Dealers pay record prices for used cars, reversing a trend that pointed to an easing of inflation.
Used car prices, normally a tiny contributor to overall inflation, have become a key influence on the direction of measures like the Consumer Price Index.
Used cars sit in a wholesale dealer lot in September. An index tracking wholesale prices offers a preview of the price changes consumers will see roughly two months later, once the vehicles hit the lot.Credit…Sarah Rice for The New York Times
One of the most closely watched leading indicators of inflation on Wall Street has hit a record high, a sign that upward pressure on prices could last for months to come.
The prices dealers pay for used cars in the wholesale market jumped 5.3 percent from August to September, according to the Manheim Used Vehicle Value Index. It’s up 27.1 percent from last year.
Used car prices have soared since the pandemic hit, when production snarls at automakers cut the supply of new vehicles as many Americans left urban centers for the suburbs, pushing up demand for personal vehicles.
While used car prices are normally a tiny contributor to the overall movement of the Consumer Price Index, one broad measure of inflation, they have become a key influence on the direction of prices.
Analysts hoping to get a good read on where inflation is heading have taken note of the Manheim index’s predictive power. As a wholesale price index, it offers a preview of the price changes consumers will see roughly two months later, after dealers pass on their costs to buyers at the lot.
Earlier this summer, the movement of the Manheim index suggested that consumer prices for used cars were set to cool off, which might mean overall price increases would moderate. But the latest reading suggested the demand and prices for used cars had reinvigorated as production issues for computer chips continue to hamper new car production. Recent storms, which resulted in potentially hundreds of thousands of flooded cars, have also contributed to demand.
“The new-vehicle production problem worsened instead of getting better in Q3,” wrote Jonathan Smoke, the chief economist for Cox Automotive, the company that produces the index. “Used inventory issues were further exacerbated by damage to vehicles caused by Hurricane Ida in late August, putting pressure on an already historically tight market.”
Last month, President Biden asked the Occupational Safety and Health Administration to write rules that would require companies with more than 100 employees to mandate coronavirus vaccinations or weekly testing. But with OSHA still going through a lengthy rule-making process, which could take several more weeks, the White House is urging companies to act now.
Several big employers have imposed mandates since Biden’s announcement, including 3M, Procter & Gamble and the airlines American, Alaska and JetBlue. IBM said on Thursday that it will require all of its U.S. employees to be fully vaccinated by Dec. 8, regardless of how often they come into the office. It will allow for “limited” medical or religious exceptions.
But many others, like JPMorgan Chase and Walmart, have yet to issue broad requirements. The OSHA standards would require reluctant companies to introduce mandates.
Executives continue to be worried about losing employees and managing the cost and complexity of vaccinate-or-test mandates. Retailers are eyeing the run-up to the holiday season, which is crucial to their yearly sales and for which finding labor was already set to be a challenge because of the pandemic.
Analysts at Goldman Sachs estimated last month that the vaccine requirements announced by the White House will apply to about 25 million unvaccinated workers in the United States and boost the number of vaccinated individuals by 12 million — or 3.6 percent of the population — by March. Based on those estimates, Goldman’s analysts expect that 82 percent of the total population, and 90 percent of adults, will have their first dose by mid-2022. To date, 65 percent of all Americans have had at least one dose.
President Biden is headed to Chicago on Thursday to make the case that vaccine mandates are crucial to the economic recovery. He plans to meet with Scott Kirby of United Airlines, a pioneer in corporate vaccine mandates, and to visit Clayco, a construction company set to announce its own mandate.
As Mr. Biden tries to sell the mandate, OSHA is working on the time-consuming process of writing standards that pass legal muster. The president’s mandate for large employers would affect more than 80 million workers.
The White House said at the time of Mr. Biden’s announcement, in early September, that the OSHA standards would take weeks, which is a typical timeline for an emergency standard. This process includes a number of steps, like demonstrating that workers face a grave danger at work and that a rule is necessary to address the danger.
Almost a month from the initial announcement, OSHA standards could still be a few weeks away, as it works through a long list of questions that business groups, like the Chamber of Commerce and Retail Industry Leaders Association, have about the finer points of vaccine mandates. A few of the issues include:
Will independent contractors count toward the 100-employee threshold?
Who will pay for testing? Companies? The government? The unvaccinated?
Will vaccine mandates include boosters, if approved?
Even after OSHA finalizes its rules, some employers wary of mandates may not act, betting that they won’t be punished because of the agency’s limited enforcement resources or that the standards could get bogged down in court.
Attorneys general in 24 states have threatened to sue. Legal experts generally say that OSHA has the authority to introduce a vaccine mandate under powers granted by the Occupational Safety and Health Act of 1970.
