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    Job Openings Dipped in May, a Sign of Continued Cooling

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    The NewsJob openings fell in May while the number of workers quitting their jobs increased, the Labor Department reported Thursday.There were 9.8 million job openings in May, down from 10.3 million in April, according to the Job Openings and Labor Turnover Survey, known as JOLTS. The report shows that the labor market is maintaining ample opportunities for workers, but that it is losing momentum.“This is a labor market that is moderating, where things are cooling down, but is still hot,” said Nick Bunker, the director of North American economic research at the job search website Indeed.The quits rate, which is often used to gauge a worker’s confidence in the job market, increased in May, particularly in the health care, social assistance and construction industries. A rise in quitting often signals workers’ confidence that they will be able to find other work, often better paying. But fewer workers are quitting their jobs than were doing so last year at the height of what was called the “great resignation.”Layoffs were relatively steady after decreasing in previous months, a sign that employers are hesitant to let go of workers.College students waiting to speak with representatives of tech companies at a job fair in Atlanta.Alex Slitz/Associated PressWhy It Matters: The Fed’s next move on interest rates is unclear.Policymakers at the Federal Reserve have worried about the strength of the labor market as they continue to tackle stubbornly high inflation.The Fed chose to leave interest rates unchanged in its June meeting after 10 consecutive increases. The JOLTS report is one of several factors that will inform the Fed’s next decision on rates.Some economists worry that the Fed will push interest rates too high and set off a recession.But the JOLTS report as well as previous economic temperature checks have led others to believe that a “soft landing” — an outcome in which inflation eases to the Fed’s goal of 2 percent without a recession — is within reach. The biggest question is whether wage growth can continue to cool as workers switch jobs, said Aaron Terrazas, chief economist at the career site Glassdoor.“A tight labor market does not necessarily have to be inflationary,” he said.Background: A cooling labor market retains underlying strength.The labor market has remained resilient amid the Fed’s efforts to slow down the economy but has shown signs of cooling in recent months. Job openings were down for three consecutive months until April.Initial jobless claims during the week that ended Saturday, also released by the Labor Department on Thursday, nudged higher from the week before, though the four-week trend shows initial claims declining.Although job openings are cooling, the reading of 9.8 million in May is high compared with prepandemic levels. In 2019, for example, the monthly totals hovered around seven million.“To some degree, I worry we’ve become desensitized to numbers that were once upon a time eye-popping,” Mr. Terrazas said.What’s Next: The June jobs report comes Friday.The June employment report — another indicator closely watched by the Fed — will be released by the Labor Department on Friday. Economists surveyed by Bloomberg expect the report to show a gain of 225,000, down from the initial reading of 339,000 for May.The unemployment rate jumped to 3.7 percent in May, from 3.4 percent a month earlier. Although still historically low, the rate was the highest since October and exceeded analysts’ expectations.Fed policymakers will hold their next meeting July 25-26. More

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    Fed Officials Were Wary About Slow Inflation Progress at June Meeting

