with Brent D. Griffiths
House Democrats are rallying around a plan to stanch surging unemployment with hundreds of billions of dollars in new rescue funds, as the mind-boggling scale of the economic destruction wrought by the coronavirus pandemic becomes clearer.
The proposal borrows from similar programs that Western European and Asian countries have already implemented to keep employees on the payrolls of damaged businesses. It aims to replace the relief the troubled Paycheck Protection Program has provided small businesses and expand it to businesses of all sizes, while cutting out banks as middlemen.
And it stands a strong chance of making it into an economic rescue package House Democratic leaders are racing to assemble and roll out in the coming days, Democratic lawmakers and top aides say. “It has picked up an enormous amount of momentum very quickly,” Rep. Pramila Jayapal (D-Wash,), who is spearing the effort, tells me.
That includes key support on Capitol Hill — where House Speaker Nancy Pelosi (D-Calif.) has been drawing attention to the measure — and off: It has earned endorsements from a range of economists, including former Federal Reserve chair Janet L. Yellen, as well as labor unions such as the AFL-CIO and liberal grass-roots groups.
“There is really serious interest now in this among our leadership,” Rep. Adam B. Schiff (D-Calif.), a close Pelosi ally who backs the proposal, tells me. “They’re gauging support for it within the caucus.”
The plan offers grants paying 100 percent of workers’ salaries and benefits.
And it covers other expenses, including rent and utilities, for firms dislocated by the pandemic. It would be retroactive to March 1, allowing firms to rehire people they have laid off. It is also adjustable going forward, so if a business can only return at 30 percent capacity, it would qualify for 70 percent of the guarantee.
Jayapal says some details remain in flux, such as how the federal government will deliver the funds. And it doesn’t have an official cost estimate yet. But an analysis from Moody’s Analytics chief economist Mark Zandi, provided by Jayapal’s office, projects a net cost of $654 billion. That accounts for savings on unemployment benefits and Medicaid that the federal government will pay out if more workers fall back on social safety net programs.
The proposal does not amount to universal basic income: The money would only go to those who were in the workforce when the pandemic struck; and it would only last as long as the health emergency. But it is ambitious — and the traction it has received already testifies to how much the coronavirus crisis has done to fundamentally remake the contours of the policy debate.
Roughly 33.5 million people have filed for jobless claims in the seven weeks since the country started locking down. The April jobs report due out this morning is projected to show unemployment surging to over 15 percent, a level not seen since the Great Depression. That could stoke new urgency for even more relief from Washington. “Mass unemployment is a policy choice, and it’s one we can’t afford to make,” Jayapal says.
The measure could engender some sticker shock.
Some moderate House Democrats are likely to flinch if they see the proposal simply as an attempt to establish a negotiating position with Senate Republicans, senior aides note. “It’s going to be tough if they see it as something partisan, a marker bill,” one tells me. Another points out the bill “is not finalized, so there’s nothing else one can say at this point.”
Pelosi had aimed to release a draft of the potentially $2 trillion broader measure today, Politico’s Heather Caygle, Sarah Ferris and John Bresnahan report. “But that timeline is slipping as members from all corners of the caucus pressure leadership to stuff the ballooning bill with their priorities, many of which were left out of the previous four aid packages negotiated with Republicans. Senior Democratic aides said Pelosi and the committees will be working through the weekend on the package.”
The Senate remains the most significant hurdle.
Senate Majority Leader Mitch McConnell (R-Ky.) maintains he wants to hit pause before approving new federal relief, reflecting spending fatigue among some in his ranks following the nearly $3 trillion lawmakers have already approved.
Yet the debate isn’t so clear cut. Sen. Josh Hawley (R-Mo.) is promoting an approach similar to Jayapal’s. It is more limited in scope. His plan would offer companies a federal guarantee for up to 80 percent of worker salaries, with bonuses for rehiring. “This approach will prepare us to surge into recovery," Hawley wrote in an op-ed for The Post last month. "Workers will benefit from the steady paycheck and the knowledge that their jobs are safe. And businesses, able to retain their workforce at little cost, will be poised for success once the economy reopens.”
Jayapal, who co-chairs the Congressional Progressive Caucus, says their offices have been consulting with each other. Meanwhile, Sens. Bernie Sandes (I-Vt.) and Mark R. Warner (D-Va.), representing opposite ideological wings on the left, are working together on their own version.
The coming jobs carnage
This is the most anticipated jobs report in decades.
Economist expect that over 20 million people lost their jobs in April. That would mean the pandemic has wiped out a decade of job gains in a single month. "Such staggering losses would be more than double what the nation experienced during the 2007-2009 financial crisis. Now that has been quickly dwarfed by the fallout from the global pandemic,” Heather Long reports.
“Trump and numerous state and local leaders decided to put the economy in a deep freeze in an effort to minimize exposure to the virus. This led businesses to suddenly shed millions of workers at a rapid rate never seen before. Analysts warn it could take many years to return to the 3.5 percent unemployment rate the nation experienced in February.”
The reopening debate
More reopening states are doing so without meeting White House guidelines.
