WEBVTT - Holiday Consumer Spending, Update on Starbucks Worker Strike 0:00:02.400 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.200 --> 0:00:12.080 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:12.160 --> 0:00:15.280 weekdays at ten am Eastern on Apple Car playing Android 0:00:15.280 --> 0:00:18.400 Auto with the Bloomberg Business App. Listen on demand wherever 0:00:18.440 --> 0:00:22.720 you get your podcasts, or watch us live on YouTube. 0:00:23.320 --> 0:00:24.320 Let's go to Starbucks. 0:00:24.360 --> 0:00:27.440 Here, thousands of Starbucks workers who walked off the job 0:00:27.480 --> 0:00:28.320 have concluded. 0:00:28.920 --> 0:00:29.400 What a minute. 0:00:29.360 --> 0:00:32.320 It's about a five day strike against the coffee giant. 0:00:32.320 --> 0:00:35.280 From Rollness, we're joined by Bloomberg's Emily Cohne. Emily, thanks for 0:00:35.320 --> 0:00:38.240 coming into studio. You get the gold star for coming 0:00:38.280 --> 0:00:40.760 in the studio. We appreciate that the coveted gold star. 0:00:41.120 --> 0:00:41.519 I did it. 0:00:41.600 --> 0:00:43.400 What's going on to Starbucks? Why are they striking? 0:00:44.000 --> 0:00:47.960 So? Starbucks workers have been in a bitter battle with 0:00:49.080 --> 0:00:52.960 the company for since twenty twenty one, end of twenty 0:00:53.000 --> 0:00:56.160 twenty one, when the first store voted to unionize. So 0:00:56.200 --> 0:00:59.040 they have this growing union presence at Starbucks. I think 0:00:59.080 --> 0:01:02.800 about five percent of their stores are unionized now and 0:01:03.200 --> 0:01:06.680 they're in the final stages of negotiating their union contract. 0:01:06.760 --> 0:01:08.720 So that final stage is when you start talking about 0:01:08.800 --> 0:01:12.120 money and wages and all the really contentious stuff. So 0:01:13.319 --> 0:01:18.520 the company is alleging that the union walked off the 0:01:18.840 --> 0:01:22.520 left the negotiating table prematurely. The union is saying Starbucks 0:01:22.560 --> 0:01:26.240 came to the table with no raise offers, so that 0:01:26.360 --> 0:01:30.360 led to this strike that lasted five days. The last 0:01:30.400 --> 0:01:33.200 day was Christmas Eve. This is a really important time 0:01:33.240 --> 0:01:36.000 for Starbucks. People stop into the store to get lattes 0:01:36.000 --> 0:01:38.559 while they're doing their last minute shopping. They're buying gift 0:01:38.560 --> 0:01:42.760 cards as stocking stuffers. But only about two percent of 0:01:42.760 --> 0:01:46.679 their stores actually closed as a result of that the strike, 0:01:47.319 --> 0:01:51.080 so probably not a huge impact on the business, but 0:01:51.200 --> 0:01:55.240 definitely a morale hit for the company. This is something 0:01:55.280 --> 0:01:57.680 that we're all talking about that we all noticed. There 0:01:57.680 --> 0:02:01.680 were lots of headlines about it, so about it's unclear 0:02:01.720 --> 0:02:05.440 about how many stores strike. It was like probably between 0:02:05.480 --> 0:02:08.320 two hundred and three hundred between what the union is 0:02:08.320 --> 0:02:11.200 saying what the company is saying. That's a small percentage 0:02:11.200 --> 0:02:15.200 of their ten thousand stores, but definitely got a lot 0:02:15.240 --> 0:02:15.720 of attention. 0:02:16.560 --> 0:02:18.600 Just ask you to sort of give us some context 0:02:18.600 --> 0:02:21.080 into how this holiday retail season went. Now that we're 0:02:21.120 --> 0:02:23.600 sort of piecing together how many people went out in 0:02:23.600 --> 0:02:26.560 shopping stories and online and all of that. What are 0:02:26.639 --> 0:02:28.799 you kind of tracking or following here in the waning 0:02:28.880 --> 0:02:30.679 days of twenty twenty four when it comes to just 0:02:30.680 --> 0:02:32.720 sort of how the consumer performed at the end of 0:02:32.720 --> 0:02:33.040 the year. 0:02:33.400 --> 0:02:35.800 Yeah, it's a good question. I think we're seeing a 0:02:35.840 --> 0:02:38.720 