Evelyn Reynolds

The average rate on the popular 30-year fixed loan will rise to 4%, according to the Mortgage Bankers Association’s forecast.
Refinance originations will drop 62% in 2022 to $860 billion.
However, mortgage originations for the purpose of buying a home are forecast to rise 9% to a record of $1.73 trillion in 2022.

A worker carries lumber as he builds a new home in Petaluma, California.
Getty Images

Rising interest rates will result in a sharp drop in refinance demand in 2022, meaning a lot less business for mortgage bankers, according to the Mortgage Bankers Association’s just-released annual forecast. It predicts total origination volume will drop 33% to $2.59 trillion.
The average rate on the popular 30-year fixed loan will rise to 4%, a full percentage point higher than it is now, MBA economists say.

That will result in a 62% drop in refinance originations to just $860 billion. It deepens the anticipated 14% decline in 2021 to $2.26 trillion
“The economy and labor market rebounded in 2021, but overall growth fell short of expectations because of stubborn supply chain issues that fueled faster inflation, slowed consumer spending, and presented challenges in filling the record number of job openings available,” said Michael Fratantoni, chief economist at the MBA. “With inflation elevated and the unemployment rate dropping fast, the Federal Reserve will begin to taper its asset purchases by the end of this year and will raise short-term rates by the end of 2022.” 
Originations for the purpose of buying a home, however, are forecast to rise 9% to a record of $1.73 trillion in 2022.
Overall, this will mark a change from the record-high production profits of 2020, when interest rates fell to record lows and homebuyer demand soared due to the coronavirus pandemic. The drop will likely result in increased competition among lenders.
“Many lenders will rely more heavily on their servicing business to achieve financial goals,” said Marina Walsh, vice president of industry analysis at the MBA. “The servicing outlook is more complicated today, with the expiration of many COVID-19-related forbearances and the need to place borrowers into post-forbearance workouts.”
Walsh added that servicing costs may rise as servicers work to meet the needs and requirements of borrowers, investors and regulators.

