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    Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

    The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    Climate Change Could Worsen Supply Chain Turmoil

    A drought that has crippled economic activity in southwestern China hints at the kind of disruption that climate change could wreak on global supply chains.Chinese factories were shuttered again in late August, a frequent occurrence in a country that has imposed intermittent lockdowns to fight the coronavirus. But this time, the culprit was not the pandemic. Instead, a record-setting drought crippled economic activity across southwestern China, freezing international supply chains for automobiles, electronics and other goods that have been routinely disrupted over the past three years.Such interruptions could soon become more frequent for companies that source parts and products from around the world as climate change, and the extreme weather events that accompany it, continue to disrupt the global delivery system for goods in highly unpredictable ways, economists and trade experts warn.Much remains unknown about how the world’s rapid warming will affect agriculture, economic activity and trade in the coming decades. But one clear trend is that natural disasters like droughts, hurricanes and wildfires are becoming more frequent and unfolding in more locations. In addition to the toll of human injury and death, these disasters are likely to wreak sporadic havoc on global supply chains, exacerbating the shortages, delayed deliveries and higher prices that have frustrated businesses and consumers.“What we just went through with Covid is a window to what climate could do,” said Kyle Meng, an associate professor at the Bren School of Environmental Science and Management and the department of economics at the University of California, Santa Barbara.The supply chains that have stretched around the world in recent decades are studies in modern efficiency, whizzing products like electronics, chemicals, couches and food across continents and oceans at ever-cheaper costs.But those networks proved fragile, first during the pandemic and then as a result of Russia’s invasion of Ukraine, with companies struggling to source their goods amid factory and port shutdowns. With products in short supply, prices have spiked, fueling rapid inflation worldwide.The drought in southwestern China has also had ripple effects for global businesses. It drastically reduced hydropower production in the region, requiring power cuts to factories and scrambling supply chains for electronics, car parts and other goods. Volkswagen and Toyota curtailed production at nearby factories, as did Foxconn, which produces electronics, and CATL, a manufacturer of batteries for electric cars.The Yangtze River, which bisects China, dipped so low that the oceangoing vessels that typically traverse its upper reaches from the rainy summer into early winter could no longer run.Companies had to scramble to secure trucks to move their goods to Chinese ports, while China’s food importers hunted for more trucks and trains to carry their cargo into the country’s interior. The heat and drought have wilted many of the vegetables in southwestern China, causing prices to nearly double, and have made it hard for the surviving pigs and poultry to put on weight, driving up meat prices. ‌Recent rainfall allowed power to be temporarily restored to houses and businesses in western China. But drought persists across much of central and western China, and reservoirs remain at a third of their usual level.Read More About Extreme WeatherHeat and Destruction: A heat dome over California sent temperatures to all-time highs, making it harder to fight the wildfires burning in various parts of the state.Big Hail: Hailstones of record size are falling left and right, and hailstorm damage is growing. But there is surprisingly little research to explain why.Water Crisis: Aging infrastructure and underinvestment have left many U.S. cities’ water systems in tatters. Now flooding and climate shocks are pushing them to failure.Flooding in South Asia: Amid a relentless monsoon season, deadly floods have devastated Pakistan and inundated Bengaluru, India’s Silicon Valley.That means less water not only for hydropower but also for the region’s chemical factories and coal-fired power plants, which need huge quantities of water for cooling.China even resorted to using drones to seed clouds with silver iodide in an attempt to trigger more rain, said Zhao Zhiqiang, the deputy director of the Weather Modification Center of the China Meteorological Administration, at a news conference on Tuesday.At the same time, the coronavirus, and China’s insistence on a zero-Covid policy, continue to pose supply chain risks by restricting movement in significant portions of the country. Last Thursday, Chinese authorities locked down Chengdu, a city of more than 21 million in southwestern China, to clamp down on coronavirus outbreaks.These frequent disruptions in Chinese manufacturing and logistics have added to concerns among global executives and policymakers that many of the world’s factories are far too geographically concentrated, which leaves them vulnerable to pandemics and natural disasters.The Biden administration, in a plan released Tuesday outlining how the United States intends to bolster its semiconductor industry, said the current concentration of chip-makers in Southeast Asia had left the industry vulnerable to disruptions from climate change, as well as pandemics and war.But setting up factories in other parts of the world to offset those risks could be costly, for both businesses and the consumers whom companies will pass their costs on to in the form of higher prices. Just as the pandemic has resulted in higher prices for consumers, Mr. Meng said, so could climate change, particularly if extreme weather affects large areas of the world at the same time.Companies could also face new costs from carbon taxes when shipping goods across borders, as well as higher transport costs for moving products by sea or air, experts say. Both ocean and airfreight are major producers of the gases contributing to climate change, accounting for about 5 percent of global carbon emissions. Companies in both sectors are quickly trying to find cleaner sources of fuel, but that transition is likely to require big investments that could drive up prices for their customers.Natural disasters and coronavirus lockdowns in China have been particularly painful, given that the country is home to much of the world’s manufacturing. But the United States has also felt the rising impacts from extreme weather.A multiyear drought in much of the Western United States has weighed on American agricultural exports. West Coast wildfires have jumbled logistics for companies like Amazon. Winter storms and power outages shut down semiconductor plants in Texas last year, adding to global chip shortages.A wildfire burned through farmland near Mulino, Ore.Kristina Barker for The New York TimesWhite House economists warned in a report this year that climate change would make future disruptions of the global supply chains more common, citing research showing that the global frequency of natural disasters had increased almost threefold in recent decades.“As networks become more connected, and climate change worsens, the frequency and size of supply-chain-related disasters rises,” the report said.The National Centers for Environmental Information, a federal agency, estimates that the number of billion-dollar disasters taking place in the United States each year has skyrocketed to an average of 20 in the last two years, including severe storms, cyclones and floods. In the 1980s, there were only about three per year.Academics say the effect of these disasters, and of higher temperatures in general, will be particularly obvious when it comes to food trade. Some parts of the world, like Russia, Scandinavia and Canada, could produce more grains and other food crops to feed countries as global temperatures rise.But those centers of production would be farther from hotter and more densely populated areas closer to the Equator. Some of those regions may struggle even more than they do now with poverty and food insecurity.One danger is that increasing competition for food could encourage countries to introduce protectionist policies that restrict or stop the export of food, as some have done in response to the pandemic and Russia’s invasion of Ukraine. These export restrictions allow a country to feed its own population, but tend to exacerbate international shortages and push up food prices, further aggravating the problem.The World Trade Organization, citing the damage that protectionist policies could pose, has urged countries to keep trade open to combat the negative effects of climate change.In a 2018 report, the W.T.O. pointed out that the global food trade was particularly vulnerable to disruptions in transportation that might occur as a result of climate change, like rising sea levels threatening ports or extreme weather degrading roads and bridges. More than half of globally traded grains pass through at least one of 14 global “choke points,” including the Panama Canal, the Strait of Malacca or the Black Sea rail network, the report said.Ngozi Okonjo-Iweala, the W.T.O.’s director general, has described trade as “a mechanism for adaptation and resilience” that can help countries deal with crop failure and natural disasters. In a speech in January, she cited economic models estimating that climate change was on track to contribute to severe malnutrition, with as many as 55 million people at risk by 2050 because of local effects on food production. But greater trade could cut that number by 35 million people, she said.“Trade is part of the solution to the challenges we face, far more than it is part of the problem,” Ms. Okonjo-Iweala said.Solomon Hsiang, the Chancellor’s Professor of Public Policy at the University of California, Berkeley, and a co-director of the Climate Impact Lab, agreed that trade might simultaneously make the world more resilient to these disasters and more vulnerable.In some situations, trade can help soften the effects of climate change — for example, allowing communities to import food when local crops fail because of a drought, he said.“That’s on the good side of the ledger,” Mr. Hsiang said. “But the bad side is, as everyone really acutely understands, we are so interconnected from our supply chains that events on one side of the world can dramatically impact people’s well-being elsewhere.” More

