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U.S. Economy Sees Strong Job Growth, Inflation Remains a Threat
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Biden Invokes Cold War Statute to Boost Critical Mineral Supply
The action aims to enhance American production of crucial materials for electric vehicles, defense systems and other technologies.WASHINGTON — President Biden took steps on Thursday to try to increase domestic production of critical minerals and metals needed for advanced technologies like electric vehicles, in an attempt to reduce America’s reliance on foreign suppliers.Mr. Biden invoked the Defense Production Act, a move that will give the government more avenues to provide support for the mining, processing and recycling of critical materials, such as lithium, nickel, cobalt, graphite and manganese. Those are used to make large-capacity batteries for electric cars and clean-energy storage systems. Yet except for a handful of mines and facilities, they are almost exclusively produced outside the United States.“We need to end our long-term reliance on China and other countries for inputs that will power the future,” Mr. Biden said during remarks at the White House, where he also announced the release of one million barrels of oil per day from the Strategic Petroleum Reserve.The Defense Production Act is a Cold War-era statute that gives the president access to funding and other enhanced powers to shore up the American industrial base and ensure the private sector has the necessary resources to defend national security and face emergencies.In a determination issued Thursday, the president said that the United States depended on “unreliable foreign sources” for many materials necessary for transitioning to the use of clean energy, and that demand for such materials was projected to increase exponentially.Mr. Biden directed his secretary of defense to bolster the critical mineral supply by supporting feasibility studies for new projects, encouraging waste reclamation at existing sites, and modernizing or increasing production at domestic mines for lithium, nickel, cobalt, graphite and other so-called critical minerals.The secretary of defense would also conduct a survey of the domestic industrial base for critical minerals and submit that to the president and Congress, the presidential determination said.A person familiar with the matter said the actions being contemplated wouldn’t be loans or direct purchases of minerals, but rather funding studies and the expansion or modernization of new and existing sites.The administration will also review potential further uses of the act in relation to the energy sector, according to a White House announcement on Thursday.The United States imported more than half its supply of at least 46 minerals in 2020, and all of its supply of 17 of them, according to the U.S. Geological Survey. Many of the materials come from China, which leads the world in lithium ion battery manufacturing and has been known to shut off exports of certain products in times of political tensions, including rare earth minerals.The Biden administration has warned that a dependence on foreign materials poses a threat to America’s security, and promised to expand domestic supplies of semiconductors, batteries and pharmaceuticals, among other goods. While the United States does have some unexplored deposits of nickel, cobalt and other crucial minerals and metals, developing mines and processing sites can take many years. Two-thirds of the world’s entire production of cobalt is in the Democratic Republic of Congo, where Chinese companies owned or financed 15 of the 19 largest mines as of 2020.But bipartisan support for expanding American mining and processing of battery components has grown in recent years. In a March 11 letter to Mr. Biden, senators including Lisa Murkowski, a Republican of Alaska, and Joe Manchin III, a Democrat of West Virginia, proposed invoking the Defense Production Act to accelerate domestic production of the components of lithium-ion battery materials, particularly graphite, manganese, cobalt, nickel and lithium.Todd M. Malan, the head of climate strategy for Talon Metals, which is developing a nickel mine in Minnesota, said Washington had reached a bipartisan consensus around providing more support for the domestic mining of electric vehicle battery minerals “driven by concern about reliance on Russia and China for battery materials as well as the energy transition imperative.”But some domestic developments may face opposition from environmentalists in Mr. Biden’s own party.Representative Raúl M. Grijalva, an Arizona Democrat who chairs the Natural Resources Committee, said in a statement Wednesday that mining companies were “making opportunistic pleas to advance a decades-old mining agenda that lets polluters off the hook and leaves Americans suffering the consequences.”“Fast-tracking mining under antiquated standards that put our public health, wilderness, and sacred sites at risk of permanent damage just isn’t the answer,” he added.Dionne Searcey More
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Soaring Cost of Diesel Ripples Through the Global Economy
