A fresh snapshot of the labor market and the state of the economic recovery will arrive on Thursday when the Labor Department issues its weekly report on unemployment claims.
Amid a persistent drop in coronavirus cases, economists expect to see that new claims for state benefits ticked down again last week even as they remained extraordinarily high. While the economic crisis has probably peaked, they say, the lasting damage to the labor market is uncertain. That could become clearer in the coming months.
Unemployment claims “really have been at an elevated level for a long time,” said Diane Swonk, chief economist for the accounting firm Grant Thornton. “What’s going to be key going forward is do they plummet at some point in time or are there some longer-term issues?”
One marker that economists are watching is the number of people filing for extended benefits, an indication that they have exhausted their regular unemployment benefits, which last in many states for 26 weeks.
“What we’re concerned about is that more people who are falling out of regular claims are moving into extended claims,” said Gregory Daco, chief U.S. economist at Oxford Economics. “That is not a good sign.”
Congress continues to work on a $1.9 trillion relief package proposed by President Biden, but adding to the urgency is the expiration of supplemental unemployment benefits in mid-March. The Biden proposal would extend them through September.
There have been some positive signs for the job market in recent days. Retail sales surged 5.3 percent in January, a bigger gain than expected, most likely powered by the latest round of stimulus checks.
AnnElizabeth Konkel, an economist for the career site Indeed, said retail job postings on Indeed were 2.6 percent higher than in February 2020. Over all, job postings on the site are up 3.9 percent.
But the economy is still weak. The Labor Department’s employment report for January, which showed a gain of just 49,000 jobs, reaffirmed the pandemic’s devastation. Of the 22 million jobs that disappeared, roughly 10 million remain lost.
Thursday’s hearing about the recent GameStop trading mania, to be held at noon by the House Committee on Financial Services, will probably feature populist anger from both parties, directed at both the popular trading app Robinhood and the short sellers who targeted the video game retailer.
Representative Alexandria Ocasio-Cortez, a New York Democrat and a member of the financial services panel that is holding the hearing, called Robinhood’s decision amid the frenzy to halt some trades of GameStop “unacceptable.” Representative Rashida Tlaib, a Michigan Democrat who is also on the committee, called the decision “beyond absurd” and accused the app of “blocking the ability to trade to protect” hedge funds.
The frustration with Robinhood and the hedge funds reflects a national backlash against the power of the nation’s largest corporations. In the last decade, a growing number of lawmakers from both political parties have charged that American business has failed their constituents, setting off a political reckoning from Wall Street to Silicon Valley.
The anger against Robinhood is bipartisan. Senator Ted Cruz, Republican of Texas, shared Ms. Ocasio-Cortez’s comments in agreement in January. “Free the traders on @RobinhoodApp,” Senator Marsha Blackburn, Republican of Tennessee, said in a tweet of her own.
Return at noon for video and live coverage of the hearing.
Keith Gill, the former MassMutual wellness education director who advocated for shares of GameStop in his free time, is prepared to tell a House committee on Thursday that he never provided investment advice for a fee and did not “solicit anyone to buy or sell the stock for my own profit.”
The statement made no mention of the fact that Mr. Gill was a registered securities broker and a chartered financial analyst while he was posting online about GameStop under the alias Roaring Kitty and another pseudonym that included a vulgarity.
In the five-page statement, Mr. Gill described himself as a true believer in the fortunes of GameStop, a video game retailer, and said his postings online about the company had nothing to do with his job at MassMutual. He portrayed himself as a one-person operation doing battle with wealthy hedge funds, some of which were shorting shares of GameStop and betting on its collapse.
“The idea that I used social media to promote GameStop stock to unwitting investors is preposterous,” Mr. Gill said in the statement, which his lawyer provided to the House Committee on Financial Services in advance of Thursday’s hearing into the speculative and aggressive trading last month in shares of GameStop. “I was abundantly clear that my channel was for educational purposes only, and that my aggressive style of investing was unlikely to be suitable for most folks checking out the channel.”
He said he had shared his investment ideas online because he “had reached a level where I felt sharing them publicly could help others.”
Mr. Gill described himself as an average guy who earned a modest income and was effectively out of work for two years before landing at MassMutual in April 2019. The statement skirted over how much money he had made trading shares of GameStop — though he said he had told his family at one point that “we were millionaires.” He also did not mention that Massachusetts securities regulators are investigating whether he violated any securities industry rules and regulations with his social media postings.
On Tuesday, Mr. Gill and his former employer were named as defendants in a proposed class-action lawsuit that claimed he misled retail investors who bought shares of GameStop during its 1,700 percent rally only to suffer losses when the stock quickly gave back most of those gains. The lawsuit contends that MassMutual and its brokerage arm did not properly supervise Mr. Gill, who was an employee until a few weeks ago.
Mr. Gill’s lawyer, William Taylor, declined to comment on the lawsuit. A spokeswoman for MassMutual said the company was reviewing the matter with Mr. Gill.
Mr. Gill is one of a half-dozen witnesses scheduled to testify at the hearing, which will focus on the impact of short selling, social media and hedge funds on retail investors and market speculation.
Energy prices
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Natural gas rose futures, which have jumped 13 percent since last Thursday, were up 0.5 percent. Production has stalled, and demand has climbed, as a result of the freezing temperatures. On Wednesday, Gov. Greg Abbott of Texas signed an executive order directing natural gas providers to stop all shipments of gas across state lines, ordering them to instead direct those sales to Texas power generators. Natural gas is responsible for the majority of the Texas power supply.
