March 4, 2021

What the Bond Market Is Telling Us About the Biden Economy

What is happening is known as a “steepening of the yield curve,” with long-term rates rising as short-term rates hold still. It tends to presage faster economic growth; it is the opposite of a “yield curve inversion,” which is known as a harbinger of recessions.

But the flip side is that the moment appears to have passed when bond markets were giving the government an all-clear signal to do whatever was necessary to boost the economy, essentially making endless funding available at extraordinarily low cost. That could have implications for how the Biden administration approaches the rest of its economic agenda.

Treasury Secretary Janet Yellen has emphasized that low interest rates, which keep the cost of debt service low, are important in her thinking about how much the government can comfortably borrow and spend.

At The New York Times’s DealBook conference on Monday, Ms. Yellen, after noting that the government’s ratio of debt to the size of the economy is much larger than it was before the global financial crisis, said: “Look at a different metric, which is more important, which is what is the cost of that debt. Look for example at interest payments on the debt as a share of G.D.P.,” which is below 2007 levels.

“So I think we have more fiscal space than we used to because of the interest rate environment,” Ms. Yellen told the Times’s Andrew Ross Sorkin.

By implication, the further that bond yields rise, and inflation expectations along with them, the more the Biden administration would view their potential spending to be constrained. Congress is now at work on a $1.9 trillion pandemic aid package, which Democratic leaders hope to pass in March. They envision a large-scale infrastructure plan after that.

Jerome Powell, the Federal Reserve chair, faced questions from Congress on Tuesday about the central bank’s policies. He emphasized the importance of returning the economy to full health above all over goals, and described the rise in bond yields in recent weeks as benign. “In a way, it’s a statement of confidence on the part of markets that we’ll have a robust and ultimately complete recovery,” Mr. Powell told the Senate Banking Committee.

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For Women in Economics, the Hostility Is Out in the Open

In response to those concerns, the American Economic Association commissioned a survey of more than 9,000 current and former members that asked about their experiences in the field. The results, released in 2019, revealed a disturbing number of cases of harassment and outright sexual assault. And it found that subtler forms of bias were rampant: Only one woman in five reported being “satisfied with the overall climate” in the field. Nearly one in three said they believed they had been discriminated against. And nearly half of women said they had avoided speaking at a conference or seminar because they feared harassment or disrespectful treatment.

“Half of women are saying they don’t even want to present in a seminar,” Dr. Modestino said. “We’re losing a lot of ideas that way.”

The harsh reception faced by women is particularly striking because they are also less likely to be invited to present their research in the first place. Women accounted for fewer than a quarter of the economic talks given over recent years, according to another paper. Racial minorities were even more underrepresented: Barely 1 percent of the speakers were Black or Hispanic.

“It’s just embarrassingly bad,” said Jennifer Doleac, an economist at Texas AM University who is one of that study’s authors. Only about 30 talks have been delivered by Black or Latina women since the authors began tracking the data, she noted. “These scholars are just not being invited, ever.”

The lack of representation is so significant that Dr. Modestino and her colleagues could not study whether Black and Latino economists were treated differently in seminars than their white counterparts — there were too few examples in their data to analyze.

The lack of opportunities has potentially significant career consequences. Research presentations, known as seminars, are an important way that academics, particularly those early in their careers, disseminate their research, build their reputations and get feedback on their work.

Seminars play a particular role in economics. In other fields, they tend to be collegial affairs, with mostly respectful questions and few interruptions. In economics, however, they often resemble gladiatorial battles, with audience members vying to poke holes in the presenter’s argument. Seemingly every economist, regardless of gender, has at least one horror story of losing control of a presentation. Many say they have been brought to tears.

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Tanden’s Confirmation on Shaky Ground as More Senators Voice Opposition

Ms. Tanden did not immediately respond to a request for comment about whether she planned to remain in the running for the job. She had apologized to lawmakers during her confirmation hearings, saying she regretted her tone and vowing to work with members of both parties.

Mr. Biden nominated her before Democrats wrested back control of the Senate in January, surprising lawmakers and aides given her history of inflammatory statements. Ms. Tanden’s prospects have long appeared tenuous in light of her criticism of Republicans and progressive Democrats after serving as an adviser to Hillary Clinton during her bid for the presidency in 2016.

