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    After Enduring a Pandemic, Small Businesses Face New Worries

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

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    Fed Prepares Another Rate Increase as Wall Street Wonders What’s Next

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    Central bankers around the world have been picking up the pace of rate increases. Now the big question looms: When will they slow down?Federal Reserve officials are set to make a second abnormally large interest rate increase this week as they race to cool down an overheating economy. The question for many economists and investors is just how far the central bank will go in its quest to tame inflation.Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they’ve referred to as “front-loading.” That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May and three-quarters of a point in June, its biggest move since 1994. Policymakers have signaled that another three-quarter-point move is likely on Wednesday.The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today’s rapid inflation won’t last. And, by raising interest rates quickly, officials are aiming to swiftly return policy to a setting at which it is no longer adding to economic growth, because goosing the economy makes little sense at a moment when jobs are plentiful and prices are climbing quickly.But, after Wednesday’s expected move, the Fed’s main policy rate would be right at what policymakers think of as a neutral setting: one that neither helps nor hurts the economy. With rates high enough that they are no longer actively juicing growth, central bankers may feel more comfortable slowing down if they see signs that the economy is beginning to cool. Jerome H. Powell, the Fed chairman, is likely to keep his options open, but economists and analysts will parse every word of his postmeeting news conference on Wednesday for hints at the central bank’s path ahead.“It feels like 75 is kind of in the books — the interesting thing is the forward guidance,” said Michael Feroli, the chief U.S. economist at J.P. Morgan, explaining that he thinks the key question is what will come next. “It’s easier to slow down going forward, because every move will be a move into tightening territory.”The Fed’s latest economic projections released in June suggested that officials would raise rates to 3.4 percent by the end of the year, up from around 1.6 percent now. Many economists have interpreted that to mean that the Fed will raise rates by three-quarters of a point this month, half of a point in September, a quarter-point in November and a quarter-point in December. In other words, it hints that a slowdown is coming.But policy expectations have regularly been upended this year as data surprises officials and inflation proves stubbornly hot. Just this month, investors were speculating that the Fed might make a full percentage-point increase this week, only to simmer down after central bankers and fresh data signaled that a smaller move was more likely.That changeability is a key reason that the Fed is likely to emphasize that it is closely watching economic data as it determines policy. Its next meeting is nearly two months away, in September, so central bankers will most likely want to keep their options open so that they can react to the evolving economic situation.“Much as we’d like Mr. Powell to pull back from the Fed’s recent hyper-aggressive tone, it’s probably too early,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in a research note ahead of the meeting.Still, there are some reasons to think that the path the Fed set forward in its projections could play out. While inflation has been running at the fastest pace in more than 40 years, it is likely to slow when July data is released because gasoline prices have come down notably this month.And, although inflation expectations had shown signs of jumping higher, one key measure eased in early data out this month. Keeping inflation expectations in check is paramount because consumers and companies might change their behavior if they expect quick inflation to last. Workers could ask for higher pay to cover rising costs, companies might continually lift prices to cover climbing wage bills and the problem of rising prices would be perpetuated.A variety of other metrics of the economy’s strength, from jobless claims to manufacturing measures, point to a slowing business environment. If that cooling continues, it should keep the Fed on track to slow down, said Subadra Rajappa, the head of U.S. rates strategy at Société Générale. While Fed officials want the economy to moderate, they are trying to avoid tipping it into an outright recession.“When you start to see cracks appear in the unemployment measures, they’re going to have to take a much more cautious approach,” Ms. Rajappa said.Markets have been quivering in recent days, concerned that central banks around the world will push their war on inflation too far and tank economies in the process. Investors are increasingly betting that the Fed might lower interest rates next year, presumably because they expect the central bank to set off a downturn.“It is very likely that central banks will hike so quickly that they will overdo it and put their economies into a recession,” said Gennadiy Goldberg, a rates strategist at TD Securities. “That’s what markets are afraid of.”But signs of slowing growth and easing price pressures remain inconclusive, and price increases are still rapid, which is why the Fed is likely to retain its room to maneuver.American employers added 372,000 jobs in June, and wages continue to climb strongly. Consumer spending has eased somewhat, but less than expected. While the housing market is slowing, rents continue to pick up in many markets.Plus, the outlook for inflation is dicey. While gas prices may be slowing for now, risks of a resurgence lie ahead, because, for example, the administration’s efforts to impose a global price cap on Russian oil exports could fall through. Rising rents mean that housing costs could help to keep inflation elevated.While Mr. Powell made clear at his June news conference that three-quarter-point rate increases were out of the ordinary and that he did “not expect” them to be common, Fed officials have also been clear that they would like to see a string of slowing inflation readings before feeling more confident that price increases are coming under control.“We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in a Bloomberg interview this month.The central bank will get a fresh reading on the Personal Consumption Expenditures index — its preferred inflation gauge — on Friday. That data will be for June, and it is expected to show continued rapid inflation both on a headline basis and after volatile food and fuel prices are stripped out. The Employment Cost Index, a wage and benefits measure that the Fed watches closely, will also be released that day and is expected to show compensation climbing quickly.Given the recent decline in prices at the gas pump, at least two months of slower inflation readings by September are possible — but not guaranteed.“They cannot prematurely hint that they think victory over inflation is coming,” Mr. Shepherdson of Pantheon wrote. More