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    Federal Reserve officials are debating how high to raise interest rates to fully wrangle inflation. The debate was in focus at their meeting last month.Federal Reserve officials were concerned about sluggish progress toward lower inflation and wary about the surprising staying power of the American economy at their June meeting — so much so that some even wanted to raise rates last month, instead of holding them steady as the central bank ultimately did, minutes from the gathering showed.Fed officials decided to leave interest rates unchanged at their June 13-14 gathering to give themselves more time to see how the 10 straight increases they had previously made were affecting the economy. Higher interest rates slow the economy by making it more expensive to borrow and spend money, but it takes months or even years for their full effects to play out.At the same time, officials released economic forecasts that suggested they would make two more quarter-point rate increases this year. That forecast was meant to send a message: Fed policymakers were simply slowing the pace of rate increases by taking a meeting off. They were not stopping their assault against rapid inflation.The meeting minutes, released Wednesday, both reinforced the message that further interest rates increases were likely and offered more detail on the June debate — underscoring that Fed officials were divided about how the economy was shaping up and what to do about it.All 11 of the Fed’s voting officials supported the June rate hold, but that unanimity concealed tensions under the surface. Some of the central bank’s officials — 18 in total, including 7 who do not vote on policy this year — were leaning toward a rate increase.While “almost all” Fed officials thought it was “appropriate or acceptable” to leave rates unchanged in June, “some” either favored raising interest rates or “could have supported such a proposal” given continued strength in the labor market, persistent momentum in the economy, and “few clear signs” that inflation was getting back on track, the minutes showed.And officials remained worried that if they failed to wrestle inflation under control quickly, there was a risk it could become such a normal part of everyday life that it would prove harder to stamp out down the road.“Almost all participants stated that, with inflation still well above the Committee’s longer-run goal and the labor market remaining tight, upside risks to the inflation outlook or the possibility that persistently high inflation might cause inflation expectations to become unanchored remained key factors shaping the policy outlook,” the minutes said.The minutes underlined what a difficult moment this is for the Fed. Inflation has come down notably on an overall basis, but that is partly because food and fuel prices are cooling off. An inflation measure that strips out those volatile categories — known as core inflation — is making much more halting progress. That has caught the Fed’s attention, especially given signs that the broader economy is holding up.“Core inflation had not shown a sustained easing since the beginning of the year,” Fed officials noted at the meeting, according to the minutes, and they “generally” noted that consumer spending had been “stronger than expected.” Officials reported that they were hearing a range of reports from businesses, as some saw weaker economic conditions and others reported “greater-than-expected strength.”The details of recent inflation data were also disquieting for some at the Fed. Officials noted that price increases for goods — physical purchases like furniture or clothing — were moderating, but less quickly than expected in recent months.While rent inflation was expected to continue to cool down and help to lower overall inflation, “a few” officials were worried that it would come down less decisively than hoped amid low for-sale housing inventory and “less-than-expected deceleration” recently in rents for leases signed by new tenants. “Some” Fed officials noted that other service prices “had shown few signs of slowing in the past few months.”Since the Fed’s meeting, officials have continued to signal that further rate increases are expected. Jerome H. Powell, the Fed chair, said during an appearance last week in Madrid that he would expect to continue with a slower pace of interest rate increases — but he did not rule out that officials could return to back-to-back rate moves.“We did take one meeting where we didn’t move, so that’s in a way a moderation of the pace,” he explained. “So I would expect something like that to continue, assuming the economy evolves about as expected.”The question for investors is what would prod the Fed to return toward a more aggressive path for rate increases — or, on the other hand, what would cause officials to hold off on future rate moves.Policymakers have been clear that the path forward for interest rate increases could change depending on what happens with the economy. If inflation is showing signs of sticking around, the job market is unexpectedly strong and consumer spending continues to chug along, that might suggest that it will take even higher interest rates to cool down household and business spending to a point where companies are forced to stop raising prices so much.If, on the other hand, inflation is coming down quickly, the job market is cooling and consumers are pulling back sharply, the Fed could feel more comfort in holding off on future rate increases.For now, investors expect the Fed to raise interest rates at its July 25-26 meeting. And economists will closely watch fresh job market data set for release on Friday for the latest evidence of how the economy is evolving. More

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    G.M.’s Sales Jumped 19% in the Second Quarter