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Oil futures also continued feel the effects of the winter storms that have disrupted production and caused widespread power outages. West Texas Intermediate, the United States benchmark, rose for a fourth day to $61.28 a barrel. It has held above $60 a barrel this week for the first time in 13 months.
U.S. markets
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Stocks on Wall Street were set to open lower on Thursday, following declines in European and Asian stock indexes, ahead of the latest update on the U.S. labor market. The Labor Department will publish its weekly report on new state jobless benefit claims, which economists expect to register a small decline.
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The S&P 500 index was poised to open down 0.4 percent, halting four consecutive days of gains.
Congressional hearing on trading frenzy
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Later on Thursday the House Financial Services Committee will question critical players in the GameStop and Reddit meme-trading frenzy, including the chief executive Robinhood, the trading app, and Keith Gill, who went by Roaring Kitty on Reddit where he talked enthusiastically about his investment in GameStop.
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GameStop’s shares closed at $45.94 on Wednesday, down from a peak of $325 on Jan. 29. Mr. Gill is expected to tell lawmakers that he did not “solicit anyone to buy or sell the stock for my own profit.”
Europe
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Shares in mining companies, including Rio Tinto, BHP and Glencore, were the best performers on the FTSE 100 index. The economic recovery from the pandemic, led by Chinese growth, has meant a boom in metal prices turning into a windfall for shareholders. Rio Tinto shares were up more than 10 percent on Thursday as iron ore futures jumped more 6 percent. The miners all announced large dividend payouts this week.
A top Federal Reserve official delivered a stark warning on Thursday morning: Banks and other lenders need to prepare themselves for the realities of a world wracked by climate change, and regulators must play a key role in ensuring that they do so.
“Financial institutions that do not put in place frameworks to measure, monitor, and manage climate-related risks could face outsized losses on climate-sensitive assets caused by environmental shifts, by a disorderly transition to a low-carbon economy, or by a combination of both,” Lael Brainard, one of the central bank’s six Washington-based governors, said in remarks prepared for delivery at an Institute of International Finance event.
Her comments come against a grim backdrop as abnormally cold weather wallops Texas — leaving millions without electricity and underlining that state and local authorities in some places are underprepared for severe weather events, which are expected to become more frequent.
Such disruptions also matter for the financial system: They pose risks to insurers, can disrupt the payment system, and can make otherwise reasonable financial bets dicey. That makes it important for the Fed to understand and plan for them, central bank officials have increasingly said.
Ms. Brainard pointed out that financial companies are beginning to address the risk by “responding to investors’ demands for climate-friendly portfolios,” among other changes. But she added that regulators like the Fed must also adapt. She raised the possibility that bank overseers may need new supervisory tools because of the challenges of climate oversight, which include long time horizons and limited precedent.
“Scenario analysis may be a helpful tool” to assess “implications of climate-related risks under a wide range of assumptions,” Ms. Brainard said, making it clear that scenarios would be distinct from full-fledged stress tests.
She noted that the Fed’s Supervision Climate Committee, which was announced last month, would work “to develop an appropriate program” to supervise banks’s climate-related risks. The Fed is also co-chair of a task force on climate-related financial risks at the Basel Committee on Banking Supervision, a global regulatory group.
Weighing in on climate risks publicly is new territory new for the Fed. Officials spent years tiptoeing around the topic, which is politically charged in the United States. The central bank only fully joined a global coalition dedicated to research on girding the financial system against climate risk late last year, and it has recently seen pushback from Republican lawmakers over the possibility of climate-tied bank stress tests.
The aerospace giant Airbus announced a 1.1 billion euro loss for 2020 on Thursday and warned that the industry might not recover from the disruption caused by the pandemic for two to four years, as new virus variants delay a resumption of worldwide air travel.
The world’s largest planemaker eliminated its dividend for a second straight year and predicted a leveling off in deliveries of its popular commercial jets, the company’s chief executive, Guillaume Faury, said.
“As of today we only expect the market to recover between 2023 and 2025,” Mr. Faury said. “The pace of recovery will depend not only on the pandemic and the rate of vaccinations, but also on the decision of governments, if they choose to tighten pandemic conditions or, as I hope, restore freedom,” he said.
The aircraft manufacturer, based in Toulouse, France, said revenue fell by 29 percent to 49.9 billion euros (about $60 billion). Still, the company is outperforming its rival Boeing, which suffered a $11.9 billion loss in 2020, weighed down by the setbacks from the 737 Max, which was grounded after 346 people were killed in two crashes involving the plane, and delays of the first deliveries of the 777X.
Airbus delivered 566 aircraft to airlines in 2020, 40 percent less than expected before the pandemic. In a sign of how badly air travel has been hit, some airlines avoided answering Airbus’s calls to alert them that the new aircraft they had ordered before the pandemic hit was ready, Mr. Faury said.
Given the uncertain outlook, Airbus won’t ramp up aircraft deliveries this year, but will instead plan to deliver about the same number of aircraft as it did in 2020. The fall in demand has left around 100 finished jets sitting parked at Airbus factories, down from a peak of around 145 last year.
Investors were not pleased with the update. Shares in Airbus fell over 3 percent in early trading.
Despite the gloomy short-term forecast, Mr. Faury said the company would continue to ramp up for a substantial change in future business, based on a new generation of carbon neutral airlines that it is designing and expects to unveil sometime this decade.
Weighing on the company’s finances were a 1.2 billion euro charge linked to more than 11,000 layoffs carried out last year, as well as another 385 million euros in costs associated with the ending of its A380 super jumbo jet.