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    Fed Officials Ask How to Better Understand Inflation After Surprises

    Federal Reserve officials, including Lisa Cook, a board member, are wrestling with how to think about price increases after 18 months of rapid change.NEW ORLEANS — Federal Reserve officials kicked off 2023 by addressing a thorny question that is poised to bedevil the central bank throughout the year: How should central bankers understand inflation after 18 months of repeatedly misjudging it?Lisa D. Cook, one of the Fed’s seven Washington-based governors, used a speech at the American Economic Association’s annual gathering in New Orleans to talk about how officials could do a better job of predicting price increases in the future. Her voice was part of a growing chorus at the conference, where economists spent time soul-searching about why they misjudged inflation and how they could do a better job next time.Fed officials must “continue to advance our understanding of inflation” and “our ability to forecast risks,” Ms. Cook said during her remarks, suggesting that central bankers could update their models to better incorporate unexpected shocks and to better predict moments at which inflation might take off.Her comments underscored the challenge confronting monetary policymakers this year. Officials have rapidly raised rates to try to cool the economy and bring inflation back under control, and they must now determine not only when to stop those moves but also how long they should hold borrowing costs high enough to substantially restrict economic activity.Those judgments will be difficult to make. Although inflation is now slowing, it is hard to know how quickly and how fully it will fade. The Fed wants to avoid retreating too soon, but keeping rates too high for too long would come at a cost — harming the economy and labor market more than is necessary. Adding to the challenge: Policymakers are making those decisions at a moment when they still don’t know what the economy will look like after the pandemic and are using data that is being skewed by its lasting effects.“The pandemic has triggered a lot of changes in terms of how our economy operates,” Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, said during a panel on Friday. “We’re very much in flux, and it’s hard to know for sure how things are going to evolve on a week-to-week or month-to-month basis.”Understanding inflation is key to the thorny policy questions facing the Fed. But determining what causes and what perpetuates price increases is a complicated economic question, as recent experience has demonstrated.Officials have raised rates rapidly to try to slow the economy and bring inflation back under control.Jim Wilson/The New York TimesFed officials and economists more broadly have had a dismal track record of predicting inflation since the onset of the pandemic. In 2021, as prices first began to take off, officials predicted that they would be “transitory.” When they lasted longer than expected, both policymakers and many forecasters on Wall Street and in academia spent 2022 predicting that they would begin to fade faster than they actually did.Given those mistakes, policymakers have begun to suggest that the central bank needs to reassess how it looks at inflation.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    US Added 223,000 Jobs in December, a Slight Easing in Pace

    The Federal Reserve’s moves to cool the economy with higher interest rates seem to be taking gentle hold. Wage growth lost momentum.The U.S. economy produced jobs at a slower but still comfortable rate at the end of 2022, as higher interest rates and changing consumer habits downshifted the labor market without bringing it to a halt.Employers added 223,000 jobs in December on a seasonally adjusted basis, the Labor Department reported on Friday, in line with economists’ expectations although the smallest gain since President Biden took office.The gradual cooling indicates that the economy may be coming back into balance after years of pandemic-era disruptions — so far with limited pain for workers. The unemployment rate ticked down to 3.5 percent, back to its level from early 2020, which matched a low last seen in 1969.“If the U.S. economy is slipping into recession, nobody told the labor market,” said Chris Varvares, co-head of U.S. economics for S&P Global Market Intelligence, noting that the December number is still nearly double the approximately 100,000 jobs needed to keep up with population growth.Monthly change in jobs More

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    U.S. unemployment rate falls in December, but rises for Black women, Hispanic men

    Commuters arrive into the Oculus station and mall in Manhattan on November 17, 2022 in New York City.
    Spencer Platt | Getty Images

    The U.S. unemployment rate declined overall in December, but rose for Black women and Hispanic men, according to the latest nonfarm payrolls report.
    Black women saw unemployment increased to 5.5% last month, up 0.3 percentage points from 5.2% in November, data from the Labor Department showed Friday. Overall, Black employment held steady at 5.7%, while the unemployment rate for Black men actually declined to 5.1% from 5.4% last month.

    Meanwhile, Latino men saw unemployment rise to 4% in December, an increase of 0.4 percentage points from 3.6% the prior month. The overall unemployment rate ticked up to 4.1% from 4.0%. Unemployment among Latino women also ticked up to 3.7% from 3.6%.
    Those figures bucked the trend in the broader economy, which showed unemployment in the U.S. fall to 3.5% from 3.7%. It was 0.2 percentage points below consensus expectations from the Dow Jones.

