Evelyn Reynolds

Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More

President Biden had an ambitious agenda to remake the economy. But under the duress of negotiations and Senate rules, he has shelved a series of proposals, some of them indefinitely.WASHINGTON — Democrats in Congress are curbing their ambitions for President Biden’s economic agenda, and Jennifer Mount, a home health care aide, worries that means she will not get the raise she needs to pay more than $3,000 in medical bills for blindness in one eye.Edison Suasnavas, who came to the United States from Ecuador as a child, has grown anxious about the administration’s efforts to establish a pathway to citizenship, which he hoped would allow him to keep doing molecular tests for cancer patients in Utah without fear of deportation.And Amy Stelly wonders — thanks to a winnowing of Mr. Biden’s plans to invest in neighborhoods harmed by previous infrastructure projects like highways that have harmed communities of color — whether she will continue to breathe fumes from a freeway that she says constantly make her home in New Orleans shudder. She has a message for the president and the Democrats who are in the process of trying to pack his sprawling agenda into a diminishing legislative package.“You come up and live next to this,” Ms. Stelly said. “You live this quality of life. We suffer while you debate.”Mr. Biden began his presidency with an expensive and wide-ranging agenda to remake the U.S. economy. But under the duress of negotiations and Senate rules, he has shelved a series of his most ambitious proposals, some of them indefinitely.He has been thwarted in his efforts to raise the federal minimum wage and create a pathway to citizenship for undocumented immigrants. He has pared back investments in lead pipe removal and other efforts that would help communities of color. Now, as the president tries to secure votes from moderates in his party, he is reducing what was originally a $3.5 trillion collection of tax cuts and spending programs to what could be a package of $2 trillion or less.That is still an enormous spending package, one that Mr. Biden argues could shift the landscape of the economy. But a wide range of Americans who have put their faith in his promises to reshape their jobs and lives are left to hope that the programs they are banking on will survive the cut; otherwise, they face the prospect of waiting years or perhaps decades for another window of opportunity in Washington.“The problem now is this may be the last train leaving the station for a long time,” said Jason Furman, an economist at the Harvard Kennedy School who was a top economic adviser to President Barack Obama. “It could be five, 10, 20 years before there’s another shot at a lot of these issues.”President Biden entered the White House with an expensive and ambitious agenda to remake the U.S. economy. He has pared back those plans.Tom Brenner for The New York TimesMr. Furman and other former Obama administration officials saw firsthand how quickly a presidential agenda can shrink, and how presidential and congressional decisions can leave campaign priorities unaddressed for years. Mr. Obama prioritized an economic stimulus package and the creation of the Affordable Care Act over sweeping immigration and climate legislation in the early years of his presidency.Stimulus and health care passed. The other two did not. A similar fate now could befall Mr. Biden’s plans for home care workers, paid leave, child care subsidies, free prekindergarten and community college, investments in racial equity and, once again, immigration and climate change.If Mr. Biden is able to push through a compromise bill with major investments in emissions reduction, “he’s got an engine that he’s working with” to fight climate change, said John Podesta, a former top aide to Mr. Obama and President Bill Clinton. “If he can’t get it, then I think, you know, we’re really kind of in soup, facing a major crisis.”Republicans have criticized the spending and the tax increases that would help fund it, claiming that the Democratic package would hurt the economy. Democrats “just have an insatiable appetite to raise taxes and spend more money,” Representative Steve Scalise, Republican of Louisiana, said on “Fox News Sunday” this week. “It would kill jobs.”Amy Stelly said she wondered whether she would continue to breathe fumes from the Claiborne Expressway, which is near her home in New Orleans.Edmund D. Fountain for The New York TimesThe threat of Republican filibusters has blocked Mr. Biden’s plans for gun and voting-rights legislation.For now, though, the president’s biggest problem is his own party. He is negotiating with progressives and moderates over the size of the larger tax and spending