The US economy is facing irreparable damage from the protection of the coronavirus pandemic, the nation’s top politicians warned lawmakers on Tuesday as Congress and the White House struggle over how to restart business and how much additional government support is needed.
In a joint statement to the deputies, the Minister of Finance Stephen Mnuchin and the Chairman of the Federal Reserve Jerome H. Powell proposed a strict assessment of the fragile state of the economy, warning of more serious job losses in the coming months. But they suggested opposing views on how best to strengthen the economy, with Mr Powell suggesting that more fiscal support for countries and businesses may be needed to avoid lasting economic damage, and Mr Mnuchin suggested that without rapid opening, the economy could never fully recover.
The videoconference hearing came at a crucial time as Congress and the White House began discussing the outline of the second major economic aid bill and potentially investing trillions of additional taxpayers’ dollars in the economy.
Mr Mnuchin’s comments reflect a change in the tone of administration officials who have begun trying to shift the economic discussion from greater financial support to allowing countries to reopen. In his opening remarks, Mr Mnuchin said that “it is so important to start bringing people back to work in a safe way”. The Trump administration has said that ensuring the protection of business liability against lawsuits from workers who are ill is a priority in future legislation.
Mr Powell sounded more cautious, explaining that full recovery would not occur until the health crisis was resolved.
“The thing 1, of course, is people who believe it’s safe to go back to work, and that’s for a sensible, thoughtful economic recovery, something we all want – and something we’re in the early stages of now – said Mr. Powell. “It will be a combination of taking the virus under control, developing therapists, developing a vaccine.”
He noted that state and local governments, in particular, could slow economic recovery if they lay off workers amid budget cuts, suggesting that Congress may need to direct more money to local communities.
The Fed usually tries to avoid fiscal policy, leaving it to Congress and the White House. But Mr Powell has repeatedly warned over the past two weeks that if the decline in the coronavirus is long, additional political support may be needed to keep the economy safe.
He was careful to avoid giving explicit advice to Congress and made sure to soften his proposals as a condition – that fiscal policymakers “might” need to do more if the recovery takes time – but reiterated on Tuesday that it was crucial not to download plug too fast
“My concern is the risk and the possibility of longer-term damage to the economy,” Mr Powell said, noting that politicians would have information on whether more was needed “relatively quickly here” as economic recovery began and became clearer. how consumers will quickly return to the shops and workers will be paid.
Here are more highlights from Tuesday’s hearing:
Mr Powell suggested that the central bank could expand its municipal debt buy-back program, and agreed that state and local authorities could slow the economic recovery if workers quit amid the budget crisis.
Mr Mnuchin warned that the economy could never fully recover if states continued to stop for months – citing the risk of “permanent damage” – comments reflecting a shift in focus from the Trump administration, which is tried to shift the economic discussion from more financial support to allowing countries to reopen.
Lawmakers have asked Mr Mnuchin and Mr Powell whether their efforts to boost the economy are doing enough to help workers and smaller companies, and warned that they should not just help large corporations. Lawmakers have repeatedly called on the couple to quickly launch a lending program on Main Street.
Mr Powell warned that the economy could face long-term damage if the political response is not strong enough, stressing again that the economy may need more help to get through the coronavirus period without lasting scars.
“There is clear evidence that when you have a situation where people are unemployed for long periods of time, it can permanently weigh their careers and their ability to return to work,” he said.
Mr Mnuchin, who previously said he expected the Treasury to return all $ 454 billion from Congress, changed that figure on Tuesday, saying the “main case” now is that the government will lose money. “Our intention is to expect to bear some losses on these facilities,” he said.
The unemployment rate will reach 15 percent, the Congressional Budget Office predicts.
The non-partisan budget service of Congress released new forecasts on Tuesday, illustrating the continued decline in the United States as the pandemic continues.
The budget department predicts that gross domestic product will shrink by 11 percent in the second quarter and the unemployment rate will reach 15 percent, with industries such as travel, hospitality and retail accounting for the bulk of the losses. The recovery is expected to be gradual and the agency expects the unemployment rate to be 8.6 percent by the end of next year.
Some of the economic aid measures taken by the United States may hinder the growth of the labor market. The Budget Office suggested that the expiring expiry of the Small Business Wage Protection Program, which aims to keep workers in wages, could set off a wave of layoffs or obstacles. And general unemployment benefits could reduce incentives for workers to find new jobs.
“Results, employment, inflation, interest rates and many other macroeconomic variables will be strongly influenced by the course of the pandemic and the social distancing measures applied to control it,” the agency said. “The extent of uncertainty regarding social distancing, as well as its impact on economic activity and the consequences for economic recovery over the next two years, is particularly high.”
Stocks fall at the end of a volatile day, bringing back part of Monday’s rally.
Shares of Wall Street fell on Tuesday, rejecting part of Monday’s profit as investors regrouped after the S&P 500 had one of the biggest rallies in weeks.
The S&P 500 fell 1 percent by the end of the day after shaking water for most of the session as investors appreciated the testimony of Federal Reserve Chairman Jerome H. Powell and Treasury Secretary Stephen Mnuchin. Both addressed Congress about their response to the coronavirus pandemic and what lies ahead for both the Fed and the Treasury.
Late in the day, drug company Modern slid after medical news website Stat questions the stability of an early-stage trial of a coronavirus vaccine. Moderna’s announcement Monday that the vaccine has made some progress has helped launch a market rally of more than 3 percent – the best daily performance for the S&P 500 in six weeks.
