[The New York Times, AP]
Here’s what you need to know:
- 963,000 filed new state unemployment claims last week, but layoffs remained high.
- State unemployment offices are still struggling, so the jobless struggle, too.
- In an industry dependent on gathering crowds, no sign of a return to work.
- Air travel is recovering slower than expected, energy agency says.
- Stocks waver as unemployment claims remain high.
963,000 filed new state unemployment claims last week, but layoffs remained high.
The number of Americans filing for state unemployment benefits fell below one million last week for the first time since March. But layoffs remain exceptionally high by historical standards, even as the pace of rehiring has slowed.
The Labor Department reported on Thursday that 963,000 people last week filed first-time claims for benefits under regular state unemployment programs. Another 489,000 applied under the federal Pandemic Unemployment Assistance program, which covers independent contractors, self-employed workers and others who don’t qualify for regular state unemployment insurance.
The number for state claims is seasonally adjusted; the figure for the federal program is not.
Unemployment filings have fallen sharply since late March, when nearly 6.9 million Americans applied for benefits in a single week. But filings still dwarf those in any previous recession: Before the coronavirus pandemic, the worst week on record was in 1982, when 695,000 people submitted claims.
Unlike the temporary layoffs and furloughs that dominated in the first weeks of the crisis, most of the new job losses are likely to be permanent.
“It’s even more frightening now,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab. “There’s no silver lining of quick recalls like the higher levels that we saw back in March.”
Even as layoffs have slowed, the broader economic recovery has lost momentum. Employers brought back 1.8 million jobs in July, the Labor Department reported last week, well below the 4.8 million in June. More timely data from private-sector sources suggests that the slowdown has continued in August, and economists warn that it could worsen now that key federal programs to help households and businesses weather the pandemic have expired.
— Ben Casselman
Jobless benefits remain a lifeline for millions, but now pack less punch.
The weekly report on unemployment claims Thursday showed that tens of millions of Americans were still relying on jobless benefits to buy food and pay rent. But those benefits just got a lot less generous.
The emergency spending bill passed by Congress in March added $600 to recipients’ weekly state unemployment checks. But that money ran out at the end of July, and negotiations between the White House and Democrats to reinstate it have stalled. President Trump announced over the weekend that he would act unilaterally to replace the extra money — at a fraction of its former level — though it remains unclear how that program would work or how long it would take to put in place.
In the meantime, many jobless Americans have seen their weekly income slashed by half or more. State unemployment benefits vary widely: In Massachusetts, some workers can receive more than $900 a week, while in Mississippi, the maximum benefit is just $235. Benefits tend to be less generous in states with larger Black populations.
The loss of the extra benefits could also hurt the broader economy at a time when hiring has slowed. The federal government paid $18.4 billion in unemployment benefits in the first 10 days of August, down from $35.4 billion in the same period in July, according to data from the Treasury Department. (The federal government is still paying for other benefits, including the Pandemic Unemployment Assistance program, which covers people left out of the regular state system.) Research has found that unemployment benefits are a particularly powerful form of stimulus because recipients tend to spend the money rather than saving it.
“Those are the people who from a macroeconomic perspective you want to be targeting the most,” said Alix Gould-Werth, an expert on unemployment insurance at the Washington Center for Equitable Growth, a progressive think tank. “Those are the lowest earners — they’re the ones who need the money the most.”
— Ben Casselman
State unemployment offices are still struggling, so the jobless struggle, too.
When millions of people lost their jobs in a matter of days last spring, the deluge of unemployment filings overwhelmed state benefits offices. Five months into the crisis, many are still struggling to catch up.
David Moniz started a new job in March as a resident chef at Sur La Table, the kitchen goods retailer, in San Jose, Calif. His timing was terrible: After he spent just one day on the job, the store shut down because of the virus, and he was furloughed.
It took Mr. Moniz, 29, weeks of calling to get through to California’s employment office and file an unemployment claim. Then, after a few weeks, his benefits abruptly stopped. His file is shown as “pending” on the state website and, despite endless hours of calling, he has been unable to get through to address the problem. He hasn’t received a check since June 1.
Without any money coming in, Mr. Moniz has burned through his savings and racked up debt. He says he has $28 left before he hits his credit limit, and owes $200 in late fees and penalties to his bank, Wells Fargo.
“Wells Fargo calls me more than anyone in my family does because of my account right now,” he said.
Overwhelmed state unemployment offices could soon have even more to deal with. President Trump’s move over the weekend to supplement jobless pay through disaster funds would create a new program that states will have to administer. And if Congress eventually reaches a deal to revive a version of the $600 weekly unemployment supplement that expired at the end of July, additional work by the states will be needed to carry it out.
