Daily Business Briefing
June 4, 2021, 8:22 p.m. ET
June 4, 2021, 8:22 p.m. ET
Two major banks that paused their corporate political giving after the U.S. Capitol riot on Jan. 6 are resuming their donations — but with new parameters.
JPMorgan Chase and Citigroup, the nation’s largest and third-largest banks, said they planned to begin donating money gathered by their political action committees to candidates. JPMorgan will restart its giving this month, and Citi resumed on Friday, according to internal memos from both banks.
Both banks said that giving via corporate PACs was a valuable way to engage with political officials from both major parties, but that they would be more transparent with employees about whom their PACs were supporting from now on.
“A PAC is an important tool for JPMorgan Chase employees to engage in the political process in the United States,” the bank’s political action committee wrote in a note that was distributed to workers on Friday. In identifying beneficiaries, the PAC will look for incumbents and candidates who embrace solutions to “longstanding structural challenges that hinder economic growth,” the memo said.
JPMorgan’s PAC in the past had given to political officials who objected to certifying the U.S. presidential election result on Jan. 6 — the backdrop for the attack on the Capitol — but has not since Jan. 1 and would not throughout the current election cycle leading up to the 2022 midterm elections, according to Patricia Wexler, a JPMorgan spokeswoman.
Citi did not rule out such giving, saying in its memo that it would evaluate those individuals “case by case.”
After the Capitol attack, which resulted in five deaths, a wide array of corporations paused their giving, arguing that objections to the election certification were destructive to democracy. They included Blue Cross Blue Shield, Charles Schwab and the Walt Disney Company. But since Jan. 6, some companies have gradually begun PAC giving again.
Donation watchers said this was hardly surprising.
“It was hard to see how they were going to have their cake and eat it, too — how they were going to take a bold stand for democracy and democratic institutions while at the same time asking Congress for entrée and favors, which is their job,” said Sheila Krumholz, executive director of OpenSecrets, which tracks federal political contributions.
The Labor Department’s report that the economy added 559,000 jobs in May, an acceleration from April, buoyed Democrats and the Biden administration on Friday, adding new fuel to the president’s claims that vaccinations and his economic program are beginning to get the economy back on track after a halting recovery from pandemic recession.
“This is historic progress,” Mr. Biden said in remarks from Rehoboth Beach, Del. “Progress that’s pulling our economy out of the worst crisis it’s been in in 100 years.”
He went on to claim credit for that progress, both from his administration’s campaign to ramp up America’s vaccine production and distribution and from the $1.9 trillion economic aid legislation he signed into law in March.
“None of this success is an accident. It isn’t luck,” Mr. Biden said, hailing “the cooperation of the American people in responding to my effort to get COVID under control, wearing masks initially and getting vaccinated.”
But the report, which fell short of analyst expectations for the second straight month and showed a slight shrinkage in the labor force, also provided fodder for Republican critics of the president. They say enhanced unemployment benefits — which were extended by Mr. Biden’s aid legislation in March — are discouraging workers from returning to jobs and holding back what could be an even faster recovery.
“Long-term unemployment is higher than when the pandemic started, and labor force participation mirrors the stagnant 1970s,” Representative Kevin Brady, the top Republican on the Ways and Means Committee, said in a news release. “It’s time for President Biden to abandon his attack on American jobs, his tax increases, his anti-growth regulations and his obsession with more emergency spending and endless government checks.”
After the April report fell substantially short of expectations, Republican governors across the country moved to prematurely end the $300-per-week supplemental unemployment benefits that began under President Donald J. Trump and are scheduled to continue through September under Mr. Biden’s aid package.
Mr. Biden said Friday those benefits had helped Americans weather the crisis but noted they expire in 90 days. “That makes sense,” he said, “it expires in 90 days.”
White House economists said last month there was not yet evidence in the numbers that the supplement was discouraging work, pointing instead to constraints like school closures and child care issues keeping women with children from returning to work, along with a large number of working-age Americans who had not been fully vaccinated. Administration economists doubled down on that reading on Friday.
“It is too soon to conclude that labor supply issues are holding back the long-term path of the recovery,” the chair of the White House Council of Economic Advisers, Cecilia Rouse, wrote in a blog post on Friday morning.
Democratic leaders in Congress continued to push for the unemployment benefits to continue as scheduled, and for lawmakers to move to enact the rest of Mr. Biden’s $4 trillion economic agenda.
“The American people need all the support they can get, especially Black and Hispanic communities that were among the hardest hit by the pandemic,” Representative Don Beyer of Virginia, the chairman of the Joint Economic Committee, said in a news release. “Lawmakers must step up. That includes continuing enhanced UI to support workers seeking jobs and Congress passing President Biden’s Jobs and Families Plans.”
