WEBVTT - Lots More with Claudia Sahm 0:00:00.200 --> 0:00:02.160 I was just saying to Joe, I'm annoyed that we 0:00:02.200 --> 0:00:04.760 didn't go to the Freight Rate Waves conference this year 0:00:04.840 --> 0:00:08.760 because they had a puppy playpen just like a bunch 0:00:08.760 --> 0:00:12.719 of puppies at this conference. And we went last year 0:00:12.760 --> 0:00:14.040 and they did not have puppies. 0:00:14.480 --> 0:00:18.320 Yeah, we had some like work thing, the one there's 0:00:18.360 --> 0:00:21.200 a board build or board group that's over an international square, 0:00:21.239 --> 0:00:23.840 which is not like in the FED complex. And they did. 0:00:23.880 --> 0:00:25.840 They had a day where they had all this stuff 0:00:25.840 --> 0:00:27.440 for the people in the building, and when was a 0:00:27.480 --> 0:00:28.200 puppy play pen. 0:00:28.480 --> 0:00:31.120 So this is a new thing adult to need, like 0:00:31.200 --> 0:00:32.879 puppy play pens at events. 0:00:32.880 --> 0:00:36.680 To be sorry, why not wait the food trucks and 0:00:36.800 --> 0:00:39.960 puppies preferably ones that are up for adoption, you know, 0:00:40.000 --> 0:00:44.040 from animal shelters, and you have the complete the ideal conference, 0:00:44.200 --> 0:00:45.279 in my opinion. 0:00:47.680 --> 0:00:54.760 I did a deadlift one, two, three, Jimmy Okay, up barges. 0:00:54.880 --> 0:00:57.000 This isn't after school special except. 0:00:56.640 --> 0:00:59.200 I've decided I'm going to base my entire personality going 0:00:59.200 --> 0:01:02.440 forward on painting for a strategic pork reserve in the US. 0:01:02.560 --> 0:01:04.280 Where's the best with imposta? 0:01:04.440 --> 0:01:05.880 These are the important question. 0:01:06.000 --> 0:01:07.400 Is it robots taking over the world. 0:01:07.520 --> 0:01:10.360 No, I think that like in a couple of years, 0:01:10.520 --> 0:01:12.800 the AI will do a really good job of making 0:01:12.800 --> 0:01:13.920 the out launch podcast. 0:01:14.600 --> 0:01:16.800 And people say, I don't really need to listen to 0:01:16.920 --> 0:01:21.440 Joe and Tracy anymore. We do have the perfect. 0:01:22.800 --> 0:01:25.400 Well in the meantime, this is lots more. 0:01:25.480 --> 0:01:27.920 A weekly chat about whatever is on our minds. 0:01:31.640 --> 0:01:35.600 We are speaking with Claudia Palm, the former Fed economist 0:01:35.640 --> 0:01:39.920 who now has her own consultancy, Psalm Consulting. Claudia, it's 0:01:39.920 --> 0:01:41.400 good to talk again. It's been a while. 0:01:42.280 --> 0:01:44.520 Yeah, no, it's great to be on. I really appreciate it. 0:01:45.000 --> 0:01:47.680 I have a really important question, which is do you 0:01:47.720 --> 0:01:50.240 get tired of having to convince people that you do, 0:01:50.360 --> 0:01:53.800 in fact know how the Psalm rule actually works, the 0:01:53.880 --> 0:01:56.600 rule that's named after you. 0:01:56.720 --> 0:02:01.760 Yeah. No, men are fascinating. I agree. It's it's interesting. 0:02:01.800 --> 0:02:03.960 I have people that ask me like they can't quite 0:02:04.080 --> 0:02:06.600 you know, match it, so they email me very politely, 0:02:06.760 --> 0:02:09.520 we you know, because it like details matter, right, exactly 0:02:09.560 --> 0:02:12.320 what average you're taking and stuff. But the people who 0:02:12.800 --> 0:02:15.760 try to explain to me that I've calculated it wrong, 0:02:16.040 --> 0:02:19.040 it's like, and then get really not happy with me 0:02:19.080 --> 0:02:22.280 when I don't agree with them and just anyways, So 0:02:22.639 --> 0:02:24.639 that's I guess just part of I mean, I'm glad 0:02:24.639 --> 0:02:27.360 they're touching data. They clearly don't know what to do 0:02:27.440 --> 0:02:28.400 with it, but it's good. 0:02:28.760 --> 0:02:31.799 Can we run a Bloomberg headline some call and men 0:02:31.840 --> 0:02:32.680 are fascinating? 