By James Pethokoukis
Item: Noting he had a “super bad feeling” about the economy, Tesla Chief Executive Officer Elon Musk said the electric carmaker needs to cut staff by around 10 percent, according to an internal email seen by Reuters.
Like every Elon Musk utterance these days, the above one got lots of social and mainstream media play. That, both for its brief substance—What does Musk know? Does he have inside econ info?—and its causal wording. Of course, Musk is hardly alone in his subjective take. Consumer confidence, at least as measured by the Conference Board, is sitting at a three-month low. As measured by the University of Michigan, confidence sits at its lowest point since 2011. (JPMorgan: “We think this relative outperformance of the Conference Board survey is likely related to its emphasis on the labor market, which by many accounts still looks strong even if there has been some cooling lately.”) What’s more, 70 percent of Americans think the country is headed down the wrong track.
President Joe Biden also had a thought about Musk’s thought: “Lots of luck on his trip to the moon,” Biden said of the SpaceX founder after, CNBC noted, “praising some of Musk’s competitors for expanding their investments in electric vehicles.” Well, at least he acknowledged Musk’s existence, a seeming rarity.
Whatever the logic behind Musk’s specific concern, it’s pretty clear what regular Americans find unsettling. “Inflation remains on the forefront of consumers’ minds,” Joanne Hsu, director of the University of Michigan survey, said in a statement. “They mentioned inflation throughout the survey, whether the questions referred to their own personal financial situations, their outlook for the economy, or buying conditions.”
Not only do surging prices hit consumer wallets—demand destruction from high prices as well as Federal Reserve rate hikes create recession risk—they create a sense of economic uncertainty. Historically high inflation makes the economy look fragile. The days of Democratic politicians and pundits hand-waving away rising prices as “boomflation” are long behind us. This from Politico:
Progressives two years ago won a big battle by getting the Federal Reserve to ease up on inflation. Now, the staying power of that hard-fought victory is in doubt. . . . [Now] that fractured supply chains and trillions of dollars in federal Covid aid are boosting inflation to rates not seen since the 1980s, critics of easy money policies say the central bank’s new pro-worker pivot stoked price spikes and made the central bank late to fighting them. Fed officials have shifted from prioritizing widespread employment to fretting about labor shortages, and progressives are left to worry whether the central bank might react differently next time.
Of course, the hand-wavers were generally the same folks who didn’t think spending another $2 trillion in March 2021 after a $900 billion spending bill in December 2020 posed a significant inflation risk. (These also tend to be people who have a super bad feeling about Musk all of the time.) Even bulls think pulling off a soft landing here, Immaculate Disinflation, is a tricky task for the Powell Fed. No one is hand-waving now.
The post The ‘Super Bad Feeling’ of Elon Musk Kind of Makes Sense appeared first on American Enterprise Institute – AEI.