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    A Fed Official Wonders: ‘Do We Need to Do Another Rate Increase?’

    The head of the powerful New York Fed said that it was an “open question,” and that rates could fall next year.John C. Williams, the president of the Federal Reserve Bank of New York, thinks that the central bank’s push to cool the economy is near its peak and that he expects that interest rates could begin to come down next year.In an interview on Aug. 2, Mr. Williams said that inflation was coming down as hoped, and that while he expected unemployment to rise slightly as the economy cooled, by how much was unclear.The upshot is that interest rates are unlikely to rise much further than the current range of 5.25 to 5.5 percent. Fed officials could also consider cutting them soon: Mr. Williams did not rule out the possibility of lowering rates in early 2024, depending on economic data. His comments are a sign that moderating inflation could pave the way for a shift in policy approach. After months of focusing single-mindedly on bringing inflation under control, officials are increasingly focused on not overdoing it as they try to ease the economy through a gentle cooling.Below are edited highlights of the interview. (Read the full transcript here.)I wonder if there is anything that is on your mind that you want to talk about?We’re seeing continued strength in the economy. At the same time, a lot of the indicators are moving in the right direction. We’ve seen the job openings and other indicators are telling us that supply and demand are moving closer together.On the inflation front I definitely think that the data are moving similarly in the right direction, but I think that similarly, the only way we’re really going to achieve the 2 percent inflation on a sustained basis is really to bring that balance back to the economy.Clearly we’re not in a recession, or anything like that — but we need to see that process of getting supply and demand, from both sides, coming back into balance.Do you think additional rate increases are necessary to achieve that?I think that’s an open question, honestly.I think we’ve got monetary policy in a good place, it is definitely restrictive, but we have to watch the data. Are we seeing the supply-demand imbalances continue to shrink, move in the right direction? Are we seeing the inflation data move in the right direction, in order to decide that?Of course, there is another question, which is: How long do we have to keep the restrictive stance of policy? And that I think it’s going to be driven by the data.Are we talking about one more rate increase or more?Given what I see today, from the perspective of the data that we have, I think — it’s not about having to tighten monetary policy a lot. To me, the debate is really about: Do we need to do another rate increase? Or not?I think we’re pretty close to what a peak rate would be, and the question will really be — once we have a good understanding of that, how long will we need to keep policy in a restrictive stance, and what does that mean.When you say “what does that mean,” what do you mean by that?I think of monetary policy primarily in terms of real interest rates, and we set nominal rates.[Note: Real interest rates subtract out inflation, while nominal rates include it. Estimates of the so-called “neutral” rate setting that neither heats nor cools the economy are usually expressed in inflation-adjusted, real terms.]Assuming inflation continues to come down, it comes down next year, as many forecast, including the economic projections, if we don’t cut interest rates at some point next year then real interest rates will go up, and up, and up. And that won’t be consistent with our goals. So I do think that from my perspective, to keep maintaining a restrictive stance may very well involved cutting the federal funds rate next year, or year after, but really it’s about how are we affecting real interest rates — not nominal rates.My outlook is really one where inflation comes back to 2 percent over the next two years, and the economy comes into better balance, and eventually monetary policy will need over the next few years to get back to a more normal — whatever that normal is — a more normal setting of policy.Could you see a rate cut in the first half next year?I think it will depend on the data, and depend on what’s happening with inflation. The first half of next year is still a ways off.I don’t think the issue is exactly the timing, or things. It’s really more that if inflation is coming down, it will be natural to bring nominal interest rates down next year, consistent with that, to keep the stance of monetary policy appropriate for an economy that’s growing, and for inflation moving to the 2 percent level.Is inflation falling faster than expected?I do think that overall P.C.E. inflation for the year will probably come in at 3 percent, that depends on a lot of different things, and I expect core inflation to be above that, based on all the information we’re seeing.I do think that we are moving to an environment already where the underlying inflation rate has come down quite a bit. Mainly because — or not mainly, but in large part because the shelter inflation has come down so much. That’s been such a big driver of core inflation over the last couple of years.Is it coming down as expected, or quicker than expected? How has this compared to what you would have forecast three months ago?The data have surprised me and everybody a lot the past couple of years, because of the pandemic, the war, Russia’s war in Ukraine, all the things that happen. Surprises in data have become more the norm. For