Also posted today: FEARFUL FEARLESSNESS.
New Wave of Layoffs Makes Pandemic Job Losses Permanent As companies brace for years of coronavirus-related disruption, thousands of furloughed workers are told they won’t be coming back.
(…) The outlook reflects an acceptance by corporate executives that they will have to contend with the pandemic and its economic fallout for a longer period than they had hoped. Some CEOs and other executives suggest more pain is ahead, said David Rubenstein, co-executive chairman of Carlyle Group, CG -2.07% a private-equity firm with around $220 billion in assets under management.
“Privately, some of them may hint that they probably won’t need as many workers as they once thought,” Mr. Rubenstein said. “They’ll have to reinvent their businesses in ways that they hadn’t done before.” (…)
A survey of human-resources employees released by Randstad RiseSmart found nearly half of U.S. employers that furloughed or laid off staff because of Covid-19 are considering additional workplace cuts in the next 12 months. (…)
“Companies that thought they could either cut wages temporarily or cut costs temporarily or hold on are now finding out that the weakness of the pandemic is now longer than they hoped,” said Diane Swonk, chief economist at Grant Thornton. (…)
For small businesses, 22% of employees furloughed between March and June had been laid off by July, while 28% were still furloughed, according to a recent study by Gusto, a payroll and benefits company for more than 100,000 small-business clients.
Many employees furloughed in the spring who haven’t been brought back to work most likely won’t have a job to return to, said Daniel Sternberg, head of data science for Gusto. That is because many small businesses have only partially reopened or have had to roll back reopening plans and sales are nowhere close to pre-pandemic levels.
“There’s not much evidence to suggest that there is going to be this massive bringing people back on the payrolls,” Mr. Sternberg said. “Businesses are also retooling in a lot of situations, and the way they are retooling requires lower head counts. They are trying to do what they can do to survive long term.” (…)
-
CFOs: Don’t Look for a Swift Economic Recovery A minority of the financial officers expect the US economy to improve by 12 months from now, a Deloitte survey says.
- A daunting 60% of company chief financial officers (CFOs) say US economic conditions are bad, and only a minority, 43%, expect things to get better a year from now, according to a quarterly survey by consulting firm Deloitte. (…)
- 42% say their company is already at or above its pre-crisis operating level, or will be by the end of the current quarter. That’s compared with 20% three months ago. (…)
- A towering 84% of CFOs now believe that stocks are overvalued, up from 55% before.
We can’t say if the 42% already back to pre-crisis conditions are also the 43% that “expect things to get better a year from now”, but we can say that nearly 60% of CFOs are in a grim mood and in survival mode. The CFOs control spending budgets.
Some recent announcements:
- MGM Resorts Lays Off 18,000 Workers, one-fourth of the company’s prepandemic workforce of 68,000 U.S. employees.
- Coke Plans to Shed 4,000 U.S. Jobs
- Salesforce.com Inc. notified its 54,000-person workforce that 1,000 would lose their jobs later this year.
- American Airlines Group and United Airlines Holdings have said more than 53,000 workers could be affected in about a month if the airlines don’t receive another infusion of funds from the government.
- Stanley Black & Decker said that in October it will permanently lay off 1,000 of them but bring back 9,300 to a full-time schedule. Chief Executive Officer James Loree told investors on a recent call the cuts are part of a $1 billion cost reduction.
- Hundreds of furloughed workers at C.H. Robinson Worldwide Inc., CHRW 0.48% one of the largest freight companies in North America, won’t be put back on the payroll, in part because their positions have been automated, the company told investors on a recent earnings call.
- Delta Air Lines Inc. said it would furlough 1,941 pilots unless a deal is reached with their union on cost-cutting. Oil-field services provider Schlumberger Ltd. said in July it is cutting 21,000 jobs amid a historic oil downturn. The announcements are part of a wave of job furloughs expected to become permanent cuts this year.
Trump Administration Begins Payroll Tax Deferral Plan The Treasury Department began implementing President Trump’s plan to allow payroll tax deferral, which he says will help the economy weather the pandemic-induced recession.
(…) It postpones some payroll taxes that would normally be due between Sept. 1 and Dec. 31 and makes them due between Jan. 1 and April 30, 2021. Under this approach, employers who opt to stop some paycheck withholding now could withhold twice as much as usual early next year. (…)
It still could take time for private payroll companies to reprogram their systems, and employers concerned about costs and legal exposure may not bother changing workers’ tax withholding. (…)
Implementation would be optional for employers, and larger employers have been wary about participating because they could also face potential tax liability, particularly for workers who leave their jobs and aren’t subject to withholding in early 2021. (…)
One very large employer looks likely to participate—the federal government that Mr. Trump controls. The National Finance Center at the Department of Agriculture, which processes payrolls for more than 600,000 federal workers at multiple agencies, said last week it was preparing to implement the tax deferral in September.
