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    ‘The economy is braking hard’ and CEO confidence is miserable, says billionaire investor Barry Sternlicht

    The Fed needs to pump the brakes on rate hikes, Barry Sternlicht said.
    If it doesn’t, it will cause a “serious recession,” he predicted.
    The central bank is expected to raise rates again next week.

    The U.S. economy is teetering on the brink of a serious downturn if the Federal Reserve doesn’t pump the brakes on its rate hikes, billionaire CEO Barry Sternlicht said.
    The central bank has already raised interest rates four times this year and is widely expected to hike them by 75 basis points next week in an effort to tame inflation. Earlier this week, consumer prices rose 0.1% instead of the 0.1% decline economists surveyed by Dow Jones were expecting.

    However, Sternlicht believes the Fed was late to the game and is now being too aggressive.
    “The economy is braking hard,” the chairman and CEO of Starwood Capital Group told CNBC’s “Squawk Box” on Thursday.
    “If the Fed keeps this up they are going to have a serious recession and people will lose their jobs,” he added.
    Consumer confidence is terrible and CEO confidence is “miserable,” Sternlicht said. Supply chain issues are being resolved, and inventories are now backing up in warehouses, which will lead to huge discounting, he said.

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    “The CPI, the data they are looking at is old data. All they have to do is call Doug McMillon at Walmart, call any of the real estate fellas and ask what is happening to our apartment rents,” he said, pointing out that the rate of rent growth is now slowing.

    The continuation of rate hikes will also cause a “major crash” in the housing market, Sternlicht predicted. The once-hot real estate market is swiftly slowing down, with mortgage rates for a 30-year fixed loan over 6% — up from 3.29% at the start of the year, according to Mortgage News Daily.
    While the Fed’s target is 2%, inflation should run at 3% to 4%, Sternlicht said.
    “Inflation that is driven by wage growth is fabulous. We should want wages to go up,” he said.

    “You can pay higher rents, you can buy your equipment, you can go to the restaurant if you have high wage growth.”
    As for when the “serious recession” will hit, Sternlicht believes it is imminent.
    “I think [in the] fourth quarter. I think right now,” he said. “You are going to see cracks everywhere.”
    Correction: Doug McMillon is CEO of Walmart. An earlier version misspelled his name.

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    Railroad Workers Point to Punishing Schedules as Cause of Strike

