NEW YORK – U.S. employment increased more than expected in May, while the unemployment rate held steady at 3.6%, signs of a tight labor market that could keep the Federal Reserve’s foot on the brake pedal to cool demand.

Nonfarm payrolls increased by 390,000 jobs last month, the Labor Department said on Friday. Data for April was revised higher to show payrolls rising by 436,000 jobs instead of 428,000 as previously estimated. The report also showed solid wage gains last month, sketching a picture of an economy that continues to expand, although at a moderate pace.

COMMENTS:

ANTHONY SAGLIMBENE, AMERIPRISE GLOBAL MARKET STRATEGIST, TROY,  MICHIGAN 

“What the market is really focused on is average hourly earnings, a tick lower than expected .. The labor market is starting to level off and if we can see wage inflation moderate a bit lower, that’s healthy for the market.”

“If the wage inflation can come down that’s a more healthy dynamic. (This report) gives permission to the Fed to keep going with their rate hikes because the labor market is strong. They can worry more about inflation pressures and less about the labor market.”

    “The market is still concerned about wage inflation. Even at 0.3% that’s still a very high rate. The market is reacting to the fact that the Fed does need to continue with the rate hikes. If wage inflation was lower the market reaction could be more positive.”

STEVEN RICCHIUTO, U.S. CHIEF ECONOMIST, MIZUHO SECURITIES USA LLC, NEW YORK

“To be honest, it’s not going to change anyone’s opinions one way or another. It’s not going to change anything on the Fed’s views, it’s not going to change anyone in the market’s views. Those people who are thinking it’s going to cause a pause in September are going to be able to point to things. Those people who think the Fed’s not going to be able to pause in September are going to be able to point at things. Net-net, it does nothing.”

“Now we’re going to see where the balance of risk comes in. Have people who have been bullish in the equity market, for example, have they overstayed their hand? People who were bullish in the bond market last week, are they’re going to get a little bit more scared that they’re not going to get the pause in September. We’re going to see where that balance comes out as a result of this number. “

JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA

    “For the first five months of the year, this market fell on the anticipation of bad news, the anticipation of higher inflation and higher interest rates and the anticipation of war in Europe. And then it fell on the actual news… Now I think the market could use a little bad news. The market may actually embrace some less-than-stellar economic news, because it could slow the Fed’s hand down. The Fed would always rather indirectly affect the market.”

IAN LYNGEN, HEAD OF U.S. RATES STRATEGY, BMO CAPITAL MARKETS, NEW YORK

“One aspect of the report that I find interesting is that average hourly earnings undershot expectations on a month-over-month basis, but it wasn’t enough to lead to a miss over the year-over-year figures, which decelerated from 5.5% to 5.2%. This is consistent with the peak inflation narrative and doesn’t really change the overall narrative for the Fed. We are still looking for 50 basis point rate hikes in June and July, with a good chance of another 50 basis point move in September.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The good news is that wage (growth) has seemed to stop going up for now. And that’s the key. This report plays into the hands of the Fed in that they’re going to have to hike rates at least another 150 basis points.  That’s the bottom line.”

“The stock indices are bouncing off their lows.”

“The employment market remains strong, and at least for now wages are not climbing faster than they were.”

“But when you have manufacturing (job growth) slowing down, that’s a key sector of the economy. That’s a sign of a weakening economy that’s headed for recession.”

SHAWN CRUZ, HEAD TRADING STRATEGIST, TD AMERITRADE, CHICAGO

“Everyone wanted to know if we would see the impact of Fed tightening show up in this report, there was a little bit of a concern there was going to be a miss on the downside but it actually beat quite a few economists’ expectations on the upside. Overall this is a solid report, the Fed decision was already a done deal so it is not like this is really going to matter for that. This was more about what does this tell us about underlying demand, the economy’s ability to handle everything going on and are we going to see leveling off in any major sector in a big way? But we didn’t really see any of this, there was leisure and hospitality was up, professional and business services, transportation and warehousing, so this was a good report that shows the general populace is going back into the labor force.”

“The one interesting thing here was the participation rate ticked up, that is a sign that either it is the cost of living or generally higher wages because there was some good wage growth here too, is pulling people back into the jobs market and to the extent that inflation is due to labor issues where they just can’t hire people to produce, that might be abating. But it doesn’t really solve the overall bigger drivers of inflation, it doesn’t solve China’s zero-COVID policies and it doesn’t solve the Russia and Ukraine situation but it does show some resiliency in the U.S. economy, at least for the time being.”

