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    Jerome Powell Is Popular. His War on Inflation Could Change That.

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    Jerome H. Powell, who is well liked across the political spectrum, is presiding over the fastest interest rate increases in generations, with another one expected this week.Jerome H. Powell has for years enjoyed something rare in a politically divided Washington: widespread popularity.While officially a Republican, Mr. Powell, the Federal Reserve chair, is a political centrist who has been nominated to prominent jobs at the central bank by President Biden as well as Presidents Barack Obama and Donald J. Trump. When Mr. Trump attacked Mr. Powell on Twitter in 2018 and 2019, criticizing him for not doing enough to stimulate the economy, liberal and conservative commentators rushed to his defense. When he was up for renomination, people across the political spectrum argued his case.The acclaim has extended beyond the capital. After delivering an economics-heavy speech on the labor market to a crowd of businesspeople in Rhode Island in 2019, Mr. Powell received a standing ovation — not a typical response to central bank oration.But the applause could soon stop.That is because Mr. Powell, who is in his fifth year of leading the world’s most important central bank, is presiding over the fastest interest rate increases in generations as the Fed tries to wrestle rapid inflation under control. The Fed is expected to raise rates by another three-quarters of a percentage point on Wednesday. And by next year, borrowing costs are expected to climb to nearly 5 percent, up from near zero as recently as March.The last time the central bank adjusted policy that quickly, in the 1980s, it inflicted economic pain that inspired intense backlash against the sitting chair, Paul A. Volcker. And while the rate increases were more extreme back then, the Fed’s moves were under far less public scrutiny than they are today, when global financial markets hang on every word coming from the central bank.Mr. Powell, 69, is acutely aware of his own reputation and that of the institution he leads. He reads four newspapers every morning, along with a set of news clips about the Fed that his staff sends him by 6 a.m. He keeps a careful eye on the debate economists are having on central bank policy, including the recent back-and-forth on Twitter between Lawrence H. Summers, a former Treasury secretary, and Paul Krugman, a New York Times columnist, about whether inflation is poised to subside so much that the Fed risks overdoing it.His consciousness of how the Fed’s moves are being received has at times prompted Mr. Powell to adjust course. He pivoted toward a gentler policy stance in early 2019 after markets reacted sharply to his Dec. 19, 2018, news conference, at which the Fed forecast that it would keep removing its support from the economy. And his awareness has shaped his communication style: Mr. Powell has tried to reach ordinary Americans, delivering plain-spoken remarks that acknowledge how economic developments shape their lives.Mr. Powell’s responsiveness has often been viewed as one of his strengths — but it is now prompting some economists and investors to question whether he will be able to stick by the central bank’s plan to wrangle inflation.Once today’s rate increases translate into palpable financial or economic pain, criticism is likely to come in hard and fast as recession risks intensify and as everyday Americans find their jobs at risk and their wage growth slowing. Already, some lawmakers and progressive economists are urging Mr. Powell to stop his rate campaign for the good of the American worker.Fed policy is made by committee, but the chair is the central bank’s most visible and powerful policymaker, and complaints are likely to be lobbed at Mr. Powell personally. As markets and the public react, some Fed watchers think he will back off before inflation is well and truly stamped out of the system.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    GDP Rose in 3rd Quarter, but US Recession Fears Persist

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    Gross Domestic Product
    Note: Quarterly changes in gross domestic product, adjusted for inflationSource: Bureau of Economic AnalysisBy The New York TimesEconomic growth rebounded over the summer, the latest government data shows, but slowing consumer spending and a rapidly weakening housing market mean the report will do little to ease fears of a looming recession.Gross domestic product, adjusted for inflation, rose 0.6 percent in the third quarter, a 2.6 percent annual rate of growth, the Commerce Department said Thursday. It was the first increase after two consecutive quarterly contractions.But the third-quarter figures were skewed by the international trade component, which often exhibits big swings from one period to the next. Economists tend to focus on less volatile components, which have showed the recovery steadily losing momentum as the year has progressed.“Ignore the headline number — growth rates are slowing,” said Michael Gapen, chief U.S. economist for Bank of America. “It wouldn’t take much further slowing from here to tip the economy into a recession.”Consumer spending, the bedrock of the U.S. economy, rose just 0.4 percent in the third quarter, down from a 0.5 percent increase in the quarter before, as rapid inflation ate away at households’ spending power.The slowdown in spending will be welcome news for policymakers at the Federal Reserve, who have been trying to cool off consumer demand to tamp down inflation. The central bank has raised interest rates aggressively in recent months, and is expected to announce another big increase at its meeting next week.But forecasters and investors have become increasingly concerned that the Fed will go too far in its efforts to slow the economy and will end up causing a recession. Consumer spending has continued to increase despite higher interest rates and rising prices, but it is unclear how long that can last.“‘Borrowed time’ is how I would describe the consumer right now,” said Tim Quinlan, senior economist at Wells Fargo. “Credit card borrowing is up, saving is down, our costs are rising faster than our paychecks are.”The impact of rising interest rates is clear in the housing market, where home building and sales have both slowed sharply in recent months. The third quarter was in some sense a mirror image of the first quarter, when G.D.P. shrank but consumer spending was strong. In both cases, the swings were driven by international trade. Imports — which don’t count toward domestic production figures — soared early this year as the strong economic recovery led Americans to buy more goods from overseas. Exports slumped as the rest of the world recovered more slowly from the pandemic.Both trends have begun to reverse as American consumers have shifted more of their spending toward services and away from imported goods, and as foreign demand for American-made goods has recovered. Supply-chain disruptions have added to the volatility, leading to big swings in the data from quarter to quarter.Few economists expect the strong trade figures from the third quarter to continue, especially because the strong dollar will make American goods less attractive overseas. More

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    Could a Market Blowout Like the UK’s Happen in the US?

