Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.
The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.
While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”
eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.
China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.
refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.
“The global economy is undoubtedly slowing,” said Gregory Daco, chief economist at the global consulting firm EY- Parthenon,but it’s “happening at different speeds.”
In other parts of the world, countries that are able to supply vital materials and goods — particularly energy producers in the Middle East and North Africa — are seeing windfall gains.
And India and Indonesia are growing at unexpectedly fast paces as domestic demand increases and multinational companies look to vary their supply chains. Vietnam, too, is benefiting as manufacturers switch operations to its shores.
head-spinning energy bills this winter ratcheted up this week after Gazprom, Russia’s state-owned energy company, declared it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.
Daily average electricity prices in Western Europe have reached record levels, according to Rystad Energy, surging past 600 euros ($599) per megawatt-hour in Germany and €700 in France, with peak-hour rates as high as €1,500.
In the Czech Republic, roughly 70,000 angry protesters, many with links to far-right groups, gathered in Wenceslas Square in Prague this past weekend to demonstrate against soaring energy bills.
The German, French and Finnish governments have already stepped in to save domestic power companies from bankruptcy. Even so, Uniper, which is based in Germany and one of Europe’s largest natural gas buyers and suppliers, said last week that it was losing more than €100 million a day because of the rise in prices.
International Monetary Fund this week to issue a proposal to reform the European Union’s framework for government public spending and deficits.
caps blunt the incentive to reduce energy consumption — the chief goal in a world of shortages.
Central banks in the West are expected to keep raising interest rates to make borrowing more expensive and force down inflation. On Thursday, the European Central Bank raised interest rates by three-quarters of a point, matching its biggest increase ever. The U.S. Federal Reserve is likely to do the same when it meets this month. The Bank of England has taken a similar position.
The worry is that the vigorous push to bring down prices will plunge economies into recessions. Higher interest rates alone won’t bring down the price of oil and gas — except by crashing economies so much that demand is severely reduced. Many analysts are already predicting a recession in Germany, Italy and the rest of the eurozone before the end of the year. For poor and emerging countries, higher interest rates mean more debt and less money to spend on the most vulnerable.
“I think we’re living through the biggest development disaster in history, with more people being pushed more quickly into dire poverty than has every happened before,” said Mr. Goldin, the Oxford professor. “It’s a particularly perilous time for the world economy.”
The people running companies that deliver all manner of products gathered in Philadelphia last week to sift through the lessons of the mayhem besieging the global supply chain. At the center of many proposed solutions: robots and other forms of automation.
On the showroom floor, robot manufacturers demonstrated their latest models, offering them as efficiency-enhancing augments to warehouse workers. Driverless trucks and drones commanded display space, advertising an unfolding era in which machinery will occupy a central place in bringing products to our homes.
The companies depicted their technology as a way to save money on workers and optimize scheduling, while breaking down resistance to a future centered on evolving forms of automation.
persistent economic shocks have intensified traditional conflicts between employers and employees around the globe. Higher prices for energy, food and other goods — in part the result of enduring supply chain tangles — have prompted workers to demand higher wages, along with the right to continue working from home. Employers cite elevated costs for parts, raw materials and transportation in holding the line on pay, yielding a wave of strikes in countries like Britain.
The stakes are especially high for companies engaged in transporting goods. Their executives contend that the Great Supply Chain Disruption is largely the result of labor shortages. Ports are overwhelmed and retail shelves are short of goods because the supply chain has run out of people willing to drive trucks and move goods through warehouses, the argument goes.
Some labor experts challenge such claims, while reframing worker shortages as an unwillingness by employers to pay enough to attract the needed numbers of people.
“This shortage narrative is industry-lobbying rhetoric,” said Steve Viscelli, an economic sociologist at the University of Pennsylvania and author of “The Big Rig: Trucking and the Decline of the American Dream.” “There is no shortage of truck drivers. These are just really bad jobs.”
A day spent wandering the Home Delivery World trade show inside the Pennsylvania Convention Center revealed how supply chain companies are pursuing automation and flexible staffing as antidotes to rising wages. They are eager to embrace robots as an alternative to human workers. Robots never get sick, not even in a pandemic. They never stay home to attend to their children.
A large truck painted purple and white occupied a prime position on the showroom floor. It was a driverless delivery vehicle produced by Gatik, a Silicon Valley company that is running 30 of them between distribution centers and Walmart stores in Texas, Louisiana and Arkansas.
Here was the fix to the difficulties of trucking firms in attracting and retaining drivers, said Richard Steiner, Gatik’s head of policy and communications.
“It’s not quite as appealing a profession as it once was,” he said. “We’re able to offer a solution to that trouble.”
Nearby, an Israeli start-up company, SafeMode, touted a means to limit the notoriously high turnover plaguing the trucking industry. The company has developed an app that monitors the actions of drivers — their speed, the abruptness of their braking, their fuel efficiency — while rewarding those who perform better than their peers.
The company’s founder and chief executive, Ido Levy, displayed data captured the previous day from a driver in Houston. The driver’s steady hand at the wheel had earned him an extra $8 — a cash bonus on top of the $250 he typically earns in a day.
“We really convey a success feeling every day,” Mr. Levy, 31, said. “That really encourages retention. We’re trying to make them feel that they are part of something.”
Mr. Levy conceived of the company with a professor at the M.I.T. Media Lab who tapped research on behavioral psychology and gamification (using elements of game playing to encourage participation).
