Rising Covid-19 cases are taking a steep toll on economic activity, battering the labor market even as new vaccines offer a ray of hope for next year.
The number of Americans filing initial claims for unemployment insurance remained high last week, the Labor Department reported Thursday. After dropping earlier in the fall, claims have moved higher, and they remain at levels that dwarf the pace of past recessions.
There were 935,000 new claims for state benefits, compared with 956,000 the previous week, while 455,000 filed for Pandemic Unemployment Assistance, a federally funded program for part-time workers, the self-employed and others ordinarily ineligible for jobless benefits.
On a seasonally adjusted basis, the number of new state claims was 885,000, an increase of 23,000 from the previous week.
Consumer caution, coupled with new restrictions on business activity like indoor dining, has pummeled the hospitality industry, lodging, airlines and other service businesses. The debut of a coronavirus vaccine this week offers the prospect of relief, but until mass inoculations begin next year, the economy will remain under pressure.
“Businesses are closing, and as a result, we are seeing job losses mount — and that’s exactly what we were fearful of going into the winter,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “It’s going to be a challenging few months, no doubt.”
At the end of November, more than 20 million workers were collecting unemployment benefits under state or federal programs, Labor Department data indicates.
With the weakening economy as the backdrop, Republican and Democratic leaders in Congress continued talks on Wednesday on another pandemic relief bill, something that economists have warned is overdue. Without action, two key programs for unemployed workers will expire this month, cutting off benefits to millions.
“We are not moving in the right direction,” said Gregory Daco, chief U.S. economist at Oxford Economics. “With the looming expiration of benefits, it’s even more worrisome.”
Data released on Wednesday showed a 1.1 percent drop in retail sales in November, a disappointing start to the crucial holiday season. Gus Faucher, chief economist at PNC Financial Services, expects economic growth to be weak for the next few months before picking up later in 2021.
“Until we get a lot of people vaccinated, the economy will face a difficult test,” he said. “I don’t know if we will see an outright contraction or the loss of jobs, but the pace of improvement will slow markedly.”
The Securities and Exchange Commission on Thursday said that Robinhood, the stock trading app, had misled its customers about how it was paid by Wall Street firms for passing along customer trades, the latest enforcement action against the popular platform.
Robinhood agreed to pay a $65 million fine to settle the charges, the latest blow to the company whose popularity has surged since its founding, offering commission-free trading and an easy-to-use app. Critics have said that the company relied on practices that hurt its rapidly growing base of customers, who tend to be younger and less experienced.
The charges announced on Thursday apply to Robinhood’s disclosures from 2015 to late 2018, the regulator said.
The S.E.C. had charged Robinhood with “repeated misstatements that failed to disclose the firm’s receipt of payments from trading firms for routing customer orders to them, and with failing to satisfy its duty to seek the best reasonably available terms to execute customer orders,” it said in a statement.
“Robinhood provided misleading information to customers about the true costs of choosing to trade with the firm,” Stephanie Avakian, director of the S.E.C.’s enforcement division, said in a statement. “Brokerage firms cannot mislead customers about order execution quality.”
As part of the settlement, Robinhood did not admit or deny the allegations. But Dan Gallagher, its chief legal officer, said that the company was committed to helping meet its customers needs. “The settlement relates to historical practices that do not reflect Robinhood today,” he said in a statement.
Millions of investors have turned to Robinhood in recent years, lured by the simple fact that the site allows investors to trade without paying commissions. Much of the retail brokerage industry has since followed suit, resulting in a surge of retail trading activity this year.
Because they do not charge commissions, brokerage firms like Robinhood make money by charging high-speed trading firms for the right to execute their clients’ orders, a practice called payment for order flow. The trading firms are willing to pay Robinhood because they can eke out incremental gains on individual trades, which because of their speed and scale add up to large amounts of money.
But that also means that the high-speed trading firms determine the price one of Robinhood’s clients would pay for shares, or what they might receive for selling stock.
The S.E.C. said that for several years, the company had failed to be transparent with customers about its use of payment for order flow. It also said that the brokerage firm had violated a duty to get customers the best possible prices for their orders, tying that failure to the high payment rates it received from trading firms in exchange for customers’ trades.
In its order summarizing the settlement, the S.E.C. said that although the company was publicly declaring that its customers were getting trading terms as good as or better than what rivals offered, internal reviews showed that was far from the case.
