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    Inflation was much hotter than expected, bad news for the Fed.

    Inflation rose quickly in September and a key measure accelerated to the fastest pace since 1982, underlining the persistence of price increases.Prices continued to climb at a brutally rapid pace in September, with a key inflation index increasing at the fastest rate in 40 years, bad news for the Federal Reserve as it struggles to wrestle the cost of living back under control.Overall inflation climbed 8.2 percent over the year through September, according to the latest Consumer Price Index report on Thursday, a slight moderation from August but more than what economists had expected.Even more worrisome, underlying inflation trends are headed in the wrong direction. After stripping out fuel and food — which are volatile and removed to get a better sense of the trajectory — prices climbed 6.6 percent over the year through September. That was the quickest rate since 1982.Inflation has been rapid for a year and a half now, and it is proving stubborn even as the Fed mounts its most aggressive campaign in generations to slow the economy and bring price increases under control. Fast inflation has also triggered the highest Social Security cost-of-living adjustment in decades — an 8.7 percent increase in benefits to retired and disabled Americans, a move that was announced Thursday.Central bankers have quickly raised interest rates from near zero to a range of 3 to 3.25 percent, and investors expect a fourth straight three-quarter-point rate increase at the Fed’s next meeting, which concludes on Nov. 2. After the release of Thursday’s inflation data, they began to bet on another large move at the central bank’s December meeting.“The trend is very troubling,” said Blerina Uruci, a U.S. economist at T. Rowe Price.Markets swung wildly after the report, with stocks falling sharply initially but then surging higher as investors struggled to digest what the data meant for the future. The S&P 500 index closed up 2.6 percent.Higher Fed rates are already slowing the housing market, and are expected to slowly filter through the rest of the economy as they make it more expensive to borrow money for big purchases or business expansions. But consumer demand is taking time to crack: With jobs plentiful and wages rising, Americans are still spending.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    With New Crackdown, Biden Wages Global Campaign on Chinese Technology

