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    Yellen Says China Trade Deal Has ‘Hurt American Consumers’

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    The Treasury secretary said an agreement made by the Trump administration, which remains under review, had failed to address fundamental problems between the two countries.WASHINGTON — Treasury Secretary Janet L. Yellen has cast doubt on the merits of the trade agreement between the United States and China, arguing that it has failed to address the most pressing disputes between the world’s two largest economies and warning that the tariffs that remain in place have harmed American consumers.Ms. Yellen’s comments, in an interview with The New York Times this week, come as the Biden administration is seven months into an extensive review of America’s economic relationship with China. The review must answer the central question of what to do about the deal that former President Donald J. Trump signed in early 2020 that included Chinese commitments to buy American products and change its trade practices.Tariffs that remain on $360 billion of Chinese imports are hanging in the balance, and the Biden administration has said little about the deal’s fate. Trump administration officials tried to create tariffs that would shelter key American industries like car making and aircraft manufacturing from what they described as subsidized Chinese exports.But Ms. Yellen questioned whether the tariffs had been well designed. “My own personal view is that tariffs were not put in place on China in a way that was very thoughtful with respect to where there are problems and what is the U.S. interest,” she said at the conclusion of a weeklong trip to Europe.President Biden has not moved to roll back the tariffs, but Ms. Yellen suggested that they were not helping the economy.“Tariffs are taxes on consumers. In some cases it seems to me what we did hurt American consumers, and the type of deal that the prior administration negotiated really didn’t address in many ways the fundamental problems we have with China,” she said.But reaching any new deal could be hard given rising tensions between the two countries on other issues. The Biden administration warned U.S. businesses in Hong Kong on Friday about the risks of doing business there, including the possibility of electronic surveillance and the surrender of customer data to the authorities.Chinese officials would welcome any unilateral American move to dismantle tariffs, according to two people involved in Chinese policymaking. But China is not willing to halt its broad industrial subsidies in exchange for a tariff deal, they said.Xi Jinping, China’s top leader, has sought technological self-reliance for his country and the creation of millions of well-paid jobs through government assistance to Chinese manufacturers of electric cars, commercial aircraft, semiconductors and other products.It might be possible to make some adjustments at the margins of these policies, but China is not willing to abandon its ambitions, said both people, who spoke on the condition of anonymity because they were not authorized to discuss the issue publicly.Academic experts in China share the government’s skepticism that any quick deal can be achieved.“Even if we go back to the negotiating table, it will be tough to reach an agreement,” said George Yu, a trade economist at Renmin University in Beijing.The Trump administration also sought, without success, to persuade Chinese officials to abandon heavy subsidies for high-tech industries. Robert E. Lighthizer, Mr. Trump’s trade representative, ended up imposing tariffs aimed at preventing subsidized Chinese companies from driving American companies out of business.Getting China to Buy American MadeThe United States and China named last year’s pact the Phase 1 agreement, and promised to negotiate a second phase. But that never happened.The tariffs have played a particularly large role in the auto industry.In response to Mr. Trump’s 25 percent tariff on imported gasoline-powered and electric cars from China, American automakers like Ford Motor have abandoned plans to import inexpensive cars from their Chinese factories. Chinese automakers like Guangzhou Auto have also shelved plans to enter the American market.Chinese car exports have surged this spring as new factories come into production, many of them built with extensive subsidies. But the inexpensive Chinese cars have mainly gone elsewhere in Asia and to Europe, even as car prices in the United States have climbed.Ms. Yellen did not specifically address automotive tariffs.The first phase of the trade deal included a requirement for a high-level review this summer. The agreement requires China to stop forcing foreign firms to transfer their technology to Chinese companies doing business there.Phase 1 also included a Chinese pledge to buy an additional $200 billion of American goods and services through the end of this year. The agreement was intended to make sure that China did not retaliate for American tariffs by discouraging Chinese companies from buying American goods.Although China has resumed large-scale purchases of U.S. goods since the countries’ trade war, neither the overall value of these purchases nor the composition of purchases has met the Trump administration’s hopes.China fell short of its commitments by 40 percent last year and is off by more than 30 percent so far this year, said Chad P. Bown of the Peterson Institute for International Economics, who has been tracking the purchases. The pace of agricultural purchases has picked up, but China is not buying