Evelyn Reynolds

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    Corporate America Has a Message for the Fed About Inflation

    If the Federal Reserve’s chair, Jerome H. Powell, and his colleagues look at company earnings reports, these themes might catch their eye.Federal Reserve officials are battling the fastest inflation in four decades, and as they do they are parsing a wide variety of data sources to see what might happen next. If they check in on how executives are describing their companies’ latest financial results, they might have reasons to worry.It’s not because the corporate chiefs are overly gloomy about their prospects as the Fed aggressively raises interest rates to control rapid inflation. Quite the opposite: Many executives across a range of industries over the last few weeks have said they expect to see sustained demand. In many cases, they plan to continue raising prices in the months ahead.That is good for investors — the S&P 500 index gained 8 percent last month as companies began reporting quarterly profits — but not necessarily welcome news for the Fed, which has been trying hard to slow consumer spending. The central bank has already raised rates five times this year and is expected to do so again on Wednesday as part of its campaign to cool off the economy. Although companies have warned that the economy may slow and often talk about a tough environment, many are not seeing customers crack yet.“While we are seeing signs of economic slowing, consumers and corporates remain healthy,” Jane Fraser, the chief executive of Citigroup, told investors recently. “So it is all a question of what it takes to truly tame persistently high core inflation.”If companies continue to charge more and consumers are still willing to pay, inflation will be harder to stamp out. That could push the Fed to keep up its push to curb momentum — and if officials must do more to wrestle prices down, it could increase the risk of financial turmoil, higher unemployment or other bad outcomes. Although some companies are reporting a nascent slowdown, the signs are far from conclusive.Demand remains strong despite higher prices.McDonald’s expects to raise prices 10 percent at its restaurants in the United States this year, its leaders said when reporting better-than-expected sales and profits for the third quarter.“I think because of the strength of the brand and the proposition as evidenced by the results, the consumers are willing to tolerate it,” said Chris Kempczinski, the fast-food giant’s chief executive.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Job Openings Rose in September Despite Higher Interest Rates

    The labor market has remained stronger than expected even as the Federal Reserve has tried to get inflation under control.The nation’s extreme shortage of job seekers worsened in September, the Labor Department reported Tuesday, after easing the previous month.Employers had 10.7 million positions open as summer ended, up from 10.3 million in August. That left roughly 1.9 posted jobs for every unemployed worker, a persistently high ratio even as the economy appears to be decelerating because the Federal Reserve is working to quell inflation.Pulling down job postings — or holding off on new ones — is usually the first step that employers take as the economy weakens, in hopes that hiring more conservatively could avoid the need to lay people off later. But the labor market has been slow to respond to rising interest rates, even as other indicators point toward an impending recession.The report is the last piece of significant economic data to land before policymakers at the Fed meet on Wednesday, and only reinforces the likely outcome. Most analysts expect the central bank to raise its benchmark interest rate by 0.75 percentage points, even if job openings tumbled in Tuesday’s Labor Department report.“What if all the JOLTS dropped to zero?” said Dana Peterson, chief economist at the Conference Board, using shorthand for the Job Openings and Labor Turnover Survey. “I don’t think that would cause them to not go 75 basis points, because they’re focused on inflation. They’ve already said there’s going to be some pain, and pain is code for the labor market.”The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.September Jobs Report: Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates.A Cooling Market?: Unemployment is low and hiring is strong, but there are signs that the red-hot labor market may be coming off its boiling point.Disabled Workers: With Covid prompting more employers to consider remote arrangements, employment has soared among adults with disabilities.A Feast or Famine Career: America’s port truck drivers are a nearly-invisible yet crucial part of the global supply chain. And they are sinking into desperation.The number of open jobs is consistent with surveys of businesses, which have continued to report difficulty hiring. The National Federation of Independent Business found in its September survey that 23 percent of its members planned to create new jobs in the next three months, and of those, 89 percent said they had few qualified applicants.The jump in job openings was largely due to huge increases at hotels and restaurants, which added 215,000 postings. And the health care and social assistance sector was looking for 115,000 more workers than the previous month, reaching 2.1 million openings total, the highest level on record.At the same time, the number of people hired declined to about 6.1 million, continuing a downward slide that began this spring. That could be a consequence of employers having a tougher time finding qualified applicants, or deciding to hold positions open longer as they wait for the economic dust to settle.The number of people quitting their jobs voluntarily, usually a sign that workers have confidence they’ll be able to find a better one, declined slightly to about 4.1 million. As a share of total employment, that was about level with recent months but down from record highs at the end of 2021.Inflation has forced some workers to find ways to increase their earnings — whether by asking for raises or finding other jobs. At the same time, fear of a looming recession has prompted some workers to stay put unless they have another offer in hand.Quitting fell most in industries that are facing the strongest headwinds from higher interest rates and weakening consumer spending, including construction, transportation and warehousing, and manufacturing.The number of layoffs also declined from recent months. That’s in line with the weekly reports of initial claims for unemployment insurance, which have remained near record lows. After hiring aggressively over the past year — and often at higher salaries — employers may be less eager to let people go, even as business wavers.In an August survey of hiring managers by the polling firm Morning Consult, about 57 percent of respondents said they were retaining more employees than they normally would because of how difficult it was to replace people. That may lead to a reversal of the typical “last-in, first-out” pattern that has been common in other downturns.“If you spent a lot of money attracting workers, you don’t want to let them go right away, because then all that money just goes down the drain,” Ms. Peterson said. “Six months later you have to find them again, and they might be asking for a different asking price. You want to keep all your talent, but if you think about it, it’s very expensive to let go of those workers you just hired and invested a lot in.” More

