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    Child Tax Credit, Proposed in Stimulus, Advances an Effort Years in the Making

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanSenate PassageWhat to Know About the BillWhat the Senate Changed$15 Minimum WageWhere Trump Voters StandAdvertisementContinue reading the main storySupported byContinue reading the main storyIn the Stimulus Bill, a Policy Revolution in Aid for ChildrenThe $1.9 trillion pandemic relief package moving through Congress advances an idea that Democrats have been nurturing for decades: establishing a guaranteed income for families with children.Anique Houpe, a single mother in Georgia, is among the parents whom Democrats are seeking to help with a plan to provide most families with a monthly check of up to $300 per child.Credit…Audra Melton for The New York TimesMarch 7, 2021Updated 5:03 p.m. ETWASHINGTON — A year ago, Anique Houpe, a single mother in suburban Atlanta, was working as a letter carrier, running a side business catering picnics and settling into a rent-to-own home in Stone Mountain, Ga., where she thought her boys would flourish in class and excel on the football field.Then the pandemic closed the schools, the boys’ grades collapsed with distance learning, and she quit work to stay home in hopes of breaking their fall. Expecting unemployment aid that never came, she lost her utilities, ran short of food and was recovering from an immobilizing bout of Covid when a knock brought marshals with eviction papers.Depending on when the snapshot is dated, Ms. Houpe might appear as a striving emblem of upward mobility or a mother on the verge of homelessness. But in either guise, she is among the people Democrats seek to help with a mold-breaking plan, on the verge of congressional passage, to provide most parents a monthly check of up to $300 per child.Obscured by other parts of President Biden’s $1.9 trillion stimulus package, which won Senate approval on Saturday, the child benefit has the makings of a policy revolution. Though framed in technocratic terms as an expansion of an existing tax credit, it is essentially a guaranteed income for families with children, akin to children’s allowances that are common in other rich countries.The plan establishes the benefit for a single year. But if it becomes permanent, as Democrats intend, it will greatly enlarge the safety net for the poor and the middle class at a time when the volatile modern economy often leaves families moving between those groups. More than 93 percent of children — 69 million — would receive benefits under the plan, at a one-year cost of more than $100 billion.The bill, which is likely to pass the House and be signed by Mr. Biden this week, raises the maximum benefit most families will receive by up to 80 percent per child and extends it to millions of families whose earnings are too low to fully qualify under existing law. Currently, a quarter of children get a partial benefit, and the poorest 10 percent get nothing.While the current program distributes the money annually, as a tax reduction to families with income tax liability or a check to those too poor to owe income taxes, the new program would send both groups monthly checks to provide a more stable cash flow.By the standards of previous aid debates, opposition has been surprisingly muted. While the bill has not won any Republican votes, critics have largely focused on other elements of the rescue package. Some conservatives have called the child benefit “welfare” and warned that it would bust budgets and weaken incentives to work or marry. But Senator Mitt Romney, Republican of Utah, has proposed a child benefit that is even larger, though it would be financed through other safety net cuts.While the proposal took center stage in response to the pandemic, supporters have spent decades developing the case for a children’s income guarantee. Their arguments gained traction as science established the long-term consequences of deprivation in children’s early years, and as rising inequality undercut the idea that everyone had a fair shot at a better life.The economic shock and racial protests of the past year brought new momentum to a plan whose reach, while broad, would especially help Black and Latino families, who are crucial to the Democrats’ coalition.Mr. Biden’s embrace of the subsidies is a leftward shift for a Democratic Party that made deep cuts in cash aid in the 1990s under the theme of “ending welfare.” As a senator, Mr. Biden supported the 1996 welfare restrictions, and as recently as August his campaign was noncommittal about the child benefit.The president now promotes projections that the monthly checks — up to $300 for young children and $250 for those over 5 — would cut child poverty by 45 percent, and by more than 50 percent among Black families.“The moment has found us,” said Representative Rosa DeLauro, a Connecticut Democrat who has proposed a child allowance in 10 consecutive Congresses and describes it as a children’s version of Social Security. “The crystallization of the child tax credit and what it can do to lift children and families out of poverty is extraordinary. We’ve been talking about this for years.”Ms. Houpe’s home state has been crucial to the advance of the benefit. Democrats are in position to enact it only because they won Georgia’s two Senate seats in runoff elections in January, barely gaining control of the chamber. Ms. Houpe decided that she needed to stay home to care for her boys during the pandemic and left a job with the Postal Service that paid nearly $18 an hour.Credit…Audra Melton for The New York TimesWhile Ms. Houpe, an independent, skipped the presidential election, that promise of cash relief led her to vote Democratic in January. “I just felt like the Democrats would be more likely to do something,” she said.Her precarious situation is the kind the subsidy seeks to address. Born to a teenage mother, Ms. Houpe, 33, grew up straining to escape hardship. Though she was young when she had a child, she came close to finishing a bachelor’s degree, found work as pharmacy technician and took a job with the post office to lift her wage to nearly $18 an hour. Raising a son on her own, she took in a nephew whom she regards as a second child.Ms. Houpe seemed on the rise before the pandemic, with the move to a new house. The monthly payment consumed 60 percent of her income, twice what the government deems affordable, but she trimmed the cost by renting out a room and started a side job catering picnics.Biden’s Stimulus PlanFrequently Asked QuestionsUpdated March 6, 2021, 1:58 p.m. ETHow big are the stimulus payments in the bill, and who is eligible?How would the stimulus bill affect unemployment payments?What would the bill do to help people with housing?During the pandemic, she spent six months waiting for schools to reopen until the boys’ plummeting grades — Trejion is 14 and Micah 11 — persuaded her that she could not leave them alone.