enough cars, airplanes or other products made in the United States to meet its obligations.China also pledged in the Phase 1 agreement that its purchases of American goods would continue rising from 2022 through 2025.Biden’s Blended ApproachThe Biden administration is cognizant that all of these purchase requirements have frustrated American allies who feel that the agreement has cost them sales.One reason China is not eager to reopen potentially acrimonious negotiations over American tariffs and Chinese subsidies is that the Phase 1 agreement has transformed trade relations between the two countries, said the people familiar with Chinese economic policymaking. Trade has gone from being one of their biggest sources of friction to becoming one of the least contentious areas of their relationship.Under Mr. Biden, the United States has maintained pressure on China and in some respects stepped it up, focusing on concerns about its humanitarian record that Mr. Trump usually overlooked.In March, the Biden administration placed sanctions on top Chinese officials as part of an effort with Britain, Canada and the European Union to punish Beijing for human rights abuses against the largely Muslim Uyghur minority group.In June, the White House took steps to crack down on forced labor in the supply chain for solar panels in the Chinese region of Xinjiang, including a ban on imports from a silicon producer there. It also set aside a dispute with Europe over aircraft subsidies for Boeing and Airbus in June so that the United States could more effectively corral allies to counter China’s ambitions to dominate key industries.China has also been accelerating the pace of “decoupling” from the United States, directing its technology companies to avoid initial public offerings in the United States and list in Hong Kong instead. That has been a big blow to Wall Street firms that have reaped large advisory fees from Chinese companies listing their shares in the United States.Katherine Tai, the U.S. trade representative, has said little so far about the Phase 1 agreement, preferring to emphasize that the administration is still developing its policy toward China.Pete Marovich for The New York TimesThe Treasury Department, with its close ties to Wall Street, has long been much more wary of antagonizing China than the Office of the United States Trade Representative, a separate cabinet agency that oversees trade policy. Katherine Tai, Mr. Biden’s trade representative, has said little so far about the Phase 1 agreement, preferring to emphasize instead that the administration is still developing its policy toward China.Ms. Yellen’s official meetings with her Chinese counterparts have so far been sparse. The Treasury Department announced last month that she had held a virtual call with Liu He, China’s vice premier. They discussed the economic recovery and areas of cooperation, and Ms. Yellen raised concerns about China’s human rights record.She expressed those concerns publicly during a speech in Brussels this week, telling European finance ministers that they should work together to counter “China’s unfair economic practices, malign behavior and human rights abuses.”The comment made waves within the Chinese government. A spokesman for China’s Ministry of Foreign Affairs, Zhao Lijian, said that “China categorically rejects” Ms. Yellen’s remarks and described them as a smear.The Biden administration has won praise for maintaining a hawkish stance toward China without the provocative approach of the Trump administration, which destabilized the global economy with tariffs and a trade war.“Joe Biden has done what he said he would do — he has collected the allies and got them aligned in a similar manner on similar issues in a way that greatly strengthens America’s position vis a vis China,” said Craig Allen, president of the US-China Business Council.Michael Pillsbury, the Hudson Institute scholar who was one of Mr. Trump’s top China advisers, said the Biden administration’s approach to China was shaping up to be tougher and “more effective” than Mr. Trump’s because Mr. Biden’s aides were united in their view that the United States cannot successfully confront China alone.The big question is what comes next.Mr. Bown, of the Peterson Institute, said the Biden administration’s review of the China trade policy was taking so long most likely because the Trump administration had made so many sweeping and sometimes conflicting actions that it was a complicated portfolio to inherit. There are also complex political calculations to be made when it comes to removing the tariffs.“It’s politically toxic to be seen to be weak on China, so you’re going to need to have your ducks in a row in terms of your economic arguments,” Mr. Bown said.Despite the recent animosity, the United States was able to help coax China into joining the global tax agreement that Ms. Yellen has been helping to broker. The Biden administration believes that China wants to be part of the multilateral system and that fully severing ties between the two countries would not be healthy for the global economy.“I think we should maintain economic integration in terms of trade and capital flows and technology where we can,” Ms. Yellen said, adding that the relationship must balance security requirements. “Clearly, national security considerations have to be very carefully evaluated and we may have to take actions where, when it comes to Chinese investment in the United States or other supply chain issues, where we really see a national security need.”Alan Rappeport reported from Washington, and Keith Bradsher from Beijing. More