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    EU Leaders Say Putin’s Gas Power Is Weakening

    In Germany and elsewhere, leaders are growing more confident that months of work to stockpile and line up alternate energy sources may help them blunt Russia’s weaponization of exports.BERLIN — Not long after Russian forces invaded Ukraine, another mobilization began. European energy ministers and diplomats started jetting across the world and inking energy deals — racing to prepare for a rough winter should Russia choose to cut off its cheap gas in retaliation for Western sanctions.Since then, President Vladimir V. Putin of Russia has fiddled with the gas tap to Europe repeatedly. Through Gazprom, the Kremlin-controlled gas monopoly, Russia has vastly reduced supplies or suspended them for days at a time — until last week, when it announced that it would indefinitely halt flows through the Nord Stream 1 pipeline that supplies Germany, and through it, much of Europe.Yet when the blow finally came, it provoked more ridicule than outrage among European leaders, who say that by now they would expect nothing less from Mr. Putin and that they have accepted that the era of cheap Russian gas is over, unimaginable as that might have seemed just months ago.In some corners, even as Europe’s leaders scramble to blunt the blow from lower gas supplies and higher prices, there is a growing sense that perhaps Russia’s weaponizing of gas exports is a strategy of diminishing returns — and that Mr. Putin may have overplayed his hand.“It would have been surprising the other way around,” Robert Habeck, Germany’s economy minister, said this week of Russia’s announcement that Nord Stream 1 would remain shut. “The only thing from Russia that is reliable is the lies.”Even the markets seemed to take the latest disruption in stride. After rising 5 percent on the heels of Gazprom’s announcement, prices are now lower than they were at the start of last week.That does not mean that European nations are not feeling the pain, or have skirted the risk that the energy crunch could sow social unrest, fracturing their unity against the Kremlin this winter. But a lot of the damage has already been done, with gas prices several times above anything that would be considered normal and pressure mounting on consumers and businesses.The question remains, then, of just how successful the hard pivot from Russian energy actually is — whether Europe has lined up enough new sources, whether its stockpiles can get it through the winter, whether conservation efforts can make a difference and whether governments can help shield consumers from rising prices.“The only thing from Russia that is reliable is the lies,” said Robert Habeck, right, Germany’s economy minister, with Chancellor Olaf Schulz, center, and Christian Lindner, the finance minister.Tobias Schwarz/Agence France-Presse — Getty ImagesRussian officials are watching and waiting for what they believe is the inevitable collapse of European resolve as the economic pain bites.“I think that the coming winter will show how real their belief is in the possibility of refusing Russian gas,” the Russian energy minister, Nikolai Shulginov, said in an interview with the Russian state-run news agency Tass. “This will be a completely new life for the Europeans. I think that, most likely, they will not be able to refuse.”Russian state news outlets are full of reports of protests in Europe. Italians, Russian state media reported, are being told to boil their pasta for just two minutes before turning off the heat, while Germans are forgoing showers.The message: Sooner or later, the Europeans’ unity against Russia will crumble under the weight of high gas prices, while Russia’s standing has been elevated.“We have not lost anything and will not lose anything,” Mr. Putin said on Wednesday.But increasingly, Europe’s leaders are signaling that, having spent months preparing for this moment, they are ready for the showdown.“Now our work is paying off!” the European Commission president, Ursula von der Leyen, said on Wednesday in Brussels. “At the beginning of the war, Russia’s pipeline gas was 40 percent of all imported gas. Today it is now down to only 9 percent of our gas imports.”That is because European leaders — especially those from Italy and Germany, which rely most on Russian energy — have crisscrossed the globe. From Algeria to Qatar, Senegal, Congo and Canada, they have been negotiating deals to replace Russian supplies.Gazprom’s Orenburg gas processing plant in Russia. Steep energy prices netted the company $41.75 billion profit in the first half of the year — $10 billion of which went to the Kremlin.Alexander Manzyuk/ReutersGermany has also leaned heavily on Norway and the Netherlands, which agreed to extend the life of its biggest gas field to combat the energy crisis.As a result, Germany’s dependency on cheap Russian gas — once more than half its overall gas imports — decreased to less than 10 percent in August.In Italy, consumption from Moscow has dropped to 23 percent from 40 percent.Chancellor Olaf Scholz of Germany and other European leaders are defiantly claiming the end of an era.For decades, dating to the days of the Soviet Union, Moscow had insisted to Germany and others that it was a reliable energy partner, no matter the political context. But now, European leaders say, Mr. Putin has shattered that understanding.