Ever since the coronavirus emerged in Europe, Sweden has captured international attention by conducting an unorthodox, open-air experiment. It has allowed the world to examine what happens in a pandemic when a government allows life to carry on largely unhindered.
This is what has happened: Not only have thousands more people died than in neighboring countries that imposed lockdowns, but Sweden’s economy has fared little better.
Sweden put stock in the sensibility of its people as it largely avoided imposing government prohibitions. The government allowed restaurants, gyms, shops, playgrounds and most schools to remain open.
More than three months later, the coronavirus is blamed for 5,420 deaths in Sweden, according to the World Health Organization. Per million people, Sweden has suffered 40 percent more deaths than the United States, 12 times more than Norway, seven times more than Finland and six times more than Denmark.
Despite letting its economy run unimpeded, Sweden has still suffered business-destroying, prosperity-diminishing damage, and at nearly the same magnitude of its neighbors. Sweden’s central bank expects its economy to contract by 4.5 percent this year, a revision from a previously expected gain of 1.3 percent. The unemployment rate jumped to 9 percent in May from 7.1 percent in March. This is more or less how damage caused by the pandemic has played out in Denmark. — Peter S. Goodman
Stocks on Wall Street dipped on Tuesday, cooling off after a rally that had lifted the U.S. market by more than 5 percent in as many days, as new economic data for Europe forecast a grim remainder for the year and cases of Covid-19 continued to spread.
The S&P 500 was slightly lower by mid-afternoon after earlier swinging from losses to gains and back again. A rally in technology stocks also faded.
Stocks in Europe were sharply lower after the European Commission issued a forecast on Tuesday saying this year’s recession would be worse than previously predicted.
The European Union’s economy is now expected to shrink by 8.3 percent this year, a downgrade from the previous forecast of a 7.4 percent. Forecasters did say it appeared the worst of the downturn may be past. “The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across Member States,” the commission said.
Wall Street’s gains recently have come despite the surge of the coronavirus around the world. In the United States, more than 47,000 new cases were reported on Monday. — Mohammed Hadi and Kevin Granville
All four of the large U.S. airlines have agreed to terms for loans from the federal government under the March stimulus bill, the Treasury Department said Tuesday.
Delta Air Lines, United Airlines and Southwest Airlines signed letters of intent under that law, known as the CARES Act, Treasury said. Last week, the department announced that American Airlines had agreed to a five-year $4.75 billion loan.
The terms of the loans announced Tuesday have not yet been disclosed, though Delta and United have said that they expect to receive loans nearly as large as American’s. Southwest has said it expects to receive a $1.1 billion loan. In a statement, Southwest said it has only agreed to terms for a loan but has not decided whether it will borrow the money, a decision it will make by Sept. 30.
The CARES Act set aside $25 billion in loans for passenger airlines. The Treasury earlier distributed another $25 billion to help the airlines pay workers through September.
Besides the big four airlines, Treasury has also agreed to lend to Alaska Airlines, JetBlue Airways, Frontier Airlines, Hawaiian Airlines, Sky West Airlines and Spirit Airlines. —Niraj Chokshi
The magnitude of job losses from the coronavirus pandemic has been 10 times greater than the hit inflicted during first months of 2008 global financial crisis, making it unlikely that employment in Europe, the United States and other developed economies will return to pre-pandemic levels before 2022 at the earliest, the Organization for Economic Cooperation and Development said Tuesday.
In a detailed report on the pandemic’s impact on the world’s labor markets, the O.E.C.D. urged governments to continue throwing financial support behind programs that support businesses and keep people employed, even as the global economy slides deeper into a recession.
Joblessness in the 37 O.E.C.D. member countries is expected to reach 9.7 percent at the end of the year, up from 5.3 percent in 2019, and could march even higher — to more than 12 percent — should a second wave of the virus force countries to shutter parts of their economies again.
“In a matter of a few months the Covid-19 crisis wiped out all improvements in the labor market made since the end of the 2008 financial crisis,” Stefano Scarpetta, the O.E.C.D.’s director of employment, labor and social affairs, said in an online press briefing.
Many countries have responded by providing financial support to companies and strengthening or extending income support to workers unable to work or who are jobless. Governments have extended or introduced job retention schemes and introduced or strengthened sick pay.
