April 3, 2020

A Widening Toll on Jobs: ‘This Thing Is Going to Come for Us All’

Finally, on Tuesday, he managed to file his claim.

“So I now join the group who can shout out to the rest: ‘There’s hope!’” Mr. Sullivan wrote in an email.

Mr. Sullivan was one of more than 366,000 New Yorkers to file claims last week, up from 80,000 the week before, according to Thursday’s federal data. California, another state that has struggled with the deluge of filings, reported close to 900,000 claims last week, up from 186,000. Those figures, unlike the nationwide total, are not adjusted for seasonal patterns.

In a news conference this week, Gov. Andrew M. Cuomo of New York said he knew the state’s claims system wasn’t keeping up with the surge, and he said hundreds of people were working to expand capacity.

“The site is so deluged that it keeps crashing because you literally have hundreds of thousands of people at any time trying to get on the site,” he said. “I apologize for the pain. It must be infuriating.”

Economists, too, have struggled to keep pace with the speed of the collapse. A month ago, most forecasters still thought the United States could avoid a recession. Today, many economists are expecting a decline in gross domestic product that rivals the worst periods of the Great Depression.

On Friday, the Labor Department will release its monthly report on hiring and unemployment, usually one of the most-watched indicators on the economic calendar. But the data was collected in early March, an eon ago in the coronavirus age. Most forecasters expect it to show only a modest uptick in the unemployment rate and a small decline in jobs, despite the wave of layoffs that hit later in the month.

For workers and businesses, the reversal of fortune has been head-spinning.

Article source: https://www.nytimes.com/2020/04/02/business/economy/coronavirus-unemployment-claims.html

Auto Sales Plummet in First Quarter as Coronavirus Keeps Buyers Away

“My wife said we could get a Mustang, but I wasn’t going to go out shopping for a car,” Mr. Maletic said.

The drop in sales is the second big blow to automakers. Most companies have shut down factories across North America to prevent the spread of the virus among workers.

Automakers and dealers expect a bigger decline in April because stay-at-home orders will be in effect for most or all of the month in many parts of the country. Even as some states lift or relax those orders, consumers will likely stay away from showrooms for some time. To lure buyers, G.M., Ford Motor and Fiat Chrysler are offering zero-percent loans that last up to seven years for new car purchases.

In St. Louis, where a lockdown order has been issued by the local government, Ann Kittlaus is unsure of how to trade in her family’s 2017 Acura MDX, since the lease is expiring soon. “We would have to have the dealer deliver a new one and take the other away,” said Ms. Kittlaus, a public relations professional and mother of two college-age children.

She added she would probably let the vehicle sit for a week to be sure it doesn’t have any traces of the virus. In any case, she said she is not in a hurry to make the trade. “It’s not like we’re going anywhere,” Ms. Kittlaus said.

A dramatic drop in sales in April could cause a painful chain reaction. With no buyers driving cars off their lots, dealers won’t have to order more from the manufacturers. That could force car companies and their suppliers to keep their plants idle or production low even once officials allow more people to go back to work.

“April is likely to see further historic declines, driven largely by a lack of consumer confidence and substantial increases in unemployment,” said Charles Chesbrough, a senior economist at Cox Automotive. “And that trend will likely continue into early summer, at best. The second quarter will be the real measure of Covid-19’s impact on the economy and the auto industry.

Article source: https://www.nytimes.com/2020/04/01/business/economy/auto-sales-coronavirus.html

Why State and Local Debt Is Fraught Territory for the Fed

William C. Dudley, who was formerly president of the Federal Reserve Bank of New York, is sympathetic to the idea of a municipal bond program of some sort, especially given that “they basically have the blessing of Congress.” But he said officials should stick to investment-grade debt.

“Once you start to get below investment grade, it gets a lot trickier — you’re taking on a lot more risk, and where does it end?” Mr. Dudley said. The central bank might end up with riskier bonds that investors are offloading because the debt is unlikely to be paid back.

Lawmakers are leading the push for Fed action. The new legislation insists that Treasury Secretary Steven Mnuchin push for an emergency lending program related to state and local finance, though it’s fuzzy on the details. Speaker Nancy Pelosi, Democrat of California, has said repeatedly that she’s urged Jerome H. Powell, the Fed chair, to do more to help municipal markets.

Senator Elizabeth Warren, Democrat of Massachusetts, urged Mr. Powell and Mr. Mnuchin in a Tuesday letter to “address the needs of state and municipal governments that face desperate budget shortfalls” and do so “rapidly.”

