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    Even a Soft Landing for the Economy May Be Uneven

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    Small businesses and lower-income families could feel pinched in the months ahead whether or not a recession is avoided this year.One of the defining economic stories of the past year was the complex debate over whether the U.S. economy was going into a recession or merely descending, with some altitude sickness, from a peak in growth after pandemic lows.This year, those questions and contentions are likely to continue. The Federal Reserve has been steeply increasing borrowing costs for consumers and businesses in a bid to curb spending and slow down inflation, with the effects still making their way through the veins of commercial activity and household budgeting. So most banks and large credit agencies expect a recession in 2023.At the same time, a budding crop of economists and major market investors see a firm chance that the economy will avoid a recession, or scrape by with a brief stall in growth, as cooled consumer spending and the easing of pandemic-era disruptions help inflation gingerly trend toward more tolerable levels — a hopeful outcome widely called a soft landing.“The possibility of getting a soft landing is greater than the market believes,” said Jason Draho, an economist and the head of Americas asset allocation for UBS Global Wealth Management. “Inflation has now come down faster than some recently expected, and the labor market has held up better than expected.”What seems most likely is that even if a soft landing is achieved, it will be smoother for some households and businesses and rockier for others.In late 2020 and early 2021, talk of a “K-shaped recovery” took root, inspired by the early pandemic economy’s split between secure remote workers — whose savings, house prices and portfolios surged — and the millions more navigating hazardous or tenuous in-person jobs or depending on a large-yet-porous unemployment aid system.Jerome H. Powell, the Fed chair, said: “I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Haiyun Jiang/The New York TimesIn 2023, if there’s a soft landing, it could be K-shaped, too. The downside is likely to be felt most by cash-starved small businesses and by workers no longer buoyed by the savings and labor bargaining power they built up during the pandemic.In any case, more turbulence lies ahead as fairly low unemployment, high inflation and shaky growth continue to queasily coexist.Generally healthy corporate balance sheets and consumer credit could be bulwarks against the forces of volatile prices, global instability and the withdrawal of emergency-era federal aid. Chief executives of companies that cater to financially sound middle-class and affluent households remain confident in their outlook. Al Kelly, the chief executive of Visa, the credit card company, said recently that “we are seeing nothing but stability.”The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Switching Jobs: A hallmark of the pandemic era has been the surge in employee turnover. The wave of job-switching may be taking a toll on productivity.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.But the Fed’s projections indicate that 1.6 million people could lose jobs by late this year — and that the unemployment rate will rise at a magnitude that in recent history has always been accompanied by a recession.“There will be some softening in labor market conditions,” Jerome H. Powell, the Fed chair, said at his most recent news conference, explaining the rationale for the central bank’s recent persistence in raising rates. “And I wish there were a completely painless way to restore price stability. There isn’t. And this is the best we can do.”Will the bottom 50 percent backslide?Over the past two years, researchers have frequently noted that, on average, lower-wage workers have reaped the greatest pay gains, with bumps in compensation that often outpaced inflation, especially for those who switched jobs. But those gains are relative and were often upticks from low baselines.Consumer spending accounts for roughly 70 percent of economic activity.Jim Wilson/The New York TimesAccording to the Realtime Inequality tracker, created by economists at the University of California, Berkeley, inflation-adjusted disposable income for the bottom 50 percent of working-age adults grew 4.2 percent from January 2019 to September 2022. Among the top 50 percent, income lagged behind inflation. But that comparison leaves out the context that the average income for the bottom 50 percent in 2022 was $25,500 — roughly a $13 hourly pay rate.“As we look ahead, I think it is entirely possible that the households and the people we usually worry about at the bottom of the income distribution are going to run into some kind of combination of job loss and softer wage gains, right as whatever savings they had from the pandemic gets depleted,” said Karen Dynan, a former chief economist at the Treasury Department and a professor at Harvard University. “And it’s going to be tough on them.”Consumer spending accounts for roughly 70 percent of economic activity. The widespread resilience of overall consumption in the past year despite high inflation and sour business sentiment was largely attributed to the savings that households of all kinds accumulated during the pandemic: a $2.3 trillion gumbo of government aid, reduced spending on in-person services, windfalls from mortgage refinancing and cashed-out stock gains.What’s left of those stockpiles is concentrated among wealthier households.After spiking during the pandemic, the overall rate of saving among Americans has quickly plunged amid inflation.The personal saving rate — a monthly measure of the percentage of after-tax income that households save overall — has dropped precipitously in recent months. 

