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Oil prices slip as wary traders eye upcoming OPEC+ meeting

SINGAPORE (Reuters) – Oil prices fell nearly 1% on Monday as traders hedged bets with the Organization of the Petroleum Exporting Countries (OPEC) considering meeting as soon as this week to discuss whether to extend record production cuts beyond end-June.

Brent crude LCOc1 fell 34 cents to $37.50 a barrel, in the first day of trading in the contract with August as the front month.

West Texas Intermediate (WTI) crude futures CLc1 for July delivery were at $35.17 a barrel, down 32 cents, by 0123 GMT.

The price falls come after front-month Brent and WTI prices posted their strongest monthly gains in years in May. Gains were boosted by OPEC crude production dropping to its lowest in two decades with demand is expected to recover as more nations emerge from coronavirus lockdowns.

“The focus is very much on OPEC+,” OCBC economist Howie Lee said, referring to the grouping of OPEC and its allies including Russia. OPEC+ agreed in April to reduce output by an unprecedented 9.7 million barrels per day (bpd) in May and June after the coronavirus pandemic ravaged demand.

“We might see a cautious pullback in (crude) prices given that downstream prices haven’t caught up … but if OPEC+ does come up with a three-month extension, there’s a possibility that prices may hit the $40 level,” Lee said.

Still, tensions between the United States and China weighed on global financial markets while traders are also keeping an eye on riots over the weekend that have engulfed major U.S. cities.

Saudi Arabia is proposing to extend record cuts from May and June until the end of the year, but has yet to win support from Russia, sources have told Reuters.

Algeria, which currently holds the OPEC presidency, has proposed an OPEC+ meeting planned for June 9-10 be brought forward to facilitate oil sales for countries such as Saudi Arabia, Iraq and Kuwait. Russia has no objection to the meeting being brought forward to June 4.

Meanwhile supply in North America is also falling as data from Baker Hughes Co showed that the U.S. and Canada oil and gas rigs count dropped to a record low in the week to May 29.

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Wall Street Week Ahead: Investors eye consumer discretionary stocks as U.S. reopens

NEW YORK (Reuters) – Investors are taking a closer look at the market’s consumer discretionary companies as a reopening U.S. economy fuels hopes of a turnaround for some of the sector’s hardest-hit names.

Many companies in the sector have been battered by the country-wide coronavirus-fueled lockdowns that have weighed on growth and damaged retail spending over the last several months, though the stocks of a few, like Amazon, have soared.

A gradual lifting of lockdowns in some states has stirred hopes for a bounce back for the retailers that make up much of the sector.

Some investors, however, say it may be months before consumers return to their previous shopping habits, making it unlikely that the companies will see a pickup in revenues in the near term.

Firms ranging from middle-income retailers such as Gap Inc and American Eagle Outfitters Inc to high-end destinations like Tiffany & Co and Vail Resorts Inc are expected to report results in the week ahead.

“This particular group is full of landmines,” said Jamie Cox, managing partner for Harris Financial Group. “There is not going to be a lot of investor follow-through until we get some certainty with what future revenue prospects are going to be.”

Shares of the Gap, for instance, are down 43% for the year to date. A recession that persists through the fourth quarter of this year would reduce the company’s revenues by 40%, according to a note by research firm Trefis.

Next Friday’s U.S. jobs report is expected to show that the unemployment rate rose to 19.8% in May, smashing April’s record 14.7%, according to a Reuters poll. Non-farm payrolls are expected to drop by 7.4 million, adding to the 20.5 million jobs lost the previous month.

Cox is focusing on dominant players such as Amazon.com Inc, Walmart Inc and Target Corp, which have a mix of essential items such as groceries as well as electronics and games that can appeal to customers who may face extended lockdowns during a potential second wave of the virus.

Overall, retail companies in the S&P 500 are up 12.9% for the year to date, a gain powered largely by Amazon’s 31% rally. Apparel companies, by comparison, are down 16.2% over the same time.

