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    Work at Home or the Office? Either Way, There’s a Start-Up for That.

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    As more Americans return to an office a few days a week, start-ups providing tools for hybrid work are trying to cash in.SAN FRANCISCO — Before the pandemic, Envoy, a start-up in San Francisco, sold visitor registration software for the office. Its system signed in guests and tracked who was coming into the building.When Covid-19 hit and forced people to work from home, Envoy adapted. It began tracking employees instead of just visitors, with a screening system that asked workers about potential Covid symptoms and exposures.Now as companies begin reopening offices and promoting more flexibility for employees, Envoy is changing its strategy again. Its newest product, Envoy Desks, lets employees book desks for when they go into their company’s workplace, in a bet that assigned cubicles and five days a week in the office are a thing of the past.Envoy is part of a wave of start-ups trying to capitalize on America’s shift toward hybrid work. Companies are selling more flexible office layouts, new video-calling software and tools for digital connectivity within teams — and trying to make the case that their offerings will bridge the gaps between an in-person and remote work force.The start-ups are jockeying for position as more companies announce plans for hybrid work, where employees are required to come in for only part of the week and can work at home the rest of the time. In May, a survey of 100 companies conducted by McKinsey found that nine out of 10 organizations planned to combine remote and on-site working even after it was safe to return to the office.Providing tools for remote work is potentially lucrative. Companies spent $317 billion last year on information technology for remote work, according to the research company Gartner. Gartner estimated that spending would increase to $333 billion this year.An Envoy employee demonstrating how to use the software to book a desk.Lauren Segal for The New York TimesHybrid and remote work have the potential to benefit workers for whom office environments were never a good fit, said Kate Lister, president of the consulting firm Global Workplace Analytics. This includes women, racial minorities, people with caregiving responsibilities and those with disabilities, along with introverts and people who simply prefer to work at odd hours or in solitude.But she and others also warned that the move to hybrid work could make remote workers “second-class citizens.” Workers who miss out on the camaraderie of in-person meetings or the spontaneity of hallway chats may end up being passed over for raises and promotions, they said.That, start-up founders argue, is where their products come in.Rajiv Ayyangar, the chief executive and co-founder of Tandem, leads one of several software start-ups that have created desktop apps that help teams better collaborate with one another and that recreate the feeling of being in an office. He said Tandem’s product was trying to help with “presence” — the ability to know what one’s teammates are doing in real time, even if the worker is not with their colleagues in the office.Tandem’s desktop program, which costs $10 a month for each user, shows what teammates are working on so colleagues know if they are available for a spontaneous video call within the app. The list of user statuses automatically updates to let people know if their co-workers are on a call, writing in Google Docs or doing some other task.Pragli and Tribe, two software start-ups that have been around since 2019, also offer similar products. People can use Pragli’s product to create standing audio or video calls that others can join. It is free, though the company plans to introduce a paid product. Tribe’s software uses busy and available statuses to facilitate in-platform video calls; it is currently only accessible with an invitation.Owl Labs, a start-up founded in 2017, is also trying to tackle “presence.” It makes a 360-degree video camera, microphone and speaker that sits in the middle of a conference table and automatically zooms in on the person who is speaking.Owl’s 360-degree camera, microphone and speaker system is intended to remote workers to attend meetings seamlessly.Owl LabsThe company, which said its customers quadrupled to more than 75,000 organizations over the pandemic, said the $999 camera was a way for remote workers to participate in office meetings by being able to see everyone who is speaking, rather than the limited view enabled by a single laptop camera.Other start-ups, such as Kumospace and Mmhmm, said they were working on improving video communications for hybrid work. Kumospace, a video-calling start-up, structures calls so that users enter a virtual room. They then navigate the room using arrow keys and can talk to people when they are close to them.The design is meant to replicate in-person socializing, where people can mill around and have multiple conversations in the same room. That contrasts with a service like Zoom, where everyone is by default in the same conversation as soon as they enter the video call.Mmhmm, which was created by the founder of the note-taking and productivity app Evernote, Phil Libin, offers a variety of interactive video backgrounds, tools for sharing slideshows and other features for live conversations and asynchronous presentations. It has a free version and a premium version, which costs $8.33 per employee a month.Some companies said their products can help businesses understand their space usage as fewer workers come in needing desks. Density, a start-up in San Francisco, makes a product that uses custom depth sensors to measure how many people are entering an area or use an open space. Companies can then analyze that data to understand how much of their office space they are actually using, and downsize as necessary.Density also plans to offer other tools for hybrid work. Last month, it acquired a software start-up that provides a system for desk and space reservation.Envoy said its new Desks product had attracted 400 companies, including the clothing retailer Patagonia and the film company Lionsgate.Larry Gadea, chief executive of Envoy, at the company’s headquarters.Lauren Segal for The New York Times“The companies that use us get much more accurate data that’s standardized across all their offices globally,” said Larry Gadea, Envoy’s chief executive. “And then it’s around using that data to inform space planning things. Do we need more floors? Do we need more meeting rooms? Do we need more desks? Do we need more desks for this one team?”Lionsgate said it had used Envoy’s products since before the pandemic. When the coronavirus arrived, it turned to Envoy’s employee-screening software to provide health checks to those entering the office.Now, as more employees return to in-person work, the company is using Envoy to manage where everyone sits, as well as to track who is coming in. Lionsgate said the information can help determine how often teams will need to be in the office.“We’ll be able to know really how much space we need,” said Heather Somaini, Lionsgate’s chief administrative officer. “So I think it’ll be really useful.” More

