Wells Fargo will allow some employees to work remotely even after the pandemic.
Daily Business Briefing
July 23, 2021, 9:40 a.m. ET
July 23, 2021, 9:40 a.m. ET
Wells Fargo is bucking a Wall Street trend by leaving the door open to remote work after the pandemic.
The bank will allow some flexibility for corporate, technology, operations and call-center employees, although arrangements will vary by job type, according to a memo sent to staff members on Friday. The plan is more specific than those of Wells Fargo’s major rivals, which have extolled the virtues of in-office work while signaling they would consider more adaptable arrangements in the future.
“When we return, our schedules will mostly resemble our prepandemic working approach, with additional flexibility,” Scott E. Powell, Wells Fargo’s chief operating officer, wrote in the memo.
Wells Fargo will bring work-from-home employees back to the office starting Sept. 7 and through October — later than other banking giants JPMorgan Chase and Goldman Sachs, which have been quicker to call back their workers.
Corporate employees are expected to come back in October and spend a minimum of three days a week in the office, while the majority of technology workers will be given more options to work remotely, according to the plan. Operations and call-center workers will be asked to return on a rotational basis in September, while branch workers will stay at their workplaces, which have largely stayed open during the coronavirus outbreak.
Almost 100,000 of the lender’s more than 259,000 staff remained at their posts during the pandemic or have already returned to their workplaces.
Mr. Powell wrote that the bank was monitoring the pandemic, including the spread of new coronavirus variants, and the plan assumes that conditions remain stable or further improve.
The cost of refinancing a mortgage could get a bit cheaper starting next month after federal housing regulators decided to end an additional fee that had been imposed on some mortgage lenders.
The move by the Federal Housing Finance Agency to eliminate the extra fee on mortgages guaranteed by Fannie Mae or Freddie Mac reversed a decision that its former leadership made last summer. A year ago, the agency imposed the 0.5 percent fee to refinance mortgages to provide an extra cushion in the event borrowers defaulted on those loans because of the Covid-19 pandemic.
“Eliminating the adverse market refinance fee will help families take advantage of the low-rate environment to save more money,” said Sandra Thompson, acting director of the F.H.F.A., which regulates Fannie and Freddie, the two government-backed mortgage finance giants.
It’s not clear how much of an impact the added fee had on the mortgage market, or what effect its removal will have.
Lenders did not have to begin paying the extra fee to Fannie or Freddie until December. An analyst with KBW, the investment bank, said in a research note that the fee probably added about 0.1 percent to the cost of a mortgage. The analyst said ending the fee was a positive development for the mortgage refinance market but was unlikely to have a big effect on the profitability of lenders.
American Airlines is bringing back its remaining 3,300 flight attendants who volunteered for extended leave during the depths of the pandemic, as it prepares for a busy year-end holiday season.
“Increasing customer demand and new routes starting later this year mean we need more flight attendants to operate the airline,” Brady Byrnes, vice president for flight service, said in a Thursday memo to the airline’s flight attendants.
The flight attendants, who went on paid and unpaid leave, will be brought back to fly in November and December. But it will be “no easy task,” Mr. Byrnes said, noting that nearly two-thirds of them will require retraining. The airline also said it planned to hire about 800 new flight attendants by March, starting with three classes who were in training when the coronavirus pandemic first seized the industry.
In a securities filing this week, American previewed its quarterly financial results for April to June, saying it expects to announce an outcome between a $35 million loss and a $25 million profit next week. Like the rest of the industry, American is experiencing a strong rebound this summer as widespread Covid-19 vaccinations drive a travel frenzy.
“We are clearly moving in the right direction,” the airline’s chief executive, Doug Parker, and its president, Robert Isom, said in a staff memo on Tuesday. “Our revenue and expense performance in the quarter came in better than expectations, and this was achieved while bringing the operation back up to full capacity and safely transporting a record number of travelers.”
Retail sales rose in June, the Commerce Department reported on Friday, an unexpected jump as American consumers increased spending on dining out and clothes and gadgets.
The 0.6 percent increase in sales last month, after a drop in spending in May, highlighted the unevenness of the economic recovery. Even as overall sales rose, sales of cars and car parts and spending at building materials, furniture and sporting goods stores declined.
“Consumers are being discriminatory on what they spend on,” said Gregory Daco, chief U.S. economist at Oxford Economics. “They’re shying away from goods that they consumed in abundance during the pandemic and returning towards goods that they didn’t have access to during the pandemic.”
