Moody's Talks - Inside Economics - A Plethora of Data

Episode Date: March 28, 2025

Mark, Marisa, and Cris break down this week's flood of economic data and explain how new auto tariffs will affect consumers and the overall economy. Their conversation addresses important concerns about the quality and availability of government statistics as they consider private-sector alternatives. They wrap up the episode with the ever-popular "statistics game" highlighting key economic indicators and with responses to listener questions. Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s AnalyticsFollow Mark Zandi on 'X', BlueSky or LinkedIn @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn Questions or Comments, please email us at [e-mail]. We would love to hear from you.  To stay informed and follow the insights of Moody's Analytics economists, visit Economic View. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Inside Economics. I'm Mark Zandi, the chief economist of Moody's Analytics. And I'm joined by my two trusty co-host, Chris DeReedies and Marissa Dina Talley. Hi, guys. Hey, Mark. Happy Friday. What's that? I said, happy Friday.

Happy Friday. Happy Friday. You know, I like these podcasts where it's just the three of us, you know, sometimes. Me too. You're right? It's a little freer. Is it, you feel freer? I feel free.

I do. Yeah, I don't feel constrained. You must have. wonder what happens when I'm unconstrained then yeah I would love to see that that would be a podcast with just you pretty ugly pretty ugly yeah yeah so how are you guys doing everyone okay a good week yeah we had our webinar earlier what's going on yeah yeah we had the webinar on Tuesday oh yeah you know months ago it does it's feel like that was like a week ago but it was a few days ago Great title, too, which you came up with Marissa, Trump, tariffs, and tail risk.

I thought that was a pretty cool. I think that explains all the people who, I think we had 1,600 people on the webinar, didn't we? Something like that. Yeah. Yeah. I haven't seen the feedback yet. Nor have I, no. You know, I take that feedback very personally.

I know. If someone's unhappy, we actually call them up and say, well, what the hell? You know, why are you unhappy? Yeah, yeah. You ignore the 99 people who said, you know, it's great. I loved it. That one person. It could have been better.

Well, here's the thing. I've been doing webinars since the beginning of time. I don't think I've ever had a webinar where I've had perfect feedback. There's always somebody. There's always somebody. Right? You know? Absolutely.

Especially in this day and age. Because, you know, given the political environment, hard not to get someone upset about something. We did get a comment during the webinar. Did we? That someone was, yeah. Oh, we were being biased. One-sided. Yeah. Yeah. I want to talk to that person. Did you get the name? Exactly. Exactly. Yeah. Yeah. We'll have the name. Okay. All right. Mark, you know where you could get a great summary of that webinar. Chat, GPT? Well, I was thinking your newsletter. Oh, my news. newsletter on LinkedIn. Yes. Yeah. Inside Economy, it's called Inside Economics. Way to tee that up, Chris.

Thank you. I tried. I tried. Nicely done, Chris. I tried, but, you know, the two of you are like LinkedIn Mavens. You've been doing this. I'm not. No, I'm definitely not, no. Oh, I thought you were, you're on LinkedIn, though? I'm on it, but I don't, I'm not very active. Oh, you're not very active. Because you're active. Not as active as you. Oh, really? You are on there and posting right away. Well, that's because I have Sarah. Sarah's a godsend.

But what was it going to ask? Oh, explain the whole newsletter thing. What's the newsletter thing on LinkedIn? So there's a option on LinkedIn where you can create newsletters, a weekly newsletter that goes out to subscribers. So people who are linked to you, certainly they should be already getting a notification that, hey, there's this newsletter out there if you want to subscribe. And otherwise, if you do a search on Inside Economics, you should be able to pull that up.

Oh, oh, so this is more like the content is pushed to you as opposed to you going to it. Is that how you think about it? You just have to subscribe. But yeah. Yeah. The thing about the newsletter is it's the posts are not limited as they, as a normal post or a regular post is. So you can have multiple charts.

You have a more in-depth type of article. You can have video, you can have pictures. Right, so it's just like a newsletter. It's a richer form. So your first newsletter post includes a full summary, really, of the webinar. All the explanations for all the different parts that we went through in terms of the tariffs and their impact. And you have multiple charts in there. It's the same article that we posted on our Inside Economics website, no, our economic view.

Economic view, right. I'm getting lost in all the different ways we get content out there. You know, the thing I like it most about that newsletter? What's that? I like the Ben Franklin logo. Yeah. Well, that's our podcast logo. I know.

I love that logo. Okay. Good. Is it just a love of Philadelphia? You know what I like most about it? It doesn't have that big M on it, you know, the big Moody's M. What do you guys think of that big Moody's M? We'll have to edit this part out of the podcast.

No, no, no, no. I want people to hear this. This is authentic. I like the M. And I'm on record liking the M. Oh, yeah, I do. Oh, my gosh. I do.

See, she's sucking up to the powers at B. That's not true. That is absolutely not true. I don't know who those powers are, but you're sucking up to them. I can feel it in my bones. In fact, I started signing my own name as M-apostrophe A-R. ISA. What?

Marissa, with an M-apostrophe. You could do it too, Mark. Oh, actually, now I have a different view on that whole big M thing now that you say that. I could do that. I could do a big M with a posthorpe

ARK. Oh, man. Okay, I'll have to think about that. Yeah, think about it. My view might change on the whole M thing. What's your view on the M thing? Chris? Since you don't have a strong view on the M thing.

You don't have a strong view on the M thing. It is a nice shade of blue. I think they chose a nice shade of view. Right. Do you think the folks out there understand what we're talking about when we're talking about it? No, not at all. Oh, really? Okay.

Probably not. Just think Moody's big M. Moody's, right. So when did this happen? I guess last year, Moody's changed its branding and Moody's changed its logo and color and it was a big to-do internally at least. And very expensive, I'm sure. And obviously it was very divisive here,

whether people like that new logo or not. That's right. Okay, well, we all have a view on the M, that's for sure. All right, but we better move on, even though I love the chit-chat. I could just chit-chat all day with you guys. But we better move on to the economic data. Plethora of data. I haven't used that word in a while, plethora.

It's a good, good word, don't you think? It applies. It applies. I mean, lots of data. Almost too much data. Yeah, almost. So maybe I don't know where to start. Maybe Marissa, I'll turn to you.

What's the data statistic of the week that you would point to? Well, I think it would be what came out this morning, which is the data on spending an income and the personal consumption expenditures deflator. that would be my highlight of the week. We can talk about some of the other stuff. But yeah, so just kind of to sum it all up, personal income came in very strong. It rose 0.8% over the month, which was the fastest rate of income growth since January of last year. And it was up 4.6% year over year. I'm going to stop you right there. I take umbrage with the last year. And it was up 4.6% year over year. The savings rate. I'm going to stop you right there. I take umbrage with the. the way you, that's another good word, by the way.