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    Global Central Banks Ramp Up Inflation Fight

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    Central banks in the U.S., Europe, Canada and parts of Asia are lifting interest rates rapidly as they try to wrestle breakneck inflation under control.Central bankers around the world are lifting interest rates at an aggressive clip as rapid inflation persists and seeps into a broad array of goods and services, setting the global economy up for a lurch toward more expensive credit, lower stock and bond values and — potentially — a sharp pullback in economic activity.It’s a moment unlike anything the international community has experienced in decades, as countries around the world try to bring rapid price increases under control before they become a more lasting part of the economy.Inflation has surged across many advanced and developing economies since early 2021 as strong demand for goods collided with shortages brought on by the pandemic. Central banks spent months hoping that economies would reopen and shipping routes would unclog, easing supply constraints, and that consumer spending would return to normal. That hasn’t happened, and the war in Ukraine has only intensified the situation by disrupting oil and food supplies, pushing prices even higher.Global economic policymakers began responding in earnest this year, with at least 75 central banks lifting interest rates, many from historically low levels. While policymakers cannot do much to contain high energy prices, higher borrowing costs could help slow consumer and business demand to give supply a chance to catch up across an array of goods and services so that inflation does not continue indefinitely.The European Central Bank will meet this week and is expected to make its first rate increase since 2011, one that officials have signaled will most likely be only a quarter point but will probably be followed by a larger move in September.Other central banks have begun moving more aggressively already, with officials from Canada to the Philippines picking up the pace of rate increases in recent weeks amid fears that consumers and investors are beginning to expect steadily higher prices — a shift that could make inflation a more permanent feature of the economic backdrop. Federal Reserve officials have also hastened their response. They lifted borrowing costs in June by the most since 1994 and suggested that an even bigger move is possible, though several in recent days have suggested that speeding up again is not their preferred plan for the upcoming July meeting and that a second three-quarter-point increase is most likely.As interest rates jump around the world, making money that has been cheap for years more expensive to borrow, they are stoking fears among investors that the global economy could slow sharply — and that some countries could find themselves plunged into painful recessions. Commodity prices, some of which can serve as a barometer of expected consumer demand and global economic health, have dropped as investors grow jittery. International economic officials have warned that the path ahead could prove bumpy as central banks adjust policy and as the war in Ukraine heightens uncertainty.“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession,” Kristalina Georgieva, the managing director of the International Monetary Fund wrote.Pool photo by Sonny Tumbelaka“It is going to be a tough 2022 — and possibly an even tougher 2023, with increased risk of recession,” Kristalina Georgieva, the managing director of the International Monetary Fund, said in a blog post on Wednesday. Ms. Georgieva argued that central banks need to react to inflation, saying that “acting now will hurt less than acting later.”Ms. Georgieva pointed out that about three-quarters of the institutions the fund tracks have raised interest rates since July 2021. Developed economies have lifted them by 1.7 percentage points on average, while emerging economies have moved by more than 3 percentage points.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Stock Market Drop Accelerated as Recession Seemed More Likely

