Editor’s note: The Economist is making some of its most important coverage of the covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For our coronavirus tracker and more coverage, see our hub SHAREHOLDERS THE world over have had a rotten 2020. Some might have hoped the collapsing value of their portfolios would at least be in part offset by dividends—the profits firms pay out to owners. Others were counting on companies to buy back their own shares. As corporate earnings season kicks off, both groups have little to look forward to. Blame poor performance, present and expected. Dividends and buy-backs are a sign of profits and confidence, both in short supply in a pandemic. Derivatives markets where investors can bet on the size of dividends imply these will fall by at least a quarter in America. If the crisis of 2007-09 is anything to go by, buy-backs (popular mainly among American firms for tax reasons) will be halved. All told, global payouts to shareholders are expected to tumble from $2.2trn in 2019 to $1.4trn this year, according to The Economist’s rough estimate (see chart). The cuts could go deeper. If the crisis worsens (or regulators step in), banks in America, which have suspended buy-backs, may do the same with dividends, which they have kept. Policymakers in Europe, where dividends are higher as a share of profits, are asking all firms to show restraint. Withheld payouts remain on firms’ balance-sheets, helping to pare down net debt. Once pruned, dividends take time to grow back—welcome news for those who think shareholders have been rewarded too richly of late. In America companies now return more money to owners than they spend on capital investments, research and development. Dig deeper:For our latest coverage of the covid-19 pandemic, register for The Economist Today, our daily newsletter, or visit our coronavirus tracker and story hub This article appeared in the Business section of the print edition under the headline "Chop chop" Reuse this contentThe Trust Project
US stocks ticked up Thursday as Wall Street tried to brush off another surge in unemployment filings amid the coronavirus crisis. The Dow Jones industrial average climbed as much as 62.01 points, or 0.2 percent, at the open despite the US Department of Labor reporting another 5.2 million initial jobless claims last week. The staggering figure means the pandemic put more than 22 million people out of work in just a month. The S&P 500 and the Nasdaq Composite also jumped as much as roughly 0.7 and 1.2 percent, respectively, in early trading. All three indexes bounced after posting losses Wednesday as fears about the virus’s economic toll weighed on investors. The jump followed a Wednesday evening briefing where President Trump said the coronavirus has peaked in the US and indicated that some states will reopen by May 1. Thursday’s jobless claims number also marked a decline from the week ending April 4, when more than 6.6 million people sought unemployment benefits. “We hope stock market investors are right that the peak in layoffs each week means the worst is over, but somehow it seems irrelevant how fast the layoffs are coming as long as they are coming,” said Chris Rupkey, chief financial economist at MUFG Union Bank. Investors were encouraged earlier in the week by signs that the peak of the virus crisis has passed, such as some European companies letting businesses get back to work and US states forming plans to restart their economies after imposing lockdown measures. But Wall Street has also had to digest a slew of bad economic news amid continued uncertainty about just how long the shutdown will last. “What the market cannot price in perfectly is when the economy re-opens, what the nuances in that reopening will look like and what its impact will be to corporate profits one quarter away, two quarters away and a year away,” said David Bahnsen, chief investment officer at the Bahnsen Group. Share this:
Even as political leaders wrangle over how and when to restart the American economy, the coronavirus pandemic’s devastation became more evident Thursday with more than 5.2 million workers added to the tally of the unemployed.In the last four weeks, the number of unemployment claims has reached 22 million — roughly the net number of jobs created in a nine-and-a-half-year stretch that began after the last recession and ended with the pandemic’s arrival.The latest figure from the Labor Department, reflecting last week’s initial claims, underscores how the downdraft has spread to every corner of the economy: hotels and restaurants, mass retailers, manufacturers and white-collar strongholds like law firms.“There’s nowhere to hide,” said Diane Swonk, chief economist at Grant Thornton in Chicago. “This is the deepest, fastest, most broad-based recession we’ve ever seen.”Some of the new jobless claims represent freshly laid-off workers; others are from people who had been trying for a week or more to file. “We’re still playing catch-up on multiple fronts,” Ms. Swonk said.
