Evelyn Reynolds

Federal labor regulators have asked a court to force Starbucks to stop what they say is extensive illegal activity in response to a nationwide campaign in which workers at more than 150 corporate-owned stores have voted to unionize.In a petition filed Tuesday with U.S. District Court in Buffalo, officials with the National Labor Relations Board accused the company of firing and disciplining union supporters; intimidating and threatening workers to discourage them from voting for the union; and effectively offering benefits to workers if they opposed the union.The agency is also seeking the reinstatement of seven Buffalo-area employees whom, it said, Starbucks had illegally forced out in retaliation for their union-organizing activities, and an order effectively recognizing the union in a Buffalo-area store where the union lost a vote despite strong initial support.The agency said in its filings that the court’s intervention was necessary to stop Starbucks’s “virulent, widespread and well-orchestrated response to employees’ protected organizing efforts” and that without the proposed remedies, Starbucks would “accomplish its unlawful objective of chilling union support, both in Buffalo and nationwide.”Reggie Borges, a Starbucks spokesman, rejected the accusations. “As we have said previously, we believe these claims are false and will be prepared to defend our case,” Mr. Borges wrote in an email.Matt Bodie, a former lawyer for the labor board who teaches labor law at St. Louis University, said it was not unusual for the agency to seek reinstatement of ousted workers. But he said the nationwide breadth of the injunction the agency was seeking was far less common, as was the request for the court to order recognition of a union at a store where the union initially lost its election.“It’s a big step in line with the Biden board’s commitment to a more rigorous and aggressive approach to labor law enforcement,” Mr. Bodie wrote in an email.The labor board has already issued more than 30 formal complaints finding merit in allegations similar to the ones it cataloged in its petition on Tuesday. It typically takes months or years to adjudicate such complaints, and the board asserted that allowing the process to run its course while the company continued to break the law would “cement this chill and nullify the impact of a final remedy.”The agency said that unlawful anti-union activity had begun shortly after workers in Buffalo went public with their union campaign in late August, and that it had escalated after two Buffalo-area stores won union votes in December. It said Starbucks had forced out several union supporters for violating rules that the company had not previously enforced.The company “quickly jettisoned its past practices to target union supporters more effectively,” the labor board wrote.A federal judge recently denied the labor board’s request to reinstate pro-union workers it said Starbucks had unlawfully forced out in a similar, if narrower, case in Arizona.The judge found that in the case of two workers, there was not evidence of retaliation for union activities, or the evidence was “inconsistent” with the accusations.In the case of a third worker, the judge found that both sides had arguments supporting their positions and that an administrative proceeding might ultimately show that Starbucks sought to retaliate over the worker’s union activities. But the judge concluded that Starbucks would have fired the worker even absent her union involvement. More

Home sales are flagging and the rest of the economy is expected to slow, maybe sharply, as rates increase. Why is the Federal Reserve doing this?Recession fears are ramping up as the Federal Reserve embarks upon an aggressive campaign to raise interest rates, and politicians and members of the public are increasingly questioning why central bankers are planning to cause the economy pain.The short answer is: This is the tool the Fed has to bring inflation under control.The central bank is trying to force price increases to slow down. It does that by raising interest rates, which makes mortgages, car loans and business borrowing more expensive. As money becomes pricier, it weighs on spending and hiring, weakening the job market and the broader economy — maybe notably. Slower growth will give supply a chance to catch up with demand.The adjustment process is already an unpleasant one: Stock prices have fallen, home sales are beginning to slow and unemployment is likely to rise. But the Fed has one way to beat inflation back in line, and that is by hammering households and companies until they stop spending so much. Central bankers have acknowledged that the transition could be bumpy and that a recession is a real risk.“Monetary policy is famously a blunt tool,” Jerome H. Powell, the Fed chair, said during testimony before senators on Wednesday. “There’s risk that weaker outcomes are certainly possible, but they are not our intent.”At the same time, they say that not trying to cool down inflation — allowing it to continue ratcheting higher, and to become entrenched — would be the bigger problem.“This is very high inflation, and it’s hurting everybody,” Mr. Powell said.Fed officials have argued that they might be able to slow down the economy enough to allow inflation to moderate without choking demand so much that it plunges America into recession. Central bankers forecast last week that they will push unemployment up slightly, but not sharply, this year and next.But that gentle landing is far from certain. As shocks continue to rock the economy — the war in Ukraine has pushed up food and fuel costs, Chinese lockdowns to contain the pandemic have slowed factory production and shipping snarls linger — it has meant that the central bank may have to slow down demand even more to bring it in line with a constrained supply of goods and services.“It’s certainly a possibility; it’s not our intention at all,” Mr. Powell said of a recession. “Certainly the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2 percent inflation and still a strong labor market.” More

