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    Three Lessons From a Surprisingly Resilient Job Market

    The recovery from the pandemic lockdowns has prompted economists to consider whether their playbook is outdated or just missing a page.The pandemic created an economic crisis unlike any recession on record. So perhaps it shouldn’t be surprising that the aftermath, too, has played out in a way that almost no economists expected.When unemployment soared in the first weeks of the pandemic, many feared a repeat of the long, slow rebound from the Great Recession: years of joblessness that left many workers permanently scarred. Instead, the recovery in the labor market has been, by many measures, the strongest on record.In early 2021, some economists foresaw a surge in inflation. Others were skeptical: Similar predictions in recent years — in some cases from the same forecasters — had failed to come true. This time, however, they were right.And when the Federal Reserve began trying to tamp down inflation, there were warnings that the job market was sure to buckle, as it had threatened to do every time policymakers began raising interest rates too rapidly in the decade before the pandemic. Instead, the central bank has raised rates to their highest level in decades, and the job market is holding steady, or perhaps even gaining steam.The final chapter on the recovery has not been written. A “soft landing” is not a done deal. But it is clear that the economy, particularly the job market, has proved far more resilient than most people thought probable.Interviews with dozens of economists — some of whom got the recovery partly right, many of whom got it mostly wrong — provided insights into what they have learned from the past two years, and what they make of the job market right now. They didn’t agree on all the details, but three broad themes emerged.

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    Unemployment usually rises when job openings fall. Not this time.
    Notes: Job openings are shown as a share of employment. Unemployment is shown as a share of the labor force. All data is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York Times

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    The racial unemployment gap is narrowing
    Note: Data is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York Times

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    Job growth has far surpassed prepandemic expectations
    Notes: Change since fourth quarter 2014. Projection based on 2015 Congressional Budget Office forecast.Source: Bureau of Labor Statistics; Congressional Budget OfficeBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Are Americans Wary While the Economy Is Healthy? Look at Nevada.

    Toni Irizarry recognizes that the economy has improved. Compared with the first wave of the pandemic, when Las Vegas went dark, and joblessness soared to levels not seen since the Great Depression, these are days of relative normalcy.Ms. Irizarry, 64, oversees a cafe at the Orleans Hotel and Casino, a property just off the Las Vegas Strip that caters mostly to locals. Guests have returned, filling the blackjack and roulette tables amid the cacophony of jingling slot machines — the sound of money.She started in the hospitality industry busing tables when she was only 16. Her paychecks have allowed her to purchase a home, raise three children and buy each of them their first car. But as she contemplates the future, she cannot shake a sense of foreboding.The outlook of people like Ms. Irizarry could be crucial in determining who occupies the White House. Nevada is one of six battleground states that are likely to decide the outcome of November’s presidential election. Its economic centerpiece, Las Vegas, was constructed on dreams of easy money. That proved a winning proposition for generations of working people, yielding middle class paychecks for bartenders, restaurant servers, casino dealers and maids. Yet over the last two decades, a series of shocks have eroded confidence.Nevada remains heavily reliant on the willingness of people around the world to spend their money at casinos, restaurants and entertainment venues.First, a speculative bonanza in real estate went spectacularly wrong, turning the city into the epicenter of a national foreclosure crisis. The Great Recession inflicted steep layoffs on the hospitality industry, demolishing the notion that gambling was immune to downturns. Then in 2020, the pandemic turned Las Vegas into a ghost town.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    For Biden, a Sunny Economy Could Finally Be a Potential Gain

