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Gustavo Petro Wins the Election, Becoming Colombia’s First Leftist Leader

BOGOTÁ, Colombia — For the first time, Colombia will have a leftist president.

Gustavo Petro, a former rebel and a longtime legislator, won Colombia’s presidential election on Sunday, galvanizing voters frustrated by decades of poverty and inequality under conservative leaders, with promises to expand social programs, tax the wealthy and move away from an economy he has called overly reliant on fossil fuels.

His victory sets the third largest nation in Latin America on a sharply uncertain path, just as it faces rising poverty and violence that have sent record numbers of Colombians to the United States border; high levels of deforestation in the Colombian Amazon, a key buffer against climate change; and a growing distrust of key democratic institutions, which has become a trend in the region.

Mr. Petro, 62, received more than 50 percent of the vote, with more than 99 percent counted Sunday evening. His opponent, Rodolfo Hernández, a construction magnate who had energized the country with a scorched-earth anti-corruption platform, won just over 47 percent.

official figures.

part of a different rebel group, called the M-19, which demobilized in 1990, and became a political party that helped rewrite the country’s constitution. Eventually, Mr. Petro became a forceful leader in the country’s opposition, known for denouncing human rights abuses and corruption.

called his energy plan “economic suicide.”

riddled with corruption and frivolous spending. He had called for combining ministries, eliminating some embassies and firing inefficient government employees, while using savings to help the poor.

One Hernández supporter, Nilia Mesa de Reyes, 70, a retired ethics professor who voted in an affluent section of Bogotá, said that Mr. Petro’s leftist policies, and his past with the M-19, terrified her. “We’re thinking about leaving the country,” she said.

Mr. Petro’s critics, including former allies, have accused him of arrogance that leads him to ignore advisers and struggle to build consensus. When he takes office in August, he will face a deeply polarized society where polls show growing distrust in almost all major institutions.

He has vowed to serve as the president of all Colombians, not just those who voted for him.

On Sunday, at a high school-turned-polling station in Bogotá, Ingrid Forrero, 31, said she saw a generational divide in her community, with young people supporting Mr. Petro and older generations in favor of Mr. Hernández.

Her own family calls her the “little rebel” because of her support for Mr. Petro, whom she said she favors because of his policies on education and income inequality.

“The youth is more inclined toward revolution,” she said, “toward the left, toward a change.”

Megan Janetsky contributed reporting from Bucaramanga, Colombia, and Sofía Villamil and Genevieve Glatsky contributed reporting from Bogotá.

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Protests against India’s new military recruitment system turn violent

LUCKNOW, India, June 16 (Reuters) – Police in northern India fired shots in the air on Thursday to push back stone-throwing crowds and authorities shut off mobile internet in at least one district to forestall further chaos, as protests widened against a new military recruitment system.

Prime Minister Narendra Modi’s government this week announced an overhaul of recruitment for India’s 1.38 million-strong armed forces, looking to bring down the average age of personnel and reduce pension expenditure. read more

But potential recruits, military veterans, opposition leaders and even some members of Modi’s ruling Bharatiya Janata Party (BJP) have raised reservations over the revamped process.

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In northern Haryana state’s Palwal district, some 50 km (31 miles) south of the capital New Delhi, crowds hurled stones at a government official’s house and police protecting the building fired shots to keep the mob at bay, according to video footage from Reuters partner ANI.

“Yes, we have fired a few shots to control the crowd,” a local police official said, declining to be named.

There was no immediate information on casualties.

Mobile internet was temporarily suspended in Palwal district for the next 24 hours, Haryana’s information department said.

Protesters in eastern India’s Bihar state set a BJP office on fire in Nawada city, attacked railway infrastructure and blocked roads, as demonstrations spread across several parts of the country, police officials told Reuters.

Protesters also attacked railway property across Bihar, settling alight coaches in at least two locations, damaging train tracks and vandalising a station, according to officials and a railways statement.

