Prices (Fares, Fees and Rates)

More stories

  • 100 Shares159 Views

    in Economy

    Could Wages and Prices Spiral Upward in America?

    by

    A labor shortage that began as businesses reopened from pandemic lockdowns is helping to push up pay. The Fed is watching carefully.Amazon, Bank of America and Chipotle are among a spate of companies raising wages this year as they compete for workers in a labor market with more open positions than unemployed job seekers.But that positive development for workers could morph into a challenge for the Federal Reserve if climbing wages help to keep inflation high, prompting employees to ask for even more money and generating an upward spiral.So far, many economists think such a situation can be kept at bay. But the Fed is closely monitoring inflation and pay data to assess the risk, because the consequences if wages and prices begin to drive each other steadily higher could be serious, requiring a response from the central bank that could be economically painful.The Fed is already poised to raise interest rates in March in an attempt to begin cooling off the economy as inflation runs at its fastest pace in 40 years. But if it needed to restrain a self-perpetuating burst in wages and prices, officials might decide to adjust policy more drastically. Higher interest rates could abruptly hit the brakes on lending and spending, potentially sending the United States into recession and foiling central bankers’ hopes of guiding growth gently toward a more sustainable path.“I think we’re much more likely to have something messier than a magical soft landing,” said Olivier Blanchard, an economist at the Peterson Institute for International Economics. “The wage evolutions are going to be the thing to look at.”Wages are already rising sharply. Pay for restaurant servers and hotel workers began to increase notably in 2021 as companies, reopening after lockdown, struggled to rehire people quickly. Now a wide array of industries are giving raises: The government’s latest employment report showed pay accelerating sharply for education and health workers, manufacturers, and professional and business services.Average hourly earnings jumped 5.7 percent in the year through January, a full percentage point more than economists had forecast.Earnings calls are replete with chief executives explaining that they are increasing pay to attract and retain talent. Unions have won pay bargaining fights. And the White House regularly celebrates signs that power in the work force seems to have shifted toward employees and away from employers.For the most part, that’s good news for labor. But economists have increasingly warned that the confluence of economic trends shaping up now — high inflation, a sense among consumers that prices might stay high for a while and a strong labor market that has handed workers bargaining power — could set the stage for a situation in which wage growth and prices feed off each other.“The combination of very high inflation, hot wage growth and high short-term inflation expectations means that concerns about falling into a wage-price spiral deserve to be taken seriously,” Goldman Sachs economists wrote in a note last week.That would be a big shift. America has not experienced a wage-price spiral since the 1970s and early 1980s, when rapid inflation and skyrocketing wages seemed to perpetuate each other. The Fed lifted interest rates to double digits and caused a painful recession to bring prices under control. Both wage growth and inflation have been slow in the decades since — until now.But even if wages and prices are both rising now, it is not clear that they are egging each other on yet, which is a crucial distinction. In fact, labor market experts point out three big reasons to doubt that a wage-price spiral will happen today.Chief among them: Productivity growth looks strong. If each individual worker can churn out more goods and services, companies should be able to pay more without hurting their profit margins and leading them to pass along the higher costs. Nick Bunker, an economist at the Indeed Hiring Lab, said recent productivity data was an encouraging sign but not a definitive one.“It’s really hard to observe in real time,” he said of the data, noting that the numbers jump around a lot. “I think it’s something to keep an eye on.”It is also unclear just how much wage bargaining power employees have, even with employers eager to hire. Wage growth appears to have been falling behind price increases for many income groups in recent months, suggesting that workers aren’t managing to persuade their companies to compensate them fully for rising costs. Unionization is much lower than in the 1970s, which could leave workers with fewer tools to bargain up pay.If that begins to crimp consumers’ ability to buy new couches and cars, it could cause demand to moderate, naturally restraining inflation.And the tie between wages and prices has been tenuous in recent decades. While research has found a link between the two in the 1960s and 1970s, the relationship collapsed after the early 1980s and has remained tame since.“The relationship between wage growth and services inflation just isn’t that tight,” said Laura Rosner-Warburton, an economist at MacroPolicy Perspectives. “Yes, you will see more inflation from wages in 2022. The question is how much?”A coffee shop in New York advertised open positions this month.Amir Hamja for The New York TimesWhile a wage-price spiral is on a “large list of risk factors” that the administration is closely watching, the “dominant forecast” is that the labor market will stay strong and price gains will moderate this year, said Jared Bernstein, a member of the White House Council of Economic Advisers.Wall Street economists generally think inflation will fade toward 3 percent this year, based on recent analyst notes and interviews. A recent survey from the Federal Reserve Bank of New York showed that consumers, who had been penciling in higher inflation in the years ahead, have begun to lower their expectations for price increases.But several forecasters said there was room for humility and wariness, because the pandemic economy has repeatedly confounded expectations. It has also drastically changed America’s economic backdrop.“The last 20 years have been years of very low inflation, very stable inflation,” Mr. Blanchard said. Before the coronavirus, inflation had hovered around — and then below — 2.5 percent for decades. Today, it has jumped to 7.5 percent.As prices for products including gas, steaks, bacon and camping equipment climb rapidly, eating into paychecks and dominating headlines, consumers are more likely to take note and ask for better pay.“Things change completely when inflation is a big number,” Mr. Blanchard said. “Salience changes.”There are signs that wages are feeding into price increases, at the margin. Prices have recently begun to rise sharply for core services, a set of purchases outside of health care, rent and transportation for which wages tend to make up a major cost of production.“That was concerning,” said Alan Detmeister, an economist at UBS who formerly led the Fed’s wage and price section. But, he added, it is hardly conclusive.More anecdotally, stories of workers winning big wage increases in a tight labor market abound.While wages in lower-qualification fields like leisure and hospitality have been rising rapidly for months, professional pay may also be on the cusp of picking up: Banks have been making big base salary increases, and Amazon will raise its maximum base salary for corporate and technology workers to $350,000 from $160,000 as it competes for a limited pool of highly trained employees.Amazon, which has also increased wages for warehouse employees, has raised prices partly in response.“With the continued expansion of Prime member benefits and the increased member usage that we’ve seen, as well as the rise in wages and transportation costs, Amazon will increase the price of our Prime membership in the United States,” Brian T. Olsavsky, the company’s chief financial officer, said on a Feb. 3 earnings call. The monthly price is rising to $14.99 from $12.99, and the annual membership is jumping to $139 from $119.“This is our first price increase since 2018,” Mr. Olsavsky noted.Other companies are raising pay but have said they are covering the climbing costs by improving efficiency. That’s the sort of sweet spot the White House and the Fed are hoping for, because it could leave workers earning more without pressuring prices relentlessly up.“We do anticipate when we do our annual review process that we will have a nominally higher wage rate increase provided to our associates,” Kevin Hourican, president and chief executive at the food distributor Sysco, said on a Feb. 8 earnings call. “And we have productivity improvement efforts that can help offset those types of increases.” More