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    Further losses may be on the way, even after a 20 percent drop in the first half of the year, as Wall Street continues to price in the Fed’s aggressive interest rate policy.Investors had an awful start to the year as stocks twice entered bear market territory, falling more than 20 percent. Stocks didn’t hang there long the first time, but the second drop has proved more durable, as Wall Street has come to accept that inflation is more persistent and that the Federal Reserve will have to be more aggressive in combating it.The S&P 500 lost 16.4 percent in the second quarter, leaving it 20.6 percent below its level at the end of 2021.Where to now? While a bounce in stocks certainly seems due, investment advisers say a lasting recovery is unlikely for now. They warn that a recession is probably on the way, if it’s not here already, and that valuations remain high, even after the big decline.“I think we’re in for a lot more pain, probably, in U.S. stocks,” said Meb Faber, chief investment officer of Cambria Investment Management. “Just to get back to historical valuations, we could easily go down a third from here.”Ella Hoxha, a manager of global bond portfolios for Pictet Asset Management, said expectations still haven’t been adjusted to incorporate the likely risk of a recession. It may seem surprising that a recession could catch Wall Street by surprise when the conversation there is about little else. But until recently, Wall Street played down its chances and talked up the prospects of a soft landing, in which growth slows but the economy avoids major, prolonged disruption.“The odds of a recession have gone up, but the markets have not fully priced in the recession case yet,” Ms. Hoxha said. “Not only is the Fed having to correct being too dovish last year, it has to unwind its balance sheet” by selling the bonds and other securities it bought to support the economy and markets.Mutual FundsHighlights of mutual fund performance in the second quarter. More

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    High Inflation in June Puts Pressure on Interest Rates

