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    Soft Landing Optimism Is Everywhere. That’s Happened Before.

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    People are often sure that the economy is going to settle down gently right before it plunges into recession, a reason for caution and humility.In late 1989, an economic commentary newsletter from the Federal Reserve Bank of Cleveland asked the question that was on everyone’s mind after a series of Federal Reserve rate increases: “How Soft a Landing?” Analysts were pretty sure growth was going to cool gently and without a painful downturn — the question was how gently.In late 2000, a column in The New York Times was titled “Making a Soft Landing Even Softer.” And in late 2007, forecasters at the Federal Reserve Bank of Dallas concluded that the United States should manage to make it through the subprime mortgage crisis without a downturn.Within weeks or months of all three declarations, the economy had plunged into recession. Unemployment shot up. Businesses closed. Growth contracted.It is a point of historical caution that is relevant today, when soft-landing optimism is, again, surging.Inflation has begun to cool meaningfully, but unemployment remains historically low at 3.6 percent and hiring has been robust. Consumers continue to spend at a solid pace and are helping to boost overall growth, based on strong gross domestic product data released on Thursday.Given all that momentum, Fed staff economists in Washington, who had been predicting a mild recession late this year, no longer expect one, said Jerome H. Powell, the central bank’s chair, during a news conference on Wednesday. Mr. Powell said that while he was not yet ready to use the term “optimism,” he saw a possible pathway to a relatively painless slowdown.But it can be difficult to tell in real time whether the economy is smoothly decelerating or whether it is creeping toward the edge of a cliff — one reason that officials like Mr. Powell are being careful not to declare victory. On Wednesday, policymakers lifted rates to a range of 5.25 to 5.5 percent, the highest level in 22 years and up sharply from near zero as recently as early 2022. Those rate moves are trickling through the economy, making it more expensive to buy cars and houses on borrowed money and making it pricier for businesses to take out loans.Such lags and uncertainties mean that while data today are unquestionably looking sunnier, risks still cloud the outlook.“The prevailing consensus right before things went downhill in 2007, 2000 and 1990 was for a soft landing,” said Gennadiy Goldberg, a rates strategist at TD Securities. “Markets have trouble seeing exactly where the cracks are.”The term “soft landing” first made its way into the economic lexicon in the early 1970s, when America was fresh from a successful moon landing in 1969. Setting a spaceship gently on the lunar surface had been difficult, and yet it had touched down.By the late 1980s, the term was in widespread use as an expression of hope for the economy. Fed policymakers had raised rates to towering heights to crush double-digit inflation in the early 1980s, costing millions of workers their jobs. America was hoping that a policy tightening from 1988 to 1989 would not have the same effect.The recession that stretched from mid-1990 to early 1991 was much shorter and less painful than the one that had plagued the nation less than a decade earlier — but it was still a downturn. Unemployment began to creep up in July 1990 and peaked at 7.8 percent.The 2000s recession was also relatively mild, but the 2008 downturn was not: It plunged America into the deepest and most painful downturn since the Great Depression. In that instance, higher interest rates had helped to prick a housing bubble — the deflation of which set off a chain reaction of financial explosions that blew through global financial markets. Unemployment jumped to 10 percent and did not fall back to its pre-crisis low for roughly a decade.Higher Rates Often Precede RecessionsUnemployment often jumps after big moves in the Fed’s policy interest rate

    Note: Data is as of June 2023.Sources: Bureau of Labor Statistics; Business Cycle Dating Committee; Federal ReserveBy The New York TimesThe episodes all illustrate a central point. It is hard to predict what might happen with the economy when rates have risen substantially.Interest rates are like a slow-release medicine given to a patient who may or may not have an allergy. They take time to have their full effect, and they can have some really nasty and unpredictable side effects if they end up prompting a wave of bankruptcies or defaults that sets off a financial crisis.In fact, that is why the Fed is keeping its options open when it comes to future policy. Mr. Powell was clear on Wednesday that central bankers did not want to commit to how much, when or even whether they would raise rates again. They want to watch the data and see if they need to do more to cool the economy and ensure that inflation is coming under control, or whether they can afford to hold off on further interest rate increases.“We don’t know what the next shoe to drop is,” said Subadra Rajappa, head of U.S. rates strategy at the French bank Société Générale, explaining that she thought Mr. Powell took a cautious tone while talking about the future of the economy on Wednesday in light of looming risks — credit has been getting harder to come by, and that could still hit the brakes on the economy.“It looks like we’re headed toward a soft landing, but we don’t know the unknowns,” Ms. Rajappa said.That is not to say there isn’t good reason for hope, of course. Growth does look resilient, and there is some historical precedent for comfortable cool-downs.In 1994 and 1995, the Fed managed to slow the economy gently without plunging it into a downturn in what is perhaps its most famous successful soft landing. Ironically, commentators quoted then in The Times weren’t convinced that policymakers were going to pull it off.And the historical record may not be particularly instructive in 2023, said Michael Feroli, the chief U.S. economist at J.P. Morgan. This has not been a typical business cycle, in which the economy grew headily, fell into recession and then clawed its way back.Instead, growth was abruptly halted by coronavirus shutdowns and then rocketed back with the help of widespread government stimulus, leading to shortages, bottlenecks and unusually strong demand in unexpected parts of the economy. All of the weirdness contributed to inflation, and the slow return to normal is now helping it fade.That could make the Fed’s task — slowing inflation without causing a contraction — different this time.“There’s so much that has been unusual about this inflation episode,” Mr. Feroli said. “Just as we don’t want to overlearn the lessons of this episode, I don’t think we should over-apply the lessons of the past.” More

