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Speaker 1: Okay, let's shake it um. Will Americans get a raise

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Speaker 1: this year? Oh God? Welcome back to the Bloomberg Benchmark podcast.

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Speaker 1: I'm your host, Tory Stillwell and economics reporter with Bloomberg

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Speaker 1: News in DC, and I am joined by my colleagues

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Speaker 1: and co hosts Dan Moss, who is our executive editor

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Speaker 1: in d C, and Ako, our editor for Benchmark, who's

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Speaker 1: been upgrooded to a co hot Yeah, and she's visiting DC,

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Speaker 1: so we're all in one room. Okay. For those of

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Speaker 1: you tuning in for the first time, Benchmark is a

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Speaker 1: podcast about numbers, but much more about the ideas that

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Speaker 1: drive the global economy. Told you in the least boring

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Speaker 1: way possible. Be sure to check out our inaugural episode

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Speaker 1: we released last week, the US economy Silent Menace about

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Speaker 1: the slow down in productivity, and our bonus show on

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Speaker 1: the market to malt in China that we released just

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Speaker 1: the other day. We are recording this on Wednesday, September six,

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Speaker 1: which is the day before probably the most important Federal

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Speaker 1: Reserve announcement in years? Dan, is that an exaggeration? I

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Speaker 1: don't think it's an exaggeration. At least half the economists

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Speaker 1: we've surveyed predict an interest rate increase that will be

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Speaker 1: the first in almost a decade. Yeah, so they're saying

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Speaker 1: we're predicting it at you know, the one plus economists

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Speaker 1: that we've surveyed at Bloomberg are very evenly split on this,

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Speaker 1: with a slight lean toward the Fed not hiking interest rates. So, Toria,

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Speaker 1: would you care to give us a prediction? Um, Because

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Speaker 1: by the time our listeners here this podcast, we will

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Speaker 1: all know whether the Fed did or didn't do it, right,

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Speaker 1: So I think we're kind of well versed on why.

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Speaker 1: It's a pretty close call. You know, the labor market

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Speaker 1: has been getting better, but inflation is sort of not

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Speaker 1: anywhere close to the Fed's target. Um. And you've got

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Speaker 1: all this market up. All right, Tori, stop past there

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Speaker 1: is your answer my call. I think that they will

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Speaker 1: not go all right? What about you? Then? Well, in

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Speaker 1: the don't column, we have financial markets, which some have

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Speaker 1: described as volatile recently. We've got the global economy. We've

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Speaker 1: got inflation which is nowhere near their target, and inflation

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Speaker 1: expectations which are drifting down, and a thing called the

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Speaker 1: balance of risks. They say that data dependent, but that

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Speaker 1: could also mean, what is the risk to the outlook

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Speaker 1: for the data? So what's your call, Tory, You've got

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Speaker 1: something there in front of you. Your call first, Okay,

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Speaker 1: for our listeners out there, my call is that the

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Speaker 1: FED will go. So it's pretty close and we're thinking

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Speaker 1: about this, like, how can we get a definitive answer? Um.

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Speaker 1: I don't know if any of you are out there

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Speaker 1: ever had a magic eight ball as kids, but I did,

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Speaker 1: and it's how I solved all of my problems basically.

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Speaker 1: So we ran out, made a target run yesterday after

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Speaker 1: work and got a magic eight ball. We're going to

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Speaker 1: shake in and find out. Yeah, all right, let's do it.

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Speaker 1: Will the FED raise interest rates? And it's September gathering?

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Speaker 1: The answer is, oh, oh tell us. My sources say no. Wow.

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Speaker 1: All right, well, you know we look forward to actually

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Speaker 1: getting the answer to that. Onto today's Business run. Yeah yeah, yeah,

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Speaker 1: it's pretty related. Yeah. Um, we're gonna be talking about

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Speaker 1: something very related about paychecks, which also is one of

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Speaker 1: my favorite topics because I like getting paid. Um, we'll

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Speaker 1: be talking about my paycheck and your paycheck and everyone's

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Speaker 1: paycheck in America. What's been happening to it and what

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Speaker 1: will happen to it over the next few years. For

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Speaker 1: our listeners out there. Dan is a bazillion levels above

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Speaker 1: me and Tori, so you might have some special insight

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Speaker 1: into my specific paycheck. So let's just say I would

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Speaker 1: absolutely love a raise. Yeah, this won't be awkward at all.

