More stories

  • in

    Inflation Cooled Notably in November, Good News for the Fed

    Inflation slowed more sharply than expected in November, an encouraging sign for both Federal Reserve officials and consumers that 18 months of rapid and unrelenting price increases are beginning to meaningfully abate.The new data is unlikely to alter the Fed’s plan to raise interest rates by another half point at the conclusion of its two-day meeting on Wednesday. But the moderation in inflation, which affected used cars, some types of food and airline tickets, caused investors to speculate that the Fed could pursue a less aggressive policy path next year — potentially increasing the chances of a “soft landing,” or one in which the economy slows gradually and without a painful recession.Stock prices jumped sharply higher after government data showed that inflation eased to 7.1 percent in the year through November, down from 7.7 percent in the previous reading and less than economists had expected.The Fed, which has been rapidly raising rates in three-quarter point increments, is expected to make a smaller move on Wednesday, bringing rates to a range between 4.25 and 4.5 percent. Central bankers will also release economic projections showing how much they expect to raise interest rates next year, and investors are now betting that they will slow to quarter-point adjustments by their February meeting as fading price pressures give them latitude to proceed more cautiously.“The overall picture is definitely improving,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “It’s unambiguously good news, but it would not be fair to say that inflation is falling everywhere — there are still pockets of big increases.”While price increases are not yet slowing across the board, they are moderating for key goods and services that consumers buy every day, including gas and meat. That is good news for President Biden, who has struggled to convince Americans that the economy is strong as the surging cost of living erodes voter confidence.“Inflation is coming down in America,” Mr. Biden said during remarks at the White House on Tuesday morning. He hailed the report as “news that provides some optimism for the holiday season, and I would argue, the year ahead.”Inflation F.A.Q.Card 1 of 5What is inflation? More

  • in

    Inflation Forecasts Were Wrong Last Year. Should We Believe Them Now?

    Economists misjudged how much staying power inflation would have. Next year could be better — but there’s ample room for humility.At this time last year, economists were predicting that inflation would swiftly fade in 2022 as supply chain issues cleared, consumers shifted from goods to services spending and pandemic relief waned. They are now forecasting the same thing for 2023, citing many of the same reasons.But as consumers know, predictions of a big inflation moderation this year were wrong. While price increases have started to slow slightly, they are still hovering near four-decade highs. Economists expect fresh data scheduled for release on Tuesday to show that the Consumer Price Index climbed by 7.3 percent in the year through November. That raises the question: Should America believe this round of inflation optimism?“There is better reason to believe that inflation will fall this year than last year,” said Jason Furman, an economist from Harvard who was skeptical of last year’s forecasts for a quick return to normal. Still, “if you pocket all the good news and ignore the countervailing bad news, that’s a mistake.”Economists are slightly less optimistic than last year.Economists see inflation fading notably in the months ahead, but after a year of foiled expectations, they aren’t penciling in quite as drastic a decline as they were last December.The Fed officially targets the Personal Consumption Expenditures index, which is related to the consumer price measure. Officials particularly watch a version of the number that illustrates underlying inflation trends by stripping out volatile food and fuel prices — so those forecasts give the best snapshot of what experts are anticipating.Last year, economists surveyed by Bloomberg expected that so-called core index to fall to 2.5 percent by the end of 2022. Instead, it is running at 5 percent, twice that pace.This year, forecasters expect inflation to fade to 3 percent by the end of 2023.The Federal Reserve’s predictions have followed a similar pattern. As of last December, central bankers expected core inflation to end 2022 at 2.7 percent. Their September projections showed price increases easing to 3.1 percent by the end of next year. Fed officials will release a new set of inflation forecasts for 2023 on Wednesday following their December policy meeting.Supply chains are healing.A worker at a garment factory in Vernon, Calif.Mark Abramson for The New York TimesOne reason to think that the anticipated but elusive inflation slowdown will finally show up in 2023 ties back to supply chains.At this time last year, economists were hopeful that snarls in global shipping and manufacturing would soon clear; consumer spending would shift away from goods and back to services; and the combination would allow supply and demand to come back into balance, slowing price increases on everything from cars to couches. That has happened, but only gradually. It has also taken longer to translate into lower consumer prices than some economists had expected.Inflation F.A.Q.Card 1 of 5What is inflation? More

