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    Only 17% of Workers Say Their Pay Has Matched Inflation

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    Wages are rising at their fastest pace in years, but prices are rising even faster.Americans have noticed.Only 17 percent of workers say they have received raises that kept up with inflation over the past year, according to a survey of 5,365 adults conducted last month for The New York Times by Momentive, the online research firm formerly known as SurveyMonkey. Most of the rest say either that they have received raises that lagged price increases or that they have received no raise at all; 8 percent of respondents said they had taken a pay cut.Nearly nine in 10 Americans say they are at least “somewhat concerned” about inflation, and six in 10 are “very concerned.” Worries about inflation cross generational, racial and even partisan lines: 95 percent of Republicans, 88 percent of independents and 82 percent of Democrats say they are concerned.Government data shows that wage gains are outpacing inflation in some corners of the economy, particularly the service sector, where competition for workers has driven rapid increases in pay. But in the aggregate, prices have risen faster than pay in recent months: The Consumer Price Index rose 6.8 percent in November, a nearly four-decade high; average hourly earnings rose 4.8 percent in November, and other measures likewise show pay gains lagging price increases.Worries about inflation are dragging down overall confidence in the economy, which is at the lowest level in the nearly five years Momentive has been conducting its survey. Republicans have been particularly pessimistic about the economy since President Biden took office a year ago, but in recent months, Democrats too have become more dour.“Pretty much the only group of people who say they’re better of now than they were a year ago are people who’ve gotten a pay raise that matches or beats inflation,” said Laura Wronski, a research scientist at Momentive.Despite their concerns, however, most Americans said inflation had not yet had a major effect on their finances — although low-income households reported having a harder time dealing with rising prices than other groups. And only 11 percent said they planned to ask for a raise if inflation continued. That could be comforting to officials at the Federal Reserve, who are watching warily for evidence of a “wage-price spiral,” in which rising prices lead workers to demand raises, leading employers to raise prices to pay for them.About the survey: Data in this article came from an online survey of 5,365 adults conducted by the polling firm Momentive from Dec. 14 to Dec. 19. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus two percentage points, so differences of less than that amount are statistically insignificant. More

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    What We Learned About the Economy in 2021

