New Unemployment Claims Rise For First Time In Nearly Two Months, But Number Of Americans Receiving Benefits Falls Sharply

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Last week’s new unemployment claims were higher than the previous week’s revised claims of 375,000, which marked the lowest level during the pandemic, and much worse than the 360,000 claims economists were expecting.

The number of Americans filing claims under the Pandemic Unemployment Assistance program, which extends benefits to self-employed workers not eligible for traditional state programs, also jumped, hitting 118,025, according to the weekly data released Thursday.

Despite the rise in new weekly claims, the total number of Americans receiving any form of benefit fell sharply to 14.8 million in the week ending May 29, about 560,000 less than the week prior and much lower than the 30.2 million weekly claims filed in the comparable week last year.

Crucial Quote

“What the claims information doesn’t tell us is how much faster the job market will heal or where so-called full employment will ultimately be because the latest data tells the story of more than 9 million job openings and an equal number of officially unemployed,” Bankrate senior economic analyst Mark Hamrick wrote in a Thursday email, referring to the Federal Reserve’s goal of full employment, which would mean the only people unemployed would be those unable to work. “The easiest part of putting people back to work occurred from May through August of last year, when more than a million jobs per month were added to payrolls.”

Big Number

5.8%. That was the unemployment rate in May, according to the Labor Department’s monthly jobs report, down from 6.1% in April.

What To Watch For

On Wednesday, the Fed said it wants to see more progress in the labor market, which is still down 7.6 million jobs since the onset of the pandemic, before it moves to raise rates and tighten policy. The Fed has long insisted the economy is still fragile and in need of assistance due to the ongoing pandemic, but the central bank is likely to change its messaging in light of expected job growth by the end of this year. Officials on Wednesday said they are looking ahead to two interest rate hikes by the end of 2023—sooner than previously expected.

Key Background

At least 26 states—including Alabama, Mississippi and South Carolina—have announced they will stop participating in the federal government’s supplemental unemployment benefits program, which provides an extra $300 a week to jobless Americans, by July 3. Some officials are claiming the payments disincentivize workers to find jobs, but in a note to clients late last month, JPMorgan economists said the early end to the unemployment insurance, which is set to expire in September, looks “tied to politics, not economics.”

They argued that many of the states that have announced the early reduction are not showing signs of a tight labor market or strong earnings growth—two factors used to justify ending the enhanced benefits. Meanwhile, some states have moved on legislation that would authorize one-time “signing bonuses” for unemployed residents who find work.

Further Reading

Jobless Claims Hit New Pandemic Low, But 15.3 Million Americans Are Still Receiving Unemployment Benefits

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I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com. And follow me on Twitter @Jon_Ponciano

Source: New Unemployment Claims Rise For First Time In Nearly Two Months, But Number Of Americans Receiving Benefits Falls Sharply

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Critics:

Unemployment benefits, also called unemployment insurance, unemployment payment, unemployment compensation, or simply unemployment, are payments made by authorized bodies to unemployed people.

The first modern unemployment benefit scheme was introduced in the United Kingdom with the National Insurance Act 1911, under the Liberal Party government of H. H. Asquith. The popular measures were to combat the increasing influence of the Labour Party among the country’s working-class population.

The Act gave the British working classes a contributory system of insurance against illness and unemployment. It only applied to wage earners, however, and their families and the unwaged had to rely on other sources of support, if any.Key figures in the implementation of the Act included Robert Laurie Morant, and William Braithwaite.

Across the world, 72 countries offer a form of unemployment benefits. This includes all 37 OECD countries. Among OECD countries for a hypothetical 40-year-old unemployment benefit applicant, the US and Slovakia are the least generous for potential benefit duration lengths, with PBD of six months. More generous OECD countries are Sweden (35 months PBD) and Iceland (36 months PBD); in Belgium, the PBD is indefinite.

The Unemployment Insurance Act 1920 created the dole system of payments for unemployed workers in the United Kingdom. The dole system provided 39 weeks of unemployment benefits to over 11 million workers—practically the entire civilian working population except domestic service, farmworkers, railroad men, and civil servants.

Unemployment benefits were introduced in Germany in 1927, and in most European countries in the period after the Second World War with the expansion of the welfare state. Unemployment insurance in the United States originated in Wisconsin in 1932.Through the Social Security Act of 1935, the federal government of the United States effectively encouraged the individual states to adopt unemployment insurance plans.

Job sharing or work sharing and short time or short-time working refer to situations or systems in which employees agree to or are forced to accept a reduction in working time and pay. These can be based on individual agreements or on government programs in many countries that try to prevent unemployment. In these, employers have the option of reducing work hours to part-time for many employees instead of laying off some of them and retaining only full-time workers. For example, employees in 27 states of the United States can then receive unemployment payments for the hours they are no longer working.

International Labour Convention

International Labour Organization has adopted the Employment Promotion and Protection against Unemployment Convention, 1988 for promotion of employment against unemployment and social security including unemployment benefit.

See also

How To Embrace The Post-Pandemic, Digital-Driven Future Of Work

Digital will separate the winners from the laggards in the hypercompetitive, post-pandemic business landscape, says Ben Pring, Managing Director of Cognizant’s Center for the Future of Work. We undertook a global, multi-industry study to understand how businesses are preparing for this future and here’s what we found.

COVID-19 changed digital from a nice-to-have adjunct to a must-have tool at the core of the enterprise. The pandemic forced businesses to reassess how they strategize and execute their digital ambitions in a world that has migrated online, possibly for good in many areas. Those that did not prioritize digital prior to the pandemic found that procrastination was no longer an option — the digital landscape is hypercompetitive.

