The Economy Shrinks by 0.3%, A Sharp Reversal from Last Quarter.

Source: Bureau of Economic Analysis | By The New York Times

The economy shrank by 0.3 percent in the first three months of the year, a sharp reversal from the previous quarter’s strong growth. The decline, however, may not be as bad as it sounds. It mostly reflects quirks in the way we measure economic activity. (Ben Casselman, The Times’s chief economic correspondent, explained those quirks in detail.)

The data suggests that the economy would be solid if Trump’s tariffs didn’t fuel uncertainty and scare American consumers and businesses. David Sanger, a White House correspondent, explained how Trump’s own policies strike directly at his political appeal as a competent steward of the economy.

The report doesn’t cover the period after what Trump called Liberation Day, when he announced tariffs that tanked stock markets and launched a trade war with China. In other words, tariffs could make coming reports worse. We just don’t know how much worse yet. — German Lopez, writer for The Morning

Trump held a televised two-hour Cabinet meeting today, at which administration officials sat behind red MAGA hats and praised him so extravagantly that right-wing commentator Ann Coulter posted: “Would it be possible to have a cabinet meeting without the Kim Jong il–style tributes?” He blamed Biden for the contracting economy and told reporters that “you could even say” that any downturn in the second quarter is Biden’s fault, too. The White House put out an official statement blaming former president Joe Biden for today’s report of the shrinking GDP and saying the country’s underlying economic numbers remain strong. In fact, Biden left behind an economy that The Economist called “the envy of the world,”

The pain from Trump’s tariffs has already hit agriculture as China has largely stopped buying American products, from pork and soybeans to lumber. Peter Friedmann, executive director of the Agriculture Transportation Coalition, a leading export trade group for farmers, told Lori Ann LaRocco of CNBC that the sector is already in “full-blown crisis” as farmers have sustained “massive” financial losses.

Economists expect the confusion and uncertainty of Trump’s tariffs to hurt growth more broadly in the second quarter of 2025 as container ships from China stop arriving in the U.S. in early to mid-May, about a month after Trump’s April 2 “Liberation Day” imposed a 145% tariff on goods from that country. Executive Director Gene Seroka of the Port of Los Angeles told CNBC’s Squawk Box yesterday that beginning next week, shipping volume at the port will drop over 35%. Executive Director of the Port of Oakland, California, Kristi McKenney noted that the lack of import trade will hurt exports as well, endangering the jobs of dockworkers, warehouse workers, and truck operators.

The East Coast ports will see similar drops a couple of weeks after the West Coast ports. United Parcel Service (UPS) has already announced that it is laying off about 20,000 employees and closing 73 of its buildings by the end of June. It says it anticipates lower volumes of shipping from its largest customer, Amazon, because of the tariffs.

Economists expect the lack of goods from around the globe, especially from China, to create shortages and higher prices. Notably, the tariffs will hit toys and Christmas items. China produces 80% of the toys sold in the U.S. and 90% of the Christmas goods. Ordering of inventory for the holidays is normally underway by now, Daisuke Wakabayashi of the New York Times reports, as it takes four to five months to make, package, and ship products to the U.S. from China. But currently the tariffs have shut down that trade.

Trump seemed to acknowledge that today when he said: “Well, maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally. But we’re not talking about something that we have to go out of our way. They have ships that are loaded up with stuff. Much of which—not all of it—but much of which we don’t need.” Ironically, the Republican Party made accusations that Biden was “ruining Christmas” a central theme of political attack in 2021, 2022, and 2023.

Chip Cutter, Bob Tita, and Stephen Wilmot of the Wall Street Journal reported yesterday that more than 80% of senior executives are worried about Trump’s tariffs and his other economic policies, and many companies say they are unable to predict future earnings. Treasury Secretary Scott Bessent says that uncertainty is strategic, intended to give the administration a leg up in negotiations.
The S&P 500 has fallen 7 percent since Trump took office. That’s the worst start to a presidential term since Gerald Ford in 1974.


The Senate rejected an effort to undo Trump’s tariffs.

Adidas said that its sneakers and sportswear would cost more in the U.S
.
Tariffs led Japan to slash its economic growth forecast.

