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    Who Are America’s Missing Workers?

    The labor market appears hot, but the share of people who are either working or actively looking for a job still hasn’t quite recovered.As the United States emerges from the pandemic, employers have been desperate to hire. But while demand for goods and services has rebounded, the supply of labor has fallen short, holding back the economy.More than two years after the Covid-19 recession officially ended, some sectors haven’t found the workers they need to operate at capacity. Only in August did the work force return to its prepandemic size, which is millions short of where it would have been had it continued to grow at its prepandemic rate.In simple numbers, some of that gap is due to Covid’s death toll: more than a million people, about 260,000 of them short of retirement age. In addition, a sharp slowdown in legal immigration has pared the potential work force by 3.2 million, relative to its trajectory before 2017, according to calculations by economists at J.P. Morgan.But the problem isn’t just that population growth has stalled. Even with an uptick in August, the share of Americans working or actively looking for work is 62.4 percent, compared with 63.4 percent in February 2020.“It’s my sense that the most important reason that the labor market feels so hot right now is that we have so many fewer people in it,” said Wendy Edelberg, director of the Hamilton Project, an economic policy center at the Brookings Institution. “Demand largely recovered, and we didn’t have the supply.”Unraveling the causes of that lingering reluctance is difficult, but it’s possible to identify a few major groups who are on the sidelines.People at retirement age, who had been staying in the work force longer as longevity increased before the pandemic, dropped out at disproportionate rates and haven’t returned. More puzzlingly, men in their prime working years, from 25 to 54, have retreated from the work force relative to February 2020, while women have bounced back. Magnifying those disparities are two crosscutting factors: the long-term health complications from Covid-19, and a lagging return for workers without college degrees.Older workers are lagging behind in returning to the work forcePercent change in labor force participation rate for each age group since before the pandemic More

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    Why Totino’s Needs 25 Ways to Make Pizza Rolls

    It takes about 21 ingredients to make a Totino’s pizza roll, the bite-size snack that soared in popularity during the pandemic as people sought easy-to-make meals.And on any given day since last winter, at least one of those ingredients, if not many, has either been difficult to find or insanely expensive.The shortages became so bad at one point that General Mills, which makes Totino’s, simply couldn’t produce enough.“We had lots of empty shelves,” said Jon Nudi, the company’s president of North America. “Every time we had something fixed, something else popped up.”General Mills is not used to empty shelves. The company sells $19 billion worth of food a year, everything from Chex and Cheerios cereals, Annie’s organic Cheddar bunnies and Betty Crocker cake mixes to pet food under the Blue Buffalo brand. With 26 factories in North America, it juggles 13,000 ingredients from around the world for its many products.So the company’s scientists, supply chain heads and procurement managers began meeting daily late last year. The solution? The company found 25 ways — recipes, if you will — to make the pizza rolls, each with a slightly different list of ingredients, swapping in cornstarches, for example, for tapioca starch that had become hard to find, or substituting one kind of potato starch for another.From left, Nia Bowdoin, Conner Thompson, and Taylor May working in the Ingredion kitchen in Bridgewater, N.J.Lanna Apisukh for The New York TimesThe pizza roll conundrum is a microcosm of an issue that’s affecting the food industry more broadly. Managing soaring prices for most of the ingredients in cookies, chips and pizza is one thing. But for many food executives, the bigger headache now is wondering each week which ingredients will — or won’t — show up at their factories.For a while last year, sugar and low-calorie sweeteners like erythritol, which is used in products like yogurt and cereal, were tough to pin down. Then palm oil, an odorless and tasteless oil that’s in about half the packaged goods in supermarkets, became hard to find. After Russia invaded Ukraine, global supplies of sunflower oil, produced by both countries, disappeared. And more recently, because of the avian flu that swept across the United States this spring, egg prices soared, leading to shortages.While food companies have long had to manage scarcity of one or two ingredients because, say, drought reduced crop yields in a part of the world, the recent rolling shortages have affected multiple ingredients for a variety of reasons. And it’s not just ingredients that are M.I.A. Some packaging, such as aluminum cans, has been hard for soda and beer manufacturers to find.Many executives say the culprit is a combination of increased extreme weather patterns around the world because of the changing climate, global transportation and labor problems, the war in Ukraine, high energy prices, and ever-shifting consumer patterns in a post-Covid environment that make the years of data they collected to try to predict trends basically useless.