Umbrage. I'm not sure I'm using it properly, but umbrage. You said, I'm going to focus on the income spending and inflation data. And you began with the income data, which was, which it was strong, but it kind of belies the weakness. I mean, the whole report was, in my view, weak. I would have led with the weak real consumer spending number, no? Or the high inflation number.

But you started with the income number. I'm just very curious. I'm just trying to start on a positive note. Okay, okay, fair now. Everything else I'm going to say is next. Proceed, proceed then. I thought you were going in order of the release. Well, that is actually what I was doing.

And it happens that that order was positive to negative. Yeah. Positive. Okay. Yeah. I'll stop. Yeah, it goes income deflator spending. Okay.

Follow along. I think she's getting annoyed at me, don't you think, Chris, I can feel it. I can feel it in her, no? All right, go ahead. Now she's really annoyed. No, I'm not annoyed. They control, Marissa.

Okay, I'll stop. I'll stop. I'll come to expect this sort of thing. This is uncontrolled mark. Now you're observing. No, unconstrained mark. Unconstrained mark. Yeah, this isn't news, Mark.

Oh, this is dark mark? What's that? Is that dark mark? Well, that's a little extreme. Like dark matter? All right. There's no reason why we should be punchy, but I feel punchy for some reason. I'm not sure why. But go ahead. A long week. I'll stop. I'll stop. I'll stop. I'll stop. Okay. So personal income was good, right? And it was up by 0.8%. As I said, month over month. Savings rate rose. Disposable income rose by a pretty strong amount. Now, all the components of personal income were up over the month.

Part of this strength in this release, and I don't know, maybe you guys know more detail about this than I do. I've searched for this, but I don't have a lot of insight, is that there was a big legal settlement payment. I don't know if it was the Facebook. Was it the Facebook settlement? You know, I chat GPT did it, and she didn't know.

Yeah, and I did too. She mentioned meta. She mentioned a Twitter settlement, but they seem too small. Maybe if you analyze it, maybe. Yeah, I'm not sure. And also, I'm also wondering why I didn't get part of the Facebook settlement too. That's my main question. But if that's what it is. I don't know. It said there was a legal settlement paid that shows up in transfer payments from a social media settlement and a medical device settlement. But it didn't say what the companies were. So I didn't know if it. it was the meta settlement or not. But that boosted transfer payments 2.2% over the month, which was really big. So a lot of this strength is sort of artificial because of this one-time settlement. But if you take that away, I mean, even if you just look at compensation was up half a percentage point over the month led by wages and salaries and supplements to wages and salaries. There was a social security adjustment back in January that's now baked into the data. So this was a good report, right?

on the income side of things. Now, if we go to the other stuff, it wasn't so great. So spending growth was weak. So spending rose only 0.1% over the month. And for the first time in three years, spending on services fell. So all that spending was led by spending on goods, and it was led by spending on autos, which could suggest that perhaps people are buying ahead of the imposition of the tariffs. Yeah, so the decline in services is weird. There was a big decline in spending on food services and accommodations, so restaurants, hotels, that sort of thing, travel.

And we've looked at other data that shows that there may be weakening in consumer spending on travel-related things and entertainment-related spending. So that kind of jives with this too. So the spending data here quite weak. Anything you want to say about that, Mark? Yeah, I think it was just a really weak report. I mean, forget about the income. I think that was just messed up by this couple payments made for selling court cases,

which we don't quite know what that is. Also, I think there was ACA, Affordable Care Act tax subsidies that do things up. And I don't think the problem right now is with the job market or income. That's okay. But the real issue is spending, that's really gone soft here. I mean, real consumer spending after inflation is no higher today than it was back at the end. You go all the way back to November last year. It's basically flat.

It goes up a little bit, goes down a little bit, it's basically flat. That's a pretty significant shift. If it continues, you know, maybe it's just temporary, but doesn't feel that way because, you know, the softnesses and things that feel like are being affected by the uncertainty created by, you know, the chaos out there in terms of economic policy, the tariffs and the trade war and that kind of thing. So it just feels, feels like a pretty, I wouldn't say disconcerting, but kind of in that direction. report. The other thing is inflation was, you know, you didn't get there, and I know you're going to go there next, but inflation was hot. I mean, it was pretty strong. So you want to fill us in on that on the PCE, the consumer expenditure deflator? Yeah, the consumer expenditure deflator rose 0.3% over the month. This was the same as it rose in the prior month. It's up 2.5% year over year.

but core PCE came in pretty, actually both of these were above expectations, right? But core PCE rose 0.4% over the month, which puts the year-over-year rate of core inflation at 2.8% year-over-year. So this was definitely a lot of those durable goods, I think. Yeah, and that core was an acceleration, on a year over a year over. year basis, that core. So in January, it was up 2.7. Now it's up 2.8. So we're going in the wrong direction there on core inflation. Yeah, durable goods. Inflation rose 0.4%, which is the strongest increase it's been in months and months and months. Yeah. And that maybe, it just feels like the tariffs in the trade war, the fingerprints are all over this. And it's doing what economists like, well,

like us have been saying, this hurts growth. Consumer spending has gone flat now since last November, and it lifts inflation. And you can already feel it. I mean, businesses are already starting to push up prices in anticipation of the tariffs, maybe because the demand is being, has, like you mentioned, vehicle demand, but pulled forward. So, you know, it just feels like this is the leading edge of a real problem in the economy, and that the next thing to go, and really, the only thing, the only thing keeping us now from going into recession is jobs and income. That has to hold firm. If that doesn't hold firm,

that feels like the fodder for an economic downturn. So we're right at the cusp of, you know, determining which direction the economy is going. And this report, in my mind, just puts everything, all that into relief, you know, to clear relief. The income, I think that's, that's backward-looking, that, you know, doesn't say very much. It's really the real spending in the inflation statistics that really, or the point here. Chris, what do you think? What's your interpretation? Yeah, I'd agree on the markets would agree with that assessment as well, right?

The stock market plummeted this morning. Oh, is it? Is the market down? Down 600 plus points. Wow. Oh, okay. The 10 years down, 10 basis points. I mean, that's.

Oh, wait, wait. So the stock markets down and bond yields are down? Yes. Okay, so what's the message in that? Inflation. I think it's gross. Right? It's probably both.

Or both. Well, if it was inflation, wouldn't that mean interest rates go up? Not down? Yeah. Yeah, that's right. Right? I mean, if you get both a, if you see red stock price, red in the stock on your screen for stock prices and you see lower yields, it's saying the market is, investors are saying,

oh, I'm worried about the economy's growth. No? Are, but I think they're reacting off of the PCE report. PCE. Maybe because the link is, that means. the Fed's not going to ease. Yeah. So that just exacerbates the growth concerns.

