On Thursday, President Joe Biden traveled to Ohio to make the case that the economy is headed in the right direction. “We’ve turned the tide,” he told the crowd in Cleveland.
Shortly afterward, during an appearance on Yahoo Finance Live, one of his top economic advisers acknowledged that in areas like inflation and in the labor market, “there's going to be some bumps in the road” as the economy continues to right itself following the pandemic.
However, National Economic Council Deputy Director Bharat Ramamurti also told Yahoo Finance that the recent inflation jump is actually a positive sign. “The faster than expected increase in some of those prices is actually a good sign in the sense that it's a sign that the economy is recovering faster than a lot of people expected,” he said.
‘Back to the levels we were at before’
In April, the Consumer Price Index (CPI) jumped at an annualized rate of 4.2%, the biggest leap in more than 12 years, the Bureau of Labor Statistics recently reported. The three categories that saw the biggest spikes in prices included used cars and trucks; airline fees; and car rentals and lodging away from home. On Friday, the Commerce Department reported that another measure of inflation, the Personal Consumption Expenditures (PCE) price index, also surged in April well beyond the Federal Reserve's 2% target rate for inflation.
Speaking to Yahoo Finance, Ramamurti noted that some of the inflation simply reflects the economy's return to normal after the pandemic. “In some cases, those price increases are just bringing us back to the levels we were at before,” he says, highlighting airline tickets as one example.
The BLS data does show that airline ticket prices — which fell in 2020 during the height of the pandemic — are now rising but still below 2019 levels. Still, the prices of used cars and trucks have reached all time highs after a 10% jump last month.
While Ramamurti said the Biden administration will continue watching inflation numbers closely, he emphasized that the inflation numbers need to be analyzed in context.
"It's also important not to overreact to some of these short-term one-month spikes when we know there's going to be some volatility in the data," he said.
‘There's going to be some bumps and some ups and downs’
When the subject turned to another area of concern for Wall Street — the labor market — Ramamurti echoed that restarting the economy presented some challenges, including vaccinating the workforce and ensuring working parents have childcare.
“There's going to be some bumps and some ups and downs,” he said.
One bump came in the form of April's jobs report, which one analyst said "might be the most disappointing jobs report of all time” after 266,000 new jobs were reported versus expectations of 1 million. Like Ramamurti, U.S. Labor Secretary Marty Walsh noted that the numbers should be evaluated in context.
"266,000 jobs under normal circumstances — and we're certainly not living in normal circumstances — would be a good month," Walsh said earlier this month when the numbers came out.
Overall Ramamurti, as Biden during his speech Thursday, often turned back to the ongoing infrastructure negotiations that have dragged between Republicans and Democrats as both sides search for bipartisan compromise. Democrats say time is limited before they lose patience and try to just go it alone using the Senate process known as reconciliation.
“The next step is making long-term investments to increase the productivity of our economy, to increase economic growth, and to position the United States to lead the global economy and to take on competitors like China,” Ramamurti said. "There's still quite a ways to go.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.