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Fed Expects Unemployment Rate to Stay High: Live Updates Fed Expects Unemployment Rate to Stay High: Live Updates
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The Federal Reserve left interest rates unchanged and near zero on Wednesday as the central bank projected a slow economic recovery from the pandemic-induced recession.The Federal Reserve left interest rates unchanged and near zero on Wednesday as the central bank projected a slow economic recovery from the pandemic-induced recession.
In their first economic projections this year, Fed officials indicated that they expected the unemployment rate to end 2020 at 9.3 percent and remain elevated for years, coming in at 5.5 percent in 2022, The New York Times’s Jeanna Smialek reports. Output is expected to be 6.5 percent lower at the end of this year than it was in the final quarter of 2019.In their first economic projections this year, Fed officials indicated that they expected the unemployment rate to end 2020 at 9.3 percent and remain elevated for years, coming in at 5.5 percent in 2022, The New York Times’s Jeanna Smialek reports. Output is expected to be 6.5 percent lower at the end of this year than it was in the final quarter of 2019.
“Nearly 20 million jobs have been lost on net since February,” the Fed chair, Jerome H. Powell, said at a news conference following the release of the forecast, and noted that the figure probably understates the extent of unemployment. “The downturn has not fallen equally on all Americans.”“Nearly 20 million jobs have been lost on net since February,” the Fed chair, Jerome H. Powell, said at a news conference following the release of the forecast, and noted that the figure probably understates the extent of unemployment. “The downturn has not fallen equally on all Americans.”
The new forecasts predict a much slower path back to economic strength than the Trump administration — and perhaps the stock market — seems to expect as the economy climbs out of a virus-spurred downturn. The Fed skipped its quarterly economic summary in March as the pandemic gripped the United States, sowing uncertainty as business activity came to a near standstill.The new forecasts predict a much slower path back to economic strength than the Trump administration — and perhaps the stock market — seems to expect as the economy climbs out of a virus-spurred downturn. The Fed skipped its quarterly economic summary in March as the pandemic gripped the United States, sowing uncertainty as business activity came to a near standstill.
“The projections highlight what a long slog the recovery will be,” Steven Friedman, senior macroeconomist at MacKay Shields, said in a note.“The projections highlight what a long slog the recovery will be,” Steven Friedman, senior macroeconomist at MacKay Shields, said in a note.
The Fed said that it would continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate.”The Fed said that it would continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate.”
Mr. Powell said that the Fed would do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.Mr. Powell said that the Fed would do “whatever we can, and for as long as it takes” to support the recovery and “limit lasting damage” to the economy.
The United States budget deficit grew to a record $1.88 trillion for the first eight months of this fiscal year, as the federal government shoveled economic relief money to Americans and delayed tax payments, the Treasury Department said on Wednesday.The United States budget deficit grew to a record $1.88 trillion for the first eight months of this fiscal year, as the federal government shoveled economic relief money to Americans and delayed tax payments, the Treasury Department said on Wednesday.
In May, the budget deficit grew to $399 billion, up 92 percent from the same month a year ago. The shortfall was driven largely by billions of dollars of economic impact payments and unemployment insurance that the federal government has deployed to buttress an economy that has been crippled by the coronavirus pandemic, The New York Times’s Alan Rappeport reports.In May, the budget deficit grew to $399 billion, up 92 percent from the same month a year ago. The shortfall was driven largely by billions of dollars of economic impact payments and unemployment insurance that the federal government has deployed to buttress an economy that has been crippled by the coronavirus pandemic, The New York Times’s Alan Rappeport reports.
The monthly figure represented the largest budget deficit for the month of May on record. However, it was less than the record gap of $738 billion in April.The monthly figure represented the largest budget deficit for the month of May on record. However, it was less than the record gap of $738 billion in April.
The deficit for the eight months through May is nearly double the shortfall for last year of $984 billion.The deficit for the eight months through May is nearly double the shortfall for last year of $984 billion.
