U.S. employment growth likely slowed significantly in July amid a resurgence in new COVID-19 infections, Reuters reported. The Labor Department’s closely watched employment report on Friday could pile pressure on the White House and Congress to speed up negotiations on another aid package. Talks have been dragging over differences on major issues including the size of a government benefit for tens of millions of unemployed workers. A $600 weekly unemployment benefit supplement expired last Friday, while thousands of businesses have burned through loans offered by the government to help with wages. According to a Reuters survey of economists, nonfarm payrolls likely increased by 1.58 million jobs in July, which would be a sharp step-down from the record 4.8 million in June. That would leave payrolls 13.1 million below their pre-pandemic level. Employment peaked at 152.5 million in February.
A decade-long boom in auto lending threatens to unravel as payment deferrals end while unemployment remains high and stimulus measures fade, the Wall Street Journal reported. Borrowing for cars, trucks and SUVs rose more than 90 percent in the past decade, faster than all other types of borrowing except student loans, according to the Federal Reserve Bank of New York. Going into the downturn, auto debt outstanding was at a record $1.35 trillion and loan balances had never been higher. There were signs of trouble even before the crisis hit. According to the New York Fed, 5.1 percent of car loan balances were 90 or more days delinquent in the first quarter, only slightly below the peak of 5.3 percent in the financial crisis. The lending boom was fueled by banks and investors who believed auto loans were a safe way to get extra yield while interest rates were low. They were relying on lessons learned in the financial crisis when consumers defaulted on their mortgages but kept making car payments. The risk is that the excesses caused by a flood of investor cash into the mortgages could show up in auto lending. If defaults rise, it will test whether lenders, and the investors that enthusiastically backed the loans, can work out deals that prevent borrowers from losing their wheels. The stress will show up first in subprime loans, made to consumers with low credit scores. About a quarter of loans made to these borrowers were packaged and sold to investors last year under contracts that limit the changes that can be made, according to S&P Global Inc.
Total commercial chapter 11 filings in July 2020 increased 52 percent from the previous year, according to data provided by Epiq. Commercial chapter 11 filings totaled 643 in July 2020, expanding from the July 2019 total of 423. Conversely, total commercial filings decreased 17 percent in July 2020, as the 2,768 filings were down from the 3,314 commercial filings registered in July 2019. The 42,861 total bankruptcy filings in July 2020 were down 33 percent from the 64,345 total filings in July 2019. Total consumer filings decreased 34 percent in July 2020, as the 40,093 filings fell from the 61,031 consumer filings registered in July 2019. “As the government considers renewing or bolstering lifelines to help stabilize the economy, the financial uncertainty due to the COVID-19 pandemic is weighing on families and businesses,” said ABI Executive Director Amy Quackenboss. “We anticipate filings increasing in the next few months as more households and companies seek the shelter of bankruptcy amid intensifying financial distress.”
More U.S. farmers are filing for bankruptcy, as federal payments projected to reach record levels this year fall short of compensating for the coronavirus pandemic and a yearslong slump in the agricultural economy, the Wall Street Journal reported. About 580 farmers filed for chapter 12 bankruptcy protection in the 12-month period ended June 30, according to federal data. That was 8 percent more than a year earlier, though bankruptcies slowed slightly in the first half of 2020 partly because of an infusion of federal aid and hurdles to filing during the pandemic, according to agricultural economists and attorneys. The pandemic has pressured prices for many commodities, squeezing farmers who raise crops and livestock, and prolonging a six-year downturn in the Farm Belt. The Trump administration is expected to dole out a record $33 billion in payments to farmers this year, according to the University of Missouri’s Food and Agricultural Policy Research Institute. The funds, including those intended to help farmers hurt by trade conflicts and the coronavirus, would push government payments to 36 percent of farm income, the highest share in nearly two decades, the institute said. “Agricultural markets have been horrible, and the pandemic exacerbated it, big time,” said Paul Swanson, an Oshkosh, Wis.-based attorney. He said he has 40 open farm-bankruptcy cases, about a third more than last year. Before the pandemic, a global grain glut and foreign competition had pushed down agricultural prices. Trade disputes deepened the pain, drawing retaliatory tariffs from top buyers of U.S. farm commodities, such as China and Mexico. Then the coronavirus hit, upending the U.S. food-supply chain. As restaurants closed, farmers plowed under thousands of acres of vegetables and dumped milk into manure lagoons. Corn prices plummeted as Americans stopped driving, cutting demand for ethanol, a corn-based biofuel blended into gasoline. Prices for slaughter-ready cattle and hogs dropped as meatpacking plants that became virus hot spots slowed or halted production. Hog farmers have lost nearly $5 billion in actual and potential profits for 2020, according to the National Pork Producers Council, a trade group. In California, agricultural businesses stand to lose as much as $8.6 billion, according to a study commissioned by the California Farm Bureau Federation.
