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Here’s why the U.S. economy shrinking in the 2nd quarter may not be so bad

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Here’s why the U.S. economy shrinking in the 2nd quarter may not be so bad

The federal government’s announcement Thursday that the U.S. economic system had two straight quarters of no progress set off new fears about an impending recession, however for many Individuals, there was underlying excellent news mingled with the unhealthy.

That’s as a result of the slowing economic system alerts that the Federal Reserve’s marketing campaign to curb inflation by elevating rates of interest, coupled with different developments right here and overseas, could also be beginning to work.

For the report:

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5:47 p.m. July 28, 2022A earlier model of this story mentioned GDP within the first quarter fell 1.9%. It fell 1.6%.

And though recessions often carry increased unemployment, a far larger variety of staff and households undergo from inflation.

Additionally there’s good cause to assume that any recession-related layoffs received’t be as unhealthy this time round, particularly if the downturn is comparatively delicate and short-lived, as most economists predict.

Furthermore, many Individuals will enter any recession with higher-than-usual financial savings, and the labor market stays robust, regardless of a smattering of layoffs throughout the nation. Thursday’s financial report confirmed rising incomes and a still-solid financial savings fee of 5.2% within the second quarter.

The official designation of a recession is made by a particular panel of specialists, who take into account a number of different components moreover quarterly progress, together with employment, revenue, spending and industrial manufacturing. Their choice won’t come for some months, maybe longer if the info are clouded.

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However Republicans misplaced no time in renewing their accusations that President Biden and different Democrats have mismanaged the economic system, pointing to at least one standard definition of recession as being two consecutive quarters with none progress in gross home product.

“Since President Biden took workplace and the Democrats took management of Congress, we’ve been in an all-out financial tailspin,” mentioned Sen. Steve Daines (R-Mont.).

Such criticisms, and the White Home’s staunch denials that the economic system is in a meltdown, are sure to proceed within the months main to a midterm election that may decide which celebration controls Congress.

Beneath the political rhetoric, there’s some fact in each sides’ claims. Most economists are predicting a reasonable recession in some unspecified time in the future.

Though recessions are not often seen as constructive, they’re an everyday characteristic of the U.S. economic system, with one on common each 6½ years since 1945.

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What complicates issues this time is the truth that inflation has erupted on the quickest tempo in many years.

A reasonable recession that raises unemployment by a proportion level or two from the present 3.6% is more likely to price on the excessive finish round 3 million jobs.

However the U.S. workforce numbers round 160 million folks, so solely a small fraction can be in peril of unemployment.

Inflation and surging costs, then again, harm all however the richest members of society.

Federal Reserve Chair Jerome H. Powell mentioned as a lot Wednesday when he introduced one other huge rate of interest hike and signaled extra to come back because the central financial institution tries to beat again inflation that climbed to a four-decade excessive of 9.1% in June.

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Even when the Fed’s tightening of economic situations sends the economic system into recession, inflicting unemployment to rise and creating different monetary hardships for some, Powell mentioned choking off inflation could be a plus for everybody because it’s a vital precondition for steady and sustainable progress.

“Value stability is basically the bedrock of the economic system,” he mentioned. “Nothing within the economic system works — the economic system doesn’t work for anyone with out worth stability.”

Powell mentioned he didn’t assume the economic system was at present in a recession, particularly due to the sturdy labor market.

“You understand, 2.7 million folks [were] employed within the first half of the 12 months. It doesn’t make sense that the economic system could be in recession with this type of factor occurring,” he mentioned.

And with nonetheless practically two job openings for each unemployed individual, Powell steered that job losses will not be giant in contrast with prior recessionary intervals. “This time may very well be completely different,” he mentioned.

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In the intervening time, based mostly on the report Thursday from the Commerce Division, the economic system appears to be gliding alongside the sting. Shopper spending, which accounts for greater than two-thirds of U.S. financial exercise, slowed however nonetheless elevated modestly over the second quarter. Folks spent much less for house furnishings and garments, however extra at accommodations, eating places and different providers.

Had been it not for the truth that corporations stockpiled fewer items, which partially was attributable to persistent provide constraints, the economic system would have posted a small constructive quantity for the spring quarter.

Nonetheless, the consequences of the Fed’s fee hikes and excessive inflation are clearly taking their toll. The information mirrored “a noticeable deceleration of financial exercise in the true economic system attributable to a weakening of home demand and the mixed impression of an power shock, inflation and rising charges,” mentioned Joseph Brusuelas, chief economist on the accounting agency RSM.

Thursday’s report confirmed that the nation’s GDP, the broadest measure of financial exercise, declined at an annualized fee of 0.9% within the second quarter, dragged down by smaller stock buildup but in addition a falloff in housing and different enterprise funding and authorities spending.

That got here after an even bigger 1.6% drop within the first three months of the 12 months.