Republicans in Congress and the Trump administration have been expressing concern about the deficit as lawmakers begin to consider another round of economic stimulus legislation. Treasury Secretary Steven Mnuchin has said that the government is paying low interest rates on the debt, but that future relief measures should be more focused on industries that have been hit hardest by the pandemic.Republicans in Congress and the Trump administration have been expressing concern about the deficit as lawmakers begin to consider another round of economic stimulus legislation. Treasury Secretary Steven Mnuchin has said that the government is paying low interest rates on the debt, but that future relief measures should be more focused on industries that have been hit hardest by the pandemic.
The deficit numbers are expected to continue to grow later this year, as outlays from the $660 billion Paycheck Protection Program are reflected in the data. Government receipts should pick up in July, however, when tax payments that were delayed from April start to come in.The deficit numbers are expected to continue to grow later this year, as outlays from the $660 billion Paycheck Protection Program are reflected in the data. Government receipts should pick up in July, however, when tax payments that were delayed from April start to come in.
Treasury Secretary Steven Mnuchin told lawmakers on Wednesday that the next round of economic stimulus legislation must help industries that have been hit hardest by the coronavirus pandemic and that the focus must be on creating incentives to get jobless workers rehired.Treasury Secretary Steven Mnuchin told lawmakers on Wednesday that the next round of economic stimulus legislation must help industries that have been hit hardest by the coronavirus pandemic and that the focus must be on creating incentives to get jobless workers rehired.
Testifying before the Senate’s small-business committee, Mr. Mnuchin said that he was pleasantly surprised that the economy had added 2.5 million jobs last month and that he believed the economy would improve sharply in the second half of the year.Testifying before the Senate’s small-business committee, Mr. Mnuchin said that he was pleasantly surprised that the economy had added 2.5 million jobs last month and that he believed the economy would improve sharply in the second half of the year.
The Treasury secretary added, however, that there was still “significant damage” to parts of the economy that needed to be addressed.The Treasury secretary added, however, that there was still “significant damage” to parts of the economy that needed to be addressed.
The White House has held off on negotiating with Congress over another economic relief package until it can more thoroughly assess how the existing measures are working. However, Mr. Mnuchin made clear that the work of stabilizing the economy was not done.The White House has held off on negotiating with Congress over another economic relief package until it can more thoroughly assess how the existing measures are working. However, Mr. Mnuchin made clear that the work of stabilizing the economy was not done.
“There’s no question that small businesses in many industries are going to need more help,” he said.“There’s no question that small businesses in many industries are going to need more help,” he said.
Mr. Mnuchin said that the administration would be looking at measures that will encourage businesses to rehire. It was also considering the need for more direct payments to Americans and adjustments to unemployment insurance benefits to ensure that people did not have incentives to remain jobless.Mr. Mnuchin said that the administration would be looking at measures that will encourage businesses to rehire. It was also considering the need for more direct payments to Americans and adjustments to unemployment insurance benefits to ensure that people did not have incentives to remain jobless.
[How do you feel about going back to work? Share your story.][How do you feel about going back to work? Share your story.]
Just Eat Takeaway said on Wednesday that it had agreed to buy Grubhub for $7.3 billion, a deal that would give the European company a foothold in the United States.
Uber had been in talks to buy Grubhub, but those discussions foundered over price and regulatory concerns, said people with knowledge of the discussions, who were not authorized to speak publicly.
Food delivery has become more popular during the coronavirus pandemic. But profits in the food delivery business have been elusive. Uber Eats, DoorDash and Grubhub have all spent millions of dollars on marketing and incentives to lure customers away from the others. Grubhub, which had been profitable, began losing money as it spent more to fight off rivals. And restaurants have complained about the fees and tactics of those companies.
In the all-stock deal, Just Eat Takeaway said it would value Grubhub at $75.15 per share, a 27 percent premium to Grubhub’s closing price of $59.05. Grubhub’s founder and chief executive, Matt Maloney, will join Just Eat Takeaway’s board and oversee its business in North America, the companies said.
