, we forecast a soft landing, but are well aware that this outcome has rarely (if ever) occurred,” according to the research led by economist Michael Feroli.

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Economic Indicators

Canada inflation creeps higher in April, economists warn more pinch to come

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© Reuters. FILE PHOTO: Tourists shop for souvenirs in Gastown as the pace of cruise ships arriving in Canadian ports picks up, two years after the industry was shuttered due to the COVID-19 pandemic, in Vancouver, British Columbia, Canada May 13, 2022. REUTERS/Jenn

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By Julie Gordon

OTTAWA (Reuters) – Canada’s annual inflation rate rose faster than expected in April, official data showed on Wednesday, and analysts warned soaring used-car and gasoline prices could stoke the trend, raising pressure on the central bank to tighten policy quickly.

The headline annual inflation rate hit 6.8% in April, Statistics Canada data showed, slightly ahead of analyst forecasts that it would stay flat at 6.7%, instead edging closer to the 6.9% hit in January 1991. It was the 13th consecutive month above the Bank of Canada’s 1-3% control range.

Food and shelter prices surged at rates not seen since the early 1980s, while gasoline price gains slowed slightly from March. Excluding food and energy, inflation was up a still-hefty 4.6%.

“Inflation is spreading much more broadly, and at clear risk of getting firmly entrenched,” said Doug Porter, chief economist at BMO Economics. “Barring a deep dive in oil prices in coming weeks and months, we expect that the worst is yet to come.”

Graphic: Canadian inflation and interest rates – https://graphics.reuters.com/CANADA-ECONOMY/INFLATION/lgpdwekqdvo/chart.png

Porter, in a note, said May inflation could exceed 7%, the highest in nearly 40 years, citing record high gasoline prices in the month and changes to how Statistics Canada tracks the impact of used car prices.

Statscan will reshuffle its baskets with its May release and start using more accurate methods to track used-car prices, which have skyrocketed due to supply chain disruptions which, along with geopolitical conflict, are driving rapid price acceleration globally. This has forced central banks to tighten monetary policy more quickly than they had planned to.

“They have to make sure that it doesn’t morph into an inflationary spiral,” said Jimmy Jean, chief economist at Desjardins Group, of the Bank of Canada’s inflation challenge.

“So the way they’re going to be communicating the next steps will be critical here,” he added.

Last week, Bank of Canada deputy governor Toni Gravelle acknowledged the 1% policy rate was “too stimulative” and reiterated that rates, which were dropped to support the economy during the pandemic, need to be higher.

The central bank is widely expected to make a second 50-basis-point increase on June 1 and money markets are betting the policy rate will be around 3% by year-end.

But Canada’s high debt-to-income level and overheated property market mean the Bank will need to tighten with caution.

“It’s kind of a fine line,” said Darcy Briggs, a portfolio manager at Franklin Templeton Canada. “The trick is to try to get inflation down without creating a lot of havoc. But that’s easier said than done.”

The Canadian dollar was trading down about 0.2% at 1.2835 to the greenback, or 77.90 U.S. cents.

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Economic Indicators

Russian economic growth slows to 3.5% y/y in Q1 – Rosstat

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© Reuters. FILE PHOTO: A general view of city skyline and skyscrapers under construction during sunset as the spread of the coronavirus disease (COVID-19) continues in Moscow, Russia May 16, 2020. REUTERS/Maxim Shemetov

(Reuters) – The Russian economy expanded by 3.5% year-on-year in the first quarter of 2022 after growing 5% in the previous quarter, data from federal statistics service Rosstat showed on Wednesday.

The first quarter is expected to have been the last with sound growth before the Russian economy took a hit from sweeping sanctions for Moscow’s decision to send tens of thousands of troops into Ukraine on Feb. 24.

The economy ministry said this week it expected gross domestic product (GDP) to contract by 7.8% in 2022.

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