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    How Inflation and High Interest Rates Have Changed the Economy

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    As inflation cools and the Federal Reserve cuts rates, an era of economic upheaval is coming to a close, but not without lingering marks.People with jobs have started showing up at homeless shelters in Atlanta. Families who can’t cover their grocery bills are pushing up demand at a Boston food bank. A dearth of available houses is plaguing Sacramento. Yet reports of recent raises abound, and a partly retired homeowner near Pittsburgh is happy about his savings.America’s bout of painfully high inflation — and the period of high interest rates meant to cure it — is finally drawing toward a close. Price increases are nearly back to a normal pace, so much so that the Federal Reserve voted on Wednesday to lower borrowing costs for the first time in more than four years.But even as the nation’s tumultuous pandemic economic era begins to approach its end, the period is destined to leave lingering marks.There are many things to celebrate about the current moment. Inflation has so far cooled without a major economic pullback, a development few economists thought possible. Consumers are still spending at a solid clip. Years of strong job growth and solid wage gains have lifted up many workers, and a run-up in stock prices is padding retirement accounts.The Greater Boston Food Bank has delivered more than 100 million pounds of food every year since 2020, up from less than 70 million in 2019.Sophie Park for The New York TimesYet the past several years have also brought serious and lasting challenges. Prices remain sharply elevated compared with their prepandemic levels, and many families are still struggling to adjust. Some have seen their wages fall behind costs. For others, pay gains have kept pace with inflation, but the memory of cheaper egg and rent prices endures, leaving an ongoing sense of sticker shock. And across the country, housing affordability has tanked, a trend that could take time and even policy changes to reverse.Grocery Inflation Jumped, Then CooledGrocery inflation was even more rapid than overall price increases in 2022, though it has recently calmed notably.

    Source: Bureau of Labor Statistics Consumer Price IndexBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Fed Cuts Interest Rates for First Time in Four Years

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    Fed officials kicked off rate cuts with a half-point reduction, confident that inflation is cooling and eager to keep the job market strong.The Federal Reserve cut interest rates on Wednesday by half a percentage point, an unusually large move and a clear signal that central bankers think they are winning their war against inflation and are turning their attention to protecting the job market.“Our patient approach over the past year has paid dividends,” Jerome H. Powell, the Fed chair, said during his news conference. But now “the upside risks to inflation have diminished, and the downside risks to unemployment have increased.”The Fed’s decision lowers rates to about 4.9 percent, down from a more than two-decade high.The pivot comes in response to months of fading inflation, and it is meant to prevent the economy from slowing so much that the job market begins to weaken more painfully. Officials have been keeping a careful eye on a recent uptick in the unemployment rate, and by starting off with a big cut, the Fed is in effect taking out insurance against a bigger employment slowdown.Reinforcing that cautious message, the decisive reduction came alongside economic projections that suggested a more rapid pace of rate cuts than officials had envisioned just a few months ago. Officials now expect to make another half-point reduction before the end of the year.“We’re going to take it meeting by meeting,” Mr. Powell said. “We made a good, strong start to this, and that is frankly a sign of our confidence, confidence that inflation is coming down.”Jerome H. Powell, the Fed chair, said that the central bank would take future interest rate cuts “meeting by meeting” after lowering rates by a half percentage point, an unusually large move.Tom Brenner/ReutersWhere Fed Officials Expect Rates Will Be More

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    Cheaper Mortgages and Car Loans: Lower Rates Are on the Horizon

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    The costs of 30-year mortgages and new car loans have been inching down in recent months, welcome news for borrowers who have endured years of high prices and high interest rates. These borrowing costs are expected to fall further: The Federal Reserve is poised to cut its benchmark interest rate on Wednesday, and officials are […] More

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    A Fed Rate Cut Would Cap a Winning Streak for Biden and Harris on Prices

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    Improved data on borrowing costs and price growth has buoyed consumers, but it might be coming too late to significantly affect the presidential raceAfter more than a year of waiting, hoping and assuring Americans that the economy could pull off a so-called “soft landing,” President Biden and Vice President Kamala Harris appear to be on the brink of seeing that happen.Inflation has cooled. Economic growth remains strong, though job gains are slowing. Mortgage costs are falling and the Federal Reserve is poised to begin cutting interest rates on Wednesday.And yet, it is unclear whether those developments will significantly alter voters’ predominantly negative perceptions of the economy ahead of the presidential election.Recent weeks have brought a run of good data on consumer prices and interest rates for the administration. The price of gasoline has fallen below $3 a gallon in much of the South and Midwest and is nearing a three-year low nationally. Spiking grocery prices have slowed to a crawl. Mortgage rates are down more than a percentage point from their recent peak. The Census Bureau reported last week that the typical household income rose faster than prices last year for the first time since the pandemic. The overall inflation rate has returned to near historically normal levels, and the Fed is poised to begin cutting interest rates from a two-decade high.The Biden administration, which has taken heat from Republicans and many economists for fueling inflation with its economic policies, has begun to celebrate those developments in bold terms. Officials are claiming vindication for their multi-trillion-dollar efforts to boost households and businesses in their recovery from the pandemic recession.Mr. Biden’s Council of Economic Advisers published a blog post on Tuesday highlighting economic and job growth under Mr. Biden that has surpassed projections. Lael Brainard, who heads Mr. Biden’s National Economic Council, told the Council on Foreign Relations in New York on Monday that the American economy has now reached a “turning point.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    As Federal Reserve Readies Interest Rate Cut, Risks to Job Market Still Loom