me, personally, the inflation data have been coming in as I had expected — and also hoped.What do you see as that sustainable pace of job growth?A lot of the labor force growth we’ve seen over the past year or so has been a rebound, and a return to a strong labor market conditions after the pandemic. That can’t continue every year forever: I mean the high labor force participation can continue, but it can’t continue to grow and grow and grow forever.Like a 100,000, or 150,000, gain in monthly employment?I’m not sure exactly, but it’s more in that 100,000 range than where it is today. We can’t be really precise about what exactly that means.What about wage growth? How much do you think you need to get wage growth down in order to feel confident that inflation is going to come down?I view wage growth, in terms of your question, as more of an indicator, rather than a goal or a target. So I don’t sit there thinking: We need to see wage growth do one thing or another in the next year or two.We’re still in an economy where demand exceeds supply, it’s a strong labor market, clearly, and wage growth has been very strong and it’s higher than inflation.Now, in the longer run, when you think about — over the next five years or something — you would expect real wages, wages adjusted for inflation, to grow consistent with productivity trends. Right now, I don’t think that’s exactly what I’m focused on. I’m more focused on: what are all these indicators, all the different data telling us about the overall balance or imbalance between supply and demand and what that implies for inflation.Would you be comfortable skipping a rate increase in September?We get a lot of data between now and the September meeting, and we will have to analyze that and make the right decision. I personally don’t have any preference of what we need to do at a future meeting.From my perspective, we have gone from a place — a year, a year and a half ago, where the inflation was way too high, not moving in the right direction, and the risks were all on inflation being too high, to one where the risks are on both sides.We have the two-sided risks that we need to balance, making sure that we don’t do too much, and weaken the economy too much — more than we need to in order to achieve our goals — and at the same time make sure that we do enough to make sure that we convincingly bring inflation back to 2 percent.Do you think that unemployment needs to go up in order for inflation to come down?Right now the unemployment rate is below many people’s view of a long-run normal unemployment rate, but not by a lot. A few tenths or so. From that perspective, I would expect the unemployment rate would move back to a more normal level. Will it rise above that, in order to really get inflation back to 2 percent? I don’t know the answer to that, in my own projection, my own forecast, I expect that the unemployment rate will rise above 4 percent next year, but I can’t say with any conviction how much will that need to happen.What do you think the criteria will be for cutting interest rates next year?To me, I think the main criteria that I’m thinking about in my forecast, is that really about with inflation coming down, needing to adjust interest rates with that so that we’re not inadvertently tightening policy more and more just because inflation is down. That is my baseline forecast — obviously, if the economic outlook changes, or other factors happen, there are other reasons why you’d change interest rates.A risk that people are talking about right now is this possibility of not just no landing, but re-acceleration. It’s possible that the economy takes back off and you guys have to do more down the road. I wonder how you think about the possibility?It’s a possibility. Being data-dependent means that if we see the data moving in that direction, we’ll need to act appropriately, as we have in the past.To me I guess if that risk were to materialize, it probably would be more that, demand is a lot stronger than I had been expecting, and we probably need more restrictive policy to bring supply and demand back into balance.A question we get from our readers all the time is: Are mortgage rates ever going to go back down to where they were before the pandemic disruptions? And I wonder what you think of that, as the person who’s done all of the research on interest rates?My expectation is that over time, over years, real interest rates will actually come back down from the levels they’re at.I haven’t seen really any strong evidence that neutral rates have yet risen much beyond what they were, say before the pandemic.If there’s a risk of going back to very low neutral rates, which obviously carries this inherent risk of ending up back at zero, why not just raise the inflation target now? It seems like you could deal with two problems at once, both giving yourself more headroom and making it easier to hit the inflation target.I think the experience of the past few years has taught me that 4 percent inflation is not considered price stability — it has not felt like price stability by the general public, or quite honestly, by policymakers; 4 percent inflation seems very high in the modern world. 3 percent seems high; 2 percent was already the compromise, of saying: Why not go all the way to zero? And there’s some technical reasons that you might not want to go all the way to zero, but 2 percent was to provide a buffer.[When the Fed reviewed its approach to setting policy in 2020] I personally felt comfortable that a 2 percent target, along with a commitment to achieving 2 percent inflation on average over time, positioned us well to achieve those goals. More