The Cognizant Center for the Future of Work (CFoW), working with Oxford Economics, recently surveyed 4,000 C-level executives globally to understand how they are putting digital to use and what they hope to achieve in the coming years. The CFoW found that digital technologies are key to success in the coming years and uncovered six key steps that all organizations can take to more fruitfully apply to gear-up for the fast unfolding digital future:

  • Scrutinize everything because it’s going to change. From how and where employees work, to how customers are engaged, and which products and services are now viable as customer needs and behaviors evolve rapidly.
  • Make technology a partner in work. Innovations in AI, blockchain, natural language processing, IoT and 5G communications are ushering in decades of change ahead and will drive new levels of functionality and performance.
  • Build new workflows to reach new performance thresholds. The most predictable, rote and repetitive activities need to be handed off to software, while humans specialize in using judgment, creativity and language.
  • Make digital competency the prime competency for everyone. No matter what type of work needs to be done, it must have a digital component. Levels of digital literacy need to be built out even among non-technologists, including specialized skills.
  • Begin a skills renaissance. Digital skills such as big data specialists, process automation experts, security analysts, etc. aren’t easy to acquire. To overcome skills shortages, organizations will need to work harder to retain and engage workers.
  • Employees want jobs, but they also want meaning from jobs. How can businesses use intelligent algorithms to take increasing proportions of tasks off workers’ plates, allowing them to spend their time creating value? This search for meaning stretches beyond the individual tasks of the job to what the organization itself stands for.…Read More……

Ben Pring leads Cognizant’s Center for the Future of Work and is a coauthor of the books Monster: A Tough Love Letter On Taming The Machines That Rule Our Jobs, Lives, and Future, What To Do When Machines Do Everything and Code Halos: How the Digital Lives of People, Things, and Organizations Are Changing the Rules of Business. In 2018, he was a Bilderberg Meeting participant. He previously spent 15 years with Gartner as a senior industry analyst, researching and advising on areas such as cloud computing and global sourcing. He can be reached at Benjamin.Pring@cognizant.com.

Source: How To Embrace The Post-Pandemic, Digital-Driven Future Of Work

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Critics:

One of the biggest misconceptions about digital transformation is that it is all about technological change. With companies feeling an urgent need to transform digitally, technology is considered to be the panacea for business problems and a way to speed up transformation.

But while technology is an important part of digital transformation, it can only deliver benefits if it is procured as part of a wider plan.

The issue is that those making the decisions to implement technology for the sake of technology may be focusing on the process of changing their business, rather than targeting their ultimate goals.

In fact, the majority (71 per cent) of IT leaders say their business is so fixated on digital transformation that the projects may not deliver tangible benefits, according to 2019 research from database company Couchbase.

Caroline Carruthers, former chief data officer at Network Rail and Lowell, believes that understanding the problems the business is trying to solve or the value it is aiming to generate is crucial.

“Otherwise, how do we know we’re not cutting a square hole [with technology] rather than a circular one? People hear buzzwords and want a quick fix; it’s engrained that we want things faster, while advances in consumer technology have meant people expect the same from business technology. However, the problems are far more complex,” she says.

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Bullish Jobs Prediction: Bank Of America Says Employment Will Return To Pre-Pandemic Levels By Year’s End

Daily Life in New York City Around The One-year Anniversary of The COVID-19 Shut Down

Following blockbuster data showing the U.S. added 917,000 jobs in March, analysts from Bank of America said they expect jobs to return to pre-pandemic levels by the end of the year if that pace of improvement continues.

It’s a much more aggressive prediction than other experts, including the Federal Reserve and Treasury Department, have taken so far this year.

Federal Reserve chair Jerome Powell has said that while he’s optimistic that hiring will pick up in the coming months, it’s “not at all likely” the U.S. will reach maximum employment this year.

In a hearing before Congress last month, Treasury Secretary Janet Yellen said she believes the economy may return to full employment next year.

Bank of America’s analysts said they expect “considerably more job creation” in the leisure and hospitality sectors—two areas hit hardest by the pandemic—in the months ahead as the U.S. economy reopens.

The growth Bank of America is predicting also comes with a risk, the analysts said: jobs could continue to accelerate beyond pre-pandemic levels right as trillions of dollars in stimulus spending kick in and the economy reopens in earnest.

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Employment Lawyer Alex Lucifero answers questions about Employee Rights When Businesses Reopen during the COVID-19 Pandemic in Canada. Can my employer discipline or fire me if I don’t feel safe returning to work when the business reopens? Can my employer recall me from work and put me in a different job, or give me different responsibilities? Can my employer recall younger employees before older employees, in an effort to protect the latter from COVID-19? Lucifero, an Ottawa employment lawyer and partner at Samfiru Tumarkin LLP, joined Annette Goerner on CTV Ottawa Morning Live, where he answered those questions and more.

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All those factors could lead to dangerous overheating and inflation, which could destabilize an already fragile economic recovery and rattle investors.

Crucial Quote

“We saw the economy gain traction in March as the American Rescue Plan moved and got passed, bringing new hope to our country,” President Biden said during prepared remarks on Friday. Biden’s flagship pandemic relief bill authorized another $1.9 trillion in federal stimulus spending.

Big Number

9.7 million. That’s how many people are now unemployed across the country, according to the Labor Department, down from 22 million at the onset of the crisis last spring.

Key Background

Biden unveiled his next legislative effort, the $2+ trillion American Jobs Plan, earlier this week. That plan is designed to revitalize American infrastructure and manufacturing and  jumpstart the transition to clean energy and industry. The Georgetown University’s Center on Education and the Workforce estimated that the plan would create or save 15 million jobs over a decade and that three-quarters of the infrastructure jobs it creates would be for workers with no more than a high school diploma.

Further Reading

The U.S. Added 916,000 Jobs In March As Labor Market Comes Roaring Back (Forbes)

The Economy Doesn’t Need The Fed’s Easy Monetary Policy To Keep Booming, BofA Says (Forbes)

$1,400 Stimulus Checks Are Already Working As Credit, Debit Spending Surges 45%, BofA Says (Forbes)

Powell And Yellen Praise Aggressive Stimulus Spending, Acknowledge Incomplete Economic Recovery In Congressional Testimony (Forbes)

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: Bullish Jobs Prediction: Bank Of America Says Employment Will Return To Pre-Pandemic Levels By Year’s End.

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January 2021 LFS Preview: Will Employment Take Another Hit?
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One-third of Hispanic parents or primary caregivers in New Mexico has had difficulty paying their rent or mortgage, while nearly half of them have seen their hours or pay cut…

Big Ethical Questions about the Future of AI

Artificial intelligence is already changing the way we live our daily lives and interact with machines. From optimizing supply chains to chatting with Amazon Alexa, artificial intelligence already has a profound impact on our society and economy. Over the coming years, that impact will only grow as the capabilities and applications of AI continue to expand.

AI promises to make our lives easier and more connected than ever. However, there are serious ethical considerations to any technology that affects society so profoundly. This is especially true in the case of designing and creating intelligence that humans will interact with and trust. Experts have warned about the serious ethical dangers involved in developing AI too quickly or without proper forethought. These are the top issues keeping AI researchers up at night.

Bias: Is AI fair

Bias is a well-established facet of AI (or of human intelligence, for that matter). AI takes on the biases of the dataset it learns from. This means that if researchers train an AI on data that are skewed for race, gender, education, wealth, or any other point of bias, the AI will learn that bias. For instance, an artificial intelligence application used to predict future criminals in the United States showed higher risk scores and recommended harsher actions for black people than white based on the racial bias in America’s criminal incarceration data.