Farmers are spending more to keep tractors and combines running. Shipping and trucking companies are passing higher costs to retailers, which are beginning to pass them on to shoppers. And local governments are paying hundreds of thousands of dollars extra to fill up school buses. Construction costs could soon rise, too.The source is the sudden surge in the price of diesel, which is quietly undercutting the American and global economies by pushing up inflation and pressuring supply chains from manufacturing to retail. It is one more cost of the war in Ukraine. Russia is a major exporter of both diesel and the crude oil that diesel is made from in refineries.Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel, which plays a critical role in the global economy because it powers so many different kinds of vehicles and equipment. A gallon of diesel is selling for an average of $5.19 in the United States, according to government figures, up from $3.61 in January. In Germany, the retail price has shot up to 2.15 euros a liter, or $9.10 a gallon, from €1.66 at the end of February, according to ADAC, the country’s version of AAA.Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago.“Not only is it a historic level, but it’s increased at a historic pace,” said Mac Pinkerton, president of North American surface transportation for C.H. Robinson, which provides supply chain services to trucking companies and other customers. “We have never experienced anything like this before.”The sharp jump is putting immense pressure on trucking firms, especially smaller operations that are already suffering from driver shortages and scarce spare parts. Many can pass increased fuel costs on to their customers only after a few weeks or months.Eventually consumers will feel the effect in higher prices for all manner of goods. While hard to quantify, inflation will be most visible for big-ticket items like automobiles or home appliances, economists say.“Really, everything that we buy online or in a store is on a truck at some point,” said Bob Costello, the chief economist for American Trucking Associations.Trucks lining up on Terminal Island between the Port of Long Beach and the Port of Los Angeles.Alex Welsh for The New York TimesManufacturers are also heavy users of diesel, leading to higher prices for factory goods. Food will go up in price because farm equipment generally runs on diesel.“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting firm in Dallas.Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.Diesel prices and Germany’s dependence on Russian energy were among the factors that on Wednesday prompted Germany’s Council of Economic Experts to cut its forecast for growth in 2022 by more than half, to 1.8 percent.Russian diesel has been flowing to Europe since the invasion last month, but traders, banks, insurance companies and shippers are increasingly turning away from the country’s diesel, oil and other exports.Several large European oil companies have announced that they are leaving Russia. TotalEnergies, the French oil giant, said this month that it would stop buying Russian diesel and oil by the end of the year.The market for oil and diesel is global, and companies can usually find another source if their main supplier can’t deliver. But no oil company or country can quickly make up for the loss of Russian energy.Saudi Arabia, for example, has not increased diesel exports because one of its largest refineries is undergoing maintenance. The kingdom and its allies in OPEC Plus have also refused to ramp up crude oil production because they are happy to have oil prices stay high. Russia belongs to the group and has significant sway over its fellow members.Christine Hemmel is a manager of a trucking company in Ober-Ramstadt, Germany, that has been in her family for four generations. Her family’s business has almost all the challenges that medium-size haulers have faced since the pandemic’s outbreak.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More
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High Inflation Could Persist as Wages Continue to Rise
Economists have been waiting for Americans to shift from buying goods, like furniture and appliances, and toward spending on vacations, restaurant meals and other services as the pandemic fades, betting the transition would take pressure off supply chains and help inflation to moderate.Rapid wage growth could make that story more complicated. Demand for services is rising just as many employers are struggling to find workers, which could force them to continue raising wages. While positive for workers, that could keep overall inflation brisk as companies try to cover their labor costs, speeding up price increases for services even as they begin to moderate for goods.Heavy spending on goods during the pandemic has been a driver of the recent inflation burst. Consumers began snapping up items a few months after pandemic lockdowns began and have kept on buying. Spending on services also has recovered, but much more slowly. That shift in what people are purchasing has roiled supply chains, which