Just Eat Takeaway was created this year through the $7.8 billion combination of two of the earliest participants in Europe’s food-delivery market, Just Eat and Takeaway.com. It has been fighting competition in Europe from Uber Eats and Deliveroo, a London-based company whose investors include Amazon.
The Ford Foundation plans to announce on Thursday that it will borrow $1 billion so that it can dramatically increase the amount of money it distributes. Four other leading charitable foundations will pledge on Thursday that they will join with Ford and increase their giving by at least $725 million.
The decision by the five influential foundations — major sponsors of social justice organizations, museums and the arts and environmental causes — could shatter the charitable world’s deeply entrenched tradition of fiscal restraint during periods of economic hardship.
That conservatism has provoked anger that foundations, which benefit from generous federal tax breaks, are hoarding billions of dollars during a national emergency, more interested in safeguarding their endowments than in helping those in need.
To raise the money, the Ford Foundation — one of the country’s iconic and oldest charitable organizations — is preparing to issue a combination of 30- and 50-year bonds, a financial maneuver common among governments and companies but extremely rare among nonprofits.
Major charitable foundations traditionally spend a little more than 5 percent of their assets in a given year — the minimum required under federal law for the tax-exempt organizations. The less they distribute, the larger their endowments grow and the higher their odds of surviving in perpetuity.
The Ford-led plan provides a workaround. By using borrowed money, foundations would go into debt but wouldn’t erode their endowments.
“For most foundations, the idea of taking on debt is outside of normative thinking,” Darren Walker, the foundation’s president, wrote in a letter last month to Ford’s board. “Covid-19 has created unprecedented challenges that require foundations to consider ideas — even radical ones that would have never been considered in the past.”
Wall Street believes it’s a great time to be a business of making electric vehicles.Wall Street believes it’s a great time to be a business of making electric vehicles.
Take Tesla. On Wednesday morning, the company’s share price rose above $1,000 for the first time ever, giving it a market value of about $185 billion. At that price, the company is second only to one other car manufacturer, Toyota, which is valued at about $215 billion. That’s despite the fact that Tesla produces and sells far fewer vehicles than Toyota and other major car companies.Take Tesla. On Wednesday morning, the company’s share price rose above $1,000 for the first time ever, giving it a market value of about $185 billion. At that price, the company is second only to one other car manufacturer, Toyota, which is valued at about $215 billion. That’s despite the fact that Tesla produces and sells far fewer vehicles than Toyota and other major car companies.
Tesla’s many critics say the shares are overvalued. And even the company’s chief executive, Elon Musk, said last month that the stock price was “too high” at about $760 per share. But the stock has been soaring for months on the promise that the company will revolutionize the automotive industry.Tesla’s many critics say the shares are overvalued. And even the company’s chief executive, Elon Musk, said last month that the stock price was “too high” at about $760 per share. But the stock has been soaring for months on the promise that the company will revolutionize the automotive industry.
Some recent good news has lifted Tesla’s share price even higher. The company’s California factory reopened last month after it had been closed for weeks under a local shutdown order intended to limit the spread of the coronavirus, allowing it to accelerate production of its anticipated sport utility vehicle, the Model Y. And sales of vehicles produced at Tesla’s Shanghai factory reportedly recovered in May.Some recent good news has lifted Tesla’s share price even higher. The company’s California factory reopened last month after it had been closed for weeks under a local shutdown order intended to limit the spread of the coronavirus, allowing it to accelerate production of its anticipated sport utility vehicle, the Model Y. And sales of vehicles produced at Tesla’s Shanghai factory reportedly recovered in May.
“While the stock has been roaring higher, we believe the main fundamental catalyst continues to be the massive China market which is showing clear signs of a spike in demand,” Daniel Ives, managing director of equity research at Wedbush Securities, said in a note on Tuesday.“While the stock has been roaring higher, we believe the main fundamental catalyst continues to be the massive China market which is showing clear signs of a spike in demand,” Daniel Ives, managing director of equity research at Wedbush Securities, said in a note on Tuesday.
