Manufacturers shutter plants, travel halted as virus spreads
The number of confirmed cases of the new coronavirus worldwide surpassed 200,000 for the first time Wednesday and the damage being seeded in the global economy is growing more clear by the day. Furloughs and job cuts, from dog walkers to oilfield workers, have begun. Governments around the world are pushing drastic countermeasures to help workers, particularly those who live paycheck to paycheck.
Following are developments Wednesday affecting various levels of the economy, businesses and workers:
MARKETS ROIL: The S&P 500 sank 5 % on Wall Street Wednesday, as fears of a prolonged coronavirus-induced recession take hold. The Dow Jones Industrial Average erased virtually all its gains since President Donald Trump’s 2017 inauguration. The CBOE Volatility Index, Wall Street’s fear gauge, appears to have broken from its tether.
European stock indexes lost more than 4% following broad losses in Asia.
CRISIS TO COME: The U.N.’s International Labor Organization estimates that fallout from the virus outbreak could cause nearly 25 million job losses worldwide and drain up to $3.4 trillion worth of income by the end of this year. The Geneva-based agency said “an internationally coordinated policy response” could help mitigate such losses through worker protections, fiscal stimulus, and support for jobs and wages. Social media is full of the posts of people who were just laid off. President Donald Trump’s former chief economist, Kevin Hassett, warned this week that U.S. job losses could reach 1 million next month.
Government’s are responding. The Treasury Department wants to start issuing direct payments to Americans by early next month as the centerpiece of a $1 trillion plan to stabilize the economy. In a memorandum issued Wednesday, Treasury is calling for two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The Treasury plan, which requires approval by Congress, also recommends $50 billion to stabilize the airlines, $150 billion to issue loan guarantees to other struggling sectors, and $300 billion to for small businesses. The plan appears to anticipate that many of the loans would not be repaid.
Senate Wednesday passed a second coronavirus response bill, and President Donald Trump quickly signed it. It passed despite significant misgivings among many Republicans over a temporary new employer mandate to provide sick leave to coronavirus victims. Trump on Wednesday moved to invoke a federal law that allows the government to marshal the private sector to deal with the coronavirus epidemic, as the economic damage
The European Central Bank is launching a new, expanded program to buy financial assets in a bid to calm markets roiled by the virus outbreak. The purchases are aimed at keeping borrowing costs down and making sure the bank’s low rates get through to the economy. The bank said Wednesday that the purchases could total up to 750 billion euros ($820 billion) by the end of this year and will include government and private-sector bonds as well as commercial paper.
Canada is deferring tax payments until August, providing a wage subsidy for small businesses and pausing student loan payments amid the pandemic. Up to $82 billion Canadian (US$56.4 billion) is being spent. The money is about three percent of Canada’s gross domestic product.
The Bank of England’s new governor Andrew Bailey has kept open the prospect that the central bank may hand money directly to households and businesses to help them through the economic shock of the coronavirus crisis. There is growing speculation that the Bank of England will soon re-launch its quantitative easing program that it used to help the British economy in the global financial crisis.
Mortgage buyers Fannie Mae and Freddie Mac said Wednesday that they will suspend all foreclosure sales and evictions of borrowers in single family homes owned by their companies.
The British government, meanwhile, is bringing forward emergency legislation to ensure that those in rented accommodation cannot be evicted in the event they can’t pay their rents as a result of the coronavirus outbreak.
ENERGY FADES: Energy prices crashed like they haven’t since the financial crisis. U.S. crude lost $6.58, or 24.4%, to $20.37 a barrel, falling below $21 a barrel for the first time since 2002. On Wednesday, Halliburton furloughed 3,500 workers in Houston for 60 days. Those workers will work every other week and maintain benefits. Oil majors including Exxon Mobil, a company that lays out spending plans a decade ahead, have said they will be slashing capital expenditures.
SUPPLY DEMANDED: Sales in almost every sector of the economy has vanished, but not for those selling or producing toilet paper, or canned or packaged foods. Social distancing is evident almost everywhere save for grocery store lines. Shares of Campbell’s Soup Co., which had been on a years-long decline, are hot. The stock has surged 5% in a month. Hormel is up 14% this week. Also in demand, Walmart and Target along with Kroger, some of the nation’s largest grocers.