  • 100 Shares189 Views

    in Economy

    January Fed Minutes Show Concern About Inflation's Spread

    by

    Officials at the Federal Reserve expressed concern about inflation at their meeting in January, in particular that it had spread beyond pandemic-affected sectors into other areas, and agreed it would be warranted to begin scaling back their support for the economy faster than they previously had anticipated, minutes of the meeting released Wednesday showed.Fed officials noted that the labor market remained strong, though the Omicron wave of the coronavirus had worsened supply chain bottlenecks and labor shortages, and that inflation continued to significantly exceed the levels the central bank targets.Most officials still expect inflation to moderate over the year as pandemic-related supply bottlenecks ease and the Fed removes some of its support for the economy. But some participants warned that inflation could continue to accelerate, pointing to factors like rising wages and rents. If inflation does not move down as they expect, most Fed officials agreed that they might need to pare back their support for the economy even more quickly, though that could carry some risk.The outlook for inflation could be worsened by China’s zero-tolerance policy toward Covid, which has led to expansive lockdowns that have shuttered factories; a clash in Ukraine that could push up global energy prices; or the spread of another variant, they said.The central bank emphasized that the pace of interest rate increases would hinge on how the economy developed. But most officials agreed that the Fed should take a faster approach to cooling the economy than it did in 2015, when it began raising rates at a slow and plodding pace in the wake of the Great Recession.“Most participants suggested that a faster pace of increases in the target range for the federal funds rate than in the post-2015 period would likely be warranted, should the economy evolve generally in line with the committee’s expectation,” the minutes read.Fed officials also agreed that it was appropriate to proceed with plans to trim the nearly $9 trillion in securities that the central bank holds. Most officials preferred to keep to a schedule announced in December, which would end such purchases starting next month, though some viewed an earlier end to the program as warranted and a way to signal that they were taking a stronger stance to fight inflation.Policymakers said the labor market had made “remarkable progress in recovering from the recession associated with the pandemic and, by most measures, was now very strong.”The January meeting solidified what markets had been anticipating: that the Fed was on track to raise interest rates in March. The question now is how quickly, and by how much. Many investors have speculated that the Fed could raise its interest rate by half a percentage point in March, instead of its usual quarter-point increase.In a statement after their two-day policy meeting in January, Fed officials laid the groundwork for higher borrowing costs “soon.” Jerome H. Powell, the Fed chair, said at a news conference after the meeting that “I would say that the committee is of a mind to raise the federal funds rate at the March meeting, assuming that the conditions are appropriate for doing so.”Inflation has continued to run hot since the Fed’s last meeting, and wage growth remains elevated. A key inflation measure released last week showed that prices were climbing at the fastest pace in 40 years and broadening beyond pandemic-affected goods and services, a sign that rapid gains could prove longer lasting and harder to shake off.January’s Consumer Price Index showed prices jumping 7.5 percent over the year and 0.6 percent from the prior month, exceeding forecasts. A separate inflation gauge that the Fed prefers also showed that prices remained elevated at the end of 2021. Overall, prices have been climbing at the fastest pace since 1982.Wall Street is now anticipating that interest rates could rise to more than 1.75 percent by the end of the year, up from near zero now. Markets began to bet on a double-size rate increase after January’s inflation data came in surprisingly strong. But some Fed officials have been tempering those expectations, saying they need to take a steady approach.Mary C. Daly, president of the Federal Reserve Bank of San Francisco, said on Sunday that the Fed needed to get moving but that its approach ought to be “measured.”“I see that it is obvious that we need to pull some of the accommodation out of the economy,” Ms. Daly said on “Face the Nation.” “But history tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve.” More

  • 100 Shares189 Views

    in Economy

    Far From the Big City, New Economic Life

    by

    GAINESBORO, Tenn. — There is not much to suggest prosperity in Gainesboro, a hamlet of 920 in Tennessee’s Upper Cumberland region. Almost one in seven homes are vacant. One-quarter of the population lives in poverty.Yet from his office in the Jackson County Courthouse, County Mayor Randy Heady outlines a picture of plenty: Revenue from sales and occupancy taxes almost doubled in the last fiscal year, and he expects another 20 percent increase this year. “Sales tax is up, occupancy tax is up, liquor tax is up,” he said.And outsiders are flocking into the county. “They are coming from other states, trying to get away from the high taxes,” Mr. Heady said. “People are moving from Arizona and California, New York and New Jersey.”Economists have long voiced fear that rural places like this are being left behind. The last of the textile businesses, once an economic mainstay, departed in the 1990s. Jackson County and several other counties in the Upper Cumberland are considered “distressed” or “at risk” by the Appalachian Regional Commission. More

