Exclusive: Coronavirus crisis could destroy far more than 25 million jobs – ILO official

GENEVA (Reuters) – The number of jobs lost around the world due to the coronavirus crisis could be “far higher” than the 25 million the International Labour Organization (ILO) estimated just a week ago, a senior ILO official said on Thursday.

The United Nations agency said on March 18 that, based on different scenarios for the impact of the pandemic on global economic growth, estimated the global ranks of jobless would rise by between 5.3 million and 24.7 million.

However, Sangheon Lee, director of the ILO’s employment policy department, told Reuters in Geneva on Thursday that the scale of temporary unemployment, lay-offs and the number of unemployment benefit claims were far higher than first expected.

“We are trying to factor in the temporary massive shock into our estimate modeling. The magnitude of fluctuation is much bigger than expected,” he said.

“We need to make downward adjustment, the projection will be much bigger, far higher than the 25 million we estimated.”

ILO’s next forecast is expected to be issued next week.

By comparison, the 2008/9 global financial crisis increased global unemployment by 22 million.

Figures released on Thursday showed the number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week.

Strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the longest employment boom in U.S. history.

Data is also pointing to a sharp jump in job losses in Western Europe despite government spending packages that include support for companies to keep workers on.

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Ackman says Pershing Square no longer has hedges on stocks

(Reuters) – William Ackman’s Pershing Square Capital Management no longer has hedges on its stock portfolio, but still has some cash to invest if equities decline further as the United States battles the coronavirus outbreak, the billionaire investor said on Saturday.

Pershing Square earned roughly $2.6 billion by hedging its stock portfolio in early March through credit protection on investment grade and high yield credit indices. Much of the money has been reinvested in stocks the firm already owns.

“Today, we are unhedged, and we no longer own any insurance”, Ackman said in a Twitter thread bit.ly/2xsAEFA, adding that he continues to believe the sooner the entire United States is shut down, the more lives will be saved and the sooner the economy will recover.

“Every day we wait, we prolong our collective misery”, Ackman said.

He told CNBC in an interview on March 18 that he thought the best approach to killing off the coronavirus was to close the borders and shut down the entire country, barring essential services, for 30 days.

The S&P 500 .SPX and the Dow Jones Industrial Average .DJI fell sharply after the interview aired.

He later said the interview was not designed to enable his firm to profit from any trades, dismissing some media speculation that he had purposely pushed markets lower to make money off his hedges.

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'This is a war and we want to survive,' says Polish retailer

WARSAW (Reuters) – Polish fashion retailers may not survive the coronavirus crisis if the government, banks and shopping mall owners do not help them bear the costs, a lobby group said on Friday, as Poland closed non-essential shops to stop the spread of the virus.

A new lobby group set up by the retail industry said it has asked the state to help pay out salaries, shopping mall owners to stop taking rents and banks to suspend loan payments. The group says it represents 100 companies and that 200,000 jobs directly depend on their survival.

“This is not even a crisis, it is difficult to name it. It is unlike anything that has happened before….This is a war and we want to survive. I do not care what the financial results will be,” Marek Piechocki, Chief Executive at Poland’s biggest fashion retailer LPP told Rzeczpospolita daily.

He said LPP, a home-grown rival to the likes of H&M and Inditex, had enough resources to continue paying salaries for the next 4-6 months. Before the crisis it had hoped to reach revenue of 10.5 billion zlotys ($2.73 billion) this year.

Tomasz Ciapala, the CEO and majority owner of Lancerto, a men’s suit maker, said that many workers in the industry are paralyzed with fear about their jobs.

“Our union comprises mostly family businesses. Most of our employees, who have been with us for a long time, are scared. This has wide social effects. Mental illness, depression, suicides – these are all side effects of joblessness,” Ciapala told a videconference on Friday.

Pawel Kaplon, a partner at Paan Capital private equity fund, has compared the functioning of fashion retailers to a large-scale restaurant which has hired suppliers and staff and bought products to prepare dishes for the next 100 days. And now has to shut down.

“We have done the cooking for the next half a year, we have payments ahead and we have nowhere to get the cash flow from,” Kaplon told the same conference.

Poland’s parliament is expected to adopt on Friday a package of legislation designed to help the economy and various industries survive the coronavirus crisis.

“The shopping malls, banks and us should participate in these costs together …as in the end each of us will win when this tsunami is over,” said Igor Klaja, the founder of popular sports wear brand 4F.

