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Brian Lehrer: Brian Lehrer on WNYC. We'll talk about the US economy now and connect it to the presidential election year. The economy in most elections is issue number one, and in case you missed it, the jobs report for March came out on Friday, and once again exceeded economists expectations with a net gain of more than 303,000 jobs. We have headlines like these. From the AP, another month of robust US job growth points to continued economic strength.

From Axios, the March jobs report was as good as it gets. Here's why. The first reason that they gave is that unemployment has remained below 4% for 26 months. From NPR, construction hiring booms in overall strong jobs report. The lead line in The Wall Street Journal story was the US economy is rapidly adding jobs, but not in a very inflationary way. From ABC, hinting at the political connection, blockbuster jobs report flexes economic strength, defying Americans lukewarm attitudes.

Those are some representative headlines from Friday. Of course, those lukewarm attitudes tend to be connected to inflation and interest rates, even as people have jobs, get paid and are spending quite a bit according to stats from the government. Let's try to figure out what it all means economically and politically with Megan Cassella, CNBC correspondent covering the intersection of Wall Street and Washington. She's also covering Treasury Secretary Yellen's trip to China, and we'll talk about that too. Megan, thanks for coming on. Welcome to WNYC today.

Megan Cassella: Thanks so much for having me. Happy to be here.

Brian Lehrer: Can you start with more about the jobs report? I saw expectations were for about 200,000 net new jobs in March, and it came in at more than 300,000. Where were the biggest surprises?

Megan Cassella: There were a lot of surprises here. More than a 50% increase above what economists had expected, That's really good. I liked, in that headline roundup, the one that said this is as good as it gets, because I do think you could argue that for [unintelligible 00:02:16] is about as good as it gets. Huge number of people finding work, more people coming into the labor force, participation rate increasing.

We saw some stalwart sectors hiring, government and healthcare that seemed to always need workers, but some cyclical ones we're hiring as well. Leisure and hospitality, for example, perhaps ramping up for a busy spring and summer season. That was really across-the-board strength. Then at the same time, wages, perhaps a little bit, surprisingly, were not increasing. They slowed just a little bit down to about 4.1%. That's still a little bit high.

Economists generally think something more in line with about a 3.5% increase year-over-year in wage growth is more consistent with the level they'd like to see to keep inflation steady, but they like the trend there. It's a really good sign that we're able to add this many workers without seeing wages increase rapidly. It means that we're not overheating in a way that would be more concerning.

Brian Lehrer: Tell us more about those cyclical sectors, as you call them. The Wall Street Journal also used the word stalwart. I guess that's a term you use in business reporting, the stalwart sectors such as healthcare and government kept adding jobs, but so did more cyclical sectors like construction, retail, trade, and what you mentioned, hospitality and leisure. NPR also focused on construction. Anything you can say about what the construction sector in particular expanding indicates or some of those others that are cyclical?

Megan Cassella: I think it's a good point. It's always interesting to focus on the different industries, to take a look at them. What's interesting to me about the cyclical ones is these are the ones that tend to be a little bit more vulnerable to economic whims. Is the economy slowing? Are people going out to dinner? Are they still going to sporting events? Are they still booking flights? They tend to be a little bit more susceptible to changes in optimism or in just regular consumer spending. It's important that those are still growing, because it means that nobody's scared yet of inflation or of any looming recession the way everyone was worried about maybe six or nine months ago. It really seems like people are willing to go out and have fun and spend money still.

Then on construction in particular, this is such an interesting one. I spoke with an economist maybe a year ago now who argued that the missing recession, which of course, is still missing. It was missing then. It's missing now. It's been long forecast and hasn't come yet. This person argued that the lack of a construction slowdown was really the main piece that we never got. An important thing to remember here is just how much the Biden administration has spent to stimulate the construction sector.

They weren't doing it just to prop up construction. They were doing it because they want to ramp up our infrastructure because they're trying to build chips factories, a more semiconductor manufacturing in this country, but the effect, perhaps unintended or a beneficial side effect, is that we really continue to keep hiring in the construction sector. The data shows us that is continuing to happen. That means that that then feeds a lot of other industries, and manufacturing, and other sorts of more blue-collar jobs are continuing to benefit from that as well. I would say you can pretty clearly see a link between the stimulus spending in some of these sectors and the fact that the economy is so, so strong today.