“All of these wrinkles are cascading through the entire food system, and I don’t think anyone is banking on it resolving itself in the next 12 or 18 months,” said Joe Colyn, a partner at JPG Resources, which works with food companies and their supply chains. “Right now, supply trumps price. It’s more important to get surety of supply, because you can’t afford to shut the factory down because you don’t have what you need.”One ingredient being tested is pea protein, which adds texture to food.Lanna Apisukh for The New York TimesAfter years of whittling down the number of their suppliers to get better prices and keep up with quality control, food companies are racing to find alternatives. Just-in-time inventory systems that worked just fine for years are being overhauled, with companies adding warehouses, silos and storage tanks to hold raw ingredients and finished products for longer periods. They’re trying to reduce transportation costs, either by looking for manufacturers nearby or removing water from goods like vegetable and fruit juices — used frequently in beverages — and transporting them as concentrates.And, like General Mills, they’re revamping recipes, or “reformulating” in industry parlance. It’s not as easy as it sounds. Swapping out one oil or emulsifier for another not only can change the product’s texture or shelf life but can affect nutrition and allergy labeling.Testing substitute ingredients has become a greater focus at Ingredion, which food companies also hire to work on new products. Lanna Apisukh for The New York TimesThe Food and Drug Administration, which ensures that nutritional labels and other information on food are accurate, has put in temporary guidance to allow manufacturers to make “minor formulation changes” because of supply disruptions or shortages without updating the ingredient list.The leeway doesn’t apply to a change that increases the safety risk because it contains a food allergen or gluten, or that replaces a key ingredient or one featured in the name or marketing. For example, a product that claims to be made with “real butter” cannot now be made with margarine, and raisin bread must contain raisins.Before the pandemic, Ingredion, a company that makes sweeteners, starches and other ingredients used by large food companies, often had its 500 scientists and 26 labs all over the country working on new products for companies. But in recent months, much more of their time has been spent figuring out what happens to the taste, texture and shelf life of a food when one or two ingredients are switched out.“The overall reformulation of a product is a very complicated equation,” said Beth Tormey, a vice president and general manager of systems and ingredient solutions at Ingredion. “It has to meet parameters of texture and taste so that consumers like it, but it also has to fit into the regulatory box and the nutrition box. It all sounds simple from a distance, but it’s not.”Take eggs. They are, explained Leaslie Carr, a senior director at Ingredion, a key source of protein for many products, but they are more than that. For baked goods, for instance, they provide moisture and volume, helping make cakes light and fluffy.“Salad dressings also use a lot of egg for body and texture,” Ms. Carr said. “So we’re trying to figure out how to use different emulsifiers to reduce the amount of egg used, maybe reduce the egg amount by half, to produce the dressings. That gives you some flexibility to continue to manufacture the product until the egg situation stabilizes.”Mr. Thompson cutting out pizza rolls. “The overall reformulation of a product is a very complicated equation,” an Ingredion executive said.Lanna Apisukh for The New York TimesGeneral Mills started to notice the supply chain disruptions late last year.The company’s plant in Wellston, Ohio, which had churned out Totino’s pizza and pizza rolls, working to meet the surge in sales that accompanied the pandemic, suddenly couldn’t get key ingredients.“First it was the starch that we use for the cheeses,” Mr. Nudi said. “Then certain packaging and oils were hard to find. A lot of the materials that we use for Totino’s were challenged from an ingredient standpoint.”By February, there weren’t enough Totino’s pizza and pizza rolls to keep grocery freezer sections full.By then, the company had started daily meetings across its research and development, procurement and supply chain departments to figure out how to revamp and substitute ingredients. For instance when starch became difficult to find, the company began substituting and combining different starches in order to figure out what worked to make the pizza rolls look and taste the same.Ms. May removing pizza rolls from an oven. For General Mills, the starch in cheeses in its Totino’s pizza rolls was an early scarcity. Lanna Apisukh for The New York TimesIn March, the company had filled freezer sections again, Mr. Nudi said.But the lessons being learned from the “new normal” in the supply chain are being felt across the entire company.Before the pandemic, the packaged food industry was a stable environment, with a consistent level of growth, Mr. Nudi said. That made having a secure, steady supply of ingredients easier.Now General Mills is lining up multiple suppliers for each ingredient and keeping more ingredients on hand.“Just-in-time deliveries don’t work anymore,” Mr. Nudi said. “We’re adding to inventory, holding more dry ingredients and fats and oils, even though that’s tough too right now. We need tanks to store those liquids, and those just aren’t readily available.” More

