1
00:00:00,040 --> 00:00:02,880
Speaker 1: Theta pied us a conference bots chief economists joins us.

2
00:00:02,920 --> 00:00:06,480
Speaker 1: Now to figure it out, Dana, these look like strong numbers.

3
00:00:07,840 --> 00:00:10,680
Speaker 2: Yes, consumers were much happier in December. We think it's

4
00:00:10,680 --> 00:00:13,840
Speaker 2: a reflection of the fact that inflation's lower, and also

5
00:00:13,920 --> 00:00:16,200
Speaker 2: they probably heard the news that the Fed's done hiking

6
00:00:16,239 --> 00:00:19,439
Speaker 2: interest rates, and they probably also saw mortgage rates come on.

7
00:00:19,640 --> 00:00:21,840
Speaker 2: So all that's really great news, and I think that

8
00:00:21,960 --> 00:00:24,560
Speaker 2: showed up in the December consumer confidence measure.

9
00:00:24,960 --> 00:00:27,320
Speaker 3: What about the expectations, I mean that number was also

10
00:00:27,400 --> 00:00:30,159
Speaker 3: quite good. However, they're still a lot of uncertainties for

11
00:00:30,240 --> 00:00:32,200
Speaker 3: next year. Walk me through the expectation read.

12
00:00:33,400 --> 00:00:36,720
Speaker 2: Sure, the expectations number jumped well above eighty and eighties,

13
00:00:36,720 --> 00:00:40,159
Speaker 2: at threshold that usually signals recession ahead. Now this is

14
00:00:40,200 --> 00:00:43,120
Speaker 2: one number, and for much of the year it's been

15
00:00:43,159 --> 00:00:46,640
Speaker 2: below eighty. So the thing is that consumers, when we

16
00:00:46,680 --> 00:00:48,400
Speaker 2: ask some point blank do you think there's going to

17
00:00:48,440 --> 00:00:51,440
Speaker 2: be a recession? About two thirds say there could be.

18
00:00:51,520 --> 00:00:53,480
Speaker 2: But it's not as strong as it was in terms

19
00:00:53,479 --> 00:00:56,480
Speaker 2: of that sentiment. So consumers are a little less worried,

20
00:00:57,160 --> 00:01:00,400
Speaker 2: but I think that they should still be concerned. Are

21
00:01:00,440 --> 00:01:03,280
Speaker 2: not going to rise as much all the excess savings

22
00:01:03,320 --> 00:01:06,000
Speaker 2: from the stimulus checks is going to go away. Lots

23
00:01:06,040 --> 00:01:09,039
Speaker 2: of consumers have debt, credit card debt and also buy now,

24
00:01:09,120 --> 00:01:12,520
Speaker 2: pay later types of loans. All those things are probably

25
00:01:12,520 --> 00:01:14,920
Speaker 2: going to coalesce into softer growth in the first half.

26
00:01:16,840 --> 00:01:19,600
Speaker 1: They've still got jobs though, that's the critical thing here.

27
00:01:21,240 --> 00:01:24,040
Speaker 2: Yes, that's true. Many consumers are working. And when we

28
00:01:24,080 --> 00:01:26,480
Speaker 2: ask CEOs of the biggest companies, what are you thinking,

29
00:01:27,080 --> 00:01:28,959
Speaker 2: many of them are not looking to let people go.

30
00:01:29,120 --> 00:01:31,280
Speaker 2: Many of them are looking to hold on to workers.

31
00:01:31,560 --> 00:01:34,199
Speaker 2: And we still have some hiring going on. But we've

32
00:01:34,200 --> 00:01:38,400
Speaker 2: definitely seen labor demand cool over the last year. Jolts

33
00:01:38,400 --> 00:01:41,880
Speaker 2: are down, quits are down, and businesses are starting to

34
00:01:41,959 --> 00:01:44,240
Speaker 2: let some folks go. So I think that we are

35
00:01:44,280 --> 00:01:47,600
Speaker 2: going to see cooler labor market again. To marry with that,

36
00:01:48,320 --> 00:01:51,560
Speaker 2: less strength, reduced strength and consumer spending in the first

37
00:01:51,560 --> 00:01:52,600
Speaker 2: half of twenty twenty four.

38
00:01:53,480 --> 00:01:56,720
Speaker 3: Dana, what do you think consumers are most sensitive too?

39
00:01:56,960 --> 00:01:57,040
Speaker 1: Like?

40
00:01:57,080 --> 00:01:58,960
Speaker 3: Do you think it's just gas prices at the pump?

41
00:01:59,280 --> 00:02:02,160
Speaker 3: Is it the mortgage rate? Is it headline?

42
00:02:02,400 --> 00:02:02,480
Speaker 2: Uh?