Brian Jacobsen, senior investment strategist for the Wells Fargo Asset Management Multi-Asset Solutions team, says retail companies will likely show rising expenses over the next several quarters due to items like more frequent sanitation of stores and technology purchases aimed at increasing the productivity of employees working from home.

“It’s really going to be a challenge to get a clear read of the direction for quite a while,” he said.

Despite those headwinds, investors may still gravitate toward companies that are able either to tap the capital markets for funds or draw from their financial reserves, said Randy Frederick, vice president of trading and derivatives with the Schwab Center for Financial Research.

Retailers such as J. Crew and J.C. Penney have already filed for bankruptcy due in part to the coronavirus pandemic, leaving more opportunity for companies that are able to survive and grab market share, said Frederick.

“You’re getting set up for potential upside surprises,” he said. “You may take a step back and look at this and say, ‘No matter how awful these numbers may be, at least they’re still in business.’”

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Amazon offering temporary hires in Colorado something more permanent

Amazon went on a hiring spree in March and April, adding 175,000 seasonal positions nationally, including more than 4,600 in Colorado, as peopled stayed home and online purchases, especially for groceries, surged.

Amazon said Friday that it expects to offer permanent, full-time positions to 125,000 of the workers hired during the pandemic starting in June. That will include more than 1,700 of the recent hires in Colorado, where Amazon employs 4,000 people statewide.

“For those who wish to stay and grow with Amazon, more than 1,700 of these seasonal-to-permanent, full-time roles will be offered in Colorado. These new roles are specifically for customer fulfillment and last-mile delivery. Amazon expects to offer more full-time roles in the coming days,” said Amazon spokeswoman Anne Laughlin in an email.

Colorado is looking at a retention rate of 37% versus 70% nationally among the surge workers hired. The jobs come with a minimum wage of $15 an hour; full medical, vision and dental insurance; a 50% 401(k) match and paid parental leave.

Dozens of Amazon facilities have suffered COVID-19 outbreaks among workers, including nine confirmed cases reported this week at a distribution facility in Aurora. The company said it has spent $800 million on COVID-19 containment measures in the first half of the year.

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Stocks slip as investors await Trump's Hong Kong response

NEW YORK (Reuters) – Global stocks fell and safe havens such as bonds and the Japanese yen rallied on Friday as investors awaited Washington’s response to China’s national security law on Hong Kong amid rising tensions between the world’s two biggest economies.

China’s parliament on Thursday passed national security legislation for the city, throwing its freedoms and its function as a finance hub into doubt.

U.S. President Donald Trump said he would hold a news conference on China later on Friday. Trepidation about a further deterioration in Sino-U.S. relations, which have soured considerably through the COVID-19 pandemic, put investors on edge.

U.S. stocks followed European and Asian shares lower. The Dow Jones Industrial Average .DJI fell 180.15 points, or 0.71%, to 25,220.49, the S&P 500 .SPX lost 14.48 points, or 0.48%, to 3,015.25 and the Nasdaq Composite .IXIC dropped 4.66 points, or 0.05%, to 9,364.33.

In Europe, the pan-regional STOXX 600 index lost 1.30% and MSCI’s gauge of stocks across the globe .MIWD00000PUS shed 0.59%.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.2%. Japan’s Nikkei .N225 retreated from a three-month high and the yen rose to a two-week high of 107.06 against the dollar, while bonds rose.

If the United States no longer thinks Hong Kong is sufficiently autonomous and no longer merits special treatment under U.S. law, the reaction would be a small downdraft, as the market should be expecting that, said Yousef Abbasi, global market strategist at INTL FCStone Financial Inc in New York.

“But if you get further sanctions and something akin to walking back the Phase 1 trade deal, the concern has to be graver because now we have to worry about retaliation from China,” Abbasi said.

The Chinese yuan CNY= weakened in offshore trade. [CNY/]

Hong Kong’s Hang Seng index .HSI declined 0.8% and has lost about 3% in the two weeks since news of China’s security legislation broke. [.HK]

The yield on benchmark 10-year U.S. Treasury notes US10YT=RR fell 4.6 basis points to 0.6624%.

