1 00:00:02,480 --> 00:00:15,880 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. 2 00:00:18,079 --> 00:00:20,960 Speaker 2: Hello and welcome to another episode of the All Thoughts Podcast. 3 00:00:21,040 --> 00:00:22,400 Speaker 2: I'm Tracy Alloway. 4 00:00:22,120 --> 00:00:23,799 Speaker 3: And I'm Joe. Why isn't thal Joe. 5 00:00:23,800 --> 00:00:27,040 Speaker 2: We're still at Jackson Hole. Yes, by the time this 6 00:00:27,120 --> 00:00:30,640 Speaker 2: episode comes out, the dust will have settled. That's the 7 00:00:30,760 --> 00:00:34,320 Speaker 2: entire event, and we will have gotten well. We already 8 00:00:34,320 --> 00:00:37,880 Speaker 2: had the speech from FED chair Jerome pow Right, and 9 00:00:38,240 --> 00:00:43,280 Speaker 2: this afternoon as we're recording, we're seeing market surging. Everyone, 10 00:00:43,600 --> 00:00:46,280 Speaker 2: it seems, has interpreted this as pretty dubbish. 11 00:00:46,360 --> 00:00:49,440 Speaker 3: Yeah, that's right, and along a Bloomberg had an interesting 12 00:00:49,479 --> 00:00:52,280 Speaker 3: piece if it wasn't as dubvish as people think, but 13 00:00:53,120 --> 00:00:56,880 Speaker 3: it felt duvish in the context of, you know, a 14 00:00:57,000 --> 00:00:59,920 Speaker 3: recent chat with us in Goolsby. Recent he was concerned 15 00:01:00,080 --> 00:01:02,320 Speaker 3: about he's starting to look at that inflation date a 16 00:01:02,360 --> 00:01:04,880 Speaker 3: little bit more fell division the context of our recent 17 00:01:04,920 --> 00:01:07,880 Speaker 3: episode with Kansas City Fed President Jeffrey Schmid, he too 18 00:01:08,040 --> 00:01:11,000 Speaker 3: was talking about, how, you know, things are maybe still 19 00:01:11,040 --> 00:01:12,560 Speaker 3: looking a little warmon could. 20 00:01:12,360 --> 00:01:14,480 Speaker 2: Be talking about if you look at the Taylor rule, 21 00:01:14,640 --> 00:01:16,480 Speaker 2: you know, you could argue maybe rates should be a 22 00:01:16,520 --> 00:01:17,080 Speaker 2: little higher. 23 00:01:17,120 --> 00:01:20,520 Speaker 3: Anyway, I think we should continue on our survey of 24 00:01:20,560 --> 00:01:22,240 Speaker 3: as many FED presidents as we can. 25 00:01:22,360 --> 00:01:24,760 Speaker 2: All right, well, we do have the perfect guests. On 26 00:01:24,800 --> 00:01:27,640 Speaker 2: that note, a friend of the pod, Richmond FED President 27 00:01:27,720 --> 00:01:29,800 Speaker 2: Tom Barkin. Welcome back. It's good to see you. 28 00:01:29,880 --> 00:01:30,960 Speaker 4: Yeah, good to see you guys too. 29 00:01:31,200 --> 00:01:33,399 Speaker 2: Thanks so much for doing this, taking time out of 30 00:01:33,400 --> 00:01:37,399 Speaker 2: your you know, hiking and conferencing schedule, so we appreciate it. 31 00:01:37,880 --> 00:01:40,800 Speaker 2: Why don't we just start with the obvious question, which 32 00:01:40,880 --> 00:01:44,480 Speaker 2: is I guess you talked earlier this week that the 33 00:01:44,600 --> 00:01:49,200 Speaker 2: balance between employment risks and inflation risks is really unclear 34 00:01:49,240 --> 00:01:52,559 Speaker 2: at the moment. Pal seemed to air on the side 35 00:01:52,560 --> 00:01:55,240 Speaker 2: of the labor market, right, he kind of chose to 36 00:01:55,280 --> 00:01:57,880 Speaker 2: prioritize that. Do you think that's the right move? 37 00:01:58,920 --> 00:02:02,240 Speaker 4: Well, as you said, I've been saying, I'm confused about everything. 38 00:02:02,240 --> 00:02:05,960 Speaker 4: I'm confused about labor market and the inflation side, and 39 00:02:06,000 --> 00:02:07,920 Speaker 4: I think there's lots of people who come up with 40 00:02:07,960 --> 00:02:11,120 Speaker 4: different views of how to weigh the risks. Here's the 41 00:02:11,120 --> 00:02:14,880 Speaker 4: interesting thing. We've been hearing from businesses for a year 42 00:02:14,880 --> 00:02:16,800 Speaker 4: and a half that they haven't been hiring. We've been 43 00:02:16,800 --> 00:02:19,440 Speaker 4: seeing in the number that they haven't been hiring. They 44 00:02:19,440 --> 00:02:22,119 Speaker 4: also haven't been laying people off. And when we get 45 00:02:22,120 --> 00:02:24,480 Speaker 4: into the job's numbers that kept coming in at one 46 00:02:24,520 --> 00:02:26,239 Speaker 4: hundred and thirty thousand a month or one hundred and 47 00:02:26,240 --> 00:02:29,200 Speaker 4: twenty thousand a month, that seems strange, but it was 48 00:02:29,200 --> 00:02:30,919 Speaker 4: good news. I mean, there's nothing wrong with a lot 49 00:02:30,919 --> 00:02:33,359 Speaker 4: of jobs. And so what we saw last month was 50 00:02:33,400 --> 00:02:36,079 Speaker 4: a different jobs report with a job's revision that now 51 00:02:36,120 --> 00:02:38,240 Speaker 4: sort of says, hey, we're growing at thirty five thousand 52 00:02:38,320 --> 00:02:41,320 Speaker 4: jobs a month. That actually makes a little more intuitive 53 00:02:41,360 --> 00:02:43,760 Speaker 4: sense to me given what I'm hearing in the marketplace. 54 00:02:43,800 --> 00:02:46,720 Speaker 4: If you're not hiring, then where the new hires coming from. 55 00:02:47,280 --> 00:02:49,800 Speaker 4: And by the way, we'll get a revision a QCW 56 00:02:49,919 --> 00:02:52,280 Speaker 4: in September that probably will take those numbers down again. 57 00:02:52,360 --> 00:02:54,680 Speaker 4: And so if you're dealing with one hundred and thirty 58 00:02:54,680 --> 00:02:58,440 Speaker 4: thousand job market, that's a very different level of confidence 59 00:02:58,680 --> 00:03:01,000 Speaker 4: than if you're dealing with a thirty five thousand or 60 00:03:01,040 --> 00:03:03,480 Speaker 4: even maybe even a zero job growth market. And I 61 00:03:03,480 --> 00:03:06,920 Speaker 4: think that's where the concern comes from. What holds you 62 00:03:06,960 --> 00:03:09,440 Speaker 4: back from being overly concerned is the unemployment rate, which 63 00:03:09,480 --> 00:03:13,120 Speaker 4: still is at four point two percent, perfectly really good 64 00:03:13,200 --> 00:03:16,000 Speaker 4: unemployment rate. You know, at any time in any cycle, 65 00:03:16,040 --> 00:03:18,840 Speaker 4: and so you know, how much how lucky do you feel, 66 00:03:18,880 --> 00:03:20,640 Speaker 4: Deale feel? Did you feel in the jobs growth? How 67 00:03:20,680 --> 00:03:22,560 Speaker 4: much do you feel in the unemployment rate? The gap 68 00:03:22,600 --> 00:03:25,400 Speaker 4: between the two obviously is driven by we're not having 69 00:03:25,480 --> 00:03:27,440 Speaker 4: net migration, you know, into the country the way that 70 00:03:27,480 --> 00:03:30,360 Speaker 4: we used to. You could call that two million a year. 71 00:03:30,840 --> 00:03:33,840 Speaker 4: My generation, the baby boomer baby boomers are aging out 72 00:03:33,840 --> 00:03:35,960 Speaker 4: of the workforce. I'm not aging, nor am I out 73 00:03:35,960 --> 00:03:39,360 Speaker 4: of the workforce, but my generation is. And that's maybe 74 00:03:39,360 --> 00:03:42,600 Speaker 4: a million three people sixty five and older increase out 75 00:03:42,640 --> 00:03:44,600 Speaker 4: of the workforce over the last three years per year. 76 00:03:45,080 --> 00:03:47,440 Speaker 4: And then you know, this temporary protected status