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    Jobs Numbers in Focus as the Fed Hints at a ‘Skip’

    Federal Reserve officials have signaled that they could hold rates steady at their upcoming meeting in June — pausing after a string of 10 straight rate increases to give themselves time to see how the economy is shaping up. But Friday’s fresh jobs data is likely to inform policymakers as they try to decide whether this is the right moment to take a break.Central bankers lifted interest rates to a range of 5 to 5.25 percent as of last month, up sharply from near-zero at the start of 2022. But they have been signaling for months that it could soon be appropriate to take a break from increasing rates so that they can assess how the economy is absorbing the big policy changes they have already made and the consequences of other developments, such as the fallout from recent bank turmoil.Higher interest rates cool the economy by making it more expensive to borrow to buy a house or finance a car purchase, but they take time to have their full effect. As rates rise, businesses gradually pull back on expansion plans, slowing hiring, which then feeds into weaker wage growth and a slower economy overall.That is why policymakers are watching job market data to figure out how higher interest rates are working. They have been expecting hiring to slow, wage gains to pull back and unemployment to begin to rise — but that has taken time to play out.Some Fed officials favor holding off on a rate increase in June, allowing more time for them to see how higher borrowing costs and heightened uncertainty are combining to restrain the economy. Patrick T. Harker, the president of the Federal Reserve Bank of Philadelphia, said this week that he is “definitely in the camp of thinking about skipping any increase at this meeting.”Others have underlined that while the Fed may be poised to pause its campaign to cool the economy, that does not mean it is done raising interest rates altogether.“A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” said Philip Jefferson, a Fed governor who is President Biden’s pick to be vice chair of the institution, during a speech this week.“Indeed, skipping a rate hike at a coming meeting would allow the Committee to see more data before making decisions about the extent of additional policy firming,” Mr. Jefferson added. The Fed vice chair is traditionally an important communicator for the institution, one who broadcasts how core officials are thinking about the policy path forward.But even as the Fed moves toward a possible pause this month, officials will take into account incoming data on the economy. A key inflation number released last week came in firmer than economists had expected, and officials will receive a fresh Consumer Price Index inflation report the day that their June 13-14 meeting begins.Friday’s jobs report could reinforce — or, if it is abnormally strong, call into question — whether a skip makes sense. More

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    Here’s What’s in the Debt Ceiling Deal

