Wolfers and Stevenson comment on jobs and inflation

May 6, 2022

Inflation has been as high as 8.5% in recent months, and despite other positive economic factors, CNN reports that President Joe Biden may be “close to the point of no return with Americans on the economy.” Ford School economics professor Justin Wolfers noted that the Federal Reserve is trying to slow the rate of inflation as it is affecting average Americans in their daily lives. "What the Fed is hoping to do is cool inflation a little so your paycheck will go a little further, although that will mean slowing the economy and that might mean a little less bargaining power for workers and fewer prospects of a wage rise anytime soon," Wolfers said on CNN's "Newsroom." 

Ford School economics professor Betsey Stevenson was also quoted by CNN, commenting that the economy isn't facing the full-blown disaster of 2008 or even the inflationary nightmares of 40 years ago. "I don't think we have the economy of the 1980s or the 1970s," she said on "The Lead with Jake Tapper." 

The most recent jobs report came out which showed a gain of 428,000 jobs. Stevenson commented to Yahoo! Finance that, “When you think about this, we're not in the early recovery stages anymore. We're in late recovery stages. We've returned, really, to a lot of back to what we were before in terms of GDP. I think today's report says they're doing exactly the right thing. We didn't see a lot of upward wage pressure in that we didn't see wages rise by very much.”

She warned that upward wage pressure could continue to propel inflation, but said the jobs report showed that may not happen. 

“So we don't have to worry that there's a whole bunch of people out there in their current job that are looking at inflation and saying, hey, we had an 8% inflation. We're going to have inflation going forward. I need you to give me an 8% raise. The boss giving them an 8% raise and then pushing up prices because they can't sell their stuff, when they're paying their workers 8% more without raising prices. That's how inflation becomes sort of a self-fulfilling prophecy. It feels like that's still contained right now when we take a look at the jobs report,” she said.

Stevenson also appeared on Bloomberg TV, saying that the jobs report showed more unemployed workers who have been on the sidelines are willing to re-enter the labor market. “If you look deeper at the data, we see people who are currently out of the workforce who want to get a job.” She added, “We are hoping that when people get their jobs they will stay in them for longer, so they are employed but the threat of inflationary pressure is reduced.”

Earlier in the week, the Bureau of Labor Statistics (BLS) released data on job openings and labor turnover. Marketplace noted that wages are rising, but inflation is also rising and asked "What does this mean for some of the lowest-paid workers and whether they stay in their jobs?"

Stevenson analyzed the difficulties in the leisure and hospitality sectors in light of the COVID-19 pandemic. 

“It’s more dangerous. People don’t want to work there as much,” she said. “And when a job gets worse, wages have gotta go up.”

BLS data shows in the first quarter of this year, compensation for jobs like cooks, waiters and hotel clerks rose more than 8% from a year ago, nearly double the average increase for workers across the board. Many in the hospitality industry have switched jobs, Stevenson said.

“Those job changers, people entering new jobs, they’re the ones getting the big wage increases.”

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