thing takes 77 00:03:47,440 --> 00:03:49,680 Speaker 4: some more people out of the workforce. And so it's 78 00:03:49,800 --> 00:03:52,640 Speaker 4: possible that you know, we're seeing your job growth and 79 00:03:52,680 --> 00:03:55,760 Speaker 4: that's going to keep the unemployment rate steady. But you know, 80 00:03:56,560 --> 00:03:59,160 Speaker 4: there's nothing wrong with being nervous about that. I think 81 00:03:59,240 --> 00:04:01,160 Speaker 4: you also have to be us on the inflation side, 82 00:04:01,240 --> 00:04:04,080 Speaker 4: and we weren't at two percent before all the tariff talk. 83 00:04:04,200 --> 00:04:07,160 Speaker 4: All the tariff stuff's coming in. It's not hitting inflation 84 00:04:07,240 --> 00:04:09,960 Speaker 4: nearly as much as some people thought, but people are 85 00:04:09,960 --> 00:04:11,920 Speaker 4: still passing it on. You would have seen Walmart's earning 86 00:04:11,960 --> 00:04:14,160 Speaker 4: support yesterday where they talked about it, or home Depot 87 00:04:14,280 --> 00:04:16,080 Speaker 4: or you know, people are talking about No. 88 00:04:16,160 --> 00:04:17,640 Speaker 2: Walmart basically said it's coming. 89 00:04:17,920 --> 00:04:21,360 Speaker 4: It's coming now. It doesn't have to be as severe 90 00:04:21,400 --> 00:04:23,160 Speaker 4: as you know people like to think. And we can 91 00:04:23,160 --> 00:04:25,279 Speaker 4: talk about that if you want, but it's coming. So 92 00:04:26,320 --> 00:04:28,119 Speaker 4: I like to say my tearo policy is really easy. 93 00:04:28,160 --> 00:04:31,159 Speaker 4: Three quarters of the time. You know, when inflation's high 94 00:04:31,160 --> 00:04:34,039 Speaker 4: and unemployment's low, raise rates, and when you have the 95 00:04:34,040 --> 00:04:37,880 Speaker 4: opposite situation, lower rates. And you know, if inflation's low 96 00:04:37,920 --> 00:04:39,800 Speaker 4: and unemployment's slow, you can spend a few more days 97 00:04:39,800 --> 00:04:42,640 Speaker 4: at Jackson Hole. But if you're going to have risk 98 00:04:42,720 --> 00:04:44,360 Speaker 4: on the inflation side and risk on the employment side, 99 00:04:44,360 --> 00:04:45,080 Speaker 4: that's what it gets hard. 100 00:04:45,880 --> 00:04:49,839 Speaker 3: Talk to us about your interpretation of Powell speech, because 101 00:04:49,880 --> 00:04:52,440 Speaker 3: it does seem like actually there is no consensus on 102 00:04:52,960 --> 00:04:55,880 Speaker 3: how quote Dovish it was the market surged. But when 103 00:04:55,880 --> 00:04:57,080 Speaker 3: you heard it or when you read it, I don't 104 00:04:57,120 --> 00:04:59,000 Speaker 3: know when you saw it. Whenever you when it, maybe 105 00:04:59,040 --> 00:05:01,560 Speaker 3: do you get in advance, so you were you read 106 00:05:01,560 --> 00:05:03,560 Speaker 3: it at the same time as we did, Like what 107 00:05:03,600 --> 00:05:04,400 Speaker 3: was your read on it? 108 00:05:05,160 --> 00:05:07,599 Speaker 4: So I think you guys are all incredibly talented and 109 00:05:07,680 --> 00:05:10,360 Speaker 4: much more talent than I am, but at interpreting speeches, 110 00:05:10,920 --> 00:05:12,000 Speaker 4: so uh. 111 00:05:12,960 --> 00:05:15,440 Speaker 2: Believe it or not. 112 00:05:15,560 --> 00:05:18,080 Speaker 4: I actually gave a speech last week and one of 113 00:05:18,120 --> 00:05:21,240 Speaker 4: the FED commentators went through my last paragraph and compared 114 00:05:21,279 --> 00:05:23,880 Speaker 4: it to my last paragraph before and said, see, Barkin 115 00:05:23,960 --> 00:05:26,080 Speaker 4: has changed in these days. And I'm like, huh, that 116 00:05:26,160 --> 00:05:28,160 Speaker 4: was really well done. I you know, I was even 117 00:05:28,160 --> 00:05:29,680 Speaker 4: sophistical commentator. 118 00:05:29,320 --> 00:05:31,760 Speaker 3: Was correct in the way that you actually yourself hadn't 119 00:05:31,760 --> 00:05:32,839 Speaker 3: thought about. 120 00:05:33,240 --> 00:05:37,200 Speaker 4: So so when you guys read these speeches, I mean, 121 00:05:37,760 --> 00:05:40,400 Speaker 4: the commas matter, the sentences matter. 122 00:05:40,760 --> 00:05:43,000 Speaker 3: That's really our call for what it's worth. That's our colleagues, 123 00:05:43,279 --> 00:05:44,760 Speaker 3: y commas. But let's give it. 124 00:05:44,839 --> 00:05:47,120 Speaker 4: Let's hear you and I And I'm sure Jay is 125 00:05:47,200 --> 00:05:49,040 Speaker 4: very sophisticated in his team, so I'm sure they're also 126 00:05:49,040 --> 00:05:51,280 Speaker 4: thinking about this. So I'm not saying people get real accidents. 127 00:05:51,320 --> 00:05:52,840 Speaker 4: But when I read it, and when I heard it, 128 00:05:52,839 --> 00:05:54,240 Speaker 4: I actually heard it live for the first time, so 129 00:05:54,240 --> 00:05:56,360 Speaker 4: I didn't read it before it came out. It seemed 130 00:05:56,400 --> 00:05:58,480 Speaker 4: like a perfectly down the middle speech to me. If 131 00:05:58,520 --> 00:06:00,040 Speaker 4: you had asked me what the markets would have and 132 00:06:00,720 --> 00:06:02,600 Speaker 4: I guess I would have imagined that they'd read it 133 00:06:02,600 --> 00:06:04,880 Speaker 4: as modestly dubbish. It seems like I read it as 134 00:06:04,960 --> 00:06:07,400 Speaker 4: more dubbish than I heard it. But what do I know. 135 00:06:07,480 --> 00:06:09,800 Speaker 4: I mean, I'm just listened to the speech like everybody else. 136 00:06:10,240 --> 00:06:12,640 Speaker 2: Well, I mean this kind of begs the question. But 137 00:06:13,160 --> 00:06:15,799 Speaker 2: how could easily have just said, you know, we're data 138 00:06:15,839 --> 00:06:19,000 Speaker 2: dependent and we're going to wait for the next CPI number, 139 00:06:19,040 --> 00:06:23,200 Speaker 2: the next payrolls number. Instead he chose to really emphasize 140 00:06:23,240 --> 00:06:27,800 Speaker 2: the labor side of the dual mandate. Why why is that? 141 00:06:27,839 --> 00:06:29,440 Speaker 4: I mean you'd have to ask, you know, when he 142 00:06:29,480 --> 00:06:30,080 Speaker 4: comes on the show. 143 00:06:30,279 --> 00:06:32,280 Speaker 2: Ye, I know you'll have a lot of questions, tell 144 00:06:32,360 --> 00:06:33,480 Speaker 2: him he should come on the show. 145 00:06:33,760 --> 00:06:35,920 Speaker 4: I will say one thing that's odd about Jackson Hole 146 00:06:35,960 --> 00:06:37,919 Speaker 4: every year is it's the period worry of the longest 147 00:06:37,920 --> 00:06:40,839 Speaker 4: break between meeting right right and this time, not only 148 00:06:40,839 --> 00:06:43,159 Speaker 4: do we have a long break between meetings, but you know, 149 00:06:43,200 --> 00:06:45,320 Speaker 4: the day after or two days after his press conference, 150 00:06:45,360 --> 00:06:47,479 Speaker 4: we got these big revisions on the job report. So 151 00:06:48,040 --> 00:06:50,719 Speaker 4: I don't know, maybe you could imagine there was a 152 00:06:51,000 --> 00:06:53,560 Speaker 4: trying to mark to market the from the press conference 153 00:06:53,600 --> 00:06:55,720 Speaker 4: to hear I don't know. I mean, it's a he 154 00:06:55,760 --> 00:06:56,440 Speaker 4: knows what he does. 155 00:06:56,720 --> 00:06:59,400 Speaker 3: Something that came up