US economy sheds jobs for first time since 2010 as coronavirus hits – as it happened
This article is more than 4 years old
Live coverage as American payrolls data shows big rise in unemployment, after composite PMI data shows UK business activity sunk to a record low in March following the Covid-19 lockdown
Evan Demaree, an emergency medical services attendant and firefighter holds his phone to his ear while talking to a friend on a windy day at the Coney Island boardwalk in April. Photograph: Kathy Willens/AP
Evan Demaree, an emergency medical services attendant and firefighter holds his phone to his ear while talking to a friend on a windy day at the Coney Island boardwalk in April. Photograph: Kathy Willens/AP
Closing summary: US and UK data show economies on recession course
It is obvious that the coronavirus lockdowns around the world will cause damage to the global economy. Today’s data suggest that damage could be bigger than the financial crisis a decade ago.
In the UK and Europe, purchasing managers’ indices (PMIs) suggest a deep recession, while the record run of job creation in the US economy finally came to a halt.
Here are some of the main developments from today:
Unemployment in Britain and the US could surpass the levels reached during the 1930s Great Depression within months as the coronavirus crisis crushes the global economy, a former Bank of England official has warned.
Doctors get instructions on a ventilator at the University Hospital Eppendorf in Hamburg Germany. Photograph: Axel Heimken/AP
British manufacturers are stepping up to the mark with efforts to cover a shortfall in ventilators, a key piece of equipment to battle Covid-19. But doubts are emerging on whether it will be enough.
Hospitals could be left without enough medical ventilators at the height of the UK coronavirus outbreak, with manufacturers struggling to build thousands of new machines in time for the likely mid-April peak in cases, write the Guardian’s Rob Davies and Jennifer Rankin.
The NHS already has 8,175 ventilators but the government believes up to 30,000 could be needed and has enlisted manufacturers in a wartime-style effort to boost stocks to to at least 61,000. Officials are working on deals to increase that number and are expected to announce new orders for hundreds more machines in the coming days.
But sources involved in projects to import or build ventilators told the Guardian that ventilator production was highly unlikely to be in full swing before the end of the month, despite unprecedented collaboration within British industry.
Legal & General to stick with dividend, rejecting Bank of England warning
There is a major row brewing in the insurance industry.Legal & General has just confirmed that it intends to pay out its dividend as planned, despite a stern warning from the Bank of England that insurers should consider the payments to shareholders carefully.
European regulators have also urged companies to reconsider making the payouts; it isn’t the best look at a time when people are losing their jobs and hoping their insurance policies will give them some protection.
Legal & General’s shares fell by 10% today, the biggest on the FTSE 100, but its statement is pretty unapologetic:
The Board continues to pay close attention to the need to protect its customers and employees at this difficult time. The Board has carefully considered the need to act prudently in maintaining safety and soundness, and in so doing ensure that Legal & General plays its full part in supporting the real economy. It also recognises the importance of dividend income to many institutional and retail shareholders, particularly in the current environment.
The Board observes that, notwithstanding significant market volatility, the Group’s Solvency position remains robust.
Whilst the Board will continue to monitor events, its current intention is to confirm its previous recommendation for a final dividend of 12.64p (2018: 11.82p) giving a full year dividend of 17.57p (2018: 16.42p), 7% higher than 2018.
The FTSE 100 loss has been finalised at 1.2%, closing at 5,415.5 points.
For the week the FTSE 100 has lost less than 2% - it could almost have been a normal week.
But within that there is a lot of variation:
Evercore: best equity strategy for past couple of weeks has just been to do the opposite of the previous day. If market was up, sell. If down, buy. Every day. But warning: Evercore describes it as an insane strategy.
On a provisional reading the FTSE 100 has closed down by 1.4% to 5,406 points.
France’s Cac 40 lost 1.6%, while Spain’s Ibex gained 2.2%. Germany’s Dax edged down by 0.5%.
European oil and gas stocks were the strongest performers among different sectors. The sector rose by 8% - perhaps unsurprisingly given Thursday’s record increase in oil prices.
Here is the full report on Debenhams, which is preparing to call in administrators after it was forced to close all its outlets under the coronavirus lockdown.
The company, which has 22,000 staff and was rescued by its lenders after collapsing into administration only a year ago, is understood to be considering filing a formal notice of intention to appoint administrators next week, writes the Guardian’s Sarah Butler.
