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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good Monday morning, everyone. We're expecting to learn any minute if the Supreme Court makes any of the blockbuster decisions we're expecting from them this month. They usually announce something on the first Monday in June, here we are. The usual release time is just after ten o'clock in the morning. Here we are, we're watching, and we'll bring you the news. Now, later in the show, Cardozo Law Professor Kate Shaw will be with us either to break down whatever decisions they're about to announce or to give us a preview of the big ones we're waiting for, which are not just about abortion and guns. We assume more or less the basics of those.

We'll talk about them as well, but also climate change, public displays of prayer by an authority figure in public schools, that's back at the Supreme Court, and more. One way or another, law professor Kate Shaw coming up. We'll have some fun this morning learning about the new public observatory coming to New York City. Have you heard about this yet? You'll be able to go see the stars, the planets, the heavens once it's fully installed. We'll tell you where and how. Let's start here. The United States Labor Department, if you missed it on Friday, gave good news and bad news for American workers, depending on how you look at it.

The good news, employers added 390,000 jobs in May in what is now a pattern of 17 straight monthly gains, that 17 according to stats in the New York Times, and 390,000 jobs net plus in May was actually pretty much more than they were expecting. Unemployment is right around a 50-year low of 3.6%, but that good news for workers, as many of you know, is presenting a continued challenge for policymakers because they're trying to pump the brakes on inflation at the same time. Here's President Biden delivering remarks on the May jobs report on Friday.

President Biden: The point is this, we've laid an economic foundation that's historically strong. Now we're moving forward to a new moment where we can build on that foundation, build a future of stable, steady growth so we can bring down inflation without sacrificing all the historic gains we've made.

Brian Lehrer: The President on Friday. Here's a question, and let me take a shot at framing the conundrum that policymakers face, and then we'll hear what our guests thinks. Can't we keep wage growth going, so badly needed after decades of middle-class wage stagnation, really the decline of the middle-class as a result, and still tame other aspects of inflation? Joining me now to break down the latest job numbers, the state of the economy generally, and to address this "new moment" that President Biden was talking about on Friday in this conundrum is Jeanna Smialek, a reporter covering the Federal Reserve and the economy for The New York Times.

Hi, Jeanna. Thanks for coming on today and starting off the week with us, welcome back to WNYC.

Jeanna Smialek: Hi, Brian. Thanks for having me.

Brian Lehrer: Listeners, help us report this story, and opinions welcome here too.

Are your wage hikes keeping up with the price hikes in your life, first of all? 212-433-WNYC. Are you one of the workers who've gotten more wages? Wage growth was going at 5% so far this year. That's so much more than in recent years, many recent years. Are your wage hikes, if you've gotten a recent wage hike, keeping up with the price hikes in your life? Which is more important to you, if you have to choose? 212-433-WNYC. 433-9692. Tell us about your work life in terms of wages right now, and job opportunities.

Have you been able to negotiate a better salary, more time off, other perks in these past few months of national job growth, the so-called great resignation, and labor shortage in some areas, anything you'd like to report from the front lines of the job numbers as employers, as well, hiring managers or employees? 212-433-WNYC. Where are you feeling that inflation the most, folks? Maybe you have an idea for keeping wages growing while tamping down other sources of inflation as most workers have decades of catching up to do. 212-433-WNYC on any of that, 212-433-9692, or tweet @BrianLehrer. Stories welcome, opinions welcome. Jeanna, where do you start? What's your headline from Friday?

Jeanna Smialek: This is a very strong labor market and it is probably not one that is sustainable over time. I think that was the big takeaway. As you alluded to, we're seeing this very strong wage growth, which as you mentioned, we haven't seen for a very long time. This is something workers can take heart in. At the same time, that wage growth is not keeping up with inflation. We are seeing really rapid inflation. I think one thing that worries the Fed is historically when you have really rapid wage increases, you can get into a situation where wages and prices start to chase one another.

