Marketplace - The inflation cooldown we’ve been waiting for?

Episode Date: May 15, 2024

Looking at fresh economic data, retail sales were flat and some categories of food dropped in price from March to April. That indicates both falling inflation and a consumer spending pullback — good things if you’re the Federal Reserve. We’ll dig into the consumer price index and hear from Chicago Fed President Austan Goolsbee about the stickiest part of inflation right now. Plus, more women are employed than ever. Could that change as pandemic support programs expire? The next $50,000 in donations to Marketplace will be matched, thanks to a generous gift from Dr. Joe Rush of Florida. Give now and double your impact.

Big news, one generous Marketplace fan, Dr. Joe Rush from Florida, is offering to match the next $50,000 in donations to Marketplace. And every single gift gets us closer to a critically important May fundraising goal. So please give right now and double your impact. Thanks to this generous match. Go to marketplace.org slash donate. Could it be that inflation's getting a tad less bumpy? From American public media, this is Market Plans.

["The Daily Show Theme"] In Los Angeles, I'm Kyle Rizdal. It is Wednesday, today the 15th of May. Good as always to have you along, everybody. 3.4% is where we start today, the April reading on inflation at the consumer level, down a tenth of 1% from the March number. Still, yes, well above where the Fed wants it to be, 2% of course, but directionally good.

We have done what we do sometimes when we want to talk things over macroeconomic wise and gotten Austin Gulesby on the phone. He's the president of the Federal Reserve Bank of Chicago. Austin, it's good to have you back. Kai, great to talk to you again. We got the CPI this morning. Let me ask you to return to your data dog roots, which is that thing that you like to do, sniffing around the data.

What are you sniffing around this time? Well, some improvement from last time, pretty much what we expected, but still higher than we were running for the second half of last year, but if you take the long view over the last year, year and a half, inflation is way down from its peak and I'm hoping that we're still on that path with some bumps. All right. Let me, yeah, I'm going to get to bumpy in a minute, but let me torture the data dog metaphor here for a second.

You know how dogs like to sniff and sniff and sniff and sniff before they mark their territory, right? Yeah. Okay, the feds been sniffing around for a long time and at some point you guys have to mark your territory, right? You keep saying we need more good data and and you know eventually you're the boy who grew up wolf. Yes, look, the second last seven months of 2023, we were at or even below the 2% inflation target and it was looking quite promising. We hit a bump in January and it's come down from there

in the months that have followed, but it hasn't come down enough as you imply the first rule of the data dogs is no when to walk and no when to sniff. That was a let's keep sniffing moment. Let me ask you specifically about bump and bumpy. You've said it a couple of times. Chair Powell says it all the time. Secretary Yellen said it last week when I was talking to her. And I guess I want to know what you all mean when you say bumpy.

I remember when it was actually David Gura asked Chair Powell, what does transitory mean? And he said what he meant by transitory. We all went, oh my God, that's what he means. Do you guys, when you say bumpy, do you mean it's just noise or is it like a really big speed bump that kind of jars the car and makes everybody's teeth shake? Well, you know that I'm forbidden. I don't speak for anybody else but me. Absolutely.

Absolutely. Absolutely. When I say bumpy, I'm hoping that it's not teeth rattling in the size of the bump. In 23, we had what has to be one of the best years of inflation falling that we've had in a very long time. Goods went from something very high inflation down to its pre-COVID trend of slight deflation. Services, they had come down from their peaks, they were still higher than pre-COVID, but making progress. And the puzzle, as we talked about before, was and remains why housing inflation has not come down more.

What happened in this bump, goods prices went up a bit, services prices went way up for a month and then have come back down. But we continue to grapple with this bit about the inflation and the figuring out what's the nature of that speed bump is still going to depend on what happens with housing. Well, keep going on that, right? Because it has been extremely slow to come down. It is arguably skewing the whole conversation because it's so sticky as a loaded word, but

it's so persistent. What do you do if housing doesn't get to where it needs to be? Well there's two parts of the housing equation, something. One is just the mechanical that the way we compute housing in our inflation measures is a kind of a slower moving average of the market rent in the housing sector. And the market rents came way down, at least the inflation, not the price level, but the inflation rate came way down. And so we've just been waiting month after month for that to happen in the slow moving official series.

