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    How Finnair’s Huge Bet on Faster Flights to Asia Suddenly Came Undone

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    Nestled near Europe’s rooftop, Finland spent decades leveraging its location to become a popular gateway for Asian travelers. Its flagship airline, Finnair, offered flights from Tokyo, Seoul and Shanghai to Helsinki that, by crossing over Russia, were hours shorter than flights to any other European capital. Airport chiefs invested nearly $1 billion in a new terminal with streamlined transfers. There were signs in Japanese, Korean and Chinese, and hot water dispensers for the instant noodle packets favored by Chinese tourists.Then Russia sent troops across Ukraine’s border on Feb. 24, and overnight the carefully constructed game table was overturned.Russia closed its airspace to most European carriers in response to bans on Russian planes. What was once a nine-hour flight to Helsinki when routed over Russia’s 3,000-mile expanse would now take 13 hours and as much as 40 percent more fuel because it had to swoop around borders.Finnair’s competitive advantage as the fastest connection from Asia and a travel hub for Europe vanished in a wisp.The sudden disintegration of Finnair’s business model is part of the wide-ranging economic upheaval that the war in Ukraine is causing for businesses around the globe.Companies that invested or traded heavily with Russia were immediately affected, and more than 1,000 have withdrawn operations from Russia, according to a database compiled by the Yale School of Management.Juho Kuva for The New York TimesNearly $1 billion was spent to build a terminal in the Helsinki, Finland, airport to streamline transfers for passengers from outside Europe.When Russia closed its airspace, Finnair could no longer pitch itself as the fastest connection from Asia.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said.High energy prices have blitzed a wider range. The Hungarian Opera House’s Erkel Theater will temporarily close because it cannot pay its energy bill. Hakle, one of the largest manufacturers of toilet paper in Germany, declared insolvency because of soaring energy costs, while ceramic, glass, chemical, fertilizer and other factories across Europe have been forced to scale back or shut down.The snack food industry, unable to get sufficient supplies of sunflower oil from Ukraine, has had to scramble for substitutes like palm oil, forcing manufacturers to rejigger supply chains, production and labeling, since they could no longer boast that their products were “nonallergenic” and “non-G.M.O.”The closed airspace caused Japan Airlines and ANA to cancel flights to Europe. And this month Virgin Atlantic said it was ceasing all traffic to and from Hong Kong because of Russia’s ban. For Finnair, though, the fallout has been extreme.“The Asia strategy had been 20 years in the making,” Topi Manner, Finnair’s chief executive, said from the company’s headquarters, next to the Helsinki terminal in Vantaa. Services were tailored to meet the tastes of its Asian customers. Half of its in-flight movies are dubbed or subtitled in Japanese, Korean and Chinese. Meal offerings include crispy chicken in Chinese garlic and oyster sauce and Korean-style stir-fried pork in spicy sauce with bok choy and steamed rice. The airline’s ground staff in Helsinki are fluent in the region’s native languages.Market Square in central Helsinki.Before the coronavirus pandemic, half of the airline’s revenue was generated by travelers from Asia. Passengers that used Helsinki as a hub to transfer to other destinations accounted for 60 percent of the revenue.But with “no end in sight” to the war, Mr. Manner said, the airline’s management quickly concluded “that Russian airspace will remain closed to European carriers for a long time and we need to adapt to that reality.”This summer, Finnair operated 76 flights between Helsinki and Asia, compared to 198 in the summer of 2019. Overall, the airline is going at 68 percent of its capacity. Operating losses in the first half of this year amounted to 217 million euros.“We really have to regroup,” Mr. Manner said.In some respects, Finnair has been regrouping ever since the pandemic hit in early 2020 and virtually halted world travel. China’s “zero Covid” policy, which continued to lock down Shanghai and other major cities this year, sharply reduced East-West traffic, hampering Finnair’s recovery compared with airlines that have large domestic markets or operate in other regions. Finnair, half of which is owned by the government, fought to survive by furloughing employees, cutting costs and raising 3 billion euros in new financing.Juho Kuva for The New York TimesThe new terminal was expected to draw 30 million passengers by 2030, a projection that has been thrown out by the uncertainty now facing Finnair’s Asia strategy.The project aimed to improve services for the connecting passengers from Asia who would never leave the airport.A 2017 publicity campaign by the state-owned company that runs Finland’s terminals primarily targeted customers from China.