So far, the SafeMode system has yielded savings of 4 percent on fuel while increasing retention by one-quarter, Mr. Levy said.
Another company, V-Track, based in Charlotte, N.C., employs a technology that is similar to SafeMode’s, also in an effort to dissuade truck drivers from switching jobs. The company places cameras in truck cabs to monitor drivers, alerting them when they are looking at their phones, driving too fast or not wearing their seatbelt.
Jim Becker, the company’s product manager, said many drivers hade come to value the cameras as a means of protecting themselves against unwarranted accusations of malfeasance.
But what is the impact on retention if drivers chafe at being surveilled?
“Frustrations about increased surveillance, especially around in-cab cameras,” are a significant source of driver lament, said Max Farrell, co-founder and chief executive of WorkHound, which gathers real-time feedback.
Several companies on the show floor catered to trucking companies facing difficulties in hiring people to staff their dispatch centers. Their solution was moving such functions to countries where wages are lower.
Lean Solutions, based in Fort Lauderdale, Fla., sets up call centers in Colombia and Guatemala — a response to “the labor challenge in the U.S.,” said Hunter Bell, a company sales agent.
A Kentucky start-up, NS Talent Solutions, establishes dispatch operations in Mexico, at a saving of up to 40 percent compared with the United States.
“The pandemic has helped,” said Michael Bartlett, director of sales. “The world is now comfortable with remote staffing.”
Scores of businesses promoted services that recruit and vet part-time and temporary workers, offering a way for companies to ramp up as needed without having to commit to full-time employees.
Pruuvn, a start-up in Atlanta, sells a service that allows companies to eliminate employees who recruit and conduct background checks.
“It allows you to get rid of or replace multiple individuals,” the company’s chief executive, Bryan Hobbs, said during a presentation.
Another staffing firm, Veryable of Dallas, offered a platform to pair workers such as retirees and students seeking part-time, temporary stints with supply chain companies.
Jonathan Katz, the company’s regional partnerships manager for the Southeast, described temporary staffing as the way for smaller warehouses and distribution operations that lack the money to install robots to enhance their ability to adjust to swings in demand.
A drone company, Zipline, showed video of its equipment taking off behind a Walmart in Pea Ridge, Ark., dropping items like mayonnaise and even a birthday cake into the backyards of customers’ homes. Another company, DroneUp, trumpeted plans to set up similar services at 30 Walmart stores in Arkansas, Texas and Florida by the end of the year.
But the largest companies are the most focused on deploying robots.
Locus, the manufacturer, has already outfitted 200 warehouses globally with its robots, recently expanding into Europe and Australia.
Locus says its machines are meant not to replace workers but to complement them — a way to squeeze more productivity out of the same warehouse by relieving the humans of the need to push the carts.
But the company also presents its robots as the solution to worker shortages. Unlike workers, robots can be easily scaled up and cut back, eliminating the need to hire and train temporary employees, Melissa Valentine, director of retail global accounts at Locus, said during a panel discussion.
Locus even rents out its robots, allowing customers to add them and eliminate them as needed. Locus handles the maintenance.
Robots can “solve labor issues,” said Nathan Ray, director of distribution center operations at Albertsons, the grocery chain, who previously held executive roles at Amazon and Target. “You can find a solution that’s right for your budget. There’s just so many options out there.”
As Mr. Ray acknowledged, a key impediment to the more rapid deployment of automation is fear among workers that robots are a threat to their jobs. Once they realize that the robots are there not to replace them but merely to relieve them of physically taxing jobs like pushing carts, “it gets really fun,” Mr. Ray said. “They realize it’s kind of cool.”
Workers even give robots cute nicknames, he added.
But another panelist, Bruce Dzinski, director of transportation at Party City, a chain of party supply stores, presented robots as an alternative to higher pay.
“You couldn’t get labor, so you raised your wages to try to get people,” he said. “And then everybody else raised wages.”
In the midst of the pandemic, the government gave unemployment benefits to the incarcerated, the imaginary and the dead. It sent money to “farms” that turned out to be front yards. It paid people who were on the government’s “Do Not Pay List.” It gave loans to 342 people who said their name was “N/A.”
As the coronavirus shuttered businesses and forced people out of work, the federal government sent a flood of relief money into programs aimed at helping the newly unemployed and bolstering the economy. That included $3.1 trillion that former President Donald J. Trump approved in 2020, followed by a $1.9 trillion package signed into law in 2021 by President Biden.
But those dollars came with few strings and minimal oversight. The result: one of the largest frauds in American history, with billions of dollars stolen by thousands of people, including at least one amateur who boasted of his criminal activity on YouTube.
39,000 investigations going. About 50 agents in a Small Business Administration office are sorting through two million potentially fraudulent loan applications.
Officials already concede that the sheer number of cases means that some small-dollar thefts may never be prosecuted. This month, Mr. Biden signed bills extending the statute of limitations for some pandemic-related fraud to 10 years from five, a move aimed at giving the government more time to pursue cases. “My message to those cheats out there is this: You can’t hide. We’re going to find you,” Mr. Biden said during the signing at the White House.
$5 trillion in relief money in three separate legislative packages — an enormous sum that is credited with reducing poverty and saving the country from a prolonged, painful recession.
But investigators say that Congress, in its haste to get money out the door, devised all three packages with the same flaw: relying on the honor system.
