Tuesday, November 24, 2020

US Economy and Stock Market Live Updates

US Economy and Stock Market Live Updates

Gross domestic product, adjusted

for inflation and seasonality, at

annual rates

Gross domestic product, adjusted for inflation

and seasonality, at annual rates

U.S. economic output grew at the fastest pace on record last quarter as businesses began to reopen and customers returned to stores. But the economy has climbed only partway out of its pandemic-induced hole, and progress is slowing.

Gross domestic product grew 7.4 percent in the third quarter, the Commerce Department said Thursday. The gain, the equivalent of 33.1 percent on an annualized basis, was by far the biggest since reliable statistics began after World War II; the previous record was a 3.9 percent quarterly increase in 1950.

Still, the economy in the third quarter remained 3.5 percent smaller than at the end of 2019, before the pandemic began. By comparison, G.D.P. shrank 4 percent over the entire year and a half of the Great Recession a decade ago.

The report was the last major piece of economic data before the presidential election on Tuesday. Even before the release, President Trump touted the prospect of a big gain as evidence that the economy had roared back to life after the spring’s pandemic-induced shutdowns.

But economists said the third-quarter figures revealed less about the strength of the recovery than about the severity of the collapse that preceded it. G.D.P. fell 1.3 percent in the first quarter and 9 percent in the second as the pandemic forced widespread business closures. A big rebound was inevitable once the economy began to reopen. The challenge is what comes next.

“The reason we had such a big bounce is that the economy went from closed to partially open,” said Michelle Meyer, head of U.S. economics at Bank of America. “The easy growth was exhausted, and now the hard work has to be done in terms of fully healing.”

Already, there are signs that the recovery is losing steam. Industrial production fell in September and job growth has cooled, even as a growing list of major corporations have announced new rounds of large-scale layoffs and furloughs. Most economists expect the slowdown to worsen in the final three months of the year as virus cases rise and federal aid to households and businesses fades.

“We’re having a record recovery, but it comes after an even more record collapse, and it looks like economic momentum is fading in the fourth quarter,” said Jim O’Sullivan, chief U.S. macro strategist for TD Securities.

Credit…David Kasnic for The New York Times

The pandemic didn’t just shrink the U.S. economy. It also reshaped it, at least temporarily — shutting down some industries almost entirely, while leading to a surge in demand in others.

Consumer spending on goods was up sharply last quarter, rising nearly 10 percent, more than enough to offset a relatively mild 2.8 percent decline in the spring. Spending on durable goods was particularly strong, as Americans rushed to buy cars, recreational vehicles and equipment for their new homebound lifestyles.

Spending on services, on the other hand, collapsed in the second quarter, falling 12.7 percent as consumers abandoned restaurant meals, gym classes and family vacations. Services spending rebounded 8.5 percent last quarter, but remains 7.7 percent below its pre-pandemic level.

Two Wisconsin businesses illustrate the diverging paths of the two sectors.

When U.S. auto plants shut down last spring, it meant an immediate loss of business for Husco International, a manufacturer of hydraulic and electromechanical components for cars and other equipment. The company cut back production and furloughed many of its workers.

But by the end of May, car factories were humming again, and Husco’s business had begun to bounce back. In September, its automotive division had its best month on record.

Austin Ramirez, the company’s president and chief executive, said he still expected sales to be down about 10 percent for the full year. Despite September’s strong results, the pandemic and the economic weakness it has wrought are still dragging down demand. And the virus is causing other complications, leading to more employee absences. But the damage to his business is not nearly as severe as in the last recession a decade ago.

“In a cyclical business like ours, this has actually been a fairly mild recession that we’ve had tools to manage,” Mr. Ramirez said.

For Becky Cooper, it is a different story. Bounce Milwaukee, the family entertainment center that she owns with her husband, shut down in March and has yet to reopen. They experimented over the summer with selling takeout pizza and offering drive-in movies in the parking lot, but sales weren’t enough to offset costs.

