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    Strategist David Roche says we’ll avoid a global recession, central banks will ‘change the goalposts’

    The market is pricing a further 25 basis point hike from the U.S. Federal Reserve later this month, though a cooler-than-expected June consumer price inflation reading on Wednesday fueled optimism that prices are finally beginning to moderate.
    Veteran strategist David Roche suggested the Fed will be hesitant to begin cutting rates back from their current elevated levels until “well into next year.”
    The global economy is looking at a period of static growth with rates remaining high, according to Roche.

    A Now Hiring sign is seen inside a WholeFoods store in New York City.
    Adam Jeffery | CNBC

    The global economy will likely avoid a recession and central banks will need to “change the goalposts” on inflation, according to veteran strategist David Roche.
    With high inflation proving sticky across many major economies, central banks have tightened monetary policy aggressively over the past 18 months. Further hikes to interest rates are expected later this year amid tight labor markets and resilient economic activity.

    It’s led a growing number of economists to believe that the additional rate rises will tip several major economies into recession, with some even suggesting that a downturn could be necessary to achieve the levels of demand destruction and unemployment that would bring about disinflation.
    The market is pricing a further 25 basis point hike from the U.S. Federal Reserve later this month, though a cooler-than-expected June consumer price inflation reading on Wednesday fueled optimism that prices are finally beginning to moderate.
    Roche suggested that since figures are beginning to reflect year-on-year comparisons to the sudden spike in prices last spring following Russia’s invasion of Ukraine, the Fed will be hesitant to begin cutting rates back from their current elevated levels until “well into next year.”
    “I think a real fear is the fact that they could cut too early and be the culprits of engendering higher inflation for a second time, so I think if anything, they will stay the course,” said Roche, a veteran investor and president of research house Independent Strategy.
    “Will that produce deflation, will that produce recession? I actually don’t think so, and the reason for that is that labor markets and disposable income — what people have to spend — are behaving differently this time.”

    The year-over-year inflation rate dropped from 4% in May to 3% in June, largely due to falling energy and transportation prices, while core inflation — which excludes volatile food and energy costs — slowed to increase by just 0.2% month-on-month. Annual core CPI remained comparatively high at 4.8%.

    Roche, who correctly predicted the development of the Asian crisis in 1997 and the 2008 global financial crisis, noted that the global economy is currently seeing a “gradual reduction” in labor demand and a “gradual reduction in hourly wages,” but not the “catastrophic collapse in employment which would create a recession.”
    Unlike the oft-referenced “goldilocks scenario” in which borrowing costs are coming down and growth is accelerating, Roche suggested the global economy is looking at a period of static growth with rates remaining high. He said this raises the question of how to bring inflation back towards the Fed’s 2% target without a “long period of pain.”
    “Or do you simply change the goalposts, or change the goalposts without really saying so, which is what I think central banks are going to do?” he added.
    No chance of ‘immaculate disinflation’
    The dismissal of any possible “goldilocks” scenario for the global economy was echoed earlier this week by JPMorgan Asset Management, though on different grounds.
    Stock markets and other risk assets rallied Wednesday on the back of the cooler U.S. CPI print, and have enjoyed a bumper first half of the year despite persistent concerns about central banks having to continue driving down growth in order to rein in inflation.
    The S&P 500 is up more than 16% year-to-date, while the tech-heavy Nasdaq 100 has soared by almost 40%. Gains in Europe and Asia have been more modest, with the pan-European Stoxx 600 up more than 8% and the MSCI Asia ex-Japan almost 3% higher.
    At a roundtable event on Tuesday, JPMorgan Global Market Strategist Hugh Gimber said current market positioning is built on an economic outlook that is “too good to be true,” with investors less well prepared for the “necessary” slowdown that “central banks are determined to achieve.”

    “We are skeptical about this notion that we can see what I’d call immaculate disinflation. We don’t think core inflation gets back to target without a meaningful hit to growth, and therefore we’re uncomfortable with the markets seeing inflation coming down and therefore potentially a recession might be avoided,” Gimber said.
    He added that core inflation will not reach tolerable levels for central banks without a weaker period for the global economy.
    “Therefore, as a result of the market moves that we’ve seen in the first half of this year, we expect higher volatility ahead,” Gimber said.
    “We think that ultimately total returns on a 12-month forward basis across risk assets could be coming under significant pressure, and therefore this is a time for investors to be focused on portfolio resilience.” More

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    Inflation Drops to 3% in June

