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    Would a Strong Job Market Stop Fed Rate Cuts? This Official Says No.

    Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said that the central bank shouldn’t act “out of fear.”Federal Reserve officials predicted at their last meeting that they would make two more quarter-point rate cuts before the end of 2024 as inflation continued to slow and the job market cooled further.But in the weeks since, labor data have come in stronger, opening a big question: What does it mean for the interest rate outlook if the job market does not slow from here?One Fed official suggested on Tuesday that the central bank should keep lowering interest rates as expected even if the economy is chugging along, so long as inflation continues to cool. Policymakers, she suggested, should not try to slow the economy down if evidence suggests that price increases are coming under control.“I’m very opposed to cutting off expansion out of fear,” Mary C. Daly, the president of the Federal Reserve Bank of San Francisco, said during an interview on Tuesday morning, ahead of a speech she delivered at New York University.She pointed out that back in 2019, in the year leading up to the pandemic, the job market was very strong but that it did not lead to rapid inflation. In that experience, low unemployment allowed for solid wage gains, and it pulled new people into the labor market.“We should not kill off job growth and good growth as long as it doesn’t produce inflation,” she said. “If we could get 2019 again, I’d be all for it — why not?”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Nobel Economics Prize Awarded to Daron Acemoglu, Simon Johnson and James Robinson

    Daron Acemoglu, Simon Johnson and James Robinson shared the award for their work on explaining the gaps in prosperity between nations.Daron Acemoglu, Simon Johnson and James Robinson received the prize for their work on explaining inequality between countries.Christine Olsson/TT News Agency, via Associated PressThe Nobel Memorial Prize in Economic Sciences was awarded on Monday to Daron Acemoglu and Simon Johnson, both of the Massachusetts Institute of Technology, and to James Robinson of the University of Chicago.They received the prize for their research into how institutions shape which countries become wealthy and prosperous — and how those structures came to exist in the first place.The laureates delved into the world’s colonial past to trace how gaps emerged between nations, arguing that countries that started out with more inclusive institutions during the colonial period tended to become more prosperous. Their pioneering use of theory and data has helped to better explain the reasons for persistent inequality between nations, according to the Nobel committee.“Reducing the huge differences in income between countries is one of our times’ greatest challenges,” Jakob Svensson, chairman of the economics prize committee, said while announcing the award. Thanks to the economists’ “groundbreaking research,” he said, “we have a much deeper understanding of the root causes of why countries fail or succeed.”According to the researchers, prosperity today is partly a legacy of how a nation’s institutions evolved over time — which they studied by looking at what happened to countries during European colonization.Countries with “inclusive” institutions that protected personal property rights and allowed for widespread economic participation tended to end up on a pathway to longer-term prosperity. Those that had what the researchers called “extractive” institutions — ones that helped elites to maintain control, but which gave workers little hope of sharing in the wealth — merely provided short-term gains for the people in power.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Russian Oil Flows Through Western ‘Price Cap’ as Shadow Fleet Grows

    A report shows how Russia has largely evaded sanctions aimed at limiting its revenue from oil sales.A plan hatched by wealthy Western nations to deprive Russia of oil revenue is largely faltering, a new report found, with the majority of the Kremlin’s seaborne oil exports evading restrictions that were supposed to limit the price of Russian crude.Almost two years since an oil “price cap” was enacted, nearly 70 percent of the Kremlin’s oil is being transported on “shadow tankers” that are evading the restrictions, according to an analysis published by the Kyiv School of Economics Institute, a Ukraine-based think tank.Russia’s success at circumventing the sanctions imposed by the Group of 7 nations has allowed it to continue to finance its war against Ukraine. The effectiveness of the price cap has been marred by loose enforcement of the policy. Officials in the United States and Europe have tried to balance their goals of crippling Russia’s economy while keeping oil markets well supplied to prevent price spikes.The challenges underscore the limitations that the world’s advanced economies have been facing as they attempt to intervene in global energy markets to try to hasten an end to Russia’s invasion of Ukraine.The Kyiv School of Economics Institute, which has argued for tougher sanctions on Russian oil, noted in its report that Russia’s shadow fleet poses a threat to the world’s oceans because the tankers are often poorly maintained and not properly insured.“There have been several instances of shadow tankers being involved in collisions or coming close to running aground in recent months,” the report said. “Large oil spills have so far been avoided but a major disaster is waiting to happen and cleanup costs would reach billions.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    How Kamala Harris’s Economic Plan Has Been Shaped by Business Leaders

