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U.S. Entered a Recession in February: Live Updates U.S. Entered a Recession in February: Live Updates
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The Federal Reserve announced a series of changes to its midsize business loan program that should make it more attractive to borrowers and banks, responding to widespread concern that the program’s terms were too restrictive and would discourage use, potentially hindering the economic recovery.
The Fed said that smaller loans would be eligible for the Main Street program, which will purchase eligible business loans from banks in order to encourage more lending. Besides dropping the minimum loan size to $250,000 from $500,000, the Fed said it would extend the loan period to five years from four, giving borrowers more flexibility in paying the funds back.
The central bank also said that it would take on more risk, holding 95 percent of the loans, while banks will have to retain just a 5 percent slice. Previously, the Fed had said that banks would need to retain 15 percent of loans made to more indebted companies.
“I am confident the changes we are making will improve the ability of the Main Street Lending Program to support employment during this difficult period,” Fed Chair Jerome H. Powell said in a statement.
The Main Street program is a new experiment for the Fed, which has never offered loans directly to a broad array of businesses, but which is now doing so through its emergency lending powers. The Treasury Departments has pledged $75 billion in Congressionally-appropriated funding to absorb any credit losses that happen in the program.
The United States officially entered a recession in February 2020, the committee that calls downturns announced on Monday, marking the beginning of the first economic downturn since the 2007 to 2009 slump.The United States officially entered a recession in February 2020, the committee that calls downturns announced on Monday, marking the beginning of the first economic downturn since the 2007 to 2009 slump.
The National Bureau of Economic Research said that the economy hit its peak in February and had since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion — one that had lasted 128 months.The National Bureau of Economic Research said that the economy hit its peak in February and had since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion — one that had lasted 128 months.
Analysts often refer to recessions as two consecutive quarters of contraction. The National Bureau of Economic Research, a nonprofit group that tracks economic cycles in the United States, formally determines when recessions begin and end based on a range of factors, most importantly gross domestic product and employment. Most economists expect that this recession will be both deep and short, with growth rebounding as state economies reopen and the world figures out how to function amid the coronavirus pandemic.Analysts often refer to recessions as two consecutive quarters of contraction. The National Bureau of Economic Research, a nonprofit group that tracks economic cycles in the United States, formally determines when recessions begin and end based on a range of factors, most importantly gross domestic product and employment. Most economists expect that this recession will be both deep and short, with growth rebounding as state economies reopen and the world figures out how to function amid the coronavirus pandemic.
“The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” the bureau said in a statement.“The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” the bureau said in a statement.
Globally, “this is almost certainly the deepest recession” since at least the Second World War, Jan Hatzius, Goldman Sachs chief economist, wrote in a note on Monday. But it is also probably the shortest: He noted that the bureau’s database showed no other recession that had lasted less than six months in records dating back to the mid-1800s.Globally, “this is almost certainly the deepest recession” since at least the Second World War, Jan Hatzius, Goldman Sachs chief economist, wrote in a note on Monday. But it is also probably the shortest: He noted that the bureau’s database showed no other recession that had lasted less than six months in records dating back to the mid-1800s.
Most economists believe the recovery has already begun. On Friday, after weeks of data depicting enormous economic destruction, the Labor Department reported that the unemployment rate fell and employers added 2.5 million jobs in May. But tens of millions are still out of work, and the unemployment rate, which fell to 13.3 percent from 14.7 percent in April, remains worse than in any previous postwar recession.Most economists believe the recovery has already begun. On Friday, after weeks of data depicting enormous economic destruction, the Labor Department reported that the unemployment rate fell and employers added 2.5 million jobs in May. But tens of millions are still out of work, and the unemployment rate, which fell to 13.3 percent from 14.7 percent in April, remains worse than in any previous postwar recession.
