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WH economic advisor amid high inflation data: 'We're encouraged by some of the trends'

Michael Pyle, Chief Economic Adviser to Vice President Kamala Harris, joins Yahoo Finance Live to discuss inflation data and the administration's outlook on the U.S. economy.

Video Transcript

- Now all the questions turn to when some of these inflationary pressures might start to abate. Importantly, as Emily highlighted yesterday, we did hear from Fed Chair Jerome Powell talking about using everything in the toolkit to get there. But estimates vary widely. And for more on what we should expect, very happy to welcome in here Michael Pyle, chief economic advisor to Vice President Kamala Harris, who joins us from the White House North lawn.

And Michael, appreciate you taking the time. I mean, when we're looking at all this, obviously it's all constantly coming in. Economists look at the numbers. And we try and figure out where this goes. But right now it does seem like the Biden administration is breaking a bit from some of those Fed projections for when it could kind of start to get better. What are you seeing? And how do you kind of project when some of these things might start to improve?

MICHAEL PYLE: So thank you for having me. I'd say first, when we look beneath the hood of this month's print, as Emily was describing just a moment ago, we see some encouraging trends. Month over month, we saw deceleration in the headline rate of inflation. That deceleration was led by a deceleration in energy prices. Prices at the pump. Obviously, it's the heating season. As you said, heating, oil, natural gas decelerating. So we're encouraged by some of those trends.

At the same time, we of course recognize there's a long way to go in terms of combating the price pressures that American families are feeling. The one additional point that I want to be sure to contextualize here is the trends that we're seeing on inflation are a global phenomenon, are reflective of the fact that the shock to the economy from the pandemic is a global shock. So over the last six months, Europe and the US have really been neck and neck in terms of the inflation that they've seen month over month.

And at the same time, the recovery that we've had here in the United States by virtue of the Rescue Plan and the steps that President Biden and Vice President Harris have taken is historic in nature. 6 million jobs added. The unemployment rate down to 3.9%. That's four years faster than the CBO thought would be possible. So inflation, encouraging trends, a global phenomenon related to the pandemic, and we're encouraged by the ongoing and historic recovery we're seeing in the labor market here in the United States.

- Yeah. Michael, let's talk about the labor market and break down a bit what's adding to some of those price pressures. Clearly, wage inflation a big issue for a lot of businesses. The latest jobs report we got out pointing to unemployment ticking lower. We're at near full employment, except we keep hearing from companies who are saying we still can't fill those jobs that we have open. Why do you think it's been so hard to lure so many of these workers back?

MICHAEL PYLE: Well, I would say again here too we're encouraged by some of the trends that we're seeing. Again, the unemployment rate moving downward in last week's print, moving down because jobs are being added. When you look at broader metrics around the labor force, things like the employment to population ratio for prime age workers, we've seen very significant strides forward over each of the last couple of months. I think the evidence is starting to point to a positive story around workers coming in off the sidelines, Americans getting back to work, the labor force expanding. And I think that's encouraging as we look ahead.

- Yeah. We also heard from Jay Powell talking about some of this isn't just all demand and that some of the tools that he could use aren't necessarily going to help on the supply side. And we talk about maybe some of that differing from what we heard from the Biden administration, particularly President Biden coming out and talking about corporations trying to squeeze more out of the products they're selling and including-- I mean, you can look at the beef industry maybe as a good example as we see prices moving higher again I think probably tied back to some of the omicron cases and, really, issues around labor there. I mean, how do you kind of alleviate some of that beyond what we're able to do, given the fact that we are still kind of experiencing these pandemic shock effects?

MICHAEL PYLE: So a few points. First, I think it's important to recognize that the Fed, through their dual mandate, has principal responsibility for achieving price stability. And President Biden, in terms of nominating Chair Powell, nominating Vice Chair Designate Brainard to lead that institution, that is the first, most important thing that the President's doing to take action against inflation.