Billions of dollars could be at stake as a law banning imports of products from China goes into effect.WASHINGTON — A sweeping new law aimed at cracking down on Chinese forced labor could have significant — and unanticipated — ramifications for American companies and consumers.The law, which went into effect on Tuesday, bars products from entering the United States if they have any links to Xinjiang, the far-western region where the Chinese authorities have carried out an extensive crackdown on Uyghur Muslims and other ethnic minorities.That could affect a wide range of products, including those using any raw materials from Xinjiang or with a connection to the type of Chinese labor and poverty alleviation programs the U.S. government has deemed coercive — even if the finished product used just a tiny amount of material from Xinjiang somewhere along its journey.The law presumes that all of these goods are made with forced labor, and stops them at the U.S. border, until importers can produce evidence that their supply chains do not touch on Xinjiang, or involve slavery or coercive practices.Evan Smith, the chief executive at the supply chain technology company Altana AI, said his company calculated that roughly a million companies globally would be subject to enforcement action under the full letter of the law, out of about 10 million businesses worldwide that are buying, selling or manufacturing physical things.“This is not like a ‘picking needles out of a haystack’ problem,” he said. “This is touching a meaningful percentage of all of the world’s everyday goods.”The Biden administration has said it intends to fully enforce the law, which could lead the U.S. authorities to detain or turn away a significant number of imported products. Such a scenario is likely to cause headaches for companies and sow further supply chain disruptions. It could also fuel inflation, which is already running at a four-decade high, if companies are forced to seek out more expensive alternatives or consumers start to compete for scarce products.Understand the Supply Chain CrisisThe Origins of the Crisis: The pandemic created worldwide economic turmoil. We broke down how it happened.Explaining the Shortages: Why is this happening? When will it end? Here are some answers to your questions.Lessons From History: Henry Ford believed short-term interests must not squeeze out investment in a business’ resilience. His management philosophy yields powerful insights about the current crisis.A Key Factor in Inflation: In the U.S., inflation is hitting its highest level in decades. Supply chain issues play a big role.Failure to fully enforce the law is likely to prompt an outcry from Congress, which is in charge of oversight.“The public is not prepared for what’s going to happen,” said Alan Bersin, a former commissioner of U.S. Customs and Border Protection who is now the executive chairman at Altana AI. “The impact of this on the global economy, and on the U.S. economy, is measured in the many billions of dollars, not in the millions of dollars.”Ties between Xinjiang and a few industries, like apparel and solar, are already well recognized. The apparel industry has scrambled to find new suppliers, and solar firms have had to pause many U.S. projects while they investigated their supply chains. But trade experts say the connections between the region and global supply chains are far more expansive than just those industries.According to Kharon, a data and analytics firm, Xinjiang produces more than 40 percent of the world’s polysilicon, a quarter of the world’s tomato paste and a fifth of global cotton. It’s also responsible for 15 percent of the world’s hops and about a tenth of global walnuts, peppers and rayon. It has 9 percent of the world’s reserves of beryllium, and is home to China’s largest wind turbine manufacturer, which is responsible for 13 percent of global output.Direct exports to the United States from the Xinjiang region — where the Chinese authorities have detained more than a million ethnic minorities and sent many more into government-organized labor transfer programs — have fallen off drastically in the past few years. But a wide range of raw materials and components currently find their way into factories in China or in other countries, and then to the United States, trade experts say.In a statement on Tuesday, Gina Raimondo, the secretary of commerce, called the passage of the law “a clear message to China and the rest of the global community that the U.S. will take decisive actions against entities that participate in the abhorrent use of forced labor.”The Chinese government disputes the presence of forced labor in Xinjiang, saying that all employment is voluntary. And it has tried to blunt the impact of foreign pressure to stop abuses in Xinjiang by passing its own anti-sanctions law, which prohibits any company or individual from helping to enforce foreign measures that are seen as discriminating against China.Though the implications of the U.S. law remain to be seen, it could end up transforming global supply chains. Some companies, for example in apparel, have been quickly severing ties to Xinjiang. Apparel makers have been scrambling to develop other sources of organic cotton, including in South America, to replace those stocks.But other companies, namely large multinationals, have made the calculation that the China market is too valuable to leave, corporate executives and trade groups say. Some have begun walling off their Chinese and U.S. operations, continuing to use Xinjiang materials for the China market or maintain partnerships with entities that operate there.Uyghur workers at a factory in Xinjiang, China, in 2019. A wide range of raw materials and components from Xinjiang currently find their way into factories in China or in other countries, and then to the United States.Gilles Sabrié for The New York TimesIt’s a strategy that Richard Mojica, a lawyer at Miller & Chevalier Chartered, said “should suffice,” since the jurisdiction of U.S. customs extends just to imports, although Canada, the United Kingdom, Europe and Australia are considering their own measures. Instead of moving their operations out of China, some multinationals are investing in alternative sources of supply, and making new investments in mapping their supply chains.How the Supply Chain Crisis UnfoldedCard 1 of 9The pandemic sparked the problem. More

