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U.S. economy adds record 4.8 million jobs in June, but still well below pre-COVID peak – CBC.ca

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The U.S. economy created jobs at a record clip in June as more restaurants and bars resumed operations, further evidence that the COVID-19 recession might be over, though a surge in cases of the coronavirus threatens the fledgling recovery.

Nonfarm payrolls increased by 4.8 million jobs in June, the Labour Department’s closely watched monthly employment report showed on Thursday. That was the most since the government started keeping records in 1939. Payrolls rebounded by 2.699 million in May.

Economists polled by Reuters had forecast payrolls increasing by three million jobs in June.

Despite the record-setting month for job gains, the U.S. economy has yet to replace even half of the record 20 million jobs it lost in April.

The job gains added to a stream of data, including consumer spending, showing a sharp rebound in activity. But the reopening of businesses after being shuttered in mid-March has unleashed a wave of coronavirus infections in large parts of the country, including the populous California, Florida and Texas.

Data doesn’t factor in scaled back reopenings

Several states have been scaling back or pausing reopenings since late June and sent some workers home. The impact of these decisions did not show up in the employment data as the government surveyed businesses in the middle of the month.

Federal Reserve Chair Jerome Powell this week acknowledged the rebound in activity, saying the economy had “entered an important new phase and (had) done so sooner than expected.” But Powell cautioned the outlook “is extraordinarily uncertain” and would depend on “our success in containing the virus.”

The unemployment rate fell to 11.1 per cent last month from 13.3 per cent in May. Employment is increasing largely as companies rehire workers laid off when non-essential businesses like restaurants, bars, gyms and dental offices, among others, were closed to slow the spread of COVID-19.

Economists have attributed the burst in job gains to the government’s Paycheck Protection Program, which gives businesses loans that can be partially forgiven if used for wages. Those funds are drying up.

In an economy that had already fallen into recession as of February, many companies, including some not initially impacted by lockdown measures, are struggling with weak demand.

Economists and industry watchers say this, together with the exhaustion of the PPP loans, has triggered a new wave of layoffs that is keeping weekly new applications for unemployment benefits extraordinarily high.

In another report on Thursday, the Labour Department said initial claims for state unemployment benefits totalled a seasonally adjusted 1.427 million in the week ended June 27, down from 1.482 million in the prior week.

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Economy

Oil prices climb on hopes for economic recovery

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Oil prices edged higher on Monday as European economic reopenings and rising U.S. demand helped offset weakness earlier in the session due to surging coronavirus cases in Asia and underwhelming Chinese manufacturing data.

Brent crude rose 56 cents, or 0.8%, to $69.27 a barrel by 11:22 a.m. ET (1522 GMT,) and West Texas Intermediate (WTI) crude was up 63 cents, or 1%, at $66.

The British economy reopened on Monday, giving 65 million people a measure of freedom after a four-month COVID-19 lockdown.

With accelerating vaccination rates, France and Spain have relaxed COVID-related restrictions, and Portugal and the Netherlands on Saturday eased travel restrictions as the holiday season approaches.

The promise of economic growth has supported oil prices in recent weeks, although the pace of inflation has kept many investors concerned about the possible rise of interest rates and fall of consumer spending.

“The news is not all negative on the demand front as the U.S. saw air travel jump on Sunday to 1.8 million people, the highest total since March 2020,” said Edward Moya, senior market analyst at OANDA.

United Airlines also announced they will add 400 daily flights to July for European destinations, Moya noted.

Summer travel bookings rose 214% from 2020 levels, the airline said, adding that it planned to fly 80% of its U.S. schedule compared with July 2019.

Worries about the spread of the coronavirus variant first detected in India are also making investors cautious.

Some Indian states said on Sunday they would extend lockdowns to help contain the pandemic, which has killed more than 270,000 people in the country.

Domestic sales of gasoline and diesel by Indian state refiners plunged by a fifth in the first half of May from a month earlier.

Singapore is preparing to close schools this week and Japan has declared a state of emergency in three more prefectures to contain outbreaks.

“The market is seemingly trapped between observing encouraging improvements in demand in the United States and Europe, and the sluggishness in consumption due to the persistence of COVID-19 in Asia,” StoneX analyst Kevin Solomon said.

China’s factories slowed their output growth in April and retail sales significantly missed expectations as officials warned of new problems affecting the recovery in the world’s second-largest economy.

China’s crude oil throughput rose 7.5% in April from the same month a year ago, but remained off the peak seen in the last quarter of 2020.

U.S. retail gasoline prices hit a fresh seven-year high on Monday, as it will take some time for the nation’s largest fuel pipeline’s supply chain to fully catch up after a cyberattack that resulted in a six-day system outage last week and mass panic-buying.

