Unemployment Claims Hold at High Levels U.S. jobless claims hovered above 800,000 for a seventh week, the Labor Department reported Thursday, continuing to point to a slowing labor-market recovery.
Claims increased to 898,000 last week, holding well above the pre-pandemic high point of 695,000, the Labor Department reported Thursday. After declining from a peak of near 7 million in March, weekly claims have clocked in between 800,000 and 900,000 for more than a month as companies readjust their head counts. (…)
The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to about 10 million in the week ended Oct. 3 from 11.2 million the previous week, according to the Labor Department. So-called continuing claims declined throughout the summer, indicating employers continued to hire workers.
However, some of the recent declines in continuing claims represent individuals who have exhausted the maximum duration of payments available through regular state programs, and are now collecting money through a federal program that provides an extra 13 weeks of benefits. About 2.8 million people were receiving aid through this extended-benefits program in the week ended Sept. 26—the largest number since the program began this spring, Labor Department data show. (…)
Thursday’s data was complicated by California pausing the processing of new claims for two weeks. The state will use this time to clear a backlog of unemployment filings and implement fraud prevention technology, the Labor Department said. As a result, the figures reflect California’s level during the last week before the pause. (…)
ING:
It is important to remember that the numbers don’t match up because there is a week lag between initial claims and continuing claims and then a further week lag for the total number of people on unemployment benefits.As of the week of September 26 there were 25.29mn people receiving some form of unemployment benefit versus 25.5mn the week before.
Axios:
The number of Americans receiving benefits from the Pandemic Emergency Unemployment Compensation (PEUC) program for long-term jobless has risen by more than 10,000% since April 11 and included 2.8 million people as of Sept. 26. The program provides an additional 13 weeks of benefits after Americans have exhausted traditional unemployment.
“One thing to keep in mind is that we are now hitting the 6-month anniversary of the spike in jobless claims over the Spring that took the data to historic highs,” Jeffries’ Simons and Markowska said. “For example, claims were 6.615M for the week of April 3. That was 27 weeks ago, and jobless benefits typically pay for 26 weeks.”
During the week ending Sept. 26, 818,000 more people enrolled in the PEUC program while 803,000 came off the rolls of continued traditional unemployment. “This suggests that the major reason we’ve seen continuing claims fall so sharply over the last couple of weeks is due to benefits expiry rather than people finding jobs.”
“The bottom line here is that the state of the labor market is contingent on the virus picture,” Shepherdson said. “So we can’t rule out further increases [in jobless claims], and at this point we’d regard a zero print for October payrolls as a decent result; a clear decline is entirely possible.”
Small Business Optimism Improves in September The NFIB Optimism Index rose 3.8 points to 104.0 in September, a historically high reading.
But the devil is in the details.
- Good time to expand does not look particularly buoyant, does it?
- Actual sales remain very weak:
- Still at historical recession lows:
- Earnings look better historically but down meaningfully YoY:
- Small biz employment up after the end of lockdowns but no momentum:
- Not much appetite for capex:
McKinsey’s most recent poll did not find U.S. consumers in high spirits:
Despite increased optimism in the economy, most Americans continue to believe that the impact of the crisis on their routines and personal finances will last beyond the next four months. Compared to prior weeks, consumers report a slight decline in overall spending and will continue their shift to essentials. Americans are approaching the holiday season with similar spending caution, particularly low- and middle-income Americans.
Four out of five Americans have yet to return to pre-COVID-19 levels of comfort with “normal” out-of-home activities. Nonetheless, those who are not currently engaging has decreased consistently, down to 64 percent from 73 percent in late July.
During yesterday’s Town Hall:
Trump then credited himself with “an amazing job” and said the virus fight is “rounding the corner”.
Quite right!
- Remdesivir has little effect on Covid-19 mortality, WHO study says Results of highly anticipated Solidarity trial strike blow to hopes for coronavirus treatments
Hotels: Occupancy Rate Declined 29.2% Year-over-year
U.S. Import Price Gains Moderate During September
Import prices increased 0.3% (-1.1% y/y) during September after rising 1.0% in August, revised from 0.9%. During the last three months, import prices rose a still firm 10.3% (AR). These figures are not seasonally adjusted and do not include import duties.
A 4.2% decline in the cost of petroleum & petroleum products (-28.1% y/y) accounted for most of the moderation in prices last month. It followed four straight months of increase. The August rise was revised to 3.5% from 2.9%.
Nonpetroleum import prices improved 0.7% (1.8% y/y) following an unrevised 0.8% August gain. Prices have risen at a strengthened 7.0% (AR) during the last three months. It was the strongest growth since May 2011, improved from price deflation as recently as April. Import prices of industrial materials excluding petroleum strengthened 3.4% in September (7.8% y/y) following a 3.9% August gain. (…)
Export prices rose 0.6% last month (-1.8% y/y) following a 0.5% August improvement. A 0.1% uptick had been expected. Prices have risen 8.6% (AR) during the last three months.
Global Auto Markets Begin to Emerge From Pandemic Slowdown New-car sales in Europe rose last month for the first time this year, a sign that the global auto industry is slowly beginning to pull out of its worst slump in decades.
(…) The European Automotive Manufacturers’ Association said Friday that new-car registrations, a proxy for sales, totaled 1.3 million vehicles, an increase of 1.1% from the previous year. That compares with an increase of 6.2% for the month in the U.S. (…)
Over the entire quarter, European new-car sales were still down about 6% in the three months to Sept. 30, according to industry data. That compares with a decline of 9.6% in the U.S. and an increase of 7.9% in China, the first time new car sales in China grew on a quarterly basis in two years. (…)
GlobalData, a research group, expects global vehicle sales this year to fall 16% compared with 2019. It also predicts that global auto sales will rebound next year, but won’t return to pre-pandemic levels of demand until 2023, and even that scenario is fraught with risks. (…)
The WSJ reporter compares YoY with MoM data. U.S. light vehicle sales were down 4.3% YoY in September.
