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Credit…Karsten Moran for The New York Times
New claims for unemployment benefits fell last week to the lowest level of the pandemic, the government reported on Thursday, offering fresh evidence of the labor market’s recovery.
A total of 566,000 workers filed first-time claims for state benefits during the week that ended April 17, the Labor Department said, a decrease of 57,000 from the previous week’s revised figure. In addition, 133,000 new claims were filed for Pandemic Unemployment Assistance, a federal program that covers freelancers, part-timers and others who do not qualify for state benefits.
Neither figure is seasonally adjusted.
“The bigger story — even though we’re going to see volatility week to week — is that the labor market continues to heal and labor demand is coming back quite strongly in line with robust growth,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.
Warmer weather, more extensive coronavirus vaccination efforts and a stream of government assistance that has enabled consumer spending have all contributed to recent gains.
Encumbrances remain. The labor market is weighed down by continuing anxiety about coronavirus infections and the demands of child care when regular school schedules have been disrupted.
According to the Census Bureau’s weekly Household Pulse Survey, more than four million people who were unemployed in March said they were not working because they were afraid of catching Covid-19.
“It’s important to keep in mind that the trend is going in the right direction,” said Heidi Shierholz, director of policy at the left-leaning Economic Policy Institute, “but we’re still at crisis levels of unemployment claims.”
The weekly level of new claims is still near historical highs recorded before the pandemic. And there are roughly 8.4 million fewer jobs than there were in early 2020.
The long-term unemployed face particular hurdles. A new report from the California Policy Lab, a research institute based at the University of California, said some states were prematurely ending extended unemployment insurance because of the way they count claims.
The worst appears to be over for airlines. Now, it’s just a matter of waiting for the summer travel frenzy to begin.
American Airlines and Southwest Airlines on Thursday were the last two major U.S. airlines to report financial results for the first three months of the year. American lost nearly $1.3 billion, while Southwest earned $116 million, a welcome profit after weathering its first annual loss in half a century last year.
“While the pandemic is not over, we believe the worst is behind us, in terms of the severity of the negative impact on travel demand,” Gary Kelly, Southwest’s chairman, said in a statement. “Vaccinations are on the rise, and Covid-19 hospitalizations in the United States are down significantly from their peak in January 2021. As a result, we are experiencing steady weekly improvements in domestic leisure bookings, which began in mid-February 2021.”
That sentiment is shared across the industry.
“With the momentum underway from the first quarter, we see signs of continued recovery in demand,” Doug Parker, American’s chief executive, said in a statement on Thursday. His counterpart at United Airlines issued a similarly hopeful statement this week, despite posting a loss of $1.4 billion. Last week, Delta Air Lines reported a $1.2 billion loss.
The industry has been buoyed by federal support, receiving $54 billion in grants to pay workers over the past year and another $25 billion in loans. Mr. Kelly of Southwest credited that support for the airline’s slight profit, saying that the airline would have lost $1 billion in the first quarter without it.
Southwest was also buoyed by its limited exposure to corporate and international travel, which have been slow to rebound and are lucrative parts of the business for American, Delta and United. Leisure travel within the United States, which all of the airlines serve, is almost fully recovered.
Air travel started to recover meaningfully in early March, with Transportation Security Administration data showing a steady rise in the number of people screened at airport security checkpoints relative to the same period in 2019. That surge has subsided somewhat since earlier this month, with screenings down about 42 percent over the past week compared with 2019.
Southwest said demand for travel continues to improve with summer fast approaching and customers once again feeling comfortable making travel plans further out. The airline estimates that it has about 35 percent of expected bookings in place for June and 20 percent for July.
Credit…Ennio Leanza/Keystone, via Associated Press
Credit Suisse said on Thursday that it suffered a loss in the first quarter stemming from loans it made to the collapsed investment fund Archegos Capital Management, a debacle that has prompted Switzerland’s financial regulator to investigate whether the bank was doing a poor job monitoring the riskiness of its investments.
The loss of 252 million Swiss francs, about $275 million, from January through March, came after a loss of 4.4 billion francs from Archegos that wiped out a big increase in revenue. Credit Suisse also said on Thursday that it had sold bonds to investors to raise $2 billion to shore up its capital.
The bank expects additional losses from Archegos of about $655 million as it finishes winding down its exposure to the firm, Thomas Gottstein, the chief executive of Credit Suisse, said during a conference call with reporters Thursday.
The bank, based in Zurich, has suffered a series of calamities this year that have severely damaged its reputation and finances. Swiss regulators are also investigating a spying scandal and Credit Suisse’s sale of $10 billion in funds packaged by Greensill Capital. The funds were based on financing provided to companies, many of which had low credit ratings or were not rated at all. Greensill collapsed in March, and its ties to former Prime Minister David Cameron of Britain have caused a political scandal.
Mr. Gottstein promised Thursday that Credit Suisse would overhaul its systems for tracking risk to avoid future disasters. Several top executives have already left the bank as part of a management shake-up, including Lara Warner, the chief risk and compliance officer.
