US ECONOMY & POLITICS

Jobless Claims Drop for First Time in Four Weeks – Wall Street Journal, 10/7/2021

• Filings for jobless benefits last week fell for the first time in four weeks, as employers continue to eschew layoffs amid a tight labor market.
• The Labor Department reported Thursday that initial unemployment claims, a proxy for layoffs, fell 38,000 in the week ended Oct. 2 to a seasonally adjusted 326,000, from a revised 364,000 the prior week. That put initial claims close to their pandemic low of 312,000 in the week ended Sept. 4.
• Meanwhile, the number of Americans continuing to claim unemployment benefits again dropped sharply, a sign of the impact of states broadly ending several federal pandemic benefits programs.
• Continuing claims, a proxy for those receiving payments, made to all unemployment programs fell to about 4.17 million in mid-September from about 12 million in late August, before the pandemic aid expired. The data accounting for all programs isn’t seasonally adjusted, and is reported on a several-week delay.
• Some states are still paying pandemic benefits as they work through backlogs.
• The end of enhanced and extended benefits reduced federal spending on such programs. Weekly Labor Department disbursements to states for unemployment programs have fallen sharply since the end of pandemic assistance in early September, to $1.65 billion for the week ending Oct. 1

Schumer Says Deal Reached on Short-Term Debt-Limit Extension – Wall Street Journal, 10/7/2021

• Senate Majority Leader Chuck Schumer said he reached a deal with Republicans to defer a showdown over the debt ceiling until December, in the face of mounting concerns over a possible government default.
• The debt ceiling doesn’t authorize new spending but allows the Treasury to raise money to pay for expenses the government has previously authorized.
• Even so, Republicans have wanted to force Democrats to pass the debt limit without any GOP help, seeking to tie Democrats, at least in voters’ eyes, to higher debt levels just as the party pursues programs that would cost in the trillions of dollars.
• Democrats, who are using reconciliation to pass much of Mr. Biden’s legislative agenda, had argued that embracing that procedure for the debt limit as well would be too risky and time consuming, and said that the easiest path was for Republicans to just step aside.
• But other factors were at play: Under the rules governing reconciliation, Democrats may also be forced to assign a dollar value to the new debt ceiling level, more directly tying Democrats to higher debt, rather than simply suspending the limit to a future date.
• Democrats had begun discussing whether to curtail the filibuster—the tactic that allows the minority to block legislation by assembling 40 of 100 no votes—to enable a debt-ceiling increase to pass with the votes of 50 senators, with Vice President Kamala Harris breaking a tie.
• Sen. Joe Manchin (D., W.Va.) effectively threw cold water on that plan on Wednesday when he indicated that he wouldn’t support such a move, but the growing clamor among Democrats may have helped push both parties to a deal.

U.S. Troops Have Been Deployed in Taiwan for at Least a Year – Wall Street Journal, 10/7/2021

• A U.S. special-operations unit and a contingent of Marines have been secretly operating in Taiwan to train military forces there, U.S. officials said, part of efforts to shore up the island’s defenses as concern regarding potential Chinese aggression mounts.
• About two dozen members of U.S. special-operations and support troops are conducting training for small units of Taiwan’s ground forces, the officials said.
• The U.S. Marines are working with local maritime forces on small-boat training. The American forces have been operating in Taiwan for at least a year, the officials said.
• The U.S. special-operations deployment is a sign of concern within the Pentagon over Taiwan’s tactical capabilities in light of Beijing’s yearslong military buildup and recent threatening moves against the island.
• Taiwan and U.S. officials have expressed alarm over nearly 150 flights near Taiwan in the past week by Chinese military aircraft.
• The Chinese aircraft have included J-16 jet fighters, H-6 strategic bombers and Y-8 submarine-spotting aircraft and have set a record for such sorties, according to the Taiwan government.

Richest Americans Flee Treasuries With Holdings at 17-Year Low – Bloomberg, 10/7/2021

• America’s super-rich hold fewer U.S. government and municipal securities than they’ve done for almost two decades, according to recent data from the Federal Reserve.
• The top 1% of households by income held $887 billion of those assets as of June, the smallest amount in 17 years and down from a peak of $1.5 trillion a decade ago.
• Americans lower down the income ladder have been trimming their holdings too. Public and municipal debt held by the bottom 99% of households peaked at about $3 trillion in June 2019, and is down by almost $400 billion since then.
• The top 20% of households held 74.2% of U.S. government and municipal securities, the lowest share in records dating back to 1989, according to the Fed.

EUROPE & WORLD

German industrial production slumps on supply chain disruption – Reuters, 10/7/2021

• German industrial output suffered its steepest drop in August since April last year, due to supply chain disruptions that are holding back growth in Europe’s biggest economy and hitting the auto sector particularly hard, official data showed on Thursday.
• The Federal Statistics Office said industrial output fell by 4.0% on the month after an increase of 1.3% in July.
• A Reuters poll had pointed to a decline in August of 0.4%.
• Production of cars and car parts fell by 17.5% on the month.
• Separately, prices for newly built residential buildings rose by 12.6% on the year in August, their biggest rise since November 1970. German consumer prices rose by rose by 4.1% year-on-year last month.