— Ben Casselman
In an industry dependent on gathering crowds, no sign of a return to work.
Even as some parts of the economy have reopened, people in industries particularly vulnerable to the pandemic see little chance of getting back to work anytime soon.
Amy Griffin is a theater actor and director who has appeared on Broadway and in regional productions across the country. But when the pandemic hit, the theater industry shut down, and it shows no sign of reopening.
“It’s pretty terrifying for me and for so many people because it’s just completely gone and you have no idea when it’ll come back,” said Ms. Griffin, who lives in Nyack, N.Y. “You just don’t know when you’re going to return to work in any capacity.”
Ms. Griffin is fortunate — her husband is a college professor and earns enough to cover their basic expenses. But the loss of income has been painful both financially and psychologically for her, especially now that the $600-a-week federal supplement has ended.
Ms. Griffin dismisses the idea that the supplement was discouraging people from working. She wants to work, she said. There simply aren’t any jobs in her industry.
“I feel like I’m going to be competing with Tony Award-winning directors to direct a middle-school play,” she said. “I would give anything to be able to go back to work. When I get to go back to work, it will be the best day of my life.”
— Ben Casselman
Air travel is recovering slower than expected, energy agency says.
A global “stalling of mobility,” especially in air travel, has prompted the International Energy Agency to make a slight downgrade in its forecast for oil demand in 2020. The agency said Thursday that demand would fall by 8.1 million barrels a day in 2020, 140,000 barrels lower than last month’s prediction.
“The aviation and road transport sectors, both essential components of oil consumption, are continuing to struggle,” the Paris-based forecasting group said in its monthly Oil Market Report. Overall, the I.E.A. predicts a roughly 8 percent decline in oil demand this year compared with 2019.
Air travel, in particular, is recovering slower than expected because of border closures and other restrictions. Aviation mileage was down 67 percent in July compared with a year before, only a modest recovery from the 80 percent decline in April. The agency also said that it did not expect the picture would improve “significantly soon,” and was now forecasting a 39 percent fall in jet fuel consumption for 2020 compared with 2019, while 2021 would also see only a gradual recovery.
Some areas are recovering faster. In China, demand for oil in June rose by 750,000 barrels a day compared with the same period a year before, “a remarkable feat,” the agency said.
— Stanley Reed
Stocks waver as unemployment claims remain high.
The stock market rally stalled on Thursday, as investors considered new data on unemployment claims that came in below expectations, but still highlighted the continuing economic devastation caused by the coronavirus.
Futures for the S&P 500 were flat while markets in Europe were lower.
The U.S. Labor Department on Thursday said 963,000 people filed first time claims for state unemployment benefits last week. That’s the first time since March that filings have dipped below one million, and fewer filings than economists had expected.
But those numbers show how deep America’s economic pain still is, and how far away a recovery may be.
With millions of Americans unemployed and stimulus benefits now ended, investors are closely watching Washington for signs of how negotiations over a new federal aid bill are playing out. After talks collapsed between congressional Democrats and Republicans last week, Treasury Secretary Steven Mnuchin and Speaker Nancy Pelosi spoke Wednesday, though there was little indication they resolved any of the myriad issues up for debate.
In financial markets, investors have managed to shrug off the drastic toll of the virus, which has sunk the American economy into one of the steepest downturns since the Great Depression, crushed corporate earnings and sent unemployment soaring.
Instead they’ve focused on economic updates that, while still dire, have not been quite as catastrophic as expected.
The result is that the S&P 500 is only a small gain away from closing at a record high,and beating a record hit in February before the pandemic sent markets into a tailspin. The index is up about 50 percent from its lowest point this year.
— Katie Robertson and Mohammed Hadi
2 German blue chips, a steel maker and a travel giant, both deep in the red.
Two of Germany’s biggest corporations reported huge losses on Thursday, illustrating the degree to which the pandemic has pushed companies to the brink.
The steel maker Thyssenkrupp reported a net loss from April through June of 668 million euros, or $790 million, caused by shutdowns of auto factories, which are big users of the company’s products. Thyssenkrupp was troubled even before the pandemic hit, and has lost nearly 2 billion euros over the last nine months.
TUI, a travel company with its own network of resort hotels, cruise ships and jetliners, reported a quarterly loss of €1.5 billion after customers canceled vacations and operations came almost to a standstill. TUI took in virtually no revenue during the quarter.
Both companies said they saw signs of improvement but were not yet ready to predict a turnaround. “Due to the continuing disruptions to economic and public life,” Thyssenkrupp said in a statement, “forecasts for the remaining months of the fiscal year are still subject to major uncertainties.”
— Jack Ewing
How Hollywood is trying to avoid the virus as it restarts filming.
