mandates — “the economic goals of maximum employment and price stability”— as new information arrived.

Donald Kohn, a senior fellow at the Brookings Institution in Washington, was a Fed insider for 40 years, and retired as vice chair in 2010. With his inestimable guidance, I plunged into Fed history during the Volcker era.

I found an astonishing wealth of material, providing far more information than reporters had access to back then. In fact, while the current Fed provides vast reams of data, what goes on behind closed doors is better documented, in some respects, for the Volcker Fed.

That’s because transcripts of Fed meetings from that period were reconstructed from recordings that, Mr. Kohn said, “nobody was thinking about as they were talking because nobody knew about them or expected that this would ever be published, except, I guess Volcker.” By the 1990s, when the Fed began to produce transcripts available on a five-year time delay, Mr. Kohn said, participants in the meetings “were aware they were being recorded for history, so we became more restrained in what we said.”

So reading the Volcker transcripts is like being a fly on the wall. Some names of foreign officials have been scrubbed, but most of the material is there.

In a phone conversation, Mr. Kohn identified two critical “Volcker moments,” which he discussed at a Dallas Federal Reserve conference in June. “In both cases, the Fed moved in subtle ways and surprised people by changing its focus and its approach,” he said.

Congress, financial circles and academic institutions. Economics students may remember Milton Friedman saying: “Inflation is always and everywhere a monetary phenomenon.”

For Fed watchers, the change in the central bank’s emphasis had practical implications. Richard Bernstein, a former chief investment strategist at Merrill Lynch who now runs his own firm, said that back then: “You needed a calculator to figure out the numbers being released by the Fed. By comparison, now, there are practically no numbers. You just need to look at the words of Fed statements.”

The Fed’s methods of dealing with inflation are abstruse stuff. But its conversations about the problem in 1982 were pithy, and its decisions appeared to be based as much on psychology as on traditional macroeconomics.

As Mr. Volcker put it at a Federal Open Market Meeting on Oct. 6, 1979, “I have described the state of the markets as in some sense as nervous as I have ever seen them.” He added: “We are not dealing with a stable psychological or stable expectational situation by any means. And on the inflation front, we‘re probably losing ground.”

17 percent by March 1980. The Fed plunged the economy into one recession and then, when the first one failed to curb inflation sufficiently, into a second.

unemployment rate stood at 10.8 percent, a postwar high that was not exceeded until the coronavirus recession of 2020. But in 1982, even people at the Fed were wondering when the economy would begin to recover from the damage that had been done.

The fall of 1982 was the second “Volcker moment” discerned by Mr. Kohn, who was in the room during meetings. The Fed decided that inflation was coming down — although in September 1982, it was still in the 6 to 7 percent range. The economy was contracting sharply, and the extraordinarily high interest rates in the United States had ricocheted around the world, worsening a debt crisis in Mexico, Argentina and, soon, the rest of Latin America.

Fed meeting that October, when one official said, “There have certainly been some other problem situations” in Latin America, Mr. Volcker responded, “That’s the understatement of the day, if I must say so.”

Penn Square Bank in Oklahoma had collapsed, a precursor of other failures to come.

“We are in a worldwide recession,” Mr. Volcker said. “I don’t think there’s any doubt about that.” He added: “I don’t know of any country of any consequence in the world that has an expansion going on. And I can think of lots of them that have a real downturn going on. Obviously, unemployment is at record levels. It is rising virtually everyplace. In fact, I can’t think of a major country that is an exception to that.”

It was time, he and others agreed, to provide relief.

The Fed needed to make sure that interest rates moved downward, but the method of targeting the monetary supply wasn’t working properly. It could not be calibrated precisely enough to guarantee that interest rates would fall. In fact, interest rates rose in September 1982, when the Fed had wanted them to drop. “I am totally dissatisfied,” Mr. Volcker said.

It was, therefore, time, to shift the Fed’s focus back to interest rates, and to resolutely lower them.

This wasn’t an easy move, Mr. Kohn said, but it was the right one. “It took confidence and some subtle judgment to know when it was time to loosen conditions,” he said. “We’re not there yet today — inflation is high and it’s time to tighten now — but at some point, the Fed will have to do that again.”