lot of what we have seen throughout the year, which 0:02:38.760 --> 0:02:41.280 is what we talk about we call the bifurcation of 0:02:41.320 --> 0:02:46.239 consumer spending, where we see the upper income consumer households 0:02:46.240 --> 0:02:50.520 making one hundred thousand dollars or more a year doing 0:02:50.600 --> 0:02:54.160 quite well. They're splurging on gifts, they're getting out there 0:02:54.200 --> 0:02:57.800 and they're shopping. The stock market's doing well, their houses 0:02:57.880 --> 0:03:00.400 are worth more than they were a year ago. They 0:03:00.440 --> 0:03:02.680 feel pretty good in our shopping. And then at the 0:03:02.800 --> 0:03:07.720 lower end we see shoppers pulling back, not shopping as much, 0:03:08.000 --> 0:03:11.639 not splurging. We had a great story last week the 0:03:11.680 --> 0:03:14.200 CEO of Newell Brands, which is the maker of Sharpie 0:03:14.240 --> 0:03:17.040 and rubber Maid and Mister Coffee, saying that they're having 0:03:17.080 --> 0:03:20.520 a much easier time selling three hundred dollars coffee makers 0:03:20.800 --> 0:03:23.919 than they are selling thirty dollars coffee makers, which tells 0:03:23.960 --> 0:03:26.440 you everything that you need to know about the economy 0:03:26.520 --> 0:03:29.400 right now. The upper income households are spending, the lower 0:03:29.400 --> 0:03:30.320 ones are pulling back. 0:03:30.919 --> 0:03:34.520 How about tariff's I mean, what is the expected impact 0:03:34.560 --> 0:03:37.320 on the consumer here? I wonder if the folks have 0:03:37.400 --> 0:03:40.440 voted for Donald Trump, are they aware that in some 0:03:40.520 --> 0:03:44.560 scenarios tariffs can result in higher prices that we pay 0:03:44.640 --> 0:03:47.840 for stuff and maybe is that a concern for the. 0:03:47.800 --> 0:03:48.520 Consumer out there. 0:03:48.600 --> 0:03:50.800 Yeah, it's a really good question. I think it's somewhat 0:03:50.840 --> 0:03:53.840 ironic that we saw a lot of voters who I 0:03:53.880 --> 0:03:56.800 think were really frustrated with the cost of their groceries 0:03:56.840 --> 0:03:59.320 and how much they were spending on things, come out 0:03:59.320 --> 0:04:02.640 and vote for because they thought he would lower prices. Meanwhile, 0:04:02.760 --> 0:04:05.400 like Trump's platform is very open and honest about his 0:04:05.480 --> 0:04:10.560 protectionist policies, the core of that being increasing tariffs. And 0:04:10.600 --> 0:04:13.720 if you know how tariffs work, like they most of 0:04:13.760 --> 0:04:17.120 the time get passed down to the consumer and raise prices. 0:04:17.360 --> 0:04:19.400 So that is going to be a big theme of 0:04:19.440 --> 0:04:22.480 our coverage and what we're looking for next year. Obviously, 0:04:22.560 --> 0:04:25.640 tariffs are really complicated. We don't know what industries are 0:04:25.680 --> 0:04:28.080 they're going to hit first, what types of products are 0:04:28.120 --> 0:04:30.880 going to hit, how big they will be, what countries 0:04:30.920 --> 0:04:35.680 they will affect. These are all still unknown, but generally speaking, 0:04:35.680 --> 0:04:39.640 what economists think will happen is that tariffs will raise 0:04:39.680 --> 0:04:44.680 prices for consumers and will slow economic growth, which ultimately 0:04:44.880 --> 0:04:47.520 is not great for the consumer, not great for the 0:04:47.520 --> 0:04:50.719 companies that we cover on the consumer beat. And you know, 0:04:50.760 --> 0:04:52.640 we got a little bit of a preview of this 0:04:53.200 --> 0:04:56.480 in the consumer confidence ratings that were just out a 0:04:56.520 --> 0:04:59.200 couple weeks ago. They tanked for the first time in 0:04:59.240 --> 0:05:03.479 a while because of this concern and uncertainty over tariffs. 