    Employees say the inflexibility of scheduling upended their personal lives. The companies say they maintained service while using fewer resources.To defuse a labor dispute that brought the nation to the brink of a potentially catastrophic railroad strike, negotiators had to resolve a key issue: schedules that workers say were punishing, upending their personal lives and driving colleagues from the industry.Workers, industry analysts and customers say the practices emanate from a business model that focuses relentlessly on holding down expenses, including labor costs. They say this leaves rail networks with little capacity to work around a disruption, whether it be a personal issue for an employee or a natural disaster like a hurricane — or, for that matter, a pandemic.Negotiations in which the Biden administration took an active role produced a tentative contract deal announced early Thursday. The agreement included a significant pay increase for the workers, whose base wages typically start around $50,000 and top out around $100,000, excluding overtime and benefits. But scheduling was the sticking point.Unions complained that to manage a shortfall of employees, the carriers effectively forced their members to remain on call for days and sometimes weeks at a time, partly through the use of strict attendance policies that could lead to disciplinary action or even firing. They said the policies pushed workers to the limits of their physical and mental health.“Every facet of your life is dictated by this job,” said Gabe Christenson, who until this year worked as a conductor for a large freight rail carrier. “There’s no way to get away from it.” Carriers said employees could take time off through paid vacation, income replacement for sick workers or removal of themselves from the list of available workers.“Railroads provide multiple ways for employees to take time to care for themselves and their families,” the Association of American Railroads, an industry group, said in a statement earlier this week.By Sunday, leaders of 10 of the 12 unions in the talks had agreed to contract terms. But two unions representing conductors and engineers — about half the 115,000 freight rail workers involved in the dispute — held out for a concession on scheduling, like the ability to see a doctor or attend to a personal matter without risking disciplinary action.President Biden in the Oval Office on Thursday with representatives of the railroads and the unions as well as Labor Department officials.Doug Mills/The New York Times“It would not harm their operations to treat employees like humans and let them take care of medical issues,” Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen, one of the two unions, said in an interview on Monday. “It’s the primary outstanding issue, one we won’t budge on — the request that they stop firing people who get sick.”After the tentative deal was announced, the two unions said it included “contract language exempting time off for certain medical events from carrier attendance policies.” The agreement will require ratification by union members, a process that could take a few weeks.In some respects, the freight rail industry is similar to other swaths of the economy, such as retail and food service, where employers have imposed increasingly lean staffing in recent decades.Rick Paterson, a longtime industry analyst with the investment bank Loop Capital, said the staffing trend for railroads became more pronounced in the early 2000s when, after years of consolidation, carriers and their investors began to recognize that they had pricing power.As a result, the dominant business model in the industry shifted from one in which the carriers sought larger volumes of traffic to one in which they sought to increase profits by raising prices and lowering expenses like labor costs.“They realized that if growing pricing is good for margins, then keeping costs low is even better,” said Mr. Paterson, who has referred to this thinking as “the cult of the operating ratio,” after the ratio of operating expenses to revenue.A freight train yard near the Port of Los Angeles on Thursday. A strike by freight rail workers would have been economically damaging.Alex Welsh for The New York TimesThe side effect, however, was to gradually eliminate any cushion in staffing levels.Unlike many workers, the conductors and engineers who operate trains don’t get weekends or other consistent days off.Instead, said Mr. Pierce, the president of the locomotive engineers union, workers go to the bottom of a list of available crews when they return home from a trip that can last days. The fewer the workers, the shorter the list, and the less time it takes for them to be summoned into action again.“It can go on indefinitely, till they interrupt the cycle by taking paid time off, which the companies routinely reject,” Mr. Pierce said.Major U.S. freight rail carriers began to accelerate the staffing cuts in recent years as they switched to a system known as precision scheduled railroading, or P.S.R., which focuses on scaling back excess equipment and employees and streamlining the shipping process. The industry has said P.S.R. enables carriers to run more efficiently and provide more reliable service, while also improving profits. Freight rail customers and employees say it has resulted in deteriorating working conditions and customer service and little resilience in dealing with unforeseen circumstances, like weather emergencies. The Surface Transportation Board, a federal regulatory agency, estimates that the carriers have 30 percent fewer employees today than six years ago.Reducing labor to match this operating model may have been sound in principle, said Mr. Paterson, the industry analyst. But he said the carriers appeared to have cut back too much to allow them to handle potential disruptions, of which the pandemic was an epic example.“When you do P.S.R., you can drop your head count by 30 percent, but why don’t you drop it 28 percent and build in a crew reserve?” he asked. “That didn’t happen.”With little margin for error, carriers found themselves with too few workers to operate their rail networks once business began to recover in the second half of 2020, putting more and more stress on their workers, and making it even harder for them to take time off.Freight rail workers on train tracks in Atlanta on Thursday.Dustin Chambers for The New York TimesWhen Mr. Christenson, the longtime conductor, who is also a co-chair of the industrywide group Railroad Workers United, began feeling run-down last year, he was reluctant to see a doctor. Under his company’s attendance policy, taking an unplanned day off could lead to disciplinary action, and “I worried about triggering an investigation,” he said.So he waited until he could get an appointment on a scheduled day off a few months later, at which point he got bad news: He had an infection that might have been easily resolved with medication but now required surgery.“They had to cut infected tissue out in my leg,” Mr. Christenson said.Railroad workers and their families, many of whom asked to remain anonymous for fear of reprisals, said similar attendance policies, which are partly intended to manage the industry’s labor shortfall, had resulted in workers’ missing important life events.This year, for example, BNSF Railway introduced a new point system for some employees, according to a February memo obtained by The New York Times. Under the policy, workers were awarded 30 points to start with and would lose points — from two to 10 — for scheduling a day off for a variety of reasons, including a family emergency, sickness or fatigue. They lose even more points for being unavailable at the last minute.When workers run out of points, they face escalating penalties, starting with a 10-day suspension, followed by a 20-day suspension and ending with possible firing. Workers can earn back points by being available for two weeks straight. BNSF said on Thursday that the policy was “designed to improve the consistency of crews being available for their shifts” and to give employees more “predictability and transparency” regarding their schedules. It said that the program was achieving those goals but that revisions had been made to give employees more flexibility. One railroad worker said the fast turnaround time between shifts had forced him to skip doctor’s appointments to address his symptoms of long Covid. Railroad workers’ family members said they rarely celebrated birthdays or holidays together even before the pandemic.Workers say that while they have paid vacation and days allotted for personal leave, the constraints that employers impose — like requiring vacation to be taken in limited windows that are far oversubscribed, or simply rejecting a proposed personal day — severely limit their options as a practical matter.Shippers have grown frustrated, too.Rail cars full of grain sat at production facilities in the Midwest for weeks at a time earlier this year, far longer than typical, said Max Fisher, the chief economist and treasurer for the National Grain and Feed Association.Chemical manufacturers, which rely on freight rail to move their products, have grown increasingly frustrated with the carriers since December, according to three surveys by the American Chemistry Council, an industry association. The latest, conducted in July, found that 46 percent of the companies felt that rail service was getting worse, while only 7 percent said it was improving.“Freight rail has been a constant thorn in our side and been a significant challenge for our members for quite some time,” said Chris Jahn, the organization’s chief executive.While the labor agreement announced on Thursday may avert a strike, it is unlikely to resolve the deeper issues that have put unions and rail carriers on a collision course. Even if carriers wanted to turn back the clock on efforts to increase efficiency, they would have shareholders to answer to.After Bill Ackman, the activist investor, won a proxy battle over the freight carrier Canadian Pacific a decade ago, the company hired Hunter Harrison, who pioneered P.S.R., as its chief executive. Mr. Harrison imposed the system there and then at CSX after joining that company in 2017, prompting investors to pressure other carriers to follow suit to eke out similar efficiencies.“Lurking in the background is the constant threat of shareholder activism if any of the railroads’ operating ratios become outliers on the high side,” Mr. Paterson said in testimony to the Surface Transportation Board this spring. More