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    Job openings surged in September despite Fed efforts to cool labor market

    Employment openings for the month totaled 10.72 million, well above the FactSet estimate for 9.85 million, according to September’s Job Openings and Labor Turnover Survey.
    The data indicates that there are 1.9 job openings for every available worker.
    The ISM Manufacturing Index posted a 50.2 reading, slightly better than the Dow Jones estimate for 50.0 but 0.9 percentage point lower than September.

    The Go! Go! Curry restaurant has a sign in the window reading “We Are Hiring” in Cambridge, Massachusetts, July 8, 2022.
    Brian Snyder | Reuters

    Job openings surged in September despite Federal Reserve efforts aimed at loosening up a historically tight labor market that has helped feed the highest inflation readings in four decades.
    Employment openings for the month totaled 10.72 million, well above the FactSet estimate for 9.85 million, according to data Tuesday from the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey.

    The total eclipsed August’s upwardly revised level by nearly half a million.
    Fed policymakers watch the JOLTS report closely for clues about the labor market. The latest numbers are unlikely to sway central bank officials from approving what likely will be a fourth consecutive 0.75 percentage point interest rate increase this week.
    September’s data indicates that there are 1.9 job openings for every available worker. The disparity in supply and demand has helped fuel a wage increase in which the employment cost index, another closely watched data point for the Fed, is growing at about a 5% annual pace.
    In other economic news Tuesday, the ISM manufacturing index posted a 50.2 reading, representing the percent of companies reporting expansion for October. That was slightly better than the Dow Jones estimate for 50.0 but 0.9 percentage point lower than September.
    One good piece of news from the ISM data: The prices index fell another 5.1 points to a 46.6 reading, indicating a lessening of inflation pressures. Order backlogs also declined, dropping 5.6 points to a 45.3 reading, while supplier deliveries fell 5.6 points to 46.8 and employment edged higher to 50.

    Hiring numbers have stayed solid, though they are slowing.
    Friday’s nonfarm payrolls report for October is expected to show growth of another 205,000, which while strong by historical levels would represent a further deceleration after averaging gains of 444,000 for the first half of 2022 but 372,000 over the past three months.
    Hiring declined by 252,000 in September, while quits edged lower. Total separations showed a sharp decline, falling by nearly 400,000 to a rate of 3.7% as a share of the labor force, down from 4% in August.
    Respondents to the ISM survey indicated various pressures continuing, while abating in other areas.
    “Challenges with labor and parts delivery are easing. Order levels are slowing down after pent-up demand in the previous month,” said one respondent in the transportation equipment industry.
    Another, in the food, beverage and tobacco sector, noted that the “growing threat of recession is making many customers slow orders substantially. Additionally, global uncertainty about the Russia-Ukraine (war) is influencing global commodity markets.”
    The Fed releases its rate decision Wednesday at 2 p.m. ET. Markets are pricing in a nearly 90% chance of a 0.75 percentage point increase, while narrowly expecting another 0.5 percentage point move in December, according to CME Group data.

