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    America Is Driving the Global Economy. When Does That Become a Problem?

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    New trade data suggests the outlook for the U.S. economy will depend in part on the rate of recovery of other nations.Containers stacked at the Port of New York and New Jersey in Elizabeth, N.J., last month. The U.S. trade deficit was $68.9 billion in April, far above levels immediately before the pandemic.Seth Wenig/Associated PressThe United States, with its aggressive pandemic aid measures and rapid vaccine rollout, is propelling the world economy, acting as a source of demand in all corners of the globe.The American government has been spending billions, creating booming demand in the United States. As new trade data shows, though, a meaningful share of this money is leaking overseas and going toward imported goods, in what economists call “fiscal leakage.” Ultimately, the outlook for the American economy will depend on the ability of other countries to take over as drivers of global demand in the months ahead — a prospect that remains uncertain.America is buying much more stuff from overseas, as its stimulus-fueled economy revs forward, while the rest of the world has not yet caught up and started buying more American exports. That is why the trade deficit was $68.9 billion in April, which was down from $75 billion in March, but far above levels of around $45 billion per month immediately before the pandemic. People are spending their stimulus money on imported furniture, appliances and other goods.One effect is that the rest of the world is acting as a pressure valve for inflationary forces that are building within American borders. If you think gasoline and lumber prices are high now, imagine if the slow-growing economies of Europe and Japan were recovering at the same breakneck pace as in the United States.“Fiscal leakage is inevitable,” said Maurice Obstfeld, a University of California, Berkeley, professor and former chief economist of the International Monetary Fund. “It’s desirable to the extent it will somewhat moderate inflationary pressures. And it’s desirable to the extent that to some degree it helps spur growth in the rest of the world, some of which comes back to help us.”It reflects a difficult geoeconomic needle the United States is trying to thread. It’s best for everybody if the rest of the world joins the party and is able to power global demand, especially once the American stimulus dollars are largely played out. But if that resurgence is too fast and too strong, it will just make the inflation problems already evident in many markets worse.Moreover, some of the most effective tools involve global vaccine distribution, not economic policy. Successful vaccination would help get supply and demand, both for physical goods and for tourism and other services, back on track.The United States typically runs a large trade surplus in services, including software, Hollywood films and banking. But the biggest single area of services exports before the pandemic was international travel.In the math of global economics, a foreign tourist staying in the United States is essentially purchasing an American services export. Travel exports were only $18 billion in the first four months of 2021, down from $67 billion in the same period of 2019.Meanwhile, flush American consumers have shifted their spending away from services and toward goods. In the first four months of the year, imports of consumer goods were 29 percent higher than in 2020, a $57 billion jump.“The only thing people could consume was goods,” said Constance Hunter, chief economist at KPMG. “You couldn’t have a wedding, you couldn’t go to a baseball game. So what did people buy? They bought goods, and that’s much more of a global market than services.”In effect, the United States and China are acting as the drivers of the global economy, while most of the rest of the world is further behind in recovery from the pandemic.In the I.M.F.’s World Economic Outlook published in April, the United States’ 2021 G.D.P. was forecast to be 3 percent above its 2019 level, while China was forecast to be 11 percent above its 2019 level. But the euro area and Japan were each on track to have economies 2 percent smaller than in 2019, with Britain, Canada, Brazil and Mexico also forecast to be in negative territory.That is unfortunate for the people in those places experiencing sluggish recoveries, but is probably helping to keep supply shortages in many sectors from being even worse. Already, a shortage of semiconductors has held back production of automobiles; shortages of building materials have suppressed housing construction; and a shortage of shipping containers has sent prices skyrocketing for moving goods across oceans.“If everybody was stimulating simultaneously, and everybody was enjoying peak growth simultaneously, you could see more congestion,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former top international economist at the Federal Reserve and U.S. Treasury.A promising possibility would be if the baton of economic growth could gradually be passed around the world — having started in 2020 in China, continuing through the first part of 2021 in the United States, then to other parts of the world as the American stimulus dollars fade. That could help the United States avoid a post-stimulus economic hangover.“If Europe is lagging us by a quarter or two, and emerging markets are lagging Europe, maybe we could get a phased global recovery where the growth that we get is a good thing, without putting too much pressure on supply at once,” Mr. Sheets said.The sluggish pace of vaccination in many parts of the world is a risk on all sides. It appears to be holding back output in important ways, contributing to America’s inflation problem — witness, for example, a recent Covid outbreak at a Taiwanese chip factory that stopped production of a product already in short supply.The I.M.F. recently published research showing that an ambitious vaccination plan could bring robust rewards. Achieving worldwide vaccination rates of 40 percent would inject the equivalent of $9 trillion into the global economy by allowing a faster return of normal commerce. Forty percent of the gains would go to advanced economies like those in the United States and Europe.That means the enormous trade deficits of the last couple of months could well fade in the months ahead — but only if the entire world is able to stay healthy, with growth revving, as well. More

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    Here Are The 5 Ways to Track the United States' Economic Recovery