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    For once, the government tried overheating the economy. For better and worse, it succeeded.For people who study the vicissitudes of the economy, 2021 has been the most interesting year of the 2000s.It hasn’t been the most dramatic (that would be 2008 or 2020), and neither the best (2000 or 2019) nor the worst (2009). Rather, it has been a year in which economic dynamics that had seemed entrenched for decades came apart, or changed in fundamental ways. Workers attained the upper hand over employers; supply chains broke; inflation surged; and the economy rebuilt itself from its depressed pandemic levels with astounding speed.In contrast to the last economic cycle, the government tried overheating the economy for once. For better and worse, it succeeded.The unemployment rate, 6.7 percent in December 2020, fell to 4.2 percent 11 months later. That same shift took three and a half years in the last expansion, from March 2014 to September 2017.But the flip side has been soaring prices and many goods in short supply. Inflation has reached its highest levels in four decades. In surveys, Americans are remarkably unsatisfied with economic conditions. The growth numbers have been good. The vibes have been bad.These are the most important things to learn from a year in which the economic ground beneath our feet shifted.Yes, you can overheat the economyIn the early months of 2021, there was vigorous disagreement between people in the centrist and left-of-center economics worlds. Was the $1.9 trillion pandemic rescue plan the Biden administration enacted, on the heels of a $900 billion bipartisan package passed in the final weeks of the Trump administration, too big relative to the hole the economy was in?For example, in February the Congressional Budget Office projected that the 2021 output gap — the economy’s shortfall relative to its full potential — was only $360 billion. Even if you think the C.B.O. numbers are too cautious, estimates like that implied that the pandemic relief that passed a month later would send too much money coursing through the economy and result in inflation.That, anyway, was the interpretation by traditional models of how fiscal stimulus works. Defenders of the Biden approach emphasized, among other things, risk management — doing everything possible to get money into Americans’ hands, aggressively roll out vaccination, and get the economy back to its prepandemic path as quickly as possible.These views were shaped in large part by the experience of the last expansion. Fiscal austerity was a major reason for a painfully long slog out of the global financial crisis. After years, or arguably decades, in which the central crisis was an under-heated economy, the experience of 2021 is a reminder that overheating can cause its own discontents.What to Know About Inflation in the U.S.Inflation, Explained: What is inflation, why is it up and whom does it hurt? We answered some common questions.The Fed’s Pivot: Jerome Powell’s abrupt change of course moved the central bank into inflation-fighting mode.Fastest Inflation in Decades: The Consumer Price Index rose 6.8 percent in November from a year earlier, its sharpest increase since 1982.Why Washington Is Worried: Policymakers are acknowledging that price increases have been proving more persistent than expected.The Psychology of Inflation: Americans are flush with cash and jobs, but they also think the economy is awful.With demand for goods exceeding supply, especially for physical items, it is clear that the surging prices and other related problems (shortages and shadow inflation) are now America’s central economic problems. Economists will debate how much they are attributable to excess stimulus for years to come. But regardless of where one comes down on that question, the events of the last few quarters are a reminder that just because the risks of overheating were dormant for a long time doesn’t mean they’ve gone away.When supply chains get messed up, it is hard to un-mess themThe disruptions to supplies of all sorts of goods have their roots in the earliest weeks of the pandemic, when manufacturers the world over pulled back on production amid collapsing demand and a public health crisis.But things didn’t play out as in past recessions. Demand for physical goods surged in late 2020 and into 2021 — not like a typical recession in which demand for cars and other big-ticket items is depressed.That happened because consumers shifted their spending toward physical goods and away from services, and government support kept incomes stable, preventing a collapse in overall demand.The result: an economywide occurrence of the “bullwhip effect,” a phenomenon from the field of operations management in which small shifts in demand ripple through supply chains to cause wild swings.The complexity of modern global supply chains and the fact that this bullwhip effect has played out across countless industries has made it a fiendishly difficult problem to solve. The issue is not just a shortage of semiconductors, or shipping containers, or any other single item. It is shortages of all these things crashing together in ways that make the feeling of scarcity and shortages more intense.More power for workers doesn’t necessarily make workers happyThe tension between soaring demand and pandemic-limited supply showed up in the labor market in 2021 as well. The result was that workers were in command to a degree not seen in at least two decades.This showed up across multiple dimensions. Wages have been rising rapidly. Companies have been forced to be more creative, flexible and aggressive in attracting a work force. The rate of people quitting their jobs soared. After two decades in which employers were mostly able to have their pick of workers, the tables had turned.And people hated it.That’s an exaggeration, of course. The Great Resignation is real, and plenty of people have taken advantage of this moment to secure a better, more rewarding employment arrangement. But in the aggregate, people view the state of the economy as horrendous.In a Gallup poll in early December, 67 percent of adults said the economy was getting worse. Overall economic confidence matched its lowest levels from the early days of the pandemic and was lower than it was in the very weak economy of 2010 and 2011.Some of this is surely tied to the fact that prices are rising more quickly than average wages, which means an average worker’s purchasing power is declining. Wage gains have been highest, in percentage terms, in lower-paying industries. In effect, hourly workers have been securing raises, while middle-managers and white collar workers are, on average, losing significant ground.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Inflation Surged Again in October, With P.C.E. Index Climbing 5 Percent

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    A key measure of inflation showed consumer prices rising at the fastest pace in three decades, as energy prices and demand for goods and services soared, posing a challenge to both the White House and the Federal Reserve.Prices climbed by 5 percent in the 12 months through October, according to Personal Consumption Expenditures price index data released Wednesday. That was the fastest pace of increase since 1990.The gauge was lifted by a 30.2 percent annual increase in the price of energy and a 4.8 percent increase in the price of food. Prices rose 0.6 percent from September to October, as supply chain disruptions continued to clamp down on the availability of certain products and components.Inflation is increasing at its fastest pace in three decades.Personal Consumption Expenditures index, percent change from a year prior