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    General Motors, Toyota and other automakers sold more trucks and sport utility vehicles as supply chain problems eased and demand remained strong despite rising interest rates.Some of the country’s biggest automakers reported big sales increases for the second quarter on Wednesday, the strongest sign yet that the auto industry was bouncing back from parts shortages and overcoming the effects of higher interest rates.General Motors, the largest U.S. automaker, said it sold 691,978 vehicles from April to June, up 19 percent from a year earlier. It was the company’s highest quarterly total in more than two years.Automakers have struggled in the last two years with a shortage of computer chips that forced factory shutdowns and left dealers with few vehicles to sell. More recently, rising interest rates have made auto loans more expensive, causing some consumers to defer purchases or opt for used vehicles.“I’m not saying we are on the cusp of exciting growth here,” said Jonathan Smoke, chief economist at Cox Automotive, a research firm. “But we are now at a turning point where the auto market returns to more balance. It’s the beginning of returning to normal.”The easing of chip shortages has allowed automakers to restock dealer lots, making it easier for car buyers to find the models and features they want, Mr. Smoke said. At the end of June, dealers had about 1.8 million vehicles in stock, nearly 800,000 more than at the same point in 2022, according to Cox data.Sales have also been helped by strong job creation and rising wages, Mr. Smoke said.At the same time, however, higher interest rates and higher car prices have put new-car purchases out of reach of many consumers. In the first half of the year, the average price paid for a new vehicle was a near-record $48,564. The average interest rate paid on car loans in the first six months of 2023 was 7.09 percent, up from 4.86 percent a year earlier, according to Cox. The average monthly payment in the first half was $784, up from $691.“Demand will be limited by the level of prices and rates, which are not likely to come down enough to stimulate more demand than the market can bear,” Mr. Smoke said.Cox estimated that total sales of new cars and trucks rose 11.6 percent in the first half of the year, to 7.65 million. The firm now expects full-year sales to top 15 million, which would be a rise of 8 percent.Several automakers reported solid quarterly sales on Wednesday. Toyota said its U.S. sales rose 7 percent, to 568,962 cars and light trucks. Stellantis, the company that owns Jeep, Ram, Chrysler and other brands, reported a 6 percent rise, to 434,648 vehicles.Honda, which had been severely hampered by chip shortages, said its sales rose 45 percent to 347,025 cars and trucks. Hyundai and Kia, the South Korean automakers, each sold more than 210,000 vehicles, posting gains of 14 percent and 15 percent.Electric vehicles remain the fastest-growing segment of the auto industry. Rivian, a maker of electric pickup trucks and sport utility vehicles, said on Monday that it delivered 12,640 in the second quarter, a 59 percent jump from a year earlier. And on Sunday, Tesla reported an 83 percent jump in global sales in the second quarter.Cox estimated that more than 500,000 electric vehicles were sold in the United States in the first six months of the year, and that more than one million would be sold in 2023, setting a record for battery-powered cars and trucks in the country.Tesla, which does not break out its sales by country, remains the largest seller of E.V.s in the U.S. market. Cox estimated that the company sold more than 161,000 electric cars in the second quarter in the United States. Ford Motor, which offers three fully electric models., reports its quarterly sales on Thursday.G.M. sold more 15,300 battery-powered cars and trucks, but nearly 14,000 were the Chevrolet Bolt, a smaller vehicle that the company will stop making at the end of the year. The company also sold 1,348 Cadillac Lyriq electric S.U.V.s and 47 GMC Hummer pickup trucks. Chevrolet will soon start delivering a new electric Silverado pickup truck, which uses the same battery technology as the Lyriq and Hummer. More

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    How Inflation and Interest Rates Vary Around the World

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    Prices are still rising too fast for comfort in many major economies, and policymakers across the globe are trying to wrestle them under control.From Melbourne to Manchester to Miami, people are struggling under the weight of hefty price increases for the things they buy each day.The worst spike in inflation that many advanced economies have seen in decades underscores the global forces driving prices higher, namely the disruptions set in motion by the coronavirus pandemic.The stakes are high for policymakers around the world, who are facing similar problems. To try to get inflation under control, central bankers have rapidly lifted interest rates, trying to slow their economies in hopes of cooling prices. More

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    At the Front Lines of the Inflation Fight, Uncertainty Reigns

