MANHATTAN (CN) — Millions of new unemployment claims, albeit coming in at a slower rate, blunted hopes for another rally on Thursday.
Markets have reacted like a yo-yo all week, with a huge rally on Monday, followed by sizeable losses the next day, and moderate gains on Wednesday. Thursday meanwhile has begun with minor losses: The Dow Jones Industrial Average lost 30 points at the opening bell.
Abroad, markets have had a mixed day, with most exchanges in Asia falling about half a percentage point and those in Europe seeing similar losses as of 9 a.m. EST.
The Labor Department’s weekly unemployment report hit right on the money for analysts’ expectations, with 2.4 million new claims filed with state unemployment offices during the week ending May 16. Many Wall Street economists had predicted anywhere from 2.4 to 2.6 million new claims.
More than 38 million workers have filed unemployment claims since mid-March, when states instituted stay-at-home orders. The seasonally adjusted unemployment rate was nearly 16% for the week ending May 9, according to the data.
Additionally, 2.2 million new “pandemic unemployment claims” have been filed with the federal government. More than half of those new claims came from Massachusetts, which saw 1.1 million new claims last week, up from 70,000 such claims the week ending May 9.
This is the second week the Labor Department has reported claims specifically attributed to the Covid-19 pandemic. The claims are for those diagnosed with Covid-19 or otherwise affected by the disease who would not normally be covered by unemployment. Only 29 states reported pandemic unemployment claims for the week ending May 9, for a total of 841,000 such claims.
Investors hoping the number of new claims continues to drop may be encouraged by news that most small businesses have received their loans under the Paycheck Protection Program.
The PPP, run by the Small Business Administration, allows companies with fewer than 500 employees to apply for loans up to $10 million. Those loans become forgivable grants if at least 75% of the funds are used to fund payroll and currently must be used within eight weeks. If those conditions are not met, they remain as low-interest loans.
Small businesses have seen the program as a crucial lifeline. A survey released Thursday by the National Federation of Independent Businesses found that 80% of its members applied for a loan under the program, with 9 out of 10 applicants receiving their loans.
More than half the companies surveyed expect the entirety of their PPP loan to be forgiven as a grant, with only a handful expecting to pay back the whole loan.
But questions on the program remain. According to the survey, 46% of borrowers say it will be difficult to abide by the eight-week forgiveness window, and 76% of borrowers find it at least somewhat difficult to meet the program’s requirements that most of the funds be used to cover payroll.
Even some proponents of the program worry that, as written, the PPP will be able to keep some small businesses afloat.
During a Wednesday conference call with reporters on Wednesday, Paul Winfree, executive director of the Heritage Foundation’s coronavirus recovery commission, called the program’s rollout “bumpy at best,” and noted that many companies have larger costs than payroll, such as rent or utilities.
“I don’t think the PPP program will be enough to save some of these folks,” Winfree said.
Another persistent problem is that the franchises and publicly traded companies — which were technically eligible under the rules of the program — swarmed banks and elbowed out mom-and-pop stores to quickly drain the funds.
Publicly traded companies had until Monday to return PPP loans without any repercussions, though many have still held onto the loans. According to FactSquared, which searches through public company filings, only 68 out of 423 public companies have announced they returned the loans.
The Treasury Department has been issuing near-weekly guidance on the program, and Secretary Steven Mnuchin has said he is open to granting further leeway to small companies on how the funds are used.
An additional lending facility for small- and medium-sized companies, run by the Federal Reserve, is expected to be up and running by the end of the month.
More than 5 million people worldwide have been confirmed infected by Covid-19, according to data from researchers at Johns Hopkins University, and roughly 328,000 have died. In the United States, more than 1.5 million people have contracted the novel coronavirus and more than 93,000 have died.