    The Federal Reserve wants inflation to average 2 percent annually over time.Source: U.S. Bureau of Economic AnalysisBy The New York TimesThe increases were in line with what analysts had expected, but the rise in the Federal Reserve’s preferred inflation gauge will only add pressure on the central bank to take quicker action to maintain stable prices.Price increases have shown few signs of fading, as some officials in the Biden administration and at the Fed argued they would earlier this year. The central bank is facing growing calls to hasten plans to end their stimulative bond-buying program and to begin to raise interest rates, a process that could risk slowing job gains and economic growth.While inflation has soured consumer sentiment and weighed on Mr. Biden’s approval ratings, those price increases have been spurred in part by a strong economic recovery. Separate data released by the Labor Department on Wednesday found that initial jobless claims dropped to their lowest point since 1969, falling by 71,000 to 199,000 last week.Mr. Biden hailed the drop in unemployment claims on Wednesday but conceded that the country was still far from a full recovery and that it had to address rising inflation.“We have more work to do before our economy is back to normal, including addressing prices increases that hurt Americans’ pocketbooks and undermine gains in wages and disposable income,” Mr. Biden said in a statement on Wednesday.In an attempt to drive down gas prices, the United States and five other world powers announced a coordinated effort on Tuesday to tap into their national oil stockpiles. Mr. Biden has ordered the Energy Department to release 50 million barrels of crude in the Strategic Petroleum Reserve, lower than what traders had expected from the emergency stockpile, which is the biggest in the world with 620 million barrels.Consumers have grown increasingly concerned about the spike in prices. A survey from the University of Michigan released on Wednesday found that consumers expressed less optimism in November than at any other time in the past decade about prospects for their finances and the overall growth of the economy. The decline in consumer sentiment was a result of the rapid increase in inflation and the lack of federal policies that would address the damage to household budgets, according to the report. More

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    Inflation Drives Sharp Downturn in Consumer Sentiment

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    Americans have turned decidedly gloomy about their financial outlook, and inflation is the main cause of the anxiety, according to a survey released Friday.The University of Michigan reported that its survey of consumer sentiment fell to its lowest level in a decade in early November. It attributed the decline to “the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation.”Hampered by supply chain disruptions and labor shortages in some industries, the economy has been straining under rising prices. The government this week reported the steepest inflation in 31 years, with a 6.2 percent increase in prices in October from a year earlier.In the Michigan survey, “rising prices for homes, vehicles and durables were reported more frequently than any other time in more than half a century.” But inflation is hardly limited to big-ticket purchases — food items like meat are getting more expensive, driving up the cost of preparing Thanksgiving meals.Many policymakers have assumed that higher inflation would be transitory, a result of the uneven reopening of the economy after widespread shutdowns because of the coronavirus pandemic.Investors, too, have shrugged off the threat of inflation, even though it can erode the value of financial assets. Bond yields, which move higher in times of inflation, remain low by historical standards. And the stock market is near record highs, despite the uptick in prices lately.But the Michigan survey is a sign that consumers are beginning to feel pinched. The survey reflected a downturn in assessments of both current conditions and economic prospects.“Consumers are angry about inflation,” said Diane Swonk, chief economist at the accounting firm Grant Thornton in Chicago.“Inflation will get worse before it gets better,” Ms. Swonk said. “It could moderate by the spring of 2022, and it does affect how people feel about the economy.”But consumers in the United States continue to spend at robust levels, she said, and the odds look good for a robust holiday shopping season. More

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    Persistent Inflation Threatens Biden's Agenda

