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    Inflation outlook hits two-year low in latest New York Fed survey

    The New York Fed’s monthly Survey of Consumer Expectations for May showed one-year inflation expectations down 0.3 percentage point to a 4.1% rate.
    That’s the lowest annual outlook since May 2021, just as inflation was beginning to spike to its highest level in more than 41 years.
    Household spending is expected to increase 5.6% over the next year, up 0.4 percentage point from April.

    Shell gas station prices are seen on May 30, 2023 in Austin, Texas.
    Brandon Bell | Getty Images

    Consumers are growing more optimistic that inflation is on the way down, according to a New York Federal Reserve survey released Monday.
    The central bank’s monthly Survey of Consumer Expectations for May showed one-year inflation expectations down 0.3 percentage point to a 4.1% rate.

    That’s the lowest annual outlook since May 2021, just as inflation was beginning to spike to its highest level in more than 41 years. The one-year expectation then was 4%; inflation as measured by the consumer price index actually would rise to 8.6% a year later.
    In the current case, the survey matches general expectations that while prices are still well above the Fed’s 2% annual target, the general trend is lower as some of the Covid pandemic-specific factors such as outsized demand for big-ticket goods and supply chain clogs are easing.
    Still, median inflation expectations over the longer run edged higher. The three- and five-year outlooks both increased 0.1 percentage point to respective readings of 3% and 2.7%.
    Some of the inflation rise has been fed by accelerating wages, and the survey showed the outlook there is also diminishing. One-year expected earnings growth fell to 2.8%, down 0.2 percentage point since April and in keeping with the general range since September 2021.
    The survey also reflected how resilient the labor market has been.

    Expectations for losing one’s job fell 1.3 percentage points to 10.9%, the lowest since April 2022. The mean likelihood of leaving one’s job also fell half a percentage point to 19.1%.
    The job market strength has come despite a series of 10 Fed interest rate hikes aimed in large part at correcting a labor imbalance in which there were 1.8 job openings for every available worker in April. Markets largely expect the Fed to skip hiking rates at its meeting this week as policymakers process the impact that their moves have had on economic conditions.
    The survey also showed household finances remain solid, with spending expected to increase 5.6% over the next year, up 0.4 percentage point from April but below the 6.7% average over the previous 12 months.
    Correction: The three- and five-year outlooks both increased 0.1 percentage point to respective readings of 3% and 2.7%. An earlier version misstated the move. More

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    As the Fed Meets, It Shares an Inflation Problem With the World

    Inflation is stubborn across a range of economies. Given its staying power, investors expect the Fed to pause rate moves only temporarily.The Federal Reserve on Wednesday is expected to stop raising interest rates for the first time in 11 policy meetings. But investors are betting that the pause will not last.The pattern of stopping and then restarting rate increases is becoming well-established around the world. The Reserve Bank of Australia paused its own campaign earlier this year only to raise rates again twice, including last week. The Bank of Canada had left rates unchanged for four months before raising them again in a surprise move on June 7.That’s because inflation is proving stubborn. Across a range of economies, from Melbourne to Munich to Miami, it has been hard to stamp out. Many central banks are contending with price increases that are only moderating slowly, propped up by higher service costs, which include things like concert tickets, rent and hotel rooms.“Everyone has a kind of similar problem,” said William English, a former Fed staff member who is now at Yale University, noting that policymakers in Britain and the eurozone are facing inflation problems that have a lot in common with the Fed’s. The European Central Bank’s policymakers also meet this week, and they are expected to continue raising rates.Policy may be tougher to predict in the months ahead as officials try to judge whether interest rates are high enough to ensure that their economies slow enough to restrain price increases.“We’re into the period where we’re kind of groping a bit,” Mr. English said. “It’s going to be a period of considerable uncertainty.”

