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    in Economy

    WeWork Bankruptcy Would Deal Another Blow to Ailing N.Y. Office Market

    The fallout would be particularly hard for landlords already struggling with piling debt and companies scaling back their office footprint.For years, landlords around the world clamored to get WeWork into their office buildings, a love affair that made the co-working company the largest corporate tenant in New York and London.Now, WeWork is perhaps days away from a bankruptcy filing — and its demise could not come at a worse time for office landlords.With fewer employees going into the office since the pandemic, companies have slashed the amount of space they lease, causing one of the worst crunches in decades in commercial real estate.Many landlords have accepted lower rents from WeWork in recent years to keep it afloat, but its bankruptcy would be an enormous blow. The pain would be centered on landlords that have leased a large proportion of their space to the company, particularly in New York, and are struggling to make payments on the debt tied to their buildings. Some landlords might quickly accept lower rents from WeWork as part of a bankruptcy reorganization and keep doing business with any new entity that emerges, but others might have to fight in court to get anything.“If you look at a lot of the vacancy in New York City, you will find that a fair amount of that was space that was leased to WeWork — and there will be even more abandoned after a bankruptcy,” said Anthony E. Malkin, the chief executive of the company that owns the Empire State Building and an early skeptic of WeWork.WeWork, despite its efforts to cut costs, still had an empire of 777 locations in 39 countries at the end of June, compared with 764 locations in 38 countries nearly two years earlier. On Friday, its website listed 47 locations in New York, where at the end of March it leased 6.9 million square feet of office space, equivalent to more than 60 percent of all co-working space, according to Savills, a real estate services firm. In London, WeWork listed 38 locations.Speculation of a possible bankruptcy filing intensified in August when WeWork warned that it might not be in business much longer. Its shares have fallen 90 percent since then.Last month, WeWork said it would miss interest payments totaling $95 million. After a 30-day grace period, the company reached a deal with creditors for a seven-day forbearance, which expires Tuesday.A WeWork office space in London. The city has 38 WeWork locations.Tolga Akmen/Agence France-Presse — Getty ImagesIn New York, where a fifth of office space is unleased or being offered for the sublet, the highest amount in decades, the fallout from a WeWork bankruptcy would be felt most in older office buildings in Midtown and downtown Manhattan. Nearly two-thirds of WeWork’s leases in Manhattan were in these so-called Class B and Class C buildings, according to the real estate advisory firm Avison Young.“We believe the value of Class B and Class C buildings will probably be 55 percent less than they were prior to the pandemic,” said Stijn Van Nieuwerburgh, a real estate professor at Columbia Business School who has been tracking the decline in office building valuations. “These are the buildings that are struggling the most and will have a tough time with a WeWork bankruptcy.”Owners of these older buildings were thrilled a few years ago to lease entire floors — or even entire buildings — to WeWork, but they now find themselves under siege. In cases where WeWork has stopped paying rent on the leases, landlords have been unable to make debt payments on buildings that are being valued sharply lower than they were a few years ago.That’s the quandary facing Walter & Samuels, a real estate firm that has WeWork as a tenant in five of its office buildings in New York. At one, 315 West 36th Street, a small edifice built in 1926 in Manhattan’s garment district, WeWork leased about 90 percent of the space and stopped paying rent earlier this year, according to Morningstar Credit. Walter & Samuels stopped making payments on a $77 million loan on the building, Morningstar said.The loan’s special servicer said the appraised value of the building had fallen to $42 million, down from $127 million when the loan was made five years ago, and the servicer is moving to foreclose, according to Morningstar.Executives at Walter & Samuels did not respond to emails seeking comment.WeWork occupies nearly all of the office space at 980 Avenue of the Americas, a mixed-use development owned by the Vanbarton Group. Joey Chilelli, a managing director at the company, said the firm could consider a range of options for the space if WeWork vacated, including turning it into residences.