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    Central bankers and economists gathered this week and, amid concerns about persistent inflation, wondered about all the things they still don’t know.When prices started to take off in multiple countries around the world about two years ago, the word most often associated with inflation was “transitory.” Today, the word is “persistence.”That was uttered repeatedly at the 10th annual conference of the European Central Bank this week in Sintra, Portugal.“It’s been surprising that inflation has been this persistent,” Jerome H. Powell, the chair of the Federal Reserve, said.“We have to be as persistent as inflation is persistent,” Christine Lagarde, the president of the European Central Bank, said.The latest inflation data in Britain “showed clear signs of persistence,” Andrew Bailey, the governor of the Bank of England, said.Policymakers from around the world gathered alongside academics and analysts to discuss monetary policy as they try to force inflation down. Collectively, they sent a single message: Interest rates will be high for awhile.Even though inflation is slowing, domestic price pressures remain strong in the United States and Europe. On Friday, data showed the inflation in the eurozone slowed to 5.5 percent, but core inflation, a measure of domestic price increases, rose. The challenge for policymakers is how to meet their targets of 2 percent inflation, without overdoing it and pushing their economies into recessions.It’s hard to judge when a turning point has been reached and policymakers have done enough, said Clare Lombardelli, the chief economist at the Organization for Economic Cooperation and Development and former chief economic adviser in the British Treasury. “We don’t yet know. We’re still seeing core inflation rising.” The tone of the conference was set on Monday night by Gita Gopinath, the first deputy managing director of the International Monetary Fund. In her speech, she said there was an “uncomfortable truth” that policymakers needed to hear. “Inflation is taking too long to get back to target.”Gita Gopinath, of the International Monetary Fund, said inflation was “taking too long” to come back down.Elizabeth Frantz/ReutersAnd so, she said, interest rates should be at levels that restrict the economy until core inflation is on a downward path. But Ms. Gopinath had another unsettling message to share: The world will probably face more shocks, more frequently.“There is a substantial risk that the more volatile supply shocks of the pandemic era will persist,” she said. Countries cutting global supply chains to shift production home or to existing trade partners would raise production costs. And they would be more vulnerable to future shocks because their concentrated production would give them less flexibility.The conversations in Sintra kept coming back to all the things economists don’t know, and the list was long: Inflation expectations are hard to decipher; energy markets are opaque; the speed that monetary policy affects the economy seems to be slowing; and there’s little guidance on how people and companies will react to large successive economic shocks.There were also plenty of mea culpas about the inaccuracy of past inflation forecasts.“Our understanding of inflation expectations is not a precise one,” Mr. Powell said. “The longer inflation remains high, the more risk there is that inflation will become entrenched in the economy. So the passage of time is not our friend here.”Meanwhile, there are signs that the impact of high interest rates will take longer to be felt in the economy than they used to. In Britain, the vast majority of mortgages have rates that are fixed for short periods and so reset every two or five years. A decade ago, it was more common to have mortgages that fluctuated with interest rates, so homeowners felt the impact of higher interest rates instantly. Because of this change, “history isn’t going to be a great guide,” Mr. Bailey said.Another poor guide has been prices in energy markets. The price of wholesale energy has been the driving force behind headline inflation rates, but rapid price changes have helped make inflation forecasts inaccurate. A panel session on energy markets reinforced economists’ concerns about how inadequately informed they are on something that is heavily influencing inflation, because of a lack of transparency in the industry. A chart on the mega-profits of commodity-trading houses last year left many in the room wide-eyed.A shopping district in central London. “Our understanding of inflation expectations is not a precise one,” said Jerome H. Powell, the chair of the Federal Reserve.Sam Bush for The New York TimesEconomists have been writing new economic models, trying to respond quickly to the fact that central banks have consistently underestimated inflation. But to some extent the damage has already been done, and among some policymakers there is a growing lack of trust in the forecasts. The fact that central bankers in the eurozone have agreed to be “data dependent” — making policy decisions based on the data available at each meeting, and not take predetermined actions — shows that “we don’t trust models enough now to base our decision, at least mostly, on the models,” said Pierre Wunsch, a member of the E.C.B.’s Governing Council and the head of Belgium’s central bank. “And that’s because we have been surprised for a year and a half.”Given all that central bankers do not know, the dominant mood at the conference was the need for a tough stance on inflation, with higher interest rates for longer. But not everyone agreed.Some argued that past rate increases would be enough to bring down inflation, and further increases would inflict unnecessary pain on businesses and households. But central bankers might feel compelled to act more aggressively to ward off attacks on their reputation and credibility, a vocal minority argued.“The odds are that they have already done too much,” said Erik Nielsen, an economist at UniCredit, said of the European Central Bank. This is probably happening because of the diminishing faith in forecasts, he said, which is putting the focus on past inflation data.“That’s like driving a car and somebody painted your front screen so you can’t look forward,” he said. “You can only look through the back window to see what inflation was last month. That probably ends with you in the ditch.” More

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    Key Inflation Gauge Cooled in May, Welcome News for Federal Reserve

