Finance

A JetBlue Airways Corp. plane departs at Reagan National Airport (DCA) in Arlington, Virginia, U.S., on Monday, April 6, 2020.
Andrew Harrer | Bloomberg | Getty Images

Check out the companies making the biggest moves midday:
JetBlue Airways — Shares of JetBlue Airways shed 7.18%. On Wednesday, the company announced it would cease its alliance with American Airlines in the northeastern U.S. after a federal judge ordered an end to the partnership in May. JetBlue said it will instead focus on its acquisition of Spirit Airlines. American shares lost 2.4%, while Spirit added 1.08%.

Affirm — Shares of the point-of-sale lender slid 10.57% after Piper Sandler downgraded Affirm to underweight from neutral. Higher interest rates and the resumption of student loan payments could hurt the stock in the months ahead, Piper Sandler said.
Sweetgreen — The salad chain jumped 15.49% following an upgrade to buy from neutral by Bank of America. The firm said increased foot traffic, sustained growth of in-store sales and long-term automation plans should all help the stock.
Ford Motor — The automaker’s stock dropped 2.4%, despite Ford reporting a 9.9% second-quarter sales increase from a year earlier. Sales of its F-Series trucks jumped 34% compared to the prior year. However, its electric vehicle sales declined 2.8%.
Keurig Dr Pepper — Shares gained 1.42% following an upgrade by Morgan Stanley to overweight from equal weight. The firm said the stock’s valuation was too low amid highly visible refreshment beverage trends.
Bank of America — The bank stock dropped 2.75%. Bank of America announced after the bell Wednesday it was increasing its quarterly dividend to 24 cents per share from 22 cents. The increase of roughly 9% puts the bank’s dividend yield at about 3.3%, based on Wednesday’s closing price.

Genius Sports — Shares soared 25.65% after the company announced it came to an agreement with the National Football League to a multi-year extension of their existing strategic partnership. Genius will remain the NFL’s exclusive distributor of real-time statistics.
Moderna — The pharma stock fell 4.25%. On Wednesday, Moderna announced a deal to develop mRNA drugs in China, despite rising tensions between the U.S. and China.
— CNBC’s Samantha Subin, Alex Harring and Jesse Pound contributed reporting. More

Layoffs declined, employers hired more workers and “quits” increased in May, according to the monthly JOLTS report issued by the U.S. Bureau of Labor Statistics.
Private-sector employers also added significantly more jobs than expected in June, according to ADP data issued Thursday.
In all, the job market is cooling gradually but remains favorable for workers, economists said.

Sturti | E+ | Getty Images

The U.S. job market is gradually cooling but remains hot despite a year-long government campaign to reign it in, amounting to a favorable environment for many jobseekers, economists said.
“It still boils down to higher worker leverage, better outside opportunities, an easier time exchanging jobs for better ones and substantially greater job security,” said Julia Pollak, chief economist at ZipRecruiter.

“You’re in a lucky position,” she added, referring to employees.
Federal and private labor data issued Thursday support that notion.
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In May, layoffs declined slightly and employers hired more workers, according to the Job Openings and Labor Turnover Survey, issued monthly by the U.S. Bureau of Labor Statistics.
Americans also quit their jobs in larger numbers, according to the JOLTS report. Since most workers quit for new employment, the uptick suggests a rebound in workers’ confidence they can find a new job, economists said.

While job openings — a barometer of business’ demand for workers — fell by about 500,000 in May, they remain well above their pre-pandemic level.
In all, job openings and monthly quits are respectively 40% and 15% higher than they were before the Covid-19 pandemic, while monthly layoffs are 21% lower, pointing to a “robust and resilient labor market,” Pollak said.

Further, payroll processing firm ADP said Thursday that jobs surged by 497,000 in the private sector in June — handily beating the 220,000 estimate. The U.S. Department of Labor will issue its monthly jobs report on Friday morning, and the ADP data may signal continued strength across the U.S. job market.

