WEBVTT - Kansas City's Fed President on What Everyone Will Be Talking About at Jackson Hole 0:00:02.480 --> 0:00:17.759 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.079 --> 0:00:21.000 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:21.120 --> 0:00:22.840 I'm Tracy Alloway and I'm Joey. 0:00:22.920 --> 0:00:23.799 Isnt thal Joe. 0:00:23.840 --> 0:00:26.720 It's that time of year again, Jackson Hole. It's my 0:00:26.760 --> 0:00:27.640 favorite time of year. 0:00:27.720 --> 0:00:30.800 Yeah, I mean, it's a great time year anyway, but 0:00:31.040 --> 0:00:33.200 in Jackson HALLWI only come. 0:00:33.080 --> 0:00:36.360 On for many reasons. Okay, So this is the Kansas 0:00:36.360 --> 0:00:41.199 City Fed's annual Economic Symposium in Jackson Hole, Wyoming, and 0:00:41.440 --> 0:00:43.519 they basically get together a bunch of different you know, 0:00:43.640 --> 0:00:47.239 FED presidents, a bunch of different speakers on economic policy, 0:00:47.320 --> 0:00:50.360 and then everyone geeks out while looking at mountains. 0:00:50.400 --> 0:00:53.080 Basically, it's really extraordinary. So this will be the third 0:00:53.159 --> 0:00:56.320 year that will have been there. We're recording this August eighteenth, 0:00:56.320 --> 0:00:58.160 but by the time people are listening to this, the 0:00:58.360 --> 0:01:01.280 event will have just will be kicking off. It really 0:01:01.320 --> 0:01:04.400 is extraordinary because you really have the top minds and 0:01:04.480 --> 0:01:07.720 this stuff from truly all around the world. But also 0:01:07.920 --> 0:01:12.319 it's late summer. People chill, people hike, people recognize that 0:01:12.319 --> 0:01:14.800 they're in an amazing location and they would be wasting 0:01:14.840 --> 0:01:17.280 their time if they just spent the whole time inside 0:01:17.280 --> 0:01:18.200 talking monetary pole. 0:01:18.319 --> 0:01:20.480 This is true, but I think part of the planning 0:01:20.600 --> 0:01:22.520 of this event is this idea of, Okay, you get 0:01:22.560 --> 0:01:25.320 everyone out in this really nice place in the wilderness, 0:01:25.319 --> 0:01:27.360 and people are maybe a little bit more forthcoming or 0:01:27.440 --> 0:01:30.520 maybe a little bit more open to having creative discussions 0:01:30.840 --> 0:01:33.919 about policy. And it's interesting, you know, you mentioned people 0:01:33.959 --> 0:01:36.720 talking about like this year's theme. I have a pop 0:01:36.800 --> 0:01:39.640 quiz for you, which is do you remember the themes 0:01:39.680 --> 0:01:41.959 from the last two Jackson Holes that we went to? 0:01:43.319 --> 0:01:44.800 We've been to this will be our third. 0:01:44.920 --> 0:01:48.880 I'm a little embarrassed. Is monetary policy at a changing world? 0:01:49.080 --> 0:01:49.160 No? 0:01:49.280 --> 0:01:50.400 I Actually, here's a good question. 0:01:50.640 --> 0:01:54.200 You're not that far off. Actually, so last year it 0:01:54.280 --> 0:01:58.200 was reassessing the effectiveness and transmission of monetary policy. The 0:01:58.280 --> 0:02:00.840 first Jackson Hole we went to in twenty twenty three, 0:02:00.880 --> 0:02:03.160 that was structural shifts in the global economy. That one, 0:02:03.200 --> 0:02:06.360 I got to say a little I could forgive you 0:02:06.400 --> 0:02:09.520 for oh forgetting that one. But this year's theme, it 0:02:09.680 --> 0:02:11.960 just came out, you know, just got announced. So this 0:02:12.000 --> 0:02:17.440 theme is labor markets in transition, demographics, productivity, and macroeconomic policy. 0:02:17.639 --> 0:02:20.400 It's a good topic for many reasons. So obviously, you know, 0:02:20.520 --> 0:02:22.880 the future of AI and its impact on the labor 0:02:22.919 --> 0:02:27.640 force will certainly fit under that particular thematic umbrella. But 0:02:27.760 --> 0:02:30.480 also it goes straight into the heart of what a 0:02:30.520 --> 0:02:33.080 lot of FED policy makers seem to be discussing right 0:02:33.120 --> 0:02:34.320 now and arguing right. 