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    After Pandemic Rebound, U.S. Manufacturing Droops

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    The pandemic had a bright silver lining for Elkhart, Ind.The city, renowned as the capital of recreational vehicle production, had a surge in demand as cooped-up families took to the highways and avoided hotels. The cluster of manufacturers enjoyed record profits, and workers benefited as well: The metropolitan area’s unemployment rate sank to 1 percent in late 2021, and average weekly wages jumped 35 percent from their level in early 2020.That frenzy, however, has turned to a chill. Dealers, who stocked up on as many trailers and vans as they could, have been discounting them to clear their lots — and new orders have dried up. The area has lost nearly 7,000 manufacturing jobs over the past year, and unemployment is now above the national average. Thor Industries, which owns a wide portfolio of RV brands, saw its sales tumble 39.4 percent from the quarter a year ago.“In 2022, manufacturers overproduced, and you’re seeing some of the impact of that from the staffing standpoint,” said Chris Stager, chief executive of the Economic Development Corporation of Elkhart County. He foresees new projects propelled by recent federal energy and infrastructure legislation, but rising interest rates are taking a toll in the meantime.“It’s not bad, but it’s not what it was,” Mr. Stager said.That’s manufacturing in America in 2023.Factory construction is proceeding more rapidly than at any time in recent memory, heralding what may be a resurgence in domestic production powered by a move away from long, fragile supply chains and by the infusion of billions of dollars in public investment.At the same time, after an extraordinary boom fed by cooped-up consumers, manufacturing is suffering something of a hangover as retailers burn through bloated inventories. Inflation-fighting efforts by the Federal Reserve, which is expected to announce another interest-rate increase on Wednesday, have squelched big-ticket purchases. New orders have been declining since last summer, and a widely followed index of purchasing activity has been downbeat for six months.Working on sponge rubber automotive HVAC drain seals at Colonial.Whitten Sabbatini for The New York TimesManufacturing employment bounced back quickly after the pandemic — which is unusual for recessions — but has contracted for two months. While layoffs in the industry remain low, job openings and hires have sunk from recent highs.“It’s not one of these really concerning plunges, where we’re shedding a bunch of manufacturing jobs, but it seems kind of stalled,” said Scott Paul, president of the Alliance for American Manufacturing. “And I think the longer that lasts, the harder it’s going to be to rev things up.”A bigger question for the American economy is whether this heralds a broader downturn, since cooling demand for goods usually signifies that consumers are feeling financially strained. “Manufacturing is always at the forefront of the recession,” notes Barbara Denham, a senior economist at Oxford Economics.To understand the current slump, it’s important to dissect the manufacturing moment from which America is emerging.For example: Those new manufacturing jobs weren’t all for people making steel coils and oak cabinets. The production of consumable items — including food, beverages, and pharmaceuticals — represented an outsize portion of the job growth from 2020 through 2022. But it tends to pay less well, requires less training and has fewer unions than heavy manufacturing in airplanes and automobiles. And it can disappear more quickly as demand returns to normal.Factory employment bounced back, but is now leveling off Number of manufacturing jobs as a percentage of the total in February 2020

    Source: Bureau of Labor StatisticsBy The New York TimesThe pandemic-era manufacturing boom also didn’t happen equally in all places. States like Nevada, Arizona, Florida and Texas surged far above their prepandemic baselines, while longtime manufacturing centers — Michigan, Illinois, New York and Ohio — have not fully bounced back. That imbalance reflects recent migration trends, as people have moved out of urban areas for more space, more sunshine and a lower cost of living.The factory construction underway is poised to further reshape the geography of American manufacturing, with the largest increases in investment happening in the Mountain West.LaDon Byars, who runs Colonial Diversified Polymer Products, said reinforcing domestic supply chains would be worth the effort.Whitten Sabbatini for The New York TimesAll that new building is propelled by several factors. Former President Donald J. Trump’s trade war raised the cost of importing from China and other countries, while the pandemic snarled ports and idled suppliers, hurting manufacturers who depended on far-flung sourcing networks.In recent months, the war in Ukraine — for which the United States has furnished more than $36 billion in weaponry — has generated more long-term contracts for defense manufacturers, mostly restricted to domestic production.Steve Macias, a co-owner of a small machine shop in Phoenix, said orders from the semiconductor industry have slowed as the demand for home electronics crested. But in the past few weeks, he has been busy serving military clients — because the Defense Department has been getting planes and ships back into fighting shape, as well as refilling empty stores of munitions.“There was a lot of deferred maintenance,” Mr. Macias said. “So you’ve got two things going on — this kind of catch-up, and this war that broke out that nobody was really anticipating.”Finally, over the last two years the passage of three major bills — the Infrastructure Investment and Jobs Act, the Bipartisan Infrastructure Law and the CHIPS and Science Act — made available hundreds of billions of dollars for the production of items like semiconductors, solar panels, wind turbines and bridge spans. Private funders have rushed to capitalize on the opportunity, even if much of it is still in the planning stages.“A lot of manufacturers are reacting to what they see as a lot of long-term structural factors in their industry,” said Adam Ozimek, chief economist at the Economic Innovation Group, an entrepreneurship-focused think tank. “They’re seeing more demand for domestic production long term. That’s a bet on the future. It’s going to take a while to really translate to employment.”Even when it does, however, that investment might not yield as many jobs as factories with similar levels of output did in the past.Freshly built production lines tend to be more automated and more efficient than those designed in the 1950s and ’60s — which they need to be, to compete with the lower cost of labor overseas. And some companies are adding robots to their plants, given the difficulty of attracting and retaining enough skilled workers to replace those retiring. The median age of workers in manufacturing is two years older than the national median.“These facilities are desperate to try to get the work force,” said Mark Farris, chief executive of the Greenville Area Development Corporation in Greenville, S.C. “And instead, I think they’re convincing the officers of the company, ‘Let’s think about robotics, let’s think about 3-D printing, the technology investment that would take the place of those workers we cannot find.’”Employers’ ferocious need for factory workers is easingManufacturing job openings surged in 2021, but have receded.

