The way we work

New data that showed the US economy added 288,000 jobs in June, substantially higher than the 215,000 consensus economists had predicted, helped push the Dow Jones Industrial Average above 17,000 for the first time.
But this news was not unanimously greeted by cheers all round. Some commentators question the long term viability of increasing the number of people working part-time. These include Federal Reserve Chair Janet Yellen, who said in April “data suggest that there may be more slack in labor markets than indicated by the unemployment rate. For example, the share of the workforce that is working part-time but would prefer to work full-time remains quite high by historical standards”. It should be noted that we saw exactly the same pattern of part-time employment growth after the US exited the minor recession in 2001/02 post the dot-com bubble and 9/11.

There have also been concerns raised about the similar situation in the UK. However, a deeper dive into the detailed data provided by the Office for National Statistics (ONS) for January-April 2014 paints a different picture. While the number of people working part-time has grown, it is slower than growth in full-time employment. More tellingly, those saying they are working part-time because they cannot find a full-time position has fallen compared to a year earlier, whilst those who choose to do so has risen.

This trend is likely to continue as the ONS allows respondents to determine their part-time status. The new rules introduced to allow all workers to ask for more flexible working hours will most likely see a rise in those working three or four days a week.

This is not in itself a cause for concern and should indeed be celebrated. Research by Alison Maitland and Peter Thomson in their book Future Work, highlight the positive benefits of flexible working. The fixed long hours culture of yesteryear has been supplanted by a more flexible approach and it is the companies and economies that best adapt to the new way of working that will succeed in the future.

Anglo-Saxon Chronicles
The newly released Markit PMI data showing the UK outstripping Eurozone economies should come as no surprise. What is still quite startling is how strongly this trend is forecast to continue. For the second quarter of 2014 the UK’s PMI growth of 0.8% should outstrip Germany’s 0.7% and the wider Eurozone’s 0.4%, according to Markit estimates.

And France’s economy is forecast to contract, falling 0.1% in the second quarter. However, the US is expected to expand more quickly, growing by 1% as it recovers from the shock drop in the first quarter.

The brightest news for the UK was around manufacturing, of which Markit said “The level of incoming new business rose at the fastest pace since November 2013 and to one of the greatest extents since the survey began in 1992. The domestic market remained the prime source of new contract wins, although inflows of new export business also strengthened”.

With strong construction PMI figures and services still well above average things look good for the UK economy. Maybe it’s not all built on sand in the Greater London area.

Trading Nations

I’ll have a deeper dive into 1H14 M&A next week after all the froth about highest values since the last dealmaking boom has died down. One observation I will make is how dominant the US and UK are in terms of cross-border acquisitions.
In 2014 Dealogic data showed the US was most favoured target destination followed by the UK, ranked by total value. In terms of overseas investing it was US at number one and UK in at fourth, closely behind Canada and Switzerland.

However, it is when you look at the full Dealogic data history that you really see the dominance of the Anglo-Saxon model in this (since 1995 and excluding real estate asset transactions). Of all cross-border deals, a party from either the UK or US has been involved in half of all deals and are responsible for 64% of all value.

It is a combination of the flexible labour markets and openness to international trading that have contributed to the recent growth of both economies. With Oxford Economics forecasting stronger GDP growth, lower unemployment and substantially higher inward FDI out through 2023 for the UK and US, compared to Germany and France, the Anglo-Saxon economies are confirming their tendency to recover faster from downturns.

It’s a Krul World (Cup)

In a bold move that would have had Sulla smiling in admiration, the Dutch manager Louis van Gaal decided to substitute one keeper for another just seconds before the end of extra-time in the Netherlands-Costa Rica quarter final.

The fact that Jasper Cillessen had minutes before made a save to keep the game alive did not seem to deter Mr. van Gaal. “We all thought Tim Krul was the best keeper to stop penalties,” said Mr. van Gaal. “He is taller and has a longer reach. It worked out. That was beautiful. I’m a bit proud of that.”

The only thing stopping this being exemplary managerial tactics is that he did not tell Mr. Cillessen of his strategy beforehand. But as it all worked out we can forgive him that.
What this World Cup can also teach corporate executives is that everyone matters. With the keepers playing key roles in so many games (go Tim Howard!), with a record 29 goals being scored by substitutes, and with unfancied teams with a very strong group ethic over-achieving (USA, Costa Rica, Chile and Mexico) the lesson is clear.

In capital markets terms it is: be aware of your available resources, be prepared to alter your strategy when the circumstances change, and be ready to make bold decisions at the right time. Easy. I wonder if Mr. van Gaal has any views on unwinding QE.

My original prediction of an Argentina-Germany final, with the South Americans edging it, is still on track. Although with the Netherlands the only one of the last four yet to win the competition, one has to hold out some hope for them.


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