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    Pandemic Wave of Automation May Be Bad News for Workers

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    The need for social distancing led restaurants and grocery stores to seek technological help. That may improve productivity, but could also cost jobs.When Kroger customers in Cincinnati shop online these days, their groceries may be picked out not by a worker in their local supermarket but by a robot in a nearby warehouse.Gamers at Dave & Buster’s in Dallas who want pretzel dogs can order and pay from their phones — no need to flag down a waiter.And in the drive-through lane at Checkers near Atlanta, requests for Big Buford burgers and Mother Cruncher chicken sandwiches may be fielded not by a cashier in a headset, but by a voice-recognition algorithm.An increase in automation, especially in service industries, may prove to be an economic legacy of the pandemic. Businesses from factories to fast-food outlets to hotels turned to technology last year to keep operations running amid social distancing requirements and contagion fears. Now the outbreak is ebbing in the United States, but the difficulty in hiring workers — at least at the wages that employers are used to paying — is providing new momentum for automation.Technological investments that were made in response to the crisis may contribute to a post-pandemic productivity boom, allowing for higher wages and faster growth. But some economists say the latest wave of automation could eliminate jobs and erode bargaining power, particularly for the lowest-paid workers, in a lasting way.“Once a job is automated, it’s pretty hard to turn back,” said Casey Warman, an economist at Dalhousie University in Nova Scotia who has studied automation in the pandemic.The trend toward automation predates the pandemic, but it has accelerated at what is proving to be a critical moment. The rapid reopening of the economy has led to a surge in demand for waiters, hotel maids, retail sales clerks and other workers in service industries that had cut their staffs. At the same time, government benefits have allowed many people to be selective in the jobs they take. Together, those forces have given low-wage workers a rare moment of leverage, leading to higher pay, more generous benefits and other perks.Automation threatens to tip the advantage back toward employers, potentially eroding those gains. A working paper published by the International Monetary Fund this year predicted that pandemic-induced automation would increase inequality in coming years, not just in the United States but around the world.“Six months ago, all these workers were essential,” said Marc Perrone, president of the United Food and Commercial Workers, a union representing grocery workers. “Everyone was calling them heroes. Now, they’re trying to figure out how to get rid of them.”Checkers, like many fast-food restaurants, experienced a jump in sales when the pandemic shut down most in-person dining. But finding workers to meet that demand proved difficult — so much so that Shana Gonzales, a Checkers franchisee in the Atlanta area, found herself back behind the cash register three decades after she started working part time at Taco Bell while in high school.“We really felt like there has to be another solution,” she said.So Ms. Gonzales contacted Valyant AI, a Colorado-based start-up that makes voice recognition systems for restaurants. In December, after weeks of setup and testing, Valyant’s technology began taking orders at one of Ms. Gonzales’s drive-through lanes. Now customers are greeted by an automated voice designed to understand their orders — including modifications and special requests — suggest add-ons like fries or a shake, and feed the information directly to the kitchen and the cashier.The rollout has been successful enough that Ms. Gonzales is getting ready to expand the system to her three other restaurants.“We’ll look back and say why didn’t we do this sooner,” she said.Shana Gonzales, who owns four Checkers franchises in the Atlanta area, said she has had difficulty finding workers to meet demand.Lynsey Weatherspoon for The New York TimesThe push toward automation goes far beyond the restaurant sector. Hotels, retailers, manufacturers and other businesses have all accelerated technological investments. In a survey of nearly 300 global companies by the World Economic Forum last year, 43 percent of businesses said they expected to reduce their work forces through new uses of technology.Some economists see the increased investment as encouraging. For much of the past two decades, the U.S. economy has struggled with weak productivity growth, leaving workers and stockholders to compete over their share of the income — a game that workers tended to lose. Automation may harm specific workers, but if it makes the economy more productive, that could be good for workers as a whole, said Katy George, a senior partner at McKinsey, the consulting firm.She cited the example of a client in manufacturing who had been pushing his company for years to embrace augmented-reality technology in its factories. The pandemic finally helped him win the battle: With air travel off limits, the technology was the only way to bring in an expert to help troubleshoot issues at a remote plant.“For the first time, we’re seeing that these technologies are both increasing productivity, lowering cost, but they’re also increasing flexibility,” she said. “We’re starting to see real momentum building, which is great news for the world, frankly.”Other economists are less sanguine. Daron Acemoglu of the Massachusetts Institute of Technology said that many of the technological investments had just replaced human labor without adding much to overall productivity.In a recent working paper, Professor Acemoglu and a colleague concluded that “a significant portion of the rise in U.S. wage inequality over the last four decades has been driven by automation” — and he said that trend had almost certainly accelerated in the pandemic.