Health News at Your Fingertips

The jump in US unemployment claims last week was particularly sharp in states which are also suffering a surge in Covid-19 cases.

Those states have recently been forced to order bars and restaurants to close again; employers have responded by laying staff off.

Our US business editor, Dominic Rushe, has the details:

Claims for unemployment have dropped sharply since the shutdown orders in March which triggered more than 6m claims in just one week. But they remain stubbornly high and in recent weeks have hovered around 1.3m a week, twice as high as the pre-pandemic record of 695,000 set in 1982.

There are signs that claims could rise higher as more states report increases in infections and reconsider their reopening plans. In the week ending 11 July the largest increases were in California, Florida and Georgia, all states struggling with rising infection rates, the labor department announced.

About 273,000 Arizona residents filed first-time unemployment claims last week, a new record as the state’s coronavirus case numbers passed 150,000. In North Carolina, where cases are also continuing to climb, unemployment claims are now approaching 2m.

Here’s Dom’s full story:

Richard Flynn, UK managing director at Charles Schwab, says the spike in jobless claims shows that the US economy is struggling:

“Today’s rise in initial jobless will disappoint the market, especially following over two straight months of positive data. With coronavirus hotspots flaring up around the country and some businesses pausing or rolling back their grand re-opening, key parts of the U.S. economy are still ailing.

While stocks have held on to their gains, the market’s internal conditions suggest there is some valid scepticism around how long this strong performance can last.

Economist and investors are alarmed and disappointed that the number of Americans filing for unemployment benefits last week jumped last week to 1.4 million.

Financier Steve Rattner, the former head of Barack Obama’s Auto Task Force, fears initial jobless claims will keep rising unless the Covid-19 pandemic is brought under control.

Naeem Aslam of Think Markets says the report shows that the US economy is in desperate need of help.

Today’s number has fueled fears that the economic data is rolling over and the optimism about the US economy is fading.

The US initial jobless claims data has a bit of mixed news for the US stock market. On one hand you have the data that is showing more Americans are out of jobs but on the other side we have hope that policy makers will deliver the second stimulus check now.

Randy Frederick of Schwab points out that weekly jobless claims have been extremely high for months:

Scott Horsley of NPR points out that nearly a million gig economy workers applied for unemployment help (which aren’t counted in the initial claims figure).

Newsflash: the number of Americans filing new claims for unemployment benefit has jumped for the first time since the end of March.

The rise comes after some States imposed new lockdown measures in an attempt to control the surge in Covid-19 cases.

The initial jobless claims total rose last week to 1.416m last week, up from 1.3m in the previous seven days.

That’s a larger increase than expected, and the first increase in the weekly jobless total in four months (back in March, it soared to a record high over 6 million people but had been dropping since).

It suggests that the labour market is weakening again, as efforts to reopen the US economy start to unwind…..

More to follow…

Social media firm Twitter has posted a surge in usage during the pandemic, and a drop in advertising revenues too.

Average daily user numbers surged by 34% in April to June compared to a year earlier, to 186m – beating forecasts of 176m.

That suggests the lockdown has left people with more time to engage with social media, and more to talk about –including Covid-19, and the Black Lives Matter protests in America for example.

But advertising sales – the core of Twitter’s revenue – fell 23% during the last quarter. Ad revenues had gradually recovered after slumping in March, but then tumbled in late May to mid June when “many brands slowed or paused spend in reaction to US civil unrest”.

Jack Dorsey, Twitter’s CEO, has hailed the jump in monetizable daily active users (mDAUs).

Our product work is paying off, with tremendous growth in audience and engagement.

We grew mDAU to 186 million, a 34% year over year increase in Q2, the highest quarterly year-over-year growth rate we’ve delivered since we began reporting mDAU growth.”

Shares have jumped 6% in pre-market trading….

Back in the markets, the pound is sliding as the UK’s trade talks with the EU continue to struggle.

Following the latest round of talks in London, the UK’s chief negotiator David Frost warned that there are still hurdles, so the UK must “face the possibility” that it can’t agree its future relationship with the EU by the end of the year.

Frost warned:

“We have always been clear that our principles in these areas are not simple negotiating positions but expressions of the reality that we will be a fully independent country at the end of the transition period.”

The EU’s chief negotiator, Michel Barnier, also warned that the two sides are still divided on two key issues – the ‘level playing field’ and access to fisheries.

He also blamed the British side for budging, saying:

By its current refusal to commit to conditions of open and fair competition and to a balanced agreement on fisheries, the UK makes a trade agreement – at this point – unlikely.

In response, the pound had dropped by half a cent against the US dollar to $1.268. It’s also down 0.4% against the euro, to €1.096.