The federal charges come a day after regulators in Massachusetts accused Robinhood of aggressively courting and manipulating inexperienced investors and then failing to protect them. In a complaint, the Massachusetts secretary of the commonwealth, William F. Galvin, said that Robinhood focused on signing up young traders with perks like free shares, and then used “gamification” marketing techniques to persuade them to trade often.
Matt Phillips and Gregory Schmidt contributed reporting.
Nearly a year after the coronavirus outbreak, the full impact of the pandemic on the U.S. economy remains unclear. Some of the most obvious indicators are in conflict: As some companies report enormous profits, the number of unemployed Americans is nearly 10 million more than it was in February, and hundreds of thousands are expected to have filed new unemployment claims last week.
The Times interviewed a rage of economists and experts who suggested looking at eight measures to understand the state of the economy that President-elect Joseph R. Biden Jr. will face on Jan. 20.
Wages: That wages and salaries have bounced back quickly is a sign that things are on track for a rapid recovery. During the last recession — which Mr. Biden and then-President Barack Obama inherited in 2009 — drops of wages and salaries took years to recover.
Unemployment for Black men: The current crisis has had a particularly negative, persistent impact on employment for Black men, who face an unemployment rate of 11.3 percent, five percentage points higher than the unemployment rate for white men.
Long-term unemployment: The number of Americans who are still in the labor force but have been unemployed for more than six months has been increasing since April. A sociologist with a left-leaning think tank said the rise in long-term unemployment, coupled with the fact that millions of workers have left the labor market altogether since February, indicated “a very serious problem in connecting people who are able to produce needed goods and services with the opportunity to do so.”
Housing costs: Home prices and rents have risen during the pandemic. But while the rising costs have strained low-income renters, the rise in housing prices typically signals strong economic growth.
New businesses: Even as countless businesses have been forced to close over the course of the pandemic, the increase in business applications over the last year is a sign that the economy may be adapting rather than totally seizing.
Spending on goods: Though the pandemic has altered Americans’ day-to-day lives, it hasn’t halted their spending as much as some feared it would. Consumption has shifted toward goods over services — buying alcohol from stores instead of from bars, for example — bucking a generational trend toward a service economy.
Food scarcity — More families across the country are unable to meet their basic needs for housing and food security, according to a Census Bureau survey.
Google received a kernel of good news on Thursday when European Union authorities approved its acquisition of the fitness-tracking company Fitbit after a lengthy review to determine whether the $2.1 billion takeover violated antitrust laws.
European regulators had been under pressure to block the deal, first announced last year, but allowed it to move forward after Google agreed not use the health and fitness data collected from Fitbit’s wearable devices and services to target ads at internet users. Google also agreed to continue providing its free Android software to competing makers of fitness and health devices.
The announcement comes as Google faces two antitrust lawsuits in the United States. On Wednesday, 10 state attorneys general accused the Silicon Valley giant of abusing its power in digital advertising. In October, the Justice Department accused the company of using illegal tactics to maintain dominance for its search engine.
The European Commission, the E.U.’s executive body, has brought three antitrust cases against Google in recent years. The company is appealing the fines.
The Bank of England, which has been battling not only a pandemic but the threat of a disruptive exit from the European Union, made no changes to its monetary policy Thursday amid signs that both threats could be receding.
The central bank left its benchmark interest rate at 0.1 percent and did not increase its purchases of government bonds. In November, at its last meeting, the bank’s Monetary Policy Committee expanded the bond purchases, a way of holding down market interest rates, by £150 billion. The bank said Thursday it would continue to aim for total asset purchases of £895 billion, or $1.2 trillion.
The bank also extended by six months a program that allows commercial banks to borrow money at or close to the benchmark interest rate, if they funnel the money to small and midsize businesses.
Successful development of vaccines against the coronavirus are “likely to reduce the downside risks to the economic outlook from Covid,” the Monetary Policy Committee said in a statement. But the committee also said growth would be “a little weaker” than policymakers expected in November because of sharper lockdowns.
Negotiators for Britain and the European Union continued to meet in Brussels on Thursday, and there were indications they had narrowed their differences, potentially averting a no-deal Brexit that would be bad for both economies, but especially Britain’s.
In one example of the potential damage, the German automaker BMW warned that it would have to significantly raise prices for cars sold in Britain if there were no deal. Nicolas Peter, the company’s chief financial officer, told German media on Wednesday that BMW would also have to raise the price of British-made Minis sold in Europe because of import and export tariffs.