Of course, the challenge with AI training is there’s no such thing as a perfect dataset. There will always be under- and overrepresentation in any sample. These are not problems that can be addressed quickly. Mitigating bias in training data and providing equal treatment from AI is a major key to developing ethical artificial intelligence.

Liability: Who is responsible for AI?

Last month when an Uber autonomous vehicle killed a pedestrian, it raised many ethical questions. Chief among them is “Who is responsible, and who’s to blame when something goes wrong?” One could blame the developer who wrote the code, the sensor hardware manufacturer, Uber itself, the Uber supervisor sitting in the car, or the pedestrian for crossing outside a crosswalk.

Developing AI will have errors, long-term changes, and unforeseen consequences of the technology. Since AI is so complex, determining liability isn’t trivial. This is especially true when AI has serious implications on human lives, like piloting vehicles, determining prison sentences, or automating university admissions. These decisions will affect real people for the rest of their lives. On one hand, AI may be able to handle these situations more safely and efficiently than humans. On the other hand, it’s unrealistic to expect AI will never make a mistake. Should we write that off as the cost of switching to AI systems, or should we prosecute AI developers when their models inevitably make mistakes?

Security: How do we protect access to AI from bad actors?

As AI becomes more powerful across our society, it will also become more dangerous as a weapon. It’s possible to imagine a scary scenario where a bad actor takes over the AI model that controls a city’s water supply, power grid, or traffic signals. More scary is the militarization of AI, where robots learn to fight and drones can fly themselves into combat.

Cybersecurity will become more important than ever. Controlling access to the power of AI is a huge challenge and a difficult tightrope to walk. We shouldn’t centralise the benefits of AI, but we also don’t want the dangers of AI to spread. This becomes especially challenging in the coming years as AI becomes more intelligent and faster than our brains by an order of magnitude.

Human Interaction: Will we stop talking to one another?

An interesting ethical dilemma of AI is the decline in human interaction. Now more than any time in history it’s possible to entertain yourself at home, alone. Online shopping means you don’t ever have to go out if you don’t want to.

While most of us still have a social life, the amount of in-person interactions we have has diminished. Now, we’re content to maintain relationships via text messages and Facebook posts. In the future, AI could be a better friend to you than your closest friends. It could learn what you like and tell you what you want to hear. Many have worried that this digitization (and perhaps eventual replacement) of human relationships is sacrificing an essential, social part of our humanity.

Employment: Is AI getting rid of jobs?

This is a concern that repeatedly appears in the press. It’s true that AI will be able to do some of today’s jobs better than humans. Inevitably, those people will lose their jobs, and it will take a major societal initiative to retrain those employees for new work. However, it’s likely that AI will replace jobs that were boring, menial, or unfulfilling. Individuals will be able to spend their time on more creative pursuits, and higher-level tasks. While jobs will go away, AI will also create new markets, industries, and jobs for future generations.

Wealth Inequality: Who benefits from AI?

The companies who are spending the most on AI development today are companies that have a lot of money to spend. A major ethical concern is AI will only serve to centralizecoro wealth further. If an employer can lay off workers and replace them with unpaid AI, then it can generate the same amount of profit without the need to pay for employees.

Machines will create wealth more than ever in the economy of the future. Governments and corporations should start thinking now about how we redistribute that wealth so that everyone can participate in the AI-powered economy.

Power & Control: Who decides how to deploy AI?

Along with the centralization of wealth comes the centralization of power and control. The companies that control AI will have tremendous influence over how our society thinks and acts each day. Regulating the development and operation of AI applications will be critical for governments and consumers. Just as we’ve recently seen Facebook get in trouble for the influence its technology and advertising has had on society, we might also see AI regulations that codify equal opportunity for everyone and consumer data privacy.

Robot Rights: Can AI suffer?

A more conceptual ethical concern is whether AI can or should have rights. As a piece of computer code, it’s tempting to think that artificially intelligent systems can’t have feelings. You can get angry with Siri or Alexa without hurting their feelings. However, it’s clear that consciousness and intelligence operate on a system of reward and aversion. As artificially intelligent machines become smarter than us, we’ll want them to be our partners, not our enemies. Codifying humane treatment of machines could play a big role in that.

Ethics in AI in the coming years

Artificial intelligence is one of the most promising technological innovations in human history. It could help us solve a myriad of technical, economic, and societal problems. However, it will also come with serious drawbacks and ethical challenges. It’s important that experts and consumers alike be mindful of these questions, as they’ll determine the success and fairness of AI over the coming years.

By: By Steve Kilpatrick
Co-Founder & Director
Artificial Intelligence & Machine Learning

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Employers Must Act Now To Mitigate The Impacts Of The Pandemic On Women’s Careers

It may be years before we comprehend the full ramifications of COVID-19 on our society and places of work. But while we are still learning to navigate the pandemic, we each have had to adapt our daily lives to respond to it.

Working women, in particular, are being impacted in profound ways, facing tremendous challenges and commonly taking on expanded duties at home while continuing to juggle their careers.

In order to understand how and to what degree women’s day-to-day lives have changed – and how they feel these changes could impact their careers – we recently conducted a survey of nearly 400 working women around the globe at a variety of career levels and spanning various industries.

The pandemic is taking a heavy toll on the daily lives of working women

What these women shared sheds light on the extent to which the pandemic is affecting their work/life balance, mental and physical health, and confidence in their long-term career prospects.

Over 80% of the women we surveyed said their lives have been negatively disrupted since the onset of COVID-19. Additional care giving responsibilities, extra household responsibilities, and heavier workloads were cited as common impacts, causing many women to experience negative tolls on their mental or physical well-being or feel unable to balance their work/life commitments.

Alarmingly, nearly 70% of women who have experienced these disruptions are concerned about their ability to progress in their career. And 60% questioned whether they actually want to progress when considering what they perceive is currently required to move up in their organization.

We should be concerned about these results in terms of the immediate impacts on women’s daily lives, the potential long-term effects on their future careers, and the broader threat to the progress made in recent years in achieving gender equality in the workplace. But our research also reveals how leaders can take action to mitigate these impacts.

Actions taken by employers will be critical in ensuring women continue to thrive

Our survey asked women what employers could do to support them in progressing during and beyond the pandemic. Using their answers and other insights from our research around key barriers and enablers, we believe there are six important steps organizations can take to ensure women continue to progress:

1) Make flexible working the norm. Going beyond “working from home” to offer a range of options that enable everyone (not just working parents) to have a manageable work/life balance is critical for making progress on gender equality. Of the 60% of women surveyed who said they questioned whether they want to progress in their organizations, more than 40% cited lack of work/life balance as a reason. Moreover, just under half of those surveyed cited having more flexible working options as something their employer can do to help them stay longer term. But this is not just about policies – these options must also be underpinned by a workplace culture that supports employees in taking advantage of them without any fear of career penalty.

