Fed Chief Testifies on Economy’s ‘Marked’ Progress: Live Updates

By Jeanna Smialek and Alan Rappeport

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During testimony before Congress, the Federal Reserve Chair, Jerome H. Powell, and Treasury Secretary Steven Mnuchin portrayed the economy as rebounding from the pandemic-induced recession.CreditCredit...Pool photo by Joshua Roberts

Treasury Secretary Steven Mnuchin offered an upbeat view of the economic recovery on Tuesday, describing it during a congressional hearing as the fastest rebound from any crisis in American history.

Yet Mr. Mnuchin acknowledged that more than half of the jobs that had been lost as a result of the pandemic had yet to be restored.

His comments came in a joint appearance before the House Financial Services Committee with Jerome H. Powell, the chair of the Federal Reserve.

Both officials projected optimism about the economic recovery so far, but Mr. Powell made clear that many of those gains were predicated on strong fiscal support, including additional jobless benefits and stimulus checks. That economic support has largely run out and lawmakers show little indication of being able to agree on another package despite the fact that millions of people remain out of work.

Mr. Powell told Congress that the economy had made meaningful progress but that the outlook was uncertain and policymakers will need to do more.

“Many economic indicators show marked improvement,” Mr. Powell said in his testimony, crediting policies like expanded unemployment insurance, which expired at the end of July. “Both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”

But Mr. Powell said the path forward would depend on virus control and “policy actions taken at all levels of government.”

“A big part of the good economic news that we have had results from the fiscal support that came with the CARES Act,” Mr. Powell said, crediting the stimulus package for fueling consumption and helping business confidence.

Asked what would happen if no additional stimulus was forthcoming, Mr. Powell said “we don’t really know what will happen” but said there are risks, including if people begin to run through the savings they have accumulated in recent months, partly as a result of the first fiscal package.

Mr. Mnuchin projected “tremendous” economic growth in the third quarter, noting increases in business activity, manufacturing and the housing market. He said that the 8.4 percent jobless rate was a “notable achievement” considering his own projections earlier this year that unemployment could hit 25 percent.

Nonetheless, Mr. Mnuchin said that more stimulus was needed and that he would continue working with Congress to strike a deal.

“The president and I remain committed to providing support for American workers and businesses,” Mr. Mnuchin said. “I believe a targeted package is still needed, and the administration is ready to reach a bipartisan agreement.”

Mr. Powell also addressed the Main Street lending program, an effort to make loans to midsize businesses that is supported by congressional funding appropriated to the Treasury Department. The Fed and the Treasury have faced criticism for the effort, which is structured in a fairly risk-averse way and which is using hardly any of its $600 billion in capacity.

The program has made or is in the process of making about 230 loans totaling roughly $2 billion, according to Mr. Powell’s statement. But he stressed the limits of loan programs and suggest that congressional spending might be more appropriate in some instances.

Under questioning from Representative Maxine Waters, the committee chair, about whether the program could be broadened to help more companies, Mr. Mnuchin said there were limits to what could be done with the existing funds that were created to backstop the Fed facilities. But Mr. Mnuchin said that he would like to see legislation that would “reallocate that money to better use.”

  • Stocks on Wall Street drifted from gains to losses and back again on Tuesday, as investors considered a fresh assessment of the U.S. economy from the Federal Reserve chair and Treasury secretary.

  • A gain for the S&P 500 on Tuesday would break a recent streak in which the index dropped in four consecutive sessions, something it had not done since February. The index was about half a percent higher in early-afternoon trading.

  • Stock benchmarks in Europe ended modestly higher, as did major indexes in Asia.

  • Oil prices also rose slightly percent, after dropping more than 4 percent on Monday.

  • Jerome Powell, the chair of the Federal Reserve, told Congress the economy had seen a marked improvement in the past few months but the outlook was uncertain and policymakers would need to do more, repeating an analysis he has offered for the past several months. Treasury Secretary Steven Mnuchin offered a more upbeat view of the economic recovery, describing it during a congressional hearing as the fastest rebound from any crisis in American history.

  • In Britain, the government announced measures to control a recent surge in coronavirus cases: pubs and restaurants must close at 10 p.m., and ministers suggested employees should work at home if they could.

  • Mike Bell, a strategist at JPMorgan Asset Management, said that the British government’s moves were “relatively moderate compared to the worst fears” of what the restrictions could have been. “That has helped stabilize markets today,” he said.

  • On Monday, stocks on Wall Street slid for the fourth straight session as investors lost confidence in the sustainability of the economic recovery. The S&P 500 recovered some of its sharpest losses to close down 1.2 percent, after a late rally in shares of technology stocks.

Brookfield Properties, which was recently involved in a deal to acquire J.C. Penney, will lay off workers in its retail arm.
Brookfield Properties, which was recently involved in a deal to acquire J.C. Penney, will lay off workers in its retail arm.Credit...Elaine Thompson/Associated Press

Brookfield Properties, the real estate company that operates more than 170 retail properties in the United States, plans to cut 20 percent of employees in its retail division, according to a memo distributed to staff on Monday, as the pandemic continues to wreak havoc on shopping centers.

“All our constituents — retailers, lenders, communities, partners, investors, consumers, vendors, shareholders and our own employees — have been affected by the events of this year and forced to revisit their relationships with our industry and our company,” Jared Chupaila, the head of the company’s retail group, said in the memo, which was obtained by The New York Times.

“While many companies were quick to implement furloughs and layoffs at the onset of the pandemic, we made the conscious decision to keep all our team employed while we gained a better understanding of its longer-term impact on our company,” he wrote.

