Evelyn Reynolds

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    in Economy

    A Fed Rate Cut Would Cap a Winning Streak for Biden and Harris on Prices

    Improved data on borrowing costs and price growth has buoyed consumers, but it might be coming too late to significantly affect the presidential raceAfter more than a year of waiting, hoping and assuring Americans that the economy could pull off a so-called “soft landing,” President Biden and Vice President Kamala Harris appear to be on the brink of seeing that happen.Inflation has cooled. Economic growth remains strong, though job gains are slowing. Mortgage costs are falling and the Federal Reserve is poised to begin cutting interest rates on Wednesday.And yet, it is unclear whether those developments will significantly alter voters’ predominantly negative perceptions of the economy ahead of the presidential election.Recent weeks have brought a run of good data on consumer prices and interest rates for the administration. The price of gasoline has fallen below $3 a gallon in much of the South and Midwest and is nearing a three-year low nationally. Spiking grocery prices have slowed to a crawl. Mortgage rates are down more than a percentage point from their recent peak. The Census Bureau reported last week that the typical household income rose faster than prices last year for the first time since the pandemic. The overall inflation rate has returned to near historically normal levels, and the Fed is poised to begin cutting interest rates from a two-decade high.The Biden administration, which has taken heat from Republicans and many economists for fueling inflation with its economic policies, has begun to celebrate those developments in bold terms. Officials are claiming vindication for their multi-trillion-dollar efforts to boost households and businesses in their recovery from the pandemic recession.Mr. Biden’s Council of Economic Advisers published a blog post on Tuesday highlighting economic and job growth under Mr. Biden that has surpassed projections. Lael Brainard, who heads Mr. Biden’s National Economic Council, told the Council on Foreign Relations in New York on Monday that the American economy has now reached a “turning point.”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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    in Economy

    Ray Dalio names the top five forces shaping the global economy

    U.S. billionaire Ray Dalio named the top five forces at the front and center of the world’s economy. 
    The founder of Bridgewater Associates named key factors which he deemed are interrelated, and often cyclical.

    Ray Dalio, founder of Bridgewater Associates, speaks onstage during The Wall Street Journal’s 2024 The Future Of Everything Festival at Spring Studios on May 22, 2024 in New York City
    Dia Dipasupil | Getty Images Entertainment | Getty Images

    SINGAPORE — U.S. billionaire Ray Dalio named the top five forces at the front and center of the world’s economy. 
    Speaking at the Milken Institute’s Asia Summit in Singapore, the founder of Bridgewater Associates said the five factors are interrelated and often cyclical. Dalio made his remarks Wednesday ahead of the U.S. Federal Reserve’s interest rate decision.

    1. Debt, money and the economic cycle

    With uncertainty still circling around what the Fed will do at its meeting this week, Dalio raised concerns about how the country’s debt will be managed.
    “We’re going to have a Fed interest rate change, and [what will] that whole dynamic do? What happens to all the debt? How will that be dealt with?” he mused. 

    The U.S. central bank has kept benchmark rates at their highest level in 23 years, leading the government to allocate $1.049 trillion for debt service — an increase of 30% compared with a year ago. This is part of an anticipated total of $1.158 trillion in payments for the entire year.
    “What is the value of it and as one man’s debts or another man’s assets? How is it as a storehold of wealth? These are important questions that are pressing questions,” he threw the question out to attendees.

    2. Internal order and disorder

    “The second is the issue of internal order and disorder,” Dalio said, referring to U.S. politics ahead of the election.

    “There are irreconcilable differences between the right and the left, prompted by large wealth and value gaps… and they call into question even the orderly transition of power,” he added.
    For the first time in the 2024 election cycle, Vice President Kamala Harris is now considered more likely to win than former President Donald Trump, a CNBC Fed Survey released Tuesday showed.
    Last week, the candidates debated issues from abortion rights to tariffs and other policy proposals.
    Still, no matter who occupies the White House, the president’s policy agenda has limited impact on the overall health of the U.S. economy.

