After President Trump’s declaration that he would bypass Congress to provide a $400 supplement to unemployment payments, with the states picking up one-quarter of the cost, state officials said Monday that they didn’t know how the plan would work — or simply said it wouldn’t.
The money is meant to replace a $600 supplement that expired at the end of July. Mr. Trump’s action called for most recipients to get an extra $300 a week from federal disaster funds, leaving the states to supply $100.
The administration said the states could tap funds provided under the CARES Act passed in March. But Gov. Gavin Newsom of California, a Democrat, said such money “simply does not exist.” He said that more than 75 percent of the $15 billion that California had received from the CARES Act had been distributed, and that the state’s share of the supplement would cost $700 million a week.
“There is no money sitting in the piggy bank of the previous CARES Act to be reprioritized or reconstituted for this purpose,” he said.
Another Democrat, Gov. Philip D. Murphy of New Jersey, said on Twitter: “States are going broke and millions of Americans are unemployed. Yet the president’s solution called for states to create a new program we cannot afford and don’t know how to administer because of this uncertainty.”
Gov. Tate Reeves of Mississippi, a Republican, said he had not decided whether to take part in the program because of concerns over the cost. “This is not as easy of an answer as some might think,” he said.
State unemployment offices, which administer the benefits even when they are funded by the federal government, said they had received minimal guidance. “We’re still waiting to see how it’s going to kind of shake out,” said Stacy Johnston, a spokeswoman for the New Mexico Department of Workforce Solutions.
President Trump’s directive to defer withholding of certain payroll taxes from September through the end of the year is being referred to as a “payroll tax holiday.” But since Mr. Trump is only suspending the tax, not cutting it, the money that companies would cease to withhold would have to be repaid next year barring legislative action.
Many companies and employees might be hesitant to opt into the program because it is not clear whether Congress will eventually forgive the deferred taxes, or if the full sum will be due at a later date.
“Some employees may not want to do this at all if they perceive that maybe Congress isn’t going to follow up with legislation to forgive this,” said Pete Isberg, vice president of government relations for ADP, a payroll specialist that serves more than 800,000 businesses. “It’s a little bit of a risk that Congress may not act, and if you’re deferring a significant amount of taxes the reality is, a few months later, you’re going to have to come up with that cash and pay those taxes.”
Furthermore, the rollout itself may be extremely expensive and time-consuming for businesses. The payroll tax rate does not usually change in the middle of the year, said Mr. Isberg, and the shift will require businesses to reprogram their payroll systems.
“Things of this magnitude normally take six months or so for orderly programming,” said Mr. Isberg.
Many businesses are likely to hold off on making any decisions until they receive additional guidance from the federal government. One option some employers might consider is to continue withholding the tax and repay workers later if it is eventually forgiven. That option would, of course, defeat the purpose of stimulating the economy now when it could use the help.
Hertz Global Holdings reported on Monday that its global revenue plummeted 67 percent in the second quarter from the year before, a decline that contributed to an $847 million loss and the car rental company’s decision in May to file for bankruptcy.
The company said business improved ahead of the Fourth of July holiday, but a rise in coronavirus cases across the South and West has since slowed demand again.
The coronavirus pandemic has devastated Hertz by grounding business travelers and tourists, making it impossible for the company to continue paying its lenders. A sharp drop in used car prices had decreased the value of its fleet, though the company said it started selling more vehicles as demand for used cars rebounded in May and June.
Though it had piled up $17 billion in debt, Hertz, which also owns the Dollar and Thrifty brands, was reporting healthy sales at the start 2020. The company’s revenue rose 6 percent in January and February.
But the pandemic dealt what the company has described as “a rapid, sudden and dramatic” blow. Sales dried up in March as much of the world started to shelter at home. Airports, where Hertz and its competitor Avis Budget Group earn most of their revenue, turned into ghost towns.
Households became more pessimistic about their employment prospects in July after months of gradual improvement, a Federal Reserve Bank of New York survey showed.
Unemployment expectations — measured as the average chance that the U.S. unemployment rate will be higher one year from now — increased in July after three months of decline, ticking up to 39.3 percent from 35.1 percent the prior month, according to the monthly Survey of Consumer Expectations.