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A push in the Buffalo area could produce the first union at company-owned stores in the U.S. But backers say moves by management are having a chilling effect.BUFFALO — During her decade-plus at Starbucks, Michelle Eisen says she has endured her share of workplace stress. She points to the company’s increased use of productivity goals, inadequate attention to training and periods of understaffing or high turnover.But she had never encountered a change that the company made after workers at her store and two other Buffalo-area locations filed for a union election in late August: two additional “support managers” from out of state, who often work on the floor with the baristas and who, according to Ms. Eisen, have created unease.“For a lot of newer baristas, it’s an imposing force,” Ms. Eisen said. “It is not an easy job. It should not be complicated further by feeling like you’re having everything you’re doing or saying watched and listened to.”Workers and organizers involved in the unionization effort say the imported managers are part of a counteroffensive by the company intended to intimidate workers, disrupt normal operations and undermine support for the union.Starbucks says the additional managers, along with an increase in the number of workers in stores and the arrival of a top corporate executive from out of town, are standard company practices. It says the changes, which also include temporarily shutting down stores in the area, are intended to help improve training and staffing — longstanding issues — and that they are a response not to the union campaign but to input the company solicited from employees.“The listening sessions led to requests from partners that resulted in those actions,” said Reggie Borges, a Starbucks spokesman. “It’s not a decision where our leadership came in and said, ‘We’re going to do this and this.’ We listened, heard their concerns.”None of the nearly 9,000 corporate-owned Starbucks locations in the country are unionized. The prospect that workers there could form a union appears to reflect a recent increase in labor activism nationwide, including strikes across a variety of industries.According to the National Labor Relations Board, union elections are supposed to be conducted under “laboratory conditions,” in which workers can vote in an environment free of intimidation, in an election process that is not controlled by the employer.Former labor board officials say the company’s actions could cause an election to be set aside on these grounds should the union lose.“You could say it’s part of an overall series of events that seems to create a tendency that people would be chilled or inhibited,” said Wilma B. Liebman, a chairwoman of the board during the Obama administration.A labor board official recently recommended that a union election at an Amazon warehouse in Alabama be overturned for similar reasons, but Mr. Borges said Starbucks did not believe anything it had done would warrant overturning an election.Starbucks has faced union campaigns before, including efforts in the early 2000s in New York City and in 2019 in Philadelphia, where the firing of two employees involved in union organizing was deemed unlawful by a labor board judge. Starbucks has appealed the ruling.Though none of the campaigns were successful in this country, a Starbucks-owned store in Canada recently unionized, and some stores owned by other companies that have licensing agreements with Starbucks are unionized.Many of the ways Starbucks has responded in Buffalo — where union backers seek to become part of Workers United, an affiliate of the giant Service Employees International Union — are typical of employers. The measures include holding meetings with employees in which company officials question the need for a third party to represent them.Starbucks is also seeking to persuade the labor board to require that workers at all 20 Buffalo-area stores take part in the election, rather than allow stores to vote individually, arguing that employees can spend time at multiple locations. (Union organizers typically favor voting in smaller units to increase the chance of gaining a foothold in at least some locations.) The board is likely to rule on this question and set an election date in the coming weeks.But some of the company’s actions during the union campaign are unorthodox, according to labor law experts. “A huge increase in staffing, shutting down stores, it’s all unusual,” said Matthew Bodie, a law professor at St. Louis University who is a former labor board attorney.Michelle Eisen, a Starbucks worker in Buffalo, said the sudden presence of managers from out of state created unease among many employees.Libby March for The New York TimesA recent visit to a Starbucks near the airport, where workers have filed for a union election, turned up at least nine baristas behind the counter but only a handful of customers.“It’s insane,” said Alexis Rizzo, a longtime Starbucks employee who has been a leader of the organizing campaign at the store. “Even if you’re just trying to run to the back to grab a gallon of milk, you now have to run an obstacle course to fit between all the folks who have no real reason to be there.”Ms. Rizzo said the number of employees in the store at once — which she said had run into the teens — made those who predate the union election filing feel outnumbered and demoralized. “It’s intimidating,” she said. “You go to work and it’s just you and 10 people you don’t know.”Starbucks said the additional personnel were intended to help the store after an uptick in workers who were out sick.Some of the additional employees have come to the airport location from a nearby store that Starbucks recently turned into a training facility. That store does not have an election petition pending, but many of its workers have pledged support for the union effort, and some feel separated and disoriented as well.“Initially, people thought our store could use a little reset,” said Colin Cochran, a pro-union employee at the store that was turned into a training facility, who has mostly been assigned to other locations since then. “As it’s dragged out and we’re getting sent to more and more other stores, it’s been frustrating. We want to see each other again.”Workers said their anxiety had been heightened by the sudden appearance of new managers and company officials from out of town.In a video of a meeting in September, a district manager in Arizona tells co-workers that the company has asked her to spend time in Buffalo over the next 90 days. “There’s a huge task force out there that’s trying to fix the problem because if Buffalo, N.Y., gets unionized, it will be the first market in Starbucks history,” the district manager says in the video, provided by a person at the meeting and viewed by The New York Times. When someone asks if the task force is a “last-ditch effort to try and stop it,” the district manager responds, “Yeah, we’re going to save it.”Will Westlake, a barista in a Buffalo suburb called Hamburg, where workers have also filed for a union election, said a store log showed that several company officials from outside the Buffalo area had been to the store during the past six weeks. Included were at least seven visits from Rossann Williams, Starbucks’ president of retail for North America.The officials sometimes work on laptops facing the baristas, sometimes join them behind the bar to work and inquire about the store, and sometimes perform menial tasks like cleaning the bathroom, Mr. Westlake said. He said that many of his co-workers felt intimidated by these officials and that he found the presence of Ms. Williams “surreal.”Starbucks said that many of the officials were regional leaders and coaches who were helping to solve operational issues and remodel stores, and that they were part of a companywide effort dating to May, when Covid-19 infection rates declined and stores across the country got busier.“The resurgence of business came so fast we were not prepared,” Ms. Williams said in an interview.Colin Cochran was among the pro-union workers at the Starbucks store that was turned into a training facility.Libby March for The New York TimesThe company says that it has added staffing in a number of cities beyond Buffalo, especially in the Midwest and the Mountain West, and that it brought on an additional recruiter in each of its 12 regions in the spring to expedite hiring. It said it had turned about 40 stores around the country into temporary training facilities.On a Saturday in October, Ms. Williams visited the training store, saying little as she stood behind a group of workers while a trainer instructed them at the bar.Later, seated outside the store to discuss her work in Buffalo, she waved off the idea that temporarily shutting down a store or making other significant changes might compromise the union election’s laboratory conditions.“If I went to a market and saw the condition some of these stores are in, and I didn’t do anything about it, it would be so against my job,” she said. “There’s no way I could come here and say I’m not going to do anything.” More

Builder confidence in the single-family home construction market rose 4 points to 80 in October on the National Association of Home Builders/Wells Fargo Housing Market Index.
Of the index’s three components, current sales conditions climbed 5 points to 87.
Sales expectations in the next six months increased 3 points to 84 and buyer traffic rose 4 points to 65.

Residential single family homes construction by KB Home are shown under construction in the community of Valley Center, California, June 3, 2021.
Mike Blake | Reuters

The nation’s homebuilders aren’t seeing any relief from supply chain issues that have slowed construction recently, but high buyer demand appears to be making up for it.
Builder confidence in the single-family home construction market rose 4 points to 80 in October on the National Association of Home Builders/Wells Fargo Housing Market Index. That is still down from 85 in October 2020 and from the record high 90 in November of last year. Anything above 50 is considered positive.