in our conversation with Jeff Schmid 156 00:06:59,560 --> 00:07:01,920 Speaker 3: was they said that, and I'm curious how there's sort 157 00:07:01,920 --> 00:07:06,560 Speaker 3: of jobs with what you've been hearing from businesses. You know, 158 00:07:06,600 --> 00:07:08,800 Speaker 3: when we talked to Mary Daily and Alaska a few 159 00:07:08,839 --> 00:07:11,440 Speaker 3: weeks ago, she said, you know, the revisions made sense 160 00:07:11,480 --> 00:07:14,480 Speaker 3: to me. Actually, look what you're saying, because actually this 161 00:07:14,760 --> 00:07:17,960 Speaker 3: is fitting with the anecdotal commentary that I've been hearing, 162 00:07:18,360 --> 00:07:22,920 Speaker 3: and intuitively, right post Liberation Day, lots of anxiety, uncertainty, 163 00:07:23,000 --> 00:07:26,960 Speaker 3: it makes sense there'd be a hiring slowdown. However, something 164 00:07:27,000 --> 00:07:30,760 Speaker 3: that Casey Fed President Schmid said was, yes, it fits, 165 00:07:30,800 --> 00:07:34,240 Speaker 3: but well, the uncertainty is easing now. Tariffs are not 166 00:07:34,320 --> 00:07:36,600 Speaker 3: as uncertain as they were in the middle of April 167 00:07:36,600 --> 00:07:39,360 Speaker 3: by any stretch. Even though there's new headlines almost every day. 168 00:07:39,440 --> 00:07:42,120 Speaker 3: There's nowhere near as much uncertainty. And then maybe that 169 00:07:42,280 --> 00:07:45,240 Speaker 3: was the cycle low for the year, that sort of 170 00:07:45,280 --> 00:07:47,920 Speaker 3: April May June July period. Does that seem plausible to 171 00:07:47,960 --> 00:07:49,920 Speaker 3: you based on what you're seeing out there. 172 00:07:51,080 --> 00:07:53,640 Speaker 4: Yeah, So I've been describing that as driving in the fog, 173 00:07:54,440 --> 00:07:56,560 Speaker 4: and you know, I've been saying that when you're driving 174 00:07:56,560 --> 00:07:57,920 Speaker 4: in the fog, it's hard to put your foot on 175 00:07:57,960 --> 00:07:59,640 Speaker 4: the breath on the gas because you don't know what's 176 00:07:59,680 --> 00:08:01,920 Speaker 4: around the next curve. And you don't want to put 177 00:08:01,920 --> 00:08:04,200 Speaker 4: your foot in the brakes either because you don't know 178 00:08:04,280 --> 00:08:05,920 Speaker 4: what someone behind you is going to run into you, 179 00:08:06,240 --> 00:08:08,240 Speaker 4: so you pull over and put on the hazards. That's 180 00:08:08,240 --> 00:08:10,840 Speaker 4: a money analogy I've been using for a few months. 181 00:08:11,160 --> 00:08:12,960 Speaker 4: But but what I've been saying, you know, the last 182 00:08:13,360 --> 00:08:16,360 Speaker 4: month is I think the fog is lifting, and I 183 00:08:16,440 --> 00:08:18,560 Speaker 4: do think we've got you know what's happening on the 184 00:08:18,600 --> 00:08:21,240 Speaker 4: immigration side, you know what's happening on the deregulation side, 185 00:08:21,400 --> 00:08:24,040 Speaker 4: different sectors in different you have different points of view 186 00:08:24,040 --> 00:08:25,640 Speaker 4: on that. We have a tax bill, so you know 187 00:08:25,680 --> 00:08:28,360 Speaker 4: what that looks like, and people have a you know 188 00:08:28,360 --> 00:08:30,360 Speaker 4: at least what the boundaries look like on tarifts. Now. 189 00:08:30,360 --> 00:08:33,200 Speaker 4: I don't think they're ever going to be once set 190 00:08:33,280 --> 00:08:35,000 Speaker 4: done and will know the rules for forever. I think 191 00:08:35,000 --> 00:08:37,920 Speaker 4: it's a tool that is going to surface again and again. 192 00:08:38,000 --> 00:08:39,800 Speaker 4: But I think people sort of know what that is. 193 00:08:39,840 --> 00:08:42,160 Speaker 4: And so when I'm talking to businesses, it feels like 194 00:08:42,800 --> 00:08:45,120 Speaker 4: it's shifting now that you know, I'm going to now 195 00:08:45,120 --> 00:08:48,000 Speaker 4: torture the analogy because they think the road's bumpy, right, 196 00:08:48,040 --> 00:08:50,600 Speaker 4: and so I still hear a lot of not hiring, 197 00:08:50,679 --> 00:08:53,560 Speaker 4: not firing. I'm going to, you know, be a little 198 00:08:53,600 --> 00:08:55,640 Speaker 4: cautious with my costs. I'm going to do it through attrition, 199 00:08:55,800 --> 00:08:58,520 Speaker 4: not through layoffs. I still hear that. I've heard a 200 00:08:58,559 --> 00:09:02,440 Speaker 4: few stories of leaning into investing, particularly supported by some 201 00:09:02,480 --> 00:09:04,640 Speaker 4: of the depreciation stuff. You know, I've been waiting for 202 00:09:04,679 --> 00:09:07,240 Speaker 4: this tax heading to pass. That have sertainty, but I 203 00:09:07,240 --> 00:09:10,720 Speaker 4: wouldn't say not at scale, you know, modest amounts of it. 204 00:09:11,120 --> 00:09:13,400 Speaker 4: The one place where you might be seeing this sentiment 205 00:09:13,640 --> 00:09:16,960 Speaker 4: change is on the consumer side, and I've been hearing 206 00:09:17,240 --> 00:09:19,520 Speaker 4: from the retailers I'm talking to and from the manufacturers 207 00:09:19,520 --> 00:09:22,800 Speaker 4: I've talked to, of a lift in consumer spending starting 208 00:09:22,800 --> 00:09:25,599 Speaker 4: in you know, end of June into July. If you 209 00:09:25,600 --> 00:09:27,600 Speaker 4: look at the credit card data, you'll see a big 210 00:09:27,600 --> 00:09:30,360 Speaker 4: increase in July, which is continued the first two weeks 211 00:09:30,840 --> 00:09:33,280 Speaker 4: of August. It would make sense that a bunch of 212 00:09:33,320 --> 00:09:36,520 Speaker 4: consumers who by the way, still have jobs, real wages 213 00:09:36,559 --> 00:09:39,160 Speaker 4: are still up as inflation comes down, and the markets 214 00:09:39,160 --> 00:09:42,959 Speaker 4: are obviously healthy, both asset valuations and houses or stock 215 00:09:43,000 --> 00:09:45,520 Speaker 4: market all very healthy, that they might have taken a 216 00:09:45,559 --> 00:09:48,360 Speaker 4: step back in the context of all the news in 217 00:09:48,559 --> 00:09:51,160 Speaker 4: April and May, and maybe now they're coming back in 218 00:09:51,280 --> 00:09:54,199 Speaker 4: so that that's the one place I'm starting to see. 219 00:09:54,400 --> 00:09:56,800 Speaker 4: I'm moving. I'm very attentive. You know, we'll get the 220 00:09:56,800 --> 00:09:59,079 Speaker 4: PC next week, very temped to what we're seeing. But 221 00:09:59,440 --> 00:10:02,280 Speaker 4: you could imagine, you know, temporary air pocket is consumers 222 00:10:02,320 --> 00:10:04,680 Speaker 4: sort of pulled back, worried, and you see this in 223 00:10:04,679 --> 00:10:07,440 Speaker 4: the consumer sentiment data, that inflation was going to hit 224 00:10:07,600 --> 00:10:09,760 Speaker 4: huge numbers and all of a sudden, you know, people 225 00:10:09,760 --> 00:10:11,120 Speaker 4: are going to be unemployed and they were going to 226 00:10:11,120 --> 00:10:13,280 Speaker 4: have issues. Now they're not seeing it. It's possible. 