    The Consumer Price Index climbed far more slowly in June, a relief for shoppers and a hopeful — though inconclusive — sign that America might pull off a “soft landing.”Inflation cooled significantly in June, offering some of the most hopeful news since the Federal Reserve began trying to tame rapid price increases 16 months ago — and boosting the chances that the central bank might be able to stop raising interest rates after its meeting this month.The Consumer Price Index climbed 3 percent in the year through June, according to data released Wednesday, less than the 4 percent increase in the year through May and just a third of its roughly 9 percent peak last summer.That overall measure is being pulled down by big declines in gas prices that could prove ephemeral, which is why policymakers closely watch a more slimmed-down version: the change in prices after stripping out food and fuel costs. That metric, known as the core index, offered news that was even better than what economists had expected.The core index climbed 4.8 percent compared with the previous year, down from 5.3 percent in the year through May. Economists had forecast a 5 percent increase. And on a monthly basis, it climbed at the slowest pace since August 2021.Slower inflation is unquestionably good news, because it allows consumer paychecks to stretch further at the gas pump and in the grocery aisle. And if inflation can come down sustainably without a big increase in unemployment or a painful economic recession, it could allow workers to hang on to the major gains they have made over the past three years: progress toward better jobs and pay that has helped to chip away at income inequality.The White House, which has spent over a year on the defensive over rising prices, celebrated the fresh report, with President Biden calling the current economic moment “Bidenomics in action.” And stocks soared as investors bet that the Fed would be able to be less aggressive in its fight against inflation — even halting its interest rate increases after a final July move — in light of the new data.“This is very promising news,” said Laura Rosner-Warburton, senior economist and founding partner at MacroPolicy Perspectives. “The pieces of the puzzle are starting to come together. But it’s just one report, and the Fed has been burned by inflation before.”Fed officials are likely to avoid declaring victory just yet. Policymakers are still trying to assess whether the moderation is likely to be quick and complete. They do not want to allow price increases to linger at slightly elevated levels for too long, because if they do, consumers and businesses could adjust their behavior in ways that make more rapid inflation a permanent feature of the economy.That’s why officials have signaled in recent weeks that they are likely to raise interest rates at their meeting on July 25 and 26. Policymakers had also indicated that one or more additional rate moves could be warranted after that.“Inflation is too high,” Thomas Barkin, the president of the Federal Reserve Bank of Richmond, said Wednesday in a speech in Maryland, according to Bloomberg. “If you back off too soon, inflation comes back strong, which then requires the Fed to do even more.”But economists and investors saw less of a chance that the Fed would raise rates again later this year in light of the fresh data.Policymakers have already slowed down the pace of rate moves sharply, skipping an adjustment at the June meeting. Assuming they hold off again in September, that could mean it would be November before they have to seriously debate lifting borrowing costs again — and by then, success in tamping down inflation could be clear.“They don’t want to unleash animal spirits too quickly here and have everyone go bananas,” said Julia Pollak, chief economist at ZipRecruiter. But by November, “it may be clear in the data that their job is done.”The details of the June report offered reasons for optimism. Inflation slowed down as a few key products and services posted steep price declines. Airfares fell 8.1 percent from the previous month, and used cars and trucks were down 0.5 percent. New vehicle prices were flat compared with May.Not all of those changes will necessarily last: Airline tickets, for instance, are not expected to continue to decline as sharply as they did in this report. But for the Fed, there were other encouraging signs that the cool-down is broad enough to prove sustainable.For one thing, the cost of housing as measured by the Consumer Price Index — which relies on rent prices — is coming down sharply. That is expected to continue in coming months. An index tracking the rent of primary residences slowed to a 0.46 percent change in June, the weakest increase since March 2022.Car prices are also stabilizing, and in some cases falling. After years in which semiconductor shortages and other parts problems limited supply, making it hard to meet booming demand, discounting is making a comeback on car dealer lots. Inventories are rebounding, and consumers have a less voracious appetite for new cars in particular.“It’s different from the past couple of years, and even different from the fall,” said Beth Weaver, who runs a Buick GMC car dealership in Erie, Pa. “Interest rates have certainly weighed on demand.”And more broadly, price increases for a basket of services excluding energy, food and housing costs — a metric that the Fed watches very closely — continued to slow in June. That progress comes even as unemployment is hovering near its lowest level in half a century and hiring remains stronger than before the pandemic.“This is very promising news,” the economist Laura Rosner-Warburton said. “But it’s just one report, and the Fed has been burned by inflation before.”Amir Hamja/The New York TimesFed interest rate increases work to slow inflation partly by slowing the job market and holding back wage increases, so the Fed’s fight against inflation and the strength of the labor market are closely tied.“The economy is defying predictions that inflation would not fall absent significant job destruction,” Lael Brainard, the director of the National Economic Council, said during a speech on Wednesday. “This economy is delivering strong results for America’s middle class.”Republicans highlighted that inflation is still higher than usual — a fact that has been biting into consumer confidence, though it may become less salient as consumers feel relief from cheaper fuel and find that they can replace their aging cars without facing eye-popping price tags.“Inflation that is almost double the Federal Reserve’s target is not a win for American wallets and budgets,” Representative Jason Smith, a Missouri Republican and chairman of the House Ways and Means Committee, said in an emailed statement, referring to the core inflation rate.Inflation does remain above the rate of increase that was normal before the 2020 pandemic, and it is still much faster than the Fed’s 2 percent goal. The Fed defines that target using a separate inflation measure, the Personal Consumption Expenditures index. That gauge is also slowing notably, and its June reading is scheduled for release on July 28.Even if central bankers are taking the slowdown cautiously — cognizant that price increases have slowed and then accelerated again before — many commentators welcomed the fresh data point as the latest sign that the economy might be able to slow gently.Officials at the Fed have been trying to engineer a “soft landing,” in which inflation slows gradually and without requiring a big jump in the unemployment rate. Jerome H. Powell, the Fed chair, has repeatedly said there was a “narrow path” to achieving one: There are few if any historical examples of the Fed wrestling significant inflation lower without a downturn.Challenges continue to loom. The economy has momentum, and the job market is strong, which could give companies the wherewithal to keep increasing prices. The war in Ukraine could always intensify, pushing up commodity prices.But there are also factors that could help out: China’s rebound has been weaker than expected, which means that fewer buyers are competing for goods in global markets. Consumers are buying fewer retail goods, and while spending on services is not plummeting, it has been gradually slowing.And as those trends combine with inflation that is easing more convincingly, the odds of a gentle deceleration may be improving.“Powell’s saying is that ‘it’s a narrow path to a soft landing,’” said Michael Feroli, chief U.S. economist at J.P. Morgan. “It’s looking maybe a little wider now.”Alan Rappeport More

