WEBVTT - Diane Swonk Talks Economic Data

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Your leadership of the National Association for Business Economics is

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<v Speaker 2>noted with KPMG. Diane Swank joins us right now. Diane,

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<v Speaker 2>just a sixty thousand foot question for our listeners, those

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<v Speaker 2>with the job, those with Google stock options and the

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<v Speaker 2>Google one hundred year piece, and those flat on their

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<v Speaker 2>back across America. How case shaped are we this morning?

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<v Speaker 1>Well, we are as much as we've been since the

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<v Speaker 1>data started on corporate profit share versus wade share in

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<v Speaker 1>the economy going back to the nineteen seventies. What we're

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<v Speaker 1>seeing is a record break between the share of profits

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<v Speaker 1>going to wealthholders versus the amount of going to wages.

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<v Speaker 1>And I think that's where the bulk of this is.

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<v Speaker 1>You're seeing the productivity gains a crew to the owners

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<v Speaker 1>of capital as opposed to workers, and that's why workers

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<v Speaker 1>are not very happy about where are Also when you

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<v Speaker 1>think about wages, I think it's very important to understand

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<v Speaker 1>that we are seeing this labor market looks like it's

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<v Speaker 1>now healing after getting cratered last year. That's important, but

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<v Speaker 1>it's healing at a pace as Claudia and Eric pointed out,

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<v Speaker 1>where we just don't need to generate many jobs be

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<v Speaker 1>able to bring the unemployment rate down, which could push

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<v Speaker 1>wages higher. That's great if it does not also be

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<v Speaker 1>accompanied by information, and we know that much like stock

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<v Speaker 1>returns compound, also inflation compounded over the last five years,

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<v Speaker 1>leaving too many prices out of reach for too many.

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<v Speaker 2>Paul, I was just going to say for your weekend reading,

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<v Speaker 2>it's not Friday, it's.

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<v Speaker 3>When I know we got a waste to go tom

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<v Speaker 3>or red headline crossing the Bloomberg terminal traders fully price

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<v Speaker 3>in FED rate cut by July versus June previously. So

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<v Speaker 3>the WORP function kind of we're seeing it right there

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<v Speaker 3>here on this strong labor print, Diane. We know that

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<v Speaker 3>FED likes to look at this unemployment right and boy,

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<v Speaker 3>you tick down from four point four percent to four

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<v Speaker 3>point three percent. That's full, full, fully employed America, isn't it.

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<v Speaker 1>Actually it is. It is even better under the hood.

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<v Speaker 1>What we saw was the U six rate, which is

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<v Speaker 1>that sort of underemployment rate where you get discouraged workers

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<v Speaker 1>and those having just cut part time for economic reasons,

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<v Speaker 1>that fell to eight percent from eight point four percent

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<v Speaker 1>in December. That's an important move It's still well above

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<v Speaker 1>the six point two percent we saw back in twenty nineteen,

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<v Speaker 1>but it is a move down and an important move

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<v Speaker 1>down for those who were really struggling to get a job.

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<v Speaker 1>What we're starting to see is some of the ice

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<v Speaker 1>melt in the labor market now and things beginning to

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<v Speaker 1>shift a bit, and we need to keep up that

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<v Speaker 1>momentum for workers on the flip side of it, it

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<v Speaker 1>keeps the fed on the sidelines longer.

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<v Speaker 4>We're not seeing you know, what does economy This labor

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<v Speaker 4>economy has been described as a kind of a low higher,

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<v Speaker 4>low fire type of environment. How about some of the

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<v Speaker 4>industries that rely historically upon immigrations, such as housing, agriculture.

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<v Speaker 4>Are we seeing any problems there?

