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    Poverty in U.S. Declined Thanks to Government Aid, Census Report Shows

    When government benefits are taken into account, a smaller share of the population was living in poverty in 2020 even as the pandemic eliminated millions of jobs.The share of people living in poverty in the United States fell to a record low last year as an enormous government relief effort helped offset the worst economic contraction since the Great Depression.In the latest and most conclusive evidence that poverty fell because of the aid, the Census Bureau reported on Tuesday that 9.1 percent of Americans were living below the poverty line last year, down from 11.8 percent in 2019. That figure — the lowest since records began in 1967, according to calculations from researchers at Columbia University — is based on a measure that accounts for the impact of government programs. The official measure of poverty, which leaves out some major aid programs, rose to 11.4 percent of the population.The new data will almost surely feed into a debate in Washington about efforts by President Biden and congressional leaders to enact a more lasting expansion of the safety net that would extend well beyond the pandemic. Democrats’ $3.5 trillion plan, which is still taking shape, could include paid family and medical leave, government-supported child care and a permanent expansion of the Child Tax Credit.Liberals cited the success of relief programs, which were also highlighted in an Agriculture Department report last week that showed that hunger did not rise in 2020, to argue that such policies ought to be expanded. But conservatives argue that higher federal spending is not needed and would increase the federal debt while discouraging people from working.The fact that poverty did not rise more during an enormous economic disruption reflects the equally enormous response. Congress expanded unemployment benefits and food aid, doled out hundreds of billions of dollars to small businesses and sent direct checks to most Americans. The Census Bureau estimated that the direct checks alone lifted 11.7 million people out of poverty last year; unemployment benefits and nutrition assistance prevented an additional 10.3 million people from falling into poverty, according to an analysis of the data by The New York Times.“It all points toward the historic income support that was delivered in response to the pandemic and how successful it was at blunting what could have been a historic rise in poverty,” said Christopher Wimer, a co-director of the Center on Poverty and Social Policy at the Columbia University School of Social Work. “I imagine the momentum from 2020 will continue into 2021.”Poverty rose much more after the previous recession, peaking at 16.1 percent in 2011, by the measure that takes fuller account of government assistance, and improving only slowly after that. Many economists have argued that the federal government did not do enough back then and pulled back aid too quickly.Despite the more aggressive response this time, however, median household income last year fell 2.9 percent, adjusted for inflation, to about $68,000. That figure includes unemployment benefits but not stimulus checks or noncash benefits such as food stamps. The decline reflects the pandemic’s toll on jobs: About 13.7 million fewer people worked full time year-round compared with 2019. More

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    Pandemic Recession Officially Lasted Only Two Months

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

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    Fed Unity Cracks as Inflation Rises and Officials Debate Future