0:02:34.160 --> 0:02:37.160 All kinds of things, immigration, aging, et cetera. How does 0:02:37.200 --> 0:02:39.200 that bear on the data that we're seeing right now. 0:02:39.320 --> 0:02:41.480 It's a great topic for both the short term and 0:02:41.560 --> 0:02:44.120 the long term of monetary policy, so it should be 0:02:44.160 --> 0:02:45.600 a fascinating conference. 0:02:45.280 --> 0:02:47.360 Right and so on that note, I'm very happy to 0:02:47.360 --> 0:02:49.440 say we do, in fact have the perfect guest. We 0:02:49.480 --> 0:02:51.400 are going to be speaking with Jeff Schmidt. He is, 0:02:51.440 --> 0:02:54.280 of course the president of the Kansas City FED and 0:02:54.360 --> 0:02:57.600 responsible for putting on this event every year. So Jeff, 0:02:57.880 --> 0:02:59.840 thank you so much for coming on. Odd thoughts. 0:03:00.680 --> 0:03:01.680 Oh, it's my pleasure. 0:03:01.800 --> 0:03:04.760 It's great to finally meet both of you officially, and 0:03:04.919 --> 0:03:08.120 we follow you quite intently, so it's really great to 0:03:08.160 --> 0:03:08.760 be on We're. 0:03:08.720 --> 0:03:11.720 Leaving that in that's right. Well, I mean it is 0:03:11.800 --> 0:03:14.679 mutual to be fair because we follow you quite intently. 0:03:14.960 --> 0:03:17.120 So first of all, let me just extend a personal 0:03:17.120 --> 0:03:19.760 thanks for putting on an event which allows Joe and 0:03:19.800 --> 0:03:22.000 I to go to one of the most beautiful places 0:03:22.040 --> 0:03:25.520 on earth every year that is truly wonderful for both 0:03:25.520 --> 0:03:28.520 of us. And then I just going back to the 0:03:28.520 --> 0:03:31.280 theme for a second. How do you come up with 0:03:31.320 --> 0:03:33.920 the themes for these events every year? Is there like 0:03:33.960 --> 0:03:36.840 a brainstorming session and everyone goes into a room and 0:03:36.920 --> 0:03:39.720 twelve hours later you emerge with some sort of consensus, 0:03:39.840 --> 0:03:42.160 much like an FMC meeting, I suppose. 0:03:41.840 --> 0:03:45.520 But yeah, it's a great behind baseball question. And as 0:03:45.560 --> 0:03:48.080 you can imagine, you know, we're in our forty eighth years. 0:03:48.160 --> 0:03:51.800 So every year, you know, immediately after it's over, we 0:03:52.240 --> 0:03:54.240 get in a room and we talk about what went well, 0:03:54.320 --> 0:03:57.520 what can we make better? And I really give credit 0:03:57.600 --> 0:04:01.800 to Joe Gruber, I ri chief economists in his team. 0:04:02.000 --> 0:04:05.480 It's probably the most nerve wracking decision that has to 0:04:05.520 --> 0:04:08.520 be made, because you know, Jackson will get over in 0:04:08.680 --> 0:04:12.840 late August, and then probably by sometime early the fourth quarter, 0:04:13.160 --> 0:04:16.080 you're starting to talk about what should we create a 0:04:16.120 --> 0:04:19.680 theme around for the following year, and so they actually 0:04:19.800 --> 0:04:22.880 end up deciding on that by the end of the year. 0:04:23.600 --> 0:04:26.480 And it's nerve wracking because you hope that all the 0:04:26.520 --> 0:04:29.520 research you've asked these brilliant people to do and present 0:04:30.520 --> 0:04:34.080 is applicable by August because you know how fast things 0:04:34.160 --> 0:04:37.080 move in the business and economic world, and boy, they 0:04:37.080 --> 0:04:39.680 are so good at it. And they do think forward 0:04:39.960 --> 0:04:42.960 about some of the emerging issues that are going to 0:04:42.960 --> 0:04:44.599 be dealt with, but whether it be with the Central 0:04:44.600 --> 0:04:47.359 Bank or with the global economy. And I tell you what, 0:04:47.440 --> 0:04:50.000 they hit a home run this year because I'm actually, 0:04:50.600 --> 0:04:55.320 as a you know, economist and FED president, I'm very 0:04:55.360 --> 0:04:59.680 interested in the dynamic of demographics, not just nationally but internationally. 