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    Inflation rose just 0.2% in June, less than expected as consumers get a break from price increases

    Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high.
    The consumer price index increased 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%.

    That compared to Dow Jones estimates for respective increases of 3.1% and 0.3%.

    Stripping out volatile food and energy prices, core CPI rose 4.8% from a year ago and 0.2% on a monthly basis. Consensus estimates expected respective increases of 5% and 0.3%.
    In sum, the numbers could give the Federal Reserve some breathing room as it looks to bring down inflation that was running around a 9% annual rate at this time in 2022, the highest since November 1981.
    “There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, chief investment officer at Key Private Bank. “The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.”
    However, central bank policymakers tend to look more at core inflation, which is still running well above the Fed’s 2% annual target. Mateyo said the report is unlikely to stop the central bank from raising rates again later this month.

    Fed officials expect the inflation rate to continue falling, particularly as costs ease for shelter, which makes up about one-third of the weighting in the CPI. However, the shelter index rose 0.4% last month and was up 7.8% on an annual basis. That monthly gain accounted for about 70% of the increase in headline CPI, the Bureau of Labor Statistics said.
    “Housing costs, which account for a large share of the inflation picture, are not coming down meaningfully,” said Lisa Sturtevant, chief economist at Bright MLS. “Because rates had been pushed so low by the Fed during the pandemic and then increased so quickly, the Federal Reserve’s rate increases not only reduced housing demand — as intended — but also severely limited supply by locking homeowners into homes they would have otherwise listed for sale.”
    Wall Street reacted positively to the report, with futures tied to the Dow Jones Industrial Average up nearly 200 points. Treasury yields were down across the board.
    Traders are still pricing in a strong possibility that the Fed will enact a quarter percentage point rate hike when it meets July 25-26. However, market pricing is pointing towards that being the last increase as officials pause to allow the series of hikes to work their way through the economy.
    The muted increase for the headline CPI came even though energy prices increased 0.6% for the month. However, the energy index decreased 16.7% from a year ago, a time when gasoline prices at the pump were running around $5 a gallon.
    Food prices increased just 0.1% on the month while used vehicle prices, a primary source for the inflation surge in the early part of 2022, declined 0.5%.
    Airline fares fell 3% on the month and now are down 8.1% on an annual basis.
    The easing in the CPI helped boost worker paychecks: Real average hourly earnings, adjusted for inflation rose 0.2% from May to June and increased 1.2% on a year-over-year basis. During the inflation surge that peaked last June, worker wages had run consistently behind the cost of living increases.
    This is breaking news. Please check back here for updates. More

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    The Energy Transition Is Underway. Fossil Fuel Workers Could Be Left Behind.

