The coronavirus outbreak is undermining nonprofits.
Nonprofit organization are ubiquitous in the United States: built on a dream, dedicated to good works, thinly capitalized. And like so much in American life, they have been upended — perhaps temporarily, maybe forever.
Crucial spring fund-raisers and conferences have been canceled. Donors are stretched in many directions, preoccupied with their own problems, and much less flush than they were two months ago. Nonprofits that are paid by local governments said new rules against large gatherings were making it impossible to deliver services.
“Everyone is losing revenue, and many have skyrocketing demand. You do the math,” said Tim Delaney, chief executive of the 25,000-member National Council of Nonprofits.
In central New Jersey, it took it took Stephanie Cartier nearly three years to open No Limits, a cafe operated by people with intellectual disabilities. That was early February. It took only a few days in March to close the 65-seat restaurant indefinitely.
Customers dwindled as fears of the coronavirus increased. There was not enough cash coming in to pay the staff.
“It was the first time many of them had a job, and now it’s gone,” Ms. Cartier said. “They didn’t even work long enough for unemployment.”
European markets fall as investors see more turbulence ahead.
Major European markets stumbled on Friday, and futures pointed to a downbeat open on Wall Street, as investors who initially cheered progress on a $2 trillion U.S. relief package saw further economic troubles ahead.
Declines in London, Paris and Frankfurt ranged from 2 to 4 percent in morning trading. Earlier, Asian markets were generally higher, on the heels of Thursday’s 6 percent gain in U.S. stocks.
Other markets signaled persistent unease. Prices for U.S. Treasury bonds, a traditional safe place to park money in times of trouble, rose in early European trading. Oil prices, another indicator of attitudes toward the economy, were mixed.
Investors may be concerned that European leaders, meeting on Thursday, failed to agree on a common strategy to address the looming recession facing the eurozone. They instructed a group of finance ministers to report back in two weeks.
The Reserve Bank of India became the latest central bank to take action, cutting a key interest rate by three-quarters of a percentage point on Friday to cushion the economic toll of a 21-day lockdown that began across the country this week.
In Asia, Tokyo was the biggest gainer among major global markets on Friday, with the Nikkei 225 index ending 3.9 percent higher. Other Asian markets were mixed.
Unemployment numbers don’t stop Wall Street rally.
Wall Street has been in rally mode, as investors this week bid up shares of companies that were set to receive support from Washington’s $2 trillion coronavirus aid bill.
With the package advancing through the Senate, the gains continued on Thursday. The S&P 500 climbed 6.2 percent, even after the government reported a staggering jump in unemployment claims by workers.
As it has been all week, investors’ focus was on companies likely to get help from the spending plan that passed the Senate on Wednesday night. The House of Representatives and President Trump are expected to approve it.
Boeing rose nearly 14 percent on Thursday because the package specifically sets aside $17 billion for “businesses critical to maintaining national security” — language that was seen as intended at least partly for the aircraft manufacturer and key Pentagon contractor.
Other companies that were hit hard in the early days of the coronavirus outbreak continued to soar. American Airlines and Delta Air Lines rose nearly 2 percent. Carnival Corporation was up about 14 percent.
But the economic crisis is perhaps the most daunting since World War II. On Thursday, a government report showed a record rise in weekly applications for unemployment benefits, which jumped to nearly 3.3 million from 282,000 in a week.
Migrant workers are locked out, leaving farms short of labor.
Border lockdowns in Europe are creating a labor shortage on farms, as migrant workers who usually harvest crops are unable to make the necessary trips.
In Britain, farmers are struggling to find people to pick raspberries and potatoes. Part of Germany’s prized white asparagus crop risks rotting in the ground. And in Italy, over a quarter of the strawberries, beans and lettuce due to ripen in the coming months may lack harvesters.
With seasonal workers unable to cross borders, governments have been forced to rethink how to supply farm labor. France’s agriculture minister this week appealed to hairdressers, waiters, florists and others temporarily unable to work to head to the nation’s fields and start picking. More than 40,000 people had applied by Thursday, but 200,000 are needed.