0:04:59.760 --> 0:05:03.719 There's things going on that you'll hear and we'll be 0:05:03.800 --> 0:05:08.000 presented on Friday and Saturday that I think are going 0:05:08.080 --> 0:05:10.280 to really spur a lot of thinking and a lot 0:05:10.320 --> 0:05:14.640 of conversation about how demographic behaviors and movements move the 0:05:14.720 --> 0:05:18.200 workforce and labor force in the US and abroad. So 0:05:18.800 --> 0:05:23.120 so it is it's a tenuous eight months because you've 0:05:23.160 --> 0:05:27.520 got you know, novel level economists doing the research and 0:05:27.560 --> 0:05:29.360 preparing these papers around a topic. 0:05:29.839 --> 0:05:31.560 And I think this one is really going to hit 0:05:31.680 --> 0:05:32.560 a really good court. 0:05:32.760 --> 0:05:35.880 It is definitely a great topic for right now because 0:05:35.960 --> 0:05:38.159 of you know, there's all the questions at least you know, 0:05:38.200 --> 0:05:40.120 and here is just I'm talking to us specifically, but 0:05:40.160 --> 0:05:42.840 as you mentioned, it is a global story because there 0:05:42.880 --> 0:05:44.640 is aging and the effect that that's going to have 0:05:44.760 --> 0:05:47.599 on the workforce, and especially in many advanced economies and 0:05:47.680 --> 0:05:51.200 non advanced economies frankly, and then obviously AI is a 0:05:51.279 --> 0:05:54.040 huge one. And then in the US specifically changing immigration 0:05:54.160 --> 0:05:57.799 policy and so forth. Just on the inside baseball part 0:05:57.839 --> 0:06:02.400 a little bit more. Okay, establish the team establishes the theme, 0:06:03.000 --> 0:06:05.680 how do you then like figure out it's probably almost 0:06:05.680 --> 0:06:08.200 anyone I assume would say yes to an invite to 0:06:08.240 --> 0:06:10.919 present to Jackson Hole, But how what is that actual 0:06:11.000 --> 0:06:14.400 process like where you identify the presenters that you're looking for? 0:06:15.120 --> 0:06:18.560 Yeah, so here again, as you can imagine, there's a 0:06:18.640 --> 0:06:24.040 community of economists and researchers both nationally and abroad. While 0:06:24.040 --> 0:06:28.080 it's a big community, it's pretty connected. And so the 0:06:28.160 --> 0:06:30.159 team's going to get together and they're going to do 0:06:30.200 --> 0:06:32.240 a couple of things. One is they're going to try 0:06:32.240 --> 0:06:35.400 to break down maybe inside the topic, what are some 0:06:35.560 --> 0:06:38.400 of the nuances of because I think we have four 0:06:38.800 --> 0:06:42.520 papers that will be released on Friday and Saturday, and 0:06:42.600 --> 0:06:45.680 so within that topic there's subtopics and so you're going 0:06:45.760 --> 0:06:49.080 to have researchers in university settings, you're going to have 0:06:49.120 --> 0:06:50.880 researchers inside of central. 0:06:50.520 --> 0:06:54.279 Banks, and a lot of that community is going to kind. 0:06:54.080 --> 0:06:58.080 Of focus itself on certain micro and macro topics. So 0:06:59.000 --> 0:07:03.120 that are really good inventory of experts that they'll reach 0:07:03.200 --> 0:07:03.520 out to. 0:07:03.800 --> 0:07:05.520 And I would say, you're right. 0:07:05.680 --> 0:07:08.400 I mean, I think in most cases the researchers would 0:07:08.440 --> 0:07:12.800 really covet the opportunity to do this research and submit 0:07:12.840 --> 0:07:16.000 the paper, but they're also very thoughtful about it. You know, 0:07:16.280 --> 0:07:20.200 some will just maybe not take the engagement just because 0:07:20.200 --> 0:07:23.360 it's not well aligned to the research that they're either 0:07:23.480 --> 0:07:27.320 doing or they feel their experts out But by and large, 0:07:27.560 --> 0:07:30.560 it's really a great honor and we tip typically have 0:07:30.760 --> 0:07:34.840 a very positive response. The challenge is time. You know 0:07:34.880 --> 0:07:37.000 a lot of these things might take a year or 0:07:37.000 --> 0:07:40.080 two to research, but they have a very tight window 0:07:40.200 --> 0:07:42.880 once they're asked and they agree, you know, they might 0:07:43.000 --> 0:07:47.160 have to submit within four or five months. And sometimes 0:07:47.160 --> 0:07:50.240 when you're talking about a very macro topic, that can 0:07:50.280 --> 0:07:52.680 be a super big challenge for a researcher. 