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Here is the situation the U.S. economy faces, with a month to go before Election Day: Job growth is stalling. Layoffs are mounting. And no more help is coming.
American households and businesses have gone two months without the enhanced unemployment benefits, low-interest loans and other programs that helped prop up the economy in the spring. And now, after President Trump’s announcement Tuesday that he was cutting off stimulus negotiations until after the election, the wait will go on at least another month — and very likely until the next presidential term starts in 2021.
It could be a dangerous delay.
Already, many furloughs are turning into permanent job losses, and major companies like Disney and Allstate are embarking on new rounds of layoffs. The hotel industry is warning of thousands of closures, and tens of thousands of small businesses are weighing whether to close up shop for good. An estimated one of every seven small businesses in the United States had shut down permanently by the end of August — 850,000 in all — according to data from Womply, a marketing platform. The deeper those wounds, the longer the economy will take to heal.
“The risk to waiting is that we may find ourselves in a place where we’re unable to turn back, we’ll hit a tipping point,” said Karen Dynan, a Harvard economist and Treasury Department official during the Obama administration.
Jerome H. Powell, the Federal Reserve chair, echoed those concerns in a speech on Tuesday, arguing that failing to provide enough support carried risks for the economy.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” he said. “Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth.”
The failure to provide that assistance will ripple through the economy.
“The economy needs another round of fiscal support with aid to households, small and midsized firms and states,” said R. Glenn Hubbard, a Columbia University economist who was chairman of the White House Council of Economic Advisers under President George W. Bush. “Failing to act will have real economic consequences.”
Stock indexes, which had risen in recent days on signs that negotiations might be making progress, dropped sharply after Mr. Trump’s announcement. Several major Wall Street banks had said in recent days that they would downgrade their growth forecasts if talks stalled.
Mr. Trump may have been listening. In a series of tweets late Tuesday, he urged both houses of Congress to “IMMEDIATELY” revive a lapsed loan program for small businesses and to approve funds for airlines and another round of stimulus checks. It remained unclear if his tweets reflected a willingness to restart negotiations.
The gridlock in Washington is a reversal from the spring, when fear of an imminent economic collapse led Congress to vote overwhelmingly to approve trillions of dollars in aid to households and businesses. The effort was largely successful: Households began spending again, companies began bringing back workers, and a predicted tidal wave of evictions and foreclosures mostly failed to materialize. The unemployment rate, which reached nearly 15 percent in April, fell to 7.9 percent in September.
But most of the aid programs expired over the summer, and in recent weeks economic gains have faltered. Economists across the ideological spectrum agree that the loss of momentum is likely to get worse if more aid doesn’t arrive soon.
“We had a bridge which took us till about September, and now the question is do we complete the bridge or don’t we?” said Raghuram G. Rajan, a former chief economist of the International Monetary Fund who is now a professor at the University of Chicago. Without more help, he said, “basically anybody who was on that bridge falls off a cliff.”
Speaker Nancy Pelosi of California and Steven Mnuchin, the Treasury secretary, spoke Wednesday morning about the prospects of a stand-alone bill for airline relief, as President Trump continued to walk back his own retreat from negotiations on a broader coronavirus relief package and push for more narrow legislation.
During the conversation, Mr. Mnuchin asked about the possibility of a stand-alone bill, as a critical payroll program for airline workers lapsed last week and airlines have warned of tens of thousands of more furloughs and layoffs without federal intervention.
Ms. Pelosi noted that Democrats had already thrown their support behind such a measure and reminded Mr. Mnuchin that Republicans had objected to unanimous passage of such a bill in the House on Friday, a spokesman for Ms. Pelosi said. She asked Mr. Mnuchin to review the legislation, championed by Representative Peter DeFazio of Oregon, the chairman of the House Transportation and Infrastructure committee.
A Treasury spokeswoman confirmed that the call took place but would not say what was discussed.
It remains unclear whether the House Democrats’ airline bill would secure enough Republican support to pass the Senate. Senator Roger Wicker of Mississippi, the chairman of the Senate Commerce committee, put forward a separate bill for airlines that would have lowered the amount of new money being spent by repurposing some funds from the previous $2.2 trillion stimulus law to help revive the program and keep airline workers employed.
Talks to secure a more comprehensive bill collapsed on Tuesday after Mr. Trump said in a tweet that he had directed his negotiators to stand down on a stimulus bill until after the election. But the president quickly began backtracking on Tuesday night, saying on Twitter that he would sign a stand-alone bill to send Americans $1,200 stimulus checks. On Wednesday morning, he urged Ms. Pelosi to “move fast” on the proposal.
People close to Mr. Mnuchin said that he was disappointed by the sudden collapse of the negotiations on Tuesday, but that he remained ready to re-engage if given the go-ahead by the president.
Mark Meadows, the White House chief of staff, said that he and Mr. Trump spoke to Mr. Mnuchin on Wednesday morning about the possibility of individual bills that could be passed.