Brian Lehrer: Listeners, with Megan Cassella, Washington correspondent for the business channel, CNBC, we invite your personal economic indicators or you can ask a question. 212-433-WNYC, 212-433-9692. If anybody is an employer in any particular sector of the economy, report on the air, help us report this story of why there seems to be such robust jobs growth month after month after month. There's many, many, many months in a row of net plus jobs. If you are an employee who just got a new job, where do you think this fits in to a bigger picture? Congratulations.

If you are struggling with inflation or struggling less with inflation, you can report on that. How does any of this affect your politics? We'll get to that. 212-433-WNYC, call or text 212-433-9692 with Megan Cassella from the business channel, CNBC. I want to talk about inflation a little bit more, again to psych that Wall Street Journal line, they said rapidly adding jobs, but not in a very inflationary way. You just said something similar, and that sounds like really good news. Can you explain some of the basics of how new jobs could add to inflation? Just because people are employed, prices go up?

Megan Cassella: There's some of that. There's the longer that people are spending, if we're all competing for the same number of goods, then those prices could go up if there's nothing stopping consumer demand. I think the clearer link here between jobs and inflation is wages are key. That was why I highlighted that figure. If you think about it, if employers are creating 303,000 new jobs in a month the way they were in March, that's a huge number. Like you said earlier, we're years into this expansion.

The thinking goes, how can we continue creating that many jobs per month if our population isn't growing at the same pace? It might mean that employers have to start competing for workers, and they're trying to lure workers away from jobs. They're offering raises and bonuses, and then employers might have to compete with each other, and we start to see wages rise because workers are in demand.

What was really good about March is that we didn't see wages rise. Beneath the data, what you noticed is that the actual size of the labor pool expanded, and labor force participation increased overall in the primate's labor force participation rate, which is really for those 25 to 54-year-olds. That is also higher than it was in February, 2020, right before the pandemic hit. That means more people are coming in off of the sidelines.

Immigration is likely playing a big role here. That's one way. Our demographics aren't really helping us as a country. Our population is aging, our domestic population is aging, but if we can get more immigration back in, those folks help fill roles, help fill jobs, and then we don't have such intense competition for workers. It also, as more people are coming in off the sidelines, that might be because of flexible work arrangements.

The journal actually had a good piece on that saying that this flexibility and more working from home means that more people can work who have been out of the labor force. Maybe that's stay-at-home parents or older workers or disabled workers. The more that can happen to bring more people into the labor force, both from abroad and at home, means that employers then don't have to compete quite as hard. They can continue creating jobs and still have the workers to fill them.

Brian Lehrer: One more time from The Wall Street Journal story, they have this headline, Strong Jobs Report Still Leaves Wiggle Room for the Fed, but Not Much. That means even with not much inflationary pressure from the new jobs as you've just been describing, it still has the Fed wary about future inflation, so they may not lower rates.

Megan Cassella: That's right. It's also that it's harder to make an argument that they need to cut rates. We're going to see updated inflation numbers on Wednesday. That'll be really key for determining the Fed's immediate path forward. One thing that we always say, "When are they cutting rates? When are they cutting rates?" Some economists like to point out the counterfactual or just the opposing view of just why would they cut rates? If we're creating above trend numbers of jobs each month, if we're not seeing wages spiraling higher, yes, they don't need to raise rates further. Obviously, they made that decision now many months ago, but there is not much that it says they need to cut them either. Consumers are spending, employers are hiring, markets are happy, everything looks pretty good. Why would you lower rates and maybe risk inviting premature inflation if you don't need to? That's the argument there.

Brian: Despite all the cheering that so many news organizations have been doing since the strong jobs report with relatively little inflationary pressure, these numbers came out on Friday, all those headlines I read at the top and what we've been discussing, is it contradictory in a way with the monthly inflation reports that have been coming out this year? They're a little stubborn.

At over 3% when the Fed wants to see 2% before they lower rates and feel comfortable. We're saying on the one hand that inflation seems to be under control despite strong job growth, but then these monthly reports come out. If it's 3-point-something percent again, we're going to see a very different headline on Wednesday, I think, which is going to say inflation just won't cool the way the Fed is trying to get it to.

