transcript
Paul Krugman on Why the Economy Is Doing Better Than We Think
The economist and Times Opinion columnist discusses inflation, unemployment and the supply chain crisis.
[MUSIC]
(SINGING) When you walk in the room, do you have sway?
- kara swisher
I’m Kara Swisher, and you’re listening to “Sway.” If you’ve gone to the grocery store lately and gotten sticker shock, you aren’t alone. Inflation in the U.S. is at its highest rate since 1982. Even though unemployment is falling and wages are rising, inflation is costing the average American household an additional $296 per month, according to Moody’s Analytics, and people have been feeling the crunch.
About one in five Americans think inflation and the high cost of living are the most important problems facing the country today. They’re more worried about inflation than about Covid-19 or the war in Ukraine. So I turned to New York Times columnist and Nobel Prize-winning economist Paul Krugman. I wanted to get his take on what’s driving inflation and how worried we should actually be. Paul, welcome to “Sway.”
So let’s just start, very simple question. Do you think the economy is good right now or bad or in between? And what are you looking at to make that determination?
- paul krugman
I mean, it’s a really good economy with a couple of problems, is the way I’d put it. I mean, it’s the best job market possibly ever. It’s easier to get a job than it was during the height of the Clinton era boom, which is great. I mean, lots of reasons to think that’s a good thing. Inflation is uncomfortably high. Inflation by itself bothers people, but in some ways, it shouldn’t matter if wages were keeping up, but they aren’t quite. So we have a situation where people who already had jobs have 1 percent or 2 percent less purchasing power than they did a year ago, and it feels a little bit out of control. So it’s not an A plus, plus economy, but it’s certainly immensely better. Compare this with where we were at this stage after the financial crisis, and it’s a great economy.
- kara swisher
Right, and then inflation has gotten a big focus for people, and especially Republicans — we’ll get to that in a second. But first, the job market. The unemployment numbers are down to a new pandemic low of 3.6 percent — astonishing. So talk about that first.
- paul krugman
So there’s always going to be some unemployment. There’s churn. There was a phrase from 2000. People used to talk about the mirror test for unemployment. If your breath would fog a mirror, you could get hired. And we’re in that kind of market, which is, that’s a good thing. And what it’s especially good for is, it’s good for young people because those people are getting a good start on their careers. A tight labor market is a really, really good thing from a lot of points of view, from a social point of view, not just purely monetary.
- kara swisher
Yeah, not necessarily corporations. The housing sector, rents are up more than 30 percent in some cities. I was sort of shocked. I have a place in San Francisco that I still have because I’m hoping to move back there, but the rents are up. And I have not raised my rent because I like the people who are living there. But it’s crazy that I was sort of surprised.
- paul krugman
And this is different. I mean, we had a crazy housing market pre-2007. That was a bubble, and it was concentrated in places where it’s very hard to build a house, basically places where the NIMBYs have prevented housing construction, like San Francisco. This one is much more broad-based.
- kara swisher
Montana, I was noticing. Rents have gone up in Montana and South Dakota.
- paul krugman
Yeah, rents are up in small towns. And it seems to be that we just haven’t been building enough housing anywhere, possibly because people got burned by the housing crisis, possibly because of all these supply chain issues. I mean, the anecdote, you have the brand new house with plywood where there should be a garage door because you can’t get a garage door. This seems to be a longer term thing, and that is kind of alarming. I mean, I think it’s mostly just that, just, whatever they may say about the economy, people are actually feeling that they have cash, and but we just haven’t built very many houses since the big housing crash 15 years ago.
- kara swisher
Right, and that includes not just the rental market, but the housing market with not a lot of inventory.
- paul krugman
Yeah, I mean, really terrible houses are getting five bids. So, still, although I don’t think that’ll last very long, at least for that, because mortgage rates are way up in the last month and a half.
- kara swisher
Right, that’s the opposite pressure on it, but would a building boom help?
- paul krugman
Oh, yeah. One of the sort of longest standing problems we’ve had in the United States is that we have not allowed enough housing to be built in places where people want to live and where businesses want to locate. San Francisco was famously bad, but New York, too. New York is a great place to live if you can afford a place.
- kara swisher
Yeah, I know. I feel that way about a lot of places. So you’ve written that the American economy is, quote, “running very hot right now.” Can you talk about what you meant by that?
- paul krugman
It’s like an engine. How many r.p.m.s are you running the engine at? The U.S. economy is currently running, it appears — all the evidence suggests that it’s running in a situation where there is more demand for workers than there are workers willing to accept jobs for whatever reason. There’s more spending out there than there is sustainable capacity to meet the demand. It’s a little bit also a little bit like exercising, right? There’s a maximum heart rate, but you can actually go above that for a little while, but not for too long. And that’s kind of where we are right now.
- kara swisher
So who’s winning right now and losing in the economy?
- paul krugman
Well, you know, for the most part, there are not very many serious losers. Some wages have lagged a little bit behind inflation, but it’s really not a big deal and corporate profits are really high. The losing part is that you worry. And this is what we learned. The hard lesson we learned in the 1970s is that if you run the economy too hot for too long, then inflation gets entrenched in the economy.
And since people don’t like inflation, both because of the real damage it does, but also because it conveys a sense that things are out of control, if you run your economy too hot for too long, then everybody starts to raise prices just because they think everybody else is going to raise prices, and then getting it back down can be very expensive. So inflation in 1979 was not actually that big a problem directly. Wages were rising about as fast as prices were. But trouble was that inflation had to be gotten down, and what followed was a horrific extended slump in the economy. It was what it took to get inflation down that was what hurt almost everybody.
- kara swisher
Right.
- paul krugman
And that’s what we’re worried about now is there’s — I would argue pretty strongly, we’re not at that point yet. That if we can bring this inflation under control in the next year or 18 months, then nothing bad really will have happened. But what happened in the ‘70s is a cautionary tale.
- kara swisher
Right, people are really worried about it. According to a recent Gallup poll, rising prices are the number one economic concern. I suspect it’s the number one concern for Americans right now, despite Ukraine, despite whatever is happening. And there’s a lot happening. And a survey in late March found that 31 percent of those polled think the economy is good, 64 percent believe it’s in bad shape. How unusual is that, are those feelings you just talked about, if people perceive it it’s so?
- paul krugman
Well, you have to hold two thoughts in mind. One, yes, inflation is a real problem, and it’s disturbing that it’s this high. Two, people’s perception of the economy does seem to be way out of line with how bad things really are. I mean, this is not a great situation on inflation, but it’s a very good job market. People know that it’s easy to find jobs, but if you ask them, recent polls I’ve seen say that a plurality of people think that the U.S. economy has lost jobs over the past year, which is crazy. And that, I think, is a media failure.
