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    What Higher Interest Rates Could Mean for Jobs

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    Layoffs are up only minimally, and employers may be averse to shedding workers after experiencing the challenges of rehiring.The past year has been a busy one for nearly every industry, as a reopening economy has ignited a war for talent. Unless, of course, your business is finding jobs for laid-off workers.“For outplacement, it’s been a very slow time,” said Andy Challenger, senior vice president of the career transition firm Challenger, Gray & Christmas. But lately, he has been getting more inquiries, in a sign that the market might be about to take a turn. “We’re starting to gear up for what we anticipate to be a normalization where companies start to let people go again.”Spurred by red-hot inflation fueled partly by competition for scarce labor, the Federal Reserve has begun raising interest rates in an effort to cool off the economy before it boils over. By design, that means slower job growth — ideally in the form of a steady moderation in the number of openings, but possibly in pink slips, too.It’s not yet clear what that adjustment will look like. But one thing does seem certain: Job losses would have to mount considerably before workers would have a hard time finding new positions, given the backlogged demand.So far, the labor market has revealed some clues about what might lie ahead.Challenger’s data, for example, shows that announced job cuts rose 6 percent in April over the same month in 2021. While still far below levels seen earlier in 2020, it was the first month in 2022 to have a year-over-year increase, and followed a 40 percent jump in March over the previous month. Some of those layoffs were idiosyncratic: More than half the layoffs in health care in the first third of this year resulted from workers’ refusal to obey vaccine mandates, with some of the rest stemming from the end of Covid-19-related programs.But other layoffs seem directly related to the Fed’s new direction. Nearly 8,700 people in the financial services sector lost jobs from January through April, Challenger found, mostly in mortgage banking. Rising rates for home loans have torpedoed demand for refinances, while prospective buyers are increasingly being priced out.Theoretically, a Fed-driven housing slowdown might in turn tamp down demand for construction workers. But builders bounced back strongly after a dip in 2020 and have only accelerated since. The National Association of Home Builders estimates that the industry needs to hire 740,000 people every year just to keep up with retirements and growth. Even if housing starts fell off, homeowners feeling flush as their equity has risen would snap up available workers to add third bedrooms or new cabinets.“A big national builder that’s concentrated in a high-cost market, and all they do is single-family exurban construction, yeah, they may have layoffs,” said the association’s chief economist, Robert Dietz. “But then remodelers would come along and say, ‘Oh, here’s some trained electricians and framers, let’s go get them.’”The National Association of Home Builders estimates that the industry needs to hire 740,000 people every year just to keep up with retirements and growth.Matt Rourke/Associated PressAnother sector that is typically sensitive to the cost of credit is commercial construction, which sustained deep losses as office development came to a screeching halt during the pandemic. Nevertheless, cash-rich clients have plowed ahead with industrial projects like power plants and factories, while federal investment in infrastructure has only begun to make its way into procurement processes.“I think that lending rates might be less important right now,” said Kenneth D. Simonson, chief economist for the Associated General Contractors of America. “An increase in either credit market or bank rates isn’t sufficient to choke off demand for many types of projects.”The tech sector, which feeds on venture capital that is more abundant in low-interest-rate environments, has drooped in recent months. Under pressure to burn less cash, some companies are looking to offshore jobs that before the pandemic they thought needed to be done on site, or at least in the country.“We’ve seen several of our clients in the high-growth technology space quickly shift their focus to reducing cost,” said Bryce Maddock, the chief executive of the outsourcing company TaskUs, discussing U.S. layoffs on an earnings call last week. “Across all verticals, the operating environment has led to an acceleration in our clients’ demand for growth in offshore work and a decrease in demand for onshore work.”In the broader economy, however, any near-term layoffs might occur on account of forces outside the Fed’s control: namely, the exhaustion of federal pandemic-relief spending, and a natural waning in demand for goods after a two-year national shopping spree. That could hit manufacturing and retail, as consumers contemplate their overfilled closets. Spending on long-lasting items has fallen for a couple months in a row, even before adjusting for inflation.If spending on durable goods declines sharply, “I could easily see that creating a recession, because suppliers would be stuck with a massive amount of inventory that they wish they didn’t have, and people employed that they wish they didn’t,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution. “Even there, it’s going to be hard to know how much was that the Fed raised interest rates, and how much was the extraordinary surge in demand for goods unwinding.”In general, if the Fed’s path of tightening does prompt firms to downsize, that’s likely to be bad news for Black, Hispanic and female workers with less education. Research shows that while a hot labor market tends to bring in people who have less experience or barriers to employment, those workers are also the first to be let go as conditions worsen — across all industries, not just in sectors that might be hit harder by a recession.So far, initial claims for unemployment benefits remain near prepandemic lows, at around 200,000 per week. But some economists worry that they might not be as good a signal of impending trouble in the labor market as they used to be.The share of workers who claim unemployment, known as the “recipiency rate,” has declined in recent decades to only about a third of those who lose jobs. These days, any laid-off workers might be finding new jobs quickly enough that they don’t bother to file. And the pandemic may have further scrambled people’s understanding of whether they’re eligible.“One possibility is that people are going to think that because they haven’t worked long enough, because they switched employers or stopped working for a period of time, that this would make them ineligible, and they’re going to assume that they can’t get it again,” said Kathryn Anne Edwards, a labor economist at the RAND Corporation. (The other possibility is that the temporary supplements to unemployment insurance during the pandemic might have introduced more people to the system, leading to more claims rather than fewer.)One good sign: Employers may have learned from previous recessions that letting people go at the first sign of a downturn can wind up having a cost when they need to staff up again. For that reason, managers are trying harder to redeploy people within the company instead.John Morgan, president of the outplacement firm LHH, said that while he was getting more inquiries from companies preparing to downsize, he did not expect as large a surge as in past cycles.“Even if they’re driving down on profits, a lot of our customers are trying to avoid the ‘fire and rehire’ playbook of the past,” Mr. Morgan said. “How can they invest in upskilling and reskilling and move talent they have inside the organization? Because it’s just really hard to acquire new talent right now, and incredibly expensive.” More

