U.S. Unemployment Claims Remain Elevated Above 800,000 Initial claims for jobless benefits show pandemic continues to batter labor market

Unemployment claims fell slightly to 840,000 last week, Thursday’s Labor Department report said. (…) The number of people collecting unemployment benefits through regular state programs, which cover most workers, fell to 11 million in the week ended Sept. 26 from 12 million the prior week, according to the Labor Department. So-called continuing claims declined throughout the summer, indicating many unemployed people are returning to work as the recovery continues.

But 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 two million people were receiving aid through this extended-benefits program in the week ended Sept. 19, up from 1.8 million a week earlier, Labor Department data show. (…)

Large corporations announced job cuts last week, including American Airlines Group Inc., United Airlines Holdings Inc. and Walt Disney Co. Many of those workers will likely seek unemployment benefits in the coming weeks, but aren’t yet reflected in the most recent claims data.

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, this week’s jobless claims report reflects California’s level during the last week before the pause, the federal agency said. (…)

Millions of workers are receiving jobless benefits through a federal pandemic program for the self-employed, gig workers and others not typically eligible for unemployment aid. In the week ended Sept. 19, there were 11.4 million individuals seeking benefits through this program. (…)

Data: Bureau of Labor Statistics; Chart: Axios Visuals

• Should We Trust The Initial Claims Data?

(…) A considerable amount of analysis is hanging on the initial claims data, including the prediction that these numbers prove the economy is heading for collapse now that the enhanced unemployment benefits have expired. If the claims data is just broken, those predictions are just wrong. (…)

Initial claims are just way too high relative to the level of JOLTS discharges and layoffs. Which series are you going to believe? True, the JOLTS data may have some pandemic-related challenges. Still on net, I think you have to give the benefit of the doubt to the BLS economists on this one as we have plenty of reasons to believe the claims data is corrupted. (…)

Yet, 60 million households is a lot of people:

• About 60 Million U.S. Households Expect Income Losses This Month Nearly 60 million Americans expect someone in their household will lose a job or take a pay cut in the next four weeks, according to survey results released Wednesday by the U.S. Census Bureau.

The Census Bureau’s latest edition of the Household Pulse Survey found that more than 27% of Americans in their prime working years — those age 25 to 54 — anticipate income losses affecting themselves or someone they live with during October.

The latest review showed a slight reduction in the number of Americans worried about potential income losses. During the prior survey period conducted Sept. 2-14, 62.3 million people were concerned. (…)

WSJ Survey: 43% of Economists Don’t See U.S. Gaining Back Lost Jobs Until 2023 They cite continued spread of coronavirus, and uncertainty surrounding stimulus package, election outcome

(…) Economists in the April survey expected that on average, payrolls would recover to their February 2020 level in just over two years, by the third quarter of 2022.

In this month’s survey, just over a third of economists, 34.7%, broadly stuck with that timeline and said payrolls would recover in 2022. A larger share, 42.9%, now see the labor market recovering in 2023, and another 12.2% expect it will take even longer—with 2% expecting it will take until 2030. (…)

More than half of economists, 57.4%, expected that in 2021, economic output will return to the seasonally and inflation-adjusted level of its prior peak in the final quarter of 2019. A further 18.5% of economists expected GDP to recover to its previous peak by the first quarter of 2022. (…)

“Over the course of Tuesday, Trump agreed with Fed chair Jay Powell that the need for fiscal stimulus is urgent, requested that Congress fund a new round of stimulus checks — and, at the same time, instructed his Treasury secretary to cease all negotiations on Capitol Hill and put off any stimulus until after the election.” (Axios)

Stimulus Talks Resume, but a Deal Remains Elusive Democratic and White House negotiators resumed discussions over a coronavirus relief deal, after House Speaker Nancy Pelosi ruled out moving forward with aid to the airline industry without a broader agreement.

(…) Few on Capitol Hill were optimistic that Congress and the White House would reach an agreement before the Nov. 3 election. (…)

In a call Thursday afternoon, Treasury Secretary Steven Mnuchin made clear that Mr. Trump was interested in reaching an agreement on a broader bill, according to Mrs. Pelosi’s spokesman, Drew Hammill, and an administration official.

The White House has gone back and forth on how broad a deal to pursue. After ruling out more talks Tuesday afternoon, Mr. Trump said Tuesday evening and reiterated in recent days that he would support individual relief bills, including aid for airlines and another round of direct checks.

“I shut down talks two days ago because they weren’t working out. Now they‘re starting to work out,” Mr. Trump said Thursday on Fox Business Network. “We’re talking about airlines and we’re talking about a bigger deal than airlines,” he said, mentioning $1,200 stimulus checks as well as unspecified other items. (…)

White House spokeswoman Alyssa Farah said Thursday that Mr. Trump was interested in legislation that included checks, as well as assistance for small businesses and airlines, but not a larger package. Later, she said the White House was “open to going with something bigger” but not the $2.2 trillion package Democrats proposed. (…)

Senate Majority Leader Mitch McConnell (R., Ky.) said Thursday he hoped to see negotiations continue but said the impending election was making compromise more difficult.

“We do agree another rescue package is needed. We had vast differences about how much we should spend,” he said at an event in Kentucky.

He noted later that there were still reservations among many Republicans.

“I’ve got a significant percentage of my members who think we’ve done enough and who are alarmed by the amount of national debt,” he said. (…)

New York City Says It Can’t Afford Teachers’ Back Pay New York City can’t afford to pay a lump sum due its teachers because of the new coronavirus, city officials said, reflecting a fiscal crisis that has already led to budget cuts and service reductions.

Most U.S. Shoppers Say They Won’t Set Foot in a Mall This Year Just 45% of U.S. consumers plan to go to a shopping mall this season, down from 64% who visited last November and December, according to an International Council of Shopping Centers survey released Friday.

