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Air Canada flight attendants defy return-to-work order, forcing airline to delay plans to resume flights

Air Canada said it suspended plans to restart operations on Sunday after the union representing 10,000 flight attendants said it will defy a return to work order. The strike was already affecting about 130,000 travelers around the world per day during the peak summer travel season. The Canada Industrial Relations Board ordered airline staff back to work by 2 p.m. Sunday after the government intervened and Air Canada said it planned to resume flights Sunday evening. Canada’s largest airline now says it will resume flights Monday evening. Air Canada said in a statement that the union “illegally directed its flight attendant members to defy a direction from the Canadian Industrial Relations Board.” “Our members are not going back to work,” Canadian Union of Public Employees national president Mark Hancock said outside Toronto’s Pearson International Airport. “We are saying no.” Hancock ripped up a copy of the back-to-work order outside the airport’s departures terminal where union members were picketing Sunday morning. He said they won’t return Tuesday either. Flight attendants chanted “Don’t blame me, blame AC” outside Pearson. The federal government didn’t immediately provide comment on the union refusing to return to work. Hancock said the “whole process has been unfair” and said the union will challenge what it called an unconstitutional order. Less than 12 hours after workers walked off the job, Federal Jobs Minister Patty Hajdu ordered the 10,000 flight attendants back to work, saying now is not the time to take risks with the economy and noting the unprecedented tariffs the U.S. has imposed on Canada. Hajdu referred the work stoppage to the Canada Industrial Relations Board. The airline said the CIRB has extended the term of the existing collective agreement until a new one is determined by the arbitrator. The shutdown of Canada’s largest airline early Saturday was impacting about 130,000 people a day. Air Canada operates around 700 flights per day. Tourist Mel Durston from southern England was trying to make the most of sightseeing in Canada. But she said she doesn’t have a way to continue her journey. “We wanted to go see the Rockies, but we might not get there because of this,” Durston said. “We might have to head straight back.” James Hart and Zahara Virani were visiting Toronto from Calgary, Alberta for what they thought would be a fun weekend. But they ended up paying $2,600 Canadian ($1,880) to fly with another airline on a later day after their Air Canada flight got canceled. “It’s a little frustrating and stressful, but at the same time, I don’t blame the flight attendants at all,” Virani said. “What they’re asking for is not unreasonable whatsoever.” Flight attendants walked off the job around 1 a.m. EDT on Saturday. Around the same time, Air Canada said it would begin locking flight attendants out of airports. The bitter contract fight escalated Friday as the union turned down Air Canada’s prior request to enter into government-directed arbitration, which allows a third-party mediator to decide the terms of a new contract. Last year, the government forced the country’s two major railroads into arbitration with their labor union during a work stoppage. The union for the rail workers is suing, arguing the government is removing a union’s leverage in negotiations. Hajdu maintained that her Liberal government is not anti-union, saying it is clear the two sides are at an impasse. Passengers whose flights are impacted will be eligible to request a full refund on the airline’s website or mobile app, according to Air Canada. The airline said it would also offer alternative travel options through other Canadian and foreign airlines when possible. Still, it warned that it could not guarantee immediate rebooking because flights on other airlines are already full “due to the summer travel peak.” Air Canada and CUPE have been in contract talks for about eight months, but they have yet to reach a tentative deal. Both sides have said they remain far apart on the issue of pay and the unpaid work flight attendants do when planes aren’t in the air. The airline’s latest offer included a 38% increase in total compensation, including benefits and pensions, over four years, that it said “would have made our flight attendants the best compensated in Canada.” But the union pushed back, saying the proposed 8% raise in the first year didn’t go far enough because of inflation. Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world. Explore this year’s list. Read More

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Fed Chair Jerome Powell may seriously disappoint Wall Street at Jackson Hole

