Here’s what you need to know:
- New jobless claims are expected to reflect continuing layoffs, even as reopening proceeds.
- U.S. stock futures fall amid a spate of glum forecasts.
- China pushes for more street vendors, suggesting its recovery may not be all it seems.
- As energy prices tumble, some developing countries trim subsidies.
- European food delivery service to buy Grubhub.
New jobless claims are expected to reflect continuing layoffs, even as reopening proceeds.
Another huge weekly batch of new unemployment claims is expected to be reported on Thursday by the Labor Department.
Economists surveyed by Bloomberg estimated that 1.6 million people filed initial claims for state unemployment insurance last week. That would continue the decline from the more than six million claims seen in a single week in March, but would still be an unusually high number.
More than 40 million state claims have been filed since the coronavirus pandemic caused a widespread shutdown of businesses, and 21.5 million jobless workers were collecting state benefits in the previous weekly report. Some of those ineligible for state benefits, like the self-employed, are getting aid under an emergency federal program.
“We’re slowly seeing the labor market recovery begin to take form,” said Robert Rosener, an economist at Morgan Stanley, but “there’s still an enormous amount of layoffs going on.”
The government reported last week that jobs rebounded last month and that the unemployment rate fell unexpectedly to 13.3 percent. Correcting for a classification error, the rate was closer to 16.4 percent.
Reopening efforts will quickly reinstate a third of the workers who lost their jobs, said Beth Ann Bovino, the chief U.S. economist at S&P Global, but a return to the labor market conditions that preceded the pandemic is unlikely before 2023.
“We’re expecting a long haul,” she said.
U.S. stock futures fall amid a spate of glum forecasts.
U.S. stock futures tumbled on Thursday, following major European markets lower, after a spate of negative forecasts about the global recovery and signs that coronavirus cases continue to climb around the world.
Futures that track U.S. stocks were predicting Wall Street would open about 1.5 percent lower. Shares of airlines, hotels and other companies that have rallied recently on optimism over the reopening of pandemic lockdowns traded lower. Oil fell about 4 percent. Stocks in London, Paris and Frankfurt were all between 2 and 3 percent lower. Earlier in the day markets in Japan and Australia fell by roughly 2 percent.
Investors were bracing for another weekly jobless claims report in the United States, which is expected to show more that about 1.6 million state claims were filed last week. They were also reacting to the Federal Reserve’s forecast on Wednesday that the unemployment rate could stay high for the next several years. Earlier that day, the Organization for Economic Cooperation and Development warned in a report that the world economy is facing the most severe recession in a century and could experience a halting recovery.
The forecasts highlight the possibility of a second wave of infections that could hit the world’s major economies as they emerge from efforts to stop their first outbreaks. The global outlook could remain unsteady until vaccines become widely available.
China pushes for more street vendors, suggesting its recovery may not be all it seems.
Xie Yiyi, who is American-educated, lost her job last Friday, making the 22-year-old Beijing resident one of millions of young people in China left unmoored and shaken by the coronavirus.
So that same day, heeding the advice of one of China’s top leaders, she decided to open a barbecue stall.
Street vendors are seen by many Chinese people as embarrassing eyesores from the country’s past, when it was still emerging from extreme poverty. In many Chinese cities, uniformed neighborhood rules enforcers called chengguan regularly evict and assault sidewalk sellers of fake jewelry, cheap clothes and spicy snacks.
But Li Keqiang, China’s premier, had publicly called for the country’s jobless to ignite a “stall economy” to get the country’s derailed economy back on track. In the process, he laid bare China’s diverging narratives after the coronavirus epidemic. Is China an increasingly middle-class country, represented by the skyscrapers and tech campuses in Beijing, Shanghai and Shenzhen? Or is much of it still poor and backward, a country of roadside stalls in back alleys?
Mr. Li’s comments defied the Communist Party’s usual narrative of untrammeled prosperity, which helped legitimize its rule.
Cities rushed to lure vendors to the streets. A few even set recruiting quotas for the chengguan, meaning that the people who once harassed and beat vendors now had to support them. An economist estimated that 50 million jobs could be created if the government gave more space to the vendors and farmers selling their produce.