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    Central bank policy rates
    Source: FactSetBy The New York TimesThe Fed has already raised rates sharply over the past 15 months, to just above 5 percent as of May, and those higher interest rates are trickling through the economy. In recent speeches, Fed officials have hinted that they could soon “skip” a rate increase to give themselves time to assess the effects of their changes so far, and investors are betting that Fed officials will hold policy steady at their meeting on Tuesday and Wednesday before lifting rates one more time in July. But those forecasts are uncertain: Traders typically have a fairly clear idea of what the Fed might do heading into its meetings, but this time markets see a small but real chance that U.S. central bankers will raise rates this week.The doubt partly owes to the fact that the Fed will receive an important inflation reading, the Consumer Price Index, on Tuesday. But it also reflects what a fraught time this is for economic policy in the United States and around the world.This is the worst inflationary episode in America and many of its peer economies since the 1970s and 1980s, so it has been a long time since the world’s policymakers contended with the issue. And while inflation has been fading, it has also demonstrated staying power.In the United States and elsewhere, inflation started in goods like cars and furniture but has moved into services like airfares, education and haircuts. That’s concerning because price increases for services tend to be driven by broad economic trends rather than one-off supply problems, and can be more lasting.“Services price inflation is proving persistent here and overseas,” Philip Lowe, the governor of the Reserve Bank of Australia, said in a speech explaining the central bank’s surprise move last week.Fed officials have been fretting that today’s price increases could prove sticky.Wage gains remain fairly rapid, which could limit how quickly prices fall as employers try to cover climbing labor bills. And while slowing rent increases should cool overall inflation, some economists have questioned whether that will be enough to steadily lower inflation.“A rebound in the housing market is raising questions about how sustained those lower rent increases will be,” Christopher Waller, a Fed governor who often favors higher interest rates, said in a recent speech.At the same time, central bankers want to avoid plunging the economy into a recession that is more painful than necessary.That is why the Fed may hit pause this week. Officials are aware that monetary policy takes months or years to have its full effect. And recent bank turmoil could further slow down lending and spending, a situation officials are still monitoring.“Anecdotally, it’s not really that bad — but we don’t have even enough survey data,” said Yelena Shulyatyeva, senior U.S. economist at BNP Paribas. For more evidence, she will be watching a Dallas Fed bank survey this month.Still, after Australia and Canada increased rates last week, investors asked: Could this mean that the Fed, too, would be more aggressive than expected?“It is a mistake to make simplistic comparisons,” Krishna Guha, head of the global policy and central bank strategy team at Evercore ISI, said, noting that the Fed still seemed likely to pause in June while teeing up a possible move in July. While the rate increases abroad underscored that inflation is proving sticky globally, he said, that’s no surprise.“We know that inflation has been frustratingly slow to come down,” he said. More

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    Mortgage Transfers Pick Up as a Way to Beat Rising Rates

