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U.S. Job Growth Slowed in August
The monthly employment report suggested that the Federal Reserve might be able to tame inflation without causing a recession.Monthly change in jobs More
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Portugal Could Hold an Answer for a Europe Captive to Russian Gas
Portugal has no coal mines, oil wells or gas fields. Its impressive hydropower production has been crippled this year by drought. And its long-running disconnect from the rest of Europe’s energy network has earned the country its status as an “energy island.”Yet with Russia withholding natural gas from countries opposed to its invasion of Ukraine, the tiny coastal nation of Portugal is suddenly poised to play a critical role in managing Europe’s looming energy crisis.For years, the Iberian Peninsula was cut off from the web of pipelines and huge supply of cheap Russian gas that power much of Europe. And so Portugal and Spain were compelled to invest heavily in renewable sources of energy like wind, solar and hydropower, and to establish an elaborate system for importing gas from North and West Africa, the United States, and elsewhere.Now, access to these alternate energy sources has taken on new significance. The changed circumstances are shifting the power balances among the 27 members of the European Union, creating opportunities as well as political tensions as the bloc seeks to counter Russia’s energy blackmail, manage the transition to renewables and determine infrastructure investments.The Alto Tamega dam, part of a hydropower facility in northern Portugal that will be operational in 2024.Matilde Viegas for The New York TimesThe urgency of Europe’s task is on display this week. On Wednesday, Russia’s energy monopoly, Gazprom, again suspended already reduced gas deliveries to Germany through its Nord Stream 1 pipeline. With natural gas costing about 10 times what it did a year ago, the European Union has called for an emergency meeting of its energy ministers next week.As Brussels tries to figure out how to manage the crisis, the possibility of funneling more gas to Europe through Portugal and Spain is gaining attention.Portugal and Spain were among the first European nations to build the kind of processing terminals needed to accept boatloads of natural gas in liquefied form and to convert it back into the vapor that could be piped into homes and businesses.This imported liquefied natural gas, or L.N.G., was more expensive than the type much of Europe piped in from Russia. But now that Germany, Italy, Finland and other European nations are frantically seeking to replace Russian gas with substitutes shipped by sea from the United States, North Africa and the Middle East, this disadvantage is an advantage.Solar panels in Sintra. Connecting such panels to Europe’s electricity grid could help ease energy shortages on the continent.Matilde Viegas for The New York TimesTogether, Spain and Portugal account for one-third of Europe’s capacity to process L.N.G. Spain has the most terminals and the biggest, though Portugal has the most strategically located.Its terminal in Sines is the closest of any in Europe to the United States and the Panama Canal; it was the first port in Europe to receive L.N.G. from the United States, in 2016. Even before the war in Ukraine, Washington identified it as a strategically important gateway for energy imports to the rest of Europe.Spain also has an extensive network of pipelines that carry natural gas from Algeria and Nigeria, as well as large storage facilities.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More
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California Senate Passes Bill to Regulate Fast-Food Industry
If signed by Gov. Gavin Newsom, the measure would create a state council to establish minimum pay and safety conditions on an industrywide basis.The California State Senate passed a bill on Monday that could transform the way the service sector is regulated by creating a council to set wages and improve working conditions for fast-food workers.The measure, known as A.B. 257, passed by a vote of 21 to 12. The State Assembly had already approved a version of the measure, and it now requires the approval of Gov. Gavin Newsom, who has not indicated whether he will sign it. The bill was vehemently opposed by the fast-food industry.The bill could herald an important step toward sectoral bargaining, in which workers and employers negotiate compensation and working conditions on an industrywide basis, as opposed to enterprise bargaining, in which workers negotiate with individual companies at individual locations.