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    Good News on Jobs May Mean Bad News Later as Hiring Spree Defies Fed

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    Employers hired rapidly and paid more in July, suggesting the Federal Reserve may have to remain aggressive in its effort to cool the economy.America’s job market is remarkably strong, a report on Friday made clear, with unemployment at the lowest rate in half a century, wages rising fast and companies hiring at a breakneck pace.But the good news now could become a problem for President Biden later.Mr. Biden and his aides pointed to the hiring spree as evidence that the United States is not in a recession and celebrated the report, which showed that employers added 528,000 jobs in July and that pay picked up by 5.2 percent from a year earlier. But the still-blistering pace of hiring and wage growth means the Federal Reserve may need to act more decisively to restrain the economy as it seeks to wrestle inflation under control.Fed officials have been waiting for signs that the economy, and particularly the job market, is slowing. They hope that employers’ voracious need for workers will come into balance with the supply of available applicants, because that would take pressure off wages, in turn paving the way for businesses like restaurants, hotels and retailers to temper their price increases.The moderation has remained elusive, and that could keep central bankers raising interest rates rapidly in an effort to cool down the economy and restrain the fastest inflation in four decades. As the Fed adjusts policy aggressively, it could increase the risk that the economy tips into a recession, instead of slowing gently into the so-called soft landing that central bankers have been trying to engineer.“We’re very unlikely to be falling into a recession in the near term,” said Michael Gapen, head of U.S. economics research at Bank of America. “But I’d also say that numbers like this raise the risk of a sharper landing farther down the road.”Interest rates are a blunt tool, and historically, big Fed adjustments have often set off recessions. Stock prices fell after Friday’s release, a sign that investors are worried that the new figures increased the odds of a bad economic outcome down the line.Even as investors zeroed in on the risks, the White House greeted the jobs data as good news and a clear sign that the economy is not in a recession even though gross domestic product growth has faltered this year.“From the president’s perspective, a strong jobs report is always extremely welcome,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in an interview. “And this is a very strong jobs report.”Still, the report appeared to undermine the administration’s view of where the economy is headed. Mr. Biden and White House officials have been making the case for months that job growth would soon slow. They said that deceleration would be a welcome sign of the economy’s transition to more sustainable growth with lower inflation.The lack of such a slowdown could be a sign of more stubborn inflation than administration economists had hoped, though White House officials offered no hint Friday that they were worried about it.“We think it’s good news for the American people,” the White House press secretary, Karine Jean-Pierre, told reporters in a briefing. “We think we’re still heading into a transition to more steady and stable growth.”The State of Jobs in the United StatesEmployment gains in July, which far surpassed expectations, show that the labor market is not slowing despite efforts by the Federal Reserve to cool the economy.July Jobs Report: U.S. employers added 528,000 jobs in the seventh month of the year. The unemployment rate was 3.5 percent, down from 3.6 percent in June.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.The Fed, too, had been counting on a cool-down. Before July’s employment report, a host of other data points had suggested that the job market was decelerating: Wage growth had been moderating fairly steadily; job openings, while still elevated, had been declining; and unemployment insurance filings, while low, had been edging higher.The Fed had welcomed that development — but the new figures called the moderation into question. Average hourly earnings have steadily risen since April on a monthly basis, and Friday’s report capped a streak of hiring that means the job market has now returned to its prepandemic size.“Reports like this emphasize just how much more the Fed needs to do to bring inflation down,” said Blerina Uruci, a U.S. economist at T. Rowe Price. “The labor market remains very hot.”Central bankers have raised borrowing costs three-quarters of a percentage point at each of their last two meetings, an unusually rapid pace. Officials had suggested that they might slow down at their meeting in September, lifting rates by half a point — but that forecast hinged partly on their expectation that the economy would be cooling markedly.Instead, “I think this report makes three-quarters of a point the base case,” said Omair Sharif, founder of Inflation Insights, a research firm. “The labor market is still firing on all cylinders, so this isn’t the kind of slowdown that the Fed is trying to generate to alleviate price pressures.”Fed policymakers usually embrace strong hiring and robust pay growth, but wages have been climbing so fast lately that they could make it difficult to slow inflation. As employers pay more, they must either charge their customers more, improve their productivity or take a hit to their profits. Raising prices is typically the easiest and most practical route.The blistering pace of hiring means the Federal Reserve may need to act more decisively to tame inflation.Scott McIntyre for The New York TimesPlus, as inflation has soared, even robust wage growth has failed to keep up for most people. While wages have climbed 5.2 percent over the past year, far faster than the 2 percent to 3 percent gains that were normal before the pandemic, consumer prices jumped 9.1 percent over the year through June.Fed officials are trying to steer the economy back to a place where both pay gains and inflation are slower, hoping that once prices start to climb gradually again, workers can eke out wage gains that leave them better off in a sustainable way.“Ultimately, if you think about the medium and longer term, price stability is what makes the whole economy work,” Jerome H. Powell, the Fed chair, said at his July news conference, explaining the rationale.Some prominent Democrats have questioned whether the United States should be relying so heavily on Fed policies — which work by hurting the labor market — to cool inflation. Senators Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, both Democrats, have been among those arguing that there must be a better way.But most of the changes that Congress and the White House can institute to lower inflation would take time to play out. Economists estimate that the Biden administration’s climate and tax bill, the Inflation Reduction Act, would have a minor effect on price increases in the near term, though it may help more with time.While the White House has avoided saying what the Fed should do, Mr. Bernstein from the Council of Economic Advisers suggested that Friday’s report could give the Fed more cushion to raise rates without harming workers.“The depth of strength in this labor market is not just a buffer for working families,” he said. “It also gives the Fed room to do what they need to do while trying to maintain a strong labor market.”Still, the central bank could find itself in an uncomfortable spot in the months ahead.An inflation report scheduled for release on Wednesday is expected to show that consumer price increases moderated in July as gas prices came down. But fuel prices are volatile, and other signs that inflation remains out of control are likely to persist: Rents are climbing swiftly, and many services are growing more expensive.And the still-hot labor market is likely to reinforce the view that conditions are not simmering down quickly enough. That could keep the Fed working to restrain economic activity even as overall inflation shows early, and perhaps temporary, signs of pulling back.“We’re going to get inflation slowing in the next couple of months,” Mr. Sharif said. “The activity part of the equation is not cooperating right now, even if inflation overall does cool off.”Isabella Simonetti More