The Fed pivot in 1982 had a startling payoff in financial markets.

As early as August 1982, policymakers at the central bank were discussing whether it was time to loosen financial conditions. Word trickled to traders, interest rates fell and the previously lackluster S&P 500 started to rise. It gained nearly 15 percent for the year and kept going. That was the start of a bull market that continued for 40 years.

In 1982, the conditions that set off rampant optimism in the stock market didn’t happen overnight. The Volcker-led Fed had to correct itself repeatedly while responding to major crises at home and abroad. It took years of pain to reach the point at which it made sense to pivot, and for businesses to start rehiring workers and for traders to go all-in on risky assets.

Today, the Fed is again engaging in a grand experiment, even as Russia’s war in Ukraine, the lingering pandemic and political crises in the United States and around the globe are endangering millions of people.

When will the big pivot happen this time? I wish I knew.

The best I can say is that it would be wise to prepare for bad times but to plan and invest for prosperity over the long haul.

I’ll come back with more detail on how to do that.

But I would try to stay invested in both the stock and bond markets permanently. The Volcker era demonstrates that when the moment has at last come, sea changes in financial markets can occur in the blink of an eye.

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How the Car Market Is Shedding Light on a Key Inflation Question

In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.

Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.

Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.

data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.

Ford Motor said on Monday that it would spend $1 billion more on parts than it was planning to in the third quarter because some components had become more expensive and harder to find.

By contrast, the supply of used cars has rebounded after plunging in the pandemic, and prices have begun to depreciate at a wholesale level, where dealers buy their stock. But, so far, those dealers aren’t really passing those savings along to consumers. The price of a typical used car has stabilized around $28,000, up 9 percent from a year ago, based on Cox Automotive data. Official used-car inflation data is easing, but only slightly.

Why consumer used-car prices — and dealer profits — are taking time to moderate is something of a mystery. Jonathan Smoke, chief economist at Cox Automotive, said dealers might be basing their prices on what they paid earlier in the year, when costs were higher, for the cars sitting on their lots.

“Dealers are feeling it,” Mr. Smoke said of the price moderation. “But because they price their vehicles based on what they pay for them, the consumer isn’t seeing the price discounts yet.”

Some early instances of discounting are showing up. At the Buick and GMC dealership that Beth Weaver runs in Erie, Pa., demand for used cars has begun to slow down, and the business has sold a few vehicles at a loss.

rolling lockdowns in China.

The Fed could raise rates so much that it snuffs out demand, but given how much pent-up car-buying appetite exists, Mr. Murphy thinks it would take a lot.

“You probably would have to go farther on rates than they have so far, or even than they are expected to go,” he said. “There may be a point at which you have enough pain that you see a pause on demand.”

If demand continues to outstrip new-car supply and dealers continue to reap big profits, that could limit how quickly inflation will ease. If the mismatch is large enough for sellers to keep pushing up prices without losing customers, it could even continue to fuel inflation.

While the car market is just one industry, the uncertainty of its return to normal holds a few lessons for the Fed. For one thing, new-car production makes it clear that supply chain disruptions are improving but not gone.

More hopefully, the car industry could offer evidence that the laws of economics are likely to reassert themselves eventually. Used-car prices have at least stopped their ascent as inventory has grown, and experts say discounting is likely around the corner. If that happens, it could be evidence that companies won’t be able to keep prices and profits high indefinitely once supply catches up with demand.

But cars reinforce the prospect that the readjustment period could last a while.

Automakers are flirting with the idea of keeping production lower so there are fewer cars in the market and price cuts are less common. Mr. Smoke is skeptical that they will hold that line once it means ceding market share to competitors — but the process could take months or years.

“I’m hesitant to say that we won’t have discounting again,” Mr. Smoke said. “But it’s going to take a while to get back to that world.”

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Strike Threat on Freight Railroads Is New Supply Chain Worry

“Failure to finalize an agreement before the Sept. 16 deadline will hurt U.S. consumers and imperil the availability, affordability and accessibility of everyday essential products,” the Consumer Brands Association, which represents manufacturers of food, beverage, household and personal care products, said in a letter to Mr. Biden last week.

