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    Chinese Unrest Over Lockdown Upends Global Economic Outlook

    Growing protests in the world’s biggest manufacturing nation add a new element of uncertainty atop the Ukraine war, an energy crisis and inflation.The swelling protests against severe pandemic restrictions in China — the world’s second-largest economy — are injecting a new element of uncertainty and instability into the global economy when nations are already struggling to manage the fallout from a war in Ukraine, an energy crisis and painful inflation.For years, China has served as the world’s factory and a vital engine of global growth, and turmoil there cannot help but ripple elsewhere. Analysts warn that more unrest could further slow the production and distribution of integrated circuits, machine parts, household appliances and more. It may also encourage companies in the United States and Europe to disengage from China and more quickly diversify their supply chains.Millions of China’s citizens have chafed under a tight lockdown for months as the Communist Party seeks to overcome the spread of the Covid-19 virus, three years after its emergence. Anger turned to widespread protest after an apartment fire last week killed 10 people and comments on social media questioned whether the lockdown had prevented their escape.It is unclear whether the demonstrations flaring across the country will be quickly snuffed out or erupt into broader resistance to the iron rule of its top leader, Xi Jinping, but so far the most significant economic damage stems from the lockdown.“The biggest economic hit is coming from the zero-Covid policies,” said Carl Weinberg, chief economist at High Frequency Economics, a research firm. “I don’t see the protests themselves being a game changer.”“The world will still turn to China for what it makes best and cheapest,” he added.Police officers during a protest in Beijing on Sunday.Kevin Frayer/Getty ImagesAsked how the Biden administration assessed the economic fallout from the latest unrest, John Kirby, coordinator for strategic communications at the National Security Council, said Monday, “We don’t see any particular impact right now to the supply chain.”Concerns about the economic impact of the spreading unrest in China, nonetheless, appeared to be partly responsible for a decline in world markets. The S&P 500 index closed 1.5 percent lower, while the dollar, often a haven in turbulent times, moved higher. Oil prices began the day with a sharp drop before rebounding.The sheer magnitude of China’s economy and resources makes it a critical player in world commerce. “It’s extremely central to the global economy,” said Kerry Brown, an associate fellow in the Asia-Pacific program at Chatham House, an international affairs institute in London. That uncertainty “will have a massive impact on the rest on the world.”China now surpasses all countries as the biggest importer of petroleum. It manufactured nearly 30 percent of the world’s goods in 2021. “There is simply no alternative to what China offers in terms of scale and capacities,” Mr. Brown said.Delays and shortages related to the pandemic prompted many industries to re-evaluate the resilience of their supply chains and consider additional sources of raw materials and workers. Apple, which recently announced that it expected sales to decline because of stoppages at its Chinese plants, is one of several tech companies that have shifted a small portion of their production to other countries, like Vietnam or India.The tilt by some companies away from China predates the pandemic, reaching back to former President Donald J. Trump’s determination to start a trade war with China, a move that resulted in a spiral of punishing tariffs.Yet even if business and political leaders want to be less reliant on China, Mr. Brown said, “the brute reality is that’s not going to happen soon, if at all.”“We shouldn’t kid ourselves that we can quickly decouple,” he added.China’s size is a lure for American, European and other companies looking not only to make products quickly and cheaply, but also to sell them in great numbers. There is simply no other market as big.Tesla, John Deere and Volkswagen are among the companies that have bet on China for future growth, but they are likely to suffer some setbacks at least in the short run. Volkswagen announced last week that its sales in China had stagnated this year, running 14 percent below expectations.A Volkswagen stand at the Auto Shanghai trade show last year. Volkswagen is one of the companies counting on the Chinese market for sales growth.Alex Plavevski/EPA, via ShutterstockThe protests highlight the political risks associated with investing in China, but analysts say the recent wave doesn’t reveal anything that investors didn’t already know.“Many investors will be looking ahead and positioning their portfolios now for the reopening,” said Nigel Green, chief executive of deVere Group, a financial advisory firm. They will be “seeking to take advantage of the country’s transition from an export economy to a consumption one,” he added.Luxury brands continue to stake their future on growth in China.As interconnected as the global economy is, one way in which China’s slowdown may be helping other nations is by keeping down the price of energy. Over the last 20 years, the growth of the Chinese economy has been a primary driver of global demand for oil and hydrocarbons in general.Energy experts say rising numbers of Covid infections and growing doubts that China will ease restrictions in major cities are a major reason that oil prices have dropped over the last three weeks to levels last seen before the Russian invasion of Ukraine in late February.“Chinese demand is the largest single factor in world oil demand,” said David Goldwyn, a senior energy diplomat in the Obama administration. “China is the swing demander.”As the Chinese economy has softened in the grip of the Covid lockdown, fewer oil tankers have sailed into Chinese ports in recent weeks, forcing the major Middle Eastern and Russian oil producers to lower their prices. Now spreading protests create another uncertainty about future demand.Chinese oil demand is expected to average 15.1 million barrels a day this quarter, down from 15.8 million a year ago, according to Kpler, an analytics firm.Barriers at a security checkpoint in Guangzhou, a southern Chinese manufacturing hub, this month.Associated PressAs for supply chain disruptions, Neil Shearing, chief economist at Capital Economics, a research firm, said he thought excessive blame had been heaped on China. “Everything has been framed around supply shortages,” he said, but in China, industrial production increased during the pandemic. The problem was that global demand surged more.For now, the biggest economic impact will be within China, rather than on the global economy. Sectors that depend on face-to-face contact — retail, hospitality, entertainment — will take the biggest hit. Over the past three days, measures of people’s movements have drastically fallen, Mr. Shearing said.He added that more people were quarantined now than at the height of the Omicron epidemic last winter. The wave of infections and the government’s response to it — not the protests — are what’s having “the biggest impact on China’s economy,” he said.Clifford Krauss More

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    Billions of Dollars at Stake in a Puzzling Holiday Shopping Season