43
00:02:02,640 --> 00:02:05,600
Speaker 3: And the Times about the Fed cunning rates? Is it

44
00:02:05,600 --> 00:02:06,600
Speaker 3: going to be politics?

45
00:02:06,760 --> 00:02:07,160
Speaker 1: What?

46
00:02:07,160 --> 00:02:08,240
Speaker 2: What are they what are they.

47
00:02:08,160 --> 00:02:09,600
Speaker 3: Basing their feeling off.

48
00:02:09,440 --> 00:02:13,040
Speaker 2: Of sure, well, we actually ask consumers for writ ins,

49
00:02:13,080 --> 00:02:16,600
Speaker 2: and the writings still continue to complain about inflation, both

50
00:02:16,639 --> 00:02:20,720
Speaker 2: food and energy. Their concerns about politics were a little

51
00:02:20,800 --> 00:02:24,560
Speaker 2: less intense, but they are concerned about interest rates. But interestingly,

52
00:02:24,600 --> 00:02:26,920
Speaker 2: in December, the number thinking that interest rates were going

53
00:02:27,000 --> 00:02:29,959
Speaker 2: to continue to rise over the next year actually lesson.

54
00:02:30,120 --> 00:02:32,800
Speaker 2: So it's still inflation. I still think that's the big

55
00:02:32,880 --> 00:02:34,640
Speaker 2: story for consumers.

56
00:02:37,000 --> 00:02:40,000
Speaker 1: Is these numbers were consistent with the idea Dana that

57
00:02:40,040 --> 00:02:42,600
Speaker 1: the consumer though is going to continue to spend because

58
00:02:42,600 --> 00:02:45,480
Speaker 1: this is this is the concern that actually we don't

59
00:02:45,520 --> 00:02:48,120
Speaker 1: get a we don't we get a no landing. We

60
00:02:48,240 --> 00:02:50,840
Speaker 1: basically just get a mid cycle slow down. The consumer

61
00:02:50,880 --> 00:02:54,600
Speaker 1: picks up pace again. We're still seeing supply chain bottlenecks.

62
00:02:54,919 --> 00:02:58,919
Speaker 1: Goods inflation could come back. Services inflation still looks pretty elevated.

63
00:03:00,080 --> 00:03:04,160
Speaker 1: Are we setting ourselves up for a reacceleration of inflation

64
00:03:04,320 --> 00:03:05,840
Speaker 1: with these kinds of consumer numbers?

65
00:03:07,360 --> 00:03:11,200
Speaker 2: Well, it's yes and no. If consumers continue to remain resilient,

66
00:03:11,240 --> 00:03:13,280
Speaker 2: many of them are working and they don't really care

67
00:03:13,320 --> 00:03:15,640
Speaker 2: about how much debt they're racking up, then you could

68
00:03:15,639 --> 00:03:18,360
Speaker 2: continue to see spending in that you could see a

69
00:03:17,840 --> 00:03:22,200
Speaker 2: reacceleration of inflation. But the key thing is the Fed here.

70
00:03:22,280 --> 00:03:25,160
Speaker 2: The Fed has choices. The Fed can keep interest rates

71
00:03:25,160 --> 00:03:27,600
Speaker 2: where they are for a much longer period of time

72
00:03:27,600 --> 00:03:30,200
Speaker 2: than markets are pricing in. We think they're probably not

73
00:03:30,240 --> 00:03:32,480
Speaker 2: going to start cutting rates until the middle of next year,

74
00:03:32,919 --> 00:03:35,720
Speaker 2: and maybe only about one hundred basis points at most

75
00:03:35,760 --> 00:03:39,680
Speaker 2: markets are looking at six rate cuts. That's probably excessive.

76
00:03:39,680 --> 00:03:42,200
Speaker 2: And if the Fed season inflation not calming the way

77
00:03:42,200 --> 00:03:44,760
Speaker 2: it wants to, it'll just keep rates where they are

78
00:03:44,960 --> 00:03:45,400
Speaker 2: right now.

79
00:03:46,080 --> 00:03:47,920
Speaker 3: Dana, our question of the day that we're going to

80
00:03:47,920 --> 00:03:50,000
Speaker 3: have throughout the next couple hours is you know what's

81
00:03:50,000 --> 00:03:51,560
Speaker 3: going to matter most next year? Is it going to

82
00:03:51,560 --> 00:03:54,200
Speaker 3: be politics or is it going to be Powell? And

83
00:03:54,240 --> 00:03:56,160
Speaker 3: I'm really wondering. I know you said that they're not

84
00:03:56,160 --> 00:03:59,360
Speaker 3: that interested or not that focus on politics yet, but

85
00:03:59,360 --> 00:04:02,160
Speaker 3: we were talking geopolitical strategists who where like, once the

86
00:04:02,200 --> 00:04:04,840
Speaker 3: nomination happens and if President Trump's gets that, that's the

87
00:04:04,840 --> 00:04:07,880
Speaker 3: most dangerous time for US politics. How do you expect

88
00:04:07,880 --> 00:04:10,960
Speaker 3: that to sort of overlay the confidence from consumers?