“The secretary and I have been talking about what we could do with stand-alone bills to help airlines, small businesses and the American people with stimulus checks, so hopefully we can convince Speaker Pelosi to do something on a stand-alone basis,” Mr. Meadows said on Fox News.
President Trump’s back and forth on supporting new stimulus measures may be a high-stakes negotiating tactic, according to today’s DealBook newsletter. Until a deal is reached, here are some of the groups left in limbo:
Airlines and hotels. An estimated 948,000 workers in the travel and tourism industry will lose their jobs without more stimulus, according to data from Tourism Economics for the U.S. Travel Association. That’s on top of the 3.5 million jobs the industry has already lost.
Restaurants. A poll last month found that 40 percent of restaurant owners expected to close their establishments within six months in the absence of government aid. Three million restaurant employees have already lost their jobs.
State and local governments. More than four million public-sector jobs could be lost as state houses and municipalities make cuts to compensate for drops in tax revenues, according to Moody’s.
Unemployed people. Temporary layoffs are becoming permanent job losses, the latest data shows, with more than seven million people out of work for at least 15 weeks. A large share have relied on stimulus and extra unemployment insurance to pay mortgages and rent, according to Deloitte, risking wider financial reverberations as savings dwindle.
The U.S. economy as a whole. “It’s simple: Less fiscal stimulus means more economic pain,” Gregory Daco of Oxford Economics wrote in a research note. The absence of additional fiscal aid could reduce economic output 1.5 percent over the next year, he estimated.
Stocks on Wall Street rose on Wednesday, recovering some of Tuesday’s losses after President Trump indicated that he wanted to revive some stimulus measures.
The bounce on Wednesday was just the latest in a series of head-spinning turns for the market. Stocks had tumbled on Tuesday afternoon in a sudden reversal after Mr. Trump unexpectedly announced the end of negotiations with Democrats over a new economic aid package.
But Mr. Trump later appeared to backtrack, saying on Twitter that he would be willing to approve more stimulus checks and spending on programs for airlines and small businesses.
The S&P 500 rose nearly 1 percent in early trading Wednesday, after Tuesday’s 1.4 percent drop. Stocks in Europe and Asia were little changed. After tumbling on Tuesday, airline shares were higher. American Airlines, Delta Air Lines and United Airlines were 2 percent to 3 percent higher.
But many analysts have been cautioning that the prospects of another stimulus deal are slim. Democrats and Republicans remain far apart in their intentions for a new spending plan, and House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have shown little progress in their efforts to bridge that gap.
“We are back in familiar gridlock territory,” said Susannah Streeter, an analyst at Hargreaves Lansdown. “There is little doubt a stimulus plan will eventually get through the Senate, but given we are inching ever closer to the vote, it is looking more unlikely to be signed off before the election. It is going to be very touch and go for airlines in particular.”
Still, some analysts on Wall Street have looked on increasingly favorable polling for former Vice President Joseph R. Biden Jr., and prospects for a resounding victory for Democrats on Nov. 3, as a precursor for a large stimulus package next year.
Such a “blue wave” would “sharply raise the probability of a fiscal stimulus package of at least $2 trillion shortly after the presidential inauguration on January 20, followed by longer-term spending increases on infrastructure, climate, health care and education that would at least match the likely longer-term tax increases on corporations and upper-income earners,” wrote analysts at Goldman Sachs this week.
The pandemic has helped the rich get richer, according to a new study. But it has also led to greater philanthropy.
Total wealth held by billionaires reached $10.2 trillion in July 2020, a new high, according to a report by UBS Global Wealth Management and PwC Switzerland. The previous peak was $8.9 trillion, reached 2017.
The world has 2,189 billionaires, up from 2,158 in 2017. Entrepreneurs in tech, health care and industrial sectors gained the most during 2018, 2019 and the first seven months of 2020, trends accelerated by the coronavirus pandemic.
The virus has also spurred billionaires to give more of their money away than ever before, with some 209 billionaires committing $7.2 billion in financial donations, goods and equipment or other types of gifts over the past few months, the report stated.
The study also predicted that billionaires will play a crucial role in the recovery and rebuilding process after the health crisis is over.
“When the storm passes, a new generation of billionaire innovators looks set to play a critical role in repairing the damage,” the report stated. “Using the growing repertoire of emerging technologies, tomorrow’s innovators will digitize, refresh and revolutionize the economy.”
The report comes at a time when the virus is widening social and economic divisions. The pandemic has been a financial boon to some wealthy Americans, while research suggests that those in lower economic strata are likelier to catch — and die from — the virus.
The home-improvement retailer Lowe’s will pay an additional $100 million in discretionary bonuses to frontline hourly workers in its U.S. stores, distribution centers and store support centers, the company said on Wednesday.
Employees will receive the bonus on Oct. 16, with full-time workers receiving $300 and part-time and seasonal hires getting $150.
“Throughout the spring, summer and now into fall, our frontline associates have shown remarkable resilience and dedication to our communities in the most trying times we have faced together,” said Marvin R. Ellison, Lowe’s president and chief executive.
