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Speaker 2: Let's go to join Sue, University of Michigan Surveys of
Speaker 2: Consumer Director. Let's talk about this umished data, Joanne, a
Speaker 2: little bit weaker than expected on the surface.
Speaker 3: What can you tell us?
Speaker 4: So it came in a little bit weaker, It declined
Speaker 4: from last month, but it was actually a very pervasive drop.
Speaker 4: We sought across all demographic groups. Republicans, Independence, Democrats alike.
Speaker 4: All declined from last month and very much. So this
Speaker 4: is a worry about inflation coming back in the year ahead.
Speaker 5: Yeah, speaking of that, I mean that one year inflation
Speaker 5: expectation ticking up to four point three percent. That's one
Speaker 5: hundred bass points higher than what was estimated and the
Speaker 5: prior read that seems very significant.
Speaker 6: Can you walk us through that?
Speaker 4: Absolutely, So this is a huge jump. We very rarely
Speaker 4: see such a huge one month jump in year ahead
Speaker 4: inflation expectations. So overall consumers are just really worried about
Speaker 4: the negative impacts of tariffs, and they're really expecting tariffs
Speaker 4: to yield quite a bit of inflation in the year ahead.
Speaker 4: We're seeing a little bit of movement on the long run.
Speaker 4: I think consumers are waiting to see how things unfold
Speaker 4: before they really update their expectations over the long run.
Speaker 2: And again, the emish current conditions came in at sixty
Speaker 2: eight point seven. Consensus was seventy three point seven. Last
Speaker 2: period was seventy four. What's the again? Kind of a
Speaker 2: big drop? Does that surprise you the magnitude of the drop.
Speaker 4: The main reason for the dropping current conditions is that
Speaker 4: buying conditions for durables really plunged this month. And the
Speaker 4: main reason for that is that over the last couple
Speaker 4: of months, a lot of consumers spot like you needed
Speaker 4: to buy durables now to avoid price increases in the
Speaker 4: future because economic policy like tariffs. However, with tariffs on
Speaker 4: imminent the ones on China already implemented, people are kind
Speaker 4: of getting concerned that it's already too late to avoid
Speaker 4: those high prices for durable So that's why current conditions
Speaker 4: really took a time.
Speaker 2: Very good joined Sue.
Speaker 3: Thank you so much. Joined Sue.
Speaker 2: She's the Surveys of Consumers Director at the University of Michigan.
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Speaker 5: You got those jobs numbers today and the immediate reaction
Speaker 5: in the market, in particular that you Mish sentiment which
Speaker 5: is the weakest, and seven months inflation expectations moving one
Speaker 5: hundred basis points higher for the next year. Joining us now,
Speaker 5: Lindsay paeisga is a chief economist.
Speaker 6: Over at Steefel.
Speaker 5: Can we just talk about the U Mish numbers for
Speaker 5: a second and the reaction within the market and that
Speaker 5: big jump in inflation expectations.
Speaker 6: What do you make of that?
Speaker 7: A concern for the market recognizing that inflation is likely
Speaker 7: to prove much stickier in nature than the Fed had
Speaker 7: previously anticipated. And this not only calls into question the
Speaker 7: Fed's earlier decision to stop short of what we've long
Speaker 7: argued should have been a much higher terminal level, but
Speaker 7: it also calls into question now the Fed's ability for
Speaker 7: further downside relief, and so you see the market responding
Speaker 7: to that, with yields pushing higher this morning after this
Speaker 7: morning's jobs report and the confidence report.
Speaker 2: So, lindsay, what did you take away from the jobs
Speaker 2: report this morning?
