Inflation—both overall and core—has been steadily normalizing from its elevated levels of the past two years. Notably, this has happened without any pronounced slowdown in economic growth or any rise in unemployment. In short, the much-discussed “soft landing” seems to be happening. Many have declared this a highly unexpected development that was unforeseen by any economists. This is obviously not true—there have been plenty of us making the case that inflation would indeed likely normalize even without a rise in unemployment.

That said, it has been a highly unusual few years and no economic analyst has called every zig and zag of the inflation debate exactly. Given that this unusual period seems to be ending, it’s a useful time for a retrospective look at predictions I made. This retrospective can be divided into four categories:

• Unambiguously wrong: I predicted a relatively short and narrow burst of inflation, with very little spillover into faster nominal wage growth. Much of this was wrong due to new shocks occurring after this initial prediction, but not all of it.
• Unambiguously right: Higher unemployment was not needed to pull down inflation or even the pace of nominal wage growth.
• Probably wrong: I thought interest rate increases as fast and high as what was done over the past year would have appreciably slowed the economy far more than they have so far.
• Probably right: The role of generic macroeconomic overheating in driving inflation has been far overemphasized. Instead, the evidence is more consistent with a story of extreme shocks causing unexpectedly large ripple effects in the wider economy.
• Totally mixed: What role, if any, did higher interest rates contribute to normalizing inflation?

Below, I’ll say a bit more about each of these.

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The Inflation Reduction Act (IRA) was signed into law a year ago this week. It is widely seen as the crown jewel of the “industrial policy” agenda of the Biden administration. While no piece of legislation is perfect, the full potential of the IRA to deliver a radically better future is often underrated. In this post, we highlight many of the IRA’s huge steps forward and also talk about the unfinished agenda for securing faster, fairer, and greener growth in the U.S. economy.

Put simply, the IRA puts the U.S. on a path where meeting its global climate change commitments is within reach—commitments which would provide a genuine chance at securing a livable planet for future generations if they are kept. At the beginning of August 2022, there was no such path to secure this livable future, but there is now—and that is a mammoth victory.

The IRA was essentially a climate change bill that included extraordinarily important health and tax changes as ride-alongs. If the bill had only included these health and tax policy changes, it would have been eminently worthy of applause. The fact that these changes were essentially side-shows to the IRA’s climate impacts is one clue about how transformative it might turn out to be.

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Economist Larry Summers made waves with highly critical remarks about the Biden administration’s economic policies while attending a Peterson Institute for International Economics event on industrial policy and U.S. foreign policy last month. Although Summers expressed support for the trio of industrial policy bills that the Biden administration has passed—the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA)—he strongly criticized the “doctrines” (his word) of the Biden administration.

For now, we’ll set aside the question of whether supporting the administration’s concrete actions but disliking their rhetoric merits this level of blistering criticism. Instead, we’ll point out two things. First, Summers’s description of the aims of these industrial policy bills (and hence the “doctrine” of Bidenomics) is obviously inaccurate. Second, to the degree that the administration really has made an intellectual break with the past (including past Democratic administrations), it’s a welcome and necessary break. This is especially true regarding Summers’s claim that the pre-Trump approach to trade policy is a model that should be restored.

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Below, EPI president Heidi Shierholz shares her insights on the jobs report released this morning, which showed 187,000 jobs added in July. Read the full Twitter thread here. 

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The U.S. Department of the Treasury has released new data on how state and local governments are spending the $350 billion of State and Local Fiscal Recovery Funds (SLFRF) allocated by the American Rescue Plan Act (ARPA), covering expenditures through March 31, 2023. Less than half of the money has been spent: States have spent 45% of the $195 billion they were allocated and local governments have spent 38%, both slight increases from the previous quarter. However, these data do not include most spending decisions made during spring state legislative sessions, which may change the situation somewhat.

Fiscal recovery funds can be used for myriad purposes related to the COVID-19 pandemic and its economic impacts. While the official pandemic state of emergency has come to a close, the economy and public services are still dealing with the negative economic impacts, including a loss of public-sector jobs. We find that the 10 states that have spent the least amount of their fiscal recovery funds have state job vacancies twice as high as the 10 states that have spent the most.

Governments should prioritize rebuilding public services and filling state and local government job vacancies with their remaining funds. Fiscal recovery funds must be obligated (designated for specific uses) by December 31, 2024, and must be spent by December 31, 2026.

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In states across the country, lawmakers are engaged in a coordinated, corporate-backed campaign to weaken child labor protections. One type of protection—minimum ages to serve alcohol in bars and restaurants—has been eroded in seven states since 2021. While lowering the age to serve alcohol may sound benign, it is not. It puts young people at risk of sexual harassment, underage drinking, and other harms.

The restaurant industry is already plagued by labor violations. In fact, it is the industry with the highest incidence of child labor law violations. Laws that lower the alcohol service age will subject more young people, at younger ages, to potentially dangerous working conditions at low wages—all in service of employers’ pursuit of cheap labor.

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One of the U.S. Supreme Court’s final decisions this term was in U.S. v. Texas, a dispute between the executive branch and two U.S. states—Louisiana and Texas—regarding whether President Biden had the authority to set priorities for how his administration conducts immigration enforcement. In other words, the states challenged the extent of prosecutorial discretion that can be exercised by a U.S. president when enforcing immigration statutes. The Supreme Court ruled by an 8–1 vote that U.S. states do not have the necessary standing to challenge the federal government’s immigration enforcement priorities—thereby affirming the president’s ability to exercise prosecutorial discretion.

Most of the media coverage and analysis of the decision has glossed over one major impact the decision could have: it could help the Biden administration better protect labor standards for all workers, including migrant workers. While helping workers was not the rationale of the decision, it could be one of its lasting impacts.

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Celebrities like Fran Drescher got a lot of media attention last week when they went on strike. The 160,000+ members of the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) joined 11,000 already striking film and television writers in the first industrywide shutdown in 63 years.

But it is not just actors—workers across the economy are either walking a picket line or preparing for labor actions later this summer. This has led many to wonder: Why do so many workers feel their only option this summer is to strike?

To us, the real question is: Why didn’t we see more of these actions sooner? For decades, the U.S. economy has been churning out radically unequal incomes. Further, essentially all of this increased inequality has come from unbalanced bargaining power in the labor market. Profit margins have increased at the expense of typical workers’ wages, and only the pay of the most highly privileged workers—corporate managers and executives and a select slice of other highly credentialed professionals—has managed to grow as fast as overall economic growth. The overwhelming majority of U.S. workers have not seen their wages grow at pace with their employers’ profits or executive pay scales.Read more

Earlier this year, the share of the adult Black population with a job—or the Black employment-to-population ratio (EPOP)—surpassed the share of the adult white population with a job for the first time in modern history. While the Black EPOP has since declined somewhat, it’s worth examining the reasons behind the sharp increase in employment over the pandemic recovery and the narrowing of the gap between Black and white workers in 2023. In my analysis, I conclude the following:

• The Black EPOP appears close to the white EPOP in recent years in part because the Black population is significantly younger (i.e., more likely to work) than the white population. After accounting for their different age distributions, Black workers have significantly lower EPOPs than white workers.
• However, the tremendous bounceback in the labor market was a significant boon for Black workers. While Black workers suffered greater losses in the pandemic recession, the employment gap narrowed because Black workers experienced a stronger jobs recovery than white workers.

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