    Recession fears have eased. Growth and job gains are beating expectations. Inflation is cooling. Consumers are happier. The president is waiting to benefit.A run of strong economic data appears to have finally punctured consumers’ sour mood about the U.S. economy, blasting away recession fears and potentially aiding President Biden in his re-election campaign.Mr. Biden has struggled to sell voters on the positive signs in the economy under his watch, including rapid job gains, low unemployment and the fastest rebound in economic growth from the pandemic recession of any wealthy country.For much of Mr. Biden’s term, forecasters warned of imminent recession. Consumers remained glum, and voters told pollsters they were angry with the president for the other big economic development of his tenure: a surge of inflation that peaked in 2022, with the fastest rate of price growth in four decades.Much of that narrative appears to be changing. After lagging price growth early in Mr. Biden’s term, wages are now rising faster than inflation. The economy grew 3.1 percent from the end of 2022 to the end of 2023, defying expectations, including robust growth at the end of the year. The inflation rate is falling toward historically normal levels. U.S. stock markets are recording record highs.The Federal Reserve, which sharply raised interest rates to tame price growth, signaled this week that it was likely to start cutting rates soon. “This is a good economy,” Jerome H. Powell, the Fed chair, whose central bank is independent from the White House, declared at a news conference this week.The Conference Board’s consumer confidence index has jumped in each of the past two months. A key component of it, in which consumers rate their current economic situations, is closing in on its recent high from February 2020, on the eve of the coronavirus pandemic.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Global Economy Is Heading Toward ‘Soft Landing,’ I.M.F. Says

    The International Monetary Fund upgraded its growth forecasts and offered a more optimistic outlook for the world economy.The global economy has been battered by a pandemic, record levels of inflation, protracted wars and skyrocketing interest rates over the past four years, raising fears of a painful worldwide downturn. But fresh forecasts published on Tuesday suggest that the world has managed to defy the odds, averting the threat of a so-called hard landing.Projections from the International Monetary Fund painted a picture of economic durability — one that policymakers have been hoping to achieve while trying to manage a series of cascading crises.In its latest economic outlook, the I.M.F. projected global growth of 3.1 percent this year — the same pace as in 2023 and an upgrade from its previous forecast of 2.9 percent. Predictions of a global recession have receded, with inflation easing faster than economists anticipated. Central bankers, including the Federal Reserve, are expected to begin cutting interest rates in the coming months.“The global economy has shown remarkable resilience, and we are now in the final descent to a soft landing,” said Pierre-Olivier Gourinchas, the chief economist of the I.M.F.Policymakers who feared they would need to hit the brakes on economic growth to contain rising prices have managed to tame inflation without tipping the world into a recession. The I.M.F. expects global inflation to fall to 5.8 percent this year and 4.4 percent in 2025 from 6.8 percent in 2023. It estimates that 80 percent of the world’s economies will experience lower annual inflation this year.The brighter outlook is due largely to the strength of the U.S. economy, which grew 3.1 percent last year. That robust growth came despite the Fed’s aggressive series of rate increases, which raised borrowing costs to their highest levels in 22 years. Consumer spending in America has held strong while businesses have continued to invest. The I.M.F. now expects the U.S. economy to grow 2.1 percent this year, up from its previous prediction of 1.5 percent.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Economists Predicted a Recession. Instead, the Economy Grew.

    A widely predicted recession never showed up. Now, economists are assessing what the unexpected resilience tells us about the future.The recession America was expecting never showed up.Many economists spent early 2023 predicting a painful downturn, a view so widely held that some commentators started to treat it as a given. Inflation had spiked to the highest level in decades, and a range of forecasters thought that it would take a drop in demand and a prolonged jump in unemployment to wrestle it down.Instead, the economy grew 3.1 percent last year, up from less than 1 percent in 2022 and faster than the average for the five years leading up to the pandemic. Inflation has retreated substantially. Unemployment remains at historic lows, and consumers continue to spend even with Federal Reserve interest rates at a 22-year high.The divide between doomsday predictions and the heyday reality is forcing a reckoning on Wall Street and in academia. Why did economists get so much wrong, and what can policymakers learn from those mistakes as they try to anticipate what might come next?It’s early days to draw firm conclusions. The economy could still slow down as two years of Fed rate increases start to add up. But what is clear is that old models of how growth and inflation relate did not serve as accurate guides. Bad luck drove more of the initial burst of inflation than some economists appreciated. Good luck helped to lower it again, and other surprises have hit along the way.“It’s not like we understood the macro economy perfectly before, and this was a pretty unique time,” said Jason Furman, a Harvard economist and former Obama administration economic official who thought that lowering inflation would require higher unemployment. “Economists can learn a huge, healthy dose of humility.”Economists, of course, have a long history of getting their predictions wrong. Few saw the global financial crisis coming earlier this century, even once the mortgage meltdown that set it off was well underway. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    U.S. Economy Grew at 3.3% Rate in Latest Quarter

