WEBVTT - What It’s Like to Be a Fed President at Jackson Hole 0:00:03.120 --> 0:00:18.440 Bloomberg Audio Studios, Podcasts, radio News. 0:00:20.120 --> 0:00:23.280 Hello and welcome to another episode of the All Thoughts podcast. 0:00:23.360 --> 0:00:25.680 I'm Tracy Allaway and I'm Joe Wisenthal. 0:00:25.920 --> 0:00:27.880 Joe. We are here at Jackson Hole. We made it. 0:00:28.040 --> 0:00:28.720 I love it here. 0:00:29.160 --> 0:00:34.080 So this is the annual Economic Symposium held by the 0:00:34.240 --> 0:00:37.640 Kansas City FED, and it's sort of a gathering of 0:00:37.720 --> 0:00:42.199 central bankers and policy makers. And the idea is that 0:00:42.920 --> 0:00:45.120 a it's a chance for them to talk about the 0:00:45.159 --> 0:00:48.640 sort of pressing issues facing the global economy and maybe 0:00:48.640 --> 0:00:52.760 their individual economies. It's a chance to go over academic 0:00:52.960 --> 0:00:56.400 literature and talk about ideas. It's also a chance potentially 0:00:56.560 --> 0:00:59.440 to guide monetary policy, at least for the FED. 0:00:59.720 --> 0:01:02.520 Right, so this is what people generally know. The FED 0:01:02.600 --> 0:01:05.200 chair gives a speech, but there's also a bunch of 0:01:05.240 --> 0:01:08.480 you know, like in theory and I suppose to practice, 0:01:08.520 --> 0:01:12.240 but in theory it helps policymakers central bankers around the 0:01:12.280 --> 0:01:16.440 world make better decisions in real time if they're up 0:01:16.480 --> 0:01:18.760 on the theories, or if they're up on what's happening 0:01:18.760 --> 0:01:22.000 in academic work and what research is being done in economics. 0:01:22.240 --> 0:01:24.400 And so, for example, the theme of this year is 0:01:24.480 --> 0:01:27.679 monetary policy transmission, which is another way of saying, how 0:01:27.720 --> 0:01:30.240 does monetary policy actually affect the real economy? Kind of 0:01:30.280 --> 0:01:32.280 a big topic, yeah, but there are a lot of 0:01:32.319 --> 0:01:35.119 questions about that. And you know how the FED is, say, 0:01:35.120 --> 0:01:38.040 going to proceed with the rate cut cycle. Well, you 0:01:38.040 --> 0:01:40.959 would want to know what rate cuts actually do before 0:01:41.000 --> 0:01:43.960 you know that might guide you. So it makes sense 0:01:44.000 --> 0:01:46.640 to sort of convene everyone here talk about the latest 0:01:46.640 --> 0:01:49.840 research and what monetary policy actually does, and then maybe 0:01:49.840 --> 0:01:51.840 that can make for better short term decisions. 0:01:51.960 --> 0:01:55.480 Absolutely, and it sort of begs the question, I guess, 0:01:55.920 --> 0:01:58.440 what is it like to be a policy maker at 0:01:58.520 --> 0:02:00.880 Jackson Hole? So you and I are coming at it 0:02:00.920 --> 0:02:04.840 from an outsider's perspective, obviously, And I should just say 0:02:04.880 --> 0:02:08.120 for people who don't know, there's only a handful of 0:02:08.160 --> 0:02:11.800 journalists basically who, yeah, who are allowed in the room 0:02:12.040 --> 0:02:15.640 where all these discussions happen and where Powell's speech is 0:02:15.680 --> 0:02:19.320 actually given. Everyone else is sort of milling around outside, 0:02:19.400 --> 0:02:23.680 learning by osmosis what's being discussed in the room. And 0:02:23.760 --> 0:02:28.320 so I'm really curious what Jackson Hole is like for 0:02:28.440 --> 0:02:31.320 an actual central banker Totally. 0:02:31.400 --> 0:02:33.480 I have to say, like when I go to conferences, 0:02:34.080 --> 0:02:35.720 you know, I'm like everyone else. I just want to 0:02:35.840 --> 0:02:37.680 hang out in the lobby and chit chat with people 0:02:37.720 --> 0:02:39.960 I don't actually like wanting to hear panels and stuff. 0:02:40.080 --> 0:02:42.760 So I sort of like that from me and you perspective. 