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    Inflation? Not in Japan. And That Could Hold a Warning for the U.S.

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    If the United States’ current bout of rising prices soon eases, its economy could fall back into the cycle of weak inflation that preceded the pandemic — a situation much like Japan’s.TOKYO — In the United States, everyone is talking about inflation. The country’s reopening from the coronavirus pandemic has unleashed pent-up demand for everything from raw materials like lumber to secondhand goods like used cars, pushing up prices at the fastest clip in over a decade.Japan, however, is having the opposite problem. Consumers are paying less for many goods, from Uniqlo parkas to steaming-hot bowls of ramen. While in the United States average prices have jumped by 5.4 percent in the past year, the Japanese economy has faced deflationary pressure, with prices dipping by 0.1 percent in May from the previous year.To some extent, the situation in Japan can be explained by its continued struggles with the coronavirus, which have kept shoppers at home. But deeper forces are also at play. Before the pandemic, prices outside the volatile energy and food sectors had barely budged for years, as Japan never came close to meeting its longtime goal of 2 percent inflation.It wasn’t for lack of trying. Over nearly a decade, Japanese policymakers have wielded nearly every trick in the economist’s playbook in an effort to coax prices higher. They have juiced the economy with cheap money, spent huge sums on fiscal stimulus like public works, and lowered interest rates to levels that made borrowing nearly free.But as Japan has learned the hard way, low inflation can be an economic quagmire. And that experience carries a warning for the United States if its current bout of inflation eases, as many economists expect, and its economy falls back into the cycle of weak inflation that preceded the pandemic.“Most economists, me included, are pretty confident that the Fed knows how to bring inflation down,” including by raising interest rates, said Joshua Hausman, an associate professor of public policy and economics at the University of Michigan who has studied Japan’s economy.However, “it’s much less clear, partly because of Japan’s experience, that we’re very good at bringing inflation up,” he added.For consumers, falling prices sound like a good thing. But from the perspective of most economists, they are a problem.Consumers are paying less for many goods, from Uniqlo parkas to steaming-hot bowls of ramen.Kazuhiro Nogi/Agence France-Presse — Getty ImagesInflation, they like to say, greases the economy’s gears. In small amounts, it increases corporate profits and wages, stimulating growth. It can also reduce the burden of debt, bringing down the relative costs of college loans and mortgages.Japan’s inability to lift inflation is “one of the biggest unsolved challenges in the profession,” said Mark Gertler, a professor of economics at New York University who has studied the issue.One popular explanation for the country’s trouble is that consumers’ expectations of low prices have become so entrenched that it’s basically impossible for companies to raise prices. Economists also point to weakening demand caused by Japan’s aging population, as well as globalization, with cheap, plentiful labor effectively keeping costs low for consumers in developed countries.The picture once looked very different. In the mid-1970s, Japan had some of the highest inflation rates in the world, approaching 25 percent.It wasn’t alone. Runaway prices set off by the 1970s oil crisis defined the era, including for a whole generation of economists who were groomed to believe that the most likely threat to financial stability was rapid inflation and that interest rates were the best tool to combat it.But by the early 1990s, Japan began experiencing a different issue. An economic bubble, fueled by a soaring stock market and rampant property speculation, burst. Prices began to fall.Japan attacked the problem with innovative policies, including using negative interest rates to encourage spending and injecting money into the economy through large-scale asset purchases, a policy known as quantitative easing.Shops and restaurants closed during a state of emergency in Osaka, Japan, in May. To some extent the situation in Japan can be explained by its continued struggles with the coronavirus.Carl Court/Getty ImagesIt seemed to do little good. Still, economists at the time saw Japan’s experience not as a warning to the world, but as an anomaly produced by bad policy choices and cultural quirks.That began to change with the financial crisis of 2008, when inflation rates around the world plummeted and other central banks adopted quantitative easing.The problem has been most notable in Europe, where inflation has averaged 1.2 percent since 2009, economic growth has been weak and some interest rates have been negative for years. During the same period, U.S. inflation averaged just below 2 percent. The Federal Reserve has kept its main interest rate at close to zero since March 2020.Some prominent economists viewed the low inflation as a sign that the U.S. and E.U. economies might be on the brink of so-called secular stagnation, a condition marked by low inflation, low interest rates and sluggish growth.They have worried that those trends will deepen as both economies begin to gray, potentially reducing demand and pushing up savings rates.In 2013, under newly elected Prime Minister Shinzo Abe, Japan began its most ambitious effort to tackle its weak economic growth and low inflation.The government embarked on a grand experiment of huge monetary and fiscal stimulus, buying enormous quantities of equities and lowering interest rates in hopes of encouraging borrowing and putting more money into the economy. As the supply of cash increased, the thinking went, its relative value would decline, effectively driving up prices. Flush with money, consumers and companies alike would spend more. Voilà, inflation.Former Prime Minister Shinzo Abe leaving his last cabinet meeting in Tokyo last year. Under Mr. Abe, Japan began an ambitious but unsuccessful effort to tackle its weak inflation.Kazuhiro Nogi/Agence France-Presse — Getty ImagesTo encourage spending, Japan adopted a policy, known as forward guidance, aimed at convincing people that prices would go up as it pledged to do everything in its power to achieve its inflation target of 2 percent.But the government’s efforts at persuasion fell short, so there was little urgency to spend, said Hiroshi Nakaso, a former deputy governor of the Bank of Japan and head of the Daiwa Institute of Research.Japan found itself in a vicious circle, said Takatoshi Ito, a professor of international and public affairs at Columbia University, who served on Japan’s Council on Economic and Fiscal Policy.Consumers came to expect “stable prices and zero inflation,” he said, adding that as a result, “companies are afraid of raising prices, because that would attract attention, and consumers may revolt.”The sluggish economy made companies reluctant to raise wages, he said, “and because real wages didn’t go up, probably consumption didn’t go up. So there was no increase for demand for products and services.”As inflation hardly moved, some economists wondered if Japan’s stimulus had been too conservative, even as it racked up one of the world’s largest debt burdens.Policymakers, citing a need to pay off the country’s debts and meet the growing costs of caring for an aging population, hedged against the spending by twice raising the country’s consumption tax, apparently weakening demand.A bus station in Tokyo. Economists point to Japan’s aging population as one reason for weakening demand.Charly Triballeau/Agence France-Presse — Getty ImagesIn the end, Mr. Abe’s experiment, known as Abenomics, may not have been as successful as hoped. But it has informed policymakers’ response to the pandemic, said Gene Park, a professor of political science at Loyola Marymount University in Los Angeles who studies Japan’s monetary policy.One takeaway, he said, is that governments could spend more than they had ever thought possible without setting off a rapid rise in inflation. Another is that they might have to spend considerably more than they had once considered necessary to stimulate growth.Japan “has given the U.S. more freedom to experiment with bolder measures,” Mr. Park said.During the pandemic, Japan, too, has tried to apply the lessons learned since 2013.The government has paid shops and restaurants to stay closed, handed out cash to every person in the country, and financed zero-interest loans for struggling businesses. Prices fell anyway. That was partly at the behest of the government itself, which recently pressured telecom companies to lower mobile phone fees it deemed too high. Most Japanese consumers are also still waiting to be vaccinated against the coronavirus, holding back economic activity.Even after the pandemic wanes, however, Japan’s inflation rates are likely to stay low, said Sayuri Shirai, an economics professor at Keio University in Tokyo and a former board member of the Bank of Japan.After all, the primary problem remains unchanged: No one is really sure why prices have stagnated.“The central bank probably doesn’t want to say that they cannot control inflation,” Ms. Shirai said. “Therefore, this issue has just been left without a clear discussion.” More