Rate hikes, banking turmoil have little effect

Workers gained unprecedented leverage as the U.S. economy reopened broadly in early 2021. Workers started to quit in record numbers — in a trend that came to known as the “great resignation” — and their wages grew at the fastest pace in decades.
The job market has somewhat cooled as the Federal Reserve has raised borrowing costs to rein in inflation, and as banks have pulled back on lending due to turmoil earlier this year. But it has continued to defy expectations to the upside.
“It’s really mind-blowing that with all the monetary tightening, with inflation, a banking crisis, that job openings are still this high,” said Aaron Terrazas, chief economist at career site Glassdoor.

It’s really mind-blowing that … job openings are still this high.

Aaron Terrazas
chief economist at Glassdoor

“Overall, the market continues a gradual slowdown,” he added.
However, it’s not good news for all workers; there are some areas of weakness, economists said.
“It’s still the story of a two-track economy,” Terrazas said.
For example, the information sector (which includes technology and media companies) saw 6% more layoffs and 17% fewer quits in May relative to pre-pandemic levels, Pollak said, citing JOLTS data.

Broadly, while jobseekers can take comfort in ample hiring and their ability to quit for better jobs, it may take longer to find a good match amid a gradual labor market slowdown, Pollak said.
That might mean signing up for job alerts and being sure to apply right away, she said.
“It is a numbers game, and workers may have to play it more smartly going forward,” Pollak added. More

The exterior of Sweetgreen’s Naperville location
Source: Sweetgreen

Check out the companies making headlines before the bell:
JetBlue Airways — JetBlue Airways declined 1.3% in premarket trading after the company said it would end its partnership in the northeastern U.S. with American Airlines and focus on Spirit Airlines. Shares of American Airlines declined about 0.9%, while shares of Spirit Airlines popped 2.3%.

Meta Platforms — The social media giant added about 2% in premarket trading after the launch of Threads, a direct competitor to Twitter. Meta CEO Mark Zuckerberg said on his Threads account early Thursday that 10 million people had signed up for the platform in seven hours after launching.
Sweetgreen — Sweetgreen jumped more than 4% after Bank of America upgraded the stock to buy from neutral. The firm cited the salad chain’s growing foot traffic, as well as its plans to automate operations.
Keurig Dr Pepper — Shares added nearly 2% after being upgraded by Morgan Stanley to overweight from equal weight. The Wall Street firm said the stock’s valuation was too low amid highly visible refreshment beverage trends.
Bank of America — Shares of Bank of America were little changed in premarket trading after the bank announced that it was hiking its quarterly divided to 24 cents per share from 22 cents. The increase of roughly 9% puts the bank’s dividend yield at about 3.3%, based on Wednesday’s closing price. The hike comes days after Bank of America said it was discussing with the Federal Reserve differences in the results between the central bank’s stress test and an internal version of the test.
Microsoft — Microsoft added 0.8% in the premarket. Morgan Stanley hiked its price target on the tech giant, saying artificial intelligence could bring the market valuation of the firm to above $3 trillion.

Plug Power — Plug Power shares rose 1.8%. Citi initiated coverage of the firm with a buy rating, saying it could become one of the largest green hydrogen suppliers in the world.
Textron — Citi initiated coverage of aircraft maker Textron with a buy rating, saying the stock is ready for a comeback this year. Shares rose nearly 0.9% in premarket trading.
— CNBC’s Brian Evans, Michelle Fox and Jesse Pound contributed reporting More

Yellen is scheduled to be in Beijing July 6-9.
Yellen will discuss with China officials the importance of responsibly managing their bilateral relationship, communicating directly about areas of concern, and working together to address global challenges.

U.S. Treasury Secretary Janet Yellen landed in Beijing July 7 on a four-day trip aimed at finding common ground for a mutually beneficial economic relationship between the world’s two largest economies.
Kevin Dietsch | Getty Images News | Getty Images

Treasury Secretary Janet Yellen landed in Beijing Thursday on a four-day trip aimed at finding common ground as rivalry between the U.S. and China becomes increasingly adversarial.
Yellen’s trip marks a deepening thaw in ties between the U.S. and China and comes weeks after Secretary of State Antony Blinken’s visit to Beijing in last month, which was the first high-level meeting between the two countries after months of tensions.

