WEBVTT - Claudia Sahm Talks US Unemployment

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Claudia Sam of New

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<v Speaker 1>Century Advisory joins us now to give us some insight. Claudia,

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<v Speaker 1>thank you so much for being with us, and happy

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<v Speaker 1>New Year. What do you make of this Matt's point

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<v Speaker 1>that we've seen unemployment claims basically at the same place

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<v Speaker 1>for almost a.

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<v Speaker 2>Year, right, so you know, as you said, we're not

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<v Speaker 2>seeing signs of deterioration in the labor market, like the

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<v Speaker 2>layoffs have not picked up in a way that was

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<v Speaker 2>the downside risk that the FED has been very acute

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<v Speaker 2>to and we haven't seen that. So we're not seeing

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<v Speaker 2>the bad news story. Frankly, we still need to see

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<v Speaker 2>some good news in the labor market so the claims

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<v Speaker 2>don't get at the piece. It's really been sticky, and

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<v Speaker 2>that's a the hiring rate has been quite low. So yes,

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<v Speaker 2>good news on the continuing claims for this week, but

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<v Speaker 2>they aren't still quite elevated, and so we need a

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<v Speaker 2>little bit more of the good news. You know, the

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<v Speaker 2>fact that the layoffs have not shown up despite you

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<v Speaker 2>know a lot of layoff announcements, like we're not seeing

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<v Speaker 2>them in terms of actual layoffs, and that's good news.

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<v Speaker 1>Quaoudia, do you take anything from the idea that continuing

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<v Speaker 1>claims came in to some of the lowest levels that

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<v Speaker 1>we've seen going back about a month, not significant, and

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<v Speaker 1>they are elevated, as you've said, But does that indicate

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<v Speaker 1>that people are actually finding work.

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<v Speaker 2>It's possible, you know, these are while the claims data

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<v Speaker 2>are very timely. I mean we get a quick read,

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<v Speaker 2>we have to be careful around the turn of the year.

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<v Speaker 2>It's just really tricky with the holidays and you know,

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<v Speaker 2>just reading these data is much harder at the turn

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<v Speaker 2>of the year than say, in the middle of the year,

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<v Speaker 2>but it is. It is potentially a good sign and

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<v Speaker 2>what we're looking for are signs of more stability in

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<v Speaker 2>the labor market, signs that those the hiring rates start

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<v Speaker 2>to pick off a pickup off their very low levels.

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<v Speaker 2>So this is encouraging, but this doesn't make the case yet, right,

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<v Speaker 2>we need to see it in the hiring data.

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<v Speaker 3>Claudia, what what does the labor market look like with

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<v Speaker 3>the stop and immigration, no new people coming to the US,

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<v Speaker 3>and the demographics fewer and fewer people having babies or

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<v Speaker 3>people having fewer babies. It would seem to me that

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<v Speaker 3>if you have the economy growing and we do, and

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<v Speaker 3>corporate revenue and profits growing as we do.

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<v Speaker 2>That.

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<v Speaker 3>You know, lack of supply in the labor pool would

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<v Speaker 3>mean more demand, but it doesn't look like that, as

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<v Speaker 3>you point out.

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<v Speaker 2>Right, well, you know, there are all kinds of timing issues, right,

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<v Speaker 2>it is quite unusual. We saw, you know, in the

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<v Speaker 2>third quarter GDP really you know, moved up higher, and

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<v Speaker 2>so did the unemployment rate, right in a much less

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<v Speaker 2>dramatic fashion, but it is moving higher. And so you know,

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<v Speaker 2>you have the ingredients for the good news story of

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<v Speaker 2>the labor market going into twenty twenty six. Consumers are

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<v Speaker 2>still out there spending. You've still got the business investment.