  • 150 Shares129 Views

    in Economy

    CPI Inflation Climbed 7.5 Percent in January, the Fastest Rise Since 1982

    by

    Consumer Price Index data showed prices climbing faster than expected, picking up across a broad array of goods and services.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Year-over-year changes in the Consumer Price Index
    Seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesA key inflation measure released on Thursday showed that prices are climbing at the fastest pace in 40 years and broadening to touch nearly every corner of the American economy, heightening the risk that they will stay elevated for longer and that policymakers may have to react more aggressively.Markets tumbled after the government released Consumer Price Index data for January, which showed prices jumping 7.5 percent over the year and 0.6 percent over the past month, exceeding forecasts. More worrying were the report’s details, which showed inflation moving beyond pandemic-affected goods and services, a sign that rapid gains could prove longer lasting and harder to shake off.Investors speculated that the hot inflation would spur a decisive reaction from the Federal Reserve — possibly a big interest rate increase at the central bank’s next gathering in March, though few Fed officials have signaled comfort with such a large move. Making money more expensive to borrow and spend could weigh on demand, slowing the economy and tamping down prices.Wall Street is now anticipating that interest rates could rise to more than 1.75 percent by the end of the year, up from near zero now, and the possibility of a more forceful Fed reaction sent a key bond yield above 2 percent for the first time since July 2019 and deflated stock prices.Most economists still believe inflation will cool by year’s end, as automobile prices climb at a more moderate pace and as supply chain problems hopefully ease. But high and widespread price increases portend trouble for a White House that is struggling to convince voters that the economy is strong, and for a Fed that looks increasingly at risk of falling behind the curve.“It was more than expected, and it was broad-based,” said Priya Misra, head of global rates strategy at TD Securities, adding that she now expects price gains to slow less drastically this year. “We’ve gotten used to these big headline numbers, but every aspect of ‘transitory’ you can push back against now.”Economists thought price gains would fade quickly in 2021 — making now-infamous predictions that inflation would prove “transitory” — only to have those projections proved wrong time and again as booming consumer demand for goods collided with roiled global supply chains that could not ramp up production fast enough.High inflation has been a political liability for the White House, as rising prices have eaten away at household paychecks, leaving consumers feeling pessimistic.Amir Hamja for The New York TimesLately, it is more than just shortages of goods at play. Price gains are increasingly hitting consumers in hard-to-avoid ways as they show up in necessities: January’s inflation reading was driven by food, electricity and shelter costs, the Bureau of Labor Statistics said.High and broadening inflation has become a political liability for President Biden, as rising prices eat away at household paychecks and detract from a strong labor market with solid wage growth. That has left consumers feeling pessimistic and has all but killed Mr. Biden’s chance to pass a sweeping climate and social policy bill given lawmaker concerns about rising prices.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Ryan Sweet, an economist at Moody’s Analytics, estimated that inflation was costing the average household $276 a month, compared with a more normal rate of inflation, which had been hovering just around 2 percent before the pandemic.“While today is a reminder that Americans’ budgets are being stretched in ways that create real stress at the kitchen table, there are also signs that we will make it through this challenge,” Mr. Biden said in a statement. He emphasized that wages grew more quickly than prices last month — though in general they have not kept up with price gains over the past year.The White House has introduced policies that might help to ease inflation slightly — discussing plans to help place military veterans into the short-staffed trucking industry, for instance — but the Fed is primarily in charge of slowing down demand to keep prices under control. Fed officials have already shifted away from trying to foster a quick economic rebound and toward bringing inflation down. After Thursday’s report, investors expected the Fed to withdraw economic support even more quickly. Markets braced for a half-percentage-point increase in the federal funds rate at the central bank’s meeting next month — double the usual increment.The inflation reading sent stocks down and government bond yields up. The S&P 500 dropped 1.8 percent, while the Nasdaq composite fell 2.1 percent. The yield on 10-year U.S. Treasury notes rose 0.1 percentage points, to about 2.03 percent, the highest level since November 2019.James Bullard, the president of the Federal Reserve Bank of St. Louis, fretted about the January inflation report in an interview with Bloomberg News and suggested that policymakers should be open to both a bigger-than-normal rate increase and to increasing rates in between officially scheduled meetings.“You have got the highest inflation in 40 years, and I think we are going to have to be far more nimble and far more reactive to data,” said Mr. Bullard, who has at times espoused bold stances that are not followed by his policymaking colleagues.The Fed generally moves borrowing costs in between meetings only at stressed moments and in emergencies, as was the case when it cut rates to zero between planned gatherings in March 2020.Inflation is abnormally high relative to the central bank’s goal: The Fed aims for 2 percent inflation on average over time, defining that target using a different but related inflation index that is also sharply elevated.And it increasingly appears to be driven less by the pandemic and more by a strong economy. Price increases in 2021 came heavily from roiled supply chains that sent new and used car prices and furniture costs up sharply. Those continue to be a big factor elevating overall inflation, but other areas are also fueling the rapid rise.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Year-over-year changes in the Consumer Price Index
    Not seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesRent of a primary residence, which counts for a big chunk of overall inflation and tends to respond more to economic conditions than to one-off trends, climbed 0.5 percent in January from the prior month, a slight acceleration. Other shelter costs rose at a steady but notable pace.“Low vacancies and the end of rent moratoriums are expected to continue to push rents higher in the year ahead,” Diane Swonk, chief economist at Grant Thornton, wrote in a note after the release.As costs for shelter and other services pick up, policymakers are hoping that supply chains will start to catch up. That could allow prices for goods to moderate or even fall — taking pressure off overall inflation.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 113 Shares109 Views

