The Federal Reserve is trying to plug a hole that fiscal policy was widely expected to be filling by now. For the economy this is less than ideal, but for financial markets it has been pretty great.

The Fed has responded aggressively to the Covid-19 crisis. It cut rates to close to zero, bought trillions of dollars of assets and launched an array of emergency lending programs. Last month, it also made two important changes to its policy framework: It will now accept inflation that runs a bit above its 2% target after periods...

U.S. unemployment claims held steady at 884,000 last week, a sign the labor-market recovery is losing steam six months after the pandemic struck the U.S.

Claims have fallen from a March peak of about 7 million but remain at historically high levels—above the pre-pandemic record of 695,000.

The total number of workers receiving assistance from...

Good day. Ahead of their September meeting, Fed officials are debating how exactly to implement their new framework governing how they will conduct policy over the long run. Elsewhere, the Bank of Canada kept its benchmark interest rate unchanged, saying it expects a faster third-quarter recovery than it had previously anticipated. On the agenda today we have a policy statement from the European Central Bank. 

 Now on to today’s news and analysis.

Applications for state unemployment benefits likely ticked down last week, a sign of gradual improvement in the labor market after the coronavirus pandemic struck this spring.

Economists forecast jobless claims declined slightly to a seasonally adjusted 850,000 last week from 881,000 a week earlier. Claims have fallen from a March peak of about 7 million, but remain at historically high levels—above the pre-pandemic record of 695,000.

FRANKFURT—The European Central Bank left its large monetary stimulus unchanged Thursday, as policy makers wait to see how a resurgence in Covid-19 cases across the continent and a jump in the value of the euro might affect the region’s economy.

Europe’s economic recovery has lost momentum in recent weeks after an initial strong bounce back, and ECB officials are worried about a possible wave of job cuts and corporate bankruptcies later in the year as some state subsidies are wound down.

Federal Reserve officials forged an agreement last month on a new framework governing how they will conduct policy over the long run. In preparing for a September meeting, they are debating how exactly to implement this strategy for an economy recovering from a severe and unusual downturn.

Central bank officials are likely at coming meetings to provide more specific guidance about what conditions would justify continued low interest rates, according to public speeches and interviews.

While the Trump administration has torn up regulations and U.S. international agreements aimed at limiting climate change-related damage, U.S. financial regulators are slowly moving in the opposite direction.

On Wednesday, the Commodity Futures Trading Commission released a first of its kind report calling for action to change the financial system so it promotes investment that doesn’t harm the environment.

“As...

When the stock market began to rally back in March, it seemed oblivious to an economy sliding into its worst contraction since the Great Depression.

Nearly six months later, some of that optimism has proved justified. The economy touched bottom in April, and it has clawed back ground every month since. The recovery has shown surprising resilience in the face of resurgent coronavirus infections and expiring fiscal stimulus.

That’s the good news. The less-good news is that recovering the remaining ground may be tougher, which may be why the stock market has wobbled recently.

Back in May, economists projected unemployment would still be 11% this December. Last month, it dropped to 8.4%. August was the fourth straight month the job market outperformed economists’ expectations.

As the economy shrank at a record 31.7% annual rate in the second quarter, economists saw only a halting recovery. In July, IHS Markit , an economic analysis firm, projected...

OTTAWA—The Bank of Canada left its benchmark overnight interest rate unchanged at 0.25% as it warned the economy will enter a slow and choppy phase of recuperation following an expected bounce back in activity during the third quarter of this year.

In a 550-word statement explaining its interest-rate decision, the central bank said the third-quarter recovery will likely be faster than it had previously anticipated. It noted a sharp rebound in household spending over the summer, as the easing of economic restrictions fueled...

The number of available jobs in the U.S. leveled off late this summer, the latest sign momentum in the labor market is easing six months after the coronavirus pandemic took hold in the U.S.

The increase in the number of job postings, a real-time measure of labor-market activity, has slowed dramatically since late July, and last week stood about 20% below 2019 levels, according to data the job-search site Indeed.com shared with The Wall Street Journal.

When the stock market began to rally back in March, it seemed oblivious to an economy sliding into its worst contraction since the Great Depression.

Five months later, some of that optimism has proved justified. The economy touched bottom in April, and it has clawed back ground every month since despite a resurgence in coronavirus infections, surprising with its strength and endurance.

That’s the good news. The less-good news is that recovering the remaining ground may be tougher, which the stock market’s recent selloff seems to signal.

Back in May, economists projected unemployment would still be 11% this December. Last month, it dropped to 8.4%. August was the fourth straight month the job market outperformed economists’ expectations.