2) Lead with empathy and trust. The need for leaders and managers to have open and supportive conversations with their teams has never been stronger, and 44% of women surveyed said that having more regular team check-ins to understand how individuals are doing is a key action leaders can take. Open dialogue can help leaders understand any short-term constraints their employees face and make sure their long-term prospects within the organization are secured.

3) Promote networking, mentorship and sponsorship as ways to learn and grow. 46% of women surveyed told us that the provision of such opportunities would entice them stay with their employer longer-term.These resources can be meaningful platforms for career growth, provided they are offered in ways and at times that accommodate different schedules and needs.  

4) Create learning opportunities that fit within employees’ daily lives. With 40% of women saying they want more learning and development opportunities,introducing approaches to learning and development that provide access to expertise and skills in flexible and practical ways can be key to supporting women, many of whom remain keen to take on more responsibilities despite the constraints imposed on them by the pandemic.

5) Ensure that reward, succession, and promotion processes address unconscious bias. With over half of those surveyed citing getting a promotion and/or a pay raise as actions employers can take to make them stay longer-term, it remains critical that organizations address unconscious bias in their reward and succession processes. This includes looking at these processes in the context of remote working and addressing any negative perceptions of unavoidable commitments outside work, such as caregiving responsibilities.

6) Above all, make diversity, respect, and inclusion non-negotiable. Of those women who said they were questioning whether they wanted to progress in their organizations, around a quarter cited lack of diversity, poor or no role models, and poor culture, and 30% cited non-inclusive behaviors experienced (e.g., microaggressions, exclusion from meetings/projects) as reasons. Beyond having the right policies and processes in place to advance gender diversity, leaders must address these non-inclusive “every day” behaviors, such as microaggressions and exclusion, through clear and visible action since this is clearly still a significant factor to ensure women remain engaged.

We are at an inflection point. With no end to the pandemic currently in sight, organizations must meet the call to support the women in their workforce and ensure they can thrive both personally and professionally—or our economy and society could face long-standing repercussions.

Emma Codd

Emma Codd

Emma Codd is Global Inclusion Leader for Deloitte and leads on the development and delivery of the global inclusion strategy.

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CBS Sunday Morning 808K subscribers The pandemic has put many working moms in an impossible situation — doing their own jobs as well as those of teachers and childcare workers, on top of housework — and some women are finding their careers in jeopardy as they balance the demands from employers with their children’s needs.

Correspondent Rita Braver hears from working mothers who describe a climate of discrimination, and examines how this challenging new work dynamic may actually set back advances that have been made in bringing equality to the workplace. Subscribe to the “CBS Sunday Morning” Channel HERE: http://bit.ly/20gXwJT Get more of “CBS Sunday Morning” HERE: http://cbsn.ws/1PlMmAz Follow “CBS Sunday Morning” on Instagram HERE: http://bit.ly/23XunIh Like “CBS Sunday Morning” on Facebook HERE: https://www.facebook.com/CBSSundayMor… Follow “CBS Sunday Morning” on Twitter HERE: http://bit.ly/1RquoQb Get the latest news and best in original reporting from CBS News delivered to your inbox. Subscribe to newsletters HERE: http://cbsn.ws/1RqHw7T Get your news on the go! Download CBS News mobile apps HERE: http://cbsn.ws/1Xb1WC8 Get new episodes of shows you love across devices the next day, stream local news live, and watch full seasons of CBS fan favorites anytime, anywhere with CBS All Access. Try it free! http://bit.ly/1OQA29B

A Scary Number of Retail Companies are Facing Bankruptcy Amid the Coronavirus Pandemic

The sign outside the J.C. Penney store is seen in Westminster, Colorado February 20, 2009. Department store operator J.C. Penney Co Inc posted a 51 percent drop in fourth quarter profit on Friday, and said its loss in the current quarter would be deeper than Wall Street estimates as shoppers hold off on spending. REUTERS/Rick Wilking (UNITED STATES) – GM1E52L0AQI01

The retail death march persists. Somewhat under-the-radar, Italian luxury goods retailer Furla filed for Chapter 11 on Friday after being hit hard from the COVID-19 pandemic. The company is looking to close stores and cut debt as part of the reorganization. The retailer, founded in 1927, plans to emerge from bankruptcy with a greater focus on e-commerce.

Furla joins a long list of well-known retailers that have buckled during the health crisis.

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New York City-based department store chain Century 21 filed for bankruptcy in September and said that it will shut 13 locations that for years served up deep discounts on designer wares. The company pinned the blame on the COVID-19 pandemic and uncooperative insurers who were supposed to help provide the company with fiscal support during tough times.

Bankrupt J.C. Penney, meanwhile, received a bailout in September from landlords Simon Property Group and Brookfield. The consortium valued the century old department store — which went bust back in May — at some $1.75 billion. A total of 650 stores will stay open, down from the more than 1,000 pre-pandemic.

“It takes a long time to kill a retailer,” Forrester retail analyst Sucharita Kodali told Yahoo Finance Live “So as long as they are able to pay their bills, which if they have an owner they will — they can absolutely be around. But that doesn’t mean death for J.C. Penney is totally off the table.”

Kodali added that J.C. Penney “may not be a great customer experience, but at least it’s alive and open. They can figure out what the plan B over five to ten years could be for that space.”

‘That’s a scary number’

States have allowed malls and retailers to reopen, but the situation remains precarious as COVID-19 infections are now back on the rise. Consequently, it’s reasonable to expect malls and stores are shutdown — or shopping times restricted —again before year end. That will raise the prospect of a fresh wave of bankruptcies in early 2021 after what could be a lackluster holiday shopping season.

“I think many of these companies will file [for bankruptcy], and it’s not a handful. It’s several dozen. And that’s a scary number,” Stifel managing director Michael Kollender, who leads the consumer and retail investment banking group for the firm, told Yahoo Finance. “It’s far more than we have seen over the last several years combined.”

Kollender and his colleague James Doak at Miller Buckfire — Stifel’s restructuring arm, where Doak is co-head — have worked on dozens of consumer and retail bankruptcies in recent years, including Aeropostale, Gymboree and Things Remembered.

“We will see some major chains go away and not come back,” Kollender added. “These are chains that were struggling before the situation. COVID-19 will put them over the ledge.”