    It promises to be unpredictable, with retailers and consumers still figuring out how much will be spent and on what kinds of goods.No one quite knows what to make of this year’s holiday shopping season. But billions of dollars are riding on it.After two pandemic holiday seasons messed with doorbusters, party plans and supply chains, retailers were hoping that this year would be a return to sanity. But just as it started to appear that families and stores could pull out their old playbooks, along came near-record inflation and the war in Ukraine, only increasing general unease about the state of the world.Some things are looking up. The pandemic has receded, supply chains generally stabilized, and the labor market is strong.But in March, the Federal Reserve started raising interest rates to slow down inflation, just as retail executives were making plans for which toys, wreaths and fuzzy socks shoppers would buy come winter. To try to ensure a robust shopping season, retailers leaned in early and often. Christmas trees showed up at Costco in August. Amazon threw what amounted to a second Prime Day in October. And it seems every day has brought ads for Black Friday deals, like the ones that Target offered throughout October.Still, shoppers seem confused. Should they buy now or later? Purchase for a lot of people or put a priority on a few? Give items or shared experiences? Trust online deliveries or go with local shops?“The truth is, we don’t know whether consumers will spend more or less on gift giving or whether they’ll do more shopping online or in the mall,” Etsy’s chief executive, Josh Silverman, told investors recently.That has left companies making predictions for the all-important retail season that amount to a shrug.“We’re not quite sure how strong holiday spending will be versus last year,” Brian Olsavsky, Amazon’s finance chief, told investors in October, “and we’re ready for a variety of outcomes.”Or, as Peter Boneparth, the chair of Kohl’s board, told analysts this month, “I think everybody believes that Christmas will come, but I don’t think anybody out there knows for sure exactly what’s going to happen.”Feeling inflation’s squeezeMathias Wasik for The New York TimesInflation is on everyone’s mind. Higher prices on all sorts of items have made people rethink what they’re buying and whom they’re buying for. While inflation is moderating slightly, it’s at the highest levels since Indiana Jones was bullwhipping raiders of the Lost Ark at the mall cineplex.More on Big TechMicrosoft: The company’s $69 billion deal for Activision Blizzard, which rests on winning the approval by 16 governments, has become a test for whether tech giants can buy companies amid a backlash.Apple: Apple’s largest iPhone factory, in the city of Zhengzhou, China, is dealing with a shortage of workers. Now, that plant is getting help from an unlikely source: the Chinese government.Amazon: The company appears set to lay off approximately 10,000 people in corporate and technology jobs, in what would be the largest cuts in the company’s history.Meta: The parent of Facebook said it was laying off more than 11,000 people, or about 13 percent of its work forceThe National Retail Federation predicts that holiday sales in November and December will increase 6 to 7 percent from last year, but that’s below the rate of inflation.“Folks are really looking for deals this year,” said Melissa Burdick, who spent a decade at Amazon and founded Pacvue, which helps big brands sell online. “They’re shifting what they’re buying to favor lower-priced brands and more necessary items.” She summed up the sentiment as: “I used to want Bose headphones. Now I will buy chips on sale on Amazon.”Cristian Tinoco, 19, who works 45 hours a week at a gym in Seattle and attends community college, said his family would focus on spending Christmas together after a rocky year.“Gas has especially gone up. I probably spend about $400 a paycheck on gas because I commute 35 minutes each way, each day. I have three siblings, so my parents have four kids at home and spend more than $1,000 a month on groceries. I help sometimes pay for food with my paycheck.“My student loan application got messed up, so I’ve been paying for college out of pocket. I don’t want to drop out. I may finally be able to start saving. I want to buy a truck — it just feels like me.”The experience is the thingPeople spent two pandemic years buying stuff. With stimulus checks, rising wages and nowhere to go, last year’s holiday season generated the biggest annual growth in retail spending on record — 14.1 percent.This year, Covid-19 travel restrictions have eased, and masking mandates are virtually gone. Retailers are bracing to lose out on spending as more people go on trips, attend concerts and eat out.The Transportation Security Administration said screenings were up 33 percent from last year, and concert bookings are up 51 percent, according to Eventbrite.“They were reminded that life is very short, and coming out of this pandemic they want to experience life again,” Mike Daher, an executive at the consultancy Deloitte, said.Mary Anna Ball, 25, a ballerina and research analyst in West Virginia, usually starts squirreling away Christmas gifts in July but this year wants to give gifts that will help her family experience the world.“I love sweaters and little kitschy things like that, but I know not everyone is that way, and you’ll kind of remember the experience more than when you’re going through your clothes of, ‘How did I get this sweater?’ If you give an experience, that’s something you’ll remember a bit longer, or maybe it’ll introduce you to a new hobby or something like that.“I have two younger brothers. Some people get siblings tattoos. I refuse to do that. But they’ve said it would be fun to go skydiving one day. I thought, I can get them a voucher and, whenever they can, they can just go down and skydive or something.”Christmas came early in many storesMathias Wasik for The New York TimesGetting what you want this year shouldn’t be a big issue. Remembering last year, when popular items were stuck at ports or somewhere in the Pacific Ocean, brands ramped up production, and retailers ordered more products. They did this earlier than usual to make sure items arrived on time, but the supply chain improved. When orders arrived earlier than expected, retailers piled items in warehouses that in some cases were already stuffed with merchandise ordered in 2021.That, combined with uncertain consumer demand, left retailers with record-high inventories, according to data from the Census Bureau.That’s leading to more deals and a hodgepodge of goods on store floors, no matter the season. In other words, Christmas came early to stores.Mike Campese, a guitarist and instructor in Las Vegas, knew this year was going to be strange when he saw holiday merchandise unusually early.“The other day, I was in Costco, and as soon as you walk in, the very first aisle is the Christmas stuff. It is still September! Oh, my God.“It is the earliest I have seen it. Usually the day after Halloween it’s like the malls are playing Christmas tunes and the decorations are up. Some people go shopping in September. I can’t do that. I am not in the spirit yet.”Waiting on deals, even for everyday itemsAmazon tried its best to hype an early holiday sale at the start of October. Some of the top-selling products in the United States — like Crest Whitestrips and protein powder — weren’t exactly typical presents.“No one is buying gifts for Christmas,” said Jason Murray, an Amazon veteran whose company, Shipium, advises online retailers. “They are buying for themselves.”It doesn’t matter much to retailers, who used the early holiday sales to try to offload products before most shoppers had even picked out their Halloween costumes. But it signaled that shoppers are motivated by deals, no matter what they’re for. After two years of limited discounts, shoppers are showing they are willing to hold out for a bargain.Brands are getting on board. “We made too many,” the bike maker Specialized said on its website, telling customers that they can “save BIG.”Rakuten, an online platform that offers deals and shopper rewards, said retailer participation in Black Friday and Cyber Monday promotions was the “biggest in the last three years.”Natalie Rodriguez, 47, who works for the Indiana Department of Revenue, said the products on sale weren’t what she wanted to give for Christmas.“I am really cognizant of those deals that are coming up right now. I think it is a grab to see who gets my money first. Am I taking advantage of it because I perceive it was a deal?“On the Amazon sale, I had 150 things in my cart and saved for later, but I didn’t see anything that is comparable to what I would think is a Black Friday deal. When I was a kid, Black Friday was superlow-cost, like 80 or 90 percent off. Most of what I saw was 30 and 40 percent on some items. It’s like, ‘Nah, I will just pass,’ especially if it is not an essential item. Crest Whitestrips were a great deal, but I don’t need them right now.“All I got was a $50 gift card with a $10 bonus on it.”On-time arrival, finallyFor years, largely spurred on by Amazon, consumers got used to fast shipping — often in two days or less. The pandemic upended that. Driver and inventory shortages meant people had to plan ahead.This year, industry experts do not expect another Shipageddon. There are more than enough delivery and warehouse workers to meet demand. Shippers should be able to deliver 110 million packages a day, almost 20 million more than shoppers are expected to order, according to ShipMatrix, a consultancy.“Because of experiences of what has gone on with global supply chains in the last few years, folks are stretching the holiday season over a longer period,” said Jamil Ghani, the vice president of Amazon Prime.Miranda Rosas, 21, a student at the University of California, Merced, was nervous about late-arriving Christmas gifts, so she started ordering last month.“Shipping last year was so awful, and a lot of items that I ordered a little bit last minute came in time, thankfully, but it took a long time. I tried to start a little sooner.