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Bank of America capital levels allow operational focus during crisis: CEO

(Reuters) – Bank of America Corp (BAC.N) is better positioned to focus on operations rather than financial risk during the coronavirus outbreak, thanks to regulatory safeguards put in place after the financial crisis in 2008, Chief Executive Brian Moynihan said on Friday.

“What’s different this time is clearly our capital liquidity,” Moynihan said in a CNBC interview. “Everything that changed has led the banking industry be in a great condition to service clients continuously for the last few weeks as this thing has hit.”

The second largest U.S. bank by assets has extended more than $50 billion in loans this so far month to commercial clients looking for cash to survive the coronavirus recession. The retail division has fielded more than 150,000 requests to defer payments on mortgages and auto loans. Many requests are managed digitally, he said.

The bank has also been hiring and reallocating employees to the consumer bank to help manage a surge in requests related to the pandemic, according to a memo seen by Reuters. So far this month the Charlotte-based bank has hired 2,000 people and shifted 3,000 internal employees to support its consumer bank.

Bank of America followed its peers like Morgan Stanley (MS.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) in reassuring employees that they would not be immediately hit by layoffs as a result of the pandemic. In the memo sent to employees on Friday, the bank said it “will not do layoffs or job reductions in 2020 due to coronavirus impacts.”

“We don’t want our teammates to worry about their jobs during a time like this,” Moynihan said.

(Corrects second-last paragraph to reflect that Wells Fargo did not suspend layoffs through 2020)

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U.S. consumer spending increases moderately in February

WASHINGTON (Reuters) – U.S. consumer spending rose moderately in February and momentum is set to fade rapidly in the coming months, with the coronavirus pandemic upending life for Americans.

The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2% last month as households spent more on electricity and gas, offsetting decreases in outlays on motor vehicles and parts as well as recreational goods.

Last month’s increase matched the gain in January and was in line with economists’ expectations.

The United States now has the most coronavirus cases in the world, with more than 82,000. Governors in more than half of the nation’s 50 states have ordered residents to stay mostly indoors, affecting more than 100 million people.

Restaurants and bars have been shuttered and airline travel severely curtailed, which economists say will greatly offset any boost to consumer spending from grocery purchases following a wave of panic buying as Americans prepared to hunker down.

When adjusted for inflation, consumer spending edged up 0.1% in February, matching January’s rise.

With “social distancing” measures to contain the virus throwing millions out of work and severely curtailing discretionary spending, economists are predicting a moderate decline in consumer spending in the first quarter, which would give way to a sharper contraction in the second quarter.

Consumer spending grew at an annualized rate of 1.8% in the fourth quarter, slowing from the brisk 3.2% pace logged in the July-September period.

Labor market strength, which was driving a steady pace of wage growth, was the economy’s main pillar of support. In February, personal income increased 0.6% after rising by the same margin in January.

Income was boosted by higher wages and government payments to farmers caught in the U.S.-China trade war.

Inflation remained muted in February. Consumer prices as measured by the personal consumption expenditures (PCE) price index edged up 0.1% after rising by the same margin in January. In the 12 months through February, the PCE price index rose 1.8%, matching the year-on-year gain in January.

Excluding the volatile food and energy components, the PCE price index gained 0.2% in February after nudging up 0.2% in January. That lifted the annual increase in the so-called core PCE price index to 1.8% in February from 1.7% January.

The core PCE index is the Fed’s preferred inflation measure. It missed the central bank’s 2% target in 2019.

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U.S. weekly jobless claims soar to record 3.28 million

WASHINGTON (Reuters) – The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week as strict measures to contain the coronavirus pandemic brought the country to a sudden halt, unleashing a wave of layoffs that likely ended the longest employment boom in U.S. history.

The weekly jobless claims report from the Labor Department on Thursday offered the clearest evidence yet of the coronavirus’ devastating impact on the economy, which has forced the Federal Reserve to take extraordinary steps and the U.S. Congress to assemble a record $2 trillion stimulus package.

Economists say the economy is already in recession. Weekly claims are the most timely labor market indicator. With nearly half the country’s population under some form of a lockdown and reports of state employment websites overwhelmed, economists are bracing for further increases in jobless claims.

“With partial lockdowns across the country leading to a sudden stop in economic activity, the U.S. economy will experience the largest economic contraction on record with the most severe surge in unemployment ever,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York.

“We expect jobless claims will continue to climb as more economic activity shuts down.”

