Job losses have hit poor Americans the hardest, the Fed says.
The economic challenges posed by the coronavirus pandemic are especially acute for the poorest Americans, according to a new Federal Reserve survey released Thursday.
Many Americans came into the nationwide lockdown with limited savings, despite gains made over the course of a record-long economic expansion. At the end of 2019, three in 10 adults said they could not cover three months’ worth of expenses with savings or borrowing in the case of a job loss, “indicating that they were not prepared for the current financial challenges,” the central bank said.
One in five people who were working in February reported that they lost a job or were furloughed in March or the beginning of April 2020, the data showed, and that pain was highly concentrated among low earners. Fully 39 percent of former workers living in a household earning $40,000 or less lost work, compared with 13 percent in those making more than $100,000, a Fed official said.
The United States economy began slowing in March, as state and local governments instituted stay-at-home orders to tame the coronavirus’s rapid spread. That has caused the steepest growth decline in the United States’ postwar history. Consumer spending has plummeted as stores and restaurants closed, and mass layoffs have become a feature of everyday life. Nearly three million people filed for unemployment benefits last week, pushing the two-month tally over 36 million.
Stocks ended a turbulent day of trading on Thursday with a solid gain, after a rebound fueled in part by a surge in oil prices.
The S&P 500 rose more than 1 percent, after recovering from an early drop of nearly 2 percent.
The early drop was fueled partly by the Labor Department’s latest report on unemployment claims, which showed that millions of workers are still losing their jobs.
But stocks rose out of that slump as oil prices jumped, prompting gains in shares of energy companies like oil services giant Halliburton and Occidental Petroleum. West Texas Intermediate, the U.S. crude benchmark, rose about 9 percent. At more than $27 a barrel, oil is now far above the lows that it plumbed in April.
The gains in oil prices came as the chief of the International Energy Agency said on Thursday that he saw “signs of a gradual rebalancing” in the oil market. Global demand for oil fell in April to about 25 percent below its normal level, the agency said, but it is expected to slowly recover as more countries ease lockdown measures.
Financial stocks also rallied on Thursday, with shares of Wells Fargo up more than 6 percent. and Capital One Financial up more than 9 percent.
It’s been a tumultuous week for stocks, as investors heard a drumbeat of warnings about the pandemic and its long-term impact.
On Tuesday, Dr. Anthony S. Fauci spoke about the serious risk of a new outbreak if the economy was reopened too quickly. On Wednesday, the Federal Reserve chair, Jerome H. Powell, warned of permanent damage to the economy if Congress and the White House did not provide sufficient financial support to prevent a wave of bankruptcies and prolonged joblessness.
J. Crew and Neiman Marcus were each facing a host of challenges before the coronavirus pandemic forced them to close their stores and eventually file for bankruptcy.
But they also shared a common problem for retailers in dire straits: an enormous debt burden — roughly $1.7 billion for J. Crew and almost $5 billion for Neiman Marcus — from leveraged buyouts led by private equity firms.
Like many other retailers, J. Crew and Neiman over the past decade paid hundreds of millions of dollars in interest and fees to their new owners, when they needed to spend money to adapt to a shifting retail environment. And when the pandemic wiped out much of their sales, neither had anywhere to go for relief except court, write Sapna Maheshwari and Vanessa Friedman.
The filings by J. Crew and Neiman Marcus followed a wave of retail bankruptcies in the past few years, and came as numerous chains, including J.C. Penney, teetered on the brink because of the pandemic.
J. Crew, which owns Madewell, and Neiman Marcus, which owns Bergdorf Goodman, have vowed to stay in business, but bankruptcies inevitably raise questions about what the future holds for employees, stores and vendors.
The fast food chain will require restaurants to clean digital kiosks every time a customer uses one and sanitize restrooms and other high-touch areas every half-hour, according to a copy of the guide reviewed by The New York Times. The guide also requires the franchisees to place “closed” decals on certain tables to promote social distancing. And it recommends putting signage on the floor to prevent customers from brushing past each other as they move around the restaurant.
All employees will have their temperatures taken before work, and they will be required to wash their hands regularly.
“For dine-in orders, the bag will be placed on a clean sanitized tray and delivered to the customer while maintaining social distance requirements,” the guide states. “Do not forget napkins and straws!”
The guide does not outline a strict timeline for reopening. Once a local government says that restaurants can admit dine-in guests, a McDonald’s official in that region will decide whether to begin reopening, the guide states. Then individual franchise owners will make a decision about whether to go through with reopening.
The guide also includes a Q. and A. section on how to manage guests who refuse to comply with social distancing guidelines.
“Always approach a situation calmly and treat everyone with respect,” the guide says. “Inform the guest: I apologize for any inconvenience, but to help keep everyone safe, we would like all our guests to maintain a safe distance of 6 feet from each other and our staff.”
As the coronavirus forces meat plants to shut down, hundreds of thousands of pigs have grown too large to be slaughtered commercially, forcing farmers to kill them and dispose of their carcasses without processing them into food.
In Iowa, the nation’s largest pork-producing state, agricultural officials expect the backlog to reach 600,000 hogs over the next six weeks. In Minnesota, an estimated 90,000 pigs have been killed on farms since the meat plants began closing last month.
One Minnesota hog farmer sealed the cracks in his barn and piped carbon dioxide through the ventilation system. Another farmer has considered gassing his animals after loading them into a truck. And a third shot his pigs in the head with a gun. It took him all day.