The coronavirus pandemic, which has shuttered businesses and halted travel around the world, will shrink the global economy by 5.2 percent this year, marking the deepest recession since World War II, according to a World Bank forecast released on Monday.The coronavirus pandemic, which has shuttered businesses and halted travel around the world, will shrink the global economy by 5.2 percent this year, marking the deepest recession since World War II, according to a World Bank forecast released on Monday.
The projected contraction comes as economies are gradually reopening after months of lockdowns that were imposed to slow the spread of the virus and reflects the deep hole that countries will be facing as they look to resume economic activity. The forecast is more dire than the 3.3 percent contraction that the International Monetary Fund predicted in April.The projected contraction comes as economies are gradually reopening after months of lockdowns that were imposed to slow the spread of the virus and reflects the deep hole that countries will be facing as they look to resume economic activity. The forecast is more dire than the 3.3 percent contraction that the International Monetary Fund predicted in April.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions.“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions.
According to the report, countries that rely on global trade, tourism, commodity exports, and external financing will face the most severe hit this year. The World Bank expects the United States economy to shrink by 6.1 percent and the Euro Area will shrink by 9.1 percent. However, in China, where the virus originated and where the most draconian containment measures were taken, growth will slow to 1 percent this year.According to the report, countries that rely on global trade, tourism, commodity exports, and external financing will face the most severe hit this year. The World Bank expects the United States economy to shrink by 6.1 percent and the Euro Area will shrink by 9.1 percent. However, in China, where the virus originated and where the most draconian containment measures were taken, growth will slow to 1 percent this year.
The World Bank expects the global economy to rebound next year, with 4.2 percent growth. But, it warns, a more protracted pandemic that leads to a breakdown in financial markets and global trade could darken the outlook.The World Bank expects the global economy to rebound next year, with 4.2 percent growth. But, it warns, a more protracted pandemic that leads to a breakdown in financial markets and global trade could darken the outlook.
U.S. stocks inched higher on Monday, adding to a rally that has put the S&P 500 close to wiping out its losses for 2020.U.S. stocks inched higher on Monday, adding to a rally that has put the S&P 500 close to wiping out its losses for 2020.
Indexes were lifted by shares of the biggest American airlines, which surged on signs that domestic air travel was starting to come back. American Airlines and United Airlines stock was up more than 8 percent, while Delta Air Lines shares were over 6 percent.Indexes were lifted by shares of the biggest American airlines, which surged on signs that domestic air travel was starting to come back. American Airlines and United Airlines stock was up more than 8 percent, while Delta Air Lines shares were over 6 percent.
The S&P 500 was up nearly 1 percent on Monday afternoon. In Europe, stocks in France and Germany were down, while Britain’s FTSE 100 was flat. Stocks have been on an upward trajectory for weeks as investors have responded to signs around the world that the virus was abating. Businesses are slowly returning to life and policymakers are pumping trillions of dollars into the economy and financial markets.The S&P 500 was up nearly 1 percent on Monday afternoon. In Europe, stocks in France and Germany were down, while Britain’s FTSE 100 was flat. Stocks have been on an upward trajectory for weeks as investors have responded to signs around the world that the virus was abating. Businesses are slowly returning to life and policymakers are pumping trillions of dollars into the economy and financial markets.
The stock market has risen nearly 43 percent since its low on March 23, a turnaround that started when the Federal Reserve signaled its willingness to funnel unlimited amounts of liquidity into financial markets.The stock market has risen nearly 43 percent since its low on March 23, a turnaround that started when the Federal Reserve signaled its willingness to funnel unlimited amounts of liquidity into financial markets.
Investors have plenty of reasons to be wary. As economies begin to reopen, many are watching for signs of a second wave of the coronavirus outbreak. It’s also unclear whether governments will be willing or able to keep giving the global economy a push, and how long it will take for the world’s growth engines to come back to full speed.Investors have plenty of reasons to be wary. As economies begin to reopen, many are watching for signs of a second wave of the coronavirus outbreak. It’s also unclear whether governments will be willing or able to keep giving the global economy a push, and how long it will take for the world’s growth engines to come back to full speed.
