US jobless claims jump; UK factories suffer record slump - as it happened

Graeme Wearden

from Economics | The Guardian on 2020-07-23 16:38 (#5626R)

The number of Americans filing fresh unemployment claims jumped last week to 1.4m, as states impose new lockdown measures

5.28pm BST

Time for a recap:

UK factories have suffered their worst slump in output on record. The CBI's latest Industrial Trends report showed that orders fell at the fastest pace since 1980, forcing firms to keep cutting jobs.

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.

Unilever, has released figures which suggest people working from home during the pandemic have been eating more ice-cream - but neglecting their personal hygiene.
Ice cream sales rose by 26 % in three months to June; while demand for shampoo and deodorant fell.'#shocked

There's a lot of resentment that we are owned by the richest man in the UK but a temporary blip in sales has resulted in 900 job losses worldwide."

5.02pm BST

There's some late drama in the currency markets: the US dollar has just dropped to its lowest level against other major currencies in nearly two years.

The dollar index has extended its recent weakness, hitting levels last seen in September 2018.

DOLLAR INDEX DROPS TO LOWEST SINCE LATE SEPTEMBER 2018 $DXY

4.59pm BST

European stock markets have ended the day roughly where they started it.

The UK's FTSE 100 and the German DAX both rose just 0.07%, while France's CAC slipped slightly. Spain (-0.4%) and Italy (-0.7%) both lost ground, as optimism over the EU's recovery fund faded.

Business resilience is a much sought-after attribute in the current economic climate and Unilever has certainly got the right ingredients. While it failed to deliver any sales growth on a group basis during its first-half period, its performance was considerably better than expected.

Analysts had forecast a 7.4% drop in second quarter sales, yet Unilever delivered a mere 0.3% decline. High demand for hygiene products helped make up for a decline in food and drink sales. While people are home were busy ordering ice cream and tea bags, Unilever suffered from a reduction in demand from cafes, bars, restaurants and ice cream vans.

4.35pm BST

My colleague Rob Davies points out that Dyson's UK workforce really are bearing the brunt of today's job cuts:

Breaking: Dyson cutting 900 jobs, of which 600 are in the UK.

That means 15% of the UK workforce is going, but 3% of non-UK staff.

Sir James Dyson was a prominent supporter of the UK's prospects outside the EU. He moved the company HQ to Singapore last year.

Story to follow.

NEW: Dyson job cuts - UK bears the brunt

15% of its workforce- around 600 jobs

3% of its workforce in the rest of the world - 300 jobs

4.23pm BST

Just in: A Guardian investigation has found that Sports Direct may be paying staff less than the minimum wage, nearly five years after problems were first uncovered at its Shirebrook warehouse in Derbyshire.

My colleague Simon Goodley explains:

In the latest investigation, the Guardian placed an undercover reporter inside the same Shirebrook, Derbyshire, warehouse during two weeks in late June and early July, where an estimated 3,000-4,000 workers distribute goods for Frasers Group, the holding company that also includes retailers such as Flannels, Jack Wills and USC.

The reporter recorded how warehouse staff at the group were unable to leave the warehouse during their 30-minute unpaid breaks - a practice some employment law experts say should count as paid working time and, if correct, would push Shirebrook's effective hourly wage rates below the legal minimum of 8.72 to about 8.20.

4.10pm BST

Technology firm Dyson is joining the ranks of companies cutting jobs since the Covid-19 crisis began.

Dyson is cutting 600 jobs in the UK and a further 300 worldwide, as part of an ongoing restructuring, the BBC reports. Most of the cuts are among customer service and retail staff.

The Covid-19 crisis has accelerated changes in consumer behaviour and therefore requires changes in how we engage with our customers and how we sell our products."

3.32pm BST

American Airlines has tumbled into the red for the last quarter, after the pandemic forced it to slash flights.

It made a net loss of just over $2bn, down from a profit of $662m a year ago, with revenues tumbling by 86%.

This was one of the most challenging quarters in American's history.

COVID-19 and the resulting shutdown of the U.S. economy have caused severe disruptions to global demand for air travel."