    in Economy

    How The Trucker Protests Are Snarling the Auto Industry

    by

    Blockades of U.S.-Canada border crossings could hurt the auto industry, factory workers and the economy, which are still recovering from pandemic disruptions.After two years of the pandemic, semiconductor shortages and supply chain chaos, it seemed as if nothing else could go wrong for the auto industry and the millions of people it employs. But then came thousands of truckers who, angry about vaccine mandates, have been blocking major border crossings between Canada and the United States.With Canadian officials baffled about what to do, the main routes that handle the steel, aluminum and other parts that keep car factories running on both sides of the border were essentially shut down Wednesday and Thursday.Ford Motor, General Motors, Honda and Toyota have curtailed production at several factories in Michigan and Ontario, threatening paychecks and offering a fresh reminder of the fragility of global supply chains and of the deep interdependence of the U.S. and Canadian economies, which exchange $140 million in vehicles and parts every day.No one knows how this is going to end. The protests are expected to swell in the coming days and could spread, including to the United States. Canada’s transport minister has called the bridge blockades illegal. Marco Mendicino, Canada’s minister of public safety, said on Thursday that the Royal Canadian Mounted Police, the national force, was sending additional officers to the Canadian capital, Ottawa, and to Windsor, Ontario. The mayor of Windsor has threatened to remove the protesters. But those statements have seemed to have little impact. Gov. Gretchen Whitmer of Michigan pleaded with Canadian officials to quickly reopen traffic.“They must take all necessary and appropriate steps to immediately and safely reopen traffic so we can continue growing our economy,” Ms. Whitmer said in a statement on Thursday.The chaos is already starting to take an economic toll. The pain is likely to be most acute for smaller auto parts suppliers, for independent truckers and for workers who get paid based on their production. Many of these groups, unlike large automakers like G.M., Ford and Toyota, lack the clout to raise prices of their goods and services. Companies and workers in Canada are more likely to suffer because they are more dependent on the United States.The longer crossings between the countries remain blocked, the more severe the damage, not only to the auto industry but also to the communities that depend on manufacturing salaries. Workers at smaller firms typically receive no compensation for lost hours, said Dino Chiodo, the director of auto at the giant Canadian union Unifor. Workers who have been sent home early because of parts shortages will spend less at stores and restaurants.“People say, ‘I have $200 less this week, what do I do?’” Mr. Chiodo said. “It affects the Canadian and U.S. economy as a whole.”Auto factories and suppliers in the United States generally keep at least two weeks of raw materials on hand, said Carla Bailo, the president of the Center for Automotive Research in Ann Arbor, Mich. If the bridges remain blocked for longer than that, she said, “then you’re looking at layoffs.”The blockades came after a demonstration in Ottawa that started nearly two weeks ago. The protests began over a mandate that truck drivers coming from the United States be vaccinated against the coronavirus and have grown to include various pandemic restrictions. Some have demanded that Prime Minister Justin Trudeau resign. The truckers have been joined by various groups, including some displaying Nazi symbols and damaging public monuments. Police in Ottawa said on Thursday that the protesters and their supporters, including some in the United States, had almost overwhelmed the city’s 911 system with calls.The crossing that has the auto industry and government officials most concerned is the Ambassador Bridge, which connects Windsor and Detroit. It carries roughly a quarter of the trade between the two countries, which has been relatively unrestricted for decades. While food and other products are also affected, about a third of the cargo that uses the bridge is related to the auto industry, Ms. Bailo said.The blockade has been felt as far south as Kentucky, where production has been disrupted at a Toyota factory, the company said on Thursday. The shutdown at the border also will prevent manufacturing at Toyota’s three Canadian plants for the rest of the week, a spokesman for the