0:02:32.840 --> 0:02:34.520 I think that that could be one. 0:02:34.400 --> 0:02:36.760 Of those Bloomberg red headlines. I think that goes across 0:02:36.840 --> 0:02:38.000 the wire when this comes out. 0:02:38.160 --> 0:02:40.720 Yeah, you should ask my editor Bob Burgess a Bloomberg 0:02:40.800 --> 0:02:43.119 opinion if I can write that piece. I'm not sure 0:02:43.120 --> 0:02:44.239 how green light that one. 0:02:44.840 --> 0:02:46.200 I thought we could get that commission. 0:02:46.880 --> 0:02:50.040 Maybe you know, a lot of our listeners started listening 0:02:50.080 --> 0:02:52.280 to us in sort of like twenty twenty, the pandemic era. 0:02:52.320 --> 0:02:54.120 But we've we had called it you on I think 0:02:54.160 --> 0:02:59.160 in January or February twenty twenty before COVID hit, just 0:02:59.240 --> 0:03:02.280 sort of talking theoretically about this idea of okay, what 0:03:02.320 --> 0:03:06.480 are these indicators of recession, et cetera. And then it 0:03:06.680 --> 0:03:10.120 was literally six weeks later and we're like, oh, well, 0:03:10.120 --> 0:03:12.760 we were talking about theoretically six weeks ago, and now 0:03:12.800 --> 0:03:15.520 we have to talk about real So here we are. 0:03:15.520 --> 0:03:17.560 I don't think we've had you I don't think we've 0:03:18.040 --> 0:03:19.320 chatted with you since then, though. 0:03:19.880 --> 0:03:23.079 Yeah, no, I show up when the world is creening 0:03:23.120 --> 0:03:25.720 towards the cliff, so I you know, I'm happy to 0:03:25.760 --> 0:03:27.880 be helpful, and you know we can do good policy, 0:03:27.919 --> 0:03:30.080 we can do it better. And yet it is not 0:03:30.760 --> 0:03:34.960 cheerful when I start getting press calls, lots of press calls. 0:03:35.080 --> 0:03:38.960 I remember, though, that was actually an incredibly prescient conversation 0:03:39.280 --> 0:03:42.440 in many ways because we did talk about the Psalm rule, 0:03:42.520 --> 0:03:45.720 and we should maybe mention on this podcast what exactly 0:03:45.720 --> 0:03:48.040 it is. But the whole idea of the Psalm rule 0:03:48.200 --> 0:03:51.760 was that it would be an early indicator of recession, 0:03:52.120 --> 0:03:56.600 so that policy makers would be able to actually start 0:03:56.760 --> 0:04:01.480 doing something about, you know, impending a contraction. And I 0:04:01.520 --> 0:04:04.240 think people kind of forget about that now. 0:04:04.320 --> 0:04:07.760 Right, Like you said, this is a recession indicator, so 0:04:07.800 --> 0:04:10.560 it doesn't forecast a recession, but very early in a recession, 0:04:10.800 --> 0:04:14.680 way before like the NBER would call the recession, way 0:04:14.680 --> 0:04:17.320 before we'd even have a lot of information on GDP. 0:04:18.040 --> 0:04:20.359 This unemployment rate should tell us we're in a recession. 0:04:21.000 --> 0:04:23.200 Let's get going, right, And there are certain things that 0:04:23.240 --> 0:04:26.000 Congress does in almost every recession, though, I'm not holding 0:04:26.000 --> 0:04:29.560 my breath if one comes soon with sending out stimulus checks, 0:04:29.640 --> 0:04:34.200 enhancing unemployment benefits, maybe getting money to communities. So just 0:04:34.520 --> 0:04:37.520 tie it to an economic indicator. I think the other 0:04:37.560 --> 0:04:40.080 thing that's important with the stimulus checks, which should be 0:04:40.080 --> 0:04:43.679 a lesson from this last cycle, is you can ahead 0:04:43.720 --> 0:04:46.719 of time determine how big should they be, who should 0:04:46.760 --> 0:04:50.760 they go to, and if we should repeat them, right, 0:04:50.800 --> 0:04:52.640 and how big they should be if you repeated them, 0:04:52.640 --> 0:04:55.520 because you can absolutely see the politics that got wrapped 0:04:55.560 --> 0:04:59.320 into the stimulus checks and not a lot of guidance 0:04:59.839 --> 0:05:01.919 right in terms of exactly when should we do it, 0:05:01.960 --> 0:05:05.120 how much should we do it after the initial response. 