Marketplace: The Cost of Wildfires – January 8, 2025

In this episode of Marketplace, host Amy Scott delves into the multifaceted impacts of wildfires in Southern California, exploring their escalating costs, the challenges of urban firefighting, insurance implications, and broader economic repercussions. Additionally, the episode touches on rising bond yields, stable gas prices, shifts in remote work policies, the increasing prevalence of multiple job holdings, and insights from the World Economic Forum's latest Future of Jobs report.

1. Wildfires in Southern California: Escalating Costs and Complex Responses

Overview of the Crisis

The episode opens with grim news from Southern California, where multiple wildfires are ravaging the Los Angeles area. The fires, fueled by powerful winds, have resulted in at least two fatalities, the destruction of over a thousand homes and buildings, and the evacuation of tens of thousands of residents. Amy Scott sets the stage by highlighting the unprecedented nature of wildfire seasons now extending year-round, a shift attributed to climate change increasing both the frequency and intensity of these disasters.

Cal Fire's Response Efforts

Kaylee Wells reports on the substantial resources required to combat these wildfires. Battalion Chief David Acuna of California's firefighting agency, Cal Fire, explains the collaborative efforts between local fire departments and Cal Fire’s incident management teams. "Usually the local fire departments handle it, but when they have incidents that get out of hand, we'll come in and provide our incident management team, which helps the local firefighters with logistics and communication" (07:45). Cal Fire also maintains a comprehensive website offering real-time updates on evacuation orders, shelter locations, and wildfire containment statistics.

Economic Implications and Rising Costs

Environmental economist Judson Boomhauer from UC San Diego discusses the unique economic burdens of urban wildfires. He notes, "A really important driver of how much we spend fighting any given fire is just the amount of property in the path of the fire" (12:30). Unlike floods, fires allow for some directional control to protect property, but this capability introduces additional hidden costs due to the extensive response efforts required. Sabrina Ashton, a lawyer with the American Red Cross, underscores the financial strain, stating, "The fires aren't just more expensive, but more frequent, too. Traditionally, Southern California's fire season happened in the fall, and now it's just all year round" (15:15).

Insurance and Urban Planning Challenges

Roy Wright, CEO of the Insurance Institute for Business and Home Safety, provides insights into the insurance industry's response to increasing wildfire risks. He emphasizes the necessity of creating defensible spaces around homes and the importance of community-wide efforts to mitigate fire spread. "We cannot eliminate wildfire. Ignitions are going to happen. And fire has been part of an ecosystem for thousands of years," Wright explains (22:50). The rising premiums and reduced availability of affordable homeowners insurance further exacerbate the vulnerability of affected communities.

2. Rising Bond Yields: Signals of Economic Uncertainty

Transitioning from wildfires to the broader economy, Sabri Benishore reports on the recent uptick in bond yields across long-term government debt. The rise in yields is indicative of shifting investor perceptions about future economic conditions.

Factors Driving Higher Yields

Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, attributes the increase to stronger-than-expected economic growth and persistent inflation. "The data have come in week by week showing the economy of today and by extension tomorrow are looking stronger," Jones states (32:10). Additionally, inflation's stubborn persistence necessitates higher yields to compensate investors for the eroded value of future returns.

Steve Laipley from BlackRock explains the concept of the term premium, highlighting increased risk aversion: "If you're going to go to the trouble of locking up your money for decades in a 10 or 30 year bond, you deserve some additional compensation for taking the additional risk" (34:20). Marvin Lo from State Street Global Markets echoes concerns about inflation stability and policy uncertainties, which contribute to the cloudiness in the bond market's outlook.

3. Stable Gas Prices and Inflation Dynamics

Mitchell Hartman discusses the latest figures from the U.S. Energy Information Administration, revealing that gasoline prices in 2024 were, on average, 21 cents lower per gallon compared to the previous year. This stability is attributed to a surplus in global oil supply and increased U.S. production.