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    Indiana Tests if the Heartland Can Transform Into a Chip Hub

    Over the past 14 months, Indiana began converting 10,000 acres of corn and bean fields into an innovation park. State leaders met with the chief executives of semiconductor giants in South Korea, Taiwan and Japan. And they hosted top Biden administration officials to show off a $100 million expansion of chip research and development facilities at a local university.The actions were driven by one main goal: to turn Indiana into a microchip manufacturing and research hub, almost from scratch.“We’ve never done anything at this scale,” said Brad Chambers, who was Indiana’s commerce secretary in charge of economic development. “It’s a multibillion-dollar commitment by the state to be ready for the transitions that are happening in our global economy.”“We’ve never done anything at this scale,” said Brad Chambers, Indiana’s commerce secretary.Kaiti Sullivan for The New York TimesIndiana’s moves are a test of the Biden administration’s efforts to stimulate regional economies through the $52 billion CHIPS and Science Act, a landmark package of funding that is planned to begin going out the door in the next few months. The program is intended to bolster domestic manufacturing and research of semiconductors, which act as the brains of computers and other products and have become central to the U.S. battle with China for tech primacy.The Biden administration has promised that the CHIPS Act will seed high-paying tech jobs and start-ups even in places with little foundation in the tech industry. In a speech in May last year, Commerce Secretary Gina Raimondo, who oversees the chips program, said she was looking at how the program would help “different places in the heartland of America.”She added, “I think we will really unleash an unbelievable torrent of entrepreneurship and capital opportunity.”Gina Raimondo, the U.S. secretary of commerce, is overseeing the CHIPS Act program. Jared Soares for The New York TimesThat makes Indiana a prime case study for whether the administration’s efforts will pan out. Unlike Arizona and Texas, which have long had chip-making plants, Indiana has little experience with the complicated manufacturing processes underlying the components, beyond electric vehicle battery manufacturing and some defense technology projects that involve semiconductors.Indiana now wants to catch up to other places that have landed big chip manufacturing plants. The push is supported by Senator Todd Young, a Republican from Indiana, who was a co-author on the CHIPS Act and has been a leading voice on increasing funds for tech hubs. Companies and universities in Indiana have applied for multiple CHIPS Act grants, with the aim of winning awards not only for chip manufacturing but also for research and development.Some economists said the Biden administration’s goals of turning farmland into advanced chip factories might be overly ambitious. It took decades for Silicon Valley and the Boston tech corridor to thrive. Those regions succeeded because of their strong academic research universities, big anchor companies, skilled workers and investors.Many other areas don’t have that combination of assets. Indiana has for decades faced a brain drain among some of its more educated young people who flock to larger cities for work, according to the Indiana Chamber of Commerce. Some industrial policy proponents see the investments as a way to reverse that exodus, as well as a broader trend toward deindustrialization that hollowed out communities in the Rust Belt.But it’s unclear whether the program can achieve such ambitious goals — or whether the Biden administration will judge it to be more effective to spread out investments around the country or concentrate them in a few key hubs.“Many pieces have to come together,” said Mark Muro, a senior fellow at the Brookings Institution. He added that the federal government’s plan to initially put $500 million into tech hubs was too small and estimated it would take $100 billion in government aid to create 10 sustainable tech hubs.Indiana does have some advantages. The state has ample land and water — which are necessary for large chip factories that use water to cool equipment and rinse silicon wafers — and it has relatively stable weather for the highly sensitive production process. It also has Purdue University, with an engineering school that has promised to turn out the technicians and researchers needed for chip production.Yet the state faces stiff competition. In January 2022, Indiana lost a bidding war to Ohio over plans by Intel, the big U.S. chip-maker, to build two factories valued at $20 billion.“We learned a lot of lessons,” Mr. Chambers said about the failure. The biggest, he said, was to have a more attractive package of land, infrastructure and work force programs ready to offer big chip companies.A year later, Indiana won a $1.8 billion investment from SkyWater, a Minneapolis-based chip-maker, to build a factory with 750 jobs adjacent to Purdue’s campus.SkyWater, a Minneapolis-based chip maker, plans to invest $1.8 billion in a factory in Indiana. SkyWaterIndiana beat out four other states vying for SkyWater’s chip facility.SkyWaterState leaders acknowledge that any tech transformation could take years, especially if there is no anchor plant by even larger chip manufacturers such as TSMC, the world’s biggest maker of cutting-edge chips.Mr. Young said he and other state leaders were in talks with big chip makers for a contract that would compare to the $20 billion that Intel committed to Ohio. But “all net new job creation in my lifetime has been created by new firms and young firms,” he said.Indiana’s chip-making metamorphosis is now centered on a tech park, LEAP Innovation District, in the town of Lebanon near Interstate 65, which connects Indianapolis and Purdue in West Lafayette. The town is surrounded by 15,000 square miles of corn and bean farms.The park began taking shape along with the CHIPS Act. In 2019, Mr. Young was a co-author of the Endless Frontier Act with Senator Chuck Schumer, a Democrat of New York and then the Senate minority leader. The bill was the precursor to the CHIPS Act.As the bill wound through Congress, Mr. Young was in regular contact with Eric Holcomb, Indiana’s governor, and Mitch Daniels, then Purdue’s president, on details of the proposal. Mr. Young said Indiana’s manufacturing roots would be its asset, if the state’s factory sector could transition to making advanced chips.“I realized that Indiana and, more broadly, the heartland stood to disproportionately benefit from the investments that we would be making,” he said in an interview last month.Mr. Holcomb and Mr. Chambers then created a plan for a tech manufacturing park. Within months, they began buying corn and bean farms in Lebanon for what became the LEAP Innovation District.In September, Ms. Raimondo and Secretary of State Antony Blinken toured Purdue University’s clean rooms, seen here, for chip research.Kaiti Sullivan for The New York TimesPurdue is also working on a $100 million expansion of semiconductor research and development.Kaiti Sullivan for The New York TimesIn May 2022, Mr. Holcomb unveiled LEAP and began installing new water and power lines and a new road there. Mr. Holcomb, Mr. Chambers and Mr. Young also traveled to more than a dozen countries to meet with the executives of chip companies like SK Hynix and TSMC. They offered cheap rent in the LEAP district, tax incentives, access to labs and researchers at Purdue, and training programs at the local Ivy Tech Community College.Some of the work paid off. When Indiana beat out four other states for SkyWater’s $1.8 billion chip facility, the company said it was impressed by the coordination between state leaders and Purdue’s new president, Mung Chiang, who launched the nation’s first semiconductor degree programs to nurture workers for chip makers.Mung Chiang, Purdue University’s president, has rolled out a semiconductor degree program to nurture chip workers. Kaiti Sullivan for The New York TimesIn September, Mr. Chiang invited Ms. Raimondo and Secretary of State Antony J. Blinken to tour Purdue’s clean rooms for chip research and to see plans for a $100 million expansion of semiconductor research and development, including 50 new faculty to work on advanced chip science.“I think you have all the ingredients,” Ms. Raimondo said in a discussion with Mr. Holcomb and Mr. Chiang during the visit. Indiana officials now await word on how much CHIPS Act funding they may get. Some early results from the LEAP district initiative offer a mixed picture of where things might go.In May 2022, the park landed its first tenant — Eli Lilly, the pharmaceutical company, not a chip maker. More

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    Schumer Wields Political Heft in Bid for New York Chips Funds