The photograph on the mining conglomerate’s social media account showed 70 ethnic Uyghur workers standing at attention under the flag of the People’s Republic of China. It was March 2020 and the recruits would soon undergo training in management, etiquette and “loving the party and the country,” their new employer, the Xinjiang Nonferrous Metal Industry Group, announced.But this was no ordinary worker orientation. It was the kind of program that human rights groups and U.S. officials consider a red flag for forced labor in China’s western Xinjiang region, where the Communist authorities have detained or imprisoned more than 1 million Uyghurs, ethnic Kazakhs and members of other largely Muslim minorities.The scene also represents a potential problem for the global effort to fight climate change.China produces three-quarters of the world’s lithium ion batteries, and almost all the metals needed to make them are processed there. Much of the material, though, is actually mined elsewhere, in places like Argentina, Australia and the Democratic Republic of Congo. Uncomfortable with relying on other countries, the Chinese government has increasingly turned to western China’s mineral wealth as a way to shore up scarce supplies.That means companies like the Xinjiang Nonferrous Metal Industry Group are assuming a larger role in the supply chain behind the batteries that power electric vehicles and store renewable energy — even as China’s draconian crackdown on minorities in Xinjiang fuels outrage around the world.The Chinese government denies the presence of forced labor in Xinjiang, calling it “the lie of the century.” But it acknowledges running what it describes as a work transfer program that sends Uyghurs and other ethnic minorities from the region’s more rural south to jobs in its more industrialized north.Xinjiang Nonferrous and its subsidiaries have partnered with the Chinese authorities to take in hundreds of such workers in recent years, according to articles displayed proudly in Chinese on the company’s social media account. These workers were eventually sent to work in the conglomerate’s mines, a smelter and factories that produce some of the most highly sought minerals on earth, including lithium, nickel, manganese, beryllium, copper and gold.It is difficult to trace precisely where the metals produced by Xinjiang Nonferrous go. But some have been exported to the United States, Germany, the United Kingdom, Japan, South Korea and India, according to company statements and customs records. And some have gone to large Chinese battery makers, who in turn, directly or indirectly, supply major American entities, including automakers, energy companies and the U.S. military, according to Chinese news reports.It is unclear whether these relationships are ongoing, and Xinjiang Nonferrous did not respond to requests for comment.But this previously unreported connection between critical minerals and the kind of work transfer programs in Xinjiang that the U.S. government and others have called a form of forced labor could portend trouble for industries that depend on these materials, including the global auto sector.A new law, the Uyghur Forced Labor Prevention Act, goes into effect in the United States on Tuesday and will bar products that were made in Xinjiang or have ties to the work programs there from entering the country. It requires importers with any ties to Xinjiang to produce documentation showing that their products, and every raw material they are made with, are free of forced labor — a tricky undertaking given the complexity and opacity of Chinese supply chains.A Critical Year for Electric VehiclesAs the overall auto market stagnates, the popularity of battery-powered cars is soaring worldwide.Charging Stations: The Biden administration unveiled proposed regulations that would require stations built with federal dollars to be located no more than 50 miles apart.General Motors: The company hopes to become a leading force in the electric vehicle industry. Its chief executive shared how G.M. intends to get there.Turning Point: Electric vehicles still account for a small slice of the market, but this year, their march could become unstoppable. Here’s why.New Materials: As automakers seek to electrify their fleets and to direct electricity more efficiently, alternatives to silicon are gaining traction.The apparel, food and solar industries have already been upended by reports linking their supply chains in Xinjiang to forced labor. Solar companies last year were forced to halt billions of dollars of projects as they investigated their supply chains.The global battery industry could face its own disruptions given Xinjiang’s deep ties to the raw materials needed for next-generation technology.Trade experts have estimated that thousands of global companies may actually have some link to Xinjiang in their supply chains. If the United States fully enforces the new law, it could result in many products being blocked at the border, including those needed for electric vehicles and renewable energy projects.Some administration officials raised objections to cutting off shipments of all Chinese goods linked with Xinjiang, arguing that it would be disruptive to the U.S. economy and the clean energy transition.Representative Thomas R. Suozzi, a Democrat from New York who helped create the Congressional Uyghur Caucus, said that while banning products from the Xinjiang region might make goods go up in price, “it’s too damn bad.”“We can’t continue to do business with people that are violating basic human rights,” he said. To understand how reliant the battery industry is on China, consider the country’s role in producing the materials that are critical to the technology. While many of the metals used in batteries today are mined elsewhere, almost all of the processing required to turn those materials into batteries takes place in China. The country processes 50 to 100 percent of the world’s lithium, nickel, cobalt, manganese and graphite, and makes 80 percent of the cells that power lithium ion batteries, according to Benchmark Mineral Intelligence, a research firm.