automaker, Scott Vazin, said.Demonstrators blocking access to the Ambassador Bridge in Windsor. The bridge accounts for roughly a quarter of the trade between the United States and Canada.Nathan Denette/The Canadian Press, via Associated PressG.M. said it had canceled two shifts on Wednesday and Thursday at a factory in Lansing, Mich., that makes Buick Enclave and Chevrolet Traverse sport utility vehicles. The company also sent workers from the first shift at a plant in Flint, Mich., home early. Ford said Thursday that plants in Windsor and Oakville, also in Ontario, were running at reduced capacity.Shortages of semiconductors and other components have not been all bad for giant automakers, creating scarcity that has driven up prices of cars in the last year. Ford and G.M. both reported healthy profits for 2021. And the economic damage will not be severe if the bridge and other crossings reopen soon, industry experts said.But the last two years have shown that, because supply chains are so complex, problems at obscure parts makers can have far-reaching and unpredictable impact. Last year, Ford had to shut down plants for weeks at a time in part because of a fire at a chip factory in Japan.“If it stretches on for weeks it could be catastrophic,” said Peter Nagle, an analyst who covers the car industry at IHS Markit, a research firm.Mr. Nagle said the bridge blockade was worse than the semiconductor shortage for carmakers. They “were already running pretty tight because of other supply chain shortages,” he said. “This is just bad news on top of bad news.”The auto industry operates relatively seamlessly across Canada, the United States and Mexico. Some parts can travel back and forth across borders multiple times as raw materials are processed and are turned into components and, eventually, vehicles.An engine block, for example, might be cast in Canada, sent to Michigan to be machined for pistons, then sent back to Canada for assembly into a finished motor. The blockades have stranded some truckers on the wrong side of the border, creating a chain reaction of missed deliveries.The slowdown in Canadian trade will disproportionately affect New York, Michigan and Ohio, said Arthur Wheaton, the director of labor studies at Cornell’s School of Industrial and Labor Relations. At the same time, he added, the protests were “certainly raising concerns for all U.S. manufacturers.”“There is already a shortage of truck drivers in North America, so protests keeping truckers off their routes exacerbates problems for an already fragile supply chain,” Mr. Wheaton said.Carmakers had hoped that shortages of computer chips and other components would ease this year, allowing them to concentrate on the long-term: the transition to electric vehicles.A larger fear for many elected officials and business executives is that the scene at the Ambassador Bridge could inspire other protests. The Department of Homeland Security warned in an internal memo that a convoy of protesting truckers was planning to travel from California to Washington, D.C., potentially disrupting the Super Bowl and President Biden’s State of the Union address on March 1.“While there are currently no indications of planned violence,” the memo, which was dated Tuesday, said, “if hundreds of trucks converge in a major metropolitan city, the potential exists to severely disrupt transportation, federal government operations, commercial facilities and emergency services through gridlock and potential counter protests.”Mr. Chiodo, the Canadian union leader, said that “the people who are demonstrating are doing it for the wrong reasons. They want to get back to the way things were before the pandemic, and in reality they are shutting things down.”The scene in Ottawa remained a raucous party Thursday, with hundreds of people on the street, many wearing Canadian flags like capes. The song “Life Is a Highway,” by the Canadian musician Tom Cochrane, pumped from loudspeakers set up on the back of an empty trailer that had been converted into a stage.But there was a thinning out of protesters — with some empty spaces where trucks had been the day before.Johnny Neufeld, 39, a long-haul trucker from Windsor, Ontario, said the vaccine mandate would spell the end of his job transporting molds into the United States since he had chosen not to be inoculated out of fear the shots had been developed too quickly. He got his first ticket from the police Thursday morning, a fine of 130 Canadian dollars (about $100) for being in a no-stopping zone.“This is a souvenir,” he said.Dan Bilefsky More