package. Centrists like Senators Joe Manchin III of West Virginia and Kyrsten Sinema of Arizona have pushed for the price tag to fall below $2 trillion. Mr. Manchin has said he wants to limit the availability of some programs to lower- and middle-income earners. Progressive groups are jockeying to ensure that their preferred plans are not cut entirely from the bill.The House has proposed investing $190 billion in home health care, for example, less than half of what Mr. Biden initially asked for. If the price tag continues to decrease, Democrats would almost certainly have to choose between two concurrent aims: expanding access to older Americans in need of caretakers or raising the wages of those workers, a group that is disproportionately women of color.Another proposal included in Mr. Biden’s original infrastructure bill was an investment of $20 billion to address infrastructure that has splintered communities of color, although the funding was slashed to $1 billion through a compromise with Republican senators.Ms. Stelly thought the funds, plus the president’s sweeping proposals to address climate change — which might also be narrowed to appease centrist Democrats — would finally result in elected officials addressing the highway emissions that have filled her lungs and darkened the windows of her home.Ms. Stelly, an urban designer, has since limited her expectations. She said she hoped the funding would be enough to at least issue another study of the highway, which claimed dozens of Black-owned businesses and the once-thriving neighborhood of Tremé.The Claiborne Expressway bisects the residential neighborhood of Tremé in New Orleans. Ms. Stelly said she hoped the funding would be enough for another study on the effects of the highway.William Widmer for The New York TimesSome Democrats are eager to pack as much as they can into the bill because they fear losing the House, the Senate or both in the midterm elections next year. Mr. Podesta has urged lawmakers to see the package as a chance to avoid those losses by giving Democratic incumbents a batch of popular programs to run on, and also giving the president policy victories that could define his legacy.Mr. Biden has promoted some of his policies as ways to reverse racial disparities in the economy and lift families that are struggling in the coronavirus pandemic from poverty.Ms. Mount, who immigrated to the United States from Trinidad and Tobago, said she was appreciative of her job helping older Americans and the disabled eat and bathe and assisting them in their homes. But her wages for her long hours — working about 50 hours a week for $400, at times — have made it effectively impossible to stay on top of payments for basic needs.She had hoped Mr. Biden’s plan to raise the minimum wage or salaries for home health care aides meant she would no longer need to choose between her electric bills and her medical expenses. She said the treatment had improved her blindness, but without a salary increase for her field, she is more convinced that she will be working for the rest of her life.“I have to make a choice: Do I go to the grocery store or pay my mortgage? Do I pay my water bill or pay my electric bill?” said Ms. Mount, who lives in Philadelphia. “With that, retirement looks B-L-E-A-K, all uppercase. What do I have there for retirement?”When Mr. Biden initially proposed two years of free community college, Ms. Mount, 64, was encouraged about future opportunities for her six grandchildren in the United States. But she fears that effort could also be cut.“That’s politics from on top,” she said. “At times, they always seem detached.”Protesters gathered in front of the White House in August in support of the DACA program, which protects young immigrants from deportation.Andrew Caballero-Reynolds/Agence France-Presse — Getty ImagesSome measures that Democrats have long promised voters have run afoul of Senate rules that dictate which policies the administration should include in bills that use a special process to bypass the filibuster, including a minimum-wage increase and a plan to offer citizenship to immigrants brought to the United States as children.When the Senate parliamentarian rejected the strategy, it made Mr. Suasnavas, who has lived in the United States since he was 13, consider the prospect of eventually being deported; he would have to leave behind his job as a medical technology specialist, and his 6-year-old daughter and 2-year-old son.“We’ve been having the hopes that politicians in Washington — Democrats and Republicans — will see not only the economic impact we can bring to the country but also we’re still people with families,” said Mr. Suasnavas, 35. “Our hearts have been broken so many times that it feels like another wound in your skin.” More

