May 18, 2022

What Higher Interest Rates Could Mean for Jobs

“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.

Article source: https://www.nytimes.com/2022/05/17/business/economy/interest-rates-jobs-layoffs.html

Treasury Secretary Yellen Looks to Get Global Tax Deal Back on Track

“I think the reality of turning a political commitment into binding domestic legislation is a lot more complex,” said Manal Corwin, a Treasury official in the Obama administration who now heads the Washington national tax practice at KPMG. “The E.U. has moved and gotten over most of the objections, but they still have Poland and it’s not clear whether they’re going to be able to get the last vote.”

With President Emmanuel Macron of France heading the European Union’s rotating presidency until June, his administration was eager to get a deal implemented. But at a meeting of European finance ministers in early April, Poland became the sole holdout, saying there were no ironclad guarantees that big multinational companies wouldn’t still be able to take advantage of low-tax jurisdictions if the two parts of the agreement did not move ahead in tandem, undercutting the global effort to avoid a race to the bottom when it comes to corporate taxation.

Poland’s stance was sharply criticized by European officials, particularly France, whose finance minister, Bruno Le Maire, suggested that Warsaw was instead holding up a final accord in retaliation for a Europe-wide political dispute. Poland has threatened to veto measures requiring unanimous E.U. votes because of an earlier decision by Brussels to block pandemic recovery funds for Poland.

The European Union had refused to disburse billions in aid to Poland since late last year, citing separate concerns over Warsaw’s interference with the independence of its judicial system. Last week, on the eve of Ms. Yellen’s visit to Poland, the European Commission came up with an 11th-hour deal unlocking 36 billion euros in pandemic recovery funds for Poland, which pledged to meet certain milestones such as judiciary and economic reforms, in return for the money.

Negotiators from around the world have been working for months to resolve technical details of the agreement, such as what kinds of income would be subject to the new taxes and how the deal would be enforced. Failure to finalize the agreement would likely mean the further proliferation of the digital services taxes that European countries have imposed on American technology giants, much to the dismay of those firms and the Biden administration, which has threatened to impose tariffs on nations that adopt their own levies.

“It’s fluid, it’s moving, it’s a moving target,” Pascal Saint-Amans, the director of the center for tax policy and administration at the Organization for Economic Cooperation and Development, said of the negotiations at the D.C. Bar’s annual tax conference this month. “There is an extremely ambitious timeline.”

Countries like Ireland, with a historically low corporate tax rate, have been wary of increasing their rates if others do not follow suit, so it has been important to ensure that there is a common understanding of the new tax rules to avoid opening the door to new loopholes.

Article source: https://www.nytimes.com/2022/05/16/us/politics/treasury-yellen-europe-global-tax.html

Stocks Return to Earth, With the S&P 500 Nearing a Bear Market

But the downdraft has sunk the share prices of companies that represent innovation and the future, too; Amazon is down more than 30 percent since the start of the year and Alphabet, Google’s parent, is off about 20 percent, as investors rethink those companies’ real value.

Virtually no stocks have been spared from losses. The market decline has “gone on and on, and it’s depressing,” Ms. Hill said.

Perhaps no one understood that emotional symbolism of the market better than Mr. Trump.

“The reason our stock market is so successful is because of me,” Mr. Trump said in November 2017 — one of many statements in which he boasted about rising stock prices or publicly pressured the Fed to further lower interest rates to juice the economy.

Early in the pandemic, in April 2020 — with stores, offices and churches shut, children marooned at home attempting remote school, and morgues running out of space for virus victims — Mr. Trump tweeted that the United States had “the biggest Stock Market increase since 1974.”

While a majority of Americans have some money invested in the stock market, it remains a rich person’s game. According to an analysis by the New York University economics Professor Edward Wolff, the top 5 percent of American wealth holders own 72 percent of all stocks.

But the stock market’s symbolic value matters. “It’s the one story that makes the news every night,” said Richard Sylla, a professor emeritus of economics at New York University’s Stern School of Business.

Is the market up or down? Are we winning or losing today, this week, this year, this presidency?

On Friday, the University of Michigan’s consumer sentiment index fell lower than expected, a drop that some economists attribute partly to stock market losses. The index is now 13 points below the low when Covid first hit, noted Ian Shepherdson, chief U.S. economist at Pantheon Macroeconomics. Such deep pessimism “suggests that people have short memories,” Mr. Shepherdson wrote in a research note.