The new recruitment system, called Agnipath or “path of fire” in Hindi, will bring in men and women between the ages of 17-and-a-half and 21 for a four-year tenure at non-officer ranks, with only a quarter retained for longer periods.

Previously, soldiers have been recruited by the army, navy and air force separately and typically enter service for up to 17 years for the lowest ranks.

The shorter tenure has caused concern among potential recruits.

“Where will we go after working for only four years?” one young man, surrounded by fellow protesters in Bihar’s Jehanabad district, told ANI. “We will be homeless after four years of service. So we have jammed the roads.”

Smoke billowed from burning tyres at a crossroads in Jehanabad where protesters shouted slogans and performed push-ups to emphasise their fitness for service.

Bihar and neighbouring Uttar Pradesh saw protests over the recruitment process for railway jobs in January this year, underlining India’s persistent unemployment problem. read more

Varun Gandhi, a BJP lawmaker from Uttar Pradesh, in a letter to India’s defence minister Rajnath Singh on Thursday said that 75% of those recruited under the scheme would become unemployed after four years of service.

“Every year, this number will increase,” Gandhi said, according to a copy of the letter posted by him on social media.

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Writing by Devjyot Ghoshal;
Editing by Andrew Cawthorne, William Maclean

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China’s holdings of U.S. Treasuries skid to 12-year low; Japan also cuts holdings

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U.S. and Chinese flags are seen in front of a U.S. dollar banknote featuring American founding father Benjamin Franklin and a China’s yuan banknote featuring late Chinese chairman Mao Zedong in this illustration picture taken May 20, 2019. REUTERS/Jason Lee/Illustration/File Photo

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NEW YORK, June 15 (Reuters) – China’s holdings of U.S Treasuries tumbled in April to their lowest since May 2010, data showed on Wednesday, with Chinese investors likely cutting losses as Treasury prices fell after Federal Reserve officials signaled sizable rate hikes to temper soaring inflation.

Chinese holdings dropped to $1.003 trillion in April, down $36.2 billion from $1.039 trillion the previous month, according to U.S. Treasury Department figures. China’s stock of Treasuries in May 2010 was $843.7 billion, data showed.

The reduction in Treasury holdings may also have been aimed at diversifying China’s foreign exchange holdings, analysts said.

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The Chinese sales contributed to a drop in overall foreign holdings of Treasuries in April that helped propel yields higher. U.S. benchmark 10-year Treasury yields started April with a yield of 2.3895% , and surged roughly 55 basis points to 2.9375% by the end of the month.

Japan’s holdings of U.S. Treasuries fell further in April to their lowest since January 2020, amid a persistent decline in the yen versus the dollar, which may have prompted Japanese investors to sell U.S. assets to benefit from the exchange rate.

Japanese holdings fell to $1.218 trillion in April, from $1.232 trillion in March. Japan remained the largest non-U.S. holder of Treasuries.

Overall, foreign holdings of Treasuries slid to 7.455 trillion, the lowest since April 2021, from $7.613 trillion in March.

On a transaction basis, U.S. Treasuries saw net foreign outflows of $1.152 billion in April, from net new foreign inflows of $48.795 billion in March. This was the first outflow since October 2021.

The Federal Reserve, at its policy meeting in March, raised benchmark interest rates by a quarter of a percentage point.

It lifted rates by 50 bps in May, but at the June policy meeting on Wednesday lifted rates by a hefty 75 bps to stem a disruptive surge in inflation. The Fed also projected a slowing economy and rising unemployment in the months to come. read more

In other asset classes, foreigners sold U.S. equities in April amounting to $7.1 billion, from net outflows of $94.338 billion in March, the largest since at least January 1978, when the Treasury Department started keeping track of this data. Foreign investors have sold stocks for four consecutive months.

U.S. corporate bonds, on the other hand, posted inflows in April of $22.587 billion, from March’s $33.38 billion, the largest since March 2021. Foreigners were net buyers of U.S. corporate bonds for four straight months.

