A new Covid-related downturn would probably cause more severe unemployment in the United States, while in Europe growth would suffer more, the Organization for Economic Cooperation and Development said on Wednesday.
The prediction came as the organization released its latest economic outlook, which reported a fast but uneven recovery from the disruption of the pandemic, emphasizing the stark imbalances in growth between advanced and less developed countries, as well as among the biggest industrial nations. .
Differing policy choices were the primary reason distinguishing the Europe and the United States, said Laurence Boone, the organization’s chief economist. “Europe has been focusing on protecting jobs throughout the crisis, and as a result employment is now already at its pre-crisis level,” she said.
By contrast, the United States has “largely focused on supporting households’ incomes rather than jobs,” she said, resulting in a quicker rebound in gross domestic product.
If the economy were to be walloped again, Ms. Boone said, “in Europe, it would be output that would be hurt more while in the U.S., it would be jobs that would take the hit.” At the start of the pandemic in 2020, Europe’s output fell much more sharply than in the United States.
Ms. Boone said that despite the new coronavirus variant, Omicron, the economic outlook remains “cautiously optimistic.” Global growth this year is expected to come in at 5.6 percent before dropping to 4.5 percent next year and 3.2 percent in 2023, according to the report.
She did warn, however, that Omicron adds to already high levels of uncertainty and could threaten the recovery.
The organization also emphasized that whatever imbalances may exist among countries in North America and Europe, the starkest asymmetries are between advanced and emerging economies, where growth and vaccination rates are lagging far behind.
Ms. Boone noted that the Group of 20 countries have collectively spent $10 trillion in response to the virus, while a scant fraction of that amount has gone to providing vaccinations to poorer countries — even though such support is crucial to the global economy’s recovery.
The organization’s latest forecast echoed concerns about prolonged inflation that were voiced on Tuesday in Washington by Jerome H. Powell, the Federal Reserve chair.
Ms. Boone cautioned that the severity of the pandemic could play out in different ways. More disruptions in the supply chain could aggravate inflation, but a new wave of Covid-related restrictions could instead cut into demand and cause inflation to recede faster.
Rising prices on essentials like food would be particularly burdensome on the poor, the organization said.
Stocks on Wall Street rose on Wednesday, continuing their tumultuous ride since the discovery of the new Covid variant last week.
The S&P 500 gained about 1 percent in early trading, following a 1.9 percent decline on Tuesday when the head of the Federal Reserve said that the central bank could speed up its plan to withdraw stimulus because of high inflation.
An index of volatility in the U.S. stock market surged to its highest since early March on Friday after the new Omicron variant was reported by researchers in South Africa. The VIX index has declined a little since then, but remains above levels seen in the past two months.
Traders had pushed back their expectations about when the Fed might eventually raise interest rates, in light of the news about the variant and some predictions that current vaccines will be less effective against it. But Jerome H. Powell, the Fed chair, said the risk of higher inflation had increased. If the central bank finishes tapering its bond-buying program sooner than expected, it could also raise interest rates sooner.
“If the Omicron variant of the Covid virus proves a temporary distraction, global markets will need to adjust” to more hawkish Fed, Steen Jakobsen, chief investment officer at Saxo Bank, wrote in a note.
The Stoxx Europe 600 rose 1.2 percent, reversing a 0.9 percent fall the previous day. The Nikkei 225 in Japan closed 0.4 percent higher.
Oil futures also rose, with West Texas Intermediate, the U.S. benchmark, up 3.5 percent to $68.51 a barrel. Brent crude, the European benchmark, rose 3.5 percent, to $71.64 a barrel.
The Organization of the Petroleum Exporting Countries and its allies including Russia will meet on Thursday to decide whether or not to stick to their plan of gradually increasing oil production.
A rushed emergency aid program for small companies devastated by the pandemic improperly sent nearly $3.7 billion to recipients prohibited from receiving federal funds, according to a government audit released on Tuesday.
