A reality check on inflation and the economy

Guests: Axios' Neil Irwin and Ina Fried.

Credits: Axios Today was produced by Niala Boodhoo, Alexandra Botti, Fonda Mwangi, Robin Linn and Alex Sugiura. Music is composed by Evan Viola. You can reach us at [email protected]. You can send questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.

Transcript

NIALA: Good morning! Welcome to Axios Today! It's Monday, August 28. I'm Niala Boodhoo. Here's what you need to know today: A racially motivated shooting in Jacksonville leaves three dead. Plus, AI's web takeover. But first, a reality check on inflation and the economy — that's today's One Big Thing.

A reality check on inflation

JEROME POWELL: Although inflation has moved down from its peak, a welcome development, it remains too high.

NIALA: That's Fed chair Jerome Powell on Friday at the Jackson Hole Economics Symposium in Wyoming. He added the central bank is prepared to raise rates further, if appropriate. But with mortgage rates already at a two-decade high so far this year, we've also seen a record number of media layoffs. What actually is going on with inflation and the economy? Axios Neil Irwin is here with a reality check. Hey Neil!

NEIL IRWIN: Hi, Niala.

NIALA: So you just got back from Jackson Hole, where Fed Chair Powell warned that inflation is still far too high. What about all the data and all the conversations we've had showing that inflation is receding?

NEIL: So they're both true. Inflation peaked at 9% in the year ended last June. It's now down to 3.2%. That said, a lot of that decline has come about because of energy prices receding, and that's usually not something that gives you good indicators of what's going to happen in the future. And so what the Fed's worried about is that, yes, we've gotten through that surge of inflation from 2021, 22, but it's settling in at a, it's still a too high rate. It's something like 4 or 5%, not the 2% that they aim for. And that's not good enough for them. So if we keep seeing evidence that that's the case, they're going to keep raising interest rates.

NIALA: Let's talk about labor. We've seen layoffs across especially tech and news. T-Mobile recently announced 5,000 job cuts. The Texas Tribune laid off 11% of their staff. Where are we still seeing a tight labor market?

NEIL: Almost everything else is the real answer. Uh, there is some real weakness in some pockets of the economy and our, our own industry, Niala, is, is one of them, there's some, uh, weakness in housing that we've seen evidence of. But the truth is, the big picture story is still that this is a very strong U.S. labor market across most industries. Wage growth has been strong, especially in kind of lower-wage jobs. That's a sign of tightness in these markets for, you know, restaurant workers, for transportation workers, for, you name it. And that basic narrative hasn't changed. Most of the job market is strong.

NIALA: Neil, we also haven't seen mortgage rates this high in more than 20 years, What effect is that having? You mentioned the housing market.

NEIL: Yeah, I mean look, the basic arc of housing has been, it was red hot in 2021, early 22. Then mortgage rates spiked when the Fed started raising rates. There was a bit of a correction and a bit of an easing in the back half of 2022. That really has gone away for the most part. The question is will this latest... leg up in rates change that and we just don't know yet because it's, it's happened very rapidly in the last few weeks. You know, I think it could, I mean 7.5% mortgage rates is quite a number for people who are already strapped with housing affordability. But, uh, you know, the reality is demand for housing is strong, supply has remained constrained. So, the basic imbalance in the housing market is still there. And I will say, it's part of a broader rebalancing going on, where bond markets are starting to say... you know, maybe this high interest rate environment isn't just a temporary thing. Maybe this will be with us for a while. And so that's being filtered into longer-term interest rates, like those you see on mortgages. And that's why there might be another challenge for housing affordability.

NIALA: Overall, what was the tone that you heard in Wyoming?

NEIL: Overall, what was definitely a much better feeling than there was a year ago in the sense that they felt that this inflation problem is coming under control. When you hear, you know, the Biden administration talk about this is a robust economy with a strong job market, strong wage growth, and declining inflation, that's accurate. At the same time, it's fair to say that this is a world in which we just don't know whether we're going to start seeing more labor market weakness. We just don't know whether inflation is really... over with or whether there's another wave that we need to worry about. So there are a lot of looming threats out there that could throw that basically optimistic sunny story under the bus.

NIALA: Neil Irwin is Axios' chief economic correspondent. Thanks, Neil.

NEIL: Thanks so much Niala.

NIALA: Speaking of mortgage rates, we're still interested in hearing your story about whether or not homeownership is even a goal for you anymore? If you can answer that question in a voice memo and text it to me, we'll be using it in future episodes. All of our contact information is in our shownotes.

