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    Is the Debt Limit Constitutional? Biden Aides Are Debating It.

    As the government heads toward a possible default on its debt as soon as next month, officials are entertaining a legal theory that previous administrations ruled out.A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.That theory rests on the 14th Amendment clause stating that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.It is unclear whether President Biden would support such a move, which would have serious ramifications for the economy and almost undoubtedly elicit legal challenges from Republicans. Continuing to issue debt in that situation would avoid an immediate disruption in consumer demand by maintaining government payments, but borrowing costs are likely to soar, at least temporarily.Still, the debate is taking on new urgency as the United States inches closer to default. Treasury Secretary Janet L. Yellen warned on Monday that the government could run out of cash as soon as June 1 if the borrowing cap is not lifted.Mr. Biden is set to meet with Speaker Kevin McCarthy of California at the White House on May 9 to discuss fiscal policy, along with other top congressional leaders from both parties. The president’s invitation was spurred by the accelerated warning of the arrival of the X-date.But it remains unclear what type of compromise may be reached in time to avoid a default. House Republicans have refused to raise or suspend the debt ceiling unless Mr. Biden accepts spending cuts, fossil fuel supports and a repeal of Democratic climate policies, contained in a bill that narrowly cleared the chamber last week.Mr. Biden has said Congress must raise the limit without conditions, though he has also said he is open to separate discussions about the nation’s fiscal path.A White House spokesman declined to comment on Tuesday.A group of legal scholars and some liberal activists have pushed the constitutional challenge to the borrowing limit for more than a decade. No previous administration has taken it up. Lawyers at the White House and the Justice and Treasury Departments have never issued formal opinions on the question. And legal scholars disagree about the constitutionality of such a move.“The Constitution’s text bars the federal government from defaulting on the debt — even a little, even for a short while,” Garrett Epps, a constitutional scholar at the University of Oregon’s law school, wrote in November. “There’s a case to be made that if Congress decides to default on the debt, the president has the power and the obligation to pay it without congressional permission, even if that requires borrowing more money to do so.”Other legal scholars say the limit is constitutional. “The statute is a necessary component of Congress’s power to borrow and has proved capable of serving as a useful catalyst for budgetary reform aimed at debt reduction,” Anita S. Krishnakumar, a Georgetown University law professor, wrote in a 2005 law review article.The president has repeatedly said it is the job of Congress to raise the limit to avoid an economically catastrophic default.Top officials, including Ms. Yellen and the White House press secretary, Karine Jean-Pierre, have sidestepped questions about whether they believe the Constitution would compel the government to continue borrowing to pay its bills after the X-date.ABC News asked Ms. Yellen amid a debt-ceiling standoff in 2021 if she would invoke the 14th Amendment to resolve it.“It’s Congress’s responsibility to show that they have the determination to pay the bills that the government amasses,” she said. “We shouldn’t be in a position where we need to consider whether or not the 14th Amendment applies. That’s a disastrous situation that the country shouldn’t be in.”The government reached the borrowing limit on Jan. 19, but Treasury officials deployed what are known as extraordinary measures to continue paying bills on time. The measures, which are essentially accounting maneuvers, are set to run out sometime in the next few months, possibly as soon as June 1. The government would default on its debt if Treasury stopped paying all bills. Economists have warned that could lead to financial crisis and recession.Progressive groups have encouraged Mr. Biden to take actions meant to circumvent Congress on the debt limit and continue uninterrupted spending, like minting a $1 trillion coin to deposit with the Federal Reserve. Internally, administration officials have rejected most of them. Publicly, Biden aides have said the only way to avert a crisis is for Congress to act.“I know you probably get tired of me saying this from here over and over again, but it is true,” Ms. Jean-Pierre said on Thursday, after referring a question about the 14th Amendment to the Treasury Department. “It is their constitutional duty to get this done.”But inside the administration, it remains an open question what Treasury would do if Congress does not raise the limit in time — because, many officials say, the law is unclear and so is the Constitution, which gives Congress the power to tax and spend.Officials who support invoking the 14th Amendment and continuing to issue new debt contend the government would be exposed to lawsuits either way. If it fails to continue paying its bills after the X-date, it could be sued by anyone who is not paid on time in the event of a default.Other officials have argued that the statutory borrowing limit is binding, and that an attempt to ignore it would draw an immediate legal challenge that would most likely rise quickly to the Supreme Court.There is a broad consensus on both sides of the debate that the move risks roiling financial markets. It is likely to cause a surge in short-term borrowing costs because investors would demand a premium to buy debt that could be invalidated by a court.The Moody’s Analytics economist Mark Zandi modeled such a situation this year and found it would create short-term economic damage but long-term gains if courts upheld the constitutional interpretation — by removing the threat of future brinkmanship over the limit.“The extraordinary uncertainty created by the constitutional crisis leads to a sell-off in financial markets until the Supreme Court rules,” Mr. Zandi wrote in March. Economic growth and job creation would be dampened briefly, he added, “but the economy avoids a recession and quickly rebounds.”Obama administration officials considered — and quickly discarded — the constitutional theory when Republicans refused to raise the limit in 2011 unless the president agreed to spending cuts. Treasury lawyers never issued a formal opinion on the question, and they have not yet this year, department officials said this week.But in a letter to the editor of The New York Times in 2011, George W. Madison, who was Treasury’s general counsel at the time, suggested that department officials did not subscribe to the theory. He was directly challenging an assertion by the constitutional law professor Laurence H. Tribe, who wrote in an opinion essay in The Times that Treasury Secretary Timothy F. Geithner had pushed to embrace the 14th Amendment interpretation, which Mr. Tribe opposed.“Like every previous secretary of the Treasury who has confronted the question,” Mr. Madison wrote, “Secretary Geithner has always viewed the debt limit as a binding legal constraint that can only be raised by Congress.” More