The finding adds to a mountain of evidence chronicling what the Small Business Administration’s inspector general, Hannibal Ware, called an “unprecedented amount of fraud” in the agency’s pandemic relief efforts. In October, Mr. Ware’s office chastised the agency for improperly doling out billions in relief money to self-employed people who made “flawed or illogical” claims of having additional workers on their payroll.
Its Economic Injury Disaster Loan program distributed more than $210 billion last year in loans and grants. The program was organized in a hurry by the Trump administration as millions of businesses temporarily shut down because of the coronavirus and was designed to quickly send out money to help companies keep up on their bills.
But the agency failed to do a legally required check of applicants’ identifying details against the Treasury Department’s Do Not Pay system, according to Tuesday’s report from Mr. Ware’s office.
The Do Not Pay system was set up in 2011 to reduce improper payments to people who are dead, convicted of tax fraud or barred from receiving federal contracts, among other red flags. Mr. Ware found 117,135 applicants who got grants and 75,180 recipients who got loans despite matches in the system indicating a “high likelihood” that the payments were improper.
Isabella Casillas Guzman, who became the agency’s administrator in March, said at a House hearing this month that she had heightened the agency’s fraud controls over its Covid-19 relief programs. “The guardrails did not exist” last year, under the prior administration, she said.
In a response included in Mr. Ware’s report, the Small Business Administration said that on April 6, 2021 — more than a year after the disaster loan program began — it started checking Do Not Pay records before sending out funds. The agency also said it would review the loans and grants previously made to recipients who were flagged as ineligible.
“We agree with the S.B.A. Office of Inspector General that the Trump administration should have applied this risk management tool, and, therefore, the S.B.A. has done just that under the Biden-Harris administration,” Han Nguyen, an agency spokesman, said on Tuesday.
Capital One said on Wednesday that it would stop charging retail customers overdraft fees, making it the latest bank to either eliminate or ease the much-maligned charges infamous for turning $3 coffees into $38 gotchas.
Overdraft programs ensure that a bill will be covered and that purchases won’t be denied when spending exceeds a consumer’s account balance. Initially marketed as a convenience, the fees have proliferated over the past quarter-century and have become known as an aggressive way to siphon money from consumers.
But over the past year, more banks have begun introducing services that provide customers with a bit of wiggle room when they enter overdraft territory.
In May, Ally Bank said it would eliminate its $25 overdraft fee, giving customers six days to get in the black again before it potentially limits how they use their accounts. A number of other banks, like Bank of America and PNC, are taking smaller but still notable steps that include grace periods and small short-term loans — if users qualify.
Customers who have already opted into Capital One’s overdraft program will be automatically moved to the no-fee version early next year, fully eradicating the $35 fees it could charge up to four times a day. Eliminating the fees will cost the bank roughly $150 million in revenue annually.
Because Capital One is one of the nation’s larger banks, its decision takes on more significance, consumer advocates said.
“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” said Lauren Saunders, associate director at the National Consumer Law Center, an advocacy group. It also “puts pressure on the rest of the banking industry to eliminate these predatory fees, which are a back-end way of harming consumers.”
Regulations introduced in 2010 helped curtail some of the worst abuses by requiring banks to receive consumers’ consent to opt in to overdraft services on debit transactions and A.T.M. withdrawals, but they’re still worth billions of dollars a year in revenue across the industry.
Capital One customers who do not have overdraft protection will be able to enroll in the no-fee program, but habitual overdrafters may not qualify. In a memo to staff, Richard Fairbank, the bank’s chief executive officer, said customers would need to show a steady pattern of deposits to be granted overdraft protection — and could not have a history of frequent overdrafts.
If a participant’s overdraft balance is not repaid after 56 days, the bank will write it off — the same regulatory procedure the bank follows now, according to a spokeswoman. The missed payment will not affect a consumer’s traditional credit score, but it will be reported to a specialty bureau, Early Warning Services, owned by seven of the largest banks.
The bank will continue to allow customers to sign up for automatic no-fee transfers from their Capital One savings or money market accounts to pay for transactions their checking account cannot cover.