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    New Inflation Developments Are Rattling Markets and Economists. Here’s Why.

    Inflation is less about pandemic and war surprises and more about economic momentum. That could make the solution more painful.When inflation began to accelerate in 2021, price pressures were clearly tied to the pandemic: Companies couldn’t produce cars, couches and computer games fast enough to keep up with demand from homebound consumers amid supply chain disruptions.This year, Russia’s war in Ukraine sent fuel and food prices rocketing, exacerbating price pressures.But now, as those sources of inflation show early signs of fading, the question is how much overall price increases will abate. And the answer is likely to be driven in part by what happens in one crucial area: the labor market.Federal Reserve officials are laser-focused on job gains and wage growth as they quickly raise interest rates to constrain the economy and slow rapid price increases. Officials are convinced that they must sap the economy of some of its momentum to wrestle the worst inflation in four decades back down to their goal of 2 percent.The way they do that is by slowing spending, hiring and wage gains — and they do that by raising the costs of borrowing. So far, a pronounced cool-down is proving elusive, suggesting to economists and investors that the central bank may need to be even more aggressive in its efforts to temper growth and bring inflation back down.As data this week showed, prices continue to soar. And, while the job market has moderated somewhat, employers are still hiring at a solid clip and raising wages at the fastest pace in decades. That continued progress seems to be allowing consumers to keep spending, and it may give employers both the power and the motivation to increase their prices to cover their climbing labor costs.As inflationary forces chug along, economists said, the risk is rising that the Fed will clamp down on the economy so hard that America will be in for a rough landing — potentially one in which growth slumps and unemployment shoots higher.It is becoming more likely “that it won’t be possible to wring inflation out of this economy without a proper recession and higher unemployment,” said Krishna Guha, who heads the global policy and central bank strategy team at Evercore ISI and who has been forecasting that the Fed can cool inflation without causing an outright recession.Rising wages could become a more primary driver of higher prices.Hiroko Masuike/The New York TimesThe challenge for the Fed is that, more and more, price increases appear to be driven by long-lasting factors tied to the underlying economy, and less by one-off factors caused by the pandemic or the war in Ukraine.Consumer Price Index data from August released on Tuesday illustrated that point. Gas prices dropped sharply last month, which many economists expected would pull overall inflation down. They also thought that recent improvements in the supply chain would moderate price increases for goods. Used car costs, a major contributor to inflation last year, are now declining.Yet, in spite of those positive developments, quickly rising costs across a wide array of products and services helped to push prices higher on a monthly basis. Rent, furniture, meals at restaurants and visits to the dentist are all growing more expensive. Inflation climbed 8.3 percent on an annual basis, and picked up by 0.1 percent from the prior month.The data underscored that, even without extraordinary disruptions, so many products and services are now increasing in price that costs might continue ratcheting up. Core inflation, which strips out food and fuel costs to give a sense of underlying price trends, reaccelerated to 6.3 percent in August after easing to 5.9 percent in July.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Biden Maneuvers to Try to Avoid Devastating Rail Strike