“I really thought that it was going to take a couple weeks or a whole week and then it would ship and then it would take another two weeks to come. Now, a lot of my stuff it’s been like, ‘Oh! Already?’”Luxury is its own thingMathias Wasik for The New York TimesThe vibes are good for people with money to spare.More than three-quarters of luxury shoppers say they plan to spend the same as or more than last year, according to a survey from Saks. Twice as many as last year said they planned on dressing up in formal attire for the holidays, and 40 percent wanted to “self-gift” shoes. Luxury goods companies are giving signals that they’re confident about the U.S. market. This month, Estee Lauder agreed to buy Tom Ford for $2.8 billion, widening its reach into fashion apparel.“Customers are going back to a social life,” said Geoffroy van Raemdonck, chief executive at Neiman Marcus, whose top customers spend an average of $25,000 a year with the brand. “This is one of the first holidays that they feel more comfortable sharing it with their loved ones. I think that there’s a lot of good things coming with the holiday.”Sabah Essa, 49, a style adviser at Neiman Marcus in Atlanta, has been working with her clients, who include doctors, housewives, reality-TV stars and young professionals, to build their holiday wish lists.“Mostly everyone wants a big expensive piece compared to last year. For example, someone maybe got a Prada bag last Christmas, and now they’re upgrading it to high-end jewelry.“They want to find an outfit for going out to dinner or a party or birthday or to grab a gift for another friend. Everybody is just really happy to go out, and they can go without a mask.“A lot of them are also traveling. They want their suitcase to be all new stuff.“One client wants to give his wife 30 different gifts for her turning 30. He wants to have that plus Christmas because her birthday falls right around Christmas. The gifts are all different ranges, from stocking stuffers to high-end jewelry to Chanel bags to shoes — a lot of shoes, from sneakers to heels to boots.“It helps that we offer our clients a glass of champagne when they come in to make it easy for them to shop. Or if they want a cup of tea or coffee. It’s more fun than the years in the past now.”Interviews have been lightly edited for clarity. More

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    ‘No Jobs Available’: The Feast or Famine Careers of America’s Port Drivers.

    Just before 4 o’clock on a Tuesday morning, the sky still black save for the reddish glow of the freeway, Marshawn Jackson rolls over in his bed at his home in Southern California and reaches for his iPhone.He clicks on an app used by truck drivers seeking assignments. The notification he absorbs is both familiar and disheartening: “No jobs available.”Mr. Jackson is paid per delivery. No work means no income. His day is already booked with two assignments, but the rest of his week is dead. Over the next 15 hours, he refreshes the app constantly, desperate to secure more jobs — an exercise in vigorous futility.He refreshes after he pulls his tractor-trailer into a nearby storage yard to pick up an empty shipping container, and again while he rolls down the freeway, toward the Port of Los Angeles — one hand on the wheel, one hand on his phone.He refreshes as he drops off the empty box, and a dozen more times while he waits for a crane to deposit another container on the chassis behind his rig, this one loaded with toys from factories in Asia. He refreshes while he fuels his truck.Each time, the same result.“You reach a point where you’re like, ‘Man, am I even making money?’” Mr. Jackson says. “Is it worth even getting up in the morning?”The sudden disappearance of work is an unexpected turn for Mr. Jackson, 37, and the rest of Southern California’s so-called dray operators — the drivers who transport shipping containers between the twin ports of Los Angeles and Long Beach and the sprawl of warehouses filling out the Inland Empire to the east.For much of the pandemic, as the worst public health crisis in a century tore at daily life, these drivers were inundated with work, even while they contended with excruciating delays at the ports. Americans sequestered in their homes filled bedrooms with office furniture and basements with exercise equipment, summoning record volumes of goods from factories in Asia. The flow overwhelmed the ports of Los Angeles and Long Beach, the gateway for roughly two-fifths of the nation’s imports.As dozens of ships sat at anchor miles off the coast, awaiting their chance to unload, dray operators like Mr. Jackson idled for hours on land before they could enter port gates. They waited hours more to pick up their containers, and yet again before they could drop them off at warehouses.These days, the lines are mostly gone, and loading and unloading goes smoothly. But the same truck drivers who endured the worst of the Great Supply Chain Disruption are now suffering another affliction as the docks reverts to a semblance of normalcy. The frenzied chaos that dominated the first years of the pandemic has been replaced by an uneasy stillness — not enough work.Like many truck drivers, Mr. Jackson works long hours.Brandon Pavan for The New York TimesHe checks his phone many times during the day to try to secure more jobs for his two employees and himself.Brandon Pavan for The New York TimesIncoming shipments are diminishing at Southern California’s two largest ports. This is partly because American demand for kitchen appliances, video game consoles and lawn furniture is finally waning. It also reflects how major retailers are bypassing Southern California, instead shipping to East Coast destinations like Savannah, Ga., to avoid potential upheaval as West Coast dockworkers face off with port managers over a new contract.Mr. Jackson’s journey through a maze of traffic-choked freeways exemplifies the bewildering, often-perilous road confronting tens of millions of workers in a global economy still grappling with the volatile effects of the pandemic along with soaring inflation.As central banks raise interest rates to choke off demand for goods and services in an effort to lower consumer prices, they are reducing income for legions of workers who are paid per assignment. The situation is especially fraught for the nation’s 75,000 dray operators and other foot soldiers of the supply chain.Dockworkers, who wield equipment to load and unload containers at ports, are protected by fierce and disciplined unions that have succeeded in commanding some of the higher wages in blue collar American life. Dray operators work primarily as independent contractors, buying their own fuel and insurance.Their status leaves them subject to constant shifts in economic fortune. In good times, like last year, dray operators command whatever the market must pay to keep them rolling. In lean times, they are guaranteed nothing.As he navigates five lanes of traffic on the way to the port, Mr. Jackson dons headphones to conduct a series of phone calls.More on CaliforniaBullet Train to Nowhere: Construction of the California high-speed rail system, America’s most ambitious infrastructure project, has become a multi-billion-dollar nightmare.A Piece of Black History Destroyed: Lincoln Heights — a historically Black community in a predominantly white, rural county in Northern California — endured for decades. Then came the Mill fire.Warehouse Moratorium: As warehouse construction balloons nationwide, residents in communities both rural and urban have pushed back. In California’s Inland Empire, the anger has turned to widespread action.He talks to his wife, sharing worries that they might not be able to close on their purchase of a newly built home. His income has fluctuated wildly in recent months. The mortgage company is demanding more documents, filling him with dread.He speaks with two men who drive a pair of trucks that he owns. He coordinates their schedules and helps them navigate unfamiliar shipping terminals. He frets that they may not bring in enough to cover the expenses on his other rigs.He passes billboards for beachfront homes in Baja, flights to Las Vegas, spa resorts. He wonders when he will be able to take his wife and 13-year-old daughter on a vacation.He contemplates the tenuous nature of American upward mobility, the forces tearing at the life he has constructed.“The way we’re living is hard times right now,” Mr. Jackson says. “You’ve still got to smile through it. You’ve still got to be positive. But, man, I’m dealing with a lot right now.”Container ships waited to enter the Port of Los Angeles during a large backlog last year.Erin Schaff/The New York Times‘Pray you can make it out.’Raised in South Central Los Angeles, Mr. Jackson says he embraced trucking as a form of liberation from a community he described as chronically short of good jobs and bedeviled by gang violence.