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    Governments Tighten Grip on Global Food Stocks, Sending Prices Higher

    Dozens of countries have thrown up trade barriers in the past two months to protect scarce supplies of food and commodities, but experts say the policies will only exacerbate a global food crisis.WASHINGTON — Ukraine has limited exports of sunflower oil, wheat, oats and cattle in an attempt to protect its war-torn economy. Russia has banned sales of fertilizer, sugar and grains to other nations.Indonesia, which produces more than half the world’s palm oil, has halted outgoing shipments. Turkey has stopped exports of butter, beef, lamb, goats, maize and vegetable oils.Russia’s invasion of Ukraine has unleashed a new wave of protectionism as governments, desperate to secure food and other commodities for their citizens amid shortages and rising prices, erect new barriers to stop exports at their borders.The measures are often well intended. But like the panic-buying that stripped grocery store shelves at various moments of the pandemic, the current wave of protectionism will only compound the problems that governments are trying to mitigate, trade experts warn.Export restrictions are making grains, oils, meat and fertilizer — already at record prices — more expensive and even harder to come by. That is placing an even greater burden on the world’s poor, who are paying an ever-larger share of their income for food, increasing the risk of social unrest in poorer countries struggling with food insecurity.Since the beginning of the year, countries have imposed a total of 47 export curbs on food and fertilizers — with 43 of those put in place since the invasion of Ukraine in late February, according to tracking by Simon Evenett, a professor of international trade and economic development at the University of St. Gallen.“Before the invasion, there’s a very small number of attempts to try and restrict exports of food and fertilizers,” Mr. Evenett said. “After the invasion you see a huge uptick.”The cascade of new trade barriers comes as the war in Ukraine, and the sanctions imposed by the West on Russia, are further straining supply chains that were already in disarray from the pandemic. Russia is the world’s largest exporter of wheat, pig iron, nickel and natural gas, and a major supplier of coal, crude oil and fertilizer. Ukraine is the world’s largest exporter of sunflower seed oil and a significant exporter of wheat, pig iron, maize and barley.With countries facing severe threats to supplies of basic goods, many policymakers have quickly dropped the language of open markets and begun advocating a more protective approach. Recommendations range from creating secure supply chains for certain critical materials in friendly countries to blocking exports and “reshoring” foreign factories, bringing operations back to their home countries.In a speech last week, Janet L. Yellen, the Treasury secretary, said the pandemic and the war had revealed that American supply chains, while efficient, were neither secure nor resilient. While cautioning against “a fully protectionist direction,” she said the United States should work to reorient its trade relationships toward a large group of “trusted partners,” even if it meant somewhat higher costs for businesses and consumers.Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said in a speech on Wednesday that the war had “justifiably” added to questions about economic interdependence. But she urged countries not to draw the wrong conclusions about the global trading system, saying it had helped drive global growth and provided countries with important goods even during the pandemic.“While it is true that global supply chains can be prone to disruptions, trade is also a source of resilience,” she said.The W.T.O. has argued against export bans since the early days of the pandemic, when countries including the United States began throwing up restrictions on exporting masks and medical goods and removed them only gradually.Now, the Russian invasion of Ukraine has triggered a similar wave of bans focused on food. “It’s like déjà vu all over again,” Mr. Evenett said.Protectionist measures have cascaded from country to country in a manner that is particularly evident when it comes to wheat. Russia and Ukraine export more than a quarter of the world’s wheat, feeding billions of people in the form of bread, pasta and packaged foods.Mr. Evenett said the current wave of trade barriers on wheat had begun as the war’s protagonists, Russia and Belarus, clamped down on exports. The countries that lie along a major trading route for Ukrainian wheat, including Moldova, Serbia and Hungary, then began restricting their wheat exports. Finally, major importers with food security concerns, like Lebanon, Algeria and Egypt, put their own bans into effect.Mr. Evenett said the dynamic was “still unfolding” and likely to get worse in the months to come. Ukraine’s summer growing season for wheat is being disrupted as fighting keeps farmers away from their fields and pulls workers off to war. And grocery stores in Spain, Greece and Britain are already introducing restrictions on the amount of cereals or oil people can buy.“We’re already feeling the pinch in Europe of limited supplies of these key crops,” he said.Several other consequential export bans on food are unrelated to the war, but they will still play into the global dynamic of rising prices.A palm oil processing plant in Indonesia’s Riau Province. The country has halted outgoing shipments of palm oil, a key ingredient in packaged food.Kemal Jufri for The New York TimesChina began ordering its firms to stop selling fertilizer to other countries last summer, in order to preserve supplies at home, Chad Bown, a senior fellow at the Peterson Institute for International Economics, and Yilin Wang, a research analyst at the institute, wrote in a recent blog post. Now that Russia has also cut off exports of fertilizer, China’s ban will be even more harmful.“China’s decision to take fertilizer supplies off world markets to ensure its own food security only pushes the problem onto others,” they wrote, adding that “China’s ongoing export restrictions could hardly come at a worse time.”Indonesia’s restrictions on palm oil, a key ingredient in packaged foods, detergent and cosmetics, are in line with similar bans the country placed on exporting the product before the war in an attempt to keep the price of oil affordable for Indonesian households.Those measures will add to skyrocketing prices for vegetable oils, driven by a disruption in the supply from Ukraine, the world’s largest producer of sunflower oil.Governments that put these restrictions in place often argue that their duty is to put the needs of their own citizens first, and the W.T.O.’s rules allow countries to impose temporary measures for national security or safety. But the measures can easily backfire, helping to push up global prices further.Price increases for food have been felt particularly keenly in poorer countries in the Middle East and sub-Saharan Africa, which depend on imported food.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    The Fed's favorite inflation gauge rose 5.2% in March as worker pay fell further behind