0:05:05.360 --> 0:05:07.560 So yes, I think taking the politics out of the 0:05:07.600 --> 0:05:10.080 things we are always do and then let Congress focus 0:05:10.120 --> 0:05:12.920 on what's new in that recession. 0:05:13.400 --> 0:05:16.440 Yeah, so speaking of what's new and kind of going 0:05:16.480 --> 0:05:20.520 back to the men are fascinating topic. But I think 0:05:20.600 --> 0:05:24.280 one of the controversies with the discussion around the SAM 0:05:24.400 --> 0:05:27.680 rule right now is you've said that you know, in 0:05:27.720 --> 0:05:31.760 some respects this is kind of a backward looking empirical measure. 0:05:31.880 --> 0:05:35.479 So the Sam rule has happened for previous recessions, but 0:05:35.720 --> 0:05:38.680 that doesn't necessarily mean that it's going to happen this 0:05:38.800 --> 0:05:43.039 time around. And I saw one guy on Twitter slash 0:05:43.360 --> 0:05:46.080 x who just was furious that you were sort of 0:05:46.120 --> 0:05:49.000 like doubting your own rule. And it was just hilarious 0:05:49.000 --> 0:05:51.960 to me because you know, who knows better about the 0:05:52.040 --> 0:05:55.800 limitations or the possibilities of this particular theory than its 0:05:55.839 --> 0:05:58.440 actual creator. And yet this guy was like, I don't 0:05:58.520 --> 0:06:01.680 understand why you're not into your own rule? Why would 0:06:01.760 --> 0:06:02.360 you doubt it? 0:06:03.000 --> 0:06:04.760 Yeah? No, I had someone last night told me I 0:06:04.839 --> 0:06:09.440 was having an identity crisis and someone else, I mean, 0:06:09.480 --> 0:06:11.919 And I've gotten emails, I think well intentioned ones of 0:06:12.040 --> 0:06:14.919 like you're being too self deprecating and you're you know, 0:06:14.960 --> 0:06:16.520 and it's like, no, no, no, see, I'm just I'm 0:06:16.520 --> 0:06:20.440 being honest here, right. This is an empirical regularity. It's 0:06:20.480 --> 0:06:24.120 a pattern that's true of every single model, every single 0:06:24.480 --> 0:06:28.680 indicator forecast that we have in macroeconomics. They're all trained 0:06:28.720 --> 0:06:32.359 on the past, and this present has been really unlike 0:06:32.400 --> 0:06:32.799 the past. 0:06:33.279 --> 0:06:34.920 Oh yeah, it's a I mean that makes a ton 0:06:34.960 --> 0:06:37.919 of sense, right, All these different models have broken apart 0:06:38.560 --> 0:06:41.360 this current cycle almost like nothing else that we've seen. 0:06:41.520 --> 0:06:44.239 So it's good to have some humility about whether things 0:06:44.240 --> 0:06:46.640 that empirically seem to be true in the past. Well, 0:06:46.720 --> 0:06:49.360 what do you since you said, you know, when your 0:06:49.400 --> 0:06:51.719 phone is ringing off the hook, that's usually a sign 0:06:51.920 --> 0:06:54.919 of maybe things are going wrong. And it does happen 0:06:54.960 --> 0:06:57.560 to be true that the unemployment rate has ticked up 0:06:57.600 --> 0:07:00.480 two three point nine percent. Earlier in the year it 0:07:00.600 --> 0:07:03.760 was three point four percent. Three point nine percent happens 0:07:03.800 --> 0:07:06.320 to be the highest since January twenty twenty two. So 0:07:06.800 --> 0:07:10.480 it's obviously called people's attention. It's not necessarily recession indicate 0:07:10.680 --> 0:07:13.120 recession sign yet, but it's real. What don't you, just 0:07:13.360 --> 0:07:17.320 for the sake of listeners, et cetera, situate the current 0:07:17.560 --> 0:07:21.480 unemployment trajectory within the context of your rule. 0:07:22.280 --> 0:07:25.080 Okay, so I guess, just so we don't dance around, 0:07:25.120 --> 0:07:26.240 what is this rule? Yeah? 0:07:26.280 --> 0:07:28.480 Yeah, what's the oil and where are we right now? 0:07:28.920 --> 0:07:32.120 Yeah? So we take the monthly unemployment rate. We take 0:07:32.160 --> 0:07:34.520 a three month moving average. I mean, if you look 0:07:34.520 --> 0:07:37.320 at the data, things bounce around. Even the unemployment rate, 0:07:37.360 --> 0:07:39.440 it's pretty well measured, it bounces around. So you take 0:07:39.480 --> 0:07:42.880 three month average, you compare in that series, you compare 0:07:43.040 --> 0:07:47.840 the current data point with the lowest over the prior 0:07:47.920 --> 0:07:50.760 twelve months. If you see an increase of a half 0:07:50.800 --> 0:07:54.400 a percentage point or more, we are in the early 0:07:54.480 --> 0:07:58.480 months of a recession. That indicator, the Samb rule, has 0:07:59.040 --> 0:08:03.640 been highly accurate since the nineteen seventies. It's triggered in 0:08:03.720 --> 0:08:06.800 every recession. It is not triggered outside of any recession. 