Verizon is buying the video conferencing platform BlueJeans as workers increasingly rely on web tools to connect during the coronavirus pandemic, the company announced Thursday. Verizon will pay about $400 million in the deal, CNBC's David Faber reported. BlueJeans has more than 15,000 customers, Verizon CEO Hans Vestberg said in an interview with Faber shortly after the deal was announced. Many enterprise tools like Zoom, Slack and Microsoft Teams have seen an uptick in usage as more American regions have been instructed to stay at home to tamp down the spread of the virus. The acquisition shows Verizon is looking to be a part of that movement as businesses still struggle to reopen offices. "As the way we work continues to change, it is absolutely critical for businesses and public sector customers to have access to a comprehensive suite of offerings that are enterprise ready, secure, frictionless and that integrate with existing tools," Verizon Business CEO Tami Erwin said in a statement. Zoom, which quickly became one of the most popular conferencing tools once stay-at-home orders set in, has recently stumbled into some speed bumps, creating an opening for rivals. After privacy and security issues with Zoom came to light, some organizations ordered their workers not to use it, including the New York City Department of Education. "We see an opportunity with our distribution channel," Vestberg said of competing with companies like Zoom. He added that BlueJeans will be built into the company's 5G offering. Including the conferencing tool in its 5G network could help Verizon compete with other carriers, including the newly combined T-Mobile and Sprint. A judge ruled in February that the acquisition could go through after a group of states challenged the merger as anticompetitive, whittling down the number of major American telecommunications companies from four to three. The companies argued their combination would help them advance plans to build out 5G networks. "We feel really good about our assets," Vestberg told CNBC. "I feel that we are in a very very good spot with 5G." According to its website, BlueJeans counts Facebook, LinkedIn and IBM-owned RedHat among its customers. Verizon said BlueJeans' founders and management team will join the company to continue the platform's growth and its employees will also become part of Verizon. Verizon said it expects the deal to close in the second quarter of the year. Vestberg also discussed what it will take for companies to return to offices around the world following a conference call of CEOs organized by the White House. Vestberg said much of the call discussed testing and other measures that would be helpful to bring Americans back to work. "It has to be a staggered coming back to the economy," Vestberg said. Subscribe to CNBC on YouTube.
Austan Goolsbee, professor at the University of Chicago Booth School and former chairman of the White House's Council of Economic Advisors, Michael Strain, director of economic policy studies at the American Enterprise Institute, and David Bailin, chief investment officer at Citi Private Bank, joins "Squawk Box" to discuss the latest weekly jobless claims amid the coronavirus crisis. 06:31 an hour ago
Even as political leaders wrangle over how and when to restart the American economy, the coronavirus pandemic’s devastation became more evident Thursday with more than 5.2 million workers added to the tally of the unemployed.In the last four weeks, the economy has lost about 22 million jobs, roughly the net number created in a nine-and-a-half-year stretch that began after the last recession and ended with the pandemic’s arrival.The latest figure from the Labor Department, reflecting last week’s initial unemployment claims, underscores how the downdraft has spread to every corner of the economy: hotels and restaurants, mass retailers, manufacturers and white-collar strongholds like law firms.“There’s nowhere to hide,” said Diane Swonk, chief economist at Grant Thornton in Chicago. “This is the deepest, fastest, most broad-based recession we’ve ever seen.”Some of the new jobless claims represent freshly laid-off workers; others are from people who had been trying for a week or more to file. “We’re still playing catch-up on multiple fronts,” Ms. Swonk said.
