Outlook: US labour figures point to cocktail of problems

Tesco goes shopping; A word in your ...

As the incumbent, George Bush has so many in-built advantages over his main opponent for the US presidency, John Kerry, that it remains hard to believe he won't win come this November's presidential election. Yet despite a union of fiscal and monetary policy so lax that it's almost criminal, the economy remains strangely immune to his charms, and the odds are certainly rising that he'll repeat his father's great shame of failing to get re-elected.

According to figures released yesterday, US employers added a barely perceptible 21,000 workers to their payrolls last month, again confirming the jobless nature of the rebound in the US economy. Most Wall Street economists had been expecting employment gains of well in excess of 100,000. The latest numbers will be a profound disappointment to Mr Bush, who needs unemployment to be sharply falling by the early summer at the latest to underwrite his chances of a second term.

For his father, there must already be a strong sense of déjà vu. By the time of Bush senior's electoral defeat in November 1993, the economy was already recovering strongly, but it came too late to save him. It was the incoming president, Bill Clinton, who was left to enjoy the political benefits of the subsequent decade of economic growth.

So why is the US economic recovery proving so resistant to job creation? In part, it's because as in Britain the recovery is so far based more on high levels of public and consumer spending than business investment. But it's also because of the astonishing leaps in productivity that are being achieved by American industry - for which read firing people for no noticeable effect on output. American companies have found that they can function perfectly well on much smaller workforces than they've had in the past.

Add in the "offshoring" phenomenon, with jobs being shipped to cheap labour China and India, and all the ingredients are there for an extended jobless recovery. One of the worrying aspects of the latest numbers is that they almost certainly mean interest rates will continue at rock bottom levels right up until the time of the election.

I say worrying because the Federal Reserve has already quite plainly left rates too low for too long to deal with the nascent inflationary pressures that are starting to build in the US economy. The latest figures are bound to prompt a rethink in Federal Reserve plans to start tightening policy over the months ahead. Alan Greenspan, the chairman has made plain that rates will remain on hold until there are clear signs of an upturn in the labour markets.

The longer the Fed holds back, the greater the distance it will have to travel when eventually it does come to act. Whoever it is that occupies the Whitehouse a year from now may be facing a powerful cocktail of economic difficulties.

A word in your ...

So, Jeroen van der Veer, exactly why did the two boards of Shell suddenly reverse ferret and sack Sir Philip Watts and his head of oil exploration and production, Walter van de Vivjer? Oh, that's an easy one. It was because the board came to believe, based on the facts established by the audit committee, that a change of leadership was required.

OK, so what were the facts? I know this one too, because the lawyers have already told me what I can say. The investigation into the downgrading of oil reserves is still ongoing, and we'll need to discuss its outcome first with the US Securities and Exchange Commission, before publishing it.

Has anything untoward been discovered in the way the reserving issue was handled? Was there any deliberate misrepresentation? Again that can only be answered by the audit committee's investigation, which is not yet complete. Sir Phil Watts and Mr van de Vivjer resigned because they had lost the confidence of the board.

Why did they lose the confidence of the board? That will be answered by the special investigation of the audit commission. Will you rule out illegal behaviour? I know why you are asking these questions but it is because Phil lost the confidence of the board.

It didn't matter how many times or in how many different ways the new Shell chairman was asked the question yesterday, he refused to spell out precisely why Sir Phil had been asked to leave. Nor would he specifically deny that there had been bad faith in the way the company's reserving policies were handled. Whether we should read anything into that refusal is anyone's guess, but it certainly doesn't look good for the former chairman.

Ever since the reserving fiasco came to light two months ago, a key question has been whether it was cock-up, negligence or deliberate misrepresentation that had led to the overstatement of reserves. A particular area of concern was the Gorgon field in Australia, which Shell booked as proven reserves even though other partners in the same project chose not to. More puzzling still, the find was categorised in the accounts merely as a revision to reserves, rather than a new discovery, which meant it was impossible to tell that Shell was booking reserves that others weren't. Was this deliberate, or just a mistake?

We need to know. Regrettably, the new chairman either couldn't or wouldn't provide answers, though, to be fair, he did promise that eventually he will. And that was the way of his first press conference generally, I'm afraid. Mr van der Veer was put on show more for the purpose of demonstrating that he was there and listening than to address the serious questions that have been raised over the way Shell is managed. He even found it within himself to thank Sir Phil for the contribution he had made to the company over the years, a tribute that was entirely absent from the deadpan press release that announced Sir Phil's removal earlier this week.

But even as an act of goodwill, Mr van der Veer's appearance was a pretty poor show. On calls for a unified board, Mr van der Veer would say only that he was still in listening mode. He thought a natural catalyst for change would be new corporate governance rules that the Dutch government plans to introduce in April next year, which seems an awfully long time off for a company that is in a state of crisis. Mr van der Veer needs to wake up and smell the coffee, or he too may be following Sir Phil overboard.

Tesco goes shopping

Tesco is a brilliantly run company, but that doesn't mean it should be allowed to do whatever it pleases. The Office of Fair Trading has made a mistake in allowing Tesco to acquire the London convenience store chain Adminstore without first having to go through a Competition Commission inquiry - only the latest, I regret to say, in a growing number of similar misjudgements.

To regard convenience stores as a market distinct from the general mass of grocery retailing, as the OFT appears to, defies common sense. As soon as Tesco gets its hands on Adminstore's 45 outlets it will convert them into the Tesco Express format, at which point they will become just another part of the buying power of the Tesco behemoth. Everyone else within walking distance of the new stores will be driven out of business, unable to compete with the prices. In the long term, consumer choice will be diminished.

By all means let Tesco continue to expand organically. In a free world, that's its right. But to allow a company with 27 per cent of the market to buy up rivals just to close them down? What kind of a competition policy is that? Under the recently enacted Enterprise Act, the OFT was given the power to make its own decisions on mergers, free from political interference. It doesn't yet appear ready for such responsibility.