Nonfarm payroll employment rises by 1.4 million in August; unemployment rate falls to 8.4%
Jobless Claims Ease, Showing Slowly Improving Labor Market Payments from state programs down, but more people are tapping pandemic benefits
(…) Weekly initial claims for jobless benefits fell by 130,000 to a seasonally adjusted 881,000 in the week ended Aug. 29, the Labor Department said Thursday. The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 1.24 million to about 13.3 million for the week ended Aug. 22. (…)
About 29 million people were receiving assistance from state and federal programs as of mid-August, Labor Department data showed. The number of people seeking assistance through some pandemic-related programs also has increased in recent weeks. (…)
Thursday’s report showed applications to a separate unemployment program created in March, pandemic unemployment assistance, rose solidly for a second straight week, and nearly matched applications to regular state programs, which cover about 90% of workers. (…)
The pandemic assistance covers gig workers, the self employed and those with special circumstances, such as being unable to report to work due to lack of child care. That program, which is less generous than regular state programs, paid benefits to 13.6 million recipients during the week of Aug. 15, the latest available data. (…)
“This is seriously worrying evidence that contractors, entrepreneurs and self-employed workers are losing their income, and in some cases closing up shop for good,” said Patrick Anderson, chief executive of the Anderson Economic Group consulting firm. (…)
Axios:
The number of Americans receiving unemployment benefits rose to 29.2 million for the latest week of data, the Department of Labor announced Thursday.
- But the increase of 2.2 million people to the rolls was largely the result of 2.3 million people being added to the Pandemic Unemployment Assistance program in just the state of California.
- California’s total PUA additions for one week nearly doubled its total number of recipients and accounted for one out of six people receiving PUA benefits nationwide.
“The unemployment data are just incredibly problematic,” Heidi Shierholz, a former chief economist to the U.S. Secretary of Labor who now serves as senior economist and director of policy at EPI, tells Axios. (…)
Shierholz adds that many of the nation’s unemployment systems are running on a 60-year-old computer program known as COBOL that in addition to crashing, often over- and undercounts recipients.
Hmmm…I was writing COBOL at university…Is this why I am often crashing?
- Without more state and federal relief specifically for restaurants, “63.6% of New York restaurants said they are likely to close by the end of the year,” the New York State Restaurant Association reports from a survey of 1,042 restaurateurs. (Axios)
- The Conference Board polled business executives across the U.S. and found that only 27% of U.S. workplaces in America’s 20 largest metro areas will be reopened by the end of the month. And more than a third of the executives surveyed—35%—still have no timeline to reopen their offices. A slightly larger group—39%—are targeting reopening in the first quarter of 2021. (Fortune)
- Meanwhile, Fortune ’s own research shows a large number of Americans—8% of those surveyed—may consider moving as a result of the pandemic. If they follow through on that intention, that would be a massive migration, and bad news for cities.
U.S. Strongest expansion in business activity since March 2019
August PMI data signalled a strong expansion in business
activity across the U.S. service sector, as output rose at the
sharpest rate for nearly one and a half years. The upturn was
driven by greater client demand, as new orders grew at the
quickest pace for over a year. As a result, firms increased their
workforce numbers sharply to cope with greater pressure on
capacity. Although business expectations ticked down slightly,
firms remained optimistic on balance, with sentiment regarding
the year ahead at its second-highest since April 2019.Meanwhile, input cost inflation eased slightly, though nonetheless remained sharp. Increased supplier prices, including for PPE, were partially passed on to clients through a second month of marked growth of charges.
The seasonally adjusted final IHS Markit US Services PMI Business Activity Index registered 55.0 in August, up notably from 50.0 in July and slightly higher than the earlier ‘flash’ estimate of 54.8. The latest expansion was strong overall and the quickest since March 2019. Firms often stated that the upturn in output was due to greater client demand and the further reopening of businesses.
Contributing to the rise in business activity was a solid increase in new sales in August. Growth in new business was commonly attributed to rising client demand and increased marketing activity. The rate of expansion was the fastest since July 2019, with new export orders also rising, growing at the fastest pace on record (since September 2014).
The faster growth of new business helped drive a second successive monthly rise in workforce numbers across the service sector in August, as firms sought to relieve pressure on capacity.