  • in

    IRS Releases Inflation-Adjusted Tax Rates for 2023

    Filers whose salaries have not kept pace with inflation could see savings on their federal income tax bills.WASHINGTON — The rapidly rising cost of food, energy and other daily staples could allow many Americans to reduce their tax bills next year, the I.R.S. confirmed on Tuesday.Tax rates are adjusted for inflation, which in typical times means incremental movements in the thresholds for what income is taxed at what rate. But after a year that brought America’s fastest price growth in four decades, the shift in rates is far more notable: an increase of about 7 percent.Other parts of the tax code will also be affected by the inflation adjustment. Those include the standard deduction Americans can claim on their tax returns.The shift would be slightly larger if not for a change Republicans made as part of President Donald J. Trump’s tax overhaul that was passed in 2017. It tied rates to a measure of inflation, called the chained Consumer Price Index, that typically rises more slowly than the standard Consumer Price Index. In September, chained C.P.I. was up about a quarter of a percentage point less, compared with the previous year, than standard C.P.I.In dollar figures, the shift will be largest at the highest end of the income spectrum, although all seven income brackets will adjust for inflation. The top income tax rate of 37 percent will apply next year to individuals earning $578,125 — or $693,750 for married couples who file joint returns. That is up from $539,900 for individuals this year. The difference: Nearly $40,000 worth of individual income is eligible to be taxed next year at a lower rate of 35 percent.Inflation F.A.Q.Card 1 of 5What is inflation? More

  • in

    The Fed, Staring Down Two Big Choices, Charts an Aggressive Path

    Federal Reserve officials are barreling toward another three-quarter-point increase in November, and they may decide to do more next year.Federal Reserve officials have coalesced around a plan to raise interest rates by three-quarters of a point next month as policymakers grow alarmed by the staying power of rapid price increases — and increasingly worried that inflation is now feeding on itself.Such concerns could also prompt the Fed to raise rates at least slightly higher next year than previously forecast as officials face two huge choices at their coming meetings: when to slow rapid rate increases and when to stop them altogether.Central bankers had expected to debate slowing down at their November meeting, but a rash of recent data suggesting that the labor market is still strong and that inflation is unrelenting has them poised to delay serious discussion of a smaller move for at least a month. The conversation about whether to scale back is now more likely to happen in December. Investors have entirely priced in a fourth consecutive three-quarter-point move at the Fed’s Nov. 1-2 meeting, and officials have made no effort to change that expectation.Officials may also feel the need to push rates higher than they had expected as recently as September, as inflation remains stubborn even in the face of substantial moves to try to wrestle it under control. While the central bank had penciled in a peak rate of 4.6 percent next year, that could nudge up depending on incoming data. Rates are now set around 3.1 percent, and the Fed’s next forecast will be released in December.Fed officials have grown steadily more aggressive in their battle against inflation this year, as the price burst sweeping the globe has proved more persistent than just about anyone expected. And for now, they have little reason to let up: A report last week showed that Consumer Price Index prices climbed by 6.6 percent over the year through September even after food and fuel prices were stripped out — a new 40-year high for that closely watched core index.“It’s a little bit hard to slow down without an apparent reason,” said Alan Blinder, a former Fed vice chair who is now at Princeton University.Mr. Blinder expects the Fed to make another big move at this coming meeting. “If you were Jay Powell and the Fed and slowed to 50, what would you say?” he said. “They can’t say we’ve seen progress on inflation. That would be laughed out of court.”Policymakers came into the year expecting to barely lift interest rates in 2022, forecasting that they would close out the year below 1 percent, up from around zero. But as inflation ratcheted steadily higher and then plateaued near the quickest pace since the early 1980s, they became more determined to stamp it out, even if doing so comes at a near-term cost to the economy.Consumer prices continue to increase rapidly month after month. Those increases are driven by a broad array of goods and services and have been stubborn even in the face of the Fed’s policy moves.John Taggart for The New York TimesOfficials are afraid that if they allow fast inflation to linger, it will become a permanent feature of the American economy. Workers might ask for bigger wage increases each year if they think that costs will steadily increase. Companies, anticipating higher wage bills and feeling confident that consumers will not be shocked by price increases, might increase what they’re charging more drastically and regularly.“The longer the current bout of high inflation continues, the greater the chance that expectations of higher inflation will become entrenched,” Mr. Powell, the Fed chair, warned at his news conference last month.Inflation F.A.Q.Card 1 of 5What is inflation? More