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Speaker 1: Dan is smiling, he's not comment he's not touching this

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Speaker 1: white for the year end. Hopefully I will get a raise. Um,

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Speaker 1: let's let's get to it. Tori set the stage for

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Speaker 1: us here. What's been happening to paychecks in America? So

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Speaker 1: I think just as ascinctly as possible, we can say

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Speaker 1: paychecks don't look great right now. You know, we're in

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Speaker 1: our seventh year of economic recovery and wages are stagnant.

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Speaker 1: They aren't really improving, especially at the rate that you

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Speaker 1: would expect with a decent clip of payroll growth that

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Speaker 1: we've been seeing, you know, with people getting jobs, with

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Speaker 1: things just generally improving, with sectors of the economy coming back,

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Speaker 1: would expect people's paychecks about back to and that's just

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Speaker 1: not happening. So well, when you say they're not moving,

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Speaker 1: I mean, are you really saying this that the numbers

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Speaker 1: when they come out every month and every quarter are

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Speaker 1: saying zero zero, zero zero. What do you mean by that? Well,

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Speaker 1: let me let me break down the numbers for you.

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Speaker 1: So we look at and I would say most economists

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Speaker 1: look at the average hourly earnings figures from the Labor Department.

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Speaker 1: This comes out every month right right with the employment report.

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Speaker 1: It's probably the most widely watched gauge that tells us

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Speaker 1: that in August hourly earnings grew two point two percent

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Speaker 1: from the year before. So the average for the entire recovery,

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Speaker 1: which started in June two thousand nine, is two percent.

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Speaker 1: So we're right there with the average. There's been basically

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Speaker 1: no pick up at all. And what normal is economists

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Speaker 1: have indicated is somewhere around three to four percent the

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Speaker 1: historical norm, right exactly. So we're not anywhere close where

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Speaker 1: we used to be. That's what. Let me just pull

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Speaker 1: you up on that one. I mean, the economy has

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Speaker 1: been growing on average between two to three for that

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Speaker 1: period of time. So does the figure that you're describing

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Speaker 1: really seen that out of whack? Now? Granted, you know,

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Speaker 1: compared with the nineties or the early odds, it's certainly

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Speaker 1: not up there, but the expansion is not up there

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Speaker 1: with the nineties or the early odds either, So it

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Speaker 1: was really that bad. Well, let me give you more data,

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Speaker 1: and this is coming from the Census Bureaus Report on

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Speaker 1: Income and Poverty, which just came out this morning. Basically,

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Speaker 1: what that told us is that median household income is

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Speaker 1: still six point five percent lower than in two thousand

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Speaker 1: and seven. So with GDP, if you just take the

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Speaker 1: overall level of GDP, that number keeps going up and

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Speaker 1: not enough. Right, the percent change may be different, but

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Speaker 1: the level goes up. You would sort of expect income

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Speaker 1: to do the same thing. Over time, our center a

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Speaker 1: living increases, but that hasn't really been the case. We're

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Speaker 1: still sort of following our way out of this hole

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Speaker 1: that was created during the recession, and things just aren't

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Speaker 1: as good as people would like them. So this is

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Speaker 1: not just a sort of a feeling perception thing you're saying.

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Speaker 1: This is grounded in real data exactly, And I think

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Speaker 1: it's probably one of the reasons that people have felt

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Speaker 1: like the recovery has been so lackbuster, pretty depressing stuff. So,

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Speaker 1: you know, you said, this is a big mystery as

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Speaker 1: to why this is happening. You know, the job markets

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Speaker 1: doing pretty well now, but wages still aren't picking up.

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Speaker 1: Give us a couple of theories as to why economists

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Speaker 1: think this uh mystery exists. I mean, he said, used

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Speaker 1: to be a reporter for the San Francisco FED. So

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Speaker 1: the theory that's come out of that shop is I

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Speaker 1: think one of the most intriguing, and I think you

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Speaker 1: know that. Yeah. So it's called the pent up wage

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Speaker 1: deflation theory, and it means, you know, back in the recession,

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Speaker 1: the economy got really bad, so what companies really wanted

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Speaker 1: to do was cut the wages of their existing employees.