“If you were to look at any electric vehicle battery, there would be some involvement from China,” said Daisy Jennings-Gray, a senior analyst at Benchmark Mineral Intelligence.The materials Xinjiang Nonferrous has produced — including a dizzying array of valuable minerals, like zinc, beryllium, cobalt, vanadium, lead, copper, gold, platinum and palladium — have gone into a wide variety of consumer products, including pharmaceuticals, jewelry, building materials and electronics. The company also claims to be one of China’s largest producers of lithium metal, and its second-largest producer of nickel cathode, which can be used to make batteries, stainless steel and other goods.Xinjiang Non-Ferrous Metal Industry Group was one of the region’s earliest miners, operating the state-owned No. 3 pegamite mining pit beginning in the 1950s.Shen Longquan/Visual China Group, via Getty ImagesIn recent years, the company has expanded into Xinjiang’s south, the homeland of most Uyghurs, acquiring valuable new deposits that executives describe as “critical” to China’s resource security.Ma Xingrui, a former aerospace engineer who was appointed Communist Party secretary of Xinjiang in 2021, has talked up Xinjiang’s prospects as a source of high-tech materials. This month, he told executives from Xinjiang Nonferrous and other state-owned companies that they should “step up” in new energy, materials and other strategic sectors.Xinjiang Nonferrous’s role in work transfer programs ramped up several years ago, as part of efforts by the Chinese leader Xi Jinping to drastically transform Uyghur society to become richer, more secular and loyal to the Communist Party. In 2017, the Xinjiang government announced plans to transfer 100,000 people from southern Xinjiang into new jobs over three years. Dozens of state-owned companies, including Xinjiang Nonferrous, were assigned to absorb 10,000 of those laborers in return for subsidies and bonuses.Transferred workers appear to make up only a minor part of the labor force at Xinjiang Nonferrous, perhaps a few hundred of its more than 7,000 employees. The company and its subsidiaries reported recruiting 644 workers from two rural counties of southern Xinjiang from 2017 to 2020, and training more since then.Some laborers were sent to the company’s copper-nickel mine and smelter, which are operated by Xinjiang Xinxin Mining Industry, a Hong Kong-listed subsidiary that has received investment from the state of Alaska, the University of Texas system and Vanguard. Other laborers went to subsidiaries that produce lithium, manganese and gold.Before being assigned to work, predominantly Muslim minorities were given lectures on “eradicating religious extremism” and becoming obedient, law-abiding workers who “embraced their Chinese nationhood,” Xinjiang Nonferrous said.Inductees for one company unit underwent six months of training including military-style drills and ideological training. They were encouraged to speak out against religious extremism, oppose “two-faced individuals” — a term for those who privately oppose Chinese government policies — and write a letter to their hometown elders expressing gratitude to the Communist Party and the company, according to the company’s social media account. Trainees faced strict assessments, with “morality” and rule compliance accounting for half of their score. Those who scored well earned better pay, while students and teachers who violated rules were punished or fined.Even as it promotes the successes of the programs, the company’s propaganda hints at the government pressure on it to meet labor transfer goals, even through the coronavirus pandemic.A 2017 article in the Xinjiang Daily quoted one 33-year-old villager as saying that he was initially “reluctant to go out to work” and “quite satisfied” with his income from farming, but was persuaded to go to work at Xinjiang Nonferrous’ subsidiary after party members visited his house several times to “work on his thinking.” And in a visit in 2018 to Keriya County, Zhang Guohua, the company president, told officials to “work on the thinking” of families of transferred laborers to ensure that no one abandoned their jobs.Chinese authorities say that all employment is voluntary, and that work transfers help free rural families from poverty by giving them steady wages, skills and Chinese-language training.“No one has been forced to become ‘transferred labor’ in Xinjiang,” Wang Wenbin, a spokesman for the Chinese foreign ministry, told reporters in Beijing this month.It is difficult to ascertain the level of coercion any individual worker has faced given the limited access to Xinjiang for journalists and research firms. Laura T. Murphy, a professor of human rights and contemporary slavery at Sheffield Hallam University in Britain, said that resisting such programs is seen as a sign of extremist activity and carries a risk of being sent to an internment camp.“A Uyghur person cannot say no to this,” she said. “They are harassed or, in the government’s words, educated,’ until they are forced to go.”Files from police servers in Xinjiang published by the BBC last month described a shoot-to-kill policy for those trying to escape from internment camps, as well as mandatory blindfolds and shackles for “students” being transferred between facilities.Other Chinese metal and mining companies also appear to be linked with labor transfers at a smaller scale, including Zijin Mining Group Co. Ltd., which has acquired cobalt and lithium assets around the globe, and Xinjiang TBEA Group Co. Ltd., which makes aluminum for lithium battery cathodes, according to media reports and academic research. Other entities that were previously sanctioned by the United States over human rights abuses are also involved in the supply chain for graphite, a key battery material that is only refined in China, according to Horizon Advisory, a research firm.An indoctrination center in Hotan, China. In 2017, the regional government announced plans to transfer 100,000 people from the cities of Kashgar and Hotan in southern Xinjiang into new jobs.Gilles Sabrié for The New York TimesThe raw materials that these laborers produce disappear into complex and secretive supply chains, often passing through multiple companies as they are turned into auto parts, electronics and other goods. While that makes them difficult to trace, records show that Xinjiang Nonferrous has developed multiple potential channels to the United States. Many more of the company’s materials are likely transformed in Chinese factories into other products before they are sent abroad.For example, Xinjiang Nonferrous is a current supplier to the China operations of Livent Corporation, a chemical giant with headquarters in the United States that uses lithium to produce a chemical used to make automobile interiors and tires, hospital equipment, pharmaceuticals, agrochemicals and electronics.A Livent spokesman said that the firm prohibits forced labor among its vendors, and that its due diligence had not indicated any red flags. Livent did not respond to a question about whether products made with materials from Xinjiang are exported to the United States.In theory, the new U.S. law should block all goods made with any raw materials that are associated with Xinjiang until they are proven to be free of slavery or coercive labor practices. But it remains to be seen if the U.S. government is willing or able to turn away such an array of foreign goods.“China is so central to so many supply chains,” said Evan Smith, the chief executive of the supply chain research company Altana AI. “Forced labor goods are making their way into a really broad swath of our global economy.”Raymond Zhong More

