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What Is a Bear Market? Are We in One?

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President Trump’s global tariffs have sent stock markets worldwide into a tailspin, and the S&P 500 on Monday briefly entered bear market territory for the first time since 2022.Mr. Trump has seemed unmoved by the decline. He signaled on Monday that he had no plans to back off on tariffs, insisting that they would bring in “billions of dollars” in revenue and that other countries had been “abusing” the United States with their trade policies.Here is what to know about a bear market.What is a bear market?A bear market is a Wall Street term for a sustained market downturn, when a stock index closes 20 percent from its last peak.The 20 percent threshold signals investor pessimism about the future of the economy.Are we in a bear market now?The S&P 500, the benchmark U.S. stock index, opened lower on Monday. The index was already down 17.4 percent from its last high, on Feb. 19, and if it closes Monday’s trading with a loss of at least 3.1 percent, that would tip it into a bear market. More

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    E.V. Tax Credits Are a Plus, but Flaws Remain, Study Finds

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    The Inflation Reduction Act was a compromise between competing priorities. Evaluating the law on the effectiveness of the $7,500 tax credit for E.V.s is tricky.A team of economists has taken on a central component of the Inflation Reduction Act: the $7,500 tax credit for U.S.-made electric vehicles.The challenge in evaluating it is that the policy has sometimes conflicting goals. One is getting people to buy electric vehicles to lower carbon emissions and slow climate change. The other is strengthening U.S. auto manufacturing by denying subsidies to foreign companies, even for better or cheaper electric vehicles.That’s why totaling those pluses and minuses is complex, but overall the researchers found that Americans have seen a two-to-one return on their investment in the new electric vehicle subsidies. That includes environmental benefits, but mostly reflects a shift of profits to the United States. Before the climate law, tax credits were mainly used to buy foreign-made cars.“What the I.R.A. did was swing the pendulum the other way, and heavily subsidized American carmakers,” said Felix Tintelnot, an associate professor of economics at Duke University who was a co-author of the paper.Those benefits were undermined, however, by a loophole allowing dealers to apply the subsidy to leases of foreign-made electric vehicles. The provision sends profits to non-American companies, and since those foreign-made vehicles are on average heavier and less efficient, they impose more environmental and road-safety costs.Also, the researchers estimated that for every additional electric vehicle the new tax credits put on the road, about three other electric vehicle buyers would have made the purchases even without a $7,500 credit. That dilutes the effectiveness of the subsidies, which are forecast to cost as much as $390 billion through 2031. “The I.R.A. was worth the money invested,” said Jonathan Smoke, the chief economist at Cox Automotive, which provided some of the data used in the analysis. “But in essence, my conclusion is that we could do better.”How the Environmental and Safety Costs of Gas- and Electric-Powered Cars Stack UpMeasuring the cost to society of carbon emissions from driving and manufacturing, local air pollutants and the danger of crashes, a new economic analysis finds that some gas-powered vehicles are less damaging than electric and hybrid vehicles.

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    The five least and most costly gas- and electric-powered vehicles
    Averages are weighted by the number of each model registered within each powertrain category. Total costs subtract fiscal benefits from gas taxes and electricity bills.Source: Hunt Allcott, Stanford; Joseph Shapiro, U.C. Berkeley; Reigner Kane and Max Maydanchik, University of Chicago; and Felix Tintelnot, Duke UniversityBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Is the U.S. Entering a Recession? Here’s Why It’s Hard to Say.

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    The U.S. may register a second straight quarter of economic contraction, one benchmark of a recession. But that won’t be the last word.The United States is not in a recession.Probably.Economic output, as measured by gross domestic product, fell in the first quarter of the year. Government data due this week may show that it fell in the second quarter as well. Such a two-quarter decline would meet a common, though unofficial, definition of a recession.Most economists still don’t think the United States meets the formal definition, which is based on a broader set of indicators, including measures of income, spending and job growth. But they aren’t quite as sure as they were a few weeks ago. The housing market has slowed sharply, income and spending are struggling to keep pace with inflation, and a closely watched measure of layoffs has begun to creep up.“A month ago, I was writing that it was very unlikely that we are in a recession,” said Jeffrey Frankel, a Harvard economist. “If I had to write that now, I would take out the ‘very.’”

