WEBVTT - Tom Barkin on Why Central Banking Is on Hard Mode Now 0:00:02.480 --> 0:00:15.880 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.079 --> 0:00:20.960 Hello and welcome to another episode of the All Thoughts Podcast. 0:00:21.040 --> 0:00:22.400 I'm Tracy Alloway. 0:00:22.120 --> 0:00:23.799 And I'm Joe. Why isn't thal Joe. 0:00:23.800 --> 0:00:27.040 We're still at Jackson Hole. Yes, by the time this 0:00:27.120 --> 0:00:30.640 episode comes out, the dust will have settled. That's the 0:00:30.760 --> 0:00:34.320 entire event, and we will have gotten well. We already 0:00:34.320 --> 0:00:37.880 had the speech from FED chair Jerome pow Right, and 0:00:38.240 --> 0:00:43.280 this afternoon as we're recording, we're seeing market surging. Everyone, 0:00:43.600 --> 0:00:46.280 it seems, has interpreted this as pretty dubbish. 0:00:46.360 --> 0:00:49.440 Yeah, that's right, and along a Bloomberg had an interesting 0:00:49.479 --> 0:00:52.280 piece if it wasn't as dubvish as people think, but 0:00:53.120 --> 0:00:56.880 it felt duvish in the context of, you know, a 0:00:57.000 --> 0:00:59.920 recent chat with us in Goolsby. Recent he was concerned 0:01:00.080 --> 0:01:02.320 about he's starting to look at that inflation date a 0:01:02.360 --> 0:01:04.880 little bit more fell division the context of our recent 0:01:04.920 --> 0:01:07.880 episode with Kansas City Fed President Jeffrey Schmid, he too 0:01:08.040 --> 0:01:11.000 was talking about, how, you know, things are maybe still 0:01:11.040 --> 0:01:12.560 looking a little warmon could. 0:01:12.360 --> 0:01:14.480 Be talking about if you look at the Taylor rule, 0:01:14.640 --> 0:01:16.480 you know, you could argue maybe rates should be a 0:01:16.520 --> 0:01:17.080 little higher. 0:01:17.120 --> 0:01:20.520 Anyway, I think we should continue on our survey of 0:01:20.560 --> 0:01:22.240 as many FED presidents as we can. 0:01:22.360 --> 0:01:24.760 All right, well, we do have the perfect guests. On 0:01:24.800 --> 0:01:27.640 that note, a friend of the pod, Richmond FED President 0:01:27.720 --> 0:01:29.800 Tom Barkin. Welcome back. It's good to see you. 0:01:29.880 --> 0:01:30.960 Yeah, good to see you guys too. 0:01:31.200 --> 0:01:33.399 Thanks so much for doing this, taking time out of 0:01:33.400 --> 0:01:37.399 your you know, hiking and conferencing schedule, so we appreciate it. 0:01:37.880 --> 0:01:40.800 Why don't we just start with the obvious question, which 0:01:40.880 --> 0:01:44.480 is I guess you talked earlier this week that the 0:01:44.600 --> 0:01:49.200 balance between employment risks and inflation risks is really unclear 0:01:49.240 --> 0:01:52.559 at the moment. Pal seemed to air on the side 0:01:52.560 --> 0:01:55.240 of the labor market, right, he kind of chose to 0:01:55.280 --> 0:01:57.880 prioritize that. Do you think that's the right move? 0:01:58.920 --> 0:02:02.240 Well, as you said, I've been saying, I'm confused about everything. 0:02:02.240 --> 0:02:05.960 I'm confused about labor market and the inflation side, and 0:02:06.000 --> 0:02:07.920 I think there's lots of people who come up with 0:02:07.960 --> 0:02:11.120 different views of how to weigh the risks. Here's the 0:02:11.120 --> 0:02:14.880 interesting thing. We've been hearing from businesses for a year 0:02:14.880 --> 0:02:16.800 and a half that they haven't been hiring. We've been 0:02:16.800 --> 0:02:19.440 seeing in the number that they haven't been hiring. They 0:02:19.440 --> 0:02:22.119 also haven't been laying people off. And when we get 0:02:22.120 --> 0:02:24.480 into the job's numbers that kept coming in at one 0:02:24.520 --> 0:02:26.239 hundred and thirty thousand a month or one hundred and 0:02:26.240 --> 0:02:29.200 twenty thousand a month, that seems strange, but it was 0:02:29.200 --> 0:02:30.919 good news. I mean, there's nothing wrong with a lot 0:02:30.919 --> 0:02:33.359 of jobs. And so what we saw last month was 0:02:33.400 --> 0:02:36.079 a different jobs report with a job's revision that now 0:02:36.120 --> 0:02:38.240 sort of says, hey, we're growing at thirty five thousand 0:02:38.320 --> 0:02:41.320 jobs a month. That actually makes a little more intuitive 0:02:41.360 --> 0:02:43.760 sense to me given what I'm hearing in the marketplace. 