After legislation passed empowering the Fed with more financial backing for emergency lending, which it would use to snap up the municipal bonds, the market for outstanding local bonds temporarily calmed. But volatility returned on Wednesday.

“Liquidity is the most critical piece right now,” said Deborah Goldberg, who is Massachusetts’ treasurer and who has been pushing the Fed to get involved.

The message from the Fed and the Treasury has been, consistently, that it is a work in progress.

“We’ll be looking at programs for state and local governments,” Mr. Mnuchin said in a CNBC interview Wednesday. “I can assure you, Jay Powell and I are working around the clock at providing liquidity into the economy.”

Mary Williams Walsh and Alan Rappeport contributed reporting.

Article source: https://www.nytimes.com/2020/04/01/business/economy/fed-coronavirus-municipal-debt.html

Trump Rebuffs Demands to Lift Tariffs as Economy Falters

In a statement Wednesday, Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce, said tariff relief “would provide some welcome breathing room for American businesses and consumers.”

“Liquidity has emerged as one of the top challenges for businesses of all sizes, and tariff relief” would alleviate some of that strain, he said.

Glenn Hubbard, an economist at Columbia University, said removing the tariffs could be critical to helping the U.S. economy recover more quickly once the virus subsides, by giving business leaders confidence to ramp up investment.

“It would be good if the president stood down on the trade wars,” Mr. Hubbard said. “If I was sitting in a C.E.O.’s chair and Covid-19 was receding, if you wanted my confidence and investment back, I think you would want to convey business certainty.”

Some lawmakers have echoed the arguments. In a bipartisan letter on March 26, eight leading lawmakers urged Treasury Secretary Steven Mnuchin to defer all tariffs for at least 90 days to help ensure businesses have enough liquidity to weather the crisis.

But longstanding opposition to removing the tariffs has also grown. Groups that supported Mr. Trump’s levies from the beginning have insisted that any removal would be ruinous for industries like steel that depend on the protection.

“We appreciate President Trump’s statement yesterday that he is NOT planning on deferring the collection tariffs,” the Coalition for a Prosperous America, which has supported the tariffs, said in a statement Wednesday.

Article source: https://www.nytimes.com/2020/04/01/business/economy/trump-tariffs-coronavirus.html

Start-Ups Are Pummeled in the ‘Great Unwinding’

Now they were being laid off over video calls.

At Bird, the Los Angeles scooter start-up, which had once been valued at as much as $2.5 billion, hundreds of employees were invited to a video conference call on Friday morning with just an hour’s notice. On the call, the voice of an unidentified executive explained that their jobs had been eliminated. A slide outlined the terms: a month of severance pay, three months of medical benefits and one year to exercise their stock options.

The workers were asked to mail in their laptops, said Jenny Alvauaje, a Bird data analyst who was on the call. Some workers missed the call but learned they had been laid off when they lost access to internal systems shortly after, she said.

In a statement that called the layoffs “a difficult decision,” a Bird spokeswoman added, “We purposefully and intentionally did not have any video on to protect privacy as we delivered the news live to individuals.”

The end was equally abrupt for Nik Buenning, 40, a data scientist at Panoramic, a marketing software start-up in Los Angeles. He was just settling into his work-from-home setup on March 23 when a companywide email said to expect a call from human resources.

Right away, he said, “people started sending Slack messages like, ‘I’m out.’ ‘I’m out.’ ‘I’m out.’” An hour later, he was out, too.

Mr. Buenning signed up for Upstream, a new networking app that unveiled itself earlier than planned to cater to tech workers affected by coronavirus layoffs. Sites like Silver Lining are also helping people connect with companies that are still hiring.

Many start-up workers have added their names to Google spreadsheets, which recruiters share in weekly newsletters like Layoff List, created by a recruiting company called Drafted. Hiring managers, venture capitalists and start-up advisers read the newsletter, said Vinayak Ranade, chief executive of Drafted.

Article source: https://www.nytimes.com/2020/04/01/technology/virus-start-ups-pummeled-layoffs-unwinding.html

Defense Production Act Has Been Used Routinely, but Not With Coronavirus

The Department of Health and Human Services did not immediately respond to a request for comment.

The law permits federal agencies to skip an often bureaucratic procurement process that can take months and force companies to come to the table to sign a contract. Given the speed of the crisis, Joshua Gotbaum, a former assistant secretary of defense for economic security, said the government did not have the luxury of normal bidding and contracting.

