Jobless Claims Expected to Top One Million for 20th Week: Live Business Updates
Jobless Claims Expected to Top One Million for 20th Week: Live Business Updates
Rashida Tlaib, Alexandria Ocasio-Cortez and other House Democrats signed on to a letter urging the Federal Reserve to do more to support state and local governments, adding to criticism that the central bank is being too cautious in some of the programs it set up to help the economy during the pandemic.
“Our states and cities are already anticipating unprecedented and catastrophic budget shortfalls,” according to the letter, shared with The New York Times ahead of its release on Thursday. It urges the Fed chair, Jerome H. Powell, to lower the rate charged on the loans the central bank makes to municipal bond holders to near-zero, while extending the debt payback period to at least five years.
The central bank is buying municipal bonds, something that Mr. Powell had long been wary of doing because he worried that it ran the risk of picking winners and losers. The Fed has restrained the pool of eligible borrowers and made the terms unattractive. Only Illinois has chosen to use the program to date, given its pricing.
The Fed generally charges relatively high rates in its emergency lending programs, because it tries not to compete with private capital. But the central bank’s role has blurred during the coronavirus crisis. For example, it now buys corporate bonds and offers loans to midsize businesses, backed by Congressional funding provided to the Treasury Department to protect the Fed against losses. Those programs have been difficult to run as a backup option, and in some cases provide credit alongside the private market rather than as a last resort.
The Democrat’s letter — led by Ms. Tlaib, Pramila Jayapal, Joe Neguse and Mark Pocan — argues that the central bank is offering friendlier loan terms to businesses than to state and local governments.
But it is difficult or impossible to make an apples-to-apples comparison between the terms of the corporate programs and the municipal facility, because the programs and the markets they aim to help are drastically different.
“The terms of borrowing are not particularly generous,” Charles Evans, the president of the Federal Reserve Bank of Chicago told reporters this week, referring to the municipal program. “It would make sense for a lot of state and local governments to be waiting until they see what the parameters of fiscal support actually are.”
Mr. Evans said that lowering the interest rate could be a “sensible thing to do,” but he noted that the programs were settled on in conjunction with the Treasury Department.
“Sometimes there are differences of perspective there,” he said. The Treasury has generally been more risk-averse than the Fed in creating emergency facilities.
With Congress and the White House still bargaining over a coronavirus relief package that would extend supplemental unemployment benefits, layoffs continue to pile up.
Wall Street analysts expect that a Labor Department report on Thursday will show that the number of new state jobless claims filed from July 26 to Aug. 1 will hover around 1.4 million for the third week.
The weekly count is down from the stratospheric levels reached in the early days of the pandemic. But the data is likely to show the 20th straight week of more than one million new state jobless claims, an extraordinary figure by historical standards.
Hundreds of thousands of additional claims are being filed weekly through a separate federal emergency jobless benefit program that covers freelancers and the self-employed.
Unless and until Congress acts, the unemployed will no longer receive the $600-a-week federal supplement that helped pay bills through the spring and early summer.
“With these benefits expiring, you have another hit to income and spending,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “So basically, everything’s pointing to a slower pace of recovery right now unless we can get the virus under control or there is a vaccine or something.”
“I think we’re going to see the pace of layoffs pick up in the coming weeks,” she added.
Wall Street’s rally was set to end Thursday as stock futures followed European markets lower ahead of the release of U.S. weekly jobless claims.
Futures for the S&P 500 were down, signaling a drop when trading began. On Wednesday, the S&P had climbed to within 2 percent of its record after a four-day rally.
European shares were lower Thursday, weighed down by warnings from Britain’s central bank of a slow recovery ahead. Asian stocks ended the day mostly in negative territory.
The yield on the 10-year U.S. Treasury note fell, and oil futures also dropped, with Brent crude down about 0.4 percent, to $45 a barrel, and West Texas Intermediate slipping more than 1 percent, to about $41.70 a barrel.
The U.S. Labor Department was expected to release data on Thursday showing that workers filed more than one million new state jobless claims for the 20th straight week, as the coronavirus pandemic continued to layoffs and business closures.
Also on Thursday, The Bank of England policymakers said that they expected the British economy to contract by 9 percent this year, a less severe downturn than they indicated a few months ago, but they also predicted that the economy would not return to its pre-pandemic levels until the end of 2021. Even in three years, they said, the economy will still be smaller than it would have been had the growth rate followed the path it was on at the end of 2019.
