Fed Unveils Stricter Trading Rules Amid Fallout From Ethics Scandal

The Federal Reserve faced scrutiny after two regional bank presidents disclosed questionable 2020 trading. Now it’s revamping the rules.

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The Federal Reserve unveiled a sweeping set of ethics changes on Thursday.Credit…Stefani Reynolds for The New York Times

The Federal Reserve unveiled a sweeping set of changes to its ethics practices on Thursday, outlining new rules governing the types of financial securities that policymakers can own and how they can trade them in response to an ethics scandal that has embroiled the central bank.

Senior Fed officials will not be allowed to hold individual stocks or other securities, and will instead be limited to purchasing diversified investment vehicles like mutual funds, the Fed said in an announcement. Trading activity will be limited in general, and during periods of heightened financial market stress the Fed will declare official trading blackouts.

The announcement amounted to rough guidelines and principles, ones that will be fleshed out and incorporated into official Fed rules in the weeks and months to come. It came as the Fed continued to grapple with fallout from trades made by two regional reserve bank officials in 2020, a year in which the central bank took extraordinary steps to rescue financial markets amid the pandemic.

Robert S. Kaplan traded millions of dollars‘ worth of oil and gas stocks and other individual company shares last year while he was head of the Federal Reserve Bank of Dallas, transactions first reported by The Wall Street Journal last month. His colleague, Eric S. Rosengren, bought and sold securities tied to real estate — which are sensitive to Fed policy — in 2020 while running the Federal Reserve Bank of Boston. Both resigned after news of their trades broke and ignited backlash. Mr. Rosengren cited health issues as his reason for retiring early while Mr. Kaplan said he did not want controversy surrounding the transactions to distract from the Fed’s work.

The trades have become a political problem for Jerome H. Powell, the Fed chair, who has faced mounting criticism just as he waits to learn whether the White House will reappoint him as the head of the central bank.

The fact that central bank officials were able to engage in trading in a year when the Fed was actively propping up markets struck many politicians, academics and even former Fed employees as inappropriate because policymakers are privy to vast amounts of financial market information. Democrats and watchdog groups in particular have questioned the Fed’s ethics policies and the culture that allowed the financial activity to happen.

Mr. Powell made his displeasure with the situation clear in public remarks last month and promptly ordered a revamp of the Fed’s ethics rules, which culminated in the new guidelines released on Thursday.

Mr. Powell has also asked for an investigation by the Fed’s independent watchdog, which has agreed to carry out a review. It is unclear when that review will be completed.

But scrutiny has persisted. Senator Elizabeth Warren, a Democrat from Massachusetts, sent a letter to Mr. Powell on Thursday asking for documents after The New York Times reported that the Fed’s ethics office in Washington had sent an email to the reserve banks in March 2020. The email suggested that officials should avoid active trading amid market turmoil and rapid-fire Fed action, and officials appear to have heeded the warning in April before some resumed financial activity later that spring.

The Fed released the text of the email to The New York Times on Thursday afternoon. It asked that officials “please consider observing a trading blackout and avoid making unnecessary securities transactions for at least the next several months, or until F.O.M.C. and Board policy actions return to their regularly scheduled timing.” The email showed that Fed officials realized trading could pose issues for the central bank, which was actively backstopping markets.

The Fed’s new rules could help to reassure the central bank’s critics by making trading limitations more standardized. They will apply to presidents at the 12 reserve banks, governors on the Fed’s seven-seat board in Washington, and senior staff, the Fed said. Beyond curtailing stock ownership, they would also prohibit officials from holding investments in individual bonds or investing in derivatives.

“These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” Mr. Powell said in a statement.

Officials will also be restricted in their ability to move money around. Policymakers and senior staff “generally” will be required to provide 45 days of advance notice for security purchases and sales, will need to obtain prior approval for such transactions, and will be asked to hold investments for at least one year, the Fed said.

