Jul 24, 2020

Axios Markets

By Dion Rabouin
Dion Rabouin

Good morning! Was this email forwarded to you? Sign up here. (Today's Smart Brevity count: 1,190 words, 4.5-minutes.)

🎙"So many times it happens too fast, you trade your passion for glory. Don't lose your grip on the dreams of the past. You must fight just to keep them alive." - See who said it and why it matters at the bottom.

1 big thing: The unemployment situation is really, really bad

Data: Department of Labor; Chart: Andrew Witherspoon/Axios

In the first week of July, nearly 1.5 million Americans were receiving unemployment benefits from the little-known Pandemic Emergency Unemployment Compensation and Short-Term Compensation programs.

  • For the week ending April 11, the first week for which data on the programs is available, PEUC and STC programs counted a little over 62,000 and 27,000 claimants each, respectively.
  • That means both programs have seen approximately 15-fold increases in about three months' time.

Why it matters: As first-time claims for traditional unemployment benefits have held steady between 1 million and 1.5 million a week for 18 straight weeks, pandemic-specific unemployment insurance programs are spiking, showing greater job losses and weakness in the economy.

What it means: The PEUC program provides additional benefits for those affected by the pandemic who have exhausted traditional state unemployment benefits.

  • STC provides benefits to people who still have jobs but whose employers have reduced their hours significantly to avoid layoffs, providing a pro-rata share of weekly benefits based on the reduction in hours of work.

Between the lines: The continuous increase in PEUC claims likely means Americans are staying unemployed for longer and the consistent uptick in STC claims shows that even businesses that have not laid off employees yet have been cutting their hours and having the government pick up the slack.

  • The number of people receiving benefits under each newly created program is higher than the total number of people receiving unemployment benefits during any week in 2019.

The big picture: Such programs have helped uphold American consumers' spending, but have been quite costly — government spending in June totaled $1.1 trillion, according to CBO estimates — more than triple outlays in June 2019, or about a $763 billion increase.

What's next: The unemployment picture looks to be worsening right as the $600 in additional federal unemployment assistance expires.

  • According to the Census Bureau’s weekly Household Pulse Survey published Wednesday, the number of employed Americans declined by about 6.7 million from mid-June through mid-July, including a 4.1 million fall from the first to the second week of July.
  • Yelp reported that its tally of business closures that had been declining consistently since March has stalled out with temporary business closures now turning to permanent ones.
  • Yelp noted that permanent closures now account for 55% of all closed businesses since March 1, an increase of 14% from June.
Bonus chart: The seasonal effect
Data: Department of Labor via FRED; Chart: Axios Visuals

Lots of media companies reported that initial jobless claims rose for the first time in 15 weeks last week, but that is only true when looking at the seasonally adjusted data.

By the numbers: Unadjusted numbers showed an increase in initial claims for the week of July 11, with claims rising to 1.5 million from 1.4 million the previous week.

  • The number of claims, not adjusted, fell last week to 1.4 million.

Why it matters: Seasonal adjustment has significantly altered the number of claims, with reports showing more than 300,000 additional initial jobless claims during weeks in May.

  • The difference between seasonally adjusted and unadjusted continuing claims was around 2 million for every week in May.

Of note: The total unadjusted number of people receiving unemployment benefits through all state and federal programs was 31.8 million for the week ending July 4. That represents about 1 in 5 people in the workforce.

2. Catch up quick

The House Judiciary Committee is likely to delay its long-planned hearing with the CEOs of Apple, Google, Facebook and Amazon because of planned memorial service for the late Rep. John Lewis. (Axios)

Senate Republicans will not release a proposal for the next coronavirus relief bill Thursday after continued differences with the White House. (WSJ)

President Trump is expected to sign three health care executive orders on Friday, with two targeting drug price restrictions. (Washington Post)

Intel stock fell by nearly 11% after hours as the company issued weak Q3 guidance and said it is seeing substantial delays on its development of cutting-edge production technology, overshadowing better-than-expected Q2 earnings and profits. (Barron's)

3. Exclusive: Apple faces multistate consumer protection probe
Data: FactSet; Chart: Axios Visuals

Axios' Margaret Harding McGill writes: Multiple states are investigating Apple for potentially deceiving consumers, according to a March document uncovered by a tech watchdog group.

