Two top Democratic economists offered dueling assessments on Wednesday of the implications of the biggest jump in consumer prices in more than a decade, showcasing an escalating debate on the risk of the economy overheating.
“When you take this plus the jobs report on Friday plus the totality of the data, I think we have a very different picture of the economy right now than a lot of people held a week ago,” Jason Furman, chairman of the Council of Economic Advisers under President Barack Obama, said after the April consumer-price report was released.
Jared Bernstein, a member of President Joe Biden’s CEA, by contrast said the report was “in keeping with the kinds of transitory pressures we’ve been talking about.”
The report showed consumer prices surged 0.9% in April from a month before, and 4.2% from April 2020; both readings were the highest in more than a decade. It came four days after the April monthly employment report showed a surprise slowdown in hiring, fueling criticism that jobless-benefit bonus payments are restraining some Americans from taking up job openings.
“I’d love to see them tilt a notch towards concern about inflation, but I think they’ll mostly be doing more to explain this away,” Furman said in a Bloomberg TV interview of the Biden administration.
Bernstein, also speaking on Bloomberg TV, said the climb in prices reflected the re-awakening of the economy after months of pandemic-caused lockdowns. The underlying pace of inflation is 2.2%, he said, near the Federal Reserve’s target. He said the supply-demand misalignment causing a spike in certain prices will work itself out in time.
Furman said while some of the price increases are indeed transitory, that’s not the full picture. Surging prices could alter inflation expectations, he said. “I think this bears some caution and should change the way people are thinking about the economy,” Furman said.
Bernstein meantime touted Biden’s $1.9 trillion rescue package that was enacted in March, saying it will help people return to work, in part through its funding for greater access to childcare.
Furman argued that the $300 a week in extra jobless benefits that was also provided by the plan was holding back a jobs recovery in some places. Furman said of the overall package, “It’s definitely too big for the moment. I don’t know any economist that was recommending something the size of what was done.”
Furman aligned with some Republican-run states, including Montana and North Dakota, that have suspended the $300 a week supplemental unemployment insurance, or UI, payments in the aim of spurring hiring.
“If I were in a state with a 3.5% unemployment rate, I’d be thinking seriously about whether paying people more to not work than to work was a good thing to continue doing,” Furman said. While it depends on the location, state of the pandemic, and economic condition, “certainly by June, July, August of this year I don’t think we need the same UI system that we had in January.”
The extra benefits currently last until early September.
—With assistance from Jonathan Ferro and David Westin.
This article was provided by Bloomberg News.