    The Senate majority leader helped deliver billions of dollars in federal funding for semiconductors. Now he’s pushing for his state to reap benefits.In a darkened hotel ballroom in San Jose, Calif., last November, the most powerful players in the semiconductor industry received a familiar sales pitch.Senator Chuck Schumer, the majority leader, appeared by video message to urge the industry titans at the Semiconductor Industry Association’s annual awards dinner to work together to strengthen American manufacturing of a critical technology — and to invest more in his home state of New York.“I ask that more of the industry consider investing in the Empire State, and if you do, you’ll find no greater champion in your corner than me, the Senate majority leader,” Mr. Schumer said, to cheers and laughs of recognition from a crowd accustomed to the senator’s solicitations.Amid growing fears about China’s dominance of technology and America’s loss of competitiveness, Mr. Schumer last year helped rally Congress to push through the biggest industrial policy programs the United States has seen a generation. The Biden administration is now preparing to invest tens of billions of dollars in the U.S. semiconductor industry in an effort to boost chip manufacturing across the country and lessen U.S. reliance on foreign factories.If Mr. Schumer gets his way, a substantial part of that funding will flow to New York.In his encounters with chip executives, Commerce Secretary Gina Raimondo and President Biden himself, Mr. Schumer has openly and aggressively drawn on his political capital as majority leader to try to channel investment to his home state. During the months where Congress was debating whether to approve that funding, industry executives who set foot in Mr. Schumer’s office or spoke to him on the flip phone he carries in his breast pocket were asked when, not if, they would invest in New York.Mr. Schumer, a longtime China critic, primarily views the investments as critical to reducing America’s reliance on Beijing for a technology that powers everything from cars and dishwashers to missiles and fighter jets. Most chip production has moved to Asia in recent decades, leaving the U.S. economy highly vulnerable to shortages, as became apparent during the pandemic.But he also saw the opportunity to fulfill a more personal goal: securing investment that could revive the factory towns of his home state, which had been hollowed out through decades of competition with China. The move would also augment his local political support, attract donations from chip companies to fill Democratic coffers and cement his legacy as a proponent of upstate New York.“I cared about upstate and I cared about competition with China,” Mr. Schumer said in an interview in Albany in June. “When I drafted the legislation, I did things with New York companies in mind.”Senate majority leaders and other legislators have long used their clout to drive federal funds back home. But Mr. Schumer is capitalizing on his position at an opportune moment, as the United States prepares to invest nearly $53 billion in the sector, including $11 billion for chip research and $39 billion in manufacturing grants.Still, some critics have cautioned that economic and strategic factors, not political influence, must determine the investment decisions that could shape the U.S. economy for decades to come.A silicone wafer at the GlobalFoundries facility.Cindy Schultz for The New York TimesIf the proposed investments are realized, New York could become one of the country’s busiest hubs for chip production. Chip makers like GlobalFoundries, IBM, Onsemi and Wolfspeed are applying for funds to build or expand facilities there. Micron Technology, a memory chip maker, is proposing to invest up to $100 billion near Syracuse over the next two decades to build what would be the largest high-tech chips facility proposed in the United States, employing up to 9,000 people.Mr. Schumer is also pushing for New York to play a leading role in semiconductor research, as the headquarters of a new federal chip research organization.Competition for federal funding is expected to be fierce. By late June, the Commerce Department — which will dole out the funds — had received nearly 400 statements of interest from companies that intended to apply for money.“I suspect there will be many disappointed companies who feel that they should have a certain amount of money,” Ms. Raimondo said in February.New York has already faced some setbacks. Taiwan Semiconductor Manufacturing Company, Samsung and Intel, makers of the most cutting-edge types of logic chips, passed over the state in recent years in favor of Arizona, Texas and Ohio, where they are now building large facilities that could absorb a significant portion of government funding.Chip industry executives say practical factors, like the cost of electricity, land and capital, the availability of workers and the proximity of their suppliers, weigh heaviest in their decisions about where to invest.But the pressure from Mr. Schumer — and from other influential lawmakers, university presidents and company executives who helped secure the funding — raises questions about the role powerful political figures will play in the next chapter of American industrial policy.“I think there is and ought to be a lot of skepticism about political players having a major say in decision making over where these funds are spent,” said Chris Miller, an associate professor at Tufts University and the author of “Chip War: The Fight for the World’s Most Critical Technology.”“If you want effective industrial policy, you have to keep it as far away as possible from pork barrel politics,” he said.The Commerce Department has been hiring experts in finance and semiconductors to review company applications, and it has set up a selection committee to chose the board for the new research center, called the National Semiconductor Technology Center. The department appears to be trying to avoid any undue influence or favoritism.“Our awards will be entirely dependent upon the strength of applications and which projects will advance U.S. economic and national security interests,” the Commerce Department said in a statement.Mr. Schumer insists that New York will win federal dollars on its own merits, but he is also explicit about the benefit his position brings. In June, as he walked the sunlit halls of the Albany NanoTech Complex, a long-running chip research and educational facility, Mr. Schumer said he “did not close out a single discussion” with a semiconductor company without encouraging them to invest in New York.GlobalFoundries is among the chip makers that stand to benefit from the CHIPS act.Cindy Schultz for The New York TimesNew York has five main advantages, he told executives: Skilled workers, stemming from New York’s history of manufacturing. Cheap and plentiful water. Cheap hydropower. Shovel-ready sites for companies to build on.