    “What we’ve really seen over the course of the last nearly three years since the pandemic hit, is that we’ve regained, in terms of aggregate numbers, all of the jobs lost,” said Michelle Holder, a distinguished senior fellow at Washington Center for Equitable Growth.
    “But the sort of industrial mix has changed, and has kind of impacted what we’re seeing with regard to the distribution of joblessness, by gender, race and ethnicity. And it’s really disaffecting Black women and Latinx men,” Holder added.
    A stronger-than-expected December jobs report continued to suggest a robust labor market, even as lighter-than-expected wage growth fanned some investor hopes that inflation may be coming down.

    Nonfarm payrolls rose by 223,000 in December, more than the Dow Jones estimate of 200,000. Meanwhile, average hourly earnings rose 0.3% for the month and gained 4.6% from a year ago. These are compared to estimates of 0.4% and 5% increases.
    “The labor market clearly remains strong,” said Elise Gould, a senior economist at the Economic Policy Institute. “We are now seeing that the household survey and the payroll survey are showing similar signs of strength, and wage growth is looks to be coming down.”

    Still, parts of the economy where Black women are overrepresented showed little improvement, or failed to regain their levels from before the pandemic, according to Holder. Government employment was little changed, adding just 3,000 jobs in December. Notably, state government education employment dropped by 24,000 because of strikes from university employees, according to the Labor Department.
    Both Black women and Latino men are well represented in the leisure and hospitality sector, according to Holder. The sector significantly added jobs in December, but remains below its pre-pandemic levels. Employment in the sector rose by 67,000 last month, but is still 932,000, or 5.5%, below what it was in February 2020.
    “Those are two industries that have not recovered well during the pandemic,” Holder said. “This is what is constraining Black women’s ability to get back to the state that they were with regard to the American workforce before the pandemic.”

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    Nonfarm payrolls rose 223,000 in December, as strong jobs market tops expectations

    Nonfarm payrolls increased by 223,000 for the month, above the Dow Jones estimate for 200,000.
    The unemployment rate fell to 3.5%, a decline of 0.2 percentage point and also better than the estimate.
    Wage growth was below expectations, with average hourly earnings up 4.6% from a year ago, below the 5% estimate.
    Leisure and hospitality led job gains, followed by health care, construction and social assistance.

    Payroll growth decelerated in December but was still better than expected, a sign that the labor market remains strong even as the Federal Reserve tries to slow economic growth.
    Nonfarm payrolls increased by 223,000 for the month, above the Dow Jones estimate for 200,000, while the unemployment rate fell to 3.5%, 0.2 percentage point below the expectation. The job growth marked a small decrease from the 256,000 gain in November, which was revised down 7,000 from the initial estimate.

    Wage growth was less than expected in an indication that inflation pressures could be weakening. Average hourly earnings rose 0.3% for the month and increased 4.6% from a year ago. The respective estimates were for growth of 0.4% and 5%.
    By sector, leisure and hospitality led with 67,000 added jobs, followed by health care (55,000), construction (28,000) and social assistance (20,000).
    Stock market futures rallied following the release as investors look for signs that the jobs picture is cooling and taking inflation lower as well.
    “From the market’s perspective, the main thing they’re responding to is the softer average hourly earnings number,” said Drew Matus, chief market strategist at MetLife Investment Management. “People are turning this into a one-trick pony, and that one trick is whether this is inflationary or not inflationary. The unemployment rate doesn’t matter much if average hourly earnings continue to soften.”
    The relative strength in job growth comes despite repeated efforts by the Fed to slow the economy, the labor market in particular. The central bank raised its benchmark interest rate seven times in 2022 for a total of 4.25 percentage points, with more increases likely on the way.

    Primarily, the Fed is looking to bridge a gap between demand and supply. As of November, there were about 1.7 job openings for every available worker, an imbalance that has held steady despite the Fed’s rate hikes. The strong demand has pushed wages higher, though they mostly haven’t kept up with inflation.
    December’s wage data, though, could provide some encouragement that the Fed’s efforts are impacting demand.
    “There’s some indication that things are moving in the right direction. We’re seeing the impact of the blunt tools of monetary policy take effect,” said Mike Loewengart, head of model portfolio construction for Morgan Stanley’s Global Investment Office. “I don’t think this is going to sway the Fed from a few additional raises going forward, but it no doubt is encouraging to see a moderation in wages.”