“The two sides are basically talking, trying to find the strategic space for both sides to operate, and this will be very good for the rest of the world,” Andrew Sheng, a distinguished fellow at the University of Hong Kong’s Asia Global Institute, told CNBC Thursday.

Yellen’s trip comes just days after China abruptly imposed export curbs on chipmaking metals and its compounds, escalating Beijing’s technological war with the U.S. and Europe.
Before departing for China, Yellen had a “frank and productive discussion” with Xie Feng, the Chinese U.S. ambassador, according to the U.S. Treasury.
“While in Beijing, Secretary Yellen will discuss with [People’s Republic of China] officials the importance for our countries — as the world’s two largest economies — to responsibly manage our relationship, communicate directly about areas of concern, and work together to address global challenges,” the Treasury Department said Sunday.
In an April speech, Yellen stressed the importance of fairness in the U.S. economic competition with China.

She outlined three economic priorities for the U.S.-China relationship: securing national security interests and protecting human rights, fostering mutually beneficial growth and cooperating on global challenges like climate change and debt distress.
A senior administration official told reporters Sunday that Yellen’s visit will underscore these objectives.
“We do not seek to decouple our economies,” the official said. “A full cessation of trade and investment would be destabilizing for both of our countries and the global economy.” More

It is easy now to point to phenomena that were features of the zero-interest-rate age. Ape jpegs selling for millions of dollars; algorithms pricing and buying homes; 20-something tech workers making “day in the life” TikToks that consisted entirely of them making snacks. Record-breaking profits at investment banks appear to be another relic of the golden age. Workers hired to meet roaring demand have been left twiddling their thumbs. Now they are being shown the door. Ahead of releasing their second-quarter earnings, institutions on Wall Street are trimming staff. Goldman Sachs culled 3,200 in the first quarter; on May 30th reports suggested the bank was letting go of another 250—this time mostly from among senior ranks. Morgan Stanley fired 3,000 or so in the second quarter. Bank of America has cut 4,000 and Citigroup 5,000. Lay-offs are also plaguing less glamorous bits of finance. Accenture and kpmg have both swung the axe. This matters not only for the poor souls handed their belongings in a cardboard box, but for the city of New York. Just as tech lay-offs have hurt San Francisco, so finance lay-offs will hurt the Big Apple. According to Enrico Moretti, an economist at the University of California, Berkeley, each of the “knowledge jobs” that make cities like New York and San Francisco successful in turn supports another five service roles—some high-paying (like lawyers), others less so (like baristas). Even if there are not additional firings, Wall Street’s retrenchment will take a toll. According to New York’s state comptroller, the average bonus pool shrank by one-fifth in the last financial year, the biggest drop since the global financial crisis of 2007-09.Although banks did not balloon quite as much as tech firms during the covid-19 pandemic, when online activity surged and working patterns seemed ready to change for good, the axe is cutting almost as deep in places. Meta’s workforce nearly doubled in size between 2019 and 2022; the firm has since let go about half of new additions. Goldman’s workforce expanded by just over one-quarter between the end of 2019 and the end of 2022, from around 38,000 to just over 48,000. By laying off some 3,450 people the firm has unwound one-third of this increase. Other banks have been a little slower to scale back. At Morgan Stanley, where employment also leapt by one-third over the same period, just one-eighth of the increase has been unwound. It is a similar story at Citigroup. There have yet to be major lay-offs at JPMorgan Chase, the king of Wall Street. Altogether, job losses might slow New York’s economy a tad—perhaps the market for TriBeCa lofts will cool—but they will hardly prove a fatal blow to a city of its size and vitality. Yet perhaps there is further for the story to run. Tech-industry lay-offs got going in earnest in 2022, when almost 165,000 jobs were lost. They are now coming thick and fast. Since the start of the year, more than 210,000 jobs have been cut. History suggests that firing seasons build momentum. It took years for banks to downsize in the wake of the global financial crisis. Just as with the tech companies, lay-offs would need to be several times bigger to return financial firms to their pre-pandemic sizes. Although banks are trimming the fat, they do not yet look lean. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Turkey’s economy does not obviously inspire emulation. Over the past five years it has been battered by soaring annual inflation, which hit 86% in October. The central bank is fresh out of foreign reserves, having spent most of them propping up the lira, also to little avail: last month the currency plummeted to an all-time low against the dollar. To make matters worse, Recep Tayyip Erdogan, Turkey’s president, is about to make good on some expensive promises following an unexpected election victory in May. The bill will probably plunge the government, which had been reasonably fiscally sensible until now, deep into the red. This chaos reflects the upside-down monetary policy pursued by Mr Erdogan. He insists that lowering interest rates is the key to fighting inflation, rather than tightening the screws, which is