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    Bank of England raises rates to 1 percent amid recession worries.

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    As prices for energy, food and commodities rise after Russia’s invasion of Ukraine, the impact is being felt sharply around the world. In Britain, the central bank pushed interest rates to their highest level in 13 years on Thursday, in an effort to arrest rapidly rising prices even as the risk of recession is growing.The bank predicted that inflation would rise to its highest level in four decades in the final quarter of this year, and that the British economy would shrink by nearly 1 percent.“Global inflationary pressures have intensified sharply in the buildup to and following the invasion,” Andrew Bailey, the governor of the Bank of England, said on Thursday. “This has led to a material deterioration in the outlook,” he added, for both the global and British economies. On an annual basis, the economy would also shrink next year.The Bank of England raised interest rates to 1 percent from 0.75 percent, their highest level since 2009. Three members of the nine-person rate-setting committee wanted to take a more aggressive step and raise rates by half a percentage point. The Bank of England has raised rates at every policy meeting since December.Prices rose 7 percent in Britain in March from a year earlier, the fastest pace since 1992. The central bank predicts the inflation rate will peak above 10 percent in the last quarter of the year, when household energy bills will increase again after the government’s energy price cap is reset in October. Ten percent would be the highest rate since 1982.The rapidly changing landscape was reflected in the prospects for economic growth. In 2023, the bank now predicts, the economy will shrink 0.25 percent instead of growing 1.25 percent, which it predicted three months ago.On Wednesday, policymakers at the U.S. Federal Reserve increased interest rates half a percentage point, the biggest jump in 22 years, in an effort to cool down the economy quickly as inflation runs at its fastest pace in four decades. The U.S. central bank also said it would begin shrinking its balance sheet, allowing bond holdings to mature without reinvestment.On Thursday, the Bank of England said its staff would begin planning to sell the government bonds it had purchased, but a decision on whether to commence these sales hasn’t been made. The bank stopped making new net purchases at the end of last year after buying 875 billion pounds ($1.1 trillion) in bonds. The bank said it would provide an update in August.The outlook for the global economy has been rocked by the war in Ukraine, which is pushing up the price of energy, food and other commodities such as metals and fertilizer. The Covid-19 pandemic continues to disrupt trade and supply chains, particularly from shutdowns stemming from China’s zero-Covid policy. Last month, the International Monetary Fund slashed its forecast for global economic growth this year to 3.6 percent from 4.4 percent, which was predicted in January.The challenge for policymakers in Britain is stark. The Bank of England has a mandate to achieve a 2 percent inflation rate. At the same time, there is evidence that the economy is already slowing down, consumer confidence is dropping and businesses are worried that price increases will depress consumer spending, a key driver of economic growth. With inflation at its highest level in three decades and wage growth unable to keep up, British households are facing a painful squeeze on their budgets.Household disposable income, adjusted for inflation, is expected to fall 1.75 percent this year, the second largest drop since records began in 1964, the bank said. The central bank’s challenge is to slow inflation to ease the pressure on households and businesses without cooling the economy too much and tipping it into a recession.“Monetary policy must, therefore, navigate a narrow path between the increased risks from elevated inflation and a tight labor market on one hand, and the further hit to activity from the reduction in real incomes on the other,” Mr. Bailey said on Thursday.Weighing that alternative, policymakers figured that pressures on costs for business and prices for consumers would persist unless they took action. Companies expect to strongly increase the selling prices for their goods and services in the near term, after the sharp rises in their expenses, the bank said. At the same time, inflation could become more entrenched because the unemployment rate is low, forcing companies to raise wages to meet their hiring needs. More

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    Job Openings in U.S. Rose to Record in March

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    A government survey released Tuesday showed a record number of job openings, with 11.5 million positions listed as available in March, underscoring the continuing strength of the labor market.The number of “quits” — a measurement of the amount of workers voluntarily leaving jobs — also reached a high, an indicator that many workers are confident they can leave their jobs and find employment that better suits their desires or needs.The data released by the Labor Department as part of its monthly Job Openings and Labor Turnover Survey, or JOLTS report, is a fresh indicator of the anomalous nature of the economy as it recovers from the pandemic recession. A resurgence of household spending and business investment is colliding with a messy reordering of the supply of goods and labor.Labor force participation has quickly recovered, nearing prepandemic rates, but has failed to keep up with the surge in job opportunities over the past year as business owners expand to meet the demand for a variety of goods and services.After a sharp climb last year, job openings plateaued somewhat. The March reading suggests that the decline in acute coronavirus concerns among experts and the average consumer — paired with the rolling back of public health restrictions and the start of the summer hiring season — is increasing businesses’ appetites for more workers. Layoffs and discharges remained uncommon, and relatively flat compared to the previous month, at 1.4 million.The Federal Reserve is raising the cost of borrowing as part of an effort to cool consumer spending, business lending and demand for workers. Markets expect the Fed to announce a half-percentage point increase in its benchmark interest rate on Wednesday.The State of Jobs in the United StatesJob openings and the number of workers voluntarily leaving their positions in the United States remained near record levels in March.March Jobs Report: U.S. employers added 431,000 jobs and the unemployment rate fell to 3.6 percent ​​in the third month of 2022.Job Market and Stocks: This year’s decline in stock prices follows a historical pattern: Hot labor markets and stocks often don’t mix well.New Career Paths: For some, the Covid-19 crisis presented an opportunity to change course. Here is how these six people pivoted professionally.Return to the Office: Many companies are loosening Covid safety rules, leaving people to navigate social distancing on their own. Some workers are concerned.Andrew Patterson, a senior international economist in Vanguard’s Investment Strategy Group, argued this strong report from the Labor Department on the eve of the central bank’s rate decision gives officials “more cover to continue to raise rates” and remove its longstanding financial support of the economy “expeditiously,” as the Fed chair, Jerome H. Powell, has said in recent weeks.Overall, even in an environment of higher borrowing costs, the remarkably robust desire among businesses to expand their work forces could help economic activity plow through the twin challenges presented by inflation, which is at a 40-year high, and the discombobulation of global supply chains compounded by coronavirus outbreaks in Asia and war in Eastern Europe.