And then the evaluation of where we are, I mean — and it’s very partisan. One of the things you can see in the surveys is that the people who really think that this economy is a complete cesspool are self-identified Republicans. And the self-identified Republicans say that the economy is worse than it was in 1980 when we had 8 percent unemployment and 14 percent inflation. So there is something going on here where people have gotten into a sour mood and, to some extent, is what they see on the chyrons on cable T.V.
- kara swisher
Not just that. When I got to San Francisco recently and I saw the gas prices coming out from the airport, it was shocking. You know what I mean? Like, visually shocking to me, and I think it was over $6.
- paul krugman
That’s not at all like the rest of the country.
- kara swisher
No, it wasn’t.
- paul krugman
It’s around $4.30 here in New Jersey.
- kara swisher
$4, right, yeah, 4 something.
- paul krugman
Part of the thing is that gas prices, although they’re high, adjusted for inflation, which sounds a little bit funny, but the price of gas compared with the price of other things is not all that high by historical standards. It’s not — even within the last decade, we’ve had times when gas has been this expensive. But it just happens to be a highly visible symbol of stuff out there.
- kara swisher
How much is it tied to what’s happening in Russia and Ukraine and the impact on the energy sector, and how much is the fate of the economy tied up in that one sector? You’re saying it’s not as big a part as people think, but it looms large in their mind for sure, especially with this conflict.
- paul krugman
Oil prices had been rising quite a lot before. And then we have Russia, which is a significant oil exporter. We don’t know how much oil the Russians are actually managing to get out, but certainly been some oil removed from the market, and there’s almost certainly some panic buying out there as well. Actually, if you really want to know about Russia-Ukraine, the much bigger issue is food.
- kara swisher
Food. I was just going to ask you that.
- paul krugman
Yeah, I mean, Russia is like 11 percent of world oil production. But Russia plus Ukraine are about a quarter of the world’s wheat exports. All of this stuff, gasoline is a few percent of the average American family’s budget. Food is somewhat higher, but a fair bit of that is not actually the cost of the foodstuffs. It’s the cost of the packaging, the preparation and the marketing. These things by themselves are not all that huge, but they’re very, obviously, very, very visible. And of course, if you’re talking about poor countries, then this rising world price of food is a very serious thing.
- kara swisher
But people notice the cost of food or milk or things like that. And on top of that, the supply chain around the pandemic was also impacting it.
- paul krugman
Yeah, I mean, and that’s where the issues like garage doors and so on — we had never seen this. Because of the internet and all that, we started to think of ourselves as having this sort of dematerialized economy, where everything was frictionless. And it turns out that actually most of the stuff we want has to get manufactured and has to get shipped from place to place.
And you can have a shortage of shipping containers. You can have a shortage of port capacity, especially if the mix of things that people are buying is very — a little skewed from what it normally is, which is what happened after the pandemic. Now, some of that may be starting to ease, but just one damn thing after another keeps happening.
- kara swisher
Right, it’s interesting. I have the same — I got a door, and it’s — I don’t know. I ordered it a long time ago, and now they’re like, oh, the door is ready. I’m like, what door? You know what I mean? Because you’re used to an economy where you click and get.
- paul krugman
That’s right.
- kara swisher
Click and get, click and get.
- paul krugman
Yeah, it’s kind of designed to be invisible to us, where it’s a little bit like Amazon. Click on the button, then stuff appears on your doorstep. And there’s actually a million workers in Amazon facilities around the country making that happen. But we’ve had a lesson that the physical logistics of the economy are both much more important and much more fragile than we had realized.
- kara swisher
So as you see higher gas prices and higher food prices, is there any other area you think is something that you’re paying attention to in terms of pricing, rents are higher? And they’re all for different reasons. They’re all for different reasons, obviously.
- paul krugman
Yeah, well, so all of it would be less so if the economy wasn’t running as hot, right? Look, we did, I think, very much the right thing by rescuing people during the pandemic. We had a tremendous amount of financial aid from the government that helped people get through, but that has created a lot of spending power.
- kara swisher
Right, and demand.
- paul krugman
And so all of these things are, to some extent, reflecting that. There are special factors, and every industry is different, but there’s a kind of shared overstimulation that’s affecting a lot of stuff. I’m making a distinction in my mind between two things that are more concepts than things you can actually exactly measure. But there’s the stuff that is the temporary disruptions. There is supply chains and food and energy. Food and energy, we can measure easily. The other stuff is a little bit harder and trickier, to be sure.
And then there’s the sort of general overheating part. And so I do believe the supply chains and all of that will get sorted out. It’s just taking longer than we thought. But there’s enormous financial incentives to make it work. That part of inflation will come down. The overheating is the part that is harder to judge. And we’re not sure yet what it’s going to take to bring that down. And we have to be. You know, the important thing is to get all of this stuff down before people start to think that inflation is a permanent condition.
- kara swisher
Permanent condition — OK, we’ll get to that in a second. So Republicans tried to pin some of the blame on stimulus payments in 2020 and last year, this demand, this people wanting to spend. And of course, that makes sense, coming out of a pandemic. Would you put any blame on the stimulus payments creating that situation? Are they right?
- paul krugman
A little bit. It made sense to provide a lot of aid. There were some things that probably didn’t make a lot of sense. The higher unemployment benefits were really necessary for a while there. The expanded child tax credit, we should keep forever, which we won’t, but we should because that was really doing a lot for children. Those $1,400 checks probably did not make a whole lot of sense. And it turns out we had a lot of aid to state and local governments that ended up not being needed, although also mostly not being spent. So I would say that the stimulus, it’s probably less than one percentage point of the inflation we’re seeing can be attributed to that.
- kara swisher
But this is something the Republicans had said, this is too much. This is too — you know.
- paul krugman
Yeah, they were saying it’s too big, governmental. And not just Republicans, there were a fair number of Democratic economists who said this looks too big. And in retrospect, they were right. But it’s not most of the story. I think the bigger story is, we have a couple of players to manage the economy.
We have the Federal Reserve, which controls interest rates, and therefore, usually takes prime responsibility for trying to control inflation. And it does appear that the Fed, it kept its pedal to the metal too long. The interest rates were kept too low, too long. And so the Fed is now reversing course on that, which I support. But you really do want to bear in mind that the Euro area, their most recent inflation number was 7.5 percent. If the problem was Biden administration policies, how come inflation is so high in the rest of the world?
- kara swisher
But it does have huge political implications. Marine Le Pen — she’s a far-right politician in France — she’s surging in popularity there. Macron’s been focused on Ukraine. She’s focusing intently herself on economic issues. And in the U.S., Republicans are focusing in on it. The same A.P. poll found that 34 percent of Americans approve of Biden’s handling of the economy, and 65 percent disapprove. How big of a problem is this for Democrats going into the midterms, where they risk losing control of both the House and Senate?