U.S. residents, meanwhile, decreased their holdings of long-term foreign securities, with net sales of $36.7 billion, data showed.

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Reporting by Gertrude Chavez-Dreyfuss; Editing by Paul Simao and Richard Pullin

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U.S. labor market appears to cool; homebuilding slumps as rates surge

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A “Now hiring” sign is displayed on the window of an IN-N-OUT fast food restaurant in Encinitas, California, U.S., May 9, 2022. REUTERS/Mike Blake

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  • Weekly jobless claims fall 3,000 to 229,000
  • Continuing claims rise 3,000 to 1.312 million
  • Housing starts plunge 14.4% in May; permits drop 7.0%

WASHINGTON, June 16 (Reuters) – The number of Americans filing new claims for unemployment benefits fell less than expected last week, suggesting some cooling in the labor market, though conditions remain tight.

There are growing signs the Federal Reserve’s aggressive efforts to slow demand and bring down inflation to its 2% target are starting to have an impact. Homebuilding slumped to a 13-month low in May, while a gauge of factory activity in the mid-Atlantic region contracted for the first time in two years in June. read more

The U.S. central bank on Wednesday raised its policy interest rate by three-quarters of a percentage point, the biggest hike since 1994. read more

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“The Fed is getting what it wants as financial market conditions tighten and interest rate-sensitive parts of the economy respond to the removal of monetary policy accommodation,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester Pennsylvania.

Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 229,000 for the week ended June 11, the Labor Department said. Economists polled by Reuters had forecast 215,000 applications for the latest week.

The decline left the bulk of the prior week’s jump intact, which had lifted filings close to a five-month high. California reported a surge in unadjusted claims last week. There were notable rises in Ohio and Michigan, potentially related to the auto industry. Claims also increased considerably in Illinois and Pennsylvania, but fell in Missouri.

Jobless claims

There has been a steady rise in reports of job cuts, mostly in the technology and housing sectors. Still, claims have remained locked in a tight range since plunging to more than a 53-year low of 166,000 in March.

Fed Chair Jerome Powell told reporters on Wednesday that “the labor market has remained extremely tight,” and that “labor demand is very strong.” The U.S. central bank has increased its benchmark overnight interest rate by 150 basis points since March.

There were 11.4 million job openings at the end of April. The number of people receiving benefits after an initial week of aid rose 3,000 to 1.312 million during the week ending June 4.

“For now, supply and demand mismatches will keep filings low,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York. “But the level could start to trend up as the Fed continues to remove policy accommodation to slow demand.”

Thursday’s data followed on the heels of news this week of a surprise decline in U.S. retail sales in May, amplifying fears of a recession.

Stocks on Wall Street tumbled. The dollar fell against a basket of currencies. U.S. Treasury yields fell.

LOSING SPEED

The housing market, the sector most sensitive to interest rates, is losing speed. But this could help to bring housing supply and demand back into alignment and lower prices.

A separate report from the Commerce Department showed housing starts plunged 14.4% to a seasonally adjusted annual rate of 1.549 million units last month, the lowest level since April 2021. Economists had forecast starts would slide to a rate of 1.701 million units.

Permits for future homebuilding declined 7.0% to a rate of 1.695 million units. A survey on Wednesday showed the National Association of Home Builders/Wells Fargo Housing Market sentiment index hit a two-year low in June, with a gauge of prospective buyer traffic falling below the break-even level of 50 for the first time since June 2020. read more

Single-family housing starts, which account for the biggest share of homebuilding, tumbled 9.2% to a rate of 1.051 million units last month, the lowest since August 2020. Starts rose in the Northeast, but fell in the Midwest, South and West regions.

housing starts and building permits

The 30-year fixed-rate mortgage jumped 55 basis points this week to a 13-1/2-year high of 5.78%, mortgage finance agency Freddie Mac reported on Thursday. That was the largest one-week increase since 1987.

