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The scale of the economic challenge facing the Biden administration became more evident Thursday morning, with fresh data on initial jobless claims underscoring the continuing toll of the coronavirus on the job market.
The Labor Department reported that new claims for unemployment benefits declined last week, but they remain at extraordinarily high levels by historical standards.
New restrictions and lockdowns amid a surge in cases in many parts of the country have decimated employment in the restaurant and leisure and entertainment industries, with little relief in sight.
“The message is the same — the labor market is extremely weak,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “It’s going to be pretty rough over the next several months.”
The Labor Department said 961,000 workers filed initial claims for state unemployment benefits last week. A further 424,000 claims were filed for Pandemic Unemployment Assistance, an emergency federal program for freelancers, part-time workers and others normally ineligible for state jobless benefits. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 900,000.
The beginning of vaccinations in December provided optimism about a quick turnaround, but the slow rollout in many parts of the country has set back those hopes. On the other hand, the passage of a $900 billion stimulus package late last year and the prospect of more aid under the Biden administration have allayed fears of a double-dip recession.
Over all, the best bet for the economy is more vaccinations, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.
“There is no better economic stimulus than a successful vaccine rollout,” he said. “It will reduce the risk of human interaction and provide a basis on which different types of businesses can open more durably.”
Credit…John Raoux/Associated Press
Even as the labor market struggles, there are signs that other economic measures are turning more positive. Interest rates are rising, an indication that traders expect faster growth and higher prices once mass inoculations take hold and the coronavirus recedes.
Yields on the benchmark 10-year Treasury note have jumped by 20 basis points to 1.10 percent over the last two months, breaking the 1 percent threshold on Jan. 6. Rates remain extremely low by historical standards, but a continuation in the surge could threaten one of the leading bright spots in the economy — the housing market.
Rock-bottom interest rates have prompted a surge in home buying and refinancing, as borrowers take advantage of the Federal Reserve’s move to lower rates after the coronavirus struck last March.
Low rates have also buoyed the stock market, as yield-hungry investors turned to equities in search of faster growth. An upturn in interest rates — reflecting lower bond prices as other investments become more attractive — would almost certainly undermine the momentum that has propelled major market indexes to record highs.
So far, economists play down the likelihood of a surge in rates. But all eyes are nevertheless on yields, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.
“It’s the No. 1 question I get from clients,” Mr. Tannenbaum said. “I know there are folks out there that think the 10-year yield is poised to become unmoored and shoot up to 1.5 or 2 percent. But I find that highly unlikely.”
Even if Mr. Tannenbaum is right about the solidity of the real estate market, rising yields could put a brake on the Biden administration’s stimulus efforts.
So-called bond vigilantes drove rates higher in the 1990s during the Clinton administration, helping to force officials to make deficit reduction a higher priority than new spending.
“We just bumped up our rate forecast for 2021,” said Scott Anderson, chief economist at Bank of the West in San Francisco. “If Biden gets his way with more stimulus, there will definitely be more concern about the pace of Treasury bond issuance. This could all make the bond market nervous.”
For now, though, a surge in rates is unlikely, said Gus Faucher, chief economist at PNC Financial Services in Pittsburgh. What’s more, the Federal Reserve can push back on yields, whether by increasing asset purchases or buying more longer-term debt.
“The Fed has some options,” Mr. Faucher said. “And the Biden administration has made it clear the economy needs more stimulus. I don’t expect them to balk on their stimulus plans even if rates move higher.”
The start of 2021 has been rocky for Britain. Its exit from the European Union unleashed a colossal amount of red tape that has left some industries desperate for help, and the country is under yet another lockdown because of a fast-spreading strain of the coronavirus.
But there has been a glimmer of hope. More than four million people in Britain have been partially vaccinated against the coronavirus, a promising pace of inoculation.
Investors looking to ride a wave of optimism about a vaccine rollout have turned to Britain’s stock market, which has posted a strong start to the year, jumping more than 6 percent in the first week.
Overall, in the first two and a half weeks of January, the FTSE 100, Britain’s benchmark stock index of large companies, gained 4.3 percent — outstripping the S&P 500 index, which rose 2.6 percent, and the Stoxx Europe 600 index, which was up 3 percent. Even when the gains are converted to U.S. dollars, the FTSE 100 still has a clear lead.
Beyond the vaccine rollout helping to ensure an economic rebound, another factor is drawing investors: the relative cheapness of British stocks.