“We created a path through the pandemic,” Mr. Manner said, but it always was intended to lead “back to the Asia strategy.”No longer. Last month, the company officially announced an about-face.“We started to pivot our network toward the West,” Mr. Manner said, expanding its partnership with American Airlines, British Airways and other carriers. In the spring, it launched four new weekly flights from Dallas-Fort Worth and three from Seattle. New routes from Helsinki to Stockholm, Copenhagen, Mumbai, India, and Doha, Qatar, have also been unveiled. As jet fuel prices skyrocket, the airline is also renting out planes and crews to other airlines, and it plans to shrink the size of its fleet and staff, and to slash costs.Finnair, which has lost 1.3 billion euros over the past three years, said it hoped to return to profitability in 2024.“It will take some time before the company gets to see if this is the right decision,” said Jaakko Tyrväinen, an airline analyst with SEB, a Nordic financial services group.For the new Helsinki terminal — which opened in June — a strategy shift was also needed.Central Helsinki.An estimated 30 million passengers were expected by 2030, up from the nearly 22 million that the existing terminals handled in 2019. Those projections are now irrelevant, and airport officials say the situation is too uncertain to make any meaningful update to that figure. Next year, 15 million travelers are expected to pass through.Perhaps more pointedly, the project, begun nearly a decade ago, was designed to improve services for transfer passengers from Asia — a majority of whom would never leave the airport.A multimedia publicity campaign that Finavia, the state-owned company that runs the country’s airline terminals, rolled out in 2017 for Helsinki airport — code letters HEL — primarily targeted customers from China. With a nod to the 2004 film “The Terminal,” the campaign, “Life in HEL,” featured Ryan Jhu, a popular Chinese actor and social media influencer, living for a month in the terminal.Now, Helsinki has an expansive new terminal dedicated to non-European transfer traffic but very few travelers.Juho Kuva for The New York TimesThe project to build the new terminal was begun nearly a decade ago.The spacious aukio, or meeting plaza, includes a wraparound video installation depicting Finnish landscapes.The upshot to the changes forced upon Finnair is vastly fewer connecting passengers in a terminal designed for them.On a recent weekday afternoon, the long, snaking lanes created to handle crowds at passport control were deserted. The spacious aukio, or meeting plaza, where passengers could sit and watch a wraparound video installation depicting Finnish landscapes, hosted a lone woman with a backpack. Moomin Shop, which sells merchandise related to the Finnish cartoon characters — particularly popular with Japanese visitors — had no customers. The Moomin cafe, farther down the main hallway, was mostly deserted.“Mornings are normally slow,” said Liccely Del Carpio, who works at the Moomin store, adding that business often picks up later in the afternoon. “All in all, it’s been OK.”The European terminal was bustling, but most of the shops and cafes that stretched along this terminal’s long hall were empty. Several other spaces were unleased or shuttered.Sami Kiiskinen, the vice president of airport development at Finavia, said that the hundreds of millions of euros in loans used to construct the airport would ultimately be repaid, but that “the schedule of paybacks must be reconsidered.” Negotiations are happening, he said.Yet, despite the likelihood that the war in Ukraine will drag on and Russian airspace will remain closed to European traffic, Mr. Kiiskinen is optimistic.“We still believe in our strategy,” he said. Major infrastructure developments like airports are designed on a 50-year horizon, he said. “Putin is not going to be there forever.”Juho Kuva for The New York TimesOn a recent weekday afternoon, a cafe branded for Moomin merchandise, cartoon characters popular with Japanese visitors, was mostly deserted.Sami Kiiskinen of Finavia, which runs the terminal, acknowledged the problems facing the project’s finances but remained optimistic over the long run: “Putin is not going to be there forever.”The new terminal at the Helsinki airport is just one of numerous commercial ventures across Europe that have been affected by Russia’s invasion of Ukraine. More

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    China’s GDP Data Delay Points to Murky Economic Picture