“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB Chairman Chuck Fowke, a homebuilder from Tampa, Florida, in a release.
Of the index’s three components, current sales conditions rose 5 points to 87. Sales expectations in the next six months increased 3 points to 84 and buyer traffic climbed 4 points to 65.
The biggest concern for builders now is affordability, as they raise prices to meet the rising costs of land, labor and materials.
The median price of a newly built home sold in August was 20% higher than August of 2020, according to the U.S. Census. While some of that is the mix of homes selling — more on the high end of the market — it also reflects builder increases.
Some builders have actually slowed home sales due to construction hurdles, as they are concerned they won’t be able to deliver houses at a normal pace.

Homebuyers are turning more and more to new construction, as the supply of existing homes for sale continues to be both incredibly lean and pricey.
“Building material price increases and bottlenecks persist and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt,” said Robert Dietz, chief economist at the NAHB.
A forecast just released by the Mortgage Bankers Association predicts the average rate on the 30-year fixed mortgage will hit 4% by the end of 2022, up from around 3% now.
Regionally, looking at the three-month moving averages builder sentiment in the Midwest rose 1 point to 69. In the Northeast it was unchanged at 72. Both the South and West were also unchanged at 80 and 83, respectively.

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Thanks to the rollout of coronavirus vaccines, the global economy is slowly starting to emerge from the Covid-19 pandemic.
But the pandemic has left one very destructive issue in its wake: disruption to global supply chains.
The rapid spread of the virus in 2020 prompted shutdowns of industries around the world.

Cargo trucks parked at the Port of Los Angeles in Los Angeles, California, U.S., on Wednesday, Oct. 13, 2021.
Kyle Grillot | Bloomberg | Getty Images

Thanks to the rollout of coronavirus vaccines, the global economy is slowly starting to emerge from the pandemic.
But Covid-19 has left one very destructive economic issue in its wake: disruption to global supply chains.

The rapid spread of the virus in 2020 prompted shutdowns of industries around the world and, while most of us were in lockdown, there was lower consumer demand and reduced industrial activity.
As lockdowns have lifted, demand has rocketed. And supply chains that were disrupted during the global health crisis are still facing huge challenges and are struggling to bounce back.
This has led to chaos for the manufacturers and distributors of goods who cannot produce or supply as much as they did pre-pandemic for a variety of reasons, including worker shortages and a lack of key components and raw materials.
Different parts of the world have experienced supply chain issues that have been exacerbated for different reasons, too. For instance, power shortages in China have affected production in recent months, while in the U.K., Brexit has been a big factor around a shortage of truck drivers. The U.S. is also battling a shortage of truckers, as is Germany, with the former also experiencing large backlogs at its ports.
Read more: As the U.K. battles food, fuel and labor crises, Boris Johnson promises change

Situation ‘will get worse’

Unfortunately, experts like Tim Uy of Moody’s Analytics say that supply chain problems “will get worse before they get better.”
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Uy said in a report last Monday.
“Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise, and GDP growth worldwide will not be as robust as a result,” he said.
“Supply will likely play catch up for some time, particularly as there are bottlenecks in every link of the supply chain—labor certainly, as mentioned above, but also containers, shipping, ports, trucks, railroads, air and warehouses.”

A sea of cargo trucks wait in long lines to enter The Port of Los Angeles as the port is set to begin operating around the clock on Wednesday, Oct. 13, 2021 in San Pedro, CA.
Jason Armond | Los Angeles Times | Getty Images

Supply chain bottlenecks — congestion and blockages in the production system — have affected a variety of sectors, services and goods ranging from shortages of electronics and autos (with problems exacerbated by the well-known semiconductor chip shortage) to difficulties in the supplies of meat, medicines and household products.
Amid higher consumer demand for goods that have been in short supply, freight rates for merchandise coming from China to the U.S. and Europe have soared, while a shortage of truck drivers across both the latter regions has exacerbated the problem of getting goods to their final destinations, and has led to high prices once those products hit store shelves.
The pandemic has only served to highlight how interconnected, and how easily destabilized, global supply chains can be.

At their best, global supply chains lower costs for businesses, often due to reduced labor and operating costs linked to the manufacturer of the products they want, and can spur innovation and competition.
But the pandemic has highlighted deep fragilities in these networks, with disruption in one part of the chain having a ripple-down effect on all parts of the chain, from manufacturers to suppliers and distributors with disruptions ultimately affecting consumers and economic growth.