David Card has made a career of studying unintended experiments to examine economic questions — like whether raising the minimum wage causes people to lose jobs.Joshua D. Angrist and Guido W. Imbens have developed research tools that help economists use real-life situations to test big theories, like how additional education affects earnings.On Monday, their work earned them the 2021 Nobel Memorial Prize in Economic Sciences.All three winners are based in the United States. Mr. Card, who was born in Canada, works at the University of California, Berkeley. Mr. Angrist, born in the United States, is at the Massachusetts Institute of Technology, and Mr. Imbens, born in the Netherlands, is at Stanford University.“Sometimes, nature, or policy changes, provide situations that resemble randomized experiments,” said Peter Fredriksson, chairman of the prize committee. “This year’s laureates have shown that such natural experiments help answer important questions for society.”The recognition was bittersweet, many economists noted, because much of the research featured in the prize announcement was co-written by Alan B. Krueger, a Princeton University economist and former White House adviser who died in 2019. The Nobels are not typically awarded posthumously. Despite that note of sadness, the economics profession celebrated the news, crediting the winners for their work in changing the way that labor markets in particular are studied.“They ushered in a new phase in labor economics that has now reached all fields of the profession,” Trevon D. Logan, an economics professor at Ohio State, wrote on Twitter shortly after the prize was announced.Mr. Card’s work has challenged conventional wisdom in labor economics — including the idea that higher minimum wages led to lower employment. He was a co-author of influential studies on that topic with Mr. Krueger, including one that used the border between New Jersey and Pennsylvania to test the effect of a minimum wage change. Comparing outcomes between the states, the research found that employment at fast food restaurants was not negatively affected by an increase in New Jersey’s minimum wage.Mr. Card has also researched the effect of an influx of immigrants on employment levels among local workers with low education levels — again finding the impact to be minimal — and the effect of school resource levels on student education, which was larger than expected.“I’m sure that if Alan were still with us, that he would be sharing this prize with me,” Mr. Card said in a news conference, after recognizing Mr. Krueger’s contributions. He also noted that initially, when it came to the minimum wage study, “quite a few economists were quite skeptical of our results.”David Neumark, an economist at the University of California, Irvine, who co-wrote a paper contesting Mr. Card and Mr. Krueger’s findings in the minimum wage study, said he still thought the work had data issues — but added that there was no doubt that the methodology was important.“They’ve all done great work — they’ve changed the way that labor economists do research,” Mr. Neumark said of the three winners.Mr. Angrist and Mr. Krueger tried in the early 1990s to gauge how much benefit people derive from extra years of education. To figure it out, they took advantage of the fact that students born earlier in the year can legally leave school earlier than those born later in the year. Those born earlier tended to get less education and also earned less later on. The effect of an additional year of education, they estimated, was a 9 percent increase in income.That study helped spur the additional work on research methods that Mr. Angrist and Mr. Imbens later carried out. That contribution has reshaped the way researchers think about and analyze natural experiments, according to the Nobel committee.The pair showed that it was possible to identify a clear effect from an intervention in people’s behavior — like a subsidy that might encourage people to ride bicycles to work — even if a researcher could not control who took part in the experiment, and even if the impact varied across individuals. They also came up with a transparent framework for such research that has increased trust in it.“The challenge, for me, has always been trying to understand, when people do empirical work, what exactly the methodological challenges are,” Mr. Imbens said via telephone in a news conference for the announcement.Two American economists affiliated with Stanford, Paul R. Milgrom and Robert B. Wilson, won the 2020 Nobel in economics for improvements to auction theory. Abhijit Banerjee and Esther Duflo of M.I.T. and Michael Kremer of Harvard University won in 2019 for their experiment-based research in development economics.The award, formally called the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, has been given out since 1969.Because the award is announced in the middle of the night on the United States’ West Coast, two of this year’s recipients were woken up by phone calls from Sweden informing them of their prize.Mr. Imbens said he was asleep when he received the call from the prize committee — around 2 a.m. — and was “absolutely stunned” to hear the news. He said he was pleased to win it alongside friends, noting that Mr. Angrist was the best man at his wedding.Mr. Card thought that a friend of his — whom he identified only as Tim — was pulling a prank on him, he said.“But then the phone number actually was a Swedish phone number,” he said. More