In a statement over the weekend, Corey Rosenbusch, the president of the Fertilizer Institute, an industry group, said a potential work stoppage would be “bad news for farmers and food security.”

The Association of American Railroads, a freight rail industry group, said a disruption to service would cost more than $2 billion per day in economic output, idle thousands of trains and result in widespread product shortages and job losses. Rail accounts for about 28 percent of U.S. freight movement, second only to trucking’s nearly 40 percent, according to federal data.

More than 460,000 additional trucks would be needed each day to carry the goods otherwise delivered by rail, the American Trucking Associations, another industry group, said in a letter last week asking lawmakers to be prepared to intervene. The trucking industry faces a shortage of 80,000 drivers, so a rail disruption would “create havoc in the supply chain and fuel inflationary pressures across the board,” it said.

In a message on Friday, Steve Bobb, the chief marketing officer of one of the rail carriers, BNSF, encouraged customers to ask Congress to intervene. His counterpart at Norfolk Southern echoed that request to its customers over the weekend, too.

Senator Roger Wicker of Mississippi, the top Republican on the Committee on Commerce, Science and Transportation, said on Friday that he was hopeful that a strike could be averted, but was prepared to act if not.

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Guaranteed Income Programs Spring Up City by City

Early in the pandemic, Alondra Barajas had a temporary job for the Census Bureau, doing phone work from the two-bedroom apartment she shared with her mother and four younger siblings. When that job ended in late 2020, she struggled to find employment.

But Ms. Barajas learned from an ad on Instagram that she might qualify for an unusual form of assistance: monthly payments of $1,000 for a year.

Since she started receiving the funds this year — while caring for her newborn, searching for a job and looking for a new place to stay — her outlook has seemed brighter.

Oakland pledged to give 600 low-income families $500 for 18 months, and in San Diego, some families with young children will get $500 a month for two years.

Last year, the state set aside $35 million over five years for cities to carry out pilot programs, which can use different criteria, including income level, people leaving the foster care system and residence in low-income neighborhoods. An application process for municipalities to tap into those funds is underway.

one of the country’s first guaranteed income programs in 2019, notes that these payments are not meant to be a sole means of income but aim to provide a buffer for people to break the cycle of poverty.

Mr. Tubbs sees the programs as crucial tools in achieving racial justice for Black people and Latinos.

“The ways in which racism and capitalism have intersected to steal wealth from some communities,” he said, “creates the disparities we see today.”

Damon Jones, an economics professor at the University of Chicago, who has studied such programs, noted that unrestricted cash — including stimulus payments — was used broadly by the federal government to stem the economic devastation of Covid-19.

“Policymakers were surprisingly open to this idea following the onset of the pandemic,” Mr. Jones said. Now the emergency aid programs have largely lapsed, ending what for some was a lifeline.

Opponents argue that guaranteed income programs are too expensive and are counterproductive.

Oren Cass, executive director of American Compass, a conservative-leaning think tank, said the case against guaranteed income was not that people “receiving random windfalls can’t benefit from them — in at least some cases, they can and do.”

Los Angeles pilot program, said the goal of her city’s effort was to promote changes to the ways federal public benefit programs were designed.

“Many, if not all, public benefit program regulations contradict each other, are difficult to navigate and are not focused on creating pathways to greater economic opportunity,” Ms. Marquez said. (Some states, including California, have built-in exemptions to ensure that accepting funding from the pilot programs does not put recipients at risk of losing certain state and federal assistance.)

The Los Angeles program received $38 million from the city. A small portion of the money comes from private funds.

According to city data, one-third of adults in Los Angeles are unable to support their families on income from full-time work alone.

“When you provide resources to families that are struggling, it can give them the breathing room to realize goals that many of us are fortunate enough to take for granted,” Mayor Eric Garcetti said when the program began.

That breathing room came at an opportune time for Ms. Barajas. After graduating from high school in 2017, she pushed aside dreams of college and began working a string of retail gigs — Claire’s, Old Navy, Walmart. She set aside $300 from her paycheck each month to help cover her family’s rent.