Speaker 7: Well, it was somewhat disappointing on the headline, no doubt,
Speaker 7: falling to a three month low in terms of that
Speaker 7: monthly job creation number. But what we see is a
Speaker 7: lot of that was likely weather related weakness. And when
Speaker 7: we look at the other components that strong upward momentum,
Speaker 7: a stronger than expected monthly jump in average hourly earnings,
Speaker 7: the unemployment rate taking down to an oppressive four percent. Again,
Speaker 7: this continues to set the stage, or set the tone
Speaker 7: of tight ish labor market conditions, supporting the Fed's assessment,
Speaker 7: as we saw in that January FOMC statement that Committee
Speaker 7: members are moving away from concerns of emerging weakness on
Speaker 7: the labor market side and conceding now that labor market
Speaker 7: conditions are likely to remain not only stable but solid
Speaker 7: going forward into twenty twenty five.
Speaker 5: The risk, though, has to be the TEARFF question. I
Speaker 5: forgot to turn on my mic. I love that I
Speaker 5: knew that on a Friday, and you saw that in
Speaker 5: you mish. Like both groups from both sides of the aisle,
Speaker 5: are worried about inflation expectations related to tariffs, particularly when
Speaker 5: it comes to say, durable goods and buying them now
Speaker 5: rather than later. We also saw wages take up in
Speaker 5: the jobs number. All of that is an inflationary spiral.
Speaker 6: No, well, it can be. It depends.
Speaker 7: Tariffs in and of themselves are not inflationary if we're
Speaker 7: talking about a one time price increase, but they absolutely
Speaker 7: can be inflationary if they result in this tit for
Speaker 7: tag retaliatory cycle that we saw during Trump's first term
Speaker 7: back and forth with China. So again it's going to
Speaker 7: depend on the scope and the intensity of these programs.
Speaker 7: But also from an immigration standpoint, policies that further restrict
Speaker 7: the labor supply in this country could exacerbate the already
Speaker 7: present divide between labor demand and labor supply, and as
Speaker 7: you mentioned, continue to put upward pressure on wages. At
Speaker 7: the same time, the administration has talked about raining in
Speaker 7: the size of government, reducing outlays, finding areas of waste
Speaker 7: and inefficiencies which could more than offset some of those
Speaker 7: inflationary pressures in the marketplace. So it remains a big
Speaker 7: question mark, but it does appear that investors looking at
Speaker 7: markets reaction, it does appear that investors are concerned about
Speaker 7: the upside risks to inflation at this point.
Speaker 2: So, putting all that together, Lindsey, what's your view of
Speaker 2: the consumer right here?
Speaker 7: Well, I think the consumer is still very solid. The
Speaker 7: consumer continues to prove very resilient in the fame of
Speaker 7: a difficult environment, years of elevated prices, elevated borrowing costs,
Speaker 7: the resumption now of student debt payments. That being said,
Speaker 7: there are a lot of challenges facing consumers potentially further
Speaker 7: higher prices or further increases in borrowing costs at this point,
Speaker 7: but we also have to look at the fact that
Speaker 7: consumers are incredibly savvy and with real growth in income
Speaker 7: excuse me gaining momentum, as well as access to other
Speaker 7: supplemental factors like four oh one k's hardship withdrawals credit cards,
Speaker 7: it's clear that consumers still have a good amount of
Speaker 7: spending and borrowing power left. But again, those challenges are
Speaker 7: very real as we look further into the new year.
Speaker 6: All right, Lindsay, thank you so much. Really appreciate it.
Speaker 5: Lindsay Pieza joining us chief economist over at Steefeld.
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Speaker 5: One stack we're watching today is Huntington Bank shares. Over
Speaker 5: the last two days, they're up by about one percent.
Speaker 5: They had an investor day yesterday where they laid out
Speaker 5: their strategy for the next few years and where their
Speaker 5: growth opportunities are, and the market took it really well.
Speaker 5: Zach Wasserman is chief financial officer at Huntington, a national bank,
Speaker 5: and he joins us here in the studio. Thank you
Speaker 5: so much for joining us. We appreciate this.
Speaker 3: It's a pleasure to be with you.
Speaker 5: So I think Huntington, and I think a company that
Speaker 5: lends a lot to average people and small businesses and
Speaker 5: sort of knows.