Right. Yeah. Okay. Wow. Okay. I also noticed the saving rate. You mentioned this. The saving rate is pushing up, right?

That's right. Yeah. It went from 4.3% to 4.6% over the month. If my memory serves as you go back a few months ago, like in the last year, it was pretty solidly in the three. So we've pushed up here in a meaningful way. I think almost a percentage point from the bottom on the saving rate. And that also is very consistent with worries about spending.

You know, the saving rate's gone up because stock market is down. Wealth effects would suggest that consumers turn more cautious. High-end, well-to-do consumers turn more cautious. That means a higher saving rate. And it's less spending. Another reason for some nervousness about, you know, where the economy is headed here. Yeah, absolutely. I mean, I think that's what we're seeing is this pullback in spending, particularly

among discretionary type spending. Yeah. And you said on the services, it was restaurants. On restaurants, you saw a real weakness. Yeah. So it all kind of fits, kind of the narrative that, look, this economy's really beginning to struggle. It's not in recession, but it feels like it's headed in that direction that things don't

change here. Anyone disagree with that? No. Okay. No. All right, Chris, what's in all the plethora of data statistics that came out this week, what would you point to other than, what Marissa did.

I mean, those are the main ones. These are the key. Yeah. Yeah, do you want me to reveal my statistic? No, no, no. We're going to play the stats game today. All right. We can wait.

Oh, I should just say one other thing was that we got the final read on GDP. We got the third print on fourth quarter GDP, which came in at 2.4%. That was actually revised up a tenth of a percentage point from 2.3%. So that's the final final for Q4. And the one-tenth of a percentage point revision came because imports were revised lower. So net exports were actually a little bit higher in the calculation. Right. I noticed inventories were not quite as, they didn't build quite as much as either, which

that's right. That's more of a positive for current quarter growth. But we'll come back to that a second. Didn't we get the consumer confidence measure from the conference board this week? We got both of them. We got both of them. The University of Michigan came. I didn't look at what happened.

What was the university? There's two surveys. Take a guess. Take a guess. Well, I think this was the second print, though, wasn't it? The first print was, wasn't this an update for the month? I mean, I think they previously released a couple of weeks ago, and it was down quite a bit. I assume it remained down week, 55, 60, something like that on the University of

Michigan. 57. It fell 7.7 points, yeah. Okay, yeah. When that's on top of the conference, there's two measures of, well, consistently followed measures of consumer confidence or sentiment. One is the University of Michigan survey I've done every month, and we got that data point today.

And the other is the conference board survey, and I think we got that on Tuesday for the month of March. Both of them fell very sharply. And that's also consistent with the concerns about the economy, right? that consumers are really on edge here, really on edge. In fact, I think I put this up on LinkedIn. You know, my favorite statistic leading indicator of recession is the Conference Board Survey of Consumer Confidence.

If it falls more than, good rule of thumb, falls more than 20 points in a three-month period, we're going into recession. Consumers are running for the bunker, going to stop spending. and if history is a guide, recession begins six months later. And I think because of the decline in March, that's the read we got on Tuesday, the index is now down 17 points over the last three months. I think something like that, 16. Yeah, 16.8.

Is that what it is? So not quite recessionary, but certainly. Darn close. Pretty darn close. Pretty darn close. Okay. Okay. Okay, I guess the other big news of the week, economic news of the week, was more on tariffs on trade. This time it was on autos. Chris, any thoughts on the announcement? This was yesterday on 25% tariffs on auto imports and auto parts imports, with some exceptions.

Yeah, certainly another inflationary type of effect here, right? The estimates are for an increase in prices of of autoes somewhere between five and even $15,000, right? So clearly that's going to have some impact. There's some, there's some complications in terms of the imposition of the tariff on, what is it, the imported parts with foreign content from Canada and Mexico. So for the time being, those USMCA parts are excluded, but just to buy time to, figure out a mechanism to charge. So the impact could even be higher than the initial estimates here once they figured things out. So yeah, another reason for some concern, I would say,

in terms of both the consumer and the economy. Mercer, any perspective on the auto tariffs? They're big. They're big. I think they're still a little confusing from what I've read. It's complicated because of what Chris just said, parts that are made in the U.S. but assembled somewhere else, for example, if parts come from Mexico, but it's assembled in the U.S. or vice versa, tariffs will only be levied on the parts that are manufactured outside and not assembled. So some automakers have said they, or actually I think the government has said they have to figure this out, you know, have to figure out this calculation of how much of a car is actually imported. So I think it's not 100% clear, but a 25% tariff on imported vehicles is very large. I will note that I

saw there was an announcement from Hyundai that they're going to invest billions of dollars in producing more vehicles in the U.S. as a result of these auto tariffs. So they already produced some vehicles in the south and they're, I think, putting $10 billion or 20 billion or something into making more of their vehicles. Do you believe that? To get around the terrorists? That they'll actually do it? I mean, do you remember Foxcon?

Does anyone remember Foxcon? No. Yes. They said, I'm going to invest $10 billion. It's kind of the same number. $10 billion in a facility in Wisconsin. That was back under President Trump's first. term with those tariffs when those tariffs were imposed.

Yeah. What happened to that? What happened to that? Nothing. Nothing happened to that. Nothing. In fact, the state of Wisconsin, they ended up a billion dollars in other tax incentives that they paid out.

And I think there's some Foxcon facility there, but I think it's like, it's a fraction of what it was. So I don't know. You don't believe it. No. Well, you have to be careful. Some of this might already have been in train. Yeah.

Already planning to... That's true. Yeah. Right. Right. What was Apple, I think, had an announcement recently. Yeah, I don't believe the tariffs or a reason why they're investing in a facility. Is it South Carolina, I believe?

By the way, I think they get Inflation Reduction Act tax credits. I think that's... Oh, I'm sure they still do, right? Yeah. Yeah. Yeah. At least so far, maybe it gets repealed, I don't know. Here's the thing.

It makes me nervous. And maybe this is why the market kind of... having a real indigestion, this feels like these tariffs are real. They're that, you know, there are not some negotiating ploy that's going to go away. When you do this, this is a big deal. And it's not just one country. It's not like I'm or two countries. This is a lot of countries.

This is Canada, Mexico. It's Japan, Korea. It's Germany. You know, this is going to affect. And that's just the folks that assemble. There's a lot of parts suppliers all over the planet. So it just feels like the signal in this move is, you know, of course, it can all be taken away. I'm not saying that.