    Federal Reserve officials are debating what to do as price risks loom, even as its leaders and the White House say today’s surge will most likely cool.Federal Reserve officials spoke with one voice throughout the pandemic downturn, promising that monetary policy would be set to full-stimulus mode until the crisis was well and truly behind America. Suddenly, they are less in sync.Central bankers are increasingly divided over how to think about and respond to emerging risks after months of rising asset values and faster-than-expected price increases. While their political counterparts in the White House have been more unified in maintaining that the recent jump in price gains will fade as the economy gets past a reopening burst, Washington as a whole is wrestling with how to approach policy at a moment of intense uncertainty.The Fed’s top officials, including Chair Jerome H. Powell, acknowledge that a lasting period of uncomfortably high inflation is a possibility. But they have said it is more likely that recent price increases, which have come as the economy reopens from its coronavirus slumber, will fade.Other officials, like James Bullard, president of the Federal Reserve Bank of St. Louis, have voiced more pointed concern that the pickup in prices might persist and have suggested that the Fed may need to slow its support for the economy more quickly as a result.Unwanted and persistent inflation seemed like a fringe possibility earlier this year, but it is becoming a central feature of economic policy debates as prices rise for used cars, airline tickets and restaurant meals. For the Fed, the risk that some of the current jump could last is helping to drive the discussion about how soon and how quickly officials should slow down their enormous government-backed bond-buying program — the first step in the central bank’s plan to reduce its emergency support for the economy.Fed officials have said for months that they want to achieve “substantial further progress” toward their goals of full employment and stable inflation before slowing the purchases, and they are just beginning to discuss a plan for that so-called taper. They are now wrestling with the reality that the nation is still missing 7.6 million jobs while the housing market is booming and prices have moved up faster than expected, prompting a range of views to surface in public and private.The bubbling debate reinforces that the central bank’s easy money policies won’t last forever, and sends a signal to markets that officials are closely attuned to inflationary pressures.“A pretty substantial part — or perhaps all — of the overshoot in inflation comes from categories that are directly affected by the reopening of the economy,” said Jerome Powell, the Fed chair.Al Drago/The New York Times“I see the debate and disagreement as the Fed at its best,” said Robert S. Kaplan, who is president of the Federal Reserve Bank of Dallas and is one of the people pushing for the Fed to soon begin to pull back support. “In a situation this complex and this dynamic, if I weren’t seeing debate and disagreement, and there were unanimity, it would make me nervous.”The central bank’s 18 policy officials roundly say that the economy’s path is extremely hard to predict as it reopens from a once-in-a-century pandemic. But how they think about inflation after a string of strong recent price reports — and how they feel the Fed should react — varies.Inflation has spiked because of statistical quirks, but also because consumer demand is outstripping supply as the economy reopens and families open their wallets for dinners out and long-delayed vacations. Bottlenecks that have held up computer chip production and home-building should eventually fade. Some prices that had previously shot up, like those for lumber, are already starting to moderate.But if the reopening weirdness lasts long enough, it could cause businesses and consumers to anticipate higher inflation permanently, and act accordingly. Should that happen, or if workers begin to negotiate higher wages to cover the pop in living costs, faster price gains could stick around.“A new risk is that inflation may surprise still further to the upside as the reopening process continues, beyond the level necessary to simply make up for past misses to the low side,” Mr. Bullard said in a presentation last week. The Fed aims for 2 percent inflation as an average goal over time, without specifying the time frame.Other Fed officials have said today’s price pressures are likely to ease with time, but have not sounded confident that they will entirely disappear.“These upward price pressures may ease as the bottlenecks are worked out, but it could take some time,” Michelle Bowman, one of the Fed’s Washington-based governors, said in a recent speech.The Fed’s top leadership has offered a less alarmed take on the price trajectory. Mr. Powell and John C. Williams, president of the Federal Reserve Bank of New York, have said it is possible that prices could stay higher, but they have also said there’s little evidence so far to suggest that they will.