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<b style='color: #6533ff'>Personal</b> and <b style='color: #00c46b'>national</b> financial well-being

Reproduced from the Federal Reserve; Chart: Kavya Beheraj/Axios

Listen to most experts, and you’d think the economy is going up in flames. In fact, tens of millions of U.S. households are thriving more than in decades.

Why it matters: High gas prices, stock market volatility and inflation are hiding the reality that the economy is working for a huge swath of Americans — and has richly bolstered their nest eggs. 

Here's a rarity — a parade of encouraging news: 

Houses: It's hard to find one to buy — and the 66% of Americans who do own houses are seeing their home values soar. The middle class has made a whopping $2.1 trillion from homeownership in the past 10 years, Fortune reports.

Retirement accounts: Despite the recent sell-off, they've been fattened by the stock market. And the share of people who say they expect to work past their early 60s has dropped below 50% for the first time.

Jobs: 11.4 million are open. The unemployment rate is 3.6% — back to pre-pandemic lows.

Safety nets: 68% of Americans say they have cash for a rainy day.

Millennial homeownership: It’s at 43%, up from 37% last year.

Reality check: There's still plenty of pain in this economy — likely with much more to come.

The tight housing market is pricing out millions of renters and potential buyers.

Rising prices — at the pump and in the grocery store — are draining wallets.

That helps explain one of the bigger polling conundrums we've seen:

We think things are going fine for us, but terribly for America. 78% of Americans are confident in their personal financial well-being, but just 24% are confident in the U.S.' financial well-being, per Federal Reserve data reported by the Atlantic's Derek Thompson (see chart above).

The bottom line: Things haven’t been so good for so many in decades, Dean Baker of the Center for Economic and Policy Research told The New York Times.

"You'd have to go back to the late 1990s to find a similar era. Before that, the 1960s."

Editor's note: This story was originally published on June 6. 

America's hidden boom

The economy is working for a huge swath of Americans.

Macroeconomics

Stock market

Jobs

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Data: U.S. Bureau of Labor Statistics; Chart: Axios Visuals

There is no silver lining: May's inflation report is a disaster for the "soft landing" camp — policymakers and politicians hoping to tame inflation without an all-out recession. Prices rose 1% alone during the month, bringing the year-over-year increase to a fresh four-decade high.

Why it matters: The Fed will likely have to take more aggressive steps to cool demand broadly in the economy to tackle worsening inflation, which amplifies the risk of a sharp economic downturn.

What the central bank will do after a summer of half-point hikes is no longer a mystery: another half-percentage point interest rate hike in September now looks likely.

Traders are pricing that in: The yield on the 2-year Treasury note jumped to its highest levels since 2008, a sign traders are bracing for more aggressive tightening in the near-term.

The big picture: Those who believed inflation peaked earlier this year woke up to a rude awakening. Price gains stayed hot — and re-accelerated, in some cases — in nearly all categories.

Housing: The shelter index rose 0.6%, the single-biggest monthly increase in 18 years.

Not since 1981 have food costs seen a bigger annual increase. The food index rose 10.1% from the prior year.

Used car prices rose 1.8% — the first acceleration in three months.

What they're saying: "Stepping back, we are struck by the fact that there were almost no pockets of weakness in this report," said Aditya Bhave and Meghan Swiber of Bank of America Securities, in a note.

Between the lines: Fed officials have emphasized in recent weeks that they need to see concrete evidence of overall inflation rates falling before relenting on their tightening campaign — that forecasts and excuses won't cut it.

"We doubt that the Fed will be feeling in a mood to parse fine details here," wrote Peter Williams and Krishna Guha of Evercore ISI in a note.

"The big picture is simply that inflation is still way too high, and policy will need to stay resolutely focused on bringing it down."

The Biden administration is pointing to Russia's invasion of Ukraine, which has disrupted the global energy and food markets. The pandemic-related lockdown in China put pressure on car prices.

The bottom line: Americans are feeling the squeeze from an "everything-is-expensive" economy. They are bracing for an economic downturn — and the chances of one just got higher.

Scorching hot inflation amplifies recession fears

Price gains stayed hot — and re-accelerated, in some cases — in nearly all categories.