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN

“There isn’t clear and convincing evidence that inflation is slowing or that the labor market is cooling. There may be some hints that job hiring is slowing. The diffusion indexes ticked down showing that the job gains aren’t as broad as they used to be.”

(Compliled by the global Finance & Markets Breaking News team)

PARIS – Airbus delivered approximately 47 aircraft in May, down 6% from the same month last year, according to industry sources and tracking data.

The European planemaker declined comment.

Jefferies on Thursday estimated that Airbus had delivered 45 jets in May.

(Reporting by Tim Hepher, editing by Tassilo Hummel)

By David Shepardson

WASHINGTON -The National Highway Traffic Safety Administration (NHTSA) said Friday it asked Tesla Inc to respond to questions by June 20 after it received 758 reports of unexpected brake activation tied to the carmaker’s driver assistance system Autopilot.

In February, NHTSA opened a preliminary evaluation into 416,000 2021-2022 Tesla Model 3 and Model Y vehicles in the United States after the agency said it had received 354 complaints about the issue over the past nine months.

NHTSA said the driver assistance system allows the vehicles to brake and steer automatically within their lanes.

NHTSA said in February that “complainants report that the rapid deceleration can occur without warning, at random, and often repeatedly in a single drive cycle.”

Owners say they have raised concerns with Tesla, which has dismissed the complaints saying the braking is normal, and some have called it “phantom braking.”

The owner of a 2021 Tesla Model Y told NHTSA in October that, while driving on a highway at 80 miles per hour, “the car braked hard and decelerated from 80 mph to 69 mph in less than a second. The braking was so violent, my head snapped forward and I almost lost control of the car.”

NHTSA in August opened a separate formal safety probe into Tesla’s Autopilot system in 765,000 U.S. vehicles after a series of crashes involving Tesla models and emergency vehicles.

A preliminary evaluation is the first phase before NHTSA could issue a formal recall demand.

In May 2021, Tesla chief executive Elon Musk said dropping a radar sensor from its partially automated driving system would address “phantom braking,” which some Tesla drivers have long complained about.

Tesla, which disbanded its media relations department, did not respond to a request for comment.

(Reporting by David Shepardson; editing by John Stonestreet and Nick Zieminski)

By Dominique Vidalon

PARIS – Carrefour is looking at 2022 with confidence as it works on a new strategy that will allow the French retailer to step up digital expansion and be more resilient amid an increasingly uncertain environment, its boss said on Friday.

Carrefour, which last year failed to tie up with Canada’s Couche-Tard and France’s Auchan, has the financial means to expand as a standalone company, Chairman and Chief Executive Alexandre Bompard also told shareholders.

“Our group never had to face so many challenges,” Bompard said, citing the COVID and the climate crisis, resulting disruptions to supply chains and inflationary pressures made worse by the crisis in Ukraine.

“We are well armed, we have the right strategy to be reactive. We are going to do all we can to demonstrate that we can face up to these challenges in 2022,” he added.

Bompard, whom Carrefour reappointed in May 2021 to lead for another three years, is working on a new strategic plan and conducting an asset review as part of the process.

In November, Carrefour pledged to spend 3 billion euros by 2026 to step up digital expansion, one of the pillars of the future strategy plan Bompard is due to unveil in autumn.

Bompard said the new plan would take into account inflation.

“Carrefour will strive to protect the purchasing power of its customers while reinforcing its economic model,” he said.

Carrefour can look to Carrefour branded products, promotional activities and loyalty programmes as well cost savings, he said.

Bompard reiterated a target to generate free cash flow above 1 billion euros in 2022.

Cash is viewed as key to Carrefour’s plans to step up digital commerce expansion without the extra financial resources that would have been on hand if two planned tie-ups last year had not failed – one with Canada’s Couche-Tard and one with France’s Auchan..

“Carrefour does not need consolidation. It has the means of its development,” Bompard said, added that while Carrefour had been approached in the past by rivals, “today, we are not working on anything”.

Carrefour shares have gained 20% this year but are still down around 10% from their level when Bompard took over in July 2017.

(Reporting by Dominique Vidalon; Editing by GV De Clercq)

(Corrects first and second paragraphs to clarify company is evaluating choices for future plant)

TOKYO – Japan’s Panasonic Holdings Corp, which makes batteries for electric car maker Tesla, is evaluating which U.S. state it will choose as the site for a new battery plant, a top executive said on Friday.

