Stocks swooned. The S&P 500 closed down 1.4 percent.
More importantly, Trump’s move threatens to hobble an already stumbling recovery, swelling the ranks of the 26 million relying on jobless assistance while leaving struggling Americans in increasingly desperate straits as unemployment benefits dry up and bans on evictions and utility shut-offs expire.
“Many unemployed say they no longer have enough money to pay rent, car payments or utility bills, or even buy food,” Heather Long notes. “The average unemployment payment fell from $900 a week to just over $300 at the end of July, a sharp reduction that makes it hard for many families to financially survive. As these people stop paying renting and car payments, it hurts landlords, firms and banks waiting for the money.”
Indeed, the abrupt end of the talks could prove a “watershed moment,” Oxford Economics chief U.S. economist Gregory Daco writes in a note whose title sums it up: “Less fiscal stimulus means more economic pain.” Daco estimates the failure to deliver more relief would translate into a 1.5 percent hit to economic growth over the next year.
Powell put the stakes in terms that, for the typically restrained central banker, amounted to a shout from the rooftops.
A prolonged slowdown in the climb back from recession could “trigger typical recessionary dynamics, as weakness feeds on weakness,” he said in a speech to the National Association for Business Economists.
Such an outcome would exaggerate wealth and racial disparities, a possibility that Powell called “tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic.” Thus, he said, policymakers should err on the side of spending too much. “Even if policy actions ultimately prove to be greater than needed, they will not go to waste,” he said.
Trump set heads spinning in Washington and beyond when, at 7 p.m. — just four hours after publicly ending relief talks — he posted a tweet that appeared to express agreement with Powell’s assessment:
But that was only the start of a confusing series of tweets that sparked speculation of a back track.
Little more than a half-hour later, Trump seemingly reaffirmed his commitment to shutting down negotiations, blaming House Speaker Nancy Pelosi (D-Calif.):
But hours later, he tweeted that Congress should send him measures to extend aid to airlines, add funds to the Paycheck Protection Program and offer another round of $1,200 stimulus checks:
Trump’s decision to ice more economic relief shocked policymakers and economists across the political spectrum.
Just three days earlier, the president inflated expectations for a breakthrough when he tweeted an endorsement of another bailout. “OUR GREAT USA WANTS & NEEDS STIMULUS. WORK TOGETHER AND GET IT DONE,” he wrote from Walter Reed National Military Medical Center, where he was undergoing treatment for his coronavirus infection.
Pelosi only learned of his reversal from his Tuesday tweets. At the time she was in the middle of a conference call with House Democrats, updating them on the status of her talks with Treasury Secretary Steven Mnuchin. The two have been working trying to forge agreement on a package worth between $1.6 trillion and $2.2 trillion.
Upon learning of Trump’s tweets, she speculated to lawmakers on the call “that the president’s sudden change in position might be connected to the steroids he’s taking as he battles covid-19,” Erica Werner and Jeff Stein report.
Trump sent the missives after his own call — with Mnuchin, Senate Majority Leader Mitch McConnell (R-Ky.) and House Minority Leader Kevin McCarthy (R-Calif.). During that call, “McConnell suggested to Trump that Pelosi was stringing him along and no deal she cut with Mnuchin would command broad GOP support to pass in the Senate,” per Erica and Jeff.
Trump managed to alienate interests as disparate as the Business Roundtable and Rep. Alexandria Ocasio-Cortez (D-N.Y.).
“We are deeply troubled by the sudden halt of negotiations,” the Business Roundtable said in a statement. “Millions of American workers, families and businesses are suffering from the economic and health impacts of the COVID-19 pandemic and need the support of their government. Communities across the country are on the precipice of a downward spiral and facing irreparable damage.” Ocasio-Cortez likewise said the decision to abandon talks is “effectively endangering millions.”
Some congressional Republicans agree. Sen. Susan Collins (R-Maine), facing her own difficult reelection race, registered an objection:
And with Trump badly trailing Democratic nominee Joe Biden in polls, and millions of Americans confronting deteriorating personal finances, reporters and analysts marveled at the president’s decision. At a minimum, pushing for a deal would allow him to claim he’s trying to avert the worst fallout of a slowing recovery.