“A pretty substantial part — or perhaps all — of the overshoot in inflation comes from categories that are directly affected by the reopening of the economy,” Mr. Powell said during congressional testimony on June 22.Mr. Williams has said there is even a risk that inflation could slow. The one-off factors pushing up prices now, like a surge in car prices, could reverse once supply recovers, dragging down future price gains.“You could see inflation coming in lower than expected,” he said last week.Which take on inflation prevails — risk-focused, watchful, or less fretful — will have implications for the economy. Officials are beginning to talk about when and how to slow down their $120 billion in monthly bond-buying, which is split between $80 billion in Treasury securities and $40 billion in government-backed mortgage debt.The Fed has held a discussion about slowing bond-buying before, after the global financial crisis, but that came during the rebound from a deep but otherwise more standard downturn: Demand was weak and the labor market climbed slowly back. This time, conditions are much more volatile since the recession was an anomaly, driven by a pandemic instead of a financial or business shock.In the current setting, officials who are more worried about prices getting out of hand may feel more urgency to dial back their economic stimulus, which stokes demand.“This is a volatile environment; we’ve got upside inflation risk here,” Mr. Bullard said at a separate event last week. “Creating some optionality for the committee might be really useful here, and that will be part of the taper debate going forward.”Mr. Kaplan said he had been vocal about his preferences on when tapering should start during private Fed discussions, though publicly he will say only that he would prefer to start cutting policy support “sooner rather than later.”“I see the debate and disagreement as the Fed at its best,” said Robert S. Kaplan, a Fed official who is pushing to start easing support.Edgard Garrido/ReutersHe thinks moving more quickly to slow bond purchases would take a “risk management” approach to both price gains and asset market excess: reducing the chances of a bad outcome now, which might mean the Fed doesn’t have to raise interest rates as early down the road.Several officials, including Mr. Kaplan and Mr. Bullard, have said it might be wise for the Fed to slow its purchases of mortgage debt more rapidly than they slow bond-buying overall, concerned that the Fed’s buying might be contributing to a hot housing market.But even that conclusion isn’t uniform. Lael Brainard, a Fed governor, and Mary C. Daly, president of the Federal Reserve Bank of San Francisco, have suggested that the mortgage-backed purchases affect financial conditions as a whole — suggesting they may be less keen on cutting them back faster.The price outlook will also inform when the Fed first raises interest rates. The Fed has said that it wants to achieve 2 percent inflation on average over time and maximum employment before lifting borrowing costs away from rock bottom.Rate increases are not yet up for discussion, but Fed officials’ published forecasts show that the policy-setting committee is increasingly divided on when that liftoff will happen. While five expect rates to remain unchanged through late 2023, opinions are otherwise all over the place. Two officials see one increase by the end of that year, three see two, three see three and another three see four. Two think the Fed will have raised rates six times.Both Fed policy debates will affect financial markets. Bond-buying and low rates tend to pump up prices on houses, stocks and other assets, so the Fed’s pullback could cause them to cool off. And they matter for the economy: If the Fed removes support too late and inflation gets out of control, it could take a recession to rein it in again. If it removes its help prematurely, the slowdown in demand could leave output and the labor market weak.The Fed will be working against a changing backdrop as it tries to decide what full employment and stable prices mean in a post-pandemic world. More money from President Biden’s $1.9 trillion economic aid bill will soon begin to flow into the economy. For example, the Treasury Department in July will begin depositing direct monthly payments into the accounts of millions of parents who qualify for an expanded child tax credit.But expanded unemployment insurance benefits are ending in many states. That could leave consumers with less money and slow down demand if it takes would-be workers time to find new jobs.As the trends play out, White House officials will also be watching to see whether the economy is hot or not. The administration is trying to pass a follow-up fiscal package that would focus on longer-term investments, and Republican opposition has centered partly on inflation risks.For Mr. Kaplan at the Fed, the point is to be watchful. He said it was important to learn from the lessons of the post-2008 crisis recovery, when monetary policy support was removed before inflation had meaningfully accelerated — but also to understand that this rebound is unique.“Realizing that this is a different situation is a wise thing,” Mr. Kaplan said. More

