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Stocks Tumble as Investors Await a New Tally of Virus’s Toll on Jobs: Live Updates

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Claims for state jobless benefits have been running at 800,000 per week, and “point to a labor market that is struggling to make progress,” one economist said.
Credit…Angela Weiss/Agence France-Presse — Getty Images

The U.S. economy’s ability to withstand layoffs and a renewed surge in coronavirus cases will become clearer on Thursday when the government reports the latest data on new claims for unemployment benefits.

After dropping in late spring and early summer as pandemic-related lockdowns eased, new claims for state jobless benefits have been steadily totaling about 800,000 a week, far above the level in previous recessions.

“The numbers are extremely worrisome, in my opinion, and they point to a labor market that is struggling to make progress,” said Gregory Daco, chief U.S. economist at Oxford Economics.

Despite widespread economic pain, Republicans and Democrats in Washington have been unable to agree on a new relief package, a failure that may cause the economy to slow further in the coming months. Federal benefits created in March to supplement state payments to the unemployed are set to expire by the end of the year.

The fresh data may show the impact from a wave of layoffs announced in recent weeks from companies like United Airlines and Allstate. Diane Swonk, chief economist at the accounting firm Grant Thornton, estimates that there have been 200,000 layoffs since the beginning of September.

“We really need the aid from Washington,” she said. “This is an economy that got into a deep hole, and it’s very hard to get out of. There is now a risk of deeper cuts and more permanent closures.”

  • Global stocks tumbled on Thursday, and Wall Street futures pointed to a drop of more than 1 percent when trading begins, as earnings reports reminded investors of the challenges so many companies face amid a second wave of coronavirus cases. New restrictions were imposed on London after a curfew in Paris and other French cities.

  • Share prices for airlines and hospitality companies, already battered this year, fell as the tightening rules in European cities cast a shadow over travel and spending during the coming holiday season.

  • The investment mood was further dampened by comments from U.S. Treasury Secretary Steven Mnuchin, who said on Wednesday that he did not expect an economic relief package before the presidential election next month. It’ll be another blow to U.S. companies whose prospects have diverged from the country’s large banks, which have benefited from an increase in trading.

  • Investors will also get an update on how well the U.S. labor market is withstanding an increase in virus cases. On Thursday, the government will report the latest data on new claims for unemployment benefits, which have held steady at about 800,000 a week, far above the level in previous recessions.

  • The Stoxx 600 Europe dropped 2.2 percent. Britain’s FTSE 100 fell 2.3 percent, Germany’s DAX index was down 3 percent and France’s CAC index was 2.3 percent lower. Asian indexes closed broadly lower, with Hong Kong’s Hang Seng down 2.1 percent and South Korea’s Kospi losing 0.8 percent.

  • Government bonds rose as investors moved to the relatively safer asset. The yield on U.S. Treasury 10-year securities, which moves in the opposite direction to prices, fell 0.03 percentage points, and Germany’s declined 0.04 percentage points to minus 0.62 percent.

  • The benchmark oil prices for Europe and the United States both fell 1.5 percent.

  • The slide in markets on Thursday is “linked to spikes in coronavirus cases and fears that regional lockdowns will subdue the economic recovery,” said Susannah Streeter, an analyst at Hargreaves Lansdown. “We are seeing fresh losses for airlines and travel stocks.”

  • Shares in the European airline companies Lufthansa and easyJet, which were already near their lows for the year, fell more than 5 percent, and shares in IAG, which owns British Airways and Iberia, fell 4.7 percent. Ryanair shares lost 3.7 percent after the Dublin-based airline said it would fly only 40 percent of its usual capacity this winter, down from previous plans for 60 percent. Shares in United Airlines were down 1.2 percent in premarket trading after the company said it had lost $1.8 billion in the three months through September.

  • Whitbread, which owns the Premier Inn chain of hotels and some restaurants, was among the worst performing stocks in Europe on Thursday, falling nearly 6 percent.

  • The Swiss pharma company Roche reported sales below analysts’ expectations on Thursday, despite sales in Covid-19 tests and new medicines, and its shares dropped more than 2 percent.

  • Shares in Marston’s, a large chain of bars and pubs in Britain, fell 6.9 percent after the company said sales for its financial year were down nearly a third compared with last year. Because of additional restrictions on the hospitality industry, the company also said it was looking to cut 2,150 jobs that are currently furloughed. That adds to concerns that Britain will experience a sharp rise in unemployment this winter as data published this week showed that the jobless rate had already climbed to a three-year high.