    Note: The personal saving rate is also referred to as “personal saving as a percentage of disposable personal income.” Personal saving is defined as overall income minus spending and taxes paid.Source: U.S. Bureau of Economic AnalysisBy The New York TimesMost major U.S. banks have reported that checking balances are above prepandemic levels across all income groups. Yet the cost of living is higher than it was in 2019 throughout the country. And depleted savings among the bottom third of earners could continue to ebb while rent and everyday prices still rise, albeit more slowly.Most key economic measures are reported in “real” terms, subtracting inflation from changes in individual income (real wage growth) and total output (real gross domestic product, or G.D.P.). If government calculations of inflation continue to abate as quickly as markets expect, inflation-adjusted numbers could become more positive, making the decelerating economy sound healthier.That wonky dynamic could form a deep tension between resilient-looking official data and the sentiment of consumers who may again find themselves with little financial cushion.Does small business risk falling behind?Another potential factor for a K-shaped landing could be the growing pressure on small businesses, which have less wiggle room than bigger companies in managing costs. Small employers are also more likely to be affected by the tightening of credit as lenders become far pickier and pricier than just a year ago.In a December survey of 3,252 small-business owners by Alignable, a Boston-based small business network with seven million members, 38 percent said they had only one month or less of cash reserves, up 12 percentage points from a year earlier. Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Many landlords who were lenient about payments at the height of the pandemic have stiffened, asking for back rent in addition to raising current rents.Gabby Jones for The New York TimesUnlike many large-scale employers that have locked in cheap long-term funding by selling corporate bonds, small businesses tend to fund their operations and payrolls with a mix of cash on hand, business credit cards and loans from commercial banks. Higher interest rates have made the latter two funding sources far more expensive — spelling trouble for companies that may need a fresh line of credit in the coming months. And incoming cash flows depend on sales remaining strong, a deep uncertainty for most.A Bank of America survey of small-business owners in November found that “more than half of respondents expect a recession in 2023 and plan to reduce spending accordingly.” For a number of entrepreneurs, decisions to maintain profitability may lead to reductions in staff.Some businesses wrestling with labor shortages, increased costs and a tapering off in customers have already decided to close.Susan Dayton, a co-owner of Hamilton Street Cafe in Albany, N.Y., closed her business in the fall once she felt the rising costs of key ingredients and staff turnover were no longer sustainable.She said the labor shortage for small shops like hers could not be solved by simply offering more pay. “What I have found is that offering people more money just means you’re paying more for the same people,” Ms. Dayton said.That tension among profitability, staffing and customer growth will be especially stark for smaller businesses. But it exists in corporate America, too. Some industry analysts say company earnings, which ripped higher for two years, could weaken but not plunge, with input costs leveling off, while businesses manage to keep prices elevated even if sales slow.That could limit the bulk of layoffs to less-valued workers during corporate downsizing and to certain sectors that are sensitive to interest rates, like real estate or tech — creating another potential route for a soft, if unequal, landing.The biggest challenge to overcome is that the income of one person or business is the spending of another. Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases, but not so much that it leads employers to lay off workers — who could pull back further on spending, setting off a vicious circle.Those who feel that inflation can be tamed without a collapse in the labor market hope that spending slows just enough to cool off price increases.Jim Wilson/The New York TimesWhat are the chances of a soft landing?If the strained U.S. economy is going to unwind rather than unravel, it will need multiple double-edged realities to be favorably resolved.For instance, many retail industry analysts think the holiday season may have been the last hurrah for the pandemic-era burst in purchases of goods. Some consumers may be sated from recent spending, while others become more selective in their purchases, balking at higher prices.That could sharply reduce companies’ “pricing power” and slow inflation associated with goods. Service-oriented businesses may be somewhat affected, too. But the same phenomenon could lead to layoffs, as slowdowns in demand reduce staffing needs.In the coming months, the U.S. economy will be influenced in part by geopolitics in Europe and the coronavirus in China. Volatile shifts in what some researchers call “systemically significant prices,” like those for gas, utilities and food, could materialize. People preparing for a downturn by cutting back on investments or spending could, in turn, create one. And it is not clear how far the Fed will go in raising interest rates.Then again, those risk factors could end up relatively benign.“It’s 50-50, but I have to take a side, right? So I take the side of no recession,” said Mark Zandi, the chief economist at Moody’s Analytics. “I can make the case on either side of this pretty easily, but I think with a little bit of luck and some tough policymaking, we can make our way through.” More

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    Why It’s Hard to Predict What the Economy Will Look Like in 2023