    Bureau of Labor StatisticsBy The New York TimesFor businesses that depend on industries related to fossil fuels, the ramp-up in federal investment may just be enough to keep them afloat even as demand shifts to clean energy.Automobile manufacturers are important clients, and Ms. Byars is encouraged as federally funded projects are required to find their parts and raw materials in the United States.Whitten Sabbatini for The New York TimesLaDon Byars runs Colonial Diversified Polymer Products, which employs about 75 people in western Tennessee. The company has survived many cycles of outsourcing and offshoring, making molded rubber products like gaskets and mats for a variety of customers. Automobile manufacturers are important clients, and Ms. Byars knows that demand for parts that go into cars with internal combustion engines will start to wane.She has been encouraged, however, by the number of solicitations she has received as a result of rules that require federally funded projects to find their parts and raw materials in the United States, rather than overseas. It may be difficult and impede progress at first, but she thinks reinforcing domestic supply chains will work out better in the end, just like building new roads.“It takes a while before they get that intersection through — it’s a mess and traffic is backed up,” Ms. Byars said. “And then when they finally open it up, everything works so much smoother and better, and you don’t have the long delays. We might not even see the impact of not being dependent on other countries, and not having the supply chain disruptions, but I do think that’s what the long-term best interest for the American people is.” More

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    Job Openings Slipped in March as Labor Market Continued Cooling

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    The NewsJob openings in March fell to 9.6 million, the Labor Department reported on Tuesday, the lowest level in two years and a further indication that the slowdown in the labor market is becoming more entrenched. It was the third straight month that job openings have declined, a notable development after last year, when job openings bounced around month to month.“The labor market has been, through Q1, a resilient anchor for the economy,” said Aaron Terrazas, chief economist at the career site Glassdoor. “But we’re getting more and more signals that those foundations are really starting to tremble.”Transportation, warehousing and utilities, professional and businesses services and construction were among the sectors that posted large drops in open positions, as higher interest rates and fears of a pullback in consumer spending continued to discourage employers from hiring.Other readings in Tuesday’s report underscored the labor market’s restraint. The total number of open jobs per available unemployed worker, a ratio that the Federal Reserve has been watching as it tries to tame rapid inflation, decreased slightly to 1.6, the lowest level since October 2021. Layoffs, which have remained historically low outside of some big-name companies in the tech sector, rose to 1.8 million in March. The number of workers voluntarily leaving their jobs — a sign that workers are finding opportunities to switch to better-paid positions, or are confident they can do so — was relatively unchanged but has been inching down.Policymakers are interested in the number of open jobs per available unemployed worker, which has remained stubbornly high for months.Hiroko Masuike/The New York TimesWhy It Matters: The last major data release before the Fed’s rate decision.The report released on Tuesday, called the Job Openings and Labor Turnover Survey, or JOLTS, is one of many that the Federal Reserve watches closely each month to gauge its efforts to slow the economy and ease inflation without spurring widespread layoffs.The Fed has been raising interest rates for more than a year as it tries to bring down rapid inflation to its target of 2 percent. It will announce its next decision on Wednesday; officials are widely expected to raise rates by a quarter percentage point, to just above 5 percent. The JOLTS report is the last major piece of data that Fed policymakers will see before their decision.In particular, they are interested in the number of open jobs per available unemployed worker, which has remained stubbornly high for months. That mismatch has helped to drive up pay and contributed to inflation. More recently, however, the ratio has been declining, a welcome sign for the Fed that underscores the labor market’s gradual slowdown.Officials also track other details in the report, including the number of layoffs and workers who quit their jobs. The Background: Labor market resilience complicates the Fed’s plan.Month after month, the labor market has remained robust, defying expectations and complicating the Fed’s efforts to cool the economy. The latest evidence came on Friday, when government data showed that wages and salaries for private-sector workers were up 5.1 percent in March from a year earlier, the same growth rate as in December.Still, higher interest rates are taking a toll on the job market, albeit gradually. Employers added 236,000 jobs in March, a healthy number but down from an average of 334,000 jobs added over the prior six months. The year-over-year growth in average hourly earnings also fell to its slowest pace since July 2021.What’s Next: A big week for economic news.The report on Tuesday kicked off a big few days for economic news.In addition to the Fed decision on Wednesday, there will be the Labor Department’s monthly snapshot of the employment situation on Friday. The report, based on April data, will provide a clearer and more up-to-date picture of the labor market, including the change in the number of jobs — a figure that has been positive for 27 straight months — and the unemployment rate. 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

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    Julie Su Faces Senate Fight as Labor Dept. Nominee