Initial claims for unemployment benefits rose 3.00 million to a seasonally adjusted 3.28 million in the week ending March 21, eclipsing the previous record of 695,000 set in 1982, the Labor Department said. That also dwarfed the peak of 665,000 in applications during the 2007-2009 recession, during which 8.7 million jobs were lost.

Economists polled by Reuters had forecast claims would rise to 1 million, though estimates were as high as 4 million.

The Labor Department attributed the surge to COVID-19, the respiratory illness caused by the coronavirus. A running tally kept by Johns Hopkins University showed that at least 1,046 people in the country have died from COVID-19.

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“This large increase in unemployment claims was not unexpected, and results from the recognition by Americans across the country that we have had to temporarily halt certain activities in order to defeat the coronavirus,” U.S. Labor Secretary Eugene Scalia said in a statement.

Layoffs were concentrated in the accommodation and food service, health care and social assistance, arts, entertainment and recreation, transportation and warehousing, and manufacturing industries.

Mounting job cuts and a sinking economy have prompted President Donald Trump, who is running for re-election in November, to push for businesses to reopen by Easter, which is April 12. With infections and the death toll rising, many health experts, economists and politicians have argued against such a move.

Fed Chair Jerome Powell said on Thursday in an interview on NBC’s “Today” show that the economy “may well be in recession” but progress in controlling the spread of the coronavirus will dictate when the economy can fully reopen.

Recessions in the United States are called by the National Bureau of Economic Research. The NBER does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries. Instead, it looks for a drop in economic activity, spread across the economy and lasting more than a few months.

The economy grew at a 2.1% annualized rate in the fourth quarter, the Commerce Department confirmed in another report on Thursday. The department also reported a 9.1% plunge in the goods trade deficit to $59.9 billion in February, as well as declines in wholesale and retail inventories, as the coronavirus helped to depressed imports.

Stocks on Wall Street were trading higher, with expectations rising that the record jump in unemployment benefits would spur additional fiscal relief. The dollar .DXY fell against a basket of currencies, while prices of U.S. Treasuries rose.

(Graphic: Unemployment benefits claims hit all-time high, here)

PAYROLLS SEEN DECLINING

The pandemic has prompted governors in at least 18 states to order residents to stay mostly indoors. “Non-essential” businesses have also been ordered closed. According to economists, a fifth of the workforce is on some form of lockdown.

The historic fiscal stimulus package, which is now before the U.S. House of Representatives, would increase payments for the unemployed by up to $600 per week per worker, and laid-off workers would get those payments for up to four months. Regular benefits, which typically run out after six months in most states, would be extended for an additional 13 weeks.

Unadjusted claims for California and Washington state, Ohio, New Jersey, Illinois, Texas and Massachusetts increased by more than 100,000 last week. Pennsylvania reported unadjusted claims increased more than 300,000.

Last week’s claims data likely will have no impact on March’s employment report as it falls outside the period during which the government surveyed employers for nonfarm payrolls, which was the week ended March 14.

Still, the unprecedented surge in jobless claims likely signals a record streak of 113 months of U.S. employment growth, dating to October 2010, came to an end this month.

“Jobs will decline in March,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “There are numerous reports of laid-off workers unable to file for unemployment insurance because so many people are trying to file at the same time. Millions of job losses are likely in coming weeks.”

(Graphic: End of a historic jobs boom, here)

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid increased 101,000 to 1.80 million for the week ended March 14, the highest since April 2018.

The so-called continuing claims data covered the period during which the government surveyed households for March’s unemployment rate. Continuing claims increased 110,000 between the February and March survey week, suggesting the unemployment rate will probably rise this month from the current 3.5%.

“We would be amazed if it didn’t exceed 10% by May, if not April,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto. “The unemployment rate could remain elevated for years.”

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Trump tells GM: Stop 'wasting time', build ventilators to address coronavirus

WASHINGTON/DETROIT (Reuters) – U.S. President Donald Trump on Friday invoked emergency powers to require General Motors Co (GM.N) to build much-needed ventilators for coronavirus patients after he accused the largest U.S. automaker of “wasting time” during negotiations.

Trump, who has been on the defensive for not moving faster to compel the production of medical equipment, for the first time invoked the Defense Production Act, saying GM was not moving quickly enough even though earlier on Friday the largest U.S. automaker announced it would begin building ventilators in the coming weeks.

Asked about negotiations with GM over ventilators, Trump expressed anger with the company’s decision to close an assembly plant in politically important Ohio. He also criticized GM’s prior decisions to build plants outside the United States.