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.Read More About Oil and Gas PricesPrices Drop Sharply: U.S. gas prices have been on the decline, offering some relief to drivers. But weather, war and demand will influence how long it lasts.Gas Tax Holiday: President Biden called on Congress to temporarily suspend the federal gas tax, but experts remain skeptical the move would benefit consumers much.‘Only Bad Options’: Mr. Biden’s trip to Saudi Arabia is unlikely to reduce oil prices. And it is not clear that anything else he might do would work, either.Summer Driving Season: The spike in gas prices is being driven in part by vacationers hitting the road. Here’s what our reporter saw on a recent trip.Officials lifted rates by 0.75 percentage points in June, the biggest move since 1994, and had been expected to make a similarly sized move at its meeting in late July. But after the new inflation data, investors began to expect a percentage-point move, based on market pricing.Fed officials themselves were hesitant to call for such a large move.“My most likely posture is 0.75, because of the data I’ve seen,” Mary Daly, president of the Federal Reserve Bank of San Francisco, said in an interview Wednesday night. She explained that she had expected a high number, so the report did not sway her.“I saw that data and thought: This wasn’t good news, wasn’t expecting good news,” she said.Ms. Daly said she could see a situation in which a bigger, one-percentage-point increase would be possible should consumer inflation expectations move higher and consumer spending fail to slow down.Loretta Mester, president of the Federal Reserve Bank of Cleveland, said on Bloomberg Television on Wednesday night that the new inflation report was “uniformly bad” and that there would be no reason to do less than the 0.75 points that the Fed approved in June. But she also suggested that she would watch incoming data and wait to see how the economy evolved before deciding whether an even larger move might be appropriate. The Fed’s next policy meeting is July 26-27.Raphael Bostic, the president of the Federal Reserve Bank of Atlanta, told reporters on Wednesday that “everything is in play,” but he, too, made it clear that he was “not wedded to any specific course of action.”Even a 0.75-point increase would be an unusually quick pace for a central bank that has tended to move gradually in recent decades. The Fed risks tipping the economy into a recession as it rapidly raises interest rates, because those increases might hit the brakes on the economy so hard that they jar businesses, prompting them to stop hiring and setting off a chain reaction in which households are left with less money to spend.But policymakers feel that they must choke off inflation quickly even if it increases the chance of a painful slowdown. That’s because they worry that, as inflation remains rapid, consumers and businesses could be getting used to it.If people begin to ask for higher wages in anticipation of price increases — negotiating cost-of-living adjustments of 6 or 7 percent, for example, instead of the typical 2 to 3 percent — companies could try to pass their swelling labor costs along to customers by raising prices. That could perpetuate rapid inflation, making it much trickier for the Fed to stamp it out.“The path toward price stability is going to entail some pain, but less pain if we do it than if we don’t do it,” Ms. Mester said.Meals at restaurants, tickets for sporting events and other services are growing more expensive.Amir Hamja for The New York TimesInflation is high across much of the world right now, as Russia’s invasion of Ukraine pushes up food and fuel prices and transportation and manufacturing issues continue to keep some goods scarce. But the new inflation report also shows evidence of price pressures that have little to do with global supply. Meals at restaurants, tickets for sporting events and other services are growing more expensive.For consumers, the fresh report is confirmation that it is increasingly tough to make ends meet. While wages are rising, they have failed to keep up with rapid price increases. After accounting for price increases, average hourly earnings have declined 3.6 percent over the past year.At the same time, necessities are becoming more expensive. Food prices overall rose 10.4 percent in June from a year earlier, the biggest annual increase since 1981. Rent for a house or an apartment also costs significantly more, having climbed at the fastest monthly pace since 1986.That is making life difficult for many families. Soaring housing costs have made relocating difficult for Elizabeth Haynes, 41, who lives with her husband in McKinney, Texas. The couple wants to relocate to another state, but high housing costs are so far prohibitive.“We’re trying to get out of Texas, and that’s proving really difficult with the rental costs and the housing costs and the shortages and all of that,” said Ms. Haynes, who is hoping to land a place she can afford in Connecticut. “So that’s kind of our big pain point.”As rapid price increases burden many Americans, they are also taking a toll on economic confidence, posing a big challenge for Mr. Biden and Democrats ahead of the midterm elections. Mr. Biden has acknowledged the pain inflation is causing, saying in a statement on Wednesday that it is “unacceptably high.”But he also called the report “out of date” because it did not capture the recent retreat in prices at the gasoline pump and in other commodities. Democrats have suggested things will soon get better, pointing out that, as fuel costs subside, overall inflation is likely to decline from its 9.1 percent reading in June.“I think we’re peaking — I think we’re going to be going down from here,” Representative Nancy Pelosi, the House speaker, said when asked for her reaction to the new data.While there is hope in Washington and on Wall Street that inflation will come down sustainably, economists have repeatedly suggested that inflation has peaked over the past 12 months only to watch it pick back up.That is partly because prices for certain goods have behaved strangely: Cars have been in short supply, and their prices have been skyrocketing, for instance. It is also partly because economists have dismissed big price swings in various goods and services as temporary one-offs, and the surprises have just continued to add up.“People have not done a very good job of predicting car inflation,” said Jason Furman, an economist at Harvard. “Beyond that, inflation is about more than 10 individual stories about 10 individual goods and services — it’s about forces in the overall economy.”If people begin to ask for higher wages in anticipation of price increases, companies could try to pass their swelling labor costs along to customers by raising prices.Hiroko Masuike/The New York TimesThat said, there are some reasons that today’s rapid price gains could abate based on the economy’s fundamentals.Consumers may struggle to sustain their spending as prices jump. If they move in with roommates, stop taking vacations or pull back on social activities to save money, supply could begin to catch up with demand, allowing price gains to decelerate.Stores including Target are already trying to sell off bloated inventories, which could allow retail prices to slow. Costs for goods including sporting equipment and televisions have already begun to cool.But, for now, hints at and forecasts for a cool-down are likely to be insufficient comfort for economic policymakers when there is little sign in the data that any concerted pullback is kicking in.“We have to be so humble about forecasting inflation,” said Blerina Uruci, an economist at T. Rowe Price, who does expect inflation pressures to fade. “We’ve just been so wrong, so consistently, in one direction.”Reporting was contributed by More