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    Food Prices Soar, and So Do Companies’ Profits

    Some companies and restaurants have continued to raise prices on consumers even after their own inflation-related costs have been covered.A year ago, a bag of potato chips at the grocery store cost an average of $5.05. These days, that bag costs $6.05. A dozen eggs that could have been picked up for $1.83 now average $2.90. A two-liter bottle of soda that cost $1.78 will now set you back $2.17.Something else is also much higher: corporate profits.In mid-October, PepsiCo, whose prices for its drinks and chips were up 17 percent in the latest quarter from year-earlier levels, reported that its third-quarter profit grew more than 20 percent. Likewise, Coca-Cola reported profit up 14 percent from a year earlier, thanks in large part to price increases. Restaurants keep getting more expensive, too. Chipotle Mexican Grill, which said prices by the end of the year would be nearly 15 percent higher than a year earlier, reported $257.1 million in profit in the latest quarter, up nearly 26 percent from a year earlier.For years, food companies and restaurants generally raised prices in small, incremental steps, worried that big increases would frighten consumers and send them looking for cheaper options. But over the last year, as wages increased and the cost of the raw ingredients used to make treats like cookies, chips, sodas and the materials to package them soared, food companies and restaurants started passing along those expenses to customers.But amid growing concerns that the economy could be headed for a recession, some food companies and restaurants are continuing to raise prices even if their own inflation-driven costs have been covered. Critics say the moves are all about increasing profits, not covering expenses. Coca-Cola, PepsiCo and Chipotle did not respond to requests for comment.“The recent earnings calls have only reinforced the familiar and unwelcome theme that corporations did not need to raise their prices so high on struggling families,” said Kyle Herrig, the president of Accountable.Us, an advocacy organization. “The calls tell us corporations have used inflation, the pandemic and supply chain challenges as an excuse to exaggerate their own costs and then nickel and dime consumers.”So far, food companies and restaurants have been able to raise prices because the majority of consumers, while annoyed that the trip to the grocery store or drive-through for takeout costs more than it did a year ago, have been willing to pay. But there are plenty of shoppers, including those with lower incomes or retirees on fixed budgets, who say the higher prices have led to changes in their routines.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Eurozone Inflation Reaches 10.7 Percent as Economies Slow Down