President Trump yesterday threatened to take executive action to extend an eviction moratorium, suspend collection of the payroll tax and boost unemployment benefits unless a coronavirus relief deal can be reached quickly with Democrats on Capitol Hill, the Wall Street Journal reported. And in a sign the White House could be preparing to act, the Trump administration has asked federal agencies to identify all of the money they have not yet spent from the $2 trillion Cares Act, which passed in March, according to two people briefed on the effort. White House officials are trying to determine whether this money could be redirected and used for other purposes, such as temporary unemployment benefits or the eviction moratorium. The president has been floating the possibility of acting unilaterally for several days, but he detailed his specific plans for the first time yeseterday at the beginning of a coronavirus news conference at the White House. It came as negotiations continued between top Trump administration officials and congressional Democrats, but agreement remained elusive. “We’re negotiating right now as we speak and we’ll see how that works out,” Trump said. “In the meantime, my administration is exploring executive actions to provide protections against eviction.... As well as additional relief to those who are unemployed as a result of the virus. Very importantly, I’m also looking at a term-limited suspension of the payroll tax.” It’s unclear how far Trump could actually go on his own, and some allies have described the threat of executive action as a way to gain leverage over Democrats in the talks. Administration officials and congressional Democrats agreed earlier this week to try to make a deal by Friday to pass legislation next week, but multiple disagreements remain between the two sides so it’s unclear whether that is a realistic goal. White House Chief of Staff Mark Meadows said earlier Wednesday that if no deal was struck by Friday, further negotiation would be pointless and Trump would act on his own. But Democrats insisted they wanted to keep negotiating until they could reach agreement on an overall relief bill.
Calls to protect corporations and schools from legal blame if workers fall ill from COVID-19 contracted on the job have incited a growing backlash as Congress and the White House negotiate over liability protections in economic relief legislation, the New York Times reported. Businesses, hospitals, schools and the trade groups that represent them have pushed for any relief package to include protections from COVID-related lawsuits. But so far, there has been little sign of a surge in litigation as the economy reopens, and prominent voices have opposed such a measure, arguing that liability shields are unfair to workers and that businesses must take responsibility to keep them safe. The issue has spilled into the world of sports. College Athlete Unity, an organization that represents thousands of athletes at universities, wrote a letter yesterday to the N.C.A.A. and the Big Ten Conference urging them to revise plans for resuming fall sports. Among the proposals was to ban the use of COVID-19 waivers. The players’ associations for the N.F.L., N.B.A., N.H.L., Major League Baseball and Major League Soccer have made a similar plea. In a letter to top Republican and Democratic lawmakers last Friday, they said that inserting liability protections in the legislation would be wrong. Some businesses — including salons, amusement parks, gyms and even President Trump’s campaign rallies — have required those who come in their doors to promise not to sue if they contract the virus. But a Republican proposal would offer a much bigger shield: It would provide five years of legal protection for businesses, hospitals, schools and nonprofits that make “reasonable efforts” to comply with government standards to protect their workers and customers from coronavirus-related lawsuits.