Plans for a mandate could also be complicated by state legislation challenging the move. Montana has outlawed employer vaccine mandates. OSHA’s standards pre-empt state governments’ existing rules, except in states that have their own OSHA-approved workplace agencies. (About half do.) The legal basis for a challenge is likely to be weakest in states that are directly within OSHA’s jurisdiction, which include Montana, Texas and Florida.
Employers wary of a mandate may decide to wait out any legal battles before putting in place any requirements of their own.
As executives await for more details, a cottage industry has emerged to help companies with everything from testing to tracking vaccinations. Smaller employers, in particular, are worried about managing the new requirements, given their limited resources.
ReturnSafe, a software company that can integrate building access systems with vaccine records, said it had gone from an average of 40 to 60 people booking a meeting via its website every week to almost 300 requests per week after President Biden’s announcement. ADP, a payroll processing company, has updated its “return to workplace” software to add features to track vaccination status and weekly Covid testing. Labor lawyers are walking companies through the complex task of handling requests for religious exemptions to vaccine mandates.
The White House released details on its mandate for federal contractors this month, which gives those workers until Dec. 8 to comply. The guidelines are stricter than the proposed rules for private employers: For example, there is no option for the unvaccinated to submit to regular testing instead of getting inoculated. A White House official said that the administration expects many companies ultimately to announce vaccine-only policies. IBM and United Airlines noted that their mandates bring them into compliance with the rule for federal contractors.
United, which announced its mandate in August, recently reported that 99 percent of its workers had been vaccinated and that it had received 20,000 applications for about 2,000 flight attendant positions, a much higher ratio than before the pandemic. Tyson Foods reported a 91 percent vaccination rate ahead of a November deadline, compared with less than 50 percent before its mandate announcement in August. These figures challenge the concerns among some employers that mandates would cause workers to quit, particularly in industries facing labor shortages.
Still, “some companies are looking at it and saying, ‘Great that those employers had a good experience. I don’t know if we’ll have the same experience,'” Douglas Brayley, an employment lawyer at Ropes and Gray, told The Times’s DealBook newsletter. “Or, they may look at it and say, ‘Great, they had a 91 percent vaccination rate, but we are so thinly staffed we couldn’t possibly lose 9 percent of our work force.'”
Noam Scheiber contributed reporting
U.S. stocks jumped on Thursday, adding to Wednesday’s gains, as investors reacted with relief to the news of an agreement in the Senate to raise the federal borrowing limit and pull the country from the brink of a debt default.
The S&P 500 gained about 1.4 percent in midday trading, while the Nasdaq composite was up 1.6 percent. European stock indexes also rallied on Thursday, rebounding from a sharp decline the day before. The Stoxx Europe 600 closed 1.6 percent higher.
The rally picked up steam after top Democrats and Republicans in the Senate on Thursday said they had struck an agreement that would allow the debt ceiling to be raised through early December.
“It’s our hope that we can get this done as soon as today,” Senator Chuck Schumer of New York, the majority leader, said on the Senate floor.
Senator Mitch McConnell of Kentucky, the minority leader, had said on Wednesday that Republicans would allow Democrats to vote on a short-term extension after weeks of disagreement over raising the debt ceiling. News of Mr. McConnell’s offer helped Wall Street rebound in late trading on Wednesday and end the day with a small gain.
The agreement eased investor concerns, at least until the first Friday in December, when Congress faces its next deadline to fund the government and raise the debt ceiling. Wall Street had been growing increasingly alarmed by the failure to reach a compromise, and warnings about the consequences of inaction grew increasingly dire. Running into the federal borrowing limit could mean delays in payments of Social Security benefits and to government contractors, including hospitals that accept patients who use Medicare and Medicaid benefits.
“The agreement is just kicking the can down to December, but that’s not something investors are concerning themselves with right now,” said Fiona Cincotta, a senior financial markets analyst at Forex.com. “The political bickering left a cloud over the markets, and the fact that that’s moved on has been a plus.”
The two-day rally means that the S&P 500 is now on track to end the week with a gain of more than 1.5 percent, which would be its best weekly showing since at least late August, before Wall Street grew jittery about the debt ceiling, spiking inflation and the prospect that the Federal Reserve will begin to withdraw some of its support for the economy.
Investors face one more hurdle this week. On Friday, the labor department will release its monthly jobs report for September. It could help economists understand how much the Delta variant of the coronavirus might have affected the economic recovery after hiring slowed dramatically in August. Economists surveyed by Bloomberg are forecasting that the U.S. economy added 500,000 jobs during September, a sharp gain from the 235,000 added in August.