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    Business groups are critical of the candidate, Julie Su, and key senators are wavering. The administration’s labor policies are central to the clash.Just over a year ago, the White House suffered an embarrassing defeat when three Democratic senators voted against advancing President Biden’s pick to run a key labor agency, dealing a blow to the administration’s pro-labor agenda.On Thursday, the administration and Senate Democrats tried to ensure that history wouldn’t repeat itself, only this time the stakes were even higher.The occasion was the Senate confirmation hearing of Julie Su, who has served as acting labor secretary since March 11 and is Mr. Biden’s choice to fill the job permanently.As with last year’s confirmation battle, over the government’s top enforcer of minimum wage and overtime laws, Ms. Su’s nomination represents a broader fight over workplace regulation, with business groups chafing against Mr. Biden’s push to strengthen unions and increase workers’ rights and benefits.And once again, there are signs that the administration may fall short, with at least two Democrats and an independent wavering over whether to support Ms. Su. A vote of the Senate Committee on Health, Education, Labor and Pensions is scheduled for next week.In her testimony before the committee on Thursday, Ms. Su largely associated herself with the record of her predecessor, Martin J. Walsh — whom some Republicans and business groups have held up as pragmatic, and whom Ms. Su served as deputy.She said she would seek employers’ advice on improving worker safety, and described the reverence she gained for small business owners after watching her immigrant parents operate a dry cleaner and a pizza franchise.Democrats argue that Ms. Su, who has strong backing from labor unions, would be a strong worker advocate and enforcer of provisions like the minimum wage, safety regulations and restrictions on child labor, as well as the right to join unions.“You need in terms of a bully pulpit a secretary of labor who makes clear that she is going to stand with working families, and she is prepared to use the powers of the office to take on corporate interests,” Senator Bernie Sanders, the Vermont independent who heads the labor committee, said in an interview on Wednesday.If confirmed, Ms. Su is also likely to lead the Biden administration’s effort to expand overtime pay for salaried workers. The administration is expected to propose a rule substantially raising the salary threshold — currently about $35,500 — below which most workers automatically qualify for overtime.Those questioning the merits of Ms. Su’s nomination have cited her record as California labor secretary and her support for the state’s labor regulations to suggest that she is a threat to certain industries.When Senator Bill Cassidy of Louisiana, the committee’s ranking Republican, pressed at the hearing for assurances that she wouldn’t pursue regulations that could harm the franchise business model, Ms. Su reminded him that her parents had been franchise owners and suggested that their businesses “were the reason my sister and I were able to go to college.”President Biden with Ms. Su and her daughters at the White House in March.Yuri Gripas for The New York TimesThe Flex Association, a trade group representing several prominent gig economy companies, has called attention to her support for a California measure that would have effectively classified gig workers as employees, requiring companies like Uber and DoorDash to pay them a minimum wage and overtime and to contribute to unemployment insurance. (The law was later scaled back through a ballot measure.)The group circulated an email on Wednesday expressing concern that Ms. Su “does not appreciate” that classifying gig workers as employees could cause many to lose access to such work.Some labor experts have disputed this claim, and a rule being finalized by the Labor Department on how to classify workers takes a different approach from the California measure. But Kristin Sharp, the Flex Association’s chief executive, said that the labor secretary would have discretion over how to carry out the new rule and that “we want to make sure that person is objective in his or her views of nontraditional work.” The group has not taken an official stand on Ms. Su’s nomination.Other business groups have cited what they say is Ms. Su’s support for a California law setting up a council to issue health and safety regulations for fast-food restaurants and create an industry-specific minimum wage.“She has supported policies that directly attack our model,” said Matthew Haller, president of the International Franchise Association, alluding to the fast-food measure. A ballot measure next year will allow voters to decide whether to nullify the law. It is unclear from a video the groups point to that she has specifically supported the law.And Republicans and a variety of business groups have highlighted accusations that California issued billions in fraudulent unemployment insurance claims while she was the state’s labor secretary in 2020. At the hearing, Mr. Cassidy recounted a report of a rapper securing hundreds of thousands of dollars in fraudulent funds in California and boasting about it on a video.Ms. Su has conceded that a large number of claims were improper. Mr. Sanders pointed out that the overpayments reflected features of a federal program that the state merely administered, and that other states paid out a far higher percentage of fraudulent claims.In recent weeks, a coalition of business groups has erected billboards and run ads critical of Ms. Su in the home states of potentially decisive senators, such as Joe Manchin of West Virginia, Kyrsten Sinema of Arizona and Jon Tester of Montana, all of whom have so far refrained from backing her nomination.The effort is reminiscent of a business-backed campaign against David Weil, whom Mr. Biden tapped to head the Labor Department’s Wage and Hour Division in 2021, and who had led the agency during the Obama administration. That nomination died on the Senate floor last year after Mr. Manchin, Ms. Sinema and a third Democratic senator, Mark Kelly of Arizona, declined to support him. (Ms. Sinema has since become an independent.)Mr. Weil and his backers lamented the muted response from progressive groups on his behalf. This time, labor unions and other supporters are making a more determined push. The A.F.L.-C.I.O. president, Liz Shuler, announced on Wednesday that a coalition of unions would make a “six-figure buy” of ads backing Ms. Su in states like Arizona and West Virginia and would urge local union members to contact their senators.The United Mine Workers of America, which is influential in Mr. Manchin’s home state and sat out the fight over Mr. Weil, endorsed Ms. Su last week.Emilie Simons, a spokeswoman for the president, said that the White House felt confident about Ms. Su’s confirmation and that it was working hard for every vote. She said that Ms. Su had offered to meet with every senator on the labor committee and that she had met with senators from both parties.At a Senate Democratic lunch on Tuesday, Senator John Hickenlooper of Colorado, regarded as one of the more moderate Democrats on the labor committee, spoke up on Ms. Su’s behalf, noting her work on expanding apprenticeships as deputy secretary.Mr. Hickenlooper said in an interview that he had watched Mr. Tester, his undecided colleague from Montana, as he delivered his remarks and that he was “hopeful that we’ll get him.”But Mr. Manchin and Ms. Sinema may be harder to wrangle, according to veterans of such nomination fights. Mr. Manchin, who is up for re-election next year in a Republican-leaning state, has yet to meet with Ms. Su. Ms. Sinema is likely to face a challenge from a labor-backed candidate in her re-election bid, giving her little incentive to accommodate unions.Larry Cohen, a former president of the Communications Workers of America who advises multiple unions and has helped secure the nomination of many pro-labor officials over the years, said that generating popular support for Ms. Su in Arizona and West Virginia might help her cause with Mr. Manchin and Ms. Sinema.But, he added, “I think there is good reason to be worried about both of them.”Jonathan Weisman More

