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    U.S. Economy’s Staying Power Poses Big Questions for the Fed

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    The Federal Reserve has been trying to slow growth without tanking it. Now, officials must ask if inflation can cool amid signs of resilience.Employers are hiring rapidly. Home prices are rising nationally after months of decline. Consumer spending climbed more than expected in a recent data release.America’s economy is not experiencing the drastic slowdown that many analysts had expected in light of the Federal Reserve’s 15-month, often aggressive campaign to hit the brakes on growth and bring rapid inflation under control. And that surprising resilience could be either good or bad news.The economy’s staying power could mean that the Fed will be able to wrangle inflation gently, slowing down price increases without tipping America into any sort of recession. But if companies can continue raising their prices without losing customers amid solid demand, it could keep inflation too hot — forcing consumers to pay more for hotels, food and child care and forcing the Fed to do even more to restrain growth.Policymakers may need time to figure out which scenario is more likely, so that they can avoid either overreacting and causing unnecessary economic pain or underreacting and allowing rapid inflation to become permanent.Given that, investors have been betting that Fed officials will skip a rate increase at their meeting on Tuesday and Wednesday before lifting them again in July, proceeding cautiously while emphasizing that pausing does not mean quitting — and that they remain determined to bring prices under control. But even that expectation is increasingly shaky: Markets have spent this week nudging up the probability that the Fed might raise rates at this month’s meeting.In short, the mixed economic signals could make Fed policy discussions fraught in the months ahead. Here’s where things stand.Interest rates are much higher.Interest rates are above 5 percent, their highest level since 2007.

    Source: Federal ReserveBy The New York TimesAfter sharply adjusting policy over the past 15 months, key officials including Jerome H. Powell, the Fed chair, and Philip Jefferson, President Biden’s pick to be the next Fed vice chair, have hinted that central bankers could pause to allow themselves time to judge how the increases are affecting the economy.But that assessment remains a complex one. Even some parts of the economy that typically slow when the Fed raises rates are demonstrating a surprising ability to withstand today’s interest rates.“It’s a very complicated, convoluted picture depending on which data points you are looking at,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank, noting that overall growth figures like gross domestic product have slowed — but other key numbers are holding up.House prices are wiggling.Higher interest rates can take months or even years to have their full effect, but they should theoretically work pretty quickly to begin to slow down the car and housing markets, both of which revolve around big purchases made with borrowed cash.That story has been complicated this time. Car buying has slowed since the Fed started raising rates, but the auto market has been so undersupplied in recent years — thanks in large part to pandemic-tied supply chain problems — that the cool-down has been a bumpy one. Housing has also perplexed some economists.

    Note: Data is seasonally adjusted.Source: S&P CoreLogic Case-Shiller Index, via
    S&P Global IntelligenceBy The New York TimesThe housing market weakened markedly last year as mortgage rates soared. But rates have recently stabilized, and home prices have ticked back up amid low inventory. House prices do not count directly in inflation, but their turnaround is a sign that it’s taking a lot to sustainably cool a hot economy.Job signals are confusing.Fed officials are also watching for signs that their rate increases are trickling through the economy to slow the job market: As it costs more to fund expansions and as consumer demand slows, companies should pull back on hiring. Amid less competition for workers, wage growth should moderate and unemployment should rise.Some signs suggest that the chain reaction has begun. Initial claims for unemployment insurance jumped to the highest level since October 2021 last week, a report on Thursday showed. People are also working fewer hours per week at private employers, which suggests bosses aren’t trying to eke so much out of existing staff.

    Notes: Data is seasonally adjusted and includes hours worked by full- and part-time private sector employees.Source: Bureau of Labor StatisticsBy The New York TimesBut other signals have been more halting. Job openings had come down, but edged back up in April. Wages have been climbing less swiftly for lower-income workers, but gains remain abnormally rapid. The jobless rate climbed to 3.7 percent in May from 3.4 percent, but even that was still well shy of the 4.5 percent that Fed officials expected it to hit by the end of 2023 in their latest economic forecasts. Officials will release fresh projections next week.