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    Federal Reserve and White House officials spent last week quizzing investors and economists about the risks of a British-style meltdown at home.WASHINGTON — Federal Reserve researchers and officials quizzed experts from Wall Street and around the world last week about a pressing question: Could a market meltdown like the one that happened in Britain late last month occur here?The answer they got back, according to four people at separate institutions who were in such conversations and who spoke on the condition of anonymity to describe private meetings, was that it probably could — though a crash does not appear to be imminent. As the Biden administration did its own research into the potential for a meltdown, other market participants relayed the same message: The risk of a financial crisis has grown as central banks have sharply raised interest rates.The Bank of England had to swoop in to buy bonds and soothe markets after the British government released a fiscal spending plan that would have stimulated an economy already struggling with punishing inflation, one that included little detail on how it would be paid for. Markets lurched, and pension funds using a common investment strategy found themselves scrambling to adjust, prompting the central bank’s intervention.While the shock was British-specific, the violent reaction has caused economists around the world to wonder if the situation was a canary in a coal mine as signs of financial stress surface around the globe.Officials at the Fed, Treasury and White House are among those trying to figure out whether the United States could experience its own market-shuddering meltdown, one that could prove costly for households while complicating America’s battle against rapid inflation.Administration officials remain confident that the U.S. financial system is unlikely to see such a shock and is strong enough to withstand one if it comes. But both they and the Fed are keeping close tabs on what is happening at a moment when conditions feel abnormally fragile.Markets have been choppy for months in the United States and globally as central banks — including the Fed — rapidly raise interest rates to bring inflation under control. That has caused abnormally large price moves in currencies and other assets because their values hinge partly on the level of interest rates and on international rate differences. Stocks have been swinging. It can be hard to quickly find a buyer for U.S. government bonds, although the market is not breaking down. And in corners of finance that involve more complicated investment structures, there’s concern that volatility could trigger a dangerous chain reaction.“In the market, there is a lot of worry, and everyone is saying it feels like something is about to break,” said Roberto Perli, an economist at Piper Sandler who used to work at the Fed and who was not part of the conversations last week. He added that it made sense that officials were checking up on the situation.President Biden at an event promoting the Inflation Reduction Act in California last week.T.J. Kirkpatrick for The New York TimesPresident Biden has repeatedly convened his top economic aides in recent weeks to discuss market flare-ups, like the one that roiled Britain.Fed officials and staff members have met with investors and economists both during normal outreach and on the sidelines of the World Bank and International Monetary Fund annual meetings last week in Washington.Fed researchers asked about three big possibilities during the meetings. They wanted to know whether there could be a trade or an investment class in the United States similar to British pension funds that could pose a significant and underappreciated threat.They also focused on whether problems overseas could spill back over to the United States financial system. For instance, Japan is one of the biggest buyers of U.S. debt. But Japan’s currency is rapidly falling in value as the country holds its interest rates low, unlike other central banks. If that turmoil caused Japan to reverse course and stop buying or even sell U.S. Treasurys — something that it has signaled little appetite for, but that some on Wall Street see as a risk — it could have ramifications for U.S. debt markets.The final threat they asked about focused on whether today’s lack of easy trading in the Treasury market could turn into a more serious problem that requires the Fed to swoop in to restore normal functioning..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.None of those areas appear to be at immediate risk of snapping, analysts told officials. The pension system in the United States is different from that in Britain, and the government debt market may be choppy, but it is still functioning.Yet they also voiced reasons for concern: It is impossible to know what might break until something does. Markets are large and intertwined, and comprehensive data is hard to come by. Given how much central bank policy has shifted around the world in recent months, something could easily go wrong.There is a good reason for officials to fret about that possibility: A market meltdown now would be especially problematic.A New York City market. The Fed is rapidly raising interest rates to bring inflation under control, but a financial crash could force it to shift that plan.Elias Williams for The New York TimesA financial disaster could force the Fed to deviate from its plan to control the fastest inflation in four decades, which includes raising rates rapidly and allowing its bond portfolio to shrink. Officials have in the past bought large sums of Treasury bonds in order to restore stability to flailing markets — essentially the opposite of their policy today.Central bankers would most likely try to draw a distinction between bond buying meant