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White House economist on the latest jobs report and where we stand with inflation


The number of jobs in the country rose again in March, and not just by a little bit - by more than 300,000, which was more job growth than we've seen in any single month since last May. So where are these jobs coming from, where are we headed, and what does this mean for inflation and interest rates? Let's hear from Ernie Tedeschi, chief economist for the White House Council of Economic Advisers until a month ago. Welcome to the program.

ERNIE TEDESCHI: Thanks for having me on.

RASCOE: So Ernie, most of the jobs came from health care and government, followed by hospitality and construction. What does that tell you about the economic recovery since the pandemic?

TEDESCHI: So it tells me two things. One, the pandemic primarily hit things like leisure and hospitality. You know, think to your lockdowns where restaurants were closed, that sort of thing, so that's where a lot of the recovery is still happening. The second thing it tells me is that with the aging population and health care is going to be a growth industry in America for years to come.

RASCOE: I don't want to offend you, but economists do seem like a cynical bunch. Y'all are never very happy.

TEDESCHI: (Laughter).

RASCOE: You know, you're always worried. Even when we get the good numbers, you're worrying about inflation. People with more money - it means more spending, higher demand, higher prices. So how much of a threat is there that inflation will rise now?

TEDESCHI: Yeah. If jobs growth is hot, if jobs growth is stronger than we think is sustainable, then there is an inflationary risk there. Now, on the other hand, if that 300,000 jobs number is being driven not because demand is too hot but because we're getting more labor supply and we have a greater capacity in our country for more employment, that's much less worrying. In fact, that's a good thing because that suggests that we can sustain an expansion in our output, sustain an expansion in our employment without price pressures.

RASCOE: About inflation, I know the Federal Reserve likes to look at the personal consumption expenditures index. It takes longer to calculate than the CPI, so February's number just came out. It was up 2.5% compared to last year. That's much better than two years ago, but it's having a hard time going down even more. So what is going on there?

TEDESCHI: Right. So one thing to keep in mind is, as we used to say at the White House, never focus on just one month of data. And you know, when you look at, say, over the last 12 months, PCE inflation has been cooling. So that's one thing. The second thing is that a lot - most of the reason why PCE inflation is still above target has to do with housing.

The good news is that it takes a while for changes in rents that you see on the ground in real life to make their way into the surveys that make up the inflation report. So we know from firms like Zillow that rental growth has cooled, but that cooling of rental data hasn't fully made its way into the official inflation data yet. And that's most of where the miss is against the Fed's 2% target.

RASCOE: Now, Fed Chairman Jerome Powell has said that the fed will probably cut interest rates later this year. What's your prediction now, given the jobs report?

TEDESCHI: I think that the Fed, you know, is very interested in the jobs report. There's very little that's directly relevant to inflation in the jobs report. The Fed has signaled that it is cutting rates three times this year. I suspect that they'll stick to that unless the actual inflation data that we'll get later this month, you know, unless that disappoints and comes in hotter than expected.

RASCOE: Kind of putting you on the spot here, but do you think the White House could have done better than it did over the past three years in terms of managing the economy?

TEDESCHI: I think that a lot of what the White House did worked better than we expected. If I had to go back personally and think about what I could have thought about differently while I was in the White House, I wish that I had appreciated the power of the supply side better way back in 2021. If I had appreciated that snarled-up supply chains in things like cars and global trade and warehousing would have been as powerful a factor as it ended up being, I would have anticipated inflation better than I did.

RASCOE: That's Ernie Tedeschi, former chief economist of the White House Council of Economic Advisers. Thank you so much for joining us.

TEDESCHI: Thanks for having me. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Ayesha Rascoe is a White House correspondent for NPR. She is currently covering her third presidential administration. Rascoe's White House coverage has included a number of high profile foreign trips, including President Trump's 2019 summit with North Korean leader Kim Jong Un in Hanoi, Vietnam, and President Obama's final NATO summit in Warsaw, Poland in 2016. As a part of the White House team, she's also a regular on the NPR Politics Podcast.
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