Headlines

NIALA: A few more stories to catch you up quick this Monday morning: A gunman in Jacksonville, Florida killed three Black people on Saturday before taking his own life. The shootings took place at a dollar store near Edward Waters University, a small, historically Black university. Police say the murders were racially motivated. And, this happened just the day after tens of thousands of people gathered at the Lincoln Memorial in Washington D.C. to mark the 60th anniversary of Reverend Dr. Martin Luther King's "I Have a Dream" speech. A hurricane and storm surge watch has been issued for large sections of Florida's Gulf Coast, including Tampa Bay, for Idalia, the latest named storm of the season. Severe weather is expected to start on Tuesday. Portions of Alabama, Georgia and the Carolinas may also be affected. And, finally - yesterday Russia gave official confirmation that Wagner mercenary leader Yevgeny Prigozhin was killed in last week's plane crash. The Russian Investigative Committee said genetic tests have confirmed his identity. Evidence does not suggest that the crash was caused by mechanical or human error, and one former U.S. national security adviser told CBS News Prigozhin's death was probably in retaliation for his attempt at mutiny this past spring. In a moment: could AI harm us all — and itself?

AI's web takeover

NIALA: Welcome back to Axios Today, I'm Niala Boodhoo. Experts say AI-generated content could account for 90% or more of the information on the internet in just a few years' time, and that could cause problems for just about everybody, including AI companies themselves.

Axios Chief Technology Correspondent, Ina Fried has the story. Ina, generative AI is still in its infancy, and we're already seeing a lot of problems when it comes to writing and original content. What exactly is going on here?

INA FRIED: So already we're seeing sort of this existential crisis in a lot of professions: a lot of people that deal with the types of words and images that these AI engines are really good at creating. So there's writers concerned whether AI is gonna take their jobs. There's commercial artists worried about what Midjourney and DALL-E are cranking out.

But on top of that, we've got a bunch of other societal issues to grapple with. We've written a ton about misinformation as an issue, deep fakes, all these things. But one of the interesting ones is the cost of creating this AI content is so low that it's gonna permeate the web a lot of experts think.

NIALA: And so if the cost of creating AI content is going to permeate the web, what role would humans play?

INA: Well, that's the fascinating thing. I think there is a widespread understanding that there are things that humans provide that we're not gonna be in very good shape if there's less of that. Most of all context and judgment. I've been testing out a ton of these AI tools, and they're really good at synthesizing information, summarizing it, creating follow-up emails, all this stuff. But you know, the one thing they can't do is provide any sort of judgment on the credibility of it. AI is not really, it doesn't have a bullshit detector, to be honest. We're not letting the AI yet write most of the articles. We're not letting it do political analysis. But, the moment we do, I think we're in for a host of new problems, and that's sort of one of the things that we're looking at is what does it mean for society when you have a ton of content that sounds good but was created by a machine that has no inherent judgment capabilities.

NIALA: And do we have any sense that people will change their relationship with the web because of this?

INA: I think that may be inevitable. I think the web will be a very different place if it looks the way experts expect it may. Don't get me wrong, there's plenty of sites out there today that are generating not very good content in the pre-generative AI era. And I worry about more convincing-sounding crap, filling the web. And we're also starting to see the early impact of this. There was a study from News Guard that found more than 400 of these sites that were basically taking legitimate news, running it through an AI engine and spitting out new text, which is, again, not as good a news source as the original one. And that's assuming neutral intent. But there is one school of thought that suggests we may actually place a greater value than we have in the past on human-generated content.

NIALA: So how should all of us be approaching all the content on the web now without knowing whether or not it's AI generated?

INA: I think looking for legitimate sources, you know, it's going to put more of a premium on those human-created sites, you know, whether it's the New York Times or CNN or Axios, going to a place where you're comfortable with their editorial standards, you're comfortable that humans are the ones making the judgments.

Look, humans aren't perfect. You can take issue with any of the ones I named. However, there's a big difference between those news organizations and AI-generated regurgitation. So I think it does really place a burden on individuals to really always pay attention to what is the source and double check.

I think the other thing that's really important in the AI era is not to take one answer from anyone as gospel and do additional research, but that's a big ask of society.

NIALA: Axios chief technology correspondent Ina Fried. Thanks, Ina.

INA: Thanks, Niala.

NIALA: That's it for us today! I'm Niala Boodhoo. Thanks for listening. Stay safe, and we'll see you back here tomorrow morning.