Reserve bank presidents now will be required to publicly disclose financial transactions within 30 days, which Washington-based policymakers already do.

The Fed will incorporate the new restrictions into rules and policies “over the coming months,” according to the release.

“It seems like a big step in the right direction,” said Sarah Binder, a professor of political science at George Washington University and the co-author of a book on the politics of the Fed. “The devil’s in the details of exactly how these get written and defined.”

The new rules still need to be followed up by the planned external investigation, said Kaleb Nygaard, a senior research associate at the Yale Program on Financial Stability who studies the central bank. And it remains to be seen whether they will resolve the public perception that Fed officials might try to profit from their positions.

“This is in line with what people would think they would be — what they should have been — all along,” he said. “Most of the problem was with perception. It’s really inappropriate and really bad. And it’s hard to know if perception-wise, this will be enough.”

The speed of the changes was surprising for the central bank, which is often a slow-moving and contemplative institution, said David Beckworth, a senior research fellow at the Mercatus Center at George Mason University.

“Yes, they were forced into this — being pushed into the spotlight — but I think the scope is also important,” he said, saying that the new rules check necessary boxes. “It’s unfortunate that this is how this came about: They got their hand caught in the cookie jar. It does seem, at first glance, to cross the t’s and dot the i’s.”

Both the ferocity of the backlash to the Fed’s ethics dilemma and the speed of the review might have owed in part to the sensitive timing. Mr. Powell’s term as chair of the Fed ends early next year, and some progressives who do not want to see him reappointed have seized on the trading issues as they argue that the White House should choose someone new.

Better Markets, a financial watchdog group that has ranked among Mr. Powell’s most strident critics, said in a release following the announcement that the rules do not go far enough.

“The policies must be broader and apply to anyone at the Fed who is in possession of material nonpublic information,” Dennis Kelleher, the group’s chief executive officer, said in an emailed statement. He also said that “new policies cannot be used to whitewash the prior bad judgment, failures of leadership, and violation of the Fed’s own policies if not the law.”

But the updated restrictions likely would have prevented the problems the central bank is now confronting had they been in place last year, several academics said.

“These trading rules show how very seriously the Board of Governors has taken the trading scandal,” said Peter Conti-Brown, a Fed and financial historian and legal scholar at the University of Pennsylvania. “These rules would have eliminated the crisis that the Fed is confronting, had they been in place.”

Senator Elizabeth Warren requested that the Federal Reserve release an email sent to officials.Credit…Stefani Reynolds for The New York Times

Senator Elizabeth Warren, Democrat of Massachusetts, asked Jerome H. Powell, the Federal Reserve chair, on Thursday to release an email the central bank’s ethics office sent in March 2020 suggesting that officials might want to avoid unnecessary trading as they unrolled a sweeping market rescue.

The email, the existence of which was first reported by The New York Times earlier Thursday, was sent to regional bank ethics officers from the Fed Board of Governor’s ethics office on March 23, as the Fed announced a far-reaching market relief program, according to a person who saw it. It suggested that people with access to sensitive Fed information might want to stop unnecessary trading for a few months.

Officials seem to have heeded the warning and halted active financial activity in late March and April, based on disclosures and statements from central bank press officers. But the fact that some officials resumed trading in and after May 2020 has helped to fuel an ethics dilemma for the central bank.

Two regional Fed presidents ultimately resigned after disclosures of trades of stock and real estate securities from last year spurred criticisms of the central bank’s ethics rules and practices. Questions have also been raised about index fund trades made by Richard H. Clarida, the Fed’s vice chair, in February, before the email was sent, and by Mr. Powell in October, long after the Fed’s market interventions had been unveiled and implemented.

Mr. Powell has ordered a revamp of the Fed’s ethics rules and has asked for an investigation by an independent watchdog. Ethics and Fed scholars have suggested his and Mr. Clarida’s trades were less questionable than the ones happening at regional central bank branches. Even so, the fallout has become a potentially potent political weapon for some progressives who would prefer that the White House does not reappoint Mr. Powell when his term expires early next year.