Some companies haven’t been raising prices. Instead, they’ve been cutting back customer services and conveniences, but how should that be measured?Inflation has surged in 2021, with various official measurements of consumer prices rising faster than they have in years. But in a crucial respect, the data may be understating things.Many types of businesses facing supply disruptions and labor shortages have dealt with those problems not by raising prices (or not by only raising prices), but by taking steps that could give their customers a lesser experience.A hotel room might cost the same as a year ago — but no longer include daily cleaning services because of a shortage of housekeepers. Some restaurants are offering limited service, with waiters stretched thin. Would-be car buyers are being advised to be flexible on the color and even make and model, lest they face a long wait to get their new wheels.Customer sentiment on restaurant cleanliness fell 4.2 percent this year, according to Black Box Intelligence, which tracks online reviews of 60,000 restaurants. Complaints have been frequent about the cleanliness of tables, floors and bathrooms. Satisfaction with customer service was also down, especially regarding beverages, with guests complaining more about receiving the wrong order or no drink at all.People trying to buy appliances and other retail goods are waiting longer. According to J.D. Power, even at the highest-rated retailers, only 57 percent of customers were able to get customer service within five minutes this year, down from 68 percent in 2018.Government statistics agencies try to take changes in product quality into account when calculating inflation. But that process, known as hedonic adjustment, most commonly applies to physical objects. It is relatively straightforward to estimate the value of, say, the quality of stitching on a shirt or the value of a backup camera on a new car. There is a whole world of inflation alarmists who argue that this process leads to the understating of true inflation.But quality changes involving customer service can be ambiguous and hard to measure. The Bureau of Labor Statistics, which generates the Consumer Price Index, does not incorporate quality adjustment on 237 out of 273 components that go into the index, including the vast majority of services.Alan Cole, a former staffer for Congress’s Joint Economic Committee who writes the newsletter Full Stack Economics, noticed these sorts of annoyances during a long drive through the Northeast this summer — fast food that took an awfully long time to come, poorly stocked condiment stations, soda machines that were out of stock. The dynamic became even more clear to him when he stayed in a hotel that had a large area designated for offering hot breakfast to guests — it was mostly empty, with a few sad mini-boxes of cereal.For years, he had argued that official inflation measures actually overstated inflation, because there were many below-the-radar product improvements not captured by the data, like software that was becoming less buggy. Now, he concluded, the reverse seemed to be happening.When there are shortages of labor or supplies, some businesses adjust mostly or entirely by raising their prices. Others find less obvious, less easily measurable ways to adapt. Consider, for example, rental cars versus hotels. Both were dealing with shortages. But they showed up in different ways.“The car company just had to charge higher prices, while the hotel could take the hit through service quality instead,” Mr. Cole said in an email exchange. “We measure them in different ways. The car company’s problem gets measured as inflation, while the hotel’s problem is mostly relayed by anecdote.”It is not unusual for businesses to deal with supply shortages through mechanisms other than price increases. Retailers don’t want to attract accusations of price gouging when goods are in short supply, especially in times of natural disaster. So they end up with empty shelves, a back-door form of rationing. In the 1970s, gasoline prices skyrocketed — but not enough to prevent long lines and rules around which cars could fill up on which days.This particular economic crisis has had far-reaching consequences that have made economic data harder to interpret than usual. “Usually when there is a disaster, if you’re a macroeconomist it’s a blip on the radar screen,” said Carol Corrado, a distinguished principal research fellow at the Conference Board who has researched inflation measurements. “But we’re talking a different kettle of fish with the Covid shock, and the economic implications and costs have become much more challenging to measure than in the past.”It would be difficult for government statistics agencies to try to measure these hidden costs and factor them into inflation measures, say people who study the data closely.Customer service preferences — particularly how much good service is worth — varies highly among individuals and is hard to quantify. How much extra would you pay for a fast-food hamburger from a restaurant that cleans its restroom more frequently than the place across the street?“What gets up to the level of a quality adjustment does become pretty subjective,” said Alan Detmeister, a senior economist at UBS who formerly tracked inflation data for the Federal Reserve. “If the Labor Department even decided they wanted to quality-adjust some of these things, they would have an extremely hard time doing it.”In some cases, one person’s quality enhancement is another’s deterioration. Is online check-in at a hotel a desirable timesaving feature, or a loss of personal touch that has real value? Reasonable people can disagree.Moreover, while there appears to be some shadow inflation in service industries, the reverse has arguably held true for many years.Suppose you believe that restaurant food has become more varied and delicious over the last few decades, as chefs have become more skilled and creative. If so, maybe the 2.7 percent average annual inflation in full-service restaurant prices from 2000 to 2019 that the Bureau of Labor reported was too high.It’s plausible to believe that’s true, and also that the 4.9 percent rise in those prices over the 12 months ended in August was too low if the effects of labor shortages had been fully accounted for.This hints at why inflation bothers people so much — and why it’s a political minefield for the Biden administration. It’s not just the prices you see and the numbers that are fed into economic models, or the news headlines and central bank inflation targets.It’s also that a given amount of spending buys experiences that are a little less satisfying, and that this adds up to an accumulation of frustrations that don’t necessarily show in the numbers. More

