WEBVTT - San Francisco Fed President Mary Daly Talks Fed Policy, Labor Market 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, podcasts, radio News. 0:00:07.840 --> 0:00:10.719 We'd like to welcome all of our viewers and listeners 0:00:10.800 --> 0:00:15.240 on Bloomberg Television and radio worldwide. And we are here 0:00:15.240 --> 0:00:18.120 in Victor, Idaho at the Rocky Mountain Economic Summit at 0:00:18.120 --> 0:00:21.760 the Bronze Buffalo Ranch at Titon Springs. And Mary Daly 0:00:21.840 --> 0:00:25.279 is joining us, the president of the San Francisco FED, 0:00:25.520 --> 0:00:28.760 and this is her district, so she's very familiar with 0:00:28.840 --> 0:00:32.879 everything that's going on around here. Now. We have, of 0:00:32.920 --> 0:00:37.680 course followed several other speakers, including Paul McCully, who I 0:00:37.680 --> 0:00:40.480 think most of our viewers know as the former chief 0:00:40.520 --> 0:00:43.840 economist at PIMCO and a number of other important jobs. 0:00:43.840 --> 0:00:46.560 And he was talking earlier about the American dream of 0:00:46.640 --> 0:00:49.360 chicken in every pot, and he said that one thing 0:00:49.400 --> 0:00:52.239 that everybody agrees, including at the FED, is that we 0:00:52.280 --> 0:00:54.960 all would like to have a bigger chicken. And I 0:00:55.040 --> 0:00:57.000 just want to make sure that that he's speaking for 0:00:57.040 --> 0:00:57.400 the FED. 0:00:57.680 --> 0:00:59.760 Absolutely we were going to have a bigger chicken or 0:00:59.760 --> 0:01:01.960 a big your vegetable, whatever it is you eat it. 0:01:02.200 --> 0:01:03.480 It's really about prosperity. 0:01:03.680 --> 0:01:06.960 There is no part of our democracy that really doesn't 0:01:06.959 --> 0:01:08.120 want more prosperity. 0:01:08.120 --> 0:01:09.520 And the FED is included in that. 0:01:09.880 --> 0:01:13.959 And our job is challenging but important and good, which 0:01:14.000 --> 0:01:17.920 is we want to support prosperity, support, you know, the 0:01:18.000 --> 0:01:21.160 labor market, and do so without having. 0:01:20.920 --> 0:01:23.880 Price stability be challenged. And that's the role of the FED. 0:01:23.920 --> 0:01:26.319 And if we do our job well and then stay 0:01:26.319 --> 0:01:29.319 in the background, all other things are possible from the 0:01:29.360 --> 0:01:31.880 businesses and consumer's households in our economy. 0:01:33.080 --> 0:01:35.279 Everybody asked me, what are you going to ask Mary? 0:01:35.680 --> 0:01:38.399 And I said, well, I'll wake up on Thursday morning 0:01:38.480 --> 0:01:41.760 and I'll look at the president's social media feed and 0:01:42.160 --> 0:01:44.400 that will tell me what the story of the day is. 0:01:44.440 --> 0:01:48.400 And of course he can't. He can't lay off. So 0:01:48.440 --> 0:01:51.400 I have to ask you, how is all that affecting 0:01:51.640 --> 0:01:54.200 you as a policymaker and your colleagues. 0:01:54.920 --> 0:01:56.920 You know, our work is really important. 0:01:56.960 --> 0:02:01.120 On the front lobby of the San Francisco FAT Head Office, 0:02:01.640 --> 0:02:03.080 we put a sign up. I put it up the 0:02:03.200 --> 0:02:05.440 very first day I became president. It says our work 0:02:05.480 --> 0:02:09.680 serves every Americans and countless global citizens, but that every 0:02:09.720 --> 0:02:14.000 American is really important. And that's the work Congress gave us, 0:02:14.040 --> 0:02:17.520 As Paul said, Congress gave us our responsibilities and our 0:02:17.520 --> 0:02:20.240 responsibilities our price stability and full employment. 