The Globe and Mail - 27.03.2020

B2| REPORTONBUSINESS O THEGLOBEANDMAIL| FRIDAY, MARCH 27, 2020

The number of Americans filing
claims for unemployment bene-
fits surged to a record of more
than three million last week as
strict measures to contain the
coronavirus pandemic brought
the country to a sudden halt, un-
leashing awave oflayoffs that
likely ended the longest employ-
ment boom in U.S. history.
The weekly jobless claims re-
port from the Labour Depart-
ment on Thursday offered the
clearest evidence yet of the coro-
navirus’s devastating impact on
the economy, which has forced
the Federal Reserve to take ex-
traordinary steps and the U.S.
Congress to assemble a record
US$2-trillion stimulus package.
Economists say the economy is
already in recession. Weekly
claims are the most timely labour
market indicator. With nearly
half the country’s population un-
der some form of a lockdown and
reports of state employment web-
sites overwhelmed, economists
are bracing for further increases
in jobless claims.
“With partial lockdowns across
the country leading to a sudden
stop in economic activity, the U.S.
economy will experience the
largest economic contraction on
record with the most severe surge
in unemployment ever,” said Gre-
gory Daco, chief U.S. economist at
Oxford Economics in New York.

“We expect jobless claims will

continue to climb as more eco-

nomic activity shuts down.”

Initial claims for unemploy-

ment benefits rose three million

to a seasonally adjusted 3.28 mil-

lion in the week ending March 21,

eclipsing the previous record of

695,000 set in 1982, the Labour

Department said. That also

dwarfed the peak of 665,000 in

applications during the 2007-08

recession, during which 8.7 mil-

lion jobs were lost.

The Labour Department attri-

buted the surge to COVID-19.

“This large increase in unem-

ployment claims was not unex-

pected and results from the rec-

ognition by Americans across the

country that we have had to tem-

porarily halt certain activities in

order to defeat the coronavirus,”

U.S. Labour Secretary Eugene Sca-

lia said in a statement.

Layoffs were concentrated in

the accommodation and food

service, health care and social as-

sistance, arts, entertainment and

recreation, transportation and

warehousing, and manufacturing

industries.

Mounting job cuts and a sink-

ing economy have prompted U.S.

President Donald Trump to push

for businesses to reopen by East-

er, which is April 12. With infec-

tions and the death toll rising,

many health experts, economists

and politicians have argued

against such a move.

Fed Chair Jerome Powell said

on Thursday in an interview on

NBC’sTodayshow that the econo-

my “may well be in recession,”

but progress in controlling the

spread of the coronavirus will dic-

tate when the economy can fully

reopen.

Recessions in the United States

are called by the National Bureau

of Economic Research. The NBER

does not define a recession as two

consecutive quarters of decline in

real gross domestic product, as is

the rule of thumb in many coun-

tries. Instead, it looks for a drop in

economic activity, spread across

the economy and lasting more

than a few months. The economy

grew at a 2.1-per-cent annualized

rate in the fourth quarter, the

Commerce Department con-

firmed in another report on

Thursday. The department also

reported a 9.1-per-cent plunge in

the goods trade deficit to

US$59.9-billion in February, as

well as declines in wholesale and

retail inventories, as the corona-

virus helped to depressed im-

ports.

Stocks on Wall Street were

trading higher, with expectations

rising that the record jump in un-

employment benefits would spur

additional fiscal relief.

REUTERS

U.S.weeklyjoblessclaimshitrecord

LabourDepartment

reportsmorethanthree

millionpeoplefiled

forbenefitslastweek

LUCIA MUTIKANIWASHINGTON

Alaska

Hawaii

Puerto

Rico

U.S. Virgin

Islands

Wash.

Maine

Conn.

Mont.

Idaho

Kans.

Minn.

W.Va.

Mich.

Nebr.

Tenn.

Miss.

Okla.

Colo.

Wyo.

Calif.

N.M.

Utah

Ohio

Iowa

N.H.

Mass.

Nev.

Ariz.

Wis.

N.C.

N.D.

Ore.

S.C.

S.D.

N.J.