Ahead of Friday’s report, the government said that initial claims for regular unemployment benefits fell last week, dropping 38,000 to 326,000 after three consecutive weekly increases. For the week ending Sept. 18, about 4.2 million people were receiving some form of unemployment assistance, down 854,638 from the previous week.
“The combination of easing labor supply constraints, strong labor demand and an improving Covid outlook should spur further labor market progress in coming months,” Lydia Boussour, the lead U.S. economist at Oxford Economics, wrote in a note.
Shareholders of Tesla will vote on Thursday on proposals aimed at forcing the electric-car maker to be more transparent and accountable in its employee dealings, just days after a jury ordered the company to pay $137 million to a former worker who said he was subjected to racism.
The votes will take place virtually at the company’s annual shareholder meeting, where some investors are also hoping to oust two directors picked by management — James Murdoch, the former 21st Century Fox executive, and Kimbal Musk, the brother of Tesla’s chief executive, Elon Musk.
If any of these efforts are successful, it would represent a big rebuke to Tesla, the dominant maker of electric cars and a Wall Street phenomenon, and to Mr. Musk’s control over the company. Tesla is the world’s most valuable automaker by far and its shares have a devoted following among professional and individual investors.
The company is on track to sell about a million cars this year and is planning a major expansion, including by building a factory near Austin, Texas, where the meeting is being hosted, and one near Berlin. Mr. Musk said last year that he had moved to Texas, where his other company SpaceX has a site for launching rockets.
Activist shareholders have submitted five proposals to compel Tesla to disclose more information about its efforts to diversify its work force, how it handles employee disputes and its human rights record. The proposals also include calls for greater oversight over how Tesla manages employees and for requiring directors to seek re-election every year, instead of every three years.
Tesla’s board opposes all those measures and has encouraged investors to re-elect Mr. Murdoch and Kimbal Musk.
A federal jury on Monday dealt Tesla a blow by siding with Owen Diaz, a former contractor who said he faced repeated racist harassment while working at Tesla’s factory in Fremont, Calif., in 2015 and 2016. The jury ordered Tesla to pay Mr. Diaz $137 million. Tesla faces similar accusations from dozens of others in a class-action lawsuit.
Under a proposal from Calvert Research and Management, a firm that focuses on responsible investment and is owned by Morgan Stanley, Tesla would have to publish annual reports about its diversity and inclusion efforts.
Another proposal, by Nia Impact Capital, which owns fewer than 1,000 Tesla shares, would require the carmaker to publish a report on its practice of using mandatory arbitration to resolve employee disputes. That practice, Nia argued in its proposal, presents “a long-tail risk” to Tesla and can make it harder for companies to identify and address widespread discrimination.
Separately, ISS, a firm that advises investors on shareholder votes and corporate governance issues, has opposed the election of Mr. Murdoch and Kimbal Musk because it says the board hasn’t justified the compensation it pays to some of its members, including nearly $6 million last year to Robyn Denholm, who chairs the board, and more than $9 million to Hiromichi Mizuno, mainly in stock option grants.
While Mr. Murdoch received only $32,500 for serving on the board last year and Mr. Musk received $20,000, the amounts paid to the other members are much higher than is typical at similar large corporations, according to ISS. Because Mr. Murdoch and Mr. Musk are the only members up for election, they should be denied a chance to continue serving on the board, ISS said.
“Accordingly, support is not warranted for directors responsible for approving director pay,” the firm said in a note to clients last month.
Mr. Musk and Mr. Murdoch hold shares and options in the company that are worth hundreds of millions of dollars at the current share price, according to Tesla’s most recent proxy filing with the Securities and Exchange Commission.
Tesla’s board said the pair should remain. Mr. Murdoch provides the company with deep executive experience, knowledge of international markets and experience with adopting new technologies, it said in a securities filing. Mr. Musk brings experience in retail and consumer markets and technology companies. Mr. Murdoch has been on Tesla’s board since 2017 and Kimbal Musk has been a board member since 2004.
Peter Eavis contributed reporting.
Lael Brainard, a Federal Reserve governor, on Thursday offered the clearest signal yet that America’s central bank is going to begin seriously assessing big banks’ exposure to climate-related financial risks.
Ms. Brainard said the Fed was developing climate-related scenarios for use in banks’ safety checkups, which are often called stress tests. She also endorsed the use of supervisory guidance — the Fed’s recommendations to banks — to encourage financial institutions to curb their exposures.
