with Brent D. Griffiths
The $600 a week in extra jobless aid lawmakers of both parties approved back in March as part of the $2.2 trillion Cares Act officially expires at the end of the month, leaving some 30 million Americans now relying on it in the lurch. With Republicans divided among themselves on key issues in the next economic rescue package, and a widening gulf between them and Democrats, quick passage looks increasingly remote.
“We’re going to have a lot more households that are dangerously close to the lowest levels available to sustain their living,” Richard Curtin, director of the University of Michigan Surveys of Consumers, tells me.
Republicans want to scale the benefit back, at a minimum.
How far to go in doing so remains an open question as Republicans seek to contain the overall cost of the relief package. But many in the party argue the payment discourages Americans' return to work and is slowing the recovery, since it offers many workers more than they would otherwise earn on the job.
President Trump, in an Oval Office meeting with congressional Republican leaders on Monday to discuss the relief package, said the benefits never should have been approved in the first place, three sources familiar with the meeting told Erica Werner, Jeff Stein, Bob Costa and Seung Min Kim.
House Democrats, in a roughly $3 trillion package they approved in May, extended the $600 bump-up through January. In the Oval Office meeting, Treasury Secretary Steven Mnuchin confirmed that Republicans planned to reduce the benefit in their bill. “We’re going to make sure that we don’t pay people more money to stay home than go to work,” he said, per my colleagues.
"GOP lawmakers have discussed proposing the federal benefit be cut from an additional $600 per week to between $200 per week and $400 per week. The lower number is viewed as the likelier outcome in their bill,” Jeff and Erica reported this weekend.
Mnuchin is correct that the enhanced benefit, when combined with state assistance, is supplying most of the jobless with more than they earned before they lost work. A University of Chicago study found more than two-thirds of recipients are collecting more now, and a fifth of them are being paid double or more what they were earning.
But with businesses still shuttered amid the coronavirus resurgence and the unemployment rate at 11.1 percent – a high not seen in modern history before the pandemic – employers are hardly scrambling for workers at the moment. Posts for open positions on the jobs site Glassdoor, for example, are down 22 percent from pre-crisis levels, Glassdoor senior economist Daniel Zhao tells me.
“Encouraging Americans to look for work might increase job search activity, but the economic benefit of that will be limited if there are no jobs to be found,” Zhao said. “In addition to being in a particularly deep economic crisis, the expiration of these benefits come at the absolutely worst time because [coronavirus] cases are rising, and we’ve seen some evidence that recovery is stalling.”
Former top Obama economic adviser Jason Furman has estimated ending the payments would shrink economic activity by 2.5 percent in the second half of the year and cost 2 million jobs over the next year. Though Doug Holtz-Eakin, an adviser to President George W. Bush, told the Wall Street Journal's Eric Morath and Te-Ping Chen extending it will keep the jobless rate high. He favors phasing it out and replacing it with an incentive to return to work, an idea gaining currency among conservatives.
The benefits aren’t just supporting the unemployed. They are propping up spending overall.
All households on average slowed down their spending at the start of the pandemic, according to a study by economists at the JPMorgan Chase Institute and the University of Chicago. But they found “unemployed households actually increased their spending beyond pre-unemployment levels once they began receiving benefits.” That unexpected outcome “has helped households to smooth consumption and stabilized aggregate demand,” the economists wrote.
Here’s how spending by households receiving the benefit has compared to those with employees who kept their jobs:
Indeed, low-income consumers have diminished their spending less than middle or high-income consumers:
Who’s spending and who’s not?
— Gregory Daco (@GregDaco) July 20, 2020
On the importance of policy stimulus and virus control in supporting a strong recovery.
Chart via @SoberLook @DailyFeather @OppInsights pic.twitter.com/R2E0o5YQE9
And jobless people who experienced delays in receiving their benefits slowed their spending by 20 percent, a data point that drives home the JPMorgan study’s key finding. “This suggests that delays have imposed substantial hardship on benefit recipients,” the economists wrote.