    Two years of spending caps, additional work requirements for food stamps and cuts to I.R.S. funding are among the components in the deal.The full legislative text of Speaker Kevin McCarthy’s agreement in principle with President Biden to suspend the nation’s borrowing limit revealed new and important details about the deal, which House lawmakers are expected to vote on this week.The centerpiece of the agreement remains a two-year suspension of the debt ceiling, which caps the total amount of money the government is allowed to borrow. Suspending that cap, which is now set at $31.4 trillion, would allow the government to keep borrowing money and pay its bills on time — as long as Congress passes the agreement before June 5, when Treasury has said the United States will run out of cash.In exchange for suspending the limit, Republicans demanded a range of policy concessions from Mr. Biden. Chief among them are limits on the growth of federal discretionary spending over the next two years. Mr. Biden also agreed to some new work requirements for certain recipients of food stamps and the Temporary Aid for Needy Families program.Both sides agreed to modest efforts meant to accelerate the permitting of some energy projects — and, in a surprise move, a fast track to construction for a new natural gas pipeline from West Virginia to Virginia that has been championed by Republican lawmakers and a key centrist Democrat.Here’s what the legislation would do:Temporarily suspends the debt limitThe deal suspends the nation’s $31.4 trillion borrowing limit until Jan. 2025. Suspending the debt limit for a period of time is different than setting it at a new fixed level. It essentially gives the Treasury Department the latitude to borrow as much money as it needs to pay the nation’s bills during that time period, plus a few months after the limit is reached, as the department employs accounting maneuvers to keep up payments.That’s different than the bill passed by House Republicans, which raised the limit by $1.5 trillion or through March 2024, whichever came first.Under the new legislation, the debt limit will be set at whatever level it has reached when the suspension ends. For political reasons, Republicans tend to prefer suspending the debt limit rather than raising it, because it allows them to say they did not technically green-light a higher debt limit.The suspension will kick the next potential fight over the nation’s debt load to 2025 — past the next presidential election.Caps and cuts spendingThe bill cuts so-called nondefense discretionary, which includes domestic law enforcement, forest management, scientific research and more — for the 2024 fiscal year. It would limit all discretionary spending to 1 percent growth in 2025, which is effectively a budget cut, because that is projected to be slower than the rate of inflation.The legislative text and White House officials tell different stories about how big those cuts actually are.Some parts are clear. The proposed military spending budget would increase to $886 billion next year, which is in line with what Mr. Biden requested in his 2024 budget proposal, and rise to $895 billion in 2025. Spending on veterans’ health care, including newly approved measures to assist veterans exposed to toxic burn pits, would also be funded at the levels of Mr. Biden’s proposed budget.Legislative text suggests nondefense discretionary outside of veterans’ programs would shrink in 2024 to about last year’s spending levels. But White House officials say a series of side deals with Republicans, including one related to funding for the Internal Revenue Service, will allow actual funding to be closer to this year’s levels.Although Republicans had initially called for 10 years of spending caps, this legislation includes just 2 years of caps and then switches to spending targets that are not bound by law — essentially, just suggestions.The White House estimates that the agreement will yield $1 trillion in savings over the course of a decade from reduced discretionary spending.A New York Times analysis of the proposal — using White House estimates of the actual funding levels in the agreement, not just the levels in the legislative text — suggests it would reduce federal spending by about $55 billion next year, compared with Congressional Budget Office forecasts, and by another $81 billion in 2025. If spending then returned to growing as the budget office forecasts, the total savings over a decade would be about $860 billion.Speaker Kevin McCarthy has said he believes a majority of his conference would vote for the deal.Haiyun Jiang for The New York TimesClaws back I.R.S. fundingThe legislation takes aim at one of President Biden’s biggest priorities — bolstering the I.R.S. to go after tax cheats and ensure companies and rich individuals are paying what they owe.Democrats included $80 billion to help the I.R.S. hire thousands more employees and update its antiquated technology in last year’s Inflation Reduction Act. The debt limit agreement would immediately rescind $1.38 billion from the I.R.S. and ultimately repurpose another $20 billion from the $80 billion it received through the Inflation Reduction Act.Administration officials said on Sunday that they had agreed to reprogram $10 billion of extra I.R.S. money in each of the 2024 and 2025 fiscal years, in order to maintain funding for some nondefense discretionary programs.The clawback will eat into the tax collection agency’s efforts to crack down on rich tax cheats. It is also a political win for Republicans, who have been outraged by the prospect of a beefed up I.R.S. and approved legislation in the House to rescind the entire $80 billion.Still, because of the leeway that the I.R.S. has over how and when it spends the money, the clawback might not affect the agency’s plans in the next few years. Officials said in a background call with reporters that they expected no disruptions whatsoever from the loss of that money in the short term.That’s likely because all of the $80 billion from the 2022 law was appropriated at once, but the agency planned to spend it over eight years. Officials suggested the I.R.S. might simply pull forward some of the money earmarked for later years, then return to Congress later to ask for more money.New work requirements for government benefitsThe legislation would impose new work requirements on older Americans who receive food stamps through the Supplemental Nutrition Assistance Program and who receive aid from the Temporary Assistance for Needy Families Program.The bill imposes new work requirements for food stamps on adults ages 50 to 54 who don’t have children living in their home. Under current law, those work requirements only apply to people age 18 to 49. The age limit will be phased in over three years, beginning in fiscal year 2023. And it includes a technical change to the T.A.N.F. funding formula that could cause some states to divert dollars from the program.The bill would also exempt veterans, the homeless and people who were children in foster care from food-stamp work requirements — a move White House officials say will offset the program’s new requirements, and leave roughly the same number of Americans eligible for nutrition assistance moving forward.Still, the inclusion of new work requirements has drawn outrage from advocates for safety net assistance, who say it punishes vulnerable adults who are in need of food.“The agreement puts hundreds of thousands of older adults aged 50-54 at risk of losing food assistance, including a large number of women,” Sharon Parrott, president of the Center on Budget and Policy Priorities, said in a statement.President Biden also agreed to some new work requirements for certain recipients of food stamps.Pete Marovich for The New York TimesPermitting reformThe agreement includes new measures to get energy projects approved more quickly by creating a lead agency to oversee reviews and require that they are completed in one to two years.The legislation also includes a win for Senator Joe Manchin III of West Virginia, a Democratic centrist, by approving permitting requests for the Mountain Valley Pipeline, a natural gas project in West Virginia. The $6.6 billion project is intended to carry gas about 300 miles from the Marcellus shale fields in West Virginia across nearly 1,000 streams and wetlands before ending in Virginia.Environmentalists, civil rights activists and many Democratic state lawmakers have opposed the project for years.The bill declares that “the timely completion of construction and operation of the Mountain Valley Pipeline is required in the national interest.”Mr. Manchin said on Twitter that he is proud to have secured the bipartisan support necessary to “get it across the finish line.” Republican members of the West Virginia delegation also claimed credit.Student loans and unspent Covid moneyThe bill officially puts an end to Mr. Biden’s freeze on student loan repayments by the end of August and restricts his ability to reinstate such a moratorium.It does not move forward with the measure that House Republicans wanted to include that would halt Mr. Biden’s policy to forgive between $10,000 and $20,000 in student loan debt for most borrowers. That initiative, which the Biden administration rolled out last year, is currently under review by the Supreme Court and could ultimately be blocked.The bill also claws back about $30 billion in unspent money from a previous Covid relief bill signed by Mr. Biden, which had been a top Republican priority entering negotiations. Some of that money will be repurposed to boost nondefense discretionary spending.According to an administration official, the deal leaves intact funding for two key Covid programs: Project NextGen, which aims to develop the next generation of coronavirus vaccines and treatments, and an initiative to offer free coronavirus shots to the uninsured.Preventing a government shutdownThe agreement only sets parameters for the next two years of spending. Congress must fill them in by passing a raft of spending bills later this year. Large fights loom in the details of those bills, raising the possibility that lawmakers will not agree to spending plans in time and the government will shut down.The agreement between Mr. Biden and Mr. McCarthy attempts to prod Congress to pass all its spending bills and avoid a shutdown, by threatening to reduce spending that is important to both parties. If lawmakers have not approved all 12 regular funding bills by the end of the year, the agreement tightens its spending caps. Nondefense discretionary spending would be set at one percent below current year levels, and it is possible that the I.R.S. would not see its $10 billion in funding for next year repurposed for other programs.The same levels would apply to defense and veterans’ spending — which would be, in effect, a significant cut to those programs compared to the agreed-upon caps. Democrats see the looming military cuts as a particularly strong incentive for Republicans to strike a deal to pass appropriations bills by the end of the year.What’s not in the billThe final agreement includes far less reduction in future debt than either side proposed.Republicans wanted much deeper spending cuts and stricter work requirements. They also wanted to repeal hundreds of billions of dollars in tax incentives signed by Mr. Biden to accelerate the transition to lower-emission energy sources and fight climate change. Mr. Biden wanted to raise taxes on corporations and high earners, and to take new steps to reduce Medicare’s spending on prescription drugs. None of those made it into the deal. More

