with Brent D. Griffiths

Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin joined hands, virtually, to defend the federal economic rescue effort they have co-captained in the face of the coronavirus pandemic.

But in remote testimony yesterday before the Senate Banking Committee, the two diverged on the path the economy will take from here. That split stands to grow more pronounced, and more consequential, as Congress debates what more it should do to help the country recover.

Mnuchin’s outlook hewed to the increasingly rosy view of the White House he serves — part of an emerging Trump administration consensus that the economy is on the cusp of a sharp bounceback that will obviate the need for new Washington spending. After noting “the jobs numbers will be worse before they get better,” the Treasury secretary emphasized the urgency of lifting restrictions. He said “there is the risk of permanent damage” to the economy the longer businesses stay shuttered.

Powell, on the other hand, stressed bringing the health crisis to heel before the economy can regain its footing. That will presage “people believing that it’s safe to go back to work so they can go out.”

And though he carefully avoided a direct call for lawmakers to support another massive aid package now, the central bank chief highlighted the risk of Congress holding back if conditions don’t improve. “My concern has been the risk and possibility of longer- run damage to the economy through unnecessary insolvencies on the part of households and businesses and long-term unemployment,” Powell said, “and that if we find ourselves in that place, we may have to do more and it could also be something that Congress would want to do.”

Neither current conditions nor economic projections offer much to cheer about.

The jobless rate will remain above 15 percent through September, according to a new estimate from the Congressional Budget Office. The economy hasn’t reached a jobless peak that high since the Great Depression, and the budget office expects the rate to drift down but remain elevated for a long time. It sees unemployment above 11 percent for the rest of this year, declining to 8.6 percent at the end of next year.

And here's the checkmark-shaped recovery in economic activity it foresees:

The latest economic indicators point to extended pain. A look beneath the hood of recent credit card activity, for example, suggests the depth of the wound to consumer activity, the economy’s growth engine. Examining data from Chase cards that’s been anonymized and aggregated, Michael Cembalest, JPMorgan Asset Management's chairman of market and investment strategy, finds consumer spending nationally is down 15 percent since last year:

But that measure includes online spending, which has especially boosted the fortunes of a handful of e-commerce giants. The falloff has been much steeper for in-person transactions, which account for roughly a third of consumer spending. That’s taken huge bites out of retail, restaurant, supermarket, lodging and gas station purchases:

New housing starts fell to a five-year low in April, dropping 30.2 percent, according to the Commerce Department. That dip came despite many states deeming homebuilding an essential activity that could continue through pandemic lockdowns, suggesting supply chain disruptions slowed activity, Reuters reports.

Weekly jobless claims due out Thursday likely won’t show a big improvement. “The immediate outlook is grim,” Pantheon Macroeconomics chief economist Ian Shepherdson writes in a note. “We are becoming less hopeful of a quick drop in jobless claims below the one million mark, which had seemed likely to come as soon as early June.”

The odds that the economic slump gets worse before it starts getting better should make Powell “reasonably confident that Congress will do more even without a further explicit push from himself,” Shepherdson writes.

Trump officials meanwhile see much brighter days around the corner.

Trump himself continues to push for a lifting restrictions and restarting commerce:

“Trump has for weeks been the leading cheerleader of a rapid economic recovery, saying in early April it will take off ‘like a rocket ship’ after the virus is contained,” Jeff Stein and Heather Long report. “The president’s confidence in a ‘spectacular’ economic comeback is shared by White House officials, said Stephen Moore, an economic adviser to the White House at the Heritage Foundation, a conservative think tank.”

As Moore put it, "From the people at the White House I talked to over the weekend, there’s a renewed sense of optimism that things are working out."

The outlook faced some sharp challenges Tuesday from Senate Democrats. “How many workers should give their lives to increase our GDP by half a percent?" Ohio Sen. Sherrod Brown, the banking panel's top Democrat, asked Mnuchin. The Treasury secretary replied that "no workers should give their lives to do that, Mr. Senator. And I think your characterization is unfair."

Trump tracker

President Trump does not want to extend the boost to unemployment insurance.

Republicans have expressed fear over workers being dissuaded from returning to their jobs: “Trump privately expressed opposition to extending a weekly $600 boost in unemployment insurance for laid-off workers affected by the pandemic …,” Seung Min Kim reports of the the president's remarks to GOP senators during an appearance at their weekly lunch in the Capitol.

The extra benefits, included as part of the $2 trillion Cares Act, run through July. House Democrats approved an extension through January 2021. “But congressional Republicans have said they are concerned that some workers are making more money on unemployment insurance than if they were on a payroll and therefore have less incentive to return to work or find a new job. Many economists fear cutting off the benefit extension could hamper the economic recovery."