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    Biden Signs Industrial Policy Bill Aimed at Bolstering Competition With China

    WASHINGTON — President Biden on Tuesday signed into law a sprawling $280 billion bill aimed at bolstering American chip manufacturing to address global supply chain issues and counter the rising influence of China, part of a renewed effort by the White House to galvanize its base around a recent slate of legislative victories.Standing before business leaders and lawmakers in the Rose Garden, Mr. Biden said the bill was proof that bipartisanship in Washington could produce legislation that would build up a technology sector, lure semiconductor manufacturing back to the United States and eventually create thousands of new American jobs.“Fundamental change is taking place today, politically, economically and technologically,” Mr. Biden said. “Change that can either strengthen our sense of control and security, of dignity and pride in our lives and our nation, or change that weakens us.”The bipartisan compromise showed a rare consensus in a deeply divided Washington, reflecting the sense of urgency among both Republicans and Democrats for an industrial policy that could help the United States compete with China. Seventeen Republicans voted for the bill in the Senate, while 24 Republicans supported it in the House.While Republicans have long resisted intervening in global markets and Democrats have criticized pouring taxpayer funds into private companies, global supply chain shortages exacerbated by the pandemic exposed just how much the United States had come to rely on foreign countries for advanced semiconductor chips used in technologies as varied as electric vehicles and weapons sent to aid Ukraine.Read More on the Relations Between Asia and the U.S.Pelosi’s Taiwan Visit: House Speaker Nancy Pelosi’s trip to Taiwan has exacerbated tensions between the United States and China, which claims the self-governing island as its own. The visit could also undermine the Biden administration’s strategy of building economic and diplomatic ties in Asia to counter Beijing.Reassuring Allies: Amid China’s military exercises near Taiwan in response to Ms. Pelosi’s visit, the Biden administration says its commitment to the region has only deepened. But critics say the tensions over Taiwan show that Washington needs stronger military and economic strategies.CHIPS and Science Act: Congress passed a $280 billion bill aimed at building up America’s manufacturing and technological edge to counter China. It is the most significant U.S. government intervention in industrial policy in decades.In a sign of how Beijing’s rise drove the negotiations for the legislation, Mr. Biden explicitly mentioned China multiple times during his remarks at the bill-signing ceremony.“It’s no wonder the Chinese Communist Party actively lobbied U.S. business against this bill,” the president said, adding that the United States must lead the world in semiconductor production.The bill is focused on domestic manufacturing, research and national security, providing $52 billion in subsidies and tax credits for companies that manufacture chips in the United States. It also includes $200 billion for new manufacturing initiatives and scientific research, particularly in areas like artificial intelligence, robotics, quantum computing and other technologies.The legislation authorizes and funds the creation of 20 “regional technology hubs” that are intended to link together research universities with private industry in an effort to advance technology innovation in areas lacking such resources. And it provides funding to the Energy Department and the National Science Foundation for basic research into semiconductors and for building up work force development programs.“We will bring these jobs back to our shores and end our dependence on foreign chips,” said Senator Chuck Schumer, Democrat of New York and the majority leader, who pumped his fists as he stepped toward the lectern. More

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    Job Openings Eased, in a Sign of the Cooling Labor Market