“If there’s something that’s going to cause a recession, it will be from some outside, exogenous shock,” said Nick Bunker, an economist at the Indeed Hiring Lab, a group that analyzes world labor markets. “It won’t be household spending.”Anonymized credit card data collected by Bank of America shows that even households with an annual income below $50,000 have about twice the savings they did before the pandemic. Still, a Gallup survey released last week found 46 percent of Americans rated their personal finances positively, down from 57 percent last year, when families were freshly benefiting from rounds of federal aid and inflation remained tame.Employers have been rankled, too, complaining of labor shortages as millions of workers — energized by the discussion about “essential work” during the pandemic and buoyed by savings — experience a degree of bargaining power they haven’t had in decades.That has led to a tense, politically charged dynamic in which wage pressures are a broadening complaint among large and small businesses trying to maintain their profit margins, even though jumps in pay haven’t generally kept up with price increases.“We’re learning a lot about how structurally fragile our economy is,” said Claudia Sahm, a former Federal Reserve economist. She cited a dependence on “endless low-wage workers and just-in-time supplies of goods” for keeping consumer prices depressed for many years.The employment cost index, which tracks wages and benefits, jumped by the most on record in the first quarter of this year, according to Labor Department figures released last week. Still, a recent analysis by the Economic Policy Institute, a left-leaning think tank in Washington, concluded that roughly 54 percent of the overall increase in prices in the nonfinancial corporate sector since the second quarter of 2020 could be attributed to an expansion of profit margins, while labor costs were responsible for less than 8 percent of price increases. The analysis indicates that 38 percent of the uptick stems from nonlabor input costs, such as overhead, fuel or raw materials.That data complicates the increasingly popular narrative that the spikes in worker pay are mostly to blame for the severity of price increases, rather than a wider mix of reasons.“Normally, you’d expect profits to decrease during a period of high inflation,” said Tony Roth, the chief investment officer of Wilmington Trust Investment Advisors, an arm of M&T Bank. The reason the opposite has happened for many companies over the last couple of years is, he said, straightforward: “Businesses are doing it because they can get away with it.”The economy, while strong, may be locked in a vexing, self-reinforcing cycle for a while: The continued wave of household spending has often signaled to businesses that they had room to raise prices without consequence — allowing executives to hire more workers while maintaining profitability.Until more consumers balk at heightened price levels, it’s unclear where prices and demand will find an equilibrium.Mr. Roth said his financial firm, like most others, was advising clients to invest in companies that still had a large amount of “pricing power” — meaning that they can raise prices without dampening demand for what they sell, either because the good or service is particularly desirable or because it is essential to the buyers’ life routines or business needs. More

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    World Economic Outlook Dims as War and Pandemic Cast a Pall

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    The International Monetary Fund’s new World Economic Outlook expects growth to slow to 3.6 percent this year. The group is one of many to slash their forecasts recently.WASHINGTON — The world economy has entered a period of intense uncertainty as a capricious pandemic and the fallout from Russia’s war in Ukraine combine to fuel rapid inflation and weigh on an already fragile global recovery.These colliding challenges are confronting policymakers and central bankers in the United States and Europe as they seek to bring down inflation without slowing growth so much that their economies tip into recession.In the last week, international organizations and think tanks have begun slashing their forecasts for growth and trade as they assess the war’s disruptions to global energy, food and commodity supplies, as well as China’s sweeping lockdowns to contain a renewed coronavirus outbreak.The pall over the world economy was underscored on Tuesday by the International Monetary Fund, which said in its World Economic Outlook that global output was expected to slow this year to 3.6 percent, from 6.1 percent in 2021. That is a downgrade from a January forecast of 4.4 percent growth this year.“Global economic prospects have been severely set back, largely because of Russia’s invasion of Ukraine,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said at a news briefing on Tuesday. “This crisis unfolds as the global economy has not yet fully recovered from the pandemic.”The impact of Russia’s war on the global economy will be a central topic for policymakers convening in Washington this week for the spring meetings of the International Monetary Fund and the World Bank.As the meetings got underway, policymakers grappled with how to maintain pressure on Russia while keeping the economic recovery on track and protecting the world’s poor from rising prices. While some countries that export commodities will benefit from a period of higher fuel and food prices, for most economies the disruptions weigh heavily.“The war has made an already dire situation worse,” Treasury Secretary Janet L. Yellen said in a speech about rising food insecurity on Tuesday. “Price and supply shocks are already materializing, adding to global inflationary pressures, creating risks to external balances, and undermining the recovery from the pandemic.”On Wednesday, Ms. Yellen plans to attend an opening session that will include Ukraine’s finance minister as the United States looks to stand with allies in opposition to Russia’s invasion, a Treasury official said. However, Ms. Yellen will not attend some Group of 20 sessions, such as those on international financial architecture and sustainable finance, if Russians are participating.Against that backdrop, the I.M.F.’s new data revealed a daunting set of economic headwinds. Mr. Gourinchas said the war was slowing growth and spurring inflation, which he described as a “clear and present danger” for many countries. He added that disruptions to Russian supplies of oil, gas and metals, along with Ukrainian exports of wheat and corn, will ripple through commodities markets and across the global economy “like seismic waves.”He acknowledged that the trajectory of the global economy would depend on how the war proceeded and the ultimate breadth of the sanctions that the United States and its allies in Europe and Asia imposed on Russia.