Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: We'll welcome our TV and radio audience worldwide. I'm Matt Miller,
Speaker 2: alongside Katie Greifeld and Michael McKee, Bloomberg's international economics and
Speaker 2: policy correspondent.
Speaker 3: He is joining us now because we have.
Speaker 2: An exclusive interview with the Richmond Fed President, Tom Bark
Speaker 2: and Tom, great to have you on the program.
Speaker 3: Thank you so much for joining us.
Speaker 2: I have to start with the biggest question, which is
Speaker 2: in terms of the data. We've heard from Bostic and
Speaker 2: Cashkari that this data from Trump's trade war hasn't really
Speaker 2: told us all that we need to know quite yet,
Speaker 2: and maybe it won't until September.
Speaker 3: What are you seeing in your district?
Speaker 4: Well, I'll agree with you that the published data shows
Speaker 4: an economy very much on the same trajectory that we've
Speaker 4: been on for the last year or two. Low unemployment,
Speaker 4: inflation settling toward target. There's a lot of questions about
Speaker 4: what happens when these tariffs are imposed, but you know
Speaker 4: how it is. There's a bunch of companies that advance.
Speaker 3: Ordered their product.
Speaker 4: They may have warned about price increases, but they haven't
Speaker 4: yet passed on the prices. The customers may accept the
Speaker 4: price increases or they may not, so we'll just have
Speaker 4: to see how it plays out. I've been describing this
Speaker 4: when I'm talking to businesses, which you know I do
Speaker 4: every day. I've been describing this as driving through fog.
Speaker 4: It's just very hard to drive when it's really foggy,
Speaker 4: and businesses are afraid to accelerate because they don't know
Speaker 4: what's around the next curve. And they're also afraid to
Speaker 4: put on the gas because you don't want someone crashing
Speaker 4: into you, and so by and large, they're pulling over
Speaker 4: and putting on the hazards.
Speaker 1: Well to that point that you're constantly speaking to businesses,
Speaker 1: is anyone making big investments at this point or hiring decisions?
Speaker 1: From your conversations, do you get the sense that firms
Speaker 1: are closed to announcing layoffs.
Speaker 4: On the hiring side, you're definitely not saying that. Lots
Speaker 4: of hiring freezes, of lots of deferred hiring, and you
Speaker 4: see that in the data as well. In terms of
Speaker 4: investment decisions, investment moves that were already underway seem to
Speaker 4: be continuing. I've heard very few cancelations, but some of
Speaker 4: the big things that you might expect to happen when
Speaker 4: the terms of trade change. I think people are still
Speaker 4: waiting to get whatever they think is final in terms
Speaker 4: of layoffs. You clearly hear and see about it in
Speaker 4: the government sector and in those sectors related to government spending.
Speaker 4: But outside of that, I just think people have the hazards.
Speaker 5: On how long are companies telling you they can hold
Speaker 5: out before they have to make some sort of decision
Speaker 5: as to whether to go ahead and invest or to
Speaker 5: cancel plans.
Speaker 4: Well, I think people are pretty patient on the investment.
Speaker 4: A lot of these are growth investments, and they're waiting
Speaker 4: to see what the terms are. If you're thinking of
Speaker 4: building a new facility somewhere, you kind of want to
Speaker 4: know what the rules are before you before you build.
Speaker 4: So I think there's a lot going in there. I
Speaker 4: also don't think there's much case for canceling. Nothing's really
Speaker 4: changed in the economic environment. You just have policy uncertainty,
Speaker 4: and I think people are just going to wait policy
Speaker 4: uncertainty out. They do think there's a light at the
Speaker 4: end of the tunnel that there will be some certainty,
Speaker 4: whether it's the tax bill or some of the trade terms.
Speaker 3: But I think they're just waiting it out. Hey, Tom,
Speaker 3: I was on Saturday.
Speaker 2: I went down to Fredericksburg to purchase a used motorcycle,
Speaker 2: and I drove it all the way back here to
Speaker 2: New York through much of your district, I imagine through Washington,
Speaker 2: d C.
Speaker 3: Of course, and I was thinking.
Speaker 2: About DOGE, the Department of Government Efficiency, the cuts that
Speaker 2: DOGE made. Have they had any specific impact on the companies,
Speaker 2: on the constituents in your district.
Speaker 4: Well, first of all, congratulations on making it through the
Speaker 4: Fredericksburg to DC ninety five district. That's a place that
Speaker 4: I travel a lot, and it's not very easy to
Speaker 4: travel it. There's no question that what we're seeing happen
Speaker 4: in terms of government spending cuts is affecting, especially the
Speaker 4: DC metro area part of my district. You see it
Speaker 4: in both announced job losses. If you look at Challenger
Speaker 4: job announcements in February and March, they were quite significant.
Speaker 4: Particularly government. We see it in the week to week
Speaker 4: governments spending numbers in retail spending, particularly discretion of retail spending.
Speaker 4: In the DC metro area, job postings are down about
Speaker 4: a third. We're even seeing listings come up in the
Speaker 4: residential real estate area, so you're definitely seeing that impact
Speaker 4: in DC Metro.
Speaker 1: Also, I get your opinion on what's going on with
Speaker 1: the relationship between hard and soft data. It's something that
Speaker 1: we talk about on the show quite frequently because you
Speaker 1: have the soft data suggesting that things look a lot
Speaker 1: more stagflationary than the hard data actually shows. And I'm
Speaker 1: wondering whether the sentiment data, the survey data that we receive,
Speaker 1: is still a reliable indicator of what the hard data
Speaker 1: will eventually reflect.
Speaker 3: Well.