(Because of an editing error, an earlier version of this briefing rendered incorrectly President Biden’s comments about the factors behind the improving economy. The item has been updated with the correct quotation.)
The Federal Reserve was hoping for months of strong job gains that would swiftly return the economy to maximum employment — but the decent-but-not-great May employment gain underlined that although the labor market is healing, progress is bumpy.
Employers added 559,000 jobs last month, below the 675,000 new jobs that economists surveyed by Bloomberg had expected. That gain would be strong in normal times, but it came after a sharp hiring slowdown in April, and with the economy still 7.6 million jobs
short of its prepandemic level.
The Fed is closely watching employment data as it assesses when to dial back its mass bond purchases, which help to make many borrowing cheap and stoke the economy.
Central bank officials have said they need to see “substantial” further progress toward their two goals — maximum employment and stable inflation — before scaling down that bond buying. They have an even higher hurdle for lifting interest rates: They want to see a return to full employment and inflation that is expected to stay above 2 percent for some time before raising rates from rock bottom.
Inflation has been moving higher this year, but Fed officials have said they expect much of the pop in prices to be temporary. And when it comes to jobs, many have been clear that the economy remains well shy of their target.
“I expect to see further progress on employment in coming months,” Lael Brainard, a Fed governor, said earlier this week. “That said, today employment remains far from our goal.”
Randal K. Quarles, the Fed’s vice chair for supervision, said in a recent speech that he expected price gains to meet the Fed’s criteria for slowing bond buying later this year. But he said the labor market offered reasons for patience.
Officials had been hoping for a quicker rebound than the one that has materialized. Jerome H. Powell, the Fed chair, said at an April event that “we want to see a string of months like that,” referencing a recent jobs report that had showed a near-million jobs.
As central bankers focus on jobs, investors are also trained on the data, because they are trying to figure out when the Fed will begin to cut back on buying of government-backed bonds. The Fed has been buying about $120 billion worth of debt each month in a program called quantitative easing. Those purchases tend to push asset prices higher, and the announcement of a policy shift has the potential to be disruptive: Markets jerked wildly when the Fed in 2013 hinted that it would slow a post-financial crisis quantitative easing program.
Hourly pay rose in May, but more slowly than in April — a possible sign that labor supply constraints are easing.
Average earnings for all workers rose 15 cents an hour in May, down from a 21-cent gain in April, the Labor Department said Friday. There was a similar slowdown in gains for nonsupervisory workers.
Economists are watching pay particularly closely because it is a key indicator of how much trouble employers are having attracting and retaining workers. Many companies, particularly in the service sector, have been complaining that they are struggling with hiring as they try to return to business as usual. Pay data from April lent credence to those complaints, showing significant increases in average pay, particularly in the leisure and hospitality sector.
Pay for non-supervisors in leisure and hospitality jumped again in May, but by less than half as much as in April. Still, those workers have seen significant pay gains in recent months: Their average earnings were $15.90 an hour in May, up from $14.80 in April. That continues a pattern of surprisingly strong wage growth, particularly for low-wage workers, during the pandemic.
Another sign that employers are having an easier time finding workers: Leisure and hospitality workers worked fewer hours last month. That followed a big jump in working hours in April.
Staples isn’t giving up its quest for Office Depot.
Staples said Friday it had sent a letter to the board of Office Depot outlining a $1 billion offer — or $18.27 a share — for its consumer business, which includes the Office Depot chain of stores and OfficeMax. Staples tried to buy all of Office Depot for more than $2 billion in January, but Office Depot rebuffed those efforts. Office Depot’s business-to-business unit comprised about half its $10 billion in sales last year.
This latest offer, which is all cash, comes at a roughly 43 percent premium to the 30-day average of Office Depot’s share price as of June 2, 2021.
Shares of Office Depot were up 12 percent Friday afternoon, giving it a market capitalization of $2.7 billion.
Staples and Office Depot have tried tie-ups before in hopes of gaining scale and becoming the country’s singular office supply store. But the retailers abandoned efforts to combine in a $6.3 billion deal in 2016 after the Federal Trade Commission sued to block the proposed merger on antitrust grounds.
The retail landscape, though, has changed significantly since then, given the rise of Amazon and other online retailers. Staples, sold itself to the private equity firm Sycamore Partners in 2017 for $6.9 billion.
Staples filed for antitrust approval to acquire Office Depot’s consumer division in November in hopes of clearing the path for such a deal. It said Monday it had made “substantial progress responding to the governmental data and document requests issued in connection” with that process.