The guidelines are nonbinding and leave governors in the driver's seat: “Still, most states that are reopening fail to adhere to even those recommendations: In more than half of states easing restrictions, case counts are trending upward, positive test results are rising, or both, raising concerns among public health experts,” the New York Times's Keith Collins and Lauren Leatherby report.
Trump administration buries CDC's detailed reopening guide: “The 17-page report by a Centers for Disease Control and Prevention team, titled ‘Guidance for Implementing the Opening Up America Again Framework,’ was researched and written to help faith leaders, business owners, educators and state and local officials as they begin to reopen,” the Associated Press's Jason Dearen and Mike Stobbe report.
“It was supposed to be published last Friday, but agency scientists were told the guidance ‘would never see the light of day,’ according to a CDC official. The official was not authorized to talk to reporters and spoke to The Associated Press on the condition of anonymity.”
- It's of a piece with a broader Trump crackdown on virus information: “Trump in recent weeks has sought to block or downplay information about the severity of the pandemic as he urges a return to normalcy,” Toluse Olorunnipa reports. “His administration has sidelined or replaced officials not seen as loyal, rebuffed congressional requests for testimony, dismissed jarring statistics and models, praised states for reopening without meeting White House guidelines and, briefly, pushed to disband a task force created to combat the virus and communicate about the public health crisis."
Michigan will allow manufacturers to reopen on May 11: Michigan Gov. Gretchen Whitmer's (D) decision removes “one of the last major obstacles to North American automakers bringing thousands of laid-off employees back to work,” Ben Klayman and David Shepardson report. “While reopening the manufacturing sector, Whitmer also extended her state’s stay-at-home order by about two weeks to May 28, citing a desire to avoid a second wave of covid-19.”
Iowa's reopening forces works to choose between lives and livelihood: “For some states, including Iowa, there is concern that some workers may choose not to return to work because they are earning more from unemployment benefits than they were on the job. While workers receive about half or less of their usual salary in regular unemployment benefits, they also receive a $600-a-week check as part of the $2 trillion federal stimulus bill signed by [Trump] in March,” Holly Bailey reports from Lone Tree, Iowa.
“Iowa Gov. Kim Reynolds has urged Iowans to return to their jobs, if they are available, arguing that reopening businesses can increase the speed to recovery amid the pandemic, even if the coronavirus threat continues. Like other officials around the country who have started to reopen their states, Reynolds has said Iowans will have to embrace a ‘new normal.’”
Deere and Caterpillar kept their factories running. Here's what we can learn: “Giving employees sick time without penalty, temperature screenings, staggered shifts and hiring a hygiene-auditing firm are some of the measures the two companies have taken to reassure employees to stay on production lines when many union and non-union workers balk at reporting for jobs that could expose them to the novel coronavirus that causes covid-19,” Rajesh Kumar Singh reports.
In the U.S.:
- At least 1,250,000 cases have been reported; 75,254 people have died.
- Scott Gottlieb: Children may be spreaders. The former FDA chief told CNBC that “tens of thousands of kids” with no symptoms or mild ones unknowingly could be spreading the disease.
- Fed official sees little sign of economic resurgence: “Though states have begun to reopen their economies, it is not clear consumers are ready to venture back to the marketplace, Atlanta Federal Reserve Bank President Raphael Bostic said … citing conversations with business officials in his region and his staff’s study of cellphone tracking data,” Reuters's Howard Schneider reports.
Wave of bankruptcies is building: “First, J. Crew. Now Neiman Marcus. Flashing red: J.C. Penney, Hertz and many more,” Bloomberg News's Eliza Ronalds-Hannon, Katherine Doherty, and Davide Scigliuzzo report. “Get ready for what could be the most jarring stretch of corporate bankruptcies in memory. The coronavirus has crushed the life out of some venerable household names.”
“For many troubled companies, like luxury retailer Neiman Marcus Group Inc., which filed on Thursday, the lockdown super-charged the effects of pre-existing problems like debt overloads and the inability to please fickle consumers. For others, the debt they rack up while the pandemic rages may prove insurmountable once the health threat is over. Few industries have been spared.”
In other news:
- Airbus deliveries plunge 80 percent: “The handovers, down from 70 planes in the same month of 2019, included two wide-bodied jets of which one was an A350 for customer Japan Air Lines. The other was an internal delivery of an A330 to be converted into a military tanker.”
- Cargo carriers reap rewards: “As passenger demand plunged …. airlines have stored about two-thirds of the world’s fleet of about 26,000 planes through mid-April, according to U.K.-based aviation consulting firm Ascend by Cirium. Air freight volumes worldwide dropped by more than 15 percent in March from a year earlier, but capacity dropped 23 percent, the International Air Transport Association said,” CNBC's Leslie Josephs reports.
- Clorox still can't meet demand for its wipes. That won't change soon: “Clorox has increased production of disinfectant products by 40 percent, but sales have stretched to five times the normal level at times during the spread of covid-19, Clorox finance chief Kevin Jacobsen said. U.S. sales of disinfectant wipes were up 146 percent for the eight-week period ended March 25 compared with a year ago, according to Nielsen,” the WSJ's Sharon Terlep reports.