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Speaker 1: But there's kind of this like psychological barrier among employers

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Speaker 1: as to actually dropping people's wages. They think it's like

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Speaker 1: a big insult to actually cut someone's salary. So instead,

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Speaker 1: what a lot of companies did was they kept it

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Speaker 1: at zero um or a very small positive rate, and

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Speaker 1: then instead waited and waited and waited and kept it

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Speaker 1: at that very very low level until finally the economy

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Speaker 1: caught up to the point where they can start um

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Speaker 1: accelerating people's races. And one theory is that that point

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Speaker 1: just hasn't come yet, that that demand hasn't picked up

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Speaker 1: enough to get there, right, So there's still maybe a

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Speaker 1: decent amount of slack out there that perhaps isn't being

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Speaker 1: picked up by the unemployment rate, which is pretty low.

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Speaker 1: It's at five point one percent, within the range that

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Speaker 1: federal was there a policymakers consider full employment. But you know,

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Speaker 1: we do have We've seen surveys when from the ft

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Speaker 1: itself that show people are willing to work more hours

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Speaker 1: at the same wage. They wouldn't even ask for a race.

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Speaker 1: So that's a that's an example of slack. Maybe there

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Speaker 1: are these people out there who are just willing to

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Speaker 1: take jobs at whatever price they can get. Well, the

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Speaker 1: economy has been growing since two thousand and nine. That

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Speaker 1: may surprise many people, but nevertheless that's a fact act

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Speaker 1: if not now when well we're waiting, Dan, I'm waiting,

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Speaker 1: I am waiting. I mean. One of the other theories

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Speaker 1: out there is that, you know, if our listeners have

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Speaker 1: listened to our very first episode, they will know that

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Speaker 1: productivity growth in the US has been very low. So

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Speaker 1: that's right over the past few years. So you know,

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Speaker 1: it could be that workers just don't quote unquote deserve

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Speaker 1: a raise just because they haven't been adding as much

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Speaker 1: value to the economy. And then there's also the theory

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Speaker 1: that companies are substituting perks like unlimited vacation paid vacation Dan,

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Speaker 1: please keep paid. Um, there's substituting those types of things

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Speaker 1: for actual pay increases. So you know, people maybe getting

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Speaker 1: these sorts of bonuses, but their actual salary may not

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Speaker 1: be going up, right. So basically the truth is everyone's

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Speaker 1: pretty stumped on this one. You know, econ when one

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Speaker 1: tells you that as a supply of workers goes down,

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Speaker 1: the price they can command should go up, that's not happening.

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Speaker 1: It's one of the many ways that real life unfortunately

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Speaker 1: doesn't adhere to our tidy theories in the economy. But

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Speaker 1: you know, we started this episode with a very big question,

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Speaker 1: will you get a raised this year? Tor? What's the answer?

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Speaker 1: It's so disappointing. I would say the best answer is

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Speaker 1: it depends And that's a frustrating answer for many people,

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Speaker 1: but it really does. So one big thing that it

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Speaker 1: depends on is your industry. And I think that this

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Speaker 1: has been the case for wages wherever. It always depends

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Speaker 1: on a specific job that you have. Exactly there's this

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Speaker 1: thing called the Jolt survey, and that is Economics reporter

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Speaker 1: shorthand for the Job Openings and Labor Turnover Survey produced

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Speaker 1: by the Labor Department. Now this might sound like a

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Speaker 1: pretty obscure number. I mean, it sounds like something that

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Speaker 1: happens when Magnus Outproducers sticks his fingers into the a

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Speaker 1: pala socket. Tell us about this and why fed chair

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Speaker 1: Yelling follows it so we can see, you know, how

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Speaker 1: many people are quitting their jobs. We can see how

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Speaker 1: many job openings there are. We can see what industries

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Speaker 1: those openings are in, so we can see layoffs, other discharges.

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Speaker 1: It's a it's a pretty important survey and it's one

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Speaker 1: that fed chair Young follows closely. As you noted Dan.

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Speaker 1: By the way, how many does she follow? A lot? Yeah,

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Speaker 1: she's got a whole dashboard, tons, fall suitcase of them.

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Speaker 1: So we looked at this survey to get an idea

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Speaker 1: of how many unemployed aid workers are competing for each

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Speaker 1: job opening in an industry. The idea is that if

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Speaker 1: you've got fewer people out there that are competing for jobs,

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Speaker 1: you know, employers have fewer people to pull from. They're

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Speaker 1: going to have to start bidding up wages so they

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Speaker 1: can either poach people or they can attract the best

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Speaker 1: and brightest. So shall we dig in all right? So

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Speaker 1: for the US, this ratio the number of unemployed people

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Speaker 1: per opening is one point. For let's run through the industries.