“Rising rates aren’t all bad news, however,” said Jacob Channel, senior economist at LendingTree. “Though it’s unlikely that home prices will majorly slump, an increase in housing supply will likely significantly slow home price growth and give would-be buyers more housing options to chose from.”

Building permits for single-family homes declined 5.5% to a rate of 1.048 million units, the lowest since July 2020.

Starts for housing projects with five units or more dove 26.8% to a rate 469,000 units. Multi-family housing permits dropped 10.0% to a rate of 592,000 units.

The number of houses approved for construction that are yet to be started increased 0.7% to 283,000 units. Housing completions were the highest since 2007, which together with slowing demand could help to lower prices.

Goldman Sachs trimmed its second-quarter gross domestic product estimate by two-tenths of a percentage point to a 2.8% annualized rate. The economy contracted at a 1.5% pace in the January-March quarter.

“The Fed’s aggressive and abrupt policy tightening may soon be criticized for letting in the winds of recession,” said Christopher Rupkey, chief economist at FWDBONDS in New York.

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Reporting by Lucia Mutikani
Editing by Nick Zieminski and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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The Fed Raises Interest Rates by 0.75 Percentage Points to Tackle Inflation

The Federal Reserve took its most aggressive step yet to try to tame rapid and persistent inflation, raising interest rates by three-quarters of a percentage point on Wednesday and signaling that it is prepared to inflict economic pain to get prices under control.

The rate increase was the central bank’s biggest since 1994 and could be followed by a similarly sized move next month, suggested Jerome H. Powell, the Fed chair, underscoring just how much America’s unexpectedly stubborn price gains are unsettling Fed officials.

As central bankers drive their policy rate rapidly higher, it will make buying a home or expanding a business more expensive, restraining spending and slowing the broader economy. Officials expect growth to moderate in the coming months and years and predicted that unemployment will rise about half a percentage point to 4.1 percent by late 2024 as their policy squeezes companies and workers.

economic projections they released Wednesday, which would be the highest level since 2008. They also foresee the Fed’s policy rate peaking at 3.8 percent at the end of 2023, up from 2.8 percent when projections were last released in March.

Consumer Price Index jumped 8.6 percent in May from a year earlier, the fastest increase since late 1981. The pace was brisk even after the stripping out of food and fuel prices.

While the Fed’s preferred price gauge — the Personal Consumption Expenditures measure — is climbing slightly more slowly, it remains too hot for comfort as well. And consumers are beginning to expect faster inflation in the months and years ahead, based on surveys, which is a worrying development. Economists think that expectations can be self-fulfilling, causing people to ask for wage increases and accept price jumps in ways that perpetuate high inflation.

“What we’re looking for is compelling evidence that inflationary pressures are abating, and that inflation is moving back down,” Mr. Powell said at his news conference Wednesday, noting that instead the inflation situation has worsened. “We thought that strong action was warranted.”

One Fed official, the president of the Federal Reserve Bank of Kansas City, Esther George, voted against the rate increase. Though Ms. George has historically worried about high inflation and favored higher interest rates, she would have preferred a half-point move in this instance.

Stock prices have been plummeting and bond market signals are flashing red as Wall Street traders and economists increasingly expect that the economy may tip into a recession. On Wednesday, the S&P 500 rose 1.5 percent, climbing after the release of the decision and Mr. Powell’s news conference, most likely because investors had already expected the Fed to make a large move.

The economy remains strong for now, but the Fed’s actions are beginning to have a real-world impact: Mortgage rates have risen sharply and are helping to cool the housing market; demand for consumer goods is showing signs of beginning to slow as borrowing becomes more expensive; and job growth, while robust, has begun to moderate.

While the economic path ahead may be a rocky one, the Fed’s policymakers contend that things would be worse in the long run if they did not act. As prices surge, worker pay is not keeping up. That means that families are falling behind as they try to afford gas, food and rent, even in a very strong labor market.