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    Is Biden Right About a Recession? The July Jobs Report Suggests Yes.

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    The strong jobs report was welcome news for President Biden, who has insisted in recent weeks that the United States is not in recession, even though it has suffered two consecutive quarters of economic contraction.But the report also defied even the president’s own optimistic expectations about the state of the labor market — and appeared to contradict the administration’s theory of where the economy is headed.Mr. Biden celebrated the report on Friday morning. “Today, the unemployment rate matches the lowest it’s been in more than 50 years: 3.5 percent,” he said in a statement. “More people are working than at any point in American history.”He added: “There’s more work to do, but today’s jobs report shows we are making significant progress for working families.”The president has said for months that he expects job creation to slow soon, along with wage and price growth, as the economy transitions to a more stable state of slower growth and lower inflation.“If average monthly job creation shifts in the next year from current levels of 500,000 to something closer to 150,000,” Mr. Biden wrote in an opinion piece for The Wall Street Journal in May, “it will be a sign that we are successfully moving into the next phase of recovery — as this kind of job growth is consistent with a low unemployment rate and a healthy economy.”White House officials prepped reporters this week for the possibility that job growth was cooling, in line with Mr. Biden’s expectations. The expectations-busting job creation number appeared to surprise them, again.But Mr. Biden will almost certainly cite the numbers as evidence that the economy is nowhere near recession. He and his aides have repeatedly said in recent weeks that the current pace of job creation is out of step with the jobs numbers in previous recessions, and proof that a contraction in gross domestic product does not mean the country is mired in a downturn. More

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    Biden’s New Economic Scorecard: The Price at the Pump