The big picture: Apple is already facing antitrust investigations from U.S. lawmakers and the European Union. Meanwhile, states have stepped up their scrutiny of Big Tech, including through multistate antitrust probes of Facebook and Google.

Details: The Texas attorney general may sue Apple for violating the state’s deceptive trade practices law in connection with a multistate investigation, according to the document, obtained by the Tech Transparency Project through a public record request and shared with Axios Thursday.

  • The Texas AG’s Consumer Protection Division “initiated this investigation for enforcement purposes. If violations are uncovered, CPD will initiate enforcement proceedings. Accordingly, the OAG anticipates litigation in this matter,” the document reads.
  • The state’s consumer protection law polices practices deemed false, deceptive or misleading.

It's not clear what specific practices Texas or any other states are looking into or the current status of the investigation.

4. Hollywood's lost summer

Photo illustration: Aïda Amer. Photo: David Livingston/GC Images

Axios' Sara Fischer writes: Nearly five months after Hollywood first began to shutter, the prospect of a reopening of theaters and production sets still seems grim.

Why it matters: The entertainment industry was experiencing record theater revenues and explosive production demand prior to the coronavirus. Now, Hollywood's facing its biggest financial crisis ever.

Driving the news: Disney pulled its live-action remake of "Mulan" from its release calendar Thursday, marking the fourth time the entertainment giant has delayed the movie's theatrical debut.

  • "Mulan," initially set to release on March 27, was pushed to July 24 and then again to August 21. Now, Disney says it doesn't know when the film will hit theaters.
  • "Star Wars" and "Avatar" sequels have also been delayed by a year, Disney said.
  • "Tenet," the highly-anticipated Christopher Nolan film, was also pulled by Warner Bros. from its release schedule indefinitely after being delayed from its original July 17 debut date.

Be smart: With most Chinese theaters still shuttered, movie studios that were banking on lucrative global releases are stuck.

  • Before the pandemic, analysts expected "Mulan" to bring in at least $1 billion globally at the box office, with a large chunk of money coming from Chinese moviegoers.

The big picture: For most studios, being aligned with a streaming service has been a game-changer.

  • On an earnings call for Warner Bros. parent company, AT&T, executives said that "Tenet" will debut in theaters, but suggested that other movies that have been delayed, like "Wonder Women," could go straight to streaming on AT&T's new service HBO Max if theaters don't open.

Theater chains have suffered tremendously from Hollywood's pandemic pause. Unlike big movie studios, which can delay releases or send movies to streaming if they need, theater chains like AMC, Regal and Cinemark are mostly beholden to health officials and studios to decide when and how they can reopen.

  • AMC said Thursday that it's pushing back reopening of most U.S. theaters until mid- to late-August. The company has faced enormous economic challenges during the outbreak. Last month, it signaled to investors that it may not survive the pandemic.

The bottom line: Hollywood is on track to face its worst year at the box office since the 1970s. At the same time, television networks, despite record viewership, are facing steep advertising declines. The entire industry is feeling the weight of the crisis.

Dion Rabouin

Thanks for reading!

Quote: "So many times it happens too fast, you trade your passion for glory. Don't lose your grip on the dreams of the past. You must fight just to keep them alive."

Why it matters: It's the eye of the tiger, it's the thrill of the fight! Rising up to the challenge of our rival. And the last known survivor stalks his prey in the night. And he's watching us all with the eyyyyyyyyyeeeeeeeeeee... of the tiger.

  • On July 24, 1982, Survivor's smash hit "Eye Of The Tiger" from the "Rocky III" soundtrack began its six-week run at No. 1 on the U.S. charts. It went on to win the Grammy for Best Rock Performance.