    The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic’s upheaval.The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.The latest reading is preliminary and may be revised in the months ahead.Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)“Stunning and spectacular,” Diane Swonk, chief economist at KPMG, said of the latest data. “We’ll take the win.” More

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    The U.S. Seems to Be Dodging a Recession. What Could Go Wrong?

    Economists have become increasingly optimistic about the odds of a soft landing. But as 2024 begins to unfold, risks remain.With inflation falling, unemployment low and the Federal Reserve signaling it could soon begin cutting interest rates, forecasters are becoming increasingly optimistic that the U.S. economy could avoid a recession.Listen to This ArticleOpen this article in the New York Times Audio app on iOS.Wells Fargo last week became the latest big bank to predict that the economy will achieve a soft landing, gently slowing rather than screeching to a halt. The bank’s economists had been forecasting a recession since the middle of 2022.Yet if forecasters were wrong when they predicted a recession last year, they could be wrong again, this time in the opposite direction. The risks that economists highlighted in 2023 haven’t gone away, and recent economic data, though still mostly positive, has suggested some cracks beneath the surface.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    The Stock and Bond Markets Are Getting Ahead of the Fed.

    Stock and bond markets have been rallying in anticipation of Federal Reserve rate cuts. But don’t get swept away just yet, our columnist says.It’s too early to start celebrating. That’s the Federal Reserve’s sober message — though given half a chance, the markets won’t heed it.In a news conference on Wednesday, and in written statements after its latest policymaking meeting, the Fed did what it could to restrain Wall Street’s enthusiasm.“It’s far too early to declare victory and there are certainly risks” still facing the economy, Jerome H. Powell, the Fed chair, said. But stocks shot higher anyway, with the S&P 500 on the verge of a new record.The Fed indicated that it was too early to count on a “soft landing” for the economy — a reduction in inflation without a recession — though that is increasingly the Wall Street consensus. An early decline in the federal funds rate, the benchmark short-term rate that the Fed controls directly, isn’t a sure thing, either, though Mr. Powell said the Fed has begun discussing rate cuts, and the markets are, increasingly, counting on them.The markets have been climbing since July — and have been positively buoyant since late October — on the assumption that truly good times are in the offing. That may turn out to be a correct assumption — one that could be helpful to President Biden and the rest of the Democratic Party in the 2024 elections.But if you were looking for certainty about a joyful 2024, the Fed didn’t provide it in this week’s meeting. Instead, it went out of its way to say that it is positioning itself for maximum flexibility. Prudent investors may want to do the same.Reasons for OptimismOn Wednesday, the Fed said it would leave the federal funds rate where it stands now, at about 5.3 percent. That’s roughly 5 full percentage points higher than it was in early in 2022. Inflation, the glaring economic problem at the start of the year, has dropped sharply thanks, in part, to those steep interest rate increases. The Consumer Price Index rose 3.1 percent in the year through November. That was still substantially above the Fed’s target of 2 percent, but way below the inflation peak of 9.1 percent in June 2022. And because inflation has been dropping, a virtuous cycle has developed, from the Fed’s standpoint. With the federal funds rate substantially above the inflation rate, the real interest rate has been rising since July, without the Fed needing to take direct action.But Mr. Powell says rates need to be “sufficiently restrictive” to ensure that inflation doesn’t surge again. And, he cautioned, “We will need to see further evidence to have confidence that inflation is moving toward our goal.”The wonderful thing about the Fed’s interest rate tightening so far is that it has not set off a sharp increase in unemployment. The latest figures show the unemployment rate was a mere 3.7 percent in November. On