    The rise in consumer prices hit another record in October, with more than half of the countries that use the euro registering double-digit increases.Consumer prices in the countries that use the euro as their currency rose at a stunning annual rate of 10.7 percent in October, the European Commission reported on Monday, while economic growth across the continent grew by 0.2 percent over the quarter that spanned July, August and September.Prices have been on an relentless upward march since last year, as painfully high energy and food prices continued to push inflation to record levels. Over the past 12 months, energy prices rose by 41.9 percent while food prices increased by 13.1 percent.More than half of the 19 countries in the eurozone recorded double-digit inflation rates in the year through October, including Germany (11.6 percent), the Netherlands (16.8 percent), Italy (12.8 percent) and Slovakia (14.5 percent), with the Baltic countries at the highest end of the spectrum with rates over 21 percent.In September, the inflation rate across the eurozone was 9.9 percent. Twelve months ago, it was 4.1 percent.“This is a significant acceleration,” said Lucrezia Reichlin, an economist at the London Business School. “Inflation is becoming broad-based.”Although economic growth overall slowed from 0.8 percent in the second quarter — April, May and June — some countries registered bigger expansions than analysts anticipated. Germany, Europe’s largest economy, grew by 0.3 percent during the third quarter, driven in part by consumer spending. Italy’s economy grew by 0.5 percent and Sweden’s by 0.7 percent. Elsewhere, growth slowed. In France and Spain, growth increased by just 0.2 percent. Austria and Belgium saw their economies shrink by 0.1 percent.In the larger bloc of 27 countries that make up the European Union, third-quarter growth also increased by 0.2 percent.The International Monetary Fund has warned that “European policymakers face severe trade-offs and tough policy choices as they address a toxic mix of weak growth and high inflation that could worsen.”Inflation is vexing many of the world’s economies and may worsen, particularly in the wake of Russia’s withdrawal from an agreement that allowed grain exports from Ukraine that is likely to push up food prices.Last week, the United States announced that consumer prices rose by 6.2 percent in the year through September, by one measure. Britain’s inflation rate was 8.8 percent over the same period.Central banks appear resolutely determined to halt the rise. “Inflation remains far too high and will stay above the target for an extended period,” Christine Lagarde, the president of the European Central Bank, said last week after announcing the bank was raising interest rates by three-quarters of a percentage point for the second time in a row.The International Monetary Fund has also urged central bankers to stay the course possibly through next year. It noted that “almost half the recent surge in European core inflation remains unexplained by its usual drivers,” suggesting that the war in Ukraine and aftershocks of the coronavirus pandemic were contributing to a new inflationary dynamic.The Federal Reserve is expected to raise interest rates by three-quarters of a percentage point when policymakers meet on Wednesday. It would be the sixth increase this year. The Bank of England, meeting on Thursday, is also expected to raise rates by the same amount.However painful higher interest rates may be for consumers and borrowers in the United States, the sting is even sharper in other regions around the world. Higher interest rates attract investors, which pushes up the value of the dollar. For emerging nations with high debt bills denominated in dollars, though, their already heavy burden grows even larger. At the same time, nations that have to import American goods or essentials like energy and food that are often priced in dollars, get much more expensive. Those countries get poorer.While most economists have urged a hard line on inflation, there are an increasing number of voices questioning whether central bankers are going too far, too fast. Higher interest rates are not going to suddenly increase the supply of oil, wheat and microchips, and may even exacerbate shortages by stunting investment.There is also fear that efforts to corral inflation will accelerate countries’ slide into recession by choking off investment and raising unemployment. Several analysts said on Monday that they expected growth in the final three months of the year to deteriorate.Andrew Kenningham, the chief Europe economist at Capital Economics, warned in a report that the eurozone “is heading for a deeper recession and higher inflation than most expect.” More

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    Jerome Powell Is Popular. His War on Inflation Could Change That.

    Jerome H. Powell, who is well liked across the political spectrum, is presiding over the fastest interest rate increases in generations, with another one expected this week.Jerome H. Powell has for years enjoyed something rare in a politically divided Washington: widespread popularity.While officially a Republican, Mr. Powell, the Federal Reserve chair, is a political centrist who has been nominated to prominent jobs at the central bank by President Biden as well as Presidents Barack Obama and Donald J. Trump. When Mr. Trump attacked Mr. Powell on Twitter in 2018 and 2019, criticizing him for not doing enough to stimulate the economy, liberal and conservative commentators rushed to his defense. When he was up for renomination, people across the political spectrum argued his case.The acclaim has extended beyond the capital. After delivering an economics-heavy speech on the labor market to a crowd of businesspeople in Rhode Island in 2019, Mr. Powell received a standing ovation — not a typical response to central bank oration.But the applause could soon stop.That is because Mr. Powell, who is in his fifth year of leading the world’s most important central bank, is presiding over the fastest interest rate increases in generations as the Fed tries to wrestle rapid inflation under control. The Fed is expected to raise rates by another three-quarters of a percentage point on Wednesday. And by next year, borrowing costs are expected to climb to nearly 5 percent, up from near zero as recently as March.The last time the central bank adjusted policy that quickly, in the 1980s, it inflicted economic pain that inspired intense backlash against the sitting chair, Paul A. Volcker. And while the rate increases were more extreme back then, the Fed’s moves were under far less public scrutiny than they are today, when global financial markets hang on every word coming from the central bank.Mr. Powell, 69, is acutely aware of his own reputation and that of the institution he leads. He reads four newspapers every morning, along with a set of news clips about the Fed that his staff sends him by 6 a.m. He keeps a careful eye on the debate economists are having on central bank policy, including the recent back-and-forth on Twitter between Lawrence H. Summers, a former Treasury secretary, and Paul Krugman, a New York Times columnist, about whether inflation is poised to subside so much that the Fed risks overdoing it.His consciousness of how the Fed’s moves are being received has at times prompted Mr. Powell to adjust course. He pivoted toward a gentler policy stance in early 2019 after markets reacted sharply to his Dec. 19, 2018, news conference, at which the Fed forecast that it would keep removing its support from the economy. And his awareness has shaped his communication style: Mr. Powell has tried to reach ordinary Americans, delivering plain-spoken remarks that acknowledge how economic developments shape their lives.Mr. Powell’s responsiveness has often been viewed as one of his strengths — but it is now prompting some economists and investors to question whether he will be able to stick by the central bank’s plan to wrangle inflation.Once today’s rate increases translate into palpable financial or economic pain, criticism is likely to come in hard and fast as recession risks intensify and as everyday Americans find their jobs at risk and their wage growth slowing. Already, some lawmakers and progressive economists are urging Mr. Powell to stop his rate campaign for the good of the American worker.Fed policy is made by committee, but the chair is the central bank’s most visible and powerful policymaker, and complaints are likely to be lobbed at Mr. Powell personally. As markets and the public react, some Fed watchers think he will back off before inflation is well and truly stamped out of the system.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Russian Trade Boomed After Invading Ukraine, Providing Ample War Funds