Article source: https://www.nytimes.com/2022/05/13/business/stock-market.html

Russian Shipping Traffic Remains Strong as Sanctions Take Time to Bite

Data from MarineTraffic, for example, a platform that shows the live location of ships around the world using those on-ship tracking systems, indicates that traffic from Russia’s major ports declined after the invasion but did not plummet. The number of container ships, tankers and bulkers — the three main types of vessels that move energy and consumer products — arriving and leaving Russian ports was down about 23 percent in March and April compared with the year earlier.

“The reality is that the sanctions haven’t been so difficult to maneuver around,” said Georgios Hatzimanolis, who analyzes global shipping for MarineTraffic.

Tracking by Lloyd’s List Intelligence, a maritime information service, shows similar trends. The number of bulk carriers, which transport loose cargo like grain, coal and fertilizer, that sailed from Russian ports in the five weeks after the invasion was down only 6 percent from the five-week period before the invasion, according to the service.

In the weeks following the invasion, Russia’s trade with China and Japan was broadly stable, while the number of bulk carriers headed to South Korea, Egypt and Turkey actually increased, their data showed.

“There’s still a lot of traffic back and forth,” said Sebastian Villyn, the head of risk and compliance data at Lloyd’s List Intelligence. “We haven’t really seen a drop.”

Those figures contrast somewhat with statements from global leaders, who have emphasized the crippling nature of the sanctions. Treasury Secretary Janet L. Yellen said on Thursday that the Russian economy was “absolutely reeling,” pointing to estimates that it faces a contraction of 10 percent this year and double-digit inflation.

Earlier this week, Ms. Yellen said that the Treasury Department was continuing to deliberate about whether to extend an exemption in its sanctions that has allowed American financial institutions and investors to keep processing Russian bond payments. Speaking at a Senate hearing, she said that officials were actively working to determine the “consequences and spillovers” of allowing the license to expire on May 25, which would likely lead to Russia’s first default on its foreign debt in more than a century.

Article source: https://www.nytimes.com/2022/05/13/business/economy/russia-shipping-sanctions.html

Jerome Powell Confirmed for a Second Term as Fed Chair

“If you had perfect hindsight, you’d go back and it probably would have been better for us to have raised rates a little sooner,” Mr. Powell said in his interview with Marketplace. “I’m not sure how much difference it would have made, but we have to make decisions in real time, based on what we know then, and we did the best we could.”

With Mr. Powell’s confirmation, Mr. Biden has now appointed four of the Fed’s seven governors in Washington, putting his imprimatur on the central bank at a crucial moment.

The Senate last month confirmed Lael Brainard, formerly a Fed governor, as Mr. Biden’s choice for the Fed’s vice chair, an influential position within the central bank.

This week, the Senate confirmed two other new Fed governors — Lisa D. Cook and Philip N. Jefferson. Mr. Biden has also nominated Michael S. Barr as the new vice chair for supervision, and his confirmation hearing before the Senate Banking Committee is scheduled for next week.

Ms. Brainard and Mr. Powell have long been aligned on policy, and the Fed’s newest governors — Ms. Cook and Mr. Jefferson — indicated during their confirmation hearings that they, too, are focused on fighting inflation. Fed officials view stable prices as a crucial building block for sustainable economic growth.

“High inflation is a grave threat to a long, sustained expansion, which we know raises the standard of living for all Americans and leads to broad-based, shared prosperity,” Ms. Cook said during her confirmation hearing. “That is why I am committed to keeping inflation expectations well anchored.”

In addition to the new faces at the seven-person Board of Governors in Washington, several of the Fed’s 12 regional reserve banks are also experiencing personnel changes. Susan M. Collins has been selected as the president of the Federal Reserve Bank of Boston, and just this week it was announced that Lorie K. Logan would lead the Federal Reserve Bank of Dallas. Both will start this summer.

Article source: https://www.nytimes.com/2022/05/12/business/jerome-powell-confirmed.html

New Data Show Few Black Economists at the Fed

Lawmakers and think tanks have for years pushed the Fed to increase diversity within its ranks, arguing that having a set of economists and researchers at the central bank who more closely reflect the public — the people the Fed ultimately serves — would lead to a wider range of viewpoints around the policy table and more rounded economic discussions.