At her confirmation hearings this month before two Senate committees, Ms. Tanden apologized multiple times for personal attacks that she had leveled on Twitter over the years. She said she had deleted more than 1,000 tweets shortly after the election in November because she regretted her tone.

Although she promised to bring a radically different approach to her communication style if she assumed the job of budget director, Ms. Tanden was confronted by Republicans with her comments about “Moscow Mitch” — a reference to Senator Mitch McConnell of Kentucky, the Republican leader — and her suggestion that “vampires have more heart than Ted Cruz,” the Republican senator from Texas.

Ms. Tanden does have the backing of the U.S. Chamber of Commerce, but conservative political action groups and liberal activists have mobilized against her nomination, suggesting that she will be hard pressed to find support from other Republicans.

“Neera Tanden is an architect of Obamacare, cheerleader for the Green New Deal and advocate for socialism in America,” David M. McIntosh, the president of the Club for Growth, said this month. “Any senator that cares about working with O.M.B. to grow the economy — not destroy it — should vehemently oppose this nomination.”

Republicans were not the only ones who confronted Ms. Tanden. Senator Bernie Sanders of Vermont, the chairman of the budget committee, asked her to “reflect” on some of the things she had said about him and his progressive allies over the years.

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Why Top Economists Are Citing a Higher-Than-Reported Jobless Rate

They count those who have been misclassified as “employed but not at work” in the Labor Department’s report, but who are actually on temporarily layoff. Then they add back people who have lost work since last February and are not applying to jobs right now, so that they are officially counted as outside the labor pool.

The second group is much bigger, adding nearly three percentage points to the refurbished unemployment rate.

“What they’re trying to do with this unemployment rate is they’re saying, ‘Look, we’re not there yet,’” said Claudia Sahm, a former Fed economist who now writes columns, including for The New York Times. “It’s so heartening to see them find a way to roll it up into a statistic that people understand.”

It is unclear whether all of the people who have left jobs and are not currently looking for new ones will re-enter the labor market when the crisis ends, but the fact that policymakers are being so explicit about incorporating them into measures of labor market weakness is a subtle but important shift.

After the 2008 downturn, Ms. Yellen was the most prominent proponent of taking many measures into account when trying to judge the job market’s strength. In 2013, when she was the Fed’s vice chair, she gave a speech laying out a dashboard of data points — including a broader measure often called the “underemployment rate” — that she looked to when determining whether the job market could truly be considered strong.

But even as she emphasized a broad range of data points as vice chair and later Fed chair, headline joblessness remained the North Star for most economists, almost universally used as a gauge of how close the labor market had gotten to “full employment.” And while economists noted that the share of the population either working or applying to jobs had dropped after the financial crisis, many did not expect the figure to bounce back much.

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On the Post-Pandemic Horizon, Could That Be … a Boom?

That vision is far from a certainty. Delays in the vaccine rollout could stall the recovery. So could new strains of the virus that render vaccines less effective. A political standoff in Washington could hold up aid for unemployed workers and struggling businesses. And even if the economy avoids all of those traps, there is unlikely to be a single moment when public health officials give an “all clear”; it could be years before people pack into bars and sports stadiums the way they did before the pandemic.

A boom also carries risks. In recent weeks, prominent economists including Lawrence H. Summers, a Treasury secretary under President Bill Clinton, have warned that Mr. Biden’s relief proposal is too large and could lead the economy to overheat, pushing up prices and forcing the Federal Reserve to bring the party to a premature end. Fed officials have largely dismissed those concerns, noting that the consistent problem in recent decades has been too little inflation rather than too much.

Other economists fear that the rebound will primarily benefit those at the top, compounding inequities that the pandemic has widened.

“We may see a boom in the future, but that may just leave some people even further behind, or may give them a trickle when they need a waterfall,” said Tara Sinclair, a George Washington University economist.

But for many businesses and households that have struggled to stay afloat during the pandemic, those concerns pale in comparison with the opportunities that a boom could provide.

Workout Anytime, a chain of 24-hour fitness clubs, was hit hard by the early stages of the pandemic, which shut down gyms nationwide. Business has since rebounded, but not to previous levels, as customers remain wary about working out in close quarters.

But Greg Maurer, a company vice president, sees better times ahead. The pandemic hasn’t dampened people’s enthusiasm for working out, he said — if anything, it has made the importance of physical fitness clearer. As soon as people are sure it’s safe, he said, he expects business to be gangbusters.