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    GDP Grew at 2.4% Rate in Q2 as US Economy Stayed on Track

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    The reading on gross domestic product was bolstered by consumer spending, showing that recession forecasts early in the year were premature, at least.The economic recovery stayed on track in the spring, as American consumers continued spending despite rising interest rates and warnings of a looming recession.Gross domestic product, adjusted for inflation, rose at a 2.4 percent annual rate in the second quarter, the Commerce Department said Thursday. That was up from a 2 percent growth rate in the first three months of the year and far stronger than forecasters expected a few months ago.Consumers led the way, as they have throughout the recovery from the severe but short-lived pandemic recession. Spending rose at a 1.6 percent rate, with much of that coming from spending on services, as consumers shelled out for vacation travel, restaurant meals and Taylor Swift tickets.“The consumer sector is really keeping things afloat,” said Yelena Shulyatyeva, an economist at BNP Paribas.The resilience of the economy has surprised economists, many of whom thought that high inflation — and the Federal Reserve’s efforts to stamp it out through aggressive interest-rate increases — would lead to a recession, or at least a clear slowdown in the first half of the year. For a while, it looked as if they were going to be right: Tech companies were laying off tens of thousands of workers, the housing market was in a deep slump and a series of bank failures set up fears of a financial crisis.Instead, layoffs were mostly contained to a handful of industries, the banking crisis did not spread and even the housing market has begun to stabilize.“The things we were all freaked out about earlier this year all went away,” said Michael Gapen, chief U.S. economist at Bank of America.Inflation has also slowed significantly. That has eased pressure on the Fed to keep raising rates, leading some forecasters to question whether a recession is such a sure thing after all. Jerome H. Powell, the Fed chair, said on Wednesday that the central bank’s staff economists no longer expected a recession to begin this year.Still, many economists say consumers are likely to pull back their spending in the second half of the year, putting a drag on the recovery. Savings built up earlier in the pandemic are dwindling. Credit card balances are rising. And although unemployment remains low, job growth and wage growth have slowed.“All those tailwinds and buffers that were supporting consumption are not as strong anymore,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “It feels to me like this hard landing has been delayed rather than canceled.” More

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    Global Economy Shows Signs of Resilience Despite Lingering Threats