Britain’s FTSE 100 index is benefiting from an investment strategy in which traders buy so-called value stocks. These are companies that are perceived to be trading below their true value because their business has been disrupted by a recession, especially in the financial and energy sectors, and the FTSE 100 has a large share of these stocks.
Analysts at Citigroup have ordained Britain’s stock market their “favorite” value trade.
“I would emphasize the very much unloved and horrible dreadful U.K. market might be worth a look this year,” Robert Buckland, a Citigroup equity strategist, said in a presentation last week. “We all know it’s been a place to avoid for many, many years.”
The British stock market has been a laggard for years.
Once converted into dollars, the annual returns of the FTSE 100 have been the worst of the three indexes for the past nine years.
Why are investors betting on a turnaround now? For one, many of them are ready for a bargain. The equity bull market has been dominated by shares of American tech companies that are expensive, which makes some investors nervous about how much they can keep rising. Cheap stocks in industries that tend to do well during economic boom times are offering an alternative.
And then there is Britain’s free-trade deal with the European Union. Some investors have put aside whether it’s a good or bad deal in its detail, in favor of relief that an agreement was reached in late December.
The deal “reduced that overhang people had of uncertainty,” said Caroline Simmons, the U.K. chief investment officer at UBS Global Wealth Management.
Credit…Jeenah Moon for The New York Times
The New Yorker’s union employees did not go to work on Thursday.
The more than 100 employees represented by The New Yorker Union, which includes fact checkers, web producers and some other editorial employees, decided on the daylong walkout after a recent round of negotiations with management failed, said Natalie Meade, the union chair.
The issue is pay. Ms. Meade, who is a fact checker at the magazine, said the union wanted to raise the salary minimum to $65,000. In the recent negotiations, managers at The New Yorker did not hit that number, she said, instead offering wage increases that she called “insulting.”
“They already know they’re underpaying us,” Ms. Meade said.
The union, which does not represent The New Yorker’s staff writers, has been working toward a collective bargaining agreement since 2018. The walkout started at 6 a.m. on Thursday and was scheduled to last 24 hours.
Before negotiations, it conducted a pay study based on data from Condé Nast, the magazine’s parent company. The survey found that union workers at The New Yorker had a median salary of $64,000 and that the company’s editorial assistants were paid a median of $42,000.
The New Yorker did not immediately respond to a request for comment.
In September, Senator Elizabeth Warren, Democrat of Massachusetts, and Representative Alexandria Ocasio-Cortez, Democrat of New York, pulled out of keynote speaker slots at The New Yorker Festival in solidarity with union workers, who were planning a digital picket line to pressure management into including a “just cause” proposal in their agreement.
“Just cause” is a provision often included in union contracts that sets a standard employers have to meet to discipline or fire workers. New Yorker management eventually agreed to include the provision.
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On President Biden’s first day in office, the head of Amazon’s consumer business, Dave Clark, sent a letter to the White House with an offer to help achieve the goal of vaccinating 100 million people in the administration’s first 100 days. By way of assistance, the retailer offered to vaccinate a large share of its workers.
The e-commerce giant has made similar offers to state governments, including Tennessee and Washington, although Amazon was not among the companies Gov. Jay Inslee of Washington announced as partners in its vaccination plan this week.
Those earlier letters to governors were signed by Brian Huseman, who runs Amazon’s U.S. lobbying team, which has been seeking permission from the Centers for Disease Control and Prevention to vaccinate “essential” workers at the company’s warehouses, data centers and Whole Foods “at the earliest appropriate time.”
The company has hired a health care provider to help administer the vaccine to employees, it said in the letters.
This suggests that public-private partnerships to distribute vaccines may come with perks for the companies taking part, the DealBook newsletter notes, potentially giving companies leverage to push employees up the line in priorities set by states. Several states are struggling to roll out vaccines as fast as they’d like because of issues with funding, staffing and logistics. In his letter to Mr. Biden, Mr. Clark said that Amazon could help with “operations, information technology and communications capabilities,” though he didn’t specify what that would entail.
The European Central Bank left its stimulus measures intact Thursday, as expected, as it waited to see whether measures announced in December would be enough to limit economic damage from the pandemic.
Following a meeting of its governing council, the bank reiterated its intent to pump as much as 1.9 trillion newly created euros, or $2.3 trillion, into bond markets as part of a “pandemic emergency” program intended to keep market interest rates low.
The bond purchases will continue at least until March 2022 and longer if necessary, the bank said.