    The drop in the unemployment rate came as the labor force participation rate edged higher to 62.3%, still a full percentage point below where it was in February 2020, the month before the Covid-19 pandemic hit.
    A more encompassing measure of unemployment that takes into account discouraged workers and those holding part-time jobs for economic reasons also declined, falling to 6.5%, its lowest-ever reading in a data set that goes back to 1994. The headline unemployment rate is tied for the lowest since 1969.
    The household count of employment, used to calculate the unemployment rate, showed a huge gain for the month, rising 717,000. Economists have been watching the household survey, which has generally been lagging the establishment count.
    The U.S. heads into 2023 with most economists expecting at least a shallow recession, the result of Fed policy tightening aimed at tamping down inflation still running near its highest level since the early 1980s. However, the economy closed 2022 on a strong note, with GDP growth tracking at a 3.8% rate, according to the Atlanta Fed.
    Fed officials at their last meeting noted that they are encouraged by the latest inflation readings but will need to see continued progress before they are convinced that inflation is coming down and they can ease up on rate hikes.
    As things stand, markets are largely expecting the Fed to increase rates another quarter-percentage point at its next meeting, which concludes Feb. 1.

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    Eurozone Inflation Eases on Lower Energy Prices

    The rate of price increases in countries using the euro slowed to 9.2 percent in December, down from 10.1 percent a month earlier.Lower energy prices helped to push inflation in Europe lower last month, the European Commission reported on Friday, but many prices are still rising at a brisk pace and policymakers have given little indication that they plan to halt planned interest rate increases.Consumer prices in the countries that use the euro as their currency rose at an annual rate of 9.2 percent in December, down from the double-digit levels of 10.1 percent in November and 10.6 percent in October.Declines in inflation reported this week in France, Germany and Spain sparked hopes that the relentless rise across the continent may have finally peaked. But several influential voices urged caution, noting that while the so-called headline rate of inflation has eased, core inflation, which strips out volatile food and energy prices, has not shown the same drop. In fact, for December, the eurozone’s core rate of inflation rose to 5.2 percent, from 5 percent the month before.Europe has benefited from a streak of mild weather, which has lowered the demand for energy, particularly the natural gas used to power much of the continent’s heating infrastructure. Several governments have also offered subsidies to blunt the painfully high energy prices that consumers pay. The drop in Germany’s inflation rate, to 9.6 percent in December from 11.3 percent the month before, was partly due to one-time assistance to help households pay their energy bills, according to the government’s statistics office.The data showed that energy prices in the eurozone rose at an annual rate of 25.7 percent in December, down from as high as 41.5 percent in October. “Europe is very lucky at the moment with the weather,” said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics. He added that government energy relief had inserted a “wedge between reality and the data.”“It’s a price control,” he said, and “once you take out that, it’s not as clear that inflation is that benign.”Nearly all eurozone countries marked a decline in their main inflation rate in December, including France (6.7 percent, from 7.1 percent in November), Italy (12.3 percent, from 12.6 percent), Spain (5.6 percent, from 6.7 percent) and the Netherlands (11 percent, from 11.3 percent). The numbers bolstered the argument that the eurozone’s record-setting pace of inflation in the past year will slowly lose steam in 2023. “We are likely past the peak,” said Riccardo Marcelli Fabiani, an economist at Oxford Economics, in a note on Friday. But he added, “we expect inflation to cool only gradually, remaining high in the short term.”The European Central Bank, which has a target of 2 percent annual inflation, has already indicated that it is likely to raise interest rates half a point in February. Christine Lagarde, the bank’s president, said last month that she expected interest rates to rise “significantly further, because inflation remains far too high and is projected to stay above our target for too long.”The December data, showing easing overall inflation but persistent underlying price pressure, will probably stoke “tense negotiations among policymakers in the next few months” noted Mr. Vistesen after the numbers were released. The Federal Reserve, the U.S. central bank, is also expected to continue raising rates.This week, Gita Gopinath, first deputy managing director of the International Monetary Fund, told the Financial Times that the Fed should “stay the course” with its planned increases.“I think it’s clear that we haven’t turned the corner yet on inflation,” she said. At the same time, the fund has also projected that a third of the world economy will face recession this year. More

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    Even a Soft Landing for the Economy May Be Uneven

