May 1, 2020

Axios Login

You made it to another "weekend."

In case you are looking for things to do next week, Axios is hosting a live online event Tuesday on COVID-19's impact on education and the jobs of the future.

Join Axios cities correspondent Kim Hart at 12:30pm ET for a conversation with Teach for America CEO Elisa Villanueva Beard, former Florida Gov. Jeb Bush, and CEO and chairman of Revolution and co-founder of AOL Steve Case

Today's Login is 1,478 words, a 5.6-minute read.

1 big thing: Creaky unemployment systems plague jobless Americans

Illustration: Eniola Odetunde/Axios

The sudden wave of tens of millions of unemployment claims has overwhelmed state agencies hobbled by outdated tech and understaffed offices, report Axios' Courtenay Brown and Kyle Daly.

Why it matters: The federal coronavirus aid package expanded unemployment benefits for laid-off workers as the pandemic roiled the labor market, but an unprepared system has boxed out people in need — and artificially depressed the unemployment count, economists say.

By the numbers: States have processed unemployment claims for roughly one in five working Americans — some 30.3 million people — in just six weeks.

  • And yet the Economic Policy Institute estimates as many as 13.9 million more Americans out of work since mid-March have been unable to get unemployment benefits because "long-neglected state [unemployment] systems are unable to handle the volume of applications."

What's happening: Three factors explain the unemployment system meltdown.

  1. Sheer volume. "It was like a recession happened overnight, and you had to just go from zero to 100 — record low levels of unemployment insurance claims to record high levels," Steve Grove, who heads Minnesota's economic development office, tells Axios.
  2. Overstressed bureaucracies. There aren't enough human beings to quickly process the huge glut of claims, and many states have intentionally built friction into their unemployment systems in a bid to nudge people back into the workforce.
  3. Obsolete technology. States' technical systems are not built to handle the load they’re now facing, and they’re often the product of years — even decades — of individual adjustments and additions that make each one unique and uniquely challenging to troubleshoot. Most states are only now scrambling to tap technology like chatbots and apps to offload work from state employees.

Fixing the technical issues could be the key to solving the problem, but states lack the expertise and resources to do so themselves.

  • At the federal level, the U.S. Digital Service and 18F both recruit experienced technologists to help federal agencies with problems just like the ones unemployment offices now face. Regulations bar them from working directly with states, but some lawmakers want to use coronavirus relief legislation to change that.
  • Corporate America is pitching in. Alaska and Pennsylvania are using IBM's Watson AI technology to field and answer residents' unemployment questions. New York announced a partnership with Google, Verizon and Deloitte to revamp its employment system.
  • There's also the nonprofit U.S. Digital Response (USDR), which recently launched to help state and local governments address technical issues related to the coronavirus crisis. A team of engineers there is helping on unemployment specifically and has been tapped by eight states so far.

The bottom line: After a more than decade-long job market boom, state labor departments across the country were unprepared for the sudden, unprecedented onslaught of unemployment filings. The newly jobless are paying the price.

  • “What we’re really hoping is that the crisis of the moment reveals that 20 years to modernize a system is a contradiction in terms,” says UDSR co-founder Jen Pahlka.

Go deeper: Government tech struggles to dole out coronavirus stimulus cash

2. Tech earnings season’s 3 takeaways

Investors were hoping to come away from this week's earnings reports with a better sense of how tech companies were faring, but they ended up with some dollops of sobering news on a heap of continuing uncertainty.

The big picture: Tech may be the sector best poised to ride out the economic disruptions caused by COVID-19, but it won't be immune from the pain, and even some of its revenue gains will be dented by a higher cost of doing business.

Here are three key takeaways.

1. Ad dollars are disappearing fast. This was clear in Google's and Facebook's reports but made even clearer in Thursday's report from Twitter. CFO Ned Segal noted that its ads business so far in April is similar to the 27% decline it was seeing at the end of March.

2. The sour economy is going to take a toll, even on the giants. It's not just the ad-powered companies bracing for a hit. Both Microsoft and Apple did beat (already lowered) market expectations, but most of the first quarter preceded the full impact of the pandemic.

  • Amazon, which would appear to be among the biggest beneficiaries of the abrupt shift to e-commerce, said Thursday that it expects to invest billions of dollars this quarter, potentially posting a loss, to better serve customers and protect employees.

3. No one really knows just how bad it is going to get. Apple declined to offer any specific earnings forecast for the coming quarter, while others offered plenty of caveats to the guidance they gave, cautioning that it's really hard to know what the second half of the year will bring.