0:02:20.360 --> 0:02:22.560 We work to carry those out every time. 0:02:22.960 --> 0:02:27.400 Our teams are the Committee, the FMC, we are laser 0:02:27.480 --> 0:02:31.000 focused on doing those responsibilities. And if you look at 0:02:31.000 --> 0:02:34.400 the headline numbers on inflation, we still have some work 0:02:34.440 --> 0:02:37.119 to do, but we are in a good place and 0:02:37.200 --> 0:02:39.400 we need to finish the job. So that's where we 0:02:39.440 --> 0:02:42.119 are and other things. You know, there have been periods 0:02:42.120 --> 0:02:46.280 of political pressure before and history serves us best as 0:02:46.520 --> 0:02:48.880 a guide there. When you stick to your work, the 0:02:48.919 --> 0:02:50.880 work that Congress gave us, the work that is for 0:02:50.919 --> 0:02:55.760 the American people, then everything else falls into place. 0:02:56.200 --> 0:03:00.160 So the President has obviously been sort of direct in 0:03:00.360 --> 0:03:04.400 his criticism of Chairman Pole. Jugury Secretary Scott Besson said 0:03:04.400 --> 0:03:08.120 on Bloomberg Television this week that the President is just 0:03:08.280 --> 0:03:12.960 working the refs, trying to create a favorable view of 0:03:13.000 --> 0:03:16.960 what should be done. Does that make any impression on you? 0:03:17.040 --> 0:03:18.359 Does it work to work the refs? 0:03:19.240 --> 0:03:21.720 You know? For me, what is really important is looking 0:03:21.760 --> 0:03:23.200 at the incoming information. 0:03:23.960 --> 0:03:26.320 How close we are? I think one of the Pauls said, 0:03:26.360 --> 0:03:28.000 you know, we're really close. 0:03:28.120 --> 0:03:32.000 We have an economy that's working, we have solid growth, 0:03:32.040 --> 0:03:35.000 we have a solid labor market. You know, the consumers 0:03:35.040 --> 0:03:38.920 are spending, but they're you know, making their way and 0:03:38.960 --> 0:03:43.600 their families. Ultimately, what is still bothersome is not we 0:03:43.640 --> 0:03:46.960 haven't achieved price stability. And you know, I define price 0:03:47.000 --> 0:03:49.320 stability this way. I do think it's sort of an 0:03:49.400 --> 0:03:52.760 ethos part. It's when people don't have to worry about inflation. 0:03:52.880 --> 0:03:54.680 When I go out and ask people. 0:03:54.840 --> 0:03:56.600 Across the twelfth district, across the. 0:03:56.560 --> 0:04:00.200 Country, what's your top worry and they stop saying inflation, well, 0:04:00.200 --> 0:04:02.640 then that's going to be a victory because they suffered 0:04:02.680 --> 0:04:05.680 for too long. And remember, inflation is like the largest 0:04:05.680 --> 0:04:06.640 tax people pay. 0:04:06.840 --> 0:04:08.120 It's an unpredictable tax. 0:04:08.160 --> 0:04:11.160 You're on a treadmill, you earn well, you've invest in 0:04:11.200 --> 0:04:14.440 your business, and inflation eroads you're well being. So I 0:04:14.480 --> 0:04:16.640 think ultimately that's what we have to think about. And 0:04:16.680 --> 0:04:19.720 that's really enough to think about, frankly, and that's where 0:04:19.760 --> 0:04:23.200 my focus is. So other things are not distracting us 0:04:23.200 --> 0:04:26.200 from our core missions. And our core missions, as we 0:04:26.240 --> 0:04:27.760 all know, have come from Congress. 0:04:28.279 --> 0:04:31.920 So essentially you're saying we are going to remain focused 0:04:31.960 --> 0:04:34.640 on inflation. We're not going to consider cutting rates until 0:04:34.680 --> 0:04:35.839 we are sure inflation. 0:04:36.080 --> 0:04:36.840 I did not say that. 0:04:38.960 --> 0:04:40.480 I have many words in her mouth to make it 0:04:40.560 --> 0:04:42.440 easier for the headline writers. 0:04:42.800 --> 0:04:44.919 I know that, and so that's why I did not 0:04:45.000 --> 0:04:47.560 say that, so that they understand the next part of that. 0:04:47.800 --> 0:04:49.919 No, seriously, I think right now. 0:04:49.720 --> 0:04:52.479 When I look at the economy and policy, I see 0:04:52.480 --> 0:04:54.800 them as both in a good place. But when I 0:04:54.839 --> 0:04:59.280 look out, we really have interest rates for a significant 0:04:59.360 --> 0:05:02.640 number of years now in restrictive territory, and what we 0:05:02.680 --> 0:05:06.279 have is an underlying economy that is responding those higher 0:05:06.279 --> 0:05:06.880 interest rates. 