Business Live Updates: Covid and Markets News

Fresh evidence of the job market’s fragility emerged Thursday, underscoring the economic challenges for the Biden administration and heightening the pressure for a fresh wave of stimulus from Washington.

The Labor Department said 961,000 workers filed initial claims for state unemployment benefits last week. On a seasonally adjusted basis, new claims totaled 900,000.

The figures represented a decline from the previous week but remain extraordinarily high by historical standards and have recently reverted to levels not seen since midsummer. In the comparable week a year ago, before the pandemic, there were 282,000 initial claims.

“Unfortunately, the labor market started 2021 with very little momentum,” said Greg Daco, chief U.S. economist at Oxford Economics. “There hasn’t been any improvement, and if anything, there has been deterioration.”

New restrictions and lockdowns amid a surge in cases in many parts of the country have decimated employment in the restaurant and leisure and entertainment industries, with little relief in sight.

« The level of layoffs is very high, and the virus is causing serious disruption,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “It’s going to be pretty rough over the next few months.”

The Labor Department reported earlier this month that employers cut payrolls by 140,000 in December, the first decline since the mass layoffs of last spring.

The beginning of vaccinations in December provided optimism about a quick turnaround, but the slow rollout in many parts of the country has set back those hopes. On the other hand, the passage of a $900 billion stimulus package last month and the prospect of more aid under the Biden administration allayed fears of a double-dip recession.

Among the emergency federal programs extended by the recent legislation was Pandemic Unemployment Assistance, which helps freelancers, part-time workers and others normally ineligible for state jobless benefits. A total of 424,000 new claims were filed under the program last week, up from 285,000 the previous week.

Mr. Daco said uncertainty about the program’s continuation might have held back claims late last year, so the jump last week might represent belated filings as well as the overall weakness of the labor market.

But Pandemic Unemployment Assistance and a $300 weekly supplement to state and federal unemployment benefits will both expire in mid-March without new legislative action.

Ms. Farooqi said meaningful improvement in the economy was unlikely by then. “More aid is needed for households and businesses,” she said. “Many businesses will shut down, and a lot of jobs will be lost without it. That poses a downside risk for the economy in the near term.”

Over all, the best bet for the economy is more vaccinations, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

“There is no better economic stimulus than a successful vaccine rollout,” he said. “It will reduce the risk of human interaction and provide a basis on which different types of businesses can open more durably.”

Even as the labor market struggles, there are signs that other economic measures are turning more positive. Interest rates are rising, an indication that traders expect faster growth and higher prices once mass inoculations take hold and the coronavirus recedes.

Yields on the benchmark 10-year Treasury note have jumped by 20 basis points to 1.10 percent over the last two months, breaking the 1 percent threshold on Jan. 6. Rates remain extremely low by historical standards, but a continuation in the surge could threaten one of the leading bright spots in the economy — the housing market.

Rock-bottom interest rates have prompted a surge in home buying and refinancing, as borrowers take advantage of the Federal Reserve’s move to lower rates after the coronavirus struck last March.

Low rates have also buoyed the stock market, as yield-hungry investors turned to equities in search of faster growth. An upturn in interest rates — reflecting lower bond prices as other investments become more attractive — would almost certainly undermine the momentum that has propelled major market indexes to record highs.

So far, economists play down the likelihood of a surge in rates. But all eyes are nevertheless on yields, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.

“It’s the No. 1 question I get from clients,” Mr. Tannenbaum said. “I know there are folks out there that think the 10-year yield is poised to become unmoored and shoot up to 1.5 or 2 percent. But I find that highly unlikely.”

Even if Mr. Tannenbaum is right about the solidity of the real estate market, rising yields could put a brake on the Biden administration’s stimulus efforts.

So-called bond vigilantes drove rates higher in the 1990s during the Clinton administration, helping to force officials to make deficit reduction a higher priority than new spending.

“We just bumped up our rate forecast for 2021,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “If Biden gets his way with more stimulus, there will definitely be more concern about the pace of Treasury bond issuance. This could all make the bond market nervous.”

For now, though, a surge in rates is unlikely, said Gus Faucher, chief economist at PNC Financial Services in Pittsburgh. What’s more, the Federal Reserve can push back on yields, whether by increasing asset purchases or buying more longer-term debt.