Hollywood has been unable to restart production on its own soundstages in California. So big movie studios, under pressure to get their production assembly lines running again, have focused on overseas shooting. The “Avatar” sequels are filming again in New Zealand. Sony Pictures has “Uncharted,” its adaptation of a popular video game, going in Berlin, report Nicole Sperling and Brooks Barnes:
Leading the way is Universal, with “Jurassic World” and a 107-page safety manual that details everything from the infrared temperature scanners the cast and crew encounter upon arrival to the vacuum-sealed meals provided by masked workers standing behind plastic partitions in the takeout-only cafeteria. Its safety protocols are serving as a model for other studios, showing Marvel, for instance, how to resume shooting “Shang-Chi” two weeks ago in Australia.
Roughly 750 people are involved in the $200 million production of “Jurassic World,” which restarted on July 6, and the set would normally be a hive of activity.
But Universal has divided the production into two categories. The larger one is made up of the departments that don’t need access to the set during filming, like construction and props. The more exclusive category, called the Green Zone, includes the director, the cast and only essential crew, like camera operators and the sound department.
Those working inside the Green Zone receive Covid-19 tests three times a week, and the sets are fogged with an antiviral mist before each use. The chairs that the actors sit in between takes are surrounded by orange cones to remind people to remain socially distant. When there is more lag time during a day, the cast can retire to a special Green Zone “living room,” complete with couches, blankets, lamps and plants. There are numerous sinks, and each time someone leaves or enters the Green Zone, he or she must wash hands.
The aim is to keep everyone healthy — and thinking less about coronavirus and more about roaming the earth with dinosaurs.
‘GUINEA PIGS’ The costs associated with the safety protocols total roughly $9 million and include the expenses from renting out an entire hotel.
Hedge funds and private equity firms gave loans. Now they’re suing.
With the delinquency rate on large commercial loans tied to real estate in the United States nearly doubling in just one month, big banks, which are among the largest real estate lenders, have been generally willing to give property owners time to work things out with tenants. A class of smaller lenders are showing their impatience.
These lenders, which include hedge funds and private equity firms, have provided billions of dollars in so-called mezzanine financing to help owners of hotels, retail complexes and office buildings run their businesses.
Already, there have been a few high-profile battles. In May, after the Mark Hotel, one of Manhattan’s most luxurious hotels, missed several payments, a California private equity firm moved to foreclose on its $35 million mezzanine loan. A New York judge blocked the attempt, claiming the action was not justified and not “commercially reasonable” during a pandemic.
Unlike traditional mortgage lenders, whose loans are secured by the real estate, mezzanine lenders make loans that can convert into an equity interest in the business if the owner is unable to pay the mortgage, rather than the property itself. So “mezz” lending, which typically pays high interest rates, is both riskier and more rewarding for investors.
A foreclosure is a way for a mezzanine lender to recoup potential losses by arranging for a sale or auction of a delinquent loan as well as its equity interest in a borrower’s business. If no bidder emerges, the mezzanine lender can oust the borrower and take over as the property owner or developer. Judges have tended to side with mezzanine lenders in foreclosure disputes, but the pandemic has prompted some judges to be more sympathetic to financially stressed borrowers.
The New York court rulings on whether it is appropriate for mezzanine lenders to foreclose on borrowers during the pandemic are particularly important because New York law is often pivotal in resolving disputes between lenders and borrowers.
— Matthew Goldstein
Catch up: Disney allows testing at resort, and revenue jumped at Tencent.
- The Walt Disney Company will allow the Florida Division of Emergency Management to operate a public testing facility on its Walt Disney World property, ending a standoff with the Actors’ Equity Association, which represents roughly 700 actors, dancers and stunt workers at the theme park complex. When the mega-resort started to call back its workers in late June, Actors’ Equity demanded that Disney provide regular tests, noting that its members worked in jobs where they were unable to wear masks or stay six feet from one another. Disney declined. Disney has not changed its stance on providing employee testing. However, the union appeared to be satisfied with Disney’s offer to host the public facility.
- The Chinese internet giant Tencent on Wednesday said it believed that President Trump’s recent executive order targeting its messaging app WeChat would not affect its other businesses in the United States. Tencent reported Wednesday that net profit rose 37 percent for the second quarter. Revenue from online games jumped 40 percent as the pandemic lockdowns kept people indoors.
- The coronavirus pandemic has wiped out business for Lyft, which said Wednesday in an earnings report that its second-quarter revenue was down 61 percent from a year ago, to $339.3 million. Its net loss was $437.1 million. Ridership was down 60 percent in the quarter than ended June 30 from the same period a year ago, Lyft said. Uber has accelerated its food delivery services to offset the impact of the pandemic, but Lyft has remained focused on transportation.