- paul krugman
Well, it’s a huge problem. And the issues for which people most blame whoever’s in power on economics tend to be the things over which that person has the least control or influence, right? If there’s one thing that Joe Biden really has very little he can do about, it’s the price of gasoline. He’s releasing some oil from the Strategic Petroleum Reserve, but for the most part, oil is traded on a world market. No U.S. President can do very much to affect that price. And the price of gasoline, for the most part, reflects the refining costs and the sort of normal markup and the taxes.
But there’s not that much that the president can do, and yet, there’s a long standing correlation between gas prices and presidential approval, which you know, is really not a — it doesn’t speak well for democracy. And yeah, it’s very likely that Democrats will lose badly in the midterms, which, by the way, the incumbent party normally does anyway.
- kara swisher
Yes, but they’re focusing on Ukraine. So you’re saying the economy is actually good. People don’t think it is, so it hardly matters, this misunderstanding.
- paul krugman
Well, it’s a little of both, right? The inflation is real. It has always been the case that inflation bothers people. To say, well, it shouldn’t, that doesn’t help. If we look at the things we think will really matter in the long run, which is getting people back to work, getting young people into the job market, having a solid recovery, then, actually, Biden has done really, really well, but he’s not going to take credit for it.
- kara swisher
But there’s real pain here for people. Inflation tends to hit poor people harder. And so it does affect people beyond their perceptions, even if they’re getting jobs, correct?
- paul krugman
Yeah, although the one thing you want to say about it is, wages are up a lot, and not up enough on average to keep up with inflation. But the wage increases have been biggest at the bottom end of the scale. So although inflation may be hitting the true inflation rate for people in the bottom third of the wage distribution, it is higher than the average inflation rate. The rate of wage increase for those people is also higher. And it’s not all clear. In fact, most of the stuff I’ve been seeing suggests that, actually, this economy’s been pretty good for people further down.
- kara swisher
We’ll be back in a minute.
If you like this interview and want to hear others, follow us on your favorite podcast app. You’ll be able to catch up on “Sway” episodes you may have missed, like my conversation with Jeffrey Sonnenfeld. And you’ll get new ones delivered directly to you. More with Paul Krugman after the break.
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So let’s talk about how to bring inflation down. How do you cool off a hot economy? You already mentioned interest rates and the Fed letting a party go on for a while, which they did, and a lot of people thought they went too far. Talk about that first and then other ways to cool off a hot economy. Obviously, interest rates is one of the top ways to do that.
- paul krugman
Well, I think pretty much interest rates is it. That’s the only thing we need to do. The big spending is behind us now. I don’t think that Build Back Better would have been particularly inflationary, but that’s not going to happen anyway because Joe Manchin is not going to let it happen. So all of that spending that took place in early 2021 is now receding rapidly in the rearview mirror. And so it’s interest rates, and the Fed has only raised the interest rate it controls directly by a quarter of a percentage point. And the biggest place where you have leverage here is housing. Mortgage rates are now up a lot in just —
- kara swisher
They are.
- paul krugman
— the last few months.
- kara swisher
It’s bizarre. I renegotiated all mine about eight months ago. I feel great.
- paul krugman
Yes, I know. It’s one of this things.
- kara swisher
I do. I’m like, for once, I made the right choice, finally.
- paul krugman
And that’s going to have an effect. It’ll take a while, but it means that presumably, these bidding wars for houses are going to cool off. But more to the point, if you’re a developer thinking about building a bunch more housing, the price at which you can expect to sell them is going to go down. So that’s probably the biggest thing. There are a few other things there as well. To some extent, business investment is going to be cooled off by these high interest rates. And consumers are going to start to feel a little bit less wealthy as house prices start to descend a bit.
So this is what you do. This is how you cool off an economy. This is how we ended the great inflation of the 1970s, was with a period of extremely high interest rates. I don’t think they’ll need to go anywhere near that high this time. But that’s how you do it.
- kara swisher
Yeah, so the Treasury Secretary Janet Yellen said in October of last year, I don’t think we’re about to lose control of inflation. She obviously was trying to calm the markets, but you think they do have control of it?
- paul krugman
Well, I think it’s not yet out of control and probably not going to go. But there’s a probably in there. It’s not a certainty. As long as people believe that it’s temporary, then it’s not that hard to end. And people do seem to believe that it’s temporary. One of the economic principles for policy that’s worked really well has been to say, do not base policy on food and energy prices. Focus on core inflation.
That doesn’t include those because those bounce around a lot, which worked really, really well in some previous — we had a spike in inflation in 2008 and another one in 2010, 2011, both of which the Fed, to its great credit, said, not to worry. This is a temporary phenomenon. And that’s mostly where we are now. I mean, there’s a little bit. There’s the overheating. You need to get that down. Yet, wages are rising. I like rising wages. Wages are rising too fast to be consistent with acceptable inflation.
So wage increases probably need to come down from what’s probably now around a 4 percent to 5 percent rate of increase to more like 3 percent. So that’s going to be the harder part, but this does not yet look like an economy in which inflation is out of control. It looks like an economy that’s hit a rocky patch, but that’s all.
- kara swisher
Right, but bringing down wages, of course, people have been fighting to get decent wages, right? You just had the victory of the Amazon workers in Staten Island, although that’s still temporary because there’s a lot to go from here. Amazon can do a lot of things. So it’s a little counterintuitive. You want to get these wages up in order to spur demand, but you don’t want demand because the prices, et cetera, et cetera.
- paul krugman
No, there is such a thing in these areas as too much of a good thing. You don’t want flat wages. You want wages rising at a reasonably decent clip, but not at a pace that is pretty much going to guarantee that inflation is going to run higher than people are comfortable with. Maybe the way to say it is, what do I think a good 2022 would look like?
And the answer is, it would be a year of slow economic growth, slower than last year, slow enough so that, in fact, maybe the unemployment rate ticks up a little bit so that employers don’t feel that they have to bid desperately to get workers, but one in which wages continue to rise and jobs continue to be readily available to people who want them. And all of the components of inflation just start coming down, and people start to relax about the whole thing.
- kara swisher
It’s interesting. A lot of people, different people I talked to at very different levels of the economy, they all kind of want to spend now, coming out of the pandemic. They want to spend in travel, and then get hit with, oh, look at that gas price. Or if you get an Uber at any time, you’re like, what? Everything does seem more expensive. When you go into a restaurant, at any range, it feels that way.
- paul krugman
Yeah, and that’s true. I mean, prices are up, but prices are up in part because people feeling like spending.