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    After Pandemic Rebound, U.S. Manufacturing Droops

    The pandemic had a bright silver lining for Elkhart, Ind.The city, renowned as the capital of recreational vehicle production, had a surge in demand as cooped-up families took to the highways and avoided hotels. The cluster of manufacturers enjoyed record profits, and workers benefited as well: The metropolitan area’s unemployment rate sank to 1 percent in late 2021, and average weekly wages jumped 35 percent from their level in early 2020.That frenzy, however, has turned to a chill. Dealers, who stocked up on as many trailers and vans as they could, have been discounting them to clear their lots — and new orders have dried up. The area has lost nearly 7,000 manufacturing jobs over the past year, and unemployment is now above the national average. Thor Industries, which owns a wide portfolio of RV brands, saw its sales tumble 39.4 percent from the quarter a year ago.“In 2022, manufacturers overproduced, and you’re seeing some of the impact of that from the staffing standpoint,” said Chris Stager, chief executive of the Economic Development Corporation of Elkhart County. He foresees new projects propelled by recent federal energy and infrastructure legislation, but rising interest rates are taking a toll in the meantime.“It’s not bad, but it’s not what it was,” Mr. Stager said.That’s manufacturing in America in 2023.Factory construction is proceeding more rapidly than at any time in recent memory, heralding what may be a resurgence in domestic production powered by a move away from long, fragile supply chains and by the infusion of billions of dollars in public investment.At the same time, after an extraordinary boom fed by cooped-up consumers, manufacturing is suffering something of a hangover as retailers burn through bloated inventories. Inflation-fighting efforts by the Federal Reserve, which is expected to announce another interest-rate increase on Wednesday, have squelched big-ticket purchases. New orders have been declining since last summer, and a widely followed index of purchasing activity has been downbeat for six months.Working on sponge rubber automotive HVAC drain seals at Colonial.Whitten Sabbatini for The New York TimesManufacturing employment bounced back quickly after the pandemic — which is unusual for recessions — but has contracted for two months. While layoffs in the industry remain low, job openings and hires have sunk from recent highs.“It’s not one of these really concerning plunges, where we’re shedding a bunch of manufacturing jobs, but it seems kind of stalled,” said Scott Paul, president of the Alliance for American Manufacturing. “And I think the longer that lasts, the harder it’s going to be to rev things up.”A bigger question for the American economy is whether this heralds a broader downturn, since cooling demand for goods usually signifies that consumers are feeling financially strained. “Manufacturing is always at the forefront of the recession,” notes Barbara Denham, a senior economist at Oxford Economics.To understand the current slump, it’s important to dissect the manufacturing moment from which America is emerging.For example: Those new manufacturing jobs weren’t all for people making steel coils and oak cabinets. The production of consumable items — including food, beverages, and pharmaceuticals — represented an outsize portion of the job growth from 2020 through 2022. But it tends to pay less well, requires less training and has fewer unions than heavy manufacturing in airplanes and automobiles. And it can disappear more quickly as demand returns to normal.Factory employment bounced back, but is now leveling off Number of manufacturing jobs as a percentage of the total in February 2020

