Fed eyes sluggish wage growth
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What is the main topic discussed in this episode?
I founded Ornot in 2013. I think the best thing about Shopify is that we can practice business without technical skills. We can manage the company's background and front-end and sell online. If Shopify was a bicycle equipment, it would be a bicycle itself. That way things are handled and our business is handled in Shopify. Start a free trial at shopify.com website.
We'll do wages and prices. We'll do companies you probably didn't know are actually companies anymore. And why would you cut up a perfectly good house and truck it all the way across town? From American Public Media, this is Marketplace.
In Los Angeles, I'm Kyle Rizdahl. It is Monday today. This one is the 8th of June. Good as it always is to have you along, everybody. We're going to start today right at the intersection of where consumers are feeling the pain in this economy right now. We'll get an inflation update on Wednesday morning. It will be the Consumer Price Index for May. The CPI, as you well know, has been trending up since the president started his war with Iran. It was 3.8 percent in April. That is year-on-year data. And the May update is going to come with some important context. Last Friday in the May unemployment report, average hourly earnings, that's labor economists speak for how much we're all making. It rose 3.4 percent year on year.
And that difference is going to be a problem for workers and for policymakers at the Federal Reserve. Marketplace's Henry Epp gets us going. If the prices we pay for groceries and gas and rent rise faster than our wages, we're losing purchasing power. Christina Sargent is an associate professor of economics at Middlebury College.
A 3.4% raise sounds great until you notice that what you buy is increasing at 4%. So that's not a pay bump, that's a pay cut.
And no one likes a pay cut, or at least most people.
What is the current state of wage growth and inflation?
But then there are economists, says Catherine Ann Edwards, who is an economist.
This is when economists do something really horrible, like say how badly people are doing and then go, and that's good. But it's not good for workers.
But it is kind of good for the Federal Reserve, which wants to keep inflation from climbing even higher.
If wage growth is low, then that should temper what could be a really accelerating inflation situation.
And that buys the Federal Reserve some time to figure out whether the Iran war is going to keep driving prices up and whether it needs to raise interest rates. Michael Puglisi, a senior economist with Wells Fargo, says the question Fed members are asking... Is this going to be a temporary phenomenon? As, you know, over the next several months, maybe the conflict winds down, supply chains normalize, energy prices, you know, they're not going to drop immediately, but they start drifting lower. Or will it be a longer-lasting conflict that keeps prices rising for months? And will the recent gains in the labor market keep going? Puglisi expects policymakers will reassess all that in the fall before they make any big interest rate moves.
Workers, though, don't really have the luxury of waiting around.
I expect that these price shocks will ripple through the economy in coming months.
Pavlina Chernova is an economist at Bard College. She also does not expect wages to improve much.
Workers are going to be squeezed on both sides, stagnating wages and increasing cost of living.
Which could make for some tough decisions in households, arguably harder choices than the ones Fed officials need to make. I'm Henry App for Marketplace. On Wall Street today, that drubbing the tech stocks took on Friday, you know what that became today? A buying opportunity, that's what. We'll have the details when we do the numbers.
The Campbell's Company, it of soups, of course, but also home to Prego sauces, Pepperidge Farm cookies, goldfish, and Snyder's pretzels. It reported quarterly profits today. Net sales down 4% from the same time a year ago. But the company did note one thing in its favor. More people are cooking from scratch these days, or as the company puts it, semi-scratch.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:00–2:13
2
What is the current state of wage growth and inflation?
2:13–8:25
3
How are rising costs affecting workers' purchasing power?
8:25–10:56
4
What role does the Federal Reserve play in wage and price dynamics?
10:56–12:58
5
How are consumers adapting to economic pressures?
12:58–15:29
6
What trends are emerging in home cooking and food purchases?
15:29–26:12