(Bloomberg Opinion) -- About two years ago, I wrote my first column on collateralized loan obligations. It followed a Barron’s article pointing individual investors to funds that buy the riskiest equity and junior debt of CLOs and offer double-digit yields. I posited that the peak must be close, based mostly on a hunch that markets only get truly frothy when mom and pop show up.With the benefit of hindsight, that turned out to be about right. Oxford Lane Capital Corp., a fund flagged by Barron’s that traded at $10.53 in July 2018, would top out at $11.50 a month later. It’s now worth just $3, not far from its low in March. Eagle Point Credit Co., which traded at $18.65 at the time, would climb by less than a dollar over the following year and is now hovering around $5.75. While these investments are known for their high yields, that’s still a steep loss in total value. And unlike public equities and even high-yield bonds, the funds show little evidence of rebounding anytime soon.What’s happening here? In the words of S&P Global Ratings: “The CLO structures are working as intended during periods of economic stress.”It truly is as simple as that. The equity and mezzanine tranches of CLOs offer huge returns but carry the risk that at the first sign of trouble, they’ll get nothing. It’s all part of how the structure is designed to protect the highest-rated portions, which famously never defaulted during the financial crisis and are owned widely by conservative investors like Japanese banks.And trouble has surfaced. Since early March, some 440 of the more than 1,500 obligors held in broadly syndicated U.S. CLOs rated by S&P have either been downgraded, placed on a negative CreditWatch, or both. Consequently, S&P has gradually put lower-rated CLO tranches themselves on negative CreditWatch, with the tally reaching 418 as of May 8. That usually either results in a downgrade or no change within 90 days. Meanwhile, Moody’s Investors Service has 859 CLO tranches worth $22 billion on downgrade watch.That portends more pain ahead for those who have tried to ride out the worst of the market’s swoon. Oliver Wriedt, chief executive officer of DFG Investment Advisers, said last week in a Bloomberg TV interview that “weaker hands” in the CLO market could be forced to sell in the coming months. Some investors might “be unable to hold tranches that are downgraded or tranches that are no longer current-pay,” he said. Many CLOs are next scheduled to distribute cash in early July. According to Bloomberg News’s Adam Tempkin, it’s likely more of them will breach key compliance tests by then, meaning some payments will shut off.“We’re excited about picking winners and avoiding losers in a market where that skill will be richly rewarded,” Wriedt said. Thus far, his company has been active in investment-grade tranches while treading cautiously among riskier parts of the debt stack.While the complete story of this economic collapse has yet to be written, one of the core themes of the first few months has been the short-lived opportunities for those investors looking to scoop up bargains. Legendary market gurus like Berkshire Hathaway’s Warren Buffett and Oaktree Capital Group LLC’s Howard Marks have pointed out that the Federal Reserve’s interventions across asset classes have kept prices from falling to levels they deem attractive. CLOs and leveraged loans are proving to be something of an exception. Triple-B and double-B CLO tranches have lost roughly 14% and 24%, respectively, so far this year. “We’re not expecting the support programs to meaningfully include the loan or CLO market,” Wriedt said. He’s buying with the expectation that “we’ll have to work this out by ourselves.” For its part, the Fed is well aware of the potential pain ahead for CLOs. Its latest Financial Stability Report, released May 15, doesn’t mince words when it comes to the structures:Defaults on leveraged loans ticked up in February and March and are likely to continue to increase, with the specific contour highly dependent on the path of overall economic activity. Such developments would weaken the balance sheets of lenders, including CLOs that hold leveraged loans, and amplify the economic effects of COVID-19.…Many lower-rated CLO tranches have been put on negative watch by rating agencies, indicating that material downgrades to those tranches are likely in the future. Some CLO investors such as hedge funds purchase lower-rated tranches using leverage. Downgrades of CLO tranches could result in margin calls on leveraged investors, forcing them to reduce their exposure by selling their holdings. Such sales have the potential of putting additional pressures on leveraged investors.It’s hard to spin this as anything other than ominous. Which, naturally, seems to be precisely why opportunistic credit funds are starting to circle this market waiting for the right time to pounce.Just last week, Bloomberg News’s Sally Bakewell reported that Tubkal Credit Partners, a fund set up with family office capital, is aiming to raise $100 million to invest in beaten-up European and U.S. lower-rated CLOs. That follows similar moves from Napier Park Global Capital and Neuberger Berman. These new funds signal that those looking for outsized profits need to act fast. Morgan Stanley strategists wrote last week that most speculative-grade European CLO tranches will ultimately return full par and deferred interest to investors, though not without the potential for wide price volatility in the interim.Which brings it back to individual retail investors, who are often less willing to ride through painful times than institutional managers. It’s hard to say how many of them bought risky CLO exposure a couple of years ago. However, it’s clear institutions are beginning to nibble now. Neuberger Berman added 400,000 shares of the Oxford Lane closed-end fund sometime in the first quarter, or about 0.5% of the shares outstanding, the biggest increase in limited data compiled by Bloomberg. Freestone Capital Management, an independent wealth adviser to high net worth families and institutions, piled the most into the Eagle Point fund in the three months through March. Private-equity firm Stone Point Capital holds almost 20% of the Eagle Point shares (though, as it happens, trimmed its position in mid-2018).With all the high-profile investors flummoxed at how stocks and risky corporate bonds can rally through a pandemic, CLOs and leveraged loans will be worth monitoring as some of the few the assets left behind. So far, they’ve inflicted serious pain on those who were left holding the bag when the coronavirus struck.But more risk takers will likely mobilize to buy low-rated CLOs on the brink of downgrades in the next few months. It could be little more than a desperate move, especially if global economy recovers more slowly than anticipated. But it’s about all that can be done to aim for high returns at a time when central banks are doing everything in their power to suppress volatility.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