The recession that many Americans fear is coming is not “at all imminent,” Treasury Secretary Janet Yellen told ABC News on Sunday.
Talk of a recession has accelerated this year as inflation remains high and the Federal Reserve takes aggressive steps to counter.
On Wednesday, the Fed announced a 75 basis point interest rate hike, its largest since 1994.

U.S. Treasury Secretary Janet Yellen testifies before a House Ways and Means Committee hearing on President Biden’s proposed 2023 U.S. budget, on Capitol Hill in Washington, June 8, 2022.
Jonathan Ernst | Reuters

The recession that many Americans fear is coming is not “at all imminent,” Treasury Secretary Janet Yellen said Sunday.
Talk of a recession has accelerated this year as inflation remains high and the Federal Reserve takes aggressive steps to counter it. On Wednesday, the Fed announced a 75 basis point interest rate hike, its largest since 1994. Fed Chair Jerome Powell also indicated the Federal Open Market Committee’s intent to continue its aggressive path of monetary policy tightening in order to rein in inflation.

At the same time, many expect the combination of resilience in consumer spending and job growth to keep the U.S. out of recession.
“I expect the economy to slow,” Yellen said in an interview with ABC’s “This Week.” “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”
Although Yellen seemed optimistic about avoiding recession, the global economy is still facing serious threats in the coming months with the continued war in Ukraine, soaring inflation and the Covid-19 pandemic. “Clearly, inflation is unacceptably high,” Yellen said.
Still, she doesn’t believe a drop-off in consumer spending would be the cause of a recession. Yellen told ABC News that the U.S. labor market is the strongest of the post-war period and predicted that inflation would slow “in the months ahead.”

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Shoppers are feeling the pressure as inflation pushes up prices for gas, groceries and a range of other goods and services.
Airlines, movie theaters and specialty retailers are among the businesses that so far say they’ve been shielded from a slowing economy.
Other companies like McDonald’s are seeing signs that consumer demand is weakening.