- kara swisher
Mm-hmm.
- paul krugman
Tourism on the island of St. Croix is currently running about 30 percent above pre-pandemic levels. People are doing a lot of revenge travel right now.
- kara swisher
They are, indeed.
- paul krugman
Which is good that we could be doing that, but not good if it continues at levels that lead to too much inflation. So it’s just kind of, pull back a bit. I mean, there are people who want us to — want the Fed to slam on the brakes. I want it to take its foot off the gas pedal and maybe just tap the brakes a little bit to bring us down. And that’s how it should be working right now.
- kara swisher
Talk about the stock market. What happens in that case? Because everybody’s sort of been on that high. And it’s gone up and down, but it’s mostly been up and to the right, especially for tech companies.
- paul krugman
The answer is, God knows, right?
- kara swisher
That’s what my grandfather used to say.
- paul krugman
Nobody is any good at that. And there’s this famous, old line, which still works, from Paul Samuelson, that the stock market had predicted nine of the last five recessions. The stock market is just not very closely tied to anything fundamental.
- kara swisher
But it has feelings, right? Because people focus on it. News media does and everything else.
- paul krugman
Yeah.
- kara swisher
Yeah. So Paul, how do we get out of this? Is there an argument for letting inflation be at all, that it’s a byproduct of stimulus, helping Ukraine fight the war, et cetera, et cetera.
- paul krugman
Within limits. Where we are now with 8 percent inflation, that’s not OK. First of all, people really hate it. And it does have some serious downsides. At that level, you start to get to a situation where you’re starting to impair the usefulness of money because the purchasing power is too unpredictable in the future.
On inflation, there’s really two things. One is that all of us tend to feel that we earned our wage increase, and that the price increase was that something that was done to us, even though it’s actually part of the same process. That’s a slightly discreditable thing, but then there’s just the sense of things of being of control. And an economy with 2 percent inflation is an economy where people feel — they’re aware that prices tend to rise a little bit, but they don’t feel that things are disorderly.
So I think that’s the point, is that inflation, it doesn’t do much good to tell people that inflation shouldn’t matter. It does matter in people’s perceptions. People won’t start to feel better until it comes down some. If things play out the way I think and hope they will, we will see inflation coming down quite a lot late this year or early next year.
And what if we reach a point where now we’re sort of at 3 percent inflation, and the normal target has been 2? Is that the time to just declare victory and pull out, to say, OK, that’s good enough. And I will probably be on the side of people saying, yeah, OK, we can stop the squeeze now. This is OK. Because there’s really no concrete evidence that 3 percent inflation does any significant harm, compared with 2 percent inflation.
- kara swisher
So you said inflation will come down late this year, early next year, that people aren’t concerned about the long-term. But that’s after the midterms. Do Democrats have enough time between now and November to convince Americans that the economy isn’t as bad as they seem to feel it is?
- paul krugman
I have absolutely no idea.
- kara swisher
Good answer.
- paul krugman
I mean, it’s certainly possible that we’ll actually start to see some significant improvement in the inflation numbers within months. We’re still living in Covid time where things happen much faster than they ever used to. And so people look at all these short-term, high frequency indicators. So there’s a lot of indications right now that we’re rapidly developing a glut of trucking capacity.
All of a sudden, after all the supply chain stuff, suddenly there seem to be too many trucks. There is something called the bullwhip effect, where when there were supply shortages, people were rushing to hoard stuff and exacerbating the supply shortages and that that may be going into reverse. So it’s possible that we’ll be seeing some good inflation news before the midterms.
- kara swisher
And people buying less, right? Getting sated at some point and not doing revenge trips or things like that.
- paul krugman
Yes, all of that. And then I do think that the Democrats need to keep hammering. I watched the sort of selected clips, and some of the Fox News hosts seemed to be actually having a hard time dealing with that last job number, that they were stammering a bit over reporting three points to 6 percent unemployment, which is telling you that there is some traction in pointing out just how good the numbers are.
So I don’t think it’s a hopeless cause. It’s definitely uphill for the Democrats because the inflation came as a big shock. But on the other hand, if the numbers start to come down, even if the unemployment rate ticks up a little bit, people’s perception that jobs are easy to get is not going to go away. So I don’t think it’s a lost cause.
- kara swisher
All right, obviously, it’s been in the news. I mentioned this Amazon thing, where they — well, I know it’s still a long road to go because they have to get a contract, and Amazon is pressing against it. When you look at that, do you see any return to the power of workers in an economy like this, or is that not the case because the rise in wages will be lower?
- paul krugman
Well, that’s the difference, right? The short-run wage increase is going to come down. We can’t run at these current rates. But a revival of worker power, I mean, I’ve been saying for a long time that there was no good economic reason why unions had to have receded so much. I mean, it’s true that manufacturing, which is where we used to have powerful unions, is a much smaller part of the economy, and that manufacturers face international competition, and then they can outsource.
But Amazon is a perfect candidate for a powerful union. The economics of unionization of Amazon and Walmart and other big service sector companies are actually extremely favorable. What’s happened is that they’ve operated in a very hostile political environment, an anti-union political environment. And maybe, just maybe Staten Island is the turning point, where, finally, the workers say, no, we’ve had enough, and we start to see labor come back. That’s what I hope for. It’s a big deal.
- kara swisher
Yeah, I don’t turn my back on Amazon. They’re working on their robots right now, as we speak. That’s where they’re going, ultimately. All right, Paul Krugman, thank you so much.
- paul krugman
Well, thank you.
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- kara swisher
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Paul Krugman on Why the Economy Is Doing Better Than We Think
The economist and Times Opinion columnist discusses inflation, unemployment and the supply chain crisis.
transcript
Paul Krugman on Why the Economy Is Doing Better Than We Think
The economist and Times Opinion columnist discusses inflation, unemployment and the supply chain crisis.
[MUSIC]
(SINGING) When you walk in the room, do you have sway?
- kara swisher
I’m Kara Swisher, and you’re listening to “Sway.” If you’ve gone to the grocery store lately and gotten sticker shock, you aren’t alone. Inflation in the U.S. is at its highest rate since 1982. Even though unemployment is falling and wages are rising, inflation is costing the average American household an additional $296 per month, according to Moody’s Analytics, and people have been feeling the crunch.
About one in five Americans think inflation and the high cost of living are the most important problems facing the country today. They’re more worried about inflation than about Covid-19 or the war in Ukraine. So I turned to New York Times columnist and Nobel Prize-winning economist Paul Krugman. I wanted to get his take on what’s driving inflation and how worried we should actually be. Paul, welcome to “Sway.”
So let’s just start, very simple question. Do you think the economy is good right now or bad or in between? And what are you looking at to make that determination?
