The Labor Department reported on Thursday that 738,000 workers filed new claims for state unemployment benefits last week, virtually unchanged from the previous week as the U.S. economic recovery struggles to keep its footing.
Another 363,000 new claims were filed under the federal Pandemic Unemployment Assistance program, which provides benefits to part-time workers, freelancers and others ordinarily ineligible for jobless aid.
On a seasonally adjusted basis, new state claims totaled 751,000, significantly lower than after the coronavirus pandemic first struck but still extraordinarily high by historical standards.
“More than a half year after the pandemic-caused downturn began, we remain in a very stressful time for the U.S. economy,” said Mark Hamrick, senior economic analyst for Bankrate.com.
That economic stress is compounded by the political impasse over a new federal aid package, which the election this week did little to resolve.
“The prospects of a fiscal stimulus over the next few weeks are still quite uncertain, and the possibility of even a stronger economy under a Democratic sweep is now highly unlikely,” said Gregory Daco, chief U.S. economist for Oxford Economics. “As a result, we are that much more concerned about the pace of growth heading into 2021 and the effect on the labor market.”
The reading on initial claims comes a day before the Labor Department releases a comprehensive report on the nation’s employment situation in October. Most forecasts point to a continued slowing in job creation.
More Americans are joining the ranks of the long-term unemployed, defined as those out of work for 27 weeks or more. The number receiving assistance from the Pandemic Emergency Unemployment Compensation program, which provides 13 weeks of benefits after state unemployment insurance runs out, is on the rise.
At the same time, a surge in coronavirus cases in the Midwest has prompted a fresh round of lockdowns, which could lead to more layoffs as businesses close and people feel less comfortable dining in restaurants and shopping in stores.
“Whoever becomes the president faces a very formidable challenge in the coming months, as winter weighs down on certain industries that were able to get by with outdoor service, as extended unemployment benefits expire at the end of the year, and as assistance for student-loan borrowers and renters expires,” said Julia Pollak, a labor economist at the career site ZipRecruiter. “A wave of challenges is coming in the direction of workers who have lost their jobs in the pandemic.”
Wall Street’s rally continued for a fourth day on Thursday, with the S&P 500 jumping more than 1.5 percent early in the day, tracking gains in global stocks and defying early predictions that investors would be spooked by uncertainty in the outcome of the U.S. presidential election.
The gains mean the S&P 500 is on track to gain more than 5 percent this week, as it rebounds from loss of 5.6 percent last week. A gain of 4.9 percent or more would be the index’s best showing since mid-April, when stocks rallied more than 12 percent.
Analysts caution that investor ability to tolerate the uncertainty won’t last for more than a few days, and concern about a contested election or civil unrest could derail the rally.
But for now, with former Vice President Joseph R. Biden inching closer to winning the White House, and Republicans seen as likely to retain control of the Senate, investors have embraced the idea that gridlock in Washington will mean few policy surprises to come in the next few years.
The Stoxx Europe 600 rose 0.9 percent on Thursday, pulled higher by technology stocks. The DAX index in Germany rose 1.3 percent, and the CAC index in France gained 1 percent. Asian markets closed higher with the Hang Seng index in Hong Kong up 3.3 percent, the biggest one-day increase in four months. The Nikkei 225 in Japan climbed 1.7 percent.
Investors are also waiting to hear from the Federal Reserve later on Thursday as policymakers conclude their two-day meeting. Emergency support programs will expire at the end of the year, but analysts are increasingly expecting that the central bank will do more to support the economy if the election outcome leads to a relatively small fiscal stimulus package.
On Friday, the Labor Department will release its monthly report on the nation’s employment situation. Most forecasts point to a continued slowing in job creation in October.
ESPN will lay off 300 employees, approximately 6 percent of its worldwide staff, and let 200 open positions go unfilled as the broadcast giant weathers a sports world disrupted by the pandemic, the sports channel’s chairman, Jimmy Pitaro, told employees in a memo Thursday.
“Prior to the pandemic, we had been deeply engaged in strategizing how best to position ESPN for future success amidst tremendous disruption in how fans consume sports,” Mr. Pitaro wrote in the memo, which was obtained by The New York Times. “The pandemic’s significant impact on our business clearly accelerated those forward-looking discussions.”
The cuts will affect divisions across the company but are expected to be especially concentrated in broadcast production. ESPN, which is owned by the Walt Disney Company, has already furloughed some employees and asked executives and highly paid employees to take pay cuts.
The pandemic has ravaged ESPN’s business. The lifeblood of the network’s nine cable channels is live games, but from March to July, there were almost no games to show. Even with the resumption of most professional and college sports, ESPN has faced low viewership and a sluggish advertising market.
This is the latest in a string of layoffs for ESPN in recent years. About 300 employees were laid off in 2015, and about 250 were laid off in two waves in 2017, including a number of high-profile on-air workers.
The layoffs come as the company continues to confront the long-term decline of pay television. The number of households paying for television peaked at 100.5 million in 2014; today that number is close to 80 million. The timing and severity of the layoffs were driven by the pandemic, but they are also a further reorientation toward a fully digital and streaming future. In August, Disney said it had more than 100 million subscribers worldwide across its Disney+, Hulu and ESPN+ streaming services.