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    Why China’s Shrinking Population Is a Problem for Everyone

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    China struggled for years to curtail its rapid population growth. Now that its population is declining, economists and others fear serious implications for China and countries around the world.Despite the rollback of China’s one-child policy, and even after more recent incentives urging families to have more children, China’s population is steadily shrinking — a momentous shift that will soon leave India as the world’s most populous nation and have broad rippling effects both domestically and globally.The change puts China on the same course of both aging and shrinking as many of its neighbors in Asia, but its path will have outsize effects not just on the regional economy, but on the world at large as well.Here’s why economists and others are alarmed by the developments.China’s shrinking work force could hobble the global economy.For years, China’s massive working-age population powered the global economic engine, supplying the factory workers whose cheap labor produced goods that were exported around the world.In the long run, a shortage of factory workers in China — driven by a better-educated work force and a shrinking population of young people — could raise costs for consumers outside China, potentially exacerbating inflation in countries like the United States that rely heavily on imported Chinese products. Facing rising labor costs in China, many companies have already begun shifting their manufacturing operations to lower-paying countries like Vietnam and Mexico.A shrinking population could also mean a decline in spending by Chinese consumers, threatening global brands dependent on sales of products to China, from Apple smartphones to Nike sneakers.A factory in Guangzhou. In the long run, a shortage of factory workers could raise costs for consumers outside of China.Gilles Sabrie for The New York TimesThe data is bad news for China’s crucial housing market.In the short term, a plunging birthrate poses a major threat to China’s real estate sector, which accounts for roughly a quarter of the country’s economic output. Population growth is a key driver of housing demand, and homeownership is the most important asset for many Chinese people. During widespread pandemic lockdowns that dampened consumer spending and export growth, China’s economy became even more dependent on the ailing housing sector.The government recently intervened to help distressed real estate developers, in an attempt to stem the fallout from its housing crisis.A housing development in Shanghai. Population growth is a key driver of housing demand, and a plunging birthrate poses a major threat to China’s real estate sector.Qilai Shen for The New York TimesChina’s shrinking work force may not be able to support its growing, aging population.With fewer working-age people in the long run, the government could struggle to sustain an enormous population that is growing older and living longer. A 2019 report by the Chinese Academy of Social Sciences predicted that the country’s main pension fund would run out of money by 2035, in part because of the shrinking work force.Economists have compared China’s demographic crisis to the one that stalled Japan’s economic boom in the 1990s.But China does not have the same resources as a country like Japan to provide a safety net for its aging population. Its households live on much lower incomes on average than in the U.S. and elsewhere. Many older Chinese residents rely on state pension payments as a key source of income during retirement.China also has some of the lowest retirement ages in the world, with most workers retiring by 60. The situation has put a tremendous strain not only on state pension funds, but also on the country’s hospital system.Older Chinese citizens exercising at a park in Beijing. With fewer working-age people, the government could struggle to sustain an enormous population that is both growing older and living longer.Gilles Sabrie for The New York TimesThe crisis has been decades in the making.China introduced the one-child policy in the late 1970s, arguing that it was necessary to keep population growth from reaching unsustainable levels. The government imposed onerous fines on most couples who had more than one child, and compelled hundreds of millions of Chinese women to have abortions. Many families favored boys over girls, often aborting baby girls or abandoning them at birth, resulting in a huge surplus of single men in the Chinese population.China announced the relaxing of the family size restrictions in 2013, but many demographic experts said the change had come too late to change the country’s population trajectory.The government’s efforts to incentivize a baby boom to solve the demographic crisis have failed to stabilize falling birthrates.Gilles Sabrie for The New York TimesThere are no easy fixes.The government’s efforts to start a baby boom to solve the demographic crisis — including offering cash handouts and easing the one-child policy to allow for three — have failed to stabilize falling birthrates. Educated Chinese women are increasingly delaying marriage and choosing not to have children, deterred by the high costs of housing and education.China has also been unwilling to loosen immigration rules to boost the population, and has historically issued relatively few green cards to replenish its shrinking work force.To address the labor shortage, China has been outsourcing low-skilled production to other countries in Asia, and adding more automation to its factories, hoping to rely more on artificial intelligence and technology sectors for future growth. More

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    Unemployment Is Low. Inflation Is Falling. But What Comes Next?

