Last week, the Bureau of Economic Analysis released data on corporate profits in the second quarter of 2024. Perhaps surprisingly, profit margins still have not started moving meaningfully closer to pre-pandemic norms. Given ongoing debates about the relationship between recent years’ price inflation and corporate profits, this blog post reiterates a few points while incorporating new data.

• A spike in profit margins contributed significantly to inflation in the early part of the pandemic recovery, and likely contributed to even more persistent inflationary pressure by helping spur a countervailing rise in nominal wage growth. For example, rising profits explained well over 40% of the rise in the price level between the end of 2019 and mid-2022, compared with profits normally accounting for about 11-12% of prices.
• The profit spike was overwhelmingly due to pandemic distortions (shifting demand rapidly across sectors) and supply chain snarls (exacerbated by the Russian invasion of Ukraine) that granted many producers temporary monopoly power in key sectors.
  • Contrary to many influential economic writers and commentators, it is simply wrong to label the correlation between high profit margins and high inflation as simple evidence of an overheated economy. The overwhelming post-World War II evidence is that profit shares fall, not rise, as economies heat up.
• Corporate power absolutely conditioned how the post-pandemic inflation happened.
  • Corporate concentration likely did not increase during the post-pandemic recovery, and concentration over the previous decade was unlikely to by itself explain much of the post-pandemic inflation.
  • But the economic and policy context of the post-pandemic recovery saw corporate power dramatically change how it was deployed to maintain and expand profits—instead of suppressing wages, they raised prices. If this episode increases public support for measures that constrain excess corporate power, that would be good even if it has little relevance for inflation in the future.

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There is a well-documented shortage of qualified candidates willing to teach in public schools at current compensation levels. But there is also a relative shortage of Black, Hispanic, and Asian-American Pacific Islander (AAPI) teachers. In this post, we measure this relative shortage of teachers by race and ethnicity by comparing the current teacher labor force to the current enrollment of school-aged children. We document a significant demographic mismatch between public school teachers and students, and we describe a substantial body of research indicating that narrowing this demographic mismatch could have educational benefits for Black, Hispanic, and AAPI students. 

In 2023, almost half of U.S. K–12 students were Black, Hispanic, or AAPI, while only a quarter of teachers identified in the same way (Figure A). This large disparity has major implications for education policy. 

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Below, EPI economists offers their insights on the jobs report released this morning, which showed 114,000 jobs added in July. Read the full thread here. 

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In the midst of record-breaking heat waves this summer, workers are facing the risk of heat-related injury, illness, and even death. In fact, heat has become the most prevalent lethal factor among all weather-related fatalities, according to the National Weather Service. To address the threat to worker safety and lives posed by rising global climate trends, the Biden-Harris administration recently announced a proposed rule to substantially reduce heat injuries, illnesses, and deaths in the workplace. The proposed rule would be “the first-ever federal regulation on heat stress in the workplace.”

The proposed rule would require employers to conduct heat hazardous identification and assessment, develop a heat injury and illness prevention plan, provide indoor work area control, and allocate time and area for rest breaks. The rule also would require employers to provide training and education in their workplace.

The new standard has two heat index triggers that apply nationwide. When temperatures reach 80 degrees Fahrenheit, the proposal would require employers to provide workers with drinking water, as well as a place and time to take breaks and help employees acclimatize to working in extreme heat. When temperatures reach 90 degrees Fahrenheit, employers would be required to provide employees with 15-minute rest breaks every two hours and monitor for symptoms of heat-related illnesses.

By establishing a federal standard, the proposed rule would benefit a vast number of U.S. workers and enhance equity. According to the Bureau of Labor Statistics, 33% of workers in 2023 were exposed to the outdoors as a regular part of their job. Furthermore, Black, African American, Hispanic, or Latino workers—who make up roughly 32% of the U.S. population—comprise 45% of all workers in outdoor conditions.

2024 could be the hottest year on record. Worsening climatic conditions mean that workers who work outdoors and indoors in high temperatures are more at risk. The proposed rule is therefore a necessary policy effort to protect workers amid the ongoing global climate crisis.

With the latest indicators showing consumer price inflation continues moderating from its June 2022 peak, prices for some goods have actually fallen over the past few years, according to underlying commodity data from the Bureau of Labor Statistics.

Consumers are seeing the biggest improvements in energy prices, as shown in Figure A below. Families filling up their oil tank for the winter ahead will be paying 36% less for heating fuel compared with prices in mid-2022. Gasoline is down 29% and heating and cooking gas is down 15%.

Families shopping for a new washer and dryer will see prices 10% lower than two years ago. At the market, they’ll be paying 8% less for apples, 3% less for milk and bacon, and 1% less for tomatoes. Prices for boys’ and girls’ shoes are 2% lower than two years ago.

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The nation’s third-largest public school system—Chicago Public Schools (CPS)—has begun developing its budget for the next fiscal year. Like the rest of the country’s schools, this budget marks the end of the district’s financial support from the Elementary and Secondary Schools Emergency Relief III Funds (ESSER III) provided during the COVID crisis. CPS invested its ESSER dollars in school staff, and it was the right choice: Chicago students had exceptional academic outcomes compared with similar districts during the pandemic recovery.

Public schools, especially schools that serve students of color, are facing severe staffing shortages that threaten students’ ability to learn. Even with the staffing improvements made possible by COVID-related fiscal relief, CPS per-pupil spending levels are not sufficient to meet recognized educational adequacy benchmarks. CPS’s 2025 budget should target maintaining recent spending levels to support the recruitment and retention of qualified staff, particularly in low-income neighborhoods and schools that serve students of color.

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Below, EPI senior economist Elise Gould offers her insights on the jobs report released this morning, which showed 206,000 jobs added in June. Read the full thread here. 

Payroll employment increased by 206,000 in June, with notable downward revisions in the prior two months. Employment growth is expected to slow as the labor market approaches full employment. The Federal Reserve should get a clear message that we are not in a hot labor market. pic.twitter.com/aQwRkGrh3A

— Elise Gould (@eliselgould) July 5, 2024

June’s gain of 206,000 jobs is on par with the average gain over the prior 12 months. There were notable increases in health care and social assistance as well as in public sector employment, primarily at the state and local level. pic.twitter.com/Reed6bxxfK

— Elise Gould (@eliselgould) July 5, 2024

While there’s more volatility in monthly and quarterly changes in wages, the deceleration in nominal wage growth is clear across all measures. There is no evidence of inflationary pressures coming from the labor market. pic.twitter.com/i7nKjjVY5I

— Elise Gould (@eliselgould) July 5, 2024

Much of the employment gains appear to be driven by men as their prime-age employment-to-population ratio rose, getting closer to their pre-pandemic levels. Prime-age women experienced some declines in June, but remain above their pre-pandemic high. pic.twitter.com/7l5ZrgGNSh

— Elise Gould (@eliselgould) July 5, 2024

Over the last few months, some have expressed concern over mild softening in certain labor market measures. For instance, after hitting a low of 3.4% in 2023, the unemployment rate slowly crept back up to 4.0% in May 2024. Ideally, unemployment would remain as low as possible, but unemployment has now been at or below 4.0% for 30 months running—the longest such stretch since the late 1960s. To put some of this in perspective, I’ve made a few comparisons with pre-pandemic unemployment and employment rates to show just how well today’s labor market stacks up. Spoiler: Even while some measures have softened a bit from peaks in 2022 and 2023, the overall picture remains stronger than what we saw in 2019. 

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