“I’m calling on this shadow army, on the many men and women who want to work,” Didier Guillaume, the minister, said on BFM television on Tuesday. “We have to produce to feed the French.”
India cuts interest rates as economic outlook dims.
India’s central bank cut a key interest rate by three-quarters of a percentage point on Friday in an effort to reduce the economic fallout from the nationwide 21-day lockdown that began on Wednesday.
The Reserve Bank of India also gave its permission for commercial banks and other lenders to give customers a three-month moratorium on loan payments.
The bank’s governor, Shaktikanta Das, said the likelihood of a global recession is increasing, although he offered no specific forecast. On Thursday, the Indian government announced a $22.6 billion relief package to get food and cash to the poorest of India’s 1.3 billion residents.
Private economists have slashed projections for India’s economic growth as the lockdown and earlier measures to counter the virus have brought commerce to a virtual halt. On Friday, Moody’s said that India’s economy would grow at a 2.5 percent rate in the 2020 calendar year, about half the rate of 2019. The previous day, CRISIL, a credit ratings service, projected 3.5 percent growth for the fiscal year that begins on April 1.
State and local governments get billions, but less than during the last crisis.
The $2 trillion coronavirus package approved by the Senate sets up a $150 billion relief fund for states and local governments, offers tens of billions more for running local infrastructure like mass transit systems and airports and expands the Federal Reserve’s authority to buy municipal bonds.
The fund is smaller than the $282 billion that states and cities received under the American Recovery and Reinvestment Act of 2009, and it has tighter limits on what it will pay for. “We do not believe there is much flexibility,” said Tom Kozlik, head of municipal strategy and credit at Hilltop Securities, an investment firm in Dallas. “It can only be spent on activities that are directly related to Covid-19.”
THE DETAILS The relief fund would make at least $1.25 billion available to each state, with amounts adjusted upward according to population. Money will also be available to the District of Columbia, territories like Puerto Rico and tribal governments.
Additional amounts will be available to school districts and higher educational institutions, airports and mass transit systems and urban housing programs. The Federal Reserve is authorized to buy up to $454 billion of debt securities — municipal bonds as well as corporate securities.
THE CONTEXT The Federal Reserve’s new bond-buying program is intended mainly to keep the markets running smoothly on bonds that have already been issued. Earlier this month, there was a rout when mutual funds had to sell municipal bonds to raise cash when herds of investors started stampeding to redeem their shares. The supply of municipal bonds exceeded market demand, and the Fed stepped in to balance things out. The legislation expands the amounts and types of debt the Fed can buy to keep that from happening again.
In addition to municipal bonds on the market, the Fed would also be able to buy new bonds as they are issued by governments. Until just weeks ago, states and local governments were not issuing much new debt. But now that the pandemic has prompted governments to delay their income-tax deadlines, some states may have to issue short-term debt just to tide themselves through until the tax revenue starts arriving, probably in summer.
How the Fed’s magic money machine will turn $454 billion into $4 trillion.
With the Federal Reserve’s help, the government plans to turn a $454 billion spending package working its way through Congress into a more than $4 trillion booster shot for the United States economy.
How, you might ask, does that add up?
The answer lies in the central bank’s emergency lending authorities, given to it by the Federal Reserve Act. When the Fed declares that circumstances are unusual and exigent, and Treasury Secretary Steven Mnuchin signs off, it can set up special programs that essentially buy debt from — or extend loans to — businesses large and small.
The Fed could simply print the money to back that lending, but it avoids taking on credit risk, so it asks for Treasury funding to insure against losses. But those taxpayer dollars can be leveraged: Because the Fed expects most borrowers to pay back, it does not need one-for-one support. As a result, a mere $10 billion from Treasury can prop up $100 billion in Fed lending. And voilà — the money Congress dedicates to Fed programs can be multiplied many times.
What else is happening:
Britain’s property market has been frozen as the government has told people not to put their homes on the market or to allow viewings of their properties. It also advised people in the middle of a transaction to delay the process and avoid moving in during the lockdown period.
Reporting was contributed by David Streitfeld, Mary Williams Walsh, Vindu Goel, Amie Tsang, Carlos Tejada, Kevin Granville and Daniel Victor.