227 00:10:13,679 --> 00:10:15,440 Speaker 2: Do you think that we're maybe getting a bit of 228 00:10:15,480 --> 00:10:18,000 Speaker 2: a reacceleration in the economy at this point, because you 229 00:10:18,000 --> 00:10:20,440 Speaker 2: look at retail sales they were very strong, as you 230 00:10:20,480 --> 00:10:23,320 Speaker 2: point out, You look at the city Economic Surprise Index 231 00:10:23,360 --> 00:10:26,040 Speaker 2: that's been ticking up, some of the regional surveys are 232 00:10:26,080 --> 00:10:28,520 Speaker 2: starting to improve a little bit. Do you see that 233 00:10:28,800 --> 00:10:30,160 Speaker 2: reacceleration impetus? 234 00:10:30,960 --> 00:10:32,720 Speaker 4: You know, it's possible. Like I said, I sort of 235 00:10:32,720 --> 00:10:34,640 Speaker 4: see the energy on the consumer side. We'll see how 236 00:10:34,640 --> 00:10:36,280 Speaker 4: long it lasts, you know, I think you can call 237 00:10:36,320 --> 00:10:38,880 Speaker 4: a reacceleration when you get there. I definitely am not 238 00:10:39,000 --> 00:10:42,000 Speaker 4: talking to businesses who are talking about blowing out earnings. 239 00:10:42,720 --> 00:10:45,320 Speaker 4: I don't. I don't hear one of those kind of accelerations. 240 00:10:45,320 --> 00:10:48,720 Speaker 4: So I don't hear frothiness yet. But I am hearing 241 00:10:48,760 --> 00:10:51,560 Speaker 4: some very positive vibes on the consumer spending side, which 242 00:10:51,559 --> 00:10:52,320 Speaker 4: I'm pleased to hear. 243 00:10:52,960 --> 00:10:56,720 Speaker 3: If inflation is warm, and maybe if there's upside risks 244 00:10:56,720 --> 00:10:59,960 Speaker 3: still to inflation, why could there be more to it 245 00:11:00,080 --> 00:11:02,800 Speaker 3: than just yeah, terriff, sorry, maybe, but like, could there 246 00:11:02,800 --> 00:11:06,680 Speaker 3: be something more going on? And perhaps that consumer strength 247 00:11:07,320 --> 00:11:10,640 Speaker 3: pretty large deficit still even with the revenue that's coming 248 00:11:10,679 --> 00:11:14,360 Speaker 3: in from tariffs. Maybe someone like the it's been I 249 00:11:14,400 --> 00:11:16,240 Speaker 3: don't know, what do you think is the story on inflation? 250 00:11:16,280 --> 00:11:18,040 Speaker 3: How much is tariffs and how much is other stuff? 251 00:11:18,480 --> 00:11:20,520 Speaker 4: Well, so I just think it takes a long time 252 00:11:20,520 --> 00:11:22,480 Speaker 4: to get inflation back to two percent. If you go 253 00:11:22,520 --> 00:11:24,400 Speaker 4: back and look at the Vulgar years, and of course 254 00:11:24,880 --> 00:11:27,160 Speaker 4: he did stuff to the economy that was much more 255 00:11:27,160 --> 00:11:29,480 Speaker 4: aggressive than what we did, and he of course he 256 00:11:29,480 --> 00:11:31,839 Speaker 4: had inflation that was much more ingrained and didn't have 257 00:11:31,880 --> 00:11:34,160 Speaker 4: an inflation target, but he took rates up a lot 258 00:11:34,320 --> 00:11:36,160 Speaker 4: inflation came down a lot, but it didn't get to 259 00:11:36,200 --> 00:11:39,800 Speaker 4: two percent. It was four, oh yeah, And you know, 260 00:11:39,960 --> 00:11:42,120 Speaker 4: it sort of eked its way down from four to 261 00:11:42,160 --> 00:11:43,520 Speaker 4: three and a half to three to two. 262 00:11:43,440 --> 00:11:46,080 Speaker 3: And a half, and then throughout the eighties and nineties exactly. 263 00:11:45,720 --> 00:11:48,240 Speaker 4: For twenty years until it sort of hit two and 264 00:11:48,320 --> 00:11:50,920 Speaker 4: sort of starts sticking around too. So I give you 265 00:11:50,920 --> 00:11:54,160 Speaker 4: that just for perspective, and you know, again from my experience, 266 00:11:54,160 --> 00:11:56,840 Speaker 4: I'll tell you why that happens, which is people don't 267 00:11:56,880 --> 00:11:59,400 Speaker 4: just immediately go back to the old number. You've got 268 00:11:59,440 --> 00:12:02,280 Speaker 4: some amount of care to do wages and prices people 269 00:12:02,320 --> 00:12:05,640 Speaker 4: who didn't raise it. People's expectations, I think are very 270 00:12:05,640 --> 00:12:09,720 Speaker 4: significantly triggered by actual inflation. And so my old job, 271 00:12:09,760 --> 00:12:11,959 Speaker 4: we had to raise prices every year, and we sort 272 00:12:12,000 --> 00:12:13,600 Speaker 4: of thought about it, and a lot of times we 273 00:12:13,679 --> 00:12:16,319 Speaker 4: raise price based on last year's inflation, and so it 274 00:12:16,480 --> 00:12:18,960 Speaker 4: just there's some stickiness to it. And so what we've 275 00:12:18,960 --> 00:12:22,200 Speaker 4: seen is very encouraging on the inflation numbers. They've gone 276 00:12:22,240 --> 00:12:25,240 Speaker 4: from you know, seven at their peak down to you know, 277 00:12:25,280 --> 00:12:27,480 Speaker 4: somewhere in the high twos. Maybe it'll tick up to 278 00:12:27,640 --> 00:12:29,680 Speaker 4: the three now. And so I think that's one piece 279 00:12:29,679 --> 00:12:31,719 Speaker 4: of it. Actual just take it's sticky. It takes a while. 280 00:12:31,720 --> 00:12:33,520 Speaker 4: And then the second piece of it is, I do 281 00:12:33,559 --> 00:12:35,280 Speaker 4: think you've got this tariff concern in there, and that 282 00:12:35,640 --> 00:12:37,960 Speaker 4: people are passing on costs, and then people who don't 283 00:12:37,960 --> 00:12:40,480 Speaker 4: even have the costs are using this as a cover 284 00:12:40,559 --> 00:12:41,360 Speaker 4: to pass on costs. 285 00:12:41,360 --> 00:12:44,600 Speaker 3: So just real quickly. Then, if there's all these factors, 286 00:12:44,600 --> 00:12:47,720 Speaker 3: et cetera, why is there conversation about cutting rates, Or 287 00:12:47,760 --> 00:12:51,120 Speaker 3: if there is conversation about cutting rates, how seriously should 288 00:12:51,240 --> 00:12:54,400 Speaker 3: the should people be take those two percent commitment? 289 00:12:54,840 --> 00:12:58,120 Speaker 4: Well, so there's calibration going on. So you've got unemployment 290 00:12:58,160 --> 00:13:01,240 Speaker 4: that's low but maybe training. You've got inflation that's been 291 00:13:01,280 --> 00:13:04,079 Speaker 4: coming down and maybe ticked up but maybe for one 292 00:13:04,080 --> 00:13:07,320 Speaker 4: time reason. And you've got a neutral rate that is 293 00:13:07,480 --> 00:13:09,840 Speaker 4: by all accounts lower than where we are, but lots 294 00:13:09,840 --> 00:13:11,720 Speaker 4: of debate about is it just a little bit lower 295 00:13:11,800 --> 00:13:13,920 Speaker 4: or is it significantly lower? And so I think those 296 00:13:13,960 --> 00:13:16,240 Speaker 4: three things go together, and people just ask it, do 297 00:13:16,280 --> 00:13:19,040 Speaker 4: you recalibrate to a different number in the context of this, 298 00:13:19,280 --> 00:13:21,680 Speaker 4: or are we well positioned where we are? 299 00:13:22,040 --> 00:13:25,120 Speaker 2: This discussion actually reminds me, what's your story for why 300 00:13:25,160 --> 00:13:28,360 Speaker 2: inflation did come down in the post pandemic period. Is 301 00:13:28,360 --> 00:13:32,240 Speaker 2: it the sort of immaculate disinflation explanation where the supply 302 00:13:32,360 --> 00:13:36,840 Speaker 2: chain pressure has just started dissipating, or did the Fed's 303 00:13:36,960 --> 00:13:40,840 Speaker 2: actions actually have a kind of sledgehammer effect here. 304 00:13:41,320 --> 00:13:42,760 Speaker 4: I think it's in all of the above. I mean, 305 00:13:43,080 --> 00:13:46,240 Speaker 4: if the FED doesn't act when people expect us to act, 306 00:13:46,480 --> 00:13:49,000 Speaker 4: then I think that sort of unwinds expectations the way. 307 00:13:49,040 --> 00:13:51,760 Speaker 4: That's not very helpful. On the other hand, you can't 308 00:13:51,800 --> 00:13:54,400 Speaker 4: ignore that a lot of the supply constraints that we're 309 00:13:54,440 --> 00:13:58,360 Speaker 4: driving prices up, commodity prices, ships backed up in harbor's chips, 310 00:13:58,360 --> 00:14:02,400 Speaker 4: no in cars, people not at work. Those things also amilorated. 