You see workers who have a little bit of power in this labor market bargaining up their pay because they're trying to cover these rising prices. At the same time, companies have a little bit of pricing power because it's very hard to raise your prices when the guy next door isn't but when the guy next door is, it's easy to eke a little bit extra out there. Companies with pricing power who are also facing rising labor costs might be more likely to pass those rising labor costs on along to customers. You can get into this upward spiral where wages and prices feed one another. That is what the Fed is very worried about. We don't see signs of that right now. In fact, wage growth moderated just a little bit.

If you were very worried that we were already in a wage-price spiral, this report is probably good news for you, but I don't think we're out of the woods yet either because we still are seeing this very rapid, historically unusual pace of wage increases.

Brian Lehrer: The headline on one of your articles is Wages Climb Briskly, Good News For Workers, But A Challenge For Policy. What is the challenge for policy?

Jeanna Smialek: I think the challenge for policy is how do we set down this economy, cool it off enough that wages moderate to a sustainable level, and that inflation comes down to a place where it's not outstripping wages so that everyone can actually end up being better off without actually tipping the economy into a

recession. That is a very tricky problem for the Fed because they work with interest rates. They raise interest rates, they increase the cost of borrowing across the economy in order to slow down demand and hiring, and wage growth. That's a very blunt tool. It's very hard to do it with any precision.

I think they are really grappling with how to cool things off in a way that sets it on a sustainable path without overdoing it to the point that we all end up in a really pretty painful economy for a while here.

Brian Lehrer: There are a few different pieces that I want to dig into a little bit. One is the historic wage stagnation that we're dealing with, what I called the decline of the middle-class in the intro, and if you can put any numbers on that. Another thing is where the inflation is coming from, whether it's necessary for all these producers of things and sellers of things to keep up in some way, or whether it's greed. Your colleague I'll note, Lydia DePillis, recently wrote about the term "greedflation", which you tweeted about. She writes, "There is not much disagreement that many companies have marked up goods in excess of their own rising costs."

Can you talk about greedification and whether anybody can actually measure it and therefore crack down on it?

Jeanna Smialek: Well, I think greedflation is actually a somewhat controversial topic, and I think it's controversial for a couple of reasons. Like Lydia mentioned, there's not much disagreement that companies are raising prices by more than they need to in order to cover their rising labor costs, that is true, but I think there's real question about whether that is unusual or something that needs to be fixed or whether this is just kind of the way the economy works. Just to unpack that a little bit, in a capitalist society like the one we have, companies are profit-seeking. They try and expand their profits. That's why you invest in Google or Microsoft because you trust Google or Microsoft to try and grow their profits.

That's basically how the system works. This is consistent with what we would expect to see in an environment where companies can swell their profit margins. If they can charge more, they will charge more. That's sort of logical. The question is whether this is going to last over time because, in standard economic theory, you would expect companies that are swelling their profit margins in a way that is unsustainable like this to be competed out of the market. The milk shop down the street raises its prices to $4 from $2, even though costs have only gone up a little, a new milk shop should open up and charge way less in order to steal away all the customers.

The question is whether that's going to happen or whether something has broken down in that chain. It does seem like we're seeing this moment of corporate profit-taking. I think the jury is out on whether that's going to last and on whether it actually requires a policy response, and on whether a policy response could be nimble enough, whether we could do something with policy that would be fast enough to deal with this greedflation inflation issue in the moment and in a quick enough way for it to matter to people.

Brian Lehrer: Right.

Jeanna Smialek: I think that's an evolving story. I don't think we have all the answers on this one yet.

Brian Lehrer: Well, and maybe this is a radical thought and maybe people aren't supposed to ask this question anytime over the last 50 years, but is there any system of price controls that guarantees the private sector producers of very in-demand goods enough profit that they still have an incentive to produce as much as needed, as much as they can sell, still very capitalist, but doesn't let them gouge people just because there's a lot of demand in the moment, but not tamp down wages at the same time?

Jeanna Smialek: I imagine that would be very difficult to figure out. I've never heard of such a system. [laughs] I think the way most economists would approach this is that while it is important to have government policing and regulation of companies that might make short term decisions that don't make sense for broader society, market forces do work pretty effectively at signaling to companies how much to produce and how much demand is out there in the economy and how much we really need of any given thing. The economy in America is pretty nimble actually. It is typically pretty good at responding to supply and demand signals.