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    The ebbing of the pandemic has brought price increases, supply bottlenecks and labor shortages. Key indicators will show whether it’s just a stage.This is a strange moment for the U.S. economy.Unemployment is still high, but companies are complaining they can’t find enough workers. Prices are shooting up for some goods and services, but not for others. Supply-chain bottlenecks are making it hard for homebuilders, automakers and other manufacturers to get the materials they need to ramp up production. A variety of indicators that normally move more or less together are right now telling vastly different stories about the state of the economy.Most forecasters, including policymakers at the Federal Reserve, expect the confusion to be short-lived. They see what amounts to a temporary mismatch between supply and demand, brought on by the relatively swift ebbing of the pandemic: Consumers, flush with stimulus cash and ready to re-engage with the world after a year of lockdowns, are eager to spend, but some businesses lack the staff and supplies they need to serve them. Once companies have had a chance to bring on workers and restock shelves — and people have begun to catch up on long-delayed hair appointments and family vacations — economic data should begin to return to normal.But no one knows for sure. It is possible that the pandemic changed the economy in ways that aren’t yet fully understood, or that short-term disruptions could have long-lasting ripple effects. Some prominent economists are publicly fretting that today’s price increases could set the stage for faster inflation down the road. Historical analogues such as the postwar boom of the 1950s or the “stagflation” era of the 1970s provide at best limited insight into the present moment.“We can’t dismiss anything at this point because there’s no precedent for any of this,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics, a forecasting firm.On Friday, the Labor Department will release its monthly snapshot of the U.S. labor market. Last month’s report showed much slower job growth than expected, and economists will be watching closely to see whether that disappointment was a fluke. But don’t expect definitive answers. A second month of weak job growth could be a sign of a faltering recovery, or merely an indication that the temporary factors will take more than a couple of months to resolve. A strong report, on the other hand, could signal that talk of a labor shortage was overblown — or that employers have overcome it by bidding up wages, which could fuel inflation.To get a clearer picture, economists will have to look beyond their usual suite of indicators. Here are some things they will be watching.1. PricesChange in consumer prices from a year earlier

    Source: Federal Reserve Bank of San FranciscoBy The New York TimesConsumer prices rose 4.2 percent in April from a year earlier, the biggest jump in more than a decade. But the largest increases were mostly in categories where demand is rebounding after collapsing during the pandemic, like travel and restaurants, or in products plagued by supply-chain disruptions, like new cars. Those pressures should ease in the coming months.What would be more concerning to economists is any sign that price increases are spreading to the rest of the economy. Researchers at the Federal Reserve Bank of San Francisco studied sales patterns from early last year to categorize products and services based on the pandemic’s impact. Their Covid-insensitive inflation index so far shows little sign of runaway inflation beyond pandemic-affected areas.Economists will also be watching other, less pandemic-specific measures that likewise aim to discern the signal of inflation amid the noise of short-term disruptions. The Federal Reserve Bank of Cleveland’s trimmed-mean C.P.I., for example, takes the Labor Department’s well-known Consumer Price Index and strips away its most volatile components.“What we’re looking for is what does underlying inflation look like,” said Ellen Zentner, chief U.S. economist at Morgan Stanley.For those looking for a simpler measure, Ms. Zentner offers a shortcut: Just look at rents. The rental component of C.P.I. (as well as the “owner’s equivalent rent” category, which measures housing costs for homeowners) is the largest single item in the overall price index, and should be less affected by the pandemic than some other categories. If rents start to rise rapidly beyond a few hot markets, overall inflation could follow.2. Inflation ExpectationsConsumer inflation expectations in the short and long term

    Source: University of MichiganBy The New York TimesOne reason economists are so focused on inflation is that it can become a self-fulfilling prophecy: If workers think prices will keep rising, they will demand raises, which will force their employers to raise prices, and so on. As a result, forecasters pay attention not just to actual prices but also to people’s expectations.In the short run, consumers’ inflation expectations are heavily affected by the prices of items purchased frequently. Gasoline prices weigh particularly heavily on consumers’ minds — not only do most Americans have to fill up regularly, but the price of gas is displayed in two-foot-tall numbers at stations across the country. Economists therefore tend to pay more attention to consumers’ longer-run expectations, such as the five-year inflation expectations index from the University of Michigan, which recently hit a seven-year high.Forecasters also pay close attention to the expectations of businesses, investors and other forecasters. Many economists pay particular attention to market-based measures of inflation expectations, because investors have money riding on the outcome. (One such measure, derived from the bond market, is the five-year, five-year forward rate, which forecasts inflation over a five-year period beginning five years in the future.) The Federal Reserve has recently begun publishing a quarterly index of common inflation expectations, which pulls together a variety of measures. It showed that inflation expectations rose in the first quarter of this year, but remain low by historical standards.3. Labor SupplyUnemployed workers per job opening