(Bloomberg Opinion) -- Big, futuristic investment bets on the post-coronavirus period still feel too early. Yet Toyota Motor Corp. seems to be confident that the dollars will matter.That stands out in a world where most rivals can barely think about cash flows for the next six months, let alone investments a year from now. While guiding toward an 80% drop in operating profits for its 2021 fiscal year, Toyota says it plans to drop capital expenditures by around 3% and keep that spending at 1.35 trillion yen ($12.6 billion), while lowering research and development only 1%. As a portion of net revenues, R&D would rise to 4.6% to about 1.35 trillion yen, up from 3.7%, which is the average since 2017.Toyota is doing what it hasn’t during previous crises that damaged supply chains and businesses around the world. In a speech during this week’s earnings call, President Akio Toyoda recalled the four difficult years after the financial crisis, made worse in 2011 by a devastating earthquake and tsunami in Japan and flooding in Thailand. The company cut costs and investments and grew substantially leaner, but “lost necessary muscle.” Toyoda said that “because we stopped everything to stop the bleeding, including investing in the future, we ended up needing some time to strengthen our company composition.”In the past couple of years, Toyota has splashed out billions on the future of cars. The investments range from $1 billion in Southeast Asia’s largest ride-hailing service, Grab Holdings Inc., the largest by an automaker, to $500 million in Uber Technologies Inc. It also has set up a joint venture with Softbank Corp. Meanwhile, the Toyota Research Institute and its Advanced Development offshoot have tried to go big into fields like artificial intelligence.So far, it’s hard to say what the exact returns have been, and it will stay that way while Covid-19 has people locked down and driving less. As long as the pandemic and its economic devastation mean lost jobs and tighter purse strings, will consumers really be ready to spend on electric cars or fancy gadgets? It seems more likely that they’ll push off upgrades for later. No one is in the mood to spend, except, well, Toyota. Sure, outlays now, in theory, set the company up to get ahead of the industry. But Toyota hasn’t necessarily shown technology prowess in the past, so it’s hard to say whether it will be able to going forward. The automaker could very well catch the future wave just right, or mistime it terribly.Corporate liquidity has become a prized commodity globally. To bolster its already-strong balance sheet, Toyota said it has signed up for a 1.25 trillion yen loan, a prudent move. But how does that square off against the planned spending, which is almost as much as in previous years? Even before the pandemic, pressure to keep up with increased connectivity and autonomy was weighing on carmakers’ balance sheets. Moody’s Investors Service noted after downgrading Toyota in April that accommodating new investments means companies “are required to save costs elsewhere.”There seem to be two Toyotas, as I have noted previously. One is focused on cost-cutting and operating within the confines of a struggling world market, and the other is trying to spend into the future. The first enables the second. Two years ago, Toyoda said that the company would hone the power of cost reduction “to strengthen earning power and expand our investments in new technology and new fields."Slimming down, especially now, is difficult. It’s unclear how Toyota classifies all of these investments, and whether they fall under R&D outlays, but costs as a portion of net sales have been edging up on a quarterly basis, despite tight control. Meanwhile, the Covid-19 production line challenges – when to stop, when to open – remain and require spending. With sales and the core business undergoing deep change, it’s hard to justify large expenditures for unknown returns. Investors may have the same problem.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

