AYESHA RASCOE, HOST:
As we say, we expect President Biden to really talk up the economy Tuesday, but as we've all heard over and over again, the economy has been in unprecedented territory. So are things really looking up? Betsey Stevenson teaches public policy and economics at the University of Michigan. She served on the Council of Economic Advisers from 2013 to 2015. And she joins us now. Welcome to the program.
BETSEY STEVENSON: It's great to talk with you.
RASCOE: So let's start with Friday's surprisingly strong employment numbers.
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PRESIDENT JOE BIDEN: We learned this morning that the economy's created 517,000 jobs just last month.
RASCOE: Biden called it strikingly good news. Do you - and, more importantly, does the Federal Reserve - agree that these jobs numbers are good news?
STEVENSON: Well, I think the jobs are great news. Let me say it's a crazy large number. It might even end up being revised down. We get revisions to this data all the time. And that's actually where the real good news was in Friday's report - was that we saw upward revisions for November and December's jobs and actually upward revisions overall for 2022 and 2021. And all of that put together says that we were adding over 400,000 jobs a month in 2022. It's definitely something he's going to want to brag about in the State of the Union.
RASCOE: How is the Federal Reserve looking at this?
STEVENSON: The Fed loves people having jobs as much as anybody else, but what they have to worry about is that pressure in the labor market, a lot of employers wanting to hire and not being able to find enough workers will lead them to start raising wages a lot. And then when they're paying those higher prices for the people who are doing the jobs, they're going to have to turn around and raise prices for their customers, leading to what they call a wage-price spiral. So it's not the jobs that they're worried about. It's that relationship between the potential for higher wages to lead to higher inflation.
RASCOE: But is there - I mean, for the average person out there listening to this who's like, OK, well, the unemployment seems to be low, but I'm paying more at the grocery store, and, you know, it's going to cost me more to get a car or buy a house or whatever - like, does the average person feel like the economy is, you know, going, like, gangbusters or whatever?
STEVENSON: You know, I think you just really nailed what President Biden's problem is. The thing about inflation is it hurts us all a little 'cause it's terrible, right? You go to the store, and we're all talking about the price of eggs. We feel it. We feel rents going up and food prices going up, but, you know, what really stinks is when you're afraid you're going to lose your job, and you're not going to have any income coming in maybe for several months. And those are people who potentially lose their homes, can't feed their children, can't feed themselves - those are real devastating outcomes. So what Biden has to try to do is convince people - look. We're coming out of the worst pandemic, and we've managed to do it with just a few bumps in the road. And yes, those bumps in the road hurt us all a little bit, but we're going to get to a full and complete recovery with much less pain than we could have had.
RASCOE: I want to turn to the idea that the U.S. has reached a debt ceiling, which Congress sets. Republicans want spending cuts to approve raising the debt ceiling. Democrats are saying Republicans want to come for your Social Security, your Medicare, and that's a nonstarter. But my understanding is that you think there does need to be some type of compromise on cutting Social Security and Medicare or at least reforming those programs.
STEVENSON: I personally would like to see us raise a little bit more revenue so that we could solve this problem through bringing in more revenue, not just through cuts. But I do think, at some point, we are going to have to tackle our entitlement programs because we are not on track to be able to meet our obligations going forward. And it's a mistake for the government to wait to tackle Social Security reforms until we're in a crisis mode. People need to be able to plan. They need to be able to count on their Social Security. And so I think that we need real, earnest, bipartisan discussions about the potential areas for compromise to achieve that.
RASCOE: That's economist Betsey Stevenson, formerly of the Council of Economic Advisers and now with the University of Michigan. Thank you so much for joining us.
STEVENSON: It was nice talking with you. Transcript provided by NPR, Copyright NPR.