0:05:04.120 --> 0:05:06.839 Very quickly here about thirty seconds. We know consumers are 0:05:06.839 --> 0:05:08.880 talking about this. How about companies themselves? As you listen 0:05:08.920 --> 0:05:11.320 to earnings calls and CEO speaking, are they engaging with 0:05:11.400 --> 0:05:13.680 the notion of what tariffs might mean for their bottom line? 0:05:14.000 --> 0:05:16.560 Some are, Some are saying, we just don't know. I 0:05:16.560 --> 0:05:18.960 think a lot of companies that were maybe already planning 0:05:18.960 --> 0:05:23.240 on moving their production outside of China or closer to 0:05:23.279 --> 0:05:26.400 the US are speaking out about it. A lot of 0:05:26.440 --> 0:05:31.400 companies are just saying they don't know. Walmart obviously said yes, 0:05:31.520 --> 0:05:36.239 like tariffs will ultimately raise prices for US, So it's 0:05:36.480 --> 0:05:40.719 different answers across the board. It'll be really interesting to 0:05:40.800 --> 0:05:43.800 watch I think there's a lot we don't know that 0:05:43.839 --> 0:05:48.320 we will learn soon once the new administration enters the 0:05:48.320 --> 0:05:48.800 White House. 0:05:48.839 --> 0:05:49.960 We know you'd be watching it closely. 0:05:49.960 --> 0:05:51.839 Emily con joining us here in the studio in New 0:05:51.880 --> 0:05:54.279 York getting that gold star from one Paul Sweeney, which 0:05:54.320 --> 0:05:56.799 is not worth nothing, I promise you, consumer editor here 0:05:57.000 --> 0:05:59.919 at Bloomberg News, talking about what twenty twenty five is like. 0:06:00.040 --> 0:06:02.040 They look like across a variety of sectors. 0:06:03.800 --> 0:06:07.679 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:07.760 --> 0:06:11.280 weekdays at ten am Eastern on applecar Play and Android 0:06:11.279 --> 0:06:14.080 Auto with the Bloomberg Business Ad. You can also listen 0:06:14.200 --> 0:06:17.280 live on Amazon Alexa from our flagship New York station, 0:06:17.640 --> 0:06:21.400 Just say Alexa Play Bloomberg eleven thirty. 0:06:22.320 --> 0:06:23.960 Something might not be feeling that's good about is the 0:06:24.000 --> 0:06:27.360 federal deficit. The incoming Trump administration facing the worst trajectory 0:06:27.360 --> 0:06:30.560 for federal borrowing in modern day history, with the deficit 0:06:30.600 --> 0:06:33.720 projected to exceed six percent of GDP next year. At 0:06:33.760 --> 0:06:36.760 something I spoke about with current Treasury Sectory Jennet Yellen, 0:06:36.839 --> 0:06:38.240 I asked her about her concerns. 0:06:39.560 --> 0:06:42.000 Well, I am concerned about the fiscal out loo can 0:06:42.080 --> 0:06:48.560 I believe the deficit reduction is necessary to keep us 0:06:48.720 --> 0:06:50.760 on a sustainable fiscal course. 0:06:51.520 --> 0:06:51.719 Now. 0:06:51.760 --> 0:06:57.440 President Biden signed into law a trillion dollars of deficit 0:06:57.520 --> 0:07:02.080 reduction over the next years. He did that in the 0:07:02.960 --> 0:07:07.200 agreement to raise the debt ceiling. And our budget proposes 0:07:07.279 --> 0:07:13.040 an additional three trillion dollars of deficit reduction over ten years, 0:07:13.280 --> 0:07:17.280 and I think that's necessary to make sure that our 0:07:17.360 --> 0:07:25.440 fiscal path is sustainable. Now, Congress hasn't really done anything to, 0:07:27.360 --> 0:07:31.440 you know, beyond what I've mentioned, to improve the fiscal outlook, 0:07:31.520 --> 0:07:34.680 and I think that's a shame. I'm disappointed in that, 0:07:34.960 --> 0:07:38.760 and I think Congress needs to work hard on that. 0:07:39.360 --> 0:07:43.720 There is a threat going forward that many of the 0:07:44.000 --> 0:07:49.720 provisions on the individual tax side of the jobs, job 0:07:49.800 --> 0:07:55.200 cuts and tax JCTA enacted by the Trump administration in 0:07:55.280 --> 0:08:00.480 Congress in twenty seventeen, they will sunset at the end 0:08:00.560 --> 0:08:07.520 of next year, and many Republicans have expressed a desire 0:08:08.520 --> 0:08:12.720 to keep all those provisions in place. CBO said that 0:08:12.760 --> 0:08:17.560 will cost five trillion dollars over ten years. So that 0:08:17.680 --> 0:08:22.480 really is and so that would be a blow in 