    U.S. officials pushed to choke off China’s access to critical semiconductor technology after internal debates and tough negotiations with allies.WASHINGTON — In conversations with American executives this spring, top officials in the Biden administration revealed an aggressive plan to counter the Chinese military’s rapid technological advances.China was using supercomputing and artificial intelligence to develop stealth and hypersonic weapons systems, and to try to crack the U.S. government’s most encrypted messaging, according to intelligence reports. For months, administration officials debated what they could do to hobble the country’s progress.They saw a path: The Biden administration would use U.S. influence over global technology and supply chains to try to choke off China’s access to advanced chips and chip production tools needed to power those abilities. The goal was to keep Chinese entities that contributed to potential threats far behind their competitors in the United States and in allied nations.The effort, no less than what the Americans carried out against Soviet industries during the Cold War, gained momentum this year as the United States tested powerful economic tools against Russia as punishment for its invasion of Ukraine, and as China broke barriers in technological development. The Russian offensive and Beijing’s military actions also made the possibility of a Chinese invasion of Taiwan seem more real to U.S. officials.The administration’s concerns about China’s tech ambitions culminated last week in the unveiling of the most stringent controls by the U.S. government on technology exports to the country in decades — an opening salvo that would ripple through global commerce and could frustrate other governments and companies outside China.In a speech on Wednesday on the administration’s national security strategy, Jake Sullivan, the national security adviser, talked about a “small yard, high fence” for critical technologies.“Choke points for foundational technologies have to be inside that yard, and the fence has to be high because these competitors should not be able to exploit American and allied technologies to undermine American and allied security,” he said.This account of how President Biden and his aides decided to wage a new global campaign against China, which contains previously unreported details, is based on interviews with two dozen current and former officials and industry executives. Most spoke on the condition of anonymity to discuss deliberations.The measures were particularly notable given the Biden administration’s preference for announcing policies in tandem with allies to counter rival powers, as it did with sanctions against Russia.With China, the administration spent months in discussions with allies, including the Dutch, Japanese, South Korean, Israeli and British governments, and tried to persuade some of them to issue restrictions alongside the United States.But some of those governments have been hesitant to cut off important commerce with China, one of the world’s largest technology markets. So the Biden administration decided to act alone, without public measures from allies.More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.Gregory C. Allen, a former Defense Department official who is now at the Center for Strategic and International Studies, said the move came after consultation with allies but was “fundamentally unilateral.”“In weaponizing its dominant choke-point positions in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale,” he wrote in an analysis.The package of restrictions allows the administration to cut off China from certain advanced chips made by American and foreign companies that use U.S. technology.President Biden visited an IBM factory in Poughkeepsie, N.Y., last week.Erin Schaff/The New York TimesU.S. officials described the decision to push ahead with export controls as a show of leadership. They said some allies wanted to impose similar measures but feared retaliation from China, so the rules from Washington that encompass foreign companies did the hard work for them.Other rules bar American companies from selling Chinese firms equipment or components needed to manufacture advanced chips, and prohibit Americans and U.S. companies from giving software updates and other services to China’s cutting-edge chip factories.The measures do not directly restrict foreign makers of semiconductor equipment from selling products to China. But experts said the absence of the American equipment would most likely impede China’s nascent industry for making advanced chips. Eventually, though, that leverage could fade as China develops its own key production technologies.Some companies have chafed at the idea of losing sales in a lucrative market. In a call with investors in August, an executive at Tokyo Electron in Japan said the company was “very concerned” that restrictions could prevent its Chinese customers from producing chips. ASML, the Dutch equipment maker, has expressed criticisms.Chinese officials called the U.S. restrictions a significant step aimed at sabotaging their country’s development. The move could have broad implications — for example, limiting advances in artificial intelligence that propel autonomous driving, video recommendation algorithms and gene sequencing, as well as quashing China’s chip-making industry. China could respond by punishing foreign companies with operations there. And the way Washington is imposing the rules could strain U.S. alliances, some experts say.Top officials in the Biden administration have an aggressive plan to counter the Chinese military’s rapid technological advances.Kevin Frayer/Getty Images“Sanctions that put the United States at odds with its allies and partners today will both undercut their effectiveness and make it harder to enroll a broad coalition of states in U.S. deterrence efforts,” said Jessica Chen Weiss, a professor of government at Cornell University and a recent State Department official.Others have argued that the moves did not come soon enough. For years, U.S. intelligence reports warned that American technology was feeding China’s efforts to develop advanced weapons and surveillance networks that police its citizens.Last October, the intelligence community began highlighting the risks posed by Chinese advances in artificial intelligence, quantum computing and semiconductors in meetings with industry and government officials..