Persistently high U.S. weekly jobless claims point to labor market scarring

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for jobless benefits rose to a two-month high last week, stoking fears the COVID-19 pandemic was inflicting lasting damage to the labor market.

The weekly unemployment claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed at least 25 million were on jobless benefits at the end of September. It reinforced views the economy’s recovery from the recession, which started in February, was slowing and in urgent need of another government rescue package.

The economic hardship wrought by the coronavirus crisis is a major hurdle to President Donald Trump’s chances of getting a second term in the White House when Americans go to the polls on Nov. 3. Former Vice President Joe Biden, the Democratic Party’s candidate, has blamed the Trump administration’s handling of the pandemic for the worst economic turmoil in at least 73 years.

“The increase in initial claims is disturbing,” said Chris Low, chief economist at FHN in New York. “It is difficult to see it and not think the recovery is vulnerable.”

Initial claims for state unemployment benefits increased 53,000 to a seasonally adjusted 898,000 for the week ended Oct. 10. Data for the prior week was revised to show 5,000 more applications received than previously reported.

Economists polled by Reuters had forecast 825,000 applications in the latest week. The surprise increase came even as California processed no claims. California, the most populous state in the nation, suspended the processing of new applications for two weeks in late September to combat fraud. It resumed accepting claims last Monday.

Unadjusted claims rose 76,670 to 885,885 last week. Economists prefer the unadjusted number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the pandemic. Including a government-funded program for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs, 1.3 million people filed claims last week.

Seven months into the pandemic in the United States, first-time claims remain well above their 665,000 peak during the 2007-09 Great Recession, though below a record 6.867 million in March. With new COVID-19 cases surging across the country and the White House and Congress struggling to agree on another rescue package for businesses and the unemployed, claims are likely to remain elevated.

Treasury Secretary Steven Mnuchin said on Thursday he would keep trying to reach a deal with House Speaker Nancy Pelosi, a Democrat, before next month’s election.

Stocks on Wall Street were lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.

MILLIONS EXHAUST BENEFITS

About 3.8 million people had permanently lost their jobs in September, with another 2.4 million unemployed for more than six months. Economists fear those numbers could swell.

Though the claims report showed a decline in the number of people on unemployment rolls in early October, economists said that was because many people had exhausted their eligibility for benefits, which are limited to six months in most states.

The number of people receiving benefits after an initial week of aid declined 1.165 million to 10.018 million in the week ending Oct. 3.

About 2.8 million workers filed for extended unemployment benefits in the week ending Sept. 26, up 818,054 from the prior week. That was the largest weekly gain since the program’s launch last spring. These benefits are set to expire on Dec. 31.

Tens of thousands of airline workers have been furloughed. State and local government budgets have been crushed by the pandemic, leading to layoffs that are expected to escalate without help from the federal government.

“Risks to the labor market outlook are weighted heavily to the downside,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The increased spread of the virus across much of the country could result in an even larger pullback in business activity than expected.”

Though economic activity rebounded in the third quarter because of fiscal stimulus, the stubbornly high jobless claims suggest momentum ebbed heading into the fourth quarter.

Other reports on Thursday showed mixed fortunes for regional manufacturing in October. A survey from the New York Federal Reserve showed its business conditions index fell seven points to a reading of 10.5 this month. Companies reported continued gains in new orders and shipments, though unfilled orders maintained their decline. Factory employment rose modestly, but the average workweek increased significantly.

Separately, the Philadelphia Fed said its business conditions index jumped to a reading of 32.3 from 15.0 in September. Measures of new orders and shipments at factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware rose. A gauge of factory employment fell, but manufacturers increased hours for workers.

Third-quarter GDP growth estimates are topping a 32% annualized rate. The economy contracted at a 31.4% pace in the second quarter, the deepest decline since the government started keeping records in 1947. Growth estimates for the fourth quarter have been cut to as low as a 2.5% rate from above a 10% pace.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

Companies may be punished for paying ransoms to sanctioned hackers – U.S. Treasury

By Raphael Satter

WASHINGTON (Reuters) – Facilitating ransomware payments to sanctioned hackers may be illegal, the U.S. Treasury said on Thursday, signaling a crackdown on the fast-growing market for consultants who help organizations pay off cybercriminals.

In a pair of advisories, the Treasury’s Office of Foreign Assets Control and its Financial Crimes Enforcement Network warned that facilitators could be prosecuted even if they or the victims did not know that the hackers demanding the ransom were subject to U.S. sanctions.