    Employers became slightly less desperate for workers in May as job openings declined for the second straight month from a record high in March.The number of open positions fell to 11.3 million, down from an upwardly revised 11.6 million in April, the Labor Department said Wednesday in the monthly Job Openings and Labor Turnover Survey. That still leaves nearly two jobs available for every unemployed person in the United States.The job openings rate jumped in retail, hotels and restaurants as Americans returned to summer leisure spending and employers struggled to keep up.By most indications, the labor market has remained very strong, with initial claims for unemployment insurance only inching up in recent months. In the May survey, the share of the work force quitting jobs remained steady, as did the share who were laid off.Concern over finding enough qualified workers increased among business leaders in the second quarter of the year, according to a survey of chief financial officers by the Federal Reserve Bank of Richmond.“The labor shortage is absolutely top of mind for every industry I talk to,” said Dave Gilbertson, vice president of UKG, the payroll and shift management software company, which monitors four million hourly workers. “Every single one of them is struggling to hire. So far I haven’t seen job openings come down. A lot of those jobs have been open for a long time.”The Federal Reserve has been trying to stem inflation by using interest rates to slow down business activity just enough that the shortfall of workers becomes less of a constraint on productive capacity, but without throwing large numbers of people out of work. The gradual decrease in job openings, while layoffs remain low, is evidence that its strategy may be working. More

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    GM Quarterly Sales Fall Amid Shortage in Computer Chips and Other Parts

    The auto industry is facing worrying signs all across its horizon, including rising interest rates and fears of a recession.But the biggest problem still seems to be making enough cars.General Motors said Friday that its U.S. deliveries of new vehicles in the second quarter declined 15 percent from a year earlier, while Toyota Motor reported a drop of 23 percent in U.S. sales. The obstacle continues to be an inability to get enough computer chips to finish vehicles.For now, at least, consumers are still eager to buy. Manufacturers are selling practically every car or truck they make and have seen no sign that inventory is building up on dealer lots, even as new-vehicle prices have climbed to record highs.“That tells me that the vehicles are still moving, and that’s probably the No. 1 thing that I’m looking at,” Paul Jacobson, the chief financial officer of General Motors, told financial analysts at a conference last month.G.M. sold 582,401 cars and light trucks from April to June, down from 688,236 a year earlier. Toyota sold 531,105, down from 688,813. Honda said its U.S. sales fell 51 percent to 239,789 vehicles.G.M. noted that its factories were holding 95,000 vehicles manufactured without certain electric components that were in short supply because of the chip shortage.At times automakers have dropped some features from vehicles because they or their suppliers didn’t have the chips they require. Honda has shipped vehicles without advanced parking sensors, and Volkswagen has produced models that don’t have blind-spot monitors that the vehicles would normally include.G.M. plans to install the missing parts in its vehicles when they become available and then make deliveries to dealers.If those vehicles had been shipped, its second-quarter sales would probably have been nearly level with its year-ago total.“We will work with our suppliers and manufacturing and logistics teams to deliver all the units held at our plants as quickly as possible,” said Steve Carlisle, executive vice president and president, North America.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Changing Behaviors: From driving fewer miles to downgrading vacations, Americans are making changes to their spending because of inflation. Here’s how five households are coping.In a filing with the Securities and Exchange Commission, G.M. said the backlog would affect second-quarter net income, which it projected to be $1.6 billion to $1.9 billion. A consensus of analysts’ forecasts compiled by Bloomberg had pointed to earnings of $2.4 billion.Because the company expects to ship most or all of the 95,000 partly completed vehicles by the end of the year, it reaffirmed its full-year outlook for net income of $9.6 billion to $11.2 billion.That may be why G.M.’s stock rose on Friday despite the lowered forecast. Its shares ended the day 1.3 percent higher, outpacing the overall market.But that outlook also assumes that demand will hold up as threats to the U.S. economy mount. Consumers are being squeezed by rising prices for gasoline and groceries. The average price paid for new vehicles in May was $47,148, up more than $5,000 from a year earlier, and the average monthly car payment was over $700, more than $100 higher than a year earlier, according to data from Cox Automotive, a market researcher. Since new models are in short supply, consumers are often paying $3,000 or more above sticker prices.And last month, the Federal Reserve increased its benchmark interest rate by three-quarters of a point, in a bid to slow the economy and tamp down inflation, and has indicated that further increases may be necessary. Higher interest rates make home and auto loans more expensive, and the Fed’s move has already resulted in a slight slowdown in housing.Some economists believe the risk of a recession is moderated by the increased savings that most consumers have built up since the coronavirus pandemic started in 2020. Eighty percent of consumers have more money in their checking accounts now than two years ago, Jonathan Smoke, the chief economist of Cox Automotive, told reporters this week on a conference call.“These consumers are able to withstand inflation because they’ve got quite a bit of cushion and their wage growth is strong enough to deal with pricing increases,” he said.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Fed Confronts a ‘New World’ of Inflation

