Mnuchin tells borrowers who took small loans that they are in the clear.
The Treasury Department eased its call for all recipients of emergency small business loans to consider returning the money if they had other options and said on Wednesday that borrowers who took loans for less than $2 million would be considered to have applied in good faith.
The updated guidance is the latest shift for the Paycheck Protection Program. It comes after Treasury Secretary Steven Mnuchin warned last month that businesses that had other access to capital and took small business loans could face audits and criminal prosecution. Borrowers were given until May 14 to review their loans, which are forgivable, and repay the money if they did not truly need it.
But on Wednesday, Treasury said that borrowers who took smaller loans were in the clear.
The agency decided that smaller loans likely went to businesses that did not have other access to capital and that the money would allow them to keep workers on the payroll. Scaling back its effort to claw back money will also allow the Small Business Administration to focus its auditing efforts on bigger companies that took larger loans.
Any company that took a loan larger than $2 million will face a review by the S.B.A. when seeking to have the loan forgiven.
According to an analysis of daily surveys conducted by Civis Analytics, while women, workers earning more than $100,000 and part-time workers are continuing to experience growing joblessness or no improvement, the rate of change is relatively brighter for men, full-time employees and people earning less than $50,000.
Other researchers tracking employment have also noted a slowdown in employment losses. For example, the Current Population Survey implies employment among working-age Americans fell 13.8 percent between early March and early April, while our tracker shows employment among this population fell 13.2 percent by mid-to-late April.
Because these results are cumulative, a slowdown means that fewer people are joining the ranks of the unemployed but also that few of the workers who became unemployed in March and April are returning to work.
Stocks on Wall Street slid on Wednesday, their second sharp drop in two days, after the Federal Reserve chair signaled a prolonged recession may be ahead unless lawmakers provide further fiscal support.
The Fed chair, Jerome H. Powell, speaking via webcast, said the central bank’s efforts to stem the damage to the U.S. economy wouldn’t be enough to address a downturn “without modern precedent.” His comments came as Congress began to hash out the future of the government’s coronavirus response. On Tuesday, House Democrats unveiled a $3 trillion relief measure that Republicans dismissed as exorbitantly priced and overreaching.
The S&P 500 was down about 2 percent in afternoon trading. Global markets were broadly lower, with European indexes down 1 to 2 percent.
The trading dip came after a downbeat day on Wall Street on Tuesday, when the S&P 500 fell 2 percent after officials warned that fully reopening the country’s economy could be a long and protracted process. The gloomy news continued as the British government reported on Wednesday that its economy fell 2 percent in the first quarter, and 5.8 percent in March alone. Commerzbank, Germany’s second-largest lender, said it was anticipating a large number of customers would be unable to repay loans.
J.C. Penney, the department-store chain that was founded in 1902, might file for bankruptcy as soon as Friday after skipping two interest payments on its debt in the past month, according to two people familiar with the matter.
The company is in talks to secure about $450 million in debtor-in-possession financing, which would allow it to keep operating the business, according to the people, who spoke on condition of anonymity because discussions were confidential. The company declined to comment.
The people said that the filing date could change, and that the amount of financing was still being negotiated. It would follow last week’s bankruptcy filing from the Neiman Marcus Group, as department stores struggle to navigate their businesses through the coronavirus pandemic. J. Crew also filed for bankruptcy last week. A filing from J.C. Penney, however, would be the biggest bankruptcy yet during the pandemic based on its number of locations and workers. The retailer, which is based in Plano, Texas, has 846 stores in the United States and Puerto Rico and 90,000 employees.
J.C. Penney skipped a $12 million interest payment due last month, saying at the time that it was a “strategic decision” in order to take advantage of a 30-day grace period before it was considered in default. The deadline for that would be Friday. The chain also skipped a $17 million interest payment due on May 7, with a grace period of five business days. The deadline to make that payment also appears to be Friday.
Southwest Airlines began a monthlong sale on Tuesday for flights between May 26 and Aug. 31, in an effort to encourage summer travel. One-way tickets range from $49 to $99, with the airline offering double frequent flier points.
Devastated carriers are struggling to fill planes as stay-at-home orders keep most people from traveling. The Transportation Security Administration said that it had conducted checks on 163,205 passengers on Tuesday, compared with 2,191,387 passengers on the same day in 2019. Most planes have been flying with an average of 23 passengers.
“This promotion is designed to see if Southwest can stimulate demand among personal or leisure travelers,” said Robert Mann, an airline industry analyst and former executive. “They’re trolling for adventurous souls to go out and sample the travel environment.”
Southwest, the largest domestic carrier, typically has two popular sales each year — one in June and another in October, but neither sale includes summer trips. The current sale fares don’t apply to flights on popular travel days like Friday and Sunday or over the Memorial Day and Labor Day holiday weekends.
The deals include a one-way nonstop flight between Los Angeles and Salt Lake City for $49, and a $99 one-way fare between Dallas and New York.
Federal Reserve Chair Jerome H. Powell delivered a stark warning on Wednesday that the United States is facing an economic hit “without modern precedent,” one that could permanently damage the economy if Congress does not provide sufficient policy support to prevent a wave of bankruptcies and prolonged joblessness.
Mr. Powell’s blunt diagnosis was the clearest signal yet that the trillions of dollars in support that policymakers have already funneled into the economy may not be enough to prevent lasting damage from a virus that has already shuttered businesses and thrown more than 20 million people out of work.
It also serves as a rejoinder to lawmakers and the Trump administration, whose discussions of additional rescue measures have run aground as Democrats unveil a dramatic wish-list and Republicans shy away from federal spending, betting instead that “reopening” the economy will quickly and dramatically lift growth.
