“Banking With Interest” podcast episode last week, said reacting to the data was “hard to do until there was clarity as to what the leadership going forward of the Fed was going to be.”

Plus, the Fed had promised to withdraw policy in a certain way, which prevented a rapid reorientation once officials began to fret that inflation might last. Policymakers had pledged to keep interest rates at rock bottom and continue to buy huge sums of bonds until the job market had healed substantially. They had also clearly laid out how they would remove support when the time came: Bond purchases would slow first, then stop, and only then would rates rise.

The point was to convince investors that the Fed would not stop helping the economy too early and to avoid roiling markets, but that so-called forward guidance meant that pulling back support was a drawn-out process.

“Forward guidance, like everything in economics, has benefits and costs,” Richard H. Clarida, who was vice chair of the Fed in 2021 and recently left the central bank, said at a conference last week. “If there’s guidance that the committee feels bound to honor,” he added, it can be complicated for the Fed to move through a sequence of policy moves.

Christopher Waller, a governor at the Fed, noted the central bank wasn’t just sitting still. Markets began to adjust as the Fed sped up its plans to remove policy support throughout the fall, which is making money more expensive to borrow and starting to slow down economic conditions. Mortgage rates, one window into how Fed policy is playing out into the economy, began to move up notably in January 2021 and are now at the highest level since the 2008 housing crisis.

Mr. Waller also pointed out that it was hard to get the Fed’s large policy-setting committee into agreement rapidly.

“Policy is set by a large committee of up to 12 voting members and a total of 19 participants in our discussions,” he said during a speech last week. “This process may lead to more gradual changes in policy as members have to compromise in order to reach a consensus.”

Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in an interview on Tuesday that different people on the committee “looked at the same data with different lenses, and that’s just the nature of the beast.”

But the Fed seems to be learning lessons from its 2021 experience.

Policymakers are avoiding giving clear guidance about what will come next for policy: Officials have said they want to quickly get rates up to the point that they start to weigh on the economy, then go from there. While Mr. Powell said the Fed was thinking about half-point increases at its next two meetings, he gave no clear guidance about what would follow.

“It’s a very difficult environment to try to give forward guidance, 60, 90 days in advance — there are just so many things that can happen in the economy and around the world,” Mr. Powell said at a news conference last week. “So we’re leaving ourselves room to look at the data and make a decision as we get there.”

The war in Ukraine is the latest surprise that is changing the outlook for the economy and inflation in ways that are hard to predict, Mr. Bostic from Atlanta said.

“I have been humbled, chastened — whatever — to think that I know the range of possible things that can happen in the future,” he said. “I’ve really tried to back off of leaning into one kind of story or path.”

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Fed Raises Interest Rate Half a Percentage Point, Largest Increase Since 2000

Deciding how quickly to remove policy support is a fraught exercise. Central bankers are hoping to move decisively enough to arrest the pop in prices without curbing growth so aggressively that they tip the economy into a deep downturn.

Mr. Powell nodded to that balancing act, saying, “I do expect that this will be very challenging — it’s not going to be easy.” But he said the economy had a good chance “to have a soft, or soft-ish, landing.”

He later elaborated that it could be possible to “restore price stability without a recession, without a severe downturn, and without materially higher unemployment.”

The balance sheet plan the Fed released on Wednesday matched what analysts had expected, which probably also contributed to the sense of market calm. The Fed will begin shrinking its nearly $9 trillion in asset holdings in June by allowing Treasury and mortgage-backed debt to mature without reinvestment. It will ultimately let up to $60 billion in Treasury debt expire each month, along with $35 billion in mortgage-backed debt, and the plan will have phased in fully as of September.

By reducing its bond holdings, the Fed is likely to take steam out of financial markets — bond prices will fall, causing yields to rise, and riskier investments like stocks will become less attractive. It also could help to cool the housing market by pushing up longer-term borrowing costs, which follow bond yields, reinforcing the effect of the central bank’s interest rate increases.

In fact, mortgage rates have already begun to push higher, climbing nearly two percentage points since the start of the year. The rate on a 30-year fixed-rate mortgage averaged 5.1 percent for the week that ended last Thursday, according to Freddie Mac, touching its highest level in more than a decade.