“If we automated less, we would not actually have generated that much less output but we would have had a very different trajectory for inequality,” Professor Acemoglu said.Ms. Gonzales, the Checkers franchisee, isn’t looking to cut jobs. She said she would hire 30 people if she could find them. And she has raised hourly pay to about $10 for entry-level workers, from about $9 before the pandemic. Technology, she said, is easing pressure on workers and speeding up service when restaurants are chronically understaffed.“Our approach is, this is an assistant for you,” she said. “This allows our employee to really focus” on customers.Ms. Gonzales acknowledged she could fully staff her restaurants if she offered $14 to $15 an hour to attract workers. But doing so, she said, would force her to raise prices so much that she would lose sales — and automation allows her to take another course.The artificial intelligence system that feeds information to the kitchen at a Checkers.Lynsey Weatherspoon for The New York TimesTechnology is easing pressure on workers and speeding up service when restaurants are chronically understaffed, Ms. Gonzales said.Lynsey Weatherspoon for The New York TimesRob Carpenter, Valyant’s chief executive, noted that at most restaurants, taking drive-through orders is only part of an employee’s responsibilities. Automating that task doesn’t eliminate a job; it makes the job more manageable.“We’re not talking about automating an entire position,” he said. “It’s just one task within the restaurant, and it’s gnarly, one of the least desirable tasks.”But technology doesn’t have to take over all aspects of a job to leave workers worse off. If automation allows a restaurant that used to require 10 employees a shift to operate with eight or nine, that will mean fewer jobs in the long run. And even in the short term, the technology could erode workers’ bargaining power.“Often you displace enough of the tasks in an occupation and suddenly that occupation is no more,” Professor Acemoglu said. “It might kick me out of a job, or if I keep my job I’ll get lower wages.”At some businesses, automation is already affecting the number and type of jobs available. Meltwich, a restaurant chain that started in Canada and is expanding into the United States, has embraced a range of technologies to cut back on labor costs. Its grills no longer require someone to flip burgers — they grill both sides at once, and need little more than the press of a button.“You can pull a less-skilled worker in and have them adapt to our system much easier,” said Ryan Hillis, a Meltwich vice president. “It certainly widens the scope of who you can have behind that grill.”With more advanced kitchen equipment, software that allows online orders to flow directly to the restaurant and other technological advances, Meltwich needs only two to three workers on a shift, rather than three or four, Mr. Hillis said.Such changes, multiplied across thousands of businesses in dozens of industries, could significantly change workers’ prospects. Professor Warman, the Canadian economist, said technologies developed for one purpose tend to spread to similar tasks, which could make it hard for workers harmed by automation to shift to another occupation or industry.“If a whole sector of labor is hit, then where do those workers go?” Professor Warman said. Women, and to a lesser degree people of color, are likely to be disproportionately affected, he added.The grocery business has long been a source of steady, often unionized jobs for people without a college degree. But technology is changing the sector. Self-checkout lanes have reduced the number of cashiers; many stores have simple robots to patrol aisles for spills and check inventory; and warehouses have become increasingly automated. Kroger in April opened a 375,000-square-foot warehouse with more than 1,000 robots that bag groceries for delivery customers. The company is even experimenting with delivering groceries by drone.Other companies in the industry are doing the same. Jennifer Brogan, a spokeswoman for Stop & Shop, a grocery chain based in New England, said that technology allowed the company to better serve customers — and that it was a competitive necessity.“Competitors and other players in the retail space are developing technologies and partnerships to reduce their costs and offer improved service and value for customers,” she said. “Stop & Shop needs to do the same.”In 2011, Patrice Thomas took a part-time job in the deli at a Stop & Shop in Norwich, Conn. A decade later, he manages the store’s prepared foods department, earning around $40,000 a year.Mr. Thomas, 32, said that he wasn’t concerned about being replaced by a robot anytime soon, and that he welcomed technologies making him more productive — like more powerful ovens for rotisserie chickens and blast chillers that quickly cool items that must be stored cold.But he worries about other technologies — like automated meat slicers — that seem to enable grocers to rely on less experienced, lower-paid workers and make it harder to build a career in the industry.“The business model we seem to be following is we’re pushing toward automation and we’re not investing equally in the worker,” he said. “Today it’s, ‘We want to get these robots in here to replace you because we feel like you’re overpaid and we can get this kid in there and all he has to do is push this button.’” More

