We all need to get used to higher prices

Transcript

NIALA BOODHOO: Good morning! Welcome to Axios Today!

It’s Tuesday April 19th. I’m Niala Boodhoo.

Here’s how we’re making you smarter today: Could driverless vehicles extend to the trucking industry? Plus, a federal judge strikes down the CDC’s mask mandate.

But first, today’s One Big Thing: why we all need to get used to higher prices.

NIALA: Our record inflation rate of 8.5% year over year won't last forever. But even when that does go away, some of the high prices we're seeing now may never go back to pre pandemic levels. As Axios’ managing editor for business Javier David writes, the days of cheap goods and services may be long gone. Javier joins us now from New York with a big picture of our current inflationary moment. So even if inflation does come back down to the Fed's target of 2% per year, why wouldn't prices also come down because of that?

JAVIER: Well I think it has largely to do with demand. What we've seen over the last year and a half or two years of the pandemic, since lockdown sort of decimated the economy, is there's a very large demand for people to buy things, do things, get out. That activity level is really kind of the driver behind what we're seeing in terms of prices. So the bottom line of it is, corporate America in a lot of instances are passing along these costs to consumers. And because the consumers are eating it, they are in a large measure, uh, not inclined to sort of roll back those costs. It's, it's good for them. And, um, if, to the extent that your customers continue to pay it, there's no real problem with it.

NIALA: So are there any areas where we might see costs or prices come down once this crisis slows? Like if we think about food or gas, what do those look like?

JAVIER: Well, some of those will normalize. I think that the biggest thing that we will see normalize is energy prices. Now energy prices are tremendously volatile, and it's one of the reasons why when they do the official calculations, they strip out some of these costs, particularly with energy. And food is also very volatile. Some of what you will see will come back down to earth. But coming back down to earth is a different connotation than coming back down to pre-pandemic levels. And I think that that is kind of the biggest takeaway for the consumer.

You're not going to see a lot of what you saw before COVID. Like Amazon, last week announced that they would be charging service costs of some source for a surcharge and that is in part to sort of offset the costs of skyrocketing energy prices. Things like surcharges are easy to roll back once the crisis ends and they'll, you know, they'll pull that back. A lot of what we see in terms of prices, food, services, the leisure costs, and that can be, uh, airline tickets that could be hotels, etc. Those costs are going to remain high, get used to paying at these higher levels because it's not going to go anywhere, barring a recession or some sort of real dramatic economic retrenchment.

NIALA: Are there companies that are taking advantage of this moment to raise prices and make more money and pass that onto the consumer?

JAVIER: You know, that's a very difficult dicey question. Um, I think the short answer is yes, there are companies that are passing those costs along, but it's not necessarily taking advantage of it because it costs them a lot of money to put that stuff together and give it to the consumer. So everyone at this point is paying a lot more in terms of energy prices. And I think that's the biggest driver. You're the best thing that we can do as an economy is get the spur underneath energy prices. If we resolve that, I think a lot of these inflationary pressures will, will sort of diminish.

NIALA: So it sounds counterintuitive. And I think, especially to people who are really struggling with food budgets at gas prices, to think that prices decreasing isn't necessarily a good thing right now. Can you explain why that is?

JAVIER: Well, prices decreasing right now would be indicative of a loss of demand. And that would be, in a lot of ways, a recessionary and not if it's not recessionary, it would be indicative of a slowdown in the economy that's dramatic enough to make people pull back on spending. They may be losing jobs. So if they losing jobs are definitely not going to be spending as much. The companies would say, okay, you know what, people aren't spending as much. And that is because they, you know, for whatever reason, the demand isn't there anymore. So we've got to do something and lower prices.

NIALA: Axios’ managing editor for business Javier David joining us from New York. Thanks, Javier.

JAVIER: Thank you.

NIALA: In a moment we’re back with how self-driving trucks could change the industry.

[ad break]

NIALA: Welcome back to Axios Today! I’m Niala Boodhoo. Self-driving cars are slowly making their way onto our streets. And now we're starting to see autonomous trucks on our highways. Right now there's a major shortage of long-haul truck drivers. But according to a recent study from the University of Michigan and Carnegie Mellon University, self-driving trucks could one day replace more than 90% of all highway trucking. Axios transportation correspondent Joann Muller has been reporting on how this could affect almost half a million long haul truckers and she joins me now. Joann, I think we have to start with this huge number, 90% of long-haul trucking jobs could be affected. What's the context here?

JOANN: Well you can imagine that once robots are driving trucks that potentially a lot of truck drivers won't have jobs anymore. But the fact of the matter is we have a shortage of truck drivers right now. And it's one of the many reasons why we have a lot of shortages on store shelves. A lot of logistics log jams because there's just not enough drivers to drive the trucks. So automated driving is actually a way that we could solve that problem. And, you know, I don't think that a 500,000 jobs are going to be affected immediately. This technology is going to roll out over time and by region, and it's probably going to start in the south.

NIALA: And so where exactly in the south are we seeing this?

JOANN: Well, it's already starting down in Texas and Arizona. This is heavy, uh, freight route for the United States and has good weather. So a lot of companies have found this to be a great place to test their technology. And what's interesting is that they are already carrying freight for real customers, but with safety drivers behind the wheel. But this is how they are sort of proving that there's a business here.

NIALA: We've heard a lot about self-driving cars getting into accidents. In some cases there have been fatal crashes. Do we think these trucks could have the same issues?

JOANN: Well obviously this technology is still in development. In general, it's a little bit easier to drive in a straight line on the freeway and drive at a steady speed. And in fact, studies have found that trucks are actually going to be way more efficient, use less fuel, when they drive themselves because they don't have leadfoot drivers and they can see farther ahead and they know what's coming and they can adjust themselves.

NIALA: What did the research say about how automatic truck driving could affect the grueling hours of what happens now for people in person?

JOANN: Yeah, it's really hard to be a long haul truck driver. You are on the road, almost, you know, 300 days a year. You don't get to see your family. You sleep in the back of the truck. It's hard to get people to take these jobs, which is why there's a shortage of something like 80,000 truck drivers right now. But there's a lot of demand for more local, short-haul trucking. And those are the ones where drivers can go home to their family at night. And if you could imagine, long-haul trucks deliver to a depot somewhere and then a human takes over and drives to the local destination. That's the model I think we're going to start seeing.

NIALA: Axios transportation correspondent Joann Muller. Thank you, Joann.

JOANN: Thanks Niala

NIALA: One last thing to know today - yesterday, a federal judge in Florida struck down the Biden administration’s mandate requiring masks on public transportation like planes, trains and buses.

This comes almost a week after the CDC announced it was extending its public transit mask rule until May 3rd. The TSA said Monday night it would stop enforcing the mask mandate

Meanwhile, lots of you listeners have been texting about your feelings on wearing masks - like Tansu in Howard County, Maryland who said mask-wearing often depends on where you are in his county:

TANSU: At a grocery store, you'd probably see about 50% of the people masked. If you go to a more rural area of our county, it would probably be, maybe like 70%, no mask, 30% masked.

NIALA: We’ll be talking about this along with the rise in cases later this week so keep those texts and voice messages coming.

That’s it for us today! You can reach our team at podcasts at axios dot com or you can also text me at (202) 918-4893.

I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.