    Central banks had a longstanding playbook for how inflation worked. In the postpandemic era, all bets are off.Federal Reserve officials are questioning whether their longstanding assumptions about inflation still apply as price gains remain stubbornly and surprisingly rapid — a bout of economic soul-searching that could have big implications for the American economy.For years, Fed policymakers had a playbook for handling inflation surprises: They mostly ignored disruptions to the supply of goods and services when setting monetary policy, assuming they would work themselves out. The Fed guides the economy by adjusting interest rates, which influence demand, so keeping consumption and business activity chugging along at an even keel was the primary focus.But after the global economy has been rocked for two years by nonstop supply crises — from shipping snarls to the war in Ukraine — central bankers have stopped waiting for normality to return. They have been raising interest rates aggressively to slow down consumer and business spending and cool the economy. And they are reassessing how inflation might evolve in a world where it seems that the problems may just keep coming.If the Fed determines that shocks are unlikely to ease — or will take so long that they leave inflation elevated for years — the result could be an even more aggressive series of rate increases as policymakers try to quash demand into balance with a more limited supply of goods and services. That painful process would ramp up the risk of a recession that would cost jobs and shutter businesses.“The disinflationary forces of the last quarter-century have been replaced, at least temporarily, by a whole different set of forces,” Jerome H. Powell, the Fed chair, said during Senate testimony on Wednesday. “The real question is: How long will this new set of forces be sustained? We can’t know that. But in the meantime, our job is to find maximum employment and price stability in this new economy.”When prices began to pick up rapidly in early 2021, top Fed policymakers joined many outside economists in predicting that the change would be “transitory.” Inflation had been slow in America for most of the 21st century, weighed down by long-running trends like the aging of the population and globalization. It seemed that one-off pandemic shocks, especially a used-car shortage and ocean shipping issues, should fade with time and allow that trend to return.But by late last year, central bankers were beginning to rethink their initial call. Supply chain problems were becoming worse, not better. Instead of fading, price increases had accelerated and broadened beyond a few pandemic-affected categories. Economists have made a monthly habit of predicting that inflation has peaked only to see it continue to accelerate.Now, Fed policymakers are analyzing what so many people missed, and what it says about the unrelenting inflation burst.“Of course we’ve been looking very carefully and hard at why inflation picked up so much more than expected last year and why it proved so persistent,” Mr. Powell said at a news conference last week. “It’s hard to overstate the extent of interest we have in that question, morning, noon and night.”The Fed has been reacting. It slowed and then halted its pandemic-era bond purchases this winter and spring, and it is now shrinking its asset holdings to take a little bit of juice out of markets and the economy. The central bank has also ramped up its plans to raise interest rates, lifting its main policy rate by a quarter point in March, half a point in May and three-quarters of a point last week while signaling more to come.Understand Inflation and How It Impacts YouInflation 101: What’s driving inflation in the United States? What can slow the rapid price gains? Here’s what to know.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.An Economic Cliff: Inflation is expected to remain high later this year even as the economy slows and layoffs rise. For many Americans, it’s going to hurt.Greedflation: Some experts say that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. It is making those decisions without much of an established game plan, given the surprising ways in which the economy is behaving.