Really what we've seen over the last couple of years is a breakdown in that ability to adjust to supply and demand signals because of trends related to the pandemic. A big part of the reason we have the inflation we have today is that producers, companies haven't been able to ramp up their supply of cars or computers, or what have you, houses are a great example, because we have just had a lot of shortages that tied to early pandemic factory lockdowns, that tied to supply chain snarls, that tied to all of these supply-side factors. In a world with price controls that wouldn't necessarily fix those problems, you still would have too few things.

In a world without price controls, in theory, the higher prices should attract new companies into the market, get them producing, and allow those shortages to alleviate over time.

Brian Lehrer: Yes. I guess the question I'm wondering-

Jeanna Smialek: [inaudible 00:13:02] [crosstalk].

Brian Lehrer: - and based on your answer, nobody else is wondering this, but whether enough profit could be baked into whatever controls that there would still be an incentive to keep producing, to produce the maximum amount of the thing, whether it's gasoline or whatever it is that meets the demand because these owners will still make a profit. I'm thinking of, and I know this is a very controversial example, but rent stabilization in New York City, where there are millions of tenants who live in rent-stabilized apartments, and I know the landlords like to argue that that creates shortages in market-rate apartments.

I personally tend to disagree because the new apartments that get built are not in the rent stabilization system, but what we also don't see is landlords of rent-stabilized

apartments getting out of the business because the system, just like this year, it's taking inflation into account and therefore allowing for some rent increases. It takes the profits into account, the need for profits into account, and guarantees the profit while still controlling the price.

I'm just wondering if you have any take on an economics report or whether that can't be applied to some other necessary goods at a time of price gouging, that again still gives the oil companies or whoever it is the incentive to keep producing as much as they can produce because each time they're going to make X percent.

Jeanna Smialek: Yes, well, as an economics reporter, it is pretty much my job not to have a take, [chuckles] but I will tell you that this is an area of active debate amongst economists. You will see that most mainstream economists believe that price controls, blunt market signals are generally not a good idea, except in very controlled instances. You will see some economists arguing for a broader application. Isabella Weber, who is a young up-and-coming economist, wrote a quite controversial paper about this earlier this year. My colleague Ben Castleman and I wrote that up and wrote about the debate about price controls. I think that a thousand-foot takeaway from that story was this remains an area of active debate.

There's no clear solution. There's no clear consensus. It's pretty obvious that in the past when applied broadly, price controls have sometimes had pretty negative aftershock effects, but it's also the case that it's not always good to use past policy as a prophecy about the future, especially because sometimes past policies weren't particularly well designed. I think there are some open questions about this one.

Brian Lehrer: I realize I'm going way beyond the scope of your recent reporting, but do you have any example from the past of a price control during a period of inflation that backfired?

Jeanna Smialek: Yes. I guess it was the early 1980s, the Nixon administration implemented what was called the Nixon shock.

Brian Lehrer: Early '70s would be Nixon, right?

Jeanna Smialek: Early '70s. Thank you. The Nixon shock, which your listeners may be familiar with, this was basically, there was a late-night announcement and he both instituted price and wage controls and took the economy basically off the gold standard in the final move. We had been moving off the gold standard for quite a while. We'd been on the Bretton Woods agreement where we pegged the dollar to gold and everybody else pegged their currencies to the dollar. He finally moved away from that system. Bunch of economic changes hit all at the same time. In the Nixon shock, he had a couple of pro-US manufacturing initiatives.

Anyway, so big package of economic initiatives all at one time but the consensus in the years since has basically been that those wage and price controls that he instituted then, which continued to be implemented on a rolling basis over subsequent years, did temporarily lower inflation, but only set it up to come roaring back when they were lifted. What we saw was a big spike in inflation after they came

off. Alan Blinder, who is an economist at Princeton and a former top-ranking Fed official, has done some pretty careful research on this. Basically, the conclusion is this just did not work. It was robbing Peter to pay Paul and we had a big payback period at the end of it.