U.S. Federal Reserve Chair Jerome Powell was scheduled to speak at 1100 a.m. EDT/1500 GMT. The market’s focus will be on the central bank’s long-term plans, including the likely restart of large-scale bond-buying.

MAY MARCHES ON

Massive amounts of government stimulus offset reams of grim economic data to prop up stocks in May. The S&P 500 .SPX is up around 4% for the month and on track for its best May since 2009.

A rally in the risk-sensitive Aussie dollar AUD=D3 is slowing, but the currency has gained nearly 2% for the month and sits 20% above March lows.

MSCI’s All Country World Index .MIWD00000PUS, which tracks stocks across 49 countries, is on track for a 3.5% gain this week – its best weekly performance since April.

(GRAPHIC: Recovery on course? – here)

Optimism has grown as countries have lifted lockdowns, spurring hopes for a speedy economic recovery.

The number of Americans seeking jobless benefits fell for an eighth straight week last week and New York has outlined plans for re-opening.

The euro EUR= was headed for its best month since December as the European Union’s 750 billion-euro coronavirus recovery fund fueled optimism about the EU’s political future. [FRX/] It hit a two-month high of $1.1114 and last traded at $1.1119.

The dollar fell 0.366% =USD against a basket of currencies.

Spot gold XAU= added 0.8% to $1,731.92 an ounce. [GOL/]

U.S. crude CLc1 recently fell 0.33% to $33.60 per barrel and Brent LCOc1 was at $34.95, down 0.96% on the day. [O/R]

Both contracts are headed for their biggest monthly gains in years as production cuts and optimism about demand recovery led by China supported prices.

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OPEC delivers three quarters of record oil cut in May: survey

LONDON (Reuters) – OPEC oil output hit the lowest in two decades in May as Saudi Arabia and other members started to deliver a record supply cut, a Reuters survey found, although Nigeria and Iraq are laggards in making their share of the reduction.

On average, the 13-member Organization of the Petroleum Exporting Countries pumped 24.77 million barrels per day (bpd) this month, the survey found, down 5.91 million bpd from April’s revised figure.

OPEC and its allies last month agreed to an output cut to offset a slump in demand and prices caused by the coronavirus crisis. An easing of government lockdowns and lower supply have helped oil prices LCOc1 more than double compared with a 21-year low below $16 a barrel in April.

“OPEC has made a strong start in May with its latest production cut, lowering supply by 5 million bpd versus April,” Daniel Gerber, chief executive of Petro-Logistics, which assesses OPEC supply by tracking tanker shipments, told Reuters.

“However, compliance is far from perfect. With less than four weeks between the adoption and the start of the agreement, many countries had already committed volumes to buyers and have not managed to reduce supply to the agreed levels.”

OPEC and its allies, known as OPEC+, agreed to cut supply by a record 9.7 million bpd from May 1. OPEC’s share, to be made by 10 members from their October 2018 output in most cases, is 6.084 million bpd.

So far in May, they delivered 4.48 million bpd of the pledged reduction, equal to 74% compliance, the survey found.

LOWEST SINCE 2002

May’s output would be the lowest by OPEC since 2002, excluding membership changes since then, Reuters survey records show. PRODN-TOTAL

The biggest drop in supply came from Saudi Arabia, which pumped a record 11.7 million bpd in April. Saudi supply is expected to drop even further in June.

The United Arab Emirates and Kuwait also cut back sharply, sources in the survey said. Both had also pumped at record rates in April.

Iraq, a laggard in making cuts in 2019, curbed output according to the survey following reduced exports from the south of the country, although at 38% its compliance was much lower than that of the Gulf OPEC members.

Another laggard, Nigeria, made only 19% of its promised reduction, the survey found.

Venezuela and Iran reduced output in May, while Libyan supply was steady. All three were exempt from voluntary cuts because of U.S. sanctions or internal issues limiting production.

Iran is seeing a drop in fuel use because of the coronavirus outbreak, compounding the impact of sanctions on supply. Venezuela, contending with both U.S. sanctions and a long-term decline in output, posted another drop in exports.