“In my view, it’s one of the most significant pieces of state employment legislation that’s passed in a long time,” said Kate Andrias, a labor law expert at Columbia University. “It gives workers a formal seat at the table with employers to set standards across the industry that’s not limited to setting minimum wages.”While sectoral bargaining is common in Europe, it is rare in the United States, though certain industries, like auto manufacturing, have arrangements that approximate it. The California bill wouldn’t bring true sectoral bargaining — which involves workers negotiating directly with employers, instead of a government entity setting broad standards — but incorporates crucial elements of the model.The bill would set up a 10-member council that would include worker and employer representatives and two state officials, and that would review pay and safety standards across the restaurant industry.The council could issue health, safety and anti-discrimination regulations and set an industrywide minimum wage. The legislation caps the figure at $22 an hour next year, when the statewide minimum wage will be $15.50. The bill also requires annual cost-of-living adjustments for any new wage floor beginning in 2024.Restaurant chains with at least 100 locations nationwide would come under the council’s jurisdiction — including companies like Starbucks that own and operate their stores as well as franchisees of large companies like McDonald’s. Hundreds of thousands of workers in the state would be affected.The council would shut down after six years but could be reconvened by the Legislature.Mary Kay Henry, the president of the nearly two-million-member Service Employees International Union, which pushed for the legislation, said it was critical because of the challenges that workers have faced when trying to change policies by unionizing store by store.“The stores get closed or the franchise owner sells or the multinational pulls the lease for the real estate,” Ms. Henry said. Franchise industry officials say it is extremely rare to close a store in response to a union campaign. Starbucks recently closed several corporate-owned stores across the country where workers had unionized or were trying to unionize, citing safety concerns like crime, though the company also closed a number of nonunion stores for the same stated reasons. Industry officials argue that the bill will raise labor costs, and therefore menu prices, when inflation is already a widespread concern. A recent report by the Center for Economic Forecasting and Development at the University of California, Riverside, estimated that employers would pass along about one-third of any increase in labor compensation to consumers.“We are pulling the fire alarm in all states to wake our members up about what’s going on in California,” said Matthew Haller, the president of the International Franchise Association, an industry group that opposes the bill. “We are concerned about other states — the multiplier effect of something like this.”Ingrid Vilorio, who works at a Jack in the Box franchise near Oakland, Calif., and who pressed legislators to back the bill during several trips to Sacramento, the state capital, said she believed the measure would lead to improvements in safety — for example, through rules that require employers to quickly repair or replace broken equipment like grills and fryers, which can cause burns.Ms. Vilorio said she also hoped the council would crack down on problems like sexual harassment, wage theft and denial of paid sick leave. She said she and her co-workers went on strike last year to demand masks, hand sanitizer and the Covid-19 sick pay they were entitled to receive. Jack in the Box did not respond to a request for comment.Mr. Haller said state agencies were already authorized to crack down on employers who violate laws governing the payment of wages, safety, discrimination and harassment.“The state has the existing tools at its disposal,” Mr. Haller said. “They should be more fully funded rather than put a punitive target on a subsection of a sector.”Mr. Haller and other opponents have cited a critique by the state’s Department of Finance arguing that the bill “could lead to a fragmented regulatory and legal environment for employers” and “exacerbate existing delays” in enforcement by increasing the burden on agencies that oversee existing rules. The bill does not provide additional funding for enforcement agencies.David Weil, who under President Barack Obama oversaw the agency that enforces the federal minimum wage, said that, while funding is critical for labor regulators, the new council could benefit a broad swath of workers even without additional funding. For example, he said, raising the minimum wage for fast-food workers could increase wages for workers in other sectors, like retail, that compete with fast-food restaurants for labor.But Dr. Weil agreed that creating new standards in the fast-food industry could end up drawing resources away from the enforcement of labor and employment laws in other industries where workers may be equally vulnerable.Opponents managed to secure a number of concessions in the State Senate, such as preventing the council from creating sick-leave or paid-time-off benefits, or rules that restrict scheduling.The Senate also eliminated a so-called joint liability provision, which would have allowed regulators to hold parent companies like McDonald’s liable for violations by franchise owners. More
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Biden’s Big Dreams Meet the Limits of ‘Imperfect’ Tools