Speaker 6: The economic roots.
Speaker 5: But you guys are also trying to expand that and
Speaker 5: become something different.
Speaker 6: Can you walk me through that?
Speaker 3: Sure? Yeah, you know the businesses.
Speaker 8: We've been performing exceptionally well recently, and one of the
Speaker 8: reasons is because we're driving expansion both geographically and in
Speaker 8: our commercial business, expanding in a number of special de
Speaker 8: vertical areas and national business lines. Just this year, we've
Speaker 8: launched into three new states, North Carolina, South Carolina, and Texas,
Speaker 8: and we've also established eight new specialty verticals that are
Speaker 8: national for example of funds financed vertical that's supporting private
Speaker 8: equity clients, one that's focused on the mortgage ecosystem, and
Speaker 8: other national commercial areas.
Speaker 2: Talk to us about loan growth, what I do know
Speaker 2: about the bank of business.
Speaker 3: That's an important driver. So talk to usbout loan growth,
Speaker 3: where it's coming from, where.
Speaker 2: You're seeing it, and is it kind of in line
Speaker 2: with what you were expecting.
Speaker 8: You know, we've actually had very strong loan growth of
Speaker 8: the last two years. If you take us to back,
Speaker 8: much of the industry has been in a pretty neutral position,
Speaker 8: not actually growing. Huntington has grown outperformed that by about
Speaker 8: ten percentage points. And for us, the growth is coming
Speaker 8: from both our core business, which is consumer small business,
Speaker 8: and then mid corporate typically private commercial clients, and then
Speaker 8: also these new initiatives that I just mentioned before launching
Speaker 8: into three new states, a number of specialty businesses.
Speaker 3: So we're seeing a nice breadth of growth.
Speaker 8: Actually, one thing that's actually you know, a nice indication
Speaker 8: of the economic strength as we're seeing strong demand from
Speaker 8: small businesses from our regional banking business, typically in the
Speaker 8: kind of smaller middle market client set. So it's a
Speaker 8: it's been a healthy dynamic we've been.
Speaker 6: Seeing before you were in this position.
Speaker 5: You also was chief financially financial officer to Visa, and
Speaker 5: I know that Huntington is trying to get into the
Speaker 5: payments business in a particular way too. What's the what's
Speaker 5: the market for that? And how do you guys play
Speaker 5: and compete in that?
Speaker 8: You know, the market for payments is incredibly broad, and
Speaker 8: if you think, if you took a.
Speaker 6: Step back to categorize it, actually like is that zell
Speaker 6: or like what is that?
Speaker 3: You know, it is so broad. The one that really
Speaker 3: needs to to zoom into it.
Speaker 8: You know, we have a number of card based payment products,
Speaker 8: so think consumer cards, commercial cards, but also importantly treasury management,
Speaker 8: and that's really the biggest driver right now we're seeing
Speaker 8: in payments growth supporting commercial clients with the ability to
Speaker 8: accept payments and then make payments in essentially every form
Speaker 8: you can imagine, Alex, so big big growth driver there.
Speaker 8: One of the things that we've done recently is invest
Speaker 8: to expand our merchant acquisition capability. Merchant acquiring is when
Speaker 8: a company accepts payments electronically, and it's often the lynchpin
Speaker 8: of their business. The lifeblood of the company is how
Speaker 8: they accept payments. So we launched a merchant acquiring business
Speaker 8: just in October and it's been going incredibly well. So,
Speaker 8: you know, kind of almost every area there's growth in
Speaker 8: payments for sure, but for US treasury management and commercial
Speaker 8: payments in particular as a major growth driver.
Speaker 2: Talk to us about your long portfolio, specifically your exposure to.
Speaker 3: Office, yeah, real estate.
Speaker 8: You know, office and commercial real estate generally for Huntington
Speaker 8: is a very small exposure. Actually, typically for large regional banks,
Speaker 8: the average commercial real estate within the loan portfolio might
Speaker 8: be fifteen or twenty percent of the loan book. For US,
Speaker 8: it's nine percent, so we're relatively smaller. In a office
Speaker 8: is only one percent of that nine Give you a sense.