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    The delay in announcing routine growth data this week was only the latest example of how hard it has become to peer into China’s economy, the world’s second largest.For the past quarter-century, China was run by a well-oiled government bureaucracy that predictably focused on the economy as its top priority.That may no longer be the case.Xi Jinping, China’s top leader, made clear on Sunday at the opening of the Communist Party’s national congress, a twice-a-decade gathering of the country’s ruling elite, that politics and national security were paramount. That point was reinforced the next day when Beijing made the unusual move of delaying what should have been a routine, closely stage-managed release of data on how the economy fared in the past three months.“It does show the primacy of politics in influencing the very competent, institutional technocracy that China has,” said Victor Shih, a specialist in Chinese elite politics and finance at the University of California, San Diego.“The very likely reason the numbers were delayed was the State Council leaders were afraid the numbers would detract from the triumphant tone of the party congress,” he added. The State Council is China’s cabinet.It is extremely rare for any large economy to delay the release of such an important economic report. The data included not just China’s economic growth from July through September but also the country’s factory production, retail sales, fixed-asset investment and property prices for September.Mr. Xi, who is expected to claim a third term in power, has sought to project confidence in China’s outlook. On Monday, a Chinese economic planning official reiterated the Communist Party’s talking points about how well China’s economy was faring, saying it improved in the last quarter.Xi Jinping, China’s leader, speaking during the opening ceremony of the 20th National Congress of the Communist Party of China in Beijing.Kevin Frayer/Getty ImagesBut that optimistic message was quickly undercut by news of the delayed release of gross domestic product data, and how the delay was handled. Reporters who called government employees on Friday and Monday about the release were told they had no information.Contacted again late Monday afternoon, the workers said only that the release had been postponed indefinitely. The National Bureau of Statistics still has not explained the delay or announced a rescheduled date. On Friday, the government also failed to release data on exports and imports for September, and has not said when it would do so.China’s refusal to provide statistics, combined with the haphazard way the postponements were communicated, suggested either that part of the bureaucracy was in disarray or that China’s economy was in worse shape than most people had realized. It also raised questions about the reliability of the data.“It’s a horrible blunder,” said Taisu Zhang, a Yale University law professor who specializes in comparative legal and economic history. “I don’t know if they are massaging the numbers — even if they need to massage the figures, the better thing to do would be to massage them within the usual time frame.”Beijing set a target in March that growth would be “about 5.5 percent” this year. Yet Western economists have estimated that China’s economy grew only a little more than 3 percent in the third quarter.That still would have been better than growth of 0.4 percent logged in the second quarter, when Shanghai was locked down for two months to stamp out a Covid-19 outbreak.Mr. Xi has put a premium on social stability and national security, often with actions that have had a side effect of slowing economic growth and employment. Regulators have clamped down on the tech sector, contributing to widespread layoffs among young employees. Dozens of the country’s private property developers have defaulted on debts this year after Beijing discouraged real estate speculation. Tycoons have been fleeing the country. Municipal lockdowns to stop outbreaks of Covid-19 have taken a heavy toll.A commercial and office complex in Beijing. China’s refusal to provide data on its economy suggests that it could be in worse shape than most people had realized.Gilles Sabrié for The New York TimesQuestions have long been raised about whether China’s economic growth statistics may be inflated somewhat or smoothed from one year to the next. But until recently China had also released more granular data that made it possible to draw conclusions about the economy’s overall health.One such measure is the rising value of new office complexes, rail lines and other investment projects. But last year, China stopped releasing data on inflation in construction costs.That has made it hard to calculate the true value of the new investments, said Diana Choyleva, chief economist at Enodo Economics, a London consulting firm. So while the total money invested is still available, it is no longer clear what that money is buying.Underlying data had been available for China’s international trade, its main engine of growth. But growing inconsistencies started to become apparent over the summer.China’s General Administration of Customs reported sharp increases through August in exports to the United States and Europe. But the number of containers leaving Chinese ports for these destinations was flat.Average prices charged by factories in China to wholesalers have been little changed. Few economists think that China is earning more money from exports through inflation. The plateau in containers even as export statistics