The Fed sets the nation’s monetary policy, raising or lowering the cost of borrowing money in order to slow down or speed up the economy. Its actions help to determine how strong the labor market is in any given moment, help to control inflation, and can influence financial stability.

“The risk with underrepresentation, from a substantive standpoint, is that you are underrepresenting perspectives that are important for policymaking,” said Skanda Amarnath, executive director at Employ America, which pushes the Fed to focus more intently on the job market.

That could mean that a range of ideas and experiences “don’t get fully understood, or captured, to the same degree,” he said.

The Fed is about to see greater racial diversity at its highest ranks: Lisa D. Cook and Philip N. Jefferson, who are both Black, were confirmed as Fed governors just this week. Susan M. Collins will become the first Black woman ever to lead a regional Fed bank when she becomes president of the Boston Fed this summer, and Raphael Bostic, the first Black man to ever lead a regional bank, is currently president of the Atlanta Fed.

The Fed’s leadership team has also become more gender diverse in recent years. Assuming Mr. Biden’s nominees are all confirmed, three of the central bank’s seven governors will be women. Once new presidents take office in Boston and Dallas this summer, five of its 12 regional bank leaders will be women.

Fed officials have in recent years talked publicly about aiming for a broader array of views within their own workplaces.

Article source: https://www.nytimes.com/2022/05/12/business/diversity-fed-black-economists.html

Why Union Efforts at Starbucks Have Spread Further Than at Amazon

“People who go to that length for a four-hour job — it’s a particular group of people who are really struggling to make it,” said Gene Bruskin, a longtime labor organizer who advised the Amazon Labor Union in the two Staten Island elections, in an interview last month.

As a result of all this, organizing at Amazon may involve incremental gains rather than high-profile election victories. In the Minneapolis area, a group of primarily Somali-speaking Amazon workers has staged protests and received concessions from the company, such as a review process for firings related to productivity targets. Chicago-area workers involved in the group Amazonians United received pay increases not long after a walkout in December.

Ted Miin, an Amazon worker who is one of the group’s members, said the concessions had followed eight or nine months of organizing, versus the minimum of two years he estimates it would have taken to win a union election and negotiate a first contract.

For workers who seek a contract, the processes for negotiating one at Starbucks and Amazon may differ. In most cases, bargaining for improvements in compensation and working conditions requires additional pressure on the employer.

At Starbucks, that pressure is in some sense the union’s momentum from election victories. “The spread of the campaign gives the union the ability to win in bargaining,” Mr. Logan said. (Starbucks has nonetheless said it will withhold new pay and benefit increases from workers who have unionized, saying such provisions must be bargained.)

At Amazon, by contrast, the pressure needed to win a contract will probably come through other means. Some are conventional, like continuing to organize warehouse employees, who could decide to strike if Amazon refuses to recognize them or bargain. The company is challenging the union victory on Staten Island.

But the union is also enlisting political allies with an eye toward pressuring Amazon. Mr. Smalls, the union president, testified this month at a Senate hearing that was exploring whether the federal government should deny contracts to companies that violate labor laws.

Article source: https://www.nytimes.com/2022/05/12/business/economy/amazon-starbucks-union.html

A Union Blitzed Starbucks. At Amazon, It’s a Slog.

“People who go to that length for a four-hour job — it’s a particular group of people who are really struggling to make it,” said Gene Bruskin, a longtime labor organizer who advised the Amazon Labor Union in the two Staten Island elections, in an interview last month.

As a result of all this, organizing at Amazon may involve incremental gains rather than high-profile election victories. In the Minneapolis area, a group of primarily Somali-speaking Amazon workers has staged protests and received concessions from the company, such as a review process for firings related to productivity targets. Chicago-area workers involved in the group Amazonians United received pay increases not long after a walkout in December.

Ted Miin, an Amazon worker who is one of the group’s members, said the concessions had followed eight or nine months of organizing, versus the minimum of two years he estimates it would have taken to win a union election and negotiate a first contract.

For workers who seek a contract, the processes for negotiating one at Starbucks and Amazon may differ. In most cases, bargaining for improvements in compensation and working conditions requires additional pressure on the employer.

