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Why Better Times (and Big Raises) Haven’t Cured the Inflation Hangover

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Frustrated by higher prices, many Pennsylvanians with fresh pay raises and solid finances report a sense of insecurity lingering from the pandemic.A disconnect between economic data and consumer sentiment is being felt by Pennsylvania residents, including, from left, Donald Woods, a retired firefighter in West Philadelphia; Darren Mattern, a nurse in Altoona; and Lindsay Danella, a server in Altoona.Left: Caroline Gutman for The New York Times. Center and right: Ross Mantle for The New York TimesIn western Pennsylvania, halfway through one of those classic hazy March days when the worst of winter has passed, but the bare trees tilting in the wind tell everyone spring is yet to come, Darren Mattern was putting in some extra work.Tucked at a corner table inside a Barnes & Noble cafe in Logan Town Centre, a sprawling exurban shopping complex in Blair County, he tapped away at two laptops. His work PC was open with notes on his clients: local seniors in need of at-home health care and living assistance, whom he serves as a registered nurse. On his sleeker, personal laptop he eyed some coursework for the master’s degree in nursing he’s finishing so he can work as a supervisor soon.Mr. Mattern, warm and steady in demeanor, says the “huge blessing” of things evident in his everyday life at 35 — financial security, a home purchase last year, a baby on the way — weren’t possible until recently.He had warehouse jobs for most of his 20s, making a few dollars above minimum wage (in a state where that’s still $7.25 an hour), until he took nursing classes in the late 2010s. Shortly after becoming certified, he pushed through long days in a hospital during the height of the Covid pandemic at a salary of $40,000. Today, he has what he calls “the best nursing job pay-wise I’ve ever had,” at $85,000.Mr. Mattern’s trajectory is one bright line in a broad upward trend that hundreds of thousands of Pennsylvanians, and millions of other Americans, have experienced since the pandemic recession — a comeback in which unemployment has been below 4 percent for the longest stretch since the 1960s, small-business creation has flourished and the stock market has reached new heights.There’s a disconnect, however, between the raw data and a national mood that is somewhat improved but still sour. A surge in average weekly pay and full-time employment has helped offset the demoralizing effects of a two-year bout of heavy inflation as the global economy chaotically reopened. But it has not neutralized them.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. Employers Added 303,000 Jobs in 39th Straight Month of Growth

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    The March data increased confidence among economists and investors that robust hiring and rising wages can continue to coexist while inflation eases.Another month, another burst of better-than-expected job gains.Employers added 303,000 jobs in March on a seasonally adjusted basis, the Labor Department reported on Friday, and the unemployment rate fell to 3.8 percent, from 3.9 percent in February. Expectations of a recession among experts, once widespread, are now increasingly rare.It was the 39th straight month of job growth. And employment levels are now more than three million greater than forecast by the nonpartisan Congressional Budget Office just before the pandemic shock.The resilient data generally increased confidence among economists and market investors that the U.S. economy has reached a healthy equilibrium in which a steady roll of commercial activity, growing employment and rising wages can coexist, despite the high interest rate levels of the last two years.From late 2021 to early 2023, inflation was outstripping wage gains, but that also now appears to have firmly shifted, even as wage increases decelerate from their roaring rates of growth in 2022. Average hourly earnings for workers rose 0.3 percent in March from the previous month and were up 4.1 percent from March 2023.Wage growth continues to slowYear-over-year percentage change in earnings vs. inflation More

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    U.S. Economy Grew at 3.3% Rate in Latest Quarter

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    The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic’s upheaval.The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.The latest reading is preliminary and may be revised in the months ahead.Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)“Stunning and spectacular,” Diane Swonk, chief economist at KPMG, said of the latest data. “We’ll take the win.” More

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    American Household Wealth Jumped in the Pandemic