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    I.M.F. Board Backs $650 Billion Aid Plan to Help Poor Countries

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    The expansion of emergency reserves to help fund vaccines and pay down debt is politically contentious in the United States.VENICE — The International Monetary Fund took a step on Friday toward easing widening global inequality and helping poor nations get access to vaccines, saying its executive board approved a plan to issue $650 billion worth of reserve funds that countries can use to buy vaccines, finance health care and pay down debt.The decision comes at a pivotal moment as Covid-19 infections continue to spread among populations that have not been inoculated and as more contagious variants of the coronavirus are posing new health threats. The pandemic has drained the fiscal resources of poor countries over the past year, and the I.M.F. projected this week that faster access to vaccinations for high-risk populations could save 500,000 lives in the next six months.The new allocation of so-called Special Drawing Rights would be the largest such expansion of currency reserves in the I.M.F.’s history. If approved by the group’s board of governors, as is expected, the reserves could become available by the end of next month.“This is a shot in the arm for the world,” Kristalina Georgieva, managing director of the I.M.F., said in a statement. “The S.D.R. allocation will help every I.M.F. member country — particularly vulnerable countries — and strengthen their response to the Covid-19 crisis.”Ms. Georgieva made the announcement as finance ministers and central bank governors of the Group of 20 nations were gathering in Venice to discuss international tax policy, climate change and the global economic response to the pandemic. The I.M.F., established in 1944 to try to broker economic cooperation, has warned of a two-track economic recovery, with poor countries being left behind while advanced economies experience rapid expansions.Ahead of the meetings, Treasury Department officials said expanding access to vaccines would be a central topic of discussion. It is also a potentially contentious one, as some developing countries have suggested that advanced economies are not doing enough to ensure fair distribution of vaccines.“The immediate priority for developing countries is widespread access to vaccines that match their deployment programs,” David Malpass, president of the World Bank, said in a speech in Venice on Friday.Mr. Malpass called on G20 countries to share doses and remove all trade barriers to exporting finished vaccines and their components. He noted that the pandemic had aggravated structural weaknesses that had dogged developing countries for years.“Even as that is accomplished,” Mr. Malpass said of expanded vaccine distribution, “development faces years of setback and struggle.”Narrowing the gap between the fortunes of advanced and developing economies was a central topic on the first day of the G20 meetings in Venice. Bruno Le Maire, France’s finance minister, told reporters on Friday that inequality was a risk to the stability and security of Europe that could lead to an influx of refugees. He argued that it must be urgently addressed.It remains to be seen how far the $650 billion will go to help developing countries as they race to vaccinate people before new variants of the virus take hold, including the Delta variant, which has plunged many countries back into a health crisis.The United Nations Conference on Trade and Development called this year for $1 trillion worth of Special Drawing Rights to be made available by the I.M.F. as a “helicopter money drop for those being left behind.”Jubilee USA Network, a nonprofit organization that advocates debt relief for poor countries, praised the move by the I.M.F. and called on wealthy countries to do more to help.“This is the biggest creation of emergency reserve funds that we’ve ever seen, and developing countries will immediately receive more than $200 billion,” said Eric LeCompte, executive director of Jubilee USA Network. “Wealthy countries who receive emergency reserves they don’t need should transfer those resources to developing countries struggling through the pandemic.”The I.M.F., the World Bank, the World Health Organization and the World Trade Organization have created a new vaccine task force and called for an additional $50 billion investment to broaden access to supplies. The groups have also called on G20 countries to set a goal of having 40 percent of their populations vaccinated by the end of this year and 60 percent by the middle of next year.The United States has thrown its support behind the expansion of the I.M.F. reserves, reversing a Trump administration policy and angering Republican lawmakers in the process.The Trump administration balked at the proposal last year and prevented it from moving forward. It argued at the time that boosting the emergency reserves was an inefficient way to provide aid to poor countries and that doing so would provide more resources to advanced economies that did not need the help, like China and Russia.Republican lawmakers have since accused the Biden administration of bolstering the fortunes of adversaries, while doing little to actually help developing nations. Although Republicans have introduced legislation that would put restrictions on how the I.M.F. reserves were used if they were authorized, such proposals are unlikely to pass with Democrats in control of Congress.Under Treasury Secretary Janet L. Yellen, the United States has taken a different view from the Trump administration, and the United States supports the allocation. Ms. Yellen believes that rich countries will have little use for the S.D.R.s but that developing economies will be able to use them to get enough money to vaccinate their people.Treasury Secretary Janet Yellen, center, arriving for the Group of 20 finance ministers and central bank governors meeting in Venice on Friday.Andrea Merola/EPA, via ShutterstockSpecial Drawing Rights work by allowing member countries of the I.M.F. to cash the asset in for hard currency. Their value is based on a basket of international currencies and is reset every five years.Each of the 190 countries that is a member of the I.M.F. gets an allotment of S.D.R.s based on its shares in the fund, which tracks with the size of a country’s economy. The new reserves would also be distributed under this formula, with the largest economic powers like the United States gaining the biggest tranche.The drawing rights cannot be used to buy things on their own, but they can be traded for currencies that can. If two countries agree, they can trade their Special Drawing Rights for cash, with the I.M.F. acting as a middleman to facilitate the trade.That has prompted some criticism that the program will not work unless rich countries voluntarily transfer their holdings to poorer nations.“It is a legitimate concern that new S.D.R.s will end up mostly in the hands of large and rich countries that have little use for them rather than in the hands of the smaller and poorer countries that really need them,” said Eswar Prasad, the International Monetary Fund’s former China chief. “A reallocation of S.D.R.s toward the latter group, in addition to increasing the overall volume of S.D.R.s, would be helpful in dealing with stresses to the global financial system.”To address some of those concerns, the I.M.F. is working to develop a new trust fund where rich countries can channel their excess S.D.R.s. The goal is to create a $100 billion pot of money that poor countries take loans from so they can expand health care systems or address climate change in conjunction with existing I.M.F. programs.The United States has previously indicated it will make available about one-fifth of its allocation, worth about $20 billion. At the urging of the United States, the I.M.F. is also working to create greater transparency around how the assets are being used so that it is clear that American adversaries are not benefiting from the proceeds.The I.M.F.’s board of governors is expected to hold its vote in early August. More