the solution favoured by generations of orthodox economists. To explain how this could be the case, Turkish officials invoke names ranging from Irving Fisher (an economist, and the finance ministry’s preferred guru) to God (Mr Erdogan’s policymaker of choice). Since the election Turkey’s monetary policy has become a little more reasonable, as interest rates have been raised. This has not stopped Mr Erdogan’s ideas catching on in the finance ministries of the developing world. “I truly wonder whether classical theories are the way to continue,” muses Ken Ofori-Atta, Ghana’s finance minister, who is one of several African ministers pondering such ideas. “We have to get rates low and growth going,” shrugged another at a recent summit on green finance in Paris. In the past month, officials in Brazil and Pakistan have expressed similar sentiments. Rather than looking at sky-high inflation, a floundering currency or fleeing investors, these ministers focus on Turkey’s gdp growth, which has been remarkably resilient, reaching 5.6% last year. They are sceptical of warnings that such a state of affairs is unsustainable, owing to stalling productivity, which ultimately determines long-run growth, and depleted foreign reserves. Some reasons for supporting ultra-loose policy when inflation is out of control are much older than Turkey’s experiment. Inflation eats away at the value of official debts, which weigh down developing countries. Letting prices run wild is an appealing option when a government has borrowed too much, even if it is also the surest path to hyperinflation and a currency crash.Other reasons are newer and come from Mr Erdogan. The Turkish president insists that in emerging markets, loose policy helps quell inflation. For countries that want firms to have access to cheap credit, in order to stimulate industrial growth, this is an appealing idea. One argument put forward is that less expensive borrowing will mean lower consumer prices. Another is that it will boost exports, which may replenish foreign reserves. The problem with both arguments is that the economic activity boosted by low rates also buoys wages and makes firms optimistic about future prices, entrenching inflation. Low rates on government bonds also send foreign investors fleeing, whacking the currency. It is nevertheless true that monetary policy works differently in emerging economies. Foreign investment matters more for market rates; aggregate demand matters less. In a recent paper Gita Gopinath, the imf’s chief economist, and co-authors find that emerging markets’ policy rates have next to no impact on their real economies. Looking at 77 developing countries since 1990, the researchers find that, just as in advanced economies, central banks raise the domestic rate at which they lend to local banks when inflation gets going. Unlike in advanced economies, banks do not pass the rate change on to government and household borrowers. To understand why, consider how banks borrow. Emerging-market financial institutions struggle to find funds at home, since few households save and there are not many big firms. Instead, they turn to international markets. Counterintuitively, the risk premium demanded by foreign financiers tends to fall when inflation is rising, since at such times economic growth tends to be strong. This balances out the impact of central-bank rate rises.Nor are international markets the only force with which policy must contend. Poor countries are also home to big informal sectors, where firms do not borrow from banks. The un and imf reckon that over 60% of the developing world’s workforce, and more than a third of its gdp, is off the books. Although informal lenders eventually match banks’ interest rates, this takes time. And informal labour markets are flexible, meaning workers’ pay rather than employment adjusts when rates rise. According to the Bank for International Settlements, a club of central banks, this means emerging economies take longer to feel the pinch of higher rates.Murky marketsInformal finance gives people an escape from the banking system. Your columnist was recently in Ghana, where she was told by an informal lender, who takes luxury cars as collateral, that business has boomed since the country’s latest debt restructuring, which wiped out much of the government’s domestic borrowing and almost took the banking industry with it. Unsurprisingly, trust in formal banks is low. The boss of one of the Accra’s biggest banks says other firms are safeguarding against the fallout from another similar episode by stockpiling dollars off the books.The problem comes with assuming Mr Erdogan’s policies will help. If high rates are diluted by foreign lenders and informal borrowers, so are low ones. Ms Gopinath’s research is reason to doubt ultra-doveish monetary policy can produce growth, but it does not support the idea that it can cut inflation, either, contra Mr Erdogan. If she is correct, officials need to focus on cutting the risk premium on foreign borrowing to strengthen the impact of monetary policy on the economy. To do this, they must convince investors to take them seriously, which means keeping deficits in check and finances stable, not jumping on the bandwagon of outlandish theories. Mr Erdogan’s experiment is best left in its trial phase. ■We’re hiring (June 12th 2023). The Economist is looking for a Britain economics writer, based in London. For details and how to apply, click here. Read more from Free exchange, our column on economics:The working-from-home illusion fades (Jun 28th)Can the West build up its armed forces on the cheap? (Jun 22nd)Wage-price spirals are far scarier in theory than in practice (Jun 15th)Also: How the Free Exchange column got its name More