Meanwhile, cost burdens rose at a steep pace, despite the rate of inflation easing from that seen in July. Higher supplier prices and greater costs for equipment such as PPE drove input prices up. With the exception of July’s recent high, the pace of increase was the fastest since October 2018.
Firms commonly stated that higher cost burdens were partially passed on to clients through greater output charges in August, with the rate of output price inflation the second-sharpest for almost two years. The strong pace of inflation eased slightly, however, with some companies continuing to note competitive pressures and efforts to boost sales.
Finally, service providers registered a solid degree of confidence with regards to the outlook for output over the coming year in August. Optimism was often linked to hopes of a further pick up in client demand and a recovery in economic performance. Despite softening from that seen in July, the level of positive sentiment was the second-highest since April 2019.
Only the consumer services sector recorded a sustained decline in business activity during August, with the rate of contraction accelerating slightly since the previous month.
Worryingly, new order growth slowed in China and the eurozone in August, and the rate of decline accelerated in Japan, all boding ill for output growth in September. More encouraging were the signals from new orders in the US and UK, both of which saw growth accelerate.
However, perhaps more importantly, of the expanding economies only the US saw faster growth of backlogs of work in August. These backlogs represent orders received by companies but not yet started or completed, and hence provide a useful guide to capacity utilisation. Rising backlogs hint that capacity will need to rise further in coming months to meet demand. Falling backlogs suggest firms may start cutting capacity. Hence the US, with its rising backlogs of work, was also the only major economy to report a robust increase in employment in August. China also saw backlogs rise, but at a slower rate, and consequently reported only a marginal gain in jobs.
Meanwhile, falling backlogs of work in the eurozone, UK and Japan were accompanied by further job losses, with the rate of job cutting even accelerating in the UK, so suggesting that companies have grown more cautious with respect to the outlook.
Here’s the global picture:
The overriding concern is that not only will growth naturally fade after the current initial bounce from the collapse seen at the height of the pandemic during the second quarter, but that growth could be further hit by a combination of rising joblessness (as a consequence of the need for ongoing social distancing) and increased containment measures as virus numbers rise again, in turn linked to more sectors opening up at a time when many countries are moving into winter months.
Note that global sentiment about prospects for the year ahead dipped in August, having climbed in the prior three months, in part reflecting growing caution about the outlook.
U.S. trade deficit grows to largest since July 2008
The U.S. trade balance fell to a deficit of $63.6 billion in July, $10 billion larger than the month before, and the biggest monthly deficit since July 2008.
The spike in the trade deficit comes despite President Trump’s trade war with China and tariffs on hundreds of billions of dollars of imports from China, Europe and other countries, as well as the U.S.-Mexico-Canada trade agreement, which went into effect this year.
- The increase between the deficit in July 2016 and July 2020 is “especially notable given the drop in trade flows related to the COVID-19 pandemic,” liberal think tank Public Citizen’s Global Trade Watch director Lori Wallach said in a statement.
- “Comparing the trade flows in the first seven months of 2019 to the same period in 2020, U.S. trade has decreased 15%.”
The $340 billion trade deficit in the first seven months of 2020 is 12.2% higher than during the same period in 2016.
- The trade deficit with China was $3 billion more on the month at $31.6 billion.
- The deficit with Europe also increased $3 billion from the prior month, to $23.1 billion.
- The July 2020 surplus in services trade was the smallest since August 2012, at $17.4 billion.
But, but, but: While much of Trump’s foreign policy has seemed driven by an intolerance for trade deficits, they are not necessarily bad for the economy. (Axios)
But he does not know that…
Covid-19 Pandemic Ravages World’s Largest Developing Economies From India to Mexico, countries are hit by worst economic declines since World War II
(…) Developing nations haven’t felt this kind of pain since the Great Depression. India’s economy shrank by nearly a quarter, 23.9%, during the April to June period compared with a year earlier, its worst performance since quarterly figures began in 1996. Peru’s economy contracted by 32% during that same period from a year earlier, Mexico’s by 18.9%, Brazil’s by 11% and Turkey’s by 9.5%.