are rising is consistent with previous periods of economic weakness in China, as exporters exaggerate the value of their shipments to customs officials as part of complex strategies to move money out of China.There are other signs that actual exports of goods are now in trouble. Taiwan has very similar trade patterns to mainland China, and on Oct. 7, Taiwan reported a sharp, unexpected drop in its imports and exports during September.The cost of shipping each container from China to the United States or Europe has also fallen steeply over the past year. It dropped much further in September. The cost of loading a container onto a ship in eastern China for delivery to Los Angeles has plunged by more than half this year, according to Container xChange, an online container logistics platform. This suggests few factories are bidding for space aboard ships.Cargo ships loading containers at the port on the Beijing-Hangzhou Canal. The cost of shipping from China to the United States or Europe has fallen steeply over the past year. Alex Plavevski/EPA, via Shutterstock“The retailers and the bigger buyers or shippers are more cautious about the outlook on demand and are ordering less,” said Christian Roeloffs, the chief executive and co-founder of Container xChange.Another problem is that even when China releases data, it sometimes provides less explanation now of how the data is calculated. Derek Scissors, a senior fellow specializing in China and India at the American Enterprise Institute in Washington, said he used to be able to get answers from Chinese officials on how certain investment statistics were calculated. But in the past couple of years, they are no longer willing to discuss their data.Monday’s postponement of the release of economic data had little discernible effect on Chinese financial markets on Tuesday. Share prices rose sharply in Hong Kong as a change in British tax policy preceded a global rally in stock markets. The Shanghai and Shenzhen stock markets, more insulated from international events and also heavily managed by the Chinese authorities, were little changed.But delays can have a corrosive effect on China’s image in financial markets.“If delays start to become a regular occurrence,” said Julian Evans-Pritchard, the senior China economist at Capital Economics, “then that could reduce confidence in the official economic data and the professionalism of China’s bureaucracy.” More

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    Labor Hoarding Could be Good News for the Economy

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    PROVO, Utah — Chad Pritchard and his colleagues are trying everything to staff their pizza shop and bistro, and as they do, they have turned to a new tactic: They avoid firing employees at all costs.Infractions that previously would have led to a quick dismissal no longer do at the chef’s two places, Fat Daddy’s Pizzeria and Bistro Provenance. Consistent transportation issues have ceased to be a deal breaker. Workers who show up drunk these days are sent home to sober up.Employers in Provo, a college town at the base of the Rocky Mountains where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers. Bistro Provenance, which opened in September, has been unable to hire enough employees to open for lunch at all, or for dinner on Sundays and Mondays. The workers it has are often new to the industry, or young: On a recent Wednesday night, a 17-year-old could be found torching a crème brûlée.Down the street, Mr. Pritchard’s pizza shop is now relying on an outside cleaner to help his thin staff tidy up. And up and down the wide avenue that separates the two restaurants, storefronts display “Help Wanted” signs or announce that the businesses have had to temporarily reduce their hours.Provo’s desperation for workers is an intense version of the labor crunch that has plagued employers nationwide over the past two years — one that has prompted changes in hiring and layoff practices that could have big implications for the U.S. economy. Policymakers are hoping that after struggling through the worst labor shortages America has experienced in at least several decades, employers will be hesitant to lay off workers even when the economy cools.Mr. Pritchard cannot hire enough employees to open the bistro for lunch at all, or for dinner on Sundays or Mondays.That may help prevent the kind of painful recession the Federal Reserve is hoping to avoid as it tries to combat persistent inflation. America’s economy is facing a marked — and intentional — slowdown as the Fed raises interest rates to chill demand and drive down price increases, the kind of pullback that would usually result in notably higher unemployment. But officials are still hoping to achieve a soft landing in which growth moderates without causing widespread job losses. A few have speculated that today’s staffing woes will help them to pull it off, as companies try harder than they have in the past to weather a slowdown without cutting staff.