“Uncertainty around these projections is considerable, well beyond the usual range,” Mr. Gourinchas said. “Growth could slow down further while inflation could exceed our projections if, for instance, sanctions extend to Russian energy exports.”Ukraine and Russia are facing the most dire economic consequences from the war. The I.M.F. expects the Ukrainian economy to contract by 35 percent this year, while Russia’s economy is projected to shrink 8.5 percent. Mr. Gourinchas noted that the Russian authorities had so far managed to prevent a collapse of their financial system and avoided bank failures but said further sanctions targeting Russia’s energy industry could have a significant impact on its economy.The sweeping sanctions that America and its allies have already imposed on Russia are the main factor contributing to the downward revision of the I.M.F.’s global growth outlook, Mr. Gourinchas said. He added that a tightening of restrictions on Russian energy exports would be an “adverse scenario” that would further slow output around the world.Rising prices around the world show no signs of abating, the I.M.F. said, even if supply chain problems ease. It expects inflation to remain elevated throughout the year, projecting it at 5.7 percent in advanced economies and 8.7 percent in emerging markets. Inflation hit 8.5 percent in the United States last month, the fastest 12-month pace since 1981.An empty street in Shanghai this week. The World Bank warned that the lingering pandemic and Covid-19 lockdowns in China could amplify income inequality and poverty rates.Aly Song/ReutersOther international organizations and research groups have also pared back their global growth forecasts. Economists at the Peterson Institute for International Economics, a Washington think tank, expect global growth to decline from a rapid 5.8 percent in 2021 to 3.3 percent annually in 2022 and 2023.The World Bank also expressed alarm this week about the state of the global economy, warning that the lingering pandemic, Covid-19 lockdowns in China and higher inflation could amplify income inequality and poverty rates. It lowered its 2022 growth forecast to 3.2 percent from 4.1 percent.“I’m deeply concerned about developing countries,” David Malpass, the World Bank president, said on Monday. “They’re facing sudden price increases for energy, fertilizer and food, and the likelihood of interest rate increases. Each one hits them hard.”According to the Bank of International Settlements, more than half of emerging economies have inflation rates above 7 percent. And 60 percent of “advanced economies,” including the United States and the euro area, have inflation over 5 percent, the largest share since the 1980s, the bank said.In Britain, inflation climbed to 7 percent in March, the highest level in 30 years.An April 12 survey of global investors by BofA Securities found that more than two-thirds were pessimistic about global growth prospects in the months ahead.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    The US Economy Is Booming. Why Are Economists Worrying About a Recession?

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    There is little sign that a recession is imminent. But sky-high demand and supply shortages are testing the economy’s limits.Employers are adding hundreds of thousands of jobs a month, and would hire even more people if they could find them. Consumers are spending, businesses are investing, and wages are rising at their fastest pace in decades.So naturally, economists are warning of a possible recession.Rapid inflation, soaring oil prices and global instability have led forecasters to sharply lower their estimates of economic growth this year, and to raise their probabilities of an outright contraction. Investors share that concern: The bond market last week flashed a warning signal that has often — though not always — foreshadowed a downturn.Such predictions may seem confusing when the economy, by many measures, is booming. The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic, and employers are continuing to hire at a breakneck pace, adding 431,000 jobs in March alone. The unemployment rate has fallen to 3.6 percent, barely above the prepandemic level, which was itself a half-century low.But to the doomsayers, the recovery’s remarkable strength carries the seeds of its own destruction. Demand — for cars, for homes, for restaurant meals and for the workers to provide them — has outstripped supply, leading to the fastest inflation in 40 years. Policymakers at the Federal Reserve argue they can cool off the economy and bring down inflation without driving up unemployment and causing a recession. But many economists are skeptical that the Fed can engineer such a “soft landing,” especially in a moment of such extreme global uncertainty.“It’s like trying to land during an earthquake,” said Tara Sinclair, a professor of economics at George Washington University.William Dudley, a former president of the Federal Reserve Bank of New York, called a recession “virtually inevitable.” He is among the economists arguing that if the Fed had begun raising interest rates last year, it might have been able to rein in inflation merely by tapping the brakes on the economy. Now, they say, the economy is growing so rapidly — and prices are rising so quickly — that the only way for the Fed to get control is to slam on the brakes and cause a recession.Still, a majority of forecasters say a recession remains unlikely in the next year. High oil prices, rising interest rates and waning government aid will all drag down growth this year, said Aneta Markowska, chief economist for Jefferies, an investment bank. But corporate profits are strong, households have trillions in savings, and debt loads are low — all of which should provide a cushion against any slowdown.“It’s easy to construct a very negative narrative, but when you actually look at the magnitude of all those impacts, I don’t think they’re significant enough to push us into a recession in the next 12 months,” she said. Recessions, almost by definition, involve job losses and unemployment; right now, companies are doing practically anything they can to retain workers.“I just don’t see what would cause businesses to do a complete 180 and go from ‘We need to hire all these people and we can’t find them’ to ‘We have to lay people off,’” Ms. Markowska said. Economists, however, are notoriously terrible at predicting recessions. So it makes sense to focus instead on where the recovery is right now, and on the forces that are threatening to knock it off course.The State of Jobs in the United StatesJob openings and the number of workers voluntarily leaving their positions in the United States remained near record levels in March.March Jobs Report: U.S. employers added 431,000 jobs and the unemployment rate fell to 3.6 percent ​​in the third month of 2022.A Strong Job Market: Data from the Labor Department showed that job openings remained near record levels in February.Wages and Inflation: Economists hoped that as households shifted spending back to services, price gains would cool. Rapid wage growth could make that story more complicated.New Career Paths: For some, the Covid-19 crisis presented an opportunity to change course. Here is how these six people pivoted professionally.Return to the Office: Many companies are loosening Covid safety rules, leaving people to navigate social distancing on their own. Some workers are concerned.Unionization Efforts: The pandemic has fueled enthusiasm for organized labor. But the pushback has been brutal, especially in the private sector.Growth will slow. That’s not necessarily a bad thing.Last year was the best year for economic growth since the mid-1980s, and the best for job growth on record. Those kinds of explosive gains — enabled by vaccines and fueled by trillions of dollars in government aid — were not likely to be repeated this year.In fact, some slowdown is probably desirable. The rapid rebound in consumer spending, especially on cars, furniture and other goods, has overwhelmed supply chains, driving up prices. Demand for workers is so strong that jobs are going unfilled despite rising wages. Jerome H. Powell, the Fed chair, said recently that the labor market had gotten “tight to an unhealthy level.”Some economists, particularly on the left, took issue with that claim, arguing that the hot labor market was good for workers. But even most of them said the recent pace of job growth was unsustainable for long.