“The Fed has some options,” Mr. Faucher said. “And the Biden administration has made it clear the economy needs more stimulus. I don’t expect them to balk on their stimulus plans even if rates move higher.”

The New Yorker’s union employees did not go to work on Thursday.

The more than 100 employees represented by The New Yorker Union, which includes fact checkers, web producers and some other editorial employees, decided on the daylong walkout after recent rounds of negotiations with management failed, said Natalie Meade, the union chair.

The issue is pay. Ms. Meade, who is a fact checker at the magazine, said the union wanted to raise the salary minimum to $65,000. In the recent negotiations, managers at The New Yorker did not hit that number, she said, instead offering wage increases that she called “insulting.”

“They already know they’re underpaying us,” Ms. Meade said.

The union, which does not represent The New Yorker’s staff writers, has been working toward a collective bargaining agreement since 2018. The walkout started at 6 a.m. on Thursday and was scheduled to last 24 hours.

Before negotiations, the union conducted a pay study based on data from Condé Nast, the magazine’s parent company. The survey found that union workers at The New Yorker had a median salary of $64,000 and that the company’s editorial assistants were paid a median of $42,000.

In a statement on Thursday, a New Yorker spokesperson said that proposals made during the recent bargaining sessions on salary were “initial offers.”

“It is our hope that, as opposed to resorting to actions like this one, the union will bargain in good faith and return a counter proposal, as is standard in negotiations,” the statement said. “That way, we can work together productively to reach a final contract as quickly as possible.”

The New Yorker spokesperson also faulted the union’s pay study, adding: “We are devoted to fair pay all around. We dispute certain conclusions of this study, and we are determined to get to an equitable agreement.”

In September, Senator Elizabeth Warren, Democrat of Massachusetts, and Representative Alexandria Ocasio-Cortez, Democrat of New York, pulled out of keynote speaker slots at The New Yorker Festival in solidarity with union workers, who were planning a digital picket line to pressure management into including a “just cause” proposal in their agreement.

“Just cause” is a provision often included in union contracts that sets a standard employers have to meet to discipline or fire workers. New Yorker management eventually agreed to include it.

The New Yorker Union is part of the NewsGuild of New York, which represents employees at The New York Times, Reuters, The Daily Beast and other news outlets.

On President Biden’s first day in office, the head of Amazon’s consumer business, Dave Clark, sent a letter to the White House with an offer to help achieve the goal of vaccinating 100 million people in the administration’s first 100 days. By way of assistance, the retailer offered to vaccinate a large share of its workers.

The e-commerce giant has made similar offers to state governments, including Tennessee and Washington, although Amazon was not among the companies Gov. Jay Inslee of Washington announced as partners in its vaccination plan this week.

Those earlier letters to governors were signed by Brian Huseman, who runs Amazon’s U.S. lobbying team, which has been seeking permission from the Centers for Disease Control and Prevention to vaccinate “essential” workers at the company’s warehouses, data centers and Whole Foods “at the earliest appropriate time.”

The company has hired a health care provider to help administer the vaccine to employees, it said in the letters.

This suggests that public-private partnerships to distribute vaccines may come with perks for the companies taking part, the DealBook newsletter notes, potentially giving companies leverage to push employees up the line in priorities set by states. Several states are struggling to roll out vaccines as fast as they’d like because of issues with funding, staffing and logistics. In his letter to Mr. Biden, Mr. Clark said that Amazon could help with “operations, information technology and communications capabilities,” though he didn’t specify what that would entail.

The European Central Bank promised on Thursday to keep easy money flowing after its president, Christine Lagarde, said that the eurozone economy shrank in the last three months of 2020 and that the outlook for 2021 was uncertain.

The bank left its stimulus measures intact, as expected, after ramping up its de facto money printing in December to limit economic damage from the pandemic.

Following a meeting of its governing council, the bank reiterated its intent to pump as much as 1.9 trillion newly created euros, or $2.3 trillion, into bond markets as part of a “pandemic emergency” program intended to keep market interest rates low.

The bond purchases will continue at least until March 2022 and longer if necessary, the bank said. The central bank also said that it would maintain a program that effectively pays banks to lend money to businesses and consumers.

Ms. Lagarde stressed that the bank could adjust the amount of stimulus up or down depending on how quickly the pandemic was brought under control. “All instruments can be adjusted and nothing is off the table,” she told reporters during an online news conference.