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    How to Enforce a Debt Deal: Through ‘Meat-Ax’ Cuts Nobody Wants

    The debt-limit legislation includes a provision meant to force both sides to pass additional bills following through on their deal: the threat of automatic cuts if they fail to do so.The bipartisan legislation Congress passed this week to suspend the debt ceiling and impose spending caps contains an arcane but important provision aimed at forcing both sides to follow through on the deal struck by President Biden and Speaker Kevin McCarthy.The 99-page measure suspends the $31.4 trillion borrowing limit until January 2025. It cuts federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025.But it also contains a number of side deals that never appear in its text but that were crucial to forging the bipartisan compromise, and that allowed both sides to claim they had gotten what they wanted out of it. To try to ensure that Congress abides by the agreement, negotiators used a time-tested technique that lawmakers have turned to for decades to enforce efforts to reduce the deficit: the threat of automatic, across-the-board spending cuts if they do not finish their work.Here’s how it works.A 1 percent cut unless spending bills are passed.Congress is supposed to pass 12 individual spending bills each year to keep the government funded. But for decades, lawmakers, unable to agree on those measures, have lumped them together into one enormous piece of legislation referred to as an “omnibus” spending bill and pushed them through against the threat of a shutdown.The debt-limit agreement imposes an automatic 1 percent cut on all spending — including on military and veterans programs, which were exempted from the caps in the compromise bill — unless all dozen bills are passed and signed into law by the end of the calendar year. Mandatory spending on programs such as Medicare and Social Security would be exempt.A wrinkle is that, because the fiscal year that drives Congress’s spending cycle ends before the calendar year does — on Sept. 30 — Congress would still need to pass a short-term bill to fund the government from October through December to avoid a shutdown.Republicans and Democrats both dread the cuts.The measure is a version of a plan offered by Representative Thomas Massie, Republican of Kentucky, a key vote to advancing the bill through the Rules Committee, who said he believed it would help avoid the Democratic-controlled Senate using the specter of a shutdown to force the House to swallow a bloated spending bill at the end of the year.“You get threatened and ransomed with a shutdown,” Mr. Massie said in an interview in late April describing the plan. “They’ll tell you, ‘If you don’t pass the Senate bill, there’s going to be a shutdown.’ I think we need to take that leverage away from anybody who would risk a shutdown to get more spending. Just take that off the table.”Some Republicans, including defense hawks, are livid about the measure, arguing that it would subject the Pentagon to irresponsible cuts. Senator Susan Collins of Maine, the top Republican on the Appropriations Committee and its defense subcommittee, called it a “harmful” provision that would leave a “threat hanging over” the Defense Department.“It would trigger an automatic, meat-ax, indiscriminate, across-the-board cut in our already inadequate defense budget and in the domestic, discretionary nondefense funding,” Ms. Collins said.Democrats, too, have a major incentive to avoid the cuts, since they have resisted reducing funding for federal programs all along.Without spending bills, major parts of the debt deal will die.Both parties stand to lose victories gained through handshake agreements during negotiations if Congress cannot pass its appropriations bills. Neither the White House nor House Republicans have published a full accounting of the agreements that do not appear in legislative text, but some have become clear.The deals allow Republicans to claim they are making deep cuts to certain spending categories while letting Democrats mitigate the pain of those cuts in the funding bills.One unwritten but agreed-upon compromise allows appropriators to repurpose $10 billion a year in 2024 and 2025 from the I.R.S. — a key priority of Republicans, who had opposed the additional enforcement funding championed by Mr. Biden and Democrats.Another side agreement, sought by Democrats, that would evaporate if the spending bills were not written designated $23 billion a year in domestic spending outside military funding as “emergency” spending, basically exempting that money from the caps in the deal.Jim Tankersley More