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    Markets Work, but Untangling Global Supply Chains Takes Time

    Decisions made early in the pandemic are having lasting effects on the ability of industries to fulfill surging demand.Auto manufacturing is a complex process with lots of pieces, meaning that the current shortages and higher prices of cars are likely to persist for some time. This is less true of simpler products like lumber.Alyssa Schukar for The New York TimesThe cure for high prices is high prices.That’s an old line used in commodity markets, and it helps explain why the great inflation scare of 2021 has eased some in recent weeks. When the price of something soars because demand outstrips supply, it has a way of self-correcting. Buyers, scared off by high prices, find other options, and sellers crank up production to take advantage of a profit opportunity.It is an idea simple enough to be taught in the first few weeks of any introductory economics class, but one with powerful implications for the American economy as it aims for a post-pandemic reboot.Several of the key products whose prices had soared in the spring have grown less expensive, as producers have increased output and buyers have held tight. This is particularly evident with lumber; as of Friday, its price was down 47 percent from its early-May peak (though still well above historical norms). Sawmills responded to soaring prices by pushing the limits of their capacity.The prices of corn, copper and a variety of other economically important commodities are also down by double-digit percentages since early May. This supports the notion that the inflation the world has been experiencing is transitory — set to ease in the months ahead as the laws of supply and demand take hold.Markets have plenty of flaws and imperfections, but when it comes to allocating scarce goods and sending signals to sellers to make more and buyers to buy less, they work quite well.But just because markets work doesn’t mean they will work instantly. The complexity of the way many of the goods still in short supply are produced, transported and sold means that people in those markets are reluctant to predict the kind of snapback evident in lumber prices.For them, a number of different problems — many but not all caused by the pandemic — are colliding at once, creating supply tangles that are taking time to unravel. In some cases, inflationary forces already set in motion have not yet made their way through to consumers.A common factor: Decisions made early in the pandemic are having long-lasting consequences in fulfilling demand that is surging with Americans’ loaded wallets.“I think we all thought in early 2020, as things were slowing down, ‘We’ve got it, it’s a recession, we know what the standard playbook is,’” said Phil Levy, chief economist of Flexport, a freight company.In a recession, incomes go down and demand for goods goes down. “A lot of shipping lines were cutting service and cutting orders because they didn’t want to get caught with a glut of supply when nobody wanted to ship anything,” he said. “And that turned out to be dramatically wrong.”Now, in what would normally be a slow time of year, container ships are operating at the outer extremes of their capacity. Shipping companies have taken exceptional efforts to create more supply, such as delaying the retirement of ships and pulling ships out of dry dock. But other factors are still holding back importers, like backlogs at ports and lingering ripple effects of the Suez Canal blockage in late March.A widely cited index of transoceanic shipping prices, the Shanghai Containerized Freight Index, is nearly four times its level before the pandemic and has continued rising in recent weeks.Mr. Levy expects prices to plateau at a high level for a while. With the global shipping system stretched to the breaking point, small disruptions could have a bigger impact than usual — the brittleness that comes from a lack of spare capacity.Meanwhile, building new capacity like container ships and expanding ports take time and require shipping companies to make a bet that the current surge of demand is more than temporary. There are signs capacity is increasing, but for now the lagged effects of the early-pandemic retrenchment are more significant.Similarly slow-moving forces are at play in the production of automobiles, a complex product made up of thousands of parts. Since the onset of the pandemic, it has been a nightmare of supply disruption.“In the 30 years I’ve been in automotive supply chains, we’ve seen sustained periods of downturn or sustained periods of upturn,” said Jeoff Burris, the owner of Advanced Purchasing Dynamics in Plymouth, Mich., a consulting firm that advises auto industry and other manufacturing firms on their supply chains. “What we have not seen is 16 months of one type of problem after another.”Now, there are higher prices for base materials like steel and aluminum. There are suppliers being forced to raise wages sharply to keep assembly lines operating. There are semiconductor manufacturers stretched too thin to provide enough computer chips to make as many cars as consumers wish to buy. There have even been shortages of resin, needed in the plastics that are part of a car, caused by Texas winter storms this year. And adding to it all, there are logjams of shipping capacity for materials imported from overseas.“It’s almost like a patient who’s fighting cancer and heart disease and diabetes all at the same time,” Mr. Burris said. The power that automakers usually hold to dissuade suppliers from increasing prices is breaking down, he said, amid the urgency to obtain supplies.And as automakers throttle production, there have been unusual dynamics in the retail side of the market.The inability of automakers to produce at full speed, combined with strong consumer demand, shows up in both obvious (prices are higher than usual) and less obvious ways, said Ivan Drury, senior manager for insights at Edmunds, a publisher of auto industry information. In the past, the “manufacturer’s suggested retail price” was generally a mere suggestion, with dealers negotiating actual sale prices $2,000 to $3,000 below that level for an average car. Now, new cars are typically selling at or only slightly below the suggested retail price, he said.And dealers are resorting to other techniques that restrict sales. With inventories lean, buyers seeking a particularly in-demand car may need to commit to buying it before it has arrived on the lot, sight unseen. Some dealers, he said, will refuse to sell to people from outside the dealer’s area, to ensure that the buyer will generate continuing service revenue.Things are even more wild in the used-car market, where the down-and-up last 16 months for the rental car industry, among other factors, has caused a severe shortage and steep price increases. Used cars and trucks were a major source of overall consumer price inflation in April and May.Mr. Drury doesn’t expect that to change anytime soon. According to Edmunds data, the average trade-in value of a car was still rising through the first three weeks of June, up an additional 2.9 percent after increasing a combined 21 percent in April and May.None of this means that the inflation of the spring will be lasting; plenty of products are experiencing more routine pricing dynamics that bear out the efficiency of the markets. Rather, the complexity of modern global supply chains means that when things get broken, they won’t necessarily get unbroken quickly.Ultimately, the cure for high prices may be high prices. But it takes more than high prices alone. More