“You really cannot have the kind of labor market we want without price stability,” Mr. Powell said Wednesday, explaining that what officials want is a job market with lots of job opportunities and rising wages. “It’s not going to happen with the levels of inflation we have.”

The White House has been emphasizing that the Fed plays the key role in bringing down inflation, even as the Biden administration does what it can to reduce some costs for beleaguered consumers and urges companies to improve gas supply.

“The Federal Reserve has a primary responsibility to control inflation,” President Biden wrote in a recent opinion column. He added that “past presidents have sought to influence its decisions inappropriately during periods of elevated inflation. I won’t do this.”

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When Stocks Become Bear Markets

The S&P 500 on Monday dropped into its second bear market of the pandemic, crossing a symbolic and worrisome threshold as stocks plunge following a meteoric rise over the last two years.

Bear markets — when stocks decline at least 20 percent from their recent peaks — are relatively rare, and they frequently precede a recession. This sell-off, dragging the S&P down from a peak on Jan. 3 (which reflects the new bear market’s starting point), comes as concerns mount over high inflation, the war in Ukraine, Covid and the Federal Reserve’s attempts to rein in the economy.

just above a bear market in May before recovering, but stocks fell sharply again on Friday following the latest release of government data showing that inflation had accelerated again.

The worry among stock traders is that the Fed could be forced to constrict the economy’s growth in order to bring inflation under control, leading to a recession. While recessions have often followed bear markets, one does not necessarily cause the other.

“It is not that consumer demand is weak yet — spending has held up,” said Paul Ashworth, who is the chief North American economist at Capital Economics. “The fear is that the Fed is going to go very hard, and that leaves us in a recession at some point.”

800,000 of the 22 million jobs lost at the height of coronavirus-related lockdowns. While rising mortgage rates have begun to dampen activity, housing — generally one of the biggest sources of wealth for Americans — remains strong.

target-date funds, which automatically move 401(k) money into bonds and other safer investments as their retirement age approaches. But 401(k) plans can still take a significant hit in market downturns. In 2008, for instance, as the S&P 500 dropped 37 percent, the average 401(k) account balance for those who were in their 50s fell 24 percent.

People with retirement accounts are keeping more of their assets in stocks now, as opposed to bonds or a mix of other investments. “There has been a growing complacency of people keeping most of their nest eggs in stocks,” said Monique Morrissey, who specializes in retirement at the left-leaning think tank Economic Policy Institute. “There has been a fundamental misunderstanding — returns do not always average out.”

The bigger issue, according to Ms. Morrissey, is that many people have gotten used to the stock market going up. That’s not a guarantee — especially in the near term.

“It’s not just the loss from January; it’s what happens going forward,” she said. “If you were counting on the amount that you have in your 401(k) to continually grow, well, then you may never get to what you had planned for.”

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White House Struggles to Talk About Inflation, the ‘Problem From Hell’

WASHINGTON — President Biden was at a private meeting discussing student debt forgiveness this year when, as happens uncomfortably often these days, the conversation came back to inflation.

“He said with everything he does, Republicans are going to attack him and use the word ‘inflation,’” said Representative Tony Cárdenas, Democrat of California, referring to Mr. Biden’s meeting with the Congressional Hispanic Caucus in April. Mr. Cárdenas said Mr. Biden was aware he would be attacked over rising prices “no matter what issue we’re talking about.”

The comment underscored how today’s rapid price increases, the fastest since the 1980s, pose a glaring political liability that looms over every major policy decision the White House makes — leaving Mr. Biden and his colleagues on the defensive as officials discover that there is no good way to talk to voters about inflation.