As the International Monetary Fund gets set for its annual meeting, economists ask if it’s time to update its mandate as the world’s financial crisis responder.Lopsided access to vaccinations, extreme economic inequality, rising food prices and staggering debt are on the agenda when the International Monetary Fund and the World Bank gather for their annual meetings in Washington next week.A pressing issue not in the official program is the controversy that has been swirling for weeks around the chief of the I.M.F., Kristalina Georgieva, threatening her leadership.An investigation last month accused Ms. Georgieva of rigging data to paint China as more business friendly in a 2018 report when she was chief executive at the World Bank. Ms. Georgieva has denied any wrongdoing.The scandal has focused on the bank’s credibility — billion-dollar decisions can be made on the basis of its information — as well as Ms. Georgieva’s culpability.But lurking behind the debate over her future are foundational questions about the shifting role of the I.M.F., which has helped guide the planet’s economic and financial system since the end of World War II.Once narrowly viewed as a financial watchdog and a first responder to countries in financial crises, the I.M.F. has more recently helped manage two of the biggest risks to the worldwide economy: the extreme inequality and climate change.Some stakeholders, though, have chafed at the scope of the fund’s ambitions, and how much it should venture onto the World Bank’s turf of long-term development and social projects. And they object to what’s perceived as a progressive tilt.“There is a modernizing streak here running through major financial institutions which is creating a kind of tension,” said Adam Tooze, a historian at Columbia University and the author of “Shutdown: How Covid Shook the World’s Economy.”Other pressures weigh on the agency as well. Washington is still home to the I.M.F.’s headquarters, and the United States is the only one of the 190 member countries with veto power, because it contributes more money than any other. But its dominance has been increasingly challenged by China — straining relations further tested by trade and other tensions — and emerging nations.The willingness of the Federal Reserve and other central banks to flush trillions of dollars into the global economy to limit downturns also means that other lenders, aside from the I.M.F., have enough surplus cash on hand to lend money to strapped nations. China has also greatly expanded its lending to foreign governments for infrastructure projects under its ambitious Belt and Road Initiative.At the same time, long-held beliefs like the single-minded focus on how much an economy grows, without regard to problems like inequality and environmental damage, are widely considered outdated. And the preferred cocktail for helping debt-ridden nations that was popular in the 1990s and early 2000s — austerity, privatization of government services and deregulation — has lost favor in many circles as punitive and often counterproductive.The debate about the role of the I.M.F. was bubbling before the appointment of Ms. Georgieva, who this month started the third year of her five-year term. But she has embraced an expanded role for the agency. A Bulgarian economist and the first from an emerging economy to head the fund, she stepped up her predecessors’ attention to the widening inequality and made climate change a priority, calling for an end to all fossil fuel subsidies, for a tax on carbon and for significant investment in green technology.She has argued that however efficient and rational the market is, governments must step in to fix built-in flaws that could lead to environmental devastation and grossly inequitable opportunity. Sustainable debt replaced austerity as the catchword.When the coronavirus pandemic brutally intensified the slate of problems — malnourishment, inadequate health care, rising poverty and an interconnected world vulnerable to environmental disaster — Ms. Georgieva urged action.Here was “a once in a lifetime opportunity,” she said, “to support a transformation in the economy,” one that is greener and fairer.The I.M.F. opposed the hard line taken by some Wall Street creditors in 2020 toward Argentina, emphasizing instead the need to protect “society’s most vulnerable” and to forgive debt that exceeds a country’s ability to repay.I.M.F. headquarters in Washington, where Republicans have bristled at Ms. Georgieva’s agenda.Daniel Slim/Agence France-Presse — Getty ImagesThis year, Ms. Georgieva managed to create a special reserve fund of $650 billion to help struggling nations finance health care, buy vaccines and pay down debt during the pandemic.That approach has not always sat well with conservatives in Washington and on Wall Street.Former President Donald J. Trump immediately objected to the new reserve funds — known as special drawing rights — when they were proposed in 2020, and congressional Republicans have continued the criticism. They argue that the funds mostly help American adversaries like China, Russia, Syria and Iran while doing little for poor nations.Ms. Georgieva’s activist climate agenda has also run afoul of Republicans in Congress, who have opposed carbon pricing and pushed to withdraw from multinational efforts like the United Nations Framework Convention on Climate Change and the Paris climate agreement.So has her advocacy for a minimum global corporate tax like the one that more than 130 nations signed on Friday.In July, Laurence D. Fink, who runs BlackRock, the world’s largest investment management company, and was at odds with the I.M.F.’s stance on Argentina, called the fund and the World Bank outdated and said they needed “to rethink their roles.”The investigation into data rigging at the World Bank focused on what is known as the Doing Business Report, which contains an influential index of business-friendly countries. WilmerHale, the law firm that conducted the inquiry, said various top officials had exerted pressure to raise the rankings of China, Saudi Arabia, the United Arab Emirates or Azerbaijan in the 2018 and 2020 editions.The law firm reported that Ms. Georgieva was “directly involved” with efforts to improve China’s rating for the 2018 edition. She said WilmerHale’s report was inaccurate and rejected its accusations. The I.M.F. executive board is reviewing the findings.The United States, which is the fund’s largest shareholder, has declined to express support for her after the allegations. Ahead of a meeting of the I.M.F. board on Friday, Ms. Georgieva maintained strong support from many of the fund’s shareholders, including France, which had lobbied hard for her to get the job in 2019. Late Friday, the I.M.F. released a statement saying the board would “request more clarifying details with a view to very soon concluding its consideration of the matter.”In Congress, Republicans and Democrats called for the Treasury Department to undertake its own investigations. A letter from three Republicans said the WilmerHale inquiry “raises serious questions about Director Georgieva’s ability to lead the International Monetary Fund.”Several people sprang to her defense, including Shanta Devarajan, an economist who helped oversee the 2018 Doing Business Report and a key witness in the investigation. He wrote on Twitter that the law firm’s conclusions did not reflect his full statements, and that the notion that Ms. Georgieva had “put her thumb on the scale to benefit one nation is beyond credulity.”“It was her job to ensure the final report was accurate and credible — and that’s what she did,” Mr. Devarajan added.In an interview, he said critics had used the investigation to discredit Ms. Georgieva. The problem, he said, is “how people may have chosen to read the findings of the report and use that to criticize Kristalina’s credibility and leadership.”Mr. Devarajan was not the only one to make the case that the controversy was functioning in some ways as a proxy for the contest over the I.M.F.’s direction. Jeffrey Sachs, director of the Center for Sustainable Development at Columbia, wrote in The Financial Times that Ms. Georgieva was receiving “McCarthyite treatment” by “anti-China forces” in Congress.Whatever role one might prefer for the I.M.F. — traditional, expanded or something else entirely — the scandal is both a distraction and a threat.Nicholas Stern, a British economist who formerly served as the chief economist and senior vice president of the World Bank, said this controversy could not come at a worse moment.“The coming few years are of vital importance to the future stability of the world economy and environment,” he wrote in a letter to the I.M.F. board in support of Ms. Georgieva. “This is as decisive a period as we have seen since the Second World War.”Alan Rappeport More