  • in

    New Inflation Developments Are Rattling Markets and Economists. Here’s Why.

    Inflation is less about pandemic and war surprises and more about economic momentum. That could make the solution more painful.When inflation began to accelerate in 2021, price pressures were clearly tied to the pandemic: Companies couldn’t produce cars, couches and computer games fast enough to keep up with demand from homebound consumers amid supply chain disruptions.This year, Russia’s war in Ukraine sent fuel and food prices rocketing, exacerbating price pressures.But now, as those sources of inflation show early signs of fading, the question is how much overall price increases will abate. And the answer is likely to be driven in part by what happens in one crucial area: the labor market.Federal Reserve officials are laser-focused on job gains and wage growth as they quickly raise interest rates to constrain the economy and slow rapid price increases. Officials are convinced that they must sap the economy of some of its momentum to wrestle the worst inflation in four decades back down to their goal of 2 percent.The way they do that is by slowing spending, hiring and wage gains — and they do that by raising the costs of borrowing. So far, a pronounced cool-down is proving elusive, suggesting to economists and investors that the central bank may need to be even more aggressive in its efforts to temper growth and bring inflation back down.As data this week showed, prices continue to soar. And, while the job market has moderated somewhat, employers are still hiring at a solid clip and raising wages at the fastest pace in decades. That continued progress seems to be allowing consumers to keep spending, and it may give employers both the power and the motivation to increase their prices to cover their climbing labor costs.As inflationary forces chug along, economists said, the risk is rising that the Fed will clamp down on the economy so hard that America will be in for a rough landing — potentially one in which growth slumps and unemployment shoots higher.It is becoming more likely “that it won’t be possible to wring inflation out of this economy without a proper recession and higher unemployment,” said Krishna Guha, who heads the global policy and central bank strategy team at Evercore ISI and who has been forecasting that the Fed can cool inflation without causing an outright recession.Rising wages could become a more primary driver of higher prices.Hiroko Masuike/The New York TimesThe challenge for the Fed is that, more and more, price increases appear to be driven by long-lasting factors tied to the underlying economy, and less by one-off factors caused by the pandemic or the war in Ukraine.Consumer Price Index data from August released on Tuesday illustrated that point. Gas prices dropped sharply last month, which many economists expected would pull overall inflation down. They also thought that recent improvements in the supply chain would moderate price increases for goods. Used car costs, a major contributor to inflation last year, are now declining.Yet, in spite of those positive developments, quickly rising costs across a wide array of products and services helped to push prices higher on a monthly basis. Rent, furniture, meals at restaurants and visits to the dentist are all growing more expensive. Inflation climbed 8.3 percent on an annual basis, and picked up by 0.1 percent from the prior month.The data underscored that, even without extraordinary disruptions, so many products and services are now increasing in price that costs might continue ratcheting up. Core inflation, which strips out food and fuel costs to give a sense of underlying price trends, reaccelerated to 6.3 percent in August after easing to 5.9 percent in July.Inflation F.A.Q.Card 1 of 5What is inflation? More