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    Change in select recession indicators since February 2020
    Notes: Production and job data are through June. Income and spending are through May and are adjusted for inflation. Income data excludes government transfer payments. All figures are seasonally adjusted.Sources: Commerce Department, Labor Department and Federal Reserve, via FREDBy The New York TimesMr. Frankel served until 2019 on the Business Cycle Dating Committee of the National Bureau of Economic Research, the semiofficial arbiter of when recessions begin and end in the United States. The committee tries to be definitive, which means it typically waits as much as a year to declare that a recession has begun, long after most independent economists have reached that conclusion. In other words, even if we are already in a recession, we might not know it — or, at least, might not have official confirmation of it — until next year.In the meantime, economists agree that the risks of a recession are rising. The Federal Reserve is raising rates aggressively to try to tame inflation, which has already contributed to large declines in the stock market and a steep drop in home construction and sales. Higher borrowing costs are all but certain to lead to slower spending by consumers, reduced investment by businesses and, eventually, slower hiring and more layoffs — all hallmarks of an economic downturn.“Are we in a recession? We don’t think so yet. Are we going to be in one? It’s a high risk,” said Joel Prakken, chief U.S. economist for S&P Global Market Intelligence.But the U.S. economy still has important sources of strength. Unemployment is low, job growth is robust, and households, in the aggregate, have lots of money in savings and relatively little debt. “The narrative that the economy has slowed quite a bit and is showing signs of deterioration from higher inflation and higher interest rates, that narrative is solid,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “But when you look at factors like jobs, where we’re still creating three to four hundred thousand jobs a month, with an unemployment rate that has not begun to show signs of sustained increases, and the cushions of excess savings, healthy household balance sheets — these are things that go far in keeping the U.S. out of recession, or at least staving off recession for longer.”What is a recession?Americans feel terrible about the economy right now — worse, at least by some measures, than at the peak of the pandemic-related layoffs in spring of 2020. It’s easy to understand why: The climbing cost of food, fuel and other essentials is eroding living standards. Hourly earnings, adjusted for inflation, are falling at their fastest pace in decades.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Pandemic Recession Officially Lasted Only Two Months

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    The pandemic recession is officially over.In fact, it has been over for more than a year.The National Bureau of Economic Research, the semiofficial arbiter of U.S. business cycles, said Monday that the recession had ended in April 2020, after a mere two months. That makes it by far the shortest contraction on record — so short that by June 2020, when the bureau officially determined that a recession had begun, it had been over for two months. (The previous shortest recession on record, in 1980, lasted six months.)But while the 2020 recession was short, it was unusually severe. Employers cut 22 million jobs in March and April, and the unemployment rate hit 14.8 percent, the worst level since the Great Depression. Gross domestic product fell by more than 10 percent.The end of the recession doesn’t mean that the economy has healed. The United States has nearly seven million fewer jobs than before the pandemic, and while gross domestic product has most likely returned to its prepandemic level, thousands of businesses have failed, and millions of individuals are still struggling to get back on their feet.To economists, however, recessions aren’t simply periods of financial hardship. They are periods of economic contraction, as measured by employment, income, production and other indicators. Once growth resumes, the recession is over, no matter how deep a hole remains. The recession that accompanied the 2008 financial crisis, for example, ended in June 2009 — four months before the unemployment rate hit its peak, and years before many Americans began to experience a meaningful rebound.The unusual nature of the pandemic-induced economic collapse challenged the traditional concept of a “recession.” The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” Taken literally, the latest downturn fails that test — the recession lasted mere weeks. But the bureau’s Business Cycle Dating Committee decided that the contraction should count nonetheless.“The committee concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warranted the designation of this episode as a recession, even though the downturn was briefer than earlier contractions,” the committee said in a statement. More

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    The Recession Isn’t Over Till They Say It’s Over. (But Who Are They?)