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

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

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    America Is on a Road to a Better Economy. But Better for Whom?

    Listen to This ArticleAudio Recording by AudmTo hear more audio stories from publications like The New York Times, download Audm for iPhone or Android.The plunge the U.S. economy took last spring was so precipitous that the charts from the time look, literally, like cliffs. Industrial output fell 12.7 percent in April 2020, the worst drop since records began a century earlier, as entire industries shut down virtually overnight. Airline travel, as measured by the number of people passing through T.S.A. checkpoints, fell 94 percent in a month — from two million people on March 1 to just 124,000 on April 1. In two months, employers cut 22 million jobs, more than in every recession in the last 50 years, combined.“This thing is going to come for us all,” the economist Martha Gimbel, now an adviser to President Biden, said in April 2020, when the full extent of the damage was just beginning to hit home. She meant every industry, every income group, every class of worker — not just flight attendants and line cooks but also white-collar workers in supposedly recession-proof industries. Even sectors that were initially thriving in lockdown, like personal entertainment and home improvement, would feel the pinch once enough people saw their paychecks evaporate. No industry is recession-proof in a recession that shuts down the entire economy.That was the dominant view at the time. But it was wrong. “This thing” didn’t come for us all. It came for the restaurants, the hotels, the movie theaters and for thousands of other businesses and millions of workers. But the ripples didn’t spread as far as economists feared. The financial system didn’t melt down. White-collar workers didn’t lose their jobs en masse. The factories and construction sites that shut down in April had mostly reopened by June.A year later, the recovery is in full swing. Restaurants are open again. Airports are filling up. The United States has regained two-thirds of the jobs lost last spring, and is closing the remaining gap at the pace of hundreds of thousands of jobs a month. In his annual letter to shareholders a year ago, Jamie Dimon, the C.E.O. of JPMorgan Chase, warned of a “bad recession” that could rival the 2008 financial crisis; in this year’s edition, he predicted a multiyear boom. Amid the euphoria, the government’s closely watched monthly jobs report showed that hiring in April was a quarter of what economists had expected, and down sharply from March. It was a stark reminder: The pandemic isn’t over. A robust recovery isn’t guaranteed. The U.S. economy still faces a long climb back to health — and the most vulnerable workers will, inevitably, be the last to benefit. The number of jobs held by college graduates in April was back almost to its pre-pandemic level; among those with a high school diploma or less, there is still a gaping hole of more than 3.5 million jobs.Counting all the various Covid relief packages passed under two presidents, the United States has now pumped more than $5 trillion into the economy.Political leaders and policymakers from President Biden on down have talked about the need to create a post-pandemic economy that is better than the one we left behind last year. The question is: Better for whom? The pre-pandemic economy, too, was praised in some corners as the best in decades, but it was still one in which the unemployment rate for Black Americans was twice that of white Americans, where someone could work a full-time job 52 weeks a year and still stay mired in poverty and where people’s toehold in the middle class was so tenuous that, within weeks of losing their jobs last spring, many were left idling in their cars in a miles-long line at a local food bank. “We need a different economy than the one we had, because the one we had clearly was not resilient,” says William Spriggs, a Howard University economist.And yet in the next breath, Spriggs allows that he is optimistic that we actually will build a different economy this time, one in which jobs are plentiful, wages are rising and prosperity is widely shared. That optimism stems in part from the relatively strong recovery so far, and partly from the federal government’s ongoing efforts to keep it on track. But it also stems from the fact that after a crisis that laid bare the deep inequities in the U.S. economy, policymakers, journalists and voters are all less likely to accept without question a recovery that reaches only a small segment of the population. The first two decades of the 21st century were a parade of economic disappointments: The bursting of the dot-com bubble was followed by a recession; which was followed by a “jobless recovery”; which was followed by another burst bubble, this time in housing; and another, even worse, recession; and another, even weaker, recovery. Officially, the Great Recession ended in June 2009, but it took two years for U.S. gross domestic product to return to its pre-recession level, and six years for unemployment to do so. Long-term joblessness didn’t even stop rising until the recession had been over for nearly a year, and it didn’t get back to its pre-2008 normal until well into 2018. Year after year, forecasters predicted that this was the year that growth would finally pick up and wages would rise and prosperity would be widely shared. And year after year they were wrong. The pessimism became so ingrained that by 2019, when things were, finally, actually pretty good, the dominant economic narrative was about what would inevitably cause the next recession. (“Global pandemic” did not tend to make the list.)Judged against that grim benchmark, this recovery already looks like an improvement. The consensus is that G.D.P. will return to its pre-pandemic level sometime this quarter, and possibly already has. The unemployment rate is on pace to get there sometime next year. Turn on CNBC these days, and the debate is not over the risks of a weak recovery but over the possibility of runaway inflation, a problem usually associated with an economy that’s running too hot, not one that’s trying to get back on its feet after a crippling recession.This