0:05:06.920 --> 0:05:08.000 You have growth slowing. 0:05:08.360 --> 0:05:12.160 The frothy labor market that was pervasive after the pandemic 0:05:12.520 --> 0:05:15.840 has now moved to a more sustainable place. People are 0:05:15.880 --> 0:05:18.400 getting jobs, but firms are finding it easier to find 0:05:18.440 --> 0:05:21.840 workers and importantly keep workers so that they're not constantly 0:05:21.880 --> 0:05:24.760 on that revolving door of train and work of the 0:05:24.760 --> 0:05:27.240 worker leaves. So I think those are all good positions. 0:05:27.640 --> 0:05:31.120 Then we have inflation coming down, and if we extract 0:05:31.200 --> 0:05:34.599 our move away from just the goods price inflations, which 0:05:34.760 --> 0:05:37.760 do show those numbers have been showing, and certainly showed 0:05:37.760 --> 0:05:41.120 in this week's print, the effect of tariffs, some of 0:05:41.120 --> 0:05:43.200 those being passed through but if you look at the 0:05:43.240 --> 0:05:47.159 other areas of inflation, you just don't see that inflation 0:05:47.320 --> 0:05:48.200 is pushing back up. 0:05:48.240 --> 0:05:49.960 You see it gradually going down. 0:05:50.320 --> 0:05:54.480 And housing services inflation, which has long been elevated, has 0:05:54.560 --> 0:05:59.080 been coming down over this year. Services inflation without housing 0:05:59.279 --> 0:06:02.680 has been coming down, slowly but coming down. So I 0:06:02.720 --> 0:06:05.359 see these is the result of the policy that we 0:06:05.400 --> 0:06:08.520 have in place. But at some point, if you hold 0:06:08.560 --> 0:06:11.400 the economy too tight, the reins we're in horse country. 0:06:11.480 --> 0:06:14.360 If you hold the bridle too tight, you actually end 0:06:14.440 --> 0:06:15.120 up stopping. 0:06:15.360 --> 0:06:18.120 And if you stop, then you take the problem people. 0:06:17.880 --> 0:06:20.200 Did have, which was inflation, and turn it into a 0:06:20.200 --> 0:06:22.960 problem that they don't have, which is the labor market. 0:06:23.040 --> 0:06:25.640 So that's why I see these two goals. The dual 0:06:25.680 --> 0:06:28.440 mandate is so critical because it gives you the kind 0:06:28.480 --> 0:06:31.559 of balance that ensures people have both things they need, 0:06:31.800 --> 0:06:35.159 opportunities in the labor market and price stability so that 0:06:35.160 --> 0:06:38.120 when they work and they invest, they can build careers 0:06:38.160 --> 0:06:40.280 and families and communities. 0:06:41.200 --> 0:06:44.159 So let me ask you how you're thinking about the 0:06:44.200 --> 0:06:46.680 economy and what you should do right now. In the 0:06:46.720 --> 0:06:48.560 sense that this was a big data week, we had 0:06:49.000 --> 0:06:51.919 consumer prices and producer prices both come in at the 0:06:51.920 --> 0:06:58.040 headline level lower than anticipated, slowing in economy, especially service prices, 0:06:58.560 --> 0:07:01.760 but we see some under lying pressures in sectors that 0:07:01.800 --> 0:07:05.480 are affected by tariffs. A retail sales today came in 0:07:05.640 --> 0:07:09.200 stronger than expected, much stronger than expected, except for a 0:07:09.200 --> 0:07:13.520 couple areas that would be affected by tariffs. So could 0:07:13.560 --> 0:07:15.880 you explain to this audience, and of course the guy 0:07:15.880 --> 0:07:19.680 at sixteen hundred Pennsylvania Avenue if he's listening, how you 0:07:19.800 --> 0:07:23.040 put all that together and decide when do winterest rates 0:07:23.080 --> 0:07:23.520 come down? 0:07:23.840 --> 0:07:26.760 Well, there's always been three scenarios that were possible. 0:07:27.280 --> 0:07:28.240 So the first. 