Business
Fed leader, concerned about jobs downturn, tees up interest rate cuts
After a near-textbook campaign to rein in inflation by raising interest rates, the head of the Federal Reserve, Jerome H. Powell, all but promised Friday to start lowering rates next month — with fingers crossed that it’s not too late to avoid a recession.
From the beginning of the inflationary surge triggered more than three years ago by the economic disruptions of the pandemic, it was clear that raising interest rates could tame price hikes. It was also clear that, if rates stayed too high too long, they could choke the economy into recession.
And few states are showing stronger signs of a possible downturn than California, which has felt the impact of high interest rates more severely than others. Not only has its unemployment rate been among the highest in the land while its job creation rate lagged, but pillar industries such as entertainment and tech have also gone through major disruption and many residents and businesses have left the state.
“Overall, the economy continues to grow at a solid pace,” Powell said in a widely anticipated speech at the annual summer symposium of central bankers in Jackson Hole, Wyo. “But the inflation and labor market data show an evolving situation. The upside risks to inflation have diminished. And the downside risks to employment have increased.
“The time has come for policy to adjust,” he said, giving the strongest signal yet of an imminent rate cut.
Investors cheered the news. Major stock indexes rose almost immediately after he began speaking.
Powell did not tip his hand on the size of the coming rate cut, but most analysts widely expect a small quarter-point move next month and a succession of similar reductions over the next year.
But Powell’s emphasis on doing “everything we can to support a strong labor market” gave some economists reason to think that the Fed could make a half-point move next month. Powell said that the pace of policy actions would “depend on incoming data, the evolving outlook, and the balance of risks.”
Whatever the initial size may be, it should fairly quickly nudge down interest rates on credit cards, auto loans and other consumer financing, but the broader economic effects of Fed policy are likely to take hold only gradually.
And with the political climate at a boil and the U.S. unemployment rising significantly since the start of the year, the Fed may find itself behind the curve in reversing course after what has been, up to now, a successful run of lowering inflation while preventing the economy from falling into a recession — the so-called soft landing.
“They’ve got to get going,” said Mark Zandi, chief economist at Moody’s Analytics, who for months has been calling on the Fed to start lowering rates.
Barring major economic changes or extreme volatility in markets, most economists see two to three quarter-point cuts this year and several more over the course of 2025, eventually bringing the Fed’s benchmark rate from the current two-decade high of 5.3% down to around 3%.
Financial markets have already priced in a September quarter-point cut, with stocks having mostly recovered from a big jolt a couple of weeks ago when investors feared the economy was turning down quickly and that it was already too late for the Fed.
Interest rates for a conventional 30-year mortgage were down to a hair below 6.5% this week, from more than 7% as recently as May. Lower rates should also help with auto purchases. Zandi said car sales have slowed as consumers have been waiting for better rates. The average interest rate on a five-year new auto loan was 8.2% in the second quarter, the highest since the Fed’s record keeping began in 2006.
The overriding question with the economy is jobs, both for workers and for political leaders facing a national election in November. And jobs are one of the two basic elements of the Fed’s responsibility. The other is price stability.
Powell acknowledged on Friday that the Fed initially misjudged the inflation spike in spring 2021, thinking that the pandemic-related surge in prices would be “transitory” and one that the Fed could look past.
Most analysts criticized Fed officials for waiting too long to raise rates, but Powell noted that they were hardly alone. “The good ship Transitory was a crowded one,” he said, adding in impromptu remarks, “I think I see some former shipmates out there today,” prompting a moment of laughter from the audience during his 15-minute speech.
It wasn’t until March 2022 when the Fed began raising rates. And, until recently, Powell and his colleagues focused squarely on consumer price inflation, which peaked in June 2022 at 9.1% and has since dropped to just under 3%. With inflation now trending toward the Fed’s 2% target, the central bank’s attention has turned to employment, which has become more worrisome in recent weeks.
