Another 6.6 million people filed for unemployment benefits last week as the coronavirus outbreak continued its devastating march through the American economy, the Labor Department reported on Thursday.
The release came as the Federal Reserve said it could pump $2.3 trillion into the economy through new and expanded programs it announced on Monday, ramping up efforts to help companies and state and local governments suffering financially amid the coronavirus.
With astonishing swiftness, the pandemic has shut down both longstanding and new businesses, leaving veteran workers and recent hires in nearly every type of industry without a paycheck. In just three weeks, more than 16 million Americans have lost their jobs — more losses than the most recent recession produced over two years.
It’s as if “the economy as a whole has fallen into some sudden black hole,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics. Many Wall Street analysts concede that at this point, forecasts are not much more than gussied-up guesses: The purposeful and sudden halt in economic activity has no precedent, and no one knows when the restrictions on movement and commerce will be lifted.
Given the current information, though, several economists expect that by the end of the month more than 20 million people will have been thrown out of work, pushing the unemployment rate toward 15 percent. In February, it was 3.5 percent, a result of 113 straight months of job growth.
The weekly tally of people filing claims is one of the best measures of the virus’s impact on the labor force, but it does not capture the full extent of the joblessness.
California recorded the largest number of initial claims last week: 925,000. New York, Michigan, Florida, Georgia and Texas also saw big jumps in the number of new applicants. Although the national figures are seasonally adjusted, the state totals are not.
The Federal Reserve said it could pump $2.3 trillion into the economy through new and expanded programs it announced on Monday, ramping up efforts to help companies and state and local governments suffering financially amid the coronavirus.
The central bank said it will use Treasury Department funds recently authorized by Congress to buy municipal bonds and expand corporate bond-buying programs to include some lower-rated and riskier debt.
The Fed’s moves expand its emergency lending powers into new territory. It has not previously used its authorities to buy municipal debt or lower-rated company debt, out of concern about credit risk and to avoid picking winners and losers. But amid market disruptions, calls for Fed action in both areas have been building.
The Fed will also set up a business lending program that targets midsize companies, including those not eligible under a Small Business Administration loan program.
“The Fed’s role is to provide as much relief and stability as we can during this period of constrained economic activity,” Fed Chair Jerome H. Powell said in the release.
The central bank will buy up to $600 billion in loans through its Main Street lending program, with the Treasury providing $75 billion in backup. That effort will offer four-year loans to companies that employ up to 10,000 workers, or have less than $2.5 billion in revenues. Banks will originate the loans and retain a 5 percent share, but will then sell the remainder to the Fed.
Stocks climbed on Wall Street, and shares in Europe were sharply higher, after the Federal Reserve announced an expansion of its emergency lending powers in another bid to backstop the U.S. economy.
The S&P 500 was up more than 1 percent in early trading.
The Fed’s announcement, which coincided with more grim news about the American economy, helped reverse an early decline. Another 6.6 million people filed for unemployment benefits last week as the coronavirus outbreak continued its devastating march through the American economy, the Labor Department reported on Thursday.
Gains on Thursday added to a rally this week that has lifted the S&P 500 by more than 10 percent. Markets had surged in recent days as investors grew optimistic that progress was being made in the fight against the virus outbreak in some of the world’s hardest-hit areas. European stocks were also higher, regaining their footing after the Fed’s announcement.
Oil prices also rose, with Brent crude, the international benchmark, gaining nearly 4 percent on continuing hopes that major petroleum-producing countries would agree to cut production.
China is holding back on national spending to mitigate the affects of the coronavirus outbreak. Unlike the United States, Europe and Japan, which are on a spending blitz to keep their respective economies afloat, Beijing has yet to step forward with a hefty financial package of its own.
The United States created a $2 trillion rescue package. Japan approved a nearly $1 trillion economic stimulus plan and, in a rare show of unity, Europe has pledged billions of euros to prevent a full-fledged financial crisis and deep recession.
But in a striking contrast to China’s role during the 2008 global financial crisis — when the government poured nearly half a trillion dollars into the economy — its financial assistance has been muted this time. Beijing is pushing state-owned banks to lend more, but it has refrained from pouring money into its financial system or announcing a rescue package.
A growing number of critics argue China should do more to mitigate job losses and business closures. Prominent economists are calling on Beijing to get the country’s consumers spending again with a nationwide voucher system.