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    European Central Bank Tweaks Strategy to Fight Inflation

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    The European Central Bank said Thursday it would adjust the guideposts it uses to set monetary policy, giving its more room to deploy crisis measures even if inflation rises above its official target. The bank also said it would begin using its clout in bond markets to fight climate change.After concluding an 18-month review of its strategy, the bank’s Governing Council said Thursday that it would no longer aim to keep inflation below, but close to, 2 percent. Rather, it would simply aim for 2 percent and be ready to accept “a transitory period in which inflation is moderately above target.”The seemingly minor change gives the bank space to keep pumping credit into the eurozone economy even if annual inflation rises above 2 percent, as long as policymakers think the jump is temporary.That situation may soon materialize. Inflation in the eurozone has been hovering around 2 percent in recent months, and could rise above the target as economies reopen and shortages of needed products like semiconductors become more acute. According to the previous strategy, the central bank would be obligated to raise interest rates or take other measures to slow the economy, even if the crisis was not over.By law, controlling prices in the 19 countries of the eurozone is the central bank’s main priority, so any adjustment to its approach to inflation has broad implications for the interest rates that businesses and consumers pay on loans, and for employment and economic growth.The bank also said it would take climate change into account when it buys corporate bonds as part of its stimulus measures. The bond purchases, made with newly created money, are a means to stimulate borrowing and economic growth. But in the future, the European Central Bank will favor companies that have made sincere efforts to reduce the amount of carbon dioxide they produce.In practice, the central bank has already provided ample evidence it was willing to bend its own rules to fight the pandemic, or the debt crisis that nearly destroyed the euro a decade ago.“We do not expect the new strategy to shift the outlook for the E.C.B.’s monetary policy stance significantly,” Holger Schmieding, chief economist at Berenberg Bank, said in a note to clients ahead of the announcement. “Instead, it will formally codify the approach which the E.C.B. has pursued anyway. This will make it easier for the E.C.B. to communicate with markets and the public.”The European Central Bank’s new approach is sure to generate criticism from places like Germany, where fear of inflation runs deep. Jens Weidmann, a member of the Governing Council and president of the Bundesbank, Germany’s central bank, has called for the European Central Bank to begin dialing back its stimulus to ensure that inflation does not get out of control. He has also said that climate change was not a matter for central banks.But Mr. Weidmann belongs to a minority on the Governing Council. The central bank said in a statement that it believed that climate change was relevant to “inflation, output, employment, interest rates, investment and productivity; financial stability; and the transmission of monetary policy.” More

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    How NYC Faces a Lasting Economic Toll Even as the Coronavirus Pandemic Passes

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    Gabriela Bhaskar/The New York TimesNew York City is beginning to rebound from the economic devastation of the pandemic.But it won’t be easy. Neighborhoods remain pockmarked by vacant commercial real estate, and the city’s unemployment rate remains almost twice the national average.While there are signs that the city is coming back to life, the path forward is anything but clear.New York Faces Lasting Economic Toll Even as Pandemic PassesThe city’s prosperity is heavily dependent on patterns of work and travel that may be irreversibly altered.Nelson D. Schwartz, Patrick McGeehan and As the national economy recovers from the pandemic and begins to take off, New York City is lagging, with changing patterns of work and travel threatening the engines that have long powered its jobs and prosperity.New York has suffered deeper job losses as a share of its work force than any other big American city. And while the country has regained two-thirds of the positions it lost after the coronavirus arrived, New York has recouped fewer than half, leaving a deficit of more than 500,000 jobs.New York City lost greatest share of jobs among 20 largest U.S. citiesThe city had an 11.8 percent decline in jobs from February 2020 to April 2021, almost three times the loss on the national level.