    The Biden administration is considering executive action to try to avoid a shutdown of the nation’s rail network that would harm the economy ahead of the midterm elections.WASHINGTON — President Biden, desperate to avert a damaging freight rail strike that could exacerbate rapid inflation, is pushing rail companies and unions to reach an agreement ahead of a Friday deadline, while exploring whether he can do anything unilaterally to assuage workers’ concerns.Mr. Biden and his economic team have been inserting themselves into final-hour negotiations between rail unions and large rail companies, which are at loggerheads over scheduling and sick time. Labor groups have insisted that employees be able to take unpaid time off for physician appointments, a request railroad companies have been unwilling to grant.On Wednesday, in anticipation of a strike, Amtrak said it would cancel all long-distance passenger trains beginning on Thursday in order to avoid possibly stranding people given that many of its trains run on tracks operated and maintained by freight carriers.Also on Wednesday, members of a small rail union, whose leaders had reached a tentative deal with freight companies, voted down the agreement, signaling more difficulty in negotiations to come. And Mr. Biden’s labor secretary gathered union and company leaders in Washington to try to resolve the impasse, with little progress.The looming strike has plunged Mr. Biden into a difficult position at a critical moment, with midterm elections that will determine whether Democrats retain control of Congress rapidly approaching and rampant inflation chipping away at the president’s support. Mr. Biden, a longtime champion of labor leaders and union employees, is caught between his long-running push to reduce the pandemic-era supply chain snarls that have helped fuel inflation and his efforts to continue to win the enthusiastic support of labor unions.As a result, Mr. Biden is attempting to walk a careful line, taking pains to tell both unions and companies that they have an obligation to the public to keep rail service moving. While he has pushed to elevate the power of organized labor throughout his time in office, he is wary of hurting American consumers and the economy, which could experience shortages and price spikes from even a brief strike.President Biden and his economic team have been inserting themselves into final-hour negotiations between the rail unions and large rail companies.Erin Schaff/The New York TimesOn Monday, Mr. Biden phoned leaders on both sides of the table to urge a deal, stressing the same message to both sides, according to people familiar with the discussions: A strike will hurt rail customers and a broad swath of people and businesses across the country, and a negotiated agreement is the best way to avoid one.Martin J. Walsh, the labor secretary, and White House officials hosted union and company leaders in Washington on Wednesday in an attempt to broker a deal before Friday, when a federally imposed “cooling off period” for negotiations expires. Workers could go on strike immediately, though they will not automatically do so.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Wholesale prices fell 0.1% in August amid inflation fears

    The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, in line with expectations.
    On a year-over-year basis, the index, which is a gauge of wholesale prices, increased 8.7%, the lowest increase since August 2021.

    The prices that producers receive for goods and services declined in August, a mild respite from inflation pressures that are threatening to send the U.S. economy into recession.
    The producer price index, a gauge of prices received at the wholesale level, declined 0.1%, according to a Bureau of Labor Statistics report Wednesday. Excluding food, energy and trade services, PPI increased 0.2%.