    Real estate agents are pushing sub-3 percent mortgages as an amenity, just like marble countertops or a view of the mountains.The only goal was to not lose money.When Matthew Kilboy listed the Washington, D.C., condominium that he and his husband had bought in 2017, they accepted that higher interest rates and a soft market for condos meant any dollar over the $529,000 they had paid was a dollar they would thank their lucky stars for.A similar two-bedroom and two-bath unit in the building had recently gone for just under half a million. The $549,000 price they listed in April was basically a wish.A month later, the couple closed at $565,000 — thanks to a little-known amenity that has become increasingly popular as mortgage rates have risen. Their unit came with an assumable 30-year mortgage, with a 2.25 percent fixed rate that the couple had locked in after a November 2020 refinancing. By advertising that the buyer could inherit the mortgage, the couple, who have moved to Denver, got several over-asking-price bids that seemed like a relic from the warped real estate market during the Covid lockdown.“It was the very first sentence of the listing,” said Mr. Kilboy, 39, a former Navy nurse whose loan, backed by the Department of Veterans Affairs, could be passed to the buyer. “No one could find an interest rate that low, so we were really pushing it.”The Federal Reserve might have slowed interest rate increases, but monthly mortgage costs remain more than double their levels from 18 months ago. This has significantly lowered the supply of for-sale inventory by discouraging the millions of homeowners who locked in bargain rates during the pandemic from selling their home and incurring potentially hundreds of dollars a month in extra borrowing costs on a new one.Because so little is for sale, home prices have remained stable, and even resumed their ascent, despite a huge increase in borrowing costs. The refrain among real estate agents and economists is that anyone who secured a mortgage rate of 3 percent or lower owns a valuable asset that they are loath to give up.But every asset has a price. And now an emerging cadre of investors and real estate agents are trying to, in effect, sell mortgage rates from several years ago by transferring them to new buyers.Redfin, the real estate brokerage, has seen a steep rise in listings like Mr. Kilboy’s that have comments like “beautiful home with assumable loan at 3.25 percent.” Facebook groups have popped up to find buyers for them, while new companies are pitching services to speed up the transfer.“Homeowners with mortgages that are capable of being assumed have something valuable that many home buyers want and would be willing to pay for,” said Daryl Fairweather, chief economist at Redfin. “For people who bought when home prices were near the peak but mortgage rates were still low, it may be an attractive way to get out of a remorseful purchase.”The assumable mortgage on Matthew Kilboy’s previous home had a 2.25 percent fixed rate, making it very attractive to buyers.Benjamin Rasmussen for The New York TimesInvestors are just as eager: The euphemistic “creative finance” has become a huge topic of conversation on sites like BiggerPockets, a forum where landlords trade tips on topics like operating short-term rentals and buying a first investment property. In books, seminars and YouTube videos, influencers peddle advice on how to find struggling homeowners willing to transfer a low-rate mortgage without their bank’s knowledge — a valuable but immensely risky strategy that title companies say they’ve seen more of.“It’s just too appealing,” said Scott Trench, chief executive of Bigger Pockets, adding the disclaimer that many of these strategies frequently involve extra risks and paperwork that most people are unfamiliar with.From the pedestrian to the dodgy, it all seems to underscore the manner in which the nation’s real estate market has been frozen by regret. Buyers are resentful that the low-cost mortgages are gone. Sellers are reluctant to lower their prices from the peaks of the pandemic. In lieu of acceptance, a determined few are trying to use imagination and fine print to build a portal to the cheap-money days of 2021.Most U.S. mortgages are not directly assumable. However, a host of popular government-backed mortgages — such as those insured by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture — typically are, said Michael Fratantoni, chief economist at the Mortgage Bankers Association. These loans are frequently used by first-time buyers and account for roughly a quarter of outstanding mortgages, according to Black Knight, a mortgage technology and data provider.In theory, any of the millions of homeowners holding a assumable low-rate mortgage have a valuable perk to sell with their home. Still, real estate agents say it can be hard in practice to transfer them. For instance, homeowners who transfer a V.A.-backed mortgage can lose their ability to get another similar loan unless they can find a V.A.-eligible buyer to take their original mortgage.Or consider a homeowner who has a low-rate mortgage but has paid a chunk of it down: To assume the loan, a buyer would have to come up with a large down payment to account for the seller’s equity — something that very few people can do.Craig O’Boyle is hoping to create a business making assumptions faster and easier. Mr. O’Boyle is a real estate agent who has been selling homes in Colorado for three decades, long enough that he remembers having to read through the door-stopper contracts that buyers and sellers now just click through on DocuSign. Reading over the lines about certain loans being assumable, he said, he had long thought that if rates ever spiked those owners would suddenly discover that their debts had value.“And then here comes this shift in the interest rate market,” Mr. O’Boyle said.Last year, he and a partner started Assumption Solutions, a consulting firm that, for a $1,100-per-deal processing fee, helps real estate agents navigate transferring mortgages between sellers and buyers. In his pitch to agents, Mr. O’Boyle argues that they push sub-3 percent rates as they do marble countertops or a view of the mountains.“You market this, and let’s say you’re competing against the house next door, your house should sell either faster or for more money,” he said.Even for the vast majority of people using a conventional mortgage that can’t be transferred, some sort of rate compensation is becoming the norm. While home prices have fallen from their all-time high last June, they haven’t come down nearly enough to make up for the increase in mortgage rates, and they’re rising again.To stimulate new loans, mortgage companies have started marketing products in which borrowers can “buy down” rates by paying several thousand dollars for a year or two of significantly lower interest. One of the more popular products is a “2/1 buydown,” in which a borrower pays for an interest rate reduction of two percentage points during the first year and one percentage point in the second.Put simply: “Most homes are unaffordable at today’s rates,” said Luis Solis, a real estate agent in Phoenix and Portland, Ore.A majority of Mr. Solis’s recent deals have had some form of interest rate compensation that is a price cut in all but name, he said. Usually it’s a lump sum at closing that buyers use to buy temporarily lower rates. Sellers with a lot of equity can cut out the middleman and finance the buyer’s purchase below prevailing rates by acting as a lender — seller financing, it’s called.Assuming mortgages, paying down rates: These are creative but straightforward solutions to rising borrowing costs. But on the margins, a rising number of investors looking to buy homes with minimal cash are trying a gray technique of finance — known as “Subject to” or “Subto” — in which they try to find people who have fallen behind on their debts and make a side agreement to take over their (low-interest) payments. (The deal is said to be “subject to” an existing loan.)The strategy has obvious appeal when interest rates are high, but it comes with a huge asterisk: Once a home has changed hands, banks typically have the right to call the loan — that is, demand that the seller’s mortgage balance be paid in full immediately. Also, if the buyer falls behind on the payments, the property can be still foreclosed on — ruining the seller’s credit, for a home that he or she no longer owns.Despite this, Bill McAfee, president of Empire Title, said he has seen an increase in customers looking to change their title under these terms, and has stock disclosures warning both sides what can go wrong.“I’m not saying I agree with doing this, but it’s a way to get into property with very little money,” he said. “They have to figure out if it’s worth the risk.” More

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    William E. Spriggs, Economist Who Pushed for Racial Justice, Dies at 68