Ransomware works by encrypting computers, holding a company’s data hostage until a payment is made. Organizations have often ponied up ransoms to liberate their data.

“It is a game changer,” said Alon Gal, chief technology officer of Hudson Rock, which works to head off ransomware attacks before they happen.

Before, companies could decide whether or not to pay cybercriminals off, he said. Now that those decisions are being brought under government oversight “we are going to see a much tougher handling of these incidents.”

The Enforcement Network’s advisory also warned that cybersecurity firms may need to register as money services businesses if they help make ransomware payments. That would impose a new reporting requirement on a previously little-regulated corner of the cybersecurity industry.

Ransomware has become an increasingly visible threat in the United States and abroad. Cybercriminals have long used the software to loot their victims. Some countries, notably North Korea, are also accused of deploying ransomware to earn cash.

(Reporting by Raphael Satter; Editing by Chizu Nomiyama and Richard Chang)

U.S. labor market slowing as fiscal stimulus fades

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits unexpectedly increased last week, supporting views the economic recovery from the COVID-19 pandemic was running out of steam amid diminishing government funding.

The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed 26 million people were on unemployment benefits in early September. The faltering labor market recovery and a recent rise in new coronavirus infections has piled pressure on Congress and the White House to come up with another rescue package.

Federal Reserve Chair Jerome Powell told lawmakers on Wednesday that Congress and the U.S. central bank needed to “stay with it” in working to support the economy’s recovery. More fiscal stimulus is looking increasingly unlikely before the Nov. 3 presidential election.

“The high level of joblessness shows that the country isn’t out of the woods yet and it won’t be if the pleading of Fed officials for more stimulus isn’t heard by government officials down in Washington,” said Chris Rupkey, chief economist at MUFG in New York. “The economy is running on empty.”

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 870,000 for the week ended Sept. 19. Data for the prior week was revised to show 6,000 more applications received than previously reported. Economists polled by Reuters had forecast 840,000 applications in the latest week.

Unadjusted claims increased 28,527 to 824,542 last week. Economists prefer the unadjusted claims number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock caused by the coronavirus crisis.

Six months after the pandemic started in the United States, jobless claims remain above their 665,000 peak during the 2007-09 Great Recession, though applications have dropped from a record 6.867 million at the end of March.

While the reopening of businesses in May boosted activity, demand in the vast services industries has remained lackluster, keeping layoffs elevated. Job cuts have also spread to industries such as financial services and technology that were not initially impacted by the mandated business closures in mid-March because of insufficient demand.

A total 630,080 applications were received for the government-funded pandemic unemployment assistance last week. The PUA is for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs. Altogether, 1.5 million people filed claims last week.

Stocks on Wall Street were trading lower. The dollar gained versus a basket of currencies. U.S. Treasury prices rose.

STALLED PROGRESS

The claims report also showed the number of people receiving benefits after an initial week of aid dropped 167,000 to 12.58 million in the week ending Sept. 12.

Economists believed the so-called continuing claims are declining as people exhaust their eligibility for benefits, which are limited to 26 weeks in most states.

Indeed, just under one million workers exhausted their first six months of state unemployment benefits in August. At least 1.6 million workers filed for extended unemployment benefits in the week ending Sept. 5, up 104,479 from the prior week.

The continuing claims data covered the period during which the government surveyed households for September’s unemployment rate. The decline in mid-September implied a further decrease in the unemployment rate from 8.4% in August.

“Only faster progress against the virus itself will assuage the unemployment struggles of so many workers in fields like entertainment who can’t return to their jobs until social distancing restrictions are relaxed ,” said Andrew Stettner, senior fellow at The Century Foundation in New York.

The Fed has cut interest rates to near zero and vowed to keep borrowing costs low for a while, and has also been pumping money into the economy. Government money to help businesses has virtually dried up. Tens of thousands of airline workers are facing layoffs or furloughs next month.

A $600 weekly unemployment benefits supplement ended in July and was replaced with a $300 weekly subsidy, whose funding is already running out. The death toll from COVID-19 in the country topped 200,000 on Tuesday, the highest number of any nation.

The ebbing fiscal stimulus is already restraining the economy after activity rebounded sharply over the summer. Gross domestic product is expected to rebound at as much as a record 32% annualized rate in the third quarter after tumbling at a 31.7% rate in the April-June period, the worst performance since the government started keeping records in 1947.

But retail sales and production at factories moderated in August. Business activity cooled in September, reports have shown. Goldman Sachs on Wednesday cut its fourth-quarter GDP growth estimate to a 3% rate from a 6% pace, citing “lack of further fiscal support.”