to keep the market functioning and monetary policy, but that could be hard to communicate.The White House, too, has reasons to worry. Mr. Biden was scarred by his experience as vice president throughout the Great Recession, during which a financial meltdown brought on the worst downturn since the 1930s, throwing millions out of work and consuming the Obama administration’s policy agenda for years of a painstakingly slow recovery.Mr. Biden has pressed his team to estimate the likelihood that the United States could experience another 2008-style shock on Wall Street. Treasury Secretary Janet L. Yellen and her deputies have been closely monitoring developments in the market for U.S. government debt and searching for any signs of British-style stress.While administration officials noted that trading has become more difficult in the market for Treasury bonds, they also pointed out that it was otherwise functioning well. Multiple officials said this week that they expected the Fed would step in to buy bonds — as the Bank of England did — in an emergency.Other administration officials came away from their meetings in Washington last week with increased worries about financial crises sprouting in so-called emerging markets, like parts of Africa, Asia and South America, where food and energy prices have soared and where the Fed’s steady march of interest rate increases has forced governments to raise their own borrowing costs. Such crises could spread worldwide and rebound on wealthier countries like the United States.Yet administration officials say the American economy remains strong enough to endure any such shocks, buoyed by still-rapid job growth and relatively low household debt.“This is a challenging global economic moment where stability is hard to find,” said Michael Pyle, Mr. Biden’s deputy national security adviser for international economic affairs, “but the U.S. has momentum and resilience behind its economic recovery, and a trajectory that puts the U.S. in a strong position to weather these global challenges.”And there is no guarantee that something will blow up. A senior Treasury official said this week that financial risks had risen with high inflation and rising interest rates, but that a variety of data the department tracked continued to show strength in American businesses, households and financial institutions.For now, markets for short-term borrowing, which are crucial to the functioning of finance overall, look healthy and fairly normal, said Joseph Abate, a managing director at Barclays. And officials are working on safeguards to stem the fallout if a disaster should come. The Financial Stability Oversight Council, which Ms. Yellen leads, discussed the issues at its most recent meeting this month, hearing staff presentations on U.S. financial vulnerabilities.The Treasury Borrowing Advisory Committee, an advisory group of market participants, has been asked in its latest questionnaire about a possible Treasury program to buy back government debt. Some investors have taken that as a signal that they are worried about a possible problem and may want to be able to improve market functioning, especially in light of their comments and outreach.“We are worried about a loss of adequate liquidity in the market,” Ms. Yellen said last week while answering questions after a speech in Washington.And the Fed already has outstanding tools that can help to stabilize markets. Those include swap lines that can funnel dollars to banks that need it overseas, and that have been used by Switzerland and the European Central Bank in recent weeks.Mr. Abate at Barclays said the Securities and Exchange Commission, Treasury and Fed seemed to be “on top of” the situation.“It’s clear in the marketplace that liquidity is a concern,” he said. “The regulators are moving to address that.” More

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    With So Much Riding on the Fed’s Moves, It’s Hard to Know How to Invest

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    Where the markets go from here depends on whether and how deftly the Federal Reserve pivots from its hawkish stance.Making money was easy for investors when they could still plausibly believe that the Federal Reserve might back down on its aggressive campaign to subdue inflation at any cost. But harsh words from the Fed chairman, Jerome H. Powell, backed by a string of large interest rate increases, finally convinced markets that the central bank meant business, sending stock and bond prices tumbling.A nervous confidence returned as October began, with stocks experiencing a big two-day rally, but then prices sank anew. Investors at first seemed more confident that the Fed would reverse course, but anxiety returned as they worried about how much damage would be inflicted before that happened. Where the markets go from here, and how to position an investment portfolio, depends on whether and how deftly the Fed changes its strategy.“A crescendo of factors is coming together that makes me think we’re going to have another few weeks of pain before the Fed capitulates,” said Marko Papic, chief strategist at the Clocktower Group.Mr. Papic thinks a dovish turn may come soon, as the Fed signals that it would settle for inflation two or three percentage points above its 2 percent target.Others think more pain lies ahead, maybe a lot more. A prerequisite for a pivot might be a “credit event,” said Komal Sri-Kumar, president of Sri-Kumar Global Strategies, meaning a default by a large investment firm or corporate or government borrower, often with severe consequences. Mutual FundsA glance at mutual fund performance in the third quarter. More

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    Labor Hoarding Could be Good News for the Economy

