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The Week in Business: Spending More, Getting Less

Consumers kept spending in May, but they got less for their money. Adjusted for inflation, spending fell in May for the first time this year — by 0.4 percent, as spending rose less than prices. Spending was also weaker in the first four months of 2022 than previously believed. Though Americans have hardly stopped making purchases even as prices for gas, groceries, travel and just about everything else rise, there are signs that high prices may be starting to take a toll on demand. Big-ticket items, in particular, have been affected, starting with the housing market, which has cooled off in recent weeks as high prices have combined with rising mortgage rates.

We are halfway through 2022, and there are signs in the financial markets that all is not well. The stock market had its worst first six months of a year since 1970. The S&P 500 has fallen nearly 21 percent since its peak in January. Bitcoin has fallen more than 50 percent this year. An index tracking the 10-year Treasury note has dropped about 10 percent. Bonds, which are seen as providing lower but more stable returns for investors, are down, too. Jerome H. Powell, the Federal Reserve chair, said last week that the bank’s efforts to fight inflation were “highly likely to involve some pain.” With all the worrisome financial and economic news, economists have increased the probability that the U.S. economy will fall 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 curtails 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 harder to defend. The court used the case to entrench the so-called major questions doctrine, which allows a court to strike down an agency’s regulations if Congress was not explicit enough in granting authority and the regulations have significant economic effects. In certain extraordinary cases, an agency “must point to ‘clear congressional authorization’ for the power it claims,” Chief Justice John G. Roberts Jr. wrote. Legal specialists say that the court’s conservative majority has given business interests a powerful tool for challenging regulations that cut into their profits.

The jobs report for June will be released on Friday, and it is expected to show a slowdown in hiring. Initial unemployment claims are up from 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 be looking at the jobs report to see whether wages are continuing to rise and at the unemployment rates, and it will be looking for indications of whether its interest rate increases are causing the economy to lose steam. The minutes from the Fed’s June meeting, where policymakers raised interest rates by three-quarters of a percentage point, the largest increase since 1994, will be released on Wednesday.

As the aftershocks of plummeting 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 cashed out when prices were high — are expected to lose money but emerge relatively unscathed. Cameron and Tyler Winklevoss, for example, the heads of the crypto company Gemini who are best known for their early supporting role in Facebook, each saw their fortunes shrink to $3.3 billion last week from $4 billion apiece, 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 work force last month. Firms like Coinbase soon followed. Meanwhile, the Winklevoss twins have taken their cover band on the road. Among the songs they played: “Don’t Stop Believin.’”

The Fourth of July weekend is one of the busiest travel weekends of the year. And this summer, it’s expected to be a messy one. Delays and flight cancellations are anticipated across the country. Last month, Pete Buttigieg, the secretary of transportation, urged airlines to ensure that they follow their flight schedules, Reuters reported. (That was just before his own flight from Washington to New York was canceled.) A combination of factors, including pent-up demand from travelers, ongoing staffing woes at the airlines and airports and Covid spread mean that flight schedules may be unreliable. The same issues are affecting travel in Europe, where airline and airport workers are staging protests over understaffing and pay.

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

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