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    Inflation Soared in June, Pinching Consumers and Challenging Policymakers

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    Prices surged 9.1 percent in June as consumers faced rapidly rising costs for gas, food and rent, a higher-than-expected reading and bad news for Americans at a moment when their wages are falling further behind the nation’s soaring cost of living.The fresh Consumer Price Index report released on Wednesday contained particularly worrying signs for the Federal Reserve, providing evidence that price pressures are broad and stubborn in ways that may make them difficult to wrestle under control.Overall, inflation is likely to moderate in July because gas prices have fallen this month — a gallon of regular gas hit an average of about $5 in June, and the cost is now hovering around $4.63. But fuel prices are volatile, making it impossible to know if today’s lower gas prices will last, and the report suggested that underlying inflation pressures remained intense.In particular, a core inflation index that strips out food and fuel prices to give a sense of the broad trend remained surprisingly high. That measure climbed 5.9 percent over the year through June, barely a slowdown from last month’s 6 percent increase. Core prices also jumped 0.7 percent from May to June, more than the previous monthly increase.Persistent price gains portend trouble for President Biden, whose approval ratings have taken a hit amid climbing costs, and could require continued forceful action from the Fed. The central bank is raising rates to slow the economy and to try to restrain inflation, and it is likely to continue adjusting policy quickly — even if doing so risks tipping the economy into a recession — as inflation looks increasingly out of control.“It’s an ugly report,” said Julia Coronado, the founder of MacroPolicy Perspectives. “I don’t think there is anything good about this report, as far as the Fed is concerned, as far as the U.S. consumer is concerned.”The global economy has been buffeted by a series of shocks that have pushed inflation higher since the outset of the pandemic. Factory shutdowns and shipping shortages have roiled supply chains, and worker shortages are making it harder for airlines to fly at capacity and for hotels to rent out rooms. Russia’s invasion of Ukraine has disrupted gas and food supplies.President Biden has acknowledged the pain that inflation is causing, calling it “unacceptably high” in a statement on Wednesday. Erin Schaff/The New York TimesWhile economic policymakers initially hoped that the disruptions would fade and that prices would ease on their own, they have stopped waiting for that to happen — especially as price increases prove not only pronounced but also widespread, rising rapidly across an array of goods and services.The Fed has been raising interest rates since March in an effort to slow consumer and business demand, hoping to cool the economy and bring inflation back down. The central bank has sped up those rate moves as price increases have proved surprisingly stubborn, and the new inflation report spurred speculation that the Fed might turn even more aggressive.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Strong Wage and Jobs Growth Keeps Fed on Track for Big Rate Increase