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. weekly jobless claims remain perched at higher levels; housing marches on

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits fell less than expected last week and applications for the prior period were revised up, suggesting the labor market recovery had shifted into low gear amid fading fiscal stimulus.

The weekly jobless claims report from the Labor Department on Thursday, the most timely data on the economy’s health, also showed nearly 30 million people were on unemployment benefits at the end of August.

Signs the labor market was stalling came a day after the Federal Reserve vowed to kept interest rates near zero for a long time. The U.S. central bank noted that the COVID-19 pandemic “will continue to weigh on economic activity” in the near term and “poses considerable risks to the economic outlook over the medium term.” Fed Chair Jerome Powell said more fiscal support was likely to be needed for the economy.

Initial claims for state unemployment benefits fell 33,000 to a seasonally adjusted 860,000 for the week ended Sept. 12. Data for the prior week was revised to show 9,000 more applications received than previously reported. Economists polled by Reuters had forecast 850,000 applications in the latest week.

Un-adjusted claims dropped 75,974 to 790,021 last week. Economists prefer the un-adjusted claims number given earlier difficulties adjusting the claims data for seasonal fluctuations because of the economic shock inflected by the coronavirus crisis. Despite last week’s big drop in un-adjusted claims, they remain extraordinarily high.

A total 658,737 applications were received for the government-funded pandemic unemployment assistance last week. The PUA is for the self-employed, gig workers and others who do not qualify for the regular state unemployment programs. Altogether, 1.45 million people filed claims last week.

The claims data added to reports this week showing a slowdown in retail sales and production at factories in August.

U.S. stocks opened lower. The dollar was steady against a basket of currencies. U.S. Treasury prices were higher.

STALL SPEED

After declining from a record 6.867 million at the end of March as businesses reopened after being shuttered to stem the spread of the coronavirus, claims have flattened, with layoffs spilling over to industries that were not initially impacted by the mandated closures.

A program to help businesses with wages expired in August, while $25 billion in government assistance for airlines’ payroll expires this month. Last week’s claims covered the period during which the government surveyed businesses for the non-farm payrolls component of September’s employment report.

The economy created 1.371 million jobs in August after adding 1.734 million in July. About 10.6 million of the 22.2 million jobs lost at the depth of the coronavirus crisis have been recovered.

While other sectors of the economy are losing steam, the housing market continues to power ahead, thanks to record-low interest rates and a migration to suburbs and low-density areas, spawned by the pandemic. Unemployment has disproportionately affected low-wage workers, who are typically renters.

A separate report from the Commerce Department on Thursday showed singe-family home building, which accounts for the largest share of the housing market, increased 4.1% to a seasonally adjusted annual rate of 1.021 million units in August.

Further gains are likely, with building permits for single-family housing units accelerating 6.0% to a rate of 1.036 million units. A 22.7% tumble in starts for the volatile multi-family housing segment, however, led to a 5.1% drop in overall home building to a rate of 1.416 million units last month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. Treasury to sell $112 billion next week, continue shift to longer-dated debt

By Ross Kerber

BOSTON (Reuters) – The U.S. Treasury Department said on Wednesday it will sell $112 billion next week in notes and bonds and that it plans to continue to shift more of its funding to longer-dated debt in coming quarters, as it finances measures to offset the impact of the COVID-19 epidemic.

The Treasury said it expects its debt needs to moderate but remain elevated, after borrowing a staggering $2.753 trillion in the second quarter.

“Treasury continues to face unprecedented borrowing needs as a result of the federal response to COVID-19,” Brian Smith, Treasury’s deputy assistant secretary for federal finance, said on a conference call.

The Treasury will sell $48 billion in three-year notes, $38 billion in 10-year notes and $26 billion in 30-year bonds next week as part of its quarterly refunding.

It said on Monday that it plans to borrow $947 billion in the third quarter, about $270 billion more than it previously estimated for the July-September period.

The federal agency will use “long-term issuance as a prudent means of managing its maturity profile and limiting potential future issuance volatility,” Smith said in a release.

As Treasury increases auction sizes, it will have larger increases in 7-year, 10-year, 20-year and 30-year notes and bonds, he said.

Treasury has been raising extra money to fund trillions of dollars in coronavirus-related economic aid allocated by Washington. As of Tuesday, White House negotiators were trying to reach a deal with congressional Democrats to extend relief measures including unemployment benefits, liability protections for businesses and a moratorium on evictions.

Borrowing has spiked far above the quarterly record set during the 2008 financial crisis.