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    PROVO, Utah — Chad Pritchard and his colleagues are trying everything to staff their pizza shop and bistro, and as they do, they have turned to a new tactic: They avoid firing employees at all costs.Infractions that previously would have led to a quick dismissal no longer do at the chef’s two places, Fat Daddy’s Pizzeria and Bistro Provenance. Consistent transportation issues have ceased to be a deal breaker. Workers who show up drunk these days are sent home to sober up.Employers in Provo, a college town at the base of the Rocky Mountains where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers. Bistro Provenance, which opened in September, has been unable to hire enough employees to open for lunch at all, or for dinner on Sundays and Mondays. The workers it has are often new to the industry, or young: On a recent Wednesday night, a 17-year-old could be found torching a crème brûlée.Down the street, Mr. Pritchard’s pizza shop is now relying on an outside cleaner to help his thin staff tidy up. And up and down the wide avenue that separates the two restaurants, storefronts display “Help Wanted” signs or announce that the businesses have had to temporarily reduce their hours.Provo’s desperation for workers is an intense version of the labor crunch that has plagued employers nationwide over the past two years — one that has prompted changes in hiring and layoff practices that could have big implications for the U.S. economy. Policymakers are hoping that after struggling through the worst labor shortages America has experienced in at least several decades, employers will be hesitant to lay off workers even when the economy cools.Mr. Pritchard cannot hire enough employees to open the bistro for lunch at all, or for dinner on Sundays or Mondays.That may help prevent the kind of painful recession the Federal Reserve is hoping to avoid as it tries to combat persistent inflation. America’s economy is facing a marked — and intentional — slowdown as the Fed raises interest rates to chill demand and drive down price increases, the kind of pullback that would usually result in notably higher unemployment. But officials are still hoping to achieve a soft landing in which growth moderates without causing widespread job losses. A few have speculated that today’s staffing woes will help them to pull it off, as companies try harder than they have in the past to weather a slowdown without cutting staff.“Businesses that experienced unprecedented challenges restoring or expanding their work forces following the pandemic may be more inclined to make greater efforts to retain their employees than they normally would when facing a slowdown in economic activity,” Lael Brainard, the Fed’s vice chair, said in a recent speech. “This may mean that slowing aggregate demand will lead to a smaller increase in unemployment than we have seen in previous recessions.”For now, the job market remains strong. Employers added 263,000 workers in September, fewer than in recent months but more than was normal before the pandemic. Unemployment is at 3.5 percent, matching the lowest level in 50 years, and average hourly earnings picked up at a solid 5 percent clip compared with a year earlier.But that is expected to change. When the Fed raises interest rates and slows down the economy, it also weakens the labor market. Wage gains slow, paving the way for inflation to cool down, and in the process, unemployment rises — potentially, significantly.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.September Jobs Report: Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates.A Cooling Market?: Unemployment is low and hiring is strong, but there are signs that the red-hot labor market may be coming off its boiling point.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.In the 1980s, when inflation was faster than it is now and entrenched, the Fed lifted rates drastically to roughly 20 percent and sent unemployment to above 10 percent. Few economists expect an outcome that severe this time since today’s inflation burst has been shorter-lived and rates are not expected to climb nearly as much.Mr. Pritchard demonstrated how to stretch pizza dough in Fat Daddy’s Pizzeria, his other restaurant in Provo.Many of the workers Mr. Pritchard and his business partner, Janine Coons, have hired are new to the industry or young.Still, Fed officials themselves expect unemployment to rise nearly a full percentage point to 4.4 percent next year — and policymakers have admitted that is a mild estimate, given how much they are trying to slow down the economy. Some economists have penciled in worse outcomes. Deutsche Bank, for instance, predicts 5.6 percent joblessness by the end of 2023.Labor hoarding offers a glimmer of hope that could help the Fed’s more benign unemployment forecast to become reality: Employers who are loath to jettison workers may help the labor market to slow down and wage growth to moderate without a spike in joblessness.“Companies are still confronting this enormous churn and losing people, and they don’t know what to do to hang on to people,” said Julia Pollak, chief economist at the career site ZipRecruiter. “They’re definitely hanging on to workers for dear life just because they’re so scarce.”When the job market slows, employers will have recent, firsthand memories of how expensive it can be to recruit, and train, workers. Many employers may enter the slowdown still severely understaffed, particularly in industries like leisure and hospitality that have struggled to hire and retain workers since the start of the pandemic. Those factors may make them less likely to institute layoffs.And after long months of very tight labor markets — there are still nearly two open jobs for every unemployed worker — companies may be hesitant to believe that any uptick in worker availability will last.