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<v Speaker 2>You know, companies will need as they expand to draw

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<v Speaker 2>on their labor force. And we should see and I

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<v Speaker 2>think this is the optimism that you can kind of

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<v Speaker 2>see in the minutes from the fed's December meeting. There's

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<v Speaker 2>an outlook there that these pieces should come together and

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<v Speaker 2>we should have hiring pickup. It doesn't necessarily need to

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<v Speaker 2>pick up to levels that we saw, you know, two

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<v Speaker 2>three years ago, when immigration was much stronger, but we

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<v Speaker 2>are at low levels that we have seen wage growth

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<v Speaker 2>slow sum we've seen the unemployment rate tick up. That

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<v Speaker 2>is a sign of the demand for workers is just

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<v Speaker 2>lagging behind the supply.

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<v Speaker 3>Diane Swank pointed out a couple of months ago that

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<v Speaker 3>cutting rates the FED, lowering rates isn't going to help

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<v Speaker 3>consumers in the lower quintile, you know, because subprime rates

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<v Speaker 3>don't come down with the front end of the curve.

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<v Speaker 3>But I wonder if it does help the labor market.

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<v Speaker 3>You know, we've lost I think seventy thousand manufacturing jobs

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<v Speaker 3>this year. We've got a ton of incentives in the

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<v Speaker 3>one big beautiful Bill to I guess bring those back,

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<v Speaker 3>and tariffs are spill to do that too. If those

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<v Speaker 3>things don't work, does cutting rates help to bring back

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<v Speaker 3>manufacturing jobs?

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<v Speaker 2>Well, cutting rates is supportive of both households and businesses

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<v Speaker 2>and expansion, I mean, and particularly say smaller businesses that

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<v Speaker 2>you know, the interest rates that they borrow with that's

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<v Speaker 2>a key, you know, calculus and their decision to expand.

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<v Speaker 2>And as they expand, they can bring on more workers. So,

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<v Speaker 2>you know, I don't you know, we shouldn't have the

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<v Speaker 2>view that the FED has the magic wand here on

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<v Speaker 2>the economy and it's going to on its own revive

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<v Speaker 2>the labor market, but the FED pulling restriction out of

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<v Speaker 2>the economy that does it helps it moves in the

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<v Speaker 2>right direction. And again it's a piece of the puzzle.

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<v Speaker 2>There's also more physical support coming early in the year.

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<v Speaker 2>And it does appear that uncertainty, just broadly about policy

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<v Speaker 2>and maybe some of technological change has weighed on labor

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<v Speaker 2>market this year. And as that dissipates, that's also another

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<v Speaker 2>ingredient to kind of get hiring going again.

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<v Speaker 1>Uncertainty has also been pretty strong because we haven't known

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<v Speaker 1>how much we can trust the data, whether we're going

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<v Speaker 1>to ben get the data. And even in this latest

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<v Speaker 1>batch of numbers or one terminal user points out that

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<v Speaker 1>seasonal adjustment, if you strip that out, you actually see

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<v Speaker 1>initial job as claims that are higher than the previous week.

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<v Speaker 1>So what do you make of these types of seasonal adjustments,

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<v Speaker 1>of these types of calculations that have raised more questions

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<v Speaker 1>than given answers.

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<v Speaker 2>Right well, these issues with seasonal adjustment, these are the

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<v Speaker 2>mainstay of trying to read macroeconomic data. Right Like, as

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<v Speaker 2>I said around the turn of the year, claims data

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<v Speaker 2>are tough from Thanksgiving into early in the year is

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<v Speaker 2>just that that's just a hard, hard read, and so

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<v Speaker 2>you do a lot of averaging kind of look at

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<v Speaker 2>the basic trend, and the basic trend looks pretty good, right,

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<v Speaker 2>So don't make too much out of one week. But yes,

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<v Speaker 2>these are our regular issues. Unfortunately, we're also dealing with,

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<v Speaker 2>you know, the backlog of the government shutdown and data

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<v Speaker 2>collection having been very disrupted, and even as we're getting

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<v Speaker 2>data and the claims data, this is not apply to them,

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<v Speaker 2>but saying like the CPI or the labor market data,

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<v Speaker 2>you know, there's these shutdown casts a long shadow, like

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<v Speaker 2>we have distorted data in a way that we don't

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<v Speaker 2>typically have distortions. We don't typically lose a month of

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<v Speaker 2>data and then try and pick up the pieces afterwards.