    Source: Bureau of Labor StatisticsBy The New York TimesAnd by some measures, the labor market is still chugging. Hiring remains particularly strong.“Everyone talks as if the economy moves in one straight line,” said Nela Richardson, chief economist at ADP. “In actuality, it’s lumpy.”Price increases are stubborn.Still, inflation itself may be the biggest wild card that could shape the Fed’s plans this month and over this summer. Officials forecast in March that annual inflation as measured by the Personal Consumption Expenditures index would retreat to 3.3 percent by the end of the year.That pullback is gradually happening. Inflation stood at 4.4 percent as of April, down from 7 percent last summer but still more than double the Fed’s 2 percent goal.

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    Year-over-year percentage change in the Personal Consumption Expenditures index
    Source: Bureau of Economic AnalysisBy The New York TimesOfficials will receive a related and more up-to-date inflation reading for May — the Consumer Price Index — on the first day of their meeting next week.Economists expect substantial cooling, which could give officials confidence in pausing rates. But if those forecasts are foiled, it could make for an even more heated debate about what comes next. More

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    U.S. Added 339,000 Jobs in May Despite Economic Clouds

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    Employers added 339,000 workers in May, the Labor Department said, though the report also offered signs of shakiness.American employers added an unanticipated barrage of workers in May, reaffirming the labor market’s vigor.Defying expectations of a slowdown, payrolls grew by 339,000 on a seasonally adjusted basis, the Labor Department said on Friday. The increase, the largest since January, suggested that the job market was still piping hot despite a swirl of economic headwinds.But below the surface, the report also offered evidence of softening. The unemployment rate, while still historically low, jumped to 3.7 percent, the highest level since October. In a sign that the pressure to entice workers with pay increases is lifting, wage growth eased.The dissonance offered a somewhat muddled picture that complicates the calculus for the Federal Reserve, which has been raising interest rates for more than a year to temper the labor market’s momentum and rein in price increases. Fed officials have indicated that the jobs report will be an important factor as they decide whether to raise interest rates again.“We’re still seeing a labor market that’s gradually cooling,” said Sarah House, an economist at Wells Fargo. “But it’s at a glacial place.”President Biden hailed the report, saying in a statement that “today is a good day for the American economy and American workers.” The S&P 500 index rose more than 1.4 percent as the data portrayed an economic engine that was running strong but not overheating.Looming over the report is the debt ceiling deal approved by Congress, though economists largely expect the spending caps and cuts to have only marginal impact on the labor market going forward.The hiring numbers suggest that employers remain eager for workers even in the face of high interest rates and economic uncertainty. Many are still bringing on employees to meet consumer demand, especially for services. The only major sectors to lose jobs were manufacturing and information.A slight reversal for manufacturing in MayChange in jobs in May 2023, by sector More

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    Supreme Court Backs Employer in Suit Over Strike Losses