  • 138 Shares149 Views

    in Economy

    Car Prices Rose More Slowly In January, But New Disruptions Loom

    by

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Year-over-year changes in the Consumer Price Index
    Not seasonally adjustedSource: Bureau of Labor StatisticsBy The New York TimesWant an optimistic take on the troubling January inflation report? Look at what’s happening with cars.Want a pessimistic take? Look at what’s happening with cars.New-car prices have skyrocketed over the past year, rising 12.2 percent as supply-chain disruptions and other issues have made it hard for manufacturers to keep up with strong consumer demand. Used-car prices are up by a remarkable 40.5 percent. Those rapid price gains have been a big factor in overall inflation, accounting for close to a quarter of the one-year increase in the Consumer Price Index.Optimists, including White House officials, have pointed to car prices as evidence that the recent bout of high inflation is likely to prove short-lived. The car market has been disrupted by a confluence of unusual forces, most of them related to the pandemic. As those forces recede, auto production should return to normal, and prices should moderate, or perhaps fall outright.The data released on Thursday provided support for that narrative. New-car prices were flat in January compared with December. Used-car prices rose 1.5 percent, their slowest pace since September, and data on wholesale prices suggests that moderation is likely to continue. Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note to clients that he expects both new and used vehicle prices to fall in coming months, which would help bring down inflation overall.But a new development is threatening that progress. Protesters in Canada have blockaded some of the busiest routes linking Canada to the United States, disrupting supply chains of some of the biggest automakers. Ford, Toyota and General Motors have all had to pause production or reduce output at some plants as a result of the protests.It isn’t clear how long those disruptions will last, or how much of an impact they will have on auto supplies. But if they prevent the car market from returning to normal as quickly as expected, that could delay the moderation in inflation that economists had expected to see and that the Biden administration had been counting on. More