“And fifth, they had the majority leader,” he said.In a yellow-lit clean room behind Mr. Schumer, workers in white protective suits were tending to hundreds of millions of dollars of advanced machinery. On tracks overhead, mechanized metal pails whizzed by carrying silicon wafers, each roughly the size of a record, to and from the machines, where they would be imprinted with layers of intricate circuitry.Mr. Schumer paused to peer over his reading glasses at a smooth, white box the size of a mobile home: an extreme ultraviolet lithography machine, made by the Dutch firm ASML, arguably the most advanced piece of machinery ever developed.Albany NanoTech is the only public research facility in the United States with such a machine. The facility is applying for federal funding to build a new clean room in an adjacent parking lot, and it hopes to become home to part of the government’s new research center.“This is the perfect place,” Mr. Schumer said. “When we wrote the CHIPS and Science bill to set up a National Semiconductor Technology Center, I had Albany in mind. And I’m pushing to get it.”Mr. Schumer said he had personally made that case to a parade of administration officials he brought through the state. That included Mr. Biden, who was pitched on New York’s potential as the two men rode in a motorcade to hear Micron’s investment announcement last October.By his telling, Mr. Schumer’s efforts on behalf of upstate New York are a personal mission, stemming in part from an early challenge from a political opponent who told voters they would never see Mr. Schumer, a Brooklyn native, west of the Hudson River. As Mr. Schumer watched companies like General Motors, General Electric and Carrier shutter their New York facilities, he said, he vowed to do something to stop the flow of young people out of the state.Mr. Schumer had also been one of Congress’ earliest China hawks, particularly on the issue of Chinese currency manipulation. During a workout in 2019 in the Senate gym, Mr. Schumer began forming a plan with Senator Todd Young, Republican of Indiana, to bolster the U.S. economy by dedicating over $100 billion to technology research.It took two years — and an aggressive, coordinated lobbying effort between government and industry — to amass the support and momentum to turn that bill into law. Mr. Schumer and other key Republican and Democratic lawmakers enlisted company executives, university presidents and state officials to talk publicly about the importance of the funding, and put pressure on reluctant members of Congress.Mr. Schumer also worked closely with Ms. Raimondo to push the bill forward. He called her frequently as obstacles arose, including during Sunday Mass and her daughter’s 18th birthday party, she said in an interview in July 2022.As the bill progressed, the prospect of funding for new U.S. factories touched off an elaborate game of courtship among legislators, state officials and companies.The number of chip lobbyists in Washington multiplied. Companies like GlobalFoundries and Intel, which stood to benefit enormously from the legislation, hosted or attended fund-raisers and virtual events for Mr. Schumer in the months before the CHIPS Act was passed. From the beginning of 2021 through June 2023, political action committees linked with Mr. Schumer received more than $350,000 in donations from executives at chip companies and their suppliers, including a $5,000 donation from Intel’s chief executive, Pat Gelsinger, data from the Federal Election Commission shows.Mr. Schumer, right, viewed a model of a Micron facility with President Biden in Syracuse, N.Y. Micron has projected that the facility will employ up to 9,000 people.Kenny Holston for The New York TimesNew York played host to a series of chip companies considering potential investments, particularly for the plot that Micron now plans to build on. TSMC looked at the site in 2019 before it chose Arizona, and Intel considered the same location but ultimately chose Ohio.Micron was ready to write off New York because the state did not have a big enough site, Ryan McMahon, the local county executive, said. To win the final bid, the county spent tens of millions of dollars acquiring land, including buying out a street of homeowners, and running gas and electricity to the site, he said.“If Schumer didn’t introduce us, it’s one of those things, you wonder if it ever would have happened,” Mr. McMahon, a Republican, said.Mr. Schumer, along with other proponents, secured an investment tax credit in the chips legislation that Micron saw as key to making the economics of the project work. And at the urging of Gov. Kathy Hochul, New York state lawmakers passed their own chips subsidy bill to complement the federal one, approving up to $500 million a year in tax abatements to chip manufacturers.Micron has said it plans to start construction next year and complete the first $20 billion phrase of the factory by 2030. New York State has promised to give Micron $5.5 billion in tax credits over the life of the project if the company meets certain employment targets.As the biggest maker of memory chips with headquarters in the United States, Micron is seen as a likely candidate for a federal grant. But other developments have thrown the project into question: Micron has recently become the subject of a crackdown in China that could cost the company an eighth of its global revenues, potentially undercutting its ability to make ambitious investments.The deal has also been met with skepticism from local government watchdogs, who fear that Micron will become the latest firm to be offered taxpayer subsidies but fail to deliver the promised economic impact.“It might be good geostrategic policy for the United States,” said John Kaehny, executive director of Reinvent Albany, a watchdog focused on the New York government. “But for New York, it’s an incredibly low return on the investment of subsidy dollars.”For both Mr. Schumer and Governor Hochul, the Micron investment became a centerpiece of their electoral strategy last fall. With Republicans on their way to the best statewide showing in two decades, both Democrats packaged clips of themselves with Micron’s chief executive into TV ads that blanketed parts of the state otherwise wary of Democrats’ economic agenda.“Transformational for upstate New York, transformational for America,” Mr. Schumer said in one.Nicholas Fandos More

