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    How This Economic Moment Rewrites the Rules

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    Jobs aplenty. Sizzling demand. If the United States is headed into a recession, it is taking an unusual route, with many markers of a boom.To understand the strange, conflicting signals being sent by the U.S. economy right now, it helps to look at Williston, N.D., in about 2010.North Dakota was in the midst of an oil boom. Scores of rigs were drilling hundreds of wells, filling up train cars with crude because there hadn’t been time to build a pipeline. Pretty much anyone who wanted a job could find one, even the teenagers who dropped out of high school to work in the oil fields. Wages soared. Fast-food restaurants offered signing bonuses. State coffers filled up with tax revenue.Yet as good as the economy was, it also felt unstable. Restaurants couldn’t hire enough workers. Housing was in short supply, and costly. Local infrastructure couldn’t withstand the sudden surge in demand. Prices for practically everything soared.“It was chaotic,” said David Flynn, an economist at the University of North Dakota who lived through the boom and has studied it. “The economy was doing well, revenues for the local areas were up across the board, but you were still short of workers and businesses were having trouble.”“That sounds a lot like the stories you’ve been hearing at the national level for the past couple years,” he added.Economists and politicians have spent weeks arguing about whether the United States is in a recession. If it is, the recession is unlike any previous one. Employers added more than half a million jobs in July, and the unemployment rate is at a half-century low.Typically, in recessions, the problem is that businesses don’t want to hire and consumers don’t want to spend. Right now, businesses want to hire, but can’t find the workers to fill open jobs. Consumers want to spend, but can’t find cars to buy or flights to book.Recessions, in other words, are about too much supply and too little demand. What the U.S. economy is facing is the opposite. Just like North Dakota in 2010.The underlying causes are different, of course. Williston was hit by a surge in demand as companies and workers flooded into what had been a small city in the Northern Plains. The United States was hit by a pandemic, which caused a shift in demand and disrupted supply chains around the world. And the comparison goes only so far: Williston’s population roughly doubled from 2010 to 2020. No one expects that to happen to the country as a whole.Still, whether local or national, the most obvious consequence is the same: inflation. When demand outstrips supply — whether for steel-toe boots in an oil boomtown or for restaurant seats in the aftermath of a pandemic — prices rise. Mr. Flynn recalled going out to eat during the boom and discovering that hamburgers cost $20, a feeling of sticker shock familiar to practically any American these days.There is also a subtler consequence: uncertainty. No one knows how long the boom will last, or what the economy will look like on the other side of it, which makes it hard for workers, businesses and governments to adapt. In Williston, companies and governments were reluctant to invest in the apartment buildings, elementary schools and sewage-treatment plants that the community suddenly needed — but might not need by the time they were complete.A family at a Williston campground in 2010. The local infrastructure couldn’t withstand the sudden surge in demand.Todd Heisler/The New York TimesThe full parking lot of the El Rancho Motel in Williston in 2010.Todd Heisler/The New York Times“Think of it as a situation of every day, seemingly, was a new shock, so you couldn’t even adjust before a new one was hitting,” Mr. Flynn said. “It’s that constant adjustment. Completely unpredictable.”Businesses have now spent two and a half years in a state of constant adjustment. In early 2020, practically overnight, Americans traded restaurant meals for home-baked bread, and gym memberships for socially distanced bike rides. Those shifts caused huge disruptions, in part because businesses were reluctant to make long-term investments to address short-term spikes in demand.“That was always going to cause its own problems on prices and shortages,” said Adam Ozimek, chief economist for the Economic Innovation Group, a Washington research organization. “Businesses were never going to be like, ‘I’m going to build 10 new bicycle factories right now because we’re in a long-term bicycling boom.’”Some other shifts caused by the pandemic are likely to prove longer lasting. But it is hard for businesses to know which.“I think businesses are correct that the current state of the economy can’t really hold — something has to give,” Mr. Ozimek said.To most people, of course, this doesn’t feel like a boom. Measures of consumer confidence are at record lows, and Americans overwhelmingly say they are dissatisfied with the economy. That perception is grounded in reality: High inflation is eroding — and in some cases erasing — the benefits of a strong job market for many workers. Hourly earnings, adjusted for inflation, are falling at their fastest pace in decades.“I know people will hear today’s extraordinary jobs report and say they don’t see it, they don’t feel it in their own lives,” President Biden said Friday. “I know how hard it is. I know it’s hard to feel good about job creation when you already have a job and you’re dealing with rising prices — food and gas and so much more. I get it.”Tara Sinclair, an economist at George Washington University, said the United States wasn’t experiencing a true boom. That would imply a virtuous circle, in which prosperity begets investment, which begets more prosperity and makes the economy more productive in the long term — a rising tide that lifts all boats.The State of Jobs in the United StatesEmployment gains in July, which far surpassed expectations, show that the labor market is not slowing despite efforts by the Federal Reserve to cool the economy.July Jobs Report: U.S. employers added 528,000 jobs in the seventh month of the year. The unemployment rate was 3.5 percent, down from 3.6 percent in June.