“I had to make a decision,” Ms. Houpe said, “my boys or my job.”But when her requests for unemployment were denied, the bottom fell out.While critics fear cash aid weakens work incentives, Ms. Houpe said it might have saved her job by allowing her to hire someone part time to supervise the boys.“I definitely would have kept my job,” she said.If she had been receiving the child benefit last year, Ms. Houpe said, she would have used it to hire someone to help watch her boys so she could have kept her job.Credit…Audra Melton for The New York TimesThe campaign for child benefits is at least a half-century old and rests on a twofold idea: Children are expensive, and society shares an interest in seeing them thrive. At least 17 wealthy countries subsidize child-rearing for much of the population, with Canada offering up to $4,800 per child each year. But until recently, a broad allowance seemed unlikely in the United States, where policy was more likely to reflect a faith that opportunity was abundant and a belief that aid sapped initiative.It was a Democratic president, Bill Clinton, who abolished the entitlement to cash aid for poor families with children. The landmark law he signed in 1996 created time limits and work requirements and caused an exodus from the rolls. Spending on the poor continued to grow but targeted low-wage workers, with little protection for those who failed to find or keep jobs.In a 2018 analysis of federal spending on children, the economists Hilary W. Hoynes and Diane Whitmore Schanzenbach found that virtually all the increases since 1990 went to “families with earnings” and those “above the poverty line.”But rising inequality and the focus on early childhood brought broader subsidies a new look. A landmark study in 2019 by the National Academies of Sciences, Engineering and Medicine showed that even short stints in poverty could cause lasting harm, leaving children with less education, lower adult earnings and worse adult health. Though welfare critics said aid caused harm, the panel found that “poverty itself causes negative child outcomes” and that income subsidies “have been shown to improve child well-being.”Republicans may have unwittingly advanced the push for child benefits in 2017 by doubling the existing child tax credit to $2,000 and giving it to families with incomes of up to $400,000, but not extending the full benefit to those in the bottom third of incomes.Republicans said that since the credit was meant to reduce income taxes, it naturally favored families who earned enough to have a tax liability. But by prioritizing the affluent, the move amplified calls for a more equitable child policy.Efforts to increase the benefit and include the needy drew strong support from Speaker Nancy Pelosi and was led in the Senate by the Democrats Sherrod Brown of Ohio, a progressive, and Michael Bennet of Colorado, a centrist. A majority of Democrats in both chambers were on board when unemployment surged because of the coronavirus.“The crisis gave Democrats an opportunity by broadening the demand for government relief,” said Sarah A. Binder, a political scientist at George Washington University.Welfare critics warn the country is retreating from success. Child poverty reached a new low before the pandemic, and opponents say a child allowance could reverse that trend by reducing incentives to work. About 10 million children are poor by a government definition that varies with family size and local cost of living. (A typical family of four with income below about $28,000 is considered poor.)“Why are Republicans asleep at the switch?” wrote Mickey Kaus, whose antiwelfare writings influenced the 1990s debate. He has urged Republicans to run ads in conservative states with Democratic senators, attacking them for supporting “a new welfare dole.”Under Mr. Biden’s plan, a nonworking mother with three young children could receive $10,800 a year, plus food stamps and Medicaid — too little to prosper but enough, critics fear, to erode a commitment to work and marriage. Scott Winship of the conservative American Enterprise Institute wrote that the new benefit creates “a very real risk of encouraging more single parenthood and more no-worker families.”But a child allowance differs from traditional aid in ways that appeal to some on the right. Libertarians like that it frees parents to use the money as they choose, unlike targeted aid such as food stamps. Proponents of higher birthrates say a child allowance could help arrest a decline in fertility. Social conservatives note that it benefits stay-at-home parents, who are bypassed by work-oriented programs like child care.And supporters argue that it has fewer work disincentives than traditional aid, which quickly falls as earnings climb. Under the Democrats’ plan, full benefits extend to single parents with incomes of $112,500 and couples with $150,000.Backlash could grow as the program’s sweep becomes clear. But Samuel Hammond, a proponent of child allowances at the center-right Niskanen Center, said the politics of aid had changed in ways that softened conservative resistance.A quarter-century ago, debate focused on an urban underclass whose problems seemed to set them apart from a generally prospering society. They were disproportionately Black and Latino and mostly represented by Democrats. Now, insecurity has traveled up the economic ladder to a broader working class with similar problems, like underemployment, marital dissolution and drugs. Often white and rural, many are voters whom Republicans hope to court.“Republicans can’t count on running a backlash campaign,” Mr. Hammond said. “They crossed the Rubicon in terms of cash payments. People love the stimulus checks.”The muted opposition to the proposal, he said, showed that “people on the right are curious about the child benefit — not committed, but movable.”An analysis by Sophie M. Collyer of Columbia University underscored the plan’s broad reach. She found that in Georgia, the child allowance would bring net gains per child of $1,700 for whites, $1,900 for Latinos and $2,100 for Blacks.As a suburban independent in a state that was long red, Ms. Houpe is among those whose loyalties are up for grabs. She rejected the argument that a child subsidy would promote joblessness and warned that some parents had to work too much. “My son had football games every Saturday morning,” she said, “and I wasn’t there for him as much as I wanted to be.”If aid posed risks, Ms. Houpe said, so did the lack of any. Out of money last fall, she suffered debilitating depression, and a panic attack grew so severe she pulled her car to the side of road. “My son was freaking out” looking for her asthma inhaler, she said. Still trying to get unemployment benefits, Ms. Houpe has plans for a baking business called The Munchie Shopp. She has practiced strawberries dipped in white chocolate and honed her red velvet cake. This week, she tried dying one blue but denied making a political statement.“During an election, people say anything to win,” she said. “Let’s see what they do.”AdvertisementContinue reading the main story More