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Final 12 months GDP expanded at an exceptionally speedy tempo of 5.7%, the quickest since 1984, because the economic system bounced again from the transient plunge attributable to the pandemic.

Most economists agree that there isn’t but the numerous broad-based drop-off in financial exercise that may mark an official recession.

The Biden administration has pushed again towards Republican assaults on its dealing with of the economic system, however the celebration in energy, and the president specifically, historically carries the political burden of accountability.

Past the political chest-beating and the tutorial debate amongst economists, the truth is that the American economic system remains to be grappling with COVID-19 pandemic-induced shocks.

And if the forecasters are proper and a recession is delicate — and inflation is tamed — over the lengthy haul, that ought to carry extra good than unhealthy for most individuals.

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Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

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Albania Gives Jared Kushner Hotel Project a Nod as Trump Returns

The government of Albania has given preliminary approval to a plan proposed by Jared Kushner, Donald J. Trump’s son-in-law, to build a $1.4 billion luxury hotel complex on a small abandoned military base off the coast of Albania.

The project is one of several involving Mr. Trump and his extended family that directly involve foreign government entities that will be moving ahead even while Mr. Trump will be in charge of foreign policy related to these same nations.

The approval by Albania’s Strategic Investment Committee — which is led by Prime Minister Edi Rama — gives Mr. Kushner and his business partners the right to move ahead with accelerated negotiations to build the luxury resort on a 111-acre section of the 2.2-square-mile island of Sazan that will be connected by ferry to the mainland.

Mr. Kushner and the Albanian government did not respond Wednesday to requests for comment. But when previously asked about this project, both have said that the evaluation is not being influenced by Mr. Kushner’s ties to Mr. Trump or any effort to try to seek favors from the U.S. government.

“The fact that such a renowned American entrepreneur shows his interest on investing in Albania makes us very proud and happy,” a spokesman for Mr. Rama said last year in a statement to The New York Times when asked about the projects.

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Mr. Kushner’s Affinity Partners, a private equity company backed with about $4.6 billion in money mostly from Saudi Arabia and other Middle East sovereign wealth funds, is pursuing the Albania project along with Asher Abehsera, a real-estate executive that Mr. Kushner has previously teamed up with to build projects in Brooklyn, N.Y.

The Albanian government, according to an official document recently posted online, will now work with their American partners to clear the proposed hotel site of any potential buried munitions and to examine any other environmental or legal concerns that need to be resolved before the project can move ahead.

The document, dated Dec. 30, notes that the government “has the right to revoke the decision,” depending on the final project negotiations.

Mr. Kushner’s firm has said the plan is to build a five-star “eco-resort community” on the island by turning a “former military base into a vibrant international destination for hospitality and wellness.”

Ivanka Trump, Mr. Trump’s daughter, has said she is helping with the project as well. “We will execute on it,” she said about the project, during a podcast last year.

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This project is just one of two major real-estate deals that Mr. Kushner is pursuing along with Mr. Abehsera that involve foreign governments.

Separately, the partnership received preliminary approval last year to build a luxury hotel complex in Belgrade, Serbia, in the former ministry of defense building, which has sat empty for decades after it was bombed by NATO in 1999 during a war there.

Serbia and Albania have foreign policy matters pending with the United States, as both countries seek continued U.S. support for their long-stalled efforts to join the European Union, and officials in Washington are trying to convince Serbia to tighten ties with the United States, instead of Russia.

Virginia Canter, who served as White House ethics lawyer during the Obama and Clinton administrations and also an ethics adviser to the International Monetary Fund, said even if there was no attempt to gain influence with Mr. Trump, any government deal involving his family creates that impression.

“It all looks like favoritism, like they are providing access to Kushner because they want to be on the good side of Trump,” Ms. Canter said, now with State Democracy Defenders Fund, a group that tracks federal government corruption and ethics issues.

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Craft supplies retailer Joann declares bankruptcy for the second time in a year

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Craft supplies retailer Joann declares bankruptcy for the second time in a year

The craft supplies and fabric retailer Joann filed for bankruptcy for the second time in less than a year, as the chain wrestles with declining sales and inventory shortages, the company said Wednesday.

The retailer emerged from a previous Chapter 11 bankruptcy process last April after eliminating $505 million in debt. Now, with $615 million in liabilities, the company will begin a court-supervised sale of its assets to repay creditors. The company owes an additional $133 million to its suppliers.

“We hope that this process enables us to find a path that would allow Joann to continue operating,” said interim Chief Executive Michael Prendergast in a statement. “The last several years have presented significant and lasting challenges in the retail environment, which, coupled with our current financial position and constrained inventory levels, forced us to take this step.”

Joann’s more than 800 stores and websites will remain open throughout the bankruptcy process, the company said, and employees will continue to receive pay and benefits. The Hudson, Ohio-based company was founded in 1943 and has stores in 49 states, including several in Southern California.