But then a backlash began, and the state media began reining in the enthusiasm. “The stall economy isn’t appropriate for first-tier cities,” said China Central Television, the state broadcaster, referring to relatively wealthy cities like Beijing and Shanghai. Allowing the stall economy to make a comeback in those cities is “equivalent of going backward in decades overnight,” it wrote. “It’s a departure from high-quality growth.”
As energy prices tumble, some developing countries trim subsidies.
The coronavirus pandemic has sent economies into recession and reduced government revenue, so some countries are taking a politically perilous path: removing restraints on electricity and petroleum prices.
Nigeria and Tunisia have lowered fuel subsidies in recent weeks, and India has raised taxes on gasoline and diesel fuel. Sudanese officials plan to replace some subsidies with direct cash payments to the poor. Venezuela, where the economy was collapsing before the pandemic, has partly reversed decades of gasoline subsidies. And the state-owned electric utility in Dubai is seeking to raise rates for the first time in a generation.
In contrast to the recent past, elected leaders are facing little political blowback for taking away subsidies and raising taxes. That’s because the prices of oil, natural gas and other fuels have collapsed in recent months. In addition, driving, flying and industrial activity have dropped off sharply.
But that could change once world energy prices shake off the pandemic’s effects. Energy subsidies are often taken for granted outside the halls of power. But they constitute vital policy choices that weigh on government budgets and economic development.
“Governments are caught in a dilemma,” said Jim Krane, an energy expert at Rice University who has studied subsidies. “Do they want to protect the poor who may have lost their jobs and incomes, or do they want to take action against the pernicious long-term cost to their budgets?”
European food delivery service to buy Grubhub.
Just Eat Takeaway said on Wednesday that it had agreed to buy Grubhub for $7.3 billion, a deal that would give the European company a foothold in the United States.
Uber had been in talks to buy Grubhub, but those discussions foundered over price and regulatory concerns, said people with knowledge of the discussions, who were not authorized to speak publicly.
Food delivery has become more popular during the coronavirus pandemic. But profits in the food delivery business have been elusive. Uber Eats, DoorDash and Grubhub have all spent millions of dollars on marketing and incentives to lure customers away from the others. Grubhub, which had been profitable, began losing money as it spent more to fight off rivals. And restaurants have complained about the fees and tactics of those companies.
In the all-stock deal, Just Eat Takeaway said it would value Grubhub at $75.15 per share, a 27 percent premium to Grubhub’s closing price of $59.05. Grubhub’s founder and chief executive, Matt Maloney, will join Just Eat Takeaway’s board and oversee its business in North America, the companies said.
Just Eat Takeaway was created this year through the $7.8 billion combination of two of the earliest participants in Europe’s food-delivery market, Just Eat and Takeaway.com. It has been fighting competition in Europe from Uber Eats and Deliveroo, a London-based company whose investors include Amazon.
Catch up: Here’s what else is happening.
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Rose Marcario, the chief executive of Patagonia for 12 years, is stepping down effective June 12, the outdoors brand said on Wednesday evening. It did not give a reason for her departure. Patagonia’s sales have dropped 50 percent in North America because of the coronavirus pandemic. The company’s transition will be led by Doug Freeman, its chief operating officer.
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Disneyland in Anaheim, Calif., will reopen on a limited basis on July 17, the theme park’s 65th anniversary, the Walt Disney Company said on Wednesday. California Adventure, an adjacent Disney property, will also reopen on that date. A phased reopening of Disney’s hotels in Anaheim will follow on July 23. The plans must still be approved by state and local health officials. Disney World is scheduled to begin reopening on July 11. Disney parks in France, Japan and Hong Kong remain closed.
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Los Angeles County issued guidelines for film and television to begin production as early as Friday, but it’s more likely that production will not resume until July at the earliest. Studios and production companies are still waiting for unions to determine job protocols, even though the industry issued its own white paper last week that established general guidelines for resuming production.
Reporting was contributed by Clifford Krauss, Li Yuan, Mohammed Hadi, Kate Conger, Adam Satariano, Michael J. de la Merced, Brooks Barnes, Tiffany Hsu, Carlos Tejada and Nicole Sperling.
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