Daily Business BriefingJuly 30, 2021Updated
July 30, 2021, 8:40 a.m. ET
July 30, 2021, 8:40 a.m. ETWorkers 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 ago 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 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 United States economy is expected to grow by 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 deaths last year.
Italy grew 2.7 percent and Spain grew 2.8 percent from the first quarter, while Portugal 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, which grew 1.5 percent from the first quarter, perhaps reflecting supply chain problems as a shortage of electronic chips has slowed manufacturing in its massive auto industry.
The French economy, however, struggled to climb out of a recession, growing 0.9 percent from April to June following 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 rose to 2.2 percent in July following a 1.9 percent rate the previous 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 earlier 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, declining to 7.7 percent in 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.
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The Federal Reserve’s favorite inflation index climbed by 4 percent in June compared with a year earlier, as a rebounding economy and soaring demand for goods helped to push prices higher.
The gains in the Personal Consumption Expenditures inflation index were the fastest since 2008, but in line with economists expectations. That rapid pace is not expected to last, but how much and how quickly it will fade is the economic question of the moment.
Inflation has been surprisingly rapid this year. Economists knew prices would post strong increases as they were measured against weak figures from 2020, when costs for many common purchases slumped. But the jump has been more intense than most were expecting.
That’s partly because supply bottlenecks have emerged across America’s reopening economy. Computer ship shortages pushed up the prices of electronics and delayed automobile production, causing used car prices to surge. Employers are struggling to hire back workers fast enough to meet returning demand, and prices for restaurant meals and some other services have begun to move higher.
June’s personal consumption expenditure price data may be a high point in the inflationary saga. Last year’s low figures are fading from the data, and many economists expect the rapid pace of price gains to begin to moderate in the coming months.
On a monthly basis, inflation climbed 0.5 percent from May to June, slightly less than the 0.6 percent economists in a Bloomberg survey had expected. The core inflation index, which strips out volatile food and fuel, climbed 3.5 percent over the past year.
How quickly inflation will fall back to the Fed’s 2 percent target, which it tries to hit on average over time, is increasingly uncertain. It is hard to know how quickly the supply chain snarls that have complicated the price picture so far this year will clear up, or whether new ones will emerge. Climbing coronavirus cases around the world could make for continued disturbances in global production and shipping routes, ones that will hit just in time for back-to-school and the holiday shopping season.
Read moreOil 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.
Read moreCredit…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.”
Read moreA 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.”
Read moreUber will only allow employees to come into its offices if they are vaccinated and wear masks, a spokesman said.Credit…John Muggenborg for The New York Times
Uber told employees on Thursday that it would require them to be vaccinated, and it postponed a mandate to return to the office, joining a group of tech companies that have delayed reopening and stepped up vaccine requirements in response to the spread of the highly contagious Delta variant of the coronavirus.
On Wednesday, Google postponed its return-to-office plans until October and said employees in its U.S. offices would be required to be vaccinated. Lyft, Uber’s largest U.S. competitor, said it would not require employees to return to the office until February. Twitter shut down its San Francisco and New York offices, and put an indefinite halt to its reopening plans. Last week, Apple postponed its reopening until October.
The changes come as coronavirus cases have surged in the United States. Cases in the country increased 146 percent in the past two weeks, according to a New York Times tally.
Uber will also require employees to be vaccinated in order to work from the office. The mandate will begin with employees in the United States, and the company will assess its requirements for employees in other countries based on vaccine availability, Uber’s chief executive, Dara Khosrowshahi, wrote Thursday in an email to staff seen by The New York Times. Unvaccinated employees will be required to work from home.
Uber had already opened some offices for employees who wanted to return voluntarily, and a spokesman said that employees could continue to come into Uber’s offices if they are vaccinated and wear masks. But the company said it would not require employees to return until Oct. 25, a delay from its initial September return date.
“It’s important to say that this date is a global target, and local circumstances will continue to dictate when it makes sense to bring employees back in a given city,” Mr. Khosrowshahi said. “Rising Covid cases in our communities are a real reminder that we still need to be cautious, look at the data, and listen to experts as we return to offices. Every day, teams across the company are closely monitoring the rapidly changing global situation.”
Uber’s return date could be pushed back further if cases continue to surge, Mr. Khosrowshahi wrote.
Uber has not said whether it will require its drivers or riders to be vaccinated. It does require them to wear masks.
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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.