“Something that held true throughout the Cold War no longer applies,” Mr. Scholz said last weekend. “Russia is no longer a reliable energy supplier. That is part of the new reality.”That new reality, perhaps, should not have come as such a shock. Mr. Putin’s gas brinkmanship dates to 2004, when Gazprom cut deliveries to Belarus, in a battle for control of a transit pipeline into Western Europe.In 2009, as Ukraine sought NATO membership under a pro-Western president, Mr. Putin ordered a sharp reduction in gas flows through the country; after Ukraine elected a pro-Russian president a year later, the Kremlin rewarded him with a 30 percent cut in natural gas prices.And even before Russia invaded Ukraine, it reduced exports in the summer of 2021, and did not refill Gazprom-owned storage sites in Europe.A compressor station near the German-Polish border for Russian gas through the Yamal-Europe pipeline.Filip Singer/EPA, via ShutterstockSergey Vakulenko, an analyst in Bonn, Germany, who worked for years in Russia’s energy industry, said that over the last two decades Russian officials had seen the geopolitical power that the United States derived from its influence over the global financial system, and sought to harness Russia’s status as a major energy exporter in a similar way.“There was a great desire, as a superpower, to have something similar,” he said. “There was the feeling that oil and gas was the answer.”Yet Russia’s cuts in gas exports to Europe since its invasion of Ukraine are of a different order of magnitude. “This is now just blackmail,” said Mikhail Krutikhin, a Russian energy analyst. “We haven’t seen it on this scale before.”In going so far, Mr. Putin has also invited greater risks. An internal Russian government economic forecast described this week by Bloomberg News estimated that a full cutoff of gas to Europe would cost as much as $6.6 billion in lost tax revenues.But with Gazprom netting a record profit of $41.75 billion in the first half of the year — $10 billion of which it passed on to the Kremlin — that is a cost Mr. Putin has calculated to be acceptable.For Russia, oil is the biggest revenue source, and Mr. Putin may be keen to use gas as a political weapon while he can, said Thomas O’Donnell, an energy expert at the Hertie School, a public policy school in Berlin.“This is where he’s got his biggest leverage to cause the most trouble in the European Union,” Mr. O’Donnell said. He added, “It’s a lever that he knows he’s going to lose in a year — or even maybe after this winter.”And a lot may depend on the severity of the winter. Even if liquid natural gas imports to Europe from other sources continue at their record high rate, a study released this week by the research institute Bruegel estimated that a complete stop to Russian supplies would require all of Europe to cut its consumption by 15 percent.European nations that used to rely on Russian gas imports for big chunks of their domestic energy production have been racing to fill gas storage facilities. Germany’s are now at 86 percent capacity, Italy’s at almost 84 percent.In Germany, large industry players have so far managed to drop their consumption by around 20 percent. A similar amount would have to be shaved off household usage, according to German energy and economy ministry models, should Russian gas remain shut off. If households don’t cut back, Germany’s gas regulator has repeatedly warned, the option could be rationing.Lights switched off in apartments in Frankfurt. German energy officials have repeatedly warned that households must conserve energy or face rationing.Michael Probst/Associated PressEurope is aiming to have enough liquid natural gas solutions in place by next year. Germany recently signed a deal for a fifth floating L.N.G. terminal, while terminals in Belgium, France and the Netherlands are fully booked.The key to surviving this winter in the face of a Nord Stream shutdown will be how well European states work together.So far, only Hungary has signed a deal for additional supplies with Gazprom.France and Germany, in contrast, agreed this week that Paris would send any excess gas to Germany, where it is badly needed, and in return Berlin promised to send its extra electricity.The tricky issue will be what happens should more critical German industry have to cut back, and voters begin to insist supplies not be diverted to neighbors — like the Czech Republic, where 70,000 people already came out in protest of soaring prices. It is a challenge many European leaders may face this winter, warned Annalena Baerbock, Germany’s foreign minister.“That will be the central question that will really put us to the test in the coming months,” Ms. Baerbock said, at a meeting of German ambassadors in Berlin this week. “Will we be able to secure our energy supply for all people in Europe together in solidarity, or not?”Gaia Pianigiani More