    Small businesses and lower-income families could feel pinched in the months ahead whether or not a recession is avoided this year.One of the defining economic stories of the past year was the complex debate over whether the U.S. economy was going into a recession or merely descending, with some altitude sickness, from a peak in growth after pandemic lows.This year, those questions and contentions are likely to continue. The Federal Reserve has been steeply increasing borrowing costs for consumers and businesses in a bid to curb spending and slow down inflation, with the effects still making their way through the veins of commercial activity and household budgeting. So most banks and large credit agencies expect a recession in 2023.At the same time, a budding crop of economists and major market investors see a firm chance that the economy will avoid a recession, or scrape by with a brief stall in growth, as cooled consumer spending and the easing of pandemic-era disruptions help inflation gingerly trend toward more tolerable levels — a hopeful outcome widely called a soft landing.“The possibility of getting a soft landing is greater than the market believes,” said Jason Draho, an economist and the head of Americas asset allocation for UBS Global Wealth Management. “Inflation has now come down faster than some recently expected, and the labor market has held up better than expected.”What seems most likely is that even if a soft landing is achieved, it will be smoother for some households and businesses and rockier for others.In late 2020 and early 2021, talk of a “K-shaped recovery” took root, inspired by the early pandemic economy’s split between secure remote workers — whose savings, house prices and portfolios surged — and the millions more navigating hazardous or tenuous in-person jobs or depending on a large-yet-porous unemployment aid system.Jerome H. Powell, the Fed chair, said: “I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Haiyun Jiang/The New York TimesIn 2023, if there’s a soft landing, it could be K-shaped, too. The downside is likely to be felt most by cash-starved small businesses and by workers no longer buoyed by the savings and labor bargaining power they built up during the pandemic.In any case, more turbulence lies ahead as fairly low unemployment, high inflation and shaky growth continue to queasily coexist.Generally healthy corporate balance sheets and consumer credit could be bulwarks against the forces of volatile prices, global instability and the withdrawal of emergency-era federal aid. Chief executives of companies that cater to financially sound middle-class and affluent households remain confident in their outlook. Al Kelly, the chief executive of Visa, the credit card company, said recently that “we are seeing nothing but stability.”The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.But the Fed’s projections indicate that 1.6 million people could lose jobs by late this year — and that the unemployment rate will rise at a magnitude that in recent history has always been accompanied by a recession.“There will be some softening in labor market conditions,” Jerome H. Powell, the Fed chair, said at his most recent news conference, explaining the rationale for the central bank’s recent persistence in raising rates. “And I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Will the bottom 50 percent backslide?Over the past two years, researchers have frequently noted that, on average, lower-wage workers have reaped the greatest pay gains, with bumps in compensation that often outpaced inflation, especially for those who switched jobs. But those gains are relative and were often upticks from low baselines.Consumer spending accounts for roughly 70 percent of economic activity.Jim Wilson/The New York TimesAccording to the Realtime Inequality tracker, created by economists at the University of California, Berkeley, inflation-adjusted disposable income for the bottom 50 percent of working-age adults grew 4.2 percent from January 2019 to September 2022. Among the top 50 percent, income lagged behind inflation. But that comparison leaves out the context that the average income for the bottom 50 percent in 2022 was $25,500 — roughly a $13 hourly pay rate.“As we look ahead, I think it is entirely possible that the households and the people we usually worry about at the bottom of the income distribution are going to run into some kind of combination of job loss and softer wage gains, right as whatever savings they had from the pandemic gets depleted,” said Karen Dynan, a former chief economist at the Treasury Department and a professor at Harvard University. “And it’s going to be tough on them.”Consumer spending accounts for roughly 70 percent of economic activity. The widespread resilience of overall consumption in the past year despite high inflation and sour business sentiment was largely attributed to the savings that households of all kinds accumulated during the pandemic: a $2.3 trillion gumbo of government aid, reduced spending on in-person services, windfalls from mortgage refinancing and cashed-out stock gains.What’s left of those stockpiles is concentrated among wealthier households.After spiking during the pandemic, the overall rate of saving among Americans has quickly plunged amid inflation.The personal saving rate — a monthly measure of the percentage of after-tax income that households save overall — has dropped precipitously in recent months. 

