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Gross domestic product, adjusted for inflation and seasonality, at annual rates

Gross domestic product, adjusted for inflation

and seasonality, at annual rates

The U.S. economic recovery stumbled but didn’t collapse at the end of last year, setting the stage for a much stronger rebound this year.

Gross domestic product rose 1 percent in the final three months of 2020, the Commerce Department said Thursday. That represented a sharp slowdown from the previous quarter, when business reopenings led to a record 7.5 percent growth rate. On an annualized basis, G.D.P. increased 4 percent in the fourth quarter, down from 33.4 percent in the third.

Looking at the quarter as a whole obscures the full extent of the slump: Many analysts believe economic output declined outright in November and December, as rising coronavirus cases and waning government aid led consumers to pull back on spending and forced businesses to shut down, in some cases for good.

But four weeks into January, the new year looks different. Aid passed by Congress in December has begun to flow in enhanced unemployment benefits, small-business loans and direct payments to households. Two runoff elections in Georgia delivered Democratic control of the Senate, making further rounds of assistance more likely. And the rollout of coronavirus vaccines, though slower than hoped, offers the prospect that hotels, bars and other businesses hurt by the pandemic will see customers return later this year.

“That fiscal stimulus is helping push the train of the economy through the tunnel, and the light on the other side is widespread vaccination and inoculation,” said Nela Richardson, chief economist at the payroll processing firm ADP.

The late-year slump was driven by a slowdown in consumer spending. Spending grew less than 1 percent in the fourth quarter, compared with 9 percent in the third. But parts of the economy that are less exposed to the pandemic helped pick up the slack. The housing market continued to surge, partly because of low interest rates, and business investment was strong, a sign of confidence among corporate leaders.

The economy is still in a significant hole. Measured against the final quarter of 2019, G.D.P. ended 2020 down 2.5 percent, making it the second-worst calendar year on record after a 2.8 percent contraction in 2008. Comparing 2020’s output over all with the previous year’s, G.D.P. fell 3.5 percent, the worst on record. The economy has regained roughly three-quarters of the output lost during the collapse last spring, and only a bit more than half of the jobs.

Cumulative percent change in

G.D.P. from the start of the

last five recessions

Final quarter

before

recession

4 quarters

into recession

Cumulative percent change in G.D.P.

from the start of the last five recessions

Final quarter

before

recession

4 quarters

into recession

Still, the rebound has been significantly stronger than most forecasters expected last spring. In May, economists at the Congressional Budget Office estimated that G.D.P. would end the year down 5.6 percent and wouldn’t reach its pre-pandemic level until well into 2022. Now, most forecasters expect it to hit that benchmark this year.

Last year’s overall showing was “bad but not historically bad, and not as bad as what was experienced in the Great Recession, and not nearly as bad as what was expected midyear,” said Jason Furman, a Harvard economist who ran the Council of Economic Advisers under President Barack Obama.

The stronger-than-expected rebound is partly a reflection of businesses’ flexibility — retailers embraced online sales, restaurants built outdoor patios, and factories reorganized production lines to allow for social distancing. But it is also a result of trillions of dollars in federal aid, which kept households and small businesses afloat when much of the economy was shut down.

“The fiscal stimulus package was not perfect,” said Stephanie Aaronson, an economist at the Brookings Institution. “But the truth is both Congress and the Fed acted very, very quickly, and I think that did save the economy from a much worse outcome.”

Credit…Ariana Drehsler for The New York Times

New claims for unemployment fell last week, the government reported on Thursday, but the elevated levels are fueling worries about prolonged damage inflicted on the labor market by the pandemic and the slow rollout of vaccines.

A total of 873,966 workers filed first-time claims for state unemployment benefits for the week that ended Jan. 23, the Labor Department said, while an additional 426,856 new claims were filed under a federal pandemic jobless program that covers freelancers, part-time workers and others normally ineligible for state jobless benefits. Neither figure is seasonally adjusted. On a seasonally adjusted basis, new state claims totaled 847,000.

The figures for newly filed claims are below the staggering levels of last spring, when the coronavirus started its march across the map, but they continue to dwarf previous records.

The impact of the virus on the service sector, particularly leisure and hospitality, is extracting the heaviest toll. “We need the service sector to come back for the economy more broadly to come back,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Although the Conference Board reported on Tuesday that consumer confidence edged up in January, views of the labor market’s current health dropped. The percentage of respondents saying jobs are “plentiful” declined, and the share saying that “jobs are hard to get” rose.