    Personal consumption expenditure prices excluding food and energy, the Fed’s preferred inflation gauge, rose 5.2% in March from a year ago.
    That was a slight deceleration from February and the Wall Street estimate.
    Employment costs accelerated 1.4% in the past quarter, while inflation-adjusted income declined 0.4% in March.
    Including food and energy, core PCE prices surged 6.6%, the fastest pace since 1982.

    Canned goods are displayed at a Safeway store on April 11, 2022 in San Anselmo, California.
    Justin Sullivan | Getty Images

    A measure that the Federal Reserve focuses on to gauge inflation rose in March, likely cementing the central bank’s intention to hike interest rates by half a percentage in May.
    The core personal consumption expenditures price index, which measures costs that consumers pay across a wide swath of items and accounts for how behavior changes in response to market dynamics, increased 5.2% from a year ago, according to the Bureau of Economic Analysis.

    However, that was slightly below the 5.3% reading in February, which was the highest since April 1983.
    March’s figure was less than the 5.3% Dow Jones estimate. On a month-over-month basis, core prices rose 0.3%, in line with the estimate, providing some hope that inflation could be peaking.
    Including volatile food and energy prices, the PCE index accelerated by 6.6%, the fastest pace since January 1982. Headline inflation was up 0.9% from February, much faster than the previous 0.5% increase.
    A separate inflation measure, the employment cost index, increased 1.4% in the first quarter from the previous period, according to the Bureau of Labor Statistics. The Dow Jones estimate for that level was 1.1%.
    The index, which measures total compensation cost for nongovernment workers, was up 4.5% over the past year. Separating out wages and salaries, the increase was 5%, the highest growth rate ever in a data series that dates to 2002 though only slightly above the previous quarter’s 4.9% gain.

    “The bigger story from today’s data releases was further evidence that inflation is starting to ease,” wrote Andrew Hunter, senior U.S. economist at Capital Economics.
    Together, the data points do little to dispel the notion that inflation is running at a much faster pace than the Fed would like. Consequently, markets widely expect a 50 basis point increase during next week’s Federal Open Market Committee meeting, with additional raises to follow.
    However, Hunter said the leveling off of the inflation data “supports our view that inflation will fall a little more quickly this year than Fed officials now appear to expect.”
    The Fed’s job became more complicated following a BEA release Thursday showing that gross domestic product, the broadest measure of U.S. economic growth, fell at a 1.4% annualized pace in the first quarter.
    While the pullback came mostly from declining inventories and the record U.S. trade deficit and was not expected to be repeated in subsequent quarters, the data nonetheless raised some concerns that the economy is at least cooling if not heading into a recession.
    Rising interest rates would help reduce activity further as the Fed looks to fight inflation not seen since the early 1980s stagflation period of low growth and surging prices.
    The rising employment costs, however, aren’t keeping up with inflation.
    Real disposable personal income, or the amount of income after taxes and adjusted for inflation, declined 0.4% in March after increasing 0.1% in February. Real spending rose 0.2% while headline personal income accelerated 0.5%.
    Faced with rising costs and falling income, Americans dipped into savings. The personal saving rate, or the amount put aside as a share of after-tax income, declined to 6.2% from 6.8% in February.