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    April Jobs Report: Gain of 428,000 Shows Vibrant Labor Market

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    The Labor Department reported a gain of 428,000 jobs in April, along with a 5.5 percent increase in average hourly earnings from a year earlier.The U.S. economic rebound from the pandemic’s devastation held strong in April with another month of solid job growth.Employers added 428,000 jobs, matching the previous month, the Labor Department reported Friday, with the growth broad-based across every major industry.The unemployment rate remained 3.6 percent, just a touch above its level before the pandemic, when it was the lowest in half a century.The challenge of a highly competitive labor market for employers — a shortage of available workers — persisted as well. In fact, the report showed a decline of 363,000 in the labor force.The economy has regained nearly 95 percent of the 22 million jobs lost at the height of coronavirus-related lockdowns two years ago. But the labor supply has not kept up with a record wave of job openings as businesses expand to match consumers’ continued willingness to buy a variety of goods and services. There are now 1.9 job openings for every unemployed worker.The hiring scramble has driven up wages, and employers are largely passing on that expense, helping fuel inflation that Americans have cited as their leading economic concern. On that front, Friday’s report showed an easing in the acceleration of average hourly earnings, which increased 0.3 percent from the month before, after a 0.5 percent gain in March.President Biden pointed to the latest data as evidence of “the strongest job creation economy in modern times,” a message the White House is increasingly amplifying ahead of the congressional elections.The unemployment rate stayed under 4 percent in April.The share of people who have looked for work in the past four weeks or are temporarily laid off, which does not capture everyone who lost work because of the pandemic. More

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    Rapid Inflation, Lower Employment: How the U.S. Pandemic Response Measures Up

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    The United States spent more on its policy response than other advanced economies. Now economists are revisiting how that worked.The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?As the Fed raises interest rates and economists increasingly warn that it may take at least a mild recession to bring inflation to heel, risks are mounting that America’s ambitious spending will end up with a checkered legacy. Rapid growth and a strong labor market rebound have been big wins, and economists across the ideological spectrum agree that some amount of spending was necessary to avoid a repeat of the painfully slow recovery that followed the previous recession. But the benefits of that faster recovery could be diminished as rising prices eat away at paychecks — and even more so if high inflation prods central bank policymakers set policy in a way that pushes up unemployment down the road.“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”The Biden administration has repeatedly argued that, to the extent the United States is seeing more inflation, the policy response to the pandemic also created a stronger economy.“We got a lot more growth, we got less child poverty, we got better household balance sheets, we have the strongest labor market by some metrics I’ve ever seen,” Jared Bernstein, an economic adviser to President Biden, said in an interview. “Were all of those accomplishments accompanied by heat on the price side? Yes, but some degree of that heat showed up in every advanced economy, and we wouldn’t trade that back for the historic recovery we helped to generate.”Inflation has picked up around the world, but price increases have been quicker in America than in many other wealthy nations.Consumer prices were up 9.8 percent in March from a year earlier, according to a measure of inflation that strips out owner-occupied housing to make it comparable across countries. That was faster than in Germany, where prices rose 7.6 percent in the same period; the United Kingdom, where they rose 7 percent; and other European countries. Other measures similarly show U.S. inflation outpacing that of its global peers.The Rise of InflationInflation has risen worldwide in the past year, but the increase has been fastest in the United States.