“You get used to seeing things,” he says. “All you can do is pray you can make it out.”Growing up, he helped his grandmother with a hair care products business, packing boxes in a warehouse when he was only 10. But when the company failed in the aftermath of the long recession that began in 2007, Mr. Jackson sought a reliable way to support his partner and their then-infant daughter.A friend told him there were good jobs in long-haul trucking. He signed up for a training program arranged by Swift, a giant in the industry.He hopped the Greyhound to Phoenix for the three-week program, sharing a motel room full of scorpions with two other trainees. They practiced on aging rigs that lacked air conditioning despite summer heat reaching 117 degrees.He was soon earning $1,000 a week hauling trailers from a Dollar Store distribution center in Southern California to Phoenix and back.But as the routes grew longer, the strains on his family life intensified. He was hauling refrigerated trailers full of lettuce from the fields of central California to a distribution center in North Carolina. He was routinely away for two and three weeks at a stretch.When his daughter graduated from kindergarten in 2016, he pleaded with the company to schedule him to be home, just for that day. One dispatcher — a gruff, former Marine — mocked him.“This is what you signed up for,” he said.Mr. Jackson did not make it to the ceremony.“I felt like I was letting my whole family down,” he says. “It changed my whole outlook.”He drove back to California and turned in the keys on the truck he leased from the company. He used savings to buy a used rig and began picking up routes as an independent contractor, limiting his time away to no more than three days.Then he figured out how to sleep at home every night. He began working in and out of the port.He eventually bought the other trucks and took on the pair of drivers, paying them a share of the proceeds on the loads they deliver.“It was one of those things where you’ve got to take a risk,” he says. “Why wouldn’t I bet it all on myself? It was something I knew I could do.”He and his family moved into a rented apartment in the Inland Empire, east of Los Angeles, and then into a modest house they bought just off the freeway. They vacationed in Mexico and Hawaii.His daughter’s name, Bailey Jackson, is painted in white letters on the door of his rig. She is the reason he keeps rolling, he says. He takes her shopping — for clothes, for books.“That girl is always reading,” he says. “Some days, she’ll finish more than one book.”This year, he signed off on buying a four-bedroom home with space for a swimming pool in a quiet community carved into the desert in Riverside County.It was a five-minute drive from the yard where he parks his truck.It was a lifetime away from South Central Los Angeles.Dray operators like Mr. Jackson have to idle for hours on land before they can enter port gates.Brandon Pavan for The New York Times’We’ve got to survive.’Though the Inland Empire lies roughly 60 miles from the ports, its clusters of warehouses are an extension of the docks.Here, major retailers stash the bounty delivered from Asia via container ships. Distribution centers supply consumers across much of the American West.In the same way that massive slaughterhouses turned Chicago into a rail hub in the late 19th century, the Inland Empire has burgeoned into a dominant center of warehousing in the age of big box retail and e-commerce.At 5:43 a.m., the sun still a vague suggestion to the east, Mr. Jackson sits behind the wheel of his enormous blue Kenworth tractor. He guides it into a Shell station and climbs down to the pavement.Diesel is selling for $6.19 a gallon, an eye-popping number. He puts $100 in the tank, enough to get to Los Angeles to drop off the empty trailer he has picked up this morning from a warehouse for a home appliance company.Fifteen minutes later, as the sun glimmers through hazy skies, he is headed west on I-60.He wonders what the day will bring.A year ago, he could take his pick from scores of jobs at the Dray Alliance, the online platform where he secures assignments. Not anymore. Whenever a new job appears, he clicks immediately, knowing that dozens of other drivers are also keeping vigil on the site.The uncertainties of the trade are wearying. Three times in the past week, Mr. Jackson has wound up on so-called dry runs — journeys aborted because of a glitch. Sometimes, the paperwork is not in order. Other times, a pickup appointment has been made incorrectly. He heads home with a $100 fee from the shipper. It barely covers the cost of gas.Last year, when dozens of container ships were waiting their turns to unload, he sometimes sat parked in lines for as long as five hours to pick up and drop off, even as the Dray Alliance’s app steered him to jobs with the least congestion. He would grab his neck pillow and pass out in the front seat.Now, no app can redress a basic reduction in demand. Not only are jobs scarce, but compensation has fallen.Less than a year ago, Mr. Jackson was earning about $700 to haul a container from San Bernardino to the port of Los Angeles, a 70-mile journey that can take more than two hours when traffic is bad. This morning’s job brings $500, even though the price of fuel has increased.Trucks waiting to enter a terminal at the Port of Los Angeles in June.Stella Kalinina for The New York TimesStill, every job draws fierce interest, because drivers are stuck with bills.“They know we’ve got to keep working,” Mr. Jackson says. “That’s how they take advantage. We’ve got to survive.”At 7:20, a vivid sun gathering force, Mr. Jackson pulls into the container storage yard near the port, rumbling over bumpy pavement. He backs into a space between two other containers, steps out of the cab, and turns a crank handle to lower the landing gear on the chassis. Then he detaches the box.He quickly finds the empty container he is picking up. But he notices that the chassis below it is painted pale yellow — an indication that it is old. This could trigger an inspection.He drives to port, entering the gates of APM Terminals at 7:40. The terminal is controlled by Maersk, a Danish company that is one of the two largest container shipping operations on earth.The security guard waves him through. A few minutes later, a dockworker driving a top loader — a machine that lifts containers — motions for Mr. Jackson to pull up to an appointed space so he can pluck the box off the rig and add it to a stack.Mr. Jackson scans the app on his phone for his next destination: space E162, the letters painted white on the dock. He pulls in tight, his passenger-side mirror grazing the container to his right. A crane lifts a box off the stacks and deposits it onto his chassis. It lands with a thunderous boom.The morning is proceeding so smoothly that Mr. Jackson indulges visions of dropping the container, at a Mattel warehouse, with time enough to spare for a proper meal — his first of the day — before heading back to the port.But then a dockworker notices the old chassis. He diverts him to a special maintenance area. There, Mr. Jackson sits for more than an hour while a mechanic administers a repair.He pulls in to a truck stop in Long Beach, and adds another $400 worth of diesel to his tank.He walks across the lot, stepping between other tractor-trailers, on his way to the restroom — his first pit stop since dawn.One of his drivers calls to report that he has accepted an assignment from Dray Alliance to drop off an empty container at the port, and is now headed back to the Inland Empire, pulling nothing.Mr. Jackson is distressed. He had arranged for the driver to pick up a load at the port this evening. He should have waited to do both jobs on a single journey. Instead, he is burning gas on two round trips — at Mr. Jackson’s expense.