311 00:14:02,559 --> 00:14:06,199 Speaker 4: We also had a really big immigration number for about 312 00:14:06,240 --> 00:14:09,480 Speaker 4: two years. That meant, you know, the supply side jobs 313 00:14:09,480 --> 00:14:12,880 Speaker 4: got filled a lot faster. It definitely released the pressure 314 00:14:12,920 --> 00:14:15,760 Speaker 4: and a lot of things so supply help. Hopefully, the 315 00:14:15,760 --> 00:14:18,560 Speaker 4: FED did its part and the combination of things brought 316 00:14:18,600 --> 00:14:18,880 Speaker 4: it down. 317 00:14:34,680 --> 00:14:36,880 Speaker 3: When we were in Alaska, we learned that there is 318 00:14:36,920 --> 00:14:40,480 Speaker 3: a major furniture expo every year in your district in 319 00:14:40,520 --> 00:14:43,840 Speaker 3: North Carolina. Also North Carolina. It's like, I think if 320 00:14:43,880 --> 00:14:47,160 Speaker 3: people think of like regions that have lost from trade 321 00:14:47,440 --> 00:14:50,560 Speaker 3: or regions that got hit really hard by free trade. 322 00:14:50,920 --> 00:14:52,640 Speaker 3: I'm not even sure if it's true, but certainly that 323 00:14:52,800 --> 00:14:54,920 Speaker 3: is the perception. It's actually it's your district. 324 00:14:55,000 --> 00:14:57,560 Speaker 2: Well, this is one thing we learned by traveling with 325 00:14:57,640 --> 00:15:00,200 Speaker 2: Tom and going on some of his trips to talk 326 00:15:00,200 --> 00:15:03,040 Speaker 2: to local businesses. There is a sense that manufacturing in 327 00:15:03,040 --> 00:15:04,520 Speaker 2: North Carolina has been hollowed out. 328 00:15:05,040 --> 00:15:07,360 Speaker 3: Absolutely, it's a very short sense. But there's also cities 329 00:15:07,360 --> 00:15:09,120 Speaker 3: in North Carolina that are some of the most dynamic 330 00:15:09,320 --> 00:15:12,280 Speaker 3: in the entire country, especially over the last couple of decades. 331 00:15:12,440 --> 00:15:16,120 Speaker 3: But I'm just curious right now, like tariffs in your district, 332 00:15:16,360 --> 00:15:17,120 Speaker 3: what are you saying. 333 00:15:17,160 --> 00:15:21,480 Speaker 4: So, no question, Historically, the textile industries, the furniture industries 334 00:15:21,480 --> 00:15:23,960 Speaker 4: got hit very hard. If you look at the Carolinas though, 335 00:15:24,000 --> 00:15:25,800 Speaker 4: and you took it the last twenty five years, you'd 336 00:15:25,800 --> 00:15:28,760 Speaker 4: say there's also been a lot of foreign based manufacturers 337 00:15:28,760 --> 00:15:31,960 Speaker 4: that have put manufacturing sites. I'm thinking of Greenville, South Carolina, 338 00:15:32,040 --> 00:15:36,440 Speaker 4: Spartanburg where I was last week, where you've got BMW 339 00:15:36,480 --> 00:15:38,800 Speaker 4: and big auto manufacturers you know, and their whole supply 340 00:15:38,920 --> 00:15:42,000 Speaker 4: chains coming into town. You know what we hear, right 341 00:15:42,040 --> 00:15:45,320 Speaker 4: now is it's very different by sector you're in, and 342 00:15:45,320 --> 00:15:48,160 Speaker 4: it's very different by your position in that sector. So 343 00:15:48,560 --> 00:15:50,680 Speaker 4: there are a lot of people who manufacture in South 344 00:15:50,720 --> 00:15:53,400 Speaker 4: and South and North Carolina, but they source abroad and 345 00:15:53,440 --> 00:15:55,280 Speaker 4: they're very worried about their costs. Think of the big 346 00:15:55,320 --> 00:15:59,200 Speaker 4: auto manufacturers. There's a lot of people who manufacture in 347 00:15:59,200 --> 00:16:01,520 Speaker 4: North Carolina and they're one hundred percent American made, and 348 00:16:01,520 --> 00:16:03,200 Speaker 4: they think this is the greatest thing in the world 349 00:16:03,280 --> 00:16:06,400 Speaker 4: because they'll get protection for their sectors. Or the people 350 00:16:06,400 --> 00:16:08,240 Speaker 4: on the other side who've been you know, putting low costs, 351 00:16:08,240 --> 00:16:10,600 Speaker 4: they're going to get So it's very very dependent. 352 00:16:10,280 --> 00:16:13,280 Speaker 2: On where you say, well, speaking of you know, specific 353 00:16:13,320 --> 00:16:16,840 Speaker 2: sectors potentially benefiting. There are loads of tariff headlines still 354 00:16:16,840 --> 00:16:19,160 Speaker 2: coming in, but one of them that caught my eye 355 00:16:19,400 --> 00:16:21,760 Speaker 2: was Trump saying that he was going to start a 356 00:16:21,840 --> 00:16:26,800 Speaker 2: furniture tariff investigation with a view to setting tariffs on 357 00:16:26,880 --> 00:16:32,160 Speaker 2: furniture imports into the US, specifically to help North Carolina. 358 00:16:32,200 --> 00:16:34,880 Speaker 2: What's your immediate reaction when you see a headline like that. 359 00:16:35,640 --> 00:16:38,000 Speaker 4: Well, we've been seeing a lot of headlines, you know, Yeah, 360 00:16:38,000 --> 00:16:40,600 Speaker 4: I know on the tariffs thing. So first thing I 361 00:16:40,680 --> 00:16:43,040 Speaker 4: downed is I tried not to serve headlines too much. 362 00:16:43,240 --> 00:16:46,400 Speaker 4: We'll see what tariffs get applied on what industries, with 363 00:16:46,440 --> 00:16:48,960 Speaker 4: what duration and what products, and that's what a lot 364 00:16:49,000 --> 00:16:52,240 Speaker 4: of the manufacturers I talked to also do. I'm sure 365 00:16:52,280 --> 00:16:54,560 Speaker 4: the people who manufacture furniture and North Calina would be 366 00:16:55,200 --> 00:16:57,960 Speaker 4: very supportive. There aren't actually all that many. A lot 367 00:16:57,960 --> 00:17:00,920 Speaker 4: of jobs have been lost, and I think if people 368 00:17:00,920 --> 00:17:04,439 Speaker 4: start to consider bringing jobs back, the thing you hear about, 369 00:17:04,560 --> 00:17:06,159 Speaker 4: you know, over and over and over again, is just 370 00:17:06,359 --> 00:17:09,919 Speaker 4: availability of workforce and the cost of workforce. You know, 371 00:17:09,960 --> 00:17:11,960 Speaker 4: the jobs that I think are most likely to come 372 00:17:11,960 --> 00:17:15,360 Speaker 4: back are ones that are the least dependent on workforce, 373 00:17:15,480 --> 00:17:19,160 Speaker 4: or have the highest skilled workforce, or have high paid workforce. 