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    The International Monetary Fund upgraded its global growth forecast for 2023.The world economy is showing signs of resilience this year despite lingering inflation and a sluggish recovery in China, the International Monetary Fund said on Tuesday, raising the odds that a global recession could be avoided barring unexpected crises.The signs of optimism in the I.M.F.’s latest World Economic Outlook may also give global policymakers additional confidence that their efforts to contain inflation without causing serious economic damage are working. Global growth, however, remains meager by historical standards, and the fund’s economists warned that serious risks remained.“The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine, but it is not yet out of the woods,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist said a news conference on Tuesday.The I.M.F. raised its forecast for global growth this year to 3 percent, from 2.8 percent in its April projection. It predicted that global inflation would ease from 8.7 percent in 2022 to 6.8 percent this year and 5.2 percent in 2024, as the effects of higher interest rates filter throughout the world.The outlook was rosier in large part because financial markets — which had been roiled by the collapse of several large banks in the United States and Europe — have largely stabilized. Another big financial risk was averted in June when Congress acted to lift the U.S. government’s borrowing cap, ensuring that the world’s largest economy would continue to pay its bills on time.The new figures from the I.M.F. come as the Federal Reserve is widely expected to raise interest rates by a quarter point at its meeting this week, while keeping its future options open. The Fed has been aggressively raising rates to try to tamp down inflation, lifting them from near zero as recently as March 2022 to a range of 5 percent to 5.25 percent today. Policymakers have been trying to cool the economy without crushing it and held rates steady in June in order to assess how the U.S. economy was absorbing the higher borrowing costs that the Fed had already approved.As countries like the United States continue to grapple with inflation, the I.M.F. urged central banks to remain focused on restoring price stability and strengthening financial supervision.“Hopefully with inflation starting to recede, we have entered the final stage of the inflationary cycle that started in 2021,” Mr. Gourinchas said. “But hope is not a policy and the touchdown may prove quite difficult to execute.”He added: “It remains critical to avoid easing monetary policy until underlying inflation shows clear signs of sustained cooling.”Fed officials will release their July interest rate decision on Wednesday, followed by a news conference with Jerome H. Powell, the Fed chair. Policymakers had previously forecast that they might raise rates one more time in 2023 beyond the expected move this week. While investors doubt that they ultimately will make that final rate move, officials are likely to want to see more evidence that inflation is falling and the economy is cooling before committing in any direction.The I.M.F. said on Tuesday that it expected growth in the United States to slow from 2.1 percent last year to 1.8 percent in 2023 and 1 percent in 2024. It expects consumption, which has remained strong, to begin to wane in the coming months as Americans draw down their savings and interest rates increase further.Growth in the euro area is projected to be just 0.9 percent this year, dragged down by a contraction in Germany, the region’s largest economy, before picking up to 1.5 percent in 2024.European policymakers are still occupied by the struggle to slow down inflation. On Thursday, the European Central Bank is expected to raise interest rates for the 20 countries that use the euro currency to the highest level since 2000. But after a year of pushing up interest rates, policymakers at the central bank have been trying to shift the focus from how high rates will go to how long they may stay at levels intended to restrain the economy and stamp out domestic inflationary pressures generated by rising wages or corporate profits.Policymakers have raised rates as the economy has proved slightly more resilient than expected this year, supported by a strong labor market and lower energy prices. But the economic outlook is still relatively weak, and some analysts expect that the European Central Bank is close to halting interest rate increases amid signs that its restrictive policy stance is weighing on economic growth. On Monday, an index of economic activity in the eurozone dropped to its lowest level in eight months in July, as the manufacturing industry contracted further and the services sector slowed down.Next week, the Bank of England is expected to raise interest rates for a 14th consecutive time in an effort to force inflation down in Britain, where prices in June rose 7.9 percent from a year earlier.Britain has defied some expectations, including those of economists at the I.M.F., by avoiding a recession so far this year. But the country still faces a challenging set of economic factors: Inflation is proving stubbornly persistent in part because a tight labor market is pushing up wages, while households are growing increasingly concerned about the impact of high interest rates on their mortgages because the repayment rates tend to be reset every few years.A weaker-than-expected recovery in China, the world’s second-largest economy, is also weighing on global output. The I.M.F. pointed to a sharp contraction in the Chinese real estate sector, weak consumption and tepid consumer confidence as reasons to worry about China’s outlook.Official figures released this month showed that China’s economy slowed markedly in the spring from earlier in the year, as exports tumbled, a real estate slump deepened and some debt-ridden local governments had to cut spending after running low on money.Mr. Gourinchas said that measures that China has taken to restore confidence in the property sector are a positive step and suggested that targeted support for families to bolster confidence could strengthen consumption.Despite reasons for optimism, the I.M.F. report makes plain that the world economy is not in the clear.Russia’s war in Ukraine continues to pose a threat that could send global food and energy prices higher, and the fund noted that the recently terminated agreement that allowed Ukrainian grain to be exported could portend headwinds. The I.M.F. predicts that the termination of the agreement could lead grain prices to rise by as much as 15 percent.“The war in Ukraine could intensify, further raising food, fuel and fertilizer prices,” the report said. “The recent suspension of the Black Sea Grain Initiative is a concern in this regard.”It also reiterated its warning against allowing the war in Ukraine and other sources of geopolitical tension to further splinter the world economy.“Such developments could contribute to additional volatility in commodity prices and hamper multilateral cooperation on providing global public goods,” the I.M.F. said. More

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    U.S. Recession Appears Less Likely, Economists Say