3.12pm BST

Wall Street has opened in subdued mood, following the rise in unemployment claims.

The Dow Jones industrial average has dipped by 48 points, or 0.2%, to 26,957 points, while the S&P 500 and the Nasdaq are flat.

3.02pm BST

Unilever has now overtaken AstraZeneca to become the most valuable FTSE 100 company.

Shares are now up 9%, after the company beat City expectations this morning (see here) and outlined plans to break up its tea business.

We believe that talk about a quick recovery is too optimistic. A deep global recession has already started and we are seeing consumer habits changing dramatically. Unemployment is rising across many markets and even for those with jobs, people are saving a bit harder."

2.25pm BST

The jump in US jobless claims underlines the need for a new stimulus package to protect the unemployed, says Charles Hepworth, investment director at GAM Investments:

US jobless claims for the week ending 18 July came in at 1.416m - a higher amount compared to the previous week and importantly the first increase the US has seen since March. The impressive falls in unemployment through April and May now appears to have stalled and this should be no major surprise as the Covid-19 pandemic continues to ravage across the US. With states halting reopening plans it feels that these numbers will continue to contrast President Trump's more bullish view on the economy.

The jobless benefits CARES Act of $600 per week payments is due to end next week and an extension of sorts is expected to help keep the economy from cratering."

2.03pm BST

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.

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.

1.53pm BST

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.

1.49pm BST

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.

After a continuous slide from the late March peak, initial claims for unempl. support rose in the latest wk, likely related to renewed layoffs due to the surge in virus cases. Unless we get this crisis under control in short order, higher figures will become the trend. pic.twitter.com/x9ZnjdtXFO

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.

At 1.416M, Initial Jobless Claims came in above the 1.300M estimate, and also above last week's 1.307M level; this was the 1st weekly increase since 3/28. Claims peaked on 3/28 but remain VERY high. https://t.co/maIeV4Rfa2 pic.twitter.com/iAGyIB2cYO

Initial claims for state unemployment benefits rose last week for the first time since March: 1.4 million. Plus another 975,000 applications for federal benefits from gig workers and others not usually eligible. (State claims fell if you take out seasonal adjustment.)

1.37pm BST

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.

Uh oh, initial #unemployment claims come in higher than expected at 1.4million as states sand cities roll back reopening plans. #DOW+59

OOF.

Initial jobless claims *rise* to 1.41 million. Up from 1.3 million last week and worse than the 1.3 million expected. First sequential deterioration. https://t.co/rbKBU16NIf pic.twitter.com/g3PwevezT1

1.17pm BST

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.

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."

*TWITTER 2Q REVENUE: $683.4M, EST. $704.6M

*TWITTER 2Q AVERAGE MONETIZABLE DAU: 186M, EST. 173.8M

*TWITTER NOT EXPECTING REVENUE FROM SUBSCRIPTIONS SERVICE IN 2020

*TWITTER SHARES UP 6.9% PREMARKET AFTER RESULTS$TWTR pic.twitter.com/rtwxSlF6Cj

12.54pm BST

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.

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."

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.

At least they both agree it's not going well

Post-Brexit trade agreement at this point 'unlikely': EU chief negotiator Barnier

Britain's chief negotiator David Frost says 'unfortunately clear' no preliminary Brexit deal by end of July

12.18pm BST

Professor Haskel also warns:

I am concerned about the economy getting stuck" and recovering only slowly and undershooting the inflation target.

Jonathan @haskelecon discusses modelling the economic impact of Covid-19 and prospects for the recovery. https://t.co/km6CfaHKas pic.twitter.com/i4kCQXatFq

12.17pm BST

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.

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

11.51am BST

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.

11.33am BST

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.

11.31am BST

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."