0:02:42.960 --> 0:02:45.239 We don't have to feel guilty about not going into 0:02:45.240 --> 0:02:47.200 the panels and like you're saying, because we aren't even 0:02:47.200 --> 0:02:49.440 given the option in the first place, So we can 0:02:49.520 --> 0:02:52.120 just hang out in the lobby and the lodge and 0:02:52.160 --> 0:02:53.720 now feel like we're shirking our job. 0:02:53.919 --> 0:02:58.480 Yeah, we physically can't try to gather information like normal 0:02:58.560 --> 0:03:01.359 journalists because this is service will stop us from entering 0:03:01.400 --> 0:03:02.119 the special room. 0:03:02.200 --> 0:03:02.639 That's right. 0:03:02.680 --> 0:03:05.320 Okay, Well, I'm very happy to say that we do, 0:03:05.440 --> 0:03:07.960 in fact have the perfect guest, someone who's been on 0:03:08.000 --> 0:03:10.840 the podcast before. We are going to be speaking with 0:03:10.919 --> 0:03:14.800 the president of the Richmond Fed, mister Tom Barkin, and 0:03:14.840 --> 0:03:16.960 he is going to tell us what it is like 0:03:17.160 --> 0:03:21.160 to actually be here at Jackson Hole as a FED member. 0:03:21.440 --> 0:03:24.400 And it's great because for people who remember the last 0:03:24.400 --> 0:03:27.080 time we talked to Tom Barkin, we went on a 0:03:27.120 --> 0:03:30.560 trip with him to North Carolina, and so it's essentially 0:03:30.600 --> 0:03:34.320 the two sides of being a regional FED president the job, right, 0:03:34.639 --> 0:03:37.840 So one part of the job is to understand what's 0:03:37.880 --> 0:03:40.520 going on in your district, and Tom does that in 0:03:40.600 --> 0:03:43.800 various ways. But then the other part is essentially we're 0:03:43.840 --> 0:03:46.520 not in DC, but the quote DC part of the 0:03:46.640 --> 0:03:49.120 job where then you like take the information that you 0:03:49.200 --> 0:03:52.240 learn and talk to other people and you know, stay 0:03:52.280 --> 0:03:54.720 up todate on the latest literature and all this, and 0:03:54.800 --> 0:03:56.840 so we're going to learn what it is that they 0:03:56.840 --> 0:03:57.440 really do here. 0:03:57.600 --> 0:04:00.000 Okay, let's do it. Tom, welcome back to the show. 0:04:00.320 --> 0:04:01.560 It's great to see you guys again. 0:04:01.800 --> 0:04:04.600 It's nice to see you in as lovely a setting 0:04:04.680 --> 0:04:07.119 as Jackson Hole, Wyoming. 0:04:06.720 --> 0:04:08.040 Although mon Airy was great too. 0:04:08.120 --> 0:04:11.320 Oh yeah, yes, absolutely, I'm thrilled just to be out 0:04:11.320 --> 0:04:14.800 of New York City in general. But okay, let's talk 0:04:14.800 --> 0:04:17.120 about Jackson Hole. How many of these have you actually 0:04:17.120 --> 0:04:17.960 been to at this point? 0:04:18.160 --> 0:04:18.880 That's my seventh. 0:04:19.040 --> 0:04:22.640 Oh wow, yes, And in that time period, have they 0:04:22.680 --> 0:04:24.920 always followed a similar format? 0:04:25.680 --> 0:04:27.760 Yes, the format has always been the same. Other than 0:04:27.880 --> 0:04:30.640 I say, I've been to seven during COVID. I know 0:04:30.680 --> 0:04:33.240 we canceled one in twenty twenty, so, but even that 0:04:33.320 --> 0:04:36.320 one kept the same format. It's an academic conference and 0:04:36.360 --> 0:04:38.800 so the chairl give a speech, they give a couple 0:04:38.839 --> 0:04:41.440 of papers, then you have dinner, then they wake up 0:04:41.440 --> 0:04:43.320 the next morning, they give a couple of papers. Another 0:04:43.360 --> 0:04:45.120 central banker give a speech, and then you move on. 0:04:45.800 --> 0:04:48.640 I know that like someone gives a paper that they've 0:04:48.640 --> 0:04:51.480 worked on, and that there are some official discustants who 0:04:51.520 --> 0:04:54.000 may have some respondents, and then people ask questions what 0:04:54.040 --> 0:04:55.919 do you do? Do you do you pipe in with 0:04:56.000 --> 0:04:57.080 any questions? 