“I didn’t go into it with a favorable view,” Trump told a news conference of the GM talks. White House adviser Peter Navarro said the administration ran into “roadblocks” with GM this week.

GM said in a statement in response to Trump that it has been working with ventilator firm Ventec Life Systems and GM suppliers “around the clock for over a week to meet this urgent need” and said its commitment to Ventec’s ventilators “has never wavered.”

The act grants the president power to expand industrial production of any key materials or products for national security and other reasons. New York Governor Andrew Cuomo and other Democrats have urged him to invoke the act, but the president had been reluctant to do so until now.

Democratic U.S. Senator Ed Markey said, “About time. Now, tell us every day: which companies will be making more of this equipment, how much is being made, and where the equipment is going.”

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On Friday, the number of confirmed coronavirus cases in the United States topped 100,000, the highest in the world according to a Reuters tally. The U.S. death toll topped 1,550. [L1N2BK21G]

Trump also said countries such as the United Kingdom, Germany, Spain and Italy need ventilators and that if the excess volume is not needed, the United States can export them.

Earlier, Trump lashed out at GM and Ford Motor Co F.M for moving too slowly just hours before GM said it would build medical equipment at an Indiana plant.

Trump criticized the U.S. automakers and said he expected the United States would make or obtain 100,000 additional ventilators within the next 100 days.

The attack on the automakers coincided with rising tension between Trump and the Democratic governors of New York and Michigan, who have criticized the administration’s response to the COVID-19 epidemic. On Thursday evening, Trump questioned in an interview on the Fox News network whether New York state needed 30,000 ventilators to cope with rising numbers of coronavirus patients, as Cuomo had said.

GM and Ford separately announced earlier this week they were working with medical equipment companies to help boost ventilator production.

GM and its partner Ventec confirmed after Trump’s tweets that the No. 1 U.S. automaker would deploy 1,000 workers to build ventilators at its Kokomo, Indiana, parts plant and ship as soon as next month. It was aiming to build more than 10,000 per month with the ability to go higher. Suppliers in the effort were told the target was 200,000 ventilators.

But early Friday, before GM issued its release, Trump attacked the automaker and Chief Executive Mary Barra on Twitter, reviving his grievance with Barra for closing and selling a car factory in Ohio, a state critical to the president’s re-election campaign.

“General Motors MUST immediately open their stupidly abandoned Lordstown plant in Ohio, or some other plant, and START MAKING VENTILATORS, NOW!!!!!! FORD, GET GOING ON VENTILATORS, FAST!!!!!!” Trump wrote on Twitter on Friday.

“They said they were going to give us 40,000 much needed ventilators, ‘very quickly’,” Trump said on Twitter of GM and Ventec’s effort. “Now they are saying it will only be 6000, in late April, and they want top dollar.”

Trump’s comments about GM and Ford came after a New York Times story Thursday suggested the White House had backed away from announcing a major ventilator deal with GM and Ventec because the price tag was too high. That drew criticism from Democrats.

Following Trump’s tweets, Ford said it was moving as fast as it could to gear up its ventilator manufacturing efforts and was in “active conversations” with the Trump administration seeking approvals. Ford said it has “teams working flat-out with GE Healthcare (GE.N) to boost production of simplified ventilators.”

Other automakers have said they are working to produce ventilators, masks and other medical equipment.

On Friday, Toyota Motor Corp (7203.T) said it was “finalizing agreements to begin working with at least two companies that produce ventilators and respirators to help increase their capacity.”

New York City Mayor Bill be Blasio on Friday said on Twitter that Tesla Inc (TSLA.O) had agreed to donate hundreds of ventilators to hospital intensive care units in New York City and the state of New York.

    Tesla Chief Executive Elon Musk in response said the electric carmaker was helping locate and deliver existing ventilators.

    Tesla on Friday did not respond to a request for comment on where it got the ventilators and whether the company was producing any ventilators of its own, something Musk has said the company will do.

Fiat Chrysler Automobiles NV (FCA) and Ferrari (RACE.MI) previously said they were exploring making ventilators in Italy.

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Toyota seeks $9.2 billion credit line from Sumitomo Mitsui, MUFG Bank: Kyodo

TOKYO (Reuters) – Toyota Motor Corp (7203.T) has sought a credit line totaling 1 trillion yen ($9.23 billion) from Sumitomo Mitsui Banking Corp and MUFG Bank as fund-raising costs rise on the back of the coronavirus pandemic, Kyodo News reported on Friday.