0:08:22.560 --> 0:08:27.160 a situation where I believe an additional three trillion. You 0:08:27.200 --> 0:08:31.120 know that not doing the five trillion and three trillion 0:08:31.200 --> 0:08:38.920 more is necessary, and if the provisions are just extended, 0:08:40.040 --> 0:08:43.040 this will be a serious blow without finding ways to 0:08:43.120 --> 0:08:46.280 pay for them. We proposed a lot of pay fors 0:08:46.320 --> 0:08:53.840 that we think would fairly ask corporations, wealthy individuals to 0:08:53.960 --> 0:08:59.319 pay their fair share. We've negotiated an international tax agreement 0:08:59.480 --> 0:09:05.280 that would create a level playing field worldwide from multinationals. 0:09:05.760 --> 0:09:09.080 The United States has not yet joined, although many other 0:09:09.160 --> 0:09:16.200 countries have, and that would be a revenue raising measure 0:09:16.280 --> 0:09:20.320 that I think would be very valuable, and there is 0:09:20.360 --> 0:09:24.640 certainly more so. I do hope that the new administration 0:09:24.840 --> 0:09:31.280 in Congress will, if they extend features of JCTA, find 0:09:31.320 --> 0:09:34.920 ways to pay for what they do and also make 0:09:34.960 --> 0:09:39.559 sure that the benefits go not to the wealthiest individuals 0:09:39.559 --> 0:09:40.880 but to middle class families. 0:09:41.760 --> 0:09:44.040 As Treasury Secretary Jenna Yellen, of course, and joining us 0:09:44.040 --> 0:09:47.400 now is Lauren sidel Baker. She's an economist at ITR Economics, 0:09:47.440 --> 0:09:49.560 and Lauren, let me pick up from what the Treasury 0:09:49.600 --> 0:09:52.520 Secretary was saying. They're talking about what might happen when 0:09:52.520 --> 0:09:55.520 it comes to taxes as you look ahead to twenty 0:09:55.559 --> 0:09:58.800 twenty five, let's zoom in on that variable in particular, 0:09:59.320 --> 0:10:01.240 how much does that that kind of define or could 0:10:01.280 --> 0:10:04.120 it define sort of the economic trajectory of the country 0:10:04.120 --> 0:10:06.559 going forward, whether or not those so called Trump era 0:10:06.679 --> 0:10:08.920 tax cuts are are extended here in twenty twenty five. 0:10:10.360 --> 0:10:12.680 Well, clearly there will be some knock on effects, but 0:10:12.800 --> 0:10:15.720 generally we're seeing the consumer be in a very stable position. 0:10:15.800 --> 0:10:18.600 So if we're talking about individual tax rates, yes, that's 0:10:18.600 --> 0:10:21.240 something we consider in our spending, but our dollars do 0:10:21.400 --> 0:10:24.560 tend to walk based on many other fundamental factors. The 0:10:24.600 --> 0:10:26.560 big one that I'm looking at right now is the 0:10:26.559 --> 0:10:28.880 strength of the labor market. We've been talking a lot 0:10:28.920 --> 0:10:33.360 about that recently, but very low new unemployment claims, we 0:10:33.440 --> 0:10:37.160 have very low layoffs and other discharge discharges excuse me. 0:10:37.240 --> 0:10:39.600 And generally, if you want a job today with this 0:10:39.679 --> 0:10:42.080 low unemployment rate, you can typically find one. There are 0:10:42.120 --> 0:10:45.440 more job openings out there than there are unemployed job seekers. 0:10:45.480 --> 0:10:47.360 So at the end of the day, yes, the. 0:10:47.320 --> 0:10:50.240 Tax rate matters, but just having that strong consumer position 0:10:50.320 --> 0:10:52.920 from an employment perspective is what matters more. 0:10:53.559 --> 0:10:55.240 And Lauren, we're seeing, we're starting to hear from some 0:10:55.240 --> 0:10:58.160 of the retailers about some of the retail spending this season, 0:10:58.280 --> 0:11:01.840 you know, up low single it seems like the consumer 0:11:02.080 --> 0:11:02.960 is in decent shape. 0:11:03.040 --> 0:11:04.320 Is that kind of what your data shows? 0:11:05.360 --> 0:11:08.520 That is absolutely what our data show the consumer. We 0:11:08.640 --> 0:11:10.520 like to complain about a number of factors. 