Why Robert Reich Is So Worried About Stagflation

Let's bring in Robert Reich. He's former US secretary of labor and emeritus professor of public policy at UC Berkeley. And, secretary, I do just have to ask you about this balance right now around an economy that, at least on the surface, is growing, consumer spending holding up, wage growth is there, job growth is there, though modest. However, we're in a hyperinflationary environment, and I will use the word hyper, meaning meaning that it's been persistent. And I do wonder when, if at all, we get to an equilibrium in that. I don't think there's an easy equilibrium in our future. I I really worry much more than your previous guest about stagflation, that terrible word, because stagflation means that you are facing really very slow job growth. You are facing wages that are not keeping up with inflation, and you are facing all... Also an inflationary environment that doesn't show dramatic signs of changing. Tariffs, obviously, are increasing prices. The war in Iran, the blockage of oil in the Persian Gulf, the problems with diesel prices, you know, given that trucks really do transport almost everything that comes to our our stores, and those costs are passed on to consumers. Given you have a 7% mortgage typically now for a lot of a lot of people... I mean, the the pressures on average working Americans are very, very high, which I think is one reason why consumer confidence is so low. Yeah. So my big worry... Let's be very, very clear. My big worry is that dread word in stagflation. Well, I I do wanna ask you too. I mean, as someone who came into, the labor secretary position during the Clinton administration, we were having this conversation in that presidential campaign leading up to this. Strong economic data at least in terms of the numbers. Yet as James Carville so famously noted, there was a feeling by the people on the ground that they weren't necessarily doing as well as what those numbers suggested. Are we looking at a potential repeat of that here in 2026, or is that a false parallel? Well, I don't think it's a false paradigm. As James Cervell said, it's the economy, stupid. It is the economy, And it's not just the economy in the abstraction of the numbers, the BLS numbers. It's also the economy that is over the typical worker's kitchen table. I call it kitchen table economics. This is what people are talking about. I can't afford this. I can't afford that. My wages are not keeping up. I'm worried that we don't have a cushion. We can't afford the rent. We can't afford a house. We can't afford the mortgage. This is where people are at going into an election. The kitchen table economic discussion is the most relevant discussion of all going into an election, and that really doesn't bode particularly well for Republicans. Yeah. I... I'm curious what you think Washington could do now to basically prevent the weaker hiring from turning into a more meaningful stagflationary, scenario. I don't think there's very much in the last four and a half weeks before an election that we can expect Washington to do, particularly when, you know, the house has gone on recess, the senate is on verge of going for round recess. No. We're not going to see any dramatic changes. My concern is that after the election, we are going to see some very, very big problems that are not even yet registered. I mean, we haven't even talked about health care costs. The typical worker is facing dramatic increases coming up with regard to insurance costs, health care costs overall because of changes that congress had may... Has made eliminating the Affordable Care Act subsidies, for example, in making Medicaid much harder to obtain by average working people, and Medicaid really does affect a lot of average working people, and then making assistance, food stamps much more difficult for people to to use and to actually even qualify for. These all affect the economy, and they all affect average working people. I don't see any relief easily in the future because a lot of these things have not even really affected most people in the worst possible ways yet. And, again, as a former labor secretary, I'm concerned about not only individuals and families, but I'm also concerned about the macro effects of all of this. Right. Right. I'm wondering if you can talk a little bit more about how you see it playing out if the workers really haven't felt meaningful pain. When... Look. What would have to happen for that to start playing out? What would have to happen for workers to actually feel better or feel feel feel more pain? I mean, they're feeling a lot of pain right now. For it to show up more in the economy. Well, I I think that what hopefully... And I'm gonna now put on my optimistic hat. Hopefully, what we see is a combination of fiscal and monetary policy that is conducive to wage growth. Right now, most Americans are getting poor. So you don't have to be a rocket science scientist to see that as wage... As wages don't keep up with inflation, as the prices of the things most people buy continue to rise faster than wages, that means most people are poor. It's not just that they feel poor. They actually are poor. Their dollars don't go as far as they were. Now I certainly hope that that changes. I don't see anything in the immediate prospect to to to suggest that that's going to change. But as long as inflation outpaces wage growth, average people, average working people are in trouble. I am curious about the administration's position about the breakeven number for job growth. I mean, Pellen put it right around 40,000. I think the three month average right now is 51,000. Over nine months, we're averaging 68,000. My question is for you isn't so much where the breakeven rate is, but is there a credible argument to be made that with slower immigration, population growth trends, and other things that maybe there is argument for just fewer jobs actually needed? There is an argument, absolutely, for fewer jobs needed. And I think the two major factors here are number one, the baby boomers are retiring. And secondly, you have so many workers in America, particularly undocumented, who are leaving the country, by force or voluntarily. Now those two factors are obviously reducing the numbers that... Of jobs you need in order to maintain kind of a healthy economy. But the problem is there is also the question of, number one, who is going to pay for all of the baby boomers' retirements? I mean, we have enormous stresses right now on the Social Security system, and also on Medicare. But secondly, you have with all of these workers who are being pushed out of the workforce, who are in or on working age, or people who are who are being deported or being forced to deport, self deport. You know, a lot of these people are in jobs that many American workers who are born here and who are here legally don't wanna take. No. They are in jobs that are in fairly dangerous roofing jobs, construction jobs that are not among the best that people want. They're jobs that, in many respects, are not really going to be easily supplied by workers. Some of them are agricultural jobs so that the economy is actually potentially weaker because all of these people have been forced to leave. And remember also that most of the people who are undocumented had been paying taxes. They had been contributing to Social Security that, you know, we don't get their taxes. We don't get their Social Security payments. It's not a free lunch for us in terms of all of these people being forced to leave the economy. Alright, secretary. Really appreciate you taking time for us. Rob... Robert Reich there, former US labor secretary, emeritus professor of public policy at UC Berkeley. And, of course, amid all the talk about the labor market inflation and wages, we also have to talk about consumer spending, particularly on some of these discretionary items. We're gonna pivot now and talk a little bit more when we come back after the break about Nike. The shares right now at their lowest level since 2013. There are some macro issues there, but a lot of idiosyncratic ones as well. That conversation coming up after the break right here on the close, right here on Bloomberg.