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    Inflation was much hotter than expected, bad news for the Fed.

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    Inflation rose quickly in September and a key measure accelerated to the fastest pace since 1982, underlining the persistence of price increases.Prices continued to climb at a brutally rapid pace in September, with a key inflation index increasing at the fastest rate in 40 years, bad news for the Federal Reserve as it struggles to wrestle the cost of living back under control.Overall inflation climbed 8.2 percent over the year through September, according to the latest Consumer Price Index report on Thursday, a slight moderation from August but more than what economists had expected.Even more worrisome, underlying inflation trends are headed in the wrong direction. After stripping out fuel and food — which are volatile and removed to get a better sense of the trajectory — prices climbed 6.6 percent over the year through September. That was the quickest rate since 1982.Inflation has been rapid for a year and a half now, and it is proving stubborn even as the Fed mounts its most aggressive campaign in generations to slow the economy and bring price increases under control. Fast inflation has also triggered the highest Social Security cost-of-living adjustment in decades — an 8.7 percent increase in benefits to retired and disabled Americans, a move that was announced Thursday.Central bankers have quickly raised interest rates from near zero to a range of 3 to 3.25 percent, and investors expect a fourth straight three-quarter-point rate increase at the Fed’s next meeting, which concludes on Nov. 2. After the release of Thursday’s inflation data, they began to bet on another large move at the central bank’s December meeting.“The trend is very troubling,” said Blerina Uruci, a U.S. economist at T. Rowe Price.Markets swung wildly after the report, with stocks falling sharply initially but then surging higher as investors struggled to digest what the data meant for the future. The S&P 500 index closed up 2.6 percent.Higher Fed rates are already slowing the housing market, and are expected to slowly filter through the rest of the economy as they make it more expensive to borrow money for big purchases or business expansions. But consumer demand is taking time to crack: With jobs plentiful and wages rising, Americans are still spending.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    August PCE Inflation Data Shows Prices Are Stubbornly High

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    The Federal Reserve’s preferred inflation gauge remained elevated in August, data released on Friday showed, further evidence that the central bank is contending with a stubborn problem as it tries to choke off the worst inflation in four decades.The Personal Consumption Expenditures inflation measure, which is the measure the Fed officially targets as it tries to achieve 2 percent annual inflation, climbed 6.2 percent over the year through August. While that was a slowdown from 6.4 percent in July, it was higher than the 6 percent that economists in a Bloomberg survey had expected.The details of the report were even more concerning. Price increases have been moderating somewhat on an overall basis, partly because gas prices have been declining. But after volatile fuel and food prices were stripped out to get a sense of underlying inflationary pressures, the index climbed 4.9 percent over the year through August, an acceleration from 4.7 percent the month before. And on a monthly basis, the core index picked up by 0.6 percent, the fastest increase since June.Consumers also continued to spend in August, particularly on dining, travel and other services, the report showed, though the pace was slowing. Incomes rose, buoyed by a hot job market.The data underlined the challenging path the Fed faces as it tries to guide the U.S. economy toward slower inflation. Both the economy and price pressures have retained momentum, even as central bankers raise interest rates to try to cool demand. As a result, the Fed has become steadily more aggressive in its efforts to constrain spending and temper inflation, and it is likely to keep raising rates and keep them elevated for a while.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    New Inflation Data Shows Prices Remain Stubbornly High

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    The Federal Reserve’s preferred inflation gauge remained elevated in new data released on Friday, further evidence that the central bank is contending with a stubborn problem as it tries to choke off the worst inflation in four decades.The Personal Consumption Expenditures inflation measure, which is produced by the Commerce Department and is the measure the Fed officially targets as it tries to achieve 2 percent annual inflation, climbed by 6.2 percent in the year through August. While that was a slowdown from 6.4 percent in July, it was higher than the 6 percent economists in a Bloomberg survey had expected.Inflation has been moderating somewhat on an overall basis partly because gas prices are declining. After stripping out food and fuel, both of which jump up and down, inflation climbed 4.9 percent in the year through August. That compares to 4.7 percent the month before. On a monthly basis, the core index picked up by 0.6 percent, a rapid pace of increase that was the fastest since June.The data underlined what a rocky road the Fed faces as it tries to guide the U.S. economy toward slower inflation.Economists are hopeful that healing supply chains, a slowing housing market, cooling consumer demand and a moderating labor market will combine to pull inflation lower in the months ahead. But Russia’s war in Ukraine poses a constant risk to the global supply of food and oil, and industries including automobiles remain severely disrupted. Rents and other service costs have been rising sharply, and labor shortages spanning many industries have pushed wages up, which could feed through to higher prices.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Factory Jobs Are Booming Like It’s the 1970s