That prediction of higher joblessness ahead is notable, because the unemployment rate is already elevated and stood at 10.2 percent in July, higher than at any point in the 2007 to 2009 recession. The souring outlook came as coronavirus cases ticked up across much of the nation, causing some places to hit pause on reopening plans. Real-time trackers suggest the rebound in consumer spending may have stalled against that backdrop.
People also perceived a higher chance of losing work over the coming year, based on the survey, an internet-based panel of 1,300 households. They put the average probability at 16 percent in July, up from 15 percent in June.
The survey wasn’t all bad news. Households judged their chances of finding a job in the case of unemployment to have improved slightly, and their expectation for income growth held steady, albeit well below 2019 levels.
Stocks rose on Monday, with Wall Street coming ever closer to a record, even as investors faced continued uncertainty over Washington’s support for businesses and unemployed workers and continuing tension between the United States and China.
After a turbulent start to the day, the S&P 500 was slightly higher by late afternoon. Shares in Europe also climbed.
The gains on Wall Street were capped by a retreat in shares of large technology companies. The Nasdaq composite fell nearly half a percent.
As small as it was, though, the gain in the S&P 500 put it less than 1 percent below its high, which it reached in late February before the sudden spread of the coronavirus shut down the American economy, leading to mass layoffs and business closures in the United States. Stocks went into a tailspin before a mix of government spending and central bank policy aimed at bolstering the economy helped reassure investors.
That spending is again a focus on Wall Street, after President Trump on Saturday signed a number of executive actions aimed at restoring unemployment benefits that had expired and providing relief for renters and student borrowers. But the moves are legally questionable, because they circumvent congress, and unlikely to have immediate, meaningful impact on the economy.
The prospects for an agreement among Democrats and Republicans in Congress are up in the air. Lawmakers have largely left the capital to return to their home districts, and it is unclear when negotiations over the bill will resume.
Treasury Secretary Steven Mnuchin said on CNBC on Monday that the White House was “prepared to put more money on the table,” to come to an agreement. “If we can get a fair deal, we’re willing to do it this week,” Mr. Mnuchin said.
The strain between Washington and Beijing also continued on Monday as the United States sent its highest-level delegation to visit Taiwan since severing official ties with the island in 1979. China, which claims the territory, said on Monday that it would impose sanctions on 11 Americans, including several senators — an apparent response to an announcement on Friday by the Trump administration of sanctions on Carrie Lam, Hong Kong’s chief executive, and 10 others for their roles in cracking down on political dissent.
WarnerMedia began a significant round of layoffs on Monday that will see its ranks decline by 600 people, according to two people with knowledge of the layoffs who were not authorized to speak publicly. It comes after the company’s corporate restructuring Friday in which three top executives were ousted.
The majority of the job losses were at Warner Bros. Entertainment. More layoffs are expected, the people said. The company has a global work force of 7,000.
As part of the overhaul, Jeffrey R. Schlesinger, president of Warner Bros. Worldwide Television Distribution, will depart, as will Ron Sanders, president of Worldwide Theatrical Distribution. Kim Williams, chief financial officer of Warner Bros. Entertainment, will also exit the company.
“Jeff, Ron and Kim are all highly valued members of my senior leadership team, and we will be forever grateful for the many meaningful and lasting contributions each of them has made to Warner Bros.,” said Ann Sarnoff, chief executive of Warner Bros. and the newly announced head of WarnerMedia’s Studio and Networks Group. “I think them all for their dedication and years of service, and wish them the very best in their next chapters.”
The moves are part of a shake-up by WarnerMedia’s new chief executive, Jason Kilar, who has helmed the company since May. Mr. Kilar is realigning WarnerMedia to put more emphasis on its new streaming service, HBO Max, which pulled in 4.1 million subscribers in its first month.
WarnerMedia is a division of AT&T.
Barry Diller’s media and technology company IAC announced on Monday that it had acquired a 12 percent stake of MGM Resorts International for $1 billion, betting on the value of building out MGM’s online gaming infrastructure at a time when the coronavirus is keeping many gamblers stuck at home.
“What initially attracted us to MGM, besides its leadership in leisure, hospitality and gaming, was an area that currently comprises a tiny portion of its revenue — online gaming,” Mr. Diller, the chairman and senior executive of IAC, said in a statement.
