US job numbers show strong growth

3 February 2012 Last updated at 21:45 GMT President Obama: "The economy is growing stronger and the recovery is speeding up"

The US economy created 243,000 jobs in January, the highest total for nine months, official figures show.

The rise was much more than expected. Analysts had forecast an increase of about 150,000 jobs.

The unemployment rate dropped to 8.3%, which was the lowest rate in nearly three years, and down from a revised rate of 8.5% in December.

News of the jobs growth caused shares to rocket up, with the Dow Jones index up 156 points at 12,862, its highest level since May 2008.

The Nasdaq index, which specialises in technology companies, soared to its highest level since December 2000 by the close of trading on Friday.

In Europe, the FTSE 100 index hit its highest level since July 2011 rising 1.8% while Germany's Dax closed up 1.6%. The Cac 40 in France was 1.5% higher.

Employment boost

However, a report on Wednesday by the US Congressional Budget Office, a federal agency, forecast that unemployment would climb to nearly 9% in the last three months of this year and peak at 9.2% early next year.

Friday's data from the Labor Department showed job growth had been widespread, with large gains in business services, leisure and hospitality, and manufacturing.

Leisure and hospitality, which includes restaurants and hotels, added 44,000 jobs.

Retailers added nearly 11,000 jobs, and professional and business services, which includes higher paying jobs in accounting, architecture and engineering, gained 70,000 - the most in 10 months.

Continue reading the main story Paul Adams BBC News, Washington

As always, the numbers are complex. But it's hard not to see this as good news - for the economy and Barack Obama's re-election chances.

The figures don't take account of those who are no longer looking for work. And the Congressional Budget Office has warned that the rate of unemployment may creep back up during 2012, that growth will be sluggish and that trillion dollar deficits aren't about to disappear.

But you can't argue with a quarter million new jobs, or with an unemployment rate that is dropping. Right now, it's back where it was when Barack Obama took office three years ago.

How does this translate politically? If this pattern continues, it's hard to see how he isn't heading for a second term. The Republican message, for now, is "the recovery could have been so much swifter without this president". That is a much harder message to sell than what is actually happening.

Obama's challenge now is to turn raw data into a general belief that things are getting better.

Factories added 50,000 workers, much more than expected and a one-year high.

Retailers added 10,500 workers and construction employment rose by 21,000. Analysts believe the figure was helped by a mild US winter, which boosted employment in those sectors.

The report was also buoyed by revisions to November and December data, which showed 60,000 more jobs created across the two months than previously reported.

Upbeat data

Lindsey Piegza, economist at FTN Financial, said: "It was a better-than-expected report, the strongest report that we've seen in quite some time.

"The big question is whether the reason we're seeing the unemployment rate drop is because more and more people are dropping out of the labour force.

"I know the market wants to rally on this number but remember we need a minimum of 250,000 just to cover demographic change."

The figures add to a range of data pointing to a gradual US economic recovery.

On Friday, the US Institute for Supply Management said its services index rose to 56.8 last month from a revised 53.0 in December. It was the highest level since February 2011.

The new orders index climbed to 59.4 from 54.6 while employment in the vast services sector was also strong, rising to the highest level in six years at 57.4 from 49.8.

Last week, it was announced that the US economy expanded at a 2.8% annual pace in the October-December quarter, a full percentage point higher than in the previous quarter.

Earlier this week, a survey from the Institute for Supply Management (ISM) indicated that the US manufacturing sector expanded at its fastest pace in seven months in January.

Unemployment and economic recovery has been a dominant issue in the campaign for November's US presidential elections.

Although the downward trend in joblessness augurs well for Barack Obama's prospects of a second term, he is still likely to face more voters out of work than any post-war president.

When Ronald Reagan won re-election in a landslide victory in 1984, joblessness in the US stood at 7.5%.

In 1932, in the midst of the Great Depression, Herbert Hoover was voted out of office in a year when unemployment was at 23.6%.

His successor, Franklin Roosevelt, faced joblessness rates of 16.9% in 1936 and 14.6% when he was re-elected four years later, according to data from the US Bureau of Labor Statistics.

RBS boss calls for pay correction

3 February 2012 Last updated at 12:40 GMT Sir Philip Hampton, chairman of RBS: Mr Hester "entitled" to bonus

The chairman of the 82% taxpayer owned Royal Bank of Scotland (RBS6) has said banker pay has been "high for too long" and needs to be "corrected".

Sir Philip Hampton defended his decision to award a bonus to chief executive Stephen Hester.

Speaking to the BBC he said the board "underestimated" the public reaction that later caused Mr Hester to turn down his bonus.

RBS needed to be run by the "best people" on "competitive" pay, he said.

"Stephen Hester has one of the most challenging and demanding jobs, I think literally, in world business," said Sir Philip.

But he said the public hostility to bonuses had prompted the board to think again about how they provided staff with incentives.

"We are a commercial organisation competing in extremely competitive markets, I think its highly unlikely that we'll have the best possible people to do that if we don't pay appropriate amounts," he said.

"Now the amounts are high by absolute standards but by relative standards what Stephen Hester is getting is not high at all, in fact its quite low."

'Dislocation'

However, Sir Philip accepted that pay needed to come down in the industry as a whole.

"Essentially, particularly in the banks, particularly in the investment banks, shareholders have done pretty badly and employees have done pretty well. That needs to be corrected," he said.