0:08:07.400 --> 0:08:10.320 You go back to World War Two. It's really pretty good. 0:08:10.360 --> 0:08:12.680 There are some places where it does trigger outside of 0:08:12.720 --> 0:08:16.360 a recession. And as you said, the unemployment rate has 0:08:16.400 --> 0:08:18.320 been rising. If you look, you do not need my 0:08:18.400 --> 0:08:20.400 rule to tell you it has been rising. You know, 0:08:20.520 --> 0:08:23.280 since the middle of the year. The Psalm rule is 0:08:23.400 --> 0:08:26.080 currently at three tenths, so it is short of its trigger. 0:08:26.880 --> 0:08:31.000 That three tenths is not It is not a good sign, 0:08:31.320 --> 0:08:33.000 right like, there are more people out of jobs that 0:08:33.320 --> 0:08:38.320 are looking for jobs, and it's often it does go 0:08:38.400 --> 0:08:41.640 into a recession once the unemployment but not always, right like, 0:08:41.679 --> 0:08:45.280 this is not we're not in the we're over the 0:08:45.320 --> 0:08:47.600 cliff stage of this. But if you look just at 0:08:47.600 --> 0:08:51.080 the monthly unemployment rates, they're up a half a percentage point. 0:08:51.240 --> 0:08:53.680 So I do a lot of education about the Psalm rule, 0:08:54.280 --> 0:08:56.720 right like, people get the half a percentage point trigger 0:08:56.760 --> 0:09:00.559 in their head, but like that's not for this rule, right, 0:09:00.640 --> 0:09:02.000 Like and it is, like I said, this is not 0:09:02.080 --> 0:09:05.920 a good sign. One of the things that has frustrated 0:09:05.960 --> 0:09:09.120 me both with the inflation debate and now what I'm 0:09:09.160 --> 0:09:11.720 seeing with unemployment is we got to look under the 0:09:11.720 --> 0:09:16.360 hood here, like why are things moving around the way 0:09:16.440 --> 0:09:21.240 they are? And it's the case that we finally in 0:09:21.280 --> 0:09:25.079 the labor market, have really seen the supply of workers, 0:09:25.480 --> 0:09:28.400 you know, the people that want jobs coming back. And 0:09:28.679 --> 0:09:31.080 at the same time, we've seen the pace of hiring 0:09:31.640 --> 0:09:34.280 slow down. The job games we're seeing every month slow down. 0:09:34.320 --> 0:09:37.640 They're still good, but we're in this space of now 0:09:37.679 --> 0:09:41.120 we've got more workers and the jobs have to catch 0:09:41.200 --> 0:09:44.240 up with them, Whereas when we were in labor shortage world, 0:09:44.760 --> 0:09:47.000 it was turned around. We had all these jobs and 0:09:47.000 --> 0:09:50.080 the workers had to catch up. So to me, it's 0:09:50.120 --> 0:09:53.600 like that's the story because otherwise, like if this were 0:09:53.679 --> 0:09:58.280 a demand driven recession, a demand or a demand driven recovery, 0:09:58.320 --> 0:10:02.680 a demand driven inflation, then the logic of once the 0:10:02.720 --> 0:10:06.120 unemployment rate gets going, it keeps going, right, You've got 0:10:06.160 --> 0:10:08.360 to have you got to have a story here, and 0:10:08.400 --> 0:10:11.640 one that is grounded in reality. Those are the best stories, 0:10:12.240 --> 0:10:16.000 at least if you do macro. 0:10:24.559 --> 0:10:27.200 Speaking of macro, Tracy, you and I we went to 0:10:27.280 --> 0:10:30.119 separate parties last night. We went to separate events. 