WEBVTT - Surveillance: Goldman Cuts U.S. Growth View 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.200 with Jonathan Ferrell and Lisa Brownwitz Jailey. We bring you 0:00:13.320 --> 0:00:18.600 insight from the best and economics, finance, investment, and international relations. 0:00:18.960 --> 0:00:23.840 Find Bloomberg Surveillance on Apple Podcast, Suncloud, Bloomberg dot Com, 0:00:23.920 --> 0:00:29.640 and of course, on the Bloomberg Terminal. Let's get to 0:00:29.760 --> 0:00:32.199 at our conversation of the day on market economics the 0:00:32.280 --> 0:00:34.920 state of the American economy. Gun Hatzius joins us. He 0:00:35.080 --> 0:00:37.879 is with Golden Sex. Yeah, I got eight ways to go, 0:00:38.000 --> 0:00:40.159 but I want to fold it into a slowdown in 0:00:40.200 --> 0:00:43.559 the fiscal umph to America. Did you adjust your g 0:00:43.680 --> 0:00:47.800 d P down because the fiscal party is over, The 0:00:47.840 --> 0:00:53.000 fiscal punch bowl is being taken away. That's certainly the 0:00:53.080 --> 0:00:55.640 reason why we think the economy is going to slow 0:00:55.720 --> 0:00:58.760 quite a bit in two thousand and twenty two. We 0:00:58.840 --> 0:01:02.480 have it going to just under two percent by the 0:01:02.560 --> 0:01:05.400 fourth quarter of next year. In the near term, I 0:01:05.440 --> 0:01:08.880 think there are still some reasons to expect stronger growth. 0:01:09.200 --> 0:01:11.000 The trend is down, but I don't think it's going 0:01:11.040 --> 0:01:14.320 to be a straight great line. Will still get some 0:01:14.440 --> 0:01:18.759 boost from the receding delta. Wave, consumers have a lot 0:01:18.760 --> 0:01:21.680 of pent up savings, and I think the inventory cycle 0:01:22.520 --> 0:01:25.200 is also going to boost growth. But these are all 0:01:25.240 --> 0:01:29.560 relatively short term, right and going forward, you know, further on, 0:01:29.640 --> 0:01:31.840 I do think growth is going to be significantly saw. 0:01:32.400 --> 0:01:35.880 Whatever the flavor of inflation here, what does it do 0:01:36.280 --> 0:01:42.039 to the wage in the inflation adjusted wage I think 0:01:42.240 --> 0:01:45.960 that really depends on whether you look at the top 0:01:46.120 --> 0:01:50.320 end of the of the wage distribution or the bottom end. 0:01:50.400 --> 0:01:54.000 I think at the bottom end, we've seen a sharp 0:01:54.040 --> 0:01:57.560 acceleration in wage growth we think to about six percent 0:01:57.680 --> 0:02:02.520 if we just for all the changes in composition, and 0:02:02.880 --> 0:02:06.600 that's obviously, you know, the strongest we've had in many years. 0:02:07.000 --> 0:02:11.440 I do think that the expanded unemployment benefits were a 0:02:11.480 --> 0:02:13.919 big driver of that, and now that those have ended, 0:02:14.360 --> 0:02:17.680 I think we'll see a deceleration there. But in the 0:02:17.720 --> 0:02:20.520 middle and upper end of the income distribution will probably 0:02:20.560 --> 0:02:24.880 see continued gradual wage acceleration as the labor market titans 0:02:24.919 --> 0:02:27.800 and I still think it is it is tightening, so 0:02:27.919 --> 0:02:32.000 overall we have wages going sort of roughly sideways in 0:02:32.040 --> 0:02:34.320 the three and a half to four percent range. That's 0:02:34.320 --> 0:02:38.680 our current estimate of the underlying pace and then the 0:02:38.800 --> 0:02:40.840 real wage you know, really is going to depend on 0:02:40.880 --> 0:02:43.600 what happens to inflation. In the short term, there is 0:02:43.639 --> 0:02:47.320 no real wage growth. In fact, real wages probably declining 0:02:47.320 --> 0:02:51.880 slightly because inflation is is higher than that. Longer term, 0:02:51.919 --> 0:02:54.360 as you go into two thousand and twenty two, I 0:02:54.360 --> 0:02:57.400 think we'll again have real wage gains. So, yeah, just 0:02:57.560 --> 0:03:00.200 help we understand next year. Full pus in to the 0:03:00.200 --> 0:03:02.320 baseline for the year, but I'm more interested in the 0:03:02.360 --> 0:03:05.160 back half. Two Are you saying one point five to 0:03:06.120 --> 