The NPR Politics Podcast - The Economy Is Weird Right Now

Episode Date: April 5, 2022

Unemployment in the United States is near record lows, wages are growing quickly, and spending in the service sector is increasing as the pandemic lulls.But there's also some worrying news: more job openings than people who want to fill them, global economic uncertainty stemming from Russia's invasion of Ukraine, and so much demand for consumer goods that the supply chain is struggling to keep up — forces that have all helped to drive inflation.Can the Federal Reserve calibrate its response in a way that won't tip the country into a recession? And what view of the economy will voters have come the November midterm elections? This episode: White House correspondent Tamara Keith, White House correspondent Asma Khalid, and chief economics correspondent Scott Horsley.Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Find and support your local public radio station.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hi, this is Yvette. I just put my heart, otherwise known as my daughter, on a plane bound for Japan, where after one and a half years online, she'll finally get to study in person. This podcast was recorded at 2.25pm on Tuesday, the 5th of April. Things may have changed by the time you hear it, but I'll still be happy for her and sad for me. Okay, enjoy the show. I mean, let's just go with happy for her, but I do understand, like, the parental need to not let your child go too far away, like to a whole other country. I know, I can't even imagine that. Mine has just turned one, the little one. I feel so far away. So I will relish the next 17 years while he lives under my domain.

I don't know if we'll relish it every day. Hey there, it's the NPR Politics Podcast. I'm Tamara Keith. I cover the White House. And I'm Asma Khalid. I also cover the White House. And we are joined by Chief Economics Correspondent Scott Horsley. Hey, Scott. Great to be with y'all. And Asma, this is pretty exciting. You are in Michigan inside a car, just like old times, recording the podcast from the road. It is exciting, though I will say the weather in Michigan has been so up and down. It was snowing yesterday, which is wild in April.

And if you guys hear a bit of background noise, it's because it's like bizarrely warm in the car right now. So I had to open the windows to join you all. But for the record, you're not driving. I am not driving. I am sitting in the passenger seat very safely with my laptop and my recorder next to me. So we are talking about the economy today, which it's kind of weird. It's both hot and cold all at the same time. And we're going to try to explain what's going on there. Scott, let's start with the jobs market. The report came out on Friday.

It said more Americans are getting hired. How could that not be a good thing? That is a good thing. 431,000 new jobs were added during the month of March. And it turns out that the jobs added in January and February were even more than we thought, 95,000 more than we thought. The U.S. economy has now added 400,000 or more jobs in each of the last 11 months. So that's really strong. We're still not quite back to the jobs level we were at before the pandemic hit, but we are getting closer. We're closing that gap. And equally encouraging, we saw another big influx of people joining or rejoining the workforce last month. And that's good because it means that all those employers who are desperate for workers may actually find some to do the work they want done.

So the thought was like six months or a year ago that inflation would be temporary, that the pandemic just needed to end, and then things would get back to normal, and the inflation would go away. So now the pandemic is not entirely over, but people are out there doing things, they're living their lives, and yet inflation has not gone away. It feels like it's getting worse. So what is going on? Yeah, inflation is really the Achilles heel in what is otherwise a very strong economy. Consumer prices in February were up 7.9% from a year earlier. That's the steepest increase in four decades. And really what's happening there is we still have a mismatch between really strong consumer demand and businesses that aren't quite

able to keep up. Now, with more people coming into the workforce and more people working, we'd like to think that that will help with some of those inflationary pressures, but it's going to take time. And in the meantime, we're going to continue to see upward pressure on prices. The fear of some economists is that that inflationary Achilles heel is going to spread to the rest of the body and will tip into a recession. The Federal Reserve is fingers crossed optimistic that they can chip away at inflation without actually sending the economy into a recession. Scott, you mentioned this idea of inflation as an Achilles heel, which I find such an interesting phrase because it does feel like when you go out and you talk to people, it's not particularly hard to meet people who feel kind of more concerned, because they'll say there's all these other metrics of the economy that are objectively doing really well. It is just inflation. And yet it seems that, you know, people broadly are just more concerned about inflation than they are any other metric. You know, I feel like you can spend an afternoon

in a grocery store parking lot and it's very easy to find Democrats, Republicans, people who are apolitical, who know the inflation numbers off the top of their head, can cite to you what they are paying for, say, a bag of apples or some bacon, and are extremely bothered by it all. And Asma, conveniently, you have spent an afternoon in a grocery store parking lot, and you are here to tell the tale. Yes, quite a bit of time. Yeah, I mean, I've been in Michigan's seventh congressional district, which is the area in and around Lansing, Michigan. And I came here because it is by all accounts, a fairly purplish area of the country. It's a very hotly contested district leading up to the midterms. And I thought it would give us a good pulse on what a cross section of people think about the economy and inflation in particular. And, you know, I would say I spent a good amount of time outside of a Walmart, a Dollar Tree, a gas station, and also

at a local grocery store chain across the Midwest known as Meijer. And it was there that I met this couple, Trevor and Krista Wilcox, who were putting groceries inside their car. And, you know, we got to talking about prices and they are frustrated by how much more they are paying for things. You know, both are troubled by rising prices. But when I asked them, who do they blame for this? It nearly the exact same moment they gave me very different responses. Do you blame anyone or do you blame anything for it? I blame the Biden administration. COVID.

You blame COVID. Yeah, I'm the nurse. And you blame Biden. The administration, yeah, there's a lot of things they could do. President Biden announced that the U.S. would be selling a million barrels of oil a day from the Strategic Petroleum Reserve to try to drive down gas prices, because that is a price that really bugs people. So is that something that will help with this? And is there more that they could be doing about inflation?