0:10:30.440 --> 0:10:33.720 Yes, you abandoned me again the second you're supposed to 0:10:33.720 --> 0:10:35.480 come with me, and then you're like, oh oops, I 0:10:35.600 --> 0:10:36.800 r s VP for something else. 0:10:36.840 --> 0:10:37.640 I double book. 0:10:38.000 --> 0:10:40.960 I'm sensing a pattern here of ditching Tracy. 0:10:41.160 --> 0:10:42.880 No, but this came up, and so I was at 0:10:42.880 --> 0:10:46.640 this sort of cocktail thing that Rick Plosius and previous 0:10:46.720 --> 0:10:49.280 lots more guests, Neil Dunna read, and some of this 0:10:49.440 --> 0:10:52.360 question came up about Okay, the rise in the unemployment rate, 0:10:52.400 --> 0:10:55.160 how much how much is this due to weakening demand 0:10:55.240 --> 0:10:57.439 for labor versus how much is this due to increase 0:10:57.440 --> 0:11:00.640 supply of labor people coming off the sideline. The one 0:11:00.679 --> 0:11:02.680 thing that seems to be true, as he pointed out, 0:11:03.160 --> 0:11:04.760 and I thought this was sort of a good thing 0:11:04.800 --> 0:11:07.320 to think about, is that either one of the stories, 0:11:07.320 --> 0:11:10.600 whether it's about slowing demand for labor increased supply, probably 0:11:10.720 --> 0:11:14.040 going to depress the state of wage growth, which is, 0:11:14.080 --> 0:11:16.840 if you're the fed, probably something you want to see. 0:11:16.880 --> 0:11:21.360 Regardless in part of feeling confident that the inflation problem 0:11:21.400 --> 0:11:22.680 is getting close to being solved. 0:11:22.960 --> 0:11:25.240 Wait, just going back to reality. I actually have a 0:11:25.240 --> 0:11:29.480 personal anecdote on this, which is my mother retired during 0:11:29.559 --> 0:11:32.640 COVID and she is now unretired really and she's back 0:11:32.640 --> 0:11:35.199 in the workforce as of about a month ago. 0:11:35.360 --> 0:11:38.560 When is she coming out that lot? Why did she? Yeah, 0:11:38.600 --> 0:11:40.120 we gotta get this story then. 0:11:40.240 --> 0:11:43.040 Wait, Claudia, can I ask did you see this morning? 0:11:43.040 --> 0:11:46.880 So Brent Donnelly, another All Thoughts guest, he published a 0:11:46.920 --> 0:11:50.280 sort of modified PSALM rule that was based on initial 0:11:50.360 --> 0:11:53.880 claims instead of the unemployment rate, and it looked kind 0:11:53.880 --> 0:11:55.440 of interesting. I don't know if you've had a chance 0:11:55.480 --> 0:11:56.200 to look at it yet. 0:11:56.440 --> 0:11:59.760 Yeah. Branda actually sent me his piece ahead of time 0:11:59.800 --> 0:12:02.280 to make sure he was characterizing this SAM rule correctly. 0:12:02.760 --> 0:12:05.439 Oh night, So some men are smart about how they 0:12:05.480 --> 0:12:07.760 do this. So yeah, so I got a preview of 0:12:07.800 --> 0:12:12.440 the piece. It's really interesting. This the context of the 0:12:12.480 --> 0:12:14.440 same rules. It was designed as we were talking about 0:12:14.480 --> 0:12:17.720 for the automatic stablers and the fiscal policy. It needed 0:12:17.720 --> 0:12:20.080 to be simple like this. It's supposed to be like 0:12:20.120 --> 0:12:24.840 in legislation. It's something everyone follows, and it's a well 0:12:25.000 --> 0:12:30.120 measured kind of stable creature. Right, So I never thought 0:12:30.120 --> 0:12:31.680 I was gonna get in the business of are we 0:12:31.720 --> 0:12:34.280 in a recession? I was supposed to be about now 0:12:34.280 --> 0:12:37.360 we help people, right, So in any case, I'm happy 0:12:37.400 --> 0:12:40.520 to be useful as I can. So I've always said 0:12:40.720 --> 0:12:43.760 it's it's entirely possible that you end up with there 0:12:43.800 --> 0:12:48.160 are better indicators of recessions, and better in the sense 0:12:48.240 --> 0:12:50.240 that I mean, mine is highly accurate, but it better 0:12:50.280 --> 0:12:55.360 would be like signaling, and even sooner. The SAM usually triggers, 0:12:55.520 --> 0:12:57.640 you know, two to three months inside of a recession. 0:12:58.120 --> 0:13:01.600 You could nail it right on day one. Be super claims. 