“There’s a lot of uncertainty about how big of a downturn are we facing,” said Benjamin Friedrich, an associate professor of strategy at Northwestern University’s Kellogg School of Management. “You kind of want to be ready when opportunities arise. The way I think about labor hoarding is, it has option value.”Employers in Provo, where unemployment is near the lowest in the nation at 1.9 percent, have no room to lose workers.Instead of firing, businesses may look for other ways to trim costs. Mr. Pritchard in Provo and his business partner, Janine Coons, said that if business fell off, their first resort would be to cut hours. Their second would be taking pay cuts themselves. Firing would be a last resort.The pizzeria didn’t lay off workers during the pandemic, but Mr. Pritchard and Ms. Coons witnessed how punishing it can be to hire — and since all of their competitors have been learning the same lesson, they do not expect them to let go of their employees easily even if demand pulls back.“People aren’t going to fire people,” Mr. Pritchard said.But economists warned that what employers think they will do before a slowdown and what they actually do when they start to experience financial pain could be two different things.The idea that a tight labor market may leave businesses gun-shy about layoffs is untested. Some economists said that they could not recall any other downturn where employers broadly resisted culling their work force.“It would be a pretty notable change to how employers responded in the past,” said Nick Bunker, director of North American economic research for the career site Indeed.And even if they do not fire their full-time employees, companies have been making increased use of temporary or just-in-time help in recent months. Gusto, a small-business payroll and benefits platform, conducted an analysis of its clients and found that the ratio of contractors per employee had increased more than 60 percent since 2019.If the economy slows, gigs for those temporary workers could dry up, prompting them to begin searching for full-time jobs — possibly causing unemployment or underemployment to rise even if nobody is officially fired.Policymakers know a soft landing is a long shot. Jerome H. Powell, the Fed chair, acknowledged during his last news conference that the Fed’s own estimate of how much unemployment might rise in a downturn was a “modest increase in the unemployment rate from a historical perspective, given the expected decline in inflation.”But he also added that “we see the current situation as outside of historical experience.”Bistro Provenance opened in September.Dinner service at the restaurant.The reasons for hope extend beyond labor hoarding. Because job openings are so unusually high right now, policymakers hope that workers can move into available positions even if some firms do begin layoffs as the labor market slows. Companies that have been desperate to hire for months — like Utah State Hospital in Provo — may swoop in to pick up anyone who is displaced.Dallas Earnshaw and his colleagues at the psychiatric hospital have been struggling mightily to hire enough nurse’s aides and other workers, though raising pay and loosening recruitment standards have helped around the edges. Because he cannot hire enough people to expand in needed ways, Mr. Earnshaw is poised to snap up employees if the labor market cools.“We’re desperate,” Mr. Earnshaw said.But for the moment, workers remain hard to find. At the bistro and pizza shop in downtown Provo, what worries Mr. Pritchard is that labor will become so expensive that — combined with rapid ingredient inflation — it will be hard or impossible to make a profit without lifting prices on pizzas or prime rib so much that consumers cannot bear the change.“What scares me most is not the economic slowdown,” he said. “It’s the hiring shortage that we have.” More

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    IMF Warns Rate Increases Could Spur A Global Recession

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    The International Monetary Fund lowered its growth outlook for 2023 and suggested that interest rate increases could spur a harsh global recession.The International Monetary Fund said on Tuesday that the world economy was headed for “stormy waters” as it downgraded its global growth projections for next year and warned of a harsh worldwide recession if policymakers mishandled the fight against inflation.The grim assessment was detailed in the fund’s closely watched World Economic Outlook report, which was published as the world’s top economic officials traveled to Washington for the annual meetings of the World Bank and the I.M.F.The gathering arrives at a fraught time, as persistent supply chain disruptions and Russia’s war in Ukraine have led to a surge in energy and food prices over the last year, forcing central bankers to raise interest rates sharply to cool off their economies. Raising borrowing costs will probably tame inflation by slowing business investment and consumer spending, but higher rates could also yield a new set of problems: a cascade of recessions in rich nations and debt crises in poor ones.There are growing fears among policymakers that a so-called soft landing will elude the global economy.“In short, the worst is yet to come, and for many people 2023 will feel like a recession,” the International Monetary Fund report said.The organization maintained its most recent forecast that the global economy will grow 3.2 percent this year but now projects that will slow to 2.7 percent in 2023, slightly lower than the fund’s previous estimate. Both figures are big comedowns from the start of the year, when the fund projected global growth of 4.4 percent in 2022 and 3.8 percent in 2023, highlighting how the outlook has darkened in recent months.Inflation is expected to peak later this year and decline to 6.5 percent in 2023 from 8.8 percent in 2022.