- paul krugman
I mean, it’s a really good economy with a couple of problems, is the way I’d put it. I mean, it’s the best job market possibly ever. It’s easier to get a job than it was during the height of the Clinton era boom, which is great. I mean, lots of reasons to think that’s a good thing. Inflation is uncomfortably high. Inflation by itself bothers people, but in some ways, it shouldn’t matter if wages were keeping up, but they aren’t quite. So we have a situation where people who already had jobs have 1 percent or 2 percent less purchasing power than they did a year ago, and it feels a little bit out of control. So it’s not an A plus, plus economy, but it’s certainly immensely better. Compare this with where we were at this stage after the financial crisis, and it’s a great economy.
- kara swisher
Right, and then inflation has gotten a big focus for people, and especially Republicans — we’ll get to that in a second. But first, the job market. The unemployment numbers are down to a new pandemic low of 3.6 percent — astonishing. So talk about that first.
- paul krugman
So there’s always going to be some unemployment. There’s churn. There was a phrase from 2000. People used to talk about the mirror test for unemployment. If your breath would fog a mirror, you could get hired. And we’re in that kind of market, which is, that’s a good thing. And what it’s especially good for is, it’s good for young people because those people are getting a good start on their careers. A tight labor market is a really, really good thing from a lot of points of view, from a social point of view, not just purely monetary.
- kara swisher
Yeah, not necessarily corporations. The housing sector, rents are up more than 30 percent in some cities. I was sort of shocked. I have a place in San Francisco that I still have because I’m hoping to move back there, but the rents are up. And I have not raised my rent because I like the people who are living there. But it’s crazy that I was sort of surprised.
- paul krugman
And this is different. I mean, we had a crazy housing market pre-2007. That was a bubble, and it was concentrated in places where it’s very hard to build a house, basically places where the NIMBYs have prevented housing construction, like San Francisco. This one is much more broad-based.
- kara swisher
Montana, I was noticing. Rents have gone up in Montana and South Dakota.
- paul krugman
Yeah, rents are up in small towns. And it seems to be that we just haven’t been building enough housing anywhere, possibly because people got burned by the housing crisis, possibly because of all these supply chain issues. I mean, the anecdote, you have the brand new house with plywood where there should be a garage door because you can’t get a garage door. This seems to be a longer term thing, and that is kind of alarming. I mean, I think it’s mostly just that, just, whatever they may say about the economy, people are actually feeling that they have cash, and but we just haven’t built very many houses since the big housing crash 15 years ago.
- kara swisher
Right, and that includes not just the rental market, but the housing market with not a lot of inventory.
- paul krugman
Yeah, I mean, really terrible houses are getting five bids. So, still, although I don’t think that’ll last very long, at least for that, because mortgage rates are way up in the last month and a half.
- kara swisher
Right, that’s the opposite pressure on it, but would a building boom help?
- paul krugman
Oh, yeah. One of the sort of longest standing problems we’ve had in the United States is that we have not allowed enough housing to be built in places where people want to live and where businesses want to locate. San Francisco was famously bad, but New York, too. New York is a great place to live if you can afford a place.
- kara swisher
Yeah, I know. I feel that way about a lot of places. So you’ve written that the American economy is, quote, “running very hot right now.” Can you talk about what you meant by that?
- paul krugman
It’s like an engine. How many r.p.m.s are you running the engine at? The U.S. economy is currently running, it appears — all the evidence suggests that it’s running in a situation where there is more demand for workers than there are workers willing to accept jobs for whatever reason. There’s more spending out there than there is sustainable capacity to meet the demand. It’s a little bit also a little bit like exercising, right? There’s a maximum heart rate, but you can actually go above that for a little while, but not for too long. And that’s kind of where we are right now.
- kara swisher
So who’s winning right now and losing in the economy?
- paul krugman
Well, you know, for the most part, there are not very many serious losers. Some wages have lagged a little bit behind inflation, but it’s really not a big deal and corporate profits are really high. The losing part is that you worry. And this is what we learned. The hard lesson we learned in the 1970s is that if you run the economy too hot for too long, then inflation gets entrenched in the economy.
And since people don’t like inflation, both because of the real damage it does, but also because it conveys a sense that things are out of control, if you run your economy too hot for too long, then everybody starts to raise prices just because they think everybody else is going to raise prices, and then getting it back down can be very expensive. So inflation in 1979 was not actually that big a problem directly. Wages were rising about as fast as prices were. But trouble was that inflation had to be gotten down, and what followed was a horrific extended slump in the economy. It was what it took to get inflation down that was what hurt almost everybody.
- kara swisher
Right.
- paul krugman
And that’s what we’re worried about now is there’s — I would argue pretty strongly, we’re not at that point yet. That if we can bring this inflation under control in the next year or 18 months, then nothing bad really will have happened. But what happened in the ‘70s is a cautionary tale.
- kara swisher
Right, people are really worried about it. According to a recent Gallup poll, rising prices are the number one economic concern. I suspect it’s the number one concern for Americans right now, despite Ukraine, despite whatever is happening. And there’s a lot happening. And a survey in late March found that 31 percent of those polled think the economy is good, 64 percent believe it’s in bad shape. How unusual is that, are those feelings you just talked about, if people perceive it it’s so?
- paul krugman
Well, you have to hold two thoughts in mind. One, yes, inflation is a real problem, and it’s disturbing that it’s this high. Two, people’s perception of the economy does seem to be way out of line with how bad things really are. I mean, this is not a great situation on inflation, but it’s a very good job market. People know that it’s easy to find jobs, but if you ask them, recent polls I’ve seen say that a plurality of people think that the U.S. economy has lost jobs over the past year, which is crazy. And that, I think, is a media failure.
And then the evaluation of where we are, I mean — and it’s very partisan. One of the things you can see in the surveys is that the people who really think that this economy is a complete cesspool are self-identified Republicans. And the self-identified Republicans say that the economy is worse than it was in 1980 when we had 8 percent unemployment and 14 percent inflation. So there is something going on here where people have gotten into a sour mood and, to some extent, is what they see on the chyrons on cable T.V.
- kara swisher
Not just that. When I got to San Francisco recently and I saw the gas prices coming out from the airport, it was shocking. You know what I mean? Like, visually shocking to me, and I think it was over $6.
- paul krugman
That’s not at all like the rest of the country.
- kara swisher
No, it wasn’t.
- paul krugman
It’s around $4.30 here in New Jersey.
- kara swisher
$4, right, yeah, 4 something.
- paul krugman
Part of the thing is that gas prices, although they’re high, adjusted for inflation, which sounds a little bit funny, but the price of gas compared with the price of other things is not all that high by historical standards. It’s not — even within the last decade, we’ve had times when gas has been this expensive. But it just happens to be a highly visible symbol of stuff out there.
