Evelyn Reynolds

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    Fed Officials Thought Rates Could Rise More if Inflation Stayed Stubborn

    Minutes from the Federal Reserve’s early November meeting suggested another rate increase remained possible, but officials were in no hurry.Federal Reserve officials are contemplating whether they will need to raise interest rates again to cool the economy and ensure that rapid inflation will fully fade, and minutes from their meeting earlier this month laid out the contours of that debate.“Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the committee’s inflation objective was insufficient,” according to minutes from the central bank’s Oct. 31-Nov. 1 meeting, which were released Tuesday.Fed officials thought that the “data arriving in coming months would help clarify the extent to which the disinflation process was continuing.”Central bankers voted to leave interest rates unchanged in a range of 5.25 to 5.5 percent at their gathering early this month, allowing themselves more time to assess whether their substantial rate moves so far are weighing on demand.Wall Street is keenly focused on what officials will do next. Fed policymakers had predicted one more 2023 rate move as of their September economic projections, but investors think that there is little chance they will raise rates at their final meeting of the year on Dec. 12-13. Tuesday’s minutes may serve to bolster that expectation of an extended pause, because they suggested that officials planned to watch how the economy shaped up over the course of “months.”Fed watchers are now trying to figure out whether officials are conclusively done raising interest rates and, if so, when they are likely to begin cutting them. Policymakers will publish a fresh set of quarterly economic forecasts at the conclusion of their December meeting. Those, together with remarks from Fed Chair Jerome H. Powell, could provide important clues about the future.As of September, policymakers expected to lower rates before the end of 2024. If that forecast stands and Mr. Powell hints that policymakers are not eager to raise rates again, investors may turn their full attention to just how soon rate cuts are coming. As of now, market pricing suggests that Wall Street expects policymakers to begin lowering interest rates at some point in the first half of 2024.But if Fed officials use the December economic projections to predict that rates could remain higher for longer — or if Mr. Powell suggests that a rate increase next year remains firmly on the table — it could keep the possibility of more action at least dimly alive. Several central bankers have been clear in recent weeks that they aren’t sure they are done raising interest rates.“I wouldn’t take additional firming off the table,” Susan Collins, the president of the Federal Reserve Bank of Boston, said in an interview on CNBC last week.The minutes from the Fed’s November gathering fleshed out how policymakers are thinking about the outlook. While officials wanted to make sure that they were cooling the economy enough to ensure that inflation would come back to their 2 percent goal in a timely way, they also wanted to avoid overdoing it by raising rates too much and risking a painful recession.Fed officials thought that “with the stance of monetary policy in restrictive territory, risks to the achievement of the committee’s goals had become more two-sided,” the minutes said, though “most participants continued to see upside risks to inflation.”Consumer Price Index inflation fell to 3.2 percent in October, down from a peak above 9 percent in summer 2022. Even so, officials are worried that it could prove difficult to wrestle inflation the rest of the way back to normal.Fed officials define their inflation target using a separate but related measure, the Personal Consumption Expenditures index, which comes out at more of a delay. The October P.C.E. figures are set for release on Nov. 30.Fed officials have been carefully watching strength in the job market and the economy as they try to figure out whether inflation is likely to come fully under control. If the economy retains too much vim — with consumers spending freely and businesses snapping up workers — companies may continue to raise prices at a faster clip than usual.Since their last meeting, the Fed has gotten some positive news on that front. While employers continued to hire in October, they did so at a much slower pace: They hired just 150,000 workers, and earlier hiring figures were revised lower.The minutes suggested that policymakers are watching for signs that “labor markets were reaching a better balance between demand and supply.” More

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    Geopolitical instability and a packed election calendar have strategists wary of 2024

    Strategists expect an increasingly fraught geopolitical backdrop and greater divergence across key regions, compounding uncertainty and market volatility for investors.
    Goldman Sachs Asset Management noted that elections in the U.S., U.K., South Africa, India, Taiwan and Russia will add to the odds of the global economy diverging from its current path.
    Lazard Chief Market Strategist Roland Temple said the most economically consequential geopolitical situation is China’s multi-faceted tension with the West over competition and Taiwan.

    Israeli soldiers transfer detained Palestinians out of the Gaza Strip on November 20, 2023, as battles between Israel and the Hamas movement continue.
    Gil Cohen-magen | AFP | Getty Images

    Geopolitical risks will be the key threat to the economic outlook for 2024, as large-scale wars converge with a slew of pivotal elections across major global powers.
    As the world’s financial institutions map out the investment landscape for next year, they expect an increasingly fraught geopolitical backdrop and greater divergence across key regions, compounding uncertainty and market volatility.

    In a global risk survey carried out among 130 businesses last month by Oxford Economics, almost two fifths of respondents viewed the Israel-Hamas war as a very significant risk to the global economy over the next two years.
    Yet worries over relations between China and Taiwan and Russia and NATO were similarly widespread, and geopolitical tensions were the top business concern over both the near and medium term, with 62% of businesses citing geopolitics as a very significant risk to the global economy.
    “Deglobalisation and persistently higher oil prices, both of which could be triggered by an intensification of geopolitical tensions, are also fairly prominent in the latest survey,” Oxford Economics researchers said.
    The International Monetary Fund expects global growth to slow to 2.9% in 2024, amid widening divergence between regions — stronger growth is projected in the U.S. and large emerging markets, while China and the euro area are expected to struggle.
    In its 2024 investment outlook published Monday, Goldman Sachs Asset Management noted that elections in the U.S., U.K., South Africa, India, Taiwan and Russia will add to the range of possibilities for the global economy to diverge from its current path.