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    The Fed’s favorite inflation index is still rising fast, but shows some hints of slowing.

    The price index that the Federal Reserve watches most closely climbed 6.6 percent in the year through March, the fastest pace of inflation since 1982 and the latest reminder of the painfully rapid price increases plaguing consumers and challenging policymakers.Much of the gain in the Personal Consumption Expenditures price index, released Friday, was driven by a pop in energy prices that came early in Russia’s invasion of Ukraine along with rising food costs. After stripping out volatile food and fuel prices, a core index climbed by a slightly more muted 5.2 percent in the year through March.On a monthly basis, that core measure picked up by 0.3 percent, slower than its pace the previous month.Central bank and White House officials spent much of 2021 hoping that a pandemic-era surge in used car prices and cost increases in other goods would fade as supply chains returned to normal, and strong demand cooled. But inflation has remained too high for the Fed’s comfort for a year, despite occasional hopeful signs like the latest monthly slowdown in the core measure, and its persistence is now drawing a firm response from the central bank.Policymakers lifted interest rates in March for the first time since 2018, and have set the stage for an even larger rate increase at their meeting next week. Many Fed officials now expect to raise rates back to a neutral setting — around 2 percent — by the end of the year as they try to slow down borrowing, temper demand and allow supply to catch up. The goal is to help cool off inflation so that it does not become locked into consumer and business expectations, which might make it a more permanent feature of America’s economy.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The task ahead is difficult. The Fed has in the past caused recessions while trying to weigh down high inflation. Officials are constraining demand just as the war in Ukraine ramps up uncertainty and threatens to keep prices for gas and other commodities elevated, potentially making the cental bank’s job even more challenging.White House officials have been emphasizing the role that the war is playing in elevating inflation, often blaming President Vladimir V. Putin of Russia for higher prices. While Russia’s invasion did push gas prices sharply higher last month, inflation had been high for months before the conflict.Government spending helped fuel some of that increase. As households received stimulus checks and expanded unemployment benefits in 2020 and 2021, they built up cash buffers, which has helped to sustain fervid spending on couches, cars and grills even as costs have climbed higher. Strong demand for goods in particular collided with shutdowns of overseas factories and overburdened transit routes to spur shortages and push prices up.Now, though, inflation has become broader. As employers struggle to hire enough workers to meet strong consumer demand, they are paying higher wages. That could prompt some businesses to charge more to cover their rising costs. It could also help households to keep up their spending.A number of services — notably rents and restaurant meals — have grown more expensive in recent months.The Fed is trying to keep those widespread price pressures from becoming embedded. While officials still expect price increases to begin fading soon and to be running considerably slower by the end of the year, they are no longer betting on that outcome.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    U.S. GDP fell at a 1.4% pace to start the year as pandemic recovery takes a hit

    Gross domestic product in the U.S. declined at a 1.4% pace in the first quarter, below analyst expectations of a 1% gain.
    Declines in fixed investment, defense spending and the record trade imbalance weighed on growth.
    Consumer expenditures rose 2.7%, but that came amid a 7.8% increase in prices.
    “This is noise; not signal. The economy is not falling into recession,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.

    Gross domestic product unexpectedly declined at a 1.4% annualized pace in the first quarter, marking an abrupt reversal for an economy coming off its best performance since 1984, the Commerce Department reported Thursday.
    The negative growth rate missed even the subdued Dow Jones estimate of a 1% gain for the quarter, but the initial estimate for Q1 was the worst since the pandemic-induced recession in 2020. GDP measures the output of goods and services in the U.S. for the three-month period.