For example, an expanded unemployment benefit gave workers an extra $600 per week in federal jobless funds on top of what they received from their state. The program was funded by the federal government but administered by states, which often had loose rules around qualifying. Applicants did not need to provide proof they had lost income because of Covid-19; they simply had to swear it was true.
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A similar we’ll-take-your-word-for-it approach was used in two loan programs run by the Small Business Administration.
Paycheck Protection Program, in which the government guaranteed loans made by private lenders, and the Economic Injury Disaster Loan program, in which the government itself gave out loans and smaller advance grants that did not have to be repaid. In both, the government trusted businesses to self-certify that they met key requirements.
using the email address of a burrito shop.
In the Paycheck Protection Program, private banks were supposed to help with the screening, since in theory they were dealing with customers they already knew. But that left out many small businesses, and the government allowed online lenders to enter the program. This year, University of Texas researchers found that some of those “fintech” lenders appeared less diligent about catching fraud.
turning fraud into a franchise — helping other people cook up fake businesses in order to get loans from the Economic Injury Disaster program.
Andrea Ayers advised one client to tell the government she ran a baking business from home, although she was not a baker, prosecutors said.
YouTube videos, where scammers offered to help for a cut of the proceeds. Some used the money on necessities, like mortgage bills or car payments. But many seemed to act out of opportunism and greed, splurging on a yacht, a mansion, a $38,000 Rolex or a $57,000 Pokémon trading card.
responsible for selling the card.
music video on YouTube, bragging in detail about how he had gotten rich by submitting false unemployment claims. His song was called “EDD,” after California’s Employment Development Department, which paid the benefits.
first reported by The Washington Post. In the Economic Injury Disaster Loan program, a watchdog found that $58 billion had been paid to companies that shared the same addresses, phone numbers, bank accounts or other data as other applicants — a sign of potential fraud.
“It’s clear there’s tens of billions in fraud,” said Michael Horowitz, the chairman of the Pandemic Response Accountability Committee, which includes 21 agency inspectors general working on fraud cases. “Would it surprise me if it exceeded $100 billion? No.”
The effort to catch fraudsters began as soon as the money started flowing, and the first person was charged with benefit fraud in May 2020. But investigators were quickly deluged with tips at a scale they had never dealt with before. The Small Business Administration’s fraud hotline — which had previously received 800 calls a year — got 148,000 in the first year of the pandemic. The Small Business Administration sent its inspector general two million loan applications to check for potential identity theft. At the Labor Department, the inspector general’s office has 39,000 cases of suspected unemployment fraud, a 1,000 percent increase from prepandemic levels.
But prosecutors face a key disadvantage: While fraud takes minutes, investigations take months and prosecutions take even longer.
pleaded guilty to mail fraud last month. His lawyers declined to comment.
first weeks of the pandemic, when the government gave out 5.8 million advance grants worth $19.7 billion in just over 100 days. In that program, fraud was easy to pull off, according to a government watchdog, which cited numerous loans given to businesses that were ineligible for funding.
Mr. Ware said he recently limited his agents to working 10 cases at a time, telling them: “You’re killing yourself. I have to protect you from you.”
told The New York Times in November.
“It’s a honey trap,” he added. “Richard Ayvazyan fell into that trap.” Mr. Ayvazyan was sentenced to 17 years in prison for participating in a ring that sought $20 million in fraudulent loans.
In the case of Mr. Oudomsine, the Pokémon card buyer, his lawyers argued in March that a judge should be lenient in deciding his sentence because the fraud had taken hardly any time at all.
“It is an event without significant planning, of limited duration,” said Brian Jarrard, who was Mr. Oudomsine’s lawyer at the time.
That did not work.
Judge Dudley H. Bowen Jr. of U.S. District Court sentenced Mr. Oudomsine to three years in prison, more than prosecutors had asked for, to “demonstrate to the world that this is the consequence” of fraud, according to a transcript of the sentencing.
Now, Mr. Oudomsine is appealing, with a new lawyer and a new argument. Deterrence, the new lawyer argues, is moot here because the pandemic-relief programs are over.
“There’s no way to deter someone from doing it, when there’s no way they can do it any longer,” said the lawyer, Devin Rafus.
Biden administration officials say they are trying to prepare for the next disaster, seeking to build a system that would quickly check applications for signs of identity theft.
“Criminal syndicates are going to look for weak links at moments of crisis to attack us,” said Gene Sperling, the White House coordinator for pandemic aid. He said the White House now aims to build a continuing system that would detect identity theft quickly in applications for aid: “The right time to start building a stronger system to prevent identity theft is now, not in the middle of the next serious crisis.”
In the meantime, the arrests go on.
Last week, prosecutors charged a correctional officer at a federal prison in Atlanta with defrauding the Paycheck Protection Program, saying she had received two loans totaling $38,200 in 2020 and 2021. The officer, Harrescia Hopkins, has pleaded not guilty. Her lawyer did not respond to a request for comment.
“You can’t have a system where crime pays,” said Mr. Horowitz, of the federal Pandemic Response Accountability Committee. “It undercuts the entire system of justice. It undercuts people’s faith in these programs, in their government. You can’t have that.”