recovery is different, in part, because this recession was different. The last crisis, like most recessions, was caused by a fundamental imbalance — the housing bubble — that had to be resolved before the economy could start growing again. Construction workers and mortgage brokers had to find jobs in other industries. Households had to get out from under unsustainable debt loads. Banks and other financial institutions had to write off hundreds of billions in bad loans. This time, there was no imbalance. Things were basically going fine, and then an outside force, what economists call an “exogenous shock,” turned the world upside-down. If we could somehow have pressed “pause” until the pandemic ended, there would have been no reason for a recession at all. Of course, there is no “pause” button. That’s why everyone was so worried about the ripple effects last year. Restaurants can’t pay waiters when they have no customers. Waiters can’t pay rent when they have no jobs. Landlords can’t pay their mortgages when their tenants don’t pay rent. Banks can’t make new loans when borrowers stop making payments. And so on and so on, until what began as an isolated crisis caused by a specific set of circumstances has turned into a general pullback in activity across the economy.Except that never really happened this time. Evictions, foreclosures and bankruptcies all fell last year. The financial system, as anyone who has checked their 401(k) balance lately can attest, did not collapse. Perhaps the most shocking statistic in a year of shocking economic statistics is this one: In what was, by many measures, the worst year since at least World War II, Americans’ income, in aggregate, actually rose.How is this possible? Because of the other reason this recovery is different: the federal government. Counting all the various Covid relief packages passed under two presidents, the United States has now pumped more than $5 trillion into the economy. That dwarfs not just what the U.S. has spent in any previous recession, but also the aid provided in almost any other large country. Here’s what that money meant in the real world: When the economy shut down last spring, the federal government stepped in to ban most evictions and made it easy for borrowers to delay payments on their mortgages and student loans. It expanded access to nutrition benefits, school-lunch programs and other emergency relief programs. The Federal Reserve bought hundreds of billions of dollars’ worth of bonds to keep credit flowing and avoid a repeat of the 2008 crisis.Most important, the government gave people money. Lots of money. By April of this year, the typical middle-class family of four had received more than $11,000 through successive rounds of direct payments. That doesn’t include the expanded child tax credit that was part of the latest aid bill, which is worth up to $3,600 per child.The CARES Act, which Congress passed in late March 2020, also provided $600 a week in extra unemployment benefits to laid-off workers, and created a whole new program — Pandemic Unemployment Assistance — to cover freelancers, gig workers and other people who ordinarily don’t qualify for benefits. And it created the Paycheck Protection Program, which gave out more than half a trillion dollars in low-interest — and in many cases, forgivable — loans to small businesses, most likely preventing thousands of employers from going under entirely.The government didn’t get everything right. Much of the economic response to Covid was deeply, frustratingly flawed. People spent weeks battling their way through busy signals and overloaded websites to claim their benefits, often only to see their payments suspended because of a lost piece of paperwork or a data-entry error. Small-business aid was snapped up by businesses that didn’t really need the help (and in some cases weren’t small), while restaurants, retailers and concert venues that were truly struggling became ensnared in a tangle of red tape and, in some cases, simply gave up. Congress, which reacted with such uncharacteristic speed in the spring, quickly fell back into its old partisan patterns, with Democrats pushing for more spending, Republicans for less — resulting in a monthslong delay in aid during a critical period last fall. “Their fiscal policy response was, in the beginning, on the money — it was exactly what we needed,” says Michelle Holder, an economist at John Jay College in New York. “But the long view was not necessarily taken into account with regard to how long it was really going to take our country to slog through this pandemic.”But as bad as it was, the scale of the hardship would have been far worse without the abundant government response. Researchers at Columbia University found that the federal aid kept 18 million Americans out of poverty last April and 13 million in January. The image of Americans lining up at food banks is, appropriately, seared on our collective memory, and measures of food insecurity did rise in the pandemic. But government aid almost certainly saved far more people from hunger, says Diane Whitmore Schanzenbach, a Northwestern University economist who has studied food insecurity during the pandemic. She notes that data from the Census Bureau shows rates of hunger dropping sharply after government aid checks arrived in January and March.And the aid didn’t just rescue millions of individual families. It also arguably rescued the economy itself. Last spring, for example, landlords across the country feared that tenants who had lost their jobs would start missing rent payments. But that never happened at a large scale. According to data from the National Multifamily Housing Council, which represents apartment owners and managers, 80 percent of tenants paid rent on time last May, and 95 percent paid by the end of the month — both comparable to the previous year, despite an eviction moratorium that lowered the stakes for nonpayment.Researchers at the JPMorgan Chase Institute, using data from thousands of checking accounts, found that practically as soon as the CARES Act aid began flowing, spending among low-income consumers rebounded fully to its pre-pandemic level. In other words, unlike in virtually every other recession on record, millions of people lost their jobs, but they didn’t have to stop spending. More than anything else, that is what put us on track to avert a downward spiral.