“I had to work,” she said. “We had no foundation, no money in our pockets.”

Last year, Ms. Barajas, 22, received funds from an extension of the child tax credit. She used some of the money for essentials like clothes and food.

On a recent afternoon in Chatsworth, a Los Angeles neighborhood, Ms. Barajas reflected on how the money from the guaranteed income program was helping her stay afloat. She moved out of her mother’s apartment in April, after an argument. Since then, she and her daughter, now 15 months old, have slept on friends’ couches and sometimes stayed at pay-by-the-week motels.

For now, they are living at a 90-day shelter for women and children. Ms. Barajas hopes to attend community college this fall, but is focused first on finding a job. Many mornings, she scrolls her iPhone looking at postings before her daughter wakes up.

Most of the money from the guaranteed-income payments goes toward food, diapers and clothing, but she’s trying to save several hundred dollars, enough for a security deposit for an apartment she hopes to move into with a friend.

“I’m one emergency away from having to spend money and then live on the streets and become homeless,” she said. “A lot of people are just hanging on with the smallest amount of wiggle room financially.”

Zohna Everett, who was part of the Stockton program, knows how it feels to live within that razor-thin margin.

Before the program began in 2019, she was driving for DoorDash five days a week, bringing in about $100 a day. Her husband at the time worked as a truck driver, and the rent for their two-bedroom apartment was $1,000. To help earn gas money, Ms. Everett sometimes collected recyclables and turned them in for cash.

“The money was a godsend,” Ms. Everett said of the Stockton program, adding that while enrolled in it, she got a contract job at the Tesla factory in Fremont, Calif., on a production line.

Until then, Ms. Everett, 51, had been in a perpetual state of hustle, never stopping long enough to realize her exhaustion. After the payments started, she noticed she was sleeping better than she had in years.

“A weight truly was lifted from me,” she said.

The payments stopped during the pandemic, but she then received stimulus money from the federal government. She had started to save some money, but after a case of Covid left her with persistent fatigue and breathing problems, she recently took a leave from her Tesla job.

“With this pandemic, there is a lot of struggling,” she said. “There needs to be a permanent solution to help people.”

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Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

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.”

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The Flaw in Biden’s Pro-Labor Record: Uber Drivers Are Still Waiting for Help

As a part-time Lyft driver in 2020, Nicole Moore was listening carefully when Joseph R. Biden Jr., a candidate for president, said the refusal by ride-hailing companies to treat their drivers as employees “deprives these workers of legally mandated benefits and protections.”

Labor activists like Ms. Moore, who runs an advocacy group in California called Rideshare Drivers United, hoped that Mr. Biden, as president, would spearhead a flurry of activity aimed at forcing companies in the gig economy like Uber, Lyft and DoorDash to classify drivers as employees rather than independent contractors. Such a change would mean paying the drivers a minimum wage, giving them benefits and making them eligible to unionize.

Instead, a year and a half into Mr. Biden’s presidency, little has been done at the federal level to address independent contractors. Enforcement of existing labor laws has not been notably beefed up. And the president’s nominee to lead the Labor Department’s enforcement division was voted down by the Senate, including by several Democrats.

labor issues and unions, and that they have been hamstrung by a recent court decision that extended a Trump-era rule making it easier for companies like Uber to argue their workers should be classified as independent contractors under federal law.

In statements, the White House and Labor Department emphasized the importance of addressing worker misclassification but did not single out gig companies like Uber.

“The president ran on an aggressive and comprehensive approach to addressing worker misclassification,” said Alexandra LaManna, a White House spokeswoman who used to be senior communications executive at Lyft. She added, “The policy of this administration is to strengthen worker power and a solution to worker misclassification is a key part of that agenda.”

passed the Protecting the Right to Organize Act, which included language making it harder for companies to classify drivers as independent. The next month, Labor Secretary Martin J. Walsh suggested to Reuters that “in a lot of cases gig workers should be classified as employees,” sending shares of gig companies’ stock tumbling.

Mr. Weil would have investigated whether gig companies were violating labor law and sought retroactive minimum pay for drivers.

a judge threw it out. The companies were also stymied in Massachusetts. But without the threat of federal enforcement, their state-by-state approach got legislation passed this year in Washington, Georgia and Alabama.

