Here’s what you need to know:
Government checks caused a surge in April incomes, but the aid programs are coming to an end.
Government infusions to Americans’ bank accounts led to a surge in personal income in April, the Commerce Department reported Friday, but the coronavirus-related economic shutdown still caused a steep decline in consumer spending.
Personal income rose overall by $1.97 trillion, a gain of 10.5 percent in March and 11.7 percent from the previous April. The drop-off in wages was offset by nearly $3 trillion in government transfer payments. Of that, $360 billion was unemployment benefits and $2.6 trillion was “other” — reflecting the checks of up to $1,200 a person that the federal government sent to most households.
That extra cash was not translated, at least immediately, into spending on consumer goods, which was down 13.6 percent from March. The decline was spread across all major categories — durable goods, nondurable goods and services.
While that multitrillion-dollar patchwork of federal and state relief programs has mitigated the damage to households, many of those programs are set to expire soon. The $1,200 checks are long gone, at least for those who needed them most, with little imminent prospect for a second round.
And the $600 per week in extra unemployment benefits that have allowed tens of millions of laid-off workers to pay rent and buy groceries will expire at the end of July, the Times’s Ben Casselman reports.
President Trump and other Republicans have played down the need for more spending, saying the solution is for states to reopen businesses and allow companies to bring people back to work. So despite pleas from economists across the political spectrum — including Jerome H. Powell, the Federal Reserve chair — any federal action is likely to be limited.
Even the most optimistic forecasters expect the unemployment rate to be well above 10 percent when the extra benefits expire, meaning there will be far more jobless workers than available jobs.
Google rescinded offers to thousands of ready-to-start contractors.
Google has rescinded offers to more than 2,000 people who had agreed to work at the company as temporary and contract workers.
Google employs more than 130,000 contractors and temp workers, a shadow work force that outnumbers its 123,000 full-time employees. Google’s full-time staff are rewarded with high salaries and generous perks, but temps and contractors often receive less pay, fewer benefits and do not have the same protections, even though they work alongside full timers.
Many of the contract and temp candidates who had agreed to work at Google before the pandemic took hold in the United States were let go without any severance or financial compensation. This came after weeks of uncertainty as Google repeatedly postponed their start dates during which time they were not paid by Google or the staffing agencies through which they were recruited.
Some of the would-be contractors left stable, full-time jobs once they received an employment offer at Google and are now searching for work in a difficult labor market. Some, who are Americans, said the rescinded offers have complicated and, in some cases, delayed their ability to receive unemployment benefits because they left their last jobs voluntarily, according to several of the workers facing this dilemma.
In mid-April, a company spokeswoman said that Google intended to bring on the people who it had already hired but who had not started.
But this did not seem to apply to contractors or temp workers for Google and Alphabet, which has a market capitalization of near $1 trillion dollars. It made $6.8 billion in profit in the first three months of 2020, despite what it called “a significant and sudden slowdown” in advertising.
“If these people were promised jobs at Alphabet, which is worth a trillion dollars, it seems like the company has a responsibility to take them on,” said Ben Gwin, who works as a data analyst in a Google office for HCL America, a contracting agency. “It’s not like Google can’t afford it.”
Markets fall as U.S.-China tensions rise.
Stocks dipped on Friday, with shares on Wall Street adding to losses from the day before, as tensions worsened between Washington and Beijing.
The S&P 500 dropped less than half a percent in early trading. Shares in Europe were also lower after a mixed day in Asia.
Investors were bracing for President Trump to unveil measures aimed at China. The Trump administration has criticized Beijing’s recent move to strengthen its authority over Hong Kong, a semiautonomous Chinese city that enjoys special trade and financial relations with the United States. Any sharp move by the administration risks inviting retaliation from Beijing, worsening tensions between the world’s two biggest single economies.
Mr. Trump had said on Thursday that he would hold a news conference on Friday to discuss China, but few details were available about when he planned to speak or what he would address specifically. In addition to rising concerns over Hong Kong, the Trump administration has been critical of China’s response to the coronavirus outbreak as the president has sought to divert blame for the toll it has taken on the United States.