“The recovery may take some time to gather momentum,” Mr. Powell said at a virtual event put on by the Peterson Institute for International Economics, where he lauded Congress’s early response packages and suggested that an uncertain outlook may call for more. “Additional fiscal support could be costly, but worth it if it helps avoid long-term economic damage and leaves us with a stronger recovery.”
Members of Congress remain divided along partisan lines over how aggressively to pursue additional relief spending, with Democrats proposing sweeping new programs and Republicans voicing concerns over the swelling federal budget deficit.
Mr. Powell and his central bank colleagues are stepping into their role as economic experts and informal advisers to prod fiscal policymakers into action. They say the recovery remains “highly uncertain,” and if the policy response proves inadequate, the consequences could be long-lasting and painful.
“While the economic response has been both timely and appropriately large, it may not be the final chapter, given that the path ahead is both highly uncertain and subject to significant downside risks,” Mr. Powell said Wednesday.
He pointed out that the burden often falls on the most disadvantaged, explaining that a Fed survey set for release on Thursday will show that almost 40 percent of people who were working in February and were members of households making less than $40,000 a year had lost their jobs in March.,
A motorcade of hundreds of buses drove around Washington, D.C., on Wednesday, part of a “rolling rally” calling for federal assistance as the industry struggles during the coronavirus pandemic. The American Bus Association and United Motorcoach Association are asking lawmakers for $15 billion in grants and loans.
“In the last stimulus bill, every form of passenger transportation was funded: airlines, Amtrak and transit, and the only form that wasn’t funded was private bus operators,” said Peter J. Pantuso, president of the American Bus Association. “The industry provides transport for 600 million people a year — as many as the airplanes do — and we were completely left out by Congress.”
More than 90 percent of the industry’s work force was laid off or furloughed because of the impact of stay-at-home orders on travel.
Doug Anderson, who owns Anderson Coach and Travel, a family business that operates 40 motor coaches, said he had to furlough 125 employees, nearly half of his work force, in March and was not optimistic about business in the coming months.
“This is prime time for the bus industry right now: March 15 to end of June; we go gangbusters and it allows us to survive the balance of the year,” Mr. Anderson said. “I’ve talked to people in the industry, and they’re expecting that maybe 50 percent of the bus companies may go out of business and may go into bankruptcy.”
The Fed is not considering negative interest rates.
Fed Chair Jerome H. Powell said on Wednesday that the central bank was not considering cutting interest rates below zero, adding that negative rates were not necessary given the Fed’s other tools.
Mr. Powell said the Fed would instead rely on the same tools it employed during the last recession — forward guidance about the path of interest rates and asset purchases.
“We have evidence that it works and that’s what we will be using,” Mr. Powell said, adding that the evidence about whether negative rates are effective is “very mixed,” Jeanna Smialek reports.
The Fed has already slashed rates to near zero and indicated that it will not raise them anytime soon. But investors have been speculating about negative rates over the past week after futures contracts began to imply that the Fed’s main policy rate would dip below zero around the end of 2020. Central bank officials have consistently pushed back on that idea.
Still, some vocal champions of negative rates have continued to call on the Fed to embrace them, including President Trump, who has repeatedly urged Mr. Powell to take rates below zero.
“As long as other countries are receiving the benefits of Negative Rates, the USA should also accept the “GIFT.” Big numbers!” Mr. Trump said in a tweet on Tuesday.
Normally, strict rules prevent employees from changing health insurance plans in the middle of a year. But the I.R.S. is giving employers a way to let workers make changes without waiting for the usual enrollment period.
Under the new guidance, employers can let their workers drop out of their health insurance if they have another option, or sign up if they failed to earlier in the year. Workers could also be allowed to add more family members to their plan, or switch from one workplace plan to another.
Catch up: Here’s what else is happening.
A United Nations report Wednesday predicted that the global economy would contract by 3.2 percent in 2020 because of the pandemic. A small increase had been expected before the crisis started. The U.N. further expects 34.3 million people to fall into extreme poverty this year, with more than half of the increase happening in Africa.
Condé Nast plans to lay off nearly 100 employees, the company’s chief executive, Roger J. Lynch, announced in a memo to staff members on Wednesday. The publisher of Vogue, Vanity Fair and The New Yorker has sought to cut costs across the company as luxury sales tumble during the coronavirus pandemic. The staff reductions follow pay cuts for top executives, including Anna Wintour, the company’s artistic director, which the company announced last month. Another 100 people will be furloughed for a few months and other employees will see reduced hours.
Britain’s economy contracted by 2 percent in the first three months of 2020 compared with the previous quarter, the government reported on Wednesday, the steepest quarterly drop since the financial crisis in 2008. In March alone, the economy shrank by 5.8 percent from February, the largest drop since the Office of National Statistics began keeping monthly tallies in 1997.
Commerzbank, Germany’s second-largest lender after Deutsche Bank, fell into the red during the first three months of 2020 as it faced an increase in problem loans caused by the pandemic. The bank reported a loss of 295 million euros, or $320 million, in the quarter, compared with a profit of €122 million a year earlier.
Reporting was contributed by Jeanna Smialek, Sapna Maheshwari, Alan Rappeport, Michael J. de la Merced, Stanley Reed, Ernie Tedeschi, Quoctrung Bui, Sophia June, Tariro Mzezewa, Jack Ewing, Carlos Tejada, Mohammed Hadi, Vikas Bajaj, Niraj Chokshi, Edmund Lee, Neal E. Boudette, Jane Margolies, Katie Robertson and Gregory Schmidt.