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    Change in consumer prices from a year earlier
    Note: Euro area and U.K. data are Harmonised Index of Consumer Prices. U.S. data is the Consumer Price Index excluding owners’ equivalent rent.Sources: U.S. Bureau of Labor Statistics, O.E.C.D., EurostatBy The New York TimesThe comparatively large jump in prices in America owes at least partly to the nation’s ambitious spending. Research from the Federal Reserve Bank of San Francisco attributed about half of the nation’s 2021 annual price increase to the government’s spending response. The researchers estimated the number, which is imprecise, by measuring America’s inflation outcome compared with what happened in countries that spent less.“The size of the package was very large compared to any other country,” said Òscar Jordà, a co-author on the study.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Trump and then Biden administrations spent about $5 trillion on pandemic relief in 2020 and 2021 — far more as a share of the nation’s economy than what other advanced economies spent, based on a database compiled by the International Monetary Fund. Much of that money went directly to households in the form of stimulus checks, expanded unemployment insurance and tax credits for parents.Payments to households helped to fuel rapid consumer demand and quick economic growth — progress that has continued into 2022. A global economic outlook released by the International Monetary Fund last week showed that America’s economy is expected to expand by 3.7 percent this year, faster than the roughly 2 percent trend that prevailed before the pandemic and the 3.3 percent average expected across advanced economies this year.That comes on the heels of even more rapid 2021 growth. And as the U.S. economy has expanded so quickly, unemployment has plummeted. After spiking to 14.7 percent in early 2020, joblessness is now roughly back to the 50-year lows that prevailed prior the pandemic.That’s a victory that politicians have celebrated. “Our economy roared back faster than most predicted,” Mr. Biden said in his State of the Union address last month. A major report from the White House on April 14 noted that the United States has experienced a faster recovery than other advanced economies, as measured by gross domestic product, consumer spending and other indicators.The Rebound in SpendingConsumer spending has recovered more quickly in the United States, even after accounting for faster inflation.

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    Change in per capita household spending since fourth quarter of 2019
    Notes: Quarterly data, adjusted for inflationSource: O.E.C.D.By The New York TimesBut increasingly, at least when it comes to the job market, America’s achievement looks less unique.Unemployment in the United States jumped much higher at the outset of the pandemic in part because America’s policies did less to discourage layoffs than those in Europe. While many European governments paid companies to keep workers on their payrolls, the U.S. focused more on providing money directly to those who lost their jobs.Joblessness fell fast in the United States, too, but that was also true elsewhere. Many European countries, Canada and Australia are now back to or below their prepandemic unemployment rates, data reported by the Organization for Economic Co-operation and Development showed.And when it comes to the share of people who are actually working, the United States is lagging some of its global peers. The nation’s employment rate is hovering around 71.4 percent, still down slightly from nearly 71.8 percent before the pandemic began.By comparison, the eurozone countries, Canada and Australia have a higher employment rates than before the pandemic, and Japan’s employment rate has fully recovered.The Rebound in JobsEmployment rates fell further in the U.S. than in many peer countries, and have not yet returned to their prepandemic level.

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    Change in employment rate since fourth quarter of 2019
    Note: Quarterly data, ages 15 to 64Source: O.E.C.D.By The New York TimesEurope’s more complete employment recovery may partly reflect its different regulations and different approach to supporting workers during the pandemic, said Nick Bennenbroek, international economist at Wells Fargo. European aid programs effectively paid companies to keep people on the payroll even when they couldn’t go to work, while the United States supported workers directly through the unemployment insurance system.That relatively subtle difference had a major consequence: Because fewer Europeans were separated from employers, many flowed right back into their old jobs as the economy reopened. Meanwhile, pandemic layoffs touched off an era of soul-searching and job shuffling in the United States.“You didn’t have as much motivation to reconsider your assessment of your work-life situation,” Mr. Bennenbroek said. “What we initially saw in the U.S. was much more disruptive.”Inflation F.A.Q.Card 1 of 6What is inflation? More

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    The US Economy Is Booming. Why Are Economists Worrying About a Recession?