“I anticipate it will be helpful to provide supervisory guidance for large banking institutions in their efforts to appropriately measure, monitor, and manage material climate-related risks, following the lead of a number of other countries,” Ms. Brainard said in remarks prepared for a Fed research conference.
Ms. Brainard said the Fed is also assessing climate-related risks from a broader perspective — trying to game out what melting ice caps and rampant wildfires could mean for the financial system as a whole.
“We are developing scenario analysis to model the possible financial risks associated with climate change and assess the resilience of individual financial institutions and the financial system to these risks,” she said.
The fact that it is developing climate scenarios puts the Fed more in line with its global counterparts, including the European Central Bank and the Bank of England, that have been examining what climate-related risks could mean for the banking sector. In addition, the Fed and its leader, Jerome H. Powell, have faced backlash for moving slowly toward a more concerted climate push.
Mr. Powell had also suggested that the Fed would test banks’ exposure to climate problems, though his remarks, to lawmakers during testimony last week, were not as definitive or as detailed as Ms. Brainard’s. He explained that the Fed’s goal was to make sure regulated banks could manage any of the risks that threats like climate change posed.
“Scenario analysis is almost certainly going to be one of the principal tools for doing exactly that,” Mr. Powell said.
The central bank oversees the nation’s largest banks, including institutions such as Goldman Sachs and Bank of America.
Anticipating strong holiday travel, United Airlines said on Thursday that it will offer 3,500 daily flights within the United States in December, the most in any month since the pandemic began.
United said it plans to offer 91 percent as many domestic flights in December as it did in the same month in 2019, though the company’s final schedule could still change. That month, United will debut new direct routes — and restart a handful of others.
The airline plans to place an emphasis on flights connecting the Midwest to warm-weather destinations like Las Vegas and Orlando or ferrying travelers to ski slopes. Flight searches for holiday travel are up 16 percent compared with the same time in 2019, the airline said.
“We’re seeing a lot of pent-up demand in our data and are offering a December schedule that centers on the two things people want most for the holidays: warm sunshine and fresh snow,” said Ankit Gupta, vice president of network planning and scheduling at United.
United and other airlines enjoyed strong demand this summer because of widespread vaccinations, though the spread of the Delta variant of the coronavirus slowed that momentum going into the fall. The industry had hoped that corporate travel would restart in a big way after Labor Day, but many professionals have not returned to offices full time and business travel remains down.
Overall, air travel appears to have settled at about 75 percent of 2019 levels in September, according to data from the Transportation Security Administration. The Biden administration’s plan to relax travel restrictions on vaccinated foreigners starting next month is expected to provide another boost, especially around the holidays.
United said it expects the Wednesday before Thanksgiving and the Sunday after the holiday to be particularly busy. It also expects Thursday, Dec. 23, and Sunday, Jan. 2, to be popular travel days.
Brian X. Chen, our Tech Fix columnist, is done with paying for a virtual private network, a service that claims to protect your privacy when you’re connected to a public Wi-Fi network at the local coffee shop, the airport or a hotel.
Many of the most popular VPN services are now also less trustworthy than in the past because they have been bought by larger companies with shady track records. That’s a deal-breaker when it comes to using a VPN service, which intercepts our internet traffic.
Many casual users may not even need a VPN anymore. Most sites now support HTTPS, a security protocol that encrypts traffic and solves most of the aforementioned problems. This means that VPNs are no longer an essential tool when most people browse the web on a public Wi-Fi network, said Dan Guido, the chief executive of Trail of Bits, a cybersecurity firm.
For those who would still prefer not to browse the web on a public Wi-Fi network, there’s an easy solution included on most smartphones: the personal hot spot, a feature for wirelessly sharing a smartphone’s cellular data connection with other devices, like your computer.
Some people still benefit from using a VPN. Here’s how to create your own ->
A digital-age magazine giant was born on Wednesday with the announcement that Dotdash, a publishing unit of Barry Diller’s InterActiveCorp, had reached an agreement to acquire Meredith, the publisher of People, Better Homes & Gardens, InStyle, Entertainment Weekly and about 40 other titles and digital brands. The purchase price is roughly $2.7 billion, or $42.18 per share, the companies said in a joint announcement. READ MORE ->
Twitter said on Wednesday that it would sell MoPub, a platform for selling mobile advertising, to the marketing company AppLovin for $1.05 billion in cash. The sale will allow Twitter to focus on expanding other products, including performance-based advertising and commerce opportunities for small and medium-size businesses, its executives said. Twitter acquired MoPub in 2013 and reportedly paid around $350 million in stock. MoPub generated about $188 million in revenue during 2020, Twitter said in a statement about the sale. READ MORE ->