“How does that cover the cost of me paying you?” Mr. Jackson asks. “The rates are down. It’s slow, bro’.”Mr. Jackson is an independent contractor who owns his truck and two others.Brandon Pavan for The New York Times‘I’m taking care of business.’At 11 in the morning, he is on the freeway again, headed back to the Inland Empire to drop off the container. He shovels a handful of popcorn into his mouth. Then he puts the bag on his console, and picks up his iPhone to refresh. No jobs.Fat clouds hang low over the Arrowhead Mountains as Mr. Jackson arrives at the Mattel warehouse just after noon. He drops the container, picks up an empty, and returns to the freeway, headed back to the port for the second half of his long day.Many truck drivers obsessively consume caffeine, perpetually fearful that they might otherwise descend into a dangerous state known as highway hypnosis.Mr. Jackson abstains. “I drink a lot of this,” he says, taking a swig from a bottle of Fiji water.To stay alert, he relies on the vibrations of his $6,000 sound system. He cranks up the dial on an old Isley Brothers classic, “Work to Do.” “I’m taking care of business, woman can’t you see. I’ve gotta make it for you, and gotta make it for me.”He rolls past a billboard for Fastevict.com, past tent cities full of homeless people, past self-storage units.He makes it to the port in time for a meal before his 3 p.m. pickup.He winds through the cracked streets of Long Beach, looking for a curb long enough to park a tractor-trailer. He finds a spot around the corner from the truck stop. He waits for an Uber Eats driver, who arrives bearing a Chipotle bowl — brown rice, chicken and avocado.He drops the container, picks up another, and parks again in Long Beach, taking a nap in the back in the cab while waiting for rush hour traffic to ease.At 6:30 in the evening, twilight settling over the parched land, he rolls toward home while again on the phone with his wife.The mortgage underwriter does not understand the division between Mr. Jackson’s personal finances and his business — a blurry line. The closing appears in danger. (He will eventually pull it off, though that will leave him staring at mortgage payments with diminished income.)Darkness fills his cab. Brake lights flicker ahead. He and his wife struggle to understand where their road leads.“People are like, ‘If you get through this point, you’ll be OK,’” Mr. Jackson says. “And I’m like, ‘How long is this point going to last?’”Major retailers are bypassing Southern California, instead shipping to East Coast destinations like Savannah, Ga., shown here, to avoid potential upheaval.Erin Schaff/The New York Times More

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    The Long Road to Driverless Trucks

    Self-driving eighteen-wheelers are now on highways in states like California and Texas. But there are still human “safety drivers” behind the wheel. What will it take to get them out?This article is part of our series on the Future of Transportation, which is exploring innovations and challenges that affect how we move about the world.In March, a self-driving eighteen-wheeler spent more than five straight days hauling goods between Dallas and Atlanta. Running around the clock, it traveled more than 6,300 miles, making four round trips and delivering eight loads of freight.The result of a partnership between Kodiak Robotics, a self-driving start-up, and U.S. Xpress, a traditional trucking company, this five-day drive demonstrated the enormous potential of autonomous trucks. A traditional truck, whose lone driver must stop and rest each day, would need more than 10 days to deliver the same freight.But the drive also showed that the technology is not yet ready to realize its potential. Each day, Kodiak rotated a new team of specialists into the cab of its truck, so that someone could take control of the vehicle if anything went wrong. These “safety drivers” grabbed the wheel multiple times.Tech start-ups like Kodiak have spent years building and testing self-driving trucks, and companies across the trucking industry are keen to reap the benefits. At a time when the global supply chain is struggling to deliver goods as efficiently as businesses and consumers now demand, autonomous trucks could alleviate bottlenecks and reduce costs.Now comes the most difficult stretch in this quest to automate freight delivery: getting these trucks on the road without anyone behind the wheel.Companies like Kodiak know the technology is a long way from the moment trucks can drive anywhere on their own. So they are looking for ways to deploy self-driving trucks solely on highways, whose long, uninterrupted stretches are easier to navigate than city streets teeming with stop-and-go traffic.“Highways are a more structured environment,” said Alex Rodrigues, chief executive of the self-driving-truck start-up Embark. “You know where every car is supposed to be going. They’re in lanes. They’re headed in the same direction.”Restricting these trucks to the highway also plays to their strengths. “The biggest problems for long-haul truckers are fatigue, distraction and boredom,” Mr. Rodrigues explained on a recent afternoon as one of his company’s trucks cruised down a highway in Northern California. “Robots don’t have a problem with any of that.”It’s a sound strategy, but even this will require years of additional development.Part of the challenge is technical. Though self-driving trucks can handle most of what happens on a highway — merging into traffic from an on-ramp, changing lanes, slowing for cars stopped on the shoulder — companies are still working to ensure they can respond to less common situations, like a sudden three-car pileup.As he continued down the highway, Mr. Rodrigues said his company has yet to perfect what he calls evasive maneuvers. “If there is an accident in the road right in front of the vehicle,” he explained, “it has to stop itself quickly.” For this and other reasons, most companies do not plan on removing safety drivers from their trucks until at least 2024. In many states, they will need explicit approval from regulators to do so.But deploying these trucks is also a logistical challenge — one that will require significant changes across the trucking industry.In shuttling goods between Dallas and Atlanta, Kodiak’s truck did not drive into either city. It drove to spots just off the highway where it could unload its cargo and refuel before making the return trip. Then traditional trucks picked up the cargo and drove “the last mile” or final leg of the delivery.In order to deploy autonomous trucks on a large scale, companies must first build a network of these “transfer hubs.” With an eye toward this future, Kodiak recently inked a partnership with Pilot, a company that operates traditional truck stops across the country. Today, these are places where truck drivers can shower and rest and grab a bite to eat. The hope is that they can also serve as transfer hubs for driverless trucks.“The industry can’t afford to build this kind of infrastructure from scratch,” said Kodiak’s chief executive, Don Burnette. “We have to find ways of working with the existing infrastructure.”They must also consider the impact on truck drivers: They aim to make long-haul drivers obsolete, but they will need more drivers for the short haul.Executives like Mr. Burnette and Mr. Rodrigues believe that drivers will happily move from one job to the other. The turnover rate among long-haul drivers is roughly 95 percent, meaning the average company replaces nearly its entire work force each year. It is a stressful, monotonous job that keeps people away from home for days on end. If they switch to city driving, they can work shorter hours and stay close to home.But a recent study from researchers at Carnegie Mellon University and the University of Michigan questions whether the transition will be as smooth as many expect. Truck drivers are typically paid by the mile. A shift to shorter trips, the study says, could slash the number of miles traveled and reduce wages.Certainly, some drivers fear they cannot make as much money driving solely in cities. Others are loath to give up their time on the highway.“There are many drivers like me,” said Cannon Bryan, a 28-year-old long-haul trucker from Texas. “I wasn’t born in the city. I wasn’t raised in the city. I hate city driving. I enjoy picking up a load in Dallas and driving to Grand Rapids, Mich.”Building and deploying self-driving trucks is far from easy. And it is enormously expensive — on the order of hundreds of millions of dollars a year. TuSimple, a self-driving truck company, has faced concerns that the technology is unsafe after federal regulators revealed that one of its trucks had been involved in an accident. Aurora, a self-driving technology company with a particularly impressive pedigree, is facing challenging market conditions and has floated the possibility of a sale to big names like Apple or Microsoft, according to a report from Bloomberg News.If these companies can indeed get drivers out of their vehicles, this raises new questions. How will driverless trucks handle roadside inspections? How will they set up the reflective triangles that warn other motorists when a truck has pulled to the shoulder? How will they deal with blown tires and repairs?Eventually, the industry will also embrace electric trucks powered by battery rather than fossil fuel, and this will raise still more questions for autonomous trucking. Where and how will the batteries get recharged? Won’t this prevent self-driving trucks from running 24 hours a day, as the industry has promised?“There are so many issues that in reality are far more complex than they might seem on paper,” said Steve Viscelli, an economic and political sociologist at the University of Pennsylvania who specializes in trucking. “Though the developers and their partners are putting a lot of effort into thinking this through, many of the questions about what needs to change cannot yet be answered. We are going to have to see what reality looks like.”Some solutions will be technical, others logistical. The start-up Embark plans to build a roaming work force of “guardians” who will locate trucks when things go wrong and call for repairs as needed.The good news for the labor market is that this technology will create jobs even as it removes them. And though experts say that more jobs will ultimately be lost than gained, this will not happen soon. Long-haul truckers will have years to prepare for a new life. Any rollout will be gradual.“Just when you think this technology is almost here,” said Tom Schmitt, the chief executive of Forward Air, a trucking company that just started a test with Kodiak’s self-driving trucks, “it is still five years away.” More