“The risks are accumulating,” Pierre-Olivier Gourinchas, the International Monetary Fund’s chief economist, said during an interview in which he described the global economy as weakening. “We’re expecting about a third of the global economy to be in a technical recession.”The fund defines a “technical recession” as an economy that contracts for two consecutive quarters.Corporate America and Wall Street are already bracing for a downturn. Jamie Dimon, the chief executive of JPMorgan Chase, told CNBC on Monday that the United States was likely to be “in some kind of recession six to nine months from now.”Despite the dire tone of the International Monetary Fund’s forecasts, some private forecasters are predicting worse. The median economist in a Bloomberg survey expects 2.9 percent global growth this year and 2.5 percent next, as the euro area posts 0.2 percent growth in 2023 and Eastern Europe sees output fall.The I.M.F. report detailed how the economies of the United States, China and the 19 nations that use the euro are in various states of slowing, with effects rippling around the world.In the United States, inflation and rising interest rates are sapping consumer spending power, and housing activity is slowing as mortgage rates rise. A recent three-month dip in gasoline prices gave consumers some relief from inflation, but prices have started to rise again. There are concerns that trend could continue after the oil production cut announced last week by the international cartel known as OPEC Plus.The fund forecast that the U.S. economy would grow 1.6 percent this year, a downgrade from its previous projection, and 1 percent in 2023.In China, lockdowns to prevent the spread of Covid-19 continue to drag on its economy, which is projected to grow 3.2 percent this year after expanding 8.1 percent in 2021. Beyond its pandemic restrictions, China is facing a crisis in its property sector as cash-constrained homeowners refuse to repay loans on unfinished properties. The International Monetary Fund warned that China’s housing crunch would spill into the country’s domestic banking sector.Europe has been heavily reliant on Russia for energy and is facing sharp increases in oil and gas prices as additional sanctions go into effect later this year, just as the weather turns colder. Tourism has buttressed many of the economies of Europe in 2022, but uncertainty about energy prices has slowed manufacturing activity.Efforts to respond to inflation have led to policy proposals that have caused their own upheaval. Britain’s financial markets have faced turmoil after investors rebuffed the tax and spending policies of Prime Minister Liz Truss and her new government. The Bank of England stepped up its intervention in Britain’s bond market on Tuesday, the second expansion of its emergency measures in two days, as it warned of a “material risk” to the nation’s financial stability.Although Russia is responsible for much of the jump in food and energy prices, its economy is holding up better than previously projected even in the face of robust international sanctions. Russia’s economy is expected to contract 3.4 percent this year and 2.3 percent in 2023, much less than many economists believed earlier in the year.International Monetary Fund officials attributed that to the resilience of its energy exports, which have allowed Russia to stimulate its economy and prop up its labor market. Still, Russia is facing a deep recession, and its economic output is far lower than before the war.The impact of Russia’s invasion of Ukraine was top of mind as policymakers gathered in Washington.Janet L. Yellen, the Treasury secretary, condemned Russia’s actions during a meeting on Tuesday of finance ministers who convened to discuss the global food crisis. Russia’s finance minister, Anton Siluanov, attended the meeting virtually.“Putin’s regime and the officials who serve it — including those representing Russia at these gatherings — bear responsibility for the immense human suffering this war has caused,” Ms. Yellen said, according to a copy of her remarks provided by a Treasury Department official.Ms. Yellen called on the Group of 20, which represents the world’s major economies, to step up financial assistance to nations facing food shortages and said she would support a freeze on debt repayment for countries that needed it.The slowdowns in advanced economies are putting pressure on emerging markets, many of which were already fragile and facing high debt burdens as they recovered from the pandemic. Higher interest rates, soaring food costs and diminished demand for exports threaten to push millions of people into poverty. And low vaccination rates in places such as Africa mean that the health effects of the pandemic are persistent.“The poor are hurt the most,” David Malpass, the president of the World Bank, told reporters before this week’s meetings. “We’re in the midst of a crisis-facing development.”The rapid appreciation of the U.S. dollar, which is the strongest it has been since the early 2000s, also represents a threat to emerging markets. The International Monetary Fund urged policymakers in those countries to “batten down the hatches” and conserve their reserves of foreign currencies for when financial conditions worsen.As the pain piles up in rich and poor countries alike, policymakers are under increasing pressure to blunt the fallout, with central bankers — including those at the Federal Reserve — facing calls to curtail interest rate increases.Still, the fund warned that doing too little to combat inflation would make the fight more costly later. It also said governments should avoid enacting fiscal policies that would make inflation worse.In its report, the fund acknowledged that its forecasts faced considerable uncertainty. The further withdrawal of Russian gas supplies to Europe could depress the continent’s economies, debt crises in developing countries could worsen, and the pandemic could come roaring back.“Risks to the outlook remain unusually large and to the downside,” the report said.Jeanna Smialek More

