September 19, 2020

Hotel Owners, Some With Trump Ties, Seek Federal Bailout

Over all, there are $550 billion worth of commercial mortgage-backed securities outstanding in the United States, financing hotels, shopping centers, office buildings and even self-storage facilities.

During the last recession, another class of securitized mortgages — then mostly home loans made to risky borrowers — played a major role in the economic crash, as homes suddenly lost value and homeowners defaulted, saddling investors, banks and other financial institutions with huge losses.

A similar pattern is emerging in the hotel industry, with $20 billion or 23 percent of the securitized debt held by the lodging industry at least 30 days delinquent on payments, according to Trepp, a company that tracks the sector. In the last recession, the total value of delinquent commercial mortgage-backed securities, known as CMBS, peaked at $13.5 billion.

While financial agencies are paying close attention to the commercial real estate market, defaults in CMBS alone are seen as unlikely to cause an economic collapse rivaling what happened when residential mortgage-backed bonds began unraveling in 2008.

In part, that is because the debt is less concentrated and the riskier slices — the ones that absorb the first losses — are generally held outside the banking sector. In 2008, banks’ exposure to securitized residential mortgages brought major lenders to their knees, choking off credit to the real economy and reverberating through the financial system.

But the experience is still creating pain. As the pandemic has dragged on, an increasing number of CMBS borrowers, particularly in the hotel industry, are giving up on paying their debt obligations and preparing to turn their properties over to lenders, according to Trepp, which as of August had counted at least 35 such loans worth a total of $1.6 billion.

In some particularly hard-hit markets like Houston, as much as 66 percent of the hotels financed with securitized debt are now delinquent, according to Trepp, or $664 million worth of delinquent CMBS loans.

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How Companies Are Getting Fast Coronavirus Tests for Employees

So that month, Mr. Sharpe began regular PCR testing for members of his sales and engineering teams, who typically travel to customers’ work sites. Workers are also tested before and after they travel to a “hot” state for work, which could otherwise require isolating themselves for several days upon returning. Mr. Sharpe said Cameron employees received test results through a website within 36 hours and could use the information to establish their health status to customers.

The company that built the site, Atlas ID, connected Cameron with a lab in Washington State that analyzed its tests. Atlas was founded in 2018 to give workers secure access to employment and income verification data, so they could share it easily with lenders and property managers. When the pandemic hit, it shifted its focus to employers in need of testing while building a network of labs to serve them.

Chip Luman, a co-founder of Atlas ID and its chief operating officer, said those relationships benefited smaller labs by offering steadier demand. “If I’m bringing in this partner that can guarantee me 100 tests every Monday from this employer, 500 from that one, they can look at capacity and plan business around that,” Mr. Luman said.

US BioTek, the lab near Seattle that handles Cameron’s tests, previously focused on allergy testing, among other services, but invested in new testing equipment during the pandemic.

Jack Frausing, US BioTek’s chief executive, said in an email that he had contacted Atlas on LinkedIn after reading about the company in the press. Mr. Frausing said US BioTek was able to provide results for over 95 percent of the samples it received within 24 hours and had the capacity to more than triple its test processing.

Other employers have begun regular testing of asymptomatic workers for similar reasons.

Some, like the meat processors Tyson Foods and JBS, have done so after outbreaks forced them to shut down facilities temporarily, and in the face of pressure from the United Food and Commercial Workers union. Representatives of both companies said they had begun testing to help protect workers.

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U.S. Restricts Chinese Apparel and Tech Products, Citing Forced Labor

Hefei Bitland “is not a direct supplier to HP,” a spokesperson for HP said in a statement. “We have robust policies in place to protect human rights and prohibit the use of involuntary labor of any kind across our supply chain. We are committed to ensuring everyone in our supply chain is treated with dignity and respect.”

American law bans the importation of any goods produced with forced labor. But human rights groups say the practice has long been widespread in Xinjiang, where many detainees are recruited into programs that assign them to work in factories, on cotton farms or in textile mills.

Xinjiang accounts for about 85 percent of China’s cotton production, according to the U.S. Agriculture Department, and about one-fifth of cotton production globally. Brands including Muji, Uniqlo, Costco, Caterpillar, Lacoste, Ralph Lauren, Tommy Hilfiger and Hugo Boss have been named in reports tying them to Xinjiang factories or materials. Some companies have denied the allegations.