The money has allowed otherwise-strapped Americans “to pay for essentials, including rent. The National Multifamily Housing Council said 96% of renters made payments in June, nearly matching a year earlier, when unemployment was near a 50-year low,” per the WSJ. “That has prompted some business lobbyists, including the Mortgage Bankers Association, to ask Congress to extend the enhanced benefits or offer other relief. Without it, the association fears apartment building owners will default on their mortgages.”
The payments won’t continue forever. But several economists say they remain necessary for now.
"We appreciate that job openings are very scarce right now, so the benefits probably aren't suppressing employment much, but that will change when states are able to re-open properly,” Pantheon Macroeconomics chief economist Ian Shepherdson wrote in a Monday note. Rather than simply chop the $600 payment down unilaterally, Shepherdson argues for scaling the amount of the payments to beneficiaries’ prior earnings.
But even Shepherdson says that change can wait, while an extension of the support for 30 million Americans cannot. Shepherdson writes ripping the rug out from beneficiaries would cause a “catastrophic plunge” in their incomes — an outcome he projects negotiators will avoid.
Indeed, the University of Michigan’s Curtin agrees that the most urgent need now is preserving the lifeline to the unemployed. The longer-term challenge facing them, and the broader economy, “is not going to ease significantly until we have a vaccine or an effective treatment.”
Latest on the federal response
A payroll tax cut will be in the GOP's next emergency relief proposal.
But some Republican lawmakers are fuming about its inclusion: “The emerging GOP coronavirus relief bill appears likely to embrace some of [Trump’s] key priorities, despite opposition from within his own party, including a payroll tax cut, very little aid to state and local governments, and measures tying school funding to the reopening of classrooms,” Erica Werner, Jeff Stein, Robert Costa and Seung Min Kim report.
“Some of these provisions are already sparking pushback from key Senate Republicans, and an even bigger showdown with Democrats appears inevitable. That clash could come [today], when [Mnuchin] and White House Chief of Staff Mark Meadows are set to meet with House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles E. Schumer (D-N.Y.) for the first bipartisan talks on what will almost certainly be the last major coronavirus relief bill before the November elections. Mnuchin and Meadows will also meet with Senate Republicans on Tuesday as they seek to quell any discontent.”
- A possible warning sign from a committee chair: “I think you’d better ask me after [Tuesday] so we can hear from the administration if they’re really serious about it,” Sen. Charles E. Grassley (R-Iowa) told our colleagues about the inclusion of a payroll tax cut.
Where things stand for now: “Mnuchin said that the White House wants the bill to amount to roughly $1 trillion in new programs, though officials are expected to use budget gimmicks to make the initial package slightly larger. Still, Democrats were looking for a much bigger bill."
Always listen to Paul Kane:
Also, Mnuchin & Meadows arrived to meet senior Senate Rs discussing "the bill". There is no bill, not yet. And this is just the R-negotiating-with-R side of the equation. There's still Pelosi to deal with. Gonna take a while.
— Paul Kane (@pkcapitol) July 20, 2020
Coronavirus fallout
From the U.S.:
- Oxford vaccine is safe and promising, according to early human trials: “A University of Oxford group and the British-Swedish pharmaceutical company AstraZeneca reported Monday that their coronavirus vaccine candidate, on which the U.S. and European governments have placed substantial bets, was shown in early-stage human trials to be safe and to stimulate a strong immune response,” William Booth and Carolyn Y. Johnson report from London.
- Bad poll numbers push Trump to bring back covid briefings: “Trump’s announcement that he would resurrect the White House coronavirus task force briefings is the culmination of weeks of debate among his aides about how best to turn around — or explain away — his administration’s failed response to the pandemic," Toluse Olorunnipa and Josh Dawsey report.
- Florida's largest teachers union sues Gov. Ron DeSantis (R) over school reopening: “The suit from the Florida Education Association asked a judge to stop [DeSantis] and Education Commissioner Richard Corcoran from requiring the return of in-person schooling without first reducing class sizes and ensuring that educators have adequate protective supplies,” Matt Zapotosky reports.