“Businesses that experienced unprecedented challenges restoring or expanding their work forces following the pandemic may be more inclined to make greater efforts to retain their employees than they normally would when facing a slowdown in economic activity,” Lael Brainard, the Fed’s vice chair, said in a recent speech. “This may mean that slowing aggregate demand will lead to a smaller increase in unemployment than we have seen in previous recessions.”For now, the job market remains strong. Employers added 263,000 workers in September, fewer than in recent months but more than was normal before the pandemic. Unemployment is at 3.5 percent, matching the lowest level in 50 years, and average hourly earnings picked up at a solid 5 percent clip compared with a year earlier.But that is expected to change. When the Fed raises interest rates and slows down the economy, it also weakens the labor market. Wage gains slow, paving the way for inflation to cool down, and in the process, unemployment rises — potentially, significantly.The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.September Jobs Report: Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates.A Cooling Market?: Unemployment is low and hiring is strong, but there are signs that the red-hot labor market may be coming off its boiling point.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.In the 1980s, when inflation was faster than it is now and entrenched, the Fed lifted rates drastically to roughly 20 percent and sent unemployment to above 10 percent. Few economists expect an outcome that severe this time since today’s inflation burst has been shorter-lived and rates are not expected to climb nearly as much.Mr. Pritchard demonstrated how to stretch pizza dough in Fat Daddy’s Pizzeria, his other restaurant in Provo.Many of the workers Mr. Pritchard and his business partner, Janine Coons, have hired are new to the industry or young.Still, Fed officials themselves expect unemployment to rise nearly a full percentage point to 4.4 percent next year — and policymakers have admitted that is a mild estimate, given how much they are trying to slow down the economy. Some economists have penciled in worse outcomes. Deutsche Bank, for instance, predicts 5.6 percent joblessness by the end of 2023.Labor hoarding offers a glimmer of hope that could help the Fed’s more benign unemployment forecast to become reality: Employers who are loath to jettison workers may help the labor market to slow down and wage growth to moderate without a spike in joblessness.“Companies are still confronting this enormous churn and losing people, and they don’t know what to do to hang on to people,” said Julia Pollak, chief economist at the career site ZipRecruiter. “They’re definitely hanging on to workers for dear life just because they’re so scarce.”When the job market slows, employers will have recent, firsthand memories of how expensive it can be to recruit, and train, workers. Many employers may enter the slowdown still severely understaffed, particularly in industries like leisure and hospitality that have struggled to hire and retain workers since the start of the pandemic. Those factors may make them less likely to institute layoffs.And after long months of very tight labor markets — there are still nearly two open jobs for every unemployed worker — companies may be hesitant to believe that any uptick in worker availability will last.“There’s a lot of uncertainty about how big of a downturn are we facing,” said Benjamin Friedrich, an associate professor of strategy at Northwestern University’s Kellogg School of Management. “You kind of want to be ready when opportunities arise. The way I think about labor hoarding is, it has option value.”Employers in Provo, where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers.Instead of firing, businesses may look for other ways to trim costs. Mr. Pritchard in Provo and his business partner, Janine Coons, said that if business fell off, their first resort would be to cut hours. Their second would be taking pay cuts themselves. Firing would be a last resort.The pizzeria didn’t lay off workers during the pandemic, but Mr. Pritchard and Ms. Coons witnessed how punishing it can be to hire — and since all of their competitors have been learning the same lesson, they do not expect them to let go of their employees easily even if demand pulls back.“People aren’t going to fire people,” Mr. Pritchard said.But economists warned that what employers think they will do before a slowdown and what they actually do when they start to experience financial pain could be two different things.The idea that a tight labor market may leave businesses gun-shy about layoffs is untested. Some economists said that they could not recall any other downturn where employers broadly resisted culling their work force.