“We have tried to do everything we could earlier this year when they went to every landlord and asked for rent reductions and concessions,” Mr. Chilelli said. “If they are able to reduce their footprint, it will hurt the office market again.”A WeWork bankruptcy would be felt most in older office buildings in Midtown and downtown Manhattan.Hilary Swift for The New York TimesMichael Emory, the founder of Allied, a real estate investment trust that operates office buildings in Canada’s largest cities, said his company walked away from a potential deal with WeWork in Toronto in 2015 because there were drawbacks for Allied. But he said he had watched other developers, particularly in New York, lease space to the company, believing that co-working providers would occupy a large percentage of office space for years.Also, Mr. Emory said, WeWork focused on landlords that were eager to fill up their office buildings and then sell them based on the new occupancy and rental income.A bankruptcy filing “will be very consequential for the New York market,” he said.WeWork declined to comment for this article.At its peak, when investors were feverishly bullish about the company and the vision of Adam Neumann, its eccentric co-founder, WeWork was valued at $47 billion. Its model was to rent office space, spruce it up and charge its customers — established companies, start-ups and individuals — to use the space for as long as they needed it.The flexibility of using a WeWork space — and its community vibe: “Our mission is to elevate the world’s consciousness,” the company declared — was supposed to attract businesses away from stodgy offices that tied tenants down with yearslong leases.But the economics of WeWork’s business were always upside down: What the company took in from customers was not enough to cover the cost of renting and operating its locations. It kept growing anyway, and from the end of 2017, it lost a staggering $15 billion. After WeWork withdrew an initial public offering in 2019, its largest outside investor — the Japanese conglomerate SoftBank — provided a lifeline with a multibillion-dollar takeover.Before that debacle, WeWork had ardent fans in the commercial real estate world who believed the company was pioneering an exciting new service.“We know these folks, we know them well,” Steven Roth, the chief executive of Vornado Realty Trust, one of the largest office landlords in New York, said in 2017. “We think what they’re doing is unbelievably impressive.”Mr. Roth declined to comment for this article. Vornado leased space to WeWork in a building in Manhattan and another in Washington, and they teamed up outside Washington to introduce WeLive residences, one of WeWork’s much-hyped but failed subsidiaries, including the for-profit private school WeGrow.Vornado no longer has WeWork as a tenant. In 2019, after questions about WeWork’s financial health mounted in the industry, Vornado’s chief financial officer said the company had limited its exposure to WeWork.The president of BXP, a part owner of an office development in the Brooklyn Navy Yard, said WeWork had stopped paying rent there.Karsten Moran for The New York TimesJLL, a real estate services firm, once predicted that co-working firms would be leasing 30 percent of all office space in the United States by the end of this decade. Such predictions did not seem outlandish just before the pandemic, when WeWork and other co-working providers accounted for 15 percent of both new and renewed leases signed in New York, according to JLL, up from 2 percent in 2010. Co-working providers accounted for less than 1 percent of all leases signed in New York last year, JLL said.And some landlords believed they would be somewhat insulated from problems at WeWork.“WeWork is out there taking on these start-ups en masse, realizing that some will stay, some will go,” Raymond A. Ritchey, an executive at BXP, formerly known as Boston Properties, said in 2014. “But they tend to be taking that risk as opposed to the landlord on a direct basis.”BXP is a part owner of a shiplike office development in the Brooklyn Navy Yard, Dock 72, where WeWork has been a major tenant since it opened in 2019 but was struggling to fill its space. At the end of last year, BXP was leasing nearly 500,000 square feet of space to WeWork across its portfolio.Douglas T. Linde, the president of BXP, said Thursday on an investor call that WeWork had stopped paying rent at two of its locations, including Dock 72. “We don’t expect WeWork to exit all the assets,” he said, “nor do we expect them to remain in place in the current footprint.”Some landlords might be able to get other co-working companies to take over WeWork’s spaces, or operate their own version, avoiding a situation in which their buildings appear desolate. But they are unlikely to take in the revenue they were initially getting from WeWork, which did end up going public, in 2021, by merging with a special-purpose acquisition company.Mr. Malkin, the Empire State Building landlord, said he had always doubted WeWork’s business model. Also, he never wanted WeWork in his company’s buildings because, he said, it packed too many people into its spaces, causing overuse of elevators and toilets.“Why would you want to do business with these people?” Mr. Malkin said. More

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    Job Growth Slows, Sowing a Mix of Concern and Calm