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    The president has grown fond of boasting about a prolonged streak of falling gasoline prices, a move wrapped in risk and irony.WASHINGTON — After topping $5 a gallon in June, the price of gasoline has fallen for more than a month. The Biden administration wants to tell you about it. Again and again.President Biden and his top aides are in an all-out campaign to trumpet what is, as of Friday, 38 consecutive days of declines in the AAA average gas price nationwide. The president mentioned that streak in a news conference in Saudi Arabia and at the start of a speech on abortion rights. Aides have repeatedly trotted out charts showing the downward trajectory in news briefings and chastised reporters for not devoting more time to the subject.When President Andrés Manuel López Obrador of Mexico needled Mr. Biden in a meeting at the White House this month, saying that Americans were crossing the border to buy cheaper gas, the president interrupted him.“It has gone down for 30 days in a row,” Mr. Biden said.Celebrating the daily declines at the pump has become his version of President Donald J. Trump’s rampant bragging about gains in the stock market: a public obsession with a single economic indicator in hopes of driving a winning narrative with consumers and voters.Embracing this particular trend comes with obvious risks for Mr. Biden. Gas prices notoriously bounce up and down, and events outside his control could easily push them up again. If the administration’s efforts to impose a global price cap on Russian oil exports falls through before year’s end, White House economists fear that prices could soar higher than they were this spring, to potentially $7 per gallon.Gasoline cheerleading also poses an ironic challenge to Mr. Biden’s efforts to confront the mounting crisis of a warming planet.The jump in prices has had the short-term effect of forcing budget-constrained Americans to drive less, temporarily reducing the consumption of fossil fuels that drive global warming. But White House aides say the high prices are not helping Mr. Biden’s efforts to move the country to a low-emissions future. Instead, those costs might be undermining his longer-term climate goals by bolstering political and public support for more oil drilling and other fossil-fuel projects.High prices for motorists have already soured voters on the president’s handling of the economy and his overall performance in office. Mr. Biden, who speaks frequently of growing up in a working-class family where “if the price of gas went up, you felt it,” has for months tried to reassure voters that he is doing whatever he can to bring those prices down.When gasoline climbed past $3 a gallon nationwide in the fall, as global demand for oil increased amid the rebound of economic activity from the pandemic, Mr. Biden opened the taps of the Strategic Petroleum Reserve. In the spring, when prices reached $4 a gallon, he announced a waiver allowing summer sales of higher-ethanol gasoline, which costs slightly less for drivers but emits more greenhouse gases over its life cycle.When prices peaked above $5 a gallon this summer amid the war in Ukraine, Mr. Biden called for a suspension of the federal gas tax (which Congress has not passed), implored oil-producing countries in the Middle East to pump more crude into global markets and accused large oil companies and refiners of profiteering.Motorists in Brooklyn last week. Gas prices peaked above $5 a gallon this summer.Hiroko Masuike/The New York TimesAnalysts say the president’s efforts may have helped hold down prices at the margins. But no economists give the administration even a majority of credit for the steep drop in global oil prices that began in early June. Instead, they point to market forces: reduced oil demand from China, which is enduring another wave of restrictions because of the coronavirus, and weakening economic activity in Europe and other wealthy nations. Russian oil has also continued to flow to world markets despite sanctions imposed by the United States and other Western nations.The average national price reported by AAA on Friday was $4.41 per gallon. The drop over the past month is likely to produce a more favorable inflation rate for July than the 9.1 percent annual increase of the Consumer Price Index that the Labor Department reported for June. Industry analysts and futures markets suggest more relief is likely to be expected in the coming weeks.Mr. Biden has embraced the change. On Friday, in his first virtual event since testing positive for the coronavirus the day before, the president convened a half-dozen economic advisers for a briefing on falling gas prices.“You can find gas for $3.99 or less in more than 30,000 gas stations, in more than 35 states,” he said. “In some places, it’s down almost a dollar from last month.”While administration officials sought to deflect blame for rising oil prices over the past year, they were happy to claim at least partial credit for the current decline.“While there’s a lot that goes into setting the global oil and gas price,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in a news briefing on Monday, “the historic actions taken by President Biden to address the impact of Putin’s invasion of Ukraine have helped and continue to help to increase the global supply of oil and therefore are in the mix of factors driving down the price.”Republicans say they are surprised the administration is celebrating at all, when prices remain more than $2 a gallon higher than they were when Mr. Biden took office. (They do not mention that he inherited an economy where global demand for oil was suppressed by the coronavirus pandemic.)It might also seem counterintuitive that the president is encouraging lower gasoline costs while he pursues what aides promise will be an ambitious unilateral agenda to cut greenhouse gas emissions.“The real answer,” Mr. Biden said on Friday, “is to get to a clean-energy economy as soon as possible, turn this into something positive.”Economists largely agree that raising the prices of fossil fuels like coal and gasoline is a way to ensure that consumers burn less of them and to encourage switching to lower-emission alternatives like electric vehicles. The Energy Department reported on Wednesday that gasoline use in the United States was down nearly 8 percent over the past four weeks compared with the same period a year ago. That continued for the second quarter of the year, which the Energy Information Administration said might have been the result of rising gasoline prices.But Biden administration officials — even economists who have previously favored steps to raise taxes on fossil fuels — say the high prices are not helping the president’s climate agenda.The prices are reinvigorating a push by Republicans for increased oil and gas drilling on federal lands, which Mr. Biden promised to end while campaigning for president. Recent price volatility could also give customers pause when they consider buying a more efficient gas-powered vehicle, or an electric one, when supply-chain shortages in the automobile industry are making it harder for consumers to buy electric cars anyway.Aides to Mr. Biden have privately said for months that to keep Americans on board with the energy transition, gas prices need to come down — definitely below $4 a gallon, and hopefully below $3, which was the national average at the start of last summer.If prices continue to decline at the rate they have over the past month, the nationwide average would slip below $3 a gallon in the final weeks of campaigning before the midterm elections. In about 79 days, to be exact.Not that anyone’s counting. More