“We’ve spent a lot of time — as a committee, and I’ve spent a lot of time personally — looking at history,” Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said in an interview on Wednesday. “Nothing quite fits this situation.”A recruiter at a job fair in North Miami Beach, Fla., last week. Labor shortages are pushing up wages, which is likely contributing to higher inflation. Scott McIntyre for The New York TimesGas prices have helped drive inflation higher.Scott McIntyre for The New York TimesThe economic era before the pandemic was stable and predictable. America and many developed economies spent those decades grappling with inflation that seemed to be slipping ever lower. Consumers had come to expect prices to remain relatively stable, and executives knew that they could not charge a lot more without scaring them away.Shocks to supply that were outside the Fed’s control, like oil or food shortages, might push up prices for a while, but they typically faded quickly. Now, the whole idea of “transient” supply shocks is being called into question.The global supply of goods has been curtailed by one issue after another since the onset of the pandemic, from lockdowns in China that slowed the production of computer chips and other goods to Russia’s invasion of Ukraine, which has limited gas and food availability.At the same time, demand has been heady, boosted by government pandemic relief checks and a strong labor market. Businesses have been able to charge more for their limited supply, and consumer prices have been picking up sharply, climbing 8.6 percent over the year through May.Research from the Federal Reserve Bank of San Francisco released this week found that demand was driving about one-third of the current jump in inflation, while issues tied to supply or some ambiguous mix of supply-and-demand factors were driving about two-thirds.That means that returning demand to more normal levels should help ease inflation somewhat, even if supply in key markets remain roiled. The Fed has been clear that it cannot directly lower oil and gas prices, for instance, because those costs turn more on the global supply than they do on domestic demand.“There’s really not anything that we can do about oil prices,” Mr. Powell told senators on Wednesday. Still, he added later, “there is a job to moderating demand so that it can be in better balance with supply.”Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Biden Casts Inflation as a Global Problem During a Visit to the Port of Los Angeles

    The visit to the nation’s busiest entry point for goods comes as President Biden struggles to show progress on resolving supply chain issues that are fueling inflation.LOS ANGELES — President Biden on Friday defended his administration’s efforts to deal with inflation, just hours after a new report showed a surprise spike in prices that puts new pressure on the White House to ease the burden on consumers.Mr. Biden used the Port of Los Angeles as a backdrop to highlight his fight against inflation, delivering a speech about how his team has tried to speed up the delivery of goods disrupted by the coronavirus pandemic.“The job market is the strongest it’s been since World War II, notwithstanding inflation,” Mr. Biden said, standing on the battleship Iowa, a decommissioned warship that has been turned into a museum.With shipping containers piled up behind him, Mr. Biden emphasized that his administration had taken action last year to reduce congestion at ports, allowing 97 percent of all packages to be delivered on time during the holiday shopping season.But six months later, serious problems remain and persistent inflation has become a major political liability for Mr. Biden.The war in Ukraine has disrupted flows of food, fuel and minerals, adding to pandemic-related shortages and pushing inflation to multidecade highs. Data released on Friday morning showed inflation picking up again, rising 1 percent from the previous month. Compared with one year ago, consumer prices rose 8.6 percent, the largest annual increase since 1981.While some clogs in the supply chain look to be clearing, analysts say that trend may yet stall — or even reverse — in the months to come, as retailers enter a busier fall season and dockworkers on the West Coast renegotiate a labor contract that could lead to work slowdowns or a strike.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Mr. Biden said he understands that Americans are anxious.“They are anxious for good reason,” he said. But he stressed that inflation is largely the result of increases in the price of gasoline and food, and he blamed the price hikes in those goods on Russia’s invasion of Ukraine.Mr. Biden argued that large price increases in the United States were part of a global problem with inflation and that Americans were in better shape than their counterparts elsewhere because of a strong jobs market and a declining budget deficit.He also lashed out at nine shipping companies that he said had used the global economic situation to increase prices by 1,000 percent, artificially adding to the cost of goods around the world. He did not name the companies.But he said they “have raised their prices by as much as 1,000 percent.”He called on Congress to crack down on shipping companies that raise prices.“The rip-off is over,” he said.Mr. Biden is correct that soaring inflation is a global problem. In a note to clients on Friday, Deutsche Bank Research said the United States ranked 48th for its inflation rate on a list of 111 countries, just above the middle of the pack.But that is little comfort to U.S. households struggling with rising costs.Analysts say the U.S. logistics industry is heading into its busier fall season, when retailers bring in products for back-to-school shopping and the holidays. Chinese exports are also on the rise as an extended coronavirus lockdown lifts in Shanghai.And, most crucially, dockworkers on the West Coast are renegotiating a labor contract with port terminal operators that expires at the end of this month. If they fail to reach an agreement, West Coast ports may see slowdowns or shutdowns that would delay deliveries and add to supply chain gridlock.Over the past two decades, labor negotiations led to at least three such slowdowns or stoppages that resulted in delays. In recent weeks, some companies that typically ship into the West Coast have begun routing some goods to the East or Gulf Coasts to try to avoid any logjams.Gene Seroka, the executive director of the Port of Los Angeles, said he expected labor talks to go beyond the July 1 contract expiry date, but downplayed the risks to trade.