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.Instead, the lingering disruptions of the pandemic, uncertainty over what the post-Covid economy will look like and fears of a recession have made businesses reluctant to make bets on the future. Business investment fell in the most recent quarter. Employers are hiring, but they are leaning heavily on one-time bonuses rather than permanent pay increases.“It’s not an economic boom in the sense of wanting to invest long term,” Ms. Sinclair said. “It’s a boomtown situation where everyone’s just waiting for it to get cut off.”The current economic climate doesn’t feel like a boom to many, with measures of consumer confidence at record lows.Hiroko Masuike/The New York TimesIndeed, the Federal Reserve is trying to cut it off. Jerome H. Powell, the Fed chair, has described the labor market, with twice as many open jobs as unemployed workers, as “unsustainably hot,” and is trying to cool it through aggressive interest rate increases. He and his colleagues have argued repeatedly that a more normal economy — less like a boomtown, with lower inflation — will be better for workers in the long term.“We all want to get back to the kind of labor market we had before the pandemic, where differences between racial and gender differences and that kind of thing were at historic minimums, where participation was high, where inflation was low,” Mr. Powell said last month. “We want to get back to that. But that’s not happening. That’s not going to happen without restoring price stability.”Mr. Biden and his advisers, too, have argued that a cooling economy is inevitable and even necessary as the country resets from its reopening-fueled surge. In an opinion article in The Wall Street Journal in May, Mr. Biden warned that monthly job growth was likely to slow, to around 150,000 a month from more than 500,000, in “a sign that we are successfully moving into the next phase of the recovery.”So far, that transition has been elusive. Forecasters had expected hiring to slow in July, to a gain of about 250,000 jobs. Instead, the figure was above 500,000, the highest in five months, the Labor Department reported on Friday. But the labor force — the number of people who are either working or actively looking for work — shrank and remains stubbornly below its prepandemic level, a sign that the supply constraints that have contributed to high inflation won’t abate quickly.Ms. Sinclair said it shouldn’t be surprising that it was taking time to readjust after the coronavirus disrupted nearly every aspect of life and work. As of July, the U.S. economy, in the aggregate, had recovered all the jobs lost during the early weeks of the pandemic. But beneath the surface, the situation looks drastically different from what it was in February 2020. There are nearly half a million more warehouse workers today, and nearly 90,000 fewer child care workers. Millions of people are still working remotely. Others have changed careers, started businesses or stopped working.“We have to remember that we are still sorting that out,” Ms. Sinclair said. “It was a big economic shock, and the fact that we came out of it as quickly as we did is still incredibly impressive. These residual pains are us just still adjusting to it.”Jim Tankersley More

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    They Flocked to China for Boom Times. Now They’re Thinking Twice.

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    A.H. Beard, a 123-year-old luxury mattress manufacturer based in Australia, started eyeing China around 2010. At the time, the family-owned company faced looming competition from low-cost, foreign-made mattresses in its home market. China, with its 1.4 billion consumers and a growing middle class with a taste for premium brands, seemed like a good place to expand.The choice paid off.A.H. Beard opened its first store there in 2013. Before the coronavirus pandemic, sales in the country were growing more than 30 percent a year. There are now 50 A.H. Beard stores across China, with plans to open 50 more. But like most foreign companies operating in China nowadays, A.H. Beard has started to think more carefully about its strategy.Beijing’s strict Covid-19 policy has exacted a heavy toll on business. The company’s exports into China are no longer on the rise.This month, Chinese officials announced that the economy grew at its slowest pace since the early days of the pandemic. Unemployment is high, the housing market is in crisis and nervous consumers — living under the constant threat of lockdowns and mass testing — are not spending.Now, the once resilient Chinese economy is looking shaky, and the companies that flocked to the country to partake in boom times are being confronted by a sobering reality: flat growth in what was once seen as a reliable economic opportunity.“I certainly don’t see China returning to the rates of growth that we had seen previously,” said Tony Pearson, chief executive of A.H. Beard.“I certainly don’t see China returning to the rates of growth that we had seen previously,” said Tony Pearson, chief executive of A.H. Beard.Matthew Abbott for The New York TimesA.H. Beard opened a flagship store in Shanghai in 2013.Matthew Abbott for The New York TimesThe cost of mattress materials and components, such as latex and natural fibers, has increased significantly.Matthew Abbott for The New York TimesSo far, most companies are staying the course, but there is a steady whiff of caution that did not exist just a few years ago.Geopolitical tensions and a U.S.