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Contraction
The fallout from the coronavirus outbreak is expected to have a significant negative impact on U.S. economic prospects, with predictions emerging for losses of millions of jobs this year and a drop in economic output of as much as $1.5 trillion. A recession is now all but certain, according to a Wall Street Journal survey of 34 economists, which projects a downturn that would last months at least, and would in some ways rival—and possibly even surpass—the severity of the 2007-09 slump triggered by the housing collapse and subprime loan debacle, Josh Mitchell and Josh Zumbrun report.
The extent of the coming downturn remains unclear to many economists, given uncertainties stemming from an unknown trajectory of the pandemic, extreme volatility in the financial markets, restrictions on daily economic activity of unknown duration and a government response that is being adjusted every day and is likely to continue to change in the weeks and months ahead.
WHAT TO WATCH TODAY
The U.S. Senate is expected to vote on a roughly $1.3 trillion package designed to blunt the economic impact of the coronavirus pandemic. Timing is uncertain.
The European Commission’s flash consumer confidence survey for March is out at 11 a.m. ET.
The White House coronavirus task force holds a briefing at 5:30 p.m. ET.
The first wave of IHS Markit’s preliminary purchasing manager surveys for March begins Monday evening with Australia and Japan. Europe and the U.S. follow Tuesday. Economists expect deep declines in economic output during the first and second quarters, and the PMIs will be the first global test of that view.
Note: This is a partial listing of key economic events and subject to change.
TOP STORIES
Firing and Hiring
Marriott International, the world’s largest hotel company, and a growing number of hotel owners are furloughing tens of thousands of workers or slashing staff in an effort to steer their companies through the coronavirus pandemic. Hilton Worldwide Holdings and Hyatt Hotels are also furloughing many employees, the hotel companies said in statements on Sunday, as most travel plans world-wide grind to a halt. Ashford, the Dallas-based firm that owns 130 hotels across the U.S., is laying off or furloughing 95% of 7,000 employees, Chief Executive Monty Bennett said. He expects about one-third of those employees probably won’t be coming back, Craig Karmin and Esther Fung report.
The hardest-hit workers are often among the lowest paid and highest risk for coronavirus transmission: restaurant workers, hotel maids and child-care providers. For many who retain their jobs, tips and commissions have evaporated. Working at home isn’t an option, nor is sick pay. There are more than 34 million people in this pool of most vulnerable workers, or about a quarter of the private workforce. About half this group was employed in services jobs in the hospitality industry. The other half come from retail, personal and maintenance service jobs, Eric Morath and Rachel Feintzeig report.
Not all companies are downsizing. Dozens of large employers have extended pay and benefits to workers whose livelihoods are affected by the virus. AT&T is offering up to 160 hours of paid time off to employees whose children are suddenly at home and need supervision. Saks Fifth Avenue is closing its stores for two weeks and will pay employees for their scheduled shifts. Apple has closed stores outside of greater China indefinitely, saying hourly workers will continue to be paid. Other big companies are extending similar assistance. At least so far, large companies’ resilience has contrasted with the cut shifts and layoffs at many small companies, which often operate with little margin for a crisis, Lauren Weber reports.
The caveat: Many companies extending pay or benefits are putting endpoints in place, raising questions of whether the measures will outlast the virus’s impact.
And some companies are still scrambling for workers. Walmart is raising pay in its e-commerce warehouses, the latest move by the company and its rivals to quickly attract employees to meet a surge in demand. The temporary raise for e-commerce warehouse staff brings starting wages for those workers to $15 to $19 an hour, the company said. Last week Walmart said it aims to hire 150,000 additional workers, mostly in its warehouses. Amazon.com said it planned to hire an additional 100,000 people in the U.S. and raise pay by $2 an hour through April. Target Corp. temporarily raised hourly wages by $2, Sarah Nassauer reports.
Even so, forced and voluntary closures are adding up. One window into what’s happening: employee scheduling, time clock and hiring software from Homebase. The firm found that more than half of the workers it tracks weren’t clocking in, almost 40% of small businesses using its software were closed and workers were working 50% fewer hours than in January. “We estimate the total impact of lost wages in the U.S. to be over $7.6 billion in the last week alone,” Homebase CEO John Waldmann said on the company’s website.
What happens when the worst is over? China‘s economic indicators are expected to have an “obvious” improvement in the second quarter and the economy will quickly recover to its potential output, central bank vice governor Chen Yulu said Sunday.
So far, some high-frequency data out of China suggest the country’s economy is recovering. “Our baseline forecast suggests a meaningful rebound in Q2 and a decent recovery in H2, where we see demand as a bigger challenge than capacity in light of the worsening global outbreak and its cascading effects on asset prices and economic activity,” Barclays economist Jian Chang wrote. Even so, the virus has taken a toll: The bank lowered its 2020 full-year growth forecast to a positive 1.3%, versus 5.8% before the outbreak.
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TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
How high for the unemployment rate? “Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product. Bullard called for a powerful fiscal response to replace the $2.5 trillion in lost income that quarter to ensure a strong eventual U.S. recovery, adding the Fed would be poised to do more to ensure markets function during a period of high volatility,” Steve Matthews reports at Bloomberg.
There’s already a book on responding to economic fallout from the novel coronavirus. Written by leading economists and posted at the Center for Economic Policy Research, the title is a bit of a giveaway: “Mitigating the COVID Economic Crisis: Act Fast and Do Whatever It Takes.”
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