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    Pandemic stimulus, a strong job market and climbing stock and home prices boosted net worth at a record pace, Federal Reserve data showed.American families saw the largest jump in their wealth on record between 2019 and 2022, according to Federal Reserve data released on Wednesday, as rising stock indexes, climbing home prices and repeated rounds of government stimulus left people’s finances healthier.Median net worth climbed 37 percent over those three years after adjusting for inflation, the Fed’s Survey of Consumer Finances showed — the biggest jump in records stretching back to 1989. At the same time, median family income increased 3 percent between 2018 and 2021 after subtracting out price increases.While income gains were most pronounced for the affluent, the data showed clearly that Americans made nearly across-the-board financial progress in the three years that include the pandemic. Savings rose. Credit card balances fell. Retirement accounts swelled.Other data, from both government and private-sector sources, hinted at those gains. But the Fed report, which is released every three years, is considered the gold standard in data about the financial circumstances of households. It offers the most comprehensive snapshot of everything from savings to stock ownership across racial, wealth and age groups.This is the first time the Fed report has been released since the onset of the coronavirus, and it offers a sense of how families fared during a tumultuous economic period. People lost jobs in mass numbers in early 2020, and the government tried to soften the blow with multiple relief packages.More recently, the job market has been booming, with very low unemployment and rapid wage growth that has helped to bolster incomes. At the same time, rapid inflation has eroded some of the gains by making everyday life more expensive.Without adjusting for inflation, median income would have risen 20 percent, for instance, based on the report released Wednesday.The job market has been booming, and at the same time, rapid inflation has eroded some of the gains by making everyday life more expensive.Hiroko Masuike/The New York TimesThe financial progress, particularly for poorer families, is especially remarkable when compared with the aftermath of the last recession, which lasted from 2007 to 2009. It took years for household wealth to rebound fully after that crisis, and for some families it never did.Income climbed across all groups between 2019 and 2022, though gains were biggest toward the top — meaning that income inequality widened.That made for a big difference between median income — the number at the midpoint among all households — and the average, which tallies all earnings and divides them by the number of households. Average income climbed 15 percent, one of the largest three-year pops on record.Wealth inequality was more complicated. Because the rich hold such a large share of financial assets in America, wealth gaps tend to grow in absolute terms when stocks, bonds and houses are climbing in price. True to that, wealth climbed much more in dollar terms for rich families.But in the three years covered by the survey, growth in wealth was actually the largest in percentage terms for poorer families. People in the bottom quarter had a net worth of $3,500 in 2022, up from $400 in 2019. Among families in the top 10 percent, median net worth climbed to $3.79 million, up from $3.01 million three years earlier.Because of the way the data is measured, it is difficult to break out just how much pandemic-related payments would have mattered to the figures. To the extent that families saved one-time checks and other help they received during the pandemic, those would have been included in the measures of net worth.Families were also still receiving some pandemic payments when the income measures were collected in 2021, which means that things like enhanced unemployment insurance probably factored into the data.Some Americans appear to have taken advantage of their improved financial positions to invest in stocks for the first time: 21 percent of families owned stocks directly in 2022, up from 15 percent in 2019, the largest change on record. Many of those new stock owners appear to have been relatively small investors, likely reflecting at least in part Americans’ enthusiasm for “meme stocks” like GameStop during the pandemic.The Fed’s newly released figures show that significant gaps in income and wealth persist across racial groups, although Black and Hispanic families saw the largest percentage gains in net worth during the pandemic period.Black families’ median net worth climbed 60 percent, to $44,900. That was a bigger jump than the 31 percent increase for white families, which lifted their household wealth to $285,000. Hispanic families saw a 47 percent increase in net worth.At the same time, racial and ethnic minorities saw slower income gains in the period through 2021. Black and Hispanic households saw small declines in earnings after adjusting for inflation, while white families saw a modest increase.For the first time, the report included data on Asian families, who had the highest median net worth of any racial or ethnic group.While the data in the report is slightly dated, it underscores what a strong position American families were in as they exited the pandemic. Solid net worth and growing incomes have helped people to continue spending into 2023, which has helped to keep the economy growing at a solid pace even when the Fed has been lifting interest rates to cool it down.That resilience has stoked hope that the Fed might be able to pull off a “soft landing,” one in which it slows the economy gently without crushing consumers so much that it plunges America into a recession. More

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    Poverty Rate Soared in 2022 as Aid Ended and Prices Rose