Ms. Warren previously had stated her opposition to keeping Mr. Powell in his role based on his track record with financial regulation, at one point calling him a “dangerous man” to have at the Fed.

“The Fed has not released this email or any other ethics advice given to Fed officials during the time period when it was heavily involved in financial markets in response to the Covid-19 pandemic,” Ms. Warren wrote in the letter Thursday.

“I am writing to ask that you release this information immediately, so that Congress and the public can evaluate the extent to which Fed officials may have known of the risks from their trading, and if they ignored calls by ethics officials to avoid this scandalous behavior,” she continued.

Credit…Jae C. Hong/Associated Press

Google said it planned to lower the cut it takes on subscription-based apps in its Play Store for devices running its Android software, in the latest concession to regulatory pressure challenging whether the company has overcharged developers.

In a blog post on Thursday, Google said it would reduce its commissions on subscriptions for apps that users pay through its Play Store to 15 percent. Currently, Google takes a 30 percent cut for the first year of subscriptions and then lowers the rate to 15 percent from the second year. Google will eliminate the two-step process starting in January and apply the lower fee from the beginning.

Google also said some eBooks and streaming music services would be eligible for fees as low as 10 percent. It was not immediately clear which services or books would qualify and how the exact percentage was set.

In March, Google cut its take on the first $1 million a company earned through the Play Store to 15 percent from 30 percent, in a move aimed at easing the financial burden for smaller developers. It came on the heels of a similar commission cut from Apple.

The latest Play Store changes reflect the whittling away of fees that Google and Apple have charged developers to push their software through their app stores. When Apple introduced the App Store in 2008, the company set its commission at 30 percent and Google soon followed with a similar fee structure.

But as companies built businesses based on apps running on smartphones and tablet computers, a growing number of developers began to question whether a 30 percent take was excessive and a byproduct of the lack of competition in the market for app stores.

Earlier this year, a group of 36 states and the District of Columbia sued Google, claiming that its app store abused its market power. Google is also fighting a lawsuit filed by Epic Games, the creator of the popular video game Fortnite, after the search giant removed the game maker’s app for circumventing its payment system and avoiding fees. Last week, Google filed a countersuit against Epic.

Facebook’s Oversight Board said the company’s lack of transparency about a program that gave some users special treatment had harmed its ability to rule on Facebook’s decisions.Credit…Kelsey McClellan for The New York Times

The panel appointed by Facebook to review its policy decisions sharply criticized the company on Thursday for not being transparent about an internal program that gives prominent users preferential treatment on the social network.

The group, known as the Facebook Oversight Board, said Facebook failed to provide relevant information about a system called cross check, which was first disclosed by The Wall Street Journal and exempts high-profile users from rules like those prohibiting harassment or incitement to violence that others on the platform must follow.

The board said the lack of transparency had harmed its ability to rule on Facebook’s decisions to remove or keep online content posted by users, including when the company barred former President Donald J. Trump.

The Oversight Board is a courtlike body that consists of about 20 former political leaders, human rights activists and journalists picked by Facebook to consider the company’s content decisions.

“The credibility of the Oversight Board, our working relationship with Facebook and our ability to render sound judgments on cases all depend on being able to trust that information provided to us by Facebook is accurate, comprehensive and paints a full picture of the topic at hand,” the group said in a blog post after publishing the report.

On Thursday, the group criticized Facebook for not being open with users about policies that led some content to be deleted. The group said it had received more than half a million appeals from users trying to understand why something was taken off the site.

“We know these cases are just the tip of the iceberg,” the group said. “Right now, it’s clear that by not being transparent with users, Facebook is not treating them fairly.”

Facebook’s chief executive, Mark Zuckerberg, has repeatedly referred to the board as the “Facebook Supreme Court,” but in practice, the group has no legal or enforcement authority. It was founded and is funded by Facebook, and critics have questioned whether the board has true autonomy. Others have pointed out that it gives Facebook the ability to punt on difficult decisions.