    U.S. employers added 150,000 workers in October, falling short of expectations, but the labor market retains spark nearly three years into a recovery.The labor market has been relentlessly hot since the U.S. economy began to recover from the shock of the pandemic. But there are signs of cooling as the holidays approach.Employers added 150,000 jobs in October on a seasonally adjusted basis, the Labor Department reported on Friday, a number that fell short of economists’ forecasts.Hiring figures for August and September were revised downward, subtracting more than 100,000 jobs from earlier reports. And the unemployment rate, based on a survey of households, rose to 3.9 percent from 3.8 percent in September.Unemployment ticked up in OctoberUnemployment rate More

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    Here’s where the jobs are for October 2023 — in one chart

    The October jobs report showed a cooling labor market in the U.S., with many sectors showing minimal or negative growth as the economy added a relatively meager 150,000 jobs overall.
    A bright spot came in health care and social assistance, which added more than 77,000 jobs. Within that, ambulatory health care gained 32,000 jobs.

    If private education was included in that category, as some economists choose to do, there would have been 89,000 jobs added in that group.
    Government employment grew by 51,000, making it the second-strongest category in October. That sector has now returned to its pre-pandemic level, the U.S. Bureau of Labor Statistics said in the report.
    “It’s usually a bad thing when job growth is led by the public service, but in this case, it is long overdue. The private sector jobs recovery was much stronger and much faster than that of the public sector,” said Julia Pollak, chief economist at ZipRecruiter.
    Other areas showed meager job growth and saw employment shrink. Mining and logging, utilities and retail trade combined to add just 2,500 jobs. Information shed 9,000 jobs, while transportation and warehousing lost more than 12,000 jobs.
    “Many workers in trucking, for example, are finding very, very soft economic conditions. You lose one job and it is not easy to find another. The same is true in tech,” Pollak said.

    Manufacturing was the weakest sector in October, dropping 35,000 jobs. The decline was due largely to strike activity, the BLS report said. That should improve in November now that the United Auto Workers union has now reached tentative agreements with the three major Detroit automakers.Don’t miss these stories from CNBC PRO: More

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    Bad news for the economy is good news for the stock market … as long as it doesn’t get too bad

    Stocks rallied sharply after the Labor Department said nonfarm payrolls rose by 150,000 in October — 20,000 fewer than expected.
    Slow, controlled growth is something the markets and the Fed are seeking in the current climate, negative growth is not.

    Traders work on the floor of the New York Stock Exchange (NYSE) on November 02, 2023 in New York City. 
    Spencer Platt | Getty Images

    Friday’s market reaction to the jobs report comes down to a simple premise: bad news is good news, as long as it isn’t too bad.
    Stocks rallied sharply after the Labor Department said nonfarm payrolls rose by 150,000 in October — 20,000 fewer than expected but a difference attributable pretty much completely to the auto strikes, which appear to be over.

    For the Federal Reserve, the relatively muted job creation coupled with wage gains nearly in line with expectations adds up to a scenario in which the central bank doesn’t really have to do anything. It can just continue to let the data flow in, without having to move on interest rates as it evaluates the impact of its previous 11 hikes.
    “The Fed finally got what it’s been looking for — a meaningful slowdown in the labor market,” said Mike Loewengart, head of model portfolio construction for Morgan Stanley’s Global Investment Office.
    “We’ve seen one or two head fakes in this direction before, but the fact that this report followed other weaker-than-expected economic data points this week may encourage investors who have been waiting for a less-hawkish Fed,” he added.
    Markets reacted in more ways than one to the report. Traders in fed funds futures reduced the probability for a December rate hike to less than 10% and now see the first cut coming as soon as May, according to CME Group tracking.
    However, that cut could be the really bad news, as it likely would signal the Fed’s concern that the economy is slowing so much that it needs a boost from monetary policy. Slow, controlled growth is something the markets and the Fed are seeking in the current climate, negative growth is not.