China’s communists see themselves as a “vanguard party”, full of dedicated social warriors. Less than 9% of the country’s adult population are members, according to figures released on June 30th. Gaining entry can take years. Even Xi Jinping, the party’s boss, was not admitted until his tenth attempt. Aspiring members are often made to attend ideology classes, take written tests, submit “thought reports”, demonstrate their worthiness through community service and survive an interview by a panel of members. Is it worth the bother?The answer might seem obvious. “Virtually every influential position in China is held by a party member,” as Bruce Dickson of George Washington University has noted. Leaks like the Panama papers have revealed the offshore riches accumulated by the families of party leaders. And Chinese social media will occasionally erupt over indiscreet displays of wealth or privilege by members, like the boss of a PetroChina subsidiary, spotted strolling through a Chengdu shopping district in June holding hands with a fashionable younger employee who was not his wife. Yet changes in the party and the economy may be eroding the material benefits of membership.Party members can be found at every rung of the economic ladder. Of the poorest tenth of Chinese households, about 14% contain a party member, according to the China Household Finance Survey by Southwestern University of Finance and Economics. A third of members are farmers and workers (down from two-thirds in 1994). Since becoming head of the party in 2012, Mr Xi has urged cadres to adhere to a less hedonistic lifestyle. “Incorruptibility is a blessing and greed is a curse,” he advised in a recent speech. In work published in 2019, Plamen Nikolov of Binghamton University and co-authors calculate a 20% wage premium for members over similar workers. One reason, according to other research, may be that card-carrying communists are more likely to get jobs in state-owned enterprises (soes) and official institutions. Figures released in May show urban soes last year paid 89% more than private firms in cities. This gap has grown during Mr Xi’s reign. But as any well-trained communist knows, true economic clout derives not from labour but capital. So how does party membership affect the assets people own, such as their stocks, bonds and property?Recent research by Matteo Targa of diw Berlin and Li Yang of the Paris School of Economics reaches a surprising conclusion. The two economists look at the urban wealth distribution, as documented by the China Household Finance Survey. In each wealth bracket, some fraction of households include party members. If the fraction were to increase by one percentage point, what would happen to that bracket’s wealth? Messrs Targa and Li calculate that at the lower rungs of the wealth distribution, party membership makes a substantial difference. At the tenth percentile, for example, a one-percentage-point increase in party-membership rates would increase wealth by almost 0.9% (see chart). But the higher up you go, the weaker the financial rewards seemingly offered by membership. For households at the 93rd percentile and beyond, party membership makes no discernible difference at all.One reason for this divergence is property. Among the middle and upper echelons of Chinese society, almost everybody now owns a flat, whether they are a member of the party or not. And so everyone in these wealth brackets has benefited from the long real-estate boom that ended in 2021. Home ownership is, unsurprisingly, patchier among people on the lower rungs of the ladder. For these households, party membership may be a decisive factor governing whether or not they own a flat. In the five years since the household-finance survey was carried out, home-ownership rates in China have risen further. House prices have also recently fallen in cities, narrowing the gap between the propertied classes and everyone else. Both of these trends probably mean that becoming a communist confers less of a material benefit than it did five years ago, let alone 20 years back. Thanks to these economic forces, Mr Xi may get the more ascetic cadres for which he has been looking. His purges and rectification campaigns have abolished some of the perks of party membership. His mishandling of China’s property market may have helped, too. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