0:07:28.120 --> 0:07:30.600 Scenario was that we'd get the tariff effect and it 0:07:30.640 --> 0:07:35.280 would spill over into all other sectors. So if the 0:07:35.520 --> 0:07:39.520 price of a tariff good goes up, then your person 0:07:39.560 --> 0:07:41.880 cutting your hair, since we were talking about barber's earlier 0:07:42.120 --> 0:07:44.840 raises his or her prices, and suddenly you've got spillover 0:07:45.120 --> 0:07:47.840 that would make it more persistent. We haven't seen any 0:07:47.920 --> 0:07:51.160 evidence that that's occurring. And I think that the house 0:07:51.200 --> 0:07:55.400 price inflation, the house services inflation, and the services inflation 0:07:55.520 --> 0:07:59.400 coming down reassures you that we're not getting that persistent component. 0:08:00.000 --> 0:08:01.600 And there's two other scenarios. 0:08:01.640 --> 0:08:03.360 One is that you get the tariff effect and it's 0:08:03.760 --> 0:08:06.000 relatively contained and it becomes a one off. 0:08:06.280 --> 0:08:07.360 And the second is you just. 0:08:07.280 --> 0:08:11.280 Don't see much of the effect because what happens is 0:08:11.600 --> 0:08:13.920 that as the tariffs settle in to whatever level they're 0:08:13.960 --> 0:08:16.680 going to be, you know, firms who are importing from 0:08:16.720 --> 0:08:19.040 other countries say you take half, I'll take half to 0:08:19.080 --> 0:08:22.400 the country. Then down the spy chain or the production chain, 0:08:22.680 --> 0:08:24.360 you're splitting it all the way and so that by 0:08:24.440 --> 0:08:27.520 the time it hits consumers it's a more muted impact 0:08:27.840 --> 0:08:30.000 than what is the announced tariffs. You know, one of 0:08:30.000 --> 0:08:32.160 the pieces of evidence we have for that is that 0:08:32.240 --> 0:08:36.160 the effective teriff right as of last week was calculator 0:08:36.200 --> 0:08:39.360 around sixteen percent, but tariff revenue is only eight percent. 0:08:39.440 --> 0:08:43.120 So that tells you there's some splitting, there's some leakages, 0:08:43.160 --> 0:08:46.040 some workarounds. Companies are very innovative, they're figuring out other 0:08:46.080 --> 0:08:48.480 ways to do things, and you know, this is a 0:08:48.520 --> 0:08:51.880 global shock, and so they're all companies across the globe 0:08:51.880 --> 0:08:54.000 are figuring it out. So when I think of that, 0:08:54.360 --> 0:08:56.400 I'm really of the mind, well, we might end up 0:08:56.440 --> 0:08:57.520 with a more muted. 0:08:57.240 --> 0:08:59.360 Impact of tariffs than we thought, and. 0:08:59.400 --> 0:09:02.960 Then I I've been this is something I've said publicly 0:09:03.000 --> 0:09:06.560 since you know, January, is all administrations come in not 0:09:06.640 --> 0:09:07.320 with one. 0:09:07.120 --> 0:09:09.120 Policy, but with a slate of policies. 0:09:09.480 --> 0:09:11.839 And you know, Paul Ryan said this this morning, and 0:09:11.880 --> 0:09:15.320 I think it's worth emphasizing the slate of policies have 0:09:15.840 --> 0:09:20.520 you know, push and pull effects, So deregulation and tax policy, 0:09:20.600 --> 0:09:24.280 tax relief, those are growth inducing policies. The tariffs could 0:09:24.280 --> 0:09:29.040 be and the immigration policy could be growth impairing policies. 0:09:29.080 --> 0:09:31.440 But we don't know yet, right and we certainly don't 0:09:31.440 --> 0:09:33.000 know thet net effect of those. 0:09:33.200 --> 0:09:34.200 And so that's why it's. 0:09:34.040 --> 0:09:37.240 Important to take in the information and not raise, not 0:09:37.360 --> 0:09:40.360 lower rates, excuse me, not lower rates preemptively, because we 0:09:40.440 --> 0:09:41.559 just don't have that certainty. 0:09:41.880 --> 0:09:43.680 And then the economy is in a good place. 0:09:43.960 --> 0:09:46.800 At the same time, you can't wait forever because if 0:09:46.800 --> 0:09:49.280 we wait too inflation gets to two percent, well then 0:09:49.320 --> 0:09:52.360 we've lost We've likely injured the economy in some way 0:09:52.400 --> 0:09:55.280 that was completely unnecessary. And so I'm of the mind 0:09:55.320 --> 0:09:57.880 that you know that the summary of economic projections we 0:09:57.920 --> 0:10:00.480 put out, which had two rate cuts for this year, 0:10:00.520 --> 0:10:02.880 I think that's a reasonable outlook to have. 0:10:03.200 --> 0:10:04.600 Of course, we are data dependent. 