If that doesn't happen, then we've got to figure out why it didn't happen, because it clearly would be more than just the mechanical thing. When you have low rates for a long time, followed by a big increase in the rates, it creates strange dynamics in the housing market that everybody can see, that you've been in your house and you thought about moving to a bigger place, but you're like, I got a three, two, five mortgage and mortgage rates

are now 8%. So I'm going to just stay in this house for a long time. I do think there's some complexity that makes this moment a little different from a regular moment. Peter Van Doren Last thing, and then I'll let you go. And it's about communication and what the Federal Reserve is saying and what everybody, by which I mean markets and analysts and business and economic media are understanding you to say. And the last year, Chair Powell and many other Fed speakers were hinting that there was going

to be no small number of rate cuts this year, three maybe, maybe four people were saying. And now clearly that's not going to happen. And I guess I wonder, did we all misread each other? Did the chairman sort of get out of over his skis too far? Did all the rest of you as well? What do you think? The FOMC puts out a summary of economic projections,

which is not debated among the committee. It's just each individual gives their opinion of what do they think will be the appropriate rate and what will be the conditions over the next year, the year after, the year after that. At the end of last year, the SEP said that the median thought there would be three cuts in this year. The market immediately concluded that must mean seven.

As they had press conferences, they said, well, if it's not seven, then it's going to be four. Then it was two. Then they thought it was zero. If you look at the SEP and the statements that come out of the committee, it looks like it moved from three to two or a very slow moving type process. And the market is on a timetable that is kind of not the monetary policy timetable. So I don't – with no offense to anyone, it seems like the people that are over-indexing are not coming from the SEP.

It's coming from the markets being impatient with the signal. Right. SEP is – another word for that is the dot plot for those familiar. Last thing – this is really the last thing and then I'll let you go. I did an event with Chair Powell in San Francisco, I don't know, like six weeks ago, and basically he said, you guys business and economic media pay way too much attention to every jot and tittle

that comes out of the Federal Reserve. You agree with that? Probably. Our perspective is always, whoa, whoa, settle down. There wasn't as much information content from as what you're concluding. I'm from the old school, which is, to me, it's a sign of success when if the market moves,

it moves from the data, not from the statements of Fed officials. Because if the big moves are when new information comes out, that's a sign that the world understands the reaction function of the Fed. And so I try to be make as just as be as clear as I can. Here's how I'm reacting. Here's what I'm looking at. Here's what I'm sniffing. And right now, it's heavily on the inflation side.

If we keep rates this restrictive for too long, we're going to have to also be thinking about the other side of the mandate, which is employment. But so far, it's still very much inflation. Austin Goolsbee, at the Chicago Fed. Austin, thanks for your time. I appreciate it. Always good to talk to you. Great to talk to you, Guy.

Speaking of the reaction function of the Federal Reserve, you want to make Wall Street traders happy? Not that that's the Fed's job. But if you do want to, all you got to do is give them a CPI that shows inflation coming down. We'll have the details when we do the numbers. Of all the categories in this morning's CPI, and there are a lot of them, apparel and appliances, window and floor coverings, tools and hardware, photographic equipment and sporting goods. It is a very long list.

The overall heading that most of us are most concerned about is food and for good reason. The pretty good news here is that the food price index, which is a CPI bucket that includes all things food, that didn't change. 0.0% inflation there month on month. Compared to last year though, food prices are up 2.2% since last April. Not bad, honestly, given the Fed's 2% target. However, comma, that is food inflation overall. As Marketplace's Kayleigh Wells explains, the story's a little different when you break it down.

That 0.0% inflation rate for food is a little deceiving, says David Beery. He teaches economics and public policy at Virginia Tech. Within that category, food pressures for dining at home have gone down, but price pressures for dining out have gone up. Restaurant menu prices are still catching up to inflation and labor shortages and everything else the pandemic made difficult.

Dining out costs more, says David Beery, because of an optic in all services. When restaurants have to raise wages, they pass the cost on to consumers. Still, eating out is a luxury. Chris Barrett, agricultural economist at Cornell, is more interested in our grocery bills. Because all of us eat every day. So we pay attention to the stuff we buy all the time.

And price decreases, or just slower inflation, is especially good news for lower income families. Having food prices go up at a slower rate is one of those things that implicitly provides us with a social safety net. The price of fresh stuff, fruit, vegetables, and meat saw some of the biggest decreases last month. Food economist David Ortega at Michigan State says it makes sense that packaged goods haven't followed suit yet. Those products were produced further back when we had higher input costs. Meaning if tomatoes were more expensive last year, it'll take the jars of salsa on the shelf made from those tomatoes a bit more time to adjust.