Supply chain crisis hits growth

As economies get back on their feet, the supply chain crisis has come to the fore as one of the biggest challenges governments now face. Covid-weary citizens are eager to spend again but are finding goods either absent or much more expensive.
The issue is now looming large ahead of Christmas, too, and last week, White House officials told Reuters that Americans could face higher prices and sparser shelves this festive season with the Biden administration trying to alleviate blockages at ports.
Read more: White House plan aims to help key West Coast ports stay open 24/7 to ease supply chain bottlenecks
China and Europe are also experiencing growth problems on the back of supply chain issues. On Monday, China reported its third-quarter GDP grew a disappointing 4.9% from the previous quarter, as industrial activity rose less than expected in September (increasing by 3.1% below the 4.5% expected by Reuters) — with supply chain issues contributing to the slowdown in activity.

“Manufacturing was hit hard by supply chain disruptions due to Covid as some port operations were hit in the third quarter of 2021, and chip shortages continued in the quarter,” Iris Pang, chief economist of Greater China at ING, noted Monday.
She said that “supply chain disruptions are expected to last as freight rates are still high and chip shortages are still a critical issue for industries like equipment, automobiles and telecommunication devices.” 
Last week, Germany’s top economists warned that “supply bottlenecks will continue to weigh on manufacturing production for the time being” and were likely to hamper growth in export-oriented Germany, Europe’s biggest economy.

Earnings impacted

Experts note that earnings are already starting to show the impact of the supply chain crisis. Invesco’s chief global market strategist, Kristina Hooper, noted last week that “supply chain fears are brewing” with a number of U.S. companies flagging up warnings about rising costs related to supply chain disruptions and potentially lower earnings.
Hooper believed some of the factors contributing to supply chain issues, such as the labor shortage, will be worked out sooner than others. But she said the problem could have longer-lasting effects on some sectors.

“No matter where companies are, they are likely experiencing supply chain disruptions, higher input costs and some issues sourcing labor,” she said in a note last Thursday.
“However, some companies will be far more impacted than others. … A rise in cost will generally have the greatest impact on low-margin companies, which tend to be found in sectors such as transportation, general retail, construction and autos. Companies that should be least impacted are those with wide profit margins, limited raw material costs and small workforces. That should include growth sectors such as tech and health care,” she said, adding that “unfortunately, those sectors’ stock prices may temporarily suffer as bond yields rise.”
“Financials may be the standouts in this environment, especially as these companies would welcome higher yields. Another differentiating factor may be how much investment companies have made in technology to increase productivity.”
Hooper noted that some shortages, of semiconductors in particular, could improve soon, with projections for a return to normal levels of production by the second quarter of 2022. “However, more general supply chain disruptions are likely to continue in the shorter term, especially if there are additional Covid waves,” she added.
“In general, supply chain disruptions and higher input costs seem likely to be relatively transitory. … And so, for me, I’ll be paying close attention to this quarter’s earnings season, but I’ll be most concerned about companies’ guidance for the fourth quarter and beyond — especially how long they expect these conditions to last,” she said.

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In a market sentiment survey of more than 600 investment professionals worldwide, conducted by the German lender between Oct. 6-8, 42% expected the Fed to stay slightly too dovish.
By contrast, 45% see a bigger risk of the Bank of England making a hawkish policy error, compared to 20% for “about right” and 20% for dovish.

People wearing face masks walk in front of a big Euro sign in Frankfurt am Main, western Germany, as the European Central Bank (ECB) headquarters can be seen in the background on April, 24, 2020.
Yann Schreiber | Getty Images

LONDON — A substantial portion of investors expect the U.S. Federal Reserve and the European Central Bank to keep monetary policy slightly too loose for too long, according to a Deutsche Bank survey.
In a market sentiment survey of more than 600 investment professionals worldwide, conducted by the German lender between Oct. 6-8, 42% expected the Fed to stay slightly too dovish, while 24% anticipated that the central bank would get policy “about right” and 33% foresaw a more hawkish tilt.

The prospect of a dovish policy error from the ECB was seen as more likely, with 46% expecting policy to remain too accommodative, compared to 26% believing policy across the common currency bloc will be “about right” and 21% seeing a premature or excessive tightening.
By contrast, 45% see a bigger risk of the Bank of England making a hawkish policy error, compared to 20% for “about right” and 20% for dovish.
Central bank policymakers have been striking a cautious tone in recent weeks, seemingly adopting a “wait and see” approach to inflation and the prospect of hiking rates.
However, Bank of England Governor Andrew Bailey on Sunday gave the clearest hint yet that British interest rates could be hiked, telling a panel that the Bank “will have to act” on rising inflation.
ECB
Andrea Enria, chair of the ECB’s supervisory board, told the European Parliament’s Economic and Monetary Affairs Committee on Thursday that although the economic outlook has improved, “caution remains of the essence.”

“We are keeping a very close eye on the buildup of risks on bank balance sheets,” Enria said, adding that the ECB is also seeing a “build-up of residential real estate vulnerabilities in some countries.”
He noted that along with “deteriorating asset quality,” banks’ “excessive search for yield” was feeding growing demand for leverage, increasing market risk.
“A sudden adjustment in yields, triggered for instance by changing investor expectations about inflation and interest rates, could in this context cause asset price corrections and direct as well as indirect losses for banks,” Enria said.