First-time unemployment claims have moved up while the number of job openings has shrunk. The nation’s unemployment rate, 4.3% in July, is up from 3.7% in January, and new reports this week indicate that job growth from March 2023 to March 2024 was considerably smaller than previously estimated, though still healthy.
“The cooling in labor market conditions is unmistakable,” Powell said, adding, “We do not seek or welcome further cooling in labor market conditions.”
California’s unemployment rate has held steady in the last three months at 5.2%, but that’s still the second-highest in the country after Nevada. (California earlier in the year had the highest jobless figure.) More recently the pace of job growth in California has picked up, but the July report from the state’s Employment Development Department shows workers in California on average are putting in fewer hours of work.
That may not be a bad thing if more workers are opting for a better work-life balance, something that has become more important since the pandemic, said Erica Groshen, an economist and former commissioner of the U.S. Bureau of Labor Statistics. And, longer term, it could mean companies are more productive if they’re producing as much or more with less labor input.
But the decline in work hours, she said, could signal weakening demand and pending layoffs if business conditions persist or worsen.
The latest data from the state EDD show average weekly hours of work for all private-sector employees was down to 33.4 hours in July, from 34.5 a year ago. That may not seem like much, but it means a significant corresponding drop in average weekly earnings, which turned negative in July compared with a year earlier. Workers in information, education and health services, professional and business services, and the leisure sector, posted fewer hours of work.
“The softening job market tends to go with reduced hours,” said Sung Won Sohn, professor of economics and finance at Loyola Marymount University. “Typically, firms start cutting back hours before shedding jobs.”
That is likely even more true now because over the past several years many employers have had trouble finding new workers when they needed them.
Tom Trujillo, president of a family-owned business that operates eight Wienerschnitzel restaurants in the Southland, has held on to his staff of about 140. But like many other fast-food franchisees, Trujillo said he has cut back on overtime and some part-time employees’ hours as a result of the $20 minimum wage that took effect in April for his industry.
In response , he said he’s raised prices and that some of his stores are opening a little later and some dining rooms closing an hour or two earlier.
“I have a reserve credit line, with a zero balance,” Trujillo said. “The lower interest rates would be nice if I have to draw on that.”
But what he said he needs most today are more customers and for them to come more often.
Whether lower interest rates could help drive greater sales at Trujillo’s and other businesses remains to be seen.
A bill that would have required insurers to offer coverage to homeowners who take steps to reduce wildfire risk on their property died in the Legislature.
The Senate Insurance Committee on Monday voted down the measure, SB 1076, one of the most ambitious bills spurred by the devastating January 2025 wildfires.
The vote came despite fire victims and others rallying at the state Capitol in support of the measure, authored by state Sen. Sasha Renée Pérez (D-Pasadena), whose district includes the Eaton fire zone.
The Insurance Coverage for Fire-Safe Homes Act originally would have required insurers to offer and renew coverage for any home that meets wildfire-safety standards adopted by the insurance commissioner starting Jan. 1, 2028.
It also threatened insurers with a five-year ban from the sale of home or auto insurance if they did not comply, though it allowed for exceptions.
However, faced with strong opposition from the insurance industry, Pérez had agreed to amend the bill so it would have established community-wide pilot projects across the state to better understand the most effective way to limit property and insurance losses from wildfires.
Insurers would have had to offer four years of coverage to homeowners in successful pilot projects.
Denni Ritter, a vice president of the American Property Casualty Insurance Assn., told the committee that her trade group opposed the bill.
“While we appreciate the intent behind those conversations, those concepts do not remove our opposition, because they retain the same core flaw — substituting underwriting judgment and solvency safeguards with a statutory mandate to accept risk,” she said.
In voting against the bill Sen. Laura Richardson, (D-San Pedro), said: “Last I heard, in the United States, we don’t require any company to do anything. That’s the difference between capitalism and communism, frankly.”
The remarks against the measure prompted committee Chair Sen. Steve Padilla, (D-Chula Vista), to chastise committee members in opposition.
“I’m a little perturbed, and I’m a little disappointed, because you have someone who is trying to work with industry, who is trying to get facts and data,” he said.