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    From Boom to Gloom: Tech Recruiters Struggle to Find Work

    Seemingly overnight, the tech industry flipped from aggressive growth, hiring sprees, lavish perks and boundless opportunity to layoffs, hiring freezes and doing more with less.Nora Hamada, a 35-year-old who works with recruiters who hire employees for tech companies, is trying to be optimistic. But the change upended her online business, Recruit Rise, which teaches people how to become recruiters and helps them find jobs.In June, after layoffs trickled through tech companies, Ms. Hamada stopped taking new customers and shifted her focus away from high-growth start-ups. “I had to do a 180,” she said. “It was an emotional roller coaster for sure.”Throughout the tech industry, professional hirers — the frontline soldiers in a decade-long war for tech talent — are reeling from a drastic change of fortune.For years during an extraordinary tech boom, recruiters were flush with work. As stock prices, valuations, salaries and growth soared, companies moved quickly to keep up with demand and beat competitors to the best talent. Amy Schultz, a recruiting lead at the design software start-up Canva, marveled on LinkedIn last year that there were more job postings for recruiters in tech — 364,970 — than for software engineers — 342,586.But this year, amid economic uncertainty, tech companies dialed back. Oracle, Tesla and Netflix laid off staff, as did Peloton, Shopify and Redfin. Meta, Google, Microsoft and Intel made plans to slow hiring or freeze it. Coinbase and Twitter rescinded job offers. And more than 580 start-ups laid off nearly 77,000 workers, according to Layoffs.fyi, a crowdsourced site that tracks layoffs.The pain was acute for recruiters. Robinhood, the stock trading app that was hiring so quickly last year that it acquired Binc, an 80-person recruiting firm, underwent two rounds of layoffs this year, cutting more than 1,000 employees.Now some recruiters are adapting from blindly filling open jobs, known as a “butts in seats” strategy, to having “more formative” conversations with companies about their values. Others are cutting their rates as much as 30 percent or taking consulting jobs, internships or part-time roles. At some companies, recruiters are being asked to make sales calls to fill their time.“Companies are being looked at pretty dramatically differently in the investor market or public market, and now they have to pretty quickly adapt,” said Nate Smith, chief executive of Lever, a provider of recruiting software.It is a confusing time for the job market. The unemployment rate remains low, and employees who outlasted the “Great Resignation” of the millions who quit their jobs during the pandemic became accustomed to demanding more flexibility around their schedules and remote working.Nora Hamada’s program for training recruiters, Recruit Rise, grew quickly after she started it last summer.Leah Nash for The New York TimesBut companies are using layoffs and the specter of a recession to assert more control. Mark Zuckerberg, chief executive of Meta, said he was fine with employees’ “self-selection” out of the company as he set a new, relentless pace of work. Some companies have asked employees to move to a headquarters city or leave, which observers say is an indirect way to trim head count without doing layoffs.Plenty of tech companies are still hiring. Many of them expect growth to bounce back, as it did for the tech industry a few months after the initial shock of the pandemic in 2020. But companies are also under pressure to turn a profit, and some are struggling to raise money. So even the best-performing firms are being more careful and taking longer to make offers. For now, recruiting is no longer a top priority.Recruiters know the industry is cyclical, said Bryce Rattner Keithley, founder of Great Team Partners, a talent advisory firm in the San Francisco Bay Area. There’s an expression about gumdrops — or “nice to have” hires — versus painkillers, who are employees that solve an acute problem, she said.“A lot of the gumdrops — that’s where you’re going to see impact,” she said. “You can’t buy as many toys or shiny things.”Ms. Hamada started Recruit Rise in July last year, when recruiting firms were so overbooked that companies had to call in favors for the privilege of their business. Her company aimed to help meet that demand by offering people — typically midcareer professionals — a nine-week training course in recruiting for technical roles.The program grew quickly, forging relationships with prominent venture capital firms and Y Combinator’s Continuity Fund, which helped funnel students from Ms. Hamada’s program into recruiting jobs at high-growth tech start-ups.In May, emails from companies wanting to hire her students started tapering off. The venture firms she worked with began publishing doom-and-gloom blog posts about cutbacks. Then the layoffs started.Ms. Hamada stopped offering new classes to focus on helping existing students find jobs. She scrambled to contact companies outside the tech industry that were hiring tech roles — like banks or retailers — as well as software development agencies and consulting groups.“It was a scary period,” she said.For Jordana Stein, the shift happened on May 19. Her start-up, Enrich, hosts recurring discussion groups for professionals. In recent years, the most popular one was focused on “winning the talent wars” by hiring quickly. Enrich’s virtual events typically filled up with a wait list. But that day, three people showed up, and they didn’t talk about hiring — they talked about layoffs.“All of a sudden, the needs changed,” Ms. Stein, 39, said. Enrich, based in San Francisco, created a new discussion group focused on employee morale during a downturn.Pitch, a software start-up based in Berlin, froze hiring for new roles in the spring. The company’s four recruiters suddenly had little to do, so Pitch directed them to take rotations on other teams, including sales and research.By keeping the recruiters on staff, Pitch will be ready to start growing quickly again if the market rebounds, said Nicholas Mills, the start-up’s president.“Recruiters have a lot of transferable skills,” he said.Lucille Lam, 38, has been a recruiter her entire career. But after her employer, the crypto security start-up Immunefi, slowed its recruiting efforts in the spring, she switched to work in human resources. Instead of managing job listings and sourcing recruits, she began setting up performance review systems and “accountability frameworks” for Immunefi’s employees.“My job morphed heavily,” she said.Ms. Lam said she appreciated the chance to learn new skills. “Now I understand how to do terminations,” she said. “In a market where nobody’s hiring, I’ll still have a valuable skill set.”Matt Turnbull, a co-founder of Turnbull Agency, said at least 15 recruiters had asked him for work in recent months because their networks had dried up. Some offered to charge 10 percent to 30 percent below their normal rates — something he had never seen since starting his agency, which operates from Los Angeles and France, seven years ago.“Many recruiters are desperate now,” he said.Those who are still working have it harder than before. Job candidates often get stuck in holding patterns with companies that have frozen budgets. Others see their offers suddenly rescinded, leading to difficult conversations.“I have to try to be as honest as possible without discouraging them,” Mr. Turnbull said. “That doesn’t make not being not wanted any easier.”At Recruit Rise, Ms. Hamada restarted classes to train recruiters in late August. Steering her students away from start-ups funded by venture capital has shown promise, even if some of them have started with internships or part-time work instead of a full-time gig.Ms. Hamada is hopeful about the new direction, but less so about the tech companies propped by venture capital funding. “They’re not looking that stable right now,” she said. More