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    Supreme Court Backs Employer in Suit Over Strike Losses

    The justices ruled that federal labor law did not block state courts from ruling on a case regarding damage caused when workers walked off the job.The Supreme Court ruled on Thursday that federal labor law did not protect a union from potential liability for damage that arose during a strike, and that a state court should resolve questions of liability.The majority found that if accusations by an employer are true, actions during a strike by a local Teamsters union were not even arguably protected by federal law because the union took “affirmative steps to endanger” the employer’s property “rather than reasonable precautions to mitigate that risk.” It asked the state court to decide the merits of the accusations.The opinion, written by Justice Amy Coney Barrett, was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh.Three conservative justices backed more sweeping concurring opinions. A single justice, Ketanji Brown Jackson, dissented.Some legal experts had said a union setback in the case would discourage workers from striking by making the union potentially liable for losses that an employer incurred during a work stoppage.“It will definitely lead to more expensive-to-resolve lawsuits against labor unions,” said Charlotte Garden, a law professor at the University of Minnesota who was an author of a brief in support of the union. Professor Garden did note, however, that the decision was less far-reaching in discouraging strike activity than it could have been.Others have argued that the ruling was necessary to prevent workers from intentionally harming an employer’s property, an act not protected by federal labor law, and that such restrictions do not jeopardize the right to strike.“Damages from intentional destruction of property are not inherent to the act of striking,” said Michael O’Neill of the Landmark Legal Foundation, a conservative legal advocacy group that submitted a brief in the case. As a result, Mr. O’Neill said, the law does not shield workers or unions from liability for such damage.The case, Glacier Northwest v. International Brotherhood of Teamsters, No. 21-1449, involved unionized employees of a concrete mixing and pouring company who walked off the job during contract negotiations, leaving wet concrete in their trucks. The employer argued that it suffered substantial monetary losses because the abandoned concrete was unusable.The union argued that it had taken reasonable steps to avoid harming the employer’s property, as federal law requires, because workers kept their trucks running as they walked off the job. That allowed the company to dispose of the concrete without damage to the trucks. The union said the lost concrete amounted to the spoilage of a product, for which unions were not typically held liable.At issue were two key questions. The first was procedural: whether the case should be allowed to go forward in state court, as employers generally prefer. The alternative is that the state court — in this case, Washington — should step aside in favor of the National Labor Relations Board, the federal agency responsible for resolving labor disputes.The second question was about what economic damage is acceptable during a strike, and what amounts to vandalism — which federal labor law does not protect — of property or equipment.The two issues are linked because under legal precedent, the labor board is supposed to elbow aside state courts when the alleged actions during the strike are at least “arguably protected” by federal law.The Supreme Court ruled that the union’s actions, as alleged by the employer, were not arguably protected because the spoilage of the product was not merely an indirect result of the strike. Instead, the employer contended in a lawsuit, “the drivers prompted the creation of the perishable product” and then waited until the concrete was inside the trucks before walking off the job.“In so doing, they not only destroyed the concrete but also put Glacier’s trucks in harm’s way,” the majority opinion said. It sent the case back to Washington State court to be litigated.Sean M. O’Brien, the president of the Teamsters, issued a defiant statement after the decision was announced. “The Teamsters will strike any employer, when necessary, no matter their size or the depth of their pockets,” he said.The U.S. Chamber of Commerce said the court “got it right” in ruling that federal law “does not pre-empt state tort claims against a union for intentional destruction of an employer’s property during a labor dispute.”In a concurring opinion, Justice Clarence Thomas agreed that the Washington State court should be allowed to take up the case. He wrote that in a future case, the Supreme Court should reconsider whether the National Labor Relations Board should have such wide latitude to take the first pass in such cases.Justice Jackson noted in her dissent that the labor board had issued its own complaint since the case was first filed in Washington State. In issuing its complaint, the labor board’s general counsel found that the strike activity was in fact protected. This by definition meant that the activity was “arguably protected,” Justice Jackson wrote, requiring the state court to stand down.The decision, which some experts said could cause unions to reconsider striking or take a more cautious approach when a perishable product could be harmed, followed a series of rulings that appeared to scale back the power of unions and workers.The court ruled in 2018 that companies could prohibit workers from collectively bringing legal actions against their employers, even though the National Labor Relations Act protects workers’ rights to engage in so-called concerted activities.In the same year, the court ruled that public-sector unions could no longer require nonmembers to pay fees that help fund bargaining and other activities that unions do on their behalf.In 2021, the court deemed unconstitutional a California regulation that gave unions access to agricultural employers’ property for recruitment.In interviews, union leaders said that the ruling on Thursday would further tilt an already uneven playing field toward employers, and that it was often not a strike itself but the threat of a strike that helped unions win concessions.“Without the threat of a strike, you have little leverage in negotiations,” said Stuart Appelbaum, the president of the Retail, Wholesale and Department Store Union, which has organized successful strikes.Mr. O’Neill’s group, the Landmark Legal Foundation, argued that a ruling against the employer could have jeopardized the labor peace that the National Labor Relations Act was enacted to assure, “placing workers and the public at risk” by essentially blessing acts of vandalism and sabotage.Unions and workers often deliberately plan strikes to exploit employers’ vulnerability — for example, Amazon workers walked out during the holiday season — and rely on an element of surprise to maximize the economic harm they inflict, and therefore the leverage the union gains.In the near term, unions that are contemplating strikes or already striking, such as unions representing Hollywood writers or United Parcel Service employees whose contract expires this summer, may have to take greater precautions to insulate themselves from legal liability.Such precautions will typically weaken the impact of strikes, said Ms. Garden, the University of Minnesota professor. “You could get unions prophylactically adopting less effective tactics — things like giving advance warning about strike, which gives the employer a lot more time to hire replacement workers,” she said.Other unions may simply decide not to strike at all out of fear of heightened legal exposure, she said.Further out, unions and their political allies may seek to enact legislation that explicitly exempts workers from liability for certain types of economic damage that arise during a strike.“There will be efforts in blue states to make the best of it, to do something protective,” said Sharon Block, a former Biden and Obama administration official who is a professor of practice at Harvard Law School.But even these laws could wind up being challenged before the Supreme Court, experts said.Adam Liptak More