  • in

    Inflation Report Dampens Biden’s Claims of Economic Progress

    The president is trying once again to accentuate the positives in the recovery from recession, but stubbornly high prices are complicating the message.The Consumer Price Index report for August showed inflation had not cooled as the administration had hoped and Americans had lost buying power over the last year as prices rose faster than wages.Sarah Silbiger for The New York TimesWASHINGTON — President Biden gathered with top Democrats at the White House on Tuesday to celebrate their inflation fight at an inopportune moment, as a sobering new report showed just how far the economy still has to go to bring soaring consumer prices under control.The Consumer Price Index report for August contained a large dose of unwelcome news for the president, who has sought to defuse Republican attacks over rising prices in the run-up to November’s midterm elections. It showed that inflation had not cooled as White House economists and other forecasters had hoped, and that workers had lost buying power over the last year as prices increased faster than wages.Another report, from the Census Bureau, showed that the typical American household saw its inflation-adjusted income fall slightly in 2021 from 2020. Perhaps more troubling for a president who has promised to close the gap between the very wealthy and the middle class, it showed that income inequality increased last year for the first time in a decade.Those developments challenged Mr. Biden’s renewed efforts to reframe the economy as a winning issue for him and his party before the midterms — though the president seemed unfazed.Mr. Biden welcomed thousands of supporters to the White House lawn to toast a new law that he says will help reduce the cost of electricity, prescription drugs and other staples of American life.The event was essentially a rally for the so-called Inflation Reduction Act, which raised taxes on large corporations, targeted nearly $400 billion in spending and tax incentives to reduce the fossil fuel emissions driving climate change, and took steps to reduce prescription drug costs for seniors on Medicare and premium costs for Americans who buy health insurance through the Affordable Care Act.Mr. Biden called the law “the single most important legislation passed in the Congress to combat inflation and one of the most significant laws in our nation’s history.”“There’s an extraordinary story being written in America today by this administration,” Mr. Biden said, adding, “This bill cut costs for families, helped reduce inflation at the kitchen table.”On Wednesday, Mr. Biden will head to the Detroit auto show, where he will champion his policies to bolster manufacturing and low-emission sources of energy.But the country’s economic reality remains more muddled than Mr. Biden’s rosy message, as the inflation report underscored. Food prices are continuing to spike, straining lower-income families in particular. The global economy is slowing sharply, and threats remain to the American recovery if European sanctions force millions of barrels of Russian oil off the global market in the months to come.The State of the 2022 Midterm ElectionsWith the primaries winding down, both parties are starting to shift their focus to the general election on Nov. 8.Polling Warnings: Democratic Senate candidates are polling well in the same places where surveys overestimated President Biden in 2020 and Hillary Clinton in 2016.Democrats’ Dilemma: The party’s candidates have been trying to signal their independence from the White House, while not distancing themselves from President Biden’s base or agenda.Intraparty G.O.P. Fight: Ahead of New Hampshire’s primary, mainstream Republicans have been vying to stop a Trump-style 2020 election denier running for Senate.Abortion Ballot Measures: First came Kansas. Now, Michigan voters will decide whether abortion will remain legal in their state. Democrats are hoping referendums like these will drive voter turnout.A possible railroad strike could disrupt domestic supply chains. The White House press secretary, Karine Jean-Pierre, told reporters on Tuesday that the president had called union and company leaders on Monday in an attempt to broker an agreement to avert the strike.Most important — and perhaps most damaging for Mr. Biden and Democrats — Americans’ wages have struggled to keep pace with fast-rising prices, an uncomfortable truth for a president who promised to make real wage gains a centerpiece of his economic program. Inflation-adjusted average hourly earnings ticked up across the economy in August, the Labor Department said on Tuesday, but they remain down nearly 3 percent from a year ago.Republicans were quick to criticize Mr. Biden after the report on Tuesday. “Every day, Americans endure Biden’s economic crisis,” said Representative Blaine Luetkemeyer of Missouri, the top Republican on the Small Business Committee. “The Democrats’ inflation continues to drive up costs and leads more and more small businesses and families questioning their future.