“There are farmers who cannot finish their sentences when they talk about what they have to do,” said Greg Boerboom, a second-generation pig farmer in Marshall, Minn., who is trying to find ways to avoid killing a backlog of more than 1,000 pigs.
“This will drive people out of farming. There will be suicides in rural America.”
Microsoft may emerge from the pandemic even stronger than before, thanks to its products that help people work remotely (including its own employees). But the company’s chief executive, Satya Nadella, said that he was “on the lookout for what is lost” in remote work.
Speaking to a group of reporters and editors from The New York Times, as detailed in today’s DealBook newsletter, Mr. Nadella noted that some work force productivity numbers have gone up at the company, but it isn’t something to “overcelebrate.” More meetings start and end on time than before, but “what I miss is when you walk into a physical meeting, you are talking to the person that is next to you, you’re able to connect with them for the two minutes before and after,” he said. Those moments are hard to replicate virtually, as are other soft skills crucial to connecting with co-workers and building a community.
“Maybe we are burning some of the social capital we built up in this phase where we are all working remote,” he said. “What’s the measure for that?”
The weekly count of new unemployment claims has been declining since late March, but job losses from the coronavirus pandemic continue to mount. The two month tally of workers who joined the U.S. unemployment rolls is now more than 36 million.
Michelle Meyer, head of U.S. economics at Bank of America, said that even with businesses reopening in some states, she doubted that callbacks to work outnumbered additional layoffs from other sectors. The slowdown has been rippling beyond the early shutdowns in retail and hospitality to professional business services, manufacturing and health care.
“In a sense, it’s a rolling shock,” she said.
Jerome H. Powell, the Federal Reserve chair, said Wednesday that Fed research being released Thursday would show that in households making less than $40,000 a year, about 40 percent of those working in February lost their jobs in March.
State unemployment insurance and emergency federal relief were supposed to tide households over during the shutdown. But several states have a backlog of claims, and applicants continue to complain of being unable to reach overloaded state agencies.
According to a poll for The New York Times in early May by the online research firm SurveyMonkey, more than half of those applying for unemployment benefits in recent weeks were unsuccessful.
Housing officials clear up question on mortgage forbearance payments.
Homeowners who have temporarily paused their federally backed mortgages because of virus-related hardships have been wondering if they could push those missed payments to the end of their loan. On Wednesday, federal regulators provided an answer: Yes.
Borrowers who reach their final payoff date and still owe the unpaid amount will have to pay it in a lump sum at that time, according to the Federal Housing Finance Agency, which oversees mortgages guaranteed by Fannie Mae and Freddie Mac. If they sell or refinance their homes, they’ll have to pay what they owe then.
Under the CARES Act, homeowners whose mortgages are backed by the federal government are permitted to skip their payments for up to a year.
Homeowners owe the skipped amount in full, and the agency is encouraging borrowers to pay it as soon as they’re able. But even if they have to push the payment to the end of their loan, homeowners will not be charged extra fees or interest on the balance.
There is one caveat: Housing officials said borrowers who were not current on their loans, or were more than 31 days delinquent before March 1, would not be eligible.
Catch up: Here’s what else is happening.
The New York Stock Exchange will begin to reopen its trading floor the day after Memorial Day, the exchange’s president, Stacey Cunningham, wrote in an op-ed article in The Wall Street Journal. As part of “measured reopening plans,” floor brokers will return in small numbers and be required to wear masks. Social distancing requirements will be in place, and workers and visitors will be screened before entry.
Disney Theatrical Productions said Thursday that its stage adaptation of “Frozen” would not reopen on Broadway once the pandemic eases, making the musical the first to be felled by the current crisis. “We believe that three Disney productions will be one too many titles to run successfully in Broadway’s new landscape,” Thomas Schumacher, the president of Disney Theatrical Productions, said in a letter to his staff.
Nissan said the head of its North American operation, José Luis Valls, had resigned for “personal reasons” and would leave the company on June 15. Nissan has struggled with anemic sales in the United States, its most important market after China. Jérémie Papin, the senior vice president for finance at Nissan North America, will replace Mr. Luis Valls, the company said.
Leslie H. Wexner, the longtime chief executive officer and chairman of L Brands, stepped down from both roles on Thursday as expected, though he will retain a board seat. Mr. Wexner, 82, the longest serving chief executive of a company in the S&P 500, recently faced serious questions about his leadership because of issues with the company’s culture and his relationship with the disgraced financier Jeffrey Epstein, a convicted sex offender.
J.C. Penney might file for bankruptcy as soon as Friday after skipping two interest payments on its debt in the past month, according to two people familiar with the matter. The company is in talks to secure about $450 million in debtor-in-possession financing, which would allow it to keep operating the business, according to the people, who spoke on condition of anonymity because discussions were confidential.
Sony reported a 57 percent drop in operating profit in the three months ending in March. The coronavirus has hit Sony’s electronics business hard, while giving a boost to some of its entertainment offerings, as people stuck at home seek to keep themselves busy.
Reporting was contributed by Vanessa Friedman, Gregory Schmidt, Jason Karaian, David Yaffe-Bellany, Patricia Cohen, Tiffany Hsu, Stanley Reed, Niraj Chokshi, Li Yuan, Ben Dooley, Carlos Tejada, Jeanna Smialek, Tara Siegel Bernard Jim Tankersely, Matt Phillips, Sapna Maheshwari, Michael J. de la Merced and Kevin Granville.