Federal Reserve: US Households, Businesses See Good Times Ahead

Households are feeling more stable, small businesses are making money and many expect to expand and hire in the coming year, signs of continued optimism in two key parts of the economy, the Federal Reserve reported Tuesday in a pair of annual surveys.

Among more than 8,000 small businesses and more than 12,000 households covered in separate surveys late last year by the Fed and its 12 regional banks, the message was similar: economic conditions have been getting better and the expectation is for the good times to continue.

“We see a decided uptick” in the economic and credit conditions faced by small businesses, said one Fed official involved in the small business survey. “We are seeing improved business confidence and improved business performance,” with profitability and access to finance increasing in 2017, more than 70 percent of firms expecting revenue growth next year, and 48 percent expecting to add employees.

Among households, 74 percent of U.S. adults said they were financially comfortable or at least okay in 2017, four percentage points higher than in 2016 and 10 percentage points higher than the first survey year of 2013. Improvement was strongest in lower income households. The percentage of households that reported they were struggling financially fell to 7 percent from 9 percent last year.

The results from the surveys show that improvements in household and business conditions that took root under President Obama continued through the first year of the Trump administration.

Both findings are potentially significant for the economy’s future performance. Businesses with fewer than 500 employees generate perhaps 60 percent of new jobs, the New York Fed estimated in material released with the small business survey, and many report plans to expand in 2018.

Consumer spending, meanwhile, accounts for the bulk of U.S. gross domestic product, and strong household income growth in recent years has buoyed the economy overall.

“The mass of the consumer sector is in pretty good shape and that should continue,” Nathan Sheets, chief economist at PGIM Fixed Income said in an interview.

However, based on answers to a series of questions, about 2-in-5 adults faced what the Fed judged to be a “high likelihood of material hardship,” such as an inability to afford sufficient food, medical treatment, housing or utilities. About 4 in 10 said they could not meet an unexpected expense of $400 without carrying a credit card balance or borrowing from a friend.

Among the smallest firms, those with less than $100,000 in revenue, about 74 percent had trouble paying their bills, and a majority of those were either averse to borrowing or worried they would be turned down and so did not apply for credit.

But in overall the results for positive, said Fed officials.

Among firms that did apply for loans, for example, 46 percent received all they requested, compared to 40 percent last year. Nearly 60 percent wanted to use the money to expand. 



Advocacy Groups Want Facebook ‘Monopoly’ to End

Facebook CEO Mark Zuckerberg told EU lawmakers Tuesday that the social media network will always be in “an arms race” with those who want to spread fake news, but that the company will be working to stay ahead and protect the network’s users. The social media giant has been under scrutiny since April when it became known that the Cambridge Analytica company harvested information on Facebook users to help Donald Trump during his 2016 U.S. presidential campaign. VOA’s Zlatica Hoke reports.



Official: Trump Administration to Publish Proposed Rule Changes for Gun Exports

The Trump administration is preparing to publish on Thursday long-delayed proposed rule changes for the export of U.S. firearms, a State Department official said on Tuesday.

The rule changes would move the oversight of commercial firearm exports from the U.S. Department of State to the Department of Commerce.

The action is part of a broader Trump administration overhaul of weapons export policy that was announced in April.

Domestic gun sales drop

Timing for the formal publication of the rule change and the opening of the public comment period was unveiled by Mike Miller the acting secretary for the Directorate of Defense Trade Controls, the State Department’s body that currently oversees the bulk of commercial firearms transfers and other foreign military sales.

He was speaking at the Forum on the Arms Trade’s annual conference at the Stimson Center, a Washington think tank.

Reuters first reported on the proposed rule changes in September as the Trump administration was preparing to make it easier for American gun makers to sell small arms, including assault rifles and ammunition, to foreign buyers.

Domestic gun sales have fallen significantly after soaring under President Barack Obama, when gun enthusiasts stockpiled weapons and ammunition out of fear that the government would tighten gun laws.

A move by the Trump administration to make it simpler to sell small arms abroad may generate business for gun makers American Outdoor Brands and Sturm, Ruger & Company in an industry experiencing a deep sales slump since the election of President Donald Trump.

Remington recovers from bankruptcy

Remington, America’s oldest gun maker, filed for bankruptcy protection in March, weeks after a shooting at a high school in Parkland, Florida, killed 17 people and triggered intensified campaigns for gun control by activists. Remington emerged from bankruptcy last week.

The expected relaxing of rules could increase foreign gun sales by as much as 20 percent, the National Sports Shooting Foundation has estimated. As well as the industry’s big players, it may also help small gunsmiths and specialists who are currently required to pay an annual federal fee to export relatively minor amounts of products.



Amazon Is Warned About Government Use of Facial Recognition

U.S. civil liberties groups on Tuesday called on Amazon.com Inc. to stop offering facial recognition services to governments, warning that the software

could be used to target immigrants and people of color unfairly.

More than 40 groups sent a letter to Amazon Chief Executive Officer Jeff Bezos saying technology from the company’s cloud computing unit was ripe for abuse. The letter underscores how new tools for identifying and tracking people could be used to empower surveillance states.

Amazon has marketed a range of uses for its Rekognition service, unveiled in late 2016. These include detecting offensive content, identifying celebrities and securing public safety.

In a blog post last year, Amazon said a new feature let customers “identify people of interest against a collection of millions of faces in near real-time, enabling use cases such as timely and accurate crime prevention.”

Customers provide the data for Amazon’s tool to search.

“Seconds saved in the field can make the difference in saving a life,” Chris Adzima, an analyst in the Washington County Sheriff’s Office in Oregon, said in the blog post.