0:04:57.200 --> 0:04:58.160 Are you so? 0:04:58.839 --> 0:05:00.760 Do you challenge them and them on the spot. 0:05:01.160 --> 0:05:02.599 There's a lot of people out here who try to 0:05:02.600 --> 0:05:05.880 do that. I've got a different agenda. They quite intentionally 0:05:05.880 --> 0:05:09.560 do these around monetary policy topics. So today they one 0:05:09.600 --> 0:05:12.080 of the papers was about the relation between inflation and 0:05:12.160 --> 0:05:15.640 unemployment and whether that's changed. And I'm looking for good 0:05:15.640 --> 0:05:17.920 ideas for policy. Yeah, so I'm looking for people to 0:05:17.960 --> 0:05:19.440 put something on the table that I can say, hey, 0:05:19.440 --> 0:05:22.560 now that's an interesting idea that supports something that I've 0:05:22.560 --> 0:05:25.400 been thinking, or that's a different way of looking at something. 0:05:25.480 --> 0:05:28.200 So I'm a customer of this, and there's a lot 0:05:28.240 --> 0:05:29.760 of people who it's just like college. There's a lot 0:05:29.760 --> 0:05:31.479 of people who sit in the front row that's probably 0:05:31.560 --> 0:05:31.800 not me. 0:05:32.200 --> 0:05:34.640 The other thing I wanted to ask is the materials 0:05:34.720 --> 0:05:38.000 for the actual conference, so we don't see them until 0:05:38.000 --> 0:05:40.520 they're sort of like drip fed to the public. Do 0:05:40.560 --> 0:05:42.560 you get them in advance and you can read them 0:05:42.600 --> 0:05:44.600 and think about them before you actually arrived. 0:05:44.640 --> 0:05:47.000 Absolutely, I got them about two weeks ago, you know, 0:05:47.080 --> 0:05:51.960 probably four sixty page papers, appendices, charts, regressions, all that stuff. 0:05:52.320 --> 0:05:54.400 I read through them, and my team also reads through them, 0:05:54.400 --> 0:05:56.200 and we actually do a whole briefing session the week 0:05:56.240 --> 0:06:00.520 before where my economists will say, I really liked this paper. 0:06:00.960 --> 0:06:02.960 Here's something that you know, somebody needs to ask this 0:06:03.040 --> 0:06:05.640 question because I think about it differently, and so I'm 0:06:05.640 --> 0:06:09.039 sort of zoned into the papers before they come. Academic 0:06:09.040 --> 0:06:12.320 conferences have this other tradition, though the discussant, and so 0:06:12.480 --> 0:06:14.600 someone will give a paper and then somebody else has 0:06:14.600 --> 0:06:17.240 done research in the exact same field will give their 0:06:17.320 --> 0:06:19.760 view on the exact same topic. It's almost never the same, 0:06:20.080 --> 0:06:21.560 so you do get a little bit of this back 0:06:21.640 --> 0:06:24.080 and forth debate, which is very helpful if you're trying 0:06:24.080 --> 0:06:26.640 to think, as I do, about how to make a 0:06:26.720 --> 0:06:27.680 make sense of policy. 0:06:28.200 --> 0:06:31.200 This is a question that many of our listeners have 0:06:31.360 --> 0:06:34.120 so I'm relaying it to you. You know, there's the 0:06:34.200 --> 0:06:38.120 bar here, there's a restaurant, there's hiking. What do you 0:06:38.200 --> 0:06:41.720 do when you're not in the room and when you're, say, 0:06:41.800 --> 0:06:44.960 on a hike with some other central banker or maybe 0:06:45.000 --> 0:06:47.280 someone you know, maybe from a different country or for 0:06:47.640 --> 0:06:51.679 are you talking about economics or are you talking about Wow, 0:06:51.720 --> 0:06:54.000 did you see that bald eagle out there? Did you 0:06:54.040 --> 0:06:56.680 catch that? You know, see the moon last night? Like? 0:06:56.720 --> 0:06:58.039 What do you guys talking about? 0:06:58.279 --> 0:07:00.920 So, as I said, the agenda's pretty There'll be three 0:07:00.920 --> 0:07:04.520 dinners and then in the afternoons there's a hike. And 0:07:04.600 --> 0:07:06.920 so after the dinner, sometimes you go to the bar 0:07:06.960 --> 0:07:09.600 and sometimes you don't. There's lots of opportunities to make 0:07:09.600 --> 0:07:13.000 new relationships and connections. There are central bankers from around 0:07:13.040 --> 0:07:14.960 the world here. And when I'm talking to a central 0:07:15.000 --> 0:07:18.840 banker from Argentina, I'm talking about the Argentinian economy because 0:07:18.840 --> 0:07:20.720 I'm interested in it. And you know, we don't have 0:07:20.760 --> 0:07:22.640 the same kind of backgrounds and our kids don't go 0:07:22.640 --> 0:07:25.400 to school together. So that's kind of business. Now, when 0:07:25.400 --> 0:07:27.560 I talk to people that I already know, then we 0:07:27.600 --> 0:07:30.800 could talk about, you know, most anything, tell stories about whatever. 