- kara swisher
How much is it tied to what’s happening in Russia and Ukraine and the impact on the energy sector, and how much is the fate of the economy tied up in that one sector? You’re saying it’s not as big a part as people think, but it looms large in their mind for sure, especially with this conflict.
- paul krugman
Oil prices had been rising quite a lot before. And then we have Russia, which is a significant oil exporter. We don’t know how much oil the Russians are actually managing to get out, but certainly been some oil removed from the market, and there’s almost certainly some panic buying out there as well. Actually, if you really want to know about Russia-Ukraine, the much bigger issue is food.
- kara swisher
Food. I was just going to ask you that.
- paul krugman
Yeah, I mean, Russia is like 11 percent of world oil production. But Russia plus Ukraine are about a quarter of the world’s wheat exports. All of this stuff, gasoline is a few percent of the average American family’s budget. Food is somewhat higher, but a fair bit of that is not actually the cost of the foodstuffs. It’s the cost of the packaging, the preparation and the marketing. These things by themselves are not all that huge, but they’re very, obviously, very, very visible. And of course, if you’re talking about poor countries, then this rising world price of food is a very serious thing.
- kara swisher
But people notice the cost of food or milk or things like that. And on top of that, the supply chain around the pandemic was also impacting it.
- paul krugman
Yeah, I mean, and that’s where the issues like garage doors and so on — we had never seen this. Because of the internet and all that, we started to think of ourselves as having this sort of dematerialized economy, where everything was frictionless. And it turns out that actually most of the stuff we want has to get manufactured and has to get shipped from place to place.
And you can have a shortage of shipping containers. You can have a shortage of port capacity, especially if the mix of things that people are buying is very — a little skewed from what it normally is, which is what happened after the pandemic. Now, some of that may be starting to ease, but just one damn thing after another keeps happening.
- kara swisher
Right, it’s interesting. I have the same — I got a door, and it’s — I don’t know. I ordered it a long time ago, and now they’re like, oh, the door is ready. I’m like, what door? You know what I mean? Because you’re used to an economy where you click and get.
- paul krugman
That’s right.
- kara swisher
Click and get, click and get.
- paul krugman
Yeah, it’s kind of designed to be invisible to us, where it’s a little bit like Amazon. Click on the button, then stuff appears on your doorstep. And there’s actually a million workers in Amazon facilities around the country making that happen. But we’ve had a lesson that the physical logistics of the economy are both much more important and much more fragile than we had realized.
- kara swisher
So as you see higher gas prices and higher food prices, is there any other area you think is something that you’re paying attention to in terms of pricing, rents are higher? And they’re all for different reasons. They’re all for different reasons, obviously.
- paul krugman
Yeah, well, so all of it would be less so if the economy wasn’t running as hot, right? Look, we did, I think, very much the right thing by rescuing people during the pandemic. We had a tremendous amount of financial aid from the government that helped people get through, but that has created a lot of spending power.
- kara swisher
Right, and demand.
- paul krugman
And so all of these things are, to some extent, reflecting that. There are special factors, and every industry is different, but there’s a kind of shared overstimulation that’s affecting a lot of stuff. I’m making a distinction in my mind between two things that are more concepts than things you can actually exactly measure. But there’s the stuff that is the temporary disruptions. There is supply chains and food and energy. Food and energy, we can measure easily. The other stuff is a little bit harder and trickier, to be sure.
And then there’s the sort of general overheating part. And so I do believe the supply chains and all of that will get sorted out. It’s just taking longer than we thought. But there’s enormous financial incentives to make it work. That part of inflation will come down. The overheating is the part that is harder to judge. And we’re not sure yet what it’s going to take to bring that down. And we have to be. You know, the important thing is to get all of this stuff down before people start to think that inflation is a permanent condition.
- kara swisher
Permanent condition — OK, we’ll get to that in a second. So Republicans tried to pin some of the blame on stimulus payments in 2020 and last year, this demand, this people wanting to spend. And of course, that makes sense, coming out of a pandemic. Would you put any blame on the stimulus payments creating that situation? Are they right?
- paul krugman
A little bit. It made sense to provide a lot of aid. There were some things that probably didn’t make a lot of sense. The higher unemployment benefits were really necessary for a while there. The expanded child tax credit, we should keep forever, which we won’t, but we should because that was really doing a lot for children. Those $1,400 checks probably did not make a whole lot of sense. And it turns out we had a lot of aid to state and local governments that ended up not being needed, although also mostly not being spent. So I would say that the stimulus, it’s probably less than one percentage point of the inflation we’re seeing can be attributed to that.
- kara swisher
But this is something the Republicans had said, this is too much. This is too — you know.
- paul krugman
Yeah, they were saying it’s too big, governmental. And not just Republicans, there were a fair number of Democratic economists who said this looks too big. And in retrospect, they were right. But it’s not most of the story. I think the bigger story is, we have a couple of players to manage the economy.
We have the Federal Reserve, which controls interest rates, and therefore, usually takes prime responsibility for trying to control inflation. And it does appear that the Fed, it kept its pedal to the metal too long. The interest rates were kept too low, too long. And so the Fed is now reversing course on that, which I support. But you really do want to bear in mind that the Euro area, their most recent inflation number was 7.5 percent. If the problem was Biden administration policies, how come inflation is so high in the rest of the world?
- kara swisher
But it does have huge political implications. Marine Le Pen — she’s a far-right politician in France — she’s surging in popularity there. Macron’s been focused on Ukraine. She’s focusing intently herself on economic issues. And in the U.S., Republicans are focusing in on it. The same A.P. poll found that 34 percent of Americans approve of Biden’s handling of the economy, and 65 percent disapprove. How big of a problem is this for Democrats going into the midterms, where they risk losing control of both the House and Senate?
- paul krugman
Well, it’s a huge problem. And the issues for which people most blame whoever’s in power on economics tend to be the things over which that person has the least control or influence, right? If there’s one thing that Joe Biden really has very little he can do about, it’s the price of gasoline. He’s releasing some oil from the Strategic Petroleum Reserve, but for the most part, oil is traded on a world market. No U.S. President can do very much to affect that price. And the price of gasoline, for the most part, reflects the refining costs and the sort of normal markup and the taxes.
But there’s not that much that the president can do, and yet, there’s a long standing correlation between gas prices and presidential approval, which you know, is really not a — it doesn’t speak well for democracy. And yeah, it’s very likely that Democrats will lose badly in the midterms, which, by the way, the incumbent party normally does anyway.
- kara swisher
Yes, but they’re focusing on Ukraine. So you’re saying the economy is actually good. People don’t think it is, so it hardly matters, this misunderstanding.
