The underlying strength of the economy will come into sharper focus Thursday morning, when the government reports the latest data on initial claims for unemployment insurance.
Although claims are down substantially from where they were in late March and April, when the coronavirus prompted widespread business shutdowns, they remain extraordinarily high by historical standards.
More than 833,000 people filed new claims for state unemployment benefits in the week ending Aug. 29, before seasonal adjustments, and a similar tally is expected in the latest report from the Labor Department.
“The signal is one of ongoing weakness,” said Rubeela Farooqi, chief U.S. economist for High Frequency Economics. “It’s been over four months since the economy started to reopen, and we’re still seeing a high pace of layoffs.”
On Wednesday, the Labor Department’s monthly report on job openings and labor turnover showed that openings continued to be dwarfed by the number of unemployed.
The August data on hiring and unemployment, announced last Friday, offered a mixed portrait. The unemployment rate fell to 8.4 percent last month and employers added 1.4 million positions, but the gains represented a slowdown in the recovery.
“I think most people have accepted that until we get a vaccine, we’re going to have an enormous hole in the labor market,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
The $600-a-week jobless benefit supplement that Congress approved in March as part of the CARES Act has been widely credited by economists with keeping the economy functioning through the coronavirus pandemic.
With the supplement, which ended in July, most unemployed workers got more than they had earned in wages; without it, they fell short of their previous income. So did the supplement simply provide a lifeline, or did it discourage people from taking jobs?
The answer has consequences for tens of millions of Americans, particularly those on the lower end of the income ladder; for businesses trying to restore their operations; and for an economy that largely depends on the lifeblood of consumer spending.
The relief is not only a matter of contention among business owners; it is also at the center of an acrimonious debate in Congress that has held up agreement on a new aid package.
With the supplement, nearly seven in 10 jobless workers got a bigger payment from the government than from their previous employer, according to one study. On its face, choosing to get more money and not work seems more appealing than settling for less and working.
That’s the way Carl Livesay, vice president for operations of Maryland Thermoform in Baltimore, sees it. Before the pandemic, the low unemployment rate made hiring a struggle, but now, even with high unemployment rates, he said, “it’s worse than it’s ever been.”
There are, of course, examples that tell a different story — millions of them. In May, June and July, more than 9.3 million workers returned to a job, forgoing the generous unemployment benefits.
One reason is that people generally look ahead. “The latest results show that Americans rationally understand the greater long-term security of returning to work rather than relying on ongoing government assistance,” said Sonal Desai, chief investment officer of Franklin Templeton Fixed Income.
Britain’s sparsely populated offices have put the economy in a quandary. The dry cleaners, coffee shops, lunch places and clothing retailers specializing in suits that serve areas packed with offices are starved of their customers.
In a country that relies on consumer spending to fuel economic growth, the government and business lobby are urging people to return to their offices, pressuring civil servants to set an example, and in turn spend more money on food and travel and in city center shops.
“The economy needs to have people back at work,” Dominic Raab, a government minister, said on Sunday.
But the companies charged with responding to this call have discovered that they can function productively with their staff working at home, and many are not in the mood to ask employees to risk getting on crowded trains or buses to return to the office.
The City of London, the financial and legal hub, was the destination for more than half a million daily commuters before the pandemic. At the start of the month, many of the lunch chains were still unlit and locked, and the train stations were significantly quieter — so were the pubs.
“The people are just not coming back,” said Robert Cane, who has worked at a dry cleaners and shoe repair business in the City for the past six years.
Catherine McGuinness, policy chair at the City of London Corporation, the district’s governing body, said that she was “very concerned” about the lack of foot traffic for the small businesses dependent on office workers, especially in the coming months as government support programs end. The corporation has offered rent holidays and business advice, but “it’s just a conundrum” for those businesses, Ms. McGuinness said.
“I do think there is a major challenge looming about unemployment rates and insolvency rates,” she said.