Ortega says sure, the drop in prices is good, but it won't necessarily make consumers feel immediately better about the economy. Their impressions of what's happening isn't really driven by the price changes. It's really driven by the price levels. And the food prices are still more than 20% higher than before the pandemic. I'm Kayley Wells for Marketplace. There are, give or take, 168 million people in the American labor force. The Bureau of Labor Statistics breaks that 168 million down every which way, race, age and sex.

And as of right now, the percentage of women who are in their prime working years, that's 25 to 54, says the BLS, that percentage is higher than it has ever been 78%. That's a lot, especially considering that during the pandemic, a good chunk of the jobs lost were in service industries dominated by women and to boot, a whole lot of women had to leave their jobs to stay home as caretakers. Best guesses had been that it would take years for those women's workforce numbers to bounce back. But here we are not just meeting pre-pandemic numbers, but beating them. Marketplace's Kristen Schwab explains what's going on there.

Back when she had her first child in 2016, Kristen Robledo in Rochester, Minnesota, didn't plan on becoming a stay-at-home mom. And then once I actually had the baby, I realized very quickly I could not manage both. So Robledo left her job in the medical field. She didn't get paid parental leave, so she says quitting made sense. And it kept making sense for a while, until 2022, when her husband's work became unsteady. Meanwhile, her industry, healthcare, was facing a worker shortage. There is a desperation for people.

I mean, I'm feeling it now since I'm here in the supervisory role. Robledo is now a program manager at a group home for aging people. She says after six years away, she's found a job that matches her interests and skills. I think it was the right job at the right time. The right job at the right time. That helps get people into the workforce and keep them there. Sarah Domasky, a professor of labor and employment relations at Penn State, says the employer-employee match has been improving for women. Women's work patterns have come to look more like men's in that more women, especially

women with college education, are working steadily for more of their adult lives. It may be why a record 78% of women in their prime working years have jobs. Pretty impressive considering just four years ago, there was a whole new term for the wave of women losing or quitting jobs, the she-session. Back then, the women's labor participation rate was about 5% lower than now. The fact that everything rebounded so quickly and has remained strong is, I think, really pretty remarkable. So what's happened?

A few things are working in tandem. A tight labor market and higher wages tend to draw people back to work. More jobs with work-from-home options. But Sharmili Majmoudar, executive VP of Policy, Programs, and Research at the nonprofit Women Employed, says the high labor participation rate goes beyond economics. We have to talk about wages, we have to talk about opportunities for advancement, and we also have to talk about people's well-being. Majmoudar says well-being has a lot to do with policy.

During the pandemic, there were federal grants for child care providers, a pause on student loans, women hold more student loan debt. There were also stimulus checks and child tax credits, cushions that gave people time to find the right jobs. But many of those federal benefits have expired, and Madhmoudar worries that could cause some women to leave the workforce again. The kind of structural policy solutions that we really need to have in place to fully realize the potential of women in the American workforce, those have yet to be implemented.

A lack of paid maternity leave is why Sarah Fudge, a construction project manager near Washington, D.C., quit her job in 2022. I didn't feel that I was making enough money for it to be worth it for me to take 12 weeks unpaid and then jump back into work. She stayed home with her daughter for less than a year. That's how long it took for hospital bills, diapers, and inflation to eat up her and her husband's savings. She doesn't qualify for employer-paid maternity leave at her new job either.

And? We've got baby number two coming in a month. She's taking a short leave and wants to keep her job. To prepare, she put her baby on a daycare wait list before she was even conceived. I'm Kristin Schwab for Marketplace. ["Dreams of a New World"] Coming up. The work-life balance part of everything is the tricky thing.

Ain't that the truth? First, though, let's do the numbers. Dow Industrial is up 349 points. Nine tenths percent closed at 39,908. The NASDAQ added 231 points. that's one in four tenths percent. 16,742. S&P 500 elevated itself 61 points, one in two tenths percent. 53.08.

Those are record highs for all three major indices and the S&P broke above 5,300 for the first time. I personally would have played the really happy music here, but I don't get to decide. Kelly Wells was just telling us about inflation in food specifically so look at some grocery stocks shall we? Kroger shed 1.6% today sprouts farmers market crept up a tenth percent grocery outlet rang up two and three tenths percent Walmart nearly flat on the day bonds up yield on the ten year

T-note down 4.34%. You're listening to Marketplace. My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many Black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama.

What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now. Big news. One generous Marketplace fan, Dr. Joe Rush from Florida, is offering to match the next $50,000 in donations to Marketplace fan Dr. Joe Rush from Florida is offering to match the next $50,000 in donations to Marketplace and every single gift gets us closer to a critically important May fundraising goal.