- paul krugman
Well, it’s a little of both, right? The inflation is real. It has always been the case that inflation bothers people. To say, well, it shouldn’t, that doesn’t help. If we look at the things we think will really matter in the long run, which is getting people back to work, getting young people into the job market, having a solid recovery, then, actually, Biden has done really, really well, but he’s not going to take credit for it.
- kara swisher
But there’s real pain here for people. Inflation tends to hit poor people harder. And so it does affect people beyond their perceptions, even if they’re getting jobs, correct?
- paul krugman
Yeah, although the one thing you want to say about it is, wages are up a lot, and not up enough on average to keep up with inflation. But the wage increases have been biggest at the bottom end of the scale. So although inflation may be hitting the true inflation rate for people in the bottom third of the wage distribution, it is higher than the average inflation rate. The rate of wage increase for those people is also higher. And it’s not all clear. In fact, most of the stuff I’ve been seeing suggests that, actually, this economy’s been pretty good for people further down.
- kara swisher
We’ll be back in a minute.
If you like this interview and want to hear others, follow us on your favorite podcast app. You’ll be able to catch up on “Sway” episodes you may have missed, like my conversation with Jeffrey Sonnenfeld. And you’ll get new ones delivered directly to you. More with Paul Krugman after the break.
[MUSIC]
So let’s talk about how to bring inflation down. How do you cool off a hot economy? You already mentioned interest rates and the Fed letting a party go on for a while, which they did, and a lot of people thought they went too far. Talk about that first and then other ways to cool off a hot economy. Obviously, interest rates is one of the top ways to do that.
- paul krugman
Well, I think pretty much interest rates is it. That’s the only thing we need to do. The big spending is behind us now. I don’t think that Build Back Better would have been particularly inflationary, but that’s not going to happen anyway because Joe Manchin is not going to let it happen. So all of that spending that took place in early 2021 is now receding rapidly in the rearview mirror. And so it’s interest rates, and the Fed has only raised the interest rate it controls directly by a quarter of a percentage point. And the biggest place where you have leverage here is housing. Mortgage rates are now up a lot in just —
- kara swisher
They are.
- paul krugman
— the last few months.
- kara swisher
It’s bizarre. I renegotiated all mine about eight months ago. I feel great.
- paul krugman
Yes, I know. It’s one of this things.
- kara swisher
I do. I’m like, for once, I made the right choice, finally.
- paul krugman
And that’s going to have an effect. It’ll take a while, but it means that presumably, these bidding wars for houses are going to cool off. But more to the point, if you’re a developer thinking about building a bunch more housing, the price at which you can expect to sell them is going to go down. So that’s probably the biggest thing. There are a few other things there as well. To some extent, business investment is going to be cooled off by these high interest rates. And consumers are going to start to feel a little bit less wealthy as house prices start to descend a bit.
So this is what you do. This is how you cool off an economy. This is how we ended the great inflation of the 1970s, was with a period of extremely high interest rates. I don’t think they’ll need to go anywhere near that high this time. But that’s how you do it.
- kara swisher
Yeah, so the Treasury Secretary Janet Yellen said in October of last year, I don’t think we’re about to lose control of inflation. She obviously was trying to calm the markets, but you think they do have control of it?
- paul krugman
Well, I think it’s not yet out of control and probably not going to go. But there’s a probably in there. It’s not a certainty. As long as people believe that it’s temporary, then it’s not that hard to end. And people do seem to believe that it’s temporary. One of the economic principles for policy that’s worked really well has been to say, do not base policy on food and energy prices. Focus on core inflation.
That doesn’t include those because those bounce around a lot, which worked really, really well in some previous — we had a spike in inflation in 2008 and another one in 2010, 2011, both of which the Fed, to its great credit, said, not to worry. This is a temporary phenomenon. And that’s mostly where we are now. I mean, there’s a little bit. There’s the overheating. You need to get that down. Yet, wages are rising. I like rising wages. Wages are rising too fast to be consistent with acceptable inflation.
So wage increases probably need to come down from what’s probably now around a 4 percent to 5 percent rate of increase to more like 3 percent. So that’s going to be the harder part, but this does not yet look like an economy in which inflation is out of control. It looks like an economy that’s hit a rocky patch, but that’s all.
- kara swisher
Right, but bringing down wages, of course, people have been fighting to get decent wages, right? You just had the victory of the Amazon workers in Staten Island, although that’s still temporary because there’s a lot to go from here. Amazon can do a lot of things. So it’s a little counterintuitive. You want to get these wages up in order to spur demand, but you don’t want demand because the prices, et cetera, et cetera.
- paul krugman
No, there is such a thing in these areas as too much of a good thing. You don’t want flat wages. You want wages rising at a reasonably decent clip, but not at a pace that is pretty much going to guarantee that inflation is going to run higher than people are comfortable with. Maybe the way to say it is, what do I think a good 2022 would look like?
And the answer is, it would be a year of slow economic growth, slower than last year, slow enough so that, in fact, maybe the unemployment rate ticks up a little bit so that employers don’t feel that they have to bid desperately to get workers, but one in which wages continue to rise and jobs continue to be readily available to people who want them. And all of the components of inflation just start coming down, and people start to relax about the whole thing.
- kara swisher
It’s interesting. A lot of people, different people I talked to at very different levels of the economy, they all kind of want to spend now, coming out of the pandemic. They want to spend in travel, and then get hit with, oh, look at that gas price. Or if you get an Uber at any time, you’re like, what? Everything does seem more expensive. When you go into a restaurant, at any range, it feels that way.
- paul krugman
Yeah, and that’s true. I mean, prices are up, but prices are up in part because people feeling like spending.
- kara swisher
Mm-hmm.
- paul krugman
Tourism on the island of St. Croix is currently running about 30 percent above pre-pandemic levels. People are doing a lot of revenge travel right now.
- kara swisher
They are, indeed.
- paul krugman
Which is good that we could be doing that, but not good if it continues at levels that lead to too much inflation. So it’s just kind of, pull back a bit. I mean, there are people who want us to — want the Fed to slam on the brakes. I want it to take its foot off the gas pedal and maybe just tap the brakes a little bit to bring us down. And that’s how it should be working right now.
- kara swisher
Talk about the stock market. What happens in that case? Because everybody’s sort of been on that high. And it’s gone up and down, but it’s mostly been up and to the right, especially for tech companies.
- paul krugman
The answer is, God knows, right?
- kara swisher
That’s what my grandfather used to say.
- paul krugman
Nobody is any good at that. And there’s this famous, old line, which still works, from Paul Samuelson, that the stock market had predicted nine of the last five recessions. The stock market is just not very closely tied to anything fundamental.