“It doesn’t look like it’s going to happen,” says Louise Sheiner, a former Federal Reserve economist who is now at the Brookings Institution. “The fiscal support is what will prevent it from happening.”Illustration by ArdneksU.S. employers added 266,000 jobs in April. In any normal time, that would represent a good month for hiring; in the two years leading up to pandemic, job growth averaged a bit under 200,000 jobs per month. But in the context of an economy that is still down more than eight million jobs from February 2020, it represented an alarming deceleration (770,000 jobs were added in March). It also further inflamed an already-simmering debate over the best way to help the economy. Democrats looked at the unexpectedly weak job growth and saw evidence of an economy still in need of government aid. Republicans looked at it and saw evidence that government aid was contributing to the problem — that enhanced unemployment benefits were discouraging people from looking for jobs, leading to a shortage of available workers. Still, few economists expect the weakness to last. Goldman Sachs, in a note to clients after the disappointing jobs report, said it expected job gains to average 800,000 per month between May and September, which would still represent a faster recovery than after any crisis in recent memory. Speed matters because a principal lesson of the last recession is that the victims of a slow recovery are disproportionately the most disadvantaged workers. Wage growth for all but the highest-earning workers didn’t begin to pick up in earnest until nearly a decade into the recovery from the last recession. The Black unemployment rate didn’t fall below 10 percent until 2015, six years after the recession ended. (The unemployment rate never hit 10 percent for white people in the first place.)‘There is going to be a tendency to look at those numbers and say, “Mission accomplished,’ before it is time.”Jerome Powell, the Federal Reserve chairman, has repeatedly cited racial and other disparities as a reason for trying to revive the economy as quickly and completely as possible. People at the bottom of the income ladder enjoyed just a few years of decent gains before the pandemic cut the recovery prematurely short. The faster we can get back there, the sooner they can begin to enjoy those gains again. “Those who have historically been left behind stand the best chance of prospering in a strong economy with plentiful job opportunities,” Powell said in a speech at a National Community Reinvestment Coalition conference in early May. “Our recent history highlights both the benefits of a strong economy and the severe costs of a weak one.”Low-income families are starting in a much different place from where they were in the last recovery. Indeed, American households are, on average, in the best financial shape in decades. Debt levels, excluding home mortgages, are lower than before the pandemic. Delinquencies and defaults are down, too. And Americans in aggregate are sitting on a mountain of cash: $6 trillion in savings as of March, more than four times as much as before the pandemic.Averages, of course, don’t tell the full story. The wealthy, and even the merely affluent, have done exceedingly well during the pandemic. They have, by and large, kept their jobs. They have seen the value of their stock portfolios soar. And they have spent less on vacations, restaurant meals and other services. For those at the other end of the economic spectrum, the picture looks very different: Many of them lost their jobs, had no investments to start with and needed every penny of the aid they received to meet basic living expenses, if they managed to get that aid at all.Those diverging fortunes are what commentators have called the “K-shaped recovery” — rapid gains for some, collapse for others. But that narrative is incomplete. Millions of people have been financially devastated, but many more have not been. Most low-wage workers kept their jobs, or got them back relatively quickly. Many of them will emerge from the pandemic in better financial shape than they entered it, thanks in large part to successive rounds of government aid. Low- and middle-income families came out of the last recession mired in debt, and spent years trying to climb out of that hole. That reality colored their financial decisions long after the recession was over: whether to buy a house, whether to go to college, whether to take a chance on that new job or that new career or that new city. This time around, many people will have the opportunity to make their choices free of that burden.The lesson of both this crisis and the last one is that policy matters. In the last recession, an initially fairly robust response petered out too quickly, leading to a decade of stagnation. That hasn’t happened this time, but it still could. Unless the April jobs numbers are indicative of a broader slowdown — something hardly any forecaster thinks is especially likely — the aggregate economic statistics are going to start looking very strong in the coming months. “There is going to be a tendency to look at those numbers and say, ‘Mission accomplished,’ before it is time,” says Nela Richardson, chief economist for ADP, a payroll-processing firm. That is what happened a decade ago. But this time, far more people are paying attention. Inside the White House, economists have zeroed in on the labor-force participation rate among Black women as a key measure of economic health. Powell, at the Fed, now talks in virtually every public appearance about race and inequality — topics that previous Fed chairs typically tiptoed around or avoided altogether. Journalists who covered the aftermath of the last recession are more likely to question the notion that the economy is good just because the unemployment rate is low.Kristen Broady, a fellow in the Brookings Institution’s Metropolitan Policy Program, says that people are finally paying attention after years of being preached to that public-policy discussions should focus less on aggregate statistics. Recently, journalists and policymakers have been bringing up the subject with her, rather than the other way around. That, as much as anything, is cause for optimism.“This is the first time,” she says, “that I have hope.” More