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    U.S. manufacturing is experiencing a rebound, with companies adding workers amid high consumer demand for products.WASHINGTON — Ever since American manufacturing entered a long stretch of automation and outsourcing in the late 1970s, every recession has led to the loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed — and then some.The resurgence has not been driven by companies bringing back factory jobs that had moved overseas, nor by the brawny industrial sectors and regions often evoked by President Biden, former President Donald J. Trump and other champions of manufacturing.Instead, the engines in this recovery include pharmaceutical plants, craft breweries and ice-cream makers. The newly created jobs are more likely to be located in the Mountain West and the Southeast than in the classic industrial strongholds of the Great Lakes.American manufacturers cut roughly 1.36 million jobs from February to April of 2020, as Covid-19 shut down much of the economy. As of August this year, manufacturers had added back about 1.43 million jobs, a net gain of 67,000 workers above prepandemic levels.Data suggest that the rebound is largely a product of the unique circumstances of the pandemic recession and recovery. Covid-19 crimped global supply chains, making domestic manufacturing more attractive to some companies. Federal stimulus spending helped to power a shift in Americans’ buying habits away from services like travel and restaurants and toward goods like cars and sofas, helping domestic factory production — and with it, job growth — to bounce back much faster than it did in the previous two recessions.Treasury Secretary Janet L. Yellen said that the recovery of manufacturing jobs was a result of the unique nature of the recession, which was induced by the pandemic, and the robust federal response, including legislation like the $1.9 trillion American Rescue Plan of 2021.“We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy,” Ms. Yellen told reporters during a trip to Detroit this month. The support for local economies and small businesses included in Mr. Biden’s rescue plan, she said, “has been tremendously helpful in restoring the health of the job market and given the shifting in spending patterns, I think that’s been to the benefit of manufacturing.”American manufacturers, like many industries, have struggled to find raw materials, component parts and skilled workers. And yet, they have continued to create jobs at a rate that has surprised even some longtime promoters of American factory employment.“We have 67,000 more workers today than we had in February 2020,” said Chad Moutray, the chief economist for the National Association of Manufacturers. “I didn’t think we would get there, to be honest with you.”In recessions over the last half century, factories have typically laid off a greater share of workers than other employers in the economy, and they have been slower to add jobs back in recoveries. Often, companies have used those economic inflection points to accelerate their pace of outsourcing jobs to foreign countries, where wages are significantly lower, and to invest in technology that replaces human workers.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.August Jobs Report: Job growth slowed in August but stayed solid, suggesting that the labor market recovery remains resilient, even as companies pull back on hiring.Job Market Trends: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Gig Workers: Labor activists hoped President Biden would tackle gig worker issues aggressively. But a year and a half into his presidency, little has been done at the federal level.Black Employment: Black workers saw wages and employment rates go up in the wake of the pandemic. But as the Federal Reserve tries to tame inflation, those gains could be eroded.This time was different. Factory layoffs roughly matched those in the services sector in the depth of the pandemic recession. Economists attribute that break in the trend to many U.S. manufacturers being deemed “essential” during pandemic lockdowns, and the ensuing surge in demand for their products by Americans.Manufacturing jobs quickly rebounded in the spring of 2020, then began to climb at a much faster pace than has been typical for factory job creation in recent decades. Since June 2020, under both Mr. Trump and Mr. Biden, factories have added more than 30,000 jobs a month.Sectors that hemorrhaged employment in recent recessions have fared much better in this recovery. Furniture makers, who eliminated a third of their jobs in the 2008 financial crisis and its aftermath, have nearly returned to their prepandemic employment levels. So have textile mills, paper products companies and computer equipment makers.Manufacturers say the numbers could be even stronger, if not for their continued difficulties attracting and hiring skilled workers amid 3.7 percent unemployment.Fernando Torres, vice president of operations for Greene Tweed, a Pennsylvania-based manufacturer of materials and components used by the aerospace and semiconductor industries, said his company has had to become more flexible to attract new workers and offer more attractive salaries and benefits. He has been looking for employees with different backgrounds that the company can train to develop the skills to fill open jobs, and said that it has been hard to retain staff because competitors are aggressively trying to lure them away.But Mr. Torres said that Greene Tweed, which employs just fewer than 2,000 workers, did not plan to give up, considering the demand for his company’s products.