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    Rising interest rates were widely expected to put the U.S. economy in reverse. Now things are looking rosier, but don’t pop the Champagne corks yet.The recession was supposed to have begun by now.Last year, as policymakers relentlessly raised interest rates to combat the fastest inflation in decades, forecasters began talking as though a recession — economic contraction rather than growth — was a question not of “if” but of “when.” Possibly in 2022. Probably in the first half of 2023. Surely by the end of the year. As recently as December, less than a quarter of economists expected the United States to avoid a recession, a survey found.But the year is more than half over, and the recession is nowhere to be found. Not, certainly, in the job market, as the unemployment rate, at 3.6 percent, is hovering near a five-decade low. Not in consumer spending, which continues to grow, nor in corporate profits, which remain robust. Not even in the housing market, the industry that is usually most sensitive to rising interest rates, which has shown signs of stabilizing after slumping last year.At the same time, inflation has slowed significantly, and looks set to keep cooling — offering hope that interest-rate increases are nearing an end. All of which is leading economists, after a year spent being surprised by the resilience of the recovery, to wonder whether a recession is coming at all.“The chances of a soft landing are higher — there’s no question about that,” said Diane Swonk, chief economist at KPMG US, referring to the possibility of bringing down inflation without causing an economic downturn. “I’m more optimistic than I was six months ago: That’s the good news.”The public is feeling sunnier, too, though hardly ebullient. Measures of consumer confidence have picked up recently, although surveys show that most Americans still expect a recession, or believe the country is already in one.There is still plenty that could go wrong, which Ms. Swonk noted. Inflation could, again, prove more stubborn than expected, leading the Federal Reserve to press on with interest rate increases to curb it. Or, on the flip side, the steps the Fed has already taken could hit with a delay, sharply cooling the economy in a way that has not surfaced yet. And even a slowdown short of a recession could be painful, leading to layoffs that are likely to disproportionately hit Black and Hispanic workers.“Soft is in the eye of the beholder,” said Nick Bunker, director of North American economic research at the career site Indeed.Economists are wary of declaring victory prematurely — burned, perhaps, by past episodes in which they did just that. In early 2008, for example, a string of positive economic data led some forecasters to conclude that the United States had navigated the subprime mortgage crisis without falling into a recession; researchers later concluded that one had already begun.But for now, at least, talk of worst-case scenarios — runaway inflation that the Fed struggles to tame, or “stagflation” in which prices and unemployment rise in tandem — has been ceding the conversation to cautious optimism.“We have seen a huge string of shocks, so I can’t predict what the future will hold,” Lael Brainard, a top White House economic adviser, said in an interview last week. “But so far, the data is very much consistent with moderating inflation and a still-resilient job market.”Inflation has come down.Economists have become more optimistic for two main reasons.The first is inflation itself, which has cooled rapidly in recent months. The Consumer Price Index in June was up just 3 percent from a year earlier, compared with a peak of 9 percent last summer. That is partly a result of factors that are unlikely to repeat — no one expects oil prices to keep falling 30 percent per year, for example.But measures of underlying inflation have also shown significant progress. And consumers and businesses appear to expect price increases to return to normal over the next few years, which makes it less likely that inflation will become embedded in the economy.Cooling inflation could allow the Fed to continue to slow its campaign of interest rate increases, or perhaps even to stop raising rates altogether earlier than planned. That could reduce the chances that policymakers go too far in their effort to control inflation and cause a recession by mistake.“Things have been going in the direction you would need them to go in order for you to get a soft landing,” said Louise Sheiner, a former Fed economist who is now at the Brookings Institution. “It doesn’t mean you’re guaranteed to get it, but certainly it’s more likely than if inflation was still 7 percent.”The job market has been resilient.The second reason for optimism has been the gradual cooling of the labor market from a rolling boil to a strong simmer.The rapid reopening of the economy in 2021 led to a huge imbalance between supply and demand: Restaurants, hotels, airlines and other businesses suddenly had hundreds of thousand of jobs to fill and not enough people to fill them. For workers, it was a rare moment of leverage, resulting in the fastest wage growth in decades. But economists worried that those rapid gains could make it hard to get inflation under control.In recent months, however, the frenzy has subsided. Employers are not posting as many openings. Employees are not hopping from job to job as freely in search of higher pay. At the same time, millions of workers have joined or rejoined the work force, helping to ease the labor shortage.So far, however, that easing has happened without a significant increase in unemployment. The jobless rate is roughly where it was in the strong labor market that preceded the pandemic. Some industries, such as tech and finance, have laid off employees, but most of those workers have found other jobs relatively quickly.“Labor market overheating is diminishing substantially, to levels where it’s no longer so worrisome,” said Jan Hatzius, chief economist for Goldman Sachs.Mr. Hatzius, who has long been more optimistic about the prospects for a soft landing than many of his peers on Wall Street, on Monday lowered his estimated probability of a recession to 20 percent from 25 percent. He said the recent progress in inflation and the labor market — as well as in consumer spending and other areas — suggested that the economy was gradually moving past the disruptions of the past few years.“We’re seeing the other side of the pandemic,” he said. “The pandemic created all of this enormous turbulence in economies, and now I think it’s going away, and to me that’s the overriding theme.”Risks remain.Still, many economists are less sanguine. Inflation, at least excluding volatile food and energy prices, remains well above the Fed’s 2 percent annual target, at 4.8 percent in June. And although the progress on inflation so far may have been relatively painless, there is no guarantee that will continue — employers that initially responded to higher interest rates by hiring fewer workers may soon begin cutting jobs outright.“People taking victory laps declaring a soft landing I think are premature,” said Laurence M. Ball, a Johns Hopkins economist who last year wrote an influential paper concluding that it would be difficult for the Fed to get inflation back to 2 percent without a significant increase in unemployment.Part of the problem is that the Fed has little margin for error. Act too aggressively to tame inflation, and the central bank could push the economy into a recession. Do too little, and inflation could pick back up — forcing policymakers to clamp back down.Neil Dutta, head of economic research at Renaissance Macro, said he worried that the strong labor market would fuel a new acceleration in the economy, leading to a resumption of rapid price increases — an “inflationary boom” that reverses much of the recent progress.“The next three to six months, the inflation dynamics will look pretty good — it will feel like a soft landing,” he added. “The question is, what comes after?”Then there are the factors outside policymakers’ control. Oil prices, which soared last year when Russia invaded Ukraine, could do so again. Food prices could start rising again, too — a possibility that became more real this week when Russia canceled a deal to allow Ukraine to export grain on the Black Sea.With the economy already slowing, even relatively small developments — such as the looming resumption of student loan payments, which will strain the finances of many younger adults in particular — could be enough to knock the recovery off course, said Jay Bryson, chief economist for Wells Fargo.“The student loan thing is not, in and of itself, enough to cause a recession, but if you do have a downturn, it could be a kind of death by a thousand paper cuts,” he said.Mr. Bryson still expects a recession to start this year. But he has become less certain in recent months. He recently asked the nearly 20 people on his team to write down how likely they thought a recession was in the next year. Answers ranged from 30 percent to 65 percent, with an average of exactly 50 percent — coin-flip odds for a soft landing that many people once thought impossible.“Keep the Champagne on ice,” Mr. Bryson said. “Hopefully early next year we can start popping it.” More