    Source: Center for New York City Affairs at the New SchoolTaylor JohnstonRestaurants and bars are filling up again with New Yorkers eager for a return to normal, but scars are everywhere. Boarded-up storefronts and for-lease signs dot many neighborhoods. Empty sidewalks in Midtown Manhattan make it feel like a weekend in midweek. Subway ridership on weekdays is less than half the level of two years ago.The city’s economic plight stems largely from its heavy reliance on office workers, business travelers, tourists and the service businesses catering to all of them. All eyes are on September, when many companies aim to bring their workers back to the office and Broadway fully reopens, attracting more visitors and their dollars. But even then, the rebound will be only partial.The shift toward remote work endangers thousands of businesses that serve commuters who are likely to come into the office less frequently than before the pandemic, if at all. By the end of September, the Partnership for New York City, a business advocacy group, predicts that only 62 percent of office workers will return, mostly three days a week.Restoring the city to economic health will be an imposing challenge for its next mayor, who is likely to emerge from the Democratic primary on Tuesday. The candidates have offered differing visions of how to help struggling small businesses and create jobs.“We are bouncing back, but we are nowhere near where we were in 2019,” said Barbara Byrne Denham, senior economist at Oxford Economics. “We suffered more than everyone else, so it will take a little longer to recover.”At 10.9 percent in May, the city’s unemployment rate was nearly twice the national average of 5.8 percent. In the Bronx, the city’s poorest borough, the rate is 15 percent. Workers in face-to-face sectors like restaurants and hospitality, many of whom are people of color, are still struggling.“While the recovery has probably exceeded expectations, unemployment remains staggeringly high for Black and brown individuals and historically marginalized communities,” said Jose Ortiz Jr., chief executive of the New York City Employment and Training Coalition, a work force development group.At the same time, hundreds of small businesses, which before the pandemic employed about half of the city’s work force, didn’t survive. And many that did are saddled with debt they took on to survive the downturn and owe tens of thousands of dollars in back rent.“I have a huge amount of debt to pay back because I had to borrow all over the place to stay alive,” said Robert Schwartz, the third-generation owner of Eneslow Shoes & Orthotics. He closed two of his four stores, but kept open branches on Manhattan’s Upper East Side and in Little Neck, Queens. “We’ll survive, but it’s going to be a long, slow recovery.”Office buildings in Lower Manhattan. The city depends more heavily than other places on office workers, business travelers, and the service businesses catering to all of them.Gabriela Bhaskar/The New York TimesEven if just 10 percent of Manhattan office workers begin working remotely most of the time, that translates into more than 100,000 people a day not picking up a coffee and bagel on their way to work or a drink afterward.Gabriela Bhaskar/The New York TimesEmpty sidewalks in parts of the city once filled with office workers make it feel like a weekend in midweek.Gabriela Bhaskar/The New York TimesOne crucial factor in the city’s economic trajectory, civic and business leaders say, is addressing safety concerns. Violent crime has risen since the pandemic hit — including a high-profile Times Square shooting in May that wounded two women and a 4-year-old girl — and the police have recently increased Midtown foot patrols.“The negatives of New York life are worse,” said Seth Pinsky, chief executive of the 92nd Street Y, a longtime cultural destination on the Upper East Side.“Crime is going up and the city is dirtier,” added Mr. Pinsky, who served as president of the city’s Economic Development Corporation under former Mayor Michael R. Bloomberg. “It’s critical that we get the virtuous cycle going again.”On Friday, Mayor Bill de Blasio said on a radio show on WNYC that the city had more police officers in the subway than at any time in the last 25 years. “We want to really encourage people back, to protect everyone,” he said.Nonetheless, worries about crime are frequently cited by workers who have returned. “There are questions from employees about safety in the city and increased concern,” said Jonathan Gray, president of the financial behemoth Blackstone. “My hope is that as the city fills up there will be less of that.”New York is certainly feeling less deserted than it did a few months ago. Nearly 195,000 pedestrians strolled through Times Square on June 13, more than twice the typical number in the bleak winter days when the coronavirus was raging. That’s a long way from the 365,000 who passed through daily before the pandemic, but the totals are edging higher, according to Tom Harris, president of the Times Square Alliance, a nonprofit group that promotes local businesses and the neighborhood.Change in foot traffic in New York City, by type of location