Oil output in Libya has plunged since Jan. 18 due to a blockade of ports and fields by groups loyal to eastern-based commander Khalifa Haftar. Production averaged 100,000 bpd in May, the survey found.

The Reuters survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data, information from tanker-trackers such as Petro-Logistics and Kpler, and information provided by sources at oil companies, OPEC and consultants.

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U.S. judge orders 15 banks to face big investors' currency rigging lawsuit

NEW YORK (Reuters) – A U.S. judge on Thursday said institutional investors, including BlackRock Inc (BLK.N) and Allianz SE’s (ALVG.DE) Pacific Investment Management Co, can pursue much of their lawsuit accusing 15 major banks of rigging prices in the $6.6 trillion-a-day foreign exchange market.

U.S. District Judge Lorna Schofield in Manhattan said the nearly 1,300 plaintiffs, including many mutual funds and exchange-traded funds, plausibly alleged that the banks conspired to rig currency benchmarks from 2003 to 2013 and profit at their expense.

“This is an injury of the type the antitrust laws were intended to prevent,” Schofield wrote in a 40-page decision.

The banks, which sometimes controlled more than 90% of the market, included Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered and UBS or various affiliates.

In their complaint, the plaintiffs accused the banks of improperly sharing confidential orders and trading positions, and using chat rooms with such names as “The Cartel,” “The Mafia” and “The Bandits’ Club.”

Banks were also accused of using deceptive trading tactics such as “front running,” “banging the close” and “taking out the filth.”

The banks countered that the plaintiffs pointed to no transactions where the alleged manipulation caused losses.

Schofield dismissed portions of some the claims, and dismissed some Allianz plaintiffs from the case.

Lawyers for the plaintiffs did not immediately respond to requests for comment.

The litigation began in November 2018, after the plaintiffs “opted out” of similar nationwide litigation that had resulted in $2.31 billion of settlements with most of the banks.

Those settlements followed regulatory probes worldwide that led to more than $10 billion of fines for several banks, and the convictions or indictments of some traders.

Investors typically opt out of litigation when they hope to recover more by suing on their own.

The case is Allianz Global Investors GMBH et al v Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 18-10364.

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Exclusive: Argentina says new debt revamp proposal in right direction, still falls short

BUENOS AIRES (Reuters) – Argentina’s economy minister said on Friday that a newly received debt restructuring proposal from two creditor groups was a step in the right direction, but still fell short of what the country needed to strike a deal.

The Ad Hoc Bondholder Group, a major creditor committee involved in $65 billion restructuring talks with Argentina, earlier said it made a new “more favorable” proposal alongside a second group of bondholders.

In a statement shared with Reuters, the minister said that the two sides had gotten closer together with recent negotiations but that there was still an important distance to cover.

(This story has been refiled to fix garble in paragraph 2)

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Stocks, euro rise on recovery hopes; U.S.-China rift lifts gold

NEW YORK (Reuters) – A gauge of global equity markets climbed on Thursday on optimism for a speedy economic recovery and a massive stimulus plan in Europe helped lift regional stocks and the euro, while gold rebounded on a safety bid on deteriorating U.S.-China relations.

MSCI’s gauge of stocks across the globe rose 0.46% but Wall Street ended lower after a late-session reversal on headlines that President Donald Trump would hold a news conference on Friday about China.

Markets are slowly realizing the escalating tensions between the U.S. and China is not going away and represent headwinds for the global economy, said Ed Moya, senior market analyst at OANDA in New York.

“There’s going to be some push back. No one was anticipating that in the immediate future,” Moya said. “It could derail some of the reopening momentum we’ve had.”

Oil futures rose, reversing earlier losses, on signs U.S. gasoline demand is increasing despite a big surprise build in crude inventories and worries that China’s new security law for Hong Kong could result in demand-dampening trade sanctions.

Gold pared earlier gains of 1% as rising stock markets dulled its safe-haven appeal, but the escalating U.S.-Chinese tensions kept bullion propped up.