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    At Sweetgreen, Seeing the Future of Work in a Desk Salad

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    A favorite lunchtime destination of many urban office workers weathered the pandemic thanks to its digital savvy. It’s confident more people will be returning to their offices soon.What can office desk salads tell us about the state of the pandemic?To Sweetgreen, which has been selling $10 to $15 salads to lines of office workers for more than a decade, they say the end is in sight.“Covid’s over,” Jonathan Neman, chief executive of Sweetgreen, said in a recent Zoom interview from Culver City, Calif., where the company is based, and where employees are being asked to return to the office on July 19. “At this point, it’s just getting people back in.”Sweetgreen, which has 129 restaurants across more than a dozen states, is among the businesses that have been obsessively tracking coronavirus case numbers on sites like Axios and The New York Times throughout the pandemic. It has also been monitoring car traffic and OpenTable reservations to gauge consumer activity.The company and its meals are connected to the status of office workers in cities, particularly millennials and those in Generation Z. Sweetgreen has raised more than $450 million in funding since it was founded in 2007 and has cultivated a loyal following thanks to its fresh ingredients, digital savvy and sharp branding, which extends to the design of its stores and celebrity partnerships with the likes of the tennis star Naomi Osaka. But it has also bet heavily on serving many white-collar workers in cities like New York and Los Angeles, a once-ubiquitous slice of urban life that was upended by the pandemic.“It has definitely been challenging, especially in the cities that had a full shutdown,” Mr. Neman said.Before the pandemic, he said, the company had set up more than 1,000 “outposts” — its name for salad pickup locations at places like corporate offices and hospitals. Sweetgreen now has about 250 up and running.With a few dozen Manhattan locations and regular digital ordering, Sweetgreen has had insight into the movements of its customers.Rozette Rago for The New York Times“We’re definitely not fully back from an office perspective,” Mr. Neman said, though he added that the company had experienced a steady rise in business since many mask mandates were dropped in May and the Memorial Day weekend.“You’re starting to see these really nice increases as people are slowly returning to the office,” Mr. Neman said. He said he planned to watch for a similar bump after July Fourth, though Labor Day “is going to be a very big moment.” Many companies have signaled that early September will be when they bring most workers back to the office, at least for part of the week.With more than 30 locations in Manhattan and many customers who order salads digitally, Sweetgreen has had insight into the movements of its customers, even if they are not yet fully back to eating at their desks again.The company has seen neighborhoods “start to really light up, like the Upper East Side and Upper West Side,” Mr. Neman said. “The true Midtown office has been the slowest to return, so we have a store in Rock Center, Bryant Park, those sorts of areas which have definitely been the slowest.”Sweetgreen is also beginning to set up more restaurants outside the city in areas like Westchester County and around Greenwich, Conn., as well as regions of New Jersey and Long Island.“There’s definitely some following customers in their dispersion,” Mr. Neman said. The company had been planning a suburban expansion before the pandemic, but it has accelerated those initiatives.Although Sweetgreen said it had been insulated from some of the shocks of the past year because of its online ordering abilities and its robust delivery service, the future of work matters for its business. The company was recently valued at $1.78 billion, and, according to a report by Axios, it has confidentially filed for an initial public offering. Sweetgreen does not share its financials but has said its revenue exceeded $300 million in 2019.Third-party research firms have found that the company is still recovering from the past year. In the New York metro market, transactions at Sweetgreen were down 20 percent in May relative to 2019, according to Earnest Research, a data analytics company that monitors millions of debit and credit card payments made in the United States.Sweetgreen, which has 129 restaurants across more than a dozen states, is among the businesses that have been obsessively tracking coronavirus case numbers.Rozette Rago for The New York Times“As higher-vaccinated markets continue to drag, the impact of the lunch crowd heading back to the office will likely be a key factor on this I.P.O., especially with fewer folks returning from the urban exodus,” said Zach Amsel, a senior data analytics director at Earnest Research.Mr. Neman is expecting companies to go back to in-office work for three or four days per week, especially after Labor Day.“The office is not dead — I do think that sitting behind a screen all day created burnout,” he said. “I land a little bit more in a moderate world, where the world’s probably not going 100 percent back to where it was, but I also don’t think the world is going full-on work from home.”As for Sweetgreen’s return to office plan this month, the company said it had been encouraging vaccinations but would not mandate them for employees. The topic has been fraught, with companies like Saks and BlackRock requiring vaccines for employees who are returning in person and others hesitating to establish those guidelines.“These decisions get so loaded these days,” Mr. Neman said. “We are trying to find the balance between creating this place that everyone feels safe but also not overstepping in terms of pure personal decisions.” More

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    Americans Are Retiring Earlier Because of Pandemic