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    The Pandemic’s Job Market Myths

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    Remember the “she-cession”? What about the early-retirement wave, or America’s army of quiet quitters?For economists and other forecasters, the pandemic and postpandemic economy has been a lesson in humility. Time and again, predictions about ways in which the labor market had been permanently changed have proved temporary or even illusory.Women lost jobs early in the pandemic but have returned in record numbers, making the she-cession a short-lived phenomenon. Retirements spiked along with coronavirus deaths, but many older workers have come back to the job market. Even the person credited with provoking a national conversation by posting a TikTok video about doing the bare minimum at your job has suggested that “quiet quitting” may not be the way of the future — he’s into quitting out loud these days.That is not to say nothing has changed. In a historically strong labor market with very low unemployment, workers have a lot more power than is typical, so they are winning better wages and new perks. And a shift toward working from home for many white-collar jobs is still reshaping the economy in subtle but important ways.But the big takeaway from the pandemic recovery is simple: The U.S. labor market was not permanently worsened by the hit it suffered. It echoes the aftermath of the 2008 recession, when economists were similarly skeptical of the labor market’s ability to bounce back — and similarly proved wrong once the economy strengthened.“The profession has not fully digested the lessons of the recovery from the Great Recession,” said Adam Ozimek, the chief economist at the Economic Innovation Group, a research organization in Washington. One of those lessons, he said: “Don’t bet against the U.S. worker.”Here is a rundown of the labor market narratives that rose and fell over the course of the pandemic recovery.True but Over: The ‘She-cession’Women lost jobs heavily early in the pandemic, and people fretted that they would be left lastingly worse off in the labor market — but that has not proved to be the case.

    Note: Data is as of June 2023 and is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesIn the wake of the pandemic, employment has actually rebounded faster among women than among men — so much so that, as of June, the employment rate for women in their prime working years, commonly defined as 25 to 54, was the highest on record. (Employment among prime-age men is back to where it was before the pandemic, but is still shy of a record.)Gone: Early RetirementsAnother frequent narrative early in the pandemic: It would cause a wave of early retirements.Historically, when people lose jobs or leave them late in their working lives, they tend not to return to work — effectively retiring, whether or not they label it that way. So when millions of Americans in their 50s and 60s left the labor force early in the pandemic, many economists were skeptical that they would ever come back.

    Notes: Percentages compare June 2023 with the 2019 average. Data is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesBut the early retirement wave never really materialized. Americans between ages 55 and 64 returned to work just as fast as their younger peers and are now employed at a higher rate than before the pandemic. Some may have been forced back to work by inflation; others had always planned to return and did so as soon as it felt safe.The retirement narrative wasn’t entirely wrong. Americans who are past traditional retirement age — 65 and older — still haven’t come back to work in large numbers. That is helping to depress the size of the overall labor force, especially because the number of Americans in their 60s and 70s is growing rapidly as more baby boomers hit their retirement years.Questionable: The White-Collar RecessionTechnology layoffs at big companies have prompted discussion of a white-collar recession, or one that primarily affects well-heeled technology and information-sector workers. While those firings have undoubtedly been painful for those who experienced them, it has not shown up prominently in overall employment data.