    Source: Bureau of Labor StatisticsBy The New York TimesRestaurants, hotels and other employers across the country in recent months have complained that they cannot find enough workers, despite an unemployment rate that remains higher than before the pandemic. There is evidence to back them up: Job openings have surged to record levels, but hiring hasn’t kept up. Millions of people who had jobs before the pandemic aren’t even looking for work.Many Republicans say enhanced unemployment benefits are encouraging workers to stay on the sidelines. Democrats mostly blame other factors, such as a lack of child care and health concerns tied to the pandemic itself. Either way, those factors should dissipate as enhanced unemployment benefits end, schools reopen and coronavirus cases fall.But not all workers may come rushing back as the pandemic recedes. Some older workers have probably retired. Other families may have discovered they can get by on one income or on fewer hours. That could allow labor shortages to persist longer than economists expect.The simplest way to track the supply of available workers is the labor force participation rate, which reflects the share of adults either working or actively looking for work. Right now it shows plenty of workers available, although the Labor Department doesn’t provide breakdowns for specific industries.Another approach is to look at the ratio of unemployed workers to job openings, which provides a rough measure of how easy it is for businesses to hire (or, conversely, how hard it is for workers to find jobs). Data from the Labor Department’s Job Openings and Labor Turnover Survey comes out a month after the main employment report, but the career site Indeed releases weekly data on job openings that closely tracks the official figures.Both those approaches have a flaw, however: People who want jobs but aren’t looking for work — whether because they don’t believe jobs are available or because child care or similar responsibilities are keeping them at home temporarily — don’t count as unemployed. Constance L. Hunter, chief economist for the accounting firm KPMG, suggests a way around that problem: the number of involuntary part-time workers. If companies are struggling to find enough workers, they should be offering more hours to anyone who wants them, which should reduce the number of people working part time because they can’t find full-time work.“The data is not necessarily going to be as informative as it would be in a normal recovery,” Ms. Hunter said. “I would not normally tell you coming out of a recession that I’m going to be closely watching involuntary part-time workers as a key indicator, but here we are.”4. WagesPrivate-sector wages and salaries, change from a year earlier

    Source: Bureau of Labor StatisticsBy The New York TimesWage growth remained relatively strong during the pandemic, at least compared with past recessions, when low-wage workers, in particular, lost ground. Many businesses that stayed open during last year’s lockdowns had to raise pay or offer bonuses to retain workers. Now, as the pandemic eases, companies are raising pay again to attract workers.The question is whether the recent wage gains represent a blip or a longer-term shift in the balance of power between employers and employees. Figuring that out will be difficult because the United States lacks a reliable, timely measure of wage growth.The Labor Department releases data on average hourly earnings as part of its monthly jobs report. But those figures have been skewed during the pandemic by the huge flows of workers into and out of the work force, rendering the data nearly useless. Economists are still watching industry-specific data, which should be less distorted. In particular, average hourly earnings for nonsupervisory leisure and hospitality workers should reflect what is happening among low-wage workers.A better bet might be to wait for data from the Employment Cost Index, which is released quarterly. That measure, also from the Labor Department, tries to account for shifts in hiring patterns, so that a rush of hiring in low-wage sectors, for example, doesn’t show up as a decline in average pay. It showed a mild uptick in wage growth in the first quarter, but economists will be paying close attention to the next release, in July.5. Everything ElseThe indicators mentioned above are hardly a comprehensive list. The Producer Price Index provides data on input prices, which often (but not always) flow through to consumer prices. Data on inventories and international trade from the Census Bureau can help track supply-chain bottlenecks. Unit labor costs will show whether increased productivity is helping to offset higher pay. Economists will be watching them all.“During normal times, you can just track a handful of indicators to know how the economy is doing,” said Tara Sinclair, an economist at George Washington University who specializes in economic forecasting. “When big shifts are going on, you’re tracking literally hundreds of indicators.” More

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    Auto sales helped get the American economy off to a good start in 2021.

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    In the first months of 2021, what was good for the auto industry was decidedly good for the American economy.Spending on motor vehicles and parts rose almost 13 percent in the first quarter, making a big contribution to the increase in gross domestic product, the Commerce Department reported Thursday. Strong sales of new and used vehicles were propelled by consumers who had delayed purchases earlier in the pandemic and by others who — because of the virus — wanted to rely less on public transit or shared transportation services like Uber.Two rounds of stimulus payments since late December were a big factor. Low interest rates, readily available credit, rising home values and stock prices, and strong trade-in values for used models also eased the path for consumers.In fact, demand in the first quarter was robust enough that the auto industry was able to post healthy results despite a shortage of computer chips that forced temporary shutdowns of many auto plants.The number of new cars and light trucks sold increased 11 percent from the comparable period a year earlier, to 3.9 million, according to the auto-sales data provider Edmunds.com.On Wednesday, Ford Motor reported it made a $3.3 billion profit in the quarter, its highest total since 2011. While it produced 200,000 fewer vehicles in the quarter than it had planned, the average selling price of Ford models rose to $47,858, 8 percent higher than in the first quarter a year ago, Edmunds reported.The combination of strong consumer demand and tight inventories — partly a result of the chip shortage — has produced something of a dream scenario for auto retailers. At AutoNation, the country’s largest chain of dealerships, many vehicles are being sold near or at sticker price even before they arrive from the factory.“I’ve never seen so much preselling of shipments,” said Mike Jackson, the chief executive. “These vehicles are coming in and going right out.”In the first quarter, AutoNation’s revenue jumped 27 percent, to $5.9 billion, and the company reported $239 million in profit. That was a turnaround from a loss a year ago, when the pandemic crimped sales and forced AutoNation to close stores. More

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    The Economy Is (Almost) Back. It Is Looking Different Than It Used To.