    3. Great power conflicts

    Dalio cited geopolitics as his third concern: namely, the relationship between the U.S. and China.
    The U.S.-China relationship has been defined by a range of ongoing tensions, such as territorial issues in the South China Sea, Taiwan’s political status and economic tariffs.
    “I think probably, there’s a fear of war that will stand in the way — mutually assured destruction. But it’s disorder,” he emphasized later, without naming a specific ignition point.

    4. ‘Acts of nature’

    Dalio then said “acts of nature” have historically posed a bigger threat to humanity and society than war.
    “Acts of nature, droughts, floods and pandemics have killed more people and been responsible for more domestic orders and international orders changing,” Dalio noted.
    And the cost of climate change is about to increase, he emphasized. According to the World Economic Forum, the climate crisis results in a 12% loss in global GDP for each 1°C increase in temperature.

    5. Technology

    Technology is going to “be fantastic” if one is able to adopt and invest in it appropriately, the billionaire said.
    “The potential productivity benefits of that are enormous,” he said, elaborating that technology produces unicorn companies, and when it does — a sliver of the population fares better.
    “Whoever wins the technology war is going to win the military war,” he further said.
    As he assessed the five factors on a whole, Dalio concluded that the “surprises are more on the downside than the upside,” he said. More

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    in Economy

    Former Dallas Fed President Kaplan advocates for a half-point interest rate cut

    Robert S. Kaplan, former president of the Federal Reserve Bank of Dallas, July 13, 2023.
    Scott Mlyn | CNBC

    Former Dallas Fed President Robert Kaplan told CNBC on Tuesday that making the bolder move of 50 basis points would better position policymakers heading into the latter part of the year.
    Markets currently are putting about 2 to 1 odds that the Federal Open Market Committee will approve the half-point reduction, a switch from prior expectations.

    If Robert Kaplan still had a say in the matter, he’d be pushing for a half percentage point interest rate reduction at this week’s Federal Reserve meeting.
    The former Dallas Fed president told CNBC on Tuesday that making the bolder move of 50 basis points would better position policymakers heading into the latter part of the year and the economic challenges ahead.

    “If I were sitting at the table, I would be advocating for 50 in this meeting,” Kaplan said during a “Squawk Box” interview. “I think the Fed may be a meeting or so late, and if I had a do-over, I might prefer we had started the cutting in July, not September.”
    Markets currently are putting about 2 to 1 odds that the Federal Open Market Committee will approve a 50 basis point reduction, as opposed to the 25 basis point cut it had been pricing in leading up to Friday, according to the CME Group’s FedWatch. One basis point equals 0.01%.
    Fed funds, the central bank’s benchmark overnight lending rate, currently stands at 5.25% to 5.50%.
    Should the committee decide to make the more aggressive move, Kaplan said it would then be incumbent on Chair Jerome Powell in his post-meeting press conference on Wednesday to indicate that additional cuts ahead are “likely to be more measured.” The Fed’s two-day policy meeting gets underway Tuesday.
    “From a risk management point of view, 50 makes the most sense,” Kaplan said. “If the group is split, a lot of this will depend, actually, on what Jay Powell personally thinks, what is his personal disposition on all this, and then his ability to wrangle everybody to a unanimous decision.”
    Kaplan ran the Dallas Fed from 2015-21 and is now a managing director at Goldman Sachs. More