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    This recession signal takes center stage as talk of a full point hike gets louder

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    Economists surveyed by Dow Jones had been expecting headline PPI to decline 0.1%.
    On a year-over-year basis, headline PPI increased 8.7%, a substantial pullback from the 9.8% increase in July and the lowest annual rise since August 2021. Core PPI increased 5.6% from a year ago, matching the lowest rate since June 2021.
    As has been the case over the summer, the drop in prices came largely from a decline in energy.
    The index for final demand energy slid 6% in August, which saw a 12.7% slide in the gasoline index that was responsible for more than three-quarters of the 1.2% decline in prices for final demand goods. That helped feed through to consumer prices, which fell sharply after briefly surpassing $5 a gallon at the pump earlier in the summer.
    Wholesale services prices increased 0.4% for the month, indicating a further transition for a pandemic-era economy where goods inflation soared. Final demand services prices increased 0.4% for the month, with the balance of that coming from a 0.8% increase in trade services.

    Those numbers come a day after the BLS reported consumer price index data for August that was higher than expected. The two reports differ in that the PPI shows what producers receive for finished goods, while the CPI reflects what consumers pay in the marketplace.
    The PPI can be leading indicator for inflation as wholesale prices feed through the economy. However, it’s importance has been tempered over the years as manufactured goods make up less of a share of total spending.
    Following the Tuesday report, stocks tanked and expectations surged for Federal Reserve action at its meeting next week. Stock market futures were positive after the PPI report while Treasury yields were higher as well.
    Markets were debating between a half percentage point and three-quarter point interest rate increase. After the release, the market fully priced in a three-quarter point move, and there is now a 1-in-3 chance of a full percentage point hike, according to fed funds futures data tracked by the CME Group.

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    In New York City, Pandemic Job Losses Linger

