Normal, but not healthy: Morning Brief
Yahoo Finance’s Myles Udland, Brian Sozzi, and Julie Hyman discuss rising wages and the overall economy’s winding road to recovery.
Video Transcript
JULIE HYMAN : But first, we start with the Morning Brief, which was appropriately enough, on inflation and on the data that, at that point, we were anticipating, and which came in, as we have been talking about this morning, not necessarily hotter-- that much hotter than anticipated, but nonetheless, you know, definitely showing some heat. 3.8% was the year-over-year increase in the core number. Month-over-month 0.7% is what we saw for those numbers.
And Myles, as you wrote in the Morning Brief, there's this sort of process of trying to figure out is this healthy or not? Is this OK or not? We talked to Claudia Sahm about that last hour, and you quoted from Neil Dutta, in terms of the OK-ness or not of how this is all going.
MYLES UDLAND: Yeah, I mean, I think Neil makes a really good point. And he sent a note out a couple of days ago on this idea of the economy right now, and the labor market specifically, but also this goes for the inflation data as well. The economy is behaving normally, given that we are in the early stage of a recovery from a very deep recession. But some of that behavior isn't necessarily healthy. And I think that with time, Neil and others expect that that health will very much normalize.
You know, he's citing things like the expiration of all of the states' unemployment, enhanced unemployment plans, which will happen in September. And that also will coincide with a likely return to pretty much 98%, probably 100% normal school year across the country, which is going to alleviate a lot of those unhealthy dynamics we've seen in the labor market specifically-- women dropping out of the labor force at a faster rate, which is particularly negative, given that women had gained share in the labor force at a faster rate than men over the last couple of decades and particularly during the post-financial crisis recovery.
But the normal parts of the cycle are inflation going up, prices rising as more demand comes in to the economy, and more hiring happening as the economy continues to accelerate out of that-- out that recessionary period. And so I think that when you get a three-decade high on core inflation, as we got this morning, that's not necessarily the healthiest dynamic. It's not your favorite way to see the economy coming out of recession if you are an economist choosing from a menu of what's my ideal recovery, right? But it is a normal part of the process.
As demand increases rapidly, when people grow more confident in their economic position, really this crisis is about people growing more confident in their ability to be healthy as they resume wide range of services or a wide range of activities, as Jay Powell has said, and also as they are allowed to do those things. Because, you know, restaurants were capacity constrained, travel was highly discouraged, airlines didn't have as many flights, not that people were getting on them anyway, so on and so forth. Those one-time events, as Claudia was referencing, they are creating big distortions within the data that don't necessarily look the healthiest if we are to view them in a vacuum.
But again, it's a normal part of the process. And we go back to the Chipotle news, which I brought up in the brief this morning, it is a normal and healthy, I think this actually hits both marks, but it's normal for a company that has to pay workers more, which Chipotle has to, to raise its prices, not to expand its margins. Chipotle is just defending its profit margins against workers making more money, and they're paying workers more money because of competition in the labor market, which is a normal part of a growing cycle.
And so, again, there's a lot of interesting things happening inside the economy. It's going to be a fascinating next few months. I think, really, the next couple of years, as we figure out what did and didn't change permanently, is going to be a fascinating time. But again, this discussion around what's a normal process and what are the parts of this process that look a little bit more abnormal, perhaps unhealthy a way to say to them, I just thought it was a really great framing from Neil on how to think about some of these issues.
BRIAN SOZZI: Well, Myles, this I love the Chipotle example because, let me run this by you, let's say we do get in fact get that magical 1 million print on headlining jobs for this month that a lot of folks are looking for, that could mean more labor shortages for the likes of a Chipotle, and then they have to raise wages again. And then suddenly we're back at that debate, is the inflation we're seeing really transitory?
MYLES UDLAND: Right, I mean, but look, I think I would argue and-- without thinking about how the Fed is going to look at it and how the Fed would argue this, I think that it's not so controversial that we could all agree that if, in the aggregate, wages start rising at a faster clip than we've seen over the last 20 years, and thus some prices are higher as a result, right, Julie, I think we can agree that's a more healthy dynamic in the economy rather than the no wage growth, no price growth, no one, you know, no nothing happening, which was kind of the slog that we saw for the first half of the last decade.
JULIE HYMAN : Yeah, I would certainly argue that. I mean, particularly on the wage side, that has been really troubling. And I think that, you know, there are all kinds of implications of that, from other prices going up, but also the sort of social unrest maybe is too strong a word, but certainly the social awareness of the gap between CEO pay and average worker pay, et cetera, and all the implications of that, the talk that we saw in the past couple of days of whether billionaire Americans are paying their fair share of taxes, all of that I think is part of this same conversation, whether you're talking about the economic side or, to me, what is equally interesting the social side of paying people more and how much people are making.
MYLES UDLAND: Yeah, and I think, you know, any change in sort of the way that things were, economically what we're looking at, you know, secular stagnation and all this kind of stuff, a welcome-- welcome problem, right? And we've talked about this in previous examples of like, you know, if you went through all your choices this time last year for, you know, what the economy would look like and what problems you'd be facing, I think we have the best set of potential problems here, when we're discussing too much demand for goods and services and too much demand from employers for labor. Probably a better outcome than-- we all had conversations with friends, you know April, May of last year. It's like the world is ending, and I hope I have my job, and things didn't get quite as bleak as-- as it seemed they would. So again, always worth keeping that perspective in mind.