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Hurt by Lockdowns, California’s Small Businesses Push to Recall Newsom

Small businesses across the country have suffered from shutdowns that sometimes seem to flare up as suddenly as surges in the coronavirus itself. Restaurants, gyms, corner stores and spas have closed, some after trying to hang in there for months.

The pain in California has been acute. Nearly 40,000 small businesses had closed in the state by September — more than in any other state since the pandemic began, according to a report compiled by Yelp. Half had shut permanently, according to the report, far more than the 6,400 that had closed permanently in New York.

Few of the pandemic choices that Mr. Newsom has faced have been easy. California has suffered enormously from Covid-19, with more than 3.5 million cases and 47,000 deaths. Los Angeles County, one of the hardest-hit places in the recent virus surge, has more than 1.2 million cases and 19,000 deaths.

Dan Newman, a political strategist for Mr. Newsom, said the governor was focused on coronavirus vaccinations and reopening the state. Mr. Newman blamed “state and national G.O.P. partisans” for supporting “this Republican recall scheme in hopes of creating an expensive, distracting and destructive circus.”

Acknowledging that the pandemic has “heavily impacted our small businesses,” the director of the Governor’s Office of Business and Economic Development, Dee Dee Myers, pointed to several state programs that offer them help. They include the California Small Business Covid-19 Relief Grant Program, the California Rebuilding Fund and the Main Street Hiring Tax Credit.

Ronna McDaniel, chairwoman of the Republican National Committee, said in a statement that Mr. Newsom had “proven that he is woefully unqualified to lead the state of California.”

In places such as Los Angeles County, where Mr. Newsom won 72 percent of the vote in 2018, and neighboring Orange County, a more conservative area, the small-business anger is particularly intense. One local business owner leading the movement to open California’s economy is Andrew Gruel, 40, a chef who owns Slapfish, a seafood restaurant chain.

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Kamala Harris: Women Leaving Work Force During Pandemic Is a ‘National Emergency’

Child care remains an issue for working mothers, and it was a major theme of the round table on Thursday. Nearly 400,000 child care jobs have been lost since the outset of the pandemic, Ms. Harris said. The closings of small businesses and the loss of millions of jobs have created the “perfect storm” for women, particularly for Black business owners, she added. “The longer we wait to act,” she said, “the harder it will be to bring these millions of women back into the work force.”

The administration’s relief proposal would provide some $130 billion to assist in the reopening of K-12 schools, a major component of child care. But how and when to do so — and how to explain the decision-making to Americans — has proved to be a stumbling point for the president and his advisers.

President Biden has promised to reopen as many schools as possible in the first 100 days of his administration, a pledge that has been questioned by teachers’ unions that want to be assured of safety measures before schools reopen. On Thursday, Ms. Harris kept her remarks on schools limited, saying the plan would “provide funding to help schools safely reopen.” Ms. Harris said in an appearance on the “Today” show on Wednesday that “teachers should be a priority” to receive vaccinations.

Several representatives from women’s advocacy groups participated in the call with Ms. Harris, including Fatima Goss Graves, the president of the National Women’s Law Center. She said that the vice president did not go into “granular” detail about school reopenings but that the group stressed other topics, including the importance of direct payments to struggling families.

“People are barely keeping it together right now,” Ms. Goss Graves said. “I was gratified to hear that she understood and spoke with urgency around getting this investment done.”

As the pandemic drags on, the statistics for women are indeed bleak.

A report published last year by researchers at the University of Arkansas and the Center for Economic and Social Research at the University of Southern California found that female employment began plummeting almost immediately once the coronavirus took hold last spring. Since then, the researchers found, women have shouldered a heavier load than men when it came to providing child care.

Non-college educated women and women of color have been disproportionately affected. Another report, published in the fall by the Brookings Institution, showed that nearly half of all working women have low-paying jobs. Those jobs are more likely to be held by Black or Latina women, and they are in sectors, such as dining and travel, that are among the least likely to return soon to a degree of normalcy.

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Global Chip Shortage Challenges Biden’s Hope for Manufacturing Revival

G.M. has halted production at one plant in the United States, one in Canada and another in Mexico until at least mid-March. At a fourth plant, the company has decided to produce vehicles without the electronics that are in short supply. When components become available, G.M. will install them and then ship the vehicles to dealers.

