The NPR Politics Podcast - Wages Up. Inflation Down. Strong Economy? Depends Who You Ask.

Episode Date: June 15, 2023

It is all in the numbers: the economy is doing really well. Workers are raises are outpacing inflation and unemployment is still near historic lows. But how people feel about it all is a messier, very political story.This episode: Justice reporter Deepa Shivaram, national political correspondent Mara Liasson, and chief economics correspondent Scott Horsley.The podcast is produced by Elena Moore and Casey Morell. Our editor is Eric McDaniel. Our executive producer is Muthoni Muturi. Unlock access to this and other bonus content by supporting The NPR Politics Podcast+. Sign up via Apple Podcasts or at plus.npr.org. Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Support for this podcast and the following message come from Autograph Collection Hotels, with over 300 independent hotels around the world, each exactly like nothing else. Autograph Collection is part of the Marriott Bonvoy portfolio of hotel brands. Find the unforgettable at AutographCollection.com. Hi, this is Jamie Lynn in Sugar House, Utah. I just got done dropping off my first and third graders for their last day of school this year. This podcast was recorded at 106 p.m. on Thursday, June 15th, 2023. Things may have changed by the time you hear it, but one thing's for sure.

It's about to get a lot less quiet around here. Okay, here's the show and have a great summer. School's out for summer. Hey there, it's the NPR Politics Podcast. I'm Deepa Shivaram. I cover the Justice Department. I'm Mara Liason, National Political Correspondent. And Chief Economics Correspondent Scott Horsley is here. Hey, Scott. Hey, great to be with y'all. Okay, so this month, and the job market has just remained really strong. Employers added 339,000 jobs in May, even sectors where you'd expect to see a slowdown, like construction, given what's happened with interest rates.

We added 25,000 construction jobs last month. Bars and restaurants are still hiring, lots of jobs in business services, healthcare. Manufacturing was one of the few sectors that saw any job losses in May, and we did see some job losses in media. But overall, the labor market is still clicking on all cylinders. And wages are up, too, as well. Yeah, wages are still going up, although not as fast as they were. And that's actually okay. If wages rise really fast, it were. And that's actually okay. If wages rise

really fast, it can put more upward pressure on prices, and then the inflation just eats away at all the wage gains. So what we'd like to see is more modest wage gains that outpace inflation. And we did see that last month. Average wages in May were up 4.3% from a year ago. That's actually a little bit more than prices rose over that 12-month period. So workers saw a real wage gain in the 12 months ending in May. And Scott, that's really what the administration has been waiting for, right? For inflation to not eat up all those wage gains. Yes. And that's what workers have been waiting for too. It's better to have a 3% wage gain and 2% inflation

than a 5% wage gain and 7% inflation. And Scott Mara mentioned this just a bit earlier, but inflation is also continuing to fall. What's going on with that? It is good news, although maybe not quite as good as the headline number would suggest, the overall inflation rate in May came down to 4%, the annual inflation rate. And that's encouraging. However, a lot of that drop was driven by a fall in gasoline prices. And we know gasoline prices go down and up with some regularity. So that improvement could quickly reverse, you know, with geopolitical events or just about anything. Economists often will strip out the prices for food and gasoline and look at what they call core inflation, which tends to be a little bit more

stable and gives you more of a picture of the underlying trend. And that was 5.3% in May. It is an improvement. It was down from 5.5% the month before, but still elevated for sure. And that 5.3% core inflation rate is still going up faster than wages. Mara, I want to turn to you here because as we talk about all of this, typically a strong economy, the assumption is that that's good news for the incumbent president. Is that the case here? Has that always been the case? Well, it used to be the case. But what we've seen recently is a decoupling of a president's approval ratings from the strength of the economy. Donald Trump, pre-COVID, had a pretty good economy and really terrible approval ratings. Joe Biden has been mired in the low 40s, even though,

as we've just discussed, there are all of these good things happening in the economy. Now, you know, if you're a Republican, you think the economy is terrible. And if you're a Democrat, you think it's pretty good, depending on who's in the White House. Yeah, that's something we definitely want to get to. But first, we're going to take a quick break, and we'll be back in a second with more of this. And we're back. And Scott, I want to talk about something that Mara had just mentioned before the break. Sometimes it feels like the way people perceive the economy doesn't really match up with the way the economy is actually functioning at. A lot of people, for example, think that we are in really turbulent economic times, but we might have a really strong economy right now. I'm curious what

your thoughts are and why people might have this kind of mismatched perception of the economy with where things actually stand. Well, one thing we know is that there's just a lot of polarization in the way people view the economy, just as there is in the way people view just about everything else. Democrats see the economy in better shape than Republicans do. And so when there's a Democrat in the White House, Republicans think the economy is in the toilet. And when there's a Republican in the White House, Democrats think the economy is in the toilet, almost regardless of what's actually happening with the objective data. But it's also true that we've been in a kind of weird economy. I mean, we obviously went through a wrenching experience of the pandemic. We've had to deal with shortages of everything from toilet paper to infant formula.