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.Mr. Sullivan and other officials began pushing to curb sales of semiconductor technology, according to current and former officials and others familiar with the discussions.But some officials, including Commerce Secretary Gina Raimondo and her deputies, wanted to first secure the cooperation of allies. Starting late last year, they said in meetings that by acting alone, the United States risked harming its companies without doing much to stop Chinese firms from buying important technology from foreign competitors.The Trump administration announced restrictions on the Chinese tech giant Huawei and singled out the company as a threat to national security.Qilai Shen for The New York TimesA Diplomatic PushEven as the Trump administration took some aggressive actions against Chinese technology, like barring international shipments to Huawei, it began quiet diplomacy on semiconductor production equipment. U.S. officials talked with their counterparts in Japan and then the Netherlands — countries where companies make critical tools — on limiting exports to China, said Matthew Pottinger, a deputy national security adviser in the Trump administration.Biden administration officials have continued those talks, but some negotiations have been difficult. U.S. officials spent months trying to persuade the Netherlands to prevent ASML from selling older lithography machines to Chinese semiconductor companies, but they were rebuffed.U.S. officials carried out separate negotiations with South Korea, Taiwan, Israel and Britain on restricting the sale and design of chips.Outside of the diplomacy, there was increasing evidence that a tool the United States had used to restrict China’s access to technology had serious flaws. Under President Donald J. Trump, the United States added hundreds of companies to a so-called entity list that prohibited American companies from selling them sensitive products without a license.But each listing was tied to a specific company name and address, making it relatively easy to evade the restrictions, said Ivan Kanapathy, a former China director for the National Security Council.Current and former U.S. officials suspect the Chinese military and previously sanctioned Chinese companies, including Huawei, have tried to gain access to restricted technology through front companies. Huawei declined to comment.Huawei could soon face additional restrictions: The Federal Communications Commission is expected to vote in the coming weeks on rules that would block the authorization of new Huawei equipment in the United States over national security concerns.Biden officials also believed the restrictions issued by the Trump administration against Semiconductor Manufacturing International Corporation, a major Chinese chip maker known as SMIC, had been watered down by industry and were allowing too many sales to continue, people familiar with the matter said.In a call with heads of American semiconductor equipment makers in March, Mr. Sullivan said that the United States was no longer satisfied with the status quo with China, and that it was seeking to freeze Chinese technology, said one executive familiar with the discussion.Mr. Sullivan, who had dialed into the call alongside Ms. Raimondo and Brian Deese, the director of the National Economic Council, told executives from KLA, Applied Materials and Lam Research that rules restricting equipment shipments to China would be done with allies, the executive said.In a statement, the National Security Council said the measures were “consistent with the message we delivered to U.S. executives because the administration has controlled only tools made by U.S. companies where there is no foreign competitor.”A semiconductor plant in Suining, China. The Biden administration took action in August to clamp down on the country’s semiconductor industry.Zhong Min/Feature China/Future Publishing, via Getty ImagesBreakthrough in ChinaAs negotiations with allied governments continued, experts at the Commerce, Defense, Energy and State Departments spent months poring over spreadsheets listing dozens of semiconductor tools made by U.S. companies to determine which could be used for advanced chip production and whether companies in Japan and the Netherlands produced comparable equipment.Then in July came alarming news. A report emerged that SMIC had cleared a major technological hurdle, producing a semiconductor that rivaled some complex chips made in Taiwan.The achievement prompted an explosion of dissatisfaction in the White House and on Capitol Hill with U.S. efforts to restrain China’s technological advancement.The Biden administration took action in August to clamp down on China’s semiconductor industry, sending letters to equipment manufacturers and chip makers barring them from selling certain products to China.Last week, the administration issued the ‌rules with global reach.Companies immediately began halting shipments to China. But U.S. officials said they would issue licenses on a case-by-case basis so some non-Chinese companies could continue supplying their Chinese facilities with support and components. Intel, TSMC, Samsung and SK Hynix said they had received temporary exemptions to the rules.The controls could be the beginning of a broad assault by the U.S. government, Mr. Pottinger said.“The Biden administration understands now that it isn’t enough for America to run faster — we also need to actively hamper the P.R.C.’s ambitions for tech dominance,” he said, referring to the People’s Republic of China. “This marks a serious evolution in the administration’s thinking.”Julian Barnes More