“We’ve been making various considerations, but we are starting to evaluate,” said Panasonic Energy Chief Executive Officer Kazuo Tadanobu, speaking to reporters during a round table event. No decision had been made yet, he added.

The Japanese conglomerate is looking at potential factory sites in Kansas and Oklahoma to supply the batteries to the U.S. electric automaker’s plant in Texas, two people with knowledge of the plan have said.

Tadanobu told investors and analysts on Wednesday that the company had shipped samples of its more powerful ‘4680’ format electric car battery to Tesla.

The 4680 format battery – 46 millimetres in width and 80 millimetres in height – is about five times bigger than those that Panasonic currently supplies, meaning the U.S. electric automaker could be able to lower production costs and boost vehicles’ driving range.

Panasonic said mass production of the new battery is set to begin before the end of March 2024 at its plant in Wakayama, western Japan, before production is moved to North America.

The Japanese company has partnered with Tesla for more than a decade, supplying batteries for its first cars.

Since then, the electric automaker has diversified supply chain and brought in other firms such as China’s Contemporary Amperex Technology Co (CATL) and South Korea’s LG Energy Solution.

(The story corrects first and second paragraphs to clarify company is evaluating choices for future plant.)

(Reporting by Satoshi Sugiyama; Editing by Kenneth Maxwell and David Dolan)

By Lisa Baertlein, Tina Bellon and Siddharth Cavale

(Reuters) – For Walmart and Target, location matters – especially when it comes to transportation costs. An analysis by Reuters shows that Walmart Inc gets a break – and Target Corp is getting hurt – by where their stores are clustered. High oil prices – $117 for a barrel of benchmark U.S. crude on Thursday – impose extra costs everywhere, but the impact varies wildly by state. The per-gallon price for diesel fuel that powers highway transport was 29% more expensive in the priciest state than the lowest-cost state, according to AAA data on May 20.

Graphic: Soaring diesel prices pack an unequal U.S. punch – https://graphics.reuters.com/WALMART-TARGET/GAS/gkplgzqwgvb/chart.png

Walmart stores are concentrated in states where gas and diesel prices are below the national average, like Texas and Florida, while Target stores skew toward high-cost states like California and New York.

Gasoline and diesel prices are higher in some states than others because of factors ranging from local taxes to proximity to oil refineries and pipelines.

The geographical groupings of Walmart and Target stores reflect the distinct strategy of each company for going after a certain type of customer.

“Walmart has found its success with lower-income customers and those that can drive to its stores, versus Target who wants the affluent customer,” said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group.

Walmart, known for having the best logistics operations among major U.S. retailers, shocked investors during its May 17 earnings call when Chief Executive Doug McMillon said the rapid run-up in oil prices resulted in first-quarter fuel costs that were $160 million higher than expected.

The next day, Target Chief Operating Officer John Mulligan gave the market a bigger jolt on the company’s earnings call by adding $1 billion to its transportation and freight cost forecast for 2022. Those costs were “hundreds of millions of dollars” higher in the first quarter than the retailer’s “already elevated” expectations, he said.

THRIFTY MINDSET

Walmart has weathered the spike in fuel prices and related shipping costs better than rival chain Target, analysts said, in large part because Walmart’s business – from where it puts its stores and distribution centers, to the miles driven by in-house truckers, to the products on its shelves – is designed to keep a lid on costs.

“They’re known for scraping pennies off the sidewalk and finding loose change under the cushions,” said Clark Williams-Derry, a researcher at the Institute for Energy Economics and Financial Analysis (IEEFA).

The mentality of thrift that underpins Walmart’s operations suggests the world’s biggest retailer is in a better position to thrive when inflation erodes shoppers’ discretionary spending.

Walmart shares have largely recovered since the company’s CEO flagged the surprise fuel cost hit, while Target shares are still down more than 25%.

Walmart and Target declined to comment on the Reuters analysis of the fuel costs. The price analysis covered all 50 states but not the District of Columbia.

Walmart has 63.5% of its stores in U.S. states where both regular and diesel prices are below the national average as tracked by AAA, according to the Reuters analysis.

Graphic: High diesel prices spare Walmart’s retail heartland – https://graphics.reuters.com/WALMART-TARGET/GAS/zdpxowjdrvx/chart.png

For Target, that figure is 44%. At the same time, 38% of Target stores are in states with high fuel prices like California and New York. Walmart’s exposure is half that, at 19%.