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    Voters See a Bad Economy, Even if They’re Doing OK

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    A New York Times/Siena poll shows remarkable pessimism despite the labor market’s resilience. That could be costly for the Democrats, and the economy.The fastest inflation in four decades has Americans feeling dour about the economy, even as their own finances have, so far, held up relatively well.Just 10 percent of registered voters say the U.S. economy is “good” or “excellent,” according to a New York Times/Siena College poll — a remarkable degree of pessimism at a time when wages are rising and the unemployment rate is near a 50-year low. But the rapidly rising cost of food, gas and other essentials is wiping out pay increases and eroding living standards.Americans’ grim outlook is bad news for President Biden and congressional Democrats heading into this fall’s midterm elections, given that 78 percent of voters say inflation will be “extremely important” when they head to the polls.

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    Thinking about the nation’s economy, how would you rate economic conditions today?
    Based on a New York Times/Siena College poll of 849 registered voters from July 5 to 7.By The New York TimesIt could be bad news for the economy as well. One long-running index of consumer sentiment hit a record low in June, and other surveys likewise show Americans becoming increasingly nervous about both their own finances and the broader economy.Economists have long studied the role of consumer sentiment, which can be driven by media narratives and indicators unrepresentative of the broader economy, like certain grocery prices or shortages of particular goods. At least in theory, economic pessimism can become self-fulfilling, as consumers pull back their spending, leading to layoffs and, ultimately, to a recession.Christina Simmons grew up poor and has worked hard to give her 7-year-old son a better life. She has climbed the ranks at the health insurer where she works near Jacksonville, Fla., and has more than doubled her salary over the past few years. Yet she feels as if she is falling behind.“I worked my butt off to get to where I’m at so I could take vacations with my son,” she said. “We would take off for the weekend and get a hotel room in another state, and go do a hike and see a waterfall and order a pizza in a hotel room and all of that. And I just can’t do that anymore.”Ms. Simmons, 30, is still able to make ends meet, partly because she is able to save money on gas by working remotely. But she is worried about what could happen if the economy slows and puts her job in jeopardy — one consequence of being promoted, she said, is that she is farther from customers, making her more vulnerable to layoffs. She has cut out modest luxuries, like a gym membership and nights out with friends, to build up her savings.“I’m saving the money just in case it gets even worse,” she said. “I’m being more strict than I have to because I don’t know how it’s going to go.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    High Inflation in June Puts Pressure on Interest Rates