0:03:08.399 GDP growth by the time we get to the back end? 0:03:10.520 --> 0:03:14.320 That's right. The four percent is in part being driven 0:03:14.440 --> 0:03:19.520 by the strength in the later part of two thousand 0:03:19.520 --> 0:03:22.720 and twenty one that has a statistical carry over into 0:03:22.760 --> 0:03:25.320 the year. But as you go through the year and 0:03:25.400 --> 0:03:28.320 especially into the back half, we have it at three 0:03:28.360 --> 0:03:31.320 percent in Q three and then one seventy five in 0:03:31.600 --> 0:03:35.800 Q four. So she's definitely a trend towards slowdown, consistent 0:03:35.880 --> 0:03:39.720 with some of these temporary positives petering out as you 0:03:39.760 --> 0:03:41.560 go through the year. Yeah, and how do you think 0:03:41.560 --> 0:03:43.440 the Federal Reserve will respond to them? Will they be 0:03:43.440 --> 0:03:45.800 looking at the cumulative games that you've pointed out, Will 0:03:45.800 --> 0:03:48.520 still be decent in the labor market or will they 0:03:48.560 --> 0:03:52.720 be worried about growth slow and bank below two Well, 0:03:52.760 --> 0:03:56.120 so a near term of course, you know, tapering is 0:03:56.240 --> 0:03:59.040 very likely to be announced at the next meeting that's 0:03:59.040 --> 0:04:02.320 going to take until the middle of two thousand and 0:04:02.320 --> 0:04:05.600 twenty two, and then I think the question is where 0:04:05.680 --> 0:04:10.120 is growth whereas the labor market, whereas inflation under our forecast, 0:04:10.680 --> 0:04:15.440 growth is much more moderate and inflation is on its 0:04:15.480 --> 0:04:19.200 way back down to something like two percent on core PC. 0:04:19.880 --> 0:04:23.039 In that environment, I don't think they're going to move 0:04:23.520 --> 0:04:27.919 directly to rate hikes, and we have the hikes not 0:04:28.080 --> 0:04:30.600 starting until two thousand and twenty three. But of course 0:04:30.920 --> 0:04:32.960 it's really going to depend on the on the data 0:04:33.240 --> 0:04:35.920 and how they compare with the criteria that the Committee 0:04:35.960 --> 0:04:38.520 has laid out. They've been very clear about that. Well, 0:04:38.560 --> 0:04:41.680 tapering isn't going to help much in reducing the supply 0:04:41.839 --> 0:04:44.400 side in facial inflationary pressures that are out there, you 0:04:44.400 --> 0:04:46.960 could argue there's limited options for the FED to do 0:04:47.040 --> 0:04:50.760 anything about that. Are the ripple effects though, of that 0:04:51.400 --> 0:04:56.640 being more persistent than maybe expected, being underestimated, the ripple 0:04:56.680 --> 0:05:01.080 effects from the supply side shortages, it's be taking longer 0:05:01.839 --> 0:05:05.320 and that I think that's you know, pretty clear in 0:05:05.320 --> 0:05:10.000 the inflation numbers in you know, I think a good indicator. 0:05:10.960 --> 0:05:14.640 Obviously only one industry is used cars, where auction prices 0:05:14.680 --> 0:05:19.160 again rose in September after several months of the clients. 0:05:19.640 --> 0:05:22.320 So I do think in the in the next several 0:05:22.360 --> 0:05:26.600 months will still have a significant inflation issue. We think 0:05:26.640 --> 0:05:29.680 four pc inflation by the end of the year is 0:05:29.839 --> 0:05:32.080 at four and a quarter percent, up from three point 0:05:32.120 --> 0:05:35.400 six percent at the moment. As you go into two 0:05:35.480 --> 0:05:39.599 thousand and twenty two, though, slower growth in demand and 0:05:40.080 --> 0:05:44.880 probably also a redirection to some degree of that demand 0:05:45.480 --> 0:05:48.479 from the good sector. Right now, it's very concentrated in 0:05:48.520 --> 0:05:52.039 the good sector. It's probably going to normalize somewhat and 0:05:52.040 --> 0:05:54.320 some of it is going to move into services, you know. 0:05:54.360 --> 0:05:59.040 I think that is going to result in UH relaxation 0:05:59.120 --> 0:06:03.400 basically of these of these supply bottlenecks and declining books prices. 