Forcing hundreds of thousands of federal employees to take tax deferrals could put pressure on lawmakers to forgive the taxes later, as Mr. Trump wants them to do. (…)
TikTok Talks Could Face Hurdle as China Tightens Tech Export Rules Chinese government trade adviser cautions app maker to study new regulations prior to sale
China announced new restrictions on artificial-intelligence technology exports that could further complicate the sale of TikTok’s U.S. operations, while intensifying the tech battle between the world’s two largest economies.
The new restrictions, unveiled Friday by China’s ministries in charge of commerce and science and technology, cover such computing and data-processing technologies as text analysis, content recommendation, speech modeling and voice-recognition.
Technologies on the list can’t be exported without a license from local commerce authorities. (…)
On Saturday, China’s official Xinhua News Agency quoted a government trade adviser as saying that ByteDance should study the new export list and “seriously and cautiously” consider whether or not it should halt its sales negotiations.
ByteDance owes its success internationally to China’s domestic technology prowess and providing updated algorithms to firms overseas is a form of technology export, the adviser—University of International Business and Economics professor Cui Fan—told Xinhua. That means that no matter who is the new operator of ByteDance’s international business, there likely will be some cross-border technology transfer, he said. (…)
The updated list of banned and restricted technology exports, which spans agriculture, pharmaceutical and other industries, also specified new restrictions on laser technology, cryptography, chip design and other high-tech categories. (…)
China’s Attempts to Spur Consumption Show Signs of Working Gauge of business activity outside the factory floor rises to its highest level in 2½ years in August
China’s official nonmanufacturing purchasing managers index rose to 55.2 in August from 54.2 a month earlier, mainly driven by the service sector, the National Bureau of Statistics said Monday. It marks the sixth consecutive month that the index topped the 50 mark that separates expansion from contraction.
Meanwhile, the manufacturing index, a gauge of China’s factory activity, slipped to 51.0 in August, from 51.1 in the previous month, falling slightly short of market expectations, though it, too, remained in expansionary territory for a sixth straight month.
While the nonmanufacturing PMI survey covers a broad variety of industries, including construction and real estate, the subindex measuring business activity in the service sector—a laggard in the broader recovery thus far—rose to 54.3 in August, from July’s reading of 53.1.
The subindex measuring construction activity fell slightly to 60.2 from 60.5, while the new-orders subindex for the entire nonmanufacturing sector, a measure of broad demand, rose to 52.3 in August from 51.5 in July. (…)
The manufacturing subindex for employment remained mired in contractionary territory for a fourth straight month, suggesting continued weakness in China’s labor markets.
The manufacturing subindex for small enterprises also fell deeper into contraction in August, to 47.7, as smaller businesses struggled to recover from the pandemic. (…)
- People in China have started to travel again, though almost all within the country due to Covid-19 border restrictions. China’s domestic air-passenger traffic in June was down 34% from a year earlier, but has been rising steadily in the past few months. That is a contrast to international passenger traffic, which was still down 98%. And that, in turn, is a big hit to companies selling to Chinese tourists, who made 169 million trips abroad in 2019. Shares of cosmetics companies and department-store operators in Korea and Japan, two of Chinese tourists’ favorite destinations, have plunged this year. (WSJ)
- “Hundreds of thousands companies have taken out state-guaranteed loans in March and April — and it saved them,” Bruno Le Maire said Saturday on France Inter radio. “With a great deal of solemnity, I’m asking banks to continue supporting companies.” Le Maire said interest rates on loans that get extended will be capped at 3%. (Bloomberg)
More Canadian Firms Than Ever Are Seeking Creditor Protection (…) an increasing number of companies are filing so-called Notices of Intention — the formal first step in the process, and one that gives the company immediate creditor protection and at least 30 days to prepare a proposal, a period that can be extended. That suggests official insolvencies among companies of all sizes are poised to rise soon.
Individual-Investor Boom Reshapes Stock Market It’s one of the year’s biggest market stories: Mom-and-pop investors have fallen back in love with stocks, lured by free trading apps, a resurgent bull market led by technology companies and a pandemic that has left millions of Americans at home with little to do.
(…) Trading by individuals accounts for a greater chunk of market activity than at any time during the past 10 years, according to Larry Tabb, head of market-structure research at Bloomberg Intelligence. (…)
On some days this year, about 25% of market volume has been individual-investor activity, said Joe Mecane, head of execution services at Citadel Securities, an electronic-trading firm that executes orders for such brokerages as Robinhood Markets Inc. and Charles Schwab Corp. SCHW 0.55% (…)
Mr. Mecane drew a parallel with the dot-com boom in the 1990s, when web-based brokers made it easier to trade stocks, just as a bull market was under way.
“It was really the start of a similar trend,” he said. “Back then, technological and business innovation provided the first foray into instant execution and self-directed retail investing.” (…)
RNC Ratings: Final Night Draws 23.8 Million Viewers The audience for the fourth day of the 2020 event was 26% smaller than in 2016, and 3.2% smaller than the Democratic National Convention’s final night this year.