Other negative news began to sink in on Tuesday, inclusive more signs of growing tensions between the United States and China. Investors also cheered on Monday after Germany backed the idea of a collective European debt to help countries be hit hardest by the outbreak, but Tuesday’s lack of detail and the prospect of a long and slow recovery weighed on the mood.
The Hudson Valley in New York State has been attracting directors looking for buccal settings for two decades. They used old towns, abandoned warehouses, office parks and rural areas to produce about 500 films, and in the process pumped more than $ 250 million into the local economy.
This year, film production in the area was booming and additional studio space was planned. But after the pandemic was blocked, work stopped.
“Things are not as they are, and they will never be the same again,” said Laurent Reito, founder and director of the Hudson Valley Film Commission, a Woodstock-based nonprofit that helps producers find seats, housing and crews.
Mary Stuart Masterson, the actress and founder of Upriver Studios, hoped to turn 104,000 square meters of a light industrial complex in Saugerties, New York, into a state-of-the-art film studio. But with the coronavirus pandemic, the leased area remains as it was, with the conversion of buildings slowed and production halted indefinitely.
“It’s time, who knows?” said Ms. Masterson, who remains optimistic that “there is a tomorrow.”
In an effort to mitigate the economic impact of the coronavirus, the government has expanded its financial security network – from strategically sensitive companies to entire industries such as energy and airlines, to the corporate bond market.
“Too big for failure, which exists for banks, has now spread to many other companies,” said Luigi Zingales, a Chicago finance professor who has long studied the interactions between government, regulation and the private sector.
This time, the actions of the Federal Reserve are much larger than simply preventing the banking sector from collapsing. The central bank essentially supported entire financial markets with its bottomless ability to buy freshly created assets.
While the Fed says it does not seek to keep stock prices, the market has recovered by about 30 percent since the institution began its giant program to pump trillions of dollars into financial markets.
Public companies have repaid less than half of the funds they received through a difficult federal loan program aimed at stabilizing small businesses.
Loans to publicly traded companies have attracted the attention of politicians and members of the public, who have said the money will be used for better use by smaller businesses. The finance ministry and the small business administration have given public companies a decision by Monday on whether to repay their loans or face possible sanctions if they have been able to obtain funds from other sources.
As of early Tuesday afternoon, about $ 550 million had been repaid from approximately $ 1.52 billion in loans opened by public companies, including some of the largest that had been announced. Calumet specialized products partners, a producer of hydrocarbon products, said on Monday it had repaid its $ 31.4 million loan.
Additional companies may announce their decision to repay their loans in the coming days.
More than 440 public companies have revealed that they have been receiving loans since the beginning of April. At least 58 of them, from the burger chain Shake Shack to the car dealership Penske Automotive Group, have returned the funds.
While the companies repaid the loans, more public companies received them in the second round of the program. This group includes companies such as Restaurants with a coffin and THE ONE groupwhich manages the STK chain from the stackhouse. Both companies said they could not access capital elsewhere.
But federal officials say the average amount of loans issued by the program above fell during its second round.
“I think we all had some concerns about how larger companies were prioritized,” Mr Mnuchin said during Tuesday’s hearing. “I believe this has already been corrected.”
Catch up: Here’s what else is happening.
City equipment, which also owns Anthropologie and Free People, reported a 32 percent drop in net sales to $ 588 million in the first quarter and a net loss of $ 138 million, a decline that comes as clothing retailers continue to struggle with temporary closures. pandemic stores. The retailer, which is known for its attractive and often large stores, said in a call for profit that it was negotiating with landlords on lease terms and cost reductions. He added that he did not want to work with those who thought it was “1995 and they can order any rent they want.”
Sephora, the cosmetics chain known for its bustling shops, where shoppers usually touch and try its products, said Tuesday it plans to open more than 70 stores on May 22, with many locations in Georgia, Texas and Tennessee. As part of a set of new protocols, it will not offer services such as transformations, testers will only be for display, and returned products will be destroyed.
Qty, the mid-priced clothing and accessories chain, said on Tuesday that its revenue fell 41 percent in the first quarter to $ 2.4 billion. It also reported a net loss of $ 541 million. The trader said it had reopened about half of the 1,100 seats since May 4th.
It’s over for Pierce 1 importThe home goods trader, who filed for bankruptcy protection in February, announced on Tuesday that he would liquidate his business. The company had closed its stores in March because of the pandemic, but was still hoping to find a buyer to continue. Pierce 1 said it would sell its remaining inventory and assets as soon as it could open stores after the government’s mandate blocked the blockade.
Walmart, the country’s largest retailer, said first-quarter sales rose more than 10 percent in the United States as customers flocked to stores and online to buy food and health products during the coronavirus pandemic. E-commerce sales rose 74 percent, doubling the company’s typical online growth rate. The company also said on Tuesday that it had hired more than 235,000 new employees to cope with growing demand.
Reports were contributed by Eugene L. Mayer, Matt Phillips, Jeanne Smialek, Jim Tankersley, Alan Rapeport, Deborah Solomon, Michael Corkery, Mike Isaac, Alexandra Stevenson, Eduardo Porter, Daisuke Wakabayashi, David Javariza-Bella-Bella McCabe, Ben Dooley, Carlos Tejada, Maria Abby-Habib, Keith Bradsher, Kate Conger, Rich Barbieri, Mohamed Hadi and Gregory Schmid.