Inflation

Joe Biden

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

A key gauge of inflation accelerated by 8.6% from a year earlier in May, the government said on Friday, a big leap from the previous month as costs for food and gasoline continued to surge.

Why it matters: Hot inflation remains a huge challenge for the Biden administration and the Federal Reserve as they deal with price shocks not seen since the 1980s that are squeezing consumers and souring their view of the economy. 

Details: The Consumer Price Index rose 1% last month. Prices rose 0.3% in April, or 8.3% from a year earlier.

Core inflation, which strips out volatile energy and food items, rose 0.6%, the same pace as April.

The backdrop: The Federal Reserve is watching for clues as price pressures are easing (though CPI is not the central bank's preferred gauge of inflation). It comes as the Fed embarks on a series of aggressive interest rate hikes to help tamp down inflation.

The bottom line: Higher prices showed few signs of relief last month, as America braces for a long stretch of elevated costs.

Go deeper: Scorching hot inflation amplifies recession fears

Inflation rises 8.6%, the fastest pace in over 40 years

Food and gasoline costs continued to surge last month.

Workplace office visits are up more than 300% since the pandemic sparked a worldwide office exodus, per new data from workplace platform company Envoy, shared with Axios.

Envoy's data is based on employee and visitor sign-ins from 14,000 worldwide locations across a range of companies.

Larger companies are seeing a bigger rebound — office visits are up 88% since the start of this year for companies with 1,500 or more employees, compared to just 56% for those with fewer than 50.

Non-employee visits are up 43% overall so far this year, in part thanks to the return of onsite interviews, Envoy says.

What they're saying: "We expect the momentum to continue," says Envoy head of analytics Jonathan Weindel. "And we see it in the headlines — almost every day more companies are either coming back fully, or coming back in a more hybrid fashion."

Between the lines: The data is further evidence that fully remote work is dying off as companies pressure workers to head back into the office.

Yes, but: Many companies are at least embracing hybrid work.

What's next: Envoy expects a further 30% bump in weekly traffic over the next six months — meaning execs, office managers and workers should brace for less elbow room.

Workplace visits are up 300% since the pandemic began

Future of work

Data: Committee for a Responsible Federal Budget, U.S. Bureau of Labor Statistics; Chart: Simran Parwani/Axios

More warehouse workers, fewer waiters. More health store employees, fewer in public schools: the overall job market is nearly back to full strength, but it looks strikingly different.

Why it matters: Pandemic-era disruptions have shaken up the composition of the labor force — with big implications for how industries will have to adjust to a longer-term worker shortfall.

What they're saying: "I'm not looking for recovery to pre-pandemic levels in each industry. Some workers have left for greener pastures and that's a good thing," Ellen Gaske, an economist at PGIM Fixed Income, tells Axios. 

"There is more opportunity for workers to return to new jobs — where the industries are growing and the outlook is potentially brighter. That churning is what offers up a possibility of stronger productivity gains and increased standard of living."

What's new: With May's payroll gains, roughly 96% of jobs lost during the pandemic are back. 

Stunning stat: The private sector has recovered 99% of all jobs lost, but public sector has regained just 58% — one illustration of the gaping hole that persists in certain areas of the economy.

Other industries have recovered and then some: the transportation and warehousing sector — think package couriers or truckers — has never made up a bigger share of the workforce, reflecting, for one, the historic appetite for goods. 

What's going on: A collision of forces — some structural, some cyclical and some already underway before the pandemic hit — are pushing workers away from some jobs and toward others, according to a recent report by Burning Glass Institute, a research firm. Among the changes ... 

The remote work allure: “The pandemic created this huge wedge. People want to move out of in-person roles — leisure and hospitality or education — and move toward the kinds of occupations and industries with more flexibility," Julia Pollak, chief economist at ZipRecruiter, tells Axios.

The goods spending boom: At the onset of the pandemic, stuck-at-home consumers bought more goods than services. But economists expect employment in consumer goods to cool off as spending on services continues to boomerang back.

Where the wages are: "Private sector employers have an advantage in this environment. They can adjust their compensation plan and policies very quickly," says Pollak. The public sector has been slower to respond, one factor perhaps pushing these workers to other gigs.