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    The Federal Reserve is trying to cool down the economy to bring inflation under control, but the job market is still going strong.A surprisingly robust June employment report reinforced that America’s labor market remains historically strong even as recession warnings reach a fever pitch. But that development, while good news for the Biden administration, is likely to keep the Federal Reserve on its aggressive path of interest rate increases as it tries to cool the economy and slow inflation.Today’s world of rapid price increases is a complicated one for economic policymakers, who are worried that an overheating job market could exacerbate persistent inflation. Instead of viewing roaring demand for labor as an unmitigated good, they are hoping to engineer a gradual and controlled slowdown in hiring and wage growth, both of which remain unusually strong. Friday’s report offered early signs that the desired cooling is taking hold as both job gains and pay increases moderated slightly. But hiring and earnings remained solid enough to reinforce the view among Fed officials that the labor market, like much of the economy, is out of whack: Employers still want far more workers than are available. The new data will likely keep central bankers on track to make another supersize rate increase at their meeting later this month as they try to restrain consumer and business spending and force the economy back into balance. “We’re starting to see those first signs of slowdown, which is what we need,” Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a CNBC interview after the report was released. Still, he called the wage data “only slightly” reassuring and said that “we’re starting to inch in the right direction, but there’s still a lot more to do, and a lot more we’ll have to see.”Fed officials began to raise interest rates from nearly zero in March in an attempt to make borrowing of many kinds more expensive. Last month, the central bank lifted its policy rate by 0.75 percentage points, the largest single increase since 1994. Central bankers typically adjust their policy only in quarter-point increments, but they have been picking up the pace as inflation proves disturbingly rapid and stubborn. While Fed policymakers have said they will debate a move between 0.5 or 0.75 percentage points at their meeting on July 26 and 27, a chorus of officials have in recent days said they would support a second 0.75 percentage point move given the speed of inflation and strength of the job market.As the Fed tries to tap the brakes on the economy, Wall Street economists have warned that it may instead slam it into a recession — and the Biden administration has been fending off declarations that one is already arriving. A slump in overall growth data, a pullback in the housing market and a slowdown in factory orders have been fueling concern that America is on the brink of a downturn. Construction workers in New York City. Employers added 372,000 workers in June.Hiroko Masuike/The New York TimesThe employment data powerfully contradicted that narrative, because a shrinking economy typically does not add jobs, let alone at the current brisk pace. Mr. Biden celebrated the report on Friday, saying that “our critics said the economy was too weak” but that “we still added more jobs in the past three months than any administration in nearly 40 years.”Private sector voices concurred that the employment report showed an economy that did not appear to be tanking. “Wage growth remains elevated and rates of job loss are low,” Nick Bunker, economic research director at the job website Indeed, wrote in a reaction note. “We’ll see another recession some day, but today is not that day.”The State of Jobs in the United StatesJob gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.June Jobs Report: U.S. employers added 372,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the sixth month of 2022.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.The contradictory moment in the economy — with prices rising fast, economic growth contracting and the unemployment rate hovering near a 50-year low — has posed a challenge for Mr. Biden, who has struggled to convey sympathy for consumers struggling with higher prices while seeking credit for the strength of the jobs recovery. Mr. Biden’s approval ratings have slumped as price growth has accelerated. Confidence has taken an especially pronounced battering in recent months amid rising gas prices, which topped $5 a gallon on average earlier this summer. On Friday, Mr. Biden emphasized that fighting inflation was his top economic priority while also praising recent job market progress. “I know times are tough,” Mr. Biden said, speaking in public remarks. “Prices are too high. Families are facing a cost-of-living crunch. But today’s economic news confirms the fact that my economic plan is moving this country in a better direction.” But unfortunately for the administration and for workers across America, tackling high prices will probably come at some cost to the labor market. As price increases bedevil consumers at the gas pump and in the grocery aisle, the Fed believes that it needs to bring inflation under control swiftly in order to set the economy on a path toward healthy and sustainable growth. The Fed’s tool to achieve that positive long-term outcome works by causing short-term economic pain. By making money expensive to borrow, the central bank can slow down home buying and business expansions, which will in turn slow hiring and wage increases. As companies and families have fewer dollars to spend, the theory goes, demand will come into better alignment with supply and prices will stop rocketing higher. Officials expect unemployment to eventually tick up as rate increases bite and the economy weakens, though they are hoping that it will only rise slightly. Fed policymakers are still hoping to engineer what they often call a “soft landing,” in which hiring and pay gains slow gradually, but without plunging the economy into a painful recession. But pulling it off will not be easy — and officials are willing to clamp down harder if that is what it takes to tame inflation. “Price stability is absolutely essential for the economy to achieve its potential and sustain maximum employment over the medium term,” John C. Williams, the president of the Federal Reserve Bank of New York, said in a speech in Puerto Rico on Friday. “I want to be clear: This is not an easy task. We must be resolute, and we cannot fall short.”Federal funds rate since January 1998