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    The recovery is profoundly unequal across sectors, unbalanced in ways that have big implications for businesses and workers.There have been a lot of strange economic numbers over the last 14 months, as the world has been whipsawed by the pandemic. But one particular line of the first-quarter G.D.P. numbers released Thursday stands out even so.Americans’ spending on durable goods — cars and furniture and other goods meant to last a long time — rose at a stunning 41.4 percent annual rate in the first three months of the year. Enjoy your Pelotons and Big Green Eggs, everybody.The central reality of the economy in 2021 is that it’s profoundly unequal across sectors, unbalanced in ways that have enormous long-term implications for businesses and workers.The economy is recovering rapidly, and is on track to reach the levels of overall G.D.P. that would have been expected before anyone had heard of Covid-19. But that masks some extreme shifts in composition of what the United States is producing. That matters both for the businesses on the losing end of those shifts and for their workers, who may need to find their way into the growing sectors.In such a tumultuous time, it helps to look at the G.D.P. numbers not in terms of how they changed compared with last quarter or last year, but with the prepandemic economy. How does the actual number in the first quarter compare with what that number would have been if it had grown at a steady 2 percent annual rate since the end of 2019, the last quarter unaffected by the pandemic.This approach confirms the basic idea that the economy is not far from that prepandemic trend line. In the first quarter, overall G.D.P. was only 3.3 percent below where it would have been in that hypothetical pandemic-free world. The United States is on track to surge above that 2019 trend in the second quarter currently underway.But as the extreme spike in first-quarter numbers reflects, there has been a huge reallocation of economic activity toward durable goods. Spending on cars and trucks is 15.1 percent higher than it would have been on the 2019 trajectory; spending on furnishings and durable household equipment is 16.6 percent higher; and spending on recreational goods is a whopping 26 percent higher.Altogether, durable goods spending is running $348.5 billion higher annually than it would have been in that alternate universe, as Americans have spent their stimulus checks and unused travel money on physical items.The housing sector is experiencing nearly as big a surge. Residential investment was 14.4 percent above its prepandemic trend, representing $90 billion a year in extra activity. And that was surely constrained by shortages of homes to sell, and lumber and other materials used to make them. It is poised to soar further in coming months, based on forward-looking data like housing starts.Another bright spot is business investment in information technology. The tech industry has been comparatively unscathed by the crisis. Spending on information processing equipment in the first quarter was 23 percent higher than its prepandemic trend, and investment in software 7.4 percent higher.Then there are the losers.The troubles of service industries, especially related to travel, are well documented. While spending on restaurants, airline tickets, concerts and other recreational activities grew in the first quarter, it was a considerably smaller surge than the one that went to physical items, and not nearly big enough to fill in the deep hole those sectors face. Spending on transportation services remains 23 percent below its prepandemic trend, recreation services 31 percent, and restaurants and hotels 19 percent.Those three sectors alone represent $430 billion in “missing” economic activity — largely equivalent, it’s worth noting, to the combined shift of economic activity toward durable goods and residential real estate.A corollary shows up in trade data. Services exports are down 26 percent compared with the prepandemic trend, which reflects in significant part the freeze-up in global travel.Less widely understood is a steep pullback in the energy sector.There are two sides of the same coin: Consumer spending on gasoline and other energy goods is down 11 percent from its prepandemic trend line. And business spending on structures is down 19 percent, which reflects a pullback in investment by both the oil extraction industry and the commercial real estate sector.Separately, the pullback in state and local governments, many of which have faced funding crunches, is real. Their spending is 4.3 percent below the prepandemic trend, another $89 billion in lost activity, though that is likely to return as federal stimulus dollars flow to their coffers and schools reopen.In every recession, shifts take place in the composition of economic activity; the economy rarely looks the same after a wrenching event as it did before. But what is striking about this crisis is the scale and speed of the economy’s rewiring.We don’t yet know how fully service industries will recover as vaccinations take place, or whether durable goods spending will return to more normal levels as stimulus checks are spent and people reallocate their budgets toward travel. We also don’t know whether the surge in information technology spending and the pullback in oil drilling are part of a longer-term shift in the economy (all the more so given the Biden administration’s emphasis on clean energy investment).Moreover, to the degree these shifts in the composition of the economy may be semi-permanent, we don’t know how seamlessly the economy will adjust. Many former waiters or hotel clerks may be ill-suited to becoming construction workers or software engineers.That’s what makes the economy of 2021 so promising but also worrying. The boom is here. We just don’t know yet how bumpy the ride will be in trying to return to something that feels like full-fledged prosperity. More

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    Signs of Economic Hope Are Growing, Some With Superlatives

