The week in business: spend more, get less

Consumers continued to spend in May, but received less for their money. Adjusted for inflation, spending fell in May for the first time this year, 0.4 percent, as spending rose less than prices. Spending was also weaker in the first four months of 2022 than previously believed. Although Americans have hardly stopped shopping even as prices for gasoline, groceries, travel and just about everything else rise, there are signs that high prices may be beginning to affect demand. Big-ticket items, in particular, have been hit, starting with the housing market, which has cooled in recent weeks as high prices combined with rising mortgage rates.

We are in the middle of 2022 and there are signs in the financial markets that all is not well. The stock market had its worst first six months of the year since 1970. The S&P 500 is down nearly 21 percent since its peak in January. Bitcoin is down more than 50 percent this year. An index that tracks the 10-year Treasury note is down about 10 percent. Bonds, seen as providing lower but more stable returns for investors, have also fallen. Jerome H. Powell, chairman of the Federal Reserve, said last week that the bank’s efforts to combat inflation were likely to “involve some pain.” With all the worrying financial and economic news, economists have increased the probability that the US economy will slip into a recession.

The Supreme Court on Thursday limited the ability of the Environmental Protection Agency to restrict carbon emissions from power plants. The 6-3 ruling, which restricts but does not eliminate the agency’s ability to regulate the energy sector, was seen as a blow to President Biden’s climate agenda. The decision also has implications for other types of regulations, which may now become more difficult to defend. The court used the case to entrench the so-called principal issues doctrine, which allows a court to strike down an agency’s regulations if Congress was not explicit enough in granting the authority and the regulations have significant economic effects. In certain extraordinary cases, an agency “must signal ‘clear Congressional authorization’ for the power it claims,” ​​wrote Chief Justice John G. Roberts Jr. Legal specialists say the court’s conservative majority has given it commercial interests a powerful tool to challenge regulations that cut into their profits.

The June jobs report is due out on Friday and is expected to show a slowdown in hiring. Initial jobless claims have increased since May. Job growth was strong last year and early this year, and the United States has nearly regained the 22 million jobs it lost during the pandemic. The Federal Reserve will watch the jobs report to see if wages and unemployment rates continue to rise, and will look for signs of whether its interest rate increases are causing the economy to lose steam. Minutes from the Fed’s June meeting, in which policymakers raised interest rates by three-quarters of a percentage point, the biggest increase since 1994, are due out on Wednesday.

As aftershocks from the plummeting cryptocurrency prices continue to reverberate, there is a divide between the haves and have-nots. Wealthy cryptocurrency executives, some of whom bought when prices were low or cashed out when prices were high, are expected to lose money but emerge relatively unscathed. Cameron and Tyler Winklevoss, for example, the heads of crypto firm Gemini, best known for their early support role at Facebook, saw their fortunes shrink last week to $3.3 billion from $4 billion each. according to Forbes. But workers at crypto firms are losing their jobs and retail investors are seeing their savings evaporate. Gemini, the first major crypto firm to announce layoffs, cut around 10 percent of its workforce last month. Firms like Coinbase soon followed. Meanwhile, the Winklevoss twins have taken their cover band on tour. Among the songs they played: “Don’t Stop Believin’”.

The 4th of July weekend is one of the busiest travel weekends of the year. And this summer, it is expected to be difficult. Flight delays and cancellations are expected across the country. Last month, Pete Buttigieg, the transportation secretary, urged airlines to make sure they follow their flight schedules, Reuters reported. (That was just before his own flight from Washington to New York was cancelled.) A combination of factors, including pent-up demand from travellers, ongoing staffing issues at airlines and airports and the spread of Covid means flight schedules can be unreliable. The same problems are affecting travel in Europe, where airline and airport workers are staging protests over understaffing and wages.

Ernst & Young agreed to pay $100 million to the Securities and Exchange Commission after regulators found hundreds of company auditors had cheated on ethics tests, and the company didn’t do enough to stop it. Spirit Airlines has delayed a shareholder vote until July 8 as it continues to talk to both Frontier Airlines and a rival suitor, JetBlue. And major players from media, technology and business will gather in Idaho on Tuesday for the annual Sun Valley conference hosted by Allen & Company. The event has been called “summer camp for billionaires.”

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