The Coopers began the year dreaming up plans for what they would do once they paid off the Small Business Administration loan they used to open the business six years ago. Instead, they had to drain their bank accounts and take on more debt to get through the pandemic. Now, with coronavirus cases spiking in Wisconsin, they don’t know when they will be able to welcome customers again — or whether they can hold out until then.

“I’m watching those numbers go up and just feeling so powerless,” Ms. Cooper said. “The beginning of March seems almost insanely optimistic to me, and I don’t see how much past that we could possibly go.”

The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

Credit…Bryan Anselm for The New York Times

The number of workers newly filing for unemployment benefits dipped slightly last week, a sign that the country’s economic recovery remains fragile.

The Labor Department reported on Thursday that 732,000 workers filed new claims for unemployment benefits last week, a decrease of about 28,000 from the previous week.

New claims for Pandemic Unemployment Assistance, an emergency federal program that covers freelancers, part-timers and other workers who do not qualify for benefits under the regular unemployment system, were tallied at 360,000, up from 345,000.

On a seasonally adjusted basis, new state claims totaled 751,000.

For several weeks, new claims for state jobless benefits have totaled roughly 800,000 a week — much lower than the total during March and April after the pandemic struck, but extraordinarily high by historical standards.

“These are remarkably elevated levels of claims,” said Mark Hamrick, senior economic analyst for Bankrate.com. “There are huge cross sections of our society and sectors within it that are suffering.”

While new jobless claims are down, the number of people receiving assistance from Pandemic Emergency Unemployment Compensation — a federal program that provides 13 weeks of additional benefits after state unemployment insurance runs out — is rising, as millions of people who lost jobs early in the pandemic remain out of work more than six months later.

“We’re moving in the right direction but not nearly as quickly as we need,” said AnnElizabeth Konkel, a labor market economist for the Indeed Hiring Lab. “We need to recover quicker so that we don’t have people transitioning to long-term unemployment.”

Surges in coronavirus cases in the Midwest could foreshadow a fresh round of jobless claims in the coming weeks if states impose lockdowns or if people feel less comfortable shopping in stores or dining at restaurants, Ms. Konkel said. And as fall turns to winter, many businesses that have managed to stay afloat may be forced to close their doors.

“In warm weather, outdoor dining was a lifeline for many businesses,” said Julia Pollak, a labor economist at the career site ZipRecruiter. “Soon that will no longer be an option in many states, so we’re likely to see more layoffs.”

Credit…Sarahbeth Maney for The New York Times

When the pandemic hit, Laura Mayer was the general manager at Public House, a restaurant at Oracle Park, the San Francisco Giants’ baseball stadium. Ms. Mayer, 56, was furloughed in March, and started receiving about $450 a week in state unemployment benefits in May.

At the end of September — the same week that her state benefits ran out — the furlough turned into a permanent layoff. She got a 13-week extension through the federal Pandemic Emergency Unemployment Compensation program, enough to last through the end of the year.

“I don’t know what will happen when that unemployment is gone,” Ms. Mayer said. “What am I going to do then?”

Her partner, Steven Flamm, is also a restaurant worker. After being laid off in March, he found a job as a server in June. He works about 25 hours a week, but his income is low enough that he still qualifies for unemployment benefits.

With their combined income, they are able to scrape together the $1,600 monthly rent for their two-bedroom apartment, especially after they stopped ordering takeout food and canceled their cable-television subscription.

But Ms. Mayer, who has a lung condition, worries that Mr. Flamm, 63, could be exposed to the virus at work and bring it home to her. She also fears for her own future, as she has only worked in restaurants for 35 years and wonders how she will develop new skills and start over.

“All that I’ve built my whole life just got wiped out,” she said. “I just don’t know what my future is, and I think that’s the scariest part.”

Credit…Jeff Chiu/Associated Press

For a month, beginning in November, United Airlines will test passengers over the age of 2 for the coronavirus on select flights from Newark Liberty International Airport to Heathrow Airport in London, in a trial intended to help convince government officials that testing could be a crucial part of reopening international travel.