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    Supply chain disruptions, a worker shortage and pain at the gasoline pump have made inflation an economic and political problem for the White House.WASHINGTON — At least once a week, a team of President Biden’s top advisers meet on Zoom to address the nation’s supply chain crisis. They discuss ways to relieve backlogs at America’s ports, ramp up semiconductor production for struggling automakers and swell the ranks of America’s truck drivers.The conversations are aimed at one goal: taming accelerating price increases that are hurting the economic recovery, unsettling American consumers and denting Mr. Biden’s popularity.An inflation surge is presenting a fresh challenge for Mr. Biden, who for months insisted that rising prices were a temporary hangover from the pandemic recession and would quickly recede. Instead, the president and his aides are now bracing for high inflation to persist into next year, with Americans continuing to see faster — and sustained — increases in prices for food, gasoline and other consumer goods than at any point this century.That reality has complicated Mr. Biden’s push for sweeping legislation to boost workers, expand access to education and fight poverty and climate change. And it is dragging on the president’s approval ratings, which could threaten Democrats’ already tenuous hold on Congress in the 2022 midterm elections.Recent polls shows Americans’ concerns over inflation are eroding their economic confidence and dimming their view of Mr. Biden’s performance. National surveys by CNBC and Fox News show a sharp decline in voter ratings of Mr. Biden’s overall performance and his handling of the economy, even though unemployment has fallen quickly on his watch and economic output has strengthened to its fastest rate since Ronald Reagan was president. Voter worry over price increases has jumped in the last month.Administration officials have responded by framing Mr. Biden’s push for what would be his signature spending bill as an effort to reduce costs that American families face, citing provisions to cap child care costs and expand subsidies for higher education, among other plans. And they have mobilized staff to scour options for unclogging supply chains, bringing more people back into the work force, and reducing food and gasoline costs by promoting more competition in the economy via executive actions.“There are distinct challenges from turning the economy back on after the pandemic that we are bringing together state and local officials, the private sector and labor to address — so that prices decrease,” Kate Berner, the White House deputy communications director, said in an interview.Mr. Biden’s top officials stress that the administration’s policies have helped accelerate America’s economic rebound. Workers are commanding their largest wage gains in two decades. Growth roared back in the first half of the year, fueled by the $1.9 trillion economic aid bill the president signed in March. America’s expansion continues to outpace other wealthy nations around the world.Inflation and shortages are the downside of that equation. Car prices are elevated as a result of strong demand and a lack of semiconductors. Gasoline has hit its highest cost per gallon in seven years. A shift in consumer preferences and a pandemic crimp in supply chains have delayed shipments of furniture, household appliances and other consumer goods. Millions of Americans, having saved up money from government support through the pandemic, are waiting to return to jobs, driving up labor costs for companies and food prices in many restaurants.Much of that is beyond Mr. Biden’s control. Inflation has risen in wealthy nations across the globe, as the pandemic has hobbled the movement of goods and component parts between countries. Virus-wary consumers have shifted their spending toward goods rather than services, travel and tourism remain depressed, and energy prices have risen as demand for fuel and electricity has surged amid the resumption of business activity and some weather shocks linked to climate change.But some economists, including veterans of previous Democratic administrations, say much of Mr. Biden’s inflation struggle is self-inflicted. Lawrence H. Summers is one of those who say the stimulus bill the president signed in March gave too much of a boost to consumer spending, at a time when the supply-chain disruptions have made it hard for Americans to get their hands on the things they want to buy. Mr. Summers, who served in the Obama and Clinton administrations, says inflation now risks spiraling out of control and other Democratic economists agree there are risks.“The original sin was an oversized American Rescue Plan. It contributed to both higher output but also higher prices,” said Jason Furman, a Harvard economist who chaired the White House Council of Economic Advisers under President Barack Obama.That has some important Democrats worried about price-related drawbacks from the president’s ambitious spending package, complicating Mr. Biden’s approach.President Biden has struggled to tell voters what he can do right away to counter several high-profile price spikes, like gasoline.An Rong Xu for The New York TimesSenator Joe Manchin III of West Virginia, a centrist, has repeatedly cited surging inflation in insisting that Mr. Biden scale back what had been a $3.5 trillion effort to expand the social safety net.Mr. Biden has tried to make the case that the investments in his spending bill will moderate price increases over time. But he has struggled to identify things he can do right away to ease the pain of high-profile price spikes, like gasoline. Some in his administration have pushed for mobilizing the National Guard to help unclog ports that are stacked with imports waiting to be delivered to consumers around the country. Mr. Biden has raised the possibility of tapping the strategic petroleum reserve to modestly boost oil supplies, or of negotiating with oil producers in the Middle East to ramp up.During a CNN town hall last week, Mr. Biden conceded the limits of his power, saying, “I don’t have a near-term answer” for bringing down gas prices, which he does not expect to begin dropping until next year.“I don’t see anything that’s going to happen in the meantime that’s going to significantly reduce gas prices,” he said.Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More