    An educator who served in the Obama administration, he championed workers, especially Black workers, and challenged his profession’s racial assumptions.William E. Spriggs, who in a four-decade career in economics sought to root out racial injustice in society and in his own profession, died on Tuesday in Reston, Va. He was 68.The A.F.L.-C.I.O., for which Dr. Spriggs had been chief economist for more than a decade, announced his death. His wife of 38 years, Jennifer Spriggs, said the cause was a stroke.One of the most prominent Black economists of his generation, Dr. Spriggs served as an assistant secretary of labor in the Obama administration and held other public-sector roles earlier in his career. But he was best known for his work outside of government as an outspoken and frequently quoted advocate for workers, especially Black workers.In addition to his role at the A.F.L.-C.I.O., based in Washington, he was a professor at Howard University, where he mentored a generation of Black economists while pushing for change within a field dominated by white men.“Bill was somebody who was deeply committed to the idea that we do economics because we have a social purpose,” William A. Darity Jr., a Duke University economist and longtime friend, said in a phone interview. “That this is not a discipline that should be deployed just for playing parlor games, and that we should use the ideas that we develop from economics for the design of social policy that will make the lives of most people far better.”Dr. Spriggs worked on varied issues, including trade, education, the minimum wage and Social Security. But the topic he came back to most frequently, and spoke most passionately about, was that of racial disparities in the labor market. Black Americans, he pointed out time and again, consistently experienced unemployment at double the rate of white people — a troubling fact that he argued got too little attention among economists.“Economists have tried to rationalize this disparity by saying it merely reflects differences in skill levels,” Dr. Spriggs wrote in an opinion article in The New York Times in 2021, before going on to dismiss that claim with a striking statistic: The unemployment rate for white high school dropouts is almost always below that of overall Black unemployment.During the nationwide racial reckoning after the death of George Floyd in 2020, Dr. Spriggs wrote an open letter to his fellow economists that was sharply critical of the field’s approach to race — not just in its failure to recruit and retain Black economists, which had been widely documented, but also in economic research.“Modern economics has a deep and painful set of roots that too few economists acknowledge,” Dr. Spriggs wrote. “In the hands of far too many economists, it remains with the assumption that African Americans are inferior until proven otherwise.”Biden administration officials said they had discussed appointing Dr. Spriggs to senior economic policy roles as recently as this year. In the end, he remained on the outside, nudging the administration in public and private not to back off its commitment to ensuring a strong economic recovery. In recent months he was a vocal critic of the Federal Reserve’s aggressive efforts to tame inflation, which Dr. Spriggs warned would disproportionately hurt Black workers.“Bill was a towering figure in his field, a trailblazer who challenged the field’s basic assumptions about racial discrimination in labor markets, pay equity and worker empowerment,” President Biden said in a statement on Wednesday.Mr. Spriggs speaking with Janet Yellen, then the chair of the Federal Reserve, at a conference in 2014. More recently he was a critic of the Federal Reserve’s aggressive efforts to tame inflation, which he said would disproportionately hurt Black workers.Jonathan Ernst/ReutersWilliam Edward Spriggs was born on April 8, 1955, in Washington to Thurman and Julienne (Henderson) Spriggs. He was reared there and in Virginia. His father had served during World War II as a fighter pilot with the Tuskegee Airmen and went on to become a physics professor at Norfolk State University in Virginia and at Howard, in Washington, both historically Black institutions.His mother was also a veteran and became a public-school teacher in Norfolk after earning her college degree while her son was in elementary school.“I remember studying history together,” Dr. Spriggs later recalled of his mother in a White House blog post written while he was at the Labor Department. “She would check out children’s books covering the topics she was learning about.”Dr. Spriggs earned a bachelor’s degree in economics and political science from Williams College in Massachusetts and attended graduate school at the University of Wisconsin, where he earned a master’s degree in 1979 and a doctorate in 1984, both in economics. While in graduate school, he served as co-president of the graduate student teachers union, helping to rebuild it after a largely unsuccessful strike the year before.Dr. Spriggs stood out at Wisconsin, and not only because he was the only Black graduate student in the economics department, recalled Lawrence Mishel, a classmate who was later president of the Economic Policy Institute in Washington, where Dr. Spriggs also worked for several years.Even as a graduate student, Dr. Mishel said, Mr. Spriggs was skeptical of the orthodox theories that his professors were teaching about how companies set workers’ wages — theories that left no room for discrimination or other forces beyond supply and demand. And unlike most students, Mr. Spriggs wasn’t interested in working for the top-ranked school where he could find a job; he wanted to work for a historically Black institution, as his father had.He got his wish, teaching first at North Carolina Agricultural and Technical State University in Greensboro and then at Norfolk State University — where his father also worked — before taking a series of jobs in government and left-leaning think tanks. He returned to academia in 2005, when he joined Howard. He was chairman of its economics department from 2005 to 2009.In addition to his wife, whom he met in graduate school, his survivors include their son, William; and two sisters, Patricia Spriggs and Karen Baldwin. Dr. Spriggs had a shaping hand in the careers of dozens of younger economists.“I would not be an economist today without Bill Spriggs,” said Valerie Wilson, director of the Program on Race, Ethnicity and the Economy at the Economic Policy Institute.Dr. Wilson was taking a break from graduate school and considering leaving the field altogether when one of her professors recommended her for a job working for Dr. Spriggs at the National Urban League. He helped restore her passion for economics by showing her an approach to the work that was less theoretical and more focused on the real world, she said. After two years at the Urban League, she told Dr. Spriggs that she was going back to graduate school.His response: “We need you in the profession.”Jim Tankersley More

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    Energy Tax Credits, Meant to Help U.S. Suppliers, May Be Hard to Get