United will administer the rapid molecular Abbott ID Now Covid-19 test to people flying between Nov. 11 and Dec. 11 on Flight 14, departing at 7:15 p.m. on Mondays, Wednesdays and Fridays from Newark. Everyone hoping to be on those flights will have to test negative for the coronavirus to board the plane. Those who test positive will be isolated and asked to get in touch with their health care provider, and the airline will help them book a flight for a later date. People who do not want to take the test will be moved to another flight.

“We believe the ability to provide fast, same-day Covid-19 testing will play a vital role in safely reopening travel around the world and navigating quarantines and travel restrictions, particularly to key international destinations like London,” said Toby Enqvist, chief customer officer for United. In September, international air arrivals to New York’s five regional airports were down 82 percent compared with September 2019, according to data from the Port Authority of New York and New Jersey.

People on the flights will have to make appointments to get tested, and the airline is advising them to plan to arrive at least three hours before a flight. The testing site at Newark will be in the United Club near Gate C93.

The pilot program is intended to make passengers feel comfortable traveling again, but it won’t replace practices like mask wearing, social distancing and protocols for boarding and deplaning that have become mandatory in recent months. Passengers will still have to follow quarantine rules when they arrive in London.

The test comes on the heels of United and other airlines offering coronavirus testing to people traveling from mainland states to Hawaii, where those with a negative test can skip the state’s 14-day quarantine. Travel industry experts believe that testing will make it possible for people to bypass quarantines and make it easier for international travel to begin again, and United’s leadership team hopes that the trial will lead to more testing at airports.

Credit…Wallace Woon/EPA, via Shutterstock

Airbus suffered a consolidated operating loss of 636 million euros, or $745 million, in the third quarter, but the European aerospace giant managed to stop bleeding cash and expected continued stability after adjusting its business in response to the coronavirus crisis, the company said Thursday.

Airbus’s chief executive, Guillaume Faury, sounded a cautiously optimistic note about the company’s future at a news briefing, a day after its rival Boeing announced plans to slash another 7,000 jobs through the end of next year, building on a much larger cut announced this spring. Boeing expects to end 2021 with about 130,000 employees, nearly 19 percent fewer than at the start of this year.

“After nine months of 2020, we now see the progress made on adapting our business to the new Covid-19 market environment,” Mr. Faury said. “Despite the slower air travel recovery than anticipated, we converged commercial aircraft production and deliveries in the third quarter and we stopped cash consumption in line with our ambition.”

Airbus earlier this year moved to curb airplane production and slash 15,000 jobs by the summer of 2021 to rein in costs as the slump in air travel from the pandemic took its toll. This week, the World Tourism Organization reported that international tourist arrivals plunged 70 percent during the first eight months of 2020, and probably would not recover for at least another year.

Airbus reported positive cash flow of €600 million in the three months to September. Its ability to maintain that trajectory would hinge on whether there was any further deterioration of the world economy and air traffic, the company said.

Mr. Faury said he expected Airbus to keep generating cash, despite new lockdowns to curb the virus announced Thursday in France and Germany, where Airbus has production operations.

The coronavirus crisis nonetheless weighed heavily on the company’s results. The plane maker took a third-quarter restructuring charge of €1.2 billion, reflecting the cost of planned job cuts.

Over the nine months of the fiscal year, Airbus had a consolidated operating loss of €2.1 billion. Third-quarter revenue fell 27 percent to €11.2 billion, reflecting a 33 percent drop in the main commercial aviation division. Airbus’s net loss from July to September was €767 million, compared with a profit of €989 million a year earlier.

Credit…Carl Court/Agence France-Presse — Getty Images

Royal Dutch Shell, Europe’s largest oil company, said on Thursday that it would raise its dividend for the third quarter by about 4 percent to 16.65 cents and keep increasing it by a similar amount annually in an effort to win back investors.