“It would be a pretty notable change to how employers responded in the past,” said Nick Bunker, director of North American economic research for the career site Indeed.And even if they do not fire their full-time employees, companies have been making increased use of temporary or just-in-time help in recent months. Gusto, a small-business payroll and benefits platform, conducted an analysis of its clients and found that the ratio of contractors per employee had increased more than 60 percent since 2019.If the economy slows, gigs for those temporary workers could dry up, prompting them to begin searching for full-time jobs — possibly causing unemployment or underemployment to rise even if nobody is officially fired.Policymakers know a soft landing is a long shot. Jerome H. Powell, the Fed chair, acknowledged during his last news conference that the Fed’s own estimate of how much unemployment might rise in a downturn was a “modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation.”But he also added that “we see the current situation as outside of historical experience.”Bistro Provenance opened in September.Dinner service at the restaurant.The reasons for hope extend beyond labor hoarding. Because job openings are so unusually high right now, policymakers hope that workers can move into available positions even if some firms do begin layoffs as the labor market slows. Companies that have been desperate to hire for months — like Utah State Hospital in Provo — may swoop in to pick up anyone who is displaced.Dallas Earnshaw and his colleagues at the psychiatric hospital have been struggling mightily to hire enough nurse’s aides and other workers, though raising pay and loosening recruitment standards have helped around the edges. Because he cannot hire enough people to expand in needed ways, Mr. Earnshaw is poised to snap up employees if the labor market cools.“We’re desperate,” Mr. Earnshaw said.But for the moment, workers remain hard to find. At the bistro and pizza shop in downtown Provo, what worries Mr. Pritchard is that labor will become so expensive that — combined with rapid ingredient inflation — it will be hard or impossible to make a profit without lifting prices on pizzas or prime rib so much that consumers cannot bear the change.“What scares me most is not the economic slowdown,” he said. “It’s the hiring shortage that we have.” More

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    Factory Jobs Are Booming Like It’s the 1970s

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

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    Who Are America’s Missing Workers?

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    The labor market appears hot, but the share of people who are either working or actively looking for a job still hasn’t quite recovered.As the United States emerges from the pandemic, employers have been desperate to hire. But while demand for goods and services has rebounded, the supply of labor has fallen short, holding back the economy.More than two years after the Covid-19 recession officially ended, some sectors haven’t found the workers they need to operate at capacity. Only in August did the work force return to its prepandemic size, which is millions short of where it would have been had it continued to grow at its prepandemic rate.In simple numbers, some of that gap is due to Covid’s death toll: more than a million people, about 260,000 of them short of retirement age. In addition, a sharp slowdown in legal immigration has pared the potential work force by 3.2 million, relative to its trajectory before 2017, according to calculations by economists at J.P. Morgan.But the problem isn’t just that population growth has stalled. Even with an uptick in August, the share of Americans working or actively looking for work is 62.4 percent, compared with 63.4 percent in February 2020.“It’s my sense that the most important reason that the labor market feels so hot right now is that we have so many fewer people in it,” said Wendy Edelberg, director of the Hamilton Project, an economic policy center at the Brookings Institution. “Demand largely recovered, and we didn’t have the supply.”Unraveling the causes of that lingering reluctance is difficult, but it’s possible to identify a few major groups who are on the sidelines.People at retirement age, who had been staying in the work force longer as longevity increased before the pandemic, dropped out at disproportionate rates and haven’t returned. More puzzlingly, men in their prime working years, from 25 to 54, have retreated from the work force relative to February 2020, while women have bounced back. Magnifying those disparities are two crosscutting factors: the long-term health complications from Covid-19, and a lagging return for workers without college degrees.Older workers are lagging behind in returning to the work forcePercent change in labor force participation rate for each age group since before the pandemic More

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    Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

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    The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    Japan Bounces Back to Economic Growth as Coronavirus Fears Recede