-China trade war have unleashed punishing tariffs for some industries. Covid-19 has snarled the flow of goods, lifting the prices of almost everything and delaying shipments by months. China’s pandemic response of quarantines and lockdowns has kept customers at home and out of stores.A.H. Beard opened its flagship store with a local partner in Shanghai almost 10 years ago. And like any high-end brand, it rolled out products with prices that defy belief. China became the best-selling market for its top-of-the-line $75,000 mattress.Since then, the cost of shipping a container has jumped sixfold. The cost of mattress materials and components, such as latex and natural fibers, have increased significantly. Other worrying signs have emerged, including a housing slump. (New homes often mean new mattresses.)Mr. Pearson said he is hoping that the Chinese Communist Party congress later this year will clarify “the trajectory for China” and imbue consumers with more confidence. “The economy still has growth potential,” he said. “But there’s always a degree of risk.”After the 2008 financial crisis when the rest of the world retrenched, China emerged as an outlier and international businesses rushed in.European luxury brands erected gleaming stores in China’s biggest cities, while U.S. food and consumer goods companies jostled for supermarket shelf space. German car manufacturers opened dealerships, and South Korean and Japanese chip firms courted Chinese electronics makers. A booming construction market fueled demand for iron ore from Australia and Brazil.Chinese consumers rewarded those investments by opening their wallets. But the pandemic has rattled the confidence of many shoppers who now see rainy days ahead.Fang Wei, 34, said she has scaled back her spending since she left a job in 2020. In the past, she spent most of her salary on brands like Michael Kors, Coach and Valentino during frequent shopping trips.Even though she is employed again, working in advertising in Beijing, she now allocates a quarter of her salary on food, transportation and other living costs. She hands the rest to her mother, who puts the money in the bank.“Because I’m worried about being laid off, I transfer everything to my mother every month,” Ms. Fang said. “It’s very depressing to go from enjoying life to subsistence.”A more frugal Chinese consumer is a worry for foreign businesses, many of which offer products that are not the low-cost option but a premium alternative. An Jun-Min, chief executive of Ginseng by Pharm, a South Korean producer of ginseng products, said he, too, has noticed Chinese “wallets have gotten thinner.”Mr. An said sales for the company’s main product, a 2 ounce bottle of a ginseng drink that sells for $18, peaked before the pandemic. The company shipped 600,000 bottles into China and Hong Kong in 2019.There are 12,000 Adidas stores in China, up from 9,000 in 2015, but the company said it expects China revenue to “decline significantly” this year.Giulia Marchi for The New York TimesSales plunged in 2020 because it was hard to get products into the country during Covid lockdowns. Business has mostly bounced back, although it is still down 10 to 20 percent from the peak.While Mr. An said he is concerned about the economic slowdown, he remains optimistic that the market for health products in China, and a familiarity with ginseng — an aromatic root said to have health benefits — will continue to benefit sales. To hedge his bets, though, he is also seeking regulatory approval to sell in Europe.That is a far cry from the unbridled optimism of the past.In 2016, when China was its fastest growing and most profitable market, Kasper Rorsted, the chief executive at Adidas, declared that the country was “the star of the company.” Adidas invested aggressively to expand its foothold. It went from 9,000 stores in China in 2015 to its current 12,000, though only 500 are operated by Adidas. Then the music stopped.After initially projecting that sales in China would accelerate this year, Adidas ratcheted down expectations in May as Covid lockdowns continued to spread. The company said it now expects China revenue to “decline significantly” and that a sudden rebound is unlikely.For now, Adidas remains undeterred. Mr. Rorsted said on a call with analysts that the company is not planning to slash costs or pull back from the country. Instead, it will “do whatever we can to double down and accelerate the growth.”Many foreign companies had bet on the rise of a Chinese middle class as a dependable source of that growth. Bain & Company, a consulting firm, said it expects China to be the world’s largest luxury market by 2025, fueled in part by what Federica Levato, a senior partner, said is still “a big wave” of a rising middle class.Kamps Hardwoods, a Michigan-based manufacturer of lumber used in homes and furniture, said China provided an opportunity to expand — at first.Sarah Rice for The New York TimesRob Kukowski, the general manager of Kamps, said China is such a big buyer of U.S. lumber that the pain is felt by the entire industry when it stops spending.Sarah Rice for The New York TimesBy 2016, China accounted for 80 percent of Kamps’s sales.Sarah Rice for The New York TimesBut those kinds of predictions look less enticing for some foreign companies that once relied heavily on the Chinese market.Kamps Hardwoods, a Michigan-based manufacturer of kiln-treated lumber used for homes and furniture, seized on the opportunity to expand in China — at first. At a Chinese trade show in 2015, Rob Kukowski, the company’s general manager, said a Chinese buyer stunned him with a huge offer to buy enough stock to fill 99 shipping containers. The $2 million order of lumber accounted for four months’ worth of business for Kamps.Chinese buyers were so desperate for lumber back then that they would visit the company’s booth and refuse to leave until Mr. Kukowski accepted a million-dollar deal on the spot. By 2016, China accounted for 80 percent of the company’s sales.Kamps soon realized that it was hard to make a profit from the large Chinese orders because many buyers were not interested in quality and only wanted the cheapest possible price. The company started to focus its effort on finding customers in the United States and other overseas markets who were willing to pay more for a better product.It was fortuitous timing. When China raised tariffs on U.S. lumber in 2018 as part of a trade war, Kamps was better positioned to weather the downturn. Today, China accounts for only 10 percent of Kamps’s sales, but it still has a large indirect impact on the company. Mr. Kukowski said China is such a big buyer of U.S. lumber that a downward price war ensues throughout the industry when it stops spending.“With their purchasing power being so strong and so much of our product going into that market,” Mr. Kukowski said. “Our industry is going to run into significant problems if their economy slows.”Jin Yu Young More

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    Ice Cream Trucks Are the Latest Target of Inflation