    Source: Bureau of Labor StatisticsBy The New York TimesThe pandemic-era manufacturing boom also didn’t happen equally in all places. States like Nevada, Arizona, Florida and Texas surged far above their prepandemic baselines, while longtime manufacturing centers — Michigan, Illinois, New York and Ohio — have not fully bounced back. That imbalance reflects recent migration trends, as people have moved out of urban areas for more space, more sunshine and a lower cost of living.The factory construction underway is poised to further reshape the geography of American manufacturing, with the largest increases in investment happening in the Mountain West.LaDon Byars, who runs Colonial Diversified Polymer Products, said reinforcing domestic supply chains would be worth the effort.Whitten Sabbatini for The New York TimesAll that new building is propelled by several factors. Former President Donald J. Trump’s trade war raised the cost of importing from China and other countries, while the pandemic snarled ports and idled suppliers, hurting manufacturers who depended on far-flung sourcing networks.In recent months, the war in Ukraine — for which the United States has furnished more than $36 billion in weaponry — has generated more long-term contracts for defense manufacturers, mostly restricted to domestic production.Steve Macias, a co-owner of a small machine shop in Phoenix, said orders from the semiconductor industry have slowed as the demand for home electronics crested. But in the past few weeks, he has been busy serving military clients — because the Defense Department has been getting planes and ships back into fighting shape, as well as refilling empty stores of munitions.“There was a lot of deferred maintenance,” Mr. Macias said. “So you’ve got two things going on — this kind of catch-up, and this war that broke out that nobody was really anticipating.”Finally, over the last two years the passage of three major bills — the Infrastructure Investment and Jobs Act, the Bipartisan Infrastructure Law and the CHIPS and Science Act — made available hundreds of billions of dollars for the production of items like semiconductors, solar panels, wind turbines and bridge spans. Private funders have rushed to capitalize on the opportunity, even if much of it is still in the planning stages.“A lot of manufacturers are reacting to what they see as a lot of long-term structural factors in their industry,” said Adam Ozimek, chief economist at the Economic Innovation Group, an entrepreneurship-focused think tank. “They’re seeing more demand for domestic production long term. That’s a bet on the future. It’s going to take a while to really translate to employment.”Even when it does, however, that investment might not yield as many jobs as factories with similar levels of output did in the past.Freshly built production lines tend to be more automated and more efficient than those designed in the 1950s and ’60s — which they need to be, to compete with the lower cost of labor overseas. And some companies are adding robots to their plants, given the difficulty of attracting and retaining enough skilled workers to replace those retiring. The median age of workers in manufacturing is two years older than the national median.“These facilities are desperate to try to get the work force,” said Mark Farris, chief executive of the Greenville Area Development Corporation in Greenville, S.C. “And instead, I think they’re convincing the officers of the company, ‘Let’s think about robotics, let’s think about 3-D printing, the technology investment that would take the place of those workers we cannot find.’”Employers’ ferocious need for factory workers is easingManufacturing job openings surged in 2021, but have receded.

    Bureau of Labor StatisticsBy The New York TimesFor businesses that depend on industries related to fossil fuels, the ramp-up in federal investment may just be enough to keep them afloat even as demand shifts to clean energy.Automobile manufacturers are important clients, and Ms. Byars is encouraged as federally funded projects are required to find their parts and raw materials in the United States.Whitten Sabbatini for The New York TimesLaDon Byars runs Colonial Diversified Polymer Products, which employs about 75 people in western Tennessee. The company has survived many cycles of outsourcing and offshoring, making molded rubber products like gaskets and mats for a variety of customers. Automobile manufacturers are important clients, and Ms. Byars knows that demand for parts that go into cars with internal combustion engines will start to wane.She has been encouraged, however, by the number of solicitations she has received as a result of rules that require federally funded projects to find their parts and raw materials in the United States, rather than overseas. It may be difficult and impede progress at first, but she thinks reinforcing domestic supply chains will work out better in the end, just like building new roads.“It takes a while before they get that intersection through — it’s a mess and traffic is backed up,” Ms. Byars said. “And then when they finally open it up, everything works so much smoother and better, and you don’t have the long delays. We might not even see the impact of not being dependent on other countries, and not having the supply chain disruptions, but I do think that’s what the long-term best interest for the American people is.” More

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    Why the 14th Amendment Is Being Cited in the Debt Ceiling Debate