And it's still a reasonably high problem. And that's still our baseline. There's a high probability that this all goes away at some point. The president will pivot on all this. But I don't know. I say that with much less confidence today as a result. result. This feels like a more permanent kind of, this is the world that we're going to face going for at higher tariffs. Now, we'll get a better sense of that next week because I think that's when

the so-called reciprocal tariffs are going to be unveiled. But we'll see. I don't know. I'm getting more of the mind that we've got to build in tariffs here for, you know, an extended period of time. I don't believe they're going to remain forever. I don't believe that at all because there's going to do so much damage to the economy and to the stock market and everything else. But I do think we, this is going to go further than I think we, we have built into our, you know, kind of baseline thinking. Another reason to be a little bit nervous, a little bit more, significantly more nervous about the economy's prospects here going forward. Here's the other thing. I think people, maybe it's just me.

You know, I hadn't, this hadn't crystallized in my thinking. But the tariffs, you know, the. automakers may decide not to pass through all of the tariffs onto consumers because they want to preserve sales. I mean, the other thing that's going to happen here is they're going to jack up price on the vehicle. Say it's 10%. You know, the tariff is 25%. Let's say they jack it up 10. That means the new vehicle price goes from on average right now. It's 50K, almost on the nose to 55K. it's already on a 50k is already on affordable for most American families 55K now you're making it really tough so that's going to hit sales so that also has all kinds of ramifications right i mean

you know think about the auto dealers think about transportation and distribution think about insurance think about maintenance i don't know i haven't even thought about in the context of lending you know auto lending i don't know what kind of impact it will have on auto lenders i'm not sure But the knock-on effects are significant. So it's not only just about raising price and hitting real income. We're going to sell a lot fewer cars. Now, more of the hits going to be on imports, but it's also going to, you know, it's going to, the domestic automakers are also going to raise price, and it's going to affect their sales. Now, they'll get a higher market share, so the net of all that might be a wash, but that means fewer sales, and that has implications.

You know, the dealers probably employing more people. The auto dealers, I'm making this up. Maybe somebody can chat GPT it. They employ more people than the automakers employ in the country. I'm guessing. I think, yeah, I think I saw like $2 million or something. Yeah, two million. I think vehicle manufacturers is more like a million.

Yeah. A million people working in it. So, you know, it just goes back to the point. It's inflation. Tariffs are inflationary and they hurt growth. and earth growth. And then, again, I keep coming back to this. Who in their right mind is going to invest in the United States based on these tariffs? Are you kidding me? Hyundai. Oh, yeah, Hyundai, Monday. But come on. That's why I don't believe it. I just don't believe it.

But, you know, if you want to build a vehicle manufacturing plan, how long do you think that takes? Oh, it takes a year. A quarter? A year? It takes years. It takes years. And then how long long is the life of that plant? Decades. Decades. So are you telling me I can count on those terrorists for decades? No. No.

This is not happening. So, you know, I don't know. I just, that announcement on autos, I, you know, I really wasn't expecting that. I really didn't think, I didn't think that was going to come before the reciprocal tariffs. I guess maybe they had, they thought they had legal, the administration thought they have, they think they have legal authority to do it, and therefore went forward with it. But I think that that may be a game changer in terms of, you know, how this all plays out.

Any thoughts on that? What's your take on irreparable damage here in terms of, you know, foreign consumers or even, yeah, foreign consumers just turning their backs and saying, you know, I don't want anything to do with American products or, you know. Well, I think that's more, that I don't think it's irreparable. I mean, that's, that's more temporary. I mean, because ultimately, I'm going to buy what I want to buy. You know, I may forego for, you know, to make a statement for a month, two, or three, but I don't know that will last. But more irreparable and nothing's totally ever always, you know, completely irreparable. The more irreparable is what it does to supply chains, you know, what other countries.

If I'm not going to locate in the U.S., that means I got to, I'm going to change my focus and invest somewhere else, that's going to happen. And once that happens, how do you turn that around anytime soon? I mean, that may be the definition of irreparable. Yeah, I have to believe any Canadian manufacturers looking for other market, right? They were so tied at the hip with the United States. Now they have to diversify, right? Right.

Even if we called the whole thing off, right? I think there's some going to be some fallout. Of course, you know, it's going to happen de facto if those chairs go in place because sales are going to collapse. Right. And they have to look for it. It's a trade between the U.S. and Canada, the trade between Mexico and the U.S. is going to fall sharply between Germany and the United States is going to fall sharply

between Japan, Korea, and the United States is going to sharp. So those companies are, they're going to direct someplace else. Some place they're going to want to sell their product. I've read there's already talks between the Canadians and the Europeans to come up with trade agreement between the two of them to. Yeah, to offset this. Yeah. Anyway, I don't know.

You can tell I'm getting more nervous. It just feels like we're headed down a, we're definitely headed down a dark path. I thought, you know, we would pivot here and start going in the other direction, but it doesn't feel like it. And the economic data is, I guess we're going to get another read next Friday, the job numbers for March. It might be too premature to expect. the big hit there, but I don't know. It feels like we should buckle in here or buckle up or whatever it is. Anyway. Still no movement on UI claims. Yeah, do I, I've been a little perplexed by unemployment insurance claims. You know, I think it may be most of the layoffs or federal

government or federal government related, you know, suppliers. And it's just people are getting severance packages. Yeah. They don't, they're not going to file right away. It's going to take some time. Some of it is tied up in court, right? Yeah, yeah. We're maybe waiting to see what happens there. I'm a little skeptical of the UI claims, but that does suggest, you know, it hasn't hit the labor market yet. And that's the reason to think we're not going into recession. The labor market holds, we don't see the layoffs and UI claims remain down.

We should be okay. But that's, let's watch that very carefully. You mentioned GDP. And I want to, we got the GDP number for the fourth quarter of 2020. 24 and I want to pivot the conversation to economic data. You know, this is something, I'm on the board of the Coleridge Initiative. The Coleridge Initiative is a nonprofit organization that helps facilitate the use of data, economic data, demographic data, within the government, federal, state, and local.

And obviously, I was just spoke at their convening this week in D.C. and there's a lot of concerns about data, data quality, data availability. And, you know, kind of the hook back into our conversation is GDP. Did you hear Commerce Secretary Lutnik's comment on GDP and GDP in the government? Marissa, did you hear that? Yeah, to remove government spending from the calculation of GDP. Is that what you're referring to? That's what I'm referring to.