The legal process provides protection from creditors for 10 working days while a company tries to secure a rescue deal. Potential administrators lined up this time around include KPMG, the advisory firm that handled a restructure of Debenhams last May.
Approaching the close in Europe the FTSE 100 is down by 1.4%, with something of a late selloff gaining pace.
Legal & General is the biggest faller, down 10.7% after EU calls for insurers to abandon dividend payments were backed by the Bank of England.
Rolls-Royce, the aerospace manufacturer, lost 9.5%. It may be related to the sale of a large part of its stake by ValueAct, an activist investors.
On the FTSE 250 losses have been worse. Shares on the mid-cap index are down by 2.3%.
Property company Hammerson is the big loser, down 25%. Companies have been withholding rent payments in its shopping malls, as retailers have little cash to hand.
Barclays and Royal Bank of Scotland are among the latest to jump on the trend, with decisions to hold “virtual” annual meetings for the banks.
Barclays switched its meeting from Glasgow to London, due to take place on 7 May, and RBS said its AGM would go ahead as planned on 29 April in Edinburgh.
Mohamed Salah of Liverpool (right) against Raheem Sterling of Manchester City in November. Photograph: Peter Powell/EPA
A fair few executives appear to have learned the lesson of the last decade that huge pay packets are not acceptable when workers are struggling. It appears that message has now filtered through to the Premier League, which is closed for lockdown.
Premier League players will be asked to take a 30% drop in their wages, via cuts or deferrals or both, in response to the coronavirus pandemic, the clubs agreed at a meeting on Friday, writes the Guardian’s David Conn.
The move came as the 20 top-flight teams said they would give £125m to the EFL and National League to help their clubs through the crisis and donate £20m to support the NHS, communities, families and vulnerable groups.
Nicole McCullough, a global health and safety expert at 3M, demonstrates the correct way to put on a N95 respiratory mask at a laboratory of 3M in Maplewood, Minnesota. Photograph: Nicholas Pfosi/Reuters
The boss of one of the world’s biggest makers of personal protective equipment (PPE) has hit back at Donald Trump after the president warned the manufacturer “will have a big price to pay” and invoked the Defence Production Act to force the manufacturing giant to produce more protective N95 protective masks for the US coronavirus fight.
3M chief executive Mike Roman said accusations of price-gouging and unauthorised reselling is “absurd” and hit back at administration claims that the company is diverting supplies to overseas markets. He said:
I know how the narrative that is propagated broadly, and it’s just not true. [...] The employees of 3M around the world are working around the clock and in the United States to deliver and continue to increase production.
The narrative that we are not doing everything we can to maximize delivery is delivery of respirators in our own country … nothing could be further from the truth. We are doing everything we can to maximise our efforts against Covid-19 and support healthcare workers here in the US.
3M came under attack from the president in a tweet on Thursday evening. “We hit 3M hard today after seeing what they were doing with their Masks. “P Act” all the way. Big surprise to many in government as to what they were doing - will have a big price to pay!”
A Grand Central train at King’s Cross station in London. Photograph: Martin Keene/PA
Train operator Grand Central, which runs services between Sunderland and Kings Cross, has announced it will suspend running, writes transport correspondent Gwyn Topham.
It is the second open-access operator - which run a limited number of trains on bigger networks - in a week to halt operations, following Hull Trains. It had been operating a skeleton service since the outbreak began.
Northern has also announced it will cut back its timetable further from Sunday, leaving no trains at all running on some branch lines.
The coronavirus pandemic is shuttering large parts of our economy, but some companies are benefiting.
Spending on PlayStation more than doubled in March, while local convenience stores such as Nisa and Costcutter recorded a surge in sales, according to the online bank Revolut.
But JD Wetherspoon, the pubs chain, was among the biggest losers in the UK.
Revolut’s customers are likely to be younger and slightly more urban than account holders at the traditional big banks. But the data – taken from spending by the digital lender’s 3 million customers from 1-31 March – gives a strong indication of the consumption patterns that have emerged since the pandemic gripped Britain.
And the surprise winner? Online cards company Moonpig.
There’s some actual good news in some US economic data just released.
The US non-manufacturing purchasing managers’ index (PMI) from the Institute of Supply Management has performed much better than economists expected, with a reading of 52.5. That was well above the 44 points expected by economists polled by Reuters. It was the 122nd consecutive month of growth in output.
