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Sheila Bair: The danger of allowing banks to artificially boost capital ratios

Former FDIC Chair Sheila Bair says regulators are allowing banks to artificially boost their capital ratios, arguing that the Fed should suspend dividends instead.

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UPS, FedEx Flex Price Power on Delivery Surge, Driving Up Shares

(Bloomberg) -- United Parcel Service Inc. and FedEx Corp. shares jumped after the couriers said they are raising prices aggressively to boost profit and help manage an avalanche of residential deliveries spurred by the coronavirus pandemic.UPS plans to apply holiday season surcharges of as much as $4 a package for shippers that send more than 25,000 parcels a week and whose peak-season volume is triple February’s level. On the low end, the charge is $1 a package for ground deliveries for shippers with volume at least 10% above February’s level. UPS, which skipped the peak-season fees last year, charged less than $1 extra per package in 2018.FedEx will boost international surcharges on select routes beginning Aug. 10. Deliveries to the U.S. from Hong Kong will double to $2 a kilo and from Taiwan will jump to $1 from 22 cents. FedEx has said it plans to apply holiday surcharges as well.UPS, FedEx and other couriers have been hit with unprecedented residential package volume amid the pandemic. Deliveries to homes can be more costly than those to businesses because there are typically fewer packages per stop and more distance between locations.The surge in demand has given couriers leverage to raise prices, however. UPS’s average U.S. volume climbed 23% in the second quarter from a year earlier, and FedEx U.S. ground deliveries jumped 20% in its latest quarter.UPS increased 7.4% to $156.19 at 12:54 p.m. in New York, while FedEx climbed 5.3% to $181.37. UPS advanced 24% this year through Thursday, while FedEx gained 14% and the S&P 500 rose 3.7%.“The peak surcharges reflect current market conditions caused by the pandemic, which includes consumer demand and available capacity,” Atlanta-based UPS said by email Friday. The fees will “help balance the volume in UPS’s network so we can provide the best possible service.”Its holiday surcharges apply from Nov. 15 to Jan. 16. From Oct. 4 through Jan. 16, the company will also charge $50 for each large package and $250 for deliveries that exceed maximum limits, according to UPS’s website.“The companies that are going to be hurt by these surcharges are the companies that can least afford it at this point, and that’s retailers,” said John Haber, chief executive officer of Spend Management Experts, a package shipping consulting firm.Many retailers have turned to e-commerce as a lifeline while customers stayed away from stores because of the virus, he said, and only strong merchants such as Amazon.com Inc. and Walmart Inc. will likely be able absorb the surcharges without passing them on to customers.FedEx began to apply international surcharges in April as volumes jumped and commercial airlines, which carry some cargo in the belly of their planes, reduced flights dramatically. The company is incurring extra costs because of virus-related restrictions by countries seeking to contain the spread.“Those restrictions continue to disrupt the global supply chain,” the Memphis, Tennessee-based company said by email. “Air cargo capacity is limited, and we are incurring incremental costs as we adjust our international networks.”FedEx and UPS aren’t expected to boost capacity much in the medium term, said Stephens analyst Jack Atkins. Combined with the surge in residential packages and international demand, that means the couriers will have the upper hand on price for a while, he said in a note Friday before the surcharges were announced.“We believe the pricing story in parcel has legs,” he wrote.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Better-Than-Expected U.S. Jobs Data Seen as Last of ‘Easy Gains’

(Bloomberg) -- The U.S. labor market’s third straight month of solid improvement from the depths of the pandemic could very well be its last for a while.Workers returned to low-wage jobs at restaurants and retailers, as major cities -- especially New York -- continued to reopen early in the month. Since then, though, many measures of activity have leveled off and a key relief program has expired with no agreement on a new deal. The July jobs report also showed that millions of Americans who lost their jobs in the early days of the pandemic remain unemployed, with the overall rate still almost triple the pre-crisis level.“We’ve had the easy gains and the labor market is becoming a little more difficult now,” said Brett Ryan, senior U.S. economist at Deutsche Bank AG. “Going forward, the expectation should be a gradual step-down“ and “it may not be a straight line in terms of improvement every month.”Employers added 1.76 million jobs in July, about 300,000 more than economists expected, according to data Friday from the Labor Department. The unemployment rate fell by about 1 percentage point to 10.2%, just above the peak following the 2008 financial crisis but a marked decline from almost 15% at the height of the pandemic.Further job gains are looking increasingly difficult with no vaccine yet in sight, and several signs point to weakness in months ahead: a federal $600 supplement to weekly unemployment benefits, which provided extra cash to prop up households, expired at the end of July. That means fewer dollars spent into the economy and at businesses, which also face the end of funds through the Paycheck Protection Program.The jobless payments are particularly important with millions unemployed for months now. Out of the 16.3 million unemployed Americans in July, almost 8 million had been out of work for 15 weeks or longer, or roughly since the start of the pandemic. That figure was up 4.7 million from June.Meanwhile, negotiations over extending the relief have stalled.“The talks are rather stalemated right now,” White House economic adviser Larry Kudlow said on Bloomberg Television after the report Friday. Despite that, President Donald Trump plans to use executive orders to get “certain priorities through” including a payroll tax cut and eviction moratorium, he said. Kudlow continued to call the economic recovery “V-shaped.”But that recovery is on pause, casting a shadow over the labor market. High-frequency indicators show that economic and payroll activity slowed or declined in the weeks following the survey period for the government’s jobs report, which takes place early in the month.“What we have is an economy that’s still adding back but with the slowing in the reopening, we’re setting August up for a very questionable report,” said Joel Naroff, president of Naroff Economics LLC.Read more: Bloomberg’s TOPLive blog on the jobs reportU.S. equities were mixed on Friday as investors weighed doubts that lawmakers will be able to agree on a new round of economic stimulus with a better-than-forecast jobs report.What Bloomberg’s Economists Say“Following an unprecedented swing from severe drop to sharp rebound, the economy is entering more conventional recession dynamics. A prolonged period of elevated unemployment and subdued participation in the labor market will weigh heavily on income growth, personal spending and top-line growth.”\-- Yelena Shulyatyeva, Andrew Husby and Eliza WingerClick here for the full noteLow-wage sectors led gains: payrolls at restaurants jumped by half a million, retail trade employment also increased, though at a slower pace, with more than 250,000 jobs added. Health care and social assistance payrolls rebounded as doctors’ offices continued to open and as demand for day care increased.Manufacturing employment rose just 26,000 in July, about one-tenth of forecasts. Auto makers added more than 39,000 workers.Government PayrollsThe report also showed a 241,000 jump in local-government employment, reflecting seasonal adjustments in the education sector.While companies are hiring, including Amazon Inc., Alphabet Inc., Ford Motor Co. and D.R. Horton Inc., layoffs have been piling up in recent weeks, particularly in industries most affected by the pandemic. American Airlines Group Inc. advised that 25,000 jobs are at risk when aid expires and United Airlines Holdings Inc. said it would furlough one-third of its pilots. L Brands Inc., which owns Victoria’s Secret, said it would lay off 15% of its workforce.The July jobs report also showed little improvement for Black Americans, with their unemployment ticking down only slightly to 14.6%, compared with 12.9% for Hispanic workers, and 9.2% for Whites. The jobless rate for women, who carry the most responsibility for childcare and homecare duties, fell to 10.5% and for men it dropped to 9.4%.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.