Gas prices are likely to rise more as OPEC and Russia announce production cut
SCOTT SIMON, HOST:
**** The economy now, which started the week on an upswing before it drooped right back by Friday - what happened? NPR's Scott Horsley joins us now to explain the volatility we seem to see every week. Thanks for being with us, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Scott.
SIMON: Friday's job report says that U.S. employers are still adding jobs, but not as fast as they had been. How concerned should people be about that?
HORSLEY: On its face, that slowdown is not worrisome. The economy has already replaced all the jobs that were lost early in the pandemic plus another half million jobs on top of that. So some slowdown is normal at this time of the recovery. Wages continue to climb albeit at a slower pace. Speaking at an auto plant in Maryland yesterday, President Biden said this is the kind of normal jobs report we should expect going forward.
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PRESIDENT JOE BIDEN: For some time, I've been saying that what we need to do in this transition - we have to move from a historically strong economic recovery to a more steady, stable recovery.
HORSLEY: But investors worry that the job market is not cooling off fast enough. They're focused on another part of the report which showed the unemployment rate actually fell in September partly because some 57,000 people dropped out of the workforce last month. That suggests the job market is still hotter than the Federal Reserve would like and also suggests the central bank is likely to keep pouring cold water on the economy by raising interest rates in an effort to control inflation. When interest rates go up, stock prices tend to go down, especially highflying tech stocks. And so the tech-heavy Nasdaq tumbled nearly 4% yesterday.
SIMON: OPEC and its partners, which, of course, include Russia, said this week they will cut oil production next month by two million barrels a day. What reasoning did they furnish?
HORSLEY: The Saudis are explaining this as a defensive move. They say they're simply trying to prop up oil prices in the face of a global economic slowdown and falling demand for oil. But this is also a political shot across the bow. The Saudis have basically aligned themselves with Russia in a way that is helping to bankroll that country's invasion of Ukraine. While the U.S. and its allies are trying to limit Russia's oil revenue, OPEC is effectively working to keep more money flowing to Moscow. David Goldman is an energy expert who served in both the Energy Department and the State Department. He thinks this is a strategic misstep for the Saudis.
DAVID GOLDMAN: Saudi Arabia has inadvertently done a great favor to the climate movement by validating what everyone had suspected already, which is that they can't be trusted to be responsible suppliers of the market and that we had better find another path.
HORSLEY: In the long term, of course, that path could include electric vehicles and cleaner alternatives to oil. But in the short term, we are likely to see higher gasoline prices. And that is not what the president and his fellow Democrats want to hear one month before the midterm elections.
SIMON: And, of course, new inflation numbers next week - rising gas prices don't exactly help that, do they?
HORSLEY: No. And inflation was already stubbornly high. The price hikes are no longer limited to a few pandemic-related categories that might be expected to ease up on their own like lumber and used cars. We're now seeing price hikes in many parts of the economy including a lot of essentials like rent and electricity. And while falling gas prices did help to lower the headline inflation rate in July and August, we're not likely to get that same break when the September numbers come out this coming week. So the Federal Reserve has its work cut out for it. The Fed was already expected to order another jumbo rate hike at its next meeting in November. And those odds were even higher by the end of this week.
SIMON: NPR chief economics correspondent Scott Horsley, thanks so much.
HORSLEY: You're welcome. ** Transcript provided by NPR, Copyright NPR.