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    There is little sign that a recession is imminent. But sky-high demand and supply shortages are testing the economy’s limits.Employers are adding hundreds of thousands of jobs a month, and would hire even more people if they could find them. Consumers are spending, businesses are investing, and wages are rising at their fastest pace in decades.So naturally, economists are warning of a possible recession.Rapid inflation, soaring oil prices and global instability have led forecasters to sharply lower their estimates of economic growth this year, and to raise their probabilities of an outright contraction. Investors share that concern: The bond market last week flashed a warning signal that has often — though not always — foreshadowed a downturn.Such predictions may seem confusing when the economy, by many measures, is booming. The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic, and employers are continuing to hire at a breakneck pace, adding 431,000 jobs in March alone. The unemployment rate has fallen to 3.6 percent, barely above the prepandemic level, which was itself a half-century low.But to the doomsayers, the recovery’s remarkable strength carries the seeds of its own destruction. Demand — for cars, for homes, for restaurant meals and for the workers to provide them — has outstripped supply, leading to the fastest inflation in 40 years. Policymakers at the Federal Reserve argue they can cool off the economy and bring down inflation without driving up unemployment and causing a recession. But many economists are skeptical that the Fed can engineer such a “soft landing,” especially in a moment of such extreme global uncertainty.“It’s like trying to land during an earthquake,” said Tara Sinclair, a professor of economics at George Washington University.William Dudley, a former president of the Federal Reserve Bank of New York, called a recession “virtually inevitable.” He is among the economists arguing that if the Fed had begun raising interest rates last year, it might have been able to rein in inflation merely by tapping the brakes on the economy. Now, they say, the economy is growing so rapidly — and prices are rising so quickly — that the only way for the Fed to get control is to slam on the brakes and cause a recession.Still, a majority of forecasters say a recession remains unlikely in the next year. High oil prices, rising interest rates and waning government aid will all drag down growth this year, said Aneta Markowska, chief economist for Jefferies, an investment bank. But corporate profits are strong, households have trillions in savings, and debt loads are low — all of which should provide a cushion against any slowdown.“It’s easy to construct a very negative narrative, but when you actually look at the magnitude of all those impacts, I don’t think they’re significant enough to push us into a recession in the next 12 months,” she said. Recessions, almost by definition, involve job losses and unemployment; right now, companies are doing practically anything they can to retain workers.“I just don’t see what would cause businesses to do a complete 180 and go from ‘We need to hire all these people and we can’t find them’ to ‘We have to lay people off,’” Ms. Markowska said. Economists, however, are notoriously terrible at predicting recessions. So it makes sense to focus instead on where the recovery is right now, and on the forces that are threatening to knock it off course.The State of Jobs in the United StatesJob openings and the number of workers voluntarily leaving their positions in the United States remained near record levels in March.March Jobs Report: U.S. employers added 431,000 jobs and the unemployment rate fell to 3.6 percent ​​in the third month of 2022.A Strong Job Market: Data from the Labor Department showed that job openings remained near record levels in February.Wages and Inflation: Economists hoped that as households shifted spending back to services, price gains would cool. Rapid wage growth could make that story more complicated.New Career Paths: For some, the Covid-19 crisis presented an opportunity to change course. Here is how these six people pivoted professionally.Return to the Office: Many companies are loosening Covid safety rules, leaving people to navigate social distancing on their own. Some workers are concerned.Unionization Efforts: The pandemic has fueled enthusiasm for organized labor. But the pushback has been brutal, especially in the private sector.Growth will slow. That’s not necessarily a bad thing.Last year was the best year for economic growth since the mid-1980s, and the best for job growth on record. Those kinds of explosive gains — enabled by vaccines and fueled by trillions of dollars in government aid — were not likely to be repeated this year.In fact, some slowdown is probably desirable. The rapid rebound in consumer spending, especially on cars, furniture and other goods, has overwhelmed supply chains, driving up prices. Demand for workers is so strong that jobs are going unfilled despite rising wages. Jerome H. Powell, the Fed chair, said recently that the labor market had gotten “tight to an unhealthy level.”Some economists, particularly on the left, took issue with that claim, arguing that the hot labor market was good for workers. But even most of them said the recent pace of job growth was unsustainable for long.“We have torn back toward normal at a really fast pace, and it would be unrealistic to think that could continue,” said Josh Bivens, the director of research at the Economic Policy Institute, a progressive think tank. Even slower wage growth, he said, wouldn’t worry him, as long as pay increases didn’t fall further behind inflation.But some economists cautioned against rooting for a slowdown in a rare moment when low-wage workers were seeing substantial pay increases, and unemployment was falling for vulnerable groups. The unemployment rate among Black Americans fell to 6.2 percent in March, but was still nearly double that of white Americans.