    Note: Data is seasonally adjusted.Source: Bureau of Labor StatisticsBy The New York TimesFor now, the nation’s high-skilled employees seem to be shuffling into new and different jobs pretty rapidly. Unemployment remains very low both for information and for professional and business services — hallmark white-collar industries that encompass much of the technology sector. And layoffs in tech have slowed recently.Nuanced: The Missing MenIt looked for a moment like young and middle-aged men — those between about 25 and 44 — were not coming back to the labor market the way other demographics had been. Over the past few months, though, they have finally been regaining their employment rates before the pandemic.That recovery came much later than for some other groups: For instance, 35-to-44-year-old men have yet to consistently hold on to employment rates that match their 2019 average, while last year women in that age group eclipsed their employment rate before the pandemic. But the recent progress suggests that even if men are taking longer to recover, they are slowly making gains.False (Again): The Labor Market Won’t Fully Bounce BackAll these narratives share a common thread: While some cautioned against drawing early conclusions, many labor market experts were skeptical that the job market would fully recover from the shock of the pandemic, at least in the short term. Instead, the rebound has been swift and broad, defying gloomy narratives.This isn’t the first time economists have made this mistake. It’s not even the first time this century. The crippling recession that ended in 2009 pushed millions of Americans out of the labor force, and many economists embraced so-called structural explanations for why they were slow to return. Maybe workers’ skills or professional networks had eroded during their long periods of unemployment. Maybe they were addicted to opioids, or drawing disability benefits, or trapped in parts of the country with few job opportunities.In the end, though, a much simpler explanation proved correct. People were slow to return to work because there weren’t enough jobs for them. As the economy healed and opportunities improved, employment rebounded among pretty much every demographic group.The rebound from the pandemic recession has played out much faster than the one that took place after the 2008 downturn, which was worsened by a global financial blowup and a housing market collapse that left long-lasting scars. But the basic lesson is the same. When jobs are plentiful, most people will go to work.“People want to adapt, and people want to work: Those things are generally true,” said Julia Coronado, the founder of MacroPolicy Perspectives, a research firm. She noted that the pool of available workers expanded further with time and amid solid immigration. “People are resilient. They figure things out.” More

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    The ‘Great Resignation’ Is Over. Can Workers’ Power Endure?

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    The furious pace of job-switching in recent years has led to big gains for low-wage workers. But the pendulum could be swinging back toward employers.Tens of millions of Americans have changed jobs over the past two years, a tidal wave of quitting that reflected — and helped create — a rare moment of worker power as employees demanded higher pay, and as employers, short on staff, often gave it to them.But the “great resignation,” as it came to be known, appears to be ending. The rate at which workers voluntarily quit their jobs has fallen sharply in recent months — though it edged up in May — and is only modestly above where it was before the pandemic disrupted the U.S. labor market. In some industries where turnover was highest, like hospitality and retail businesses, quitting has fallen back to prepandemic levels.Quits Are High, But Falling