    The Biden administration is trying to increase renewable energy investments in distressed regions, but some are skeptical those measures would be enough to make up for job losses.Tiffany Berger spent more than a decade working at a coal-fired power plant in Coshocton County, Ohio, eventually becoming a unit operator making about $100,000 annually.But in 2020, American Electric Power shut down the plant, and Ms. Berger struggled to find a job nearby that offered a comparable salary. She sold her house, moved in with her parents and decided to help run their farm in Newcomerstown, Ohio, about 30 minutes away.They sell some of the corn, beans and beef they harvest, but it is only enough to keep the farm running. Ms. Berger, 39, started working part time at a local fertilizer and seed company last year, making just a third of what she used to earn. She said she had “never dreamed” the plant would close.“I thought I was set to retire from there,” Ms. Berger said. “It’s a power plant. I mean, everybody needs power.”The United States is undergoing a rapid shift away from fossil fuels as new battery factories, wind and solar projects, and other clean energy investments crop up across the country. An expansive climate law that Democrats passed last year could be even more effective than Biden administration officials had estimated at reducing fossil fuel emissions. While the transition is projected to create hundreds of thousands of clean energy jobs, it could be devastating for many workers and counties that have relied on coal, oil and gas for their economic stability. Estimates of the potential job losses in the coming years vary, but roughly 900,000 workers were directly employed by fossil fuel industries in 2022, according to data from the Bureau of Labor Statistics.The Biden administration is trying to mitigate the impact, mostly by providing additional tax advantages for renewable energy projects that are built in areas vulnerable to the energy transition. But some economists, climate researchers and union leaders said they are skeptical the initiatives will be enough. Beyond construction, wind and solar farms typically require few workers to operate, and new clean energy jobs might not necessarily offer comparable wages or align with the skills of laid-off workers.Coal plants have already been shutting down for years, and the nation’s coal production has fallen from its peak in the late 2000s. U.S. coal-fired generation capacity is projected to decline sharply to about 50 percent of current levels by 2030, according to the Energy Information Administration. About 41,000 workers remain in the coal mining industry, down from about 177,000 in the mid-1980s.The industry’s demise is a problem not just for its workers but also for the communities that have long relied on coal to power their tax revenue. The loss of revenue from mines, plants and workers can mean less money for schools, roads and law enforcement. A recent paper from the Aspen Institute found that from 1980 to 2019, regions exposed to the decline of coal saw long-run reductions in earnings and employment rates, greater uptake of Medicare and Medicaid benefits and substantial decreases in population, particularly among younger workers. That “leaves behind a population that is disproportionately old, sick and poor,” according to the paper.The Biden administration has promised to help those communities weather the impact, for both economic and political reasons. Failure to adequately help displaced workers could translate into the kind of populist backlash that hurt Democrats in the wake of globalization as companies shifted factories to China. Promises to restore coal jobs also helped Donald J. Trump clinch the 2016 election, securing him crucial votes in states like Pennsylvania.Federal officials have vowed to create jobs in hard-hit communities and ensure that displaced workers “benefit from the new clean energy economy” by offering developers billions in bonus tax credits to put renewable energy projects in regions dependent on fossil fuels.Tiffany Berger, who was laid off when the plant in Coshocton County was shut down, struggled to find work that offered a comparable salary. She moved in with her parents and decided to help run her family’s farm.Maddie McGarvey for The New York TimesIf new investments like solar farms or battery storage facilities are built in those regions, called “energy communities,” developers could get as much as 40 percent of a project’s cost covered. Businesses receiving credits for producing electricity from renewable sources could earn a 10 percent boost.The Inflation Reduction Act also set aside at least $4 billion in tax credits that could be used to build clean energy manufacturing facilities, among other projects, in regions with closed coal mines or plants, and it created a program that could guarantee up to $250 billion in loans to repurpose facilities like a shuttered power plant for clean energy uses.Brian Anderson, the executive director of the Biden administration’s interagency working group on energy communities, pointed to other federal initiatives, including increased funding for projects to reclaim abandoned mine lands and relief funds to revitalize coal communities.Still, he said that the efforts would not be enough, and that officials had limited funding to directly assist more communities.“We’re standing right at the cusp of potentially still leaving them behind again,” Mr. Anderson said.Phil Smith, the chief of staff at the United Mine Workers of America, said that the tax credits for manufacturers could help create more jobs but that $4 billion likely would not be enough to attract facilities to every region. He said he also hoped for more direct assistance for laid-off workers, but Congress did not fund those initiatives. “We think that’s still something that needs to be done,” Mr. Smith said.Gordon Hanson, the author of the Aspen Institute paper and a professor of urban policy at the Harvard Kennedy School, said he worried the federal government was relying too heavily on the tax credits, in part because companies would likely be more inclined to invest in growing areas. He urged federal officials to increase unemployment benefits to distressed regions and funding for work force development programs.Even with the bonus credit, clean energy investments might not reach the hardest-hit areas because a broad swath of regions meets the federal definition of an energy community, said Daniel Raimi, a fellow at Resources for the Future.“If the intention of that provision was to specifically provide an advantage to the hardest-hit fossil fuel communities, I don’t think it’s done that,” Mr. Raimi said.Local officials have had mixed reactions to the federal efforts. Steve Henry, the judge-executive of Webster County, Ky., said he believed they could bring renewable energy investments and help attract other industries to the region. The county experienced a significant drop in tax revenue after its last mine shut down in 2019, and it now employs fewer 911 dispatchers and deputy sheriffs because officials cannot offer more competitive wages.“I think we can recover,” he said. “But it’s going to be a long recovery.”Adam O’Nan, the judge-executive of Union County, Ky., which has one coal mine left, said he thought renewable energy would bring few jobs to the area, and he doubted that a manufacturing plant would be built because of the county’s inadequate infrastructure.“It’s kind of difficult to see how it reaches down into Union County at this point,” Mr. O’Nan said. “We’re best suited for coal at the moment.”Federal and state efforts so far have done little to help workers like James Ault, 42, who was employed at an oil refinery in Contra Costa County, Calif., for 14 years before he was laid off in 2020. To keep his family afloat, he depleted his pension and withdrew most of the money from his 401(k) early.In early 2022, he moved to Roseville, Calif., to work at a power plant, but he was laid off again after four months. He worked briefly as a meal delivery driver before landing a job in February at a nearby chemical manufacturer.He now makes $17 an hour less than he did at the refinery and is barely able to cover his mortgage. Still, he said he would not return to the oil industry.“With our push away from gasoline, I feel that I would be going into an industry that is kind of dying,” Mr. Ault said. More