Indeed, the Federal Reserve is trying to cut it off. Jerome H. Powell, the Fed chair, has described the labor market, with twice as many open jobs as unemployed workers, as “unsustainably hot,” and is trying to cool it through aggressive interest rate increases. He and his colleagues have argued repeatedly that a more normal economy — less like a boomtown, with lower inflation — will be better for workers in the long term.
“We all want to get back to the kind of labor market we had before the pandemic, where differences between racial and gender differences and that kind of thing were at historic minimums, where participation was high, where inflation was low,” Mr. Powell said last month. “We want to get back to that. But that’s not happening. That’s not going to happen without restoring price stability.”
Mr. Biden and his advisers, too, have argued that a cooling economy is inevitable and even necessary as the country resets from its reopening-fueled surge. In an opinion article in The Wall Street Journal in May, Mr. Biden warned that monthly job growth was likely to slow, to around 150,000 a month from more than 500,000, in “a sign that we are successfully moving into the next phase of the recovery.”
So far, that transition has been elusive. Forecasters had expected hiring to slow in July, to a gain of about 250,000 jobs. Instead, the figure was above 500,000, the highest in five months, the Labor Department reported on Friday. But the labor force — the number of people who are either working or actively looking for work — shrank and remains stubbornly below its prepandemic level, a sign that the supply constraints that have contributed to high inflation won’t abate quickly.
Ms. Sinclair said it shouldn’t be surprising that it was taking time to readjust after the coronavirus disrupted nearly every aspect of life and work. As of July, the U.S. economy, in the aggregate, had recovered all the jobs lost during the early weeks of the pandemic. But beneath the surface, the situation looks drastically different from what it was in February 2020. There are nearly half a million more warehouse workers today, and nearly 90,000 fewer child care workers. Millions of people are still working remotely. Others have changed careers, started businesses or stopped working.
This past week brought home the magnitude of the overlapping crises assailing the global economy, intensifying fears of recession, job losses, hunger and a plunge on stock markets.
At the root of this torment is a force so elemental that it has almost ceased to warrant mention — the pandemic. That force is far from spent, confronting policymakers with grave uncertainty. Their policy tools are better suited for more typical downturns, not a rare combination of diminishing economic growth and soaring prices.
Major economies including the United States and France reported their latest data on inflation, revealing that prices on a vast range of goods rose faster in June than anytime in four decades.
China reported that its economy, the world’s second-largest, expanded by a mere 0.4 percent from April through June compared with the same period last year. That performance — astonishingly anemic by the standards of recent decades — endangered prospects for scores of countries that trade heavily with China, including the United States. It reinforced the realization that the global economy has lost a vital engine.
The specter of slowing economic growth combined with rising prices has even revived a dreaded word that was a regular part of the vernacular in the 1970s, the last time the world suffered similar problems: stagflation.
Most of the challenges tearing at the global economy were set in motion by the world’s reaction to the spread of Covid-19 and its attendant economic shock, even as they have been worsened by the latest upheaval — Russia’s disastrous attack on Ukraine, which has diminished the supply of food, fertilizer and energy.
“The pandemic itself disrupted not only the production and transportation of goods, which was the original front of inflation, but also how and where we work, how and where we educate our children, global migration patterns,” said Julia Coronado, an economist at the University of Texas at Austin, speaking this past week during a discussion convened by the Brookings Institution in Washington. “Pretty much everything in our lives has been disrupted by the pandemic, and then we layer on to that a war in Ukraine.”
Great Supply Chain Disruption.
meat production to shipping exploited their market dominance to rack up record profits.
The pandemic prompted governments from the United States to Europe to unleash trillions of dollars in emergency spending to limit joblessness and bankruptcy. Many economists now argue that they did too much, stimulating spending power to the point of stoking inflation, while the Federal Reserve waited too long to raise interest rates.
8 Signs That the Economy Is Losing Steam
Card 1 of 9
Worrying outlook. Amid persistently high inflation, rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:
Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.
The housing market. Demand for real estate has decreased, and construction of new homes is slowing. These trends could continue as interest rates rise, and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market.
Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.
Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.
The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.
Now playing catch-up, central banks like the Fed have moved assertively, lifting rates at a rapid clip to try to snuff out inflation, even while fueling worries that they could set off a recession.
Given the mishmash of conflicting indicators found in the American economy, the severity of any slowdown is difficult to predict. The unemployment rate — 3.6 percent in June — is at its lowest point in almost half a century.
American consumers have enhanced fears of a downturn. This past week, the International Monetary Fund cited weaker consumer spending in slashing expectations for economic growth this year in the United States, from 2.9 percent to 2.3 percent. Avoiding recession will be “increasingly challenging,” the fund warned.
Orwellian lockdowns that have constrained business and life in general. The government expresses resolve in maintaining lockdowns, now affecting 247 million people in 31 cities that collectively produce $4.3 trillion in annual economic activity, according to a recent estimate from Nomura, the Japanese securities firm.
But the endurance of Beijing’s stance — its willingness to continue riding out the economic damage and public anger — constitutes one of the more consequential variables in a world brimming with uncertainty.
sanctions have restricted sales of Russia’s enormous stocks of oil and natural gas in an effort to pressure the country’s strongman leader, Vladimir V. Putin, to relent. The resulting hit to the global supply has sent energy prices soaring.