Speaker 8: With that being said, you know what we're seeing in
Speaker 8: that commercial real estate environment is this is gonna this
Speaker 8: is gonna be a situation that plays out over multiple years. Thankfully,
Speaker 8: we are seeing a fairly orderly process of refinancing and
Speaker 8: generally seeing pretty sound ability for our commercial real estate
Speaker 8: developers to maintain their financing and to successfully roll through maturities.
Speaker 3: But it'll take a while to run through.
Speaker 8: To give you a sense, something like twenty percent of
Speaker 8: the portfolio matures any given year, so this will be
Speaker 8: you know, on average, it will take five years to.
Speaker 3: Really roll through.
Speaker 8: So I think that's a kind of an industry dynamic
Speaker 8: we're seeing, which this is a dynamic that will play out.
Speaker 3: Over quite sometime.
Speaker 5: What part of this encompasses any kind of M and
Speaker 5: A versus organic I guess you know, for.
Speaker 3: Us, we're focused on organic growth. You know, M and A.
Speaker 8: It can be a tool for banks to grow, certainly,
Speaker 8: we've seen m and A in the industry over time.
Speaker 8: With that being said, it can also be distracting to
Speaker 8: the progress that the companies making on organic growth. And
Speaker 8: for us Alex we're seeing so much progress on our
Speaker 8: organic growth initiatives, both acquiring customers but also importantly putting
Speaker 8: more and more focus around the value added fee services
Speaker 8: that come around that come to them, namely payments, wealth management,
Speaker 8: and capital markets, and so, you know, just the customer acquisition.
Speaker 8: We're seeing the success in those businesses. That's where our
Speaker 8: focus is. To give you a sense in the fourth
Speaker 8: quarter just that we just closed a ten percent year
Speaker 8: over year revenue growth really driven by those organic strategies.
Speaker 3: What's a typical corporate customer for you guys?
Speaker 8: You know, often, Paul, they are middle market companies that
Speaker 8: are private.
Speaker 3: That's the most typical company, you know.
Speaker 8: You know, the regional banks serve a really important niche
Speaker 8: within the overall US economy because you know, the client
Speaker 8: set that we are servicing are typically you know, focused
Speaker 8: on their local market.
Speaker 3: They want a bank with a.
Speaker 8: Company that is deeply embedded in the community and knows
Speaker 8: them personal, but importantly can bring down to them the
Speaker 8: power of a large bank in terms of specialized capabilities.
Speaker 8: It's actually one of the reasons why we've been so
Speaker 8: successful in these new geographic launches.
Speaker 3: How about private credit? Is that a competitor to you? No,
Speaker 3: It's funny.
Speaker 8: We get this question all the time and the answer
Speaker 8: generally is no. Okay, you know, private credit is looking
Speaker 8: for the sort of you know, the kind of loans
Speaker 8: that they finance are typically where there's more leverage, where
Speaker 8: there's more yield to be had. Because of the risk,
Speaker 8: that's not the core client for Huntington. And so we
Speaker 8: actually were up on stage at our investor day yesterday
Speaker 8: and our head of Commercial Business mentioned that only in
Speaker 8: two cases last year across our entire business did we
Speaker 8: see commercial borrowers actually go to a private credit facility
Speaker 8: away from our own lending facility.
Speaker 3: All right, Zach, thank you so much. We appreciate that.
Speaker 2: Zach Wasserman, chief financial office of Huntington National Bank located
Speaker 2: in Columbus, Ohio, Miller Columbus, Ohio as well.
Speaker 6: So he's still banks there even here.
Speaker 3: Well, he's a player.
Speaker 2: I think it's just this is old, this is a
Speaker 2: Miller account.
Speaker 6: Okay, this is different. Gotcha.