The bottom line: America's labor market recovery has been swift. The next test is which industries fully recover — and which don't.

America's new labor market

America has recovered 96% of jobs lost during the pandemic — but the labor market has never looked more different

Tesla CEO Elon Musk said he is prepared to cut staff by about 10%, citing a "super bad feeling" about the economy, according to an internal email seen by Reuters.

Driving the news: Musk's email, titled "pause all hiring worldwide," was sent Thursday to Tesla executives, two days after he said that staff will be required to return to work in person.

Musk in a separate email to staff on Friday said that the salaried headcount will be cut by 10%, citing the company becoming "overstaffed in many areas," per Reuters. 

"Note, this does not apply to anyone actually building cars, battery packs or installing solar," he said, also noting that "hourly headcount will increase."

The big picture: Musk told Tesla staff this week that employees "should pretend to work somewhere else" if they're not willing to return to their offices. 

"Anyone who wishes to do remote work must be in the office for a minimum (and I mean *minimum*) of 40 hours per week or depart Tesla," he said. 

By the numbers: Tesla shares fell 8.5% on Friday after news of the hiring freeze emerged, CNBC reports.

Tesla and its subsidiaries employed nearly 100,000 people at the end of 2021, per Reuters.

Representatives for Tesla could not immediately be reached for comment.

Go deeper: Musk's WFH warning amplifies threat level for workers

Editor's note: This story has been updated with information on Elon Musk's email sent to staff on Friday. 

Austin

Austin Alerts

A daily look at the most significant and interesting stories affecting Austin. Written by Nicole Cobler and Asher Price.

Axios Austin Thought Bubble

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Report: Elon Musk wants Tesla to cut 10% of jobs

"Note, this does not apply to anyone actually building cars, battery packs or installing solar," Musk said Friday.

CEO of Tesla Motors Elon Musk speaks at the Tesla Giga Texas manufacturing "Cyber Rodeo" grand opening party on April 7, 2022 in Austin, Texas

Tesla CEO Elon Musk speaks at a Tesla Giga Texas manufacturing opening party on April 7 in Austin, Texas. Photo: Suzanne Cordeiro/AFP via Getty Images

Elon Musk

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

America's demand for workers is still hot: The number of job openings were near all-time highs and managers laid off the fewest employees on record in April, the Labor Department said on Wednesday.

Why it matters: The labor market remains tight as employers's appetite for labor outruns the pool of available workers. It's a boon for the American workforce, but a challenge for the Federal Reserve that wants to cool off the labor market to help tame soaring inflation.

By the numbers: Job openings ticked down to 11.4 million in April, close to the record high set in March (which was revised higher by 300,000, to 11.8 million job openings).

Some 4.4 million workers quit their jobs — roughly the same as the prior month, a sign that this closely-watched metric may be starting to level off, though at historically high levels.

The quits rate has soared as Americans trade up for, in most cases, better-paying jobs. The phenomenon had been particularly pronounced in the leisure and hospitality sector, but there was a drop-off in April: The quits rate fell to 5.2% in April from 5.7%.

Another industry, real estate, saw its quits rate jump from 1.9% to 3.5%. 

The bottom line: There are about 1.9 open jobs for every unemployed American, down from 2 jobs in March — a sign of an on-fire labor market.

U.S. job openings are near record highs

There are about 1.9 open jobs for every unemployed American.

A "Now Hiring" sign on a Long Island store

A hiring ad on the windows of the Advance Auto Parts store in Bay Shore, New York. Photo: Steve Pfost/Newsday RM via Getty Images

Labor economics

New York workers are dragging their feet in returning to the office, and crime is a reason why.

Driving the news: Office occupancy rates are languishing well below the national average, the New York Post reported this week. That's a drag on businesses that rely on foot traffic, and subway ridership struggling to recover from the pandemic. 

Ex-investment banker and author Carol Roth told Axios recently that there's a ​"high degree of uncertainty for those businesses who depend on in-person foot traffic."

Why it matters: The Big Apple is in the throes of a crime wave that’s diminishing the appetite of workers who, while perhaps fatigued by remote work, are worried  about an overall deterioration in public safety, delaying the city's revival. 