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    To Juice the Economy, Biden Bets on the Poor

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    #masthead-section-label, #masthead-bar-one { display: none }The Jobs CrisisCurrent Unemployment RateWhen the Checks Run OutThe Economy in 9 ChartsThe First 6 MonthsAdvertisementContinue reading the main storySupported byContinue reading the main storynews analysisTo Juice the Economy, Biden Bets on the PoorMr. Biden’s bottom-up $1.9 trillion aid package is a sharp reversal from the tax cut bill that was President Donald J. Trump’s first big legislative victory.Volunteers distributing food on Monday in Warren, Mich. President Biden’s economic relief plan overwhelmingly helps low earners and the middle class and is more focused on people than on businesses.Credit…Elaine Cromie for The New York TimesPublished More

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    Biden Presses Economic Aid Plan, Rejecting Inflation Fears

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    #masthead-section-label, #masthead-bar-one { display: none }The Jobs CrisisCurrent Unemployment RateWhen the Checks Run OutThe Economy in 9 ChartsThe First 6 MonthsAdvertisementContinue reading the main storySupported byContinue reading the main storyBiden Presses Economic Aid Plan, Rejecting Inflation FearsDespite a better-than-expected jobs report, administration officials stressed that millions of workers still needed help from a proposed $1.9 trillion stimulus package.President Biden continued to press his case for his stimulus plan on Friday after a stronger-than-expected jobs report.Credit…Al Drago for The New York TimesJim Tankersley and March 5, 2021, 6:58 p.m. ETWASHINGTON — With a $1.9 trillion economic aid package on the brink of passing Congress and the pace of vaccinations picking up, some economists, Republican lawmakers and Wall Street traders are increasingly raising a counterintuitive concern: that the economy, still emerging from its precipitous pandemic-induced drop, could be on a path toward overheating.The Biden administration rejected that argument again on Friday. Despite a stronger-than-expected jobs report, the president and his aides said there was still a long way to go to ensure the benefits of the recovery flow to workers hardest hit by the pandemic, who are predominantly people of color.Passing President Biden’s recovery plan, they said, remains essential to a full and equitable recovery.“Black workers are still facing an economic crisis,” Janelle Jones, the chief economist at the Labor Department, said in an interview. “We cannot talk about recovery and taking our foot off the gas while these workers are still facing economic devastation.”For those workers, Ms. Jones said, “It really matters what we do in the next two weeks.”But some Republicans, saying the economy no longer needs an injection of nearly $2 trillion in borrowed money, continued to urge Democrats to pare back the stimulus package, which Senate Democrats have modified slightly in recent days.On Wall Street, there were signs this week that investors are beginning to believe that such a large package could spur some resurgence in inflation, though there is little to suggest that markets anticipate a return to the dangerous levels of the 1970s, as a few prominent economists have warned.Mr. Biden continued to press his case for the full $1.9 trillion plan in afternoon events at the White House, meeting with top economic advisers and then hosting a round-table discussion to build support for the plan.“Today’s jobs report shows that the American Rescue Plan is urgently needed,” the president told reporters before the start of the meeting with aides. He said the jobs gains in February were likely because of a $900 billion relief bill Congress and President Donald J. Trump approved in December, and he warned that without more assistance, further gains “are going to be slow.”“We can’t go one step forward and two steps backward,” Mr. Biden said.In the Senate, lawmakers began voting on a flurry of amendments to the bill, which could pass as soon as Saturday. Democrats huddled to find agreement on last-minute tweaks to the legislation to appease centrists in their caucus.Republicans on Capitol Hill have locked arms against the bill. Some senators say their opposition comes, in part, from fears that Mr. Biden’s plan would pour too much money into a recovery that is accelerating on its own.The Biden plan “risks overheating an already recovering economy,” Senator Rob Portman, Republican of Ohio, said this week on the Senate floor, “leading to higher inflation, hurting middle-class families and threatening long-term growth.”Mr. Portman cited inflation concerns voiced in recent weeks by the Harvard economist Lawrence H. Summers, a Treasury secretary under President Bill Clinton and top economic aide to President Barack Obama. In an email this week to reporters, an aide to Senator Mitch McConnell of Kentucky, the Republican leader, highlighted reports of rising fears of American inflation among top British officials.Mr. Biden has ambitious ideas for other big programs this year, including a major infrastructure package, further fueling concerns about economic overheating. The administration insists those plans would not be inflationary because they would be offset by tax increases on the wealthy and corporations, but some economists and Democrats say they could end up being at least partly financed by deficit spending.Inflation expectations have