    Despite the disappointing number, markets paid little attention to the report, with stocks and bond yields both mostly higher. Some of the GDP decline came from factors likely to reverse later in the year, raising hopes that the U.S. can avoid a recession.
    “In retrospect, this could be seen as a pivotal report,” said Simona Mocuta, chief economist at State Street Global Advisors. “It reminds us of the reality that growth has been great, but things are changing and they won’t be that great going forward.”
    A plethora of factors conspired to weigh against growth during the first three months of 2022, which fell off a cliff following the 6.9% gain to close out last year.
    Rising Covid omicron infections to start the year hampered activity across the board, while inflation surging at a level not seen since the early 1980s and the Russian invasion of Ukraine also contributed to the economic stasis.
    Prices increased sharply during the quarter, with the GDP price index deflator rising 8%, following a 7.1% jump in Q4.

    A deceleration in private inventory investment weighed on growth after helping propel GDP in the back half of 2021. Other restraints came from exports and government spending across state, federal and local governments, as well as rising imports.
    An 8.5% pullback in defense spending was a particular drag, knocking one-third of a percentage point off the final GDP reading.
    But consumer spending, which accounts for about two-thirds of the economy, held up fairly well for the quarter, rising 2.7% as inflation kept pressure on prices. However, a burgeoning trade deficit helped shave 3.2 percentage points off growth as imports outweighed exports.
    “This is noise; not signal. The economy is not falling into recession,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “Net trade has been hammered by a surge in imports, especially of consumer goods, as wholesalers and retailers have sought to rebuild inventory. This cannot persist much longer, and imports in due course will drop outright, and net trade will boost GDP growth in Q2 and/or Q3.”
    While recession expectations on Wall Street remain low, there’s further trouble ahead for the economy: In an effort to combat burgeoning price increases, the Federal Reserve plans to enact a series of rate hikes aimed at slowing growth further.
    The personal consumption expenditures price index excluding food and energy, a preferred inflation measure for the Fed, rose 5.2% in the quarter, well above the central bank’s 2% inflation target.
    Current market pricing indicates the equivalent of 10 quarter-percentage point interest rate moves that would take the Fed’s benchmark interest rate to about 2.75% by the end of the year. That comes after two years of near-zero rates aimed at allowing a recovery from the steepest recession in U.S. history.
    Along with that, the Fed has halted its monthly bond-buying program aimed at keeping rates low and money flowing through the economy. The Fed will start shrinking its current bond holdings as soon as next month, slowly at first then ultimately at a pace expected to hit as high as $95 billion a month.
    While economists still largely expect the U.S. to skirt an outright recession, risks are rising.
    Goldman Sachs sees about a 35% chance of negative growth a year from now. In a forecast that is an outlier on Wall Street, Deutsche Bank sees the chance of a “significant recession” hitting the economy in late 2023 and early 2024, the result of a Fed that will have to tighten much more to tamp down inflation than forecasters currently anticipate.
    That all comes after a year in which GDP rose at a 5.7% pace, the fastest since 1984. While consumer expenditures, which account for nearly 70% of the U.S. economy, drove growth in the first half of 2021, an inventory rebuild from the depleted pandemic levels accounted for almost all the growth in the final two quarters of the year.
    Sustaining that growth into 2022 will require an easing in clogged supply chains and some resolution in Ukraine, both of which will face pressures from higher interest rates from not just the Fed but also global central banks that are engaged in a similar struggle against inflation.
    Correction: The decline in growth came due to a deceleration in private inventory investment, which helped propel growth in the back half of 2021. An earlier version misstated the year.

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    Biden Administration Plays Down Growth Decline in G.D.P. Report