    Foot traffic data was aggregated and anonymized by Foursquare from smartphone apps that shared location data. Data as of June 18, 2021.Source: FoursquareTaylor JohnstonWhen Mr. Gray returned to Blackstone’s Midtown headquarters last summer, there were just 16 other people spread over 19 floors. Today, there are more than 1,600, and Blackstone is asking all employees who have been vaccinated to return.“It’s gone from feeling super lonely and now it’s feeling pretty normal,” Mr. Gray added.Wall Street and the banking sector are pillars of the city’s economy, and they have been among the most aggressive industries in prodding employees to go back to the office. James Gorman, the chief executive of Morgan Stanley, told investors and analysts this month that “if you want to get paid in New York, you need to be in New York.”Many firms, including Blackstone and Morgan Stanley, have huge real estate holdings or loans to the industry, so there is more than civic pride in their push to get workers to return. Technology companies like Facebook and Google are increasingly important employers as well as major commercial tenants, and they have been increasing their office space. But they have been more flexible about letting employees continue to work remotely.Google, which has 11,000 employees in New York and plans to add 3,000 in the next few years, intends to return to its offices in West Chelsea in September, but workers will only be required to come in three days a week. The company has also said up to 20 percent of its staff can apply to work remotely full time.The decision by even a small slice of employees at Google and other companies to stay home part or all of the week could have a significant economic impact.Even if just 10 percent of Manhattan office workers begin working remotely most of the time, that translates into more than 100,000 people a day not picking up a coffee and bagel on their way to work or a drink afterward, said James Parrott, an economist with the Center for New York City Affairs at the New School.“I expect a lot of people will return, but not all of them,” he said. “We might lose some neighborhood businesses as a result.”The absence of white-collar workers hurts people like Danuta Klosinski, 60, who had been cleaning office buildings in Manhattan for 20 years. She is one of more than about 3,000 office cleaners who remain out of work, according to Denis Johnston, a vice president of their union, Local 32BJ of the Service Employees International Union.Ms. Klosinski, who lives in Brooklyn, said that she had been furloughed twice since last spring and that she had been idle since November. She said she feared that if she were not recalled by September, she would lose the health insurance that covers her husband, who suffered a stroke and a heart attack.“I’m worried about losing everything,” she said.Also weighing on the city’s outlook is the decline in visits by tourists, who are venturing back in dribbles, not in droves.Performers in Times Square, which saw nearly 195,000 pedestrians pass through on a recent day. That’s a long way from the 365,000 who passed through daily before the pandemic.Gabriela Bhaskar/The New York TimesAn ice cream vendor waited for customers at Bryant Park in Midtown.Gabriela Bhaskar/The New York TimesPassengers aboard a cruise to the Statue of Liberty. City officials expect that it will take at least a few years to draw as many visitors as in 2019.Gabriela Bhaskar/The New York TimesIn 2019, New York welcomed over 66 million out-of-towners, and they spent more than $45 billion in hotels, restaurants, shops and theaters. City officials expect that it will take years to draw so many visitors again, especially the bigger-spending foreign tourists and business travelers on expense accounts.Ellen V. Futter, president of the American Museum of Natural History, said domestic tourism was rebounding faster than she had expected. “The local population is out and about and happy to be so,” Ms. Futter said. But the scarcity of international visitors “is going to tamp down the pace of recovery,” she said.That lag will spell prolonged pain for many businesses. Employment in hotels and restaurants is about 150,000 lower than it was before the pandemic, while the number of jobs in the performing arts is down about 40,000.To be sure, there are signs of a strengthening economy. After many residents fled the city last year, high-priced condos are again being snapped up, and the rental market is showing signs of firming after price drops.Rudin Management, the real estate giant, is trimming back the concessions it offered to attract tenants at the height of the pandemic. “I’m getting calls from people saying their son or daughter or grandson or granddaughter is graduating and asking for an apartment,” said William C. Rudin, the firm’s chief executive. “We didn’t get those calls for a year.”New Yorkers are also getting out more. When the Rockaway Hotel in Queens opened in September after years of planning, a hip destination in a historically working-class beach neighborhood, “people who lived four blocks away would take hotel rooms for the night because they wanted a staycation,” said Terence Tubridy, a managing partner.Since indoor dining resumed in February, the 53-room hotel’s weekend occupancy rate has been 80 percent, Mr. Tubridy said. Along with more visitors recently from California and the Midwest, he reports a flood of inquiries about weddings and birthday parties.As the hotel prepares for its first opportunity to serve the bustling summer crowds at Rockaway Beach, Mr. Tubridy is looking to add 100 employees to his current staff of 180.Amy Scherber is also seeing signs of better days. When the pandemic struck, she was forced to close all but two of her Amy’s Bread shops in New York City and lay off more than 100 employees. She wound up making cakes and pastries herself in a kitchen in Long Island City, Queens.But now, Ms. Scherber has rehired some of her employees, and a crew of four bakers is handling the pastries while she oversees the steadily increasing production of baguettes and other loaves. She has reopened her store in Chelsea Market, a Manhattan tourist destination, and is preparing to reopen other retail locations. Her wholesale business is also rebounding as restaurants that were closed for months are again ordering dinner rolls.“In the last couple of weeks, we finally have seen the business starting to pick up a bit,” said Ms. Scherber, who started her operation 29 years ago. She is hopeful about a strong recovery, she said. But she added, “I see the city taking several years to be the economy it was.”The Empire State Building and One World Trade Center.Gabriela Bhaskar/The New York Times More

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    A Fading Coal County Bets on Schools, but There’s One Big Hitch

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    WELCH, W.Va. — Lillian Keys came back.After receiving her bachelor’s degree from Concord University in Athens, W.Va., the 24-year-old English teacher did something rare among her peers: She returned home to Welch to teach at Mount View High School, from which she graduated in 2014. “People my age and older usually don’t come back to the county,” Ms. Keys told me. “A lot of our kids want to go away.” More

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    America Is Driving the Global Economy. When Does That Become a Problem?