After falling to record lows about a year ago, sales rebounded this spring and are now fluctuating month to month, propelled by an uneven reopening of the economy. June’s sales were better than economists had forecast, but sales in coming months could be hampered by reactions to the fast-spreading Delta variant of the coronavirus, rising prices and the end of some government benefits.
Weighing on sales last month was a shortage of computer chips that limited how many cars and trucks automakers could deliver to dealers. The production of motor vehicles and parts declined 6.6 percent in June, the Federal Reserve reported on Thursday.
The shortage has also helped push up prices, in particular for used cars, which rose 10.5 percent in June, the government reported this week. The combination of low inventory and high prices is discouraging car buyers, economists say. Excluding cars and car parts, retail sales rose 1.3 percent in May.
The Consumer Price Index rose at the fastest pace in 13 years in June as inflation accelerated, the Labor Department said this week. A survey by the Federal Reserve Bank of New York also found that consumers expect higher inflation in the near term and over the course of several years.
“You’re starting to see a pickup in inflation expectations that might make consumers more cautious in terms of opening up their pocketbooks when they’re spending,” Beth Ann Bovino, U.S. chief economist at S&P Global Ratings Services, said ahead of Friday’s release.
Spending is also shifting from durable goods, such as electronics and furniture, to leisure activities, Ms. Bovino said. Some of that spending is not reflected in Friday’s report.
“This report only captures a small sliver on consumer spending, on restaurants and bars, but it misses all the travel,” she said.
As the back-to-school season approaches in September, Ms. Bovino expects more parents, who might have relied on unemployment benefits and tended to their children while they pivoted to remote learning, to rejoin the work force. That could help companies increase output and ease some of the shortages of supplies and products.
“I suspect we are going to see some of the supply constraints that businesses are facing right now ease come September,” she said.
Spending could also be affected by states withdrawing early from federal unemployment insurance programs, cutting off the $300 a week in aid that was added to benefits last year. Twenty-four states stopped paying the extended benefits, with most cutting off the aid in June, and an analysis by Bank of America based on credit and debit card spending showed that spending in states that ended the benefits saw a decline in consumer spending last week.
The states that withdrew the benefits have argued that the aid was discouraging people from seeking work when some businesses were trying to staff up as the economy reopens. Many economists say discontinuing benefits may end up hurting personal incomes more than they help address the worker shortage.
Ms. Bovino expects the child tax credit, which will provide all but the most affluent families up to $300 a month per child as part of the pandemic relief package, an extra lift to consumer spending. The size of the credit depends on a family’s income, the number of children and their ages.
“This could help give a cushion to those people who are unemployed as they find a job,” Ms. Bovino said.
The Biden administration warned American companies operating in Hong Kong that they are at risk of electronic surveillance and having their data collected as harsh new security restrictions implemented by China constrain what can be said online and upend the international business community.
The State Department on Friday said because of the new restrictions by the Chinese government, businesses could be subjected to electronic surveillance without a warrant. According to the advisory, companies may not have access to certain media websites, and companies could face retaliation for complying with U.S. sanctions and refusing to conduct business with certain executives in Hong Kong.
The advisory, issued by the departments of Homeland Security, State, Commerce and Treasury, warns of financial, legal and reputational risks for the U.S. companies.
It was issued as Antony J. Blinken, the secretary of state, criticized China for undermining Hong Kong’s democratic institutions, cracking down on protests and journalists and targeting a business environment that “has deteriorated in the past year.”
“Beijing has chipped away at Hong Kong’s reputation of accountable, transparent governance and respect for individual freedoms, and has broken its promise to leave Hong Kong’s high degree of autonomy unchanged for 50 years,” Mr. Blinken said in a statement on Friday.
Beijing last year imposed laws to subdue political strife as pro-democracy demonstrations spread throughout the city. The measures empowered the authorities to restrict demonstrations, seize broad control of security cases and impose harsh penalties on anyone who urges foreign countries to criticize or impose sanctions on the Chinese government. The Hong Kong government also crafted web controls that undermined the data privacy of some of the world’s largest internet companies.
Hong Kong was once known as a haven of internet freedom amid the Chinese government’s repression of free speech. But the surveillance and censorship powers have called into question the viability of continuing operations for American businesses, including major internet companies. An industry group representing the largest U.S. internet companies warned earlier this month that the restrictions in Hong Kong could impact companies’ ability to provide services in the city.
“The situation in Hong Kong is deteriorating,” President Biden said on Thursday during a news conference with Chancellor Angela Merkel of Germany. “And the Chinese government is not keeping its commitment that it made on how it would deal with Hong Kong, and so it is more of an advisory as to what may happen in Hong Kong. It’s as simple as that and as complicated as that.”