Larry Kudlow, the director of the National Economic Council, boasted in February that the coronavirus was contained in the United States and that “it’s pretty close to airtight.” His private message was more ambiguous.
Credit…Anna Moneymaker for The New York Times

On the afternoon of Feb. 24, President Trump declared on Twitter that the coronavirus was “very much under control” in the United States, but hours earlier, senior members of the president’s economic team, privately addressing board members of the conservative Hoover Institution, were less confident.

Tomas J. Philipson, a senior economic adviser to the president, told the group he could not yet estimate the effects of the virus on the American economy. To some in the group, the implication was that an outbreak could prove worse than Mr. Philipson and other Trump administration advisers were signaling in public at the time.

The next day, board members — many of them Republican donors — got another taste of government uncertainty from Larry Kudlow, the director of the National Economic Council. Hours after he had boasted on CNBC that the virus was contained in the United States and “it’s pretty close to airtight,” Mr. Kudlow delivered a more ambiguous private message. He asserted that the virus was “contained in the U.S., to date, but now we just don’t know,” according to a document describing the sessions obtained by The New York Times.

The document, written by a hedge fund consultant who attended the three-day gathering of Hoover’s board, was stark. “What struck me,” the consultant wrote, was that nearly every official he heard from raised the virus “as a point of concern, totally unprovoked.”

The consultant’s assessment quickly spread through parts of the investment world. U.S. stocks were already spiraling because of a warning from a federal public health official that the virus was likely to spread, but traders spotted the immediate significance: The president’s aides appeared to be giving wealthy party donors an early warning of a potentially impactful contagion at a time when Mr. Trump was publicly insisting that the threat was nonexistent.

Interviews with eight people who either received copies of the memo or were briefed on aspects of it as it spread among investors in New York and elsewhere provide a glimpse of how elite traders had access to information from the administration that helped them gain financial advantage during a chaotic three days when global markets were teetering.

To many of the investors who received or heard about the memo, it was the first significant sign of skepticism among Trump administration officials about their ability to contain the virus. It also provided a hint of the fallout that was to come, said one major investor who was briefed on it: the upending of daily life for the entire country.

“Short everything,” was the reaction of the investor, using the Wall Street term for betting on the idea that the stock prices of companies would soon fall.

Poorer families were more likely to use their stimulus money to pay down debts, while richer families saved the money.
Credit…Jenny Kane/Associated Press

Americans used one-time stimulus checks they received from the federal government early in the pandemic to pad their savings accounts and pay off debt, new research from the Federal Reserve shows.

Households spent just 29 percent of the money they received earlier this year, the Federal Reserve Bank of New York said in a post on its website, citing its Survey of Consumer Expectations, conducted in June and August. Another 36 percent of the cash was saved, while 35 percent was used to pay down debt.

Americans adults who qualified for the stimulus received up to $1,200 each, with an extra $500 added per child in the household. Out of the Fed’s sample, 89 percent of households received money.

Poorer families and those who lost jobs or income amid the pandemic were more likely to use their money to pay down debts, while richer families saved the money.

“The economic impact payments, by increasing both household income and the debt pay down, contributed importantly to the sharp increase in the overall saving rate during the early months of the pandemic,” the central bank’s researchers wrote in the post.

Several factors might have been behind the relatively low spending and high saving. People were unsure when the economic crisis would clear up, the researchers wrote, and might have been acting cautiously. They were on lockdown, which might have limited opportunities to spend, and some rent payments — which count as consumption — were delayed.

The trends seem unlikely to change if new aid becomes available: In the August survey, the New York Fed asked what households might do if they received another $1,500 check. Respondents expect to spend even less of that money, about 24 percent.

The newfound savings buffer cushioned the blow as expanded unemployment insurance expired. Consumer spending has held up even though millions remain unemployed but are no longer receiving an extra $600 per week from the federal government.

“We’re still benefiting from the stimulus,” Randal K. Quarles, vice chair for supervision at the Fed, said during an event on Wednesday, noting that it makes it harder to guess what will happen to the economy once that tailwind fades.

  • Wells Fargo has found evidence that some employees filed fraudulent applications to get money from a Small Business Administration relief program supporting companies dealing with coronavirus lockdowns, according to an internal memo. The memo said the employees had created fake profiles to file for money from the Economic Injury Disaster Loan program. “We have terminated the employment of those individuals and will cooperate fully with law enforcement,” the bank’s head of human resources, David Galloreese, wrote in the memo, which was posted on an internal website on Wednesday.

  • United Airlines lost $1.8 billion in the three months through September, with operating revenue down 78 percent compared with the same period in 2019. The airline said it ended September with more than $19 billion in cash and other available liquidity, boosted by a large debt offering backed by its mileage program and the ability to borrow $5.2 billion from the Treasury Department.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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