Europe recovers from double-dip recession but lags the United States. – The New York Times

Daily Business Briefing

July 30, 2021Updated 

Aug. 5, 2021, 9:07 a.m. ET

Aug. 5, 2021, 9:07 a.m. ET

Workers at a Volkswagen assembly line in Zwickau, Germany, last month.
Credit…Matthias Rietschel/Reuters

Europe’s economy exited a painful double-dip recession in the second quarter, rebounding faster than expected from the ravages of the pandemic as consumers spent pent-up savings and restaurants, factories and other businesses sprang to life after pandemic control restrictions eased.

Gross domestic product, the broadest measure of economic output, grew 2 percent in the second quarter of the year in the eurozone, up nearly 14 percent from a year earlier and reversing a 0.3 percent contraction in the first three months of the year, Eurostat, Europe’s statistics agency, reported on Friday.

But the eurozone’s recovery, while striking for its speed, is far from complete: It continues to lag the United States, which reported data Thursday showing that it had returned to its prepandemic level of output in the second quarter. Europe is not expected to hit that marker before the end of the year.

The European Union recently increased its forecast for growth this year to 4.8 percent, but the U.S. economy is expected to grow 6.9 percent in 2021, according to the Organization for Economic Cooperation and Development.

Nonetheless, Europe’s recovery has gained speed as service and manufacturing sentiment and activity jumped among the 19 nations that share the euro currency, after governments worked to prevent new lockdowns in spring. Authorities also applied pressure on citizens to ramp up vaccinations that are seen as the key to sustaining a recovery — and winding down billions in pandemic support for workers and businesses.

The vaccination push has reaped benefits: This week, the European Union pulled ahead of the United States in total vaccinations, adjusted for population, a turnaround from the spring.

Europe’s four biggest economies recorded expansions over the April-to-June quarter, with the most robust growth in southern Europe, in countries that suffered the brunt of Covid-19 deaths last year.

Italy grew 2.7 percent and Spain 2.8 percent from the first quarter, while Portugal’s and Austria’s economies surged more than 4 percent, thanks to a rebound in tourism. But growth was weaker than expected in Germany, Europe’s largest economy — 1.5 percent from the first quarter, perhaps reflecting supply chain problems as a shortage of electronic chips has slowed manufacturing in its huge auto industry.

The French economy, however, struggled to climb out of a recession, growing 0.9 percent from April to June after zero growth in the first three months. President Emmanuel Macron has been trying to coerce the French into getting vaccinated in a bid to cement a recovery.

Counting the 27 European Union countries, Eurostat said economic output rose 1.9 percent last quarter.

Europe’s revival has helped stoke a mild return of inflation, which has risen to 2.2 percent in July after a 1.9 percent rate last month. The European Central Bank, which until recently sought to keep inflation below or close to 2 percent, has a new strategy that will tolerate inflation above its target if the price increases are considered transitory.

Keeping economies open is seen as crucial to sustaining Europe’s rebound. Since countries ended lockdowns this year, order books for industrial goods have filled rapidly — so much that some European manufacturers have begun to express worry about keeping up with demand. And unemployment continued to fall, to 7.7 percent in the euro area in July from 8 percent in June, Eurostat reported.

“Never before has sentiment been so positive among eurozone businesses and consumers,” Bert Colijn, senior eurozone economist at ING Bank, said in a note to clients. “This indicates that the economic rebound is in full swing.”

Since the pandemic arrived in early 2020, Europe’s economy has been rocked by two recessions — a double-dip recession. In the second quarter of 2020 alone, eurozone economic output shrank 12.1 percent.

But in a reflection of the return of economic fervor, many of Europe’s biggest companies reported bumper earnings this week, from a surge in aircraft delivery at Airbus, the world’s largest plane maker, to a consumer splurge in the purchases of expensive scarves and handbags at the luxury retailer Hermes. But the Delta variant, which has caused a jump in coronavirus infections across Europe, has recently caused consumer confidence to tick back down, increasing uncertainty among service sector businesses.

Vaccinations, though, are weakening the link between cases and hospitalizations, meaning the economic consequences of a new wave of coronavirus cases will be far milder than those of previous waves, Rory Fennessy, an economist at Oxford Economics, said in a note.

Nonetheless, depending on how the pandemic evolves, “the potential ramifications of the Delta variant are the main downside risk to the outlook,” he said.

A Walmart spokesman said the company recommended that customers wear masks in areas with substantial or high transmission rates.
Credit…Charles Krupa/Associated Press

Walmart and the Walt Disney Company said on Friday that they would mandate vaccines for some employees, joining a growing list of companies requiring immunization. And The New York Times Company indefinitely postponed its planned return to the office.

