Unpacking stagflation fears

Summary

Marketplace Morning Report: Unpacking Stagflation Fears Release Date: March 10, 2025

In this episode of the Marketplace Morning Report, host Sabri Ben delves into the rising concerns of stagflation—a challenging economic scenario characterized by high inflation and stagnant growth. The discussion encompasses expert insights, legislative developments, international trade tensions, and real estate market trends, providing listeners with a comprehensive overview of the current economic landscape.

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1. Rising Risk of Stagflation and Economic Uncertainty

00:01 – 03:05

Sabri Ben introduces the topic by highlighting increased recession risks due to unstable economic policies, including tariffs. Treasury Secretary Scott Bessant has suggested that the economy might require a "detox," while President Donald Trump has not dismissed the possibility of a recession, fuelling market unease.

Guest Expert: Julia Coronado, Founder and President of Macro Policy Perspectives and Professor at the University of Texas at Austin.

Key Points:

• Definition of Stagflation: Julia Coronado explains, “From a technical definition, stagflation means you get high inflation and low growth. There’s no technical definition, but that’s the idea” (01:32).

• Causes of Stagflation: Coronado attributes stagflation risks to trade wars and tariffs, which simultaneously drive up consumer prices and suppress economic growth. She emphasizes multiple sources of economic uncertainty, including interruptions in government contracts, federal worker layoffs, and fluctuating immigration policies.

• Federal Reserve's Dilemma: In a stagflation scenario, traditional monetary policies become ineffective. Coronado notes, “You don't want to raise rates because growth is falling. On the other hand, you can't really cut rates because inflation is rising” (02:23). This predicament forces the Federal Reserve to balance competing economic threats without clear solutions.

• Path Out of Stagflation: According to Coronado, stagflation may be self-correcting as high prices dampen growth, eventually leading to reduced inflation. This downturn could enable the Fed to lower interest rates to stimulate the economy once stability is restored.

2. Congressional Efforts to Prevent Government Shutdown

03:10 – 04:29

Sabri transitions to legislative updates, reporting on House Republicans' tentative plans to vote on a stopgap funding bill—a continuing resolution aimed at preventing a partial government shutdown by funding federal operations through September 30, 2025.

Key Points:

• Funding Details: The bill maintains most funding at 2024 levels, with specific increases for the Pentagon to raise pay for junior enlisted service members. Non-defense spending is expected to decrease slightly, with additional funds allocated to nutritional assistance programs for women, infants, and young children.

• Political Stance:

  • President Trump's Endorsement: Trump has lauded the bill as a "very good funding bill," urging Republican members to support it unequivocally on Truth Social (03:26).

  • Democratic Opposition: House Appropriations Committee ranking member Rosa DeLauro criticizes the measure as a “blank check for Elon Musk," arguing it lacks sufficient Congressional oversight on spending decisions. Similarly, Senator Patty Murray labels it a “slush fund,” reflecting deep partisan divides over federal budgeting priorities.

3. Escalating Trade Tensions with China

04:29 – 05:13

The report highlights renewed trade tensions as China enforces retaliatory tariffs on certain U.S. agricultural products. These include significant taxes—ranging from 10% to 15%—on goods such as chicken, beef, and wheat. Additionally, China has imposed bans on dozens of U.S. companies, preventing them from purchasing Chinese products or conducting business within the country.

Implications:

• Impact on U.S. Agriculture: The tariffs threaten to disrupt the livelihoods of American farmers and exporters, potentially leading to increased consumer prices domestically.

• Broader Economic Effects: China's move could exacerbate existing tensions, affecting global supply chains and international trade relations, further contributing to economic uncertainty.

4. Real Estate Market Insights: Optimal Selling Times

05:35 – 07:03

Transitioning to the housing market, Sabri discusses new data from Zillow indicating that late May represents a "golden window" for selling homes, with properties fetching approximately $5,600 more than the average sale price during this period.