“The recovery from my perspective is fairly robust, and so why not enjoy this right now?” said Michelle Holder, president of the Washington Center for Equitable Growth, a progressive think tank. She said that while economists were right to be concerned about high inflation, “I don’t think similar voices were this bent out of shape about high unemployment.”A slowdown doesn’t have to mean a recession. (In theory.)Rush-hour commuters are returning to New York City’s subways. The United States has regained more than 90 percent of the jobs lost in the early weeks of the pandemic.Gabby Jones for The New York TimesThe key question for policymakers is whether they can cool the economy without putting it into deep freeze. Mr. Powell argues that they can, though he acknowledges that it won’t be easy.His argument goes something like this: There are 11 million open jobs and fewer than six million unemployed workers. There are more would-be home buyers than there are homes to buy, and more would-be car buyers than available cars. By gradually raising interest rates and making it more expensive to borrow, the Fed is hoping to curb demand for workers and homes and cars, but not by so much that employers start cutting jobs.That is a tricky balance, and historically the Fed has failed to achieve it more often than not. But unlike after the last recession, when the grindingly slow recovery seemed at constant risk of stalling out, the current rebound is fast enough that it could lose substantial momentum without going into reverse. Employers could slash hiring plans, for example, and still have jobs for practically anyone who wanted one.Some economists also remain hopeful that supply constraints will ease as the pandemic recedes, which would allow inflation to cool without the Fed’s needing to do as much to reduce demand. There are some signs of that happening: More than 400,000 people rejoined the labor force in March, as falling coronavirus cases and more reliable school schedules allowed more people to return to work.Aaron Sojourner, an economist at the University of Minnesota, said policymakers shouldn’t think of the economy as “overheating” so much as “fevered,” its capacity limited by the pandemic.“When you have a fever, you can’t perform at the level that you can perform at when you’re healthy, and you break a sweat even when you’re doing less than what you used to be able to do,” he said. Improvements in the public health crisis, he said, should allow the fever to break.A lot could go wrong.For much of last year, Fed officials shared Mr. Sojourner’s view, seeing inflation as a result of pandemic-related disruptions that would soon dissipate. When those disruptions proved more persistent than expected, policymakers changed course, but too late to prevent inflation from accelerating beyond what they intended to allow.The challenge is that central bankers must make decisions before all the data is available.It is possible, for example, that the imbalances that led to rapid inflation are beginning to dissipate, largely on their own. Federal aid programs created early in the pandemic have mostly ended, and many families have drawn down their savings. That could bring down demand just as supply is starting to catch up. In that scenario, the Fed could short-circuit the recovery if it acts too aggressively.But it is also possible that strong job growth and rising wages will keep consumer demand high, while supply-chain disruptions and labor shortages linger. In that case, if the Fed is too cautious, it runs the risk of letting inflation spiral further out of control. The last time that happened, the Fed under Paul A. Volcker had to induce a crippling recession in the early 1980s to bring inflation to heel.Mr. Powell has argued it is not too late to prevent such a “hard landing.” But even if a recession is inevitable, it isn’t likely to happen overnight.“I don’t think we’re going to go into a recession in the next 12 months,” said Megan Greene, a senior fellow at Harvard’s Kennedy School and global chief economist for the Kroll Institute. “I think it’s possible in the 12 months after that.”Global turmoil makes everything more complicated. Soaring oil prices and global instability have led forecasters to lower their estimates of economic growth this year.Gabby Jones for The New York TimesWhen this year began, forecasters pegged February or March as the moment when major inflation indexes would hit their peak and begin to fall. But the war in Ukraine, and the resulting spike in oil prices, dashed those hopes. The year-over-year rate of inflation hit a 40-year high in February, and almost certainly accelerated further in March as gas prices topped $4 a gallon in much of the country.The pandemic itself also remains a wild card. China in recent weeks has imposed strict lockdowns in parts of the country in an effort to stop the spread of coronavirus cases there, and a new subvariant has led to a rise in cases in Europe. That could prolong supply-chain disruptions globally, even if the United States itself avoided another coronavirus wave.“The biggest unknown is global supply chains and how we manage all of those because it’s contingent on Chinese Covid policy and a war in Europe,” Ms. Greene said.There is little sign so far that rising gas prices, stock market volatility or fear of Covid has damped consumers’ willingness to spend, or businesses’ willingness to hire. But those factors are adding to uncertainty, making it harder for policymakers to discern where the economy is headed, and to decide how to react. More

