Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Plumbing Industry
Transcript
- Lucas: You know how everyone talks about inflation in groceries or rent? I want to talk about something that's hitting households in a quieter but maybe more persistent way: plumbing. Luna: Like the cost to fix a leaky faucet or replace a water heater? Because I just had to do that last month and the bill was eye-watering. Lucas: Exactly. And that's not random. The plumbing industry is a perfect case study for stagflation — high prices, slow growth, and a structural supply constraint that isn't going away. Before we get into it, I'll just say: if walking through the economy with us has made something click for you, we keep this show ad-free because of listeners who chip in. It's buy me a coffee dot com slash fexingo. Seriously, even a five-dollar coffee helps keep the lights on. Luna: Yeah, it's a small thing but it adds up. And it means we never have to do a sponsored segment on, like, mattress foam. Lucas: Right. So — plumbing. The Bureau of Labor Statistics data shows there are about 24,000 fewer plumbers in the U.S. today than there were five years ago. Meanwhile, the average age of a plumber is 55. That's a demographic time bomb. Luna: And the housing stock isn't getting any younger either. The median age of a home in the U.S. is now over 40 years old. Older pipes, older fixtures — more things break. Lucas: Right. So you have supply of labor shrinking and demand for repairs growing. The result is that plumbing service prices have risen about 22 percent since the start of 2023, according to the CPI data for maintenance and repair services. That's way above the headline inflation rate, which is hovering around 3 percent or so. Luna: And it's not just labor. Materials have been volatile too. Copper pipe prices swung 30 percent last year alone. Plumbers are having to build that uncertainty into their quotes. Lucas: That's a key point. Many contractors have shifted from time and materials billing to fixed-price contracts. They're essentially charging a premium upfront to cover the risk of material price spikes. That's a rational hedge, but it means homeowners face a higher sticker price even if the job is straightforward. Luna: So in a stagflation environment — high inflation plus slow growth — plumbing becomes this sticky inflation contributor. It's not like you can postpone a burst pipe. The demand is inelastic. Lucas: Exactly. And the labor shortage is structural. Fewer young people are entering the trades. High school vocational programs were gutted decades ago. There's this cultural bias toward four-year degrees. So the pipeline of new plumbers is thin. Luna: And the ones who are coming in are demanding higher wages. Hourly rates for plumbers in major metros like New York or San Francisco are now north of $150 an hour. That's not just inflation — that's a scarcity premium. Lucas: Right. And that's the stagflation pattern: you have cost-push inflation from labor scarcity, not just from demand overheating. The broader economy is growing slowly — real GDP growth was only 2.1 percent annualized in the first quarter — but plumbing prices are accelerating. Luna: It's also interesting how this feeds into the housing affordability crunch. If you're a first-time homebuyer, you're already stretched. Then you discover the water heater is 15 years old and needs replacing, and that's another $2,000 you didn't budget for. Lucas: Some homeowners are responding by deferring maintenance. But that's a gamble. A small leak ignored can become a $10,000 mold remediation. So the cost compounds. Luna: There's also a geographic angle. In states like Florida and Texas, where new construction has boomed, there's more competition for plumbers. But in the Rust Belt, the existing stock is older and the workforce is aging faster. Lucas: I saw a stat from the National Association of Home Builders that the number of plumbing contractors has actually declined by about 5 percent since 2020, even as housing starts picked up. That's a mismatch. Luna: So what's the solution? Apprenticeship programs? Higher immigration for skilled trades? Lucas: Both. But it takes years to train a competent plumber. And immigration policy is, well, uncertain. The Fed's latest Beige Book actually mentioned that construction and trades labor remains one of the hardest categories to fill. And that was before the tariff news. Luna: Tariffs on imported materials — like the proposed generic drug tariffs — but also on steel and aluminum, which affect pipe costs. That's another layer. Lucas: Right. The import price data from June showed costs of goods from China hit their highest since 2008. A lot of plumbing fixtures and fittings come from China. So even if labor costs stabilize, materials might not. Luna: So plumbing is this perfect microcosm: aging workforce, aging housing stock, inelastic demand, and supply chain vulnerability. It's not going away. Lucas: And it's a reminder that inflation isn't just about the stuff you buy at the grocery store. It's embedded in the services that keep your house running. That's the kind of inflation that's harder to squeeze out with interest rate hikes. Luna: Because if you raise rates, you slow the economy, but you don't create more plumbers. You might even discourage people from investing in training programs if credit is tight. Lucas: Exactly. The Fed can crush demand, but not supply constraints that are demographic and structural. That's the classic stagflation bind. Luna: I'm curious — are there any signs that more young people are starting to consider the trades? Given the wage premiums now? Lucas: There are some green shoots. Enrollment in trade schools is up modestly — about 4 percent year-over-year according to the National Student Clearinghouse. But from a very low base. And the average age of new entrants is still around 28, because many come after trying other careers first. Luna: So it'll take a decade to meaningfully shift the supply curve. Lucas: Probably. In the meantime, homeowners should expect plumbing costs to keep outpacing general inflation. And that's the story for a lot of skilled trades — electricians, HVAC, roofing. They all face similar dynamics. Luna: Which means the 'services inflation' that the Fed keeps talking about is not just restaurants and haircuts. It's the stuff that literally keeps your house from falling apart. Lucas: Right. And I think that's worth paying attention to, because it's not something monetary policy can easily fix. Next time we'll look at another trade facing similar pressure. Luna: Looking forward to it. 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