Factory Jobs Are Booming Like It’s the 1970s.

 

A headline in the New York Times today read: “Factory Jobs Are Booming Like It’s the 1970s.” The story explained that more money in the hands of consumers thanks to federal stimulus spending, along with a new skepticism of stretched supply lines, has created a rebound in American manufacturing.

Since the 1970s, authors Jim Tankersley, Alan Rappeport, and Ana Swanson explain, outsourcing and automation have meant that every recession has seen factory jobs disappear and never return as employers used downturns to move operations to countries with lower wage levels. This time, though, American manufacturers have not only regained all the jobs lost during the pandemic, they have also added about 67,000 more. Those numbers would be higher if the labor market weren’t so tight, a condition leading employers to offer higher wages and better benefits.

Biden has made it clear that he is trying to overturn 40 years of “supply side” economics, ushered in by President Ronald Reagan. This system was designed to free up capital at the top of the economy through tax cuts and deregulation in the belief that putting capital in the hands of the wealthy—the “supply side”— would lead them to invest more in the economy, thus making it grow more quickly and providing more jobs. While Republicans came to embrace that ideology wholeheartedly, in fact it never showed signs of increasing economic growth. What it did was to move wealth dramatically upward. It also made the measure of the economy the health of Wall Street rather than Main Street.

Biden, insisting that he would build the economy “from the bottom up and the middle out,” he, along with the Democrats in Congress, bolstered domestic manufacturing with measures like the Bipartisan Infrastructure Law, the Inflation Reduction Act, and the CHIPS and Science Act.

Now, statistics show, that investment has paid off. Chad Moutray, the chief economist for the National Association of Manufacturers, told the New York Times reporters: ​​“We have 67,000 more workers today than we had in February 2020. I didn’t think we would get there, to be honest with you.”

National Economic Council director Brian Deese told the reporters, “One of the most striking things that we are seeing now is the number of companies—U.S. companies and global companies—that are committing to build and expand their manufacturing footprint in the United States, and doing so based on their view that not only did the pandemic highlight the need for more resilience in their supply chains, but that the United States is creating a policy environment that makes long-term investment here in the United States more attractive.”

Meanwhile, the real net worth of the bottom 50% of U.S. households has climbed 60% since Biden took office, now reaching $67,524.

One of the things that will continue to feed this change is the plan to forgive significant student loan debt, especially among low-income Black and Brown Americans. This story is hitting the news today after the Congressional Budget Office responded to a series of questions posed by Senator Richard Burr (R-NC) and Representative Virginia Foxx (R-NC), both fervently opposed to the program. The CBO’s responses to those specific questions have been widely published, suggesting the program will cost the U.S. $400 billion. This is sparking cries about its expense, but this particular CBO number calculates the cost over the next 30 years rather than the usual ten, does not address the stimulus effects of the relief, and does not take into account how much anyone would actually have repaid. The estimate is, the CBO states in its letter, “highly uncertain.”

In contrast to Biden’s economic program, on Friday the new government of Prime Minister Liz Truss announced the most radical tax cuts in Britain since 1972, cutting the top income tax rate as well as corporate taxes to spur the economy. This unfunded cut will mean borrowing at rising interest rates. Concerns about inflation, already hammering the British economy, made the value of the pound, which is the English unit of currency, drop to its lowest level since 1985.

White House economic advisor Jared Bernstein said: “President Biden has been very clear about the negative track record of trickle-down, Reagan-style tax cuts.”

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Republicans have managed to keep voters behind their economic program by downplaying it and emphasizing cultural issues, primarily abortion, which reliably turned out anti-abortion voters. Now that the Supreme Court has overturned the 1973 Roe v. Wade decision legalizing abortion, Republicans have a demographic problem: a majority of voters support reproductive rights and are turning out to vote, and there is no longer a reason for anti-abortion voters to show up.

So Republican leaders are downplaying abortion: reporter Eric Garcia noted today that Republican representative and Senate candidate Ted Budd (R-NC), who is a cosponsor of the House version of Senator Lindsey Graham’s (R-SC) national abortion bill, didn’t mention his stance in a recent rally with former president Trump. They are also inventing new cultural crises, most notably an attack on LGBTQIA folks but also a renewed attack on immigrants.