On Wednesday, Mr. Musk told staff in a memo that it was also time for the company to ramp up production of the Tesla Semi commercial truck, according to Reuters. That might be in response to Nikola, an Arizona-based electric truck start-up whose stock has rocketed since it went public last week.On Wednesday, Mr. Musk told staff in a memo that it was also time for the company to ramp up production of the Tesla Semi commercial truck, according to Reuters. That might be in response to Nikola, an Arizona-based electric truck start-up whose stock has rocketed since it went public last week.
About $130 billion is sitting in the federal government’s Paycheck Protection Program, waiting to be tapped by small businesses hurt by the pandemic.
When it opened in April with $349 billion, the paycheck program ran out of money in less than two weeks, prompting Congress to swiftly approve additional funding of $310 billion. The outflow of money has been slower since. Many small businesses are wary of borrowing, mainly because they find the program’s rules confusing and limiting.
Even more striking is the fact that on many days last month, more money was coming back into the fund than going out — meaning that businesses that had received the money were returning it. Some public companies that received money returned it after a public outcry. Some small businesses got duplicate loans, and that money has been returned, too. But there are thousands of small businesses that have sent back the money because they do not think they can use it as the program intended — to mostly pay workers.
The world economy is facing the most severe recession in a century and could experience a halting recovery as policymakers brace for a potential second wave of the coronavirus and as countries embrace protectionist policies, the Organization for Economic Cooperation and Development warned in a new report.The world economy is facing the most severe recession in a century and could experience a halting recovery as policymakers brace for a potential second wave of the coronavirus and as countries embrace protectionist policies, the Organization for Economic Cooperation and Development warned in a new report.
A grim economic outlook released by the O.E.C.D. on Wednesday depicted a world economy that is walking on a “tightrope” as countries seek to reopen after three months of lockdowns. Considerable uncertainty remains, however, as the prospects and timing of a vaccine remain unknown. Health experts fear that the spread of the virus could accelerate again later this year.A grim economic outlook released by the O.E.C.D. on Wednesday depicted a world economy that is walking on a “tightrope” as countries seek to reopen after three months of lockdowns. Considerable uncertainty remains, however, as the prospects and timing of a vaccine remain unknown. Health experts fear that the spread of the virus could accelerate again later this year.
“Extraordinary policies will be needed to walk the tightrope towards recovery,” said Laurence Boone, the O.E.C.D.’s chief economist.“Extraordinary policies will be needed to walk the tightrope towards recovery,” said Laurence Boone, the O.E.C.D.’s chief economist.
The O.E.C.D., which comprises 37 of the world’s leading economies, predicts that the global economy will contract 6 percent this year if a second wave of the virus is avoided. If a second wave does occur, world economic output would fall 7.6 percent, before rebounding by 2.8 percent in 2021. The two scenarios are viewed as equally plausible.The O.E.C.D., which comprises 37 of the world’s leading economies, predicts that the global economy will contract 6 percent this year if a second wave of the virus is avoided. If a second wave does occur, world economic output would fall 7.6 percent, before rebounding by 2.8 percent in 2021. The two scenarios are viewed as equally plausible.
Barring a second wave, the O.E.C.D. expects the United States economy to shrink 7.3 percent and the euro area to shrink 9 percent. Among developed countries, Britain’s predicted fall was the steepest, at 11.5 percent. Emerging economies like Brazil, Russia and South Africa, will be hit hard given the strain on their already fragile health systems.Barring a second wave, the O.E.C.D. expects the United States economy to shrink 7.3 percent and the euro area to shrink 9 percent. Among developed countries, Britain’s predicted fall was the steepest, at 11.5 percent. Emerging economies like Brazil, Russia and South Africa, will be hit hard given the strain on their already fragile health systems.
U.S. stocks seesawed on Wednesday as the Federal Reserve promised to keep interest rates low and continue to bolster an economy ravaged by the coronavirus, but signaled that a recovery will be slow and clouded in uncertainty.U.S. stocks seesawed on Wednesday as the Federal Reserve promised to keep interest rates low and continue to bolster an economy ravaged by the coronavirus, but signaled that a recovery will be slow and clouded in uncertainty.