climbed gradually since the November election, and moved up slightly after a strong jobs report on Friday. Even so, commonly cited measures show that investors are penciling in price gains just a bit above 2 percent in coming years. That is consistent with the Fed’s stated goals, and not the kind of destabilizing, runaway price gains that the economy experienced a generation ago.A closed restaurant in Phoenix this week. The president and his aides said there was still a long way to go to ensure the benefits of the recovery flow to workers hardest hit by the pandemic.Credit…Juan Arredondo for The New York TimesStill, the fact that investors are expecting growth to surge this year has mattered for markets.Bond yields have been climbing since the start of 2021, as investors anticipate a little more inflation and a rapid economic bounceback. That adjustment has caused stock prices to drop in recent weeks. Higher interest rates make it more expensive for companies to borrow and can attract money away from the stock market.As investors look for a pickup in growth and slightly faster price increases, watchers of the Federal Reserve have begun to expect that it might begin to slow its big bond purchases, which it has been using to bolster growth, and raise interest rates sooner than had been anticipated.The central bank has promised to leave interest rates near zero until the economy has achieved full employment and inflation is above 2 percent and expected to stay there for some time. If markets expect the economy to reach those goals sooner rather than later, that could be seen as an expression of optimism.“If you look at why they’re moving up, it’s to do with expectations of a return to more normal levels, more mandate-consistent levels of inflation, higher growth, an opening economy,” Jerome H. Powell, the Fed chair, said of rates during a recent congressional testimony.But markets are forward-looking: The economy has a long way to go before it will be back to full strength. Administration officials have vowed not to be distracted by improvements in high-profile numbers, like overall job growth, and instead keep pouring fuel on the recovery until historically disadvantaged groups have regained jobs, income and the benefits of other measures of economic progress.Job gains last month came in above economists’ forecasts, but it would take more than two years of hiring at the current level to return the labor market to its employment level in early 2020.In addition, while all demographic groups continue to feel economic pain, the fallout has not been evenly spread. Employment for Black workers remains nearly 8 percent below its prepandemic level, while employment for white workers is down about 5 percent. Black workers tend to lose jobs heavily during recessions, then gain them back only after a long stretch of job growth.Ms. Jones, the labor department economist, said the administration was determined to accelerate the recovery for marginalized workers, noting that Black workers, in particular, took years longer to recover from the 2008 financial crisis — a delay that left lasting scars on those households.“Nothing about the state of the world means that Black workers have to face a large amount of labor market slack,” she said. “We can choose the benchmark that we actually want to restore the economy to.”People waiting last month at a food bank in Pflugerville, Texas. The Biden administration says its stimulus package is still necessary to accelerate the recovery for marginalized workers.Credit…Ilana Panich-Linsman for The New York TimesBut even some economists who have favored substantial government spending in the past, most prominently Mr. Summers and Olivier Blanchard of the Peterson Institute for International Economics, have warned that Congress risks overdoing it by pouring so much money into the economy at a time when it is already healing.Mr. Blanchard posted on Twitter on Friday morning, comparing the big fiscal package with a snake swallowing an elephant: “The snake was too ambitious. The elephant will pass, but maybe with some damage.”Mr. Summers warned in a recent opinion piece in The Washington Post that the Biden package is going to pump far more money into the economy than it is missing, arguing that the monthly amount “is at least three times the size of the output shortfall.”One major concern is that as the government pushes money into an economy that does not need so much support, too many dollars will end up chasing too few goods and services.Fed officials do not believe that big spending is going to fundamentally change the way consumers and businesses think about prices. Inflation has been low for decades, and businesses often report that they have little pricing power in a world where technology and globalization makes competition fierce.Inflation is likely to jump temporarily this year as economic data rebounds from its very low readings last year and people spend their savings on missed vacations and restaurant dinners. But Fed officials have said there is little to suggest that such an increase would last.“I think it’s a constructive thing for people to point out potential risks,” Mr. Powell said this week during a question-and-answer session. “But I do think it’s more likely that what happens in the next year or so is going to amount to prices moving up but not staying up — and certainly not staying up to the point where they would move inflation expectations materially above 2 percent.”AdvertisementContinue reading the main story More