The Fed’s moves “will quickly make financing big-ticket purchases more challenging.” Jonathan Smoke, chief economist at Cox Automotive, wrote in a research note after the meeting. “This is exactly what the Fed wants to see. As demand for homes, cars and other durables declines in response to declining affordability, the rate of price increases should slow as well.”

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The Fed Bets on a ‘Soft Landing,’ but Recession Risk Looms

Jerome H. Powell, the Federal Reserve chair, emphasized this week that the central bank he leads could succeed in its quest to tame rapid inflation without causing unemployment to rise or setting off a recession. But he also acknowledged that such a benign outcome was not certain.

“The historical record provides some grounds for optimism,” Mr. Powell said.

That “some” is worth noting: While there may be hope, there is also reason to worry, given the Fed’s track record when it is in inflation-fighting mode.

The Fed has at times managed to raise interest rates to cool down demand and weaken inflation without meaningfully harming the economy — Mr. Powell highlighted examples in 1965, 1984 and 1994. But those instances came amid much lower inflation, and without the ongoing shocks of a global pandemic and a war in Ukraine.

The part Fed officials avoid saying out loud is that the central bank’s tools work by slowing down the economy, and weakening growth always comes with a risk of overdoing it. And while the Fed ushered in its first rate increase this month, some economists — and at least one Fed official — think it was too slow to start taking its foot off the gas. Some warn that the delay increases the chance it might have to overcorrect.

40-year high and continued to accelerate, but longer-term price growth expectations have nudged only slightly higher.

If consumers and businesses anticipated rapid price increases year after year, that would be a troubling sign. Such expectations could become self-fulfilling if companies felt comfortable raising prices and consumers accepted those higher costs but asked for bigger paychecks to cover their rising expenses.

But after a year of rapid inflation, it is no guarantee that longer-term inflation expectations will stay in check. Keeping them under control is a big part of why the Fed is getting moving now even as a war in Ukraine stokes uncertainty. The central bank raised rates a quarter point this month and projected a series of interest rate increases to come.

While officials would usually look past a temporary pop in oil prices, like the one the conflict has spurred, concerns about expectations mean they do not have that luxury this time.

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

Mr. Powell signaled that the Fed might raise interest rates by half a percentage point in May and imminently begin to shrink its balance sheet of bond holdings, policies that would remove help from the U.S. economy much more rapidly than in the last economic expansion.

Some officials, including Mr. Bullard, have urged moving quickly, arguing that monetary policy is still at an emergency setting and out of line with a very strong economy.

But investors think the Fed will need to reverse course after a series of rapid rate increases. Market pricing suggests — and some researchers think — that the Fed will raise rates notably this year and early next, only to reverse some of those moves as the economy slows markedly.

“Our base case has the Fed reversing quickly enough to avoid a full-blown recession,” Krishna Guha, the head of global policy at Evercore ISI, wrote in a recent analysis. “But the probability of pulling this off is not particularly high.”

So why would the Fed put the economy at risk? Neil Shearing, the group chief economist at Capital Economics, wrote that the central bank was following the “stitch in time saves nine” approach to monetary policy.

Raising interest rates now to reduce inflation gives the central bank a shot at stabilizing the economy without having to enact an even more painful policy down the road. If the Fed dallies, and higher inflation becomes a more lasting feature of the economy, it will be even harder to stamp out.

“Delaying rate hikes due to fears about the economic spillovers from the war in Ukraine would risk inflation becoming more entrenched,” Mr. Shearing wrote in a note to clients. “Meaning more policy tightening is ultimately needed to squeeze it out of the system, and making a recession at some point in the future even more likely.”

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‘I Don’t Have the Right to Cry’: Ukrainian Women Share Their Stories of Escape

I just had a feeling that we had to get out of there. Every minute you hear these explosions, these shots somewhere nearby, it’s hard to understand, are you a target? Even if it’s silent, the silence feels ominous. There is just this constant sense of danger.

And I had a great sense of guilt that I was not protecting my children. I felt like a terrible mother because my children are in danger and they’re suffering. It’s cold and they have nothing to eat. So, we decided to leave.