“We have torn back toward normal at a really fast pace, and it would be unrealistic to think that could continue,” said Josh Bivens, the director of research at the Economic Policy Institute, a progressive think tank. Even slower wage growth, he said, wouldn’t worry him, as long as pay increases didn’t fall further behind inflation.But some economists cautioned against rooting for a slowdown in a rare moment when low-wage workers were seeing substantial pay increases, and unemployment was falling for vulnerable groups. The unemployment rate among Black Americans fell to 6.2 percent in March, but was still nearly double that of white Americans.“The recovery from my perspective is fairly robust, and so why not enjoy this right now?” said Michelle Holder, president of the Washington Center for Equitable Growth, a progressive think tank. She said that while economists were right to be concerned about high inflation, “I don’t think similar voices were this bent out of shape about high unemployment.”A slowdown doesn’t have to mean a recession. (In theory.)Rush-hour commuters are returning to New York City’s subways. The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic.Gabby Jones for The New York TimesThe key question for policymakers is whether they can cool the economy without putting it into deep freeze. Mr. Powell argues that they can, though he acknowledges that it won’t be easy.His argument goes something like this: There are 11 million open jobs and fewer than six million unemployed workers. There are more would-be home buyers than there are homes to buy, and more would-be car buyers than available cars. By gradually raising interest rates and making it more expensive to borrow, the Fed is hoping to curb demand for workers and homes and cars, but not by so much that employers start cutting jobs.That is a tricky balance, and historically the Fed has failed to achieve it more often than not. But unlike after the last recession, when the grindingly slow recovery seemed at constant risk of stalling out, the current rebound is fast enough that it could lose substantial momentum without going into reverse. Employers could slash hiring plans, for example, and still have jobs for practically anyone who wanted one.Some economists also remain hopeful that supply constraints will ease as the pandemic recedes, which would allow inflation to cool without the Fed’s needing to do as much to reduce demand. There are some signs of that happening: More than 400,000 people rejoined the labor force in March, as falling coronavirus cases and more reliable school schedules allowed more people to return to work.Aaron Sojourner, an economist at the University of Minnesota, said policymakers shouldn’t think of the economy as “overheating” so much as “fevered,” its capacity limited by the pandemic.“When you have a fever, you can’t perform at the level that you can perform at when you’re healthy, and you break a sweat even when you’re doing less than what you used to be able to do,” he said. Improvements in the public health crisis, he said, should allow the fever to break.A lot could go wrong.For much of last year, Fed officials shared Mr. Sojourner’s view, seeing inflation as a result of pandemic-related disruptions that would soon dissipate. When those disruptions proved more persistent than expected, policymakers changed course, but too late to prevent inflation from accelerating beyond what they intended to allow.The challenge is that central bankers must make decisions before all the data is available.It is possible, for example, that the imbalances that led to rapid inflation are beginning to dissipate, largely on their own. Federal aid programs created early in the pandemic have mostly ended, and many families have drawn down their savings. That could bring down demand just as supply is starting to catch up. In that scenario, the Fed could short-circuit the recovery if it acts too aggressively.But it is also possible that strong job growth and rising wages will keep consumer demand high, while supply-chain disruptions and labor shortages linger. In that case, if the Fed is too cautious, it runs the risk of letting inflation spiral further out of control. The last time that happened, the Fed under Paul A. Volcker had to induce a crippling recession in the early 1980s to bring inflation to heel.Mr. Powell has argued it is not too late to prevent such a “hard landing.” But even if a recession is inevitable, it isn’t likely to happen overnight.“I don’t think we’re going to go into a recession in the next 12 months,” said Megan Greene, a senior fellow at Harvard’s Kennedy School and global chief economist for the Kroll Institute. “I think it’s possible in the 12 months after that.”Global turmoil makes everything more complicated. Soaring oil prices and global instability have led forecasters to lower their estimates of economic growth this year.Gabby Jones for The New York TimesWhen this year began, forecasters pegged February or March as the moment when major inflation indexes would hit their peak and begin to fall. But the war in Ukraine, and the resulting spike in oil prices, dashed those hopes. The year-over-year rate of inflation hit a 40-year high in February, and almost certainly accelerated further in March as gas prices topped $4 a gallon in much of the country.The pandemic itself also remains a wild card. China in recent weeks has imposed strict lockdowns in parts of the country in an effort to stop the spread of coronavirus cases there, and a new subvariant has led to a rise in cases in Europe. That could prolong supply-chain disruptions globally, even if the United States itself avoided another coronavirus wave.“The biggest unknown is global supply chains and how we manage all of those because it’s contingent on Chinese Covid policy and a war in Europe,” Ms. Greene said.There is little sign so far that rising gas prices, stock market volatility or fear of Covid has damped consumers’ willingness to spend, or businesses’ willingness to hire. But those factors are adding to uncertainty, making it harder for policymakers to discern where the economy is headed, and to decide how to react. More

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    The Fed Bets on a ‘Soft Landing,’ but Recession Risk Looms