    The vice president has repeatedly incorporated suggestions from business executives into her economic agenda.When two of Vice President Kamala Harris’s closest advisers arrived in New York last month, they were seeking advice. The Democratic nominee was preparing to give her most far-reaching economic speech, and Tony West, Ms. Harris’s brother-in-law, and Brian Nelson, a longtime confidant, wanted to know how the city’s powerful financiers thought she should approach it.Over two days, the pair held meetings across Wall Street, including at the offices of Lazard, an investment bank, and the elite law firm Paul, Weiss. Among the ideas the attendees pitched was to provide more lucrative tax breaks for companies that allowed their workers to become part owners, according to two people at the meetings. The campaign had already been discussing such an idea with an executive at KKR, the private equity firm.A few days later, Ms. Harris endorsed the idea during her speech in Pittsburgh. “We will reform our tax laws to make it easier for businesses to let workers share in their company’s success,” she said.The line, while just a piece of a much broader speech, was emblematic of Ms. Harris’s approach to economic policy since she took the helm of the Democratic Party in July. As part of a bid to cut into former President Donald J. Trump’s polling lead on the economy, her campaign has carefully courted business leaders, organizing a steady stream of meetings and calls in which corporate executives and donors offer their thoughts on tax policy, financial regulation and other issues.The private feedback has, in sometimes subtle ways, shaped Ms. Harris’s economic agenda over the course of her accelerated campaign. At several points, she has sprinkled language into broader speeches that business executives say reflects their views. And, in at least one instance, Ms. Harris made a specific policy commitment — to pare back a tax increase on capital gains — after extended talks with her corporate allies.This article is based on interviews with more than two dozen campaign officials, policy experts, donors, lobbyists and business leaders.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Led by Believers in the City’s Future, Detroit Is on the Rebound

    Once the largest city in the U.S. to declare bankruptcy, this Midwestern metropolis is now thriving. But some obstacles still remain.On a sunny Friday morning last month, Mike Duggan, the mayor of Detroit, got behind thewheel of his black Jeep Grand Cherokee to give a tour of the city he has led for 10 years. Not far from Michigan Central Station, the former hulking ruin that was recently transformed into a gleaming office complex, he slowed to point to a construction site of vertical steel girders and yellow earth-moving machines. It will become a 600-room JW Marriott hotel, linked to the city’s convention center and scheduled to open by 2027, when college basketball’s Final Four will be played in Detroit.Farther west, more earth movers were crawling along a mile-long stretch of riverfront land, adding contours that will soon be a spacious, green recreation area, with elaborate play structures, a water park, basketball courts and outdoor workout equipment. It will be one of the final links in a 3.5-mile chain of parks, open spaces and bike paths that have replaced the warehouses and industrial yards that previously lined the Detroit River.Just beyond the park stood a vestige of Detroit’s troubled past — a crumbling, boarded-up building that was once the Southwest Detroit Hospital, which closed 18 years ago. Detroit City FC, a professional soccer club, hopes to raze it and build a new stadium.A mile or so away, Mr. Duggan, 66, pulled up at another construction site that will be the home of a University of Michigan research and innovation center focusing on software, artificial intelligence and other advanced technologies. “This is where we are going to create the jobs of the future,” he said.“I’m excited about how much pride is back among Detroiters,” said Mayor Mike Duggan.Nic Antaya for The New York TimesTwenty minutes later, Mr. Duggan stepped out of the Jeep at a small park off Rosa Parks Boulevard, north of downtown. In 1967, it was the site of an unlicensed after-hours club that was raided by the police. The action provoked a violent uprising that raged for five days, left 34 people dead, 1,200 injured, and more than 14,000 homes, buildings and stores burned or destroyed. The episode spurred the flight of thousands of residents from the city and marked the start of Detroit’s long, painful decline.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    The Federal Reserve may have pretty much just hit its 2% inflation target

    This week’s inflation data provided more evidence that the Federal Reserve is nearing its 2% objective, a mark that Goldman Sachs thinks the central bank may have already hit.
    From a policy standpoint, lower inflation opens the door for the Fed to keep cutting interest rates.