“Everything goes back to the health crisis,” Ms. Farooqi said, “Once you get most of the population vaccinated, that’s a completely different picture.”

The $900 billion pandemic relief bill signed into law last month has provided a bridge of support, but provisions specifically extending relief to jobless workers are scheduled to expire in mid-March.

President Biden has proposed a $1.9 trillion emergency relief package that includes a $400 weekly unemployment insurance supplement, although Republicans and a handful of Democratic lawmakers have balked at the cost of the overall proposal.

Credit…Tristan Spinski for The New York Times

Job recruiters are accustomed to seeing a pattern in late January: When the holiday crush and seasonal gigs end, job-hunting surges. But not this year.

The demand is there, but many of the job seekers aren’t, said Julia Pollak, a labor economist with the hiring site ZipRecruiter.

“In our marketplace over the past three weeks, employer activity has been completely exuberant, it has surpassed our forecasts,” Ms. Pollak said. But the ranks of “job seekers are way, way, way lower than usual.”

Some have argued that generous jobless benefits are discouraging people from working. But Ms. Pollak disagrees, saying the main reason for the low number of applications is the continuing fallout from the coronavirus pandemic.

“Many people who should be looking for jobs aren’t even eligible for benefits, like millions of women who left the labor market for child care,” she said. And some are staying home because of other family responsibilities, or out of concern about getting sick if they re-enter the work force, particularly with the arrival of a more infectious coronavirus strain, she said.

Ernie Tedeschi, an economist and head of fiscal analysis at Evercore ISI, described the labor market as “treading water right now.”

The pandemic and the cold winter months in parts of the country continue to hobble the economy’s recovery, he said, and vaccine distribution has been too slow to have much effect.

At ZipRecruiter, the strongest demand for jobs can be found in delivery services, e-commerce, big-box and grocery stores and warehouse clubs as well as tax preparation, mortgage origination and home building.

Industries like hospitality, leisure, travel and others that involve face-to-face contact have incurred the biggest job losses, but in one way that lopsidedness is reassuring, Mr. Tedeschi said. Those are businesses that one would expect to be down because of the pandemic. It would be more worrying if the weakness had spread throughout the labor market, a sign of longer-term scarring in the economy, he said.

Credit…Lindsey Wasson for The New York Times

American Airlines, Southwest Airlines and JetBlue Airways reported steep annual losses on Thursday, joining industry peers in closing the books on a merciless year for aviation.

American lost nearly $8.9 billion in 2020, which its chief executive, Doug Parker, described as “the most challenging year in our company’s history.” JetBlue shed almost $1.4 billion and Southwest nearly $3.1 billion, its first annual loss since 1972.

“The Covid-19 pandemic challenged our industry in ways we have never seen before,” Robin Hayes, JetBlue’s chief executive, said in a statement.

The airline industry’s hopes now rest on the distribution of the coronavirus vaccine, but none of the airlines expect a rebound to materialize soon. In fact, Southwest expects to incur higher daily losses in January and February than it did in the final three months of 2020 because of a seasonal decline in travel and the rising cost of fuel.

Southwest said it also expected revenues to be down between 65 and 70 percent in January and February compared to a year earlier. American said it expected revenues to be down 60 to 65 percent in the first three months of 2021 compared to the same period in 2019. JetBlue forecast a similar decline.

Operating revenues for 2020 were down about 63 percent for Southwest and 65 percent for both American and JetBlue compared to 2019. Southwest said it ended the year with about $13.3 billion in easily accessible cash and short-term investments, while American had nearly $14.3 billion and JetBlue about $3.1 billion.

Southwest also said that it expects to start flying Boeing’s 737 Max on March 11, just over two years after the plane was grounded worldwide following two fatal crashes. The Federal Aviation Administration lifted its ban on the jet in November and has since been followed by regulators in Brazil, Canada and Europe.

The trio of financial results on Thursday came a day after Boeing reported a $11.9 billion loss in 2020, its worst year ever. Earlier this month, United Airlines reported a $7 billion annual loss and Delta Air Lines a loss of over $12 billion. At the time, Delta’s chief executive called 2020 the “toughest year” in the carrier’s history, and United’s chief executive said the pandemic had “changed United Airlines forever.”