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All eyes will turn to Federal Reserve Chairman Jerome Powell on Friday, when he is scheduled to deliver a highly anticipated speech at a central bank conference in Jackson Hole, Wyo. The annual event previously has served as an opportunity for policymakers to tease forthcoming rate moves. Last year, Powell signaled a pivot to cuts, saying “the time has come for policy to adjust” and that “my confidence has grown that inflation is on a sustainable path back to 2%.” Wall Street overwhelmingly expects the Fed to resume rate cuts in September, after holding off for months as President Donald Trump’s tariffs ripple through the economy. That’s as Trump and the White House have put immense pressure on the Fed to ease while a more dovish governor was named to the board of governors. But Powell may not drop big hints this year. For one thing, some analysts don’t think a September rate cut is in the bag because inflation remains above the Fed’s 2% target and is ticking higher as tariffs put upward pressure on prices. Meanwhile, economists are debating whether deteriorating jobs data are due to weak demand for workers or weak supply. If the problem is supply, then rate cuts would worsen inflation. “Tariffs are feeding through unevenly and will continue to push inflation higher in the coming months,” wrote Michael Pearce, deputy chief U.S. economist at Oxford Economics, in a note on Friday. “It will be difficult for policymakers to tease out one-off tariff effects from longer-lasting inflationary pressures.” For now, he thinks the Fed will remain on hold until December, but a weak August jobs report would change his view. Market veteran Ed Yardeni has maintained a “none-and-done” forecast for this year, saying the Fed will hold off on cuts due to still-elevated inflation and the continued resilience of the U.S. economy. As for the Jackson Hole speech, a note from Yardeni Research on Sunday predicted Powell would keep his cards close to his vest. “Odds are that he will be more of an owl—waiting and watching—than either a hawk or a dove,” it said. “In other words, he’ll say that a Fed rate cut is possible at the September meeting, but the Fed’s decisions are data-dependent.” Bank of America has similarly been skeptical about rate cuts this year and pointed out that Powell suggested in July he would be comfortable with low job gains as long as the unemployment rate stays in a tight range. That scenario now looks like it’s becoming reality, and BofA said Powell’s Jackson Hole speech will give him a chance to “walk the talk.” “If Powell wants to lean against a September cut, he could say that the policy stance remains appropriate given the data at hand. We note that this phrasing would allow him to retain the optionality of cutting if the August jobs report is very weak,” the bank said in a note Wednesday. “Of course, he might also telegraph a cut by saying it is appropriate to move to a less restrictive policy stance.” Wall Street has so thoroughly priced in a September cut that any sign investors may have to wait longer would not only be a severe letdown—it would feel like a rate hike. Preston Caldwell, chief US economist at Morningstar, wrote Tuesday that given how long the market has been expecting a reduction, “postponing cuts much further would constitute an effective tightening of monetary policy at this stage.” ‘We don’t think Powell can firmly guide toward easing’ But even some economists who do think the Fed will cut next month are doubtful that Powell will tip his hand on Friday. JPMorgan said the tension in the Fed’s dual mandate between fighting inflation and maximizing employment now favors the latter. Despite recent inflation data indicating tariffs are filtering into prices more, the disappointing jobs report should tilt the Fed toward cutting rates next month. “However, with several Fed speakers recently stating that the case for a cut has not been made, and with more employment data to come, we don’t think Powell can firmly guide toward easing at the next meeting,” JPMorgan said in a note Friday. Citi Research chief US economist Andrew Hollenhorst thinks Powell will hint at a cut, but won’t go beyond that. The hint could come in the form of a remark that risks to employment and inflation are coming into balance. In July, Powell said if they were in balance, then rates should be more neutral. Given that he called the current rate level “modestly restrictive,” that suggests balanced risks would merit a cut. Since then, jobs data show the labor market has softened, allowing Powell to say that risks are more balanced and that rate cuts would be appropriate next month if that trend continues, Hollenhorst wrote in a note Friday. “We expect Chair Powell to confirm market pricing for a return to rate cuts in September, but stop short of explicitly committing to cut at that meeting,” he said. “We do not expect he will comment on the size of the cut, but it is safe to assume the base case at the moment is for a 25bp cut.” Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world. Explore this year’s list. Read More

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We still aren’t sure what’s going on with tariffs and inflation — or what will happen next

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Months after President Donald Trump launched his trade war, economic data continue to give mixed signals on how much tariffs are affecting prices in the U.S. While the consumer price index has ticked higher, it has also consistently come in below forecasts, though the latest reading on producer prices surprised to the upside. Certain sectors heavily exposed to tariffs have seen spikes, but July data showed less upward price pressure on some goods prices and more pressure on some services. “Despite this firmness, the tariff pass-through effect on consumer prices arguably has been less bad than expected so far,” JPMorgan economists led by Michael Feroli said in a note on Friday. According to the bank, one potential explanation for the muted inflation numbers is that firms are eating the tariff cost at the expense of their profit margins, which are currently wide by historical standards and can accommodate the added costs without harming capital or operating budgets. Other explanations include the delayed effects of duties on prices as companies draw down pre-tariff inventories, the seasonality of prices as inflation during the summer tends to be softer than in the winter, and tariff costs being passed though more via services rather than goods, JPMorgan added. Yet another explanation could be that the tariff rates importers are actually paying are far below the headline numbers. A recent Barclays report found that the weighted-average levy in May was just 9% versus the bank’s estimate for 12%. That’s because demand shifted away from countries with higher tariffs while more than half of U.S. imports that month were duty-free. Despite higher rates on Canada, for example, they don’t apply to goods covered under the U.S.-Mexico-Canada trade agreement. “The real surprise in the U.S. economy’s resilience lies not in its reaction to tariffs but that the rise in the effective tariff rate has been more modest than commonly thought,” the report said. To be sure, Barclays said the weighted-average rate has edged up to 10% today and predicted it will eventually settle at around 15%, as more products like pharmaceuticals are expected to get hit with levies and as loopholes close. Businesses vs. consumers Citi Research still doesn’t see much evidence of broad-based price pressure from tariffs and attributed the recent uptick in services to one-time anomalies, such as the 5.8% jump in portfolio management fees due to the rally in asset prices. Citi also doesn’t expect consumers to get hit with big price hikes in the future, even as more levies are expected to roll out. “Softer demand means firms will have difficulty passing tariff costs on to consumers,” chief US economist Andrew Hollenhorst said in a note. “While some firms might still attempt to slowly increase prices in coming months, the experience so far suggests these increases will be modest in size. This should reduce concerns about upside risk to inflation and increase concerns that decreased profit margins will cause firms to pullback on hiring.” By contrast, Goldman Sachs predicted consumers will pay most of the tariff costs. As of June, they had absorbed 22%, but that figure should jump to 67% by October if the pattern seen in early rounds of Trump’s trade actions continues. For businesses, the burden will shrink from 64% down to 8%, while foreign suppliers will see an uptick from 14% to 25% of the tariff impact. Unraveling the mystery over what tariffs are doing—or not doing—to inflation has major implications for the Federal Reserve, which is trying to balance both sides of its dual mandate. Tariffs have kept inflation stubbornly above the Fed’s 2% target, causing policymakers to hold off on rate cuts. But weakness in jobs data have raised alarms on employment, fueling demands for easing. “The evidence so far is that almost all of the costs of tariffs are being born by domestic firms,” Citi’s Hollenhorst wrote. “The lack of pass-through should reduce lingering Fed official inflation concerns and allow for a series of rate cuts beginning in September. If anything markets are underpricing the potential for faster and/or deeper cuts.” Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world. Explore this year’s list. Read More

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