Bank of England policymaker Professor Jonathan Haskel is warning that the UK’s recovery could be weak because consumers are too scared of Covid-19 to return to normal behaviour.

In a speech just published, Haskel argues that demand, not supply, will be the key factor on whether the UK economy rebounds from the slump, or struggles.

Haskel identifies unemployment, or the fear of losing one’s job, as a key factor, along with anxiety about the virus itself.

He also highlights the importance of health measures — both Covid-19 tests, and measures within shops, bars and restaurants to keep people safe.

Evidence is emerging that the dominant driver of activity will in fact be on the demand side. When the economy re-opens, customers might still fear infection and therefore stay away from consumption that has a social element to it (pubs, restaurants etc.). It seems likely that such demand weakness will therefore drag on the economy and hold back the recovery.

The path of recovery crucially depends therefore on the fear of infection, which in turn depends on the mix of public (e.g. track and trace) and private (e.g. screens in shops) health measures undertaken. It also depends on the fear, or realisation, of unemployment, as weak activity and capacity constraints on the operation of surviving businesses, and insolvencies, translate into a fall in the demand for labour

He cites evidence from America that people are still nervous about dining out:

Disappointingly, the CBI also found that UK manufacturers expect employment to continue falling next quarter.

Although the pace of job cuts may slow, it shows that the government’s stimulus efforts aren’t preventing a rise in unemployment.

The pandemic also forced UK factories to run down their inventories in the last quarter, the CBI reports:

Firms ran down inventories at a hefty pace in the quarter to July, likely due to COVID-related supply disruption.

Stocks of raw materials and work in progress fell at their fastest pace since April 1981 and January 1981, respectively. Stocks of finished goods declined at their quickest rate since October 2009.

Tom Crotty, Group Director at chemicals giant INEOS, agrees that manufacturing may have passed the low point, given output is now expected to rise.

But he also warns that many are still in distress, despite the overall improvement in today’s report:

“The latest survey showcases the significant challenges that manufacturers have faced over the last three months due to the COVID-19 crisis. However, these results may prove to be a low point in the crisis, with manufacturers expecting output to grow for the first time since the pandemic hit.”

“Government policy measures have proved vital in supporting manufacturers during the crisis, but it’s clear that many firms are still in distress. As the UK economy begins to recover, it will remain vital that the government continues to work with firms to both shore up near-term cash flow and build a stronger, more sustainable manufacturing sector.”

The CBI has tweeted the key charts from today’s Industrial Trends report.

It shows how factory output fell at a record speed in May-July, following the lockdown:

Just in: UK manufacturers are more upbeat about their future prospects, after being hammered by the pandemic.

The CBI’s gauge of business sentiment has stabilised in the last three months, according to its latest healthcheck on the sector.

That follows a record plunge in the February-April quarter, and suggests the slump in UK manufacturing may have bottomed out.

Factory bosses told the CBI that they expect output to begin to recover in the coming months, for the first time since Covid-19 hit the economy. Indeed, expectations for output over the next quarter were the strongest since early 2018.

Today’s survey also shows that the last three months have been very grim for UK manufacturing. Output volumes declined at a record pace, while total new orders fell at their fastest rate since October 1980.

That has driven unemployment up, with headcounts dropped at their quickest pace since April 2009.

And worryingly, the percentage of firms reporting weak export order books hit its lowest level on record.

So while the CBI sees “some early signs” that the worst may be over, it also warns that the COVID-19 crisis is weighing heavily on firms’ investment plans.

Rain Newton-Smith, CBI chief economist, explains:

“Manufacturers continue to face extreme hardship due to the COVID-19 crisis. Output volumes continued to decline at a record pace, while total orders have fallen at their fastest rate since October 1980.

“There are tentative signs of gradual recovery on the horizon, with firms expecting output and orders to begin to pick up in the next three months. But demand still remains deeply depressed.

The US dollar remains under pressure today, trading at its lowest levels in four months.

Traders continue to see value in the euro, now that European leaders are backing a €750bn recovery programme.

This pushed the euro up to $1.16 overnight, a 21-month high, while the dollar index is at its lowest since March.

Marios Hadjikyriacos at XM explains that investors are expecting America’s central bank to expand its stimulus programmes again soon.

The currency market continues to be dominated by the resurgent euro, which has been liberated from its fiscal shackles after EU leaders took a step closer towards risk sharing this week.

Since FX is a zero-sum game in the sense that for every winner there must be a loser, the euro’s fortunes have come mostly at the expense of the dollar, which may also be bleeding because investors are anticipating more action from the Fed next week.

That’s what the bond market is saying at least, judging by the inability of longer-term US yields to get off the floor even though stock markets keep floating higher.