 

The economy added 315,000 jobs, showcasing a labor market that is still strong

September 2, 20228:41 AM ET

SCOTT HORSLEY

Twitter

A man walks past a "now hiring" sign posted outside of a restaurant in Arlington, Va., on June 3.

Olivier Douliery/AFP via Getty Images

The U.S. job market remains unusually hot heading into the Labor Day weekend. But there are signs of a refreshing breeze.

Employers added 315,000 jobs in August, according to a report from the Labor Department. The unemployment rate rose to 3.7% from 3.5% in July, but only because nearly 800,000 new people entered the workforce. Employment gains for June and July were revised down by a total of 107,000 jobs.

Retailers, factories and health care all added jobs last month.

The labor market continues to shine, despite slowing economic growth and rising fears of recession. Payroll employment has now surpassed pre-pandemic levels. That leaves workers with more money to spend and helps to support the consumer-driven economy.

But a strong labor market also has the potential to fuel even higher inflation at a time when businesses are already struggling to keep up with rising demand for goods and services.

Prices in July were up 8.5% from a year ago. Inflation remains near a four-decade high, despite the recent drop in gasoline prices.

Employers have added 3.5 million jobs so far this year, and they're eager to add more. In July, there were nearly twice as many job openings as there were unemployed workers to fill them.

Federal Reserve chairman Jerome Powell worries that mismatch could push wages — and eventually prices — even higher.

"The labor market is particularly strong, but it is clearly out of balance, with demand for workers substantially exceeding the supply of available workers," Powell said last week, while speaking at an economic conference in Jackson Hole, Wyo.

The Fed is likely to take some comfort from the big influx of new workers last month. The number of people working or looking for work rose by 786,000 in August after declining in the two previous months. The share of adults in the workforce jumped to 62.4% last month from 62.1% in July, and the share of people aged 25-54 in the workforce jumped to 82.8% — slightly below pre-pandemic levels.

The Fed is raising interest rates aggressively

Average wages in August were up 5.2% from a year ago — unchanged from July.

Nela Richardson, chief economist for the payroll processing company ADP, believes wage gains have begun to level off, which could ease upward pressure on prices.

"Wages have jumped up but they've stabilized," Richardson said. "And so, depending on your view — half empty or half full — [that] could be interpreted as good news for the future of inflation."

The Federal Reserve has been raising interest rates aggressively in an effort to tamp down demand and bring prices under control. The central bank has boosted rates by 2.25 percentage points since March. Another rate hike of 0.5 to 0.75 percentage points is expected later this month.

Higher interest rates are already taking a toll on the housing market. The average rate on a 30-year fixed mortgage has jumped to 5.66% this week, from less than 3% a year ago. Both new home construction and the sale of existing homes have slumped as a result.

Construction companies added only 16,000 jobs last month, down from 24,000 in July.

While a few, high-profile businesses like Bed Bath & Beyond have announced job cuts in recent days, most employers are reluctant to lay workers off, despite signs of waning economic growth.

New claims for unemployment benefits — a proxy for layoffs — have fallen in each of the last three weeks, and claims remain very low by historical standards.

What's more, a preliminary estimate from the Labor Department shows job growth in the 12 months ending in March was even stronger than initially reported.

The estimate, released last week, is based on a more comprehensive tally of businesses. It shows there were 462,000 more payroll jobs in March than were reported in the monthly survey. A final job count will be released early next year.

 Good News on Jobs May Mean Bad News Later as Hiring Spree Defies Fed

Employers hired rapidly and paid more in July, suggesting the Federal Reserve may have to remain aggressive in its effort to cool the economy.

A job fair in North Miami Beach, Fla. The country added 528,000 jobs last month, the Labor Department reported on Friday.Credit...Scott McIntyre for The New York Times

By Jeanna Smialek and Jim Tankersley

Aug. 5, 2022

America’s job market is remarkably strong, a report on Friday made clear, with unemployment at the lowest rate in half a century, wages rising fast and companies hiring at a breakneck pace.

