Speaker 1: Bloomberg Audio Studios, podcasts, radio news. He is magnificent. The
Speaker 1: essay at High Frequency Economics is a yield based analysis
Speaker 1: of the economy. It is what Karl Weinberg did at
Speaker 1: Lehman Brothers for decades, and it was just thrilled that
Speaker 1: he could join us here this morning.
Speaker 2: Karl.
Speaker 1: I love your research note and that you say the
Speaker 1: labor market's going to hover, but GDP may be light
Speaker 1: link the two together into the first part of twenty
Speaker 1: twenty six.
Speaker 3: Hi Tom, good morning, Thanks for having me back on
Speaker 3: the show. It's been a while. You know, we're at
Speaker 3: full employment. That's my assessment anyhow, others might not agree
Speaker 3: with that. But even at a four and a half
Speaker 3: percent unemployment rate, which I think, by the way, is
Speaker 3: going to go down in this morning's report, and we'll
Speaker 3: get a revision downward to the figure that we saw
Speaker 3: for in November. But when we're at full employment like this,
Speaker 3: all right, the economy has trouble growing. The only way
Speaker 3: it can grow is either by immigration or getting more
Speaker 3: people in the labor force, or by increasing productivity. So
Speaker 3: productivity was really strong in the third quarter. The economy
Speaker 3: grew well, but there's no promise that those productivity gains
Speaker 3: are going to continue into the fourth quarter. So GDP
Speaker 3: growth may be capped, if you will, by the economy
Speaker 3: being at full employment right now.
Speaker 1: I really I'm more focused, folks on the SAGGI GDP
Speaker 1: outlook of selected economists. Mister Myron want six rate cuts
Speaker 1: one and a half percent? Down? Down down? Is that
Speaker 1: a Carl Weinberg theme.
Speaker 3: Absolutely not. I think Myron is wrong. I think he's
Speaker 3: abusing and misinterpreting the Tailor rule and the estimates and
Speaker 3: the importance of our star within the Taylor rule. Our
Speaker 3: star certainly has come down, but potential GDP has also
Speaker 3: come down, potential GDP growth. So when you put the
Speaker 3: two together, there's no recommendation from the Tailor rule or
Speaker 3: anything that I know about economics for the Fed to
Speaker 3: continue to cut rate with the economy at full employment.
Speaker 1: This is Kurt Weinberg and Michael Faroli at JP Morgan
Speaker 1: this phrase potential GDP. None of these people within the
Speaker 1: Trump administration talk about. It's like they're blank to it.
Speaker 2: Carl. The focus obviously today will be on the labor market.
Speaker 2: But the other side of the Fed mandate is inflation.
Speaker 2: What's your inflation view, are you concerned that we may
Speaker 2: see stick your inflation that maybe the market's discounting.
Speaker 3: I'm concerned about more inflation as twenty twenty six progresses,
Speaker 3: because if the economy continues to grow but it can't
Speaker 3: find the workers to make it grow, then we'll have
Speaker 3: too much income chasing too few goods, and that will
Speaker 3: put upward pressure on prices once again. To me, that's
Speaker 3: what the FED should be thinking about. To my clients,
Speaker 3: that's not what the FED is thinking about. But in
Speaker 3: my view, that's what the FED should be thinking about.
Speaker 2: So given that backdrop, how do you expect the FED
Speaker 2: to behave this year? Is it one cut too cuts?
Speaker 2: Do they need to be more aggressive or less aggressive?
Speaker 3: I don't know. I mean, that's really a big question
Speaker 3: we have. First of all, we have four new voters
Speaker 3: on the FOMC. We've lost both of the voters who
Speaker 3: dissented from previous rate cuts, and at least two of
Speaker 3: the new people coming on board may be more inclined
Speaker 3: to ease rather than to hold steady. Even as soon
Speaker 3: as the next meeting against that, FED Chair Powell still
Speaker 3: commands probably three votes on the FOMC out of the twelve.
Speaker 3: And that's the swing, if you will, between those who
Speaker 3: will ease and those who will settle. So I don't
Speaker 3: really know where they're going to go on this, but
Speaker 3: what I'm hoping to see as we move through the
Speaker 3: year is a change in the perception that payrolls are
Speaker 3: slowing because the economy is weak. That's where the FED
Speaker 3: is right now to payrolls are slowing because the labor
Speaker 3: market is tight and there just aren't enough workers to
Speaker 3: hire to keep payrolls growing quickly.
Speaker 1: Some time left here, and I want to get you
Speaker 1: on much more in twenty twenty six. You should see
Speaker 1: where he lives. I mean I took the Nash Rambler once. Yeah,
Speaker 1: I had to put you know, the chains on it
Speaker 1: in I'll enter to get up. Okay, it's up the toconomy.
Speaker 1: You know it's it's like God's country. Yes, sure it's beautiful,
Speaker 1: Carl in your note, And I got any ways to
Speaker 1: go your Carl, but I got to go to your
Speaker 1: legendary reputation on the Pacific rim and on crisis. Do
Speaker 1: you are your radar up in twenty twenty six for
Speaker 1: China or other currency or debt upsets.
Speaker 3: I'm upset for I'm on the alert for a lot
Speaker 3: of things coming from China this year that we've never
Speaker 3: seen before. Right, if you read the IEA's Critical Critical
Speaker 3: Critical Minerals Outlook, I believe is the proper name of it. Okay,
Speaker 3: China sits at the root of every supply chain for
Speaker 3: every critical material for every Western economy, no exceptions to that.
Speaker 3: So all right, this is a weapon that G tested
Speaker 3: with rare earths last year that he's testing right now
Speaker 3: again with Japan. And G has things that he wants
Speaker 3: and I think he's going to asking for them with
Speaker 3: Lee Bridge. I think that's the risk for China in
Speaker 3: the new year.
Speaker 1: Carl, not enough time, Thank you so much, Carl Weinberger.
Speaker 1: With this high Frequency Economics, just definitive research report,