In a statement, Facebook thanked the board for issuing its transparency report.

“We believe the board’s work has been impactful, which is why we asked the board for input into our cross-check system,” the company said, “and we will strive to be clearer in our explanations to them going forward.”

Facebook is under pressure from regulators to explain more clearly its policy decisions and recommendation algorithms. European policymakers are drafting laws that would require the company to make it easier for users to appeal content-related decisions and to share more details about how its system works with outside auditors.

Calls for regulation have increased after disclosures made by Frances Haugen, the former Facebook product manager who shared scores of documents and information about the company’s internal workings with journalists and policymakers.

After Ms. Haugen’s documents revealed the existence of the cross check program, the Oversight Board said, Facebook asked the group to offer recommendations about how to change the program.

A whistle-blower has been awarded nearly $200 million for information that led to direct evidence of wrongdoing in an investigation, a federal regulator said on Thursday. The award is the largest the agency has given.

The evidence led to successful enforcement action in the case, said the Commodity Futures Trading Commission, which did not disclose the identity of the whistle-blower, the exact dollar amount or details of the investigation.

The whistle-blower program was created by the Dodd-Frank Act in 2010, and has awarded more than $300 million since its first disbursement in 2014. The money is distributed to whistle-blowers whose claims disclose wrongdoing in the financial sector.

Whistle-blowers are eligible to receive 10 to 30 percent of the fines collected in awards that are disbursed by the CFTC Customer Protection Fund. No money is withheld from victims to fund the program. The agency said the whistle-blower awards to date were tied to cases with fines totaling more than $3 billion.

A federal regulator has asked giant technology firms like Amazon, Google and Facebook to turn over information about how they run their digital payments systems, including the ways they track and store their customers’ personal information.

The Consumer Financial Protection Bureau made the request to six U.S.-based tech companies and said it would also study the practices of the Chinese firms WeChat Pay and Alipay, payments businesses connected with WeChat and Alibaba. The bureau said it wanted to determine whether the companies’ practices harm consumers by limiting their choices over how to pay and exposing too much of their personal data to outside parties.

The request was a sign that the agency’s new director, Rohit Chopra, intends to look beyond traditional financial services companies — the central focus of the agency since it was created a decade ago — to determine which other kinds of companies may need to be monitored. The C.F.P.B. cited its authority over payments processors in making the requests.

“Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits,” Mr. Chopra said in a statement on Thursday. He also listed some of the tech companies to whom he had sent information requests in a post on Twitter.

Banks, which have often complained that they are subjected to rules and oversight that nonbank financial companies don’t have to deal with, cheered the move.

“Since the bureau was founded, a growing share of banking activity has occurred outside of the purview of leading regulators, putting consumers and the resiliency of the financial system at risk,” Richard Hunt, the chief executive of the Consumer Bankers Association, an industry lobbying group, said in a statement. “C.B.A. long has advocated for instituting a level playing field to ensure every American family receives the protections they deserve, regardless of where they go to meet their financial needs.”

A Google spokesman declined to comment. A spokeswoman for WeChat’s owner, Tencent, also declined to comment. Representatives for Amazon, Facebook and Alibaba Group did not immediately respond to requests for comment on Thursday.

U.S. stocks logged their seventh straight day of gains on Thursday, with the S&P 500 marking a record. The benchmark U.S. index closed 0.3 percent higher, while the tech-heavy Nasdaq composite rose 0.6 percent.

The S&P 500 has gained nearly 6 percent in less than three weeks, recovering its losses from September, which was the stock market’s worst month this year.

American Airlines and Southwest Airlines both reported profits for the three months ending in September, though both carriers were dependent on pandemic aid for those results. Shares of American rose nearly 2 percent, while Southwest was down 1.6 percent.