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    A public weary of virus precautions pushed up consumption of goods and services, but the longer-term picture is uncertain as the global economy weakens.TOKYO — Restaurants are full. Malls are teeming. People are traveling. And Japan’s economy has begun to grow again as consumers, fatigued from more than two years of the pandemic, moved away from precautions that have kept coronavirus infections at among the lowest levels of any wealthy country.Lockdowns in China, soaring inflation and brutally high energy prices could not suppress Japan’s economic expansion as domestic consumption of goods and services shot up in the second three months of the year. The country’s economy, the third largest after the United States and China, grew at an annualized rate of 2.2 percent during that period, government data showed on Monday.The second-quarter result followed growth of 0 percent — revised from an initial reading of a 1 percent decline — during the first three months of the year, when consumers retreated to their homes in the face of the rapid spread of the Omicron variant.After that initial Omicron wave burned out, shoppers and domestic travelers poured back onto the streets. Case numbers then quickly galloped back to record highs for Japan, but this time the public — highly vaccinated and tired of self-restraint — has reacted less fearfully, said Izumi Devalier, head of Japan economics at Bank of America.“After the Omicron wave ended, we had a very nice jump in mobility, lots of catch-up spending in categories like restaurant and travel,” she said.The new growth report indicates that Japan’s economy may finally be back on track after more than two years of yo-yoing between growth and contraction. Still, the country remains an economic “laggard” compared with other wealthy nations, Ms. Devalier said, adding that consumers, especially older people, “are still sensitive to Covid risks.”As that sensitivity has slowly declined over time, she said, “we have had this very gradual recovery and normalization from Covid.”The second-quarter growth came despite stiff headwinds, particularly for Japan’s small- and medium-size enterprises. China’s Covid lockdowns have made it hard for retailers to stock in-demand products like air-conditioners, and for manufacturers to procure some critical components for their goods.A weak yen and higher inflation have also weighed on companies. Over the last year, the Japanese currency has lost more than 20 percent of its value against the dollar. While that has been good for exporters — whose products have grown cheaper for foreign customers — it has driven up prices of imports, which have already become more expensive because of shortages and supply chain disruptions caused by the pandemic and Russia’s war in Ukraine.While inflation in Japan — at around 2 percent in June — is still much lower than in many other countries, it has forced some companies to substantially raise prices for the first time in years, potentially dampening demand from consumers accustomed to paying the same amounts year after year.Japan faces other challenges both at home and abroad. Small- and medium-size enterprises in particular are likely to struggle as pandemic subsidies come to an end and foot traffic to their businesses remains below prepandemic levels.Additionally, geopolitical tensions are creating greater uncertainty for Japan’s key industries. Frictions between the United States and China over Speaker Nancy Pelosi’s visit to Taiwan this month have raised concerns among Japanese policymakers about possible disruptions to trade. Taiwan is Japan’s fourth-largest trade partner and a critical producer of semiconductors — essential components for Japan’s large automobile and electronics industries.As for Japan’s overall economic outlook, “short term, momentum is pretty good, but beyond that, we are actually quite cautious,” Ms. Devalier said.At home, she expects consumption to slow as people adjust to the new normal of living with the pandemic and their enthusiasm for spending dims. Wage growth, which has been stagnant for years, is falling behind inflation, which is likely to affect spending. And, she said, “for manufacturing and exports we expect a slowdown in momentum reflecting the fact that we expect global growth to be weaker.”Even under ideal conditions, Japan’s domestic consumption is at least a year away from returning to prepandemic levels, said Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research and Consulting.“Next year, we should be in a situation where it’s not necessary to worry about Covid infections and there are no restrictions whatsoever on economic activity,” he said.By then, he said, Japan will have most likely relaxed restrictions on tourism and business travel from abroad, which have been an additional drag on its economic performance.But with Omicron cases still climbing, fully returning to normal life this year is “impossible,” he said. More

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    In an Unequal Economy, the Poor Face Inflation Now and Job Loss Later