Hotels: Occupancy Rate Declined 29.6% Year-over-year

The economic problem is centered around schools. If families and teachers are worried about what happens when children go to school, it is hard to get the economy – including jobs and incomes – back on track. Education disparities, which are already stark, will continue to widen. Some children will never attain the reading and math skills they are missing now. This will likely lower their lifetime incomes.

There are roughly 57 million children in primary and secondary schools in the US, living in 34 million households (of which nearly 24 million have two parents and 10 million have one). There are close to four million teachers and more than one million childcare workers. The continuing failure to provide virus testing in schools thus directly affects about one-third of the population. (ING)

Saudis Consider Canceling OPEC Plans to Boost Output The debate inside Saudi Arabia comes amid weaker-than-expected oil demand, as Covid-19 cases in many parts of the world rise and the expected return of Libyan crude threatens to swell global supplies.

(…) In its latest monthly report in September, OPEC downgraded its estimates for an expected oil demand recovery next year, saying it wouldn’t come as fast and not be as sizable as expected amid resurgent infections from the Covid-19 virus. (…)

Saudi Arabia needs prices of about $76 a barrel to balance its spending this year and $66 a barrel in 2021, according to the International Monetary Fund.

• The Oil Market Has an Aviation Problem Passenger-flight activity is mired at around half of pre-pandemic levels, leaving a hole in global oil demand that is hampering crude prices.

• OPEC sees oil demand plateauing in late 2030s, marking a major shift in bloc’s outlook

Bank of Canada Keeps Door Open to Possibility of Negative Rates

(…) “We are not actively discussing negative interest rates at this point but it’s in our toolkit and never say never,” Macklem said Thursday via videoconference, after a speech to the Global Risk Institute. (…)

Earlier this year, then-governor Stephen Poloz dismissed such a move, and emphasized its disruptive effects. After replacing Poloz as governor in June, Macklem said cutting rates below zero risked creating distortions in the financial system. (…)

EARNINGS WATCH

The Q3’20 earnings season begins next week. This is from Credit Suisse:

• 54% of the S&P 500’s market cap will top 2019’s EPS in 2020. This trend is more pronounced in the growth benchmark (74%) and TECH+ (73%).
• S&P 500 Revenues and EPS are projected to decline -4% and -22% YoY. 2Q delivered outsized EPS surprises, a trend likely to continue in 3Q.
• 500: EPS expectations are bifurcated with TECH+ and Non-Cyclicals projected to fall only -1% and -5% YoY versus Financials and Cyclicals at -23% and -60

From Refinitiv/IBES:

PANDEMONIUM

H-1B Overhaul Pressures Outsourcing Firms and Their U.S. Clients Among the possible scenarios: Fewer projects. And the projects that get done will be at a higher price.

The restrictions, announced Tuesday, require U.S. employers to pay H-1B workers higher wages, narrow the types of credentials needed for foreign job applicants to qualify and shorten the length of visas for certain contract workers. (…)

U.S. employers last year filed a total of 201,011 applications for H-1B visas, up from 190,098 in 2018, according to U.S. Citizenship and Immigration Services. In both years, the maximum number of visas was capped at 65,000, along with 20,000 set aside for highly qualified applicants with advanced degrees in science, engineering and IT, among other fields. The caps remain the same for the current fiscal year. (…)

Steve Yale-Loehr, a Cornell University Law School professor who specializes in immigration law, said companies might opt to avoid the costs associated with more frequent visa renewals or higher wages by establishing offices in other countries such as Canada, to access overseas tech talent.

“As the immigration regime in the United States over the last 3½ years has gotten more restrictive, more companies are thinking about offshoring some positions, or research or manufacturing plants,” Mr. Yale-Loehr said.

China Joins WHO’s Vaccine Program, Filling Void Left by Trump

Beijing on Thursday joined the $18 billion Covax initiative that aspires to give lower-income countries the same access to vaccines as wealthier nations. The move came despite China “leading the world with several vaccines in advanced stages of R&D and with ample production capacity,” spokeswoman Hua Chunying said in a statement on Friday.

“We are taking this concrete step to ensure equitable distribution of vaccines, especially to developing countries, and hope more capable countries will also join and support Covax,” she said. (…)

President Xi Jinping promised in May that vaccines developed by China would be made a global “public good” to be shared by all. The decision could also help the country’s image following widespread criticism from abroad over how it handled the initial outbreak in the central city of Wuhan, where Covid-19 first emerged last year. A global survey this week by the Pew Research Center found that negative perceptions of China reached record highs in the U.S. and other major economies. (…)

“In many ways this is a soft power win for China, coming amidst a slew of negative reports in other fields in recent weeks,” said Nicholas Thomas, an associate professor in health security at the City University of Hong Kong. “It is a win made all the easier by President Trump’s impetuous decision to withdraw from the WHO and his short-sighted refusal to commit the U.S. to Covax. Now anything America does in this area will be seen as catching up to China, when the U.S. was expected to lead.” (…)

The Security of 5G: “We must not surrender our national security for the sake of short-term technological development” The UK Defence Committee publishes its report “The Security of 5G”. The report finds that the development of 5G will increase our dependency on mobile connectivity, opening the UK up to security risks such as espionage, sabotage or system failure.

(…) Our inquiry found that there is clear evidence of collusion between Huawei and the Chinese state, which supports the decision to remove them from the UK’s networks. The designation of Huawei as a high-risk vendor by the UK Government is appropriate and completely justified with the correct steps being taken to remove them from the UK’s 5G. (…)

Face masks: what the data say The science supports that face coverings are saving lives during the coronavirus pandemic, and yet the debate trundles on. How much evidence is enough?