Ark.

Tex.

Del.

Md.

N.Y.

Ala.

Mo.

Ind.

Fla.

Ga.

Va.

Pa.

La.

Ky.

Vt.

Ill.

R.I.

50,000 100,000 150,000 200,000

U.S. WEEKLY UNEMPLOYMENTINSURANCE CLAIMS,ADVANCE INITIALCLAIMS

Filed during week ended March 21, notseasonally adjusted

Note: Advance claimsare notdirectly comparableto claimsreported in prior weeks. Advance claimsare reported bythestate liable for

payingtheunemploymentcompensation, whereaspreviousweeksreported claimsreflectclaimantsbystateofresidence.

MURAT YÜKSELIR/THE GLOBE AND MAIL, SOURCE: U.S. DEPARTMENT OF LABOUR

A&W Canadais asking landlords
for a two-month rent deferral, as
the COVID-19 pandemic forces
restaurants to limit dine-in ser-
vice or close in an effort to stop
the spread of the virus.
The burger chain, whose fran-
chisees operate nearly 1,000 res-
taurants across the country, e-
mailed its landlords on Wednes-
day, saying “our franchisees need
immediate support to ensure the
long term viability of their busi-
nesses.”
“We are asking for your agree-
ment to defer rent payments for
a period of two months,” said the
e-mail from Patti Parente, the
vice-president of development
for A&W Food Services of Canada
Inc.
One of the landlords who re-
ceived the e-mail from A&W said
a blanket request for a rent de-
ferral is “not working with land-
lords.”
“I expect A&W to pay the rent
on time,” said Cierra Watson, ex-
ecutive vice-president of Watson
Properties. “If no money comes
in, how are you supposed to pay
the mortgage, hydro, gas, insur-
ance?”
Ms. Watson’s company owns
two low-rise buildings in Toron-
to. She said another restaurant
tenant came to her and wanted

to work with her on a solution,

which Ms. Watson said she was

happy to do.

But she found A&W’s demand

outrageous. “It is a chain. A&W is

saying ‘Screw you. Because I am

A&W, you are going to take it,’ ”

Ms. Watson said.

A&W said it sent the e-mail be-

cause it had been contacted by

many of its landlords to discuss

how to “help support” its fran-

chise operators. “As a response,

we drafted this letter to start

these kinds of positive, forward-

looking conversations with all

our landlords,” the company said

in an e-mailed statement.

Grocers, drug stores and dis-

count chains are the only retail-

ers that have seen a spike in sales

as Canadians are told to stay at

home.

With April’s rent looming, ten-

ants and their landlords are

scrambling for a way to pay their

respective bills.

Some banks have said they

would consider deferring mort-

gages for up to six months for

small businesses. But Ms. Watson

and other landlords say that is

not a viable option. Interest con-

tinues to accrue over those six

months. In the meantime, there

are still bills to pay, including re-

alty taxes and insurance.

Leases typically contain force

majeure clauses that cover

events outside of the parties’

control. Those clauses usually re-

quire the tenant to continue pay-

ing the rent, even in the event of

a government shutdown.

“The worst thing the tenant

can do is not pay the rent. The

reason being, 99 out of 100 leases

have wording ‘whatever is hap-

pening in the world, does not

prevent you from paying rent,’ ”

said Mark Uster, a lawyer with

Dale & Lessmann LLP who spe-

cializes in commercial real es-

tate.

Ontario has temporarily

banned evictions for residential

tenants, though has not done the

same for commercial ones. If a

business does not pay the rent,

the tenant is technically in de-

fault on the lease, allowing the

landlord to begin proceedings to

evict the tenant.

Ms. Watson said she was pre-

pared to take legal action if A&W

did not pay the rent.

A&W Canada, whose franchisees operate nearly 1,000 restaurants across the country, told landlords that their
‘franchisees need immediate support to ensure the long term viability of their businesses.’
TIJANAMARTIN/THECANADIANPRESS

A&Wrequeststwo-monthrent

deferralfromfranchisees’landlords

RACHELLEYOUNGLAI
SUSAN KRASHINSKY ROBERTSON

IexpectA&Wto pay the

rent on time.Ifno

money comes in, how

are you supposed to pay

the mortgage, hydro,

gas, insurance?