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    Amazon Union Group, Challenging Christian Smalls, Seeks Vote

    A split over the stewardship of the union’s high-profile president, Christian Smalls, has led a rival faction to file a lawsuit seeking an election.A dissident group within the Amazon Labor Union, the only certified union in the country representing Amazon employees, filed a complaint in federal court Monday seeking to force the union to hold a leadership election.The union won an election at a Staten Island warehouse with more than 8,000 employees in April 2022, but Amazon has challenged the result and has yet to begin bargaining on a contract.The rise of the dissident group, which calls itself the A.L.U. Democratic Reform Caucus and includes a co-founder and former treasurer of the union, reflects a growing split within the union that appears to have undermined its ability to pressure Amazon. The split has also threatened to sap the broader labor movement of the momentum generated by last year’s high-profile victory.In its complaint, the reform caucus argues that the union and its president, Christian Smalls, illegally “refuse to hold officer elections which should have been scheduled no later than March 2023.”The complaint asks a federal judge to schedule an election of the union’s top officers for no later than Aug. 30 and to appoint a neutral monitor to oversee the election.Mr. Smalls said in a text message Monday that the complaint was “a ridiculous claim with zero facts or merit,” and a law firm representing the union said it would seek legal sanctions against the reform group’s lawyer if the complaint was filed.The complaint states that under an earlier version of the union’s constitution, a leadership election was required within 60 days of the National Labor Relations Board’s certification of its victory.But in December, the month before the labor board certification, the union’s leadership presented a new constitution to the membership that scheduled elections after the union ratifies a contract with Amazon — an accomplishment that could take years, if it happens at all.On Friday, the reform caucus sent the union’s leadership a letter laying out its proposal to hold prompt elections, saying it would go to court Monday if the leadership didn’t embrace the proposal.The reform group is made of up more than 40 active organizers who are also plaintiffs in the legal complaint, including Connor Spence, a union co-founder and former treasurer; Brett Daniels, the union’s former organizing director; and Brima Sylla, a prominent organizer at the Staten Island warehouse.The group said in its letter that enacting the proposal could “mean the difference between an A.L.U. which is strong, effective, and a beacon of democracy in the labor movement” and “an A.L.U. which, in the end, became exactly what Amazon warned workers it would become: a business that takes away the workers’ voices.”Mr. Smalls said in his text that the union leadership had worked closely with its law firm to ensure that its actions were legal, as well as with the U.S. Labor Department.Jeanne Mirer, a lawyer for the union, wrote to a lawyer for the reform caucus that the lawsuit was frivolous and based on falsehoods. She said that Mr. Spence had “improperly and unilaterally” replaced the union’s founding constitution with a revised version in June 2022, and that the revision, which called for elections after certification, had never been formally adopted by the union’s board.Retu Singla, another lawyer for the union, said in an interview that the constitution was never made final because there were disagreements about it within the union’s leadership.Mr. Spence said he and other members of the union’s board had revised the constitution while consulting extensively with the union’s lawyers. A second union official involved in the discussions corroborated his account.The split within the union dates from last fall, when several longtime Amazon Labor Union organizers became frustrated with Mr. Smalls after a lopsided loss in a union election at an Amazon warehouse near Albany, N.Y.In a meeting shortly after the election, organizers argued that control of the union rested in too few hands and that the leadership should be elected, giving rank-and-file workers more input.The skeptics also complained that Mr. Smalls was committing the union to elections without a plan for how to win them, and that the union needed a better process for determining which organizing efforts to support. Many organizers worried that Mr. Smalls spent too much time traveling the country to make public appearances rather than focus on the contract fight on Staten Island.Mr. Smalls later said in an interview that his travel was necessary to help raise money for the union and that the critics’ preferred approach — building up worker support for a potential strike that could bring Amazon to the bargaining table — was counterproductive because it could alarm workers who feared losing their livelihoods.He said a worker-led movement shouldn’t turn its back on workers at other warehouses if they sought to unionize. A top union official hired by Mr. Smalls also argued that holding an election before the union had a more systematic way of reaching out to workers would be undemocratic because only the most committed activists would vote.When Mr. Smalls unveiled the new union constitution in December, scheduling elections after a contract was ratified, many of the skeptics walked out. The two factions have operated independently this year, with both sides holding regular meetings with members.In April, the reform caucus began circulating a petition among workers at the Staten Island warehouse calling on the leadership to amend the constitution and hold prompt elections. The petition has been signed by hundreds of workers at the facility.The petition soon became a point of tension with Mr. Smalls. In an exchange with a member of the reform caucus on WhatsApp in early May, copies of which are included in Monday’s legal complaint, Mr. Smalls said the union would “take legal action against you” if the caucus did not abandon the petition.The tensions appeared to ease later that month after the union leadership under Mr. Smalls proposed that the two sides enter mediation. The reform caucus accepted the invitation and suspended the petition campaign.But according to a memo that the mediator, Bill Fletcher Jr., sent both sides on June 29 and that was viewed by The New York Times, the union leadership backed out of the mediation process on June 18 without explanation.“I am concerned that the apparent turmoil within the ALU E. Board means that little is being done to organize the workers and prepare for the battle with Amazon,” Mr. Fletcher wrote in the memo, referring to the union’s executive board. “This situation seriously weakens support among the workers.”Colin Moynihan More