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    Central bankers have been clear that they will do what it takes to control inflation. They are betting on a soft landing, but a bumpy one is possible.Jerome H. Powell, the Federal Reserve chair, emphasized this week that the central bank he leads could succeed in its quest to tame rapid inflation without causing unemployment to rise or setting off a recession. But he also acknowledged that such a benign outcome was not certain.“The historical record provides some grounds for optimism,” Mr. Powell said.That “some” is worth noting: While there may be hope, there is also reason to worry, given the Fed’s track record when it is in inflation-fighting mode.The Fed has at times managed to raise interest rates to cool down demand and weaken inflation without meaningfully harming the economy — Mr. Powell highlighted examples in 1965, 1984 and 1994. But those instances came amid much lower inflation, and without the ongoing shocks of a global pandemic and a war in Ukraine.The part Fed officials avoid saying out loud is that the central bank’s tools work by slowing down the economy, and weakening growth always comes with a risk of overdoing it. And while the Fed ushered in its first rate increase this month, some economists — and at least one Fed official — think it was too slow to start taking its foot off the gas. Some warn that the delay increases the chance it might have to overcorrect.The Fed has touched off recessions with past rate increases: It happened in the early 1980s, when Paul Volcker raised rates in a campaign to bring down very rapid inflation and sent unemployment rocketing painfully higher in the process.“There is no guarantee that there will be a recession, but you have high inflation, and if you’re serious about bringing it down quickly, you have to hike a lot,” said Roberto Perli, the head of global policy at Piper Sandler, an investment bank, and a former Fed economist. “The economy doesn’t like that. I think the risk is substantial.”It is no surprise that it can be difficult to cool down inflation while sustaining an economic expansion. Higher borrowing costs trickle through the economy by slowing the housing market, discouraging big purchases and prompting companies to cut expansion plans and hire fewer workers. That broad pullback weakens the labor market and slows wage growth, helping inflation to moderate. But the chain reaction plays out gradually, and its results can be seen only with a delay, so it is easy to lay on the brakes too hard.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: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.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.“No one expects that bringing about a soft landing will be straightforward in the current context — very little is straightforward in the current context,” Mr. Powell acknowledged during his remarks this week, adding, “My colleagues and I will do our very best to succeed in this challenging task.”Six of the eight Fed-rate-increase cycles since the early 1980s have ended in recession, though some of those were caused by external shocks — like the pandemic — and some by asset bubble implosions, including the 2007 housing crisis and the collapse in internet stocks in the early 2000s.Fed officials are hoping that today’s strong economy will help them avoid a rough landing. They point to the fact that labor markets are booming and consumer demand is solid, so lifting rates and tempering voracious buying might help supply to catch up and chill the economy without giving it freezer burn. Mr. Powell has argued that with so many open jobs per unemployed worker, the Fed might be able to slow down the labor market a bit without pushing the unemployment rate up.Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, said the Fed was not at a point where it had to decide between fighting inflation or pummeling growth.“Given where the economy is now, and where the risks are, to my mind the major economic challenge is inflation,” Ms. Mester told reporters on a call Wednesday. “I don’t see it as being a trade-off at this point.”James Bullard, the president of the Federal Reserve Bank of St. Louis, said in an interview that he thought the fact that the central bank had credibility as an inflation fighter — and was raising rates to defend that credibility — could allow it to adjust policy in a way that allowed demand to moderate without causing major economic disruptions.A FedEx worker picked up packages in New York this month. After a year of rapid inflation, there is no guarantee that longer-term inflation expectations will stay in check.DeSean McClinton-Holland for The New York TimesIn the 1980s, when Mr. Volcker was the Fed chair, the central bank had to convince the world that it was prepared to wrestle inflation under control after more than a decade of rapid price gains.“Do whatever it takes — I guess that’s the mantra of the day. I do think inflation is our No. 1 concern,” Mr. Bullard said. “I don’t think, however, that it is a Volcker-like situation.”Near-term consumer and market inflation expectations have shot higher over the past year as inflation has hit a 40-year high and continued to accelerate, but longer-term price growth expectations have nudged only slightly higher.If consumers and businesses anticipated rapid price increases year after year, that would be a troubling sign. Such expectations could become self-fulfilling if companies felt comfortable raising prices and consumers accepted those higher costs but asked for bigger paychecks to cover their rising expenses.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Jobless for a Year? Employment Gaps Might Be Less of a Problem Now.

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    People who were out of work for a while have typically found it much harder to get a job. The pandemic may have changed how employers view people who have been unemployed for months or years.Jamie Baxter used to be skeptical of job applicants who had not worked for long stretches of time, assuming that other employers had passed them over.“My mind would jump to the negative stigma of ‘Wow, why could this person not get a job for this long?’” said Mr. Baxter, who is chief executive of Qwick, a temporary staffing company for the hospitality industry.Yet recently, he has hired at least half a dozen people who had been out of work for several months or longer. The pandemic, he said, “made me open my eyes.”Mr. Baxter’s change of heart reflects an apparent willingness among employers in the pandemic era to hire applicants who have been jobless for long periods. That’s a break from the last recession, when long-term unemployment became self-perpetuating for millions of Americans. People who had gone without a job for months or years found it very difficult to find a new one, in part because employers avoided them.The importance of what are often referred to as “résumé gaps” is fading, experts say, because of labor shortages and more bosses seeming to realize that long absences from the job market shouldn’t taint candidates. This is good news for the 2.2 million people who have been out of work for more than six months, and are considered long-term unemployed, according to the Labor Department, double the number before the pandemic.But that change may not last if more people decide to return to the job market or if the economy cools because of another wave of coronavirus cases, experts say.Mr. Baxter, whose company is based in Phoenix, said he has learned from his own experience. Forced to lay off roughly 70 percent of his 54 employees when the pandemic hit, he realized he was responsible for creating the very employment gaps he had once used to screen out job applicants.