“Placing resources in support of our direct-to-consumer business strategy, digital, and, of course, continued innovative television experiences, is more critical than ever,” Mr. Pitaro wrote.
As England entered its second national lockdown to slow the spread of the resurgent coronavirus pandemic, Britain’s central bank said it would increase monetary stimulus in the face of a renewed downturn in the economy as the government announced an extension of its furlough program through March.
The Bank of England also downgraded its projections for the path of the recovery, forecasting a 2 percent drop in G.D.P. in the fourth quarter compared with a previous projection of 4 percent growth. Three months ago, policymakers said they expected the British economy to recover to its pre-pandemic level by the end of 2021. On Thursday, they said this would not happen until early 2022.
Policymakers voted unanimously to buy 150 billion pounds ($195 billion) more in government bonds next year, increasing the bank’s total stock to £875 billion. This was more purchases than economists had predicted.
This is the third time the Bank of England has increased bond-buying in 2020, the year its program of purchases had been expected to end. Quantitative easing, as such purchases are known, is intended to bolster the economy by keeping interest rates low and encouraging financial institutions to invest in riskier assets than government bonds.
The chancellor of the Exchequer, Rishi Sunak, said Thursday the government’s furlough program, which pays 80 percent of wages for the hours employees cannot work, will be extended through the end of March. It was supposed to end in October and be replaced by a less generous plan.
The central bank said on Thursday that it expected 5.5 million people to be put on furlough in November, about three million more than are currently using it. The Treasury also increased grants to self-employed workers and businesses.
Beginning Thursday, restaurants, bars, hotels, nonessential shops, gyms and all other leisure facilities must close until Dec. 2. Unlike in the spring lockdown, however, schools will remain open and construction and manufacturing work will continue. The measures were announced over the weekend after Italy, France, Germany and Belgium also introduced tighter restrictions on movement, all in an effort to curb a second wave of virus infections that has filled some hospitals and caused more deaths.
In the spring, Britain shuttered businesses and much of its economy later than some of its European neighbors and in the end had a longer lockdown and one of the worst recessions in the second quarter. Some politicians and economists fear that Britain is repeating this error. Opposition lawmakers had pushed for a lockdown weeks ago but the government persisted with local restrictions instead. On Sunday, before the latest restrictions were imposed, a senior government official suggested that the proposed one-month timeline for this lockdown might have to be extended.
The worsening outlook for the British economy, which will also be affected by the country’s separation from the European Union at the end of the year, may renew speculation about whether the central bank will introduce negative interest rates. Last month, the Bank of England asked banks if they were operationally ready for the introduction of zero or negative rates. The bank rate was held at 0.1 percent at this month’s policy meeting.
General Motors reported robust third-quarter results as auto sales and production rebounded through the summer after the coronavirus forced the industry to shut down factories and dealerships in the spring.
The automaker reported net income of $4 billion, a 74 percent increase from the same period in 2019. Revenue in the quarter was unchanged at $35.5 billion.
Almost all of G.M.’s profit was generated in North America, where it enjoyed strong demand for high-margin models like trucks and sport utility vehicles. G.M. earned $4.4 billion in North America before interest and taxes, up from $3 billion a year ago.
The company’s international operations broke even, a slight improvement from a year earlier. Its finance arm generated $1.2 billion in pretax profit, up from $700 million in the year-ago period.
It’s common practice for market analysts, economists and other strategists to incorporate opinion polls into their models and forecasts. Although the pre-election polls pointed to a win for Joseph R. Biden Jr. on Tuesday, which still may prove correct, the underlying details were way off and the margin of victory much narrower than expected. On top of the errors in 2016, financial forecasters are rethinking how much faith to place in polls when making assumptions about elections, the DealBook newsletter explains.
“Sympathy is wearing awfully thin with regard to U.S. pollsters who have now been unacceptably far from the market two straight elections,” said Eric Lascelles, the chief economist at RBC Global Asset Management. “I’m not quite sure what we’re going to do if we literally cannot trust pollsters to be within eight points of the correct answer.”
Scott Minerd, the global chief investment officer at Guggenheim Investments, said he didn’t rely on polling at all in the run-up to the election. “In my mind, there were just too many tossup states,” he said. To guide his analysis, Mr. Minerd looked instead to indicators his firm had developed, such as the performance of stocks most exposed to key policy pledges by each candidate.
“That doesn’t mean polling is dead,” he said. A major problem is that “voters just don’t want to say what they really think,” but at some point artificial intelligence could, perhaps, identify patterns in poll data that would have “a higher correlation with election outcomes,” he added.
In the meantime, strategists like Ben Laidler, the head of Tower Hudson, an investment research firm, said he would take polls “with a bigger pinch of salt” in the future. He noted that political betting markets were less sure about Mr. Biden’s chances than opinion polls. Others say that indicators like Google searches and counting signs in yards could take more prominence in election models.