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    Here’s what to watch out for in Friday’s jobs report for May

    Economists surveyed by Dow Jones expect job growth in May of 190,000, a slowdown from the 253,000 jobs added in April and the smallest gain since December 2020.
    The jobs count has beaten consensus estimates 13 of 16 times since January 2022.
    Wages are expected to increase 0.3% for the month and 4.4% from a year ago, a level that officials have said is not consistent with a return to 2% inflation.

    Construction workers on a job site on May 05, 2023 in Miami, Florida.
    Joe Raedle | Getty Images

    Watching the monthly jobs reports this year has been something of a waiting exercise, with economists and market participants looking for a downturn that never seems to arrive.
    That scenario is likely to recur Friday when the Labor Department releases its nonfarm payrolls count for May. Economists surveyed by Dow Jones expect job growth of 190,000, a slowdown from the 253,000 jobs added in April, below the 2023 monthly average of 284,500 and the lowest monthly gain since December 2020.

    But judging by the way these reports have been going, the risk is probably to the upside in a jobs market that has been nothing if not resilient. The jobs count has beaten consensus estimates 13 of 16 times since January 2022.
    “The labor market still looks tight. Job openings are very high, unemployment is at a 50-plus-year low. We’re expecting further job gains… actually a bit above consensus,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities America. “I would tell people to focus on whatever the trend is.”
    For how much the headline numbers have been defying the market outlook, LaVorgna sees some underlying weakness.

    Total job openings edged higher in April to 10.1 million, but the pivotal leisure and hospitality industry actually registered a nearly 6% decline, according to Labor Department data released Wednesday. That could be bad news for a sector that has generated more than 900,000 jobs over the past year.
    Also, the April nonfarm payrolls report showed that job growth estimates for the prior two months were cut by 149,000, indicating that the picture from earlier this year hadn’t been quite as robust as initially indicated.

    “Right now, we’re getting close to an inflection point,” said LaVorgna, who was chief economist for the National Economic Council under former President Donald Trump. “I don’t think it’s going to happen in May, but given the amount of tightening in the economy that the Fed has engineered and given that lending standards have gotten more restrictive, the labor market should weaken. History tells us when it happens, it happens fast.”

    Defying the Fed

    The tight labor market and the pressure that has put on wages and inflation has bedeviled the Federal Reserve. The central bank has raised interest rates 10 times since March 22, only to see inflation stay well above the Fed’s 2% target.
    Policymakers, though, have signaled that they may be willing to skip hiking again when they meet later in June, as they look to see how all the policy tightening has impacted conditions.
    “A decision to hold our policy rate constant at a coming meeting should not be interpreted to mean that we have reached the peak rate for this cycle,” Fed Governor Philip Jefferson said in a speech Wednesday. “Indeed, skipping a rate hike at a coming meeting would allow the [rate-setting Federal Open Market Committee] to see more data before making decisions about the extent of additional policy firming.”
    One area policymakers will be focused on is average hourly earnings.
    Wages are expected to increase 0.3% for the month and 4.4% from a year ago, a level that officials have said is not consistent with a return to 2% inflation. However, May could bring some good news in that regard.