At its September meeting, the ECB deferred a number of important decisions to December, but since then, surging energy prices have driven euro zone inflation to a 13-year high of 3.4% year-on-year, and analysts expect it to continue rising.
HSBC Senior Economist Fabio Balboni said in a research note Monday that although divisions are widening among the Governing Council, President Christine Lagarde will likely argue the case for retaining a highly accommodative stance at the October meeting.
“Our view remains that the December ECB forecast will still show inflation below 2% in the medium-term, paving the way for the ECB to announce a step-up of the ‘normal’ QE programme alongside the end of PEPP next March, and we think the first rate rise is still a long way away,” Balboni said.
“But with the risk that rising energy prices could prove more sustained and lead to second-round effects, the medium-term outlook for monetary policy has now certainly become uncertain. We expect some pushback against the market in October. The question is how forceful it will be.”
Bank of England
Meanwhile, the Bank of England will be tasked with balancing an overall expansion of economic activity against signs of a sharper deceleration in the third quarter, and increasing risks in the fourth.
U.K. GDP rose by just 0.4% in August, with July’s output revised lower to -0.1%. However, the weaker third-quarter growth follows an upward revision across the second to 5.5% annually from 4.8%.
“On the face of it, the marked slowdown in economic activity into Q3 should serve as a warning against too swift a tightening in monetary policy, particularly as GDP looks set to face ongoing headwinds from higher utility prices, cuts in Universal Credit [benefits support] and eventually increases in National Insurance all pressuring household incomes over what threatens to be a difficult winter,” said David Page, head of macro research at AXA Investment Managers.

Recent comments from Bank of England Governor Andrew Bailey about the effects of higher inflation expectations has led AXA to conclude that the Bank is lining up a pre-emptive tightening of policy.
“We change our forecast to envisage the first hike (0.15% to 0.25%) by the BoE in February next year,” Page said in a research note last week.
“We then consider a second in August (to 0.50%) and a third in May 2023 (to 0.75%). However, short-term interest rate markets consider a faster pace, including a first hike in December this year and almost fully pricing in a rise to 1.00% by end-2022.”
The Fed
Red hot inflation data has been a key source of speculation that the U.S. Federal Reserve may be forced to hike rates sooner rather than later. Minutes from the latest meeting of the Federal Open Market Committee indicated that the central bank could start tapering its monthly bond-buying from next month.
The U.S. consumer price index jumped 0.4% month-on-month in September and 5.4% year-on-year, according to Labor Department figures.

However, Richmond Fed President Thomas Barkin said last week that more economic data was needed before the Fed could start to consider rate hikes.
In an interview with CNBC on Friday, Barkin indicated that he is leaning toward beginning the tapering process in November, with growing inflation risks at the top of the agenda.
Fed officials have stressed that even after the start of tapering, it will be some time before interest rate hikes begin.