0:11:10.600 --> 0:11:11.920 Right we see prices going up. 0:11:11.960 --> 0:11:15.320 We've clearly been hit by inflation, but overall, our wages 0:11:15.400 --> 0:11:18.240 have still been rising, so our purchasing power is actually 0:11:18.320 --> 0:11:20.560 better off today than it has been at any point 0:11:20.559 --> 0:11:23.480 in history. So I think that low single digit growth 0:11:23.480 --> 0:11:25.719 that we're seeing from retailers, in some ways, we were 0:11:25.840 --> 0:11:29.800 spoiled in the post pandemic kind of stimulus era where 0:11:29.840 --> 0:11:32.640 consumers just had so much essentially windfall to go out 0:11:32.640 --> 0:11:35.520 and spend a lot of those very high growth rates 0:11:35.559 --> 0:11:38.120 in retail spending, those were never going to be sustainable. 0:11:38.200 --> 0:11:39.880 So what we're seeing today. 0:11:39.640 --> 0:11:42.479 Is these growth rates come back down to something more sustainable, 0:11:42.520 --> 0:11:45.640 a little bit more healthy for our kind of retail sector. 0:11:46.000 --> 0:11:49.160 But this is overall growth. It's slowing growth, yes, but 0:11:49.240 --> 0:11:52.679 it is still positive movement. And many of the fundamental 0:11:52.720 --> 0:11:55.520 leading indicators that we see today are putting in place 0:11:55.640 --> 0:11:57.080 an even better growth picture. 0:11:57.120 --> 0:11:58.199 In twenty twenty five. 0:11:58.400 --> 0:12:00.520 Lauren, I wondered what stood at to you from the 0:12:00.559 --> 0:12:03.480 most recent comments from the FED chair from Jerome Powell. 0:12:03.520 --> 0:12:05.559 Of course, he is adamant as he always has been, 0:12:05.559 --> 0:12:08.319 that the FED is data driven. There's this kind of 0:12:08.400 --> 0:12:12.840 complementary argument about the FED being data point driven. What 0:12:12.920 --> 0:12:16.840 if you've taken away just about their approach to the numbers, 0:12:16.920 --> 0:12:18.720 to the economic data that we've been getting, and what 0:12:18.720 --> 0:12:22.600 they're going to sort of treat as paramount most important here. 0:12:22.559 --> 0:12:23.480 In twenty twenty five. 0:12:23.600 --> 0:12:26.760 Yes, there's the FED favorite, the PCE flavor, all of that, 0:12:27.520 --> 0:12:29.400 But when the FED looks at that kind of panoply 0:12:29.480 --> 0:12:31.959 of data at the dashboard down in Washington, d C. 0:12:32.240 --> 0:12:34.439 What's most important to them and indeed what's most important 0:12:34.440 --> 0:12:36.360 to you here as we turn the corner into twenty 0:12:36.400 --> 0:12:36.840 twenty five. 0:12:38.480 --> 0:12:40.560 So the FED, with their duel mandate, we always have 0:12:40.679 --> 0:12:43.760 this kind of seesaw effect. Where are they putting more 0:12:43.760 --> 0:12:46.880 attention more focus. For a while, it was inflation, because 0:12:46.960 --> 0:12:48.920 that was the side of their dual mandate that really 0:12:48.920 --> 0:12:51.480 got away from us with very very high inflation numbers. 0:12:51.800 --> 0:12:54.080 Once we saw inflation start to come down, and I 0:12:54.120 --> 0:12:56.720 will be absolutely clear, even those core PC numbers were 0:12:56.720 --> 0:12:59.679 not yet at the fed's target two percent rate, but 0:13:00.000 --> 0:13:02.320 we're moving enough in that direction that they shifted their 0:13:02.360 --> 0:13:04.920 focus away from the inflation side and toward that labor 0:13:04.960 --> 0:13:09.359 market side. Now the labor market, well, some directional deterioration 0:13:09.520 --> 0:13:12.600 is happening. This is coming from such a tight starting point. 0:13:12.880 --> 0:13:15.440 This is still a tight labor market. So I think 0:13:15.559 --> 0:13:18.280 if we do see as we at ITR have been saying, 0:13:18.280 --> 0:13:20.800 we expect to see inflation start to build in the 0:13:20.800 --> 0:13:22.880 back half of twenty twenty five, I think it will 0:13:22.920 --> 0:13:25.320 be very easy for that focus to shift back to 0:13:25.360 --> 0:13:29.040 inflation very quickly. That's something we saw in especially the 0:13:29.080 --> 0:13:31.360 dot plot that came out in the most recent meeting. 