0:13:01.600 --> 0:13:05.720 We get claims weekly. It's faster moving. I never looked 0:13:05.720 --> 0:13:07.760 at claims I have, I mean, having been at the 0:13:07.800 --> 0:13:11.280 FED and following data all these kind of data before 0:13:11.320 --> 0:13:15.800 I left claims. I just don't feel comfortable using a 0:13:15.880 --> 0:13:21.640 data series where actually deer season can cause strange aberrations 0:13:21.679 --> 0:13:23.439 and the data to the point Department of Labor has 0:13:23.440 --> 0:13:25.440 to publish that like in the little header. 0:13:25.760 --> 0:13:29.080 Oh my god, so this is people what taking off 0:13:29.120 --> 0:13:30.480 time from I did not. 0:13:30.600 --> 0:13:35.160 Yeah, you're more often you'll see like plant closures like 0:13:35.240 --> 0:13:37.840 regular like in the auto industry. There's regular closures at 0:13:37.880 --> 0:13:40.760 certain times the year to do maintenance. So that's a 0:13:40.800 --> 0:13:43.840 more typical one to show in the headline. But years 0:13:43.840 --> 0:13:45.640 ago when I was at the FED, there was one 0:13:45.679 --> 0:13:48.120 on deer season in Michigan because it you know, these 0:13:48.160 --> 0:13:52.840 are monthly things, but it's extremely timely. It's something absolutely 0:13:52.920 --> 0:13:54.600 to Faull like, I keep an eye on. I mean, 0:13:54.679 --> 0:13:56.800 came out today, right, you know, and it does tell 0:13:56.880 --> 0:13:59.400 us something, so I wasn't. And I've had other friends 0:13:59.400 --> 0:14:02.240 who have, you know, push claims as a way to 0:14:02.280 --> 0:14:04.319 do this. I think that's fine. It makes a lot 0:14:04.320 --> 0:14:08.200 of sense to me, you know, in the forecasting. I mean, heck, 0:14:08.240 --> 0:14:10.680 if we still use the yield curve to say anything 0:14:10.679 --> 0:14:14.080 about a recession coming, I would feel much more comfortable 0:14:14.120 --> 0:14:16.400 at having something claims in, you know, in the labor 0:14:16.440 --> 0:14:19.960 market space, just because you know, I said, like, the 0:14:20.040 --> 0:14:24.400 labor market is so central to this recovery, any recovery. 0:14:24.760 --> 0:14:28.560 It's been really strong. Most Americans spend their paychecks as 0:14:28.560 --> 0:14:31.040 long as they still have jobs, they're still out there spending. 0:14:31.200 --> 0:14:35.000 If they're unable to spend, like we're done, right, there's 0:14:35.040 --> 0:14:38.200 seventy percent of the economy, so you have this change. 0:14:38.200 --> 0:14:40.680 So to me, thinking about anything tied to the labor 0:14:40.720 --> 0:14:43.320 market as an early indicator, it makes so much sense. 0:14:43.640 --> 0:14:46.440 The other thing that I find to be very powerful 0:14:46.560 --> 0:14:51.800 about this idea and the importance of trying to capture 0:14:51.800 --> 0:14:54.760 something that happens early in the recession is that one 0:14:54.760 --> 0:14:58.120 thing that you just see and Alex Williams over at 0:14:58.160 --> 0:15:01.680 Employee America has talked about the as well, and obviously 0:15:01.760 --> 0:15:04.840 it informs some of the core logic of what we're 0:15:04.840 --> 0:15:07.240 working on. Is once it gets going, the rise and 0:15:07.280 --> 0:15:10.760 the unemployment rate, it really gets moving. And so maybe 0:15:10.800 --> 0:15:14.240 three in the three point three, three point nine percent, 0:15:14.760 --> 0:15:16.480 it's a you know, it's still a blow four percent 0:15:16.520 --> 0:15:19.400 that's really good, but historically, like once it gets going, 0:15:19.880 --> 0:15:22.480 you know, you'd expect it to seriously, if the recession 0:15:23.160 --> 0:15:25.880 starts to snowball, it could go to six or seven 0:15:25.920 --> 0:15:29.400 percent very fast or in a fairly short period of time. 0:15:30.240 --> 0:15:33.560 And so the idea, I guess, you know, in the 0:15:33.640 --> 0:15:38.360 dream world of rules based fiscal automatic stabilizers, that seems 0:15:38.400 --> 0:15:40.520 like the process that you really want a short circuit. 