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    Inflation Fears Rise as Prices Surge for Lumber, Cars and More

    Federal Reserve officials believe low and stable price expectations give them room to heal the job market. But what if outlooks change?Turn on the news, scroll through Facebook, or listen to a White House briefing these days and there’s a good chance you’ll catch the Federal Reserve’s least-favorite word: Inflation. If that bubbling popular concern about prices gets too ingrained in America’s psyche, it could spell trouble for the nation’s central bank. More

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    Amid Economic Turmoil, Biden Stays Focused on Longer Term

    The president’s advisers are pushing their most detailed argument yet for the long-term benefits of a $4 trillion agenda to remake the American economy.WASHINGTON — President Biden and his economic team on Thursday made their most detailed case yet for trillions of dollars in new federal spending to rebuild public investment in workers, research and physical infrastructure, focusing on long-term ingredients of economic growth and equality as the current recovery from recession showed signs of distress.The president’s aides published what amounted to a deeper economic backbone for the argument that Mr. Biden is making publicly and privately to sell his plans to lawmakers, including the message he conveyed to a group of Republican senators he invited to the White House on Thursday to discuss an infrastructure package centered on roads, bridges, transit and broadband.That meeting ended with encouraging words from both sides. Republicans said Mr. Biden invited the senators, who had previously offered a nearly $570 billion, narrowly focused package, to return with an updated offer, including how to pay for new spending.Senator Shelley Moore Capito of West Virginia, who is leading the Republicans’ negotiations, said lawmakers would prepare an updated offer for the president to review by early next week, including a more detailed list of the kinds of projects they would be willing to fund and a set of proposals to cover the costs. The senators said they expected Mr. Biden would then respond with a counteroffer.“I made it clear that this was not a stagnant offer from us,” Ms. Capito said. “He made it clear that he is serious in wanting to pursue this.”She said Republican senators were open to raising the overall top-line price tag of their offer, which is a fraction of the new spending the president proposed. She also suggested that Republicans would be willing to cut a deal with Mr. Biden even if he decided to pursue a more progressive package, including priorities beyond traditional infrastructure, with only Democratic votes. Other senators predicted the sides would know by Memorial Day whether they could reach a deal.“It’s in nobody’s interest to draw this out beyond the time when you think it’s workable,” said Senator Roy Blunt, Republican of Missouri. “But I certainly left there thinking there’s a workable agreement to be had if we want to stretch a little both ways.”Shortly before the meeting, the White House Council of Economic Advisers posted a document to its website that cast Mr. Biden’s $4 trillion economic agenda as a way to correct decades of tax-cutting policies that had failed to bolster the middle class. In its place, the administration is pushing a rebuilding of public investment, like infrastructure, research and education, as the best way to fuel economic growth and improve families’ lives.The so-called issue brief reflects the administration’s longer-term thinking on economic policy when conservatives have ramped up criticism of the president over slowing job growth and accelerating inflation.Administration officials express confidence that recent price surges in used cars, airfare and other sectors of the economy will prove temporary, and that job growth will speed up again as more working-aged Americans are vaccinated against Covid-19 and regain access to child care during work hours. They say Mr. Biden’s $1.9 trillion economic aid package, which he signed in March, will lift job growth in the coming months, noting that new claims for unemployment fell to a pandemic-era low on Thursday.The officials also said it was appropriate for the president to look past the current crisis and push efforts to strengthen the economy long term.The two halves of Mr. Biden’s $4 trillion agenda, the American Jobs Plan and the American Families Plan, are premised on the economy returning to a low unemployment rate where essentially every American who wants to work is able to find a job, Cecilia Rouse, the chair of the Council of Economic Advisers, said in an interview.“The American Rescue Plan was rescue,” Dr. Rouse said. “It was meant as stimulus as we work through this hopefully once-in-a-century, if not longer, pandemic. The American Jobs Plan, American Families Plan are saying, look, that’s behind us, but we knew going into the pandemic that there were structural problems in our country and in our economy.”Mr. Biden’s plans would raise taxes on high earners and corporations to fund new federal spending on physical infrastructure, care for children and older Americans, expanded access to education, an accelerated transition to low-carbon energy and more.Those efforts “reflect the empirical evidence that a strong economy depends on a solid foundation of public investment, and that investments in workers, families and communities can pay off for decades to come,” Mr. Biden’s advisers wrote. “These plans are not emergency legislation; they address longstanding challenges.”The five-page brief focuses on arguments about what drives productivity, wage growth, innovation and equity in the economy. The issues predate the coronavirus recession and recovery, and Democrats in particular have pledged for years to address them.The brief begins by attacking the “old orthodoxy” of tax-cutting policies by presidents and Congress, including the 2017 tax cut passed by Republicans under President Donald J. Trump. A driving rationale behind that law was an effort to encourage more investment by private companies, bolstering what economists call the nation’s capital stock. The brief faults those policies for not producing the rapid gains in economic growth that champions of those policies promised, and it says that raising taxes on high earners “will help ensure that the gains from economic growth are more broadly shared.”Republicans continue to insist that tax cuts, particularly for businesses, are the key to economic competitiveness and middle-class prosperity. They have refused to negotiate any changes to their party’s signature 2017 tax law as part of an infrastructure agreement, even as they concede some need for a limited version of the new public investments Mr. Biden is calling for.Republicans used the meeting on Thursday to reiterate that they would be unwilling to raise corporate or personal taxes lowered by their 2017 law. Instead, they pitched the president on the use of zero-interest loans and public-private partnerships, in addition to existing gasoline taxes and other government savings.Mr. Biden would raise taxes to reverse what his economic team calls the federal government’s underinvestment in policies that help educate children and adults, facilitate the development of new technologies and industries and support parents so they are able to work and earn more. His team cites the wave of quickly developed coronavirus vaccines from Pfizer and Moderna, which grew out of publicly funded research, as an example of public investments yielding private-sector innovation.“Those started with ideas that were funded by the public sector decades ago,” Dr. Rouse said. “And then the private sector built on top of that, so it’s really, the private sector needs to work with the public sector. We are all very grateful that the public sector was willing to take that risk, and it didn’t pay off right away.”“In many ways, the federal government should be patient,” she said. “We are a kind of entity, we should be patient. So I’m not saying we have to wait a million years for something to pay off, but we don’t need to have the kind of immediate payoff that a private company might need to see.”That argument is in many ways a departure from how administrations typically pitch economic policies during a crisis. There is no focus in the brief on immediate job creation or a quick bump in economic growth.Weeks after Mr. Biden detailed both halves of his plan, the administration has offered no projections about the effects of his policies on jobs or growth. Instead, Dr. Rouse and other administration officials cited forecasts by the Moody’s Analytics economist Mark Zandi, which are among the more favorable outside analyses of the president’s agenda.Administration officials say there is no need for their economic team to produce such forecasts. Congressional Republicans have repeatedly called for the White House to produce an estimate of how many jobs would be created by Mr. Biden’s plans. More