The Federal Reserve left interest rates near zero on Wednesday and pledged to keep supporting the United States economy as the pandemic continues to depress economic growth and sideline millions of workers.
“The path of the economy will depend significantly on the course of the virus,” the central bank said in its post-meeting statement. “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.”
The Fed said it would continue to keep rates near-zero until the central bank “is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Jerome H. Powell, the Fed chair, said at a news conference following the meeting that “the pace of recovery looks like it has slowed” since the virus began to spike again in June.
“Recent labor market indicators point to a slowing in job growth, particularly among smaller businesses,” he said, and consumer surveys “look like they may be softening again now.”
He also predicted a long slog ahead for workers in certain sectors of the economy, even once the economy reopens more fully, particularly those that involve “lots of people getting together in close proximity” like restaurants, bars, hotels and other places.
“There won’t be enough jobs for them,” he said. “There will be a need both for more support from us and for more fiscal policy.”
The Fed has put in place a series of measures since March to help cushion the economic fallout as businesses closed or reduced capacity and shoppers stayed home to control the spread of coronavirus. It has rolled out nine emergency lending programs, which are meant to keep credit flowing to businesses and state and local governments. It is purchasing government-backed bonds to keep markets functioning normally, and it has slashed interest rates to rock bottom to entice borrowing and spending.
Policymakers have made it clear that they are unlikely to dial back that support anytime soon. Economists expect them to eventually tie their guidance around how long rates will stay low to some metric, whether that’s a date, a specific unemployment rate, or an inflation target.
On Tuesday, officials announced that they would extend their nine emergency lending programs through the end of 2020. Seven of the programs were initially supposed to end in late September, but as coronavirus cases have continued to rise, it has become clear that the market backstops could still be needed in the months to come.
The Fed said on Wednesday that it would also extend its programs meant to keep dollar funding readily available to foreign central banks through March 2021.
The unemployment rate, while falling, remains historically high at 11.1 percent. Initial jobless claims ticked up last week after months of gradual improvement, stoking concerns that the economy may be backsliding. Data suggest that many businesses are beginning to close permanently.
U.S. employment data has been relentlessly grim in recent weeks, showing rising layoffs and falling job postings. But Wednesday brought a glimmer of optimism: Data from the Census Bureau showed an increase in jobs last week, after four straight weekly declines.
The data, from the bureau’s experimental Household Pulse Survey, showed that the number of employed people rose by about 1.9 million last week, partly reversing a decline of more than four million the week before.
Overall employment is still down by nearly five million since mid-June. Just over 52 percent of American adults were employed last week, according the survey, down from 54 percent last month.
The Census Bureau started the survey as an effort to track the pandemic’s economic impact in a more timely manner than is possible using standard monthly or quarterly indicators. The survey has drawn more attention since correctly signaling the big increase in employment in the jobs report for June.
Still, economists caution against reading too much into week-to-week changes in such a new data source. It is possible, for example, that last week’s report overstated the extent of job losses, and that the latest report is best interpreted as a return to the previous trend of gradual declines.
The stock of Eastman Kodak Company is nearly fifteen times higher on Wednesday than it was at the start of the week — and the surge has nothing to do with photography.
The Trump administration said on Tuesday that it would lend $765 million to the company to produce critical pharmaceutical components to decrease America’s reliance on foreign nations for medicines.
“If we have learned anything from the global pandemic, it is that Americans are dangerously dependent on foreign supply chains for their essential medicines,” said Peter Navarro, a White House adviser on trade and the economy, said in a statement.
Kodak’s stock price tripled on Tuesday after the announcement and then climbed more than six times higher at one point on Wednesday. The company said the project, to be established in the Eastman Business Park in Rochester, N.Y., will support 360 direct jobs.
The firm, founded in 1888, employed more than 60,000 people in Rochester at its peak in the early 1980s. It struggled to keep up with the rise of digital photography, and filed for bankruptcy in 2012. In an attempt to remain relevant as its fortunes waned, in 2018 Kodak launched a “photo-centric cryptocurrency.” Its beaten-down stock got a short-lived bump from that project, but nothing like what it’s seen over the past 24 hours.
U.S. stocks rose on Wednesday as the U.S. Federal Reserve announced it would leave interest rates near-zero and continue to support the U.S. economy amid the continuing coronavirus pandemic.
The S&P 500 was up about 1 percent. European markets were mixed, while Asian markets had a mostly positive day.
Investors had expected the Fed to leave rates unchanged and were looking for the further indication that policymakers would continue to use the central bank’s power to cushion the economy as millions of Americans remain unemployed and economic growth is depressed.
On Wednesday, policymakers said they would extend programs meant to keep dollar funding available to foreign central banks. That announcement comes after officials announced on Tuesday that they would extend their nine emergency lending programs through the end of 2020.