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Mr. Biden and his aides have celebrated falling gasoline prices on a daily basis throughout the summer. Those decreasing prices have helped inflation moderate from its high point this year, though not enough to offset rising rent, food and other costs last month.Even as he acknowledges the pain of rapid price increases across the economy, Mr. Biden has claimed progress in the fight against inflation, including with the signing last month of the energy, health care and tax bill that Democrats called the Inflation Reduction Act. On Tuesday morning, he sought to put a positive shine on the August data, saying in a statement issued by the White House that it was a sign of “more progress” in bringing down inflation.At his celebration on Tuesday afternoon, Mr. Biden barely mentioned the word “inflation.” Instead, he talked about reducing medical and energy costs — and, to a much larger extent, about the law’s efforts to combat climate change.Near the end of the speech, he gave a strident defense of his administration’s economic record, including strong job creation, record small-business formation and a rebound of the manufacturing sector.“And guess what?” Mr. Biden said. “For all the criticism I got and the help you gave me for gas prices bringing — they’re down more than $1.30 a gallon since the start of the summer. We’re making progress. We’re getting other prices down as well. We have more to do. But we’re getting there.”Recent weeks have brought signs of hope for administration officials, among both consumers and companies. The National Federation of Independent Business reported on Tuesday that its Small Business Optimism Index rose in August as inflation anxiety eased, continuing a rebound from its depths this year. The Federal Reserve Bank of New York reported on Monday that consumer inflation expectations were also falling.Officials inside the administration and at the Federal Reserve say strong job growth and consumer spending this summer have put to rest fears that the country slipped into recession in the first half of the year.“What is most notable about where we are right now is the resilience of the labor market recovery, the resilience of American consumers and households, and that we are beginning to see some signs that prices may be moderating,” Brian Deese, the director of Mr. Biden’s National Economic Council, said in an interview this week.“There’s more work to do,” Mr. Deese said. “But I think that is a signal that the economic decisions that this president has made are bearing fruit.”But polls continue to show that inflation is hurting Mr. Biden and his party at a pivotal moment, as Democrats seek to retain control of the House and the Senate. High prices loom as the top issue for voters in national opinion polls, and Americans say they trust Republicans more to handle inflation and the economy overall than Democrats.On Tuesday, stock markets recorded their largest daily loss in two years, driven by investor fears of stubborn inflation pushing the Federal Reserve to raise interest rates higher and faster than many expected.Economists on Wall Street and in policy circles are debating whether the U.S. economy can achieve a so-called soft landing, with economic and job growth slowing in order to bring inflation down — but not slowing so much as to push millions of Americans out of work. Some, like the former Treasury Secretary Lawrence H. Summers, have warned that the unemployment rate will need to rise significantly to bring price growth down to historical levels.Mark Zandi, the chief economist at Moody’s Analytics, whose analyses of Mr. Biden’s policy proposals are often promoted by the White House, said on Twitter on Tuesday that “job and wage growth must sharply slow” to reduce price increases in the service sector. “This is on the Fed, which must hike rates to get job and wage growth down without pushing the economy under.”Tuesday’s inflation report, he added, “suggests that while still doable, it won’t be easy.” More