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    The justices ruled that federal labor law did not block state courts from ruling on a case regarding damage caused when workers walked off the job.The Supreme Court ruled on Thursday that federal labor law did not protect a union from potential liability for damage that arose during a strike, and that a state court should resolve questions of liability.The majority found that if accusations by an employer are true, actions during a strike by a local Teamsters union were not even arguably protected by federal law because the union took “affirmative steps to endanger” the employer’s property “rather than reasonable precautions to mitigate that risk.” It asked the state court to decide the merits of the accusations.The opinion, written by Justice Amy Coney Barrett, was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor, Elena Kagan and Brett M. Kavanaugh.Three conservative justices backed more sweeping concurring opinions. A single justice, Ketanji Brown Jackson, dissented.Some legal experts had said a union setback in the case would discourage workers from striking by making the union potentially liable for losses that an employer incurred during a work stoppage.“It will definitely lead to more expensive-to-resolve lawsuits against labor unions,” said Charlotte Garden, a law professor at the University of Minnesota who was an author of a brief in support of the union. Professor Garden did note, however, that the decision was less far-reaching in discouraging strike activity than it could have been.Others have argued that the ruling was necessary to prevent workers from intentionally harming an employer’s property, an act not protected by federal labor law, and that such restrictions do not jeopardize the right to strike.“Damages from intentional destruction of property are not inherent to the act of striking,” said Michael O’Neill of the Landmark Legal Foundation, a conservative legal advocacy group that submitted a brief in the case. As a result, Mr. O’Neill said, the law does not shield workers or unions from liability for such damage.The case, Glacier Northwest v. International Brotherhood of Teamsters, No. 21-1449, involved unionized employees of a concrete mixing and pouring company who walked off the job during contract negotiations, leaving wet concrete in their trucks. The employer argued that it suffered substantial monetary losses because the abandoned concrete was unusable.The union argued that it had taken reasonable steps to avoid harming the employer’s property, as federal law requires, because workers kept their trucks running as they walked off the job. That allowed the company to dispose of the concrete without damage to the trucks. The union said the lost concrete amounted to the spoilage of a product, for which unions were not typically held liable.At issue were two key questions. The first was procedural: whether the case should be allowed to go forward in state court, as employers generally prefer. The alternative is that the state court — in this case, Washington — should step aside in favor of the National Labor Relations Board, the federal agency responsible for resolving labor disputes.The second question was about what economic damage is acceptable during a strike, and what amounts to vandalism — which federal labor law does not protect — of property or equipment.The two issues are linked because under legal precedent, the labor board is supposed to elbow aside state courts when the alleged actions during the strike are at least “arguably protected” by federal law.The Supreme Court ruled that the union’s actions, as alleged by the employer, were not arguably protected because the spoilage of the product was not merely an indirect result of the strike. Instead, the employer contended in a lawsuit, “the drivers prompted the creation of the perishable product” and then waited until the concrete was inside the trucks before walking off the job.“In so doing, they not only destroyed the concrete but also put Glacier’s trucks in harm’s way,” the majority opinion said. It sent the case back to Washington State court to be litigated.Sean M. O’Brien, the president of the Teamsters, issued a defiant statement after the decision was announced. “The Teamsters will strike any employer, when necessary, no matter their size or the depth of their pockets,” he said.The U.S. Chamber of Commerce said the court “got it right” in ruling that federal law “does not pre-empt state tort claims against a union for intentional destruction of an employer’s property during a labor dispute.”In a concurring opinion, Justice Clarence Thomas agreed that the Washington State court should be allowed to take up the case. He wrote that in a future case, the Supreme Court should reconsider whether the National Labor Relations Board should have such wide latitude to take the first pass in such cases.Justice Jackson noted in her dissent that the labor board had issued its own complaint since the case was first filed in Washington State. In issuing its complaint, the labor board’s general counsel found that the strike activity was in fact protected. This by definition meant that the activity was “arguably protected,” Justice Jackson wrote, requiring the state court to stand down.The decision, which some experts said could cause unions to reconsider striking or take a more cautious approach when a perishable product could be harmed, followed a series of rulings that appeared to scale back the power of unions and workers.The court ruled in 2018 that companies could prohibit workers from collectively bringing legal actions against their employers, even though the National Labor Relations Act protects workers’ rights to engage in so-called concerted activities.In the same year, the court ruled that public-sector unions could no longer require nonmembers to pay fees that help fund bargaining and other activities that unions do on their behalf.In 2021, the court deemed unconstitutional a California regulation that gave unions access to agricultural employers’ property for recruitment.In interviews, union leaders said that the ruling on Thursday would further tilt an already uneven playing field toward employers, and that it was often not a strike itself but the threat of a strike that helped unions win concessions.“Without the threat of a strike, you have little leverage in negotiations,” said Stuart Appelbaum, the president of the Retail, Wholesale and Department Store Union, which has organized successful strikes.Mr. O’Neill’s group, the Landmark Legal Foundation, argued that a ruling against the employer could have jeopardized the labor peace that the National Labor Relations Act was enacted to assure, “placing workers and the public at risk” by essentially blessing acts of vandalism and sabotage.Unions and workers often deliberately plan strikes to exploit employers’ vulnerability — for example, Amazon workers walked out during the holiday season — and rely on an element of surprise to maximize the economic harm they inflict, and therefore the leverage the union gains.In the near term, unions that are contemplating strikes or already striking, such as unions representing Hollywood writers or United Parcel Service employees whose contract expires this summer, may have to take greater precautions to insulate themselves from legal liability.Such precautions will typically weaken the impact of strikes, said Ms. Garden, the University of Minnesota professor. “You could get unions prophylactically adopting less effective tactics — things like giving advance warning about strike, which gives the employer a lot more time to hire replacement workers,” she said.Other unions may simply decide not to strike at all out of fear of heightened legal exposure, she said.Further out, unions and their political allies may seek to enact legislation that explicitly exempts workers from liability for certain types of economic damage that arise during a strike.“There will be efforts in blue states to make the best of it, to do something protective,” said Sharon Block, a former Biden and Obama administration official who is a professor of practice at Harvard Law School.But even these laws could wind up being challenged before the Supreme Court, experts said.Adam Liptak More