Speaker 4: I separate business and consumer sentiment on that. I think
Speaker 4: business sentiment is a very good indicator of what you're
Speaker 4: seeing and what you're here. What you're seeing in the
Speaker 4: business sentiment is the surgeon optimism that came anticipating pro
Speaker 4: business policies after the election has backed off, and you
Speaker 4: see hesitancy to invest, hesidency to hire, And that's the
Speaker 4: same thing you're seeing, you know, as you talk to businesses,
Speaker 4: and so I think that's very consistent by the way
Speaker 4: we saw the same thing in twenty nineteen, and I
Speaker 4: think it played out in a very similar way. A
Speaker 4: consumer sentiment seen, which historically has been strongly correlated with
Speaker 4: consumer spending, has not seemed to be for the last
Speaker 4: two or three years. I think that's pretty simple. Inflation
Speaker 4: is a big bugaboo in people's minds. As you know,
Speaker 4: everybody hates inflation, and the prospect of inflation drives sentiment
Speaker 4: down significantly, you know, And today's always on media environment
Speaker 4: where people look at notifications all day long that notifications
Speaker 4: they are seeing are tariff's tariffs, inflation, and they're anticipating that.
Speaker 4: You can see that in terms of the consumer sentiments
Speaker 4: expected inflation five or ten year, one year, five year,
Speaker 4: ten or whatever, and that takes sentiment down. There's no
Speaker 4: evidence yet that that inflation driven drop in sentiment drops spending,
Speaker 4: and nothing I'm seeing in the real time spending data
Speaker 4: suggests that spending is dropping. But that's why I say
Speaker 4: there's the disconnect on the consumer side. Sentiment seems very
Speaker 4: very clearly moving things on the business side, less clear
Speaker 4: on the consumer side.
Speaker 5: Tariff's tariffs, tariffs, as you mentioned, is what we've been
Speaker 5: talking about for some months. But now we have the
Speaker 5: budget bill on the horizon, the fiscal side of it.
Speaker 5: What are people telling you in your district and you
Speaker 5: have a lot of rural areas as well, about the
Speaker 5: potential effects on the economy from the bill. Some see
Speaker 5: stimulus from no tax on tips, no tax on overtime.
Speaker 5: Maybe that's an inflation problem going forward, and others say
Speaker 5: maybe there's a problem with consumer spending going forward because
Speaker 5: people are losing income from Medicaid and other cuts. How
Speaker 5: do you see that affecting the economy.
Speaker 4: Well, I was in rural Virginia, as I was telling
Speaker 4: you earlier last week, and we had a lot of
Speaker 4: conversations about how they're saying policy. I don't think this
Speaker 4: has reached the level of much focus in the small towns,
Speaker 4: at least in my district. I think people are focused
Speaker 4: on the basics the places people do. They worry about healthcare.
Speaker 4: Rural healthcare is a pretty big issue in the small towns,
Speaker 4: and people wonder about how any changes to healthcare is
Speaker 4: going to affect rural hospitals. And I think people just
Speaker 4: waiting to see where Washington lands on this.
Speaker 2: We had a drop in GDP that surprised me last quarter.
Speaker 2: I talked to the experts here at Bloomberg about it,
Speaker 2: and they told me that's okay. It's because we were
Speaker 2: pulling forward so much ahead of President Trump's tariffs, and
Speaker 2: now that he's pushing those tariff dates back, I wonder
Speaker 2: if you think companies and consumers are going to continue
Speaker 2: to pull forward and bring so many imports in that
Speaker 2: we get another big drop in GDP. Tom could we
Speaker 2: have a technical recession because of this?
Speaker 4: Well, so, the businesses who are facing these tariffs go
Speaker 4: in one of two directions. There's some set of people
Speaker 4: who pull forward, and you certainly saw that in pharmaceuticals
Speaker 4: in the first quarter. Stockpile inventory is in advance of tariffs.
Speaker 4: But there's another set that are actually pulling back and
Speaker 4: saying and we saw that in China. If you look
Speaker 4: at the shipments out of China, out of the ports,
Speaker 4: and they're saying, look, I'm not taking this till I
Speaker 4: see where it goes. Now we've got a different tarif
Speaker 4: regime in China for some period of time, we're not
Speaker 4: yet seeing much movement in terms of shipments out of China.
Speaker 4: I think takes a few weeks to get that going.
Speaker 4: And I just think we're going to see some back
Speaker 4: and forth on this this quarter next quarter, and we
Speaker 4: just have to get off to get the other side
Speaker 4: of it again. It's part of why I say there's
Speaker 4: so much fog here because you might say we had
Speaker 4: a great consumer spending month in March because auto sales boomed,
Speaker 4: or you might say that people bought their cars before
Speaker 4: they saw price increases.
Speaker 5: Well, as we wrap this up, when you look forward,
Speaker 5: which part of the mandate do you think we'll see
Speaker 5: an effect first on the inflation side or the employment side.
Speaker 4: I'm more balanced than a lot of what you read.
Speaker 4: I could describe you how some of these forces like
Speaker 4: tariffs might be inflationary. I can describe to you how
Speaker 4: other forces like lower gas prices might be disinflationary.
Speaker 3: I can describe you how.
Speaker 4: Less government spending might be less employment, and that has
Speaker 4: issues on the employment side. I can also describe you
Speaker 4: how people who haven't hired for eighteen months, if spending continues,
Speaker 4: might need to start hiring. And so I'm waiting to
Speaker 4: see what happens, all right.
Speaker 1: A great conversation to start this week. Are big thanks
Speaker 1: to Richmond FED President Tom Barkin and Bloomberg's Michael McKee.