Investors have pummeled Shell’s shares since the company cut its dividend earlier this year for the first time since World War II. The share price was up about 2 percent in trading on Thursday.

Ben van Beurden, the company’s chief executive, said that Shell would be able to afford both increasing payouts to shareholders and the large investments needed to put in place his plans to shift Shell away from emissions generating oil and natural gas to cleaner energy like wind, solar and hydrogen. The idea is to make Shell “ a compelling investment case,” Mr. van Beurden said in a statement.

Shell’s adjusted earnings of $955 million for the third quarter were 80 percent lower than in the period the previous year as the company struggles with lower oil and natural gas prices stemming from the coronavirus pandemic.

Mr. van Beurden said during a news conference that Shell would sharply increase investment in what he labeled Shell’s future businesses to roughly 25 percent of the annual total of capital spending of around $20 billion, from 11 percent. Those businesses including retailing, renewable energy and electric power. Mr. van Beurden said that 2019 was probably Shell’s “high point” for oil production.

Credit…Michel Euler/Associated Press

Tiffany & Company said on Thursday that it has agreed to cut the price of its sale to the French conglomerate LVMH Moët Hennessy Louis Vuitton. The settlement would end a dispute between the companies and seal one of the luxury world’s largest deals.

Tiffany and LVMH agreed to a revised price of $131.50 a share, down from $135. That would bring the sale to just under $16 billion, or about $400 million less than before. They also agreed to settle dueling lawsuits in a Delaware court.

Directors of Tiffany met late on Wednesday to vote on the proposal.

LVMH agreed to buy Tiffany in November 2019, intent on adding the company’s diamond rings and robin’s egg blue boxes to a stable of brands that includes Louis Vuitton, Dior and Givenchy. The acquisition would give LVMH a bigger foothold in the United States, executives said at the time, as well as expose Tiffany to more shoppers in Europe and China. The move also promised to cement the status of Bernard Arnault, the LVMH chairman and chief executive, as the top deal maker in the luxury business.

But the French luxury giant grew increasingly nervous about the transaction, its biggest ever, as the pandemic devastated the retail industry. Tiffany’s sales fell by nearly 40 percent in the six months to July, and it recorded a loss of more than $30 million. The company’s shares fell far below the deal price, as investors doubted LVMH’s resolve in going through with the takeover.

A deadline to complete the deal in August was delayed by three months and then, in September, LVMH threatened to abandon the takeover altogether, accusing Tiffany of poor financial performance and breaches of the acquisition agreement. Also, and unusually, LVMH said that the French government had asked it to pause the takeover because of the United States’s trade battle with France.

Tiffany sued LVMH in a Delaware court to compel the company to complete the deal. After more legal wrangling about the timing of the trial, it was scheduled for early January. Now, that might not be needed.

Credit…Spencer Platt/Getty Images
  • U.S. stock futures wobbled on Thursday as traders received an update on the health of the U.S. economy. The S&P 500 index had its worst day in months on Wednesday and a measure of volatility climbed to its highest level since June after new lockdowns in France and Germany exposed the fragility of the economic recoveries from the pandemic. European stocks tentatively reversed some of their losses on Thursday morning.

  • The Stoxx Europe 600 index rose 0.3 percent, after tumbling nearly 3 percent on Wednesday. In Germany, the DAX index climbed 0.4 percent and both the CAC index in France and the FTSE 100 index in Britain gained 0.3 percent. In Japan, the Nikkei 225 index closed 0.4 percent lower and the yen was 0.2 percent stronger against the U.S. dollar after the Bank of Japan kept policy the same but cut its forecasts for economic growth and inflation.

  • A report on U.S. gross domestic product data for the third quarter, released Thursday, showed the fastest quarterly increase on record but revealed an incomplete recovery, with the economy still several percentage points smaller than before the pandemic. G.D.P. grew 7.4 percent in the third quarter, the Commerce Department said.