Ms. Moore said she was pessimistic about Mr. Biden’s following through on his promises.

“That was certainly the hope,” she said. “I’m old enough to learn that you can’t pin all your hopes on any one politician.”

Kate Conger contributed reporting.

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What Will Happen to Black Workers’ Gains if There’s a Recession?

Black Americans have been hired much more rapidly in the wake of the pandemic shutdowns than after previous recessions. But as the Federal Reserve tries to soften the labor market in a bid to tame inflation, economists worry that Black workers will bear the brunt of a slowdown — and that without federal aid to cushion the blow, the impact could be severe.

Some 3.5 million Black workers lost or left their jobs in March and April 2020. In weeks, the unemployment rate for Black workers soared to 16.8 percent, the same as the peak after the 2008 financial crisis, while the rate for white workers topped out at 14.1 percent.

Since then, the U.S. economy has experienced one of its fastest rebounds ever, one that has extended to workers of all races. The Black unemployment rate was 6 percent last month, just above the record low of late 2019. And in government data collected since the 1990s, wages for Black workers are rising at their fastest pace ever.

first laid off during a downturn and the last hired during a recovery.

William Darity Jr., a Duke University professor who has studied racial gaps in employment, says the problem is that the only reliable tool the Fed uses to fight inflation — increasing interest rates — works in part by causing unemployment. Higher borrowing costs make consumers less likely to spend and employers less likely to invest, reducing pressure on prices. But that also reduces demand for workers, pushing joblessness up and wages down.

“I don’t know that there’s any existing policy option that’s plausible that would not result in hurting some significant portion of the population,” Mr. Darity said. “Whether it’s inflation or it’s rising unemployment, there’s a disproportionate impact on Black workers.”

In a paper published last month, Lawrence H. Summers, a former Treasury secretary and top economic adviser to Presidents Bill Clinton and Barack Obama, asserted with his co-authors that the Fed would need to allow the overall unemployment rate to rise to 5 percent or above — it is now 3.5 percent — to bring inflation under control. Since Black unemployment is typically about double that of white workers, that suggests that the rate for Black workers would approach or reach double digits.

The Washington Post and an accompanying research paper, Jared Bernstein — now a top economic adviser to President Biden — laid out the increasingly popular argument that in light of this, the Fed “should consider targeting not the overall unemployment rate, but the Black rate.”

Fed policy, he added, implicitly treats 4 percent unemployment as a long-term goal, but “because Black unemployment is two times the overall rate, targeting 4 percent for the overall economy means targeting 8 percent for blacks.”

news conference last month. “That’s not going to happen without restoring price stability.”

Some voices in finance are calling for smaller and fewer rate increases, worried that the Fed is underestimating the ultimate impact of its actions to date. David Kelly, the chief global strategist for J.P. Morgan Asset Management, believes that inflation is set to fall considerably anyway — and that the central bank should exhibit greater patience, as remnants of pandemic government stimulus begin to vanish and household savings further dwindle.

“The economy is basically treading water right now,” Mr. Kelly said, adding that officials “don’t need to put us into a recession just to show how tough they are on inflation.”

Michelle Holder, a labor economist at John Jay College of Criminal Justice, similarly warned against the “statistical fatalism” that halting labor gains is the only way forward. Still, she said, she’s fully aware that under current policy, trade-offs between inflation and job creation are likely to endure, disproportionately hurting Black workers. Interest rate increases, she said, are the Fed’s primary tool — its hammer — and “a hammer sees everything as a nail.”

having the federal government guarantee a job to anyone who wants one. Some economists support less ambitious policies, such as expanded benefits to help people who lose jobs in a recession. But there is little prospect that Congress would adopt either approach, or come to the rescue again with large relief checks — especially given criticism from many Republicans, and some high-profile Democrats, that excessive aid in the pandemic contributed to inflation today.

“The tragedy will be that our administration won’t be able to help the families or individuals that need it if another recession happens,” Ms. Holder said.