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Speaker 6: Right back to the market and what we're seeing right now.
Speaker 5: We saw the job's number coming a little bit of
Speaker 5: a disappointment, but then we had revisions higher. So the
Speaker 5: idea was that relatively neutral for the jobs world. Average
Speaker 5: hourly earnings though beating expectations, and then we got you
Speaker 5: missed around ten and that really jolted markets as well,
Speaker 5: falling to the lowest and seven months. Also, the inflation
Speaker 5: expectation for one year rose one hundred bases points.
Speaker 6: It was a very big jump. We wanted to get.
Speaker 5: More into all of this and sort of encapsulate what
Speaker 5: is happening within the jobs market. Kate Dushane is CEO
Speaker 5: of RGP joining us.
Speaker 6: What was your biggest takeaway?
Speaker 9: Well, I think this job's report really a mixed bag.
Speaker 9: We saw some numbers moving lawyer lower, as you said,
Speaker 9: but also others getting revised higher. So I think it's
Speaker 9: it's fairly neutral given the pressures from the LA wildfires
Speaker 9: and some of the frigid weather that we've all endured
Speaker 9: in January across the country, so we have to just
Speaker 9: keep watching what's happening in the couple of months to come.
Speaker 2: So, Kate, I guess one of the big issues is
Speaker 2: what this might mean just from an overall labor market.
Speaker 2: But my takeaway would be, I've got a market that
Speaker 2: seems at four point one percent, it feels kind of
Speaker 2: fully employed. I've got wages that are rising faster than inflation.
Speaker 2: Is that what you see when you when when you
Speaker 2: talk to your clients out there in terms of their
Speaker 2: view of the labor market.
Speaker 9: Yeah, I would still say this is a really strong
Speaker 9: labor market. I think we have seen in our client
Speaker 9: base employers or excuse me, employees staying put. So as
Speaker 9: companies now are starting to increase some of their transformation
Speaker 9: projects again, they're turning to other labor sources like outside
Speaker 9: talent to supplement the teams that exist within their environments.
Speaker 5: One of the biggest outside risks right now, like the
Speaker 5: impact of terrorists, for example, the unknowns that we think
Speaker 5: are coming.
Speaker 6: How does it transmit into the jobs market.
Speaker 9: Right Sorry about that. Unknowns make everyone nervous and that
Speaker 9: can be a dampening effect on the labor market. But
Speaker 9: there's also tremendous pent up demand in terms of innovation,
Speaker 9: technology transformation, digital transformation that's happening in our client base.
Speaker 9: There's a push around cost cutting and supply chain optimization.
Speaker 9: Those pressures in a business don't go away. So we
Speaker 9: have some countervailing I would say pressure is happening in
Speaker 9: the marketplace that we see in our client base. I
Speaker 9: would say, on the average, we are cautiously optimistic that
Speaker 9: the environment for labor continues to improve throughout twenty twenty five.
Speaker 9: But there are uncertainties related to Trump's trade policies and
Speaker 9: immigration policies, and how they all play out and what
Speaker 9: the timing is will certainly impact what is the ultimate outcome?
Speaker 3: Kate.
Speaker 2: Yeah, you mentioned immigration, and as this administration begins to
Speaker 2: perhaps implement some changes, what kind of impact do you
Speaker 2: think that could have. If there's in fact lower immigration,
Speaker 2: maybe even forced deportations, how do you think that will
Speaker 2: be felt within the labor market.
Speaker 9: Well, it'll certainly impact certain sectors of the labor market
Speaker 9: in certain industries.
Speaker 6: You know, our.
Speaker 9: Business is primarily professional services. You are looking at professional
Speaker 9: and business services. Talent pools, and those, especially in this
Speaker 9: hybrid environment, can often be delivered remotely, and we can
Speaker 9: tap into labor pools that are global in nature. But
Speaker 9: things like retail or construction or healthcare workers that have
Speaker 9: to be on site. I think some of these immigration
Speaker 9: policies will create supply and demand problems and put more
Speaker 9: pressure there.