Strong wage gains in September lend credence to the notion that inflation could run longer than many economists anticipate.
The persistent price increases have ramifications for consumers and policymakers.
Despite the slow pace of job growth in the last two months, most economists expect the Federal Reserve to start easing back on the help it has provided to the economy.

September’s wage gains provided more fuel to the argument that the current pace of inflation could run longer than many economists anticipate.
Average hourly earnings rose 0.6% for the month, making the year-over-year increase 4.6%. Over the past six months, wages are running at an average 6% annual gain.

Excluding a brief spike in 2020, that’s the fastest annual pace since the Bureau of Labor Statistics started tracking the measure in March 2007. It’s also the third month in a row that the annual rise has been more than 4% and comes amid a tightening labor market and inflation that has been more persistent than many experts have expected.

“You’re getting the perfect recipe for a secular shift in inflation,” said Joseph LaVorgna, chief economist for the Americas at Natixis and a former chief White House economist. “You’re having a hard time getting the goods you want and restocking your inventory because of the supply chain disruptions. It’s the perfect storm for be-careful-what-you-wish-for if you want higher inflation.”
Though inflation is running around a 30-year high, many economists and Federal Reserve officials believe it is “transitory,” the product of temporary pressures that will ease soon and return the rate back to its usual level around 2%.
However, the pressures being felt in the marketplace don’t feel transitory.

Calego President David Rapps, whose company makes luggage as well as multiple other consumer products for major retailers, scoffed at the notion that inflation will fade soon.

“I laugh when I read very smart people in suits, especially the Fed, say that it’s temporary,” Rapps said. “I don’t know the last time you had all these pressures happening at once in the market around consumer products.”
He said it’s forced his company to make adjustments along supply chain lines and scale to ensure it can keep up.
“We have to get as nimble as we possibly can,” Rapps said. “We have to figure out just on the container front how to get containers in the first place, and in the second place how to get them at the most competitive prices.”
The persistent price increases have multiple ramifications.