We needed to get to Irpin. There was some kind of transfer that would help take us to Kyiv. To get there, we had to cross this park. And as we entered the park, some kind of madness started. It was shelling, it was shooting. We all fell to the ground and covered our heads. Everywhere around us, there was glass exploding, flying glass. My husband put his body over my daughter, the youngest one.

The bridge was out. So, we had to walk across this piece of metal. Suddenly, again, there was shooting from both sides. There was a sound of the shots hitting metal. We got to the ground, on our palms, you know? And on the other side, there was a soldier, one of ours. He picked up Marina, my youngest daughter. She thought it was all a game. When he picked her up, she laughed.

I write TV shows. But now I feel like I’m a character in one of them. I didn’t want to leave my homeland. I was satisfied with my country, even with all its shortcomings and all its complications. But now I understand that tomorrow is my last day in my country. I don’t want to be a refugee somewhere in a foreign land. I’ll miss my home. I’ll miss my things, our photographs, pictures of my parents. I left my diaries, my children’s toys, my dresses.

Two children, ages 8 and 14

Interviewed on March 11. She escaped Mariupol, a port city in southern Ukraine that has been under siege by the Russian military for more than two weeks.

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How to Fight Inflation With Lessons From History

Annual spending in the Union reached a staggering 16 times its prewar budget. Despite the need for funds, there was great fear in Congress of increasing taxes because of Americans’ well-known antipathy to taxation.

But Salmon P. Chase, the fiscally conservative Treasury secretary, was mortally afraid of inflation. He recognized that without revenue the government would have to resort to the printing press. After the southern states seceded, interest rates on the country’s debt soared and foreigners refused to lend.

Thaddeus Stevens, the chair of the House Ways and Means Committee, went further than Mr. Chase imagined by inventing an entirely new tax code. Previously, the Union had funded itself with tariffs on foreign trade, which it raised several times. Alongside that it created a system of “internal taxes,” on everything from personal income to leaf tobacco, liquor, slaughtered hogs and fees on auctioneers. Congress also created a new bureau to collect taxes, a forerunner of the Internal Revenue Service, underscoring its commitment to raising revenue this way.

Mr. Stevens had no idea how much revenue the taxes would raise, or if people would even pay them. (“Everything on the earth and under the earth is to be taxed,” one Ohioan groused.) But by 1865, the Treasury netted $300 million from customs and internal taxes — six times its prewar tax revenue.

That revenue helped moderate the inflation created by the issuance of “greenbacks,” notes that circulated as money, to pay for the war. The country’s credit improved and Mr. Chase was able to borrow prodigious sums. Ultimately, inflation in the Union was no greater than during the two World Wars in the following century.

The Confederacy faced similar financial challenges. Christopher Memminger, its German-born Treasury secretary, warned that printing notes was “the most dangerous of all methods of raising money.” But the South was ideologically opposed to taxation, especially by the central government.

The South approved a very modest tax (half a percent on real estate), but collection was left to the states and few tried to collect it. With cotton shipments to Europe pinched by the Union blockade, Mr. Memminger soon found he had little choice but to print notes to cover the cost of the war. These inflated at a catastrophic rate.

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Could Inflation Prompt Powell to Act Like Volcker?

To Jerome H. Powell, the chair of the Federal Reserve, Paul Volcker is more than a predecessor. He is one of his professional heroes.

“I knew Paul Volcker,” Mr. Powell said during congressional testimony this month. “I think he was one of the great public servants of the era — the greatest economic public servant of the era.”

Now, if rapid inflation proves more stubborn than policymakers expect, Mr. Powell could find himself in a situation in which he must follow Mr. Volcker’s lead. The towering former Fed chair is best remembered for waging an aggressive — and painful — assault on the swift price increases that plagued America in the early 1980s.

Mr. Volcker’s Fed rolled out policies that pushed a key short-term interest rate to nearly 20 percent and sent unemployment soaring to nearly 11 percent in 1981. Car dealers mailed the Fed keys from unsold vehicles, builders sent two-by-fours from unbuilt houses and farmers drove tractors around the Fed building in Washington in protest. But the approach worked, killing off the rapid price inflation that had festered throughout the 1970s.

expected to begin raising interest rates from near zero at its meeting this week, and is likely to signal that it expects to make a series of moves this year as it tries to cool down the economy and control inflation.