Phone calls are making a comeback. The nation’s biggest telecommunications companies were prepared for a huge shift toward more internet use from home, but did not expect the return of plain old voice calls.
Verizon is now handling an average of 800 million wireless calls a day during the week, more than double the number made on Mother’s Day, one of the busiest call days of the year. Verizon added that the length of voice calls was up 33 percent from an average day before the outbreak. AT&T said that the number of cellular calls had risen 35 percent and that Wi-Fi-based calls had nearly doubled from averages in normal times.
In contrast, internet traffic is up only 20 percent to 25 percent from typical daily patterns, AT&T and Verizon said.
The rise of the phone call is all the more surprising given how much Americans abandoned voice calls in recent years. Since 2000, some 90 million American households stopped using landline phones, according to USTelecom. Wireless calls replaced much of that calling activity, but the volume of minutes spent on phone calls has not changed much over the past decade as people turned to texting and to apps like FaceTime and WhatsApp.
After a 3.4 percent rise on Wednesday, the S&P 500 bounced up 23 percent from its low in a disastrous March, despite a darkening outlook for economic growth and corporate profits.
One reason: It’s the time to buy for investors able to stomach the market’s swoons.
Cole Smead, a portfolio manager at the Smead Value Fund, has been snapping up bargains in beaten-up parts of the market, like oil and energy producers, homebuilders and shopping mall companies, that are closely tied to short-term swings in the economy.
“We will never get these prices again,” said Mr. Smead, whose fund has $1.3 billion in assets.
As economically damaging as the pandemic will no doubt be, Wall Street is starting to see a path forward that wasn’t clear a few weeks ago. Slowing infection rates, hefty government relief packages and the Federal Reserve’s efforts to calm the markets have helped eased investors’ minds.
Some of the buyers are opportunistic hedge fund traders and mutual fund managers, driving sharp gains for blue-chip shares that were battered by the market sell-off. Some are traders feeling pressure to get into a rising market. And some are short-sellers forced to buy to minimize their own losses.
But mom-and-pop investors have largely been sitting out — a sign that the rally doesn’t reflect widespread optimism.
Even after Japan declared a state of emergency to fight the coronavirus pandemic in its largest population centers earlier this week, the central government is urging governors to wait two weeks to ask businesses to close for fear of damaging the economy.
Prime Minister Shinzo Abe officially announced the emergency declarations earlier this week for seven prefectures that include Tokyo, Kobe, Osaka and Yokohama and represent a population of 56.1 million people. The government does not have the legal power to issue stay-at-home orders or compel businesses to close, but governors can request that businesses suspend operations to help contain the spread of infection.
While some of the governors want to ask businesses to close now, the central government wants them to wait to see if individual citizens will flatten the curve of infections by refraining from going outside and working from home. On Thursday, the health ministry announced 511 newly confirmed cases — a 46 percent jump over a day earlier.
A special adviser to the prime minister, Yousuke Isozaki, said in a tweet on Thursday that the central government had “differences” with the governors. “Tokyo Metropolitan Government wants to make a request to close certain businesses,” he wrote. “Other prefectures are reluctant because they cannot compensate the businesses. The government’s stance is that they cannot compensate for business closure so we want to wait and see for two weeks.”
In announcing the state of emergency this week, Mr. Abe warned citizens to avoid closed spaces where crowds meet — places like nightclubs, karaoke bars and live music halls.
One municipality is taking matters into its own hands. Gotemba, a city of about 88,000 in the foothills of Mount Fuji, is offering owners of businesses such as bars and nightclubs a maximum of 1 million yen (about $9,200) in compensation for closing between April 16 and 30.
Catch up: Here’s what else is happening.
WeWork has not made scheduled rent payments to the landlords of some of the buildings where it operates its co-working spaces, according to a person briefed on the situation. The decision to hold back rent is part of WeWork’s efforts to renegotiate better deals with building owners as the company tries to cut costs and limit its losses.
The used-car retailer CarMax said on its website on Wednesday that it would furlough 15,500 employees, effective April 18. The company’s president and chief executive, Bill Nash, will forgo half of his salary, and the company’s senior leadership will take an unspecified reduction in pay.
Reporting was contributed by Jeanna Smialek, Graham Bowley, Keith Bradsher, Cecilia Kang, Patricia Cohen, Tiffany Hsu, Ben Sisario, Carlos Tejada, Nicole Perlroth, Matt Phillips, Motoko Rich, Hisako Ueno and Makiko Inoue.