    The Wall Street giant’s asset management arm noted that concerns over government debt sustainability and the fiscal trajectory in the U.S. may mount in the run-up to the presidential election of next November, while domestic socioeconomic risks — such as strikes in certain industries amid stubbornly high inflation — could persist across major economies and further weigh on growth.
    “Rising geopolitical tensions could trigger more trade restrictions across the globe, resulting in further economic fragmentation. We expect economies to continue to invest heavily in their economic security over the next 12 months and beyond,” GSAM strategists wrote.
    “This may be driven by developed markets ‘re-shoring’ and ‘friend-shoring’ critical supply chains that remain highly interdependent and, in some cases, over-concentrated, such as leading-edge semiconductors.”
    Russia-Ukraine, Israel-Hamas, China-Taiwan
    The view was echoed by Roland Temple, chief market strategist at Lazard, who said in a global outlook report last week that, while predicting the course of any single geopolitical crisis is fraught, what is clear is that “the global trajectory is toward more frequent conflicts of increasing consequence.”
    “Navigating the evolving — at times treacherous — geopolitical landscape will likely require access to deep wells of expertise, as geopolitical issues that could have been ignored in the past now stand to directly impact companies’ supply chains and customer bases,” Temple said.
    “Ongoing geopolitical conflicts and tensions are likely to depress growth further, while adding to inflationary pressures that are beyond the control of central banks.”
    Temple predicted that the Russia-Ukraine conflict will extend well into 2024, as the Ukrainian counteroffensive loses momentum due to the encroaching winter, while concerns mount over the reliability of Western funding and military aid.

    “While a negotiated settlement is likely the only way to end the war, both sides remain far from the point of agreeing to capitulate on their grand designs — that is, for Russia to control all of Ukraine and for Ukraine to control all of its sovereign territory,” he said.
    As for the Middle East, the most “combustible situation” would be a spill-over of the Israel-Hamas conflict into nearby states, including Iran, which could “spiral into a regional conflict with global and military implications.” The primary risk of this form of escalation would be a disruption of the transit of energy supplies through the Strait of Hormuz, through which around 20% of global oil supply is shipped.
    But Temple argued that all parties, including Iran, Israel and the United States have strong incentives to avoid this outcome, and that the most economically consequential geopolitical situation is China’s multi-faceted tensions with the West over competition and Taiwan.
    “Early 2024 Taiwan elections will set the stage for the rest of the year. The Democratic Progressive Party (DPP) is currently well ahead of the more Beijing-friendly Kuomintang (KMT),” he noted.
    “A DPP victory would likely escalate tension with Beijing as the DPP is seen as favoring a formal declaration of independence, a red line for the Chinese government.”

    A clear result of both direct industrial competition between China and the U.S. and concerns over China’s intentions in Taiwan is growing supply chain fragmentation, as trade tariffs and barriers along with post-Covid logistical concerns have led developed economies to pursue “friend-shoring” or “near-shoring” policies.
    “These plans are proving more difficult than policymakers might have envisioned, given inertia around supply chains and the challenge of cultivating the necessary skills among workers in new locales,” Temple said.
    “Still, geopolitical tension is contributing to economic fragmentation which, at least in the short run, may dampen global growth and contribute to inflationary forces.”
    On a positive note, Temple suggested that sustained disinflation should allow the U.S. Federal Reserve and other central banks to consider cutting interest rates as early as the second quarter, which should “mitigate headwinds to growth and invigorate capital expenditures in anticipation of a cyclical economic rebound.”
    Security and semiconductors
    GSAM Head of Asset & Wealth Management Marc Nachmann and his team expect critical mineral supply chains to receive attention due to their growing importance in the clean energy transition, along with their potential vulnerability to supply shocks.
    As a result, GSAM suggested investors should avoid trying to time the market or make calls on binary political or geopolitical outcomes, but instead take a proactive approach to asset allocation based on “extensive bottom-up research.”
    “We think companies that successfully align with corporate and government efforts to boost the security of supply chains and resources as well as national security will emerge as long-term winners,” the strategists said, adding that firms with pricing power, durable business models and strong balance sheets should be the focus.
    “Public equity market may present opportunities to gain targeted exposure to more established firms that produce semiconductors and to semiconductor manufacturing equipment, as well as to industrial automation and technology companies that are facilitating the reshoring of manufacturing.”
    Demand for natural gas products is likely to rise, as nations seek affordable, reliable and sustainable energy, GSAM predicted, while growing and more complex security threats create opportunities for cybersecurity platforms and aerospace and defense technology providers. More

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    A 30-Year Trap: The Problem With America’s Weird Mortgages