The administration has at times splintered internally over how to discuss price increases and has revised its inflation-related message several times as talking points fail to resonate and new data comes in. Some Democrats in Congress have urged the White House to strike a different — and more proactive — tone ahead of the November midterm elections.

increased by 8.3 percent in the year through April, and data this week is expected to show inflation at 8.2 percent in May. Inflation averaged 1.6 percent annual gains in the five years leading up to the pandemic, making today’s pace of increase painfully high by comparison. A gallon of gas, one of the most tangible household costs, hit an average of $4.92 this week. Consumer confidence has plummeted as families pay more for everyday purchases and as the Fed raises interest rates to cool the economy, which increases the risk of a recession.

a series of confidential memos sent to Mr. Biden last year by one of his lead pollsters, John Anzalone. Inflation has only continued to fuel frustration among voters, according to a separate memo compiled by Mr. Anzalone’s team last month, which showed the president’s low approval rating on the economy rivaling only his approach to immigration.

wrote in a tweet that went viral this weekend.

The White House knows it is in a tricky position, and the administration’s approach to explaining inflation has evolved over time. Officials spent the early stages of the current price burst largely describing price pressures as temporary.

When it became clear that rising costs were lasting, administration officials began to diverge internally on how to frame that phenomenon. While it was clear that much of the upward pressure on prices came from supply chain shortages exacerbated by continued waves of the coronavirus, some of it also tied back to strong consumer demand. That big spending had been enabled, in part, by the government’s stimulus packages, including direct checks to households, expanded unemployment insurance and other benefits.

Some economists in the White House have begun to emphasize that inflation was a trade-off: To the extent that Mr. Biden’s stimulus spending spurred more inflation, it also aided economic growth and a faster recovery.

have claimed credit for strong economic growth.

“Some have a curious obsession with exaggerating impact of the Rescue Plan while ignoring the degree high inflation is global,” Gene Sperling, a senior White House adviser overseeing the implementation of the stimulus package, wrote on Twitter last week, adding that the law “has had very marginal impact on inflation.”

Brian Deese, the director of the National Economic Council, acknowledged in an interview last week that there were some disagreements among White House economic officials when it came to how to talk about and respond to inflation, but he portrayed that as a positive — and as something that is not leading to any kind of dysfunction.

“If there wasn’t healthy disagreement, debate and people feeling comfortable bringing issues and ideas to the table, then I think we would be not serving the president and the public interest well,” he said.

He also pushed back on the idea that the administration was deeply divided on the March 2021 package’s aftereffects, saying in a separate emailed comment that “there is agreement across the administration that many factors contributed to inflation, and that inflation has been driven by elevated demand and constrained supply across the globe.”

How to portray the Biden administration’s stimulus spending is far from the only challenge the White House faces. As price increases last, Democrats have grappled with how to discuss their plans to combat them.

deficit reduction as a way to lower inflation and arguing that Republicans have a bad plan to deal with rising costs. Mr. Biden regularly acknowledges the pain that higher prices are causing and has emphasized that the problem of taming inflation rests largely with the Fed, an independent entity whose work he has promised not to interfere with.

The administration has also highlighted that inflation is widespread globally, and that the United States is better off than many other nations.

The renewed messaging comes as Mr. Biden and his top aides have grown increasingly concerned about the public’s negative views of the economy, according to an administration official. Economists within the administration are more sidelined when it comes to setting the tone on issues like inflation than in previous White Houses, another person familiar with the discussions said.

So far, the talking points have done little to change public perception or to mollify concerns on Capitol Hill, where some Democrats are pushing for the White House to find a more compelling story.

“There has to be more of a laser focus on the economy, a bolder message, a clearer story,” said Representative Ro Khanna, a California Democrat who wrote a New York Times opinion piece last week saying that Democrats need a more ambitious plan for fighting inflation. He added that “rhetoric about ‘Well, we’re doing really well’ does not capture the profound sense of anxiety that Americans feel.”

Part of the difficulty is that there is only so much politicians can do to fight price increases.

suspended a ban on summertime sales of higher-ethanol gasoline blends to try to temper price increases at the pump, spurring frustration among climate activists still angry over the collapse of the president’s climate and social-spending package.