Yeah, what do you think of that? I don't I don't get it. I don't understand why you would do that. It is separated out in the report. You can clearly see what government spending is contributing separate from everything else. If you want to calculate GDP minus that, it's very easy to do. If you want to see all the other components, I don't know why. I mean, the implication in what he said was that we shouldn't be counting government. spending because there's a lot of waste in that number that I think the quote was something like if the government purchases a tank or a fighter plane, then that should be spending. But paying all the people to decide whether to purchase that tank or fighter plane is wasteful and shouldn't be counted, right? Wasn't that his rationale? Right. Yeah, paraphrasing, obviously. But like, I mean, then you could say that about. the private sector too, right? I mean, when a company purchases an office building or

hires someone or purchases software equipment, do we count that? But we don't count all the people that work for the company that make those decisions. I mean, it just doesn't, I don't know. I don't understand the, I mean, I understand that I think the motivation is because all of these cuts to government spending that's happening under Doge is going to have a downward right, going to put downward pressure on GDP because you're going to have government spending falling, presumably. And they want to remove that from the calculation. But that's just sort of semantics, right? I mean, you can go into the report and easily see the different components and remove whatever you want if you'd like to calculate it that way. There's no way,

there's no reason to fundamentally change the definition of GDP. Right. Chris? You perspective on that. Okay, what she said. Well, that's absolutely right. I mean, you mentioned GDP grew 2.4% annualized in the fourth quarter of 2024. By the way, it grew 2.8% calendar year 2024, which was a good year. That's a really good year. Our tracking estimate for Q1, real GDP growth, so we take all the economic data, including

like today's consumer spending data and everything, all the months. information that's coming in, and we translate that through a model into what it means for the current quarter growth. It's 0.8%. And I think the concern that's coming through in Commerce Secretary Lutnik's argument that we should exclude government from GDP is that we could easily get a negative number in Q2. Easily. Because correct me if I'm wrong. I think I've got the GDP accounting correct. This is from the Bureau of Economic Analysis.

The way the BEA calculates government spend in the NIPA accounts is by looking at, in part, compensation of government employees. So if you're cutting comp, if you're cutting comp, if you're cutting jobs, you're cutting comp, that's a direct hit to government expenditures. and you can see how the arithmetic comes out here, you could easily get a negative number. If our underlying growth rate is close to one, and that's in the first quarter before the cuts really took effect,

if they start taking effect in Q2, Q3, you know, that's the fodder for outright GDP declines, GDP declines. So you can see why there's a level of concern there. But more broadly, what does that raise concerns? concerns about, in your mind, Chris, about the data we get from the government in general. Should we be nervous about that? I mean, we rely like everyone else does on government statistics, you know, employment, unemployment, inflation, wages, investment, you know, it goes on and on and on. And we trust that data. It's, you know, obviously it has its problems. It's based on samples and samples are imperfect. And, There's all kinds of measurement issues and seasonal adjustment and quality correction, on and on and on. But we trust the underlying data.

Should we be nervous about that in the context of these kinds of comments? Yeah, absolutely. And we were nervous about government data even before this, right? We've been talking about the decline in survey response rates, right? So not even cuts by the government necessarily, but just the fact that you can't get people to answer a survey. at the same rate as you could in the past. And so what does that imply for the quality of the data? And I think those are really important discussions to have.

And if you wanted to have a discussion about GDP, how it's flawed, how it's estimated, there's lots of things not to like about GDP. We can have that debate and discussion and we should have it and put all that data into context. That's important, right? But this just continues to throw more doubt into that data. And it also suggests that, hey, maybe we don't need to fund the collection of this data as we used to. Or, you know, maybe there are private sources that can replace it and be equally as effective, right? So that also makes me nervous, right?

You know, there are lots of companies, of course, that rely on this data to make their own decisions, right? If we didn't have a good data on the consumption, the spending and the unemployment, what have you, that certainly would diminish the quality of their decision making. And then obviously we do have the Federal Reserve. We have other policymakers that rely heavily on this information. So if we're not getting the highest quality we can get, even understanding that it's never perfect, right, at least let's do our best, right,

to help those lawmakers, policymakers make the right decision. Otherwise, they're in a fog, right? We didn't always have GDP to guide central banks or even the government's relatively modern metric. I think post-depression, right? First depression, I think it was Cousnets, right? Cusnets, yeah.

Like the 40 or something. So, and so, yeah, you can guide your economy without it, but not very well if you look at the, if you look at the historical record, right? We're much better off having higher quality data than not. Yeah, there's a lot to unpack there. I mean, you did, you know, putting aside, any concerns about government continued funding of government statistical agencies, which I think is a reasonable concern in the context of all the things that are going on and all the cutting that's being

done. And also abstracting from kind of the comments from the Commerce Secretary that, you know, makes me queasy, you know, that, you know, implying that you shouldn't trust the data or the, the, or what the data is purported to measure. But there, even, as you pointed out, before any of that, the quality of data is increasingly of some concern because of declining response rights. Because all these, or at least most of these data series that we look at are based on samples of different parts of the economy, you know, whether that be consumers or households or businesses or whatever it is. And those response rates are way down. So I'll give you an example.

And I, because I know this, because I presented this at that convening for the Coalorge Initiative, the Joltz report, the job opening labor turnover survey report, which we all really pay a lot of attention to because it goes to hiring, it goes to layoffs, it goes to quits. You know, you get under the hood as to what's going on with job growth and unemployment. You know what the response? You know what the response rate to that was 10 years ago in 2015? You want to take a crack at it? What was the response rate? Chris, do you want to take a crack? 80%. It was two-thirds, two-thirds. Two-thirds. Okay. You know what it is today? Ten years later? A third. A third. A third. A third. I'm obviously I'm rounding. A third. But pick your statistic. You know, see Consumer Price Index,

employment cost index, the CES, the CPS, that's the current population survey, you know, the basis for the unemployment rate data, all have fallen very sharply. And the problems are quite pernicious, you know, what's behind the decline in survey responses. You know, it could go to survey fatigue. You know, we're always filling out surveys to tell people. how we like their product or whether we enjoyed the hotel room or the or the ride. Yeah. It goes to, it goes to cyber.

You know, I'm always nervous about interfacing with anything that comes over, you know, my computer screen, you know, even if it's purported to come from the government, I'm not sure. And privacy.

Now, particularly given all the things that are going on, I mean, do I really, if I'm not compelled to, Do I really want to hand over any information whatsoever? I'm not so sure, but all those things are happening. And it's not just in the United States.

I mean, I think if you go over to the U.K., the survey responses to their, for the data to calculate the unemployment rate had fallen so sharply, they can't even calculate an unemployment rate now. Yeah. Right? Can you imagine that? Bizar. Yeah.

Bizar. It's bizarre. And it's also reduced funding for these surveys. I mean, this has been a long battle. This isn't new. I remember when I worked at the BLS 20 years ago, we were talking about funding for the current population survey. And that's always been a battle in every administration is to give these statistical agencies more funding. So if you don't support the collection of this data, it's going to be harder and harder to do. You recall just one more, if you recall last year, there was talk of reducing the sample size. of the current population survey, which is only 60,000 households,

yeah, because they didn't have enough funding to keep the sample at 60,000. They were going to actually reduce the sample size, which means poor quality data, right? There's already pretty big margins of error around some of these estimates, and the smaller that sample gets, the more error-prone the data gets.

