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>> mike konczal joint is, he is a director of macroeconomic analysis at the roosevelt institute with us this morning to talk about inflation, the biden administration and the u.s. economy. first of all tell us about the roosevelt institute and you work there, what is its mission and how is your group fund transferred we're a nonprofitit part of the franklin delano roosevelt did the library. we do many things including events at the library to we're also a think tank that is dedicated to carry on the legacy of franklin and eleanor roosevelt. refunded through a series of trust that were set up and agreeance towards various projects that we do. my project which ads lead is abt macroeconomic recovery look at inflation unemployment and have his recovery has been going since covid. we will begin with inflation. before you came on the program, the consumer price index was announced, a jump again in june and the new york times says inflation hit a four decade high

in june. prices climbing 9.1%. what's the reason for that? guest: there's a combination of factors. food and energy, there is not enough supply at the global level following the invasion of ukraine, so that has been inflating food and energy crises. goods are still high, given reopening of supply chains, things like semiconductors, the high-price of automobiles, goods are finally getting relative to where we want, and services are where we would expect. that's driven by housing, but it is also broader. inflation is higher than you would expect and it will require a response. host: what do you think the response will be on the federal reserve side? guest: they will probably do another 75 basis point hike next meeting.

the fact that it is higher and higher across the board, not driven by one quirky thing over the month, means they will probably continue to hike after a slightly more aggressive break. host: and growing at the fastest pace since 1981 -- does the -- does this mean the u.s. is in a recession? guest: we are not in a recession yet, but it is still very elevated. employment growth is very high, spending is high. those are the things that generate the business cycle and whether or not we are in a recession or not. we could see a recession, but that would probably be because of the federal reserve's hiking cycle and trying to cool demand. host: the jobs report was on friday. what did that show us? guest: higher than 80% of job numbers since 1980.

365,000, which is very high given how low unemployment is. that's the kind of low rate we have not seen in 50 or 60 years, where it was before the pandemic, a record low. that kind of job recovery is very strong. if it was still a recession, it would reverse very quickly. the employment to population ratio has plateaued a little bit, but that number is very noisy. both the country and the globe is recovering from the pandemic and reopening over the last year and a half, but high inflation, gdp numbers, high-growth spending in the numbers. host: what are the economic dangers year and the implications in the u.s. of the continued conflict in ukraine? guest: aside from humanitarian concerns, the inability to

address our energy supply here and in europe. it's a bigger issue in europe. the ability to have natural gas to keep energy resources at stable rates. host: what are the pushback from democrats on inflation over the last couple of months. yeah, it is bad here, but you should see what it is like in europe. 9%, 10%, or double digits. is that still lower than inflation they are seeing in europe? guest: the inflation in europe is largely driven by energy prices for the last several months. so be careful if you are doing an apples to apples comparison. it is higher here than in europe on an apples to apples comparison, but there is a trade-off there in thinking about the rate of the recovery.

energy prices are what hit people in their pocketbooks, energy and food prices are what they feel, so it has been very important, very important indicators that the federal reserve can feel. it requires a coordinated national and international policy response. host: mike konczal is our guest. we are talking about inflation and the potential for recession in the economy. we welcome your calls. for democrats, (202) 748-8000. for republicans, (202) 748-8001. for independents and others, (202) 748-8002. housing costs are said to keep inflation elevated this year, creating another challenge for the federal reserve, who want to

see signs price pressures are easing before slowing their interest rate increase. what's keeping those prices high as home mortgage rates climb as well? guest: the way they record housing has a bit of a delay to it. they need to figure out how much that is valued. so there is a bit of a lag. we know housing prices are coming down, where the federal l reserves rate hikes have the most impact. they have probably seen closing prices have gone down a bit in their neighborhood, so that market is definitely cooling. that's where we will see the federal reserve's actions most quickly. that disconnect will go up a little more, but those prices are starting to come down. think of that in context to the broader picture. it still higher than we want.

housing, we have already started to see an impact and see where some of the housing starts in new constructions, coming down in its own way, but the fed is taking strong action on it. host: what is the difference between housing costs and new construction, do you think? guest: lower demand. to the effect that the fed cools demand by raising interest rates, people will buy less housing. the prices will come down, but there is also less incentive to build more housing. do you think there is a residual effect, if you will, from the pandemic? guest: people built up a lot of savings and changed their consumption patterns, where people are buying more goods and less services. people are buying gym equipment, but fewer gym memberships.