    Buying a home was hard before the pandemic. Somehow, it keeps getting harder.Prices, already sky-high, have gotten even higher, up nearly 40 percent over the past three years. Available homes have gotten scarcer: Listings are down nearly 20 percent over the same period. And now interest rates have soared to a 20-year high, eroding buying power without — in defiance of normal economic logic — doing much to dent prices.None of which, of course, is a problem for people who already own homes. They have been insulated from rising interest rates and, to a degree, from rising consumer prices. Their homes are worth more than ever. Their monthly housing costs are, for the most part, locked in place.The reason for that divide — a big part of it, anyway — is a unique, ubiquitous feature of the U.S. housing market: the 30-year fixed-rate mortgage.That mortgage has been so common for so long that it can be easy to forget how strange it is. Because the interest rate is fixed, homeowners get to freeze their monthly loan payments for as much as three decades, even if inflation picks up or interest rates rise. But because most U.S. mortgages can be paid off early with no penalty, homeowners can simply refinance if rates go down. Buyers get all of the benefits of a fixed rate, with none of the risks.“It’s a one-sided bet,” said John Y. Campbell, a Harvard economist who has argued that the 30-year mortgage contributes to inequality. “If inflation goes way up, the lenders lose and the borrowers win. Whereas if inflation goes down, the borrower just refinances.”This isn’t how things work elsewhere in the world. In Britain and Canada, among other places, interest rates are generally fixed for only a few years. That means the pain of higher rates is spread more evenly between buyers and existing owners.In other countries, such as Germany, fixed-rate mortgages are common but borrowers can’t easily refinance. That means new buyers are dealing with higher borrowing costs, but so are longtime owners who bought when rates were higher. (Denmark has a system comparable to the United States’, but down payments are generally larger and lending standards stricter.)Only the United States has such an extreme system of winners and losers, in which new buyers face borrowing costs of 7.5 percent or more while two-thirds of existing mortgage holders pay less than 4 percent. On a $400,000 home, that’s a difference of $1,000 in monthly housing costs.“It’s a bifurcated market,” said Selma Hepp, chief economist at the real estate site CoreLogic. “It’s a market of haves and have-nots.”It isn’t just that new buyers face higher interest rates than existing owners. It’s that the U.S. mortgage system is discouraging existing owners from putting their homes on the market — because if they move to another house, they’ll have to give up their low interest rates and get a much costlier mortgage. Many are choosing to stay put, deciding they can live without the extra bedroom or put up with the long commute a little while longer.The result is a housing market that is frozen in place. With few homes on the market — and fewer still at prices that buyers can afford — sales of existing homes have fallen more than 15 percent in the past year, to their lowest level in over a decade. Many in the millennial generation, who were already struggling to break into the housing market, are finding they have to wait yet longer to buy their first homes.“Affordability, no matter how you define it, is basically at its worst point since mortgage rates were in the teens” in the 1980s, said Richard K. Green, director of the Lusk Center for Real Estate at the University of Southern California. “We sort of implicitly give preference to incumbents over new people, and I don’t see any particular reason that should be the case.”A ‘Historical Accident’The story of the 30-year mortgage begins in the Great Depression. Many mortgages at the time had terms of 10 years or less and, unlike mortgages today, were not “self-amortizing” — meaning that rather than gradually paying down the loan’s principal along with the interest each month, borrowers owed the principal in full at the end of the term. In practice, that meant that borrowers would have to take out a new mortgage to pay off the old one.That system worked until it didn’t: When the financial system seized up and home values collapsed, borrowers couldn’t roll over their loans. At one point in the early 1930s, nearly 10 percent of U.S. homes were in foreclosure, according to research by Mr. Green and a co-author, Susan M. Wachter of the University of Pennsylvania.In response, the federal government created the Home Owners’ Loan Corporation, which used government-backed bonds to buy up defaulted mortgages and reissue them as fixed-rate, long-term loans. (The corporation was also instrumental in creating the system of redlining that prevented many Black Americans from buying homes.) The government then sold off those mortgages to private investors, with the newly created Federal Housing Administration providing mortgage insurance so those investors knew the loans they were buying would be paid off.The mortgage system evolved over the decades: The Home Owners’ Loan Corporation gave way to Fannie Mae and, later, Freddie Mac — nominally private companies whose implicit backing by the federal government became explicit after the housing bubble burst in the mid-2000s. The G.I. Bill led to a huge expansion and liberalization of the mortgage insurance system. The savings-and-loan crisis of the 1980s contributed to the rise of mortgage-backed securities as the primary funding source for home loans.By the 1960s, the 30-year mortgage had emerged as the dominant way to buy a house in the United States — and apart from a brief period in the 1980s, it has remained so ever since. Even during the height of the mid-2000s housing bubble, when millions of Americans were lured by adjustable-rate mortgages with low “teaser” rates, a large share of borrowers opted for mortgages with long terms and fixed rates.After the bubble burst, the adjustable-rate mortgage all but disappeared. Today, nearly 95 percent of existing U.S. mortgages have fixed interest rates; of those, more than three-quarters are for 30-year terms.No one set out to make the 30-year mortgage the standard. It is “a bit of a historical accident,” said Andra Ghent, an economist at the University of Utah who has studied the U.S. mortgage market. But intentionally or otherwise, the government played a central role: There is no way that most middle-class Americans could get a bank to lend them a multiple of their annual income at a fixed rate without some form of government guarantee.“In order to do 30-year lending, you need to have a government guarantee,” said Edward J. Pinto, a senior fellow at the American Enterprise Institute and a longtime conservative critic of the 30-year mortgage. “The private sector couldn’t have done that on their own.”For home buyers, the 30-year mortgage is an incredible deal. They get to borrow at what amounts to a subsidized rate — often while putting down relatively little of their own money.But Mr. Pinto and other critics on both the right and the left argue that while the 30-year mortgage may have been good for home buyers individually, it has not been nearly so good for American homeownership overall. By making it easier to buy, the government-subsidized mortgage system has stimulated demand, but without nearly as much attention on ensuring more supply. The result is an affordability crisis that long predates the recent spike in interest rates, and a homeownership rate that is unremarkable by international standards.“Over time, the 30-year fixed rate probably just erodes affordability,” said Skylar Olsen, chief economist for the real estate site Zillow.Research suggests that the U.S. mortgage system has also heightened racial and economic inequality. Wealthier borrowers tend to be more financially sophisticated and, therefore, likelier to refinance when doing so saves them money — meaning that even if borrowers start out with the same interest rate, gaps emerge over time.“Black and Hispanic borrowers in particular are less likely to refinance their loans,” said Vanessa Perry, a George Washington University professor who studies consumers in housing markets. “There’s an equity loss over time. They’re overpaying.”‘Who Feels the Pain?’Hillary Valdetero and Dan Frese are on opposite sides of the great mortgage divide.Ms. Valdetero, 37, bought her home in Boise, Idaho, in April 2022, just in time to lock in a 4.25 percent interest rate on her mortgage. By June, rates approached 6 percent.“If I had waited three weeks, because of the interest rate I would’ve been priced out,” she said. “I couldn’t touch a house with what it’s at now.”Mr. Frese, 28, moved back to Chicago, his hometown, in July 2022, as rates were continuing their upward march. A year and a half later, Mr. Frese is living with his parents, saving as much as he can in the hopes of buying his first home — and watching rising rates push that dream further away.“My timeline, I need to stretch at least another year,” Mr. Frese said. “I do think about it: Could I have done anything differently?”The diverging fortunes of Ms. Valdetero and Mr. Frese have implications beyond the housing market. Interest rates are the Federal Reserve’s primary tool for corralling inflation: When borrowing becomes more expensive, households are supposed to pull back their spending. But fixed-rate mortgages dampen the effect of those policies — meaning the Fed has to get even more aggressive.“When the Fed raises rates to control inflation, who feels the pain?” asked Mr. Campbell, the Harvard economist. “In a fixed-rate mortgage system, there’s this whole group of existing homeowners who don’t feel the pain and don’t take the hit, so it falls on new home buyers,” as well as renters and construction firms.Mr. Campbell argues that there are ways the system could be reformed, starting with encouraging more buyers to choose adjustable-rate mortgages. Higher interest rates are doing that, but very slowly: The share of buyers taking the adjustable option has edged up to about 10 percent, from 2.5 percent in late 2021.Other critics have suggested more extensive changes. Mr. Pinto has proposed a new type of mortgage with shorter durations, variable interest rates and minimal down payments — a structure that he argues would improve both affordability and financial stability.But in practice, hardly anyone expects the 30-year mortgage to disappear soon. Americans hold $12.5 trillion in mortgage debt, mostly in fixed-rate loans. The existing system has an enormous — and enormously wealthy — built-in constituency whose members are certain to fight any change that threatens the value of their biggest asset.What is more likely is that the frozen housing market will gradually thaw. Homeowners will decide they can’t put off selling any longer, even if it means a lower price. Buyers, too, will adjust. Many forecasters predict that even a small drop in rates could bring a big increase in activity — a 6 percent mortgage suddenly might not sound that bad.But that process could take years.“I feel very fortunate that I slid in at the right time,” Ms. Valdetero said. “I feel really bad for people that didn’t get in and now they can’t.” More