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    How Should the Fed Deal With Climate Change?

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    When the economy hits hard times, survey data shows, people are less likely to worry about the environment.The climate crisis is at high risk of becoming an economic crisis.That is an increasingly widespread view among leading economic thinkers — that a range of economic and financial problems could result from a warming planet and humanity’s efforts to deal with it. But if you believe that to be true, what should the United States’ economist-in-chief do about it?That question has taken new urgency as President Biden weighs whether to reappoint Jerome Powell to another term leading the Federal Reserve or choose someone else.Climate activists and others on the left have argued that Mr. Powell should be replaced by someone with stronger credentials as a climate hawk. Demonstrators backing this cause were planning to protest at an annual Fed symposium in Jackson Hole, Wyo., starting Thursday, but the event was made online-only at the last minute because of a rise in coronavirus cases. Among other things, they want the Fed to use its regulatory powers to throttle the flow of bank lending to carbon-producing industries.At the same time, some Republicans are assailing the Fed for mere research efforts involving climate. It is clear there would be a huge outcry on the right if a new Fed chair were to take an activist stance in trying to limit the availability of capital in energy-extraction businesses.So far, Mr. Powell and other leaders at the central bank have taken a middle ground. They’ve committed to studying the ways global warming will affect the economy and the financial system, and they’re factoring those conclusions into their usual jobs of guiding the economy and regulating banks — but not trying to manage how loans and resources are allocated.Arguably, one of the more important things the Fed can do to help fight climate change is to excel at its primary job: maintaining a stable, strong economy. Consider some surprising public opinion data.Since 1989, Gallup has polled Americans about whether climate change worried then personally. The net share of people who have expressed concern — those who have said they worry about climate “a fair amount” or “great deal” versus those who have worried “only a little” or “not at all” — offers a sense of how seriously Americans take the threat.The net share of people worried about climate change reached its peak not in recent years, when the damaging effects have become more visible. The peak was in April 2000, when the share of people worried about the climate was 45 percentage points higher than the share not worried. That was also one of the best months for the U.S. economy in decades, near the peak of the late 1990s boom, with unemployment a mere 3.8 percent.Two of the times when climate worry in the survey hit a low were in 2010 and 2011, in the aftermath of the global financial crisis, when the net shares of those worried versus not worried were only four and three percentage points.Using a broader range of evidence from both the United States and Europe, two political scientists at the University of Connecticut, Lyle Scruggs and Salil Benegal, found that a decline in climate concern in that period was driven significantly by worse economic conditions, which increased worry about more immediate issues. In times of scarcity, people tend to think less of policies with long-term payoffs.“The state of the economy affects people’s sensitivity to the future versus the present,” Professor Scruggs said. “Historically climate change has fallen into the same camp as a lot of other environmental issues, where people’s answers tend to wax and wane with the economy.”If a central bank can achieve consistent prosperity, this research suggests, it may change some political dynamics on aggressive climate action. Prosperity could support branches of government that have more explicit responsibility for curtailing greenhouse gases, building out clean energy capacity, or helping communities adapt to more extreme weather.Not everyone who studies public opinion on climate agrees.Anthony Leiserowitz, director of the Yale Program on Climate Change Communication, attributes the decline in concern about climate change in the early 2010s not to the weak economy, but to widening political polarization and a pivot of conservative media toward climate change denialism.“What we saw was a symbiotic relationship between conservative media, conservative elected officials and the conservative public,” he said. “That drove the shift. It wasn’t the economy.”A paper published this summer by Michael T. Kiley, a Fed staff member, analyzed how temperature variations affect economic performance. It concluded that climate change may not change the typical rate of growth in the economy over time, but could make severe recessions more common. A major crop failure, for example, would lower G.D.P. directly and could simultaneously create economic ripple effects such as bank failures.And Lael Brainard, a Fed governor and potential Biden appointee to become the next chair, has emphasized that the unpredictable nature of climate change could make obsolete the historical models on which economic policy is based.“Unlike episodic or transitory shocks, climate change is an ongoing, cumulative process, which is expected to produce a series of shocks,” she said in a March speech. “Over time, these shocks can change the statistical time-series properties of economic variables, making forecasting based on historical experience more difficult and less reliable.”If Ms. Brainard is correct, it raises a dispiriting possibility: As the planet gets hotter, it could make it harder to keep the economy on an even keel. But the worse the economy performs, the more toxic and dysfunctional climate politics may become. More