    Some Biden administration officials believe a constitutional clause prevents the United States from failing to make payments even if it means breaching the debt limit.WASHINGTON — Faced with an impasse over raising or suspending the nation’s debt limit, some White House officials are looking to a clause in the 14th Amendment to ensure the United States does not default on its debt.The amendment, adopted after the Civil War, conferred citizenship to former slaves — and contains a more obscure section on public debt. Here is a brief history of the 14th Amendment and an explanation of its provisions, including why it’s now being talked about in the White House.What does the 14th Amendment say?Considered by historians to be a milestone for civil rights, the 14th Amendment to the Constitution extended citizenship to former slaves. It also guaranteed that the right to due process and equal protection under the law applied to both federal and state governments.The expansive amendment is the most cited amendment in lawsuits, according to the Library of Congress.Section 1 of the amendment established that “all persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside” and that “no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.”Another provision, known as the Disqualification Clause, was more obscure until the events of Jan. 6, 2021. Some have argued that the clause, outlined in Section 3 of the 14th Amendment, bars anyone who has “engaged in insurrection or rebellion” from holding public office.Now, the standoff over the national debt has renewed debate over Section 4 of the amendment, known as the public debt clause.What spurred its adoption?After the Civil War and the assassination of President Abraham Lincoln, lawmakers sought to set out the terms of the Confederacy’s surrender and the rebellious states’ re-entry into the Union.The 13th Amendment’s formal abolition of slavery also meant that the size of delegations from former Confederate states would increase, even as the states passed discriminatory “Black codes” and prevented former slaves from voting. Reconstructionist Republicans in Congress sought to address these issues by passing the Civil Rights Act of 1866, which guaranteed citizenship and equal protection for former slaves.Although Republicans had enough votes to override a veto by President Andrew Johnson, some remained concerned that the protections in the law were not strong or permanent enough, and began seeking a constitutional amendment.A joint committee on Reconstruction then drafted what would become the 14th Amendment, which was passed by Congress in 1866 and ratified two years later.Why does it contain a public debt clause?The 14th Amendment includes a provision that protected public debt held by the federal government, and prohibited payment of debt held by the Confederate states.“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned,” the clause reads.That section, historians say, was added because of fears that if former Confederate states were to regain political power in Congress, lawmakers might repudiate federal debts and guarantee Confederate debt. Reconstructionist Republicans also thought that the clause would discourage loans to future insurrectionists.“Southerners were used to having their way in Congress — they had dominated the institution from 1787 until secession in 1861 — and many believed that when their representatives arrived in House and Senate, they would be able to tear up the nation’s i.o.u.s. Section 4 was the response,” Garrett Epps, a legal scholar, has previously written.Why is it being discussed today?Some legal scholars contend that the public debt clause overrides the statutory borrowing limit, which is set by Congress and can be lifted or suspended only with lawmaker approval.The United States hit that cap on Jan. 19 and on Monday, Treasury Secretary Janet L. Yellen warned that the federal government could run out of cash to pay its bills by June 1 unless it was able to borrow more money.The Biden administration is discussing whether the 14th Amendment compels the government to continue issuing new debt to pay bondholders, along with Social Security recipients, military personnel and others, even if Congress fails to lift the limit before the so-called X-date. More

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    Everything You Need to Know About the Debt Ceiling

    Congress controls how much money the United States can borrow. Here’s a look at why that is and what it means.Washington is heading for another big fight over whether to raise or suspend the nation’s debt limit, which caps the amount of money the federal government can borrow to pay its bills.This year is shaping up to be the messiest fight in at least a decade. Republicans are demanding that an increase in the borrowing limit be accompanied by spending cuts and other cost savings. President Biden has said he will oppose any attempt to tie spending cuts to raising the debt ceiling, increasing the likelihood of a protracted standoff.The president is set to meet with Republican and Democratic leaders at the White House on May 9 to discuss a path forward. But it is still unclear how quickly lawmakers will act to raise the nation’s borrowing cap.Here is what you need to know about the debt limit and what happens if no deal can be reached:What is the debt limit?The debt limit is a cap on the total amount of money that the United States is authorized to borrow to fund the government and meet its financial obligations.Because the federal government runs budget deficits — meaning it spends more than it brings in through taxes and other revenue — it must borrow huge sums of money to pay its bills. Those obligations include funding for social safety net programs, interest on the national debt and salaries for members of the armed forces.Approaching the debt ceiling often elicits calls by lawmakers to cut back on government spending. But lifting the debt limit does not actually authorize any new spending — in fact, it simply allows the United States to spend money on programs that have already been authorized by Congress.When was the debt limit reached?The United States officially hit its debt limit on Jan. 19, prompting the Treasury Department to use accounting maneuvers known as extraordinary measures to continue paying the government’s obligations and avoid a default. Those measures temporarily curb certain government investments so that the bills can continue to be paid.The ability to use those measures to delay a default could be exhausted by June. Treasury Secretary Janet L. Yellen on Monday warned lawmakers that the United States could run out of cash by June 1 if the borrowing cap isn’t raised or suspended.How much debt does the United States have?The national debt crossed $31 trillion for the first time last year. The borrowing cap is set at $31.381 trillion.Why does the United States have a debt limit?According to the Constitution, Congress must authorize government borrowing. In the early 20th century, the debt limit was instituted so that the Treasury would not need to ask Congress for permission each time it had to issue debt to pay bills.During World War I, Congress passed the Second Liberty Bond Act of 1917 to give the Treasury more flexibility to issue debt and manage federal finances. The debt limit started to take its current shape in 1939, when Congress consolidated different limits that had been set on different types of bonds into a single borrowing cap. At the time, the limit was set to $45 billion.While the debt limit was created to make government run more smoothly, many policymakers believe that it has become more trouble than it’s worth. In 2021, Ms. Yellen said she supported abolishing the debt limit.What happens if the debt limit is not raised or suspended?If the government exhausts its extraordinary measures and runs out of cash, it would be unable to issue new debt. That means it would not have enough money to pay its bills, including interest and other payments it owes to bondholders, military salaries and benefits to retirees.No one knows exactly what would happen if the United States gets to that point, but the government could default on its debt if it is unable to make required payments to its bondholders. Economists and Wall Street analysts warn that such a scenario would be economically devastating, and could plunge the entire world into a financial crisis.Will military salaries, Social Security benefits and bondholders be paid?Various ideas have been raised to ensure that critical payments are not missed — particularly payments to the investors who hold U.S. debt. But none of these ideas have ever been tried, and it remains unclear whether the government could actually continue paying any of its bills if it can’t borrow more money.One idea that has been proposed is that the Treasury Department would prioritize certain payments to avoid defaulting on U.S. debt. In that case, the Treasury would first pay the bondholders who own U.S. Treasury debt, even if it delayed other financial obligations like government salaries or retirement benefits.So far, the Treasury seems to have ruled that out as an option. Ms. Yellen has said that such an approach would not avoid a debt “default” in the eyes of markets.“Treasury systems have all been built to pay all of our bills when they’re due and on time, and not to prioritize one form of spending over another,” Ms. Yellen told reporters earlier this year. More