Inflation Worries Hit U.K. Markets as Energy Prices Soar – Wall Street Journal, 10/7/2021

• Surging energy costs have spread fear among investors in recent weeks that inflation isn’t going away.
• One place where the strains are being felt most acutely is the U.K., where bond markets have exhibited some wild moves.
• The most dramatic swings took place with government bonds whose coupons are linked to inflation. Those bonds, and derivatives known as swaps, are seen as a measure of where investors believe inflation is headed. Yields on them surged to their highest levels in over a decade.
• Inflation-linked gilts, as U.K. government bonds are known, signaled that the U.K.’s retail price index could jump to an annual rate of 7% by April 2022, according to Deutsche Bank.
• The rate on one-year inflation swaps surged to 6.27% earlier this week, up from 5.77% last week, the highest level since at least 2005 and hovered close by on Thursday. The three-year inflation swap rate also jumped, approaching 5% in intraday trading.

European Industry Buckles Under a Worsening Energy Squeeze – Bloomberg, 10/7/2021

• European industry is being pushed closer to breaking point as the region’s energy crisis worsens by the day.
• Power and gas prices are hitting fresh records almost daily, and some energy-intensive companies have temporarily shut operations because they’re becoming too expensive to run. As winter approaches and Europeans start to turn on their heaters, the squeeze will intensify, pushing more executives into tough decisions about keeping plants open.
• Ammonia producer SKW Stickstoffwerke Piesteritz GmbH is among those that’s been forced into drastic steps.
• The German company, which burns through 640 gigawatt hours of natural gas each year, equivalent to about 50,000 households, said Tuesday it will cut production by 20% to offset rising gas prices.
• “It doesn’t make sense to make ammonia at these price levels,” said Chief Executive Officer Petr Cingr. “A complete production stop looms if the government doesn’t act.”
• On Wednesday, the European Union issued a fresh warning and said it will outline measures including tax cuts and state aid that governments can use to help.

Chinese Property Bonds Tumble Again – Wall Street Journal, 10/7/2021

• Asia’s junk-bond market suffered through another wave of selling Thursday, pushing prices of many Chinese developers’ bonds further into distressed territory.
• Prices of U.S. dollar bonds of many Chinese property companies gapped lower by around five points, according to several market participants. Some tumbled even more, as fears of more defaults and further price declines led many investors to sell their holdings.
• Among the worst hit were bonds of Kaisa Group Holdings, a residential developer that previously defaulted on its international debt in 2015. The company’s Hong Kong-listed shares dropped 7.5% on Thursday despite a broader stock market rally in the city.
• A day earlier on Wednesday, an ICE BofA index of high-yield dollar bonds from Chinese companies showed a yield of more than 18%, its highest in nearly a decade.

Tilray posts 43% rise in quarterly revenue on strong cannabis demand – Reuters, 10/7/2021

• Canadian pot producer Tilray on Thursday reported a 43% rise in first-quarter revenue, driven by strong demand for cannabis after coronavirus-led lockdowns.
• The world’s largest cannabis producer by sales said its revenue rose to $168 million in the quarter ended Aug. 31 from $117.49 million a year earlier. Net cannabis revenue jumped 38%.
• Tilray’s net loss widened to $34.6 million in the first quarter from $21.74 million, as total expenses more than doubled.
• The company said it was on track for at least $80 million in cost savings from its deal to merge with Aphria.
• Tilray, which announced the deal in December, added that it had saved about $55 million on a run-rate basis to date from the deal, with actual cash savings close to $20 million.

UN ends Yemen war crimes probe in historic defeat at rights body – Reuters, 10/7/2021

• The United Nations Human Rights Council narrowly agreed on Thursday to end the mandate of its independent investigators who have found that all sides in Yemen’s conflict have committed acts that may amount to war crimes.
• Saudi Arabia lobbied heavily against the Western resolution that would have extended by two years the mandate of the independent team who have documented possible war crimes in Yemen, including by the Riyadh-led coalition, activists said.
• The vote at the 47-member Geneva forum was 21 countries against the resolution presented by the Netherlands, with 18 in favor, seven abstentions and one delegation absent (Ukraine).

Factmonster – TODAY in HISTORY

• The Stamp Act Congress convened in New York to draw up colonial grievances against England. (1765)
• Poet-writer Edgar Allan Poe died at age 40. (1849)
• The Republic of East Germany was formed. (1949)
• Andrew Lloyd Webber’s “Cats,” the longest running show in Broadway history, opened. (1982)
• U.S. and British forces launched bombing campaign against Taliban government and al-Qaeda terrorist camps in Afghanistan. (2001)
• California governor Gray Davis was recalled and former bodybuilder and actor Arnold Schwarzenegger was elected in his place. (2003)