Anyway, as Bloomberg illustrates, Europe’s car sales are barely growing out of a deep slump. Europe’s car sales are still down 29% for the year through September.
Top World Bank Economist Says Financial Crisis Could Emerge From Pandemic
World Bank Chief Economist Carmen Reinhart said the coronavirus pandemic is turning into a major economic crisis and warned of the possibility of a financial crisis emerging.
“This did not start as a financial crisis but it is morphing into a major economic crisis, with very serious financial consequences,” Reinhart said in an interview with Bloomberg Television. “There’s a long road ahead.” (…)
“The scenario we are in is not a sustainable one,” she added. (…)
Canada’s September home sales set record, soaring 45.6% from last year Canadian homes sales set a monthly record in September and the national average price soared 17.5 per cent from last year, the Canadian Real Estate Association said Thursday. (…) the average gain over the first nine months of 2020 was 11.6 per cent. (…)
EARNINGS WATCH
As of Thursday morning, we had 41 reports in, a 88% beat rate and a +23.6% surprise factor largely stemming from the 7 Consumer Discretionary companies (+147.2%) and the 13 Financials (+26.6%) having reported.
The surprise from Financials prompted analysts to revise the sector’s Q3 numbers to -7.2% from -21.6% and Q4’s to -14.8% vs -22.1%. The surprise from the 7 CD cos. did not tilt the group’s estimates much. In all, S&P 500 Q3 earnings are now seen down 18.8% from -21.4%.
Meanwhile, trailing EPS dropped to $136.94 with the full year now at $131.15.
In mid-July, the first 39 companies to report, including 7 CDs and 13 Financials, showed a 77% beat rate and a +12.1% surprise factor.
Bloomberg on banks’ results:
The earnings reports themselves came with many superlatives: trading revenue jumped more than 20% for a third straight quarter, net income for the five biggest U.S. firms more than tripled that of the second quarter, and loan loss provisions — the boogeyman from last earnings season — grew by a scant $172 million for the top five. By most measures, it’s fair to say that the big banks passed this round with flying colors.
The stock market tells a different story. Financial shares did get a lift on Thursday, but are still down about 1% for the week so far, despite some solid earnings reports. Zooming out, the sector is down nearly 19% year-to-date — meanwhile, the S&P 500 index is roughly 8% higher in 2020.
This chart courtesy of Bloomberg’s own Joe Weisenthal helps to explain why investors are still wary overall. It plots the 10-year Treasury yield against the ratio of the Financial Select Sector SPDR exchange-traded fund and the SPDR S&P 500 ETF Trust. The correlation is clear:
A basic tenet of banking’s business model is to borrow at short-term rates and lend out at longer rates. That’s a tough way to turn a profit when the 2-year to 10-year yield curve can’t seem to break above 60 basis points. And with the budding reflation bet in the bond market held hostage by stop-and-start U.S. stimulus talks, it’s unclear what will generate the sustained inflation needed for the long-end to sell-off meaningfully.
Banks are flush with cash, earn 0.1% on their excess reserves but see no point in lending:
Also from yesterday’s Town Hall:
Mr Biden repeated his intention to raise the US corporate tax rate from 21 per cent to 28 per cent, arguing that it would bring in $1tn of revenue while criticising the fact that many companies have generated significant profits during the pandemic.
Individual-Investing Boom Fuels Trading in Low-Price Stocks Trading in speculative stocks with low share prices has surged this year, fueled by a huge influx of individuals using zero-commission investing apps and online brokerages
(…) During several months this spring and summer, more than 25% of the shares traded in the U.S. stock market were in companies with a share price below $5, according to data from the New York Stock Exchange.
From 2012 to 2019, that percentage mostly hovered between 10% and 15%, the NYSE data show. In September it fell to 17.1%, still high by historical standards. (…)
Retail activity has accounted for almost 20% of trading volume this year, nearly double the level from 2010, according to Bloomberg Intelligence. JMP Securities estimates some 10 million new online-brokerage accounts have been created in 2020, about half at Robinhood Markets Inc., whose app is popular with younger investors. (…)
In August, 57% of Robinhood accounts held stocks priced below $5, compared with 14% at Charles Schwab Corp. and 16% at Fidelity Investments, Atom Finance estimates. (…)
TRUE TO (PER)FORM
Yesterday from various Credit Suisse analysts:
China’s Economic Squeeze on Australia Extends to Cotton China’s top economic-planning body is targeting Australian cotton, Australian industry groups say, the latest escalation in the countries’ diplomatic and trade row.
(…) China buys around 65% of Australia’s cotton crop, according to industry figures, a trade worth some $600 million a year.
The cotton concerns come on the heels of similar suspicions that China is discouraging use of Australian coal.
China is Australia’s biggest two-way trade partner and top export destination, but tensions between them have reached new heights in recent months. After Australia began seeking support from European leaders for an investigation into China’s response to the coronavirus—which first spread widely in the Chinese city of Wuhan—China slapped restrictions on imports of Australian beef, barley and wine. It also warned its people against traveling to Australia, whether as a tourist or a student, saying racial discrimination against Chinese people was rising there. (…)
A recent study by the Australian Strategic Policy Institute, a security think tank, found that of 27 countries subjected in recent years to what it calls Chinese coercive diplomacy—including state-issued threats as well as trade and tourism restrictions—Australia suffered the highest number of recorded cases, followed by Canada and the U.S. (…)
How Have Households Used Their Stimulus Payments and How Would They Spend the Next?