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.Read More About Oil and Gas PricesPrices Drop Sharply: U.S. gas prices have been on the decline, offering some relief to drivers. But weather, war and demand will influence how long it lasts.Gas Tax Holiday: President Biden called on Congress to temporarily suspend the federal gas tax, but experts remain skeptical the move would benefit consumers much.‘Only Bad Options’: Mr. Biden’s trip to Saudi Arabia is unlikely to reduce oil prices. And it is not clear that anything else he might do would work, either.Summer Driving Season: The spike in gas prices is being driven in part by vacationers hitting the road. Here’s what our reporter saw on a recent trip.Officials lifted rates by 0.75 percentage points in June, the biggest move since 1994, and had been expected to make a similarly sized move at its meeting in late July. But after the new inflation data, investors began to expect a percentage-point move, based on market pricing.Fed officials themselves were hesitant to call for such a large move.“My most likely posture is 0.75, because of the data I’ve seen,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said in an interview Wednesday night. She explained that she had expected a high number, so the report did not sway her.“I saw that data and thought: This wasn’t good news, wasn’t expecting good news,” she said.Ms. Daly said she could see a situation in which a bigger, one-percentage-point increase would be possible should consumer inflation expectations move higher and consumer spending fail to slow down.Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on Bloomberg Television on Wednesday night that the new inflation report was “uniformly bad” and that there would be no reason to do less than the 0.75 points that the Fed approved in June. But she also suggested that she would watch incoming data and wait to see how the economy evolved before deciding whether an even larger move might be appropriate. The Fed’s next policy meeting is July 26-27.Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, told reporters on Wednesday that “everything is in play,” but he, too, made it clear that he was “not wedded to any specific course of action.”Even a 0.75-point increase would be an unusually quick pace for a central bank that has tended to move gradually in recent decades. The Fed risks tipping the economy into a recession as it rapidly raises interest rates, because those increases might hit the brakes on the economy so hard that they jar businesses, prompting them to stop hiring and setting off a chain reaction in which households are left with less money to spend.But policymakers feel that they must choke off inflation quickly even if it increases the chance of a painful slowdown. That’s because they worry that, as inflation remains rapid, consumers and businesses could be getting used to it.If people begin to ask for higher wages in anticipation of price increases — negotiating cost-of-living adjustments of 6 or 7 percent, for example, instead of the typical 2 to 3 percent — companies could try to pass their swelling labor costs along to customers by raising prices. That could perpetuate rapid inflation, making it much trickier for the Fed to stamp it out.“The path toward price stability is going to entail some pain, but less pain if we do it than if we don’t do it,” Ms. Mester said.Meals at restaurants, tickets for sporting events and other services are growing more expensive.Amir Hamja for The New York TimesInflation is high across much of the world right now, as Russia’s invasion of Ukraine pushes up food and fuel prices and transportation and manufacturing issues continue to keep some goods scarce. But the new inflation report also shows evidence of price pressures that have little to do with global supply. Meals at restaurants, tickets for sporting events and other services are growing more expensive.For consumers, the fresh report is confirmation that it is increasingly tough to make ends meet. While wages are rising, they have failed to keep up with rapid price increases. After accounting for price increases, average hourly earnings have declined 3.6 percent over the past year.At the same time, necessities are becoming more expensive. Food prices overall rose 10.4 percent in June from a year earlier, the biggest annual increase since 1981. Rent for a house or an apartment also costs significantly more, having climbed at the fastest monthly pace since 1986.That is making life difficult for many families. Soaring housing costs have made relocating difficult for Elizabeth Haynes, 41, who lives with her husband in McKinney, Texas. The couple wants to relocate to another state, but high housing costs are so far prohibitive.“We’re trying to get out of Texas, and that’s proving really difficult with the rental costs and the housing costs and the shortages and all of that,” said Ms. Haynes, who is hoping to land a place she can afford in Connecticut. “So that’s kind of our big pain point.”As rapid price increases burden many Americans, they are also taking a toll on economic confidence, posing a big challenge for Mr. Biden and Democrats ahead of the midterm elections. Mr. Biden has acknowledged the pain inflation is causing, saying in a statement on Wednesday that it is “unacceptably high.”But he also called the report “out of date” because it did not capture the recent retreat in prices at the gasoline pump and in other commodities. Democrats have suggested things will soon get better, pointing out that, as fuel costs subside, overall inflation is likely to decline from its 9.1 percent reading in June.“I think we’re peaking — I think we’re going to be going down from here,” Representative Nancy Pelosi, the House speaker, said when asked for her reaction to the new data.While there is hope in Washington and on Wall Street that inflation will come down sustainably, economists have repeatedly suggested that inflation has peaked over the past 12 months only to watch it pick back up.That is partly because prices for certain goods have behaved strangely: Cars have been in short supply, and their prices have been skyrocketing, for instance. It is also partly because economists have dismissed big price swings in various goods and services as temporary one-offs, and the surprises have just continued to add up.“People have not done a very good job of predicting car inflation,” said Jason Furman, an economist at Harvard. “Beyond that, inflation is about more than 10 individual stories about 10 individual goods and services — it’s about forces in the overall economy.”If people begin to ask for higher wages in anticipation of price increases, companies could try to pass their swelling labor costs along to customers by raising prices.Hiroko Masuike/The New York TimesThat said, there are some reasons that today’s rapid price gains could abate based on the economy’s fundamentals.Consumers may struggle to sustain their spending as prices jump. If they move in with roommates, stop taking vacations or pull back on social activities to save money, supply could begin to catch up with demand, allowing price gains to decelerate.Stores including Target are already trying to sell off bloated inventories, which could allow retail prices to slow. Costs for goods including sporting equipment and televisions have already begun to cool.But, for now, hints at and forecasts for a cool-down are likely to be insufficient comfort for economic policymakers when there is little sign in the data that any concerted pullback is kicking in.“We have to be so humble about forecasting inflation,” said Blerina Uruci, an economist at T. Rowe Price, who does expect inflation pressures to fade. “We’ve just been so wrong, so consistently, in one direction.”Reporting was contributed by More

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    Inflation Soared in June, Pinching Consumers and Challenging Policymakers

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More