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    U.S. Job Growth Eases, but Is Too Strong to Suit Investors

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    The gain of 263,000 was shy of recent monthly totals but still robust. Stocks fell on fears of a harder, longer Fed campaign to fight inflation.Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. But the strong showing left many investors unhappy because they saw signs that the fight against inflation may become tougher and more prolonged.Employers added 263,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, a decline from 315,000 in August. The number was the lowest since April 2021 but still solid by prepandemic standards. The unemployment rate fell to 3.5 percent, equaling a five-decade low.“If I had just woken up from a really long nap and seen these numbers, I would conclude that we still have one of the strongest job markets that we’ve ever enjoyed,” said Carl Tannenbaum, chief economist at Northern Trust.Officials at the Federal Reserve have been keeping a close eye on hiring and wages as they proceed with a series of rate increases meant to combat inflation. The job data indicates that, for now, they are doing so without tipping the economy into a recession that would throw millions out of work.But it also increases the prospect that the effort to subdue price increases will be more extended. For investors, that came as bad news, since higher interest rates raise costs for companies and weigh on stock prices.The S&P 500 recorded its worst one-day performance since mid-September, falling 2.8 percent and eroding gains from earlier in the week.Fed officials have signaled in speeches this week that they remain resolute in trying to wrestle inflation lower, and that they are waiting for clear evidence that the economy is headed back toward price stability before they pull back.Wage growth has subsided somewhat, at least compared with the trend a year ago. Average hourly earnings climbed 5 percent from a year earlier, roughly matching economists’ expectations but slowing down slightly from the prior annual reading.Wages are still growing, but less rapidly in some sectorsPercent change in earnings for nonmanagers since January 2019 by sector More

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    Less Turnover, Smaller Raises: Hot Job Market May Be Losing Its Sizzle

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    Unemployment is low, and hiring is strong. But there are signs that frenzied turnover and rapid wage growth are abating.Last year, Klaussner Home Furnishings was so desperate for workers that it began renting billboards near its headquarters in Asheboro, N.C., to advertise job openings. The steep competition for labor drove wages for employees on the furniture maker’s production floor up 12 to 20 percent. The company began offering $1,000 signing bonuses to sweeten the deal.“Consumer demand was through the roof,” said David Cybulski, Klaussner’s president and chief executive. “We just couldn’t get enough labor fast enough.”But in recent months, Mr. Cybulski has noticed that frenzy die down.Hiring for open positions has gotten easier, he said, and fewer Klaussner workers are leaving for other jobs. The company, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages. The $1,000 signing bonus ended in the spring.“No one is really chasing employees to the dollar anymore,” he said.By many measures, the labor market is still extraordinarily strong even as fears of a recession loom. The unemployment rate, which stood at 3.7 percent in August, remains near a five-decade low. There are twice as many job openings as unemployed workers available to fill them. Layoffs, despite some high-profile announcements in recent weeks, are close to a record low.But there are signs that the red-hot labor market may be coming off its boiling point.Major employers such as Walmart and Amazon have announced slowdowns in hiring; others, such as FedEx, have frozen hiring altogether.Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel where the job market was particularly hot last year.More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans, and partly because the pool of available workers has grown as more people come off the economy’s sidelines.The labor force grew by more than three-quarters of a million people in August, the biggest gain since the early months of the pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.“Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months.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.August Jobs Report: Job growth slowed in August but stayed solid, suggesting that the labor market recovery remains resilient, even as companies pull back on hiring.Factory Jobs: American manufacturers have now added enough jobs to regain all that they shed during the pandemic — and then some.Missing Workers: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Black Employment: Black workers saw wages and employment rates go up in the wake of the pandemic. But as the Federal Reserve tries to tame inflation, those gains could be eroded.That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.But for employers — and for policymakers at the Federal Reserve — the calculation looks different. A modest cooling would be welcome after months in which employers struggled to find enough staff to meet strong demand, and in which rapid wage growth contributed to the fastest inflation in decades.Too pronounced a slowdown, however, could lead to a sharp rise in unemployment, which would almost certainly lead to a drop in consumer demand and create a new set of problems for employers.Leila and David Manshoory have struggled for months to recruit workers for their fast-growing skin care and beauty brand, Alleyoop. In recent weeks, however, that has begun to change. They have begun to get more applications from more qualified candidates, some of whom have been laid off by other e-commerce companies. And notably, applicants aren’t demanding the sky-high salaries they were last spring.