(Bloomberg Opinion) -- Two months ago, as Congress considered its initial legislative response to the economic crisis caused by the coronavirus, speed was of the essence. Now a more deliberate pace is called for. That’s why congressional Republicans are right to be hesitant about the $3 trillion coronavirus relief bill that House Democrats unveiled on Tuesday.The first coronavirus relief bill was remarkable for the bipartisanship and compromise involved. President Donald Trump relented on the suspension of the payroll tax he had championed in favor of the Paycheck Protection Program. House Democrats entrusted the Federal Reserve with a huge lending package for big business. Senate Republicans acquiesced to an unprecedented increase in unemployment benefits.Each of these programs has seen some of its skeptics’ fears come true. That has understandably increased resistance to the House’s sweeping legislation, which includes funding for rural broadband expansion and a bailout for the U.S. Postal Service. Remarks from some state leaders, about how they intend to use Covid-19 aid to pursue long-standing objectives unrelated to the current crisis, also haven’t helped.None of this is to say that relief is unnecessary. Another round of aid is almost certainly called for, on both humanitarian and economic grounds. State and local governments are facing large budget shortfalls due to the pandemic. Not only are they spending more to combat Covid-19, they are also seeing declines in sales and income tax revenue from the social distancing that began in March.These revenue losses are due not to irresponsible budgeting, but to efforts to contain the loss of life. Moreover, without some sort of federal support, states are likely to turn to drastic budget cuts and large tax increases. Both strategies would increase immediate hardship and slow long-term economic recovery.It’s important, however, to put in context the size and urgency of the support being asked for.During the Great Recession, Congress provided about $290 billion in aid to states. That covered only about 40% of state budget gaps, with the rest being made up by budget cuts and spending increases that slowed the national recovery. So far in response to Covid-19, the federal government has appropriated $535 billion in relief to state and local governments. In addition, the Federal Reserve has created a $500 billion municipal lending facility.For all of 2020, combined state and local tax revenue was expected to be about $1.84 trillion. More than half of that has already been offered in some form relief. If Congress appropriated another $1 trillion, federal aid to state and local governments this year would actually exceed their expected tax collections.Some more context: Moody’s latest estimate is that states will see a combined revenue decline of $160 billion in 2020 and 2021. Even the most pessimistic forecasts put the shortfall at $500 billion over the next three years. That’s less than a quarter of the $2 trillion in aid that would, under the House Democrats’ plan, be appropriated over the course of a few months.The temptation for states to take advantage of congressional generosity to fund a wish list of projects is understandable. Indeed, if any one state is doing so, it would almost be political malpractice for other states not to try.Fulfilling those wish lists, however, will undermine public trust and could create a backlash that threatens future aid — not only for this crisis but also for future ones. Congress therefore has responsibility to provide aid that is sufficient but appropriate to the situation.That may mean some funding now, but at levels far lower than proposed. Then, as the full extent of revenue shortfalls becomes clear, Congress should be prepared to do more. The pandemic is affecting every state differently, but it is in the national interest that all states be able to provide essential services, maintain reasonable tax rates and contribute to America’s economic recovery.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Karl W. Smith, a former assistant professor of economics at the University of North Carolina and founder of the blog Modeled Behavior, is vice president for federal policy at the Tax Foundation.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Moody’s Analytics offers free access to loan-level mortgage and auto data during the COVID-19 pandemic

Moody’s Corporation (NYSE:MCO) today announced that it has been named for the first time to DiversityInc’s Top 50 Companies for Diversity, premiering at number 45 on the list. Moody’s was also recognized as a Top 29 Company for LGBT employees on DiversityInc’s specialty list.