    Even as the country as a whole has recovered all of the jobs it lost during the pandemic, the city is still missing 176,000 — the slowest recovery of any major metropolitan area.The darkest days of the pandemic are far behind New York City. Masks are coming off, Times Square is packed with tourists and Midtown Manhattan lunch spots have growing lines of workers in business suits. Walking around the city, it often feels like 2019 again.But the bustling surface obscures a lingering wound from the pandemic. While the country as a whole has recently regained all of the jobs it lost early in the health crisis, New York City is still missing 176,000, representing the slowest recovery of any major metropolitan area, according to the latest employment data.New York relies more than other cities on international tourists, business travelers and commuters, whose halting return has weighed on the workers who cater to them — from bartenders and baggage handlers, to office cleaners and theater ushers. A majority of the lost private sector jobs have been concentrated in the hospitality and retail industries, traditional pipelines into the work force for younger adults, immigrants and residents without a college degree.By contrast, overall employment in industries that allow for remote work, such as the technology sector, is back at prepandemic levels.The lopsided recovery threatens to deepen inequality in a city where apartment rents are soaring, while the number of residents receiving temporary government assistance has jumped by almost a third since February 2020. As New York emerges from the pandemic, city leaders face the risk of an economic rebound that leaves thousands of blue-collar workers behind.“The real damage here is that many of the industries with the most accessible jobs are the ones that are still struggling to fully recover,” said Jonathan Bowles, the executive director of the Center for an Urban Future, a public policy think tank.New York City was hit particularly hard by the first wave of the virus, prompting business closures and employer vaccine mandates that were among the longest and strictest in the country. Part of the reason for New York’s lagging recovery is that it lost one million jobs in the first two months of the pandemic, the most of any city. More recently, New York City has regained jobs at a rapid clip. The technology sector actually added jobs in the first 18 months of the pandemic, a period when almost every other industry shrank.But job growth slowed this summer in sectors like hotels and restaurants compared with a year ago, while businesses in technology, health care and finance increased employment at a faster pace over the same period, according to an analysis by James Parrott, an economist at the Center for New York City Affairs at the New School.After being laid off from her restaurant job early in the pandemic, Desiree Obando, 35, chose not to return, enrolling instead in community college.Andrew Seng for The New York TimesIn July, the city’s unemployment rate was 6.1 percent, compared with 3.5 percent in the country overall that month.At the height of the pandemic, Ronald Nibbs, 47, was laid off as a cleaner at an office building in Midtown Manhattan, where he had worked for seven years. Mr. Nibbs, his girlfriend and his two children struggled on unemployment benefits and food stamps.He secured temporary positions, but the work was spotty with few people back in offices. He did not want to switch careers, hoping to win his old position back. He began to drink heavily to deal with the anxiety of unemployment.In May, his building finally called him back to work. “When I got that phone call, I wanted to cry,” Mr. Nibbs said.There are 1,250 fewer office cleaners in the city now than there were before the pandemic, according to Local 32BJ of the Service Employees International Union.Last month, New York officials cut their jobs growth forecast for 2022 to 4.3 percent, from 4.9 percent, saying the state was not expected to reach prepandemic levels of employment until 2026. Officials cited the persistence of remote work and the migration of city residents away from the state as a long-term risk to employment levels.The number of tourists visiting New York City this year is expected to rebound to 85 percent of the level in 2019, a year in which a record 66.6 million travelers arrived, according to forecasts from NYC & Company, the city’s official tourism agency.However, according to the agency, visitors to the city are spending less money overall because those who have historically stayed longer — business and international travelers — have not returned at the same rates. This has hurt department stores that depend on high-spending foreign visitors, as well as hotels that rely on business travelers to book conferences and banquets.Ilialy Santos, 47, returned to her job as a room attendant this month at the Paramount Hotel in Times Square, which is reopening for the first time since March 2020. The hotel had been a candidate to be converted into affordable housing, but the plan was opposed by a local union, the New York Hotel and Gaming Trades Council, in order to save jobs.Ms. Santos said she could not find any employment for two years, falling behind every month on her bills. The hotel union provided a $1,000 payment to her landlord to help cover her rent.“I’m excited to be going back to work, getting back to my normal life and becoming more stable,” Ms. Santos said.Despite the city’s elevated unemployment rate, many employers say they are still struggling to find workers, especially in roles that cannot be done remotely. The size of the work force has also dropped, declining by about 300,000 people since February 2020.The number of tourists visiting New York City in 2022 is expected to rebound to 85 percent of the level in 2019, a year in which a record 66.6 million travelers came to the city.Christopher Lee for The New York TimesSome blue-collar employees who lost their jobs early in the pandemic are now holding out for positions that would allow them to work from home.Jade Campbell, 34, has been out of work since March 2020, when the pandemic temporarily shuttered the Old Navy store where she had worked as a sales associate. When the store called her back in the fall, she was in the middle of a difficult pregnancy, with a first-grade son who was struggling to focus during online classes. She decided to stay home, applying for different types of government assistance.Ms. Campbell now lives on her own in Queens without child care support; her children are 1 and 8 years old. She has refused to get vaccinated against Covid-19, a prerequisite in New York City for many in-person jobs. Still, she said she felt optimistic about applying for remote customer service roles after she reached out to Goodwill NYNJ, a nonprofit, for help with her résumé.“I got two kids I know I have to support,” she said. “I can’t really depend on the government to help me out.”At Petri Plumbing & Heating in Bay Ridge, Brooklyn, several workers quit over the city’s policy that employees of private businesses be fully vaccinated. The restriction was the most stringent in the country when it was announced in December 2021 at the end of Mayor Bill de Blasio’s term.After Mayor Eric Adams signaled earlier this year that his administration would not enforce the mandate, Michael Petri, the company’s owner, offered to rehire three former workers. One returned, another had found another job and the third had moved to another state, he said.Thanks to a $50 hourly wage and monthly bonuses, current job openings at Petri Plumbing have attracted a flood of applicants. In a shift from before the pandemic, Mr. Petri said he now has to wade through more applicants with no plumbing experience.The strongest candidates often have too many driving infractions to be put on the company’s insurance policy, he said. But recently, Mr. Petri was so desperate to hire a mechanic with too many infractions that he recruited a young worker just to drive him.“This is without a doubt one of the more difficult times we have faced,” said Mr. Petri, whose family started the company in 1906.The disruptions have set the city’s youngest workers back the most. The unemployment rate for workers ages 16 to 24 is 20.7 percent.After graduating from high school in 2020, Simone Ward enrolled in community college but dropped out after a few months, feeling disengaged from online classes.Ms. Ward, 20, signed up for a cooking program with Queens Community House, a nonprofit organization, which allowed her to get a part-time job preparing steak sandwiches at Citi Field during baseball games. But the scheduling was inconsistent, and the job required a 90-minute commute on three subway lines from her home in Brooklyn’s Canarsie neighborhood.She applied for data entry jobs that would allow her to work remotely, but never heard back. She remembered interviewing for a job at an Olive Garden restaurant and recognizing in the moment that she was flailing, her social skills diminished by the isolation of lockdown.“The pandemic feels like it set my life back five steps,” she said. New York officials have cited the persistence of remote work and the migration of workers to other states as long-term risks to employment levels.Hiroko Masuike/The New York TimesFor Desiree Obando, 35, losing her job at a restaurant in Manhattan’s West Village early in the pandemic nudged her to leave the hospitality industry after 12 years. When the restaurant group she used to work for asked her to come back a few months later, she had already enrolled at LaGuardia Community College, returning to school after dropping out twice before, with the goal of becoming a high school counselor.She is now working a part-time job at an education nonprofit that pays $20 an hour, less than her hospitality job. But the work is close to her home in East Harlem, giving her the flexibility to pick up her daughter whenever the school has virus exposures.Ms. Obando is hopeful that she will eventually get an income boost after she completes her master’s degree.“There’s nothing like the pandemic to put things in perspective,” Ms. Obando said. “I made the right choice for me and my family. More