“Under the process of business as usual, they’re not even going to award contracts until this month or April, then there will be a protest,” he said. “Under the Defense Production Act, they could have sat down with people in February” and finalized a contract.

Previous administrations have also been hesitant to invoke the law for nonmilitary matters.

If the federal government used the law to make itself the priority, other clients that had worked through the company’s procurement process could have their orders delayed, though under the law, the vendor is protected from lawsuits.

“My general experience is when you’re in the midst of a national crisis, contractors generally speaking want to help,” said Ernest B. Abbott, who was the general counsel of FEMA during the Clinton administration. “They want to participate. They want to be able to keep their people employed to build what’s needed for the nation.”

But Mr. Hall, who in the months after Mr. Trump took office assisted Customs and Border Protection in using the law to secure body armor from Armor Express, a Michigan-based company, said such caution had allowed understanding of the law’s powers to atrophy.

“You have people on the civil side saying, ‘What is this thing? I might get in trouble using it,’” Mr. Hall said.

While FEMA and Health and Human Services have discussed the law in training situations, Mr. Hall said he often had to press his superiors to prepare for its use in the event of a national emergency, such as a pandemic.

Article source: https://www.nytimes.com/2020/03/31/us/politics/coronavirus-defense-production-act.html

Coronavirus Prompts Instacart and Amazon Strikes Over Health Concerns

Still, she said, she was concerned about losing her livelihood if she were to walk off the job. Ms. Brazier said that most of the Instacart personnel at her store turned up for work on Monday and that it appeared to be a fairly normal day.

Several current and former Instacart workers said it was notable that the walkout appeared to unite those who are classified by the company as independent contractors with so-called in-store shoppers, who are employees and only prepare orders within stores.

In the past, only contractors had taken part in similar actions. But once a Vice article about the walkout began circulating on Friday, said Ryan Hartson, who is an in-store Instacart employee in Chicago, he and other employees decided to join in. “It’s the nature of being front-line workers,” he said. “It feeds into ‘Oh, we need to take action, go forward and do that together.’”

Jake Rosenfeld, a sociologist at Washington University in St. Louis who studies labor, said that organizing typically accelerated in good economic times rather than recessions, with the glaring exception of the Great Depression, in which a sense of despair helped bring workers together.

But Mr. Rosenfeld said he was skeptical that workers could capitalize on the current anxiety and frustration absent favorable legislation that enables organizing, a more accommodating response from employers or more robust assistance from established institutions, like existing unions.

Mr. O’Toole, the Chicago union official, said there were hundreds of Instacart employees in the area that his union was trying to organize after helping to organize a small group in suburban Skokie. He said the call for the strike was “clearly resonating.”

Article source: https://www.nytimes.com/2020/03/30/business/economy/coronavirus-instacart-amazon.html

Scary Times for U.S. Companies Spell Boom for Restructuring Advisers

A restructuring can happen in out-of-court talks. But when a company’s debts are complex or the parties start vying over who will be paid first, the company may seek protection in bankruptcy court, where all the debts are renegotiated under the watch of a judge. In bankruptcy, the company would also seek new financing and a fresh start.

In anticipation of demand, many law firms are redirecting their lawyers into restructuring and bankruptcy-related assignments from other areas. Frank Aquila, a corporate attorney at Sullivan Cromwell who typically focuses on merger and acquisition work, said he’s been spending a lot of time with clients seeking to strengthen their cash position, either by reducing debt, selling assets or considering federal aid.

But Mr. Aquila and other advisers said that businesses generally prefer to work with banks rather than seek a government loan — especially if it means giving up the ability to buy back stock or dealing with restrictions on how the money can be used.

Michael C. Eisenband, a co-leader of corporate finance and restructuring at FTI Consulting, echoed the sentiment. “If you get $100 million, what happens when the company starts to turn around?” he said. “Do the first profits have to pay the government back first?”

Still, some companies — in particular, airlines — will get targeted relief from the $2.2 trillion economic lifeline bill that President Trump signed on Friday, and another $2 trillion that the Federal Reserve is using to keep the bond markets functioning properly.

Corporate failures are inevitable in the current crisis, especially given that there is $6 trillion in U.S. corporate debt that remains outstanding — near record levels. Particularly vulnerable is the $760 billion in junk bonds issued by U.S. companies, with $178 billion of that coming due over the next 12 months, according to Dealogic. Junk bonds pay investors higher interest rates.