HEAVY INDUSTRY: Ford, General Motors, Fiat Chrysler, Honda and Toyota said on Wednesday they would shut down all factories in North America, citing concerns for employees who work in close quarters building automobiles.Nissan will close U.S. plants starting Friday. In addition, Hyundai closed its Alabama plant after a worker tested positive for the virus.
BMW is closing its factories in Europe. It follows Ford, Volkswagen, Renault, Groupe PSA and Fiat Chrysler. It is not only the risk of infection, but cratering demand. Airbus, the global aircraft maker, is halting production in France and Spain for the week. Porsche on Wednesday halted production at its main plant in Stuttgart, and will the same will take place at its plant in Leipzig starting Saturday. Scania of Sweden will halt operations at most European production facilities on Wednesday next week.
WHEELS DOWN: Airlines are in crisis. U.S. carriers on Monday asked the federal government for more than $50 billion in rescue aid. Late last week, Delta, American and United on successive days announced massive cuts to their flight schedules. They have grounded hundreds of planes, imposed hiring freezes and asked employees to consider voluntary unpaid leave. On Wednesday, JetBlue, Spirit and Allegiant announced cutbacks. JetBlue’s CEO told employees that cancellations are running 10 times higher than normal.
Nicholas Calio, CEO of Airlines for America, predicted Wednesday that federal assistance for airlines will pass despite opposition among some some lawmakers. “We will get the votes eventually for a package because it has to happen. Otherwise, people are going to be losing their jobs … and we will have an economic catastrophe,” he told The Associated Press.
Canadian-based Porter airlines is temporally suspending operations until June. Flights will stop Friday and there will be temporary layoffs.
TRADE WAR TRUMPS PANDEMIC: In the face of a potentially withering global recession, the United States moved ahead with new tariffs on Airbus planes as part of the Trump administration’s ongoing trade war with Asia and Europe. The tariffs will further test U.S. airlines teetering on cataclysmic declines in air travel.
The tariff on large aircraft from the European Union moved to 15%, up from 10%, on Wednesday. The levies are paid by U.S. airlines that import the planes.
WANDER LOST: States and cities that depend heavily on tourism are capitulating, for now. The governor of Hawaii encouraged everyone to postpone vacations there for at least the next 30 days. The governor of Nevada ordered all casinos to close for the month. Major casinos have already ceased operations on the Las Vegas Strip.
RESPECTING BORDERS: The U.S. and Canada agreed to close their shared border to nonessential travel and the Trump administration is considering a plan to turn back all people who cross the border illegally from Mexico.
The European Union closed its borders for 30 days. The EU is still trying to repatriate some 80,000 citizens stuck outside Europe but faces huge logistical challenges.
Puerto Rico’s governor asked the Federal Aviation Administration to temporarily halt all commercial passenger flights to and from the U.S. territory for two weeks.
ONLINE HELP: Facebook says it is launching an information hub on the coronavirus in the next 24 hours for users in the U.S., U.K., Italy, France and Spain — and will expand it to other countries in the next few days — to help people find authoritative information amid the pandemic. Facebook CEO Mark Zuckerberg said during a conference call with reporters Wednesday that the hub will include information from the World Health Organization, the Centers for Disease Control and other health authorities, along with material from health experts, data visualizations from academics and journalists, as well as things like pleas from celebrities and other trusted figures urging people to stay home. The company is also widening its “community help” tool that is already used to connect people who can help each other during disasters.
THEATER AID: Faced with a lengthy shutdown due the coronavirus pandemic, movie theaters are requesting relief from the U.S. government. The National Association of Theater Owners, the trade group that represents most of the industry’s cinemas, said Wednesday that it’s asking for immediate relief measures for its chains and its 150,000 employees. The theaters are requesting loan guarantees for exhibitors, tax benefits for employees and funds to compensate for lost ticket sales and concessions. NATO said the movie theater industry is “uniquely vulnerable” to the crisis and needs assistance to weather a near total shutdown of two to three months.