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    How to Catch Pandemic Fraud? Prosecutors Try Novel Methods.

    Federal prosecutors are scrambling to recoup billions of dollars in pandemic aid from people who falsely obtained funds from government programs that were intended to keep the economy afloat during the Covid shutdowns.In some districts, prosecutors are screening those suspected of a violent crime for potential involvement in pandemic fraud schemes. Other investigators are putting together “strike force teams” to unravel the most sophisticated enterprises or leaning on local officials to steer them toward potential fraudsters in their areas.The moves come as the federal government looks for novel ways to root out what officials say was an enormous number of fraudulent claims that were submitted and approved during the pandemic. Many of the programs that were set up to dole out relief money required minimal proof from those seeking funds and approved applications quickly in order to pump money into the economy.While the exact amount that was stolen is unknown, the Small Business Administration’s inspector general estimated that more than $200 billion — or at least 17 percent of the roughly $1.2 trillion in pandemic loans the agency doled out — was disbursed to “potentially fraudulent actors.” Nearly $30 billion has been seized or returned to the agency, according to the office.Thousands of investigations are still underway. The Labor Department’s inspector general has about 160,000 open investigations focused on unemployment-insurance fraud from the pandemic.But rooting out those who defrauded pandemic-relief programs has proved difficult, given the sheer amount of fraud. So far, the federal government has charged more than 2,230 defendants with schemes and offenses related to pandemic fraud, according to the Justice Department. More than 550 convictions have been made related to fraud involving funds from the Paycheck Protection Program and the Economic Injury Disaster Loan program, according to the S.B.A.’s office of inspector general.Michael Galdo, the acting director of Covid-19 fraud enforcement at the Justice Department, said there was a “wide variety of different approaches across U.S. attorney’s offices,” which have a large amount of freedom to determine the most effective way to catch fraudsters.Power in Local ConnectionsIn the Northern District of Mississippi, officials at the U.S. attorney’s office are traveling to individual counties and asking local officials to review lists of people who received pandemic loans. That approach can help prosecutors catch recipients they might not otherwise find, since local officials typically know, for example, whether someone owned a business, overstated the number of employees on an application or listed an address that was actually an empty lot.Clay Joyner, the U.S. attorney for the district, said the approach had helped uncover more cases than the district had the resources to criminally prosecute, so the office is pursuing civil cases in many investigations that involve smaller loans.“Thousands of the loans are for those lower-tier amounts,” Mr. Joyner said. “If you were trying to pursue all of these cases criminally, it would almost be impossible.”The office’s civil division has reached over 200 judgments, more than any other district in the country. Officials have recovered over $2.2 million so far, although they expect to recover more than $23 million through their civil judgments so far.Mr. Joyner said the office had also pursued civil cases because the financial consequences could be severe. Under a federal law commonly used for civil fraud cases, individuals could be required to pay three times the amount of a stolen loan, in addition to penalties and fees. Although the money usually has been spent already, most fraudsters agree to return the full amount through a repayment plan, Mr. Joyner said.Officials said they did not initially plan to pursue more civil cases, but they realized they could take advantage of the district’s small-town, rural nature after an attorney in the office recognized the names of loan recipients and suspected that many did not own businesses because he had grown up in the same area.Scrutiny of Other SuspectsOfficials at the U.S. attorney’s office in Maryland have started screening all new suspects of violent crime and illegal possession of firearms for pandemic fraud. Erek L. Barron, the U.S. attorney for the district, said the method had allowed officials to pursue investigations they normally would not have the capacity to take on.“We can’t take each and every case, so we have to be very thoughtful about the dollar amounts and the individuals that we investigate and prosecute,” he said.Since officials instituted the process in 2021, more than 60 percent of screened cases have turned up reasonable suspicion of pandemic-related fraud, Mr. Barron said, adding that the overlap had “presented an opportunity to go after two priorities in one.”“Those who are involved in violence, it’s not a stretch to imagine that they’re also willing participants in other wrongdoing,” he said.One recent case involved Jerry Phillips of Capitol Heights, Md., who was sentenced to seven years in federal prison after admitting to obtaining more than $1 million in relief funds using fake and stolen identities. After he was arrested and officials searched his residence, they recovered four “ghost guns,” including one he had illegally modified into a machine gun. Mr. Phillips had purchased the guns online, in part with an alias and address he used for fraud schemes, according to court documents.Special Teams for FraudThe Justice Department has also established “strike force teams” in several U.S. attorney’s offices. Phillip A. Talbert, the U.S. attorney for the Eastern District of California, said its joint strike force with the Central District of California used a data-driven approach to identify large fraud schemes. Analysts from the F.B.I. and at least five other federal agencies work with the offices, searching databases for patterns of suspicious activity.“If you just looked at one application or a couple applications, it may not be apparent that’s just a little piece of the fraud scheme,” Mr. Talbert said.The office’s earlier fraud cases originated mostly from referrals by banks and state and federal agencies. One case involved Andrea M. Gervais of Roseville, Calif., who was sentenced to 36 months of probation after pleading guilty to theft of government money in a scheme involving more than 90 fraudulent unemployment claims. The case began after investigators discovered someone had filed a claim using the identity of a sitting U.S. senator, which was processed for payment. The official was Senator Dianne Feinstein of California, according to a person familiar with the investigation. Senator Feinstein’s office confirmed that a person had used the senator’s name to file fraudulent unemployment claims, but it declined to provide additional comment.Mr. Talbert said the strike force would help the office investigate cases that are harder to detect, such as those involving international fraud rings.Dan Fruchter, an assistant U.S. attorney in the Eastern District of Washington, said officials initially focused on cases that were less complicated to prove, such as those involving fake businesses, but he also expected the office to prosecute more complex cases in the coming years. Investigations can take longer if people with legitimate businesses overstated facts in their applications or made improper purchases, for instance.Since forming its own strike force last year to strengthen coordination with federal law enforcement, the office has charged 19 defendants and recovered about $4 million.A Broad SweepIn addition to U.S. attorney’s offices, hundreds of people across more than 40 offices of inspectors general are working on pandemic fraud investigations, as are agents from the F.B.I., the Secret Service, the Postal Inspection Service, Homeland Security Investigations and Internal Revenue Service Criminal Investigation.Brian Miller, the country’s special inspector general for pandemic recovery, said he expected to uncover new leads over the next few years as more borrowers defaulted on pandemic loans, a “red flag” for potential fraud. He said default rates on interest payments for some programs had already been alarmingly high, and he urged Congress to fund the office past 2025, when many final payments are due.Michael Horowitz, the Justice Department’s inspector general and chairman of the Pandemic Response Accountability Committee, which is composed of 20 agency inspectors general, said investigators had prioritized mostly multimillion-dollar fraud cases, but he anticipated prosecutors would pursue more lower-dollar cases in the coming years.“They’re still big numbers,” Mr. Horowitz said. “In any other time, they would be viewed as bigger frauds.” More