I think even people who support price controls think that that didn't really work [chuckles] and think that it's a bad example and basically say that we wouldn't want to try this way again.

Brian Lehrer: This way, but I also heard your point from your earlier answer where it's possible that something that didn't work in the past didn't work because it was badly designed, not because the basic idea is necessarily bad in all cases. You know what? Look at this, Jeanna, somebody's calling in. Judy in Port Washington who says she was an intern at Nixon's price control agency. The very thing you just mentioned. Let's hear a story, I guess, from Judy in Port Washington. Judy, you're on WNYC. Hi there.

Judy: Hi. Thank you. Yes, it was a summer. One of my college summers. I was hired not as an economist, I hasten to add, but as a writer, and a bunch of us, the Nixon Cost of Living Council was being closed down and we were writing it up. My job was I had one paragraph, I had to write about volatile price controls, so things that vary wildly from one month to the next. Prices of everything had to be reported to the government so they could figure out what the profit margin was. I cannot see businesses doing that today. Even as a writer, I just can't see them doing it but if a price varied wildly, it was even harder to figure out if there was too much profit being made, and they imposed arbitrary caps.

Since a lot of the inflation seems right now to be attributed to oil prices, I think that would be a special problem for anybody trying to resurrect this thing. As a non-economist, that's what I wanted to contribute.

Brian Lehrer: Judy, thank you very much. I'm just curious if you remember any buzz in the office at that time since you were there as, if I understood you correctly, they were starting to dismantle the Nixon price control agency, any buzz about what didn't work, what did work, who was frustrated by the fact that it was being taken apart? Anything like that?

Judy: I didn't get an overall feeling of triumph, this was our great contribution to civilization. I think people felt it had been a necessary job but, yes, I don't think [crosstalk]--

Brian Lehrer: They were going to go on to their next job.

Judy: I don't think anybody was running around shouting, "This worked so well, let's do it again." [laughs]

Brian Lehrer: Yes. Right. Judy, thank you. Thank you for your call. I really appreciate it. I want to go right on from that to one of our callers comparing the raise and the inflation in his own life. It's Malik in the Financial District. Malik, you're on WNYC. Thank you for calling in today.

Malik: Thank you, Brian. Long-time listener, first-time caller, so happy to be on. Yes, I recently got a promotion and a raise of about 8%, and then I went back to my employer stating all the inflation facts and how rent in New York is going up. Essentially they said there's nothing they can do and they're not giving any inflation raises. In my mind, it's like my pay is essentially staying the same if I'm only getting an 8% raise and inflation's at almost 9%. I'm in a junior role at a marketing communications agency, but it's not adding up. [chuckles] Yes. Even though I feel like they're aggressively hiring, but they're not making inflation raises, which is kind of ridiculous in my opinion.

Brian Lehrer: Where are you seeing inflation most in your life?

Malik: I think specifically at the grocery store and my rent this month went up like 300 bucks or something. I feel like rent and the grocery store for sure.

Brian Lehrer: Malik, thank you very much. Glad you made your first call to the show. Don't make it be your last. Jeanna, any reflection on either of those last two calls? Malik certainly demonstrates the conundrum.

Jeanna Smialek: Yes, absolutely. Absolutely. I think actually to bring it back to our previous conversation, I think one of the really critical things to think about when we talk about price controls is they're called wage and price controls for a reason. Anytime we've previously instituted them, the way they typically work is you put a cap on wages at the same time as you put a cap on price increases. They don't necessarily leave people feeling a lot better in the short run because currently what we're seeing is wage growth.

It's at least somewhat keeping up with inflation, and in an environment where you have wage and price controls, you're basically instituting a policy where wages are not going to be keeping up with inflation in the near term. I think that's important to note. I do think one thing that Fed Chair Jerome Powell will often say when he talks about today's economy because as your listeners may know, he has been very focused on sort of the employment side of the Fed's job throughout his tenure as Fed Chair. What he talks about now is this idea that this is not a sustainable economy and it's not sustainable for workers either. For exactly the reasons that Malik was just talking about.