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    Job Openings Rose in April, Defying Cooling Trend

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    After three consecutive months of declines, job openings jumped in April, reaching 10.1 million, the Labor Department reported on Wednesday.The surge signals that job opportunities are withstanding the economic pressures that have led many to believe that the American economy may soon enter a recession.At the same time, the report — known as JOLTS, or the Job Openings and Labor Turnover Survey — showed that the labor market was far less feverish than it was a year earlier.The quits rate — viewed as an indicator of how confident workers are in leaving a job and finding employment elsewhere — was 3 percent, seasonally adjusted, in April 2022. Since then, it has retreated to 2.4 percent, just above its prepandemic peak. And the hiring rate was unchanged from March, which was the lowest since December 2020.Layoffs, however, decreased again, showing that employers are hesitant to let go of employees brought on board during this recovery.A bagel shop in Brooklyn advertised that it had positions to fill.Earl Wilson/The New York TimesThe data complicates the interest-rate outlook.The jump in openings may put pressure on the Federal Reserve to take interest rates even higher.The statistical relationship between high job vacancies, as calculated by the government, and low unemployment has been frequently cited by the Federal Reserve chair, Jerome H. Powell, as a key sign of the labor market’s being “unsustainably hot” and “clearly out of balance, with demand for workers substantially exceeding the supply of available workers.”But even as some economists remain unsatisfied with the progress on subduing prices, others worry that reliance on job openings as a core measure of labor market balance may lead the Fed to keep the cost of borrowing for businesses and households too high for too long, prompting a harsher downturn than necessary.“The quits rate is nearly back to prepandemic levels, the hires rate has already reverted to prepandemic pace,” Skanda Amarnath, the executive director of Employ America, a nonprofit that supports tight labor markets, wrote in a note. “JOLTS data should not drastically color this broader assessment of labor market tightness but will matter at the margins for the Fed’s own perception of labor market heat.”Some question how much weight to give the report.After peaking at a record of around 12 million in March 2022, job openings as measured by the government have fallen overall. For the past year, a mix of strong hiring for positions that were already listed and a decline in business sentiment has led to a pullback in newly created listings. But the April uptick is at least a pause in recent trends.Some economists think the JOLTS report should be taken with a grain of salt. Gregory Daco, the chief economist at EY-Parthenon, said the bump in listings could reflect summer hiring in the rebounding service sector, though he added, “I’d want to see June before assuming that summer hiring is stronger than last year.”The report is based on a survey of about 21,000 nonfarm business and government establishments. The economic research team at Goldman Sachs has made the case that since the response rate to the JOLTS report has fallen sharply since the start of the pandemic, “these findings argue for currently treating JOLTS less like the ‘true’ level of job openings.”The May jobs report will be the next gauge.The May employment report, to be released by the Labor Department on Friday, will fill out the labor market picture before Fed policymakers meet on June 13 and 14.Economists surveyed by Bloomberg expect the data to show the addition of 195,000 jobs on a seasonally adjusted basis, down from 253,000 in the initial report for April. Unemployment, which was 3.4 percent in April — matching the lowest level since 1969 — is expected to rise to 3.5 percent, and the month-over-month increase in wages is expected to ease. More

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    Remote Work Gives Amazon Workers a Common Cause