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    Survey Finds Support for Halting Federal Unemployment Benefits

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    A slim majority of Americans say it is time for enhanced unemployment benefits to end.The federal government is providing jobless workers with $300 a week in benefits on top of their regular unemployment payments. Those benefits are set to last until September, although 26 states — all but one led by Republicans — have cut them off early or plan to do so in coming weeks.Critics, including many business owners and Republican politicians, argue that the extra benefits are discouraging people from looking for jobs and making it hard for businesses to find workers. Proponents, including progressive groups and many Democratic politicians, contend that the benefits are needed as the economy continues to heal and while pandemic-related risks remain.Republican arguments seem to be resonating with the public. Just over half of Americans — 52 percent — want the extra benefits to end immediately, according to a survey of 2,600 adults conducted this month for The New York Times by the online research firm Momentive, which was previously known as SurveyMonkey. Another 30 percent want the benefits to end in September as planned. Only 16 percent want the additional benefits to continue indefinitely.Views on the benefits are divided along partisan lines. Of Republicans, 80 percent want the extra benefits to end right away, compared with 27 percent of Democrats. But even among Democrats, most respondents don’t want the benefits to last past September.The survey also asked respondents who weren’t working what was keeping them off the job. Thirty-three percent said they were looking for jobs but “have not been able to find one that is worth taking,” and another 11 percent said they did not feel safe returning to work. Respondents volunteered a range of other explanations, including:“I don’t want to wear a mask and I don’t plan to be vaccinated.”“I am just recently fully vaccinated and will begin driving for Lyft again next week.”“Child care and no luck on job search.”“Age. Companies look at my age and pass.”“Car broke down and no money to fix it.”The survey included 65 respondents who said they were currently receiving unemployment benefits. Asked how they would behave if their benefits were cut off, 17 said they would still not return to work. Most of the rest said they would take a job that paid less than they wanted, made them feel unsafe or offered poor hours or working conditions.As of early June, some 3.5 million people were receiving benefits in states that plan to end some or all of the emergency programs early. A handful of states, including Alabama, Indiana and Missouri, have already cut off extra payments; more than 700,000 people were receiving benefits in those states as of early June. More

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    Looking for Bipartisan Accord? Just Ask About Big Business.

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    In surveys and political discourse, Republicans are increasingly critical of corporations, but not for the reasons Democrats have long held that view.Republicans in Washington and around the country have soured on big business, joining Democrats in expressing concern that corporations wield too much influence. The shift has left corporate America with fewer allies in a tumultuous period for American society and the global economy. More