Key Points:

• Seasonal Influences: Richard Green from the USC Lusk Center for Real Estate explains, “The biggest factor here is the academic calendar” (05:46). Families aim to buy and move during summer breaks, aligning with the end of the school year.

• Regional Variations: The peak selling season varies by location. For instance:

  • San Diego: The market peaks in late March, influenced by milder weather and local demand cycles.
  • Phoenix: Peak sales occur as late as November. Amanda Pendleton, Zillow's home trends expert, attributes this to the region's favorable climate year-round and the influence of retirees, or "snowbirds," looking to settle before winter (06:23).

• Strategies for Sellers: When selling outside the optimal window, homeowners can enhance their property’s appeal by:

  • Highlighting Outdoor Amenities: Showcasing features like patios or gardens can attract buyers.
  • Utilizing Virtual Tours: Investing in 3D home tours to provide immersive viewing experiences.
  • Maximizing Exposure: Ensuring listings reach a wide audience through diverse marketing channels.

Katie Wells of Marketplace suggests these strategies can help maintain or increase a home's market value despite seasonal challenges (06:42).

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Conclusion

This episode of the Marketplace Morning Report offers a nuanced exploration of current economic challenges, including the potential onset of stagflation, legislative maneuvers to sustain government operations, escalating trade disputes with China, and strategic insights into the real estate market. By incorporating expert analysis and up-to-date data, the report equips listeners with a thorough understanding of the factors shaping today’s economic environment.

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For more insights and updates, subscribe to the Marketplace newsletter every Friday at Marketplace.org.

Transcript

[Sabri Ben]

Dusting off an old economic term, stagflation from Marketplace, I'm Sabri Ben, ashore in for David Brancaccio. Surveys show economists believe the risk of recession has increased due to unstable economic policy, including tariffs. Treasury Secretary Scott Bessant said the economy might need a detox. And President Donald Trump over the weekend didn't allay any fears when he declined to rule out a recession. Joining us to talk about that and more is Julia Coronado, founder and president of Macro Policy Perspectives and a professor at the University of Texas is Austin. Good morning, Julia.

[Julia Coronado]

Good morning.

[Sabri Ben]

Does the economy need to enter a period of pain before a period of resurgence? Is that what's going on here?

[Julia Coronado]

Well, I don't know that it needs to, but it looks like it might. And it's a very interesting shift in message from the administration that a detox sounds like a veiled word for a recession. And certainly there has been a lot of data indicating that firms and consumers are losing confidence because of all the sources of uncertainty. Tariffs and trade wars are one of them. But there's a lot of interruptions in government contracts, federal worker layoffs, immigration policy. There's a lot of sources of uncertainty and change in the economy.

[Sabri Ben]

Now if we were to enter a period of recession, it would not be a normal one. The fear is something called stagflation. Let's take a moment to explain that one. What is it?

[Julia Coronado]

From a technical definition, stagflation means you get high inflation and low growth. There's no technical definition, but that's the idea. And the driver of that would be a trade war that you get tariffs and counter tariffs. Those drive up consumer prices and that also drives down growth. The problem with that is we usually look to the Federal Reserve to cut interest rates to help boost the economy if growth is stumbling. But if inflation is rising, they may not be able to do that as quickly or as much as they typically do.

[Sabri Ben]

Right. So in a normal scenario you get inflation with growth.

[Julia Coronado]

Right.

[Sabri Ben]

And the medicine for that is raising interest rates. In a stagflationary situation, the medicine does not work.

[Julia Coronado]

Right. You don't want to raise rates because growth is falling. On the other hand, you can't really cut rates because inflation is rising. So this puts the Fed in a very difficult position trying to weigh which one is the bigger risk to the medium term outlook for the economy.

[Sabri Ben]

How does one get out of a stagflationary situation?

[Julia Coronado]

Well, usually the inflation is self destructive because those high prices are not coming from higher growth. They lead to lower growth and that ultimately can lead to lower inflation, and then the Fed would be able to lower interest rates and stimulate the economy.

