Job cuts pile pressure on governments


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Latest news

  • The UK unveiled its much-anticipated list of overseas destinations that travellers could visit without needing to quarantine on their return

  • The EU granted Gilead’s experimental coronavirus drug remdesivir conditional approval, paving the way for it to be marketed to member states

  • Confirmed global coronavirus cases approach 10.8m and fatalities near 513,000

Job losses widespread

The steady drumbeat of pandemic-induced job cuts continued this week, even as a clutch of new data provided some welcome glimmers of hope. 

Few sectors are untouched. Energy jobs in the US for example — now down 14 per cent since the pandemic began — continued to disappear even before cuts at the oil majors come into effect. Many of the hardest-hit areas, such as Texas, are crucial battlefield states in November’s presidential election.

In the UK there have already been warnings this week that more than 10,000 jobs are at risk in sectors such as retail and aviation. Today it was the turn of manufacturing, as a survey from trade body Make UK said almost three-quarters of companies were planning cuts in the next six months. The report puts more pressure on ministers to protect employment ahead of a stimulus package expected next week. 

Set against the gloomy corporate announcements was a range of economic indicators that offered a more positive view. 

The non-farm payrolls report in the US showed employers added 4.8m new jobs in June and the unemployment rate dropped to 11.1 per cent as the rebound from the initial pandemic shock sped up, although this was before lockdowns began to be reimposed. 

In the EU, the rate of unemployment rose to 6.7 per cent — its highest level for eight months but lower than many economists had forecast. Today’s data from China, however, showed workers losing jobs for the fifth consecutive month, despite an otherwise upbeat picture of a recovering services sector.

The big question is whether rising consumer sentiment can help mitigate a potentially huge jump in unemployment when stimulus schemes and furloughs — covering 40m workers in Europe alone — come to an end. 

Markets

The FT revealed that the World Bank had dropped plans for a second sale of pandemic bonds after criticism that the first had been too slow to pay out aid to poor countries hit hard by the pandemic. One critic said a rethink was needed: “We need to somehow engage with private money because public money isn’t enough or isn’t fast enough.”

The positive survey of China’s services industries indicated the country’s economic recovery was accelerating, at least to investors, who drove Chinese stocks to a five-year peak. One analyst said the data “should be taken with a pinch of salt”.

Line chart of US dollar terms, rebased showing Chinese stocks outperform US and European peers in turbulent 2020

Investors pulled the most amount of money out of US junk bond funds last week since the depths of the sell-off in March, as investor appetite for lower-rated debt diminished. Reasons include rising concern for the US economy as infections began rising again and an eagerness to take profits after the recent rally fuelled by central bank intervention.

Business

Spanish steelmaker Celsa became the first beneficiary of a UK government scheme — Project Birch — to bail out companies deemed strategically important. The loan, believed to be about £30m, goes to a UK operation that employs 1,600 people with sites in south Wales that supply steel to the construction industry.

A shift to buying online is perhaps no surprise during lockdown but the ecommerce industry is watching closely for signs that shopping habits have changed for good. Shopify, the Canadian group that calls itself online retail’s “operating system”, has particularly benefited as, more obviously, has Amazon, which one projection says will take almost $4 of every $10 spent by US shoppers online in 2020.

Chart shows selected countries (% of total retail sales) showing retail e-commerce sales penetration

Despite people spending more on food during lockdowns, all three UK listed grocers — Sainsbury’s, Tesco and Wm Morrison — are expecting little or no full-year jumps in profit, writes retail correspondent Jonathan Eley. Factors include a big increase in costs, the loss of high-margin food-on-the-go products and a big drop in demand for fuel.

Global economy

German chancellor Angela Merkel urged Europe to unite behind a coronavirus rescue plan as her country took over the six-month rotating presidency of the EU. Olli Rehn, governor of the Bank of Finland and a former vice-president of the European Commission, wrote in the FT that the stimulus should target healthcare, employment, sustainable development and digital transformation. The FT Editorial Board advocated a compromise, where governments have to reform and invest for longer-term sustainable growth without intrusive oversight. “The big difference now,” it says, “is that this is about spending money, not saving it through the austerity which did so much to undermine the EU’s legitimacy in crisis countries.”

A jump in motorbike sales in India was interpreted by analysts as a welcome indicator of recovery, especially in the country’s rural economy, where “government stimulus and expectations of a good harvest have fuelled everything from higher tractor sales to increased biscuit consumption”. India is the world’s top market for motorcycles and scooters, with 17m sold last year.

Watch this Africa editor David Pilling interviews the IMF’s Kristalina Georgieva on the continent’s precarious position.

Readers respond

Triple bee plus comments on chief economic commentator Martin Wolf’s latest column: The shape of the recovery is not a given but must be decided.

We’re all going to have to admit it: the globally co-ordinated central bank (and fiscal) reaction has been stellar. Yes there are long-term ramifications etc etc. Well I personally don’t know anyone who has a horizon beyond the next few years. Do you?

Get in touch

How is your workplace dealing with the pandemic? And what do you think business and markets — and our daily lives — will look like after lockdown? Please tell us by emailing covid@ft.com. We may publish your contribution in an upcoming newsletter. Thanks

The essentials

Covid-19 cases surge in Texas and Florida. Seven-day rolling average of new cases, by number of days since 10 average daily cases first recorded. Texas and Florida are both approaching 10,000 daily average cases

The worrying spread of new infections in the US prompted Texas to order the wearing of masks. US national editor Edward Luce, writing in our Swamp Notes newsletter, thinks they should be compulsory. The politicisation of mask-wearing means you can now spot a person’s ideological bent at 100 paces, he notes. He recommends this video footage of Floridians railing against the practice. Our Lex business opinion column reports that Goldman Sachs has calculated that wearing masks could save 5 per cent of output that would otherwise be lost through lockdowns. 

The UK laid out plans for a full return to school in September. All pupils in England must attend but teachers have been told to prepare remote learning in case of coronavirus outbreaks. Teaching unions remain wary. The FT Editorial Board commented on the delicate problem facing all governments: how to balance the desire for normal life with the imperatives of public health. “They can start with being candid with their voters,” it concludes.

Watch: World-renowned dancers in Barcelona, Buenos Aires, Johannesburg, Kansas City and London respond to the pandemic, in an FT collaboration with Sadler’s Wells.

Happy Independence Day for tomorrow to all our American readers. But stay safe: US coronavirus correspondent David Crow reports the fears of public health experts that thousands could contract the virus at indoor parties, crowded outdoor events, religious services and family gatherings.

Connecticut congresswoman Rosa DeLauro shows a photograph of people crowded into a pool at the Lake of the Ozarks in Missouri on Memorial Day weekend in May © POOL/AFP via Getty Images

Final thought

FT writers relate their experiences of a very different summer, including observations on peak beard, learning Danish and the everyday happiness of being holed up with a cat. What will your abiding memory be?

© Namyoung An



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