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Growth of 4.9 percent shows the country’s huge industrial sector has run into trouble. But exports and services are looking strong.BEIJING — Steel mills have faced power cuts. Computer chip shortages have slowed car production. Troubled property companies have purchased less construction material. Floods have disrupted business in north-central China.It has all taken a toll on China’s economy, an essential engine for global growth.The National Bureau of Statistics announced on Monday that China’s economy increased by 4.9 percent in the third quarter, compared to the same period last year; the period was markedly slower than the 7.9 percent increase the country notched in the previous quarter. Industrial output, the mainstay of China’s growth, faltered badly, especially in September, posting its worst performance since the early days of the pandemic.Two bright spots prevented the economy from stalling. Exports remained strong. And families, particularly prosperous ones, resumed spending money on restaurant meals and other services in September, as China succeeded once again in quelling small outbreaks of the coronavirus. Retail sales were up 4.4 percent in September from a year ago.Chinese officials are showing signs of concern, although they have refrained so far from unleashing a big economic stimulus. “The current international environment uncertainties are mounting, and the domestic economic recovery is still unstable and uneven,” said Fu Linghui, the spokesman for the National Bureau of Statistics.The government’s own efforts, though, are part of the current economic challenges.In recent months, the government has unleashed a raft of measures to address income inequality and tame businesses, in part with the goal of protecting the health of the economy. But those efforts, including penalizing tech companies and discouraging real estate speculation, have also weighed on growth in the current quarter.The government had also imposed limits on energy use as a part of a broader response to climate change concerns. Now, the power shortages are hurting industry, and the country is rushing to burn more coal.“The economy is sluggish,” said Yang Qingjun, the owner of a corner grocery store in an aging industrial neighborhood of shoe factories in Dongguan, near Hong Kong. Power cuts have prompted nearby factories to reduce operations and eliminate overtime pay. Local workers are living more frugally.“Money is hard to earn,” Mr. Yang said. Trying to Solve the Real Estate QuestionUrbanization was once a great engine of growth for China. The country built spacious apartments in modern high-rises for hundreds of millions of people, with China producing as much steel and cement as the rest of the world output combined, if not more.Now, real estate — in particular, the debt that developers and home buyers amassed — is a major threat to growth. The country’s biggest developer, China Evergrande Group, faces a serious cash shortage that is already rippling through the economy.Construction has ground to a halt at some of the company’s 800 projects as suppliers wait to be paid. Several smaller developers have had to scramble to meet bond payments.This could create a vicious cycle for the housing market. The worry is that developers may dump large numbers of unsold apartments on the market, keeping home buyers away as they watch to see how far prices may fall.“Some developers have encountered certain difficulties, which may further affect the mood and confidence of buyers, causing everyone to postpone buying a house,” said Ning Zhang, a senior economist at UBS.The fate of Evergrande has broader import for the long-term health of the economy.Officials want to send a message that bond buyers and other investors should be more wary about lending money to debt-laden companies like Evergrande and that they should not assume that the government will always be there to bail them out. But the authorities also need to make sure that suppliers, builders, home buyers and other groups are not badly burned financially.These groups “will get made more whole than the bondholders, that’s for sure,” predicted David Yu, a finance professor at the Shanghai campus of New York University.Addressing Difficulties in Heavy IndustryAs electricity shortages have spread across eastern China in recent weeks, regulators have cut power to energy-intensive operations like chemical factories and steel mills to avoid leaving households in the dark. It has been a double whammy for industrial production, which has also been whacked by weakness in construction.Industrial production in September was up only 3.1 percent from a year earlier, the lowest since March of last year, when the city of Wuhan was still under lockdown because of the pandemic.“The power cuts are more concerning to some extent than the Evergrande crisis,” said Sara Hsu, a visiting fellow at Fudan University in Shanghai.Power lines in Dongguan, China. The government has imposed limits on energy use, as a part of a broader response to climate change concerns. Gilles Sabrié for The New York TimesThe Energy Bureau in Zhejiang Province, a heavily industrialized region of coastal China, reduced power this autumn for eight energy-intensive industries that process raw materials into industrial materials like steel, cement and chemicals. Together, they consume nearly half the province’s electricity but account for only an eighth of its economic output.Turning down the power to these industries risks creating shortages in industrial materials, which could ripple through supply chains.Understand China’s New EconomyCard 1 of 6An economic reshaping. More