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    For the Economy, the Present Doesn’t Matter. It’s All About the Near Future.

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storyUpshotSupported byContinue reading the main storyFor the Economy, the Present Doesn’t Matter. It’s All About the Near Future.The economy is at a major inflection point, and the question is whether job creation will accelerate in the months ahead.March 5, 2021Updated 10:41 a.m. ETAn empty food court in a Phoenix shopping mall.Credit…Juan Arredondo for The New York TimesIt is generally considered bad journalistic practice to start an article this way, but it must be said: The new jobs numbers that the Labor Department released Friday morning don’t matter.These numbers can sometimes be unimportant in the sense that any one economic report offers only a partial view of what is going on, and is subject to margins of error and future revisions.But it’s more than that in this case. This jobs report is inconsequential because the economy is at a momentous inflection point — what matters is not what happened in the last few weeks, but where things end up several weeks from now.The report that 379,000 jobs were added in February and that the unemployment rate edged down to 6.2 percent is good news. It is a better result than what was recorded in January, and better than forecasters expected.But the economy is still in a deep hole, with nine million fewer jobs than a year ago, or around 12 million shy of where we would be if pre-pandemic job growth had continued over the last year.For a simple model of today’s economy, think of it this way: A giant, complicated assembly line has been shut down for a year, and it is now being fired back up. Different stations on the assembly line are coming back at different speeds. The number of final products currently rolling off the assembly line is less important than the details of the progress all those different stations are making (or not) toward returning to full capacity.In normal times, the total employment gains reported Friday would be a blockbuster number. But continuing to add jobs at that pace would still mean a two-year grind back to pre-pandemic employment levels. The question is whether job creation will accelerate in the months ahead as more Americans are vaccinated and begin to resume normal patterns of behavior, especially regarding travel and entertainment. More

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    February 2021 Jobs Report Is Expected to Show Only Modest Gains

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storyFebruary Jobs Report Is Likely to Show Limited Improvement: Live UpdatesFebruary jobs report is expected to show only modest gains.March 5, 2021, 5:19 a.m. ETMarch 5, 2021, 5:19 a.m. ETVolunteers at St. Mary’s Food Bank in Phoenix preparing boxes for food donations.Credit…Juan Arredondo for The New York TimesThe Labor Department is scheduled to release its monthly gauge of the American labor market on Friday morning. Economists surveyed by Bloomberg expect only small improvements, estimating a gain of 182,000 jobs and no change in the unemployment rate at 6.3 percent.Roughly 10 million fewer jobs exist today than a year ago, and the January report showed a gain of only 49,000. While economists have offered increasingly optimistic forecasts for growth later in the year, millions of workers are still relying on unemployment benefits and other government assistance. First-time jobless claims also rose last week.Federal Reserve and top administration officials have emphasized that the Labor Department’s figures understate the extent of the damage. More than four million people have quit the labor force in the last year, including those sidelined because of child care and other family responsibilities or health concerns. They are not included in the official jobless count.To carry struggling households and businesses through the coming months, Congress is considering a $1.9 trillion package of pandemic relief.In recent weeks, recruiting sites have had an increase in job postings, but demand remains lopsided. The warehouse, transportation, health care, finance and professional services sectors have shown particular strength. But the parts of the economy hit hardest by the pandemic, like restaurants, travel, salons and entertainment, are still floundering.The February report is also expected to show a decline in state and local government payrolls.“The dominant driver of the labor market right now is the Covid situation and the status of reopenings,” said Robert Rosener, a senior U.S. economist at Morgan Stanley.He added that unusually harsh weather, particularly in the first half of February, right before the government conducted its surveys, could also have depressed hiring last month.AdvertisementContinue reading the main story More

