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New claims for state unemployment insurance fell last week, but layoffs continue to come at an extraordinarily high level by historical standards.
Initial claims for state benefits totaled 790,000 before adjusting for seasonal factors, the Labor Department reported Thursday. The weekly tally, down from 866,000 the previous week, is roughly four times what it was before the coronavirus pandemic shut down many businesses in March.
On a seasonally adjusted basis, the total was 860,000, down from 893,000 the previous week.
“It’s not a pretty picture,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “We’ve got a long way to go, and there’s still a risk of a double-dip recession.”
The situation has been compounded by the failure of Congress to agree on new federal aid to the jobless.
A $600 weekly supplement established in March that had kept many families afloat expired at the end of July. The makeshift replacement mandated by President Trump last month has encountered processing delays in some states and has funds for only a few weeks.
“The labor market continues to heal from the viral recession, but unemployment remains extremely elevated and will remain a problem for at least a couple of years,” said Gus Faucher, chief economist at PNC Financial Services. “Initial claims have been roughly flat since early August, suggesting that the pace of improvement in layoffs is slowing.”
New claims for Pandemic Unemployment Assistance, an emergency federal program for freelance workers, independent contractors and others not eligible for regular unemployment benefits, totaled 659,000, the Labor Department reported.
Federal data suggests that the program now has more beneficiaries than regular unemployment insurance. But there is evidence that both overcounting and fraud may have contributed to a jump in claims.
Mary Costanzo was laid off as a bookkeeper at an accounting firm on March 27. She filed for unemployment benefits and started receiving $451 a week after taxes in Massachusetts benefits, plus a $600 federal supplement.
Her husband, who does shipping and receiving at a weather equipment company, held on to his job, bringing in $2,500 per month after taxes. But Ms. Costanzo, 57, had been earning more — $4,000 in take-home pay each month — and the family relied on her income for their largest bills, including monthly car payments of $368 and $280.
When the federal supplement ended, she didn’t have enough to cover September’s $2,262 mortgage payment on their four-bedroom colonial house in Burlington, northwest of Boston. Her husband pulled $6,000 out of his 401(k) savings to make the mortgage payment and to have money on hand for October and November in case Ms. Costanzo hasn’t found work by then.
This month, she stopped receiving the state benefits, too. The unemployment office told her that she needed to refile her claim. She did so, but no benefits have materialized.
Lost Wages Assistance, a short-term replacement supplement, produced a lump sum of $1,200 this week. She doesn’t know if she will receive any more from the program. She does know that if she doesn’t get a job soon, she and her husband will keep draining their retirement savings.
After months of fruitless searching, Ms. Costanzo had her first job interview this week. If she gets the job, she will start on Monday.
She will be relieved if she is hired, but she will also be concerned, because the job requires working in the office. She had wanted a job she could do remotely, because she fears bringing the coronavirus home to her sons, 27 and 31, who have cystic fibrosis and are prone to lung infections.
“At this point, I don’t have a choice,” she said. “I need to work to pay the mortgage.”
Marcos Quintana, 29, was laid off in December from his job as a seasonal custodian at a school in Bakersfield, Calif. He expected to find new work quickly, but the pandemic hit, and many custodial jobs dried up.
He started receiving $200 a week in state unemployment benefits, as well as a $600 boost from the federal government. When the $600 program expired in late July and his state unemployment benefits ran out, he was left with $230 a week from Pandemic Emergency Unemployment Compensation, a federal program for those whose state benefits have expired.
Mr. Quintana lived with his girlfriend, who lost her job as a hairstylist in March when salons closed. She filed for unemployment benefits but never received them, so Mr. Quintana supported them, paying the $935 in rent and as much as $300 in utilities for their apartment. To avoid falling behind on his $357 car payment and $185 car insurance bill, he cut off cable television and borrowed from his father.
Then Mr. Quintana found that he was eligible for Lost Wages Assistance, a short-term supplement that provides $300 a week from federal disaster funds. He was certified to receive the payments on Sept. 15, but he’s not sure when they will arrive.