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    For Theresa Clarke, a retiree in New Canaan, Conn., the rising cost of living means not buying Goldfish crackers for her disabled daughter because a carton costs $11.99 at her local Stop & Shop. It means showering at the YMCA to save on her hot water bill. And it means watching her bank account dwindle to $50 because, as someone on a fixed income who never made much money to start with, there aren’t many other places she can trim her spending as prices rise.“There is nothing to cut back on,” she said.Jordan Trevino, 28, who recently took a better paying job in advertising in Los Angeles with a $100,000 salary, is economizing in little ways — ordering a cheaper entree when out to dinner, for example. But he is still planning a wedding next year and a honeymoon in Italy.And David Schoenfeld, who made about $250,000 in retirement income and consulting fees last year and has about $5 million in savings, hasn’t pared back his spending. He has just returned from a vacation in Greece, with his daughter and two of his grandchildren.“People in our group are not seeing this as a period of sacrifice,” said Mr. Schoenfeld, who lives in Sharon, Mass., and is a member of a group called Responsible Wealth, a network of rich people focused on inequality that pushes for higher taxes, among other stances. “We notice it’s expensive, but it’s kind of like: I don’t really care.”Higher-income households built up savings and wealth during the early stages of the pandemic as they stayed at home and their stocks, houses and other assets rose in value. Between those stockpiles and solid wage growth, many have been able to keep spending even as costs climb. But data and anecdotes suggest that lower-income households, despite the resilient job market, are struggling more profoundly with inflation.That divergence poses a challenge for the Federal Reserve, which is hoping that higher interest rates will slow consumer spending and ease pressure on prices across the economy. Already, there are signs that poorer families are cutting back. If richer families don’t pull back as much — if they keep going on vacations, dining out and buying new cars and second homes — many prices could keep rising. The Fed might need to raise interest rates even more to bring inflation under control, and that could cause a sharper slowdown.In that case, poorer families will almost certainly bear the brunt again, because low-wage workers are often the first to lose hours and jobs. The bifurcated economy, and the policy decisions that stem from it, could become a double whammy for them, inflicting higher costs today and unemployment tomorrow.“That’s the perfect storm, if unemployment increases,” said Mark Brown, chief executive of West Houston Assistance Ministries, which provides food, rental assistance and other forms of aid to people in need. “So many folks are so very close to the edge.”America’s poor have spent part of the savings they amassed during coronavirus lockdowns, and their wages are increasingly struggling to keep up with — or falling behind — price increases. Because such a big chunk of their budgets is devoted to food and housing, lower-income families have less room to cut back before they have to stop buying necessities. Some are taking on credit card debt, cutting back on shopping and restaurant meals, putting off replacing their cars or even buying fewer groceries.But while lower-income families spend more of each dollar they earn, the rich and middle classes have so much more money that they account for a much bigger share of spending in the overall economy: The top two-fifths of the income distribution account for about 60 percent of spending in the economy, the bottom two-fifths about 22 percent. That means the rich can continue to fuel the economy even as the poor pull back, a potential difficulty for policymakers.The Federal Reserve has been lifting interest rates rapidly since March to try to slow consumer spending and raise the cost of borrowing for companies, which will in turn lead to fewer business expansions, less hiring and slower wage growth. The goal is to slow the economy enough to lower inflation but not so much that it causes a painful recession.Officials at West Houston Assistance Ministries said its food bank served 200 households on Friday.Meridith Kohut for The New York TimesBut job growth accelerated unexpectedly in July, with wages climbing rapidly. Consumer spending, adjusted for inflation, has cooled, but Americans continue to open their wallets for vacations, restaurant meals and other services. If solid demand and tight labor market conditions continue, they could help to keep inflation rapid and make it more difficult for the Fed to cool the economy without continuing its string of quick rate increases. That could make widespread layoffs more likely.“The one, singular worry is the jobs market — if demand is constrained to the point that companies have to start laying off workers, that’s what hits Main Street,” said Nela Richardson, chief economist at the job market data provider ADP. “That’s what hits low-income workers.”8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More