Megan Cassella: I think that's right. I think inflation plays a bigger role in the Fed's thinking than jobs. Maybe they wouldn't admit that and maybe not substantially so, but I do think that that's been number one for the past couple years, just because we did see inflation spiral so much out of their control, hitting around 9% at its peak year-over-year. We're doing so much better than we were. Inflation's down by 2/3 roughly. Yes, it's stubborn, but I do think on the one hand, most economists that I've ever spoken with always expected that. The phrasing you always heard was, the last mile of inflation is going to be the hardest.

That's definitely true. We're seeing that we're likely to see it again on Wednesday. Housing is a big area where the Fed has long hoped and thought that they would see more of a slowdown, and we just haven't quite seen it show up in the data yet for any number of reasons. Demographics and lack of supply being a huge part of that reasoning, and that's something the Fed just can't control that much. It also is separate from our current inflationary cycle.

Those are just realities in America right now that are keeping inflation a little bit higher than they want to see. It's moving in the right direction, but you're right that it's not there yet. That just contributes to the thinking of, why cut rates if inflation isn't yet where you want it to be, and job growth is still so strong? Obviously, they don't want to keep rates too high for too long, but if the economy continues to appear to be humming along, then they're likely to keep them higher just a little bit longer to try to get inflation more in the path that they want to see.

Brian: We're talking about unemployment relatively low, but a few people are calling in on unemployment and underemployment in various sectors. Let's take one of those. Stacy in Brooklyn, you're on WNYC. Hi, Stacy.

Stacy: Hi. Actually I'm in Manhattan. It's okay.

Brian: Okay. Sorry.

Stacy: I don't see these numbers. I am in my mid-50s. I'm in middle management, I've been out for six months. I know tons and hundreds of people who are in the same position as me. I wonder where these numbers are coming from. That's my point, is that sometimes I think these numbers are skewed. Plus gig workers, I know a lot of people who are doing gig stuff now, and they're people with advanced degrees. I just feel like we're not getting the whole story.

Brian: Stacy, if you're comfortable saying, you work in middle management in what sector of the economy?

Stacy: I was working for marketing advertising.

Brian: Thank you. Megan?

Megan Cassella: It's a really good point, and I completely empathize with everyone who's in a similar position, because we always know the data doesn't tell the full story. This is actually really interesting. From a political point of view, this is one of the hardest things that Biden administration has been grappling with. Is that on the one hand, the data is really strong, they're inclined to go out there and celebrate and say, "Look how well we're doing particularly compared to where we thought we might be at this point when the pandemic first hit and was just wreaking economic havoc," but they also know that that doesn't resonate with so many people.

We're still seeing, though they've been improving, we're seeing pretty low consumer optimism numbers or consumer pessimism numbers in the sentiment data. We are seeing people sometimes pick up multiple jobs, or switch to gig work, and that sort of thing. I think different industries, some are not doing as well as others. Marketing and advertising falls in the broader media world that has definitely seen some difficulties as has the technology sector or the information sector where we've seen some layoffs. By and large, the data is good in the aggregate, but I do think that that risks glossing over a lot of these hiccups in specific industries and specific geographic locations, or whatever it might be, that really not everyone is on the same page and that's worth remembering.

Brian: A number of people are texting about wages and a disconnect perhaps between what should happen theoretically according to the economics textbooks, as you were describing before. If there's competition for labor, wages should go up. Listener writes, "The number of jobs may be good, but what about the wages they pay? How many Americans can't afford housing, healthcare, even food?" Another listener writes, "Could these numbers also be explained by a deflationary pressure on wages? Are the new jobs just not paying that much?"

Yet another listener writes, "I worked in the event promotions and production industry. I noticed that within the last two years, the wages have been cut back to pre-COVID wages." Another one, one more, these are all from different listeners, "These discussions need to disconnect the rise in corporate price power and their increased profits from greed-flation." Are there wage statistics attached to the jobs numbers statistics that came out Friday?

Megan Cassella: There are. This is such an interesting snapshot of how people are feeling, because, again, this is where we're seeing a disconnect between the hard data and what people are saying and feeling. Wages were up. I believe it was 4.1% in the jobs data that just came out on Friday. That's slightly slower than the 4.3% the month prior, but year-over-year, wages are up in aggregate, more than 4%.