Talks over whether to roll back Trump-era tariffs on Chinese goods have also gotten caught in the inflation maw. Ms. Yellen has said she supports relaxing tariffs to help ease prices, but other Democrats are wary that removing them would make Mr. Biden look weak on China.

Inflation is also influencing conversations about whether to forgive student loan debt, one of Mr. Biden’s key campaign promises. Economists in the administration think that loan forgiveness would, at most, push inflation up a little bit by giving people with outstanding student debt more financial wiggle room. But some economists in the administration’s orbit have expressed concern about the possibility of doing something that could stimulate demand — even slightly — at a moment when it is already hot.

To help mute the inflationary effect, forgiveness would most likely be accompanied by a resumption of interest payments on all student loans that have been paused since the pandemic.

For now, the administration is considering forgiving at least $10,000 for borrowers in a certain income range, according to people familiar with the matter. Mr. Cárdenas said that Mr. Biden knew he would be attacked over inflation but that he did not think the issue would prevent the president from canceling at least $10,000 worth of debt.

“Will it affect him going beyond that? It may,” he said.

Jonathan Martin contributed reporting.

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The Potential Dark Side of a White-Hot Labor Market

Ms. Calvo is hoping to work her way up to the assistant store-manager level, which would put her in a salaried position, and thinks she has made the prudent choice in leaving school, even if her parents disagree.

“They think it’s a bad idea — they think I should have quit working, gone to college,” she said. But she has made enough money to put her name on a lease, which she recently signed along with her boyfriend, who is 19 and works at the restaurant in a local Nordstrom.

“I feel like I have a lot of experience, and I have a lot more to gain,” Ms. Calvo said.

The question, then, is how people like Ms. Calvo will fare in a weaker labor market, because today’s remarkable economic strength is unlikely to continue.

The Fed is raising rates in a bid to slow down consumer demand, which would in turn cool down job and wage growth. Monetary policy is a blunt instrument: There is a risk that the central bank will end up pushing unemployment higher, and even touch off a recession, as it tries to bring today’s rapid inflation under control.

That could be bad news for people without credentials or degrees. Historically, workers with less education and those who have been hired more recently are the ones to lose their jobs when unemployment rises and the economy weakens. At the onset of the pandemic, to consider an extreme example, unemployment for adults with a high school education jumped to 17.6 percent, while that for the college educated peaked at 8.4 percent.

The same people benefiting from unusual opportunities and rapid pay gains today could be the ones to suffer in a downturn. That is one reason economists and educators like Ms. Jackson often urge people to continue their training.

“We worry about their long-term futures, if this derails them from ever going to college, for a $17 to $19 Target job. That’s a loss,” said Alicia Sasser Modestino, an associate professor at Northeastern University who researches labor economics and youth development.

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Why a Not-So-Hot Economy Might Be Good News

When it comes to the economy, more is usually better.

Bigger job gains, faster wage growth and more consumer spending are all, in normal times, signs of a healthy economy. Growth might not be sufficient to ensure widespread prosperity, but it is necessary — making any loss of momentum a worrying sign that the economy could be losing steam or, worse, headed into a recession.

But these are not normal times. With nearly twice as many open jobs as available workers and companies struggling to meet record demand, many economists and policymakers argue that what the economy needs right now is not more, but less — less hiring, less wage growth and above all less inflation, which is running at its fastest pace in four decades.

Jerome H. Powell, the Federal Reserve chair, has called the labor market “unsustainably hot,” and the central bank is raising interest rates to try to cool it. President Biden, who met with Mr. Powell on Tuesday, wrote in an opinion article this week in The Wall Street Journal that a slowdown in job creation “won’t be a cause for concern” but would rather be “a sign that we are successfully moving into the next phase of recovery.”

“We want a full and sustainable recovery,” said Claudia Sahm, a former Fed economist who has studied the government’s economic policy response to the pandemic. “The reason that we can’t take the victory lap right now on the recovery — the reason it is incomplete — is because inflation is too high.”

undo much of that progress.

