U.S. regains 1.4 million jobs in August and unemployment drops to 8.4% as economic recovery shows resilience


The numbers: The U.S. regained 1.4 million jobs in August and the unemployment rate posted a surprisingly large drop to 8.4%, suggesting an economic recovery is still plowing ahead even if the pace of growth has slowed since the start of the summer.

The increase in hiring last month exceeded Wall Street’s forecast. Economists polled by MarketWatch had forecast a 1.2 million gain. U.S. stocks fell in Friday trades.

The employment picture was a bit softer after stripping out the hiring of 238,000 temporary Census workers and those who work in public education.

Private-sector hiring rose by 1 million, down from 1.48 million in July, the government said Friday.

The most positive news was a big reduction in the official jobless rate to 8.4% from 10.2%, marking the fourth straight decline from a pandemic peak of 14.7%. A separate survey of households showed a much larger number of people returning to work (3.76 million) and a sharp decline in the unemployed (-2.8 million).

“I would say today’s jobs report was a good one,” Federal Reserve Chairman Jerome Powell told NPR in an interview.

One caveat: The jobless rate would have been closer to 9% if households gave an accurate description of their employment status, the Bureau of Labor Statistics said. Some survey respondents have mistakenly classified themselves as absent from work instead of unemployed, a problem that has plagued the BLS survey since the pandemic began.

Several million Americans still haven’t returned to the labor force, however, since the start of the pandemic and some 29 million were reportedly receiving jobless benefits as of the middle of last month.

Read: Initial jobless claims fall to new pandemic low of 881,000 — but there’s a big catch

The start of the school year, what’s more, has also spawned fresh problems for companies and their employers.Many parents lack day-care options and are grappling with how to care for their school-age children learning at home while they work at the same time.

A new Federal Reserve study found the new school year has made it harder for businesses that are hiring to attract workers.

Read:Economy softened in August, Fed says, as some temporary layoffs turn permanent

A stalemate in Congress over another financial-rescue package has also left many unemployed Americans in a more precarious financial position. A $600 federal unemployment stipend expired at the end of July and small businesses can no longer apply for loans to help cover payroll costs.

Read: Did the expired $600 federal jobless benefit keep people from going back to work?

A spate of companies such as American Airlines
AAL,
+1.87%
,
United
UAL,
+2.16%

and MGM Resorts
MGM,
+1.95%
,
meanwhile, have announced new furloughs and layoffs with their businesses still in a deep slump.

A United Airlines ticket agent helps a passenger check in for a flight at San Francisco International Airport. United Airlines announced plans to furlough over 16,000 workers including pilots, flight attendants and technicians.


Getty Images

Some companies warn job losses could become permanent without more government help or a faster rebound in the economy.

The U.S. shed more than 22 million jobs during the worst of the pandemic. So far it’s restored about 10.7 million jobs, leaving about half of the people who were laid off still out of work.

What happened: The number of peopled employed by government jumped by 344,000, largely because of a big increase in temporary Census workers.

In the private sector, retailers led the way in hiring again as they brought back almost one-quarter of a million workers. Restaurants also added 134,000 jobs.

Retailers, restaurants and hotels have borne the brunt of the U.S. effort to contain the coronavirus. The number of customers they can allow has been restricted and many Americans are still too worried about the coronvirus to eat out, go to stores or travel.

Even after a spate of rehiring, for instance, some 2.5 million restaurants jobs still haven’t returned.

The rest of the hiring was scattered in a variety of industries.

White-collar businesses added almost 200,000 jobs, though more than half were temporary. Transportation and warehousing jobs increased by 78,000. Health-care providers boosted payrolls by 75,000. Financial firms hired 36,000 workers. And manufacturers added 29,000 people.

Average hourly wages rose 11 cents to $29.47 an hour. The yearly rate of pay appeared to soar early in the pandemic, but only because more lower-paid workers lost their jobs than higher paid ones.

The normally slow-changing wage data is likely to be less useful until the economy is mostly recovered. Wages were growing about 3% a year before the pandemic.

The increase in employment in July marked down slightly to 1.73 million. The increase in June was little changed at 4.79 million.

How many people are really unemployed, though, is still a bit of a mystery. The monthly employment survey puts the number at 13.6 million, but the weekly jobless-claims report indicates it could be closer to 30 million.

