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.

Rent — which is the biggest monthly expense for many families and plays a big role in determining inflation overall — has also been rising at a rapid clip. In cities such as Tampa, Fla., Spokane, Wash., and Knoxville, Tenn., listed rents were up by 30 percent or more in the fall from a year earlier, according to data from Apartment List.

Igor Popov, the chief economist at Apartment List, said the breakneck pace of new rent increases is unlikely to repeat itself this year. But many rents will be resetting at higher market rates this spring and summer, he said, adding that they were likely to continue rising as long as wages did the same.

Article source: https://www.nytimes.com/2022/03/31/business/economy/inflation-rising-wages.html

And in Britain, a cut in fuel taxes and support for poorer households will cost $3.2 billion.

The outlook is a change from October, when Rishi Sunak, Britain’s chancellor of the Exchequer, announced a budget for what he called an “economy fit for a new age of optimism,” with large increases in education, health and job training.

In his latest update to Parliament, Mr. Sunak warned that “we should be prepared for the economy and public finances to worsen potentially significantly,” as the country faces the biggest drop in living standards it has ever seen.

The energy tax relief was welcomed by the public, but the reduced revenues put even more pressure on governments that are already managing record high debt levels.

“The problem is that some countries have quite a big chunk of legacy debt — in Italy and France, it’s over 100 percent of gross domestic product,” said Lucrezia Reichlin, an economics professor at the London Business School, referring to the huge amounts spent to respond to the pandemic. “That is something which is very much new for the economic governance of the union.” European Union rules, which were temporarily suspended in 2020 because of the coronavirus, limit government debt to 60 percent of a country’s economic output.

And the demands on budgets are only increasing. European Union leaders said this month that the bill for new defense and energy spending could run as high as $2.2 trillion.

For Germany, Europe’s largest economy, the costs are enormous. The coalition government has committed $1.7 billion to buy more liquefied natural gas and is investing nearly as much in building a permanent L.N.G. terminal and renting several floating ones in order to reduce its dependence on Russian fuel. At the same time, it has agreed to keep coal-fired power plants in reserve, even as it earmarked nearly $220 billion over the next four years to revive the country’s transition to renewable energy sources.

Article source: https://www.nytimes.com/2022/03/29/business/economy/european-union-military-spending.html

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.

Article source: https://www.nytimes.com/2022/03/29/business/economy/job-openings-quits-hiring.html

Senator Elizabeth Warren, Democrat of Massachusetts, and Senator Ron Wyden, Democrat of Oregon and the chairman of the Finance Committee, released separate proposals last year that would tax the wealthiest, albeit in different ways. Ms. Warren had championed the idea of a wealth tax in her unsuccessful presidential campaign.

The decision by the administration to call for a wealth tax also reflects political realities over how to finance Mr. Biden’s economic agenda.

Moderate Democrats, including Senator Kyrsten Sinema of Arizona, have balked at raising the corporate tax rate or lifting the top marginal income tax rate to 39.6 percent from 37 percent, leaving the party with few options to raise revenue.

Still, Senator Joe Manchin III, Democrat of West Virginia, slammed the idea of taxing billionaires after Mr. Wyden’s proposal to do so was released, although Mr. Manchin has since suggested he could support some type of billionaires’ tax.

Top Biden administration officials have expressed skepticism about wealth taxes in the past.

Treasury Secretary Janet L. Yellen said last year that a wealth tax was “something that has very difficult implementation problems.” And Natasha Sarin, the Treasury Department’s counselor for tax policy and implementation, was a co-author of an opinion essay published by The Washington Post in 2019 that argued that a wealth tax would present “a revenue estimation puzzle.”

Legal questions about such a tax also abound, particularly whether a tax on wealth — rather than income — is constitutional. If Congress approves a wealth tax, there has been speculation that wealthy Americans could mount a legal challenge to the effort.

Steven M. Rosenthal, a senior fellow at the Tax Policy Center, said the White House proposal raised complicated questions about how taxpayers and the Internal Revenue Service would assess the value of assets that are not publicly traded and how investments that lose money would be handled.

Article source: https://www.nytimes.com/2022/03/26/us/politics/biden-billionaires-minimum-tax.html

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.

Russia provides about 40 percent of Europe’s gas, and its biggest customers tend to be in Eastern and Central Europe. Some countries have built up L.N.G. import capacity, but much of it is in Southern Europe, which is not well connected by pipeline to the countries in the north and the east.

A month into the war in Ukraine, Russian gas shipments to Europe have remained relatively stable, but that could change. Mr. Putin suggested on Wednesday that countries hostile to Russia should be required to pay for its energy in rubles rather than euros or dollars. That would force European companies to deal with Russian banks that have been sanctioned by Western governments.

