Airline cancellations are racking up as travelers gear up for a busy holiday weekend. We’ll also look at Chairman Powell’s most recent comments on the global economy and Wall Street’s stock market worries for the second half of the year.
But first, read about the top takeaways from Tuesday’s primaries.
Welcome to On The Money, your nightly guide to everything affecting your bills, bank account and bottom line. For The Hill, we’re Sylvan Lane, Aris Folley and Karl Evers-Hillstrom. Someone forward you this newsletter? Subscribe here.
Nation braces for chaotic travel this holiday weekend
Americans are headed into an ugly Fourth of July travel weekend, with 1,800 flights canceled already this week and days left to go.
Airlines are struggling to meet surging demand after pandemic lockdowns and amid pilot and staffing shortages, but they are also accusing the Federal Aviation Administration (FAA) of not having adequate staffing and failing to provide a plan on personnel ahead of the summer holiday.
Consumer groups and the Biden administration, however, are blaming the airlines, which won tens of billions of dollars in stimulus payments during the coronavirus pandemic as flights dried up. The government argues the handouts should have allowed the airlines to keep themselves fully staffed as passengers returned.
The bickering signals that everyone is expecting a difficult holiday weekend as many Americans seek what are in some cases their first real vacations since 2020 or 2019.
The FAA levied rare criticism against airlines, indicating that Americans won’t accept issues stemming from staff shortages because carriers received $54 billion from Congress to keep their workers employed.
Airlines say that pandemic relief only covered 77 percent of payroll costs, and they were forced to reduce staff when federal aid temporarily lapsed in late 2020.
The background: Going into this summer, carriers trimmed their flight schedules to lessen cancellations and blunt the impact of soaring fuel costs. That could help prevent a total meltdown, but the limited number of seats available will make it difficult for travelers to find a replacement flight if their trip is delayed or canceled.
Karl, Alex Gangitano and Zach Schonfeld have more here.
A FRAZZLING PLACE I NEVER KNEW
Powell: Global economy is in a ‘new world’
Federal Reserve Chairman Jerome Powell in a Wednesday speech said the global economy has entered a “new world” when it comes to inflation, while insisting the Fed would stick to its goal of keeping inflation at a 2 percent annual hike.
Powell said the low inflation era after the 2008 financial crisis is over and that new economic forces have led to higher inflation, creating challenges for the world’s central banks.
“The last 10 years were, so far, the height of the disinflationary forces that we’ve faced, and really it goes back to before the global financial crisis, but since the global financial crisis, we’ve had very low inflation in the United States,” Powell said at a central banking forum in Portugal.
“That world seems to be gone now, at least for the time being.”
The Hill’s Tobias Burns explains why here.
Wall Street braces for turmoil
The stock market is set to close out a brutal month of losses as Wall Street braces for a rocky second half of the year.
All three major U.S. stock indexes — the Dow Jones Industrial Average, the S&P 500 and the Nasdaq composite — reached bear market status in June, falling at least 20 percent from record highs set toward the start of the year.
While stocks sank gradually for much of 2022, the sell-off accelerated in June amid deepening concerns about the economy.
“We were just kind of finding our way along the bottom, and then in June that semblance of a bottom fell out. I think that was a real psychological turn for investors,” said Callie Cox, an investment analyst at eToro, an online investing platform.
“Inflation isn’t under control and markets haven’t quite found their footing yet. June felt like a reality check in a way, and it was a reality check for a situation we didn’t fully understand,” she continued.
The background: After cruising through record highs through 2021, stocks drifted lower throughout the spring as the Federal Reserve ramped up its efforts to fight inflation. Economists were hopeful that inflation had peaked in March, in sync with the Fed’s first interest rate hike, and would finally come down after reaching 40-year highs.
But as inflation steamed ahead through May and June, the Fed accelerated its attempts to cool off price increases while also boosting the risk of a recession.
Sylvan breaks it down here.
THINGS ARE LOOKING UP?
Two-thirds of small business owners expecting higher revenue despite inflation concerns
Two-thirds of small businesses expect to increase their revenue over the next year and 43 percent plan to hire more staff, the highest figures in two years, according to a survey from the U.S. Chamber of Commerce and MetLife.
The report found that small businesses are the most optimistic they’ve been since the start of the pandemic, despite growing concerns about the impact of red-hot inflation. Forty-four percent of small businesses cite inflation as the biggest challenge, up from 33 percent last quarter, according to the survey, which was conducted April 29-May 17.
“Historic inflation is top-of-mind and deeply troubling to small businesses right now,” U.S. Chamber of Commerce vice president of small business policy Tom Sullivan said in a statement, noting that consumer demand remains strong despite rising costs.
Economists say that consumers are likely to spend less as higher costs eat away at their earnings. Meanwhile, the Federal Reserve’s decision to raise interest rates to fight inflation is already slowing down the U.S. economy, which shrank 1.6 percent in the first quarter, and raising borrowing costs for businesses.
Karl has more on this here.
Good to Know
A member of the Federal Communications Commission (FCC) asked Apple and Google to remove TikTok from their app stores over concerns about data harvesting.
FCC Commissioner Brendan Carr, who was appointed by former President Trump, said the app poses national security threats, adding to the growing backlash from Republicans after BuzzFeed reported earlier this month that employees of TikTok’s parent company in China have access to private data on U.S. users.
Here’s what else we have our eye on:
New York Attorney General Letitia James (D) sued 10 “ghost gun” manufacturers on Wednesday, alleging the companies sold tens of thousands of parts to New Yorkers that were used to create illegal, untraceable guns.
Snapchat revealed on Wednesday that it will now offer Snapchat+, a subscription plan providing a collection of “exclusive, experimental, and pre-release features” for $3.99 a month.
More than 70 percent of Americans surveyed in a new poll support temporarily suspending federal and state gas taxes as the country grapples with high inflation and lingering supply chain issues.
The U.S. Food and Drug Administration is advising parents and caregivers not to use neck floats for babies after one child died and another was hospitalized.
Hillicon Valley — App stores urged to remove TikTok
Targeting road safety could save more than 500K lives per year, study finds