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    Soaring retail sales and a sharp drop in jobless claims are the latest reflection of a quickening recovery and suggest a year of remarkable growth.The American economic recovery is gathering steam, renewing confidence that a vibrant revival awaits as the pandemic recedes.After months of false starts, evidence is mounting that the economy has definitively turned a corner, with more growth on the horizon. Job gains last month were the strongest since August. There are signs that the snarled global supply chain may be untangling.And in dual reports on Thursday, the government reported more good news: Retail sales in March blew past expectations, rising nearly 10 percent, and jobless claims last week fell to their lowest level of the pandemic.Even as the country is still straining to contain the virus, as millions of people remain unemployed and as a large portion of the population remains unvaccinated, the data suggests that the long-heralded economic rebound is within reach.“I’m feeling quite optimistic,” said Gregory Daco, chief U.S. economist at Oxford Economics. “I think what we’re seeing is evidence of this booming economy that we’re going to be seeing over the coming months.”In the year since the coronavirus smothered the economy, economists have held out hope for a significant turnaround defined by plentiful job opportunities, higher wages and supercharged spending after months of pent-up demand. But the tantalizing promise at times appeared unlikely at best: After a period of growth over the summer, job gains largely stalled heading into the new year. New state unemployment claims spiked to over a million in one week in January. Retail sales, bolstered by stimulus payments, jumped in January only to slide the next month.Monthly Retail Sales

    Seasonally adjusted advance monthly sales for retail and food services.Source: Commerce DepartmentThe New York TimesYet recent weeks have delivered increasing reason for hope. With a fresh round of federal payments in their pockets and vaccines in their arms, many Americans have begun shopping and dining out with renewed alacrity, driving retail sales. A 9.8 percent increase last month was a strong comeback from the nearly 3 percent drop in February, when previous stimulus money had dissipated and a series of winter storms made travel difficult across much of the United States.The increase was broad-based, including big-ticket purchases like cars and discretionary spending on sporting goods, which economists interpreted as a sign of strong household income and growing optimism. Sales of clothing and accessories rose 18 percent, while restaurants and bars recorded a 13 percent increase — demonstrating how many areas of consumption are bouncing back.“I found it very encouraging that there are signs that people are waking up from hibernation, buying new clothes and going out to restaurants,” said Beth Ann Bovino, U.S. chief economist at S&P Global. “I think people are feeling optimistic that the United States will win the war on the virus. And they have good reason to be hopeful.”Many economists said the strong retail sales were likely to continue through the spring, even after the new stimulus payments are used up.The gradual return to normal activities as business restrictions ease has in turn prompted employers to recall workers — and this time, to hold on to them.The Labor Department reported on Thursday that the number of first-time claims for state unemployment benefits fell sharply last week, to about 613,000, the lowest level since the start of the pandemic. That was a decline of 153,000, the largest week-over-week decrease since the summer.In addition, 132,000 new claims were filed for Pandemic Unemployment Assistance, a federal program that covers freelancers, part-timers and others who do not routinely qualify for state benefits. That was a decline of 20,000 from the previous week.“We’re gaining momentum here, which is just unquestionable,” said Diane Swonk, chief economist at the accounting firm Grant Thornton.There are also broader signs of a comeback.After a devastating year, airlines are growing increasingly hopeful as travelers return. Over the past month, more than one million people were screened each day at federal airport checkpoints, according to the Transportation Security Administration, a signal that a sustained travel recovery is underway.As a result, American Airlines said this week that it expected to sell more than 90 percent as many tickets within the United States this summer as it did in the summer of 2019. Delta Air Lines said Thursday that it had recovered about 85 percent of its domestic leisure sales. If trends hold, the airline said, it could be profitable again by the summer.“A year after the onset of the pandemic, travelers are gaining confidence and beginning to reclaim their lives,” Ed Bastian, the company’s chief executive, said in announcing the airline’s first-quarter financial results. “Delta is accelerating into the recovery.”Moreover, the nation’s ports are handling record cargo volumes as consumers stock up. March was the busiest month on record for the Port of Oakland, while the Port of Los Angeles, the main point of entry for goods from Asia, said the first three months of the year were the busiest first quarter in its 114-year history.“As more Americans get vaccinated, businesses reopen and the economy strengthens, consumers continue to purchase goods at a dizzying pace,” Gene Seroka, the port’s executive director, said in a statement.For months, the port, like others around the world, has been overwhelmed by an influx of cargo, forcing container ships to wait days offshore to unload their goods. In many cases, the containers are unloaded and immediately sent back so they can be filled for another eastbound trip. While the backlog remains, Mr. Seroka said, it is expected to be eliminated in the coming months.The Port of Los Angeles, the main point of entry for goods from Asia, said the first three months of this year were the busiest first quarter in its 114-year history.Coley Brown for The New York TimesThe improving signs on so many fronts are being reflected in brightening forecasts for the months ahead. Morgan Stanley said Thursday that it expected the economy to grow 7.5 percent in 2021, after shrinking 3.5 percent in 2020. That would be the strongest growth rate for a calendar year since the 1950s.But if the economy appears to be on the upswing, the recovery is still fragile. Weekly applications for unemployment claims have remained stubbornly high for months, causing frustration even as businesses reopen and vaccination rates increase. They have also been a volatile economic indicator, temporarily dipping to their lowest level of the pandemic in mid-March before rising again in recent weeks.“You’re still not popping champagne corks,” Ms. Swonk said. “I will breathe again — and breathe easy again — once we get these numbers back down in the 200,000 range.”What’s more, concerns about workplace safety persist, especially for younger workers who have just become eligible for vaccinations. Many children are still attending schools remotely, complicating the full-time work prospects for their caregivers.Jobless claims for the next few months could remain significantly elevated as the labor market adjusts to a new normal.“The job market conditions for job seekers have really improved extremely quickly between January and now,” said Julia Pollak, a labor economist at the job site ZipRecruiter. “But there are still huge barriers to returning to work.”The rebound in March sales also shows how consumer spending — and the economic rebound as a whole — remains highly dependent on government support.President Biden’s $1.9 trillion American Rescue Plan, which was signed into law last month, provides $1,400-a-person payments to most households. The payments began arriving around March 17, and by the end of the month, economists saw signs that spending was ramping up again, such as increased hotel occupancy and travel through airports.Economists at Morgan Stanley had predicted that core retail sales would jump 6.5 percent in March, driven by the payments. The investment bank said only 30 percent of consumers tended to spend their payments within 10 days, suggesting that many have money on hand that could strengthen April sales as well.Other factors are contributing to the brightening recovery prospects. Mr. Biden moved up the deadline for states to make all adults eligible for vaccination to April 19, and every state has complied, laying the groundwork for more people to rejoin the work force. Students who have been learning remotely are increasingly returning to the classroom, a shift that will especially benefit women, who have been disproportionately sidelined during the pandemic by caregiving duties.Echoing the general perception that post-pandemic life is beckoning, American consumers are feeling increasingly upbeat. One measure of sentiment, tabulated by the Conference Board, showed that consumer confidence in March recorded its biggest one-month gain in nearly a decade, fueled by increased income and stronger business and employment expectations.“This was the deepest, swiftest recession ever,” said Ms. Pollak, the ZipRecruiter economist. “But it’s also turning into the fastest recovery.”Ben Casselman contributed reporting. More