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    After years in which Americans worked later in life, the latest economic disruption has driven many out of the work force prematurely.Dee Dee Patten, 57, hadn’t planned to retire early. But when the coronavirus-induced lockdown took hold in 2020 and business dried up at the mechanical repair shop that she and her husband, Dana, owned in Platteville, Colo., they decided to call it quits.Mildred Vega, 56, had even less choice in the matter. Soon after she lost her job because of a restructuring at a Pfizer office in Vega Baja, P.R., the pandemic foreclosed other options.Mrs. Vega and the Pattens are three of the millions of Americans who have decided to retire since the pandemic began, part of a surge in early exits from the work force. The trend has broad implications for the labor market and is a sign of how the pandemic has transformed the economic landscape.For a fortunate few, the decision was made possible by 401(k) accounts bulging from record stock values. That wealth, along with a surge in home values, has offered some the financial security to stop working well before Social Security and private pensions kick in.But most of the early retirements are occurring among lower-income workers who were displaced by the pandemic and see little route back into the job market, according to Teresa Ghilarducci, a professor of economics and policy analysis at the New School for Social Research in New York City.“They might call themselves retired, but basically they are unemployed and in a precarious state,” Ms. Ghilarducci said. Economic downturns typically induce more people to leave the work force, but there has been a faster wave of departures this time than during the 2008-9 recession, she said.After analyzing data from the Bureau of Labor Statistics and the University of Michigan Health and Retirement Study, Ms. Ghilarducci found that among people with incomes at or below the national median, 55 percent of retirements recently were involuntary.By contrast, among the top 10 percent of earners, only 10 percent of exits were involuntary. “It’s a tale of two retirements,” Ms. Ghilarducci said.For the Pattens, most of their company’s revenue came from inspecting school buses in the northern part of Colorado. When schools pivoted to remote learning in March 2020, the business stopped receiving its usual traffic.“On average, we had 10 to 20 buses a day that we brought in and inspected and then put them out on the road for the kids,” Mrs. Patten said. “When spring break hit, we didn’t see another bus.”When schools reopened, they had trouble finding a mechanic. In July, they managed to hire one, but he left almost immediately. And the work was too physically demanding for the couple to carry on by themselves, Mrs. Patten said.They sold their shop and equipment, along with their house, putting some of the money into a retirement account. When a separate certificate of deposit account matures, they plan to buy a home in Denver. Since Mr. Patten is 62, he applied for Social Security — but his monthly benefits will be far lower than what he would have received if he had waited a few more years.Mrs. Patten with a photo of her old home and business. When schools pivoted to remote learning, the Pattens’ business of inspecting school buses stopped.Matthew Staver for The New York TimesThe shift toward early retirement reverses a long-running trend. The share of Americans over 65 still active in the work force is 50 percent higher than it was 20 years ago. Some are working longer because they have to and can’t afford to retire, while others are living longer and in better health and want to keep going into the office.Early retirements not only reflect the pandemic’s economic impact but may also hold back the recovery, because retired workers tend to spend more cautiously. They will also be drawing on Social Security sooner rather than paying into the program and bolstering its long-term viability.“Older generations tend to earn more and lift spending,” said Gregory Daco, chief U.S. economist at Oxford Economics. With this group out of the labor force in greater numbers, “it’s more of a negative than a positive for the economy.”In the 15 months since the pandemic began, about 2.5 million Americans have retired, Mr. Daco said. That’s about twice the number who retired in 2019, which means there are essentially 1.2 million fewer people in the work force over the age of 55 than would otherwise be expected.The abrupt increase in retirements — as reflected in the way people describe their work status in monthly government surveys — has also fallen unequally among groups of different educational and ethnic backgrounds.A November 2020 study by the Pew Research Center found that the share of Americans born between 1946 and 1964 with just a high school diploma who are retired rose two percentage points from the prior February, double the proportion among those with a college degree.What’s more, the share of the Hispanic population in this age group who are retired jumped four percentage points, compared to one percentage point increases for white and Black boomers.Hispanic workers, especially Hispanic women, were hit disproportionately hard by the downturn in leisure and hospitality employment, said Richard Fry, a senior researcher at the Pew Research Center.In terms of older workers over all, “it’s anyone’s guess whether they will return,” Mr. Fry said.The proportion of adults 16 or older who are employed or looking for a job, now at 61.6 percent, has been slipping for years, falling from 66 percent in 2009 to 63 percent in early 2020. But it dived when the pandemic hit and has been slow to recover.The aging of the population, along with the tendency of less educated workers to drop out of the work force amid stagnating wages and fewer opportunities in higher-paid fields like manufacturing, has also hurt labor participation.And evidence is accumulating that more older workers are eyeing the exits.A recent household survey by the Federal Reserve Bank of New York found that the average probability of working beyond age 67 was 32.9 percent, equaling the lowest level since researchers began asking the question in 2014. In November 2020, the figure was 34.9 percent.The premature retirement of millions of workers sensing a lack of opportunity may seem puzzling when many businesses are scrambling to find employees — a conundrum that has forced economists to rethink the workings of the labor market.Part of the answer appears to be a mismatch of skills between available workers and jobs. In addition, salaries in many open positions have remained too low to lure people from the sidelines.If the newly retired workers don’t return, the labor market could get a lot tighter, heightening the risk that the Federal Reserve will need to raise interest rates to tamp down inflation, said Carl Tannenbaum, chief economist at Northern Trust in Chicago.“We already have a challenge of keeping labor force growth at decent levels,” he said. “Immigration is down, the birthrate is down, and it’s much harder for the economy to maintain its productive potential if all these folks stay retired.”Mrs. Vega said she might take a part-time job once the pandemic ebbs enough for her to comfortably return to an office setting, but she plans to spend the rest of her time with her parents and children.She qualified for a Pfizer pension available to retirees 55 or older. Though early retirement wasn’t in her plans, she is trying to make the best out of her situation.“I loved my job, but I don’t miss the stress levels,” she said. “The constant stress affects my mental and physical health. The pandemic made me realize how much time my job was taking away from me to spend with my family.”The Pattens feel unnerved with the sudden change after 22 years of nonstop work, but they, too, are looking at the upside.“We both know that, at our age, it was probably the best thing for us,” Mrs. Patten said. “We will get used to all of this time on our hands. Our plan is to volunteer, travel and look for a new place to live after 30 years on the old homestead.” More

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    U.S. Deficit Expected to Hit $3 Trillion in 2021, Budget Office Says