The unit has more than 2,000 employees, according to a spokeswoman for Brookfield Properties, who declined to comment further on the memo. The layoffs will affect people who work at Brookfield Properties’ corporate headquarters and in malls. Brookfield has recently been involved in deals to buy bankrupt retailers, including J.C. Penney and Forever 21.

CNBC first reported on the cuts on Tuesday.

Deutsche Bank will close 100 out of 500 domestic branches as part of an effort to cut costs.
Deutsche Bank will close 100 out of 500 domestic branches as part of an effort to cut costs.Credit...Emile Ducke for The New York Times

Deutsche Bank, under intense pressure to cut costs, said Tuesday it would close one-fifth of its domestic branches after the pandemic helped persuade tech-averse Germans to switch to online banking.

Germans are notoriously suspicious of electronic banking. Two-thirds of all consumer transactions are made with cash, according to a 2019 report by the consulting firm McKinsey & Company. But the pandemic forced Germans to get friendly with banking online, emboldening Deutsche Bank to close 100 out of 500 branches as part of a broader effort to cut costs and improve its chronically weak profits.

The branch closures were first reported by Reuters.

Shuttering the branches will lead to an unspecified number of job losses, a Deutsche Bank spokesman said, but would not raise the overall total of 18,000 job cuts the bank had previously announced.

The switch to more electronic banking could also help Deutsche Bank deal with another problem: money laundering. Electronic transactions are much easier to trace than cash.

Along with JPMorgan Chase, Citigroup and Bank of America, Deutsche Bank was among the big international lenders whose regulatory filings indicated they had helped move trillions of dollars of dirty money, according to documents obtained by BuzzFeed News and shared with a worldwide consortium of journalists.

Deutsche Bank said in a statement that the problems reported to BuzzFeed were already well known to regulators and it was working to change its ways. “We have devoted significant resources to strengthening our controls and we are extremely focused on meeting our responsibilities and obligations,” the bank said.

  • The World Economic Forum won’t be held in Davos, Switzerland, next year. The annual gathering of the global elite at the Swiss ski resort was already rescheduled for the summer, from its usual time in January, because of the pandemic. Now, organizers say a new location elsewhere in Switzerland will be announced in the coming weeks. The summit for executives, political leaders and other bigwigs celebrated its 50th year in 2020, and has become synonymous with its exclusive Alpine setting.

  • Ralph Lauren said on Tuesday that it would reduce its global work force by 15 percent by the end of the company’s fiscal 2021 as part of its plans to simplify its organizational structure as the pandemic continues to take a toll on the retail industry. The company said it expected to incur a pretax charge of up to $160 million in connection to the layoffs. The retailer also plans to invest in new technology, including augmented reality, to enhance its online shopping infrastructure. “The changes happening in the world around us have accelerated the shifts we saw pre-COVID, and we are fast-tracking some of our plans to match them — including advancing our digital transformation and simplifying our team structures,” Patrice Louvet, the company’s president and chief executive, said in a statement.

  • Whitbread, the British owner of restaurant and hotel chains including Premier Inn, said on Tuesday it planned to lay off 6,000 workers, about 18 percent of its work force. The company is already in the process of cutting 15 percent to 20 percent of its head office staff. Whitbread said tourist bookings were “strong” but that September and October used to be busy periods of business bookings. Also on Tuesday, the British government announced new guidance for people to work from home if they could.

  • The Hollywood unions representing the interests of the directors, actors, below-the-line crafts people and the Teamsters have reached a deal with the major studios to restart production during the coronavirus pandemic. The agreement focuses on testing regimens, personal protective equipment, and a system to create zones for different groups of workers.

A Tesla Model X in front of a Tesla service center. The company is expected to announce advancements in battery technology.
A Tesla Model X in front of a Tesla service center. The company is expected to announce advancements in battery technology.Credit...Julian Stratenschulte/picture alliance, via Getty Images

Tesla is expected to outline advances in battery technology and announce new production plans on Tuesday as part of its annual general meeting and a “Battery Day” presentation much anticipated by the carmaker’s fans.

In a message on Twitter, the company’s chief executive, Elon Musk, said the battery strategy “affects long-term production” of its vehicles, especially three vehicles not yet introduced — a semi truck, a pickup known as the Cybertruck and a two-seat roadster.

Mr. Musk also appeared to temper expectations for an immediate effect on Tesla’s business, saying that what the company will announce “will not reach serious high-volume production until 2022.” Tesla’s stock fell about 4 percent on Tuesday.

He also said Tesla would increase purchases of battery cells from Panasonic, LG and CATL, a Chinese battery maker. But he hinted that Tesla had new manufacturing goals of its own. “Even with our cell suppliers going at maximum speed, we still foresee significant shortages in 2022 and beyond unless we also take action ourselves,” he wrote.

The events on Tuesday in Fremont, Calif., will begin after the close of Wall Street trading. Because of the pandemic, the meeting and presentation will be available mostly to an online audience, though the company said “a very limited number of stockholders,” determined by a drawing, would be allowed to attend in person.

Tesla offers models that can go 350 miles or more on a single charge, while many competitors fall short of that range. Audi’s e-tron electric sport utility vehicle and the Chevrolet Bolt, made by General Motors, go about 200 to 250 miles on a charge.

But many companies are racing to catch or pass Tesla. A start-up company, Lucid Motors, has said it plans to offer a car next year that can exceed 500 miles on a charge.

Mr. Musk has often outlined ambitious plans that failed to unfold as described. Last year, he said one million Teslas would be operating in the United States this summer as driverless taxis. But the company has not yet demonstrated a car capable of operating without a driver.