    “Investors who are eager for the Fed to be cutting rates should be careful what they wish for,” Michael Arone, chief investment strategist at State Street Global Advisors, said in an interview earlier this week.
    Despite market pricing, it seems like cuts aren’t around the corner if recent statements from Fed officials are any indication. Fed Chairman Jerome Powell said Wednesday that cuts have not been a part of the conversation among policymakers.
    “It seems like that’s still a ways off in my mind,” Richmond Fed President Thomas Barkin said during an interview Friday on CNBC’s “Squawk on the Street.” “You could imagine scenarios where demand comes off and you have to do something. You could imagine a scenario where inflation is starting to settle and you want to lower real rates. Both of those imaginary things still feel pretty far out the distance.”
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    U.S. payrolls increased by 150,000 in October, less than expected

    Nonfarm payrolls increased by 150,000 for the month, against the consensus forecast for an increase of 170,000. That was a sharp decline from the gain of 297,000 in September.
    The unemployment rate rose to 3.9%, the highest level since January 2022, amid a sharp decline in household employment.
    From a sector standpoint, health care led with 58,000 new jobs. Other leading gainers included government (51,000), construction (23,000) and social assistance (19,000).
    Manufacturing posted a decline, mostly due to the auto strikes.

    The U.S. economy saw job creation decelerate in October, confirming persistent expectations for a slowdown and possibly taking some heat off the Federal Reserve in its fight against inflation.
    Nonfarm payrolls increased by 150,000 for the month, the Labor Department reported Friday, against the Dow Jones consensus forecast for an increase of 170,000. The United Auto Workers strikes were primarily responsible for the gap as the impasse meant a net loss of jobs for the manufacturing industry.

    The unemployment rate rose to 3.9%, the highest level since January 2022, against expectations that it would hold steady at 3.8%. Employment as measured in the household survey, which is used to compute the unemployment rate, showed a decline of 348,000 workers, while the rolls of the unemployed rose by 146,000.
    A more encompassing jobless rate that includes discouraged workers and those holding part-time positions for economic reasons rose to 7.2%, an increase of 0.2 percentage point. The labor force participation rate declined slightly to 62.7%, while the labor force contracted by 201,000.
    “Winter cooling is hitting the labor market,” said Becky Frankiewicz, chief commercial officer at staffing firm Manpower Group. “The post-pandemic hiring frenzy and summer hiring warmth has cooled and companies are now holding onto employees.”
    Average hourly earnings, a key measure for inflation, increased 0.2% for the month, less than the 0.3% forecast, while the 4.1% year over year again was 0.1 percentage point above expectations. The average work week nudged lower to 34.3 hours.
    The Fed uses wage data as one component of its inflation watch. The central bank has opted not to raise interest rates at its past two meetings despite inflation running well above its 2% target. Following Friday’s jobs data, markets further reduced the probability of a rate hike in December to just 10%, according to a CME Group gauge.

    Markets reacted positively to the report, with futures tied to the Dow Jones Industrial Average adding 100 points.
    From a sector standpoint, health care led with 58,000 new jobs. Other leading gainers included government (51,000), construction (23,000) and social assistance (19,000). Leisure and hospitality, which has been a leading job gainer, added 19,000 as well.
    Manufacturing posted a loss of 35,000, all but 2,000 of which came because of the auto strikes. Transportation and warehousing saw a decline of 12,000 while information-related industries lost 9,000.
    “After years of incredible strength, the labor market could finally be slowing. The topline miss, plus downward revisions and higher unemployment, deliver a strong message to [Chair] Jerome Powell and the Fed,” said David Russell, global head of market strategy at TradeStation. “Further tightening is now highly unlikely, and rate cuts could be back on the table next year.”
    In addition to the October slowdown, the Bureau of Labor Statistics revised lower its counts for the previous two months: September’s new total is 297,000, from the initial 336,000, while August came in at 165,000 from 227,000. Combined, the revisions took the original estimates down by 101,000.
    Job creation skewed heavily to full-time workers, reversing a recent trend. Full-time jobs grew by 326,000, while part-time tumbled by 670,000 as summertime seasonal jobs wrapped up.
    The report comes at an important time for the U.S. economy.
    Following a third quarter in which gross domestic product expanded at a 4.9% annualized pace, even better than expected, growth is expected to slow considerably. A Treasury report earlier this week put expected fourth-quarter GDP growth at just 0.7%, and 1% for the full year 2024.
    Fed policymakers have deliberately tried to slow the economy in order to tackle inflation
    . On Wednesday, the Fed’s rate-setting committee chose to hold the line for the second consecutive meeting following a series of 11 hikes since March 2022.
    Markets expect the Fed is likely done raising, though central bank officials insist they are dependent on incoming data and still could hike more if inflation doesn’t show consistent signs of falling.
    Inflation data has been mixed lately. The Fed’s preferred gauge showed the annual rate fell to 3.7% in September, an indication of steady but slow progress back to its goal.
    Surprisingly strong consumer spending has helped propel prices higher, with strong demand giving companies the ability to charge higher prices. However, economists fear that rising credit card balances and increased withdrawals from savings could slow spending in the future. More