0:02:43.800 --> 0:02:46.720 If you're not hiring, then where the new hires coming from. 0:02:47.280 --> 0:02:49.800 And by the way, we'll get a revision a QCW 0:02:49.919 --> 0:02:52.280 in September that probably will take those numbers down again. 0:02:52.360 --> 0:02:54.680 And so if you're dealing with one hundred and thirty 0:02:54.680 --> 0:02:58.440 thousand job market, that's a very different level of confidence 0:02:58.680 --> 0:03:01.000 than if you're dealing with a thirty five thousand or 0:03:01.040 --> 0:03:03.480 even maybe even a zero job growth market. And I 0:03:03.480 --> 0:03:06.920 think that's where the concern comes from. What holds you 0:03:06.960 --> 0:03:09.440 back from being overly concerned is the unemployment rate, which 0:03:09.480 --> 0:03:13.120 still is at four point two percent, perfectly really good 0:03:13.200 --> 0:03:16.000 unemployment rate. You know, at any time in any cycle, 0:03:16.040 --> 0:03:18.840 and so you know, how much how lucky do you feel, 0:03:18.880 --> 0:03:20.640 Deale feel? Did you feel in the jobs growth? How 0:03:20.680 --> 0:03:22.560 much do you feel in the unemployment rate? The gap 0:03:22.600 --> 0:03:25.400 between the two obviously is driven by we're not having 0:03:25.480 --> 0:03:27.440 net migration, you know, into the country the way that 0:03:27.480 --> 0:03:30.360 we used to. You could call that two million a year. 0:03:30.840 --> 0:03:33.840 My generation, the baby boomer baby boomers are aging out 0:03:33.840 --> 0:03:35.960 of the workforce. I'm not aging, nor am I out 0:03:35.960 --> 0:03:39.360 of the workforce, but my generation is. And that's maybe 0:03:39.360 --> 0:03:42.600 a million three people sixty five and older increase out 0:03:42.640 --> 0:03:44.600 of the workforce over the last three years per year. 0:03:45.080 --> 0:03:47.440 And then you know, this temporary protected status thing takes 0:03:47.440 --> 0:03:49.680 some more people out of the workforce. And so it's 0:03:49.800 --> 0:03:52.640 possible that you know, we're seeing your job growth and 0:03:52.680 --> 0:03:55.760 that's going to keep the unemployment rate steady. But you know, 0:03:56.560 --> 0:03:59.160 there's nothing wrong with being nervous about that. I think 0:03:59.240 --> 0:04:01.160 you also have to be us on the inflation side, 0:04:01.240 --> 0:04:04.080 and we weren't at two percent before all the tariff talk. 0:04:04.200 --> 0:04:07.160 All the tariff stuff's coming in. It's not hitting inflation 0:04:07.240 --> 0:04:09.960 nearly as much as some people thought, but people are 0:04:09.960 --> 0:04:11.920 still passing it on. You would have seen Walmart's earning 0:04:11.960 --> 0:04:14.160 support yesterday where they talked about it, or home Depot 0:04:14.280 --> 0:04:16.080 or you know, people are talking about No. 0:04:16.160 --> 0:04:17.640 Walmart basically said it's coming. 0:04:17.920 --> 0:04:21.360 It's coming now. It doesn't have to be as severe 0:04:21.400 --> 0:04:23.160 as you know people like to think. And we can 0:04:23.160 --> 0:04:25.279 talk about that if you want, but it's coming. So 0:04:26.320 --> 0:04:28.119 I like to say my tearo policy is really easy. 0:04:28.160 --> 0:04:31.159 Three quarters of the time. You know, when inflation's high 0:04:31.160 --> 0:04:34.039 and unemployment's low, raise rates, and when you have the 0:04:34.040 --> 0:04:37.880 opposite situation, lower rates. And you know, if inflation's low 0:04:37.920 --> 0:04:39.800 and unemployment's slow, you can spend a few more days 0:04:39.800 --> 0:04:42.640 at Jackson Hole. But if you're going to have risk 0:04:42.720 --> 0:04:44.360 on the inflation side and risk on the employment side, 0:04:44.360 --> 0:04:45.080 that's what it gets hard. 0:04:45.880 --> 