  • in

    Relief Eludes Many Renters as Fed Raises Interest Rates

    As the central bank sharply increases borrowing costs, it could lock would-be home buyers into rentals and keep a hot market under pressure.Rents have been rising swiftly across America for much of the pandemic era, and housing experts are warning that they could now receive a boost from an unlikely source: the Federal Reserve.As the central bank raises interest rates to cool down the economy and contain rapid inflation, it is also pushing up mortgage costs, putting home purchases out of reach for many first-time buyers. If people who would have otherwise bought a home remain waylaid in apartments and rented houses, it could compound already-booming demand — keeping pressure on rental prices.While it is tough to predict how big or how lasting that Fed-induced bump in rental demand might prove, it could ironically make it more difficult for the central bank to wrestle inflation lower in the near term. Rent-related costs make up nearly a third of the closely tracked Consumer Price Index inflation measure, so anything that helps to keep them climbing at an unusually brisk pace is likely to perpetuate rapid inflation.Rents on new leases climbed by 14.1 percent in the year through June, according to Apartment List, an apartment listing service. While that is slightly less than the 17.5 percent increase over the course of 2021, it is still an unusually rapid pace of growth. Before the pandemic, a 2 to 3 percent pace of annual increase was normal. The recent quick market rent increases have been slowly spilling over to official inflation data, which track both new and existing leases.“A lot of folks are seeing now as they go to re-sign their lease that it’s hundreds more dollars than last month, thousands more dollars than last month,” said Nicole Bachaud, an economist at the housing website Zillow, whose own rent tracker is running fast. “We’re going to continue to see pressure in rent prices; to what extent is to be seen.”Gail Linsenbard lectures on philosophy at a college in Boulder, Colo., but housing in the area has gotten so pricey that she has been teaching remotely — recently from a friend’s house in Cincinnati, now from a friend’s place in New York — to make ends meet.“The rents in Boulder have just skyrocketed, so I could no longer afford to live there,” said Dr. Linsenbard, a 62-year-old ethicist, who said that the $36,000 she earns lecturing four classes per semester had always been tight, but was increasingly failing to keep up with inflation. While she can rely on a national network of friends, the situation has disrupted her life.“I’d so prefer my own place,” she said.Besides burdening millions of families across America, rising rents have emerged as a particularly thorny issue for the Fed. While coronavirus-related supply disruptions have fueled price increases in products like cars and couches, the recent surge in rents relates to longer-running fundamentals. America has for years failed to build enough housing, and as members of the massive millennial generation grow older and move away from their parents and roommates, the need for apartments and leased homes has grown.The pandemic took that demographic trend and sped it up. After being cooped up during quarantines, people looked for their own places — and apartment construction could not keep pace.Builders were completing units at an unusually rapid 349,000-per-year rate in early 2022, about 1.2 times the prepandemic pace, based on estimates in a report from the Joint Center for Housing Studies at Harvard. But the number of occupied apartments was rising more than twice as quickly.Rents on new leases climbed by 14.1 percent across the country in the year through June, based on Apartment List data.Anna Watts for The New York TimesAmerica’s rental vacancy rate slumped as apartment supply struggled to keep pace with soaring demand, and was lingering at levels last seen in the 1980s through the start of 2022.The resulting run-up in market rents, which began in earnest last summer, has slowly trickled into official inflation data as people renew their leases. A category in the Consumer Price Index that measures rent of primary residence surged by 5.2 percent in the year through May, and fresh data will be released this week.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