    The White House dismissed a slump in first-quarter growth that was driven by a quirk in inventories and a jump in imports, emphasizing that Thursday’s report on gross domestic product also pointed to underlying strength in consumer spending.G.D.P. declined 0.4 percent in the first quarter after adjusting for inflation, or 1.4 percent on an annualized basis, the Commerce Department said Thursday. Companies had stockpiled inventories in the fourth quarter and built them more slowly at the start of the year, and imports far outstripped exports as Americans bought goods from abroad, driving the decline.“While last quarter’s growth estimate was affected by technical factors, the United States confronts the challenges of Covid-19 around the world, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength,” President Biden said in a statement following the release, referring to President Vladimir V. Putin of Russia. Mr. Biden also noted that “consumer spending, business investment, and residential investment increased at strong rates.”Mr. Biden and Democrats are facing a challenging midterm election year as inflation runs at its fastest pace in four decades, chipping away at household budgets and eroding consumer confidence. At the same time, the Federal Reserve is raising interest rates to try to keep rapid price increases from becoming permanent, which could begin to meaningfully cool down the economy just as voters head to the polls.The administration has tried to pin high inflation on Russia’s invasion of Ukraine. While the war has pushed gas and other commodity prices higher, inflation was high even before Russia’s attack.Republicans have seized on rising prices to blast Mr. Biden’s economic policies. The decline in growth at the start of the year gave them room to ramp up that criticism.“Accelerating inflation, a worker crisis, and the growing risk of a significant recession are the signature economic failures of the Biden administration,” Representative Kevin Brady, a Texas Republican, said in a news release on Thursday.Representative Kevin McCarthy of California, the House Republican leader, also blamed Democrats for the drop in growth and 40-year high inflation levels.“In 15 months, one-party Democrat rule has squandered America’s recovery and left you paying the price,” Mr. McCarthy wrote on Twitter.The Biden administration’s 2021 economic stimulus, which sent checks to households and provided other relief at a time when the job market was already recovering, has been criticized by economists for helping to stoke excessively strong consumer demand. That probably ramped up inflationary pressures as the economy reopened, some research has suggested.Republicans often seize on that to argue that the burst in inflation is the administration’s fault. But administration officials point out that their policies helped to drive a swift recovery, came at an uncertain moment, and built on a pandemic response started under the Trump administration.In a speech on Thursday, Treasury Secretary Janet L. Yellen defended the scale of the efforts to support the economy. She recalled the dire economic projections in the early days of the pandemic and said that the spending was needed to avert a worst-case scenario, though some economists warned that the final installation in 2021 was too much and too poorly targeted even at the time of its passage.“Throughout 2020, and into 2021, the path of the pandemic, including its severity and the role of future viral strains could not be predicted,” Ms. Yellen said at an event at the Brookings Institution held by the Hamilton Project and Hutchins Center. “Given this uncertainty, the recovery packages sought to protect against tail risk.” More

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    Economy Contracted in the First Quarter, but Underlying Measures Were Solid

    The U.S. economy contracted in the first three months of the year, but strong consumer spending and continued business investment suggested that the recovery remained resilient.Gross domestic product, adjusted for inflation, declined 0.4 percent in the first quarter, or 1.4 percent on an annualized basis, the Commerce Department said Thursday. That was down sharply from the 1.7 percent growth (6.9 percent annualized) in the final three months of 2021, and was the weakest quarter since the early days of the pandemic.The decline was mostly a result of the two most volatile components of the quarterly reports: inventories and international trade. Lower government spending was also a drag on growth. Measures of underlying demand showed solid growth.Most important, consumer spending, the engine of the U.S. economy, grew 0.7 percent in the first quarter despite the Omicron wave of the coronavirus, which restrained spending on restaurants, travel and similar services in January.“Consumer spending is the aircraft carrier in the middle of the ocean — it just keeps plowing ahead,” said Jay Bryson, chief economist for Wells Fargo.But choppy waters may lie ahead. The first-quarter data mostly predates the spike in gas prices that has accompanied Russia’s invasion of Ukraine and the lockdowns in China that have threatened to further disrupt global supply chains. The Federal Reserve in March raised interest rates for the first time since the pandemic began, and several more rate increases are expected this year as policymakers seek to tame the fastest inflation in four decades.“We are watching a bunch of seismic changes in real time,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution.The biggest challenge facing the economy is inflation. Consumer prices rose at a 7 percent annual rate in the first quarter, and Americans’ after-tax incomes, adjusted for inflation, fell for the fourth quarter in a row. So far, higher prices have done little to dampen consumers’ willingness to spend, but that will change if inflation keeps outpacing income gains, said Beth Ann Bovino, chief U.S. economist for S&P Global.“There’s a tipping point,” she said. Sometime this year, she added, “I’m expecting to see households starting to respond either by trading down, looking for deals, being less willing to pay higher prices.” More

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    Trump Officials Gave Pandemic Loan to Trucking Company Despite Objections