The price of a barrel of Brent crude oil rose by nearly a third in the first three months after the invasion, though recent weeks have seen a reversal on the assumption that weaker economic growth will translate into less demand.
major pipeline carrying gas from Russia to Germany cut the supply sharply last month, that heightened fears that Berlin could soon ration energy consumption. That would have a chilling effect on German industry just as it contends with supply chain problems and the loss of exports to China.
euro, which has surrendered more than 10 percent of its value against the dollar this year. That has increased the cost of Europe’s imports, another driver of inflation.
ports from the United States to Europe to China.
“Everyone following the economic situation right now, including central banks, we do not have a clear answer on how to deal with this situation,” said Kjersti Haugland, chief economist at DNB Markets, an investment bank in Norway. “You have a lot of things going on at the same time.”
Understand Inflation and How It Impacts You
The most profound danger is bearing down on poor and middle-income countries, especially those grappling with large debt burdens, like Pakistan, Ghana and El Salvador.
As central banks have tightened credit in wealthy nations, they have spurred investors to abandon developing countries, where risks are greater, instead taking refuge in rock-solid assets like U.S. and German government bonds, now paying slightly higher rates of interest.
This exodus of cash has increased borrowing costs for countries from sub-Saharan Africa to South Asia. Their governments face pressure to cut spending as they send debt payments to creditors in New York, London and Beijing — even as poverty increases.
U.N. World Food Program declared this month.
Among the biggest variables that will determine what comes next is the one that started all the trouble — the pandemic.
The return of colder weather in northern countries could bring another wave of contagion, especially given the lopsided distribution of Covid vaccines, which has left much of humanity vulnerable, risking the emergence of new variants.
So long as Covid-19 remains a threat, it will discourage some people from working in offices and dining in nearby restaurants. It will dissuade some from getting on airplanes, sleeping in hotel rooms, or sitting in theaters.
Since the world was first seized by the public health catastrophe more than two years ago, it has been a truism that the ultimate threat to the economy is the pandemic itself. Even as policymakers now focus on inflation, malnutrition, recession and a war with no end in sight, that observation retains currency.
“We are still struggling with the pandemic,” said Ms. Haugland, the DNB Markets economist. “We cannot afford to just look away from that being a risk factor.”
“We look for stuff you don’t see in every roadside place,” Ms. Stuckey said.
Certain classics — rubber alligators and coonskin caps — remain popular, as do Mexican blankets and Baja jackets.
“Jesus stuff sells,” Ms. Stuckey said. “We brought in walking sticks recently, and we blew through them.” Less popular? “License plate signs — they are really cute, but they are not selling,” she said. “State merch doesn’t turn as well. That stuff is collecting dust. Except for Texas. Texans love their Texas merch.”
Then there is a plan to extend Stuckey’s turf by selling candy through outlets like Food Lion, TravelCenters of America and food brokers. There was even a seasonal run of a Stuckey’s Pecan Log Roll beer in partnership with an Atlanta-area brewery.
“That’s part of our strategy to expand the brand, and I think collaborations are the path to scale,” Ms. Stuckey said.
Ultimately, the goal is to leverage road-trip allure to drive candy sales, use candy profits to increase manufacturing and, perhaps, turn Stuckey’s into the top-of-mind pecan brand, like Planters is for peanuts or Diamond for almonds. There might even be a handful of Stuckey’s destination superstores.
For now, Stephanie Stuckey puts in the miles and spreads the gospel of road tripping, finding joy even when the trip leads to an Arkansas Stuckey’s with a hole in the roof.
“Here’s the interesting thing — this was the moment when I realized this company is going to make it,” she said. “Because even with a hole in the roof, there were people in there. And I checked, and the store was profitable. If a Stuckey’s with a hole in the roof can be profitable, the chain can be profitable.”
China’s entrepreneur class is grappling with the worst economic slump in decades as the government’s zero Covid policy has shut down cities and kept would-be customers at home. Yet they can’t seem to agree on how loudly they should complain — or even whether they should at all.
A tech entrepreneur wrote in a big group chat in May that many members were too critical. “What people here do every day is criticizing the government and the system,” she wrote. “I can’t see any entrepreneurship in this.”
A top venture capitalist told his nearly nine million social media followers that as much as everyone had suffered from the pandemic, they should try to stay away from negative news and information.
zero Covid policy, which has put hundreds of millions of people under some kind of lockdowns in the past few months, costing jobs and revenues. He’s saying what many others are whispering in private but fear to say in public.
“The questions we should ask ourselves are,” he wrote in an article that was censored within an hour of posting but shared widely in other formats, “what caused such widespread negative sentiment across the society? Who should be responsible for this? And how can we change it?”
He said the lockdowns in Shanghai and other cities made it clear that wealth and social status meant little to a government determined to pursue its zero Covid policy. “We’re all nobodies who could be sent to the quarantine camps, and our homes could be broken into,” he wrote. “If we still choose to adapt to and put up with this, all of us will face the same destiny: trapped.”
staying out of politics is no longer an option for China’s business leaders. But some of his peers are reluctant, given the potential penalties.
steered away from the market economy and cracked down on some industries. It demonized entrepreneurs and went after some of the most prominent of them. Then when the mild, albeit contagious, Omicron variant of the coronavirus emerged in China this year, the government meddled with free enterprise as it hadn’t in decades.
The lockdowns and restrictions have done so much damage to the economy that Premier Li Keqiang summoned about 100,000 cadres to an emergency meeting in late May. He called the situation “severe” and “urgent,” citing sharp drops in employment, industrial production, electricity consumption and freight traffic.