that's a feature of the economy. spending is still strong but consumer sentiment is low, but people are spending money as things go pretty well. it will be interesting to see how that is resolved in the next six months, but it's real about the economy. people are buying things. this 9.1% increase does not mean we are in a recession. but it does not mean we are announcing to the public we are in a recession now. if that happens, what happens next? guest: they could do that with the lagging indicators. the economist that tend to do that officially declare that it will be after, and most people will have already known we are in a recession. we have had a period of low negative gdp growth because of weird calculations, so other

means of measuring gdp are very strong. host: you did a piece on firm level markups from corporate profits as well. these profits have been assigned as u.s. markets increase their profits at the fastest pace since 1955. let's use that term, firm level markups. what does that mean? guest: it's the amount firms can sell savings over the cost of goods sold in their line, combined with other things. it's basically a measure of profit. those are at record highs. we do that corporate -- we knew from aggregate statistics corporate profits were high last

year. was it supply, demand, concentration or something more nebulous? we were able to look at firm level data based on public record, and found a couple of interesting things. one, profits are up across the board, implying there has been a demand storage, because people are just buying a lot of stuff. certain industries saw huge increases in profits, whether it's shipping and so forth, industries particularly hit by the reopening. then we saw firms with higher profits after the pandemic had even higher profits than we would expect. there might be a market power story as well. it's a very 2021 story in 2022. inflation is broader, but those profits are real. if they can come down through competition, government action, or wages, that can be a good headline to help bring down

inflation without necessarily causing any other problems. host: the political term is price gouging. is there anyway as an economist to quantify price gouging? guest: it's hard to separate it from consumers spending more and supply chains being disrupted. we look at firms we thought had really high profits before the pandemic, abnormally high profits and even higher profits afterwards. there's a big question is the economic community about whether this is an evident thing, but there is something real here worth investigating. whether or not these profits come down through competition, increase supply, or government action, it can bring down inflation. host: what do you think would help bring down inflation? guest: they can lower

prescription drug price costs, put money in the pockets of the people. that would be really important. a reconciliation bill, senator manchin has been talking about $500 billion in savings and push some taxes on corporations -- that would be helpful to supplement the federal reserve's actions. you know, there is a bill, the compete acts, the house and the senate, they are trying to reconcile it, were going back would be very good. there is also the space infrastructure program, getting back to floyd would also be very helpful. we can push competition through a variety of mechanisms we already have in place. our evidence hits the broader picture and given how high inflation is, it requires a whole of government approach. host: let's go first to edward

and overcome the delaware, on the democrat line. you are on with mike konczal, go ahead. caller: if the gas is going down, wise inflation going up? guest: that's a good question. the price going down at the pump is not yet recorded, so it will be on a month's delay. it will be lower next month, and that's encouraging. moreover, getting the food and energy prices label, the more inflation will come down. the inflation is broader than that question of food and energy. for individuals, it will be a huge relief and whom to their pocketbooks. but this is a broader problem that requires a bigger government action as well. host: and it's broader than just the consumer price index, correct?

guest: the federal reserve looks at a slightly different review. they are starting to diverge a little bit, but no matter where you look, in laois and is higher. host: to york, maine, on the coast, we go to add on the independent line. >> hi, thank you for taking my call, and thank goodness for c-span. the problem i can't figure out is the connection between the -- and cpi. when i built my first house, i built it for $30,000. i had a mortgage that was 17%. the job i had was a government job, $10 an hour, i was a machinist. that paid $400 a month.

today, that same house is 100,000. but that same job is only $26 an hour. so how is it that the price of my home jumped 10 times but my wage only jumped 2.5 times? thank you very much for taking my question. host: ok. guest: absolutely. the price of housing is high. there is a housing shortage, particularly since the great recession. in subsequent wake, a lot of people build fewer housing. that left this huge gap in housing. 15 years later, we are paying the price for that. blue states and blue cities make it very hard to build new housing relative to the demand. also for many people, housing is

unaffordable, no matter what the level is. i hope some part of these programs can get through, not to deal with inflation in the next few months, but the next few years. housing prices is one of those things that generationally, for young people, is a major cost for some reviewable. -- some people. host: a question on twitter from bobby, describe the difference between inflation and recession. which is harder on the american? guest: essentially if the country goes wrong, there prices going down because people are buying fewer things. recessions put people out of the labor force, they tend,

unemployment tends to skyrocket under recession and people who still have their jobs are usually in weaker positions. it's hard to find new jobs, to move, to advance your skills. the costs are very real. even though inflation needs to come down, they need to take it seriously. host: so what brought the government out of it during the pandemic? guest: unemployment was 15%, but we spent a lot of money. the cares act helps support families, support communities by supplementing government programs. we spent more money in december and early 2021 to ensure families had the income to survive that period.

obviously, inflation is up everywhere in different degrees, so we know we can solve this problem. how can we get other recoveries you that extra last mile? host: let's hear from maria on the democrat line. caller: thank you for taking my call. can you hear me? host: yes. caller: good -- >> women healthcare advocates testified on the impact of overturning roe v. wade. go -- >> block the will of the