Price increases had run high for more than a decade by the time Mr. Volcker became chair in 1979, making them a part of everyday lives. Shoppers expected prices to go up, businesses knew that, and both acted accordingly.

This time, inflation has been anemic for years (until recently), and most consumers and investors still expect costs to return to lower levels before long, survey and market data show. While inflation has been rapid for the past year, that is a comparatively short period and one that may not fuel the same kind of expectations for higher prices that bedeviled Mr. Volcker’s era.

And while today’s inflation is taking a bite out of household budgets, it is slower than in previous periods: While it rose to 7.9 percent in February, the fastest pace since 1982, it is still well below a peak of 14.6 percent in 1980. Economists expect price gains to begin moderating this year, rather than climbing to such high levels.

more muted version of the wage-price spiral that helped keep inflation high during Mr. Volcker’s years.

are climbing as Russia wages war on Ukraine, mirroring oil price shocks that rocked the economy in the years before Mr. Volcker’s ascent to the chair. The Arab oil embargo of 1973-74 and the Iranian revolution of 1979 both curtailed supply and sharply pushed up pump prices.

And geopolitical instability is fueling uncertainty about what will happen next, much as it did in the 1970s, when war raged in Vietnam.

“That’s the proper historical reference for what we’re trying not to replicate,” Mr. Powell said of the 1970s during separate remarks to Congress this month. “One of the things that is different now is that central banks — including the Fed — very squarely take responsibility for inflation.”

When inflation was taking off in the 1960s and 1970s, Fed officials bickered about how high to raise rates as they worried about hurting the labor market too much. Many economic historians now think that their reluctance to act more quickly allowed those price gains to become locked in until they required a more draconian response.

awaiting Senate confirmation, is the latest economic test that he has had to contend with during his tenure.

Mr. Powell, 69, began his first four years as Fed chair in early 2018. By that Christmas, the central bank’s campaign of steady rate increases intended to fend off inflation had collided with President Donald J. Trump’s trade war to send markets plummeting.

In 2019, Mr. Trump publicly pushed for lower rates and accosted Mr. Powell — whom the president had chosen to lead the central bank — in interviews and on Twitter, calling him a “bonehead,” an “enemy” and a golfer who could not putt.

Then came the onset of the pandemic in 2020, and Mr. Powell and his colleagues crossed red lines and upended norms to rescue markets and the economy. They averted a financial crisis, but 2021 brought with it a new challenge: rapid inflation.

Now, critics are questioning whether the monetary help that Mr. Powell’s Fed unleashed to protect the pandemic-stricken economy — lowering rates to near zero and buying trillions of dollars in government bonds — combined with huge fiscal stimulus to supercharge demand and release an inflationary genie that could prove hard to trap.

The Fed has already begun removing some of that support, stopping bond purchases and communicating plans to raise interest rates by a quarter-point this month and steadily throughout the rest of the year. Mortgage rates have already begun climbing in anticipation of those actions.

wanted to see full employment return before paring back its support, has been too slow to react to changing conditions.

This moment “represents a decade of economic experience in the late 1960s and 1970s, compressed into a year,” said Lawrence H. Summers, a former Treasury secretary who spent last year warning that inflation was going to take off as the government overstimulated the economy.

“The question is: Is this the Fed’s Paul Volcker moment, or is this the Fed’s Arthur Burns moment?” he said.

Mr. Burns preceded Mr. Volcker as Fed chair and was late to react to fast inflation, afraid of slowing the job market and hurting Republicans politically. Mr. Summers warned that so far, today’s situation looked more Burns than Volcker, because the Fed spent 2021 only slowly adjusting to the reality of inflation and is now planning to only steadily adjust policy.

While White House and Fed officials had expected inflation to fade last year, optimistically labeling it “transitory,” their hopes were foiled as rapid consumer demand for couches, cars and other goods collided with pandemic-constrained supply chains. Price gains accelerated rather than slowing down.