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    Labor Board Proposes to Increase Legal Exposure for Franchised Chains

    Federal labor regulators on Tuesday proposed a rule that would make more companies legally liable for labor law violations committed by their contractors or franchisees.Under the proposal, which governs when a company is considered a so-called joint employer, the National Labor Relations Board could hold a company like McDonald’s liable if one of its franchisees fired workers who tried to unionize, even if the parent company exercised only indirect control over the workers. Indirect control can include requiring the franchisee to use software that locks in certain scheduling practices and setting limits on what the workers can be paid.Under the current approach, adopted in 2020, when the board had a majority of Republican appointees, the parent company could be held liable for such labor law violations only if it exerted direct control over the franchisee’s employees — such as directly determining their schedules and pay.The joint-employer rule also determines whether the parent company must bargain with employees of a contractor or franchisee if those employees unionize.Employees and unions generally prefer to bargain with the parent company and to hold it accountable for labor law violations because the parent typically has more power than the contractor or franchisee to change workplace policies and make concessions.“In an economy where employment relationships are increasingly complex, the board must ensure that its legal rules for deciding which employers should engage in collective bargaining serve the goals of the National Labor Relations Act,” Lauren McFerran, the chairwoman of the board, which has a Democratic majority, said in a statement.The legal threshold for triggering a joint-employer relationship under labor law has changed frequently in recent years, depending on the political composition of the labor board. In 2015, a board led by Democrats changed the standard from “direct and immediate” control to indirect control.As a result of that shift, parent companies could also be considered joint employers of workers hired by a contractor or franchisee if the parent had the right to control certain working conditions — like firing or disciplining workers — even if it didn’t act on that right.Under President Donald J. Trump, the board moved to undo that change. The Republican-led board not only restored the standard of direct and immediate control, it also required that the control exercised by the parent be “substantial,” making it even more difficult to deem a parent company a joint employer.The franchise business model has faced rising pressure. On Monday, Gov. Gavin Newsom of California said he had signed a bill creating a council to regulate labor practices in the fast food industry. The council has the power to raise the minimum wage for the industry in California to $22 an hour next year, compared with a statewide minimum of $15.50, and to issue health and safety standards to protect workers.The fast food industry strongly opposed the measure, arguing that it would raise costs for employers and prices for consumers. More

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    Biden Administration Releases Plan for $50 Billion Investment in Chips