California, Target’s No. 1 market with 16% of its 1,921 stores, had the nation’s highest average per-gallon fuel prices as of May 20. California’s stricter environmental rules and high taxes on motor fuel are among the drivers of its above-average prices. (graphic: https://tmsnrt.rs/3PNiaTB)

Graphic: Target’s more upscale locations pack a bigger diesel-cost punch – https://graphics.reuters.com/WALMART-TARGET/GAS/byprjdblbpe/chart.png

Per-gallon fuel prices are sharply lower in Texas, Walmart’s top market. Of Walmart’s 5,300 locations – including Sam’s Club operations – in U.S. states, more than 11% are in Texas.

Walmart supplies stores from 46 regional distribution centers against only 29 for Target, said Marc Wulfraat, president of logistics consultancy MWPVL International. As a result, the average distance a truck drives to the stores is less for Walmart.

“Efficiency matters more when prices are high,” said IEEFA’s Williams-Derry.

While Target outsources trucking, Walmart has roughly 11,000 in-house big rig drivers moving a large proportion of the nonperishable goods it sells. Because of that, “we think Walmart has an advantage over Target when it comes to controlling overall freight costs,” CFRA Research analyst Arun Sundaram said.

Fuel costs matter to consumers too, and Walmart’s focus on food and other consumables gives it a leg up over Target’s more discretionary bent, said Scott Mushkin, CEO of retail consulting firm R5 Capital.

Pandemic-weary consumers are already cutting spending on goods like flat-screen televisions and furniture as they shift dollars toward travel and entertainment.

The U.S. Bureau of Economic Analysis estimated the higher price of fuel in March relative to January would shift $96 billion in consumer spending to gasoline this year, if volume remains the same. Retail gas prices tracked by AAA, on average, are up another 5% since that forecast was issued.

When shoppers shed masks earlier this year, Target got stuck with unsold TVs and small kitchen appliances. Now, it is cutting prices on those items – a move that makes it harder to offset higher transport and freight costs, analysts said.

Walmart is the nation’s biggest seller of groceries. That makes it easier to pass higher transport costs for fresh produce, meat and other food to consumers, Mushkin said. “People gotta eat,” he said.

(Reporting by Lisa Baertlein in Los Angeles and Siddharth Cavale in New York; Additional reporting by Tina Bellon in Austin, Tex.; Editing by Kevin Krolicki and Matthew Lewis)

By Ezgi Erkoyun and Nevzat Devranoglu

ISTANBUL – Turkey’s annual inflation rate jumped to a 24-year high of 73.5% in May, fuelled by the war in Ukraine, rising energy prices and a tumbling lira — though the figure was slightly lower than economists had feared.

Inflation has surged since last autumn, when the lira slumped after the central bank launched a 500 basis-point easing cycle sought by President Tayyip Erdogan.

The latest figure surpassed the 73.2% touched in 2002 and is the highest since October 1998, when annual inflation was 76.6% and Turkey was battling to end a decade of chronically high inflation. Nevertheless, the consensus forecast was for annual inflation to rise to 76.55%.

Month-on-month consumer prices rose 2.98%, the Turkish Statistical Institute (TUIK) said on Friday, compared to a Reuters poll forecast of 4.8%.

Transport and food costs have soared by 108% and 92% respectively over the last year, reflecting a deepening economic crisis for Turks struggling to afford basic goods. The domestic producer price index climbed 8.76% month-on-month in May for an annual rise of 132.16%.

GRAPHIC: Turkey’s inflation jumps to highest since 1998 (https://graphics.reuters.com/TURKEY-ECONOMY/INFLATION/gdvzyeezkpw/chart.png)

SINGLE DIGITS?

The lira weakened 0.25% to 16.5050 against the dollar touching its weakest since December. The local currency tumbled 44% in 2021 and another 20% this year.

Despite the highest annual rate in Erdogan’s two decades in power, Finance Minister Nureddin Nebati said on Twitter monthly inflation readings are trending lower in a positive sign.

Nebati has previously said inflation will fall to single digits in time for next year’s election under an economic programme that prioritises low interest rates, high production and exports, and a current account surplus.

However the trade deficit widened 157% year-on-year in May to $10.7 billion, mainly due to energy imports. The central bank forecasts single digit inflation by end-2024.

Economists see inflation remaining high for the rest of 2022 and ending the year at 63%, based on a median estimate, up from 52% in last month’s poll.