Tension between Washington and Beijing, which are currently negotiating a trade deal, has been one of the few factors that has managed to deter bullish investors who have looked past the coronavirus pandemic’s immense human and economic toll, and instead have focused on signs of a recovery as they bid stocks higher.
Investors were also parsing mixed retail sales data from Europe, as well as business confidence figures from Britain.
Renault says it will slash jobs and production.
The French carmaker Renault said on Friday that it would cut nearly 15,000 jobs worldwide and drastically reduce production as it tries to deal with “the major crisis facing the automotive industry.”
About a third of the job cuts would be in France, Renault said. The company, which is partly owned by the French government, indicated it is likely to close several factories while it cuts the number of cars it produces annually to 3.3 million, from 4 million. Renault will also pull out of China, where it has failed to get much traction.
Renault has been hit hard by the pandemic. Renault sales in the European Union, its most important market, fell almost 80 percent in April, when dealerships were closed and most buyers were not leaving their homes.
Can the dollar keep this up?
The U.S. dollar has gained about 7 percent this year against a basket of major currencies. But with interest rates at rock-bottom levels, the Fed’s printing presses revving up and the government borrowing enormous sums for stimulus spending, today’s DealBook newsletter asks: Can it retain its haven status?
A recent research note by Gregory Daco at Oxford Economics found that since 1973, the dollar has appreciated an average of 6 percent in the past six recessions, in line with its performance during the current downturn. Mr. Daco expects the dollar to remain strong this year, but not for the usual reasons.
Unlike in past recessions, when investors flocked to the safety of Treasury bonds, foreign investors dumped U.S. government debt at a record rate in March, which would normally push the dollar down. But since the Fed flooded the markets with stimulus, the U.S. stock market has, unusually, become a “safe refuge,” Mr. Daco writes, propelled by tech stocks whose businesses are benefiting from stay-at-home orders.
Airlines prepare for a long recovery.
American Airlines and Delta Air Lines are offering buyouts to employees as they prepare for a rebound in demand for air travel that most industry expect will take years to materialize.
“Delta will have to be a smaller airline as we adjust to reduced demand and the need for distancing and safety during travel,” Delta’s chief executive, Ed Bastian, told employees in a memo on Wednesday. “A smaller Delta unfortunately means fewer people will be required.”
Delta is offering two programs — an early retirement option and a general buyout package — to most employees except for pilots, whose union is still in talks with management, Mr. Bastian said. The email did not say how much of its work force the airline was seeking to pare.
The American program, also announced on Wednesday, applies to management and support staff, which the airline hopes to cut by about 30 percent, or about 5,000 workers.
The British low-price airline easyJet said on Thursday that it planned to reduce staff by up to 30 percent and that it expected to fly in the July-September period at nearly 30 percent of the capacity a year earlier. When flights restart, staff and passengers will be required to wear masks and, at least initially, no onboard food service will be offered, the company said.
Going into the crisis, American had 130,000 employees and Delta had 90,000; about 40,000 workers at each have taken voluntary leave or early retirement. Most airline jobs are protected into the fall as a condition of the CARES Act, which provided $50 billion to passenger airlines, half of it earmarked to pay employees through September.
Catch up: Here’s what else is happening.
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Nordstrom, the top-performing department store in the United States, said on Thursday that its net sales fell 40 percent to $2 billion in the first quarter, and that it posted a net loss of $521 million. Digital sales accounted for more than half of its total net sales during the quarter. The retailer closed stores on March 17 and started reopening in early May. It said it now has about 40 percent of its locations open.
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Costco Wholesale said on Thursday that its net sales rose 7.3 percent to $36.5 billion in its quarter ending May 10 and that it posted a net profit of $838 million, as the pandemic prompted customers to stock up on goods. The warehouse chain, which has more than 500 U.S. locations, said its income took a hit from a $283 million pretax charge “from incremental wage and sanitation costs related to Covid-19.”
Reporting was contributed by Ben Casselman, Niraj Chokshi, Daisuke Wakabayashi, Kate Conger, Jack Ewing, Mike Isaac, Maggie Haberman, Kevin McKenna, Mohammed Hadi and Carlos Tejada.
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May 29, 2020 at 09:24PM
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Stocks Drop on Rising U.S.-China Tensions: Live Updates - The New York Times
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