And fortunately, they got the funding. They were able to keep the sample in place. Your labor statistics. Yeah. Well, yeah, I mean, I think the lesson or the message in declining survey response rates is not cut funding. It's decreased funding. Yeah. I mean, if you don't have the data, your policy makers are flying blind.

How can the Federal Reserve, you know, when it sets monetary policy interest rates. Right. It looks at inflation and it looks like at unemployment. You know, those are the two things that it looks like. If you can't measure those two things, then how do you set? Well, you'll set it, but you won't set it well. It won't set industry policy very well. So, I mean, it's just absolutely critical.

But it doesn't feel like we're moving in that direction at all. There's, if anything, wait, because you sent me an email, I guess, some advisory group, you know, economic advice, too. Can you explain? Yeah, there's a group called Vesak, which is the federal. Economic Statistics Advisory Committee, which is made up of academics, economists, government officials, private sector, people that volunteer their time to advise agencies like the BLS and the BEA on how they produce their statistics, kind of like a user group feedback type thing. And these committees talk about these issues like falling response rates and how can we, you know, turn this around or how can

we improve the data, right? That was disbanded at the end of last month by the administration. And then there was another committee that focused strictly on the BEA data, which is the data where we get, this is the agency we get GDP and income and PCE deflator, all of these extremely important statistics. There was an advisory committee just for the BEA that was also disbanded by the administration. So that's not a good sign, right? It's sending a signal that this isn't important. And, And this is not a priority for the administration, clearly, but I mean, just these aren't, these aren't even committees where people were getting paid to participate on them. So you hear the argument that, well, okay, if the government isn't going to devote more resource or, in fact, devote less resource to collecting data and other information, you should rely on them on private markets. on, but in fact, private companies are increasingly collecting more data for their own business

practices. What's wrong with that argument, Chris? Why shouldn't, why don't we, you know, just ante up and buy those, that data from the various private sources? We should use all the data, right? We should be using those private sources, but those sources are not perfect either, right? They're, they're off, the private sources are often, um, collecting data that's really exhaust from another profit-making enterprise, right?

So the good example might be the payroll data, payroll survey data, or payroll data from a payroll processor like ADP, right? Their main business is processing these payrolls, and as a byproduct they were able to see or get a lot of information about what's going on in the labor market. But that's great, but that's also got its own biases and, you know, distinct issues, right? First and foremost, it's only their customers, right?

They're not surveying the broader market or the broader economy. So smaller businesses that may not subscribe or use that type of service may be left out or there may be certain industries that don't typically participate with that payroll process. So it's got some gaps to it as well. So helpful, but the broad-based survey that the government provides, is really again that's the that's the gold standard only the government can provide it yeah right else is going to step in what's you know what's the profit incentive that they can offer to collect this information right right well let's uh we'll end this part of the conversation because

i do want to play the stats game and maybe take a question or two from uh from listeners uh But before we do, I'm just going to ask you, what is your favorite alternative private data source that you use? You mentioned ADP. Is there one that, and I'll turn to Marissa first, maybe. Is there a alternative data sort of, I think listeners always are very curious and, you know, what we're looking at, that you look at that, you know, you think is particularly valuable, Marissa? So? Mm. Are you, Chris?

Yeah, I think it depends on the topic. But one of, I do like the consumer credit report data, right? That's, from Equifax. From Equifax. Yeah. Or Experian or TransUnion. Yeah. Again, it's got its flaws.

Everybody knows that they're things that can crop up in a credit report. But it's very timely. It's not biased, right? It's just the numbers as reported in terms of delinquents. and credit formation and credit inquiries. It just gives you a lot of detail about actual observed consumer behavior. So that's always been a favorite of mine. Yeah.

And that, I mean, the data we collect, we collect from Equifax, but you're right, the other bureaus have the same kind of data. That, correct me if I'm wrong, but that's a census, isn't it? It's based on all the credit files, not just a sample. So that makes it even more valuable because you know that those survey issues that I described earlier. That's right. That's right. It's a full sense.

So it's great. Again, there's a blind spot in terms of the unbanked, right? You're not going to do what's going on with them. But, you know, again, no data is going to be perfect. But this one is really good to capture most or a broad swath of the population in terms of what's going on with their consumer credit cards, their credit cards, mortgages and whatnot. Right, right. Mr. Mr. Do you have one, particularly in the labor market that you look at? I mean, any alternative data there?

Like anything from like Indeed or? Yeah, I mean, there's, there are some. Right. Chris mentioned ADP. I don't really look at that that much, but Indeed puts out a hiring metric and a job opening metric that often corresponds and moves in the same direction as Joltz ultimately does. So I think it's pretty good. And it's very detailed, too.

So they have it by industry and occupation and region of the country, that kind of thing. So that's a, yeah, that's a pretty good measure. There's also, I mean, that is, this isn't really data exhaust, but then there's surveys like Challenger Gray and Christmas that are private sector surveys of the job market that, that aggregate layoff announcements that kind of scrapes the web and aggregates announcements for layoffs, I tend to look at that as well. I really like the house price series in the commercial real estate value series that we construct because they're based on actual transactions. We get that data and we can see from deeds that are filed at county courthouses, you know, what those values are. And then we could construct

so-called repeat sales price indices at a detailed geographical level and in the commercial real estate market across property type. And, you know, I find that highly. It's very timely. We can track that monthly, very, very valuable. So anyway, okay, let's play the stats game. We before it a stat. We, the rest of us try to figure that out through clues, questions, to Dr. Reasoning. The best stat is one that's not so easy.

We get it immediately. One that's not so hard. We never get it. And we always begin with Marissa. Marissa, what's your stat? My stat is, where is it? 5%. Is that the inflation expectations and the University of Michigan survey?

One year. One year. Virtual cowbell. Virtual cowbell. Baby. Nice. Right out of the gate. Right out of the gate.