Royal Caribbean International said on Friday that it would begin sailing six ships from ports in Florida and Texas in July and August. The return will kick off on July 2 in Miami, the company said in a statement posted on its website. “Thanks in large part to the successful rollout of vaccines, the world of adventure is beginning to open up,” Michael Bayley, the president and chief executive of Royal Caribbean, said in the statement. The cruise industry has been stalled for more than a year following outbreaks of the coronavirus onboard ships. In April, the Centers for Disease Control and Prevention published a set of technical guidelines to help cruise companies start sailing again, but an industry trade group called the instructions “burdensome and ambiguous.” On May 25, Royal Caribbean became the first cruise line to receive approval from the C.D.C. to conduct simulated voyages.
Walmart said on Friday that it would close all of its stores in the United States on Thanksgiving Day this year as a show of appreciation to its workers. In announcing the closures, the retailer said that the move was a way of saying “thank you” to its employees for their hard work during the pandemic. The company, which has been criticized for not raising its starting wages this year, said it was also expanded its pandemic emergency leave policy through Sept. 30. Walmart also closed its stores last Thanksgiving.
The S&P 500 gained 0.9 percent on Friday after the Labor Department’s monthly jobs report showed an increase in hiring in May compared with a surprisingly low number the month before.
U.S. employers added 559,000 jobs in May, the government said and the unemployment rate fell to 5.8 percent. Investors and policymakers are trying to deduce what is happening in the labor market, in which millions of people are unemployed but some employers say they are struggling to hire.
The slower than expected increase in jobs is likely to give the Federal Reserve more time before policymakers consider pulling back monetary stimulus. The jobs report “is allowing investors to relax a little about the prospect of Fed tightening,” Mike Bell, a strategist at JPMorgan Asset Management, wrote in a note.
The yield on 10-year Treasury notes fell 7 basis points, or 0.07 percentage points, to 1.55 percent, as investors bet that interest rates would stay lower for longer.
An index of the U.S. dollar, which tracks the currency against major peers, fell 0.4 percent.
Oil prices rose. Futures on West Texas Intermediate, the U.S. crude benchmark, climbed 1.2 percent to $69.62 a barrel, the highest since late 2018.
Travel and tourism stocks fell in Europe after Britain removed Portugal from the list of countries people could travel to without quarantining on their return. Britain also didn’t add any new countries to the list, citing rising coronavirus cases.
Earlier on Friday, shares in Rolls-Royce, which makes and services engines for airliners, fell 1.9 percent. IAG, which owns British Airways, dropped 0.9 percent after falling 5.4 percent on Thursday when the changes to the travel list were announced. EasyJet and Wizz Air shares declined about 6 percent this week.
The Stoxx Europe 600 gained 0.4 percent.
The fact that the labor force participation rate was essentially flat is going to create more pressure on President Biden and Democrats to transition the unemployment insurance supplement into a hiring bonus.
The desire for remote work seems to be one reason why face-to-face jobs in restaurants and bars are going unfilled. A ZipRecruiter survey found 44 percent of people want remote work even after the pandemic ends.
There is a mismatch between the type of jobs employers are offering and the type that workers want. More than half of people searching on ZipRecruiter want remote work. Just 10 percent of employers are offering that.
The boom in teenage employment is real. The jobless rate among 16- to 19-year-olds dropped from 14.8 percent in January to 9.6 percent in May.
Most economists don’t expect job creation to really go into overdrive until the fall when schools reopen, enhanced unemployment benefits end and more people are fully vaccinated.
The 10-year Treasury yield is now down a little, to 1.6 percent.
To some degree, friction is normal in reopening an economy as mammoth at the United States. It’s not like switching on a light.
The official unemployment rate fell to 5.8 percent in May. Adjusting for misclassification and people leaving the labor force (roughly what the Fed has recently been discussing lately), unemployment was 8.7 percent, down just a tick from April.
There is a big puzzle in the labor market: Nearly seven million people who are out of work say they want a job and there are roughly eight million jobs open. Why such a mismatch?
Mike Bell at JPMorgan Asset Management says the jobs report is a “goldilocks scenario of a labor market recovery that is not too cold to raise concerns about the economy, but not too hot to prompt fears about faster than expected monetary policy tightening.” That’s good for stocks.
Hourly pay in leisure and hospitality is now running above its pre-Covid trend. I wouldn’t make too much of one month of data, but if that continues, it would be notable.
This slowdown in employment gains will make it easier for the Fed to keep up its stimulus and other central banks, too. I’m thinking about the European Central Bank, which meets Thursday. A debate about tapering is happening there, too.
The number of workers reporting that they are on temporary layoff fell below two million for the first time since the pandemic began. Permanent layoffs are also falling, but more slowly.