IN LATE JUNE Robert Friedland, the bombastic boss of Ivanhoe, a Canadian miner, warned that the world was running the risk of a “train wreck”, when a crunch in copper supply would derail the energy transition. The metal is used in everything from wiring to wind turbines—and green mandates in America, Asia and Europe will soon demand many more of these. The price of copper, Mr Friedland suggested, could jump ten-fold in response. Right now, however, the train is not so much derailed as chugging along happily. Having peaked at $10,700 a tonne in March last year, copper prices at the London Metal Exchange have dropped by around 10% since January, to $8,300 a tonne. Spot prices remain on par with or higher than those for delivery in three months, suggesting that investors do not expect them to bounce back soon. What is going on?Because of its range of uses, which include construction, electronics and weaponry, copper prices indicate the health of the global economy, earning the metal the nickname “Dr Copper”. Worries about the economy may therefore be making investors gloomy about copper’s prospects. The post-covid rebound in China, which consumes as much as 55% of global supply, is already fading. Growth is also flagging in the West as rising interest rates bite. Yet the lack-of-demand story does not fully explain the price fall. Despite the country’s construction slump, China is using 5% more copper this year than last, possibly because the metal—used to form cladding, pipes and roofs—tends to track building completions, which have held up, rather than housing starts. A 7% jump in the making of cooling units in anticipation of a hot summer also supports demand. If copper markets are decidedly cool, then, it is also because supply has risen. Over the winter a series of disruptions—from protests in Peru to floods in Indonesia—dented global production. Now these problems are easing. As a result, smelters are feeling confident enough to charge miners higher fees, indicating no shortage of raw materials (see chart 1).At the same time, financial investors are snubbing copper. As interest rates rise, they prefer to hold cash-generating assets rather than commodities, which yield nothing. For much of this year “non-commercial” net positioning on copper-futures markets has been in the red, implying that more investors are betting prices will fall than recover (see chart 2). Yet today’s prices remain $2,500 a tonne above production costs at the marginal mine, notes Robert Edwards of CRU, a consultancy. This implies that the recent correction has taken froth out of the market, rather than pushed prices too low, suggesting they could stay subdued for a while.As the energy transition speeds up, it should give a jolt to demand. Sales of electric vehicles (evs), which are already rising, are expected to ramp up significantly in the coming years, and each unit contains three to four times more copper than its petrol-powered peer. Even in a scenario where the transition happens slowly, the International Energy Agency (IEA), an official forecaster, estimates that copper demand from green uses, propelled by the ev boom and undersea cabling for wind farms, will nearly double by 2040. Supply may struggle to keep up. The average age of the world’s ten biggest mines is 64, which is forcing miners to dig deep for ores of ever lower quality, making each new tonne of refined copper costlier to produce. New mines are scarce. Assuming all certain and probable projects go ahead, McKinsey, a consultancy, forecasts that supply will hit 30m tonnes by 2031, 7m tonnes short of estimated demand. A severe crunch like that envisioned by Mr Friedland could still be avoided. Most forecasting models, including the IEA’s, expect copper demand outside clean-energy uses to remain stable. Tom Price and Ben Davis of Liberum Capital, an investment bank, reckon this is unlikely, because China’s long building boom has probably ended. Pricey copper will also prompt substitution: some evs already use aluminium wiring. And McKinsey points out that new tech—if it achieves its potential—could close much of the supply gap this decade. There is time to avoid a train wreck. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More