Walmart also said Friday that employees in areas with substantial transmission rates would be required to wear masks. The grocery giant Kroger, too, said it was reinstating mask requirements for associates in some areas. And starting Monday, the Florida-based grocery chain Publix will require employees to wear masks in all of its stores regardless of their vaccination status.

Walmart, the nation’s biggest private employer, said the mask requirements would apply in areas of the country with substantial or high transmission rates, and a spokesman said the company recommends that customers wear masks in those areas, too. The retailer is also doubling its reward to employees who get vaccinated from $75 to $150.

The company is also mandating vaccines for employees in its headquarters, as well as managers who travel in the United States, the company’s chief executive, Doug McMillon, said in a memo on Friday. The mandate does not apply to employees in stores, clubs, distribution and fulfillment centers.

Disney said salaried and nonunion hourly U.S. employees at its sites must be fully vaccinated. Unvaccinated workers who are already on site will have 60 days to get the immunization, and new hires will be required to be fully vaccinated before starting work.

The New York Times had been planning for employees to start to return, for at least three days a week, on Sept. 7.

“In light of the evolution of the virus, including new trends around the Delta variant and the updated guidance from the C.D.C. this week on masking, we have decided to push out our plans for a full return at this time,” Meredith Kopit Levien, the chief executive of The New York Times Company, wrote in an email to staff on Friday. Ms. Levien said that The Times’s offices would be open for those who wanted to go in voluntarily, with a mandatory proof of vaccination.

The company is “not ready to specify a new date for a full reopening,” she wrote, adding that the company would provide employees at least four weeks notice before asking them to return.

Here’s what some other companies have said about their changing policies:

Banca Monte dei Paschi, considered the oldest in the world, ranked low in stress tests. It is in merger talks with Unicredit, an Italian rival.
Credit…Max Rossi/Reuters

Even after taking a beating during the pandemic, almost all of Europe’s largest banks would be able to withstand another severe economic downturn, European regulators said Friday after putting the lenders through a simulated trial by fire.

But the stress tests, conducted by the European Central Bank and the European Banking Authority, also exposed some vulnerabilities. Banca Monte dei Paschi di Siena, considered the oldest bank in the world, is also the weakest in Europe, according to the regulators. The Italian bank’s capital would be wiped out in a hypothetical recession lasting through 2023, the tests found.

UniCredit, the largest bank in Italy, said Thursday it was in talks to take over Monte dei Paschi with encouragement from the Italian government, which would assume the Siena bank’s bad loans. Monte dei Paschi, founded in 1472, has been struggling for more than a decade under the weight of problem loans and the ill-advised acquisition of a rival.

Under the worst-case scenario that regulators used to assess bank strength, Deutsche Bank and Société Générale were prominent among the banks that would be pushed closest to regulatory red lines. Both would have enough capital to withstand the crisis, however.

“Even in this year’s more severe adverse scenario, Deutsche Bank proves its resilience in the face of potential challenging conditions,” James von Moltke, Deutsche Bank’s chief financial officer, said in a statement.

The stress tests provided some reassurances that banks could survive further waves of infection and economic disruption. And they set the stage for many banks to begin paying dividends to shareholders.

Contrary to fears, the pandemic has not caused a financial crisis. That is because before Covid-19 struck, regulators forced European banks to increase their capital so they had bigger cushions in case of a shock. In addition, European governments pumped money into their economies, helping to prevent an epidemic of loan defaults.

The stress tests “show that the euro area banking system is resilient to adverse economic developments,” the European Central Bank said in a statement.

Gary Gensler, the chair of the Securities and Exchange Commission, which will “seek certain disclosures” from Chinese companies meant to protect American investors.
Credit…Jonathan Ernst/Reuters

After investors lost billions of dollars from a sharp slump in U.S.-traded Chinese stocks over rising regulatory scrutiny from Beijing, U.S. market officials want to make sure those companies are telling investors about all the risks they face before they sell more shares on American markets.

The Securities and Exchange Commission will “seek certain disclosures” from Chinese companies before their requests to register or sell shares in the United States would be approved, the regulator said in a statement Friday. Those disclosures include the risks companies might face from officials in Beijing, who have taken a stronger hand in regulating technology companies in particular in recent months.

The disclosures also include the risks inherent in the unusual corporate structures many Chinese companies use to raise money overseas without violating Beijing’s laws restricting foreign ownership in a number of industries.