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    WASHINGTON — The U.S. economy is rebounding from the pandemic downturn faster than expected and is on track to regain all the jobs lost during the coronavirus by the middle of next year, partly as a result of enormous amounts of federal spending that will push the budget deficit to $3 trillion for the 2021 fiscal year, the Congressional Budget Office said on Thursday.New forecasts that incorporate the $1.9 trillion stimulus package that President Biden signed into law in March give little credence to warnings by Republican lawmakers and some economists that runaway inflation from all that spending could cripple the economy. Instead, the budget office predicted that a recent spike in prices for cars, airline tickets and other products would be temporary and begin to recede this year.Administration officials downplayed the deficit projections and focused instead on the predictions for economic growth, saying the strong numbers validate Mr. Biden’s push to douse the economy in stimulus and reinforce their view that inflation poses little threat to the recovery.The budget office, which is nonpartisan, predicted the economy would grow 6.7 percent for the year, after adjusting for inflation. That would be the fastest annual growth in the United States since 1984. It is significantly faster than the budget office and the Biden administration had each projected this year.The unemployment rate is also estimated to fall below 4 percent next year and remain historically low for years to come, signaling a significant acceleration in job gains from what the office predicted in February. The C.B.O. said then that unemployment would not fall below 4 percent until 2026.Budget office officials said the uptick in growth and employment forecasts stemmed in large part from aggressive government stimulus. But the economy is also benefiting from consumers, who are rapidly spending savings they built up during the pandemic. Households were buttressed by multiple rounds of stimulus, including direct checks, passed under President Donald J. Trump, and by a faster-than-anticipated return to normalcy in the economy as vaccinations have spread.Mr. Biden’s aides claimed credit for many of those developments. They said the president’s push to accelerate vaccine production and distribution had fueled the reopening of the economy. David Kamin, a deputy director of the White House National Economic Council, said in an interview that Mr. Biden’s stimulus package, the American Rescue Plan, was intended to drive a more rapid return to low unemployment, and that the budget office’s projections were evidence it was succeeding.“This report really goes to the very theory of the case as to why we pursued a rescue plan,” he said.Administration officials also heralded updated projections from the International Monetary Fund, released Thursday afternoon, which predicted the U.S. economy would grow 7 percent in 2021 after adjusting for inflation. In April, the I.M.F. forecast 4.6 percent growth for the year in the United States.Mr. Biden’s stimulus plan will push the federal budget deficit near record highs for the fiscal year, the budget office projected, but it will eventually leave the country in slightly better fiscal shape.The spending approved by Mr. Biden is projected to increase the deficit by $1.1 trillion for the fiscal year, which ends in September. The total deficit of $3 trillion would be the second-largest since 1945, in nominal terms and as a share of the economy, behind the 2020 fiscal year.But the increased growth that is accompanying the larger deficit this year will slightly improve the country’s fiscal outlook over the next decade, with the total deficit falling by about 1 percent, the budget office said.“Projected revenues over the next decade are now higher because of the stronger economy and consequent higher taxable incomes,” it wrote in its report.Mr. Biden’s rescue plan included direct payments of $1,400 each to low- and middle-income Americans, $350 billion to help states and municipalities patch what were expected to be budget shortfalls and hundreds of billions of dollars to accelerate vaccines and more widespread coronavirus testing. It also extended supplemental federal payments of $300 a week to unemployed workers through September, a benefit that Republican governors across the country have ended early as business owners complain of difficulties finding workers.The budget office cited those benefits as “dampening the supply of labor,” along with workers’ health concerns. It said the expiration of the benefits, along with less worry about contracting the virus, would help bolster employment growth in the second half of this year.Inflation, which has been a big topic in Washington, is projected to moderate in the months to come. The office forecast inflation rising above recent trends to hit 2.6 percent for the year, which is stronger growth than the February projection, yet officials see those price pressures subsiding in the second half of the year, as a variety of supply constraints ease in areas like lumber and automobiles.The forecasters expect economic growth to continue at a strong pace in 2022, hitting 5 percent in real terms. But they see it declining quickly in the years to follow, as the labor force grows more slowly than is typical. Budget office officials said that reflected, in part, the effects of more restrictive immigration policies adopted under Mr. Trump. By 2023, the office predicts, growth will slow to 1.1 percent.That forecast does not account for any additional economic policies Mr. Biden might enact in the intervening time. He is currently pushing Congress to approve as much as $4 trillion in spending and tax cuts meant to create jobs and aid growth by improving the productivity of workers and the broader economy, like repairing bridges and subsidizing child care costs to help more parents, particularly women, work additional hours.Fiscal hawks said the report’s long-term deficit projections underscored the need for any additional economic investments to be fully paid for, and not financed with federal borrowing. Debt held by the public rises to nearly $36 trillion by 2031, the budget office now predicts. That would be slightly larger — by just over 6 percent — than the size of the total American economy that year.“While it made sense to borrow to weather the pandemic and jumpstart the recovery,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget in Washington, “the strong economic growth projections from C.B.O. show that it is time to pivot away from further deficit-financing and towards paying for things and, ultimately, decreasing the national debt from its current path.” More

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    Supreme Court Rejects Request to Lift Federal Ban on Evictions