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    China's First Quarter Growth is Expected to Boom on Paper

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    The world’s traditional growth engine is expected to report a double-digit first-quarter jump. But consumers and small business aren’t fully sharing in the spoils.Factories are whirring, new apartments are being snapped up, and more jobs are up for grabs. When China releases its new economic figures on Friday, they are expected to show a remarkable postpandemic surge.The question is whether small businesses and Chinese consumers can fully share in the good times.China is expected to report that its economy grew by a jaw-dropping double-digit figure in the first three months of the year compared with the same period last year. Economists widely estimate the number to be 18 percent to 19 percent. But the growth is as much a reflection of the past — the country’s output shrank 6.8 percent in the first quarter of 2020 from a year earlier — as it is an indication of how China is doing now.A year ago, entire cities were shut down, planes were grounded and highways were blocked to control the spread of a relentless virus. Today, global demand for computer screens and video consoles that China makes is soaring as people work from home and as a pandemic recovery beckons. That demand has continued as Americans with stimulus checks look to spend money on patio furniture, electronics and other goods made in Chinese factories.China’s recovery has also been powered by big infrastructure. Cranes dot city skylines. Construction projects for highways and railroads have provided short-term jobs. Property sales have also helped strengthen economic activity.The port container terminal in Lianyungang, a city in China’s Jiangsu Province. Global demand for Chinese goods is soaring.Hector Retamal/Agence France-Presse — Getty ImagesBut exports and property investment can carry China’s growth only so far. Now China is trying to get its consumers to return to their prepandemic ways, something that other countries will soon have to grapple with as more vaccines become available.Demand for Chinese exports is expected to weaken later in the year. Policymakers have moved to tamp down overheating in the property market and in the corporate sector, where many firms have borrowed beyond their means. Many economists are looking for signs of a broader recovery that relies less on exports and the government and more on Chinese consumers to juice growth.A slow vaccination rollout and fresh memories of lockdowns have left many consumers in the country skittish. Restaurants are still struggling to bounce back. Waiters, shopkeepers and students are not ready yet for the “revenge spending” that economists hope will power growth. When virus outbreaks occur, the Chinese authorities are quick to put new lockdowns in place, hurting small businesses and their customers.To avoid a wave of outbreaks in February, the authorities canceled the travel plans of millions of migrant workers for the Lunar New Year holiday, the biggest holiday in China.“China’s Covid strategy has been to crush it when it reappears, but there seems to be a lot of voluntary social distancing, and that’s affecting services,” said Shaun Roache, chief economist for Asia Pacific at S&P Global. “It’s holding back normalization.”A worker producing engineering equipment for export at a factory in Nantong in Jiangsu Province. Demand for Chinese exports is expected to weaken later in the year. Agence France-Presse — Getty ImagesWu Zhen runs a family business of 13 restaurants and dozens of banquet halls in Yingtan, a city in China’s southeastern Jiangxi Province. When China began to bounce back last year, more people started going to her restaurants for their favorite dishes, like braised pork. But just as she and her employees began preparing for the Lunar New Year, a new Covid-19 outbreak prompted the authorities to limit the number of people allowed to gather in one place to 50.“It should have been the best time of the year for our business,” said Ms. Wu, 33.This year, Ms. Wu decided that closing the entire business over the holiday would be cheaper. “If we want to serve Lunar New Year’s Eve dinner, the labor wage for one day is three times higher than the usual time. We save more money by just closing the doors and the business,” she said. It will be the second year in a row that the restaurants shut their doors over the holiday.Ms. Wu inherited the business from her father two years ago and employs more than 800 people. Before the pandemic, three-quarters of the business revenue came from big banquets for weddings and family reunions. She said business had yet to return to normal after months of crushing virus restrictions.The setbacks facing small-business owners like Ms. Wu are also affecting regular consumers who are jittery about opening their wallets. According to Zhaopin, China’s biggest job recruitment platform, more jobs in hotels and restaurants, entertainment services and real estate are available than a year ago. But households are still being cautious about spending.Families continue to save at a higher rate than they did before the pandemic, something that worries economists like Louis Kuijs, who is head of Asian economics at Oxford Economics. Mr. Kuijs is looking at household savings as an indication of whether Chinese consumers are ready to start splurging after months of being stuck at home.“More people still seem to not go all the way in terms of carefree spending,” he said. “At times there are still some lingering Covid concerns, but there is perhaps also a concern about the general economic situation.”Many families took on more debt last year to buy property and cover expenses during the pandemic. China still largely lacks the kind of social safety net that many wealthy countries provide, and some families have to dip into savings for health care and other big costs.Unlike much of the developed world, China doesn’t subsidize its consumers. Instead of handing out checks to jump-start the economy last year, China ordered state-owned banks to lend to businesses and offered tax rebates.Retail figures on Friday will give a better sense of where consumers are picking up their old spending habits. But data from the first two months of the year already show that consumers like Li Jinqiu are spending less and saving more.Mr. Li, 25, who recently got married, has a 1-month-old baby at home. He had planned to work for the family business, but it has been hit by the pandemic and he doesn’t think there is much opportunity for him if he stays.“The whole family has some sense of crisis,” Mr. Li said. “Because of the pandemic and because of family business, I have a sense of crisis.”Mr. Li said he had received a job offer in sales at a financial firm in Beijing but had delayed the start date to help take care of his newborn. He said he had once borrowed to spend on items like his $150,000 Mercedes. Now he drives a $46,000 electric car and has put off buying new clothes.“When I spend,” he said, “I am more cautious.” More