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    Despite hopeful signs, economists worry that a recession is on the way or that the Federal Reserve will cause one in trying to rein in inflation.There are two starkly different ways of looking at the U.S. economy right now: what the data says has happened in the past few months, and what history warns could happen next.Most of the recent data suggests that the economy is strong. The job market is, incredibly, better today than it was in February 2020, before the coronavirus pandemic ripped a hole in the global economy. More people are working. They are paid more. The gaps between them — by race, gender, education or income — are smaller.Even inflation, long the black cloud in the economy’s sunny sky, is showing signs of dissipating. Government data released on Wednesday showed that consumer prices were up 5 percent in March from a year earlier, the slowest pace in nearly two years. Over the past three months, prices have risen at the equivalent of a 3.8 percent annual rate — faster than policymakers would like, but no longer the five-alarm fire it was at its peak last year.Yet for all the good news, economists remain worried that a recession is on the way or that the Federal Reserve will cause one in trying to rein in inflation.“The data has been reassuring,” said Karen Dynan, a Harvard economist and former Treasury official. “The things that we’re nervous about are all the things that we don’t have a lot of hard data about.”Beginning with the banks: Most of the recent data predates the collapse of Silicon Valley Bank and the upheaval in the banking system that followed. Already, there are signs that small and midsize lenders have begun to tighten their credit standards in response to the crisis, which, in turn, could push the businesses that are their clients to cut back on hiring and investment. The extent of the economic effects won’t be clear for months, but many forecasters — including economists at the Fed — have said that the turmoil has made a recession more likely.The Fed began raising interest rates more than a year ago, but the effect of those increases is just beginning to show up in many parts of the economy. Only in March did the construction industry begin to shed jobs, even though the housing market has been in a slump since the middle of last year. Manufacturers, too, were adding jobs until recently. And consumers are still in the early stages of grappling with what higher rates mean for their ability to buy cars, pay credit card balances and take on other forms of debt.The economic data that paints such a rosy picture of the economy is “a look back into an old world that doesn’t exist anymore,” said Ian Shepherdson, chief economist of Pantheon Macroeconomics.The Federal Reserve began raising interest rates more than a year ago, but the effect of those increases is just beginning to show up in many parts of the economy.Stefani Reynolds for The New York TimesMr. Shepherdson expects overall job growth to turn negative as soon as this summer, as the combined impact of the Fed’s policies and the bank-lending crunch hit the economy, leading to job cuts. Fed policymakers “have done more than enough” to tame inflation, he said, but appear likely to raise rates again anyway.Other economists, however, argue that the Fed has little choice but to keep raising rates until inflation is definitively in retreat. The recent slowdown in consumer price growth is welcome, they argue, but it is partly a result of the declines in the price of energy and used cars, both of which appear poised to resume climbing. Measures of underlying inflation, which strip away such short-term swings, have fallen only gradually.“Inflation is coming down, but I’m not sure that the momentum will continue if they don’t do more,” said Raghuram Rajan, an economist at the University of Chicago Booth School of Business and a former governor of India’s central bank.The Fed’s goal is to do just enough to bring down inflation without causing such a severe pullback in borrowing and spending that it leads to widespread job cuts and a recession. Striking that balance perfectly, however, is difficult — especially because policymakers must make their decisions based on data that is preliminary and incomplete.“It is going to be extremely hard for them to fine-tune the exact point,” Mr. Rajan said. “They would love to have more time to see what’s happening.”A miss in either direction could have serious consequences.The recovery of the U.S. job market over the past three years has been nothing short of remarkable. The unemployment rate, which neared 15 percent in April 2020, is down to the half-century low it achieved before the pandemic. Employers have added back all 22 million jobs lost during the early weeks of the pandemic, and three million more besides. The intense demand for labor has given workers a rare moment of leverage, in which they could demand better pay from their bosses, or go elsewhere to find it.The strong rebound has especially helped groups that are frequently left behind in less dynamic economic environments. Employment has been rising among people with disabilities, workers with criminal records and those without high school diplomas. The unemployment rate among Black Americans hit a record low in March, and pay gains have in recent years been fastest among the lowest-paid workers.All of that progress, critics say, could be lost if the Fed goes too far in its effort to fight inflation.Consumers are still in the early stages of grappling with what higher rates mean for their ability to buy cars, make credit card payments and take on other forms of debt.Gabby Jones for The New York Times“For this tiny moment, we finally see what a labor market is supposed to do,” said William Spriggs, a Howard University professor and chief economist for the A.F.L.-C.I.O. And the workers benefiting most from the labor market’s current strength, he said, will be the ones who suffer most from a recession.“You should see from this moment what you are truly risking,” Mr. Spriggs said. With inflation already falling, he said, there is no reason for policymakers to take that risk.“The labor market is finally hitting its stride,” he said. “And instead of celebrating and saying, ‘This is fantastic,’ we have the Fed hanging over everybody and casting shade on this unbelievable set of circumstances and saying, ‘Actually this is bad.’”But other economists caution that there are also risks in the Fed’s doing too little. So far, businesses and consumers have treated inflation mostly as a serious but temporary challenge. If they instead begin to expect high rates of inflation to continue, it could become a self-fulfilling prophecy, as companies set prices and workers demand raises in anticipation of higher costs.If that happens, the Fed may need to take much more aggressive action to bring inflation to heel, potentially causing a deeper, more painful recession. That, at least according to many economists, is what happened in the 1970s and 1980s, when the Fed, under Paul Volcker, brought inflation under control at the cost of what was, outside of the Great Depression and the pandemic, the highest unemployment rate on record.The real debate isn’t between the relative evils of inflation or unemployment, argued Jason Furman, a Harvard economist and former top adviser to President Barack Obama. It is between some unemployment now and potentially much more unemployment later.