Real wages, supply chain disruption, and commercial building : The Indicator from Planet Money It's a new year so that means it's time to choose our indicators to watch! Listen to find out what we will be tracking in the economy for 2022.

Indicators to watch in 2022

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This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.


And I'm Darian Woods.


And I'm Adrian Ma.

VANEK SMITH: And we are all gathered here together on this very special day because it is 2022 (laughter). It has been a very strange couple of years. I feel like, as a country, we've just seen indicator after indicator after indicator. It's almost hard to know where to look, and the story these indicators tell feels really mixed.

WOODS: On the one hand, you've got airlines shutting down routes because they don't have enough staff 'cause they're sick. You've got schools going virtual. But on the other hand, you've got unemployment at low rates, you've got people buying a lot of stuff and then you've also got inflation really high. So it is such a mixed picture out there.

MA: So we thought - are there, like, a few underrated indicators that we could pay attention to that might give us a clue of where this pandemic economy is going this year? And so that's what we did.


WOODS: Today on the show, indicators for 2022. Three indicators of how the economy might be doing once we get to the end of this year and signs about whether or not we have kind of transited through this current mess of a pandemic economy.

VANEK SMITH: Yeah, when do we get back to precedented times? That's what we're all...


WOODS: Precedented - that is the word we want.

VANEK SMITH: Adrian Ma, Darian Woods, we've all come up with one indicator that we are going to be especially watching in 2022 to try to help give us a sense of what on earth is going on with the U.S. economy. Darian Woods, will you kick us off?

WOODS: Sure. So my indicator is real wages, and real wages are what you get after you take into account the rising cost of living - you know, inflation, price rises. So how much will workers be earning at the end of the year? That's the question I want to ask.

VANEK SMITH: Right. Because, like, for a lot of Americans - for the average American, in fact, our paychecks have gotten a little bigger. But then there's the question of how much we can buy with those paychecks. Can we buy more than we could a couple of years ago or less?

WOODS: But I'm also interested in whether this kind of recovery will be equally shared or not. And so will this be a so-called K-shaped recovery?

VANEK SMITH: Oh, yes - the famous K-shaped recovery. It's like the economic version of "Sesame Street" - the letter K.

WOODS: It's actually much less technical than it sounds. It's literally just the letter K.


VANEK SMITH: Exactly. You've got this little top line going up. In this case, it can represent the wealthy workers getting wealthier. And the bottom of the K, that line going down, that could be lower income workers losing out.

WOODS: So to drill into that, let's look at the workers in a sector that traditionally pays a smaller amount, and that is leisure and hospitality. Last year, real hourly earnings for the hotel workers and museum guides and bartenders actually went up 7.1%, and that's taking into account inflation. Now, part of that rise in hourly earnings might simply reflect hazard pay and how hard it is to attract workers.

MA: I mean, these are jobs where you're standing around people and interacting very closely, and everybody's breathing on each other.

VANEK SMITH: And everybody's cranky right now, also. You're dealing with a lot...

WOODS: That is true. Yeah.

VANEK SMITH: ...Of grumpy people.

MA: There's, like, a grumpy premium for these jobs that are a little tougher - well, a lot tougher than they used to be. But 7%, that's still not a bad raise.

WOODS: So let's look at the other side, too. So one of the sectors that actually pays a lot higher is finance, and a lot of those workers have been safely working from home during the pandemic - these mortgage brokers, traders, insurance workers. And in finance, real hourly earnings last year actually fell 2.1%.

VANEK SMITH: Oh, my gosh. So actually, wages fell for finance workers? That's really surprising.

WOODS: Yeah. So they might have actually got, you know, little pay raises, but inflation on average ate into the paycheck of people working in this sector. You know, now, this is just one window into inequality, but this is one I'll be tracking closely this year.

VANEK SMITH: That is an excellent indicator.

Adrian Ma, what is your 2022 indicator to watch?

MA: OK, so the drumroll, please (imitates drumroll). My indicator to watch this year is the Global Supply Chain Pressure Index.

WOODS: It just rolls off the tongue (laughter).

VANEK SMITH: Pressure index.