Article source: https://www.nytimes.com/2020/03/30/business/coronavirus-companies-restructuring-bankruptcy.html

Trump Said He Was the President of Manufacturing. Then Disaster Struck.

“If we don’t flatten the curve, we’re on a trajectory currently to exceed our capacity in the New Orleans area for ventilators by about April the 4th, and all beds available in hospitals by about April the 10th,” Gov. John Bel Edwards, Democrat of Louisiana, said Sunday on “Meet the Press on NBC. “So we’re doing everything we can to surge capacity. It’s very difficult.”

Industry executives made the point that while the Defense Production Act enabled the White House to create the illusion of decisive executive action, it did not solve the nuts-and-bolts problem of gearing up scores of suppliers or creating Made-in-America production lines where few exist. That is the problem G.M. and Ventec, and other companies involved in the effort like Ford and Medtronic, are facing — often seeking parts from the same suppliers.

“We are moving full steam ahead on ventilators because they know there is an immediate need for increased production,” said Chris Brooks, Ventec’s chief strategy officer, even if it is still unclear whether the customers are hospitals, states or the Federal Emergency Management Agency, which the White House has delegated to take charge of the effort.

Mr. Trump came to this crisis belatedly, but once he did he has tried to portray himself as a wartime president, one who is making use of all of America’s talents to fight an invisible but devastating enemy. And in that regard, the best analogy may be Franklin D. Roosevelt’s “arsenal of democracy,” the phrase he used in a Dec. 29, 1940, fireside chat, as he tried to get American industry to support Britain in its fight with Nazi Germany, without getting the United States into the war.

It turned out to be prescient, because industry was already getting onto a wartime footing by the time Japan attacked Pearl Harbor a year later, plunging the United States into a manufacturing frenzy. That is when Ford began churning out B-24 bombers and Sherman tanks.

But in this case, Mr. Trump sought the language of wartime action without the responsibility for making it happen. He welcomed voluntary efforts that were already underway, as manufacturers like Medtronic and the Dutch manufacturing giant Phillips promised to ramp up production. The problem was that it was uncoordinated — as if the Pentagon had announced it needed more missiles, more artillery shells and more nuclear weapons but left unclear how many or where they should be delivered.

That was the situation Mr. Kushner found when he entered the effort, at the request of Vice President Mike Pence. He moved the authority to deal with the issue from the Department of Health and Human Services to FEMA, saying that the latter agency knew how to act in a “battle rhythm.” But still, no one knew how many ventilators were already in the market, where they would be needed first or how many more companies could be expected to make. And it was complicated by the fact that many of the largest manufacturers had moved operations offshore, to Ireland, Switzerland and, of course, China.

Article source: https://www.nytimes.com/2020/03/29/us/politics/coronavirus-trump-ventilators-manufacturing-gm.html

April Bills Loom. The Economy Hangs on How Many Are Left Unpaid.

Progressives, including Representative Alexandria Ocasio-Cortez of New York, have called for moratoriums on rent and other financial obligations. And even conservatives, despite concern about government initiatives already costlier than those in the 2008-9 financial crisis, have said this is a case where it makes sense to provide grants — not merely loans — to individuals and businesses.

Michael R. Strain, director of economic policy studies at the right-leaning American Enterprise Institute, said that corporations might be able to afford to take on extra debt to carry them through a period of lost revenue, but that most small businesses, particularly in the service sector, could not.

“A manufacturing company could come back to a backlog of orders, but if you’re a services business, you’ve just lost this revenue,” he said. “People are not going to go out to eat six times as often when this is over.”

If businesses have to take on huge debt burdens to survive the crisis, Mr. Strain said, “that situation leads to a much more prolonged downturn.”

For workers, weathering more than a few weeks without pay may be a challenge. The 11-year economic expansion left record low unemployment, but it did less to ensure financial stability. The Federal Reserve reported last year that four in 10 Americans would have difficulty covering an unexpected expense of $400.

Cori Aitken, 34, lost one job as a sales representative at Temescal Brewing, a small brewery in Oakland, Calif., and another job tending bar. Now she’s looking to cut her $1,900 monthly expense budget, which includes about $1,000 in rent and $300 for utilities, along with a phone bill, car insurance and loan payments.

Article source: https://www.nytimes.com/2020/03/28/business/economy/coronavirus-bills-rent-payments.html