Democrats are debating whether doing nothing will cost more than doing something to deal with climate change, education, child care, prescription drugs and more.WASHINGTON — As lawmakers debate how much to spend on President Biden’s sprawling domestic agenda, they are really arguing about a seemingly simple issue: affordability.Can a country already running huge deficits afford the scope of spending that the president envisions? Or, conversely, can it afford to wait to address large social, environmental and economic problems that will accrue costs for years to come?It is a stealth battle over the fiscal future at a time when few lawmakers in either party have prioritized addressing debt and deficits. Each side believes its approach would put the nation’s finances on a more sustainable path by generating the strongest, most durable economic growth possible.The debate has shaped a discussion among lawmakers about what to prioritize as they scale back Mr. Biden’s initial proposal to dedicate $3.5 trillion over 10 years to programs and tax cuts that would curb greenhouse gas emissions, make child care more affordable, expand access to college and lower prescription drug prices, among other priorities. The smaller bill under discussion could increase the total amount of government spending on all current programs by about 1.5 percent to 2.5 percent over the next decade, depending on its size and components. Mr. Biden has proposed fully paying for this with a series of tax increases on businesses and the wealthy — including raising the corporate tax rate, increasing taxes on multinational corporations and cracking down on wealthy people who evade taxes — along with reducing government spending on prescription drugs for older Americans.As the negotiations continue, Democrats are considering cutting back or jettisoning programs to shave hundreds of billions of dollars off the final price to get it to a number that can pass the House and Senate along party lines. One key part of Mr. Biden’s climate agenda — a program to rapidly replace coal- and gas-fired power plants with wind, solar and nuclear energy — is likely to be dropped from the bill because of objections from a coal-state senator: Joe Manchin III, Democrat of West Virginia.The discussions have focused attention on Washington’s longstanding practice of using budgetary gimmicks to make programs appear to be paid for when they are not, as well as opening a new sort of discussion about what affordable really means.The debate about what the United States can afford used to be pegged to its growing budget deficits and warnings that the government, which spends much more than it brings in, could saddle future generations with mountains of debt, sluggish economic growth, runaway inflation and enormous tax hikes. But those concerns receded after no such crisis materialized. The country experienced tepid inflation and low borrowing costs for a decade after the 2008 financial crisis, despite increased borrowing for economic stimulus under President Barack Obama and for tax cuts under President Donald J. Trump.In its place is a new debate, one focused on the long-term costs and benefits of the government’s spending decisions.Many Democrats fear the United States cannot afford to wait to curb climate change, help more women enter the work force and invest in feeding and educating its most vulnerable children. In their view, failing to invest in those issues means the country risks incurring painful costs that will slow economic growth.“We can’t afford not to do these kinds of investments,” David Kamin, a deputy director of the White House National Economic Council, said in an interview.Take climate change: The Democratic think tank Third Way estimates that if Congress passes an aggressive plan to reduce greenhouse gas emissions, U.S. companies will invest an additional $1.3 trillion in the construction and deployment of low-emission energy like wind and solar power and energy-efficient technologies over the next decade, and $10 trillion by 2050. White House officials say that if the country fails to reduce emissions, the federal government will face mounting costs for relief and other aid to victims of climate-related disasters like wildfires and hurricanes.“Those are the table stakes for the reconciliation and infrastructure debate,” said Josh Freed, the senior vice president for climate and energy at Third Way. “It’s why we think the cost of inaction, from an economic perspective, is so enormous.”But to some centrist Democrats, who have expressed deep reservations about spending $2 trillion on a bill to advance Mr. Biden’s plans, “affordable” still means what it did in decades past: not adding to the federal debt. The budget deficit has swelled in recent years, reaching $1 trillion in 2019 from additional spending and tax cuts that did not pay for themselves, before topping $3 trillion last year amid record spending to combat the coronavirus pandemic.Mr. Manchin says he fears too much additional spending would feed rising inflation, which could push up borrowing costs and make it harder for the country to manage its budget deficit. He has made clear that he would like the final bill to raise more revenue than it spends in order to reduce future deficits and the threat of a debt crisis. Mr. Biden says his proposals would help fight inflation by reducing the cost of child care, housing, education and more.A few economists agree with Mr. Manchin, warning that even fully offsetting spending and tax cuts could fuel inflation. Michael R. Strain, a centrist economist at the conservative American Enterprise Institute who supported many of the pandemic spending programs, said in an interview this year that additional spending that stoked consumer demand would “exacerbate pre-existing inflationary pressures.”President Biden visited the Capitol Child Development Center in Hartford, Conn., on Friday. He has warned that if Congress does not act to invest in children, the United States will face slower economic growth for generations to come.Sarahbeth Maney/The New York TimesRepublicans, who have vowed to fight any version of the spending bill, argue that the national economy cannot afford the burden of taxes on high earners and businesses that Democrats have proposed to help offset their plans. They say the increases will chill growth when the recovery from the pandemic recession remains fragile.“The tax hikes are going to slow growth, flatten out wages and both drive U.S. jobs overseas and hammer small businesses,” said Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee. “There will be a significant economic price to all this spending.”U.S. Inflation & Supply Chain ProblemsCard 1 of 6Covid’s impact on supply continues. More