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    Job openings fell more than expected in March to lowest level in nearly two years

    Job vacancies totaled 9.59 million for the month, down from 9.97 million in February and below the FactSet estimate for 9.64 million.
    Layoffs and discharges jumped by 248,000, taking the rate as a share of the workforce up to 1.2% from 1%.
    Orders for manufactured goods increased 0.9% in March, less than the 1.3% estimate.

    An employee hiring sign with a QR code is seen in a window of a business in Arlington, Virginia, April 7, 2023.
    Elizabeth Frantz | Reuters

    Employment openings pulled back further in March, hitting a nearly two-year low in a sign that the ultra-tight U.S. job market is loosening and possibly putting less pressure on inflation, the Labor Department reported Tuesday.
    The department’s Job Openings and Labor Turnover Survey showed that job vacancies totaled 9.59 million for the month, down from 9.97 million in February and below the FactSet estimate for 9.64 million.

    At the same time, layoffs and discharges jumped by 248,000 to just over 1.8 million, taking the rate as a share of the workforce up to 1.2% from 1%.
    Though the data set runs a month behind the nonfarm payrolls number, the Federal Reserve watches the JOLTS report closely for signs of labor slack. A lower number is positive for inflation as it indicates less pressure on wages and could ease pressure on the Fed to continue raising interest rates.
    However, stocks fell following the release, with the Dow Jones Industrial Average down more than 500 points on the session as investors remained concerned over the state of the economy and news that the U.S. may hit its borrowing limit sooner than expected.
    A separate report from the Commerce Department at the same time showed orders for manufactured goods increased 0.9% in March, less than the 1.3% estimate.
    The level of job vacancies was the lowest total since April 2021 and cut the ratio of open jobs to available workers to 1.6 to 1 after being around 2 to 1 for most of the past two years or so.

    “The Fed should gain some comfort from the gradual decline in this ratio, but also is likely to see this data as reaffirming the need for another rate hike tomorrow,” said Ronald Temple, chief market strategist at Lazard.
    Quits, which are considered a measure of worker confidence in the ability to leave one’s job and find another, declined by 129,000 to 3.85 million, the lowest level since May 2021 amid what had been dubbed the Great Resignation.
    Hires for the month were unchanged at 6.15 million, while separations rose slightly.
    The release comes as the central bank began its two-day policy meeting Tuesday. Markets are assigning a nearly 100% probability that the central bank on Wednesday will announce a 0.25 percentage point rate increase. More

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    Job Openings Slipped in March as Labor Market Continued Cooling