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Speaker 1: How do you get full tents of a person of

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Speaker 1: these workers that are walking around the toulso does halfway?

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Speaker 1: So looking at this is about the real world, not

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Speaker 1: about numbers. But you're getting to the point getting and

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Speaker 1: getting there. So looking at the industries and there you

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Speaker 1: know associated ratios will go in order from the smallest largest.

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Speaker 1: So with the smallest ratio we have financial activities, it's

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Speaker 1: point six, and then from there we have professional business services,

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Speaker 1: education and health services, information, retail and wholesale trade, and

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Speaker 1: leisure and hospitality. All of these industries have ratios that

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Speaker 1: are smaller than the US is overall. So these are

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Speaker 1: the good industries to be in, right, if you want

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Speaker 1: your wages to go up? Right, These industries are tighter

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Speaker 1: than the overall US labor market, so there's going to

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Speaker 1: be a little bit more competition in terms of employers

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Speaker 1: and who they have to pick from and higher from.

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Speaker 1: And then for those that have a little more slack,

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Speaker 1: we have transportation and utilities, manufacturing and construction. So you

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Speaker 1: is that these are all three of these are you know,

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Speaker 1: really cyclical industries. They all got hurt pretty badly during

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Speaker 1: the recession and they're all still trying to recover. So

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Speaker 1: there are you know, companies have more people to choose from,

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Speaker 1: So people who are in those industries have poor prospects

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Speaker 1: for getting a raise this year relative to the others. Yeah,

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Speaker 1: we'll hold on a second. What about the US manufacturing

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Speaker 1: renaissance some of us have heard about. How come manufacturing

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Speaker 1: really doesn't face you strongly here? I don't know about that.

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Speaker 1: The manufacturing data has been pretty shaky lately. You know,

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Speaker 1: the the US dollar has been appreciating and global growth

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Speaker 1: hasn't been stellar either, So manufacturing and manufacturers in the

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Speaker 1: US have been having a pretty hard time. So that

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Speaker 1: we have something to do with it as well. Our

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Speaker 1: colleagues show moved this really interesting story back a couple

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Speaker 1: of weeks ago, based on report from the staffing firm

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Speaker 1: UM Robert half and that showed that white collar workers

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Speaker 1: are probably going to get a very big bit pay

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Speaker 1: boost next year. UM they looked at starting salaries and

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Speaker 1: they found that the numbers should be the best in

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Speaker 1: eight years or something like that. So that's pretty exciting.

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Speaker 1: If um, you have a professional job, you know, the

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Speaker 1: best industry to be in right now is uh Surprise

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Speaker 1: Surprise technology. So you know a lot of my friends

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Speaker 1: in San Francisco will be very happy to hear this.

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Speaker 1: For example, if you are a big data engineer, you

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Speaker 1: could probably snag a starting pay of between a nine

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Speaker 1: thousand and a half dollars to a hundred and eighty

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Speaker 1: three thousand dollars, So that's a nine percent jump from

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Speaker 1: That's a lot of money. And also if you're you know,

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Speaker 1: an app developer or like a security analyst or like

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Speaker 1: a ux specialist, you know, those are really good jobs

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Speaker 1: to be in. Two so once again a great time

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Speaker 1: to be in tech and also a pretty good time

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Speaker 1: to be in very specialized roles like that. Well, that's

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Speaker 1: very encouraging for those folks. I wonder if we ought

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Speaker 1: to take a step back and you know, ask ourselves

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Speaker 1: a different question. We've been asking why, why, why, why

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Speaker 1: hasn't this up and why is this perception that it

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Speaker 1: hasn't kicked in? Maybe we should be asking ourselves why not.