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    Inflation and its rising fuel prices have pushed some ice cream truck owners to the brink.On a steamy evening at Flushing Meadows Corona Park in Queens, Jaime Cabal had a line of customers at his Mister Softee ice cream truck. He blended milkshakes, topped bowls of vanilla soft-serve with strawberries and dipped cones into cherry and blue-raspberry shell. One boy no sooner finished his treat than he begged his parents for more, pointing at the menu’s pops shaped like SpongeBob SquarePants, Sonic the Hedgehog and Tweety.Crowds like these are becoming rarer for ice cream vendors across the country as high fuel prices feed inflation, leaving some owners of soft-serve trucks questioning their future in the business.Owning an ice cream truck used to be a lucrative proposition, but for some, the expenses have become untenable: The diesel that powers the trucks has topped $7 a gallon, vanilla ice cream costs $13 a gallon and a 25-pound box of sprinkles now goes for about $60, double what it cost a year ago.Many vendors say the end of the ice-cream-truck era has been years in the making. Even the garages that house these trucks are evolving, renting parking spaces to other types of food vendors as the ranks of ice cream trucks dwindle.For much of the day at Flushing Meadows Corona Park in Queens, Mr. Cabal sits in his truck waiting for customers.Jose A. Alvarado Jr. for The New York TimesParks, pools and residential streets used to be prime territory for the ice cream man. But now, more often than not, a soft-serve truck’s jingle plays to a crowd of no one as prices for some cones with add-ons like swirly ice cream and chocolate sauce reach $8 on some trucks.Though no organization appears to have hard figures on just how many ice-cream trucks are currently working the streets of New York City, some owners said they would likely leave the business in the next few years. It’s a sentiment that is felt nationwide, where mobile ice-cream vendors face higher costs for city permits and registration, and hefty competition from other ice cream businesses, said Steve Christensen, the executive director of the North American Ice Cream Association.The ice cream truck, he said, is “unfortunately becoming a thing of the past.”New delivery methods, through third-party apps or ghost kitchens, are proliferating. Brick-and-mortar scoop shops are focusing on offering a fun experience, he said, and serve dozens more flavors than a traditional ice cream truck can, driving lines away from these vehicles.“It’s horrible,” said Mr. Cabal, the ice cream vendor in Queens, who has worked on ice cream trucks for the last nine years. Inflation has even raised the cost of mechanical parts for the truck. Last year, when his slushy machine broke down, a part he needed cost $1,600. He decided to wait a few more months to fix it, but part nearly doubled in cost, to $3,000. Now, the slushy is off the menu and the machine is sitting in his garage.In 2018, Mr. Cabal thought business in the Flushing Meadows Corona Park would be good enough to support his own truck, so he sold his house in New Jersey for $380,000, moved to Hicksville, N.Y., and bought a Mister Softee franchise. He won a contract with the city to operate in the park.Despite the tens of thousands of dollars he pays each year for that permit and others, Mr. Cabal has contended with unlicensed vendors who sell fruit, empanadas and Duro wheels from baby strollers, and even ice cream from pushcarts strategically placed around his truck. He said they undercut him on price so much that it’s impossible for him to compete. Ramon Pacheco said many of his 27 years in the ice cream truck business were profitable, but the pandemic has drastically cut into customer traffic.Jose A. Alvarado Jr. for The New York TimesIn Lower Manhattan, Ramon Pacheco is struggling with his recent decision to raise his prices by 50 cents to account for some of his increased daily expenses, like $80 in gasoline ($15 before the pandemic) and $40 in diesel, ($18 earlier). He now pays about $41 for the three gallons of vanilla ice cream that used to cost him $27.He has sold ice cream for 27 years, and since the pandemic, he said he’s noticed a drop-off in demand. He now takes in as little as $200, before expenses, selling ice cream for nine hours. Sometimes, if a regular customer comes to him with $2 for ice cream, he’ll just sell it at a loss.“I’m 66, and I’m tired,” Mr. Pacheco said in Spanish, adding that he is thinking of selling his truck next year.Carlos Cutz decided to leave his job at a deli two years ago to work on an ice cream truck to support himself, his wife and their three children. He took out a loan and bought his own truck in May.The ice cream man he bought it from had a route in Williamsburg, Brooklyn, and Mr. Cutz has resisted raising the prices to avoid alienating his customer base, even though his expenses have doubled for products like a package of 250 cake cones.“These have been the worst years for ice cream trucks,” he said in Spanish, adding “I’m going to try to do the best that I can to continue with this business. I’m feeding my family, and I can’t leave a business I haven’t tried.”Carlos Cutz decided to leave his job at a deli and buy an ice cream truck.Jose A. Alvarado Jr. for The New York TimesThe price of gasoline has been the most shocking expense in recent months for Andrew Miscioscia, the owner of Andy’s Italian Ices NYC which operates three trucks for private catering events. He spent $6,800 in June on gas alone. Mr. Miscioscia pivoted to catering during the pandemic when sales slipped on the Upper West Side.“People are not getting out like they used to,” he said. “And there’s a lot of competition out there.”Still, the appearance of an ice cream truck on a hot summer day remains a thrill for many. At Flushing Meadows Corona Park, Domenica Chumbi, of Hillside, N.J., held a vanilla cone dipped in cherry shell for her quinceañera photos. The pink-hued ice cream not only matched her dress and her party’s theme of cherry blossoms, but it also summoned memories of childhood visits to the park.“It’s something that reminds me of New York,” she said.Follow New York Times Cooking on Instagram, Facebook, YouTube, TikTok and Pinterest. Get regular updates from New York Times Cooking, with recipe suggestions, cooking tips and shopping advice. More

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    After Enduring a Pandemic, Small Businesses Face New Worries