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    The increase in poverty reversed two years of large declines. Median income, adjusted for inflation, fell 2.3 percent to $74,580.Poverty increased sharply last year in the United States, particularly among children, as living costs rose and federal programs that provided aid to families during the pandemic were allowed to expire.The poverty rate rose to 12.4 percent in 2022 from 7.8 percent in 2021, the largest one-year jump on record, the Census Bureau said Tuesday. Poverty among children more than doubled, to 12.4 percent, from a record low of 5.2 percent the year before. Those figures are according to the Supplemental Poverty Measure, which factors in the impact of government assistance and geographical differences in the cost of living.The increases followed two years of historically large declines in poverty, driven primarily by safety net programs that were created or expanded during the pandemic. Those included a series of direct payments to households in 2020 and 2021, enhanced unemployment and nutrition benefits, increased rental assistance and an expanded child tax credit, which briefly provided a guaranteed income to families with children.Nearly all of those programs had expired by last year, however, leaving many families struggling to stay ahead of rising prices despite a strong job market and improving economy. Overall poverty now looks much the way it did in 2019, with the notable difference that financial hardship has declined among Black households, reflecting higher incomes in recent years.The Share of Children in Poverty More Than DoubledThe poverty rate for those under 18 rose to 12.4 percent last year.

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    Share of each age group living in poverty
    Note: Data are the supplemental poverty rates, which adjust for geographic differences. The rates also include wage income, taxes and the fullest account of government aid.Source: Census BureauBy Karl RussellOne pandemic program that did not expire was a temporary freeze in Medicaid terminations, a move that allowed the program to cover more Americans than ever. Because of that program, the share of Americans without health insurance matched a record low last year of 7.9 percent. But states are unwinding that temporary coverage, and the uninsured rate has probably increased in recent months.The increasing cost of living added to the challenge last year. The poverty threshold, which is based on the cost of essential items like food and housing, rose sharply: A family of four living in a rental home was considered poor under the supplemental measure if the family’s income was less than $34,518 in 2022, up from $31,453 in 2021.Higher prices didn’t just hit the poor. Median household income, adjusted for inflation, fell 2.3 percent in 2022, to $74,580, as the fastest inflation since 1981 overwhelmed the impact of increased employment and rising wages.“People are working hard,” said Margaret O’Conor, who runs Common Pantry, a small food bank in Chicago. “They’re just not making ends meet, the cost of living is too much.” Rent in particular has soaked up a lot of people’s extra earnings.Common Pantry, like many food banks, had demand explode during the pandemic and then recede in 2021, when people received stimulus checks, enhanced unemployment benefits and the child tax credit, among other assistance. Then, as those programs lapsed, demand began to climb again.“2022 just threw us,” Ms. O’Conor said. “We were not expecting it. I don’t think any food pantry was really expecting it.”The White House, in a blog post previewing the report, argued that more recent data “tell a more optimistic story.” Inflation has cooled in recent months, while the job market has remained strong and wages continue to rise.The hot job market has had clear benefits for those able to take advantage of it. Many workers, especially in low-paying industries like hospitality and retail, experienced significant wage gains in 2022. Supersized unemployment benefits and other cash payments allowed workers to hold out for higher-paying jobs. Income for the poorest 20 percent of households — excluding tax credits and some other government benefits — rose 4.3 percent last year, adjusted for inflation. Income gains also outpaced inflation for the least educated workers.Those effects were more pronounced for women. The share of working women who were employed full time for the whole year reached 65.6 percent, the highest level on record — which also allowed real earnings to fall less for women than they did for men.The story was not as rosy for Americans over 65, for whom the poverty rate rose to 14.1 percent, despite an 8.7 percent cost-of-living increase in Social Security payments. Labor force participation among older people remains depressed, as many lost jobs and have had a difficult time re-entering the workplace.“People became more isolated, experienced significantly more health problems,” said Jess Maurer, the executive director of the Maine Council on Aging. “Older people had a harder time coming out of the pandemic, coming back into the community.”Inequality, as measured by the gap in pretax income between the richest and poorest 10 percent of households, narrowed, as most of the decrease in median incomes came from those at the middle and top of the wage distribution. Racial gaps also shrank, as white households lost ground to inflation, while inflation-adjusted income was little changed for other racial and ethnic groups.The “official” poverty rate — an older measure that is widely considered outdated because it excludes many of the government’s most important anti-poverty programs, among other shortcomings — was nearly flat last year, at 11.5 percent, reflecting the offsetting forces of higher prices and increased earnings of low-wage workers. By that measure, the poverty rate for Black Americans was 17.1 percent, the lowest rate on record.U.S. Poverty Increased Last YearThe supplemental poverty rate — which accounts for the impact of government programs — increased to to 12.4 percent last year, surpassing the official poverty rate, which was 11.5 percent.