Freedom from being watched

But rights groups say the powerful tool raises concerns.

“People should be free to walk down the street without being watched by the government,” said the letter to Bezos. “Facial recognition in American communities threatens this freedom. In overpoliced communities of color, it could effectively eliminate it.”

Amazon has helped various U.S. jurisdictions use Rekognition, said the letter, citing public records obtained by affiliates of the American Civil Liberties Union.

In Oregon, law enforcement uploaded 300,000 mug shots dating to 2001 into Amazon’s cloud and indexed them in Rekognition, according to another Amazon blog post.

Rekognition identified four faces with more than 80 percent similarity to an image of an unidentified hardware store thief; a Facebook search subsequently helped with the case, the post said.

The City of Orlando Police Department has also used Rekognition, according to Amazon’s website.

In a statement, Amazon Web Services said, “Our quality of life would be much worse today if we outlawed new technology because some people could choose to abuse the technology.”

Amazon requires customers to abide by the law and be responsible when using Rekognition, it added.

The world’s largest online retailer is not alone: Microsoft Corp and Alphabet Inc.’s Google offer recognition services as well.

Identifying faces has become a common feature in consumer products from Apple Inc. and Facebook Inc.



Facebook’s Zuckerberg Apologizes to EU Lawmakers

Facebook Chief Executive Mark Zuckerberg apologized to EU lawmakers on Tuesday, saying the company had not done enough to prevent misuse of the social network and that regulation is “important and inevitable.”

Meeting the leaders of the European Parliament, Zuckerberg stressed the importance of Europeans to Facebook and said he was sorry for not doing enough to prevent abuse of the platform.

“We didn’t take a broad enough view of our responsibility. That was a mistake and I am sorry for it,” Zuckerberg said in his opening remarks.

In response to questions about whether Facebook ought to be broken up, Zuckerberg said the question was not whether there should be regulation but what kind of regulation there should be.

“Some sort of regulation is important and inevitable,” he said.

He declined to answer when leading lawmakers asked him again as the session concluded whether there was any cross use of data between Facebook and subsidiaries like WhatsApp or on whether he would give an undertaking to let users block targeting adverts.

Facebook has been embroiled in a data scandal after it emerged that the personal data of 87 million users were improperly accessed by a political consultancy.



US, China Near Rescue Deal for Chinese Telecom Firm ZTE

U.S. President Donald Trump said Tuesday “there is no deal” yet to lift the seven-year ban on the sale of American-made components to the giant Chinese telecommunications company ZTE, but that there might be a settlement as part of ongoing trade talks between the world’s two biggest economies.

Trump told reporters at the White House that he could envision a $1.3 billion fine against ZTE for violating the U.S. ban on trading with Iran and North Korea, the replacement of ZTE’s management and board of directors and imposition of “very, very strict security” to prevent the theft of U.S. intellectual and national security secrets.

“We caught them doing bad things,” he said.

Trump said Chinese President Xi Jinping asked him to look into the fate of ZTE after the firm said it had to shut its production because the U.S. banned sale of American-made components ZTE uses to manufacture an array of technology products until 2025. Trump said he also heard protests from the U.S. companies selling goods to ZTE.

Trump declared he was “not satisfied” with the state of U.S.-China trade talks after last week’s negotiations in Washington. China agreed to “substantially reduce” the $375 billion annual trade surplus it has over the U.S. by buying more American goods, but there was no mention of any specific import and export targets in the statement agreed to by the two countries.

U.S. Commerce Secretary Wilbur Ross is headed to China next week for further trade talks.

Trump commented on the ZTE case as U.S. news accounts quoted officials as saying a deal was near.

His suggestion of a $1.3 billion fine was slightly more than the $1.2 billion penalty the U.S. imposed last year on ZTE after uncovering its trade ban violations.

On Sunday, White House economic adviser Larry Kudlow said, “Do not expect ZTE to get off scot-free. Ain’t going to happen.”

Congressional opposition

But some U.S. lawmakers voiced opposition to settling the case.

U.S. Sen. Marco Rubio, who lost the 2016 Republican presidential nomination to Trump, contended that Washington had “surrendered” to Beijing. The Florida lawmaker said he would try to block it.

“Making changes to their board and a fine won’t stop them from spying and stealing from us. But this is too important to be over. We will begin working on veto-proof congressional action,” Rubio said on Twitter.

Senate Democratic Leader Charles Schumer said, “The proposed solution is like a wet noodle,” contending ZTE’s technology devices threaten to steal U.S. national security secrets.

Rescuing ZTE

Trump last week called for rescuing ZTE “to get back into business, fast.” He said “too many jobs in China” were being lost after the U.S. banned the sales of American-made components to ZTE. The U.S. leader said, “Commerce Department has been instructed to get it done!”

While some U.S. officials said the penalties against ZTE — the fine and the ban on sale of U.S. components until 2025 — were a law enforcement action, Trump linked the issue to ongoing trade and tariff disputes with China. The two countries over the weekend called off the threat of imposing higher tariffs on billions of dollars of each other’s exports while their negotiations continue.

Meanwhile, China announced Tuesday that on July 1 it will cut tariffs on most imported cars from 25 percent to 15 percent, still well above the 2.5 percent levy the U.S. imposes on cars imported from overseas.

The announcement by China’s finance ministry follows a pledge by Xi last month to lower the import duties and to ease foreign ownership restrictions for the Chinese auto industry.

Trump repeatedly has mentioned the 25 percent automobile tariff as a key trade barrier between the two countries.

On Monday, Trump said new trade between China and the U.S. will especially benefit U.S. farmers.

“Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce,” he said on Twitter.