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    Voluntary quits per 100 workers
    Note: Data is seasonally adjustedSource: Labor DepartmentBy The New York TimesNow the question is whether the gains that workers made during the great resignation will outlive the moment — or whether employers will regain leverage, particularly if, as many forecasters expect, the economy slips into a recession sometime in the next year.Already, the pendulum may be swinging back toward employers. Wage growth has slowed, especially in the low-paying service jobs where it surged as turnover peaked in late 2021 and early 2022. Employers, though still complaining of labor shortages, report that it has gotten easier to hire and retain workers. And those who do change jobs are no longer receiving the supersize raises that became the norm in recent years, according to data from the payroll processing firm ADP.“You don’t see the signs saying $1,000 signing bonus anymore,” said Nela Richardson, ADP’s chief economist.Ms. Richardson compared the labor market to a game of musical chairs: When the economy began to recover from pandemic shutdowns, workers were able to move between jobs freely. But with recession warnings in the air, they are becoming nervous about getting caught without a job when fewer are available.“Everyone knows the music is about to stop,” Ms. Richardson said. “That is going to lead people to stay put a bit longer.”Aubrey Moya joined the great resignation about a year and a half ago, when she decided she had had enough of the low wages and backbreaking work of waiting tables. Her husband, a welder, was making good money — he, too, had changed jobs in search of better pay — and they decided it was time for her to start the photography business she had long dreamed of. Ms. Moya, 38, became one of the millions of Americans to start a small business during the pandemic.Today, though, Ms. Moya is questioning whether her dream is sustainable. Her husband is making less money, and living costs have risen. Her customers, stung by inflation, aren’t splurging on the boudoir photo sessions she specializes in. She is nervous about making payments on her Fort Worth studio.“There was a moment of empowerment,” she said. “There was a moment of ‘We’re not going back, and we’re not going to take this anymore,’ but the truth is yes, we are, because how else are we going to pay the bills?”But Ms. Moya isn’t going back to waiting tables just yet. And some economists think workers are likely to hold on to some of the gains they have made in recent years.“There are good reasons to think that at least a chunk of the changes that we’ve seen in the low-wage labor market will prove lasting,” said Arindrajit Dube, a University of Massachusetts professor who has studied the pandemic economy.The great resignation was often portrayed as a phenomenon of people quitting work altogether, but the data tells a different story. Most of them quit to take other, typically better-paying jobs — or, like Ms. Moya, to start businesses. And while turnover increased in virtually all industries, it was concentrated in low-wage services, where workers have generally had little leverage.For those workers, the rapid reopening of the in-person economy in 2021 provided a rare opportunity: Restaurants, hotels and stores needed tens of thousands of employees when many people still shunned jobs requiring face-to-face interaction with the public. And even as concerns about the coronavirus faded, demand for workers continued to outstrip supply, partly because many people who had left the service industry weren’t eager to return.The result was a surge in wages for workers at the bottom of the earnings ladder. Average hourly earnings for rank-and-file restaurant and hotel workers rose 28 percent from the end of 2020 to the end of 2022, far outpacing both inflation and overall wage growth.In a recent paper, Mr. Dube and two co-authors found that the earnings gap between workers at the top of the income scale and those at the bottom, after widening for four decades, began to narrow: In just two years, the economy undid about a quarter of the increase in inequality since 1980. Much of that progress, they found, came from workers’ increased ability — and willingness — to change jobs.Pay is no longer rising faster for low-wage workers than for other groups. But importantly in Mr. Dube’s view, low-wage workers have not lost ground over the past two years, making wage gains that more or less keep up with inflation and higher earners. That suggests that turnover could be declining not only because workers are becoming more cautious but also because employers have had to raise pay and improve conditions enough that their workers aren’t desperate to leave.The strong labor market gave Danny Cron, a restaurant server, the confidence to keep changing jobs until he found one that worked for him.Yasara Gunawardena for The New York TimesDanny Cron, a restaurant server in Los Angeles, has changed jobs twice since going back to work after pandemic restrictions lifted. He initially went to work at a dive bar, where his hours were “brutal” and the most lucrative shifts were reserved for servers who sold the most margaritas. He quit to work at a large chain restaurant, which offered better hours but little scheduling flexibility — a problem for Mr. Cron, an aspiring actor.So last year, Mr. Cron, 28, quit again, for a job at Blue Ribbon, an upscale sushi restaurant, where he makes more money and which is more accommodating of his acting schedule. The strong postpandemic labor market, he said, gave him the confidence to keep changing jobs until he found one that worked for him.“I knew there were a plethora of other jobs to be had, so I felt less attached to any one job out of necessity,” Mr. Cron wrote in an email.But now that he has a job he likes, he said, he feels little urge to keep searching — partly because he senses that the job market has softened, but mostly because he is happy where he is.“Looking for a new job is a lot of work, and training for a new job is a lot of work,” he said. “So when you find a good serving job, you’re not going to give that up.”The labor market remains strong, with unemployment below 4 percent and job growth continuing, albeit more slowly than in 2021 or 2022. But even optimists like Mr. Dube concede that workers like Mr. Cron could lose leverage if companies start cutting jobs en masse.“It’s very tenuous,” said Kathryn Anne Edwards, a labor economist and policy consultant who has studied the role of quitting in wage growth. A recession, she said, could wipe away gains made by hourly workers over the past few years.Still, some workers say one thing has changed in a more lasting way: their behavior. After being lauded as “essential workers” early in the pandemic — and given bonuses, paid sick time and other perks — many people in hospitality, retail and similar jobs say they were disappointed to see companies roll back benefits as the emergency abated. The great resignation, they say, was partly a reaction to that experience: They were no longer willing to work for companies that didn’t value them.Amanda Shealer, who manages a store near Hickory, N.C., said her boss had recently told her that she needed to find more ways to accommodate hourly workers because they would otherwise leave for jobs elsewhere. Her response: “So will I.”“If I don’t feel like I’m being supported and I don’t feel like you’re taking my concerns seriously and you guys just continue to dump more and more to me, I can do the same thing,” Ms. Shealer, 40, said. “You don’t have the loyalty to a company anymore, because the companies don’t have the loyalty to you.” More

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    GDP Data Shows US Economic Growth Rate of 2% in Q1