[Sabri Ben]

Julia Coronado is founder and president of Macro Policy Perspectives. Thank you so much.

[Julia Coronado]

My pleasure.

[Sabri Ben]

House Republicans tentatively plan to vote tomorrow on a stopgap funding bill. Both houses of Congress have to pass the legislation by this Friday night to avoid a partial government shutdown. Marketplace's Nancy Marshall Genser has more.

[Nancy Marshall Genser]

The bill, known as a continuing resolution, would fund the government through Sept. 30, the end of the federal government's 2025 fiscal year. The stopgap measure would mostly keep funding at 2024 levels, although the Pentagon would get a bump up with a raise for junior enlisted service members. Non defense spending would mostly fall a bit, although there would be extra money for a nutritional assistance program for women, infants and young children. President Trump says it's a very good funding bill. On Truth Social, he urged all Republicans to vote yes with no dissent. Most Democrats are expected to dissent. House Appropriations Committee ranking member Rosa DeLauro says the funding measure would be a blank check for Elon Musk. She points out it doesn't include much direction from Congress on how the Trump administration should spend the money. Senator Patty Murray, the top Democrat on the Senate Appropriations Committee, called the spending bill a slush fund. I'm Nancy Marshall Genser for Marketplace and.

[Sabri Ben]

China's retaliatory tariffs on certain US Agricultural goods have come into force this morning. Some US Farm products like chicken, beef and wheat will now be taxed at 10 to 15% in China. China's also blocked dozens of U.S. companies from buying Chinese products or even doing business in China at all.

[Marketplace]

If you want to be savvy about the economy, the Marketplace newsletter is just what you need. Every Friday, you'll get explainers and analysis that make sense of everything from the moving markets to grocery prices. No jargon, no hype, just smart takes delivered to your inbox. Sign up [e-mail] subscribe.

[Sabri Ben]

New data out from the real estate company Zillow says late May is the golden window to sell your house. Homes sell for more $5,600 more than they do on average. Marketplaces Kaylee Wells has more.

[Richard Green]

The biggest factor here is the academic calendar, says Richard Green.

[Amanda Pendleton]

It's been the same answer for a long time, which is it's when the school year ends.

[Richard Green]

He directs the USC Lusk center for Real Estate and says buyers shop in the spring so they can move in the summer when the kids are on break. But that isn't happening everywhere. The peak selling time in San Diego arrives in late March. In Phoenix, it won't hit until late November. Greene says the weather is responsible.

[Amanda Pendleton]

It's just a pain to move when it's snowy and icy, whereas in San Diego and in Phoenix, you know the weather is similar all year.

[Richard Green]

Places like Phoenix are also less influenced by the kids school calendars and more by the schedule of retirees, says Zillow's home trends expert Amanda Pendleton, snowbirds who.

[Kailey Wells]

May be looking to settle down into a new home before the winter.

[Richard Green]

Pendleton says she gets that selling during the seasonal surge is not always possible.

[Kailey Wells]

They've got to sell when they've got to sell, right? The baby's coming, they're starting a new job.

[Richard Green]

And if that happens, there are other ways to boost a home's price. She recommends flaunting the outdoor amenities, springing for the virtual 3D home tour, and getting the listing in front of as many eyeballs as possible. I'm Kailey Wells for Marketplace, and in.

[Sabri Ben]

New York, I'm Sabri Benishore with the Marketplace Morning Report from APM American Public Media.

[Janelie Espinal]

Consumer confidence had its sharpest monthly decline since 2021, which means we're all in our feels about money. And while uncertainty is the only constant these days, it's also a great reason to get serious about understanding personal finance. I'm Janelie Espinal, host of Financially Inclined, a podcast from Marketplace that makes learning about money simple. Learn about practical skills like negotiating job offers, dealing with money and friendship and love, entrepreneurship and student loans. Get serious about your money and build a life you've always dreamed of. Listen to Financially Inclined wherever you get your podcast.