    Federal Reserve Chairman Jerome Powell arrives to a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC. 
    Anna Moneymaker | Getty Images

    This week’s inflation data provided more evidence that the Federal Reserve is nearing its objective, fresh on the heels of the central bank’s dramatic interest rate cut just a few weeks ago.
    Consumer and producer price indexes for September both came in around expectations, showing that inflation is drifting down to the central bank’s 2% target.

    In fact, economists at Goldman Sachs think the Fed may already be there.
    The Wall Street investment bank Friday projected that the Commerce Department’s personal consumption expenditures price index for September will show a 12-month inflation rate of 2.04% when it is released later this month.
    If Goldman is correct, that number would get rounded down to 2% and be right in line with the Fed’s long-held objective, a little over two years after inflation spiked to a 40-year high and unleashed an aggressive round of interest rate hikes. The Fed prefers the PCE as its inflation gauge though it uses a variety of inputs to make decisions.
    “The overall trend over 12, 18 months is clearly that inflation has come down a lot, and the job market has cooled to a level which is around where we think full employment is,” Chicago Fed President Austan Goolsbee said in a CNBC interview Thursday after the latest consumer price data was released. “We’d like to get both of them to stay in the space where they are right now.”

    Some obstacles ahead

    While keeping inflation at bay may not be an easy task, the latest data indicates that though prices are not receding from their troublesome heights of a few years ago, the rate at which they are increasing is pulling back.

    The 12-month rate for the all-items consumer price index was at 2.4% in September, while the producer price index, a proxy for wholesale inflation and a leading gauge for pipeline pressures, showed an annual rate of 1.8%.
    Goldman’s projection that the PCE index is heading to 2% is also about in line with tracking from the Cleveland Fed.
    The central bank district’s “inflation nowcasting” dashboard pegs the 12-month headline PCE rate at 2.06% for September, which would get rounded up to 2.1%. However, on an annualized pace, inflation for the entire third quarter is running at just a 1.4% rate — well below the Fed’s 2% goal.
    To be sure, there are some caveats to show that policymakers still have some work to do.
    Core inflation, which excludes food and energy and is a metric that the Fed considers a better measure of longer-term trends, is expected to run at a 2.6% annual rate for the PCE in September, according to Goldman. Using just the consumer price index, core inflation was even worse in September, at 3.3%.
    Fed officials, though, see the unexpectedly high shelter inflation numbers as a major driver of the core measure, which they figure will ease as a lower trend in rents works its way through the data.
    Fed Chair Jerome Powell on Sept. 30, addressing the rent situation, said he expects housing inflation to continue to recede while “broader economic conditions also set the table for further disinflation.”
    From a policy standpoint, lower inflation opens the door for the Fed to keep cutting rates, particularly as it turns its attention to the labor market, though there’s some trepidation about how quickly it should move.
    September’s half percentage point reduction to a fed funds range of 4.75% to 5% was unprecedented for an economy in expansion, and the Fed at the very least is expected to return to its normal quarter-point pace. Atlanta Fed President Raphael Bostic even said Thursday he’d be open to skipping a move altogether at the November meeting.
    “Aggressive easing would risk spiking consumer demand just as it is settling into a sustainable pace,” PNC senior economist Kurt Rankin said in a post-PPI analysis. “This result would in turn put pressure on businesses to meet that demand, re-igniting gains in those businesses’ own costs as they jockey for the necessary resources to do so.”
    Futures traders are betting on a near certainty that the Fed cuts rates by a quarter point at both the November and December meetings. More

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    Trump Blames Immigrant Surge for Housing Crisis. Most Economists Disagree.