The ultimate goal, Ms. Lagarde repeated numerous times, was to ensure that borrowing costs for businesses, eurozone citizens and governments remained favorable.

Her statement that stimulus could also be reduced raised expectations that the central bank might be expecting a quicker economic recovery. But Ms. Lagarde, citing extended lockdowns and the slow rollout of vaccinations, indicated she remained wary, though she stopped short of predicting a recession in the first quarter of 2021.

“I wish I was cautiously optimistic,” Ms. Lagarde said. “I’m now getting old enough to be realistic and to observe the development of the situation, which is really hard to predict.”

• Stocks on Wall Street were unchanged in early trading on Thursday, a day after the S&P 500 index closed at a record.

• The FTSE 100 in Britain and Stoxx Europe 600 posted modest gains, with the latter touching an 11-month high. Most Asian markets had ended higher.

• United Airlines fell more than 4 percent, after it said it lost $1.9 billion in the fourth quarter, bringing its total losses for 2020 to just over $7 billion, its worst year since merging with Continental Airlines a decade ago.

• In Europe, some renewable energy stocks extended their gains on Thursday. President Biden has recommitted the United States to the Paris climate agreement and pledged to spend heavily on the development of alternative energy.

• Shares of Siemens Gamesa, a Spanish subsidiary of Siemens Energy that makes wind turbines, rose more than 3 percent on Thursday. Orsted and Vestas, two Danish wind energy companies, also climbed, and are up nearly 6 percent and 8 percent this week.

United Airlines lost $1.9 billion in the fourth quarter, bringing its total losses for 2020 to just over $7 billion, its worst year since merging with Continental Airlines a decade ago. Despite that terrible loss, the airline said it expects 2021 to be a “transition year” as it prepares for a recovery from the coronavirus pandemic.

“The truth is that Covid-19 has changed United Airlines forever,” the company’s chief executive, Scott Kirby, said in a statement. “The passion, teamwork and perseverance that the United team showed in 2020 is exactly what will help us build a new United Airlines that’s better, stronger and more profitable than ever.”

The airline reported about $3.4 billion in operating revenue in the final three months of last year, down more than two-thirds from the same period in 2019. It ended the year with access to nearly $20 billion in cash or cash-equivalent funds, not including federal stimulus loans.

Delta Air Lines last week reported a $12.4 billion loss in 2020, capping what its chief executive called the “toughest year in Delta’s history.”

In anticipation of a recovery, United has resumed major maintenance and engine overhauls so that planes sidelined by weak demand will be ready as more people start flying again, it said.

But that recovery is unlikely to arrive for quite some time. United said it expects to bring in about a third as much operating revenue in the first quarter of this year as it did during the same three months in 2019. Most analysts believe the airline industry will not fully recover from the pandemic for several years.

Suriname, Guyana and Brazil are the new areas of focus for oil companies, attracting more new investment than the Gulf of Mexico and other more established oil fields. They are helping to keep global oil prices relatively low, undermining efforts by Russia and its allies in the Organization of the Petroleum Exporting Countries, like Saudi Arabia, to manage global supply and push up prices.

The recent pickup in interest in Guyana and Suriname is somewhat surprising because their promise as oil producers has often come up empty, reports The New York Times’s Clifford Krauss. Companies drilled more than 100 unsuccessful wells there, mostly in shallow waters, from 1950 to 2014. But after rich fields were found in the deep waters off Brazil, Exxon Mobil and other companies returned to take another look. Exxon struck a gusher in Guyanese waters in 2015, opening the current flurry of exploration.

In Guyana, oil companies have found more than 10 billion barrels of probable reserves of accessible oil and gas offshore, according to IHS Markit, the energy consulting firm. Production began in 2019 and is ramping up quickly. Guyana already accounts for one of the top 50 oil basins worldwide, according to consultants.

Suriname has at least three billion to four billion barrels of reserves, energy experts said, or up to half the new oil and gas discovered around the world last year.

Oil companies say they can make money in Suriname with oil prices as low as $30 to $40 a barrel because of lower costs. That is roughly equivalent to the threshold in Guyana and well below today’s oil price. It is also below break-even levels in many places, including some U.S. shale fields, where costs usually add up to nearly $50 a barrel.