The student loan plan is the latest example of Democrats practicing the art of the possible on the nation’s most pressing economic challenges and ending up with risky or patchwork solutions.WASHINGTON — President Biden’s move this week to cancel student loan debt for tens of millions of borrowers and reduce future loan payments for millions more comes with a huge catch, economists warn: It does almost nothing to limit the skyrocketing cost of college and could very well fuel even faster tuition increases in the future.That downside is a direct consequence of Mr. Biden’s decision to use executive action to erase some or all student debt for individuals earning $125,000 a year or less, after failing to push debt forgiveness through Congress. Experts warn that schools could easily game the new structure Mr. Biden has created for higher education financing, cranking up prices and encouraging students to load up on debt with the expectation that it will never need to be paid in full.It is the latest example, along with energy and health care, of Democrats in Washington seeking to address the nation’s most pressing economic challenges by practicing the art of the possible — and ending up with imperfect solutions.There are practical political limits to what Mr. Biden and his party can accomplish in Washington.Democrats have razor-thin margins in the House and Senate. Their ranks include liberals who favor wholesale overhaul of sectors like energy and education and centrists who prefer more modest changes, if any. Republicans have opposed nearly all of Mr. Biden’s attempts, along with those of President Barack Obama starting more than a decade ago, to expand the reach of government into the economy. The Supreme Court’s conservative majority has sought to curb what it sees as executive branch overreach on issues like climate change.As a result, much of the structure of key markets, like college and health insurance, remains intact. Mr. Biden has scored victories on climate, health care and now — pending possible legal challenges — student debt, often by pushing the boundaries of executive authority. Even progressives calling on him to do more agree he could not impose European-style government control over the higher education or health care systems without the help of Congress.The president has dropped entire sections of his policy agenda as he sought paths to compromise. He has been left to leverage what appears to be the most powerful tool currently available to Democrats in a polarized nation — the spending power of the federal government — as they seek to tackle the challenges of rising temperatures and impeded access to higher education and health care.Arindrajit Dube, an economist at the University of Massachusetts Amherst who consulted with Mr. Biden’s aides on the student loan issue and supported his announcement this week, said in an interview that the debt cancellation plans were necessarily incomplete because Mr. Biden’s executive authority could reach only so far into the higher education system.“This is an imperfect tool,” Mr. Dube said, “that is however one that is at the president’s disposal, and he is using it.”But because the policies pursued by Mr. Biden and his party do comparatively little to affect the prices consumers pay in some parts of those markets, many experts warn, they risk raising costs to taxpayers and, in some cases, hurting some consumers they are trying to help.Mr. Biden’s plan would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 for Pell grant recipients.Cheriss May for The New York Times“You’ve done nothing that changes the structure of education” with Mr. Biden’s student loan moves, said R. Glenn Hubbard, a Columbia University economist who was the chairman of the White House Council of Economic Advisers under President George W. Bush. “All you’re going to do is raise the price.”Mr. Hubbard said Mr. Biden’s team had made similar missteps on energy, health care, climate and more. “I understand the politics, so I’m not making a naïve comment here,” Mr. Hubbard said. “But fixing through subsidies doesn’t get you there — or it gets you such market distortions, you really ought to worry.”Mr. Biden said on Wednesday that his administration would forgive up to $10,000 in student debt for individual borrowers earning $125,000 a year or less and households earning up to $250,000, with another $10,000 in relief for people from low-income families who received Pell grants in school.What’s in the Inflation Reduction ActCard 1 of 8What’s in the Inflation Reduction ActA substantive legislation. More
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Fed Chair Signals More Rate Increases Ahead, Shaking Wall Street
JACKSON, Wyo. — Jerome H. Powell, the chair of the Federal Reserve, delivered a sobering message on Friday, saying the Fed must continue to raise interest rates — and keep them elevated for a while — to bring the fastest inflation in decades back under control.The central bank’s campaign is likely to come at a cost to workers and overall growth, he acknowledged; but he argued that not acting would allow price increases to become a more permanent feature of the economy and prove even more painful down the road.Stock prices plunged in the wake of Mr. Powell’s comments, as investors digested his stern commitment to raising rates and choking back inflation even if doing so damages growth and causes unemployment to rise. The S&P 500 fell 3.4 percent, its worst daily showing since mid-June, and investors in bonds began to bet that the central bank will raise rates by more than they had been expecting.Mr. Powell’s full-throated commitment to defeating inflation began to put to rest an idea that had been percolating among investors: that the central bank might lift rates slightly more this year but then begin to lower them again next year. Instead, the Fed chair echoed many of his colleagues in arguing that rates will need to go higher, and will need to stay in economy-restricting territory for a while, until inflation is consistently coming down.