0:06:03.680 --> 0:06:06.039 But we're not yet in terms of supply issues. We 0:06:06.040 --> 0:06:08.000 also have a real energy crunch out there in the 0:06:08.000 --> 0:06:10.560 world that is driven crude oil prices to now eighty 0:06:10.600 --> 0:06:12.960 two dollars a barrel on w T I what is 0:06:12.960 --> 0:06:16.640 the real economic impact of crude north of AD. I 0:06:16.680 --> 0:06:21.640 think again it adds to the near charm stackflation narrative. 0:06:21.760 --> 0:06:24.599 It's bad for growth, but you know, at the same 0:06:24.640 --> 0:06:27.839 time boots inflation mainly headline there. There's not a major 0:06:27.920 --> 0:06:31.360 impact on the core numbers. They are the high numbers. 0:06:31.360 --> 0:06:34.719 They are really driven by other factors. But it's all 0:06:34.760 --> 0:06:38.040 pointing in the in the same direction in terms of 0:06:38.279 --> 0:06:43.599 way on growth and making making inflation higher. Yeah, long 0:06:43.640 --> 0:06:47.800 ago and far away, a younger hotsis defined the housing 0:06:47.880 --> 0:06:53.080 market in America as we saw housing prices collapse. Let's 0:06:53.120 --> 0:06:57.080 go to your Brookings effort here the balance sheet effects 0:06:57.200 --> 0:07:02.640 of the home price downturn. We need a rewrite sheet 0:07:02.680 --> 0:07:06.719 effects of the home price upturn. What do you make 0:07:06.880 --> 0:07:09.480 of this boom, Yahn? What does it mean for our 0:07:09.600 --> 0:07:13.520 viewers and listeners? Well, I think it is one of 0:07:13.680 --> 0:07:18.440 the items on the strong side of the ledger and 0:07:18.640 --> 0:07:22.960 one reason I think why we are getting a good 0:07:23.000 --> 0:07:26.400 amount of balance sheet support that is upsetting to some 0:07:26.520 --> 0:07:31.240 degree the negative fiscal impulse. But I think ultimately the 0:07:31.320 --> 0:07:34.680 negative fiscal impulse is probably going to be larger, in 0:07:34.800 --> 0:07:39.200 part because this housing boom underlike the pre two thousand 0:07:39.280 --> 0:07:42.920 and seven or two thousand and eight housing boom doesn't 0:07:42.960 --> 0:07:46.880 feature the same amount of mortgage equity withdrawal, you know, 0:07:46.880 --> 0:07:52.320 wholem equity, borrowing, cash out refis, etcetera. That was really 0:07:52.640 --> 0:07:57.160 a particular sort of way to turbo charge the housing 0:07:57.160 --> 0:07:59.760 wealth effect back then. We're not seeing that to the 0:08:00.000 --> 0:08:03.320 integrat degree now, so I also think the consumption effect 0:08:03.320 --> 0:08:05.440 isn't going to be as large. Yeah, just quickly, a 0:08:05.440 --> 0:08:08.240 final question, what do you make of this stag inflation 0:08:08.320 --> 0:08:11.360 conversation that's taking place right now? What are you when 0:08:11.400 --> 0:08:14.400 your team tan of clients about it? But I think 0:08:14.400 --> 0:08:17.360 in the near German's real if you're just defined stagflation 0:08:17.920 --> 0:08:21.760 as you know, deceleration and growth from the extremely rapid 0:08:21.840 --> 0:08:24.280 pace that we had a couple of quarters a goal 0:08:24.640 --> 0:08:27.840 and much higher inflation than we've had in several decades. 0:08:27.920 --> 0:08:30.920 I mean, it's just a description of the fact. The 0:08:31.040 --> 0:08:33.680 question is, I think what happens as you go into 0:08:33.679 --> 0:08:35.800 two thousand twenty two, and I think that's going to 0:08:35.880 --> 0:08:40.480 be a more traditional, you know, sort of cyclical slowdown 0:08:40.559 --> 0:08:44.160 narrative also with the clients and inflation. But we're not 0:08:44.200 --> 0:08:46.280 there yet, and we're probably not going to be there 0:08:46.360 --> 0:08:49.040 for at least a few months longer. You just quickly then, 0:08:49.080 --> 0:08:51.480 just looking at the FED forecast real GDP next year, 0:08:51.480 --> 0:08:53.400 there are at three point eight year of four This 0:08:53.440 --> 0:08:57.120 is for twenty two core pc. There are two point three. 0:08:57.280 --> 0:08:59.000 Just you and just quickly confirmed. What are you at 0:08:59.040 --> 0:09:04.080 for two for on core pc? So on a for 0:09:04.160 --> 0:09:07.440 corpc by the end of the year, we're a so 0:09:07.679 --> 0:09:11.920 a little bit below the FEDS forecast for GDP growth. 