    The Inflation Reduction Act contains tax breaks for solar and wind companies to buy American equipment. Qualifying won’t be easy.In April, Vice President Kamala Harris visited Qcells, a solar panel manufacturing facility in Dalton, Ga., to announce an early triumph of the Inflation Reduction Act: Summit Ridge Energy, one of the nation’s largest developers of community solar projects, would purchase 2.5 million U.S.-made solar panels.Subsidies under the new law brought the price in line with that of imported panels, allowing the companies to fight climate change and promote American manufacturing in one fell swoop.A month later, the Treasury Department issued guidance that functionally would require the solar cells — not just the panels — to be made in the United States for Summit Ridge to have confidence that it will get its 10 percent tax credit on installations that use them. Qcells won’t be able to produce cells until late 2024, sending Summit Ridge scrambling to find cheaper components for projects currently in its pipeline.“There’s not a single solar manufacturer who fully qualifies for this at this moment in time, which makes it difficult and is actually starting to cool investment,” said Leslie Elder, Summit Ridge’s vice president of political and regulatory affairs. “Now we have to re-evaluate based on what can pencil.”On paper, the Inflation Reduction Act is transformative for electricity generation in the United States.The law offers tax credits that could cover up to 70 percent of a renewable energy project’s cost if it checks several boxes meant to support American workers and communities. A new analysis finds that those incentives more than offset the additional expense associated with using domestically produced goods and paying prevailing wages.But guidance rolling out from the Biden administration — presaging formal rules — has raised alarm among energy companies that some of the credits might be difficult if not impossible to use, at least in the near term. The resulting frustration is emblematic of the current stage of climate action: an eye-straining haze of technical rule-making that reflects a tension between urgency and ensuring that the benefits of the energy transition are widely shared.Wally Adeyemo, the deputy secretary of the Treasury, expressed confidence that in combination, the rules would strike that balance.“We have a great deal of clarity about the strategic objectives, and we’re already seeing the impact of that in terms of the economy,” Mr. Adeyemo said. “It isn’t about any one rule. It’s about an ecosystem of rules that have been created under the I.R.A. that put us in a position to go from a country that had underinvested in the clean energy transition to being at the head of the pack.”The analysis, overseen by professors at Princeton and Dartmouth experienced in modeling climate policy’s effects, finds that the incentive aimed at U.S. manufacturers makes domestic solar panels more than 30 percent less costly to produce than imports. With incentives claimed by clean energy developers that meet labor standards and use domestic content, the total cost of generating utility-scale solar electricity could be lowered by 68 percent, and onshore wind energy by 77 percent.The study was funded by the BlueGreen Alliance, a partnership of unions and environmental groups. The organization has championed elements of the Biden administration’s climate agenda that support domestic manufacturing, particularly in places hurt by globalization, automation and the decline of fossil fuels.“Until now, the moral case and the business case did not always align,” said Ben Beachy, the organization’s vice president for industrial policy. “The I.R.A. changes that by offering developers an airtight business case for supporting high-paying jobs and a stronger and fairer U.S. manufacturing base.”The impact of the climate law is already evident, with announcements of 47 new plants to make batteries, solar panels and wind turbines since it was passed, according to American Clean Power, a trade association. Other analyses, including a paper by economists and engineers at the Electric Power Research Institute, the Federal Reserve Bank of Minneapolis and the University of California, Berkeley, found that the law would encourage more low-emissions projects eligible for uncapped tax credits than anticipated, potentially making the costs to the government substantially higher than earlier estimates.A recent study found that federal incentives could reduce the total cost of utility-scale onshore wind energy generation by 77 percent.Alisha Jucevic for The New York TimesBut the BlueGreen Alliance’s study shows significant uncertainty about the impact of rising material costs as demand for domestically sourced aluminum, steel and concrete increases, and doesn’t account for profits manufacturers might command before more competition enters the market. It also projects four million more jobs will be available in wind and solar energy by 2035 than if the I.R.A. hadn’t passed — more than eight times the current employment base — but does not model whether labor supply will measure up.“I find some of their key results to be highly optimistic, and that they likely underestimate some of the economywide costs associated with this scale of clean energy deployment,” said Daniel Raimi, a fellow at the think tank Resources for the Future who reviewed the analysis.At the same time, clean energy companies are digesting the administration’s guidance on how the tax credits will be allocated, and finding some unworkable in ways that may slow deployment.Take the bonus of up to 20 percent for developers that locate projects in low-income communities (which is separate from a bonus of 10 percent for locating in areas struggling with the transition away from fossil fuels). The Treasury Department, wanting to ensure that credits give rise to projects that wouldn’t otherwise happen, will award them only to projects not yet completed. Solar installers would have to sell the system and then wait to see if they got the credit before starting work.“I think we will lose some development in low-income communities this year because of the way that credit has been constructed,” said Sean Gallagher, a vice president for policy at the Solar Energy Industries Association. “Either the developer is going to absorb that difference, or they’ll have to go back to the customer to renegotiate the price, or the project’s not going to happen.”An even thornier issue is the extra 10 percent for using domestically manufactured components. Manufacturers are concerned that while effectively requiring solar cells to be made in the United States to qualify for the credit, the Treasury Department did not require their foundational component — the wafer, a thin slice of silicon that conducts energy — to be domestically produced. That could allow Chinese factories to continue to dominate a key part of the supply chain.“The prices they’re ultimately getting from the developers are undermined because the Chinese wafer manufacturers can crash the prices,” said Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition.Developers are upset because receiving the credit will, in most cases, require a complex calculation of the cost of each component to reach the threshold of 40 percent U.S.-produced content, and manufacturers are loath to disclose sensitive pricing information. Many also expected a more gradual phase-in process that would allow some of the current U.S. factory output to qualify for the credit, while planning for more stringent requirements.Brett Bouchy is the chief executive of Freedom Forever, a residential solar installation company that did more than $1 billion in business last year. He had planned to build a solar module and cell manufacturing plant in Arizona, which would cost $100 million and employ 1,000 people, to supply his own operations. After the guidance came out, he halted those plans — he couldn’t be confident his panels would qualify for the domestic content credit on top of the 7 cents per watt available to manufacturers.“We cannot make it work,” Mr. Bouchy said. “There is no benefit, because that 7 cents is eaten up with increased U.S. labor costs. Why would you invest $100 million when you really can’t get a return?”Those who support the administration’s approach emphasize that the bonus tax credits are just that: bonuses, not requirements, to offset costs associated with going the extra mile. Developers already get a 30 percent base incentive — and at least 10 years of certainty — for paying prevailing wages and employing apprentices, which most don’t consider very difficult.Todd Tucker, the director of industrial policy and trade at the Roosevelt Institute, said high standards were necessary to make investors confident that new U.S. factories would have enough orders to stay in business.“Once you start indicating that you’re going to allow some flexibility, that, by definition, softens the market signal,” he said.The Treasury Department is still taking comments on the rules for all of the credits, and industry trade associations are vying to change them. Even so, most companies say that the Inflation Reduction Act overall is a powerful force for decarbonization, and that companies have a strong incentive to seek every credit it allows.“It’s amazing how focusing this is for the mind, when people start throwing these kinds of dollars around,” said Sheldon Kimber, the chief executive of Intersect Power, a clean energy developer. “We’re being asked to do a hard thing, but there’s a lot of money in it for us.” More