MA: If that sounds a little bit unfamiliar, it is probably because this is a brand new indicator.

VANEK SMITH: An indicator is born.

WOODS: Love it.

MA: So the Global Supply Chain Pressure Index - basically what it is, is it takes all this data on international shipping costs and manufacturing in different countries, and it crunches it all together into this single number to try and capture, like, just how gummed up the world's supply chain is in any given month. And a few economists at the New York Fed came up with this because they were looking for some simple way, some, like, shorthand way of summing up just how messed up the supply chain is. And they looked around, and they couldn't find one, so, you know...

VANEK SMITH: They, like, fashioned an index. That's wonderful.

MA: To find out more about it, I called up Jan Groen last week. He's one of the economists who worked on it. And I asked him - how does it feel to give birth to this new metric?

That's like coming out with, like, a new app or a new hit song or something as far as - I mean, I don't know. You tell me.

JAN GROEN: It's a good feeling because, you know, a broader audience maybe can follow the developments in this sector a little bit more easily because of this indicator. So, yeah. No, I'm pretty proud of it, actually.

MA: So basically what Jan and company did, they took their new indicator, and they actually projected it back in time, like, two decades to see, like, how much pressure there is in the global supply chain going back all the way to 1997. He knew that there was going to be some sort of spike around 2020, but even he says he was kind of surprised just how different the scale was compared to past years.

GROEN: It just pales in comparison what we've seen in the past, you know, two years. I mean, so that was kind of an eye-opener, actually.

VANEK SMITH: And, you know, Adrian, all this supply chain pressure - like, it has these real effects. I mean, it's not just that it takes a few weeks to get your dishwasher or something like that. But also, like, this is one of the things that is being pointed to about why prices are rising so fast. It's sort of one of the culprits of inflation - that the supply of things is stuck, so there's fewer stuff around and that, you know, when demand is high, and supply can't meet it, that does push up prices.

MA: Absolutely. Yeah.

WOODS: So Adrian and I have given ours. So Stacey, what's your indicator for 2022?

VANEK SMITH: OK, so my indicator is - it's a little bit of a borrowed indicator, I have to say.

WOODS: Hey, if it's good, it's good.

VANEK SMITH: It is an indicator that Cardiff Garcia pointed out last year, and I love it. I love this indicator, but it is called the Architecture Billings Index. Basically, all this does is polls architecture firms about whether they are billing actively. So it's sort of asking architecture firms, like, how much business do you have right now?

And so what this measures is nonresidential construction. So not all the houses that are being built because construction numbers are kind of off the charts for houses, but this is, are businesses expanding?

WOODS: Like offices and factories and that kind of thing.

VANEK SMITH: Yes. And the reason that I think this is interesting is - couple things. First, of course, you know, this has been, like, sort of the best of times and the worst of times for a lot of businesses. Some businesses like Amazon and Zoom, you know, have seen huge spikes in demand.

For some businesses, though, this has been incredibly hard. Small businesses, a lot of them have struggled. Thousands of businesses have closed. It's such a strange time. So I like this index for sort of giving a sense of what's going on with businesses.

The other thing I feel like this indicator reveals is our working-from-home situation. When things reopen, how much are they going to reopen? Are businesses going to scale back their office presence?

MA: Is this sort of like these two forces pulling the Architecture Billings Index up and down? Like, you would have, like, some businesses like Amazon that are building more warehouse space and stuff like that, and that kind of pulls up the index. But then you have a lot of businesses with workers who are staying home, or they've decided they're not going to do the office thing anymore, and that sort of pulls the index down. And that's sort of where the tug of war is happening.

VANEK SMITH: Yeah, absolutely. But also, businesses closing and vacating their spaces, too or just not expanding at the rate that they used to.


MA: So there you go. One, two, three indicators to follow in 2022. We got real wages, global supply chain pressure and architecture billings. If you want to follow these, we'll link to them on our website. Check them out and follow along with us.

WOODS: This episode of THE INDICATOR was produced by Brittany Cronin with help from Isaac Rodrigues. It was fact-checked by Corey Bridges. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.


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