Tesla rose 3.3 percent after it reported on Wednesday a big jump in revenue, to $13.8 billion from $8.8 billion a year ago. Sales of its Model Y continued to rise in the United States, China and Europe, despite a shortage in computer chips that has hobbled much of the rest of the auto industry. It was the carmaker’s second quarter in a row that its profit exceeded the billion-dollar mark.

Initial claims for state jobless benefits fell last week, the Labor Department reported on Thursday. The weekly figure was about 290,000, down 6,000 from the previous week, as it heads back to prepandemic margins.

Federal investigators have concluded that two men killed in a Tesla crash in Texas last spring were sitting in the front seats of the car with seatbelts on, contradicting initial statements by local police that no one was driving the vehicle during the accident.

The new information comes from a notice the National Transportation Safety Board posted on its website on Thursday and suggests that the driver of the Tesla, a Model S sedan, had not put the car on the company’s driver-assistance system, known as Autopilot, and gone into the back seat — something other Tesla drivers have done.

A Harris County sheriff’s constable said in April that evidence at the scene of the accident suggested that no one was driving the car when it crashed.

In its notice, the federal safety board also indicated that Tesla’s Autopilot driver-assistance system was likely not in use when the crash occurred. A critical component of Autopilot called Autosteer is not normally active on the unmarked, residential roads where the crash took place in Spring, Texas, a suburb north of Houston, the board said.

Data from the car showed the driver had the accelerator pedal depressed almost all the way and the car was going as fast as 67 miles per hour in the five seconds before the crash. The road has a speed limit of 30 m.p.h.

The car drove off the road at a curve and then hit a drainage culvert, a raised manhole and a tree. The crash damaged the car’s battery pack and it ignited. It took firefighters four hours to douse the high-intensity blaze. The Tesla’s occupants — who were 59 and 69 years old — were fatally injured by the crash and the fire, the safety board said.

The board noted that its investigation was ongoing and that it was still looking at Autopilot; the fire that consumed the car after the crash; whether the occupants were able to exit the car; and whether the driver was under the influence of alcohol or drugs.

Google’s European headquarters in an area in central Dublin known as Silicon Docks, where many major tech companies have their headquarters. Credit…Paulo Nunes dos Santos for The New York Times

WASHINGTON — The United States reached an agreement on Thursday with Austria, France, Italy, Spain and Britain that will terminate the threat of American tariffs on certain goods from those countries in exchange for the eventual removal of digital services taxes that they had imposed on companies like Facebook, Amazon and Google.

The agreement comes as more than 130 countries agreed this month to an overhaul of the international tax system that will prompt nations to adopt a global minimum tax of 15 percent and change taxing rights so that large multinational corporations are taxed based on where their goods and services are sold, rather than where they operate.

The part of the agreement that applies to the large firms was a response to a global tax dispute between the United States and European countries, which in recent years imposed the digital services taxes targeted at American technology giants.

Through the deal reached on Thursday, Austria, France, Italy, Spain and Britain will remove their digital services taxes once that part of the global agreement, known as Pillar 1, is enacted. That is expected to occur sometime in 2023. Taxes that are collected from companies between now and then will be eligible for a credit.

The agreement amounts to a concession from the United States, which wanted the digital services taxes to be removed immediately once the global pact was reached this month. European countries refused, citing concerns about whether the United States could get the new tax changes through Congress to properly comply with the agreement.

The Trump administration initially imposed tariffs on France in 2020 in retaliation for its digital services tax and began the process of imposing tariffs on other countries as well. The Biden administration said this year that it was prepared to impose tariffs on those governments but suspended any action while the global tax talks were underway.

The Office of the United States Trade Representative said Turkey and India, which also have digital services taxes that the United States wants rolled back, did not join the agreement that was reached on Thursday.

WeWork’s Wall Street location in New York, one of its biggest markets.Credit…Hilary Swift for The New York Times

Two years after WeWork’s attempt to become a public company flamed out spectacularly, the co-working giant started trading on the stock market on Thursday, hoping that investors will now believe in its prospects.