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    Historical data has always been critical to those who make economic predictions. But three years into the pandemic, America is suffering through an economic whiplash of sorts — and the past is proving anything but a reliable guide.Forecasts have been upended repeatedly. The economy’s rebound from the hit it incurred at the onset of the coronavirus was faster and stronger than expected. Shortages of goods then collided with strong demand to fuel a burst in inflation, one that has been both more extreme and more stubborn than anticipated.Now, after a year in which the Federal Reserve raised interest rates at the fastest pace since the 1980s to slow growth and bring those rapid price increases back under control, central bankers, Wall Street economists and Biden administration officials are all trying to guess what might lie ahead for the economy in 2023. Will the Fed’s policies spur a recession? Or will the economy gently cool down, taming high inflation in the process?With typical patterns still out of whack across big parts of the economy — including housing, cars and the labor market — the answer is far from certain, and past experience is almost sure to serve as a poor map.“I don’t think anyone knows whether we’re going to have a recession or not, and if we do, whether it’s going to be a deep one or not,” Jerome H. Powell, the Fed chair, said during a news conference last week. “It’s not knowable.”Doubt about what comes next is one reason the Fed is reorienting its monetary policy approach. Officials are now nudging borrowing costs up more gradually, giving them time to see how their policies are affecting the economy and how much more is needed to ensure that inflation returns to a slow and steady pace.As policymakers try to guess what lies ahead, the markets that have been most disrupted in recent years illustrate how big changes — some spurred by the pandemic, others tied to demographic shifts — continue to ricochet through the economy and make forecasting an exercise in uncertainty.Housing is strange.The pandemic era has repeatedly upended the housing market. The virus’s onset sent urbanites rushing for more space in suburban and small-city homes, a trend that was reinforced by rock-bottom mortgage rates.Then, reopenings from lockdown pulled people back toward cities. That helped push up rents in major metropolitan areas — which make up a big chunk of inflation — and, paired with the Fed’s rate increases, it has helped to sharply slow home buying in many markets.The question is what happens next. When it comes to the rental market, new lease data from Zillow and Apartment List suggests that conditions are cooling. The supply of available apartments and homes is also expected to climb in 2023 as long-awaited new residential buildings are finished.The Biden PresidencyHere’s where the president stands after the midterm elections.A New Primary Calendar: President Biden’s push to reorder the early presidential nominating states is likely to reward candidates who connect with the party’s most loyal voters.A Defining Issue: The shape of Russia’s war in Ukraine, and its effects on global markets, in the months and years to come could determine Mr. Biden’s political fate.Beating the Odds: Mr. Biden had the best midterms of any president in 20 years, but he still faces the sobering reality of a Republican-controlled House for the next two years.2024 Questions: Mr. Biden feels buoyant after the better-than-expected midterms, but as he turns 80, he confronts a decision on whether to run again that has some Democrats uncomfortable.“The frame I would put on 2023 is that we’re really going to enter the year back in a demand-constrained environment,” said Igor Popov, chief economist at Apartment List. “We’re going to see more apartments competing for fewer renters.”Mr. Popov expects “small growth” in rents in 2023, but he said that outlook is uncertain and hinges on the state of the labor market. If unemployment soars, rents could fall. If workers do really well, rents could rise more quickly.At the same time, existing leases are still catching up to the big run-up that has happened over the past year as tenants renew at higher rates. It is hard to guess both how much official inflation will converge with market-based rent data, and how long the trend will take to fully play out.“It could resolve in months, or it could take a year,” said Adam Ozimek, the chief economist at the Economic Innovation Group.Then there’s the market for owned housing, which does not count into inflation but does matter for the pace of overall economic growth. New home sales have fallen off a cliff as surging mortgage costs and the recent price run-up has put purchasing a house out of reach for many families. Even so, new mortgage applications have ticked up at the slightest sign of relief in recent months, evidence that would-be buyers are waiting on the sidelines.Demographics explain that underlying demand. Many millennials, the roughly 26- to 41-year-olds who are America’s largest generation, were entering peak home-buying ages right around the onset of the pandemic, and many are still in the market — which could put a floor under how much home prices will moderate.Plus, “sellers don’t have to sell,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association, who expects home prices to be “flattish” next year as demand wanes but supply, which was already sharply limited after a decade of under-building following the 2007 housing crash, further pulls back.Given all the moving parts, many analysts are either much more optimistic or very pessimistic.“It’s almost comical to see the house price growth forecasts,” Mr. Popov said. “It’s either 3 percent growth or double-digit declines, with almost nothing in between.”The car market remains weird, too.The car market, a major driver of America’s initial inflation burst, is another economic puzzle. Years of too little supply have unleashed pent-up demand that is spurring unusual consumer and company behavior.Used cars were in especially short supply early in the pandemic, but are finally more widely available. The wholesale prices that dealers pay to stock their lots have plummeted in recent months.But car sellers are taking longer to pass those steep declines along to consumers than many economists had expected. Wholesale prices are down about 14.2 percent from a year ago, while consumer prices for used cars and trucks have declined only 3.3 percent. Many experts think that means bigger markdowns are coming, but there’s uncertainty about how soon and how steep.The new car market is even stranger. It remains undersupplied amid a parts shortages, though that is beginning to change as supply chain issues ease and production recovers. But both dealers and auto companies have made big profits during the low-supply, high-price era, and some have floated the idea of maintaining leaner production and inventories to keep their returns high.Jonathan Smoke, chief economist at Cox Automotive, thinks the normal laws of supply and demand will eventually reassert themselves as companies fight to retain customers. But getting back to normal will be a gradual, and perhaps halting, process.Still, “we’re at an inflection point,” Mr. Smoke said. “I think new vehicles are going to be less and less inflationary.”Labor markets are the most important question mark.Perhaps the most critical economic mystery is what will happen next in America’s labor market — and that is hard to game out.Part of the problem is that it’s not entirely clear what is happening in the labor market right now. Most signs suggest that hiring has been strong, job openings are plentiful, and wages are climbing at the fastest pace in decades. But there is a huge divergence between different data series: The Labor Department’s survey of households shows much weaker hiring growth than its survey of employers. Adding to the confusion, recent research has suggested that revisions could make today’s labor growth look much more lackluster.“It’s a huge mystery,” said Mr. Ozimek from the Economic Innovation Group. “You have to figure out which data are wrong.”That confusion makes guessing what comes next even more difficult. If, like most economists, one accepts that the labor market is hot right now, Fed policy is clearly poised to cool it down: The central bank has raised interest rates from near zero to about 4.4 percent this year, and expects to lift them to 5.1 percent in 2023.Those moves are explicitly aimed at slowing down hiring and wage growth, because central bankers believe that inflation for many types of services will remain elevated if pay gains remain as strong as they are now. Dentist offices and restaurants will, in theory, try to pass climbing labor costs along to consumers to protect their profits. But it is unclear how much the job market needs to slow to bring pay gains back to the more normal levels the Fed is looking for, and whether it can decelerate sufficiently without plunging America into a painful recession.Companies seem to be facing major labor shortages, partly as a wave of baby boomers retires, and Fed officials hope that will make firms more inclined to hang onto their workers even if the broader economy slows drastically. Some policymakers have suggested that such “labor hoarding” could help them achieve a soft landing that bucks historical precedent: Unemployment could rise notably without spiraling higher, cooling the economy without tipping it into a painful downturn.Typically, when the unemployment rate rises by more than 0.5 percentage points, like the Fed forecasts it will do next year, the jobless rate keeps rising. Loss of economic momentum feeds on itself, and the nation plunges into a recession. That pattern is so established it has a name: the Sahm Rule, for the economist Claudia Sahm.Yet Ms. Sahm herself said that if the axiom were to break down, this wacky economic moment would be the time. Consumers are sitting on unusual savings piles that could help sustain middle-class spending even through some job losses, preventing a downward spiral.“The thing that has never happened would have to happen,” she said. “But hey, things that have never happened have been happening left and right.” More