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    What is Going on with China, Cotton and All of These Clothing Brands?

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    A user’s guide to the latest cross-border social media fashion crisis.Last week, calls for the cancellation of H&M and other Western brands went out across Chinese social media as human rights campaigns collided with cotton sourcing and political gamesmanship. Here’s what you need to know about what’s going on and how it may affect everything from your T-shirts to your trench coats.What’s all this I’m hearing about fashion brands and China? Did someone make another dumb racist ad?No, it’s much more complicated than an offensive and obvious cultural faux pas. The issue centers on the Xinjiang region of China and allegations of forced labor in the cotton industry — allegations denied by the Chinese government. Last summer, many Western brands issued statements expressing concerns about human rights in their supply chain. Some even cut ties with the region all together.Now, months later, the chickens are coming home to roost: Chinese netizens are reacting with fury, charging the allegations are an offense to the state. Leading Chinese e-commerce platforms have kicked major international labels off their sites, and a slew of celebrities have denounced their former foreign employers.Why is this such a big deal?The issue has growing political and economic implications. On the one hand, as the pandemic continues to roil global retail, consumers have become more attuned to who makes their clothes and how they are treated, putting pressure on brands to put their values where their products are. One the other, China has become an evermore important sales hub to the fashion industry, given its scale and the fact that there is less disruption there than in other key markets, like Europe. Then, too, international politicians are getting in on the act, imposing bans and sanctions. Fashion has become a diplomatic football.This is a perfect case study of what happens when market imperatives come up against global morality.Tell me more about Xinjiang and why it is so important.Xinjiang is a region in northwest China that happens to produce about a fifth of the world’s cotton. It is home to many ethnic groups, especially the Uyghurs, a Muslim minority. Though it is officially the largest of China’s five autonomous regions, which in theory means it has more legislative self-control, the central government has been increasingly involved in the area, saying it must exert its authority because of local conflicts with the Han Chinese (the ethnic majority) who have been moving into the region. This has resulted in draconian restrictions, surveillance, criminal prosecutions and forced-labor camps.OK, and what about the Uyghurs?A predominantly Muslim Turkic group, the Uyghur population within Xinjiang numbers just over 12 million, according to official figures released by Chinese authorities. As many as one million Uyghurs and other Muslim minorities have been retrained to become model workers, obedient to the Chinese Communist Party via coercive labor programs.Burberry created signature check “skins” for characters in the Honor of Kings video game, which its owner, the Chinese technology company Tencent, removed over the company’s stand on cotton produced in the Xinjiang region.via Honor of KingsSo this has been going on for awhile?At least since 2016. But after The New York Times, The Wall Street Journal, Axios and others published reports that connected Uyghurs in forced detention to the supply chains of many of the world’s best-known fashion retailers, including Adidas, Lacoste, H&M, Ralph Lauren and the PVH Corporation, which owns Calvin Klein and Tommy Hilfiger, many of those brands reassessed their relationships with Xinjiang-based cotton suppliers.In January, the Trump administration banned all imports of cotton from the region, as well as products made from the material and declared what was happening “genocide.” At the time, the Workers Rights Consortium estimated that material from Xinjiang was involved in more than 1.5 billion garments imported annually by American brands and retailers.That’s a lot! How do I know if I am wearing a garment made from Xinjiang cotton?You don’t. The supply chain is so convoluted and subcontracting so common that often it’s hard for brands themselves to know exactly where and how every component of their garments is made.So if this has been an issue for over a year, why is everyone in China freaking out now?It isn’t immediately clear. One theory is that it is because of the ramp-up in political brinkmanship between China and the West. On March 22, Britain, Canada, the European Union and the United States announced sanctions on Chinese officials in an escalating row over the treatment of Uyghurs