Apr 9, 2021

Axios Markets

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🎙 “There! His Majesty can now read my name without glasses. And he can double the reward on my head!” - See who said it and why it matters at the bottom.

1 big thing: Half of small businesses unlikely to hire back workers
Data: Facebook Global State of Small Business Report; Chart: Axios Visuals

Axios' Kim Hart writes: Nearly a third of small- and medium-sized businesses have had to lay off workers as a result of the COVID-19 pandemic, and half say they don't plan to rehire employees in the next six months, per Facebook's Global State of Small Business Report out Friday.

Why it matters: Small businesses have been pummeled in the past year, and small businesses owned by people of color faced higher closure rates, lower sales and bigger staff reductions.

By the numbers: 22% of U.S. businesses reported they were closed in February 2021, an increase from 16% in October 2020, per Facebook's survey of more than 35,000 small- and medium-sized businesses.

  • "Businesses have reduced their costs and payroll which is horribly painful and could be really harmful to the business long term," Urban Institute senior fellow Brett Theodos tells Axios.

Between the lines: The fact that 51% of global and U.S. small- and medium-sized businesses aren't planning to rehire in the near future suggests lower levels of optimism about the economic recovery, even as vaccinations become more widespread and states begin to open up.

Yes, but: While small businesses may not be planning on scaling rapidly in the second half of the year, some sectors are doing better than expected in terms of keeping up with loan payments and maintaining their credit standing, said Theodos, who analyzed data from Dun & Bradstreet on 1 million businesses between September 2019 and January 2021.

  • Small businesses are nimble and many were able to quickly cut costs by shedding employees and physical space to save on rent when revenues plummeted at the start of the pandemic, he said.
  • The Paycheck Protection Program and flexibility from lenders significantly helped provide some financial float for small businesses over the past year.

Yes, but, but: That doesn't mean their recovery will be quick or easy, and many businesses that closed may not be able to reopen.

  • Companies that are in loan forbearance may not be in great financial shape, "but it means lenders still have some confidence they'll be able to pay," he said.

The bottom line: Even the businesses that managed to maintain operations thanks to PPP payments and emergency lender flexibility will likely be conservative in hiring and spending for some time.

Bonus chart: Jobless claims rise, bucking employment rebound story
Data: U.S. Department of Labor; Chart: Will Chase/Axios

U.S. initial jobless claims remained below 1 million for the third straight week, but after a notable drawdown during the week of March 20, claims increased for the second straight week.

The intrigue: March's blowout nonfarm payrolls report showing 916,000 jobs added should have signaled a positive trend for employment gains, however, the jobless claims report suggests layoffs continue. That could hamper the recovery.

On the other side: While traditional jobless claims rose by 28,000 to more than 740,000 last week, claims for the Pandemic Unemployment Assistance program fell to 151,000.

2. Catch up quick

Citing an OECD proposal, the Biden administration is calling for the world's biggest multinational companies to pay taxes to national governments based on their sales in each country. (FT)

GM says it will reduce production in some of its North American plants due to a global semiconductor chip shortage. (Axios)

3. Netflix inks major streaming deal with Sony, expanding library
Data: FactSet; Chart: Axios Visuals

Axios Media Trends author Sara Fischer writes: Netflix and Sony Pictures Entertainment have struck a major, multiyear deal beginning in 2022 that will give Netflix access to Sony's biggest franchises, like "Spider-Man" and "Jumanji."

Why it matters: Sony is one of the only major movie studios that doesn't have its own streaming platform to distribute its content on.

  • At a moment when most major entertainment companies and studios are trying to pull their content off of Netflix to supply their own streaming services, the Sony deal offers a major boost to Netflix's library.

Details: The deal will also bring the studio's new movies to Netflix, like "Uncharted" and "Morbius," following their U.S. theatrical debut next year.

The big picture: Movie studios like Sony traditionally would license their content to cable networks following their theatrical releases. In the streaming world, it's notable that Sony has bypassed traditional television networks for a streaming company.

4. Climate is the century's investment story

Axios Generate authors Ben Geman and Andrew Freedman write: A successful global effort to slash carbon emissions demands huge investment to finance the transformation of energy systems and related infrastructure — and it's a capital shift that's already well underway.

Why it matters: Private investment is already ramping up, and President Biden wants to spend hundreds of billions of dollars. Independent experts say the spending that will be needed to achieve net-zero carbon emissions by 2050 — a goal now embraced by the U.S. and many other countries — would be on the scale of the industrial revolution.

A few snapshots:

  • In 2020, the research firm BloombergNEF estimates that worldwide investment in renewables, electric vehicles and other tech under the overall "energy transition investment" umbrella already topped $500 billion.
  • Now, Biden is calling for a huge increase in his infrastructure package. ClearView Energy Partners estimates that the "energy relevant" portions of the package could cost as much as $584 billion in the coming years. (And the White House has said its summary doesn't count the costs of the plan's new and expanded tax credits for clean energy.)
  • The private sector is already making huge investments of its own. For instance, General Motors is investing $27 billion through 2025 on the development of electric vehicles and autonomous tech.
  • Oil giants like BP and Shell are moving to diversify too, even as fossil fuels remain their dominant business lines now.

What they're saying: "The fact that there is out there, globally, a $23 trillion market for clean energy products, for products that will reduce greenhouse gas emissions, is a massive opportunity for this country," Energy Secretary Jennifer Granholm said Thursday.

  • The figure Granholm cited is an estimate from the International Finance Corporation, part of the World Bank Group, of a catch-all category (not just energy) of various "climate-smart investments" in emerging markets.
  • "Other countries are seeing that opportunity as well, and our economic competitors are working to corner the market on those opportunities," she added, citing China.

Read more.

5. U.S. may be close to hitting a vaccine wall
Data: CDC; Cartogram: Andrew Witherspoon/Axios

Axios Vitals author Caitlin Owens writes: There are growing signs that parts of the country may be close to meeting demand for the coronavirus vaccine — well before the U.S. has reached herd immunity.

By the numbers: On average, states have administered 76% of the doses they've received from the federal government. New Hampshire has administered the largest share of all states, at 89.8%, while Alabama has administered the smallest — only 61.4% of its doses.

Driving the news: An analysis released by Surgo Ventures yesterday concluded that "the supply-demand shift for the vaccine will happen earlier than expected — as early as the end of April — and before the nation reaches the 70-90% threshold for achieving herd immunity."

  • It released a survey finding that 59% of U.S. adults say they're either already vaccinated, or plan to be as soon as the shot is made available to them. At the current U.S. vaccination rate, all of those vaccine-enthusiastic adults could be inoculated by the end of April.
  • Vaccination rates will then slow, and Surgo's projections show that only around 52% of Americans will be vaccinated by July. When combined with people who have already been infected, the immunity rate overall may be around 65% by then — still not high enough for herd immunity.

Read more.

Thanks for reading!

Quote: “There! His Majesty can now read my name without glasses. And he can double the reward on my head!”

Why it matters: On April 9, 1768, John Hancock, a merchant, refused to allow British customs agents to go below deck on his ship. It is considered by some to be the first act of physical resistance to British authority in the colonies.

  • After putting his bold and now famous signature on the Declaration of Independence, Hancock, the first to sign the document and the president of the second Continental Congress, reportedly said the above quote.

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