0:10:04.720 --> 0:10:08.040 If all of you who are business owners say no, Mary, 0:10:08.400 --> 0:10:10.640 the inflation's right around the corner and is going to 0:10:10.640 --> 0:10:12.760 spill over, well, then that's a different thing. It's one 0:10:12.800 --> 0:10:15.720 of the reasons Reserve Bank presidents in particular spends so 0:10:15.880 --> 0:10:20.240 much time in their communities asking questions like I asked Crystal. 0:10:19.920 --> 0:10:22.240 This morning, what are you thinking? What are you seeing? 0:10:22.720 --> 0:10:25.120 Are you raising prices because of this? That? And she 0:10:25.200 --> 0:10:25.719 can give me. 0:10:25.720 --> 0:10:28.760 That information, and so far I'm not hearing that that's 0:10:28.760 --> 0:10:30.000 a pervasive outcome. 0:10:30.760 --> 0:10:32.840 Let me dig deeper into that and ask you. I 0:10:32.880 --> 0:10:36.200 know you talking to CEOs and companies all across the 0:10:36.200 --> 0:10:39.560 district all the time, what's the basic attitude most of 0:10:39.640 --> 0:10:42.440 the time. I'm told by folks at the FED that 0:10:42.520 --> 0:10:44.800 everybody's just sort of sitting on their hands right now. 0:10:44.840 --> 0:10:45.600 Not in the West. 0:10:45.679 --> 0:10:48.480 Maybe it's our Western spirit, but I have the nine 0:10:48.520 --> 0:10:51.800 Western states and I don't see sitting on hands behavior. 0:10:51.840 --> 0:10:55.439 I see cautious optimism. And there's a cautiousness people, aren't. 0:10:55.640 --> 0:10:55.880 You know. 0:10:55.960 --> 0:10:58.800 What I heard originally was we're going to wait and see. 0:10:58.880 --> 0:11:01.400 But now that the direction of travel on tariff seems 0:11:01.440 --> 0:11:04.760 to be negotiation to lower rates than we're announced on 0:11:05.080 --> 0:11:07.640 Liberation Day, and the tax policy and other things that 0:11:07.679 --> 0:11:10.680 past people are already seeing that they can work in 0:11:10.320 --> 0:11:13.440 this system. And so you know, I've been to a 0:11:13.440 --> 0:11:17.000 lot of places since January, and I've been to Alaska twice, 0:11:17.120 --> 0:11:20.120 which is at the heart of some of the changes 0:11:20.160 --> 0:11:22.480 in programs that you see. And what they are is 0:11:22.520 --> 0:11:26.920 cautiously optimistic. Come to the inter Mountain West cautiously optimistic. 0:11:27.160 --> 0:11:30.960 California cautiously optimistic. So you know, whether I'm in the 0:11:30.960 --> 0:11:34.960 coastal part of my district, the you know, Alaska, I 0:11:35.000 --> 0:11:37.719 haven't been to a whye, but they're also cautiously optimistic. 0:11:38.000 --> 0:11:43.360 But the inter Mountain West, I think this is a 0:11:43.600 --> 0:11:47.559 You guys are always a little poster children for optimistic, 0:11:47.840 --> 0:11:50.480 but I think it's really optimistic at this point. And 0:11:50.640 --> 0:11:53.760 you know, recognizing costs may rise, other things may happen, 0:11:53.840 --> 0:11:57.360 but workers are easier to find opportunities are out there. 0:11:57.520 --> 0:11:59.920 Maybe not taking every risk you would take if every 0:12:00.040 --> 0:12:03.880 thing was certain, but certainly not stalling out and waiting 0:12:03.880 --> 0:12:06.880 to see, you know, the growth. One of my directors 0:12:06.880 --> 0:12:10.200 put it as growth does not come to the meek. 0:12:10.640 --> 0:12:12.200 So you have to take some risks. 0:12:12.000 --> 0:12:15.120 To do well. When you do go to Hawaii, let 0:12:15.120 --> 0:12:17.280 me know. I know, come out and cover. 0:12:17.160 --> 0:12:19.640 That I go all that I go regularly. 