The pandemic has toppled several household names this year. Stein Mart, a 112-year-old discounter, filed for bankruptcy in early August and will look to close most of its nearly 300 stores. The company cited significant financial stress brought on by the COVID-19 pandemic for its decision.

August also saw Lord & Taylor — the oldest U.S. department store founded in 1826 — file for Chapter 11 bankruptcy protection after being crippled by COVID-19 store closures. The company was purchased for $100 million from Hudson’s Bay by fashion startup Le Tote in 2019. Le Tote also filed for Chapter 11.

Men’s Wearhouse-owned Tailored Brands also filed for Chapter 11 in August, too. The company said it had received $500 million in debtor-in-possession financing from existing lenders.

Meantime, Ascena Retail Group, the owner of Ann Taylor and Lane Bryant, finally filed for bankruptcy protection in late July. The company, which has been circling the bowl for years, will look to the courts to help it shave $1 billion in debt. But it’s likely the retailer will be far slimmer post bankruptcy than its current 2,800 store count.

AdChoices

Regional retailer Paper Store filed for Chapter 11 in July as well. The operator of 86 stationary and card stores in the Northeast said it’s looking for a buyer.

New York & Co. parent company RTW Retailwinds also filed for Chapter 11 bankruptcy protection in July after years of growing irrelevance in malls. The women’s apparel company — which changed its name to the bizarre RTW Retailwinds as part of a rebranding in 2018 — operates 378 outlet and and mall-based stores across 32 states. It may close all of its stores as part of the filing.

“The combined effects of a challenging retail environment coupled with the impact of the Coronavirus (COVID-19) pandemic have caused significant financial distress on our business, and we expect it to continue to do so in the future. As a result, we believe that a restructuring of our liabilities and a potential sale of the business or portions of the business is the best path forward to unlock value. I would like to thank all of our associates, customers, and business partners for their dedication and continued support through these unprecedented times,” said RTW Retailwinds CEO Sheamus Toal in a statement.

And the list of now defunct retailers is almost endless.

Brooks Brothers filed for bankruptcy in July. It has been dealt a twin blow to its finance from closed malls and a shift away from preppy clothing. The company would up being sold to the duo of Authentic Brands Group and Simon Property Group for $325 million.

GNC has walked through death’s door after knocking on it for years. The 85-year-old vitamin seller filed for bankruptcy in late June after years of battling waning sales and a debt load north of $1 billion. GNC plans to shutter up to 1,200 stores across the U.S. The company operates more than 5,800 stores.

NEW YORK, NEW YORK - AUGUST 07:  A person wears a protective face mask outside the GNC store as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 7, 2020 in New York City. The fourth phase allows outdoor arts and entertainment, sporting events without fans and media production. (Photo by Noam Galai/Getty Images)
A person wears a protective face mask outside the GNC store as the city continues Phase 4 of re-opening following restrictions imposed to slow the spread of coronavirus on August 7, 2020 in New York City. (Photo: Noam Galai/Getty Images)

“Some companies are just not going to survive this,” says McGrail, who is the COO of one of the world’s largest asset disposition and valuation firms, Tiger Capital Group. Its McGrail’s team — which often includes store associates of a stricken retailer — that hangs the “Everything must go” signs and works to fetch top dollar on fixtures and other inventory.

Such is the current life for McGrail and others in the retail bankruptcy and restructuring fields. In talking to a host of experts, one thing is abundantly clear: more retail bankruptcies are very likely over the next twelve months.

Even for those retailers emerging from bankruptcy, vendors are likely to be tepid to ship them product while at the same time tightening payment terms as the pandemic rages on.

That one-two punch usually kills a wounded retailer for good.

Then there is the general uncertainty on how people will view going back to the mall in the new normal of social distancing. That fog of war is poised to persist well beyond the coming holiday season.

“We are in a retail tsunami,” Kollender said.

This story was originally published on June 24, 2020, and has been updated.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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Combating Unemployment Fraud With Biometrics And Common Sense

Some 837,000 Americans filed initial claims for unemployment insurance last week, according to the U.S. Department of Labor. While this reflects a slight decrease from the previous week, initial jobless claims are still stuck above the highest levels reached in the 2008-2009 Great Recession, according to The Associated Press. This number doesn’t paint a completely accurate picture because California, which accounts for more than a quarter of the country’s aid applications, provided the same figure it did the previous week.

Why? Because the State of California Employment Development Department has stopped accepting new jobless claims during a two-week reset period so it can tackle a backlog of 600,000 claims and implement some much-needed anti-fraud technology.

While the U.S. labor market continues to grapple with the effects of COVID-19, government agencies providing unemployment benefits are also grappling with a spike of fraudulent claims related to the pandemic by people using stolen identities.

Using stolen data to steal benefits

Earlier this year the FBI reported that U.S. citizens from several states have been victimized by criminal actors using stolen personally identifiable information (PII) to submit fraudulent unemployment insurance claims online. The ability to obtain PII is nothing new — fraudsters were doing this well before the onset of the pandemic.

Between data breaches, the dark web, phishing attacks, social engineering and impersonation scams, it’s easy for cybercriminals to get their hands on names, Social Security numbers, phone numbers and home addresses. They then have enough information to pose as their victim and file a fraudulent claim online with the ultimate goal of gaining control of communications and payments.

Victims of unemployment insurance theft often don’t know they’ve been targeted until much later, when they try to file their own claim for unemployment insurance or receive a notification from the state unemployment insurance agency. In some cases, this correspondence comes in the form of a physical letter containing the full Social Security number or other valuable PII of the person being defrauded. If the fraudster has already changed the mailing address tied to the claim, the government is unintentionally putting the victim at higher risk for continued identity theft.

Fighting fraud with digital identity verification

It’s clear that the current process of allowing people to file unemployment claims using readily available information isn’t working because there is no way to determine whether someone filing the claim is who they say they are. Data-centric approaches alone do not meet Gartner’s definition of identity proofing because there is no test that the individual claiming the identity is, in fact, the authentic possessor of that identity. The identity assurance achieved with this capability used in isolation is relatively low, relying only on “something you-but-not-only-you know.”

Implementing a biometric-based identity verification process is key to thwarting unemployment fraud amid the pandemic and beyond. Government agencies responsible for each state’s unemployment benefits program need to consider high-assurance solutions with the following four requirements: 

  1. Government-issued ID: Asking for a photo of a driver’s license or passport when someone files a new claim establishes the individual’s real-world identity, and AI-powered software can quickly determine if the ID document is real.
  2. Real-time selfie: Determine if the person possessing the ID is who they claim to be. Requiring a selfie also acts as a strong deterrent to fraudsters who generally do not want to show their face while committing a crime.
  3. Liveness detection: Ensure the individual is physically present and not a spoof by incorporating liveness checks which can sniff out if someone is using a video or a picture of a picture instead of a valid selfie. 
  4. Ongoing biometric authentication: Require the user to capture a new selfie which creates a fresh biometric that is instantly compared to the original selfie to confirm the account owner is the actual person logging into the account.