In the statement, Mr. Blinken also warned that journalists continue to be targeted in Hong Kong. “Hong Kong authorities have mounted a persistent and politically motivated campaign against the free press,” Mr. Blinken said, noting that the authorities had in April arrested Jimmy Lai, the 73-year-old founder of a pro-democracy newspaper in Hong Kong.
Across Europe, governments and businesses are maneuvering to try to stop a surge in coronavirus cases — driven by the rapid spread of the Delta variant — from hampering the continent’s recovery.
For the past few months, the relaxation of pandemic restrictions and the growing ranks of the vaccinated have propelled the economy forward. The European Commission recently upgraded its forecasts for the region. Britain has recorded four straight months of economic growth, and in some regions of the country, the number of employees on payroll is higher than before the pandemic.
But now the Delta variant is casting a shadow over the summer and threatening the upbeat outlook. It has made the path of the recovery much more unpredictable and uneven.
Britain
In Britain, the final lifting of restrictions on Monday is expected to add fresh momentum to the economic recovery. But the surge in infections presents an unexpected new hurdle to businesses trying to operate at full capacity. Businesses including hospitality, theater and trucking are having to shut down temporarily as workers go into self-isolation because they have either caught the virus or been told that they have come into contact with someone who has.
The surge in the number of people self-isolating has been a curveball even for businesses that prospered during the past 16 months. Fowlds Cafe, on a residential street in South East London, needed to close only five days during the first lockdown while the owner quickly transformed it into a coffee shop and general store with no seating. Business has been strong.
But after carefully navigating the pandemic restrictions for over a year, Fowlds recently had to shut for three days because a member of the staff had been in contact with someone who had the virus — so the rest of the team also needed to self-isolate and wait for coronavirus test results. Such closures are becoming more frequent. This week, the average number of new cases climbed above 30,000 per day for the first time since January.
“I do think it’s going to be very disruptive,” said Jack Wilkinson, the owner of Fowlds. He’s trying to mitigate the impact by looking for more part-time staff to reduce the chances of the whole team’s needing to isolate at once. But he said he was unlikely to reintroduce seating in the cafe until next spring, to help keep staff and customers safe.
And there is a risk that rising case numbers persuade people to spend more time in their homes and not out in restaurants, gyms and theaters, spending money to drive the economy. Recently, the number of restaurant bookings and retail foot traffic plateaued.
“Something does feel a bit different this time around,” Mr. Wilkinson said.
Southern Europe
In other European countries, rising case numbers have collided with the return to normal life, and restrictions have been reimposed. In Spain, which again has one of the highest infection rates in Europe, some regional governments have reintroduced restrictions. The virus is mainly spreading among the younger, unvaccinated population, creating fears of a new pullback in international travel and canceled bookings.
Portugal has reintroduced a curfew in Lisbon, Porto and other popular tourism spots, dampening a second summer travel season. When the European Commission published its latest economic forecasts last week, Portugal was one of only two countries for which the growth prediction wasn’t upgraded because coronavirus restrictions in June had slowed the pace of recovery there.
“Spain and other Mediterranean countries, they really have a big problem,” said Guntram Wolff, director of Bruegel, a Brussels-based economic think tank. “This health situation affects a critical sector massively.”
Northern Europe
This week, France and the Netherlands also announced new measures. In France, the government is trying to avoid another shutdown by introducing a “health pass,” showing whether users are vaccinated or recently tested negative to get them into restaurants and aboard planes and trains. The country has pursued a “whatever it takes” policy to support workers on paid furlough and to help businesses avoid bankruptcy. After nearly 300,000 jobs were destroyed last year, around 187,000 new ones have been created.
The German economy has been bouncing back quickly. Masks are still mandatory inside stores, but restaurants are open and full. The unemployment rate, at 5.9 percent, is almost back to the precrisis level. Optimism among German business managers is at its highest level since the beginning of 2019.
But Germany’s recovery has also been bumpy, and, as in the rest of Europe, the Delta variant is a looming threat. The infection rate in Germany remains very low, at eight per 100,000 people over seven days. But the number of new cases has doubled in the last week, and three-quarters of those were attributed to the variant. More than two million people are still on paid furlough and not counted as unemployed. The auto industry, Germany’s biggest export sector, is struggling with a shortage of semiconductors.
So far there is no talk of renewed lockdowns, but quarantine rules for travelers returning from Portugal and some other countries will discourage tourism. That is bad news for the rest of Europe: Germans are among the continent’s most avid travelers.
‘A fragile situation’
On a recent visit to Brussels, Janet L. Yellen, the U.S. Treasury secretary, urged Europe to maintain a supportive fiscal stance through next year and “seriously consider” additional fiscal measures.