Impact on consumers and the Fed

At the most basic level, they raise questions on how long cash-flush consumers will keep up a rapid spending pace that saw retail sales rise 0.7% in August although economists thought consumer purchases would decline.
But it’s also important at the policy level.
The Fed is considering pulling back on some of the extraordinary economic help it has provided during the pandemic, and September’s weak 194,000 nonfarm payroll increase might otherwise serve as a deterrent.
“The report was certainly good enough to initiate tapering,” LaVorgna said, using the market’s term for a reduction in the Fed’s monthly bond purchases. “There’s no reason for the Fed to wait.”
Other economists share the sentiment that the central bank can go ahead and start gently easing back on its purchases, which are now set at a minimum of $120 billion a month. Fed officials have indicated they could start tapering in December and conclude the asset purchase program by mid-2022.
While the payroll growth has slowed over the past two months, the inflationary pressures through wages and prices are enough to convince many economists that the economy no longer needs as much help.
“Overall, the most important takeaway in terms of the economic outlook is the increasing inflationary pressure evident in the [September jobs] report,” Citigroup economist Andrew Hollenhorst wrote. “Firms are paying higher wages and extending hours of work as they react to the shortage of labor.”
Wages are clearly on the rise, particularly in some of the pandemic’s hardest-hit sectors.
Leisure and hospitality saw a roughly 0.5% monthly increase in wages, putting the industry up about 10.8% from a year ago. Retail wages rose 0.7% in September and are up 6.2% from the same period in 2020.
“Upward pressure on wages is almost certain to persist for some time – a detriment to employers and another source of inflation pressure, but also a factor that should support consumer spending in the coming months,” Plante Moran Financial Advisors Jim Baird wrote.
That in turn should keep the Fed on its tapering schedule — an announcement in November, with reductions likely starting in December.

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Where the Suburbs EndA single-family home from the 1950s is now a rental complex and a vision of California’s future. More