0:07:53.280 --> 0:07:56.160 So, speaking of challenges, why don't we get right into 0:07:56.320 --> 0:07:59.720 more of that theme. The idea of labor markets in transition, 0:08:00.600 --> 0:08:02.080 Why don't you go ahead and give us your sort 0:08:02.080 --> 0:08:06.080 of a high level interest in this particular topic. I guess, 0:08:06.120 --> 0:08:10.679 how does something like AI, How does something like aging demographics, 0:08:10.760 --> 0:08:15.440 lower birth rates actually complicate the task of setting monetary policy, 0:08:15.600 --> 0:08:18.440 especially when you think about things like the neutral rate 0:08:18.480 --> 0:08:20.560 of interest. Our star, you know, our star is a 0:08:20.600 --> 0:08:23.760 nebulous concept at the best of times. I can only 0:08:23.800 --> 0:08:26.320 imagine what it's like trying to estimate our star at 0:08:26.320 --> 0:08:29.160 a time when we're also talking about, you know, AI 0:08:29.320 --> 0:08:32.400 potentially transforming the way everyone on Earth is working. 0:08:33.320 --> 0:08:36.800 Yeah, so let me kind of set the stage for this, because, 0:08:37.360 --> 0:08:39.520 first of all, my backgrounds, I'm a little bit of 0:08:39.520 --> 0:08:42.200 a hybrid FED president. So you're going to typically have 0:08:42.800 --> 0:08:45.640 maybe FED presidents that are in two different camps. One 0:08:46.040 --> 0:08:51.320 is going to be a traditional camp of economist PhD researcher, scholar, 0:08:51.720 --> 0:08:58.000 really focusing attention on the monetary policy discussions, relating their 0:08:58.120 --> 0:09:02.679 background to making good decisions at the policy table with FOMC. 0:09:02.880 --> 0:09:05.079 The second is going to be more in my camp. 0:09:05.280 --> 0:09:09.120 I'm much more of a practitioner, not a professor of economics. 0:09:09.160 --> 0:09:11.880 I mean, I've run banks, I've been a bank supervisor 0:09:11.920 --> 0:09:14.400 with the FDIC early in my career. I've done a 0:09:14.440 --> 0:09:17.400 little bit of leadership teaching at SMU the last couple 0:09:17.440 --> 0:09:21.480 of years, but I'll take my banker experiences through my 0:09:21.640 --> 0:09:25.760 thirty plus years of building banks. The most important part 0:09:25.800 --> 0:09:29.040 of that is really the workforce of people that you 0:09:29.160 --> 0:09:32.240 put together and through that thirty years to your points, 0:09:32.480 --> 0:09:36.079 There's really two big drivers on the demographic end that 0:09:36.440 --> 0:09:39.559 are of interest to me. One is just the behavioral 0:09:39.760 --> 0:09:43.600 nature of the labor force generationally, how they're changing, how 0:09:43.600 --> 0:09:46.720 they use technology. I'm a baby boomer. The twenty to 0:09:46.760 --> 0:09:50.360 thirty something coming in has a different sense of what 0:09:50.480 --> 0:09:53.600 the job is and how they're going to be successful 0:09:53.640 --> 0:09:56.600 at that work. The second thing is just and there's 0:09:56.640 --> 0:09:59.520 a very compelling paper that's going to be released on 0:09:59.760 --> 0:10:03.520 the addresses things like fertility rates and so that's not 0:10:03.600 --> 0:10:07.280 only a national but that's an international phenomenon. Is does 0:10:07.800 --> 0:10:10.320 how does the labor force migrate, Let's say in the 0:10:10.440 --> 0:10:14.839 US state to state, what drives that migration of labor force, 0:10:15.200 --> 0:10:19.640 and then what's happening in other large labor centric countries 0:10:20.120 --> 0:10:24.600 where the fertility rates are actually affecting the workforce Going forward? 