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    Factory Jobs Are Booming Like It’s the 1970s

    U.S. manufacturing is experiencing a rebound, with companies adding workers amid high consumer demand for products.WASHINGTON — Ever since American manufacturing entered a long stretch of automation and outsourcing in the late 1970s, every recession has led to the loss of factory jobs that never returned. But the recovery from the pandemic recession has been different: American manufacturers have now added enough jobs to regain all that they shed — and then some.The resurgence has not been driven by companies bringing back factory jobs that had moved overseas, nor by the brawny industrial sectors and regions often evoked by President Biden, former President Donald J. Trump and other champions of manufacturing.Instead, the engines in this recovery include pharmaceutical plants, craft breweries and ice-cream makers. The newly created jobs are more likely to be located in the Mountain West and the Southeast than in the classic industrial strongholds of the Great Lakes.American manufacturers cut roughly 1.36 million jobs from February to April of 2020, as Covid-19 shut down much of the economy. As of August this year, manufacturers had added back about 1.43 million jobs, a net gain of 67,000 workers above prepandemic levels.Data suggest that the rebound is largely a product of the unique circumstances of the pandemic recession and recovery. Covid-19 crimped global supply chains, making domestic manufacturing more attractive to some companies. Federal stimulus spending helped to power a shift in Americans’ buying habits away from services like travel and restaurants and toward goods like cars and sofas, helping domestic factory production — and with it, job growth — to bounce back much faster than it did in the previous two recessions.Treasury Secretary Janet L. Yellen said that the recovery of manufacturing jobs was a result of the unique nature of the recession, which was induced by the pandemic, and the robust federal response, including legislation like the $1.9 trillion American Rescue Plan of 2021.“We had a huge shift away from services and into goods that spurred production and manufacturing and very rapid recovery in the U.S. economy,” Ms. Yellen told reporters during a trip to Detroit this month. The support for local economies and small businesses included in Mr. Biden’s rescue plan, she said, “has been tremendously helpful in restoring the health of the job market and given the shifting in spending patterns, I think that’s been to the benefit of manufacturing.”American manufacturers, like many industries, have struggled to find raw materials, component parts and skilled workers. And yet, they have continued to create jobs at a rate that has surprised even some longtime promoters of American factory employment.“We have 67,000 more workers today than we had in February 2020,” said Chad Moutray, the chief economist for the National Association of Manufacturers. “I didn’t think we would get there, to be honest with you.”In recessions over the last half century, factories have typically laid off a greater share of workers than other employers in the economy, and they have been slower to add jobs back in recoveries. Often, companies have used those economic inflection points to accelerate their pace of outsourcing jobs to foreign countries, where wages are significantly lower, and to invest in technology that replaces human workers.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.Job Market Trends: The labor market appears hot, but the supply of labor has fallen short, holding back the economy. Here is why.Gig Workers: Labor activists hoped President Biden would tackle gig worker issues aggressively. But a year and a half into his presidency, little has been done at the federal level.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.This time was different. Factory layoffs roughly matched those in the services sector in the depth of the pandemic recession. Economists attribute that break in the trend to many U.S. manufacturers being deemed “essential” during pandemic lockdowns, and the ensuing surge in demand for their products by Americans.Manufacturing jobs quickly rebounded in the spring of 2020, then began to climb at a much faster pace than has been typical for factory job creation in recent decades. Since June 2020, under both Mr. Trump and Mr. Biden, factories have added more than 30,000 jobs a month.Sectors that hemorrhaged employment in recent recessions have fared much better in this recovery. Furniture makers, who eliminated a third of their jobs in the 2008 financial crisis and its aftermath, have nearly returned to their prepandemic employment levels. So have textile mills, paper products companies and computer equipment makers.Manufacturers say the numbers could be even stronger, if not for their continued difficulties attracting and hiring skilled workers amid 3.7 percent unemployment.Fernando Torres, vice president of operations for Greene Tweed, a Pennsylvania-based manufacturer of materials and components used by the aerospace and semiconductor industries, said his company has had to become more flexible to attract new workers and offer more attractive salaries and benefits. He has been looking for employees with different backgrounds that the company can train to develop the skills to fill open jobs, and said that it has been hard to retain staff because competitors are aggressively trying to lure them away.But Mr. Torres said that Greene Tweed, which employs just fewer than 2,000 workers, did not plan to give up, considering the demand for his company’s products.“We are looking for lots of employees,” Mr. Torres said. “We are not looking at slowing down.”Chuck Wetherington, president of BTE Technologies, a manufacturer of medical devices based in Maryland, said that he was trying to expand his work force of around 40 by 10 percent. A lack of workers, he said, has become a bigger problem than supply chain disruptions.“Our backlog continues to grow,” Mr. Wetherington said at a National Association of Manufacturers briefing. “I just can’t find the employees.”Mr. Biden has pushed a variety of legislative initiatives to boost domestic manufacturing, including direct spending on infrastructure, tax credits and other subsidies for companies like battery makers and semiconductor factories, and new federal procurement requirements that benefit manufacturers located in the United States. Biden administration officials say those policies could play a decisive role in further encouraging factory job growth in the coming months and years, in hopes of continuing the expansion and possibly pushing factory employment back to pre-2008 levels.Other factors could help hasten more American manufacturing. Delayed deliveries, sky-high shipping prices and other supply chain issues during the pandemic have encouraged some chief executives to think about moving production closer to home. The average price to ship a 40-foot container internationally has fallen sharply in recent months, but it is still three times higher than it was before the pandemic, according to tracking by the freight booking platform Freightos.A container ship at the Port of Los Angeles. As Covid-19 crimped global supply chains, domestic manufacturing became more attractive to some companies.Stella Kalinina for The New York TimesBusinesses are also beginning to question the wisdom of producing so many goods in China, amid rising tensions between Washington and Beijing over trade and technology. The Chinese government’s insistence on a zero-Covid policy, despite the severe disruptions it has caused for the economy, has especially shaken many executives’ confidence in their ability to operate in China. Mr. Biden has also maintained many tariffs on Chinese imports imposed by Mr. Trump.