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    JPMorgan backs off recession call even with ‘very elevated’ risks

    JPMorgan Chase economists on Friday bailed on their recession call.
    “Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected,” the bank’s lead economist said.
    Michael Feroli added that risk is not completely off the table. Specifically, he cited the danger of Fed policy that has seen 11 interest rate hikes implemented since March 2022.

    JPMorgan Chase economists on Friday bailed on their recession call, joining a growing Wall Street chorus that now thinks a contraction is no longer inevitable.
    While noting that risks are still high and growth ahead is likely to be slow, the bank’s forecasters think the data flow indicates a soft landing is possible. That comes despite a series of interest rate hikes enacted with the express intent of slowing the economy, and several other substantial headwinds.

    Michael Feroli, chief economist at the nation’s largest bank, told clients that recent metrics are indicating growth of about 2.5% in the third quarter, compared with JPMorgan’s previous forecast for just a 0.5% expansion.
    “Given this growth, we doubt the economy will quickly lose enough momentum to slip into a mild contraction as early as next quarter, as we had previously projected,” Feroli wrote.
    Along with positive data, he pointed to the resolution of the debt ceiling impasse in Congress as well as the containment of a banking crisis in March as potential headwinds that have since been removed.
    Also, he noted productivity gains, due in part to the broader implementation of artificial intelligence, and improved labor supply even as hiring has softened in recent months.
    Rate risk
    However, Feroli said risk is not completely off the table. Specifically, he cited the danger of Fed policy that has seen 11 interest rate hikes implemented since March 2022. Those increases have totaled 5.25 percentage points, yet inflation is still holding well above the central bank’s 2% target.

    “While a recession is no longer our modal scenario, risk of a downturn is still very elevated. One way this risk could materialize is if the Fed is not done hiking rates,” Feroli said. “Another way in which recession risks could materialize is if the normal lagged effects of the tightening already delivered kick in.”
    Feroli said he doesn’t expect the Fed to start cutting rates until the third quarter of 2024. Current market pricing is indicating the first cut could come as soon as March 2024, according to CME Group data.
    Market pricing also points strongly toward a recession.
    A New York Fed indicator that tracks the difference between 3-month and 10-year Treasury yields is pointing to a 66% chance of a contraction in the next 12 months, according to an update Friday. The so-called inverted yield curve has been a reliable recession predictor in data going all the way back to 1959.
    Changing mood
    However, the mood on Wall Street has changed about the economy.
    Earlier this week, Bank of America also threw in the towel on its recession call, telling clients that “recent incoming data has made us reassess” the forecast. The firm now sees growth this year of 2%, followed by 0.7% in 2024 and 1.8% in 2025.
    Goldman Sachs also recently lowered its probability for a recession to 20%, down from 25%.
    Federal Reserve GDP projections in June pointed to respective annual growth levels ahead of 1%, 1.1% and 1.8%. Chairman Jerome Powell said last week that the Fed’s economists no longer think a credit contraction will lead to a mild recession this year.
    — CNBC’s Michael Bloom contributed to this report. More

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    The story of inflation, as told through your child’s backpack

    Rising costs are weighing on families this back-to-school season.
    An average family with children in elementary through high school plans to spend a record $890.07 on back-to-school items this year, according to a survey.
    CNBC used the producer price index to track how the costs of making items typically purchased for students has changed between 2019 and 2023.

    Jamie Grill | Getty Images

    Back-to-school shopping hasn’t been easy this year for Lauren Cyr.
    The mother of three has searched for deals and spread out her shopping across multiple paychecks. Still, the 31-year-old sees higher price tags on everything from backpacks to paper — and the summer ritual is squeezing her family budget more than it did in prior years.

    “Before I even went shopping, I will tell you, I had a full-on panic attack and cried,” said Cyr, a customer service manager living in Ruskin, Florida. “It’s just a headache.”
    Cyr isn’t alone. An average family with children in elementary through high school plans to spend a record $890.07 on back-to-school items this year, according to a survey of more than 7,800 consumers released last month by the National Retail Federation and Prosper Insights and Analytics. Total spending on school-related items for students in these grades is expected to climb to a new high of $41.5 billion.
    There is, however, a silver lining: Back-to-school shoppers were less likely to say they are spending more because of higher prices in 2023 than in 2022, according to the NRF data. Instead, consumers have reported that purchases of more supplies and bigger-ticket items have contributed to higher spending this year.
    Still, rising costs can leave millions of Americans in a lurch as they try to fill the backpacks of school-age children this year. While inflation has broadly slowed, consumers may not feel any respite as prices of school supplies are still rising.
    “For the average family, there’s going to be sticker shock,” said Jay Zagorsky, a professor at Boston University’s Questrom School of Business.