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    Inflation isn't just about fuel costs anymore, as price increases broaden across the economy

    Rather than fuel, it was food, shelter and medical services that drove costs higher in August, slapping a costly tax on those least able to afford it.
    The food at home index, a good proxy for grocery prices, has increased 13.5% over the past year, the largest such rise since March 1979.
    For medical care services, the monthly increase of 0.8% was the fastest monthly gain since October 2019. Veterinary care was up 10% from a year ago.

    A person shops in a supermarket as inflation affected consumer prices in New York City, June 10, 2022.
    Andrew Kelly | Reuters

    For the better part of a year, the inflation narrative among many economists and policymakers was that it was essentially a food and fuel problem. Once supply chains eased and gas prices abated, the thinking went, that would help lower food costs and in turn ease price pressures across the economy.
    August’s consumer price index numbers, however, tested that narrative severely, with broadening increases indicating now that inflation could be more persistent and entrenched than previously thought.

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    CPI excluding food and energy prices — so-called core inflation — rose 0.6% for the month, double the Dow Jones estimate, bringing year-over-year cost-of-living increases up 6.3%. Including food and energy, the index rose 0.1% monthly and a robust 8.3% on a 12-month basis.

    At least as important, the source of the increase wasn’t gasoline, which tumbled 10.6% for the month. While the summertime decline in energy prices has helped temper headline inflation numbers, it hasn’t been able to squelch fears that inflation will remain a problem for some time.

    The broadening of inflation

    Rather than fuel, it was food, shelter and medical services that drove costs higher in August, slapping a costly tax on those least able to afford it and raising important questions about where inflation goes from here.
    “The core inflation numbers were hot across the board. The breadth of the strong price increases, from new vehicles to medical care services to rent growth, everything was up strongly,” said Mark Zandi, chief economist at Moody’s Analytics. “That was the most disconcerting aspect of the report.”
    Indeed, new vehicle prices and medical care services both increased 0.8% for the month. Shelter costs, which include rents and various other housing-related expenses, make up nearly a third of the CPI weighting and climbed 0.7% for the month.

    Food costs also have been nettlesome.
    The food at home index, a good proxy for grocery prices, has increased 13.5% over the past year, the largest such rise since March 1979. Prices continued their meteoric climb for items such as eggs and bread, further straining household budgets.
    For medical care services, the monthly increase of 0.8% is the fastest monthly gain since October 2019. Veterinary costs rose 0.9% on the month and were up 10% over the past year.
    “Even things like apparel prices, which often decline, were up a little bit [0.2%]. My view is that with these lower oil prices, they stick and assuming they don’t go back up, that will see a broad moderation of inflation,” Zandi said. “I have not changed my forecast for inflation to get back to [the Federal Reserve’s 2% target] by early 2024, but I’d say I hold that forecast with less conviction.”