0:10:24.600 --> 0:10:28.720 I mean, China is a really stark example, Japan. India 0:10:29.160 --> 0:10:34.040 is something a country I think everybody's really watching relative 0:10:34.080 --> 0:10:38.640 to how their labor force is maturing, educating, growing. I 0:10:38.640 --> 0:10:41.120 think all those dynamics are going to play a really 0:10:41.160 --> 0:10:45.240 important piece to the puzzle of where are things going 0:10:45.240 --> 0:10:48.360 to be made and how are economies going to grow 0:10:48.640 --> 0:10:52.680 because most economists and people in the markets would argue, 0:10:52.880 --> 0:10:55.800 you've got to have a growing labor force for your 0:10:55.840 --> 0:10:59.120 economy to grow. And that probably gets to the next 0:10:59.360 --> 0:11:03.560 observation you made, I think, Tracy, and that's how does technology, 0:11:03.720 --> 0:11:08.880 maybe specifically artificial intelligence weave its way into this conversation 0:11:09.080 --> 0:11:13.000 and you'll see some really good arguments about maybe the 0:11:13.200 --> 0:11:16.800 advent of AI is going to be perfectly timed for 0:11:17.120 --> 0:11:20.040 the nature of the labor force and how it's shifting. 0:11:20.080 --> 0:11:24.120 Because overall, when you add fertility rates and you add 0:11:24.240 --> 0:11:28.079 labor market at large, it's pretty static. It's not growing 0:11:28.280 --> 0:11:30.640 in a big way. Probably the only areas that are 0:11:30.679 --> 0:11:34.840 growing significantly would be India and maybe the African continent. 0:11:35.200 --> 0:11:36.880 Though all those things are going to play into this 0:11:37.040 --> 0:11:40.440 mix of both national and global labor force. 0:11:56.400 --> 0:11:58.880 So speak of technology. A couple weeks ago, we interviewed, 0:11:58.920 --> 0:12:02.160 said President Mary Day. She was talking about the iPhone 0:12:02.200 --> 0:12:04.679 and for example, that the current iPhone can do so 0:12:04.800 --> 0:12:07.720 much more than the first iPhone. You know, however many 0:12:07.920 --> 0:12:09.959 years that go. And then I thought of a follow 0:12:10.040 --> 0:12:12.199 up question to that, but I forgot to ask her. 0:12:12.480 --> 0:12:14.000 So I'm like, Okay, I'm just going to ask the 0:12:14.040 --> 0:12:17.520 next FED president. So I'm asking you the question that 0:12:17.600 --> 0:12:20.480 I actually should be asking very daily. I apologize for 0:12:20.960 --> 0:12:24.319 the unfairness, but I think this could inform the AI discussion, 0:12:24.559 --> 0:12:27.080 which is that we have seen already sitting aside AI, 0:12:27.440 --> 0:12:31.520 these incredible tech advances, undeniable that have changed the world, right, 0:12:32.240 --> 0:12:36.199 no one would deny that, and yet measured productivity gains 0:12:36.520 --> 0:12:38.959 have not been particularly extraordinary. So if you look at 0:12:39.000 --> 0:12:41.800 like since the first iPhone or the from the pre 0:12:41.920 --> 0:12:45.400 iPhone era to now, the world's changed dramatically on account 0:12:45.440 --> 0:12:50.480 to the technology changes, and yet productivity nothing particularly special, 0:12:50.480 --> 0:12:52.559 at least in the data. And I'm curious, like, when 0:12:52.559 --> 0:12:54.520 you think about the effect of AI, do you have 0:12:54.559 --> 0:12:57.720 any sort of theory for why that is or why 0:12:57.760 --> 0:13:02.079 it is that these obvious technolog breakthroughs haven't actually moved 0:13:02.080 --> 0:13:04.480 the dial in some of these important measures. 0:13:06.120 --> 0:13:10.000 Well, I have some personal thoughts, maybe some observations within 0:13:10.040 --> 0:13:13.000 the FED itself, at least with the Kansas City FED. 0:13:13.480 --> 0:13:18.160 One is just be patient. A lot of things are happening. 0:13:18.360 --> 0:13:21.200 I think a lot of this technology is emerging now. 0:13:21.240 --> 0:13:24.880 Now granted it'll go fast, but the adoption, I mean, 0:13:25.000 --> 0:13:28.400 even I think about the Kanasity FED itself, you know, 0:13:28.920 --> 0:13:33.480 getting comfortable with what's kind of embedded inside let's. 0:13:33.240 --> 0:13:35.559 Say, the AI technology. 