The grim economic toll from the coronavirus pandemic jumped on Thursday when the government reported another 4.4 million people filed new unemployment claims last week, bringing the five-week total to more than 26 million.
The report is likely to intensify the debate over when to lift restrictions that have helped fight the virus’s spread but placed the economy in a stranglehold, reports Patricia Cohen of The Times.
“At all levels, it’s eye-watering numbers,” said Torsten Slok, chief international economist at Deutsche Bank Securities. As large as the figures have been, they don’t capture the full extent of layoffs — or the cascade of economic troubles that they have set in motion.
Problems responding to the waves of jobless claims now will affect the shape of the recovery when the pandemic eases, Mr. Slok said. Laid-off workers need money quickly to pay for rent, groceries and credit card bills. If they can’t do so, he said, the hole that the larger economy has fallen into “gets deeper and deeper, and more difficult to crawl out of.”
Treasury warns big companies not to take small business loans.
The Trump administration warned big companies on Thursday that they must prove they are in need of emergency small business loans to keep their operations running and have no other option to get financing or repay the funds.
The new guidance from the Treasury Department came amid an uproar over bigger companies taking loans through the Paycheck Protection Program while smaller businesses have been left out.
The Treasury Department updated its “Frequently Asked Questions” page about the P.P.P. to urge “large companies with adequate sources of liquidity” to think twice before applying for small business loans that are backed by the Small Business Administration.
The S.B.A.’s $349 billion fund to support these loans ran out last week and is expected to be replenished with another $310 billion this week. Backlash over the program has been escalating after some big restaurant chains, including Shake Shack, took out multiple $10 million loans for their subsidiaries.
Treasury notes that, by law, the small business loans are intended to be taken in cases when the money is “necessary to support the ongoing operations.” It said that borrowers need to certify this in “good faith” and to take into account their ability to access other sources of money.”
Treasury Secretary Steven Mnuchin warned businesses that they would be investigated and could face penalties if they improperly accept small business money. He has urged such businesses to return those funds. The guidance released on Thursday said borrowers that repay loans in full by May 7, 2020 will be deemed by the S.B.A. to have made their certifications in good faith, leaving them in good standing with the government.
It could be years before the U.S. economy fully recovers from the pandemic, but some airline and auto industry executives are starting to ask what it will take to reopen their businesses.
Delta Air Lines, American Airlines, United Airlines and Southwest Airlines have already aggressively advertised the precautions they are taking to lure back passengers, from fogging cabins with disinfectant to restricting food service to blocking out middle seats.
The chief executive of Delta, Ed Bastian, told financial analysts on Wednesday his company was prepared to “make whatever changes to the business model that will be necessary.” That could mean federally administered “immunity passports” or spacing out seats or running flights with fewer passengers.
“This recovery is going to take several years,” Mr. Bastian said. “It’s going to be multiphased, it’s going to be choppy along the way. We’ll have opportunities to test all those theses and see what it takes.”
But what works for some airlines may not work for others. Michael O’Leary, the chief executive of low-cost carrier Ryanair, told The Financial Times on Wednesday that the airline would not return to flying with middle seats empty.
Automakers are also making plans to turn the lights back on. Volkswagen said on Wednesday it has called employees back to work at its plant in Chattanooga, Tenn., on May 3, making the company one of the first major automakers to resume manufacturing since much of the industry shut down because of the coronavirus pandemic.
The company said it had spent several weeks putting in place health and safety measures to protect the 3,800 people who work at the plant, which makes the Atlas sport-utility vehicle. Volkswagen stopped production at the plant on March 21 after state and local officials issued stay-at-home orders. Gov. Bill Lee of Tennessee said on Monday he would let his order for people to stay home expire on April 30.
General Motors, Ford Motor and Fiat Chrysler have not yet called factory workers back, and continue to negotiate with the United Automobile Workers union over safety measures.
The French carmaker Renault plans to begin limited production at a plant outside Paris on Monday. The company resumed production last week at factories in Portugal and Spain that make engines and gearboxes.
Renault’s plant in Flins, about 25 miles west of Paris, will be the first vehicle assembly plant in France to reopen. Initially only about one-quarter of the work force will report for duty to reduce the risk of infection, a spokeswoman said.
With the economy shut down and tens of millions out of work, the energy for protest is high. Many civil rights activists are angry that black and Latino people are being disproportionately killed by the virus.
It’s a moment that might otherwise give rise to demonstrations in the streets. Instead, people are generally shut in by government order, or simply fear getting within six feet of another human. There have been hashtags (#CancelRent) and email blasts and grainy video rallies, but those methods are more easily ignored by bankers, landlords and elected officials.
So activists have turned to other tactics, like painting slogans on cars and putting recorded chants on the internet.
