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Uber, Lyft, Trump’s Enhanced Unemployment Benefits and SoftBank’s Comeback

A judge rules against Uber and Lyft, Trump’s executive order draws skepticism and tech investor SoftBank starts on the comeback trail.
Portland, Oregon, USA - Dec 4, 2019: Uber X and Lyft PIN Pickup area in Portland International Airport at night. (By Tada Images)
Portland, Oregon, USA - Dec 4, 2019: Uber X and Lyft PIN Pickup area in Portland International Airport at night. (By Tada Images)
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Good morning! Today’s word count is 1,484 words, or a 10-minute read. Let’s get to it:

“The Dow opened higher and the S&P 500 rose, suggesting the broad index may continue a winning streak that is pushing it close to a record,” The Wall Street Journal writes.

  • S&P 500: $3,360.47
  • Nasdaq: $10,942.70
  • Bitcoin: $11,892.17
  • U.S. 10-Year: 0.653%

Uber, Lyft Ordered to Classify Drivers as Employees

“A California judge said Monday that ride-hailing companies Uber Technologies Inc. and Lyft Inc. shouldn’t classify their drivers as independent contractors, citing the state’s gig-worker law that went into effect this year. The ruling is on hold until the companies have a chance to appeal,” The Wall Street Journal writes.

Why It Matters

It’s a battle of two diverging opinions.

  • California said the decision to classify drivers as contractors deprived them of paid sick leave and unemployment insurance. The state also said the companies haven’t contributed to state payroll taxes used to fund general health welfare programs.
  • Uber and Lyft fired back saying the law could take away flexibility from drivers, forcing them to work prescheduled shifts and that its platform facilitates transactions between drivers and passengers, not transportation companies.

The gig economy is evolving.

  • By definition, the gig economy is “a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.”
  • Governments are starting to demand many of the same labor protections and other regulatory requirements for “gig” freelance workers.
  • But companies such as Uber and Lyft designed their business models around short-term, inexpensive labor.
  • In an attempt to strengthen its case that drivers are operating with independence, Uber started testing a new feature earlier this year, allowing some drivers to set their own fares.

Ridesharing is hurting pretty bad.

  • Covid-19 immediately put a strain on Uber and Lyft’s core businesses as stay-at-home orders scaled back local travel.
  • Uber reported steep losses in the last two quarters, and both companies are trying to cut costs and ride out the crisis.

It’ll be a few months before there’s a resolution.

  • “The companies had asked the judge to postpone the litigation, citing among other reasons a proposed ballot initiative for November that would exempt them from the California law, known as Assembly Bill 5.”
  • The city attorneys of Los Angeles, San Diego and San Francisco have all jumped on the bandwagon, asking the court to force the companies to reclassify drivers as employees.

Numbers to Consider

  • 325,000 – The number of Lyft drivers in California.
  • 200,000 – An estimate of Uber’s driver-base in California.
  • 71 Percent – The share of drivers saying they wanted to be independent contractors, according to a nationwide survey drawing responses from 734 Uber and Lyft drivers.

Read More: (WALL STREET JOURNAL)

Federal Government Sent Workers Nearly A Quarter Billion in $600-a-Week Jobless Aid

According to the U.S. Department of Labor, the federal government spent nearly $250 billion on extra $600-a-week unemployment benefits from early April to the end of July. The added funds, passed by Congress and President Trump in March, provided relief for many Americans dealing with Covid-19-related financial struggles.

Why It Matters

The benefits expired on July 31.

  • As American households reel from the loss of economic assistance, the White House and Democratic lawmakers remain deadlocked on a broader pandemic relief deal.
  • In the meantime, President Trump signed an executive order that would provide $300 a week from the federal government and call on states for another $100.

Enhanced relief helped prop up the broader economy.

  • Despite a historically high unemployment rate, household income in June was higher than it was in February.
  • The increase in unemployment insurance payments more than offset the drop in wage and salary income.

There’s a bipartisan split on the effectiveness of the benefits.

  • Some Republicans and conservative economists say the higher payments disincentive people from returning to work.
  • A study published by Yale economists last month found the opposite – workers with more generous jobless benefits didn’t experience more substantial employment declines and have returned to jobs at similar rates as others.

Trump’s solution may not be effective.

  • The $600 payments succeeded in propping up consumer spending, according to Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth.
  • Gould-Werth expressed skepticism about $300 to $400 payments that wouldn’t arrive until at least September.
  • She also predicted the funds to be used for such benefits would be exhausted in around five weeks.