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<v Speaker 2>So it does make it more complicated, but you know,

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<v Speaker 2>thankfully there's a lot of information out there. You just

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<v Speaker 2>kind of, you know, pull it all in and get

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<v Speaker 2>a sense of what's going on. And really the tenor

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<v Speaker 2>of the data in general is pretty good, I mean solid.

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<v Speaker 2>Like I said, we still need labor market to pick up,

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<v Speaker 2>but the ingredients are there.

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<v Speaker 1>When I feel want to feel good, I walk down

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<v Speaker 1>the street and I see all these people going to

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<v Speaker 1>stores and being together and going to work, and when

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<v Speaker 1>I want to feel bad, I read the news and

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<v Speaker 1>I read all these stories about how computers are coming

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<v Speaker 1>for our jobs, and how a lot of places are

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<v Speaker 1>seeing opportunities to replace human labor with algorithmic algorithmic programs.

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<v Speaker 1>I'm just wondering, based in the data that you've been

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<v Speaker 1>looking at, how much credence is there behind this sort

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<v Speaker 1>of placement concept of AI.

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<v Speaker 2>Well, I think looking at surveys industry level data that

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<v Speaker 2>when we think about the labor market being somewhat slow

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<v Speaker 2>right now, I don't think that AI really can you know,

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<v Speaker 2>you can point to that as a key driver. Broadly.

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<v Speaker 2>There are some industries in tech, increasingly in finance where

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<v Speaker 2>you see more adoption and there probably are cost savings

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<v Speaker 2>happening with employers. I think, you know, it does fit

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<v Speaker 2>into this piece of the broader uncertainty right like do

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<v Speaker 2>you need to hire? Do you need these workers? That's

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<v Speaker 2>much harder to parse out of the data, because there's

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<v Speaker 2>a lot of different sources of uncertainty right now that

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<v Speaker 2>businesses have. But in terms of you know, the adoption

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<v Speaker 2>really holding back the labor market, I think it's hard

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<v Speaker 2>to point to a broad story, but it is certainly

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<v Speaker 2>something something to watch. But we should also remember that

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<v Speaker 2>the new technology also enables new jobs and new uses

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<v Speaker 2>of technology, So it's not just about saving labor. It's

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<v Speaker 2>also about making labor more productive, and that can be

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<v Speaker 2>a real good news story over the long haul.

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<v Speaker 3>Goottie, I love when you're on because I learned so

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<v Speaker 3>much from you, and because of your notable achievements in economics,

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<v Speaker 3>but also because you went to Dennison and I spent

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<v Speaker 3>a year there. My dad went to Dennis, and my

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<v Speaker 3>mom went to Dennis, and I grew up in Granville.

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<v Speaker 3>What do you think of the value of a college

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<v Speaker 3>education for the average American these days? Because so many

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<v Speaker 3>not just kids, but adults are having trouble meeting repayment

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<v Speaker 3>requirements well into their forties, and it doesn't look like

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<v Speaker 3>recent graduates are getting a huge advantage in the jobs market.

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<v Speaker 2>All right, Well, technical skills and training are. I mean,

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<v Speaker 2>they're always important for getting ahead. They do payoff. I

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<v Speaker 2>have a very ecumenical view. I had an excellent education

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<v Speaker 2>at Dennis and University Liberal Arts College, but that's not

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<v Speaker 2>for everybody. I mean, my daughter's in engineering school Illinois.

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<v Speaker 2>She's you know, different technical training, and I think you

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<v Speaker 2>know in the trades and there's there are lots of

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<v Speaker 2>ways to gain skill, and we certainly don't want to

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<v Speaker 2>push every child through a college education, particularly with the

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<v Speaker 2>cost of it. But it doesn't you know. I still

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<v Speaker 2>think you know, and the data bear this out. Like

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<v Speaker 2>the education and the skills, they do pay off.

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<v Speaker 1>Claudia Sum of New Century Advisors, wonderful to see you,

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<v Speaker 1>Happy new year. Thank you so much, see you in

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<v Speaker 1>twenty twenty six.