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    New trade data suggests the outlook for the U.S. economy will depend in part on the rate of recovery of other nations.Containers stacked at the Port of New York and New Jersey in Elizabeth, N.J., last month. The U.S. trade deficit was $68.9 billion in April, far above levels immediately before the pandemic.Seth Wenig/Associated PressThe United States, with its aggressive pandemic aid measures and rapid vaccine rollout, is propelling the world economy, acting as a source of demand in all corners of the globe.The American government has been spending billions, creating booming demand in the United States. As new trade data shows, though, a meaningful share of this money is leaking overseas and going toward imported goods, in what economists call “fiscal leakage.” Ultimately, the outlook for the American economy will depend on the ability of other countries to take over as drivers of global demand in the months ahead — a prospect that remains uncertain.America is buying much more stuff from overseas, as its stimulus-fueled economy revs forward, while the rest of the world has not yet caught up and started buying more American exports. That is why the trade deficit was $68.9 billion in April, which was down from $75 billion in March, but far above levels of around $45 billion per month immediately before the pandemic. People are spending their stimulus money on imported furniture, appliances and other goods.One effect is that the rest of the world is acting as a pressure valve for inflationary forces that are building within American borders. If you think gasoline and lumber prices are high now, imagine if the slow-growing economies of Europe and Japan were recovering at the same breakneck pace as in the United States.“Fiscal leakage is inevitable,” said Maurice Obstfeld, a University of California, Berkeley, professor and former chief economist of the International Monetary Fund. “It’s desirable to the extent it will somewhat moderate inflationary pressures. And it’s desirable to the extent that to some degree it helps spur growth in the rest of the world, some of which comes back to help us.”It reflects a difficult geoeconomic needle the United States is trying to thread. It’s best for everybody if the rest of the world joins the party and is able to power global demand, especially once the American stimulus dollars are largely played out. But if that resurgence is too fast and too strong, it will just make the inflation problems already evident in many markets worse.Moreover, some of the most effective tools involve global vaccine distribution, not economic policy. Successful vaccination would help get supply and demand, both for physical goods and for tourism and other services, back on track.The United States typically runs a large trade surplus in services, including software, Hollywood films and banking. But the biggest single area of services exports before the pandemic was international travel.In the math of global economics, a foreign tourist staying in the United States is essentially purchasing an American services export. Travel exports were only $18 billion in the first four months of 2021, down from $67 billion in the same period of 2019.Meanwhile, flush American consumers have shifted their spending away from services and toward goods. In the first four months of the year, imports of consumer goods were 29 percent higher than in 2020, a $57 billion jump.“The only thing people could consume was goods,” said Constance Hunter, chief economist at KPMG. “You couldn’t have a wedding, you couldn’t go to a baseball game. So what did people buy? They bought goods, and that’s much more of a global market than services.”In effect, the United States and China are acting as the drivers of the global economy, while most of the rest of the world is further behind in recovery from the pandemic.In the I.M.F.’s World Economic Outlook published in April, the United States’ 2021 G.D.P. was forecast to be 3 percent above its 2019 level, while China was forecast to be 11 percent above its 2019 level. But the euro area and Japan were each on track to have economies 2 percent smaller than in 2019, with Britain, Canada, Brazil and Mexico also forecast to be in negative territory.That is unfortunate for the people in those places experiencing sluggish recoveries, but is probably helping to keep supply shortages in many sectors from being even worse. Already, a shortage of semiconductors has held back production of automobiles; shortages of building materials have suppressed housing construction; and a shortage of shipping containers has sent prices skyrocketing for moving goods across oceans.“If everybody was stimulating simultaneously, and everybody was enjoying peak growth simultaneously, you could see more congestion,” said Nathan Sheets, chief economist at PGIM Fixed Income and a former top international economist at the Federal Reserve and U.S. Treasury.A promising possibility would be if the baton of economic growth could gradually be passed around the world — having started in 2020 in China, continuing through the first part of 2021 in the United States, then to other parts of the world as the American stimulus dollars fade. That could help the United States avoid a post-stimulus economic hangover.“If Europe is lagging us by a quarter or two, and emerging markets are lagging Europe, maybe we could get a phased global recovery where the growth that we get is a good thing, without putting too much pressure on supply at once,” Mr. Sheets said.The sluggish pace of vaccination in many parts of the world is a risk on all sides. It appears to be holding back output in important ways, contributing to America’s inflation problem — witness, for example, a recent Covid outbreak at a Taiwanese chip factory that stopped production of a product already in short supply.The I.M.F. recently published research showing that an ambitious vaccination plan could bring robust rewards. Achieving worldwide vaccination rates of 40 percent would inject the equivalent of $9 trillion into the global economy by allowing a faster return of normal commerce. Forty percent of the gains would go to advanced economies like those in the United States and Europe.That means the enormous trade deficits of the last couple of months could well fade in the months ahead — but only if the entire world is able to stay healthy, with growth revving, as well. More