“You’re risking losing millions of jobs if you wait too long,” Mr. Furman said.There have been some encouraging — though still tentative — signs in recent weeks that the Fed may be succeeding at the delicate task of slowing the economy just enough but not too much.Data from the Labor Department this month showed that employers were posting fewer open positions and that workers were changing jobs less frequently, both signs that the job market was beginning to cool. At the same time, the pool of available workers has grown as more people have rejoined the labor force and immigration has rebounded.The combination of increased supply and reduced demand should, in theory, allow the labor market to come back into balance without leading to widespread job cuts. So far, that appears to be happening: Wage growth, which the Fed fears is contributing to inflation, has slowed, but layoffs and unemployment remain low.Jan Hatzius, chief economist for Goldman Sachs, said the recent job market data made him more optimistic about avoiding a recession. And while that outcome is far from certain, he said, it is worth keeping the current debate in perspective.“Given the incredible downturn in the economy that we saw in 2020 — with obvious fears of a much, much, much worse outcome — if you actually manage to get back to a reasonable inflation rate and high employment levels in, say, a three- to four-year period, it would be a very good outcome,” Mr. Hatzius said. 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    How Janelle Jones’s Story About Black Women and the Economy Caught On

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    The first Black woman to serve as chief economist at the Labor Department advanced the idea that lifting up people on the margins helps everyone else, too.“Transforming Spaces” is a series about women driving change in sometimes unexpected places.It takes approximately 30 seconds of conversation with Janelle Jones, the chief economist and policy director of one of the largest labor unions in the United States, to learn where she’s from and why it matters.“I’m from Ohio! Is that not obvious?” she exclaimed, at a decibel level that reflects how core the state is to her identity. Lorain, Ohio, to be exact, where her mother and her mother’s mother (and aunts, uncles and cousins) worked in the local Ford plant.Those union jobs, and the upward mobility they provided to millions of Black people who migrated from the South in search of freedom and opportunity, taught Ms. Jones what it means to move from the margins to the middle class. She noticed the difference when her mother switched to making Econoline vans after years serving Happy Meals at McDonald’s — a business that her current employer, the Service Employees International Union, is in a long-running battle to unionize.Now she is fighting to make more jobs as good as the union jobs that supported her family — or, even better, jobs with new safeguards that protect workers’ physical health.“It is a town where one of the best jobs you can have is to work at Ford,” Ms. Jones, 39, said of Lorain. “And while I love that for a lot of the people I know, it’s not the only way a town of 70,000 should be able to have economic security.”Last year, Ms. Jones left the U.S. Labor Department, where she served as chief economist, for the Service Employees International Union, which represents nearly two million security guards, nurses, teachers, airport retail workers and janitors. About two-thirds of the members are women, and more than half are people of color. That’s why the position seemed tailor made for the philosophy she’d developed and advanced over her entire career — that targeting policies to assist some of the most disadvantaged members of society will lift everyone else up in the process.Ms. Jones with Aparna Kumar, assistant director of communications for the Service Employees International Union, at the organization’s headquarters in Washington, D.C.Lexey Swall for The New York TimesMs. Jones’s superpower, according to her colleagues, is her ability to translate the economy into a framework that helps workers.For the past several years, Ms. Jones has been developing one central philosophy: Because Black women have historically been concentrated in low-paid caregiving jobs, which are often excluded from labor laws and benefits like Social Security, they have accumulated less wealth and experienced worse health outcomes. Furthermore, Ms. Jones argues, helping Black women — through measures like raising wages in care professions and canceling more student debt — is the best way to construct an economy that functions better for everyone.In 2020, she gave her narrative a name, “Black Women Best.” She came up with it while working for a progressive nonprofit called Groundwork Collaborative, which conducted focus groups across the country to find a narrative about how the economy should work for working people.“They were like, ‘I would like to not be tired,’” Ms. Jones recalled of the participants. “‘I want to buy school supplies.’ ‘I want to know that if my car breaks down, because I think it might, I won’t lose my apartment.’” Solving those basic problems for people with the least resources, she thought, would buoy the labor market from the bottom up.Her premise, which she articulated in a working paper for the Roosevelt Institute, a left-leaning think tank, found an eager audience under President Biden, who owed his victory in large part to Black women. It was embraced by influential figures, including corporate economists and a Federal Reserve president, and formed the basis of a 133-page report commissioned by the Congressional Caucus on Black Women and Girls.It hasn’t escaped pushback: Some scholars, including Tommy J. Curry at the University of Edinburgh, counter that Black men are more disadvantaged than Black women. Dr. Curry, a professor specializing in Africana philosophy and Black male studies at the university, said that, while he understands the “political popularity” of Ms. Jones’s theory, the evidence did not back it up. Black women, he said, “have seen higher levels of labor participation, entrepreneurial endeavors supported by government grants, and higher rates of college degree attainment since the 2000s, while Black men have been shown to have greater unemployment, less earnings per dollar — at 51 cents by some measures — and an overall downward mobility.”Ms. Jones declined to respond to Dr. Curry’s critique, but emphasized that her policy recommendations are generally not a zero-sum game.Ms. Jones in her office, meeting remotely with government relations colleagues about their lobbying efforts to increase the federal minimum wage to $15.Lexey Swall for The New York TimesMs. Jones’s desk chronicles her history in photos, books and a letter from President Biden.Lexey Swall for The New York Times“I do think that, in a really short period of time, she’s been able to get traction because people do see it as an additive vision,” said Angela Hanks, who worked with Ms. Jones at Groundwork and is now the chief of programs at the think tank Demos. “In a world where there aren’t a ton of totally new ideas, it’s a new idea. And one that’s resonant because it’s explicit but not exclusionary.”While few concrete policy changes are the result of one person’s efforts, it’s possible to see Ms. Jones’s message in actions as small as a guaranteed income program for Black mothers in Mississippi (now in its fourth round of funding) and as large as the expanded child tax credit and unemployment insurance provisions in the American Rescue Plan Act of 2021. Both federal policies helped low-income people in service professions, where Black women are overrepresented.