Money on the Hill

Some senators pressured Powell and Mnuchin to do more to rescue the economy.

The next phase of stimulus remains marred in disagreements: “Senators of both parties peppered Mnuchin and Powell with questions about how they planned to maximize the reach of all of the business aid programs amid concerns that the smallest employers and even some larger companies might fall through the cracks,” Politico's Victoria Guida and Zachary Warmbrodt report.

“Sen. Thom Tillis (R-N.C.), who is up for reelection this year, said he had a growing sense ‘that we have a bit of a doughnut hole’ in which some businesses are too big for small business loans but not big enough to qualify for the Main Street lending. Mnuchin said the intention was to make sure businesses ‘don’t fall out in between.’ ”

  • The duo also faced heat over who is benefiting from existing relief efforts: Sens. Brown and Elizabeth Warren (D-Mass.) "said the Fed and Treasury were not doing enough to ensure that the money actually benefits workers … [Warren] urged Mnuchin to require executives to be held personally liable and be subject to criminal penalties if they provide false information or misuse bailout funds. Mnuchin said he would review the idea but Warren took his response as a ‘no.’ She accused the former banker of ‘boosting [his] Wall Street buddies’ and ‘leaving the American people behind.’ Mnuchin shot back that lawmakers had already weighed in on the potential strings attached to the aid when they created the bailout programs.”
  • The administration still wants to cut payroll taxes, despite little interest on the Hill: White House economic adviser Larry Kudlow floated the idea again Tuesday, telling reporters, "We’ve offered a payroll tax holiday so that you come back to work (and) those folks will get a higher after-tax wage – 7.6 percent higher.”

House Speaker Nancy Pelosi (D-Calif.) is moving to revamp PPP. The House will vote next week to ease restrictions on how small businesses can use loan money from the program, Politico's Zachary Warmbrodt and Heather Caygle report: “It’s a notable shift in strategy for [Pelosi], who has until now focused her efforts on more comprehensive coronavirus legislation, including the $3 trillion rescue package the House passed Friday. And it could reduce the sense of urgency some in Congress have to pass another big relief measure.”

Rep. Pramila Jayapal (D-Wash.) secured moderate support for payroll protection plan: “After [Pelosi] excluded a plan to keep unemployment down by subsidizing firms to keep workers on payrolls from her relief package last week, dozens of progressives have banded together with 10 ‘front-line’ Democrats from swing districts to introduce it as a standalone piece of legislation," the Intercept's Ryan Grim reports.

Top CEOs say local governments need more money: “Top business leaders in California are urging Congress to approve an additional $1 trillion in spending to head off massive budget cuts,” CNBC's Yasmin Khorram reports.

“In a letter to Congress, members of California Gov. Gavin Newsom’s task force on business and jobs recovery wrote, ‘the worst of the economic impact [is] likely still to come’ The letter, which was sent Friday, was signed by nearly 100 business leaders including Disney Executive Chairman Bob Iger, Salesforce CEO Marc Benioff, Priscilla Chan of the Chan Zuckerberg Initiative (and wife of Facebook CEO Mark Zuckerberg), Netflix Chief Content Officer Ted Sarandos and venture capitalist Ben Horowitz of the VC firm Andreessen Horowitz.”

Market movers

Stocks snap three-day winning streak.

The positive vaccine news might have been premature: “U.S. stocks fell for the first time in four sessions after reports circulated that Moderna Inc.’s vaccine study, which was credited in part for Monday's rally, didn’t produce enough critical data to assess its success. Crude oil and Treasuries gained,” Bloomberg's Claire Ballentine and Vildana Hajric report.

“The S&P 500 and Nasdaq Composite turned negative in the last hour of trading, while the Dow Jones Industrial Average extended its losses. Equities had fluctuated much of the day after optimism over the drug as a potential coronavirus vaccine sent the S&P up the most Monday in almost six weeks. Crude oil rose for a fourth day.”

Why the Moderna surge might have jumped the gun: Several vaccine experts asked by STAT concluded that, based on the information made available by the Cambridge, Mass.-based company, there’s really no way to know how impressive — or not — the vaccine may be,” Stat's Helen Branswell reports.

“While Moderna blitzed the media, it revealed very little information — and most of what it did disclose were words, not data. That’s important: If you ask scientists to read a journal article, they will scour data tables, not corporate statements. With science, numbers speak much louder than words. Even the figures the company did release don’t mean much on their own, because critical information — effectively the key to interpreting them — was withheld."

Federal Reserve Bank of Boston President Eric Rosengren cast a cautious eye at attempts to restart the economy amid the unresolved coronavirus crisis, while also reaffirming the central bank’s desire to do what it takes to offset the pandemic’s impact.