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    Fed Chair Powell Offered a Patient Message. Markets Quivered Anyway.

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    #masthead-section-label, #masthead-bar-one { display: none }Biden’s Stimulus PlanWhat’s NextReconciliation, ExplainedFact Check$15 Minimum WageWhere Trump Voters StandAdvertisementContinue reading the main storySupported byContinue reading the main storyFed Chair Powell Offered a Patient Message. Markets Quivered Anyway.Stocks fell and bond yields rose after the Fed leader reiterated that the central bank did not plan to pull back policy support soon.Federal Reserve Chair Jerome Powell in Washington in December.Credit…Al Drago for The New York TimesMarch 4, 2021Updated 5:41 p.m. ETJerome H. Powell, the chair of the Federal Reserve, said he and his colleagues have a “high standard” for what full employment means, underscoring that the central bank is likely to be patient in removing its support for the economy.Mr. Powell pointed out that the virus has pushed many people out of the job market and said that “4 percent would be a nice unemployment rate to get to, but it will take more than that to get to maximum employment.” It is unlikely the job market will return to full speed this year, he added, speaking in an online question-and-answer session hosted by The Wall Street Journal.In fact, Mr. Powell’s entire message on Thursday centered on how cautious the central bank plans to be in dialing back economic policies — low interest rates and large-scale bond buying — that are meant to help the economy recover from the painful coronavirus shock.But antsy markets appeared unconvinced: Rates jumped and stocks slumped as the Fed chair spoke. The S&P 500 index, which had been up more than half a percent earlier in the day, fell into negative territory — eventually closing with its third consecutive day of decline.Investors have begun to pencil in faster growth and higher inflation in recent weeks, betting that a cocktail of big government spending, widespread vaccinations and rock-bottom interest rates are setting the stage for rapid growth and faster price gains. Market players have begun to speculate that the Fed might lift interest rates earlier than expected, even as the central bank’s top officials pledge patience.“The message, which he sent very clearly, was lower for longer,” said Subadra Rajappa, head of rates strategy at Société Générale. “It was the market reaction I was quite surprised by.”Ms. Rajappa said investors might have expected Mr. Powell to signal that the Fed was prepared to counteract recent market moves — perhaps by shifting toward longer-term bond purchases, among other policy options. He may have disappointed them by declining to tee up such a change.The yield on the 10-year Treasury note, an important benchmark that influences the cost of borrowing for companies and households alike, crept higher as the Fed chair spoke. It ended the day at 1.55 percent.Stock indexes fell as that happened. Higher interest rates can weigh on stock prices by making bond investing more comparatively attractive — higher yields can mean higher investment returns for buyers — and by nibbling into corporate profits.The Fed chair did acknowledge on Thursday that the Fed was watching the market fluctuations, saying that sharp bond market moves last week were “notable” and caught his attention and that he “would be concerned” by disorderly conditions or a persistent change that makes credit expensive and threatens the Fed’s goals.He rejected the idea that the central bank was poised to remove its policy support soon, saying at one point that the Fed was committed to “staying on the playing field, with our tools, until the job is really done” and the economy is healed.“My best guess is that he was trying to push back against the expectations of early rate hikes that have dominated the markets this year,” Roberto Perli, a partner and economist at Cornerstone Macro, said in an email. “What he said was no different from what he said so far, and the market needs something more convincing.”The central bank is currently buying $120 billion in government debt and mortgage-backed securities each month, and officials have said that they need to see “substantial further progress” before slowing that pace.Love’s Furniture and Mattresses in Warren, Mich., advertised its closing on Monday.Credit…Elaine Cromie for The New York TimesMr. Powell reiterated on Thursday that the Fed would communicate “well in advance” when it thinks it is reaching that threshold, while declining to put a date on when that might happen.“There’s reason to think that we’ll begin to make more progress, soon,” Mr. Powell acknowledged. “But even if that happens, as now seems likely, it will take some time to achieve ‘substantial’ further progress.”When it comes to lifting shorter-term interest rates, their classic policy tool, officials have been clearer about precisely what they want to accomplish before adjusting their cheap-money stance.“That’s going to depend entirely upon the path of the economy,” Mr. Powell said of the plan for interest rates. He said the country had to get to maximum employment, inflation must sustainably reach 2 percent, and those price gains must be on track to exceed 2 percent for some time.“Those are the conditions,” he said. “When they arrive, we will consider raising interest rates. We’re not intending to raise interest rates until we see those conditions fulfilled.”Even as many analysts anticipate higher inflation this year after very weak price increases in 2020, Mr. Powell was careful to draw a distinction between a short-term pop and a sustained acceleration.“If we do see what we believe is likely a transitory increase in inflation” then “I expect that we will be patient,” Mr. Powell said. “There’s a difference between a one-time surge in prices and ongoing inflation.”And when it comes to the job market, he pointed out that American employers now report 10 million fewer jobs than before the pandemic, leaving a lot of room for a labor rebound. The unemployment rate, which will be updated Friday, stood at 6.3 percent in January — still well above its 3.5 percent rate last year. And that understates the pandemic’s labor market cost, since many people have stopped looking for work altogether and are not counted into the official jobless number.Initial jobless claims increased last week after a big drop the prior week, the latest report showed, showing that the labor market’s recovery remains rocky for now, though a better performance might lie ahead as vaccines allow the economy to reopen more fully.“There’s good reason to expect job creation to pick up in coming months,” Mr. Powell said. “We need that.”Mr. Powell, whose term as Fed chair ends early next year, declined to comment on whether he would like another term. He was originally appointed as a governor by President Barack Obama, then elevated to chair by President Donald J. Trump. He said he was focused on the job at hand.“There’s a lot left to, we have a lot of ground left to cover,” he said. But given the advent of widespread vaccinations, there’s “good reason for optimism.”Matt Phillips contributed reporting.AdvertisementContinue reading the main story More