- Lawmakers want more scrutiny over a $700 million Treasury loan to a trucking company: “A bipartisan congressional oversight body is raising questions about a $700 million emergency loan awarded by the Treasury Department to a U.S. trucking company,” Jeff Stein and Erica Werner report. Mnuchin earlier this month announced an unusual deal in which the government would take a 30 percent stake in trucking giant YRC in return for a substantial loan. Commissioners are raising alarms that taxpayers are likely to lose money.
From the corporate front:
- Southwest says 28 percent of workers seek leaves or exits: “Delta Air Lines said it was reviewing its pilot staffing after 2,234 bids for early retirement,” Reuters's Tracy Rucinski and David Shepardson report. The Southwest requests represent around 24 percent of pilots and 33 percent of flight attendants.
- Airlines are facing the end of normal business travel, which may never fully return: “At stake is the most lucrative part of the airline industry, driven by businesses that accepted -- however grudgingly -- the need to plop down a few thousand dollars for a last-minute ticket across the U.S. or over an ocean … Business travel makes up 60 percent to 70 percent of industry sales, according to estimates by the trade group Airlines for America,” Bloomberg News's Mary Schlangenstein, Esha Dey, and Brian Eckhouse report.
- IBM earnings falter: “IBM officials and industry analysts have said some companies have been skittish about technology purchases with the economic uncertainty caused by the coronavirus … [The company] said its second-quarter revenue fell by 5.4 percent, albeit a smaller decline than Wall Street analysts were forecasting, to $18.12 billion,” WSJ's Asa Fitch reports.
- Manhattan's retail pain grows: “Lower Fifth Avenue, running from 42nd to 49th streets, had the biggest drop in retail asking rents in the second quarter, sliding 30 percent from a year earlier, according to a report by brokerage Cushman & Wakefield. Soho and Madison Avenue were among areas with declines of more than 14 percent,” Bloomberg New's Natalie Wong reports.
- Warner Bros. postpones Christopher Nolan's “Tenet" again: The film which at one time was suppose to kick-off blockbusters in the U.S. will now be delayed until at least September. “The announcement, however, suggested that the film might open earlier overseas — a development that would be a major break with recent practice that has seen studios limit staggered release times to avoid piracy and additional marketing expense,” Steven Zeitchik reports.
Around the world:
- EU leaders agree to $859 billion relief plan: “European leaders agreed to a vast spending plan to rescue the economies of coronavirus-hit countries, overcoming deep-seated divisions on the extent to which rich European Union nations should commit to helping poorer ones. The deal on a $2.1 trillion E.U. budget and rescue package came after a marathon four days of grinding discussions among members of the 27-nation union,” Michael Birnbaum, Quentin Ariès and Loveday Morris report.
- Australia extends job-saving program but scales it back: "The welfare program was scheduled to come to an end by Sept. 30, but treasury officials determined there was a ‘strong’ case for keeping it running, the Sydney Morning Herald reported, Antonia Farzan reports.
Market movers
Tech stocks fuel rally.
Nasdaq surges more than 2 percent. “Stocks rose on Monday as Amazon shares led other major tech stocks higher. Traders also weighed the prospects of a potential coronavirus vaccine and more U.S. fiscal stimulus," CNBC's Fred Imbert reports.
- The S&P 500 is now in positive territory for the year: "The S&P 500 advanced 0.8%, or 27.11 points, to 3,251.84, turning positive for 2020 with a 0.6% gain on the year. The Nasdaq Composite outperformed, rising 2.5%, or 263.90 points, to 10,767.09. The Dow Jones Industrial Average traded 8.92 points higher to 26,680.87, after being down more than 150 points earlier in the day.
- Big tech names jumped across the board: “Amazon rose 7.9% to post its best day since December 2018 after a Goldman Sachs analyst hiked his price target on the stock to $3,800 per share, the highest on the Street. Facebook and Netflix gained more than 1% each, while Apple and Alphabet gained 2.1% and 3.1%, respectively. Shares of Microsoft jumped 4.3%.”
Money on the Hill
Judy Shelton looks to be on track for confirmation.