A woman pushes a shopping cart through the grocery aisle at Target in Annapolis, Maryland, on May 16, 2022, as Americans brace for summer sticker shock as inflation continues to grow.
Jim Watson | AFP | Getty Images

People still appear willing to shell out to travel, go to the movies and have a drink or two, even as surging prices and fears of a recession have them pulling back in other areas.
How people spend their money is shifting as the economy slows and inflation pushes prices higher everywhere including gas stations, grocery stores and luxury retail shops. The housing market, for example, is already feeling the pinch. Other industries have long been considered recession proof and may even be enjoying a bump as people start going out again after hunkering down during the pandemic.

Still, shoppers everywhere are feeling pressured. In May, an inflation metric that tracks prices on a wide range of goods and services jumped 8.6% from a year ago, the biggest jump since 1981. Consumers’ optimism about their finances and the overall economy sentiment fell to 50.2% in June, its lowest recorded level, according to the University of Michigan’s monthly index.
As gas and food prices climb, Brigette Engler, an artist based in New York City, said she’s driving to her second home upstate less often and cutting back on eating out.
“Twenty dollars seems extravagant at this point for lunch,” she said.
Here’s a look at how different sectors are faring in the slowing economy.

Movies, experiences holding up

Concerts, movies, travel and other experiences people missed during the height of the pandemic are among the industries enjoying strong demand.

Live Nation Entertainment, which owns concert venues and Ticketmaster, hasn’t seen people’s interest in attending concerts wane yet, CEO Joe Berchtold said at the William Blair Growth Stock Conference earlier this month.
In movie theaters, blockbusters like “Jurassic World: Dominion” and “Top Gun: Maverick” have also pulled in strong box office sales. The movie industry long been considered “recession proof,” since people who give up on pricier vacations or recurring Netflix subscriptions can often still afford movie tickets to escape for a few hours.
Alcohol is another category that’s generally protected from economic downturns, and people are going out to bars again after drinking more at home during the early days of the pandemic. Even as brewers, distillers and winemakers raise prices, companies are betting that people are willing to pay more for better-quality alcohol.
“Consumers continue to trade up, not down,” Molson Coors Beverage CEO Gavin Hattersley said on the company’s earnings call in early May. It might seem counterintuitive, but he said the trend is in line with recent economic downturns.
Alcohol sales have also been shielded in part because prices haven’t been rising as quickly as prices for other goods. In May, alcohol prices were up roughly 4% from a year ago, compared with the 8.6% jump for overall consumer price index.
Big airlines like Delta, American and United are also forecasting a return to profitability thanks to a surge in travel demand. Consumers have largely digested higher fares, helping airlines cover the soaring cost of fuel and other expenses, although domestic bookings have dipped in the last two months.
It isn’t clear whether the race back to the skies will continue after the spring and summer travel rushes. Business travel usually picks up in the fall, but airlines might not be able to count on that as some companies look for ways to curb expenses and even announce layoffs.
People’s desire to get out and socialize again is also boosting products like lipstick and high heels that were put away during the pandemic. That recently helped sales at retailers including Macy’s and Ulta Beauty, which last month boosted their full-year profit forecasts.
Luxury brands such as Chanel and Gucci are also proving to be more resilient, with wealthier Americans not as affected by climbing prices in recent months. Their challenges have been more concentrated in China of late, where pandemic restrictions persist.
But the fear is that this dynamic could change quickly, and these retailers’ short-term gains could evaporate. More than eight in 10 U.S consumers are planning to make changes to pull back on their spending in the next three to six months, according to a survey from NPD Group, a consumer research firm.
“There is a tug-of-war between the consumer’s desire to buy what they want and the need to make concessions based on the higher prices hitting their wallets,” said Marshal Cohen, chief retail industry advisor for NPD.