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    Share of the population living in poverty
    Note: The supplemental rate adjusts for geographic differences. It also includes wage income, taxes and the fullest account of government aid.Source: Census BureauBy Karl Russell“There has really been this resurgence in terms of the labor market fortunes of Black workers, particularly Black male workers,” said Michelle Holder, an economist at John Jay College in New York. “The most important element for people in my community is can we get a job, and if we can get a job, can we keep a job? And right now, both things look pretty darn good.”But those unable to work, or unable to work full-time, faced a one-two punch of higher costs and lost benefits in 2022 — problems that have continued this year. Increased federal nutrition benefits, one of the last vestiges of pandemic aid efforts, expired last spring. Factoring in the loss of benefits, real income fell for the poorest households in 2022, and inequality rose.“Tight labor markets are incredibly powerful, they’re really important, but they’re not sufficient,” said Elisabeth Jacobs, a senior fellow at the Urban Institute.When a high-risk pregnancy forced Amber Summers to leave her job in rural Southern Illinois in 2021, the expanded child tax credit provided a lifeline. The $250 monthly payments helped cover her mortgage and allowed her son, now 9, to play Little League Baseball for the first time.“It was financial stability and stress relief for our family,” she said.But when the payments lapsed at the end of 2021, the family’s finances quickly unraveled — especially after Ms. Summers’s husband, Tim, contracted Covid and lost his job as a cook. And while both of them have since returned to work, neither is receiving full-time hours, and they are falling further behind on their bills. Opportunities for better-paying jobs are limited in their area.“The child tax credit helped pull our family out of poverty for such a short period of time,” Ms. Summers, 32, said.Congress passed the expanded child tax credit as part of the American Rescue Plan, President Biden’s pandemic-relief package, in early 2021. But while other Covid-era relief programs were always intended to expire once the emergency passed, supporters hoped to make the expanded child credit permanent.That didn’t happen. Faced with united opposition from congressional Republicans as well as some conservative Democrats, Mr. Biden dropped his effort to extend the program at the end of 2021; a renewed push failed again last year. The rise in poverty in 2022, social policy experts said, was the inevitable result of that decision.“Today’s Census report shows the dire consequences of congressional Republicans’ refusal to extend the enhanced Child Tax Credit, even as they advance costly corporate tax cuts,” Mr. Biden said in a statement.Correspondingly, the highest increases in poverty were in the South, where research has shown the child tax credit had the greatest effect, and among Alaska Natives and American Indians, for whom the poverty rate rebounded to 23.2 percent.Critics of the child tax credit and other pandemic aid have argued that the rapid rebound in poverty after the programs’ expiration is evidence that the progress made against poverty in recent years was, in effect, artificial. Michael Strain, an economist at the conservative American Enterprise Institute, argued that programs that offer incentives to work — such as the earned-income tax credit and the standard child tax credit — have led to more sustainable gains.“Yes, this alleviated child poverty, but it didn’t really do a whole lot to encourage self-sufficiency,” he said.Progressives take a different lesson: Government programs succeeded in lifting millions of people out of poverty. An analysis by researchers at Columbia University on Tuesday found that child poverty would have been nearly 50 percent lower in 2022 if the expanded tax credit had remained in place. The programs might also have had longer-run benefits, they argue, but ended before those effects could be seen.“The last few years just illustrated in an incredible way the power of effective government intervention,” said Arloc Sherman, a vice president at the Center on Budget and Policy Priorities, a progressive research organization. “The last couple years, through a plunge in poverty and what is now a record single-year increase in poverty in 2022, have shown that poverty is very much a policy choice.”Margot Sanger-Katz More

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    GDP Data Shows US Economic Growth Rate of 2% in Q1