    He said shoppers should not insist on buying a specific item or brand as prices rise. “By being flexible in what you’re purchasing, you can actually come away with both a happy child and a happy wallet.”

    CNBC used the producer price index — a closely followed gauge of inflation on businesses measured by the Bureau of Labor Statistics — to track how the costs of making items typically purchased for students has changed between 2019 and 2023. PPI data breaks out the changing costs of specific items through a sampling of wholesalers.
    Those producers can then pass added expenses onto consumers in the form of smaller products or higher prices.
    Retailers from Gap to Kohl’s are trying to woo consumers with deals as prices go up. Walmart said it has kept the school supply basket at the same price as last year by offering common items such as backpacks starting at $6. Target kicked off the back-to-school season in early July with a special sale for customers who belong to its loyalty program.
    The federal data is not a perfect representation of the change in spending, as the amount customers pay can vary by brand, store or location. Prices may also not perfectly match the path of inflation because the products are made and ordered by retailers months before back-to-school season ramps up, according to Zagorsky.
    But the federal data can offer insight into how much more consumers across the country are paying for key items as children head back to the classroom.

    Paper

    Two data points measure the changing cost of paper.
    First, there’s the classic writing and printing paper. There are also tablets and pads of paper.
    Prices of both fell early during the Covid-19 pandemic before surging. Paper cost producers about 24% more in June 2023 than it did the same month four years prior, while tablets and pads were up 33.1% during that period.

    Writing, art and office supplies

    The price of products such as glue and pencils is also rising.
    Inflation for pens, markers and mechanical pencils — as well as parts associated with these products — appears to have peaked. But prices were 13% higher in June 2023 than in the same month in 2019.
    The rate of inflation for a group of goods that includes lead pencils and other supplies typically used in offices and for art has moved similarly. Prices climbed 23.2% from June 2019 to June 2023.

    Backpacks

    Perhaps the most iconic symbol of a student is also more expensive to produce.
    Backpack prices have increased less than they have for other goods, but they are still 10.5% higher in June 2023 than they were in the same month in 2019.

    — CNBC’s Gabriel Cortes and Melissa Repko contributed to this report. More

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    Black unemployment rate ticks lower in July as jobs market remains tight

    The jobless rate for Black workers fell to 5.8% in July, Labor Department data showed Friday. That’s down from 6.0% in June and lower than the 6.0% rate from the year-ago period.
    Hispanic workers’ overall unemployment rate ticked slightly higher to 4.4% in July from 4.3% in June.
    Asian workers’ unemployment rate fell to 2.3% in July, a 0.9 percentage point drop from 3.2% in June.

    Workers install solar panels during the completion phase of a 4-acre solar rooftop atop AltaSea’s research and development facility at the Port of Los Angeles, in the San Pedro neighborhood, on April 21, 2023 in Los Angeles, California.
    Mario Tama | Getty Images

    The unemployment rate for Black workers fell slightly in July as the broader labor market remains tight.
    Black workers’ jobless rate fell to 5.8%, according to the Labor Department on Friday. That’s down from 6.0% in June. It’s also lower than the 6.0% rate from the year-ago period. Broken down by gender, Black men’s unemployment rate fell to 5.3% in July from 5.9% in June. Meanwhile, Black women’s jobless rate declined to 5.2%, down from 5.4% the prior month.

    Those figures reflect continued tightness in the broader labor market. In July, the U.S. unemployment rate was little changed at 3.5%, which is just above the lowest level since late 1969.
    “It shows that the labor market is strong and in a good place,” Economic Policy Institute’s Valerie Wilson said. “Even with the hikes, the interest rate hikes, that the Federal Reserve has been implementing, we continue to see unemployment remain low.”

    For Black workers, the labor force participation rate, which measures the number of people who are employed or seeking work, also ticked slightly higher, to 62.7%.
    The unemployment rate for Hispanic workers also ticked slightly higher, to 4.4% in July from 4.3% in June. The rate for Hispanic men rose to 4.0% from 3.8%. Hispanic women’s rate declined slightly to 4.0% from 4.1%.
    Wilson, director of EPI’s program on race, ethnicity and the economy, said the slight rise could be due in part to the higher unemployment rates across the leisure and hospitality industries, transportation and utilities, as well as construction.

    “It seems to me that some of these patterns are related to what’s happening in industries where different groups of workers are a larger share of those employed in those industries,” Wilson said.
    Meanwhile, Asian workers’ unemployment rate fell to 2.3% in July, a 0.9 percentage point drop from 3.2% in June.

    Overall, however, Wilson said, the report showed a positive trend for the labor market, particularly as wage growth continues to show strength even as inflation declines. In July, average hourly earnings gained 0.4% for the month, higher than the 0.3% estimate from economists polled by Dow Jones.
    “We’re actually seeing now that inflation is falling faster than wage growth is slowing, which means that real wages are actually growing,” Wilson said.
    “Those are signals that we can have a so-called soft landing as the Fed tries to manage and address inflation while also trying to make sure that we continue to have a strong labor market,” Wilson added.
    — CNBC’s Jeff Cox contributed reporting. More