China’s parliament approved national security legislation for Hong Kong that democracy activists say could erode the territory’s freedoms and jeopardize its role as a global financial hub.

Investors have largely turned a blind eye to renewed U.S.-China tensions and instead are focused on the reopening of business activity, Candice Bangsund, a global asset allocation portfolio manager at Fiera Capital in Montreal, said earlier in the session.

“Stocks have maintained that positive momentum largely reflecting optimism that growth will recover as COVID lockdowns are eased and economies progressively reopen,” Bangsund said. “Enhanced government stimulus announcements this week out of Europe and Japan have emboldened that risk-on trade.”

The number of Americans seeking jobless benefits fell for an eighth straight week last week, but claims remained astonishingly high.

In Europe, the pan-regional STOXX 600 index rose 1.64% to an 11-week high on the European Union’s plan to prop up the bloc’s coronavirus-hit economies with a 750-billion-euro ($828 billion) recovery fund.

The euro fell 0.04% to $1.1072, a two-month high. The dollar index fell 0.423%.

Stocks on Wall Street closed lower, as early gains in healthcare and technology stocks were overtaken by falling bank and consumer discretionary shares.

The Dow Jones Industrial Average fell 147.63 points, or 0.58%, to 25,400.64. The S&P 500 lost 6.4 points, or 0.21%, to 3,029.73 and the Nasdaq Composite dropped 43.37 points, or 0.46%, to 9,368.99.

Overnight in Asia, markets were subdued after U.S. Secretary of State Mike Pompeo warned Hong Kong no longer warranted special treatment under U.S. law.

MSCI’s broadest index of Asia-Pacific shares outside Japan ended flat. Shares in Hong Kong ended down 0.7% as Chinese shares managed to close in positive territory [.SS], while Japan’s Nikkei jumped 2.3%. [.N][.T]

Euro zone bond yields were stable, with Italian borrowing costs – a key European confidence indicator – edging toward eight-week lows. Safe-haven German bonds sold off slightly.

U.S. government debt yields rose as stocks gained, reducing demand for safe-haven bonds, before the Treasury is due to sell a record $38 billion of seven-year notes.

Benchmark 10-year notes rose 1.5 basis points to yield 0.6966%.

The U.S. Energy Information Administration said crude inventories rose 7.9 million barrels in the latest week, exceeding expectations, due to a big increase in imports. But gasoline stockpiles fell unexpectedly as refiners boosted output. [EIA/S]

U.S. crude futures rose 90 cents to settle at $33.71 a barrel while Brent rose 55 cents to settle at $35.29.

Saudi Arabia and some other OPEC oil producers are considering extending record-high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian industry sources.

U.S. gold futures settled up 0.1% at $1,728.30 an ounce.

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Small-business loan terms eased under U.S. House-passed bill

WASHINGTON (Reuters) – The U.S. House of Representatives on Thursday approved legislation increasing the amount of time, to 24 weeks from the current eight weeks, for small businesses to use Paycheck Protection Program (PPP) loans spurred by the coronavirus outbreak.

The legislation, passed by a vote of 417-1, now goes to the Senate. The program, created in March, helps support small businesses during the pandemic and encourages them to retain employees.

Last week, senators worked on a bipartisan bill extending the time frame to 16 weeks, instead of the 24 weeks embraced by the House.

If the Republican-controlled Senate passes a bill that varies from the Democratic-led House’s, the two chambers would have to reconcile differences before sending it to Republican President Donald Trump for signing into law.

Meanwhile, the Democratic-controlled House failed to pass legislation opposed by most Republicans requiring public reports on PPP loan recipients.

The House-passed bill comes as states have begun loosening efforts to control the spread of the novel coronavirus, which has raced across the United States and the world.

More than 100,000 people in the United States have died from COVID-19, the illness caused by the coronavirus. Over 1.7 million U.S. cases have been reported.

Under the PPP program, loans for restaurants, hotels and other businesses would convert into federal grants if recipients adhere to a set of conditions, including spending the loan amount within the required time.

Many businesses have been unable to meet the eight-week requirement.

