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A line of three blocks increasing in height.

🌱 Ah, springtime in Sing Sing. Good morning, it's Matt.

Though renamed in 1901 to put some daylight between itself and the notorious state penitentiary of the same name, it's tough to beat the old name of my town for sheer musicality.

Whatever you call it, the daffodils are up, and tips of tulips are just cracking the mulch. Somewhere, song sparrows are trilling in the sun. Happy Earth Day.

Let’s get this Friday started. Today’s newsletter, edited by Kate Marino, is 1,097 words, 4.5 minutes.

1 big thing: An overlooked piece of the labor shortage

Data: BLS via FRED; Chart: Axios Visuals
Data: BLS via FRED; Chart: Axios Visuals

The labor force participation rate — the share of the adult population either working or looking for work — has not quite recovered from pre-pandemic levels. A new paper sheds light on one factor behind the shortfall: substance abuse, Emily writes.

Why it matters: There's an acute labor shortage in the U.S., and this is one reason alongside reduced immigration, child care issues and ongoing concerns about COVID-19.

Driving the news: Between 9% and 26% of the decline in workforce participation between February 2020 and January 2022, among people aged 25 to 34, is probably due to a rise in dependency on substances like opioids and methamphetamines. That's according to findings in a paper released this week by the National Bureau of Economic Research.

  • In recent months, labor force participation increased — it's now a half-percentage point lower than pre-pandemic. And 18% to 52% of that remaining shortfall could be from those struggling with substance abuse, says Karen Kopecky, an economist at the Atlanta Fed and co-author of the paper.

By the numbers: Specific data on how many more people turned to these substances during the pandemic is not yet available. So, to arrive at this conclusion, the researchers backed into it.

  • They had a rough sense of how substance abuse pushes down workforce participation: Prior research shows that opioid users' labor force participation rate is 13 percentage points lower than the rate for nonusers, and for methamphetamine users, it's 16 points lower, they noted.
  • And, the researchers found 17,522 more deaths in the U.S. attributable to opioid and meth use than were expected between April 2020 and June 2021.
  • Those numbers likely reflect an increase in abuse of these drugs, Kopecky says. (Some could be due to a decline in available medical care or a shift in opioid consumption toward more deadly fentanyl.)
  • Using the additional death numbers, the study estimates that the number of substance abusers increased by about 2.8 million during the time period.

The increase in drug abuse is related to a broader problem: The mental and physical health issues also driving the labor shortage, as Axios' Felix Salmon wrote about last year.

  • Long COVID could be keeping 1.6 million out of the labor market as well, according to one recent estimate.

Flashback: A surge in opioid abuse dating back to the early 2000s was already keeping an increasing number of prime-age workers out of the labor force. The pandemic worsened the situation.

The bottom line: This is a sticky problem. By definition, quitting such addictive drugs is exceedingly difficult, the paper's authors note.

2. Catch up quick

🚢 The West is still buying Russian oil, but an opaque market is forming to cover the tracks. (WSJ)

💰 New EU legislation could cost tech giants billions in fines. (Bloomberg)

3. How e-commerce enables inflation

Illustration of groceries in a shopping cart.
Illustration: Aïda Amer/Axios

Blame the rise of e-commerce for (at least some of) the inflation we're seeing. We no longer live in a "Price is Right" world where any given item has a knowable true price that is broadly unchanged from day to day or from store to store, Axios' Felix Salmon writes.

  • Instead, prices are constantly fluctuating and unpredictable — which makes them much easier to raise.

Why it matters: Prices, like phone numbers, are things we don't need to remember — we can look them up on the internet if we need to know them. As we pay less attention, however, we become less price-sensitive, giving companies more scope to raise prices.

How it works: Historically, it has been difficult for merchants to change prices. Economists talk of "menu costs" — if a restaurant wants to raise its prices, it needs to reprint all of its menus, often at significant expense.

  • If the restaurant menu is a QR code, on the other hand, raising prices is just a matter of changing numbers on a single web page. That's why e-commerce outlets generally change their prices much more frequently than physical stores do.
  • Physical stores are now following suit: E-ink displays at supermarkets can change as frequently as a price on Amazon, while a single item from a single restaurant can have a whole range of different prices depending on where and how it was ordered.

Where it stands: It's becoming increasingly hard to know what anything is supposed to cost. Prices sometimes seem as though they're the product of a random number generator: Here a loaf of bread is $29, and there the five-volume Jasper Johns catalogue raisonné is $199. If you paid face value for your concert ticket, you're in the minority.

The bottom line: Most prices are dynamic these days. Until recently, that worked in consumers' favor, as merchants competed to offer the lowest price. Now, it's working against us, as they attempt to maintain or even increase their margins in the face of higher costs.

  • The American public, dazed from its most recent $100 trip to the gas station, increasingly barely blinks at the latest improbable price for, say, a 10-minute Uber ride. We might not be able to afford it, but we pay it anyway.

4. 🏡 Charted: This is not a buyer's market

Data: Redfin analysis of MLS data; Chart: Axios Visuals
Data: Redfin analysis of MLS data; Chart: Axios Visuals

The monthly mortgage payment on the median-priced home is up 38% from last year, according to a Redfin analysis, released yesterday, of mortgage rates and MLS data on asking prices, Emily writes.

State of play: The housing boom is entering a different phase now. Where once, low mortgage rates helped offset surging home prices, now, fast-rising rates are putting homes further out of reach for buyers.

The bottom line: This is going to spook a lot of potential homebuyers and is a sign of cooling from the frenzy of the past couple of years. But because home inventories are still at record lows, don't expect prices to come down very much.

  • "[T]he housing market is still tilted further in sellers' favor than at any time in history," said Redfin chief economist Daryl Fairweather in a statement yesterday.

5. Tesla's impressive profitability

Data: FactSet; Chart: Axios Visuals

Tesla's net income was $3.32 billion in its most recent quarter. That's roughly double the highest quarterly earnings that Stellantis has ever seen, Felix writes.

  • Context: Stellantis, if you're not keeping up with auto industry mergers, is the company that owns Chrysler, Jeep, Dodge, Fiat, Maserati, Citroën, Peugeot, Opel, and many other car brands.

Why it matters: Tesla is now firmly established as a major global carmaker.

  • It's successfully navigated the transition from carmaker of the future to carmaker of the present — the first new company to do so in many decades. And it doesn't need to raise any fresh equity to continue to grow.

The bottom line: At this kind of profitability, Tesla can easily fund itself via its own cashflows.