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    The NewsThe United States economy grew faster early this year than previously believed.Gross domestic product, adjusted for inflation, expanded at an annual rate of 2 percent in the first three months of the year, the Commerce Department said Thursday. That was a significant upward revision from the 1.1 percent growth rate in preliminary data released in April. (An earlier revision, released last month, showed a slightly stronger rate of 1.3 percent.)An alternative measure of growth, based on income rather than production, painted a different picture, showing that the economy contracted for the second quarter in a row. That measure was also revised upward from the prior estimate.The report underscored the surprising resilience of the country’s economic recovery, which has remained steady despite high inflation, rapidly rising interest rates and persistent predictions of a recession from many forecasters on Wall Street.The new data is cause for “genuine optimism,” wrote Gregory Daco, chief economist at EY, the consulting firm previously known as Ernst & Young, in a note to clients. “This is leading many to rightly question whether the long-forecast recession is truly inevitable.”Consumers are powering the recovery through their spending, which increased at a 4.2 percent rate in the first quarter, up from a 1 percent rate in late 2022 and faster than the 3.7 percent rate initially reported in April. That spending, fueled by a strong job market and rising wages, helped offset declines in other sectors of the economy like business investment and housing.Consumers are powering the recovery through their spending, which increased at 4.2 percent rate in the first quarter.Jim Wilson/The New York TimesWhat It Means: Complications for the Fed.The continued strength of the consumer economy poses a conundrum for policymakers at the Federal Reserve, who have been raising interest rates in an effort to curb inflation without causing a recession.On the one hand, data from the first quarter provides some signs of success: Economic growth has slowed but not stalled, even as inflation has cooled significantly since the middle of last year.But many forecasters, both inside and outside the central bank, are skeptical that inflation will continue to ease as long as consumers are willing to open their wallets — meaning policymakers are likely to take further steps to rein in growth. At their meeting this month, Fed officials left interest rates unchanged for the first time in more than a year, but they have signaled they are likely to resume rate increases in July.The Fed chair, Jerome H. Powell, at a conference in Madrid on Thursday, noted that inflation had repeatedly defied forecasts of a slowdown.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.What’s Next: Data on income and spending.Mr. Powell and his colleagues will get more up-to-date evidence on their progress on Friday, when the Commerce Department releases data on personal income, spending and inflation from May.Jeanna Smialek More

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    Consumer Spending Rose More Than Expected in April

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    New data on spending and income suggest that the economy remains robust despite the Federal Reserve’s interest rate increases.Americans’ income and spending both rose in April, a sign of economic resilience amid rising prices and warnings of a possible recession.Consumer spending increased 0.8 percent in April, the Commerce Department said Friday. The uptick followed a two-month slowdown in spending and exceeded forecasters’ expectations, as Americans shelled out for cars, restaurant meals, movie tickets and other goods and services.After-tax income rose 0.4 percent, fueled by a strong job market that continues to push up wages and bring more people into the work force. Data from the Labor Department this month showed that Americans in their prime working years were employed in April at the highest rate in more than two decades.Separate data released by the Commerce Department on Friday showed that a key measure of business investment also picked up in April, a sign that corporate executives aren’t expecting a major slump in demand in coming months.Consumers’ resilience is a mixed blessing for officials at the Federal Reserve, who worry that robust spending is contributing to inflation, but who also don’t want it to slow so rapidly that the economy falls into a recession. The gradual slowdown in spending seen in recent months is broadly consistent with the “soft landing” scenario that policymakers are aiming for, but they have been wary of declaring victory too soon — a concern that April’s data, which showed persistent inflation alongside stronger spending, could underscore.“The odds of a recession dropped again,” wrote Robert Frick, corporate economist with Navy Federal Credit Union, in a note to clients on Friday. “The one problem from the report is inflation remains stubbornly high, and may tempt the Fed to raise the federal funds rate even more, when a pause was on the table,” he added, referring to the upcoming meeting of policymakers in June.It is unclear how long consumers can continue to prop up the economic recovery. Savings that some households built up in the pandemic have begun to dwindle, and there are signs companies are beginning to pull back on hiring. The standoff over the debt limit could further sap the economy’s momentum, although there were signs on Thursday evening that leaders in Washington were closing in on a deal to avert a default. More

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    Once an Evangelist for Airbnbs, She Now Crusades for Affordable Housing