At Starbucks, that pressure is in some sense the union’s momentum from election victories. “The spread of the campaign gives the union the ability to win in bargaining,” Mr. Logan said. (Starbucks has nonetheless said it will withhold new pay and benefit increases from workers who have unionized, saying such provisions must be bargained.)

At Amazon, by contrast, the pressure needed to win a contract will probably come through other means. Some are conventional, like continuing to organize warehouse employees, who could decide to strike if Amazon refuses to recognize them or bargain. The company is challenging the union victory on Staten Island.

But the union is also enlisting political allies with an eye toward pressuring Amazon. Mr. Smalls, the union president, testified this month at a Senate hearing that was exploring whether the federal government should deny contracts to companies that violate labor laws.

Article source: https://www.nytimes.com/2022/05/12/business/economy/amazon-starbucks-union.html

U.S. Inflation Is Still Climbing Rapidly

Rents picked up by 0.6 percent in April from March, and a measure of housing costs that uses rents to estimate the cost of owned housing climbed 0.5 percent, up from 0.4 percent the prior month. The pickup in housing costs is particularly important, because they make up about a third of the overall inflation index.

“Domestically generated inflationary pressures remain strong,” Andrew Hunter, senior U.S. economist at Capital Economics, wrote after the report was released.

Part of the increase in core inflation in April owed to trends that should not last, most notably a big pop in airfares as travel demand surges after the latest wave of the coronavirus. Even so, Ms. Rosner-Warburton said she expected annual C.P.I. inflation to remain 5.1 percent at the end of the year, far above levels that prevailed before the pandemic.

The Fed aims for 2 percent annual inflation on average, though it defines that goal using a related but different measure that tends to run slightly lower and comes out with more of a delay. That inflation index picked up by 6.6 percent over the year through March, and April figures will be released later this month.

The fact that high inflation is lasting so long is a problem for the central bank. After a full year of unusually swift increases, household and investor expectations for future price changes have been creeping higher, which could perpetuate inflation if households and businesses adjust their behavior, asking for bigger raises and charging more for goods and services.

As such risks have mounted, the Fed has begun to lift interest rates to try to keep price increases from galloping out of control in a more lasting way. In March, Fed policymakers lifted their main policy interest rate for the first time since 2018, then followed that up with the biggest increase since 2000 at their meeting last week.

By making it more expensive to borrow money, officials hope to weaken spending and hiring, which could help supply to catch up with demand. As the economy returns to balance, inflation should come down.

Article source: https://www.nytimes.com/2022/05/11/business/economy/april-2022-cpi.html

New F.T.C. Majority Gives Lina Khan a Chance to Push an Aggressive Agenda

Ms. Khan has also said she wants to bulk up the agency’s powers by considering regulations governing privacy and how algorithms make decisions. She has said that the F.T.C. underutilized its role as a rules-making body and that regulations would enhance its mandate to protect consumers.

“Given that our economy will only continue to further digitize, marketwide rules could help provide clear notice and render enforcement more impactful and efficient,” she said last month at a privacy conference.

The F.T.C. could also act on requests from progressive activist groups that want the agency to ban data-driven advertising business models and forbid noncompete agreements that stop workers from taking a job with a competitor of their current employer.

But former F.T.C. officials said Ms. Khan faced challenges, even with the Democratic majority. The creation of privacy regulations could take years, said Daniel Kaufman, a former deputy head of the agency’s consumer protection bureau. Businesses are likely to challenge rules in court that don’t fit into the F.T.C.’s mandate to protect consumers from deceptive and unfair practices.

“The F.T.C.’s rule-making abilities are not designed to tackle behavioral advertising so I’ve been telling my clients the agency could kick something off with a lot of press but it’s unclear where it will go,” Mr. Kaufman, a partner at the law firm BakerHostetler, said.

Ms. Khan’s efforts are also sure to continue facing opposition from Mr. Phillips and Ms. Wilson. Mr. Phillips has said he has reservations about the agency’s becoming a more muscular regulator. In January, he said Congress, not the F.T.C., should be the one to make new privacy rules.

Ms. Wilson recently posted screenshots of an internal survey showing that satisfaction among the F.T.C.’s career staff has fallen. “New leadership has marginalized and disrespected staff, resulting in a brain drain that will take a generation to fix,” she said.

Article source: https://www.nytimes.com/2022/05/11/technology/ftc-majority-lina-khan.html