89
00:04:12,160 --> 00:04:14,960
Speaker 2: Sure, I mean usually consumers don't really pay a ton

90
00:04:15,000 --> 00:04:17,760
Speaker 2: of attention to the election until October. We call that

91
00:04:17,760 --> 00:04:22,080
Speaker 2: the October surprise. Anything surprising that happens in October impacts

92
00:04:22,120 --> 00:04:25,320
Speaker 2: the election materially, and that's October of the election year,

93
00:04:25,440 --> 00:04:28,599
Speaker 2: not this October that we just had. But certainly the

94
00:04:28,640 --> 00:04:30,840
Speaker 2: economy is going to play into it. If prices are

95
00:04:30,880 --> 00:04:33,240
Speaker 2: starting to pick up again, or if there is a

96
00:04:33,240 --> 00:04:40,680
Speaker 2: recession and consumers are disgruntled, that can matter. Dan.

97
00:04:41,040 --> 00:04:42,440
Speaker 1: The other question that a lot of people are asking

98
00:04:42,520 --> 00:04:46,120
Speaker 1: right now is our financial markets and the financial market

99
00:04:46,160 --> 00:04:48,359
Speaker 1: strength that we're seeing having an impact as well in

100
00:04:48,440 --> 00:04:52,640
Speaker 1: terms of people's confidence. How does this break down by

101
00:04:52,800 --> 00:04:55,760
Speaker 1: age cohort? How does this break down by socioeconomic group.

102
00:04:56,279 --> 00:04:59,560
Speaker 1: If the financial markets are performing, that's a big that's

103
00:04:59,560 --> 00:05:02,520
Speaker 1: a su substantial amount of money going into people's pockets

104
00:05:02,600 --> 00:05:05,720
Speaker 1: or certainly makes them feel better. What's the correlation?

105
00:05:07,120 --> 00:05:10,000
Speaker 2: Sure, certainly for those people who have assets like financial

106
00:05:10,040 --> 00:05:13,040
Speaker 2: assets and housing, when the market's doing well, when mortgage

107
00:05:13,120 --> 00:05:16,320
Speaker 2: rates are falling, that's great for those folks. Most people

108
00:05:16,360 --> 00:05:19,359
Speaker 2: don't have any stocks, and many people are renters, but

109
00:05:19,440 --> 00:05:22,240
Speaker 2: when they hear the stock markets doing well, they signal

110
00:05:22,320 --> 00:05:23,760
Speaker 2: they see that as a signal that they're going to

111
00:05:23,800 --> 00:05:26,679
Speaker 2: continue to remain employed, and that's going to keep them

112
00:05:27,360 --> 00:05:30,359
Speaker 2: basically happy because you'll have money coming in. So I

113
00:05:30,400 --> 00:05:34,200
Speaker 2: think stock market and financial market strength is good for

114
00:05:34,320 --> 00:05:35,400
Speaker 2: consumer confidence.

115
00:05:36,000 --> 00:05:38,479
Speaker 3: Dani, And last question for me is the vibe session

116
00:05:38,920 --> 00:05:44,279
Speaker 3: over the Vibe session, Yeah, where it's like you're still

117
00:05:44,320 --> 00:05:47,280
Speaker 3: doing stuff, but you feel really bad. There's actually no

118
00:05:47,440 --> 00:05:50,640
Speaker 3: recession in the data, but the disconnect between the reality

119
00:05:50,760 --> 00:05:51,920
Speaker 3: versus how people feel.

120
00:05:52,520 --> 00:05:56,440
Speaker 2: Is that still happening well again, because consumers are still

121
00:05:56,480 --> 00:05:59,400
Speaker 2: focused on inflation and when you go to the grocery store,

122
00:05:59,480 --> 00:06:01,960
Speaker 2: food price are still high. When you buy a car,

123
00:06:02,040 --> 00:06:05,359
Speaker 2: the insurance is high, and rents are high. That's affecting

124
00:06:05,400 --> 00:06:08,640
Speaker 2: people's sentiment. So even though they're going out and spending,

125
00:06:09,600 --> 00:06:12,560
Speaker 2: spending is much less and they're still upset about inflation

126
00:06:12,720 --> 00:06:14,160
Speaker 2: and that's still coming through.

127
00:06:14,560 --> 00:06:16,839
Speaker 3: Hey, Dana, thanks a lot, really great to get the perspective.

128
00:06:16,839 --> 00:06:17,320
Speaker 1: Thank you so much.

129
00:06:17,320 --> 00:06:20,080
Speaker 3: Sana Peterson at the Conference Board, Chief Economist,