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Unemployment Claims Dip, but Layoffs Remain a Worry

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The number of Americans filing for unemployment benefits fell last week, but employers continue to lay off workers at an extraordinarily high pace that exceeds the worst levels of past recessions.

Initial claims for state benefits totaled 790,000 before adjustments for seasonal factors, the Labor Department reported Thursday. The tally, down from 866,000 the previous week, is roughly four times what it was before the coronavirus pandemic shut down many businesses in March.

The latest data suggests that jobless claims have flattened since the big gains in hiring recorded last spring as the economy bounced back, economists said. And layoffs continue — on Wednesday, for example, Raytheon said it would eliminate 15,000 commercial aerospace and corporate jobs.

“I’m concerned about a plateau,” said Gregory Daco, chief U.S. economist at Oxford Economics. “It suggests we are entering the second phase of the recovery, one that is slower and more susceptible to downside risk.”

Other economic data has been mixed. The Commerce Department reported Wednesday that retail sales rose 0.6 percent in August, compared with a 0.9 percent gain in July, as consumers grew more cautious.

And in a sign of how guarded the long-term economic view remains, the Federal Reserve indicated that it would keep interest rates near zero at least through 2023.

“The labor market continues to heal from the viral recession, but unemployment remains extremely elevated and will remain a problem for at least a couple of years,” said Gus Faucher, chief economist at PNC Financial Services.

Initial weekly state unemployment claims

By Ella Koeze·Not seasonally adjusted. Does not include claims made under the Pandemic Unemployment Assistance program.·Source: Labor Department

New claims last week for Pandemic Unemployment Assistance, an emergency federal program for freelance workers, independent contractors and others not eligible for regular unemployment benefits, totaled 659,000, the Labor Department said.

Federal data suggests that the program now has more beneficiaries than regular unemployment insurance. But there is evidence that both overcounting and fraud may have contributed to a jump in claims.

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The largest surge by far last week was in Arizona, where the Labor Department reported more than 165,000 initial claims under the program, an increase from 101,000 the week before. Both weeks, only California — which has also reported widespread fraud — had a higher tally.

“We are reviewing over one million P.U.A. claims for likely fraudulent activity,” Brett Bezio, deputy press secretary of the Arizona Department of Economic Security, said in an email. To give a sense of the scale of the attempted abuse, he pointed out that the state had received nearly 2.7 million jobless claims during the pandemic, which represents 80 percent of Arizona’s work force.

While Pandemic Unemployment Assistance has been hit with allegations of fraud, another new program, Lost Wages Assistance, has struggled to pay any money at all.

President Trump created it last month with federal disaster funds after Republicans and Democrats in Congress deadlocked on a relief bill. The payments of $300 per week — half the amount of a federal supplement that expired at the end of July — are retroactive to the week that ended Aug. 1. But officials said there was money for no more than six weeks, so states have been told that the coverage ended Sept. 5.

More than 30 states have begun paying benefits, but “it’s kind of a zombie program,” said Michele Evermore, senior researcher and policy analyst at the National Employment Law Project, a worker advocacy group.

“Every state seems to be doing it differently,” she added, with some paying a lump sum of $1,800 to cover six weeks after getting off to a late start.

As with the earlier supplement, overwhelmed computer systems have added to delays. Colorado was set to begin making payments this week, but its certification process briefly froze because of demand, news reports said.

As programs like Pandemic Unemployment Assistance and Lost Wages Assistance expire or run out of funds, job searches might be expected to increase. But they haven’t — a sign some unemployed workers are giving up on finding a new position for now.

“Job-seeker numbers are pretty flat,” said Julia Pollak, labor economist at ZipRecruiter, an online employment marketplace. “People still expect to get their old jobs back.”

Ms. Pollak said she was surprised because 36 percent of those surveyed in July by ZipRecruiter said they would spend more time searching for work if the $600 weekly supplement ended. Just over 40 percent said they would be willing to take a less appealing position.

Instead, people aren’t budging. “We see a level of stasis in the economy,” Ms. Pollak said. “The uncertainty causes people to sit and wait. The whole economy is in a bit of a freeze.”

In some cases, workers have dropped out of the labor market. Labor Department data showed that 125,000 women ages 25 to 54 left the work force in August.

“This is a situation where many people are choosing to delay re-entering the labor force or to withdraw,” Ms. Pollak said. “In some cases, it makes more sense for workers to wait for conditions to improve in their industry. It’s costly for people to switch.”

In the meantime, the delays and other logistical headaches in jobless programs are taking a toll on workers and their families.

Marcos Quintana, 29, was laid off in December from his job as a seasonal custodian at a school in Bakersfield, Calif. He expected to find new work quickly, but the pandemic hit, and many custodial jobs dried up.

ImageMarcos Quintana cut off cable television and borrowed from his father but still had to move out of his apartment.
Credit…Horatio Baltz for The New York Times

He started receiving $200 a week in state unemployment benefits, as well as a $600 boost from the federal government. When the $600 program expired in late July and his state unemployment benefits ran out, he was left with $230 a week from Pandemic Emergency Unemployment Compensation, a federal program for those whose state benefits have expired.

Mr. Quintana lived with his girlfriend, who lost her job as a hairstylist in March when salons closed. She filed for unemployment benefits but never received them, so Mr. Quintana supported them, paying the $935 in rent and as much as $300 in utilities for their apartment. To avoid falling behind on his $357 car payment and $185 car insurance bill, he cut off cable television and borrowed from his father.

Then Mr. Quintana found that he was eligible for Lost Wages Assistance. He was certified to receive the payments on Sept. 15, but he’s not sure when they will arrive.

Regardless, the money will be too late to avoid upheaval in Mr. Quintana’s life. His relationship with his girlfriend soured as the financial stress mounted. And Mr. Quintana couldn’t afford their bills.

So last week the couple split up, and he moved in with his parents.

“I feel like a kid again,” he said. “Like I’ve taken two steps backward in life.”

Even though it has been unpredictable, Lost Wages Assistance has been helpful for some workers as they navigate an unforgiving economic climate.

Mary Costanzo was laid off as a bookkeeper at an accounting firm on March 27. She filed for unemployment benefits and started receiving $451 a week after taxes in Massachusetts benefits, plus the $600 federal supplement.

Credit…Philip Keith for The New York Times

When the federal supplement ended, she didn’t have enough to cover September’s $2,262 mortgage payment on their four-bedroom house in Burlington, northwest of Boston. Her husband pulled $6,000 out of his 401(k) savings to make the mortgage payment and to have money on hand for October and November in case Ms. Costanzo hasn’t found work by then.

This month, she stopped receiving the state benefits, too. The unemployment office told her that she needed to refile her claim. She did so, but no benefits have materialized.

Lost Wages Assistance produced a lump sum of $1,200 this week. Ms. Costanzo doesn’t know if she will receive any more from the program. She does know that if she doesn’t get a job soon, she and her husband will keep draining their retirement savings.

After months of fruitless searching, Ms. Costanzo had her first job interview this week. If she gets the job, she will start on Monday.

She will be relieved if she is hired, but she will also be concerned, because the job requires working in an office. She had wanted a job she could do remotely, because she fears bringing the coronavirus home to her sons, 27 and 31, who have cystic fibrosis and are prone to lung infections.

“At this point, I don’t have a choice,” she said. “I need to work to pay the mortgage.”

Patricia Cohen contributed reporting.

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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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