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    It has been a tough few years for companies without the scale to cruise through disruption. Making money isn’t getting any easier.America’s small businesses can’t catch a break.After two years of shutdowns and restrictions due to the Covid-19 pandemic, they’re straining to keep up with price increases without losing customers to larger competitors. They are struggling to keep positions filled as competition for workers remains at a fever pitch. And just at the moment that many business owners begin to recover and shore up their depleted savings, they’re worried that the Federal Reserve’s medicine for inflation will bring fresh hardship: higher borrowing costs and timid consumers.Surveys show that small-business sentiment has taken a markedly pessimistic turn in recent months — even more so than that of professional forecasters and of corporate executives.In June, the National Federation of Independent Business measured its lowest reading ever for economic expectations. The nonprofit Small Business Majority, in a survey in mid-July, found that nearly one in three small businesses couldn’t survive for more than three months without additional capital or a change in business conditions. The U.S. Chamber of Commerce’s Small Business Index for the second quarter showed that inflation had skyrocketed to the top of owners’ concerns. Seventy-five percent of participants in Goldman Sachs’s small-business coaching program reported that higher costs had impaired their finances.The sector — which the federal government typically defines as businesses below a certain size, ranging from 500 to 1,500 employees depending on the industry — is responsible for two of every three jobs created over the past 25 years, according to the Labor Department. So a weakening of that engine bodes ill for American growth and prosperity.Corinne Hodges runs the Association of Women’s Business Centers, a national network offering training, mentoring and financing to entrepreneurs. The organization’s funding from the Small Business Administration was augmented to help thousands of businesses navigate the pandemic, but, with the extra money now exhausted, the centers are laying off advisers, just as clients are asking for more help.“We saw pivoting in Covid,” Ms. Hodges said. “Well, what is it now? What’s the new pivot? It’s just been a vise grip of pressure emerging from the pandemic. Is a pivot going to be enough, or does it need to be something more?”Kymme Williams-Davis was one of those who survived pivot after pivot, and she isn’t sure she can make it much longer.Seven years ago, she started a coffee shop in Brooklyn called Bushwick Grind, specializing in fair-trade beans that are locally roasted. She spent $200,000 building out the space with a kitchen, and developed a brisk business selling healthier fare than that of the fast food outlets around her.When the pandemic hit, the shop had to close for nine months. Ms. Williams-Davis made rent by subletting the space to other small vendors. When she reopened in 2021, she got a boost from a contract to deliver 400 meals a day to the city’s vaccine sites. That cash flow allowed her to qualify for a loan to buy her own space.But she hasn’t been able to find anything in Brooklyn, in part because large investors keep outbidding her. Foot traffic hasn’t recovered. The cost of coffee, kale and other provisions — if she can even get them — is skyrocketing. Farmers from upstate are saving on gas by taking fewer trips into the city, so she has begun to swap in lower-grade ingredients.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    China’s Economy Hits a Slump as Covid Policy Takes a Toll

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    High unemployment, a housing market in crisis and sluggish consumer spending during lockdowns are putting pressure on Beijing in a year when officials are focused on projecting stability.When countries around the world have stumbled in the face of pandemic headwinds, China has often stood apart, seemingly impervious to financial pressures that undermined growth.But now, dragged down by its commitment to curbing the spread of Covid-19 with widespread lockdowns and mass quarantines, China has suffered one of its worst quarters in years, threatening a global economy heavily dependent on Chinese factories and consumers.For the country’s ruling Communist Party, the downturn could put added pressure on Beijing at a sensitive moment. China is scheduled to hold its party congress later this year. A thriving economy and growing wealth was part of the bargain that Chinese citizens accepted in exchange for living under authoritarian rule.But the lockdowns, a staple of Beijing’s zero-Covid policy, have heightened the risk of instability — both socially and economically.The National Bureau of Statistics in China said on Friday that the economy expanded 0.4 percent from a year earlier in the second quarter, worse than some economists’ expectations. It was the lowest growth rate since the first three months of 2020, when the country effectively shut down to fight the early stages of the pandemic, and its economy shrank for the first time in 28 years.The 2020 downturn was short-lived, with the Chinese economy recovering almost immediately. But the current outlook is not so promising. Unemployment is close to the highest levels on record. The housing market is still a mess, and small businesses are bearing the brunt of weakness in consumer spending.“China is the shoe that has never dropped in the global economy,” said Kenneth Rogoff, a professor of economics at Harvard University and a former chief economist for the International Monetary Fund. “China is no position to be the global engine of growth right now, and the long-term fundamentals point to much slower growth in the next decade.”Construction in Beijing this month. China has urged local authorities to step up measures to ensure job stability during lockdowns.Wang Zhao/Agence France-Presse — Getty ImagesThis is an unwanted complication in a year when China is trying to project unwavering strength and stability. At the party congress, Xi Jinping, the country’s leader, is expected to coast to another five-year term, further cementing his grip on power.In May, Li Keqiang, China’s premier, called an emergency meeting and sounded the alarm about the need to gin up economic growth to more than 100,000 officials from businesses and local governments. The stark warning cast doubt about China’s ability to reach its earlier growth target of 5.5 percent for the year. The Latest on China: Key Things to KnowCard 1 of 6China’s economy stumbles. More