    Note: The personal saving rate is also referred to as “personal saving as a percentage of disposable personal income.” Personal saving is defined as overall income minus spending and taxes paid.Source: U.S. Bureau of Economic AnalysisBy The New York TimesMost major U.S. banks have reported that checking balances are above prepandemic levels across all income groups. Yet the cost of living is higher than it was in 2019 throughout the country. And depleted savings among the bottom third of earners could continue to ebb while rent and everyday prices still rise, albeit more slowly.Most key economic measures are reported in “real” terms, subtracting inflation from changes in individual income (real wage growth) and total output (real gross domestic product, or G.D.P.). If government calculations of inflation continue to abate as quickly as markets expect, inflation-adjusted numbers could become more positive, making the decelerating economy sound healthier.That wonky dynamic could form a deep tension between resilient-looking official data and the sentiment of consumers who may again find themselves with little financial cushion.Does small business risk falling behind?Another potential factor for a K-shaped landing could be the growing pressure on small businesses, which have less wiggle room than bigger companies in managing costs. Small employers are also more likely to be affected by the tightening of credit as lenders become far pickier and pricier than just a year ago.In a December survey of 3,252 small-business owners by Alignable, a Boston-based small business network with seven million members, 38 percent said they had only one month or less of cash reserves, up 12 percentage points from a year earlier. Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Gabby Jones for The New York TimesUnlike many large-scale employers that have locked in cheap long-term funding by selling corporate bonds, small businesses tend to fund their operations and payrolls with a mix of cash on hand, business credit cards and loans from commercial banks. Higher interest rates have made the latter two funding sources far more expensive — spelling trouble for companies that may need a fresh line of credit in the coming months. And incoming cash flows depend on sales remaining strong, a deep uncertainty for most.A Bank of America survey of small-business owners in November found that “more than half of respondents expect a recession in 2023 and plan to reduce spending accordingly.” For a number of entrepreneurs, decisions to maintain profitability may lead to reductions in staff.Some businesses wrestling with labor shortages, increased costs and a tapering off in customers have already decided to close.Susan Dayton, a co-owner of Hamilton Street Cafe in Albany, N.Y., closed her business in the fall once she felt the rising costs of key ingredients and staff turnover were no longer sustainable.She said the labor shortage for small shops like hers could not be solved by simply offering more pay. “What I have found is that offering people more money just means you’re paying more for the same people,” Ms. Dayton said.That tension among profitability, staffing and customer growth will be especially stark for smaller businesses. But it exists in corporate America, too. Some industry analysts say company earnings, which ripped higher for two years, could weaken but not plunge, with input costs leveling off, while businesses manage to keep prices elevated even if sales slow.That could limit the bulk of layoffs to less-valued workers during corporate downsizing and to certain sectors that are sensitive to interest rates, like real estate or tech — creating another potential route for a soft, if unequal, landing.The biggest challenge to overcome is that the income of one person or business is the spending of another. Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases, but not so much that it leads employers to lay off workers — who could pull back further on spending, setting off a vicious circle.Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases.Jim Wilson/The New York TimesWhat are the chances of a soft landing?If the strained U.S. economy is going to unwind rather than unravel, it will need multiple double-edged realities to be favorably resolved.For instance, many retail industry analysts think the holiday season may have been the last hurrah for the pandemic-era burst in purchases of goods. Some consumers may be sated from recent spending, while others become more selective in their purchases, balking at higher prices.That could sharply reduce companies’ “pricing power” and slow inflation associated with goods. Service-oriented businesses may be somewhat affected, too. But the same phenomenon could lead to layoffs, as slowdowns in demand reduce staffing needs.In the coming months, the U.S. economy will be influenced in part by geopolitics in Europe and the coronavirus in China. Volatile shifts in what some researchers call “systemically significant prices,” like those for gas, utilities and food, could materialize. People preparing for a downturn by cutting back on investments or spending could, in turn, create one. And it is not clear how far the Fed will go in raising interest rates.Then again, those risk factors could end up relatively benign.“It’s 50-50, but I have to take a side, right? So I take the side of no recession,” said Mark Zandi, the chief economist at Moody’s Analytics. “I can make the case on either side of this pretty easily, but I think with a little bit of luck and some tough policymaking, we can make our way through.” More

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    Bed Bath & Beyond Warns of Possible Bankruptcy