0:04:49.839 Talk to us about your interpretation of Powell speech, because 0:04:49.880 --> 0:04:52.440 it does seem like actually there is no consensus on 0:04:52.960 --> 0:04:55.880 how quote Dovish it was the market surged. But when 0:04:55.880 --> 0:04:57.080 you heard it or when you read it, I don't 0:04:57.120 --> 0:04:59.000 know when you saw it. Whenever you when it, maybe 0:04:59.040 --> 0:05:01.560 do you get in advance, so you were you read 0:05:01.560 --> 0:05:03.560 it at the same time as we did, Like what 0:05:03.600 --> 0:05:04.400 was your read on it? 0:05:05.160 --> 0:05:07.599 So I think you guys are all incredibly talented and 0:05:07.680 --> 0:05:10.360 much more talent than I am, but at interpreting speeches, 0:05:10.920 --> 0:05:12.000 so uh. 0:05:12.960 --> 0:05:15.440 Believe it or not. 0:05:15.560 --> 0:05:18.080 I actually gave a speech last week and one of 0:05:18.120 --> 0:05:21.240 the FED commentators went through my last paragraph and compared 0:05:21.279 --> 0:05:23.880 it to my last paragraph before and said, see, Barkin 0:05:23.960 --> 0:05:26.080 has changed in these days. And I'm like, huh, that 0:05:26.160 --> 0:05:28.160 was really well done. I you know, I was even 0:05:28.160 --> 0:05:29.680 sophistical commentator. 0:05:29.320 --> 0:05:31.760 Was correct in the way that you actually yourself hadn't 0:05:31.760 --> 0:05:32.839 thought about. 0:05:33.240 --> 0:05:37.200 So so when you guys read these speeches, I mean, 0:05:37.760 --> 0:05:40.400 the commas matter, the sentences matter. 0:05:40.760 --> 0:05:43.000 That's really our call for what it's worth. That's our colleagues, 0:05:43.279 --> 0:05:44.760 y commas. But let's give it. 0:05:44.839 --> 0:05:47.120 Let's hear you and I And I'm sure Jay is 0:05:47.200 --> 0:05:49.040 very sophisticated in his team, so I'm sure they're also 0:05:49.040 --> 0:05:51.280 thinking about this. So I'm not saying people get real accidents. 0:05:51.320 --> 0:05:52.840 But when I read it, and when I heard it, 0:05:52.839 --> 0:05:54.240 I actually heard it live for the first time, so 0:05:54.240 --> 0:05:56.360 I didn't read it before it came out. It seemed 0:05:56.400 --> 0:05:58.480 like a perfectly down the middle speech to me. If 0:05:58.520 --> 0:06:00.040 you had asked me what the markets would have and 0:06:00.720 --> 0:06:02.600 I guess I would have imagined that they'd read it 0:06:02.600 --> 0:06:04.880 as modestly dubbish. It seems like I read it as 0:06:04.960 --> 0:06:07.400 more dubbish than I heard it. But what do I know. 0:06:07.480 --> 0:06:09.800 I mean, I'm just listened to the speech like everybody else. 0:06:10.240 --> 0:06:12.640 Well, I mean this kind of begs the question. But 0:06:13.160 --> 0:06:15.799 how could easily have just said, you know, we're data 0:06:15.839 --> 0:06:19.000 dependent and we're going to wait for the next CPI number, 0:06:19.040 --> 0:06:23.200 the next payrolls number. Instead he chose to really emphasize 0:06:23.240 --> 0:06:27.800 the labor side of the dual mandate. Why why is that? 0:06:27.839 --> 0:06:29.440 I mean you'd have to ask, you know, when he 0:06:29.480 --> 0:06:30.080 comes on the show. 0:06:30.279 --> 0:06:32.280 Ye, I know you'll have a lot of questions, tell 0:06:32.360 --> 0:06:33.480 him he should come on the show. 0:06:33.760 --> 0:06:35.920 I will say one thing that's odd about Jackson Hole 0:06:35.960 --> 0:06:37.919 every year is it's the period worry of the longest 0:06:37.920 --> 0:06:40.839 break between meeting right right and this time, not only 0:06:40.839 --> 0:06:43.159 do we have a long break between meetings, but you know, 0:06:43.200 --> 0:06:45.320 the day after or two days after his press conference, 0:06:45.360 --> 0:06:47.479 we got these big revisions on the job report. So 0:06:48.040 --> 0:06:50.719 I don't know, maybe you could imagine there was a 0:06:51.000 --> 0:06:53.560 trying to mark to market the from the press conference 0:06:53.600 --> 0:06:55.720 to hear I don't know. I mean, it's a he 0:06:55.760 --> 0:06:56.440 knows what he does. 0:06:56.720 --> 0:06:59.400 Something that came up in our conversation with Jeff Schmid 0:06:59.560 --> 0:07:01.920 was they said that, and I'm curious how there's sort 0:07:01.920 --> 0:07:06.560 of jobs with what you've been hearing from businesses. You know, 0:07:06.600 --> 0:07:08.800 when we talked to Mary Daily and Alaska a few 0:07:08.839 --> 0:07:11.440 weeks ago, she said, you know, the revisions made sense 0:07:11.480 --> 0:07:14.480 to me. Actually, look what you're saying, because actually this 0:07:14.760 --> 0:07:17.960 is fitting with the anecdotal commentary that I've been hearing, 0:07:18.360 --> 0:07:22.920 and intuitively, right post Liberation Day, lots of anxiety, uncertainty, 0:07:23.000 --> 0:07:26.960 it makes sense there'd be a hiring slowdown. However, something 0:07:27.000 --> 0:07:30.760 that Casey Fed President Schmid said was, yes, it fits, 0:07:30.800 --> 0:07:34.240 but well, the uncertainty is easing now. Tariffs are not 0:07:34.320 --> 0:07:36.600 as uncertain as they were in the middle of April 0:07:36.600 --> 0:07:39.360 by any stretch. Even though there's new headlines almost every day. 0:07:39.440 --> 0:07:42.120 There's nowhere near as much uncertainty. And then maybe that 0:07:42.280 --> 0:07:45.240 was the cycle low for the year, that sort of 0:07:45.280 --> 0:07:47.920 April May June July period. Does that seem plausible to 0:07:47.960 --> 0:07:49.920 you based on what you're seeing out there. 0:07:51.080 --> 0:07:53.640 Yeah, So I've been describing that as driving in the fog, 0:07:54.440 --> 0:07:56.560 and you know, I've been saying that when you're driving 0:07:56.560 --> 0:07:57.920 in the fog, it's hard to put your foot on 0:07:57.960 --> 0:07:59.640 the breath on the gas because you don't know what's 0:07:59.680 --> 0:08:01.920 around the next curve. And you don't want to put 0:08:01.920 --> 0:08:04.200 your foot in the brakes either because you don't know 0:08:04.280 --> 0:08:05.920 what someone behind you is going to run into you, 0:08:06.240 --> 0:08:08.240 so you pull over and put on the hazards. That's 0:08:08.240 --> 0:08:10.840 a money analogy I've been using for a few months. 0:08:11.160 --> 0:08:12.960 But but what I've been saying, you know, the last 0:08:13.360 --> 0:08:16.360 month is I think the fog is lifting, and I 0:08:16.440 --> 0:08:18.560 do think we've got you know what's happening on the 0:08:18.600 --> 0:08:21.240 immigration side, you know what's happening on the deregulation side, 0:08:21.400 --> 0:08:24.040 different sectors in different you have different points of view 0:08:24.040 --> 0:08:25.640 on that. We have a tax bill, so you know 0:08:25.680 --> 0:08:28.360 what that looks like, and people have a you know 0:08:28.360 --> 0:08:30.360 at least what the boundaries look like on tarifts. Now. 0:08:30.360 --> 0:08:33.200 I don't think they're ever going to be once set 0:08:33.280 --> 0:08:35.000 done and will know the rules for forever. I think 0:08:35.000 --> 0:08:37.920 it's a tool that is going to surface again and again. 0:08:38.000 --> 0:08:39.800 But I think people sort of know what that is. 0:08:39.840 --> 0:08:42.160 And so when I'm talking to businesses, it feels like 0:08:42.800 --> 0:08:45.120 it's shifting now that you know, I'm going to now 0:08:45.120 --> 0:08:48.000 torture the analogy because they think the road's bumpy, right, 0:08:48.040 --> 0:08:50.600 and so I still hear a lot of not hiring, 0:08:50.679 --> 0:08:53.560 not firing. I'm going to, you know, be a little 0:08:53.600 --> 0:08:55.640 cautious with my costs. I'm going to do it through attrition, 0:08:55.800 --> 0:08:58.520 not through layoffs. I still hear that. I've heard a 0:08:58.559 --> 0:09:02.440 few stories of leaning into investing, particularly supported by some 0:09:02.480 --> 0:09:04.640 of the depreciation stuff. You know, I've been waiting for 0:09:04.679 --> 0:09:07.240 this tax heading to pass. That have sertainty, but I 0:09:07.240 --> 0:09:10.720 wouldn't