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    Fed Confronts a ‘New World’ of Inflation

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    Central banks had a longstanding playbook for how inflation worked. In the postpandemic era, all bets are off.Federal Reserve officials are questioning whether their longstanding assumptions about inflation still apply as price gains remain stubbornly and surprisingly rapid — a bout of economic soul-searching that could have big implications for the American economy.For years, Fed policymakers had a playbook for handling inflation surprises: They mostly ignored disruptions to the supply of goods and services when setting monetary policy, assuming they would work themselves out. The Fed guides the economy by adjusting interest rates, which influence demand, so keeping consumption and business activity chugging along at an even keel was the primary focus.But after the global economy has been rocked for two years by nonstop supply crises — from shipping snarls to the war in Ukraine — central bankers have stopped waiting for normality to return. They have been raising interest rates aggressively to slow down consumer and business spending and cool the economy. And they are reassessing how inflation might evolve in a world where it seems that the problems may just keep coming.If the Fed determines that shocks are unlikely to ease — or will take so long that they leave inflation elevated for years — the result could be an even more aggressive series of rate increases as policymakers try to quash demand into balance with a more limited supply of goods and services. That painful process would ramp up the risk of a recession that would cost jobs and shutter businesses.“The disinflationary forces of the last quarter-century have been replaced, at least temporarily, by a whole different set of forces,” Jerome H. Powell, the Fed chair, said during Senate testimony on Wednesday. “The real question is: How long will this new set of forces be sustained? We can’t know that. But in the meantime, our job is to find maximum employment and price stability in this new economy.”When prices began to pick up rapidly in early 2021, top Fed policymakers joined many outside economists in predicting that the change would be “transitory.” Inflation had been slow in America for most of the 21st century, weighed down by long-running trends like the aging of the population and globalization. It seemed that one-off pandemic shocks, especially a used-car shortage and ocean shipping issues, should fade with time and allow that trend to return.But by late last year, central bankers were beginning to rethink their initial call. Supply chain problems were becoming worse, not better. Instead of fading, price increases had accelerated and broadened beyond a few pandemic-affected categories. Economists have made a monthly habit of predicting that inflation has peaked only to see it continue to accelerate.Now, Fed policymakers are analyzing what so many people missed, and what it says about the unrelenting inflation burst.“Of course we’ve been looking very carefully and hard at why inflation picked up so much more than expected last year and why it proved so persistent,” Mr. Powell said at a news conference last week. “It’s hard to overstate the extent of interest we have in that question, morning, noon and night.”The Fed has been reacting. It slowed and then halted its pandemic-era bond purchases this winter and spring, and it is now shrinking its asset holdings to take a little bit of juice out of markets and the economy. The central bank has also ramped up its plans to raise interest rates, lifting its main policy rate by a quarter point in March, half a point in May and three-quarters of a point last week while signaling more to come.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.An Economic Cliff: Inflation is expected to remain high later this year even as the economy slows and layoffs rise. For many Americans, it’s going to hurt.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. It is making those decisions without much of an established game plan, given the surprising ways in which the economy is behaving.“We’ve spent a lot of time — as a committee, and I’ve spent a lot of time personally — looking at history,” Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said in an interview on Wednesday. “Nothing quite fits this situation.”A recruiter at a job fair in North Miami Beach, Fla., last week. Labor shortages are pushing up wages, which is likely contributing to higher inflation. Scott McIntyre for The New York TimesGas prices have helped drive inflation higher.Scott McIntyre for The New York TimesThe economic era before the pandemic was stable and predictable. America and many developed economies spent those decades grappling with inflation that seemed to be slipping ever lower. Consumers had come to expect prices to remain relatively stable, and executives knew that they could not charge a lot more without scaring them away.Shocks to supply that were outside the Fed’s control, like oil or food shortages, might push up prices for a while, but they typically faded quickly. Now, the whole idea of “transient” supply shocks is being called into question.The global supply of goods has been curtailed by one issue after another since the onset of the pandemic, from lockdowns in China that slowed the production of computer chips and other goods to Russia’s invasion of Ukraine, which has limited gas and food availability.At the same time, demand has been heady, boosted by government pandemic relief checks and a strong labor market. Businesses have been able to charge more for their limited supply, and consumer prices have been picking up sharply, climbing 8.6 percent over the year through May.Research from the Federal Reserve Bank of San Francisco released this week found that demand was driving about one-third of the current jump in inflation, while issues tied to supply or some ambiguous mix of supply-and-demand factors were driving about two-thirds.That means that returning demand to more normal levels should help ease inflation somewhat, even if supply in key markets remain roiled. The Fed has been clear that it cannot directly lower oil and gas prices, for instance, because those costs turn more on the global supply than they do on domestic demand.“There’s really not anything that we can do about oil prices,” Mr. Powell told senators on Wednesday. Still, he added later, “there is a job to moderating demand so that it can be in better balance with supply.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Covid Vaccine and Fisheries Deals Close a ‘Roller Coaster’ W.T.O. Meeting