    A ‘fully staffed’ jobs market?

    Data from Homebase indicates wages for small- and medium-sized businesses declined 0.2% in May, the first monthly decline since 2021. That came even with a 0.64% increase in employees working and a 1.16% gain in hours worked.
    Payrolls processing firm ADP reported Wednesday that wages for workers who stayed at their jobs increased 6.5% in May, still high but a deceleration from previous months. ADP also said private payrolls expanded by a higher-than-expected 278,000 in May.
    A Fed report Wednesday noted that wages grew “modestly” which was in line with the rest of the observations the “Beige Book” had about the jobs economy.
    “Overall, the labor market continued to be strong, with contacts reporting difficulty finding workers across a wide range of skill levels and industries,” the report said, noting that some employers said “they were fully staffed, and some reported they were pausing hiring or reducing headcounts due to weaker actual or prospective demand or to greater uncertainty about the economic outlook.”
    The unemployment rate in May was expected to nudge higher to 3.5%, which would still be near the lowest level since 1969. More

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    Private payrolls rose by 278,000 in May, well ahead of expectations, ADP says

    Private sector employment increased by a seasonally adjusted 278,000 for the month, ahead of the Dow Jones estimate for 180,000, ADP reported.
    The ADP report noted that the distribution of job grains was “fragmented” as increases were concentrated in just a few industries.
    Salary growth is still strong showing signs of decelerating, the payroll processing firm said.

    The U.S. labor market posted another month of surprising strength in May as companies added jobs at a pace well above expectations, according to a report Thursday from payroll processing firm ADP.
    Private sector employment increased by a seasonally adjusted 278,000 for the month, ahead of the Dow Jones estimate for 180,000 and a bit lower than the downwardly revised 291,000 in April. May’s increase took the payroll growth so far in 2023 to 1.09 million.

    The ADP report noted that the distribution of job grains was “fragmented” for the month, as increases were concentrated in leisure and hospitality, which added 208,000 positions, and natural resources and mining, which saw a gain of 94,000.
    Construction added 64,000 jobs, but multiple other categories saw declines.
    For instance, manufacturing saw a drop of 48,000, financial activities lost 35,000 and education and health services was off by 29,000. Trade, transportation and utilities posted an increase of 32,000 while the other services category added 12,000.
    From a size perspective, companies with 500 or more workers lost 106,000 jobs. Small firms, with fewer than 50 workers, added 235,000 positions.
    One area of note for ADP was a slowdown in the pace of wage gains, with annual pay up a still-robust 6.5% in May but down from the 6.7% increase in April. Those switching jobs reported an annual increase of 12.1%, off a percentage point from the month before.

    “This is the second month we’ve seen a full percentage point decline in pay growth for job changers,” ADP chief economist Nela Richardson said. “Pay growth is slowing substantially, and wage-driven inflation may be less of a concern for the economy despite robust hiring.”
    The ADP count comes a day ahead of the Labor Department’s more closely watched nonfarm payrolls report, which is expected to show job growth of 190,000 in May following a gain of 253,000 in April.
    ADP’s report serves as a precursor to the government’s tally, though the two sometimes can differ considerably. The Labor Department said private payrolls rose by 230,000 in April.
    The payroll gains have come despite the Federal Reserve’s efforts to tackle inflation and slow the labor market through a series of interest rate increases. Central bank officials have said in recent days that they may be in favor of skipping another hike in June as they weigh the impact of policy tightening that began in March 2022.
    A separate report Thursday showed that initial filings for unemployment benefits were little changed last week.
    Jobless claims totaled 232,000 for the week ending May 27, up 2,000 from the previous week and slightly below the Dow Jones estimate for 235,000. Continuing claims edged higher as well to 1.795 million. More

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    House Set to Vote on Debt Ceiling Bill Amid Republican Resistance