  • in

    Strong Wage and Jobs Growth Keeps Fed on Track for Big Rate Increase

    The Federal Reserve is trying to cool down the economy to bring inflation under control, but the job market is still going strong.A surprisingly robust June employment report reinforced that America’s labor market remains historically strong even as recession warnings reach a fever pitch. But that development, while good news for the Biden administration, is likely to keep the Federal Reserve on its aggressive path of interest rate increases as it tries to cool the economy and slow inflation.Today’s world of rapid price increases is a complicated one for economic policymakers, who are worried that an overheating job market could exacerbate persistent inflation. Instead of viewing roaring demand for labor as an unmitigated good, they are hoping to engineer a gradual and controlled slowdown in hiring and wage growth, both of which remain unusually strong. Friday’s report offered early signs that the desired cooling is taking hold as both job gains and pay increases moderated slightly. But hiring and earnings remained solid enough to reinforce the view among Fed officials that the labor market, like much of the economy, is out of whack: Employers still want far more workers than are available. The new data will likely keep central bankers on track to make another supersize rate increase at their meeting later this month as they try to restrain consumer and business spending and force the economy back into balance. “We’re starting to see those first signs of slowdown, which is what we need,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a CNBC interview after the report was released. Still, he called the wage data “only slightly” reassuring and said that “we’re starting to inch in the right direction, but there’s still a lot more to do, and a lot more we’ll have to see.”Fed officials began to raise interest rates from nearly zero in March in an attempt to make borrowing of many kinds more expensive. Last month, the central bank lifted its policy rate by 0.75 percentage points, the largest single increase since 1994. Central bankers typically adjust their policy only in quarter-point increments, but they have been picking up the pace as inflation proves disturbingly rapid and stubborn. While Fed policymakers have said they will debate a move between 0.5 or 0.75 percentage points at their meeting on July 26 and 27, a chorus of officials have in recent days said they would support a second 0.75 percentage point move given the speed of inflation and strength of the job market.As the Fed tries to tap the brakes on the economy, Wall Street economists have warned that it may instead slam it into a recession — and the Biden administration has been fending off declarations that one is already arriving. A slump in overall growth data, a pullback in the housing market and a slowdown in factory orders have been fueling concern that America is on the brink of a downturn. Construction workers in New York City. Employers added 372,000 workers in June.Hiroko Masuike/The New York TimesThe employment data powerfully contradicted that narrative, because a shrinking economy typically does not add jobs, let alone at the current brisk pace. Mr. Biden celebrated the report on Friday, saying that “our critics said the economy was too weak” but that “we still added more jobs in the past three months than any administration in nearly 40 years.”Private sector voices concurred that the employment report showed an economy that did not appear to be tanking. “Wage growth remains elevated and rates of job loss are low,” Nick Bunker, economic research director at the job website Indeed, wrote in a reaction note. “We’ll see another recession some day, but today is not that day.”The State of Jobs in the United StatesJob gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.June Jobs Report: U.S. employers added 372,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the sixth month of 2022.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 contradictory moment in the economy — with prices rising fast, economic growth contracting and the unemployment rate hovering near a 50-year low — has posed a challenge for Mr. Biden, who has struggled to convey sympathy for consumers struggling with higher prices while seeking credit for the strength of the jobs recovery. Mr. Biden’s approval ratings have slumped as price growth has accelerated. Confidence has taken an especially pronounced battering in recent months amid rising gas prices, which topped $5 a gallon on average earlier this summer. On Friday, Mr. Biden emphasized that fighting inflation was his top economic priority while also praising recent job market progress. “I know times are tough,” Mr. Biden said, speaking in public remarks. “Prices are too high. Families are facing a cost-of-living crunch. But today’s economic news confirms the fact that my economic plan is moving this country in a better direction.” But unfortunately for the administration and for workers across America, tackling high prices will probably come at some cost to the labor market. As price increases bedevil consumers at the gas pump and in the grocery aisle, the Fed believes that it needs to bring inflation under control swiftly in order to set the economy on a path toward healthy and sustainable growth. The Fed’s tool to achieve that positive long-term outcome works by causing short-term economic pain. By making money expensive to borrow, the central bank can slow down home buying and business expansions, which will in turn slow hiring and wage increases. As companies and families have fewer dollars to spend, the theory goes, demand will come into better alignment with supply and prices will stop rocketing higher. Officials expect unemployment to eventually tick up as rate increases bite and the economy weakens, though they are hoping that it will only rise slightly. Fed policymakers are still hoping to engineer what they often call a “soft landing,” in which hiring and pay gains slow gradually, but without plunging the economy into a painful recession. But pulling it off will not be easy — and officials are willing to clamp down harder if that is what it takes to tame inflation. “Price stability is absolutely essential for the economy to achieve its potential and sustain maximum employment over the medium term,” John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech in Puerto Rico on Friday. “I want to be clear: This is not an easy task. We must be resolute, and we cannot fall short.”Federal funds rate since January 1998

    Rate is the federal funds target rate until Dec. 15, 2008, and thereafter it is the upper limit of the federal funds target rate range.Source: The Federal ReserveBy The New York TimesStocks fell after the release of the employment numbers, likely because investors saw them as a sign that the Fed would continue constraining the economy.“The tremendous momentum in the economy to me suggests that we can move at 75 basis points at the next meeting and not see a lot of protracted damage to the broader economy,” Mr. Bostic said Friday.Fed officials are closely watching wage data in particular. Average hourly earnings climbed by 5.1 percent in the year through June, down slightly from 5.3 percent the prior month. Wages for non-managers climbed by a swift 6.4 percent from a year earlier. While that pace of increase is slowing somewhat, it is still much higher than normal — and could keep inflation elevated if it persists, as employers charge more to cover climbing labor costs.“Wages are not principally responsible for the inflation that we’re seeing, but going forward, they would be very important, particularly in the service sector,” Jerome H. Powell, the Fed chair, said at his news conference in June.“If you don’t have price stability, the economy’s really not going to work the way it’s supposed to,” he added later. “It won’t work for people — their wages will be eaten up.”Wage growth may be slowing in retail and hospitality jobs.Percent change in earnings for nonmanagers since January 2019 by sector More