I'm on fire. Okay. You want to explain? Yeah. I mean, this keeps popping up and up and up each month, right? From both consumer confidence surveys, both conference board and Michigan, they ask for what consumers think inflation will be next year. And this has been rising very quickly since the start of the year. So in the Michigan survey, in January, we were at 3.3%. This is what consumers thought

inflation rate would be a year from now in January. And we're at 5% now as of March. So this is, actually, I didn't look to see how high this is. Like, when was the last time it was 5%. I think it was three years ago, if I'm not wrong. Yeah, it was November 2022. You have to go back to when people thought inflation would be that high. And if you remember, 2022, was peak inflation coming out of the pandemic. So this just shows this expectation that I think that tariffs are going to have a real impact on inflation here. You're seeing it across all surveys, across all demographic groups, think inflation is going to be significantly higher next year. Hey, Chris, do you know, are inflation expectations in the bond market equally as elevated, do you know,

have they pushed up as much? It doesn't feel like they have. You know, they actually came back down. If you look at the five-year break, even, right, I was looking at that just a few days ago, and they had risen. They're still high relative, of course, to where they were, say, a year ago. but they're actually backing down a bit. I don't know. I didn't check today. Maybe things have changed here, but.

Right. Yeah. So concern, but not quite as concerned as they were just a few weeks ago. A few weeks ago. You know, the one thing that strikes me about the inflation expectations,

particularly the consumer, but also in the bond market, usually it's higher oil prices, gasoline prices, the cost of regular run leaded that's kind of driving those expectations up or down. But I think cost of a gallon

of regular on lead is, like three bucks, right? It hasn't budged, you know, at all. So it has nothing to do with what's going on here. And it's all about the tariffs and the trade war. And it's, you know, affecting people's thinking. And that's, I think that's one reason why the Fed's going to be cautious here because they're fearful that if the tariffs, even though they're one time, get into the inflation expectations, that could then infect wage demands and you get a more kind of self-reinforcing kind of persistent in inflation and they really don't want that to happen. That's stackflation.

So that's a good one. Chris, what's your stat? Okay. It's two stats related. 69 and 71. They sound like index values. They are. Are they from Michigan?

They are. Is it current and future? No. No. It's current. Did you see a Michigan survey of consumer sentiment? Isn't that? It is.

It's too demographic. Is it a Republican? No. No, I was going to go with that. There's big news there as well. Yeah. You've got to tell us. Is it income related?

No. Is it age? Yes. Okay. I'll tell you the two age groups. Oh, two age groups. Okay. 18 to 34 and 55 plus.

Who do you think is six? 71 versus 69. Oh, that's interesting. 69 versus 71, so they're almost the same. They are almost the same, but they are, one is lower than the other. Yes, indeed. Thank you. Thank you for that.

What insight, baby, that is. You know, that's what people come to inside economics for. Yeah, that's right. Which one is lower? My intuition is probably wrong, but my intuition would be that the folks that are older would have a lower, maybe the 69, and the younger would be 71. Is that right? So that's what typically is true.

Historically, if you go back, the younger are always much more optimistic than the old. Not anymore. Interesting. Right now it's the younger cohort is more pessimistic than the older. I would have thought older just because. 18 to 34. 18 to 34. versus 55 plus.

Okay. Yeah, I would have thought older people just are more sensitive to the stock market. Yeah. The value of their 401K is plummeting. The wealth effect, I would have thought, you know? Well, both indices have come down, right? They're both down. It's just that the 18 to 34 has come down even faster.

And to what do you ascribe that, do you think? I think they're just nerd. They don't have that nest egg, right? They don't have that housing wealth or even the stock market. Well, so yeah. Yeah. If you're older, you have the stock market goes down, 10, 20%, you don't feel good, but you've got, that's after years of gains, right?

You have some cushion. You got some cushion. That 18 to 34 year old group still looking to try to buy a house, trying to save up, but really struggling. But you're saying it has fallen more than the last few months. That's right. That's right. The problem with the house has always been a problem with the house.

Yeah, but I think their outlook is even dark. darker now. Even darker. You know, the one thing I think might be going on, and I have no basis for saying it, but I'm going to say it anyway, speculation, is going back to the joltz, hiring rates are very low. And it's not like these young people are getting laid off. The problem, some of that's going on probably, but that's not the issue. The issue is they can't get a job. They can't get hired. And, you know, I can see it. I can see it in my own world. You know, highly educated, very talented, very eager, they're having a tough time breaking in.

And that's got to be really debilitating psychologically. I mean, really debilitating. So I wonder if there's something like, maybe we can look at that regionally or something to get a better sense of that. But anyway, all right, I got one. Ready? 4.5%. That's the House price.

Analytics, house price index. It is, but that's not the 4.5%. I had in mind. And you were so proud of yourself. I was so smug. I know the statistic. Yes. Is it, so it's not anything to do with house prices?

No. It came out this week, though. It's, oh. Inflation related? No. I think what's the other big stat that came out this week? We talked about it. GDP.

GDP. Okay. You should know this because you've used this on, this stat on me before, Chris. Oh, it's GDI. GDI. GDI, real gross domestic income, 4.5%. I couldn't believe it's that high. Yeah.

Yeah. Yeah. Yeah. Yeah. So, you know, the kind of the thinking is to get to reality, you should take the average of GDP growth and GDI growth. And that gets you to, well, one, say, two and a half, the other is four and a half. They get you to three and a half. See how I did that?

Real insight. Three and a half percent. That actually was a pretty good quarter. fourth quarter of 2024 was a good quarter. And you know what? If you look at GDI for a calendar 2024, it was 3% on the nose, 3% on the nose. So that was a really good year. But we're coming off here pretty quickly, pretty quickly. Okay, let's take a few listener questions. Hey, Marissa, I know you've been in and day with questions. Do you have any good ones there you want to post to the group? Yeah, I have one that kind of goes back to what we were talking about before with the trade war

and the motivation for doing this. Do you think that given that we're, I think you could say we're in a trade war at this point, right? Oh, yeah. Given this and given the alienation of other countries and our largest trading partners, do you think that there's some risk that foreigners stop buying U.S. treasury debt?

Oh. I got a view. Chris, do you want to take that or you want me to go first? Go ahead. Well, to some degree they already are. Not that they're selling the debt, but they're just not buying, like the Chinese. You know, the Chinese were still are huge holders of U.S. treasuries, but much less so than they were, you know, five, ten years ago. And for obvious reasons, I mean, given the growing tensions between the U.S. and China,

they've decided to reduce their exposure to U.S. Treasury debt. So if you look at their holdings, you know, I'm making this up, but I think we're down to $700 billion, something like that. It was well over a trillion at one point in time. Again, that's from my mind's eye, so I might have that wrong. But that gives you a kind of rough order of magnitude. So I think we've already seen that in the case of China, a very large holder of treasury debt. I sense also that other countries are putting pressure on their institutions, their pension

funds, insurance companies, other institutional investors to stay closer to home, you know, buy my country's debt, your country's debt. It kind of sort of felt like that was happening during the pandemic. Historically, when you get a thing like a pandemic or another crisis, money comes flowing into the United States because it was always deemed to be AAA, you know, money good. You get your money back if you invest here. So in times of crisis, the money would flow. But it didn't flow during the, into the U.S. to the same degree that it did in the pandemic

as it has historically. And I do think I don't have hard data, but my sense of it talking to different investors is that there's some, you know, more home bias that invest here at home. You know, other foreign buyers are also more cautious. I don't know if it's because of any geopolitical reason, just more economic, like the Japanese. They're now the largest foreign holders of U.S. Treasury debt. They become a little bit more circumspect in buying treasury bonds only because they can now buy 10-year JGBs. That's the Japanese government bond at a positive interest rate.