in Xinjiang.Not long after, screenshots from a statement posted in September 2020 by H&M citing “deep concerns” about reports of forced labor in Xinjiang, and confirming that the retailer had stopped buying cotton from growers in the region, began circulating on Chinese social media. The fallout was fast and furious. There were calls for a boycott, and H&M products were soon missing from China’s most popular e-commerce platforms, Alibaba Group’s Tmall and JD.com. The furor was stoked by comments on the microblogging site Sina Weibo from groups like the Communist Youth League, an influential Communist Party organization.Within hours, other big Western brands like Nike and Burberry began trending for the same reason.And it’s not just consumers who are up in arms: Influencers and celebrities have also been severing ties with the brands. Even video games are bouncing virtual “looks” created by Burberry from their platforms.Backtrack: What do influencers have to do with all this?Influencers in China wield even more power over consumer behavior than they do in the West, meaning they play a crucial role in legitimizing brands and driving sales. When Tao Liang, otherwise known as Mr. Bags, did a collaboration with Givenchy, for example, the bags sold out in 12 minutes; a necklace-bracelet set he made with Qeelin reportedly sold out in one second (there were 100 made). That’s why H&M worked with Victoria Song, Nike with Wang Yibo and Burberry with Zhou Dongyu.But Chinese influencers and celebrities are also sensitive to pleasing the central government and publicly affirming their national values, often performatively choosing their country over contracts.In 2019, for example, Yang Mi, the Chinese actress and a Versace ambassador, publicly repudiated the brand when it made the mistake of creating a T-shirt that listed Hong Kong and Macau as independent countries, seeming to dismiss the “One China” policy and the central government’s sovereignty. Not long afterward, Coach was targeted after making a similar mistake, creating a tee that named Hong Kong and Taiwan separately; Liu Wen, the Chinese supermodel, immediately distanced herself from the brand.The actress Zhou Dongyu, the actor Wang Yibo and the singer and actress Victoria Song, all Chinese influencers who had deals with Western brands that they then  repudiated when their products were said to disrespect the Chinese people and government.VCG/VCG, via Getty ImagesAnd what’s with the video games?Tencent removed two Burberry-designed “skins” — outfits worn by video game characters that the brand had introduced with great fanfare — from its popular title Honor of Kings as a response to news that the brand had stopped buying cotton produced in the Xinjiang region. The looks had been available for less than a week.So this is hitting both fast fashion and the high end. How much of the fashion world is involved?Potentially, most of it. So far Adidas, Nike, Converse and Burberry have all been swept up in the crisis. Even before the ban, additional companies like Patagonia, PVH, Marks & Spencer and the Gap had announced that they did not source material from Xinjiang and had officially taken a stance against human rights abuses.This week, however, several brands, including VF Corp., Inditex (which owns Zara) and PVH all quietly removed their policies against forced labor from their websites.That seems squirrelly. Is this likely to escalate?Brands seem to be concerned that the answer is yes, since, apparently fearful of offending the Chinese government, some companies have proactively announced that they will continue buying cotton from Xinjiang. Hugo Boss, the German company whose suiting is a de facto uniform for the financial world, posted a statement on Weibo saying, “We will continue to purchase and support Xinjiang cotton” (even though last fall the company had announced it was no longer sourcing from the region). Muji, the Japanese brand, is also proudly touting its use of Xinjiang cotton on its Chinese websites, as is Uniqlo.Wait … I get playing possum, but why would a company publicly pledge its allegiance to Xinjiang cotton?It’s about the Benjamins, buddy. According to a report from Bain & Company released last December, China is expected to be the world’s largest luxury market by 2025. Last year it was the only part of the world to report year on year growth, with the luxury market reaching 44 billion euros ($52.2 billion).Is anyone going to come out of this well?One set of winners could be the Chinese fashion industry, which has long played second fiddle to Western brands, to the frustration of many businesses there. Shares in Chinese apparel groups and textile companies with ties to Xinjiang rallied this week as the backlash gained pace. And more than 20 Chinese brands publicly made statements touting their support for Chinese cotton. More