The Federal Reserve chair, Jerome H. Powell, and Treasury Secretary Steven Mnuchin will testify before Congress on Tuesday morning in the first accountability hearing since Congress handed the Fed and Treasury hundreds of billions of dollars to help rescue the U.S. economy from coronavirus-induced shutdowns.
Lawmakers are expected to grill Mr. Mnuchin and Mr. Powell over their use of the $500 billion in CARES Act funding to help keep credit flowing through the economy. The money was intended to offer a bridge to companies and state and local governments so that they could get through the falloff in business activity brought about by the virus.
The efficacy of those programs remains an open question. Concerns have been growing that the Treasury’s desire to avoid taking any losses may hamstring the ability of the Fed to actually get money to companies that are in desperate need of financial help.
Others are concerned that the Fed is not attaching enough restrictions — like requirements to hang onto employees — to the programs it is rolling out.
The Treasury secretary has also faced criticism over his handling of a small-business lending program which, while separate from the $500 billion pot of money, is nevertheless intended to help keep the economy humming amid quarantines.
Mr. Mnuchin, in prepared testimony released ahead of the hearing, is expected to attempt to portray the economy as in a temporary period of pain, potentially striking a different tone from Mr. Powell, who has begun warning that the economy could be in for a rough road ahead if more support is not forthcoming.
“Working closely with governors, we are beginning to open the economy,” Mr. Mnuchin said in the prepared remarks, adding that, “We expect economic conditions to improve in the third and fourth quarters.”
Mr. Powell has been vocal about the potential for a prolonged economic downturn, saying that businesses and households may need even more support beyond the $2 trillion Congress has already appropriated.
“We are committed to using our full range of tools to support the economy,” Mr. Powell said in his prepared remarks. “We recognize that these actions are only a part of a broader public-sector response.”
Public companies have returned less than half of the funds they received through a troubled federal loan program meant to stabilize small businesses.
The loans to publicly-traded firms drew scrutiny from members of the public and policymakers who said the money would have been put to better use with smaller businesses. The Treasury Department and the Small Business Administration gave public companies until Monday to decide whether they would return their loans or face possible sanctions if they had been able to get funds from other sources.
As of Monday night, about $512 million of the roughly $1.52 billion in loans disclosed by public companies had been returned, including some of the largest that had been disclosed. Additional companies may disclose their decision to return their loans in the coming days.
More than 440 public companies have disclosed receiving the loans since early April. At least 58 of them, from the burger chain Shake Shack to the auto dealer Penske Automotive Group, have given the funds back.
Even as companies returned the loans, more public companies received them in the program’s second round. That group included companies like Ark Restaurants and The ONE Group, which runs the STK chain of steakhouses. Both firms said they could not have accessed capital elsewhere.
Walmart, the nation’s largest retailer, said sales in the first quarter soared more than 10 percent in the United States as customers flocked to its stores and online to buy food and health care products during the coronavirus pandemic.
Deemed an essential business, Walmart has been able to keep its stores and e-commerce network operating every day of the crisis, giving it an advantage over some competitors who have been forced to close.
Across the company, including its international business and Sam’s Club unit, operating income increased 5.6 percent to $5.2 billion from a year earlier, while revenue increased 8.6 percent to $134.6 billion.
E-commerce sales increased 74 percent, double the company’s typical online growth rate, as Walmart shipped more items from its stores to customers’ homes and expanded its curbside pickup business.
“Our omnichannel strategy, enabling customers to shop in seamless, flexible ways, is built for serving the needs of customers during this crisis and in the future,’’ Doug McMillon, its chief executive, said in a statement.
The company also said on Tuesday it had hired more than 235,000 new employees to handle the surging demand and paid more than $900 million in bonuses and higher wages.
U.S. stocks inched lower and European markets fell on Tuesday, after Wall Street’s biggest daily gain in 6 weeks.
Investors were waiting for an appearance by the Federal Reserve chair, Jerome H. Powell, before Congress on Tuesday, where he was expected to tell lawmakers that the central bank will use its “full range of tools” to support the economy as it reels from the coronavirus pandemic. Treasury Secretary Steven Mnuchin will also testify on how the $500 billion in stimulus funding has been managed so far.
The drop followed a jump of more than 3 percent in major Wall Street indexes on Monday, as a drug company, Moderna, said that early testing of its coronavirus vaccine on a small group of people had shown promising results. Investors also focused on comments from Mr. Powell, who said that the central bank could do more to help the American economy.
Other negative news began to sink in on Tuesday, including more signs of rising tensions between the United States and China. Investors also were cheered on Monday after Germany backed the idea of collective European debt to help countries hit hardest by the outbreak, but on Tuesday, the lack of details and the prospect of a long and slow recovery weighed on sentiment.
The coronavirus has done what a chorus of pleas from 7-Eleven store owners in Japan could not: forced the company that controls the chain, Seven & I Holdings, to allow some of its locations to close for the night.
It is a relief for store owners who were already putting in grueling hours for meager returns before the virus struck and have since watched business dry up as Japan’s workers sheltered at home under a state of emergency.
As Japan moved last week to lift that declaration across much of the country, however, some franchisees were wondering if the change of heart would outlast the pandemic.