    A bipartisan coalition was set to push through the compromise struck by Speaker Kevin McCarthy and President Biden, even as lawmakers in both parties signaled their displeasure with the plan.The House on Wednesday was poised to push through legislation negotiated by President Biden and Speaker Kevin McCarthy to suspend the debt ceiling and set federal spending limits, as a bipartisan coalition lined up to cast a critical vote to pull the nation back from the brink of economic catastrophe.The bill would defer the federal debt limit for two years — allowing the government to borrow unlimited sums as necessary to pay its obligations — while imposing two years of spending caps and a string of policy changes that Republicans demanded in exchange for allowing the country to avoid a disastrous default. The vote, expected Wednesday night, was coming days before the nation was projected to exhaust its borrowing power, and after a marathon set of talks between White House negotiators and top House Republicans.With both far-right and hard-left lawmakers in revolt over the deal, congressional leaders cobbled together a coalition of Republicans and Democrats willing to drag the bill over the finish line, throwing their support behind the compromise in an effort to break the fiscal stalemate that has gripped Washington for weeks.It nearly collapsed on its way to the House floor, when hard-right Republicans sought to block its consideration, and in a suspenseful scene, Democrats waited several minutes before swooping in to supply their votes for a procedural measure that allowed the plan to move ahead.Representative Dan Bishop of North Carolina, along with other hard-right House Freedom Caucus members, tried to block the procedure to advance the debt deal to a vote on Wednesday.Haiyun Jiang for The New York TimesThe deal would suspend the $31.4 trillion borrowing limit until January 2025. It would cut federal spending by $1.5 trillion over a decade, according to the Congressional Budget Office, by effectively freezing some funding that had been projected to increase next year and then limiting spending to 1 percent growth in 2025, which is considered a cut because it would be at a lower level than inflation. The legislation would also impose stricter work requirements for food stamps, claw back some funding for I.R.S. enforcement and unspent coronavirus relief money, speed the permitting of new energy projects and officially end Mr. Biden’s student loan repayment freeze.The compromise was structured with the aim of enticing votes from both parties, allowing Republicans to say that they succeeded in reducing some federal spending — even as funding for the military and veterans’ programs would continue to grow — while allowing Democrats to say they spared most domestic programs from significant cuts.Ahead of the series of votes on Wednesday, Mr. McCarthy urged his members to support the bill, framing it as a “small step putting us on the right track,” and promoting the spending cuts and work requirements Republicans won in the deal.“Everybody has a right to their own opinion,” he said. “But on history, I’d want to be here with this bill today.”In the Senate, both Democratic and Republican leaders said they would quickly take up the legislation and push to get the package to Mr. Biden as swiftly as possible, with Senator Chuck Schumer, Democrat of New York and the majority leader, warning that lawmakers would need to approve the bill without changes to meet the June 5 deadline when the Treasury Secretary Janet L. Yellen has said the government would default without action by Congress.“I cannot stress enough that we have no margin for error,” Mr. Schumer said. “Either we proceed quickly and send this bipartisan agreement to the president’s desk or the federal government will default for the first time ever.”Senator Chuck Schumer, Democrat of New York and the majority leader, warned that lawmakers would need to approve the bill without changes to meet a June 5 deadline to avert a default.Haiyun Jiang for The New York TimesPassage of the deal would be a major victory for Mr. McCarthy, a California Republican who faced a massive challenge in shepherding a debt-ceiling increase through a narrowly divided chamber populated by Republicans who have long refused to raise the borrowing limit. Few had expected that Mr. McCarthy would be able to unite his fractious conference around any such measure, much less one negotiated with Mr. Biden, without prompting an attempt by his right flank to oust him.As of Wednesday, no such effort had materialized, thought there still may be political consequences ahead for Mr. McCarthy. Representative Dan Bishop, Republican of North Carolina and a member of the ultraconservative Freedom Caucus, has publicly said that he considered the debt and spending deal grounds for removing Mr. McCarthy from his post. Another member of the group, Representative Ken Buck, Republican of Colorado, told CNN that its members would have “discussions about whether” to try to oust him.“I’m not suggesting the votes are there to remove the speaker, but the speaker promised that we would operate at 2022 appropriations levels when he got the support to be speaker,” Mr. Buck said. “He’s now changed that to 2023 levels plus one percent. That’s a major change for a lot of people.”Under the rules House Republicans adopted at the beginning of the year that helped Mr. McCarthy become speaker, any single lawmaker could call for a snap vote to depose him, a move that would require a majority of the House.Hard-right lawmakers were nonetheless furious over the compromise, savaging the bill and Mr. McCarthy’s handling of the negotiations as a betrayal.“No one sent us here to borrow an additional $4 trillion to get absolutely nothing in return,” said Representative Chip Roy, Republican of Texas, who promised “a reckoning about what just occurred.”In a dramatic display of their displeasure, 29 conservative Republicans took the unusual step of breaking ranks on a procedural vote to take up the legislation, normally a formality that passes entirely along party lines.In a dramatic tableau on the House floor, as the Republican defections piled up, imperiling the deal, Representative Hakeem Jeffries of New York, the minority leader, finally raised a green voting card in the air, signaling to fellow Democrats that it was time go ahead and bail Republicans out. A stream of centrist and veteran lawmakers — 52 in all — crowded into the well of the House and voted “yes,” rescuing the deal from collapse.After a pause on the floor when Republicans came up short on votes, Representative Hakeem Jeffries, the New York Democrat and minority leader, gave the assent to a group of Democrats to help move toward a vote on the deal.Kenny Holston/The New York TimesMr. Jeffries had gathered Democrats in the Capitol on Wednesday morning, along with top White House officials who had helped broker the deal, and urged them to back the compromise. He argued that Mr. Biden had successfully fended off the worst of Republicans’ demands, and reiterated that allowing the nation to default was not an option.“I made clear that I’m going to support legislation that is on the floor today,” Mr. Jeffries told reporters at a news conference after the meeting. “And I support it without hesitation or reservation or trepidation.”But progressive Democratics bristled at the package, and said they could not support new work requirements for safety net programs or incentivize Republicans from weaponizing the debt ceiling as a political cudgel.“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, who took particular aim at changes to the Supplemental Nutrition Assistance Program and a measure to expedite production of a gas pipeline. “This was their deal, this was their negotiations. They’re the ones trying to come in and cut SNAP, cut environmental protections, trying to ram through an oil pipeline through a community that does not want it.”“Republicans need to own this vote,” said Representative Alexandria Ocasio-Cortez, Democrat of New York, one of a group of Democrats displeased with Republican provisions in the bill.Kenny Holston/The New York Times“This has been a hostage situation,” Representative Greg Casar, Democrat of Texas, said. “We’re going to get out of the hostage situation. I appreciate the president negotiating down the ransom payment for the hostage. But I think it’s appropriate for progressives to say we never want to be in this situation again.”Adding to progressive discontent are provisions in the deal that claw back some unspent money from a previous pandemic relief bill, and reduce by $10 billion — to $70 billion from $80 billion — new enforcement funding for the I.R.S. to crack down on tax cheats. Other measures in the bill include a provision meant to speed the permitting of certain energy projects and a provision meant to force the president to find budget savings to offset the costs of a unilateral action, like forgiving student loans — though administration officials could circumvent that requirement.The deal also includes measures meant to avert a government shutdown later this year.Carl Hulse More