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    2023 COLA Could Strain Social Security Program

    The Social Security Old-Age and Survivors Insurance Trust Fund could be depleted a year or two earlier than expected as a result of larger payouts.The 8.7 percent Social Security cost-of-living increase that was announced on Thursday is welcome news for retirees who are struggling to cope with surging inflation. But it could bring the social safety net program a step closer to insolvency.Annual government reports in June showed that the Social Security Old-Age and Survivors Insurance Trust Fund, which pays out retiree benefits, would be depleted in 2034. At that time, the fund’s reserves will run out, leaving the system reliant on incoming tax revenue. Those funds will provide enough money to cover only 77 percent of scheduled benefits unless Congress intervenes.Social Security is largely funded through payroll taxes, taxes levied on Social Security benefits and interest on money that the trust funds invest.Now that the program will be paying out more to help retirees keep up with rising prices, the program will be under even more pressure to sustain itself. Budget experts warn that the reserves could run out before 2034 as a result of the larger benefits.“This very large COLA increase is likely to bring the year of insolvency forward by a full year,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, referring to the cost-of-living adjustment. “It is just another reminder that procrastinating on addressing these imbalances leaves the people who depend on Social Security particularly vulnerable to a further deterioration in its finances.”The increased outlays for retirees will be partly offset by higher taxes on Americans. Along with the bigger benefits, the maximum amount of earnings subject to the Social Security payroll tax will increase to $160,200 from $147,000. Employers and employees each contribute 6.2 percent of wages up to that salary threshold, which is adjusted every year based on average wage growth.Because wages are rising, the amount of earnings subject to the tax is rising as well.Ms. MacGuineas estimated that the Social Security Trust Fund could have been depleted as much as two years earlier without the offsetting effect of the higher tax threshold.Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities, said the depletion date could be accelerated by as much as two years. But she added that a couple of years of high inflation probably would not fundamentally change Social Security’s long-term financing outlook.“It’s normal for Social Security’s trustees to update the expected reserve depletion date as circumstances change,” Ms. Romig said.Ms. Romig noted that more than 65 million retirees count on Social Security for most of their income and that the cost-of-living increase would ensure that older Americans did not fall into poverty as they aged.The June projections actually showed the depletion date of the fund being delayed by a year, from an earlier projection of 2033, the result of a stronger-than-expected economic recovery in 2021.Anqi Chen, assistant director of savings research at the Center for Retirement Research at Boston College, said the impact of the cost-of-living adjustment on the Social Security Trust Fund would depend on a combination of wage growth and labor force participation in the U.S. economy.“Higher wage growth would mean higher revenue for Social Security and a higher labor force participation would mean more workers contributing to the program, which also means higher revenue,” said Ms. Chen, who is also a senior research economist at the center.The future of Social Security has emerged as a major issue in the midterm elections this year. Republicans have argued that their proposals are intended to protect the long-term viability of Social Security, but Democrats and President Biden have warned that if Republicans take control of Congress they will scale back the program and curb benefits for retirees.“MAGA Republicans in Congress continue to threaten Social Security and Medicare — proposing to put them on the chopping block every five years, threatening benefits, and to change eligibility,” Karine Jean-Pierre, White House press secretary, said in a statement on Wednesday. “If Republicans in Congress have their way, seniors will pay more for prescription drugs and their Social Security benefits will never be secure.” More