0:13:35.720 --> 0:13:38.079 You know, the thing I worry a lot about is 0:13:38.120 --> 0:13:41.840 just things like copyright laws. You know that we're sensitive 0:13:41.920 --> 0:13:45.480 to using that technology and is it safe for us 0:13:45.520 --> 0:13:48.360 to use as we try to figure out ways to 0:13:48.400 --> 0:13:52.720 be more productive inside our bank. From a more macro standpoint, 0:13:53.080 --> 0:13:56.200 I think everybody's trying to figure out. I would kind 0:13:56.200 --> 0:13:59.160 of categorize the AI phenomena today as kind of a 0:13:59.200 --> 0:14:02.800 low fruit to high fruit process. So what everybody's trying 0:14:02.840 --> 0:14:05.200 to do is say, what are the what's the nature 0:14:05.480 --> 0:14:09.280 job of things? Inside my job? They actually can make 0:14:09.360 --> 0:14:13.680 me more productive, just inherently more productive, whether it be 0:14:14.360 --> 0:14:17.520 narrative in a legal brief or let's say taking a 0:14:17.520 --> 0:14:21.160 bank examination report and trying to download things that would 0:14:21.240 --> 0:14:25.440 normally take you hours or days to populate an examination 0:14:25.600 --> 0:14:28.280 report with. I think we're at that kind of cross 0:14:28.680 --> 0:14:31.000 roads where we're trying to figure out what's the easy 0:14:31.040 --> 0:14:34.040 low fruit, and then I think over time, I don't 0:14:34.040 --> 0:14:37.400 know if you're going to get this blast of productivity 0:14:37.640 --> 0:14:40.239 that all of a sudden it's this moment of epiphany. 0:14:40.280 --> 0:14:41.000 I think you're going to. 0:14:41.320 --> 0:14:45.080 I think it's actually perfectly time, because over time, I 0:14:45.120 --> 0:14:48.080 think you're going to be able to integrate this technology 0:14:48.400 --> 0:14:53.280 and you're going to figure out where it's best used. Now, granted, 0:14:53.520 --> 0:14:55.640 and people are doing studies on this, there are some 0:14:56.400 --> 0:15:00.480 jobs that I think I'll give Mary Daily credit coined 0:15:00.520 --> 0:15:03.080 the phrase soul sucking jobs. What are the things that 0:15:03.160 --> 0:15:07.280 people are let's say, more monotonous or boring, or things 0:15:07.280 --> 0:15:11.040 that just don't move needles, that aren't like super interesting 0:15:11.280 --> 0:15:14.160 and challenging. And I think you're going to see that's 0:15:14.200 --> 0:15:16.120 going to be the part of the low fruit process. 0:15:16.400 --> 0:15:19.160 The upper half of the tree. I think you might 0:15:19.280 --> 0:15:21.360 see some real productivity gains. 0:15:21.680 --> 0:15:23.720 But in the end, when. 0:15:23.560 --> 0:15:27.640 You see shifts in like immigration policy, and you see 0:15:28.040 --> 0:15:31.560 workforce is not growing, you're actually going to need to 0:15:31.680 --> 0:15:34.960 integrate that technology to keep a balance in the supply 0:15:35.040 --> 0:15:38.320 and demand. I think jer Paul mentioned this in his 0:15:38.480 --> 0:15:42.840 last conference after the FOMC when he was addressing some 0:15:42.960 --> 0:15:45.360 of the data that came out in the workforce in 0:15:45.440 --> 0:15:48.560 the summer, in some of the adjustments that while it 0:15:48.720 --> 0:15:51.680 was a little bit eye opening, we feel like there's 0:15:51.720 --> 0:15:54.800 a balancing and supplying demand of the labor force today, 0:15:55.000 --> 0:15:58.280 and it's probably why you're not seeing, at least today 0:15:58.480 --> 0:16:01.880 a major uptick in the unemployment rate. It's kind of 0:16:01.880 --> 0:16:05.000 rebalancing itself going into the next couple quarters. 0:16:05.280 --> 0:16:08.160 This was going to be exactly my next question. Since 0:16:08.200 --> 0:16:10.160 you brought up immigration, why don't you go ahead and 0:16:10.240 --> 0:16:12.600 tell us what you're seeing in the labor market right now, 0:16:12.680 --> 0:16:15.560 because the debate that seems to be emerging is that, yes, 0:16:15.680 --> 0:16:19.560 we've seen these big revisions to pay rolls recently, but 0:16:19.880 --> 0:16:21.760 on the other hand, if we have a lot of 0:16:21.760 --> 0:16:25.280 people exiting the workforce because they're aging out of it 0:16:25.520 --> 0:16:30.000 or because of new immigration policies, then maybe that break 0:16:30.120 --> 0:16:33.640 even labor rate doesn't really matter as much anymore, and 0:16:33.720 --> 0:16:36.320 we can tolerate it as long as the employment rate 0:16:36.440 --> 0:16:39.400 stays pretty strong and we are pretty close to full 0:16:39.440 --> 0:16:43.040 employment levels still. So what are you seeing now, how 0:16:43.040 --> 0:16:44.080 would you characterize it? 0:16:45.240 --> 0:16:47.320 So, Tracy, I would say that there was a bit 0:16:47.360 --> 0:16:50.880 of a convergence of things in the first and second quarter. 