Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’
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By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) – Fourteen months after the pandemic triggered a national emergency, the final chapter of the U.S. economic recovery may begin this month, with rapid changes starting with the end of enhanced unemployment benefits in half the states and ending in the fall’s expected reopening of schools and universities.
Along the way, Major League Baseball stadiums are slated to return to full capacity, and the largest state economy, California, on June 15 will shed its final COVID-era restrictions and give bars, restaurants and other businesses a green light on the road to normal.
That same day in Washington, the U.S. Federal Reserve is expected to open debate about when and how to cut the economy loose from its crisis-fighting monetary policy and shift to managing what is hoped to be a long economic expansion.
The questions about just what the post-pandemic economy will look like are myriad: How many people will return to jobs? How many businesses will have survived or failed? How resilient will the country be when pandemic supports are withdrawn? The answers should start to come soon.
“The timing really is awesome,” Porchlight Brewing Co. general manager Tyson Herzog said of the just-in-time-for-summer end of California’s restrictions, which closed many restaurants for parts of last year and kept them under strict limits during the fight against the virus.
An $800 billion small business assistance program helped many firms survive, including Herzog’s. After a year of home-delivering beer in his 1999 Dodge Caravan he plans to hire more onsite staff and expand production amid already record sales.
Since coronavirus vaccines rolled out in December, forecasts have pointed to record-breaking numbers this year, including the fastest annual gross domestic product growth in nearly 40 years.
More than 60% of people 12 years and older are at least partially vaccinated. The rate of new infections and deaths has plummeted, while confidence, travel, and human socializing – and the commerce that accompanies all that – have risen steadily.
Still, the pieces have not yet clicked in unison.
Companies in May added 559,000 jobs, but the total number remains 7.6 million short of early 2020. About 3.6 million more people are unemployed, and the labor force is 3.5 million smaller.
Shortages of supplies, workers and raw materials have crimped the recovery with businesses curtailing hours, turning away customers, or delaying filling orders. The Fed’s most recent national economic snapshot referenced shortages 44 times, compared with 17 in January and three a year ago.
Economists expect that to ease. The pandemic put the economy into what some likened to an induced coma. Shaking off the stupor takes time, and is complicated by some of the programs used to cushion the economy’s sharp drop last spring.
Stimulus payments and low interest rates, for example, fueled a boom in home sales that spilled into home construction and lumber prices. Yet the costs for wood and some other commodities already have begun easing: lumber futures are down 24% from their peak, with copper and aluminum falling around 5%. Likewise, the splurge on automobiles, appliances and other goods will likely prove a one-time affair; even if demand remains strong, supply will likely catch up.
Workers sidelined by a variety of issues, from health concerns to lack of childcare, have been given latitude on when to return to work through expanded unemployment benefits that pay some more than their former jobs. That starts to wind down on June 12 when the first four states end the extra benefits launched last spring as one plank in a financial “bridge” to the other side of the pandemic.
In all, $5.2 trillion deployed across an array of programs helped make the coronavirus recession unique: Personal incomes actually rose even as unemployment hit 14.8% in April 2020.
With the money now largely spent, the programs one-by-one are being shuttered.
By July 10 half the states will have ended the extra unemployment benefits, and the program lapses nationwide on Sept. 4. The Payroll Protection Program of small business loans closed May 31.
There’s dispute over what role those and other programs play in decisions to work or not. But to the degree prices, wages and other factors have been distorted by the pandemic, the next few weeks should wring those distortions out.
June will inaugurate a “summer-boom with demand still strong and supply issues – on labor and capital – being resolved,” said Gregory Daco, chief U.S. economist for Oxford Economics. “There is evidence of supply bottlenecks slowly easing…On the labor front, reduced virus fear, reduced benefits, better childcare, will draw people back.”
And people seem primed to respond.
After a year of lockdown, public parks are again hosting crowds, sports stadiums are filling, and restaurants are booked to the limit.
California had among the first cases of COVID-19, imposed some of the stiffest restrictions, and will be among the last states to let it all go.
Damian Fagan, owner of the Almanac Taproom in Alameda, is getting ready. While he is adding up to six new employees to his current 12-person staff ahead of the June 15 reopening, he expects such a rush of business he plans to limit his hours for another few weeks “so we don’t have this tsunami of changes.”
“I don’t know how long this party will last,” he said. Eventually, “this massive excitement period dies down,” and business can get back to normal.
(Reporting by Howard Schneider and Ann Saphir; Editing by Dan Burns and Andrea Ricci)
By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job openings rose to a two-year high in February while hiring picked up as strengthening domestic demand amid increased COVID-19 vaccinations and additional pandemic aid from the government boost companies’ needs for more workers.
The Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Tuesday was the latest indication that the labor market had turned the corner after shedding jobs in December as the nation buckled under a fresh wave of COVID-19 infections and depleted government relief.
“Labor demand should continue to heat up as companies brace for a post-pandemic burst in pent-up demand,” said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
Job openings, a measure of labor demand, increased 268,000 to 7.4 million as of the last day of February. That was the highest level since January 2019 and pushed job openings 5.1% above their pre-pandemic level.
The second straight monthly rise in vacancies lifted the jobs openings rate to a record 4.9% from 4.7% in January.
There were an additional 233,000 job openings in the health care and social assistance industry. Vacancies in the accommodation and food services sector, one of the industries hardest hit by the pandemic, increased by 104,000 jobs. Arts, entertainment and recreation job openings rose 56,000.
But vacancies decreased in state and local government education as well as educational services and information.
Economists polled by Reuters had forecast job openings would rise to 6.995 million in February. The report followed on the heels of news on Friday that the economy added 916,000 jobs in March, the most in seven months.
The labor market is being boosted by an acceleration in the pace of COVID-19 vaccinations and the White House’s recently passed $1.9 trillion pandemic relief package, which is sending additional $1,400 checks to qualified households and fresh funding for businesses.
Demand for labor could increase further as more services businesses reopen. The U.S. Centers for Disease Control and Prevention said on Friday fully vaccinated people could safely travel at “low risk.”
An Institute for Supply Management survey on Monday showed services businesses reporting they “have recalled everyone put on waivers and made new hires” and had “additional employees added to service the needs of new customers at new locations.”
STIFF COMPETITION
In February, hiring rose 273,000, the largest gain in nine months, to 5.7 million. That boosted the hiring rate to 4.0% from 3.8% in January. Hiring was led by the accommodation and food services industries, which increased by 220,000 jobs. But hiring decreased in state and local government education.
Hiring still has a long way to go, with employment 8.4 million jobs below its peak in February 2020.
“The labor market continues to improve but remains a long way from what the Federal Reserve would describe as the conditions to restore maximum employment,” said John Ryding, chief economic advisor at Brean Capital in New York.
The U.S. central bank has signaled it would maintain its ultra-easy monetary policy stance for a while to allow complete healing.
With unemployment well above pre-pandemic levels, competition for jobs remains tough. There were 1.4 unemployed people for every open job in February, well above 0.82 on the eve of the first wave of the pandemic lockdowns 12 months ago.
“This means employers will have an easier time hiring, but job seekers still don’t have the bargaining power they did prior to the pandemic,” said Nick Bunker, director of research at Indeed Hiring Lab.
Layoffs increased to 1.8 million from 1.7 million in January amid job cuts in the finance and insurance industry. The layoffs rate was unchanged at 1.2%.
Risks remain to the brightening labor market outlook.
“New strains of the virus and unwillingness to abide by health recommendations could extend the impact of the pandemic on the economy,” said Sophia Koropeckyj, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “In addition, the severity of the downturn, which closed many business, means that many industries will not bounce back immediately.”
The number of people voluntarily quitting their jobs rose to 3.4 million from 3.3 million in January. The quits rate was unchanged at 2.3%.
The quits rate is normally viewed by policymakers and economists as a measure of job market confidence. But the pandemic has forced millions of women to drop out of the labor force mostly because of problems related to child care, with many schools still only offering online learning.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
(Reuters) – More than half of the world’s airline pilots are no longer flying for a living amid the plunge in demand during the coronavirus pandemic, according to a new survey, and those that are still flying feel less valued by their employers.
A poll of nearly 2,600 pilots by UK-based GOOSE Recruitment and industry publication FlightGlobal, released on Thursday, found only 43% were doing the job they had trained for, with 30% unemployed, 17% furloughed and 10% in non-flying roles.
Many pilots that are still flying have faced deteriorating working conditions. Hong Kong’s Cathay Pacific Airways Ltd, for example, instituted permanent pay cuts of up to 58%, and Turkish Airways and Singapore Airlines Ltd have temporarily lowered salaries.
“We can see the effect the pandemic has had on employed pilots too,” GOOSE Recruitment chief executive officer and founder Mark Charman said in a statement. “Large numbers are feeling insecure about their jobs, an increased number are planning to look for new roles this year as well as many feeling less valued by their employers.”
For the unemployed pilots in the survey, 84% said it was due to the pandemic. Before COVID-19 hit, there had been widespread pilot shortages that had driven up demand for aviators and led to improving pay and conditions.
Now, 82% of unemployed pilots would take a pay cut for a new opportunity, the survey found.
For those that have kept their jobs, pilots in Europe reported being the most stressed by COVID-19, with respondents citing the risk of catching the virus, disjointed rules and the possibility of being placed in quarantine during a rotation as among their concerns.