You know, the economy and how people feel about the health of the economy, often in recent years, falls along partisan lines. And that is not atypical. And it's akin to what I've been hearing now. You know, when you ask people who they blame for rising prices, it's fairly routine that I will say I hear from Republicans. They blame the White House. They blame the president. And Democrats will blame either the pandemic, the war in Ukraine,

or they'll say it's sort of the natural ebb and flow of the economy and the way things are. And at times they even blame corporations and the sort of greedy corporations that they feel are trying to reap in profits at this point in time. But what to me is interesting is that it felt like on this reporting trip, I heard more of a sense of frustration about rising prices that was bipartisan. So even though people might be blaming different actors that are responsible here, there is a deep sense of frustration about how high prices have gotten. And, you know, you ask people, are we on a right track, wrong track

as a country? Where are we? And it was fairly common for me to hear from both Republicans and Democrats a real like middling response. Nobody really felt like the country was headed in a great direction right now. We have a lot more to get to. But first, we have to take a quick break. And we're back. And Scott, there is a question that I asked before that I feel like we haven't quite answered. And maybe there isn't a good answer, but I'm going to ask it anyway.

Could the Biden administration be doing more about inflation? What could they be doing? Well, sure. And I mean, I should say, first of all, that the primary responsibility for addressing inflation is with the Federal Reserve. The central bank has begun to raise interest rates, and they're going to be doing more of that over the course of the year. And the goal there is to tamp down demand so that the supply-demand imbalance is not so wide. And if they get their way, they'll tamp down demand just enough to curb inflation without going overboard and sending the economy into a tailspin or a recession. There are things the administration can do around the margins to address some of the supply chain challenges. We've talked about

releasing oil from the Strategic Petroleum Reserve to hopefully bring down gasoline prices, which are a big part of the inflation puzzle over the last few months. We have actually started to see gasoline prices come down a bit. The average, according to AAA today, was about $4.18 a gallon, which is down about seven cents over the last week. But the pandemic continues to be a big driver of inflationary forces. It has shifted people's buying habits. It's shifted the way supply chains work. It's raising costs all over the planet, not just here in the United States. And there's a limited ability for the administration to do stuff in the short run that's going to fix that. Scott, I have a question for you, because one of the criticisms I've heard

from some Republicans is not so much about what President Biden is or is not doing in this particular moment, but also the sense that by issuing additional stimulus checks, they feel like he essentially just flooded the economy with cash. And there is a belief among some Republicans that the American Rescue Plan that was passed, what, back in the spring after the president took office, and that additional stimulus aid, though, they say, contributed to the inflation environment that we're in right now. And that is an argument you hear amongst Republicans. Oh, and that's not just a Republican talking point. There are plenty of economists across

the political spectrum who will say that there's a valid argument that the administration and the democratically controlled Congress in shaping that American Rescue Plan did help to fuel inflation, just as the Federal Reserve, led by Republican Jerome Powell, did help to fuel inflation, just as the Federal Reserve, led by Republican Jerome Powell, did help to fuel inflation. The question, I think, is how much less inflation could we have and still have the really robust jobs recovery that we've had? Could you have gotten an equal amount of jobs recovery with less inflation? Certainly, some people would say yes, you could have. You could have tailored the American Rescue Plan more narrowly. You could have done with a lot less stimulative spending and gotten just as much job growth

with less inflation. And economists and political people will be arguing about that for years to come. Scott, I have a less abstract question for you, which is, you know, we're talking about inflation, but it does not hit all people equally. And I'm wondering who this hits the hardest. Yeah, it's absolutely the case. You know, we say inflation is 7.9%, for example, in February, but that doesn't really mean everybody's feeling the same effects. People in general at the bottom of the income ladder feel the effects of inflation more for a variety of reasons. They tend to spend more of their household budget on necessities like gasoline and food,

which have seen some of the biggest increases. And so you're more exposed to those inflationary forces than you would be, say, if the price of concert tickets went up and you could say, well, I'll just skip the concert this week. On the other hand, it's the low-wage workers who've also seen, in general, some of the largest pay increases over the last year. So it's kind of a two-sided coin where lower wage workers have gotten, in many cases, the real increase in their purchasing power because their wages have gone up more than prices, even as people with higher incomes have perhaps lost ground because their wage increases have been smaller relative to inflation. But it's certainly the case that some families feel the effects of inflation much more than others.

And that would also include, for example, retirees on a fixed income. Asma, this is an election year, and you are in a very competitive congressional district, one of the ones that Republicans are targeting to tip in their direction. Are you getting a sense of how the economy is going to play into the messages that we're going to hear coming from candidates all over the country leading into the November election? Well, I will say if this district is any indication of what we might see elsewhere, I think that broadly speaking, inflation will be central to how Republicans message this election cycle. You know, I was at a campaign event this morning for the Republican who is trying to unseat the Democratic incumbent who represents this district, Congresswoman Alyssa Slotkin. And the Republican candidate, his name is Tom Barrett. Essentially, his entire

campaign event was built around focusing. He held it at a gas station in a town just north of Lansing. So I think we know what it was about. It was essentially about rising prices. Right. So, yeah, if this is any indication of how they intend to message, I would say it would be central and it is likely to be central in a lot of different congressional races that we see ahead of the November elections. Yeah. OK, well, we are going to have to leave it there for now. Scott Horsley, thanks so much for joining us. Always good to be with you. I'm Tamara Keith. I cover the White House.

And I'm Asma Khalid. I cover the White House. And thank you for listening to the NPR Politics Podcast.