According to data compiled by The New York Times, new infections are still increasing in more than a third of U.S. states. Public officials are also wary of a spike in new cases as thousands of protesters across the country demonstrate against police brutality after the death of George Floyd.According to data compiled by The New York Times, new infections are still increasing in more than a third of U.S. states. Public officials are also wary of a spike in new cases as thousands of protesters across the country demonstrate against police brutality after the death of George Floyd.
But the focus remains on the positive. For example, Britain’s government is reportedly considering allowing pubs and restaurants to open for outdoor drinking and dining beginning June 22, earlier than expected. On Monday, New York City will begin to reopen some businesses.But the focus remains on the positive. For example, Britain’s government is reportedly considering allowing pubs and restaurants to open for outdoor drinking and dining beginning June 22, earlier than expected. On Monday, New York City will begin to reopen some businesses.
On Friday, stocks got a boost after U.S. jobs figures came in much stronger than expected, showing employers added 2.5 million jobs in May. The S&P 500 rose more than 2 percent, and is now close to recouping all of its losses for 2020 so far.On Friday, stocks got a boost after U.S. jobs figures came in much stronger than expected, showing employers added 2.5 million jobs in May. The S&P 500 rose more than 2 percent, and is now close to recouping all of its losses for 2020 so far.
The pandemic is a disaster for the eurozone economy but also a chance to fight climate change and make better use of information technology, Europe’s top central banker said Monday.The pandemic is a disaster for the eurozone economy but also a chance to fight climate change and make better use of information technology, Europe’s top central banker said Monday.
“The crisis can be an opportunity to modernize our economies to make them fit for the future,” Christine Lagarde, the president of the European Central Bank, told members of the European Parliament.“The crisis can be an opportunity to modernize our economies to make them fit for the future,” Christine Lagarde, the president of the European Central Bank, told members of the European Parliament.
The hundreds of billions of euros that the European Union is spending on crisis relief should be deployed in ways that accelerate the shift to a green economy, Ms. Lagarde said. She did not give specifics, but the term usually refers to technology that is less dependent on fossil fuels and produces less carbon dioxide.The hundreds of billions of euros that the European Union is spending on crisis relief should be deployed in ways that accelerate the shift to a green economy, Ms. Lagarde said. She did not give specifics, but the term usually refers to technology that is less dependent on fossil fuels and produces less carbon dioxide.
Speaking by video conference, Ms. Lagarde also said that the pandemic has helped promote digital technology, an area where Europe often lags the United States.Speaking by video conference, Ms. Lagarde also said that the pandemic has helped promote digital technology, an area where Europe often lags the United States.
“Now is the time to expedite the digital transformation on a more permanent basis and bring the E.U. to the frontier of the digital economy,” she said.“Now is the time to expedite the digital transformation on a more permanent basis and bring the E.U. to the frontier of the digital economy,” she said.
As some of the wealthiest health care companies in the United States received billions of dollars in taxpayer funds to help them cope with lost revenue from the pandemic, they laid off or cut the pay of tens of thousands of doctors, nurses and lower-paid workers, while continuing to pay their top executives millions.As some of the wealthiest health care companies in the United States received billions of dollars in taxpayer funds to help them cope with lost revenue from the pandemic, they laid off or cut the pay of tens of thousands of doctors, nurses and lower-paid workers, while continuing to pay their top executives millions.
The New York Times analyzed tax and securities filings by 60 of the country’s largest hospital chains, which together have received more than $15 billion in emergency funds through the economic stimulus package in the federal CARES Act.The New York Times analyzed tax and securities filings by 60 of the country’s largest hospital chains, which together have received more than $15 billion in emergency funds through the economic stimulus package in the federal CARES Act.