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    How Engagement Rings Explain What’s Happening in the Economy

    A major jeweler claims the pandemic may have prevented people from meeting their future fiancés, cutting demand for engagement rings. Inflation and anxiety among shoppers haven’t helped.Aftershocks from the coronavirus pandemic continue to rumble across the U.S. economy, and Signet Jewelers shared a surprising one this week: The company is selling fewer engagement rings this year because, it says, singles who were stuck at home during lockdowns failed to meet their would-be fiancés in 2020.“As we predicted, there were fewer engagements in the quarter resulting from Covid’s disruption of dating three years ago,” Virginia C. Drosos, the chief executive at Signet, which owns Kay Jewelers and Zales, told investors on Thursday. Shares of Signet, the largest jewelry retailer in the United States, tumbled after the company cut its forecasts for sales and profit for the rest of the year.In a way, the engagement ring has become a sparkly microcosm of the American economy. The bridal jewelry business is being buffeted by the delayed effects of the pandemic, rapid inflation that is squeezing consumers and a growing sense of nervousness among shoppers.Some of the volatility is owed purely to the pandemic. Weddings were canceled in droves during 2020 lockdowns, but bounced back starting in late 2021 and throughout 2022, and were expected to level off over the coming years as more typical patterns returned. Wedding-related activity does appear to show some early signs of slowing in 2023, but it is unclear whether that’s the result of a 2020 dating dry spell, per Signet, or simply a return to the longstanding shift toward later and fewer marriages.What is clear? Wedding trends are also tied to broader, and potentially longer-lasting, economic forces. Signet may be selling less because fewer people are getting down on one knee, but also because ring shoppers are becoming more cautious and spending less amid rapid inflation and rising uncertainty about the direction of the economy. Both the volume and value of jewelry sold by Signet last quarter declined.Ms. Drosos said that the company had “expected the low-double-digit decline in engagements that we saw this quarter,” but that other factors were also at play. “Recent consumer confidence, lower tax refunds, economic concerns triggered by regional bank failures and continued inflation led to a weakening trend in spending across the jewelry industry,” she added.Consumers are contending with big challenges this year. Prices have climbed about 15 percent cumulatively over the past three years, as measured by the Personal Consumption Expenditures index. Inflation has slowed in recent months, but many workers are finding that their wages are falling behind.The Federal Reserve has been raising interest rates to try to cool the economy and fight the stubborn price increases. Besides making it more expensive for consumers to shop on credit or take out loans, the rate moves have increased the chance that the economy might tip into a recession. As many households watch their savings dwindle and worry about their job security, they may be less willing to spend on big-ticket items like fancy diamond rings and bespoke wedding dresses.David’s Bridal, the wedding dress retailer, suggested in a bankruptcy filing this year that some brides had become increasingly budget-conscious.An “increasing number of brides are opting for less-traditional wedding attire, including thrift wedding dresses,” James Marcum, the company’s chief executive, said in a court filing.Like much of the economy, the wedding industry has shown signs of a split, as higher earners find that they are able to reach into their savings and keep spending, and lower-income families that spend a bigger share of their earnings on necessities like food begin to crack under the weight of inflation.LVMH, the luxury retail group that owns jewelers including Tiffany, reported continued growth in early 2023, including solid sales of jewelry.“Everybody was expecting 2023 to be a horrendous year for luxury in the U.S.,” Jean-Jacques Guiony, LVMH’s chief financial officer, told investors in April, explaining that a collapse had not materialized. “It’s normalizing, but it’s not bad, either.”But at more mass-market brands like Kay and Zales, shoppers may be starting to pull back.“We began to see softening at higher price points, which previously had been relatively insulated, and lower price points remained under pressure,” Joan Hilson, Signet’s finance chief, said during Thursday’s call.Signet is hoping wedding-ring demand will bounce back: It is predicting 500,000 more engagements from 2024 to 2026 than the prepandemic trend would suggest, as dating delayed by the lockdowns leads to matches. But analysts at Bank of America “worry that some of that rebound will be offset” by a “pinched consumer” spending less on jewelry, they wrote.Shane McMurray, founder of the Wedding Report, is skeptical of a big gap year in engagements. He expects weddings to fall 20 percent in 2023 from 2022 levels as trends return to normal. And Lyman Stone, director of research at the consulting firm Demographic Intelligence, agreed that the current slowdown in weddings might reflect a return to previous trends rather than a one-off weakening.“It does look like 2023 is going to be a low year,” he said. “I do think that placing the blame for that on lockdowns in 2020 is a little bit strained.” More