0:07:30.880 --> 0:07:33.000 But I think these other central bank I mean, it 0:07:33.080 --> 0:07:36.320 is very interesting to understand how the US is seen 0:07:36.320 --> 0:07:38.840 from other windows and how those economies are. I talked 0:07:38.840 --> 0:07:41.880 to someone from Germany yesterday. This is going to make 0:07:41.920 --> 0:07:44.360 me interested, but not yours. Our savings rate went up 0:07:44.760 --> 0:07:47.320 at the beginning of COVID to about fifteen or sixteen percent. 0:07:47.400 --> 0:07:49.840 The same thing happened in Germany. Our savings rate has 0:07:49.840 --> 0:07:51.840 come down to about three and a half. Theirs is 0:07:51.880 --> 0:07:56.440 still at seventeen. Really, so why are German consumers not 0:07:56.640 --> 0:07:59.559 spending the way American consumers are. That's an interesting topic 0:08:00.040 --> 0:08:01.560 thing we spent some time on. It's the kind of 0:08:01.880 --> 0:08:05.840 example of the kind of thing. Well, so, the thing 0:08:05.880 --> 0:08:08.840 that really makes it crazy interesting is there's a whole 0:08:08.840 --> 0:08:11.760 social safety debt in Europe that doesn't exist here. And 0:08:11.800 --> 0:08:13.920 so most of the time you think people are saving 0:08:14.320 --> 0:08:17.120 for retirement, they're saving for a rainy day, or they're 0:08:17.160 --> 0:08:19.880 saving because they're worried about losing their job. Well, in 0:08:19.920 --> 0:08:22.160 Germany they kept everyone's job during the pandemic, and you've 0:08:22.160 --> 0:08:24.560 got a pension, So why are they saving? And I 0:08:24.560 --> 0:08:26.920 think the best explanation I've gotten it's actually something on 0:08:26.920 --> 0:08:30.040 my list to study going forward. Is there's just a 0:08:30.040 --> 0:08:34.640 lot more precautionary feeling about the situation in Europe, the 0:08:34.720 --> 0:08:37.440 risks versus the Ukraine and what's happening over there, And 0:08:37.480 --> 0:08:39.000 it's just a culture that maybe it's just gotten a 0:08:39.040 --> 0:08:43.040 lot more cautious due to geopolitics, if nothing else. 0:08:43.679 --> 0:08:46.559 That does sound really interesting by and large. I mean, 0:08:46.600 --> 0:08:50.800 obviously the situation in the Argentina economy is radically different 0:08:50.960 --> 0:08:54.400 than it is here in the US. Germany is probably still, 0:08:54.480 --> 0:08:58.080 you know, all things considered similar cyclically to the US. 0:08:58.440 --> 0:09:00.920 Does it feel like buy and large charge, at least 0:09:00.960 --> 0:09:05.160 among developed countries central bankers that there is a strong 0:09:05.240 --> 0:09:09.400 set of common mysteries perhaps, or are they really like 0:09:09.440 --> 0:09:12.800 everyone's sort of seeing different things in their own country. 0:09:12.800 --> 0:09:14.640 I mean, I'm sure it's makes of both, But how 0:09:14.720 --> 0:09:16.280 much of a global factor? Is there? 