The stunning highs and lows of the U.S. economy

Transcript

NIALA BOODHOO: Good morning! Welcome to Axios Today! It’s Monday, April 11th. I’m Niala Boodhoo. Today: get ready for the summer of “revenge travel.” But first, the stunning highs and lows of the American economy is today’s One Big Thing.

Our economic headlines have been dominated by inflation, and an update scheduled for tomorrow isn't looking good. We're expecting to see another 40 year high in inflation for the month of March. But there is some good news you might've missed in all of this. We're also seeing the lowest number of employment claims in 54 years. As Axios’ Neil Irwin writes: a tight job market and high inflation are two sides of the same coin. And he's here to explain what that coin looks like. Good morning, Neil.

NEIL IRWIN: Hi Niala.

NIALA: Neil, two years ago, we had 6.1 million people filing for unemployment benefits in a single week, a record. Where are we now?

NEIL: So, as you say, two years ago, height of the pandemic, insane numbers, everyone losing their jobs. Now we're at the opposite extreme, 166,000 people filed new unemployment claims last week. That's the second lowest of the 2,282 weeks dating back to 1967, when we have this data. So, uh, we're in a weird world where fewer people are filing unemployment claims than virtually they ever have in our modern recorded history. So this is a tight labor market. People who have jobs are able to keep them for now.

NIALA: This is, this is the fewest amount of people we have filing for claims in 54 years. What did the size of the labor market look like 54 years ago?

NEIL: It was half the size. Uh, so it's an even more remarkable thing to observe. Look every week for 54 or 55 years, The Labor Department releases these numbers on how many people filed new jobless claims. And what's striking is how the numbers we've seen last few weeks, last few months are lower than we saw even in other good economies, right? Even then lower than we saw in 2019, 1999, times when the economy was booming, doing well. We're doing better than that in terms of this one measure, of like how many people are actually filing unemployment claims. That's a good sign. That's a sign that employers are not firing people. Those are all great signs for the labor market.

NIALA: I bet there are people who are thinking: But what about the size of the labor market? Is it smaller than before the pandemic? Because less people are looking for work. How does that factor into this?

NEIL: The labor force is still smaller than it was pr- pandemic. We're still below the February 2020 numbers, but not that far below. I think people are not quite understanding how quickly this labor market has improved and come back from the pandemic lows. And it's true. Everything's not completely healed. You can still find pockets of weakness for certain types of jobs for certain overall numbers. But those numbers have been improving fast in the last few months. If things continue the way they have, we're going to have a full employment, robust job market, by any measure possible within another few months.

NIALA: And how does that help fuel inflation? The relationship between a tight job market and higher inflation?

NEIL: It's not one for one. But it is true that this tight labor market is a factor in the high inflation we're having. So what you have is employers can't find workers. They have to offer higher wages, better benefits, things to get people on board. And when they have to pay more to get workers, they have to charge higher prices.

NIALA: Do you feel like the news of the job market has really been lost in the economic conversation this year? The news of how good a job market we're in really is?

NEIL: Look, let me just state this very clearly. This is an extremely good labor market. And I was covering the Great Recession, the recovery back in the early 2010s. And it was terrible. And we went for years and years with this very slow job growth, job creation, very slow decline in the unemployment rate. And what took 10 years last time has happened in two years this time. And that's fantastic and it's better for workers. People who want a job can get a job. They're able to demand higher pay. That said, we are dealing with a bigger inflation problem than we did during the 2010s.

NIALA: So let's break down some of these factors when the Consumer Price Index numbers come out on Tuesday, we're likely going to hear The White House talk about how the Russian invasion of Ukraine is a big factor. Do economists see that as a big factor?

NEIL: At the headline level. Absolutely yes. Right, so we're getting a number month on month. This can be something like 1%, 1.1% inflation overall. That's driven primarily by the fact that energy prices surged in March, right? Gas prices were up 20% in March because of the war in Ukraine. That's significant. That's also not really driven by underlying economic factors: What's going on in the mechanics of the economy. That said, the current forecast for core inflation, meaning excluding food and energy, these things that are driven by geopolitical things. That's expected to be 0.5%. That's still pretty high, right? Like we still have high trend inflation. And so it's a, it's a delicate thing because yes, there's going to be a high headline number. The White House is gonna blame that on energy prices on Russia. And that's true, but there's still very high underlying inflation right now. When that comes down as a very important question for the future of the economy.

NIALA: Neil, can you help us understand these underlying factors? What else do we need to know about why we're in this situation right now?

NEIL: I mean, it's partly what we just talked about around wages, right? Employers are paying more to their workers. They're passing those costs on their customers. But there's a broader thing. Like demand is high. There's a lot of money floating around right now. Stock prices are high. Spending is high, and that is pulling up prices because there's more demand than there is supply. And that's the fundamental imbalance in this economy right now. How that resolves is the big question, right? So we have this high inflation now. This surging demand. Do we solve that by The Federal Reserve tightening interest rates and we suddenly end up with a slower economy. We'll see. But the reality is it's not just energy prices, not just Russia. There are more things going on.

NIALA: Axios’ chief economic correspondent, Neil Irwin. Thanks, Neil.

NEIL: Thanks, Niala.

NIALA: Speaking of inflation - in a moment, we’re back with Americans ready to shell out the big bucks for travel this summer.

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NIALA: Welcome back to Axios Today! I’m Niala Boodhoo. After two years of hunkering down at home, Americans are splurging on so-called “revenge travel” - premium airfare, nicer hotels, and longer vacations. And confession: I did this a few weeks ago when I got tickets for Wimbledon. Joann Muller is Axios’ travel and transportation correspondent and here now with details of this latest trend. Hi Joann.

JOANN MULLER: Hi Niala.

NIALA: What are experts expecting travel to look like this summer? I have to tell you, I bought the tennis tickets, and now I've been looking at airplane tickets and thinking “bad idea.”

JOANN: [laughs] If you need someone to come with you, I would love to go to Wimbledon with you, but you know, you are feeling the same way everyone else is. We have put off travel too long. We want to see our loved ones. We want to go on those long-delayed vacations. And I am also planning a big trip. I'm going to Newfoundland this year, this summer. That is a trip I would not have made and I'm going to take two weeks to do it, not just one. This is what's happening everywhere. People are splurging on nicer accommodations, longer stays, fancier seats on the airplane. Everybody is ready to spend money.

NIALA: But this is happening despite rising costs, not just in the U.S. We look at what's happening with gas prices. How is this playing out in the travel industry?

JOANN: Yes, absolutely. Airfares are going up. Airfares since the beginning of January are up 40%, which is astonishing right? But it's really only about 7% higher than what it was before the pandemic. So remember that while, during the pandemic flights were pretty cheap because hardly anyone was flying and they were trying to lure people. But I think people are putting that aside and they're just ready to spend the money.

NIALA: It's April. Is it too late now to be booking summer travel?

JOANN: My sources at various airlines and travel agencies tell me that flight prices are going to peak in May and so you better get on it. O r you know, if you wait until June, things will be coming down again, but you probably won't get a seat until maybe September.

NIALA: Axios transportation correspondent Joann Muller. Thanks, Joann.

JOANN: Thanks, Niala.

NIALA: That’s all we’ve got for you today! If you’re a fan of the show, we’ve love it if you can leave us a starred review on Apple podcasts. And, you can always text me your feedback and story ideas: I’m at (202) 918-4893. I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.