Ford canceled shifts last week at two important pickup truck plants. One of them, near Kansas City, Mo., is closed this week because of inclement weather and a shortage of natural gas in the Midwest.

Economists say the effect is likely to be small but noticeable. Mark Zandi, the chief economist at Moody’s Analytics, said he expected the chip shortage to reduce new vehicle sales by 450,000 units in 2021. That would lower overall economic output in the United States by approximately $15 billion, or not quite 0.1 percent of gross domestic product, which is expected to increase by 5.6 percent this year, he said.

Industry analysts say the shortages are partly because of a pre-pandemic trend toward consolidation and inventory depletion in the chip sector, which was exacerbated by the kind of coronavirus-related disruptions that have led to shortages of other products, such as exercise bikes, tablets and toys.

Factory shutdowns, first in China and then elsewhere around the world, disrupted production of the chips and the cars and electronics that require them. Automakers and consumer electronics companies then underestimated the surge in demand from at-home buyers, leaving companies scrambling with chip makers to secure their supply, according to analysts.

President Donald J. Trump’s trade policy might have also played a role, as chip makers anticipated that new U.S. restrictions on the type of technology that Chinese companies such as Huawei could buy would lower demand. Chip makers responded by trimming output.

Winter storms this week have also shut down or slowed production at chip factories owned by Samsung and NXP Semiconductors near Austin, Texas, potentially exacerbating the shortages.

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As Winter Sweeps the South, Fed Officials Focus on Climate Change

“We would note that it has long been the policy of the Federal Reserve to not dictate to banks what lawful industries they can and cannot serve, as those business decisions should be made solely by each institution,” they wrote last month.

Mr. Powell and Mr. Quarles echoed the lawmakers’ assertion that the Fed’s bank stress tests measured bank capital needs over a much shorter time frame than climate change, though they said the Fed was working to help banks manage their risks, including those related to climate.

The central bank is quickly moving toward greater activism on the topic. Its Supervision Climate Committee, announced last month, will work “to develop an appropriate program” to supervise banks’s climate-related risks, Ms. Brainard said Thursday. The Fed is also co-chair of a task force on climate-related financial risks at the Basel Committee on Banking Supervision, a global regulatory group.

Though the central bank is politically independent, President Biden has placed climate at the center of his administration’s economic priorities. Treasury Secretary Janet L. Yellen has pledged to “fight the climate crisis.

Ms. Brainard, the Fed’s last remaining governor appointed by President Barack Obama, has been a leading voice in pushing for greater attention to climate issues, speaking on the matter at a conference in 2019. So has Mary C. Daly, president of the Federal Reserve Bank of San Francisco, who held that conference.

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Should the Feds Guarantee You a Job?

Dr. Hamilton, who favors a federal job guarantee, was co-author of a 2018 study — with Mark Paul, William A. Darity Jr. and Khaing Zaw — that sought to estimate the cost. Based on 2016 employment figures, and assuming an average cost per job of $55,820, including benefits, the study found it would cost $654 billion to $2.1 trillion a year, which would be offset to some extent by higher economic output and tax revenue, and savings on other assistance programs like food stamps and unemployment insurance.

And the prospect of a large-scale government intervention in the labor market raises thorny questions.

First, there’s determining the work the government could offer to fulfill a job guarantee. Health care and infrastructure projects require workers with particular skills, as do high-quality elder care and child care. Jobs, say, in park maintenance or as teaching aides could encroach on what local governments already do.

What’s more, the availability of federal jobs would drastically change the labor equation for low-wage employers like McDonald’s or Walmart. Dr. Strain argues that a universal federal guarantee of a job that paid $15 an hour plus health benefits would “destroy the labor market.”

Some wealthy countries have job guarantees for young adults. Since 2013, the European Union has had a program to ensure that everyone under 25 gets training or a job. But those programs are built on subsidizing private employment, not offering government jobs.

Many European countries have also subsidized private payrolls during the pandemic, allowing employers to cut hours instead of laying off workers.

The United States has a limited wage-subsidy program, the Work Opportunity Tax Credit, passed in 1996. It extends a credit of up to $9,600 for employers who hire workers from certain categories, like food-stamp recipients, veterans or felons.

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