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    At Amazon, warehouse workers have shown support for corporate colleagues, noting they have nothing to gain if office workers lose flexibility that the pandemic proved possible.Eric Deshawn Lerma felt waves of anxiety when he sat down to tally the new costs in his routine since Amazon’s return to the office this spring. There’s parking. There’s fuel. There’s lunch. They add up to at least $200 extra a month, all to support a policy whose justification he can’t fully understand — after three years in which he and his teammates have been doing their jobs from home.Still, when Mr. Lerma heard that some of his colleagues were organizing a walkout to protest the return-to-office policy, which asks employees to come in at least three days a week, he initially wavered on whether to participate. After all, he realizes that thousands of Amazon workers have no flexibility to work from home. Their jobs require them to go into warehouses to do physically taxing labor each day.“It really provided me with a sense of internal conflict about working from home being a luxury or a right,” said Mr. Lerma, 27, who is an executive assistant in Seattle and joined the company, where he feels he has grown personally and professionally, in 2022. “There are different rights and amenities afforded to my role.”He ultimately decided, though, that he would probably join virtually. “While warehouse workers have much harsher working conditions than I do,” he said, “I should still be able to reserve the right to protect my autonomy as an employee.”Thousands of corporate employees, across industries, who remain adamant that they do not want to return to the office are now confronting a tension: How do their demands compare with those of the millions of workers whose jobs have never permitted them the ease of remote work? And can a corporate employee’s advocacy be of use to workers, including those trying to unionize, outside the corporate sphere?This tension follows a pandemic that exacerbated the divide between white-collar workers who could do their jobs from the safety of their homes and workers who often could not and were exposed to higher Covid risks.Simultaneously, workers in both the corporate and noncorporate realms have re-evaluated their working conditions, quit their jobs in waves and called for higher wages, amid a tight labor market at one point called a “workers economy.” The unemployment rate this spring has remained low, at 3.4 percent, with wages rising.Most Amazon workers have been working at company facilities throughout the pandemic.Hiroko Masuike/The New York TimesAt Amazon, hundreds of corporate employees plan to walk off the job on Wednesday, for one hour during lunchtime, in protest of the company’s return-to-office rule, among other issues including layoffs and the company’s impact on the climate. Weeks earlier, employees voiced their frustrations with the R.T.O. policy in a Remote Advocacy channel, with over 30,000 members, on the Slack workplace messaging system.The company has more than 350,000 corporate and tech employees globally. More than 800 in Seattle and 1,600 globally have pledged to participate in the walkout. Some employees, particularly working parents, pin some of their frustration to the financial toll of returning to the office, especially the cost and pressures of child care.The vast majority of Amazon’s more than one million workers, including those who formed a union at a Staten Island warehouse, have been working in person throughout the pandemic.Apple, where employees issued open letters protesting in-person work, and at the Gap have encountered a similar dynamic. At Starbucks, more than 70 named employees, along with others who remained anonymous, released a petition this year urging the company to permit them to keep working remotely. Members of the union representing Starbucks baristas have been supportive of these corporate workers, even though most of the company’s roughly 250,000 U.S. employees, including those across more than 300 unionized stores, cannot work from home.Indeed, many workers in warehouses and stores have been quick to show support for their corporate colleagues, noting that they have nothing to gain from seeing office workers lose out on the flexibility that the pandemic proved was possible.“The work that we’re doing is in two separate fields,” said Anna Ortega, 23, who is active in Inland Empire Amazon Workers United, a group of warehouse workers, and has been working at an Amazon facility in San Bernardino, Calif., for almost two years. “It’s just showing us that Amazon has a problem with workers and listening to us.”Ms. Ortega spends her days lifting 50-pound packages — a task she could never do from home. But she said she supported the Amazon workers who were asking for the flexibility to keep working remotely.“If your employees are happy and are able to work productively from home, I think they would be able to bring better results,” Ms. Ortega said.An Amazon spokesman, Brad Glasser, said that the company respected “employees’ rights to express their opinions and peacefully assemble,” but that it had felt “good energy” since more employees returned to the office.Members of a union representing Starbucks store staff have offered support to corporate employees who petitioned in favor of remote work.Audra Melton for The New York TimesAt Starbucks, members of the union representing store workers have corresponded with corporate employees on Discord and other platforms, offering their support. And when corporate employees released their petition, they asked the company both to reverse its return-to-office policy and to allow free and fair union elections across stores.Jake Sklarew, 34, a software engineer at Starbucks who signed the petition, was frustrated by the return-to-office policy because during the pandemic he had bought a home in an affordable area, 30 miles from the office, thinking he’d be able to keep working remotely. Earlier in his career, when he worked in restaurants, he commuted as much as three hours a day, and he sees his current calls for fairer company policies as connected to the struggles of baristas demanding workplace respect.“The people that are working in stores, when you talk to them, they’re not asking for other people to have to work in person,” he said, adding that it wouldn’t make sense for Starbucks to end remote work for some just because not everyone can do it. “It feels to me like kind of an eye-for-an-eye situation: You’re not helping anyone — you’re just hurting everyone.”Starbucks has suggested that its policy, which requires its 3,750 corporate workers to come in three days a week, contains an element of equity for its employees, or “partners,” because “many partners didn’t have the privilege of working remotely.” But some union members have rejected this logic.To Sarah Pappin, 32, a Starbucks shift supervisor in Seattle, what corporate employees are asking for is directly related to what store employees are demanding, such as increased Covid safety protections.“Even jobs that you might think of as dream jobs can be exploited,” she said. “I think there is a growing understanding that we’re all workers.”But that sense of solidarity doesn’t erase the guilt that some office workers feel as they ask to hold on to the freedom of a workday in their living room. Many office workers have realized, too, all the advantages they have even in their organizing efforts.“We’re so much closer to leadership,” Mr. Lerma said. “I have access to a work-issued laptop that has provided me with the complete address book of everyone within Amazon. I have access to Slack, which can give me any contact I want. A warehouse employee doesn’t have that luxury.” More