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    Inflation Cooled Notably in November, Good News for the Fed

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    Inflation slowed more sharply than expected in November, an encouraging sign for both Federal Reserve officials and consumers that 18 months of rapid and unrelenting price increases are beginning to meaningfully abate.The new data is unlikely to alter the Fed’s plan to raise interest rates by another half point at the conclusion of its two-day meeting on Wednesday. But the moderation in inflation, which affected used cars, some types of food and airline tickets, caused investors to speculate that the Fed could pursue a less aggressive policy path next year — potentially increasing the chances of a “soft landing,” or one in which the economy slows gradually and without a painful recession.Stock prices jumped sharply higher after government data showed that inflation eased to 7.1 percent in the year through November, down from 7.7 percent in the previous reading and less than economists had expected.The Fed, which has been rapidly raising rates in three-quarter point increments, is expected to make a smaller move on Wednesday, bringing rates to a range between 4.25 and 4.5 percent. Central bankers will also release economic projections showing how much they expect to raise interest rates next year, and investors are now betting that they will slow to quarter-point adjustments by their February meeting as fading price pressures give them latitude to proceed more cautiously.“The overall picture is definitely improving,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “It’s unambiguously good news, but it would not be fair to say that inflation is falling everywhere — there are still pockets of big increases.”While price increases are not yet slowing across the board, they are moderating for key goods and services that consumers buy every day, including gas and meat. That is good news for President Biden, who has struggled to convince Americans that the economy is strong as the surging cost of living erodes voter confidence.“Inflation is coming down in America,” Mr. Biden said during remarks at the White House on Tuesday morning. He hailed the report as “news that provides some optimism for the holiday season, and I would argue, the year ahead.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Why Are Middle-Aged Men Missing From the Labor Market?