Many business leaders believe that it will be hard to reverse the damage if the government doesn’t stop the zero Covid policy. Yet they feel that there’s nothing they can do to make Beijing change course.
The chairman of a big internet company told me that with all the pandemic restrictions, he and others were operating as if dancing with shackles on while expecting the sword of a lockdown to strike at any moment. With a big public company to run, he said, it would be too risky to be vocal. He hoped the economists could be more outspoken.
The chairman of a publicly listed conglomerate with many consumer-facing businesses said he had to shut down a few of his companies and let people go as revenues dropped off a cliff. He’s not a Christian, he said, but he has been praying to God every day to help him get through this tough period.
articles that compared the pros and cons of different pandemic policies. Then, in mid-May, his social media Weibo account was suspended.
Jack Ma, the founder of the e-commerce behemoth Alibaba, largely disappeared from public view after he criticized banking regulators in late 2019. The regulators quashed the initial public offering of Ant Group, the tech and financial company controlled by Mr. Ma, and fined Alibaba a record $2.8 billion last year.
Ren Zhiqiang, a retired real estate developer, was sentenced to 18 years in prison on charges of committing graft, taking bribes, misusing public funds and abusing his power. His real crime, his supporters say, was criticizing Mr. Xi’s handling of the coronavirus outbreak in early 2020.
Mr. Zhou, 49, is known as a maverick in Chinese business circles. He founded his first business in stereo systems with his brother in the mid-1990s when he was still in college. In 2010, he started Yongche, one of the first ride-hailing companies.
Unlike most Chinese bosses, he didn’t demand that his employees work overtime, and he didn’t like liquor-filled business meals. He turned down hundreds of millions of dollars in funding and refused to participate in subsidy wars because doing so didn’t make economic sense. He ended up losing out to his more aggressive competitor Didi.
He later wrote a best seller about his failure and became a partner at a venture capital firm in Beijing. In April, he was named chairman of the ride-sharing company Caocao, a subsidiary of auto manufacturing giant Geely Auto Group.
A Chinese citizen with his family in Canada, Mr. Zhou said in an interview that in the past many wealthy Chinese people like him would move their families and some of their assets abroad but work in China because there were more opportunities.
Now, some of the top talent are trying to move their businesses out of the country, too. It doesn’t bode well for China’s future, he said.
“Entrepreneurs have good survivor’s instinct,” he said. “Now they’re forced to look beyond China.” He coined a term — “passive globalization” — based on his discussions with other entrepreneurs. “Many of us are starting to take such actions,” he said.
The prospect depressed him. China used to be the best market in the world: big, vibrant, full of ambitious entrepreneurs and hungry workers, he said, but the senseless and destructive zero Covid policy and the business crackdowns have forced many of them to think twice.
“Even if your company is a so-called giant, we’re all nobodies in front of the bigger force,” he said. “A whiff of wind could crush us.”
All the business leaders I spoke to said they were reluctant to make long-term investment in China and fearful that they and their companies could become the next victim of the government’s iron fist. They’re focusing on their international operations if they have them or seeking opportunities abroad.
Mr. Zhou left for Vancouver, British Columbia, in a hurry in late April when Beijing was locking down many neighborhoods. Then he wrote the article, urging his peers to try to speak up and change their powerless status.
He said he understood the fear and the pressure they faced. “Honestly speaking, I’m scared, too.” But he would probably regret it more if he did nothing. “Our country can’t go on like this,” he said. “We can’t allow it to deteriorate like this.”
In recent years, a few of Mr. Zhou’s articles and social media accounts have been deleted. His outspokenness has caused uneasiness among his friends, he said. Some have told him to shut up because it didn’t change anything and was creating unnecessary risks for himself, his family, his companies and the stakeholders in his businesses.
But Mr. Zhou can’t help himself. He’s worried that China could become more like it was under Mao: impoverished and repressive. His generation of entrepreneurs owes much of their success to China’s reform and opening up policies, he said. They have the responsibilities to initiate change instead of waiting for a free ride.
Maybe they can start by speaking up, even if just a little bit.
“Any change starts with disagreement and disobedience,” he said.
For large and small nations around the globe, the prospect of averting a recession is fading.
That grim prognosis came in a report Tuesday from the World Bank, which warned that the grinding war in Ukraine, supply chain chokeholds, Covid-related lockdowns in China, and dizzying rises in energy and food prices are exacting a growing toll on economies all along the income ladder. This suite of problems is “hammering growth,” David Malpass, the bank’s president, said in a statement. “For many countries, recession will be hard to avoid.”
World growth is expected to slow to 2.9 percent this year from 5.7 percent in 2021. The outlook, delivered in the bank’s Global Economic Prospects report, is not only darker than one produced six months ago, before Russia’s invasion of Ukraine, but also below the 3.6 percent forecast in April by the International Monetary Fund.
Growth is expected to remain muted next year. And for the remainder of this decade, it is forecast to fall below the average achieved in the previous decade.
poorer, hungrier and less secure.
Roughly 75 million more people will face extreme poverty than were expected to before the pandemic.
Per capita income in developing economies is also expected to fall 5 percent below where it was headed before the pandemic hit, the World Bank report said. At the same time, government debt loads are getting heavier, a burden that will grow as interest rates increase and raise the cost of borrowing.