The hospitals — including publicly traded juggernauts like HCA and Tenet Healthcare, elite nonprofits like the Mayo Clinic, and regional chains with thousands of beds — are collectively sitting on tens of billions of dollars of cash reserves that are supposed to help them weather an unanticipated storm. They awarded their five highest-paid officials about $874 million in the most recent year for which they have disclosed their finances.The hospitals — including publicly traded juggernauts like HCA and Tenet Healthcare, elite nonprofits like the Mayo Clinic, and regional chains with thousands of beds — are collectively sitting on tens of billions of dollars of cash reserves that are supposed to help them weather an unanticipated storm. They awarded their five highest-paid officials about $874 million in the most recent year for which they have disclosed their finances.
At least 36 of those hospital chains have laid off, furloughed or reduced the pay of employees as they try to save money during the pandemic.At least 36 of those hospital chains have laid off, furloughed or reduced the pay of employees as they try to save money during the pandemic.
More than a dozen workers at the wealthy hospitals said in interviews that their employers had put the heaviest financial burdens on front-line staff, including low-paid cafeteria workers, janitors and nursing assistants. They said pay cuts and furloughs made it even harder for medical workers to do their jobs, forcing them to treat more patients in less time.More than a dozen workers at the wealthy hospitals said in interviews that their employers had put the heaviest financial burdens on front-line staff, including low-paid cafeteria workers, janitors and nursing assistants. They said pay cuts and furloughs made it even harder for medical workers to do their jobs, forcing them to treat more patients in less time.
In the past week, it has seemed like every major company has publicly condemned racism. All-black squares cover corporate Instagram. Executives have made multimillion-dollar pledges to anti-discrimination efforts and programs to support black businesses.In the past week, it has seemed like every major company has publicly condemned racism. All-black squares cover corporate Instagram. Executives have made multimillion-dollar pledges to anti-discrimination efforts and programs to support black businesses.
Yet many of the same companies expressing solidarity have contributed to systemic inequality, targeted the black community with unhealthy products and services, and failed to hire, promote and fairly compensate black men and women, David Gelles writes.Yet many of the same companies expressing solidarity have contributed to systemic inequality, targeted the black community with unhealthy products and services, and failed to hire, promote and fairly compensate black men and women, David Gelles writes.
“Corporate America has failed black America,” said Darren Walker, the president of the Ford Foundation and a member of the board of Pepsi, and who is black. “Even after a generation of Ivy League educations and extraordinary talented African-Americans going into corporate America, we seem to have hit a wall.”“Corporate America has failed black America,” said Darren Walker, the president of the Ford Foundation and a member of the board of Pepsi, and who is black. “Even after a generation of Ivy League educations and extraordinary talented African-Americans going into corporate America, we seem to have hit a wall.”
With dozens of cities protesting the violent deaths of George Floyd, Ahmaud Arbery, Breonna Taylor and others, a national conversation about racism is underway. For black executives, who have spent their lives excelling at business while overcoming structural discrimination, the killings and ensuing protests have unleashed an outpouring of emotion. Many are speaking candidly about their private fears, as well as their disappointment with the corporate apparatus that made them stars.With dozens of cities protesting the violent deaths of George Floyd, Ahmaud Arbery, Breonna Taylor and others, a national conversation about racism is underway. For black executives, who have spent their lives excelling at business while overcoming structural discrimination, the killings and ensuing protests have unleashed an outpouring of emotion. Many are speaking candidly about their private fears, as well as their disappointment with the corporate apparatus that made them stars.
Robert F. Smith, a private equity billionaire and the richest black man in America, said he had been overwhelmed by conflicting feelings. “I am saddened, I am angry, I am upset and I am determined,” he said. “I run through that wave of emotions every minute.”Robert F. Smith, a private equity billionaire and the richest black man in America, said he had been overwhelmed by conflicting feelings. “I am saddened, I am angry, I am upset and I am determined,” he said. “I run through that wave of emotions every minute.”
Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.
Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.
To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.
If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.
As lockdowns complicated closing deals, the real estate industry lobbied the Treasury Department to get extensions on those dates. But once the relief was granted, deals began to fall apart.