“That’s the needle we’re trying to thread right now,” said Harry J. Holzer, a Georgetown University economist. “We want to give up as few of the gains that we’ve made as possible.”

Economists disagree about the best way to strike that balance. Mr. Powell, after playing down inflation last year, now says reining it in is his top priority — and argues that the central bank can do so without cutting the recovery short. Some economists, particularly on the right, want the Fed to be more aggressive, even at the risk of causing a recession. Others, especially on the left, argue that inflation, while a problem, is a lesser evil than unemployment, and that the Fed should therefore pursue a more cautious approach.

But where progressives and conservatives largely agree is that evaluating the economy will be particularly difficult over the next several months. Distinguishing a healthy cool-down from a worrying stall will require looking beyond the indicators that typically make headlines.

“It’s a very difficult time to interpret economic data and to even understand what’s happening with the economy,” said Michael R. Strain, an economist with the American Enterprise Institute. “We’re entering a period where there’s going to be tons of debate over whether we are in a recession right now.”

11.4 million job openings at the end of April, close to a record. But there are roughly half a million fewer people either working or actively looking for work than when the pandemic began, leaving employers scrambling to fill available jobs.

The labor force has grown significantly this year, and forecasters expect more workers to return as the pandemic and the disruptions it caused continue to recede. But the pandemic may also have driven longer-lasting shifts in Americans’ work habits, and economists aren’t sure when or under what circumstances the labor force will make a complete rebound. Even then, there might not be enough workers to meet the extraordinarily high level of employer demand.

Persistently weak pay increases were a bleak hallmark of the long, slow recovery that followed the last recession. But even some economists who bemoaned those sluggish gains at the time say the current rate of wage growth is unsustainable.

“That’s something that we’re used to saying pretty unequivocally is good, but in this case it just raises the risk that the economy is overheating further,” said Adam Ozimek, chief economist of the Economic Innovation Group, a Washington research organization. As long as wages are rising 5 or 6 percent per year, he said, it will be all but impossible to bring inflation down to the Fed’s 2 percent target.

Fed officials are watching closely for signs of a “wage-price spiral,” a self-reinforcing pattern in which workers expect inflation and therefore demand raises, leading employers to increase prices to compensate. Once such a cycle takes hold, it can be difficult to break — a prospect Mr. Powell has cited in explaining why the central bank has become more aggressive in fighting inflation.

“It’s a risk that we simply can’t run,” he said at a news conference last month. “We can’t allow a wage-price spiral to happen. And we can’t allow inflation expectations to become unanchored. It’s just something that we can’t allow to happen, and so we’ll look at it that way.”

speech in Germany this week, Christopher J. Waller, a Fed governor, argued that as demand slows, employers are likely to start posting fewer jobs before they turn to layoffs. That could result in slower wage growth — since with fewer employers trying to hire, there will be less competition for workers — without a big increase in unemployment.

“I think there’s room right now for inflation to come down a significant amount without unemployment coming up,” said Mike Konczal, an economist at the Roosevelt Institute.

The Fed’s efforts to cool off the economy are already bearing fruit, Mr. Konczal said. Mortgage rates have risen sharply, and there are signs that the housing market is slowing as a result. The stock market has lost almost 15 percent of its value since the beginning of the year. That loss of wealth is likely to lead at least some consumers to pull back on their spending, which will lead to a pullback in hiring. Job openings fell in April, though they remained high, and wage growth has eased.

“There’s a lot of evidence to suggest the economy has already slowed down,” Mr. Konczal said. He said he was optimistic that the United States was on a path toward “normalizing to a regular good economy” instead of the boomlike one it has experienced over the past year.

But the thing about such a “soft landing,” as Fed officials call it, is that it is still a landing. Wage growth will be slower. Job opportunities will be fewer. Workers will have less leverage to demand flexible schedules or other perks. For the Fed, achieving that outcome without causing a recession would be a victory — but it might not feel like one to workers.

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