“In Egypt more than half of the population is eligible for subsidized bread,” said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development. “Now, that’s going to be much more expensive for government coffers, and it’s happening where countries are already more indebted than before.”
stock market’s woes. The conflict has caused dizzying spikes in gas prices and product shortages, and is pushing Europe to reconsider its reliance on Russian energy sources.
Global growth slows. The fallout from the war has hobbled efforts by major economies to recover from the pandemic, injecting new uncertainty and undermining economic confidence around the world. In the United States, gross domestic product, adjusted for inflation, fell 0.4 percent in the first quarter of 2022.
Russia’s economy faces slowdown. Though pro-Ukraine countries continue to adopt sanctions against the Kremlin in response to its aggression, the Russian economy has avoided a crippling collapse for now thanks to capital controls and interest rate increases. But Russia’s central bank chief warned that the country is likely to face a steep economic downturn as its inventory of imported goods and parts runs low.
Trade barriers go up. The invasion of Ukraine has also unleashed a wave of protectionism as governments, desperate to secure goods for their citizens amid shortages and rising prices, erect new barriers to stop exports. But the restrictions are making the products more expensive and even harder to come by.
Prices of essential metals soar. The price of palladium, used in automotive exhaust systems and mobile phones, has been soaring amid fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, another key Russian export, has also been rising.
“Insecurity and violence continue to weigh on the outlook” for many low-income countries, the World Bank said, while “more rapid increases in living costs risk further escalating social unrest.” Several studies have pointed to rising food prices as an important trigger for the Arab Spring uprisings in 2011.
In Latin American and the Caribbean, growth is expected to slow to 2.5 percent from 6.7 percent last year. India’s total output is forecast to drop to 7.5 percent from 8.7 percent, while Japan’s is expected to remain flat at 1.7 percent.
The World Bank, founded in the shadow of World War II to help rebuild ravaged economies, provides financial support to low- and middle-income nations. It reiterated its familiar basket of remedies, which include limiting government spending, using interest rates to dampen inflation and avoiding trade restrictions, price controls and subsidies.
Managing to tame inflation without sending the economy into a tailspin is a difficult task no matter what the policy choices are — which is why the risks of stagflation are so high.
At the same time, the United States, the European Union and allies are struggling to isolate Russia, starving it of resources to wage war, without crippling their own economies. Many countries in Europe, including Germany and Hungary, are heavily dependent on either Russian oil or gas.
The string of disasters — the pandemic, droughts and war — is injecting a large dose of uncertainty and draining confidence.
Among its economic prescriptions, the World Bank underscored that leaders should make it a priority to use public spending to shield the most vulnerable people.
That protection includes blunting the impact of rising food and energy prices as well as ensuring that low-income countries have sufficient supplies of Covid vaccines. So far, only 14 percent of people in low-income countries have been fully vaccinated.
“Renewed outbreaks of Covid-19 remain a risk in all regions, particularly those with lower vaccination coverage,” the report said.
Millions of amateur investors got into the stock market during the pandemic — some gingerly, some aggressively, some determined to teach Wall Street bigwigs a lesson — and almost couldn’t help but make money, riding a bull market for the better part of two years.
Now they may have to wrestle with a bear.
“It definitely isn’t as easy to trade in this market,” said Shelley Hellmann, a 47-year-old former optometrist in Texas who began actively investing in April 2020 while isolating from her family.
Tracking stock movements on an iPad Mini in her bedroom, she banked big gains as the market soared. Within a couple of months, she was considering making day trading a full-time gig. But since the S&P 500 peaked on Jan. 3, profits have been harder to come by.
“Sometimes I am glad to not be red for the year,” she said.
Five months of bumpy declines have put the S&P 500 on the precipice of a bear market — a drop of 20 percent or more from its most recent high, which is considered a psychological marker of investors’ dimmed view of the economy. Including a tumble of 4 percent on Wednesday, the index is down more than 18 percent from its peak on Jan. 3.
bored sports bettors or meme-stock aficionados who piled into GameStop — have tapped the brakes, or scrambled to shuffle their portfolios into more defensive positions.
grim reaper slaying low interest rates and stock market bulls.
bid-ask spread — the small difference between the highest price a buyer is willing to pay and the lowest a seller is willing to accept — kept costing him fractions that added up.
By January, some of his classes had resumed in person, and with them his onerous commute from the Bronx. Instead of trading for an hour every morning, he cut back to twice a week. The market was also becoming a lot choppier, and it was increasingly difficult to hold his positions. He had always used stop-loss orders — instructions to sell when a stock dropped to a certain price — to prevent disastrous declines. But with constant drops, he kept getting pushed out of his trades.
which measures retail investors’ behavior and sentiment, based on a sample of accounts that completed trades in the past month. Their interests have been shifting toward less volatile names and more stable holdings like shorter-term bonds, the firm said.
Ms. Hellmann, who started actively trading in the early days of the pandemic, said she was sticking with it, learning more and refining her approach as she goes along.
She often rises at 3 a.m. and turns on CNBC to begin plotting her strategy for the day, which involves studying stocks’ price movements, a process she compared to learning to catch a softball — watching its arc, then trying to figure out the physics of where it will land. “That is what I’m doing with price and volume,” she said.
Long a buy-and-hold investor, she began with roughly $50,000 — money that came from shares of ConocoPhillips that she inherited in 2014 after the death of her grandfather, who had been a propane salesman. Her approach has grown increasingly complex over the past two years: Last fall, she took a large position in an exchange-traded fund that bets against the price of natural gas — which has gone up as Russia’s invasion of Ukraine roiled energy markets.
