Macro outlook: jobs, housing, inflation + Dutch farmers protests & EU climate missteps

The episode opens with banter from two hosts in Italy who say they bought matching outfits, with jokes about a tailor and a clothing brand. Another host joins from an undisclosed conference and says he is off the record this week. The talk is light and sets up the news run.

A host reads from the June Fed minutes, which flag a significant risk that elevated inflation could become entrenched if the public doubts the Fed's resolve. He notes the language has moved from transient to entrenched.

He then cites job openings: a March peak of 11,900,000 and 11.3 million in May, which he calls extraordinary, with two openings for every person who needs a job. These figures are his reading of the data and are not checked here. Another speaker adds that white-collar hiring is dropping, and a third argues that so many unfilled openings point to a structural problem, with pay too low to draw people off the sidelines.

One speaker says the openings may mean the opposite of what the Fed implies. He suggests two labor markets: white-collar workers, where tech firms have slammed on the brakes and unemployment should rise, and blue-collar work, where record-low participation keeps inflation up because jobs go unfilled amid warped incentives. Another puts participation about 10% off its peak and says more workers would raise output, ease inflation and lift monetary velocity.

A different speaker argues the Fed assumes higher rates will cut demand, which is partly true, but that this inflation is not purely excess demand. In his view there is also a supply problem, with commodity input prices inflated well before the Ukraine war and made worse by it for energy and food. A host jokes about how soon Ukraine would come up, and the speaker says he only calls it an exacerbator.

A host says quits remain at a record high, with over 4 million people leaving jobs each month versus under 3 million before the pandemic. He reads this as people believing they can find another job, or having savings. He gives these numbers as his own and they are not verified here.

Another speaker argues the pandemic and stimulus caused a sharp shift in how people earn money. Many moved to work from home or to gig and on-demand work, and fewer want restaurant or fast-food jobs, so old-economy employers are stuck at half staffing. He expects part of this change to be near permanent, so fast food may not return to being as cheap, while other areas such as services and Etsy sales work for people.

A host adds that white-collar jobs fell by 325,000 and manufacturing by 208,000, while hospitality and retail gained most. He takes that as people feeling they have more options.

One host asks whether remote work and the new options have made the economy more productive. A speaker answers that, before the lockdowns, the economy was growing about 2% a year, and that enforcing them began what he calls a supply-side recession.

He gives an example of a factory making wheels that is ordered shut for 12 to 18 months while its workers receive about $2.5 trillion in their accounts. When it reopens, rubber, steel and workers are scarce and buyers will pay more, so prices rise. He says the Fed minutes confirm this view, and asks a colleague to read the quote.

A speaker argues the economy was in a supply-side recession and that very high rate hikes, whose end point is still unclear, may now destroy demand and add a demand-side one. He says it is unusual to have both at once, and that consumer confidence is starting to turn, which should become clearer over the next 6 to 9 months. In his view supply chains are not fixed and the situation is complicated.

A host turns to second-order effects: with people not going to the office, downtowns suffer, including offices, restaurants and commuting. He mocks the San Francisco mayor's call to revitalize Soma as something that will never happen, comparing it to a tweet promising lower gas prices, and another speaker teases that politics is coming.

A speaker cites a broker statistic that San Francisco could have 30,000,000 square feet of office vacancy by year end because of subleases and expiring leases. He looked up total office space as about 75,000,000 square feet and concludes this is roughly 40% vacancy, which he says he has never heard of. Another speaker says San Francisco is an outlier because it was tech-heavy and went remote, and that New York is apparently still fairly stable. These numbers are their own and not verified.

A speaker says office markets look stable only because tenants signed long leases, usually 7 or 10 years with credit-worthy tenants, and that is why shared-office models with month-to-month leases are fragile in a recession. As these leases roll over, tenants that have gone remote or hybrid treat the office more like a co-working space and shrink their footprint. In his view that explains why San Francisco vacancy keeps rising.