“Transitory” has now become a dirty word in policymaking circles. Though officials continue to predict that inflation will moderate, they acknowledge more clearly how uncertain that is.

“We have never put our economy into a deep freeze and then defrosted it before,” said Megan Greene, a senior fellow at a Harvard Kennedy School center and chief global economist for the Kroll Institute. “And we haven’t had a war in continental Europe for a while.”

in Shanghai and Shenzhen, China, a major technology manufacturing hub and port city, are boosting the risk that supply chains remain roiled in the coming months. Those shocks from outside come when price pressures have already begun broadening to categories like rent, another development that could make inflation last.

It is not clear whether those factors will keep inflation drastically higher, but Fed officials will be watching warily.

If the Fed has to raise interest rates to painful levels to cool off the economy and put a lid on prices, it could send financial markets tumbling, erasing stock and housing wealth. It could also slow wage increases and throw people out of jobs as companies retrench, curtailing investment and hiring.

But Fed inaction — or under-action — would also carry risks. High prices that chip away at consumer buying power year after year would make it hard for families and businesses to plan for the future. They could especially hurt people who are out of work and living on savings, or the poor, who devote a big chunk of their budgets to necessities and have less room to cut back if costs get out of control.

Mr. Volcker, Mr. Powell’s long-ago predecessor, one of his professional idols and — potentially, if things go wrong — his muse, died in 2019. But he had thoughts on the trade-off.

Maintaining confidence that a dollar will be able to buy tomorrow what it can today “is a fundamental responsibility of monetary policy,” Mr. Volcker wrote in his 2018 memoir. “Once lost, the consequences can be severe and stability hard to restore.”

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Inflation Rises to 7.9 Percent for February 2022

Prices climbed at the fastest pace in decades in the month leading up to the war in Ukraine, underlining the high stakes facing the United States — along with many developed economies — as the conflict promises to drive costs higher.

The Consumer Price Index rose by 7.9 percent through February, the fastest pace of annual inflation in 40 years. Rising food and rent costs contributed to the big increase, the Bureau of Labor Statistics said, as did a nascent surge in gas prices that will become more pronounced in the March inflation report.

The February report caught only the start of the surge in gas prices that came in response to Russia’s invasion of Ukraine late last month. Economists expect inflation to pick up even more in March because prices at the pump have since jumped to record-breaking highs. The average price for a gallon of gas was $4.32 on Thursday, according to AAA.

Rapidly climbing costs are hitting consumers in the pocketbook, causing confidence to fall and stretching household budgets. Rising wages and savings amassed during the pandemic have helped many families continue spending despite rising prices, but the burden is falling most intensely on lower-income households, which devote a big chunk of their budgets to daily necessities that are now swiftly becoming more expensive.

signaled it will raise interest rates by a quarter percentage point at its meeting next week, probably the first in a series of moves meant to increase the cost of borrowing and spending money and slow down the economy. By reducing consumption and slowing the labor market, the Fed is able to take some pressure off inflation over time.

Broadening price pressures and high gas costs could become a serious issue for central bank policymakers if they help convince consumers that the run-up in prices will last. If people begin expecting inflation, they may change their behavior in ways that make it more permanent: accepting price increases more readily, and asking for bigger raises to keep up.

“It was another bad report,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “Inflation was already way too high before the invasion of Ukraine.”

keep shipping routes tangled and parts scarce. Ukraine is an important producer of neon, which could keep computer chips in short supply, perpetuating the shortages that have plagued automakers. Higher energy costs could ricochet through other industries.

Even without further supply chain troubles, there are signs that inflation is widening beyond a few pandemic-affected sectors, an indication that they could last as the latest virus surge fades from view. Rent of primary residences, for instance, climbed by 0.6 percent from the prior month — the fastest monthly pace of growth since 1999.

Price gains have been rapid around much of the world, causing many central banks to scale back how much help they are providing to their economies. The European Central Bank on Thursday decided to speed up its exit from its bond-buying program as it tries to counter rising inflation. Europe’s push to end its energy dependence on Russia promises to raise costs at a time when inflation is already nearly triple the central bank’s target.

a separate inflation index, but one that is also up considerably.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

For someone who was a longtime Manhattanite, that’s a real loss, Mr. Gutbrod, 61, said. He used to enjoy three restaurant brunches or dinners each week. Now it’s more like one every two weeks.