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    Men ages 35 to 44 are staging a lackluster rebound from pandemic job loss, despite a strong economy.For the past five months Paul Rizzo, 38, has been delivering food and groceries through the DoorDash app. But he spent the first half of 2022 earning no paycheck at all — reflecting a surprising trend among middle-aged men.After learning last Christmas that his job as an analyst at a hospital company was being automated, Mr. Rizzo chose to stay at home to care for his two young sons. His wife wanted to go back to work, and he was discouraged in his own career after more than a decade of corporate tumult and repeated disappointment. He thought he might be able to earn enough income on his investments to pull it off financially.Mr. Rizzo’s decision to step away from employment during his prime working years hints at one of the biggest surprises in today’s job market: Hundreds of thousands of men in their late 30s and early 40s stopped working during the pandemic and have lingered on the labor market’s sidelines since. While Mr. Rizzo has recently returned to earning money, many men his age seem to be staying out of the work force altogether. They are an anomaly, as employment rates have rebounded more fully for women of the same age and for both younger and older men.About 87 percent of men ages 35 to 44 were working as of October, down from 88.3 percent before the pandemic struck in 2020. The stubborn decline has spanned racial groups, but it has been most heavily concentrated among men who — like Mr. Rizzo — do not have a four-year college degree. The pullback comes despite the fact that wages are rising and job openings are plentiful, including in fields like truck driving and construction, where college degrees are not required and men tend to dominate.Economists have not determined any single factor that is keeping men from returning to work. Instead, they attribute the trend to a cocktail of changing social norms around parenthood and marriage, shifting opportunities, and lingering scars of the 2008 to 2009 downturn — which cost many people in that age group jobs just as they were starting their careers.“Now, all of a sudden, you’re kind of getting your life together, and if you’re in the wrong industry …” Mr. Rizzo said, trailing off as he discussed his recent labor market experience. “I wasn’t the only one who dropped out. I can tell you that.”How male employment shifted during the pandemicMen ages 35-44 are working at a notably lower rate than before the pandemic.

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    Change in male employment rate since Feb. 2020 by age group
    Note: Three-month rolling average of seasonally adjusted dataSource: Bureau of Labor StatisticsBy The New York TimesHow female employment shifted during the pandemicWomen’s employment has rebounded across age groups.

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    Change in female employment rate since Feb. 2020 by age group
    Note: Three-month rolling average of seasonally adjusted dataSource: Bureau of Labor StatisticsBy The New York TimesMen have been withdrawing from the labor force for decades. In the years following World War II, more than 97 percent of men in their prime working years — defined by economists as ages 25 to 54 — were working or actively looking for work, according to federal data. But starting in the 1960s, that share began to fall, mirroring the decline in domestic manufacturing jobs.What is new is that a small demographic slice — men who were early in their careers during the 2008 recession — seems to be most heavily affected.“I think there’s a lot of very discouraged people out there,” said Jane Oates, a former Labor Department official who now heads WorkingNation, a nonprofit focused on work force development. Men lost jobs in astonishing numbers during the 2008 financial crisis as the construction and home-building industries contracted. It took years to regain that ground — for men who were then in their 20s and early 30s and just getting started in their careers, employment rates never fully recovered. Economists came up with a range of explanations for the men’s slow return to the labor force. After the war on crime of the 1980s and 1990s, more men had criminal records that made it difficult to land jobs. The rise of opioid addiction had sidelined others. Video games had improved in quality, so staying home might have become more attractive. And the decline of nuclear family units may have diminished the traditional male role as economic provider.Now, recent history appears to be repeating itself — but for one specific age group. The question is why 35- to 44-year-old men seem to be staying out of work more than other demographics.Patricia Blumenauer, vice president of data and operations at Philadelphia Works, a work force development agency, said she had observed a dip in the number of men in that age range coming in for services. A disproportionately high share of those who do come in leave without taking a job.Ms. Blumenauer said that age range is a group “that we’re not seeing show up.” She thinks some men who lost their blue-collar jobs early in the pandemic may be looking for something with flexibility and higher pay. “The ability to work from home three days a week, or have a four-day weekend — things that other jobs have figured out — aren’t possible for those types of occupations.”When men don’t find those flexible jobs or can’t compete for them, they might choose to make ends meet by staying with relatives or doing under-the-table work, Ms. Blumenauer said.The pandemic has probably also slowed America’s already-weak family formation, giving single or childless men less of an incentive to settle into steady jobs, said the economist Ariel Binder. On the flip side, disruptions to schooling and child care meant that some men who already had families may have stopped doing paid work to take on more household tasks.“So on the one hand you get these men who are just not expecting to have a stable romantic relationship for most of their lives and are setting their time use accordingly,” Dr. Binder said. “Then there are men who are participating in these family structures, but doing so in nontraditional ways.”Like labor force experts, government data suggest that a combination of forces are at play.A growing number of men do seem to be taking on more child care duties, time use and other survey data suggests. But a shift toward being stay-at-home dads is unlikely to be the full story: Employment trends look the same for men in the age group who report having young kids living with them and those who don’t.What clearly does matter is education. The employment decline is more heavily concentrated among people who have not graduated from college and who live in metropolitan areas or suburbs, based on detailed government survey data.An education gap among menMen without a four-year college degree have returned to work more slowly than others in the same age group.

