Tangle - November's inflation numbers.

Episode Date: December 19, 2022

Last month, consumer prices rose 7.1% from a year ago, down from 7.7% in October and the peak of 9.1% in June. On a month-to-month basis, inflation rose just 0.1%. Core CPI, which excludes more volatile food and energy costs, was up 0.2% from October to November, the lowest month- to- month increase since August of 2021. All of these numbers came in lower than economists expected, which spurred a momentary stock market rally. Today, we're going to take a look at some reactions to the latest numbers, then my take.Today’s clickables: Quick hits (1:41), Today’s story (3:21), Right's take (7:14), Left's take (12:07), Isaac’s take (17:20), Your Questions Answered (19:56), Under the Radar (21:51), Numbers (22:36), Have a nice day (23:22).You can read today's podcast here.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. Music for the podcast was produced by Diet 75. Today’s episode was edited by Zosha Warpeha.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

Twas the season of chaos, and all through the house, not one person was stressing. Holla differently this year with DoorDash. Don't want to holla do the most? Holla don't. More festive, less frantic. Get deals for every occasion with DoorDash. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+.

The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. From executive producer Isaac Saul, this is Tangle.

Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, the place we get views from across the political spectrum. Some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we're going to be talking about the November inflation numbers, which are pretty critical. Some good news, I think. Before we jump in, though, first off, I want to give a quick heads up that we have a job opening here at Tangle. We are looking to launch a YouTube channel in 2023, and we're looking for a part-time video editor to join the team. There's also an opportunity to help edit this podcast as well if you're somebody who

has both video and audio editing skills. If you're interested in the role, there is a link to the job listing in today's episode description. There's also a link at the top of today's newsletter if you want to check your inbox for that. I wanted to give a heads up about it here I'm hoping to fill this position sometime by you know mid to late January so that sounds like something you might be interested if you're somebody with video editing experience or YouTube experience and you're looking for some part-time work please do reach out and apply all right with, with that out of the way, we'll start off today with some quick hits. First up, the House's January 6th committee will hold its last public hearing today

and is expected to make a non-binding criminal referral for a number of individuals. Number two, Russia officials warned unpredictable consequences in response to news that the U.S. was sending advanced technology to Ukraine to repel missile attacks. Number three, Twitter CEO Elon Musk reinstated the accounts of some journalists who were banned on the platform after allegedly violating a new doxing rule. Twitter also reversed a rule that banned the sharing of links to other social media platforms. Musk then lost a user poll asking whether he should step down as Twitter's CEO and promised to abide by the results. Number four, three men convicted of

supporting a plot to kidnap Michigan Governor Gretchen Whitmer were sentenced to multiple years in prison. Number five, the Senate passed a one-week government funding bill to avoid a government shutdown and is expected to introduce a full omnibus bill on Monday. And the numbers are out. Up only one-tenth on headline. Up one-tenth on headline. Remember, the high-water mark here was in June of 22, a seven-year high at 1.3. We're going to begin with CPI fueling the rally this morning, Jim.

You've said it's pretty remarkable. How much of this holds? Let's talk about the U.S. economy now. Inflation in the United States appears to be cooling off slowly. The latest Consumer Price Index report for November shows inflation is up 7.1% over the past year. Last week, the Labor Department released its November inflation numbers, showing that inflation had once again slowed month to month and year over year.

A quick reminder, inflation is measured by the Consumer Price Index, or CPI, which is designed by the Bureau of Labor Statistics to measure price fluctuations for urban buyers who represent the vast majority of Americans. The CPI tracks 80,000 items in a fixed basket of goods and services, representing everything from gasoline to apples to the cost of a doctor's visit. Last month, consumer prices rose 7.1% from a year ago, down from 7.7% in October and the peak of 9.1% in June. On a month-to-month basis, inflation rose just 0.1%. Core CPI, which excludes more volatile food and energy prices, was up 0.2% from October to November, the lowest month-to-month increase since August of 2021. All of these numbers came in lower than economists had expected,