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    Here’s what to watch in Friday’s big October jobs report

    Economists surveyed by Dow Jones are expecting Friday’s nonfarm payrolls report to show job growth of just 170,000 in October, down from 336,000 the previous month.
    Though long-standing trends such as aggressive job switching and big wage gains now show signs of reversing, hiring is still strong, one staffing executive said.
    A potentially important trend to watch Friday has been the hiring of part-time workers in recent months.

    Now Hiring banner in window of FedEx Office storefront, Queens, New York.
    Lindsey Nicholson | UCG | Universal Images Group | Getty Images

    Apologies if you’ve heard this one before, but the jobs market is slowing down. No, really.
    Aside from the long-standing calls for a recession to hit the U.S., the expectation for a hiring retreat is probably the most oft-heard — and, so far, incorrect — economic call of at least the last year.

    True to form, the consensus Wall Street call is that the October nonfarm payrolls report, which the Labor Department is scheduled to release Friday at 8:30 a.m. ET, will show a sharp decline from September. Economists surveyed by Dow Jones are expecting growth of just 170,000, down from the shockingly high 336,000 the previous month and well below the 260,000 monthly average so far in 2023.
    Don’t hold your breath looking for that big of a decline, said Amy Glaser, senior vice president at global staffing firm Adecco.
    “This is going to be another surprising month. We’re still seeing resilience in the market,” Glaser said. “We’re still seeing a ton of positivity on the ground with our clients.”
    Though long-standing trends such as aggressive job switching and big wage gains now show signs of reversing, hiring is still strong as employers look for incentives such as flexible work scheduling to bring in new talent, she added.
    “Folks aren’t able to jump from one job to another and gain these huge, astronomical pay increases, which is good news for the employers,” Glaser said. “On the flip side, we’re seeing a return of the workforce … The folks coming off the bench are really going to make an impact over the upcoming months.”

    Trends in labor force participation will be one metric worth watching closely when the report hits, as the participation rate is still half a percentage point below its pre-pandemic level. Here are a few more:
    Average hourly earnings
    Wages increased 4.2% from a year ago in September. That is expected to decrease to 4% for October. The earnings picture is an important component to inflation, and one policymakers will be viewing with a careful eye.
    The Dow Jones estimate is for a 0.3% monthly gain, after rising 0.2% in September. Federal Reserve officials have said they don’t think wages have been the key driver of inflation, though Chair Jerome Powell said Wednesday that the labor market could emerge as a more significant factor ahead.
    Full-time vs. part-time
    “In recent months, firms are hiring relatively more part-timers, indicative of the uncertainty in near-term business conditions,” said Jeffrey Roach, chief economist at LPL Financial.
    Indeed, a potentially important trend has been the hiring of part-time workers in recent months. Since June, their rolls have swelled by 1.16 million, according to Labor Department data. Conversely, full-time positions have dropped by 692,000.
    “Employers are creating more part-time opportunities that are bringing in players off the bench,” Glaser said. “There’s still a bit of caution on the side of employers, and they’re choosing to open part-time roles in this wait-and-see mentality.”
    The unemployment rate
    While the rise in the jobless rate over past months has generally flown under the radar considering how historically low it is, the level actually is approaching a potential danger zone.
    An economic premise known as Sahm’s Rule states that recessions happen when the unemployment rate’s three-month average runs half a percentage point above its 12-month low. The current rate of 3.8% is 0.4 percentage point above the recent low last seen in April.
    “Most investors expect additional deterioration in the job market before we see a meaningful deceleration of inflation,” Roach said.
    Strike impact
    Close to half a million American workers have gone on strike in recent months. While a number of those high-profile stoppages have been resolved, some of the activity will show up in the October jobs report.
    Specifically, the Bureau of Labor Statistics is estimating that about 30,000 striking United Auto Workers will subtract from last month’s count, posing potential downside risks for the report.
    Homebase, which compiles widely watched high-frequency data on employment trends, said the jobs market generally is turning lower.
    The firm’s database indicates that employees working declined 2.4% in October, computed on a seven-day average using January as the baseline. Hours worked, another important metric, fell 2%, Homebase said. More