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    U.S. Economy’s Staying Power Poses Big Questions for the Fed

    The Federal Reserve has been trying to slow growth without tanking it. Now, officials must ask if inflation can cool amid signs of resilience.Employers are hiring rapidly. Home prices are rising nationally after months of decline. Consumer spending climbed more than expected in a recent data release.America’s economy is not experiencing the drastic slowdown that many analysts had expected in light of the Federal Reserve’s 15-month, often aggressive campaign to hit the brakes on growth and bring rapid inflation under control. And that surprising resilience could be either good or bad news.The economy’s staying power could mean that the Fed will be able to wrangle inflation gently, slowing down price increases without tipping America into any sort of recession. But if companies can continue raising their prices without losing customers amid solid demand, it could keep inflation too hot — forcing consumers to pay more for hotels, food and child care and forcing the Fed to do even more to restrain growth.Policymakers may need time to figure out which scenario is more likely, so that they can avoid either overreacting and causing unnecessary economic pain or underreacting and allowing rapid inflation to become permanent.Given that, investors have been betting that Fed officials will skip a rate increase at their meeting on Tuesday and Wednesday before lifting them again in July, proceeding cautiously while emphasizing that pausing does not mean quitting — and that they remain determined to bring prices under control. But even that expectation is increasingly shaky: Markets have spent this week nudging up the probability that the Fed might raise rates at this month’s meeting.In short, the mixed economic signals could make Fed policy discussions fraught in the months ahead. Here’s where things stand.Interest rates are much higher.Interest rates are above 5 percent, their highest level since 2007.

    Source: Federal ReserveBy The New York TimesAfter sharply adjusting policy over the past 15 months, key officials including Jerome H. Powell, the Fed chair, and Philip Jefferson, President Biden’s pick to be the next Fed vice chair, have hinted that central bankers could pause to allow themselves time to judge how the increases are affecting the economy.But that assessment remains a complex one. Even some parts of the economy that typically slow when the Fed raises rates are demonstrating a surprising ability to withstand today’s interest rates.“It’s a very complicated, convoluted picture depending on which data points you are looking at,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank, noting that overall growth figures like gross domestic product have slowed — but other key numbers are holding up.House prices are wiggling.Higher interest rates can take months or even years to have their full effect, but they should theoretically work pretty quickly to begin to slow down the car and housing markets, both of which revolve around big purchases made with borrowed cash.That story has been complicated this time. Car buying has slowed since the Fed started raising rates, but the auto market has been so undersupplied in recent years — thanks in large part to pandemic-tied supply chain problems — that the cool-down has been a bumpy one. Housing has also perplexed some economists.