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    The Fed’s Vice Chair for Supervision Suggests Big-Bank Regulation Changes

    In a series of changes that has bank lobbyists on the defensive, Michael Barr is calling for higher bank capital and tougher annual stress tests.Michael S. Barr, the Federal Reserve’s vice chair for supervision, announced on Monday that he would be pushing for significant changes to how America’s largest banks were overseen in a bid to make them more resilient in times of trouble — partly by ratcheting up how much capital they have to get them through a rough patch.The overhaul would require the largest banks to increase their holdings of capital — cash and other readily available assets that could be used to absorb losses in times of trouble. Mr. Barr predicted that his tweaks, if put into effect, would be “equivalent to requiring the largest banks hold an additional two percentage points of capital.”“The beauty of capital is that it doesn’t care about the source of the loss,” Mr. Barr said in his speech previewing the proposed changes. “Whatever the vulnerability or the shock, capital is able to help absorb the resulting loss.”Mr. Barr’s proposals are not a done deal: They would need to make it through a notice-and-comment period — giving banks, lawmakers and other interested parties a chance to voice their views. If the Fed Board votes to institute them, the transition will take time. But the sweeping set of changes that he set out meaningfully tweak how banks both police their own risks and are overseen by government regulators.“It’s definitely meaty,” said Ian Katz, an analyst at Capital Alpha who covers banking regulation.The Fed’s vice chair for supervision, who was nominated by President Biden, has spent months reviewing capital rules for America’s largest banks, and his results have been hotly anticipated: Bank lobbyists have for months been warning about the changes he might propose. Midsize banks in particular have been outspoken, saying that any increase in regulatory requirements would be costly for them, reining in their ability to lend.Monday’s speech made clear why banks have been worried. Mr. Barr wants to update capital requirements based on bank risk “to better reflect credit, trading and operational risk,” he said in his remarks, delivered at the Bipartisan Policy Center in Washington.For instance, banks would no longer be able to rely on internal models to estimate some types of credit risk — the chance of losses on loans — or for particularly tough-to-predict market risks. Beyond that, banks would be required to model risks for individual trading desks for particular asset classes, instead of at the firm level.“These changes would raise market risk capital requirements by correcting for gaps in the current rules,” Mr. Barr said.Perhaps anticipating more bank pushback, Mr. Barr also listed existing rules that he did not plan to tighten, among them special capital requirements that apply only to the very largest banks.The new proposal would also try to address vulnerabilities laid bare early this year when a series of major banks collapsed.One factor that led to the demise of Silicon Valley Bank — and sent a shock wave across the midsize banking sector — was that the bank was sitting on a pile of unrealized losses on securities classified as “available for sale.”The lender had not been required to count those paper losses when it was calculating how much capital it needed to weather a tough period. And when it had to sell the securities to raise cash, the losses came back to bite.Mr. Barr’s proposed adjustments would require banks with assets of $100 billion or more to account for unrealized losses and gains on such securities when calculating their regulatory capital, he said.The changes would also toughen oversight for a wider group of large banks. Mr. Barr said his more stringent rules would apply to firms with $100 billion or more in assets — lowering the threshold for tight oversight, which now applies the most enhanced rules to banks that are internationally active or have $700 billion or more in assets. Of the estimated 4,100 banks in the nation, roughly 30 hold $100 billion or more in assets.Mr. Katz said the expansion of tough rules to a wider set of banks was the most notable part of the proposal: Such a tweak was expected based on remarks from other Fed officials recently, he said, but “it’s quite a change.”The bank blowups this year illustrated that even much smaller banks have the potential to unleash chaos if they collapse.Still, “we’re not going to know how significant these changes are until the lengthy rule-making process plays out over the next couple of years,” said Dennis Kelleher, the chief executive of the nonprofit Better Markets.Mr. Kelleher said that in general Mr. Barr’s ideas seemed good, but added that he was troubled by what he saw as a lack of urgency among regulators.“When it comes to bailing out the banks, they act with urgency and decisiveness,” he said, “but when it comes to regulating the banks enough to prevent crashes, they’re slow and they take years.”Bank lobbyists criticized Mr. Barr’s announcement.“Fed Vice Chair for Supervision Barr appears to believe that the largest U.S. banks need even more capital, without providing any evidence as to why,” Kevin Fromer, the chief executive of the lobby group the Financial Services Forum, said in a statement to the news media on Monday.“Further capital requirements on the largest U.S. banks will lead to higher borrowing costs and fewer loans for consumers and businesses — slowing our economy and impacting those on the margin hardest,” Mr. Fromer said. Susan Wachter, a finance professor at the University of Pennsylvania’s Wharton School, said the proposed changes were “long overdue.” She said it was a relief to know that a plan to make them was underway.The Fed vice chair hinted that additional bank oversight tweaks inspired by the March turmoil were coming.“I will be pursuing further changes to regulation and supervision in response to the recent banking stress,” Mr. Barr said in his speech. “I expect to have more to say on these topics in the coming months.” More