  • The European Central Bank will announce its latest policy decision later on Thursday. The resurgence of the pandemic in the eurozone has led governments in its largest economies to reinstate widespread lockdowns, shuttering hospitality and leisure businesses and asking people to stay at home through November. This could add pressure on policymakers to increase monetary stimulus.

  • Shares in Lloyds Banking Group rose 3 percent after the lender reported a pretax profit of more than 1 billion pounds ($1.3 billion) for the third quarter amid a surge in demand for mortgages and said it expected to record fewer losses on its loans. Shares in Royal Dutch Shell climbed 2 percent after the oil and gas company returned to profit in the third quarter and said it would increase dividends to shareholders.

Credit…Philippe Lopez/Agence France-Presse — Getty Images

France was bracing for a fresh blow to its beleaguered economy as President Emmanuel Macron reimposed a nationwide lockdown through December to prevent an alarming surge of coronavirus cases from spiraling out of control.

In a televised address on Wednesday, Mr. Macron said the virus had rapidly resurfaced “everywhere” in France, and that requiring businesses to close and people to shelter at home was the only solution to curbing the pandemic. He pledged substantial financial support to prevent a wave of bankruptcies and layoffs from rippling through the eurozone’s second-largest economy.

“You can’t have a prosperous economy when you have the virus circulating throughout the country,” he said.

The new lockdown, which will begin Thursday night, would still allow essential sectors to keep operating, and it won’t be as severe as the country’s two-month nationwide quarantine earlier this year, when the entire country was shut in, Mr. Macron said.

Still, he acknowledged it would have a severe impact on businesses that have already grown cash poor because of previous restrictions to curb the virus.

France is expected to report on Friday a jump in growth during the third quarter, when summer vacations helped fuel a temporary economic revival.

But those figures will likely be eclipsed by the new lockdown, economists warned. The government has calculated that 60 billion euros is lopped off economic activity for every month in which a total lockdown is active.

“Macron did not want to be here,” Mujtaba Rahman, the managing director for Europe at London-based Eurasia Group, said in a note to clients ahead of the announcement. “He had hoped by now to be celebrating an economic recovery from the first lockdown.”

Vulnerable sectors are likely to sink further, including retail, aviation, tourism and hospitality, which make up over 10 percent of economic activity. In Paris alone, for example, the hotel occupancy rate had already plunged to 26 percent in September, when a new curfew was put into effect, according to MKG, a French consulting firm. That figure is likely to worsen.

Bars, restaurants and nonessential businesses will close, although students will continue to go to school. Factories, farms and construction sites will stay open, along with some public services, to limit potentially wider economic damage. Earlier Wednesday, Germany announced the closure of restaurants and bars, starting Monday.

French lawmakers last week approved a fresh 100 billion euro package to bolster the country’s economy, on top of nearly 500 billion in financial aid announced during the previous lockdown. Businesses hardest hit by the new confinement will get 10,000 euros per month, and their payrolls will effectively be nationalized so that employees who cannot work may keep their jobs.

Firms that can’t pay rent will be able to obtain waivers, while small- and medium-sized businesses would get additional financial help, Mr. Macron said. Remote work will be “the go-to solution” for all companies, Mr. Macron said.

“The economy must not come to a halt,” he said.

  • Ford Motor reported a big jump in profit in the third quarter after a yearslong restructuring and a rebound in sales after the pandemic shut down dealerships and factories for about two months this spring. The automaker earned $2.4 billion in the three months ended in September, up from $425 million for the same period a year earlier. It lost money overseas, but the company’s North American operations and its division that offers credit did well.

  • The online lender Social Finance, better known as SoFi, received tentative approval on Wednesday for a national banking charter, which would let the company hold deposits and offer consumers a broader range of financial services. The Office of the Comptroller of the Currency granted SoFi preliminary approval for a charter, subject to SoFi’s compliance with additional regulatory requirements. In particular, SoFi must apply for Federal Reserve membership and obtain deposit insurance from the Federal Deposit Insurance Corporation. Those next steps will take several months, at the least; the earliest SoFi could actually start running a bank would be some time next year.

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