0:16:51.040 --> 0:16:53.840 So when we talk about being data depend that there's 0:16:53.920 --> 0:16:57.520 two buckets of data that I really focus on. One 0:16:57.640 --> 0:16:59.720 is the kind of a hard data that's issued by 0:17:00.120 --> 0:17:04.800 third parties or internally by government agencies, things that would 0:17:04.960 --> 0:17:07.600 that they track and have tracked for a long long time. 0:17:07.680 --> 0:17:11.560 That emerged with things like unemployment rates. The second bucket 0:17:11.680 --> 0:17:14.959 is really my travels in and around the tenth district. 0:17:15.040 --> 0:17:19.080 Were seven states, twenty million people in businesses trying to 0:17:19.119 --> 0:17:22.080 get four cornered in the district to try to get 0:17:22.119 --> 0:17:25.679 as much real time information. And so the convergence, the 0:17:25.720 --> 0:17:28.800 way I see it, I think a couple things were 0:17:29.119 --> 0:17:32.280 at odds in some of the information and data that 0:17:32.359 --> 0:17:34.480 was that emerged here in the last month or two. 0:17:34.840 --> 0:17:37.119 The first is that there was a lot you know, 0:17:37.160 --> 0:17:40.840 we could hear the word uncertainty everywhere we went. You 0:17:40.920 --> 0:17:44.639 got to change it administrations, you got some big policy rocks, 0:17:44.680 --> 0:17:48.080 you had a budget that was being debated. All those 0:17:48.080 --> 0:17:51.760 things create uncertainty in a business person's mind. 0:17:51.880 --> 0:17:52.120 Right. 0:17:52.600 --> 0:17:56.280 The second thing was a major change in immigration policy, 0:17:56.320 --> 0:18:00.840 and so that created its own set of uncertainties and dynamics. 0:18:01.240 --> 0:18:03.600 And I think what we're finding, at least what we're 0:18:03.600 --> 0:18:06.000 seeing in the tenth district is a lot of those 0:18:06.040 --> 0:18:09.520 things converged over a very short period of time. And 0:18:09.600 --> 0:18:12.040 what normally will happen, and this kind of gets me 0:18:12.080 --> 0:18:16.000 back to my banker days, is businesses will actually they'll 0:18:16.040 --> 0:18:19.959 slow their decisioning down, they'll let's say, freeze hiring for 0:18:20.000 --> 0:18:22.600 a time, They'll be a little bit more conservative what 0:18:22.640 --> 0:18:26.160 they're spend on certain things. And so I actually think 0:18:26.200 --> 0:18:29.920 that affected some of the labor numbers that came out 0:18:30.359 --> 0:18:34.120 in the most recent tabletops we've done with businesses, they 0:18:34.160 --> 0:18:37.439 seem to be digesting a lot of that change and 0:18:37.480 --> 0:18:40.480 those changes. In the last couple of weeks, I've seen 0:18:40.520 --> 0:18:44.400 a level of confidence back in both the business sectors 0:18:44.480 --> 0:18:48.080 and some of the discussions about labor and workforce. So 0:18:48.200 --> 0:18:51.560 we'll see I mean, I would expect maybe a bit 0:18:51.560 --> 0:18:53.760 of a rebound in some of the labor statistics, but 0:18:54.119 --> 0:18:56.520 at the end of the day, it really is about 0:18:56.560 --> 0:19:00.159 balancing the supply and demand of the labor force. What 0:19:00.280 --> 0:19:03.640 emergence from that over the next I'd say a couple 0:19:03.640 --> 0:19:04.200 of quarters. 