What's difficult is that when you break that down by income sector, some sectors are seeing their wage growth outpace inflation. I think most often you're seeing the lowest income sectors are actually doing well and just recently have begun to outpace inflation. It's very rare for wages to go down, but it's also very rare for prices to go down. If your wages are holding steady, if you haven't gotten a raise in a while, or even if they're increasing cost of living, 2.5%, 3%, that's below average right now, and that's also not going up as quickly as inflation has been.

Even though inflation is way down from its peak, it's still up more than 3% year-over-year, month after month after month now. Over the last two years it's up a huge amount. I don't have the number in front of me, but it's really up a lot. Somebody mentioned housing. Housing is up even higher. Some of these core areas of spending that you really just can't get away from are up stubbornly high. I think that's part of what makes people feel a little bit pessimistic here or maybe a lot pessimistic, is that they're seeing all these headlines of the economy is doing so great and they really don't feel it. A huge part of that is just that the cost of living is going up faster than wages are.

Brian: As we continue for a few more minutes with Megan Cassella, Washington correspondent for the business channel, CNBC, and here is David in Westfield, New Jersey who wants to respond to something that you said, in particular about one of the stats. David, you're on WNYC. Hello.

David: Hi. Good morning. Thank you for taking my call. I thought it was fascinating about the impact that immigration is having on wages and that it's helping to keep them down and keeping job growth healthy relative to the inflation rate. I'm just wondering, as a common sense perspective, why is that still a wonky point and not being talked about more in your opinion? It seems like a great counter-narrative to all this ugly stuff we hear about immigration.

Brian: Megan?

Megan Cassella: Absolutely. It's a great question. I would argue, I have long tried to bring immigration more into the conversation. You're right that it doesn't always break through. I think one of the reasons is because this is such a politically charged topic in our country that so often I've found when I have reported something on immigration, whether it's on air, whether it's in writing, so many people are responding and saying, "We don't need these workers coming into our country. This is repressing wages. This means that I'm not able to get work or my neighbor isn't able to get work."

It just doesn't resonate in the same way. Even though, when you look at it from this perspective in terms of needing to fill jobs, and needing to combat some demographic trends in the US that otherwise would show us on an inflationary trend for decades to come, because of the way our population is aging, it's actually a really bipartisan issue. The Chamber of Commerce, for example, which traditionally, historically, has leaned a little bit more Republican-leaning has been very gung ho in favor of immigration reform, because they say we [unintelligible 00:20:35] so many business owners.

So many of our members need to be able to hire and are looking to, for example, increase the visa cap for the number of either highly skilled or seasonal workers that they can bring in each year. I do think we're hearing it come up a little bit more in that context, but you're right, that it doesn't break through all that often. I think partly because there's so much pushback every time it does come up. Even the administration, I think, at times has said there are flaws in our immigration system. Even folks who want to increase overall immigration, they recognize we need to do it in a streamlined way. It's very nuanced. It's not always, I guess, the easiest soundbite to get across.

Brian Lehrer: Still a lot of unhappiness coming in text messages. Listener writes, union labor in publishing, "I'm not feeling this great economy. My wages barely cover life in New York City." Another one, "Why is salad dressing $9 a bottle and Ben & Jerry's $10.49 and college tuition is spiking $90,000?" Another listener writes, "Every month we hear that the figures are much better than economists expected. Who are these incompetent, pessimistic economists?" What do you think about that one?

Megan Cassella: I think that's an interesting one. Actually, before I was covering economics as closely as I am, I always wondered, why do we only care about the consensus opinion? Why don't we care about the overall trend? Of course, we care about both. These are generally economists from the major banks and investment firms and groups that all submit their own forecasts, and they take really close look at every single data release, even the ones you really aren't hearing about all that often. There's data coming out almost every day that gets factored into these forecasts.

Then news organizations like Bloomberg or The Wall Street Journal, or organization called FactSet will consolidate them all and take an average of all of those and then say, "This is what was expected, and this is how we did." I agree with you, though. It's interesting to always see the market, for example, react when something is way above or below expectations versus just how the overall trend looks. I think both are taken into account. It's definitely hard to always reconcile what you're seeing in the data versus what you're hearing on the ground as a lot of these comments are showing us.