“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,” Mr. Powell said in a speech on Friday. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”He then added: “These are the unfortunate costs of reducing inflation.”Mr. Powell was speaking at the Federal Reserve Bank of Kansas City’s annual conference near Jackson, Wyo., in a speech that is typically his most closely watched appearance of the year. That prominent platform gave him an opportunity to clearly signal the Fed’s commitment to wrestle inflation lower to markets and the public, which he did in his terse and to-the-point eight-minute speech.“The process won’t be painless, and I think he’s being more upfront about that,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research. “The likelihood of recession is rising, because that’s the solution to the inflation problem — that’s what they’re telling you.”While central bankers have spent much of the past year saying they hope to set the economy down gently — and not tip it into recession — Mr. Powell’s remarks made it clear that a bumpy landing would be a price worth paying to return price stability to the United States.The Fed has lifted interest rates from near zero in March to a range of 2.25 to 2.5 percent, and investors have been waiting for any hint at how fast and far the Fed will raise rates in coming months. Higher interest rates make it more expensive to borrow money to build a house or expand a business, slowing economic activity and cooling down the job market. That can eventually help reduce demand enough that supply catches up and price increases slow down.Mr. Powell did not say what pace lies ahead, suggesting that Fed officials will watch incoming data as they decide whether to make a third straight “unusually” large three-quarter-point rate increase at their Sept. 20-21 meeting. He reiterated that the Fed was likely to slow its increases “at some point,” but he also said central bankers had more work to do when it came to constraining the economy and bringing inflation back under control.Inflation F.A.Q.Card 1 of 5Inflation F.A.Q.What is inflation? More
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U.S. income growth slowed in July, and consumer spending barely grew.
Americans’ incomes rose more slowly last month — but, for once, those gains weren’t swallowed up by higher prices.Personal income, after taxes, rose 0.2 percent in July, the Commerce Department said Friday. That was slower than the 0.7 percent gain in June. But while the gains in June were more than offset by sharply higher prices, in July, Americans saw their inflation-adjusted incomes rise 0.3 percent as lower gas prices led to a respite from inflation.Consumer spending also cooled in July, as Americans pulled back on purchases of goods. Overall consumer spending rose 0.1 percent, the weakest showing since a decline in December and down from a 1 percent gain in June. Spending on services, which has rebounded sharply as the pandemic has ebbed, continued to rise, but more slowly than in prior months.The moderation in spending could be welcome news for policymakers at the Federal Reserve, who have been trying to tamp down demand without pushing the recovery into reverse.Income and spending, adjusted for inflation, are also among the indicators that economists at the National Bureau of Economic Research use to determine when a recession has begun. The gains in July are the latest evidence that the economy, though slowing, is not in a recession.Economists warn that the reprieve from inflation may prove temporary. But they say households should be able to keep spending as long as employers keep hiring and pay keeps rising. Income from wages and salaries rose 0.8 percent in July, the biggest gain since February. The Labor Department will provide data on employment and wages for August at the end of next week.Diane Swonk, chief economist at the accounting firm KPMG, said the underlying strength of the consumer economy reflected a handoff from the government, which helped support households and businesses with record spending earlier in the pandemic, to the private sector, which has roared back over the past year and a half.“We have seen the private sector really pick up that baton, which has been amazing,” she said. More
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Biden Student Loan Plan Squarely Targets Middle Class