By: Ella Koeze·Source: Refinitiv
A generally upbeat mood prevailed in global stock markets on Thursday, as lawmakers from both parties in Washington signaled they were close to reaching a deal on an economic aid package, an extraordinary shift in tone from both Republicans and Democrats, and more people received a coronavirus vaccine.
Investors are also looking toward an economic recovery sometime next year with one coronavirus vaccine already approved in several countries, and a second close to receiving emergency approval.
Still, the pandemic is far from over and continuing to take a staggering human and economic toll. Claims for state unemployment insurance illustrated this on Thursday, with 935,000 filing new claims last week, the Labor Department said.
The market gains on Thursday were relatively small: the S&P 500 rose about half a percent in early trading. The Stoxx Europe 600 gained 0.5 percent, while the FTSE in Britain was flat. Most Asian indexes closed the day with gains.
In Washington, talks continued on a $900 billion stimulus plan that would provide a new round of direct payments to millions of Americans as well as additional unemployment benefits, food assistance and rental aid. Republicans and Democrats alike signaled that they were ready to coalesce around the main elements, though a final agreement hasn’t been reached.
The Federal Reserve chair, Jerome H. Powell, on Wednesday made a point of saying the central bank was in no mood to begin scaling back its efforts to bolster the economy. He said the Fed’s policy decisions were intended to show that policymakers would “deliver powerful support to the economy until the recovery is complete.” He said the economy would face near-term challenges, but would likely bounce back quickly once vaccines were widely available, perhaps by midyear.
Ten state attorneys general on Wednesday accused Google of illegally abusing its monopoly over the technology that delivers ads online. The state prosecutors said that Google overcharged publishers for the ads it showed across the web and edged out rivals who tried to challenge the company’s dominance. They also said that Google had reached an agreement with Facebook to limit the social network’s own efforts to compete with Google for ad dollars. Google said the suit was “baseless” and that it would fight the case.
Tyson Foods has fired seven workers accused of being involved in a betting pool over how many employees would get the coronavirus, the company said Wednesday. The son of a meatpacking worker who died in April filed a suit claiming that the manager of the Waterloo, Iowa, pork plant organized a “cash buy-in, winner take all” betting pool. In all, about 1,000 workers at the plant — about a third of the work force — tested positive for the virus. Tyson had hired the law firm Covington & Burling to conduct an independent investigation of the matter, led by Eric H. Holder Jr., the former U.S. attorney general.
The Fed left interest rates at near-zero on Wednesday and committed to buying $120 billion worth of government-backed bonds per month for the foreseeable future. The central bank formally tied those purchases to its twin goals of maximum employment and stable inflation, saying they would continue at their current pace “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.”
The National Retail Federation, an industry trade group, said retail workers should be prioritized for a coronavirus vaccine, citing their frontline work in stores, distribution centers, restaurants and delivery services. The request was made in a letter sent on Wednesday to the Advisory Committee on Immunization Practices, a panel of independent experts advising the Centers for Disease Control and Prevention on how to distribute the vaccines. The trade group estimated that the retail industry employs 32 million workers.
The Pandemic’s Toll
There remains widespread confusion about a key element of the plan to protect some of the most vulnerable Americans against the coronavirus, report Rebecca Robbins and Jessica Silver-Greenberg for The New York Times: how nursing homes will get consent to vaccinate residents who aren’t able to make their own medical decisions.
Some states are starting vaccinations in their nursing homes this week, but a broader nationwide effort will start in earnest on Monday as CVS and Walgreens employees begin to arrive at tens of thousands of nursing homes and assisted-living facilities to vaccinate staff and residents.
A CVS executive said such residents’ legal representatives will be able to provide consent to nursing homes electronically or over the phone, but officials at multiple large nursing home chains said they were not aware of that.
If residents or their representatives have not given consent before CVS or Walgreens employees show up, it is not clear whether or when they will have another chance to be inoculated.
There is no federal requirement for people to give consent before getting vaccinated, but it is standard practice and is often needed for billing purposes. States have different requirements about how medical consent can be given and what information needs to be provided to the person who is consenting. Guidance from the Centers for Disease Control and Prevention is that residents or their representatives should receive a fact sheet about the coronavirus vaccine and then consent to receiving it.
Executives from CVS and Walgreens said in interviews that they had been planning the vaccination campaign for months and were confident it would work. “If there are concerns or challenges, we certainly are open to work with facilities to try to minimize any disruption that they may have,” said Rick Gates, a Walgreens executive leading the company’s planning.