The week in business: Spend more, get less

Consumers continued to spend in May, but got less for their money. Adjusted for inflation, spending fell in May for the first time this year, by 0.4 percent, as costs rose less than prices. Spending was also weaker in the first four months of 2022 than previously thought. Although Americans have hardly stopped shopping, even as prices for gasoline, groceries, travel and just about everything else are rising, there are signs that high prices may be starting to affect demand. High-priced goods have been particularly affected, starting with the housing market, which has cooled in recent weeks as high prices have 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% from its peak in January. Bitcoin is down more than 50 percent this year. The index tracking 10-year government bonds was down about 10 percent. Bonds, which are seen as providing lower but more stable returns for investors, also fell. Jerome H. Powell, chairman of the Federal Reserve, said last week that the bank’s efforts to fight inflation were “very likely to cause some pain.” With all the troubling financial and economic news, economists have increased the likelihood that the US economy will slip into recession.

The Supreme Court on Thursday limited the Environmental Protection Agency’s ability to limit carbon emissions from power plants. The 6-3 decision, which limited but did not eliminate the agency’s ability to regulate the energy sector, was seen as a blow to President Biden’s climate agenda. The decision has implications for other types of regulation, which may now become more difficult to defend. The court used the case to uphold the so-called fundamental issues doctrine, which allows the court to strike down an agency’s regulations if Congress was not clear enough in granting authority and the regulations have significant economic effects. In some extraordinary cases, an agency “must cite “express authorization by Congress” for the authority it claims,” ​​Chief Justice John G. Roberts Jr. wrote. Legal experts say the court’s conservative majority has given business 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 earlier this year, and the United States has nearly recovered the 22 million jobs it lost during the pandemic. The Fed will look at the jobs report to see if wages and unemployment rates continue to rise, and look for indications that interest rate hikes are causing the economy to lose steam. The minutes of the Fed’s June meeting, at which policymakers raised interest rates by three-quarters of a percentage point, the largest increase since 1994, will be released on Wednesday.

As the aftershocks from the sharp drop in cryptocurrency prices continue to reverberate, there is a divide between the haves and the have-nots. Wealthy cryptocurrency executives — some of whom bought when prices were low or withdrew when prices were high — are expected to lose money but emerge relatively unscathed. Cameron and Tyler Winklevoss, for example, the heads of crypto company Gemini, who are best known for their early backing of Facebook, saw their fortunes shrink to $3.3 billion last week from $4 billion each, according to Forbes. But workers at cryptocurrency companies are losing their jobs, and retail investors are watching their savings evaporate. Gemini, the first major crypto company to announce layoffs, cut about 10 percent of its workforce last month. Firms like Coinbase soon followed. Meanwhile, the Winklevoss twins hit the road with their cover band. Among the songs they performed: “Don’t Stop Believin.”

The Fourth of July weekend is one of the busiest travel weekends of the year. And this summer is set to be messy. Flight delays and cancellations are expected across the country. Last month, Pete Buttigieg, the transportation secretary, called on airlines to ensure they stick to their flight schedules, Reuters reported. (This was just before his own flight from Washington to New York was canceled.) A combination of factors, including pent-up passenger demand, ongoing airline and airport staffing issues, 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 staffing and pay shortages.

Ernst & Young has agreed to pay $100 million to the Securities and Exchange Commission after regulators found hundreds of the firm’s auditors cheated on ethics exams — and the firm didn’t do enough to stop it. Spirit Airlines has postponed a shareholder vote until July 8 as it continues to negotiate with both Frontier Airlines and rival bidder JetBlue. And major players in media, technology and business will gather in Idaho on Tuesday for the annual Sun Valley Conference hosted by Allen & Company. The event has been dubbed a “billionaire summer camp.”

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