Yes, but: Labor Department data shows a slow but steady decline in remote work, suggesting that more workers are opting for in-person work, even if it's hybrid. 

NY keeps WFH vibe as crime spikes

Spiking crime has NY workers reluctant to return to offices

Illustration of an office chair moving from left to right, but slowing down and reversing before it gets all the way across the screen.

Remote work

It's not just the cost of borrowing to buy a home that's getting more expensive. Pricier credit card debt is also putting a squeeze on consumers who are relying more on plastic amid the worst inflation shock in decades.

Why it matters: For those carrying a balance, that debt is expected to get even costlier to pay off, as the Federal Reserve continues an aggressive interest rate hike campaign to tamp down red-hot price growth. 

"The prime rate may end the year at 6%. Add in credit card companies' average margin and that could push the average credit card rate a little over 19% — the highest we have on record," says Ted Rossman, a senior industry analyst at Bankrate.

Credit card rates — unlike mortgage rates — move with a lag in response to Fed policy.

By the numbers: Consumers have opened a record number of new credit card accounts so far this year — 11.5 million, according to Equifax. 

And in a sharp shift from a pandemic-era trend, credit card balances are growing again. Balances jumped consecutively in the final three quarters of 2021, before backing off slightly last quarter, according to the Fed's latest household debt and credit report.

Balances are still about 10% below the pre-pandemic peak. 

The bottom line: Amid the booming job market, delinquency rates remain at rock-bottom levels, though there's been a slight uptick in borrowers with lower credit scores starting to fall behind on payments.

Latest borrower squeeze: Credit card rates climb

It comes as some consumers rely more on plastic amid the worst price shock in decades.

Credit cards

Retail

Axios Markets

Some are warning that the Federal Reserve's effort to slow inflation could potentially return the U.S. economy to the unusual condition it found itself in during the 1970s and early 1980s: Stagflation. 

The big picture: Despite high inflation, the U.S. economy is humming along — with unemployment at 3.6% in April —near the low levels that last prevailed in the late 1960s. 

Stagflation describes a highly unusual economic state of affairs when the economy is weak or stagnating — with high or rising unemployment — yet inflation is also elevated.

This is the opposite of what usually happens. 

High inflation tends to break out when economic growth is really roaring. 

Periods of weak economic growth, and rising joblessness, are typically accompanied by slow price increases, or even falling prices.

While the annual pace of price increases have surged to 40-year highs in recent months, unemployment is incredibly low.  This is an inflationary environment, not stagflation.  

When's the last time we had stagflation? 

The best-known stagflationary episodes hit the U.S. in the 1970s and early 1980s, when a series of oil shocks — especially the 1973 embargo that Arab members of OPEC placed on the United States in response for military support of Israel — sent fuel costs and inflation surging, as unemployment simultaneously shot higher. 

The combination of energy shocks and stagflationary conditions lasted on and off  into the early years of the Reagan administration. As late as 1982, unemployment was hovering around 10% and prices were rising as much as 6% annually. 

A number of economic policy bigwigs — former Federal Reserve chairman Ben Bernanke, current Fed chair Jerome Powell and Treasury secretary Janet Yellen (who also led the Fed) — have recently either implicitly or explicitly suggested that as the Fed tries to bring down inflation, unemployment will likely rise. 

That will likely mean we'll have an economy that is sort of stagflationary, at least for some period of time. In other words, growth will be weakening, but inflation will still be high.

Treasury Secretary Janet Yellen on Wednesday: "The economic outlook globally is challenging, and uncertain, and higher food and energy prices are having stagflationary effects, namely, depressing output and spending and raising inflation all around the world."

Bernanke in a New York Times article published this week: ''Even under the benign scenario, we should have a slowing economy ... And inflation's still too high but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high,'' he predicted. ''So you could call that stagflation."

Powell told the Wall Street Journal this week: "I would say there could be some pain involved in restoring price stability."

What can Biden do about stagflation if it actually occurs?

Not much that wouldn't be politically unpalatable. 

Biden could propose a sharp reduction in federal deficit spending. That could help reduce inflation, but it would likely hurt growth and raise unemployment. 