Mortgage rates may be appealingly low, but people shopping for a new home this spring face a challenging market.Mortgage rates may be appealingly low, but people shopping for a new home this spring face a challenging market.
Demand, which was pent up during coronavirus stay-at-home orders, and a dearth of homes for sale are keeping prices high and setting off bidding wars in some areas as states continue to reopen for business. Some buyers may also find it tougher to qualify for mortgages, as lenders require higher credit scores and bigger down payments in response to higher unemployment and economic uncertainty in the pandemic.Demand, which was pent up during coronavirus stay-at-home orders, and a dearth of homes for sale are keeping prices high and setting off bidding wars in some areas as states continue to reopen for business. Some buyers may also find it tougher to qualify for mortgages, as lenders require higher credit scores and bigger down payments in response to higher unemployment and economic uncertainty in the pandemic.
Nationally, the median price for a home, excluding new construction, was about $287,000 in April, up more than 7 percent from a year earlier, the National Association of Realtors reported.Nationally, the median price for a home, excluding new construction, was about $287,000 in April, up more than 7 percent from a year earlier, the National Association of Realtors reported.
Now, with many states lifting restrictions on home tours, the housing market is reawakening. Shoppers are feeling more comfortable visiting properties: About two-thirds of people who attended an open house within the past year said they would attend an open house now “without hesitation,” a separate survey from the Realtors association found.Now, with many states lifting restrictions on home tours, the housing market is reawakening. Shoppers are feeling more comfortable visiting properties: About two-thirds of people who attended an open house within the past year said they would attend an open house now “without hesitation,” a separate survey from the Realtors association found.
But some sellers remain cautious. They want to show homes by appointment only, and they want offers from serious buyers who have been preapproved for financing, said Lawrence Yun, chief economist with the association. “They don’t want casual shoppers,” he said.But some sellers remain cautious. They want to show homes by appointment only, and they want offers from serious buyers who have been preapproved for financing, said Lawrence Yun, chief economist with the association. “They don’t want casual shoppers,” he said.
Dunkin’ Donuts said on Monday that it planned to hire up to 25,000 new workers at its franchises to deal with an influx of customers as states start to reopen. Dunkin’, which has 8,500 restaurants in the United States, said about 90 percent of its locations were now open.Dunkin’ Donuts said on Monday that it planned to hire up to 25,000 new workers at its franchises to deal with an influx of customers as states start to reopen. Dunkin’, which has 8,500 restaurants in the United States, said about 90 percent of its locations were now open.
BP said Monday that it planned to eliminate 10,000 jobs — nearly 15 percent of the company’s total work force — with most cuts coming by the end of the year. The company’s chief executive, Bernard Looney, said in a companywide email that the cuts were needed to stem losses arising from the coronavirus pandemic as well as to create a leaner company to achieve his ambitions to sharply reduce BP’s carbon dioxide emissions.BP said Monday that it planned to eliminate 10,000 jobs — nearly 15 percent of the company’s total work force — with most cuts coming by the end of the year. The company’s chief executive, Bernard Looney, said in a companywide email that the cuts were needed to stem losses arising from the coronavirus pandemic as well as to create a leaner company to achieve his ambitions to sharply reduce BP’s carbon dioxide emissions.
Reporting was contributed by Jessica Silver-Greenberg, Jesse Drucker, David Enrich, Patricia Cohen, Stanley Reed, Ben Casselman, Jason Karaian, Jack Ewing, David Gelles, Ann Carrns, Matt Phillips, Paul Sullivan, Carlos Tejada, Katie Robertson and Kevin Granville. Reporting was contributed by Jeanna Smialek, Jessica Silver-Greenberg, Jesse Drucker, David Enrich, Patricia Cohen, Stanley Reed, Ben Casselman, Jason Karaian, Jack Ewing, David Gelles, Ann Carrns, Matt Phillips, Paul Sullivan, Carlos Tejada, Katie Robertson and Kevin Granville.