Coronavirus fallout

America is now reopened.

But what that means varies widely: “Connecticut was among the last states to take a plunge back to business on Wednesday, when its stay-at-home order lifted and stores, museums and offices were allowed to reopen. But not far away in New Jersey, the reopening has been more limited, with only curbside pickup at retail stores and allowances for certain industries,” the New York Times reports.

The IRS is finding out that reopening can be challenging. 

The agency's struggles may foretell what's ahead for rest of the federal government: “The Internal Revenue Service had barely begun bringing its lowest-paid workers back to the office in late April when someone in the Philadelphia call center came down with a fever, forcing the third-floor staff to head home  …  three service centers, among 10 campuses nationwide where the IRS is trying to reinstate 11,000 employees, had to partially close for a week for deep cleaning,” Lisa Rein reports.

“The tax behemoth that touches virtually every American has made the government’s most aggressive effort so far to recall its workforce … Even before the recent covid-19 infections, few employees felt secure enough to go back. As of Monday, about 3,000 customer-service and clerical workers had volunteered to return to the office, an absentee rate of almost 75 percent."

  • What it means for you: “The staffing shortage will prolong delays — refunds for paper tax filers, responses to amended tax returns, returns frozen after they were flagged for identity theft. The Austin office is backed up with 250,000 paper-heavy requests for identification numbers from foreign-born taxpayers who are not eligible for Social Security numbers.”
More from the U.S.:
  • At least 1,521,000 cases have been reported; at least 90,000 people have died.
  • Trump takes a first step toward returning medical supply chains: “The Trump administration said it has awarded a $354 million contract to a Virginia start-up that will produce a variety of generic drugs and their ingredients — including medicines used to treat covid-19 — at advanced manufacturing facilities in the United States,” David J. Lynch, Jeanne Whalen and Laurie McGinley report. “White House officials called it a potential landmark in the efforts to return pharmaceutical manufacturing to the United States from overseas.”
  • New York's outbreak is back where it started, Cuomo says: New York Gov. Andrew Cuomo (D) said “that the state’s outbreak has slowed to levels not seen since the beginning of the pandemic as the number of fatalities, rate of new infections and the daily number of hospitalizations related to covid-19 continue to fall," CNBC's Jasmine Kim and William Feuer report.
  • Nonessential plant tours are banned in Michigan, but Trump's visit is still on: “Ford says it will require the president to wear a mask, something he has not done on other recent plant tours,” Crain's Detroit Business's Chad Livengood reports. The automaker appeared to backtrack from their requirement later in the day and Trump simply told reporters “we'll see” of the prospect that he would wear a mask.
More from the corporate front: 
  • Sales soar at Walmart and Home Depot: The retail giants “reported big boosts in quarterly sales, propped up by panic-buying as Americans hunkered down at home. Walmart said online sales surged 74 percent, lifting overall sales by nearly 9 percent from February to April. Meanwhile, Home Depot said its revenue rose 7 percent,” Abha Bhattarai reports. “On the other side of the spectrum: Kohl’s. The department store chain posted a 41 percent drop revenue for the quarter.”
  • Airlines show signs of life: “Bookings are again outpacing cancellations and June reservations are showing ‘modest improvement,’ Southwest Airlines Co. said,” Bloomberg's Mary Schlangenstein reports. “United Airlines Holdings Inc. is seeing reduced cancellation rates and ‘moderate’ strengthening on U.S. and some international routes. Delta Air Lines Inc. has noticed a slight bounce in leisure bookings, and American Airlines Group Inc. said it’s filling a greater portion of seats on its planes.”
  • Big chains see room to grow as small restaurants get crushed: “Big fast-food brands like Domino’s Pizza, Chipotle and Wendy’s that were doing well before the crisis want to grow – or continue pre-existing expansion plans – after the pandemic subsides,” Reuters's Hilary Russ reports. “David Deno, chief executive officer of Outback Steakhouse parent company Bloomin’ Brands, told Reuters … ‘I don’t mean to wish ill on anybody, but there’s going to be real estate opportunities,' for new stores or relocations to areas with ‘better visibility, better access and better parking.’”
  • Alphabet CEO Sundar Pichai expects many employees to keep working remotely: “I expect by the end of the year, we’ll be at 20 percent to 30 percent capacity. Which may still mean we are able to get 60 percent of our employees in once a week, or something like that,” Pichai said on ‘The Vergecast’ podcast, CNBC's Jessica Bursztynsky reports. “As it ramps up operations, Pichai said he believes the company will cap office attendance at 20 percent to 30 percent of workers in the office at any given time.”
  • McDonald's workers file lawsuit against the chain: “Five McDonald’s workers in Chicago and four of their family members filed a lawsuit against the fast-food giant … alleging that it responded inadequately to the pandemic,” CNBC's Amelia Lucas reports. “The lawsuit, which is seeking class-action status, comes as McDonald’s prepares to reopen dining rooms across the country.”
  • Magic Johnson offering $100 million in loans to minority-owned businesses: “The CEO of Magic Johnson Enterprises collaborated with MBE Capital Partners to offer $100 million in loans to minority- and women-owned companies hurt by stay-at-home orders,” CNBC's Jabari Young reports. “The loans were funded through Johnson’s EquiTrust Life Insurance Company and will be provided through the Small Business Administration’s Paycheck Protection Program.”
Around the world:
  • South Korea begins reopening schools: The country began “a phased reopening starting with the oldest students after a two month suspension of classes,” Min Joo Kim reports from Seoul. “Some 450,000 third-year students returned to their high schools under a set of strict social distancing guidelines from temperature checks at the gate to mask-wearing in classrooms.”
  • Drug touted by Japanese prime minister not showing clear efficacy in trials: “An anti-influenza drug touted as a potential coronavirus treatment by Japanese Prime Minister Shinzo Abe has not shown clear efficacy in clinical trials, Kyodo News reported,” Antonia Farzan reports.