0:13:32.120 --> 0:13:36.000 BED officials are starting to scale down their expectations for 0:13:36.080 --> 0:13:38.480 the number of cuts we'll get in twenty twenty five. Again, 0:13:38.520 --> 0:13:41.480 this is something we've had on our horizon for a while. Now, 0:13:41.520 --> 0:13:44.360 we do see those mounting inflation pressures coming back. 0:13:44.400 --> 0:13:46.080 Not to the recent highs. I don't want to. 0:13:46.080 --> 0:13:49.160 Scare anyone, but starting to see some of those fundamental 0:13:49.200 --> 0:13:51.520 pressures build. I don't think we're going to be comfortably 0:13:51.559 --> 0:13:54.120 at that two percent rate, and with the labor markets 0:13:54.160 --> 0:13:56.960 still relatively healthy again. It's going to be very easy 0:13:56.960 --> 0:13:59.600 to shift away from that side of the dual mandate. 0:13:59.679 --> 0:14:03.880 And I don't expect that we'll get rate hikes anytime soon, 0:14:03.960 --> 0:14:06.320 but by the end of twenty twenty five, it's not 0:14:06.800 --> 0:14:10.280 unimaginable that we could even see rates not just level off, 0:14:10.320 --> 0:14:11.439 but start to climb again. 0:14:12.520 --> 0:14:14.040 Lauren, new administration coming in. 0:14:14.080 --> 0:14:16.400 We don't know a lot about their economic policies, but 0:14:16.440 --> 0:14:18.800 what we do know is tariffs are on the table. 0:14:19.280 --> 0:14:22.760 Potential changes to immigration and migrant policy are on the table. 0:14:23.440 --> 0:14:26.680 Some have suggested that those two in and of themselves 0:14:26.720 --> 0:14:27.840 could be inflationary. 0:14:28.200 --> 0:14:29.400 Is that a material risk for you? 0:14:31.080 --> 0:14:31.720 Absolutely. 0:14:31.760 --> 0:14:33.880 We don't know a lot about those programs, but we 0:14:33.960 --> 0:14:37.680 do know that they tend historically to be inflationary. Tariffs, 0:14:37.720 --> 0:14:40.520 I mean, the inflation is almost built into the goal 0:14:40.640 --> 0:14:43.560 right to increase the cost of foreign imports. Back in 0:14:43.600 --> 0:14:46.720 the twenty eighteen Trump taraff round, we did see even 0:14:46.800 --> 0:14:49.520 domestic producers they felt like they had a little more 0:14:49.520 --> 0:14:52.920 wiggle room right with the cost of their competition products 0:14:52.920 --> 0:14:56.080 going up, So we saw domestic producers increase their prices 0:14:56.080 --> 0:14:57.080 back in twenty eighteen. 0:14:57.760 --> 0:14:59.680 Immigration, if we see mass deportations. 0:14:59.680 --> 0:15:02.400 Again, I mentioned there are more jobs available than there 0:15:02.440 --> 0:15:06.240 are job seekers, So taking, however, many million people kind 0:15:06.240 --> 0:15:08.600 of out of our labor force, even if they are 0:15:08.760 --> 0:15:12.320 not documented legal workers today, that will cause a little 0:15:12.320 --> 0:15:14.840 bit more upside pressure on wages. So we don't have 0:15:14.960 --> 0:15:17.640 full details. It remains to be seen what is actually 0:15:17.760 --> 0:15:20.040 policy proposal versus campaign rhetoric. 0:15:20.120 --> 0:15:22.680 But if we do tend in that direction, which. 0:15:22.520 --> 0:15:26.120 Seems a pretty good bet at this point, those would 0:15:26.120 --> 0:15:28.080 tend to put more upside pressure on prices. 0:15:28.360 --> 0:15:30.520 And we know that the FED is now wrestling with 0:15:30.560 --> 0:15:33.440 all of these various permutations of what could happen and 0:15:33.480 --> 0:15:36.360 what effect that could have on the economy. Lauren, let 0:15:36.360 --> 0:15:39.000 me ask you about the so called neutral rate and 0:15:39.040 --> 0:15:42.080 the Fed's necessary obsession with kind of figuring that out. 0:15:42.080 --> 0:15:44.200 Of course it can't pinpoint it in real time, but 0:15:44.840 --> 0:15:46.600 what's your sense of where it is? How much of 0:15:46.640 --> 0:15:48.360 a struggle this has been, indeed it's going to be 0:15:48.400 --> 0:15:50.680 for the FED here going forward? You mentioned the fact 0:15:50.680 --> 0:15:53.080 that they haven't reached that inflation target of two percent? 