“I used to go on relaxing drives,” he said, but now joy rides are unaffordable. “I’m on a shoestring budget, and I work pretty hard. For anyone who doesn’t make a lot of money, you have to be intelligent and start cutting corners.”

As it disturbs everyday lives, inflation is likely to dog Democrats and the administration as they fight to retain control of Congress in November. Despite plentiful jobs and quickly rising wages, consumer confidence has fallen to itslowest level since the summer of 2011, when the economy was clambering back from the global financial crisis and Congress was bickering over lifting the nation’s debt ceiling.

That probably at least partly reflects the reality that pay is not quite keeping up with inflation for the typical worker, and that consumers are paying more at the pump, which tends to be a very salient cost for Americans.

In February, the cost of food rose, which is also difficult for consumers on tight budgets. Over the past year, grocery prices have increased by 8.6 percent, the largest yearly jump since the period ending in April 1981. Fresh fruit and dairy products became notably more expensive last month.

The White House has emphasized that it is trying to offset rising costs to the degree that it can.

“We’ve taken steps to address bottlenecks in the supply chain, to reduce those bottlenecks,” Jen Psaki, the White House press secretary, said this week.

But those changes have mostly helped around the edges, and as prices have shown little sign of moderating on their own, Fed officials have coalesced around the view that they will need to use their policies to cool off demand and keep today’s rapid inflation from becoming entrenched. That may limit the central bank’s room to react to any slowdown in growth prompted by uncertainty and high gas prices.

“They need to stay on track,” said Ms. Rosner-Warburton. “They don’t have as much leeway to respond to these risks, given how elevated inflation is.”

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What the Conflict in Ukraine Means for the U.S. Economy

Russia’s threatened invasion of Ukraine could have economic repercussions globally and in the United States, ramping up uncertainty, roiling commodity markets and potentially pushing up inflation as gas and food prices rise around the world.

Russia is a major producer of oil and natural gas, and the brewing geopolitical conflict has sent prices of both sharply higher in recent weeks. It is also the world’s largest wheat exporter, and is a major food supplier to Europe.

The United States imports relatively little directly from Russia, but a commodities crunch caused by a conflict could have knock-on effects that at least temporarily drive up prices for raw materials and finished goods when much of the world, including the United States, is experiencing rapid inflation.

Global unrest could also spook American consumers, prompting them to cut back on spending and other economic activity. If the slowdown were to become severe, it could make it harder for the Federal Reserve, which is planning to raise interest rates in March, to decide how quickly and how aggressively to increase borrowing costs. Central bankers noted in minutes from their most recent meeting that geopolitical risks “could cause increases in global energy prices or exacerbate global supply shortages,” but also that they were a risk to the outlook for growth.

contending with quickly rising prices, businesses are trying to navigate roiled supply chains and people report feeling pessimistic about their financial outlooks despite strong economic growth.

“The level of economic uncertainty is going to rise, which is going to be negative for households and firms,” said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics, noting that the effect would be felt most acutely in Europe and to a lesser degree in the United States.

A major and immediate economic implication of a showdown in Eastern Europe ties back to oil and gas. Russia produces 10 million barrels of oil a day, roughly 10 percent of global demand, and is Europe’s largest supplier of natural gas, which is used to fuel power plants and provide heat to homes and businesses.

The United States imports comparatively little Russian oil, but energy commodity markets are global, meaning a change in prices in one part of the world influences how much people pay for energy elsewhere.

It is unclear how much a conflict would push up prices, but energy markets have already been jittery — and fuel prices have risen sharply — on the prospect of an invasion.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

If a conflict drives global uncertainty and causes investors to pour money into dollars, pushing up the value of the currency, it could actually make United States imports cheaper.

Other trade risks loom. Unrest at the nexus of Europe and Asia could pose risk for supply chains that have been roiled by the pandemic.