CIERRA WATSON

EXECUTIVEVICE-PRESIDENT

OFWATSONPROPERTIES

Canadian business groups are joining their counterparts in

the United States and Mexico to ask for a delay in the imple-

mentation of the new United States-Canada-Mexico Agree-

ment that replaces NAFTA, saying it’s unfair to expect com-

panies to adjust to new rules during a deadly pandemic.

The Trump administration has talked about making June 1

the entry-into-force date for all elements of the USMCA – in-

cluding new regional content rules for autos – and United

States Trade Representative Robert Lighthizer sent Congress

notice of that date in early March.

Flavio Volpe, president of Canada’s Automotive Parts

Manufacturers’ Association, said the imposition of new rules

on companies “that are in an unprecedented shutdown be-

cause of a global pandemic would be recklessly harmful.”

His organization, along with auto industry associations in

the U.S. and Mexico, is urging allthree governments to work

together to postpone enforcement until January, 2021. Mr.

Volpe points out that all three countries are still working to

develop uniform regulations to implement the deal.

Mark Agnew, senior director of international policy at the

Canadian Chamber of Commerce, the country’s largest busi-

ness lobby, said they would also like to see a delay.

“All new regulatory processes that are not critical need to

be paused,” Mr. Agnew said.“The government needs to be

talking to businesses about what a grace period or phase-in

approach could look like.”

He said the Chamber understands U.S. President Donald

Trump wants to have the USMCA in force before fall elec-

tions, but added there must be a way to delay new obligations

on companies. “Under normal circumstances, companies

could rush to make it happen. But you have all sorts of busi-

nesses that are closed. You have workers going into self-isola-

tion. And those who are working are pulling their hair out

because of COVID-19.”

Asked whether the Canadiangovernment would try to

convince the United States to put off implementation of the

USMCA, Deputy Prime Minister Chrystia Freeland’s office

said Ottawa is in closecontact with theU.S. government.

“With respect to the entry into force of the new NAFTA,

Canadiangovernment officials continue to closely co-ordi-

nate with our businesses, labour and other domestic stake-

holders. Canada is working with the U.S. and Mexico on uni-

form, trilateral regulations, which are required before the

agreement can enter into force for all three countries,” Kathe-

rine Cuplinskas, Ms. Freeland’s press secretary, said in a state-

ment.

A Canadiangovernment official, who was granted ano-

nymity by The Globe and Mail because they were not autho-

rized to discuss the matter publicly, said Ottawa understands

the concerns being raised by business groups, but cautioned

the Trump administration remains very eager to bring the

deal into force on June 1.

The U.S. embassy in Canada referred questions to the Of-

fice of the United States Trade Representative. The trade de-

partment could not be immediately reached for comment.

The USMCA imposes stricter rules for cars made in Cana-

da, Mexico or the U.S. if automakers want to avoid duties

when moving between the countries. Seventy-five per cent of

North American auto content must come from the NAFTA

region, up from 62.5 per cent under the old North American

free-trade agreement. Forty per cent to 45 per cent of content

must be made by workers earning at least US$16 an hour.

Canada and Mexico will also be bound by a quota system and

new auto-content rules; any auto exports that exceed the

quota and fail to meet the new rules will be subject to tariffs.

Canadian trade consultant Peter Clark agrees it’s “overly

ambitious” for the U.S. to expect companies to be able to

comply with new rules in two months. “The supply chains

are all screwed up. They just can’t do it in that time frame.”

If the rules go into force June 1, Mr. Volpe says, the risk is

that cars entering the U.S. from Canada could be slapped with

duties because companies don’t have the necessary informa-

tion to know if their products are compliant. “There is going

to be a massive list of vehicles that don’t meet the new USM-

CA rules and will incur a 2.5-per-cent tariff on them at a time

when nobody is spending money or working,” he said.

With reports from Reuters

Businessgroupscallfor

USMCAdelayamidvirus

STEVEN CHASEOTTAWA