(Bloomberg Opinion) -- Not too long ago, BlackRock Inc. was super bullish on the prospect of exchange-traded bond funds. While it took 17 years for these passive vehicles to reach $1 trillion in assets under management, doubling that would take a fraction of the time, the investment manager predicted. These funds have become “disruptors” of the once opaque and difficult-to-access global bond market, it said. Passive funds have indeed become popular. More than 60% of institutional investors used debt ETFs last year, up from 20% in 2017. Meanwhile, emerging market bond ETFs represent the fastest growing segment, rising at an annualized rate of 38% over the last decade, to $82 billion in assets under management.  As much as BlackRock’s marketing executives may tout “disruption,” instability is one thing developing markets can do without — especially now that they’re issuing debt left and right. Investors are understandably starting to ask who will pay when things go pear-shaped. If they bail, the passive funds they’ve gobbled up could well kill emerging-market investing. Take a look at BlackRock’s $13 billion iShares J.P. Morgan USD Emerging Markets Bond ETF. It’s well-liked by investors because it tracks sovereign dollar issues, which takes the problem of currency volatility off the table. But its exposure doesn't accurately reflect the gross domestic product of its constituents. China, for instance, has a weighting of just 3.8%, making it the eighth-largest component of the ETF. Meanwhile, Argentina, Turkey, South Africa, Egypt and Colombia — the new Fragile Five according to Bloomberg Intelligence — together have a 14% weight, data compiled by Bloomberg show. Add the next five in line, and about 35% of your ETF’s holdings are vested with the most vulnerable nations.(1) BlackRock is simply tracking the widely followed J.P. Morgan index, which is by no means the only one with a heavy tilt toward troubled countries. The Bloomberg Barclays EM USD Aggregate Sovereign Index, for instance, also has more than a third of its weight behind the Fragile 10. Since the collapse of Lehman Brothers Holdings Inc., quantitative easing has driven billions of dollars of capital into emerging markets. With rates near zero in the developed world, investors have eagerly  taken on extra risk in the pursuit of yield. As a result, nations with current account and fiscal deficits, such as Indonesia, ended up issuing plenty of dollar bonds. Meanwhile, healthier ones, like export-oriented China and South Korea, developed their domestic government bond markets instead. After all, it’s cheaper to raise money in your own currency. Beijing only raises dollar bonds when it feels like showing off its prime rating abroad.Now, the virus is raising uncomfortable questions. Economies big and small are on lockdown, facing large shortfalls in government revenues and big fiscal spending plans. How will the most vulnerable ones meet their debt obligations?In mid-April, the Group of 20 agreed to halt repayments for the poorest countries. That won’t be enough. African economies, for instance, have the largest external funding gap among the low-income group analyzed by Moody’s Investors Service Inc. That amounts to around $40 billion to $50 billion this year, or about 4% to 5% of their combined GDP. The G-20 debt relief is worth only $10 billion.If, say, a few African countries lit up the global news headlines by walking a tad too close to default, would ETF investors sell out of their positions altogether? It wouldn’t be irrational. Thanks to passive funds’ transparency, we know at least one-third of our positions are vested with some of the most fragile emerging economies.BlackRock created retail products from an asset class once preserved for professionals. This great democratization experiment is a double-edged sword. Sure, it helps struggling nations raise money. But in times of distress, contagion becomes the word. Stock pickers — value investors, in particular — have long argued ETFs distort equity markets. That assessment isn’t far off for fixed income, either.(1) Bloomberg Intelligence has assigned a vulnerability rating based on current account balance, short-term external debt, reserve coverage, government effectiveness and deviation from inflation targets.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

A look at the value investor's latest 13F filing Continue reading...

The $357 million YCG Enhanced fund looks for companies with enduring pricing power in growing industries. The strategy has paid off.

Moody’s Corporation (NYSE: MCO) announced today that Mark Kaye, Senior Vice President & Chief Financial Officer, will speak at the Barclays Americas Select Franchise Conference on Tuesday, May 12, 2020. Mr. Kaye’s presentation will begin at approximately 9:00 a.m. Eastern Time and will be webcast live. The webcast can be accessed at Moody’s Investor Relations website, ir.moodys.com.