Homes, big-ticket items squeezed

The once red-hot housing market is among those clearly hurting from the slowdown.
Rising interest rates have dampened mortgage demand, which is now roughly half of what it was a year ago. Homebuilder sentiment has dropped to the lowest level in two years after falling for six consecutive months. Real estate firms Redfin and Compass both announced layoffs earlier this week.
“With May demand 17% below expectations, we don’t have enough work for our agents and support staff,” Redfin CEO Glenn Kelman wrote in an email to employees later posted on the company’s website.         
For the retail sector more broadly, data from the Commerce Department also showed a surprising 0.3% drop in overall in May from the previous month. That included declines at online retailers and miscellaneous store retailers such as florists and office suppliers.
And while demand for new and used cars remains strong, auto industry executives are starting to see signs of potential trouble. With the cost for new and used vehicles up by double digits over the last year, car and other motor vehicle dealers saw sales decline 4% decline in May from the previous month, according to the U.S. Department of Commerce.
Ford Motor CFO John Lawler said this week that delinquencies on car loans are starting to tick up too. Although the increase could signal tough times ahead, he said said it’s not yet a worry, since delinquencies had been low.
“It seems like we’re reverting back more towards the mean,” Lawler said at a Deutsche Bank conference.
The restaurant industry is also seeing signs of potential trouble, although how eateries are affected could vary.
Fast-food chains have also traditionally fared better in economic downturns since they’re more affordable and draw diners with promotional deals. Some restaurant companies are also betting people will keep dining out as long as grocery prices rise faster.
The cost of food away from home rose 7.4% over the 12 months ended in May, but prices for food at home climbed even faster, shooting up 11.9%, according to the Bureau of Labor Statistics. Restaurant Brands International CEO Jose Cil and Wendy’s CEO Todd Penegor are among the fast-food executives who have emphasized the gap as an advantage for the industry.
But McDonald’s CEO Chris Kempczinski said in early May that low-income consumers have started ordering cheaper items or shrinking the size of their orders. As the largest U.S. restaurant chain by sales, it’s often seen as a bellwether for the industry.
On top of that, traffic across the broader restaurant industry slowed to its lowest point of the year in the first week of June, according to market research firm Black Box Intelligence. That was after the number of visits also slowed in May, though sales ticked up 0.7% on higher spending per visit.
Barclays analyst Jeffrey Bernstein also said in a research note on Friday that restaurants are accelerating discounting, a sign that they’re expecting same-store sales growth to slow. Among the chains that have introduced new deals to draw diners are Domino’s Pizza, which is offering half-price pizzas, and Wendy’s, which brought back its $5 Biggie Bag meal.
Among those scrambling to adjust to a shift in shopper behavior are mass-merchant retailers like Target and Walmart, which issued cautious guidance for the year ahead.
Target warned investors earlier this month that its fiscal second-quarter profits would take a hit as it discounts people bought up during the pandemic but no longer want, such as small appliances and electronics. The big-box retailer is trying to make room on its shelves for the products in demand now: beauty products, household essentials and back-to-school supplies.
CEO Brian Cornell told CNBC that the company’s stores and website are still seeing strong traffic and “a very resilient customer” overall, despite the shift in their buying preferences. Rival Walmart has also been discounting less-desired items like apparel, although the retail giant said it’s been gaining share in grocery as shoppers look to save.
— Leslie Josephs, Lauren Thomas, Michael Wayland, John Rosevear, Sarah Whitten and Melissa Repko contributed reporting.

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The Federal Reserve suddenly finds itself second-guessed as it tries to navigate the economy through inflation and away from recession.
Complaints center on three themes: That the Fed didn’t act quickly enough to tame inflation, that it isn’t acting aggressively enough now, and that it should have been better at seeing the current crisis coming.
“The Fed is going to have to raise rates much higher than they are now,” said Lewis Black, CEO of Almonty Industries, a Toronto-based global miner of tungsten

The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., June 14, 2022.
Sarah Silbiger | Reuters

After years of being a beacon for financial markets, the Federal Reserve suddenly finds itself second-guessed as it tries to navigate the economy through a wicked bout of inflation and away from ever-darkening recession clouds.
Complaints around the Fed have a familiar tone, with economists, market strategists and business leaders weighing in on what they feel is a series of policy mistakes.

Essentially, the complaints center on three themes for actions past, present and future: That the Fed didn’t act quickly enough to tame inflation, that it isn’t acting aggressively enough now even with a series of rate increases, and that it should have been better at seeing the current crisis coming.
“They should have known inflation was broadening and becoming more entrenched,” said Quincy Krosby, chief equity strategist at LPL Financial. “Why haven’t you seen this coming? This shouldn’t have been a shock. That, I think is a concern. I don’t know if it’s as stark a concern as ‘the emperor has no clothes.’ But it’s the man in the street vs. the PhDs.”
Consumers in fact had been expressing worries over price increases well before the Fed started raising rates. The Fed, however, stuck to its “transitory” script on inflation for months before finally enacting a meager quarter-point rate hike in March.
Then things accelerated suddenly earlier this week, when word leaked out that policymakers were getting more serious.

‘Just doesn’t add up’

The path to the three-quarter-point increase Wednesday was a peculiar one, particularly for a central bank that prides itself on clear communication.