“I knew I was creating employment gaps,” he said. “Maybe other people would have employment gaps for very justifiable reasons. It doesn’t mean that they are not a good employee.”Even in normal times, the long-term unemployed face steep odds. The longer applicants are out of work, the more they may become discouraged and the less time they may spend searching for jobs. Their skills may deteriorate or their professional networks may erode.Some employers regard applicants with long periods of unemployment unfavorably, research shows — even if many are reluctant to admit it.“Employers don’t often articulate why but the idea, they believe, is that people who are out of work are damaged in some way, which is why they are out of work” said Peter Cappelli, the director of the Center for Human Resources at the Wharton School of the University of Pennsylvania.Some economists believe the pandemic’s unique effects on the economy may have changed things. Notably, the pandemic destroyed millions of jobs seemingly all at once, especially in the travel, leisure and hospitality industries. Many people could not, or chose not to, work because of health concerns or family responsibilities.“For people who were just laid off because of Covid, will there be a stigma? I don’t really think so,” Mr. Cappelli said. Although monthly job-finding rates plummeted for both the short- and long-term unemployed during the early part of the pandemic, the rate for the long-term jobless has since rebounded to roughly the same level as before the pandemic, according to government data. While that does not imply the employment-gap stigma has disappeared, it suggests it is no worse than it has been.That was what Rachel Love, 35, found when she applied for a job at Qwick.After Ms. Love was furloughed, and then laid off from her sales job at a hotel in Dallas last year, she kept hoping that her former company would hire her back. She had been unemployed for about a year when she came to terms with the idea of getting a new job and became aware of a business development position at Qwick.Interviewers did not press her about why she had been out of work for so long. “I hope now, just with everything going on, I think people can look at the résumé and look at the time frame and maybe just infer,” said Ms. Love, who began working remotely for Qwick in June.The tight labor market is almost certainly a factor. In October, there were 11 million job openings for 7.4 million unemployed workers.“The fact of the matter is, there are far more jobs in the U.S. than there are people to fill them right now,” said Jeramy Kaiman, who leads professional recruitment for the western United States at the Adecco Group, a staffing agency, working primarily with accounting, finance and legal businesses. As a result, he added, employers have had to become more willing to consider applicants who had been out of work for a while.Even when the worker shortage eases, labor experts express optimism that employers will care less about employment gaps than before, partly because the pandemic has made hiring managers more sympathetic.Zoë Harte, the chief people officer at Upwork, a company that matches freelancers with jobs, said there had been a “societal shift” in how companies understand employment gaps.“It’s become more and more evident that opportunity isn’t equally distributed, and so it’s important for us as people who are creating jobs and interviewing people to really look at ‘What can this person contribute?’ as opposed to ‘What does this piece of paper say they have done in the past?’” she said.That aligns with Burton Amos’s experience. After he was laid off from his job as a program support specialist with a federal contractor at the start of the pandemic, Mr. Amos, 60, started an online wireless accessories business and began studying for a career in information technology but was unable to land other work.On his résumé and LinkedIn profile, he was open about his lack of full-time employment, an approach that seemed to appeal to interviewers.“Every job did ask about ‘What am I doing right now?’” he said. “They didn’t specifically say anything specific about the pandemic.” He recently received multiple job offers and has accepted a position as a public aid eligibility assistant with the State of Illinois.Many companies have also redoubled their efforts on diversity and are more willing to employ people with a range of backgrounds and experiences, including applicants with long employment gaps.Scott Bonneau, vice president of global talent attraction at the hiring site Indeed, said employment gaps are “not a part of our consideration.” His company instead tries to evaluate a candidate’s skills and capabilities. That practice began before the pandemic, as part of the company’s diversity and inclusion efforts, and it is a shift that he said he expected to see at other businesses.“I think there is the beginnings of a movement to stop focusing on employment gaps entirely at least in certain parts of the employment world,” said Mr. Bonneau, whose responsibilities include hiring people for jobs at Indeed.But other labor experts worry that the employment-gap stigma will return once the economy stabilizes.Employers may not be as forgiving of gaps on résumés that stretch into next year now that jobs, and vaccines, are more available, said Jesse Rothstein, a professor of public policy and economics at the University of California, Berkeley. The stigma may be more evident for lower-wage workers in industries where current job openings are especially high.“I would expect that to whatever extent that it exists, it will come back,” Mr. Rothstein said.History also suggests that the empathy that hiring managers may feel now will not last, said Maria Heidkamp, the director of program development at the Heldrich Center for Workforce Development at Rutgers University.In a study released in 2013 by the Heldrich Center, a quarter of American workers said they were directly affected through a job loss and nearly 80 percent said they knew at least someone who had lost a job in the previous four years. Those levels would seem to make hiring managers more understanding of those who had lost their jobs because the experience was so common, Ms. Heidkamp said. “But that’s not what we saw,” she said.“The equation may play out differently” now, she added. “That said, I’m still worried.”Ben Casselman More

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    How Inflation Affects Turkey's Struggling Economy