which spurred a momentary stock market rally. These numbers are the strongest evidence yet that inflation is slowing from the increase that began about 18 months ago, reaching a 40-year high earlier this year. Gas, healthcare, airline fares, hotel rooms, electricity, and furniture all saw prices fall in November. New car prices stayed the same while housing costs were up. However, the housing data is a lagging indicator, and real-time measures actually show home prices and apartment rentals are falling. Meanwhile, grocery prices continue to rise, up 0.5% from October to November and up 12% from a year ago. Inflation was terrible in 2022, but the outlook for 2023 is much better, Bill Adams,

the chief economist for Comerica Bank, told the Associated Press. Supply chains are working better, business inventories are higher, ending most of the shortages that fueled inflation in 2020. The same day the numbers were released, the Fed raised interest rates again by another 0.5%. A reminder, interest rates represent the cost of borrowing. When the Federal Reserve raises interest rates, it makes credit card debt, mortgages, and loans more expensive. The Fed uses interest rate hikes to slow spending and investment in order to tamp down inflation. Fed Chair Jerome Powell has bucketed inflation into three trends, the core CPI, which excludes food and energy,

housing costs, which makes up about one-third of the CPI, and services unrelated to housing, like education or auto insurance. Powell notes progress in goods and housing, but says inflation in other services has remained high, which is a trend that continued in the latest report. He says real-time drops in prices of apartment rent and homes should start showing up in government data next year. We first covered inflation in October of 2021 and have covered it nearly every month since. You can find all our previous coverage with a link in today's episode description. Today, we're going to take a look at some reactions to the latest numbers and then my take. First up, we'll start with what the right is saying.

The right is still worried about inflation and hopes the Fed keeps increasing rates. Many panned the White House for its optimistic response, given the larger historical context of this moment. Some still worry about a worst-case scenario in the global economy. The Wall Street Journal editorial board said inflation is not vanquished yet. The market hope is that the Federal Reserve will end its interest rate increases sooner than expected, but that would be a mistake as the report shows the anti-inflation fight is still far from over. A 7.1 increase in prices is still a long way from victory, and inflation continues to be sticky across much of the economy, the board said.

Food rose 0.5 percent. Much of the decrease came in energy prices, which are volatile and fell by 1.6 percent. But service prices, excluding energy services, rose 0.4 percent and are up 6.8 percent in the past year. The core of CPI, less energy and food, rose 0.2 percent in the month and is still high at an annual rate of 6%. Wage increases will also give the Fed pause as a separate Labor Department report Tuesday showed a 0.5% increase in real wages for the month. That's welcome news for workers who have seen a 3% decline in real average weekly earnings in the past year as a result of inflation. But it also signals that workers and employers are playing catch-up and there are still 10 million unfilled jobs, the board said.

The Fed's temptation will be to think that slower growth can do the heavy anti-inflation lifting. But the challenge for the Fed isn't getting inflation down merely to 4% or 5% as a new baseline for the next interest rate cutting cycle. Then inflation will rise again. In Fox News, E.J. Antony said nobody should rejoice over the still awful inflation numbers. If you listen to the White House, the latest inflation data is cause for celebration, like an early Christmas gift to America. Yet nothing could be further from the truth. Inflation is still crushing American families and there's no financial cause for rejoicing, a sad situation during the holiday season, Antoni said.

The administration's claims to be winning against inflation fly in the face of their own data. Since Biden took office, prices have risen 13.8%. In fact, prices have risen so much faster than wages that the average family has lost $5,800 in real annual income, i.e. what their incomes can actually buy. Conversely, real incomes rose $4,000 under President Trump. Add on to that the increased borrowing costs resulting from higher interest rates, and the average family is effectively $7,100 poorer today than when Biden became president, Antony said. Yes, 7.1% inflation is better than 9.1%, but it's surely nothing to brag about. At the current 7.1% pace, prices will still double in about a decade.