Brian Lehrer: Here's another interesting one, "Wondering if the fact that the labor markets don't seem to be affected by the Fed's moves could support the opposite point. Why not cut rates, if the Fed's rates don't seem to be working the way they were hoping to cool labor markets?"

Megan Cassella: The worry there is really on the inflation side. It's about this premature reheating of the economy that, in the data, if already it looks like people are really doing well, employers are doing well, wages are still rising more than they want, inflation is still rising faster than they would like to see, that there's no reason to cut rates because then we might see that take off even faster. As an example, I have a mortgage payment. I just bought a house a couple months ago, so my mortgage rate is quite high.

If they were to cut, then everybody who has a mortgage at a high rate could refinance and have a lower rate and suddenly have that much more money on hand for consumer spending. Then we might book a vacation we might not otherwise have booked. Really quickly, you might start to see spending increase above even where it is and then we could see inflation start to pick back up again. That's what they're concerned about. If the economy isn't starting to falter on its own, they figure maybe we have a little bit more room to keep rates high for a little bit longer.

Brian Lehrer: As Washington correspondent for CNBC, how does all this connect to the presidential election? I saw one strategist on television say, perhaps the two most important points for any incumbent president seeking reelection in most years, obviously, there are a lot of factors in politics that are different in every cycle, but often, the June and September jobs reports. Look at those and the correlation for whether the president gets reelected or not.

Megan Cassella: That's interesting, to look specifically at those months if that's when people are paying most attention and equating it with their vote. Overall, I think the economy is one of the most difficult things the Biden administration has to deal with. Partly because as you mentioned, it's one of the biggest, if not the biggest factor playing into whether or not an incumbent gets reelected. Historically, recessions have been harmful, if not fatal for incumbent presidents, and we don't have a recession. We're quite far from it right now, but we do have a complicated, nuanced economy, where a lot of people really don't feel like they're doing so well.

It's likely because their wages just aren't rising fast enough. They're comparing their maybe overall level of savings to 2021 when all this stimulus money went up, and we saw savings really spike. If people don't have those anymore, then they feel like they're not doing as well as they were a few years ago. The Biden administration has tried to really strike a balance here in that they want to go out and celebrate these figures, but they also have said that they need to lead with empathy, with sympathy, with a message overall that they recognize that people are still hurting, still recovering, still feeling like they're not doing as well as they could be doing.

That blunts their message a little bit. If you remember, previous administrations have been able to be more unabashed or unequivocal in their celebration of how well an economy was doing. Whether or not everybody agreed with that, they would just hammer home that message. This administration, for better or for worse, has looked at polling and decided they can't do that, because as I mentioned, those sentiment numbers still aren't as good as they would like them to be. There's still a lot of stories like the ones we're hearing today that folks are still hurting a little bit. It means they have to try to strike that balance, and it means that their message is a little bit more muddled than it might otherwise be on the economy.

Brian Lehrer: We covered on the show two weeks ago a Bloomberg poll, which showed an improvement for Biden compared to the poll numbers that he was getting vis-à-vis Trump in important swing states. One of the things when you drill down on that poll that might have been a reason why is that there was an uptick. I don't know how big the uptick was, but they reported an uptick in the public perception of the economy, which had been so down for so long. I wonder if you're seeing anything like that, if you've looked at that poll or other poll numbers, and if you're seeing politically an uptick in the public perception of the economy right now that may or may not be helpful to Biden.

Megan Cassella: We definitely are seeing an increase, which is really good news for the administration. They have to keep hoping that that continues. Sentiment was so, so very low for most of last year, I would say. It has begun to increase fairly steadily, and that's a really good sign. The other thing that I think has been really interesting in polling, and the journal, again, had a piece on this, I think it was last week. We've seen this actually for a year more, is this trend of people saying, "I'm doing okay, but I feel like everyone else isn't doing that well."

I think what the journal highlighted when they were asked, "How is your state doing? How's your state's economy?" The numbers were quite strong, but then when the question was, "How is the US economy doing," the numbers were really quite low. It's this interesting divide that is really quirky in the data and we don't see it all that often of, everything is terrible, but I'm fine, is how I've heard it described. That plays into this idea of what-- It helps explain the disconnect in the data of how the aggregate data is quite good, and yet the sentiment data is still quite low.