say not at scale, you know, modest amounts of it. 0:09:11.120 --> 0:09:13.400 The one place where you might be seeing this sentiment 0:09:13.640 --> 0:09:16.960 change is on the consumer side, and I've been hearing 0:09:17.240 --> 0:09:19.520 from the retailers I'm talking to and from the manufacturers 0:09:19.520 --> 0:09:22.800 I've talked to, of a lift in consumer spending starting 0:09:22.800 --> 0:09:25.599 in you know, end of June into July. If you 0:09:25.600 --> 0:09:27.600 look at the credit card data, you'll see a big 0:09:27.600 --> 0:09:30.360 increase in July, which is continued the first two weeks 0:09:30.840 --> 0:09:33.280 of August. It would make sense that a bunch of 0:09:33.320 --> 0:09:36.520 consumers who by the way, still have jobs, real wages 0:09:36.559 --> 0:09:39.160 are still up as inflation comes down, and the markets 0:09:39.160 --> 0:09:42.959 are obviously healthy, both asset valuations and houses or stock 0:09:43.000 --> 0:09:45.520 market all very healthy, that they might have taken a 0:09:45.559 --> 0:09:48.360 step back in the context of all the news in 0:09:48.559 --> 0:09:51.160 April and May, and maybe now they're coming back in 0:09:51.280 --> 0:09:54.199 so that that's the one place I'm starting to see. 0:09:54.400 --> 0:09:56.800 I'm moving. I'm very attentive. You know, we'll get the 0:09:56.800 --> 0:09:59.079 PC next week, very temped to what we're seeing. But 0:09:59.440 --> 0:10:02.280 you could imagine, you know, temporary air pocket is consumers 0:10:02.320 --> 0:10:04.680 sort of pulled back, worried, and you see this in 0:10:04.679 --> 0:10:07.440 the consumer sentiment data, that inflation was going to hit 0:10:07.600 --> 0:10:09.760 huge numbers and all of a sudden, you know, people 0:10:09.760 --> 0:10:11.120 are going to be unemployed and they were going to 0:10:11.120 --> 0:10:13.280 have issues. Now they're not seeing it. It's possible. 0:10:13.679 --> 0:10:15.440 Do you think that we're maybe getting a bit of 0:10:15.480 --> 0:10:18.000 a reacceleration in the economy at this point, because you 0:10:18.000 --> 0:10:20.440 look at retail sales they were very strong, as you 0:10:20.480 --> 0:10:23.320 point out, You look at the city Economic Surprise Index 0:10:23.360 --> 0:10:26.040 that's been ticking up, some of the regional surveys are 0:10:26.080 --> 0:10:28.520 starting to improve a little bit. Do you see that 0:10:28.800 --> 0:10:30.160 reacceleration impetus? 0:10:30.960 --> 0:10:32.720 You know, it's possible. Like I said, I sort of 0:10:32.720 --> 0:10:34.640 see the energy on the consumer side. We'll see how 0:10:34.640 --> 0:10:36.280 long it lasts, you know, I think you can call 0:10:36.320 --> 0:10:38.880 a reacceleration when you get there. I definitely am not 0:10:39.000 --> 0:10:42.000 talking to businesses who are talking about blowing out earnings. 0:10:42.720 --> 0:10:45.320 I don't. I don't hear one of those kind of accelerations. 0:10:45.320 --> 0:10:48.720 So I don't hear frothiness yet. But I am hearing 0:10:48.760 --> 0:10:51.560 some very positive vibes on the consumer spending side, which 0:10:51.559 --> 0:10:52.320 I'm pleased to hear. 0:10:52.960 --> 0:10:56.720 If inflation is warm, and maybe if there's upside risks 0:10:56.720 --> 0:10:59.960 still to inflation, why could there be more to it 0:11:00.080 --> 0:11:02.800 than just yeah, terriff, sorry, maybe, but like, could there 0:11:02.800 --> 0:11:06.680 be something more going on? And perhaps that consumer strength 0:11:07.320 --> 0:11:10.640 pretty large deficit still even with the revenue that's coming 0:11:10.679 --> 0:11:14.360 in from tariffs. Maybe someone like the it's been I 0:11:14.400 --> 0:11:16.240 don't know, what do you think is the story on inflation? 0:11:16.280 --> 0:11:18.040 How much is tariffs and how much is other stuff? 