A federal voucher program is at risk of being sharply scaled back as the White House seeks to slash its social policy package to appease two centrist senators.SAN FRANCISCO — Audrey Sylve, a retired bus driver, has spent 13 agonizing years on a waiting list for a federal voucher that would help cover rent for an apartment in one of America’s most expensive housing markets.This summer it seemed that help was finally on the way.In late July, congressional Democrats introduced a $322 billion plan to bolster low-income housing programs as part of the $3.5 trillion social spending plan embraced by President Biden. At its center is a $200 billion infusion of aid for the country’s poorest tenants, which would allow another 750,000 households to participate in a program that currently serves two million families.Affordable-housing advocates saw it as a once-in-a-generation windfall that would allow local governments to move thousands of low-income tenants like Ms. Sylve, 72, off waiting lists and to expand aid to families at the highest risk of homelessness.But optimism has given way to anxiety. Low-income housing, and the voucher program in particular, are among those most at risk of being sharply scaled back as the White House seeks to slash the package to accommodate the demands of two centrist Democrats, Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona, according to several people involved in the talks.Congressional negotiators are seeking to cut the overall size of the 10-year package, in coordination with the White House, to between $1.9 trillion and $2.3 trillion. Housing is just one of several high-price priorities on the chopping block in the negotiations.Yet proponents say no other proposal is likely to have as immediate an effect on the lives of the country’s most vulnerable as the increase in rental assistance because it addresses a foundational problem: securing an affordable place to live when rents everywhere are outpacing earnings.“I’m all for funding early childhood education, child care and the expansion of health care with education, but we cannot be successful with any of that unless people have safe and secure housing,” said Representative Maxine Waters, a California Democrat who leads the House Financial Services Committee, which drafted the original plan.Supporters of the expansion say every penny is required to begin addressing a crisis that threatens to undermine recent gains in the fight to reduce poverty. They fear it will be elbowed aside by other programs, such as universal child care, that enjoy broader political support because they benefit middle-class, and not just poor, people.“Better health care or increased educational access doesn’t do much for families sleeping in their car or under a bridge, or for the millions more on the verge,” said Diane Yentel, president of the National Low Income Housing Coalition, which is pressuring the White House to fund the program as it was drafted. “There are no ‘savings’ to be had here.”The financial services industry, which puts together the complex public-private financing packages used to build most affordable developments, has already factored in a significantly scaled-back congressional compromise.“Much of the proposed $400 billion in housing-related grants and tax subsidies is likely to be cut from the reconciliation bill,” analysts from Goldman Sachs wrote in an email last week. That figure bundled the $332 billion package, which also includes increases for public housing authorities and an affordable housing construction fund, with a smaller package of tax breaks in the bill.White House officials say they have made no decisions. Ms Waters and her counterpart in the Senate, Sherrod Brown, a Democrat of Ohio, said they would not accept any deal that cut the housing plan more than any other proposal.“We’re not going to scale back. We’re not going to lose our way on this,” Mr. Brown, chairman of the Banking Committee, said in an interview. “And we’re not going to compromise the mission of transforming the fight on poverty.”The White House is looking for ways to win support for its package from Senators Kyrsten Sinema and Joe Manchin III.Stefani Reynolds for The New York TimesOver the past two decades, the federal government has stopped bankrolling construction of government-run public housing projects. Instead, it has shifted resources to voucher programs, which bridge the financial gap between what a poor tenant can afford to pay and what a landlord might reasonably expect to get on the open market.Demand far outstrips supply: One recent study found that the federal government has provided funding for only a quarter of the vouchers needed to help house eligible families — and many housing authorities have simply stopped taking names to avoid leaving tenants in the lurch.Even if the voucher increase somehow makes it past Mr. Manchin and Ms. Sinema, it would represent only a down payment on an enormous unmet need for housing aid exacerbated by rocketing real estate values in most major cities.California’s estimated share of the new aid would bankroll only a fraction of the new vouchers needed to meet the demand, said Matthew Schwartz, president of the California Housing Partnership, a nonprofit that works with community groups to finance low-income housing projects.But it would be a significant improvement, Mr. Schwartz said, particularly on top of a $22 billion affordable-housing plan that Gov. Gavin Newsom signed into law this summer.Joseph Villarreal, executive director of the housing authority of Contra Costa County, outside San Francisco, is less concerned about the future than fulfilling the promises he has made in the past. He saw the new cash in personal terms, as a way to fulfill a commitment more than a decade in arrears.“It would be horrible if any, much less the majority, if this voucher money gets cut from the proposal,” he said.Mr. Villarreal’s organization, which serves as a pass-through for federal funding, maintains 51 separate waiting lists for the vouchers — some for specific developments, others for targeted demographic groups, with 47,000 families in limbo. “It weighs on me,” he said of the lists.Ms. Sylve, who said she was scraping by on a small pension and Social Security, was one of 6,000 chosen from 40,000 qualified Contra Costa County applicants in a lottery to be added to the slow-moving queue for the program, which is still known by its historical name, Section 8.A few years ago she was told that a voucher was about to become available, but that fell through, and she has spent much of the past 13 years hopping from apartment to apartment. Last spring, Ms. Sylve moved in with her daughter across the bay in San Francisco, because the neighborhood around her apartment had become too dangerous.“They give you hope, and that’s the hardest part,” Ms. Sylve said. “But you keep hoping, year after year after year.”A survey of 44 large housing authorities across the country conducted by the Center on Budget and Policy Priorities, a left-leaning Washington think tank, painted a grim picture of the voucher program. A total of 737,000 people were on waiting lists, and 32 of the authorities are refusing to take new applications, with a few exceptions for particularly vulnerable populations.The situation on the West Coast was especially dire, with eight times as many people lingering on waiting lists as receiving aid in San Diego, where the list has topped 108,000. Long waiting lists are also a staple in Washington, Philadelphia, Houston, Honolulu, Little Rock, Ark., and New York, which closed its list years ago.Will Fischer, director for housing policy for the center, said bolstering the voucher program was the most important single move the federal government could make to address the homelessness crisis.“Look, the public housing money is urgently needed — but it would be for existing units, for families who already have a place to live,” he said. “And most of the other funding in the proposal actually serves people a little bit higher up the income scale.”Representative Ritchie Torres, a Bronx Democrat whose district is among the poorest in the country, said housing always seemed to be listed as the third, fourth or fifth priority of many liberal lawmakers.When House Democrats peppered Mr. Biden with questions about the social spending package at a meeting in the Capitol this month, Mr. Torres — a former chairman of the New York City Council housing committee — was stunned when he realized no one had asked the president about rental aid, and spoke up.Mr. Biden responded by promising he would “protect” housing, without elaborating, Mr. Torres said. 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