You know, for many years it was negative. Now they can buy it at one and a half, two percent, I think. And they can do that without any currency risk. They're very nervous about the fact that they could, you know, because the yen is so cheap relative to the dollar that if they invest in dollars, it could get crushed, you know, if the yen were to appreciate the dollar would decline in value. So they've been more cautious. So there's lots of reasons why foreign holdings have come down.

But I do think part of the reason, one of the reasons is people are just not as anxious to invest in the United States for lots of different, you know, geopolitical reasons. Chris? Yeah, I'd add that probably the experience after the Russian invasion of Ukraine and the sanctions imposed on Russia and their capital availability to access capital. I also think that that hasn't. Ah, good point. On governments in terms of, you know, they want to ensure that they, you know, things could change. They want to ensure that they have access to capital. So I could certainly see some of those sovereign governments and pension funds, as you mentioned, Mark, kind of focusing or out of treacherer.

certainly looking to diversify to a greater degree. I'm not sure about the more private investors or funds. I don't know that they necessarily are in. They're just looking at the total return here. But yeah, I think there's certainly something to be said from the sovereign government side. Well, not everyone is as rapacious as you are, Chris, you know? I mean, most are. Most are.

Let's ask chat, GPT. I'm really curious about Chinese holdings, whether I got that right or not. Let's just see. Chat GPD's coming online. Can you tell me what the value is of Chinese holdings of U.S. Treasury debt? Here's going. As of January 2025, China's holdings of U.S. Treasury securities were about $760.8 billion. Okay.

What do you guys have to say? Something. I said $700 billion. Okay. Let me ask you. Let me ask it this. Okay. Very good.

One more. One more. What was the peak holdings of the Chinese of U.S. Treasuries? What was the highest amount that they've owned throughout history? The peak was around $1.3 trillion, which happened in late 2013. Thank you. Appreciate that. So it's down by almost half.

Yeah, there you go, right? Yeah, very good. Okay, let's take another, one more question and we'll call it a podcast. I'm sure people are getting very tired out there. This is a good one. Yeah. given all the doge cuts, right, to the firings in particular, do you think that all these people getting laid off and fired from the federal government will easily be absorbed into the private

sector? Is the job market strong enough to absorb all these people without pushing the unemployment rate higher? Yeah, good question. Chris? I think a lot of them will be hired. I think That one reason perhaps why we haven't seen unemployment insurance claims take off is that you do have some of that. But you also have folks who are taking retirement, early retirement instead. Right. So I don't think that there'll be a, I don't see that it's significant enough to really push the unemployment rate to up a sufficient degree. But that said, you know, everything else we've discussed about weakening economy, perhaps weakening, weakening hiring, what you are going to see. perhaps some longer struggle for folks in certain occupations to find work.

Yeah, I agree with Chris. I think it puts upper pressure on unemployment, but it's too small to push it up a lot, right? I mean, I think in our baseline, we're assuming federal government employment comes down by three, 400,000 jobs from the peak. So let's say that happens over, you know, an 18-month period. What is that? That's 30, 35,000 per month. Just for context, the economy creates 150, right now is creating 150, 175,000 per month.

So it's consequential. And I do think that's one reason to be nervous about the labor market and the economy's prospects here going forward. But, you know, I think, you know, the more likely scenario is that those folks get reasonably absorbed. Unemployment will push up a little bit, but not a lot. The other thing that's going to keep unemployment down is slowing in the labor force, right, because of the immigration policy. So we're just going to see a lot. We already are seeing a lot more immigrants come into the country. Pretty soon we're going to start seeing that show up in fewer

applications among immigrants for work authorization and then ultimately less labor force. And that will tighten up the labor market, so that'll limit any increase in the unemployment rate. Again, another reason to think that we should be able to, the labor market should kind of hang together reasonably. So, and we should be able to navigate through all this without suffering a recession. But again, given, given, you know, recent events and given it looks like we're going down the trade war path to a greater degree than I just had previously thought, you know, the risks here are a lot higher. So I don't know, Mercer, what do you think?

Yeah, I think on net, it isn't going to be a huge deal to the overall labor force when you look at the aggregate numbers. But I think if you were just to look at the Washington, D.C. area, there's real possibility that you could even have a recession there. Absolutely. And if you look at the industry mix, I think you'll see big changes in the composition of job growth. I mean, I think that the immigrants that aren't coming into the country, the jobs that they typically get, those aren't going to be filled by federal government employees, right? Those are two different types of profile of worker. So you're going to have federal government employees trying to go into the private sector and information in professional business services in industries like that. the industries that are going to be hurt by lower immigration are going to be things like agriculture and construction. So I think you'll see a compositional mix difference there. But I think

overall, when you just look at the unemployment rate, you just look at job growth, you know, you probably see minimal impact on the top line numbers. Yeah. Well, I've already gotten three resumes from people affected by those cuts. Yeah. I mean, I assume you have as well. Yeah. I mean, I know people that have lost their job or know that they're losing their job that are now out there looking for work. Great talented people. Okay. Anything else before we call it a podcast? No.

Which country is the third largest foreign holder of treasuries? Ooh, I'd say the UK. Oh, very good. Excellent. I am on fire, baby. I am on fire. Why, you're the chief economist. The bar is high you're saying?

That's funny. I think that's because all that Middle Eastern money is sitting in the UK. You know, all the Saudi money, all the UAE money. I think a lot of it's sitting there in London, probably. Anyway. Because it goes to London and then the financial houses in London or Switzerland by, you know, the U.S. treasuries. There you go. Yeah.

If you can guess number four, then, you know. Ooh, really? Yeah. Ooh. Number four, would it be a surprising country? Really? Surprising to me. In retrospect, I can see why.

Oh, in retrospect, you can see why. You want to take a guess, Marissa? Can you tell me what continent this country is there? Europe. Europe. It's a European? Oh, it's probably like... Is it like Luxembourg or something?

Yes. It's going to be Luxembourg. You got it. You got it, Marissa. Yeah. That same thing's happening, obviously. Yeah.

All that Middle Eastern money. Anyway. Anyway, okay, we're going to call this a podcast. I hope you found out of some value, and we'll talk to you next week. Take care now, dear listener.