Bureau van Dijk, a Moody’s Analytics company, and RDC, which Moody’s acquired in January, are Category Leaders in a new Chartis Research report.

71% of portfolio managers are unable to view performance attribution of ESG factors, finds a survey by RiskFirst, a Moody's Analytics company.

Optimum Reassurance Inc. has selected the Moody’s Analytics RiskIntegrity™ for IFRS 17 solution to meet the new accounting standard.

The coronavirus pandemic poses significant risks to the collateralised loan obligations (CLOs) market as the creditworthiness of the debt deteriorates, the European Union's securities watchdog said on Wednesday. CLOs are securities backed by a pool of loans taken out by companies that have high levels of debt and typically a non-investment grade credit rating. The European Securities and Markets Authority (ESMA) said in a report on how Moody's Investors Service, S&P Global Ratings and Fitch Ratings credit rating agencies rate CLOs that it had a number of supervisory concerns.

Moody’s Corporation (NYSE: MCO) announced today that Raymond McDaniel Jr., President & Chief Executive Officer, will speak at Bernstein’s Thirty-Sixth Annual Strategic Decisions Conference on Thursday, May 28, 2020. Mr. McDaniel’s presentation will begin at approximately 8:00 a.m. Eastern Time and will be webcast live. The webcast can be accessed at Moody’s Investor Relations website, ir.moodys.com.

Q1 2020 Moody's Corp Earnings Call

(Bloomberg Opinion) -- Andrew Bailey, the Bank of England’s new governor, tried out a little bit of “whatever it takes” central banker language last week by opening up the possibility of negative interest rates in the U.K. “I don’t want to say we’re nearer” to that eventuality, he said “but we’re not ruling anything out.”For now the BOE’s focus is still on buying more bonds through its quantitative easing programs to manage the Covid-19 economic crisis, and rightly so. Negative rates would open up a dangerous pathway for Britain. They should only be used if nothing else manages to stimulate the economy. The official bank rate has been lowered twice this year already to its current 0.1%.With Prime Minister Boris Johnson’s post-lockdown plan only just published, we need to see whether it gives an adequate boost to consumer spending, which constitutes about one-third of the U.K.’s gross domestic product and is the driver of the country’s economy. There’s certainly a lot of room for improvement. Barclays Plc reported that credit card spending fell 53% in the last week of March versus the prior year comparison. And, during normal times at least, Brits don’t need much encouragement to start spending: The U.K. household savings rate is about 6%, significantly lower than the 10.5% European average.One possible advantage of a gradual and staggered reopening would be if people took their summer holidays in the U.K., providing a desperately needed leg-up to the domestic hospitality and leisure industries. Cutting deposit rates to zero or below wouldn’t make those who can afford to spend feel any more emboldened.The experience of negative rates thus far in Europe doesn’t really show that they stop citizens from saving and get them to spend more (the euro area’s household savings rate has remained elevated in recent years). They could indeed do the opposite by making savers worry about their dwindling nest eggs, leading in turn to increased hoarding. From a pure markets perspective, there’s also the peril of investors getting into riskier products to try to find yields. The European Central Bank, which has had negative rates for several years, hasn’t cut official rates during this crisis after realizing that such a move wouldn’t do much. Much of the euro area appeared to be heading into recession before the coronavirus struck and lending has been anemic at best. Sweden has reversed its negative rates back to zero.Bailey will also be mindful of not crippling those lenders who have offered their customers variable-rate mortgages — particularly less well-capitalized building societies. More than a quarter of Britain’s 1.5 trillion pounds ($1.85 billion) of home mortgages are subject to variable rates. If the BOE’s rate went sub-zero, that wouldn’t be healthy for the profit margins of lending institutions, which have been struggling for a while in a world of rock-bottom interest rates. Moody’s Investors Service downgraded the debt of the country’s largest savings deposit taker, Nationwide Building Society, at the end of April and it maintains a negative outlook on the U.K. banking system. And it’s not as though the extra savings for those mortgage customers would really change the situation. Some 73% of U.K. residential mortgages are on fixed rates anyway. Those wealthy enough to have mortgages (you have to be rich to be able to afford to borrow) often end up saving the proceeds from lower interest rates rather than spending.One reason for pushing official rates below zero is to shame lenders into passing the cuts onto their customers. But that won’t force banks to lend more, particularly as they’re having to offer mortgage payment holidays because of the Covid-19 lockdowns. The BOE is already encouraging bank lending via super-cheap loans to the industry.There are better regulatory methods for kick-starting the transmission of monetary policy, such as telling banks that they won’t be able to restart dividend payments or generous bonuses unless they start pumping money into the economy via lending. Bailey and his institution need to try to make sure banks are in a position to lend and have the right incentives. Maybe that’s an impossible task given the natural fears about bad loans. Negative rates aren’t any kind of solution.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