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    Inflation increased 0.4% in September, more than expected despite rate hikes

    Consumer prices rose 0.4% in September and were up 8.2% from a year ago, according to BLS data released Thursday.
    Excluding food and energy, the core consumer price index accelerated 0.6% and 6.6% respectively.
    Worker wages took another hit, falling 0.1% monthly and 3% year over year when adjusted for inflation.
    Markets now expect the Fed could institute consecutive 0.75 percentage point rate hikes in November and December.

    Prices consumers pay for a wide variety of goods and services rose more than expected in September as inflation pressures continued to weigh on the U.S. economy.
    The consumer price index for the month increased 0.4% for the month, more than the 0.3% Dow Jones estimate, according to the Bureau of Labor Statistics. On a 12-month basis, so-called headline inflation was up 8.2%, off its peak around 9% in June but still hovering near the highest levels since the early 1980s.

    Excluding volatile food and energy prices, core CPI accelerated 0.6% against the Dow Jones estimate for a 0.4% increase. Core inflation was up 6.6% from a year ago.
    The report rattled financial markets, with stock market futures plunging and Treasury yields moving up.
    Another large jump in food prices boosted the headline number. The food index rose 0.8% for the month, the same as August, and was up 11.2% from a year ago.
    That increase helped offset a 2.1% decline in energy prices that included a 4.9% drop in gasoline. Energy prices have moved higher in October, with the price of regular gasoline at the pump nearly 20 cents higher than a month ago, according to AAA.
    Closely watched shelter costs, which make up about one-third of CPI, rose 0.7% and are up 6.6% from a year ago. Transportation services also showed a big bump, increasing 1.9% on the month and 14.6% on an annual basis. Medical care costs rose 1% in September.

    The rising costs meant more bad news for workers, whose average hourly earnings declined 0.1% for the month on an inflation-adjusted basis and are off 3% from a year ago, according to a separate BLS release.
    Inflation is rising despite aggressive Federal Reserve efforts to get price increases under control.
    The central bank has raised benchmark interest rates 3 full percentage points since March. Thursday’s CPI data likely cements a fourth consecutive 0.75 percentage point hike when the Fed next meets Nov. 1-2, with traders assigning a 98% chance of that move.
    The chances of a fifth straight hike three-quarter point hike also are rising, with futures pricing in a 62% probability following the inflation data.

    This is breaking news. Please check back here for updates.

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    Battle Over Wage Rules for Tipped Workers Is Heating Up