    The Commerce Department issued guidelines for companies angling to receive federal funding aimed at bolstering the domestic semiconductor industry.WASHINGTON — The Department of Commerce on Tuesday unveiled its plan for dispensing $50 billion aimed at building up the domestic semiconductor industry and countering China, in what is expected to be the biggest U.S. government effort in decades to shape a strategic industry.About $28 billion of the so-called CHIPS for America Fund is expected to go toward grants and loans to help build facilities for making, assembling and packaging some of the world’s more advanced chips.Another $10 billion will be devoted to expanding manufacturing for older generations of technology used in cars and communications technology, as well as specialty technologies and other industry suppliers, while $11 billion will go toward research and development initiatives related to the industry.The department is aiming to begin soliciting applications for the funding from companies no later than February, and it could begin disbursing money by next spring, Gina Raimondo, the secretary of commerce, said in an interview.The fund, which was approved by Congress in July, was created to encourage U.S. production of strategically important semiconductors and spur research and development into the next generation of chip technologies. The Biden administration says the investments will lessen dependence on a foreign supply chain that has become an urgent threat to the country’s national security.“This is a once-in-a-lifetime opportunity, a once-in-a-generation opportunity, to secure our national security and revitalize American manufacturing and revitalize American innovation and research and development,” Ms. Raimondo said. “So, although we’re working with urgency, we have to get it right, and that’s why we are laying out the strategy now.”Trade experts have called the fund the most significant investment in industrial policy that the United States has made in at least 50 years.It will come at a pivotal moment for the semiconductor industry.Tensions between the United States and China are rising over Taiwan, the self-governing island that is the source of more than two-thirds of the most advanced semiconductors. Shortages of semiconductors have also helped to fuel inflation globally, by increasing delivery times and prices for electronics, appliances and cars.Semiconductors are crucial components in mobile phones, pacemakers and coffee makers, and they are also the key to advanced technologies like quantum computing, artificial intelligence and unmanned drones.With midterm elections fast approaching, the Biden administration is under pressure to demonstrate that it can use this funding wisely and lure manufacturing investments back to the United States. The Commerce Department is responsible for choosing which companies receive the money and monitoring their investments.In its strategy paper, the Commerce Department said that the United States remained the global leader in chip design, but that it had lost its leading edge in producing the world’s most advanced semiconductors. In the last few years, China has accounted for a substantial portion of newly built manufacturing, the paper said.The high cost of building the kind of complex facilities that manufacture semiconductors, called fabs, has pushed companies to separate their facilities for designing chips from those that manufacture them. Many leading companies, like Qualcomm, Nvidia and Apple, design chips in the United States, but they contract out their fabrication to foundries based in Asia, particularly in Taiwan. The system creates a risky source of dependence for the chips industry, the White House says.The department said the funding aimed to help offset the higher costs of building and operating facilities in the United States compared with other countries, and to encourage companies to build the larger type of fabs in the United States that are now more common in Asia. Domestic and foreign companies can apply for the funds, as long as they invest in projects in the United States.To receive the money, companies will need to demonstrate the long-term economic viability of their project, as well as “spillover benefits” for the communities they operate in, like investments in infrastructure and work force development, or their ability to attract suppliers and customers, the department said.Projects that involve economically disadvantaged individuals and businesses owned by minorities, veterans or women, or that are based in rural areas, will be prioritized, the department said. So will projects that help make the supply chain more secure by, for example, providing another production location for advanced chips that are manufactured in Taiwan. Companies are encouraged to demonstrate that they can obtain other sources of funding, including private capital and state and local investment.The Commerce Department is setting up two new offices housed under the National Institute of Standards and Technology to set up the programs.One of the department’s biggest challenges will be ensuring that the government funds add to, rather than displace, money that chip making companies were already planning to invest. Companies including GlobalFoundries, Micron, Qualcomm and Intel have announced plans to make major investments in U.S. facilities that may qualify for government funding.The chips bill specifies that companies that accept funding cannot make new, high-tech investments in China or other “countries of concern” for at least a decade, unless they are producing lower-tech “legacy chips” destined to serve only the local market.The Commerce Department said it would review and audit companies that receive the funding, and claw back funds from any company that violates the rules. The guidelines also forbid recipients from engaging in stock buybacks, so that taxpayer money doesn’t end up being used to reward a company’s investors.“We’re going to run a serious, competitive, transparent process,” Ms. Raimondo said. “We are negotiating for every nickel of taxpayer money.”In addition to the new prohibitions on investing in chip manufacturing facilities in China, officials in the Biden administration have agreed that the White House should take executive action to scrutinize outbound investment in other industries as well, Ms. Raimondo said.But she added that the administration was still working through the details of how to put such a policy in place.Earlier versions of the chips bill also proposed setting up a broader system to review investments that U.S. companies make abroad to prevent certain strategic technologies from being shared with U.S. adversaries. That provision, which would have applied to cutting-edge technologies beyond the chips sector, was stripped out of the bill, but officials in the Biden administration have been considering an executive order that would establish a similar review process.The United States has a review system for investments that foreign companies make in the United States, but not vice versa.The Biden administration has also taken steps to restrict the types of advanced semiconductors and equipment that can be exported out of the United States.In statements last week, Nvidia and Advanced Micro Devices, both based in Silicon Valley, said they had been notified by the U.S. government that exports to China and Russia of certain high-end chips they produce for use in supercomputers and artificial intelligence were now restricted. These chips help power the kind of supercomputers that can be used in weapons development and intelligence gathering, including large-scale surveillance. Ms. Raimondo declined to discuss the export controls in detail but said the department was “constantly evaluating” its efforts, including how best to work with allies to deny China the equipment, software and tooling the country uses to enhance its semiconductor industry. More