A broader measure of unemployment known as the U6 suggests the “real” rate was 14.2% in August, down from 16.5% in the prior month. The U6 rate includes workers who can only find part-time work and those who have become too discouraged to look for jobs because so few are available.

Big picture: The U.S. economy have proven quite resilient, expanding again in August despite the summer viral outbreak and the end of massive federal benefits. A variety of reports such as restaurant reservations, retail spending and in-store shopping also suggest an increase in consumer spending and steady if slower growth in the economy.

What’s less clear is whether the economy can sustain its foward progress.

Unemployment remains sky-high, the threat of a fresh wave of layoffs is rising and the coronavirus is still very much a threat. A divided political leadership in Washington and one of the most divisive presidential elections in history is unlikely to help, either.

See:Marketwatch’s Coronavirus Economic Recovery Tracker

What they are saying? “The August employment report was stronger than we expected,” said chief economist Richard Moody of Regions Financial. “ That said, while the labor market is clearly healing, it remains far from healthy.”

There are certain industries that are essentially stuck until the virus recedes further, such as air travel, sporting event and concert admissions,” said chief economist Stephen Stanley. “But for most of the economy, the return to normal is occurring inch by inch and day by day, with plenty more to come.”

Market reaction: The Dow Jones Industrial Average
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-0.56%
,
S&P 500
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-0.81%

and Nasdaq
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-1.26%

all declined in Friday trades.



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Fastly stock drops 20% as analysts weigh in on how TikTok may affect the edge-computing platform’s growth


Fastly Inc. shares pulled back from their recent lofty heights Thursday, as analysts weighed in on how the popular video-sharing platform TikTok will affect the edge-computing platform’s growth as more businesses migrate functions to the cloud.

Fastly
FSLY,
-16.24%

shares fell as much as 21% Thursday, and were last down 17% at $90.40, on volume of more than 23 million shares, compared with a 52-week average daily volume of 3.4 million shares.

Late Wednesday, Fastly reported quarterly results and an outlook that topped Wall Street estimates, but revealed that TikTok was the company’s single largest customer, accounting for 12% of revenue. Fastly is a so-called “edge-based” cloud-computing platform that allows developers to get the best possible performance from their applications.

TikTok has come under fire from President Donald Trump, who has suggested banning the service as a national-security risk because of ownership by the Chinese company ByteDance. Trump has also suggested that the U.S. Treasury should get a cut of the purchase price if TikTok is acquired by Microsoft Corp.
MSFT,
+0.90%
.
Also of note, organized TikTok users were credited with helping to wildly inflate attendance expectations of Trump’s ill-attended Tulsa, Oklahoma rally back in June.

Even with Thursday’s drop, Fastly shares have soared 324% from their opening on the New York Stock Exchange in May 2019, with shares skyrocketing 294% in the past three months. In comparison, the tech-heavy Nasdaq Composite Index
COMP,
+0.64%

has gained 25% in the past three months, and the S&P 500 index
SPX,
+0.36%

has risen 17%.

Oppenheimer analyst Timothy Horan downgraded Fastly to perform from outperform and said TikTok was a “major risk” to the elevated stock price.

“A TikTok ban in the U.S. could prevent FSLY from hitting 3Q/FY20 guidance,” Horan said. “TikTok is FSLY’s largest customer and is likely ~15% of revenues in 1H20, with about half that generated in the U.S. We do think a TikTok/ MSFT deal is far from certain, and long-term MSFT could move TikTok delivery on its own edge infrastructure.”

For the third quarter, Fastly forecast an adjusted loss of a penny a share to net income of a penny a share on revenue of $73.5 million to $75.5 million. Analysts, who had previously forecast a loss of 4 cents a share on revenue of $72 million on average, now expect earnings of a penny a share on revenue of $74.8 million.

Read:Facebook’s TikTok rival comes as Chinese company’s future is in limbo

William Blair analyst Jonathan Ho, who has an outperform rating on the stock, said weakness could make a good entry point given its recent performance, even with a possible U.S. ban of TikTok.

“Third-quarter guidance calls for sequentially flat revenue growth, which appears conservative but also reflects some unknowns around TikTok and continued COVID-19-driven demand as global economies reopen,” Ho said. “Fastly remains a stock we would want to own given broader themes around digital transformation and edge compute, and we would take advantage of weakness in the shares.”

Raymond James analyst Robert Majek, who rates the stock as market perform, said TikTok “remains a double-edged sword” for Fastly.