    The home goods retailer said weak sales and slower foot traffic had forced it to consider options for restructuring.Bed Bath & Beyond, the beleaguered home goods retailer, warned investors on Thursday about rapidly darkening prospects for its future, saying that bankruptcy was a possible option and raising doubts that it could pull off an ambitious turnaround plan it put in place just months ago.The company could make a decision on its next steps — including whether to file for bankruptcy — within weeks, though it is possible the process will take longer, according to two people familiar with the matter who spoke on the condition of anonymity because the process is confidential.Bed Bath & Beyond, known to many shoppers for its distinctive and seemingly inescapable blue and white coupons, has struggled for years to compete with the likes of Amazon, as more shoppers have gone online for everyday home products.The retailer laid out a plan in August to turn itself around that included 150 store closings, cost cuts and layoffs. But it needs cash to execute those plans, and it is not clear that the crucial holiday shopping season brought in enough for it to continue without help from outside investors.“The company has concluded that there is substantial doubt about the company’s ability to continue as a going concern,” Bed Bath & Beyond said in a statement.Sue Gove, who became the retailer’s permanent chief executive in October, has been focused on working through a restructuring plan to improve the company’s ailing supply chain and better stock its stores. But its suppliers remain unconvinced, and it said in a regulatory filing that it was at risk of running out of cash in the coming months.“Before Christmas, there was just a glimmer of hope,” said Neil Saunders, managing director at the retail consulting firm GlobalData. “There was a view that, OK, it’s going to be difficult, but maybe they were going to pull through. Things have just got worse.”He added, “They sent out a very clear signal today that they’ve just run out of time.”Bed Bath & Beyond employed about 32,000 workers as of February and said in October that it had closed about half the stores it planned to as part of its restructuring.The company, which now has roughly 900 stores across the country, reported preliminary earnings Thursday, noting lower sales and slower foot traffic compared with the previous year. The company said its sales were about $1.3 billion for the quarter that ended Nov. 26, about a third lower than the year before, when it had more stores. The period included the run-up to Black Friday.The retailer estimated that it would record a loss of $386 million in its latest quarter, much worse than the $276 million loss in the previous year, and said it would need more time than expected to close its books. As of March, Bed Bath & Beyond had roughly $3 billion in debt.The company’s share price closed nearly 30 percent lower on Thursday, giving it a market capitalization of $150 million. At its peak in 2013, the company’s market value was $17 billion..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.In addition to a possible bankruptcy, Bed Bath & Beyond is exploring a number of options to shore up its balance sheet, including selling pieces or all of the company. To help with those efforts, it is working with advisers at the law firm Kirkland & Ellis, the consulting firm Alix Partners and the investment bank Lazard, the two people familiar with the matter said. Alix Partners and Lazard declined to comment. A spokesman for Kirkland did not respond to a request for comment.“No determinations have been made as of this time,” Julie Strider, a Bed Bath & Beyond spokeswoman, said in a statement regarding the retailer’s next steps.Its ability to obtain cash through those means will determine whether it needs to file for bankruptcy.Bed Bath & Beyond plans to give an update on Tuesday about its efforts to raise cash.A bankruptcy filing would give Bed Bath & Beyond the chance to shed debt and stores and emerge as a leaner, stronger company, as Neiman Marcus was able to after filing for bankruptcy in 2020. But if performance deteriorates, or its suppliers decide they will not offer their support, Bed Bath & Beyond could be forced to close, like Toys “R” Us.“What we’ve seen many times is that it ends up being a stay of execution,” Michael Baker, a retail analyst at D.A. Davidson, said. “Sometimes that works, but oftentimes you see an announcement of scaling back and having fewer stores and then that’s followed by a complete liquidation.”The attempted turnaround announced in August is being led by Ms. Gove, who at that time was interim C.E.O. after the abrupt departure of the previous chief executive, Mark Tritton, in June.But transforming a company under the burden of debt payments and the glare of suppliers that have lost their faith can be tricky. Investing in supply chains and merchandising requires money — and patience.“Transforming an organization of our size and scale requires time,” Ms. Gove said. “We anticipate that each coming quarter will build on our progress.”Ms. Gove said she had spoken to suppliers directly in an attempt to instill confidence. But they have continued to hold back, resulting in lower levels of in-stock items. Supply chain challenges made more severe by China’s tough Covid strategy have made suppliers particularly picky about the retailers they sell their product to.Bed Bath & Beyond has also been trying to win back the support of investors, who have watched as a series of activist investors, including the meme stock favorite Ryan Cohen, have pushed for changes on its board and for the company to consider selling its Buy Buy Baby brand. Mr. Cohen sold his stake in the company in August, pushing its shares down 40 percent.It has had to grapple with other turmoil. In September, its chief financial officer, Gustavo Arnal, died in what was ruled a suicide. Laura Crossen, the retailer’s chief accounting officer, has since been serving as interim financial chief.Despite Bed Bath & Beyond’s bespoke challenges, its debt worries resonate with the broader retail industry. Inflation, rising interest rates and continued supply chain challenges are probably setting up retailers up for a challenging 2023. Consumers were willing to spend this holiday season, with U.S. retail sales up 7.6 percent from the previous period of Nov. 1 to Dec. 24, according to Mastercard Spending Pulse. But how much longer that trend will last is unclear, if the economy tips into a recession, as a number of economists have forecast.And those who may look to the debt market for reprieve will probably find lenders less eager than they have been in the past two years, when interest rates hovered near zero. Lenders that were previously willing to put money into riskier companies like Bed Bath & Beyond may no longer be willing to take that bet. Supply chain issues worldwide mean companies have less product, not only to sell to customers but to offer lenders as collateral.For a company in as much financial trouble as Bed Bath & Beyond, “it’s very difficult to raise new capital, but it’s also difficult to get your current capital providers to want to play ball for a longer period of time,” said James Gellert, the chief executive of the financial analytic firm RapidRatings International.That makes it “really hard for a company like them to claw out of the position that they’re currently in.” More