    The former president often implies that deportations will bring down housing costs. Reality is more complicated.Former President Donald J. Trump and his running mate, Senator JD Vance, regularly blame America’s housing affordability crisis on a recent surge in immigration. They point to their plans for mass deportations of undocumented workers as part of the solution.But most economists do not believe that immigrants have been a major driver of the recent run-up in housing prices. Rents and home costs started to surge in 2020 and 2021, before the flow of newcomers began to pick up in 2022 and 2023.And while immigrants could have kept housing demand elevated in some markets, past studies suggest that they are a small part of the overall story. Even the economist whose paper Mr. Vance had cited as evidence said in an interview that she thought that immigration’s recent impact on housing costs had been minuscule.In fact, a number of economists and housing industry experts said that one of the solutions Mr. Trump was proposing — large-scale deportations — could actually backfire and make the housing crisis worse.That’s because immigrants do not simply add to the demand for housing: They are an important part of the work force that supplies it. Foreign-born workers make up a quarter of the construction labor force, and they are especially concentrated in trades like plastering, hanging drywall and roofing.Across many booming housing markets, particularly in the South, the recent flow of migrants has helped residential builders meet demand for both skilled trades and relatively unskilled laborers, industry groups say and job market data suggest.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    French budget surprises with focus on tax hikes as analysts warn of ratings downgrades

    France’s newly-installed government on Thursday presented a draft budget containing 60 billion euros ($65.6 billion) in tax hikes and spending cuts in a bid to cut its 6.1% deficit to 5% of gross domestic product by next year.
    While tax hikes are focused on big corporations and high earners, the budget also contains politically-controversial measures including a levy on electricity consumption, vast public spending cuts and a delay to pension adjustments.
    Analysts warned the package may not be enough to stave off further ratings downgrades for the economy and may hinder economic growth.

    France’s newly-installed government on Thursday presented a draft budget containing 60 billion euros ($65.6 billion) in tax hikes and spending cuts, as analysts warned the package may not be enough to stave off ratings downgrades for the economy.
    The 2025 budget features a greater focus on tax-raising measures than some were expecting. Analysts also flagged “politically complicated” proposals such as a delay to an inflation adjustment for pensions, and cuts to local government, the civil service and the healthcare system.

    Other key elements include temporary additional taxes on large shipping firms and corporations with revenue of more than a billion euros a year, impacting around 440 companies; an income tax surcharge on households with incomes over 500,000 euros; the reintroduction of a levy on electricity consumption; and an increase in taxes and charges on airline tickets and cars with high emissions.
    One of the budget’s core aims is to reduce France’s projected 6.1% deficit for 2024 to 5% of gross domestic product next year — an effort to comply with European Union rules which state a member nation’s budget deficit should not exceed 3% of GDP.
    The government set a new target of meeting this rule by 2029, an extension of its previous goal of 2027. It also warned the deficit could swell to 7% next year without action.

    Political challenge

    The task of finding 60 billion euros in a year left the government with few options, meaning it had to turn to those which are “politically complicated,” Hadrien Camatte, senior economist for France, Belgium and the euro zone at Natixis, told CNBC’s “Squawk Box Europe” on Friday.
    The fragile French government led by Prime Minister Michel Barnier has already faced one vote of no confidence this week, which it survived.

    The government was formed last month after fraught negotiations in the wake of the July parliamentary election, which handed the most seats to the left-wing New Popular Front — itself a relatively divided alliance — but failed to deliver any party or coalition a majority.

    In acknowledgement of this, Barnier characterized the draft budget as a starting point to be debated by lawmakers and said he was open to changes that maintain its fiscal integrity.
    “There will be changes and there will be heated debate regarding pensions and social security contributions,” Camatte said, with debate over the budget set to kick off on Oct. 21 and votes on various portions of it from Oct. 29.
    “The problem is when you have to find 60 billion, we have never found 60 billion in one year, it would be unprecedented, and that’s why it’s not very credible to find so huge an amount, especially with only a very fragile relative majority.”