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    Members of the global trade group were forced to scale back plans for more ambitious agreements, but they were ultimately able to reach several deals at a meeting in Geneva.WASHINGTON — Members of the World Trade Organization announced several agreements on Friday at the close of their first in-person ministerial conference in four years, pledging to rein in harmful government policies that have encouraged overfishing and relax some controls on intellectual property in an effort to make coronavirus vaccines more widely available.The agreements were hard fought, coming after several long nights of talks and extended periods when it appeared that the meeting would yield no major deals at all. Indeed, while the parties were able to reach a compromise on vaccine technology, the divide remained so deep that both sides criticized the outcome.“It was like a roller coaster, but in the end we got there,” Ngozi Okonjo-Iweala, the director general of the World Trade Organization, said at an early-morning news conference in Geneva after the group’s members approved the final package of agreements.The deals were an important success for an organization that has come under fire for being unwieldy, bureaucratic and mired in disagreement. But several of the government officials, business leaders and trade experts who descended on the trade body’s headquarters on the shore of Lake Geneva this week described the agreements as the bare minimum and said the trade organization, while still operational, was hardly thriving.Wendy Cutler, a vice president at the Asia Society Policy Institute and a former trade negotiator, wrote in an email that the deals, “when packaged together, are enough to claim success but by no means suggest that the W.T.O. has turned a corner.”Ministers ended up stripping out some of the most meaningful elements of a deal to combat harmful subsidies for fishers that have depleted global fish stocks, Ms. Cutler said, and the pandemic response was “too little, too late.”The outcomes “seem particularly meager in light of the grave challenges facing the global economy, ranging from sluggish growth to a serious food crisis to climate change,” she said.To address the growing food crisis around the world, which has been brought on by the pandemic and the war in Ukraine, the group’s members made a mutual declaration to encourage trade in food and try to avoid export bans that are exacerbating shortages.The trade organization also agreed to temporarily extend a ban on taxes or customs duties on electronic transmissions, including e-books, movies or research that might be sent digitally across borders. But the debate was difficult and protracted over an issue that many businesses and some government officials argued should be low-hanging fruit.“Ministers spent the entire week preventing the demise of the e-commerce moratorium, instead of looking ahead at how to strengthen the global economy,” said Jake Colvin, the president of the National Foreign Trade Council, which represents major multinational businesses.One of the trade body’s biggest accomplishments was reaching an agreement to help protect global fishing stocks that has been under negotiation for the last two decades.Governments spend $22 billion a year on subsidies for their fishing fleets, often encouraging industrial fishing operations to catch far more fish than is sustainable, according to the Pew Charitable Trusts. The agreement would create a global framework for sharing information and limiting subsidies for illegal and unregulated fishing operations, as well as for vessels that are depleting overfished stocks or operating on the unregulated high seas.In the organization’s over 25-year history, the deal was only the second agreement on adjusting trade rules to be signed by all of the body’s members. And it was the group’s first agreement centered on environmental and sustainability issues.Oceans advocates had mixed reactions.Isabel Jarrett, manager of the Pew Charitable Trusts’ project to reduce harmful fisheries subsidies, called the agreement “a turning point in addressing one of the key drivers of global overfishing.”“Curbing the subsidies that drive overfishing can help restore the health of fisheries and the communities that rely on them,” she said. “The W.T.O.’s new agreement is a step towards doing just that.”But others expressed disappointment. “Our oceans are the big loser today,” said Andrew Sharpless, the chief executive of Oceana, a nonprofit group focused on ocean conservation. “After 20 years of delay, the W.T.O. failed again to eliminate subsidized overfishing and in turn is allowing countries to pillage the world’s oceans.”As part of the agreement, negotiations will continue with the goal of making recommendations on additional provisions to be considered at next year’s ministerial conference.World Trade Organization members also agreed to loosen intellectual property rules to allow developing countries to manufacture patented Covid-19 vaccines under certain circumstances. Katherine Tai, the U.S. trade representative, said in a statement that the trade organization’s members “were able to bridge differences and achieve a concrete and meaningful outcome to get more safe and effective vaccines to those who need it most.”The issue of relaxing intellectual property rights for vaccines had become highly controversial. It pitted the pharmaceutical industry and developed countries that are home to their operations, particularly in Europe, against civil society organizations and delegations from India and South Africa.Stephen J. Ubl, the president and chief executive of the Pharmaceutical Research and Manufacturers of America, said the agreement had “failed the global population.” Global vaccine supplies are