After a tumultuous day on Wednesday, futures markets indicated New York trading would open with a measure of calm on Thursday. The S&P 500 was set to open little changed following the worst single-day drop since October.

European markets opened lower before recovering some of their losses, and Asian stock markets closed in the red. This week, traders have been unnerved by the gloomy short-term outlook for the global economy and the havoc caused by speculative trading in other corners of the market.

Investors are facing a host of concerns, which has increased volatility. There is uncertainty about whether the market can sustain its relentless rise of recent months, and whether asset bubbles were starting to form. They also worried about whether the Biden administration would be able to quickly pass an ambitious stimulus spending program or be forced to pare it back to get a bill through a closely contested Senate.And investors are watching the pace of the coronavirus vaccine rollout, wary of delays that could push back the economic recovery around the world.

“The assumption was by the time we got to midyear we were fully back to normal and that’s being questioned,” said Karen Ward, a strategist at J.P. Morgan Asset Management.

“The whole timeline of vaccine rollout and that point of normality is going back a few months,” she said. “The markets are pretty comfortable waiting as long as they know that in the economic cost that’s incurred in the interim is absorbed by governments.”

Unease also stemmed from the shocking run-up in shares of companies with big brand names but uncertain prospects, like GameStop, the video game retailer; AMC, the movie theater chain; and BlackBerry, once the maker of hand-held devices that no financial professional would leave the office without. The surge pointed to frothy conditions in financial markets, suggesting a bunch of amateurs investors could take the reins and force steep losses on established hedge funds.

Investors who had bet that these stocks would perform poorly were taking losses at a steep cost brought on by a group of traders cheering each other on in a Reddit forum for picking stocks. Point72, the hedge fund run by Steve Cohen, the billionaire hedge fund manager and owner of the New York Mets baseball team, has lost nearly 15 percent this year, according to a person with knowledge of the matter.

Regulators stepped in to say that they were watching the situation. In premarket trading on Thursday, shares in GameStop rose again. Naked Brand, a clothing retailer, was one of the most heavily traded stocks in premarket trading, up more 70 percent after being cited in a Reddit forum.

Elsewhere, investors moved money into traditionally safe assets. Yields on U.S. Treasury bonds fell back toward 1 percent as prices rose.

Europe

The Stoxx Europe 600 was down 0.7 percent.
The FTSE 100 in Britain fell 1 percent, the DAX in Germany was down 0.6 percent, and the CAC 40 in France was 0.2 percent lower.

Asia

In Japan, the Nikkei 225 index tumbled 1.5 percent.
China-related stocks also suffered. The Shanghai Composite Index fell 1.9 percent, while Hong Kong shares were down 2.6 percent.

GameStop One-Week Share Price

GameStop’s shares were one of the most actively traded stocks in premarket trading on Thursday as amateur traders continue to drive it higher, while collectively taking on some of Wall Street’s most sophisticated investors. They’ve piled into trades around companies — big and small — that other investors had written off, pushing stock prices to stratospheric levels.

The main focus is GameStop, the troubled video game retailer. Its stock is up about 40 percent in premarket trading, a much more moderate gain after trading platforms placed restrictions on the stock. But it’s already up 1,700 percent this month, including Wednesday’s climb of 135 percent, that has given the company an astonishing market valuation of $24 billion. AMC Entertainment rose 300 percent on Wednesday, and BlackBerry is up more than 275 percent this month.

Billions of shares were traded in Naked Brand, a clothing manufacturer, on Wednesday. Its share price rose from 39 cents to $1.38, a 252 percent gain. It was again one of the most traded stocks in premarket on Thursday, rising 110 percent, after being cited on a Reddit forum. The company had been trying to orchestrate its own turnaround and escape “penny stock” status to avoid being delisted.

The surging shares have become detached from the factors that traditionally help establish a company’s value to investors — like growth potential or profits. But the traders who are piling in probably aren’t thinking about those fundamentals.

Instead, they are part of a frenzy that appears to have originated on a Reddit message board, WallStreetBets, a community known for irreverent market discussions, and on messaging platforms like Discord. (One comment from WallStreetBets read, “PUT YOUR LIFTOFF DIAPERS ON ITS ABOUT TO START.”) Both Tesla’s Elon Musk and the billionaire tech investor Chamath Palihapitiya have encouraged the crowd via Twitter.