- Kohl's to reopen 25 percent of stores starting next week: “The department store operator said stores in four U.S. states had already reopened earlier this week and outlets in 10 more states would open on Monday,” Reuters's Uday Sampath reports.
- Dish Network's commercial base has been hit: “The company ended March with 413,000 fewer TV customers. That included a net loss of 132,000 satellite subscribers and 281,000 accounts on Sling TV, Dish’s online channel service," WSJ's Drew FitzGerald reports.
- Small music clubs formed a lobbying group to push for PPP money: More than 1,200 venues and promoters "have formed an advocacy group, the National Independent Venue Association, with Dayna Frank, the owner of First Avenue in Minneapolis, a regular spot for Prince, the Replacements and Hüsker Dü, as its board president,” the NYT's Ben Sisario reports. The group has retained Akin Gump Strauss Hauer & Feld to lobby for it.
Around the world:
- Lufthansa seeks 9 billion euro bailout: The airline is negotiating with Germany’s economic stabilisation fund. “The ‘stabilisation package’ includes a non-voting capital component, known as a so-called silent participation, a secured loan, and a capital increase which may leave the government with a shareholding of up to 25 percent plus one share, the company said,” Reuters's Edward Taylor and Arno Schuetze report.
- Australia launches three-phase reopening plan: “States will be allowed to pace through the steps on their own, and Prime Minister Scott Morrison said he hoped the entire country would reach the third phase by July,” Teo Armus reports.
Wall Street expected “bubble stocks” to tank, but so far they continue to soar.
Beyond Meat and Peloton lead the way: “The names skeptics used to point their fingers at are actually among the biggest winners this year, and their strength pushed the tech-heavy Nasdaq Composite into positive territory on Thursday,” CNBC's Yun Li reports.
“High-flyers Amazon and Netflix were the among the first stocks to fully make back the losses from the coronavirus sell-off that triggered the fastest bear market on record. Meanwhile, shares of Beyond Meat and Peloton rebounded violently, and are now up more than 50 percent each this year. Tesla is up a whopping 86 percent. It turns out society shutting down to curb the spread of the coronavirus is good business for many of these speculative names. Investors flocked to their old loves Netflix and Amazon in the stay-at-home age, while cheering positive news from smaller players like Beyond Meat and Peloton."
Traders have started pricing in the possibility of negative interest rates. Bloomberg's Edward Bolingbrook and Alex Harris: "Fed funds futures contracts extended their rally from earlier this week and prices for early 2021 contracts surged above 100, a level that marks the boundary to negative interest rates. The five-year Treasury rate also hit an unprecedented low as securities rallied across the curve and falling yields weighed on the dollar.
“Federal Reserve Chairman Jerome Powell has consistently pushed back against the idea of taking interest rates negative, though Atlanta Fed President Raphael Bostic said Thursday the central bank will deploy its full arsenal to aid the pandemic-hit economy.”
The earnings callback
Beer is in hot demand in stores around the world, but that might not be enough.
- The world's largest beer maker forecasts a dismal Q2: “Anheuser-Busch InBev, the brewer of Budweiser, Corona and Stella Artois, sold 9.3 percent less beer and other drink than a year ago in the first three months of 2020, but this decline worsened to about a third in April as bars and restaurants closed and some production halted,” Reuters's Philip Blenkinsop reports. “Stores across the world have seen surging sales of beer, wine and spirits, although the pace in many countries has slowed and it seems unlikely to make up the shortfall from lost sales in bars, clubs and restaurants.”
- Nintendo smashes records with hit Animal Crossing: The Japanese gaming company said “its fourth-quarter profit soared 200 percent due to surging demand for its Switch games console, and that title Animal Crossing: New Horizons shifted a record 13.4 million units in its first six weeks,” Reuters's Sam Nussey reports.
U.S., China stand by trade deal as tensions ratchet up.
Negotiators struck a conciliatory tone on a check-in call. The two sides “discussed the prospects of China fulfilling a Phase 1 trade deal that [Trump] has threatened to scrap in the coming days as bilateral relations fray,” Gary Shih reports.
“Although the Chinese representative, Vice Premier Liu He, stopped short of guaranteeing that China would keep its promise to buy an additional $200 billion in U.S. products, both he and U.S. officials agreed to ‘strengthen cooperation on the macroeconomy and public health and create favorable conditions for implementing the Phase 1 deal,’ according to a Chinese statement.”
Americans are still staying home: “According to a Washington Post analysis of data provided by SafeGraph, a company that aggregates cellphone location information, the peak period of our collective, coronavirus-induced lockdown was the seven-day period ending April 7. (There was also a one-day spike on Easter Sunday.) During that time, U.S. residents spent a whopping 93 percent of their time at home, up from the early March averages of roughly 70 percent,” Kevin Schaul, Brittany Renee Mayes and Bonnie Berkowitz report.
“As of April 30, people were still at home an average of 89 percent of the time.”
- Labor releases April unemployment numbers
- Hostess Brands, Bloomin’ Brands and SeaWorld Entertainment are among the notable companies reporting their earnings