Among the European companies reporting quarterly earnings on Wednesday were Deutsche Bank (down 1.9 percent despite a surge in trading revenue), Barclays (down 4.5 percent after a net loss that it attributed to the pandemic) and the luxury group Kering, the parent company of Gucci (which gained 4 percent after a smaller-than-expected drop in sales).
In Hong Kong, after the markets closed, the government reported that the territory’s economy contracted 9 percent in the second quarter from a year ago, the fourth consecutive quarter of declines.
Jeff Bezos of Amazon, Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google are testifying before Congress on Wednesday, making their case about why their companies actually are not that powerful.
Follow our live coverage here:
Gap Inc., the retailer that oversees its namesake chain, Old Navy and Banana Republic, has been facing a wave of lawsuits from major mall owners and smaller landlords after it stopped paying tens of millions of dollars in rent for its roughly 2,800 stores in North America. Now, the company is filing its own lawsuits and counterclaims, saying that it is actually owed money for rent it paid in March and that leases must be renegotiated or terminated based on unexpected closures and major shifts in the shopping landscape.
The disputes highlight the growing tension between big retail chains and landlords because of the pandemic. Gap is a huge tenant, saying in a filing last month that it suspended rent payments in April for stores that had temporarily closed, a roughly $115 million cost per month in North America.
Simon Property Group, the biggest mall operator in the U.S., sued Gap last month, saying the company owed it about $66 million in unpaid rent for April, May and June, while the upscale Brookfield Properties sued Gap in Texas, saying that the company owed more than $2 million in unpaid rent in that state. Numerous other smaller properties have also filed lawsuits against Gap and its chains for unpaid rent.
Gap said in a complaint to Simon Property last week that “shopping for apparel in physical stores will look nothing like what was contemplated by the leases when they were executed.” The company added that if the parties knew when entering the leases that Gap “would not be permitted to operate a retail store for the entire duration of the leases, or to do so only with restricted limits on the occupancy of the premises, the parties would not have agreed on the same amount of rent and other terms.”
Gap, based in San Francisco, declined to comment but confirmed it has filed multiple counterclaims and five of its own lawsuits against landlords, including Brookfield. Simon Property declined to comment.
Lindsay Kahn, a spokeswoman for Brookfield, said in an emailed statement that while the company could not speak to the specifics of the ongoing litigation, “it should be clear from the filings that The Gap Inc. has taken inappropriate positions at a time when we should be working together.”
“Brookfield has worked hard to reopen its shopping centers safely and consistent with guidance from local authorities, which is important for the many businesses and jobs that depend on commercial activity at our properties,” she wrote. “The filing is a matter of contract law and Brookfield intends to hold Gap accountable.”
The Treasury Department and the United States Postal Service said on Wednesday that they had reached an agreement on terms that would allow the Postal Service to access $10 billion in loan money that was approved by Congress in the March economic relief package.
The terms of the agreement were not disclosed. Treasury said in a statement that the Postal Service was authorized to borrow the money if it determined that it could no longer fund its operating expenses.
The Postal Service had warned earlier this year that it could run out of money by September without financial assistance. Democrats wanted to provide it with a cash infusion, but Treasury Secretary Steven Mnuchin insisted that the money be allocated as a loan that would only be distributed if the Postal Service implemented reforms such as price increases for shipping.
“While the USPS is able to fund its operating expenses without additional borrowing at this time, we are pleased to have reached an agreement on the material terms and conditions of a loan, should the need arise,” Mr. Mnuchin said in a statement.
The new Postmaster General, Louis DeJoy, started imposing cost cutting measures earlier this month that critics warned would slow mail delivery. The fate of the Postal Service is an especially fraught issue this year, as millions of American could be relying on its services to vote by mail in the November presidential election.
Mr. DeJoy, a long time Republican donor and financial backer of President Trump who was given the job in May, said in a statement that access to the loan would delay “an approaching liquidity crisis” but that more cost cutting was in store.
“The Postal Service, however, remains on an unsustainable path and we will continue to focus on improving operational efficiency and pursuing other reforms in order to put the Postal Service on a trajectory for long-term financial stability,” Mr. DeJoy said.
Deutsche Bank, Germany’s largest lender, reported a small but better-than-expected profit Wednesday as it cashed in on market turbulence caused by the pandemic.
The bank said its net profit during the second quarter of the year was 61 million euros, or $72 million, compared to a loss of more than 3 billion euros a year earlier. Like other big banks, Deutsche Bank recorded a surge in trading fees as clients frantically adjusted their portfolios in response to the pandemic.
Deutsche Bank, based in Frankfurt, has been paring back its investment banking but remains a force in currency trading and bond markets. Sales in the unit that handles those activities surged 40 percent to more than 2 billion euros, helping to offset a nearly fivefold increase in the amount that Deutsche Bank had to set aside to cover problem loans.