    Rate is the federal funds target rate until Dec. 15, 2008, and thereafter it is the upper limit of the federal funds target rate range.Source: The Federal ReserveBy The New York TimesStocks fell after the release of the employment numbers, likely because investors saw them as a sign that the Fed would continue constraining the economy.“The tremendous momentum in the economy to me suggests that we can move at 75 basis points at the next meeting and not see a lot of protracted damage to the broader economy,” Mr. Bostic said Friday.Fed officials are closely watching wage data in particular. Average hourly earnings climbed by 5.1 percent in the year through June, down slightly from 5.3 percent the prior month. Wages for non-managers climbed by a swift 6.4 percent from a year earlier. While that pace of increase is slowing somewhat, it is still much higher than normal — and could keep inflation elevated if it persists, as employers charge more to cover climbing labor costs.“Wages are not principally responsible for the inflation that we’re seeing, but going forward, they would be very important, particularly in the service sector,” Jerome H. Powell, the Fed chair, said at his news conference in June.“If you don’t have price stability, the economy’s really not going to work the way it’s supposed to,” he added later. “It won’t work for people — their wages will be eaten up.”Wage growth may be slowing in retail and hospitality jobs.Percent change in earnings for nonmanagers since January 2019 by sector More

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    U.S. Economy Added 372,000 Jobs in June, Defying Slowdown Fears

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    The strong Labor Department report comes as consumers and businesses express increasing concern about a downturn.The U.S. economy powered through June with broad-based hiring on par with recent months, keeping the country clear of recession territory even as inflation eats into wages and interest rates continue to rise. Employers added 372,000 jobs, the Labor Department reported Friday, and the unemployment rate, at 3.6 percent, was unchanged from May and near a 50-year low. Washington and Wall Street had keenly awaited the new data after a series of weaker economic indicators. The June job growth exceeded economists’ forecasts by roughly 100,000, offering some reassurance that a sharper downturn isn’t underway — at least not yet. But the strength of the report, which also showed bigger wage gains than expected, could give the Federal Reserve more leeway for tough medicine to beat back inflation. Now, all eyes will be watching whether the Fed’s strategy of raising interest rates pushes the country into a recession that inflicts harsh pain. Employment growth over the last three months averaged 375,000, a solid showing though a drop from a monthly pace of 539,000 in the first quarter of this year. Employers have continued to hang on to workers in recent months, with initial unemployment claims rising only slightly from their low point in March.The private sector has now regained its prepandemic employment level — an achievement trumpeted by the White House on Friday — though the level is still below what would have been expected absent the pandemic. Other than the public sector, no broad industry lost jobs in June, on a seasonally adjusted basis.“We’ve essentially ground our way back to where we were pre-Covid,” said Christian Lundblad, a professor of finance at the Kenan-Flagler Business School at the University of North Carolina. “So, this doesn’t necessarily look like a dire situation, despite the fact that we’re struggling with inflation and economic declines in some other dimensions.”Strong demand for workers is also evident in the 11.3 million jobs that employers had open in May, a number that remains close to record highs and leaves nearly two jobs available for every person looking for work. In this equation, any workers laid off as certain sectors come under strain are more likely to find new jobs quickly. The Labor Department’s broadest measure of labor force underutilization — which includes part-time workers who want more hours and people who have been discouraged from job hunting — sank to its lowest rate since the household survey took its current form in 1994, a sign that employers are maximizing their existing work force as hiring remains difficult. The education and health sector gained the most jobs in June.Change in jobs, by sector More