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    The Federal Reserve is monitoring “core” price increases for a hint at how inflation will develop. A slowdown in May is likely to come as a welcome development.The Federal Reserve’s preferred inflation measure climbed more slowly than economists had expected in the year through May after stripping out food and fuel prices — an encouraging sign that price increases are gradually moderating.Although inflation has been cooling notably on an overall basis in recent months, Fed officials have been closely tracking the “core” inflation measure that cuts out grocery and gas costs, which they think offers a better signal of how price increases might shape up in the months and years to come. It has been stuck at an elevated level and slowing down only gradually, a source of concern for policymakers who have spent more than a year raising interest rates in a bid to tame price increases.The May data broke with that trend, at least a little. Prices climbed 4.6 percent over the past year, excluding food and fuel. That compared with 4.7 percent in the previous month, which economists had expected would repeat itself. Core inflation is down from a 5.4 percent peak, but it remains well above the Fed’s 2 percent inflation goal.Progress in wrestling overall inflation has been swifter. The Personal Consumption Expenditures index measure that includes food and gas climbed 3.8 percent in the year through May, in line with economists’ forecasts. That measure peaked at about 7 percent last summer.More moderate overall inflation is taking some pressure off consumers: Cheaper tanks of gas and less rapid price increases in the grocery aisle are helping paychecks to go further. But for officials at the Fed, signs that inflation remains stubborn under the surface have been a reason to worry. Officials believe that they need to wrestle core price increases lower to make sure that the economy’s future is one of modest and steady price increases.To do that, Fed policymakers have been raising interest rates. Making it more expensive to get a home loan or expand a business restricts the economy’s momentum. By slowing growth and cooling demand, the moves are meant to make it harder for corporations to increase their prices without losing customers.Policymakers skipped a rate increase at their June meeting after 10 straight moves, but they have signaled that they expect to lift rates beyond their current level of just above 5 percent — perhaps to 5.5 percent by the end of the year. Investors have been betting on only one more move this year, but they increasingly see two rate moves as a possibility.Jerome H. Powell, the Fed chair, emphasized this week at an event in Madrid that the outlook for how much more rates might move this year is uncertain.“We’ve all seen inflation be, over and over again, shown to be more persistent and stronger than expected,” Mr. Powell said. “At some point that may change. And I think we have to be ready to follow the data and be a little patient as we let this unfold.” 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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    Fed Chair Powell Says He Expects Slower Interest Rate Increases to Continue

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    After rapid interest rate increases, Federal Reserve officials could move to a steadily slower pace — though they are not ready to commit.Jerome H. Powell, the Federal Reserve chair, said on Thursday that he would expect to continue with a slower pace of interest rate increases after central bankers skipped raising interest rates in June for the first time in 11 policy meetings — but he did not rule out that officials could return to back-to-back rate moves.“It may be that we don’t move for a meeting, and then move at a meeting,” Mr. Powell said.Speaking at a conference in Madrid, he reiterated an assertion he made a day earlier that he would not take future rate increases at consecutive meetings “off the table.” But he added that he would expect a more patient approach to persist.“We did take one meeting where we didn’t move, so that’s in a way a moderation of the pace,” he explained. “So I would expect something like that to continue, assuming the economy evolves about as expected.”Mr. Powell noted, however, that the economy “has a tendency to do something different” than policymakers anticipate.Fed officials raised interest rates rapidly in 2022, making a string of three-quarter-point increases. They slowed to a half-point move late last year, and have been progressively moving toward smaller, and now more intermittent, adjustments.Raising interest rates is like hitting the brakes on economic growth: It slows consumer and business demand in order to bring down inflation. Lifting rates more gradually is akin to tapping the brake pedal less firmly. Fed officials are still slowing the economy, but they are trying to avoid an unnecessarily jarring halt. For now, central bankers expect to raise their policy rate two more times in 2023, from just above 5 percent to just above 5.5 percent. If those moves happen at an every-other-meeting pace, that could mean rate increases at the central bank’s meetings in July and November.But significant uncertainty clouds that forecast. Investors put a low — though rising — probability on two more rate increases by the end of the year. They are betting that it is more likely that the Fed will make only one more rate increase in 2023, as the economy slows and inflation cools.Mr. Powell noted that the Fed has repeatedly been wrong in the other direction, overestimating how quickly price increases moderate.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.“It wouldn’t have been thinkable to have a 5 percent interest rate before the pandemic,” he later added. “And now the question is — is that tight enough policy?” More