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The Week in Business: spend more, get less

    Consumers continued to spend in May, but received less value for money. Adjusted for inflation, May spending fell for the first time this year – by 0.4 percent, as spending rose less than prices. Spending was also weaker than previously believed in the first four months of 2022. While Americans have barely stopped making purchases, even as prices for gas, groceries, travel and just about everything else soar, there are signs that high prices are starting to take a toll on demand. Big-ticket items have been particularly affected, starting with the housing market, which has cooled in recent weeks due to high prices coupled with rising mortgage rates.

    We are halfway through 2022 and there are signs in the financial markets that things are not going well. The stock market experienced its worst first six months of a 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 is down about 10 percent. Bonds, which are believed to provide lower but more stable returns for investors, have also fallen. Federal Reserve chairman Jerome H. Powell said last week that the bank’s efforts to fight inflation are “very likely to cause pain.” With all the worrying financial and economic news, economists have increased the odds of the US economy slipping into recession.

    The Supreme Court on Thursday limited the Environmental Protection Agency’s ability to limit carbon emissions from power plants. The 6-3 ruling, which curtails but does not disable 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 regulation, which may now be more difficult to defend. The court used the case to enshrine the so-called major questions doctrine, which allows a court to remove an agency’s regulations if Congress was not explicit enough in granting powers and the regulations have significant economic effects. In certain extraordinary cases, an agency must “refer to ‘clear congressional authorization’ for the power it claims,” ​​Chief Justice John G. Roberts Jr. wrote. Legal specialists say the court’s conservative majority has provided corporate interests with a powerful tool for challenge regulations that affect their profits.

    The June jobs report will be released on Friday, and hiring is expected to slow. The first unemployment claims have risen 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 continue to rise and unemployment figures, and will look for clues as to whether the rate hikes are causing the economy to lose momentum. Minutes from the June meeting of the Fed, 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 rift 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 come out relatively unscathed. For example, Cameron and Tyler Winklevoss, the heads of crypto firm Gemini, best known for their early supporting role in Facebook, saw their fortunes dwindle to $3.3 billion from $4 billion apiece last week, according to Forbes. But employees at cryptocurrency companies are losing their jobs and private investors are seeing their savings evaporate. Gemini, the first major crypto firm to announce layoffs, cut about 10 percent of its workforce last month. Companies like Coinbase soon followed suit. Meanwhile, the Winklevoss twins have taken their cover band with them. Among the songs they played: “Don’t Stop Believin.”

    The weekend of July 4 is one of the busiest travel weekends of the year. And this summer is expected to be a messy one. 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 canceled.) A combination of factors, including pent-up traveler demand, ongoing staffing problems at airlines and airports, and the spread of Covid, mean that flight schedules can be unreliable. The same issues affect travel in Europe, where airline and airport workers are protesting understaffing and wages.

    Ernst & Young has agreed to pay $100 million to the Securities and Exchange Commission after regulators found hundreds of the company’s accountants cheated on ethics exams — and the company didn’t do enough to stop it. Spirit Airlines has postponed a shareholder vote to July 8 as it continues to talk with both Frontier Airlines and a rival rival, 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 “Billionaires’ Summer Camp.”