11.29am BST

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:

#Manufacturing output volumes in the quarter to July fell at a record pace. However, firms expect output to begin to recover in the coming months, marking the first time that manufacturers have anticipated output to grow since the COVID-19 crisis hit #ITS https://t.co/QdN12Y5yE1 pic.twitter.com/YHDogZGJRf

Domestic orders and export orders fell at record rates (since 1975 and 1958, respectively). Manufacturers expect domestic orders to begin to pick up in the next three months, while export orders are expected to fall at a slower pace #ITS https://t.co/QdN12Y5yE1 pic.twitter.com/bNnDFApfYR

Business sentiment stabilised in the three months to July, following a survey-record plunge in April. Meanwhile, export sentiment fell at a slower pace following a record decline last quarter #ITS https://t.co/QdN12Y5yE1 pic.twitter.com/c3YUODt0xh

11.16am BST

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.

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.

10.54am BST

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.

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.

10.32am BST

The owner of the Daily Mail, MailOnline, the i and Metro saw print advertising revenue plunge by 69% and digital income fall by almost a fifth in the three months to the end of June as the coronavirus lockdown hammered publishers.

Since March, the impact of Covid-19 has resulted in a pronounced reduction in advertising revenues across both print and digital formats,"

Growth in online traffic has helped mitigate the impact on digital but not enough to compensate for the overall reduction in advertising spend".

10.25am BST

Small investors have been spending lockdown taking punts on volatile stock markets, boosting trading at online investment firms IG Group and AJ Bell.

IG Group said pre-tax profits surged 52% to 296m over the year to May, after average daily trade volumes reached 1m at the peak of the Covid-19 market sell-off in March. That is three times higher than average trade volumes of 336,000 recorded a year earlier.

10.01am BST

More UK businesses have reopened this month as the economy slowly emerged from the Covid-19 lockdown.

That's according to the latest healthcheck on the UK economy from the Office for National Statistics.

According to the latest Business Impact of Coronavirus Survey, 92% of responding businesses said they were trading between 29 June - 12 July compared with 86% responding between 1 - 14 June (before non-essential retail was allowed to reopen in England) https://t.co/ckeTGk54cM pic.twitter.com/O1qTejx5GF

The proportion of working adults travelling to work at some point during the previous week rose above 50% for the first time since data started being collected in mid-May, while the proportion working at home exclusively remained stable at 27% https://t.co/O9tDaTUma7 pic.twitter.com/SP1VXaHR66

9.49am BST

UK insurer Beazley has been dragged into the red by the costs of the Covid-19 pandemic.

Beazley, which specialises in marine, property, data breach and life insurance, made a loss of $13.8m for the first half of 2020, down from a profit of $166.4m.

In responding to this crisis, the insurance industry faces record losses on a par with major natural catastrophes. Having a well-diversified portfolio means our COVID-19-related claims are neither excessive nor restricted in any particular line of business.

We have estimated that Beazley's pandemic-related losses will amount to $170m net of reinsurance split between political, accident & contingency ($70m) and marine, property and reinsurance ($100m). There is still uncertainty around how COVID-19 will impact liability lines of business.

9.34am BST

European stock markets have opened higher this morning, with the UK's FTSE 100 jumping 1% (partly thanks to Unilever).

Even if most bullish trends remain valid on European benchmarks so far, especially on the DAX-30 Index, lingering concerns over the uncertainty on the timing of the next US stimulus package combined with simmering US-Sino tensions is making stocks a less attractive asset class.

While investors welcomed recent progress made by healthcare companies in the struggle against the pandemic (Pfizer Inc. +8%), most of them are becoming increasingly worried that the relationship between Washington and Beijing will worsen prior to the US election in November and put further pressure on riskier assets.

9.31am BST

German carmarker Daimler has reassured investors that it's turning the corner from the pandemic, after seeing sales slump this year.

Ola Kallenius, Daimler's chairman, says:

We are now seeing the first signs of a sales recovery - especially at Mercedes-Benz passenger cars, where we are experiencing strong demand for our top end models and our electrified vehicles.

Assuming that the economic recovery continues in the second half of the year and that there is no new major wave of COVID-19 infections in our key sales markets, Daimler expects both Group EBIT and the free cash flow of the industrial business to be positive in 2020, but lower than in the previous year

9.25am BST

Shares in Unilever have surged by 8% this morning, after benefiting from the boost in eating at home during the pandemic.