Among other banks issuing earnings reports, Barclays reported a smaller-than-expected profit and said it would increase its reserve for bad loans by 1.6 billion pounds ($2.1 billion). And Santander fell to the first loss in its 163-year history after a big write-down on its assets.
Boeing said on Wednesday that it was slowing plane production and might cut jobs as it reels from the grounding of the 737 Max and a devastating aviation slowdown brought on by the coronavirus pandemic. The company also reported a $2.4 billion loss in the second quarter.
“These past few months have been unlike anything we’ve seen,” Boeing’s president and chief executive, Dave Calhoun, said in a message to staff. “The pandemic’s effect on our communities and industry is ongoing. And the challenges we face as a company are still unfolding.”
Boeing’s revenues plunged 25 percent, to $11.8 billion, in the quarter compared with last year, a loss driven by its struggling commercial business and partially offset by its government, defense and space programs. The company has previously announced plans to slash about 16,000 jobs worldwide, or about a tenth of its work force, and warned on Wednesday that more cuts could come. Boeing’s share price was down nearly 4 percent around noon.
The quarterly update came a day after a global airline industry group, the International Air Transport Association, downgraded its forecast for when air travel will return to normal, blaming poor virus containment in the United States and other developing economies, a slow rebound for business travel, and low consumer confidence. Now, passenger traffic is not expected to return to last year’s levels until 2024, the group said. Boeing said it believes the industry could reach that milestone somewhat sooner.
The industry’s middling recovery is being led by short, domestic trips typically on single-aisle, planes like the 737 Max. Longer international flights aboard wide-body planes, like Boeing’s 787 or 777 lines, are expected to lag as much as a year behind.
The plane maker said it would make fewer of the 777 and 787 planes for now and pushed back production plans for the 737 family of planes, including the troubled 737 Max jet, which has been grounded since March 2019 after two fatal crashes. Boeing now expects to reach a production rate of 31 737s per month by the beginning of 2022. That is about half the rate Boeing had targeted before the Max was grounded and represents a delay from the company’s previous plan to reach that rate sometime next year.
The Max moved closer to flying passengers again this month, after the Federal Aviation Administration concluded a series of test flights and said it was close to formally proposing changes that would address its safety concerns. In a call with analysts, Boeing’s chief financial officer, Greg Smith, said that the company expects to start delivering the jet to customers by the end of the year and expects to distribute most of the approximately 450 Max jets in storage by 2022.
In the note to staff, Mr. Calhoun also confirmed that Boeing would end production of the famed 747 in 2022. Once nicknamed “Queen of the Skies,” the plane was the world’s first jumbo jet and celebrated the 50th anniversary of its first flight last year.
General Motors suffered a loss in the second quarter as the coronavirus pandemic took a heavy toll on its operations in most regions of the world.
The automaker lost $758 million as its second-quarter revenue was more than halved, to $16.8 billion compared with $36.1 billion in the same period a year ago. The company used $9 billion in cash during the quarter but still has $28.3 billon on hand.
“Covid-19 has affected every aspect of our business,” the company’s chief executive, Mary T. Barra, said in a conference call.
Ms. Barra added that G.M. had reduced costs and had ample cash to spur sales as the economy improves. “We have put the company in position for continued recovery in the third and fourth quarters and beyond,” she said.
In North America, which generates the bulk of G.M.’s profit, new vehicle deliveries fell 36 percent to 565,000 cars and light trucks. The pandemic forced the company to halt production in North America for two months, and depressed purchases of new vehicles by both consumers and fleet customers like rental-car companies.
Its smaller South American unit suffered an even harsher blow, as deliveries fell 65 percent in the quarter, to 57,000 vehicles. In China, where the virus outbreak has receded faster than in the United States, deliveries fell 5 percent.
G.M. stock was down about 2 percent in early afternoon trading.
Ms. Barra also said companies like G.M. have an “increasing responsibility to take a stand against racial injustice.” The automaker recently formed an inclusion board, chaired by Ms. Barra, to increase diversity in the company. “General Motors has a strong track record of diversity by many objective standards, but we must do more and we will,” she said.
On Thursday morning, when the Commerce Department announces the nation’s second-quarter economic output, the data is likely to reflect the biggest decline in the 70-plus years that such statistics have been compiled. But you may see two widely different numbers.
Forecasters expect the report to show that gross domestic product — the broadest measure of goods and services produced — fell at an annual rate of about 35 percent. That doesn’t mean, however, that the economy shrank by more than a third in a mere three months.
The United States has traditionally reported the figure as an annual rate — that is, how much the economy would grow or shrink if the change were sustained for a full year. But when annual rates are applied to short-term changes, the results can be misleading.
For that reason, The New York Times plans to emphasize the nonannualized percentage change in its coverage. And on that basis, if the forecasters are on target, the G.D.P. should be about 10 percent lower in the second quarter than in the first.
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