0:09:12.080 --> 0:09:14.840 We're at three point three percent if you look at 0:09:14.880 --> 0:09:16.960 it on the fourth quarter to the fourth quarter basis. 0:09:17.280 --> 0:09:19.640 It's the way the FED looks at it. Yeah, and 0:09:19.679 --> 0:09:22.440 thank you, sir. I appreciate that clarification got my sex 0:09:22.520 --> 0:09:25.600 chief economist on the path forward. Ye, thank you very much. 0:09:31.200 --> 0:09:33.760 So picture the scene you have won the Nobel Prize 0:09:33.760 --> 0:09:36.680 in Economics, but you don't know you've won the Nobel 0:09:36.720 --> 0:09:39.160 Prize in economics, and Tom the phone rings you live 0:09:39.160 --> 0:09:42.640 in America on the West coast maybe, and your phonus room. 0:09:42.720 --> 0:09:45.920 Do you pick up the phone? Well, I don't know 0:09:45.960 --> 0:09:48.160 if you pick up the phone, but that is the great, 0:09:48.200 --> 0:09:50.560 great tradition and maybe you miss it a few times. 0:09:50.920 --> 0:09:53.880 Is Guido im Men's did this morning of the three 0:09:53.880 --> 0:09:56.320 winners here. This is a gentleman who did the hard 0:09:56.320 --> 0:09:58.960 work the math out of Brown University in the House 0:09:59.280 --> 0:10:04.160 of Tony Land Gast Grido Evans has been definitive in econometrics. 0:10:04.200 --> 0:10:07.400 Think Claude Granger and Robert Angel of San Diego a 0:10:07.520 --> 0:10:10.800 number of years ago. Grado, this is an award for 0:10:10.960 --> 0:10:15.679 labor and the choices of society makes in trying to 0:10:15.760 --> 0:10:21.400 figure out jobs and wages. Discreat choice is the hallmark 0:10:21.600 --> 0:10:26.120 of your work. What are the modern choices we're making 0:10:26.240 --> 0:10:32.439 in labor in two thousand twenty one? Well, thanks thanks 0:10:32.600 --> 0:10:36.599 for having me say. I mean, first all, it's just 0:10:36.760 --> 0:10:39.760 been great shining this with with josh Anglis and David 0:10:39.840 --> 0:10:42.960 Carr because they've they've been such role models for me 0:10:43.080 --> 0:10:45.760 that they've been so fun to to work with and 0:10:46.000 --> 0:10:51.120 have his colleagues, and in addition kind of Alan Couger 0:10:51.280 --> 0:10:55.560 who's also worked in this this area, and all three 0:10:55.600 --> 0:10:57.959 of them kind of have been working on these really 0:10:57.960 --> 0:11:03.600 important subscentive questions and sacked and having been their colleagues, 0:11:04.080 --> 0:11:06.920 then that motivated me to look at a lot of 0:11:06.960 --> 0:11:11.520 the methodological issues related to their questions. To make their 0:11:11.600 --> 0:11:14.880 arms is more convincing and more credible and hopefully more 0:11:14.960 --> 0:11:20.480 useful for policymakers. I look, Guido at the present work 0:11:20.520 --> 0:11:23.040 here in the hallmark of this is to take David 0:11:23.080 --> 0:11:26.880 Carter and Ellen Krueger over to what Angerston in Ben's 0:11:26.960 --> 0:11:32.440 did an econometrics and math, over to the modern technology 0:11:32.480 --> 0:11:38.800 of Amazon, target and the rest getting sixteen seventeen eighteen 0:11:38.840 --> 0:11:43.400 dollars an hour because they can't find labor. From where 0:11:43.480 --> 0:11:47.480 you sit, what does the marginal wage due to all 0:11:47.679 --> 0:11:54.640 of America with Amazon going out looking for the marginal employee. 0:11:55.160 --> 0:11:57.920 But at the moment, I think it's all very much 0:11:58.000 --> 0:12:03.599 influx after the pandemics, of course, has had great effects 0:12:03.600 --> 0:12:09.960 on on inequality and it's it's had such an equal 0:12:10.000 --> 0:12:12.960 impact on different parts of the of the labor market, 0:12:13.840 --> 0:12:17.680 and so I think Ellen and David's work is still 0:12:17.720 --> 0:12:23.920 extremely relevant there and I think the current administration has 0:12:23.960 --> 0:12:30.040 probably taken up very seriously. Yeah, Guido, obviously your work 0:12:30.080 --> 0:12:34.600 focused on natural experiments in the actual study