0:09:16.600 --> 0:09:18.800 Much more in common than different? The whole practice of 0:09:18.840 --> 0:09:22.520 central banking has been i'd say globalized over the years, 0:09:23.000 --> 0:09:26.800 and central bankers really do think about inflation targeting, for example, 0:09:26.960 --> 0:09:29.319 the same ways in their banks like New Zealand and 0:09:29.360 --> 0:09:32.679 Australia that back in two thousand or even before that 0:09:32.960 --> 0:09:35.160 set inflation targets before the rest of us, and we 0:09:35.280 --> 0:09:37.840 learned from them, and so there's a lot of learning, 0:09:37.920 --> 0:09:39.880 there's a lot of discussion. I think there's very much 0:09:39.880 --> 0:09:42.840 a common framework. Now. The economies are very different. I mean, 0:09:42.840 --> 0:09:46.680 the US economy has come through this unbelievably well. The 0:09:46.760 --> 0:09:48.920 European economies have not, and so we have a much 0:09:48.960 --> 0:09:51.600 stronger economy. So much of our economy as services, so 0:09:51.679 --> 0:09:55.599 much as supplied to ourselves. A lot of this deglobalization 0:09:55.679 --> 0:09:58.960 has felt much more on the European side. The challenges 0:09:59.000 --> 0:10:00.640 in China right now are felt much more on the 0:10:00.640 --> 0:10:04.440 European side. And then emerging market countries, they really just 0:10:04.600 --> 0:10:06.480 are worried we're going to increase rates further and they're 0:10:06.480 --> 0:10:09.160 going to end up offside, and so they're very dependent 0:10:09.240 --> 0:10:11.080 on our strength of our dollar the weakness. 0:10:11.360 --> 0:10:29.880 Now, when we were with you in North Carolina, I 0:10:29.920 --> 0:10:33.360 remember we talked about the process of putting together the 0:10:33.400 --> 0:10:37.600 statements for the FMC meetings. And we're here at Jackson 0:10:37.679 --> 0:10:41.400 Hole every year the FED chair gives a speech. What's 0:10:41.440 --> 0:10:45.000 the process like for putting together that particular speech? 0:10:45.760 --> 0:10:48.199 Well, it's his speech, so I'll let him talk backly 0:10:48.240 --> 0:10:50.600 how he does the process. But I've talked to him before, 0:10:50.640 --> 0:10:52.959 and I know he thinks about it for months. I mean, 0:10:53.480 --> 0:10:55.439 this is a big speech on a global stage. It's 0:10:55.480 --> 0:10:58.800 gotten a certain amount of cachet to it, and he 0:10:58.840 --> 0:11:00.640 thinks hard about, you know, what he wants to say 0:11:00.640 --> 0:11:02.240 and how he wants to say it, and he writes 0:11:02.280 --> 0:11:04.760 the speech, and you know he'll consult with who he 0:11:04.880 --> 0:11:07.080 wants to when he does that, but it's his speech 0:11:07.080 --> 0:11:09.000 and it's his conversation. 0:11:09.520 --> 0:11:12.240 Were you surprised? So you know, the markets were a 0:11:12.240 --> 0:11:16.480 bit surprised by the forcefulness with which Powell really just 0:11:16.520 --> 0:11:20.920 focused on cutting off left tail outcomes for the labor market. 0:11:21.320 --> 0:11:24.400 And it's clear that the big shift has happened, and 0:11:24.440 --> 0:11:27.920 he very explicitly said, we do not have any aspirations 0:11:27.920 --> 0:11:30.199 to see a softer labor market, and in some sense 0:11:30.280 --> 0:11:33.160 it's softer than it is in twenty nineteen. Were you surprised, 0:11:33.160 --> 0:11:35.040 I don't know when you first read this speech, probably 0:11:35.080 --> 0:11:36.680 before us. Were you surprised? 0:11:37.480 --> 0:11:40.120 He gets to write his own speech, so he once 0:11:40.200 --> 0:11:41.480 see that. 0:11:41.360 --> 0:11:42.679 Clearly, I think we're taken by surprise. 0:11:42.720 --> 0:11:44.680 Otherwise, we want to see the economy. Since we were 0:11:44.720 --> 0:11:46.800 together three or four months ago, the economy has moved 0:11:46.800 --> 0:11:49.160 in a in a very different way. First of all, 0:11:49.200 --> 0:11:51.960 on the inflation side, I might have even said four 0:11:52.000 --> 0:11:53.840 or five months ago, I was looking for inflation to 0:11:53.920 --> 0:11:57.200 sustain and broaden. So it's sustained. We've got very low 0:11:57.240 --> 0:11:59.319 readings for four months in a row, and it's now 0:11:59.320 --> 0:12:02.400 across the backs, whereas six months ago, eight months ago, 0:12:02.480 --> 0:12:05.200 it was really just in goods, and so the concern 0:12:05.360 --> 0:12:10.120 about inflation reaccelerating has definitely come down significantly. At the 0:12:10.120 --> 0:12:13.560 same time, the labor market stats have also softened, and 0:12:13.600 --> 0:12:16.160 so you know, the phrase I've been using is people 0:12:16.160 --> 0:12:19.120 aren't hiring, but they're not firing, and that's just not 0:12:19.280 --> 0:12:23.960 a high likely sustainable outcome. Either demand will continue and 0:12:23.960 --> 0:12:26.520 people start hiring again, or you'll start to see layoffs. 