“We are looking for lots of employees,” Mr. Torres said. “We are not looking at slowing down.”Chuck Wetherington, president of BTE Technologies, a manufacturer of medical devices based in Maryland, said that he was trying to expand his work force of around 40 by 10 percent. A lack of workers, he said, has become a bigger problem than supply chain disruptions.“Our backlog continues to grow,” Mr. Wetherington said at a National Association of Manufacturers briefing. “I just can’t find the employees.”Mr. Biden has pushed a variety of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies like battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers located in the United States. Biden administration officials say those policies could play a decisive role in further encouraging factory job growth in the coming months and years, in hopes of continuing the expansion and possibly pushing factory employment back to pre-2008 levels.Other factors could help hasten more American manufacturing. Delayed deliveries, sky-high shipping prices and other supply chain issues during the pandemic have encouraged some chief executives to think about moving production closer to home. The average price to ship a 40-foot container internationally has fallen sharply in recent months, but it is still three times higher than it was before the pandemic, according to tracking by the freight booking platform Freightos.A container ship at the Port of Los Angeles. As Covid-19 crimped global supply chains, domestic manufacturing became more attractive to some companies.Stella Kalinina for The New York TimesBusinesses are also beginning to question the wisdom of producing so many goods in China, amid rising tensions between Washington and Beijing over trade and technology. The Chinese government’s insistence on a zero-Covid policy, despite the severe disruptions it has caused for the economy, has especially shaken many executives’ confidence in their ability to operate in China. Mr. Biden has also maintained many tariffs on Chinese imports imposed by Mr. Trump.“The pandemic response by China has definitely prompted more than a rethink on where to put new money. I think we are actually beginning to see action,” said Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics. How much of that investment came to the United States was unclear. “I don’t think anyone really knows,” she added.Ed Gresser, the vice president of trade and global markets at the Progressive Policy Institute, a left-leaning think tank, said that the United States had seen a noticeable uptick in new manufacturing establishments since 2019, especially in the pharmaceutical sector, which might be a response to the pandemic. Food and beverage establishments have also continued to grow.But while growth in the U.S. manufacturing sector was strong last year, so were imports of manufactured goods, Mr. Gresser said. That suggests, he said, that the growth of manufacturing probably reflects strong consumer demand in the United States through the pandemic, rather than a shift to production in the United States.While attitudes toward doing business in China have quickly soured, patterns of production have been slower to change. A survey of 117 leading companies released in August by the U.S. China Business Council found that business optimism had reached record lows, but U.S. corporations remained overwhelmingly profitable in China, which is still home to the world’s most expansive ecosystem of factories and a lucrative consumer market.Eight percent of the surveyed companies reported moving segments of their supply chain out of China to the United States in the past year, while another 16 percent had moved some operations to other countries. But 78 percent of the companies said they had not shifted any business away from China.The Biden administration is hopeful that new policies — including a manufacturing competitiveness law and a climate law the president signed this summer — will encourage more companies to leave China for the United States, particularly cutting-edge industries like clean energy and advanced computing.Brian Deese, the director of the National Economic Council, said in an interview that the laws were already changing the calculus for investment and job creation in the United States. In recent weeks, White House officials have promoted factory announcements from automakers, battery companies and others, directly linked to the climate bill.“One of the most striking things that we are seeing now,” Mr. Deese said, “is the number of companies — U.S. companies and global companies — that are committing to build and expand their manufacturing footprint in the United States, and doing so based on their view that not only did the pandemic highlight the need for more resilience in their supply chains, but that the United States is creating a policy environment that makes long term investment here in the United States more attractive.” More