If you get into a situation where you're getting all these great wage gains and you're obviously happy to be getting those but they are just in no way keeping up with your cost of living gains, it doesn't really leave you further ahead. What economic policymakers in Washington are very focused on achieving right now is a situation where we get inflation back towards that 2% target that they shoot for on average over time and allow wages to probably grow more slowly than they're growing now, but hopefully grow more quickly than price increases.

Brian Lehrer: Well, we name-checked the 1970s already once in this conversation. When we come back from a break, I want to go back to the 1970s again because I think that was the time that wages, as a general matter for non-elite workers,

stopped keeping up with prices and stopped keeping up with, say, the top 20% in the economy where increasingly the wealth has been concentrated.

I want to talk a little bit about the history of middle-class decline in this country as part of the big picture for the decisions facing the Fed, I know another one may be coming maybe even this week or next week about interest rates and facing policy makers in general with New York Times economics and Fed reporter Jeanna Smialek, talking about the delicate dance between trying to keep wages growing and trying to keep prices from growing. TJ in Manhattan, you're on WNYC. Hi, TJ

TJ: Morning to you and to your guest. Jeanna, I want to ask you [unintelligible 00:24:50]. Inflation is not the most dangerous thing here. Inflation could be even good for business, at least initially. I think the danger is what's called stagflation, which we've seen in the '70s, that means inflation and stagnation. Are we likely to go into that route?

Brian Lehrer: TJ, thank you very much. Here come the 1970s again, just when even baby boomers would probably rather leave them behind, [chuckles] but Jeanna, how about that term which dates from the '70s stagflation?

Jeanna Smialek: Right, the dreaded stagflation. I think this is going to be the biggest debate in economics this year, is are we headed for a stagflationary environment because what we know is that the Fed is slowing down the economy deliberately to try and control inflation. Sort of naturally it follows that we're going to have a period where the economy is slowing down but inflation is still high because it takes some time for that chain reaction to really play out. It does seem likely that we're going to have a period of slower growth and rapid inflation, whether that constitutes stagflation though is a big open question. I think the answer most economists would give is it has to last for a while.

We need to get in a situation where these things are both true and they're kind of feeding on one another for it to really be a stagflationary episode. You'll talk to a lot of economists these days who say certainly the risks of a stagflation have gone up. It is absolutely the case that we could end up in that situation. However, it is just too soon to tell whether it's actually going to happen or not, and a lot hinges on what happens next, not just with Fed policy, but also with luck because we have had a situation recently where we have not had great luck when it comes to inflation. We had the supply chain issues, we had all the port backups and all the shipping problems, and [crosstalk]--

Brian Lehrer: Pandemic related more or less.

Jeanna Smialek: Exactly, pandemic-related. China's policies of locking down to control COVID have very much exacerbated them. Then, we got hit with the Russian invasion of Ukraine, which while more acutely felt in Europe has been a major inflationary shock here in the United States as well because it's pushed up food prices, it's pushed up fertilizer prices, it's pushed up all kinds of commodity oil and gas prices. If our luck continues to be pretty bad, the risks of stagflation definitely increase. If our luck improves, maybe that risk is diminished.

Brian Lehrer: Stagflation would be if, and for you as a Federal Reserve correspondent, I guess we're expecting the Fed to push interest rates up another full point this summer, maybe even a point and a half by September. If they do that, that's supposed to make the cost of borrowing to invest in your business or to buy a house so expensive that the rate of growth of the economy slows down. That's the stag part. The inflation rate also slows down because businesses aren't growing as fast, demand isn't there as it is right now, and more meets supply more evenly so prices wouldn't keep growing.

Why did it happen in the past that if the Federal Reserve Board did increase interest rates and interest rates got crazy high in the late '70s, early '80s, they got into the teens, we're talking about like 2%, 3% interest rates now as being huge, interest rates got into the teens, and yet the inflation continued? Tell us a little more about why that happened.

Jeanna Smialek: Right. I would say that at least some of that episode came down to bad luck. We saw a situation where yes, interest rates were going up a lot, but at the same time, we were hit by repeated commodity shocks. We had oil embargoes and we had the sort of ricocheting of those higher oil prices through the broader economy. There was a situation where higher prices were partially just drawing the short stick. It was also the case in the 1970s, I think this is a really, really important nuance, it was the case in the 1970s that inflation had been high for a very long time.