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    U.S. Moves to Bar Noncompete Agreements in Labor Contracts

    A sweeping proposal by the Federal Trade Commission would block companies from limiting their employees’ ability to work for a rival.In a far-reaching move that could raise wages and increase competition among businesses, the Federal Trade Commission on Thursday unveiled a rule that would block companies from limiting their employees’ ability to work for a rival.The proposed rule would ban provisions of labor contracts known as noncompete agreements, which prevent workers from leaving for a competitor or starting a competing business for months or years after their employment, often within a certain geographic area. The agreements have applied to workers as varied as sandwich makers, hairstylists, doctors and software engineers.Studies show that noncompetes, which appear to directly affect roughly 20 percent to 45 percent of U.S. workers in the private sector, hold down pay because job switching is one of the more reliable ways of securing a raise. Many economists believe they help explain why pay for middle-income workers has stagnated in recent decades.Other studies show that noncompetes protect established companies from start-ups, reducing competition within industries. The arrangements may also harm productivity by making it hard for companies to hire workers who best fit their needs.The F.T.C. proposal is the latest in a series of aggressive and sometimes unorthodox moves to rein in the power of large companies under the agency’s chair, Lina Khan.President Biden hailed the proposal on Thursday, saying that noncompete clauses “are designed simply to lower people’s wages.”“These agreements block millions of retail workers, construction workers and other working folks from taking a better job, getting better pay and benefits, in the same field,” he said at a cabinet meeting.The public will be allowed to submit comments on the proposal for 60 days, at which point the agency will move to make it final. An F.T.C. document said the rule would take effect 180 days after the final version was published, but experts said it could face legal challenges.The agency estimated that the rule could increase wages by nearly $300 billion a year across the economy. Evan Starr, an economist at the University of Maryland who has studied noncompetes, said that was a plausible wage increase after their elimination.Dr. Starr said noncompetes appeared to lower wages both for workers directly covered by them and for other workers, partly by making the hiring process more costly for employers, who must spend time figuring out whom they can hire and whom they can’t.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.He pointed to research showing that wages tended to be higher in states that restrict noncompetes. One study found that wages for newly hired tech workers in Hawaii increased by about 4 percent after the state banned noncompetes for those workers. In Oregon, where new noncompetes became unenforceable for low-wage workers in 2008, the change appeared to raise the wages of hourly workers by 2 percent to 3 percent.Although noncompetes appear to be more common among more highly paid and more educated workers, many companies have used them for low-wage hourly workers and even interns.About half of states significantly constrain the use of noncompetes, and a small number have deemed them largely unenforceable, including California.But even in such states, companies often include noncompetes in employment contracts, and many workers in these states report turning down job offers partly as a result of the provisions, suggesting that these state regulations may have limited effects. Many workers in those states are not necessarily aware that the provisions are unenforceable, experts say.“Research shows that employers’ use of noncompetes to restrict workers’ mobility significantly suppresses workers’ wages — even for those not subject to noncompetes, or subject to noncompetes that are unenforceable under state law,” Elizabeth Wilkins, the director of the F.T.C.’s office of policy planning, said in a statement.The commission’s proposal appears to address this issue by requiring employers to withdraw existing noncompetes and to inform workers that they no longer apply. The proposal would also make it illegal for an employer to enter into a noncompete with a worker or to try to do so, or to suggest that a worker is bound by a noncompete when he or she is not.The proposal covers not just employees but also independent contractors, interns, volunteers and other workers.Lina Khan, the F.T.C. chair, has tried to use the agency’s authority to limit the power and influence of corporate giants.Graeme Sloan, via Associated PressDefenders of