were not built to produce, ship and deliver so many cars, treadmills and washing machines.Policymakers spent months betting that as the virus waned and consumers resumed more normal shopping patterns, prices of goods would slow their ascent or even fall. That would pull down inflation, which has been running at its fastest pace in 40 years.But that transition — assuming it happens — may do less to cool inflation than many had hoped. A big chunk of what the government defines as “services” inflation comes from rental housing costs, which often move up alongside wage growth, as households can afford more and bid up the cost of a limited supply of housing units. And when it comes to discretionary services, like salons and gyms, labor is a major cost of production. Rising pay likely means higher prices.Jason Furman, a Harvard economist who served as a top adviser to President Barack Obama, said the shortage of workers in many service industries means that if demand for services goes up, prices will too. That means a shift in spending back to services won’t necessarily result in an overall slowdown in the pace of price increases.“An awful lot of services are incredibly constrained,” he said. “As we shift back to services, we’ll get more services inflation and less goods inflation, and I don’t think it’s at all obvious that the result of that is less inflation.”While America has gotten used to thinking about shortages in products — couches are out of stock, shoes are back-ordered — labor shortfalls could mean that services will also end up oversubscribed, allowing providers to charge more.MaidPro, a home-cleaning firm, has seen a surge in demand from professionals who are spending more time at home. But it is having trouble finding workers to keep up, said Tom Manchester, the company’s president.“Our demand right now outstrips our supply of being able to service that demand,” he said. “Demand has just continued to be strong — like double-digit strong. And if we could find qualified pros to meet the demand, we’d be even more ahead than we are today.”An Amazon employee delivering packages in Manhattan. Americans have continued to buy goods even as services have rebounded.Gabby Jones for The New York TimesMr. Manchester said hourly wages were up $1 to $3, adding to costs at a time when cleaning products have gotten pricier and higher gas prices have made travel reimbursements more expensive. MaidPro franchisees have been able to pass those costs on to their customers, both via fuel surcharges and outright price increases that have more or less kept up with inflation.So far, they have lost few customers — in part because few competitors have capacity to take on new customers.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.“If someone has someone that they really like coming in to clean their home, they don’t want to lose them,” he said. “They don’t want to risk saying, ‘I want to move away from MaidPro and try to find someone else,’ because in nine out of 10 instances, that someone else isn’t available.”Some economists argue that if goods inflation slows, that could still help price gains overall to moderate, even amid rising wages. Prices for products that last a long time rose 11.6 percent in the year through January, and prices for shorter-lived products like cosmetics and clothing were up 7.2 percent, still much stronger than services inflation.“We have in mind a big decline in goods prices,” said Roberto Perli, the head of global policy research at the investment bank Piper Sandler. “It would take a lot of increase in service prices to actually offset that.”Outright declines in goods prices are not guaranteed. Take cars: Rapid price growth in new and used autos was a big driver of inflation last year, and many economists expect those prices to dip in 2022. But Jonathan Smoke, the chief economist at Cox Automotive, said continued shortages mean prices for new cars are likely to continue rising, and issues with new car supply could spill over to blunt the expected decline in used car costs.And services inflation is now also coming in fast. It ran at 4.6 percent in the year through January, the quickest pace since 1989, and it has been posting large monthly gains since autumn. That is enough to keep inflation above the Federal Reserve’s 2 percent goal even if product prices stop accelerating.While goods have taken up a bigger chunk of household budgets in recent months than they did before the pandemic, Americans still spend nearly twice as much on services as on goods overall.“You don’t need a lot of extra services inflation to make up for your lost goods inflation,” Mr. Furman said.Restaurants, hotels and other discretionary services aren’t the only places where persistent demand could run up against limited supply, Mr. Furman argued. Many nonurgent health care services saw a decline in demand during the pandemic and are now experiencing a rebound amid a shortage of nurses and other skilled workers.Inflation F.A.Q.Card 1 of 6What is inflation? More
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Americans, especially Republicans, are getting more worried about inflation.