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    Unions in Sweden Expand Blockade Against Tesla

    The LatestElectricians and dockworkers across Sweden on Friday joined a widening effort by unions in the country to pressure Tesla to sign a collective bargaining agreement with its mechanics.The labor action expanded three weeks after the autoworkers’ union, IF Metall, called a strike against Tesla in an effort to secure a collective arrangement over pay and working conditions for its roughly 120 members who work as mechanics for the electric vehicle maker. In the latest move, dockworkers at dozens of ports refused to unload cars from ships and electricians stopped repair work at the company’s charging stations, highlighting the power of organized labor in a country where collective agreements cover nine in 10 of all employees.Port workers blocking a ship from loading Tesla vehicles onto a ship moored at the port of Malmo in Sweden, in early November.Johan Nilsson/TT News Agency, via Associated PressTesla in Sweden: No production but many sales.Tesla does not produce any vehicles in Sweden, but runs several facilities where the cars are serviced. So far this year, the Tesla Model Y is the best-selling new car in Sweden, with more than 14,000 registrations through October, according to Mobility Sweden, an industry group.At the outset of the mechanics’ strike, a Tesla representative told Swedish media that the company followed labor laws in the country, and that it chose not to sign a collective agreement. The company said it would do what it could to keep its business operating.Quotable: ‘It is both important and obvious that we help.’The Swedish Transport Workers’ Union, whose members work at Sweden’s docks, said in a statement that “it is both important and obvious that we help, to stand up for the collective agreement and the Swedish labor market model.”How It Started: Mechanics at Tesla went on strike on Oct. 27.In late October, IF Metall, which represents 300,000 workers in Sweden, including some of Tesla’s mechanics, said talks with company representatives had ended without resolution. The union began the strike action at Tesla’s 12 service centers on Oct. 27.Dockworkers initially refused to unload any Teslas at four major Swedish ports starting on Nov. 7, which on Friday expanded to 55 ports.Unions representing cleaners have also refused to service Tesla facilities, and the postal workers’ union stopped any deliveries from reaching the company’s sites.Both IF Metall and the Transport Workers’ Union have acknowledged that Tesla has found ways around the strikes. Tesla appeared to be bringing in other mechanics to staff its facilities and bringing new vehicles into Sweden by truck, they said.The strike efforts have also been hampered by some union members who work for Tesla and refused to join, Swedish media have reported.What Other Unions Say: Germans have voiced support.In Germany, where Tesla produces the Model Y at a gigafactory outside Berlin, union leaders have been seeking to organize the roughly 11,500 employees who work there. Tesla’s leadership has not engaged with the German autoworkers’ union, IG Metall. Last month, several hundred workers wore union stickers calling for “safe and fair work.”Dirk Schulze, the regional head of IG Metall in Brandenburg, where Tesla has its factory, has expressed his solidarity with the striking workers in Sweden. The strike in Sweden has given workers in Germany “the courage and confidence to organize themselves into a union and take their fate into their own hands,” Mr. Schulze said in a statement.The union has not announced any further measures.What Happens Next: More strikes are planned in Sweden.This week, IF Metall said 50 of its members at Hydro Extrusions, a company that produces an aluminum component for Tesla, would walk off their jobs next Friday. More

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    Biden Faces Economic Challenges as Cost-of-Living Despair Floods TikTok