Forty percent of pilots said their mental health had been affected by the pandemic, with the figure higher among younger pilots.
“The amount of stress and anxiety the pandemic has caused me has permanently scarred my outlook on life,” one surveyed pilot said.
(Reporting by Jamie Freed in Sydney. Editing by Gerry Doyle)
By Dan Burns
(Reuters) – U.S. consumers on balance paid only a little bit more for goods and services last month as supply chain disruptions that contributed to a bump up in inflation over the summer began to ease, a welcome respite for the millions who remain unemployed.
While that easing pressure on pinched consumers might offer a benefit to Republican President Donald Trump’s reelection prospects against Democratic challenger Joe Biden, it does come with a big “on the other hand” caveat: It is the latest sign of fading momentum in the rebound from this spring’s record-setting economic slump.
A bit of inflation typically is an indication of strengthening demand, an encouraging signal that consumers have reliable sources of income allowing them to contribute to growing an economy that hinges extensively on their spending. But with roughly 11 million still out of work and desperate for a new round of COVID-19 relief from Washington, September’s modest uptick in prices is no such signal.
Here’s Jefferies chief financial economist Aneta Markowska’s take: “After several months of above-trend gains, price pressures are finally normalizing. Both headline and core CPI increased by just 0.2% (month-to-month) in September, with the underlying details painting an even weaker picture.”
In fact, she notes prices would have been unchanged but for one thing: The largest monthly increase in used car and truck prices since 1969. And with cash-strapped consumers increasingly reliant on their own transport to get to an on-site job, that’s no welcome development.
Food price increases, too, are moderating after a big run up in the spring, but where you eat makes a big difference.
If eating at home, as millions without work have no choice but to do, then food prices were lower for a third straight month.
If eating out, though, as more consumers are doing as restaurants continue to reopen around the country, prices shot up by the most in 12 years last month.
(Reporting by Dan Burns; Editing by Andrea Ricci)
WASHINGTON (Reuters) – The U.S.’s top economic challenge now is bringing unemployed workers back to jobs as those displaced from hard-hit industries like food service may find their “classic next job” has also disappeared, Richmond Federal Reserve bank president Thomas Barkin said on Wednesday.
“Where I see the real challenge now is getting the last 5% of Americans back into the workforce,” Barkin said in an interview on Bloomberg television, referring to the current 8.4% unemployment rate that is about 5 percentage points above the record low of last year.
That could be tough, Barkin said, because “we know a lot of people used to be waiters or work at an amusement park…Their classic next job would have been at a retailer or working at another restaurant. If those places are not hiring how do we get them redeployed?”
The U.S. is currently about 11 million jobs shy of where it was in February. Monthly job growth has been strong since the pandemic led to a massive round of layoffs, and a jobs report Friday is expected to show several hundred thousand positions were added in September. Private payroll processor ADP’s data on Wednesday estimated the number at 749,000.
That would still represent a slowing over recent months, and economists at the Fed and elsewhere worry it may take years to reclaim lost ground in the labor market.
Concerns about persistent damage to the employment prospects particularly for younger or less skilled workers has been growing as the pandemic slump continues, and companies begin retooling for a smaller future workforce.
Disney on Tuesday announced it was laying off 28,000 workers as coronavirus-related restrictions on its theme parks lengthened through the summer and into the fall.
Though most are part-time jobs it was an example of the dynamic Barkin described, eliminating positions that could serve as flexible or entry level work for people who will now need to look elsewhere in an economy where many industries and occupations open to less skilled employees may have to cut back.
“Issues of job retraining, issues of getting (education) grants…Those are the kind of things that are important if we are going to bring the economy all the way back,” Barkin said.
(Reporting by Howard Schneider; Editing by Chizu Nomiyama)
By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) – Federal Reserve policymakers on Friday began fleshing out what their new tolerance for inflation will mean in practice, an issue critical to how investors and households reshape their own outlooks even if it may not be relevant to any immediate decisions by the U.S. central bank.
The new policy, laid out in a strategic document last month and incorporated into a policy statement issued on Wednesday, pledges to keep interest rates near zero until inflation has hit the Fed’s 2% target and is on track “to moderately exceed” it “for some time.”
As it stands, with the coronavirus pandemic sapping demand, leaving millions of Americans unemployed, and threatening the survival of entire industries, inflation is not seen as the core risk. Economic projections released by the Fed this week show inflation only reaching 2% by the end of 2023, with any shift towards tighter monetary policy likely years down the road.
But how the Fed’s new language is interpreted by the central bank’s five current Washington-based governors and 12 regional bank presidents will be central to whether bond markets, stock investors and even consumers see the new approach as likely to be effective, and start behaving in a way that actually helps push inflation higher.