  • 138 Shares99 Views

    in Economy

    Inflation probably climbed at fastest pace in four decades in January.

    by

    Consumer Price Index data released on Thursday could show the biggest annual price increase since early 1982.A key inflation measure set for release Thursday morning is expected to show that prices continued to climb at the fastest pace in 40 years.But the data could also show some moderation in how much costs are going up each month — a potential silver lining as consumers wait for price pressures to lessen after a bruising year.Economists expect the Consumer Price Index data for January to show that prices climbed by 7.2 percent over the past year, up from 7 percent in December. That would be the fastest clip since February 1982.But prices are expected to have climbed 0.4 percent in January from the prior month. That is unusually rapid, but it is a moderation from the biggest monthly increases last year, which came in as high as 0.9 percent.Forecasters anticipate that inflation will ease meaningfully in 2022: Many expect it to finish the year closer to 3 percent. But economists regularly predicted that price gains would fade quickly in 2021, only to have those projections foiled as booming consumer demand for goods collided with roiled global supply chains that could not ramp up production fast enough.The recent spike in prices for food, fuel, cars and other goods has become a problem for both the Federal Reserve, which is responsible for keeping prices stable, and the White House, which has found itself on the defensive as rising costs eat away at household paychecks and detract from a strong labor market with solid wage growth.On Wednesday, Jen Psaki, the White House press secretary, tried to put a positive spin on the numbers, acknowledging that the data to be released Thursday would most likely show a high reading for the year but that the trajectory is for prices to decrease.“We expect a high year inflation rate reading in tomorrow’s data, given what we know about the last year,” Ms. Psaki said, adding that “it’s not about the recent trends.”“Inflation is expected to decrease over the course — and moderate — over the course of this year,” she said.Even so, the new data could add to the urgency for the Fed to begin weaning the economy off the rock-bottom interest rates that have been in place since March 2020.Fed officials have signaled that they will begin raising rates at their meeting next month. Higher rates can slow down consumer and business spending by making it more expensive to finance a car, house or machine purchase. Policymakers have also suggested that they will soon begin to shrink their balance sheet of bond holdings, which should push up longer-term interest borrowing costs and further cool off the economy.Investors now expect that central bankers might lift interest rates six times this year as they try to slow down the economy and tamp down price gains. More