“I believe such disclosures are crucial to informed investment decision-making and are at the heart of the S.E.C.’s mandate to protect investors in U.S. capital markets,” Gary Gensler, the commission’s chair, said in the statement.

It wasn’t immediately clear how the S.E.C.’s new rules would affect the shares of Chinese companies on Wall Street. Many of them already disclose those risks.

The S.E.C.’s statement follows a sell-off in recent weeks in Chinese shares, particularly in those of education companies that provide tutoring services to hopeful parents. Concerned that the high cost of raising children has turned off Chinese couples from having more children, Beijing officials in recent days said they would saddle the country’s big for-profit education industry with new restrictions.

Shares of erstwhile Wall Street darlings plunged as a result. The New York-traded shares of New Oriental Education & Technology Group, one of the industry’s best-known companies, lost half their value last week as the news leaked out.

The S.E.C.’s statement focused specifically on a type of legal structure that Chinese companies use to raise money overseas. Called a variable interest entity, the structure lets foreign investors share in the profits of a Chinese company. But it doesn’t give them any control over an affiliated legal entity that stays within China and holds the crucial business licenses and other assets that allow the company to keep operating in the mainland.

Under new rules from Chinese regulators, education companies would no longer be allowed to use such structures.

The S.E.C. said in its statement that Chinese companies must disclose that “investors are not buying shares of a China-based operating company but instead are buying shares of a shell company issuer that maintains service agreements with the associated operating company.”

Such disclosures are already a common feature in filings by many Chinese companies. For example, Alibaba Group, the e-commerce giant that is worth hundreds of billions of dollars on Wall Street, discloses in its filings that its V.I.E. is controlled by a group of senior executives and others in China. It has also said that its businesses could be drastically affected if Beijing turned a critical eye toward such legal structures.

President Joe Biden delivered remarks on the importance of American manufacturing at Mack — Lehigh Valley Operations in Lower Macungie Township, Pa, Wednesday.
Credit…Kenny Holston for The New York Times

The White House won a major victory this week when Republican senators helped advance a $1 trillion bipartisan infrastructure deal. For President Biden, it’s a “vindication of his faith in bipartisanship and a repudiation of the slash-and-burn politics of his immediate predecessor,” The New York Times’s Jim Tankersley writes.

But the road to passing legislation won’t be smooth, the DealBook newsletter reports, as Democrats fight among themselves over an even bigger proposal and former President Donald J. Trump warns conservatives to resist passing any laws or face political retaliation.

The bill devotes $550 billion in new spending to physical infrastructure, including roads, bridges, rail, transit and water. That’s significantly less than earlier Democratic proposals, with far fewer dollars available for public transit and electric vehicle charging stations, for example. “That’s what it means to compromise and forge consensus,” Mr. Biden said.

Negotiators found new ways to pay for it. Instead of the original plan to bolster the I.R.S. to collect more taxes, money previously earmarked for pandemic-related aid is being repurposed, like the extra unemployment benefits canceled by two dozen Republican governors. The cryptocurrency industry is up in arms over a clause aimed at raising nearly $30 billion by imposing more tax reporting requirements on transactions. This could have “unintended consequences that strike at the heart of innovation,” said Kristin Smith of the Blockchain Association industry group.

Democrats also have a $3.5 trillion budget blueprint to pass. It would provide more spending for the administration’s priorities on climate, health care and education, and theoretically wouldn’t need Republican approval if Democrats unite to pass it through a process called reconciliation. But Senator Kyrsten Sinema of Arizona, a centrist Democrat, has said she wants to spend less, drawing ire from Representative Alexandria Ocasio-Cortez of New York and other progressives, who implied their support for the Sinema-led bipartisan infrastructure bill is conditional on the $3.5 trillion budget passing reconciliation. Chuck Schumer, the Senate majority leader, has warned colleagues of long nights and weekends ahead.

Oil and gas prices have recovered after a sharp drop during the pandemic.
Credit…Matt Rourke/Associated Press

HOUSTON — Exxon Mobil and Chevron, the largest American oil companies, reported strong quarterly earnings on Friday as the energy industry recovered from the sharp drop in demand for fossil fuels during the pandemic.

It was the second-consecutive quarterly profit for the companies following several quarters of losses. The improved results were based on a powerful rally of oil and natural gas prices, which have recovered roughly to levels of early 2020 before the pandemic took hold.

In the second quarter alone, the American benchmark oil price rose from about $61 to about $73 a barrel. Prices hovered below $40 a barrel for much of 2020, and even briefly fell below zero in April of last year as producers were forced to pay buyers.