Those safety nets will need to remain in place as the virus continues to pose a threat to a global economic recovery, the O.E.C.D. said. — Liz Alderman
Across the country, the pandemic has produced something of a silver lining for infrastructure projects as commuting decreased drastically and railways and highways emptied. And low interest rates have helped reduce borrowing costs, spurring construction activity.
But the crisis is already straining state and local finances, muddling the long-term prospects for infrastructure improvements and the real estate developments that count on them.
“Several states and localities really did take advantage of the fact that when this pandemic started, they saw fewer people on the road or transit systems and the opportunity to accelerate work already planned for the winter and spring time period,” said Jim Tymon, executive director of the American Association of State Highway and Transportation Officials.
In New York, officials are predicting that roadwork at La Guardia Airport will be completed six months ahead of schedule. Track work on the city’s subway system, including upgrades to the subway shuttle between Times Square and Grand Central Terminal, is also ahead of schedule. Road work on the New York Thruway has also gained speed.
But the looming question for developers, planners and commercial enterprises is: What happens next?
As industry insiders try to predict revenue for the next six to 18 months — the time expected for a coronavirus vaccine to be developed — they see a likely decline in gas taxes, permit fees, tolls and other user fees that fund infrastructure. That will have a ripple effect on commercial real estate projects that rely on the infrastructure to be in place. — Miranda S. Spivack
The economic recession unleashed by the coronavirus in the European Union this year will be even worse than previously predicted, the European Commission said in its latest forecasts Tuesday, taking into account data from the second quarter during which the vast majority of its economies were under lockdown.
The Commission, the bloc’s administrative branch, said the European Union economy would shrink by 8.3 percent this year, a steep downgrade from predictions released in the spring that saw a 7.4 percent contraction. The smaller euro-area, the subgroup of 19 E.U. nations that share the common currency, will have it even worse, shrinking by 8.7 percent this year.
At stake is the economic health of the richest bloc of nations in the world, a key trading partner to the United States and home to one of the most important currencies in global trading and saving, the euro.
The data is especially grim for nations in the bloc’s southern rim, some of which were particularly pummeled by the virus. Italy, the E.U.’s third-largest economy is seen as worst-affected, set to shrink by 11.2 percent; Spain, the fourth-largest economy, is facing a 10.9 percent recession; France, the second-largest economy after Germany, will shrink by 10.6 percent.
But, forecasters cautiously pointed to a silver lining, noting that a recovery was already afoot in parts of the bloc. “Early data for May and June suggest that the worst may have passed,” it said. “The recovery is expected to gain traction in the second half of the year, albeit remaining incomplete and uneven across Member States.”
European Union leaders are expected to meet in person for the first time in months next week to try and hammer out a compromise on a 750-billion euro fund that will inject money into member states’ economies in a bid to prop up their recoveries. — Matina Stevis-Gridneff
Data released by the Treasury Department on Monday provided the latest indication of how the government’s centerpiece effort to shore up mom-and-pop shops set off a race by organizations far afield from Main Street to secure federal money.
The data, which the Trump administration released under pressure from lawmakers and watchdog groups, offered the most detailed look yet at the sectors and businesses that took advantage of a program aimed at keeping workers on the payroll amid virus-induced shutdowns.
Restaurants, medical offices and car dealerships were the top recipients of large loans from the federal government’s $660 billion small business relief program. The administration said that the money allocated through the program so far had helped support more than 50 million jobs.
There was no apparent link between the amount of economic damage suffered by states and how successful the small businesses in them were at getting the loans from the program. The share of overall small business payroll supported per state ranged from 72 percent in Virginia to 96 percent in Florida.
North Dakota, South Dakota, Nebraska and Kansas all saw loan approvals of at least 90 percent of their eligible small-business payroll, even though they rank among the least-affected states in terms of unemployment claims during the crisis. Two of the hardest-hit states for claims, New York and California, saw loan approvals equal to about three-quarters of their eligible payrolls.
The information released on Monday was confined to companies that received loans of more than $150,000 through the Paycheck Protection Program. The administration said that 86.5 percent of the loans were for less than that amount.