After officials for weeks had insisted that hiking 75 basis points was not on the table, a Wall Street Journal report Monday afternoon, with little sourcing, said that it was likely more aggressive action was coming than the planned 50-basis-point move. The report was followed with similar accounts from CNBC and other outlets. (A basis point is one-one hundredth of 1 percentage point.)
Ostensibly, the move came about following a consumer sentiment survey Friday showing that expectations were ramping up for longer-run inflation. That followed a report that the consumer price index in May gained 8.6% over the past year, higher than Wall Street expectations.
Addressing the notion that the Fed should have been more prescient about inflation, Krosby said it’s hard to believe the data points could have caught the central bankers so off guard.
“You come to something that just doesn’t add up, that they didn’t see this before the blackout,” she said, referring to the period before Federal Open Market Committee meetings when members are prohibited from addressing the public.

“You could applaud them for moving quickly, not waiting six weeks [until the next meeting]. But then you go back to, if it was that dire that you couldn’t wait six weeks, how is it that you didn’t see it before Friday?” Krosby added. “That’s the market’s assessment at this point.”
Fed Chair Jerome Powell did himself no favors at Wednesday’s news conference when he insisted that there is “no sign of a broader slowdown that I can see in the economy.”
On Friday, a New York Fed economic model in fact pointed to elevated inflation of 3.8% in 2022 and negative GDP growth in both 2022 and 2023, respectively at minus-0.6% and minus-0.5%.
The market did not look kindly on the Fed’s actions, with the Dow Jones Industrial Average losing 4.8% for the week to fall below 30,000 for the first time since January 2021 and wiping out all the gains achieved since President Joe Biden took office.
Why the market moves in a particular way in a particular week is generally anybody’s guess. But at least some of the damage seems to have come from impatience with the Fed.

The need to be bold

Though the 75 basis point move was the biggest one-meeting increase since 1994, there’s a feeling among investors and business leaders that the approach still smacks of incrementalism.
After all, bond markets already have priced in hundreds of basis points of Fed tightening, with the 2-year yield rising about 2.4 percentage points to around its highest level since 2007. The fed funds rate, by contrast, is still only in a range between 1.5% and 1.75%, well behind even the six-month Treasury bill.
So why not just go big?
“The Fed is going to have to raise rates much higher than they are now,” said Lewis Black, CEO of Almonty Industries, a Toronto-based global miner of tungsten, a heavy metal used in a multitude of products. “They’re going to have to start getting up into the high single digits to nip this in the bud, because if they don’t, if this gets hold, really gets hold, it’s going to be very problematic, especially for those with the least.”
Black sees inflation’s impact up close, beyond what it will cost his business for capital.
He expects the workers in his mines, based largely in Spain, Portugal and South Korea, to start demanding more money. That’s because many of them took advantage of easily accessed mortgages in Europe and now will have higher housing costs as well as sharp increases in the daily cost of living.
In retrospect, Black thinks the Fed should have started hiking last summer. But he sees pointing fingers as useless at this point.
“Ultimately, we should stop looking for who is to blame. There was no choice. This was the best strategy they thought they had to deal with Covid,” he said. “They know what has to be done. I don’t think you can possibly say with the amount of money in circulation that they can just say, ‘let’s raise 75 basis points and see what happens.’ That’s not going to be sufficient, that’s not going to slow it down. What you need now is to avoid recession.”

What happens now

Powell has repeatedly said he thinks the Fed can manage its way through the minefield, notably quipping in May that he thinks the economy can have a “soft or softish” landing.
But with GDP teetering on a second consecutive quarter of negative growth, the market is having its doubts, and there’s some feeling the Fed should just acknowledge the painful path ahead.
“Since we’re already in recession, the Fed might as well go for broke and give up on the soft landing. I think that’s what investors are expecting now for the short term,” said Mitchell Goldberg, president of ClientFirst Strategy.
“We could argue that the Fed went too far. We could argue that too much money was handed out. It is what it is, and now we have to correct it. We have to look forward now,” he added. “The Fed is way behind the inflation curve. They have to move quickly and they have to move aggressively, and that’s what they’re doing.”
While the S&P 500 and Nasdaq are in bear markets — down more than 20% from their last highs — Goldberg said investors shouldn’t despair too much.
He said the current market run will end, and investors who keep their heads and stick to their longer-term goals will recover.
“People just had this sense of invincibility, that the Fed would come to the rescue,” Goldberg said. “Every new bear market and recession seems like the worst one ever in history and that things will never be good again. Then we climb out of each one with a new set of stock market winners and a new set of winning sectors in the economy. It always happens.”

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