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    Consumer Spending Rose More Than Expected in April

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

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    Restaurant Chain Franchises Face Scrutiny From the FTC

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    Troubles at the restaurant chain Burgerim highlight concerns about whether franchisees need more protection in their contracts with franchisers.“Making It Work” is a series about small-business owners striving to endure hard times.When Kenneth Laskin flew to California to meet with executives at Burgerim, a start-up chain of restaurants, he was made to feel not just like another prospective franchisee, but like part of a family.The company’s executives, he said, made a point one evening of highlighting their common Jewish faith by praying with him in Hebrew.At the time, in 2017, Mr. Laskin believed he was being offered a plum deal. He paid $50,000 for the right to open up as many Burgerim franchised restaurants as he wanted in Oregon. “I got an entire state,” Mr. Laskin recalled.Today, Burgerim has run into trouble, leaving a trail of financial problems, a lawsuit by the Federal Trade Commission and broader regulatory scrutiny of whether protections for franchisees like Mr. Laskin are adequate.The challenges highlighted by Burgerim come as franchising continues to grow as a way that people are choosing to start small businesses.There has been rising concern about whether franchisees need more protection in their contracts with franchisers. That concern has found a sympathetic ear in the Biden administration and in several state legislatures, and has resulted in multiple proposed limits on franchisers’ powers.In the end, Mr. Laskin opened only one Burgerim restaurant, in Eugene, Ore., which closed in 2020 during the pandemic. Since then, Mr. Laskin has been depleting his savings to pay the bills.Burgerim, which boasted of having inventive high-quality burgers, has been criticized by former franchisees for making grand promises and poor disclosure about business risks. Of the more than 1,500 franchises Burgerim sold, most never opened, the commission said in a lawsuit that the agency filed last year against the company and its founder in U.S. District Court in California.Peter Bronstein, a lawyer for Oren Loni, who was the company’s principal executive in the United States, said that Burgerim made some business mistakes but that it was often trying to help its franchisees succeed. The two sides have been in mediation, according to the court file. Kenneth Laskin believed he got a plum deal to start as many Burgerim franchised restaurants as he wanted in Oregon. He ended up opening only one, which closed during the pandemic.Zack Wittman for The New York TimesEven as the pandemic was still bearing down, the number of franchised establishments in the country grew 2.8 percent in 2021 and 2 percent in 2022. That number is expected to increase an additional 2 percent this year, bringing the total to 805,436 franchises, according to the latest data released by the International Franchise Association, an industry group.As the franchising network expands, so does its contribution to the broader economy. Franchises employed 8.4 million people last year, a 3 percent increase from 2021.There is historical evidence, according to the International Franchise Association, that the first U.S. franchise dates back to Ben Franklin, who created a network of printing partnerships.Franchising took root in the American business landscape in the decades following World War II, with the growth of franchised brands like Howard Johnson’s hotels.Sam Falk/The New York TimesToday a fundamental symbiosis drives the business model: Franchisees pay an upfront fee to an franchiser like Dunkin’ Donuts or Applebee’s, which gets them access to all of that brand’s suppliers, advertising and technology. The franchisee can lean on these established systems to get their business up and running quickly rather than having to start from scratch. And the franchiser, in turn, receives the franchising fee, typically tens of thousands of dollars, in addition to a regular royalty payment from the franchisee.“Franchising has always been an on-ramp for the middle class to open their own business,” said Charlie Chase, the chief executive of FirstService Brands, a franchiser of home renovation and painting services.Over the years, Mr. Chase, who has served on the board of directors of the International Franchise Association, said he had helped hundreds of successful franchisees get their start. “We have created a lot of millionaires,” he said.Still, Mr. Chase said he was concerned about how some franchisees were being pushed into businesses without understanding all of the risks.He blames aggressive internet advertising for some of this (Mr. Laskin learned about Burgerim from a Facebook advertisement, for example), and also a network of third-party brokers that often push prospective franchisees to buy multiple franchises at a time.The Federal Trade Commission, under the leadership of Lina Khan, is looking broadly at industry practices including disclosure and issues such as franchisers’ unilaterally changing the terms of an agreement with a franchisee.