By implementing advanced digital identity verification, government agencies can adapt to the modern fraud landscape and prevent cybercriminals from stealing unemployment benefits from the citizens who truly need them, while making it easier and more secure for legitimate users to submit claims and access their accounts.

Robert Prigge

Robert Prigge

Robert is responsible for all aspects of Jumio’s business and strategy. Specializing in security and enterprise business, he held C-level or senior management positions at Infrascale, Secure Computing, McAfee, Quest Software, Sterling Commerce and IBM.

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Entrepreneurs Can Help Fix The Unemployment Crisis For Disabled Communities

Over the past two weeks I’ve spent time with two individuals who represent the largest minority group in the United States: Americans with disabilities. The first, Ric Nelson, is a 37-year-old entrepreneur in Anchorage Alaska. Nelson has cerebral palsy and requires full-time assistance to manage his physical needs. Nelson is academically brilliant and highly energized to advance the interests of the disabled.

He graduated in the top 10 percent of his high school class and, against high odds, used the scholarship he obtained to secure associate’s and bachelor’s degrees in Small Business Management and Business Administration. Most recently, he completed a master’s degree in Public Administration. 

Nelson serves on multiple boards and after eight years of service became chair of the Governor’s Council on Disabilities and Special Education (GCDSE) for Alaska, where he is currently employed as Employment Program Coordinator. I learned from my discussion with Nelson the full extent of the plight of disabled employees. 

Related: The Best Funding Resources for Disabled Entrepreneurs

The National Council on Disabilities (NCD) estimates between 40 and 57 million people in the U.S. are disabled. As of 2018, only 18 percent were employed. Statistics from the Census Bureau show the sum inched up slightly in 2019 but reached only 19.3 percent even prior to the global health crisis. 

Not surprisingly, the COVID recession has been disproportionately hard for the disabled, who’ve lost nearly one million U.S. jobs between March and May of this year. Complicating factors include jobs ended due to the extra risk of immunocompromised conditions and the predominance of disabled workers in lower-level positions in industries such as food and service that have been most heavily hit. Concerns for the ability to comply with ADA (American Disability Act) requirements in work-from-home arrangements have also been a factor. Funding for private organizations to support the disabled have suffered as well. 

However, Nelson notes that entrepreneurship could be an answer to some of these needs. 

One disabled entrepreneur’s story

Christopher Casson agrees. Casson, who just turned 35, is an event and commercial photographer who is on the autistic spectrum. Instead of viewing his traits as a hindrance, he considers them a gift that gives him an unusually high level of focus and allows him to help other employees and entrepreneurs as an activist for disability needs. 

In 2018, Casson launched the Autism To ARTism movement to eliminate negative stigma and emphasize strengths and raise awareness for the challenges autistic adults face, as current systems tend to leave them forgotten after high school.  After completing associate’s and bachelor’s degrees in graphic design and computer animation, Casson interned with a wedding photography studio and in 2019 established Christopher Casson Photography, LLC. 

Related: Freelancers Will Soon Be Able to Buy Short-Term Disability Insurance Through This Startup

I met Casson while serving as a coach for the Next Impactor competition that culminated in Chicago in August 2019. Casson was the fourth place winner and also received the Video Vanguard award for a video challenge he’d led. 

Six months ago, Casson’s business was ready for launch in March 2020, and then, of course, we all know what happened next. The events industry that had been his primary target disappeared on a dime. 

On the advice of an advisor, Casson is now hoping to shift to real estate photography, which is showing steady and even increasing demand. Is this a good idea? 

To find out, I interviewed Michael Schoenfeld, a 35-year experienced photographer and cinematographer at the helm of Michael Schoenfeld Studio in Salt Lake City. Schoenfeld is the photographer my agency has used for our own needs and recommended to clients. Schoenfeld has received a number of awards, including multiple Graphis Platinum awards, and was selected as a judge of the Graphis 2020 New talent Annual this year.

Of most interest to me, however, he successfully pivoted from individual photographer to program head of a giant initiative for one of the nation’s top three self-storage companies 1,600 U.S. sites. The company wanted a high-level library of photographs at each U.S. site. When we last spoke about the project in 2018, he was in the midst of bidding, hiring, and organizing an enterprise project levels beyond anything he’d encountered in his photographic career. 

“How did it go?” I asked. “And what would be your words of advice to an emerging photographer like Casson?” 

An expert weighs in

Schoenfeld was candid. He noted that by and large, photographers enter their industry based on interest and talents, but with virtually zero experience in managing a business or succeeding as an entrepreneur. Failure rates are dismal. Of those who survive, many are capable of producing only $18-20,000 a year.

“Find a way to get some entrepreneurial training early,” he said. “Work you’re a** off. That’s my biggest secret.” 

In his own case, Schoenfeld’s enterprise project for his giant and publicly-traded client was every bit as challenging as he believed it would be. The program tested his ability to plan and execute as a program director. He rightly anticipated the variance of abilities in the regional photographers he commissioned was less an issue than the process and rules for tweaking the results to make them consistent across all states.

While he met the deadlines and executed properly in year one, he quickly determined success would come more readily in years two and three by engaging a smaller field of photographers who were tested and proven and assigning a larger regional territory to each. The strategy succeeded, as the program is now in its third year and on schedule for successful 2020 completion in spite of the interruptions from the health crisis. 

Similarly, he noted that the region’s largest hospital, which previously engaged him for most of its advertising photography, suddenly noted that it wouldn’t dare to use the photography now as it depicts patients receiving flu shots from practitioners who are not wearing masks.

The hospital asked if it would be possible to photoshop masks into the photos. 

Again, it was entrepreneurial problem solving and project/budget management, along with photographic skills, that let him succeed. As he’d kept records of the lighting, color, and specifications for every photograph he’d created, Schoenfeld was able to recreate each photo setting and photograph masks positioned exactly where the people in the original photographs had been. This allowed him to cut and photoshop the masks onto the original photos while maintaining the quality the client required. 