Americans are more worried about inflation than at any point since 1985, and that concern is quickly escalating, according to a new poll, a potential problem for Democrats and the White House ahead of the midterm elections in November.A Gallup poll released Tuesday showed that rising prices were the No. 1 economic concern for Americans, with 17 percent calling inflation the “nation’s most important problem.”Inflation stress divided slightly among income groups — 63 percent of adults earning $40,000 or less were very concerned, compared with 58 percent of those earning $100,000 or more — and starkly along political lines. About 79 percent of Republicans were seriously worried about inflation, versus 35 percent of Democrats.“That reflects the ongoing phenomenon we’re seeing in polarization,” said Lydia Saad, director of U.S. social research at Gallup. She noted that people increasingly answered economic questions differently when their party controlled the White House, and often in a way that reflected the administration’s messaging. “Democrats are just going to downplay problems, just like Republicans did when Trump was in office,” she said.President Biden’s administration initially expected rapid inflation to fade. As it has lingered, the White House has switched to arguing that it is part of a global phenomenon and has been exacerbated by Russia’s invasion of Ukraine. That is accurate but probably not the full story, since inflation in the United States is higher than in many other developed economies.Prices in the United States rose 7.9 percent in the 12 months through February, according to the latest reading of the Consumer Price Index released this month. That was the highest level of inflation since early 1982.Ms. Saad said it might be a “silver lining” that the worry index was lower now than at the start of the 1980s, when about half of American adults ranked rising prices as the nation’s top problem. Inflation had been elevated for years back then, peaking at about 14.6 percent in 1980.Even so, rising prices have been undermining confidence in the overall economy, according to the Gallup numbers and other consumer sentiment readings. Survey data from the University of Michigan shows that Republicans have been more pessimistic about the economy than at any point since 1980. Democrats, while more optimistic, were less confident in March than they had been at any point since Mr. Biden’s 2020 election victory. More
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Workers Are Still in High Demand, Department of Labor Reports
Job openings last month remained near record levels, and the number of workers voluntarily leaving their positions increased, the Labor Department said on Tuesday.The data, released as part of the agency’s monthly report on job openings, layoffs and quitting, serve as indicators of how much demand there is for workers in the U.S. economy and the extent to which employers are still struggling with labor shortages months after the economy began recovering from the pandemic’s worst damage.There were about 11.3 million job openings in February, essentially the same as the month before and down a little from a record in December, though the number of hires overall edged up by 263,000 last month, to about 6.7 million.After falling during the peak of Covid-19 lockdowns in 2020, the rates at which so-called prime-age workers — those aged 25 to 54 — are working or seeking work has rallied back to prepandemic levels. Yet with the economy growing faster than in decades, demand for labor has outpaced the availability of workers — at least at the wages and benefits employers are offering.There are still roughly three million or so people who have not returned to the work force, according to the government data.“Looking at how poorly our labor force has grown so far this year, if companies want to win the war for talent they need to engage the people who may not be actively seeking work right now, or be the first option people see when they do return,” Ron Hetrick, a senior economist at Emsi Burning Glass, a data and research company, wrote in a note.That echoes the sentiment of many unions and labor activists, who have been saying that even though wage growth has picked up, people aren’t feeling valued enough by employers. It’s led to fresh questions about how bosses might get to know the “love language” of their hires and find sometimes unconventional ways to show them that they care. There are also more straightforward requests: Several progressive economists have noted that employers could, for instance, take some jobs generally expected to be low-wage — such as fast food service and cashiers — and entice workers by offering higher pay and better benefits.Large public companies and small businesses alike often say that they have already substantially raised pay from before the pandemic and that with inflation raging at highs unseen since the early 1980s, raw material and other costs have made business more difficult. An expensive surge in commodity markets suggests that price increases for food and energy could worsen, especially if firms raise prices further.Still, despite widespread frustration with inflation and shortages of some products and materials, some surveys suggest businesses are becoming more optimistic about the future. The MetLife and U.S. Chamber of Commerce Small Business Index recently reached a pandemic-era high, with about three in five of the small business owners surveyed saying their business is in good health. More
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Why the U.S. Can’t Quickly Wean Europe From Russian Gas