    Tax focus

    The policy mix underpinning the 2025 budget is “less skewed towards spending cuts and more geared towards tax increases than we anticipated,” analysts at Goldman Sachs said in a note Friday.
    “The magnitude of the proposed consolidation and the corresponding reliance on tax increases leave us less confident in the ability of the government to meet its 2025 deficit target of 5.0%. Our previous research has found that abrupt adjustments and tax-based consolidations tend to have a lower chance of succeeding in improving the fiscal position sustainably,” they wrote, noting their own deficit forecast was 5.2%.
    However, they also flagged the potential for some near-term political stability given the government’s survival of the Oct. 8 no confidence vote.

    French Minister for the Economy, Finance and Industry Antoine Armand arrives at the Elysee presidential palace to attend the weekly cabinet meeting, during which France’s 2025 budget was presented, on October 10, 2024 in Paris. 
    Ludovic Marin | Afp | Getty Images

    This means their base case is currently for the government to pass the budget bill by the end of the year, they said, but with greater uncertainty beyond that point.
    “When you need fresh money very quickly, you don’t have any other option than increasing taxes. The problem is that tax is already very elevated in France,” Natixis’ Camatte told CNBC, noting the country has the second-highest wage taxation rate in Europe.
    Despite an emphasis on tax hikes, the bill’s split should see government spending cut by 40 billion euros while revenues rise by 20 billion euros, according to Erik-Jan van Harn, senior macro strategist at Rabobank.
    However, he added: “Barnier’s ambitious plans are fraught with implementation risks. His government commits until 2029 but isn’t very likely to survive until then.”

    Ratings risk

    Questions remain over what the 2025 budget will mean for France’s economic growth, and whether the country can avoid further credit downgrades on its sovereign debt, after cuts by agencies S&P and Fitch over the last two years.
    The government has spread its measures to try to avoid harming economic growth, Evelyn Herrmann, Europe economist at Bank of America Global Research, told CNBC’s “Squawk Box Europe” on Friday.
    “There is the hope is that by doing that and by going more into perhaps the upper income groups and the particularly profitable companies — and the promise to do that temporarily — perhaps you avoid a kind of typical strong effect on growth of these measures,” she continued.
    However, the Goldman Sachs analysts estimate the impact of the package on economic growth will turn from a 0.3 percentage point boost in 2024 to a 0.5 percentage point drag in 2025 and 2026; while UBS said the historically large 2% of GDP fiscal consolidation would be “likely to hurt growth.”
    Statistics agency Insee this week forecast 1.1% growth for the French economy this year, which Natixis’s Camatte described as “maybe a bit too optimistic, even if it’s not unrealistic.”
    “My worry is for the trajectory beyond 2025, because measures to reduce the deficit beyond 2025 are undocumented and when you are doing debt sustainability analysis, the trajectory of France is clearly a risk,” he said.
    In the near-term, ratings agencies would be in a wait-and-see mode given the lack of specific detail around the budget, he added, though a negative outlook from S&P or Fitch could not be ruled out.
    “At this stage it’s more keep calm and let’s decide next year to see if the spending cuts are credible or not,” Camatte said. However, he expects agency Moody’s, which has maintained a better rating on France, to go into a negative outlook this year before downgrading next year.
    Rabobank’s Van Harn was even more downbeat, arguing that sharp spending cuts would “put a lid on economic growth” and that “a rating downgrade by one of the major rating agencies seems likely.”
    “Stark austerity has its price. Economic growth, which is already weak, will be hampered by a sharp turn in France’s fiscal stance. The government would do well to consider the economic side effects of their policy, but the lack of political capital risks that Barnier will be forced to make the wrong decisions,” he said Friday.
    “Given the risks already highlighted by [Fitch] and the comparatively optimistic nature of its earlier projections, we see a rating downgrade as likely. While clearly not a positive from a spread perspective we believe that the market is already largely pricing for such a move.”
    — CNBC’s Charlotte Reed contributed to this story More