374 00:17:19,200 --> 00:17:21,240 Speaker 4: And a lot of these jobs have gone to place 375 00:17:21,280 --> 00:17:24,200 Speaker 4: with very low cost workforces. And I don't know the 376 00:17:24,280 --> 00:17:26,600 Speaker 4: level of tariff that one would need to get to to, 377 00:17:27,680 --> 00:17:29,359 Speaker 4: you know, bring those jobs back, but it's a pretty 378 00:17:29,359 --> 00:17:32,720 Speaker 4: significant number. The other thing that's really not talked about 379 00:17:32,800 --> 00:17:34,679 Speaker 4: much that I just think is interesting. I was in Hickory, 380 00:17:34,680 --> 00:17:36,439 Speaker 4: which is a factory town. I talked to a lot 381 00:17:36,440 --> 00:17:39,679 Speaker 4: of furniture manufacturers there, and they're looking for workers. This 382 00:17:39,760 --> 00:17:41,920 Speaker 4: is during the COVID and they were, you know, having 383 00:17:41,960 --> 00:17:46,680 Speaker 4: a very strong demand cycle. But I went to community college. 384 00:17:46,720 --> 00:17:48,880 Speaker 4: I talked to a bunch of workers there and I said, well, 385 00:17:48,880 --> 00:17:51,119 Speaker 4: you guys trained to get in the furniture industry, and 386 00:17:51,359 --> 00:17:53,119 Speaker 4: several of them told me, you know, my dad was 387 00:17:53,160 --> 00:17:55,560 Speaker 4: in there and got laid off, and so we're not 388 00:17:55,640 --> 00:17:58,280 Speaker 4: going there. You know, the thought that people are waiting 389 00:17:58,320 --> 00:18:00,520 Speaker 4: to go back into the jobs to build the matters 390 00:18:00,520 --> 00:18:03,000 Speaker 4: a lot too. And so as we bring jobs back 391 00:18:03,000 --> 00:18:04,560 Speaker 4: in the country, which would be great, and I hope 392 00:18:04,560 --> 00:18:07,440 Speaker 4: we do, making sure there's stable jobs and their jobs 393 00:18:07,440 --> 00:18:08,960 Speaker 4: that are going to be around for a generation is 394 00:18:09,040 --> 00:18:10,920 Speaker 4: very important, I think in terms of getting workers into 395 00:18:10,960 --> 00:18:11,399 Speaker 4: the jobs. 396 00:18:11,800 --> 00:18:14,560 Speaker 3: We are recording this today that Chairman Powell gave his 397 00:18:14,600 --> 00:18:18,159 Speaker 3: final speech as FED chair at Jackson Hole. It was 398 00:18:18,160 --> 00:18:22,160 Speaker 3: a policy speech and he did not talk about FED 399 00:18:22,200 --> 00:18:25,480 Speaker 3: independence and the attacks on FED independence that are coming 400 00:18:25,480 --> 00:18:28,400 Speaker 3: from the White House and so forth, the political pressure 401 00:18:28,480 --> 00:18:30,840 Speaker 3: that the FED has been coming under. When you think 402 00:18:30,880 --> 00:18:33,840 Speaker 3: about inflation, maybe not in the short term, maybe not 403 00:18:34,040 --> 00:18:37,080 Speaker 3: you know, the latest PPI reading or whatever, but when 404 00:18:37,119 --> 00:18:40,080 Speaker 3: you think about like the long term, like the ability 405 00:18:40,119 --> 00:18:43,119 Speaker 3: of the FED to maintain that two percent inflation. Do 406 00:18:43,200 --> 00:18:46,760 Speaker 3: you think about, like, well, will the US political system 407 00:18:47,320 --> 00:18:50,680 Speaker 3: have the sort of stomach to preserve a FED as 408 00:18:50,720 --> 00:18:54,000 Speaker 3: an independent agentic force in the economy. 409 00:18:54,880 --> 00:18:57,200 Speaker 4: Well, so we've all relearned something in the last five 410 00:18:57,280 --> 00:18:59,400 Speaker 4: years that we didn't know we need to relearn, which 411 00:18:59,440 --> 00:19:02,840 Speaker 4: was how much we hate inflation. And inflation, you know, 412 00:19:02,920 --> 00:19:05,760 Speaker 4: it feels unfair. You get a raise and then you know, 413 00:19:05,800 --> 00:19:09,720 Speaker 4: the money gets spent somewhere else. It creates uncertainty, and frankly, 414 00:19:09,760 --> 00:19:12,679 Speaker 4: it's just exhausting. It's exhausting to deal with people who 415 00:19:12,720 --> 00:19:14,680 Speaker 4: are trying to raise your prices or to shop around 416 00:19:14,720 --> 00:19:17,840 Speaker 4: for better prices, or deal with you know, vendors. And so, 417 00:19:18,600 --> 00:19:20,240 Speaker 4: if there's one thing I think the American people have 418 00:19:20,280 --> 00:19:21,960 Speaker 4: aligned on over the last five years, it's just how 419 00:19:22,040 --> 00:19:24,560 Speaker 4: much we hate inflation. And you know, there's been a 420 00:19:24,560 --> 00:19:26,840 Speaker 4: lot of work done in a lot of countries in 421 00:19:26,920 --> 00:19:29,440 Speaker 4: terms of what's the best way to get inflation on control? 422 00:19:29,480 --> 00:19:31,680 Speaker 4: And an independent central bank is the answer to that question. 423 00:19:31,720 --> 00:19:33,480 Speaker 4: The research is very powerful. 424 00:19:33,680 --> 00:19:36,200 Speaker 3: Do you worry that like the that the that over 425 00:19:36,320 --> 00:19:39,720 Speaker 3: the medium term, that the sort of political system that 426 00:19:39,760 --> 00:19:42,320 Speaker 3: has allowed for an entity like the FED to exist 427 00:19:42,320 --> 00:19:45,880 Speaker 3: and operate outside of the electoral cycle is understressed. 428 00:19:46,359 --> 00:19:48,960 Speaker 4: I hope and I expect that this country is going 429 00:19:49,000 --> 00:19:50,920 Speaker 4: to recognize that independent central bank is the best way 430 00:19:50,920 --> 00:19:52,960 Speaker 4: to get into control the thing which we hate the most. 431 00:19:53,960 --> 00:19:57,480 Speaker 2: Just on the people hate inflation point, which I think 432 00:19:57,840 --> 00:20:01,760 Speaker 2: is a very salient idea. You've been very vocal on 433 00:20:01,800 --> 00:20:06,200 Speaker 2: the idea of like companies having learned the inflation playbook, right, 434 00:20:06,280 --> 00:20:10,480 Speaker 2: like they tested price elasticity during the last round of 435 00:20:10,520 --> 00:20:14,679 Speaker 2: high inflation, and you know, maybe maybe there's more of 436 00:20:14,720 --> 00:20:17,680 Speaker 2: an impulse this time around to raise prices to offset 437 00:20:17,800 --> 00:20:21,280 Speaker 2: either higher input costs or higher tariff costs. Are you 438 00:20:21,400 --> 00:20:24,760 Speaker 2: still sort of on the inflationary impulse side. Do you 439 00:20:24,800 --> 00:20:27,199 Speaker 2: think that residual experience still matters. 440 00:20:27,920 --> 00:20:30,160 Speaker 4: I definitely think the residual experience matters. When I talk 441 00:20:30,200 --> 00:20:33,320 Speaker 4: to companies about the tariffs that hit them. The first 442 00:20:33,359 --> 00:20:35,360 Speaker 4: thing here is going to pass it on to my customers. 