Pocket change

Disney loses its architect at critical time.

Kevin Mayer's jump to TikTok complicates things for the media giant: “While the rest of Disney, including its movie studio, ESPN sports empire and especially its theme parks, has been rocked by the coronavirus, Disney has flourished, picking up more than 54 million subscribers since it launched late last year,” the WSJ's Erich Schwartzel and Joe Flint report.

“Still, the streaming platform faces speed bumps. The shutdown of most television and movie production has hampered plans to increase its original content, and new rivals, including AT&T Inc.’s HBO Max and Comcast Corp.’s Peacock, are coming on the scene. After more than two decades climbing the ranks at Disney, Mayer is leaving his role as head of direct-to-consumer and international operations to become chief executive of short-video app TikTok, owned by Chinese tech giant Bytedance Ltd.”

Facebook to launch new shopping feature: “Facebook Inc is launching Shops, a service that will allow businesses to display and sell products on the world’s largest social network’s platforms, Chief Executive Mark Zuckerberg said,” Reuters's Katie Paul reports.

“The move to build up e-commerce offerings follows Facebook’s launch last year of limited shopping options on photo-sharing app Instagram and messaging app WhatsApp. Company leaders wager making the platforms more business-friendly will generate fresh ad revenue, even as user growth slows. Facebook Shops will tie at least some of those efforts together, enabling businesses to set up a single online store accessible via both Facebook and Instagram.”

Santander settles predatory auto-lending claims for $550 million: “The settlement, announced Tuesday, resolves charges that one of the largest subprime auto lenders in the U.S. made loans borrowers couldn’t afford to repay. The [nearly three dozen] states also claim that Santander failed to monitor dealers that falsified borrowers’ incomes and other information when submitting loan applications,” the WSJ's Ben Eisen and AnnaMaria Andriotis report.

The regulators

Otting is stepping down. 

The banking regulator just finished a controversial overhaul of Community Reinvestment Act rules. “Joseph Otting, who has served as Comptroller of the Currency since November 2017, has made it a priority to overhaul rules for the Community Reinvestment Act. The law was enacted in 1977 to end ‘redlining,’ a practice where banks wouldn’t lend in lower-income communities,” WSJ's Andrew Ackerman reports

“Mr. Otting, a former bank CEO, told Senate lawmakers last week that he sought to accelerate completion of the change amid the coronavirus pandemic… The overhaul more precisely defines the types of lending and other investment in low-income communities that banks would be credited for under the law. A bad evaluation can restrict banks from merging or opening new branches."

From Gregg Gelzinis, a senior policy analyst at the Center for American Progress: 



  • The Fed releases minutes from its April 28-29 policy meeting
  • The House Education and Labor Workforce Protections Subcommittee holds a hearing on protecting workers from covid-19
  • Target, Lowe's, Expedia Group, McKesson and L Brands are among the notable companies reporting their earnings


  • The Labor Department releases weekly jobless claims
  • The National Association of Realtors releases existing home sales for April
  • Best Buy, Hormel Foods, Intuit and BJ's Wholesale Club are among the notable companies reporting their earnings


  • China kicks off its annual legislative session, the National People's Congress
  • Alibaba Group, Deere, Foot Locker and Buckle are among the notable companies reporting their earnings

The funnies

From The Post's Ann Telnaes:

Bull session