0:15:53.920 --> 0:15:56.120 Is it coming into any better focus here as we 0:15:56.200 --> 0:15:57.280 get into twenty twenty five? 0:15:58.800 --> 0:16:00.440 So we have to keep in mind that is made 0:16:00.480 --> 0:16:03.240 up of academics, So something like where is the neutral rate? 0:16:03.320 --> 0:16:06.200 That's a very academic argument. We will never know in 0:16:06.280 --> 0:16:08.560 real time. We'll only look back and say what did 0:16:08.600 --> 0:16:10.560 we get right and what did we get wrong? So 0:16:10.680 --> 0:16:12.880 at this point, I'm not sure it matters where the 0:16:12.960 --> 0:16:16.720 neutral rate is. What does matter is how many of 0:16:16.760 --> 0:16:20.040 these fundamental factors will be increasing inflation and then those 0:16:20.080 --> 0:16:22.560 add on risks right from the policy side that you 0:16:22.680 --> 0:16:25.920 just mentioned. What will that do to the inflation rate? 0:16:25.960 --> 0:16:27.760 How much does the FED need to move to keep 0:16:27.800 --> 0:16:31.200 inflation and check versus our labor market issues? Those are 0:16:31.200 --> 0:16:34.560 really long term demographic problems. So that's not something that's 0:16:34.640 --> 0:16:36.880 quite so easy to just for the FED to kind 0:16:36.880 --> 0:16:39.000 of put their hand on the scale to tilt that 0:16:39.120 --> 0:16:41.960 down to show balance in the labor market. 0:16:42.040 --> 0:16:43.160 It's demographics. 0:16:43.200 --> 0:16:45.520 That's not something they can fight with birth rates, right, 0:16:45.520 --> 0:16:47.320 That just isn't what the FED is here to do. 0:16:48.360 --> 0:16:52.240 So, Lauren, what is your GDP call for twenty twenty 0:16:52.240 --> 0:16:54.440 five and what are the real variables there that could 0:16:54.680 --> 0:16:55.920 kind of move that one way or the other. 0:16:57.560 --> 0:17:01.400 I do expect solid steady GDP growth. We're looking for 0:17:01.400 --> 0:17:04.399 about two and a half percent growth, in twenty twenty five. Again, 0:17:04.480 --> 0:17:08.440 a lot of those fundamental leading indicators that we tend 0:17:08.480 --> 0:17:11.440 to follow, they're showing upturn. We've had much more subdued 0:17:11.480 --> 0:17:14.560 growth lately, especially in things like our manufacturing economy, our 0:17:14.600 --> 0:17:18.159 industrial sector, but we see green shoots going forward. We 0:17:18.200 --> 0:17:21.560 see with this lower interest rate environment, now having had 0:17:21.600 --> 0:17:24.680 some room to run, businesses are looking to invest next year. 0:17:24.960 --> 0:17:25.600 There will be. 0:17:25.560 --> 0:17:30.480 Of course added policy implications, but the general underlying fundamental 0:17:30.560 --> 0:17:33.160 factors those are the ones that we find much more 0:17:33.200 --> 0:17:36.960 consistently important to business investment and to the long term 0:17:37.000 --> 0:17:40.080 growth of the economy. So I'm looking for steady consumer 0:17:40.160 --> 0:17:42.840 spending to really be the engine fueling that growth, but. 0:17:42.840 --> 0:17:44.480 A resurgence in business investment. 0:17:44.960 --> 0:17:48.120 The government side of GDP, they keep on spending, as 0:17:48.119 --> 0:17:51.440 we just heard from Yellen. So I do fully expect 0:17:51.920 --> 0:17:54.880 steady but rather broad based growth in twenty twenty five. 0:17:55.040 --> 0:17:57.080 I'll ask you lastly just to place this the US 0:17:57.119 --> 0:18:01.480 economy in a wider context, to global context. It does 0:18:01.520 --> 0:18:04.200 seem that things here are much better, certainly than they 0:18:04.240 --> 0:18:06.560 are in many parts many parts of Europe. Do you 0:18:06.640 --> 0:18:08.160 expect for that to persist? 