Still, polls will remain a useful guide to the market consensus — however misguided — and “we take our own views against it” when devising trading strategies, Mr. Laidler said.
A feeble recovery staged over the summer months when the pandemic was in a brief lull in Europe has been disrupted by the second onslaught gripping the region, European Commission forecasts said Thursday, adding that the bloc will not return to pre-pandemic economic output before 2022 at the earliest.
The autumn forecast, the latest installment of the commission’s quarterly health check of the economies of the 27 E.U. countries, showed that the second wave of Covid-19 infections, which have forced a growing number of countries to go back into full or partial lockdowns in recent weeks, will weaken the economic recovery of the region in 2021. The forecast said that the bloc’s economies will shrink on average by 7.4 percent this year; the core of the region, the euro area of 18 nations that share the common currency, will see a 7.8 percent contraction, the commission said.
“This forecast comes as a second wave of the pandemic is unleashing yet more uncertainty and dashing our hopes for a quick rebound,” said Valdis Dombrovskis, the European Commission executive vice president.
The Spanish economy will be worst hit, the forecasts said, set to shrink by 12.4 percent, followed by Italy, which is predicted to lose 9.9 percent of its economic output this year. France, the bloc’s second-largest economy, will contract by 9.4 percent, whereas the leader, Germany, will see a more moderate 5.4-percent contraction.
Prognosticating in this environment is treacherous, the report authors warned: “Uncertainties and risks surrounding the Autumn 2020 Economic Forecast remain exceptionally large.”
A worsening pandemic and longer-term, deeper scars to the economy after this crisis, such as an avalanche of bankruptcies and high unemployment, could also set the recovery back more than is currently foreseen, the report warned. The specter of double-digit unemployment is returning to the European south, especially set to hurt Greece (with a jobless rate of 18 percent) and Spain (16.7 percent), the forecast showed.
But perhaps one of the more lasting impacts of the financial crisis unleashed by the pandemic will be spiraling debt burdens across the board in E.U. countries.
In the euro area, aggregate government debt will jump to more than 100 percent of economic output in 2022, from 85.9 percent. The European Union has issued joint bonds in recent weeks, at a scale never before attempted, to begin funding some of its joint social and economic support measures for its members. And the European Central Bank has been providing ample liquidity to members that need funding to support prolonged furlough plans and other economic recovery measures.
A landmark stimulus package, a 750 billion euro, or $883 billion, set of grants and loans to help lift economies, known as NextGenerationEU, is stuck in negotiations and will not come online until next year.
The Federal Reserve is likely to adopt a wait-and-see approach at the conclusion of its two-day meeting on Thursday, Jeanna Smialek reports, as policymakers try to avoid inserting the Fed into the election story line.
The tone the Fed chair, Jerome H. Powell strikes during his virtual postmeeting remarks, which will start around 2:30 p.m., could be the most important thing to come from the November gathering. He is likely to continue to pledge a very long period of rock-bottom interest rates. And he may sound at least somewhat worried, given the economic backdrop.
Here’s what to look out for at this week’s meeting.
Bond buying is in the cross hairs.
Many economists believe Fed officials could extend the duration of their bond portfolio — meaning that they will start buying longer-dated bonds in a bid to push down rates on such securities. The point is to make many types of credit cheaper, which could help support borrowing and demand. Minutes from the Fed’s September meeting suggested that officials might discuss and refine communication around their balance sheet plans at coming meetings, but few economists expect major moves this soon.
Emergency programs face an uncertain future.
Programs backed by funding from pandemic relief legislation are at a crossroads. They are set to expire at the end of December, and Mr. Powell and the Treasury secretary, Steven Mnuchin, must decide whether to extend them into 2021.
There are big questions around what it would mean if the whole suite of programs were allowed to sunset. On one hand, markets are operating smoothly now, and the Fed has demonstrated a willingness to step in that may keep them calm even in the absence of actual programs. Yet eliminating the formal backstop just as the nation plunges into renewed stress, with election uncertainty and virus cases on the rise, could undermine confidence.
Voters in Illinois rejected a proposal to increase tax rates on high earners, the centerpiece of Gov. J.B. Pritzker’s plans to address the state’s severe money problems. The ballot measure didn’t come close to passing: As of Wednesday morning, 55 percent of voters opposed the measure. The ballot measure would have instituted a graduated income tax to raise billions of new revenue.
Gap on Wednesday tweeted an image of a half-red, half-blue hoodie bearing the brand’s logo, along with the caption, “The one thing we know, is that together, we can move forward.” Clicking the image showed the sweatshirt being zipped up. The post, which was subsequently deleted, quickly went viral and was met with widespread mockery and criticism. “Read the room,” several users wrote. “Really? A red & blue hoodie is the healing ointment America needs?” one user posted.
Proposition 21, a California initiative that would have given local authorities more leeway in setting rent control policies, was decisively defeated on Tuesday. It was the second time in two years that California voters rejected expanding rent control even as the state contends with high housing costs and homelessness. With nearly three-quarters of the votes counted, barely 40 percent favored the initiative.