- kara swisher
But it has feelings, right? Because people focus on it. News media does and everything else.
- paul krugman
Yeah.
- kara swisher
Yeah. So Paul, how do we get out of this? Is there an argument for letting inflation be at all, that it’s a byproduct of stimulus, helping Ukraine fight the war, et cetera, et cetera.
- paul krugman
Within limits. Where we are now with 8 percent inflation, that’s not OK. First of all, people really hate it. And it does have some serious downsides. At that level, you start to get to a situation where you’re starting to impair the usefulness of money because the purchasing power is too unpredictable in the future.
On inflation, there’s really two things. One is that all of us tend to feel that we earned our wage increase, and that the price increase was that something that was done to us, even though it’s actually part of the same process. That’s a slightly discreditable thing, but then there’s just the sense of things of being of control. And an economy with 2 percent inflation is an economy where people feel — they’re aware that prices tend to rise a little bit, but they don’t feel that things are disorderly.
So I think that’s the point, is that inflation, it doesn’t do much good to tell people that inflation shouldn’t matter. It does matter in people’s perceptions. People won’t start to feel better until it comes down some. If things play out the way I think and hope they will, we will see inflation coming down quite a lot late this year or early next year.
And what if we reach a point where now we’re sort of at 3 percent inflation, and the normal target has been 2? Is that the time to just declare victory and pull out, to say, OK, that’s good enough. And I will probably be on the side of people saying, yeah, OK, we can stop the squeeze now. This is OK. Because there’s really no concrete evidence that 3 percent inflation does any significant harm, compared with 2 percent inflation.
- kara swisher
So you said inflation will come down late this year, early next year, that people aren’t concerned about the long-term. But that’s after the midterms. Do Democrats have enough time between now and November to convince Americans that the economy isn’t as bad as they seem to feel it is?
- paul krugman
I have absolutely no idea.
- kara swisher
Good answer.
- paul krugman
I mean, it’s certainly possible that we’ll actually start to see some significant improvement in the inflation numbers within months. We’re still living in Covid time where things happen much faster than they ever used to. And so people look at all these short-term, high frequency indicators. So there’s a lot of indications right now that we’re rapidly developing a glut of trucking capacity.
All of a sudden, after all the supply chain stuff, suddenly there seem to be too many trucks. There is something called the bullwhip effect, where when there were supply shortages, people were rushing to hoard stuff and exacerbating the supply shortages and that that may be going into reverse. So it’s possible that we’ll be seeing some good inflation news before the midterms.
- kara swisher
And people buying less, right? Getting sated at some point and not doing revenge trips or things like that.
- paul krugman
Yes, all of that. And then I do think that the Democrats need to keep hammering. I watched the sort of selected clips, and some of the Fox News hosts seemed to be actually having a hard time dealing with that last job number, that they were stammering a bit over reporting three points to 6 percent unemployment, which is telling you that there is some traction in pointing out just how good the numbers are.
So I don’t think it’s a hopeless cause. It’s definitely uphill for the Democrats because the inflation came as a big shock. But on the other hand, if the numbers start to come down, even if the unemployment rate ticks up a little bit, people’s perception that jobs are easy to get is not going to go away. So I don’t think it’s a lost cause.
- kara swisher
All right, obviously, it’s been in the news. I mentioned this Amazon thing, where they — well, I know it’s still a long road to go because they have to get a contract, and Amazon is pressing against it. When you look at that, do you see any return to the power of workers in an economy like this, or is that not the case because the rise in wages will be lower?
- paul krugman
Well, that’s the difference, right? The short-run wage increase is going to come down. We can’t run at these current rates. But a revival of worker power, I mean, I’ve been saying for a long time that there was no good economic reason why unions had to have receded so much. I mean, it’s true that manufacturing, which is where we used to have powerful unions, is a much smaller part of the economy, and that manufacturers face international competition, and then they can outsource.
But Amazon is a perfect candidate for a powerful union. The economics of unionization of Amazon and Walmart and other big service sector companies are actually extremely favorable. What’s happened is that they’ve operated in a very hostile political environment, an anti-union political environment. And maybe, just maybe Staten Island is the turning point, where, finally, the workers say, no, we’ve had enough, and we start to see labor come back. That’s what I hope for. It’s a big deal.
- kara swisher
Yeah, I don’t turn my back on Amazon. They’re working on their robots right now, as we speak. That’s where they’re going, ultimately. All right, Paul Krugman, thank you so much.
- paul krugman
Well, thank you.
[MUSIC]
- kara swisher
“Sway” is a production of New York Times Opinion. It’s produced by Nayeema Raza, Blakeney Schick, Daphne Chen, Caitlin O’Keefe and Wyatt Orme, with original music by Isaac Jones, mixing by Sonia Herrero and Carole Sabouraud, and fact-checking by Kate Sinclair, Kristina Samulewski and Mary Marge Locker. Special thanks to Shannon Busta and Kristin Lin. The senior editor of “Sway” is Nayeema Raza, and the executive producer of New York Times Opinion audio is Irene Noguchi.
If you’re in a podcast app already, you know how to get your podcasts, so follow this one. If you’re listening on The Times website and want to get each new episode of “Sway” delivered to you, along with a ticket to your very own revenge vacation — I’m going to Hawaii — download any podcast app, then search for “Sway,” and follow the show. We release every Monday and Thursday. Thanks for listening.
From rising gas prices and inflation to the Russia-Ukraine war, the U.S. economy has experienced all sorts of turbulence recently. But it hasn’t all been a bad news story: The U.S. unemployment rate reached a low of 3.6 percent in March and wages are rising. In this conversation, Kara Swisher asks the economist and Nobel laureate Paul Krugman to put all these factors into perspective. “It’s not an A++ economy,” Krugman says, but it’s “immensely better” than where the economy was during the 2008 financial crisis.
[You can listen to this episode of “Sway” on Apple, Spotify, Google or wherever you get your podcasts.]
Kara asks Krugman to take stock of the supply chain crisis, trillions of dollars in stimulus spending and other major economic agitators. They discuss whether the low unemployment rate will translate to greater worker power and what this might mean for unionization efforts at companies like Amazon. And Krugman weighs in on how the federal government could help cool down an “overheating” economy.
(A full transcript of the episode will be available midday on the Times website.)
Thoughts? Email us at sway@nytimes.com.
“Sway” is produced by Nayeema Raza, Blakeney Schick, Daphne Chen, Caitlin O’Keefe and Wyatt Orme, and edited by Nayeema Raza; fact-checking by Kate Sinclair; music and sound design by Isaac Jones; mixing by Carole Sabouraud and Sonia Herrero; audience strategy by Shannon Busta. Special thanks to Kristin Lin and Kristina Samulewski.
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