0:12:26.520 --> 0:12:28.120 And so I think there's more concern on the labor 0:12:28.120 --> 0:12:31.040 market and less concern on inflation relatively, and we've got 0:12:31.040 --> 0:12:33.280 to dual mandate. So I think if you look at 0:12:33.320 --> 0:12:35.839 the minutes that came out a week ago, they'll give 0:12:35.840 --> 0:12:37.680 you a pretty good sense of where the committee was. 0:12:37.720 --> 0:12:41.280 And I think, as always, Jay speaks thoughtfully and responsibly 0:12:41.280 --> 0:12:42.160 for the committee. 0:12:42.360 --> 0:12:44.160 So one of the reasons we like talking to you 0:12:44.280 --> 0:12:47.120 is because you go out and you speak to companies 0:12:47.240 --> 0:12:50.520 about what they're actually doing in an attempt to figure 0:12:50.559 --> 0:12:53.800 out what that means for the economy. What are you 0:12:53.880 --> 0:12:58.320 hearing from companies right now versus say April when we 0:12:58.400 --> 0:12:59.800 last spoke to you, was it April? 0:13:00.080 --> 0:13:00.400 I think so. 0:13:01.360 --> 0:13:03.680 Consumers, you hear a lot of talk about people saying 0:13:03.720 --> 0:13:06.080 that consumer's weak and people are running out of savings. 0:13:06.360 --> 0:13:08.480 That's not what I'm hearing. What I'm hearing is consumers 0:13:08.480 --> 0:13:11.920 are still spending, but they're choosing. And the way I 0:13:12.000 --> 0:13:14.920 think about it is they now have the time to 0:13:15.040 --> 0:13:16.760 when they go into a store and they see something 0:13:16.760 --> 0:13:19.480 that's at a price, they don't like to say, I 0:13:19.480 --> 0:13:21.560 think I'm going to do something else. And so if 0:13:21.600 --> 0:13:24.320 you look at Walmart's you know results, they would talk 0:13:24.360 --> 0:13:27.160 about people trading down. If you look at targets results, 0:13:27.200 --> 0:13:29.719 they talked about the kind of reaction they're getting to 0:13:29.800 --> 0:13:33.160 lower prices. McDonald's results in the five dollars value meal. 0:13:33.160 --> 0:13:36.480 I've talked to hotel chains that every room is booked, 0:13:36.480 --> 0:13:38.680 but they can't raise price at all because the second 0:13:38.720 --> 0:13:40.640 they raise price, people just won't buy it and won't 0:13:40.640 --> 0:13:42.760 book it. I talk to a fast food leader who's 0:13:42.840 --> 0:13:47.080 rolling out software actually to encourage their franchises not to 0:13:47.200 --> 0:13:48.880 raise prices anymore. 0:13:49.280 --> 0:13:50.800 That's a counter trend. 0:13:50.960 --> 0:13:54.000 Yeah, So I really think what's going on is prices 0:13:54.040 --> 0:13:57.400 are up, people are aware of it, and people are reacting. 0:13:57.440 --> 0:14:00.560 Two years ago, you know, you were just out spending 0:14:00.559 --> 0:14:02.600 and you just wanted it, or you needed those Tailor 0:14:02.600 --> 0:14:04.400 Swift tickets. You always like it when I bring Taylor 0:14:04.440 --> 0:14:08.440 Swift back in. But I think today people are making 0:14:08.520 --> 0:14:11.880 choices and they're spending money where there's promotions where there's discounts, 0:14:12.320 --> 0:14:14.360 or they're you know, moving from beef to chicken, or 0:14:14.400 --> 0:14:15.960 they're moving from Kroger to Walmart. 0:14:16.160 --> 0:14:20.880 Do you still hear from companies that have vacancies unfilled? 