That is a horrific rate of inflation, and it's breaking the back of the middle class. Now, the same president who told us inflation was transitory is predicting that it will be gone by the end of next year. Biden is always wrong, but never in doubt. The statistics from his own administration do not support that prediction at all. In CNN, Steve Kamen said the Fed could be facing a nightmare scenario. With price growth still drastically above normal levels, labor markets quite tight, and household spending resilient, the Fed's challenges are far from over. As we move into 2023, inflation will continue to be a key risk to both the U.S. and foreign

economies. There's no doubt the Federal Reserve was late in responding to inflation. Unfortunately, this story is far from over. U.S. inflation has moved down a bit since its peak earlier this summer, but this importantly reflects declines in energy prices. So-called core inflation, which excludes volatile energy and food prices and thus provides a more reliable reading on base trends, has largely moved sideways over the course of this year, came and said. The base case scenario for most forecasters is gloomy but not catastrophic. U.S. inflation moves down gradually over the year, driven by supply chain disruptions easing energy and other commodity prices falling, and aggregate demand softening. There's a much more worrisome scenario, however, in which U.S. inflation remains stubbornly high,

perhaps because the combination of continued tight labor markets and elevated living costs fuel persistent rapid wage growth, Kamin said. Such a wage price spiral could pose a difficult conflict between the policy needs of the U.S. economy and those of the rest of the world. Further increase in interest rates would be essential to bring down U.S. inflation and inflation expectations. But at a time when many of our trading partners were mired in recession, further policy tightening could create grave problems abroad. Substantial job losses, widespread defaults, and disruptions in international financial markets. Alright, that is it for the rightist saying, which brings us to what the left is saying.

Many on the left are optimistic the Fed is winning, and some say we can start easing up on rate increases. Some argue a soft landing is still possible, while others say the Fed could stop rate hikes now, but it won't. Bloomberg's editorial board said the Fed's soft landing for the economy might still be possible. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province.

Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. Tuesday's inflation report had persuaded some investors that the central bank could afford to lighten up on monetary policy. Prices excluding food and energy rose by 6% in the year to November, down from 6.3% in the year to October. For the second month running, that was a greater decline than expected. Signs of subsiding inflationary pressure were also apparent across a wider range of price components, the board said. Taken together, such data suggests

that price increases have peaked. Yet, the Fed is right. It's too soon to say that the inflation rate is securely on course back to its target of 2%. In his remarks on Wednesday, Chair Jerome Powell stressed that the labor market is still tight. Companies report a huge overhang of vacancies, he said. It's as though the economy is facing a structural labor shortage. If things continue to unfold as it predicts, the bank will deserve to be congratulated on a job well done, despite its admitted error in failing to start raising interest rates sooner. One other point is worth noting. Powell was asked during his press conference whether the Fed might consider changing its inflation target if getting back to 2% proves too difficult, an option that some economists advocate.

The chairman dismissed the idea briskly, the board said. This was something the Fed hadn't discussed and wouldn't discuss, he said. The inflation target is 2%, and that's that. If core inflation threatens to settle between 3% and 4% next year, he can expect to be pressed more aggressively on the matter. Yet here, too, Powell is right. Things are roughly on track because nobody doubts the Fed's commitment to low inflation. If that changes, all bets are off. In Market Watch,

Rex Nutting said the Fed should pause its interest rate hikes now, but he knows they won't. With the relatively benign report on the Consumer Price Index in November released on Tuesday, the Fed now has compelling evidence that it has achieved its immediate goal of seeing a significant slowing in inflation, Nutting wrote. The CPI report was actually better than it's being portrayed by the media, which continued to focus irrationally on year-over-year changes in inflation rather than looking at what has happened since the Fed began raising interest rates nine months ago. In March of 2022, when the Fed first raised interest rates, inflation was accelerating. From January to March, the CPI had risen at an 11.3% annual rate. That was an alarming inflation rate, which called for action by the Fed.