    Economic despair dominates social media as young people fret about the cost of living. It offers a snapshot of the challenges facing Democrats ahead of the 2024 election.Look at economic data, and you’d think that young voters would be riding high right now. Unemployment remains low. Job opportunities are plentiful. Inequality is down, wage growth is finally beating inflation, and the economy has expanded rapidly this year.Look at TikTok, and you get a very different impression — one that seems more in line with both consumer confidence data and President Biden’s performance in political polls.Several of the economy-related trends getting traction on TikTok are downright dire. The term “Silent Depression” recently spawned a spate of viral videos. Clips critical of capitalism are common. On Instagram, jokes about poor housing affordability are a genre unto themselves.Social media reflects — and is potentially fueling — a deep-seated angst about the economy that is showing up in surveys of younger consumers and political polls alike. It suggests that even as the job market booms, people are focusing on long-running issues like housing affordability as they assess the economy.The economic conversation taking place virtually may offer insight into the stark disconnect between optimistic economic data and pessimistic feelings, one that has puzzled political strategists and economists.Never before was consumer sentiment this consistently depressed when joblessness was so consistently low. And voters rate Mr. Biden badly on economic matters despite rapid growth and a strong job market. Young people are especially glum: A recent poll by The New York Times and Siena College found that 59 percent of voters under 30 rated the economy as “poor.”President Biden’s campaign is working with content creators on TikTok to “amplify a positive, affirmative message” on the economy, a deputy campaign manager said.Desiree Rios for The New York TimesThat’s where social media could offer insight. Popular interest drives what content plays well — especially on TikTok, where going viral is often the goal. The platforms are also an important disseminator of information and sentiment.“A lot of people get their information from TikTok, but even if you don’t, your friends do, so you still get looped into the echo chamber,” said Kyla Scanlon, a content creator focused on economic issues who posts carefully researched explainers across TikTok, Instagram and X.Ms. Scanlon rose to prominence in the traditional news media in part for coining and popularizing the term “vibecession” for how bad consumers felt in 2022 — but she thinks 2023 has seen further souring.“I think people have gotten angrier,” she said. “I think we’re actually in a worse vibecession now.”Surveys suggest that people in Generation Z, born after 1996, heavily get their news from social media and messaging apps. And the share of U.S. adults who turn to TikTok in particular for information has been steadily climbing. Facebook is still a bigger news source because it has more users, but about 43 percent of adults who use TikTok get news from it regularly, according to a new survey by the Pew Research Center.It is difficult to say for certain whether negative news on social media is driving bad feelings about the economy, or about the Biden administration. Data and surveys struggle to capture exactly what effect specific news delivery channels — particularly newer ones — have on people’s perceptions, said Katerina Eva Matsa, director of news and information research at the Pew Research Center.“Is the news — the way it has evolved — making people view things negatively?” she asked. It’s hard to tell, she explained, but “how you’re being bombarded, entangled in all of this information might have contributed.”More Americans on TikTok Are Going There for NewsShare of each social media site’s users who regularly get news there, 2020 vs. 2023

    Source: Pew Research Center surveys of U.S. adultsBy The New York TimesMr. Biden’s re-election campaign team is cognizant that TikTok has supplanted X, formerly known as Twitter, for many young voters as a crucial information source this election cycle — and conscious of how negative it tends to be. White House officials say that some of those messages accurately reflect the messengers’ economic experiences, but that others border on misinformation that social media platforms should be policing.Rob Flaherty, a deputy campaign manager for Mr. Biden, said the campaign was working with content creators on TikTok in an effort to “amplify a positive, affirmative message” about the economy.A few political campaign posts promoting Mr. Biden’s jobs record have managed to rack up thousands of likes. But the “Silent Depression” posts have garnered hundreds of thousands — a sign of how much negativity is winning out.In those videos, influencers compare how easy it was to get by economically in 1930 versus 2023. The videos are misleading, skimming over the crucial fact that roughly one in four adults was unemployed in 1933, compared with four in 100 today. And the data they cite are often pulled from unreliable sources.But the housing affordability trend that the videos spotlight is grounded in reality. It has gotten tougher for young people to afford a property over time. The cost of a typical house was 2.4 times the typical household income around 1940, when government data start. Today, it’s 5.8 times.Nor is it just housing that’s making young people feel they’re falling behind, if you ask Freddie Smith, a 35-year-old real estate agent in Orlando, Fla., who created one especially popular “Silent Depression” video. Recently, it is also the costs of gas, groceries, cars and rent.“I think it’s the perfect storm,” Mr. Smith said. “It’s this tug of war that millennials and Gen Z are facing right now.”Inflation has cooled notably since peaking in the summer of 2022, which the Biden administration has greeted as a victory. Still, that just means that prices are no longer climbing as rapidly. Key costs remain noticeably higher than they were just a few years ago. Groceries are far more expensive than in 2019. Gas was hovering around $2.60 a gallon at the start of 2020, for instance, but is around $3.40 now.Young Americans Are Spending More and Earning MoreIncome after taxes and expenditures for householders under 25

    Source: Bureau of Labor Statistics Consumer Expenditure Survey By The New York TimesThose higher prices do not necessarily mean people are worse off: Household incomes have also gone up, so people have more money to cover the higher costs. Consumer expenditure data suggests that people under 25 — and even 35 — have been spending a roughly equivalent or smaller share of their annual budgets on groceries and gas compared with before the pandemic, at least on average.“I think things just feel harder,” said Betsey Stevenson, a professor of public policy and economics at the University of Michigan, explaining that people have what economists call a “money illusion” and think of the value of a dollar in fixed terms.And housing has genuinely been taking up a bigger chunk of the young consumer’s budget than in the years before the pandemic, as rents, home prices and mortgage costs have all increased.Housing Is Eating Up Young People’s BudgetsShare of spending devoted to each category for people under 25