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    Precious Price ditched her profitable business of renting home stays to tourists to combat the mounting housing crisis.“Making It Work” is a series is about small-business owners striving to endure hard times.When Precious Price bought her first home four years ago in Atlanta while working as a marketing consultant, she took advantage of her frequent business trips by renting out her house on Airbnb during her absences. “I knew I wanted to use that as a rental or investment property,” she said. “I began doing that, and it was honestly very lucrative.”For Ms. Price, 27, and other young entrepreneurs of color, online short-term rental platforms like Airbnb and Vrbo represented a path to building wealth on their own terms. With an excellent credit score and minimal start-up capital — a primary barrier for people in this demographic — a professional Airbnb host could amass a stable of apartments on long-term leases, then turn around and rent those properties on a nightly basis to vacationers.Some of these entrepreneurs see it as a more equitable alternative to corporate America, with its legacy of institutionalized bias and inflexibility toward caregivers and working parents. Others are motivated by the desire to cater to Black travelers, who say they still face discrimination even after platforms like Airbnb promised to address issues like documented cases of bias.Ms. Price became an evangelist of sorts, establishing social media channels to teach other would-be entrepreneurs how to follow in her footsteps, and churning out a digital library’s worth of videos, tutorials and advice using the handle @AirbnbMoney.The irony was not lost on Ms. Price that her grand real estate ambitions were propelled by the 296-square-foot “tiny house” she spent nearly six months building for herself in her backyard. When the coronavirus pandemic slammed the brakes on travel, grounding her road-warrior lifestyle and evaporating her supplemental income stream virtually overnight, her tiny house allowed her to continue renting out her primary home and making a large profit.She even added to her portfolio, buying a second house and renting several furnished apartments in Atlanta’s popular Midtown neighborhood, and she eventually left her consulting job to manage her rental business full time.“It was a freeing experience at the time,” she said. “I’m making a ton of money that most of my family has never seen in their lifetime.”Ms. Price was earning as much as $12,000 a month and deriving a sense of purpose from her work on social media helping her peers achieve financial security. Initially, she said she had no interest in renting to long-term tenants — the profit margin for tourist bookings was so much higher.“I was adamant about only renting to vacationers,” Ms. Price said. “I was just so heavily into the rat race.”Then, the distressing messages started to come. First one or two, then too many to ignore: a litany of increasingly distraught calls and emails from people who didn’t want her Airbnbs for a weekend away — they were in desperate need of a place to call home.Ms. Price at the Emerging Founders program at Atlanta Tech Village, where she got support developing a resource hub to help homeowners of color build tiny homes.Lynsey Weatherspoon for The New York TimesMs. Price realized she was on the front lines of a housing crisis. By renting property to tourists rather than long-term renters, she and others like her were exacerbating the nation’s housing affordability problem, as she related in a 2022 TEDxAtlanta talk. “I started to realize that conversation began happening across the country,” she said.The pleas and stories of financial precariousness hit home for Ms. Price, the oldest of five siblings and a first-generation college graduate. She went to business school at Indiana University. “When I started to get these calls from single mothers and students, I started to realize that’s the identity of some of my family members,” she said. “And I’m realizing the connection of how I’m not very far removed at all from that.”She began to re-examine her values and to walk away from the lucrative vacation-rental business. She stopped listing properties on short-term rental sites, and over the next several months, she shed her rental portfolio. “Everyone has their own ethical compass and for me, mine felt just off with what I was doing,” Ms. Price said.The few remaining tenants she has now are on long-term leases, and the rent she collects is enough to cover her costs, with maybe “a couple hundred dollars left