Morgani Brown, 24, lives and works in Charlotte, N.C., and has experienced the modest yet meaningful improvements in job quality that many Black workers have since the initial pandemic recession. She left an aircraft cleaning job with Jetstream Ground Services at Charlotte Douglas International Airport last year because the $10-an-hour pay was underwhelming. But six months ago, the work had become more attractive.

has recently cut back its work force. (An Amazon official noted on a recent earnings call that the company had “quickly transitioned from being understaffed to being overstaffed.”)

Ms. Brown said she and her roommates hoped that their jobs could weather any downturn. But she has begun hearing more rumblings about people she knows being fired or laid off.

“I’m not sure exactly why,” she said.

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Retailers Stumble Adjusting to More Selective Shoppers

This hasn’t been the year retailers planned for.

After two years of navigating the pandemic — which brought record online sales and shoppers willing to buy all manners of items, to the point that the global supply chain became strained — executives knew a new normal would take shape.

Sales might slow, the thinking went, but people would still want TVs, fashionable dresses and throw pillows. So, with supply chain issues in mind, companies stocked up. But this spring it became clear that those items weren’t selling quickly enough. As people watched the prices of food and gas rise, their spending became more selective, leaving retailers with shelves of inventory they couldn’t get rid of.

The magnitude of the miscalculation was crystallized this week in a batch of quarterly earnings from major retailers like Walmart and Target, which showed a mix of declining sales of discretionary goods and lower profits. A number revised their guidance, lowering expectations for both sales and profits for the rest of the year. A glut of inventory weighed on companies’ balance sheets: Inventory at Walmart rose 25 percent from this time last year. At Target, it increased 36 percent. And Kohl’s said inventory was up 48 percent.

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.

“The last two years was great for retailers because consumers were buying everything they had to offer,” Liza Amlani, founder of Retail Strategy Group, which works with brands on their merchandising and planning strategies. “They just can’t do that anymore. You have to understand what the consumer wants more now than ever.”

In July, U.S. retail sales were virtually unchanged, according to data from the Commerce Department released Wednesday. Excluding the sales of gas and cars, retail sales actually increased 0.7 percent. But 85 percent of U.S. consumers said that inflation is altering the way they shop, according to a survey released this week from Morning Consult.

Most retailers are hoping this pullback period is only temporary. In the meantime, companies are trying to signal to customers that it’s worth doing what spending they do in their stores. Kohl’s, for instance, said that its private-label brands outperformed the national ones it carries last quarter, and that shoppers gravitated toward buying more basic apparel that could be worn with many different outfits.

Retailers are also turning to the familiar strategy of discounting merchandise to entice shoppers to open their wallets. It’s one they didn’t have to deploy for most of the pandemic, when people showed they were willing to pay full price for a wide range of items. Target, Walmart and Ross Stores all said they have marked down goods in recent weeks. In turn, retailers like BJ’s Wholesale Club — even if they were content with their balance sheets — said they lowered prices on some categories in order to stay competitive. Robert Eddy, chief executive at BJ’s Wholesale Club, even said that the company was willing to “alter the scope and the depth of those promotions” for the holiday season.

The strategy of discounting might not actually get to the root cause, analysts say.

“There is a point at which lower prices don’t trigger incremental demand because the consumers already have it,” said Simeon Siegel, a managing director at BMO Capital Markets. “It’s not an indication that the company is dead. It’s not an indication that they’re never going to buy it again. They just need the time lag.”

Retailers need to realize that consumers are thinking differently, Mr. Siegel said. Some big-ticket purchases — like an exercise bike, living room couch or patio grill — will happen just once. In other cases, the amount of time between purchasing and replenishing will be longer. A person might now buy a candle every few months, compared to doing it every month in the early stages of the pandemic when they were home more often. And more people are choosing to spend their money on things like air travel and movie tickets this summer compared to last.

With all of these variables, lowering prices might not trigger the demand a retailer wants, Mr. Siegel said. It might simply just cut into a company’s profits.

For the stores that did see sales growth, like the big-box retailers Walmart and Target, most of that volume was attributed to higher food prices. Groceries have narrower margins than, say, a retailer’s private-label dress brand, and the shift in sales from one category to another affects the company’s overall profitability.