From Bloomberg Opinion columnist Conor Sen:
From Jonathan Swan of Axios:
From Bloomberg’s Joe Weisenthal:
From NBC national political reporter Sahil Kapur:
From former Obama Treasury Department economist Ernie Tedeschi:
Even Kevin Hassett, a former top economic aide to Trump, called the decision a mistake:
Biden bashed Trump for the decision, too. “Make no mistake: if you are out of work, if your business is closed, if your child’s school is shut down, if you are seeing layoffs in your community, Donald Trump decided today that none of that — none of it — matters to him,” he said in a statement, adding the president “never even really tried to get a deal.”
While the broader market sold off in the wake of Trump’s tweets, a group of stocks that could benefit from a Biden victory surged. “The Nomura-Wolfe Biden Election Basket, which bets on potential winners from Democrats taking control in Washington while wagering against losers, jumped to a record high,” Bloomberg’s Richard Richtmyer reports.
Airlines’ shares tumble after Trump calls of relief talks.
The nation’s major carriers had already begun furloughing thousands of employees: “Airline shares fell more than the broader market after Trump’s comments …,” CNBC’s Leslie Josephs reports.
“American’s shares fell 4.5 percent to $12.53, while United’s closed at $34.88, down 3.7 percent on the day. Shares of Southwest Airlines, which asked its unionized employees on Monday to take pay cuts in order to avoid furloughs through the end of next year, fell 2.4 percent to $37.58. Delta Air Lines ended the day down nearly 3% percent at $31.06.”
A President-elect Biden could send signals to the market: “The Fed uses a practice called ‘forward guidance’: It makes statements about what it will do in the future in order to influence the economy today,” New York Magazine’s Josh Barro writes.
“If and when Democrats win the election — if they take the presidency and both houses of Congress, which appears to be the most likely outcome — they won’t have an immediate ability to enact legislation, but they can immediately start making commitments about what legislation they will pass, and those commitments can start helping the economy right away by giving economic actors clarity about what resources will be available to them come winter.”
Latest on the federal pandemic response
The Cares Act poured millions into corporations with no strings attached.
At least 133 companies received a total of more than $5 billion in refunds: “For pipeline company Antero Midstream, a firm at the forefront of the Appalachian fracking boom, the mammoth stimulus bill known as the Cares Act delivered a quick and happy benefit: a $55 million payment from the Treasury Department,” Desmond Butler, Steven Mufson and Douglas MacMillan report.
“Antero Midstream, a $2.5 billion company, is one of at least 133 corporations that received help this year from the little-noticed provision of the Cares Act. By the end of June, the companies reported receiving more than $5 billion in Cares Act refunds … And while the bill did not say anything explicit about a fossil fuel bailout, as many as 30 percent of publicly traded oil and gas companies said in corporate filings they planned to use this tax provision, according to researchers at the University of Chicago who reviewed hundreds of filings made between March and May.”
- Companies with ties to lenders received PPP funds faster than others. The phenomenon was on display in Washington, D.C., where the Wall Street Journal compared experiences of businesses downtown “against those for low-income neighborhoods east of the Anacostia River, where commercial areas are dotted with small Black-owned firms, non-profit organizations and churches,” the WSJ’s Yuka Hayashi, Anthony DeBarros and Amara Omeokwe report. “There was a wide gap between the two areas in terms of when borrowers got their money.”
Employer demand for workers is weakening.
Job openings are another sign of the tenuous recovery: “The number of job postings fell 0.3 percent in September from a month earlier, after logging monthly gains between 5 percent and 7 percent throughout the summer, according to jobs website Glassdoor,” WSJ’s Sarah Chaney reports.
“Separate data from jobs site Indeed show job postings logged weaker improvements in September than in early summer. The number of available jobs plummeted when the pandemic hit the U.S. labor market in March, but began to rise as states allowed many businesses to reopen in late spring and early summer. Those gains have slowed, and September job postings on Glassdoor and Indeed remained well below precrisis levels.”