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    Unemployment Nears Prepandemic Level

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    Federal Reserve officials are tasked with fostering “full employment,” and while it has been difficult to guess what that means as the economy recovers from huge job losses at the start of the pandemic, March hiring data seemed likely to reaffirm to policymakers that the labor market is running hot.Now, central bankers are hoping conditions settle into a more sustainable balance.The jobless rate declined to 3.6 percent in March from 3.8 percent in February, data released Friday showed. Unemployment is rapidly closing in on the 3.5 percent unemployment rate that prevailed before the pandemic.The unemployment rate continued to fall in March.The share of people who have looked for work in the past four weeks or are temporarily laid off, which does not capture everyone who lost work because of the pandemic. More

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    Low Unemployment in Nebraska: Workers Thrive, Businesses Cope

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    Harry’s Wonder Bar is a trusted old dive in Nebraska’s capital, frequented by office clerks, construction workers and graduate students alike: the sort of wood-paneled place with a pool table in the back where phones generally stay in pockets, second fiddle to casual conversation, and beer mugs come frosted regardless of the season.As a half-dozen or so happy hour patrons gathered at the bar on a recent afternoon, most had something remarkable in common: Everybody seemed to know somebody who had earned a significant raise, or multiple raises, in the past year — and many, if not all, had received a jump in pay themselves.That included the bartender on the early-evening shift, Nikki Paulk, an easygoing woman with a flash of pink hair. “I’m in hot demand, baby,” she said, mentioning “desperate” employers with a burst of a grin. “I’ve worked at like six bars in the last six months because I just keep getting better offers I can’t turn down.”The unemployment rate in Nebraska was 2.1 percent in February, tied with Utah for the lowest in the nation and near the lowest on record for any state. In several counties, unemployment is below 1 percent. Even taking into account adults who have left the work force, the share of the population 16 and older employed in Nebraska is around 68 percent, the nation’s highest figure.After decades of wage and income stagnation, the seesaw of power between managers and their workers looks to at least temporarily be tilting in the direction of labor, with employers in competition for workers instead of the other way around. Unemployment in states including Indiana, Kansas, Montana and Oklahoma is almost as low as in Nebraska, testing the benefits and potential costs of an economy with exceptionally tight labor markets.Ms. Paulk, 35, graduated from college with a graphic design degree during the Great Recession, when jobs were scarce. She remembers working 60-hour weeks near minimum wage in Illinois, “being excited to find a quarter” that could go toward laundry. In 2013, she moved to Nebraska and took a job in medical data entry for $12 an hour.She started bartending in 2018, and since then, she says, her overall pay has more than doubled to $25 (and sometimes $30) an hour, including tips.The nationwide jobless rate in February was 3.8 percent, nearly back to prepandemic levels that were the lowest in a half-century. The particularly low unemployment in Nebraska is partly attributable to its higher-than-average high school graduation rate, and the dominant role of industries like manufacturing and agriculture that are less volatile than the service or energy sectors during downturns. Even at the peak of Covid-19 lockdowns in the spring of 2020, the state unemployment rate was 7.4 percent, half the national number.Yet the labor market in Nebraska may also be a harbinger for the country at large. Most economists expect overall unemployment to continue ticking downward this year. Job openings are near record highs, and jobless rates in January were lower than a year earlier in 388 of the 389 metropolitan areas evaluated by the Bureau of Labor Statistics.Many business analysts contend that if labor remains scarce, wages will grow too rapidly and employers will continually pass on that increased expense to consumers. At least for now, evidence of such a spiral is sparse: Federal Reserve data shows that median annual pay increases are well within the range — 3 to 7 percent — that prevailed from the 1980s until the 2007-9 recession.The State of Jobs in the United StatesJob openings and the number of workers voluntarily leaving their positions in the United States remained near record levels in March.March Jobs Report: U.S. employers added 431,000 jobs and the unemployment rate fell to 3.6 percent ​​in the third month of 2022.A Strong Job Market: Data from the Labor Department showed that job openings remained near record levels in February.Wages and Inflation: Economists hoped that as households shifted spending back to services, price gains would cool. Rapid wage growth could make that story more complicated.New Career Paths: For some, the Covid-19 crisis presented an opportunity to change course. Here is how these six people pivoted professionally.Return to the Office: Many companies are loosening Covid safety rules, leaving people to navigate social distancing on their own. Some workers are concerned.Unionization Efforts: The pandemic has fueled enthusiasm for organized labor. But the pushback has been brutal, especially in the private sector.The Fed, still concerned, has begun raising interest rates to cool off the economy and tame inflationary pressures. Supply chain challenges that arose during the pandemic have persisted, and the war in Ukraine is further complicating the outlook for inflation as well as overall economic growth. Consumer spending remains buoyant, yet surveys reflect dour economic sentiment among the public.In the meantime, even as price increases nag household budgets, burying the value of some new wage gains, a noticeable mass of employees and job seekers are gaining more leverage regarding benefits and conditions.Tony Goins was appointed by Gov. Pete Ricketts in 2019 as director of Nebraska’s Department of Economic Development.Terry Ratzlaff for The New York TimesDuring a virtual summit about the local economy held in February by the nonprofit group Leadership Lincoln, Eric Thompson, the director of the Bureau of Business Research at the University of Nebraska-Lincoln, argued that the labor market might be simply rebalancing.