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<v Speaker 1>Well, we are seeing a major shift in things like

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<v Speaker 1>leisure and hospitality in terms of quit rates. Quit rates

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<v Speaker 1>in that sector have soared, even as they've cooled and

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<v Speaker 1>sort of come to a near standstill across the economy

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<v Speaker 1>and the job openings and labor turnover survey, we saw

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<v Speaker 1>those quit rates really soar. That has not been accompanied

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<v Speaker 1>by a lot of wage pressures in the economy that

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<v Speaker 1>was very weak last year, and in fact, vacations actually

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<v Speaker 1>went down a bit. Over the course of the year.

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<v Speaker 1>We saw only the affluent households continuing to spend heavily

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<v Speaker 1>on vacations, and that showed up in the breakdown in

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<v Speaker 1>terms of people paying to go to the front of

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<v Speaker 1>the bus, in terms of the planes and luxury hotels

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<v Speaker 1>continue to do extremely well, but the rest of the

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<v Speaker 1>economy side of vacations did not. In twenty twenty five, the.

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<v Speaker 2>Binging you here, folks, I believe is doctor Swark. That's

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<v Speaker 2>that's Kevin Worsh. Yes, seeing Diane Swark right now, Like

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<v Speaker 2>Kevin Warsh is saying to Dan, we need to talk

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<v Speaker 2>right now, Diane. One of the things here, and you know,

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<v Speaker 2>I'll pick on you know a city that I know

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<v Speaker 2>is really having trouble. Alexander County, Illinois. Six percent unemployment right,

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<v Speaker 2>this is kro It's you know, southern Southern Illinois has

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<v Speaker 2>really struggled. How do you synthesize, Diane with all your

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<v Speaker 2>decades of work the easy gloom path versus observing the

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<v Speaker 2>vibrancy of the American economy. I mean, the media and

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<v Speaker 2>Tom Keen are really really good at going out and

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<v Speaker 2>finding a six percent unemployment rate and saying, OMG, the

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<v Speaker 2>world's going to end, but there's an America that's vital

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<v Speaker 2>out there. How do you balance that after this report?

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<v Speaker 1>Well, I think the important issue is is that we

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<v Speaker 1>know that fewer firms and fewer households are counting for

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<v Speaker 1>more of the ECONO gains in the US economy. And

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<v Speaker 1>that's where you get to the K shaped economy. We've

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<v Speaker 1>talked about it a lot, but it's showing up and

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<v Speaker 1>just about everywhere and every strata, even with higher income

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<v Speaker 1>households now trading down and going to big box discounters

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<v Speaker 1>trying to get more value because they're feeling strained as

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<v Speaker 1>well unless they have a large stock portfolio. So there

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<v Speaker 1>really is this delineating thread that goes through the US

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<v Speaker 1>economy in terms of wealth versus non wealth, and it's

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<v Speaker 1>not just housing market wealth. Equity in your home cannot

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<v Speaker 1>be as easily tapped, but wealth in the stock market

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<v Speaker 1>has moved up dramatically, and that is important because it's

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<v Speaker 1>not filtering down to workers and the dichotomy of those

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<v Speaker 1>two things happening at the same time. The hard part

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<v Speaker 1>is that it keeps inflation void as well, and I

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<v Speaker 1>think that's something that the Fed is going to be

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<v Speaker 1>watching for and we know that, as you heard earlier.

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<v Speaker 1>I think Eric pointed it out. If these losses that

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<v Speaker 1>we saw on jobs last year were more structural than

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<v Speaker 1>cyclical in nature, then rate cuts don't help them. If

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<v Speaker 1>they are more demand driven, and the rate cuts actually

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<v Speaker 1>helped to reignite employment, that's great, although they don't usually

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<v Speaker 1>work quite this quickly, so I have my doubts about that.

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<v Speaker 1>I think you are working through some big uncertainty issues

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<v Speaker 1>that finally abated a bit, but measures of uncertainty move

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<v Speaker 1>back up again in the month of January.

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<v Speaker 2>Dayne Swack, thank you for your work. Dayne Swack is

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<v Speaker 2>KPMG here