“Franchising can be a good business model, but it can also lead to a lot of harm,” Elizabeth Wilkins, the director of the commission’s Office of Policy and Planning, said. “We are concerned about instances where the promise does not match with reality. We believe there is a significant gap that is worth our investigation.”In the case against Burgerim,  federal officials said that the company executives told franchisees they would refund their franchise fees if their business did not open, but that many people never got their money back. Mr. Bronstein, the lawyer for Mr. Loni, said offering refunds “was not the best way to run a business.”In the years since the 2008 financial crisis and mortgage meltdown, regulators have bolstered protections for consumers by improving disclosure by banks and banning certain fees they can charge. But small businesses, including franchisees, have not benefited from the same extensive regulatory scrutiny.“There is a view in the consumer protection world that small businesses do not get the same level of protections as other consumers,” Samuel Levine, the director of the F.T.C.’s Bureau of Consumer Protection, said. “Yet, consumers and small businesses, including franchisees, face many of the same challenges. That is something we are trying to address.”The F.T.C., under the leadership of Lina Khan, above, is looking broadly at industry practices at franchises including disclosure about business risks. Saul Loeb/Agence France-Presse, via Getty ImagesAs part of that effort, the Federal Trade Commission is looking at how to apply laws like the Robinson-Patman Act, an antitrust law that prevents large corporations from using discriminatory pricing to take advantage of small businesses. The agency also has proposed a rule banning noncompete clauses in employment contracts and may consider limiting the use of noncompete clauses in franchise agreements.When Mr. Laskin bought a franchise, he was not looking to become a millionaire, but rather to build a stable middle-class life.He opened his sole Burgerim store in Oregon in September 2019.But the problems started soon after his grand opening, Mr. Laskin said. Burgerim had not established a reliable food distribution system in Oregon, he said, forcing Mr. Laskin to fend for himself to supply his restaurant. In trying to help new locations get off the ground, the company never collected royalties from the franchisees, which limited its ability to support its restaurant network over the long term, Mr. Bronstein said. Still, he added, there are many Burgerim restaurants that operated successfully.Mr. Laskin kept the business going during the pandemic by offering take out. But he couldn’t find people to work during the lockdowns, which meant he and his wife ran the entire operation themselves.Mr. Laskin, who has severe back pain from years of restaurant work, hoped a franchise would offer him the chance to delegate work to employees and spare his back.But some days, Mr. Laskin would return from the burger restaurant at night unable to walk the final few yards up his driveway because of the pain from standing on his feet all day.The Burgerim leadership, Mr. Laskin said, provided no support during the pandemic.A Burgerim restaurant in Walnut Creek, Calif., last year.Gado/Getty ImagesHe closed his restaurant in May 2020 and moved to Florida. Mr. Laskin, 57, said that his back problems limited the type of work he can do and that it had been difficult finding work after his burger business closed.The struggles of the former Burgerim franchisees were brought to light in 2020 by the publication Restaurant Business, which focuses on the food service industry, in a series of articles.Some franchisees say improving disclosure or increasing regulations on fee structures will not be a panacea in rooting out the industry’s troubled actors.“Transparency is a great thing, but I am not sure more disclosure is going to change any outcomes,” said Greg Flynn, the founder and chief executive of Flynn Restaurant Group, the largest franchisee in the country with 2,400 locations and 73,000 employees, operating brands like Taco Bell, Pizza Hut and Panera.“There are a lot of stories of franchisees buying into a system and then it goes badly for them,” he added. “I would just suggest that they might have had a similar experience outside of a franchise system.”Mr. Laskin says it is not just bad timing or circumstances that were to blame. “The system is fundamentally crippled,’’ he said. “There is too much secrecy. It shouldn’t be this difficult.” More