President Biden is offering what independent analysts suggest would be his most targeted assistance yet to middle-class workers — while trying to repair what he casts as a broken bridge to the middle class.WASHINGTON — The big winners from President Biden’s plan to forgive hundreds of billions of dollars in student loans are not rich graduates of Harvard and Yale, as many critics claim.In fact, the benefits of Mr. Biden’s proposals will largely go to the middle class. According to independent analyses, the people eligible for debt relief are disproportionately young and Black. And they are concentrated in the middle band of Americans by income, defined as households earning between $51,000 and $82,000 a year.The Education Department estimates that nearly 90 percent of affected borrowers earn $75,000 a year or less. Ivy League graduates make up less than 1 percent of federal student borrowers nationwide.Economists say the full scope of Mr. Biden’s plan, including significant changes meant to reduce the payments that millions of borrowers will make for years to come, will help middle-income earners from a wide range of schools and backgrounds.“You’ll have a lot more people who are making zero payments and will have significant loan forgiveness in the future,” said Constantine Yannelis, an economist at the University of Chicago’s Booth School of Business. “The relief to borrowers is going to be more targeted to the people who really need it.”Yet despite the appeal of such debt relief, the program still has set off a contentious debate as economists and political figures assess the full consequences of the plan. By some estimates, it will cost as much as a half-trillion dollars over the course of a decade, imposing a future burden on American taxpayers.The plan also could encourage colleges to raise tuition even faster than they already are. Schools could try to persuade borrowers to take on as much debt as possible to cover higher tuition, with the belief that the federal government would help pay it back.Some conservative and Democratic economists also say the program could add significantly to what is already the highest inflation rate in four decades. Evidence suggests those claims are overstated, however, and American shoppers are not likely to see prices spike because of the program.The announcements Mr. Biden made, including both debt forgiveness and a restart next year of loan payments for all borrowers after a nearly three-year pause, will most likely be a wash for consumer prices, a wide range of economists say.“Debt forgiveness that lowers monthly payments is slightly inflationary in isolation,” analysts from Goldman Sachs wrote in a research note on Thursday, “but the resumption of payments is likely to more than offset this.”What to Know About Student Loan Debt ReliefCard 1 of 5What to Know About Student Loan Debt ReliefMany will benefit. More
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Pace of Climate Change Sends Economists Back to Drawing Board
Economists have been examining the impact of climate change for almost as long as it’s been known to science.In the 1970s, the Yale economist William Nordhaus began constructing a model meant to gauge the effect of warming on economic growth. The work, first published in 1992, gave rise to a field of scholarship assessing the cost to society of each ton of emitted carbon offset by the benefits of cheap power — and thus how much it was worth paying to avert it.Dr. Nordhaus became a leading voice for a nationwide carbon tax that would discourage the use of fossil fuels and propel a transition toward more sustainable forms of energy. It remained the preferred choice of economists and business interests for decades. And in 2018, Dr. Nordhaus was honored with the Nobel Memorial Prize in Economic Sciences.But as President Biden signed the Inflation Reduction Act with its $392 billion in climate-related subsidies, one thing became very clear: The nation’s biggest initiative to address climate change is built on a different foundation from the one Dr. Nordhaus proposed.Rather than imposing a tax, the legislation offers tax credits, loans and grants — technology-specific carrots that have historically been seen as less efficient than the stick of penalizing carbon emissions more broadly.The outcome reflects a larger trend in public policy, one that is prompting economists to ponder why the profession was so focused on a solution that ultimately went nowhere in Congress — and how economists could be more useful as the damage from extreme weather mounts.A central shift in thinking, many say, is that climate change has moved faster than foreseen, and in less predictable ways, raising the urgency of government intervention. In addition, technologies like solar panels and batteries are cheap and abundant enough to enable a fuller shift away from fossil fuels, rather than slightly decreasing their use.Robert Kopp, a climate scientist at Rutgers University, worked on developing carbon pricing methods at the Department of Energy. He thinks the relentless focus on prices, with little attention paid to direct investments, lasted too long.“There was an idealization and simplification of the problem that started in the economics literature,” Dr. Kopp said. “And things that start out in the economics literature have half-lives in the applied policy world that are longer than the time period during which they’re the frontier of the field.”Carbon taxes and emissions trading systems have been instituted in many places, such as Denmark and California. But a federal measure in the United States, setting a cap on carbon emissions and letting companies trade their allotments, failed in 2010.What’s in the Inflation Reduction ActCard 1 of 8What’s in the Inflation Reduction ActA substantive legislation. More