    The NewsJob openings in March fell to 9.6 million, the Labor Department reported on Tuesday, the lowest level in two years and a further indication that the slowdown in the labor market is becoming more entrenched. It was the third straight month that job openings have declined, a notable development after last year, when job openings bounced around month to month.“The labor market has been, through Q1, a resilient anchor for the economy,” said Aaron Terrazas, chief economist at the career site Glassdoor. “But we’re getting more and more signals that those foundations are really starting to tremble.”Transportation, warehousing and utilities, professional and businesses services and construction were among the sectors that posted large drops in open positions, as higher interest rates and fears of a pullback in consumer spending continued to discourage employers from hiring.Other readings in Tuesday’s report underscored the labor market’s restraint. The total number of open jobs per available unemployed worker, a ratio that the Federal Reserve has been watching as it tries to tame rapid inflation, decreased slightly to 1.6, the lowest level since October 2021. Layoffs, which have remained historically low outside of some big-name companies in the tech sector, rose to 1.8 million in March. The number of workers voluntarily leaving their jobs — a sign that workers are finding opportunities to switch to better-paid positions, or are confident they can do so — was relatively unchanged but has been inching down.Policymakers are interested in the number of open jobs per available unemployed worker, which has remained stubbornly high for months.Hiroko Masuike/The New York TimesWhy It Matters: The last major data release before the Fed’s rate decision.The report released on Tuesday, called the Job Openings and Labor Turnover Survey, or JOLTS, is one of many that the Federal Reserve watches closely each month to gauge its efforts to slow the economy and ease inflation without spurring widespread layoffs.The Fed has been raising interest rates for more than a year as it tries to bring down rapid inflation to its target of 2 percent. It will announce its next decision on Wednesday; officials are widely expected to raise rates by a quarter percentage point, to just above 5 percent. The JOLTS report is the last major piece of data that Fed policymakers will see before their decision.In particular, they are interested in the number of open jobs per available unemployed worker, which has remained stubbornly high for months. That mismatch has helped to drive up pay and contributed to inflation. More recently, however, the ratio has been declining, a welcome sign for the Fed that underscores the labor market’s gradual slowdown.Officials also track other details in the report, including the number of layoffs and workers who quit their jobs. The Background: Labor market resilience complicates the Fed’s plan.Month after month, the labor market has remained robust, defying expectations and complicating the Fed’s efforts to cool the economy. The latest evidence came on Friday, when government data showed that wages and salaries for private-sector workers were up 5.1 percent in March from a year earlier, the same growth rate as in December.Still, higher interest rates are taking a toll on the job market, albeit gradually. Employers added 236,000 jobs in March, a healthy number but down from an average of 334,000 jobs added over the prior six months. The year-over-year growth in average hourly earnings also fell to its slowest pace since July 2021.What’s Next: A big week for economic news.The report on Tuesday kicked off a big few days for economic news.In addition to the Fed decision on Wednesday, there will be the Labor Department’s monthly snapshot of the employment situation on Friday. The report, based on April data, will provide a clearer and more up-to-date picture of the labor market, including the change in the number of jobs — a figure that has been positive for 27 straight months — and the unemployment rate. More

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    Fed Will Decide Next Rate Move After Bank Jitters

    The Federal Reserve will release a policy decision on Wednesday on the heels of another bank collapse.WASHINGTON — Federal Reserve officials are widely expected to lift borrowing costs by a quarter of a percentage point on Wednesday, the 10th consecutive rate increase since March 2022. But investors and economists think that this could be the central bank’s last move before it pauses.Fed officials face a complicated backdrop going into this week’s meeting: Risks to the financial system loom large, but inflation also remains stubborn.The banking system has been in turmoil since the collapse of Silicon Valley Bank on March 10. Government officials spent this past weekend racing to find a buyer for First Republic, which had been struggling for weeks and was sold to JPMorgan Chase in a deal announced early Monday morning.Some of the banking sector tumult stems from the Fed’s rapid interest rate increases over the past year. Central bankers are expected to lift rates to just above 5 percent this week, up from near-zero as recently as March 