of empirical data. 0:12:34.880 --> 0:12:37.360 As we talk about monetary policy and a federal reserve 0:12:37.400 --> 0:12:41.559 that wants to operate on actual, realized data versus expectations, 0:12:42.840 --> 0:12:44.880 is that something that can only really be done with 0:12:45.000 --> 0:12:49.720 hindsight bias. No, I think a lot of these methods 0:12:49.760 --> 0:12:55.080 are very relevant for for informing future policies, and a 0:12:55.080 --> 0:13:00.360 lot of the datual experiment literature has also made roads 0:13:00.400 --> 0:13:05.120 into macroeconomics and is incredibly interesting work going on there 0:13:05.120 --> 0:13:09.520 that early on the Christian David Roman is very interesting 0:13:09.559 --> 0:13:13.920 work there nowadays, uh, I mean Necamora and Don Science 0:13:13.960 --> 0:13:17.199 and doing very interesting work trying to also tease out 0:13:17.280 --> 0:13:21.240 correlation and causality in macroeconomic settings, where these classes are 0:13:21.240 --> 0:13:24.800 even more challenging than in the settings with my code 0:13:24.840 --> 0:13:28.600 data that David, Josh and I have typically looked at 0:13:29.640 --> 0:13:32.640 Professor Emmons, what is so important here? And I think 0:13:32.679 --> 0:13:35.080 we'll do just one final questionnaire as you go to 0:13:35.160 --> 0:13:39.560 your massive media day and celebration of this award, And 0:13:39.640 --> 0:13:43.040 the final question is we have a certitude about data. 0:13:43.520 --> 0:13:46.280 It's in our economics, it's in our academics, it's in 0:13:46.360 --> 0:13:49.520 Wall Street, it's in everything to do with the financial media. 0:13:50.160 --> 0:13:52.600 You grew up in what I'm gonna call the Baysie 0:13:52.640 --> 0:13:57.559 in the house, which is real doubt over ninety and certitude. 0:13:57.880 --> 0:14:01.800 Are we too confident about our data that we're trying 0:14:01.800 --> 0:14:05.760 to guess the future on I think I think that 0:14:05.920 --> 0:14:08.720 that's a super interesting question, and that's that's something that 0:14:09.840 --> 0:14:12.920 that's occupy a lot of my of my thinking. We're 0:14:12.960 --> 0:14:17.040 trying to I think traditionally we've we've certainly aired on 0:14:17.080 --> 0:14:19.120 the side of putting too much faith in the in 0:14:19.160 --> 0:14:21.280 the models, and so a lot of the methods have 0:14:21.400 --> 0:14:24.040 been developing have been trying to get away from that 0:14:24.120 --> 0:14:29.160 and trying to make these methods more robust, but as 0:14:29.280 --> 0:14:35.120 as ongoing challenges and in doing so, professor, before you run, 0:14:35.160 --> 0:14:37.960 did you miss the phone call? What time did they call? 0:14:38.240 --> 0:14:40.160 I miss I missed the first phone call. I got 0:14:40.160 --> 0:14:45.720 the second one. Uh so, I was been a long 0:14:45.800 --> 0:14:49.280 day before for us. I was. I was sleeping well 0:14:49.840 --> 0:14:55.000 and uh I wasn't expecting this as it's often the way, sir, 0:14:55.120 --> 0:14:57.280 as it's often the white They missed the phone call. 0:14:57.400 --> 0:14:59.840 Queen Emmant s, thank you so and congratulations so much. 0:15:00.000 --> 0:15:03.400 E tunny walk about Prize for Economics winner and Stanford 0:15:03.480 --> 0:15:06.800 University Economics professor, that's home. They always missed the code. 0:15:07.160 --> 0:15:09.480 That's what I find always funny about this. They always 0:15:09.760 --> 0:15:18.200 missed the code. Right now and we are well timed 0:15:18.200 --> 0:15:20.960 to speak to one of our great labor economy, and 0:15:21.040 --> 0:15:22.960 she is inquisitive, to say the least out of the 0:15:23.000 --> 0:15:28.320 Michigan Shop Claudius sam Joe's joins us always controversial, always opinionated, 0:15:28.760 --> 0:15:31.400 and knowing that it is a day of celebration in 0:15:31.440 --> 0:15:34.760 her world, which is labor economics, Claudia, and we want 0:15:34.760 --> 0:15:37.080 to stay in theme. But if I look at Guido 0:15:37.200 --> 0:15:40.400 in Ben's, if I look at Joshua Angerston, particularly if 0:15:40.440 --> 0:15:44.120 I look at David Card and Alan Krueger, um, I 0:15:44.520 --> 0:15:47.360 just have to say, this is a day of the 0:15:47.440 --> 0:15:53.320 minimum wage. Fold their work into the observation. Amazon has 0:15:53.360 --> 0:15:57.360 to give out eighteen dollars an hour to find someone today. 