    WASHINGTON — Democratic lawmakers on Wednesday released a report alleging that top Trump administration officials had awarded a $700 million pandemic relief loan to a struggling trucking company in 2020 over the objections of career officials at the Defense Department.The report, released by the Democratic staff of the House Select Subcommittee on the Coronavirus Crisis, describes the role of corporate lobbyists during the early months of the pandemic in helping to secure government funds as trillions of dollars of relief money were being pumped into the economy. It also suggests that senior officials such as Steven Mnuchin, the former Treasury secretary, and Mark T. Esper, the former defense secretary, intervened to ensure that the trucking company, Yellow Corporation, received special treatment despite concerns about its eligibility to receive relief funds.“Today’s select subcommittee staff report reveals yet another example of the Trump administration disregarding their obligation to be responsible stewards of taxpayer dollars,” Representative James E. Clyburn of South Carolina, the Democratic chairman of the subcommittee, said in a statement. “Political appointees risked hundreds of millions of dollars in public funds against the recommendations of career D.O.D. officials and in clear disregard of provisions of the CARES Act intended to protect national security and American taxpayers.”The $2.2 trillion pandemic relief package that Congress passed in 2020 included a $17 billion pot of money set up by Congress and controlled by the Treasury Department to assist companies that were considered critical to national security. In July 2020, the Treasury Department announced it was giving a $700 million loan to the trucking company YRC Worldwide, which has since changed its name to Yellow.Lobbyists for Yellow had been in close touch with White House officials throughout the loan process and had discussed how the company employs Teamsters as its drivers, according to the report.Mark Meadows, the White House chief of staff, was a “key actor” coordinating with Yellow’s lobbyists, according to correspondences that the committee obtained. The report also noted that the White House’s political operation was “almost giddy” in its effort to assist with the application.The loan raised immediate questions from watchdog groups because of the company’s close ties to the Trump administration and because it had faced years of financial and legal turmoil. The firm had lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it had defrauded the federal government for a seven-year period. It recently agreed to pay $6.85 million to resolve allegations “that they knowingly presented false claims to the U.S. Department of Defense by systematically overcharging for freight carrier services and making false statements to hide their misconduct.”To qualify for a national security loan, a company needed certification by the Defense Department.According to the report, defense officials had recommended against certification because of the accusations that the company had overcharged the government. They also noted that the work that the company had been doing for the federal government — which included shipping meal kits, protective equipment and other supplies to military bases — could be replaced by other trucking firms.But the day after a defense official notified a Treasury official that the company would not be certified, one of Mr. Mnuchin’s aides set up a telephone call between him and Mr. Esper.The report indicated that Mr. Esper was not initially familiar with the status of Yellow’s certification. Before the call, aides prepared a summary of the analysis and recommendations of the department’s career officials that concluded that the certification should be rejected. Before those reached Mr. Esper, Ellen M. Lord, the department’s under secretary for acquisition and sustainment who was appointed by Mr. Trump, intervened and requested a new set of talking points that argued that the company should receive the financial support “to both support force readiness and national economic security.” Ms. Lord could not immediately be reached for comment.After the call with Mr. Mnuchin, Mr. Esper certified that the company was critical to national security, and a week later the approval of the loan was announced.Mr. Mnuchin then sent an email to Mr. Meadows that included news reports praising the loan. He highlighted positive comments from James P. Hoffa, the longtime president of the Teamsters union, who according to documents in the report made a direct plea to President Donald J. Trump about the loan.Mr. Esper and Mr. Mnuchin declined to comment. A former Treasury official familiar with the process said the loan saved 25,000 union jobs during an economic crisis and prevented disruption to the national supply chain that the Defense Department, businesses and consumers had depended on. The former official said that because of the terms of the loan, taxpayers were profiting from the agreement.A spokesman for Mr. Esper said that the company met the criteria to be eligible for the loan and emphasized that the report made clear that senior staff at the Defense Department recommended that he certify it. The Treasury Department made the final decision to issue the loan, the spokesman added.The Trump InvestigationsCard 1 of 6Numerous inquiries. More

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    Hot Job Market, an Economic Relief, Is a Wall Street Worry