(Bloomberg) -- Uber Technologies Inc. brought a $900 million bond sale, just a day after a report said it has made an offer to acquire food delivery company Grubhub Inc.That’s up from a planned $750 million, which may be used for acquisitions among other general corporate purposes, according to a statement Wednesday. The five-year notes, which can’t be bought back for two years, will yield 7.5%, according to people with knowledge of the matter, who asked not to be named discussing a private transaction.Read more: Uber Fueling Up With Liquidity for Grubhub M&A: Credit ReactA deal with Grubhub would combine two of the largest food-delivery apps in the U.S. as the coronavirus drives a surge in demand, Bloomberg reported Tuesday. While neither company confirmed, they both acknowledged they’re always looking for opportunities to provide value to their businesses.Uber said last week that it will close its food delivery service, Uber Eats, in markets where it isn’t popular. In the first quarter, bookings from ride-hailing customers declined for the first time ever due to travel shutdowns, but Uber said that part of its business is now beginning to recover.S&P Global Ratings grades Uber’s new unsecured notes as CCC+, or seven levels below investment grade. Moody’s Investors Service rates them B3, one step higher than S&P.Morgan Stanley, Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Barclays Plc and HSBC Holdings Plc are managing the bond sale, according to the people.(Updates with size in first paragraph, yield in second)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.

1:26 PM ET: Dems look to exclude oil&gas; from Main Street lending

Moody’s Analytics announced today that its software has been selected by Danish pension fund, Lægernes Pension.