But then the Fed raised interest rates at six straight meetings, going from near zero to near 4%, and now inflation is decelerating. From September to November, inflation rose at a 3.7% annual rate. The progress is much less apparent when the figures are reported on a year-over-year basis, as most media outlets do. From November 2021 to November 2022, inflation rose 7.1%, but that figure is meaningless to our understanding of what the Fed has accomplished, because that time frame also includes five months of high inflation from before the Fed acted, Nutting said. Because rate hikes take some time to have an impact on prices and on the economy, they didn't really start to bite until July. In the five months since then, inflation has slowed to 2.5% annualized rate,

noticeable to anyone who's looking. In the Washington Post, E.J. Dionne Jr. said he hopes the Fed considers easing up on interest rate hikes soon. I was among those who did underestimate the immediate threat of inflation in early 2021, so I salute those, notably former Treasury Secretary Lawrence H. Summers, who warned us about what was coming. But in light of Tuesday's Bureau of Labor Statistics report showing that inflation slowed more sharply than expected, I also want to make the case that we doves made the right mistake, meaning that we were right that this inflation is quite different from earlier bouts, he said. At the risk of oversimplifying, inflation hawks examine our situation and see something approaching the situation of the 1970s, inflation roaring out of control and in danger of becoming embedded in the

economy. The result back then was stagflation, the worst combination of economic sluggishness with rising prices. But it's not the 1970s anymore. Jared Bernstein, a longtime advisor to President Biden and a member of the White House Council of Economic Advisors, points to three big differences. First, the inflation of the 70s was driven by big oil price shocks from the Middle East. The United States is now far less dependent on Middle Eastern oil. Second, unlike now, unions were still strong in the 1970s and many contracts contained cost of living increases that created an upward wage price spiral, Dion Jr. said. The third difference, the Federal Reserve has a much better understanding than in earlier years of the underlying mechanisms of inflation, Bernstein said. So here's hoping that

policymakers, including Powell, don't let fears of the 1970s kick away real economic gains in the early 2020s. All right, that is it for what the right and the left are saying, which brings us to my take. Throughout the inflation debate, I've kept most of my responses pretty muted. Predicting the future is hard enough in politics, but in economics, it seems damn near impossible. It's worth remembering that around this time last year, most economists were saying inflation had already peaked and predicted the personal consumption expenditures index would be running at about 2.5% by the end of 2022. It's running at about 5%, more than twice that. For obvious reasons, that makes it tough to actually believe what many

economists think now, which is that inflation has peaked, will keep coming down, and a soft landing might be possible. In the last couple weeks, I've become more convinced of one of my previous positions and much less sure about another. I'm more convinced that inflation is a legitimate threat that needs to be stamped out, and that we should continue with interest rate hikes until we're 100% sure it's behind us. The impact of the interest rate hikes is really starting to be visible on a consistent basis in the data, which is great news. That means this approach is working, working at a time when we seem to be slowly hammering kinks out of our supply chain, too.

The Fed has inflation on the ropes, so they should keep hammering it until we're certain it's over. As much as people fear a deep recession or significant economic damage, it's also clear the labor market is still tight, wages are still strong, and we still have an opportunity for the coveted soft landing, where inflation comes down without setting off a major recession. At the same time, I'm less convinced of how much inflation matters to voters, or at least how much they blame our current administration for it. In our Friday edition, Democratic strategist Simon Rosenberg made the case to me that inflation is simply an exaggerated story. His argument was

appealing in its simplicity. If inflation had been impacting Americans as much as the media said it had, Democrats would never have had the performance they just did in the midterms. Alternatively, if it had been impacting Americans and they blamed the Biden administration for it, then again, Democrats would have never had the performance they just had. Either way, the politics of this latest report are great for the Biden administration. Inflation is still too high, but we have now gotten several consecutive months of encouraging numbers with all sorts of other indicators that it's on its way down. On top of that, most of the focus is on the Fed now, not Biden.