“The war causing natural gas to spike up at a time when it seasonally comes down did not help me much,” she said.
Even so, she’s more than quintupled her money since early 2020, riding the strength of a rally that has the S&P 500 up nearly 80 percent since it bottomed out in March 2020, even with its recent fall.
Experiencing losses after a period of gains can be instructive, said Dan Egan, vice president of behavioral finance and investing at Betterment, which builds and manages diversified portfolios of low-cost funds and provides financial planning services.
“If you have a good initial experience with investing, you see this is part of it, it will be OK,” he said. “We get bumps and bruises that you need to learn what pain feels like,” he said.
Eric Lipchus, 40, has felt plenty of pain in his nearly two decades of full-time day trading — he owned options on Lehman Brothers, the investment bank that imploded during the financial crisis of 2008-9. Before that, he had watched his older brother and father dabble in the markets during the dot-com boom and bust.
“I have been on a roller coaster,” he said. “I am making OK money this year but it’s been up and it’s been down. It seems like it could be a tough year — not as much upside as in previous years.”
Challenging conditions like investors are now facing can get stressful in a hurry, Mr. Lipchus said. Right now, he’s keeping half his portfolio in cash — and is taking a fishing trip to the Thousand Islands in a couple of weeks to clear his head.
As the rest of the world learns to live with Covid-19, China’s top leader, Xi Jinping, wants his country to keep striving to live without it — no matter the cost.
China won a battle against its first outbreak in Wuhan, Mr. Xi said last week, and “we will certainly be able to win the battle to defend Shanghai,” he added, referring to the epicenter of the current outbreak in China.
summarized it as “zero movement, zero G.D.P.” Multinational companies have grown wary of further investments in the country.
For more than two years, China kept its Covid numbers enviably low by doggedly reacting to signs of an outbreak with testing and snap lockdowns. The success allowed the Communist Party to boast that it had prioritized life over death in the pandemic, unlike Western democracies where deaths from the virus soared.
More transmissible variants like Omicron threaten to dent that success, posing a dilemma for Mr. Xi and the Chinese Communist Party. Harsher lockdowns have been imposed to keep infections from spreading, stifling economic activity and threatening millions of jobs. Chinese citizens have grown restless, pushing back against being forced to stay home or to move into grim, government-run isolation facilities.
politically important year for Mr. Xi, China’s censors have moved quickly to muffle calls for a change in course on Covid-19. The head of the World Health Organization, whose recommendations China once held up as a model, was silenced this week when he called on the country to rethink its strategy.
Photographs and references to Tedros Adhanom Ghebreyesus, the director general of the W.H.O., were promptly scrubbed from the Chinese internet after the statement. The foreign ministry responded by calling Mr. Tedros’s remarks “irresponsible,” and accusing the W.H.O. of not having a “proper understanding of the facts.”
China’s state-controlled media has also glossed over the draconian measures officials have deployed to deal with outbreaks. This week, as some authorities in Shanghai erected new fences around quarantine zones, boarded up more homes and asked residents not to leave their apartments, state media painted a picture of a city slowly returning to normal.
One article described the “hustle and bustle of city life” returning, while another focused on statistics for how many stores had reopened.
has not happened. Several Chinese companies are in the testing phase of a homegrown mRNA option, and China also recently approved for emergency use a Covid-19 antiviral pill made by Pfizer called Paxlovid.
Administering three vaccine shots, using antiviral therapies and offering more effective vaccines could help China find a path out of zero Covid, Mr. Ajelli said.
disappointing winter wheat harvest in June could drive food prices — already high because of the war in Ukraine and bad weather in Asia and the United States — further up, compounding hunger in the world’s poorest countries.
A pause on wealth redistribution. For much of last year, China’s top leader, Xi Jinping, waged a fierce campaign to narrow social inequalities and usher in a new era of “common prosperity.” Now, as the economic outlook is increasingly clouded, the Communist Party is putting its campaign on the back burner.
By one estimate, nearly 400 million people in 45 cities have been under some form of lockdown in China in the past month, accounting for $7.2 trillion in annual gross domestic product. Economists are concerned that the lockdowns will have a major impact on growth; one economist has warned that if lockdown measures remain in place for another month, China could enter into a recession.
European and American multinational companies have said they are discussing ways to shift some of their operations out of China. Big companies that increasingly depend on China’s consumer market for growth are also sounding the alarm. Apple said it could see a $4 billion to $8 billion hit to its sales because of the lockdowns.
struggle to find and keep jobs during lockdowns.
Even as daily virus cases in Shanghai are steadily dropping, authorities have tightened measures in recent days following Mr. Xi’s call last week to double down. Officials also began to force entire residential buildings into government isolation if just one resident tested positive.
The new measures are harsher than those early on in the pandemic and have been met with pockets of unrest, previously rare in China where citizens have mostly supported the country’s pandemic policies.
In one video widely circulated online before it was taken down by censors, an exasperated woman shouts as officials in white hazmat suits smash her door down to take her away to an isolation facility. She protests and asks them to give her evidence that she has tested positive. Eventually she takes her phone to call the police.
“If you called the police,” one of the men replies, “I’d still be the one coming.”
Isabelle Qian contributed reporting, and Claire Fu contributed research.