Monday’s vote was the fourth time a bill that would have required insurers to offer coverage to so-called “fire hardened” homes failed in the Legislature since 2020, according to an analysis by insurance committee staff.
Fire hardening includes measures such as cutting back brush, installing fire resistant roofs and closing eaves to resist fire embers.
Pérez’s legislation was thought to have a better chance of passage because it followed the most catastrophic wildfires in U.S. history, which damaged or destroyed more than 18,000 structures and killed 31 people.
The bill was co-sponsored by the Los Angeles advocacy group Consumer Watchdog and Every Fire Survivor’s Network, a community group founded in Altadena after the fires formerly called the Eaton Fire Survivors Network.
But it also had broad support from groups such as the California Apartment Association, the California Nurses Association and California Environmental Voters.
Leading up to the fires, many insurers, citing heightened fire risk, had dropped policyholders in fire-prone neighorhoods. That forced them onto the California FAIR Plan, the state’s insurer of last resort, which offers limited but costly policies.
A Times analysis found that that in the Palisades and Eaton fire zones, the FAIR Plan’s rolls from 2020 to 2024 nearly doubled from 14,272 to 28,440. Mandating coverage has been seen as a way of reducing FAIR Plan enrollment.
“I’m disappointed this bill died in committee. Fire survivors deserved better,” Pérez said in a statement .
Also failing Monday in the committee was SB 982, a bill authored by Sen. Scott Wiener, (D-San Francisco). It would have authorized California’s attorney general to sue fossil fuel companies to recover losses from climate-induced disasters. It was opposed by the oil and gas industry.
Passing the committee were two other Pérez bills. SB 877 requires insurers to provide more transparency in the claims process. SB 878 imposes a penalty on insurers who don’t make claims payments on time.
Another bill, SB 1301, authored by insurance commissioner candidate Sen. Ben Allen, (D-Pacific Palisades), also passed. It protects policyholders from unexplained and abrupt policy non-renewals.
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Politicians in Washington and the reporters who cover them have an often adversarial relationship.
But on the last Saturday in April, they gather for an irreverent celebration of press freedom and the First Amendment at the Washington Hilton Hotel: The White House Correspondents’ Association dinner.
Hosted by the association, an organization that helps ensure access for media outlets covering the presidency, the dinner attracts Hollywood stars; politicians from both parties; and representatives of more than 100 networks, newspapers, magazines and wire services.
While The Times will have two reporters in the ballroom covering the event, the company no longer buys seats at the party, said Richard W. Stevenson, the Washington bureau chief. The decision goes back almost two decades; the last dinner The Times attended as an organization was in 2007.
“We made a judgment back then that the event had become too celebrity-focused and was undercutting our need to demonstrate to readers that we always seek to maintain a proper distance from the people we cover, many of whom attend as guests,” he said.
It’s a decision, he added, that “we have stuck by through both Republican and Democratic administrations, although we support the work of the White House Correspondents’ Association.”
Susan Wessling, The Times’s Standards editor, said the policy is a product of the organization’s desire to maintain editorial independence.
“We don’t want to leave readers with any questions about our independence and credibility by seeming to be overly friendly with people whose words and actions we need to report on,” she said.
The celebrity mentalist Oz Pearlman is headlining the evening, in lieu of the usual comedy set by the likes of Stephen Colbert and Hasan Minhaj, but all eyes will be on President Trump, who will make his first appearance at the dinner as president.
Mr. Trump has boycotted the event since 2011, when he was the butt of punchlines delivered by President Barack Obama and the talk show host Seth Meyers mocking his hair, his reality TV show and his preoccupation with the “birther” movement.
Last month, though, Mr. Trump, who has a contentious relationship with the media, announced his intention to attend this year’s dinner, where he will speak to a room full of the same reporters he often derides as “enemies of the people.”
Times reporters will be there to document the highs, the lows and the reactions in the room. A reporter for the Styles desk has also been assigned to cover the robust roster of after-parties around Washington.