0:12:19.679 --> 0:12:21.720 It is in the district, but I haven't been this year, 0:12:21.720 --> 0:12:23.120 but I will let you know next time. 0:12:23.640 --> 0:12:26.640 Another question on what you're hearing from CEOs. The big 0:12:26.720 --> 0:12:30.720 question about whether we have an inflation impact from tariffs 0:12:30.840 --> 0:12:33.760 is whether companies are going to pass them along. What 0:12:33.840 --> 0:12:36.480 are the bosses out there, the people who we should 0:12:36.480 --> 0:12:39.520 have asked Crystal, what are they telling you about that? 0:12:39.920 --> 0:12:43.080 Well, no, firms live in an equilibrium or an ecosystem 0:12:43.160 --> 0:12:46.360 like everyone else, and so the impulse, of course is 0:12:46.400 --> 0:12:49.720 to pass along any cost increase and protect margins. But 0:12:49.760 --> 0:12:53.559 there's also a recognitions that customers, consumers are exhausted, right 0:12:53.600 --> 0:12:56.880 They've been paying higher price levels and then with rising inflation, 0:12:57.160 --> 0:12:59.160 and as the economy slows, and you see this in 0:12:59.200 --> 0:13:01.920 the sentiments based for consumers, they're a little more worried 0:13:01.920 --> 0:13:04.000 about the job markets. So they're going to be even pickier, 0:13:04.240 --> 0:13:07.160 and so you would expect retail spending to slow today. 0:13:07.480 --> 0:13:09.400 If you average the two months, you get something that 0:13:09.440 --> 0:13:13.160 looks kind of normal. But we see consumer spending over time, 0:13:13.280 --> 0:13:16.160 slowing from where it was, but not falling off a cliff. 0:13:16.200 --> 0:13:18.280 So I think that's just part of a solid economy. 0:13:18.480 --> 0:13:21.680 But it does discipline the idea that you'll just simply 0:13:21.760 --> 0:13:23.000 raise prices. 0:13:22.600 --> 0:13:24.600 And push them completely through. 0:13:24.679 --> 0:13:27.760 And so what we're hearing is that companies are saying 0:13:27.880 --> 0:13:31.760 they're trying to negotiate with the import country to take 0:13:31.800 --> 0:13:34.240 a little bit, the importing firms take a little bit off, 0:13:34.400 --> 0:13:36.800 and then they're trying to push it along the supply chains. 0:13:36.960 --> 0:13:39.720 They'll pass a little bit through, but unlikely to pass 0:13:39.800 --> 0:13:42.640 the whole thing through. And importantly, in the goods sector, 0:13:42.760 --> 0:13:46.720 this is especially a parent because if at the post 0:13:46.760 --> 0:13:51.040 pandemic there was this massive, really large, significant you could 0:13:51.040 --> 0:13:54.680 see it in the data rotation of consumers to goods 0:13:54.679 --> 0:13:59.000 purchases over services purchases, and people will buying many more 0:13:59.000 --> 0:14:02.480 goods than they bought. But now their coffers are probably full. 0:14:03.679 --> 0:14:05.720 They have a lot of pelotons and other things and 0:14:05.760 --> 0:14:08.240 so you know, bikes and things of that sort. So 0:14:08.480 --> 0:14:11.800 it's very easy for consumers to be priced sensitive on 0:14:11.880 --> 0:14:15.400 those items and then turn themselves back to services and 0:14:15.440 --> 0:14:17.640 buy experiences over goods. 0:14:17.640 --> 0:14:19.640 And I think the goods providers are aware of that. 0:14:20.040 --> 0:14:23.160 So whatever the impulse is, the practicality has to meet 0:14:23.200 --> 0:14:23.800 the consumer. 0:14:24.320 --> 0:14:27.400 What is you use the words of solid economy? What 0:14:27.560 --> 0:14:31.320 to you is a solid economy? And how far do 0:14:31.320 --> 0:14:33.320 you think will be from that at the end of 0:14:33.360 --> 0:14:33.680 the year. 0:14:34.120 --> 0:14:37.160 You know, if we see what we've been seeing, which 0:14:37.200 --> 0:14:40.280 is that we're slowed to a sustainable pace. And right 0:14:40.320 --> 0:14:43.000 now you know two percent growth is the estimate of trend. 