0:14:20.920 --> 0:14:21.600 What's going on with that? 0:14:21.960 --> 0:14:26.440 You do? You do hear vacancies, It's narrower, so it's 0:14:26.480 --> 0:14:32.880 really places with skilled trades, nurses, mechanics, auto mechanics. Those 0:14:32.880 --> 0:14:34.920 are the kinds of places where people are still hiring 0:14:35.280 --> 0:14:37.520 in small towns. And we were together in a small town, 0:14:37.560 --> 0:14:39.840 but you just don't have the same supply of labor 0:14:40.280 --> 0:14:42.880 in small towns. That's where they're vacancies. And when I'm 0:14:42.920 --> 0:14:45.240 talking to the bigger companies. What they're telling me is, 0:14:46.240 --> 0:14:48.280 you know, I'm just kind of slowing down the hiring. 0:14:48.680 --> 0:14:50.680 You know, I'm gonna let attriction work my workforce down. 0:14:50.680 --> 0:14:52.200 I don't want to fire people because I don't want 0:14:52.200 --> 0:14:54.280 to end up short again, but I'm just gonna slow 0:14:54.320 --> 0:14:55.840 it down. And then I've been pressing them and I've 0:14:55.880 --> 0:14:59.040 been saying, but do you have plans for layoffs? Because 0:14:59.080 --> 0:15:00.680 you know, if you're going to do a layoff, it 0:15:00.680 --> 0:15:02.280 takes you three months to get it done, and no 0:15:02.320 --> 0:15:05.880 one that's doing that right, I mean one person here there. 0:15:06.080 --> 0:15:07.920 And so that's why I say we're in a low hiring, 0:15:07.960 --> 0:15:10.920 low firing mode. It just that doesn't feel like something 0:15:10.960 --> 0:15:12.640 that's going to persist. And so it's going to move 0:15:12.680 --> 0:15:14.080 left or it's going to move right. We'll just have 0:15:14.120 --> 0:15:15.080 to see. 0:15:15.240 --> 0:15:19.960 What's the urgency then on supporting the labor market, and 0:15:20.320 --> 0:15:23.000 there's obviously a debate going on right now about how 0:15:23.160 --> 0:15:27.880 fast deterioration in that market actually happens. We had Claudia 0:15:27.960 --> 0:15:31.080 Palm on the podcast recently and she was talking about 0:15:31.160 --> 0:15:33.720 maybe it's different this time, but how are you thinking 0:15:33.720 --> 0:15:36.280 about the pace or the rate of change in the 0:15:36.320 --> 0:15:37.080 labor market. 0:15:37.760 --> 0:15:39.840 So the other thing that's happening in the labor market 0:15:40.000 --> 0:15:42.360 is a lot more supply of labor, and part of 0:15:42.360 --> 0:15:46.320 that is participation, prime age participations hitting twenty twenty five 0:15:46.400 --> 0:15:50.440 year highs, and immigration which is up significantly. And so 0:15:50.560 --> 0:15:53.640 the last jobs report, where unemployment went up from four 0:15:53.640 --> 0:15:56.800 point one to four point three, you actually added jobs 0:15:56.880 --> 0:15:59.280 one hundred and fourteen thousand jobs. We just added four 0:15:59.360 --> 0:16:01.960 hundred and twenty five people to the workforce. So the 0:16:02.000 --> 0:16:05.000 denominator got bigger. And so you know, there's some people 0:16:05.000 --> 0:16:07.480 who look at the unemployment rate and say, oh my gosh, 0:16:07.600 --> 0:16:09.680 the labor market's about to fall off a cliff. That's 0:16:09.680 --> 0:16:12.120 not how I see it, you know, I see a 0:16:12.320 --> 0:16:15.840 loosening labor market being driven by a lot more supply. Now, 0:16:16.400 --> 0:16:18.920 what's the urgency. It's not. We're not in a situation 0:16:19.000 --> 0:16:22.120 I don't believe where there is this big cliff there. 0:16:22.120 --> 0:16:24.480 But when we make policy, you're trying to make it 0:16:24.480 --> 0:16:26.800 for a year from now, right, because the lags of 0:16:26.840 --> 0:16:29.120 monetary policy, you're trying to meet a year a year 0:16:29.120 --> 0:16:32.040 from now. And so you've got a labor market which 0:16:32.080 --> 0:16:34.480 is slowly cooled, and you've got inflation which is now 0:16:34.520 --> 0:16:37.640 gradually cooled, and so you sort of say, well, which 0:16:37.800 --> 0:16:39.920 do I worry most more about? And it's been very 0:16:39.920 --> 0:16:41.400 clear for the last two and a half years that 0:16:41.480 --> 0:16:43.840 all you'd worry about is inflation, and now