    A system counting tips toward the minimum wage is being fought in many places. Critics say it’s often abused. Defenders say workers benefit overall.With Americans resuming prepandemic habits of going out, eating out and traveling, leisure and hospitality businesses have scrambled to hire, sometimes offering pay increases that outpace inflation.But for many whose pay is linked to tips, like restaurant servers and bartenders, base wages remain low, and collecting what is owed under the law can be a struggle.In all but eight states, employers can legally choose to pay workers who receive tips a “subminimum” wage — in some places as low as $2.13 an hour — as long as tips bring their earnings to the equivalent of the minimum wage in a pay period. Economists estimate that at least 5.5 million workers are paid on that basis.The provision, known as the tip credit, is a unique industry subsidy that lets employers meet pay requirements more cheaply. And even in a tight labor market, it is often abused at the employees’ expense, according to workers, labor lawyers, many regulators and economists.“It’s baked into the model,” said David Weil, the administrator of the Wage and Hour Division of the Labor Department under President Barack Obama, referring to the frequency of violations. “And it’s very problematic.”Terrence Rice, a bartender from Cleveland who has worked in the bar and restaurant industry since 1999, chuckled at the notion that the law is consistently followed.“As long as I’ve been doing this, I have never, ever — not one time — met anyone that’s been compensated” for a below-minimum pay period, he said, adding that slow weeks with inadequate pay are viewed as the “feast or famine” norm in the industry. Busier seasons, weekends or shifts can bring a rush of a cash followed by slow weekdays, bad-weather weeks or economic turbulence.Now the yearslong arrangement is coming under increasing challenge.In the District of Columbia, a measure on the November ballot would ban the subminimum wage by 2027. A ballot proposal in Portland, Maine, would ban subminimum base pay and bring the regular minimum wage to $18 an hour over three years.Employers in Michigan are bracing for increased expenses in February, when the state tipped minimum of $3.75 an hour is set to be discontinued and the regular state minimum wage will rise to $12 from $9.87.Xander Gudejko, a district manager for Mainstreet Ventures Restaurant Group, which owns spots throughout Michigan, offered a common view in the local business community: “When I think of the potential positives for us, I can’t really think of anything.”Though tipped employees can include hotel housekeepers, bellhops, car washers and airport wheelchair escorts, most are in food and beverage service jobs. Perfect compliance may involve a complex dance of having workers clock in at the minimum-wage rate for setup work until opening, clock out, then clock back in at a tipped wage.Businesses using the two-tier system are prohibited from having tipped employees spend more than 20 percent of their shifts on side work like rolling silverware or cleaning. They also cannot include back-of-house employees, like kitchen workers, in tip pooling — the collection and redistribution of all gratuities at a certain rate, usually set by the employer.The last robust compliance investigation of full-service restaurants by the Labor Department is somewhat dated, having ended in 2012, but it found that 83.8 percent of the examined firms were in violation of labor law, with a large share of the infractions related to tips.The National Restaurant Association, which represents over 500,000 small and larger restaurants, argues that instances of illegal underpayment of tipped workers are overstated and that workers, customers and employers, in general, find the system workable.“There’s a reason people choose tipped restaurant jobs — they know the economics are in their favor,” said Sean Kennedy, the group’s executive vice president of public affairs. “For many servers, they’ve chosen restaurants as a career because their industry skills and knowledge mean high earning potential in a job that’s flexible to their needs.”Ryan Stygar, a labor lawyer and a managing partner at Centurion Trial Attorneys, whose practice mostly represents workers in wage-theft cases but also defends businesses accused of violations, called the network of laws surrounding tipped workers “so bizarre and obscure” that employers acting in good faith can still make legal mistakes.Even when the law is followed to the letter, Mr. Stygar said, the system is unfair to workers. “You are sacrificing your tips to meet the employers’ minimum-wage obligations,” he said.Employers are required to keep records of tips and usually do so through a mix of their own accounting, credit card receipts and self-reporting from staff members. Most involved in the system say the tracking works in murky ways.“In reality, who’s monitoring this complex two-tier system?” said Sylvia Allegretto, a former chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley.“The onus is on you, the worker, to possibly enrage, or at least annoy, your boss, who also, coincidentally, controls your schedule,” she said.Talia Cella, a training manager at Illegal Pete’s, a fast-casual burrito spot in Boulder, Colo. The restaurant offers starting pay of $15 plus tips as well as health care coverage.Andrew Miller for The New York TimesIn many civil disputes, employment attorneys have successfully argued before courts that managers implicitly wield opportunities to work more lucrative shifts as a carrot for not rocking the boat on workplace abuse and as a stick to prevent retaliation.Sylvia Gaston, a waitress at a restaurant in Astoria, Queens, said her base wage is $7.50 an hour — even though New York City’s legal subminimum is $10, which must come to at least $15 after tips. Ms. Gaston, 40, who is from Mexico, feels that undocumented workers like her have a harder time fighting back when they are shortchanged.“It doesn’t really matter if you have documents or not — I think folks are still getting underpaid in general,” she said. “However, when it comes to uplifting your voices and speaking about it, the folks who can get a little bit more harsh repercussions are people who are undocumented.”Subminimum base pay for some tipped workers in the state, such as car washers, hairdressers and nail salon employees, was abolished in 2019 under an executive order by Gov. Andrew M. Cuomo, but workers in the food and drinks industry were left out.Gov. Kathy Hochul, Mr. Cuomo’s successor, said while lieutenant governor in 2020 that she supported “a solid, full wage for restaurant workers.” And progressive legislators plan a bill in January that would eliminate the two-tier wage system by the end of 2025.When The New York Times asked if she would support such changes, Ms. Hochul’s office did not answer directly. “We are always exploring the best ways to provide support” to service workers, it said.Proponents of abandoning subminimum wages say there could be advantages for employers, including less turnover, better service and higher morale.David Cooper, the director of the economic analysis and research network at the Economic Policy Institute, a progressive think tank, contends that when wage laws are changed to a single-tier system, business owners can have the assurance that “every single person they compete with is making the same exact adjustment,” reducing the specter of a competitive disadvantage.Still, he acknowledged, there would downsides. Restaurants and bars with less popularity and lower productivity could lose out in a substantially higher-wage environment, leading to higher prices and potentially closings.“This is not costless,” Mr. Cooper said. “But for a long time, we haven’t been internalizing the costs of paying workers less than they can live on.”Some employers who could use the two-tier wage system are taking a different approach.Talia Cella, 33, is a training manager at Illegal Pete’s, a burrito spot founded in Boulder, Colo., with locations throughout Arizona and Colorado. Those states have a subminimum wage under $10 an hour for tipped workers, and a regular minimum under $13. Illegal Pete’s offers starting pay of $15 plus tips as well as health care coverage.Before rising to her current position, Ms. Cella was hired as a server and trained as a bartender in 2016. She was previously making base pay of $5 an hour elsewhere as a waitress and hostess, unable to afford a car and biking to the bus stop in snow to make winter shifts.Even at what her company is paying, Ms. Cella said, recruiting and hiring are “more challenging than ever” because of labor shortages. But she said the business, with the help of a recent 10 percent price increase, remained profitable and was able to expand despite soaring food costs.She attributes this, in part, to “out-vibing” the competition.“Having work be a stable part of your life — where it’s like you go there, you’re getting paid a living wage, you have health insurance, you know this place cares about you — then you’re more likely to show up to work and give your best,” Ms. Cella said. “If you want people to give you more of themselves, more of their time, more of their effort, then you have to be willing to invest more of your company into the individual people as well.” More

