Morning news brief
A MARTÍNEZ, HOST:
Just how hot is the U.S. job market?
STEVE INSKEEP, HOST:
In January, employers added more than half a million jobs, we're told. The unemployment rate fell to its lowest level in more than half a century. But a single month's numbers can be wrong or a fluke, so we get some context today when the Labor Department offers another month's worth of numbers.
MARTÍNEZ: Here's NPR's Scott Horsley. Scott, so what do we expect to see in today's jobs report?
SCOTT HORSLEY, BYLINE: Good morning, A. Forecasters think hiring probably slowed last month, but of course, that's what they were expecting in January, too. And instead, we got the strongest job growth in six months. And it wasn't just that strong jobs report that got people's attention in January. There was also a big jump in spending that month as people opened their pocketbooks at restaurants and department stores and auto showrooms, and inflation, which had been trending down, picked up a little steam as well. So all that set off some alarm bells for Federal Reserve Chairman Jerome Powell and his colleagues. They thought they were making good progress in getting inflation under control. But Powell told lawmakers this week that if economic indicators keep coming in hot like that, the Fed may have to hit the brakes harder by raising interest rates even faster than they have been.
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JEROME POWELL: If - and I stress that no decision has been made on this, but if the totality of the data were to indicate that faster tightening is warranted, we'd be prepared to increase the pace of rate hikes.
HORSLEY: Now, the Fed's next rate-setting meeting is coming up in less than two weeks, and the strength of today's jobs report will be a big factor in whether they raise rates by a quarter point like they did last month or move more aggressively with a half-point interest rate hike.
MARTÍNEZ: Yesterday General Motors said it's offering buyouts to most of its white-collar workers. That's just one of a few big companies that's cutting jobs. Scott, how does that square with these really strong jobs numbers?
HORSLEY: Yeah, there have been a lot of headlines about layoffs, especially in the tech sector and also with some manufacturing firms. So far, though, this isn't making much of a dent in the overall jobs data. You know, unemployment remains super low, and that's one reason the Fed feels like it has some latitude to move aggressively against inflation. Powell did get some pushback this week from Massachusetts Senator Elizabeth Warren. She notes that an informal forecast by Fed officials back in December showed unemployment climbing to 4.6% this year. Now, that would still be quite low by historical standards, but it does imply a loss of about 2 million jobs. Here's Powell's rather testy exchange with the senator.
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POWELL: Right now, the unemployment rate is 3.4%, which is the lowest in 54 years. And we actually don't think that we need to see a sharp or enormous increase in unemployment to get inflation under control.
ELIZABETH WARREN: I'm looking at your projections. Do you call two - laying off 2 million people this year not a sharp increase in unemployment?
POWELL: I would say 4 1/2%...
WARREN: Explain that to the 2 million families who are going to be out of work.
HORSLEY: Now, Powell insists the Fed is not trying to put anybody out of work. He also adds working people are getting hurt right now by high inflation.
MARTÍNEZ: So what sectors then might feel the pinch of the slowdown the most?
HORSLEY: The housing market is very sensitive to rising interest rates. Mortgage rates jumped again this week to nearly 6 3/4%. So that's going to likely weigh on construction workers and realtors and mortgage brokers. Factories are also feeling some pressure. But, you know, the services sector continues to expand, and that's a big share of what people spend money on, and it's also a big share of the workforce.
MARTÍNEZ: NPR's Scott Horsley. Scott, thanks.
HORSLEY: You're welcome.
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MARTÍNEZ: The leader of the European Union visits President Biden today.
INSKEEP: Ursula von der Leyen is president of the European Commission, which is the name for their executive branch. She's done this job for more than three years through the pandemic and the war in Ukraine. And when she meets President Biden today, she is representing the interests of dozens of countries, including France, Italy and her own nation, Germany.
MARTÍNEZ: And she's likely to tell President Biden the U.S. is unfair to European companies that make green technology. NPR's Rob Schmitz joins us now from Berlin. Rob, what's she worried about?
ROB SCHMITZ, BYLINE: Yeah, she's worried that the Inflation Reduction Act of the United States is a protectionist act. This is also called the IRA, and it promises tax breaks to companies making technology for clean energy, but only if their operations are located on U.S. soil. And European leaders are really concerned that EU companies will flee Europe to cash in on these tax breaks. Many here feel that the EU economy could be at stake here. When the IRA passed into law, Volkswagen, for example, announced that it put plans for a battery plant in Eastern Europe on hold because the company said it suddenly stood to save more than $10 billion by moving that plant and with it hundreds of jobs to the U.S. Since then, it's been waiting for the EU to come forth with a rival deal so that it can weigh its options. But Marcel Fratzscher, president of the German Institute for Economic Research, says he's skeptical about that.
MARCEL FRATZSCHER: To be quite honest, I have big doubts that companies like Volkswagen really seriously consider moving certain plants from Europe to the U.S. And what I currently see is a bit of a blackmail. So companies in Europe say, you know, let's see what the Europeans are willing to match, how much money we can get in addition. And that's a very dangerous game.
SCHMITZ: And, A, Fratzscher says it's dangerous because these companies are trying to squeeze billions of dollars out of an already cash-strapped EU. And when the EU loses money like this, it has less money to help incentivize carbon-saving climate goals. So in the end, he says, the environment loses, and big multinationals win.