Regardless, the money will be too late to avoid upheaval in Mr. Quintana’s life. His relationship with his girlfriend soured as the financial stress mounted. And Mr. Quintana couldn’t afford their bills.
So last week the couple split, and he moved in with his parents.
“It feel like a kid again,” he said. “Like I’ve taken two steps backward in life.”
When the federal government’s $600 weekly supplemental benefit for recipients of unemployment insurance expired at the end of July, ZipRecruiter, an online employment marketplace, expected a huge wave of searches to follow.
But it never materialized. “Job seeker numbers are pretty flat,” said Julia Pollak, labor economist at ZipRecruiter. “People still expect to get their old jobs back.”
Ms. Pollak said she was surprised because 36 percent of those surveyed in July by ZipRecruiter said they would spend more time searching for work if the $600 payments ended. Just over 40 percent said they would be willing to take a less appealing position.
Instead, people aren’t budging. “We see a level of stasis in the economy,” Ms. Pollak said. “The uncertainty causes people to sit and wait. The whole economy is in a bit of a freeze.”
In some cases, workers have dropped out of the labor market. Labor Department data showed that among female workers 25 to 54 years old, 125,000 left the work force in August.
“This is a situation where many people are choosing to delay re-entering the labor force or to withdraw,” Ms. Pollak said. “In some cases, it makes more sense for workers to wait for conditions to improve in their industry. It’s costly for people to switch.”
As regular unemployment benefits run out, Ms. Pollak and ZipRecruiter still expect a fresh wave of searchers by the end of the year. “There is some return to normal,” she said. “People don’t want to maintain a Covid-style lockdown forever.”
Shares in Snowflake, the data storage and analytics provider, are poised to fall in their second day of trading today. But they are still set to trade at more than double the price set for its stock-market debut on Wednesday, the latest sign of investors’ insatiable appetite for tech stocks, according to today’s DealBook newsletter.
After pricing its stock at $120 apiece in its initial public offering, Snowflake saw its shares open at $245 yesterday, climb to $319 and close at $254. That valued the company at more than $70 billion, which is about the same as Goldman Sachs. (Another tech company that went public yesterday, JFrog, saw its share price jump 50 percent from its I.P.O. level.)
Excitement for all things from Silicon Valley has powered a boom in tech investing, especially during the pandemic, which has made people more reliant on the internet for work and life. That means rapidly amassing wealth for executives like Snowflake’s chief executive, Frank Slootman, whose stake is now worth billions, as well as investors like Jack Dorsey of Twitter and Warren Buffett’s Berkshire Hathaway.
But that extreme performance also gives ammunition to critics of traditional I.P.O.s, where investment banks set a stock’s offering price, usually at a slight discount to draw in prospective investors. Some Silicon Valley figures have argued that such deals tend to shortchange companies going public: Bill Gurley, the venture capitalist, asserted yesterday that Snowflake’s stock “pop” shows how “broken” that process is. And the Zillow co-founder Spencer Rascoff tweeted:
I’m no math whiz, but if $SNOW sold 28 million shares at $120 per share in the IPO and it’s now at $275 a few minutes later, then they appear to have left $4.3 billion on the table in the IPO.
So on the one hand, congrats on the IPO. On the other hand, 🤦♂️
— Spencer Rascoff (@spencerrascoff) September 16, 2020
Analysts expect to see more companies explore going public by merging with blank-check funds, which are seemingly multiplying by the dozens, or by listing their shares directly onto public markets, as the data-mining consultancy Palantir is planning to do.
The Federal Reserve’s lending program for state and local governments has drawn scrutiny from a congressional commission tasked with overseeing it, with one Democrat-appointed member of the body calling the limited help states and municipalities are receiving “shameful.”
The so-called Municipal Liquidity Facility, which the Fed established with backing from a $454 billion pot that Congress gave to the Treasury Department to support such emergency programs, is meant to buy short-term securities that state and local governments use to finance themselves. The goal is to help those struggling to raise money at reasonable rates on private markets.
It is structured to be used only as a backup option, and as of the Fed’s last detailed report, only the state of Illinois and the Metropolitan Transportation Authority in New York had chosen to use it. The lack of use came under fire at the first oversight hearing focused on the municipal program, held Thursday.