3. ICANN blocks sale of .org domain

The organization that oversees the handling of internet domain names said late Thursday that its board had voted to reject the transfer of the .org domain from the nonprofit Internet Society to a venture-backed private company.

The big picture: The move is the latest twist in a long-running saga that has $1 billion at stake, along with the future of the portion of the internet reserved for nonprofit organizations.

What they're saying: "ICANN's role is to ensure the stable and secure operation of the Internet's unique identifier systems," board chair Maarten Botterman said in a statement. "We are dedicated to making the right decision, knowing that whatever we decide will be well received by some, and not by others."

  • Ethos Capital, the would-be purchaser of the .org domain, criticized the move and said it was "evaluating its options."
  • "ICANN has overstepped its purview," Ethos said in a statement. "Today’s action opens the door for ICANN to unilaterally reject future transfer requests based on agenda-driven pressure by outside parties."

Background: A long list of elected officials, nonprofit leaders and internet luminaries had encouraged ICANN to block the deal, including Esther Dyson, California Attorney General Xavier Becerra and Human Rights Watch head Kenneth Roth.

Yes, but: Internet pioneer Vint Cerf and others came out in favor of the deal, as noted on a website put up by the deal's backers.

4. Smartphone sales are indeed tanking

Illustration: Eniola Odetunde/Axios

Remember how we said earlier this week that smartphone sales were poised to take a hit? Well, there's now a lot more data from companies and analysts indicating that's already starting to happen.

Why it matters: Smartphones have been the growth engine of consumer electronics for more than a decade. Sales were already slowing before the coronavirus, but the industry now appears headed for a significant dip.

Driving the news:

  • Apple said during its earnings report Thursday that iPhone sales should be comparatively weaker this quarter.
  • Qualcomm said to expect smartphone shipments this quarter to be down about 30%, rather than roughly flat from a year ago, as it previously projected.
  • IDC said first-quarter smartphone sales suffered their worst-ever year-over-year decline, with unit shipments falling nearly 12% from 2019.
  • In a separate interim forecast, IDC now projects an 11% drop in smartphone revenue this year, larger than the 6% it was predicting a month ago — and an even sharper contrast with the 5% increase it originally projected for 2020.

Yes, but: It still looks like 5G phones will go mainstream this year. Qualcomm said it is not lowering its full-year forecast that between 175 million and 225 million 5G-capable phones will be sold in 2020.

5. GOP senators unveil bill to police data use during pandemic

Sen. Roger Wicker (R-Miss.) Photo: Sarah Silbiger/Getty Images

Senate Republicans on Thursday announced a measure to police how companies use Americans' personal data to track the spread of the coronavirus, Axios' Margaret Harding McGill reports.

The big picture: Tech firms are increasingly looking to use data to combat the pandemic. Lead bill sponsor Sen. Roger Wicker (R-Miss.) said in a statement that this data "has great potential to help us contain the virus and limit future outbreaks, but we need to ensure that individuals’ personal information is safe from misuse."

Details: The COVID-19 Consumer Data Protection Act is meant to give consumers more control over how their health, geolocation and proximity data is collected and used during the pandemic.

  • It would require companies to obtain consent to collect or transfer that data for the purposes of tracking the spread of the disease.
  • Companies also would have to explain to consumers how the data will be handled, and how long it will be retained.
  • The data would have to be deleted or de-identified when it is no longer being used for the public health emergency.
  • The FTC and state attorneys general would handle enforcement.

Yes, but: The bill specifically focuses on data collected in connection with the pandemic and does not apply to other types of health data. That limited scope means even data that may indirectly relate to people's coronavirus infection status wouldn't be protected, argued Public Knowledge policy counsel Sara Collins.

Between the lines: The bill sponsors didn't get any Democrats to join before announcing it. It's being led by Senate Commerce Committee Chairman Wicker and Republican Sens. John Thune, Jerry Moran and Marsha Blackburn.

Margaret has more here.

6. Take Note

On Tap

Trading Places

Code for America is today announcing government veteran Amanda Renteria as its new CEO, succeeding founder Jen Pahlka, who announced a year ago that she was stepping down. CFO Zeryn Sarpangal and CTO Lou Moore, who had been interim chief executives, will now return to their prior roles.

  • Apple VP of public policy and government affairs Cynthia Hogan has been named to Joe Biden's committee to vet potential running mates. She is joined on the four-person committee by former Sen. Chris Dodd, Rep. Lisa Blunt Rochester and L.A. Mayor Eric Garcetti.