Majek said one “area of perceived softness” in Fastly’s results was slowing growth in its large enterprise customers, which could reflect a COVID-19 related pullback in spending, but noted the addition of a very significant customer.

“We note that the gross adds included one very meaningful customer, Amazon
AMZN,
+0.55%
,
which we believe is using Fastly to deliver ~90% of its image content across the 20 global cities we tested,” Majek said.

Stifel analyst Brad Reback, who has a buy rating and hiked his price target to $98 from $30, noted that while 12% of Fastly’s revenue came from TikTok, half of that came from outside of the U.S., and that digital transformation trends, prompted by COVID-19 adaptation, would drive more organizations to “re-platform their applications” using Fastly.

“The banning of the app in the US would create short-term uncertainty around Fastly’s revenue contribution from ByteDance; however, management believes it has the ability to backfill the majority of this potentially lost traffic,” Reback said.

Of the 11 analysts who cover Fastly, five have buy or overweight ratings, four have hold ratings, and two have sell ratings, and an average target price of $93.25, according to FactSet data.



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Boeing to delay 777X as demand drops for big jets


© Reuters. FILE PHOTO: Signage of The Boeing Company in Seattle

By Eric M. Johnson and Tim Hepher

SEATTLE/PARIS (Reuters) – Boeing Co (N:) is preparing to delay its all-new 777X jet by several months or up to a year, three people familiar with the matter said, as the COVID-19 crisis exacerbates a drop in demand for the industry’s largest jetliners.

Boeing hopes to bring the jet to market as passenger travel rebounds after a downturn caused by the pandemic. It would also hope for a detente in a trade war between Washington and Beijing, which has sidelined crucial Chinese aircraft buyers.

But stretching out the development opens up fresh risks for Boeing, such as losing engineering attention and momentum, and tougher scrutiny from the U.S. Federal Aviation Administration during the years-long certification process.

Delay could also cause problems in Boeing’s supply chain.

An announcement of the delay could come as early as next week when Boeing announces earnings, one of the people said.

Boeing declined to comment on the 777X timeline. It said it was continuing flight tests and “working closely with our customers around the world as they continue to adapt to the evolving COVID-19 situation.”

Boeing has been working to get the 777X, a larger version of the 777 mini-jumbo, into the hands of customers in 2021. That’s already a year later than originally scheduled after snags with its General Electric (N:) GE9X engines among other issues.

Now Boeing is preparing to delay the timeline by perhaps a year, two of the people said. A third said a delay was likely but that Boeing wanted to get production “going hard” to put planes in the air by 2022-2023.

“There are so many widebody aircraft being retired, mothballed,” the third person said. “If air travel comes back to 2019 levels, many new planes will be needed.”

The 777X will be the first major jet to be certified since the role of software flaws in two fatal 737 MAX crashes prompted accusations of cozy relations between Boeing and the FAA.

The 777X – composed of two models, the 777-8 and the larger and more closely watched 777-9 which seats 406 passengers and is due to be delivered first – competes with the Airbus (PA:) A350-1000, which seats about 360 passengers.

Modern twinjets are displacing older four-engined Boeing 747s and soon-to-be-axed Airbus A380s. Boeing has told suppliers the last 747-8 will roll off assembly lines in around two years.

Experts had expressed worries about demand for large jets due to overcapacity and economic weakness, even before COVID.

While Boeing says it has sold 309 777X planes – worth $442 million each at list prices – many in the industry have questioned its dependence on Middle East carriers which are scaling back orders.

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Snap stock drops in late trading as losses grow, but sales and users continue to increase


Snap Inc.’s losses widened in the second quarter as Snapchat’s parent company dealt with the effects of the COVID-19 pandemic, sending shares lower in after-hours trading Tuesday afternoon.

Snap
SNAP,
-2.09%

shares were down 10% immediately after the report was released Tuesday. The company said it lost $326 million, or 23 cents a share, compared with a loss of $255.2 million, or 19 cents a share, in the year-ago quarter. After adjusting for stock-based compensation and other factors, Snap reported a loss of $95.6, or 9 cents a share, compared with an adjusted loss of $78.7 million, or 6 cents a share a year ago.

Revenue improved 17% to $454 million from $388 million a year ago. The company declined to project what its results could be for the third quarter.