There are some signs that European businesses and individuals might reduce their use of natural gas in part because it has become so expensive. For example, Yara International, a major fertilizer manufacturer in Italy and France, has said that it would reduce production because of high costs of raw materials like natural gas.

While reducing demand would help, some climate scientists and activists are worried that the Biden administration’s and European Union’s focus on building L.N.G. terminals could deal a grievous blow to the effort to address global warming by encouraging the use of fossil fuels.

“There is a risk of locking in 20 or even 30 years of emissions from export infrastructure at a time when you really need to be reducing your overall emissions,” said Clark Williams-Derry, a senior fellow at the Institute for Energy Economics and Financial Analysis, a research organization.

Article source: https://www.nytimes.com/2022/03/25/business/energy-environment/biden-europe-lng-natural-gas.html

The Fed began to raise interest rates this month in a bid to cool the economy down and temper high inflation, and Mr. Powell made clear this week that the central bank planned to keep lifting them — perhaps aggressively. After a year of unpleasant price surprises, he said, the Fed will set policy based on what is happening, not on an expected return to the old reality.

“No one is sitting around the Fed, or anywhere else that I know of, just waiting for the old regime to come back,” Mr. Powell said.

The prepandemic normal was one of chronically weak demand. The economy today faces the opposite issue: Demand has been supercharged, and the question is whether and when it will moderate.

Before, globalization had weighed down both pay and price increases, because production could be moved overseas if it grew expensive. Gaping inequality and an aging population both contributed to a buildup of savings stockpiles, and as money was held in safe assets rather than being put to more active use, it seemed to depress growth, inflation and interest rates across many advanced economies.

Japan had been stuck in the weak-inflation, slow-growth regime for decades, and the trend seemed to be spreading to Europe and the United States by the 2010s. Economists expected those trends to continue as populations aged and inequality persisted.

Then came the coronavirus. Governments around the world spent huge amounts of money to get workers and businesses through lockdowns — the United States spent about $5 trillion.

The era of deficient demand abruptly ended, at least temporarily. The money, which is still chugging out into the U.S. economy from consumer savings accounts and state and local coffers, helped to fuel strong buying, as families snapped up goods like lawn mowers and refrigerators. Global supply chains could not keep up.

Article source: https://www.nytimes.com/2022/03/24/business/economy/america-russia-pandemic-inflation.html

Jane Watiri Taylor was working as a nurse at the Travis County Jail in Austin, Texas, when the pandemic hit. She called it the most frightening time she could remember in 10 years of nursing. Not only was she worried about catching the virus during her shifts, but some inmates took out their anger and frustration on her.

“One time this person literally tried to spit on me,” she remembered. “They said, ‘I have Covid, and I’m going to give it to you.’ They spit on my scrubs; luckily it never got on my face.”

For Ms. Watiri Taylor, 54, like so many other health care workers, “the burnout was real.”

“I like taking care of people. But at that point, I was like, ‘I think I’m going to change jobs and start taking care of plants,’” she said. “You know, plants are never going to call me names, or insult or abuse me. I really needed to get out of that job.”

In July 2021, she left to pursue a dream she’d had since her childhood in Kenya: to become a farmer.

She had been growing fruits and vegetables in her backyard since 2015. To learn how to run her own farming business, she signed up for a class through Farmshare Austin, a nonprofit. She subleased a small piece of land in Lexington, Texas, to grow fruits and vegetables on a larger scale. She now sells her produce at local farmers’ markets.

“I want to nurture people; that’s why I got into nursing,” she said. “With farming, you are still nurturing people, but in a different way. It is really satisfying when you grow stuff and are able to know that eventually it is going to help make sure someone has got food on the table and it is going to nourish their bodies. And to me, that’s enough.”

Farming is much less predictable than nursing, and the financial instability worries her. Still, she says she is much happier than when she was working as a nurse.

“Money is important,” she said. “But I want to be able to wake up every morning excited about what I’m doing. And that’s how I feel about farming.”

“It was time for me to take a step back.”

Adam Simon

Article source: https://www.nytimes.com/2022/03/23/business/pandemic-workers-careers.html

If Mr. Xi and Mr. Putin organize their own economic coalition, they could bring in other nations seeking to shield themselves from Western sanctions — a tool that all recent U.S. presidents have used.

“Your interdependence can be weaponized against you,” said Dani Rodrik, a professor of international political economy at Harvard Kennedy School. “That’s a lesson that I imagine many countries are beginning to internalize.”