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According to court documents, Joann began receiving unpredictable and inconsistent deliveries of yarn and sewing items from its suppliers, making it difficult to keep its shelves stocked. Joann’s suppliers also discontinued certain items the retailer relied on.

Along with the “unanticipated inventory challenges,” Joann and other retailers face pressure from inflation-wary consumers and interest rates that were for a time the highest in decades. The crafts supplier has also been hindered by competition from others in the space, including Michael’s, Etsy and Hobby Lobby, said Retail Wire Chief Executive Dominick Miserandino.

“It did not necessarily learn to evolve like its nearby competitors,” Miserandino said of Joann. “Not many people have heard of Joann in the way they’ve heard of Michael’s.”

Joann is not the first retailer to continue to struggle after going through bankruptcy. The party supply chain Party City announced last month it would be shutting down operations, after filing for and emerging from Chapter 11 bankruptcy in 2023.

Over the last two years, more than 60 companies have filed for bankruptcy for a second or third time, Bloomberg reported, based on information from BankruptcyData. That’s the most over a comparable period since 2020, when the COVID-19 pandemic kept shoppers home.

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Discount chain Big Lots filed for bankruptcy last September, and the Container Store, a retailer offering storage and organization products, declared bankruptcy last month. Companies that rely heavily on brick-and-mortar locations are scrambling to keep up with online retailers and big-box chains. Fast-casual restaurants such as Red Lobster and Rubio’s Coastal Grill have also struggled.

High prices have prompted consumers to pull back on discretionary spending, while rising operating and labor costs put additional pressure on businesses, experts said. The U.S. annual inflation rate for 2024 was 2.9%, down from 3.4% in 2023. But inflation has been on the rise since September and remains above the Federal Reserve’s goal of 2%.

If a sale process for Joann is approved, Gordon Brothers Retail Partners would serve as the stalking-horse bidder and set the floor for the auction.

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U.S. Sues Southwest Airlines Over Chronic Delays

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U.S. Sues Southwest Airlines Over Chronic Delays

The federal government sued Southwest Airlines on Wednesday, accusing the airline of harming passengers who flew on two routes that were plagued by consistent delays in 2022.

In a lawsuit, the Transportation Department said it was seeking more than $2.1 million in civil penalties over the flights between airports in Chicago and Oakland, Calif., as well as Baltimore and Cleveland, that were chronically delayed over five months that year.

“Airlines have a legal obligation to ensure that their flight schedules provide travelers with realistic departure and arrival times,” the transportation secretary, Pete Buttigieg, said in a statement. “Today’s action sends a message to all airlines that the department is prepared to go to court in order to enforce passenger protections.”

Carriers are barred from operating unrealistic flight schedules, which the Transportation Department considers an unfair, deceptive and anticompetitive practice. A “chronically delayed” flight is defined as one that operates at least 10 times a month and is late by at least 30 minutes more than half the time.

In a statement, Southwest said it was “disappointed” that the department chose to sue over the flights that took place more than two years ago. The airline said it had operated 20 million flights since the Transportation Department enacted its policy against chronically delayed flights more than a decade ago, with no other violations.

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“Any claim that these two flights represent an unrealistic schedule is simply not credible when compared with our performance over the past 15 years,” Southwest said.

Last year, Southwest canceled fewer than 1 percent of its flights, but more than 22 percent arrived at least 15 minutes later than scheduled, according to Cirium, an aviation data provider. Delta Air Lines, United Airlines, Alaska Airlines and American Airlines all had fewer such delays.

The lawsuit was filed in the United States District Court for the Northern District of California. In it, the government said that a Southwest flight from Chicago to Oakland arrived late 19 out of 25 trips in April 2022, with delays averaging more than an hour. The consistent delays continued through August of that year, averaging an hour or more. On another flight, between Baltimore and Cleveland, average delay times reached as high as 96 minutes per month during the same period. In a statement, the department said that Southwest, rather than poor weather or air traffic control, was responsible for more than 90 percent of the delays.

“Holding out these chronically delayed flights disregarded consumers’ need to have reliable information about the real arrival time of a flight and harmed thousands of passengers traveling on these Southwest flights by causing disruptions to travel plans or other plans,” the department said in the lawsuit.

The government said Southwest had violated federal rules 58 times in August 2022 after four months of consistent delays. Each violation faces a civil penalty of up to $37,377, or more than $2.1 million in total, according to the lawsuit.

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The Transportation Department on Wednesday also said that it had penalized Frontier Airlines for chronically delayed flights, fining the airline $650,000. Half that amount was paid to the Treasury and the rest is slated to be forgiven if the airline has no more chronically delayed flights over the next three years.

This month, the department ordered JetBlue Airways to pay a $2 million fine for failing to address similarly delayed flights over a span of more than a year ending in November 2023, with half the money going to passengers affected by the delays.

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