“Obviously, it’s still always better to be the employer than the worker, or at least usually it is,” he said. But the current environment does enable some employees to switch jobs or more easily vie for higher-level positions. Local employers are dropping degree requirements for a range of midlevel and entry roles.Many fast-food restaurants, struggling to staff locations near the $9 minimum wage in the state, have begun to offer starting wages of $14. Evidence of automation is just as rampant as Help Wanted signs: Some pharmacies dotting the main roads and highways appear to have more self-checkout kiosks than employees at a given hour.Mr. Thompson said such moves were not necessarily ominous for the working class but rather a reflection of the need for businesses to adapt while workers find jobs that can “maximize their skills and potential.”Tony Goins, a former senior vice president at JPMorgan Chase who was appointed by Gov. Pete Ricketts in 2019 as director of Nebraska’s Department of Economic Development, said the tight labor market could prompt managers to become more flexible and innovative.“At the end of the day, the market is dictating that I have to pay employees more money,” said Mr. Goins, a small-business owner himself with a cigar lounge in Lincoln. “So, I mean, how are you going to offset that?” To stay competitive in hiring, he said, managers need to improve culture, leadership, employee retention and recruiting.He spoke of his son, an assistant men’s basketball coach at Boston College — a position that he says requires continued outreach as well as the dual promise of “the chance to play for a winning program” and gaining personal development. “That’s not what C.E.O.s are used to,” he said.Businesses aiming to grow have begun to offer incentives beyond pay. The Japanese company Kawasaki Motors is spending $200 million to expand the 2.4-million-square-foot site in northern Lincoln where it makes Jet Skis, all-terrain vehicles and rail cars. It is increasing its 2,400-member work force by over 500 employees, with jobs primarily in fabrication, welding and assembly.The company is becoming more flexible about hiring and work styles in order to pull it off. “It used to take a couple of weeks to get hired at Kawasaki,” said Bryan Seck, its chief talent management strategist in Lincoln. “Now, it’s down to four hours.”With the knowledge that many parents remain on the sidelines of the work force because of child care duties, Kawasaki recently created a 9 a.m. to 2 p.m. shift tailored for those who need to retrieve children from school and day care in the early afternoon. Starting wages are $18.10 an hour, Mr. Seck said, with benefits including health care and a 401(k) plan.Todd Heyne, the chief construction officer at Allo Communications, a cable company based in Lincoln.Terry Ratzlaff for The New York TimesIn addition to increasing wages to retain employees, Todd Heyne, the chief construction officer at Allo Communications, a cable company based in Lincoln, said management decided that easing in-person work requirements could expand the pool of available workers. That led the company to allow many of its customer service representatives and technical support employees to train and work farther afield as it prepares to expand beyond Nebraska and Colorado.Not all problem-solving is easy. The added labor costs come on top of supply chain pressures that have increased the price of crucial materials like fiber optic cable by as much as 30 percent. Vendors are often charging 20 percent more for their contracted tasks. As a result, the company has taken steps like hiring its own trucking staff.In the end, “combined with some automation efficiencies, our team will see sizable wage increases with less rudimentary work,” Mr. Heyne said, reducing manual paperwork, centralizing back-end systems and doing more to fix customers’ network issues remotely. So despite the cost challenges, “I’ve never been more optimistic about where we’re sitting, our position in the market, how we compete against our competitors, and our technology,” he added. “Which is strange.”For many, the opportunity of this economic moment is tinged with worry. They include Ashlee Bridger, a 30-year-old student at the Lincoln campus of Southeast Community College who works in administration for the nearby firm Huffman Engineering after being recruited from a job fair.Ms. Bridger left her job as a nurse to pursue a career in human resources because she felt confident enough to bet on herself: “Of course, it was a risk. Leaving any career is.” But in the current job market, she said, “I knew I would be able to work my way up easier.”She has also had a series of life milestones fall into place. She will graduate in May with an associate degree and will start bachelor’s degree work in the fall at Nebraska Wesleyan University. The managers at Huffman have told her that she is welcome to continue working there when her schedule allows, and that they would like to hire her in a more senior role after she completes her studies.Last year, she got married in summer, then moved with her husband into a newly built house in Lincoln in August. Though they feel financially stable, she half-joked that they were lucky the home was mostly built before lumber prices soared. With prices up across the board now, “I’m more cautious about my spending,” she said.Ms. Paulk, the bartender at Harry’s thriving off better pay, has friends and customers who are upset about recent inflation. “But it’s something controlled out of our hands anyway,” she said with a shrug.“All I know,” she added, “is now I’m not broke anymore — it’s great. Life is good.” More