0:11:18.480 --> 0:11:20.520 Well, so I just think it takes a long time 0:11:20.520 --> 0:11:22.480 to get inflation back to two percent. If you go 0:11:22.520 --> 0:11:24.400 back and look at the Vulgar years, and of course 0:11:24.880 --> 0:11:27.160 he did stuff to the economy that was much more 0:11:27.160 --> 0:11:29.480 aggressive than what we did, and he of course he 0:11:29.480 --> 0:11:31.839 had inflation that was much more ingrained and didn't have 0:11:31.880 --> 0:11:34.160 an inflation target, but he took rates up a lot 0:11:34.320 --> 0:11:36.160 inflation came down a lot, but it didn't get to 0:11:36.200 --> 0:11:39.800 two percent. It was four, oh yeah, And you know, 0:11:39.960 --> 0:11:42.120 it sort of eked its way down from four to 0:11:42.160 --> 0:11:43.520 three and a half to three to two. 0:11:43.440 --> 0:11:46.080 And a half, and then throughout the eighties and nineties exactly. 0:11:45.720 --> 0:11:48.240 For twenty years until it sort of hit two and 0:11:48.320 --> 0:11:50.920 sort of starts sticking around too. So I give you 0:11:50.920 --> 0:11:54.160 that just for perspective, and you know, again from my experience, 0:11:54.160 --> 0:11:56.840 I'll tell you why that happens, which is people don't 0:11:56.880 --> 0:11:59.400 just immediately go back to the old number. You've got 0:11:59.440 --> 0:12:02.280 some amount of care to do wages and prices people 0:12:02.320 --> 0:12:05.640 who didn't raise it. People's expectations, I think are very 0:12:05.640 --> 0:12:09.720 significantly triggered by actual inflation. And so my old job, 0:12:09.760 --> 0:12:11.959 we had to raise prices every year, and we sort 0:12:12.000 --> 0:12:13.600 of thought about it, and a lot of times we 0:12:13.679 --> 0:12:16.319 raise price based on last year's inflation, and so it 0:12:16.480 --> 0:12:18.960 just there's some stickiness to it. And so what we've 0:12:18.960 --> 0:12:22.200 seen is very encouraging on the inflation numbers. They've gone 0:12:22.240 --> 0:12:25.240 from you know, seven at their peak down to you know, 0:12:25.280 --> 0:12:27.480 somewhere in the high twos. Maybe it'll tick up to 0:12:27.640 --> 0:12:29.680 the three now. And so I think that's one piece 0:12:29.679 --> 0:12:31.719 of it. Actual just take it's sticky. It takes a while. 0:12:31.720 --> 0:12:33.520 And then the second piece of it is, I do 0:12:33.559 --> 0:12:35.280 think you've got this tariff concern in there, and that 0:12:35.640 --> 0:12:37.960 people are passing on costs, and then people who don't 0:12:37.960 --> 0:12:40.480 even have the costs are using this as a cover 0:12:40.559 --> 0:12:41.360 to pass on costs. 0:12:41.360 --> 0:12:44.600 So just real quickly. Then, if there's all these factors, 0:12:44.600 --> 0:12:47.720 et cetera, why is there conversation about cutting rates, Or 0:12:47.760 --> 0:12:51.120 if there is conversation about cutting rates, how seriously should 0:12:51.240 --> 0:12:54.400 the should people be take those two percent commitment? 0:12:54.840 --> 0:12:58.120 Well, so there's calibration going on. So you've got unemployment 0:12:58.160 --> 0:13:01.240 that's low but maybe training. You've got inflation that's been 0:13:01.280 --> 0:13:04.079 coming down and maybe ticked up but maybe for one 0:13:04.080 --> 0:13:07.320 time reason. And you've got a neutral rate that is 0:13:07.480 --> 0:13:09.840 by all accounts lower than where we are, but lots 0:13:09.840 --> 0:13:11.720 of debate about is it just a little bit lower 0:13:11.800 --> 0:13:13.920 or is it significantly lower? And so I think those 0:13:13.960 --> 0:13:16.240 three things go together, and people just ask it, do 0:13:16.280 --> 0:13:19.040 you recalibrate to a different number in the context of this, 0:13:19.280 --> 0:13:21.680 or are we well positioned where we are? 0:13:22.040 --> 0:13:25.120 This discussion actually reminds me, what's your story for why 0:13:25.160 --> 0:13:28.360 inflation did come down in the post pandemic period. Is 0:13:28.360 --> 0:13:32.240 it the sort of immaculate disinflation explanation where the supply 0:13:32.360 --> 0:13:36.840 chain pressure has just started dissipating, or did the Fed's 0:13:36.960 --> 0:13:40.840 