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    in Economy

    How the Fed Cutting Interest Rates Affects Banks, Stocks and More

    For corporate America, this week’s expected interest rate cut carries risks along with rewards.It’s easy to assume that lower interest rates are a panacea. Almost everyone, after all, is affected to some degree by the cost of borrowing. When the Federal Reserve cuts its benchmark rates — as it is expected to do this week for the first time since the pandemic — that makes credit less expensive for consumers and corporations alike.The cheaper debt means companies can spend more to expand, just as consumers might be able to afford bigger homes with lower mortgage rates.But there is a complicated and somewhat unpredictable interplay between interest rates and the business world. Lower rates bolster the economy, but for companies and their investors, lower rates do not always carry unalloyed positive effects.Here’s what to expect for corporate America when the Fed lowers rates:For markets, it’s all about ‘why.’All else equal, lower rates are good for the stock market. When investors gauge the value of a stock, they tend to come up with a higher figure when interest rates fall because of a common valuation principle known as discounting, in which a company’s future cash flows and costs become more attractive under low-rate conditions.Fed officials are expected to cut rates by a quarter or a half a percentage point at this week’s meeting. In practice, according to analysts, the reason rates are being lowered matters more than the precise timing or magnitude.If the economy is faltering, forcing the Fed to lower rates quickly, that can be a headwind to the stock market. A gentle return to a more normal level of rates — at least in the context of the past few decades — is less likely to crimp corporate profits in the way that an economic downturn could.“It’s less about when they cut and how quickly, and more about why they cut,” said Greg Boutle, head of U.S. equity and derivatives strategy at BNP Paribas.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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    in Economy

    In Nevada, Economy Tops Issues as Unemployment Remains High

    The state is among a handful that will decide the presidential contest, and workers have felt increased prices at the grocery store and gas station.Sold-out shows along the Strip. Crews constructing a course for a major Formula 1 race. A record number of passengers at Harry Reid International Airport.For much of the past year, Las Vegas, the anchor of Nevada’s economy, has watched in delight as visitors have flocked to town for conventions, football games and summer pool parties, further solidifying its rebound from the doldrums after the pandemic shutdowns.But statewide, the economy is still burdened by high unemployment and higher costs of living — twin pocketbook struggles that animate voters here in one of a handful of states expected to decide the November presidential election.And about a quarter of Nevada voters in a New York Times/Siena College poll last month named the economy as their top issue. It was cited nearly twice as often as any other concern, comparable to findings in other swing states.A topic with particular resonance among Nevada workers — eliminating federal taxation on tips — burst into the national discourse after former President Donald J. Trump told a crowd in Las Vegas that he intended to do away with the practice if elected. He was inspired, Mr. Trump has said, by a conversation with a waitress in the city.His opponent, Vice President Kamala Harris, later endorsed the idea during a campaign stop in Las Vegas, but paired the proposal with a promise to raise the federal minimum wage.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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    in Economy

    How SMIC, China’s Semiconductor Champion, Landed in the Heart of a Tech War

    Efforts by the Beijing-backed Semiconductor Manufacturing International Corporation, or SMIC, to break through innovation barriers have landed it in a geopolitical tech battle.In a sprawling factory in eastern Shanghai, where marshy plains have long since been converted into industrial parks, China’s most advanced chipmaker has been hard at work testing the limits of U.S. authority.Semiconductor Manufacturing International Corporation, or SMIC, is manufacturing chips with features less than one-15,000th of the thickness of a sheet of paper. The chips pack together enough computing power to create advancements like artificial intelligence and 5G networks.It’s a feat that has been achieved by just a few companies globally — and one that has landed SMIC in the middle of a crucial geopolitical rivalry. U.S. officials say such advanced chip technology is central not just to commercial businesses but also to military superiority. They have been fighting to keep it out of Chinese hands, by barring China from buying both the world’s most cutting-edge chips and the machinery to make them.Whether China can advance and outrace the United States technologically now hinges on SMIC, a partly state-backed company that is the sole maker of advanced chips in the country and has become its de facto national semiconductor champion. SMIC pumps out millions of chips a month for other companies that design them, such as Huawei, the Chinese technology firm under U.S. sanctions, as well as American firms like Qualcomm.So far, SMIC hasn’t been able to produce chips as advanced as those of rivals such as Taiwan Semiconductor Manufacturing Company in Taiwan, or others in South Korea and the United States. But it is racing forward with a new A.I. chip for Huawei called the Ascend 910C, which is expected to be released this year.Huawei’s chip is not as fast or sophisticated as the coveted processors from Nvidia, the U.S. chip giant, which the White House has banned for sale in China. SMIC can also most likely make only a small fraction of what Chinese firms want to buy, experts said.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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    in Economy