So please give right now and double your impact thanks to this generous match. Go to marketplace.org slash donate. This is Marketplace. I'm Kai Rizdal. You remember all those times that I've metaphorically, anyway, patted you all on the back, you the American consumer upon whose shoulders two-thirds of this economy rests? You remember all those times?

Well, savor them because they might not be coming around again for a while. We got April retail sales data this morning, flat month on month, after big gains in February and March. Now, consumers have surprised us in the past, bouncing back when we thought there wasn't much bounce left. But as Marketplace at Mitchell Hartman reports, this time just might be different. Month after month, inflation was high, prices were high, and consumers just kept on spending until now. This is the report I've been waiting for when we do see that pullback.

Retail analyst Claire Tassin at Morning Consult says in prices, but that can only go on for so long. And retailers? They're seeing more pullback from their shoppers, trading down, looking for deals and discounts. The grass is a little greener over by nationwide economist Orrin Klatschkin. I don't think this is the start of a sharp decrease in consumer spending. He anticipates only a moderate pullback in the face of high prices and slowing wage growth. But he too sees evidence consumers are getting maxed out. The high rate environment is weighing on consumers' willingness to tap credit lines.

Retailers report use of buy now pay later is down. Meanwhile, consumers savings from the pandemic have largely been depleted. And so says Dan North at Credit Insurer Allianz Trade. We're starting to see consumers move to credit cards. And this is happening at really outrageous interest rates of about 21% on average. You know, if you have a lower credit score, it's even higher. For now, says Morning Consult's Claire Tassen. People are still spending money, but they seem pretty unhappy.

As they have been for a while. I'm Mitchell Hartman for Marketplace. Mitchell was talking big picture consumer spending right there, but the reality of this economy is that the details do matter. What people are feeling in their day to day, consumers and businesses too. So we gave one of our retail regulars a call. Philip Rollins runs the comic and record store Offbeat. It's in downtown Jackson, Mississippi.

We just had record store day last month and we're just coming off of free comic book day. So those were two pretty big sales days for us. Free comic book day, it turns into great business because I get kind of old inventory out. So I put a lot of stuff on sale, but also I garner a lot of people that didn't know about the shop.

Be like, oh, I didn't know you carry single issues and you become subscribers. So that gets like repeat customers and stuff like that. The biggest cost is still records. Records are still the biggest cost. My price in comics has gone up slightly, but I've pivoted the way I've done business a little bit. So primarily when I first opened, I primarily was carrying

collected editions and those collected editions run between like 20, 25 up to 40, 50, $150. I've kind of fell back from that model and I've garnered a base of about 30 dedicated subscribers to comics that come out monthly now and so it's a better return for me and it's you know just one of those things that kind of helps a lot with building customer trust as well. I had a customer on Mother's Day and her daughter is like really into J-pop and K-pop and she was snowballing questions at me about groups and I was just like, mm-hmm, mm-hmm. I knew a few of them but then she started getting like really in-depth and it was just like, okay-hmm, mm-hmm. I knew a few of them, but then she started getting

like really in depth and it was just like, okay, you got me, I don't have the complete knowledge of the garment on that. So it was, you know, just being, you know, straight up and honest and then checking out those groups when I do have time. The work life balance part of everything is the tricky thing.

I hate homework. So, often times when I get home, I'm like, I'm not opening up my laptop. I refuse to. And I break that rule on Sundays and Monday mornings. So, Sunday night, I place my comic book orders for DC, and Monday mornings I do that for Marvel and I try not to overwork myself and once it's six o'clock I am flying out the door. Same same man, same same. That was Philip Rollins running off-beat in Jackson, Mississippi. 10th anniversary this Friday if you happen to be in town.

This final note on the way out today which will come as sweet, sweet relief to parents of children of a certain age. Chuck E. Cheese says that at very, very long last, it's getting rid of that creepy animatronic band. That's my word, creepy, not the company's. It's been around for 40 years and the New York Times reported this week it's gonna go away by the end of the year and all but two locations. If you don't know what I'm talking about, count yourself fortunate. If you do, just know that I've got a 23 year old who still says I owe him a birthday party there. Believe me, that is not happening.

Our Media Production team includes Brian Allison, Jake Cherry, Jessam Duhler, Drew Jostat, Gary O'Keefe, Charlton Thorpe, Juan Carlos Turado, and Becca Weinman. Jeff Peters is the manager of Media Production. I'm Kyle Rizzo. We will see you tomorrow, everybody. This is APN. My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama,

I get answers to some of the hardest questions about how things came to be for many Black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many Black Americans. Listen now.