Some off-duty reporters from The Times will also be present at this late-night circuit, though everyone remains cognizant of their roles, said Patrick Healy, The Times’s assistant managing editor for Standards and Trust.
“If they’re reporting, there’s a notebook or recorder out as usual,” he said. “If they’re not, they’re pros who know they’re always identifiable as Times journalists.”
For most of The Times’s reporters and editors, though, the evening will be experienced from home.
“The rest of us will be able to follow the coverage,” Mr. Stevenson said, “without having to don our tuxes or gowns.”
A former female staffer who worked for Beast Industries, the media venture behind the popular YouTube channel MrBeast, is suing the company, alleging she was sexually harassed and fired shortly after she returned from maternity leave.
The employee, Lorrayne Mavromatis, a Brazilian-born social media professional, alleges in a lawsuit she was subjected to sexual harassment by the company’s management and demoted after she complained about her treatment. She said she was urged to join a conference call while in labor and expected to work during her maternity leave in violation of the Family and Medical Leave Act, according to the federal complaint filed Wednesday in the U.S. District Court for the Eastern District of North Carolina.
“This clout-chasing complaint is built on deliberate misrepresentations and categorically false statements, and we have the receipts to prove it. There is extensive evidence — including Slack and WhatsApp messages, company documents, and witness testimony — that unequivocally refutes her claims. We will not submit to opportunistic lawyers looking to manufacture a payday from us,” Gaude Paez, a Beast Industries spokesperson, said in a statement.
Jimmy Donaldson, 27, began MrBeast as a teen gaming channel that soon exploded into a media company worth an estimated $5 billion, with 500 employees and 450 million subscribers who watch its games, stunts and giveaways.
Mavromatis, who was hired in 2022 as its head of Instagram, described a pervasive climate of discrimination and harassment, according to the lawsuit.
In her complaint, she alleges the company’s former CEO James Warren made her meet him at his home for one-on-one meetings while he commented on her looks and dismissed her complaints about a male client’s unwanted advances, telling her “she should be honored that the client was hitting on her.”
When Mavromatis asked Warren why MrBeast, Donaldson, would not work with her, she was told that “she is a beautiful woman and her appearance had a certain sexual effect on Jimmy,” and, “Let’s just say that when you’re around and he goes to the restroom, he’s not actually using the restroom.”
Paez refuted the claim.
“That’s ridiculous. This is an allegation fabricated for the sole purpose of sparking headlines,” Paez said.
Mavromatis said she endured a slate of other indignities such as being told by Donaldson that she “would only participate in her video shoot if she brought him a beer.”
“In this male-centric workplace, Plaintiff, one of the few women in a high-level role, was excluded from otherwise all-male meetings, demeaned in front of colleagues, harassed, and suffered from males be given preferential treatment in employment decisions,” states the complaint.
When Mavromatis raised a question during a staff meeting with her team, she said a male colleague told her to “shut up” or “stop talking.”
At MrBeast headquarters in Greenville, N.C., she said male executives mocked female contestants participating in BeastGames, “who complained they did not have access to feminine hygiene products and clean underwear while participating in the show.”
In November 2023, Mavromatis formally complained about “the sexually inappropriate encounters and harassment, and demeaning and hostile work environment she and other female employees had been living and experiencing working at MrBeast,” to the company’s then head of human resources, Sue Parisher, who is also Donaldson’s mother, according to the suit.
In her complaint, Mavromatis said Beast Industries did not have a method or process for employees to report such issues either anonymously or to a third party, rather employees were expected to follow the company’s handbook, “How to Succeed In MrBeast Production.”
In it, employees were instructed that, “It’s okay for the boys to be childish,” “if talent wants to draw a dick on the white board in the video or do something stupid, let them” and “No does not mean no,” according to the complaint.
Mavromatis alleges that she was demoted and then fired.
Paez said that Mavromatis’s role was eliminated as part of a reorganization of an underperforming group within Beast Industries and that she was made aware of this.
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