0:15:59.000 --> 0:16:03.520 All right, So for these Nobel Prize winners today, you know, congratulations, 0:16:04.040 --> 0:16:06.960 uh and I agree. There you can go back to 0:16:07.040 --> 0:16:11.480 the really path breaking work that David Card and Alan 0:16:11.560 --> 0:16:15.240 Krueger did in the early nine nineties, and it was 0:16:15.440 --> 0:16:19.280 very careful, empirical work. Go out in the world and 0:16:19.360 --> 0:16:22.480 see what is happening in states that raise minimum wage 0:16:22.560 --> 0:16:25.440 and states that don't. Now, a lot of happened in 0:16:25.520 --> 0:16:28.520 terms of research that since then, but they at least 0:16:28.640 --> 0:16:32.960 raise the question that you raise wages and you don't 0:16:32.960 --> 0:16:36.720 lose out on business. It's not bad for the company. 0:16:36.760 --> 0:16:40.320 Normally in economics we'd say this, this is gonna be 0:16:40.360 --> 0:16:43.160 a problem for employers, it's gonna be a problem for businesses. 0:16:43.600 --> 0:16:46.320 And they found in one case, and like I said, 0:16:46.320 --> 0:16:48.480 there's a lot of literature, there's a lot of debate 0:16:48.560 --> 0:16:50.920 after that about the effects of minimum wage, but it 0:16:50.960 --> 0:16:54.520 really opened up a conversation. Let's get past our models 0:16:54.960 --> 0:16:57.400 and let's go see what's happening to all of this, 0:16:57.560 --> 0:17:00.960 and the the incredibly acute mathematic tics of Angers and 0:17:01.160 --> 0:17:03.760 Emmons as well also working. I should point out with 0:17:03.800 --> 0:17:07.119 Alan Krueger Claudia some what this comes down to is 0:17:07.160 --> 0:17:10.239 the reality right now. And I have a question on 0:17:10.359 --> 0:17:14.840 local economics, think David blanche Flower at Dartmouth is Amazon 0:17:15.160 --> 0:17:20.159 target cost go? Are they the marginal price determinant of 0:17:20.200 --> 0:17:26.040 the wage in local economies? Well, this is a trend 0:17:26.119 --> 0:17:28.840 we have seen for decades. So this goes way beyond 0:17:29.119 --> 0:17:32.880 COVID in that you have local labor markets where there 0:17:33.000 --> 0:17:37.040 is a dominant employer. Amazon's a big company in terms 0:17:37.040 --> 0:17:40.600 of customers buying things. Amazon can be a big employer 0:17:40.640 --> 0:17:42.639 if you are in an area that has one of 0:17:42.680 --> 0:17:45.359 the warehouses. I grew up in Indiana, close to an 0:17:45.359 --> 0:17:48.000 inter state. When I go home, there's all kinds of 0:17:48.040 --> 0:17:51.320 warehouses in place now or being built. They tend to 0:17:51.359 --> 0:17:55.000 pay above the local wage, but then they have a 0:17:55.040 --> 0:17:58.959 lot of bargaining power over the workers, and and that 0:17:59.040 --> 0:18:02.520 can lead to real problems, not just in terms of wages, 0:18:02.560 --> 0:18:06.000 but working conditions. Right Like, we know from a lot 0:18:06.040 --> 0:18:08.960 of people that have worked in these plans or these warehouses, 0:18:09.240 --> 0:18:12.480 it's not an easy job. And John, you wonder if 0:18:12.520 --> 0:18:15.719 this is the new form of unionization almost the dominance 0:18:15.760 --> 0:18:18.879 of these companies setting the marginal wage. Let's build on 0:18:18.920 --> 0:18:21.159 some of this time, the contribution of Card and Kruger 0:18:21.240 --> 0:18:24.080 to the real world, the real economy for good, Claudia, 0:18:24.080 --> 0:18:26.920 a quote of yours. I want economic policy to be good, 0:18:27.359 --> 0:18:29.880 like economists to do good in the world. Larry, you're 0:18:29.920 --> 0:18:32.439 referring to Larry Summers. Here is something of it. I 0:18:32.480 --> 0:18:34.520 don't now. I see him as a roadblock to achieving 0:18:34.560 --> 0:18:37.000 that girl that was in an interview with Political magazine. 