over,” she said. She supplements that income with freelance consulting and public speaking gigs. Although she is earning a fraction of her former income, she is more fulfilled and no longer feeling burned out, she said.The housing crisis Ms. Price witnessed in Atlanta is playing out across the nation. The United States is short about 6.5 million single-family homes, according to the National Association of Realtors. For more than a decade, homes were not built fast enough to keep pace with population growth, a trend that was exacerbated by the pandemic. During this time, demand for larger homes grew even as construction slowed, hamstrung first by public health restrictions, then by a labor shortage and supply-chain issues that made everything from copper pipe to carpet scarcer and more expensive.The number of affordable houses has plunged: Only 10 percent of new homes cost less than $300,000 as of the fourth quarter of 2022, even as mortgage rates have roughly doubled over the past year.These challenges have a cascading effect that has driven up rents, as well: Moody’s Analytics found that the average renter now spends more than 30 percent of their income on rent.“If you look at rental vacancy rates, they’re extremely low,” said Whitney Airgood-Obrycki, a senior research associate at the Joint Center for Housing Studies at Harvard University. “It’s really hard for people to find an affordable place to move to. It’s extremely tight, especially for low-income renters.”As Ms. Price experienced up close, a growing number of municipalities — including Atlanta — have emerged from the pandemic only to find a full-blown housing crisis on their doorsteps. Lawmakers are seeking greater regulation of short-term rentals, with many trying to discourage “professional hosts,” as opposed to homeowners who are renting out part or all of their primary home.Policies should be nuanced enough to distinguish between the two categories of renters, said Ingrid Gould Ellen, a professor of urban policy and planning at New York University, and faculty director of the university’s Furman Center for Real Estate and Urban Policy.“Airbnb can be a really useful tool for a lot of people, for homeowners who are maybe struggling to make their mortgage payments, or even renters who want to occasionally make some income and rent their units while they’re away on vacation,” she said. “Those are all forms of usage that don’t actually restrict the long-term supply of housing.”Ms. Price’s experience with the tiny house in her backyard inspired her to search for another way for people to add housing — and for homeowners to generate rental income. These units, known colloquially as “tiny homes” or “granny flats” and identified formally as accessory dwelling units, can take the form of tiny homes, guest cottages, or apartments that are either stand-alone or attached to the primary house. An increasing number of policymakers are hoping these units can help take some of the pressure off the tight housing market.Living in roughly 300 square feet lets Ms. Price earn income renting out her primary house.Lynsey Weatherspoon for The New York Times“She’s working on a pressing problem — the lack of housing supply across the U.S.,” said Praveen Ghanta, a technology entrepreneur who began the Emerging Founders program, a start-up incubator for Black, Latino and female founders in Atlanta. Ms. Price, a participant in the program, is working on a start-up she named Landrift, which is intended to be a resource hub so that homeowners — particularly homeowners of color — can increase the value of their properties and generate income by building their own tiny homes. “We can make a meaningful impact, particularly in markets like Atlanta,” Mr. Ghanta said.“Sometimes I think people get fixated on the notion of affordable housing and that it has to be nonprofit,” he said. “The reality is there’s a lot of both money to be made and housing to be supplied, even within market rate constructs.”Ms. Price has reoriented her social media platforms away from the management of short-term rental properties and toward the promotion of small-scale development of accessory dwelling units. “At this point I do want to begin acquiring other properties,” she said. She is looking for houses with enough land to accommodate a tiny house while building a second ancillary structure — a guest cottage — on her first property.“My plan is to get a property I would be able to do some kind of housing on so I’m not just taking housing, but would be able to make more housing,” she said. “The American dream is real estate.” More