A declining economic outlook has driven down U.S Treasury yields across the curve to record or near-record lows, helping raise equity prices and lower borrowing costs.

(Additional reporting by Karen Brettell in New York; Editing by Paul Simao)

U.S. Treasury to make recommendation on TikTok to Trump this week: Mnuchin

WASHINGTON (Reuters) – U.S. Treasury Secretary Steve Mnuchin said on Wednesday that popular Chinese-owned video-sharing app TikTok was under a national security review and that his agency would make a recommendation to the president on the app this week.

The Committee on Foreign Investment in the United States (CFIUS), which reviews deals by foreign acquirers for potential national security risks and is led by Treasury, is looking at TikTok, Mnuchin told reporters at the White House.

The committee has the power to force companies to unwind deals or put in place measures to protect U.S. national security.

“TikTok is under CFIUS review. We will be making a recommendation to the president this week so we have lots of alternatives,” he said.

TikTok did not immediately respond to a request for comment.

Flanked by Mnuchin, Trump said before leaving the White House on a trip to Texas that “we are thinking about making a decision” about the company, owned by China’s Beijing Bytedance.

(Reporting by Alexandra Alper; Writing by Doina Chiacu; Editing by Chris Reese and Bernadette Baum)

U.S. Treasury chief sees ‘significant amount’ for schools in next coronavirus aid bill

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin said on Friday that he expects the next coronavirus aid bill to provide a “significant amount of money” to help U.S. K-12 schools to reopen safely.

Mnuchin made the comment during a U.S. House of Representatives Small Business Committee hearing at which he also said more funding was needed to help businesses hardest hit by the pandemic, such as travel related industries.

The Trump administration has been pushing for schools to reopen in the fall, which would allow many parents to return to work and help revive the economy.

(Reporting by David Lawder; Editing by Chris Reese)

Treasury’s Mnuchin open to blanket forgiveness for smaller business relief loans

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin said Friday policymakers should consider blanket forgiveness for all smaller businesses that received “Paycheck Protection Program” loans.

Mnuchin told lawmakers that they should consider such an approach to reduce complexity, coupled with some form of fraud protection.

He also said the Trump administration supports adding more funds to the $660 billion program, as well as allowing especially hard-hit businesses to apply for a second emergency loan.

He did not define how small a loan would have to be to qualify for automatic forgiveness, and added it should be paired with some form of fraud protection without going into detail. Several business and banking groups have pushed for blanket forgiveness for all loans under $150,000, arguing the requirements for applying for forgiveness under the program are too complex.

His comments come as Congress is preparing further economic relief legislation to support businesses and people harmed by pandemic lockdowns. Roughly $100 billion remains in the PPP, a forgivable loan program created by the initial stimulus package, is set to expire on Aug. 8.

Mnuchin added that he would also support applying some sort of “revenue test” to future PPP loans to make sure the remaining funds go to businesses that need it the most. The PPP has come under criticism after wealthy and larger companies secured loans under the program, which was billed as relief for small businesses.

“This time, we need to have a revenue test and make sure that money is going to businesses that have significant revenue declines,” he said.

He also said he would support efforts to set aside a portion of remaining PPP funds for minority-owned businesses, amid concerns from some lawmakers that those businesses were struggling to secure funding.

(Reporting by Pete Schroeder; Editing by Nick Zieminski)

U.S. Treasury’s Mnuchin says Trump eyeing restaurant tax changes, travel boost

WASHINGTON (Reuters) – Treasury Secretary Steven Mnuchin on Monday said bipartisan discussions are underway over whether more U.S. government relief funding is needed amid the nation’s novel coronavirus outbreak, but that President Donald Trump is focused on taxes and travel.

In an interview on Fox Business Network, Mnuchin said the Trump administration was prepared to back additional coronavirus stimulus money for American businesses if needed, but that right now it was carefully monitoring the economy as some states restart activity.

Mnuchin said Trump wanted tax changes to make businesses’ entertainment expenses “fully tax deductible like it used to be … to get people to go back to restaurants.”

“The president’s also looking about ways to stimulate travel,” he added. “As the economy opens up, I think you’ll see demand coming back,” for domestic travel, he said, although it’s “too hard to tell” if international travel could open up later in 2020.

Congress has already passed several major coronavirus relief bills worth nearly $3 trillion during the pandemic, but Democratic lawmakers and both Republican and Democratic governors have called for billions more to help shore up local governments battered by the outbreak as they grapple with infections and historic waves of unemployment.