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    The NewsThe United States economy grew faster early this year than previously believed.Gross domestic product, adjusted for inflation, expanded at an annual rate of 2 percent in the first three months of the year, the Commerce Department said Thursday. That was a significant upward revision from the 1.1 percent growth rate in preliminary data released in April. (An earlier revision, released last month, showed a slightly stronger rate of 1.3 percent.)An alternative measure of growth, based on income rather than production, painted a different picture, showing that the economy contracted for the second quarter in a row. That measure was also revised upward from the prior estimate.The report underscored the surprising resilience of the country’s economic recovery, which has remained steady despite high inflation, rapidly rising interest rates and persistent predictions of a recession from many forecasters on Wall Street.The new data is cause for “genuine optimism,” wrote Gregory Daco, chief economist at EY, the consulting firm previously known as Ernst & Young, in a note to clients. “This is leading many to rightly question whether the long-forecast recession is truly inevitable.”Consumers are powering the recovery through their spending, which increased at a 4.2 percent rate in the first quarter, up from a 1 percent rate in late 2022 and faster than the 3.7 percent rate initially reported in April. That spending, fueled by a strong job market and rising wages, helped offset declines in other sectors of the economy like business investment and housing.Consumers are powering the recovery through their spending, which increased at 4.2 percent rate in the first quarter.Jim Wilson/The New York TimesWhat It Means: Complications for the Fed.The continued strength of the consumer economy poses a conundrum for policymakers at the Federal Reserve, who have been raising interest rates in an effort to curb inflation without causing a recession.On the one hand, data from the first quarter provides some signs of success: Economic growth has slowed but not stalled, even as inflation has cooled significantly since the middle of last year.But many forecasters, both inside and outside the central bank, are skeptical that inflation will continue to ease as long as consumers are willing to open their wallets — meaning policymakers are likely to take further steps to rein in growth. At their meeting this month, Fed officials left interest rates unchanged for the first time in more than a year, but they have signaled they are likely to resume rate increases in July.The Fed chair, Jerome H. Powell, at a conference in Madrid on Thursday, noted that inflation had repeatedly defied forecasts of a slowdown.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.What’s Next: Data on income and spending.Mr. Powell and his colleagues will get more up-to-date evidence on their progress on Friday, when the Commerce Department releases data on personal income, spending and inflation from May.Jeanna Smialek More

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    World Bank Projects Weak Global Growth Amid Rising Interest Rates

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    A new report projects that economic growth will slow this year and remain weak in 2024.The World Bank said on Tuesday that the global economy remained in a “precarious state” and warned of sluggish growth this year and next as rising interest rates slow consumer spending and business investment, and threaten the stability of the financial system.The bank’s tepid forecasts in its latest Global Economic Prospects report highlight the predicament that global policymakers face as they try to corral stubborn inflation by raising interest rates while grappling with the aftermath of the pandemic and continuing supply chain disruptions stemming from the war in Ukraine.The World Bank projected that global growth would slow to 2.1 percent this year from 3.1 percent in 2022. That is slightly stronger than its forecast of 1.7 percent in January, but in 2024 output is now expected to rise to 2.4 percent, weaker than the bank’s previous prediction of 2.7 percent.“Rays of sunshine in the global economy we saw earlier in the year have been fading, and gray days likely lie ahead,” said Ayhan Kose, deputy chief economist at the World Bank Group.Mr. Kose said that the world economy was experiencing a “sharp, synchronized global slowdown” and that 65 percent of countries would experience slower growth this year than last. A decade of poor fiscal management in low-income countries that relied on borrowed money is compounding the problem. According to the World Bank, 14 of 28 low-income countries are in debt distress or at a high risk of debt distress.Optimism about an economic rebound this year has been dampened by recent stress in the banking sectors in the United States and Europe, which resulted in the biggest bank failures since the 2008 financial crisis. Concerns about the health of the banking industry have prompted many lenders to pull back on providing credit to businesses and individuals, a phenomenon that the World Bank said was likely to further weigh down growth.The bank also warned that rising borrowing costs in rich countries — including the United States, where overnight interest rates have topped 5 percent for the first time in 15 years — posed an additional headwind for the world’s poorest economies.The most vulnerable economies, the report warned, are facing greater risk of financial crises as a result of rising rates. Higher interest rates make it more expensive for developing countries to service their loan payments and, if their currencies depreciate, to import food.In addition to the risks posed by rising interest rates, the pandemic and the conflict in Ukraine have combined to reverse decades of progress in global poverty reduction. The World Bank estimated on Tuesday that in 2024, incomes in the poorest countries would be 6 percent lower than in 2019.“Emerging market and developing economies today are struggling just to cope — deprived of the wherewithal to create jobs and deliver essential services to their most vulnerable citizens,” the report said.The World Bank sees widespread slowdowns in advanced economies, too. In the United States, it projects 1.1 percent growth this year and 0.8 percent in 2024.China is a notable exception to that trend, and the reopening of its economy after years of strict Covid-19 lockdowns is propping up global growth. The bank projects that the Chinese economy will grow 5.6 percent this year and 4.6 percent next year.Inflation is expected to continue to moderate this year, but the World Bank expects that prices will remain above central bank targets in many countries throughout 2024. More