Amid the tensions of President Trump’s trade war and a growing spotlight on human rights abuses in Xinjiang, some major apparel brands have tried to limit their exposure to the region in recent years, including by moving textile and clothing operations to Bangladesh, Indonesia and Vietnam. In July, the sportswear maker Patagonia announced that it was exiting Xinjiang, and that it had told its global suppliers that using fiber made in the region was prohibited.

But human rights groups and industry analysts say supply chains in China remain opaque, allowing companies to profit off involuntary labor by Uighurs and other ethnic Muslims. Travel restrictions in Xinjiang can prevent companies from investigating their supply chains there, and companies that carry out audits of their suppliers may see only what the Chinese factories want them to see.

Concerns about the prevalence of forced labor in these supply chains led Customs and Border Protection to draw up more sweeping restrictions on products made with cotton and fabric from Xinjiang. On the morning of Sept. 8, an agency official told The New York Times that the import bans would cover the supply chains for cotton, from yarn to textiles and apparel made in the Xinjiang Autonomous Region, as well as tomatoes and tomato paste.

But that order was never announced. Officials from the Agriculture Department, the Treasury Department and the U.S. Trade Representative intervened to raise objections about the measure, saying it could threaten American cotton exports to China, or put the trade deal Mr. Trump signed with China in January at risk, people familiar with the matter said.

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Unemployment Benefits Program Has Issues With Fraud and Math

“We do suspect that a big part of the unusual recent rise in P.U.A. claims is linked to fraud,” said Loree Levy, a spokeswoman for the California Employment Development Department. She said the state was investigating “unscrupulous attacks” exploiting identity theft and vulnerabilities in the system.

Pandemic Unemployment Assistance is meant to provide benefits to the self-employed, independent contractors, gig workers, part-timers and others ordinarily ineligible for state unemployment insurance. Set up to last through the end of the year, it was a major element of the CARES Act, which economists widely agree has kept the country from a far greater economic calamity. According to the Labor Department, $47 billion in pandemic unemployment benefits have been paid so far.

Fraud is not uncommon in hastily assembled disaster programs, including the Paycheck Protection Program, the component of the CARES Act that provided forgivable loans to small businesses to help weather the pandemic without layoffs.

But signs of trouble with the Pandemic Unemployment Assistance program have surfaced for months as people who did not file claims — including the governor of Arkansas — found benefits issued in their names. A growing number of states have signaled that the problems with the program go beyond the routine.

California has warned that it is cutting off recipients when it detects irregularities, like mailings stacking up at a given address. “These situations are believed to be fraud, and scammers will often try to intercept, redirect, or gather mail associated with these claims,” the state’s employment agency wrote.

Colorado said Thursday that in a six-week stretch this summer, 77 percent of new claims under the program were not legitimate.

“Nationally, it’s just presented an opportunity for criminals to take advantage of a program that doesn’t have a lot of safety measures in place,” said Cher Haavind, deputy executive director of the Colorado Department of Labor.

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Unemployment Benefits Are at Heart of a Debate Over Hiring

Within two or three days of the benefit’s expiration, he said, applications tripled. When the government approved the $300 replacement, he said, the numbers began to dwindle, even though most states have yet to start making the payments.

“It’s free money, so they feel they don’t have to work anymore,” he said.

Other employers share his sentiment. One-third of small-business owners surveyed by the National Federation of Independent Business said the supplement made hiring harder.

There are, of course, examples that tell a different story — millions of them. In May, June and July, more than 9.3 million workers returned to a job, forgoing the generous unemployment benefits.

And that story turns out to be by far the most common.

Researchers at Yale University who reviewed scheduling and time clock data for small businesses said, “We find no evidence that more generous benefits disincentivized work either at the onset of the expansion or as firms looked to return to business over time.”

Five other studies by different groups of economists produced the same results.

And in a survey by Franklin Templeton-Gallup, conducted in early August, most people said extra government relief would not keep them from going back to work.

One reason is that people generally look ahead. “The latest results show that Americans rationally understand the greater long-term security of returning to work rather than relying on ongoing government assistance,” said Sonal Desai, chief investment officer of Franklin Templeton Fixed Income.

New research from economists at the University of Chicago and New York University came to the same conclusion. The extra benefits, even if extended, are fleeting. In a recession, the possibility of not getting another job offer after refusing one is scary, as is the likelihood that lower wages and career setbacks could be permanent. Stability is worth a lot.