One of the Fed’s corporate bond buying programs has been more active than the municipal facility, in part because the Fed has used it to proactively buy bonds, rather than waiting for borrowers to tap the program based on preset pricing rules.
“It’s a shameful disparity that reflects this administration’s priorities: taking care of big time executives and wealthy shareholders while abandoning emergency responders, teachers, firefighters, nurses, and all the people who count on their help,” Bharat Ramamurti, a Democrat-appointed commissioner, said at the hearing. “And it will further widen the racial income and wealth gaps in this country.”
A Republican member of the commission suggested that the program was no longer needed because credit was easily available.
“Liquidity in the municipal bond market has been restored, and as such, the MLF, in my view, should wind down,” Senator Patrick J. Toomey, Republican of Pennsylvania, said.
While the Fed — which tries to be independent of politics — administers emergency lending programs, the Treasury has control of the congressional funds that back up several of them. As a result, Treasury Secretary Steven Mnuchin has played a key role in determining credit risk and design in the individual programs.
The central bank itself sees many of its market-facing programs as backstops that should avoid crowding out private investors, and which can be successful even if they are lightly used.
“The MLF has contributed to a strong and rapid recovery in municipal securities markets,” Kent Hiteshew, a Fed official who has been instrumental in designing the program, said in remarks prepared for the hearing. “We are not aware of any cities or counties with populations below the MLF eligibility thresholds that are currently having difficulty accessing capital at affordable rates.”
Main Street businesses — especially music clubs, gyms, restaurants, bars and others that were forced to close by the coronavirus pandemic — are trying to figure out how, or if, they can dig out of debt.
Nearly 73,000 businesses have closed permanently since the pandemic took hold, according to an analysis by Yelp. And the fate of many that remain open increasingly hinges on their ability to renegotiate their leases.
“For 10 weeks, our revenue went to zero and stayed at zero,” said Rhonda Stark, the owner of three Orangetheory Fitness gyms in Ohio that were shut down from mid-March until late May. Ms. Stark’s collective rent bill, her largest fixed expense, tops $32,000 a month. She hasn’t paid it in full since March. Ms. Stark’s gyms have reopened at a reduced capacity, cutting her sales by about 30 percent. To stay open, she needs to strike new deals with her landlords.
Retail rent collections plunged in April to just 54 percent of the total owed, according to Datex Property Solutions, a software company that tracks data on thousands of its clients’ retail properties nationwide. By August, collections had rebounded to nearly 80 percent, but some tenants, like movie theaters, clothing retailers, hair salons and gyms, were much further behind.
“When tenants can’t pay the rent, it imperils landlords’ ability to pay their own overhead and their loans, and the whole thing cascades,” Mark Sigal, chief executive of Datex, said.
For both sides, it’s a complicated dance. Property owners have their own expenses to pay, including taxes, insurance, mortgage or debt payments, and maintenance bills. Buildings owned by real estate investment trusts or Wall Street bondholders have complex management structures and governing covenants that can limit the property manager’s ability to make a deal.
Stocks on Wall Street dropped sharply in early trading on Thursday, a decline led by technology stocks. It extends a slump that began the day before after the Federal Reserve said it would need to keep rates near zero for years to ensure an economic recovery, but noted that more immediate action needs to come from Washington.
The S&P 500 fell about 1 percent in early trading, though later clawed back some of those losses.
Large cap tech stocks, which have carried the market for much of its recovery since March, lagged on Thursday. The Nasdaq composite index slid 1.2 percent. Amazon fell more than 2 percent. Apple dropped more than 1.5 percent.
The retreat came even as new claims for unemployment benefits in the United States declined last week, government data showed. But at 860,000 on a seasonally adjusted basis, the reported number of claims was slightly higher than economists had expected.
“Market participants have seemingly refocused on the cautious characterization of the economic recovery by the Fed and repeated calls for fiscal stimulus, which, despite a burst of optimism yesterday, does not appear imminent,” wrote analysts with BMO Capital Markets, in a note to clients Thursday.