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    Companies Put Return-to-Work Plans in Motion

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerBuildings in Manhattan, where the amount of sublet office space available to rent surged nearly 50 percent last year.Credit…George Etheredge for The New York TimesReturn-to-Office Plans Are Set in Motion, but Virus Uncertainty RemainsMany employers are not making a decision until many workers are vaccinated. And some are making plans for “hybrid” work arrangements.Buildings in Manhattan, where the amount of sublet office space available to rent surged nearly 50 percent last year.Credit…George Etheredge for The New York TimesSupported byContinue reading the main storyJulie Creswell, Gillian Friedman and March 3, 2021, 5:00 a.m. ETA year and a pandemic ago, over 100,000 people filled the central business district in Charlotte, N.C., pouring out of offices, including several recently built skyscrapers, and into restaurants, bars and sports venues. Then as the coronavirus sent employees to their homes, much of the city center quickly went quiet and dark.The return of those employees to their offices has been halting and difficult. Last fall, Fifth Third Bank began bringing back workers, but soon reversed course. LendingTree, which is moving from the suburbs to the city, is waiting for the end of the school year. Wells Fargo has delayed its return to the office several times, telling its employees recently that they will continue to work remotely through at least May 1. And Duke Energy will bring some employees back in June, and most of the 6,000 people at its headquarters in September, when children should be able to go back to schools.Corporate executives around the country are wrestling with how to reopen offices as the pandemic starts to loosen its grip. Businesses — and many employees — are eager to return to some kind of normal work life, going back to the office, grabbing lunch at their favorite restaurant or stopping for drinks after work. But the world has changed, and many managers and workers alike acknowledge that there are advantages to remote work.While coronavirus cases are declining and vaccinations are rising, many companies have not committed to a time and strategy for bringing employees back. The most important variable, many executives said, is how long it will take for most employees to be vaccinated.Another major consideration revolves around the children of workers. Companies say they can’t make firm decisions until they know when local schools will reopen for in-person learning.Then there is a larger question: Does it make sense to go back to the way things were before the pandemic given that people have become accustomed to the rhythms of remote work?“Everyone has different comfort levels with coming back,” said Chuck McShane, a senior vice president at the Charlotte Regional Business Alliance, an organization that has helped lure businesses to the area. “For some companies, it depends on the type of work you’re doing and whether you can remain at home. But a concern about continued remote work is, how do entry-level workers get socialized into the office culture?”About a quarter of employees across the country are going into offices these days, according to Kastle Systems, an office security firm that gets data from 3,600 buildings in the United States.Many companies, paying to rent empty office space, are eager for that number to rise. Their executives believe having employees working side by side improves collaboration, supports the development of younger employees and nurtures the heart and soul of any company — its culture.A mass return to the office would help revive the economies of city centers that have been ghost towns for months.Credit…George Etheredge for The New York TimesA lone pedestrian in Midtown Manhattan. The number of workers returning to the office remains below 20 percent in New York.Credit…George Etheredge for The New York TimesThat’s why some managers like Mark Rose, chief executive of Avison Young, a commercial property consulting and property management firm based in Chicago with offices around the world, is asking employees to return to the office in April.“You’re not going to be fired or written up if you don’t come back, but it is the expectation that, subject to local laws, and subject to your individual issues, that you start to make your way back,” Mr. Rose said about his 5,000 employees. “It absolutely is going to be an expectation.”A mass return to the office would, of course, be a boon for commercial real estate companies like Avison Young. Landlords, whose revenues are under threat as corporations move out or reduce the amount of space they rent, would breathe a sigh of relief. Many tenants have more space than they need. In Manhattan, the amount of sublet office space available to rent surged nearly 50 percent last year and it is currently 27 percent of all available space, the highest share since the period right after the 2008 financial crisis, according to Savills.Moreover, a return to the office would help revive city centers that have been ghost towns for months. Restaurants and bars could start hiring again and returning commuters could generate much-needed revenue for struggling transit systems.The course of the pandemic has largely dictated office attendance. That number crashed in March and April last year as the pandemic took hold and started slowly rising in the late spring, according to Kastle. Another surge in infections after Thanksgiving drove occupancy down but it appears to be on an upswing.There are big regional differences. In large cities in Texas, more than a third of workers are back, while the New York, San Francisco and Chicago areas remain below 20 percent.[embedded content]Some of these regional differences might be explained by how people get to work. “In places where people are commuting through public transportation, we know that makes people much more vulnerable to Covid because of the sheer presence of others, compared to if you’re commuting in your own car,” said Tsedal Neeley, a Harvard Business School professor who studies remote work.The Coronavirus Outbreak More