    As Federal Reserve Readies Interest Rate Cut, Risks to Job Market Still Loom

    The Federal Reserve is poised to lower interest rates this week. Recent jobs data have been a reminder that a soft landing is not yet assured.An object in motion stays in motion. Is a labor market trend that’s well underway any different?That’s the question looming for officials at the Federal Reserve as they try to pull off a feat that has never really been accomplished before: gently cooling an economy that was experiencing rip-roaring inflation without tanking the job market in the process.So far, the Fed’s attempt at a soft landing has worked out better than just about anyone, including central bankers themselves, expected. Inflation has cooled significantly, with the Consumer Price Index down to 2.5 percent from a peak of 9.1 percent just two years ago. And even with the Fed’s policy interest rate at its highest level in more than two decades, consumer spending has held up and overall growth has continued to chug along.Fed officials are eager to keep it going. That is why all signals suggest that they will lower interest rates at the conclusion of their meeting on Wednesday — and the only real question is whether they will cut them by a typical quarter of a percentage point or by a half percentage point. They are also likely to forecast that they will lower interest rates further before the end of the year, perhaps predicting that they will cut them by a full point from their current 5.33 percent.But even as the Fed turns an important corner on its fight against inflation, real risks remain. And those center on the labor market.Unemployment has been slowly, but steadily, rising. Wage growth has been consistently slowing. Job openings have come down, and hiring rates have come down along with them. And while all of those developments are what the Fed wanted — the point of this exercise was to slow an overheated job market and prevent it from fueling future inflation — central bankers have been clear that they do not want to see it continue.“We do not seek or welcome further cooling in labor market conditions,” Jerome H. Powell, the Fed chair, said in his latest speech.Unemployment and Underemployment RiseThe jobless rate historically jumps during recessions.

    Notes: Unemployment is the share of people actively looking for work; underemployment also includes people who are no longer actively looking and those who work part time but would prefer full-time jobs. Seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesWage Growth Is Cooling SteadilyAfter spiking in 2022, wage gains for rank-and-file workers have been coming down.

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    Year-over-year change in average hourly earnings
    Note: Data is for production and nonsupervisory employees and is not seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesJob Openings Fall, Just as More People Look for ThemAfter years in which jobs were much more plentiful than available workers, that ratio is on the cusp of flipping.

    Data are seasonally adjusted.Source: The Bureau of Labor StatistticsBy The New York TimesWe 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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    Hollywood Movie Producers Find a Harder Time Making a Living

    Corporate consolidation and technology have upended many jobs in recent decades. But few arcs are more surprising than that of the Hollywood producer.In more than three decades as a studio executive and producer, Kevin Misher has worked on some of the most beloved movies in Hollywood, including “Rudy,” “Meet the Parents” and “Public Enemies.”As recently as 2012, his production company, Misher Films, supported three development executives and three assistants. It had a studio deal worth more than $1 million in many years, which allowed it to acquire scripts and hire writers while meeting payroll.But today, even as Mr. Misher continues to produce high-profile movies like “Coming 2 America” and “You People,” as well as television shows, documentaries and podcasts, his company has slimmed down amid the industry’s changing economics. Years often pass between the time producers start a project and the time they are paid. Deals for producers have dried up as studios have sought greater efficiencies. Mr. Misher’s six employees have dwindled to one, along with a partner who earns a portion of his fees.“Those deals sustained you — they were a paycheck,” Mr. Misher said. “They allowed you to make a basic wage while waiting for a payout.”The unraveling of these arrangements has not only made life harder for an accomplished producer like Mr. Misher, whose job is to originate movies by identifying promising material, and to oversee the hundreds or thousands of people involved in writing and filming. It has also hollowed out the field’s middle tier and made it almost impossible for young people to enter the profession.“It starts to self-select for people who come in already with money,” said Mr. Misher, part of a group of more than 100 producers called Producers United, who are seeking more favorable financial terms through discussions with Hollywood studios. “The perspective gets narrower, it isn’t as innovative or diverse.”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