He could attempt the kind of wage and price controls that President Nixon imposed in 1971, though that seems extremely unlikely and not particularly effective. 

He could basically let the Fed deal with it. That's essentially the path Jimmy Carter took in the late 1970s. The soaring Fed rate hikes and the deep recession that followed contributed mightily to his annihilation in the 1980 presidential election.  

The bottom line: Like we said above, we don't yet have stagflation. It's possible that the Fed is able to thread the needle so perfectly that inflation comes down easily and unemployment raises ever so slightly and nobody notices. 

But stagflation is a possibility, and an unappealing one for practically everyone. 

What stagflation means and what Biden could do about it

High inflation tends to break out when economic growth is really roaring.

Illustration of a dollar sign covered in cracks with pieces of tape over the cracks.

Stagflation

The next U.S. jobs report could be a big market-moving event.

Why it matters: The Fed wants to know if the U.S. labor market has made “substantial further progress,” the vague threshold that would give the FOMC the confidence to dial back some of its emergency bond purchase program.

By the numbers: According to FactSet, economists estimate U.S. employers added 756,500 jobs in August, which would be a slowdown from the 943,000 added in July.

The unemployment rate is estimated to have fallen to 5.2% in August from 5.4% the month prior.

What they’re saying: “The softening in employment activity would be consistent with other economic data that have weakened since the surge in COVID case counts due to the Delta variant,” Bank of America U.S. economist Joseph Song says.

“Related to that,” Wells Fargo economists write, “the FOMC is likely to again consider deteriorating public health conditions as a detriment to ‘substantial further progress,’ which removes some heft from the August employment report when it comes to determining the timing of potential tapering.”

In other words, assuming job growth did decelerate significantly in August, then the FOMC may wait until after its Sept. 22 meeting to announce the timing of tapering.

What to watch: The August U.S. jobs report will be released at 8:30am ET on Friday.

Go deeper: The harm the Fed wants to avoid by tapering too early

What economists expect from the August jobs report

The Fed wants to know if the U.S. labor market has made “substantial further progress.”

A man walks by a "Now Hiring" sign outside a store in Arlington, Va.

A man walks by a "Now Hiring" sign outside a store in Arlington, Va. Photo: Olivier Douliery/AFP via Getty Images

Jobs report

Axios Future

A survey of C-suite executives found more than a quarter are considering moving their operations to another state or country.

Why it matters: The forced march to remote work during the pandemic has shaken loose the bonds that tie large businesses to their home territory — and that could be bad news for high-cost cities and states.

By the numbers: In a poll of 150 C-suite executives released today and conducted by the consulting firm West Monroe, 29% of companies reported they were considering moving major operations or headquarters to another state or country.

The biggest reason was the cost of talent and living in their current location, followed by the burden of taxes.

Not surprisingly, the No. 1 destination under consideration was Texas, followed by Florida — two states with generally low costs of living and low tax burdens.  

Of note: West Monroe's chief strategy officer Tom Bolger tells Axios the West Coast "had by far more companies looking to relocate than any other geographical area in the survey."

That dovetails with recent reporting about tech companies and founders looking to relocate out of the Bay Area, which has some of the highest housing prices in the country.   

That includes Tesla and SpaceX CEO Elon Musk, who said in December that he was moving from California to Texas. 

Be smart: Companies complaining about the high cost of living and working in states like California or New York is hardly new, but the embrace of remote work — accelerated by the pandemic — has given workers and CEOs more options.

Nearly half of the executives polled by West Monroe said they had plans to split their workforces between remote and onsite, though only 1% said they would go fully remote.

"If I'm paying major city taxes in a place like New York City and it doesn't really matter for me if I'm in New York, why not go somewhere that's less expensive?"

The bottom line: Mayors of high-cost cities may need to fight to keep their businesses.

New survey shows companies are open to moving to cheaper locales

Remote work — accelerated by the pandemic — has made it easier for companies to seek out less expensive regions

The Phoenix office tower in Houston, Texas. The Lone Star State was the top stated destination for executives considering moving their operations. Photo: Loren Elliott/Getty Images

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