Personally, we've been covering this story for over a year, and this is the most optimistic I've been that there is light at the end of the tunnel and that the folks who are quote-unquote in control at the Fed are doing a good enough job to get us out of this mess gently. All right, that is it for my take, which brings us to your questions answered. This one is from Maria in Dayton, Ohio. This one is from Maria in Dayton, Ohio. Maria said, Russia's effect on American politics, specifically, how much of an effect do they have? Do we actually know? Is this media hype or do they actually rig some of our elections? If you're willing to cover this topic, I would like to hear your thoughts. Okay, so first of all, I think rig is an extremely strong word,

and I would never use that to describe Russia's attempts to influence our elections. Here's what we're pretty certain Russia does. On social media, they have bot networks that parrot Russian propaganda. They have created groups on platforms like Facebook to share political content and even organize political events that may influence public opinion. On the global stage, they try to mainstream decidedly anti-West and anti-American talking points. And of course, we are fairly confident Kremlin-length hackers helped access the DNC emails that were leaked by WikiLeaks heading into the 2016 race,

the most notable of their recent operations. Here's what we don't have any clear evidence of, that Russia accessed our voting machines to change any votes, compromise politicians, or otherwise rigs our election in any meaningful way. Basically, Russia's influence amounts to a fairly well-coordinated social media operation. But even those aren't necessarily about helping one candidate or the other. Oftentimes, it is just about creating chaos or amplifying actual fake news. Unfortunately, I think the media both overhypes this influence on the left and is too dismissive of it on the right. It matters on the margins, yes, but I think it's also way less insidious than I imagine many Americans believe.

And it has to be said, when you compare it to the far more overt ways America has meddled in the elections of other foreign nations, it is closer to child's play. All right, that is it for our reader question, which brings us to our under the radar section. Strikes are surging in the U.S. There have been 374 worker strikes in 2022, a 39% increase from 2021, according to a database from Cornell. These worker strikes have happened at some of the most high profile companies in the world, including Amazon and Starbucks. They've been fueled by anger over working conditions during the pandemic and buffered by other labor winds, including a rise in unionization. Strikes were already on the rise before the pandemic, with a 17-year high in 2019. Axios has the story about the rising strikes,

and there is a link to it in today's episode description. All right, next up is our numbers section. The increase in the price of eggs from November 2021 to November 2022 was 49.1%. The increase in the price of airfare during that time period was 36%. The increase in the price of energy was 13.1%. And the decrease in the price of used cars and trucks between November 2021 and November 2022 was 3.3%. The decrease in the price of smartphones between November 2021 and November 2022 was 23.4%. The current average price of a gallon of gasoline in the United States was $3.14. And the average price of a gallon of gasoline in the U.S. a year ago was $3.30. All right, that is it for our numbers section, which brings us last but not least to our

Have a Nice Day story. Christmas came a little early for Joy Milan. Joy is the owner of Taco Bout Joy's, a restaurant located in Glenview, Illinois. Apparently, the restaurant hadn't been getting the kind of traffic Joy had hoped for. Her daughter, Isabel, shared a TikTok video of her mom waiting by the door looking out for customers, but from inside showing a totally empty restaurant. It breaks my heart, she said in the video, adding that she wished she could give her mom customers for Christmas. Well, the post struck a chord, racking up 38.5 million views and over 69,000 comments, and then a wave of business and lines out the door. Today has this remarkable story, and there's a link to it in today's episode description. All right, that is it for today's

podcast. As always, if you want to support our work, please go to retangle.com slash membership and consider becoming a member. We'll be right back here same time tomorrow. Have a good one. Peace. Our podcast is written by me, Isaac Saul, and edited and produced by Trevor Eichhorn. Our script is edited by Ari Weitzman,

Sean Brady, and Bailey Saul. Shout out to our interns, Audrey Moorhead and Watkins Kelly, and our social media manager, Magdalena Pakova, who designed our logo. Music for the podcast was produced by Diet75. For more from Tangle, subscribe to our newsletter or check out our website at www.readtangle.com T'was the season of chaos and all through the house, not one person was stressing. Holla differently this year with DoorDash. Don't want to holla do the most? Holla don't.

More festive, less frantic. Get deals for every occasion with DoorDash. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases.

What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur and 100% protection is not guaranteed. Learn more at flucellvax.ca.