The grim economic toll from the coronavirus pandemic jumped on Thursday when the government reported another 4.4 million people filed new unemployment claims last week, bringing the five-week total to more than 26 million.
The report is likely to intensify the debate over when to lift restrictions that have helped fight the virus’s spread but placed the economy in a stranglehold, reports Patricia Cohen of The Times.
“At all levels, it’s eye-watering numbers,” said Torsten Slok, chief international economist at Deutsche Bank Securities. But as large as the figures have been, they do not capture the full extent of layoffs — or the cascade of economic troubles that they have set in motion.
Problems responding to the waves of jobless claims now will affect the shape of the recovery when the pandemic eases, Mr. Slok said. Laid-off workers need money quickly to pay for rent, groceries and credit card bills. If they cannot do so, he said, the hole that the larger economy has fallen into “gets deeper and deeper, and more difficult to crawl out of.”
The Trump administration warned big companies on Thursday that they must prove they were in need of emergency small business loans to keep their operations running and had no other option to get financing or repay the funds.
The new guidance from the Treasury Department came amid an uproar over bigger companies taking loans through the Paycheck Protection Program while smaller businesses have been left out.
The Treasury Department updated its “Frequently Asked Questions” page about the P.P.P. to urge “large companies with adequate sources of liquidity” to think twice before applying for loans backed by the Small Business Administration.
The S.B.A.’s $349 billion fund to support these loans ran out last week and is expected to be replenished with another $310 billion this week. Backlash over the program has been escalating after some big restaurant chains, including Shake Shack, took out multiple $10 million loans for their subsidiaries.
The Treasury notes that, by law, the small-business loans are intended to be taken in cases when the money is “necessary to support the ongoing operations.” It said that borrowers needed to certify this in “good faith” and to take into account their ability to get access to other sources of money.
Treasury Secretary Steven Mnuchin warned businesses that they would be investigated and could face penalties if they improperly accept small-business money. He has urged such businesses to return those funds. The guidance released on Thursday said borrowers that repaid loans in full by May 7, 2020, would be deemed by the S.B.A. to have made their certifications in good faith, leaving them in good standing with the government.
The rally in the stock market carried on to a second day on Thursday, with the rebounding shares of energy companies leading the gains as oil prices rose.
The gains came even as millions more workers claimed unemployment benefits in the United States and data from Europe highlighted the heavy toll of economic shutdowns to prevent the spread of coronavirus.
Investors have been shrugging off such data in recent weeks, as the shock of the economic devastation caused by the coronavirus pandemic fades and they begin to expect an eventual recovery. Governments have started to discuss measures to return to normal.
Businesses in Europe and the United States have begun to detail their plans to reopen businesses. Delta Air Lines, American Airlines, United Airlines and Southwest Airlines have already aggressively advertised the precautions they are taking to lure back passengers, from fogging cabins with disinfectant to restricting food service to blocking out middle seats.
Volkswagen said on Wednesday that it had called employees back to work at its plant in Chattanooga, Tenn., on May 3, making the company one of the first major automakers to resume manufacturing since much of the industry shut down amid the pandemic.
The market rally on Thursday was led by shares of energy companies, as crude oil continued its rebound from a staggering plunge earlier in the week. Futures for West Texas Intermediate crude, the American benchmark, which had fallen into negative territory earlier in the week, rose nearly 30 percent.
Senator Mitch McConnell, the majority leader, shot down the possibility of additional federal aid for state governments, suggesting that they should instead be allowed to declare bankruptcy. His comments could leave the Federal Reserve at the center of helping strapped state and local leaders.
“This whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” Mr. McConnell, a Republican from Kentucky, said in an interview with a conservative radio host on Wednesday. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”
States cannot declare bankruptcy to restructure their debt, though local governments sometimes do. That means that when cash shortages crop up — like now, as coronavirus quarantines delay income tax filings and tank other sources of income, like casino revenue, just as costs skyrocket — they must tax more, slash spending or issue additional debt.
If the federal government is not willing to come through with the cash that states need to cover expenses, they will probably turn to the third option, which is where the Fed will come in. The central bank announced this month that it would begin buying short-term debt from states and some large cities and counties.
The CARES Act did provide some funding to the state and local governments in the form of a $150 billion relief fund. That was insufficient to plug the hole coronavirus has shot through budgets, though, and governments could again be forced to lay off teachers and other public workers. A similar scenario played out in the wake of the 2008 financial crisis, hampering the economic recovery.
It’s a moment that might otherwise give rise to demonstrations in the streets. Instead, people are generally shut in by government order, or simply fear getting within six feet of another human. There have been hashtags (#CancelRent) and email blasts and grainy video rallies, but those methods are more easily ignored by bankers, landlords and elected officials.
So activists have turned to other tactics, like painting slogans on cars and putting recorded chants on the internet.
“Direct action is so much about people putting their bodies on the line,” said John Washington, an organizer in Buffalo with People’s Action, a national network of local advocacy organizations. “In a way, Covid has stolen that.”
After years of working almost exclusively on long-term projects and pushing day-to-day management to his deputies, Jeff Bezos, 56, has turned back to the here-and-now problems facing Amazon, the company he founded and grew into a global behemoth, writes The Times’s Karen Weise.
As the giant retailer grapples with a surge of demand, labor unrest and supply chain challenges brought on by the coronavirus, he is holding daily calls to help make decisions about inventory and testing, as well as how and when — down to the minute — Amazon responds to public criticism. He has talked to government officials. And in April, for the first time in years, he made a publicized visit to one of Amazon’s warehouses.
“For now, my own time and thinking continues to be focused on Covid-19 and how Amazon can help while we’re in the middle of it,” Mr. Bezos wrote to shareholders last week.
But Amazon is one of the few companies that have benefited financially from the crisis. Because of all the customer demand, its shares have hit record highs. That has made Mr. Bezos, the wealthiest man in the world, $25 billion richer since early March.
Catch up: Here’s what else is happening.
Target reported Thursday that sales since February were up 7 percent, with in-store sales falling slightly and online purchases jumping 100 percent. The retailer also extended its $2 an hour emergency pay rate for workers through May 30.
The German carmaker Daimler said that its operating profit plunged 78 percent in the first three months of 2020 as the coronavirus outbreak devastated sales. Daimler felt the effects of the virus early in the year because, like other German carmakers, it gets much of its sales from China, where the pandemic began. Daimler’s finance unit, which provides car loans, set aside 400 million euros, about $430 million, to cover possible credit losses.
Equinor, the Norwegian energy giant, said it would cut its dividend for the first quarter to 9 cents a share, two-thirds below the amount paid in the previous quarter. The move, which the company said would shore up financial strength after the steep drop in oil prices, may rattle investors, who have been attracted to the high-dividend yields offered by major oil companies.
The Swiss bank Credit Suisse said that net profit rose 75 percent in the first quarter as volatile stock and bond markets generated trading fees. But, following a trend among banks, Credit Suisse nearly quadrupled the money it set aside to cover customers who might not be able to repay their loans.
Alcoa said on Wednesday that it would stop production at its Intalco smelter in Ferndale, Wash., and lay off employees because of declining demand for its products. The aluminum maker had already cut production at that plant and others, and it said that about 30 percent of its global smelting capacity was now idle.
Reporting was contributed by Patricia Cohen, Ben Dooley, Jeanna Smialek, Conor Dougherty, John Eligon, Karen Weise, Su-Hyun Lee, Vindu Goel, Niraj Chokshi, Jack Ewing, Carlos Tejada, Neal E. Boudette, Stanley Reed, Daniel Victor and Kevin Granville.