The earlier effort collided with concerns about WeWork’s breakneck growth, its huge losses and the alarming management style of its co-founder Adam Neumann. WeWork has new leaders who have pared back its expenses and hope to exploit an office space market that has been upended by the pandemic. But the company still has lofty growth targets, big losses and many empty desks in its 762 locations around the world. And WeWork made it through the last two years only because of huge financial support from SoftBank, the Japanese conglomerate that is WeWork’s largest shareholder.

“We got here on a different road than we anticipated, but we’re here,” Marcelo Claure, WeWork’s executive chairman and a senior SoftBank executive, said in an interview Thursday with CNBC.

Instead of an initial public offering, WeWork entered the public markets by merging with a special-purpose acquisition company, or SPAC, something of a craze these days. It is expected to raise as much as $1.3 billion from the deal, a sum that includes stakes held by the investment firms BlackRock and Fidelity. At Thursday’s stock price, WeWork was worth about $9.5 billion, a fraction of the $47 billion valuation placed on the company before investors soured on it in 2019.

Shares in the SPAC, called BowX, were trading around $10 this month. On Thursday, the new WeWork shares — with the ticker symbol WE — closed at $11.78.

WeWork leases office space and charges membership fees to customers — including freelancers, start-ups and small and large businesses — to use it. Its business rests on the belief that people might prefer the flexibility of such an arrangement over a traditional office lease, which can last for years and have other burdensome conditions.

The pandemic, which emptied office towers around the world, also crushed WeWork’s business.Credit…Hilary Swift for The New York Times

Though flexible office space was not new, WeWork said its business could not only revolutionize how people worked, but also change how people lived and thought. Mr. Neumann attracted billions of dollars in investments, with the biggest coming from SoftBank, which ended up bailing out WeWork when it withdrew the 2019 I.P.O. and was in danger of bankruptcy.

Investors in WeWork must judge whether SoftBank will use any increase in the stock price to sell some of its 61 percent stake.

SoftBank may be eager to recoup the $16 billion it has sunk into WeWork, a sum that combines nearly $11 billion of equity investments, $5 billion of debt financing and payments to Mr. Neumann.

“I made a wrong decision,” Masayoshi Son, SoftBank’s chief executive, said last year. “I didn’t look at WeWork right.” SoftBank has agreed to cap its voting power in the company below 50 percent. SoftBank and other investors have to wait several months before they can sell their shares.

The pandemic, which emptied office towers around the world, also crushed WeWork’s business.

Traditional landlords survived because tenants were legally obliged to keep paying their yearslong leases, most of which remain in effect. But WeWork’s customers were able to cancel their much shorter-term agreements as they expired. WeWork’s revenue in the second quarter of this year was $593 million, well below the $988 million in revenue it reported for the first quarter of 2020, its peak quarter.

And this partly explains why the company is using up cash rather than generating it. In the first half of this year, WeWork consumed $1.31 billion of cash running its operations and purchasing property and equipment, more than the $1.15 billion in the same period of 2020.

Still, WeWork has made strides in cutting its operating expenses — and hopes it will become profitable if its revenue grows. Some of the biggest savings have come from renegotiating leases with landlords or getting out of them.

Sandeep Mathrani, WeWork’s chief executive, said this month that the company had exited more than 150 full leases and done 350 lease amendments so far this year. “What we did through the pandemic was correct the cost structure, right size the company,” he said in an interview with CNBC on Thursday.

Perhaps the biggest question hanging over WeWork is whether it will suffer in the downturn that is pounding some of the biggest office space markets or find an opening in a work world reshaped by the pandemic.

Occupancy levels in office towers in cities like New York, Chicago and San Francisco, among WeWork’s biggest markets, are still well below prepandemic levels — and may never return to what they were, with many companies letting employees work fully or partly from home. In this environment, companies are vacating their spaces when leases expire or subletting them. As a result, record amounts of office space are being dumped onto the market, and rents have plunged.