“The pandemic response by China has definitely prompted more than a rethink on where to put new money. I think we are actually beginning to see action,” said Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics. How much of that investment came to the United States was unclear. “I don’t think anyone really knows,” she added.Ed Gresser, the vice president of trade and global markets at the Progressive Policy Institute, a left-leaning think tank, said that the United States had seen a noticeable uptick in new manufacturing establishments since 2019, especially in the pharmaceutical sector, which might be a response to the pandemic. Food and beverage establishments have also continued to grow.But while growth in the U.S. manufacturing sector was strong last year, so were imports of manufactured goods, Mr. Gresser said. That suggests, he said, that the growth of manufacturing probably reflects strong consumer demand in the United States through the pandemic, rather than a shift to production in the United States.While attitudes toward doing business in China have quickly soured, patterns of production have been slower to change. A survey of 117 leading companies released in August by the U.S. China Business Council found that business optimism had reached record lows, but U.S. corporations remained overwhelmingly profitable in China, which is still home to the world’s most expansive ecosystem of factories and a lucrative consumer market.Eight percent of the surveyed companies reported moving segments of their supply chain out of China to the United States in the past year, while another 16 percent had moved some operations to other countries. But 78 percent of the companies said they had not shifted any business away from China.The Biden administration is hopeful that new policies — including a manufacturing competitiveness law and a climate law the president signed this summer — will encourage more companies to leave China for the United States, particularly cutting-edge industries like clean energy and advanced computing.Brian Deese, the director of the National Economic Council, said in an interview that the laws were already changing the calculus for investment and job creation in the United States. In recent weeks, White House officials have promoted factory announcements from automakers, battery companies and others, directly linked to the climate bill.“One of the most striking things that we are seeing now,” Mr. Deese said, “is the number of companies — U.S. companies and global companies — that are committing to build and expand their manufacturing footprint in the United States, and doing so based on their view that not only did the pandemic highlight the need for more resilience in their supply chains, but that the United States is creating a policy environment that makes long term investment here in the United States more attractive.” More

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    Central Banks Accept Pain Now, Fearing Worse Later

    Federal Reserve officials and their counterparts around the world are trying to defeat inflation by rapidly raising interest rates. They know it will come at a cost.A day after the Federal Reserve lifted interest rates sharply and signaled more to come, central banks across Asia and Europe followed suit on Thursday, waging their own campaigns to crush an outbreak of inflation that is bedeviling consumers and worrying policymakers around the globe.Central bankers typically move slowly. That’s because their policy tools are blunt and work with a lag. The interest rate increases taking place from Washington to Jakarta will need months to filter out across the global economy and take full effect. Jerome H. Powell, the Fed chair, once likened policymaking to walking through a furnished room with the lights off: You go slowly to avoid a painful outcome.Yet officials, learning from a history that has illustrated the perils of taking too long to stamp out price increases, have decided that they no longer have the luxury of patience.Inflation has been relentlessly rapid for a year and a half now. The longer that remains the case, the greater the risk that it is going to become a permanent feature of the economy. Employment contracts might begin to factor in cost-of-living increases, companies might begin to routinely raise prices and inflation might become part of the fabric of society. Many economists think that happened in the 1970s, when the Fed tolerated out-of-control price increases for years — allowing an “inflationary psychology” to take hold that later proved excruciating to crush.But the aggressiveness of the monetary policy action now underway also pushes central banks into new and risky territory. By tightening quickly and simultaneously when growth in China and Europe is already slowing and supply chain pressures are easing, global central banks risk overdoing it, some economists warn. They may plunge economies into recessions that are deeper than necessary to curb inflation, sending unemployment significantly higher.“The margin of error now is very thin,” said Robin Brooks, chief economist at the Institute of International Finance. “A lot of this comes down to judgment, and how much emphasis to put on the 1970s scenario.”In the 1970s, Fed policymakers did lift interest rates in a bid to control inflation, but they backed off when the economy began to slow. That allowed inflation to remain elevated for years, and when oil prices spiked in 1979, it reached untenable levels. The Fed, under Paul A. Volcker, ultimately raised rates to nearly 20 percent — and sent unemployment soaring to more than 10 percent — in an effort to wrestle the price increases down.That example weighs heavily on policymakers’ minds today.“We think that a failure to restore price stability would mean far greater pain later on,” Mr. Powell said at his news conference on Wednesday, after the Fed raised rates three-quarters of a percentage point for a third straight time. The Fed expects to raise borrowing costs to 4.4 percent next year in the fastest tightening campaign since the 1980s.The Bank of England raised interest rates half a point to 2.25 percent on Thursday, even as it said the United Kingdom might already be in a recession. The European Central Bank is similarly expected to continue raising rates at its meeting in October to combat high inflation, even as Russia’s war in Ukraine throws Europe’s economy into turmoil.As the major monetary authorities lift borrowing costs, their trading partners are following suit, in some cases to avoid big moves in their currencies that could push up local import prices or cause financial instability. On Thursday, Indonesia, Taiwan, the Philippines, South Africa and Norway lifted rates, and a large move by Switzerland’s central bank ended the era of below-zero interest rates in Europe. Japan has comparatively low inflation and is keeping rates low, but it intervened in currency markets for the first time in 24 years on Thursday to prop up the yen in light of all of the action by its counterparts.The wave of central bank action is expected to have consequences, working by design to sharply slow both interconnected commerce and national economies. The Fed, for instance, sees its moves pushing U.S. unemployment to 4.4 percent in 2023, up from the current 3.7 percent.A housing development in Phoenix. Climbing interest rates are already making it more expensive to borrow money to buy a car or purchase a house in many nations.Adriana Zehbrauskas for The New York TimesAlready, the moves are beginning to have an impact. Climbing interest rates are making it more expensive to borrow money to buy a car or a house in many nations. Mortgage rates in the United States are back above 6 percent for the first time since 2008, and the housing market is cooling down. Markets have swooned this year in response to the tough talk coming from central banks, reducing the amount of capital available to big companies and cutting into household wealth.Yet the full effect could take months or even years to be felt.Rates are rising from low levels, and the latest moves have not yet had time to fully play out. In continental Europe and Britain, the war in Ukraine rather than monetary tightening is pushing economies toward recession. And in the United States, where the fallout from the war is far less severe, hiring and the job market remain strong, at least for now. Consumer spending, while slowing, is not plummeting.That is why the Fed believes it has more work to do to slow the economy — even if that increases the risk of a downturn.