After a rocky start, Trump may finally get his Fed pick through the Senate: “Judy Shelton, the controversial economist known for her sharp criticism of the Federal Reserve, is poised to take a big step toward joining the central bank’s board, adding a new layer of political tension as policymakers deal with the worst economic crisis in decades,” Rachel Siegel reports.
“The Senate Banking Committee is set to vote [today] on Shelton’s nomination, which previously appeared in jeopardy after several Republicans on the panel suggested Shelton’s views made her too much of an outlier for a seat on the Fed’s board of governors. Lawmakers and economists have raised concerns about Shelton’s push to return the country to the gold standard, along with her views that the Fed should pull back its powers and keep closer ties to the White House.”
- Opposition from one Republican on the panel would have been enough to derail Shelton’s nomination: “On Monday evening, a spokesperson for John Neely Kennedy (R-La.), another senator who had expressed concerns, said the lawmaker would also support the nomination, essentially guaranteeing full support among the 13 Republicans on the committee. All 12 Democrats on the Senate Banking Committee staunchly opposed Shelton’s nomination from the start.”
Dodd-Frank turns 10.
It's been a decade since President Obama signed the sweeping reform into law: Now, former President Obama will remark on the anniversary during a virtual event with Better Markets, a think tank advocating stricter financial regulation, later today.
It's legacy: “Dodd-Frank keeps consumers and the economy safe from risky behavior by insurance companies and banks. Over time, the law has been subject to scrutiny and loosening under the Trump administration, but lawmakers agree that the current financial environment due to covid-19 would be far worse without the preventative measures provided by the law,” Forbes's Kelly Anne Smith reports.
Don't expect conservatives to host any celebrations: Only six Republican lawmakers voted in favor of the final Dodd-Frank bill (three in each house) — of those only Sen. Susan Collins (R-Maine) remains in Congress.
- The partisan fight over the law soured banking-related policy for years: "Anger over the 2008-9 mortgage crisis fueled Democrats' unified support for tougher banking rules, while the GOP united around concerns of government overreach. Those themes dominated the two banking committees for much of the past decade, as partisanship helped slow other bills such as reform of the government-sponsored enterprises,” American Banker's Neil Haggerty reports. But since moderate Democrats joined Republicans to support a targeted rollback of certain Dodd-Frank provisions in 2018, many see the partisan freeze on banking legislation starting to thaw. They note banking provisions in recent coronavirus rescue bills, and proposals to reform anti-money-laundering and cannabis banking rules as examples where members of both parties are working together.”
When superpowers collide
U.S. sanctions more Chinese companies over alleged human rights violations.
The Trump administration continues to hammer Beijing over its treatment of Uighurs: “The Commerce Department added 11 companies to a trade blacklist over the alleged Xinjiang violations, bringing to nearly 50 the number of Chinese entities on the list. The sanctions restrict the companies’ access to U.S. technology and other goods,” Jeanne Whalen reports.
“In a brief statement, the Commerce Department said nine of the companies were involved in forced-labor activities involving Uighurs and other Muslim minority groups. The statement did not elaborate, and department officials did not respond to a request for further details. Several of the companies were named in a report this year as running factories that used Xinjiang laborers compelled to work under a forced-labor program led by the government.”
Pocket change
Tens of thousands of workers walk out in solidarity with Black Lives Matter.
Some of nation's largest unions took part in the protest: “The ‘Strike for Black Lives,’ as leaders have dubbed the campaign, featured workers from a broad range of industries. Members of the Service Employees International Union, International Brotherhood of Teamsters, American Federation of Teachers and dozens of other labor and political groups took part,” Jacob Bogage reports.
“The campaign is pressing for ‘an unequivocal declaration that Black Lives Matter’ from business and political leaders, and urging government officials to ‘reimagine our economy and democracy’ with civil rights in mind. Organizers also called on businesses to ‘dismantle racism, white supremacy, and economic exploitation’ and ensure access to union organizing, according to a list of demands posted on the strike’s website.”
- Demonstrations took place in over 200 cities: “Organizers did not have exact figures on how many people walked off the job, but said around 1,500 janitors in San Francisco struck together. Close to 6,000 nurses from 85 nursing homes in New York, New Jersey and Connecticut picketed outside their workplaces.”