The furniture companies that dot Hickory, N.C., in the foothills of the Blue Ridge Mountains, have been presented with an unforeseen opportunity: The pandemic and its ensuing supply chain disruptions have dealt a setback to the factories in China and Southeast Asia that decimated American manufacturing in the 1980s and 1990s with cheaper imports.
At the same time, demand for furniture is very strong.
In theory, that means Hickory’s furniture companies have a shot at building back some of the business that they lost to globalization. Local furniture companies had shed jobs and reinvented themselves in the wake of offshoring, shifting to custom upholstery and handcrafted wood furniture to survive. Now, furniture makers like Hancock & Moore have a backlog of orders. The company is scrambling to hire workers.
Yet the same forces that are making it difficult for overseas manufacturers to sell their goods in the United States — and giving American workers a chance to command higher wages — are also throwing up obstacles, Jeanna Smialek reports for The New York Times.
Many of the companies are dependent on parts from overseas, which have been harder — and more expensive — to obtain. Too few skilled workers are seeking jobs in the industry to fill open positions, and businesses are unsure how long the demand will last, making some reluctant to invest in new factories or to expand to towns with bigger potential labor pools.
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The star CNN anchor Chris Cuomo was suspended indefinitely by the network on Tuesday after new details emerged about his efforts to assist his brother, Andrew M. Cuomo, the former governor of New York, as he faced a cascade of sexual harassment accusations that led to the governor’s resignation.
Chris Cuomo had previously apologized for advising Andrew Cuomo’s senior political aides — a breach of traditional barriers between journalists and lawmakers — but thousands of pages of evidence released on Monday by the New York attorney general, Letitia James, revealed that the anchor’s role had been more intimate and involved than previously known.
“The documents, which we were not privy to before their public release, raise serious questions,” CNN said in a statement on Tuesday, adding: “As a result, we have suspended Chris indefinitely, pending further evaluation.” READ MORE →
For four days, Elizabeth Holmes took the stand to blame others for the alleged fraud at her blood testing start-up, Theranos. On the fifth day, prosecutors tried making one thing clear: She knew.
Over more than five hours of cross-examination on Tuesday, Robert Leach, the assistant U.S. attorney and lead prosecutor for the case, pointed to text messages, notes and emails with Ms. Holmes — and with her business partner and former boyfriend, Ramesh Balwani — discussing problems with Theranos’s business and technology. Mr. Leach had a common refrain: No one hid anything from Ms. Holmes. As Theranos’s chief executive, he argued, she was to blame.
It was the culmination of three months of testimony and nearly four years of waiting since Ms. Holmes was indicted on charges of wire fraud and conspiracy to commit wire fraud in 2018. READ MORE →
Electric vehicles are central to the Biden administration’s push for clean energy and a revival of American manufacturing. But as Apple did with gadgets, Tesla is forming stronger ties with China to get closer to both its adroit manufacturing supply chain and huge market of car buyers.
China is poised to become a major player in electric cars, and Tesla and a slew of Chinese electric vehicle upstarts are helping its companies become even more competitive.
Tesla’s huge factory in Shanghai works with local suppliers to make increasingly sophisticated components that are helping them go head-to-head with Western and Japanese auto suppliers.
“China is overtaking its competitors by switching lanes in the car race,” said Patrick Cheng, chief executive of NavInfo, a mapping and autonomous driving technology company in Beijing. “The race used to be about internal combustion engine vehicles. Now it’s the electric cars.”
One hears the word “overtaking” a lot in the Chinese auto industry. Many of its executives and engineers believe that the transition to new-energy vehicles presents a similar opportunity as mobile internet did in the last decade, when Chinese companies created powerful platforms such as the mobile messaging app WeChat and the short video app TikTok.
That’s why the Chinese government has embraced Tesla with open arms. It has offered Mr. Musk’s company cheap land, loans, tax benefits and subsidies. It even allowed Tesla to run its own plant without a local partner, a first for a foreign automaker in China.
Beijing is seeking what the business world calls the catfish effect: Toss an aggressive fish into a pool so that the established denizens will swim harder.
Electric cars could shake up the auto industry — and, by extension, jobs, technology and geopolitical influence. READ THE FULL ARTICLE →