actions actually have a kind of sledgehammer effect here. 0:13:41.320 --> 0:13:42.760 I think it's in all of the above. I mean, 0:13:43.080 --> 0:13:46.240 if the FED doesn't act when people expect us to act, 0:13:46.480 --> 0:13:49.000 then I think that sort of unwinds expectations the way. 0:13:49.040 --> 0:13:51.760 That's not very helpful. On the other hand, you can't 0:13:51.800 --> 0:13:54.400 ignore that a lot of the supply constraints that we're 0:13:54.440 --> 0:13:58.360 driving prices up, commodity prices, ships backed up in harbor's chips, 0:13:58.360 --> 0:14:02.400 no in cars, people not at work. Those things also amilorated. 0:14:02.559 --> 0:14:06.199 We also had a really big immigration number for about 0:14:06.240 --> 0:14:09.480 two years. That meant, you know, the supply side jobs 0:14:09.480 --> 0:14:12.880 got filled a lot faster. It definitely released the pressure 0:14:12.920 --> 0:14:15.760 and a lot of things so supply help. Hopefully, the 0:14:15.760 --> 0:14:18.560 FED did its part and the combination of things brought 0:14:18.600 --> 0:14:18.880 it down. 0:14:34.680 --> 0:14:36.880 When we were in Alaska, we learned that there is 0:14:36.920 --> 0:14:40.480 a major furniture expo every year in your district in 0:14:40.520 --> 0:14:43.840 North Carolina. Also North Carolina. It's like, I think if 0:14:43.880 --> 0:14:47.160 people think of like regions that have lost from trade 0:14:47.440 --> 0:14:50.560 or regions that got hit really hard by free trade. 0:14:50.920 --> 0:14:52.640 I'm not even sure if it's true, but certainly that 0:14:52.800 --> 0:14:54.920 is the perception. It's actually it's your district. 0:14:55.000 --> 0:14:57.560 Well, this is one thing we learned by traveling with 0:14:57.640 --> 0:15:00.200 Tom and going on some of his trips to talk 0:15:00.200 --> 0:15:03.040 to local businesses. There is a sense that manufacturing in 0:15:03.040 --> 0:15:04.520 North Carolina has been hollowed out. 0:15:05.040 --> 0:15:07.360 Absolutely, it's a very short sense. But there's also cities 0:15:07.360 --> 0:15:09.120 in North Carolina that are some of the most dynamic 0:15:09.320 --> 0:15:12.280 in the entire country, especially over the last couple of decades. 0:15:12.440 --> 0:15:16.120 But I'm just curious right now, like tariffs in your district, 0:15:16.360 --> 0:15:17.120 what are you saying. 0:15:17.160 --> 0:15:21.480 So, no question, Historically, the textile industries, the furniture industries 0:15:21.480 --> 0:15:23.960 got hit very hard. If you look at the Carolinas though, 0:15:24.000 --> 0:15:25.800 and you took it the last twenty five years, you'd 0:15:25.800 --> 0:15:28.760 say there's also been a lot of foreign based manufacturers 0:15:28.760 --> 0:15:31.960 that have put manufacturing sites. I'm thinking of Greenville, South Carolina, 0:15:32.040 --> 0:15:36.440 Spartanburg where I was last week, where you've got BMW 0:15:36.480 --> 0:15:38.800 and big auto manufacturers you know, and their whole supply 0:15:38.920 --> 0:15:42.000 chains coming into town. You know what we hear, right 0:15:42.040 --> 0:15:45.320 now is it's very different by sector you're in, and 0:15:45.320 --> 0:15:48.160 it's very different by your position in that sector. So 0:15:48.560 --> 0:15:50.680 there are a lot of people who manufacture in South 0:15:50.720 --> 0:15:53.400 and South and North Carolina, but they source abroad and 0:15:53.440 --> 0:15:55.280 they're very worried about their costs. Think of the big 0:15:55.320 --> 0:15:59.200 auto manufacturers. There's a lot of people who manufacture in 0:15:59.200 --> 0:16:01.520 North Carolina and they're one hundred percent American made, and 0:16:01.520 --> 0:16:03.200 they think this is the greatest thing in the world 0:16:03.280 --> 0:16:06.400 because they'll get protection for their sectors. Or the people 0:16:06.400 --> 0:16:08.240 on the other side who've been you know, putting low costs, 0:16:08.240 --> 0:16:10.600 they're going to get So it's very very dependent. 