    On the positive side, prices came down again for things such as airline tickets, coffee and fruit. A survey released earlier this week by the New York Fed showed consumers are growing less fearful about inflation, though they still expect the rate to be 5.7% a year from now. There also are signs that supply chain pressures are easing, which should be at least disinflationary.

    Higher oil possible

    But about three-quarters of the CPI remained above 4% in year-over-year inflation, reflecting a longer-term trend that has refuted the idea of “transitory” inflation that the White House and the Fed had been pushing.
    And energy prices staying low is no given.
    The U.S. and other G-7 nations say they intend to slap price controls on Russian oil exports starting Dec. 5, possibly inviting retaliation that could see late-year price increases.
    “Should Moscow cut off all natural gas and oil exports to the European Union, United States and United Kingdom, then it is highly probable that oil prices will retest the highs set in June and cause the average price of regular gas to move well back above the current $3.70 per gallon,” said Joseph Brusuelas, chief economist at RSM.
    Brusuelas added that even with housing in a slump and possible recession, he thinks price drops there probably won’t feed through, as housing has “a good year or so to go before the data in that critical ecosystem improves.”
    With so much inflation still in the pipeline, the big economic question is how far the Fed will go with interest rate increases. Markets are betting the central bank raises benchmark rates by at least 0.75 percentage point next week, which would take the fed funds rate to its highest level since early 2007.
    “Two percent represents price stability. It’s their goal. But how do they get there without breaking something,” said Quincy Krosby, chief equity strategist at LPL Financial. “The Fed isn’t finished. The path to 2% is going to be difficult. Overall, we should start to see inflation continue to inch lower. But at what point do they stop?”

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    Pandemic Aid Cut U.S. Poverty to New Low in 2021, Census Bureau Reports

    A measure that accounts for all federal subsidies also showed a reduction of almost half in the number of children below the poverty level.A second year of emergency pandemic aid from the federal government drove poverty to the lowest level on record in 2021 and cut the number of poor children by nearly half, the Census Bureau reported on Tuesday.The poverty rate fell to 7.8 percent, down from 9.2 percent the previous year, according to the Supplemental Poverty Measure, a yardstick that includes wages, taxes and the fullest account of government aid. In addition, the share of children in poverty sank to another record low of 5.2 percent, down 4.5 percentage points from 2020, a sharp acceleration of a long-term trend. In large part, those changes reflect the trillions of stimulus dollars approved by Congress, culminating in the Democrats’ American Rescue Plan of March 2021, especially the expanded child tax credit, which temporarily provided an income guarantee to families with children.Real median household income reached $70,800, not significantly different from 2020, as increases in full-time employment were offset by rising inflation and decreases in unemployment insurance, which had been supplemented above normal levels through the summer of 2021. The “official” poverty rate, generally considered outdated because it omits hundreds of billions spent on programs like tax credits and housing assistance, also did not change significantly from the previous year.How Poverty Has DecreasedThe official poverty rate was 11.6 percent last year, but the supplemental rate — which accounts for the impact of government programs — fell to 7.8 percent.

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    Share of the population living in poverty
    The supplemental rate adjusts for geographic differences. It also includes wage income, taxes and the fullest account of government aid.Sources: Census Bureau; Columbia UniversityKarl RussellThis data covers a year that was profoundly influenced by a set of emergency programs that have largely expired. Since then, many families have again found themselves under financial strain.Progressives see the reduction in poverty — even if temporary — as evidence that the federal government has the power to give people a better standard of living and that it should continue to do so in the future.“Man, I’m just grinning ear to ear,” said Luke Shaefer, who runs a center on poverty at the University of Michigan and sees the expanded child tax credit as a blueprint for a permanent program. “Americans wonder if the government can shape successful policies that address poverty. This offers incontrovertible evidence that it can.”Inflation F.A.Q.Card 1 of 5What is inflation? More