“Direct action is so much about people putting their bodies on the line,” said John Washington, an organizer in Buffalo with People’s Action, a national network of local advocacy organizations. “In a way, Covid has stolen that.”
Stocks rose for a second day on Wednesday, even as the number of people claiming unemployment benefits in the United States climbed and data from Europe highlighted the heavy toll of economic shutdowns to prevent the spread of coronavirus.
The S&P 500 rose nearly 1 percent and benchmarks in Europe were also slightly higher.
The gains came after the government said that more than 4.4 million workers filed for unemployment insurance last week, a figure that, while roughly in line with what analysts had expected, shows the severity of the downturn facing the United States economy. Over the last five weeks more than 26 million people have said they’re suddenly out of work. That number likely understates the actual job losses because many are having a hard time even filing unemployment claims.
In Europe, a survey of business activity, the IHS Markit purchasing managers index, fell to 13.5 points, from 29.7 in March. In Britain, it fell to 12.9 in April, from 36 the month before. The sharp declines were the steepest falls in the survey’s 22 years.
Still, stocks have been slowly climbing for weeks even in the face of such grim data, as investors expect an eventual recovery from the current drop and governments start to discuss measures to reopen businesses.
It helped that oil prices, which had collapsed earlier in the week, continued to rebound on Thursday, gaining more than 8 percent.
After years of working almost exclusively on long-term projects and pushing day-to-day management to his deputies, Jeff Bezos, 56, has turned back to the here-and-now problems facing Amazon, the company he founded and grew into a global behemoth, writes The Times’s Karen Weise.
As the giant retailer grapples with a surge of demand, labor unrest and supply chain challenges brought on by the coronavirus, he is holding daily calls to help make decisions about inventory and testing, as well as how and when — down to the minute — Amazon responds to public criticism. He has talked to government officials. And in April, for the first time in years, he made a publicized visit to one of Amazon’s warehouses.
“For now, my own time and thinking continues to be focused on Covid-19 and how Amazon can help while we’re in the middle of it,” Mr. Bezos wrote to shareholders last week.
But Amazon is one of the few companies that have benefited financially from the crisis. Because of all the customer demand, its shares have hit record highs. That has made Mr. Bezos, the wealthiest man in the world, $25 billion richer since early March.
The European Central Bank said Wednesday it would lower its lending standards to allow commercial banks in the eurozone to post junk bonds as collateral for cheap loans, in an effort to prevent a credit crunch.
The extraordinary action by the central bank was a reaction to fears that hundreds of billions of euros in corporate bonds were on the verge of being downgraded to junk status, because the companies that issued the debt may not be able to repay it.
The mass downgrades could cause severe financial turmoil because, under the old rules, banks that hold the debt could no longer use it as collateral to borrow from the central bank.
Eurozone banks can borrow as much money as they want from the European Central Bank, but must post collateral. Previously the central bank did not accept junk bonds, but it said Wednesday it would allow the debt as collateral as long as it was still rated investment grade on April 7.
The central bank said in a statement that an ample supply of collateral “is crucial for banks to provide funding to firms and households during the current challenging times.”
Catch up: Here’s what else is happening.
Target reported Thursday that sales since February are up 7 percent, with in-store sales falling slightly and online purchases jumping 100 percent. The retailer also extended its $2 an hour emergency pay rate for workers through May 30.
The German carmaker Daimler said that its operating profit plunged 78 percent in the first three months of 2020 as the coronavirus outbreak devastated sales. Daimler felt the effects of the virus early in the year because, like other German carmakers, it gets much of its sales from China, where the pandemic began. Daimler’s finance unit, which provides car loans, set aside 400 million euros, about $430 million, to cover possible credit losses.
Equinor, the Norwegian energy giant, said it would cut its dividend for the first quarter to 9 cents a share, two-thirds below the amount paid in the previous quarter. The move, which the company said would shore up financial strength after the steep drop in oil prices, may rattle investors, who have been attracted to the high dividend yields offered by major oil companies.
The Swiss bank Credit Suisse said that net profit rose 75 percent in the first quarter as volatile stock and bond markets generated trading fees. But, following a trend among banks, Credit Suisse nearly quadrupled the money it set aside to cover customers who may not be able to repay their loans.
Alcoa said on Wednesday that it would stop production at its Intalco smelter in Ferndale, Wash., and lay off employees because of declining demand for its products. The aluminum maker had already cut production at that plant and others, and it said that about 30 percent of its global smelting capacity was now idle.
Reporting was contributed by Patricia Cohen, Ben Dooley, Conor Dougherty, John Eligon, Karen Weise, Su-Hyun Lee, Vindu Goel, Niraj Chokshi, Jack Ewing, Carlos Tejada, Neal E. Boudette, Stanley Reed, Daniel Victor and Kevin Granville.