We have experienced the highest inflation in decades, even though it's started to come down now, and that's a good thing. But so people do have reasons to be concerned about the economy, although it's certainly not the case that we're in a recession, as a lot of people think. Objectively, the job market is very strong. Wages are still going up. The economy is still growing, although not as fast as it had been. interesting to watch is that as inflation has come down from that north of 9% figure it was last summer to where it is now in the 4% range, how much will people's concerns about inflation abate? And I mentioned that a lot of the drop in inflation has been in the categories of food and fuel, gasoline and groceries, which don't necessarily tell us a whole lot about the underlying economy, but those are the prices that people pay the most attention to. So even if people are paying more for other things, if they're saving on gas and groceries,

will that relieve some of the economic stress? I think that's something to keep an eye on. Scott, let me ask you about an alternative theory that maybe people's perceptions of the economy are correct. They're just paying attention to something different. Because even before this current round of inflation, we had inflation in housing, the cost of higher education, and health care, the three things that make you a middle-class person.

Those are the big-ticket items. And that inflation predated this. And maybe people are thinking, yes, I know that the price of eggs went down, but it's still harder for me to be in the middle class, to find a house that I can afford, there's a housing crisis in this country, to pay for my kid's college education, and to pay for healthcare. I certainly think there could be something to that. And even if you own a house, say, and you have a fixed rate mortgage and you're not too worried about what's happening with interest rates or even home prices, it may affect your psyche a little bit. Certainly the cost of higher education for anyone who's got kids in college or

got kids who they hope are going to be in college or the kids who are in college themselves, I mean, the cost of higher education has just vastly outstripped background inflation for a long time. Yeah, for a long time. For decades. And that's one reason that the student debt issue is so salient for people. So I think those are valid points, at least in terms of people's political sense, even if it doesn't necessarily tell us how the economy is doing in objective terms. Scott, you mentioned that message of kind of gas and groceries. I remember covering Nevada during the midterm elections, and that was something that Republican strategists in that state were really pushing home as their message was that people are choosing between gas and groceries. Therefore, we should probably vote Democrats out of office.

And so I kind of want to get into the political side of this, because right now, the messaging from both parties is pretty starkly not related to the economy. Republicans are talking about investigating Joe Biden, pardoning Trump. You've got Biden's side talking about, you know, what he's done in the past couple of years, the strength of the economy, unions, American manufacturing. But none of those things are really pocketbook issues. And so both of you, Mara and Scott, is this a political kind of lens that you see going forward in the next several months as we head into the primaries? Or is this kind of a right now strategy? Well, I think both parties will obviously try to capitalize on the messages that they think will be most effective for their candidates. So I think Democrats will talk at least about the economic numbers that are positive. You'll hear Democrats talking about the millions of jobs that have been added to the economy on President Biden's watch. On the flip side, you will hear Republicans talking about inflation, and they certainly won't talk about the drop in inflation, but they'll talk about the sort of vestigial pain that people feel from higher prices. But there's no doubt that the

Republican primary is focused on the culture wars, not on kitchen table issues. And Joe Biden is out there trying to push what he called in the State of the Union his blue-collar blueprint, a message that's directly aimed at non-college voters, preferably white non-college voters, the voters that Democratic Party has been losing in droves over the years. And he's pushing all the things that he's done to create jobs for people without college degrees, whether it's the CHIPS Act or the infrastructure bill or, you know, anything else that has been a result of his policies because he wants those

voters to give him a second look. And are Republicans focused on non-pocketbook issues, Mara, because that's where they think their voters are or because if they talk about pocketbook issues, it's not a winning message for them? I mean, the tax policies they advocate are not tax policies that most Americans agree with. Well, I think, first of all, they definitely think the culture war issues are the things that their voters care about. In terms of the economic message of the Republican Party, they don't know what their message is. They're at war with each other. It's a party in transition. There are candidates like Mike Pence, who's kind of an old-fashioned Reagan Republican, who still believes in limited government, low taxes. But there's a big change happening in

the Republican Party, and it's unclear where they're going to land. So for now, the focus is on the culture war. But I agree, some of the messaging about lower taxes for the rich or corporations isn't popular, that's for sure. But remember, Donald Trump made a pretty big break with Reaganomics. And he wasn't for free trade. He didn't care about the deficit. I don't think it's that they know what their economic message is and it's unpopular. I think they're in a state of flux about where they stand on a lot of economic issues. That's it for today, Scott Horsley. Thank you so much for joining us. Always a pleasure.

I'm Deepa Shivaram. I cover the Justice Department. And I'm Mara Liason, National Political Correspondent. And I'm Mara Liason, national political correspondent. And thank you for listening to the NPR Politics Podcast.