0:14:43.040 --> 0:14:47.000 If you simply add up productivity growth and the labor 0:14:47.000 --> 0:14:50.400 force growth, so we could get more out of productivity 0:14:50.440 --> 0:14:53.640 and get a higher number. We could get more out 0:14:53.680 --> 0:14:58.280 of productivity, get a higher number. We could absolutely grow 0:14:58.280 --> 0:15:00.520 a little faster. I wouldn't be surprised about that, but 0:15:00.600 --> 0:15:03.480 I would I don't think we need to slow precipitously 0:15:03.920 --> 0:15:06.600 to produce the last mile on inflation. 0:15:06.720 --> 0:15:08.760 If you will, I think we can actually do it. 0:15:08.800 --> 0:15:11.640 With this study of growth, expansion and the labor market 0:15:11.680 --> 0:15:14.000 that hovers around the current level. I wouldn't want to 0:15:14.000 --> 0:15:17.720 see more weakness in the labor market. I really wouldn't 0:15:17.720 --> 0:15:19.480 want to see that, Which is why you can't wait 0:15:19.520 --> 0:15:22.440 forever thinking that inflation is just around the corner. So 0:15:22.480 --> 0:15:24.680 we have to wait till we know, I think, you know, 0:15:24.840 --> 0:15:28.800 clarity in central banking is overrated. We'd want, we want 0:15:28.920 --> 0:15:31.960 some clarity, but we can't wait for perfect clarity, because 0:15:32.000 --> 0:15:34.680 then we'll always be backward looking and by then it's 0:15:34.720 --> 0:15:35.120 too late. 0:15:35.960 --> 0:15:39.960 You mentioned potential growth, which is the sum of productivity 0:15:40.000 --> 0:15:43.960 and labor force growth. The President has also got policies 0:15:43.960 --> 0:15:47.400 on labor force growth, bringing it way down. Have you 0:15:47.480 --> 0:15:51.000 seen effects on the economy in your district yet? From that? 0:15:51.400 --> 0:15:55.680 You know, you see pockets of places where firms relied 0:15:55.720 --> 0:16:00.040 on immigration, legal immigration as well, and people have the 0:16:00.120 --> 0:16:02.160 is just a chilling effect on those markets, and so 0:16:02.280 --> 0:16:04.520 you hear it, but it's in pockets. I wouldn't say 0:16:04.520 --> 0:16:08.280 there's a broad based concern over that at this point. 0:16:08.320 --> 0:16:10.280 I think there was a lot of concern originally, but 0:16:10.320 --> 0:16:13.360 it just hasn't materialized that way, and so that's been 0:16:13.360 --> 0:16:17.280 a help. Now on we talked about labor force growth. 0:16:17.840 --> 0:16:20.800 It is a fact that we have one of the 0:16:20.880 --> 0:16:25.560 lowest labor force participation rates in the industrialized world for 0:16:25.920 --> 0:16:29.800 men largely, but women to between twenty five and fifty four. 0:16:30.240 --> 0:16:34.440 So our industrialized competitors all have higher labor force participation 0:16:34.520 --> 0:16:37.000 rates that we do. So when we talk about labor 0:16:37.000 --> 0:16:39.200 force growth, I think we have to broaden it beyond 0:16:39.880 --> 0:16:45.440 the immigration and if immigration's gone, where our hands are tied. Really, 0:16:46.560 --> 0:16:49.320 what is the remedy for so many men in particular 0:16:49.400 --> 0:16:50.560 sitting on the sidelines. 0:16:51.800 --> 0:16:55.320 Is there a model for what you think happens to 0:16:55.720 --> 0:16:59.520 the labor market based on the immigration policies the administration. 0:16:59.160 --> 0:17:03.360 Has, You know, we have a way immigration has gone. 0:17:03.440 --> 0:17:05.800 It went way up and it's come way down. One 0:17:05.840 --> 0:17:08.760 of the remedies that firms use, frankly, is they increase 0:17:08.840 --> 0:17:11.879 technology so that they can use the workforce that we 0:17:12.000 --> 0:17:14.879 have and match it with technology. And you see that, 0:17:14.960 --> 0:17:19.080 you know many we've all been to hotels and convenience 0:17:19.080 --> 0:17:22.160 stores and other things where self checkout and self check 0:17:22.240 --> 0:17:25.240 in and all these things have technology solutions coming. I 0:17:25.280 --> 0:17:28.520 also think, you know, we have this Emerging Tech Economic 0:17:28.560 --> 0:17:31.040 Research Network at the San Francisco FED. We've launched it 0:17:31.040 --> 0:17:34.280 in January twenty