Though there are limited new things Europe can do, governments must not withdraw its fiscal support prematurely, Mr. Wolff of Bruegel said. “That’s the key message, because we are still in this very fragile situation.”
Aside from carefully considering vacation locations to avoid virus hot spots, there hasn’t been a “big adjustment in the behavior” by Europe’s population because in some countries, the case numbers are still relatively low, Mr. Wolff said. But he expects the situation to worsen. “With the Delta variant, we will see consequences in the fall,” he said.
In showrooms across the country, Americans are buying cars — new and used — almost as fast as they can be made or resold. The frenzy is being fed by two related forces: Automakers are struggling to increase production because of a shortage of computer chips caused in large part by the pandemic. And a strong economic recovery, low interest rates, high savings and government stimulus payments have bolstered demand.
Used-car prices are up about 45 percent over the past year, according to government data published this week. New-car and truck prices are up about 5 percent over the past year.
“The market is insane right now.” said Rick Ricart, who is expecting nearly 40 Kia Telluride sport utility vehicles to arrive at his family’s dealership near Columbus, Ohio, over the next three weeks.
Those price increases have fed a debate in Washington about whether President Biden’s policies, particularly the $1.9 trillion American Rescue Plan he signed in March, are responsible for the sharp rise in inflation, reports The New York Times’s Neal E. Boudette. The government said this week that consumer prices across the economy rose 5.4 percent in the last year through June.
Republican lawmakers have argued that the March legislation is overheating the economy and are citing the rise in prices to oppose additional government spending. But Biden administration officials have pointed out that temporary supply shortages are largely responsible for the surge in prices of cars and other goods.
Government stimulus may have helped some consumers, but it is hard to say how much. There are several large forces at play.
The chip shortage, for example, is affecting automakers all over the world and is not directly related to U.S. policies. Industry officials blame limited production capacity for semiconductors and pandemic-related disruptions in supply and demand for the shortage.
Rental car companies that sold off thousands of cars during the pandemic to survive are now in the market to buy cars and trucks. They want to take advantage of a summer travel boom that has driven up rental rates to several hundred dollars a day in some places.
Even cryptocurrency enthusiasts have mixed feelings about their culture and markets. So it’s no wonder that lawmakers and regulators are torn over digital assets, as developments this week made clear, the DealBook newsletter reports.
Cryptocurrencies have “completely failed” to become a legitimate payment system, the Federal Reserve chair, Jerome Powell, said yesterday at a Senate hearing. He added that so-called stablecoins — cryptocurrencies whose value is pegged to the dollar or another asset like gold, with the idea of making them a predictable means of exchange — are dangerously unregulated.
Central banks could step in and develop digital versions of their currencies, but Mr. Powell is “legitimately undecided” about the benefits of doing so, he told senators. The Fed will put out a report on a digital dollar around September; the European Central Bank began a study of a digital euro this week.
“Smart legislation” is on the way “in the coming months,” Senator Cynthia Lummis of Wyoming, a Bitcoin holder and congressional crypto champion, said after the hearing. Ms. Lummis, a Republican, had pressed Mr. Powell to be precise about terms, warning against speaking about all digital assets interchangeably. “It’s important to be working from common definitions to have a clear legal framework,” Ms. Lummis said. Writing laws for the fast-moving industry won’t be easy.
The rise of Dogecoin is an example of the strange ways crypto mania has changed markets, perplexed officials and even made industry insiders question their assumptions. The token was created as a joke years ago to mock crypto culture, but it has recently minted millionaires, generated a big chunk of revenue for the trading app, Robinhood, and even caught the Fed’s attention. Dogecoin’s co-creator, Jackson Palmer, forcefully denounced the cryptocurrency world in sweeping terms this week, and those still in the industry didn’t entirely disagree with his points.
Sam Bankman-Fried, founder of one of the largest crypto exchanges, FTX, called Dogecoin the “asset of the year” because it is a “reflection of our era.” When millions of traders can join forces online to push up the prices of joke cryptocurrencies or meme stocks, it alters the meaning of value. That phenomenon is arguably “bad for the world,” he told DealBook. Sitting next to a painting of the dog that is Dogecoin’s mascot, a gift he keeps by his desk, Mr. Bankman-Fried said: “This is the coin we deserve, for better or worse.”
The pandemic was supposed to lead to a great tech diaspora. Freed of their offices and after-work klatches, the Bay Area’s tech workers were said to be roaming America, searching for a better life in cities like Miami and Austin, Texas — where the weather is warmer, the homes are cheaper and state income taxes don’t exist.