Phil Levy, the chief economist at Flexport, said that Russia and Ukraine were far less linked into global supply chains than a country like China, but that conflict in the area could disrupt flights from Asia to Europe. That could pose a challenge for industries that move products by air, like electronics, fast fashion and even automakers, he said at an event at the National Press Foundation on Feb. 9.

“Air has been a means of getting around supply chain problems,” Mr. Levy said. “If your factory was going to shut because you don’t have a key part, you might fly in that key part.”

Some companies may not yet realize their true exposure to a potential crisis.

Victor Meyer, the chief operating officer of Supply Wisdom, which helps companies analyze their supply chains for risk, said that some companies were surprised by the extent of their exposure to the region during the Russian invasion of Ukraine in 2014, when it annexed Crimea.

Mr. Meyer noted that if he were a chief security officer of a company with ties to Ukraine, “I would militate rather strongly to unwind my exposure.”

There could also be other indirect effects on the economy, including rattling consumer confidence.

Households are sitting on cash stockpiles and probably could afford higher prices at the pump, but climbing energy costs are likely to make them unhappy at a moment when prices overall are already climbing and economic sentiment has swooned.

“The hit would be easily absorbed, but it would make consumers even more miserable, and we have to assume that a war in Europe would depress confidence directly too,” Ian Shepherdson at Pantheon Macroeconomics wrote in a Feb. 15 note.

Another risk to American economic activity may be underrated, Mr. Obstfeld said: The threat of cyberattack. Russia could respond to sanctions from the United States with digital retaliation, roiling digital life at a time when the internet has become central to economic existence.

“The Russians are the best in the world at this,” he said. “And we don’t know the extent to which they have burrowed into our systems.”

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Why the January Jobs Report May Disappoint, and Is Sure to Perplex

The January jobs report is arriving at a critical time for the U.S. economy. Inflation is rising. The pandemic is still taking a toll. And the Federal Reserve is trying to decide how best to steer the economy through a swirl of competing threats.

Unfortunately, the data, which the Labor Department will release on Friday, is unlikely to provide a clear guide.

A slew of measurement issues and data quirks will make it hard to assess exactly how the latest coronavirus wave has affected workers and businesses, or to gauge the underlying health of the labor market.

“It’s going to be a mess,” said Skanda Amarnath, executive director of Employ America, a research group.

on Twitter and in conversations with reporters that a weak January jobs number would not necessarily be a sign of a sustained slowdown.

Economists generally agree. Coronavirus cases have already begun to fall in most of the country, and there is little evidence so far that the latest wave caused lasting economic damage. Layoffs have not spiked, as they did earlier in the pandemic, and employers continue to post job openings.

“You could have the possibility of a payroll number that looks really truly horrendous, but you’re pulling on a rubber band,” said Nick Bunker, director of economic research for the job site Indeed. “Things could bounce back really quickly.”

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

Economists typically pay more attention to the survey of businesses, which is larger and seen as more reliable. But some say they will be paying closer attention than usual this month to the data from the survey of households, because it will do a better job of distinguishing between temporary absences and more lasting effects from Omicron, such as layoffs or postponed expansions.

But economists have also cautioned not to minimize the impact that even temporary absences from work could have on families and the economy, especially now that the government is no longer offering expanded unemployment benefits and other aid.

“There isn’t that much Covid relief funding sloshing about anymore, so absences from work may actually reflect a meaningful decline in income,” said Julia Pollak, chief economist at the employment site ZipRecruiter.

Even in normal times, January jobs data can be tough to interpret. Retailers, shippers and other companies every year lay off hundreds of thousands of temporary workers hired during the holiday season. Government statisticians adjust the data to account for those seasonal patterns, but that process is imperfect. January is also the month each year when the Labor Department incorporates long-run revisions and other updates to its estimates.

“January is a messy month as it is,” Mr. Amarnath said.

This year, it could be extra messy because the pandemic has disrupted normal seasonal patterns. The labor shortage led some companies to hire permanent workers instead of short-term seasonal help during the holidays; others may have retained temporary workers longer than planned to cover for employees who were out sick. If that results in fewer layoffs than usual, the government’s seasonal adjustment formula will interpret that continued employment as an increase.