    This year’s decline in stock prices follows a historical pattern: “When unemployment is ultra low, the uppity times are behind us,” a bank research chief said.The U.S. unemployment rate is 3.6 percent — only a hair above its level just before the pandemic, which was a 50-year low. Corporate profits rocketed by 35 percent in 2021, and profit margins were at their widest since 1950. Yet stocks have been hammered lately: Two key stock indexes, the S&P 500 and the Nasdaq 100, have been deep in negative terrain since the start of the year.What may seem a contradiction is actually a historical pattern: Hot labor markets and hot stock markets often don’t mix well.In fact, times of low unemployment are correlated with somewhat subdued stock returns, while valuations trend higher on average during periods of high unemployment. Analysts explain this phenomenon as a plain function of the unemployment rate’s status as a “lagging indicator” — letting people know how the economy was faring in the immediate past — while the stock market itself constantly serves as a “leading indicator,” coldly, if somewhat imperfectly, projecting an evolving consensus about the fate of companies as time goes on.“When unemployment is ultra low, the uppity times are behind us, and when it’s super high, there are good times ahead,” said Padhraic Garvey, a head of research at ING, a global bank.Stocks outperform on average when unemployment is high.Average annual returns in the S&P 500 index from 1948 to 2022, by the concurrent rate of unemployment

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    Average annual returns
    Note: The S&P 500 index was formally introduced in 1957. The performance of companies prior to 1957 that joined the index later are included in this analysis.Sources: Ben Koeppel, BXK Capital; Ben Carlson, Ritholtz Wealth By The New York TimesIn 2007, for instance, unemployment sank as low as 4.4 percent, but the annual return for the S&P 500 index was only 5.5 percent. Stocks plunged during the financial crisis the next year — and then, in 2009, as unemployment ripped higher to 10 percent, the index gained 26.5 percent. (Breaks in the pattern occur, since various tailwinds for big business, such as the tech boom of the 1990s, can briefly overpower historical trends.)When recoveries peak, investor exuberance can lead to excessive risk taking by businesses, which plants the seeds of the next downturn — just as workers are benefiting from being in high demand, with their higher wages cutting into corporate cash piles built up during good times, putting pressure on near-term profits. Financial investors also have to contend with the Federal Reserve’s response to the cycle — if there’s inflation, as there is now, a strong labor market may give it room to raise interest rates. A weak one can pressure it to cut rates. Action in either direction affects stock valuations.The State of Jobs in the United StatesJob openings and the number of workers voluntarily leaving their positions in the United States remained near record levels in March.March Jobs Report: U.S. employers added 431,000 jobs and the unemployment rate fell to 3.6 percent ​​in the third month of 2022.Job Market and Stocks: This year’s decline in stock prices follows a historical pattern: Hot labor markets and stocks often don’t mix well.New Career Paths: For some, the Covid-19 crisis presented an opportunity to change course. Here is how these six people pivoted professionally.Return to the Office: Many companies are loosening Covid safety rules, leaving people to navigate social distancing on their own. Some workers are concerned.This year, in addition to those forces, the war in Ukraine has slowed global growth and added to the pandemic’s strain on global supply chains, increasing the cost of raw materials.Senior executives at Morgan Stanley wrote in a recent note that their “strategists see higher wages amid the tightening labor market and related labor shortages posing a risk to 2022 corporate profit margins,” adding a reminder that “what matters for markets isn’t always the same as what matters for the aggregate economy.”Wage growth, milder in recent history, has spiked quickly.Median wage growth for hourly workers from the prior year, three-month average

    Note: Gaps in the data are due to methodology changes in the Current Population Survey that prevent year-over-year comparisons.Source: Federal Reserve Bank of AtlantaBy The New York TimesEven though large companies achieved record profit margins last year, earnings estimates for many firms are declining compared with expectations set earlier this year. Recent “wage inflation,” as many frame it, is seen by countless stock traders as adding one burden too many — rapid enough to worry not only executives but also some prominent liberal economists who typically shrug off complaints about labor expenses as overplayed.Federal Reserve data shows that median annual pay increases are within the range — 3 to 7 percent — that prevailed from the 1980s until the 2007-9 recession. But a variety of leaders in business and in government, including the Fed chair, Jerome H. Powell, and Treasury Secretary Janet L. Yellen, have become more wary of their brisk pace.Corporate profits hit new highs last year.After-tax profits for U.S. corporations, seasonally adjusted