(Reporting by Bozorgmehr Sharafedin in London, additional reporting by Yuka Obayashi in Tokyo; Editing by Marguerita Choy and Barbara Lewis)

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Economy

World Economic Forum cancels 2021 annual meeting in Singapore

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The World Economic Forum cancelled its 2021 annual meeting scheduled for Singapore in three months’ time on Monday, saying it was not possible to hold such a large, global event due to the COVID-19 situation.

“Regretfully, the tragic circumstances unfolding across geographies, an uncertain travel outlook, differing speeds of vaccination rollout and the uncertainty around new variants combine to make it impossible to realise a global meeting with business, government and civil society leaders from all over the world at the scale which was planned,” it said in a statement.

WEF had already pushed back its special meeting in Singapore, initially scheduled for mid-May, following the announcement last year it was moving from its usual home in the Swiss alps due to the pandemic situation in Europe.

The city-state has in recent days imposed some of the tightest restrictions since it exited a lockdown last year to combat a spike in local COVID-19 infections.

Acknowledging WEF’s decision to cancel the event, the Singapore trade ministry said on Monday that it “fully appreciates the challenges caused by the ongoing global pandemic, particularly for a large meeting with a broad span of international participants.”

The WEF’s next annual meeting will instead take place in the first half of 2022. Its location and date will be determined based on an assessment of the situation later this summer, it added in a statement.

(Reporting by Michael Shields; Editing by Toby Chopra and Catherine Evans)

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Economy

Wall Street weighed down by inflation jitters

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Wall Street’s main indexes slipped on Monday after a sharp recovery late last week, as signs of inflationary pressures building up in the economy kept investors worried about monetary policy tightening.

Shares of Discovery Inc jumped 7% on plans to merge with U.S. telecoms giant AT&T Inc’s media assets, including CNN and HBO. AT&T shares gained 3.8%.

The S&P 500 saw its biggest one-day jump in more than a month on Friday as investors picked up beaten-down stocks following a pullback earlier in the week on concerns around inflation and a sooner-than-expected tightening by the U.S. Federal Reserve.

In a relatively quiet week for economic data, minutes on Wednesday from the Fed’s policy meeting last month could shed more light on the policymakers’ outlook of an economic rebound.

“The conversation around inflation is really the focus of the market and everyone’s trying to get a picture on whether the Fed is right in saying if this is all temporary or is this something they need to take more seriously,” said Greg Swenson, founding partner of Brigg Macadam.

“You’ll continue to see rotation (out of technology stocks) not only because of the outperformance of tech in the last year versus cyclicals, but the only way you can stay long equities and hedge against inflation is own more cyclicals – bank, energy.”

The Russell 1000 value index, which includes energy and bank stocks, continued to outperform on Monday, taking its year-to-date gains to 17.3%, versus its tech-laden growth counterpart’s rise of about 4%.

At 9:44 a.m. ET, the Dow Jones Industrial Average was down 68.67 points, or 0.20%, at 34,313.46, the S&P 500 was down 9.19 points, or 0.22%, at 4,164.66, and the Nasdaq Composite was down 48.45 points, or 0.36%, at 13,381.52.

Four of the 11 major S&P sectors declined, with technology leading losses.

Earnings this week will be scrutinized for clues on whether rising prices had any impact on consumer demand and if retailers could sustain their strong earnings momentum.

Walmart Inc, home improvement chain Home Depot Inc and department store operator Macy’s are set to report on Tuesday, with Target Corp Ralph Lauren and TJX Cos on tap later in the week.

With the earnings season at its tail-end, overall earnings for S&P 500 companies are expected to have climbed 50.6% from a year ago, according to Refinitiv IBES, the strongest pace of growth in 11 years.

ViacomCBS shares gained 3.5% after a report that billionaire George Soros’s investment firm bought stocks as they were being sold off during the meltdown of Archegos Capital Management.

Cryptocurrency-related stocks like Marathon Digital, Riot Blockchain and Coinbase fell between 6% and 9% as bitcoin swung in volatile trading after Tesla boss Elon Musk’s tweets about the carmaker’s bitcoin holdings.

Declining issues outnumbered advancers for a 1.27-to-1 ratio on the NYSE and for a 1.27-to-1 ratio on the Nasdaq.

The S&P index recorded 24 new 52-week highs and no new low, while the Nasdaq recorded 44 new highs and 19 new lows.

 

(Reporting by Medha Singh and Sruthi Shankar in Bengaluru; Editing by Saumyadeb Chakrabarty and Maju Samuel)

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