But dire warnings over the past year that tech was done with the Bay Area because of a high cost of living, homelessness, crowding and crime are looking overheated, reports Kellen Browning of The New York Times. A growing number of industry workers already trickling back as a healthy local rate of coronavirus vaccinations makes fall return-to-office dates for many companies look likely.
“I think people were pretty noisy about quitting the Bay Area,” said Eric Bahn, a co-founder of an early-stage Palo Alto, Calif., investment firm, Hustle Fund. “But they’ve been very quiet in admitting they want to move back.”
Bumper-to-bumper traffic has returned to the region’s bridges and freeways. Tech commuter buses are reappearing on the roads. Rents are jumping, especially in San Francisco neighborhoods where tech employees often live.
And on Monday, Twitter reopened its office, becoming one of the first big tech companies to welcome more than skeleton crews of employees back to the workplace. Twitter employees wearing backpacks and puffy jackets on a cold San Francisco summer morning greeted old friends and explored a space redesigned to accommodate social-distancing measures.
The Walt Disney Company said on Thursday that it would move roughly 2,000 consumer products and theme park-related jobs out of California over the next 18 months. The beneficiary will be Florida, where Disney already employs 60,000 theme park and consumer products workers in the Orlando area.
“In addition to Florida’s business-friendly climate, this new regional campus gives us the opportunity to consolidate our teams and be more collaborative and impactful both from a creative and operational standpoint,” Josh D’Amaro, chairman of Disney Parks, Experiences and Products, said in a memo to employees that was viewed by The New York Times.
The 2,000 jobs represent less than 5 percent of Disney’s work force in California. Disney’s corporate headquarters will remain in Burbank, where the company operates from a complex that includes soundstages and the headquarters for ABC, the Disney-owned television network. Mr. D’Amaro said Disney “remains committed” to its presence in California, where an expansion of the Disneyland Resort is underway.
Hewlett-Packard, Oracle and Tesla, among other California companies, have recently moved their headquarters to more tax-friendly states. Disney’s comparatively modest move has been in the works since 2019 and was delayed by the pandemic, a spokeswoman said.
Most of the affected Disney employees work in Glendale, Calif., a city near Burbank where Disney has had operations since 1961 — notably Imagineering, the company’s secretive research and design division. About 20 years ago, Disney created an office complex in Glendale called the Grand Central Creative Campus (GC3, in Disney shorthand) to house employees who handle consumer products licensing and merchandise design.
Once moved, the 2,000 Disney employees will work at offices in Lake Nona, a fast-growing area about 20 miles east of Walt Disney World where property developers like Tavistock have benefited from state tax breaks.
The Federal Aviation Administration on Thursday instructed airlines to inspect a pair of cabin air pressure switches on all Boeing 737 planes, citing safety concerns.
If the switches fail, oxygen levels could fall dangerously low inside a plane without warning. That could incapacitate flight crews, making them lose control of the plane.
“Addressing these failures requires immediate action,” the agency said in a directive.
Airlines have not reported any failures that led to a dangerous drop in oxygen levels during flight. But in September, an unnamed airplane operator said the switches on three planes — all different 737 models — had failed a test. Boeing decided late last year that those failures were not a security issue, but the company and the F.A.A. later concluded that they represented a threat after further investigation and analysis.
The F.A.A.’s directive applies to all 737 models, including the troubled 737 Max, which was banned globally in March 2019 after two fatal crashes. That ban began to be lifted late last year and the Max has been used on thousands of flights since.
The order, known as an airworthiness directive, makes mandatory a recommendation that Boeing issued to its customers last month, the company said in a statement. “Safety is our highest priority, and we fully support the F.A.A.’s direction,” Boeing said.
The order applies to about 2,500 planes in the United States and over 9,300 more worldwide. The switches must be inspected within 2,000 flight hours of the last time they were tested or within 90 days of the effective date of the order.
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Lordstown Motors, the embattled electric truck manufacturer, acknowledged in a regulatory filing on Thursday that it is the subject of an investigation by the U.S. attorney’s office in Manhattan relating to its merger last year with DiamondPeak Holdings, a special purpose acquisition company. The New York Times reported earlier this month that federal prosecutors had opened an inquiry into the company, and the Securities and Exchange Commission is running its own investigation.
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The small Hawaii company whose Boeing 737 cargo plane crashed off the island of Oahu this month has lost its authority to fly, the Federal Aviation Administration said. The agency had been investigating the company, Rhoades Aviation, since the fall and the decision is separate from the investigation into the July 2 crash. As of Thursday, Rhoades had only one operational Boeing 737.