But sprinkled among the beneficiaries of the Paycheck Protection Program’s largest loans were businesses that are likely to attract scrutiny. — Jeanna Smialek, Jim Tankersley and Luke Broadwater
With Uber agreeing this week to buy Postmates, and Lululemon announcing its acquisition of Mirror last week, we are starting to see the new face of M.&A., argues U.C. Berkeley’s Steven Davidoff Solomon (a.k.a. the Deal Professor) in today’s DealBook newsletter.
Deal-making will not be marked by huge, industry-changing transactions, he writes. Instead, as antitrust regulators scrutinize big deals, there will be a steady stream of acquisitions of medium-sized companies by technology giants and other big companies in high-growth industries. It will be about building brands and network effects.
That is what the Postmates deal is about. Having lost out on buying Grubhub over antitrust issues, Uber is buying a much smaller contender in food delivery — after the acquisition, the U.S. food delivery market will go from four to three main competitors. The market loves it, sending Uber’s market cap up by more than the transaction’s $2.65 billion purchase price.
Lululemon’s $500 million takeover of Mirror is out of Google’s playbook of entering new, adjacent businesses and capturing lucrative network effects. Mirror sells an expensive mirror that displays live fitness classes for home workouts. It’s a way to showcase Lululemon apparel for people who aren’t shopping or going to gyms as much as before.
This is what post-pandemic M.&A. is all about, the Deal Professor predicts. The big will get bigger and push their brands into new places, amassing customers via formidable networks. As the Nasdaq rises higher in response, these companies will use deal-making to corner and capture their markets, leaving older rivals further behind.
For years, flight schools, airlines and experts encouraged people to become pilots. They promised young recruits a job that was lucrative and secure because thousands of pilots in their late 50s and early 60s would retire in the coming years and demand for travel would continue growing.
The profession is still stacked with older aviators, but the pilots most at risk as airlines make deep cuts in the coming months are those who are just starting out.
To prepare for an uncertain future, the nation’s largest airlines are stockpiling billions of dollars in cash. If ticket sales do not recover soon, American Airlines, Delta Air Lines, Southwest Airlines and United Airlines have said they could resort to job cuts as soon as Oct. 1, the first day when airlines are free to eliminate jobs and reduce hours under a stimulus law that Congress approved in March.
Airlines could lay off, furlough or reduce the hours of tens of thousands of pilots, cuts that would disproportionately fall on those who have less union seniority and training. Major airlines have already stopped hiring pilots after posting hundreds of openings in the first quarter of the year, according to Future & Active Pilot Advisors, a consulting firm.
Several companies are offering buyout packages to avoid deeper cuts later. Southwest has acknowledged in discussions with its pilots union that the airline is most likely overstaffed by more than a thousand pilots. The company is offering several years of partial pay and benefits to those who agree to leave the company temporarily or permanently. Delta warned last week that it could furlough nearly 2,600 pilots and is offering early-retirement packages. — Niraj Chokshi
After months of fixating on the pandemic, investors have begun to take into account that the not-too-distant future could look very different from the business-friendly thrust of the current administration.
Investors aren’t yet making buying and selling decisions based on the suggestion of a win by former Vice President Joseph R. Biden Jr., so the market’s dips and rallies don’t fully reflect their worries. But there are clues.
On June 24, when the market dropped 2.6 percent during a broad-based rise in coronavirus infections, some Wall Street traders and analysts attributed part of the fall to data from polls — including one produced by The New York Times and Siena College — showing Mr. Biden’s lead over President Trump.
Of course, no one can ever be entirely sure what moves a market. But stocks of some military companies have also underperformed, reflecting a view among some investors that a Biden victory could depress weapons sales.
And Wall Street analysts, who provide market research to hedge funds, asset managers and other big investors, say those clients are increasingly seeking their advice on the impact of a Biden presidency, especially on taxes.
Recently, inquiries from investors about Mr. Biden’s lead in the polls have focused almost exclusively on the issue of taxes, said Jonathan Golub, chief U.S. equity strategist at Credit Suisse. “That’s, right now, kind of the market’s focus,” he said.
“The market is starting to worry that Trump will not be re-elected,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. “Trump is consistently viewed as a positive for the stock market.” — Matt Phillips