Natural gas prices have rallied this summer, rising by 11 percent in the last month alone. The Delta variant of the coronavirus have sent shudders through the market, but oil and gas prices have held up so far.

Exxon said it made $4.7 billion in the three months that ended in June, compared with a $2.7 billion profit in the first quarter this year and a loss of $1.1 billion in the second quarter of last year. In addition to higher oil and natural gas demand, sales of chemicals and lubricants improved. The company, based in Irving, Texas, had a $2.3 billion profit in its chemical business, which Darren Woods, Exxon’s chief executive, said was the best performance in the company’s history.

“Positive momentum continued during the second quarter across all of our businesses,” Mr. Woods said. “We’re realizing significant benefits from an improved cost structure, solid operating performance and low-cost-of-supply investments.”

The strong quarterly performance may relieve some of the pressure on Mr. Woods, who suffered a defeat in June when three candidates backed by a small investment firm, Engine No. 1, won seats on Exxon’s board. The firm and its supporters among professional investors have said the company needs to take climate change more seriously and move toward cleaner fuels.

Chevron reported $3.1 billion profit for the second quarter on revenue of $37.6 billion. The company made $1.4 billion in the first quarter this year and lost $8.3 billion in the second quarter of last year.

“Second quarter earnings were strong, reflecting improved market conditions,” said Mike Wirth, Chevron’s chief executive. “Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending.”

The company, which is based in San Ramon, Calif., said the company’s average sale price for a barrel of oil and natural gas liquids was $54 during the quarter compared with $19 in the quarter the year before.

Chevron reported that it cut its capital spending by 32 percent so far this year compared with last, while increasing its oil and natural gas production by 5 percent.

Credit…Andrew Kelly/Reuters

In late 2018, Chelsey Glasson, a researcher at Google who had worked there for four years, moved to a new team. She was pregnant at the time and said she immediately felt she was being discriminated against. Her new boss suggested that her forthcoming maternity leave might “rock the boat,” and she was effectively stripped of her management responsibilities.

When she filed a complaint with human resources, she was offered 10 free sessions with a mental health counselor who was contracted by Google and available on campus.

At the time, she thought, “What a great resource, of course I’m going to take advantage of this.”

More than a year later, when Ms. Glasson filed a pregnancy discrimination lawsuit against Google, her counselor told Ms. Glasson that she was “really nervous and uncomfortable” seeing her after Google had asked for access to records of their sessions, Alisha Haridasani Gupta and Ruchika Tulshyan report for The New York Times. “She was concerned that affiliating with me would compromise her contract with Google,” Ms. Glasson said.

“That was an incredibly low, deflating moment in my experience,” she said. She added that Google had already been using those subpoenaed records to suggest that she was distressed for personal reasons, not because of a potentially toxic work environment or discrimination.

In interviews with The Times, six former and current Google employees recalled that when they spoke up against workplace misconduct, they, too, were offered free short-term counseling — called the Employee Assistance Program (E.A.P.) — or medical leave.

A Google executive, who asked not to be identified because he is not permitted to speak to reporters, said that when employees report difficulties at work with a colleague, Google’s human resources officers are instructed to remind those employees that the company offers up to 20 therapy sessions a year. (Google recently expanded the benefit to 25 sessions.)

Of course, offering counseling isn’t necessarily a bad thing. Nor is this kind of counseling unique to Google.

But counseling can become problematic when it’s used as a stopgap or a quick fix to resolve tense workplace situations that might not legally be considered harassment or bullying but that are nonetheless unacceptable, said Erica Scott, a human resources expert.

Tolerating bad managers while directing employees to a counseling program is a “shocking” way to “shield the employer from accountability,” she said. “These are employee matters that are the employer’s obligation to deal with, not a third party.”

A woman interviewing for a position at a job fair in St. Louis last month.
Credit…Whitney Curtis for The New York Times

Economists at the University of California, Berkeley, and the University of Chicago this week unveiled a vast discrimination audit of some of the largest U.S. companies. Starting in late 2019, they sent 83,000 fake job applications for entry-level positions at 108 companies — most of them in the top 100 of the Fortune 500 list, and some of their subsidiaries.

Their insights can provide valuable evidence about violations of Black workers’ civil rights, Eduardo Porter reports for The New York Times.

The researchers — Patrick Kline and Christopher Walters of Berkeley and Evan K. Rose of Chicago — are not ready to reveal the names of companies on their list. But they plan to, once they expose the data to more statistical tests.