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    Are Higher Rates Slowing the Economy? A Zoo Offers Clues.

    Leesburg Animal Park in Northern Virginia has seen strong business at its Pumpkin Village festival this autumn. Even with rainy weekends and a jump in admission prices, families have been coming out to visit the petting zoo, ride on giant slides and zigzag through a hay-bale maze.Shirley Johnson, the park’s owner, had been nervous that demand might recede. Headlines were warning all year about impending recession as the Federal Reserve raised interest rates to cool growth and contain inflation. That downturn hasn’t happened, but the uncertainty and higher borrowing costs have influenced her investment plans.“You can’t stick your neck out quite as far as you could,” she said. The park has held off on an expansion of its gibbon pen, a big project that would have given the playful primates more space, but would have also required taking out a loan.The park’s experience is one example of a story playing out across the country. More than a year and half into the Fed’s campaign to cool the economy, higher borrowing costs are clearly weighing on business investment and some interest-rate-sensitive sectors, but consumers are spending at a much stronger clip than had been expected.To cover rising expenses, the park has raised ticket prices. So far, people are still coming.Erin Schaff/The New York TimesThat resilience has central bankers on watch. For now, they are pleased that the labor market and economic growth have held up even as inflation has come down substantially, and this week Fed officials chose to leave interest rates unchanged as they wait to see whether that can continue. But they are also looking for further evidence that their moves are working to restrain the economy.“Everyone has been very gratified to see that we’ve been able to achieve pretty significant progress on inflation without seeing the kind of increase in unemployment that is very typical” with interest rate increases, Jerome H. Powell, the Fed chair, said on Wednesday. “The same is true of growth.”But he said that economic growth, which is mainly powered by consumer spending, would most likely need to slow for inflation to fully return to a normal pace. It is now running at about 3.4 percent, still well above the Fed’s 2 percent goal.“What we do with demand is still going to be important,” he said.Surveying the economy reveals that the effects of the Fed’s rate moves are clear in some places, are mixed in others and have yet to make much of a dent elsewhere.What has the Fed done with interest rates?Starting in March last year, the Fed has raised its key rate, which is now set to a range of 5.25 to 5.5 percent. That is above the level that central bankers think is necessary to slow the economy over time.Higher Fed rates have also helped to push up longer-term borrowing costs in markets, sending mortgage rates to nearly 8 percent, a more than two-decade high.Despite that, growth remains a lot quicker than economists think is normal. The economy expanded at a 4.9 percent annualized rate from July through September, the Commerce Department reported last week. That has prompted a debate about whether the Fed’s policies are succeeding at cooling things down.While economists think higher borrowing costs are having an effect, policymakers are watching the data to get a sense of whether they are weighing on the economy enough to fully wrangle inflation.“There’s a question of calibration,” William English, a former Fed economist who is now at Yale, said of the higher rates. “But are they working? Sure.”The park has made some medium-size investments this year, like improving its camel enclosure.Erin Schaff/The New York TimesWhere are the effects of higher rates clear?Higher rates tend to dent stock prices: Higher borrowing costs hurt the outlook for corporate profits and prod investment funds toward higher returning interest-bearing securities like bonds. That effect has begun to show up, although markets have been volatile.The S&P 500 fell for three consecutive months, from August through October, which coincided with a rise in longer-term market rates. Stocks are off to a stronger start in November, as long-term yields have dipped in recent days.Higher rates have driven up the value of the dollar, which makes imports cheaper for local buyers and U.S. exports more expensive abroad, among other effects.And steeper borrowing costs slow business investment. For instance, investment in equipment has been negative for three of the past four quarters, which could be a sign of rate increases at work. Caterpillar, the maker of industrial equipment, spooked investors this week when it reported a shrinking order backlog.Where are the effects mixed?While the Fed’s rate moves have made it more expensive to borrow to buy a house or a car, both of those markets have had shortages recently — making it complicated to see the effects.Take cars. They were in painfully short supply for months during the pandemic, as supply chain problems collided with strong demand. Supply has returned, but now there is a hole in the used car market, since far fewer new cars than usual were sold in 2021 and 2022.Car buyers have pulled back in recent months, but pent-up demand means that sales have eased, not plummeted.“It’s been more resilient than we thought this year,” John Lawler, the chief financial officer at Ford Motor, said on a recent earnings call. He noted that vehicles now cost about 14 percent of a consumer’s monthly disposable income, up from 13 percent before the pandemic, and Ford expects a gradual return to normal over the next 12 to 18 months.The housing market is even more complex. Housing supply is limited, partly because people who have locked in low mortgage rates are now hesitant to sell. Given a dearth of older houses on the market, existing home sales are way down, but new home sales have stabilized and home prices are popping.Higher interest rates are weighing on business investment and interest rate-sensitive sectors. And zoos.Erin Schaff/The New York TimesWhere are the effects not showing up?If there’s one place where it’s tough to see higher rates biting, it’s the consumer sector.The job market has held up even as the Fed’s rate moves have weighed on some parts of the economy: Hiring has slowed on average this year compared with last year, but it remains quicker than what was normal before the pandemic. Wage gains have cooled, but are also faster than the pre-2020 pace.That has allowed Americans to keep shopping, even through price increases and fading government pandemic relief. Spending climbed faster in September than economists had expected.Strong consumption could be a concern for the Fed, if it lasts, because it could enable companies to keep raising prices to cover their own costs or protect profits without losing customers — which could keep inflation rising.Take the animal park. It has made some medium-size investments this year, like improving its camel enclosure. But those projects cost money, and day-to-day operations have become more expensive.To keep up, the business raised prices. They scrapped a cheaper child ticket for the Pumpkin Village. Ordinary weekday visits also cost more: $17.95 for adults, per the park’s website, up from $15.95 at the end of 2021.So far, consumers are still coming.“People just want to be outside,” Ms. Johnson said. “It’s good old-fashioned fun.” More