2022. After that quick series of adjustments, many lenders are facing losses on older securities and loans, which pay relatively low interest rates compared with newer securities issued in a higher-rate world.Despite the Fed’s moves — which were meant to rein in quick inflation by slowing the economy — the job market has maintained some momentum and price increases have shown concerning staying power. Companies continue to hire at a solid clip, and data released last week showed that wages continued to climb quickly at the start of the year. While inflation has been slowing, it is increasingly driven by service price increases that have shown little sign of cooling off — which could make it difficult to wrestle price increases the whole way back to the Fed’s slow and steady goal.Policymakers will give the public a sense of how they are thinking about the fraught economic moment on Wednesday in their post-meeting statement at 2 p.m. Because the Fed will not release fresh economic projections at this meeting — those come out just once a quarter — investors will look to a news conference with the Fed chair, Jerome H. Powell, at 2:30 p.m. for clues about what comes next.The Fed could hint at a pauseWhen Fed policymakers released their economic estimates in March, they expected to raise interest rates to a range of 5 to 5.25 percent in 2023.If officials adjust policy as expected this week, they will have lifted rates to that level. The question now is whether they deem that sufficient, or whether policymakers think that the economy and inflation are resilient enough that they will need to adjust borrowing costs more to cool things down and lower inflation fully.Mr. Powell could offer some signal during his news conference, or he could opt to leave the Fed’s options open — which is what some economists expect.“They don’t need to rule anything out,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “The worst scenario for them would be to signal that they’re done, then have the data force them to do a U-turn.”Investors expect Fed officials to stop after this week, hold rates steady for a few months and then begin to lower them — perhaps substantially, to a range of 4.5 to 4.75 percent by the end of the year.Fed policymakers, however, have been adamant that they do not expect to lower rates imminently. And some have hinted that more increases might be warranted if inflation and economic strength show staying power.“Monetary policy needs to be tightened further,” Christopher Waller, a Fed governor and one of the central bank’s more inflation-focused members, said in an April 14 speech. “How much further will depend on incoming data on inflation, the real economy and the extent of tightening credit conditions.”Bank turmoil will influence policyFed officials have been clear that the upheaval in the banking system could slow the economy — but policymakers do not know by how much.Banking trouble is different from other types of business distress, because banks are like the yeast in the sourdough starter of the economy: If they aren’t working, nothing else grows. They lend out money to would-be home buyers, people who want to buy new cars or garage additions, and businesses that want to expand and hire.It is pretty clear that banks are going to pull back their lending at least somewhat in response to the recent turmoil. Anecdotal signs are already surfacing around the country. The question is how acute that shift will be.“If the response to recent banking problems leads to financial tightening, monetary policy has to do less,” Austan Goolsbee, the president of the Federal Reserve Bank of Chicago, said in an April 11 speech. “It’s not clear by how much less.”He noted that private-sector estimates suggested that the hit to growth from the banking turmoil could be equivalent to one to three quarter-point rate increases. That estimate came well before First Republic’s demise, but after its troubles started.The economy’s resilience will be criticalOne big question for the Fed — and which will matter for everyone — is whether the U.S. economy will squeak through this episode without plunging into a painful recession.Fed staff members said at the central bank’s March meeting that they expected the economy to experience a “mild recession” in the wake of the recent banking turmoil. And Fed officials — including Mr. Powell — have suggested that a recession is possible as officials try to slow the economy enough to bring inflation under control.But if a recession hits, it is not obvious how painful it will be. Some economists warn that downturns usually build on themselves, as people respond to a little bit of economic weakness by pulling back on spending a lot: It may be hard to push the unemployment rate up just a little bit without pushing it significantly.Others point out that the post-pandemic economy is a weird one, characterized by unusually strong corporate profits and lots of job openings. Because there may be room to squeeze margins and cut unfilled positions, the economy may be able to cool down more gently than in the past — a so-called “soft landing.”Mr. Powell will get a chance to weigh in on which outcome he thinks is most likely on Wednesday. More