More from the United States:
- Hospitalizations reach new highs in seven states as infections rise: “Six states — Arkansas, Montana, North Dakota, South Dakota, Wisconsin and Wyoming — set records for coronavirus-related hospitalizations on Tuesday, according to data tracked by The Post. A seventh, Oklahoma, reported its highest count of hospitalizations since late July,” Antonia Farzan and Jacqueline Dupree report.
- White House clear vaccine standards it tried to derail: “The standards, which would be applied to an emergency use authorization for a vaccine, are the same as ones the agency proposed weeks ago. In many ways, they are similar to the standards for a traditional approval. But the White House, worried that the criteria would delay authorization of a vaccine, presumably beyond the Nov. 3 election, decided to sit on the guidance,” Laurie McGinley, Yasmeen Abutaleb and Carolyn Y. Johnson report.
- Pence team agrees to plexiglass barrier on his side for the debate: “The Commission on Presidential Debates said that Vice President Pence had dropped his objections to a plexiglass barricade on his side of the stage for [tonight’s] debate after viewing the setup during a walk-through of the debate hall,” Michael Scherer and Josh Dawsey report.
- Ultra-Orthodox Jews protest new coronavirus restrictions in Brooklyn: “The Jewish Telegraphic Agency reported that demonstrators in the Borough Heights neighborhood set a pile of masks on fire, while a photojournalist for the New York Post captured a large crowd of onlookers gathering around a flaming pile of cardboard boxes and other assorted garbage,” Teo Armus and Antonia Farzan report.
From the corporate front:
- Boeing cuts jet demand forecast: “The U.S. planemaker, which dominates jet sales together with Europe’s Airbus, forecast 43,110 commercial aircraft deliveries over the next 20 years, down 2 percent from 44,040 projected a year ago and worth an unchanged $6.8 trillion at list prices,” Reuters’s Eric M. Johnson and Tim Hepher reports.
- Southwest flight attendants reject call for pay cuts: “On Monday, Southwest Chief Executive Gary Kelly said he was asking unions to agree to pay cuts in order to prevent furloughs and layoffs through 2021 as the industry struggles to stem losses from the pandemic,” Reuters’s Tracy Rucinski reports.
- Samsung likely to post 35 percent surge in Q3 profit: “The company’s smartphone profit, which accounted for one-third of earnings last year, likely jumped as handset demand rebounded after the pandemic curbed sales in the first half of 2020,” Reuters’s Joyce Lee reports.
Around the world:
- Powell isn’t alone in saying stimulus will be crucial: “The outcome of the U.S. negotiations could influence the pace of the global economic recovery as well, and a top European central banker on Tuesday joined the call for more spending now as the risk from the virus persists. ‘These weeks are extremely critical not only for the public health issue but also for consumer confidence and investor confidence,’ said Philip Lane, a member of the European Central Bank’s executive board,” Reuters’s Howard Schneider and Balazs Koranyi report.
- Hospitalizations rise almost 25 percent in England: “Daily hospital admissions of people with the coronavirus in England rose by almost 25 percent as pharmaceutical company Roche reported a supply chain issue that had caused a ‘significant drop’ in its production of test kits, threatening the country’s testing system,” Jennifer Hassan reports from London.
Money on the Hill
House probe faults big tech companies for monopolistic tactics.
The report’s publication caps a 16-month investigation: “Amazon, Apple, Facebook and Google engaged in anti-competitive, monopoly-style tactics to evolve into four of the world’s most powerful corporate behemoths, according to congressional investigators who called in a wide-ranging report for sweeping changes to federal laws so that government regulators can bring Silicon Valley back in check,” Tony Romm, Cat Zakrzewski and Rachel Lerman report.
“The approximately 450-page document, released by the House’s top antitrust panel, found that the four tech giants relied on dubious, harmful means to solidify their dominance in Web search, smartphones, social networking and shopping — and in the process evaded the very federal regulators whose primary task is to ensure that companies do not grow into such unmatched corporate titans.” (Amazon CEO Jeff Bezos owns The Washington Post)
USTR Robert Lighthizer defends trade policies amid rising deficit.