Other numbers could also be deceptive. The unemployment rate, for example, could fall even if hiring slowed. That is because the government considers people unemployed only if they are actively searching for work, and the spike in Covid cases may have led some to suspend their job searches.

Data on average hourly earnings could also be skewed because it is based on the payroll data — people who aren’t on payrolls aren’t counted in the average at all. Low-wage workers were probably the most likely to be missing from payrolls last month, since higher-wage workers are more likely to have access to paid sick leave. That could lead to an artificial — and temporary — jump in average earnings when policymakers at the Fed are watching wage data for hints about inflation.

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Wages Rise at Fastest Pace Since 2002 as Inflation Continues to Run Hot

Inflation came in strong and wage growth remained elevated at the end of 2021, setting the stage for a challenging economic year in which the Federal Reserve and White House will try to maintain momentum in the job market while wrestling price gains under control.

The Personal Consumption Expenditures index, the Fed’s preferred inflation gauge, came in at 5.8 percent in December, up from 5.7 percent the prior month. That beat out the prior month to become the fastest pace since 1982.

climbed 4 percent in the year through the fourth quarter, with its wages and salaries measure picking up by 4.5 percent.

That marked the fastest pace of increase for both the overall compensation and the wages and salaries measure since the data series started two decades ago.

taken steps aimed at relieving pressure on choked supply chains, the job of slowing down demand to bring prices under control rests primarily with the Fed.

produced by the Federal Reserve Bank of New York that incorporates backlogs, delivery times and inventories.

Inflation sped up starting last year as people bought more goods, aided by repeated government relief checks and other federal benefits. The world’s factories and shipping lines have struggled to keep up with demand, resulting in rising prices for cars, lumber and clothing. While spending has moderated somewhat recently — it fell in December as Omicron spread, as goods consumption declined — it is unclear whether that is a blip caused by the pandemic or a lasting pullback.

Fed officials have been watching for signs that inflation, which they have projected will ease to less than 3 percent by the end of the year, might instead linger.

“We are attentive to the risks that persistent real wage growth in excess of productivity could put upward pressure on inflation,” Jerome H. Powell, the Fed’s chair, said during a news conference on Wednesday. Friday’s data could offer officials some slight reprieve.

Mr. Powell had in December specifically cited the previously Employment Cost Index reading — which came in high during the third quarter — as one reason that the Fed had decided to shift from stoking growth to preparing to fight back if inflation becomes long-lasting.

The fact that the measure did not pick up as sharply as expected in the final quarter of the year could give investors some confidence that the central bank’s policy-setting group, the Federal Open Market Committee, will not further speed up its plans to withdraw economic help.

University of Michigan survey has shown sentiment faltering as prices have risen, and the Conference Board’s index ticked down in January.

“You have very high inflation, so people are seeing an erosion of their purchasing power,” said Dana M. Peterson, chief economist at The Conference Board, noting that the resurgent virus is also to blame. “People will have higher confidence once we’re beyond Omicron.”

For now, it is a moment of pronounced economic uncertainty.

Ashley Fahr, the owner of the culinary company and event space La Cuisine in Venice, Calif., said rising grocery costs began to bite at a difficult moment — just before Omicron began to surge, causing people to pull back from activities like the cooking classes and catering events she offers.

She noticed in December that her food bill had gone up by about 15 percent, chipping away at her margins, and passed about 5 percent of that on to customers while absorbing the rest of the increase.

“I didn’t want to quote a number people would balk at,” she said.

Ms. Fahr said she pays her workers — most of whom are independent contractors — competitive wages and that it’s hard to keep up with rising prices and still turn a profit. She is watching to see what other local caterers and cooking classes do with their pricing — and whether they begin to pass on the full increase to customers.

“If everyone else does it, I’ll do it too,” Ms. Fahr said.

That sort of logic is what economic officials worry about. If businesses and consumers begin to expect prices to steadily rise, they may begin to accept instead of resisting them — and when inflation gets baked into expectations, it might spiral upward year after year, economists worry.

“What we’re trying to do is get inflation, keep inflation expectations well anchored at 2 percent,” Mr. Powell, the Fed chair, said at his news conference this week. “That’s always the ultimate goal.”

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