Entrepreneurial skills are necessary amidst crisis

Beyond artistic skills and the ability of any photographer, disabled or not, to move beyond being a barely successful practitioner to a growing and sustainable business requires entrepreneurial skills and an unfailing work ethic to succeed. In fact, Schoenfeld notes, it is this set of requirements that is allowing so many international photographers from regions such as India to become surprisingly adept at stepping in and meeting the needs that U.S. photographers would otherwise be able to fill as “their biggest resource is time,” Schoenfeld notes, and they are willing to invest any number of hours required to hone their skills to succeed. 

Related: How This Comedian Overcame Chronic Pain and Disability to Build Her Media Career

Cheryl Snapp Conner / Entrepreneur Leadership Network VIP

We usually talk about unemployment numbers but what do you think of the fact that in 2015 only 17.5% of people with disabilities had a job? I’m taking on the new challenge of a weekly video blog in 2017. In 2017, help make a difference in the lives of millions. Join me in supporting Handicap International and directly impact the lives of people living with disabilities across 60 countries. http://www.handicap-international.us This content originally appeared in my blog with Handicap International: http://www.handicap-international.us/… ———————— I travel the world as a motivational speaker, and I am the first armless pilot in the world. I’ve taken up my latest challenge to make at least one video blog every week in 2017. Click the subscribe link above to make sure you catch next week’s video. To order a copy of the book Disarm Your Limits, visit http://www.jessicacox.com/store The Kindle version of Disarm Your Limits is available at http://www.DisarmYourLimits.com To order a Deluxe Edition DVD of Right Footed, click store.rightfootedmovie.com Watch Right Footed on iTunes at https://itunes.apple.com/us/movie/rig… Join me on social media: Facebook: http://www.facebook.com/jcmsofficial Twitter: https://twitter.com/jess_feet Instagram: Rightfooted ———————— Video shot and edited by Patrick Chamberlain Find Patrick on Facebook: http://www.facebook.com/mrjessicacox

Five Points To Consider When Looking At The Latest Labor Market Data

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The Bureau of Labor Statistics released its latest estimates for the state of the labor market on August 7. The economy gained 1.8 million jobs in July and the unemployment rate fell to 10.2% in July from 11.1% in June. Still, 16.3 million workers were looking for a job but unable to find one and the unemployment rate stayed at double digits for the fourth month in a row. Moreover, the pace of job gains has markedly slowed from 4.8 million new jobs in June to a little over a third of that rate with 1.8 million new jobs in July.

The U.S. is looking at a deep, prolonged recession with massive economic pain for many workers. The continuation of the labor market picture requires swift and large-scale policy interventions from helping the workers hurt the most by the recession and from further worsening the economic outlook.

Five points are worth highlighting with respect to the latest jobs data.

First, the job market slowdown occurred as many states bungled their pandemic response. Several states rushed to reopen their economies in May, even as the virus’ spread was not under control. Many experienced massive surges in new infections. These surges prompted new public health measures, while people also curbed their own activities. Businesses closed and laid off people anew. Job gains stalled and economic pain deepened in states that had taken fewer precautions to stemming the virus’ spread. It is now abundantly clear that getting the spread of the novel coronavirus under control is key to a sustained economic recovery and to quickly bringing people back to work.

Related: How to start a real estate business by investing of only 500$

Second, this is still a recession that heavily falls on women. White, Latina and Asian women have higher unemployment rates than is the case for White, Latino and Asian men.

This trend reversed, though, among African-American men and women over the spring. Initially, Black women had higher unemployment rates than Black men, but Black men have had higher unemployment rates than Black women in June and July. In July, the unemployment rate for Black men stood at 15.2%, while that for Black women was 13.5%.

Third, all communities of color suffer from higher unemployment than white workers do. The unemployment rate was 14.6% for Black workers, 12.9% for Latinx workers and 12.0% for Asian workers in July 2020. In comparison, the unemployment rate for white workers fell below 10% with 9.2% last month. The difference in unemployment rates by race or ethnicity was thus largest between Black and white workers.

Moreover, the unemployment rate has declined more for white workers than for either Black or Asian American workers. The unemployment rate for white workers dropped by five percentage points from April to July 2020, a little less than the six percentage point drop for Latinx workers. In contrast, the unemployment rate only fell by 2.1 percentage points for Black workers and by 2.5 percentage points for Asian American workers. Slower labor market improvements for African-Americans than for white workers reflect the pattern of “first fired, last hired.” In any recession, Black workers suffer from more widespread, longer-term unemployment than white workers do.

Fourth, people are looking longer for a new job as the deep recession persists. The share of unemployed workers who have permanently lost their jobs grew from 11.1% in April to 22.6% in July. At the same time, the average length of unemployment almost tripled from 6.1 weeks in April to 17.9 weeks in July. As a growing share of workers have difficulties finding a new job amid double-digit unemployment rates, they will face economic hardships such as delayed or deferred rent payments and an inability to regularly pay for food.

Fifth, older workers now have relatively high unemployment rates. The unemployment rate for workers 55 years old and older was 8.8% in July, while that for workers from 35 to 44 years old was 8.1% and that for that for workers from 45 to 54 years old was 7.8%. This is a reversal from prior recessions, when older workers typically had lower unemployment rates than younger ones. Many older workers are staying in the labor market because they often lack savings and have high costs, for instance, from widespread debt and insufficient health insurance.

The Trump administration has abdicated responsibility for identifying and coordinating a national pandemic response. State and local governments have not gotten the pandemic under control in large parts of the country. With the public’s health at a high risk, people are slowing down on their own to protect their health and governments reimpose measures to control the spread of the virus on businesses. Job losses and widespread unemployment continue on a massive scale. To avoid making the recession even worse, Congress will need to quickly provide assistance to unemployed workers, struggling businesses and cash strapped state and local governments at the front line of the efforts to defeat the virus and bring the job market back.

Follow me on Twitter.

I am an economist focusing on retirement security, wealth inequality and economic policy. I care about how people handle economic risks and whether policies to address these risks can help reduce inequality. My research appears both in academic publications and as policy reports for Washington think tanks. I am a professor of public policy at the University of Massachusetts Boston and a senior fellow at the Center for American Progress, Washington, DC.

Source: forbes.com

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Hindsight: Unnecessary Recession? Foresight: “Deep & Permanent Damage” (Bernanke & Yellen)

The number the media, and apparently much of the population, fixates on daily is the new virus case count in the U.S.  While cases have clearly skyrocketed, deaths from the virus continue to fall. Perhaps the case counts are a function of the level of testing. First Trust’s economists recently published some interesting statistics:

  • on Monday, July 6th, deaths were -86% below the Monday, April 20th peak.;
  • hospital capacity, nationwide, still appears manageable – albeit some specific locations may have hospital capacity issues;
  • The skew of deaths toward the elderly is also significant. The total percentage of deaths/confirmed cases (138,782/3,630,587 as of July 18) is 3.8%. Of those that have died, 33.2% were 85 years old or older, and 92.5% of deaths are in people over 55 years old.