Continue reading the main story

Bankers have made personal fortunes over the past decade, while anyone unfortunate enough to own shares in their institutions has been consigned to near penury.”

End Quote Robert Peston Business editor, BBC News Sir Philip said business people in general were "very aware" of the politics surrounding pay and of a "dislocation" between top business people and ordinary people.

He said elements of campaigns against inequality were "perfectly reasonable."

"Where I have more reservations is where the debate becomes hysterical rather than analytical or reasonable and I think we saw something of a witch hunt, something of a mob mentality around an issue," he said.

Social responsibility

Sir Philip's comments came as the Labour leader, Ed Miliband, called for a culture of "one nation banking" in which financial institutions are not "isolated" from the rest of society.

Mr Miliband had called for the government to block the bonus to Mr Hester and will press for a vote on bonuses in parliament next week.

Other top bankers have also warned about pay.

On Thursday, the chief executive of Deutsche Bank warned of a "social time bomb" from rising wealth and income inequality.

He suggested top earners have a "social responsibility" towards philanthropy.

1.1 million face £100 tax fines

3 February 2012 Last updated at 13:44 GMT The deadline for the return of self-assessment details was delayed owing to industrial action Just over one million taxpayers face a penalty of £100 for failing to submit their self-assessment tax returns on time.

The figure of 1.1 million is the lowest since online filing first started, and compares with 1.4 million last year and 1.6 million the year before.

HM Revenue and Customs allowed an extra two days' grace beyond the normal 31 January deadline due to strike action.

However, 1.1 million people failed to file by the end of 2 February.

They will have to pay the £100 fine unless they have a reasonable excuse.

Valid reasons include serious illness, a bereavement, or a loss of documents because of theft, fire or flood.

After three months, additional fines of £10 a day start to accrue and could eventually amount to a maximum of £1,600.

Record numbers

Self-assessment tax forms have to be filled in by people with more complicated tax affairs or more than one source of income, for instance the self-employed or those with a high income from savings.

The latest forms were for the tax year which ended in April 2011 and altogether a record 9.45 million forms were submitted on time.

About 1.8 million had come in on paper by the paper deadline of 31 October 2011.

A further 7.65 million were submitted online - another record.

The public sector union, the PCS, held industrial action at call centres and inquiry offices to protest against the appointment of private companies to run call-handling trials in two contact centres.

This led to the self-assessment deadline being extended.

David Gauke, Exchequer Secretary to the Treasury, said: "I'm delighted so many people filed their tax returns online this year. The record number proves that it's quick, easy and secure to do."

"HMRC have always been clear that they want returns not penalties, so it is good news that over 90% of all returns were submitted on time," he added.

New punishment

In previous years a fine for late filing, or for failing to pay any tax due, could not in fact be applied if the size of the fine was larger than the amount of tax owed.

So in practice some late-payers escaped punishment because they had little or no tax to hand over.

HMRC has become increasingly fed up with this hard core of persistent late-payers, hence last year's change to the rules - which has come into effect for the first time this year.

The £100 fine will now be levied automatically, unless the taxpayer can come up with a reasonable excuse.

MPC member attacks lending cuts

2 February 2012 Last updated at 11:58 GMT Mr Posen called for new ways to provide funding for small and medium-sized businesses Bank of England Monetary Policy Committee member Adam Posen has criticised banks for not lending enough to small and medium-sized businesses.

Mr Posen told the BBC banks had overreacted and said the need to increase capital reserves was not a reason to stop lending.

He questioned if bankers were "reluctant, risk-averse jerks", or if there was a more fundamental problem.

He also dismissed banks' defence that there was little demand for new loans.

'Excuse'

Speaking on BBC Radio 5live's Wake up to Money, Mr Posen said the cut back in lending to small and medium-sized businesses had been "enormous".

He said banks had taken the "wrong risks" prior to the 2008 credit crunch.

"Now they've overreacted, not just in the UK but worldwide, and they've cut back on all kinds of lending that could be productive," he said.

"Regulators said they want capital buffers to go up, but they don't have to up immediately, so that's partly an excuse [for banks not to lend].

"When banks say it's all about no demand [for loans], that's crazy. Fees, prices and spreads on loans going to small businesses are going up, and normally prices don't go up when demand is falling."

He added that banks were choosing to roll over loans to big businesses rather than make new loans to smaller firms.

Alternative funding

Mr Posen said the problem was particularly acute in the UK due to the lack of alternative funding for small businesses.

He said he was in favour of other mechanisms that would allow investors and savers to lend money direct to businesses.

If there were enough, he said, the loans could then be packaged together to offer an attractive return to investors.

"We need to think of ways of pooling lots of business loans so they become a fit investment for big investors.

"These would need to be very vanilla, so everyone knows what's in them."

He said there were such schemes but there needed to be more, as there are in the US and France.

Falling inflation

Mr Posen also dismissed some criticisms of the Bank's programme of quantitative easing (QE), whereby it creates money to buy assets.

Some commentators have said it creates inflationary pressure in the economy, while the money created sits on banks' balance sheets and does not filter through into the real economy.

"QE is not about inflation - if it was, inflation would continue to rise, but instead we're seeing it fall and it's going to keep falling all year," Mr Posen said.

He also rejected the idea that banks simply sit on the cash.

"We buy directly from big investors like the pension funds and they invest it in the real economy."

He did, however, concede that "in the UK we don't have the structures to disperse the money into the real economy".

But he said "things would have been much worse without QE".