“We’ve put $3 trillion out, if we need to put more money out to support American business and American workers, the president’s absolutely prepared to do that,” Mnuchin said. “We’re also going to take into account what the economic impact is as we open up the economy.”

“We’re beginning to have conversations on a bipartisan basis, we’re going through the issues, we’re going to have very detailed discussions,” he added, when asked if June could be a target for the next wave of federal aid from Congress.

On Sunday, White House economic adviser Larry Kudlow said he would not rule out anything in a new relief bill, including more money for state and local governments and small businesses.

(Reporting by Susan Heavey; additional reporting by Lisa Lambert; Editing by Chizu Nomiyama and Jonathan Oatis)

U.S. job growth surges; annual wage gain largest since 2009

A man holds his briefcase while waiting in line during a job fair in Melville, New York July 19, 2012. REUTERS/Shannon Stapleton

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. job growth accelerated in August and wages notched their largest annual increase in more than nine years, strengthening views that the economy was so far weathering the Trump administration’s escalating trade war with China.

The Labor Department’s closely watched employment report published on Friday also showed slack in the jobs market was rapidly diminishing, with a broader measure of unemployment falling to a level not seen since 2001. The report cemented expectations for a third interest rate increase from the Federal Reserve this year when policymakers meet on Sept. 25-26.

“The economy is on an adrenalin rush,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Given the amount of fiscal stimulus that the economy is benefiting from, it’s going to take a lot to get it off that high.”

Nonfarm payrolls surged by 201,000 jobs last month, boosted by hiring at construction sites, wholesalers and professional and business services, the Labor Department said. There were also gains in transportation and healthcare employment.

Job growth averaged 185,000 per month in the past three months. The economy needs to create 120,000 jobs per month to keep up with growth in the working-age population.

Average hourly earnings increased 0.4 percent, or 10 cents in August after rising 0.3 percent in July. That raised the annual increase in wages to 2.9 percent in August, the largest gain since June 2009, from 2.7 percent in July.

A broader measure of unemployment, which includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment, fell one-tenth of a percentage point to 7.4 percent, the lowest level since April 2001. The unemployment rate was unchanged at 3.9 percent.

Economists polled by Reuters had forecast nonfarm payrolls increasing by 191,000 jobs last month and the unemployment rate falling to 3.8 percent. The economy created 50,000 fewer jobs in June and July than previously reported.

The dollar firmed against a basket of currencies after the report, while U.S. Treasury yields rose. U.S. stock index futures extended losses.

Analysts say the administration’s $1.5 trillion tax cut package and increased government spending were shielding the economy from the trade tensions, which have also seen Washington engaged in tit-for-tat tariffs with other trade partners, including the European Union, Canada and Mexico.

They also note that the import duties implemented so far have affected only a small portion of the American economy, but warned this could change if President Donald Trump pressed ahead with additional tariffs on Chinese imports.

The United States and China have slapped retaliatory tariffs on a combined $100 billion of products since early July.

LIMITED IMPACT FROM TARIFFS

Americans had until Thursday to comment on a list of $200 billion worth of Chinese goods widely expected to be hit with tariffs soon. The government imposed import duties on goods including steel, aluminum, washing machines, lumber and solar panels early this year to protect American industries from what Trump says is unfair foreign competition.

Global outplacement firm Challenger, Gray & Christmas said on Thursday there were 521 tariff-related job cuts in August, but these were largely offset by the hiring of 359 workers by steel producers.

The employment report added to manufacturing and services industries surveys in suggesting the Trump administration’s protectionist trade policy was having a marginal impact on the economy for now. The economy grew at a 4.2 percent annualized rate in the second quarter, almost double the 2.2 percent pace set in the January-March period.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell two-tenths of a percentage point to 62.7 percent last month, putting a wrinkle on an otherwise upbeat employment report.

Job gains in August were almost across all sectors, though manufacturing payrolls fell by 3,000. That was the first drop since July 2017 and followed an increase of 18,000 in July. Manufacturing employment was weighed down by declines in machinery, computer and electronic products and motor vehicle and parts industries.

Construction companies hired 23,000 more workers last month. They increased payrolls by 18,000 jobs in July. Wholesalers added 22,400 jobs last month. Payrolls in the professional and business services industries rose by 53,000 jobs in August.

Employment at sporting goods, hobby, book and music stores rebounded by 9,200 jobs in August after shedding 30,300 jobs in July related to the closing of all Toys-R-Us stores.

But retail payrolls fell 5,900 last month and government shed 3,000.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)