“What Black Women Best is pushing us to do is to center those who have always been described as ‘deserving’ of their economic hardship,” said Azza Altiraifi, a senior policy manager at the racial justice advocacy group Liberation in a Generation. “Those sorts of stories were not common before. And it’s not because there weren’t people doing that research — it just didn’t seem to be a worthwhile exploration.”Ms. Jones’s path to influencing policy wasn’t a straight line. After majoring in math at Spelman, a historically Black college for women, she started two different Ph.D. programs and dropped out each time, after finding them to be only glancingly useful for the real work she wanted to do.“I felt like economics was the way I could do something for my grandmother, who was on a fixed income, or do something for my cousin, who’s a home health aide,” Ms. Jones said, explaining why she called off her pursuit of a doctorate. “I thought it was going to be labor economics, the things that I love, and it wasn’t. It was like advanced real analysis. It was honestly awful.”Fortunately for Ms. Jones, Washington is littered with Ph.D. dropouts who found policymaking more motivating than academic credentials. She spent years training with economists at the city’s labor-oriented think tanks. When Mr. Biden’s transition team went looking for a chief economist at the Department of Labor, in the wake of nationwide protests for racial equity in early 2020, she was an obvious choice — and became the first Black woman to hold the position.Ms. Jones with Alesia Lucas, assistant director of communications for the Service Employees International Union.Lexey Swall for The New York TimesWorking for Labor Secretary Martin J. Walsh, Ms. Jones found, was a unique opportunity to put her ideas into practice. She was charged with carrying out the president’s executive order on advancing racial equity, which instructed each agency to determine how it could eliminate barriers for minorities. Ms. Jones dug in, finding ways to make sure people of color got their share of procurement dollars, unemployment insurance, apprenticeships, jobs at the department, fair performance reviews and everything else that the Labor Department had to offer.Through it all, she argued that the economy hadn’t recovered until everyone was doing well. At times she even had to make that case inside the 17,000-person department, where some of her colleagues didn’t realize that the Black unemployment rate is almost always about twice as high as the white unemployment rate. Other times she had to make that case publicly, in regular videos breaking down the latest jobs report, for the better part of the year she worked at the Labor Department.While the average unemployment rate sank back to its prepandemic level in 2022, the racial gap remained wide. “It took forever — forever — for Black women to recover to even 2018 levels,” Ms. Jones said. She took this message to Twitter, sometimes using memes. In 2021, she didn’t hide her disappointment when the Senate backed off of legislation that came right out of the Black Women Best playbook — including beefed-up subsidies for child and elder care — in the face of opposition from Senator Joe Manchin III, the West Virginia Democrat.Mr. Walsh, who recently stepped down as labor secretary, said that Ms. Jones kept him focused on the idea that the prepandemic status quo wasn’t good enough.Ms. Jones is seven months into her new role at the Service Employees International Union.Lexey Swall for The New York Times“Janelle brought her brilliant economic mind, passion for building an accessible, equitable economy for all, and leadership to the Department of Labor at a critical time of transformation in the American economy,” Mr. Walsh said in an email, “insisting that this country’s workers — especially those usually left behind — remain at the forefront of the national policy response to tremendous upheaval.”Ultimately, Black men and women made strong gains as the pandemic waned, in part because in 2021 the Federal Reserve held off on raising interest rates for months in an attempt to cool off the economy, even as prices started to escalate. Raising interest rates makes businesses less willing to expand and often results in layoffs, which tend to hit people of color first. Ms. Jones, who now speaks for millions of union workers, had argued that a tight labor market would reduce racial inequality.“I care about all workers, obviously, but I really, really care about Black and brown women,” Ms. Jones said. “And to be in a place where those workers are centered, where it’s most of our members — it feels like the perfect place to do the things that make me excited.” More

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    California Economy Is on Edge After Tech Layoffs and Studio Cutbacks

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    As recession fears persist, the troubles in major industries have hurt tax revenues, turning the state’s $100 billion surplus into a deficit.California has often been at the country’s economic forefront. Now, as fears of a national recession continue to nag, the state is hoping not to lead the way there.While the California economy maintains its powerhouse status, outranking even those of most countries, the state’s most-powerful sectors — including tech companies and supply chain logistics — have struggled to keep their footing, pummeled by high interest rates, investor skittishness, labor strife and other turmoil.Even the weather hasn’t cooperated. Severe flooding throughout much of the winter, caused by atmospheric rivers, has left farming communities in the Central Valley devastated, causing hundreds of millions of dollars in crop losses.Thousands of Californians have been laid off in the last few months, the cost of living is increasingly astronomical, and Gov. Gavin Newsom revealed in January that the state faced a $22.5 billion deficit in the 2023-24 fiscal year — a plummet from the $100 billion surplus a year ago.