“It’s important to know, with all this cargo on the way, the rank-and-file dockworkers will be out on the job every day,” he said.“And the employers know they’ve got to get these products to market,” he added. “So we’re going to give these people some room. Let them negotiate in their space, and the rest of us are going to work on keeping the cargo and the economy moving.”Dockworkers on the West Coast, including at the Port of Los Angeles, are renegotiating a labor contract with port terminal operators that expires at the end of this month. Failure to reach an agreement could further delay deliveries.Stella Kalinina for The New York TimesMr. Biden has kept close relationships with labor unions and may hesitate to put pressure on dockworkers to conclude any talks. But a work slowdown or strike would be bad news for the administration, which has frequently come under attack about rising prices.By some metrics, supply chain pressures have been easing in recent weeks. The average global price to ship a 40-foot container of goods fell to $7,370 as of June 3, down from a peak of more than $11,000 in September, though that was still five times higher than before the pandemic began, according to the Freightos Baltic Index.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Is ‘Greedflation’ Rewriting Economics, or Do Old Rules Still Apply?

    Economists and politicians are debating whether monopolistic companies are fueling inflation in ways that confound longstanding theory.There are few good things about living through a period with the highest inflation in four decades, but here’s one: It’s a chance to re-examine what happens in an economy that’s gone haywire.Since prices started to escalate a year ago, politicians and economists have seized on inflation to tell their preferred story about what went wrong, and what policies would bring it back into line. Some say it’s very straightforward: Supply and demand, Economics 101.“There’s simply a lot of cash out there,” said Joe Brusuelas, chief economist for the accounting firm RSM US, referring to the several trillion dollars in pandemic stimulus that’s filtered into the economy since early 2020. “The competition for those goods is up and that’s sending prices up, whether we’re talking about getting a Nissan Sentra or a seat on an American Airlines flight.”The White House and progressive organizations, however, say wait a minute: This time is different. In a time of extraordinary disruption, they contend, increasingly dominant corporations are taking the opportunity to jack up prices more than they otherwise could, which is squeezing consumers and supercharging inflation. Or “greedflation,” as the hypothesis has come to be known.The argument comports with the Biden administration’s focus on the ills of economic concentration. Congressional Democrats have run with the idea, introducing bills that would impose a temporary “excess profits tax” on companies that charge prices they deem unreasonably high, or simply ban those high prices altogether. Critics, including the nation’s largest business lobby, deride these efforts as based on a “conspiracy theory” and a “flimsy argument.”So what’s really going on?It’s hard to tease out. A pandemic, a trade war, a land war, huge government spending, and a global economy that’s become vastly more integrated might be too complex for traditional macroeconomic theory to explain. Josh Bivens, research director at the left-leaning Economic Policy Institute, thinks that’s a good reason to revisit what the discipline thought it had figured out.“When I hear stories about an overheating labor market, I don’t think about falling real wages, and yet we have falling real wages,” Dr. Bivens said. Nor is the rise in profits typical when unemployment is so low. “The idea that ‘there’s nothing to see here’ — there’s everything to see here! It’s totally different.”When thinking about greedflation, it’s helpful to break it down into three questions: Are companies charging more than necessary to cover their rising costs? If so, is that enough to meaningfully accelerate inflation? And is all this happening because large companies have market power they didn’t decades ago?Productive Profits, or Gouging?There is not much disagreement that many companies have marked up goods in excess of their own rising costs. This is especially evident in industries like shipping, which had record profits as soaring demand for goods filled up boats, driving up costs for all traded goods. Across the economy, profit margins surged during the pandemic and remained elevated.When all prices are rising, consumers lose track of how much is reasonable to pay. “In the inflationary environment, everybody knows that prices are increasing,” said Z. John Zhang, a professor of marketing at the Wharton School at the University of Pennsylvania who has studied pricing strategy. “Obviously that’s a great opportunity for every firm to realign their prices as much as they can. You’re not going to have an opportunity again like this for a long time.”Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Measuring Inflation: Over the years economists have tweaked one of the government’s standard measures of inflation, the Consumer Price Index. What is behind the changes?Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what that means for inflation.The real disagreement is over whether higher profits are natural and good.Basic economic theory teaches that charging what the market can bear will prompt companies to produce more, constraining prices and ensuring that more people have access to the good that’s in short supply. Say you make empanadas, and enough people want to buy them that you can charge $5 each even though they cost only $3 to produce. That might allow you to invest in another oven so you can make more empanadas — perhaps so many that you can lower the price to $4 and sell enough that your net income still goes up.Here’s the problem: What if there’s a waiting list for new ovens because of a strike at the oven factory, and you’re already running three shifts? You can’t make more empanadas, but their popularity has risen to the point where you would charge $6. People might buy calzones instead, but eventually the oven shortage makes all kinds of baked goods hard to find. In that situation, you make a tidy margin without doing much work, and your consumers lose out.This has happened in the real world. Consider the supply of fertilizer, which shrank when Russia’s invasion of Ukraine prompted sanctions on the chemicals needed to make it. Fertilizer companies reported their best profits in years, even as they struggle to expand supply. The same is true of oil. Drillers haven’t wanted to expand production because the last time they did so, they wound up in a glut. Ramping up production is expensive, and investors are demanding profitability, so supply has lagged while drivers pay dearly.Even if high prices aren’t able to increase supply and the shortage remains, an Economics 101 class might still teach that price is the best way to allocate scarce resources — or at least, that it’s better than the government price controls or rationing. As a consequence, less wealthy people may simply have no access to empanadas. Michael Faulkender, a finance professor at the University of Maryland, says that’s just how capitalism works.“With a price adjustment, people who have substitutes or maybe can do with less of it will choose to consume less of it, and you have the allocation of goods for which there is a shortage go to the highest-value usage,” Dr. Faulkender said. “Every good in our society is based on pricing. People who make more money are able to consume more.”Sorting Chickens and EggsThe question of whether profit margins are speeding inflation is harder to figure out.Economists have run some numbers on how much other variables might have contributed to inflation. The Federal Reserve Bank of San Francisco found that fiscal stimulus programs accounted for 3 percentage points, for example, while the St. Louis Fed estimated that manufacturing sector inflation would have been 20 percentage points lower without supply chain bottlenecks. Dr. Bivens, of the Economic Policy Institute, performed a simple calculation of the share of price increases attributable to labor costs, other inputs, and profits over time, and found that profit’s contribution had risen significantly since the beginning of 2020 as compared with the previous four decades.That’s an interesting fact, but it’s not proof that profits are driving inflation. It’s possible that causality runs the other way — inflation drives higher profits, as companies hide price increases amid broader rises in costs. The St. Louis Fed’s Ana Maria Santacreu, who did the manufacturing inflation analysis, said that it would be very hard to pin down.“It would be interesting to get data on profit margins by industry and correlate those with inflation by industry,” she said. “But I still think it is difficult to capture any causal relationship.”Concentration’s Double EdgeIf you think that’s complicated, try establishing whether market power is playing a role in any of this.It is well established that the American economy has grown more concentrated. On a fundamental level, domination by a few companies may have made supply chains more brittle. If there are two empanada factories and one of them has a Covid-19 outbreak, that in itself creates a more serious shortage than it would if there were 10 factories.“Concentration has affected prices during the pandemic, even setting aside any potentially nefarious actions on the part of leaders,” said Heather Boushey, a member of President Biden’s Council of Economic Advisers.But most of the public argument has been about whether companies with more market share have been affecting prices once goods are finished and delivered. And that’s where many economists become skeptical, noting that if these increasingly powerful corporations had so much leverage, they would have used it before the pandemic.Inflation F.A.Q.Card 1 of 5What is inflation? More