Stocks slipped in Europe on Thursday, as investors awaited the outcome of a European Central Bank meeting and the latest tally of claims for jobless benefits in the United States. Futures on Wall Street suggested a drop when trading begins there.
Major European indexes were lower, led by the FTSE 100 in Britain, which lost 0.6 percent. Asian stocks had a mixed day, with the Nikkei in Japan gaining 0.9 percent while the Shanghai Composite in China shed 0.6 percent.
The price of a U.S. 10-year Treasury note rose, while oil futures lost ground. Gold was flat.
Later on Thursday, a fresh reading on the state of the U.S. economy will be provided when the government reports the latest data on initial claims for unemployment insurance. The number of claims has come down substantially from late March and April, but the figure remains extraordinarily high by historical standards.
Last week, the government reported that more than 833,000 people had filed new claims for state unemployment benefits, before seasonal adjustments, and a similar tally is expected in the latest statistics from the Labor Department.
After that, policymakers at the European Central Bank will conclude their monthly two-day meeting, and the topic of the surging euro is expected to be discussed. When the euro rises in value — it has gained 10 percent against the dollar since March — it makes European exports more expensive, dampening economic growth. It also contributes to deflation because imported goods are cheaper, which can also weaken an economy. But the E.C.B. has limited tools available to solve the problem; interest rates are already incredibly low.
On Wednesday, stocks on Wall Street rebounded from a three-day rout that had pulled the S&P 500 down 7 percent from its record high, with the index gaining more than 2 percent, its biggest single-day jump since early June. The tech-heavy Nasdaq composite — which had dropped 10 percent over just three days — rose 2.7 percent.
BP said Thursday that it would pay $1.1 billion to Equinor for 50 percent stakes in leases for offshore wind sites that the Norwegian company holds off the coast of Long Island and New England. BP said that the areas have the potential to generate power for more than 2 million homes once developed. The London-based company is expected to outline further details of a push into low carbon energy next week.
J.C. Penney reached an agreement on Wednesday to sell its retail business to the mall operators Simon Property Group and Brookfield Property Partners, averting a liquidation that would have represented a significant failure in the retail industry. Simon and Brookfield will pay about $300 million in cash and assume $500 million in debt to buy J.C. Penney, lawyers for J.C. Penney said at a bankruptcy court hearing on Wednesday. A certain portion of the company’s stores and distribution centers will become two separate property companies, according to the hearing. In all, the deal values J.C. Penney at $1.75 billion, including the funds committed to support its business after it emerges from bankruptcy.
Some of Europe’s largest airlines have announced new cuts to their flying schedules.
After nearly all their planes were grounded in the early days of the pandemic, the airlines tentatively rebuilt their services in the summer as travel restrictions loosened in Europe to allow for vacations. But passenger demand has now fallen again in response to changing quarantine restrictions, as coronavirus cases rise in Britain and continental Europe.
IAG, the parent company of British Airways and Iberia, said on Thursday that it had seen “an overall leveling off of bookings” since July and expected to fly even less for the rest of this year and next year than it had previously forecast.
On Tuesday, easyJet said it would cut flights because “the constantly evolving government restrictions across Europe and quarantine measures in the U.K.” had eroded the confidence of customers to make travel plans. On Wednesday, Ryanair cut its target for passenger numbers by another 10 million for the fiscal year to March.
In Britain, airlines and airports have urged the government to adopt in-airport testing as a way to limit two-week quarantines for passengers returning from overseas. The list of countries exempt from quarantine rules keeps changing, and this week travelers returning from seven Greek islands were told they would need to quarantine. The government has responded that it doesn’t believe testing in airports will be effective at catching most positive cases, especially people recently infected on their journeys.
The latest reductions in flights signal how far away the airline industry is from recovering from the pandemic. IAG said it doesn’t expect passenger demand to return to 2019 levels until 2023 at the earliest. The airline group published details of its plan to raise 2.7 billion euros ($3.2 billion) by selling new shares to existing shareholders as a new chief executive took over this week.
The New York Times
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