“It is not possible for Turkey, which has gone beyond the rules of the economic doctrine, to solve its key problem of high inflation with its current policies,” said economist Arda Tunca, a columnist at PolitikYol.

DATA CREDIBILITY

Opposition lawmakers and economists have questioned the reliability of TUIK’s figures, claims TUIK has dismissed. Polls show Turks believe inflation is far higher than official data.

In a surprise, TUIK said it stopped publishing average prices of individual items in the inflation basket, which had been listed in a monthly table since 2003.

The institute said it will publish an index table showing changes in item groups, as part of Eurostat compliance.

“Establishing TUIK’s structure independent from government is as important as the central bank’s independence,” said Mahfi Egilmez, another Turkey-based economist said on Twitter. “Accurate and reliable data production is the first and foremost prerequisite to implementing correct policies.”

(Additional reporting by Halilcan Soran and Berna Suleymanoglu; Editing by Christina Fincher and Jonathan Spicer)

SYDNEY – Elon Musk got into a Twitter spat with Australia’s third-richest man on Friday over the value of putting an end to the pandemic-era habit of remote working.

In an internal email this week, the Tesla Inc chief executive said “everyone at Tesla is required to spend a minimum of 40 hours in the office per week”, and “if you don’t show up, we will assume you have resigned”. That drew criticism from worker advocates about potential exposure to the coronavirus.

The co-founder of Australian project management software maker Atlassian Plc, Scott Farquhar, ridiculed the directive in a series of tweets as being “like something out of the 1950s”. The U.S.-listed company’s “work from anywhere” policy was “key for our continued growth”, he said.

“We’re setting our sights on growing Atlassian to 25K employees by FY26,” Farquhar concluded. “Any Tesla employees interested?”

Musk shot back: “The above set of tweets illustrate why recessions serve a vital economic cleansing function”.

The exchange is not unusual for Musk, who frequently uses Twitter to make unapologetic pronouncements about sensitive subjects.

In Silicon Valley, many tech firms moved to mixed home and office working during the pandemic, while others have set dates for returning to the office only to push them back as new outbreaks have occurred.

Musk, the world’s wealthiest man and also CEO of SpaceX, also has a record of taking on other billionaires. In 2021, he posted an image of a second-place medal in response to a tweet by Jeff Bezos celebrating the success of Amazon.com Inc.

In 2017, Farquhar’s Atlassian co-founder, Mike Cannon-Brookes, cooperated with Musk, publicly taking up and facilitating his offer to supply a powerful Tesla battery installation for the state of South Australia after it suffered a blackout in 2017.

Cannon-Brookes, who has since led a campaign to buy Australian energy company AGL Energy Ltd and speed up its transition to renewable power, reposted Farquhar’s remarks criticising Musk’s return-to-office order.

(This story corrects to change to ‘U.S.-listed’ from ‘London-listed’ in paragraph 3)

(Reporting by Byron Kaye; Editing by Bradley Perrett)

BERLIN -German exports rose more than forecast in April, as Europe’s biggest economy relied on trade with the United States and the euro area to recover from the initial impact of the war in Ukraine, government data showed on Friday.

Exports rose 4.4% from the previous month, the Federal Statistical Office said, almost three times the 1.5% increase predicted by economists in a Reuters poll.

In March, exports had fallen by 3%.

The boost for Germany’s export-driven economy came despite a collapse in trade with Russia over recent months due to severe sanctions imposed by the West in a bid to punish Moscow for its invasion of Ukraine.

Exports from Germany to Russia dropped 10% in April after plummeting 60% in March, the statistics office said.

Imports also increased more than expected in April, by 3.1%, following a 3.2% rise in March, the statistics office reported.

ING chief economist Carsten Brzeski called the April trade data a “pleasant surprise”.

“German exports have defied renewed supply chain disruptions and the economic impact of the war in Ukraine. At least for now,” he said.

However, the Chambers of Industry and Commerce (DIHK) warned that the upswing could be short-lived.

“The export engine is grinding tremendously,” said DIHK foreign trade chief Volker Treier, adding that the April growth was solely due to price increases in exports, which had actually fallen in real terms.

Supply-chain bottlenecks were yet to come – but with some delay – as a result of China’s weeks-long COVID lockdowns, Treier said.

The DIHK expects German exports to stagnate in 2022 on the whole.

(Reporting by Rachel More and Rene Wagner, Editing by Miranda Murray and Hugh Lawson)