The Federal Reserve said Wednesday that the U.S. economy continued to show weakness, and that policymakers would keep interest rates very low through at least 2023. But, with interest rates already near zero, the central bank’s chief again said that the kind of direct spending that only Congress can authorize would be needed to help the economy continue its recovery.
“My sense is that more fiscal support is likely to be needed,” said the Fed chair, Jerome H. Powell. Lawmakers have been deadlocked for weeks on any new spending plans.
European indexes were broadly lower, with the FTSE 100 down less than half a percent and the Stoxx Europe 600 losing 0.7 percent. Automakers like Volkswagen and Renault dropped after industry data showed European new car sales down more than 17 percent in August compared to a year ago.
In Asia, nearly every index closed lower. Hong Kong’s Hang Seng lost 1.6 percent, and South Korea’s Kospi fell 1.2 percent.
Oil futures were down about 0.6 percent. Risk-aversion in the markets pushed up the price of U.S. Treasury’s 10-year notes, and gold was lower.
Delta Air Lines expanded a debt offering backed by its SkyMiles loyalty program to $9 billion on Thursday, a $2.5 billion increase over its original financing plans announced earlier in the week. Airlines have been racing to amass cash for what is expected to be a long and volatile travel recovery.
Registrations of new cars fell 19 percent in the European Union in August, a much steeper decline than in July when registrations fell 6 percent compared to a year earlier, the European Automobile Manufacturers Association said Thursday. The decline in car sales added to evidence that the economic rebound is losing steam. “Further recovery in the coming quarters will likely be rather sluggish,” the Kiel Institute, an economic research organization in Germany, said Thursday as it revised its forecasts for growth in the European economy downward.
Top Glove, the world’s largest medical glove manufacturer, on Thursday reported its best financial performance ever because of demand stemming from the pandemic. The Malaysia-based company said its net profit last quarter was 1.33 billion ringgit, or about $321 million, 18 times higher than the same quarter a year earlier. Rights activists have raised concerns about forced labor in Malaysia’s glove industry, which provides two-thirds of the global supply, leading U.S. Customs and Border Protection to impose an import ban on two of Top Glove’s subsidiaries in July. The company, which says it has begun reimbursing foreign workers for the fees they paid recruitment agencies, said on Thursday that it was “making good progress” in working with the U.S. authorities to lift the ban.
The pilots union at United Airlines has reached an agreement to avoid furloughs until next summer, sparing the jobs of thousands of pilots weeks before broad job cuts are slated to begin across the industry. The union, the United Master Executive Council, said the agreement, which has yet to be approved by its 13,000 members, would protect pilots from furloughs until June. It would also open a second round of early retirement offers and includes temporary work reductions that would be reversed automatically as the airline recovers.
Fastly is up more than 310 percent this year. Zscaler is up over 180 percent. Chegg and Veeva are up 75 percent and 90 percent. In a tech universe dominated by Apple, Amazon, Microsoft and Google, the share prices of little companies you’ve probably never heard of are soaring.
The coronavirus pandemic has accelerated trends that were building for years by forcing large swaths of the population to work from home and shop online. And many obscure companies are taking off, driven by investors who expect them to flourish in an economy whose future arrived ahead of schedule.
“When it comes to remote work in particular, the past 10 weeks have seen more changes than we’ve seen in the previous 20 years,” said Erik Brynjolfsson, an economist and the director of the Digital Economy Lab at Stanford University.
Surveys conducted by Mr. Brynjolfsson and economists at the Massachusetts Institute of Technology found that the share of Americans working from home jumped to about 50 percent this year, from around 15 percent before the pandemic.
The tech-heavy Nasdaq composite index is up roughly 60 percent since it bottomed out in late March, and much of those gains can be attributed to the shares of the tech behemoths. Investors have bet heavily that those companies’ dominant market positions will only improve in the pandemic and its aftermath.
But the trajectory of smaller technology stocks has been even more remarkable. Zoom — the suddenly ubiquitous video conferencing service — has been an investor darling, up close to 500 percent this year as workplaces shut down. Peloton, the home video cycling company, is up almost 200 percent amid widespread gym closures — and just added to its product line.