Numbers to Consider

  • $16.6 Billion – The federal government’s spending on the enhanced benefits in the last four weeks of July.
  • 6 Weeks – How long it would take to exhaust the $44 billion allotted for relief at the July spending rate.
  • $38.4 Billion – The total amount of federal benefits California received, the largest among any state.

Read More: (WALL STREET JOURNAL)

A Quick Look

SoftBank Starts Comeback with Multi-Billion Profit, Helped by Sprint Sale

  1. To offset the damage from suffering its worst year, technology investor SoftBank Group Corp. unloaded assets to bolster its balance sheet. The company posted a profit of nearly $12 billion in the April-June quarter, part of which was helped by the Sprint sale.
  2. SoftBank’s $100 billion Vision Fund, the world’s largest tech investment pool, also helped drive the turnaround. While write-downs help SoftBank cap its loss at $9 billion for the year ending March 31, the company said the Vision Fund posted a ¥296.6 billion ($2.8 billion) investment gain in the latest quarter.
  3. SoftBank aims to scale back its investing ambitions and put “big chunks” of some of its most valuable assets for sale. The group intends to fund around $47 billion in stock and debt buybacks, as well as hold extra cash. Among those assets are stakes in Alibaba, Japanese mobile-phone unit SoftBank Corp. and T-Mobile. As of Tuesday, SoftBank said it had sold or monetized ¥4.3 trillion ($41 billion) in the last month.
  4. After purchasing U.K. chip designer Arm for $32 billion in 2016, SoftBank is considering a sale of part or all of the firm. Another potential option would be a public offering for Arm’s shares in 2023 or earlier.
  5. “The start of the coronavirus pandemic this year added to the company’s woes, pummeling many of the Vision Fund’s startups further and pushing SoftBank’s share price to a low of ¥2,687 ($25.37) in mid-March. The company drastically shrank plans for a second multibillion-dollar Vision Fund.”

Read More: (WALL STREET JOURNAL)

Worth Your Time

Hold The Line: President Trump wants employers to stop collecting the “6.2 percent levy that is the employee share of Social Security taxes.” But employers’ willingness to cooperate will depend on how the IRS and Treasury Department handle the situation. Companies such as Walmart, Home Depot and UPS, among others, are worried about getting left holding the bag if Congress doesn’t forgive any of these deferred payments. (WALL STREET JOURNAL)

Reason To Believe: Russia registered the world’s first Covid-19 vaccine, according to President Vladimir Putin. “The conditions of the vaccine’s development, however, have raised concerns in Moscow and in the West over the safety of the vaccine and fears that the Kremlin is sacrificing the safety of its citizens.” (WALL STREET JOURNAL)

Eye On You: Eastman’s Kodak wild stock swing last week produced what The Wall Street Journal says might be the most significant contribution on record to a religious nonprofit. Kodak board member George Karfunkel and his wife, Renee, donated nearly half of their Kodak shares (equivalent to roughly $116 million) to a Jewish charity they started two years ago. The move, made on the day Kodak’s shares soared, is well-timed and casts a shadow on an already sticky situation about whether Kodak appropriately disclosed news of its potential government loan. (WALL STREET JOURNAL)

Mr. Roboto: “Robots that delivered a burger and fries a few years ago were a high-tech gimmick that gave hotel guests a good laugh. Now, some manufacturers suggest these machines could help guests stay safe during a global pandemic.” (WALL STREET JOURNAL)

Tidbits

Covid-19 cases in the U.S. have dropped below 50,000 for the second straight day, but the total count globally surpassed 20 million.

General Motors CEO Dhivya Suryadevara is stepping down to join online commerce firm Stripe, a “surprising departure for one of the auto maker’s fastest rising stars.”

SPAC News! CuriosityStream, a documentary streaming service, is going public by way of a merger with a blank-check company called Software Acquisition Group.

FuboTV, a sports streaming service that merged with FaceBank Group, announced Tuesday it’s filing to go public.

China saw strong auto sales in July, fueling the country’s hopes for economic growth.

The White House is handing off the use of a specific communication frequency to the FCC for auction, so private operators can step toward leveraging 5G technology.

A Couple Cents Content

I wrote about Nintendo’s recent success and the ups and downs of its defined role in the video game industry. (POST)

Catch up on everything you missed during last week’s Live Show. (YOUTUBE)

The “Netflix of Factual TV” is going public through a SPAC. Check out Justin Oh’s breakdown. (TIKTOK)

Any interest in sports business news? I’m starting to pump out some short-form video content like this: (TIKTOK)

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