Inflation really started to ratchet up during the 1960s and then we basically went through most of the 1970s without the Fed taking really decisive, really painful action to control inflation. Not until Paul Volcker took over in the early 1980s did the Fed move interest rates up to those very punishing levels that you just mentioned. I think what we saw happen in that era was consumers and businesses and basically, everybody across the economy began to expect much higher inflation year after year.

When unions were negotiating wage packages, they were trying to beat the inflation level, when households were talking about wages with their own bosses, they were trying to beat the inflation level, and anytime a company was setting its pricing policies, it was doing that with this high inflation rate in mind, knowing that its input costs and its labor costs were likely to go up. We did get into that cycle I was talking about earlier where wages and prices fed on one another, and that inflationary psychology made it a lot harder to crush inflation out of the economy, which meant that it required a longer period of slow growth and really painful economic effect in order to wrestle inflation back under control.

I think the hopeful story you can tell about today is that has not been the case. People generally seem to understand why we've had this high inflation, which is these unlucky one-offs tied to the pandemic. You see some indications that consumer psychology around inflation is changing, but certainly, it doesn't seem likely that it's changed the way it did over the course of the entire 1970s this quickly. The hopeful story you can tell yourself is the Fed might be able to get us into the soft landing more easily than it was obviously incapable of doing that in the 1970s and

1980s.

Brian Lehrer: We have so many good callers. We'll try to get a couple more on here before we run out of time for this segment. Dawn in Long Island City has a horror story for us, I think, an inflation horror story. Right, Dawn?

Dawn: Yes, Brian, I do. First of all, I have been on the show before. I've been listening to you for a decade now and my whole family loves you. Anyway,-

Brian Lehrer: Thank you.

Dawn: -thank you so much for this segment. I think that we hit the trifecta of issues we're talking about. My partner and I are in our mid-30s. He's a maritime attorney in insurance, so he has a lot of information regarding the supply chain nightmare and he's been saying this was going to happen for a long time just because of what he was seeing within his company because he works in-house at a shipping insurance company. He hasn't gotten a raise in two years. I'm an entertainment worker. I was just in a show off Broadway that just couldn't get butts in the seats and so we closed. Our salaries aren't going up in entertainment because we're paradoxically so in need of folks there. Our work hinges on that.

There's no way we have any negotiating power within the union. We're competing against non-union shows, which obviously is like a race to the bottom. That all coincides with this year, they're trying to raise the gross rent. They're trying to raise it $1,100 if you factor in real numbers what we were paying this year with a small concession, they're trying to raise it upwards of $1,400 nearing $1,500. We've [crosstalk]--

Brian Lehrer: That's your rent for where you live?

Don: That's our rent increase for where we live. We live on the waterfront in Long Island City. We've been paying 44. They're trying to raise it to 57. The last thing I'll say is I literally just got off the phone with the HCR. For anyone that needs information, they're great. You can request your rental history, and knowing what it was in 2019, obviously, is a really helpful piece of information if you're trying to negotiate with your landlord. The HCR is the Homes and Community Renewal agency, and that's just at hcr.ny.gov. The trick with that though, is they only have that information for rent-stabilized apartments.

If you're in a market-rate apartment, unless you get lucky with StreetEasy, trying to find that rental history, which is also really hard because you can completely withdraw that listing, so that precludes you from finding that information out. You're screwed and so you don't know what to do. Anyway.

Brian Lehrer: Well, I know I don't have any advice for you. I don't know if Jeanna as a national economics reporter has any advice for you. I will mention just to piggyback on what you said about what you can look up. If you are renting something that's being offered as a market-rate apartment, you can at least use that site you were describing to find out if it's actually a rent-stabilized apartment and the landlord is trying to get over you in that way by hiding the fact that it's a rent-stabilized

apartment. You could at least find that, but Jeanna, you hear Dawn's rent horror story here. Anything she can do that occurs to you?