The three companies could not immediately be reached for comment.

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Ackman's hedge funds make money this year as hedges help

BOSTON (Reuters) – Billionaire investor William Ackman, who hedged his Pershing Square Capital management portfolio weeks ago to guard against coronavirus-inspired panic selling, told investors his private hedge fund is making money this year, an investor said on Wednesday.

The Pershing Square LP fund gained a net 6.8% this month, leaving it up 0.8% after fees for the year to date, the source said. The publicly traded Pershing Square Holdings fund is up 7.9% for the month and 0.2% for the year.

A spokesman declined to comment.

By comparison the average equity-focused hedge fund is down 15.5% for the month through Thursday, with average year-to-date losses at nearly 16%, data from Goldman Sachs show.

The numbers were released just hours after Ackman wrote to investors to say he had taken off the hedges and was becoming “increasingly positive” on stock and credit markets.

The moves helped inoculate his portfolio from the type of losses that many hedge fund investors are bracing to see when managers finalize their March numbers next week.

Ackman earned $2.6 billion in proceeds from the hedges and said that he had reinvested most of the money in existing holdings Agilent (A.N), Berkshire Hathaway (BRKa.N), Hilton Worldwide Holdings (HLT.N), and Lowe’s (LOW.N).

One week after taking to Twitter, television and text interviews with impassioned pleas for a 30-day shutdown of the United States to stop the virus’ spread, Ackman said his outlook had brightened. Moves by states and federal and Treasury monetary helped, he said.

Performance however may remain volatile, the manager warned, saying he might have to sell recently bought holdings or go back on the defensive.

Last year his fund earned a 58% return.

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Airlines turn to cargo for revenue as U.S. Senate nears industry aid vote

SYDNEY/CHICAGO (Reuters) – Delta Air Lines Inc (DAL.N) and Air New Zealand Ltd (AIR.NZ) said they would offer cargo charter services on passenger planes to boost revenue as the U.S. Senate neared a vote on a bill to give its carriers $58 billion in aid, including payroll support.

The passenger travel industry has been decimated by the coronavirus pandemic, with Australia’s Flight Centre Travel Group Ltd (FLT.AX) on Thursday announcing plans to cut 6,000 travel agent roles globally, either temporarily or permanently.

Virgin Australia Holdings Ltd (VAH.AX) plans to permanently cut more than 1,000 jobs among the 8,000 staff that have been stood down due to cuts to its flying schedule, Chief Executive Paul Scurrah said.

“That is going to be heartbreaking for those people. This is no fault of theirs,” Scurrah told the Australian Broadcasting Corp on Thursday. “This is the worst airline crisis the industry has ever seen.”

New Zealand’s Auckland International Airport Ltd (AIA.NZ) said it had cut 90 contractors and was talking to its staff about reducing hours and salaries by 20% as demand plummets.

In the United States, United Airlines Holdings Inc (UAL.O) announced further cuts to domestic capacity, meaning its overall capacity, including international, will be down by around 68% in April.

The U.S. Senate is preparing to vote on an industry aid package, half in the form of grants to cover some 750,000 employees’ paychecks.

In a win for labor, companies receiving funds cannot lay off employees before Sept. 30 or change collective bargaining agreements.

The draft bill has restrictions on stock buybacks, dividends and executive compensation, and allows the government to take equity, warrants or other compensation as part of the rescue package.

In an effort to raise much-needed revenue and keep some planes in the air, Delta and Air New Zealand said they had joined the growing number of carriers offering cargo charters on passenger planes.

“We’ve shared these options with our global cargo customer base and are getting some strong interest from customers wanting to ship to and from Shanghai, Hong Kong, San Francisco, Los Angeles, Sydney and Melbourne,” Air New Zealand General Manager Cargo Rick Nelson said.

Around half the world’s air cargo normally travels in the bellies of passenger planes rather than dedicated freighters, so the cancellation of passenger flights has led to a sharp reduction in cargo capacity.

The International Air Transport Association (IATA), which represents the airline industry, said on Wednesday that red tape is holding up medical and other emergency supplies needed to help tackle the coronavirus crisis.

Examples include two shipments, each containing about five to 10 tonnes of medical supplies, bound for Latin America and currently held up in Dubai and India.

Figures to be published next week will show global air freight traffic fell around 10% in February, putting it on course for a 15%-20% drop for the year as a whole, IATA said.

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