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    Biden advisor defends stimulus and inflation surge: ‘The real cause was the global pandemic’

    Heather Boushey made her comments during an interview with CNBC’s Charlotte Reed at the Aix-en-Provence economic forum in France.
    “The inflation, the real cause was the global pandemic, and that is about the resiliency of our global supply chains,” Boushey said.
    A $1.9 trillion relief package, the American Rescue Plan was announced in Jan. 2021 and passed by Congress in March of that year.

    The Covid-19 pandemic, rather than Joe Biden’s economic policies and stimulus packages, is the “real cause” of high inflation, according to a member of the U.S. President’s Council of Economic Advisers.
    In an interview over the weekend, it was put to Heather Boushey that a key criticism against “Bidenomics” and the huge stimulus it had brought, was that it had, to a certain extent, fueled inflation.   

    Boushey, who was speaking to CNBC’s Charlotte Reed at the Aix-en-Provence economic forum in France, rejected this notion. “What the president did when he first came into office, the American Rescue Plan — we were in the middle of a pandemic, and he put in place a policy that gave us enough flexibility to deal with all the challenges that came our way,” she said.
    A $1.9 trillion relief package, the American Rescue Plan was announced in Jan. 2021 and passed by Congress in March of that year.

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    “Had we done that, and the United States’ inflation spiked higher than anyone else, well, maybe you could make the case that it was about that policy,” Boushey added.
    “But the reality is, is that that isn’t what happened — yes, the United States had inflation, but so did other countries that did not have the same policies.”
    “So the inflation, the real cause was the global pandemic, and that is about the resiliency of our global supply chains.”

    Expanding on her point, Boushey said this was why the U.S. was “making the investments that we need to make.”