“It’s an EKG,” Mr. Newsom said at the time, comparing a graph of the state’s revenue to the sharp spikes and drops of the heart’s electrical activity. “That sums up California’s tax structure. It sums up the boom-bust.”The structure, which relies in large part on taxing the incomes of the wealthiest Californians, often translates into dips when Silicon Valley and Wall Street are uneasy, as they are now. Alphabet, the parent company of Google, one of the state’s most prominent corporations, said in January that it was cutting 12,000 workers worldwide, and Silicon Valley Bank, a key lender to tech start-ups, collapsed last month, sending the federal government scrambling to limit the fallout.This has coincided with a drop in venture capital funding as rising interest rates and recession fears have led investors to become more risk-averse. That money, which declined 36 percent globally from 2021 to 2022, according to the management consulting firm Bain & Company, is critical to Silicon Valley’s ability to create jobs.“The tech sector is the workhorse of the state’s economy, it’s the backbone,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “These are high earners who might not be able to carry the state as much as they did in the past.”Gov. Gavin Newsom, center, said in January that the state faced a $22.5 billion deficit in the 2023-24 fiscal year, after a $100 billion surplus a year ago.Lipo Ching/EPA, via ShutterstockEntertainment, another pillar of California’s economy, has also been in retreat as studios adjust to new viewing habits. Disney, based in Burbank, announced in February that it would eliminate 7,000 jobs worldwide.In California alone, employment in the information sector, a category that includes technology and entertainment workers, declined by more than 16,000 from November to February, according to the latest Bureau of Labor Statistics data, which predates a recent wave of job cuts in March.A recent survey from the nonpartisan Public Policy Institute of California found widespread pessimism about the economy. Two-thirds of respondents said they expected bad economic times for the state in the next year, and a solid majority — 62 percent — said they felt the state was already in a recession.When Mr. Newsom announced the deficit earlier in the year, he vowed not to dip into the state’s $37 billion in reserves, and instead called for pauses in funding for child care and reduced funding for climate change initiatives. Joe Stephenshaw, director of the California Department of Finance, said in an interview that he and top economists had begun to spot points of concern — persistent inflation, higher interest rates and a turbulent stock market — on the state’s horizon during the second half of last year.“Those risks became realities,” said Mr. Stephenshaw, an appointee of the governor.He acknowledged that the problem was driven largely by declines in high earners’ incomes, including from market-based compensation, such as stock options and bonus payments. As activity slowed, he said, interest rates rose and stock prices fell.But the state’s problems aren’t limited to the tech industry.Cargo processing at the Port of Los Angeles in February was down 43 percent from the year before.Alex Welsh for The New York TimesCalifornia’s robust supply chain, which drives nearly a third of the state’s economy, has continued to buckle under stresses from the pandemic and an ongoing labor fight between longshoremen and port operators up and down the West Coast, which has prompted many shipping companies to rely instead on ports along the Gulf and East Coasts. Cargo processing at the Port of Los Angeles, a key entry point for shipments from Asia, was down 43 percent in February, compared with the year before.“The longer it drags on, the more cargo will be diverted,” said Geraldine Knatz, a professor of the practice of policy and engineering at the University of Southern California, who was executive director of the Port of Los Angeles from 2006 to 2014. Still, wherever the economic cycle is leading, California heads into it with some strengths. Although unemployment in February, at 4.3 percent, was higher than in most states, it was lower than the rate a year earlier. In the San Francisco and San Jose metropolitan areas, unemployment was below 3.5 percent, better than the national average.Over decades, California’s economy has historically seen the highest of highs and the lowest of lows, part of the state’s boom-bust history. During the recession of the early 1990s, largely driven by cuts to aerospace after the end of the Cold War, California was hit much harder than other parts of the country.Zeeshan Haque is looking for a job after losing his position as a software engineer at Google. “It’s just very competitive at this time because of so many layoffs,” he said.Mark Abramson for The New York TimesIn March, the U.C.L.A. Anderson Forecast, which provides economic analysis, released projections for both the nation and California, pointing to two possible scenarios — one in which a recession is avoided and another in which it occurs toward the end of this year.“Even in our recession scenario we have a mild recession,” said Jerry Nickelsburg, director of the Anderson Forecast.Regardless of which scenario pans out, California’s economy is likely to be better off than the national one, according to the report, which cited increased demand for software and defense goods, areas in which California is a leader. Mr. Nickelsburg also said the state’s rainy-day fund was healthy enough to withstand the decline in tax revenues. But that shortfall could complicate the speed at which Mr. Newsom can carry out some of his ambitious, progressive policies. In announcing the deficit, Mr. Newsom scaled back funding for climate proposals to $48 billion, from $54 billion.The fiscal outlook also casts a cloud over progressive proposals, widely supported by Democrats, who have a supermajority in the Legislature.A state panel that has been debating reparations for Black Californians is set to release its final report by midyear. Economists have projected that reparations could cost $800 billion to compensate for overpolicing, housing discrimination and disproportionate incarceration rates. Once the panel releases its report, it will be up to lawmakers in Sacramento to decide how much state revenue would support reparations — a concept that Mr. Newsom has endorsed.Through all this, one thing has remained constant: Many Californians say their biggest economic concern is housing costs.The median value for a single-family home in California is about $719,000 — up nearly 1 percent from last year, according to Zillow — and recent census data shows that some of the state’s biggest metro areas, including Los Angeles and San Francisco Counties, have continued to shrink. (In Texas, where many Californians have relocated, the median home value is about $289,000.)Still, some Californians remain optimistic.Zeeshan Haque, a former software engineer at Google, learned in January that he was being laid off. His last day was March 31.“It was out of nowhere and very abrupt,” said Mr. Haque, 32, who recently moved from the Bay Area to Los Angeles.He bought a $740,000 house in the city’s Chatsworth neighborhood in February and spent time focusing on renovations. But in recent weeks, he has begun to look for a new job. He recently updated his LinkedIn avatar to show the hashtag #opentowork and said he hoped to land a new job soon.“It’s just very competitive at this time because of so many layoffs,” he said.Ben Casselman More