currently plentiful, he said, and the agreement did little to address “real issues affecting public health,” such as supply chain bottlenecks or border tariffs on medicines.Lori Wallach, the director of the Rethink Trade program at the American Economic Liberties Project, called the outcome “a dangerous public health fail” and “a vulgar display of multilateralism’s demise” in which a few rich countries and pharmaceutical companies blocked the will of more than 100 countries to improve access to medicines. The agreement did not loosen intellectual property rights for treatments or therapeutics, as civil society groups had wanted.Divisions between rich and poor countries and between big business and civil society groups were apparent in other negotiations, which were also overlaid with the geopolitical challenges of a global pandemic and the Russian invasion of Ukraine.The World Trade Organization requires consensus from all of its 164 members to reach agreements, and India emerged as a significant obstacle in several of the negotiations, including over e-commerce duties and fishery subsidies.Mr. Colvin said the requirement of unanimous consent had put severe limits on the trade body’s ability to produce meaningful outcomes. “The system is set up to reward hostage-taking and bad faith,” he said.Catrin Einhorn More

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    Hiring Remains Strong Even as Fed Tries to Cool Economy

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    The Labor Department reported 390,000 new jobs in May, as policymakers try to ease inflation without inducing a recession.American employers extended an impressive run of hiring in May, even as policymakers took steps to cool the economy in an effort to ease high inflation.The Labor Department reported Friday that employers added 390,000 jobs, the 17th straight monthly gain. The unemployment rate was 3.6 percent for the third straight month, a touch away from a half-century low.At the same time, the labor force grew by 330,000 people, and the share of adults employed or looking for work continued to edge closer to prepandemic levels.The data signaled that the Federal Reserve’s initial moves to dial back its monetary support for the economy were — at least so far — not constraining business activity so much that hiring was feeling a pinch.After the strong rebound from the depths of the coronavirus lockdowns — all but 800,000 of the 22 million jobs that were lost have been recovered — the Fed has shifted its emphasis from maximum employment to its other mandate: price stability. The challenge is to apply its primary tool, a steady series of interest-rate increases, without inflicting a recession.“I think we’re on sort of what looks like a glide path right now, and that’s good — nothing’s broken,” said Guy Berger, the principal economist at the career-focused social network LinkedIn. “But keep fast-forwarding it a year and the question marks are still big.”The closely watched indicators include the impact on wages, which have been increasing at a pace not seen in decades, though not enough to keep up with inflation over the past year. The Fed is worried that rising labor costs will be passed along to consumers.Wages kept rising across industries.Percent change in average hourly earnings for nonmanagers since January 2019

    Data is seasonally adjusted. Not adjusted for inflation.Source: Bureau of Labor StatisticsBy The New York TimesOn that score, the Labor Department report showed little change in trajectory. Average hourly earnings rose 0.3 percent from the previous month, the same pace as in April, and were 5.2 percent higher than a year earlier, compared with a 5.5 percent year-over-year increase in April.“It’s moderating, but it’s not moderating to a level, I think, where it’s consistent with the Fed’s inflation goals,” said Michael Feroli, chief U.S. economist at J.P. Morgan, said of wage growth. He said the Fed would probably want wages to cool toward an annualized 3.5 percent pace, at the higher end, a rate that officials view as aligned with 2 percent inflation.The State of Jobs in the United StatesJob gains continue to maintain their impressive run, even as government policymakers took steps to cool the economy and ease inflation.May Jobs Report: U.S. employers added 390,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fifth month of 2022.Vacancies: Employers had 11.4 million vacancies in April down from a revised total of nearly 11.9 million the previous month, which was a record.Opportunities for Teenagers: Jobs for high school and college students are expected to be plentiful this summer, and a large market means better pay.Higher Interest Rates: Spurred by red-hot inflation, the Federal Reserve has begun raising interest rates. What does that mean for the job market?President Biden gave a nuanced celebration of the jobs data in remarks on Friday, emphasizing recent gains while arguing that a slowdown would be welcome, allowing inflation to ease.“The point is this: We’ve laid an economic foundation that’s historically strong,” Mr. Biden said. “Now we’re moving forward to a new moment, where we can build on that foundation, build a future of stable, steady growth so that we can bring down inflation without sacrificing all of the historic gains that we have made.”Stocks declined on Friday and bond yields rose as investors evidently read the report as reinforcing the Fed’s muscular efforts, which risk denting economic growth. “The better the data, the more difficult that a pause or reduced pace of tightening later this year becomes,” analysts at TD Securities wrote in a research report published after the jobs numbers were released.The continued job gains are among many indications of a vibrant economy. Reports from the nation’s largest banks show checking accounts are still above 2019 levels for nearly all income groups. New bankruptcies and debt-collection proceedings are both at their lowest levels since tracking began in 1999.Yet those encouraging trends have been at odds with the generally sour national mood, dominated by inflation concerns. U.S. consumer sentiment declined in early May to the lowest since 2011, according to the University of Michigan.The unemployment rate stayed flat in May.The share of people who have looked for work in the past four weeks or are temporarily laid off More