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    Have You Been Shortchanged on Tipped Wages? We Want to Hear From You.

    Most states allow workers to be paid less than the usual minimum wage if they get tips. Experts say the system is often abused at employees’ expense.In most states, employees who receive tips can be paid a subminimum wage as long as tips bring their earnings to the equivalent of the minimum wage in a given pay period. Many experts say the system is often abused at employees’ expense.Do you work for tips in the hospitality industry, make base pay that is below the minimum wage and feel that you’ve illegally lost income recently? If so, The New York Times would like to hear about your experiences.We will not publish any part of your submission without contacting you first. We may use your contact information to follow up with you.We’d like to know about problems you’ve had collecting your pay as a tipped worker. More

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    Wholesale prices rose 0.4% in September, more than expected as inflation persists

    The producer price index increased 0.4% for September, compared with the Dow Jones estimate for a 0.2% gain.
    Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago.

    Wholesale prices rose more than expected in September despite Federal Reserve efforts to control inflation, according to a report Wednesday from the Bureau of Labor Statistics.
    The producer price index, a measure of prices that U.S. businesses get for the goods and services they produce, increased 0.4% for the month, compared with the Dow Jones estimate for a 0.2% gain. On a 12-month basis, PPI rose 8.5%, which was a slight deceleration from the 8.7% in August.

    Excluding food, energy and trade services, the index increased 0.4% for the month and 5.6% from a year ago, the latter matching the August increase.
    Inflation has been the economy’s biggest issue over the past year as the cost of living is running near its highest level in more than 40 years.
    The Fed has responded by raising rates five times this year for a total of 3 percentage points and is widely expected to implement a fourth consecutive 0.75 percentage point increase when it meets again in three weeks.

