CNBC gets inflation wrong by letting politics warp its reporting

July 9, 2021

By Adam Guillette

CNBC gets politics wrong all the time. But what would you expect from a cable channel that specializes in money and markets?  Well, one thing for sure would be that you’d expect them to get economics right. That’s why this piece from the website claiming that rising inflation is good news because it will help workers get raises, is shocking. It’s as if they don’t understand how inflation works, at least in the view of economists.

In a tweet by CNBC, they call rising wages the “silver lining” for inflation.


While in passing, the CNBC article mentions the danger of a self-reinforcing cycle of wage-price inflation, it is in fact, this phenomenon that most worries the Federal Reserve and will cause them to start raising interest rates.

It’s what competitor Bloomberg calls the “dreaded spiral”.

“That raises the prospect of what’s known and dreaded in economics as a wage-price spiral,” writes Bloomberg. “The idea is that higher wages spur more spending growth that strains production capacity and drives up business costs. In turn, companies raise prices and workers demand even larger pay increases to stay ahead of a rising cost of living.”

So far from being a “silver lining,” rising wages, more properly termed as “wage inflation,” is the red sky in the morning warning sailors to take warning.

It may look beautiful on the horizon, but once it breaks over the economy, look out because the economy could sink, fast.

As Reuters acknowledged last month, wage inflation “will also fuel faster inflation and probably force the Federal Reserve to scale back its bond-buying program and raise interest rates earlier than top policymakers have indicated so far.”

One economist told Bloomberg that it’s probably too late to prevent a “persistent upturn” in inflation, calling Fed officials “in full denial,”  which means the economy could suffer from a recession combined with inflation as soon as this year.

“A substantial pickup in wage gains would be the quickest path to turning a ‘transitory’ inflation blip into a persistent upturn,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said in a note according to Bloomberg.

So what’s behind the disconnect for CNBC?

Is it that the progressive push for higher wages is clouding the editorial judgment of CNBC?

Vox for example recently admitted that inflation is a problem, but their only remedy for it is hiking wages.

“If inflation takes off and jobs and wages don’t go with it,” says Vox, “then everyday items can become prohibitively expensive for many people.” Thus wages need to go up again.

Buzzfeed last month also argued that higher prices (i.e. inflation) were a poor reason to worry about wage hikes.

This would not be the first time that CNBC let politics warp it’s editorial judgment on something with substantial economic costs to the US.

In 2014, CNBC suppressed reporting from then-CNBC reporter Melissa Francis about the true costs of Obamacare.

“It is shocking, but it actually doesn’t surprise me,” said Francis. “Because when I was at CNBC, I pointed out to my viewers that the math of Obamacare simply didn’t work….And when I did that, I was silenced.”


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