“We have always understood that restoring price stability while achieving a relatively modest increase in unemployment, and a soft landing, would be very challenging,” Mr. Powell said on Wednesday. “No one knows whether this process will lead to a recession, or if so, how significant that recession would be.”Many global central bankers have painted today’s inflation burst as a situation in which their credibility is on the line.“For the first time in four decades, central banks need to prove how determined they are to protect price stability,” Isabel Schnabel, an executive board member of the European Central Bank, said at a Fed conference in Wyoming last month.A FedEx worker making deliveries in Miami Beach. Consumer spending in the United States, while slowing, is not plummeting.Scott McIntyre for The New York TimesBut that does not mean that the policy path the Fed and its counterparts are carving out is unanimously agreed upon — or unambiguously the correct one. This is not the 1970s, some economists have pointed out. Inflation has not been elevated for as long, supply chains appear to be healing and measures of inflation expectations remain under control.Mr. Brooks at the Institute of International Finance sees the pace of tightening in Europe as a mistake, and thinks that the Fed, too, could overdo it at a time when supply shocks are fading and the full effects of recent policy moves have yet to play out.Maurice Obstfeld, an economist at the Peterson Institute for International Economics and a former chief economist of the International Monetary Fund, wrote in a recent analysis that there is a risk that global central banks are not paying enough attention to one another.“Central banks clearly are scrambling to raise interest rates as inflation runs at levels not seen for nearly two generations,” he wrote. “But there can be too much of a good thing. Now is the time for monetary policymakers to put their heads up and look around.”Still, at many central banks around the world — and clearly at Mr. Powell’s Fed — policymakers are treating it as their duty to remain resolute in the fight against price increases. And that is translating into forceful action now, regardless of the imminent and uncertain costs.Mr. Powell may have once warned that moving quickly in a dark room could end painfully. But now, it’s as if the room is on fire: The threat of a stubbed toe still exists, but moving slowly and cautiously risks even greater peril. More

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    How the Car Market Is Shedding Light on a Key Inflation Question

    How easily companies give up swollen profits could determine how easily the Federal Reserve can cool inflation. Dealerships offer clues.In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.“With production now increasing, and interest-sensitive demand cooling, there may soon be pressures to reduce vehicle margins and prices in order to move the higher volume of cars being produced off dealer lots,” Ms. Brainard explained during her remarks.The Fed has been raising interest rates to make borrowing for big purchases — cars, houses, business expansions — more expensive. The goal is to cool demand and slow the fastest inflation in four decades. Whether it can pull that off without inflicting serious pain on the economy will hinge partly on how easily companies surrender their hefty profits.If companies begin to lower prices to compete for customers as demand abates, price increases might slow without costing a lot of jobs. But if they try to hold on to big profits, the transition could be bumpier as the Fed is forced to squeeze the economy more drastically and quash demand more severely.“There has been a giant shift in bargaining power between consumers and corporations,” said Gennadiy Goldberg, senior U.S. rates strategist at TD Securities. “That’s where the next adjustment has to come — corporations have to see some pain.”The example of the auto industry offers reasons for hope but also caution. While there are signs that price increases for used cars are beginning to moderate as supply recovers, that process has been halting, and the new-car market illustrates why the path toward lower profits that help slow inflation could be a long one.That’s because three big forces that are playing out across the broader economy are on particularly clear display in the car market. Supply chains have not completely healed. Demand may be slowing down, but it still has momentum. And companies that have grown used to charging high prices and raking in big profits are proving hesitant to give up.The auto market split into two segments that are now diverging — new cars and used cars.New-car production was upended as the pandemic shut down factories making semiconductors and other parts, and it is only limping back. Freshly minted vehicles remain extraordinarily scarce, according to dealers and data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    New Inflation Developments Are Rattling Markets and Economists. Here’s Why.

    Inflation is less about pandemic and war surprises and more about economic momentum. That could make the solution more painful.When inflation began to accelerate in 2021, price pressures were clearly tied to the pandemic: Companies couldn’t produce cars, couches and computer games fast enough to keep up with demand from homebound consumers amid supply chain disruptions.This year, Russia’s war in Ukraine sent fuel and food prices rocketing, exacerbating price pressures.But now, as those sources of inflation show early signs of fading, the question is how much overall price increases will abate. And the answer is likely to be driven in part by what happens in one crucial area: the labor market.Federal Reserve officials are laser-focused on job gains and wage growth as they quickly raise interest rates to constrain the economy and slow rapid price increases. Officials are convinced that they must sap the economy of some of its momentum to wrestle the worst inflation in four decades back down to their goal of 2 percent.The way they do that is by slowing spending, hiring and wage gains — and they do that by raising the costs of borrowing. So far, a pronounced cool-down is proving elusive, suggesting to economists and investors that the central bank may need to be even more aggressive in its efforts to temper growth and bring inflation back down.As data this week showed, prices continue to soar. And, while the job market has moderated somewhat, employers are still hiring at a solid clip and raising wages at the fastest pace in decades. That continued progress seems to be allowing consumers to keep spending, and it may give employers both the power and the motivation to increase their prices to cover their climbing labor costs.As inflationary forces chug along, economists said, the risk is rising that the Fed will clamp down on the economy so hard that America will be in for a rough landing — potentially one in which growth slumps and unemployment shoots higher.It is becoming more likely “that it won’t be possible to wring inflation out of this economy without a proper recession and higher unemployment,” said Krishna Guha, who heads the global policy and central bank strategy team at Evercore ISI and who has been forecasting that the Fed can cool inflation without causing an outright recession.Rising wages could become a more primary driver of higher prices.Hiroko Masuike/The New York TimesThe challenge for the Fed is that, more and more, price increases appear to be driven by long-lasting factors tied to the underlying economy, and less by one-off factors caused by the pandemic or the war in Ukraine.Consumer Price Index data from August released on Tuesday illustrated that point. Gas prices dropped sharply last month, which many economists expected would pull overall inflation down. They also thought that recent improvements in the supply chain would moderate price increases for goods. Used car costs, a major contributor to inflation last year, are now declining.Yet, in spite of those positive developments, quickly rising costs across a wide array of products and services helped to push prices higher on a monthly basis. Rent, furniture, meals at restaurants and visits to the dentist are all growing more expensive. Inflation climbed 8.3 percent on an annual basis, and picked up by 0.1 percent from the prior month.The data underscored that, even without extraordinary disruptions, so many products and services are now increasing in price that costs might continue ratcheting up. Core inflation, which strips out food and fuel costs to give a sense of underlying price trends, reaccelerated to 6.3 percent in August after easing to 5.9 percent in July.Inflation F.A.Q.Card 1 of 5What is inflation? More