Speaker 6: What about Doge.
Speaker 5: We just heard Scott Beson talking about Doge. If we
Speaker 5: cut a boatload of government workers, doesn't that just lead
Speaker 5: to so much supply in the labor market and just
Speaker 5: really tick that unemployment rate higher.
Speaker 9: Well, it depends on the skill sets that are coming
Speaker 9: out of that environment. So we need to learn a
Speaker 9: lot more before I think we decide what the impact
Speaker 9: will be. You know, typically about six percent of federal
Speaker 9: workers retire or resign in a typical year. It's looking
Speaker 9: like that could be much much higher given the activities
Speaker 9: that we're listening to around Doze right now. But it's
Speaker 9: really going to depend on what are the skill sets
Speaker 9: coming into the marketplace and are they the kind of
Speaker 9: skill sets that private industry is looking for to decide
Speaker 9: what impact might.
Speaker 2: Come an old topic, but one I like revisiting is
Speaker 2: the whole hybrid work thing. What do you are you
Speaker 2: seeing any trends evolving here or is it kind of
Speaker 2: set in stone? Hybrid three four days? Is that kind
Speaker 2: of the new normal now?
Speaker 9: We really believe it is, and that's supported by a
Speaker 9: recent Gallup poll that said hybrid has really landed in
Speaker 9: the economy. Here, and we see that to be true
Speaker 9: in our client service. I'd say the only industries where
Speaker 9: that maybe is less true is in financial services, which
Speaker 9: tends to want people on site. We saw that with
Speaker 9: the JP Morgan announcement last month, and healthcare certainly has
Speaker 9: been more on site than others. But otherwise, you know,
Speaker 9: we think about seventy five percent of our clients are
Speaker 9: solidly in the hybrid camp.
Speaker 5: You have like twenty years of experience working with C
Speaker 5: suites and helping them to manage transformation initiatives. So what's
Speaker 5: your best guess on what happens with DEI.
Speaker 6: So thank you.
Speaker 9: I mean, we've certainly all been reading lots of headlines
Speaker 9: about what's happening around DEE and I I think what's
Speaker 9: getting lost is that businesses can deliver the best results
Speaker 9: for their customers or clients when they can attract the
Speaker 9: smartest and innovative talent from a wide range of backgrounds
Speaker 9: and experiences.
Speaker 6: And that's what we focus on.
Speaker 9: It's really about what are the skill sets and perspectives
Speaker 9: you need for the best problem solving and fostering an
Speaker 9: environment where employees can do their best work is how
Speaker 9: businesses will compete and win and that's what we focus on.
Speaker 9: It's really about problem solving and getting different perspectives.
Speaker 2: Is AI a do you think is a net positive
Speaker 2: for employment or net negative? A lot of folks saying, Gee,
Speaker 2: it may take some jobs away from from individuals, but
Speaker 2: then others say, no, it's just simply going to improve their.
Speaker 3: Potential. How do you think about it?
Speaker 9: Yeah, I am more of an optimist that AI is
Speaker 9: going to bring more productivity and I actually think more
Speaker 9: engagement in the workforce. That, however, requires that people be
Speaker 9: willing to upskill and I think reskill a little bit.
Speaker 6: Certainly, there are.
Speaker 9: Jobs that are very task oriented and repetitive task oriented
Speaker 9: that could be very disrupted by AI. But moving into
Speaker 9: more business analytics, project management, technology skills, coding skills, I
Speaker 9: mean as long as workers are willing to engage in
Speaker 9: some skill set acquisition, I think by and large, we
Speaker 9: need AI to play a role as the digital worker
Speaker 9: or we will not achieve the productivity goals that our
Speaker 9: economy needs.
Speaker 6: Kate, we really appreciate it.
Speaker 5: I don't envy how difficult this time must be for
Speaker 5: you your clients at Kate Dushane, CEO of r GP,
Speaker 5: joining us from California.
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