As people spent more time in their homes, we saw growth in home consumption of foods, ice cream and tea. It also meant that consumers had fewer personal care occasions from going to work or socialising, and we saw a decline in our personal care business, except for hygiene products.

Negative volumes in Europe were a result of significant declines in out of home ice cream and food service, as well as reduced demand for personal care products.

The most severely impacted countries were Italy and Spain, where increased demand for in home eating and hygiene products only partially offset these negative impacts.

9.05am BST

There's a glimmer of good news in Germany this morning.

Consumer confidence in Europe's largest economy has jumped, thanks to tax cuts as Berlin tries to stimulate growth.

German Consumer Confidence above expectationshttps://t.co/vuxSDPQ3UN pic.twitter.com/tEo85rYbV9

There is no doubt that the reduction in value-added tax has contributed to the extremely positive progress. It is clear that consumers are looking to make major purchases earlier than planned, which will help boost spending this year.

Sharp rise in #German #consumer confidence for August clearly helped by temporary VAT cut. German stimulus measures lift consumer morale - GfK https://t.co/NhMQD6JXxW

9.01am BST

France's finance minister has warned that the French economy won't return to pre-crisis levels until 2022.

Bruno Le Maire told the National Assembly that GDP is still expected to tumble by 11% this year, and only rise by 8% next year, as recent economic data was satisfying but too fragile".

Devant les deputes, lors du debat d'orientation budgetaire, Bruno Le Maire reconnait que "les incertitudes sont totales pour 2021." #Economie #COVID19 #DirectAN pic.twitter.com/Malo8fO2tW

8.47am BST

The price of copper fell in China today as traders brace for a new wave of tit-for-tat retaliations between Washington and Beijing.

The most-traded September copper contract on the Shanghai Futures Exchange ended down 0.9% at 51,970 yuan ($7,429.59) a tonne, while three-month copper on the London Metal Exchange rose 0.1% to $6,493 a tonne by 0703 GMT, having fallen as much as 0.8% earlier in the session.

The United States' move to shut the Chinese consulate in Houston, Texas on Wednesday prompted Beijing to consider closing the U.S. consulate in the central city of Wuhan, a person with direct knowledge of the matter said.

8.37am BST

A dire slump in exports helped to drive South Korea into its worst slump in over 20 years

Asia's fourth-largest economy contracted 2.9% year-on-year in the April-June period, the Bank of Korea said, after a fall of 1.3% in the first quarter, putting the country into recession for the first time in around two decades. It's the fastest decline since the aftermath of the 1998 Asian financial crisis, when it fell 3.8%.

South Korea was one of the worst hit countries outside China in the early part of the pandemic, recording around 900 new cases a day in February. But by April, an intensive tracking and tracing campaign had reduced the daily figures to single digits. The country is now battling new outbreaks, including one centred on bars in Seoul.

8.25am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Investors have plenty to worry about today.

CHINA'S YUAN OPENS TRADE AT 7.0088 PER DOLLAR VS LAST CLOSE AT 6.9989

I guess they were burning documents and burning papers."

*CHINA'S BLUE-CHIP CSI300 INDEX DOWN MORE THAN 1% IN MORNING TRADE pic.twitter.com/9rWAJ61lNP

US-China tensions could persist into the US election in November. A change of leadership might not mark the end of pressure on China from the US.

Investors around the world need to consider the implications of trade policy and other major election policy issues for their portfolios."

South Korea enters first technical recession since 2003. pic.twitter.com/gvEDycvnbi

The number I've heard more frequently (including today) is that GOP will propose $200/week; Pelosi proposes $600/week; & they end up somewhere around $400/week.

But this report suggests GOP will come in lower, at ~$100/week, which is lower than what Trump said yesterday https://t.co/3cCGRwbhQ5

The still high caseload across the US means that the need for additional stimulus is still fairly acute, however optimism surrounding a bill being enacted in the next 2-3 weeks is fading.

Congressional Democrats and Republicans remain nearly $2tr apart in funding. Senate Minority Leader Schumer said late yesterday that it would not make sense for Democrats to start talking to their Senate counterparts until Republican leadership had a bill to work off.

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