“I think the tables are turning a little bit,” Mr. Manshoory said. “There are people who need to pay their bills and are realizing there might not be a million jobs out there.”Alleyoop, too, has pared its hiring plans somewhat in preparation for a possible recession. But not too much — Mr. Manshoory said he saw this as a moment to snap up talent that the three-year-old company might struggle to hire in a different economic environment.“You kind of want to lean in when other people are pulling back,” he said. “You just have more selection. There’s a lot of, unfortunately, talented people getting let go from really large companies.”The resilience of the labor market has surprised many economists, who expected companies to pull back on hiring as growth slowed and interest rates rose. Instead, employers have continued adding jobs at a rapid clip.Klaussner Home Furnishings, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages.Eamon Queeney for The New York Times“There are some signs in the labor market data that there’s been a bit of cooling since the beginning of the year, or even the spring, but it’s not a lot,” said Nick Bunker, director of North American economic research for the career site Indeed. “Maybe the temperature has ticked down a degree or two, but it’s still pretty high.”But Mr. Bunker said there was evidence that the frenzy that characterized the labor market over the past year and a half had begun to die down. Job openings have fallen steadily in Indeed’s data, which is more up to date than the government’s tally.And Mr. Bunker said the decline in voluntary quits was particularly notable because so much recent wage growth had come from workers moving between jobs in search of better pay.Recent research from economists at the Federal Reserve Banks of Dallas and St. Louis found that there had been a huge increase in poaching — companies hiring workers away from other jobs — during the recent hiring boom.If companies become less willing to recruit workers from competitors, and to pay the premium that doing so requires, or if workers become less likely to hop between jobs, that could lead wage growth to ease even if layoffs don’t pick up.There are hints that could be happening. A recent survey from another career site, ZipRecruiter, found that workers had become less confident in their ability to find a job and were putting more emphasis on finding a job they considered secure.“Workers and job seekers are feeling just a little bit less bold, a little bit more concerned about the future availability of jobs, a little bit more concerned about the stability of their own jobs,” said Julia Pollak, chief economist at ZipRecruiter.Some businesses, meanwhile, are becoming a bit less frantic to hire. A survey of small businesses from the National Federation of Independent Business found that while many employers still had open positions, fewer of them expected to fill those jobs in the next three months.More clues about the strength of the labor market could come in the upcoming months, the time of year when companies, including retailers, traditionally ramp up hiring for the holiday season. Walmart said in September that this year it would hire a fraction of the workers it did during the last holiday season.The signs of a cool-down extend even to leisure and hospitality, the sector where hiring challenges have been most acute. Openings in the sector have fallen sharply from the record levels of last year, and hourly earnings growth slowed to less than 9 percent in August from a rate of more than 16 percent last year.Until recently, staffing shortages at Biggby Coffee were so severe that many of the chain’s 300-plus stores had to close early some days, or in some cases not open at all. But while hiring remains a challenge, the pressure has begun to ease, said Mike McFall, the company’s co-founder and co-chief executive. One franchisee recently told him that 22 of his 25 locations were fully staffed and that only one was experiencing a severe shortage.A Biggby Coffee store in Sterling Heights, Mich. Until recently, staffing shortages at some locations were so severe that many of the chain’s 300-plus stores had to close early some days.Sarah Rice for The New York Times“We are definitely feeling the burden is lifting in terms of getting people to take the job,” Mr. McFall said. “We’re getting more applications, we’re getting more people through training now.”The shift is a welcome one for business owners like Mr. McFall. Franchisees have had to raise wages 50 percent or more to attract and retain workers, he said — a cost increase they have offset by raising prices.“The expectation by the consumer is that you are raising prices, and so if you don’t take advantage of that moment, you are going to be in a pickle,” he said, referring to the pressure to increase wages. “So you manage it by raising prices.”So far, Mr. McFall said, higher prices haven’t deterred customers. Still, he said, the period of severe staffing shortages is not without its costs. He has seen a loss in sales, as well as a loss of efficiency and experienced workers. That will take time to rebuild, he said.“When we were in crisis, it was all we were focused on,” he said. “So now that it feels like the crisis is mitigating, that it’s getting a little better, we can now begin to focus on the culture in the stores and try to build that up again.” More