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J.C. Penney Avoids Liquidation in Sale to Mall Operators Simon and Brookfield

J.C. Penney’s bankruptcy already had serious implications for American malls and workers, as the company prepared to close as many as 250 locations and started liquidations at more than 100 stores this summer. Smaller mall retailers often have so-called co-tenancy clauses in their leases, which allow them to pay reduced rent or even break their leases if two or more anchor stores — like Sears, Macy’s and J.C. Penney — leave a location.

Many malls have already lost one or two department stores in recent years and are likely to struggle to find potential replacements as the pandemic persists. At the same time, chains like Victoria’s Secret and Gap are looking for ways to cut back on the number of their stores.

J.C. Penney, which in its heyday operated more than 1,500 stores, was long viewed as a budget-friendly destination for Americans seeking reliable home furnishings and apparel. But the retailer has been on a downward slope for years. It faced growing competition from rivals like Kohl’s and Macy’s, e-commerce took off, and it struggled to attract younger consumers to its midtier mall locations.

Its decline was greatly accelerated in the past decade by the involvement of William A. Ackman, a hedge fund manager, and Ron Johnson, a former retail chief at Apple, whose turnaround attempt became one of the most disastrous retail makeovers in recent history. Mr. Ackman, who bought a major stake in J.C. Penney in 2010 and later joined its board, recruited Mr. Johnson, who sought to transform the stores into collections of boutiques, team up with high-end designers and banish coupons and promotions in favor of everyday low prices.

Mr. Johnson’s efforts ultimately alienated J.C. Penney’s core customers and led to sales and traffic declines — the retailer erased roughly $4.3 billion in sales, or 25 percent of its revenue, in a single year. Mr. Johnson was ousted after 17 months in April 2013, but J.C. Penney has continued to struggle and cycled through executives.

The company traces its roots to Kemmerer, Wyo., where James Cash Penney Jr. invested in a dry-goods store called the Golden Rule, which was later renamed J.C. Penney. Mr. Penney, who died in 1971, remained devoted to the notion of the Golden Rule in how the company treated its workers, sharing its profits with staff from its early days.

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The Fed Enabled a Record Expansion. Trump Is Taking Credit.

By retaining his predecessor’s patient approach to rate increases — and then stopping them altogether as inflation, which the central bank tries to keep under control, hovered at low levels — Mr. Powell’s Fed helped to keep the longest economic expansion in United States history chugging along. The stretch of unbroken growth pushed unemployment to its lowest level in 50 years, prompting companies to cast a wider net for employees, pulling long-sidelined workers back into jobs.

“Both monetary and fiscal policy were stimulative, and it did lead to a strong labor market,” said Stephanie Aaronson, a former Fed researcher who is now at the Brookings Institution. Very low inflation “has given policymakers the latitude to try new things.”

That matters as more than a talking point: It could fundamentally shape the post-pandemic economy. The Fed has signaled that it intends to leave rates low to push unemployment down again, which could help return the labor market to strong levels. But the challenges posed by business closures and job reshuffling mean that elected officials, who have taxing and spending powers that the Fed lacks, may prove crucial to the speed and scope of the rebound.

“The single most important thing we can do here is to support a strong labor market,” Mr. Powell said in late August remarks. “That is more of an all-governmental society project,” and “to wait to the eighth and ninth year of the cycle to get those results — we can do better than that with other policies.”

To be sure, it is easy to overstate how strong conditions were before the pandemic struck.

About 83 percent of adults in their prime working years were in the labor force at the start of 2020, which was a marked improvement but still down from an 84.6 percent high in the late 1990s. Inequality prevailed. Wage growth had picked up from the expansion’s early years, but it remained shy of historical records.

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U.S. May Ban Cotton From Xinjiang Region of China Over Rights Concerns

Studies and news reports have documented how groups of people in Xinjiang, especially the largely Muslim Uighur and Kazakh minorities, have been recruited into programs that assign them to work in factories, cotton farms, textile mills and menial jobs in cities.

President Trump has taken a harder stance toward China as the presidential election approaches, blaming Beijing for allowing the coronavirus to spread around the world and ravage the American economy. The Trump administration has steadily ramped up its pressure on China in recent months, placing sanctions on dozens of companies and individuals over alleged human rights violations in Xinjiang and national security risks.