As expected, the central bank also said that it would maintain a program that effectively pays banks to lend money to businesses and consumers.
The European economy continues to suffer from the burden of extended lockdowns, but analysts had not expected the central bank to take further action Thursday after expanding programs intended to encourage banks to lend and hold down market interest rates.
Stocks on Wall Street were set to open higher on Thursday after the S&P 500 index closed at a record high after President Biden was sworn in the previous day.
The benchmark U.S. index was heading for a 0.2 percent increase, and European stocks were mostly higher as traders anticipated more U.S. fiscal stimulus. The Stoxx Europe 600 index rose 0.4 percent, reaching an 11-month high. Most markets in Asia closed higher.
Renewable energy stocks extended gains this week after Mr. Biden recommitted the United States to the Paris climate agreement. Shares in Orsted and Vestas, two Danish wind energy companies, are up nearly 6 percent and 8 percent this week. Siemens Gamesa, a Spanish subsidiary of Siemens Energy that makes wind turbines, rose more than 3 percent on Thursday. Shares in First Solar, an American company, were up 2.8 percent in premarket trading.
Oil prices declined on Thursday. Futures of West Texas Intermediate fell 0.6 percent to just under $53 a barrel.
The pound rose 0.6 percent against the U.S. dollar and was stronger against most major peers after the Bank of England governor struck a cautious tone about the use of negative interest rates, diminishing some expectations in the market that the tool could be used soon. The central bank governor, Andrew Bailey, said that he expected the British economy to experience a “pronounced recovery” as the vaccination program is rolled out.
Credit…Sebastian Hidalgo for The New York Times
United Airlines lost $1.9 billion in the fourth quarter, bringing its total losses for 2020 to just over $7 billion, its worst year since merging with Continental Airlines a decade ago. Despite that terrible loss, the airline said it expects 2021 to be a “transition year” as it prepares for a recovery from the coronavirus pandemic.
“The truth is that Covid-19 has changed United Airlines forever,” the company’s chief executive, Scott Kirby, said in a statement. “The passion, teamwork and perseverance that the United team showed in 2020 is exactly what will help us build a new United Airlines that’s better, stronger and more profitable than ever.”
The airline reported about $3.4 billion in operating revenue in the final three months of last year, down more than two-thirds from the same period in 2019. It ended the year with access to nearly $20 billion in cash or cash-equivalent funds, not including federal stimulus loans.
Delta Air Lines last week reported a $12.4 billion loss in 2020, capping what its chief executive called the “toughest year in Delta’s history.”
In anticipation of a recovery, United has resumed major maintenance and engine overhauls so that planes sidelined by weak demand will be ready as more people start flying again, it said.
But that recovery is unlikely to arrive for quite some time. United said it expects to bring in about a third as much operating revenue in the first quarter of this year as it did during the same three months in 2019. Most analysts believe the airline industry will not fully recover from the pandemic for several years.
Credit…Adriana Loureiro Fernandez for The New York Times
Suriname, Guyana and Brazil are the new areas of focus for oil companies, attracting more new investment than the Gulf of Mexico and other more established oil fields. They are helping to keep global oil prices relatively low, undermining efforts by Russia and its allies in the Organization of the Petroleum Exporting Countries, like Saudi Arabia, to manage global supply and push up prices.
The recent pickup in interest in Guyana and Suriname is somewhat surprising because their promise as oil producers has often come up empty, reports The New York Times’s Clifford Krauss. Companies drilled more than 100 unsuccessful wells there, mostly in shallow waters, from 1950 to 2014. But after rich fields were found in the deep waters off Brazil, Exxon Mobil and other companies returned to take another look. Exxon struck a gusher in Guyanese waters in 2015, opening the current flurry of exploration.
In Guyana, oil companies have found more than 10 billion barrels of probable reserves of accessible oil and gas offshore, according to IHS Markit, the energy consulting firm. Production began in 2019 and is ramping up quickly. Guyana already accounts for one of the top 50 oil basins worldwide, according to consultants.
Suriname has at least three billion to four billion barrels of reserves, energy experts said, or up to half the new oil and gas discovered around the world last year.
Oil companies say they can make money in Suriname with oil prices as low as $30 to $40 a barrel because of lower costs. That is roughly equivalent to the threshold in Guyana and well below today’s oil price. It is also below break-even levels in many places, including some U.S. shale fields, where costs usually add up to nearly $50 a barrel.