There are all sorts of explanations for why this might be going on, the biggest of which is that people just don't like high prices. They're still learning that even though inflation, which is the rate of price increases, is slowing, the level of price increases are not going to go back down to what they remember. That's hard to grapple with. It's also just this overall-- the sentiment of coming out of a pandemic, starting to return to normal after a couple of really boom years of people revenge spending and traveling a lot and that sort of thing. We're settling back down to earth, and coming to terms with where we are now, and what our circumstances look like. It just means that there's a lot of different threads out there, and it's hard to hear a coherent message out of them.

Brian Lehrer: A few more interesting texts. Somebody writes, "I'm sick of hearing people complain about inflation. Consumer spending is off the rails." Another listener writes as pushback on this idea that a lot of immigration is good for the economy, because it holds inflation down, because it holds wages down. Listener writes, "If Black unemployment, Brian, is roughly double that of whites, then the lower wages that immigrants cause is a greater threat to Black workers." What do you think?

Megan Cassella: I think I would have to look closer at the data to know for sure. I do think that bringing Black unemployment down would be a major beneficial step for the economy. It's something this administration has talked about, actually, and it's something that we saw early in the pandemic. First, there were thoughts that Black unemployment would stay high, then there was a lot of progress that was celebrated with it coming back down.

Clearly, if we're looking for workers, like I mentioned, that's one of the reasons we need immigration is because we need to find more workers, then we, of course, need to look at the groups that are not participating as much in the economy or that have higher unemployment rates, and Black workers tend to be at or near the top of that list. I do think that's a little bit how it ties in with immigration. As long as we see more of those workers start finding work, that's better for everybody and the economy.

Brian Lehrer: In our last two minutes, I see you have also been writing about Treasury Secretary Janet Yellen's trip to China. What is she doing in China?

Megan Cassella: She has just wrapped up her trip. Yellen was there for about five days. She was there to meet with her economic counterparts and to meet with business leaders operating in China. The administration said, "Don't expect any major policy developments out of this trip", but the goal was to continue managing the economic relationship. She ended up focusing a lot on trade while she was there. She really brought this pretty firm message about industrial overcapacity. It's this idea that the Chinese government has been very heavily subsidizing certain manufacturing industries, particularly what Yellen called green technologies, EVs, and solar cells.

What she's worried about is that with so much government investment, they're producing too much, they're going to flood the global market with really cheap imports, and that hurts manufacturers in the US and around the globe. She really brought a firm message there. She said it was well received, that she got some pledges from China to perhaps start to curb their behavior. It was all about mostly trade and managing that relationship with our fellow largest economy.

Brian Lehrer: Trump is running on imposing tariffs on goods from China, in fact, I think all imports as a way to keep American manufacturing jobs being created and as a way to keep wages high because those American manufacturers wouldn't have to compete with cheap imports. Does Biden have a response to that?

Megan Cassella: What's interesting to me, I covered trade for the entirety of the Trump administration, and while Biden has taken a much calmer and more measured approach to China on the policy minutia, he actually really hasn't changed very much. He left Trump's initial round of tariffs on China in place, those are still there. Yellen this week was talking about potentially-- Her wording was that she wouldn't rule out anything to protect our domestic manufacturing industries, and that includes tariffs.

The Biden administration would not do anything close to what Trump is proposing, which is 60% tariffs on all goods imported from China, but they're not afraid to use tariffs. They've kept some in place, and they're considering more. One note on tariffs, I will add though, is that despite now bipartisan support for tariffs, most economists continue to say that tariffs are a tax on consumers. If we're buying something from China and there's an import tax on it or a tariff on it, then that means the consumer pays more rather than anyone else. Despite bipartisan support, there's still economic pushback there.

Brian Lehrer: Right, which suggests a larger discussion that we'll have to have another day, which is, would we rather have a high price, high wage economy, or a cheap goods, low wage economy, which is actually better for the average American. We leave that there on answered with Megan Cassella who covers Washington for the business channel, CNBC. Thank you so much.

Megan Cassella: Thank you.

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