The federal budget deficit will be nearly $4 trillion in 2020, the C.B.O. says.
The Congressional Budget Office said Friday that it expected the federal budget deficit to hit $3.7 trillion for the 2020 fiscal year, which would be its largest size as a share of the economy since World War II.
In a new round of forecasts that officials cautioned were highly uncertain amid the coronavirus pandemic, the budget office said it expected the economy to shrink by 5.6 percent over the course of this year, ending 2020 with an unemployment rate of nearly 12 percent.
The budget office said it expected a historic drop in economic activity to be recorded this spring, but that recovery will begin to set in as social distancing measures are relaxed but not eliminated at the end of June.
Still, it forecasted a slow climb back from the damage the virus caused the economy and the federal budget. It projected growth of 2.8 percent in 2021 — which would be nowhere close to the sharp rebound that some Trump administration officials have said they expect — and a budget deficit of more than $2.1 trillion for the 2021 fiscal year.
By the close of the 2020 fiscal year, which ends in September, the budget office now expects the size of the national debt to exceed the annual output of the economy, with debt to gross domestic product at 101 percent.
Some Republican governors are urging movie theaters to reopen sooner rather than later, despite business and public health realities that make an abrupt relighting of marquees impractical, if not impossible.
To help restart Georgia’s economy, Gov. Brian Kemp wants theaters to reopen starting Monday. Tennessee, where Regal Cinemas is based, plans to allow most businesses to reopen at the end of next week. South Carolina and Ohio are also restarting their economies. Texas and Florida are itching to do the same.
But movie theaters are worried about opening up too early, Nicole Sperling and Brooks Barnes report.
They don’t want to be lumped in with meatpacking plants and senior centers as hot spots for the virus. Already struggling financially, theaters fear that a too-soon return could stigmatize them as dangerous places to congregate. And with new movies from Hollywood not set to debut until the middle of July — at the earliest — opening too soon would only make operators spend money before they could truly recoup costs from patrons.
“Hell no, we’re not opening on Monday,” Chris Escobar, who owns the 485-seat Plaza Theater in Atlanta, said by phone. “When we do, it will not be because of political pressure. It will be because leading public health experts say our lives are no longer at risk.”
The major theater chains, which operate independently but consult one another on best practices, are spending their time determining what protocols should be established. These potentially include separating seating in auditoriums and longer times between showings to allow for deeper cleaning of theaters.
Consumers have been battered by the pandemic. But is it possible they’re seeing light at the end of the tunnel?
A closely watched index of consumer sentiment from the University of Michigan plunged 19.4 percent in April, according to data released Friday. That’s the biggest one-month drop on record, and follows an 11.8 percent drop in March.
But sentiment stabilized, or even edged up slightly, from a preliminary reading earlier in April. Although consumers’ assessments of their current economic conditions is in a deep slump, their expectations for the future have fallen by far less, suggesting that many Americans expect a relatively rapid economic rebound.
That optimism could provide a badly needed economic jolt as businesses begin to reopen in coming weeks. But Richard Curtin, chief economist for the Michigan survey, noted that it also poses a risk: If states move too quickly to return to business as usual and there is a renewed outbreak, it could dash consumers’ hopes and send sentiment back into free fall.
“The necessity to reimpose restrictions could cause a deeper and more lasting pessimism across all consumers, even those in states that did not relax their restrictions,” he wrote Friday.
The Federal Reserve’s efforts to stabilize financial markets are rising substantially, the central bank’s first 30-day public report on the programs showed.
The Fed disclosed details on three of its emergency lending facilities, all of which have rolled out since mid-March. One is aimed at primary dealers, the big banks that serve as the government’s conduit to the broader financial system, another at money market mutual funds, and the third at the commercial paper market, which businesses use to tap short-term funding.
The central bank said that it had made about $86 billion in loans altogether to the three facilities. Of those, the mutual fund program had been lent the largest amount, at $51 billion. The Fed is providing only aggregate information on the programs, which do not use CARES Act funding, and the reports cover the period through April 14.
The commercial paper and money market facility are each backed by $10 billion in funding from the Treasury Department’s exchange stabilization fund, which, assuming it is multiplied up about 10 times per the Fed’s often-used convention on these programs, should be able to support about $200 billion in Fed lending. The primary dealer facility does not have credit risk, like the other two programs, so it does not require a Treasury backstop.
The Fed publishes more up-to-date information on the facilities as part of its weekly financial accounts. The most recent edition showed that loans to the money market facility have actually fallen somewhat since April 14, while use of the primary dealer facility was little changed. The fact that the programs are not growing to capacity suggests that their mere presence may be enough to stabilize markets.
A newer facility that takes Paycheck Protection loans off bank balance sheets, and that will be subject to a separate disclosure, has taken about $8 billion in loans.
Coronavirus infections are a significant problem at meatpacking plants in the United States. Several workers have died, and many plants have closed or reduced output. Now a complaint on behalf of workers at a Smithfield Foods pork plant in Milan, Mo., has brought a renewed focus to working conditions in the industry.
It also seeks to test a novel legal question: whether health hazards at the plant present a public nuisance.
The complaint says workers are typically required to stand almost shoulder to shoulder, must often go hours without being able to clean or sanitize their hands, and have difficulty taking sick leave. Workers say they are reluctant to cover their mouths while coughing or to clean their faces after sneezing because they might miss a piece of meat as it goes by, creating a risk of disciplinary action.
The claims appear in a complaint filed Thursday in federal court by an anonymous Smithfield worker and the Rural Community Workers Alliance, a local advocacy group whose leadership council includes several other Smithfield workers.