But for our part, to the tee up of your question, the administration, the executive branch can really focus in on the supply side of the economy. And we've been taking aggressive action for many months now there. I'd highlight work at ports and across our supply chains. This has been a key priority area for the administration for many months now. And we see dwell times at ports, the amount of time that containers sit there at port down by 40%. We see shipping costs down by 25% from a few months ago. Those are encouraging signs in terms of the velocity and fluidity of our supply chains.

Around meat and competition, yes, that's also a focus. We recognize that in spaces like meatpacking, we've seen a concentrated industry for a number of years now. And the shock of the pandemic allowed that market power in part to be expressed through stronger prices in the here and now. That's why the President's very focused, the Vice President's very focused on increasing competition across the economy, including in spaces like meatpacking.

Lastly, the Build Back Better agenda still continues to be an important focus area for the administration. We want to meet middle class families where they are in terms of the big prices that they face. Health care, prescription drugs, child care and the like. And we think that's an important thing to be doing in terms of meeting those families where they are and the pinches that they face.

- Michael, on the issue of progress at the ports, I want to play for you what we heard from the Fed Chair yesterday in that confirmation hearing and get your thoughts on the other side.

JEROME POWELL: The supply side constraints have been very persistent and very durable. We're not seeing, really, a lot of progress. If you look across the global supply chains and what's happening domestically, look at our ports, look at Long Beach and LA, the two big ports on the West Coast for Asia, the number of ships at anchor is still at a record level. So we're not really seeing yet the kind of progress we, essentially, all forecasters really thought we'd be seeing by now. And that's really what's driving it.

- Jerome Powell there saying we're not seeing a whole lot of progress. Michael, you've pointed to some progress that the White House is seeing. We've heard the President highlight. Secretary Buttigieg was just out at the ports talking about that. What is the Fed missing that the White House is seeing?

MICHAEL PYLE: So we, again, continue to see progress in the metrics that we're tracking month over month. If you look at the volume of overall goods going through those ports, those are up nearly 15% versus the prior record year. This has been a record year for throughput at those West Coast ports. And that's reflected in the fact that this holiday season there were a lot of forecasts of empty shelves, challenges at the holiday time. Well, that just didn't happen. That was the dog that didn't bark.

And when you look under the hood, some of the metrics I talked about-- shipping costs down by 25%. The dwell time of containers taken off the ship, put on the port, then put back onto a truck to move on to end destinations, that dwell time, that amount on the port has declined by over 40%. So we're seeing progress across the metrics that we're tracking day by day, that our ports envoy John Porcari is tracking day by day. And we're encouraged both by the throughput that we're seeing, but also, again, very visible things like the holiday season and the fact that the presents were there under the tree for American families.

- Yeah. And Michael, just lastly, obviously this has all been incredibly difficult to forecast. And I think we heard a little bit of that from Jay Powell. And when you look at the numbers, obviously pretty off in terms of what Treasury Secretary Janet Yellen had predicted back in the summer last year. 3% inflation for 2021. Now at 7% as we wrap up the year. I mean, when you look out at it, I think important to highlight that we didn't necessarily hear and aren't hearing from you that this is going to be the peak number. So I mean, when you kind of move through your forecast for this year, what are you expecting to see? Is it going to be averaging around seven? How do you see this coming down as we progress through the year?

MICHAEL PYLE: So I would be cautious in terms of identifying a specific month as a peak. But as the President said, we do expect in the period of time ahead for inflation to top out. And as we go across the course of 2022, consistent with the top outside forecasters, including the Fed, we expect a continual deceleration of inflation across the course of 2022. And so we think that we've got some encouraging trends to come. And that's what we'll be keeping an eye out for in the months ahead.

- All right. Michael Pyle joining us there from the White House lawn. Appreciate that. Chief economic advisor to Vice President Kamala Harris. Thanks again for the time, sir. Be well.