those are 0:16:43.920 --> 0:16:46.440 much more balanced. And then you ask the question, Okay, 0:16:46.440 --> 0:16:49.840 we've got rates and restrictive territory. Real rates if you 0:16:49.880 --> 0:16:52.040 look at the financial markets are a little bit over 0:16:52.080 --> 0:16:54.120 two percent. Maybe you can take a little bit of 0:16:54.160 --> 0:16:56.120 the edge off that. That's I think dialing down the 0:16:56.200 --> 0:16:58.080 level of restraint is the way I think the chair 0:16:58.120 --> 0:16:59.640 says it. But you can take a little bit of 0:16:59.680 --> 0:17:01.880 the edge off that in a world where your risks 0:17:01.880 --> 0:17:03.480 are more balance. That's how I think about it. 0:17:03.600 --> 0:17:06.200 I'm going to try to keep pushing you on this. 0:17:06.080 --> 0:17:08.159 And well, this will be fun. Yeah, you'll ask me 0:17:08.200 --> 0:17:09.240 the same question five times. 0:17:09.359 --> 0:17:11.240 Yeah, I'll see if I get to get a slightly 0:17:11.240 --> 0:17:14.480 different answer each time. You know, there'd be one school 0:17:14.600 --> 0:17:18.160 of thought that would say, if you're concerned about potential 0:17:18.200 --> 0:17:21.199 weakening of the labor market, that the current low firing 0:17:21.320 --> 0:17:24.800 hiring is unsustainable and the risks have shifted to the 0:17:24.880 --> 0:17:28.320 labor side, that you want to start the rate cut 0:17:28.400 --> 0:17:31.400 cycle and make a statement, and maybe that would mean 0:17:31.520 --> 0:17:36.160 fifty basis points versus say, easing into it with maybe 0:17:36.240 --> 0:17:39.680 a few twenty fives strong out How would you think 0:17:39.720 --> 0:17:44.000 about the different possible paths that the FED can now 0:17:44.119 --> 0:17:48.080 take to reducing the risks of a bad outcome in 0:17:48.119 --> 0:17:49.040 the labor market. 0:17:49.320 --> 0:17:51.679 To me, the question is all conviction. You know, what 0:17:51.720 --> 0:17:54.600 do you convinced of? Yeah, And the stronger your conviction, 0:17:54.840 --> 0:17:57.760 then the more forcibly you move, whether that's raising rates 0:17:57.840 --> 0:17:59.840 or lowering rates. And then the more that you're in 0:17:59.880 --> 0:18:02.920 a test and learn world, I think the more you say, 0:18:02.960 --> 0:18:06.159 let's move gradually or deliberately or methodically, whichever your favorite 0:18:06.200 --> 0:18:09.000 word is. So to me, it's about conviction. How convinced 0:18:09.040 --> 0:18:11.600 are you and the scenario you just painted, you were 0:18:11.640 --> 0:18:14.679 extremely convinced, even convincing, if you want to put it 0:18:14.720 --> 0:18:16.520 that way, in terms of what you were trying to do. 0:18:17.200 --> 0:18:19.119 I think we'll learn more as the year goes on 0:18:19.240 --> 0:18:20.840 in terms of the data in the same way that 0:18:20.840 --> 0:18:23.359 we did when we started raising rates with inflation. We 0:18:23.400 --> 0:18:25.639 started small, and then you know, we got convinced that 0:18:25.680 --> 0:18:28.200 inflation was not going away and you had to move faster. 0:18:28.720 --> 0:18:30.880 So the more convinced you are the faster and more? 0:18:31.000 --> 0:18:34.480 And how what scenario are you convinced of right now? 0:18:35.320 --> 0:18:36.960 Well, I've described you know where we are right now, 0:18:36.960 --> 0:18:39.600 which is we've got risks on the inflation side still, 0:18:39.600 --> 0:18:42.480 and we've got risks on the unemployment side still, and 0:18:42.520 --> 0:18:45.040 we've got either one of them could go in both ways. 0:18:45.080 --> 0:18:47.480 So I'm in. I'm very much a test and learn 0:18:47.560 --> 0:18:50.200 kind of guy in general, and you know, we'll obviously 0:18:50.280 --> 0:18:52.000 learn a lot even before the next meeting, so we'll 0:18:52.000 --> 0:18:52.600 see what we learn. 0:18:53.119 --> 0:18:55.800 You mentioned data just then, and this is obviously been 0:18:55.840 --> 0:18:58.760