443 00:20:35,600 --> 00:20:38,280 Speaker 4: But I also think this residual experience matters on the 444 00:20:38,320 --> 00:20:41,800 Speaker 4: customer side. I guess I just remind everybody that this 445 00:20:41,840 --> 00:20:45,200 Speaker 4: isn't twenty twenty two. In twenty twenty two, a bunch 446 00:20:45,240 --> 00:20:47,800 Speaker 4: of supply costs hit a bunch of companies that passed 447 00:20:47,800 --> 00:20:49,919 Speaker 4: it on and the people who received them. You and 448 00:20:49,960 --> 00:20:51,879 Speaker 4: I we hadn't spent money for a year and a 449 00:20:51,880 --> 00:20:55,639 Speaker 4: half with COVID, We'd gotten stimulus payments, our assets were 450 00:20:56,040 --> 00:20:59,280 Speaker 4: quite frothy and highly valued. We were ready for revenge 451 00:20:59,320 --> 00:21:02,399 Speaker 4: spending spent. And that's twenty twenty two. We're not in 452 00:21:02,440 --> 00:21:04,199 Speaker 4: twenty twenty two, when, by the way, we also had 453 00:21:04,200 --> 00:21:07,080 Speaker 4: accommodateive monetary policy. We're in twenty twenty five. Here we 454 00:21:07,080 --> 00:21:10,120 Speaker 4: have restrictive monetary policy. And in addition, you have consumers 455 00:21:10,119 --> 00:21:12,919 Speaker 4: who are already trading down. And so I've said earlier, 456 00:21:12,920 --> 00:21:15,439 Speaker 4: they've got money, but they're not dying to spend it. 457 00:21:15,480 --> 00:21:18,880 Speaker 4: And what you hear is normal price retailer to value, retailer, 458 00:21:19,160 --> 00:21:23,719 Speaker 4: beef to chicken, vacationist staycation, that's what you're hearing. And 459 00:21:23,800 --> 00:21:26,520 Speaker 4: people in private label is growing, and so I think 460 00:21:26,560 --> 00:21:28,880 Speaker 4: those customers are not going to accept those price increases 461 00:21:28,880 --> 00:21:31,119 Speaker 4: the same way they have. And it's sort of Milton 462 00:21:31,160 --> 00:21:33,359 Speaker 4: friedmany a little bit. If there's not more money in 463 00:21:33,400 --> 00:21:35,920 Speaker 4: the system, how are you going to get inflation? And 464 00:21:36,480 --> 00:21:38,320 Speaker 4: you could argue there's some money in the system and 465 00:21:38,359 --> 00:21:40,720 Speaker 4: you'll get some inflation. I believe that, but I don't 466 00:21:40,720 --> 00:21:42,080 Speaker 4: think you're going to get anywhere near the kind of 467 00:21:42,119 --> 00:21:46,120 Speaker 4: stuff that people imagine, because this company that's now learned 468 00:21:46,160 --> 00:21:48,159 Speaker 4: how to pass on prices is going to meet a 469 00:21:48,200 --> 00:21:49,560 Speaker 4: consumer who's ready to resist it. 470 00:21:50,200 --> 00:21:52,960 Speaker 2: You mentioned restrictiveness just then, and this is something that 471 00:21:53,000 --> 00:21:55,199 Speaker 2: Pal also said in the speech today. He said, you know, 472 00:21:55,320 --> 00:22:00,040 Speaker 2: rates are still restrictive, I think he said, albeit modestly so. 473 00:22:00,080 --> 00:22:02,760 Speaker 2: But when I look at stocks at all time highs 474 00:22:02,800 --> 00:22:08,080 Speaker 2: and credit spreads, you know, basically thirty year lows financial conditions, 475 00:22:08,520 --> 00:22:12,240 Speaker 2: things don't seem all that restrictive. If you look specifically 476 00:22:12,280 --> 00:22:15,120 Speaker 2: at the market. How is the FED sort of coming 477 00:22:15,200 --> 00:22:19,160 Speaker 2: to the conclusion about the relation of benchmark rates here 478 00:22:19,640 --> 00:22:19,880 Speaker 2: or the. 479 00:22:19,880 --> 00:22:22,240 Speaker 4: Character As you can tell from the SEP. Different people 480 00:22:22,280 --> 00:22:25,239 Speaker 4: have different models. Of course, the model that we use 481 00:22:25,240 --> 00:22:27,080 Speaker 4: in Richmond, you know, has a lot to do with 482 00:22:27,200 --> 00:22:29,879 Speaker 4: the impact of rates on the economy, and so you know, 483 00:22:29,960 --> 00:22:31,520 Speaker 4: you can see what rates are and you can lag 484 00:22:31,560 --> 00:22:32,800 Speaker 4: it and look at you later and see what the 485 00:22:32,800 --> 00:22:34,720 Speaker 4: impact is. One thing I like to look at is 486 00:22:34,800 --> 00:22:39,960 Speaker 4: nominal consumption. Nominal consumption was quite elevated during the pandemic. 487 00:22:40,000 --> 00:22:42,000 Speaker 4: We raised rates and it came down still at a 488 00:22:42,040 --> 00:22:44,280 Speaker 4: decent level. It's been sort of five and a half 489 00:22:44,280 --> 00:22:46,440 Speaker 4: percent until the last couple of months, but it sort 490 00:22:46,440 --> 00:22:48,720 Speaker 4: of seems to have come off that in the last 491 00:22:48,760 --> 00:22:50,600 Speaker 4: month of two. We'll see what the more recent data is. 492 00:22:50,640 --> 00:22:52,360 Speaker 4: But that nominal consumption is a great way to look 493 00:22:52,359 --> 00:22:55,000 Speaker 4: at it because it just says what's happening rates to 494 00:22:55,040 --> 00:22:57,040 Speaker 4: what people are doing in the economy. I do agree 495 00:22:57,040 --> 00:23:00,080 Speaker 4: there are lots of other factors that affect dynamis in 496 00:23:00,119 --> 00:23:02,560 Speaker 4: the economy, and if the market's frothy, a thing we 497 00:23:02,600 --> 00:23:05,240 Speaker 4: don't control, that's also part of it. But in the 498 00:23:05,240 --> 00:23:06,840 Speaker 4: part we control, I think you can see it by 499 00:23:06,840 --> 00:23:07,440 Speaker 4: its works. 500 00:23:07,720 --> 00:23:09,960 Speaker 3: I think I just have one more question for you, 501 00:23:10,119 --> 00:23:11,919 Speaker 3: And I just feel like, maybe because you talk to 502 00:23:11,960 --> 00:23:15,640 Speaker 3: businesses so much, maybe you have some fresh insight on this. 503 00:23:15,680 --> 00:23:19,000 Speaker 3: Do you hear much about electricity prices in your conversations 504 00:23:19,400 --> 00:23:21,320 Speaker 3: these days? Because I feel like there's starting to be 505 00:23:21,359 --> 00:23:23,040 Speaker 3: in the news and the strain on the grid, and 506 00:23:23,359 --> 00:23:26,320 Speaker 3: but for whatever reason, how is that you're hearing much 507 00:23:26,320 --> 00:23:26,600 Speaker 3: about that? 508 00:23:26,760 --> 00:23:29,840 Speaker 4: A lot of concern about electricity availability? Okay, you know, 509 00:23:29,920 --> 00:23:31,639 Speaker 4: are we going to have an electricity to power all 510 00:23:31,680 --> 00:23:34,320 Speaker 4: the AI and all the data centers are going up. 511 00:23:34,720 --> 00:23:37,520 Speaker 4: You know there are states, you know, Virginia's one where 512 00:23:37,720 --> 00:23:39,600 Speaker 4: data centers are quite right, and so you do hear 513 00:23:39,720 --> 00:23:42,080 Speaker 4: a little bit of public concern about what's this all 514 00:23:42,160 --> 00:23:45,280 Speaker 4: going to mean? But just a reminder that electricity prices 515 00:23:45,320 --> 00:23:48,520 Speaker 4: tend to lag significantly. They got to go through rate processes. 516 00:23:48,560 --> 00:23:51,320 Speaker 4: Every state is different, and so you know, I'm not 517 00:23:51,359 --> 00:23:55,480 Speaker 4: sure that's hitting the consumer public. I do hear lots 518 00:23:55,520 --> 00:24:00,640 Speaker 4: of I'll just call it local infrastructure funding HOSS being 519 00:24:00,680 --> 00:24:03,800 Speaker 4: passed on to consumers and consumers making trade offs in 520 00:24:03,800 --> 00:24:06,320 Speaker 4: that context. So you know, there was a big water 521 00:24:06,359 --> 00:24:08,080 Speaker 4: increase in the town I was in in Maryland a 522 00:24:08,119 --> 00:24:09,920 Speaker 4: month ago, and a lot of conversations about people not 523 00:24:09,960 --> 00:24:12,159 Speaker 4: paying their water bill. Because so you do hear it 524 00:24:12,359 --> 00:24:14,320 Speaker 4: more broadly, but I wouldn't say that the price is 525 00:24:14,359 --> 00:24:14,760 Speaker 4: yet hit. 526 00:24:15,760 --> 00:24:17,359 Speaker 2: Okay, So I'm going to ask a sort of on 527 00:24:17,400 --> 00:24:20,000 Speaker 2: the ground color question. But when you think about this 528 00:24:20,240 --> 00:24:22,680 Speaker 2: Jackson Hole and you think about maybe last year is 529 00:24:22,760 --> 00:24:25,359 Speaker 2: Jackson Hole in twenty twenty four, can you compare and 530 00:24:25,400 --> 00:24:27,840 Speaker 2: contrast the vibes? How are they different? 