noncompetes argue that employees are free to turn down a job if they want to preserve their ability to join another company, or that they can bargain for higher pay in return for accepting the restriction. Proponents also argue that noncompetes make employers more likely to invest in training and to share sensitive information with workers, which they might withhold if they feared that a worker might quickly leave.A ban “ignores the fact that, when appropriately used, noncompete agreements are an important tool in fostering innovation,” Sean Heather, a senior vice president at the U.S. Chamber of Commerce, said in a statement.At least one study has found that greater enforcement of noncompetes leads to an increase in job creation by start-ups, though some of its conclusions are at odds with other research.Dr. Starr said that noncompetes did appear to encourage businesses to invest more in training, but that there was little evidence that most employees entered into them voluntarily or that they were able to bargain over them. One study found that only 10 percent of workers sought to bargain for concessions in return for signing a noncompete. About one-third became aware of the noncompete only after accepting a job offer.Michael R. Strain, an economist at the American Enterprise Institute, said that while there were good reasons to scale back noncompetes for lower-wage workers, the rationale was less clear for better-paid workers with specialized knowledge or skills.“If your job is to make minor tweaks to the formula for Coca-Cola and you’re one of 25 people on earth who knows the formula,” Dr. Strain said, speaking hypothetically, “it makes total sense that Coca-Cola might say, ‘We don’t want you to go work for Pepsi.’”He said that it might be possible to satisfy an employer’s concerns with a less blunt tool, like a nondisclosure agreement, but that the evidence for this was lacking.In a video call with reporters on Wednesday, Ms. Khan said she believed the F.T.C. had clear authority to issue the rule, noting that federal law empowers the agency to prohibit “unfair methods of competition.”But Kristen Limarzi, a partner at Gibson, Dunn & Crutcher who previously served as a senior official in the antitrust division of the Justice Department, said she believed such a rule could be vulnerable to a legal challenge. Opponents would probably argue that the relevant federal statute is too vague to guide the agency in putting forth a rule banning noncompetes, she said, and that the evidence the agency has on their effects is still too limited to support a rule.At the helm of the F.T.C. since last year, Ms. Khan has tried to use the agency’s authority in untested ways to rein in the power and influence of corporate giants. In doing so, she and her allies hope to reverse a turn in recent decades toward more conservative antitrust law — a shift that they say enabled runaway concentration, limited options for consumers and squeezed small businesses.Ms. Khan has brought lawsuits in recent months to block Meta, Facebook’s parent company, from buying a virtual reality start-up and Microsoft from buying the video game publisher Activision Blizzard. Both cases employ less common legal arguments that are likely to face heavy scrutiny from courts. But Ms. Khan has indicated she is willing to lose cases if the agency ends up taking more risks.Ms. Khan and her counterpart at the Justice Department’s antitrust division, Jonathan Kanter, have also said they want to increase the focus of the nation’s antitrust agencies on empowering workers. Last year, the Justice Department successfully blocked Penguin Random House from buying Simon & Schuster using the argument that the deal would lower compensation for authors.One question looming over the discussion of noncompetes is what effect banning them may have on prices during a period of high inflation, given that limiting noncompetes tends to raise wages.But the experience of the past two years, when rates of quitting and job-hopping have been unusually high, suggests that noncompetes may not currently be as big an obstacle to worker mobility as they have traditionally been. Partly as a result, banning them may not have much of a short-term effect on wages.Instead, some economists say, the more pronounced effect of a ban may come in the intermediate and long term, once the job market softens and workers no longer have as much leverage. At that point, noncompetes could begin to weigh more heavily on job switching and wages again.“Doing something like this is a way to help sustain the increase in worker power over the last couple of years,” said Heidi Shierholz, president of the liberal Economic Policy Institute, who was chief economist at the Labor Department during the Obama administration.David McCabe More