Egged on by the message boards, these traders are rushing to buy options contracts that will profit from a rise in the share price. And that trading can create a feedback loop that drives the underlying share prices higher, as brokerage firms that sell the options have to buy shares as a hedge.

As more traders snap up options, the brokers have to buy up more shares, driving the astounding rise in the company’s stock prices. GameStop began the year at $19 and ended trading on Wednesday at nearly $348.

Another reason the shares are rising so quickly is that, until recently, they were heavily targeted by big investors who bet the stocks would decline by taking on short positions. As the shares surge, the shorters also have to buy the stock in order to cut their losses, and that triggers a so-called short squeeze — a sudden spike in a share’s value.

Gabe Plotkin, the hedge fund trader whose Melvin Capital was shorting GameStop, confirmed to CNBC on Wednesday that he had exited his position after having to raise a $2.75 billion bailout from Citadel and his former boss, Steve Cohen, amid the short squeeze. Mr. Plotkin’s other short bets appear to be suffering, possibly because they are being targeted by traders — Melvin and Mr. Plotkin are often pilloried on the message boards.

The Securities and Exchange Commission said Wednesday it is “actively monitoring” the volatile trading.

Credit…Sasha Arutyunova for The New York Times

As shares of GameStop, the video game retailer, have surged amid a wave of speculative investment by small investors, Point72, the hedge fund run by the Mets owner Steve Cohen, has lost nearly 15 percent this year, according to a person with knowledge of the matter.

GameStop’s sudden rally — the shares jumped 135 percent on Wednesday alone and are up more than 1,700 percent this year — has taken a toll on some large investors who had bet against the stock. The losses at Point72, which manages nearly $19 billion in assets, stem in part from the firm’s investment in Melvin Capital, a hedge fund that had a massive bet against GameStop.

As the shares rose, Melvin was saddled with sudden losses and had to accept $2.75 billion in rescue capital from two outside investors. One of the rescuers was Point72, which already had roughly $1 billion under management with Melvin, said two people with knowledge of the relationship, and added $750 million to help stabilize Melvin this week.

Because Melvin was investing money on Point72’s behalf, Point72’s results have also been hurt by the recent turmoil, said those people.

Point72’s losses are the first clear indication of the ripple of effect of Melvin’s recent troubles, which have been a cause of concern for both Wall Street and the baseball community. Stocks faced their worst performance since October on Wednesday in part because investors are worried that other large funds could be facing losses as well.

And late Tuesday night, Mr. Cohen faced questions on Twitter over the potential impact of the Melvin losses on the Mets, which he purchased for about $2.5 billion in November.

“Why would one have anything to do with the other,” Mr. Cohen replied in a post on Twitter.

A spokesman for Mr. Cohen said he was not available for comment.

Credit…Armando Babani/EPA, via Shutterstock

The European Central Bank on Thursday effectively warned eurozone banks to clean up their acts, saying that many are complacent about losses they may suffer from a surge in problem loans caused by the pandemic.

The central bank, which has ultimate supervisory authority over commercial banks in the 19 countries that belong to the eurozone, also said that top managers at many lenders were not doing a good job of overseeing their operations and that many banks lacked a clear plan to address chronically weak profits.

No large European banks have failed since the pandemic hit. That is largely because after the financial crisis a decade ago, regulators forced lenders to reduce risk and increase their ability to absorb losses.

But in its annual report on the health of eurozone banks, the European Central Bank said that risks to banks remained high, especially as government support programs begin to run out.

Andrea Enria, the head of the European Central Bank’s bank supervision arm, said there was evidence that commercial banks are deliberately ignoring signs that problem loans could spike once emergency measures expire. He pointed to rules that allow companies and individuals to delay loan repayments.

Banks are required to set aside money to cover loans that are likely to default. But these provisions cut into profits and banks often try to keep these reserves as low as they can get away with. Mr. Enria said that provisions for problem loans in Europe were lower than in the United States and other countries, a sign that banks may be systematically underestimating risk.

“Asset quality deterioration remains our main concern for 2021,” Mr. Enria said at a news conference.

He also expressed concern that eurozone banks are loading up on leveraged loans, packages of high-risk credit to businesses that have invited comparison to the mortgage-backed securities that led to the 2008 financial crisis.

Without naming any bank, the European Central Bank criticized managers for “insufficient follow-up and oversight of business functions.” It also said banks were not doing enough to rectify the fact that most of them are barely profitable, if at all.