531 00:24:28,960 --> 00:24:31,359 Speaker 4: This is my eighth one. Two of them were virtual. 532 00:24:31,400 --> 00:24:34,359 Speaker 4: They're not nearly as good when they're virtual no fish, 533 00:24:35,240 --> 00:24:36,080 Speaker 4: it's a nice picture. 534 00:24:37,359 --> 00:24:37,800 Speaker 1: I'd say. 535 00:24:37,800 --> 00:24:42,200 Speaker 4: In general, the vibe is pretty much the same every time. 536 00:24:42,320 --> 00:24:45,000 Speaker 4: I mean, I really like them because there's a they 537 00:24:45,080 --> 00:24:47,239 Speaker 4: turn over the population a little, you know, and so 538 00:24:47,480 --> 00:24:47,840 Speaker 4: they are new. 539 00:24:48,320 --> 00:24:49,239 Speaker 2: There's new guests every time. 540 00:24:49,320 --> 00:24:51,840 Speaker 4: The academics, I haven't met new leaders. I haven't met, 541 00:24:51,880 --> 00:24:54,760 Speaker 4: so that's kind of fun for me, and I get that, 542 00:24:54,840 --> 00:24:57,360 Speaker 4: but I'm not sure the vibe changes all that much. 543 00:24:57,400 --> 00:24:59,680 Speaker 4: It's a it's a real privilege to be invited to 544 00:25:00,320 --> 00:25:02,560 Speaker 4: like this, and I enjoy it. I don't spend a 545 00:25:02,600 --> 00:25:06,480 Speaker 4: lot of time thinking about the vibe. The vibes exactly all. 546 00:25:06,480 --> 00:25:08,480 Speaker 2: Right, Tom Barkin, thank you so much for coming back 547 00:25:08,520 --> 00:25:09,080 Speaker 2: on all thoughts. 548 00:25:09,080 --> 00:25:11,160 Speaker 4: Really appreciate it, and I always appreciate being with you things. 549 00:25:11,200 --> 00:25:11,800 Speaker 3: Thank you so much. 550 00:25:25,480 --> 00:25:28,040 Speaker 2: Joe. You know, I have some furniture from North Carolina. 551 00:25:28,160 --> 00:25:29,640 Speaker 2: It's really good quality. 552 00:25:30,080 --> 00:25:33,440 Speaker 3: Maybe maybe in North Carolina, just imported through the port 553 00:25:33,960 --> 00:25:34,480 Speaker 3: or the shows. 554 00:25:35,040 --> 00:25:37,760 Speaker 2: No, actually made in North Carolina. And I know that 555 00:25:37,800 --> 00:25:40,760 Speaker 2: because it's vintage, so it was probably back when the 556 00:25:40,760 --> 00:25:42,720 Speaker 2: furniture industry was a little bit bigger there. 557 00:25:42,840 --> 00:25:45,920 Speaker 3: I do think like did North Carolina. I mean, it's 558 00:25:45,960 --> 00:25:49,040 Speaker 3: a long standing debate. Some of the biggest boom cities 559 00:25:49,480 --> 00:25:52,199 Speaker 3: of the twenty and twenty tens were like you know, 560 00:25:52,280 --> 00:25:55,600 Speaker 3: Durham and all those places, et cetera. You know, it's 561 00:25:55,640 --> 00:25:59,119 Speaker 3: still like going back to Charlotte. Charlotte was huge booms, 562 00:25:59,560 --> 00:26:01,680 Speaker 3: all the bank stuff there. Like you think about the 563 00:26:01,720 --> 00:26:03,720 Speaker 3: last twenty five years, this is the area that we 564 00:26:03,760 --> 00:26:06,399 Speaker 3: think is like most quote hollowed out, etc. It's also 565 00:26:06,440 --> 00:26:07,960 Speaker 3: like one of the fastest growing. Here is the whole 566 00:26:08,200 --> 00:26:11,679 Speaker 3: is it complete? Even the past is complicated. Hindsight is 567 00:26:11,720 --> 00:26:12,439 Speaker 3: not twenty twenty. 568 00:26:12,680 --> 00:26:15,639 Speaker 2: Yeah, and I think complication is sort of Complication and 569 00:26:15,760 --> 00:26:19,879 Speaker 2: uncertainty are the big buzzwords of this conference. Clearly, like 570 00:26:19,920 --> 00:26:21,639 Speaker 2: we hear it over and over again that there are 571 00:26:21,760 --> 00:26:24,680 Speaker 2: risks on both the employment side of the mandate and 572 00:26:24,720 --> 00:26:28,040 Speaker 2: the price side of the mandate, and central bankers basically 573 00:26:28,040 --> 00:26:30,400 Speaker 2: have to make like a tough choice over which one 574 00:26:30,400 --> 00:26:32,639 Speaker 2: they're going to concentrate on. I did think it was 575 00:26:32,680 --> 00:26:36,639 Speaker 2: interesting that Tom mentioned that he read Pal's speech is 576 00:26:36,680 --> 00:26:39,600 Speaker 2: more down the middle than perhaps the market did. No. 577 00:26:39,760 --> 00:26:42,359 Speaker 3: I thought that was interesting too. I like the fog 578 00:26:42,400 --> 00:26:44,360 Speaker 3: analogy that you actually don't want to break too much 579 00:26:44,359 --> 00:26:46,560 Speaker 3: of the fawity fog either because the car behind you 580 00:26:46,720 --> 00:26:49,240 Speaker 3: might not react in time. That that was really good. 581 00:26:49,840 --> 00:26:52,119 Speaker 3: I also liked the part about how three quarters of 582 00:26:52,119 --> 00:26:55,119 Speaker 3: the time vigg as central banker is really easy because 583 00:26:55,119 --> 00:26:58,159 Speaker 3: either you hike or you cut or you go on 584 00:26:58,200 --> 00:27:01,040 Speaker 3: a hike in Wildman the at the fourth time, like 585 00:27:01,200 --> 00:27:04,760 Speaker 3: the fear of stagflation, Yeah, right, that's what that's what 586 00:27:04,800 --> 00:27:07,760 Speaker 3: that forth. So here's like, this is that fourth time? Now, 587 00:27:07,800 --> 00:27:10,320 Speaker 3: how persistent will it be with it? But the basic 588 00:27:10,400 --> 00:27:13,119 Speaker 3: like what we're talking about in all these conversations, what 589 00:27:13,200 --> 00:27:16,520 Speaker 3: we're talking about is this building anxiety about stagflation. 590 00:27:16,640 --> 00:27:21,760 Speaker 2: It's stagflation combined with really difficult to predict timelines for 591 00:27:21,840 --> 00:27:25,240 Speaker 2: exactly when it materializes. Right, Like that also seems to 592 00:27:25,240 --> 00:27:28,160 Speaker 2: be a complicating factor. Okay, well on that note, shall 593 00:27:28,200 --> 00:27:28,640 Speaker 2: we leave it there. 594 00:27:28,680 --> 00:27:29,360 Speaker 3: Let's leave it there. 595 00:27:29,480 --> 00:27:31,840 Speaker 2: This has been another episode of the aud Lots podcast. 596 00:27:32,000 --> 00:27:34,800 Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway 597 00:27:34,920 --> 00:27:35,960 Speaker 2: and I'm Jill Wassenthal. 598 00:27:36,040 --> 00:27:38,760 Speaker 3: You can follow me at the Stalwart. Follow our producers 599 00:27:38,800 --> 00:27:42,119 Speaker 3: Kerman Rodriguez at Carman armand Dashel Bennett at Dashbot and 600 00:27:42,240 --> 00:27:45,200 Speaker 3: Kilbrooks and Kilbrooks For more Odd Lots content, go to 601 00:27:45,200 --> 00:27:47,639 Speaker 3: Bloomberg dot com slash odd Lots or of the daily 602 00:27:47,680 --> 00:27:50,200 Speaker 3: newsletter and all of our episodes, and you can chat 603 00:27:50,240 --> 00:27:52,119 Speaker 3: about all of these topics twenty four to seven in 604 00:27:52,280 --> 00:27:55,360 Speaker 3: our discord Discord dot gg slash. 605 00:27:55,000 --> 00:27:57,439 Speaker 2: Out Lots and if you enjoy all thoughts. 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