0:16:10.280 --> 0:16:13.280 On where you say, well, speaking of you know, specific 0:16:13.320 --> 0:16:16.840 sectors potentially benefiting. There are loads of tariff headlines still 0:16:16.840 --> 0:16:19.160 coming in, but one of them that caught my eye 0:16:19.400 --> 0:16:21.760 was Trump saying that he was going to start a 0:16:21.840 --> 0:16:26.800 furniture tariff investigation with a view to setting tariffs on 0:16:26.880 --> 0:16:32.160 furniture imports into the US, specifically to help North Carolina. 0:16:32.200 --> 0:16:34.880 What's your immediate reaction when you see a headline like that. 0:16:35.640 --> 0:16:38.000 Well, we've been seeing a lot of headlines, you know, Yeah, 0:16:38.000 --> 0:16:40.600 I know on the tariffs thing. So first thing I 0:16:40.680 --> 0:16:43.040 downed is I tried not to serve headlines too much. 0:16:43.240 --> 0:16:46.400 We'll see what tariffs get applied on what industries, with 0:16:46.440 --> 0:16:48.960 what duration and what products, and that's what a lot 0:16:49.000 --> 0:16:52.240 of the manufacturers I talked to also do. I'm sure 0:16:52.280 --> 0:16:54.560 the people who manufacture furniture and North Calina would be 0:16:55.200 --> 0:16:57.960 very supportive. There aren't actually all that many. A lot 0:16:57.960 --> 0:17:00.920 of jobs have been lost, and I think if people 0:17:00.920 --> 0:17:04.439 start to consider bringing jobs back, the thing you hear about, 0:17:04.560 --> 0:17:06.159 you know, over and over and over again, is just 0:17:06.359 --> 0:17:09.919 availability of workforce and the cost of workforce. You know, 0:17:09.960 --> 0:17:11.960 the jobs that I think are most likely to come 0:17:11.960 --> 0:17:15.360 back are ones that are the least dependent on workforce, 0:17:15.480 --> 0:17:19.160 or have the highest skilled workforce, or have high paid workforce. 0:17:19.200 --> 0:17:21.240 And a lot of these jobs have gone to place 0:17:21.280 --> 0:17:24.200 with very low cost workforces. And I don't know the 0:17:24.280 --> 0:17:26.600 level of tariff that one would need to get to to, 0:17:27.680 --> 0:17:29.359 you know, bring those jobs back, but it's a pretty 0:17:29.359 --> 0:17:32.720 significant number. The other thing that's really not talked about 0:17:32.800 --> 0:17:34.679 much that I just think is interesting. I was in Hickory, 0:17:34.680 --> 0:17:36.439 which is a factory town. I talked to a lot 0:17:36.440 --> 0:17:39.679 of furniture manufacturers there, and they're looking for workers. This 0:17:39.760 --> 0:17:41.920 is during the COVID and they were, you know, having 0:17:41.960 --> 0:17:46.680 a very strong demand cycle. But I went to community college. 0:17:46.720 --> 0:17:48.880 I talked to a bunch of workers there and I said, well, 0:17:48.880 --> 0:17:51.119 you guys trained to get in the furniture industry, and 0:17:51.359 --> 0:17:53.119 several of them told me, you know, my dad was 0:17:53.160 --> 0:17:55.560 in there and got laid off, and so we're not 0:17:55.640 --> 0:17:58.280 going there. You know, the thought that people are waiting 0:17:58.320 --> 0:18:00.520 to go back into the jobs to build the matters 0:18:00.520 --> 0:18:03.000 a lot too. And so as we bring jobs back 0:18:03.000 --> 0:18:04.560 in the country, which would be great, and I hope 0:18:04.560 --> 0:18:07.440 we do, making sure there's stable jobs and their jobs 0:18:07.440 --> 0:18:08.960 that are going to be around for a generation is 0:18:09.040 --> 0:18:10.920 very important, I think in terms of getting workers into 0:18:10.960 --> 0:18:11.399 the jobs. 0:18:11.800 --> 0:18:14.560 We are recording this today that Chairman Powell gave his 0:18:14.600 --> 0:18:18.159 final speech as FED chair at Jackson Hole. It was 0:18:18.160 --> 0:18:22.160 a policy speech and he did not talk about FED 0:18:22.200 --> 0:18:25.480 independence and the attacks on FED independence that are coming 0:18:25.480 --> 0:18:28.400 from the White House and so forth, the political pressure 0:18:28.480 --> 0:18:30.840