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    Even before the pandemic, Turkey was trying to ward off financial meltdown. The crisis has accelerated as President Recep Tayyip Erdogan has doubled down on his unorthodox policies.The signs of Turkey’s disastrous economy are all around. Long lines snake outside discounted bread kiosks. The price of medicine, milk and toilet paper are soaring. Some gas stations have closed after exhausting their stock. Angry outbursts have erupted on the streets.“Unemployment, high living costs, price increases, and bills are breaking our backs,” the Confederation of Progressive Trade Unions said last month.Even before the coronavirus pandemic and supply chain bottlenecks began walloping the world’s economies nearly two years ago, Turkey was trying to ward off a recession as it struggled with mountainous debt, steep losses in the value of the Turkish lira, and rising inflation. But in recent weeks that slow-moving train wreck has sped up with a ferocious intensity. And the foot that’s pushing hardest on the accelerator belongs to the country’s authoritarian president, Recep Tayyip Erdogan.Why is this happening now?Turkey’s economic problems have deep roots but the most recent crisis was caused by Mr. Erdogan’s insistence on lowering interest rates in the face of galloping inflation — precisely the opposite tactic of what economists almost universally prescribe.Mr. Erdogan, who has ruled Turkey for 18 years, has long resisted that particularly painful prescription, but his determination to keep cutting interest rates even as the country’s inflation rate tops a staggering 21 percent appears to be pushing Turkey past a tipping point.Normally, investors and others look to a nation’s central bank to keep inflation in check and set interest rates. But Mr. Erdogan has repeatedly shown that if Turkey’s central bankers and finance ministers won’t do what he wants, he will get rid of them, having already fired three in two years.The value of the lira has nose-dived in recent weeks, and on Monday hit a record low — reaching 14.3 to a dollar, from about 7 to the dollar earlier this year — pushing some businesses and households that have borrowed money from abroad into bankruptcy. The currency’s steep decline means prices for imported goods keep rising. Shortages are common and people are struggling to afford food and fuel. The youth unemployment rate is 25 percent. The president’s popularity is sinking and his opponents have become emboldened.With an election coming up in 18 months, Mr. Erdogan seems convinced that his strategy will enable the Turkish economy to grow out of its problems. Most economists, however, say a crash is more likely.When did Turkey’s economic problems begin?“Interest rates make the rich richer, the poor poorer,” the Turkish President Recep Tayyip Erdogan said in a recent interview.Antonio Masiello/Getty ImagesMr. Erdogan’s aggressive pro-growth strategies have worked for him before. Since he began governing Turkey in 2003, he has undertaken expensive infrastructure projects, courted foreign investors and encouraged businesses and consumers to load up on debt. Growth took off.“Turkey was considered to be an economic miracle” during the first decade of Mr. Erdogan’s rule, said Kadri Tastan, a senior fellow at the German Marshall Fund based in Brussels. Poverty was sliced in half, millions of people swelled the ranks of the middle class, and foreign investors were eager to lend.But Mr. Erdogan’s relentless push to expand became unsustainable. Rather than pull back, however, the giddy borrowing continued.The increasingly unstable economy was caught in a bind. High interest rates attracted foreign investors to accept the risk and keep lending, but they would stunt growth. Mr. Erdogan was unwilling to accept that trade-off, and continued to support cheap borrowing as inflation took off and the currency’s value declined.And he insists that high interest rates cause inflation — even though it is low interest rates that put more money into circulation, encourage people to borrow and spend more, and tend to drive up the prices.“Erdogan has his own economic philosophy,” said Henri Barkey, a fellow at the Council on Foreign Relations.The economy seesawed between these conflicting goals until 2018 when growing political tensions between Turkey and the United States caused the value of the lira to topple.The political standoff eased, but the underlying economic problems remained. Mr. Erdogan kept pushing state banks to offer cheap loans to households and businesses and the borrowing frenzy continued. “Things never really normalized,” said Selva Demiralp, an economist at Koc University in Istanbul.When the chief of the central bank resisted pressure from the president to lower the 24 percent interest rate in 2019, Mr. Erdogan fired him, the beginning of a pattern.To prop up the lira, Turkish banks began selling off their reserves of dollars. Those stocks of dollars are now running low.The global economic slowdown caused by the coronavirus pandemic has added to the strains by limiting the sales of Turkish goods around the world. Tourism, which was one of Turkey’s most dynamic sectors, has also been badly hit.What is President Erdogan’s approach to interest rates and what do economists say?A protest against the economic policies of the government in Istanbul on Sunday.Murad Sezer/ReutersBy keeping interest rates low, Mr. Erdogan argues that consumers will be more eager to keep shopping and businesses will be more inclined to borrow, invest money in the economy and hire workers.And if the lira loses value against the dollar, he says, Turkey’s exports will simply become cheaper and foreign consumers will want to buy even more.That is true to some degree — but it comes at a heavy price. Turkey is quite dependent on imports like automobile parts and medicine, as well as fuel and fertilizer and other raw materials. When the lira depreciates, those products cost more to buy.At the same time, Mr. Erdogan’s disdain for conventional economic theory has scared off some foreign investors, who had been eager to loan Turkish businesses hundreds of millions of dollars but now are losing faith in the currency.And the lower rates go, the faster inflation rises. Over the past year, the lira has lost more than 45 percent of its value, and the official inflation rate has surged past 20 percent, although many analysts believe the rate on the streets is much higher.By comparison, an inflation rate of 6.8 percent so far this year in the United States (the highest in nearly four decades) and a 4.9 percent rate in the eurozone are enough to set off alarms.In Turkey, skyrocketing prices are causing misery among the poor and impoverishing the middle class.“We can’t make a living,” said Mihriban Aslan, as she waited on a long line to buy bread in Istanbul’s Sultangazi district. “My husband is 60 years old, he can’t work much now.” He has a small pension of 1,800 lira — which at the moment is worth about $125. “I sometimes do needle work at home to bring in extra money,” she said.Businesses would rather hoard goods than sell them because they don’t think they will be able to afford to replace them.Ismail Arslanturk, a 22-year-old cashier at a neighborhood grocery shop, complained that the price of green lentils has nearly doubled. “I don’t believe the economy will be fixed after this point,” said Mr. Arslanturk, who added he was forced to leave high school to help support his family. “I am hopeless.’’A currency exchange office in Turkey. Over the past year, the lira has lost more than 45 percent of its value.Emrah Gurel/Associated PressWhat has Erdogan’s response been to the intensifying crisis?The president has doubled down on his approach, asserting he will “never compromise” on his opposition to higher interest rates. “Interest rates make the rich richer, the poor poorer,” he said in an interview on national television last month. “We have prevented our country from being crushed in such a way.”The president has invoked Islamic precepts against usury and referred to interest charges on loans as the “mother and father of all evil,” and blamed foreign interference for rising prices. Analysts like Mr. Barkey of the Council on Foreign Relations said that such comments are primarily aimed at appealing to more conservative religious segments of the country that represent the core of Mr. Erdogan’s support.Turkey’s fundamental problem, Mr. Barkey maintains, is that it has an overly confident ruler who has been in power for a long time. “He believes in his omnipotence and he’s making mistakes,” Mr. Barkey said, “but he’s so surrounded by yes men that nobody can challenge him.” More