The Ukraine war, he added, has “probably put a nail in the coffin of hyperglobalization.”

China and, increasingly, Russia have taken steps to wall off their societies, including erecting strict censorship mechanisms on their internet networks, which have cut off their citizens from foreign perspectives and some commerce. China is on a drive to make critical industries self-sufficient, including for technologies like semiconductors.

And China has been in talks with Saudi Arabia to pay for some oil purchases in China’s currency, the renminbi, The Wall Street Journal reported; Russia was in similar discussions with India. The efforts show a desire by those governments to move away from dollar-based transactions, a foundation of American global economic power.

For decades, prominent U.S. officials and strategists asserted that a globalized economy was a pillar of what they call the rules-based international order, and that trade and financial ties would prevent major powers from going to war. The United States helped usher China into the World Trade Organization in 2001 in a bid to bring its economic behavior — and, some officials hoped, its political system — more in line with the West. Russia joined the organization in 2012.

But Mr. Putin’s war and China’s recent aggressive actions in Asia have challenged those notions.

“The whole idea of the liberal international order was that economic interdependence would prevent conflict of this kind,” said Alina Polyakova, president of the Center for European Policy Analysis, a research group in Washington. “If you tie yourselves to each other, which was the European model after the Second World War, the disincentives would be so painful if you went to war that no one in their right mind would do it. Well, we’ve seen now that has proven to be false.”

“Putin’s actions have shown us that might have been the world we’ve been living in, but that’s not the world he or China have been living in,” she said.

Article source: https://www.nytimes.com/2022/03/22/us/politics/russia-china-global-economy.html

At the Siemens Gamesa factory in Aalborg, Denmark, where the next generation of offshore wind turbines is being built, workers are on their hands and knees inside a shallow, canoe-shaped pod that stretches the length of a football field. It is a mold used to produce one half of a single propeller blade. Guided by laser markings, the crew is lining the sides with panels of balsa wood.

The gargantuan blades offer a glimpse of the energy future that Europe is racing toward with sudden urgency. The invasion of Ukraine by Russia — the European Union’s largest supplier of natural gas and oil — has spurred governments to accelerate plans to reduce their dependence on climate-changing fossil fuels. Armed conflict has prompted policymaking pledges that the more distant threat of an uninhabitable planet has not.

Smoothly managing Europe’s energy switch was always going to be difficult. Now, as economies stagger back from the second year of the pandemic, Russia’s attack on Ukraine grinds on and energy prices soar, the painful trade-offs have crystallized like never before.

Moving investments away from oil, gas and coal to sustainable sources like wind and solar, limiting and taxing carbon emissions, and building a new energy infrastructure to transmit electricity are crucial to weaning Europe off fossil fuels. But they are all likely to raise costs during the transition, an extremely difficult pill for the public and politicians to swallow.

Article source: https://www.nytimes.com/2022/03/22/business/economy/ukraine-russia-europe-energy.html

The oil and gas price spike and other commodity disruptions tied to the war in Ukraine could push already accelerating prices even higher, spelling trouble for consumer inflation expectations. Expectations can become self-fulfilling if shoppers and businesses come to expect inflation year after year and act accordingly.

“The risk is rising that an extended period of high inflation could push longer-term expectations uncomfortably higher,” Mr. Powell said.

Still, he noted that the job market was already very strong, which could help the economy withstand a period with more restrictive policy.

“By many measures, the labor market is extremely tight, significantly tighter than the very strong job market just before the pandemic,” Mr. Powell said. “Record numbers of people are quitting jobs each month, typically to take another job with higher pay.”

Fed officials are hoping that workers — who are in short supply — will go back into the job market in the coming months and years, helping to take pressure off employers. If that happens, it could help inflation to slow down as wage growth moderates.

“In a sense, it’s a great labor market,” Mr. Powell said — but not a sustainable one. He noted that “this is a labor market that’s out of balance, that really has an excess of demand over supply.”

Employees have gone back more slowly than forecasters expected, either because they retired early or because pandemic-tied issues like caregiving shortages are keeping them at home. Likewise, supply chain problems, like factory shutdowns and shipping snarls, have been slower to heal, in part because of repeated coronavirus outbreaks.

“It continues to seem likely that hoped-for supply-side healing will come over time as the world ultimately settles into some new normal, but the timing and scope of that relief are highly uncertain,” Mr. Powell said. “In the meantime, as we set policy, we will be looking to actual progress on these issues and not assuming significant near-term supply-side relief.”

Talmon Joseph Smith contributed reporting.

Article source: https://www.nytimes.com/2022/03/21/business/economy/powell-fed-inflation.html