Along with pricing, retailers need to figure out how to deal with their inventory issues, especially with the all-important holiday season just a few months away.

“Getting through the inventory levels allows them to have a cleaner store, a cleaner supply chain,” said Bobby Griffin, equity research analyst at Raymond James. “They won’t be able to predict it perfectly, but getting through excess inventory will give them more flexibility to try to adapt to what the holiday is throwing at them.”

For all the challenges, some retailers saw a brighter path ahead. While inventory at TJX, the owner of the T.J. Maxx and Marshall’s chains, was up 39 percent for the quarter, the company said it was comfortable at that level because they had what shoppers actually wanted.

“They’re looking for an exciting treasure hunt, an entertaining shopping experience in stores,” Ernie Herrman, TJX’s chief executive, said in a call with analysts, “and along with that value equation, we continue to provide those two things.”

Isabella Simonetti contributed reporting.

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It Was the Housing Crisis Epicenter. Now the Sun Belt Is an Inflation Vanguard.

A.J. Frank watched the Phoenix real estate market and its entire economy implode as he was graduating from high school in 2009, a scarring experience that has made him a cautious saver. He is again living through a major economic upheaval as the cost of living climbs sharply.

Phoenix — among the hardest-hit cities during the housing crisis — is now on the leading edge of another painful economic trend as the United States faces the most rapid inflation in 40 years. The city is experiencing some of the fastest price increases in the nation, something Mr. Frank has felt firsthand.

His landlord tried to raise his rent nearly 30 percent this year, prompting him to move. Mr. Frank, a 31-year-old engineer, is still paying $250 a month more than he was previously, and rising grocery and gas bills have reduced his disposable income.

national rate of 8.5 percent in July. Prices in the Southern United States have risen 9.4 percent over the past year, the fastest pace of any large region in the nation and more rapid than in the Northeast, where prices are up 7.3 percent.

surged earlier this year. Because many Sun Belt cities depend on cars and air-conditioning, those purchases make up a larger percentage of consumer budgets in the region. And, just as it did in 2008, housing is playing a crucial role — this time, through the rental market, which is a major contributor to overall inflation. In Phoenix, rents are up 21 percent from a year ago, and in Miami, they are up about 14 percent. For urban dwellers nationally, rent is up only about half as much, 6.3 percent.

The Sun Belt’s intense bout of inflation matters for several reasons. While inflation is painful everywhere, it is having a disproportionate impact on families in cities like Tampa Bay, where prices have shot up faster than in areas like New York City. Demand at food banks and for eviction counselors has jumped across the region, providers said, as signs of that distress manifest.

Real-time market rent trackers that reported prices shooting up in Sun Belt cities last year are now showing bigger increases in places like New York, San Jose and Seattle.

Those market rent increases take time to trickle into official inflation figures because of the way the government calculates its data. Much as Phoenix’s official inflation numbers are surging now partly because of the run-up in market rents in 2021, nascent increases in big coastal cities could keep pressure on inflation in months to come. And the effect could be palpable at a national level: New York and its suburbs account for about 11 percent of the nation’s rental housing-related costs in the Consumer Price Index, compared to about 1 percent for Phoenix.

“Even if we get a slowdown in the Sun Belt, it may not be enough to offset what we’re seeing in other markets,” said Omair Sharif, founder of Inflation Insights.

Federal Reserve officials noted that risk at their July meeting, according to minutes released Wednesday, observing that “in some product categories, the rate of price increase could well pick up further in the short run, with sizable additional increases in residential rental expenses being especially likely.”

The Fed has been raising interest rates since March to try to slow consumer and business demand and cool inflation and is expected to lift them again at its meeting in September.

To date, much of the regional divide in price increases — from rents to consumer goods and services — has traced back to migration. People have been flocking to less expensive cities from big coastal ones for years, but that trend accelerated sharply with the onset of the pandemic. The pattern is playing out across both the Mountain West, where inflation is also remarkably high, and the Sun Belt.

experienced some of the biggest population gains in 2021, adding about 221,000 and 93,000 residents through domestic migration. Phoenix and Tampa added newcomers especially rapidly. “As people have basically poured into these Sun Belt metros, that’s put additional demand on the housing market, and supply has struggled to keep up,” said Taylor Marr, an economist at Redfin. “A lot of the inflation variation is pretty correlated with these migration patterns.”

leases are 35 percent more expensive than at the start of the pandemic but have risen only 2 percent in the past six months, for instance.