0:15:40.920 --> 0:15:43.280 Yeah no, and I mean over in the monetary policy 0:15:43.360 --> 0:15:46.080 side too, yeah right, and they I mean they you know, 0:15:46.120 --> 0:15:49.280 at the FED, getting ahead of it would be more 0:15:49.320 --> 0:15:51.520 would be ideal, not waiting until we're in it. And 0:15:51.600 --> 0:15:53.880 to your point, the you know, looking at the kind 0:15:53.920 --> 0:15:57.840 of recent set, like since the seventies of recessions, the 0:15:57.880 --> 0:16:00.200 mildest one for two thousand and one, you saw two 0:16:00.240 --> 0:16:04.080 percentage point increase in the unemployment or two percentage point 0:16:04.120 --> 0:16:06.480 increase the unmployment rates. That would put us well above 0:16:06.560 --> 0:16:10.760 five and the typical increase is more like four percentage 0:16:10.760 --> 0:16:14.480 points or close to four. So yeah, I mean, if 0:16:14.680 --> 0:16:17.040 anything you can do to show well, if you can 0:16:17.120 --> 0:16:21.920 short circuit the cycle, that's amazing. If you can tamp 0:16:22.000 --> 0:16:25.440 it down right, and the sooner you get out relief, 0:16:25.480 --> 0:16:28.520 whether it's from the FED or from Congress, the better 0:16:28.640 --> 0:16:33.880 chance you have at softening the blow, decreasing the hardship, 0:16:34.080 --> 0:16:37.480 and like making this not one of the bad ones. 0:16:51.880 --> 0:16:53.920 Can I get your view on something as an economist 0:16:53.920 --> 0:16:56.120 and someone who is sort of dealing with data on 0:16:56.160 --> 0:16:58.760 a day to data basis, I have this pet theory 0:16:58.960 --> 0:17:02.640 and I'm kind of in early stages of actually seeing 0:17:02.800 --> 0:17:06.359 if it's true or not. This is the way journalism works, 0:17:06.400 --> 0:17:09.679 but it's intuitively attractive to me, but the idea is 0:17:09.720 --> 0:17:13.480 that a lot of the economic data that we have now, 0:17:13.560 --> 0:17:18.200 which is you know, de facto aggregate, isn't as informative 0:17:18.280 --> 0:17:22.280 because the sort of distribution within those indices is a 0:17:22.280 --> 0:17:25.840 lot more extreme, maybe than it used to be. So 0:17:26.800 --> 0:17:29.359 a classic example would be if you look at the 0:17:29.400 --> 0:17:33.359 Michigan Survey of Consumer sentiment, you look at the aggregate number, 0:17:33.359 --> 0:17:36.320 but of course if you break it down by Republicans 0:17:36.400 --> 0:17:41.560 or Democrats, they're going in almost completely opposite directions. And 0:17:41.600 --> 0:17:45.359 I have a feeling that that might be the case 0:17:45.480 --> 0:17:47.879 for a lot of different things right now, but I 0:17:47.960 --> 0:17:51.600 haven't actually started breaking down the data to see if 0:17:51.640 --> 0:17:53.840 it's true or not. So I guess my question is, like, 0:17:54.280 --> 0:17:58.000 how reliable are a lot of these aggregate figures at 0:17:58.000 --> 0:18:00.760 the moment or is there really a diff difference in 0:18:00.840 --> 0:18:03.840 the way we're measuring the economy or the suitability of 0:18:03.920 --> 0:18:07.399 economic data for the post COVID economy versus how we 0:18:07.400 --> 0:18:08.439 were doing things before. 0:18:09.280 --> 0:18:12.399 Right You're you're absolutely onto something, and it goes in 0:18:12.760 --> 0:18:16.760 the category of know thy data, like who is in 0:18:16.800 --> 0:18:18.960 this and how are we measuring? So something like the 0:18:19.000 --> 0:18:22.199 unemployment rate or the Michigan Survey Sentiment which I'm a 0:18:22.280 --> 0:18:26.560 huge fan of too. Every single person counts the same, right, 0:18:26.640 --> 0:18:29.440 Like these are take all of the people that are surveyed, 0:18:29.560 --> 0:18:32.640 take an average, and you get more. You can get 0:18:32.680 --> 0:18:35.360 more detail, whether it's in the household survey that goes 0:18:35.400 --> 0:18:37.800 into the unemployment rate or the Michigan survey that's got 