Jeanna Smialek: I don't have a lot of solutions, unfortunately. I think it is interesting. We are hearing a lot of these horror stories these days. A lot of people are seeing really rapid rent hikes. Some of that is payback from the pandemic. A lot of it is we saw rents increase very sharply. Asking rents increase very sharply over the back half of last year, so from June to December, and now rents are resetting. The plurality of rents are taken out early in the year, and so we're seeing landlords really make some pretty big rent hikes. We knew this was coming down the line, but it does not make it feel any better for the people who are experiencing it right now. It's pretty bad [inaudible 00:35:19] inflation.

Brian Lehrer: Let's talk about this in terms of equality, and Dawn, good luck out there. I wish I had more to offer you for your situation. I mentioned at the beginning that there's what, you'll tell me if you disagree, has been middle-class decline in this country for decades and concentration of income in the top 20% or so. It's not just the top 1% like people say, to some degree, it's crazy in the top 1/10th of 1% and 1% but I think it's also that the top 20% is running away with most of the wages and everybody's been falling behind.

In a Times article by your colleague, Lydia DePillis, who we mentioned before, one notable feature of the economic recovery since the pandemic that she pointed out has been the low unemployment rate among disadvantaged classes of workers as a good thing, she writes April for example, was the first time since 1972, here comes that decade again, that a higher share of Black people of all ages were working or looking for work than the average. Last month participation by Black people grew to 63%. With a 50-year frame, what are we looking at in terms of increasing inequality, decline of the middle class that we want to be rooting for the economy to correct?

Jeanna Smialek: Right. I think it's really important to talk about the two kinds of inequality here. There's income inequality, which is the amount you earn, and income inequality has gotten a lot worse over the last four or five decades. Then, there's wealth inequality, which is the amount of savings you have. It's things like stocks and housing wealth, and that has just exploded over the last 40 to 50 years. There are two distinct kinds of inequality.

They obviously relate to one another, but I think it's important to lay out the difference right at the top. What we're seeing right now is a situation where income inequality, that earnings inequality, has actually narrowed a bit in the last couple of years, which is a real change in trend because of this very strong labor market, because we are seeing workers regain some amount of bargaining power. I think the are real questions about whether that can last, and it also matters whether you're thinking about it as a nominal, so pre-inflation adjusted or after inflation-adjusted basis, those things all come into play.

I think what we can say unequivocally is that if you are a disadvantaged worker in this labor market, you probably have opportunities that you haven't had in decades

because employers are just so desperate to hire and because employers are really reassessing the way that they treat marginalized workers in this environment. At a moment when there are 1.9 job openings for every unemployed and active job seeker, employers are starting to have to think do I really need that college degree in order to hire this person? Do I really care if this person has maybe a minor criminal infraction on their background?

You're seeing a moment where I think a bunch of people might get sucked into the labor market, be given opportunities, and have that last in a positive way, that economists call this positive hysteresis where a period of very strong labor markets can actually leave people with a lasting positive legacy. That could be very good news from an inflation standpoint. At the same time, [chuckles] until recently, we had seen a big run-up in stocks during the pandemic, and that's bad for the other side of the equation, which is wealth inequality.

The reason that's so bad is because stocks make up a big share of the wealth of the richer classes, but very, very few people in the bottom half of the income and wealth distribution hold any stocks at all. When they do hold stocks, they don't hold a lot. Anytime you see the stock market really rallying, you see a big divide in wealth inequality. In as much as stocks are falling now, that's probably actually good for wealth inequality in the sense that it will make it smaller. Anyway, those are two different dynamics that we've seen playing out in this post-pandemic era.

Brian Lehrer: All right. Thanks for that clear description. One of the primary questions of our times, how to keep wages continuing to catch up with history without inflation continuing to run out of control Conundrum upon conundrum for policymakers right now, and obviously an issue for a platform for competing ideas in the midterm election season that is just beginning. My guest has been Jeanna Smialek, a reporter covering the Federal Reserve and the economy for the New York Times. Jeanna, thank you so much.

Jeanna Smialek: Thanks for having me.

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