    Source: Bureau of Labor Statistics Consumer Expenditure SurveyBy The New York TimesIn addition to prices, content about student loans has taken off in TikTok conversations (#studentloans has 1.3 billion views), and many of the posts are unhappy.Mr. Biden’s student-loan initiatives have been a roller coaster for millions of young Americans. He proposed last year to cancel as much as $20,000 in debt for borrowers who earn less than $125,000 a year, a plan that was estimated to cost $400 billion over several decades, only to see the Supreme Court strike down the initiative this summer.Mr. Biden has continued to push more tailored efforts, including $127 billion in total loan forgiveness for 3.6 million borrowers. But last month, his administration also ended a pandemic freeze on loan payments that applied to all borrowers — some 40 million people.The administration has tried to inject more positive programming into the social media discussion. Mr. Biden met with about 60 TikTok creators to explain his initial student loan forgiveness plan shortly after announcing it. The campaign team also sent videos to key creators, for possible sharing, of young people crying when they learned their loans had been forgiven.The Biden campaign does not pay those creators or try to dictate what they are saying, though it does advertise on digital platforms aggressively, Mr. Flaherty said.“It needs to sound authentic,” he said. More

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    Ray Dalio says U.S. reaching an inflection point where the debt problem quickly gets even worse

    Soaring U.S. government debt is reaching a point where it will begin creating larger problems, Bridgewater Associates founder Ray Dalio said Friday.
    “Economically strong means financially strong,” Dalio said on CNBC’s “Squawk Box.”
    The government spent $659 billion on net interest costs in fiscal 2023 to finance the debt. Dalio said that is a recipe for trouble.

    Soaring U.S. government debt is reaching a point where it will begin creating larger problems, Bridgewater Associates founder Ray Dalio said Friday.
    The hedge fund titan warned during a CNBC appearance that the need to borrow more and more to cover deficits will exacerbate the political and social problems the country is facing.

    “Economically strong means financially strong,” Dalio said on “Squawk Box.” “Financially strong means: do you earn more than you spend? Do you have a good income statement as a country? And do we have a good balance sheet?”
    The U.S. is $33.7 trillion in debt, a total that exploded by 45% since the Covid pandemic in early 2020, according to Treasury Department data. Of that total, $26.7 trillion is owed by the public. Last year, the government rang up a $1.7 trillion deficit as it sought to keep up the pace of spending.
    As the debt built up and the Federal Reserve raised interest rates to try to tamp down inflation, the government spent $659 billion on net interest costs in fiscal 2023 to finance the debt.
    Dalio said that is a recipe for trouble.
    “The worse that gets, the more we are going to have that long-term problem,” he said. “You can see it in the numbers. It’s just a matter of numbers. We are near that inflection point.”

    Along with the basic budget issues, Dalio also cautioned that foreign buyers, who make up about 40% of demand for U.S. Treasurys, have been backing off, creating a supply-demand problem.
    Data through January indicates that foreign holdings of U.S. government debt total $7.4 trillion, down $253 billion, or 3.3% over the past year. China in particular has cut its holdings strongly, pulling back 17% during the period.
    “You want to keep spending at the same level, there is the need to get more and more into debt. The way that works, it accelerates,” Dalio said. “We are at the point of that acceleration, which creates the supply-demand problem. It’s made worse by the other issues that we’re talking about, the internal political issue, the internal social conflict issue.”
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    U.A.W. Members at General Motors Ratify Contract