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    How the Car Market Is Shedding Light on a Key Inflation Question

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    How easily companies give up swollen profits could determine how easily the Federal Reserve can cool inflation. Dealerships offer clues.In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.“With production now increasing, and interest-sensitive demand cooling, there may soon be pressures to reduce vehicle margins and prices in order to move the higher volume of cars being produced off dealer lots,” Ms. Brainard explained during her remarks.The Fed has been raising interest rates to make borrowing for big purchases — cars, houses, business expansions — more expensive. The goal is to cool demand and slow the fastest inflation in four decades. Whether it can pull that off without inflicting serious pain on the economy will hinge partly on how easily companies surrender their hefty profits.If companies begin to lower prices to compete for customers as demand abates, price increases might slow without costing a lot of jobs. But if they try to hold on to big profits, the transition could be bumpier as the Fed is forced to squeeze the economy more drastically and quash demand more severely.“There has been a giant shift in bargaining power between consumers and corporations,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities. “That’s where the next adjustment has to come — corporations have to see some pain.”The example of the auto industry offers reasons for hope but also caution. While there are signs that price increases for used cars are beginning to moderate as supply recovers, that process has been halting, and the new-car market illustrates why the path toward lower profits that help slow inflation could be a long one.That’s because three big forces that are playing out across the broader economy are on particularly clear display in the car market. Supply chains have not completely healed. Demand may be slowing down, but it still has momentum. And companies that have grown used to charging high prices and raking in big profits are proving hesitant to give up.The auto market split into two segments that are now diverging — new cars and used cars.New-car production was upended as the pandemic shut down factories making semiconductors and other parts, and it is only limping back. Freshly minted vehicles remain extraordinarily scarce, according to dealers and data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Inflation Came in Faster Than Expected in August Even as Gas Prices Fell

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    Overall inflation moderated less than anticipated, and a closely watched measure of price pressures jumped, bad news for the Federal Reserve.Price increases remained uncomfortably rapid in August as a broad array of goods and services became more expensive even as gas prices fell, evidence that the sustainable inflation slowdown the Federal Reserve and White House have been hoping for remains elusive.Prices rose 8.3 percent from a year earlier, a fresh Consumer Price Index report released on Tuesday showed. While slightly better than July’s 8.5 percent, the rate was not as much of a moderation as economists had expected as rent costs, restaurant meals and medical care became more expensive. Compounding the bad news, a core measure of inflation that strips out gas and food to get a sense of underlying price trends accelerated more than forecast.Stocks plummeted on Tuesday, with the S&P 500 falling 4.3 percent — its biggest drop since the depths of the pandemic in 2020 — as the data appeared to cement the case for another unusually large interest rate increase of three-quarters of a percentage point at the Fed’s meeting next week. That would be the third consecutive move of that size and bring rates to a range of 3 to 3.25 percent. Investors speculated that officials could even opt for a more drastic adjustment of a full percentage point this month or extend their campaign of swift rate moves for longer.Fed officials have been raising interest rates since March to slow the economy in a bid to tame America’s worst bout of inflation in four decades, but the data suggested that their efforts were not yet having much of an effect. Inflation’s relentlessness may force central bankers to clamp down on the economy harder, potentially pushing up unemployment more starkly, as they try to wrestle prices back under control.“Inflation momentum accelerated in all the wrong places,” said Blerina Uruci, a U.S. economist at T. Rowe Price, explaining that strong household balance sheets may be helping to sustain demand even as interest rates rise and borrowing becomes expensive.“In this environment, monetary policy has to do that much more to cool down demand and have an effect on prices,” Ms. Uruci said.Prices, including rapid increases for food away from home, climbed from July to August.Hiroko Masuike/The New York TimesThe inflation data also contained unwelcome news for the White House. President Biden, whose popularity with voters has suffered amid rising costs, sought to put a positive spin on the new data by noting that prices overall have been essentially flat over the past two months thanks to cheaper gas. But the fact that inflation retains so much staying power is likely to detract from the administration’s positive talking points.That’s because the latest report’s details offered plenty to worry about.Two products that had been major factors in inflation over the past year — gas and used cars — are now falling in price, a widely expected and important development. But the cost of other goods and services is rising so much that it is more than offsetting those declines.Prices climbed 0.1 percent from July as rapid increases hit a variety of products and services, including food away from home, new cars, dental care and vehicle repair. Given how much gas prices fell in August, the price index had been forecast to decline on a monthly basis.Inflation F.A.Q.Card 1 of 5What is inflation? More