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    Fed Officials Were Split Over June Rate Pause, Minutes Show

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    In the Federal Reserve’s last meeting, “several” participants thought rates may have moved high enough to get inflation under control.Federal Reserve officials were unanimous in their decision to raise interest rates earlier this month, but were conflicted over whether additional increases would be necessary to bring inflation under control, according to minutes from the Fed’s last meeting released on Wednesday.The Fed voted to raise interest rates by a quarter-point on May 3, to a range of 5 to 5.25 percent, the 10th straight increase since the central bank started its campaign to rein in inflation last year. Although officials left the door open to further rate increases, the minutes make clear that “several” policymakers were leaning toward a pause.“Several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary,” the minutes said.Still, some officials believed “additional policy firming would likely be warranted at future meetings” since progress on bringing inflation back to the central bank’s 2 percent target could continue to be “unacceptably slow.”Policymakers believed that the Fed’s moves over the past year had significantly contributed to tighter financial conditions, and they noted that labor market conditions were starting to ease. But they agreed that the labor market was still too hot, given the strong gains in job growth and an unemployment rate near historically low levels.Officials also agreed that inflation was “unacceptably high.” Although price increases have shown signs of moderating in recent months, declines were slower than officials expected, and officials were concerned that consumer spending could remain strong and keep inflation elevated. Some noted, however, that tighter credit conditions could slow household spending and dampen business investment.Fed officials believed the U.S. banking system was “sound and resilient” after the collapses of Silicon Valley Bank and Signature Bank this year led to turbulence in the banking sector. Although they noted that banks might be pulling back on lending, policymakers said it was too soon to tell how big of an impact credit tightening might have on the overall economy.One source of concern for policymakers was brinkmanship over the nation’s debt limit, which caps how much money the United States can borrow. If the cap is not raised by June 1, the Treasury Department could be unable to pay all of its bills in a timely manner, resulting in a default. Many officials said it was “essential that the debt limit be raised in a timely manner” to avoid the risk of severely damaging the economy and rattling financial markets.The central bank’s next move remains uncertain, with policymakers continuing to leave their options open ahead of their June meeting.“Whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks,” Christopher Waller, a Federal Reserve governor, said in a speech on Wednesday.The president of the Minneapolis Fed, Neel Kashkari, said in an interview with The Wall Street Journal last week that he could support holding rates steady at the June 13-14 meeting to give policymakers more time to assess how the economy is shaping up.“I’m open to the idea that we can move a little bit more slowly from here,” he said.Officials have reiterated that they will continue to monitor incoming data before reaching a decision. On Friday, the Commerce Department will release a fresh reading of the Personal Consumption Expenditures index, the Fed’s preferred gauge of inflation. Early next month, the federal government will also release new data on job growth in May. More