    Russia’s relationship with the world is continuing to evolve rapidly. To assess the global shifts, The Times analyzed years of country-level trade data compiled by the Observatory of Economic Complexity, an online data platform. Because the data is published with a lag, the picture it provides is inherently backward looking. Russia’s ability to trade with […] More

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    Workers at Trader Joe’s in Brooklyn Reject Union

    Workers at a Trader Joe’s store in Brooklyn have voted against unionizing, handing a union its first loss at the company after two victories this year.The workers voted 94 to 66 against joining Trader Joe’s United, an independent union that represents employees at stores in Western Massachusetts and Minneapolis. Workers at a Trader Joe’s in Colorado filed for an election this summer but withdrew their petition shortly before a scheduled vote.“We are grateful that our crew members trust us to continue to do the work of listening and responding to their needs, as we always have,” Nakia Rohde, a company spokeswoman, said in a statement after the National Labor Relations Board announced the result on Thursday.The result raises questions about whether the uptick in union activity over the past year, in which unions won elections at several previously nonunion companies like Starbucks, Amazon and Apple, may be slowing.Union supporters recently lost an election at an Amazon warehouse near Albany, N.Y., and the pace of unionization at Starbucks has dropped in recent months, though the union has won elections at over 250 of the company’s 9,000 corporate-owned U.S. stores so far.Workers at a second Apple store recently won an election in Oklahoma City, however, and unions have upcoming votes at a Home Depot in Philadelphia and a studio owned by the video game maker Activision Blizzard in upstate New York.As of June, Trader Joe’s had more than 500 locations and 50,000 employees across the country and was not unionized. Early in the pandemic, the company’s chief executive sent a letter to employees complaining of a “current barrage of union activity that has been directed at Trader Joe’s” and arguing that union supporters “clearly believe that now is a moment when they can create some sort of wedge in our company.”The company has said it is prepared to negotiate contracts at its unionized stores. An employee involved in the union, Maeg Yosef, said the two sides were settling on bargaining dates.Union supporters at the Brooklyn store had said they were seeking an increase in wages, improved health care benefits and paid sick leave as well as changes that would make the company’s disciplinary process more fair.Before union supporters had a chance to talk with all their colleagues, management became aware of the campaign and announced it in a note posted in the store’s break room in late September. The company also fired a prominent union supporter a day or two later.Amy Wilson, a leader of the union campaign in the store, said organizing had become more difficult after the firing and the note from management.“The last core of people hadn’t been spoken to directly by their co-workers, and we lost them instantly,” she said, referring to the note. “It undermined the trust, the relationship. They felt excluded and offended.”Ms. Rohde, the Trader Joe’s spokeswoman, did not respond to a question about why management posted the break room note. She said that while she couldn’t comment on the firing of the union supporter, “we have never and would never fire a crew member for organizing.”Trader Joe’s is known for providing relatively good wages and benefits for the industry, though workers have complained that the company has made its health care and retirement benefits less generous over the past decade. More