Sundar Pichai, chief executive officer of Google Inc., attends a news conference in New Delhi, India, on Wednesday, Jan. 4, 2017. Bloomberg | Bloomberg | Getty Images Alphabet, the parent company of Google, is pulling back on some of its investments for the rest of the year amid the Covid-19 crisis and it's starting with hiring. "We believe now is the time to significantly slow down the pace of hiring, while maintaining momentum in a small number of strategic areas where users and businesses rely on Google for ongoing support, and where our growth is critical to their success," CEO Sundar Pichai told workers this week in a memo first reported by Bloomberg. "Beyond hiring, we continue to invest, but will be recalibrating the focus and pace of our investments in areas like data centers and machines, and non business essential marketing and travel." A spokesperson confirmed the slowdown in a statement to CNBC. "We'll be slowing down the pace of hiring, while maintaining momentum in a small number of strategic areas, and onboarding the many people who've been hired but haven't started yet." Pichai reportedly noted that the company added 20,000 employees in 2019 and had planned to do the same this year. So far, it has on-boarded 4,000 new employees and a thousand more are scheduled to onboard soon, the memo stated. The announcement comes as the company faces economic headwinds caused by the Covid-19 pandemic, which has effected the global economy. CNBC found Wednesday that the company started pulling back on skills training resources for the contractors and temporary workers that make up nearly half of its workforce. The move also comes as the company tries to motivate its workforce to stay focused on customer needs amid shelter-in-place orders triggered by the pandemic. "Just like the 2008 financial crisis, the entire global economy is hurting, and Google and Alphabet are not immune to the effects of this global pandemic," Pichai reportedly stated in the memo. "We exist in an ecosystem of partnerships and interconnected businesses, many of whom are feeling significant pain."
Speaker of the House Nancy Pelosi speaks with Mad Money's Jim Cramer at the NYSE on Sept. 17th, 2019. Adam Jeffery | CNBC House Speaker Nancy Pelosi of California called Zoom "a Chinese entity" in a television interview, despite the company's roots in Silicon Valley. The remark lines up with some public criticism of Zoom after millions flocked to it to hold meetings virtually while staying home to avoid spreading the Covid-19 coronavirus. The surge of interest has sent company's stock higher while broader indices fell. But in recent weeks, Zoom has also dealt with security and privacy issues, including "Zoombombing," where intruders take over meetings and post offensive images, and the possible routing of some calls through servers in China, which the company now says was accidental. Pelosi's comments came after she was asked about the possibility of Congress voting remotely. "People think we can do Congress by Zoom. Zoom is a Chinese entity that we've been told not to even trust the security of," Pelosi said, according to a transcript of her conversation on Tuesday with MSNBC's Chris Hayes. "So there are challenges, it's not as easy as you would think." Strictly speaking, Pelosi's statement was not accurate. Zoom was founded in 2011 and has been incorporated in Delaware since April 21, 2011, according to a record on the state's website. When the company raised $6 million in 2013, its headquarters was in Santa Clara, according to a statement. However, Zoom's product development team is based "largely" in China, and it operates research and development centers in that country, according to the company's most recent annual report. Co-founder and CEO Eric Yuan, who previously worked on the Webex video calling product that Cisco acquired in 2007, is the largest individual shareholder of Zoom with 3.9% of the stock's outstanding shares. He emigrated from China in 1997, when he was 27, CNBC previously reported, but he is a U.S. citizen, according to a December regulatory filing. Zoom has also come under fire for potentially routing some meetings through data center infrastructure in China, which the company says was not supposed to happen. However, the company took steps to prevent that from happening further, according to an April 3 blog post from Yuan. Zoom saw record usage as coronavirus took hold, and in February the company added servers to handle the surge, including in China. In doing so, though, the company didn't follow its usual policies, and some meetings might have connected to systems in China when they shouldn't have, Yuan wrote. Zoom took the Chinese data centers off the list of secondary backup bridges for users outside China soon after learning about the issue, Yuan wrote. "It's a reference to the criticism and security concerns stemming from the company routing large numbers of their calls through China," a Pelosi spokesperson told CNBC in an email on Wednesday in reference to Speaker Pelosi's remarks. Zoom didn't immediately respond to a request for comment. WATCH: Zoom shares drop after report Google banned app from employee devices
Amazon said on Tuesday it had fired three reported critics of the company’s pandemic response for workplace violations, dismissals that drew sharp words from US Senator Bernie Sanders and a labour coalition.The company on Friday fired two user experience designers, Maren Costa and Emily Cunningham, for what it called repeated violations of internal policies, without specifying which ones.The two workers, who gained prominence for pushing the company to do more on climate change, had recently…
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