This could hurt WeWork in a few ways, industry experts say. Fewer workers coming into cities means less business for all office space operators, co-working companies included. Falling office rents could undercut WeWork’s appeal and reduce what it can charge.

John Arenas, chief executive of Serendipity Labs, a flexible-office company, said urban co-working companies are “facing competition from sublet, and resistance and uncertainty about going back to work.”

WeWork has plenty of empty desks. In the third quarter, it had 461,000 memberships and 764,000 physical desks, which translates into an occupancy rate of 60 percent. That’s down from 85 percent in mid-2019 but up from 45 percent at the end of last year.

WeWork could benefit if companies that cut back on traditional leases decide they need flexible spaces when they want employees to meet in one place.

And WeWork’s management says companies it interacts with want 20 percent of their total space to be flexible, in theory providing solid demand.

WeWork is projecting that revenue more than doubles by 2024 and that memberships surge by more than 50 percent.

If all this happens, Mr. Neumann, who departed WeWork under a cloud during the attempted 2019 I.P.O., would stand to benefit. His stock in the company is worth nearly $690 million at Thursday’s closing price. He also holds a type of option on WeWork shares that is worth over $230 million at the stock price. Combining those sums with over $800 million he received for exiting and giving up control of the company, Mr. Neumann could one day reap well over $1 billion from WeWork.

“Adam is just another shareholder,” Mr. Claure told CNBC.

The Southwest Airlines check-in area at Midway International Airport in Chicago. The airline industry has shown progress despite the spread of the Delta variant of the coronavirus.Credit…Tannen Maury/EPA, via Shutterstock

American Airlines and Southwest Airlines reported profits for the three months ended in September, reflecting the industry’s recovery despite the spread of the Delta variant of the coronavirus. But the airlines aren’t entirely out of the woods: Both would have reported losses were it not for federal pandemic aid.

Still, the financial results, released on Thursday, show that the industry is on the mend as travel steadily resumes and both American and Southwest said they expected to do even better in the final three months of the year, lifted by corporate, international and holiday travel.

“We made good progress in our pandemic recovery in third quarter 2021, and I expect more in fourth quarter,” Gary Kelly, Southwest’s chief executive, said in a statement. “I’m very excited about the demand recovery and our prospects for 2022.”

Southwest reported a profit of $446 million for the third quarter, with revenue of $4.7 billion. The Delta variant robbed the airline of an estimated $300 million in revenue over the summer, but Southwest also suffered from operational challenges, including a three-day stretch of widespread flight delays and cancellations in June that was echoed this month.

“Available staffing fell below plan and, along with other factors, caused us to miss our operational on-time performance targets,” Mr. Kelly acknowledged. As a result, the airline has reined in plans for 2022 as it looks to hire 5,000 people before the end of this year. Mr. Kelly said Southwest was more than halfway toward that goal.

Ticket sales have started to improve in recent weeks, but the Delta variant and the operational challenges will weigh on Southwest’s fourth-quarter results. The airline said the virus had cost it an estimated $40 million this month, while a dayslong stretch of disrupted flights that ended last week would cost it $75 million. The rest of the quarter looks strong, though, with trends in holiday ticket sales in line with 2019.

American, which reported a profit of $169 million bolstered by federal aid, also said it expected strong holiday demand, which the airline expects will help it end the fourth quarter with about 80 percent as much revenue and nearly 90 percent as many seats sold as in the final three months of 2019.

American received nearly $1 billion in federal aid during the third quarter to help pay employee salaries, while Southwest received $763 million.

Both airlines said they were optimistic about the recovery in corporate travel and a rebound in international travel with the United States expected to ease travel restrictions early next month. Delta and United, which both recently reported profits for the same quarter, have also expressed optimism for the months ahead, though rising fuel costs could weigh on those improvements.