Of course we already know that this is going to tumble, given the number of people who have been laid off in the US already. But at least it shows that there was some life in the US economy before the coronavirus pandemic intervened.
And US stock markets have turned positive in the last half hour: investors buy the rumour, so the shock of the non-payrolls number was well priced in already.
Oil prices are not quite matching yesterday’s record-breaking gains, but those betting prices will rise are not doing too badly either.
Investors are betting that oil producers will agree production cuts that will push prices higher. (Whether higher oil prices is good for anyone but the oil companies is another matter - although higher prices are at least correlated with lower carbon emissions.)
The price of Brent crude futures has risen by another 12% today, after yesterday’s astonishing 21% gain. One barrel of Brent will set you back $33.42, almost $12 higher than the 18-year low of $21.65 hit on Monday.
But despite Donald Trump’s apparent certainty that Russia and Saudi Arabia had agreed a deal, there is a long way to go before any agreement results in actual production cuts.
Here’s the Reuters take:
OPEC and its allies are working on a deal for an unprecedented production cut equivalent to about 10% of global supply, an OPEC source said. (Full Story)
Oil prices slumped 65% in the first quarter on a demand slump caused by the global coronavirus outbreak and moves by Russia and Saudi Arabia to flood the market after their failure last month to extend much smaller OPEC+ supply cuts.
A meeting of the Organization of the Petroleum Exporting Countries and allies such as Russia, a grouping known as OPEC+, has been scheduled for Monday, the Azerbaijan energy ministry said, but details on the distribution of production cuts were thin on the ground.
Workers inspect a Bentley Continental GT at the luxury automaker’s manufacturing facility in Crewe before the coronavirus lockdowns forced production to cease. Photograph: Darren Staples/Reuters
The British car industry has only weeks, not months, before many companies run out of money, the sector’s lobby group boss has warned.
With every major automotive factory closed in the UK a large proportion of the 800,000 workers in the industry are furloughed, but they will not be able to access government funding to pay 80% of those salaries until the end of the month.
Here’s the Reuters report:
“The supply chain are really concerned about how quickly they can access finance because they need it now,” the chief executive of the Society of Motor Manufacturers and Traders Mike Hawes told Reuters.
“They won’t have weeks upon weeks of funding to sustain them,” he said.
The temporary suspension of tax contributions on personnel, business rates administered by local councils and a levy on apprenticeships should all be options, he said.
US stock markets have opened lower in the wake of the non-farm payrolls data. (Indeed, it’s difficult to know what kind of reading could have been taken positively given what we know is coming in terms of unemployment numbers.)
The benchmark S&P 500 fell 8.36 points, 0.33%, to 2,518.54. The Nasdaq dropped 26 points, or 0.35%, and the Dow Jones industrial average fell 84 points or 0.39% to 21,329 points.
And a note from earlier: it isn’t a coincidence that two economists quoted earlier, Betsey Stevenson and Justin Wolfers, are both commenting on the US labour market at the same time. They are, in fact, a couple. If you want a bit of diversion from what feels like a different age, this Valentine’s Day podcast from NPR’s Planet Money is fun.
A person walks past a Debenhams store in Nottingham. Photograph: Tim Goode/PA
Debenhams’ owners are preparing to place the venerable department store in administration to protect it from creditors during the coronavirus lockdown, according to Sky News.
The company, which was founded as a single shop in 1778, would be one of the most prominent corporate victims of the coronavirus pandemic if it collapses.
Most of the company’s employees are already furloughed, with the government to pay 80% of their wages while stores are closed.
The Sky report said:
The retailer, which employs about 22,000 people, could file a notice of intention to appoint administrators as early as next week.
KPMG, the accountancy firm, is understood to be among those on standby to handle the process. [...]
Its online operations would continue to trade during any period of insolvency, sources said on Friday.
Justin Wolfers, an economist at the University of Michigan, estimates that US unemployment may already have reached an astonishing 13%.
It may be jarring to see in the official numbers that the unemployment rate has risen from 3.5% to 4.4%
But the reality is much worse: My calculations suggest that in the ensuing three weeks since these numbers were collected, the unemployment rate has risen to 13%.
Nevertheless, Betsy Stevenson, a former member of the Barack Obama’s Council of Economic Advisers and former chief economist at the US labor department, points out that it’s the biggest one-month increase in unemployment since 1975.
The increase in unemployment from February to March represents the largest monthly increase since January 1975.
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