  • 113 Shares99 Views

    in Economy

    Biden Notes Economic Success as Employment and Wages Rise

    by

    President Biden on Friday celebrated unexpectedly rapid January hiring and new data that showed historically strong employment gains over the past year, seizing on good news at a moment when consumers are nervous about their prospects thanks to a lingering pandemic and persistent inflation.America has recorded 6.6 million new jobs since January 2021, giving Mr. Biden the strongest first year of job gains of any president since the government began collecting data in 1939. The unemployment rate has dropped precipitously since the worst of the pandemic, and wages rose a rapid 5.7 percent in the year through January.The progress came on the heels of historic job losses at the start of the pandemic — and the recovery remains incomplete. But the surprisingly strong pace of the rebound offers Mr. Biden a chance to try and turn around an economic narrative that has focused largely on negatives: soaring inflation and dour consumer sentiment.On Friday, Mr. Biden attempted to capitalize on the numbers and the moment.“If you can’t remember a year when so many people went to work in this country, there’s a reason — it never happened,” Mr. Biden said during remarks from the White House.But the administration is in a delicate position as it tries to shift the economic conversation and refocus voters on the breakneck pace of the recovery, rather than the ongoing effects of the pandemic.Brisk inflation is eroding workers’ spending power, government support for families and businesses is fading, and households report pessimistic outlooks. Inflation is expected to come in at 7.3 percent in the year through January when the government releases fresh consumer price data next week.And some of the same developments that Mr. Biden cited on Friday as wins for his administration are likely being eyed warily by the Federal Reserve, which is poised to raise interest rates from rock bottom at their March meeting as officials try to cool the economy.Surging wages could mean that companies will lift prices to cover their rising labor costs, exacerbating inflation and forcing a more vigorous central bank response. Jerome H. Powell, the Fed chair, has previously signaled that the central bank would be worried if wage growth exceeded productivity, a sign that it would drive prices higher over time.“No matter how bullish you are about productivity growth, the Fed can’t live with that pace, if it is sustained,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote after the release of the January jobs report.The report spurred investors across Wall Street to speculate that policymakers might make a bigger rate increase than previously expected at their next meeting — perhaps half a percentage point — as rising wages amp up the inflation urgency.Investors on Friday also sharply increased their bets that the central bank might make six or seven quarter-point rate increases in 2022. The Fed’s benchmark interest rate is currently set near zero, and that would leave interest rates close to 2 percent.How much the Fed slows down the economy this year could have important political implications. Fed rate increases tend to slow hiring, cause stock and other asset prices to fall, and weaken the market for big purchases like houses and cars.Economists have been expecting economic growth to moderate in 2022, as government pandemic supports fade and the Fed pulls back its pandemic-era help. That could mean that this is a high point for the White House — one that it is trying to embrace, even as it tries to sustain the progress.“For many Americans, wages are up this year,” Mr. Biden said. “That’s good — we have to continue to keep wages growing. And we need even more high-paying jobs.”Some of the president’s top economic aides have been frustrated by the persistent gloom expressed in polls of public sentiment despite economic growth and job gains.Officials say they believe the ongoing pandemic is primarily responsible for how people feel about their lives. But several senior administration officials have said privately in recent days that the White House was working harder to claim credit for the robust economy even as it was careful not to alienate people who are still struggling, especially with costs rising sharply on many goods and services.The president nodded at the pain of inflation during his remarks, emphasizing the need for more competition among corporations and pointing out that the administration is doing what it can to ease price pressures.“Look, average people are getting clobbered by the cost of everything,” Mr. Biden said, noting that gas and food prices are up. Later, he added, “there’s a lot we can do to give families a little extra breathing room.”Last year, Mr. Biden frequently argued that his legislative agenda, including a $2.2 trillion social spending bill in Congress, was his answer to those economic challenges. Now, with that bill stalled in the Senate, the president is increasingly talking about steps his administration can take without lawmakers.On Friday, he repeatedly sought to connect the strong growth in jobs numbers to his early executive orders calling for a “Buy America” approach to the economy. He noted the recent announcements by several large companies to increase manufacturing in the United States, including a planned $20 billion semiconductor facility in Ohio and $7 billion electric vehicle plant in Michigan.After delivering his remarks at the White House, Mr. Biden, along with Vice President Kamala Harris, again hailed the good economic news during a visit to an ironworkers union office in Maryland, where he signed an executive order aimed at lowering the costs of federal construction projects.Whether the White House can shift the national mood from economic pessimism to optimism — particularly ahead of the midterm elections — will depend in large part on the trajectories of the economy and the pandemic.Mr. Biden signed an executive order he said would help lower costs of federal construction projects during a visit to an ironworkers union office in Upper Marlboro, Md., on Friday.Sarahbeth Maney/The New York TimesMuch of the contrast between how rapid progress has proved and how voters feel about it likely owes to the virus, which has lingered on for nearly two years, disrupting lives and inflicting tragedy. And while employment did grow rapidly last year, there are still 2.9 million fewer workers on payrolls today than there were in February 2020.The January jobs data may have looked strong partly because the virus has disrupted normal hiring patterns: As labor shortages bit in industries like retail, employers might have decided not to lay off seasonal workers who usually would have been let go after the holidays. As 2022 begins, virus flare-ups make economic forecasting a field of nonstop surprise.“We expected the very low pace of year-end layoffs to support job growth this month, and with hindsight, this tailwind more than offset the temporary Omicron drag,” economists at Goldman Sachs wrote in a research note.Thanks at least in part to big government spending that helped to fuel a rapid recovery in consumer demand, the pace of labor market healing has consistently surprised economists. While the unemployment rate ticked up to 4 percent in January, that is down from 14.7 percent at the start of the pandemic and not far above the 3.5 percent that prevailed before its onset.“Overall the labor market remains tight,” Michael Feroli, chief U.S. economist at J.P. Morgan, wrote of the data — but he noted that as the virus persists, they are also hard to read. “Fed Chair Powell has recently vowed to be humble, which will be useful in reading these numbers.”More traders see a half-point rise in March.Probability of a 50 basis point interest rate increase at the Federal Reserve’s March 16 meeting, derived from trading in futures contracts

    Source: CME GroupBy The New York TimesBen Casselman More