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    Charles R. Morris, Iconoclastic Author on Economics, Dies at 82

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    Resisting ideological labels, experienced in government and banking, he critiqued policymakers’ “good intentions” and the costs of health care and forecast the 2008 financial crisis.Charles R. Morris, a former government official, banker and self-taught historian of economics who as a prolific, iconoclastic author challenged conventional political and economic pieties, died on Monday in Hampton, N.H. He was 82.The cause was complications of dementia, his daughter, Kathleen Morris, said.Mr. Morris wrote his signature first book, “The Cost of Good Intentions: New York City and the Liberal Experiment” (1980), after serving as director of welfare programs under Mayor John V. Lindsay and as secretary of social and health services in Washington State.The book was a trenchant Emperor’s New Clothes analysis of how the Lindsay administration’s unfettered investment in social welfare programs to ward off civil unrest had delivered the city to the brink of bankruptcy, and it pigeonholed Mr. Morris as a neoconservative.But as a law school graduate with no formal training in economics, he defied facile labeling.While his 15 nonfiction books often revisited well-trodden topics — including the Great Depression, the nation’s tycoons, the cost of health care, the Cold War arms race and the political evolution of the Roman Catholic church — he injected them with revealing details, provocative insights and fluid narratives.“The Cost of Good Intentions” (1981) was less a screed about liberal profligacy as it was an expression of disappointment that benevolent officials had become wedded to programs that didn’t work. He concluded that the best and the brightest in the government, as well as complicit players on the outside, had figured that if a day of reckoning ever came, it would not be on their watch.Steven R. Weisman wrote in The New York Times Book Review that Mr. Morris, as a former city budget official and, at the time, as a vice president for international finance at Chase Manhattan Bank, was more intent on adding perspective than affixing blame.“He exonerates neither his current nor his former employer,” Mr. Weisman wrote.In the book, Mr. Morris quoted Peter Goldmark Jr., then the state budget director, as saying: “Remember the 14th century and the advent of the plague? Was it possible for those people to stand on the docks in Genoa or Venice, watch the rats pouring off the ships, and not understand?”“Yes,” Mr. Morris wrote dubiously, “it was possible.”He would also belie Thomas Carlyle’s characterization of economics as “the dismal science” by injecting tantalizing nuggets.Reviewing Mr. Morris’s “A Time of Passion: America 1960-1980” (1984) for The Times Book Review, Michael Kinsley wrote that “some of the most vivid moments in this book come when he stops the rush of history to describe incidents from his own time as a poverty-program and prison administrator.”“He truly has been ‘mugged by reality,’ in Irving Kristol’s famous definition of a neoconservative,” Mr. Kinsley added, but concluded, “Overall, his book radiates a generosity and good will that set it apart from the typically sour neoconservative creed.”Charles Richard Morris was born on Oct. 23, 1939, in Oakland, Calif., to Charles B. and Mildred (Reid) Morris. His father was a technician for a printing ink manufacturer; his mother was a homemaker.After attending Mother of the Savior Seminary in Blackwood, N.J., Mr. Morris graduated from the University of Pennsylvania with a degree in journalism in 1963. He was director of the New Jersey Office of Economic Opportunity from 1965 to 1969.He earned a degree from the university’s law school in 1972 while working for New York City government. He was recruited by Washington State on the basis of his reputation as the city’s assistant budget director and welfare director.Praising Mr. Morris’s service to the city and his proficiency as an author, Edward K. Hamilton, first deputy mayor during the Lindsay administration, said that he nonetheless differed with some of the conclusions and recommendations in “The Cost of Good Intentions.”“Many of its stated or implied remedial nostrums, even if desirable in theory, were simply infeasible in the real-world circumstances,” Mr. Hamilton said, “given the complex web of intersecting state, local and federal authorities and the politics overshadowing all of it.”Mr. Morris later served as director of the Vera Institute of Justice in London.He is survived by his wife, Beverly Gilligan Morris, along with their sons, Michael and Matthew; their daughter, Kathleen Morris; and four grandchildren. A sister, Marianne Donovan, also died on Monday. Mr. Morris lived in Hampton.Among his other books were “A Rabble of Dead Money: The Great Crash and the Global Depression: 1929-1939 (2017); “Comeback: America’s New Economic Boom” (2013); “The Sages: Warren Buffett, George Soros, Paul Volcker, and the Maelstrom of Markets” (2009); “The Trillion Dollar Meltdown” (2008); “The Surgeons: Life and Death in a Top Heart Center (2007),” which dissects the cost of care to the public and to practitioners; “American Catholic: The Saints and Sinners Who Built America’s Most Powerful Church” (1997); and “The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy” (2005).Assessing “The Tycoons” in The Times Book Review, Todd G. Buchholz, a former economics adviser to President George H.W. Bush, wrote of Mr. Morris, “I admired his drive to delve into competing theories of the Great Depression, sleeves rolled up, digging evenhandedly into the muck of academic research and the tumbleweed of the Dust Bowl.”Rarely allowing himself to be typecast, Mr. Morris would debunk what he called the conservative conventional wisdom that raising the minimum wage costs jobs. He complained in the Jesuit magazine America that the nation’s existing health care system benefits the wealthiest Americans. In an interview on the business blog bobmorris.biz in 2012, he criticized graduate schools of business.“Business schools tend to focus on topics that are suitable to blackboards, so they overemphasize organization and finance,” Mr. Morris said. “Until very recently, they virtually ignored manufacturing. I think a lot of the troubles of the 1970s and 1980s, and now more recently the 2000s, can be traced pretty directly to the biases of the business schools.”In “The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash” (2008), which won the Gerald Loeb Award for business reporting, Mr. Morris precisely predicted the collapse of the investment bank Bear Stearns and the ensuing global recession.He wrote the book in 2007, when most experts were still expressing optimism about the economy. He also appeared in the Oscar-winning documentary “Inside Job” (2010) about the 2008 financial crisis.“I think we’re heading for the mother of all crashes,” Mr. Morris wrote his publisher, Peter Osnos, the founder of Public Affairs books, early in 2007, adding, “It will happen in summer of 2008, I think.”Mr. Osnos recalled that after the book was published, “George Soros and Paul Volcker called me and asked, ‘Who is this Morris, and how did he get this so right, so early?’” More