Remote Work and Rising Prices

Episode Summary

Executive Summary: The episode centers on inflation, labor-market tightness, and the persistence of remote work, framed by a conversation with Indeed research director Nick Bunker. The hosts dissect the hot August CPI report, discuss why inflation remains sticky despite some easing in energy and supply chains, and explore how job openings, quits, and remote work are reshaping labor demand and workplace norms.

Main Topics: August CPI and the inflation outlook (Priority: 5/5): Ryan Sweet argues the August CPI was disappointing, with core inflation rising much faster than expected and price pressures broadening across goods and services. The group debates whether the report changes the inflation trajectory and what it means for the Fed. Labor market tightness and job openings (Priority: 5/5): Nick Bunker explains why Indeed’s postings data still show a very tight labor market, with openings elevated relative to pre-pandemic levels and quit behavior remaining strong. The discussion contrasts openings-based measures with unemployment and participation metrics. Housing, rent, and shelter inflation (Priority: 4/5): The hosts connect high shelter inflation to housing-market dynamics, including cooling home prices, easing market rents, and supply additions in multifamily housing. They note shelter will likely remain a major inflation driver for months. Remote work’s persistence and labor-market effects (Priority: 5/5): Bunker presents evidence that remote work is durable, citing Indeed postings that advertise remote work and Census data showing a sharp rise in people working primarily from home. The panel discusses productivity, talent retention, and long-run changes to office-based work. Indeed’s data and labor-market measurement (Priority: 4/5): Bunker describes Indeed’s job-posting data, its timeliness versus JOLTS, and how the platform’s data help compare labor markets across countries and metro areas. He also addresses concerns about permanent postings and compositional distortions. Energy prices and CPI components (Priority: 3/5): A statistics game and later discussion highlight the inflation impact of electricity, natural gas, and Europe’s energy crunch. The hosts worry utility price increases may keep inflation elevated even as gasoline cools.

Key Arguments: Core CPI is still running too hot, and a single soft month should not be overinterpreted; averaging recent months gives a better picture of inflation momentum. Inflation is becoming broader and stickier, with shelter, rents, and services keeping pressure on prices even as gasoline and some supply-chain components ease. Job openings and quit rates are better indicators of labor-market tightness than unemployment alone in the current cycle because demand rebounded much faster than labor supply. Remote work is not a temporary pandemic artifact; it appears to have become structurally embedded in job postings and job-seeker behavior. Indeed’s high-frequency postings data provide a timely signal of labor demand and align broadly with JOLTS, though exact levels and sector mix differ. The Fed can cool the economy, but some wage and churn dynamics—especially in leisure and hospitality—may not respond cleanly to interest-rate hikes. Housing supply is slowly improving, which should eventually cool rent inflation, but the pass-through to CPI shelter will be delayed. Some apparent labor-market anomalies may reflect speed of recovery and compositional shifts rather than a fundamentally different employment destination.

Data Points: Headline CPI (Aug, y/y): 8.3% - August consumer price inflation; still above target despite a small monthly increase. Core CPI (Aug, m/m): 0.6% - Inflation excluding food and energy; double consensus expectations and a major disappointment. Headline CPI (Aug, m/m): 0.1% - Held down by a large decline in gasoline prices. Gasoline prices (Aug, m/m): -10%+ - Main reason the headline CPI was muted in August. CPI contribution from supply-chain-sensitive goods: 1.0 percentage point - Includes new/used vehicles, electronics, and apparel; unchanged from July. CPI contribution from energy: 2.1 percentage points - Lower than July’s 2.9 percentage points due to falling pump prices. CPI contribution from food: 1.5 percentage points - Food prices remain a significant source of inflation. CPI contribution from shelter: 2.0 percentage points - Shelter is the largest sticky component and highest since the early 1990s. CPI peak relative to Feb. 2020 baseline: +62.9% - Indeed’s U.S. job postings peak compared with pre-pandemic levels. Indeed U.S. job postings vs. Feb. 2020: +50%+ - Current job postings remain well above pre-pandemic baseline despite cooling. U.S. job postings growth since start of year: Gradual pullback - Indeed sees slower postings, especially in software development. JOLTS openings-to-unemployed ratio: ~2:1 - Illustrates the extraordinary tightness of the labor market. Unfilled positions (JOLTS): 11 million+ - Approximate level discussed for openings. Unemployed workers: ~5 million - Used to illustrate the openings-to-unemployed ratio. Prime-age employment-population ratio: 80.3% - Near pre-pandemic norms, suggesting labor supply is relatively strong on this measure. Employment Cost Index (ECI) growth: 5%+ - A key wage-growth metric, indicating continued labor-market pressure. Remote-work share of U.S. postings on Indeed: 8.8% - Share of postings mentioning remote work, up from 2.5% in 2019. Remote-work share of U.S. searches on Indeed: <10% - Job seeker interest in remote work remains elevated. People working primarily from home (ACS): 17.9% in 2021 - Up from 5.7% in 2019, showing remote work’s rapid adoption. Remote work in software-development postings: Just under 40% - Remote work remains especially common in tech-related jobs. Control retail sales (Aug): 0.0% - August retail sales excluding autos, building materials, gasoline, and restaurants were unchanged. Q3 GDP tracking estimate: 1.1% annualized - Ryan’s estimate fell after softer retail sales data. U.S. natural gas prices: +61.2% - Year-over-year rise cited in the statistics game. European natural gas prices: +188.8% - Year-over-year rise cited in the statistics game, reflecting the energy shock in Europe. U.S. electricity prices: +15.8% - Year-over-year increase, underscoring second-round inflation pressure from energy.

Pivotal Quotes: "I think it’s very much here to stay." — Nick Bunker: On the persistence of remote work and its likely long-term role in job design. "Inflation is broadening out." — Ryan Sweet: Explaining why the August CPI was concerning beyond the headline number. "the temperature of the labor market is being driven now by the speed at which it’s moving, not its distance from its final destination." — Nick Bunker: His explanation for why labor-market tightness remains unusually strong despite improving participation measures.

Implications: Inflation is likely to ease only gradually, with shelter and services delaying a return to target. Labor demand remains strong, and remote work looks structurally embedded, reshaping hiring, productivity, and city-level demand patterns.