Consider that confirmed cases represent just over 1.1% of the total U.S. population, but field tests are now showing that up to 20% of those tested are positive for the virus. While there are issues in assuming that 20% of the population have already had the virus (some think that there are a huge number of asymptomatic carriers), if that is anywhere close to reality, then the overall probability of dying from the virus is 0.04% (.0004), and if one is under 55 years old (most of the working aged population), then that probability falls to .003% (.00003, i.e. 3 per 100,000 who contract it). Even within this younger demographic, only those with compromised immune systems have any real risk. The 20% assumption may be high (there are reasons people get tested), but even at 10%, the younger demographic has little death risk.

The Economy

Market observers are now using high frequency data markers to gauge the state of the economy. Sometimes, even small deviations from expectations in the economic data results in outsized financial market reaction.

  • Retail Sales: While falling -5.5% from the week ending July 4th (holiday week) to the week ending July 11th, retail sales were still +4.7% higher than the same 2019 week, and up +7.5% M/M in June (May was still in the depths of business closures). On the surface, this looks promising. But, let’s not forget that consumer income has not yet been impacted because of government money drops. As discussed below, there are still 32 million people unemployed, and there will likely be a large negative impact when government largesse returns to “normal” (perhaps after the elections);
  • Hotel Occupancy (week ended June 27th): While up from the April lows, there is only 46.2% occupancy vs. 84.9% a year earlier;
  • Open Table (July 13): this indicator shows a -66.2% Y/Y change. The M/M change was -1.2%; looks like the daily media drumbeat on new cases has had an impact;
  • TSA checkpoint data (July 13): This shows the number of air travelers, and it was up 5.2% W/W and 61.7% M/M. But, because the denominator is so small, the percentage changes become almost meaningless. Y/Y traffic is still off -73.2%. No wonder United and American Airlines AAL are throwing in the towel and have pre-announced significant layoffs.

The conclusion here is that, after an initial pop, and especially with renewed business restrictions, the Recovery, at best, has flattened.

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Employment

As I have maintained in this blog, employment is the most important gauge of the health of the economy. The more reliable state data from the traditional unemployment insurance programs is still showing significant Initial Claims each week (1.300 million the week of July 11th). There now is almost no downward slope, as the prior two weeks were 1.310 and 1.413 million. And, while Total Claims, as shown in the table and chart (sum of Initial Claims and Continuing Claims) have declined eight weeks in a row and in nine of the last ten, the chart shows the deceleration in the rate of decline in unemployment.

When the less reliable data on the temporary PUA program (Pandemic Unemployment Assistance – via the CARES Act) (less reliable because not all states are reporting and some states report more detail than others) is added to the state data, as shown in the next table and chart, one gets a flavor of just how deep the unemployment hole has become. Worse, beginning in June, total unemployment (or at least the claims) began to rise again. One of the emerging trends is that large companies, which had been hoping for the promised “V”-shaped recovery, have now given up and will start laying off. United and American Airlines are good examples. In addition, the approaching end of PPP may have a similar effect for mid-size and small businesses that are still alive.

Debt – The Fed Continues to be Nervous

For the banks, defaults haven’t yet become a huge issue due to forbearance. That will soon be ending. In the past week, the major banks reported Q2 results, and all significantly bolstered their loan loss reserves. In May, more than 100 million debt payments were missed. The consumer loan industry says it takes 180 days to deal with and resolve delinquent accounts, so we really won’t know the extent of consumer issues until Q4/Q1. I suspect the same is true of commercial loans.

Meanwhile, the Fed continues to worry. In recent Congressional testimony, former Fed Chairs Bernanke and Yellen warned that “the U.S. economy is facing deep and permanent economic damage” (i.e., certainly no “V,” and perhaps no “W”) without further significant fiscal and monetary stimulus including the expanded unemployment benefit program and providing aid to state and local governments.  In fact, Yellen worried out loud about probable large layoffs at the state and local levels without such aid. Bernanke, echoing those famous words of former ECB President Mario Draghi, said Congress and the Fed should do “whatever it takes.”

The Fed’s Beige Book, a report on local conditions by the 12 Regional Federal Reserve Banks (published eight times per year) emphasized “uncertainty” emanating from businesses in their purview. Here are some excerpts:

“Most Districts reported that manufacturing activity moved up, but from a very low level;”

“Outlooks remained highly uncertain…;”

“Employment increased on net in almost all Districts…However, payrolls in all Districts were well below pre-pandemic levels. Job turnover rates remained high with contacts across Districts reporting new layoffs;”

“Contacts in nearly every District noted difficulty in bringing back workers because of health and safety concerns, childcare needs, and generous unemployment insurance benefits.”

Bankruptcies and Debt Concerns

As I’ve shown over the past few blogs, bankruptcies continue to trend up. It will take years for the damage done to the economy by the lockdowns to be recouped.  The lives and livelihoods of millions of citizens have been transformed (many ruined) overnight.

We are just beginning to see the early symptoms of debt destruction, and we are going to see the impacts of such debt destruction on many of the traditional sectors, including the financial ones. These impacts will have long lasting effects. Meanwhile, the Fed has convinced market participants that there is no risk, and that the Fed has their backs. The result is that yield differentials between safe and highly risky assets have all but disappeared – at least their spreads have come way in. In the table and chart below, bankruptcies (from the Bloomberg database) are trending up.

The implications for interest rates are clear. More and more debt (corporate America including the zombies and the federal government) means that future interest rates can’t rise lest interest payment burdens become unmanageable and turn the economy south.

Conclusions

  • With hindsight, the probability of death from the virus for most of the working aged population appears remote (minuscule);
  • The economy hit zero in April, and the May/June re-openings led to the early up-leg of a “v,” but this nascent recovery now appears to be stalling as governors decide to re-restrict businesses;
  • Employment numbers, too, are stalling. Companies are beginning to give up hope for a rapid recovery and are setting up for a long period of economic softness (i.e., they are starting to think about major layoffs);
  • Debt issues are just beginning to emerge and will come front and center in Q4/Q1. The Fed sees this as do former Chairs Bernanke and Yellen.
Follow me on Twitter. Check out my website.

Robert Barone, Ph.D. is a Georgetown educated economist. He is a financial advisor at Four Star Wealth Advisors. http://www.fourstarwealth.com.

Source: https://www.forbes.com

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