Adam Kamins, a director at Moody’s Analytics who focuses on regional and local forecasting, said he expected inflation to begin to equalize across the country as price increases in the South fade more swiftly.

“I think there’s going to be some level of convergence in regional inflation,” Mr. Kamins said. “We just haven’t seen it yet.”

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U.S. Gas Prices Fall Below $4 a Gallon, AAA Says. Here’s Why.

Gas prices in the United States fell below $4 a gallon on Thursday, retreating to their lowest level since March, a sign of relief for Americans struggling with historically high inflation and a political boost for President Biden, who has been under pressure to do more to bring down prices.

The national average cost of a gallon of regular gasoline now stands at $3.99, according to AAA. That’s still higher than it was a year ago but well below a peak of nearly $5.02 in mid-June. The average price has fallen for 58 consecutive days.

Energy costs feed into broad measures of inflation, so the drop is also good news for policymakers who have struggled to contain rising prices. It is a welcome development for Mr. Biden, who has spent recent weeks trumpeting the drop in gasoline prices, even as he pledges to do more to bring costs down. Mr. Biden has criticized oil companies for their record profits, and this year he released some of the nation’s stockpile of oil in an effort to reduce price pressures.

cost of gasoline at the pump is determined by global oil prices, which have tumbled to their lowest point since the war in Ukraine began in February, a drop that reflects in part the growing concern of a worldwide recession that will hit demand for crude.

said in a statement, citing it as one example of recent “encouraging economic developments.”

For consumers, falling gas prices offer a respite from a shaky economy, rapid inflation and other worries. “We have new rising diseases and inflation, and people expect a recession,” said Zindy Contreras, a student and part-time waitress in Los Angeles. “If I just had to not worry about my gas tank taking up $70, that’d be a huge relief, for once.”

Ms. Contreras has been filling up her 2008 Mazda 3 only halfway as a result of the higher prices, costing her $25 to $30 each visit to the pump, and she had found opportunities to car-pool with friends. These days, Ms. Contreras usually gets gas twice a week, driving 15 miles to and from work each week and an additional 10 to 50 miles a week, depending on her plans.

The national average price masks wide regional variations. Prices vary according to the health of local economies, proximity to refineries and state taxes, said Devin Gladden, a spokesman with AAA.

weaker demand because of high costs, a sharp decline in global oil prices in recent months and the suspension of taxes on gasoline in a handful of states.

Nearly two-thirds of people in a recent AAA survey said they had altered their driving habits because of high prices, mostly by taking fewer trips and combining errands. On Thursday, the Organization of the Petroleum Exporting Countries revised down its forecast for global oil demand this year.

Regardless of the causes, the lower prices are a welcome change for drivers for whom the added expense — often $10 to $15 extra for a tank of gas — had become yet another hurdle as they sought to get their lives back to normal as the coronavirus pandemic eased.

“The affordability squeeze is becoming very real when you see these high prices at the gas pump,” said Beth Ann Bovino, the U.S. chief economist at S&P Global. “So, in that sense, it’s a positive sign certainly for those folks that are struggling.”

That cushion — cash not spent on gasoline that can go elsewhere — also extends to businesses, particularly as the price of diesel fuel drops. Diesel, which is used to fuel, for instance, farm equipment, construction machinery and long-haul trucks, has also fallen from a June record, though at a slower pace than gasoline prices.

The drop in the price of gas is also good news for the economy, as businesses face less pressure to pass energy costs on to their customers — a move that would add to the country’s inflation problem.

hurricanes later this year could damage Gulf Coast refineries and pipelines, choking off supplies.

For now, though, the steady drop in the cost of fuel offers Americans a reprieve.

“If gasoline prices stay at or near the levels they have reached, that would mean much more cushion for households,” Ms. Bovino said.

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