The 559,000 jobs added is unlikely to alter the Fed’s patient stance given they were looking for much more robust job growth before starting to taper or nudging rates higher. This report doesn’t move the needle much.
There is not a big reaction in the markets to the May jobs report. Stock futures are up a little, the dollar is down 0.3 percent and 10-year Treasury note yields are completely flat at 1.625 percent.
Remote work is continuing to fall as more offices reopen; 16.6 percent of workers were remote in May, down from peak of 35.4 percent. And 30 percent of professional workers were remote, down from a high of 57.4 percent.
Perhaps unsurprisingly, a large portion of the May pickup in jobs was in leisure and hospitality, which was up 292,000 for the month. As restrictions lifted further and Americans — vaccinated and eager to go out again — returned to restaurants and bars.
The three-month average job creation is 541,000. That would be great in a normal recovery, but it is far from the kind of explosive surge many (me included!) have been expecting. At this rate, we’re 14 months away from filling the hole.
Job growth picked up in May, but was still weaker than in March. The big picture: we’re still down 7.6 million jobs from before the pandemic.
The Fed was hoping for a “string” of million-ish jobs numbers. They are having to settle for something a lot more lackluster.
Put it all together, and this is an economy that is healing, but not with the kind of robust, hot vaccine summer boom that I had expected before the April jobs report.
The labor force participation rate actually edged down. That is consistent with the story that people are holding back, not re-entering the workforce en masse despite the economy re-opening.
Headline job gains were super close to consensus, labor force participation was little changed, and the number of people who are working part time for economic reasons was stable. Whatever you thought about the job market yesterday is unlikely to change too much on this report.
The unemployment rate fell for “good” reasons in that employment was up, unemployment was down. But labor force was basically flat (actually down slightly), which will add fuel to “labor shortage” concerns.
The revision to April jobs growth is only up 278,000. Nothing special — I suspected we might see a much bigger upward revision.
U.S. employers added 559,000 jobs in May. The unemployment rate fell to 5.8%.
William Ackman’s jumbo special purpose acquisition company has finally found its big deal: It is closing in on an agreement to buy a 10 percent stake in Universal Music Group, the home of artists like Taylor Swift, at a $42 billion valuation.
If completed, the transaction would be the biggest involving such a fund, known as a SPAC, to date — and it would certainly be among the most complex, the DealBook newsletter notes.
Mr. Ackman’s SPAC, Pershing Square Tontine Holdings, would invest $4 billion for a 10 percent stake in Universal, of which the French conglomerate Vivendi owns 80 percent and China’s Tencent owns 20 percent. A deal could be struck before the end of the month.
There would still be $1.5 billion left in what remains of the SPAC, and that would be rolled into a new publicly traded vehicle into which Mr. Ackman’s Pershing Square hedge fund would put more money, for a total of $2.9 billion. That vehicle would then look for another acquisition target.
Existing Pershing Square Tontine investors would also receive a financial instrument known as a right that offers them a piece of yet another new takeover vehicle known as a special purpose acquisition rights company, or SPARC.
Vivendi had already been planning to take Universal public in Amsterdam; those plans will go ahead, meaning that unlike a traditional SPAC deal, Pershing Square Tontine won’t give Universal its stock listing. SPAC investors, who would not get a vote on the deal, would instead get Universal’s shares when it later goes public.
The complex transaction is unlike any other SPAC deal, and in many ways doesn’t resemble a SPAC at all. Vivendi is a clear winner, because it would get another major investor for Universal at a higher valuation than Tencent had given the music label earlier this year.
The outcome for Pershing Square Tontine’s various investors is more complicated. Mr. Ackman’s hedge fund would end up owning at least 29 percent of the fund created from the remainder of the SPAC, giving it a greater percentage of the vehicle than it had before the Universal deal.
Those investors could also take a stake in the SPARC, giving them the option of participating in whatever deal the new fund strikes at a set price. The SPARC would have up to $10.6 billion to spend on a takeover, assuming all the rights are exercised and Mr. Ackman’s fund invests the full $5 billion it is allowed to in the new vehicle.
Neither the leftover Pershing Square Tontine fund nor the SPARC is subject to the two-year deadline that SPACs generally face.
Shares in Pershing Square Tontine plunged in after-hours trading on Thursday after news reports about the Universal transaction emerged, and opened about 10 percent down on Friday. They remain a bit above the blank-check firm’s $20 I.P.O. price, but down from a high of more than $30 a few months ago.
Today in the On Tech newsletter, Shira Ovide writes that technology has evolved from a succession of Big Bang moments to something so meshed into our lives that we often don’t notice it.