Analysts surveyed by FactSet had expected adjusted an adjusted loss of 9 cents a share on sales of $442 million.

Daily active users, an important measure of the service’s popularity, improved 17% to 238 million, roughly in line with the average analyst forecast of 238.5 million. Snap said that users increased from the previous quarter and the previous year in all of its geographies.

“We are grateful that the resilience of our business has allowed us to remain focused on our future growth and opportunity,” Snap Chief Executive Evan Spiegel said in a statement announcing the quarterly results.

Snap is expected to continue to benefit, like Facebook Inc.
FB,
-1.49%

, from a return of advertisers in the second half of the year. Digital media platforms, in particular, are the most likely destination spot for brands in place of billboards and traditional channels like linear TV, according to Wall Street analysts.

Snap is most frequently mentioned as a “share gainer outside the duopoly” of Facebook and Google parent Alphabet Inc.
GOOGL,
-0.50%

GOOG,
-0.46%
,
Loop Capital Markets analyst Rob Sanderson said in a July 20 note.

“We conducted scenario analyses that show the potential for double-digit stock returns over the next three years, with potentially 20%+ returns for Snap,” Jefferies analyst Brent Thill added in a July 13 note that maintained an overweight rating on Snap shares, and raised its price target to $30 from $20.

In a July 15 note, J.P. Morgan analyst Doug Anmuth picked Snap and Facebook as the most promising stocks, followed by Alphabet, Pinterest Inc.
PINS,
-1.38%

and Twitter Inc.
TWTR,
-0.13%

. Anmuth maintained an overweight rating on Snap’s stock, and raised his price target to $28 from $22

Snap’s shares have improved 52% this year. The broader S&P 500 index
SPX,
+0.16%

is up 0.7% in 2020.



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London drops from the top 10 European travel hot spots for the first time as the return to the skies stalls


Buckingham Palace, Madame Tussauds and St. Paul’s Cathedral have all been magnets for tourists visiting London, but new research shows the U.K. capital has fallen off the top 10 list of most booked European cities for the first time ever.

Bookings slumped in June, according to data seen by MarketWatch.

A study by travel research firm ForwardKeys shows the dire state of the travel industry in Europe and the U.S., with bookings so far in 2020 falling by 99.6%.

Read: Closed attractions and travel restrictions put New York City’s $70 billion tourism industry on hold indefinitely

The data come as countries around the world ease lockdowns and restrictions on travel, sparking optimism that the travel and tourism sector may rebound in time for the busy summer season.

But the data paint an alarming picture and suggest hopes of a recovery may be long coming.

From being the most booked destination one year ago, London has fallen to 11th place as bookings have recovered significantly slower than other European cities. The U.K. capital is seeing around 5% of 2019’s bookings, while the average for the European Union is 23%, ForwardKeys showed.

France is leading the way in Europe, with Visiting Friends and Relatives bookings quickly approaching 2019 levels.

“London is one of the world’s most popular cities to visit. So, to see it drop out of the European top 10 tells you just how damaging an impact the COVID-19 pandemic, and the measures to contain it, are having on travel to the U.K.,” said Olivier Ponti, vice president for insights at ForwardKeys.

“However, now that the most restrictive U.K. quarantine regulations are being relaxed, I expect to see London climb back up the rankings soon,” he said.

The data also suggest a fragile recovery for domestic airlines in the U.S. After an initial recovery from early April lows, which saw bookings return to 30% of 2019 levels, bookings have fallen back and are now at just a fifth of what they were a year ago.

The data show the gap between new bookings and cancellations, an indicator of travel demand, reached its widest point ever in the first two weeks of July, with 90% fewer bookings than cancellations.

Globally, bookings have been outpaced by cancellations since mid-March, the longest stretch ever.

Read:American Airlines CEO: ‘Let’s go fly, for God’s sake’

The study by ForwardKeys could worry investors in airlines, hotel groups and tour operators, like British Airways owner International Airlines Group (IAG)
IAG,
-3.51%

and easyJet
EZJ,
-2.41%

who had hoped for a sturdy recovery for the travel and tourism sector.

IAG stock has fallen two-thirds this year while easyJet is down by more than half, and both have suggested a return to 2019 levels of flying could take until 2023 or 2024.

The Arca Airline Index, which tracks major airline stocks, has gained 44% since March lows when many countries rolled out travel bans and enforced lockdowns, but it is still down by more than 50% for 2020.



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