Glencore, the giant Swiss-based mining and commodities trader, said it would not pay shareholders a proposed $2.6 billion dividend because of continuing uncertainty caused by the coronavirus, and would instead focus on reducing its debt after reporting a loss for the first half of the year. Shares fell more than 4 percent before recovering, a main reason for the drop in the FTSE 100.
In Washington, prospects for a deal on a new rescue package to address the coronavirus’s toll on the economy appeared to dim. Top Democrats and White House officials on Wednesday remained nowhere close to an agreement and were growing increasingly pessimistic that they could meet a self-imposed Friday deadline as President Trump again threatened to act on his own to provide relief.
The Bank of England presented both a better and worse outlook for the British economy on Thursday. As the central bank left its monetary policy stance unchanged, policymakers said that they expected the British economy to contract by 9.5 percent this year, a less severe downturn than they indicated a few months ago, and the unemployment rate would peak at 7.5 percent at the end of the year.
But then the economy won’t return to its pre-pandemic level until the end of 2021, they said. Even in three years, the economy will still be smaller than it would have been had the growth rate followed the path it was on at the end of 2019.
The central bank said economic indicators suggested consumer spending was rising but the bank’s governor, Andrew Bailey, added that it was not possible to make confident forecasts based on the current state of the recovery. The latest projections have an “unusually large downside skew,” he said, meaning they included a wide range of possible negative outcomes.
While the central bank assumes the economic impact of the coronavirus will dissipate gradually over the next few years, its forecast is challenged by fears of a second pandemic wave. Even as the British government is encouraging people to eat out and return to their offices, it is putting parts of the country under another round of lockdown restrictions and delaying the reopening of some businesses because of flare-ups in the virus.
Amid speculation in financial markets about whether the Bank of England would adopt negative interest rates, the central bank published some analysis on the policy idea, saying that it would be less effective “at this time” but that negative rates were still an option.
The economic collapse caused by the coronavirus has put millions of economic futures in doubt. More than nine million people have been furloughed in Britain, or 29 percent of the country’s work force, and 2.8 million have filed unemployment claims.
Some fields, such as hospitality or live entertainment, seem especially uncertain, leaving some people in a quandary: Wait for business and employment to pick up, or leave behind a job and career and try something new?
For Hanna Scaife, 24, the choice became simple as the lockdown wore on. She has enrolled in an art school beginning in September, with plans to transfer to the University of Sunderland to study ceramics and glass.
“I think it’s time for a change,” she said.
Angela Saunders, 39, built a hospitality and catering recruitment business with her husband in Scarborough, northeast England, but the pandemic brought that to an end. Now, they plan to pivot and begin buying and selling vintage clothing.
“Although recruitment can earn us a lot of money,” she said, “taking a step back has made me realize, really, I’d rather just have enough money and more happiness.”
For many workers, the transition to more secure positions will be difficult, because they will require retraining and further education, and be competing against a flood of other unemployed people, said Michael Koch, an assistant professor for human resource management and organizational behavior at the University of Kent.
“The gig economy is going to grow as a result of Covid,” he said, as businesses will aim to employ workers on short-term contracts or use more casual labor to maintain flexibility should a lockdown happen again.
More than half of Americans who flew in the past year are not ready to do so again, according to a new survey, underscoring the difficulty airlines face in convincing people it is safe for them to get back on planes.
In the survey of nearly 6,500 travelers conducted by Gallup and the financial firm Franklin Templeton, 52 percent said they were uncomfortable flying.
Younger adults are more willing to travel; only a third of those between the ages of 18 and 34 expressed discomfort with the idea. But older adults, who tend to have more time and money to travel, are far more reluctant. Among those 55 or older, 69 percent said they would not be comfortable taking a flight.
Unsurprisingly, views on flying vary significantly by political identification. Nearly 60 percent of Democrats said they were uncomfortable flying, compared with 54 percent of independents and just 42 percent of Republicans.
Even those willing to fly have limits. Although 44 percent said they were comfortable getting on a flight that lasted less than two hours, only 21 percent said they were open to the idea of flying more than six hours, confirming the industry consensus that international travel will take much longer to recover than shorter, domestic trips.
Travelers are also divided in their willingness to pay to have an empty seat next to them. Just under half said they would not shell out any money for greater distance from others, while 47 percent said they would pay up to $100. That share shrinks as the price of an empty seat rises, though 18 percent said they would spend $250 or more.