After years of weak inflation, that is the Fed’s hope. It is based on fears of a Japanese-style low inflation rut that can have its own damaging effects over time, and Fed officials on Friday started to outline their views of how to proceed.
Atlanta Fed President Raphael Bostic said, for example, that he’d be paying closer attention to how fast inflation rises rather than to its quarter-to-quarter level in implementing the new approach.
In an interview on Bloomberg Television, Bostic said if inflation went up to 2.3% but appeared stable “that would be fine … By contrast if we were at 2.2 and the next quarter at 2.4 and then at 2.6, that trajectory would give me concern” and perhaps require efforts to cool the economy.
‘GHOST STORIES’
Minneapolis Fed President Neel Kashkari, in contrast, laid out a more open-ended view in written comments describing why he dissented against the rate-setting Federal Open Market Committee’s policy statement on Wednesday.
The Fed, he felt, was setting itself up to make the same mistake it has in the past of reacting too quickly to inflation “ghost stories” and risked nipping off job growth too soon.
He said the Fed instead should switch its focus to core inflation, a slower moving variable that excludes volatile commodity prices, and ensure that it reached 2% on a “sustained basis.”
“I would have preferred the Committee make a stronger commitment to not raising rates until we were certain to have achieved our dual mandate objectives,” of maximum employment consistent with stable prices, Kashkari said in an essay.
A second dissent from Dallas Fed President Robert Kaplan argued the central bank should keep its options open to raise rates sooner if needed – a sign of the broad debate now taking place over just what the new framework will mean in practice.
Critics say they feel the Fed’s new approach rings hollow without strong measures to back it up and produce the higher inflation they seek, such as more aggressive bond-buying.
But St. Louis Fed President James Bullard said inflation may move higher on its own if, as he suspects, the economic recovery gains traction at a time when global supply chains are being reorganized, monetary policy is loose, and governments are issuing record levels of debt to finance pandemic-related spending.
“A lot of people on Wall Street are saying ‘you could not hit 2%, how are you going to have inflation above 2%?,'” Bullard said in webcast remarks to a Washington University in St. Louis forum.
“I think we are at a moment where you may see some inflation … You have got more relaxed central banks … You have got huge fiscal deficits which historically have been a catalyst for inflation. And you have possibly bottleneck-type pressures.”
(Reporting by Howard Schneider and Ann Saphir; Editing by Paul Simao)
WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits unexpectedly rose last week, touching the highest level in more than a year, which could raise concerns about labor market health in the wake of the slowdown in job gains in April.
Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 294,000 for the week ended May 7, the highest level since late February 2015, the Labor Department said on Thursday.
Claims for the prior week were unrevised. Economists polled by Reuters had forecast initial claims slipping to 270,000 in the latest week.
Despite last week’s jump, claims remained below 300,000, a threshold associated with healthy job market conditions, for 62 consecutive weeks, the longest stretch since 1973.
A Labor Department analyst said there were no special factors influencing last week’s claims data and no states had been estimated. There was a surge in claims in New York and Michigan in the latest week.
The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased 10,250 to 268,250 last week, the highest level in almost three months.
The claims report came on the heels of data last week showing nonfarm payrolls increased only 160,000 in April, the smallest gain in seven months, after advancing by 208,000 in March.
The labor market has been fairly robust despite a sharp slowdown in economic growth in the first quarter. The spike in jobless claims and moderation in employment gains likely do not suggest a deterioration given difficulties adjusting the data for seasonal fluctuations.
A report on Tuesday showed job openings hit an eight-month high in March, with the rate re-testing its post-recession high.
Thursday’s claims report showed the number of people still receiving benefits after an initial week of aid rose 37,000 to 2.16 million in the week ended April 30.
The four-week average of the so-called continuing claims fell 3,750 to 2.14 million, the lowest reading since November 2000.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
The Labor Department reported Friday that a record number of Americans are out of the workforce.
The August labor report showed 94,031,000 Americans were not in the labor force, down 261,000 from July. The labor participation rate of 62.6 percent is holding at a 38-year low for the third straight month.
It’s the first time that the total number of Americans out of the workforce topped 94 million.
The report also showed that a record number of women were out of the workforce. 56,253,000 women were neither employed or looked for employment in the month of August, up 44,000 from July. The labor force participation rate for women was at 56.7 percent.
The report sent the stock markets into a tumble to wrap up the week. All three of the major stock indexes were down with the Dow Jones Industrial Average down over 200 points. Oil markets were down as well following the report.
The jobs report said that 173,000 jobs were added during the month, much lower than analyst expectations. At least one analyst told CNN the number would likely stop the Federal Reserve from raising a key interest rate as widely believed will happen at their September meetings.
“You can’t hike on a 173,000 number,” says Phil Orlando, an economist at Federated Investors. “The Fed has to think long and hard about pushing this thing out to December.”