While the coronavirus pandemic has caused similar economic pain in richer nations, the fallout for developing nations is different in two key ways: First, the pandemic continues to tear through many developing countries. India has the world’s highest toll of daily new cases, and the U.S. is the only rich nation in the top 10 of daily Covid-19 deaths. The longer the pandemic drags on, the longer the economic pain.
Secondly, developing nations have far fewer resources to spend protecting their workers and companies from the economic fallout. While rich nations can simply print more money or take on debt at a low cost, such a move by developing nations might create more economic instability by sparking a selloff of the local currency. (…)
Unlike in rich countries, lockdowns in many developing nations were less effective at stopping the virus in its tracks, partly because many people don’t have savings and can’t afford to stop working.
Except for India, new cases and new deaths have stopped rising in most countries.
Pfizer sees COVID-19 vaccine data in thick of U.S. election fight
U.S. drugmaker Pfizer should know in October if a COVID-19 vaccine it is developing works, Chief Executive Albert Bourla said on Thursday, potentially placing it at the center of bitter U.S. presidential politics ahead of the Nov. 3 election.
Pfizer would submit the candidate for approval immediately if data shows the vaccine, developed with partner, Germany’s BioNTech, proves safe and effective, Bourla said at an online briefing sponsored by drug industry group IFPMA. (…)
“We will never ourselves submit for authorization or approval any vaccine before we feel it is safe and effective,” Bourla said. “We will not cut corners.”
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Unlikely that a COVID-19 vaccine will be ready in October, but not impossible, Fauci says
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Here Is Everything We Know About A COVID-19 Vaccine This doesn’t bode well for Trump’s insistence that a vaccine will be widely available by election day.
TECHNICALS WATCH
Interestingly, Lowry’s Research’s data show that Selling Pressure has not increased this week. Buying Power has kept sliding, however, although it remains above Selling Pressure. Yesterday’s breadth “was weak”.
Ciena Flashes a Warning Sign for Tech Optical gear maker’s outlook helps sink tech stocks in a market priced to perfection
(…) As part of its fiscal third-quarter report early Thursday, Ciena issued a disappointing revenue forecast for the current period ending in October. The company now expects revenue in the range of $800 million to $840 million—about 17% below Wall Street’s expectations. Ciena had previously noted that the pandemic has complicated network build-outs, with major projects taking longer than normal to complete. Chief Executive Gary Smith added a new angle: that Ciena’s customers have “grown more cautious” about the outlook for their businesses, and thus “are beginning to exercise greater restraint” in their capital expenditures.
Ciena’s customers range from large telecommunications carriers to giant cloud service operators—the latter of whom use optical gear to connect their massive data centers to one another. In the cloud provider end of the market, Mr. Smith says the company now expects spending on optical gear will be flat to low single-digits for the year compared with the 7% to 10% growth projected at the start of the year. Ciena’s shares plunged 24% Thursday in the stock’s worst single-day selloff in more than a decade. (…)
How Options-Market Amateurs Might Have Tripped Up Big Tech U.S. technology giants have stumbled. In true David and Goliath fashion, it might be the work of amateur investors dabbling with derivatives.
‘Downbeat’ US executives dump most stock in a month since 2015 Record-breaking equity rally encourages company executives to cash in
The Justice Department plans to bring an antitrust case against Google as soon as this month after Attorney General Bill Barr overruled career lawyers who said they needed more time to build a strong case. (NY Times via Axios)
India bans Alibaba’s Taobao, Ant’s Alipay while tripling forbidden list
India banned 118 more China-owned mobile applications in a further move to curb Chinese tech companies amid mounting tensions on the two Asian giants’ disputed border.
Some of China’s most popular apps are on the new restricted list released Wednesday by India’s Ministry of Electronics and Information Technology, including e-commerce giant Alibaba Group Holding’s Taobao, Ant Group’s widely used payment service Alipay, Tencent Holding’s popular game PlayerUnknown’s Battlegrounds, or PUBG, and Baidu Inc.’s search service.
The banned apps are “prejudicial to sovereignty and integrity of India” as well as “security and public order,” the ministry said. The agency said it received complaints about the apps “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.” In late June India announced an unprecedented ban of 59 Chinese apps on national security grounds.