twenty four, and we do CEO round 0:17:34.280 --> 0:17:37.560 tables and other things around this topic. And it has 0:17:37.640 --> 0:17:42.119 been just astounding how many medium and small sized businesses 0:17:42.359 --> 0:17:46.280 are adopting generative AI or AI solutions that aren't generitive 0:17:46.359 --> 0:17:49.960 AI just planing on machine learning to augment their talent 0:17:50.040 --> 0:17:54.280 pool and actually expand their productivity with a smaller workforce 0:17:54.280 --> 0:17:55.320 that can't grow as fast. 0:17:55.320 --> 0:17:57.120 So I think there are solutions there. 0:17:57.160 --> 0:18:00.000 And if you could put that productivity and an invasion 0:18:00.840 --> 0:18:03.960 with some increase in the domestic labor force, then I 0:18:04.000 --> 0:18:06.600 think that could be a very win win situation for 0:18:06.680 --> 0:18:08.160 expanding our growth rate. 0:18:08.440 --> 0:18:12.800 When personal computers came along, the productivity gains were talted. 0:18:12.920 --> 0:18:15.760 That didn't show up for quite some time. I know 0:18:15.800 --> 0:18:19.840 you followed the tech world very closely, silicon valleys in 0:18:19.880 --> 0:18:24.640 your district. When are we going to see the productivity 0:18:24.680 --> 0:18:30.359 gains from AI and how is that offset by job 0:18:30.480 --> 0:18:34.080 losses that are going to come when the computers do 0:18:34.320 --> 0:18:35.440 what some of us do. 0:18:36.400 --> 0:18:38.959 So one of the things that are really important to know. 0:18:39.040 --> 0:18:41.679 So a little known fact. Maybe I remember it like 0:18:41.680 --> 0:18:43.960 it was yesterday, but one of my first jobs I 0:18:44.000 --> 0:18:46.280 come in as an economist. I'm a micro economist labor 0:18:46.320 --> 0:18:50.240 economist by training. But Chairman Greenspan, as you remember, was 0:18:50.440 --> 0:18:53.960 very thoughtful about productivity and he thought it was there 0:18:54.000 --> 0:18:56.040 even if we can't measure it in the statistics. The 0:18:56.080 --> 0:18:59.080 statistics are always the last to find productivity. So he 0:18:59.200 --> 0:19:01.960 set me out. His team set me out to be 0:19:02.000 --> 0:19:08.080 the collector of anecdotal information qualitative information on this, and 0:19:08.119 --> 0:19:11.080 you could see it everywhere. Companies were testing things, they 0:19:11.119 --> 0:19:13.199 were trying to bring it to scale, etc. So the 0:19:13.240 --> 0:19:17.919 productivity improvements were there long before they ever aggregated up 0:19:17.960 --> 0:19:21.720 into the aggregate statistics. So now we're going to talk 0:19:21.760 --> 0:19:25.800 about the job issues. Well, computerization was a technology that 0:19:26.200 --> 0:19:33.160 actually replaced workers more quickly than it augmented possibilities. Generative 0:19:33.160 --> 0:19:36.600 AI has a different component of possibility, and I think 0:19:36.600 --> 0:19:39.720 it's useful for us to remember this. So generative AI 0:19:39.920 --> 0:19:43.840 can make people who aren't as skilled in something newly 0:19:44.119 --> 0:19:48.080 minted workers people who are the best example I can 0:19:48.080 --> 0:19:53.520 find is physicians assistants. Physicians assistants can now triage people 0:19:54.080 --> 0:19:58.800 in the frontline medical places if they allow it with 0:19:59.080 --> 0:20:03.320 generative AI assistance. So they say you sprain your ankle, well, 0:20:03.440 --> 0:20:05.080 they have a protocol that gets spit out. 0:20:05.160 --> 0:20:07.040 Did you break your ankle? How would I know? Would 0:20:07.040 --> 0:20:08.760 I get the X ray? I put the X ray 0:20:08.760 --> 0:20:09.240 into there. 0:20:09.400 --> 0:20:11.560 So they can do these things and it makes the 0:20:11.560 --> 0:20:16.159 physician assistant more productive right away. It doesn't mean we 0:20:16.240 --> 0:20:18.719 replace doctors, but we have a shortage of doctors, and 0:20:18.760 --> 0:20:21.720