    The United Automobile Workers union hopes the agreements with General Motors, Ford and Stellantis will help it make inroads at other companies.Members of the United Automobile Workers union have given their backing to new contracts with the three big U.S. automakers, agreements that deliver hefty wage increases and other gains that had eluded the union for more than 20 years.In the most closely contested vote, the tentative contract agreement at General Motors won the support of 55 percent of the nearly 36,000 members casting ballots, according to a tally from all the G.M. locals that the union posted on Thursday.Tentative agreements with Ford Motor and Stellantis, the maker of brands including Jeep and Chrysler, appeared headed for approval by more decisive margins, nearly complete results there showed.A spokesman for the union confirmed the accuracy of the tallies but declined to comment further.The agreements are similar across the three automakers and raise the top wage for production workers 25 percent, to more than $40 over four and a half years, from $32. They were reached last month after a six-week wave of strikes that hobbled the companies — a strategy spearheaded by the union’s new president, Shawn Fain, who had vowed to take a more adversarial approach to negotiations than his predecessors.Workers leaving the Ford Chicago Assembly Plant on Thursday.Jamie Kelter Davis for The New York TimesThe agreements appear to have quickly reverberated across the auto industry, with Toyota, Hyundai and Honda announcing significant wage increase at nonunion plants in the United States only days later.“We call that the U.A.W. bump, and that stands for ‘U Are Welcome,’” Mr. Fain said in testimony before the Senate Health, Education, Labor and Pensions Committee this week. “And we’re very proud of that. And when these workers decide to organize and join the U.A.W., they’re going to realize the full benefit of union membership and get what they’re fully due.”The new contracts also included larger company contributions to workers’ retirement plans and the right to strike over plant closures. All three automakers declined to comment on the ratification votes.Mr. Fain said the union was seeking to capitalize on its momentum by waging muscular organizing campaigns at nonunion plants, and, in remarks submitted to the Senate committee, he added that thousands of workers were already contacting the union and signing union cards.But even Mr. Fain’s tough approach in the talks with the Big Three did not yield terms attractive enough to many union members. G.M. workers at several large plants voted against the tentative agreement by large margins.In contrast, members of the International Brotherhood of Teamsters recently approved a new contract at United Parcel Service with 86 percent support, while a new contract between the Writers Guild of America and Hollywood studios passed with 99 percent support.Rebecca Givan, a labor studies professor at Rutgers University, said Mr. Fain had achieved a major victory despite having taken office only a few months earlier with a goal of reorienting the union.Huey Harris, at the G.M. plant in Flint, said he had voted in favor of the contract despite his belief that it didn’t offer veteran workers like him enough gains.Nic Antaya for The New York TimesDr. Givan said the union’s approach of initially striking at one plant at each of the three automakers and ramping up over time had “really upended a lot of conventional wisdom” in the labor movement and had proved unusually successful at reversing some concessions that the union had accepted years earlier, like the suspension of a cost-of-living adjustment.“This shows that if workers build enough power, they can win things back,” she said.U.A.W. members at Mack Truck also ratified a contract on Wednesday, after rejecting an initial agreement with the company.Across the three automakers, skepticism toward the agreements arose in large part from veteran workers who felt that the proposed contracts did not go far enough to compensate them for years of concessions and weak wage growth, even given strong gains for newer workers. Wages for some newer workers will more than double over the next four years.Huey Harris, a G.M. employee at a large truck assembly plant in Flint, Mich., who has worked at the company for over 20 years, said the deal should have gone further in rewarding veteran workers, though he ultimately voted for it. “The traditional people didn’t think they were offered enough in the contract,” he said.Curtis March, who works at Ford’s Chicago plant and made the inflation-adjusted equivalent of more than $40 an hour in the early 1990s, will make about $36 in the first year of the new contract, he said.Jamie Kelter Davis for The New York TimesSeveral longtime employees of the Big Three automakers said that even after the large gains of the new contract, they would not be making more than when they started their careers.Curtis March, who works at Ford’s Chicago Assembly Plant, said he made about $18 an hour once he reached the top wage for production workers at the company in the early 1990s, equivalent to more than $40 today when adjusted for inflation. He will make about $36 in the first year of the new contract.Mr. March said the deal was likely to pass at Ford because it placated more recent employees, who outnumber veterans like him. Workers at his plant approved the deal after voting against several previous contracts.Despite the ultimate success, the path to ratifying the contracts has included some internal strains for Mr. Fain and the union. Unite All Workers for Democracy, a reform group that played a key role in electing Mr. Fain and six other members of the U.A.W. executive board to their positions, declined to formally recommend that union members approve the contract even after Mr. Fain urged the group to do so at a recent meeting, according to three people familiar with the meeting. Instead, Unite All Workers passed a resolution committing it to stay neutral during the ratification vote, though it stated that the group “celebrates the record gains made in this agreement.”Two of these people also said the union’s General Motors department had been less communicative and less proactive in distributing information about the contract to local union officials and members than the Ford and Stellantis departments.The union declined to comment on these developments.LaDonna Newman, a longtime Ford worker, said about the U.A.W.’s president, Shawn Fain, “I give him a lot of kudos for having the courage to go against the corporations.”Jamie Kelter Davis for The New York TimesRatification could also bring political benefits to President Biden, who waded into the negotiations over the summer and fall, and who risked angering business leaders by increasingly siding with the union’s members.Administration officials were taken aback in August when Mr. Fain called for a 40 percent raise for autoworkers and a four-day workweek. Executives at the Big Three called the White House to ask if Mr. Fain was serious. A senior administration official said Biden aides had reassured them that the union wanted a deal, but acknowledged that the negotiations could go quite differently from the way the automakers were used to.In mid-September, when Mr. Biden was in New York for meetings at the United Nations General Assembly, he joined aides on a video call to make a decision that he and his team had been building toward for weeks: to join autoworkers on a picket line in Detroit. That decision infuriated executives, the administration official said, but the White House saw it as a victory for the president and for workers, by making a clear statement about where Mr. Biden stood in the negotiations.Some autoworkers argued that the union had erred by failing to expand the strike, which eventually included about one-third of the companies’ unionized workers in the United States, even more.LaDonna Newman, another longtime Ford worker who opposed the contract because of its limited gains for veteran workers, said she believed the union could have won more at the bargaining table had it been willing to escalate further.Still, she did not blame Mr. Fain for the outcome. “He walked into a burning building,” Ms. Newman said. “I give him a lot of kudos for having the courage to go against the corporations.”Jim Tankersley More

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    Caen las tarifas aéreas en EE. UU., para alivio de los pasajeros