    The world’s largest economy was also, she added, “encouraging our friends and allies around the world to work with us to foster the resiliency in supply chains that we will need, and to move us away from fossil fuels, which have these volatile prices, towards clean energy.”
    The latter scenario would provide “more stable prices over time, where we can get away from some of the disruptions that the global economy can cause for domestic prices.”
    Inflation in the U.S. rose at a 4% annual rate in May, according to the Labor Department, its lowest annual rate in over two years. In mid-2022, inflation in the U.S. topped 9% to reach a four-decade high with market commentators noting multiple factors, such as clogged supply chains, outsized demand for goods over services, and trillions of dollars in Covid-related stimulus spending.
    Biden’s approval ratings hit an all-time low last year with polls showing Americans were unhappy with the state of the U.S. economy and soaring gas prices.
    During her interview with CNBC, Boushey also noted that the inflation rate had “come down for 11 months now” and that the U.S. had also “seen stronger growth than other G7 countries, and we have not seen higher inflation.”
    —CNBC’s Jeff Cox contributed to this article. More

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    Chips Make It Tough for the U.S. to Quit China

    Chipmakers are finding it increasingly hard to operate in China but say doing business in the country is still key to their survival.In May, Micron Technologies, the Idaho chipmaker, suffered a serious blow as part of the U.S.-China technology war. The Chinese government barred companies that handle crucial information from buying Micron’s chips, saying the company had failed a cybersecurity review.Micron said the change could destroy roughly an eighth of its global revenue. Yet in June, the chipmaker announced that it would increase its investments in China — adding $600 million to expand a chip packaging facility in the Chinese city of Xian.“This investment project demonstrates Micron’s unwavering commitment to its China business and team,” an announcement posted on the company’s Chinese social media account said.Global semiconductor companies are finding themselves in an extremely tricky position as they try to straddle a growing rift between the United States and China. The semiconductor industry has become ground zero for the technology rivalry between Washington and Beijing, with new restrictions and punitive measures imposed by both sides.U.S. officials say American products have fed into Chinese military and surveillance programs that run counter to the national security interest of the United States. They have imposed increasingly tough restrictions on the kind of chips and chip-making equipment that can be sent to China, and are offering new incentives, including grants and tax credits, for chipmakers who choose to build new operations in the United States.But factories can take years to construct, and corporate ties between the countries remain strong. China is a major market for chips, since it is home to many factories that make chip-rich products, including smartphones, dishwashers, cars and computers, that are both exported around the world and purchased by consumers in China.Overall, China accounts for roughly a third of global semiconductor sales. But for some chipmakers, the country accounts for 60 percent or 70 percent of their revenue. Even when chips are manufactured in the United States, they are often sent to China for assembly and testing.“We can’t just flip a switch and say all of sudden you have to take everything out of China,” said Emily S. Weinstein, a research fellow at Georgetown’s Center for Security and Emerging Technology.The industry’s reliance on China highlights how a close — but extremely contentious — economic relationship between Washington and Beijing is posing challenges for both sides.Those tensions were reflected during Treasury Secretary Janet L. Yellen’s visit to Beijing this week, where she tried to walk a fine line by faulting some of China’s practices while insisting the United States was not looking to sever ties with the country.Ms. Yellen criticized punitive measures China has recently taken against foreign firms, including limiting the export of some minerals used in chip making, and suggested that such actions were why the Biden administration was trying to make U.S. manufacturers less reliant on China. But she also affirmed the U.S.-China relationship as strategic and important.“I have made clear that the United States does not seek a wholesale separation of our economies,” Ms. Yellen said during a roundtable with U.S. companies operating in China. “We seek to diversify, not to decouple. A decoupling of the world’s two largest economies would be destabilizing for the global economy, and it would be virtually impossible to undertake.”The Biden administration is poised to begin investing heavily in American semiconductor manufacturing to lure factories out of China. Later this year, the Commerce Department is expected to begin handing out funds to help companies build U.S. chip facilities. That money will come with strings: Firms that take funding must refrain from expanding high-tech manufacturing facilities in China.The administration is also weighing further curbs on the chips that can be sent to China, as part of a push to expand and finalize sweeping restrictions it issued last October.These measures could include potential limits on sales to China of advanced chips used for artificial intelligence, new restrictions for Chinese companies’ access to U.S. cloud computing services, and restrictions on U.S. venture capital investments in the Chinese chip sector, according to people familiar with the plans.The administration has also been considering halting the licenses it has extended to some U.S. chipmakers that have allowed them to continue selling products to Huawei, the Chinese telecom firm.Japan and the Netherlands, which are home to companies that make advanced chip manufacturing equipment, have also put new restrictions on their sales to China, in part because of urging from the United States.China has issued restrictions of its own, including new export controls on minerals used in chip manufacturing.Amid tighter regulations and new incentive programs from the United States and Europe, global chip companies are increasingly looking outside China as they choose the locations for their next major investments. But these facilities will likely take years to construct, meaning any changes to the global semiconductor market will unfold gradually.John Neuffer, the president of the Semiconductor Industry Association, which represents the chip industry, said in a statement that the ongoing escalation of controls posed a significant risk to the global competitiveness of the U.S. industry.“China is the world’s largest market for semiconductors, and our companies simply need to do business there to continue to grow, innovate and stay ahead of global competitors,” he said. “We urge solutions that protect national security, avoid inadvertent and lasting damage to the chip industry, and avert future escalations.” More