    A worker installs the instrument cluster for the Ford Motor Co. battery powered F-150 Lightning trucks under production at their Rouge Electric Vehicle Center in Dearborn, Michigan on September 20, 2022.
    Jeff Kowalsky | AFP | Getty Images

    However, Wednesday’s data shows the Fed still has work to do. Indeed, Cleveland Fed President Loretta Mester on Tuesday said “there has been no progress on inflation.” Following the PPI release, traders priced in an 81.3% chance of a three-quarter point hike, the same as a day ago.
    Stock market futures trimmed gains following the news, while Treasury yields were little changed on the session.

    The PPI release comes a day ahead of the more closely watched consumer price index. The two measures differ in that PPI measures the prices received at the wholesale level while CPI gauges the prices that consumers pay.
    Some two-thirds of the increase in PPI was attributed to a 0.4% gain in services, the BLS said. A big contributor to that increase was a 6.4% jump in prices received for traveler accommodation services.
    Final demand goods prices also rose 0.4% on the month, pushed by a 15.7% advance in the index for fresh and dry vegetables.

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    in Economy

    Labor Hoarding Could be Good News for the Economy

    PROVO, Utah — Chad Pritchard and his colleagues are trying everything to staff their pizza shop and bistro, and as they do, they have turned to a new tactic: They avoid firing employees at all costs.Infractions that previously would have led to a quick dismissal no longer do at the chef’s two places, Fat Daddy’s Pizzeria and Bistro Provenance. Consistent transportation issues have ceased to be a deal breaker. Workers who show up drunk these days are sent home to sober up.Employers in Provo, a college town at the base of the Rocky Mountains where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers. Bistro Provenance, which opened in September, has been unable to hire enough employees to open for lunch at all, or for dinner on Sundays and Mondays. The workers it has are often new to the industry, or young: On a recent Wednesday night, a 17-year-old could be found torching a crème brûlée.Down the street, Mr. Pritchard’s pizza shop is now relying on an outside cleaner to help his thin staff tidy up. And up and down the wide avenue that separates the two restaurants, storefronts display “Help Wanted” signs or announce that the businesses have had to temporarily reduce their hours.Provo’s desperation for workers is an intense version of the labor crunch that has plagued employers nationwide over the past two years — one that has prompted changes in hiring and layoff practices that could have big implications for the U.S. economy. Policymakers are hoping that after struggling through the worst labor shortages America has experienced in at least several decades, employers will be hesitant to lay off workers even when the economy cools.Mr. Pritchard cannot hire enough employees to open the bistro for lunch at all, or for dinner on Sundays or Mondays.That may help prevent the kind of painful recession the Federal Reserve is hoping to avoid as it tries to combat persistent inflation. America’s economy is facing a marked — and intentional — slowdown as the Fed raises interest rates to chill demand and drive down price increases, the kind of pullback that would usually result in notably higher unemployment. But officials are still hoping to achieve a soft landing in which growth moderates without causing widespread job losses. A few have speculated that today’s staffing woes will help them to pull it off, as companies try harder than they have in the past to weather a slowdown without cutting staff.“Businesses that experienced unprecedented challenges restoring or expanding their work forces following the pandemic may be more inclined to make greater efforts to retain their employees than they normally would when facing a slowdown in economic activity,” Lael Brainard, the Fed’s vice chair, said in a recent speech. “This may mean that slowing aggregate demand will lead to a smaller increase in unemployment than we have seen in previous recessions.”For now, the job market remains strong. Employers added 263,000 workers in September, fewer than in recent months but more than was normal before the pandemic. Unemployment is at 3.5 percent, matching the lowest level in 50 years, and average hourly earnings picked up at a solid 5 percent clip compared with a year earlier.But that is expected to change. When the Fed raises interest rates and slows down the economy, it also weakens the labor market. Wage gains slow, paving the way for inflation to cool down, and in the process, unemployment rises — potentially, significantly.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.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.In the 1980s, when inflation was faster than it is now and entrenched, the Fed lifted rates drastically to roughly 20 percent and sent unemployment to above 10 percent. Few economists expect an outcome that severe this time since today’s inflation burst has been shorter-lived and rates are not expected to climb nearly as much.Mr. Pritchard demonstrated how to stretch pizza dough in Fat Daddy’s Pizzeria, his other restaurant in Provo.Many of the workers Mr. Pritchard and his business partner, Janine Coons, have hired are new to the industry or young.Still, Fed officials themselves expect unemployment to rise nearly a full percentage point to 4.4 percent next year — and policymakers have admitted that is a mild estimate, given how much they are trying to slow down the economy. Some economists have penciled in worse outcomes. Deutsche Bank, for instance, predicts 5.6 percent joblessness by the end of 2023.Labor hoarding offers a glimmer of hope that could help the Fed’s more benign unemployment forecast to become reality: Employers who are loath to jettison workers may help the labor market to slow down and wage growth to moderate without a spike in joblessness.“Companies are still confronting this enormous churn and losing people, and they don’t know what to do to hang on to people,” said Julia Pollak, chief economist at the career site ZipRecruiter. “They’re definitely hanging on to workers for dear life just because they’re so scarce.”When the job market slows, employers will have recent, firsthand memories of how expensive it can be to recruit, and train, workers. Many employers may enter the slowdown still severely understaffed, particularly in industries like leisure and hospitality that have struggled to hire and retain workers since the start of the pandemic. Those factors may make them less likely to institute layoffs.And after long months of very tight labor markets — there are still nearly two open jobs for every unemployed worker — companies may be hesitant to believe that any uptick in worker availability will last.“There’s a lot of uncertainty about how big of a downturn are we facing,” said Benjamin Friedrich, an associate professor of strategy at Northwestern University’s Kellogg School of Management. “You kind of want to be ready when opportunities arise. The way I think about labor hoarding is, it has option value.”Employers in Provo, where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers.Instead of firing, businesses may look for other ways to trim costs. Mr. Pritchard in Provo and his business partner, Janine Coons, said that if business fell off, their first resort would be to cut hours. Their second would be taking pay cuts themselves. Firing would be a last resort.The pizzeria didn’t lay off workers during the pandemic, but Mr. Pritchard and Ms. Coons witnessed how punishing it can be to hire — and since all of their competitors have been learning the same lesson, they do not expect them to let go of their employees easily even if demand pulls back.“People aren’t going to fire people,” Mr. Pritchard said.But economists warned that what employers think they will do before a slowdown and what they actually do when they start to experience financial pain could be two different things.The idea that a tight labor market may leave businesses gun-shy about layoffs is untested. Some economists said that they could not recall any other downturn where employers broadly resisted culling their work force.“It would be a pretty notable change to how employers responded in the past,” said Nick Bunker, director of North American economic research for the career site Indeed.And even if they do not fire their full-time employees, companies have been making increased use of temporary or just-in-time help in recent months. Gusto, a small-business payroll and benefits platform, conducted an analysis of its clients and found that the ratio of contractors per employee had increased more than 60 percent since 2019.If the economy slows, gigs for those temporary workers could dry up, prompting them to begin searching for full-time jobs — possibly causing unemployment or underemployment to rise even if nobody is officially fired.Policymakers know a soft landing is a long shot. Jerome H. Powell, the Fed chair, acknowledged during his last news conference that the Fed’s own estimate of how much unemployment might rise in a downturn was a “modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation.”But he also added that “we see the current situation as outside of historical experience.”Bistro Provenance opened in September.Dinner service at the restaurant.The reasons for hope extend beyond labor hoarding. Because job openings are so unusually high right now, policymakers hope that workers can move into available positions even if some firms do begin layoffs as the labor market slows. Companies that have been desperate to hire for months — like Utah State Hospital in Provo — may swoop in to pick up anyone who is displaced.Dallas Earnshaw and his colleagues at the psychiatric hospital have been struggling mightily to hire enough nurse’s aides and other workers, though raising pay and loosening recruitment standards have helped around the edges. Because he cannot hire enough people to expand in needed ways, Mr. Earnshaw is poised to snap up employees if the labor market cools.“We’re desperate,” Mr. Earnshaw said.But for the moment, workers remain hard to find. At the bistro and pizza shop in downtown Provo, what worries Mr. Pritchard is that labor will become so expensive that — combined with rapid ingredient inflation — it will be hard or impossible to make a profit without lifting prices on pizzas or prime rib so much that consumers cannot bear the change.“What scares me most is not the economic slowdown,” he said. “It’s the hiring shortage that we have.” More