Impact on Inflation

Jay Hatfield of Infrastructure Capital Advisors emphasizes that energy prices significantly influence both headline and core inflation. "Oil is critical not just to headline inflation, but even core inflation, which excludes oil prices," Hatfield notes (39:45). Joe Brucelas from RSM Consulting highlights historical instances where oil price spikes exacerbated inflation rates, citing the pandemic-induced surge following Russia's invasion of Ukraine.

Stephen Schork of the Schork Report explains the current equilibrium in the oil market: "With the average price of gas right now at $3.06 a gallon, a penny less than this time last year... we have a kind of Goldilocks market where the producer is making money, the consumer is not getting banged... at the pump" (44:50). However, risks remain, including geopolitical tensions that could disrupt supplies and trigger a new oil crisis.

4. Shifting Remote Work Policies: Balancing Flexibility and Employer Needs

The landscape of remote work is evolving as major corporations like JPMorgan Chase, Amazon, Walmart, and Dell roll back remote work policies, mandating a return to the office. Kristen Schwab explores the dynamics between employee desires for flexibility and employer preferences for in-person collaboration.

Labor Market Influences

Harry Holzer, former chief economist for the Department of Labor, explains that the labor market's current state diminishes employees' bargaining power compared to the height of the pandemic. "Back in 2021 and 2022, we'd coined phrases like the great resignation and quiet quitting. Employees had power," Holzer states (53:10). Erica Groschen from the Bureau of Labor Statistics corroborates this, noting a decline in the prevalence of remote work hours (54:25).

Employee Preferences and Future Outlook

Melissa Jesior, CEO of Eagle Hill Consulting, warns that inflexible remote work policies may lead to future labor shortages as market conditions shift back in favor of employees. "Because of how the labor market ebbs and flows, there will be labor shortages someday in the future," Jesior cautions (56:00). Kristen Schwab points out that while the current trend favors employers, maintaining flexible policies could enhance long-term competitiveness as employee preferences evolve (57:15).

5. The Rise of Multiple Job-Holding: Economic Necessity and Trends

Samantha Fields reports on the increasing number of Americans holding multiple jobs, a trend that has accelerated beyond pre-pandemic levels. As of November, nearly 5.5% of workers held more than one job, up from earlier years.

Drivers Behind the Trend

Emma Harrington, assistant professor of economics at the University of Virginia, attributes the rise to both economic necessity and the broader availability of multiple job opportunities. "Technology and the rise of remote work have also made it easier to both find and juggle multiple opportunities," Harrington explains (1:05:30). Lonnie Golden from Penn State University highlights that approximately half of those holding multiple jobs do so to gain additional income, while others seek fulfillment or are unable to secure suitable full-time employment (1:07:50).

Demographic Insights and Implications

Julia Pollack, chief economist at ZipRecruiter, notes that while multiple job-holding can signal a robust labor market, it also underscores disparities among different demographic groups. "Women, Black people, and those who are single, widowed, or divorced are more likely than others to work multiple jobs," Pollack observes (1:10:15). This trend reflects both the advantages of a dynamic economy and the ongoing challenges related to wage stagnation and job stability.

6. Future of Jobs Report: AI and Sustainability Shaping Employment

In the closing segment, the World Economic Forum's new Future of Jobs report reveals that over 40% of employers plan to downsize their workforce within the next five years due to the increasing role of artificial intelligence (AI) in automating tasks. However, a majority also intend to hire new employees with AI-related skills.

Impact of AI and Sustainability Initiatives

The report highlights a dual focus on technological advancement and sustainability. Nearly half of employers expect efforts to reduce carbon emissions to significantly transform their business operations by the latter half of the decade. This shift underscores the growing importance of integrating AI and sustainable practices into the workforce to remain competitive and responsive to global challenges.

Conclusion

This episode of Marketplace offers a comprehensive exploration of the escalating costs and complexities associated with wildfires in Southern California, while also providing insightful analysis on broader economic trends such as rising bond yields, stable gas prices, evolving remote work dynamics, and the increasing prevalence of multiple job holdings. The discussions reflect the intricate interplay between environmental challenges, economic policies, and labor market developments shaping today's societal landscape.

Note: Timestamps in brackets (e.g., 07:45) indicate approximate positions within the podcast for referenced quotes.