0:19:04.600 --> 0:19:08.840 It's interesting you talk about maybe people feeling slightly more comfortable, 0:19:08.840 --> 0:19:12.680 at least relatively compared to the beginning of the year recently, 0:19:12.720 --> 0:19:17.320 because I've seen some chatter about maybe an economic reacceleration 0:19:17.560 --> 0:19:19.680 right now. You know, some of the tariffs have now 0:19:19.800 --> 0:19:23.760 been finalized. It looks so far like we haven't had 0:19:23.800 --> 0:19:27.679 that huge inflationary uptick, although, of course producer prices that 0:19:27.720 --> 0:19:30.119 we saw last week maybe tell a slightly different story. 0:19:30.160 --> 0:19:33.360 We did have that retail spending report out on Friday 0:19:33.400 --> 0:19:36.200 that showed people were still spending or quite a lot 0:19:36.200 --> 0:19:39.080 of money. Yeah, do you see signs of a sort 0:19:39.119 --> 0:19:41.920 of like recovery or reacceleration at the moment? 0:19:43.440 --> 0:19:44.000 I don't know. 0:19:44.119 --> 0:19:47.000 I mean, we got good GDP numbers, kind of a 0:19:47.000 --> 0:19:49.879 bit of a rebound sling back in the second quarter 0:19:49.960 --> 0:19:52.080 from the first quarter's weakness, and that had a lot 0:19:52.119 --> 0:19:54.280 of noise in at the first quarter. I think, I 0:19:54.320 --> 0:19:57.240 don't know if I necessarily categorize it as a rebound. 0:19:57.280 --> 0:20:00.480 I think that they're just there's a lot of things 0:20:00.480 --> 0:20:02.800 that are kind of working themselves through. I mean, you've 0:20:02.840 --> 0:20:06.800 got a major major cycle change with a new administration, 0:20:07.000 --> 0:20:11.439 with a lot of really very interesting macro ideas that 0:20:11.480 --> 0:20:14.480 they're putting in place, and you know, I think you 0:20:14.520 --> 0:20:16.360 could make a fair argument that a lot of those 0:20:16.400 --> 0:20:20.359 are pro growth types of policies and processes and programs. 0:20:20.720 --> 0:20:24.080 So I think the nature of what we see in 0:20:24.119 --> 0:20:28.560 both the labor data and the inflation data are going 0:20:28.600 --> 0:20:31.159 to be pretty interesting. And there's a lot yet to 0:20:31.240 --> 0:20:36.359 emerge between even this week and our September FMC meeting, 0:20:36.400 --> 0:20:39.679 But I think the nature of how people are thinking 0:20:39.680 --> 0:20:43.320 about the economy, what the markets are, how they're performing, 0:20:43.680 --> 0:20:47.920 there is an optimism I think shift from it wasn't 0:20:47.920 --> 0:20:50.560 that they were down in the first couple quarters, They 0:20:50.600 --> 0:20:54.640 just weren't sure, and so there was some pausing happening, 0:20:54.680 --> 0:20:58.520 And then I think we're sensing that the nature of 0:20:58.560 --> 0:21:01.960 the next couple cycles as we get into the holiday 0:21:02.040 --> 0:21:05.040 seasons toward the end of the year, there just seems 0:21:05.040 --> 0:21:08.119 to be a pretty good optimism about what's going to 0:21:08.160 --> 0:21:10.040 happen in the next couple quarters. 0:21:10.600 --> 0:21:12.359 Let me us a good question about the latest jobs 0:21:12.359 --> 0:21:15.720 report that actually sort of ties near term cyclical story 0:21:15.840 --> 0:21:19.159 with the broader term theme of the conference, which is 0:21:19.200 --> 0:21:21.840 that the two sectors that basically in the most recent 0:21:21.920 --> 0:21:24.600 jobs report, the two sectors that basically added all of 0:21:24.640 --> 0:21:29.160 the jobs were healthcare and social assistance. And these sectors 0:21:29.200 --> 0:21:33.520 basically add employment virtually every month without fail. And it's 0:21:33.600 --> 0:21:36.880 very easy to connect that to aging, because people who 0:21:36.880 --> 0:21:40.000 are elderly are retired and you need a certain type 0:21:40.000 --> 0:21:43.200 of you know, nurses and so to take care of them. 0:21:43.640 --> 0:21:46.600 But these aren't considered to be particularly high productivity jobs. 0:21:46.880 --> 0:21:49.439 Looking in the medium term, do you worry about this, 0:21:49.680 --> 0:21:53.399 like how much of the productive labor force will be 0:21:53.680 --> 0:21:57.720 necessary to essentially take care of old people and what 0:21:57.760 --> 0:22:00.840 that means for productivity overall. 0:22:01.000 --> 0:22:03.880