Mr. Diller added that the move, in the midst of the global pandemic that has dealt a devastating blow to the gambling industry, might surprise some investors, but it represents the “opportunistic zeal” of the company. One billion dollars would have bought about six percent of MGM’s shares at the start of this year.
“We believe MGM presented a ‘once in a decade’ opportunity for IAC to own a meaningful piece of a pre-eminent brand in a large category with great potential to move online,” the company said in a letter to shareholders. “IAC has always been opportunistic with its capital, and if ever there was a time, this moment is unique.”
The move comes shortly after IAC’s separation from Match Group, the parent company of the dating site Match.com, which Mr. Diller said left IAC with $3.9 billion in cash and no debt. MGM’s stock was up 20 percent after the announcement Monday morning.
Beginning in March, casinos across the country were forced to close because of the pandemic, and though many opened back up over the summer, they did so with limited capacity. On July 30, MGM Resorts reported a net loss of $857 million for the second quarter, compared to a profit of $43 million during the same period last year.
Jet fuel is known as the steady eddy of the refinery business, a predictable profit maker that balances the seasonal gyrations of gasoline and diesel sales. But for airlines, it is a headache — a big and unpredictable expense that confounds managers.
So Delta Air Lines tried a bold experiment: It bought an oil refinery in 2012 outside Philadelphia, the first such purchase by a major U.S. airline. When jet fuel prices were high, as they were then, Delta figured the refinery, which turns crude oil into the stuff that planes, cars and trucks burn, could offset some of its expenses and perhaps even make money.
“A lot of energy guys hate it, and I can understand why, because we’re taking money out of their pockets,” Ed Bastian, the airline’s current chief executive and then president, said at an industry conference in 2012.
But the refinery made only modest profits some years and lost money in others. This year, as the coronavirus hammered demand for air travel, it has become a liability for Delta, widely considered by analysts as one of the best-run airlines in the country.
Executives at Delta and its refinery declined requests for comment.
The Eastman Kodak Company’s stock tumbled nearly 30 percent on Monday after a U.S. government agency said it would pause a potential $765 million loan to the company for the production of pharmaceutical ingredients in the United States.
The U.S. International Development Finance Corporation said in a tweet on Friday that “recent allegations of wrongdoing raise serious concerns” and it would not proceed with the deal until the allegations were cleared.
Kodak is facing allegations of insider trading after its chief executive, Jim Continenza, received 1.75 million stock options the day before the potential loan from the government was announced. The announcement of the deal caused Kodak’s shares to spike more than 1,000 percent.
On July 28, we signed a Letter of Interest with Eastman Kodak. Recent allegations of wrongdoing raise serious concerns. We will not proceed any further unless these allegations are cleared.
— DFCgov (@DFCgov) August 7, 2020
The potential loan, which was announced last month, was an effort by the Trump administration to start to chip away at the United States’ dependence on foreign countries for medicines. Under the project, Kodak would produce critical drug components from its headquarters in Rochester, N.Y.
On Friday, Kodak said it had created a special committee to review internal activity around the loan announcement, and said it would offer no further public comment during that review.
Simon Property Group, the biggest mall operator in the United States, said on Monday that 91 percent of tenants across its U.S. properties were open and operating as of Aug. 7, but noted that it was still working to collect rent payments. The company said that it collected about 51 percent of contractual rent from U.S. retailers in April and May combined, 69 percent in June and 73 percent in July, including “some level of rent deferrals.” Simon has been rumored to be a potential bidder for J.C. Penney, which filed for bankruptcy in May, and to be negotiating with Amazon to transform some empty department store space into Amazon distribution hubs. It declined to “respond to market rumors or speculation” when asked about the deals on an earnings call. But the company acknowledged its involvement in recent bids for bankrupt chains including Brooks Brothers and Lucky Brand, saying that its interest went beyond securing rent payments from their stores and that it believed in the brands.
Saudi Aramco, the world’s largest oil company, said on Sunday that its quarterly earnings plunged more than 73 percent compared with a year ago, as lockdowns imposed to curb the coronavirus pandemic drastically cut the demand for oil and slammed prices. Despite the steep fall in earnings, to $6.6 billion from $24.7 billion, the company said it would continue paying a quarterly dividend of $18.75 billion, almost three times its cash flow. Aramco is locked into paying such a large amount — $75 billion a year — because of commitments made in the run-up to its initial public offering last year.