a historical basis, that’s an extraordinarily low rate, and one that has been associated with a robust economy, not a weak one. Economic growth accelerated in the three months through September (the third quarter), with gross domestic product climbing at a 4.9 percent annual rate. That doesn’t look at all like the recession that had been widely anticipated a year ago.To the contrary, with indicators of robust economic growth like these, it’s no wonder that longer-term interest rates in the bond market have been dropping in anticipation of Fed rate cuts. The federal funds futures market on Wednesday forecast federal funds cuts beginning in March. By the end of 2024, the futures market expected the federal funds rate to fall to below 4 percent.But on Wednesday, the Fed forecast a slower and more modest decline, bringing the rate to about 4.6 percent.Too Soon to RelaxSeveral other indicators are less positive than the markets have been. The pattern of Treasury rates known as the yield curve has been predicting a recession since Nov. 8, 2022. Short-term rates — specifically, for three-month Treasuries — are higher than those of longer duration — particularly, for 10-year Treasuries. In financial jargon, this is an “inverted yield curve,” and it often forecasts a recession.Another well-tested economic indicator has been flashing recession warnings, too. The Leading Economic Indicators, an index formulated by the Conference Board, an independent business think tank, is “signaling recession in the near term,” Justyna Zabinska-La Monica, a senior manager at the Conference Board, said in a statement.The consensus of economists measured in independent surveys by Bloomberg and Blue Chip Economic Indicators no longer forecasts a recession in the next 12 months — reversing the view that prevailed earlier this year. But more than 30 percent of economists in the Bloomberg survey and fully 47 percent of those in the Blue Chip Economic Indicators disagree, and take the view that a recession in the next year will, in fact, happen.While economic growth, as measured by gross domestic product, has been surging, early data show that it is slowing markedly, as the bite of high interest rates gradually does its damage to consumers, small businesses, the housing market and more.Over the last two years, fiscal stimulus from residual pandemic aid and from deficit spending has countered the restrictive efforts of monetary policy. Consumers have been spending resolutely at stores and restaurants, helping to stave off an economic slowdown.Even so, a parallel measurement of economic growth — gross domestic income — has been running at a much lower rate than G.D.P. over the last year. Gross domestic income has sometimes been more reliable over the short term in measuring slowdowns. Ultimately, the two measures will be reconciled, but in which direction won’t be known for months.The MarketsThe stock and bond markets are more than eager for an end to monetary belt-tightening.Already, the U.S. stock market has fought its way upward this year and is nearly back to its peak of January 2022. And after the worst year in modern times for bonds in 2022, market returns for the year are now positive for the investment-grade bond funds — tracking the benchmark Bloomberg U.S. Aggregate Bond Index — that are part of core investment portfolios.But based on corporate profits and revenues, prices are stretched for U.S. stocks, and bond market yields reflect a consensus view that a soft landing for the economy is a near-certain thing.Those market movements may be fully justified. But they imply a near-perfect, Goldilocks economy: Inflation will keep declining, enabling the Fed to cut interest rates early enough to prevent an economic calamity.But excessive market exuberance itself could upend this outcome. Mr. Powell has spoken frequently of the tightening and loosening of financial conditions in the economy, which are partly determined by the level and direction of the stock and bond markets. Too big a rally, taking place too early, could induce the Fed to delay rate cuts.All of this will have a bearing on the elections of 2024. Prosperity tends to favor incumbents. Recessions tend to favor challengers. It’s too early to make a sure bet.Without certain knowledge, the best most investors can do is to be positioned for all eventualities. That means staying diversified, with broad holdings of stocks and bonds. Hang in, and hope for the best. More