0:18:37.480 --> 0:18:40.960 Why do you think that, Claudia, Right, Well, this is 0:18:41.000 --> 0:18:44.639 this really is not about Larry. It's it's about the 0:18:44.720 --> 0:18:48.760 change that needs to happen. In economics. I think if 0:18:49.880 --> 0:18:54.159 of a generation of economists, particular in macroeconomics, there is 0:18:54.200 --> 0:18:57.320 a I have a mental model. I have a way 0:18:57.320 --> 0:19:00.119 the world should work, and I'm going to keep going 0:19:00.240 --> 0:19:03.480 back to it. Larry did an interview with Noah Smith, 0:19:03.560 --> 0:19:06.240 and he was really clear, I don't have a model. 0:19:06.320 --> 0:19:09.199 He has an intuition and that comes from years of 0:19:09.280 --> 0:19:15.080 experience watching the economy. But the real contribution of the 0:19:15.119 --> 0:19:18.240 Nobel Prize winners today is to say, let's step back, 0:19:18.359 --> 0:19:20.920 let's go get the data, let's look at the world, 0:19:21.520 --> 0:19:25.160 and not do introspection. It is too hard and can 0:19:25.280 --> 0:19:27.520 really lead to a stray if you're doing that from 0:19:27.560 --> 0:19:32.640 the Ivory Towers in Cambridge, Massachusetts. So that's really and 0:19:32.800 --> 0:19:35.600 Larry just happens to be a flag bearer of the 0:19:35.680 --> 0:19:39.840 old guard. And I just particularly in this crisis, particularly 0:19:39.840 --> 0:19:43.640 in the way that different groups of people, marginalized workers, 0:19:43.640 --> 0:19:48.080 the ones who end up working at Amazon, they need 0:19:48.160 --> 0:19:50.159 economists to be out in the world looking at the 0:19:50.240 --> 0:19:54.520 data and not sitting back and using past experience, using 0:19:54.800 --> 0:19:59.240 intuition to make decisions. So that that's what that concerned 0:19:59.320 --> 0:20:01.800 that I'm raising is about what your advice. Clodia then 0:20:01.840 --> 0:20:04.760 to a students of economics right now who are just 0:20:04.760 --> 0:20:07.680 starting gout and be much bigger question I think for 0:20:07.800 --> 0:20:10.040 policy Mike, is that the Federals who have been conditioned 0:20:10.040 --> 0:20:14.840 by everything you just said. Mm hmm. Yeah. So economics 0:20:14.920 --> 0:20:17.760 is all around us, right, It's not just listening to 0:20:17.800 --> 0:20:19.880 what the Fed is gonna do, what the markets are doing. 0:20:20.200 --> 0:20:22.719 A really big debate that's happening right now that is 0:20:22.800 --> 0:20:28.280 absolutely using the tools of the prize winners today are 0:20:28.560 --> 0:20:31.879 the debates about what is causing the labor shortage. How 0:20:31.960 --> 0:20:36.800 important was unemployment insurance in that holding back of workers. 0:20:37.080 --> 0:20:39.760 There's a lot of debate on Friday about not seeing 0:20:39.760 --> 0:20:43.160 big numbers now that it are in early September, those 0:20:43.200 --> 0:20:47.359 benefits expired and they're absolutely using those methods because we 0:20:47.400 --> 0:20:51.200 saw different states roll off their benefits at different points 0:20:51.200 --> 0:20:54.200 this summer. So these tools, they've been refined since they've 0:20:54.240 --> 0:20:58.480 been developed. But like, but economists are out there trying 0:20:58.520 --> 0:21:02.680 to answer the questions, the questions about people about labor markets. 0:21:03.200 --> 0:21:06.320 The policymakers need to know so that they can make 0:21:06.440 --> 0:21:09.440 big decisions. Well, let's talk about the questions in the 0:21:09.520 --> 0:21:13.320 labor market. Participation has remained stubbornly low. We saw more 0:21:13.359 --> 0:21:16.880 evidence of that on Friday. Is that again transitory as 0:21:16.920 --> 0:21:19.320 we talk about so many of the shortages out there 0:21:19.359 --> 0:21:23.840 are or is that something structural? Well I said throughout 0:21:23.880 --> 0:21:27.760 this COVID is the enemy of everything that is happening 0:21:27.760 --> 0:21:30.320 in our world, and it is absolutely the case in 0:21:30.400 --> 0:21:34.120 labor markets. Now it's not the only factor, I think 0:21:34.119 --> 0:21:36.199 in the