Smithfield said the complaint was without merit. “The health and safety of our employees is our top priority,” said Keira Lombardo, executive vice president for corporate affairs and compliance.
Stocks on Wall Street posted small gains on Friday, as a week of dramatic turns in the financial markets came to a close.
The S&P 500 rose about half a percent by Friday afternoon, but trading was unsteady after an earlier rally had faded. Shares in Europe and Asia had fallen.
The focus among traders in the United States this week has been oil prices after the American benchmark for crude crashed into negative territory on Monday — a move that broke through the relative calm that had settled over financial markets. On Tuesday, stocks suffered their sharpest drop in three weeks after the dive in oil prices, and even after rebounding slightly the S&P 500 is still on track to end the week with a drop.
Oil prices also drifted from gains to losses on Friday after a sharp rebound earlier in the week. They remain near historical lows amid concerns about oversupply.
Still, stocks are subject to sudden changes in sentiment or reversals in efforts to reopen economies. Economic and corporate data continues to outline the toll the coronavirus has taken on the global economy, and American officials emphasized that recovery would be difficult. On Friday, new data showed that the near-shutdown of the economy has pushed U.S. manufacturing into free-fall.
And even as some companies begin to consider reopening factories, they face opposition in some quarters. For example, the United Automobile Workers union said on Thursday that it was opposed to companies restarting auto production next month, saying it was not yet safe for its members to return to work.
An ad hoc network of companies, wealthy individuals, academics and former diplomats has emerged to help the United States get the Chinese-made goods it needs to save coronavirus patients and protect front-line workers — and, perhaps, to help polish China’s dented image along the way.
The United States faces a desperate shortage of medical gear, including masks and ventilators, and Chinese factories are able to produce them. But a snarled supply chain and complicated politics stand between production and delivery, and those with stakes in keeping the U.S.-China relationship alive are stepping in to help.
The group includes people like Jack Ma and Joseph Tsai, the founders of Alibaba, the Chinese e-commerce giant; Marc Benioff, a co-founder of Salesforce, who struck a pact with Alibaba last year to sell its services in China; and Yichen Zhang, the chairman of Citic Capital, a major Chinese investment firm affiliated with a state-run conglomerate.
Responding to calls for help from doctors, Mr. Zhang saw a chance to help one of Citic Capital’s portfolio companies, which got into the business of making protective gear for China during its own outbreak, and Yale University, which his daughter attends. He sent 10,000 masks and 40 protective gowns to Yale’s health clinic.
“It’s a business opportunity and a social responsibility,” said Henry Yin, Mr. Zhang’s assistant.
Last month, big restaurant chains like KFC, Wendy’s and Papa John’s asked the federal government for $145 billion in coronavirus relief funds.
These companies had been highly profitable in recent years. So where had all their money gone? Like much of corporate America, the restaurant chains had spent a large chunk on buying back their own stock, a practice aimed at bolstering its price, Emily Flitter and Peter Eavis report.
The crisis has exposed the potential failings of the shareholder-focused strategy embraced by many big companies. Shareholders, wanting stock prices to go higher, pushed management to use cash on buybacks and dividends. And senior executives, paid largely in stock and on the basis of how the stock performed, were happy to oblige.
The result was that companies often didn’t have much spare cash, leaving them more exposed to economic downturns.
Catch up: Here’s what else is happening.
Amazon lost an appeal on Friday of a French court decision that ordered the e-commerce giant to stop delivering nonessential items in France during the coronavirus crisis to protect workers. The Versailles Court of Appeals upheld a lower court’s ruling, made last week, that prompted Amazon to shutter its six mammoth warehouses around France temporarily and put its 10,000 workers on paid furlough.
The manufacturing sector was struggling even before the pandemic; now the near-shutdown of the economy has pushed it into free-fall. New orders for durable goods like cars and washing machines fell 14.4 percent in March, one of the biggest declines on record, the Census Bureau reported Friday. Orders for nondefense capital goods, a measure of business investment, fell 33.4 percent, mostly because of a huge drop in orders for aircraft including Boeing’s troubled 737 MAX jet.
Reckitt Benckiser, the maker of the disinfectants Lysol and Dettol issued a statement on Friday warning against the improper use of their products after President Trump theorized about the possible medical benefits of disinfectants in the fight against the virus. “As a global leader in health and hygiene products, we must be clear that under no circumstance should our disinfectant products be administered into the human body (through injection, ingestion or any other route),” the company said.
The mood among German business managers is more pessimistic than ever. The Ifo Institute’s monthly survey of business sentiment, a reliable indicator of the direction of Europe’s largest economy, plunged to its lowest level ever, the research organization in Munich said on Friday.
The ratings agency Standard & Poor’s issued a more pessimistic view of about two dozen major European banks, meaning that the lenders face a higher risk of downgrades that would make it more expensive for them to raise money on capital markets. Among the banks now regarded by S&P as having a negative outlook are Deutsche Bank and Commerzbank in Germany; ING Group in the Netherlands; Barclays, Royal Bank of Scotland and Lloyds Bank in Britain; and BNP Paribas and Crédit Agricole in France.
Reporting was contributed by Noam Scheiber, Liz Alderman, Alexandra Stevenson, Nicholas Kulish, David Gelles, Sapna Maheshwari, Neal E. Boudette, Mohammed Hadi, Livia Albeck-Ripka, Niraj Chokshi, Ben Dooley, Jack Ewing, Ben Casselman, Jeanna Smialek, Peter Eavis, Emily Flitter, Carlos Tejada, Kevin Granville and Daniel Victor.