(Bloomberg) -- It took just one month for the labor market in the world’s largest economy to capsize. It will take longer for the damage to be fully realized.In the harshest downturn for American workers in history, employers cut an unprecedented 20.5 million jobs in April, tripling the unemployment rate to 14.7%, the highest since the Great Depression era of the 1930s. And it’s only set to worsen in May, as cuts spread further into white-collar work.“It’s devastating,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics. “There’s someone behind each of these numbers. It’s going to take years to recover from this. There’s a case to be made that a lot of these are temporary layoffs, so hopefully people can return to work quickly as we begin to reopen the economy -- but there’s no guarantee in that.”The coronavirus pandemic brought the U.S. economy to a standstill after a record-long expansion, with April’s losses erasing roughly all of the jobs added over the past decade. It also laid bare just how precarious employment is for vast swaths of Americans, with an outsize impact on lower-paid workers as well as women and minorities.With a steep recession underway, the destruction of jobs heaps election-year pressure on President Donald Trump to restart the economy and show results by November. But with little containment of a contagious disease that’s killed 75,000 Americans and counting, business is returning unevenly and slowly if at all, and signs are mounting that many employers will be forced to make the cuts permanent.The pandemic’s initial tremors hit those least able to absorb the blow, with April’s job losses concentrated in lower-wage labor, from hospitality to retail and restaurants.In May, layoffs will extend further into white-collar positions, according to Lydia Boussour of Oxford Economics.The April report “really reflects the first-round effect of the Covid-19 crisis, so all these industries that are really on the front line were directly hit by the lockdowns and fear,” she said. In May, the job losses will likely be in the “second-round” of companies including more professional positions, corporate offices, and higher-earners, she said.With stimulus checks from the U.S. government making up a smaller share of income for such people, the deepening employment hole could fan calls for a fourth round of fiscal aid from Congress -- on top of trillions of dollars already dispatched. The Federal Reserve is likely to keep pumping money into the economy while leaving interest rates near zero for an extended period.There’s also risk in coming months that a recession will morph into a deeper depression, or a prolonged and sustained downturn -- if a second wave of infections closes down business again after some states reopen. That’s becoming more and more likely, according to Moody’s Analytics, which projects a peak unemployment rate in May of about 17%.Stock investors have largely looked past the dire economic news, with equities rallying since late March. The S&P 500 was higher on Friday and on track for a 3% weekly gain, while the yield on benchmark 10-year Treasuries rose and the Bloomberg dollar index pared its decline.What Bloomberg’s Economists Say“The extent of job losses is consistent with Bloomberg Economics’ modeling of a near 40% contraction in real GDP for the quarter. While layoffs were concentrated in sectors such as restaurants, hospitality and leisure, losses occurred in nearly all subcategories. The breadth of job losses is a jarring signal of the massive challenge of restarting vast swaths of the economy -- not just a few sectors -- and it therefore serves as a stark indication that a ‘V-shaped’ recovery will not be possible.”\-- Carl Riccadonna, Yelena Shulyatyeva and Andrew HusbyRead more for the full reaction note.Earnings, UnemploymentA clearer measure of job realities on the ground -- the so-called underemployment rate, which includes discouraged workers and those working part-time who want full hours -- rose to nearly 23%, implying nearly a quarter of Americans experienced a job hit.One particular group of lower-paid workers -- leisure and hospitality employees, such as those in restaurants and hotels -- declined by 7.65 million, almost half of total employment in the sector.The Labor Department said the unadjusted unemployment rate in April would have been almost 5 percentage points higher if unemployed workers had properly classified themselves, rather than marking down that they were employed but absent from work. Furloughed workers accounted for about 4 out of every 5 unemployed Americans.The data showed average hourly earnings rose a massive 4.7% from the prior month and 7.9% from a year earlier -- more than double March’s pace -- but those figures were skewed higher by the disproportionate loss of low-wage workers from payrolls, rather than any wage pressures boosting employee pay.The labor-force participation rate fell to 60.2% -- the lowest since 1973 -- from 62.7%. Among prime-age men, those ages 25 to 54, it dropped to a record-low 86.4%.Almost every industry was hit hard. Manufacturers cut 1.33 million positions and retailers 2.1 million. Even health-care jobs fell by 1.44 million as non-Covid visits and elective procedures dried up or offices closed.Trump -- who’s polling behind the presumptive Democratic nominee, former Vice President Joe Biden -- said Friday that the massive U.S. job losses from the coronavirus outbreak aren’t a surprise and that he shouldn’t be blamed for it.While the pandemic has crushed economies around the world, job losses hurt more in the U.S. than in most other developed nations. That’s because about 160 million Americans get health insurance through employers and without jobs, they could face steep monthly premiums or lose coverage entirely -- which may exacerbate the economic and health impact of Covid-19.Harder HitThe crisis hit harder for demographics including women and minorities, after they had benefited from the previous tightening of the labor market.The jobless rate among women jumped to 15.5% from 4%, compared with a 9-point increase among men, to 13%. Among black and African Americans, the unemployment rate was 16.7%; it was 18.9% for Hispanics and Latinos, up from record lows in 2019.How fast hiring resumes is critical to the strength of the overall recovery. Already, Uber Technologies Inc., Boeing Co. and U.S. Steel Corp. have announced sweeping layoffs, a sign companies are banking on a slow resumption of growth.Read More:Last Hired, First Fired: Job-Loss Stories in the Virus RecessionLayoffs Start Turning From Temporary to Permanent Across America‘Scary Time’ for American Middle Class as Office Jobs DisappearShare of Unemployed on Temporary Layoff in U.S. Soars to RecordTrump’s 2020 Jobs Bet Unravels on Worst Slump Since DepressionThe resulting job insecurity will undoubtedly merge with health concerns to restrain consumer demand, no matter how soon businesses restart.Economists expect it to take time for employment to recover, even if the pandemic eases. Policy makers are also advising caution: San Francisco Fed President Mary Daly told Bloomberg Television on Thursday: “No one who I talk to is looking at a V-shaped recovery -- they really think this will be gradual and it will take time to build confidence back up for both workers and consumers.”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.