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    The C.D.C. had imposed an eviction moratorium, saying it was needed to address the coronavirus pandemic.WASHINGTON — The Supreme Court on Tuesday refused to lift a moratorium on evictions that had been imposed by the Centers for Disease Control and Prevention in response to the coronavirus pandemic.The vote was 5 to 4, with Chief Justice John G. Roberts Jr. and Justices Stephen G. Breyer, Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh in the majority.The court gave no reasons for its ruling, which is typical when it acts on emergency applications. But Justice Kavanaugh issued a brief concurring opinion explaining that he had cast his vote reluctantly and had taken account of the impending expiration of the moratorium.“The Centers for Disease Control and Prevention exceeded its existing statutory authority by issuing a nationwide eviction moratorium,” Justice Kavanaugh wrote. “Because the C.D.C. plans to end the moratorium in only a few weeks, on July 31, and because those few weeks will allow for additional and more orderly distribution of the congressionally appropriated rental assistance funds, I vote at this time to deny the application” that had been filed by landlords, real estate companies and trade associations.He added that the agency might not extend the moratorium on its own. “In my view,” Justice Kavanaugh wrote, “clear and specific congressional authorization (via new legislation) would be necessary for the C.D.C. to extend the moratorium past July 31.”At the beginning of the pandemic, Congress declared a moratorium on evictions, which lapsed last July. The C.D.C. then issued a series of its own moratoriums.“In doing so,” the challengers told the justices, “the C.D.C. shifted the pandemic’s financial burdens from the nation’s 30 to 40 million renters to its 10 to 11 million landlords — most of whom, like applicants, are individuals and small businesses — resulting in over $13 billion in unpaid rent per month.” The total cost to the nation’s landlords, they wrote, could approach $200 billion.The moratorium defers but does not cancel the obligation to pay rent; the challengers wrote that this “massive wealth transfer” would “never be fully undone.” Many renters, they wrote, will be unable to pay what they owe. “In reality,” they wrote, “the eviction moratorium has become an instrument of economic policy rather than of disease control.”In urging the Supreme Court to leave the moratorium in place, the government said that continued vigilance against the spread of the coronavirus was needed and noted that Congress has appropriated tens of billions of dollars to pay for rent arrears.The challengers argued that the moratorium was not authorized by the law the agency relied on, the Public Health Service Act of 1944.The 1944 law, the challengers wrote, was concerned with quarantines and inspections to stop the spread of disease and did not bestow on the agency “the unqualified power to take any measure imaginable to stop the spread of communicable disease — whether eviction moratoria, worship limits, nationwide lockdowns, school closures or vaccine mandates.”The C.D.C. argued that the moratorium was authorized by the 1944 law. Evictions would accelerate the spread of the coronavirus, the agency said, by forcing people “to move, often into close quarters in new shared housing settings with friends or family, or congregate settings such as homeless shelters.”The case was complicated by congressional action in December, when lawmakers briefly extended the C.D.C.’s moratorium through the end of January in an appropriations measure. When Congress took no further action, the agency again imposed moratoriums under the 1944 law.In its Supreme Court brief, the government argued that it was significant that Congress had embraced the agency’s action, if only briefly.Last month, Judge Dabney L. Friedrich of the Federal District Court in Washington ruled that the agency had exceeded its powers in issuing the moratorium.“The question for the court,” she wrote, “is a narrow one: Does the Public Health Service Act grant the C.D.C. the legal authority to impose a nationwide eviction moratorium? It does not.”Judge Friedrich granted a stay of her decision while the government appealed, leaving the moratorium in place. A unanimous three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit declined to lift the stay, saying the government was likely to prevail on appeal.Whatever else may be said about the eviction moratorium, the challengers told the Supreme Court, it has outlived its purpose.“The government may wish to prolong the moratorium to see out its economic-policy goals,” they wrote, “but that does not render its stated justification plausible. Forcing landlords to provide free housing for vaccinated Americans may be good politics, but it cannot be called health policy.” More

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    Markets Work, but Untangling Global Supply Chains Takes Time