While its C.E.O., Elon Musk, and the state’s conservative lawmakers share libertarian sensibilities, they differ greatly on climate change and renewable energy.Tesla’s move from Silicon Valley to Texas makes sense in many ways: The company’s chief executive, Elon Musk, and the conservative lawmakers who run the state share a libertarian philosophy, favoring few regulations and low taxes. Texas also has room for a company with grand ambitions to grow.“There’s a limit to how big you can scale in the Bay Area,” Mr. Musk said Thursday at Tesla’s annual meeting hosted at its new factory near the Texas capital. “Here in Austin, our factory’s like five minutes from the airport, 15 minutes from downtown.”But Texas may not be the natural choice that Mr. Musk makes it out to be.Tesla’s stated mission is to “accelerate the world’s transition to sustainable energy,” and its customers include many people who want sporty cars that don’t spew greenhouse gases from their tailpipes. Texas, however, is run by conservatives who are skeptical of or oppose efforts to address climate change. They are also fiercely protective of the state’s large oil and gas industry.And, despite the state’s business-friendly reputation, Tesla can’t sell vehicles directly to customers there because of a law that protects car dealerships, which Tesla does not use.Tesla’s move is not surprising: Mr. Musk threatened to leave California in May 2020 after local officials, citing the coronavirus, forced Tesla to shut down its car factory in the San Francisco Bay Area. But his decision to move to Texas highlights some gaping ideological contradictions. His company stands at the vanguard of the electric car and renewable energy movement, while Texas’ lawmakers, who have welcomed him enthusiastically, are among the biggest resisters to moving the economy away from oil and natural gas.“It’s always a feather in Texas’ hat when it takes a business away from California, but Tesla is as much unwelcome as it is welcome,” said Jim Krane, an energy expert at Rice University in Houston. “It’s an awkward juxtaposition. This is a state that gets a sizable chunk of its G.D.P. from oil and gas and here comes a virulent competitor to that industry.”In February, a rare winter storm caused the Texas electric grid to collapse, leaving millions of people without electricity and heat for days. Soon after, the state’s leaders sought — falsely, according to many energy experts — to blame the blackout on renewable energy.“This shows how the Green New Deal would be a deadly deal for the United States of America,” Gov. Greg Abbott said of the blackout on Fox News. “It just shows that fossil fuel is necessary for the state of Texas as well as other states to make sure we will be able to heat our homes in the wintertimes and cool our homes in the summertimes.”Mr. Musk, a Texas resident since last year, seemed to offer a very different take on Thursday, suggesting that renewable energy could in fact protect people from power outages.“I was actually in Austin for that snowstorm in a house with no electricity, no lights, no power, no heating, no internet,” he said. “This went on for several days. However, if we had the solar plus Powerwall, we would have had lights and electricity.”Tesla is a leading maker of solar panels and batteries — the company calls one of its products Powerwall — for homeowners and businesses to store renewable energy for use when the sun has gone down, when electricity rates are higher or during blackouts. The company reported $1.3 billion in revenue from the sale of solar panels and batteries in the first six months of the year.Mr. Musk’s announcement that Tesla would be moving its headquarters from Palo Alto, Calif., came with few details. It is not clear, for example, how many workers would move to Austin. It’s also unknown whether the company would maintain a research and development operation in California in addition to its factory in Fremont, which is a short drive from headquarters and which it said it would expand. The company has around 750 employees in Palo Alto and about 12,500 in total in the Bay Area, according to the Silicon Valley Institute for Regional Studies.It is also not clear how much money Tesla will save on taxes by moving. Texas has long used its relatively low taxes, which are less than California’s, to attract companies. County officials have already approved tax breaks for the company’s new factory, and the state might offer more.Over the years, California granted Tesla hundreds of millions of dollars in tax breaks, something that Gov. Gavin Newsom noted on Friday. But because Tesla will continue to have operations in California, it may still have to pay income tax on its sales in the state, said Kayla Kitson, a policy analyst at the California Budget & Policy Center.Whatever incentives they offer Tesla, Texas officials are not likely to change their support for the fossil fuel industries with which the company competes.In a letter to state regulators in July, Mr. Abbott directed the Public Utility Commission to incentivize the state’s energy market “to foster development and maintenance of adequate and reliable sources of power, like natural gas, coal and nuclear power.”A Tesla factory under construction in Austin in September.Joe White/ReutersThe governor also ordered regulators to charge suppliers of wind and solar energy “reliability” fees because, given the natural variability of the wind and the sun, suppliers could not guarantee that they would be able to provide power when it was needed.Mr. Abbott’s letter made no mention of battery storage, suggesting that he saw no role for a technology that many energy experts believe will become increasingly important in smoothing out wind and solar energy production. Tesla is a big player in such batteries. Its systems have helped electric grids in California, Australia and elsewhere, and the company is building a big battery in Texas, too, Bloomberg reported in March.Texas has no clean energy mandates, though it has become a national leader in the use of solar and wind power — driven largely by the low cost of renewable energy. The state produces more wind energy than any other.Another issue that divides Tesla and Texas is the state’s law about how cars can be sold there.As in some other states, Texas has long had laws to protect car dealers by barring automakers, including Tesla, from selling directly to consumers. California, the company’s biggest market by far, has long allowed the company to sell cars directly to buyers, which lets it earn more money than if it had to sell through dealers.Tesla has showrooms around Texas, but employees are not even allowed to discuss prices with prospective buyers and the showrooms cannot accept orders. Texans can buy Teslas online and pick the vehicles up at its service centers.Once the Austin factory starts producing vehicles, including a new pickup truck Tesla calls Cybertruck, those vehicles will have to leave the state before they can be delivered to customers in Texas.Efforts to change the law by Tesla and some state lawmakers have gone nowhere, including during the legislative session that concluded this year. That’s partly because car dealers have tremendous political influence in the state.Perhaps once Tesla has moved to Austin and started producing cars, Mr. Musk might have enough political clout to get the Legislature to act. Texas lawmakers typically meet only every two years, however, so it would most likely take at least until 2023 for the company’s customers to receive a car directly from its factory there.Michael Webber, professor of mechanical engineering at the University of Texas at Austin, said Mr. Musk’s decision to move to Texas might have been influenced in part by the ability to pressure the state to change its law.“The Texas car market is the second-largest car market in America after California, so if you are selling cars it kind of makes sense to get closer to your customers,” Mr. Webber said. “The Texas car market is particularly difficult outside of cities because of the legislative barriers.”There were already signs on Friday that some in Texas, including those involved in oil and gas and related industries, were happy to have Tesla because it could eventually employ thousands of people.“It can only be positive for Texas, because it brings more business to Texas,” said Linda Salinas, vice president for operations at Texmark Chemicals, which is near Houston. “Even though it’s not fossil business, it’s still business.”She said Texmark might even benefit from Tesla’s manufacturing operations in the state. “Texmark produces and sells mining chemicals to people who mine copper, and guess what batteries are made out of?”Peter Eavis More