0:18:09.760 --> 0:18:10.399 I think the. 0:18:10.280 --> 0:18:13.320 Reasons that our economy is doing better than Europe. Those 0:18:13.359 --> 0:18:16.560 are very foundational and it's a strong foundation. So we 0:18:16.600 --> 0:18:18.840 see a lot of foreign direct investments still coming into 0:18:18.840 --> 0:18:21.919 the United States. I don't think the re onshoring story 0:18:21.960 --> 0:18:24.679 has completely played out. There is more movement in that 0:18:24.760 --> 0:18:28.320 direction globally. We're just in a point of nationalism as 0:18:28.359 --> 0:18:29.439 opposed to globalism. 0:18:29.520 --> 0:18:31.280 The pendulum is shifting that direction. 0:18:31.440 --> 0:18:34.040 So with our strong consumer base that did get a 0:18:34.119 --> 0:18:37.280 little bit more boost than their European counterparts from that 0:18:37.359 --> 0:18:41.240 pandemic era stimulus spending. Yes, I think we are in 0:18:41.280 --> 0:18:44.600 a broad kind of strong position that's going to encourage 0:18:44.600 --> 0:18:47.320 the foreign direct investment to keep flowing this way. So 0:18:47.440 --> 0:18:49.480 for the foreseeable future, I think the US is a 0:18:49.560 --> 0:18:50.800 very good place to do business. 0:18:51.320 --> 0:18:53.679 All right, Lauren, thank you so much. We appreciate that. 0:18:53.720 --> 0:18:57.679 As always, Lauren sidel A Baker its economics, getting your 0:18:57.720 --> 0:19:01.119 thoughts on economic conditions out there are Federal Reserve and 0:19:01.160 --> 0:19:03.240 maybe a little bit of a peak ahead to twenty 0:19:03.480 --> 0:19:04.200 twenty five. 0:19:05.760 --> 0:19:09.600 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:19:09.720 --> 0:19:12.399 weekdays at ten am Eastern on Apple card Playing and 0:19:12.520 --> 0:19:15.439 broud Otto with the Bloomberg Business app listen on demand 0:19:15.480 --> 0:19:19.800 wherever you get your podcasts, or watch us live on YouTube. 0:19:20.760 --> 0:19:21.159 What do you go for? 0:19:21.280 --> 0:19:22.440 Let's talk about real estate now. 0:19:22.520 --> 0:19:24.719 New home sales in the US rebounded last month as 0:19:24.760 --> 0:19:27.520 builders and consumers sealed deals that have been delayed by 0:19:27.560 --> 0:19:30.600 storms in the South, and buyers took advantage of heavy 0:19:30.600 --> 0:19:33.760 sales incentives. He's the Best Freeman set of Luxury real 0:19:33.840 --> 0:19:36.400 Estate broke which Brown Harris Stevens had to say about 0:19:36.400 --> 0:19:36.800 the market. 0:19:37.760 --> 0:19:40.120 All real estate is local, so it depends on where 0:19:40.160 --> 0:19:42.200 you are and what the demand is. I'll give you 0:19:42.240 --> 0:19:45.080 an example, a place like Palm Beach. You put something 0:19:45.119 --> 0:19:47.600 on the market, there is a swarm of people who 0:19:47.600 --> 0:19:50.840 want to buy. But that's obviously more typically more high end, 0:19:50.880 --> 0:19:54.760 more expensive Connecticut. There's no supply, so when people put 0:19:54.800 --> 0:19:56.879 their homes on the market, there's a rush of people 0:19:56.960 --> 0:20:00.320 to line up to bid on the homes. I think 0:20:00.359 --> 0:20:02.720 once we have more supply than we're going to get 0:20:02.720 --> 0:20:05.280 prices to come down. And if sellers start to put 0:20:05.280 --> 0:20:07.680 their homes on the market and buyers get into the market, 0:20:07.800 --> 0:20:11.040 we start to see fluidness and supply and demand intersect, 0:20:11.160 --> 0:20:13.800 which is a healthy housing market, which we didn't have 0:20:13.840 --> 0:20:14.760 in twenty twenty four. 0:20:15.080 --> 0:20:17.199 Well, you talk about Palm Beach, you talk about Connecticut. 0:20:17.480 --> 0:20:19.600 I'm going to be selfish and ask about Manhattan. 0:20:19.600 --> 0:20:21.840 What does the supply picture look like there and how 0:20:21.880 --> 0:20:23.640 does that feed into the pricing dynamic. 0:20:23.640 --> 0:20:25.680 We have a decent supply, you know, the market in 0:20:25.720 --> 0:20:29.119 the city has been pretty flat. High end has done well, 0:20:29.160 --> 0:20:31.560