    Note: Data is seasonally adjusted.Source: S&P CoreLogic Case-Shiller Index, via
    S&P Global IntelligenceBy The New York TimesThe housing market weakened markedly last year as mortgage rates soared. But rates have recently stabilized, and home prices have ticked back up amid low inventory. House prices do not count directly in inflation, but their turnaround is a sign that it’s taking a lot to sustainably cool a hot economy.Job signals are confusing.Fed officials are also watching for signs that their rate increases are trickling through the economy to slow the job market: As it costs more to fund expansions and as consumer demand slows, companies should pull back on hiring. Amid less competition for workers, wage growth should moderate and unemployment should rise.Some signs suggest that the chain reaction has begun. Initial claims for unemployment insurance jumped to the highest level since October 2021 last week, a report on Thursday showed. People are also working fewer hours per week at private employers, which suggests bosses aren’t trying to eke so much out of existing staff.

    Notes: Data is seasonally adjusted and includes hours worked by full- and part-time private sector employees.Source: Bureau of Labor StatisticsBy The New York TimesBut other signals have been more halting. Job openings had come down, but edged back up in April. Wages have been climbing less swiftly for lower-income workers, but gains remain abnormally rapid. The jobless rate climbed to 3.7 percent in May from 3.4 percent, but even that was still well shy of the 4.5 percent that Fed officials expected it to hit by the end of 2023 in their latest economic forecasts. Officials will release fresh projections next week.

    Source: Bureau of Labor StatisticsBy The New York TimesAnd by some measures, the labor market is still chugging. Hiring remains particularly strong.“Everyone talks as if the economy moves in one straight line,” said Nela Richardson, chief economist at ADP. “In actuality, it’s lumpy.”Price increases are stubborn.Still, inflation itself may be the biggest wild card that could shape the Fed’s plans this month and over this summer. Officials forecast in March that annual inflation as measured by the Personal Consumption Expenditures index would retreat to 3.3 percent by the end of the year.That pullback is gradually happening. Inflation stood at 4.4 percent as of April, down from 7 percent last summer but still more than double the Fed’s 2 percent goal.

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    Year-over-year percentage change in the Personal Consumption Expenditures index
    Source: Bureau of Economic AnalysisBy The New York TimesOfficials will receive a related and more up-to-date inflation reading for May — the Consumer Price Index — on the first day of their meeting next week.Economists expect substantial cooling, which could give officials confidence in pausing rates. But if those forecasts are foiled, it could make for an even more heated debate about what comes next. More

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    Jobless claims increase more than expected to their highest since October 2021

    Jobless claims totaled 261,000 for the week ended June 3, an increase of 28,000 from the previous week.
    The total was well ahead of the Dow Jones estimate for 235,000 and was the highest weekly rate since Oct. 30, 2021.
    The report comes less than a week ahead of the next Federal Reserve meeting.

    First-time jobless claims rose sharply last week in a potential sign that the labor market is softening up after more than a year of interest rate hikes.
    Initial filings for unemployment benefits totaled a seasonally adjusted 261,000 for the week ended June 3, an increase of 28,000 from the upwardly revised level of the previous period, the Labor Department reported Thursday.

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    The total was well ahead of the Dow Jones estimate for 235,000 and was the highest weekly rate since Oct. 30, 2021.
    That weekly jump pushed up the four-week moving average of claims by 7,500 to 237,250, the highest since April 29. Continuing claims, which run a week behind the headline number as they measure those who have filed for multiple weeks, fell by 37,000 to 1.757 million.
    The Labor Department did not cite any specific factor for the increase. The unadjusted total was 219,391, which was an increase of 10,535, or 5%, from the previous week. Seasonal factors would have indicated a 6% decrease, the department noted.
    A total of 1.635 million people were receiving jobless benefits through May 20, up from 1.283 million from a year ago, an increase of 27.4%.
    “One week’s worth of data is nowhere near enough evidence to conclude that claims are now breaking decisively to the upside, but other indicators have been signaling a jump in claims for some time now,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Higher claims also are consistent with the ongoing deterioration in credit availability and the lagged effect of the Fed’s tightening.”

    The report comes less than a week ahead of the next Federal Reserve meeting, during which central bank policymakers will have to decide their next move with interest rates.
    Markets are expecting the Fed to skip a rate hike at the two-day meeting that concludes Wednesday. The chances of no increase rose to 73.6% following the claims data, from about 65% prior to the release, according to CME Group data. A less-robust labor market reduces pressure on the Fed to tighten monetary policy as the increase of employment and wages has been a factor in high inflation.
    Since March 2022, the Fed has raised its benchmark borrowing rate 10 times to a targeted range of 5%-5.25%. During that period, the labor market has shown resilience, with nonfarm payrolls climbing by nearly 1.6 million in 2023.
    However, the May jobs report showed some chinks in the armor, with the unemployment rate rising by 0.3 percentage point to 3.7% as the household survey showed a decline of 310,000 in those saying they are employed.
    Inflation has fallen as the Fed has raised rates but remains well above the central bank’s 2% target.
    The Fed will get its last look at inflation data ahead of the meeting when the Bureau of Labor Statistics on Tuesday releases the consumer price index report for May. Headline CPI is expected to rise just 0.1% on a monthly basis while the core excluding food and energy is projected up 0.4%, according to a FactSet estimate. More