    Las aerolíneas están comenzando a ofrecer precios de rebaja, una señal de que tienen problemas para llenar los aviones.En fechas recientes en Estados Unidos, las tarifas aéreas a muchos destinos populares han caído a su nivel más bajo en meses; incluso los viajes durante la temporada festiva son mucho más baratos que el año pasado. Esto les ha dado un respiro a los consumidores, tras meses de frustración por los elevados precios de todo tipo de bienes y servicios.La abundancia de buenas ofertas hace pensar que quizá la vigorosa recuperación de la industria aérea tras la pandemia por fin va bajando el ritmo, ya que la oferta de boletos se empareja con la demanda, que parece relativamente firme, e incluso la supera en algunas rutas.Tengamos en cuenta las tarifas que consiguió hace poco Denise Diorio, maestra jubilada de Tampa, Florida. Gastó menos de 40 dólares en un boleto de ida y vuelta a Chicago y solo pagó 230 dólares por un viaje redondo de Nueva York a París, el cual planea hacer este mes.“Les he venido diciendo a todos mis amigos que si quieren ir a alguna parte, deben comprar sus boletos ahora”, comentó.Las gangas que encontró quizá sean excepcionales, pero Diorio está en lo correcto cuando asegura que hay muchas ofertas.Este mismo mes, el precio promedio de un vuelo nacional cerca del Día de Acción de Gracias estaba casi un 9 por ciento por debajo del nivel del año pasado. En cuanto a los vuelos cerca de la Navidad, eran aproximadamente un 18 por ciento más baratos, según la aplicación de reservaciones y rastreo de precios Hopper. Kayak, el motor de búsqueda de viajes, analizó un rango más amplio de fechas cerca de las fiestas y descubrió que los precios de los vuelos nacionales eran alrededor de un 18 por ciento más bajos por la fecha del Día de Acción de Gracias y un 23 por ciento por Navidad.“En muchos casos, observamos algunas de las tarifas más bajas desde que se reanudaron los viajes tras los recortes de 2020, en realidad”, afirmó Kyle Potter, editor ejecutivo del blog de viajes y servicio de alerta de ofertas Thrifty Traveler.El precio de los boletos para vuelos dentro de Estados Unidos bajó durante el verano, aseveró Potter, y en épocas recientes es más común encontrar ofertas para viajes internacionales, en particular a Europa.Las aerolíneas bajan sus tarifas cuando quieren tentar a más personas a reservar boletos porque la demanda es baja o la competencia es más fuerte. Sin duda, la competencia se ha intensificado en algunas rutas, pero los expertos en viajes indican que no hay certeza de que la demanda vaya en declive.Se espera que el Día de Acción de Gracias de este año establezca una cifra récord para los viajes aéreos, con predicciones de casi 30 millones de pasajeros, según Airlines for America, un grupo de la industria. Esta cifra sería un 9 por ciento más alta que la del año pasado y estaría un 6 por ciento por encima de la de 2019, antes de la pandemia.Pero algunas aerolíneas afirman que la demanda va en descenso en los periodos que no son de festividades o temporada alta. Además, algunos aeropuertos han manejado tal número de vuelos que las compañías de transporte se han visto obligadas a reducir las tarifas para llenar los aviones.Ese no había sido un problema durante la mayor parte del periodo de recuperación tras la pandemia. El clima y otras perturbaciones limitaron la oferta de vuelos el año pasado y en 2021, al igual que la escasez de pilotos capacitados, repuestos y aviones, entre otros factores. Esas condiciones provocaron un alza en el precio de los boletos, mantuvieron llenos los aviones y ayudaron a las aerolíneas a obtener excelentes ganancias.“La industria de la aviación nunca había registrado el tipo de márgenes de ganancias y rendimiento sobre capital visto en los últimos 2 años y medio”, señaló John Grant, principal analista de la empresa consultora y de datos de aviación OAG. “Casi estamos de nuevo en una industria más normal”.Para las principales aerolíneas estadounidenses continúan los buenos tiempos, impulsados en particular por una gran demanda de vuelos internacionales. Pero las compañías más pequeñas y de bajo costo han comenzado a sufrir. Varias revelaron resultados financieros decepcionantes para el trimestre concluido en septiembre. Los ejecutivos de esas aerolíneas han dicho que la demanda va en descenso, las tarifas han caído y los costos se han mantenido elevados. También señalan que el mal clima y la escasez de controladores de tráfico aéreo les han complicado la operación aérea.Por ejemplo, JetBlue Airways perdió 153 millones de dólares en el tercer trimestre, en contraste con las ganancias de 57 millones de dólares registradas en el mismo periodo el año pasado. La empresa indicó hace poco que planea cambiar algunos vuelos de mercados abarrotados, como Nueva York, a otros en los que espera un mejor desempeño, como el Caribe. Las compañías de transporte económicas Spirit Airlines y Frontier Airlines les informaron hace poco a los inversionistas que buscaban recortar decenas de millones de dólares en costos.La competencia ha sido aguerrida en algunos mercados importantes, lo que ha impulsado a la baja las tarifas y las utilidades.En Denver, donde se encuentran las oficinas generales de Frontier, este verano hubo un 14 por ciento más asientos disponibles que en el verano de 2019, según la proveedora de datos de aviación Cirium. Miami y Orlando, Florida, dos destinos populares a los que vuelan muchas empresas, experimentaron aumentos en capacidad todavía mayores.No obstante, mientras que las aerolíneas añadieron vuelos en mercados populares en busca de captar pasajeros, en aeropuertos de otras ciudades, como Los Ángeles, un centro de actividades de muchas aerolíneas importantes, se observaron reducciones considerables en la capacidad con respecto al verano de 2019.“Es evidente que existe una enorme correlación entre las aerolíneas que funcionan bien y aquellas que tienen dificultades, en términos de sus márgenes, cuando comparamos dónde están sus concentraciones”, señaló el mes pasado Barry Biffle, director ejecutivo de Frontier, durante una teleconferencia para presentar los resultados de la aerolínea correspondientes al tercer trimestre.En cuanto a las rutas internacionales, los analistas no saben con tanta certeza por qué las tarifas van a la baja ni si se mantendrán así. Gangas como las que consiguió Diorio para su viaje a París podrían ser señal de que las aerolíneas más grandes pronto enfrentarán presiones financieras o sencillamente que la industria va regresando a una normalidad prepandémica.“Por lo regular, la demanda de viajes a Europa baja durante el invierno”, explicó Steve Hafner, director ejecutivo de Kayak. “Así que me parece que eso refleja las tendencias normales”.Pero la demanda de viajes internacionales podría enfrentar obstáculos, en parte debido a las guerras de Medio Oriente y Ucrania. Los analistas también advierten que muchos consumidores quizá estén menos dispuestos a derrochar dinero en viajes o tengan menos posibilidades de hacerlo ahora que en los dos años pasados, cuando contaban con el dinero que habían ahorrado durante la pandemia. Incluso si la demanda se mantiene firme, las aerolíneas corren el riesgo de ofrecer demasiados asientos en rutas populares al extranjero.Cualquiera que sea la causa de la reciente caída de las tarifas, las ofertas son un bienvenido alivio para los viajeros después de sufrir años de precios altos, dijo Potter.“En cualquier caso, la receta para vuelos baratos está ahí”, afirmó. “Si se trata solo de un pequeño exceso de capacidad, es una victoria para los consumidores. Si la demanda de viajes está cayendo, en cierto modo es una ganancia aún mayor para las personas que nunca van a renunciar a viajar”.Niraj Chokshi escribe sobre la aviación, los ferrocarriles y otras industrias del transporte. Más de Niraj Chokshi More