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    Change in employment rate for people ages 35-44
    Note: Three-month rolling average of seasonally adjusted data.Source: Current Population Survey via IPUMSBy The New York TimesSome economists speculate that the disproportionate decline could be because the age group has been buffeted by repeated crises, making their labor market footing fragile. They lost work early in their careers in 2008, faced a slow recovery after and found their jobs at risk again amid 2020 layoffs and an ongoing shift toward automation.“This group has been hit by automation, by globalization,” said David Dorn, a Swiss economist who studies labor markets.That fragility theory makes sense to Mr. Rizzo.He had seen the Navy as his ticket out of poverty in Louisiana and had expected to have a career in the service until he broke his back during basic training. He retired from the military after a few years. Then he pivoted, earning a two-year degree in Georgia and beginning a bachelor’s degree at Arizona State University — with dreams of one day working to cure cancer.Then the Great Recession hit. Mr. Rizzo had been working nights in a laboratory to afford rent and tuition, but the job ended abruptly in 2009. Phoenix was ground zero for the financial implosion’s fallout.Frantic job applications yielded nothing, and Mr. Rizzo had to drop out of school. Worse, he found himself staring down imminent homelessness. His tax refund saved him by allowing him and his wife to move back to Louisiana, where jobs were more plentiful. But after they divorced, he hit a low point.“I had nothing to show for my life after my 20s,” he explained.Mr. Rizzo spent the next decade rebuilding. He worked his way through various corporate positions where he taught himself skills in Excel and Microsoft SharePoint, married again, had two sons and bought a house.Yet he was regularly at risk of losing work to downsizing or technology — including late last year. The company he worked for wanted him to move into a new role, perhaps as a traveling salesperson, when his desk job disappeared. But his sons have special needs and that was not an option.He quit in January. He watched the kids, posted on his investment-related YouTube channel and watched Netflix. He thought he might be able to live on military payments and dividend income, becoming part of the “Financial Independence, Retire Early,” or FIRE, trend. But then the Federal Reserve raised interest rates and markets gyrated.“I got FIRE, all right,” he said. “My whole portfolio got set on fire.”Mr. Rizzo, who began working for DoorDash in July, making a delivery in Kenner.Emily Kask for The New York TimesMr. Rizzo turned to DoorDash, earning his first paycheck on July 4. While he is technically back in the labor market, gig work like his isn’t well measured in jobs data. If many men are taking a similar path but do not work every week, they might be overlooked in surveys, which ask if someone worked for pay in the previous week to determine whether they were employed.Mr. Rizzo is waiting to see what happens to his DoorDash income in an economic pullback before he rules out corporate work forever. Already, other dashers are complaining that business is slowing as people have spent down pandemic savings.The veteran counts himself fortunate. He knows men in his generation who have struggled to find any footing in the labor market.“It feels like it’s the after-affects of 2008 and 2009,” he said. “Everyone had to restart their lives from scratch.” More

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    Why Retailers Are Trying Extra Hard to Woo Holiday Shoppers

