Author talks labor market trends, Fed recession outlook, industry pivots to a pandemic economy

Semafor Business and Finance Editor Liz Hoffman joins Yahoo Finance Live to discuss labor market trends tied to job openings and layoffs, the Fed's inflation outlook amid recession woes, and how industries like hospitality-leisure, travel, and automakers adapted in the COVID-era economy.

Video transcript

- The Labor Department's JOLTS data showed a slightly cooling labor market, meanwhile, but still one with 10.8 million job openings, or 1.9 job openings per available worker. Let's talk about the economy with Semafor's Liz Hoffman. She's the author of the new book "Crash Landing, the Inside Story of How the World's Biggest Companies Survived an Economy on the Brink." Liz, nice to see you. We'll get to the book in just a moment. First, what do you see happening with this economy? Any chance the Fed chair can cool off that labor market, just about two jobs per available worker.

LIZ HOFFMAN: Yeah. The Fed has had a real hard time with the labor market. You've seen the openings cool a little bit, but still about double what they were before the pandemic, and just absolutely no sign that the wage war, the talent war is cooling in anywhere outside of Silicon Valley, where there is, frankly, a lot of slack. It's just been incredibly hard. And the one place I think the Fed's had a little more success with its playbook is in the housing market. But, again, that's the most rate-sensitive corner of the economy. And things that are a little bit trickier I think-- I, mean they're really pushing on a string with a lot of the labor stuff.

- Liz, when it comes to a more aggressive Fed raising the odds of a recession, how do you see that and how potentially bad or deep this recession could get if the Fed doesn't let up any time soon?

LIZ HOFFMAN: I mean, I think it's just worth pointing out that they're willing to put the economy into a recession. I feel like we don't say that out loud enough. And the market seems constantly surprised by that. That may well be the cost of this. Most people I talk to think it will be to the extent we're in one now pretty short and fairly mild and we should be snapped back by later this year.

- OK. So let's talk about the book "Crash Landing" in which there was no playbook, as you point out, for CEOs to handle the devastating circumstances. And you talk about how some of them did manage their way out of it. Let's start with Airbnb's Brian Chesky. What did he do in the midst of all the chaos?

LIZ HOFFMAN: Airbnb is such a fascinating story. They had come into 2020 expecting to go public, the biggest event in a private companies trajectory. They were going to join the pantheon of Silicon Valley unicorns. And Brian Chesky had spent the holiday season coming into 2020 with a pile of prospectuses, kind of figuring out what story he wanted to tell. And the one he'd landed on was that this would be the year of connection, which just always struck me and stuck with me as I reported the book.

And then bookings just fell off a cliff. I mean, the idea that you would, frankly, leave your home for a while and go to a stranger's home seemed insane to a lot of people. He did two things. He raised money in a pretty humbling way. Raised $2 billion from private investment firms in April of 2020. Required a major cut in their valuation, which is something most tech CEOs are pretty reluctant to do. And then pretty quickly pivoted. I would say got a little lucky, but recognized that, in fact, people did want to travel, but they didn't want to go to a hotel in Las Vegas. They wanted to go to a cabin in the woods for a month.

And so they pivoted to long-term stays very quickly and, really, were back on the IPO track by that summer, went public at the end of 2020 at a just monster valuation. And so, to me, it's a lesson in acting quickly, jumping on the trend when it looks favorable, and really kind of seeing that process through.

- So, Liz, sticking with the travel sector, but more specifically looking at the airlines, American Airlines CEO Doug Parker very committed, making multiple trips to Capitol Hill to secure that multibillion dollar bailout. What did we learn from him and what that tells us about the airline industry today?

LIZ HOFFMAN: I mean, Doug Parker lived in the Willard hotel for a lot of 2020. I should start by saying that American in particular came into this crisis in a fairly weak position. So the government aid was for them in particular absolutely crucial. But stepping back, airlines, you know, I think coming into 2020 there was this sense that they had kind of escaped the boom and bust cycle that is so core, unfortunately, to that industry. They are in the business of flying gigantic capital-intensive hunks of metal around and are constantly lurching from one crisis to another.

And, look, I think there's a fair amount of criticism that you can levy on the airline bailout, which is fundamentally what it was. But just think about how much the sort of travel hell of 2021-2022, the holiday meltdowns that we saw at Southwest. I would just caution people to think about how much worse that would have been had this industry, which is heavily unionized, heavily regulated and training and hours and compliance, you know, had gotten thrown off the rails. The cost of doing that, of course, was that it just goes down as another instance of moral hazard and gives everyone another excuse to to, frankly, hate on the airlines, which is a perennial villain.

- The US auto industry was bailed out long before. And two CEOs had to navigate COVID, Jim Farley, who's the CEO now, and formerly Jim Hackett. What were the circumstances facing them? And how'd they handle it?

LIZ HOFFMAN: Ford came in to the crisis incredibly indebted and sort of, strategically, had lost a lot of ground to companies like Tesla, a lot of the EV startups, a lot of Chinese carmakers. So they had both a financial problem and a strategic problem. The financial problem largely solved itself when the Fed effectively agreed to backstop a huge portion of the corporate debt market. In particular, Jim Hackett had been putting out feelers in Washington.

If you'll remember, an early Fed program had agreed to put Fed money behind very high-rated corporate bonds. Ford had lost its investment grade credit rating fairly early in the crisis. And Jim Hackett did some very quiet lobbying and got a tweak to that rule that allowed the Fed to, effectively, backstop Ford debt. And they did the largest junk bond offering in history. The other part of the Ford story that I found compelling-- Ford is a company that sort of oozes Americana. They made bombers in World War II. They made iron lung for polio patients in the 20th century.

There's a lot of criticism, fairly, I think, about companies sort of pursuing the last penny at the cost of sort of bigger ideals. But Ford has actually always remained fairly true to that DNA. And they stepped up and said, look, there's something we can do here. And they ended up making ventilators, face shields. They used batteries from their power tools and basically pieces of F-150 air conditioning systems, and they made these respirators to help purify the breathing mechanisms for first responders and really help keep hospitals staffed. So I think they deserve a lot of credit for that.

- All right. Nonfiction books about leaders persevering, my favorite personal category. It ain't even close. The book is "Crash Landing." She is Liz Hoffman. Appreciate you being with us. Looking forward to reading it. You got to get us a few copies, Liz.

LIZ HOFFMAN: We'll send them over. Thanks for having me.

- All right. I look forward to reading.