Credit Suisse also plans to pare back the size of a unit that serves hedge fund clients and was involved in the Archegos losses. Mr. Gottstein declined to say whether the debacle would lead to major changes at Credit Suisse’s investment bank, which has a large presence in New York.
But he suggested that Credit Suisse would not retreat from investment banking. “The underlying results show that the strategy is working,” he told reporters. “I wouldn’t say that because we had two disappointing incidents we should throw the whole strategy overboard.”
If not for the Archegos loss, Credit Suisse would have made a pretax profit of 3.6 billion francs, the bank said. Revenue for the quarter rose 30 percent to 7.6 billion francs as Credit Suisse raked in fees from lively trading on stock and bond markets.
The bank is certain to face intense official scrutiny in months to come. The Swiss regulator, known as Finma, said it would “investigate in particular possible shortcomings in risk management” at Credit Suisse. Finma also said that it would “continue to exchange information with the competent authorities in the U.K. and the U.S.A.”
Mr. Gottstein acknowledged Thursday that the bank had received inquiries from regulators in the United States and Britain, but did not give details.
He declined to confirm a report in the The Wall Street Journal that Credit Suisse’s exposure to Archegos had reached more than $20 billion before the fund collapsed in late March. Mr. Gottstein conceded that Credit Suisse was one of the banks most exposed to Archegos.
The quarterly loss, which Mr. Gottstein described as “unacceptable,” compared with a profit of 1.3 billion francs in the first quarter of 2020.
Around 100 special purpose acquisition companies, or SPACs, went public each month in the first quarter of the year. So far in April, you could count the number of those initial public offerings on two hands, the DealBook newsletter reports.
The sudden drop in debuts of the blank-check funds, which are created with the sole purpose of finding an unspecified private company to acquire, has market watchers asking whether this is a pause — or a more permanent plunge.
The slowdown coincides with increased scrutiny by the Securities and Exchange Commission. The regulator issued a statement at the end of last month highlighting “the key considerations related to the unique risks and challenges of a private company entering the public markets through a merger with a SPAC.” Not long after, another note offered “guidance” on some of the trickier accounting issues related to blank-check funds. Neither statement suggested any rule changes, but with Gary Gensler, the S.E.C.’s new enforcement-minded chairman, taking over this week, SPAC sponsors have slowed their roll.
The recent performance of SPACs has also been lousy. Analysts at Goldman Sachs note that a stock price index of 200 SPACs (pre- and post-merger) has badly underperformed the market this year, down 17 percent versus a 10 percent gain in the S&P 500. SPACs have also lagged an index of unprofitable tech stocks, suggesting that investors have particular concerns about SPACs, because plenty of them have acquired other unprofitable tech companies.
But we haven’t heard the last of SPACs. The amount of money these shell companies have raised to date could drive $900 billion in acquisition activity over the next two years, according to the Goldman analysts. And more than 25 SPACs filed I.P.O. registration documents this month, per SPAC Research, adding to a pipeline of more than 200 others that have disclosed plans to go public but haven’t yet sealed the deal, for whatever reason.
Credit…Daniel Roland/Agence France-Presse — Getty Images
The European Central Bank on Thursday maintained a stimulus program intended to counteract the economic effects of the pandemic, as expected, while promising to make sure that eurozone businesses and consumers have an ample supply of credit.
Following a monetary policy meeting, the bank’s Governing Council said in a statement that it would continue buying government and corporate bonds to prevent “a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic.”
At its last meeting, in March, the bank stepped up the pace of the bond purchases, a form of printing money that helps keep market interest rates low. The bank has also been funneling money directly to commercial banks at negative interest rates, provided they lend the money to customers.
The central bank said Thursday that it had seen “a high takeup” of the money, which is essentially free to lenders.
Credit…Apple, via Reuters
Tile said Apple boxed out its products and then copied them. Spotify said Apple blocked it from telling customers that they could find cheaper prices outside its iPhone app. And Match Group testified that it now paid nearly $500 million a year to Apple and Google in app store fees, the dating company’s single largest expense.
That testimony came Wednesday at a Senate hearing on Apple’s and Google’s control over their app stores, held by the Judiciary subcommittee on antitrust. The hearing was the latest example of the growing scrutiny of Big Tech and the increasing agreement among Democrats, Republicans and smaller companies that the world’s biggest tech companies have become too powerful.
At the hearing, representatives from Apple and Google defended their companies’ practices, saying that they don’t copy competitors, that few apps pay their commissions and that they charge the commissions to fund the security of their app stores.
Both Democratic and Republican senators were skeptical of those explanations. “Google and Apple are here to defend the patently indefensible,” said Senator Richard Blumenthal, a Democrat from Connecticut. “If you presented this fact pattern in a law school antitrust exam, the students would laugh the professor out of the classroom, because it is such an obvious violation of our antitrust laws.”
Apple and Google have long had a stranglehold on the business of mobile apps. But that position, which has earned them hundreds of billions of dollars, has increasingly led to regulatory, legal and public-relations headaches.
Federal and state lawmakers are holding hearings and considering legislation to weaken the companies’ app-store controls. The Justice Department is investigating the issue. And in a trial next month, Apple is set to face off against Epic Games, the Fortnite maker, which is suing Apple for forcing it to use Apple’s payment system in its iPhone app.