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Speaker 1: Perhaps the answer lies in the absence of any real

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Speaker 1: inflationary precious tour. You wrote about this just today. Yeah,

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Speaker 1: I mean, I'm inclined to think that inflation provides a

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Speaker 1: little bit of a silver lining here because inflation has

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Speaker 1: been really subdued for a lot of the recovery. So

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Speaker 1: that means that, you know, paychecks aren't going up a

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Speaker 1: ton um, but at least inflation isn't either, So it's

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Speaker 1: not like your entire paycheck, your entire race, i should say,

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Speaker 1: is being eaten up by inflation. But you're right, if

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Speaker 1: there's if there's lack of inflation in the US economy

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Speaker 1: right now, you know, employers aren't sitting there being like, gosh,

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Speaker 1: prices are rising so much, my employers are or my

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Speaker 1: employees are about to revolt if I don't give them

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Speaker 1: a race. So I don't have to. And in this

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Speaker 1: story you published today, Cold Fed can thank Amazon Cuba

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Speaker 1: a streak of inflation misses, you're actually posing the question

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Speaker 1: of whether the technology that just praised as a potential

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Speaker 1: raise bearer, if that's the word or the phrase to use,

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Speaker 1: could it be working the other way as well, Aki,

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Speaker 1: in terms of holding inflation down so some employers can site. Look,

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Speaker 1: inflation is one one and a half percent, Why the

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Speaker 1: heck do you need a rise? Right exactly? And I

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Speaker 1: think this is really important to the whole wages are

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Speaker 1: not growing idea in the sense that for many people,

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Speaker 1: especially coming out of the recovery, which is driven by

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Speaker 1: a credit boom and bust, they're making their spending decisions

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Speaker 1: on what their paycheck looks like. No, Americans haven't been

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Speaker 1: taking out a ton of debt in the wake of

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Speaker 1: the recession. It seems like they sort of learned their lesson.

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Speaker 1: They got badly burned, and now they're working on paying

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Speaker 1: that debt down and acquiring new debt really slowly. So

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Speaker 1: it's got huge implications for our economy because what they

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Speaker 1: can spend is based on what they make, and if

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Speaker 1: they're not making a lot more, they're probably not going

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Speaker 1: to be able to spend a lot more, right right, right,

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Speaker 1: And we should also, you know, note this other caveat that,

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Speaker 1: although you know, when you look at the average or

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Speaker 1: the media and people's wages haven't been growing that much,

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Speaker 1: when you actually look at the very top percentiles, the

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Speaker 1: really rich people, their wages have been actually going up

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Speaker 1: a lot. And when you look at the bottom percentiles,

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Speaker 1: their wages have been, you know, sometimes going down exactly.

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Speaker 1: So just for some context, I think this is good

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Speaker 1: because it's it's nice to sort of get a figure.

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Speaker 1: Well okay, well, so guys are talking about wages. How

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Speaker 1: much does a family make them? So the census data

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Speaker 1: out this morning, like we mentioned, said that the overall

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Speaker 1: median household income was fifty three thousand, six hundred and

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Speaker 1: fifty seven dollars. So that wasn't a statistically different change

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Speaker 1: from last year. Once you adjust for inflation, and you

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Speaker 1: know there hasn't been a statistically significant change over the

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Speaker 1: last three years. That's pretty depressing. Yeah, yeah, you know.

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Speaker 1: We started this episode by asking will you see a

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Speaker 1: raise this year? And Torrey and Dan, all you gave

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Speaker 1: us was hedged answers. Come on, that's not entirely true.

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Speaker 1: I would say, you know, what we know from econ

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Speaker 1: one on one, as you said, says yes, we should

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Speaker 1: be getting raises soon, but it's just not happening, and

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Speaker 1: it's not happening for the past six years. So well,

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Speaker 1: I know the perfect solution to this, the magic eight. Yeah, okay,

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Speaker 1: let's shake it. Will Americans get a raise this year?

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Speaker 1: A big race, a big race statistically significant. Right yeah, right,

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Speaker 1: all right? Oh god, what is it the most depressing

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Speaker 1: magic eight ball of all time? The answer is very doubtful.

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Speaker 1: On that note, thanks so much for joining us again

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Speaker 1: today and listening to the Bloomberg Bench our podcast. We

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Speaker 1: will be back next week and until then, you can

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Speaker 1: find us on the Bloomberg terminal as well as Bloomberg

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Speaker 1: dot com. We are also on iTunes and pocket casts.

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Speaker 1: And while you're there, please take a minute to subscribe, rate,

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Speaker 1: and review so that more people can find us. You know,

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Speaker 1: we've had some amazing feedback over the past weeks since

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Speaker 1: we launched, and we're really excited to be reaching more people. UM,

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Speaker 1: so let us know what you thought of the show. Um.

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Speaker 1: You can talk to us and follow us on Twitter

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Speaker 1: at at Akio seven, at Tory Stillwell with one L

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Speaker 1: in the middle, and at Dan Moss d C.