    Notes: Profits are in current dollars, not adjusted for inflation, minus capital consumption adjustment or inventory valuation adjustment (IVA). Sources: U.S. Bureau of Economic Analysis; Federal Reserve Bank of St. LouisBy The New York TimesIn the nonfinancial “real” economy, intense competition for workers that leads to greater choice and compensation is positive “because we’re making more money, we have more money to spend, we can absorb inflation better because we’ve gotten raises,” said Liz Young, head of investment strategy at SoFi, a San Francisco-based financial services company. At the same time, she acknowledged, “The other thing with a tight labor market is that when wages increase somebody has to pay for that.”Through most of the swift recovery from the pandemic-induced recession, money managers made a simple bet on the strengthening labor market as a signal that more people earning more disposable income would lead to even more spending on goods and services sold by the companies they trade, enhancing their future earnings.Now, the calculus on Wall Street isn’t so simple.In the coming months, many financial analysts say they’ll pay less attention to data on job creation and focus instead on growth in average hourly earnings — cheering for them to flatten or at least moderate, so that labor costs can ebb.Stocks have tumbled so far in 2022.S&P 500 daily close through April 26

    Source: S&P Dow Jones Indices LLCBy The New York TimesAfter three years of outsized returns, the down year in markets is compounding the sour mood among the nation’s broadly defined middle class, whose wage gains have generally not kept up with inflation, and whose retirement savings and net worth (outside of home equity) are partly tied to such indexes. The University of Michigan consumer sentiment index has been hovering near lows not reached since the slow jobs recovery after the 2008 financial crisis.Ultimately, this cranky disconnect between strong jobs data and the national mood may stem from an initial lag between relative winners and losers in this robust-but-rocky recovery: The economic benefits of tightening an already-tight labor market are, in the short run, relatively concentrated — accruing to those with lower starting wages and less formal education, and to demographic cohorts like Black Americans, who are often “last hired, first fired” during business cycles. In the meantime, the downsides of even temporary high inflation are diffuse — spread broadly across the population, though frequently damaging the finances of lower-income groups the most.It remains true that the increased demand for labor has helped millions of workers come out ahead. After adjusting for inflation, wages have fallen for middle- and high-income groups but risen for the bottom third of earners on average: The wages of the typically lower-paid employees of the leisure and hospitality industry — the broad sector focused on travel, dining, entertainment, recreation and tourism — have risen nearly 15 percent over the past year, far outpacing inflation.A substantial bloc of economists are contending that wages are receiving too much blame for inflation. A recent analysis across 110 industries by the Economic Policy Institute, a progressive think tank based in Washington, concluded that wage growth wasn’t correlated with the surge in costs that suppliers dealt with last year, suggesting that much of inflation could still be stemming from other forces, like supply chain imbalances.Many analysts believe that if unemployment stays low enough for long enough, the fruits of a hot labor market will widen — creating a virtuous cycle in which employers increase pay for various rungs of workers, while economizing their business models to become more efficient, increasing capacity, productivity and the health of corporate balance sheets.That hope is under threat, as the Federal Reserve proceeds with a plan to increase borrowing costs by quickly raising interest rates to rein in some lending, consumer spending, business investment and demand for labor.Despite various challenges, the most optimistic market participants predict that employers, workers and consumers can experience a so-called “soft landing” this year, in which the Fed increases borrowing costs, helping inflation and wage growth moderate without a painful slowdown that kills off the recovery: Morgan Stanley strategists, for instance, expect real wages to turn positive overall by midyear, outpacing price increases, as inflation eases and pay rates maintain some strength. That could be a boon for stocks as well.“It’s possible that over the next few quarters the labor market continues to be tight despite the Fed hiking,” said Andrew Flowers, a labor economist at Appcast, a tech firm that helps companies target recruitment ads. He still sees an “overwhelming appetite” for hiring.Although especially low unemployment isn’t typically a bullish sign for stocks, some recent years have bucked the trend. In 2019, when the S&P 500 returned roughly 30 percent, unemployment by year’s end had fallen to 3.6 percent, in line with present levels.In such an uncertain environment, forecasts for how stocks will fare by the end of the year are varying widely among top Wall Street firms. By several technical measures, the market’s trajectory is currently near “make or break” levels.Public companies have “become massively efficient, so from an operating performance basis, they’ve been able to take on these extra costs,” said Brian Belski, the chief investment strategist at BMO Capital Markets. The outlook from Mr. Belski’s bank is among the most confident, with a call that the S&P 500 index will finish 2022 at 5,300 — 27 percent above Tuesday’s close, and far above most estimates.“At the end of the day, I think for the economy it’s good that we are seeing these sort of wages,” he said. “Don’t ever bet against the U.S. consumer, ever.” More