The new ban could produce a stampede out of China for major apparel brands. Amid a prolonged trade war and rising tensions between the United States and China, many companies have looked to relocate apparel supply chains to countries like Vietnam, Bangladesh and Indonesia. But some have found China’s quality production hard to replicate, or faced fierce competition for factory space.

The measure, called a withhold release order, would be issued by U.S. Customs and Border Protection. The agency has in the past issued such bans against individual companies it suspected of using forced labor in Xinjiang, but it has been weighing more sweeping action against a broader category of goods. Customers and Border Protection did not immediately respond to a request for comment.

In July, the Trump administration placed several apparel companies on a blacklist that prevented them from buying American products, citing their use of forced labor in Xinjiang. The list included reported current or former suppliers to major international apparel brands, such as Ralph Lauren, Tommy Hilfiger and Hugo Boss. Several of the listed Chinese companies and the major international brands they supply pushed back against those measures, saying they had found no evidence of forced labor or other abuses in their supply chains.

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Looking to Buy a Used Car in the Pandemic? So Is Everyone Else

The boom is of a piece with other unexpected trends in a recession that has left millions of people unemployed and has devastated airlines, restaurants, hotels and small businesses. Despite that pain, the pandemic has been a boon to old standbys of the economy, such as canned and processed foods and suburban home sales, that had fallen out of favor in recent years.

The auto industry’s equivalent of the three-bedroom ranch with the charming backyard patio is a low-mileage car or S.U.V. — a lot cheaper than the newer version but just as good at taking the family to a socially distanced picnic after months of isolation.

The growing desire to own a car has caught many people by surprise and unnerved others who are worried about what it might say about the future of cities and transportation. Mayor Bill de Blasio, who gets around in an S.U.V., recently implored New Yorkers, many of whom don’t own vehicles, not to buy a car, saying they represent “the past.”

Those fears might be overdone. Buying a used car does not increase the number of cars on the road, of course. And sales of new cars are not taking off. If anything, part of the sudden mania for used cars stems from the yearslong rise in the price of new cars and trucks. On average, new vehicles now sell for about $38,000, more than many consumers can afford or are willing to pay.

In addition, many Americans realize they don’t have to worry that they’re buying a rattle trap that’s constantly in the shop. Cars and trucks of recent vintage are better made than those from a couple of decades ago, and certainly compared with the vehicles Ralph Nader inveighed against in his 1965 book, “Unsafe at Any Speed.”

Take Susan Sutherland, a tech worker in Bradley Beach on the Jersey Shore, who prefers buying new cars but recently purchased a 2016 Nissan Rogue because the cost of new vehicles put her off. “I paid $42,000 for the first house I bought,” she said. “I couldn’t imagine paying almost that for a car.”

Before the coronavirus, Ms. Sutherland regularly rode trains to New York City, Washington and beyond to see her son’s heavy-metal band, Tooth Grinder. But after a tough battle with the coronavirus that included two stays in the hospital, she decided to trade in her 2008 Mitsubishi sport utility vehicle for a newer car she could rely on for longer trips.

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Working From Home Poses Hurdles for Employees of Color

Some specialists on workplace diversity worry that as work shifts to home offices, efforts to advance people of color into executive positions will be blunted. More traditional candidates will end up dominating the conversation, they say, leaving others out.

Evelyn Carter, managing director at Paradigm, a consulting firm, cited a concept called distance bias to describe the dynamic that can occur in the virtual office. “You put more emphasis on people closer to you,” she said. “You don’t have connections where you don’t have proximity, so you maintain relationships with the people you already know.”

When employees gather online, it’s easier for some to fall through the cracks.

It’s harder to tell which employees have shrunk back in their chairs or otherwise withdrawn in virtual meetings, said Ms. Carter, who is African-American, but moderators should pay attention to clues like people with their cameras off and try to draw those participants back into the discussion.

Being visible is critical for people of color in the workplace and harder to achieve in a work-from-home environment, said Joy Fitzgerald, chief diversity and inclusion officer at the drugmaker Eli Lilly.

“To succeed, 50 percent is performance, 25 percent is perception and the other 25 percent, which is a force multiplier, is visibility,” said Ms. Fitzgerald, who is African-American. “But if people don’t know you, they don’t see you. It creates a higher degree of complexity and challenge for underrepresented groups.”

With many companies not expected to ask employees to return to their pre-pandemic workplaces before 2021, the implications of the virtual office for people of color have become an increasingly urgent topic for diversity officers, human resource chiefs and leaders in the Black business community like Ms. Bryant.

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