Jared Sine, the chief legal officer at Match Group, said on Wednesday that Google had called his company the previous night when his planned testimony became public. He said Google wondered why his testimony appeared to be tougher than what Match had said on a recent earnings call.
Mr. Blumenthal called that intimidation, and Senator Amy Klobuchar, the Minnesota Democrat who is the subcommittee’s chairwoman, suggested that the senators would investigate.
Wilson White, a government affairs official at Google, said that Match was an important partner and that Google would never aim to intimidate the company.
“There are many, many ways they could hurt our business,” Mr. Sine said. “We’re all afraid, is the reality, Senator. We’re fortunate you’re listening to us today.”
“Well,” Ms. Klobuchar replied, “I hope the Justice Department is, too.”
Credit…Kayana Szymczak for The New York Times
The market may already be dictating some of the agenda for Gary Gensler, who started as chairman of the Securities and Exchange Commission on Saturday.
Mr. Gensler already has a lot on his plate, Matthew Goldstein reports for The New York Times:
One of the first things he will probably have to weigh in on is whether to assert more control over the red-hot market for special purpose acquisition companies, or SPACs, those speculative businesses that have raised well over $100 billion from investors.
He must also decide whether the S.E.C. should do more to protect small investors, who have recently become a major force in the stock markets.
Then there’s Archegos Capital Management, the $10 billion fund whose implosion last month spotlighted the loosely regulated world of family offices.
“Gensler is going to be confronted with a range of enforcement issues, and he is going to have to determine what his priorities are,” said Daniel Hawke, a former chief of the S.E.C.’s market abuse unit and now a partner with the law firm Arnold & Porter.
Dennis Kelleher, chief executive of Better Markets, a nonprofit organization, said he expected Mr. Gensler to focus on reforming the rules around corporate disclosures — including seeking more transparency from companies and big investors on their risks from climate change and contributions to it, as well as diversity on company boards — because it affected much of his agenda.
“Disclosure writ large will be a common thread through all the issues,” Mr. Kelleher said. “The S.E.C. is fundamentally a disclosure agency, and through better disclosure, you are supposed to be able to empower investors and enable enforcement.”
Credit…Andrew Testa for The New York Times
Arrival, a small electric vehicle company, is creating highly automated “microfactories” where its delivery vans and buses will be assembled by multitasking robots, breaking from the approach pioneered by Henry Ford and used by most of the world’s automakers.
The advantage, according to Arrival, is that its microfactories will cost about $50 million rather than the $1 billion or more required to build a traditional factory, Neal E. Boudette reports for The New York Times.
“The assembly line approach is very capital-intensive, and you have to get to very high production levels to make any margin,” said Avinash Rugoobur, Arrival’s president and a former General Motors executive. “The microfactory allows us to build vehicles profitably at really any volume.”
The company is also replacing most steel parts used in vehicles with components made from advanced composites, a mix of polypropylene, a polymer used to make plastics, and fiberglass. These parts are to be held together by structural adhesives instead of metal welds.
The use of composites, which can be produced in any color, would eliminate three of the most expensive parts of an auto plant — the paint shop, the giant printing presses that stamp out fenders and other parts, and the robots that weld metal parts into larger underbody components. Each typically costs several hundred million dollars.
The company, which is based in London and is setting up factories in England and the United States, says this method should yield vans that cost a lot less than other electric models and even today’s standard, diesel-powered vehicles.
Shares in renewable energy companies rose as President Biden’s two-day climate summit began on Thursday, designated as Earth Day. Mr. Biden is expected to announce that the United States will intend to cut greenhouse gas emissions nearly in half by the end of the decade.
Ahead of the virtual summit with dozens of world leaders, Britain has also sped up its own climate change targets. On Tuesday, it set a new target of cutting emissions by nearly 80 percent by 2035, compared with 1990 levels. On Wednesday, the European Union agreed to a new target to reduce net emissions at least 55 percent by the end of the decade.
“As governments around the world look to kick-start their recoveries as well as reach climate goals, green spending has become one avenue for doing so,” strategists at UBS Global Wealth Management wrote in a note. “We think the sustainable investment universe will continue to expand rapidly.”
Shares in Orsted, a Danish wind energy company, rose 3.4 percent on Thursday, ending a eight-day streak of losses. Shares in Siemens Gamesa Renewable Energy jumped nearly 6 percent. First Solar shares rose in premarket trading, extending a gain of 5.4 percent from Wednesday. The iShares Global Clean Energy exchange-traded fund, which has $5.6 billion in assets, rose 2 percent on Wednesday and kept climbing in premarket trading.
Elsewhere in markets
U.S. stock futures were little changed. The Stoxx Europe 600 index rose 0.5 percent.
Credit Suisse shares plunged 6 percent on Thursday after the Swiss bank said it suffered a loss in the first quarter after billions of francs were lost because of loans made to investment fund Archegos Capital Management
The euro rose 0.2 percent against the dollar before the European Central Bank announces its latest monetary policy decisions. Economists are not expecting a change after the bank ramped up the pace of its bond buying program at its previous meeting in March.