The Biden administration’s plan to send more natural gas to Europe will be hampered by the lack of export and import terminals.HOUSTON — President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will largely be symbolic, at least in the short run, because the United States doesn’t have enough capacity to export more gas and Europe doesn’t have the capacity to import significantly more.In recent months, American exporters, with President Biden’s encouragement, have already maximized the output of terminals that turn natural gas into a liquid easily shipped on large tankers. And they have diverted shipments originally bound for Asia to Europe.But energy experts said that building enough terminals on both sides of the Atlantic to significantly expand U.S. exports of liquefied natural gas, or L.N.G., to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Mr. Biden and the European Commission president, Ursula von der Leyen, announced on Friday.“In the near term there are really no good options, other than begging an Asian buyer or two to give up their L.N.G. tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once sufficient gas terminals were built, the United States could become the “arsenal for energy” that helps Europe break its dependence on Russia. Friday’s agreement, which calls on the United States to help the European Union secure an additional 15 billion cubic meters of liquefied natural gas this year, could also undermine efforts by Mr. Biden and European officials to combat climate change. Once new export and import terminals are built, they will probably keep operating for several decades, perpetuating the use of a fossil fuel much longer than many environmentalists consider sustainable for the planet’s well-being.For now, however, climate concerns appear to be taking a back seat as U.S. and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine by depriving him of billions of dollars in energy sales.The United States has already increased energy exports to Europe substantially. So far this year, nearly three-quarters of U.S. L.N.G. has gone to Europe, up from 34 percent for all of 2021. As prices for natural gas have soared in Europe, American companies have done everything they can to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forgo L.N.G. shipments so they could be sent to Europe.The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. Gas bubbles out of the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers there are gradually increasing their output of both oil and gas after greatly reducing production in the first year of the pandemic, when energy prices collapsed.But the big problem with sending Europe more energy is that natural gas, unlike crude oil, cannot easily be put on oceangoing ships. The gas has to first be chilled in an expensive process at export terminals, mostly on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process is run in reverse to convert L.N.G. back into gas.A large export or import terminal can cost more than $1 billion, and planning, obtaining permits and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also gets L.N.G. from suppliers like Qatar and Egypt.Some European countries, including Germany, have until recently been uninterested in building L.N.G. terminals because it was far cheaper to import gas by pipeline from Russia. Germany is now reviving plans to build its first L.N.G. import terminal on its northern coast.A pier in Wilhelmshaven, Germany, the port where Uniper, a German energy company, wanted to build a liquified natural gas terminal before it was shelved. Now Germany is reviving plans to build it.The New York Times“Europe’s need for gas far exceeds what the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”In the longer term, however, energy experts say the United States could do a lot to help Europe. Along with the European Union, Washington could provide loan guarantees for U.S. export and European import terminals to reduce costs and accelerate construction. Governments could require international lending institutions like the World Bank and the European Investment Bank to make natural gas terminals, pipelines and processing facilities a priority. And they could ease regulations that gas producers, pipeline builders and terminal developers argue have made it more difficult or expensive to build gas infrastructure.Charif Souki, executive chairman of Tellurian, a U.S. gas producer that is planning to build an export terminal in Louisiana, said he hoped the Biden administration would streamline permitting and environmental reviews “to make sure things happen quickly without micromanaging everything.” He added that the government could encourage banks and investors, some of whom have recently avoided oil and gas projects in an effort to burnish their climate credentials, to lend to projects like his.“If all the major banks in the U.S. and major institutions like BlackRock and Blackstone feel comfortable investing in hydrocarbons, and they are not going to be criticized, we will develop $100 billion worth of infrastructure we need,” Mr. Souki said.A handful of export terminals are under construction in the United States and could increase exports by roughly a third by 2026. Roughly a dozen U.S. export terminal projects have been approved by the Federal Energy Regulatory Commission but can’t go ahead until they secure financing from investors and lenders.“That’s the bottleneck,” Mr. Tsafos said.Roughly 10 European import terminals are being built or are in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most still don’t have their financing lined up.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More