After an afternoon of up-and-down trading, the S&P 500 ended about half a percent lower. Technology shares were a standout, with the Nasdaq composite rising slightly.After an afternoon of up-and-down trading, the S&P 500 ended about half a percent lower. Technology shares were a standout, with the Nasdaq composite rising slightly.
The Fed said that it would continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate.”The Fed said that it would continue buying government-backed debt “at least at the current pace” to sustain smooth market functioning, and that it “will closely monitor developments and is prepared to adjust its plans as appropriate.”
The Fed’s projections suggested that interest rates would remain near rock bottom for the foreseeable future.The Fed’s projections suggested that interest rates would remain near rock bottom for the foreseeable future.
At the same time, the central bank issued its first economic forecasts of the year, indicating that officials believe the unemployment rate would end 2020 at 9.3 percent and remain elevated for years, coming in at 5.5 percent in 2022.At the same time, the central bank issued its first economic forecasts of the year, indicating that officials believe the unemployment rate would end 2020 at 9.3 percent and remain elevated for years, coming in at 5.5 percent in 2022.
“We do think that this is going to take some time — I think most forecasters believe that,” Mr. Powell said.“We do think that this is going to take some time — I think most forecasters believe that,” Mr. Powell said.
Investors were also sizing up a pessimistic forecast issued Wednesday by the Organization for Economic Cooperation and Development that warned that the world economy was facing the most severe downturn in a century.Investors were also sizing up a pessimistic forecast issued Wednesday by the Organization for Economic Cooperation and Development that warned that the world economy was facing the most severe downturn in a century.
Investors have recently taken heart in signs that the global economy is on the mend, particularly in China, Europe and the United States. They have also been cheered by government and central bank efforts to use money to fight the global freeze. On Monday, the S&P 500 erased its losses for this year.Investors have recently taken heart in signs that the global economy is on the mend, particularly in China, Europe and the United States. They have also been cheered by government and central bank efforts to use money to fight the global freeze. On Monday, the S&P 500 erased its losses for this year.
But that rally cooled in recent days as concerns grew about a second wave of the virus. Infections are still rising in many U.S. states and public health officials are concerned that the nationwide protests over police brutality may lead to new cases of the virus.But that rally cooled in recent days as concerns grew about a second wave of the virus. Infections are still rising in many U.S. states and public health officials are concerned that the nationwide protests over police brutality may lead to new cases of the virus.
When employees at Salesforce, the cloud software giant based in San Francisco, eventually return to their office towers, they may find that the fun is gone from their famously fun-loving workplaces. Disneyland in Anaheim, Calif., will reopen on a limited basis on July 17, the theme park’s 65th anniversary, the Walt Disney Company said on Wednesday. California Adventure, an adjacent Disney property, will also reopen on that date, with people wanting to visit either theme park required to use a new reservation system. A phased reopening of Disney’s hotels in Anaheim will follow on July 23. The plans must still be approved by state and local health officials. Disneyland attracted roughly 19 million visitors last year, making it the world’s second-busiest theme park behind the Magic Kingdom at Walt Disney World in Florida, according to the Themed Entertainment Association. Disney World is scheduled to begin reopening on July 11. Disney parks in France, Japan and Hong Kong remain closed.
No more chatting in the elevator. No hugging. No more communal snack jars.
Before employees can even enter the office, they will be required to fill out online health surveys and take their temperature. For those who pass the health screening and have a good reason to go in, Salesforce will schedule their shifts — and send them digital entry tickets for the lobby with an arrival time.
These new command-and-control work practices are intended to help protect Salesforce’s more than 50,000 employees as the company undertakes a colossal task: figuring out how to safely reopen its more than 160 offices around the world.
“It’s going to be different,” Salesforce’s chief executive, Marc Benioff, said. “It’ll be more sterile. It’ll be more hospital-like.”
Salesforce’s vision of a more micromanaged workplace is indicative of the complexities that many businesses are grappling with during the pandemic and signals a significant cultural shift for office workers across the United States.