A group of lenders steering J.C. Penney Co.’s bankruptcy process is asking potential buyers of the retail chain to increase their bids after a round of offers in July were seen as too low, Bloomberg News reported. The lenders are pushing for offers closer to the approximately $2.2 billion of J.C. Penney’s debt they hold. Earlier proposals from mall owners and retail firms added up to payments of about $1.8 billion. If those don’t improve, the lenders could acquire the company through a credit bid, in which they forgive the debt in return for ownership. A bid from mall owners Simon Property Group Inc. and Brookfield Property Partners LP is viewed more favorably in part because it’s likely to preserve the most jobs. The two landlords have an incentive to keep J.C. Penney alive because it’s one of their largest tenants. J.C. Penney employed almost 85,000 people when it went bankrupt in May. Private equity firm Sycamore Partners and Saks Fifth Avenue owner Hudson’s Bay Co. were also among the first round of bidders. Both firms own retail chains they could potentially combine with J.C. Penney or some of its brands.
A report by CBRE Group Inc. said that New York was already dealing with a glut of retail space — and the pandemic is making it worse. Average asking rents in Manhattan, which have been sliding for years, plunged to the lowest level since 2011 in the second quarter, Bloomberg News reported. Vacancies are growing in prime shopping districts, the firm said. Then there are the bankruptcies. Brooks Brothers and Neiman Marcus Group Inc. are just two on the growing list of companies that have filed for chapter 11, potentially adding to a glut of empty stores. “It’s a nightmare,” said Tom Mullaney, managing director of restructuring at Jones Lang LaSalle Inc. “A lot of stores are going to disappear and never come back.” Midtown’s office workers are at home, and many are expected to stay there for months. The same is true of international tourists, with a 40 percent decline seen this year, according to the Partnership for New York City. In addition to national chains, the group estimated that as many as one third of the city’s 230,000 small businesses will close for good as restaurants and bars struggle to pay rent with social distancing sapping business.
A group of Senate Republicans yesterday backed extending a $25 billion payroll assistance program for U.S. airlines after warnings that carriers may be forced to cut tens of thousands of jobs without government action, Reuters reported. The letter, spearheaded by Sen. Cory Gardner (R-Colo.) and addressed to Senate Majority Leader Mitch McConnell (R-Ky.) and Senate Minority Leader Chuck Schumer (D-N.Y.) and copied to Treasury Secretary Steve Mnuchin, was the first public disclosure of significant support in the Republican-led Senate for additional emergency funding for U.S. airlines. A spokesman for McConnell declined to comment. Senators Marco Rubio (R-Fla.), Roger Wicker (R-Miss.), James Inhofe (R-Okla.), James Risch (R-Idaho), John Cornyn (R-Texas), Todd Young (R-Ind.), Susan Collins (R-Maine), Martha McSally (R-Ariz.), Shelley Moore Capito (R-W.Va.) and others who signed the letter said that they backed a new six-month extension of the $25 billion payroll support program “to avoid furloughs and further support those workers.”
A U.S. Republican congressman urged the Trump administration to review millions in coronavirus stimulus loans paid to U.S. companies with ties to China’s aviation and defense industries, amid deepening tensions between Beijing and Washington, Reuters reported. The letter by Rep. Jim Banks (R-Ind.) is addressed to Small Business Administrator Jovita Carranza and Treasury Secretary Steven Mnuchin, tasked with overseeing the Paycheck Protection Program. That program, which loans money to firms to encourage them to retain employees during the coronavirus-related shutdown, has drawn fire for technical glitches, a lack of transparency and for doling out funds to large companies with ample access to credit. Banks called for the probe, citing loans to companies whose Chinese parents, including aircraft manufacturer Aviation Industry Corporation of China (AVIC) and weapons maker China Aerospace Science and Industry Corporation (CASIC), were recently designated as owned or controlled by the Chinese military by the U.S. Defense Department. The companies include Continental Aerospace Technologies Inc, which is owned by AVIC and received $5 million to 10 million from the program. It also includes Honghua America LLC, the U.S.- based subsidiary of Chinese drill rig manufacturer Honghua Group, which is in turn owned by CASIC. Honghua received up to $1 million, according to SBA data.