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    Economists are divided on the risk of a U.S. recession. And the jobs data isn't helping

    Academics and analysts have told CNBC a recession is everything from inevitable to unlikely over the last month.
    The continued debate reflects a split over whether to focus on falling GDP in real terms, or strength in personal spending and the job market.
    “We live in a period of multiple shocks – from Covid-19 over energy prices to political deglobalization – which make predictions extremely difficult,” one economist said.

    Is the U.S. economy showing no signs of a recession or hurtling inescapably towards one? Is it in fact already in one? 
    More than a month after the country recorded two successive quarters of economic contraction, it still depends who you ask. 

    Steve Hanke, professor of applied economics at Johns Hopkins University, believes the U.S. is headed for a “whopper” of a recession in 2023. While Stephen Roach of Yale University agrees it will take a “miracle” for the U.S. to avoid a recession next year — but it won’t be as bad as the downturn of the early 1980s. 
    Yet the Nobel Prize-winning economist Richard Thaler says he doesn’t see “anything that resembles a recession” in the U.S. right now, pointing to recent low unemployment, high job vacancies, and the fact that the economy is growing — just not as fast as prices. 
    And market participants are similarly divided. 
    Liz Ann Sonders, chief investment strategist at Charles Schwab, says a recession is more likely than a soft landing for the U.S. economy right now, although it may be a rotational recession that hits the economy in pockets. 
    While Steen Jakobsen, chief investment officer at Saxo Bank, was clear in a recent interview with CNBC: the U.S. is not heading for a recession in nominal terms, even if it is in real terms.

    Recent surveys reflect the split. A Reuters poll of economists in late August put the chance of a U.S. recession within a year at 45% (with most saying one would be short and shallow), and a Bloomberg survey put the probability of a downturn at 47.5%. 

    Mixed signals 

    So why the discrepancy? It depends what you focus on: gross domestic product (GDP), or the jobs market.
    U.S. GDP declined by 0.9% year-on-year in the second quarter and by 1.6% in the first, meeting the traditional definition of a recession. The slump in growth was driven by a number of factors including falling inventories, investment and government spending. Inflation-adjusted personal income and saving rates also fell.
    However, in the U.S. a recession is officially declared by the National Bureau of Economic Research, which likely won’t make a judgment on the period in question for some time.
    What makes this time different from every other six-month period of negative GDP since 1947 has been continued strength in the jobs market. 
    The closely-watched nonfarm payrolls data for August, released Friday, showed nonfarm payrolls increased by 315,000 — a solid rise, but the lowest monthly gain since April 2021.
    It added to other recent releases which have shown a slowdown in private payroll growth, but a much higher rate of new job openings than expected.

    William Foster, senior credit officer at Moody’s, said jobs-versus-GDP continued to be the big debate among economic commentators, against a backdrop of the U.S Federal Reserve changing quickly from an accommodative monetary policy — where it adds to the money supply to boost the economy — to a restrictive one, involving interest rate hikes in order to tackle inflation, which hit 8.5% in July.
    “We’re coming out of an extraordinary period that’s not been seen before in history,” Foster told CNBC by phone. 
    When making its decision, the National Bureau of Economic Research looks at real income for households, real spending, industrial production and the labor market and unemployment — and those variables aren’t giving clear recession signals, Foster said. 
    “The jobs market is still struggling to hire people, particularly in the services sector,” he said.

    Wider indicators

    Foster also noted that households were still spending relatively strongly, albeit at a slower rate of growth, enabled by the period of accumulation of household savings during the pandemic.
    However, at the recent Ambrosetti Forum in Italy, economist Joseph Stiglitz told CNBC he was concerned about the fall in real wages workers were experiencing despite the tight labor market.
    As well as disagreeing on which indicators to focus on, commentators are also split on what certain sectors are showing.
    Investor Peter Boockvar says the latest data on housing and manufacturing show why the U.S. will not be able to avoid a recession, with the National Association of Home Builders/Wells Fargo Housing Market Index dropping into negative territory in August.
    But according to Saxo Bank’s Jakobsen: “We still have double digit increases in the rental market. That is not going to create a recession.”
    “Simply, people have enough money on the balance sheet to buy an apartment and rent it out and make 20 to 30%. So [a recession] is not going to happen.”

    Volatile times

    There are broader reasons for the current level of debate too, said Alexander Nutzenadel, professor of social and economic history at the Humboldt University of Berlin.
    “We live in a period of multiple shocks – from Covid 19 over energy prices to political deglobalization – which make predictions extremely difficult,” he told CNBC by email. 
    This means the economic performance of a highly developed country such as the U.S. depends heavily on external factors. 