But the good news now could become a problem for President Biden later.

Mr. Biden and his aides pointed to the hiring spree as evidence that the United States is not in a recession and celebrated the report, which showed that employers added 528,000 jobs in July and that pay picked up by 5.2 percent from a year earlier. But the still-blistering pace of hiring and wage growth means the Federal Reserve may need to act more decisively to restrain the economy as it seeks to wrestle inflation under control.

Fed officials have been waiting for signs that the economy, and particularly the job market, is slowing. They hope that employers’ voracious need for workers will come into balance with the supply of available applicants, because that would take pressure off wages, in turn paving the way for businesses like restaurants, hotels and retailers to temper their price increases.

The moderation has remained elusive, and that could keep central bankers raising interest rates rapidly in an effort to cool down the economy and restrain the fastest inflation in four decades. As the Fed adjusts policy aggressively, it could increase the risk that the economy tips into a recession, instead of slowing gently into the so-called soft landing that central bankers have been trying to engineer.

“We’re very unlikely to be falling into a recession in the near term,” said Michael Gapen, head of U.S. economics research at Bank of America. “But I’d also say that numbers like this raise the risk of a sharper landing farther down the road.”

Interest rates are a blunt tool, and historically, big Fed adjustments have often set off recessions. Stock prices fell after Friday’s release, a sign that investors are worried that the new figures increased the odds of a bad economic outcome down the line.

Even as investors zeroed in on the risks, the White House greeted the jobs data as good news and a clear sign that the economy is not in a recession even though gross domestic product growth has faltered this year.

“From the president’s perspective, a strong jobs report is always extremely welcome,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in an interview. “And this is a very strong jobs report.”

Still, the report appeared to undermine the administration’s view of where the economy is headed. Mr. Biden and White House officials have been making the case for months that job growth would soon slow. They said that deceleration would be a welcome sign of the economy’s transition to more sustainable growth with lower inflation. The lack of such a slowdown could be a sign of more stubborn inflation than administration economists had hoped, though White House officials offered no hint Friday that they were worried about it. 

“We think it’s good news for the American people,” the White House press secretary, Karine Jean-Pierre, told reporters in a briefing. “We think we’re still heading into a transition to more steady and stable growth.”

 

U.S. Economy Shows Another Decline, Fanning Recession Fears

Gross domestic product, in an initial reading, fell 0.2 percent in the second quarter. President Biden said any troubles would be transitory.

By Ben Casselman

July 28, 2022

+8

%

Gross domestic product

+6

+4

+2

0

–0.2%

2nd

quarter

2022

–2

–4

–6

–8

’06

’08

’10

’12

’14

’16

’18

’20

’22

Quarterly changes in real gross domestic product

Source: Bureau of Economic Analysis

By The New York Times

A key measure of economic output fell for the second straight quarter, raising fears that the United States could be entering a recession — or perhaps that one had already begun.

Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the Commerce Department said Thursday. That drop followed a decline of 0.4 percent in the first quarter. The estimates for both periods will be revised in coming months as government statisticians get more complete data.

News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun and, if so, whether President Biden was to blame. Economists largely say that conditions do not meet the formal definition of a recession but that the risks of one are rising.

For most people, though, a “recession” label matters less than the economic reality: Growth is slowing, businesses are pulling back and families are having a harder time keeping up with rapidly rising prices.

“We’re absolutely losing momentum,” said Tim Quinlan, a senior economist for Wells Fargo. “Income gains at minimum have struggled to keep pace with inflation, and that’s what is chipping away at people’s ability to spend.”

A deceleration, on its own, isn’t necessarily bad news. The Federal Reserve has been trying to cool the economy in a bid to tame inflation, and the White House has argued that the slowdown is part of an inevitable and necessary transition to sustainable growth after last year’s rapid recovery.

“Coming off of last year’s historic economic growth — and regaining all the private-sector jobs lost during the pandemic crisis — it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Mr. Biden said in a statement issued after the release of the G.D.P. report. “But even as we face historic global challenges, we are on the right path, and we will come through this transition stronger and more secure.”