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    The Federal Reserve is poised to lower interest rates this week. Recent jobs data have been a reminder that a soft landing is not yet assured.An object in motion stays in motion. Is a labor market trend that’s well underway any different?That’s the question looming for officials at the Federal Reserve as they try to pull off a feat that has never really been accomplished before: gently cooling an economy that was experiencing rip-roaring inflation without tanking the job market in the process.So far, the Fed’s attempt at a soft landing has worked out better than just about anyone, including central bankers themselves, expected. Inflation has cooled significantly, with the Consumer Price Index down to 2.5 percent from a peak of 9.1 percent just two years ago. And even with the Fed’s policy interest rate at its highest level in more than two decades, consumer spending has held up and overall growth has continued to chug along.Fed officials are eager to keep it going. That is why all signals suggest that they will lower interest rates at the conclusion of their meeting on Wednesday — and the only real question is whether they will cut them by a typical quarter of a percentage point or by a half percentage point. They are also likely to forecast that they will lower interest rates further before the end of the year, perhaps predicting that they will cut them by a full point from their current 5.33 percent.But even as the Fed turns an important corner on its fight against inflation, real risks remain. And those center on the labor market.Unemployment has been slowly, but steadily, rising. Wage growth has been consistently slowing. Job openings have come down, and hiring rates have come down along with them. And while all of those developments are what the Fed wanted — the point of this exercise was to slow an overheated job market and prevent it from fueling future inflation — central bankers have been clear that they do not want to see it continue.“We do not seek or welcome further cooling in labor market conditions,” Jerome H. Powell, the Fed chair, said in his latest speech.Unemployment and Underemployment RiseThe jobless rate historically jumps during recessions.

    Notes: Unemployment is the share of people actively looking for work; underemployment also includes people who are no longer actively looking and those who work part time but would prefer full-time jobs. Seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesWage Growth Is Cooling SteadilyAfter spiking in 2022, wage gains for rank-and-file workers have been coming down.

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    Year-over-year change in average hourly earnings
    Note: Data is for production and nonsupervisory employees and is not seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesJob Openings Fall, Just as More People Look for ThemAfter years in which jobs were much more plentiful than available workers, that ratio is on the cusp of flipping.

    Data are seasonally adjusted.Source: The Bureau of Labor StatistticsBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    For the Fed, a Sign That the Job Market Is Cooling but Not Cracking

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    Federal Reserve officials are moving toward their first rate cut since the 2020 pandemic downturn as they try to keep the economy from cooling too much. Friday’s fresh jobs data gave them reasons for both comfort and concern.Unemployment eased slightly to 4.2 percent in August, from 4.3 percent in July — a sign that joblessness has not started a relentless march upward, which is welcome news for both American workers and Fed officials. But hiring was weaker than economists had expected, with 142,000 jobs added in August.Altogether, the report suggested that the job market was slowing, but not imploding, more than two years into the Fed’s campaign to slow the economy with higher interest rates. That has kept Fed officials noncommittal and investors guessing about just how much the Fed will cut rates this month.Fed policymakers raised interest rates starting in 2022 to tap the brakes on a hot economy. At the time, hiring was rapid and wage growth robust, and officials worried that a burst of rapid inflation would not fade on its own against that backdrop. They ultimately lifted borrowing costs to a more-than-two-decade high of 5.3 percent, where they remain.But inflation has been cooling notably and wage gains have been steadily moderating, so Fed officials have become increasingly wary of overdoing it. They wanted to return the job market and economy to a sustainable pace, but they do not want to cause either to crash.That is why the Fed is poised to lower interest rates. The question has been whether policymakers will cut rates by a quarter percentage point or a half percentage point at their Sept. 17-18 gathering. That was one reason that Wall Street was intently focused on Friday’s jobs report: If it showed clear cracks in the labor market, investors expected it to prod the Fed toward a bigger rate cut.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Job Market Shifts to Lower Gear

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    Employers added 142,000 jobs in August, fewer than economists had expected, and previous months were revised downward.The labor market appears to be treading water, with employers’ desire to hire staying just ahead of the supply of workers looking for jobs.That’s the picture that emerges from the August jobs report, released on Friday, which offered evidence that while softer than it has been in years, the landscape for employment remains healthy, with wages still growing and Americans still eager to work.“This report does not indicate that we’re taking another step toward a recession, but we’re still seeing further signs of cooling,” said Sam Kuhn, an economist with the recruitment software company Appcast. “We’re trending more closely to a 2019 labor market, than the labor market in 2010 or 2011.”Employers added 142,000 positions last month, the Labor Department reported. That was somewhat fewer than forecast, bringing the three-month average to 116,000 jobs after the two prior summer months were revised down significantly. Over the year before June, the monthly average was 220,000, although that number is expected to shrink when annual revisions are finalized next year.The unemployment rate edged down to 4.2 percent, alleviating concerns that it was on a steep upward trajectory after July’s jump to 4.3 percent, which appears to have been driven by weather-related temporary layoffs.In other signs of stability, the average workweek ticked up to 34.3 hours and wages grew 0.4 percent over the month, slightly more than economists had expected but not enough to add significant fuel to inflation.Wages Are Outpacing InflationYear-over-year percentage change in earnings vs. inflation More