Chevron agrees to $5 billion takeover of Noble Energy: “Chevron Corp. agreed to a deal to buy Noble Energy Inc. for about $5 billion in what would be the largest oil-patch tie-up since the pandemic delivered a shock to the industry,” WSJ's Cara Lombardo and Christopher M. Matthews report.
“Noble, based in Houston, is an independent oil-and-gas producer with U.S. and international operations. Buying the company would expand Chevron’s presence in the DJ Basin of Colorado and Permian Basin, which spans West Texas and New Mexico. It would also give San Ramon, Calif.-based Chevron, which has a market value of $163 billion, assets in the eastern Mediterranean and West Africa and yield potential annual cost savings of $300 million, according to Chevron.”
Jack Ma's Ant Group plans to bypass New York in dual IPOs: “Ant Group Co., the Chinese technology and financial-services giant that owns popular mobile-payments network Alipay, said it is planning initial public offerings in Hong Kong and Shanghai, bypassing New York as it seeks to accelerate its growth in China and abroad,” WSJ's Stella Yifan Xie and Serena Ng report.
“Ant is moving to list closer to home while tensions flare between the U.S. and China, including threats of sanctions on Chinese officials and delisting Chinese firms from U.S. stock exchanges. Back in 2014, e-commerce giant Alibaba Group Holding Ltd —from which Ant’s flagship Alipay business was spun out of—chose New York as its listing venue and raised $25 billion. It was the world’s largest IPO until Saudi Aramco’s listing last year.”
Chart topper
From Bloomberg's Tracy Alloway:
U.S. states representing 75% of the U.S. population are reversing or pausing their reopening plans, Goldman: pic.twitter.com/fA6AYYTA0D
— Tracy Alloway (@tracyalloway) July 21, 2020
Daybook
Today:
- Top pharma officials are set to testify in front of a House subcommittee about the efforts to develop a covid-19 vaccine — companies represented include Moderna, Pfizer, Johnson & Johnson, Merck and AstraZeneca.
- Better Markets, a think tank advocating stricter financial regulation, holds a virtual event from 1 p.m.-5 p.m. looking back at the Dodd-Frank Act on its tenth anniversary. Former President Barack Obama will give opening remarks.
- Maryland Gov. Larry Hogan and former FDA Commissioner Scott Gottlieb headline a covid-related webinar for the American Enterprise Institute
- United Airlines, Coca-Cola, TD Ameritrade, Harley-Davidson, Philip Morris International, Capital One Financial, Snap, Texas Instruments, Raytheon and Lockheed Martin are among the notable companies reporting their earnings
Wednesday:
- European Central Bank President Christine Lagarde speaks about the global economy with The Post's David Ignatius
- The Senate Foreign Relations Committee holds a hearing on competition with China
- The House Small Business Committee Subcommittee on Investigations holds a hearing on the Small Business Administration's technology
- Biogen, Discover Financial Services, Las Vegas Sands, Whirlpool, Chipotle Mexican Grill and Spirit Airlines are among the notable companies reporting their earnings
Thursday:
- The Labor Department releases the latest numbers on weekly jobless claims
- The House Financial Services Committee holds a hearing on the Heroes Act, Democrats' sweeping proposal for the next phase of coronavirus relief
- The Senate Small Business Committee holds a hearing on minority small businesses' access to capital during covid
- Financial Services Chairwoman Maxine Waters (D-Calif.) and Sen. Elizabeth Warren (D-Mass.) deliver introductory remarks during the Center for Responsible Lending's virtual event honoring Dodd-Frank.
- Amazon, AT&T, Southwest Airlines, Hershey, Intel, Alaska Air Group, Union Pacific, Tractor Supply Co., Aaron's and Scholastic are among the notable companies reporting their earnings. (Amazon CEO Jeff Bezos owns The Washington Post)
Friday:
- The National Association of Realtors releases new-home sales data for June
- Verizon, American Express, Bloomin' Brands, Goodyear Tire & Rubber, Honeywell International and Lear Corp. are among the notable companies reporting their earnings