0:18:37.800 --> 0:18:41.119 individual respondents, right, so you can do a lot and 0:18:41.160 --> 0:18:44.679 they're everybody, everybody is equal. If you go into something 0:18:44.720 --> 0:18:51.760 like GDP inflation consumer spending, there, we don't all count 0:18:51.760 --> 0:18:55.080 the same, right, Like even with inflation, which I think 0:18:55.080 --> 0:18:57.359 that's one where people kind of miss this one more. 0:18:58.040 --> 0:19:00.439 Inflation is like what is the price of the shopping 0:19:00.520 --> 0:19:04.280 cart this month versus last month? Some people put a 0:19:04.320 --> 0:19:08.000 lot more into the US shopping cart than others. Right. 0:19:08.080 --> 0:19:12.840 So they're represented now, thankfully. And this has been because 0:19:12.880 --> 0:19:16.480 the concern that you raised is one that's out there, right, 0:19:16.520 --> 0:19:18.560 Like for years when I was at the FED, because 0:19:18.560 --> 0:19:20.520 I worked on consumer spending, it's like, okay, let's think 0:19:20.520 --> 0:19:23.280 about the distributions. And there were times where some patterns 0:19:23.280 --> 0:19:28.159 were not holding up, and inequality on what looked like 0:19:28.280 --> 0:19:30.840 it could have been doing something like the wealth effect 0:19:30.840 --> 0:19:34.120 has really moved around in strange ways, not strange necessarily, 0:19:34.200 --> 0:19:37.440 but so there's an awareness of this, and I give 0:19:38.080 --> 0:19:43.199 huge kudos to some of the official statistical agencies and 0:19:43.240 --> 0:19:46.320 that we have so much more data on the distribution. 0:19:47.880 --> 0:19:53.000 All of my academic style research is using household micro data, 0:19:53.400 --> 0:19:56.439 but I'm always using it to answer macro questions. So 0:19:56.480 --> 0:19:58.679 I'm a big fan of taking the micro up to 0:19:58.680 --> 0:20:01.480 the macro and the macro down to the micro like 0:20:01.520 --> 0:20:04.639 in terms of conversations, and there's a lot more data 0:20:04.720 --> 0:20:06.960 like that. I'll give you a shout out to the 0:20:06.960 --> 0:20:09.199 FED because it's one of my favorite data says to 0:20:09.200 --> 0:20:11.760 go look at. For a long time, they've published the 0:20:11.760 --> 0:20:14.240 financial Accounts or what was called the Flow of funds 0:20:14.680 --> 0:20:16.800 before that had all these different pieces of wealth in 0:20:16.840 --> 0:20:21.560 the economy quarterly, and now they also published the distributional 0:20:21.600 --> 0:20:25.280 financial accounts. They use the Survey of Consumer Finances, which 0:20:25.280 --> 0:20:29.119 is the household survey to split apart, quarter by quarter 0:20:30.119 --> 0:20:33.480 on the household side, who's got this wealth, And it's 0:20:33.560 --> 0:20:36.399 absolutely fascinating and it's one where you can see these 0:20:36.440 --> 0:20:40.480 distributions and how much they've expanded. I mean, the reality 0:20:40.560 --> 0:20:42.760 is the United States has been a very unequal country 0:20:42.800 --> 0:20:46.120 for quite some time, but you do have to think 0:20:46.119 --> 0:20:49.359 about when you're doing the macro, how things could be 0:20:49.400 --> 0:20:52.760 spreading out and leading you astray. And yet you can 0:20:52.840 --> 0:20:54.639 look out at the recovery. Now I've had a lot 0:20:54.640 --> 0:20:55.960 of people will be like, oh, this is just the 0:20:56.040 --> 0:20:57.880 rich and the poor. It's like, no, no, no, See 0:20:57.920 --> 0:21:02.280 this has been good, not for every single person, but 0:21:02.560 --> 0:21:05.200 up and down the distributed, like this is not normal 0:21:05.720 --> 0:21:09.560 for a recovery in terms of how much people you know, 0:21:09.760 --> 0:21:12.159 bottom half of the income distribution, like they're in a 0:21:12.160 --> 0:21:14.600 better place than they were going into COVID. Yeah. 0:21:14.640 --> 0:21:17.200 Actually, just on that note, and this kind of goes 0:21:17.240 --> 0:21:20.720