    The current situation of “stagflation” — when high inflation and economic stagnation occur simultaneously — is historically rare, he continued, though not completely unprecedented. 
    “We had a similar moment in the 1970s, but from this experience we know that monetary policy has enormous difficulties to find the right balance between fighting inflation and preventing a recession.”
    Finally, he noted that the economics profession had become “much more diverse” in recent years.
    “There is no ‘mainstream economics’ anymore, everything has become controversial, including theory, data and methods,” Nutzenadel said.
    The very practice of having a recession officially declared by the National Bureau of Economic Research has recently been questioned by some, with Tomas Philipson, professor of public policy studies at the University of Chicago, recently asking: “Why do we let an academic group decide? We should have an objective definition, not the opinion of an academic committee.”
    In any case, Philipson concluded, “What really matters is paychecks aren’t reaching as far. What you call it is less relevant.”
    — CNBC’s Jeff Cox contributed to this report.

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    'Why shouldn't it be as bad as the 1970s?': Historian Niall Ferguson has a warning for investors

    Historian Niall Ferguson warned Friday that the world is sleepwalking into an era of political and economic upheaval akin to the 1970s — only worse.
    Speaking to CNBC at the Ambrosetti Forum in Italy, Ferguson said that the catalyst required to spark a repeat of the 70s — namely inflation and international conflict — had already occurred.
    “The ingredients of the 1970s are already in place,” Ferguson, Milbank Family Senior Fellow at the Hoover Institution, Stanford University, told CNBC’s Steve Sedgwick.

    Historian Niall Ferguson warned Friday that the world is sleepwalking into an era of political and economic upheaval akin to the 1970s — only worse.
    Speaking to CNBC at the Ambrosetti Forum in Italy, Ferguson said the catalyst events had already occurred to spark a repeat of the 70s, a period characterized by financial shocks, political clashes and civil unrest. Yet this time, the severity of those shocks was likely to be greater and more sustained.

    “The ingredients of the 1970s are already in place,” Ferguson, Milbank Family Senior Fellow at the Hoover Institution, Stanford University, told CNBC’s Steve Sedgwick.
    “The monetary and fiscal policy mistakes of last year, which set this inflation off, are very alike to the 60s,” he said, likening recent price hikes to the 1970’s doggedly high inflation.
    “And, as in 1973, you get a war,” he continued, referring to the 1973 Arab-Israeli War — also known as the Yom Kippur War — between Israel and a coalition of Arab states led by Egypt and Syria.
    As with Russia’s current war in Ukraine, the 1973 Arab-Israeli War led to international involvement from then-superpowers the Soviet Union and the U.S., sparking a wider energy crisis. Only that time, the conflict lasted just 20 days. Russia’s unprovoked invasion of Ukraine has now entered into its sixth month, suggesting that any repercussions for energy markets could be far worse.
    “This war is lasting much longer than the 1973 war, so the energy shock it is causing is actually going to be more sustained,” said Ferguson.

    2020s worse than the 1970s

    Politicians and central bankers have been vying to mitigate the worst effects of the fallout, by raising interest rates to combat inflation and reducing reliance on Russian energy imports.
    But Ferguson, who has authored 16 books, including his most recent “Doom: The Politics of Catastrophe,” said there was no evidence to suggest that current crises could be avoided.
    “Why shouldn’t it be as bad as the 1970s?” he said. “I’m going to go out on a limb: Let’s consider the possibility that the 2020s could actually be worse than the 1970s.”

    Top historian Niall Ferguson has said the world is on the cusp of a period of political and economic upheaval akin to the 1970s, only worse.
    South China Morning Post | Getty Images

    Among the reasons for that, he said, were currently lower productivity growth, higher debt levels and less favorable demographics now versus 50 years ago.
    “At least in the 1970s you had detente between superpowers. I don’t see much detente between Washington and Beijing right now. In fact, I see the opposite,” he said, referring to recent clashes over Taiwan.

    The fallacy of global crises

    Humans like to believe that global shocks happen with some degree of order or predictability. But that, Ferguson said, is a fallacy.
    In fact, rather than being evenly spread throughout history, like a bell curve, disasters tend to happen non-linearly and all at once, he said.
    “The distributions in history really aren’t normal, particularly when it comes to things like wars and financial crises or, for that matter, pandemics,” said Ferguson.
    “You start with a plague — or something we don’t see very often, a really large global pandemic — which kills millions of people and disrupts the economy in all kinds of ways. Then you hit it with a big monetary and fiscal policy shock. And then you add the geopolitical shock.”
    That miscalculation leads humans to be overly optimistic and, ultimately, unprepared to handle major crises, he said.
    “In their heads, the world is kind of a bunch of averages, and there aren’t likely to be really bad outcomes. This leads people … to be somewhat overoptimistic,” he said.
    As an example, Ferguson said he surveyed attendees at Ambrosetti — a forum in Italy attended by political leaders and the business elite — and found low single-digit percentages expect to see a decline in investment in Italy over the coming months.
    “This is a country that’s heading towards a recession,” he said.

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