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    Decisions made early in the pandemic are having lasting effects on the ability of industries to fulfill surging demand.Auto manufacturing is a complex process with lots of pieces, meaning that the current shortages and higher prices of cars are likely to persist for some time. This is less true of simpler products like lumber.Alyssa Schukar for The New York TimesThe cure for high prices is high prices.That’s an old line used in commodity markets, and it helps explain why the great inflation scare of 2021 has eased some in recent weeks. When the price of something soars because demand outstrips supply, it has a way of self-correcting. Buyers, scared off by high prices, find other options, and sellers crank up production to take advantage of a profit opportunity.It is an idea simple enough to be taught in the first few weeks of any introductory economics class, but one with powerful implications for the American economy as it aims for a post-pandemic reboot.Several of the key products whose prices had soared in the spring have grown less expensive, as producers have increased output and buyers have held tight. This is particularly evident with lumber; as of Friday, its price was down 47 percent from its early-May peak (though still well above historical norms). Sawmills responded to soaring prices by pushing the limits of their capacity.The prices of corn, copper and a variety of other economically important commodities are also down by double-digit percentages since early May. This supports the notion that the inflation the world has been experiencing is transitory — set to ease in the months ahead as the laws of supply and demand take hold.Markets have plenty of flaws and imperfections, but when it comes to allocating scarce goods and sending signals to sellers to make more and buyers to buy less, they work quite well.But just because markets work doesn’t mean they will work instantly. The complexity of the way many of the goods still in short supply are produced, transported and sold means that people in those markets are reluctant to predict the kind of snapback evident in lumber prices.For them, a number of different problems — many but not all caused by the pandemic — are colliding at once, creating supply tangles that are taking time to unravel. In some cases, inflationary forces already set in motion have not yet made their way through to consumers.A common factor: Decisions made early in the pandemic are having long-lasting consequences in fulfilling demand that is surging with Americans’ loaded wallets.“I think we all thought in early 2020, as things were slowing down, ‘We’ve got it, it’s a recession, we know what the standard playbook is,’” said Phil Levy, chief economist of Flexport, a freight company.In a recession, incomes go down and demand for goods goes down. “A lot of shipping lines were cutting service and cutting orders because they didn’t want to get caught with a glut of supply when nobody wanted to ship anything,” he said. “And that turned out to be dramatically wrong.”Now, in what would normally be a slow time of year, container ships are operating at the outer extremes of their capacity. Shipping companies have taken exceptional efforts to create more supply, such as delaying the retirement of ships and pulling ships out of dry dock. But other factors are still holding back importers, like backlogs at ports and lingering ripple effects of the Suez Canal blockage in late March.A widely cited index of transoceanic shipping prices, the Shanghai Containerized Freight Index, is nearly four times its level before the pandemic and has continued rising in recent weeks.Mr. Levy expects prices to plateau at a high level for a while. With the global shipping system stretched to the breaking point, small disruptions could have a bigger impact than usual — the brittleness that comes from a lack of spare capacity.Meanwhile, building new capacity like container ships and expanding ports take time and require shipping companies to make a bet that the current surge of demand is more than temporary. There are signs capacity is increasing, but for now the lagged effects of the early-pandemic retrenchment are more significant.Similarly slow-moving forces are at play in the production of automobiles, a complex product made up of thousands of parts. Since the onset of the pandemic, it has been a nightmare of supply disruption.“In the 30 years I’ve been in automotive supply chains, we’ve seen sustained periods of downturn or sustained periods of upturn,” said Jeoff Burris, the owner of Advanced Purchasing Dynamics in Plymouth, Mich., a consulting firm that advises auto industry and other manufacturing firms on their supply chains. “What we have not seen is 16 months of one type of problem after another.”Now, there are higher prices for base materials like steel and aluminum. There are suppliers being forced to raise wages sharply to keep assembly lines operating. There are semiconductor manufacturers stretched too thin to provide enough computer chips to make as many cars as consumers wish to buy. There have even been shortages of resin, needed in the plastics that are part of a car, caused by Texas winter storms this year. And adding to it all, there are logjams of shipping capacity for materials imported from overseas.“It’s almost like a patient who’s fighting cancer and heart disease and diabetes all at the same time,” Mr. Burris said. The power that automakers usually hold to dissuade suppliers from increasing prices is breaking down, he said, amid the urgency to obtain supplies.And as automakers throttle production, there have been unusual dynamics in the retail side of the market.The inability of automakers to produce at full speed, combined with strong consumer demand, shows up in both obvious (prices are higher than usual) and less obvious ways, said Ivan Drury, senior manager for insights at Edmunds, a publisher of auto industry information. In the past, the “manufacturer’s suggested retail price” was generally a mere suggestion, with dealers negotiating actual sale prices $2,000 to $3,000 below that level for an average car. Now, new cars are typically selling at or only slightly below the suggested retail price, he said.And dealers are resorting to other techniques that restrict sales. With inventories lean, buyers seeking a particularly in-demand car may need to commit to buying it before it has arrived on the lot, sight unseen. Some dealers, he said, will refuse to sell to people from outside the dealer’s area, to ensure that the buyer will generate continuing service revenue.Things are even more wild in the used-car market, where the down-and-up last 16 months for the rental car industry, among other factors, has caused a severe shortage and steep price increases. Used cars and trucks were a major source of overall consumer price inflation in April and May.Mr. Drury doesn’t expect that to change anytime soon. According to Edmunds data, the average trade-in value of a car was still rising through the first three weeks of June, up an additional 2.9 percent after increasing a combined 21 percent in April and May.None of this means that the inflation of the spring will be lasting; plenty of products are experiencing more routine pricing dynamics that bear out the efficiency of the markets. Rather, the complexity of modern global supply chains means that when things get broken, they won’t necessarily get unbroken quickly.Ultimately, the cure for high prices may be high prices. But it takes more than high prices alone. More

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    Top U.S. Officials Consulted With BlackRock as Markets Melted Down

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    The world’s largest asset manager was central to the pandemic crisis response. Emails and calendar records underscore that critical role.As Federal Reserve Chair Jerome H. Powell and Treasury Secretary Steven Mnuchin scrambled to save faltering markets at the start of the pandemic last year, America’s top economic officials were in near-constant contact with a Wall Street executive whose firm stood to benefit financially from the rescue. More