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    Labor costs show surprise decline in the third quarter

    Construction workers at a project in the Upper East Side neighborhood of Manhattan, NY on Oct. 6th, 2023. 
    Adam Jeffery | CNBC

    The cost of labor unexpectedly declined in the third quarter, providing at least some relief on the inflation front, the Labor Department reported Thursday.
    Unit labor costs, a measure of hourly compensation against productivity, fell 0.8% for the July-through-September period at a seasonally adjusted rate. Economists surveyed by Dow Jones had been looking for a gain of 0.7%. On a 12-month basis, unit labor costs increased 1.9%.

    The breakdown reflected a 3.9% increase in hourly compensation, offset by a 4.7% rise in productivity.
    That increase in productivity also was more than expected, beating the Dow Jones estimate for a rise of 4.3% for the biggest quarterly gain since the third quarter of 2020. Output climbed 5.9%, while hours worked rose 1.1%.
    The developments come as the Federal Reserve is seeking to tamp down inflation through a series of interest rate increases.
    On Wednesday, Fed Chair Jerome Powell said wage gains “have really come down significantly over the course of the last 18 months to a level where they’re substantially closer to that level that would be consistent with 2% inflation over time,” the central bank’s target.
    In other economic news Thursday, initial filings for unemployment benefits for the week ended Oct. 28 totaled a seasonally adjusted 217,000, up 5,000 from the previous period and higher than the 214,000 estimate, the Labor Department said in a separate report.
    Continuing claims, which run a week behind, totaled 1.82 million, an increase of 35,000 and higher than the 1.81 million FactSet estimate. More