labor markets, and we actually see this a 0:21:36.240 --> 0:21:40.520 lot of places. What whatever problems we were living with 0:21:40.640 --> 0:21:45.600 before COVID, those became so much worse. Right, if you 0:21:45.640 --> 0:21:48.560 think about before COVID, there were a lot of parents 0:21:48.600 --> 0:21:53.400 that struggled to get childcare. It was often extremely unaffordable 0:21:53.480 --> 0:21:56.679 in areas of the country like where I live outside 0:21:56.720 --> 0:22:01.359 of Washington, d C. And then we have COVID and 0:22:01.840 --> 0:22:05.280 it becomes harder, it's less reliable, and our parents are 0:22:05.320 --> 0:22:08.440 concerned about it not being safe, and so that decision 0:22:08.480 --> 0:22:10.600 that was always hard. Do you have like the one 0:22:10.680 --> 0:22:13.520 wage earner off of the mother who would make less wages, 0:22:13.560 --> 0:22:15.480 do you have her stay at home or do she 0:22:15.560 --> 0:22:18.520 go back to work? Right like, that got so much worse, 0:22:18.600 --> 0:22:21.440 and we saw a lot of parents drop out of 0:22:21.480 --> 0:22:24.480 the labor force early on, and one of the disappointments 0:22:24.520 --> 0:22:28.760 on Friday was it's fall. Schools are reopening. It's a 0:22:28.760 --> 0:22:31.359 little rocky because people kids get sent home if a 0:22:31.400 --> 0:22:36.119 COVID exposure. Women didn't come back last month. September were 0:22:36.160 --> 0:22:38.880 supposed to be one of the big ones. So that's 0:22:38.920 --> 0:22:42.160 just one example, Claudia, is what you're saying helping make 0:22:42.240 --> 0:22:44.560 the case for some of the social policies on the 0:22:44.560 --> 0:22:47.000 table in terms of longer term economic spending in Congress. 0:22:47.080 --> 0:22:50.640 Childclaire is included in that right. So, I think we're 0:22:50.680 --> 0:22:53.439 at the point now where we we have seen this 0:22:53.480 --> 0:22:56.760 in so many places, the structural problems the labor market 0:22:56.800 --> 0:22:59.320 in general, low wage workers had a lot of problems 0:22:59.560 --> 0:23:02.680 in terms of what they were able to bargain for before, 0:23:03.240 --> 0:23:08.399 so let's fix those. This crisis has amplified and made 0:23:08.400 --> 0:23:12.080 it so obvious that the inequalities, the inequities and our 0:23:12.119 --> 0:23:16.680 economy are they're holding us all back. Now. Congress has 0:23:16.760 --> 0:23:21.320 not done big future looking long term investments in the 0:23:21.400 --> 0:23:26.280 country for a long time, and frankly, it is absolutely 0:23:26.480 --> 0:23:29.520 frustrating to see the whole debate about how many trillion 0:23:29.560 --> 0:23:33.160 dollars we have a lot to do in this country 0:23:33.440 --> 0:23:36.639 and sadly, I think Congress doesn't have a lot of 0:23:36.640 --> 0:23:41.080 crap practice recently and getting it done. Claudia, we've gotta 0:23:41.119 --> 0:23:42.760 leave it that we appreciate your time this morning. We're 0:23:42.760 --> 0:23:44.520 ready to thank you very much for being with this, 0:23:44.600 --> 0:23:47.720 Clodia Sanda of the Family Institute, and a whole wealth 0:23:47.720 --> 0:23:50.080 of experience, Tom Back of the Federal Serve as well 0:23:56.240 --> 0:23:58.440 on the COVID On the vaccine, I don't know where 0:23:58.440 --> 0:24:00.800 I said things are getting better, but where I sait 0:24:00.920 --> 0:24:03.199 maybe isn't the rest of America or the rest of 0:24:03.200 --> 0:24:06.600 the world. It is a world of vaccine protest, whether 0:24:06.640 --> 0:24:11.400 in Rome this weekend and thousands of Melbourne, Australia again 0:24:12.000 --> 0:24:15.320 and others around the world, and the oddity in America 0:24:15.359 --> 0:24:20.199 of possible vaccine protests by businesses and by their employees. 0:24:20.280 --> 0:24:25.360 Joshua Scharstein joins them. JOHNS. Hopkins, Bloomberg School of Public Health. Joshua, 0:24:25.359 --> 0:24:31.480 are you surprised by vaccine protest? I'm not not surprised, 0:24:31.480 --> 0:24:34.760 given just how polarized the whole pandemic has been over 0:24:34.800 --> 0:24:37.920