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    Job Openings Rose in April, Defying Cooling Trend

    After three consecutive months of declines, job openings jumped in April, reaching 10.1 million, the Labor Department reported on Wednesday.The surge signals that job opportunities are withstanding the economic pressures that have led many to believe that the American economy may soon enter a recession.At the same time, the report — known as JOLTS, or the Job Openings and Labor Turnover Survey — showed that the labor market was far less feverish than it was a year earlier.The quits rate — viewed as an indicator of how confident workers are in leaving a job and finding employment elsewhere — was 3 percent, seasonally adjusted, in April 2022. Since then, it has retreated to 2.4 percent, just above its prepandemic peak. And the hiring rate was unchanged from March, which was the lowest since December 2020.Layoffs, however, decreased again, showing that employers are hesitant to let go of employees brought on board during this recovery.A bagel shop in Brooklyn advertised that it had positions to fill.Earl Wilson/The New York TimesThe data complicates the interest-rate outlook.The jump in openings may put pressure on the Federal Reserve to take interest rates even higher.The statistical relationship between high job vacancies, as calculated by the government, and low unemployment has been frequently cited by the Federal Reserve chair, Jerome H. Powell, as a key sign of the labor market’s being “unsustainably hot” and “clearly out of balance, with demand for workers substantially exceeding the supply of available workers.”But even as some economists remain unsatisfied with the progress on subduing prices, others worry that reliance on job openings as a core measure of labor market balance may lead the Fed to keep the cost of borrowing for businesses and households too high for too long, prompting a harsher downturn than necessary.“The quits rate is nearly back to prepandemic levels, the hires rate has already reverted to prepandemic pace,” Skanda Amarnath, the executive director of Employ America, a nonprofit that supports tight labor markets, wrote in a note. “JOLTS data should not drastically color this broader assessment of labor market tightness but will matter at the margins for the Fed’s own perception of labor market heat.”Some question how much weight to give the report.After peaking at a record of around 12 million in March 2022, job openings as measured by the government have fallen overall. For the past year, a mix of strong hiring for positions that were already listed and a decline in business sentiment has led to a pullback in newly created listings. But the April uptick is at least a pause in recent trends.Some economists think the JOLTS report should be taken with a grain of salt. Gregory Daco, the chief economist at EY-Parthenon, said the bump in listings could reflect summer hiring in the rebounding service sector, though he added, “I’d want to see June before assuming that summer hiring is stronger than last year.”The report is based on a survey of about 21,000 nonfarm business and government establishments. The economic research team at Goldman Sachs has made the case that since the response rate to the JOLTS report has fallen sharply since the start of the pandemic, “these findings argue for currently treating JOLTS less like the ‘true’ level of job openings.”The May jobs report will be the next gauge.The May employment report, to be released by the Labor Department on Friday, will fill out the labor market picture before Fed policymakers meet on June 13 and 14.Economists surveyed by Bloomberg expect the data to show the addition of 195,000 jobs on a seasonally adjusted basis, down from 253,000 in the initial report for April. Unemployment, which was 3.4 percent in April — matching the lowest level since 1969 — is expected to rise to 3.5 percent, and the month-over-month increase in wages is expected to ease. More