Trump’s long-loathed metric is rising amid the pandemic: The U.S. Trade Representative “said that the higher U.S. trade deficit in 2020 has been largely due to non-monetary gold imports and that Trump’s trade policies were working despite a $67.1 billion August trade deficit that was the largest in 14 years,” Reuters’s David Lawder reports.
“In a statement, Lighthizer said the larger August trade deficit was due to the stronger performance of the U.S. economy amid the coronavirus compared to those of its G7 trading partners.”
Trump moves to tighten visa access for high-skilled foreign workers: “The Trump administration announced significant changes to the H-1B visa program for high-skilled workers, substantially raising the wages that U.S. companies must pay foreign hires and narrowing eligibility criteria for applicants,” the New York Times’s Zolan Kanno-Youngs and Miriam Jordan report.
“Top administration officials framed the changes as a way to protect American jobs during the pandemic, even though the Trump administration first committed to overhauling the program in 2017 as part of its efforts to reduce the number of foreign nationals employed in the United States.”
When superpowers collide
Judge to hold hearing on TikTok ban the day after the election.
Some aspects of the Commerce Department’s order are set to go into effect in mid-November: “U.S. District Judge Carl Nichols in Washington issued a preliminary injunction on Sept. 27 that barred the Commerce Department from ordering Apple Inc and Alphabet Inc’s Google app stores to remove TikTok for download by new users,” Reuters’s David Shepardson reports.
“Nichols must now decide whether to block the other aspects of the Commerce Department order set to take effect on Nov. 12 … Talks are ongoing to finalize a preliminary deal for Walmart Inc and Oracle Corp to take stakes in a new company, TikTok Global, that would oversee U.S. operations. Trump said last month the deal had his ‘blessing.’”
Corporate diversity data is finally coming out.
The decision makes it easier to hold companies to their pledges: “A Bloomberg survey of members of the S&P 100 index as of June found that 25 percent were willing to provide a full copy of their EEO-1 report, a document companies have to provide to the federal government but aren’t required to make public. The filing includes breakdowns by race of several tiers of a company’s workforce, from executives to service employees,” Bloomberg News’s Gerald Porter Jr., Jeff Green and Cedric Sam report.
- Labor Department probing Microsoft’s efforts to hire more Black employees: “A letter from the agency overseeing federal contractors for the Labor Department sent to the software giant last week suggested the initiative might be a violation of the Civil Rights Act because it ‘appears to imply that employment action may be taken on the basis of race,’ ” USA Today’s Jessica Guynn reports. “Potentially at stake are federal contracts awarded by the federal government, including a multibillion-dollar cloud computing contract from the Defense Department.”
GE says it has received a “Wells Notice”: “Federal securities regulators have warned General Electric Co. of a civil-enforcement action over its accounting for a legacy insurance business, adding a fresh hurdle to efforts to turn around the once-mighty manufacturer,” the WSJ’s Theo Francis and Ted Mann report.
“The industrial giant said in a securities filing … that it received the so-called Wells notice on Sept. 30 over the company’s accounting for reserves related to an insurance business it has been trying to wind down for years.”
Government watchdog probing IRS’s use of cell phone location data.
The agency tried to identify phones present at scene of a crime: “In a letter to Capitol Hill shared with WSJ on Tuesday, Treasury Inspector General for Tax Administration J. Russel George said he was examining the agency’s use of software sold by Venntel Inc., a data company that caters to government clients in the intelligence, military and law enforcement space,” Byron Tau reports.
“The investigation came at the request of Sens. Ron Wyden (D-Ore.) and Elizabeth Warren (D-Mass.), who wrote to the inspector general last month raising concerns that the warrantless surveillance of mobile phones might violate the holding in a landmark 2018 Supreme Court case that requires law enforcement to obtain a warrant to track mobile phones of suspects. Wyden is leading an investigation into the use of cellphone location data for domestic surveillance.”
- The first and only vice presidential debate is held in Salt Lake City
- The Fed’s FOMC releases minutes of its September meeting
- The Labor Department releases weekly jobless claims