A total of $659 billion has been provided by Congress for the loan program, which is part of broader coronavirus emergency aid totaling around $3 trillion so far.

The House bill that passed on Thursday includes other changes giving businesses more flexibility in using the aid.

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U.S. weekly jobless claims drop, but economic recovery still elusive

WASHINGTON (Reuters) – The number of Americans seeking jobless benefits fell for an eighth straight week last week, likely as some people returned to work, but claims remained at astonishingly high levels, suggesting it could take the economy a while to rebound as businesses reopen.

The Labor Department’s weekly jobless claims report on Thursday, the most timely data on the economy’s health, also showed a decline in the number of people receiving unemployment checks in mid-May. The data, however, excludes gig workers and others collecting benefits under a federal government program.

These workers do not qualify for the regular state unemployment insurance. The various programs, different reporting periods and protocols at state unemployment offices make it hard to get a clear pulse on the labor market.

Economists said the government’s Paycheck Protection Program, part of a historic fiscal package worth nearly $3 trillion, which offered businesses loans that could be partially forgiven if they were used for employee salaries, was also creating confusion.

“We are entering the confusion stage for the employment and unemployment numbers,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “Reopening of the economy is taking people from government payrolls to private sector payrolls, which is good. But the PPP is creating problems with understanding what exactly is happening.”

Initial claims for state unemployment benefits fell 323,000 to a seasonally adjusted 2.123 million for the week ended May 23, the Labor Department said. Claims have declined steadily since hitting a record 6.867 million in late March, but have not registered below 2 million since mid-March.

Economists polled by Reuters had forecast initial claims falling to 2.1 million in the latest week. Layoffs persist in the insurance, educational services, public administration, transportation and warehousing, agriculture, construction, manufacturing and retail trade industries.

The astonishingly high level of claims, nearly three months after the shuttering of non-essential businesses to control the spread of COVID-19, points to a long recovery for the economy.

That was underscored by other data from the Commerce Department on Thursday showing business spending on equipment plummeting in April and the economy contracting at a much steeper 5.0% annualized rate in the first quarter instead of the previously estimated 4.8% pace.

Data in hand, including on the housing market, manufacturing and consumer spending has left economists expecting gross domestic product could drop in the second quarter at as much as a 40% rate, the worst since the Great Depression.

Stocks on Wall Street were trading higher, but simmering tensions between the United States and China kept investors on edge. The dollar eased against a basket of currencies. U.S. Treasury prices dipped.

LONG-TERM DAMAGE

A record 40.767 million people filed claims since March 21.

“We think these filings in the 10 weeks since the mid-March coronavirus pandemic lockdown tells the true story of the wreckage out there in the country and the enormous long-term damage done to the economy,” said Chris Rupkey, chief economist at MUFG in New York.

The number of people still receiving unemployment benefits after an initial week of aid dropped 3.860 million to 21.052 million in the week ending May 16. The so-called continuing claims number is reported with a week lag.

Economists cautioned against reading too much into the sharp decline, noting that some states required residents to file for benefits on a bi-weekly basis, which they said was injecting volatility into the data. The drop in continuing claims was concentrated in Florida, California, Washington State and Ohio.

“We doubt this is due to hiring and may reflect more the fact the continuing claims numbers are state benefits and don’t include the people claiming the Pandemic Unemployment Assistance,” said James Knightley, chief international economist at ING in New York.

The Pandemic Unemployment Assistance (PUA) program is the federal government initiative that pays unemployment checks to gig workers and many others for coronavirus-related job and income losses.

These workers do not qualify for regular state unemployment insurance and are not included in both the weekly jobless claims and continuing claims figures. There were 1.193 million claims submitted last week under the PUA program, on top of the 7.793 million applications processed in the week ending May 9.

Including gig workers and other claimants, a staggering 31 million people were receiving benefits under all programs in early May.

The continuing claims data covered the period during which the government surveyed households for May’s unemployment rate.

Continuing claims increased roughly by 3 million between the April and May survey periods, suggesting a rise in the jobless rate from a post-World War Two record of 14.7% last month.

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