Mr. Enria urged banks to consider mergers as a way to address the overcrowded European banking market, and said that they need to do more to reduce costs.

“Staff cuts will be absolutely necessary,” he said.

Credit…Ethan Miller/Getty Images

Eric Bolling, a former Fox News personality whose weekly talk show for the Sinclair Broadcast Group showcased his friendly relationship with former President Donald J. Trump, is leaving the broadcasting network, he said on Wednesday.

Mr. Bolling said that he planned to return to television shortly, but that he would wait to share details about his new job until after his Sinclair program, “America This Week,” ends on Saturday. He is also starting a podcast next month with the former Green Bay Packers quarterback Brett Favre.

Hired by Sinclair in 2019 to expand its current-affairs programming, Mr. Bolling was one of a handful of conservative-leaning hosts granted interviews with Mr. Trump during his tenure in the White House. His show aired on Sinclair stations in dozens of local markets.

Sinclair gained attention for mandating that its affiliates air segments from pro-Trump commentators, including a former Trump campaign aide, Boris Epshteyn. In October, Sinclair was forced to edit an episode in which Mr. Bolling spread misinformation about the coronavirus and questioned the utility of lockdowns and face masks.

“Eric has decided to pursue other professional opportunities,” Sinclair said in a statement on Wednesday. “We wish Eric the best in his future endeavors.”

Mr. Bolling was a co-host of “The Five” on Fox News. He left the network in 2017 after denying allegations that he had sent lewd messages to colleagues. He later became a prominent national advocate for curbing opioid abuse after the death of his son, who had taken a pill laced with fentanyl.

It’s called a short squeeze, and it involves investors betting on which way a stock will go — up or down. These bets are placed by buying stock options, and the options allow an investor to make money even if the stock itself loses value. If the stock goes up in value, the bets can become losers. Investors who bet against a stock are called “shorts.”

In the case of GameStop, the video game retailer many professional investors had written off, the shorts include at least two big hedge funds. Now a band of day traders, fueled in part by a message board on Reddit, are putting the squeeze on Wall Street.

The Times’s Matt Phillips explains what’s going on.

Peacock, Comcast’s ad-supported streaming service, grabbed over 33 million customers as of the end of last year, a 50 percent jump from September, the company reported in its fourth-quarter results Thursday.

The company overall saw a 2.4 percent drop in sales to $27.7 billion and a 29 percent plummet in adjusted profit to $2.6 billion as the pandemic continued to cut into its theatrical and theme parks businesses. Still, Comcast’s performance beat investor’s expectations. Brian Roberts, the chief executive, said he is “optimistic” the company will come back toward growth as vaccines are distributed throughout the world.

Comcast also announced it would raise its dividend payments to shareholders by 8 cents on an annualized basis to $1 per share and plans to repurchase shares later in the year. The stock rose more than 3 percent in premarket trading.

Comcast has recast itself as more of an internet and technology provider than a television service, and its focus on Peacock is part of that effort. The company’s quarterly performance has become a regular reminder of that ongoing transformation. Comcast’s traditional pay-TV business lost 248,000 customers in the period, but it added 538,000 broadband subscribers for a total of 30.6 million, a high. Its cable video customers now number only 19.8 million.

The company’s NBCUniversal division, which continues to undergo a massive reorganization, last week announced a deal with WWE to make Peacock its exclusive streaming provider, in effect buying out the WWE Network’s digital TV service. NBCUniversal has been bolstering Peacock’s sports lineup, adding the majority of its Premier League games to the platform. Comcast also plans to shut down its NBC Sports Cable network by the end of this year and shunt its programming over to Peacock and the USA Network.

But longer term, Peacock is meant to replace the lost advertising dollars from a shrinking pay-TV universe. That means it will need to be far larger and be available on digital players as well as other broadband systems such as Cox and Charter. Adding more sports and exclusive content would help add leverage to those negotiations.

Comcast’s NBC broadcast group saw a 12 percent drop in sales to $2.7 billion on weaker advertising, in part because of the loss of sports programming, while its studios division fell 8.3 percent to $1.4 billion. Advertising across its broadcast and cable networks fell 7.8 percent to $2.5 billion. Theme parks dropped 63 percent to $579 million.

The company still expects the Tokyo Olympics to take place this summer, a cash cow for its advertising business.

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GameStop One-Week Share Price