MARTÍNEZ: So then that's got to be why von der Leyen is in Washington.
SCHMITZ: Yeah, she's trying to negotiate changes to the IRA that wouldn't lead to an exodus of European companies to the U.S. to cash in on these incentives. And here in Germany, this is a real threat to the economy. An internal report compiled by the EU and leaked to German media shows that 1 in 4 companies in German industry is considering leaving the country. We also know that multinationals like BASF and BMW are considering leaving, too, because of high energy costs.
MARTÍNEZ: Then how realistic do you think it is for von der Leyen to convince President Biden to accommodate the EU and then stop that exodus from even happening?
SCHMITZ: Yeah, it does seem possible. A senior White House official speaking on background says that the U.S. wants to make sure that incentives under the IRA and EU incentives for clean energy will not be competing with one another in the sort of zero-sum way. If that happened, this official said it would impact jobs on both sides of the Atlantic and would instead create windfalls for private interests. So it appears that the Biden administration is open to the EU's concerns and would prefer to have a partnership so that the U.S. and the EU can instead work together to reduce their dependence on China, which controls many of the rare earth metals that are needed for this clean energy transition. And this will also be high on the agenda in today's meeting.
MARTÍNEZ: All right. We're going to hear more about that later today. That's NPR's Rob Schmitz, joining us from Berlin. Rob, thanks.
SCHMITZ: Thank you.
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MARTÍNEZ: All right. California's run of intense winter weather is not over.
INSKEEP: Hope you're ready, A.
MARTÍNEZ: I have to be.
INSKEEP: Yeah. The first of two atmospheric rivers is hitting the state today. Somewhere over the head of A Martínez, there's a high risk of flooding and landslides and avalanches. And Governor Gavin Newsom wants President Biden to declare an emergency and release federal aid.
MARTÍNEZ: NPR's Nathan Rott is in Southern California. Nathan, before I drove in to NPR West, the skies looked like they were about to tear open at any moment. It looks like it could be a pretty big storm.
NATHAN ROTT, BYLINE: Yeah, it definitely is. You know, we're talking about forecasts of more than a hundred inches of snow at some mountain passes in the Sierra Nevada, upwards of 10 inches of rain in some parts of central California. It'll be a little tamer down here in Southern California, but millions of people were put under flood watches Thursday in anticipation of this atmospheric river that's expected to really hit home today, atmospheric rivers being essentially giant conveyor belts of moisture that cart water from the tropics to places like California. This one is carrying water from near Hawaii. And what's unique about this storm and concerning is that it's expected to bring rain to areas that have already been inundated with snow.
MARTÍNEZ: Yeah, there are some mountain communities that are still trying to dig themselves out.
ROTT: Yeah, that's right - I mean, places like Big Bear, not far from where both of us are, which has been dealing with blocked roads and power outages from that deep snow, you know, but even more so in central parts of the state. You know, the concern there is, A, that rain could fall at pretty high elevations onto some of these places that already are buried in snow. And so the problem that that could cause is this rain could be absorbed by the snow. And as any experienced driveway shoveler knows, wet snow is a heck of a lot heavier than dry, so it could add extra stress to structures that are still buried or trigger avalanches. The other problem is potential runoff. Rain and warmer temperatures could help melt more of the snow, adding to these flood concerns. Here's Karla Nemeth, the director of California's Department of Water Resources, at a briefing yesterday.
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KARLA NEMETH: Rivers and creeks can rise very quickly, and so it does have the potential to be a dangerous situation, particularly in areas that had experienced flooding before.
ROTT: Which, if you remember, A, is a whole lot of California, as we've been seeing this year.
MARTÍNEZ: Yeah. So what are officials trying to do to lower those risks?
ROTT: So they're urging everyone who's experienced flooding this year, particularly those who live near a river or creek, to be ready to go, right? The U.S. Bureau of Reclamation and California's Department of Water Resources have been strategically releasing water from reservoirs so that they can handle all of this incoming runoff, which is a kind of wild thing if you stop and think about it, because just last year, nearly all of California was in some state of drought, so letting go of water would have seemed unthinkable.
MARTÍNEZ: All right, so you mentioned the D-word, Nate. Anytime it rains in California, people want to know, is the drought over?
ROTT: I'm sorry, A. It is not. Groundwater reservoirs in much of California are still very much depleted. You know, remember, people sucked so much water out of the earth in some parts of California during the heart of the drought that the ground actually sank. More broadly, though, if we step back, the megadrought plaguing California is also impacting much of the western U.S., and California depends on a lot of water from that broader region. So the good news is many parts of the West are seeing a wet year. Skiers are having a heyday. But this drought has brought to light some bigger fundamental issues about water in the Western U.S., the way that it's used, the way that it's allocated - issues like the whole system being predicated on a presumption that there's more water available than there normally is. And even a really wet winter like we're experiencing right now - it does not address all of those concerns.
MARTÍNEZ: That's NPR's Nathan Rott, reporting from Southern California. Nathan, stay dry.
ROTT: You as well, A. Transcript provided by NPR, Copyright NPR.