As the economy shrank at a record 31.7% annual rate in the second quarter, economists saw only a halting recovery. In July, IHS Markit , an economic analysis firm, projected gross domestic product would expand...

The British pound fell against the euro and the dollar Wednesday, extending a seven-day losing streak that is the currency’s worst percentage decline since the coronavirus market crisis in March.

Investors are fretting anew about the economic pain from the U.K.’s political divorce from the European Union, which will come on top of the slowdown already inflicted by pandemic-related shutdowns.

The...

Good day. Senate Republicans trimmed the cost of their new stimulus proposal by tapping uncommitted money tied to the Federal Reserve’s emergency lending programs. Meanwhile, new research suggests monetary policy isn’t well suited to support an economy when parts of it are shut down for health policy reasons, and in such a situation government spending is called for, Michael S. Derby reports. And we round up market commentary ahead of the European Central Bank's meeting tomorrow. 

 Now on to today’s news and analysis.

The European Central Bank is likely to discuss the eurozone’s recent weak inflation data and the appreciation of the euro, say Nomura’s economists ahead of the ECB’s monetary policy meeting on Thursday. Annual eurozone CPI dropped into negative territory at -0.2% in August, preliminary data showed. However, any action to counteract low inflation is unlikely at this stage, the economists say. Any eventual action would more likely involve tweaks to the Pandemic Emergency Purchase Programme rather than to interest rates, they say. “The benefits that a 10 bp or 20 bp rate...

Government spending policies are likely to provide the clearest path toward recovery from the coronavirus pandemic, not the actions of the central bank, new academic work says.

The pandemic and efforts to contain it generate a much different economic impact than conventional downturns, Michael Woodford of Columbia University says in a paper published by the National Bureau of Economic Research. To help reign in the virus, parts of the economy have shut down while others have remained open, causing a reverberating impact through...

For decades, Britain’s Conservative Party politicians decried the European Union for its supposed aversion to free markets.

Now trade negotiations that will define the future relationship between the U.K. and the EU from next year have stalled, in large part because Prime Minister Boris Johnson’s government wants the freedom to ignore EU rules limiting state subsidies of private companies.

With...

Retail-industry hiring accelerated in August as more businesses reopened and more people left their homes to go shopping.

Stores, gasoline stations, auto dealers and other retailers added a seasonally adjusted 249,000 jobs in August, the Labor Department said Friday. Almost half the growth occurred at general-merchandise stores, a category that includes large employers such as Walmart Inc. and Costco Wholesale Corp. Vendors of electronics, appliances, furniture and garden supplies were among those that added jobs last month.

The U.S. lacks a key ingredient that helped propel it to economic dominance in the 20th century: productivity gains from higher education. Figuring out why could help influence the economy’s long-term trajectory once it emerges from the coronavirus crisis.

In 2009, President Obama, worried about the economy’s global standing, set a goal for the U.S. to have the world’s most-educated workforce by 2020.

The...

Inflation is in focus during a relatively light week for economic data. August consumer prices for China are out Wednesday and for the U.S on Friday.

Monday

China’s August exports likely rose 7.3% from a year earlier thanks to the sustained global recovery and last year’s low base, according to a Wall Street Journal poll. That would extend...

Good day. Friday's U.S. jobs report was better than expected, but around 11.5 million fewer people had jobs in August than in February and Fed Chairman Jerome Powell warned that it's unclear how fast that number will fall. "I think we’re not really going to know the pace…of the recovery with any clarity for a couple more months," he said in a radio interview Friday. Meanwhile, calm in the vast repo market doesn’t mean the Fed is done dealing with issues in the short-term funding market, the Journal's Michael S. Derby writes. Elsewhere, a Bank of England policy maker said Friday he thought it "quite likely that additional monetary stimulus will be appropriate" for the U.K.

 Now on to today’s news and analysis.

The mortgage market recorded its best quarter in years this spring, a reflection of how the housing market is booming in 2020 even as much of the economy stumbles.

Lenders issued $1.1 trillion in home loans between April and June, according to mortgage-data firm Black Knight Inc. That was the biggest quarter in the company’s records, which date to 2000. Lenders extended roughly $2.5 trillion in home loans in all of 2019.

Refinancings,...

The Federal Reserve has an enormous number of things to worry about as the coronavirus pandemic rages on. The repo market, by and large, is no longer one of them.

Last September, just ahead of a rate-setting Federal Open Market Committee meeting, the market in which businesses borrow and lend primarily Treasurys began seizing up, in turn destabilizing short-term interest rates. That forced the central bank to add liquidity in size to markets for the first time in over a decade to help bring its main policy tool, the federal...