In the study, applicants’ characteristics — like age, sexual orientation, or work and school experience — varied at random. Names, however, were chosen purposefully to ensure applications came in pairs: one with a more distinctive white name — Jake or Molly, say — and the other with a similar background but a more distinctive Black name, like DeShawn or Imani.

On average, applications from candidates with a “Black name” get fewer callbacks than similar applications bearing a “white name.”

This aligns with a paper published by two economists from the University of Chicago: Respondents to help-wanted ads in Boston and Chicago had much better luck if their name was Emily or Greg than if it was Lakisha or Jamal.

This experimental approach with paired applications, some economists argue, offers a closer representation of racial discrimination in the work force than studies that seek to relate employment and wage gaps to other characteristics — such as educational attainment and skill — and treat discrimination as a residual, or what’s left after other differences are accounted for.

The Berkeley and Chicago researchers found that discrimination isn’t uniform across the corporate landscape. Some companies discriminate little, responding similarly to applications by Molly and Latifa. Others show a measurable bias.

All told, for every 1,000 applications received, the researchers found, white candidates got about 250 responses, compared with about 230 for Black candidates. But among one-fifth of companies, the average gap grew to 50 callbacks. Even allowing that some patterns of discrimination could be random, rather than the result of racism, they concluded that 23 companies from their selection were “very likely to be engaged in systemic discrimination against Black applicants.”

  • Amazon on Thursday followed a trend among the country’s biggest tech firms. The company said it made more money in the latest quarter compared with last year — a lot more money. The company said sales in the three months ending in June hit $113.1 billion, up 27 percent from a year earlier, when lockdowns were at their most extreme. It made $7.8 billion in profit, up 48 percent from $5.2 billion a year ago. But shares of Amazon’s stock were down more than 7 percent in aftermarket trading, as investors had expected sales to be even higher and the outlook for the next quarter to be rosier. The other biggest tech companies — Apple, Facebook, Google and Microsoft — also reported blockbuster results this week. Even so, only Google has seen its stock rise this week.

  • Scarlett Johansson, who has played the Marvel character Black Widow in eight blockbuster films, sued the Walt Disney Company on Thursday over its pandemic-era streaming strategy. The complaint, filed in Los Angeles Superior Court, claims that Disney breached her contract when it released “Black Widow” simultaneously in theaters and on Disney+ earlier this month. Ms. Johansson’s suit said that Disney had promised that “Black Widow” would receive an exclusive release in theaters for approximately 90 to 120 days and that her compensation — based largely on bonuses tied to ticket sales — was gutted as a result of the hybrid release. The lawsuit marked a sharp escalation in a festering standoff between movie actors and media companies over compensation in the streaming age.

  • Koch Foods, one of the nation’s largest poultry processors, was indicted on Thursday on federal charges of engaging in a nationwide conspiracy to fix prices of chicken products. Also accused of taking part in the same conspiracy were four executives who worked for Pilgrim’s Pride, another poultry producer. The indictments are part of a long-running investigation into claims that some of the biggest American poultry companies, including Tyson Foods and Pilgrim’s Pride, conspired to manipulate chicken prices, raising costs for American consumers. The conspiracy began as early as 2012 and lasted until at least 2019, the Justice Department said in a statement on Thursday.

  • The S&P 500 fell 0.5 percenton Friday. Even so, the index ended July with a gain of 2.3 percent. The Nasdaq composite fell 0.7 percent.

  • Amazon fell 7.6 percent after reporting that sales in the three months ending in June hit $113.1 billion, up 27 percent from a year earlier. But the company cautioned that online sales were slowing slightly as people shopped more in person and spent time vacationing or socializing.

  • Markets in Europe were lower, with the Stoxx Europe 600 falling 0.5 percent. Markets in Asia traded lower, with the Hong Kong’s Hang Seng Index closing with a 1.4 percent loss.

  • The yield on 10-year U.S. Treasury notes fell to 1.24 percent from 1.27 percent.

  • A measure of inflation, the Personal Consumption Expenditures inflation index, showed that prices are rising fast, but its 0.5 percent gain from May to June was slower than economists had expected. The index climbed by 4 percent in June compared with a year earlier, the fastest since 2008, and in line with expectations.

  • Europe’s economy exited a painful double-dip recession in the second quarter, rebounding faster than expected. Gross domestic product, the broadest measure of economic output, grew 2 percent in the second quarter of the year, Eurostat, Europe’s statistics agency, reported on Friday.


CreditCredit…Sean Dong

Today in the On Tech newsletter, Shira Ovide writes that America’s tech companies, which deserve criticism for misusing their power, also should get credit for using their might to take decisive action in response to virus risks.

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