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    Debt Ceiling: U.S. Could Run Out of Cash by June 1, Yellen Warns

    President Biden said he would meet with lawmakers on May 9 to discuss ways to avoid a default.WASHINGTON — Treasury Secretary Janet L. Yellen said on Monday that the United States could run out of money to pay its bills by June 1 if Congress does not raise or suspend the debt limit, putting pressure on President Biden and lawmakers to reach a swift agreement to avoid defaulting on the nation’s debt.The more precise warning over when the United States could hit the so-called X-date dramatically reduces the projected amount of time lawmakers have to reach a deal before the government runs out of money to pay all of its bills on time.The new timeline could accelerate negotiations between the House, Senate and Mr. Biden over government spending — a high-stakes standoff between the president and the House Republicans who have refused to raise the limit without deep spending cuts attached.In response to Ms. Yellen’s new timeline, Mr. Biden on Monday called the top four leaders in Congress to ask for a meeting on May 9 to discuss fiscal issues. The president reached out to Speaker Kevin McCarthy and Representative Hakeem Jeffries of New York, the minority leader, along with Senator Chuck Schumer of New York, the majority leader, and Senator Mitch McConnell of Kentucky, the minority leader.Economists have warned that failure to raise the debt limit, which caps the total amount of money the United States can borrow, threatens to rock financial markets and throw the global economy into a financial crisis.Because the United States runs a budget deficit — meaning it spends more money than it takes in — it must borrow huge sums of money to pay its bills. In addition to paying Social Security benefits, along with salaries for the military and government workers, the United States is also required to make interest and other payments to the bondholders who own its debt.The Treasury Department had previously projected that it could run out of cash sometime in early June, but the new estimate raises the alarming prospect that the United States could be unable to make some payments, including to bondholders, in a matter of weeks.“Given the current projections, it is imperative that Congress act as soon as possible to increase or suspend the debt limit in a way that provides longer-term certainty that the government will continue to make its payments,” Ms. Yellen said in a letter to Congress.The Congressional Budget Office also warned on Monday that time was running out more quickly than previously thought. The nonpartisan budget office said tax receipts from income payments that were processed in April were smaller than it had anticipated and that future tax payments were unlikely to have much impact.“That, in combination with less-than-expected receipts through April, means that the Treasury’s extraordinary measures will be exhausted sooner than we previously projected,” Phillip Swagel, the C.B.O. director, wrote in an analysis posted on the agency’s website.White House officials had not expected the date of possible default to arrive so soon, and the accelerated timetable could scramble the president’s approach to the potential crisis.Mr. Biden has continued to insist he will not negotiate directly over the limit, saying Congress must raise the cap without conditions. The newly compressed calendar leaves little time for the president and congressional leaders to find agreement on raising the limit. Mr. McCarthy is traveling in the Middle East this week. Later this month, Mr. Biden is scheduled to attend the Group of 7 nations leaders’ summit in Japan, then travel on to Australia for a summit with the leaders of Japan, India and Australia.House Republicans passed legislation in April that would raise the debt limit in exchange for deep spending cuts and roll back recent climate legislation that Democrats passed along party lines. Mr. Biden has blasted that bill, saying it would hurt working families while benefiting the oil and gas industry, and he has accused Republicans of putting America’s economy on the line.On Monday, the president called on Republicans “to make sure the threat by the Speaker of the House to default on the national debt is off the table.”“For over 200 years, America has never, ever, ever failed to pay its debt. To put in the capital — in colloquial terms, America is not a deadbeat nation. We have never, ever failed to meet the debt,” Mr. Biden said.Republican Senators reacted to the news on Monday by emphasizing the onus was now on Mr. Biden to negotiate to avoid economic calamity.“It is very scary,” Senator Joni Ernst of Iowa and a member of Republican leadership said of the looming crisis. “President Biden needs to step it up and get to the table. Kevin McCarthy and the folks in the house, they did their part.”Some expressed optimism that the approaching deadline would force action.“Washington’s at its best when it has a deadline to respond to,” Senator Thom Tillis, Republican of North Carolina, said.Mr. Schumer and Mr. Jeffries urged Republicans to lift the limit immediately with no strings attached. “We do not have the luxury of waiting until June 1 to come together, pass a clean bill to avoid a default and prevent catastrophic consequences for our economy and millions of American families,” the lawmakers wrote in a joint statement on Monday. While there is bipartisan agreement that the nation needs to find a way to reduce the gap between when it spends and what it collects, even the most ardent supporters of fiscal reform say the debt limit must be raised.“We need to raise the debt limit as soon as possible, without drama and without serious risk of default,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. “To threaten default or drag one’s feet is the height of irresponsibility. Lawmakers need to commence serious discussions immediately.”The possibility of a default by June 1 could compel lawmakers to agree to a short-term increase or suspension of the debt limit to provide more time for negotiations. But even that temporary salve is far from assured given competing factions within the Republican Party.The United States technically hit its $31.4 trillion debt limit in January, forcing the Treasury Department to employ accounting maneuvers known as extraordinary measures to allow the government to keep paying its bills, including payments to bondholders who own government debt. Ms. Yellen said at the time that her powers to delay a default — in which the United States fails to make its payments on time — could be exhausted by early June. She cautioned, however, that the estimate came with considerable uncertainty.Tax receipts depend on a complicated array of factors such as the jobless rate, wages and whether taxpayers submit their returns on time. On Monday, the Treasury secretary underscored the challenges of predicting the default date, noting that the new estimate was based on currently available data that is inherently variable, such as tax payments from individuals.“The actual date that Treasury exhausts extraordinary measures could be a number of weeks later than these estimates,” Ms. Yellen said.A Treasury Department official said that, as of April 30, the government had a cash balance of about $300 billion. Ms. Yellen’s ability to delay a default will depend in part on how much tax revenue comes into the federal government this spring.Payments for the 2022 tax year are still arriving. Goldman Sachs economists projected last week that by the second week of June, the Treasury Department could have about $60 billion of cash remaining, which would allow the government to keep making its payments until late July.Some budget analysts have suggested that winter storms could complicate the Treasury Department’s ability to delay a default. Severe storms, flooding and mudslides in California, Alabama and Georgia this year prompted the Internal Revenue Service to push the April 18 filing deadline to October for dozens of counties.The I.R.S. also gave those affected areas more time to make contributions to retirement and health savings accounts, potentially affecting their taxable income.Ms. Yellen has already been taking steps to ensure that the federal government has sufficient cash on hand.Earlier this year, she announced that she would redeem some existing investments and suspend new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.Ms. Yellen said on Monday that the Treasury Department was suspending the issuance of State and Local Government Series Treasury securities to help manage the risks associated with the debt limit. She lamented that the move would deprive state and local governments of an important tool to manage their finances.Brinkmanship over the debt limit has revived debates over how far the executive branch can go to avoid a default. Ms. Yellen, however, has dismissed the notion that she could prioritize certain payments or mint a platinum coin worth $1 trillion to ensure that the United States remains solvent.Although markets have broadly remained calm about the prospect of a default, there are some signs that investors are becoming nervous.They have sold government bonds that mature in three months — around the time policymakers have said the United States could run out of cash — and snapped up bonds with just one month until they are repaid.The cost of insuring existing bond holdings against the possibility that the United States will default on its debts has also risen sharply. Still, some analysts say the market reaction would need to be much more pronounced to force a fast deal.In a separate report issued by the Treasury Department on Monday about the risks facing the economy, Eric Van Nostrand, the acting assistant secretary for economic policy, laid out the dire consequences of failing to raise the debt limit.“A default by the U.S. government — including the failure to pay any of the United States’ obligations — would be an economic catastrophe, sparking a global downturn of unknown but substantial severity,” Mr. Van Nostrand said.Catie Edmondson More