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    The Fed Bets on a ‘Soft Landing,’ but Recession Risk Looms

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    Central bankers have been clear that they will do what it takes to control inflation. They are betting on a soft landing, but a bumpy one is possible.Jerome H. Powell, the Federal Reserve chair, emphasized this week that the central bank he leads could succeed in its quest to tame rapid inflation without causing unemployment to rise or setting off a recession. But he also acknowledged that such a benign outcome was not certain.“The historical record provides some grounds for optimism,” Mr. Powell said.That “some” is worth noting: While there may be hope, there is also reason to worry, given the Fed’s track record when it is in inflation-fighting mode.The Fed has at times managed to raise interest rates to cool down demand and weaken inflation without meaningfully harming the economy — Mr. Powell highlighted examples in 1965, 1984 and 1994. But those instances came amid much lower inflation, and without the ongoing shocks of a global pandemic and a war in Ukraine.The part Fed officials avoid saying out loud is that the central bank’s tools work by slowing down the economy, and weakening growth always comes with a risk of overdoing it. And while the Fed ushered in its first rate increase this month, some economists — and at least one Fed official — think it was too slow to start taking its foot off the gas. Some warn that the delay increases the chance it might have to overcorrect.The Fed has touched off recessions with past rate increases: It happened in the early 1980s, when Paul Volcker raised rates in a campaign to bring down very rapid inflation and sent unemployment rocketing painfully higher in the process.“There is no guarantee that there will be a recession, but you have high inflation, and if you’re serious about bringing it down quickly, you have to hike a lot,” said Roberto Perli, the head of global policy at Piper Sandler, an investment bank, and a former Fed economist. “The economy doesn’t like that. I think the risk is substantial.”It is no surprise that it can be difficult to cool down inflation while sustaining an economic expansion. Higher borrowing costs trickle through the economy by slowing the housing market, discouraging big purchases and prompting companies to cut expansion plans and hire fewer workers. That broad pullback weakens the labor market and slows wage growth, helping inflation to moderate. But the chain reaction plays out gradually, and its results can be seen only with a delay, so it is easy to lay on the brakes too hard.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“No one expects that bringing about a soft landing will be straightforward in the current context — very little is straightforward in the current context,” Mr. Powell acknowledged during his remarks this week, adding, “My colleagues and I will do our very best to succeed in this challenging task.”Six of the eight Fed-rate-increase cycles since the early 1980s have ended in recession, though some of those were caused by external shocks — like the pandemic — and some by asset bubble implosions, including the 2007 housing crisis and the collapse in internet stocks in the early 2000s.Fed officials are hoping that today’s strong economy will help them avoid a rough landing. They point to the fact that labor markets are booming and consumer demand is solid, so lifting rates and tempering voracious buying might help supply to catch up and chill the economy without giving it freezer burn. Mr. Powell has argued that with so many open jobs per unemployed worker, the Fed might be able to slow down the labor market a bit without pushing the unemployment rate up.Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, said the Fed was not at a point where it had to decide between fighting inflation or pummeling growth.“Given where the economy is now, and where the risks are, to my mind the major economic challenge is inflation,” Ms. Mester told reporters on a call Wednesday. “I don’t see it as being a trade-off at this point.”James Bullard, the president of the Federal Reserve Bank of St. Louis, said in an interview that he thought the fact that the central bank had credibility as an inflation fighter — and was raising rates to defend that credibility — could allow it to adjust policy in a way that allowed demand to moderate without causing major economic disruptions.A FedEx worker picked up packages in New York this month. After a year of rapid inflation, there is no guarantee that longer-term inflation expectations will stay in check.DeSean McClinton-Holland for The New York TimesIn the 1980s, when Mr. Volcker was the Fed chair, the central bank had to convince the world that it was prepared to wrestle inflation under control after more than a decade of rapid price gains.“Do whatever it takes — I guess that’s the mantra of the day. I do think inflation is our No. 1 concern,” Mr. Bullard said. “I don’t think, however, that it is a Volcker-like situation.”Near-term consumer and market inflation expectations have shot higher over the past year as inflation has hit a 40-year high and continued to accelerate, but longer-term price growth expectations have nudged only slightly higher.If consumers and businesses anticipated rapid price increases year after year, that would be a troubling sign. Such expectations could become self-fulfilling if companies felt comfortable raising prices and consumers accepted those higher costs but asked for bigger paychecks to cover their rising expenses.Inflation F.A.Q.Card 1 of 6What is inflation? More