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    With an economic slowdown a distinct possibility, stores hope customers’ willingness to open their wallets will last through the season.Amazon held what amounted to an extra Prime Day in October, blanketing its site with deals. Best Buy rolled out Black Friday-level sales last month. And on Friday, Kohl’s entered the first 200 people to walk into each of its stores into a sweepstakes, with prizes including gift cards to Sephora and a family trip to a Legoland resort.With the arrival of the all-important holiday shopping season, retailers are not just competing with one another to attract customers. They are also competing against the clock.For now, Americans are spending, buoyed by pandemic-era savings and a red-hot labor market. But at the same time, prices are climbing at the fastest pace in decades and the Federal Reserve is attempting to rein them in by raising interest rates. That effort to curb demand by making borrowing more expensive is, in turn, making consumers pessimistic about the economy. And a recession is a distinct possibility.Retailers, some of them sitting on a glut of inventory, want to sell as much as they can while consumers are still pulling out their wallets. So they are barraging customers with discounts, hoping to entice them to buy before an economic slowdown causes a change in behavior once more.Whether retailers succeed will have profound implications. Billions of dollars are at stake, and companies will be watching the outcome closely as they make hiring and investment decisions for the new year.“We’re going to spend a lot of time right now focused on executing our plan, getting through the holiday season and then assessing the consumer and the overall retail landscape as we look to 2023,” Brian Cornell, the chief executive of Target, said on a call with analysts this month.More broadly, retail sales during the holiday shopping period could provide clues about the trajectory of the economy in the weeks and months to come.“For the overall economy, I think that it’s going to be very important to look at what the consumer is doing because really that’s going to be your key indicator,” said Lydia Boussour, an economist at EY-Parthenon. “It’s the key engine of growth.”An Express store at the Tanger Outlet in North Charleston, S.C. To entice bargain-hungry shoppers and move unwanted inventory, many companies are promoting “value.”Gavin McIntyre for The New York TimesForecasters generally believe that consumer spending, which accounts for about 70 percent of total economic growth, will remain strong in the fourth quarter, in large part because of household savings. Collectively, Americans by the middle of this year were still sitting on about $1.7 trillion in extra savings accumulated during the pandemic, based on Fed estimates, thanks in part to government aid.But in September, the most recent month for which calculations were available, Americans saved only 3.1 percent of their after-tax income, less than half the share before the pandemic. And poorer Americans are seeing their savings dwindle even faster than wealthier ones.Meanwhile, credit card balances in the third quarter swelled 15 percent compared with a year earlier, according to the Federal Reserve Bank of New York. That was the largest increase in more than two decades, as consumers increasingly rely on credit even as borrowing costs are rising.And a University of Michigan survey this month showed a sharp decline in “consumer sentiment” — a measurement of how people feel about the economy and their financial situation. Even as consumers continue to make purchases, Ms. Boussour said, “they’re feeling depressed about the overall economic situation, and they are going to grow increasingly reluctant to spend.”An employee at Bath & Body Works at Tanger Outlet greeted Black Friday shoppers. Forecasters generally expect that consumer spending will remain strong in the fourth quarter, largely because of household savings.Gavin McIntyre for The New York TimesRetail sales grew 1.3 percent in October, more than expected, as shoppers snapped up earlier-than-usual holiday deals. Some major retailers including Walmart and Home Depot reported strong third-quarter earnings, bolstered by sales for less discretionary goods like groceries or items related to home renovation and do-it-yourself projects. “Households are still spending money because they can,” said Aneta Markowska, chief financial economist at the investment bank Jefferies. “I still think there’s a lot of uncertainty about next year because the Fed obviously has raised rates very aggressively this year and we haven’t really felt the effects yet.”But several retailers said they saw demand for their products slow during the month, and when shoppers did buy, they seemed motivated by sales. Some companies have lowered their financial outlook or declined outright to provide forecasts for next year to avoid being caught flat-footed.This was not how the end of this year was supposed to be. For two holiday shopping seasons, retailers strained against pandemic disruptions. Now that the virus restrictions and supply chain snarls that defined those periods have largely abated, retailers had been expecting something of a return to normal.Instead, retailers find themselves trying to outrun a likely economic slowdown.To entice bargain-hungry shoppers and move unwanted inventory, many companies are promoting “value,” offering steep discounts and low prices more so than last year even as labor costs remain high. Many started their holiday blitzes early in the hopes of jump starting sales. Target held Deal Days in October and Old Navy rolled out a “Sorry, Not Sorry” holiday campaign. “Value clearly matters to everyone,” Corie Barry, the chief executive of Best Buy, said on an earnings call last week.J.C. Penney brought back doorbuster sales on Black Friday aimed at getting shoppers back into the store.Justin Hamel for The New York TimesAt J.C. Penney, stores returned to 5 a.m. doorbusters on Black Friday, promoting the “pre-inflation pricing” for items like Instant Pots, hair flat irons and coats.Jeff Gennette, the chief executive of Macy’s, said that a feature on its website that allows users to peruse gifts priced from $15 to $100 seemed to be particularly tempting to shoppers.“If you’ve got an item that’s competing with the competitor, and you’re a higher price, you’ve got to make those adjustments,” he said.Retailers are trying to eliminate any obstacles between a shopper and a potential purchase. Jill Timm, the chief financial officer for Kohl’s, said the chain was providing more personalized offers to shoppers, as well as clearly laying out the discount amounts on certain items to prevent customers from being confused “because they had to do math.”Kohl’s is “really making sure that the offers that we’re putting in are meaningful to the customer to drive their behavior,” Ms. Timm said.Signaling value is part of the overall strategy for Primark, an international clothing retailer, as it looks to grow its presence in the United States.In a recently opened store at a mall in Garden City, N.Y., Primark executives pointed out large signs that advertised $11 hoodies, $4 biker shorts and $20 for a baby-blue bag featuring Stitch from the Disney movie “Lilo and Stitch” — and noted that a candle, at 90 cents without any holiday discount, cost less than at Walmart.“It needs to be a very clear moment when you walk in of that perception that there is amazing value throughout the whole store,” said Kevin Tulip, Primark’s U.S. president.Shoppers seemed price conscious on Black Friday and throughout the weekend.Retailers dropped online prices for merchandise like toys, electronics and computers, according to data released on Friday from Adobe Analytics. Discounts for sporting goods and TVs were far steeper this year than last year, according to Adobe data, and clothing prices were slightly lower this year. The average discount for Black Friday deals in the United States was 30 percent, according to Salesforce. In 2019, Salesforce said, the average discount rate for Black Friday was 33 percent.In-store sales on Friday rose 12 percent from last year, and e-commerce sales increased 14 percent compared with 2021, according to Mastercard SpendingPulse data released on Saturday. Those sales included spending not just in retail stores but also at restaurants.Still, not everyone was satisfied. On social media, people complained that Black Friday deals weren’t as sizable as they expected.In San Francisco, Riz Gordon, 24, woke up at 6 a.m. on Friday to shop with her parents and younger sister. Going to the stores that day is “a long family tradition,” she said, and they had already picked out stocking stuffers and smaller presents. But inflation was on their minds.“The prices are very much different than 10 years ago,” Ms. Gordon said.On Sunday, at a Target in Springfield, Ill., D.J. Baggerly, 69, made a quick trip for one final Christmas gift: a white knitted throw blanket. She had spent the weekend mostly shopping online, working through her grandchildren’s wish list.Ms. Baggerly lives on a fixed income, and the higher prices for gas and groceries, she said, have been “ridiculous.” Asked if she planned to cut back on spending in the coming weeks, she said, “Oh yeah. I’m done.”Ben Casselman More