Lowe’s has given more than $675 million in incremental financial support to workers this year, the company said. In August, the company said its profits for the second quarter surged by more than $1 billion, as the coronavirus pandemic spurred people across the country to take on home improvement projects while cooped up at home.
When the pandemic first hit, many companies bumped workers’ pay. But since then, many companies, including Amazon, Kroger and Albertsons, have quietly ended this so-called hero pay, though some of them continue to give out bonuses. Lowe’s gave its employees a $2 per hour raise for the month of April.
Americans recognize that the coronavirus is a health problem — but they think that it poses more of a risk to the general public than to them personally, based on a new Federal Reserve Bank of New York analysis.
Asked about risks posed by the coronavirus over the next three months, people placed their own chance of exposure lower than that of the general public by about 17.5 percentage points on average, researchers at the New York Fed found in a survey of households. That gap — which the Fed researchers called “overconfidence” — faded over time, so that people perceived a similar private and public risk over a three-year period.
“These results hold promise in partly explaining why Covid-19 has been difficult to contain,” the authors wrote. In short, people might behave less cautiously because they perceive their chances of getting sick as lower.
Differences in personal characteristics could justify the lower perceived risk among some people, the researchers noted. For instance, high-income workers who are able to work from home might genuinely have a lower chance of exposure than the general public.
The data does seem to partly reflect that: People with a college education and a higher income were more likely to report a lower personal risk relative to their perceived public risk, the authors wrote.
But there was no major relationship between the severity of local outbreaks and overconfidence, the authors said. And higher-income people had a bigger public-private gap, but they also perceived a higher risk from the disease in general than lower-income people.
The results come from the New York Fed’s May Survey of Consumer Expectations.
General Electric said on Tuesday that it had received a notice from the Securities & Exchange Commission warning that the agency could sue the company “for possible violations of the securities laws,” relating to an accounting investigation of long-term care insurance policies held by its financial services unit, GE Capital.
Levi Strauss & Company reported a 27 percent sales decline to $1.1 billion in the quarter that ended Aug. 23, as the denim company struggled with lower foot traffic and store closures. Levi’s, which went public last year, said that online sales soared in the period and accounted for 24 percent of overall sales, double the share from a year earlier.
The Federal Aviation Administration proposed new training requirements for pilots of Boeing’s 737 Max in a draft report Tuesday, a milestone in the plane’s return to service after being grounded in March 2019. The report, which is open to public comment through Nov. 2, calls for pilots to receive simulator training, which was not required when the plane was first certified. The grounding is expected to be lifted this winter.
The Defense Department last month awarded a handful of unexpected and inexperienced companies with multimillion-dollar contracts to produce disposable medical gowns to protect workers on the front lines of the coronavirus pandemic.
Now those companies are on the hook to produce tens of millions of gowns in a matter of months.
One deal, for $323 million, went to JL Kaya, a small business run from a Florida warehouse, whose only prior federal contracting work was a $7,296 project to make gauze.
A batch of contracts worth $194 million went to Health Supply US, a company founded six months ago by a former Trump administration official.
And an $88 million contract for gowns went to Maddox Defense, which says it has done government subcontracting work but has never managed a major contract of its own.
The administration’s selection of inexperienced companies for a crucial job has raised questions across Washington. In phone calls and letters, trade groups for major garment manufacturers have lodged complaints with the Defense Logistics Agency. And at least one company filed a complaint about the gowns contracts with the Government Accountability Office, a watchdog agency that investigates federal spending.
Amazon sets the rules for digital commerce, and Apple favors its own apps and services on its devices. Facebook holds “firmly entrenched” monopoly power over social networking. Google has maintained its search dominance by grabbing information from third parties without permission to improve search results.
Those are some of the findings from a sweeping report by House lawmakers accusing four of the world’s largest tech companies of abusing their market power. The document, which was released on Tuesday, concludes a 15-month investigation.
Read more of our coverage of the report:
House Lawmakers Condemn Big Tech’s ‘Monopoly Power’
In a 449-page report that was presented by the House Judiciary Committee’s Democratic leadership, lawmakers said the four companies had turned from “scrappy” start-ups into “the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.” The lawmakers said the companies had abused their dominant positions, setting and often dictating prices and rules for commerce, search, advertising, social networking and publishing.
To amend the inequities, the lawmakers recommended restoring competition by effectively breaking up the companies, emboldening the agencies that police market concentration and throwing up hurdles for the companies to acquire start-ups. They also proposed reforming antitrust laws, in the biggest potential shift since the Hart-Scott-Rodino Act of 1976 created stronger reviews of big mergers.
12 Accusations in the Damning Report on Amazon, Apple, Facebook and Google
Amazon harvests the sales and product data from its marketplace to spot hot-selling items, copy them and offer its own competing products, typically at lower prices.
Apple has used its control over the App Store to punish rivals, including by ranking them lower in search results, restricting how they communicate with customers, and removing them outright from the store.
Facebook has grown so overwhelmingly powerful that internal findings suggest its greatest competition exists within itself.
Google maintained its search monopoly by grabbing information from third parties without permission to improve search results.