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    Warren Revives Wealth Tax, Citing Pandemic Inequalities

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    #masthead-section-label, #masthead-bar-one { display: none }The Coronavirus OutbreakliveLatest UpdatesMaps and CasesRisk Near YouVaccine RolloutNew Variants TrackerAdvertisementContinue reading the main storySupported byContinue reading the main storyWarren Revives Wealth Tax, Citing Pandemic InequalitiesA tax on the net worth of America’s wealthiest individuals remains popular with voters, but has yet to be embraced by President Biden.Senator Elizabeth Warren plans to introduce legislation Monday that would apply a 2 percent tax to individual net worth above $50 million, and an additional 1 percent surcharge above $1 billion.Credit…Anna Moneymaker for The New York TimesMarch 1, 2021Updated 3:49 p.m. ETWASHINGTON — Senator Elizabeth Warren, Democrat of Massachusetts, introduced legislation on Monday that would tax the net worth of the wealthiest people in America, a proposal aimed at persuading President Biden and other Democrats to fund sweeping new federal spending programs by taxing the richest Americans.Ms. Warren’s wealth tax would apply a 2 percent tax to individual net worth — including the value of stocks, houses, boats and anything else a person owns, after subtracting out any debts — above $50 million. It would add an additional 1 percent surcharge for net worth above $1 billion. It is co-sponsored in the House by two Democratic representatives, Pramila Jayapal of Washington, who leads the Congressional Progressive Caucus, and Brendan F. Boyle of Pennsylvania, a moderate.The proposal, which mirrors the plan Ms. Warren unveiled while seeking the 2020 presidential nomination, is not among the top revenue-raisers that Democratic leaders are considering to help offset Mr. Biden’s campaign proposals to spend trillions of dollars on infrastructure, education, child care, clean energy deployment, health care and other domestic initiatives. Unlike Ms. Warren, Mr. Biden pointedly did not endorse a wealth tax in the 2020 Democratic presidential primaries.But Ms. Warren is pushing colleagues to pursue such a plan, which has gained popularity with the public as the richest Americans reap huge gains while 10 million Americans remain out of work as a result of the pandemic.Polls have consistently shown Ms. Warren’s proposal winning the support of more than three in five Americans, including a majority of Republican voters.“A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations,” Ms. Warren said. “As Congress develops additional plans to help our economy, the wealth tax should be at the top of the list to help pay for these plans because of the huge amounts of revenue it would generate.”She said she was confident that “lawmakers will catch up to the overwhelming majority of Americans who are demanding more fairness, more change, and who believe it’s time for a wealth tax.”The Coronavirus Outbreak More