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    As the Fed Raises Rates, Worries Grow About Corporate Bonds

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    Executives, analysts and bond traders are all wondering if corporate finance is about to unravel as interest rates rise.As the Federal Reserve raises interest rates in an effort to tame inflation, the corporate bond market, which lends money to many companies, has been hammered particularly hard.The steep rise in interest rates has caused bond values to tumble: From October 2021 to October 2022, an index that tracks investment-grade corporate bonds is down by roughly 20 percent. By some measures, overall bond market losses have been worse than at any time since 1926.Even the price of bonds issued by the highest-rated corporations have cratered this year.The ICE BofA US Corporate Index, which tracks the performance of U.S. dollar denominated investment grade rated U.S. corporate debt, has severely declined.

    Source: Federal Reserve Bank of St. LouisBy The New York TimesThe yield on bonds issued by solid businesses is now about 6 percent, about twice as much as it was a year ago. That number indicates how high of an interest rate rock-solid corporations would have to pay to borrow more money right now; rates are even higher for smaller businesses or those that investors consider risky.Corporate bankruptcies and defaults remain low by historical standards, but a growing number of companies are struggling financially. Businesses in industries like retail, manufacturing and real estate are especially vulnerable because their sales are weak or falling. In many cases, their customers have also been hurt by higher interest rates because the higher borrowing costs have effectively raised the costs of big-tickets items like homes and cars.Until recently, for example, Carvana was a fast growing used car retailer with a soaring stock. The number of cars the company sold fell 8 percent in the third quarter, and its spending on interest payments tripled compared with the same period a year earlier. The interest rate on a big chunk of its debt issued this year that matures in 2030 is 10.25 percent. Its bonds are trading at less than 50 cents to the dollar, suggesting that investors would require Carvana to pay an interest rate of nearly 30 percent if it were to borrow more money for the same amount of time. The company’s stock is down more than 90 percent over the last year.“There’s certainly a lot of headwinds,” Ernest Garcia III, Carvana’s chief executive, said on a conference call with analysts last week. “Recently, we’ve seen car prices depreciate to the tune of give or take 10 percent so far this year, but we’ve also seen interest rates shoot up very rapidly and I think that overall has harmed affordability,” he added, even as he expressed optimism about the company’s ability to weather the financial storm.Carvana, Co. has paid more in interest payments in the last quarter compared to last year and sold fewer cars.Joe Raedle/Getty ImagesBefore rates jumped, companies borrowed a ton of money last year, with lower-rated firms selling more new bonds in 2021 than in any other year. But that flow has turned into a trickle as interest rates have risen and investors have grown more discerning about whom they lend money to. Banks are still making more commercial and industrial loans, but they are also becoming more discerning and are charging higher interest rates.Most investors, executives and economists expect a recession or anemic growth next year, which could make doing business, borrowing money and paying off loans even more difficult.What the Fed’s Rate Increases Mean for YouCard 1 of 4A toll on borrowers. More