Allowing an owner to close shop for a few hours in the dead of night or during a national holiday might not seem like a big deal. But 7-Eleven, so omnipresent in Japan that it is considered part of the national infrastructure, believes that consistent service across all of the country’s 21,000 locations is crucial to the brand’s value. Like many franchises, it has strict expectations for everything from shops’ layout to how employees dress and greet customers.
In December, the company severed the contract of one owner, Mitoshi Matsumoto, after he decided to close his shop in the Osaka area on New Year’s Day, Japan’s most important holiday. 7-Eleven has said the decision was in response to the high number of complaints registered by customers against Mr. Matsumoto. The matter is now the subject of competing lawsuits.
Even during the pandemic, 7-Eleven has seemed to bend its rules only reluctantly.
The shape of economic recovery: Swoosh, check mark or hockey stick?
Fewer executives are expecting a V- or U-shaped economic recovery anymore. Instead, as detailed in today’s DealBook newsletter, they are trying to describe a steep initial fall followed by a long, drawn-out recovery.
THE SWOOSH Nike’s logo has become a go-to descriptor, maybe because everyone is watching “The Last Dance” documentary about Michael Jordan. Torsten Slok, Deutsche Bank’s chief economist, recently suggested that a “swoosh recovery” was appearing in data on restaurant bookings.
THE CHECK MARK Carlos Rodriguez, C.E.O. of the payroll processor A.D.P., told investors that a “check mark” was the shape he had in mind. “We have an economist on our board and he referred to it as the Nike swoosh, but that’s probably a copyright or trademark violation,” he added.
THE HOCKEY STICK The CFA Institute recently surveyed more than 13,000 members, and most of those polled expected a “hockey stick” recovery, meaning “some form of stagnation for two to three years before a steady pick up,” the organization said.
For young adults entering the job market, or early in their working life, this is a particularly anxious time.
A large body of research — along with the experience of those who came of age in the last recession — shows that starting a career during an economic crisis can mean a lasting disadvantage. Wages, opportunities and confidence in the workplace may never fully recover.
Jesse Rothstein of the University of California, Berkeley, followed college graduates who entered the labor market after the 2008 financial crisis. By 2018, those who had landed jobs in 2010 and 2011 had a lower employment rate than people at the same age who graduated before the recession hit, and those working earned less.
College students who graduated into a recession 40 years ago experienced similar problems. And young people without a college degree are at an even greater disadvantage.
Starting work in a downturn means getting jobs that are a worse fit. Once the economy recovers, it means competing with people who have more experience. What’s more, said Lisa B. Kahn, an economics professor at the University of Rochester, such workers seem more risk-averse.
“People that graduate into a recession don’t change jobs as often as people that graduate into booms,” she noted. And those job changes are one of the best ways to get a raise.
An Amazon warehouse in northeastern Pennsylvania has become the retailer’s biggest coronavirus hot spot. More employees at the warehouse have been infected than at any of Amazon’s roughly 500 other facilities in the United States.
Local lawmakers believe that more than 100 workers have contracted the disease, but the exact number is unknown. At first, Amazon made each new case public. But when the total reached about 60, the announcements stopped giving specific numbers.
The disclosures also stopped at other Amazon warehouses. The best estimate is that 800 of the company’s 400,000 blue-collar workers have had the disease. But that number, crowdsourced by Jana Jumpp, an Amazon worker, almost certainly understates the spread of the illness at Amazon.
At the 600,000-square-foot warehouse in Pennsylvania, products shipped from China and elsewhere are removed from trucks and broken down into smaller packages that are trucked to Amazon’s other facilities for shipment to shoppers. Safety measures began arriving at the warehouse in mid-March, but they were introduced without rigor.
Amazon defended its protective measures, but workers and community leaders began worrying early on that the company wasn’t doing enough.
Catch up: Here’s what else is happening.
It’s over for Pier 1 Imports. The home goods retailer, which filed for bankruptcy protection in February, announced Tuesday that it would liquidate its business. The company had closed its stores in March because of the pandemic, but was still hoping to find a buyer to keep going. Pier 1 said that as soon as it could open stores after government-mandated lockdowns lift, it would sell its remaining inventory and assets.
Thai Airways, Thailand’s flagship carrier, announced on Tuesday that it would go through a reorganization in bankruptcy court. The airline, which is majority owned by the government, stopped all flights in April in response to travel restrictions to limit the spread of the virus. The government is stepping in to help the airline restructure so that it doesn’t go bankrupt and cost the jobs of 22,000 people, Prime Minister Prayuth Chan-ocha told reporters. The airline said it would “resume operations once the Covid-19 situation subsides.”
A prolonged global recession is the top near-term worry among leaders in risk management, according to a report published on Tuesday by the World Economic Forum. The report relied on surveys of 350 risk professionals, who also listed high unemployment, another outbreak and protectionism among their fears in the next 18 months.
Reporting was contributed by Michael Corkery, Alexandra Stevenson, Eduardo Porter, David Yaffe-Bellany, Hisako Ueno, David McCabe, Ben Dooley, Carlos Tejada, Maria Abi-Habib, Keith Bradsher, Jeanna Smialek, Kate Conger, Rich Barbieri, Mohammed Hadi and Gregory Schmidt.