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    The contraction in the U.S. seemed to end quickly in April 2020, but the committee charged with determining an endpoint has been quiet.One year ago, a committee of economists declared that the pandemic had officially caused the United States to fall into a recession. So is it over yet?It might seem a simple question — and yet the committee still doesn’t have an answer. That’s because it’s more of a head-scratcher than it might seem. And the issue raises some other weird questions, like: What is a recession?Let’s back up. America’s semiofficial arbiter of these things is a committee of the National Bureau of Economic Research, a private organization based in Cambridge, Mass. It’s called the Business Cycle Dating Committee, and it consists of eight esteemed academics who specialize in macroeconomics and business cycles.Their definition of a recession has been “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”Economists like those on the committee use the term recession to refer only to the period in which economic activity is contracting, not to the entire period of bad economic times. That’s why the previous recession was ruled to have technically ended in June 2009, even though the economy still felt terrible to people during the sluggish recovery that followed.Which brings us to the pandemic recession. There’s little argument that economic activity peaked in February 2020 and contracted in March 2020. The United States went through a period of rapidly collapsing economic activity with no modern precedent. Travel-related industries were most heavily affected, but sectors as varied as manufacturing, retail, construction and health care also took a hit.“Significant decline in economic activity.” Check. “Spread across the economy.” Check. Ah, but now consider “lasts more than a few months” — what about that?It now looks as if economic activity bottomed out sometime in April, maybe six weeks or so after the February peak. The committee says it weights two monthly data series particularly heavily: personal income excluding government transfers, and payroll employment. Both of these were higher in May than in April, providing evidence that April was the trough.That’s not to say that the economy was in very good shape for the remainder of 2020. The personal income measure surpassed its prepandemic level only last month, and employment is still well below prepandemic levels. But the direction of change has now been positive for more than a year.Robert Hall, the Stanford economist who chairs the committee, declined to comment Thursday on when a ruling on the recession end date might come. But let’s imagine that the end date winds up being April. If the economic peak of the previous expansion was February 2020 and the trough of the recession was April 2020, then it really lasted only two months. Or even less, if you believe the rebound actually started in mid-April.Two months are not “more than a few months.” The previous shortest recession on record was the one that began in January 1980 and lasted six months.In effect, the committee’s judgment is that even if the pandemic recession did not fit the usual definition of a recession, it still was one.In its own words: “In the case of the February 2020 peak in economic activity, we concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be quite brief.”Professor Hall declined to comment beyond that, saying that further elaboration on the jointly approved written comments would need to be approved by the committee.But it’s easy to imagine why the committee ended up with that conclusion. It would be awfully pedantic to refuse to classify an enormous economic contraction as a recession just because it didn’t fit a somewhat vague definition that a few economists had written down.“I think way back in March of 2020 there was a question of: ‘Should we call this a recession?’” said Tara Sinclair, an economist at George Washington University who studies business cycles. “Or if this is something that is going to last a few weeks, then the economy bounces right back, should it be treated as a recession or as the equivalent of a natural disaster?”Waiting to call an endpoint made sense, she said, as the committee was watching for evidence of a second wave of virus outbreak that might cause the economy to tumble again. In fact, a wave of infections in the fall dragged down employment numbers for a single month, but by most evidence it did not cause a broad or sustained contraction in economic activity.But “at this point, they are taking a particularly long time to call a particularly clear trough,” Professor Sinclair said.There’s one more wrinkle that shows how the pandemic recession is a weird one. Another common definition of recession, used especially widely outside the United States, is two straight quarters of contraction in G.D.P.Even though the actual economic contraction lasted only a few weeks in early 2020, it appears in the G.D.P. tables as having stretched over two quarters. The economy was shutting down in mid-March severely enough to cause the economy to shrink at a 5 percent annual rate in the first quarter that ended March 31.Then the continued collapse of the economy into early April meant that the second quarter, which began April 1, recorded a further 31 percent rate of shrinkage. If the pandemic had started at the beginning of a quarter rather than the end, the data would most likely have shown only a single quarter of declining G.D.P.The exact start date and end date aren’t of great importance, of course, unless you’re a chart maker focused on where the gray bars should go in an economic data visualization, or a politician looking for talking points on the campaign trail. What matters for people is how long and how severe the bad times turn out to be.But if nothing else, what appears likely to be the shortest recession on record shows just how odd the pandemic economy has really been. More