Customers browse cars at an AutoNation car dealership in Fremont, California, in February.Credit…David Paul Morris/Bloomberg

The global shortage of computer chips has wreaked havoc on auto production, but it is also helping to pump up the bottom lines of auto retailers.

In the latest example, AutoNation, a chain of more than 350 new-vehicle franchises, reported on Thursday that its profit doubled to $362 million in the third quarter. The result, the company’s sixth-consecutive record quarter on a per-share basis, stemmed mainly from higher prices and rising sales of used cars.

Because of the chip shortage, automakers have had to idle plants for weeks at a time, leaving consumers with fewer new cars to choose from. The lack of inventory has pushed up prices and allowed both manufacturers and dealers to cut back on profit-eating discounts and incentives they once had to offer to move cars off the lot.

“This is a result of the pandemic and then the chip shortage,” Mike Jackson, AutoNation’s chief executive, said. “There’s not enough supply to meet demand. Vehicles come in and they go out right away.”

At the end of September, AutoNation had about 5,000 new vehicles in inventory. At the same point in 2019, it had 56,000.

Mr. Jackson estimated that 60 percent of the vehicles that AutoNation ordered from manufacturers were earmarked as sold before they even arrived at its dealers. That is a far cry from the past, when cars sometimes sat unsold for six months or more.

The tight supply of new vehicles has caused many consumers to turn to used models. In the third quarter, AutoNation sold more than 77,000 used cars and trucks, a 20 percent rise from a year earlier.

The rush for used cars has also pushed up prices and left dealers rushing to acquire pre-owned cars and trucks. AutoNation has even begun approaching owners who post for-sale notices on eBay, AutoTrader and other websites. “If you put a car up for sale, you’re going to hear from us,” Mr. Jackson said.

Dealer inventories are likely to remain tight well into 2022 even if the chip shortage abates, Mr. Jackson added. “There’s tremendous pent-up demand, so it will take time before the manufacturers can build up dealer inventory,” he said.

Mr. Jackson, 72, won’t be at the helm to see it, however. He is about to retire after serving as AutoNation’s chief executive for most of the last 22 years. He will be succeeded on Nov. 1 by Mike Manley, a former chief executive of Fiat Chrysler.

Danielle Miess lost her job at a travel agency in the Philadelphia area. Her unemployment benefits have run out, but she isn’t looking for another office job. Instead, she is cobbling together a living from a variety of gigs.Credit…Kriston Jae Bethel for The New York Times

The labor force shrank in September. There were five million fewer people working than before the pandemic began, and three million fewer were looking for work.

The slow return of workers is causing headaches for the Biden administration, which has been counting on a strong economic rebound to give momentum to its political agenda, and confounding forecasters, Ben Casselman reports for The New York Times.

Conservatives have blamed generous unemployment benefits for keeping people at home, but evidence from states that ended the payments early suggests that any impact was small. Progressives say companies could find workers if they offered higher pay, but the worker shortages aren’t limited to low-wage industries.

Instead, economists point to a complex, overlapping web of factors, many of which could be slow to reverse.

The health crisis is still making it difficult or dangerous for some people to work, while savings that were built up during the pandemic have made it easier for others to turn down jobs they do not want. Psychology may also play a role: Surveys suggest that the pandemic led many people to rethink their priorities. And the glut of open jobs may be motivating some to hold out for better offers.

The net result is that, arguably for the first time in decades, workers up and down the income ladder have leverage. And they are using it to demand not just higher pay but also flexible hours, more generous benefits and better working conditions.

“It’s like the whole country is in some kind of union renegotiation,” said Betsey Stevenson, a University of Michigan economist who was an adviser to President Barack Obama. “I don’t know who’s going to win in this bargaining that’s going on right now, but right now it seems like workers have the upper hand.”

CreditCredit…By Haik Avanian

Today in the On Tech newsletter, Shira Ovide writes that Comcast TVs may never be best sellers, but they’re interesting because of what they represent: the corporate land grab to become the starting point for all things streaming in Americans’ homes.

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