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    Inflation Is Still High. What’s Driving It Has Changed.

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    Two years ago, high inflation was about supply shortages and pricier goods. Then it was about war in Ukraine and energy. These days, services are key.America is now two years into abnormally high inflation — and while the nation appears to be past the worst phase of the biggest spike in price increases in half a century, the road back to normal is a long and uncertain one.The pop in prices over the 24 months that ended in March eroded wage gains, burdened consumers and spurred a Federal Reserve response that has the potential to cause a recession.What generated the painful inflation, and what comes next? A look through the data reveals a situation that arose from pandemic disruptions and the government’s response, was worsened by the war in Ukraine and is now cooling as supply problems clear up and the economy slows. But it also illustrates that U.S. inflation today is drastically different from the price increases that first appeared in 2021, driven by stubborn price increases for services like airfare and child care instead of by the cost of goods.Fresh wage and price data set for release on Friday are expected to show continued evidence of slow and steady moderation in March. Now Fed officials must judge whether the cool-down is happening fast enough to assure them that inflation will promptly return to normal — a focus when the central bank releases its next interest rate decision on Wednesday.Inflation Is Slowly Coming DownYear-over-year percentage change in the Consumer Price Index

    Sources: Bureau of Labor Statistics; New York Fed’s Global Supply Chain Pressure IndexBy The New York TimesThe Fed aims for 2 percent inflation on average over time using the Personal Consumption Expenditures index, which will be released on Friday. That figure pulls some of its data from the Consumer Price Index report, which was released two weeks ago and offered a clear picture of the recent inflation trajectory.Before the pandemic, inflation hovered around 2 percent as measured by the overall Consumer Price Index and by a “core” measure that strips out food and fuel prices to get a clearer sense of the underlying trend. It dropped sharply at the pandemic’s start in early 2020 as people stayed home and stopped spending money, then rebounded starting in March 2021.Some of that initial pop was due to a “base effect.” Fresh inflation data were being measured against pandemic-depressed numbers from the year before, which made the new figures look elevated. But by the end of summer 2021, it was clear that something more fundamental was happening with prices.Demand for goods was unusually high: Families had more money than usual after months at home and repeated stimulus checks, and they were spending it on cars, couches and deck furniture. At the same time, the pandemic had shut down many factories, limiting how much supply the world’s companies could churn out. Shipping costs surged, goods shortages mounted, and the prices of physical purchases from appliances to cars jumped.Higher Prices for Services Are Now Driving InflationBreakdown of the inflation rate, by category

    Note: The services category excludes energy services, and the goods category excludes food and energy goods.Sources: Bureau of Labor Statistics; New York Times analysisBy The New York TimesBy late 2021, a second trend was also getting started. Services costs, which include nonphysical purchases like tutoring and tax preparation, had begun to climb quickly.As with goods prices, that tied back to the strong demand. Because households were in good spending shape, landlords, child care providers and restaurants could charge more without losing customers.Across the economy, firms seized the moment to pad their bottom lines; profit margins soared in late 2021 before moderating late last year.Businesses were also covering their growing costs. Wages had started to climb more quickly than usual, which meant that corporate labor bills were swelling.Pay Has Climbed Quickly, but Not as Fast as PricesYear-over-year percentage change in the Employment Cost Index, a measure of labor costs, and the Consumer Price Index, a measure of living costs

    Note: The Consumer Price Index is reported monthly. The Employment Cost Index is reported quarterly and is as of Q4 2022. Early 2023 data is a Goldman Sachs forecast.Source: Bureau of Labor StatisticsBy The New York TimesFed officials had expected goods shortages to fade, but the combination of faster inflation for services and accelerating wage growth captured their attention.Even if pay gains had not been the original cause of inflation, policymakers were concerned that it would be difficult for price increases to return to a normal pace with pay rates rising briskly. Companies, they thought, would keep raising prices to pass on those labor expenses.Worried central bankers started raising interest rates in March 2022 to hit the brakes on growth by making it more expensive to borrow to buy a car or house or expand a business. The goal was to slow the labor market and make it harder for firms to raise prices. In just over a year, they lifted rates to nearly 5 percent — the fastest adjustment since the 1980s.Yet in early 2022, Fed policy started fighting yet another force stoking inflation. Russia’s invasion of Ukraine that February caused food and fuel prices to surge. Between that and the cost increases in goods and services, overall inflation reached its highest peak since the 1980s: about 9 percent in July.In the months since, inflation has slowed as cost increases for energy and goods have cooled. But food prices are still climbing swiftly, and — crucially — cost increases in services remain rapid.In fact, services prices are now the very center of the inflation story.They could soon start to fade in one key area. Housing costs have been picking up quickly for months, but rent increases have recently slowed in real-time private sector data. That is expected to feed into official inflation numbers by later this year.That has left policymakers focused on other services, which span an array of purchases including medical care, car repairs and many vacation expenses. How quickly those prices — often called “core services ex-housing” — can retreat will determine whether and when inflation can return to normal.Excluding Housing Costs, Prices of Core Services Are RisingYear-over-year percentage change in the Consumer Price Index for services, stripping out housing and energy costs

    Sources: Bureau of Labor Statistics; New York Times analysisBy The New York TimesNow, Fed officials will have to assess whether the economy is poised to slow enough to bring down the cost of those critical services.Between the central bank’s rate moves and recent banking turmoil, some officials think that it may be. Policymakers projected in March that they would raise interest rates just once more in 2023, a move that is widely expected at their meeting next week.But market watchers will listen intently when Jerome H. Powell, the Fed chair, gives his postmeeting news conference. He could offer hints at whether officials think the inflation saga is heading for a speedy conclusion — or another chapter.Ben Casselman More