Los Angeles County issued guidelines for film and television to begin production as early as Friday, but it’s more likely that production will not resume until July at the earliest. Studios and production companies are still waiting for unions to determine job protocols, even though the industry issued its own white paper last week that established general guidelines for resuming production.Los Angeles County issued guidelines for film and television to begin production as early as Friday, but it’s more likely that production will not resume until July at the earliest. Studios and production companies are still waiting for unions to determine job protocols, even though the industry issued its own white paper last week that established general guidelines for resuming production.
Simon Property Group, the biggest mall operator in the United States, said on Wednesday that it was terminating its $3.6 billion agreement to buy Taubman Centers, which operates malls including the Mall at Short Hills in New Jersey and Westfarms in Connecticut. Simon Property said that the pandemic “had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry.” It is the second prominent retail deal to fall apart because of the pandemic, following the termination of the sale of Victoria’s Secret to a private equity firm last month.Simon Property Group, the biggest mall operator in the United States, said on Wednesday that it was terminating its $3.6 billion agreement to buy Taubman Centers, which operates malls including the Mall at Short Hills in New Jersey and Westfarms in Connecticut. Simon Property said that the pandemic “had a uniquely material and disproportionate effect on Taubman compared with other participants in the retail real estate industry.” It is the second prominent retail deal to fall apart because of the pandemic, following the termination of the sale of Victoria’s Secret to a private equity firm last month.
Starbucks on Wednesday said that it expected to lose up to $3.2 billion in revenue in the current quarter, with an operating income decline of up to $2.2 billion. The coffee chain said it would permanently close about 400 stores in the Americas over the next 18 months.Starbucks on Wednesday said that it expected to lose up to $3.2 billion in revenue in the current quarter, with an operating income decline of up to $2.2 billion. The coffee chain said it would permanently close about 400 stores in the Americas over the next 18 months.
AMC Theaters, the world’s largest cineplex operator, announced on Tuesday that “almost all” of its locations in the United States and Britain would reopen next month. Over all, theaters in 90 percent of overseas markets will be running again by mid-July, according to the National Association of Theater Owners, a trade organization for movie exhibitors in 98 countries.AMC Theaters, the world’s largest cineplex operator, announced on Tuesday that “almost all” of its locations in the United States and Britain would reopen next month. Over all, theaters in 90 percent of overseas markets will be running again by mid-July, according to the National Association of Theater Owners, a trade organization for movie exhibitors in 98 countries.
Shares of Chesapeake Energy, a pioneer in extracting natural gas from shale rock, went on a wild ride on Tuesday amid reports that it was preparing a bankruptcy filing. Trading was halted for more than three hours in the morning. When buying and selling resumed, the trading was quickly interrupted again by circuit breakers. The company’s shares closed just below $24 for a loss of about 66 percent for the day.Shares of Chesapeake Energy, a pioneer in extracting natural gas from shale rock, went on a wild ride on Tuesday amid reports that it was preparing a bankruptcy filing. Trading was halted for more than three hours in the morning. When buying and selling resumed, the trading was quickly interrupted again by circuit breakers. The company’s shares closed just below $24 for a loss of about 66 percent for the day.
Reporting was contributed by Nicole Sperling, Niraj Chokshi, Alan Rappeport, Jeanna Smialek, Stacy Cowley, Sapna Maheshwari, Michael J. de la Merced, Natasha Singer, Mohammed Hadi, Jason Karaian, Brooks Barnes, Karen Weise and Clifford Krauss. Reporting was contributed by James B. Stewart, Nicholas Kulish, Kate Conger, Adam Satariano, Michael J. de la Merced, Brooks Barnes, Nicole Sperling, Niraj Chokshi, Alan Rappeport, Jeanna Smialek, Stacy Cowley, Sapna Maheshwari, Michael J. de la Merced, Natasha Singer, Mohammed Hadi, Jason Karaian, Brooks Barnes, Karen Weise and Clifford Krauss.